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34–178 PDF 2007

REFORMING SECTION 115 OF THE

COPYRIGHT ACT FOR THE DIGITAL AGE

HEARING

BEFORE THE

SUBCOMMITTEE ON COURTS, THE INTERNET, 

AND INTELLECTUAL PROPERTY

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MARCH 22, 2007

Serial No. 110–33

Printed for the use of the Committee on the Judiciary

(

Available via the World Wide Web: http://judiciary.house.gov 

(II)

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

LINDA T. SA ́ NCHEZ, California 

STEVE COHEN, Tennessee 

HANK JOHNSON, Georgia 

LUIS V. GUTIERREZ, Illinois 

BRAD SHERMAN, California 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

ARTUR DAVIS, Alabama 

DEBBIE WASSERMAN SCHULTZ, Florida 

KEITH ELLISON, Minnesota 

[Vacant] 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

CHRIS CANNON, Utah 

RIC KELLER, Florida 

DARRELL ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio

PERRY APELBAUM, Staff Director and Chief Counsel 

JOSEPH GIBSON, Minority Chief Counsel 

SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

HOWARD L. BERMAN, California, Chairman 

JOHN CONYERS, JR., Michigan 

RICK BOUCHER, Virginia 

MARTIN T. MEEHAN, Massachusetts 

ROBERT WEXLER, Florida 

MELVIN L. WATT, North Carolina 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HANK JOHNSON, Georgia 

BRAD SHERMAN, California 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

ZOE LOFGREN, California 

HOWARD COBLE, North Carolina 

TOM FEENEY, Florida 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

CHRIS CANNON, Utah 

RIC KELLER, Florida 

DARRELL ISSA, California 

MIKE PENCE, Indiana 

SHANNA WINTERS, Chief Counsel 

BLAINE MERRITT, Minority Counsel 

(III)

C O N T E N T S 

MARCH 22, 2007

OPENING STATEMENT 

Page 

The Honorable Howard L. Berman, a Representative in Congress from the 

State of California, and Chairman, Subcommittee on Courts, the Internet, 

and Intellectual Property .................................................................................... 1

The Honorable Howard Coble, a Representative in Congress from the State 

of North Carolina, and Ranking Member, Subcommittee on Courts, the 

Internet, and Intellectual Property .................................................................... 3

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, Ranking Member, Committee on the Judiciary, and Member, 

Subcommittee on Courts, the Internet, and Intellectual Property .................. 10

WITNESS 

Ms. Marybeth Peters, Register of Copyrights, U.S. Register of Copyrights, 

Washington, DC 

Oral Testimony ..................................................................................................... 18

Prepared Statement ............................................................................................. 21

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the the Honorable Howard Coble, a Representative 

in Congress from the State of North Carolina, and Ranking Member, Subcommittee on Courts, the Internet, and Intellectual Property ......................... 5

Prepared Statement of the the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Chairman, Committee on the 

Judiciary, and Member, Subcommittee on Courts, the Internet, and Intellectual Property .................................................................................................... 10

Prepared Statement of the Honorable Lamar Smith, a Representative in 

Congress from the State of Texas, Ranking Member, Committee on the 

Judiciary, and Member, Subcommittee on Courts, the Internet, and Intellectual Property .................................................................................................... 13

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Sheila Jackson Lee, a Representative 

in Congress from the State of Texas, and Member, Subcommittee on Courts, 

the Internet, and Intellectual Property .............................................................. 60

Prepared Statement of the Honorable Steve Cohen, a Representative in Congress from the State of Tennessee, and Member, Subcommittee on Courts, 

the Internet, and Intellectual Property .............................................................. 65

Ethan Smith, Sales of Music, Long in Decline, Plunge Sharply, Rise in 

Downloading Fails to Boost Industry: A Retailing Shakeout, Wall Street 

Journal, March 21, 2007 at A1 ........................................................................... 66

Statement released by SESAC, Inc. on ‘‘Reforming Section 115 of the Copyright Act for the Digital Age’’ .............................................................................. 69

Joint statement released by the American Society of Authors, Composers 

and Publishers and Broadcast Music, Inc. comments on Reforming Section 

116 of the Copyright Act for the Digital Age ..................................................... 74

(1)

REFORMING SECTION 115 OF THE 

COPYRIGHT ACT FOR THE DIGITAL AGE 

THURSDAY, MARCH 22, 2007

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COURTS, THE INTERNET,

AND INTELLECTUAL PROPERTY, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC.

The Subcommittee met, pursuant to notice, at 10 a.m., in Room 

2141, Rayburn House Office Building, the Honorable Howard Berman (Chairman of the Subcommittee) presiding. 

Present: Representatives Berman, Conyers, Boucher, Wexler, 

Watt, Cohen, Johnson, Schiff, Lofgren, Coble, Feeney, Goodlatte, 

Chabot, Cannon, Keller, Issa, Pence, and Smith. 

Staff present: Perry Apelbaum, Chief of Staff/General Counsel; 

Joseph Gibson, Minority Chief Counsel; Rosalind Jackson, Professional Staff Member; David Whitney, Minority Counsel; and 

Shanna Winters, Subcommittee Chief Counsel. 

Mr. BERMAN. Welcome. We will open the hearing now. 

The hearing of the Subcommittee on Courts, the Internet, and 

Intellectual Property will come to order. 

I will recognize myself for an opening statement. 

I would be remiss to begin any music licensing hearing without 

acknowledging that reforming section 115 may not be the top priority of many in this room. After all, small webcasters are scrambling to assess the viability of their current business models after 

the recent rate determination by the Copyright Royalty Board. 

In addition, the recent announcement of the XM-Sirius merger 

has exposed the glaring inequities of the Copyright Act in its application to different technologies: Internet, cable, satellite and, of 

course, the over-the-air broadcasters. 

This raises the question: Should I and interested colleagues reintroduce a version of the PERFORM Act, and is it finally time for 

a performance right to extend to rusty old radio? 

These developments highlight a quintessential issue for this Subcommittee: Should we proceed with comprehensive reform of music 

licensing or deal with it in a piecemeal fashion? For the sake of 

this hearing, the Subcommittee will limit its focus to section 115. 

Many times over the past several years, this Subcommittee has 

explored the need for reforming the section 115 compulsory license 

for musical works. All interested parties agree that it is broken and 

that the licensing structure that was developed to deal with the 

distribution of piano rolls, while updated, still does not provide a 

2

fluid mechanism for a new physical and digital music delivery models. 

Complaints about section 115 range from its administrative burdens relating to the complexities of the notice requirements to the 

legal ambiguities relating to the definition of digital phonorecord 

delivery, DPD, or more broad, where or if a performance ends and 

reproduction begins. 

However, no consensus exists for how to fix section 115. At the 

macro level, parties agree that rampant piracy over peer-to-peer 

networks creates a dire need to address digital music licensing reform. In 2005, alone, nearly 20 billion illegal file swaps and 

downloads occurred. 

This piracy harms an industry that provides jobs in my district 

and throughout the country, and it hurts all the parties involved, 

from the songwriter, to the recording artist and to all the businesses that service the industry. 

In a post-Grokster environment, we have a unique opportunity to 

channel consumers away from illegal P2P networks, toward legitimate online music distribution services. 

But the window is closing. In 2006, digital music sales totaled $2 billion, up from $1.1 billion in 2005. Consumers downloaded an estimated 795 million songs, up 89 percent from the 2005 figures. 

Currently, there are 4 million tracks available for downloading, facilitated by 500 online music services, available in over 40 countries. Further fueling the growth of digital downloads, portable 

music player sales increased 43 percent, to $120 million in 2006. 

In addition, ringtones, once dismissed as nothing more than a passing fad, have become a $3 billion worldwide market. 

This is all good news. However, despite their meteoric growth, 

legal online music services still represent the equivalent of a fly on 

the back of the online piracy elephant. Yesterday’s Wall Street

Journal described how digital music has failed to compensate for 

lost sales of CDs and that according to BigChampagne, 1 billion 

songs a month are traded on illegal file-sharing networks. I will let 

you figure out what BigChampagne is. 

Therefore, since there is broad consensus that inefficiencies in 

section 115 hinder the rollout of new legal music offerings, we must 

turn our focus to the question of how to reform section 115. I fear 

that if we do not address particularly reforms to section 115 soon, 

legitimate music services will not be able to compete with free or 

provide consumers with their choice of music any time, any place 

and in any format, while at the same time ensuring that creators 

receive adequate compensation. 

There have been multiple suggestions for reforming the compulsory license, including, one, designating an agent to collectively 

manage reproduction and redistribution rights; two, collectively licensing performance, distribution and reproduction rights for a 

music rights organization; three, amending 115 to ease just the administrative burden and legal uncertainty; and, four, repealing section 115 and allowing the marketplace to regulate licensing. 

Last year, the former Chairman of this Subcommittee, Congressman Lamar Smith, made a valiant effort to resolve the issue. Perhaps back then the interested parties lacked the motivation to act. 

Clearly, all parties would benefit from section 115 reform. 

3

For example, the business survival of the digital media association members’ depends on the success of legitimate online music 

services. In addition, the proliferation of additional legal music offerings will provide vital new sources of royalties for members of 

the National Music Publishers Association and songwriters. Finally, RIAA members will also benefit through the distribution of 

their works in secure, new formats. 

Since the Subcommittee last met on this issue, there have been 

several developments. First, the Copyright Office determined that 

ringtones fall within the scope of the 115 license, though the determination is on appeal. Also, ASCAP and digital music services are 

facing off in a Federal court in New York over whether a download 

of a musical work implicates a public performance, and copyright 

royalty judges are about to set a discovery schedule in the section 

115 rate proceeding. 

