The present copyright statute as amended in 1971, also affords limited protection to sound recordings. The owner of copyright in a sound recording, which may be the performers, the record producer, or both, enjoys the exclusive right "(t)o reproduce and distribute to the public by sale or other transfer of ownership, or by rental, lease, or lending, reproductions of" that particular sound recording. This right does not protect the copyright owner from other renditions of the underlying work, even if the other renditions "imitate or simulate those in the copyrighted sound recording." Further, the right does not "extend to .. reproductions made by transmitting organizations exclusively for their own use." The provisions governing sound recordings were added to the law because the massive dissemination of piratical records and tapes was depriving performers and record producers of substantial income.

Under present Federal law, performing artists and record producers are afforded no copyright protection against the unauthorized performance of their sound recordings. Over the years, their efforts to change this situation have caused considerable controversy. Recent attempts to expand the copyright revi; sion bill to include recognition of a performance right in sound recordings began in earnest with an amendment proposed by Senator Harrison Williams in the 91st Congress (1969). A modified version of Senator Williams' amendment was a part of the revision bill approved by the Senate Committee on the Judiciary last year, section 114 of S. 1361.

After leaving the Judiciary Committee, the revision bill was referred to the Senate Committee on Commerce. The report of the Commerce Committee recommended amending the bill to exempt from infringement liability the public performance by a radio or television broadcasting station of a copyrighted sound recording. In the course of floor consideration of the revision bill last September, the Senate adopted an amendment sponsored by Senator Ervin, striking the record performance right entirely.

ARGUMENTS FOR AND AGAINST PERFORMANCE RIGHT IN SOUND RECORDINGS Arguments favoring a performance right

Performing artists and record producers argue that they should be assured compensation when their performances as embodied in sound recordings are utilized for profit, since their efforts are clearly original, intellectual creations entitled to protection as "writings" under the United States Constitution. They point out that a great many countries throughout the world recognize that sound recordings cannot be performed publicly without reasonable compensation.

They note that most radio stations devote a large amount of air time to the performance of sound recordings and, as a result, derive substantial income from their advertisers. Only the owner of copyright in the musical composition receives compensation for these public performances, although the performing artist, and sometimes the creative elements in the recording as such, are often the greatest factors in a sound recording's success. The same type of argument is made with respect to jukebox operators and suppliers of background music; they enjoy a profit from the public performance of sound recordings, while the performers and record producers receive nothing.

Proponents of a performance right in sound recordings also point out that the present revision bill not only denies Federal copyright protection, but also strips them of any existing common law, or potential State statutory rights since State law is pre-empted by section 301. Prior to the recent Supreme Court decision in Goldstein v. State of California, 412 U.S. 546 (1973), it could be persuasively argued that the common law or statutes of a State could offer protection in the nature of a copyright to a recorded performance only until the sound recording embodying the performance was sold, or publicly distributed. The Goldstein opinion, however, supports the view that a State has a broader power to recognize a property right in the nature of a copyright in a performance embodied in a sound recording. The decision suggests that such a right could be unlimited in duration. Although there are presently no state statutes recognizing such a performance right in sound recordings, Goldstein indicates that such a statute might be valid unless Congress has evidenced a contrary intention. Arguments opposing a performance right

Opposition to any recognition of a performance right in sound recordings comes primarily from broadcasters, CATV and jukebox operators, and suppliers of background music. Some argue that the contributions of performers and rec

ord producers to sound recordings, although significant, lack sufficient intellectual creativity to justify protection as "writings of an author" under the copyright clause of the Constitution. They argue that the problems surrounding sound recording performances as so complex, and involve so many conflicting economic interests, that adequate study would seriously delay passage of a much needed copyright revision bill. They suggest that neither performers nor record producers have demonstrated any pressing economic need; record companies appear to be thriving financially, and performers seem to be sufficiently compensated through contract.

Commercial broadcasters and other users point out that their public performance of sound recordings already benefits both record producers and performing artists. The producers benefit because air play stimulates records sales. The increase in record sales also benefits the performers because most have royalty agreements with the record producers, and because they obtain free publicity through the public airing of their performances.

