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Mr. FINKELSTEIN. Yes; that interferes with the freedom of thought, so it said.

If Muzak pipes music into the several establishments, rather than try to have a license with the individual establishment, we make an arrangement, the society makes an arrangement with Muzak under which it obtains a license for all the establishments to which it sends music.

In other words, you have what we call clearance at the source with the person in the best position to account and pay for the users.

So the little man does not have to do anything more—in the case of Muzak-than

pay his franchise fee to the Muzak Corp. He does not have to deal with another organization.

Mr. FORRESTER. I have one question I want to ask you.

Did I get the impression from your statement that this bill as drawn would be incapable of performance, that is, you could not collect this 1 cent a week?

Mr. FINKELSTEIN. No, Congressman Forrester. If I gave any such impression, I would like to withdraw it. What I say is this: As the jukebox industry is run, the little that you know about the industry, you might find some difficulty in determining who is the proprietor within the statute that is not the fault of the statute, but the fault, in my opinion, of the operation of the industry. You might have some difficulty in determining just who is the owner.

Mr. FORRESTER. I thought I understood you to say there would be a blanket charge because to collect this 1 cent per week would be unenforcable.

Mr. HARRIS. May I ask just one question in relation to that?

Is your blanket charge going to be based on the 1 cent in the statute?

Mr. FINKELSTEIN. I should say that the 1 cent in the statute is a maximum just as the 2 cents in the manufacturing clause provision works out in practice to be a maximum.

Generally, they pay a cent and a half or even less. They pay as low as 1 cent.

But I should think, from the point of negotiation, if you are going to depart from paying on the statutory basis, that you start with the premise that the statute establishes a reasonable value in terms of congressional thinking for a record in the jukebox for a week, and you go from that point on, knowing that the most that the jukebox operator would have to pay under the statute, if he has 50 selections in the machine, would be $26 a year.

He is not going to negotiate to pay more than that with any organization, to pay more than that to all copyright owners.

Mr. HARRIS. Then would it not be more realistic, Mr. Finkelstein, to set this specific sum of 1 cent as a maximum, rather than as a specific sum

Mr. FINKELSTEIN. That question has been raised. If you set it as a maximum, Congress would not be fixing what in its opinion is the reasonable value of the rise under the statutory scheme, just as in the case of the 2-cent provision for what is known as the compulsory license in the manufacturing of records that fixes what at that time Congress felt was a reasonable rate; but in practice, if you are going to negotiate, if the manufacturer is going to negotiate instead of paying the statutory rate, he says, “The most I have to pay, if I do

not negotiate, is what the statute provides and if I do negotiate I want it for less."

Mr. HARRIS. What do you think about the legality of that situation?

Mr. FINKELSTEIN. In the report on the 1909 bill, they went into that. They said that the constitutionality would be questionable, but they pointed to a decision which in the opinion of the Currier committee at that time, in 1909, gave support to the constitutionality of such a provision. That report is appended to Howell's book on the copyright law.

I think I can find the case mentioned here.
Mr. FORRESTER. Could you give us the effect of that?

Mr. FINKELSTEIN. Well, they said this: Inasmuch as Congress is creating a new right that did not exist before, Congress has the power to attach any conditions to the grant of that right that it wishes.

So in that case, in giving the right to control the manufacture of phonograph records, which was denied to a copyright owner before that, they said we can condition the grant by this twofold provision: One, that once the record is manufactured with the consent of the author or copyright owner, anyone else can manufacture upon payment of 2 cents; and then they said the payment of this 2 cents shall. not free the device for use in public performance for profit, and they put another “but” on that—but performance by means of coinoperated machines, as they then knew them, and they referred to penny parlors in this report, shall not be deemed to be a public performance for profit.

Mr. Rogers. Now, when you mention a recording for profit, you are familiar with the law to the effect that the copyright owners of songs have a right under the present law to prohibit the recording of that song without securing a license from the copyright owner?

Now, that is the law, is it not?

Mr. FINKELSTEIN. Not entirely. That is true except as to poems, and so forth.