I don’t deny that several obstacles seem to remain in the way of 

full-scale realization of music distribution possibilities. Whatever 

the outcome of the reforms we ultimately adopt, our focus needs to 

remain on facilitating the licensing of distribution and reproduction 

rights so that consumers can receive music in the manner they 

want, while at the same time providing rightful compensation to 

the creators of music. 

Rewards for innovation are hard enough to come by for the songwriters who are often the first to create but last to be paid. 

I look forward today to hearing from our witness, Marybeth Peters, and would now recognize our distinguished Ranking minority 

Member, my friend Howard Coble, for his opening statement. 

Mr. COBLE. Thank you, Mr. Chairman. 

Mr. Chairman, as you know, because of term limits, I was removed from this Subcommittee for the past 4 years. It is indeed 

good to see old friends in the room today, including the distinguished Register and her able staff who is covering her back as we 

speak. 

Mr. Chairman, article 1, section 8 of the Constitution grants 

Congress this power: To promote the progress of science and useful 

arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries. 

In 1909, the 61st Congress decided to exercise this power by enacting a compulsory license that authorized anyone to reproduce 

and distribute piano rolls for use in the home entertainment centers of their day, player pianos, providing they paid a royalty of 2 

cents to the owner of the copyright in the musical work, which typically was the songwriter or a music publisher. 

The antecedent of section 115 of the Copyright Act, which is the 

subject of our hearing today—this license was intended to balance 

the interests of copyright owners in controlling and receiving compensation from the use of their writings and the interests of consumers and music distributors who wanted to make available the 

widest variety of musical compositions at the lowest cost to the 

public. 

The development of new technologies and mediums for the physical distribution of music, such as phonographic records and cassette tapes, as well as a recognition of the woefully inadequate 

4

compensation provided to copyright owners by the 2-cent statutory 

royalty, led to amendments to the law in 1976. 

In 1995, the Congress again revisited the license by enacting the 

Digital Performance Right in Sound Recordings Act, or DPRA. At 

that time, Congress sought to anticipate the transition from the 

physical distribution of products, such as albums, CDs, and tapes 

that contained music to the digital delivery of music files by computer and the Internet, by making clear that copyright owners 

were to benefit from the payment of royalties for digital deliveries 

of phonorecords. 

Notwithstanding these amendments, there is substantial evidence that section 115 is, in the words of our distinguished Register, Ms. Peters, dysfunctional. The Copyright Office reports that 

the license appears to be seldom used by licenses, the administration of the license is fraught with inefficiencies, ambiguities and 

difficulties and recommends the license needs to be structurally 

changed and amended to clarify which licensees are required for 

the transmission of music if Congress is to improve its operation. 

Indeed, the view that the license is dysfunctional is widely 

shared by those in the music publishing, reproduction and distribution industries. It is, furthermore, the opinion of the present and 

former leaders of this Subcommittee, who worked diligently and introduced the Section 115 Reform Act of 2006, which is commonly 

referred to as SIRA. 

Though marked up by the Subcommittee last June, you will recall, Mr. Chairman, several outstanding issues conspired to prevent 

that measure from being formally enacted prior to the adjournment 

of the Congress for that year. 

I believe the Members of this Subcommittee and the parties interested in modernizing the music licensing systems owe a debt 

and gratitude to our former Chairman, Representative Smith, the 

distinguished gentleman from Texas, and the current Chairman, 

Representative Berman, the distinguished gentleman from California, for their commitment and leadership in seeking to change 

or to make section 115 relevant in the age of digital music. 

Finally, while there is an Amen chorus that the license is broken 

and requires repair, the composers, music publishers, record companies, digital distributors and consumers, who all have a legitimate stake in rebalancing section 115, all sing different tunes 

about how precisely it should be accomplished. The process that led 

to the introduction and markup of the Section 115 Reform Act 

brought many of these parties closer together. 

I look forward to hearing the testimony from Ms. Peters today, 

Mr. Chairman, as you indicated, and to learning more about proposals to clarify the rights that need to be licensed, as well as approaches for streamlining the rights approval process. 

This concludes my remarks, and I thank the Chairman. 

[The prepared statement of Mr. Coble follows:]

5

PREPARED STATEMENT OF THE THE HONORABLE HOWARD COBLE, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF NORTH CAROLINA, AND RANKING MEMBER, SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY


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Mr. BERMAN. Thank you very much, Mr. Coble. 

Chairman Conyers? 

Mr. CONYERS. After these two great descriptions of what we are 

here for, I will put my statement in the record. 

[The prepared statement of Mr. Conyers follows:]

PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR., A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF MICHIGAN, CHAIRMAN, COMMITTEE ON THE JUDICIARY, AND MEMBER, SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

Let me begin by thanking my good friend from California, the Chairman of the 

Subcommittee, for convening today’s hearing. I’d also like to take this opportunity 

to recognize the presence of our sole witness, Marybeth Peters. I believe this is the 

third time that Ms. Peters has agreed to testify before the Subcommittee on this 

issue, in as many years. And, I’d just like to personally thank her for her continued 

willingness to help out, as we search for a solution to this difficult and complex 

problem. 

In just a few years, copyright holders have gone from being just victims of largescale Internet piracy to embracing the Internet to market their works. Copyright 

owners, including record companies and songwriters, responded to consumer demands by working with Internet sites like iTunes to provide digital content to consumers. In essence, they are taking advantage of the very technology that threatens 

their livelihood. 

Despite this turnaround, though, we are still hearing that music is not widely 

available online and that the reason is the difficulty in getting licenses from music 

publishers over the musical compositions. Companies seeking the licenses claim the 

procedures are outdated and the law is not clear on which online music services require which licenses. There are even suggestions that Congress should alter the licensing scheme into a ‘‘blanket’’ license so that users of compositions pay royalties 

into a pool and the Copyright Office divvies up the money amongst the publishers. 

Let me state that I am one Member who would be concerned with proposals limiting the ability of songwriters and publishers to negotiate licenses for their compositions. Despite the fact that they actually create and write the songs we listen 

to, songwriters and publishers receive what appear to be the lowest royalties in the 

music industry. 

Publishers should not be penalized for protecting their property rights in the same 

way every other industry has done: the record companies have sued individuals for 

copyright infringement and file sharing companies have sued record companies and 

others for copyright violations. 

Simple economics would dictate that it is in the publishers’ self-interest to license 

their work to anyone who can protect it from piracy and who can pay the royalties. 

Simply put, music publishers and songwriters have no incentive to keep music off 

the Internet, but limiting their rights even further could create disincentives. 

In short, I hope we can let the market work before we introduce more regulations 

into an already heavily-regulated content industry. The last thing we want to do is 

create further obstacles to creativity.

Mr. BERMAN. This is really a three-witness hearing, Marybeth 

Peters, the register, Mr. Coble and myself. 

And the Ranking Member of the Committee, Mr. Smith? 

Mr. SMITH. Mr. Chairman, I do have an opening statement I 

would like to make. 

Mr. BERMAN. Yes, you are recognized. 

Mr. SMITH. Mr. Chairman, first of all, I appreciated your comments a while ago about our efforts last year, and of course I hope 

those efforts will lead to results sometime soon this year. 

Mr. Chairman, thank you for convening this hearing on section 

115 of the Copyright Act and the status of proposals to adapt it to 

the realities of today’s digital marketplace. 

Last June, this Subcommittee began the process of bringing the 

law that governs the music industry, a multibillion dollar enterprise, into the digital age with the introduction and markup of the 

11

Section 115 Reform Act of 2006, or SIRA. Prior to the introduction 

of SIRA, the Subcommittee had conducted seven hearings over the 

past two Congresses on aspects of the copyright law that relate to 

music licensing and digital technology. 

SIRA was introduced to focus attention on the need to modernize 

the mechanical license that governs the making and distribution of 

phonorecords in the U.S. The need for a comprehensive rewrite of 

this compulsory license has been apparent for some time. Imperfect 

and in many ways anachronistic, the license is nevertheless one 

that has generally been accepted by those who have been engaged 

in composing, publishing or producing phonorecords for many 

years. 

In its current form, though, the license fails to adequately encourage the cultivation and development of a robust, legitimate, online digital music market, something that is necessary for the future health of composers, publishers, record companies, recording 

artists and consumers. The development of a legal marketplace will 

improve the consumer experience by enabling music lovers to purchase and enjoy music when and where they want. 

Tens of millions of American consumers already embrace technologies that enable them to enjoy music in new, exciting and previously unimaginable ways. As the number and variety of online 

music services expands, Congress has the responsibility to ensure 

the law is modernized in a manner that strikes the appropriate 

balance between the rights of copyright owners, the economic necessities of the marketplace and the interest of consumers. 

SIRA was an important first step in beginning this process. The 

requirement to update our Nation’s music licensing laws grows 

more urgent every day. 

Mr. Chairman, as you noted a while ago, proof of this statement 

was on the front page of yesterday’s Wall Street Journal, which 

published an article that described a ‘‘seismic shift in the way consumers acquire music,’’ and stated overall, ‘‘Sales of all music, digital and physical, are down 10 percent this year and that CD sales 

have plunged a startling 20 percent over the last year.’’

To be sure, there are a number of factors that have contributed 

to this dramatic decline. However, Congress and the music industry have the power to advance the adoption of a modern, sensible 

and efficient music licensing system that rewards creators and facilitates the ability of legitimate licensees to acquire the legal 

rights that they need to reproduce, distribute and perform music. 

I am encouraged that we have the opportunity to build on SIRA’s 

foundation and hopefully succeed in enacting a bipartisan measure 

that updates and reforms our Nation’s music licensing laws. 

The critical question that will need to be addressed by the music 

industry this Congress is whether it will find common ground and 

take the steps necessary for the development of a 21st century 

music licensing system. 

In closing, Mr. Chairman, I want to thank you and the Ranking 

Member of this Subcommittee for your recognition of the importance of this issue and the decision to schedule this oversight hearing so early in the congressional session. 

