1982] Audio Home Recording 1531 ble license fee in an amount and on terms fixed by the court."” There is also substantial precedent in other areas of the law for judicial imposition of compulsory licenses. In antitrust litigation, where the patenting of vital processes has contributed to a firm's market power, a court will often order the firm to license would-be competitors at a reasonable royalty rate." A judicially imposed compulsory license is a recognized remedy in patent infringement cases as well." Under a compulsory license royalty scheme, it would not be necessary to enforce the copyright laws against the individual who engages in home recording: the manufacturer's payment of the courtimposed royalty on the recording equipment would relieve the equipment's purchaser from liability. It is likely, of course, that the manufacturer would shift the cost of the royalty payment to the consumer by raising the price of audio recording equipment; but because the consumer is the primary infringer, there is no reason why he should not ultimately pay for the privilege of recording copyrighted works. Enforcing the royalty decree against the manu * 17 U.S.C. § 405(b) (Supp. IV 1980). In addition to this provision authorizing judicial imposition of a compulsory license, the Copyright Act provides for a statutorily imposed compulsory license in four circumstances. See id. § 111(c)-(d) (retransmission of copyrighted works by cable radio and television systems); id. § 115 (production and distribution of phonorecords of nondramatic musical works); id. § 116 (public performance of copyrighted musical works on a jukebox); id § 118 (use of certain works in connection with noncommercial broadcasting). "See United States v. Glaxco Group, Ltd., 410 U.S. 52 (1973); Besser Mfg. Co. v. United States, 343 U.S. 444 (1952); Hartford-Empire Co. v. United States, 323 U.S. 386 (1945). "In Foster v. American Machine & Foundry Co., 492 F.2d 1317 (2d Cir.), cert. denied, 419 U.S. 833 (1974), for example, the district court denied the plaintiff injunctive relief from the defendant's infringement of his patent. Instead, it granted him a reasonable royalty for the defendant's continued use of his patented process. The United States Court of Appeals for the Second Circuit affirmed the ruling, observing that [T]he court could properly conclude that to impose irreparable hardship on the infringer by injunction, without any concomitant benefit to the patentee, would be inequitable. . . . Instead, the District Court avoided ordering a cessation of business to the benefit of neither party by compensating [the plaintiff] in the form of a compulsory license with royalties. Id. at 1324. The court's reasons for granting a compulsory license in Foster would apply equally well in the home recording context, where an injunction against the manufacture of home recording equipment would cause substantial injury to manufacturers, sellers, and consumers without producing an offsetting benefit for the copyright owners. For other patent infringement cases in which the courts have imposed compulsory licensing remedies, see Royal-McBee Corp. v. Smith-Corona Marchant, Inc., 295 F.2d 1 (2d. Cir. 1961); Siemens Aktiengesellschaft v. Beltone Elec. Corp., 407 F. Supp. 807 (N.D. II. 1975). 1532 Virginia Law Review [Vol. 68:1505 facturer would present no problems of privacy or of enforceability, given that the sales of the equipment are public and easily monitored. There remain the difficulties of determining the amount of the royalty and devising a method of apportioning among the claimant copyright owners the royalty funds collected. These problems are complex but by no means insuperable. Although it is beyond the scope of this article to propose a detailed royalty collection and distribution scheme for audio home recording, the author will suggest several approaches that may prove useful in developing such a scheme. One possible model is the Copyright Royalty Tribunal, which governs several areas of copyright law subject to statutorily imposed compulsory licensing under the current Copyright Act." For example, the 1976 Act requires the operators of cable television systems to pay a percentage of their gross receipts into a fund that is distributed by the Copyright Royalty Tribunal among copyright claimants. The Tribunal's procedure for determining the identities and royalty shares of the claimants has worked reasonably well; nevertheless, many copyright owners feel that the systems evolved in the private market are more successful. The American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music, Inc. (BMI) are private enterprises that control the performance copyrights to most musical works published in the United States. The copyright owner of a song li "See 17 U.S.C. § 111(d)(2) (Supp. IV 1980) (cable television); id. § 116(b)(1)(A) (coinoperated jukeboxes). It would be possible, of course, for Congress to apply a statutory royalty scheme administerd by the Copyright Royalty Tribunal to audio and video home recording. The proposed Mathias Amendment, S. 1758, 97th Cong., 1st Sess. (1981), and Edwards Bill, H.R. 5705, 97th Cong., 2d Sess. (1982), would accomplish just such a result. A legislative solution would bypass the difficulties of establishing contributory infringement liability as to manufacturers and distributors of audio home equipment. See supra notes 7086 and accompanying text. One drawback to the Mathias and Edwards proposals, however, is that a collection and distribution scheme administered by the Copyright Royalty Tribunal is likely to be less efficient than a privately negotiated agreement worked out under a court's supervision. See infra notes 96-97 and accompanying text. Of course, Congress could limit itself to imposing contributory infringement liability without addressing how the appropriate royalties should be collected and distributed. This approach would allow copyright owners to collect their royalties through private negotiation or litigation rather than from the Copyright Royalty Tribunal. For a discussion of the economic efficiency concerns relevant to these nonadministrative alternatives, see supra note 88. 