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the price of those records to go so high that the public would not get them? Would you go that far?
Mr. FINKELSTEIN. I do not think you can prophesy those things. I think all you could say is that the price would be increased.
In the dramatic field, the French Co., as you know, rents out or sells copies of a dramatic work to people who are going to perform it and then they charge a royalty of $25 for a performance.
If, instead of charging a separate royalty, they charged an amount, when they sold the copies that would eliminate the necessity of paying royalties for the performance, they would have to charge so much for the copy that the little people would not by able to buy it because their fee is $25 for the smallest performance use.
When it gets on Broadway, it is a percentage, 6 percent of whatever the box office is.
Mr. FORRESTER. In addition, you would be making the person who bought it pay for something when he was not in it for profit.
Mr. FINKELSTEIN. That is correct.
Mr. ROGERS. Now ordinarily the performance being for profit, as you have outlined it ought to be, most operators of jukeboxes are not operating those jukeboxes, but only as a side line.
In other words, I may have a theater and my theater has drama, music, and whatnot, which is my main business, but an operator of a jukebox usually is a fellow who has a restaurant, a tavern, or some place where the main business is that of food, liquor, or something else.
Now, do you feel that because his mairi business may be that and part of the method of attracting his customers is the use of the jukebox, that he should be placed in the same class as a radio station or fellow who is engaged in the business purely for performance for profit?
Mr. FINKELSTEIN. I think that the rates that you fix take all that into consideration, but the fact of liability, as Justice Holmes pointed out in the case of Herbert v. Shanley Company, is that if people have music in their establishment, they have music because it pays and it pays out of the public's pocket, and if the public pays the author would be very poorly protected if he was not allowed to participate in some way in that extra profit that comes in from the use of his work.
Mr. ROGERS. You feel that the percentagewise agreement given here, such as this 1-cent a week, is so infinitesimal as compared with the main part of his business that the music is a sufficient attraction to put him in the class of making a profit from at least part of it, the same as a performer or a theater owner, or something of that nature, that because of that he should pay his proportionate share ?
I will go a little further. You know that the automobile has thousands of patents and so forth. I recognize that a patent and copyright are somewhat different, but once a man sells his right to General Motors, as an example, on a certain part, they may thereafter put that part on an automobile.
Now if I buy that automobile, should I be required to pay a tribute to the inventor?
Mr. FINKELSTEIN. In that case, Congressman, the patented article is made expressly for the purpose of use, and its objective has been exhausted when the car is sold.
Mr. ROGERS. Now here I need this automobile in my business to get to and from my work. If I did not have it, I could not make a living, just the same as the tavern keeper down there needs a little entertainment to get the boys in, so to speak.
Now when he buys the jukebox, or rents it, and when he buys the records and uses them, is he in any different class than I would be when I buy an automobile where there may be a dozen patents on it?
Mr. FINKELSTEIN. The Copyright Act expressly contains a provision that high lights that difference between a copyright and a patent. Section 27 of the act expressly provides that the material object copyrighted shall be distinct from the copyright and the transfer of one does not carry with it the other. And then the law follows that out, it says you shall have the specific right to print or publish; to record the work; to perform it, and so forth; the patent law does not have that.
The patent law gives you the right to use and nobody can touch that for any purpose whatsoever until you make some kind of agreement.
But in the case of a copyright, once you publish it then your rights are defined in those narrow channels that Congress has created.
Mr. Rogers. But the rights after the publication, as you have admitted here, the right of recording now is with the author at the time he secures his copyright.
Now, having that, and giving him that protection, should we now extend that to anybody who may use it thereafter, as in the case of the automobile, and they pay tribute to him?
I want to know what is the distinction?
Mr. FINKELSTEIN. I think just this, if I may point it out: Let us take the same phonograph record we are talking about and have it played on a broadcasting station, on a commercial program by a disk jockey. Nobody questions today but that is the use of a separate right under the Copyright Act, and you have the right to collect.
It is only by sheer accident that the jukebox is not in the same position, only because with the situation that existed in 1909 nobody ever foresaw there would be this jukebox today that would come under that exemption.
