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*-*n of judicial review is also important in this context, ai op is a growing feeling that judicial review, for the rat

rents, is highly desirable. In a memorandum which y I for Mr. Valenti, of the Motion Picture Producers Assoc

o n is thrown out, which is based on the Postal Servic divtivities and which may be quite applicable to this situ Citas. instead of authorizing either House of Congress se ne adjustment or otherwise consider it, you would pern 27.ng to go directly to the courts, whose review would not

- rather would be on the basis of the record that had be w: Le Roralty Tribunal. These would be safeguards that

Tipad probably satisfy the complaints that were made. i s very sketchy, Mr. Chairman, but I hope this is sufficient

• bus galvarings. WALIVMEIER. Thank you. Pan Am ars questions? If not, there is a vote pending, and we : bearings to be closed, save a review of what we have h ... priew indicate we require further enlightenment we dov bu qments to have another hearing day, but you have 2'3" wer all the material and it has been extremely valuab]

ay that we could not have had all of our membership

Ms. Ringer. The assurances I have are purely oral, Mr. Drive but I have been told by staff on the Senate Judiciary Committer if the House passes the bill, as soon as the revision bill is out of ta way in the Senate nothing would stand in the way of Senate acceptare of the separate legislation.

1 I think the feeling was that they did not want to have this inter fering with the ongoing progress of the revision bill at this par ticular time, but there is no substantive opposition to it.

Mr. DRINAx. Thank you.

Ms. Ringer. Let me go on to the Royalty Tribunal, which obrican is an extremely important subject for your subcommittee.

The evolution of the concept of the Royalty Tribunal is trane pages 12 through 20 of this report, and obviously I cannot guardo the details of this. The tribunal is not just somebody's bright : it did evolve from a series of events which can be traced program,

In 1967, your subcommittee reported a bill which did not roup I Royalty Tribunal, because there was, I believe, a conscious effort ! try to structure the compulsory licenses in the bill so as to avoid ( kind of Government activity.

But what the House did on April 11, 1967, by knocking out the cable provisions which had been reported by your committee, and by changing the concept of the jukebox compulsory license, set the for something that was almost inevitable: the development of Animate sort of Royalty Tribunal. Perhaps the simplest thing I can do is a right to the end, Mr. Chairman, and state what I think might be de with the Royalty Tribunal.

What we are saying is that on the basis of this is on page through 30-on the basis of the summary of the development of the bill, and what is now facing the tribunal, it is a necesary mon* sion that the proliferation of compulsory license systems mandales the establishment of a Royalty Tribunal.

In the aggregate, the duties they seem likely to be called upon to perform are simply too large, compler, and specialized to be hani, de noroby ('ongress and the courts. The ('opyright Office believes that if chapter 8 were enacted in its present form, it would probably with stand a direct challenge to its constitutionality.

We now have an exchange of memos between Professor Gellhorna":1 Profesor Polluck. The Gellhorn-Pollack papers, which both deal with the question of constitutionality through in quite different terms do not clearly settle the question of constitutionality or uncon-t1tu 09:ity, Ilowever, implicit in both papers is the feeling that you coudorf tainly make the tribunal unequivocally constitutional by certain amendments

We do suggest several, and they fall under four categories: 1.tinintrative structure, standarvis for determinations, timetables, and yildicial review. If I may try to summarize this very briefly, we talk that the tribunal should probably have a permanent statt: t'at it should have continuity and not be a ad hoc ais laid out in the bil st the moment. Turning to the standaril, with each compulsory lit! the Royalty Tribunal hits to deal with, there should be specific stal.de

." be the last hearing date, I would think we would I IRIE al proceedings of this subcommittee in connection ***1 of copyright this year, but obviously early next year 105 mnmn to the subject. And we thank you, Ms. Ringre 292 I want to thank you, Mr. Chairman, and the subc

fuis courtesy and patience. Thank you very much. LUISULIER. The committee stands adjourned.

*., at 11:15 a.m., the subcommittee adjourned, subje L**Cair.)

This in. I think, one of the most important Axts of risolving al.y constitutionaldjoubts with report to the tribunal:

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The question of judicial review is also important in this context, and I think there is a growing feeling that judicial review, for the rateIching adjustments, is highly desirable. In a memorandum which you Tourised from Mr. Valenti, of the Motion Picture Producers Associai in, a sligompution is thrown out, which is based on the Postal Service's ritemaking activities and which may be quite applicable to this situa1 of Basically, instead of authorizing either House of ('ongress to trto the rate adjustment or otherwise consider it, you would permit 1'in rate ruling to go directly to the courts, whose review would not be ole noro, but rather would be on the basis of the record that had been Torude in the Royalty Tribunal. These would be safeguards that, I turk, would probably satisfy the complaints that were made.

