Senator MATHIAS. The opening witness will be Mr. David Ladd, the Register of Copyrights, who is accompanied by several of his assistants from the Copyright Office, whom I will ask him to introduce for the record.

Mr. Ladd?

STATEMENT OF HON. DAVID LADD, REGISTER OF COPYRIGHTS AND ASSISTANT LIBRARIAN OF CONGRESS FOR COPYRIGHT SERVICES, ACCOMPANIED BY DOROTHY SCHRADER, GENERAL COUNSEL AND ASSOCIATE REGISTER OF COPYRIGHTS; HARRIET OLER, KENT DUNLAP, AND MARILYN KRETSINGER

Mr. LADD. In a moment, Mr. Chairman. First of all, I would like to say how delighted I am to share with Miss Sills the audience which the Copyright Office has drawn here today. [Laughter.]

Senator MATHIAS. We will do this for you any time you come.
Mr. LADD. Thank you, Mr. Chairman.

It is, of course, an honor to be invited before the committee to give the Copyright Office views on the legislative issues before you. It is a comparable honor to be invited to appear here in the company of Miss Sills. I have been an opera buff for many years; I have heard Miss Sills many times, and never in my wildest dreams did I ever hope to share the stage with America's prima donna.

Let me take this occasion, though, to express to you, Miss Sills, my admiration for the plans that you explained at the Smithsonian lecture a few weeks ago to create a truly national American opera company, which is already focused on American singers and is increasingly focusing on American composers. When I met Miss Sills on that occasion, I did ask her if she would revive at the New York City Opera Virgil Thompson's "The Mother of Us All." She said she would be delighted, upon my payment of $250,000. And, Miss Sills, I have not yet been able to come up with the money.

Finally, before I turn to my statement, let me say that on this day of my entry into show biz, I am very glad that my act does not follow Miss Sills.

Now let me introduce my colleagues from the Copyright Office. Dorothy Schrader is general counsel and Associate Register of Copyrights; Harriet Oler, Kent Dunlap, and Marilyn Kretsinger, who are all attorney advisers.

Let me open my statement by offering to the committee and to the Congress my congratulations. As I say in the prepared statement, the Betamax decision, which is what brings us here today, did break like a thunderclap over the copyright and entertainment worlds. There was, as you suggest, Mr. Chairman, a considerable amount of sensational and, I believe, distorting publicity about that opinion; but now, at the remove of several months, the Congress is in a position calmly to assess the issues which were raised in that litigation and are raised by the current problems in the industries we are concerned with. I have submitted a rather long statement; and since, as you have directed, it will be entered in the record, Í hope to boil this statement down to some essentials-really, to six points. And I hope in going through those six points as briefly as possible, to identify some rather wide swaths of controversy and debate which probably can be eliminated from these hearings.

The first point is that while the issue that we are dealing with here is independently of enormous importance, it is not an isolated issue. It is a particular expression of the continuing problem of adapting copyright to changing technologies. The Congress has already encountered this in trying to adapt the law to the photocopying issue, for example, and if I give you one example, I will show you that this is not atypical-that is to say, the issue before us is not atypical.

Satellite transmission is fairly recent, but already, home-Earth stations are dropping so rapidly in price that the unauthorized interception of those signals is becoming a problem for program producers and suppliers. There, as here, as in photocopying, there is a continuing and accelerating problem of adapting copyright to the technology.

What those instances have in common is the difficulty of finding, discerning, and measuring mass use of copyrighted materials.

The second point that I want to make is there is a basic issue, as you suggested, Mr. Chairman, in your opening statement, that everybody agrees upon. No one is trying to stop home taping. As a matter of fact, I doubt that anybody ever had that in mind at any time. No one is trying to invade the privacy of the home. No bill before the Congress would forbid home taping. Every bill before this committee now expressly allows it.