Mr. Rogers. Now, we know that poems are not covered under that set-up at the present time. We have a bill which this committee has already reported out, H. R. 3589, which covers the point, the recording rights of poems and things of that nature. Mr. Bryson. The Congressman is now speaking of his own report. Mr. FINKELSTEIN. I thought it was an excellent report. Mr. ROGERS. I think Mr. Harris deserves a lot of credit.

I asked one of the others if as an example one of these recording companies make a number of these records, do you not now, under the law of the authority, and you as representative of ISCAP, which has these rights assigned to you, have the right to go to that recording company and say, "Now, listen, if you record this one and put it on so many records, then we from ASCAP shall ask of you to pay a license in the sum of $1,000," or $5,000, or $10,000?

Mr. FINKELSTEIN. Perhaps I should make clear that the society has only a limited grant from its members and that is not one of the things granted to the society.

Mr. Rogers. You mean by that that if I, as a song writer, get a copyright and assign it to ASCAP, or that I have ÀSCAP police it, I guess that would be the proper word, to police and see that I get the proper royalties, that ASCAP does not have the right to say that to a recording company?

Mr. FINKELSTEIN. May I explain the grant to the society!

An author writes a composition. His income will come from these sources: There will be the sale of sheet music, and for that purpose he makes an agreement with his publisher. ASCAP has nothing to do with it. He makes an agreement with this publisher under which the publisher agrees to pay him usually 3 cents or more as a royalty on each copy of sheet music sold.

Then the publisher also has the right to go to the recording company and make an agreement for the licensing of the manufacture of records.

Mr. Rogers. Let us follow you through. At the time that the contract is made with the publishing company, certain rights are given to the publishing company?

Mr. FINKELSTEIN. That is correct.

Mr. ROGERS. Now, would you outline to this committee what those rights usually are?

Mr. FINKELSTEIN. That is what I was trying to do, Congressman Rogers.

The writer grants to the publisher the right to make agreements for the recording of the work on phonograph records and the usual arrangement is on the theory that the writer and the publisher participate equally in any income from other than the direct income of the publisher in the sales of sheet music.

There the publisher pays a royalty.

Mr. ROGERS. Would not the writer then have the privilege, if he so desired, to say to the publisher "I do not give to you the right to recording”?

Mr. FINKELSTEIN. He certainly would.
Mr. ROGERS. He would have that right?
Mr. FINKELSTEIN. Surely.

Mr. ROGERS. Then, could not the writer reserve that right to himself and could he not say to all recording companies who attempt to use it that “You cannot use it without securing a license from me”!

Mr. FINKELSTEIN. Yes. The writer could reserve recording rights in his deal with the publisher. Unfortunately for the writer, no publisher, in my opinion, would take a work under those circumstances, because he cannot get enough merely from the sale of sheet music to justify publication.

You see, he would have to have an interest in these other rights to warrant his making the investment necessary to publish the work.

Mr. ROGERS. What I am getting at is that under the present law the writer is fully protected from these recordings that finally get into the hands of the tavern keepers.

Now, what I want to bring out is that from the time that he publishes it and the law gives him the copyright, if he so desires he may protect himself as to the kind and extent of the publication and the performance for profit, can he not?

Mr. FINKELSTEIN. With the one limitation on the performance for profit.

Mr. ROGERS. What is the limitation?

Mr. FINKELSTEIN. Just the thing we are addressing ourselves to today, that if the performance is by means of a jukebox, then that is outside the control completely of the writer, or any other copyright owner.

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Mr. ROGERS. Does he not have control? Now, the fellow does not get these records for nothing. At least, I never saw any given away. He has to buy them, and when he buys them the fellow who has made them says, “Well, here is something that Bing Crosby is singing.” This, that, or the other. “Here is this song, here is that song. "

That is what they sell to them, and in many instances, as you and I know, they have made a special composition to fit into these jukeboxes, some of them to play as much as 10 or 15 minutes.

Mr. FINKELSTEIN. I have never seen one, Congressman.

Mr. ROGERS. We have some big ones out our way. The point I am getting at is that the author or the writer, having been given full control of his work, that he has produced, having produced it, is in a postiion to control it to any individual who may use it.

Now, Congress has already said that he who uses it for profit rather than in a jukebox shall be liable. Why cannot the writer, when he goes down to this publisher, reserve those rights and then go over himself and make the deal with the recording company so that, in turn, when they sell the records to the tavern owner or whoever else may buy them, that author should be protected?

