80 An English decision had reached the same conclusion as our WhiteSmith case, n. 13, supra, that perforated music rolls did not constitute copyright infringement. Boosey v. Whight [1900] 1 Ch. 122. 81 Copyright Act, 1911 (1 & 2 Geo. 5, c. 46) §19. 82 For a valuable historical review from early times to 1937, see 1 Ladas, op. cit. n. 77 supra, pp. 410-440. 83 Copyright Act, 1956 (4 & 5 Eliz. 2, C. 74) §8. 84 It is well settled that "Copyright laws do not grant to copyright owners the privilege of combining in violation of otherwise valid state or federal laws." Alfred Bell & Co. v. Catalda Fine Arts, 74 F. Supp. 973, 977 (S. D. N. Y. 1947), modified, 191 F. 2d 99 (2d Cir. 1951). “[A] copyright may no more be used than a patent to deter competition between rivals in the exploitation of their licenses." United States v. Paramount Pictures, Inc., 334 U. S. 131, 144 (1948). "An agreement illegal because it suppresses competition is not any less so because the competitor's article is copyrighted." Interstate Circuit, Inc. v. United States, 306 U. S. 208, 230 (1939). Cf. Bobbs-Merrill Co. v. Straus, 210 U. S. 339 (1908). APPENDIX APPENDIX A Extract from Report of the Register of Copyrights on the General Revision of the U. S. Copyright Law (1961) 7. THE COMPULSORY LICENSE FOR THE RECORDING OF MUSIC. a. The present law and its history Sections 1(e) and 101(e) of the present statute contain elaborate and complex provisions for what is commonly known as the "compulsory license" for the making of sound recordings of music. In brief, they provide that when the copyright owner of a musical work has once permitted it to be recorded, any other person may record the work upon (1) giving notice to the copyright owner of his intention to do so and (2) paying a royalty of 2 cents for each record manufactured. These provisions were inserted in the act of 1909 in view of the special conditions existing at that time. The Supreme Court, in the White-Smith case mentioned above, had held that the pre-1909 law gave no exclusive right to the copyright owner to make a sound recording of his musical work. In the general revision bills leading up to the act of 1909 it was proposed to give the copyright owner such an exclusive right. As stated at some length in their reports (H. Rept. No. 2222, S. Rept. No. 1108, 60th Cong., 2d sess.) the congressional committees felt that composers should be given adequate compensation for the use of their music in sound recordings. They were first inclined to give the copyright owner the exclusive right to make sound recordings, in the same way that all other rights are given exclusively. During the course of the hearings, however, it was learned that one dominant record company, anticipating the establishment of an exclusive recording right, had contracted with the leading music publishers for the exclusive right to record all their music. To forestall the danger that this company would acquire a monopoly in the making of records, the committees adopted the device of the compulsory license. b. Practical effect of the compulsory license The compulsory license provisions are rather severe in their effect upon the copyright owner. Once he exploits his right to record his music, he is deprived of control over further recordings. He cannot control their quality nor can he select the persons who will make them. There have been many complaints of inferior recordings and of recordings by financially irresponsible persons. What is perhaps even more important, the statute places a ceiling of 2 cents per record on the royalty he can obtain. In essence, the compulsory license permits anyone indiscriminately to make records of the copyright owner's music at the 2-cent rate fixed in the statute. In practice the authors of musical works generally assign their recording and other rights to publishers, under an agreement for the division of royalties. In most instances the record companies secure licenses from the publishers, thereby avoiding some of the mechanics of notice and accounting required by the statute for exercise of the compulsory license. But the statutory rate of 2 cents per record operates as a ceiling on the royalty rate paid, even as to the first recording. For records of popular music, the royalty rate paid is commonly less than 2 cents. c. Need for the compulsory license The danger of a monopoly in the situation existing in 1909 was apparently the sole reason for the compulsory license. There are now hundreds of recording companies competing with one another, and the music available for recording is widely scattered among hundreds of competitive publishers. The market for recordings and the number and variety of compositions recorded have increased tremendously. The volume of music available for recording is immense and constantly growing. Much of the new music available remains unrecorded, and no one can foretell whether a recording of a particular composition will strike the public fancy. Author and publisher groups have urged strenuously that, since the compulsory license is no longer justified as an antimonopoly measure, it should now be eliminated. They argue that the fundamental principle of copyright—that the author is to have the exclusive right to control the commercial exploitation of his work-should apply to the recording of music, as it is applied to all other kinds of works and to other means of exploiting music. d. Analysis of arguments for retaining the compulsory license Representatives of the record industry argue that even though the antimonopoly reason for the compulsory license is gone, there are now other reasons for retaining it. They contend that, by giving all record companies the opportunity to make records of the music recorded by any one company, the compulsory license is beneficial in the following respects: (1) It provides the public with a variety of recordings of any particular musical work, which might not be true if the copyright owner could give an exclusive license to one record company. (2) It enables smaller record companies to compete with the larger ones by offering other