12

Mr. Chairman, I ask unanimous consent that the Wall Street 

Journal article that you and I have referred to be made a part of 

the record. 

Mr. BERMAN. It will be so documented. 

[The information referred to is available in the Appendix.] 

Mr. SMITH. And, furthermore, Mr. Chairman, I want to apologize 

for having to leave almost immediately in order to get to the House 

floor. As you know, the Judiciary Committee has a bill that is coming up, and I need to tend to that. But I know this is going to be 

an interesting hearing, and I look forward to reading Marybeth’s 

testimony and to learning more about this subject. 

And I yield back the balance of my time. 

[The prepared statement of Mr. Smith follows:]

13

PREPARED STATEMENT OF THE HONORABLE LAMAR SMITH, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF TEXAS, RANKING MEMBER, COMMITTEE ON THE JUDICIARY, AND MEMBER, SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY


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Mr. BERMAN. See, in the old days, we wouldn’t have been able 

to continue while a Judiciary bill was going on on the House floor. 

Thank you very much, Mr. Smith. 

Do any other Members wish to make opening statements? 

Okay. Then I will introduce our witness, known to anybody who 

has been around here a while. She is Marybeth Peters, the register 

of copyrights. Ms. Peters has been register since 1994. Previously, 

she served as the policy planning advisor to the former register. 

In addition to her leadership of the Copyright Office, Ms. Peters 

serves on the Intellectual Property Advisory Committees of several 

law schools and is a member of the Board of Trustees of the Copyright Society of the United States of America. 

Ms. Peters received her undergraduate degree from Rhode Island 

College and her law degree from George Washington University. 

She is not simply important because of her position but she is truly 

an expert on this subject. 

Ms. Peters, it is good to have you here again. Your written statement will be part of the record in its entirety, and we would appreciate you being able to summarize your testimony in around 5 minutes. 

We welcome you. Please begin. 

TESTIMONY OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, U.S. REGISTER OF COPYRIGHTS, WASHINGTON, DC 

Ms. PETERS. Let me start by saying, Chairman Berman, Ranking 

Member Coble and Members of the Subcommittee, thank you for 

inviting me to testify on reforming the compulsory license dealing 

with the reproduction and distribution of non-dramatic musical 

works by means of physical phonorecords and digital phonorecord 

deliveries, section 115 of the Copyright Act, a topic that has been 

on the Subcommittee’s agenda and my office’s agenda for more 

than 3 years. 

During this period, I have testified four times, three of them before this Subcommittee, and I am going to use the same word that 

you used, Mr. Berman, that there have been valiant efforts by you 

and Mr. Smith and by the Subcommittee staff over the past 3 

years, valiant efforts by the parties and even by my office to reach 

consensus on reform. 

Yes, we were close, but at the end of the day, legislation was not 

enacted. Today, my message is, the situation is worse, new issues 

are arising, and the likelihood of reaching consensus has lessened 

considerably, yet reform of section 115 is urgent. So my focus today 

is on what potentially is achievable. 

Now, over the past 3 years, I have offered a number of solutions—at different times, different solutions. My preferred solution 

has always been abolition of the license. However, I am not advocating abolishing the license today. That would bring chaos. So 

whatever we do to reform needs to be achievable, and we can look 

at maybe the reform as transitional if in fact the goal, ultimately, 

and you agree, is to get rid of the license. 

Before going on, let me give a little bit of background, and you 

both referred to it, Mr. Coble and Mr. Berman, in your opening remarks. In 1995, the compulsory license was amended in anticipation of the introduction of digital music services. It was expanded 

19

to cover digital phonorecord deliveries. However, no one anticipated 

what would come. No one anticipated peer-to-peer, Napster and the 

like. Nor could anyone foresee the issues that such technologies 

would raise. 

The Copyright Office, through its regulatory powers, has updated 

its regulations in response to industry petitions to make the compulsory license work better, and we may continue to do so, but regulatory action won’t solve the problem. Substantive legislative reform is needed. 

I want to highlight two possible solutions. First, it could be 

wholesale sublicensing with a safe harbor provision for sublicensors 

or an amendment to section 115 to mirror the blanket compulsory 

license in section 114, which is the section which deals with digital 

performances of sound recordings. 

Under either option, however, the issue of clarifying the rights 

is essential. More about rights later. 

Let me start with sublicensing, which exists today in the marketplace. Online music companies can go to one entity, typically the 

record label, and receive all of the rights they need to operate a 

music service. Sublicensing works and with the addition of minimal 

statutory changes could work even better. I don’t expect that every 

party will endorse additional sublicensing provisions, but this approach would solve the problem. 

Sublicensing makes sense from a practical perspective, because 

music services already have to deal with the record labels. So long 

as the record label passes on the proper royalty amount to the publisher that they have collected and the music services get the rights 

they need and money flows back in a timely fashion, then the parties will get the benefit of the compulsory license. 

The second legislative option is to adopt the 114 model in section 

115. This would require greater changes in the law, but much of 

the language to create a 115 license already exists in 114. 

Under the 114 framework today, one entity with respect to 

webcasters, SoundExchange, collects all the royalty income on behalf of all rights holders and then distributes that money to them. 

It is an efficient system that both licensees and licensors support, 

despite the outcry over the recent rate decision. It is not necessarily over the process, per se. It is the rate. 

As I have noted earlier, solving the rights issue is really necessarily, and the question here is, what is the problem with the 

rights. Licensing is divided into two separate markets. One is public performance; one is reproductions and distributions. 

This pits two different middlemen for the same copyright owner 

against each other. Each wants and each demands a piece of the 

action, whatever that action might be. But whether or not two or 

more separate rights are truly indicated and deserving of compensation is a question that is before a variety of bodies at this 

point. 

But on top of whether or not they are truly implicated, there is 

the belief that it is inefficient to require a licensee to seek out two 

separate licenses from two separate sources in order to compensate 

the same copyright owner for the right to engage in a single transmission of a single work. So clarification of what rights are implicated and whether those rights have liability is critical. 

20

If the goal, and I think this is the goal, is to shift users away 

from piratical services to legitimate services, we must have a statutory framework that enables music services to flourish. As I think 

all of us who have spoken this morning have said, the current 

framework for online services isn’t just outdated, it is broken. It 

needs to be fixed. 

I look forward to working with all of you in trying to figure out 

a solution that will work for the digital marketplace, that will compensate songwriters, and that will compensate publishers. The key 

is not to deny rights holders the ability to get a fair bargain. It is 

really to enable music services so money will flow back. 

Thank you. 

[The prepared statement of Ms. Peters follows:]

21

PREPARED STATEMENT OF MARYBETH PETERS


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Mr. BERMAN. Thank you very much. 

I will recognize myself for 5 minutes for some questions, and 

then we will move ahead. 

I know the Copyright Office expressed unease about last year’s 

bill. So if Congress were to pursue legislation similar to SIRA, 

what policy considerations should we be concerned with? 

Ms. PETERS. I think we went on record with some of our concerns, and I will just outline one of them. One of them, actually, 

I think, is solvable. I think we actually even came forward with a 

way to do it, and it really deals with streaming and specifically 

whether or not when streams are involved there is in fact a distribution of a phonorecord. 

We believe that especially on-demand streams could well substitute for the sale of a phonorecord, and, therefore, the value of 

an on-demand stream is higher than pure streaming. So we agree 

that that is a compensable act that really has a high value. 

Our disagreement was calling it a distribution of a phonorecord. 

For us, it really was a public performance. So this issue was about 

terminology, and I think that that is fixable. 

There were some other issues that dealt with the administration 

of the license that get into the nitty-gritty of a designated agent 

and what the transparency of that organization is and how it runs. 

And we can give you further details if you want. 

Mr. BERMAN. So, basically, what you are saying really is, it is not 

a fight about so much—I mean, there will be differences of opinion 

about compensation, but it is a fight about how you analyze and 

the terminology used to describe it. 

Ms. PETERS. Well, our concern was the way that it was described 

in that bill. 

Mr. BERMAN. Right. 

Ms. PETERS. My issue about rights clarification, I think, has 

ratcheted up a little bit since SIRA basically was on the table. I 

think the proceeding in the rate court in the southern district of 

New York with regard to whether or not compensatable performances are involved in downloads is a big issue right now. 

Mr. BERMAN. Okay. One of the webcasters’ concerns in the context of section 115 reform is how to treat ephemeral recordings 

used to facilitate the transmission of music. Here is what has been 

cited as your position on this issue. 

Ms. PETERS. You are talking about a footnote. 

Mr. BERMAN. Footnote 434. 

Ms. PETERS. Four-thirty-four. 

Mr. BERMAN. But I am only going to read part of it here. 

‘‘As we indicated in 1998 to the affected parties, we saw no justification for the disparate treatment of broadcasters and 

webcasters regarding the making of ephemeral recordings, nor did 

we see any justification for the imposition of a royalty obligation 

under a statutory license to make copies that have no independent 

economic value and are made solely to enable another use that is 

permitted under a separate compulsory license.’’

There is a lot of controversy about this footnote. What did the office mean to say in footnote 343 of your section 104 report? 

Ms. PETERS. As opposed to what we didn’t mean. 

39

Mr. BERMAN. And maybe I beat Mr. Boucher to this question, I 

don’t know. 

Ms. PETERS. When we were doing what is known as the 104 report, we were looking at various exemptions, and, really, this issue 

came up with respect to the fact that section 112(a) basically gave 

broadcasters a free ride. And so it came up in the context of 112(a). 

And then what we basically said is, in principle, we believe that 

people who perform like activities should be treated essentially the 

same way. And because the focus was on that broadcaster you 

shouldn’t have to pay at all, we basically said, to equalize them, 

then maybe they shouldn’t have to pay at all. 