Mr. Rogers. Let us grant your argument that nobody foresaw it, and follow it on through. They did foresee that he had a property right and we protected him in it in many instances, just the same as we protect the patent right. But once he makes his own agreement as to how he shall part with those rights, the same as Joe Blow may part with his rights; I gave an illustration of an automobile, but let us take a radio, as an example—there are patent features in each radio—when I buy the radio and use it in my home, I do not pay any royalty to the individual who may have patented that because I paid that at the time I purchased the radio.
Now, why can you not extend the same thing to a jukebox operator? What is the distinction?
Mr. FINKELSTEIN. The logical result of that kind of argument would be that once the sheet of music is sold, it ought to be usable not merely in the home for private use for which it was intended, the same as the phonograph record, but, and let us say you buy an orchestration for it, for a hundred pieces, that you can perform at Carnegie Hall and charge admission and that the composer would not be entitled to collect on that.
Now, he would have to get the money somewhere if he is going to be encouraged to write, and the only thing you can do then is to put it in the price of sheet music. That is the only practical way you can do it.
That would raise the price of sheet music so high for the person who just wants to use it for a performance in the home, that it would place a burden on him that ought to be discharged by somebody else. It is different from patents.
Mr. ROGERS. Your thought is that if the writer protects the right that he has and charges the price that he thinks he should get for it, that it would be prohibitive for the public to get the sheet music!
Mr. FINKELSTEIN. I think it would be clearly in the case of sheet music and I think ultimately in the case of records.
Mr. ROGERS. Let us follow it on through this way:
You know, and I know, that there are thousands of songs, some that become hits and others which are duds. Now, whenever one becomes a hit that is when they drop the nickel in the jukebox, is it not?
Mr. FINKELSTEIN. That is correct.
Mr. ROGERS. Now, at the time the author parted with the recording rights, he could not foresee whether that was going to be a hit or whether it was going to be a dud. He may have sold it low.
Now, that it has become popular, is this not one method of his now cashing in on his work which he did not recognize at the time he sold it?
Mr. FINKELSTEIN. Yes. There has been a very fortunate development in America and throughout the world. Where, in the old days, the author would walk into the publisher and sell his song outright for whatever amount he needed at the time, today he figures on securing his income through royalties, royalties paid by the publisher for sales of sheet music, or royalties paid by a manufacturer of phonograph records, royalties paid by the radio station for the use on radio; by the dance hall, by everybody but the jukebox operator.
If I may get on with my statement, Congressman, I may iron out some of those questions. I did not mean to interrupt.
Mr. ROGERS. That is all right.
When you speak about the author, the author has to worry about creating good works, digging down in the ground. He very rarely is a good businessman for himself. In other words, you do not want to impose upon the author the task of going around and doing business all over the place. He should worry about writing. That is enough of a headache.
Mr. ROGERS. Let us assume that that is all true, but is it the objective and should it be the duty of Congress to put an arm around him and say that his business judgment is bad and therefore instead of making millions we will let him go on the old-age pension roll when he gets to that age?
If that is a problem, that is something else.
Mr. Bryson. Gentlemen, the hour is getting late, and we should be recessing for lunch.
Mr. RAMSAY. It seems to me there is some disturbance over what you said about making private contracts. Is there anything in this bill that, if passed, would prohibit the right of contract
Mr. FÍNKELSTEIN. Nothing whatsoever, Congressman Ramsay.
Mr. FORRESTER. Before you leave, you never did answer my question. You were interrupted. I asked you whether this bill as drawn would be capable of performance.
Mr. FINKELSTEIN. We hope it is.
Mr. FORRESTER. I got the distinct impression now that you were worried about that. I want to know, is it capable of a practical performance on the collection of 1 cent a week on the record ?
Mr. FINKELSTEIN. I think it definitely is, just as the 2-cent manufacturing clause on phonograph records is capable of enforcement.
Mr. FORRESTER. Why, then, do you want this license choice now?
Mr. FINKELSTEIN. We do not want it. We say it is available if the user wants it. We are willing to stand aside, which may happen, which will happen unless the users say they prefer to do business differently from the method outlined in the statute.
Mr. BRYSON. But not to exceed the maximum.
