The Audio Home Recording Act

DePaul Journal of Art, Technology & Intellectual Property Law

Volume 2 Issue 2 Spring 1992 Article 1

Barbara Fox Kraut

Follow this and additional works at: https://via.library.depaul.edu/jatip

Recommended Citation Barbara F. Kraut, The Audio Home Recording Act, 2 DePaul J. Art, Tech. & Intell. Prop. L. 38 (1992) Available at: https://via.library.depaul.edu/jatip/vol2/iss2/1

This Legislative Updates is brought to you for free and open access by the College of Law at Via Sapientiae. It has been accepted for inclusion in DePaul Journal of Art, Technology & Intellectual Property Law by an authorized editor of Via Sapientiae. For more information, please contact [email protected]. Kraut: The Audio Home Recording Act

LEGISLATIVE UPDATES

The Audio Home the bill on consumers, the audio hardware industry, Recording Act and the music industry. Background Introduction The music industry has long voiced concern over 7 On August 1, 1991, Senator Dennis DeConcini (D- the home taping of copyrighted sound recordings. Ariz.), Chairman of the Senate Judiciary Subcom- Although the Supreme Court held in Sony Corp. of mittee on Patents, Copyrights, and Trademarks, America v. Universal City Studios that home video introduced the Audio Home Recording Act in the taping of television broadcasts is not copyright in- Senate.' The identical bill was presented in the fringement,8 the case left the legality of home audio House of Representatives on August 2, 1991 by taping unresolved. The most recent technological Representative Jack Brooks (D-Texas).2 The pro- advance, digital audio tape recorders and media, posed legislation adds a new chapter to the Copy- which bring studio-quality recording ability into right Act (Title 17). The most significant provision the consumer's home,9 has sparked much debate of the bill explicitly prohibits infringement actions over the legality of home taping and worry about for home audio taping of copyrighted sound record- the effects of home taping on the pocketbooks of ings; thus removing the legal cloud over home tap- record companies and music copyright owners. In- 3 ing of sound recordings. Second, the Act mandates deed, the music industry believes it loses over $1 that all digital audio tape recorders imported for billion a year in sales because of home taping in the sale or manufactured in the United States for non- United States. 10 If DAT recorders are sold to con- professional use be equipped with the Serial Copy sumers without some protection against copying, Management System ("SCMS' to prevent the mak- its financial loss from 4 the music industry fears ing of duplicates of first generation copies. Finally, home taping will increase significantly. Because of the bill subjects the sale of digital audio tape the fear, the music industry has successfully stalled ('DAT recorders and media to a royalty charge to the importation, manufacture, distribution, and be distributed to the owners of the copyright in the sale of DAT recorders and media for nonprofes- musical work and the copyright in the sound re- sional use in the United States. cording. 5 The music industry's early attempts to convince The Audio Home Recording Act of 1991 represents audio hardware manufacturers to voluntarily in- an historic compromise between audio hardware stall copy preventing mechanisms in DAT recorders and music industries, marking the end of a ten year failed." In addition, legislation proposed in 1987 to stalemate over the import of digital audio technol- prohibit DAT recorders in the United States was ogy which threatens record companies and music not enacted. 2 In 1989, legislation was introduced copyright owners with an increase in home taping. proposing that all DAT recorders contain SC1MS." The bill is a "win-win-win" solution. It benefits However, witnesses at a hearing before the Senate consumers, who finally will have access to new Communications Subcommittee testified that the digital recording technologies, the music industry, SCMS would not adequately protect copyright own- which will receive compensation from the sale of ers.14 In addition, the songwriters and publishers digital audio recorders and tapes, and the audio who testified advocated a royalty system to com- hardware industries, which will be able to import pensate for losses from home taping, and engineers digital audio recorders without fear of legal re- 6 maintained that the SCMS could be easily circum- course. vented. 5 As a result, the Digital Audio Tape Re- This update first will explore the background of the corder Act of 1990 never gained the support needed Audio Home RecordingAct; specifically, the 10 year to move through Congress. controversy surrounding digital audio technology The hurdle to United States importation and sale and the congressional response to the problem. of DAT recorders seemed to be overcome when Next, the update will outline the substance of the members of the audio hardware industry agreed to bill. Finally, the conclusion will discuss the effect of equip DAT recorders with the SCMS while members of the recording industry agreed not to further

