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G. UNCONSCIONABLE TRANSFERS

This new statutory pattern would greatly aid creators while meeting the needs of copyright users. It should be pointed out, however, that even this proposal has some drawbacks for creators. The most noticible is the fact that publishers can use work forever and pay only one fee

if certain conditions

are met. For this reason, which stems from the general inability of the creator to negotiate on a value for value basis, we would suggest that the concept of unconscionability be added to the statute. Such a concept was present in Section 16 (Alternative B) with respect to unremunerative transfers in the 1964 Preliminary Draft. We would suggest that such a remedial concept be added as a new subdivision (f) for Section 201. It would read as follows: "(f) Unconscionable transfers. An author may, at any time following the transfer of a copyright or of any rights under it, bring suit to reform or terminate a transfer in which the profits received by the transferee or his successors in title are strikingly disproportionate to the compensation, consideration, or share received by the authors or his successors. In such action the plaintiff shall have the burden of proving that, taking into consideration all factors including the bargaining position of the parties, their respective contributions to the success of the work, and changes in business practices or media exploitation, the terms of the transfer have proved to be unfair or grossly disadvantageous to the author. The court shall decide the action in accordance with the principles of equity, and shall have discretion to reform or terminate the transfer on whatever terms it considers just and reasonable."

V. CONCLUSION

Our proposals would, we believe, permit our members and creators generally to bargain on what will more closely approximate a value for value basis. At the same time, these proposals will

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permit publishers to purchase the usage in creative works that they need.

We are most appreciative for the opportunity to make this Supplemental Submission to the Judiciary Committee and hope that it will be of assistance in considering S. 2044 and the effect of work for hire on our nation's creative free lancers.

SECTION 101

APPENDIX A

excerpt giving work-for-hire definition

17 USC 201.

17 USC 202.

A "work made for hire" is

(1) a work prepared by an employee within the scope of his or her employment; or

(2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. For the purpose of the foregoing sentence, a "supplementary work" is a work prepared for publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting upon, or assisting in the use of the other work, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes, and an "instructional text" is a literary, pictorial, or graphic work prepared for publication and with the purpose of use in systematic instructional activities.

§201. Ownership of copyright

(a) INITIAL OWNERSHIP. Copyright in a work protected under this title vests initially in the author or authors of the work. The authors of a joint work are coowners of copyright in the work.

(b) WORKS MADE FOR HIRE.-In the case of a work made for hire, the employer or other person for whom the work was prepared is considered the author for purposes of this title, and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright.

(c) CONTRIBUTIONS TO COLLECTIVE WORKS. Copyright in each separate contribution to a collective work is distinct from copyright in the collective work as a whole, and vests initially in the author of the contribution. In the absence of an express transfer of the copyright or of any rights under it, the owner of copyright in the collective work is presumed to have acquired only the privilege of reproducing and distributing the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series.

(d) TRANSFER OF OWNERSHIP.

(1) The ownership of a copyright may be transferred in whole or in part by any means of conveyance or by operation of law, and may be bequeathed by will or pass as personal property by the applicable laws of intestate succession.

(2) Any of the exclusive rights comprised in a copyright, including any subdivision of any of the rights specified by section 106, may be transferred as provided by clause (1) and owned separately. The owner of any particular exclusive right is entitled, to the extent of that right, to all of the protection and remedies accorded to the copyright owner by this title. (e) INVOLUNTARY TRANSFER.-When an individual author's ownership of a copyright, or of any of the exclusive rights under a copyright, has not previously been transferred voluntarily by that individual author, no action by any governmental body or other official or organization purporting to seize, expropriate, transfer, or exercise rights of ownership with respect to the copyright, or any of the exclusive rights under a copyright, shall be given effect under this title.

§ 202. Ownership of copyright as distinct from ownership of material object

Ownership of a copyright, or of any of the exclusive rights under a copyright, is distinct from ownership of any material object in which the work is embodied. Transfer of ownership of any material object, including the copy or phonorecord which the work is first fixed, does not of itself convey any rights in the copyrighted work embodied in the object; nor, in the absence of an agreement, does transfer of ownership of a copyright or of any exclusive rights under a copyright convey property rights in any material object.

Senator MATHIAS. Our next panel will be composed of Mr. Townsend Hoopes, president, Association of American Publishers; Mr. Gabe Perle, vice president, Time, Inc. Mr. Secretary, do you want to open this panel?