1982] Audio Home Recording 1533 censes his performance right to one of these organizations, and the organization in turn issues a blanket license to radio and television stations entitling the licensee to broadcast any title in the ASCAP or BMI catalogue. The licensing fee may be based on a percentage of the station's gross receipts, less certain adjustments. The royalties-minus ASCAP's or BMI's commission-are distributed to the original copyright owners on the basis of market survey information that establishes the frequency with which the copyrighted work is broadcast. This arrangement works to the satisfaction of nearly all the parties involved." The blanket license approach would translate reasonably well to the audio home recording field. A court could require the plaintiff copyright owner to license the defendant manufacturer to continue making audio home recording equipment used to infringe the plaintiff's copyright. In return, the plaintiff would receive a certain percentage of the gross receipts attributable to the sale of the infringing equipment. The court would determine a reasonable royalty percentage based on the number of times the defendant's equipment was likely to be used to record plaintiff's copyrighted material. Such an estimate could be based on: (1) defendant's share of the audio home recording equipment market, (2) the average incidence of infringing home use with respect to the particular type of equipment sold by defendant, (3) the total sales of each of plaintiff's prerecorded musical works, and (4) the appropriate royalty payment due on each work illegally copied." Thus a contributory infringer who markets high-fidelity recording tape especially suited for duplication of musical recordings might be expected to pay a larger royalty than one who manufactures a lower-quality product. A record producer whose copyrighted works are both numerous and popular-and thus frequent targets of home recording-would be entitled to receive larger total royalty payments than a plaintiff less often injured through unauthorized copying. A court could largely avoid the complex task of devising a roy "It is only the "small" or nondramatic performing right that the copyright owner licenses in such instances. See generally 3 M. Nimmer, supra note 13, § 10.10[E]. "See generally 2 id. § 8.19; S. Shemel & M. Krasilovsky, This Business of Music 157-72 (4th ed. 1979). "The parties could commission the relevant information from existing market survey groups in much the same manner as ASCAP and BMI presently do. See S. Shemel & M. Krasilovsky, supra note 95, at 160-61. 1534 Virginia Law Review [Vol. 68:1505 alty collection and distribution scheme by determining the issue of liability and then allowing the parties to negotiate a licensing arrangement among themselves. The private agreement would form the basis of a consent decree, which the court could enforce by retaining jurisdiction over the matter and, if necessary, appointing a master to oversee the execution of the parties' plan. Parties to subsequent actions of a similar nature could agree to be bound by the same consent decree. The consent decree has the considerable advantage that it relieves the courts of the burden of working out the details of the royalty scheme. In addition, this approach may be superior to a legislative solution vesting control in the Copyright Royalty Tribunal, because it allows the parties most directly affected by the remedial scheme to fashion the plan for its execution. It is just this type of consent decree, administered by a special court-appointed master, that successfully governs the licensing and royalty distribution operations of ASCAP and BMI.” IV. CONCLUSION Audio home recording of copyrighted works has never been protected by any special exemption, express or implied, from the scope of the copyright laws. The practice is also not defensible under the "fair use" doctrine that has been developed by the courts and codified in the Copyright Act of 1976. Although enforcing the copyright laws against individual home-use infringers presents grave difficulties, courts can avoid these difficulties by recognizing that the manufacturers of recorders and tapes are contributory infringers and by imposing royalty payments on their sales of recording equipment. If the copyright system is to function effectively in concert with the new audio and video recording technology, such a royalty system is essential. " See United States v. ASCAP, 1940-1943 Trade Cas. (CCH) 1 56,104 (S.D.N.Y. 1941); United States v. BMI, 1940-1943 Trade Cas. (CCH) 1 56,096 (E.D. Wis. 1941). Senator DECONCINI. Thank you very much. I have no further questions. Thank you, gentlemen. That is all we have. Thank you very much. We will now go to the next panel, Mr. Jack Valenti, president of the Motion Picture Association of America; Kay Peters, chairman of the Telecommunications Policy Committee, Screen Actors' Guild, and Jack Golodner, director, Department for Professional Employees, AFL-CIO. Mr. Valenti, if you would just take your time in setting up there. We have a vote on, and the chairman will be back momentarily. I am going to go cast my vote. If you will just sit tight, the committee will stand in recess until the chairman returns. [A brief recess was taken.] Senator MATHIAS. The committee will come to order. Our next panel: Mr. Jack Valenti, president of the Motion Picture Association of America; Ms. Kay Peters, chairman of the Telecommunications Policy Committee; Jack Golodner, the director of the Department of Professional Employees of the AFL-CIO. You have a choice as to how you will proceed. Mr. VALENTI. I will lead off, Mr. Chairman. Senator MATHIAS. Mr. Valenti. STATEMENTS OF JACK VALENTI, PRESIDENT, MOTION PICTURE ASSOCIATION OF AMERICA, INC.; KAY PETERS, CHAIRMAN, TELECOMMUNICATIONS POLICY COMMITTEE, SCREEN ACTORS' GUILD; AND JACK GOLODNER, DIRECTOR, DEPARTMENT FOR PROFESSIONAL EMPLOYEES, AFL-CIO Mr. VALENTI. In case questions come up on a survey that I will present to you, I have supporting me Dr. Frank Cronin, of Battelle Memorial Institute, and Fritz Attaway and Alan Cooper, vice presidents of MPAA. They are seated behind me. They will be assisting me. Let me begin my 5-minute presentation by saying, Mr. Chairman, that there is one truth in the honoring of the ownership of intellectual property and in the observance of copyright, and that truth is: Whenever a new technology enters the marketplace, it is the obligation of the Congress to move swiftly and with precision to define the rights of copyright owners so that this new technology can then enter the market without damaging the creative community. What is tormenting the market today, Mr. Chairman, is a lack of precision and definition. We are watching the entry into the marketplace of new devices and new inventions that were not even mentioned in the Copyright Act of 1976. What has happened, as this committee well knows, is a few years ago some inventive genius put together a machine called a video cassette recorder that could copy in the home intellectual property that is owned by someone else and licensed in another marketplace. That is what the problem is all about: New devices that did not exist when the 1976 law was written, new devices that can easily duplicate what others have labored to create, and then having the machine manufacturers blithely proclaim that the owners of the |