Appendix — Heilman v. Bell

j @ t, U. &

' E i D

20 1978

rptaneen oe ig a Ee

| THE L_Micaet 2, CLER

SUPREME COURT of the UNITED STA

OCTOBER TERM, 1978

DAVID L. HEILMAN and E-C TAPE

SERVICE, INC., a Wisconsin Corporation,

Petitioners,

GRIFFIN B. BELL, Attorney General of the United States

of America, his agents, servants, employees, attorneys,

successors and all those persons in active concert) or

participation with them.

Respondents.

Appendix to

Petition for Writ of Certiorari

RICHARD L. CATES

BRUCE F. KHLKE

LAWTON & CATES

110 East Main Street

Madison, Wisconsin 53703

Attorneys for Petitioners

GUILD PRINTING SEZ MADISON WIS

INDEX TO APPENDIX

PAGE

ra gigs pre Ns esc tos ob 0 be as ws lO]

ay Cara a a ale ie oes aoe ok A 8 108

PLAIN TIFE’'S MOTION FOR SUMMARY

ii a sk bo hs ola Cor seas pass ss 109

AFEIDAVTEE IN SUPPORT OF MOTTON

FOR SUMMARY JUDGMENT................ 110

DEFENDANT'S MOTION FOR SUMMARY

Ne el sey eke sae vd ves ese 114

PLAIN TIFE’S MOTION FOR PRELIMINARY

ey oocig sais eX neve pas wv aves a)

AFFIDANVTE IN SUPPORT OF MOTION FOR

PRELIMINARY INJUNCTION................ 116

DISTRICT COURT

ROMUPUEPTM PRIMED CITIEIELER os leeds nese ees 122

ORDER DISMISSING PLAINTIFFS’ MOTION

FOR PRELIMINARY INJUNCTION........... 129

JUDGMENT DISMISSING THE ACTION........ 130

APPENDIX

101

PAGE IN THE UNITED STATES DISTRICT COURT

OPINION OF COURT OF APPEALS ........... 131 FOR THE EASTER DISTRICT OF UISCUNSEe

JUDGMENT AFFIRMING DISTRICT COURT... 140 eee ae

E-C TAPE SERVICE, INC.,

a Wisconsin corporation,

ORDER DENY PETITION FOR | Plaintiffs, = our O° CLL

REHEARING EN BANG ........cccceceeeees 141 vs.

EDWARD H. LEVI, Attorney General

of the United States of America, [Equitable Relief Sought]

his agents, servants, employes,

attorneys, successors and all

those persons in active concert

or participation with them,

Civil Action File No.:

Defendants.

The plaintiffs DAVID L. HEILMAN and E-C TAPE SER-

VICE, INC. by their attorneys SAMSON, FRIEBERT, FINERTY &

BURNS by ROBERT H. FRIEBERT allege and show to the Court as

follows:

1. This action is brought for declaratory and in-

junctive relief for a threatened prosecution of the plaintiffs

for alleged violations of 17 U.S.C. §101(e) and §104 which

threatened prosecution violates rights guaranteed to the plain-

tiffs by the First, Fourth and Fifth Amendments to the United

States Constitution. The amount in controversy exceeds the

sum of $10,000 exclusive of interest and costs.

2. Jurisdiction is founded upon 28 U.S.C. §§1331,

2201 and 2282.

3. The plaintiff DAVID L. HEILMAN resides in the

Eastern District ef Wisconsin and is the President of the

plaintiff corporation E-C TAPE SERVICE, INC.

4. The plaintiff E-C TAPE SERVICE, INC. is a cor-

APPENDIX

102

poration duly organized and existing under and by virtue of

the laws of the State of Wisconsin with its principal place

ef business with respect to the matters involved in this case

at Lake Villa, Illinois and is in the business of, among

other things, manufacturing and selling phonograph records

and magnetic tapes throughout the United States and in for-

eign countries. Its corporate headquarters and other busi-

ness is conducted at 3695 North 126th Street, Brookfield,

Wisconsin in the Eastern District of Wisconsin.

5. The defendant EDWARD H. LEVI is the Attorney

General of the United States of America whose principal place

of business is in the District of Columbia. This suit is

brought against the Attorney General in his official capacity

and his agents, servants, employes, attorneys, successors and

all those persons in active concert or participation with

them are made defendants herein.

