CHAPTER 1, SECTIONS 110, 112

NONCOMMERCIAL BROADCASTING

Summary

Section 110 deals with seven types of public performances and displays which, because of their noncommercial or special nature, are exempted from copyright liability. The most important of these involve face-to-face teaching activities, in folder 4, and instructional broadcasting. Not included among the activities exempted is "public broadcasting"-noncommercial broadcasting of a general cultural or educational nature to the public at large. The treatment to be accorded to this type of performance remains a major issue in the general revision bill.

Section 112 deals generally with so-called "ephemeral recordings"-usually one recording of programs made by a licensed broadcaster for delayed transmission or archival purposes. The issue arises with respect to the number of these recordings an unlicensed instructional broadcaster can make, and how long he can use them. The bill allows the making of 30 copies and their use for seven years, and the dispute is whether this goes too far or not far enough.

Background and general considerations

The present law exempts from the control of the copyright owner all performances of nondramatic literary and musical works that are not "for profit." A performance is generally considered to be "for profit" if it occurs with an expectation by the person causing the performance of direct or indirect commercial advantage or gain to be derived by it. Thus, a live performance of a nondramatic literary or musical work for purely educational purposes is generally exempt under the current law. This is also true of the unsponsored performance of such works on instructional radio and television.

One of the most controversial issues earlier in the revision effort was whether or not to retain the "for profit" provision. The 1961 Report of the Register of Copyrights favored retention. In 1965, however, the Register modified his position. Because of the upsurge in both the number and importance of nonprofit performances especially nonprofit broadcasts reaching huge audiences, he indicated that the "for profit" exemption was too broad and its continuation would endanger authors' rights.

"Fully acknowledging the unique public value of educational broadcasting and its need for financial support, we must also recognize the large public audiences it is now reaching, the vast potential audiences that are awaiting it, and the fact that, as a medium for entertainment, recreation and communication of information, a good deal of educational programming is indistinguishable from a good deal of commercial programming . . . It does not seem too much to ask that some of the money now going to support educational broadcasting activities be used to compensate authors and publishers whose works are essential to those activities." Supplementary Report of the Register on the 1965 Revision Bill, at 35.

Since 1965, the approach has been, therefore, to state the public performance right in broad terms in section 106 and provide specific exemptions for educational and other nonprofit uses in other sections.

Section 110 creates specific exemptions for instructional broadcasting and section 112 permits public broadcasters to make thirty recordings of programs incorporating nondramatic musical and literary works, and to retain them for seven years.

Public broadcasting has recently put forward a proposal to create a compulsory licensing system that would allow public broadcasters to perform and record nondramatic literary and musical works, and to display and record pictorial, graphic, and sculptural works, without permission but upon payment of a fee. The so-called Mathias Amendment, which was proposed last year as an amendment to S. 1361 but was not taken up by the Senate, would add a new section 118 to the bill for this purpose. While the proposal would utilize the Royalty Tribunal concept in setting the compulsory licensing fees, it appears to be intended to serve mainly as a framework for private negotiation. Analysis of section 110 (2)

Section 110 of the revision bill deals with performances and exhibitions that are now generally exempt under the "for profit" limitation. Clause (1) covers "face to face" teaching activities, and clause (2) deals with instructional broad

casting. The section draws a line between instructional broadcasting, which is an adjunct to the actual classwork of educational institutions, and public broadcasting, which is intended for the enlightenment, edification or instruction of the public at large. It exempts "the performance of a nondramatic literary or musical work or display of a work by or in the course of transmission" if three conditions are met. The first is that the performance or display must be "a regular part of the systematic instructional activities of a governmental body or a nonprofit educational institution." The second condition is that "the perform ance or display is directly related and of material assistance to the teaching content of the transmission." The third condition is that the transmission must be made "primarily" for: “(i) reception in classrooms or similar places normally devoted to instruction, or (ii) reception by persons to whom the transmission is directed because of their disabilities or other special circumstances prevent their attendance in classrooms or similar places normally devoted to instruction, or (iii) reception by officers or employees of governmental bodies as part of their official duties or employment."

