Ms. RINGER. This is on pages 10 and 11. The language of section 110(5) seems adequate to express the intended scope of the exemption, and any effort to make the provision more explicit by reference to the size of the establishment, the number of patrons, the number of loudspeakers, et cetera, could freeze the provision unnecessarily and leave unpredictable loopholes.

But it seems imperative for fresh consideration to be given to the interpretation of section 110(5) in both Senate and House reports. The commentary should provide a consistent answer to the frequently asked question: How would the Aiken case be decided under the 1975 revision bill? As things stand now, the House reports of 1966 and 1967 and the Senate report of 1974 are inconclusive, while the 1975 Senate report, now in the form of a draft before the full Senate Committee on the Judiciary, may in its final form state: "This clause is not intended to generally exempt performances or displays in commercial establishments for the benefit of customers or employees."

The main point I am trying to get across is that this should be interpreted consistently. It should not be left up in the air, as it is now. The legislative history of section 110(5) indicates that the provision was based in part on the traditional, pre-Aiken interpretation of the Jewell-LaSalle decision, and that public communication by means other than a home receiving set or further transmission of a broadcast to the public was not intended to be exempted. The Aiken majority based its decision on a narrow construction of the word "perform" in the 1909 statute, which in turn was impelled by the earlier CATV precedents. This is what Justice Blackmun was decrying in his concurring opinion.

This basis for the decision would be completely overturned by the revision bill. It is reasonable to assume that Mr. Aiken's apparatus was not an ordinary home receiving set and that, if four speakers were necessary for proper reception by all his customers, there was a further transmission-that is, a communication "whereby images or sounds are received beyond the place from which they were sent.” This is the definition of "transmit" in the definitions section.

In other words, all

Mr. RAILSBACK. Where do you come down on that issue?

MS. RINGER. I came down on the side of an interpretation that would make clear that you would be liable if the receiving set was not of the ordinary home receiving set variety, and you would not be excused by merely stringing speakers-in other words, there is a line that has to be drawn.

Mr. RAILSBACK. You would further specify in the Senate report MS. RINGER. I have not seen the final version of the marked up fullcommittee report. My impression is that it will come close to saving that any commercial use of music in this type of situation would be an infringement. I would not go that far. I would say the distinction is whether or not you are actually retransmitting from something that is not home-receiving apparatus. I am inclined to think that is probably what Aiken was doing.

The Court may well have been right in what it was deciding under the 1909 law and may well have been bound by the CATV precedents. There was some regret expressed. They felt themselves trapped into this because there has been licensing in areas like this, and it was a

drastic thing to do to declare this long-standing interpretation of and earlier Supreme Court decision incorrect.

Mr. RAILSBACK. So where they would use some apparatus in addition to the home receiving set, you would make that distinction?

Ms. RINGER. Of course, you have quadrophonic stereo reception now, which presumably involves four speakers. If you have four speakers, a very nice hi-fi rig behind your bar, for example, in a restaurant, and the people that are sitting at the bar get the benefit of it. I would say that would not be an infringement, but if you are stringing the speakers around the restaurant so that people in all four corners or all of the areas of the restaurant or all of the rooms of the restaurant are getting the performance, I think that was what subsection 5(b) was intended to catch, intended not to exclude from the exemption.

Mr. KASTENMEIER. Is it your point of view-apparently we do not know-I read the case of course that Mr. Aiken had a home receiving set, but nonetheless strung four speakers to various parts of his establishment.

Ms. RINGER. I am not clear as to what kind of receiving set he had. Of course, some home receiving sets are very sophisticated. It may well have been something that would fall within that, but he did string four speakers to it, and it was I think recognizable as a commercial motivation rather than a simple mom-and-pop type of candy store I'll-entertain-myself-while-I'm-waiting-for-customers type of operation.

This is, of course, something that needs to be addressed in the report. I do not think there is any necessity for amending the bill.

Mr. DRINAN. Ms. Ringer, would you explain at the bottom of page 9 and 10 the proposed addition to section 501? How does that fit in with the rest of your

MS. RINGER. That is the next point. It is completely unrelated.