6. The plaintiffs are engaged in the business of

making and selling sound recordings in the form of records

and tapes. The plaintiffs have purchased records and tapes

on the open market which contain recordings which have been

“fixed" prior to February 15, 1972 and which have been manu-

factured and sold through usual commercial channels by record

companies. The plaintiffs then make compilation records and

tapes from these sound recordings by grouping individual

sides or cuts by classification and year, manufacture addi-

tional copies of their compilation and market and sell the

compilations after affixing to each a label which contains

the titles of the original sec:

the recording artists whose performances have been copied.

In accordance with the provisions of Public Law 92-140 (a

APPENDIX

103

copy of which is attached hereto as Exhibit "A"), plaintiffs

affix to the aforesaid compilations, in either tape or re-

cord form, the [P] oqyretens notice and register said compil-

ation with the United States Copyright Office.

7. With respect to each and every song so used,

plaintiffs have paid or tendered to the publisher the full

statutory royalty to which it is entitled under the copyright

law. 17 U.S.C. §lle). (Copies of 17 U.S.C. §l(e), §101(e)

and §104 are attached hereto as Exhibit "B"). Certain of the

publishing companies (27 in number) have accepted said pay-

ments, while others (127) have refused to accept said pay-

ments. At all times, the plaintiffs have made all reasonable

efforts to fully comply with all applicable provisions of the

copyright law of the United States.

8. Prior to 1909 composers did not have any copy~

right interests in mechanical reproductions (records) of

their songs. White-Smith Music Publishing Company v. Apollo

Company, 209 U.S. 1 (1908). 43 Cong. Rec. 3765-3767 (March

3, 1909).

9. By Public Law 349, Chapter 320, 35 Stat. 1075,

Act of March 4, 1909, as codified at 17 U.S.C. §l(e), Congress

granted to the composer of songs a copyright interest in re-

cords. Congress conditioned that copyright grant with a

proviso known as the compulsory license law whereby the com-

poser must yield up his copyright interest upon receipt of

a royalty of two cents per record which can be tendered to

him by any manufacturer after the initial use of the song.

17 U.S.C. §lle),

10. From 1909 until sometime in late 1974 or early

1975, it had been the position of the Department of Justice

APPENDIX

104

of the United States of America as well as all other inter-

ested federal agencies that this statutory provision author-

ized duplicators of records such as the plaintiffs herein

to pay the statutory royalty of two cents per record and

thereby to obtain the right to duplicate compositions of com-

posers which had been made into records. Prior to the enact-

ment of Public Law 92-140 on October 15, 1971, composers

could only resort to civil remedies for the coll ction of

their two cents compulsory license royalty.

ll. Public Law 92-140 at §2 created criminal sanc-

tions for the first time for failure to remit the compulsory

license royalty of two cents per record. 17 U.S.C. §10l(e).

12. Throughout the proceedings which led to the

enactment of §2 of Public Law 92-140, it was conceded by every-

body that record duplicators such as the plaintiffs herein,

could duplicate recordings upon payment of the two cents per

record compulsory license royalty fee to the composers. Cri-

minal sanctions were deemed necessary because many duplica-

tors, other than the plaintiffs herein, did not remit the

two cents and, therefore, civil sanctions were inadequate to

meet the situation.

13. On June 29, 1971, the Department of Justice of

the United States of America in a letter to the Chairman of

the Judiciary Committee of the House of Representatives, the

tinorebie Emanuel Celler, stated the following with respect

to this proposed bill:

“However, since the bill provides that the amend-

ment to 17 U.S.C. §10l(e) will taxe effect im-

mediately upon enactment, criminal sanctions

would seem to be available to prevent further

piracy of existing recordings where copyrighted

music was used and the pirate does not pay the

statutory royalty to the holder of the musical

copyright."

APPENDIX

105

14. The defendant through his agent, servant and

employe, John Murphy, Chief of the Regulations Section of

the Justice Department, publicly repudiated the prior posi-

tion of the government as presented to Congress and announced

that it is now the position of the Justice Department that

persons such as the plaintiffs herein who duplicate sound re-

cordings fixed prior to February 15, 1972 wiil be prosecuted

pursuant to 17 U.S.C. §10l(e) even though they pay or tender

the two cents compulsory license fees to composers. This

public announcement and threatened prosecution is contained

in an issue of Billboard magazine dated March 8, 1975. A

copy of the article is attached hereto as Exhibit "C".