They also point out that they already pay a substantial amount to groups representing authors and composers for the right to perform copyrighted works publicly. They argue that requiring them to pay the performers and record companies as well would be an unjustifiable economic hardship. The additional burden could force many marginal operations out of business. This result, they submit, not only would benefit no one, but would actually be detrimental to the interests of performers and record companies.

Analysis of the record performance royalty in section 114 of 1974 bill

The revision bill reported favorably by the Senate Judiciary Committee included a right in the public performance of sound recordings. Radio and television stations, cable television, jukebox operators, and background music services were subject to its provisions. The bill provided that, once phonorecords of a sound recording had been distributed to the public under the authority of the copyright owner, the public performance of the sound recording would be subject to compulsory licensing. Although a negotiated license could be substituted for the compulsory license, the bill provided that the negotiated rate of royalty fees could not be less than the compulsory rate. The bill outlined the procedures to be followed in obtaining a compulsory license and also provided for a deposit of the required royalty fees with the Register of Copyrights. In the absence of a negotiated license, failure to comply with the specified requirements would render the public performance of a sound recording an act of infringement, subject to the civil remedies set forth in the bill.

The royalty fees required by the bill could be computed on either a blanket or a prorated basis. The compulsory licensing rate for radio and television stations would have been based upon the individual station's gross receipts from advertising sponsors. Stations with gross receipts under $25,000 per year were specifically exempted from any liability, while those with receipts over $200,000 were required to pay one percent of their net sponsor receipts for a blanket license. For broadcast stations with gross receipts greater than $25,000 but less than $100,000, the bill provided that the yearly payment would be $250. In the case of stations having gross receipts greater than $100,000 but less than $200,000, the payment would have been $750.

For background music services and other transmitters, the bill provided a blanket rate of two percent of gross receipts from subscribers or others who pay to receive the transmission. If such receipts were less than $10,000, the bill specifically exempted the transmitter from any liability. For all other users not otherwise exempted or covered, the blanket rate was $25 per year for each location where the sound recordings were to be performed. For users who wished to pay on a prorated basis, the bill empowered the Register of Copyrights to prescribe, for each class of users, a standard formula for computing the royalty fee. Section 116 of the bill provided that one eighth of the funds distributed to beneficiaries of the compulsory license fee for jukeboxes would be allocated to copyright owners and performers of sound recordings. In the case of sound recordings performed by means of secondary transmissions on cable systems, the record producers and performers were entitled to share in funds distributed to beneficiaries of the compulsory license fee for secondary transmissions under section 111.

The bill directed the Register of Copyrights, after deducting reasonable administrative costs, to distribute the funds deposited to those entitled, or to their designated agents. In the event of a controversy concerning the distribution of funds, the bill provided that the Copyright Royalty Tribunal should resolve it.

Analysis of Danielson bills (H.R. 5345)

H.R. 5345 would establish a performance right in sound recordings within the context of the present 1909 Act. While portions of the bill are similar to the record performance right provisions in section 114 of S. 1361, several significant changes had to be made in order to draft the provision within the constraints of the present law. Certain other amendments are probably necessary to make the provisions workable apart from the revision bill.

The framework of the Danielson bill tracks the former proposal in S. 1361. Once the sound recording has been distributed in copies to the public, a compulsory license mechanism is triggered. Negotiated licenses may be substituted for compulsory licenses, but the royalty cannot be less than the annual rates set in the bill. The statutory rates are similar to those in S. 1361. A principal difference is that one rate is set for television stations and another for radio stations. Jukebox operators would pay $1 annually for each player.

The bill does not establish a statutory body to fulfill the role of the Copyright Royalty Tribunal in distributing royalties, nor is the Register of Copyrights or any other organization designated to receive royalties. As a technical matter, the general authority given to a panel of the American Arbitration Association may not be adequate to handle the collection and distribution of fees. Another significant departure from the proposal in S. 1361 is the absence of an exemption from the antitrust laws to facilitate negotiation of voluntary licenses.

CHAPTER 1, SECTION 116

PERFORMANCES OF MUSIC ON COIN-OPERATED PHONORECORD PLAYERS (“JUKEBOXES”) Background and summary

The last paragraph of section 1(e) of the present copyright law exempts jukebox operators from the obligation to pay royalties for the public performance of copyrighted music. This provision was added to the 1909 Act as part of a last minute compromise dealing with coin-operated player pianos, and it has generally been regarded as an unjust anachronism, especially since the emergence of jukeboxes as a major entertainment industry.