However, what you really need to step back and say is, what is 

the value of those ephemeral copies. And it may be that there is 

value and you flip it the other way. But our main point, and I 

agree we took a position that said, don’t pay at all. Basically, make 

E, which deals with webcasting and sound recordings, the equivalent of A, which deals with broadcasters and no liability, the same. 

I am here today to basically say, I can see the arguments with 

regard to server copies in some instances, and so the issue is one 

of value. If there is value and it should be licensed, there should 

be payment, but whoever is involved should be treated exactly the 

same way. Don’t have disparity. 

Mr. BERMAN. I will restrain myself from getting into the issue of 

the free ride for broadcasters, and I will——

Ms. PETERS. So will I. 

Mr. BERMAN. This is a 115 hearing, and I will recognize the 

Ranking Member, Mr. Coble, for 5 minutes. 

Mr. COBLE. Thank you. 

Thank you, Mr. Chairman and Ms. Peters. As has been said, it 

is good to have you with us this morning. 

Ms. Peters, the goal of the music industry is to increase its revenue at a time when sales of CDs are falling and consumers are 

choosing to acquire music by other means. Some might even believe 

that we are attempting to swim upstream against the tide here, 

but let me ask you this: Do you think that success in reforming section 115 will actually result in reversing these trends and growing 

the pie for those involved in creating, producing and distributing 

music? 

Ms. PETERS. I believe that reform will help. Ultimately, it is the 

consuming public that makes the decision in the marketplace, but 

I do believe that the more legitimate services that you have, and 

that means enabling the digital music services to have as much 

music as possible to make available to consumers, moves us in the 

right direction. It is very difficult to compete against free. 

A second part of all of this is the consumer. We have to do a better job of explaining why promoting creativity, promoting songwriters, and promoting not only the people who write the songs but 

also the people who bring the songs to us. That has to be appreciated. So it is kind of a dual track, but this is certainly the first 

step. 

Mr. COBLE. Let me put a simplified question to you that may not 

involve a simplified answer. What do you consider to be the chief 

obstacle or impediment to reform, A, and, B, how do we overcome 

it? 

40

Ms. PETERS. The chief obstacle, in my view, is there are at least 

three major parties involved all of whom have their own—and I understand it—issues and way they want to see this resolved. Trying 

to reach consensus isn’t going to happen because their own interests differ significantly. So it really is, I think, Congress’ responsibility to step back and say, what is the best balance? 

You cited the Constitution. What encourages creativity the most 

and distribution of product for the benefit of the American people? 

And I think there are some hard choices that you have to make. 

You are going to have to decide on what the path is and what a 

fair balance is. 

Obviously, if the answer were easy, we would have solved it 3 

years ago. And people in my office will smile, we have been meeting with various parties asking, what the situation is and where 

are you going. I had a reaction the other day. I went, ‘‘Ahh,’’ I 

threw up my arms. I said, ‘‘I don’t know what to do. This is so complicated.’’

So it is difficult, but choose a path. Choose a 114 blanket license 

or choose the path and then keep that path narrow to accomplish 

ease of administration of the mechanical compulsory license so that 

digital music services can bring the largest amount of content to 

the people so that they can compete with free, unauthorized services. 

Mr. COBLE. Well, it is easier to propound a simple question, and 

I think you responded as well as you could. I thank you for that. 

Ms. Peters, given that the 115 license is seldom used, that technology is moving faster than the legislative process and that industry stakeholders have been unable or unwilling to agree on one 

comprehensive reform proposal, should our Committee consider 

simply sunsetting the license just as the distant signal satellite license, the 119 license expires every 5 years unless expressly reauthorized by the Congress? What say you to that? 

Ms. PETERS. If what you are saying is, leave the license as it is 

and sunset it, I don’t think it works. The problem is now you have 

got to enable music services now. You have got to figure out how 

to keep services in business and let them expand and grow to serve 

consumers’ needs. So you can’t leave it as it is. 

Actually, I was suggesting that if you fix it and do a short-term 

fix, and then sunset it. But I don’t think a solution is leave it as 

it is and in 5 years sunset it. I support sunsetting it, but the experience with sunsets hasn’t been good. They don’t go away. 

Mr. COBLE. And I see a red light. I see Mr. Berman is looking 

at me, so I yield back. 

Mr. BERMAN. So, basically, you are saying we are going to have 

to make tough decisions? 

Ms. PETERS. I am saying that I think the time has come——

Mr. BERMAN. I hate when that happens. [Laughter.] 

Ms. PETERS. So do I. 

Mr. BERMAN. Although, I don’t know, the sunset means we have 

to make tough decisions over and over again. 

Ms. PETERS. That is exactly right. 

Mr. BERMAN. Since I don’t know exactly where people came in, 

I am just going to go in the order of seniority and recognize the 

gentleman from Virginia, Mr. Boucher, for 5 minutes. 

41

Mr. BOUCHER. Mr. Chairman, thank you very much. 

And, Ms. Peters, welcome back to the Subcommittee. 

Ms. PETERS. Thank you. 

Mr. BOUCHER. We enjoy your biannual, it not annual, appearances here. 

I think that we all agree on the urgent need for section 115 reform, and you have certainly well-stated that in your opening statement, and I thank you for that carefully prepared presentation. 

Last year, unfortunately, as we sought to process that reform, we 

had a consensus that was pretty close on most of the key provisions, as you also indicated in your statement. But then at the last 

minute, as the measure came to the Subcommittee for final consideration, there were added some extraneous and very controversial 

provisions, namely provisions that would have disabled the portable device that XM Satellite Radio is beginning to market and also 

a provision that would, as I recall, have added a digital audio 

broadcast flag. 

That latter provision is not mature and, frankly, has not been 

through the same kind of vetting process that the video broadcast 

flag went through with an independent group comprised of various 

stakeholder engineers making sure the standard was workable and 

efficient. That hasn’t happened for the audio flag. 

And for the audio flag, it may not be necessary for Congress to 

act at all, because one company, essentially, controls the intellectual property, iBiquity, that is being used by the digital radio 

broadcasters. So, I mean, with an agreement with that company 

and all the external stakeholders, it could be implemented without 

Congress even having to act. 

All of that aside, my question to you is this: I very much hope 

that in the interest of getting an effective section 115 reform 

passed in this Congress, that all of those who might be tempted to 

burden this bill with these extraneous and controversial provisions 

or other matters that would be controversial and might weigh it 

down would refrain from doing so. Because if we pass a section 115 

reform, everybody who has a copyright interest is going to benefit. 

The labels benefit, the performers benefit, the songwriters and publishers benefit. 

And I think that Wall Street Journal article that Congressman 

Smith presented, which I also read yesterday, makes the case as 

clearly as any of us possibly can, that the lawful distribution by 

streams and downloads of music on the Internet has got to be 

made more feasible, and the legal underbrush that is causing that 

system, as you said, to be broken simply has got to be cleared 

away. We can do that pretty effectively with the 115 reform. 

So the first question I have for you is, do you have any comment 

on the appropriateness of let’s don’t burden this reform with some 

of these extraneous and controversial provisions that are really not 

necessary to reforming section 115? 

Ms. PETERS. The answer is, yes, don’t burden with extraneous 

provisions. I guess the issue is, what is extraneous and what really 

is critical, and we may have some disagreement on some of that. 

But, no, that is——

Mr. BOUCHER. Well, we don’t need an audio flag for HD radio. 

Ms. PETERS. No, I agree. We don’t have to——

42

Mr. BOUCHER. And we don’t need to disable the portable devices 

that XM is putting out to do this, do we? 

Ms. PETERS. Not through 115, but the question is——

Mr. BOUCHER. Thank you. That pretty well answers——

Ms. PETERS. But the question is——

Mr. BOUCHER. Thank you. That is a great answer. Why don’t we 

leave it at that? 

Ms. PETERS. No, no. I meant, the question is, what is 115 going 

to cover? Activity is either an infringement or it isn’t. Section 115 

should focus on what kind of activity you want to promote through 

a compulsory license. 

Mr. BOUCHER. All right. Let’s leave it with that. 

Now, my second question is this: I actually like that footnote a 

lot, and I am very familiar with that footnote, and I think you 

clearly got it right when you said that these incidental copies—the 

buffer copies, the cache copies, the ephemeral copies—that are necessary in order to effectuate a transmission that itself is licensed 

really have no independent value. You can’t sell these for anything. 

They are only essentially made in the marketing of something for 

which copyright royalties are paid under another license. 

And so why not say that these items simply do not have independent value? It is hard for me to imagine that they do. And I, 

frankly, a little bit surprised this morning to hear you suggest that 

maybe they do after all and that your footnote was not properly 

stated. 

So tell me this: How can they possibly have independent value 

when they all do is effectuate a transmission that itself is licensed? 

Ms. PETERS. I am not a guru in the marketplace. I stand by the 

statement with regard to incidental, temporary copies. The question that has come up, and where we actually have seen deals, we 

have seen contracts where there is separate money for a server 

copy, just raises for me a question on whether or not there is value. 

Mr. BOUCHER. Well, Ms. Peters, is it possible those deals were 

made because of the legal uncertainty with regard to whether or 

not this would be termed to be a copy unless we clearly declared 

that they had no independent value? I think the answer is, yes. 

Ms. PETERS. It could be. 

Mr. BOUCHER. Thank you. 

Ms. PETERS. I don’t know the answer to that question. 

Mr. BOUCHER. Thank you, Mr. Chairman. I yield back. 

Mr. BERMAN. I recognize the gentleman from Florida, Mr. 

Feeney. 

Mr. FEENEY. Well, thank you. 

And thanks for your testimony. My colleague asked questions 

and answered them for you, but I am a little new to this issue, so 

I am going to ask you for some advice. 

