months after the Agreement by stating, in paragraph 66 of the Cable Television Report and Order, that "The Commission has no intention of setting out detailed regulations today only to revise them tomorrow. But, as we gain experience and insight, we retain the flexibility to act accordingly to make revisions, major or minor and to keep pace with the future of this dynamic area of communications technology If the Commission can disavow the Agreement in 1972, certainly after the Supreme Court decision in 1974 in TelePrompTer Corp v CBS, Inc., supra n 1, determined that importation of distant signals would have no impact on copyright holders extracting recompense for their creativity and labor or suffer loss, the cable television industry is certainly justified in disavowing the Agreement In addition to this fact, when the compulsion under which CATV was subjected, in proposing compromise plans and accepting the Consensus Agreement, there is no reason to continue to support the payment of copyright. This is particularly true in the light of Department of Justice's opposition to the extension of copyright to CATV as anti-competitive On July 31 and August 1, 1973, hearings were held on S 1361. The bill was reported on July 3, 1974 and was passed by the United States Senate on September 11, 1974 It is now pending in the House of Representatives where no action is likely this year A new bill must be introduced and passed by both houses next year before it becomes law As previously indicated. H R 2512 was passed in 1967 after Section 111 was deleted from the bill following a major confrontation between two committees It is. therefore, important to analyze Section 111 in the context of the present situation because Subcommittee No 3 of the House Judiciary Committee has not considered the provisions of the present section. II-ANALYSES OF S. 1361 S 1361 consists of eight chapters containing some 68 sections in Title - General Revision of Copyright Law There are three chapters of particular concern to cable television Chapter 1 is concerned with the Subject Matter and Scope of Copyright Chapter 5 deals with Copyright Infringement and Remedies Chapter 8 establishes the Copyright Tribunal CHAPTER 1 SUBJECT MATTER AND SCOPE OF COPYRIGHT Section 101 defines various terms. "To perform a work means to recite, render, play, dance or act it either directly or by means of any device or process or in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible To 'display a work means to show a copy of it, either directly or by means or a film, slide, television image, or any other device or process or, in the case of a motion picture or other audiovisual work, to show individual images nonsequentially To perform or display a work publicly means (1) to perform or display it at a piace open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; (2) to transmit or otherwise commun icate a performance or display of the work to a place specified by clause (1) or to the public by means f any device or process whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times' To transmit a performance or display is to communicate it by any device or process whereby images or sounds are received beyond the place from which they are sent ' In the Report of the Senate Committee on the Judiciary to accompany S 1361, at page 113, the meaning of the above provisions are explained as follows "Under the definitions of perform'. 'display', 'publicly' and 'transmit' in Sec- The foregoing provisions make it clear that the bill intends to reverse the holding of the United States Supreme Court in Fortnightly Corp. v United Artists Television, Inc., 392 US 190 (1968) that "Broadcasters perform, viewers do not perform. Thus, while both broad- Section 106 lists five fundamental rights given to copyright owners - the exclusive rights of reproduction, adaptation, publication, performance and display are stated generally in this section "These exclusive rights, which comprise the so-called 'bundle of rights' that However, the bill, after setting up these exclusive rights, provides various limitations, qualifications, or exceptions in the remaining 11 sections of the chapter. Thus, section 106 is subject to those sections and must be read in conjunction with those provisions (Report, p. 110, et seq.). Section 111, which was deleted from H.R. 2512 before it was passed by the House in 1967, has been revised by the Senate. This section modifies the liability of CATV by limitations on the exclusive rights of copyright owners in secondary transmission. This section has five subsections. Subsection (a) provides that a secondary transmission (CATV) embodying a performance or display of a work is not an infringement if: (1) The secondary transmission is not made by a cable system, but is, in effect, a master antenna system located in the local service area of a broadcast station licensed by the FCC for which no direct charge is made. (2) The secondary transmission is solely for purposes described in clause (2) of Section 110 (systematic instructional activities, related to teaching content of the transmission, it transmitted for reception in classrooms, to persons disabled from attending classes or reception by government employees in the course of official duties). (3) The secondary transmission is by a carrier that has no control over subject matter or re- (4) The secondary transmission is by a governmental body