The DeConcini bill does provide broad exemptions for home taping. Your amendments do, too, but in addition, they provide compensation for the program properties which are used. In video, the authorization for that home taping is for personal use; in audio, the authorization is even broader, because it allows medium-tomedium taping as, for example, taping from authorized copies of discs to tapes.

The mechanism which is proposed in your amendments is a compulsory license, and it follows a model which we already have in the copyright law of the cable television compulsory license. That is to say, there is a royalty imposed upon the tape and hardware, but then, in common with the cable compulsory license, the rates are to be set by the Copyright Royalty Tribunal, collected by the Copyright Office, distributed in accordance with the directions and adjudications of the Copyright Royalty Tribunal, and all of this is subject to judicial review.

The third point is to identify an area which I think you really could eliminate from the discussion, for all practical purposes. There is much debate about whether or not the Sound Recording Act of 1971 included a home audio taping exemption, whether any such exemption was imported sub silentio into the 1976 revision, and whether so imported, it was expanded to videotaping as well. The legislative history on these issues is not altogether clear, but they need not occupy this committee's time. What is clear from the legislative history is that the 1971 Sound Recording Act was directed at commercial piracy primarily, and only incidentally was home taping considered, that no one then saw any practical way of controlling home taping; that the Copyright Office at that time advised the Congress that a crunch would come on home taping, and the crunch is now here.

The point is that the Congress here-whatever the result in the Betamax case and on whatever rationale-the Congress here is legislating prospectively, and in my view, Mr. Chairman, it should legislate regardless of the timetable for the review of the Betamax opinion, if any, in the Supreme Court.

I want to turn now to the question of harm. Before I enter upon a discussion of the potential harm to the copyright industries here involved, I want to make clear my premise that any unauthorized use of copyrighted material is an invasion of the right, and that Congress should be extremely wary in all cases of permitting an impairment or erosion of the basic rights which are declared in section 106 of the statute.

On audio, there really is no question that almost all of the home taping for audio displaces the original, authorized copyright royalty bearing copy. I daresay that in the hearings which will ensue, no one will dare argue to the contrary. In that case, the harm is very clear, palpable, and at the moment, very large. If we turn to video, there is some injury from time shifting, but the primary injury is from taping for what has been called librarying.

Now, much of the debate which has gone on to date in the press, among the public, and in the hearings in Los Angeles has dealt with how much of that home videotaping is done for time shifting and how much of it is done for librarying. Fortunately, in my view, you do not have to spend very much time on that, because your bill, Senator Mathias, contains an automatic mechanism which will concentrate the royalty precisely at the specific point of greatest harm. In order to time shift, the home videotaper needs not more than four or five tapes. He may, under your bill, by the purchase of a machine and the payment of the reasonable royalty which is called for, acquire the power to tape for a lifetime. He may also, by the purchase of not more than four or five tapes, and the payment of a nominal royalty, acquire the capability of taping for a lifetime. Only to the extent that the home taper desires to library will he require the additional tapes, and on those tapes, he will pay the royalty. So there is an elegant and precise mechanism directly in the bill itself which concentrates the royalty precisely on the point of principal injury to the copyright industries.

I want now to turn to point 5, the international considerations which in my view are important. There is no doubt, and there is considerable evidence assembled in our statement to the effect that the marketing of American copyrighted works, motion pictures and recordings abroad is very important to the American balance of payments and promises to become more so as this traffic, in relation to all other international commerce, becomes larger. In two countries already, Germany and Austria, as we explained in our statement, legislation has already been adopted to impose the kind of royalty and the kind of scheme which you propose in your bill. But there is a problem in other countries generally, and the kinds of solutions which you have proposed here are under consideration there. If we do not set an example in the United States by providing for this kind of compensation for the mass use of copyrighted property, it will be impossible for me and other copyright officials and our trade representatives to urge such a course upon foreign countries so that the United States and its citizens may enjoy the

royalties which they deserve from the use of their copyright properties abroad.