This is very sketchy, Mr. Chairman, but I hope this is sufficient to 00:bude the hearings

Mr. KASIT NYEIER. Thank you.
Ar there any questions? If not, there is a vote pending, and we will

der these hearings to be closed, save a review of what we have had, Somild such review indicate we require further enlightenment we can rane arrangements to have another hearing day, but you have at

rut gone over all the material and it has been extremely valuable. I : m only sorry that we could not have had all of our membership here forthpop mortings

should this be the last hearing date, I would think we would need 10 more official proceedings of this subcommittee in connection with 1. subject of copyright this year, but obviously early next year we *;,la ruin return to the subject. And we thank you, Vis, Ringre.

V RINGER. I want to thank you, Mr. Chairman, and the subwom11.:'lene for your courtesy and patience. Thank you very much. Mr. KASTENMEYR. The committee stands adjournee.

Wherrupon, at 11:13 a.m., the subcommittee adjournedd, subject to Ilse call of the Chair.)

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APPENDIXES

APPENDIX 1 During October, 1975, the Teleprompter Corporation, which had contributed testimony on the cable television issue in June, submitted a memorandum, an explanation of proposed amendments to Sections 111(d) and 111(e) of H.R. 2223, and a Memorandum Considering the Constitutionality of Proposed Copyright Legislation (H.R. 2223).

This submission, plus a number of responsive submissions by other interested parties and an amplification of the proposal of Teleprompter, were received in November, 1975. In alphabetical order, the submissions responsive to Teleprompter are as follows:

Ad Hoc Committee of Concerned Cable Television Operators for a Fair Copy. right Law (Frederick W. Ford).

George J. Barco (Pennsylvania Cable Television Association).
CATA (Richard L. Brown).
('BS (Robert V. Evans).
Motion Picture Association of America, Inc. (Jack Valenti).
National Association of Broadcasters (John B. Summers).
National Broadcasting Company, Inc. (Robert Hynes).
National Collegiate Athletic Association (John Coppedge).
Vational Cable Television Association (Rex. A. Bradley).
David O. Wicks, Jr. (Becker Communications Associates).

In 1976 the subcommittee received a further proposal from the National Association of Broadcasters, a letter from ABC Television Affiliates Association, and a memorandum of April 13, 1976 designated “Agreement between NCTA and MPAA as to terms of copyright legislation."

These various proposals, submissions, and documents constitute Appendix 1 to the hearing record.

MEMORANDUM OF TELEPROMPTER CORPORATION

EXPLANATION OF PROPOSED AMENDMENTS TO SECTIONS 111(d) AND 111(e) OF

H.R. 2223

Attached hereto is a redraft of the royalty provisions (and related definitions) contained in Section 111 of the proposed Copyright Bill. This redraft, in Teleprompter's opinion, is a more equitable and rational approach to the problem of copyright liability than that currently found in the bill.

Also attached is a memorandum of law prepared by Professor Ernest Gellhorn of the University of Virginia Law School. This memorandum argues that the provisions relating to the establishment of the Royalty Tribunal, as now set forth in H.R. 2223, are seriously vulnerable to constitutional attack.

Before describing in detail what we have attempted to do in our proposed redraft, a few words of background may be useful, Teleprompter's basic position is that there should be no copyright liability of any sort for cable television retransmission of broadcast signals. Everyone seems to agree that, as a matter of pure logic, there is no justification for imposing copyright liability on cable's retransmission of local signals. The real question of copyright liability has always concerned cable television's importation and retransmission of "distant broad. cast signals." However, retransmission of distant broadcast signals actually is a benefit to the originating station which is able to gain additional advertising revenues by virtue of its reaching distant markets via cable. These additional advertising revenues enable the originating station to pay copyright owners more than it otherwise would be able to. Therefore, allowing the copyright owner to collect copyright payments when the cable system in the distant market re. transinits the copyrighted program would enable the copyright owner to extract a windfall double payment.

1 - pat n programming costs times the popularity of the non-ne men of the distant signal in the county in which the cable system

Irod as a market share percentage.

Tot of this formula is illustrated by the following example. In nemen with quarterly revenues for the basic service of retransm u gals of $500.000 which imports two distant non-network aff 0.08 A and B). If station A has a 5% share of the market in en is located and station B has a 3% share, and if the most

aussion indicates that all broadcast stations pay 28% of *he programming costs, then the quarterly copyright liability 1.5m vith respect to the programming on each of stations A and B sred as follows:

Multiplied by Multiplie percentage of their clarity o

total revenues nonnet Cable system which broadcast- graming basic subscriber ing stations spend as a ma

revenues for programing

$500,000 500,000

This is the position that Teleprompter has urged in its testimony before be Subcommittee on Courts, Civil Liberties and the Administration of Justice and a various meetings with individual members of the Subcommittee. We believe Is position is logically sound and deserves support. However, we fear that, 1. whatever reason, our position may not be adopted by the Subcommittee. We therefore are submitting a compromise proposal which we believe corrects the most glaring deficiencies of H.R. 2223.