recordings of the same music. (3) It benefits authors and publishers by giving their works public exposure through several different recordings, thereby increasing their revenue from royalties. All of these asserted benefits flow from multiple recordings of a musical work by several companies under nonexclusive licenses, as opposed to a single recording by one company under an exclusive license. The removal of the compulsory license, however, would not necessarily result in exclusive licenses being given. If it is true that authors and publishers benefit from multiple recordings, they would presumably seek to give nonexclusive licenses to several companies. We understand that in those foreign countries having no compulsory license, the recording of musical works is usually licensed nonexclusively to any reputable company. It seems likely that in the absence of the compulsory license, multiple recordings would still be licensed nonexclusively. If so, the three benefits attributed to the compulsory license by the record industry would still exist, but with these differences: the author or publisher could refuse a license to a recorder whom he considered irresponsible or for a recording he considered undesirable, and the royalty rate would be fixed by free negotiation. Even assuming that removal of the compulsory license would result in the granting of exclusive licenses, we believe that any loss of the three benefits flowing from multiple recordings would be offset by other considerations: (1) The public now gets a variety of recordings of certain musical works because, when a record made by one company promises to be a hit, other companies make records of the same music. Under a regime of exclusive licenses, each company would have to record different music; while the public would not get several recordings of the same music, it would probably get recordings of a greater number and variety of musical works. (2) A small record company may now make a competing record of a musical work with which a large company has made a prospective hit, but this also works the other way. Many hits are now originated by small companies; and their prospective hits are often smothered by records of the same music brought out by larger companies having better known performers and greater promotional facilities. Under a regime of exclusive licenses, the companies would not compete with various recordings of the same music, but they would compete with recordings of different music. There is little danger that the large companies would get all the hits: in the popular field the number of compositions available for recording is virtually inexhaustible, and which of them may become hits is unpredictable. (3) The authors and publishers believe they would benefit from removal of the compulsory license. They would no doubt take care of their own interests in deciding whether nonexclusive or exclusive licenses are better for them. Nonexclusive licenses might be more profitable for those authors who have already achieved success. The possibility of granting an exclusive license might give new and unknown authors more opportunity to have their works recorded. Representatives of the record industry have also argued that the enormous growth since 1909 in the volume of the records manufactured and sold has proved the worth of the compulsory license. They point out that the record 52-380 O-66-pt. 2-5 industry has prospered, authors and publishers have received more royalties, and the public has been supplied with more records of a better quality at a lower price. We do not see why this expansion of the record industry, coincident with technical improvements and rising public demand, should be attributed to the compulsory license. Other entertainment industries have enjoyed a similar growth. And we understand that the record industry has also expanded in foreign countries where there is no compulsory license. e. General observations Removal of the compulsory license would be likely to result in a royalty rate, fixed by free negotiation, of more than the present statutory ceiling of 2 cents. The record companies would, of course, lose the advantage of the lower rate. The price of records to the public might be increased by a few cents, though this is not certain since many factors enter into the pricing of records. If it is true that a freely negotiated rate would exceed 2 cents, we would conclude that the 2-cent ceiling denies authors and publishers the compensation due them for the use of their works. We have previously mentioned the fundamental principle of copyright that the author should have the exclusive right to exploit the market for his work, except where this would conflict with the public interest. In the situation prevailing in 1909, the public interest was thought to require the compulsory license to forestall the danger of a monopoly in musical recordings. The compulsory license is no longer needed for that purpose, and we see no other public interest that now requires its retention. For these reasons we favor complete elimination of the compulsory license provisions. However, we recognize that the present practices in the record industry are based on the compulsory license, and that its elimination would require some major adjustments and new contractual relationships. We therefore propose that the present compulsory license provisions be left in effect for a reasonable time after the new statute is enacted. If Congress, after considering this highly controversial question, determines that the principle of the compulsory license should be retained, we believe that substantial changes should be made in the present provisions. Among the problems that would need to be considered are: The royalty rate and the basis on which it is to be computed; The present requirement that the copyright owner file a notice of use as a condition to recovery for infringement; The mechanics for assuring payment of the royalties; The copyright owner's remedies against those who make records without permission and without complying with the compulsory license require ments. |