Under section 110, only performances of nondramatic literary or musical works would be exempt. The performance on public radio or television of a dramatic work, a dramatico-musical work such as an opera or musical comedy, or a motion picture could occur lawfully only if the copyright owner's permission had been obtained. With respect to exhibitions, the exemption would apply to any type of work to which the right "to display . . . publicly" under section 106(5) applies that is, literary, musical, dramatic and choreographic works, pantomines, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work.

The 1967 Report and its successors indicate that, in subclause (A) of clause (2), "systematic instructional activities" is intended as the general equivalent of "curriculums" but that it could be broader in certain cases. A transmission would be a regular part of these activities if it conforms with the established teaching practices of the governmental body or educational institution. The term "educational institution" was used because it is broad enough to cover a wide range of establishments engaged in teaching activities. It is not, however, intended to cover "foundations," "associations," etc. who are not primarily and directly engaged with instruction. Subclause (C) requires that the transmission be made "primarily," and not necessarily "solely," for reception to the three groups specified. Thus, the transmission could still be exempt even though capable of reception by the public at large. Conversely, if a transmission is primarily for reception of the public but is also received in classrooms, it is not exempt. The subject matter, content and time are factors to be considered in determining the "primary" purpose of a program.

Paragraph (1) of subclause (C) covers generally what are known as "inschool broadcasts" whether open or closed circuit. The reference to "classrooms or similar places" is intended to have the same meaning as that used in clause (1). Paragraph (ii) was included because educational broadcasters argued that one of their unique advantages over traditional teaching techniques is the ability to bring instructional material to members of the population who for various reasons cannot be brought together in classrooms, e.g., shutins and preschool children. Paragraph (iii) is intended to permit the use of copyrighted material in the course of instructional transmissions to Government employees who are receiving training as part of their official duties or employment. Analysis of section 112(b)

Section 112(b) represents a response to public broadcasters' requests for special recording privileges. It permits a nonprofit organization that is entitled to transmit a performance or display of a work under section 110 (b) to make not more than 30 copies or phonorecords and to use the ephemeral recordings for transmitting purposes for not more than seven years after the initial transmission. Thereafter, one copy or phonorecord may be preserved exclusively for archival purposes.

The Mathias and Bayh amendments

Two amendments on behalf of public broadcasting were put forward in the Senate during the last stages of consideration of S. 1361, the general revision bill in 1974. Neither was taken up at the time, but they are now under active consideration at the subcommittee level.

The amendment sponsored by Senator Mathias would add a new section 118 to the bill, creating a compulsory licensing system to use copyrighted nondra

matic literary and musical works, and pictorial, graphic and sculptural works in the transmission of "public broadcasts." Public broadcasts are defined as transmissions of “educational television or radio programs by or for noncommercial educational broadcast stations." Under this proposal the user would have to record in the Copyright Office a notice of his intention at least one month before the initial broadcast and thereafter at stated intervals, as prescribed by the Register of Copyrights.

No specific royalty is proposed; instead it is to be left up to the Copyright Royalty Tribunal to determine what is a reasonable royalty in particular cases. The Amendment also provides that the Tribunal may calculate the royalty on any method it finds most appropriate with respect to the type of the work and the nature of the use, and that it may be calculated on a per-use, per-program, prorated or annual basis. In certain instances the royalty may be negotiated, and this negotiated rate may be substituted for the rates set by the Tribunal.

The user is to deposit with the Register of Copyrights a statement of account and the total royalty fee; those entitled to receive royalty payments are to file a claim during the month of July. The rest of the provision generally follows the other compulsory license sections in the revision bill.

A second amendment proposed by Senator Bayh, would remove the restrictions imposed in section 112(b) concerning ephemeral recordings. His proposal would grant an unlimited exemption to nonprofit organizations and governmental bodies to make copies of the programs they transmit and to distribute copies for transmission by other similar organizations. Thus, the seven-year period and the restriction of 30 copies or phonorecords would be removed.

Efforts are now in progress, under the auspices of the staff of the Senate Subcommittee on Patents, Trademarks, and Copyrights, to reach agreement on voluntary licensing arrangements that would accommodate the needs of public broadcasting. If successful, these discussions could alleviate the need for at least some aspects of the Mathias and Bayh amendments.