This is one of those areas where Congress tries to regulate an industry that technology is changing so dramatically that legislation 

is obsolete before it is effective. And would we be better off, given 

the state of things—I mean, nobody could have predicted 15 years 

ago, or for that matter 5, the status of BlackBerrys or iPods of 

downloading music on our computers, and given that we can assume that nobody can predict 5 or 15 years from now what the 

technological opportunities for consumers will be, would we be betVerDate 0ct 09 2002 13:32 Sep 11, 2007 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\032207\34178.000 HJUD1 PsN: 34178
43

ter off, for example, going to a principles-based set of standards 

and letting the courts figure it out? 

Another alternative would be—you know, throughout states in 

this country we regulate utilities, for example, electric, water, 

sewer. Could we create a utility-type regulator of experts that 

would meet, if necessary, 5 days a week, 4 weeks a month to settle 

some of these issues that are rapidly changing? 

Would either of those be a better alternative than Congress trying to anticipate market technology changes? 

Ms. PETERS. Let me start with the second. I would hate to see 

creative product treated as a utility. I would hate to see a song or 

motion picture or a piece of artwork treated as a utility. So I am 

not going to go down that road. I would not suggest that. I think 

these are efforts of some of the most talented people in the United 

States and throughout the world, and each one is different and 

each one has value. 

It is true that some of the difficulties that we have had with the 

law is when you use language that is very specific, sometimes to 

create certainly at a particular moment in time, that that language 

doesn’t transition well toward change. And it is true that adopting 

basic principles whereby things like, if in fact a copy is made only 

to enable a licensed performance, then basically there should not 

be liability. That kind of a principle can adapt with change. 

And in fact in compulsory licenses, with regard to rate settings 

and terms, there already is a structure, a copyright royalty structure, and those people are equipped to deal with what are the services that are in the license and to set rates and terms. So I think 

that that is a better way to go. Stay away from copyright as a utility. 

Mr. FEENEY. Well, I didn’t mean to regulate——

Ms. PETERS. I am teasing. It is all right. 

Mr. FEENEY [continuing]. The quality. But in terms of the——

Ms. PETERS. No, I know. I know what—actually, I have heard 

that many times, that everybody treats music like a utility. 

Mr. FEENEY. The Securities and Exchange Commission for 80 

years in this country has regulated corporate governance without 

any serious long-term impact on freedom or capitalism or creativity, although we have some minor problems now and then, and 

that is a different Committee. 

You mentioned in your testimony the suggestion that we might 

create a music rights organization to combine both the mechanical 

and the performance rights, and you mentioned the benefits of onestop shopping. But there are some potential harms with this approach too. Would you elaborate on what the downside or adverse 

consequences are? 

Ms. PETERS. I mean, the truth of the matter is that that was a 

proposal that we, the Copyright Office, put forward. There was a 

hearing on that proposal where I was the only witness, and I can 

say that there was no support from anyone on that proposal. 

The downside is the reality of today’s world, the reality that the 

way that music has traditionally been licensed has different organizations that do that. They are well-established and the thought of 

basically combining rights and having one organization handle both 

is not a welcomed thought to those organizations. 

44

Mr. FEENEY. And, finally—well, I see my—I will yield back the 

balance of my time. 

Mr. BERMAN. I thank the gentleman. 

The gentleman from Florida, Mr. Wexler? 

Mr. WEXLER. Mr. Chairman, I just got here after the——

Mr. BERMAN. Okay. My problem is, I wasn’t keeping track of 

when people got here. 

Mr. WEXLER. I defer to whoever was here before me. 

Mr. BERMAN. Okay. 

Then Mr. Watt, the gentleman from North Carolina? 

Mr. WATT. Thank you, Mr. Chairman. 

Thank you for your testimony. 

I am new to the Subcommittee and we never got a shot at this 

issue the last time in the full Committee, so I have two questions 

that I would like to get your responses to. 

It sounds like you were very, very close to an agreement, at least 

that would have solved some of these issues, in the last term in 

Congress. 

Ms. PETERS. I would say you were close to an agreement. It was 

Congress, not us. 

Mr. WATT. Then I will rephrase it to say, it sounds like we were 

close——

Ms. PETERS. You were, you were, yes. Okay. Yes. 

Mr. WATT [continuing]. To an agreement in—or they were close 

in the Subcommittee——

Ms. PETERS. Right. Yes. Yes. 

Mr. WATT [continuing]. To an agreement that would have resolved this. What changes in the marketplace have taken place 

since that near agreement that need to be taken into account, if 

any? 

And you, I think, indicated in your testimony that you perceive 

that it is more difficult to do it now than it was then. What are 

the things that make it more difficult from your perspective, and 

how might we work through those? 

And then, finally, what advice would you give a new Member of 

this Subcommittee about what role he might play in advancing this 

process to a conclusion? 

Ms. PETERS. That is a good question. Let me start with——

Mr. BERMAN. Go along with the Chairman is a good answer. 

[Laughter.] 

Ms. PETERS. Well, you have your answer. Okay. Your Chairman 

has spoken. 

Mr. BERMAN. I am just kidding. I am just kidding. 

Mr. WATT. Sounds like I either need to follow the Chairman or 

follow Boucher, and neither one of those seems like a real good 

choice to me. [Laughter.] 

Ms. PETERS. That is amazing. 

Mr. BERMAN. I can understand why. 

Ms. PETERS. Let me start with what has changed. I am not sure 

what we heard, basically, is that our new business models that 

bring about a necessity to adjust the road that I basically suggested we go down, a blanket license or sublicensing. We heard 

that increasingly it is—a compulsory license kicks in after a copyVerDate 0ct 09 2002 13:32 Sep 11, 2007 Jkt 000000 PO 00000 Frm 00048 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\032207\34178.000 HJUD1 PsN: 34178
45

right owner has authorized, so the copyright owner is in the driver’s seat for the very first recording of a song. 

Mr. WATT. Was the sublicensing that you are talking about in 

the last legislation? 

Ms. PETERS. It is actually in the 1995 legislation. But when this 

compulsory license kicks in is after there actually has been——

Mr. WATT. You are talking to me about something—let me go 

back and maybe frame the question. 

Ms. PETERS. Okay. 

Mr. WATT. If we were starting exactly where we left off the last 

time, not new things, what are the market changes that would create impediments to moving to conclusion, the changes that have 

taken place, and what change would you make from that basic 

structure? 

Ms. PETERS. I don’t think it is marketplace change, per se, but 

it is organizations who are dealing with the marketplace who believe that the existing marketplace is causing new difficulties in 

the licensing. And what I was getting at was this license never 

dealt with the first recording of a song. Now we are hearing that 

we really need to solve the problem of the first recording of a song. 

We have heard that although the law essentially allows one 

owner to license for all owners, that the practice is not to do that 

in the music area and that each owner is now only authorizing 

their piece. So the question is, how many owners are there. In the 

past, there may have been two, maybe three. We recently heard 17. 

When you get 17 owners and each one has to license the piece, if 

that is the trend, that makes it more difficult. So it is those kinds 

of things. It is really how the players are now dealing with transactions that are causing some of the strains. 

And I don’t have advice on how you deal with it, other than to 

say that if you were dealing with two owners and now you are 

dealing with 17, it is more complicated. If you were dealing with 

subsequent recordings and now the issue is the initial one, it is a 

much bigger issue for a compulsory license. 

Mr. BERMAN. The gentleman’s time has expired. 

The gentleman from Utah, Mr. Cannon? 

Mr. CANNON. Thank you, Mr. Chairman. 

And welcome back to the Committee, Ms. Peters. 

Ms. PETERS. Thank you. 

Mr. CANNON. I don’t want to be offensive to anybody else who is 

appearing before this or any other Subcommittee that I serve on, 

but you are my favorite witness, and it is amazing to me that you 

know so much and you have such breadth and depth on this subject. 

I apologize that I have been in and out and doing other things, 

and this has been asked, I think, perhaps in other ways, but you 

have been quoted historically as saying that getting rid of the compulsory license would cause chaos in the industry. Could that be 

done with a phase-out at 6 months or a 1-year phase-out, and does 

that make sense to do? 

Ms. PETERS. I am not the best person to answer that question. 

It really is——

Mr. CANNON. You should leave that judgment up to us, Ms. Peters——

46

Ms. PETERS. Well, no, it is the part——

Mr. CANNON [continuing]. About your qualifications, because you 

have already made it. 

Ms. PETERS. Although we have said that the compulsory license 

is rarely used, that doesn’t mean that it really doesn’t form the 

backdrop of licensing activities. So when you take that backdrop 

away, what happens? And I have heard from the parties that it 

would create increased chaos, but I think that that is an area that 

you certainly could raise with the affected parties. 

Mr. CANNON. There are technologies out there that are emerging 

that would do a great deal more than what we are actually currently doing in practice. We have a bunch of high-tech companies 

that are, among other things, using music for things that music 

has never been used for and, therefore, it is hard to say what the 

purpose is or how to charge that. 

So, for instance, if a company allows or creates for a family to 

put together a family album and that family may be five kids and 

two parents and grandparents and hopefully grandkids and greatgrandkids, in Utah, that could actually be quite a number. 

Ms. PETERS. Yes. 

Mr. CANNON. With everybody having a copy, the question is, how 

do you license that? And, currently, I am thinking of a particular 

company that does this, and if they had to license every song that 

they use, and in fact that is what they have been doing and they 

are very frustrated, they are in a world where there is no traditional model for licensing and so they have to negotiate them. And 

they are negotiating in the context of a model that nobody understands the scope of. Whereas, I think that——

Ms. PETERS. That is the issue. 

Mr. CANNON. Right. So do we help solve that issue by getting rid 

of the compulsory license and letting other models emerge that will 

be creative about how we license? 