Persistent efforts to repeal the jukebox exemption have gone forward for half a century without success, despite the widely-held view that the present blanket exemption unfairly deprives copyright owners of significant revenue and discriminates against all other commercial users who must pay copyright royalties in order to perform copyrighted music. No other copyright law in the world has a provision exempting performances of music on coin-operated record players from liability. Since U.S. composers are paid when their songs are performed abroad on jukeboxes, our international relations are strained by the failure of our law to protect foreign composers on a reciprocal basis.

The jukebox industry has argued for exemption or special treatment on several grounds that the payment of royalties by recording companies to music proprietors for reproduction of the music on phonorecords is passed on to jukebox operators; that the bargaining position of the parties is unequal; that the repeated performance of songs on jukeboxes increases their popularity and adds to their profits from other types of uses; and that the economic impact of an added "tax" on jukebox operators would be adverse.

The issue of jukebox liability was sharply drawn in the context of the 1965 revision bill, and a compulsory licensing provision, the basis for section 116 of H.R. 2223, emerged as a compromise. The dispute over the statutory amount to be fixed as the compulsory licensing fee continued until the eve of passage by the House of Representatives of the revision bill in 1967, which set the annual fee at $8 per box.

During Senate consideration of copyright revision between 1967 and 1974, the concept of a Copyright Royalty Tribunal was added to the bill. The provisions dealing with the Tribunal appear in Chapter 8 of the revision bill, and are discussed in a separate Briefing. Originally, the Tribunal was charged with reviewing all statutory royalty rates established in the bill, including the rate for jukebox performances. Senate Judiciary Committee Report No. 983 (93rd Congress, 1st Session) expressed the view that the statutory royalty rates should be subject to periodic review as a matter of sound public policy. However, when the Senate in September 1974 passed the revision bill, it added an amendment sponsored by Senator Hollings that removed the jukebox royalty from review by the Tribunal. At the present time the question of whether the $8 annual fee

should or should not be subject to periodic review by the Tribunal appears to be the principal, if not the only, remaining issue affecting jukeboxes.

ANALYSIS OF SECTION 116

Subsection (a): Scope of compulsory license

Section 116 of the revision bill repeals the blanket exemption for performances of music on jukeboxes, and substitutes a compulsory licensing system. This system applies to "a nondramatic musical work embodied in a phonorecord" and gives the operator of a particular "coin-operated phonorecord player" a compulsory license "to perform the work publicly on that phonorecord player" if he follows a prescribed procedure and pays the established $8 fee. The proprietor of the establishment where the performance occurs would be exempt from liability for infringement unless he is also the operator of the machine, or unless he fails or refuses to reveal the identity of the operator.

Subsection (b): Compulsory licensing procedure

The compulsory license to operate a coin-operated phonorecord player is acquired by filing an application with the Copyright Office within one month after the machine is placed in use. Renewal of the license is required every January for each box. The application for each jukebox certificate must be accompanied by a yearly royalty fee of $8, with provision for prorating for half a year or less. Once the certificate is issued by the Copyright Office. It must be affixed to the machine in a way that would be readily visible to the public. Failure to follow each step of this procedure (filing the application, paying the royalty and affixing the certificate) would make any public performance on that machine an infringement subject to all remedies for infringement this bill would provide.

Subsection (c): Distribution of royalties

The royalty fees collected from the operators would be distributed by the Register to those copyright owners entitled. A musical copyright owner of a nondramatic musical work who is not affiliated with a performing rights society would receive the pro rata share of the fees to be distributed to which he can prove he is entitled. The performing right societies would distribute the remainder of the fees according to such agreements as they may stipulate among themselves, and section 116 insulates them from the anti-trust laws for this purpose. The Register of Copyrights is to constitute a panel of the Copyright Royalty Tribunal, in accordance with Chapter 8, if a controversy arises concerning the distribution of particular royalty fees.

Subsection (d): Criminal penalties

Section 116 provides special fines for false statements in an application, for altering a certificate, or for affixing a certificate to the wrong box.

Subsection (e): Definitions

Definitions of "coin-operated phonorecord player." "operator," and "performing rights society" are provided for the special purposes of section 116.