Basically, what we have done is to build on the distinction between local and distant signals referred to above. As many others have done before us, we bare proposed elemination of copyright liability for the retransmission of local nals. We have gone somewhat further, however, in also proposing that tberre no copyright liability for the retransmission of network programming. The redson for this is that the entire nation is really "local" to the network. That isa copyright owner who sells his product to a network anticipates that it wil ve viewed throughout the entire country and is compensated accordingly. Thus, there is no need for the cable system to pay the copyright owner a second fee whet. : enables his programming to reach certain isolated communities which, bere of terrain problems or gaps in the placing of affiliated stations, would not other wise have received such programming.

Having decided that, if there should be any copyright Hability at all. so! liability should be only with respect to the non-network programming of dis'aa! stations, we then confronted the following two questions:

1. What percentage of total cable revenues should be available for copyrigt: payments?

2. How much is each distant signal worth for copyright purposes?

As to the first question-how much of the cable industry's revenue should le available for copyright payments—we propose, in the interest of comproo.ee to use the same percentage as applies to television stations. In other words, II is a given year' all television stations paid 28% of their total revenues for program ming costs then, under our proposal, 2846 of each cable television systea total revenues would also be potentially subject to copyright liability,

In passing, we wish to state that adopting the same perrentage for programming costs as is applicable to the broadcasting stations seems to us extreme ! generous for two reasons. First, capital costs of the cable industry are able greater than those of the broadcasters who, at no cost to them, are able to ul. ize immensely valuable and scarce spectrum space. Therefore, the cable Industry has less money available than do the broadcasters to pay for programming ond, using the same percentage as the broadcasters completely ignores the beer fit to the originating station (and thus to the copyright owner) of cable's carriage of distant signals.' However, in order to come up with a formula which war sides can agree upon we have decided to adopt without change the model of their broadcasters.

We now turn to the second question-namely, how much is a distant sien! worth for copyright purposes. In our opinion, earlier attempts to answer ll :: question have been hindered by the assumption that all imported signals are of the same value to the cable system. Clearly this is not true and once we m ale that it is not true the solution to the problem becomes much simpler. What we suggest, therefore, is that copyright payments be made for the non-betwntk pro gramming on each imported signal on the basis of the popularity of that prob gramming in the market in which the cable ssstein is located.

Thus, under our formula. the non-network programming on each signal wblo is distant to a particular cable ørstem would be entitled to meeive a penatapat that cable system's revenues in a rondance with the following computatda

(nble system's revenues for transinission of broadcasting imals fimes penentage which is equal to the perrotage of total broadcasting station Net

I breat to a $7.000 quarterly fee for the programming on St:

idearterly fee for the programming on Station B. Overall the qu I ur 224% of the cable system's basic subscriber revenues. torne that this proposal is far more equitable than the one now co

chose it is directed at what is conceded by all concerne o f the problem-namely cable's importation of distant signal

s... the bot by no means incidental, virtue of our approach is tha .. lased on actual relationships in the real world, it is autom

ilere is thus no need to resort to the ill-conceived Co .. . to make periodic adjustments which, because they ai ** i Paris expressed Congressional purpose or to any knowi

d to be arbitrary. In this connection, it is worth con im Gellhorn's memorandum concerning the dubious ( be proposed statutory provisions establishing the Tribuna

TELEPROMPTER CORPOR.

[October BORT LACESSE FOR SECONDARY TRANSMISSIONS BY CABLE SY !! 13} spadary transmission to be subject to compulsory |

*** cle), the cable system shall at least one month before wistnasmision or within 30 days after the enactment of ***as later, record in the Copyright Office, a notice including 'n panty and address of the person who owns or oper

***.68200 service or has power to exercise primary contro T he name and location of the primary transmitter, or 132 bereafter, from time to time, such further informatii

righ's shall prescribe by regulation to carry out the pu

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1's stem whose secondary transmissions have been subjec

& under subsertion (c) shall, during the months of Janua "Piter, deposit with the Register of Copyrights, in accorda

at the Register shall prescribe by regulation
tatement of account, covering the three months next I

the number of channels on which the cable system made ! is to its subscribers, the names and locations of all

les whose transmissions were further transmitted by the Del timber of subscribers to the cable system, and

All to the cable system (irrespective of source and sepai the gross revenues paid to the cable system for advertis

cable casting for which a per program or per chani 10 bis subscribers for the basic service of providing

of primary broadcast transmitters; and

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