Ms. PETERS. I will tell you that I think the person who you are 

referring to, and certainly the Digital Media Association will tell 

you that the easiest way to sell it to them right now is a blanket 

license or sublicensing. 

Mr. CANNON. But the trouble with a blanket license is, how do 

you deal with the complexities of the ultimate use of the material? 

Ms. PETERS. You let the copyright royalty judges set rates for the 

various types of uses. 

Mr. CANNON. Right. That will really enhance the rate at which 

we——

Ms. PETERS. And two of them are here, you know. 

Mr. CANNON. That would really enhance the rate at which we get 

new uses for licenses. 

Ms. PETERS. It is very difficult in a world that changes this 

quickly. And the good news is that more and more music is being 

used in more and more ways. 

Mr. CANNON. And the people that create the music ought to get 

paid more and more money for it if we can figure out how to do 

that. 

Ms. PETERS. Well, they certainly ought to get paid for it as it is 

being used, yes. 

47

Mr. CANNON. Right. But really, currently, there are huge chunks. 

I am not sure what the value of those chunks is right now, but over 

time, that value, I think, grows, becomes dominant, but we are not 

getting there because of the rigidity of the current system that we 

have. 

Ms. PETERS. I agree. 

Mr. CANNON. Thank you. So does that mean that we should get 

rid of the compulsory license? 

Ms. PETERS. I have always been an advocate of the marketplace 

and that when marketplace has to work, it does, and systems come 

into play. I am just not sure of an industry that has operated for 

so long in a particular fashion and their ability to transition over. 

However, I am aware that the predominant position of the music 

publisher, not the songwriters, who feel that they don’t have 

enough bargaining power to come out well in this is to abolish the 

license. 

Mr. CANNON. Right. I just might note that the Wall Street Journal, as of March 21, has a headline, ‘‘Sales of Music, Long in Decline, Plunge Sharply.’’

Ms. PETERS. Plunge, yes. 

Mr. CANNON. This is maybe at the point where we actually have 

to do something about it. 

You are always a delight, and thank you. 

Mr. Chairman, I yield back. 

Ms. PETERS. Thank you. 

Mr. BERMAN. I thank the gentleman. Russia, 1993, might be a 

good case study in quickly getting rid of something. 

The gentleman from Tennessee, Mr. Cohen? 

Mr. COHEN. Thank you, Mr. Chairman. 

Like Mr. Watt, I am new to the Committee and new to much of 

the subject matter. But unlike Mr. Watt, I feel a great deference 

and appreciation for the wisdom and sarcastity of the Chairman. 

[Laughter.] 

Mr. BERMAN. I can tell he is a freshman. [Laughter.] 

Mr. COHEN. But rising rapidly. [Laughter.] 

Mr. BERMAN. I will just sit here and bask. [Laughter.] 

Mr. COHEN. Help me with the difference. There is a definition of 

musical work and there is a definition of sound recording. Help me 

with those, the distinction. 

Ms. PETERS. Okay. Musical work, there is a songwriter, there is 

a composer, there is somebody who basically today probably with 

electronic equipment can play the piano, they can basically capture 

digitally as an audio file or they could as the old composer, sit 

down with the music note taker and sketch out the song. The song, 

the notes, the lyrics that may accompany them, that is the musical 

composition. That is the foundation that starts it all. 

In today’s world, the way you exploit a musical composition is by 

getting someone to make a recording of the former, and the fixation 

of the performance—the performer, the other musicians, the contributions of any sound engineers—that performance is, when it is 

fixed, is a sound recording. 

So think songwriter, music; performer, sound recording. 

48

They are two separate rights. Sound recordings came into the 

Federal copyright system in 1972. Before that, they weren’t there. 

Music has been there since 1831. 

So it is the song and then the performance. There is one song, 

there are many different performances of that song. Each performance can result in a separate sound recording if it is fixed in a file. 

Mr. COHEN. I appreciate that. I understand the differences now. 

And the musical works are licensed right now for the over-the-air 

broadcasters; is that right? They have to pay for that, but they 

don’t have to pay for the recordings? 

Ms. PETERS. The musical composition has a variety of rights. One 

stream is making these phonorecords, making CDs, MP3 files. That 

is the reproduction and distribution rights. 

The probably more important right in today’s world, I will argue, 

where you make more of your money is every time a musical composition is publicly performed that means through the radio, 

through the television, in a bar, many bars, some bars—I want to 

clarify that—some restaurants, there is a payment for that public 

performance, ASCAP, BMI, SESAC licensed public performance. 

They license them on a blanket basis. That works well. 

On the delivery services, where you are authorizing downloads, 

like Apple iTunes, it is the reproduction distribution of phonorecord 

downloads. You are getting a physical object. 

I know, it is complicated. 

Mr. COHEN. It is complicated, but you are helping me a lot, and 

I have a kind of suggested question, which I think it is no secret 

we have these, that the musical works may be licensed to be performed by over-the-air broadcasters. Sound recordings do not have 

the opportunity to generate any licensing income from the use of 

recordings on the radio. And it may be what the Chairman——

Ms. PETERS. That is true. 

Mr. COHEN [continuing]. Was suggesting we not get into with the 

radio, but as we consider this, do you think we should consider 

granting a full performance right in sound recordings? 

Ms. PETERS. I have always supported a full performance right in 

sound recordings. And when the law was changed in 1995 to give 

them a limited sound recording performance right, I accepted it 

saying, ‘‘God, we broke the barrier and there is a recognition,’’ but 

was very upset that it wasn’t broader. 

If you look at a performance, one of the key things is it performed. And if in fact you are not basically giving them the right 

to control performance, you are giving them less than totally valuable rights. So, of course, I support that. 

Mr. COHEN. Thank you. 

And seeing the red light is up and I have no longer time, I will 

yield the remainder of my time. 

Ms. PETERS. Anything I can do to help you with——

Mr. BERMAN. I thank the gentleman. I want to make it clear that 

I only suggested not getting into that issue at this hearing. I did 

not suggest not getting into that issue. 

Mr. COHEN. Next hearing. 

Mr. BERMAN. The gentleman from Florida who was here earlier, 

Mr. Keller? 

Mr. KELLER. Well, thank you, Mr. Chairman. 

49

I want to thank you for coming before us again. You heard Chris 

Cannon say that you are his favorite witness, but you see it is the 

rest of us that are sticking around. Just point that out. [Laughter.] 

Mr. BERMAN. So this is everyone-savage-their-colleague week. 

[Laughter.] 

Mr. KELLER. Just teasing. 

From time to time, this Subcommittee has received complaints 

about problems that music users have had in acquiring a license 

for subscription services, ringtones, DVDs or other new types of 

products and services, and these problems seem to arise because 

there are always questions about how section 115 should be applied 

to new technologies. 

As we look at section 115 reform, are there things that we can 

do to minimize these kinds of disputes in the future so that new 

kinds of products don’t get delayed by legal uncertainty? 

Ms. PETERS. Well, this really goes to my issue about clarifying 

rights. When there may be a right that is implicated, the question 

then is, which of those rights really need compensation and which 

of those rights might be exempt? I was suggesting earlier that if 

you adopted a basic principled approach, it may be easier to figure 

out whether new activities would be covered or not. 

For me, the biggest problem is, I will use the download situation. 

Today, I go into a store, if they are still around, and I buy a CD. 

It is very clear that what I have purchased is a CD and the rights 

that had to be cleared in order to produce that CD, the reproduction and the distribution right. 

If today, instead, I decide to go online to Apple iTunes to get the 

same CD, assuming I could do that, or to get tracks from that CD, 

in essence, I am going to end up with the same thing. I am going 

to end up with a physical thing—this time it is going to be a digital 

file—so that I can listen to that in my home whenever I want to. 

But what is different is there is a transmission, and the question 

is, the transmission that is the equivalent to my walking in the 

store, is that a public performance for which there should be compensation? That kind of issue needs to be clarified. 

Mr. KELLER. Thank you. Some have asserted that section 115 

might require payment of twice the mechanical royalties if the 

same recording is included on one disc in two different formats, 

such as stereo and surround sound. Is that your view? And if so, 

and if the disc can’t be sold for twice the price, is that something 

that we should be addressing? 

Ms. PETERS. That was one of the issues that was on the original 

list of things that we were told needed to be resolved. That is more 

a physical object issue rather than an online purchase issue. 

If you start going down and solving all of those problems, I think 

you are going to not be able to get a bill through. There are a whole 

bunch of issues that are like that. 

Mr. KELLER. You testified earlier that the reform of the digital 

music licensing system is the most important music issue currently 

before the Congress. How hopeful are you that this issue can finally be resolved this Congress? What specific steps do you think 

we should be taking? And then, finally, do you think we should 

move forward despite the lack of consensus right now in the music 

industry on a single reform proposal? 

50

Ms. PETERS. Most people who know me know that I am the eternal optimist, so I will say that, in my typical fashion, I believe that 

it is achievable. Likely? I don’t know. It certainly hasn’t been 

solved in 3 years, but the focus in 3 years was to get the parties 

to reach consensus. 

So the question is, do you have the stamina to basically say, 

‘‘This is something we want to do,’’ and move it forward? I think 

it can be moved forward, but it really does take political will and 

it does take this Committee getting involved and deciding what it 

thinks is best, the Members think is best. 

Mr. KELLER. Well, thank you. 

And, Mr. Chairman, I yield back the balance of my time. 

Mr. BERMAN. I thank the gentleman. 

And I recognize the gentleman from Georgia, Mr. Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman. I will decline, at this 

point, from exercising my power of wit. [Laughter.] 

And so I won’t try to be a part-time comedian like I have heard 

some of the others doing today. 

That was not an insult, that was a joke. [Laughter.] 

Mr. BERMAN. It doesn’t take much to exceed what has gone on 

before you. [Laughter.] 

Mr. JOHNSON. And I will take that as an insult. [Laughter.] 