or other non-profit organization Subsection (c) provides in clause (1) for compulsory licensing of secondary transmission of the primary transmission by an FCC licensed broadcast facility upon compliance with the notice of ownership and quarterly payment provisions of subsection (d), and (A) the primary transmission is exclusively aural and the secondary transmission is permisible under FCC rules; (B) where the cable system is in whole or in part, within the local service area as prescribed by the FCC, of the primary transmitter or (C) where carriage of signals comprising the secondary transmission is permissible under FCC rules Clause (2) of subsection (c) provides that notwithstanding the compulsory license, the secondary transmission is actionable under Section 501, 502 and 506, as an infringement where carriage of the signals comprising the secondary transmission is not permissible under FCC rules or where the cable system has not recorded a notice with the Office of Copyright, as specified in subsection (d). This section converts the Copyright Law into an enforcement law for FCC rules by which broadcasters could continually harass cable operators with vexatious litigation on any pretext of carriage of signals not permitted by the FCC rules. It is submitted that this is not a proper function of Copyright Law The Committee considered excluding from the scope of the compulsory license carriage of certain professional sports, but decided to leave this matter to the Commission and the Commerce Committee (Report p. 132). Subsection (b). The meaning of subsection (b) is clearer if considered after (c) because it is phrased in terms of an exemption to both (a) and (c). This section provides that notwithstanding exemptions of subsection (a) (master antenna, teaching, carriers or co-ops) or subsection (c) (compulsory license for: aural primary transmissions carried in compliance with FCC rules; local service area signals. or where secondary transmission are permissible under the FCC rules subject to the notice to Copyrights Office) the secondary transmission is not made for reception of public at large, but limited to particular members of the public (pay-TV). Subsection (d) (1) provides for notice of ownership of the cable system and other information that may be required to the Office of Copyright one month before the secondary transmission Clause (2) provides for deposit in the Office of Copyright, on a quarterly basis, in accordance with the Register s regulations (A) a statement of account specifying source of income, number of subscribers and the like and (B) the quarterly royalty, based on a sliding percentage scale on gross receipts from subscribers for the basic services of providing secondary transmission of primary broadcast transmitters The sliding scale runs from 1 percent on quarterly gross receipts of up to $40,000 to 2% percent on quarterly gross receipts of more than $160.000. Based on a $5.00 monthly rate, a 3000 subscriber system would pay $250 a quarter and a 6000 subscriber system would pay $750 a quarter on $90,000 of gross receipts for basic subscriber services (Report p 133) Note the rate base may be expanded to other services on which copyright may already been paid and the rate increased The only limit is what the three arbitrators from the American Arbitration Association prescribe that is not set aside in Congress within 90 days Clause (3) of subsection (d) provides procedures for the distribution of royalty fees deposited with the Register of Copyrights. Subsection (e) contains definitions of "primary transmission", "secondary transmission", "cable systems and "local service area of a primary transmitter" The definition of "secondary transmission" makes special provision for non-contiguous states. territories and possessions The definition of "cable system" is unusual in that for royalty fee purposes the Commission s definition is changed to two or more cable systems in contiguous communities under common owner ship or control or operating from one headend shall be considered one system The definition of "local service area of a primary transmitter" is the one in which a television broadcast station is entitled to insist on carriage by the cable system under FCC rules CHAPTER 5 COPYRIGHT INFRINGEMENT AND REMEDIES Section 501 provides that anyone who violates any of the rights provided in Section 106 through 117 is an infringer. It provides that the legal or beneficial owner may institute an action for infringement subject to certain requirements. The most significant provision is that for any secondary transmission by a cable system which is actionable as an infringement of Section 111(c), a television station holding a copyright or other license to transmit or perform that work shall, for purposes of instituting an action. be treated "as a legal or beneficial owner, if such secondary transmission occurs within the local service area of that television station." The Court may require notice to all persons having an interest in the copyright, as disclosed by the records in the Office of Copyright, Section 502 gives the Courts power to restrain infringements of copyright Section 504 provides that an infringer is liable for actual damages and profits or at the election of the copyright owner, statutory damages of $250 to $10.000 as the Court considers just. If the infringement was willful, statutory damages may be increased to $50,000 by the Court or if the infringer shows that he had no reason to believe his acts were an infringement, the Court may reduce the statutory damages to $100 Section 506 provides severe criminal penalties for willful infringement, ranging from $2500 fine and one year imprisonment to $50,000 fine and seven years imprisonment CHAPTER 8 COPYRIGHT ROYALTY TRIBUNAL Section 801 establishes in the Library of Congress a Copyright Royalty Tribunal This section states that the purpose of the Tribunal is to make determinations concerning the adjustment of royalty rates specified by Sections 111 and 115 to assure that the rates are reasonable If the Tribunal finds the statutory rates a Tribunal rate, or the revenue basis in respect to Section 111 does not provide a reasonable royalty fee for the basic service of providing secondary transmissions of the primary broadcast transmitter or is otherwise unreasonable, the Tribunal may change the royalty rate or the revenue basis on which the fee is assessed or both to assure reasonable royalty fee. This section makes it clear that neither the rates nor the rate base on which they will be calculated is fixed, but may be changed very shortly Section 802 requires the Register of Copyrights to give notice on July 1, 1975 of proceedings to review royalty rates prescribed by Sections 111, 114 and 115. During the year 1982 and every fifth year thereafter, petitions for adjustment of the rates may be filed. Section 803. If the Register of Copyrights determines that there is a controversy on distribution of fees or gives notice of significant interest of a petition under Section 802, he shall request the American Arbitration Association to submit three names to which objections can be filed. If no objections are filed. it will constitute a panel of the Tribunal to function as the Tribunal. If objections to members are well founded, additional names shall be requested and the Tribunal then constituted. There is no provision for appeal to the Courts. Three arbitrators unskilled in this area will effectually control rates and the rate base. Section 806 provides for a report of a Tribunal decision to the Senate and House and Section 807 provides that, if either House resolution, within 90 days, does not favor the decision, it shall not become effective. If no resolution of disapproval is passed, the Tribunal decision shall become effective Section 809 does not provide for any judicial review of the Tribunal's decisions on royalty rates SUMMARY In brief, Section 106 makes cable television systems, when performing as a community antenna fully liable as an infringer when distributing copyrighted programs on signals received from television stations. Exceptions from liability are provided for master antenna, teaching or instructional activities common and other carriers and nonprofit co-ops. CATV is given a compulsory license to carry radio, local and other signals authorized by the FCC. Nevertheless, it is an infringement if carriage of a signal is not permissible under FCC rules or the appropriate notice is not filed with the Office of Copyright. This provision is a real sleeper because it will give copyright protection and penalties both civil, criminal and injunctive to the broadcaster if CATV by accident or otherwise fails to nonduplicate a network or syndicated signal or in any other way carries a signal not permitted by the FCC rules. In addition, over-the-air carriage of pay-TV is fully actionable unless cleared by the owner of the copyright. QUERY: May the broadcaster clear programs apparently not he can only sue. A sliding scale of across-the-board fees is prescribed on basic services which must be deposited with the Office of Copyright quarterly. A hearing will be held in 1975 to consider both the rate base and the rates to be paid to insure a "reasonable royalty fee", whatever that is. No standards are prescribed only the sujective idea of the three arbitrators will prevail unless disapproved within 90 days by one house of Congress. There is no Court appeal to test whether the record supports the award. Stiff civil and criminal penalties are provided for infringements. Broadcasters holding a license are treated as a beneficial owner within their local service area for purposes of instituting an action for infringement. A Copyright Royalty Tribunal is formed. Panels of the Tribunal are appointed from the American Arbitrator Society. The rates prescribed in Section 111(d) (1) and the rate base (basic subscriber service) will be reviewed in 1975 and again in 1982 and every five years thereafter to assure the copyright owner a "reasonable royalty fee." III - THE PUBLIC should not pay a copyright FEE VIA CATV It is clear that the Register of Copyrights makes his whole case for CATV copyright liability on the fact that CATV charges its subscribers and makes a profit and failure to share these profits could damage the copyright. The Supreme Court disagreed with these assumptions and found otherwise in TelePrompTer Corp. v. CBS, Inc., supra n.l. If the Register's theory of liability is correct, which it is not, then anyone who makes a profit, directly or indirectly, from a performance of a copyrighted work should be liable. This liability would run to wire and receiver manufacturers and countless other business enterprises which enable the public to view the performance. Moreover, this theory assumes that the retransmission of a