CHAPTER 1. SECTION 111

SECONDARY TRANSMISSION; CABLE TELEVISION

Summary of the problem

The Chairman of the Federal Communications Commission has recently referred to copyright revision as cable television's "biggest bugaboo at all," which may be true. But there can be little doubt that the reverse is equally true, and equally regrettable. The copyright question may have stunted the growth of CATV, but the CATV issue certainly brought the general revision bill to a dead halt for several years. The issue is still far from completely settled, but recent developments make the prospects for an ultimate copyright solution somewhat more hopeful.

Section 111 deals with other forms of secondary transmissions in addition to cable television, but the on-going controversy is focused on the latter. At present, much of the activities of cable television consists of the retransmission of copyrighted programing initially broadcast over the air. The present state of the law does not recognize these activities as infringing the exclusive rights of the copyright proprietor in television programming. Section 111 represents an attempt at a compromise under which cable systems would be subject to a simple compulsory license with respect to such secondary transmissions as may be allowed carriage under the regulations of the Federal Communications Commission.

This provision represents a significant departure from earlier proposals on this issue in the revision bill. It is premised upon a recognition that the cable television issue involves both copyright and communications questions, and that each must be considered in the context of the other. Section 111 also rests on the principle that, in combining copyright and communications policy, the public interest in both spheres must be carefully evaluated.

The public interest in some form of copyright responsibility for cable television rests on the simple principle that the economic rewards of authorship are the surest and best way to encourage the kinds of individual creativity which makes for a vital culture, especially in the mass media. The principle underscored by the Communications Act of 1934 is the right of all Americans to adequate television and radio services at reasonable costs. Cable television is a striking example of the tangency between communications and copyright policies.

Background

Community Antenna Television, or cable television as it is now most often known (the initials CATV will stand for either), arose during the 1950's in response to the need for television service in certain areas, especially small communities lacking adequate television service for a variety of reasons. The dominant causes were usually either topographic irregularities which prevented satisfactory reception of otherwise available programming, or sheer distance from broadcast centers.

Often too small to support an advertising-based broadcast station, these areas frequently received no benefit from the expansion of the broadcast spectrum to include UHF frequencies, a policy adopted by the Federal Communications Commission to increase broadcast services on a nationwide basis. Until the advent of cable television, the only means available to such localities for obtaining high quality reception, or any reception at all, fell into two categories: expensive home antennas and cooperative, non-profit boosters, translators and repeaters. Boosters, translators and repeaters merely served to extend the range of distant signals by picking them up at advantageous locations and retransmitting them over the air. Such devices, however, carried only a single channel and lacked the capacity to evolve into true local broadcasting outlets.

The introduction of cable television into these underserved areas meant that in many cases a viewer could receive five or more channels. Not only could cable television provide at least three network signals, but a variety of independent stations as well. Unlike the passive repeating devices, CATV systems also possessed the capacity to become program originators, utilizing channels not used for retransmissions.

The very promise of CATV created concern over the impact of its activities on the nation's communications structure. In 1959 the FCC decline to assert jurisdiction over cable television systems, and for three years it appeared that the industry would grow without regulatory controls.

In 1962, however, in an apparent about-face, the Commission took its first decisive step in the CATV area when it refused to grant a microwave license to an applicant who would have used the facility to transmit signals directly to a CATV system for ultimate distribution to subscribers. The basis for the decision was highly significant for our purposes: the Commission found that the importation of the distant signal into the rural area in question would have destroyed the marginally successful local broadcaster, who could not compete with imported programming. In so acting, the Commission was protecting the economic interests of broadcasters and their program suppliers who licensed them in exchange for copyright royalties. Its purpose was to support local broadcast services as a means of community expression, but its effect had copyright implications.

Expanding upon its decision, the Commission in 1965 applied uniform rules to all microwave carriers serving cable systems and expressed its intention to adopt regulations directly governing cable at an early date. Although the FCC adopted several orders governing cable television between 1965 and 1972, it was not until the Fourth Report and Order on Cable Television (1972), that a comprehensive regulatory program emerged from the Commission.