Ms. Peters, the Copyright Act has, for decades, defined six separate rights within copyright, including the rights of performance, 

reproduction and distribution. One could read your testimony to 

suggest that some of these rights could be combined. 

For example, you suggest that the right of reproduction, which 

may be exploited by a company in order to perform the work, need 

not be separately licensed and compensated and instead, by law, it 

be licensed along with the performance right. 

Do we possibly diminish the value of each separate right, allowing them to be licensed together? 

Ms. PETERS. I am not in any way suggesting that we should be, 

at this point, combining any rights. Each right is an important 

right. Each right should be licensed. The question is administration. The question is the way that you go about obtaining the necessary rights. And the point that I have made on a number of occasions is that music is more difficult than other types of works because of the historic way in which it has been licensed. And it 

worked well in the past, but right now we are feeling the strain. 

And so the goal was, is there a more efficient way to accomplish 

getting the licenses that you need for all of the rights, and the 

value of the product, you look at the product as a whole, and obviously it is based on getting rights, but the value should always be 

the full value of what the market will bear for the product. The 

goal is to simplify the getting of the rights. It is not dealing with 

the value. Authors, publishers need to get full market value. 

Mr. JOHNSON. So what exactly would you propose as far as 

changing the method of obtaining the rights to performance or reproduction? I assume you——

Ms. PETERS. Well, actually, the performance rights today, other 

than the question on whether or not they may be implicated, and 

the courts are looking at some of that, though I suggested that you 

could take a step in clarifying that, but the performance right, asVerDate 0ct 09 2002 13:32 Sep 11, 2007 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\032207\34178.000 HJUD1 PsN: 34178
51

suming that you need it, is very easy to clear. The three performing 

rights societies give blanket licenses, then negotiate it. 

The issue is on the reproduction and distribution of 

phonorecords, it is on digital delivery of phonorecords and the fact 

that we don’t have the equivalent of these three performing rights 

societies to cover all songs and all of the rights holders. 

Mr. JOHNSON. Why hasn’t the marketplace adapted to the changing times? I guess that is hard for you to answer, but apparently 

the marketplace which used so—I mean, you stated and I am also, 

I believe that the market responds and should respond, should 

have the freedom to respond to the changing realities, but apparently that has not occurred. 

Ms. PETERS. Well, actually, the market is responding. The reality 

is that free got a big head start. Napster, which originally wasn’t 

doing legal content, enabled huge unauthorized uploading. And 

now we are playing catch-up. 

But the problem for the digital music services is, in order to compete, because free has everything, they don’t have to clear anything, is they can’t have, like, some of the songs and compete. They 

have got to have almost all of the songs to compete. 

So the fact that you can clear 50 percent of the songs or 70 percent of the songs is not good enough for them to compete. So how 

do we make it possible for them to do the things that the performing rights societies do today, which is essentially clear all 

rights and almost all the songs. 

Mr. JOHNSON. And the ability is there, we just don’t have the law 

in place to enable the agency to capture 100 percent. 

Mr. BERMAN. I think the answer is, yes, we don’t, and that is——

Ms. PETERS. Okay. I will leave it there. 

Mr. BERMAN. But the time of the gentleman has expired. 

The gentleman from California, Mr. Issa? 

Mr. ISSA. I thank the Chairman from California. 

It is good to see you again. 

Ms. PETERS. It is good to see you too. 

Mr. ISSA. You are my favorite witness. [Laughter.] 

Ms. PETERS. Well, I am happy. The people in front of me are 

doing better than the people behind me. [Laughter.] 

Mr. ISSA. Now, whether this is the favorite subject of this Committee is a different story. This is not the first time we have 

brought this up, it won’t be the last, but if I can use your presence 

here to characterize a point. 

I come from the patent side, even though I often say I have the 

Sunny Bono seat, because I am the non-lawyer but the intellectual 

property owner on the Committee, and in the patent world it is 

pretty easy for us to understand that anybody who invents, including a team of 10, if you don’t have a contract, all 10 have individual rights; they can all sell the invention. They can all make, 

use or sell. And that is pretty cool. It is a little troublesome for a 

company that has 12 engineers and you have to get them all contracted or you will lose your rights, but at least it is clear. 

It certainly isn’t clear here. I am sure if Sonny Bono were here 

today and we asked, ‘‘Well, how did you make sure that the guy 

running the mikes and doing the mixing, who may have been doing 

52

it for cheap, free or just an opportunity to tour with the band, gave 

his rights to you,’’ he would have an answer, and it worked for him. 

But it is very clear we don’t have that same level of clarity in 

copyright. 

So what I am hearing here today, what I have heard in previous 

hearings is, we have a legacy problem. We have a problem we 

patchworked together from 1831—which, by the way, I wrote that 

down, because that is not a date I had in my notes—from 1831 we 

have sort of patchworked together copyright and we have never 

had the simple clarity that I believe we enjoy in patents about 

what you get, how you get it, how you control it. 

So if I follow your logic—and do I get a straight head shake on 

that that it is a legacy problem? 

Ms. PETERS. Yes. But the one thing I would disagree with is, it 

wasn’t till new technologies came along. So 1831 until piano rolls 

wasn’t such a big deal. 

Mr. ISSA. Very true. And I got an opportunity to meet Hare 

Guttenberg the other day, I meet him regularly, he is a member 

of the European Union parliament. Until his family business got 

going, probably people who wrote songs didn’t have to worry too 

much about whether they got money for duplications of it, because 

you could only handwrite it. 

But technology has been on a steady role for, oh, albeit a couple 

thousand years, and we are where we are, which is you have got 

broadcasters, if they are terrestrial, under one set of rules; you 

have the Internet, whether it is 802.11 and it is wireless and it is 

going through the air or whether it is more conventional wired, another set of rules. 

You have got the question of whether or not you are caching or 

storing on a hard drive in that process, whether you have got a 

copy or you are just transmitting it. One would say that even on 

my computer when I am streaming, am I in fact recording it for 

a period of time because I have to have a buffer. 

We can go through endlessly all that, but in the limited time, if 

I turn it around the other way and say, if this Committee sets its 

sights on bringing clarity and it says, ‘‘Look, you have to own it,’’ 

and everybody in the mix owns what they produced until or less 

they sign it away, if they sign it away exclusively, under what contractual agreement, they have done that. If they don’t sign it away 

exclusively, but non-exclusively, then they have the right to sell 

what they own. Well, what they sold is now in a package. 

If we set those principles with—that is one set of principles, then 

I will ask a second question. You are comfortable with that part, 

that we need to make it that simple. 

Ms. PETERS. I think the law itself is pretty okay and simple. 

What we basically say is, all creators would jointly own, and be licensed by one. Combined the others are subject to a duty of account. What is happening is the opposite. It is subject to an agreement to the contrary. There are all these agreements to the contrary. 

Mr. ISSA. And which I do appreciate that. 

The last part, though, is because we live in a world of compulsory 

licenses, don’t we need to produce a uniform compulsory license act 

that essentially says that when you have a compulsory license it 

53

is 9.5 cents, hypothetically, but since 9.5 cents doesn’t get you to 

2 cents for a cached copy, there has to be, in fact, some streamlining of that system to say, as you said, unless you otherwise do, 

but, in a sense, isn’t there a mandate that we deal with that so 

that you can have that flexibility of pricing? 

Because it is very clear today that I can sell my song to Sirius 

or XM, in a sense, but I may or may not be paid or somebody can 

collect two-thirds of the royalty and say, ‘‘Go sue for the other 

third,’’ and that is happening as we speak. 

Ms. PETERS. I guess I am not totally clear with what my answer 

would be. And it really comes down to compulsory licensing, per se. 

Our Constitution, basically, talks about exclusive rights and exercise of exclusive rights. Compulsory license cuts back on that exclusivity, and in an online environment, there is a push by a lot 

of people to just basically mandate compulsory licensing. 

My personal view is that if we go that route, we lose something 

very valuable. It may be that that is where we end up, but I certainly don’t want to be there right now. And I would rather get rid 

of this license than basically expand it to say, as a compulsory license, it deals with all uses of everything. 

Mr. BERMAN. Did you want to just add a final point? The time 

of the gentleman has expired. 

Ms. PETERS. Okay. Anyway——

Mr. ISSA. Your time is unlimited, though, isn’t it, Chairman. 

Mr. BERMAN. You and I can sit here for the third and fourth 

rounds. 

Mr. ISSA. Thank you, Chairman. 

Ms. PETERS. Mr. Issa, I would like to think about it and maybe 

get back to you. I hadn’t really thought all of that through at this 

point, and I think there are more nuances than I am willing to 

commit to at this point. 

Mr. ISSA. Thank you for your candor. 

Thank you, Mr. Chairman. 

Mr. BERMAN. The gentleman from California, Mr. Schiff? 

Mr. SCHIFF. Thank you, Mr. Chairman. 

I want to ask you a couple questions. First, whether you can 

highlight any specific concerns or comments that you have with regard to last year’s SIRA legislation. In particular, do you believe 

that the authority to set rates for a modified section 115 license 

should remain with the copyright royalty judges or do you support 

the proposed structure in last year’s bill that provided for private 

sector negotiations first with arbitration procedures available if 

those failed? 

And the second question is, in discussing the rate-setting procedures, you indicate that it would be wise to provide the rate-setting 

body with the flexibility to set a schedule of rates depending on the 

services offered. As you know, some have argued that a per unit 

rate would be difficult to utilized and would prefer a percentage of 

revenue option instead. And I would love to get your thoughts on 

that as well. 

Ms. PETERS. Rate and term setting for compulsory licenses are 

set by copyright royalty judges as the body that is going to do that. 

The license, basically, suggest that the parties negotiate, and if 

they can reach agreement, then that is the preferable way. So if 

54

they can reach agreement on what the rate should be, then normally that is blessed, and it is only when there is disagreement 

that you end up with the body setting rates. 