15. The defendant by John Murphy also announced

that property will be seized by the Federal Bureau of Investi-

gation such as the property owned by the plaintiff corpora-

tion herein.

16. As a result of these threats of seizure and

prosecution, the plaintiffs herein have ceased doing business

as described above and now seek a declaration of the meaning

of 17 U.S.C. §l(e), §10l(e) and §104 and seek a declaration

that the copyright laws do not prohibit the activities of the

plaintiffs as described in any respect with respect to dupli-

cating sound recordings fixed prior to February 15, 1972.

17. The proposed seizure of sound recordings and

tapes as threatened by the defendant violates rights guaran-

teed to these plaintiffs by the First, Fourth and Fifth

Amendments to the United States Constitution as a prior re-

straint on the freedom of speech as well as threats of ille-

gal searches and seizures upon assertions that the products

of the plaintiff corporation are contraband when Congress

APPENDIX

106

has not declared the possession of such items to be illegal

or the items themselves to be contraband.

18. The threatened prosecution of the plaintiffs

by the defendant upon a recently changed interpretation by

the Justice Department of laws which had received a differ-

ent interpretation within all concerned branches of the gov- .

ernment from 1909 until 1975, constitutes a denial to the

plaintiffs of their right to due process of law in violation

of the Fifth Amendment to the United States Constitution be-

cause the statutes involved, if subject to such wide vari-

ance in interpretations and meaning within the government is

necessarily void for vagueness because men of reasonable

ability, intelligence and experience must guess as to the

meaning and application of said statutes. Furthermore, the

plaintiffs are being denied notice with respect to what con-

duct of theirs is proper and what conduct is improper.

WHEREFORE, your plaintiffs pray for the following:

1. For a declaration of the rights, privileges and

immunities of the plaintiffs, declaring that 17 U.S.C. §ll(e),

§10l(e) and §104 are inapplicable to duplicators of songs

fixed prior to February 15, 1972 who tender the two cents

compulsory license fee or those sections are inapplicable to

the duplicators of songs fixed prior to February 15, 1972 be-

cause such duplications do not constitute a use of the compo-

sers' copyright or the copyright interests of anyone else.

2. For a declaration that any interpretation which

makes the plaintiffs criminally liable for duplicating sound

recordings of songs fixed prior to February 15, 1972 upon

tendering the two cents compulsory license royalty to com-

posers would render the statutes involved unconstitutional.

APPENDIX

107

3. For interlocutory and permanent injunctive re-

lief enjoining the defendant and his agents, servants, em-

ployes, attorneys, successors and all those persons in ac~-

tive concert or participation with them from seizing records

and tapes and other property owned by the plaintiffs in con-

junction with their business activities involving recording

and duplicating records and tapes and enjoining them from

prosecuting the plaintiffs for alleged violations of 17 U.S.C.

§l01(e) or §104 when the plaintiffs have duplicated sound

recordings of sonqs fixed prior to February 15, 1972 upon

tendering the two cents compulsory license royalty fee to

composers.

4. For such other further legal and equitable re-

lief.

5. For costs and disbursements.

SAMSO, | FRIEBERT, FINERTY & BURNS

“By ROBERT H. FRIEBERT

Attorneys for Plaintiffs

P.O. ADDRESS:

710 North Plankinton Avenue

Milwaukee, Wisconsin 53203

(414) 271-0130

APPENDIX | APPENDIX

108 | 109

UNITED STATES DISTRICT COURT IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF WISCONSIN FOR THE FASTERN DISTRICT OF WISCONSIN

DAVID L. HEILMAN and E-c.__ 8 kahekReRReRR RRR RHR HR HR RR ARR RRR RR KH RR HH RHR KR KR KR

TAPE SERVICE, INC., a :

Wisconsin corporation, : DAVID L. HELLMAN and

: L-C TAPE SERVICE, INC.,

Plaintiffs, : a Wisconsin corporation,

VS. Plaintiffs,

EDWARD H. LEVI, Attorney General Case No. 75-C-117 vs. Case No. 75-C-117

of the United States of America,

his agents, servants, employes, EDWARD fi. LEVI, Attorney Géneral

attorneys, successors and all

those persons in active concert

or participation with tham,

of the United States of America,

his agents, servants, employes,

attorneys, successors and all

those persons in active concert

or participation with then,

Defendantse

ee ee ee ee ee ee eee ee -<—<-=

Defendants.

