AUDIO HOME RECORDING ACT OF 1991 WEDNESDAY, FEBRUARY 19, 1992 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON INTELLECTUAL PROPERTY AND JUDICIAL ADMINISTRATION, The subcommittee met, pursuant to notice, at 9:37 a.m., in room 2237, Rayburn House Office Building, Hon. William J. Hughes (chairman of the subcommittee) presiding. Present: Representatives William J. Hughes, John Conyers, Jr., Patricia Schroeder, Carlos J. Moorhead, and Howard Coble. Also present: Hayden W. Gregory, counsel; Elizabeth Fine, assistant counsel; Phyllis Henderson, staff assistant; and Thomas E. Mooney, minority counsel. OPENING STATEMENT OF CHAIRMAN HUGHES Mr. HUGHES. The Chair has received a request to cover this hearing in whole or in part by television broadcast, radio broadcast, and still photography, or by any of such methods of coverage. In accordance with committee rule 5(a), permission will be granted unless there is an objection. Is there objection? [No response.] Mr. HUGHES. Hearing none, permission is granted. Good morning. Today, the subcommittee is pleased to consider H.R. 3204, the Audio Home Recording Act. I joined Chairman Brooks in introducing H.R. 3204 last August. Since then our ranking Republican member, Carlos Moorhead of California, and 8 other members of this subcommittee have joined the ranks of what are now 57 cosponsors of the bill. The Senate is considering similar legislation under the leadership of Senator DeConcini in the other body. The Audio Home Recording Act represents a dramatic compromise reached between the recording and music industries, the consumer electronics industry and consumers themselves. The agreement will encourage the development and introduction of advanced consumer products and will at the same time assure that the copyrights on creative works are properly protected. This legislation attempts to solve the problem of home taping of recorded music, a problem that is already of concern to the recording industry. The American recording industry estimates that it loses close to a billion dollars in revenues each year to home recording. The dispute over home taping of recorded music, however, took on a new dimension 5 or 6 years ago with the introduction of the digital audio tape, or DAT. DAT as well as other new digital technologies will enable perfect copies to be made from digital recordings. Consequently, the problem of home taping is a matter of much greater exigency to the music industry. At the urging of Congress, the music and record industries worked with the electronics industry to control home taping as we enter the digital age. They produced what was called the Athens agreement. H.R. 4069, which incorporated the Athens agreement, was introduced in the 101st Congress as a technological solution to the home taping problem. Music producers, authors and performers whose products would still to a limited extent be taped at home opposed the legislation because it did not provide them with any compensation. Ultimately, this disagreement short circuited the legislation. I might add that this original agreement was not well received by this committee. Indeed, it was not received at all by this committee. Although my predecessor, Mr. Kastenmeier, and the chairman of the full committee, Mr. Brooks, were moving forces in encouraging the warring parties to propose a solution to the copyright problems they faced, the legislative solution proposed was specifically drafted to circumvent copyright-based jurisdiction. Last year, the parties went back to the negotiating table and returned with a comprehensive agreement in hand. This agreement was incorporated into H.R. 3204, the Audio Home Recording Act of 1991. H.R. 3204 contains the following principal provisions. First, it protects consumers and the electronic industry from copyright infringement suits when consumers tape digital or analog recordings for private, noncommercial use. Second, the bill requires that all digital audio recorders incorporate a serial copy management system (SCMS). This SCMS system will prevent the making of second-generation copies of digital recordings. For example, the owner of a digital recorder could make one or more copies of the original recordings, but the SCMS system would prevent any of these first generation copies from being recopied. Third, the bill establishes a royalty system to compensate authors, performers, record companies, and music publishers. The royalty, which is modest, will be part of the cost of acquiring digital recording equipment and blank tapes. The royalty will be collected by the Copyright Office and distributed by the Copyright Royalty Tribunal. Finally, the bill sets forth remedies for violations of the royalty or SCMS provisions. We are very pleased that industries with very different commercial interests have worked together to develop the consensus proposal we are considering today. Now, we must scrutinize this proposal to the same extent we review any legislative proposal to determine if the legislation is in the overriding public interest, whether it fits within the policy of our copyright laws and is flexible enough to accommodate new technological developments. To the extent necessary, we will incorporate any necessary changes in the legislation that will advance these public policy goals. The Audio Home Recording Act is indeed landmark legislation, and I look forward to receiving testimony this morning from a broad array of experts from around the country. [The bill, H.R. 3204, follows:] 102D CONGRESS 1ST SESSION H. R. 3204 To amend title 17, United States Code, to implement a royalty payment system and a serial copy management system for digital audio recording, to prohibit certain copyright infringement actions, and for other purposes. IN THE HOUSE OF REPRESENTATIVES Mr. BROOKS (for himself and Mr. HUGHES) introduced the following bill; which was referred jointly to the Committees on the Judiciary, Energy and Commerce, and Ways and Means A BILL To amend title 17, United States Code, to implement a royalty payment system and a serial copy management system for digital audio recording, to prohibit certain copyright infringement actions, and for other purposes. 1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 SECTION 1. SHORT TITLE. 4 This Act may be cited as the "Audio Home Recording 2 1 SEC. 2. IMPORTATION, MANUFACTURE, AND DISTRIBUTION 2 3 4 OF DIGITAL AUDIO RECORDING DEVICES AND MEDIA. Title 17, United States Code, is amended by adding 5 at the end the following: 6 7 "CHAPTER 10-DIGITAL AUDIO RECORDING DEVICES AND MEDIA “SUBCHAPTER A—DEFINITIONS, PROHIBITION OF CERTAIN INFRINGEMENT ACTIONS, AND RULES OF CONSTRUCTION "Sec. "1001. Definitions. "1002. Prohibition on certain infringement actions. "1003. Effect on other rights and remedies with respect to private home copying or otherwise. "SUBCHAPTER B-ROYALTY PAYMENTS "1011. Obligation to make royalty payments. "1012. Royalty payments. "1013. Deposit of royalty payments and deduction of expenses. "1014. Entitlement to royalty payments. "1015. Procedures for distributing royalty payments. "1016. Negotiated collection and distribution arrangements. 12 "As used in this chapter, the following terms and 13 their variant forms mean the following: •HR 3204 IH 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 "(1) A 'digital audio copied recording' is a reproduction in a digital recording format of a phono record, whether that reproduction is made directly from another phonorecord or indirectly from a transmission. "(2) A 'digital audio interface device' is any machine or device, now known or later developed, whether or not included with or as part of some other machine or device, that supplies a digital audio signal through a nonprofessional interface, as the term 'nonprofessional interface' is used in the Digital Audio Interface Standard in part I of the technical reference document or as otherwise defined by the Secretary of Commerce under section 1022(b). "(3) A 'digital audio recording device' is any machine or device, now known or later developed, whether or not included with or as part of some other machine or device, the recording function of which is designed or marketed for the primary pur pose of, and that is capable of, making a digital audio copied recording for private use, except for “(A) professional model products, and "(B) dictation machines, answering ma chines, and other audio recording equipment that is designed and marketed primarily for the |