Now, certain parties——

Mr. SCHIFF. So, in effect, you have a system of arbitration already? 

Ms. PETERS. Well, no. I was basically saying you actually have 

a system that encourages voluntary negotiation against the parties, 

and if they reach the rates, then that is fine. And if there are parties who haven’t reached agreement, then that body sets the compulsory license rates. So a compulsory license in nature is compulsory. The license is there, and the rates will be set by the judges, 

but there is always encouragement of voluntary licenses. 

With respect to whether or not you were going to do a percentage 

of revenue or a——

Mr. SCHIFF. Well, yes, but still on that first point, are you saying 

then that you prefer to have the present system than have a negotiation followed by an arbitration? 

Ms. PETERS. I hadn’t really thought about it. I actually think 

that we have a new system. I think that a lot of work went into 

that new system, and I stand behind the fact that the system that 

is in place is a good one. And I hadn’t really focused on that this 

really had an additional arbitration. I need to think about that. 

Mr. SCHIFF. And what are your thoughts in terms of per unit 

rate versus percentage of revenue option? 

Ms. PETERS. I think it depends on the circumstance. I think that 

both options should—you need to, basically, have flexibility to figure out what is best under the particular circumstances. And it is 

really going to come down to what the proposals are and what the 

evidence is and what is provided for the royalty judges to decide 

what they think is the fairest approach. And there is a review process in the court of appeals for the D.C. circuit, but, actually, this 

new body basically has a reconsideration provision with respect to 

when they basically put out rates there is a period in which people 

can petition for reconsideration. 

So, I think that sometimes the per transaction rate is the appropriate option, sometimes a percentage of revenue, if you can clearly 

define what that percentage rate is going to be of. 

Mr. SCHIFF. In looking at the subscription music services, 

though, do you have a sense of what you think is more appropriate? I mean, that is the main context in which this is implicated, 

isn’t it? 

Ms. PETERS. I am not sure, but I really do not know what is the 

appropriate option—I haven’t really considered what the evidence 

is or not. Thank God we are not in that business. 

But I have supported flexibility. I have supported that it can be 

either a penny rate, or it can be a percentage. It is really going to 

come down what is the best under the circumstances, what works. 

It is really what works. 

Mr. SCHIFF. Thank you, Mr. Chairman. 

Mr. BERMAN. Abusing, once again, the Chairman’s prerogative, 

the question then comes is it iTunes revenues or is it iPods revenue, but never mind. 

Ms. PETERS. No, that is——

55

Mr. BERMAN. The gentlelady from California, Ms. Lofgren. 

Ms. LOFGREN. Thank you. 

Mr. BERMAN. I am sorry, I am sorry. 

The gentleman from Ohio, Mr. Chabot? 

Mr. CHABOT. Thank you very much, Mr. Chairman. 

First of all, let me apologize for not being here earlier in the 

hearing. I am the Ranking Member of the Small Business Committee, we have a hearing going on down there. 

I am new to this Subcommittee. I have been on the Judiciary for 

13 years now but not the Subcommittee, and so I wanted to particularly thank you for coming this morning to educate us on this 

very important issue. 

As I was preparing for this hearing, by reading section 115, I 

couldn’t help—— [Laughter.] 

Well, my staff read it. 

Ms. PETERS. All right. 

Mr. CHABOT. I read most of it. I couldn’t help but think to myself 

that this is a lawyer’s and an infringer’s dream statute. There were 

so many exceptions and references that it is difficult to keep 

straight what is legal and what is not. Moreover, I had just read 

in yesterday’s Wall Street Journal about the continued plight of the 

music industry with declining sales in the range of 20 percent from 

last year. 

So my question—and I will keep it to just one question, because 

I have to get back to the Small Business Committee to make sure 

that the Democrats aren’t running amuck down there, just kidding—what role has this statute played, if any, in the decline of the 

music industry, and how can we tighten this statute up to revitalize the music industry and push back against infringement, 

which has been such a scourge on the industry? 

Ms. PETERS. I can make an argument that when a statute is, like 

you said, too complex and people can’t figure out what you can do 

and what you can’t, that is a problem. Here what we are really 

talking about is in order to have legitimate services functioning, 

they need the rights and they need all songs. And the current 

clearance process, even under the statutory license, doesn’t work. 

So there is an impediment that needs to be fixed in order, at 

least with regard to people who want to use a statutory license that 

now is there, to make that workable. So there is a piece. 

Mr. CHABOT. Thank you very much. 

Mr. Chairman, I will yield back my time in order to give Ms. 

Lofgren time. 

Mr. BERMAN. The gentlelady from California, Ms. Lofgren? 

Ms. LOFGREN. Thank you very much, Mr. Chairman. I know the 

bells have rung for a vote, so I will be brief. 

I would like to thank the Chairman and Ranking Member for 

this hearing, and I think there is broad agreement that 115 reform 

is important. And if you look at the headlines, ‘‘Sales of Music, 

Long in Decline, Fall More Quickly,’’ all the parties who have had 

tiffs and understandably trouble sorting this out have tremendous 

motivation to get this right. 

I agree with the Chairman, he and I have talked, and we always 

see eye to eye on every single item on copyright. There are issues 

and reasonable people can differ on the issue of how we deal with 

56

receivers on satellite radio, whether or not there should be broadcast flags. I am sure we, at some point, will get into it, but I am 

hopeful that we don’t get into it in 115, because 115 needs to get 

done, and wherever people are on the whole argument about copyright, I think there is broad consensus there, and that is a piece 

of the good news. 

Just on cache copies, I want to associate myself with Mr. Boucher’s remarks on the validity of your footnote comment. I mean, 

to charge separately for cached copies is kind of like instead of paying the cab driver for the ride, you are paying for every drop of oil 

in the engine. It is an impediment to making this thing go. We 

need to simplify this in a way that will allow people to be paid. And 

diverting ourselves in that way continues an impediment. We need 

to simplify, we need certainty so people know who to pay and how 

much to pay, and we need to have an ability to control ambitions 

on payment so that we don’t eliminate the development of new 

markets. 

Ms. PETERS. Well, SIRA would have actually answered those 

questions. I would really have covered all activity. 

Ms. LOFGREN. I have a question. In your testimony, you admit 

with some candor that section 114 or the sublicensing solution that 

you talk about have impediments to enactment. Let me just ask 

you this, because there are actors who have business models that 

have grown up around the current situation that this would impact, and none of us are hostile to those associations, they have 

performed an important role. 

Can you envision a way for the existing actors to somehow have 

a role in what you suggested? 

Ms. PETERS. I can’t speak for them, but they are all——

Ms. LOFGREN. No, no. Don’t speak for them, and you don’t even 

have to do the details. Can you envision such a thing, and we can 

follow up later with the details if you can. 

Ms. PETERS. The truth is, I am not sure. I really am not sure. 

I would hope the answer was yes, but I don’t have a huge amount 

of comfort that it is yes. 

Ms. LOFGREN. I do think that as we address the problems with 

the current digital music licensing situation, one of the things that 

we are never able to do on the Committee and that is true of me 

and I think every Member, is that we can’t really imagine the next 

wave of innovation. And I remember some of the other issues we 

did and we are talking about Web sites and none of us thought 

about peer-to-peer. 

Ms. PETERS. That is right. 

Ms. LOFGREN. Maybe there was somebody in a lab who was 

thinking about it. 

So I am just wondering, do you think that we can develop principles that are less likely to impinge on the development of new 

technology that will still provide for compensation? 

Ms. PETERS. Well, first of all, sublicensing does do that. There 

are people who really are opposed to that. As for a blanket license, 

I actually do think you get there and accomplish the same thing 

too. Because you get the license and you worry more about the 

niceties of it later. 

57

Ms. LOFGREN. Mr. Chairman, my time is just about up. The bells 

are ringing again. Are we able to submit questions for the record? 

Mr. BERMAN. What I was going to say, because there are more 

issues, rather than have a second round now, I would like to suggest in addition to having an important position, a great deal of experience and a great deal of expertise, you are a great educator, 

and I am thinking of convening a more informal meeting with 

Members and you just to continue a little bit of this process of understanding this complicated mess called, music licensing——

Ms. PETERS. Whatever you want. 

Mr. BERMAN [continuing]. In the future, and certainly there will 

be a chance to submit questions, for the record, which we hope you 

answer. 

Ms. PETERS. Oh, we will. 

Mr. BERMAN. And unless there is a compelling desire to come 

back for a second round, I think I would rather continue it in an 

informal basis. 

Mr. WATT. Would that be kind of like the president offering those 

people not being under oath—— [Laughter.] 

I will withdraw the question. 

Mr. BERMAN. With that, the hearing is now adjourned. 

[Whereupon, at 11:41 a.m., the Subcommittee was adjourned.] 

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PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON LEE, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF TEXAS, AND MEMBER, SUBCOMMITTEE ON

COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY


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PREPARED STATEMENT OF THE HONORABLE STEVE COHEN, A REPRESENTATIVE IN

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ETHAN SMITH, SALES OF MUSIC, LONG IN DECLINE, PLUNGE SHARPLY, RISE IN

DOWNLOADING FAILS TO BOOST INDUSTRY: A RETAILING SHAKEOUT, WALL STREET

JOURNAL, MARCH 21, 2007 AT A1


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STATEMENT RELEASED BY SESAC, INC. ON ‘‘REFORMING SECTION 115 OF THE

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JOINT STATEMENT RELEASED BY THE AMERICAN SOCIETY OF AUTHORS, COMPOSERS

AND PUBLISHERS AND BROADCAST MUSIC, INC. COMMENTS ON REFORMING SECTION

116 OF THE COPYRIGHT ACT FOR THE DIGITAL AGE


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