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Hearing Subcommittee on Courts, the Internet, and Intellectual Property:Digital Music Licensing and Section 115 of the Copyright Act

Location: Washington, DC


March 8, 2005


Mr. Goodlatte. Mr. Chairman, thank you for holding this very interesting hearing.

Mr. Potter, I would like to follow up; in fact, I would like to ask all of you on the conversation you had with Mr. Berman regarding the progress that you are making toward working out these issues in the private sector since last year's hearing. I think we are not quite to where Mr. Berman described it as having a deal, and I would like to hear you tell us what kind of progress you are making and whether you think the parties can come up with a final workable solution without intervention by the Congress.

Mr. Potter. I think that we have to start from the premise that Congressional action is absolutely necessary. It may be a consensus presentation by the industries and a request, a joint request to legislate, but the law that exists today, both in 115 and 114, is remarkably micromanaging, and it is built, constructed specifically for industries as they existed at the time of enactment or as some who are in the room thought the industries might develop.

That is a very hard way to legislate, because as soon as the industry veers off into a new direction that's unexpected, and that could be any industry. It's sort of like if you literally by statute said gas stations must be full service, and then, somebody said, well, why can't we be self service? We want to have you pump your own gas. But they had to go back to Congress. That's the level of detail that 115 includes and in some respects 114. So I think regardless of what negotiations transpire and results transpire, we do have to come back to legislation.

Mr. Goodlatte. Mr. Israelite, do you want to comment on that?

Mr. Israelite. Thank you. It is difficult for me to evaluate this, being so new on the job, but what I can tell you is in just the few weeks that I've been on the job, we've had very productive initial discussions with the digital folks and with the recording industry and with the songwriting groups, and so, I'm encouraged, and I'm optimistic.

The music business is one where there are historical conflicts, and one of the things that I think can help us is that we are all very united in the fight against piracy, and I think that a lot of our efforts in that regard can help us to learn to work better together, and so, I'm optimistic about that, but I do think that we ought to give negotiations a chance to work, and I think if you look at the progress from just last March to where we are today, you see some significant movement. And so, I'm optimistic that we can continue that.

Mr. Goodlatte. Mr. Kenswil or Mr. Newton, do you have any comments on that?

Mr. Newton. I did want to comment, and this goes back to your question, Mr. Conyers, about how shocked you were that I used article I, section 8 in dealing with these issues, and we understand that it was James Madison who wrote the very powerful and concise words that deal with these copyright issues. I was shocked when I saw that it was on the same page as the war powers and the Post Office and building roads, but to me, it also shows how important he thought it was to give it incentive.

And the only profession mentioned in that article I, section 8 is authors. The inventors are not involved in this discussion we are having today. It mentions inventors, but we are talking about authors. We sign away some of those exclusive rights to our publishers. Sometimes, our publishers are our own selves; that's in my case, some cases. So it is very clear, very ungray, the exclusive rights, and that's the point of my song, and I hope we get a chance to get to that. The exclusive rights are given only to the authors.

Mr. Goodlatte. Mr. Newton, you are on my nickel, and I need to get----

Mr. Newton. Okay; sorry.

Mr. Goodlatte.--a couple of other questions in.

Mr. Kenswil, did you want to respond?

Mr. Kenswil. Obviously, the marketplace is usually the best place to decide these things. I agree that we probably need to come back to you. Hopefully, we will get to an agreement. If everybody agrees to work day and night for several weeks, I'm
sure we could get there. It's a matter of the desire, and then, hopefully, we can come back to you with an agreement that could be codified, which will probably be necessary.

Mr. Goodlatte. Mr. Potter, in Mr. Israelite's written testimony, he states that the National Music Publishers Association members and the Harry Fox Agency affiliates have issued over 2.85 million licenses to 215 different licensees for digital delivery of musical works. Have online music services been able to satisfy consumer demand for specific types of content, or are there still types of music for which there is significant consumer demand that are unavailable to online music service companies, and can a consumer obtain these types of music legitimately online?

Mr. Potter. Your question goes to types of music, and that's a tough one to answer. Let me provide a couple of ideas. One is that any single song, if the consumer wants it at that moment, and it's not on our service, it's available on Grokster and Kazaa. It's a really simple proposition for the consumer. If I can't get it legally, I know I can get it illegally.

Mr. Goodlatte. I understand that. Can they get it legally?

Mr. Potter. Can they get it legally? There are still several bands, frankly, that have not authorized their songs; several people on the master recording issues, and that's an issue that----

Mr. Goodlatte. But there's no genre or type of music that isn't being licensed.

Mr. Potter. I don't know that there is a genre or type of music that is not being licensed, but there are several holes in the catalogue for several online services.

Mr. Kenswil. I can identify one just off the top of my head, and that's international music. There are many, many millions of songs that have never been available in this country, and there is a marketplace for them. The reason for that is in the past, it has not been economic to release them. Online makes it economic to release them. But we go back, we have a large Indian repertoire, a large Mandarin repertoire of music, Cantonese repertoire at Universal. It's very hard to do that, because not only can't we find the publishing companies to license; we probably, in many cases, there isn't one, because those rights have never even been assigned in this country.

Mr. Potter. That might get to the orphan copyright study that I know the Copyright Office is doing.

Mr. Goodlatte. I think Mr. Israelite wanted to comment, if that's all right.

Mr. Israelite. I'll just mention that at least in the subscription world, we've agreed to license everything, and we've agreed to do that without even knowing what our compensation will be in the future, and again, we're also open to a blanket license that would license everything in that space. And so, you know, one of the things that's important to remember is that as quickly as these services want to offer music, ultimately, the money has to find the right people who need to get paid. And so, part of the equation is being able to provide the proper information, make the request in the proper way, and so, we've been working through those issues, but it's something we're committed to doing.

Mr. Goodlatte. Thank you, Mr. Chairman.


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