SUMMARY STATEMENT OF BRUCE A. LEHMAN
ASSISTANT SECRETARY OF COMMERCE
AND
COMMISSIONER OF PATENTS AND TRADEMARKS
ON
H.R. 1506
BEFORE THE
SUBCOMMITTEE ON COURTS AND INTELLECTUAL PROPERTY
JUNE 28, 1995
The Administration supports the granting of a full public
performance right in sound recordings. Under present U.S.
copyright law, sound recordings are the only works capable
of being performed that are not granted the public
performance right. The Administration believes that in view
of the significant contribution that performers and
producers of sound recordings make to the U.S. economy, the
time has come to eliminate this historical anomaly. Further,
some foreign countries deny performance royalties to U.S.
owners of sound recordings because the United States has no
public performance right. Thus, the granting of this right
may put U.S. negotiators on better footing to argue for
access to these foreign royalties.
The Administration supports H.R. 1506 to the extent that it
seeks to provide a public performance right. However, the
Administration is concerned with a number of the provisions
in the bill that prevent the granting of a full public
performance right. For example, all non digital
transmissions are exempted from this legislation, as are
many digital transmissions, including non subscription
digital transmissions. The bill also subjects all remaining
digital transmissions to compulsory licensing.
The Administration does not believe that this compulsory
licensing system is necessary. Copyright owners should be
allowed to bargain freely in the marketplace. If, as
proponents of compulsory licenses fear, individual copyright
owners of public performance rights were to use their
exclusive rights in an abusive manner, then antitrust laws
may be called upon for relief.
The Administration has additional concerns with H.R. 1506
which are discussed fully in our prepared testimony. The
Administration continues to support the granting of a full
public performance right in sound recordings. We support the
Committee's efforts in seeking to provide protection to
performers and producers, and we are grateful for the
opportunity to discuss this legislation with you today.
STATEMENT OF BRUCE A. LEHMAN
ASSISTANT SECRETARY OF COMMERCE
AND
COMMISSIONER OF PATENTS AND TRADEMARKS
ON
H.R. 1506
BEFORE THE
SUBCOMMITTEE ON COURTS AND INTELLECTUAL PROPERTY
COMMITTEE ON THE JUDICIARY
UNITED STATES HOUSE OF REPRESENTATIVES
JUNE 28, 1995
Mr. Chairman and Members of the Committee:
I am pleased to appear before you today to testify on a bill
that, in certain limited instances, will provide copyright
owners of sound recordings an exclusive right to perform
their sound recordings publicly by means of digital
transmissions.
Of the copyrighted works capable of being performed, sound
recordings are the only works which are not granted public
performance rights. This deficiency in our system is not
justifiable as a matter of policy, and we believe that the
time has come to bring protection for performers and
producers of sound recordings into line with the protection
afforded to the creators of all other works. Therefore, we
applaud the efforts of the Chairman and Members~o correct
this inadequacy and I come before you on behalf of the
Administration to support those provisions of H.R. 1506 that
establish an exclusive right in the public performance of
sound recordings by means of digital transmission.
2
While we support the provisions of the bill that establish
the exclusive right, we are concerned with the numerous
provisions that limit this right through carve-outs and
exemptions for certain transmissions, and through the
imposition of statutory or compulsory licenses on the
remaining transmissions. The carve-outs and exemptions in
the bill severely limit the scope of the public performance
right. Among the transmissions and performances not covered
by this bill are:
ù all analog transmissions, such as those of
traditional radio broadcasters;
ù all public performances not involving transmissions,
such as DJs playing records in nightclubs;
ù all non subscription digital transmissions;
ù various retransmissions of non subscription digital
transmissions; and
ù transmissions to or within a business establishment,
that is confined to the premises of that business
establishment, and the premises of other business
establishments under common ownership or control.
The Administration believes that a full public performance
right is warranted for sound recordings. Further, we are
convinced that there is no justification for exemptions from
the performance right based on distinctions in the location
of the performance such as in business establishments -- or
the type of transmission -such as digital versus analog or
subscription versus non subscription. There is no reason to
afford a lower level of protection to one class of creative
artists over others. However, while the Administration
continues to support a full public performance right, if a
distinction must be made based on the type of transmission,
we believe that the public performance right should at least
cover all digital transmissions.