Mr. FINKELSTEIN. Presumably this is the way it is done. This is the way the manufacturers of phonograph records do it. They say: “We wish to record your work. If you insist on the statutory rate, we will not record your work. If you want to be paid less than the statutory rate, we will record your work, and we will pay so much."
Mr. BRYSON. Your bill authorizes the collection of 1 cent a week per record as long as it is in use?
Mr. FINKELSTEIN. That is correct.
Mr. Bryson. Does your bill provide that you can make a blanket charge, or are you confined under the terms of this law to 1 cent a week?
Mr. FINKELSTEIN. You are permitted to make any bargain you want. There is no prohibition against it. There is nothing in the bill that prohibits any kind of bargain that the parties may arrive at.
Mr. BRYSCN. But as a lawyer you have no right now except what the law is going to give you?
Mr. FINKELSTEIN. That is right; there is no compulsion other than what the law gives.
Mr. Bryson. How can you come around and make a blanket agreement when the law says it is going to be the other way?
Mr. FINKELSTEIN. I do not think the Congress would write a law
Mr. ROGERS. May I interrupt you?
You and I recognize under the present set-up the right of authors under ASCAP, where the law authorizes a minimum damage of $250. What this law does is bring us in under that, and it says instead of the $250 then we shall collect 1 cent a week per record for each two jukebox operators so long as he operates; but, if he does not come in and make that payment, this amends or is attached to that part of the law which permits ASCAP to come in and say, “Well, brother, when you forgot to pay your 1 cent a week at the end of the month, then the law is that we can come in and make you pay us a minimum damage of $250."
That is what this bill does. Is that not right?
Mr. FINKELSTEIN. May I put it this way? If you discover—and you rarely discover these things—if you discover that and you find the man has infringed and has not paid as provided in the statute, then he is just an infringer like anybody else.
Mr. FORRESTER. I will make it just as simple as I can.
Suppose you get this bill as it is drawn, how would you enforce the collection of these proceeds?
Mr. FINKELSTEIN. There would be nothing for us to do except possibly in a policing capacity for our members.
Mr. FORRESTER. Whoever is going to do it, how would you enforce it?
Mr. FINKELSTEIN. All you could do would be to go around, I suppose,
to the jukeboxes, and you find in such-and-such a jukebox you have such-and-such titles, you know the titles are listed, and you know whether or not it is your composition.
Now, I suppose that what you do is wait until the end of the following month and see whether you got a report that there was such and such use in such a place.
Mr. FORRESTER. If that is the case, you cannot enforce it.
Mr. FINKELSTEIN. That is right. And then 30 days later the payment.
If you have that, you are finished.
Mr. FORRESTER. If you had to go around in individual cases, it would be impossible of performance; is that not right?
Mr. ROGERS. For your information, Mr. Congressman, ASCAP has an excellent policing force throughout the United States.
Mr. FORRESTER. But it has America to deal with, too.
Mr. BRYSON. Gentlemen, it is 12:30. We usually adjourn at this hour until 2 o'clock. In the meantime, let us get a good meal and maybe our minds will be a bit clearer.
(Thereupon, at 12:30 p. m., the committee recessed, to reconvene at 2:30 p. m. the same day.)
The committee reconvened at 2 p. m., upon the expiration of the recess.
STATEMENT OF HERMAN FINKELSTEIN—Resumed
Mr. BRYSON. Gentlemen, the hour has arrived to resume the hearing. Mr. Finkelstein, you may proceed.
Mr. FINKELSTEIN. Mr. Chairman, I would just like to clear up two more things, if I may, and then, without trying to go into my prepared statement, summarize what I had in mind as quickly as possible so as not to consume any more time than necessary.
Mr. Bryson. You propose to submit your written statement for the record ?
Mr. FINKELSTEIN. Yes, Mr. Chairman.
I am afraid I did not point out this morning the impossibility of any author making the type of agreement that Congressman Rogers suggested with the record company because of the 2-cent compulsory license provision.
It is just one of those things where you miss the obvious answer. The obvious answer should have been that, once you make an agreement with any one record manufacturer to record the work, any other manufacturer can come along and record the same work on the payment of the statutory fee of 2 cents.