Mr. DRINAN. We should just let her talk. Everything flows so well. Ms. RINGER. This is ballroom point. It is completely unrelated. I guess there is some remote relation to the basic liability question, but essentially this was a proposal put forward on behalf of entrepreneurs who contract with independent musicians or combos, and they are not employed. It is an independent contract relationship. The performers arrive, and they unpack their material. They play. Nobody controls what they are playing, and they get back in their van and go on, and somebody from the performing rights society is in the audience, and they sue the proprietor. They consistently win in the Courts, and there was an effort in the Senate-which I believe also produced at least one letter here to your subcommittee-proposing further amendment. That would in fact be to section 501, but it is really more relevant to this subsection-that is why I put it here-which would read, at the top of page 10:

Notwithstanding any other provision of this title, the proprietor of an establishment in which nondramatic musical work is performed by or under the exclusive directions of an independent contractor, not an employee of the proprietor, is not liable for infringement with respect to such public performance.

This was put forward as an amendment offered by Senator Hruska in the Senate Judiciary Committee on October 7 and was voted down.

I would agree with that result for the reasons I give on pages 11 and 12, in which I indicate that vicarious liability in this situation is a settled principle of copyright law, that a person who violates any of the exclusive rights of the copyright owner is an infringer, including persons who can be considered related or vicarious infringers.

The case law on this suggests that to be held a related or vicarious infringer in the case of performing rights, a defendant must either actively operate or supervise the operation of the place where the performances occur or control the content of the infringing program, and he must expect commercial gain from this operation in either direct or indirect benefit from the infringing performance. This does include the entrepreneurs of ballrooms and similar places.

There is a large and forceful body of authority upholding vicarious liability where these conditions are met. No justification exists for adopting a contradictory amendment which could create a large and dangerous loophole in the public performance right. I am quoting actually from a letter I wrote to Senator McClellan who had asked specifically for my opinion on this earlier, and I did give him my opinion with a lot of citations which I have spared you.

Mr. PATTISON. How, as a practical matter, can the owner of the establishment-let us say, let us talk about a fieldhouse at an institution, a college, how as a practical matter can that owner when he has got an independent contract agreement, and he is being very careful not to turn into an employer-employee relationship with all the liabilities that flow from it, how can he as a legal matter control the music that is played by the group that is performing?

Ms. RINGER. Admittedly, a lot of this is not handled in a very formal manner, but of course he can indemnify himself.

Mr. PATTISON. It can be part of the contract?

Ms. RINGER. Yes. Turning it around, Mr. Pattison, as these things operate practically, he may be the only person that can be found for anyone to sue.

Mr. PATTISON. Which makes the indemnity not terribly valuable. MS. RINGER. I would probably agree with that as a practical matter, but it is a balancing which the courts have been very consistent in resolving in favor of the copyright owner.

This is not a part of the statute, but is a part of copyright case law. Mr. PATTISON. Thank you.

Ms. RINGER. This is all on chapter 4.

Now, I will go on, if I may, to the difficult problem of cable television. This is in a very fluid state. I think this is illustrated by the fact that after I wrote this, the full Senate Judiciary Committee did work its will and made a few changes. I think there has been a strategic policy decision to save some of the proposals for the House, so I think this is not as settled as some of the other issues we have been discussing.

What I mainly want to get across to you here is the enormous body of history that lies behind this provision and the complexity of the situation which involves by no means just the present law and the bill, but in addition a body of administrative regulations which have an extraordinary history of their own and ongoing activities in the executive branch, which is continuing to work on this today.

I think I can review very briefly the history of copyright issues involving cable television under 14 headings which I have included on pages 2 through 26 of this chapter.

Cable was not an issue until around 1963 in copyright because it had not yet come to have a significant commercial impact on the copyright owners' rights. I was interested to discover, when I was doing some research in Europe on performers' rights, that this secondary transmission issue had been a copyright issue before World War II with respect to radio in Switzerland where the Alps were in the way of the radio signals, and the same questions had arisen.

There are written into basically two versions of the Bern Convention provisions respecting retransmissions of copyrighted material, but in the United States the issue really did not arise until the early 1960's. The early efforts to try to deal with this were a little naive, although I think not uncreditable.