3
In addition to the exemptions, the bill also contains a
number of statutory license provisions that apply to all
remaining public performances under the bill. The
Administration finds such compulsory licenses problematic
for a number of reasons. First, the Administration believes
that many of the justifications put forth in support of such
licensing schemes are unfounded. Specifically, concerns
voiced by some over potentially abusive practices by the
holders of exclusive performance rights do not warrant the
imposition of compulsory licensing. Rather, the
Administration believes that mechanisms other than
compulsory licensing -- such as antitrust laws are better
suited for combating such practices. In addition, we cannot
justify adding new compulsory licenses to our law while the
United States continues in its efforts to rid the rest of
the world of unjustified compulsory licensing systems, which
force U.S. copyright owners to accept statutory license fees
rather than fees set in the marketplace for the use of their
works abroad.
Policy Justification for a Full Performance Right
I stated that the denial of a public performance right in
sound recordings is not justifiable as a matter of policy.
However, others want to maintain the historically
discriminatory treatment of performers and producers of
sound recordings. I would like to analyze these arguments,
and present the Administration's position on why a full
performance right is warranted.
Some argue that copyright owners of sound recordings should
not be granted a public performance right because they
already derive indirect benefit from the public performance
of their works. Specifically, it is argued that the public
performance of a work is "free advertising," that provides
the copyright owner of the sound recording with the indirect
benefit of increased sales of reproductions of that work.
4
Therefore, the copyright owner gets benefits indirectly
through increased sales of reproductions, they should be
denied an exclusive public performance right and its
associated royalty payments.
This argument is flawed in two respects. First, with the
advent of high quality copying devices that can be used to
copy sound recordings from digital broadcasts, those
broadcasts may, in fact, replace sales of sound recordings.
Thus, H.R. 1506 would only partially compensate copyright
owners of sound recordings for such lost sales. Second,
simply because the public performance of a sound recording
may induce someone to purchase a copy does not justify the
denial of the public performance right. Consider owners of
copyrights in all other works, who enjoy the full panoply of
exclusive rights, and who are not restricted from exercising
all of their rights merely because the exercise of one right
increases the value of the exercise of another right. For
instance:
ù The copyright owner of the musical composition
embodied in a sound recording is paid both when
recordings of the composition are sold and when the
composition is publicly performed -- even though the
public performance might increase the number of records
sold and thus benefit the copyright owner's
reproduction and distribution rights.
ù Serial excerpts from a novel that are published in a
magazine might increase sales of the book, but the
magazine nonetheless must obtain permission from the
author of the book to publish the excerpts.
ù The copyright owner of that novel may also increase
his book sales when a motion picture based on the novel
is released. However, no one suggests that the motion
picture company shouldn't have to pay the copyright
owner of the novel for the right to turn it into a
movie, just because the movie might indirectly benefit
the copyright owner.
5
The copyright owners of sound recordings should be able to
decide for themselves, as do all other copyright owners, if
"free advertising" is sufficient compensation for the use of
their works. If the arguments regarding the benefit
copyright owners derive from the public performance of their
sound recordings are correct, the users should be able to
negotiate a reasonable license fee--perhaps no fee at all in
some circumstances.
Some opponents of this public performance right argue that
there is a finite limit to the "public performance
royalties" that can be paid by those who publicly perform
copyrighted works. As a sound recording embodies two
distinct copyrighted works -- the musical composition and
the sound recording--this argument posits that the
performance royalties currently enjoyed by the copyright
owners of musical compositions will be reduced if their
licensees must additionally pay royalties to the copyright
owners of sound recordings. Although the Administration does
not accept this static "royalty pie" argument as
justification for denying public performance rights to sound
recordings, it does highlight a marketplace issue we believe
should be addressed. That is, that the Administration
believes section 115 of the Copyright Act would no longer
serve its intended purpose if a full performance right were
granted.
Section 115 of the Copyright Act requires the copyright
owner of a musical composition to allow record companies to
make and distribute records utilizing that composition, and,
in the absence of a negotiated fee, fixes the amount of
money the record company will pay the copyright owner for
that privilege. By establishing a full performance right,
composers, music publishers, and record companies can and
should engage in price competition and free negotiation in
the marketplace. The
6
Administration believes that eliminating the compulsory
mechanical license, and granting a full public performance
right in sound recordings, taken together, will go a long
way toward regularizing the treatment of sound recordings
and musical compositions under the copyright laws.
These two arguments against granting a public performance
right mask the domestic and international consequences of
our lack of a public performance right. By granting a full
performance right in sound recordings, the United States
will treat the creators of these culturally and economically
important copyrighted works the same as all other works
capable of being performed. Such a performance right will
provide increased incentive for creators of sound recordings
to produce and disseminate more works, thereby expanding
consumer choice and adding to the U.S. economy.