CHAPTER 1, SECTION 115

COMPULSORY LICENSE FOR REPRODUCTION OF MUSIC ON PHONORECORDS

Background and summary

Section 1(e) of the Act of 1909 established the first, and so far the only, compulsory license in our copyright law. For the most part unchanged since 1909, the so-called "compulsory licensing" or "mechanical royalty" provision permits the reproduction of copyrighted music on records once the copyright owner has recorded his work or licensed someone to do so.

Some consideration was given, at the outset of the current effort to revise the copyright law, to outright abolition of this compulsory license provision, but the arguments in favor of retention proved persuasive. A number of criticisms of specific aspects of the present system were considered, notably the amount of the statutory royalty, which has remained at two cents per song per record manufactured since 1909. A related question was the criterion for determining the number of records for which a royalty must be paid. Recent litigation has also thrown a spotlight on an additional issue: whether unauthorized duplicators 57-786-76-pt. 3-44

of musical sound recordings are eligible to obtain a compulsory license to reproduce the copyrighted music on their tapes or disks.

Section 115 of the revision bill now provides for a rate of 3 cents per work embodied in each phonorecord, or 4 of one cent per minute of playing time or fraction thereof, whichever is larger. The new rate is payable for every phonorecord "manufactured and distributed in accordance with the license," and unauthorized duplicators of sound recordings are not eligible for the compulsory license. The bill explicitly limits the applicability of this compulsory license provision to nondramatic musical works reproduced in phonorecords, and clears up several other ambiguities in the present law.

General considerations

An earlier debate centered about the case for any increase in the 2 cent royalty rate of the present law. The conclusion reached by the 1967 House Judiciary Subcommittee, after weighing the economic arguments and counterarguments, was that some increase was justified, and the subcommittee settled on 22 cents. The current debate centers on the request of the authors and publishers of music for a still higher royalty rate in view of the marked inflationary spiral between 1967 and the present.

In assessing the case for a higher statutory rate, it seems useful to review briefly the general arguments and counterarguments on the issue of an increase in the statutory rate. The following are the major arguments of the authors and music publishers:

(i) The marked increase in level of prices since 1909 and again since 1967 should result in a higher statutory rate.

(ii) The relative bargaining positions of music proprietors and record companies have shifted radically since 1909 and record companies have a strong if not predominant position in the music field.

(iii) Statistics purporting to show only modest recording company profits are misleading because of cross-ownership involving broadcasters, motion picture companies, recording artists, and recording companies.

(iv) The rigidity of a statutory rate, even though subject to periodic review by the Copyright Royalty Tribunal, creates an unfavorable bargaining position in negotiating voluntary licenses. The statutory rate operates as a ceiling and depresses the rates actually agreed to in bargaining, and therefore the rate should be higher to allow more flexibility in private negotiations.

The arguments of the record producers in support of a lower fee can be summarized as follows:

(i) Inflationary trends since 1909 are meaningless in view of other economic changes in the industry that have kept the price of records down; recent Increases were overdue and entirely justified. Since long-playing records and tapes rather than single records now dominate the market, the royalty is usually 20 cents or more per unit rather than 2 cents.

(ii) Music proprietors receive income from many sources for use of their music, but record companies must rely on income from one source, the sale of records. (ili) An increase in the statutory royalty rate beyond that proposed in the Bill would have grave impact on the entire record industry; either the increase would have to be passed on to consumers or some companies would be forced out of business or forced to cut back drastically on the number and quality of their offerings.

General comment

ANALYSIS OF SECTION 115

This section retains the essential features of the present law's compulsory licensing system, but introduces a number of modifications that either clear up uncertainties under the existing law or dispense with unnecessary procedures. Unlike the new compulsory licensing systems for jukeboxes (section 116) and cable television (section 111), the system established by section 115 does not involve the Copyright Office in the collection of, accounting for and disbursement of fees. As under the 1909 Act, these matters are handled between the parties. On the other hand, the amount of the royalty (now pegged at 3 cents per work per record in H.R. 2223) is made subject to review by the Copyright Royalty under Chapter 8.

Subsection (a): Availability and scope of compulsory license

The license may be obtained only for the making and distribution of phonorecords containing nondramatic music, and only after the copyright owner has