Now Comes Edward Il. Levi, Attorney General of the

i ee tt ene ee ee eke eRe eR RMR RRNA AKAN R

United States of America, defendant above named, by his

MOTION FOR SUMMARY JUDGMENT

attorneys William J. Mulligan, United States Attorney for

ee tt Ltt ee ee ee ee Ree eke ke eRe ke eM) We eheea

the Eastern District of Wisconsin by Joseph P. Stadtmueller,

First Assistant United States Attorney for said District, NOW COME the Plaintiffs, David L. Heilman and E-C

and as and for his answer to plaintiff's complaint admits Tape Service, Inc., by their attorneys, Lawton & Cates and

and denies as follows: Pruce F. Ehlke, and move the court to enter judgment in their

1. Defendants admit the allegations contained in favor pursuant to Rule 56, Federal Rules of Civil Procedure.

paragraphs 3, 4, 5, 6, 8, 13 and 15 of the complaint. Dated this l2th day of July, 1976.

aa

h

2. Defendants deny each and every other allegation

of the complaint and puts the plaintiffs to their proof

thervon . {

\ IS MA ———

WHEREFORE, defendant demands judgment dismissing “wrued ina

w Ao fast ny eee 7

plaintiff's complaint together with the costs and disburse- — ee ae

ments in this action. Attorneys a Plaintiffs.

fv)

Dated at Milwaukee, Wisconsin this G =~ day of May,

1975.

1am os WILLIAM J. MULLIGAN

ae Gist Viz United States Attorney

MAY = 7 1975

° 73 Asef p ~J CaN; “ee

SAMSON, FRIEKERE. f JOSEPH Pf ft

’ INTRIY & Luang First Assistant United States

ATiUn?

ORNEYS AT LAW Attorney

APPENDIX

110

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF WISCONSIN

tata Rie NM BL, at a ie ee ee eo oe ae ee

DAVID L. HEILMAN and

e E-C TAPE SERVICE, INC., . |

a Wisconsin corporation, ~ }

ed

Plaintiffs,

ft Case No, 75-C-117

EDWARD H. LEVI, Attorney General

of the United States of America, a4

his agents, servants, employes,

attorneys, successors and all

those persons in active concert

Or participation with then,

Defendants.

Bh te te OE Ee ar Bl ie er ek, a eg

- AFFIOAVIT IN SUPPORT OF

MOTION FOR SUMMARY JUDGMENT

ce eae eee Ae eee Bee ee eng ee ee

STATE OF WISCONSIN)

: ss

MILWAUKEE COUNTY )

DAVID L. HEILMAN, after being first duly sworn, on

Oath deposes and says as follows:

1. That he is one of the Plaintiffs in the forepoing

action and that he resides Mt 2172 Korth abth Street, Milwaukee,

Wisconsin.

2. That he was president of the Plaintiff corporation,

E-C Tape Service, Inc. at al] times naterial hereto, until April

of 1976 when he resignec that position,

5. That the Plaintiff, E-c Tape Service, Inc., is a

corporation organized anc existing under the laws of the State of

Wisconsin and had its eerporate headquarters at 3695 North booth

Street, Brookfield, tisconsin,

mms

section 7.

APPENDIX

111

4. That E-C Tape Service, Inc. has engaged in the business

of producing and marketing Original anthologies of musical compositions

previously recorded by others. This is accomplished by conceiving

a theme and format for an anthology, obtaining records and tapes

containing the desired selections, duplicating the desired selec-

tions, and finally re-recording them in an Original format,

sequence and combination. That although the individual selections

in a given anthology are all reproduced from records and tapes,

previously made by others, the anthologies themselves are new

and original presentations of the material. All anthologies so

created and produced by Plaintiffs are the subjects of compilation

copyrights owned by E-C Tape Service, Inc. pursuant to 17 U.S.C.

5. That said anthologies are marketed on the basis

of the appeal generated by their own themes and formats.

6. That many of the individual selections contained

in the anthologies are not otherwise commercially available in

any form, and those that are otherwise commercially available are

frequently unavailable in the same form--that is, reel-to-reel

tape, Cassette, 8-track stereo, or record--as the anthologies.

7, That the anthologies created, produced and sold

by Plaintiffs, were priced at $5.77 01 $6.98 for cassettes and

8-track tapes, and at $4.98 or $5.98 for records.