During this period of debate within the Commission, State and Federal courts entertained numerous cases intended to determine whether cable television's retransmissions of copyrighted programming was a violation of the exclusive rights of copyright owners under the 1909 Copyright Act, or of proprietary interests protected at the common law of unfair competition. A series of unfair competition lawsuits came to naught. When copyright proprietors finally took up the battle the stage was squarely set for two key Supreme Court decisions explor ing the question of whether cable's retransmission activities violated the exclusive right to authorize the public performance of works which had been licensed for broadcasting on a geographically limited basis.

In Fortnightly Corp. v. United Artists, Inc. 392 U.S. 390 (1968), the Supreme Court applied a "functional test" to determine whether cable systems were active "performers", subject to the Copyright Act's proscriptions, or whether they were passive "viewers" whose activities amounted to no more than doing for subscribers what those suscribers could legitimately do for themselves. In Fortnightly, the cable company was seen to fall on the viewer's side of the line.

Fortnightly, however, concerned the retransmission of signals which, in theory at least, were considered local to the area serviced by the defendant. The question of whether or not the same result would apply in situations involving the

importation of distant signals remained upon until early in 1974, when the Court decided C.B.S. v. Teleprompter Corp. In that case, the Court held that the importation of distant signals among other activities, did not change the essential nature of CATV operations under Fortnightly's “functional test." In both cases the Supreme Court made clear that it was required to construe the 1909 copyright law as it found it, and that it was up to Congress to remedy any resulting injustice to copyright owners or unfairness to the public.

Legislative History.-The first revision bills submitted in 1964 and 1965 did not specifically treat the subject of cable television. During the extensive hearings on the bill, it became apparent that the copyright problem of cable was very serious, and that some provision would be required. As reported by the House Judiciary Subcommittee, the bill included long, detailed provisions seeking to govern cable's liability for secondary transmissions of primary transmissions embodying copyrighted programming. Like all of its successors, the provision was a compromise. Section 111 of that bill would have exempted from all liability systems that functioned merely as "master antennas" for local signals. There were distinguished from cable retransmissions where the system also originated programming, imported signals into areas already served by the networks, or imported programming for which a local conventional broadcaster already had secured a license from the copyright proprietor or originating authority. CATV systems which retransmitted signals into areas not already served by the major networks, would be permitted to do so upon payment of a "reasonable license fee."

The feasibility of providing some form of compulsory license was explored during the House consideration of the bill. Rejecting the proposal, the House Judiciary Committee Report noted:

Aside from the obvious difficulties of determining what the proper percentage would be and of allocating payments among an indefinite number of owners of copyrighted works of different types and values, it would be difficult to collect and distribute royalties equitably without establishing unacceptable Government controls or administration. The committee is opposed to any such system and sees no need for it.

When the revision bill came to the House floor in April 1967, it became apparent that section 111 did not offer an acceptable solution. A series of compromises resulted in the entire section being dropped from the bill, which was passed and sent to the Senate without any CATV provision.

In 1968, however, a decision in the Fortnightly case was anticipated by both the parties to the cable-copyright controversy and the Senate, as well. Further, the FCC was pressing forward in its study of the cable problem and regulatory action was deemed at hand.

Senate examination of the cable question culminated in an extensive redrafting of section 111 and produced a provision far exceeding the House version in treating communications policy issues. S. 543 conditioned the right to import signals upon a detailed standard of minimum service, and defined such service in the top 50 television markets as consisting of the three major national networks, three independent commercial stations and one noncommercial educational station. Below the top fifty markets, adequate service was defined as reception of the three major national networks, two independent commercial stations and one noncommercial educational station.

S. 543 provided a compulsory licensing system under which cable systems could import the signal of the nearest station needed to fill the complement of stations constituting adequate service in their area. Complex provisions also treated the problem of program exclusivity and set out a graduated royalty rate for the compulsory license fees.

By 1970, however, it was apparent that this ambitious proposal was in difficulty. The decision in favor of cable companies in the Fortnightly case and the pendency of the Teleprompter action tended to slow the legislative process. Far more important, however, was the opposition of the Federal Communications Commission to the approach of S. 543.

The Commission, after stressing the necessity of a balanced mixture of communication and copyright policies, had reconsidered its position and launched the rulemaking proceeding that was to culminate in the Fourth Report and Order on Cable Television in 1972. The Commission's regulations fell into four broad areas: 1) signal carriage requirements and a standard of minimum service; 2) program origination requirements, contract carriage