Spring 1992 38 Published by Via Sapientiae, 2016 1 DePaul Journal of Art, Technology & Intellectual Property Law, Vol. 2, Iss. 2 [2016], Art. 1

oppose the importation, distribution, and sale of audiovisual works, nonmusical literary works, DAT recorders in the United States. 16 Sony Corpo- computer programs, or databases. 2 15 Therefore, the ration began sale in the United States of SCMS Audio Home Recording Act only applies to digital equipped DAT recorders in June of 1990.17 audio recorders or items used nonprofessionally to Yet, on July 9, 1990, a class action suit was fied by record audio works. a group of songwriters and publishers in the U.S. B. Prohibitions On Certain Infringement District Court for the Southern District of New York Actions 8 against Sony Corporation and its U.S. affiliates. Section 1002(a) of the Audio Home Recording Act The class of 40,000 copyright owners, fronted by prohibits an infringement action to be brought lyricist Sammy Cahn, claimed that Sony Corpora- based on the 'manufacture, importation, or distri- tion was contributorily infringing copyrights since bution of a digital audio recording device or analog "the only plausible, overwhelmingly predominant audio recording medium" if it is not for direct or use for DAT recorders is for infringing taping ac- 26 19 indirect commercial advantage. For example, 'the tivities." The plaintiffs sought an injunction on copying of a phonorecord by a consumer for private, the further importation and sale of DAT recorders noncommercial use is not for direct or indirect in the United States. This suit was settled, how- commercial advantage, and is therefore not action- ever, on July 11, 1991 when the Electronics Indus- able."7 tries Association, the Recording Industry Associa- tion of America, and the Copyright Coalition of the Therefore, this section puts to rest the question of National Music Publishers Association announced whether home audio taping for private use is copy- that they had reached a compromise agreement right infringement by specifically prohibiting in- ending their long dispute.20 The compromise agree- fringement actions based on private home taping. ment is reflected in the Audio Home Recording Act In addition, section 1002(1) protects manufactur- of 1991.21 ers, importers, and distributors of DAT recorders from suits claiming copyright infringement for con- Substance of the Legislation tributing to home taping with DAT machines. The Audio Home Recording Act of 1991 would add C. Royalty Payments a new chapter 10 to the Copyright Act. It consists of four subchapters: (A) Definitions, Prohibition of Subchapter B of the Act involves royalty payments Certain Infringement Actions, and Rules of Con- and lists specific notice, accounting, and payment struction; (B) Royalty Payments; (C) The Serial procedures which importers, manufacturers, and Copy Management System; and (D)Remedies. 22 distributors of DAT devices must follow. Section The most significant provisions in these sub- 1011(a) prohibits a person from importing, manu- chapters will be discussed. facturing, or selling any DAT device in the United States unless the person complies with the royalty 2 A. Definitions procedures specified in subchapter B. 8 Section 1001 of the Audio Home RecordingAct lists Generally, any importer or distributor of DAT de- definitions of relevant words contained in the Act. vices must file a notice and a quarterly and annual The most significant parts of section 1001 are the statement of account with the Register of Copy- definitions of "digital audio interface device," "digi- rights.29 The statements of account are reviewed by tal audio recording device," and "digital audio re- independent certified public accountants and may cording medium." In each of these definitions the be reviewed independently by interested copyright Act states that it is a machine or material object parties. 0 '"ow known or later developed."23 This means that the Act will apply not only to digital audio devices Section 1012 enumerates the method of calculating in current use, but to those which may be invented the royalties. For each DAT device imported into in the future. Therefore, the Act will not have to be and distributed in the United States or manufac- amended each time there is a technological ad- tured and distributed in the United States, the 31 vancement in the area of digital audio devices. royalty is 2% of the transfer price. Moreover, the royalty maximum is $8 per device, but if it is a Another significant aspect of these definitions is physically integrated unit with more than one DAT what they exclude. The definitions of "digital audio device, the royalty maximum is $12 per unit.3 2 The interface device" and "digital audio recording de- 24 royalty maximum may be increased during the vice" explicitly exclude professional models. A sixth year after the Act goes into effect upon peti- "digital audio recording medium" does not include tion to the Copyright Tribunal. For each DAT an object that consumers use to make copies of medium imported into and distributed in the