Let me skip to the hearings that were held before your subcommittee in 1965-I discuss them briefly on page 5-which were black and white in more ways than one. The problem was put forward to your subcommittee in completely dialectical terms, the operators arguing for complete exemption, and all of the copyrights owners plus the broadcasters and sports promoters arguing for full liability. It did look very, very difficult. It looked like a very difficult problem to try to reach any sort of compromise on this.

Before your subcommittee acted, while it was marking up the bill in 1966, the Federal Communications Commission, which had backed and filled on this issue, came down with an order asserting jurisdiction over CATV systems and promulgated rules which I think almost everyone would agree amounted to a freeze. This was a system involving a very complex requirement for hearings in order to import distant signals.

There were a number of requests for hearings. The backlog soared instantly. It was obviously not a viable way of approaching the problem, but this was the rule. During the time you were considering the bill in 1966 and 1967, the FCC had in effect frozen the importation of distant signals because you had to have a hearing, and nobody could get through to the end of the hearing.

On October 12, 1966, and again on March 8, 1967, the House Judiciary Committee reported the general revision bill with a carefully worked out compromise provision which neither imposed full liability on cable operators nor made them completely exempt. It adopted what was known as the white, black, and gray area approach. This did not involve compulsory licensing, but it involved the white area, which was completely exempt, the black area that was completely liable, and an intermediate or gray area which was liable only if advance notice had been given that a local station had an exclusive license to show the same program in the area.

This was, of course, a fairly clear-cut recognition of copyright owners' rights in this subject matter. I have to mention-although I am coming to it in a minute in more detail-that during this period, these questions were being heavily litigated, and the cases were headed for the Supreme Court. There was some support for the compromise, but more opposition, and it was obvious that the bill as it

stood had enormous communications implications, which produced an unfortunate jurisdictional dispute between the Judiciary and Commerce Committees, which got onto the floor, as I am sure the chairman remembers very well.

The result was that, in a successful effort to save the rest of the legislation, the CATV section was deleted in its entirely, and the whole problem was sent over to the Senate.

Meanwhile, after victories in lower courts, the copyright owners lost their big copyright case in cable in the Fortnightly case in June of 1968. In fact and I think this is sometimes forgotten-there were two decisions a week apart in the Supreme Court, both very fundamental to cable television in this country. These were the Southwestern case and the Fortnightly case. They were certainly intended to interact, but they have not done so.

The Southwestern case, which was decided first, involved two questions-I am now on page 7-first, whether the Federal Communications Commission has authority, under the Communications Act of 1934, to regulate CATV systems at all; and second, whether 1966 FCC regulations banning cable retransmission of distant signals into the 100 largest television markets under certain conditions were within the Commission's authority.

The Court's decisions supported the FCC's authority to regulate cable television under the 1934 act and without additional legislation, as long as the actions it takes are reasonably ancillary to the effective performance of the Commission's various responsibilities for the regulation of television broadcasting. This was an opinion by Justice Harlan, and it made clear there were limits to the Commission's authority, but it pointedly declined to define what those limits are, and it specifically upheld the administrative order involved in the case as coming within the regulatory authority of the FCC.

The FCC-and this is no secret-was certainly relying on the Court to uphold copyright liability as part of its master plan. It was definitely relying on copyright to assist it in regulating cable as part of its efforts to support local over-the-air broadcasting in the late 1960's. This was its policy, and it was seeking the help of the copyright law in carrying it out.

It was therefore quite disappointed that the Supreme Court 1 week later held against copyright liability in the Fortnightly case, but under circumstances that left the scope of the decision somewhat unclear. I am reading now from page 8.

The FCC in 1968 was committed to the active support of local broadcasting, particularly by independent stations on the ultra-high frequency bands, and it considered it a duty to maintain the inviolability of clearly defined geographic television markets by preventing cable from fragmenting local audiences and thereby causing loss of advertising revenue to the local stations. This is a flat statement. I think it is true. The FCC wanted cable to stand and bargain, and it really wanted to prevent what it called unfair competition as against local broadcasters.

The FCC was therefore as disappointed as anyone by the Fortnightly decision which held that, at least under the circumstances in the case, cable operators do not perform the programs they retrans