Mr. HOOPES. Thank you, Senator Mathias, I would be glad to. STATEMENTS OF A PANEL CONSISTING OF TOWNSEND HOOPES, PRESIDENT, ASSOCIATION OF AMERICAN PUBLISHERS, ACCOMPANIED BY CHARLES BUTTS, FIRM OF HOUGHTON MIFFLIN; JOHN ROBLING, ENCYCLOPAEDIA BRITANNICA; JON BAUMGARTEN, COPYRIGHT COUNSEL; AND E. GABRIEL PERLE, VICE PRESIDENT, TIME, INC., ACCOMPANIED BY BARRY AGDERN, CHAIRMAN, COPYRIGHT SUBCOMMITTEE, LEGAL AFFAIRS COMMITTEE; ALFRED H. WASSESTROM, FORMER CHAIRMAN, LEGAL AFFAIRS COMMITTEE, MAGAZINE PUBLISHERS ASSOCIATION Mr. HOOPES. My name is Townsend Hoopes. I am the president of the Association of American Publishers. I am accompanied this morning by Charles Butts of Houghton Mifflin, John Robling of the Encyclopaedia Britannica, and Jon Baumgarten, who is our copyright counsel.

I will briefly summarize my written statement, Mr. Chairman, which I hope will be produced in the record.

Senator MATHIAS. Let me say for the benefit of all succeeding witnesses that the statements will appear in full in the record. You can brief them, summarize them for your oral testimony.

Mr. HOOPES. We welcome the opportunity to express our views on S. 2044 relating to works made for hire. As to books, S. 2044 applies essentially to reference works like encyclopedias and to instructional texts-mainly for elementary and high schools. It appears to us that this bill is based on a faulty premise.

In his statement accompanying introduction of the bill, Senator Cochran stated that it would "protect the author's copyright in the works described, except where express agreement is made to do so otherwise." But examination of the 1976 Copyright Act clearly shows that this desirable safeguard is already present in that law. Section 101, clause (2), the clause that would be amended by the Cochran bill, now states that commissioned and collective works can qualify as "works made for hire" only "if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire."

Section 201(b) of the Copyright Act provides further that, in the case of a work established as "made for hire" by reason of agreement between the parties, the publisher and the author may expressly agree upon the allocation of rights between them.

In sum, we believe that the Cochran bill is based on the mistaken assumption that the Copyright Act automatically divests authors of commissioned works of their rights. This is not the case. It should be noted that the 1976 Copyright Act represents in this regard a change in favor of the author. Under the earlier law, copyright in commissioned works was generally presumed to reside automatically and totally in the publisher. Publishers agreed to changes in 1976 as part of a carefully balanced compromise between author rights and interests and basic business needs.

In drafting section 101(2) of the work for hire provisions, Congress considered the practical problems involved in publishing certain categories of works. As to book publishers, this means essentially encyclopedias or other reference works and instructional texts-mainly for elementary and high schools. The typical encyclopedia is composed of contributions from literally thousands of individual authors. No encyclopedia publisher can employ all of the experts in the variety of fields necessary to produce a quality work. Instead, each contributor is commissioned-in the terms of the act, hired for a specific task by the publisher, who also assumes all the risks of the venture. The publisher applies his creative talents to direct, coordinate, and merge all of these efforts into a single work that will serve the anticipated needs of the public. In addition, encyclopedias are periodically revised after the first publication.

Similar considerations apply to the publication of instructional texts. Here, the educational publisher commissions-that is hiresa carefully selected team of authors, usually professional teachers, to contribute to the preparation of the work. Then he supervises the planning, creation, and marketing of those materials. It is inherently difficult to look at the final product and isolate a particular author's original contribution. But in the absence of a single identifiable copyright owner of the whole work, the process of revision and the ability to adapt or license particular versions and uses-for example, abridgements or foreign language editionswould be severely inhibited. If segments of larger interwoven units were subject to myriad terminations of the publisher's rights, that would create a totally unworkable situation.

These concerns I speak of are not parochial, nor limited to the financial fate of particular publishers. They extend to the publishing community's basic ability to meet the public needs for reference and instructional works. They are also related to the problem of maintaining the economic incentive for publishers and related entrepreneurs to produce important and socially useful collective works.

Thank you, Mr. Chairman.

Senator MATHIAS. Thank you, Mr. Secretary. Mr. Perle?

Mr. PERLE. Mr. Mathias, thank you for giving me this opportunity to talk to you and for the record.

My name is E. Gabriel Perle. I am submitting this statement on behalf of the Magazine Publishers Association.

I have prepared and submitted for the record a written statement, which I shall not read because in 5 minutes I think I can be more effective in responding to some of the things that I heard this morning.

I feel a sense, as I said in my statement, of déjà vu about this. For 20 long years there was a copyright law revision effort. A good part of that effort was devoted to work made for hire. At that time it was called employee for hire. I might add that there is nothing in the statute today which uses the word employee. We did get that out of the statute.

In the course of those 20 years, all sides were heard talking about everything. I could talk not for 5 minutes but for hours just

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