Finally, as the sixth point and as a general principle, I implore the Congress to be wary of carving exemptions into the Copyright Act. Each one presented may be worthy and may have popular support, but the copyright royalty is a minor component of the final price to the consumer of almost any copyrighted product. But cumulatively, those royalties provide the powerful incentive to support the creation and distribution of copyrighted works to the American public and indeed, to the international public.

That completes my prepared statement, Mr. Chairman. I will be glad to answer any questions you may have.

Senator MATHIAS. Mr. Ladd, I think your statement has been a very strong one and very comprehensive, and I appreciate it. My own involvement in this issue has extended over a long period of time. I first came face-to-face with the general principles that are involved in the famous jukebox legislation that survived from Congress to Congress. We never really got it resolved until we finally passed the Copyright Act of 1976. But I suppose that that controversy lasted almost 20 years, trying to resolve the exemption that had been put into the Copyright Act of 1909 for coin-operated devices. And this is really a technological extension of the principles that are involved in that long-running dispute, and I hope this one can be resolved in less time.

You have mentioned the fact that we are dealing with the protection of the intellectual property of American artists and authors-

Mr. LADD. In truth, it is all artists and authors, but yes, American authors, as well.

Senator MATHIAS. Well, all. But I am thinking now particularly in the context of the use of American intellectual property in other parts of the world.

Mr. LADD. Yes.

Senator MATHIAS. One of the exciting aspects of dealing with this kind of legislation is that we are creating something; we are doing something innovative, I think, and we are dealing with the cutting edge of the new technologies, so that we can take the leading position, I think, in the world, in showing how to do this job. But it is my understanding that in both Great Britain and Germany, they are at least experimenting with other approaches, using a kind of jamming signal whenever a copyrighted performance is being broadcast.

Mr. LADD. May I respond to that-whenever you are ready for me to.

Senator MATHIAS. Well, I am just anxious to know what is going on in other places.

Mr. LADD. In the "Green Paper" which was issued by the United Kingdom government, the possibility was held out of developing spoiler devices to prevent unauthorized copying.

Senator MATHIAS. This would permit broadcast, but simultaneously, the spoiler signal is sent-

Mr. LADD. Would foil the copying. The motion picture industry, for example, has tried to develop such systems and has not really been successful. That came out in the International Conference on

Motion Picture Piracy in Geneva last year. There will be motion picture industry witnesses following me, and they can probably answer that more particularly.

One of the members of our staff has said that the creation of a better mousetrap in terms of spoilers will probably just simply result in smarter mice. And I really do not think that that approach is very promising.

If I may turn my attention to Germany and Austria, I am not aware there of experimentations of a technological nature to foil, but there is in Germany now a proposal to revise the statute which is already in place, and the Austrian statute is only now being fully implemented.

Senator MATHIAS. One of the discussions that was prolonged in the drafting process of this amendment was whether or not we should have attempted to set the royalty fees in the legislation, whether Congress should assume that duty. What is your feeling about that?

Mr. LADD. I think it should not do so for these reasons. The bill provides—your amendment provides for, I think "appropriate and reasonable" is the term, compensation. I would favor allowing the Copyright Royalty Tribunal to operate within that broad standard. If at a later time, the Congress finds that those standards are not satisfactory, it may revise the legislation to insert them. But I am afraid that the insertion, for example, of a ceiling might very well result in something not resembling a market value. I oppose that. Senator MATHIAS. One final question. The testimony of the Home Recording Rights Coalition asserts that this amendment would jeopardize the existence of 25,000 small business establishments, that a number of the retail establishments that sell and service equipment would find this an unreasonable burden. Do you have any information which would shed any light on this concern?

Mr. LADD. I do not, Senator. I cannot respond to that. My view is that the copyright owner should be allowed to control the exploitation of his property, but on the particular question you are asking as to what effect that will have on the number and size of distribution outlets, I do not know.

Senator MATHIAS. Thank you very much, Mr. Ladd. [Prepared statement of David Ladd follows:]