television signal by CATV is a performance which the Supreme Court of the United Sates, on two occasions, has held that is is not. Mr. Arthur Krim, in his testimony before Subcommittee No. 3, House Judiciary Committee (Hearings on H.R.4347, P. 1334, June 24, 1965), attempted to justify the assertion that carriage of programs by CATV would seriously damage the copyrighted work by refer ring to the importation of distant signals. Neither Mr. Krim, the Register of Copyrights, or anyone else has attempted to show that the reception of a signal carrying a copyrighted work off-the-air in an area the television station is obligated to serve and for which the copyright owner has been compensated in any way damages the future runs of the work, the broadcaster or anyone else. As we have shown, the Supreme Court found Mr. Krim's contention erroneous. The fact that CATV makes a profit, by assisting the TV station to deliver its programs to the public it is obligated to serve and for which the copyright owner has been paid. has no bearing on whether CATV should pay copyright CATV services keeps the copyright owner honest by delivering the signal carrying his program to the public for which he has been paid. In February 1965, in my remarks before the International Radio and Television Society, I stated "At the present time, a sponsor who buys a program usually pays the "It is a scientific fact, recognized in the Sixth Report and Order, however, that "A community antenna television system within the Grade B contour merely aids the sponsor in getting his moneys worth from the copyright owner and the station by assuring the sponsor that anyone who desires the signal will receive it clearly, and thus increase the potential audience Certain copyright owners are not satisfied with this They collect from the sponsor who recovers his cost from the public and they would like to collect again from the CATV operator who must also pass his cost on to the public Some way or other it does not seem right to me for the public to have to pay for two tickets to the same performance No one has attempted, to my knowledge, since that time to refute this argument There is an additional factor relating to the question of "profits" Although early figures breaking down program expenses for television were not published, it is significant that the television industry, as a whole was reported in 1952, by the FCC, to have had revenues of $323,266,000 and expenses of $267 902.000. In 1973, the Commission reported that 604 VHF and UHF stations expended 218 266.000 for fim and $64,749,000 for royalty and license fees for a total of $283 015.000. The three networks expended $624.430.000 in amortization expense on programs obtained from others. $3.128.000 for records and transcriptions. $7,248 000 for music license fees and $75,467.000 for other performances or program nights it is difficult, if not impossible to estimate the actual copyright fees received because of the intermixture of other program costs with copyright it is obvious, however that because of television the 28 companies that control, almost 100% of copyrighted fare on television, have made huge profits (of which 85% we are told comes from the top 50 markets) from that exposure and have been paid hand somely by the public through the broadcaster for programs dedicated to serve that same public Why should the copyright owner, these 28 companies. Mr Krim spoke of in 1965 and a few others that may have since joined them, be entitled to "siphon off" duplicate copyright fees from the public under the Quise that CATV makes a profit and these companies are entitled to "a piece of the action ? Those facts should demonstrate conclusively that the copyright owner giants (1) by virtue of their access to the air (2) with no charges by the Government to transport their product to the public (3) compared to CATV companies which pay up to $10,000 a mile for their channels of communication to Subscribers should certainly be required to forego double fees from a reception service for the public The small number of copyright owners who dominate this area should certainly be required to give something back to the public in return for using the public domain for what are obviously huge profits Cable television or its advertisers will pay for any programs it siphons from broadcast television whereas the public would receive nothing for the cash the broadcasters would have the copyright owner siphon from the public via CATV There is a basic conflict between communications policy and any copyright law in which a cable antenna system is required to pay copyright on any signal it is authorized to receive and distribute on its system by the Federal Communications Commission The Court has construed the Communications Act to empower the Commission to regulate CATV In exercising this power, the Commission requires, as a condition of receiving and carriage of television broadcast signals, that CATV systems must carry all local signals The definition of local signal varies according to the size market where the system is located Nevertheless the Commission exercises its power to require carriage of certain signals and permits the carriage of others. Such regulations now constitute CATV a supplemental service to make the Commission's allocations of frequencies more effective Until set aside, revised or revoked, CATV systems must comply with those carriage rules |