Mr. FINKELSTEIN. I must be a little bit dense this morning. I think I see your point Congressman. It is this: Would it not be possible to say that when the record is sold to a tavern owner for use in a jukebox the author shall get a larger royalty than when it is sold to a person for uso in the home?

Mr. Rogers. Now, wait a minute. Yes; either that, or the recording company when they buy the rights some place along the line, either they buy it from the publisher or someone that the writer has assigned. Now when he pays that price, why cannot a sufficient amount then go to the artist who created the song and that then be worked out in that way rather than getting every tavern keeper who may have two jukeboxes pay a cent a week?

Mr. FINKELSTEIN. Just this, that if you required, when a record is sold, that the price be high enough to pay a royalty for public performance for profit, the price to the general public would be raised, the price to the man who wants to use it in the home would be raised, and it would be unlawful to say you shall charge a higher price to the tavern owner than you charge to anybody else because once these records get into the channels of commerce—and copyrights are unlike patents on many things-once these records get into the channels of commerce, the author or the copyright owner has no right to control the further use except as that right is granted by the Congress.

Mr. Rogers. In other words, you visualize violation of the Sherman antitrust law if, as an example, one of these recording companies should pay a man $10,000 for a record and having to charge more in proportion in order to get his money back because he may try to control the price of the record at a later date as distinguished from one going in a tavern, one going into a church, and one going into a home.

If they set up a price for that system, that would be a violation of the Sherman antitrust law, then.

Mr. FINKELSTEIN. And I think that Judge Hand put it very well in the RCA v. Whitman case in the second circuit: in the field of copyright unless Congress grants the right you cannot try to get it by agreement in some indirect way.

91590—51-ser. 11, pt. 1-3

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Mr. ROGERS. Congress has specifically granted the right to the writer when he registers it over here and gets a copyright. He has it; that is his property.

Now, having that property and having it so nobody can use it unless he says so, is he not in a position then to bargain on his own property? If not, why not?

Mr. FINKELSTEIN. I think my answer is “No”, and for these reasons:

You see, the patent law gives the patentee the exclusive right to use, and he has complete control of the patent, but in the field of copyright, Congress has given only spec fic rights.

In 1791 the only right given by the Congress was the right to make copies and if you tried by some indirect way to collect on public performances of the work, you would be trying to get something that Congress did not at that time give.

The dramatists suffered terribly under that law, and finally in 1856 the right was given to the copyright owner in the case of dramatic works, to control public performances.

Now, they could continue to perform musical works in public whether or not for profit until 1897, when the right of public performance was given and that right which was given in 1897 and which gave the copyright owner the right to control all public performances was cut down in 1999 to public performances for profit. The rights given are specified in the law: the right to print, publish, and vend, the right to make other versions; there is the right to perform publicly for profit, and the right in the case of musical compositions to make phonograph records subject to the limitations that I mentioned before, the 2-cent royalty, a provision that that shall not free it for public performance for profit so as to nullify the other grant, but then a Îimitation that if it is performed by means of a coin-operated machine, it shall not be deemed to be a public performance for profit.

Beyond that, if you try to assert any rights, you are running afoul of the law.

I think it is similar to the Fashion Originators Guild case where, by agreement among the manufacturers of dresses, they tried to control designs where the copyright law and the patent law did not give any design copyright or design patent for their purposes. The court held you just cannot make an agreement to try to give what Congress has denied.

Mr. Rogers. But here Congress has granted absolute ownership to the fellow who is the author.

Mr. FINKELSTEIN. I do not think they have. I think they have granted only limited ownership, limited in time. It expires in 56 years. It is limited in scope.

You cannot do anything you want with this property. Once you publish it, then your rights are limited to only those specific rights that Congress gives.

Mr. Rogers. One of those specific rights is the right of recording, is it not?

Mr. FINKELSTEIN. That is right.

Mr. ROGERS. That is limited and still given to the author. If he sells it to a publisher, that is his hard luck usually.

Now, let us follow it on through. Do you think if the writer would insist upon his good royalty at that time, that that would in turn cause

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