A full performance right not only puts copyright owners of
sound recordings on equal footing with other copyright
owners domestically, it also removes a serious international
barrier to foreign royalties. Presently, public performance
rights are granted in many foreign markets, however, some of
these countries condition the availability of these
royalties on reciprocity. Due to the lack of reciprocity in
the United States, U.S. performers and their record
companies are denied their fair share of foreign royalty
pools for the public performance of U.S. sound recordings in
some countries. While the granting of a public performance
right does not guarantee access to these foreign royalties,
it removes a tremendous stumbling block in our efforts to
negotiate in this area.
7
The Administration's Position on Statutory Licensing
I stated that some of the justifications for the statutory
licenses in H.R. 1506 are unfounded. In particular, I noted
the concern expressed by some that by granting an exclusive
performance right in sound recordings, performers or their
recording companies may unreasonably limit the availability
of licenses to perform their sound recordings. The
Administration does not share this concern. It is difficult
to imagine why performers or their recording companies would
seek to limit the performances of their sound recordings.
Indeed, if the performer is to derive the indirect benefit
of increased sales of reproductions, it is clearly in the
performer's interest to have their works performed for the
buying public to hear. Generally speaking, it is unlikely
that a performer would refuse a license when performance
royalties as well as increased public exposure to the
performance is in his or her interest, and the marketplace
will determine the fair value for licensing the right.
However, if abusive practices are encountered, there is
sufficient protection through the antitrust laws to
alleviate such isolated occurrences.
Specific Provisions of Concern
The proposed sections 114(e) and 114(h), however, have
raised some concerns from an antitrust perspective. The
Administration believes that, as written, these provisions
could weaken the ability of antitrust law to address
potentially anti competitive behavior by performance rights
holders. Therefore; the Administration suggests that section
114(e) be deleted to remove the authority of copyright
owners and entities performing sound recordings to designate
common agents to negotiate, agree to, pay or receive royalty
payments. Further, we suggest that section 114(h) be
strengthened to prevent rights holders from licensing to
their
8
affiliated programmers in a way that would artificially
boost licensing rates to the industry as a whole.
While the Administration supports the provisions of H.R.
1506 establishing a public performance right, we are
troubled by the numerous carve-outs, exemptions, and
statutory licenses contained in the bill. Specifically, the
bill fails to provide full exclusivity for "interactive
transmissions" (i.e., those in which a subscriber or other
end user specifies when a particular sound recording should
be transmitted) by subjecting such transmissions to
statutory licensing under the proposed amendment to section
114(d)(2) of the Copyright Act. This is particularly
troublesome because interactive digital transmissions are
the most likely to result in the making of reproductions by
a subscriber -- i.e., "downloading" a copy. Therefore, by
subjecting such transmissions to statutory licenses, the
price of a sound recording will be established by operation
of law versus the present operation of the marketplace.
In addition, the Administration finds unnecessary the
statutory licensing requirements for subscription
transmissions found in the proposed amendment to section
114(f) of the Copyright Act, as well as the statutorily
defined remuneration percentages of the proposed amendment
to section 114(g). We recognize the concern expressed by
some that owners of the exclusive performance right in sound
recordings could have the potential to exercise their right
to the detriment of owners of the rights in the musical
composition -- particularly in vertically integrated
business arrangements. Absent evidence of anti competitive
practices, however, the Administration believes that the
licensing of this right should be left to the marketplace
and sees no reason to create a new compulsory license. At
9
present, we are not convinced this further limitation on an
already very limited public performance right is necessary.
Other points of concern in H.R. 1506 include the provisions
establishing a new section 115(3)(B)(ii) & (iii). These
provisions categorize digital phonorecord deliveries as
either identifiable and non-identifiable, and subsequently
establish a licensing procedure under section 115(c)(4)
based on these categories. The Administration believes that
such a complex compulsory licensing scheme is unnecessary,
and potentially unworkable based on the use of identifiable
and non-identifiable categories. Also of concern is the
breadth of the exemption of section 114(d)(1)((B)(iii) with
respect to business establishments "under common ownership
or control." Unlike an exemption for a single business, this
provision appears to exempt, for example, entire shopping
malls, office buildings, and other commonly controlled
enterprises.
Conclusion
The Administration continues to support a full public
performance right, however, we recognize that a full
performance right may be unattainable at this time. While
the limited scope of the right granted in H.R. 1506 is all
that may be possible at present, we are troubled by the
bill's exemptions, and the imposition of compulsory licenses
on much of the remainder of the public performance right.
I would be pleased to answer any questions Members of the
Committee may have.
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