39 Journal of Art & Entertainment Law https://via.library.depaul.edu/jatip/vol2/iss2/1 2 Kraut: The Audio Home Recording Act United States or manufactured and distributed in court finds that the defendant acted innocently, the the United States, the royalty is 3% of the transfer court may reduce the total amount of damages. 47 3 4 price. Finally, the court may order the remedial modifica- All royalty payments are deposited with the Regis- tion of destruction of any DAT devices that do not comply with section 1021 and are in the defendant's ter of Copyrights, which, after deducting expenses, 48 custody or control. deposits the money with the United States Treas- 35 ury. The royalty payments are then distributed to Additionally, under section 1032(a), if there is a any interested copyright party whose musical work dispute between a copyright party and a manufac- or sound recording has been embodied in phonore- turing party, it may be resolved by binding arbitra- cords and distributed to the public.36 tion if the parties mutually agree. D. The Serial Copy Management System Although the Act provides for varied and extensive Section 1021(a) prohibits the "importation, manu- remedies, section 1031(e) limits civil actions and facture, and distribution of any digital audio re- remedies. Section 1031(e)(1) states that 'o more cording device or any digital audio interfact device than one action shall be brought against any party that does not conform to the standards and specifi- and no more than one award of statutory dam- cations to implement the Serial Copy Management ages ...shall be permitted" for a violation of System that are set forth in the technical reference section 1011 involving the same DAT device or for document. 37 In other words, no a violation of section 1021 involving DAT devices nonprofessional 49 DAT device can be made, imported, or sold in the from the same model. Parties are permitted to United States which does not contain the Serial intervene in an action within 30 days of publication 0 Copy Management System. In addition, section of notice of the suit in the Federal Register. Each 1021(b) prohibits anyone from making or importing complaining party may recover actual damages for a device to bypass the Serial Copy Management a violation of the Serial Copy Management System. System.38 However, if more than one party elects to recover actual damages those damages will be limited to a E. Remedies single award of the defendant's profits.51 Subchapter D of the Audio Home Recording Act provides civil remedies, statutory damages, or Conclusion binding arbitration for violations of the Act. Under The Audio Home Recording Act will enable the section 1031(a), copyright parties and DAT manu- audio hardware industry to import, manufacture, facturers harmed by a violation of the Act or the and distribute DAT recorders and tape without the United States Attorney General may bring a civil threat of legal recourse. It will also compensate action in a district court.39 The court may issue a copyright owners, through a royalty system, for the preliminary or permanent injunction, award dam- home taping that will undoubtedly take place with ages or costs, and grant any reasonable equitable the DAT recorders. Most significantly, it will give relief.40 When "the nonprevailing party has not United States consumers access to current and proceeded in good faith" the nonprevailing party future DAT technology and allow private home may have to pay reasonable attorney fees to the taping. 9 prevailing party.41 Barbara Fox Kraut When the defendant has violated section 1011 by not paying or paying too few royalties, the defen- 1. S. 1623, 102nd Cong., 1st Sess. (Aug. 1, 1991). 42 dant must pay the royalties due plus interest. 2. H.R. 3204, 102nd Cong., 1st Sess. (Aug. 2, 1991). Moreover, the court must award statutory damages 3. S. 1623 & H.R. 3204, Subchapter A, § 1002(a). in an amount that the court deems just.4 When the 4. Id. at Subchapter C, § 1021. defendant has acted wilfully, statutory damages 5. Id. at Subchapter B, § 1011. by a specified amount.44 6. 137 Cong. Rec. 11,845-11,846 (daily ed. Aug. 1, will be increased 1991)(statement of Sen. DeConcini); See also, Witnesses Hail When the defendant has violated section 1021 by Compromise Bill on Audio Home Taping, DAT Royalties, BNA DAILY REP. FOR ExEcUTIvEs, Oct. 30, 1991, at A-9 (hereinafter importing, manufacturing, or distributing a DAT Witnesses Hail Compromise Bill)(reporting on testimony before device without the Serial Copy Management Sys- the Senate Judicieary Subcommittee on Patents, Copyrights tem or by attempting to bypass the System, the and Trademarks). defendant must pay actual and statutory dam- 7. Comment, DigitalAudioTape: New Fuel Stokes the Smol- ages.45 In the case of a wilful violation, the defen- deringHomeTaping Fire, 37 UCLAL. REv. 733,734 (1990). Ever since the Sound Recording Act of 1971 was passed providing dant may have to pay not more than $5,000,000 of copyright protection to sound recordings for the first time, home 4 additional damages. On the other hand, if the taping has been an issue. Id.

40 Spring 1992 40 Published by Via Sapientiae, 2016 3