8. That the anthologies produced by Plaintiffs contain

duplications only of selections which were recorded or "fixed"

prior to February 15, 1972,

9. That such recordings "fixed" prior to February 15,

1972, are not themseives protected by any copyright.

10, That the underlying musical compositions of such

selections are protected by composition copyright subject to the

compulsory license provision of 17 U.S.C. section l(e).

APPENDIX

112

ll. That with respect to all selections used by Plaintiff —s,

Plaintiffs have paid or tendered te the composition copyright holder

the two cent royaity as required ty 17 U.S.C. section lle).

12. That of the composition copyright holders whose

compositions have been used in Plaintiffs’ anthologies, 27 have

accepted saiag royalty payments while 127 have refused to accept

said payments.

13. ‘That affian't's experience in the record industry

spans a period of over six years, during which time he has produced

records and tapes and marketed records and tapes throughout the

United States.

14. That based on affiant's experience in the recording

industry, it is common practice for an individual composer to sell

his composition to a publishing company. The publishing company in

turn attempts to induce a recording company to record the composi-

tion. Commonly a recording company will own, as subsidiaries, one

or more publishing companies. Thus, frequently, as to a given

recording, any rights in the recording itself and the composition

copyright are subjects of common ownership.

15. That based on affiant's experience in the recording

industry, typical contracts between recording companies and recording

artists are seven year contracts. These contracts cenmerally provide

that the recording costs--advertising, promotion, studio costs and

other production costs--are charged to the recording artist and are

collected from royalties payable to the artist. Generally, these

contracts provide that if a given record is unsuccessful and the

artist's royalties are insufficient to cover the recording costs,

those costs are simply carried forward and charged against royalties

from subsequent records by that artist. One of the few costs not

usually charged to the artist is the cost of pressing the records.

y § &

APPENDIX

113

Typically, that cost varies from about thirty-two cents per

long play altun to about thirty-nine cents per long play album,

depending on yolune. Typical contracts between recording companies

and recording artists are attached hereto as Exhibit A and in-

corporated herein.

Dated this 12th day of July, 1976.

in LT. HETLMAN

Subscribed and sworn to before

me this 12th day of July, 1976.

bitary Public, Silwaukee County, FI

My Commission

[Exhibit Ato Affidavit — not printed.)

APPENDIX

114 |

UNITED STATES DISTRICT COURT bd

EASTERN DISTRICT OF WISCONSIN

RRR ee

DAVID L. HEILMAN and

E-C TAPE SERVICE, INC.,

Plaintiffs, MOTION FOR SUMMARY

JUDGMENT

vs.

EDWARD H. LEVI, et al., Civil No. 75-C-117

be Defendants.

NOW COMES defendant, Edward H. Levi, by

William J. Mulligan, United States Attorney for the

Eastern District, by William E. Callahan, Jr., Assistant

United States Attorney for said District, and, pursuant

to Rule 56(b) of the Federal Rules of Civil Procedure,

moves this Court for an Order granting, summary judgment

in his favor on the grounds that there is no genuine

issue as to any material fact and he is entitled to

judgment as a matter cf law.

In support of this motion, said defendant

relies on the attached memorandum of law, together

with all other matters presently on file with this

Court.

Dated at Milwaukee, Wisconsin, this fae day

of July, 1976.

WILLIAM J. MULLTGAN

United States Attorney ;

/ ®

By: / P af J , J.

Ge Ae Oe a

(QITLTAN ES CALLAIIAN, JR.

Assistant United States Attorney

H

|

|

|

'

APPENDIX

115

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF WISCONSIN

DAVID L. HEILMAN and

E-C TAPE SERVICE, INC.,

A Wisconsin Corporation,

Plaintiffs,

i MOTION FOR

PRELIMINARY INJUNCTION

EDWARD H. LEVI, Attorney

General of the United States

of America, his agents.

servants, employees, attorneys,

successors and all those

persons in active concert or

participation with them,

Defendants. Case No. 75-C-117

NOW COME the Plaintiffs, David L. Heilman and E-C Tape

Service, Inc., by their attorneys, LAWTON & CATES and Bruce F.

Ehlke, and move the Court to grant a preliminary injunction against

prosecution in the Northen District of Illinois, Eastern Division,

or any other forum for alleged violations of 17 U.S.C. 88), 101(e)

and 104; and 18 U.S.C. §1341, pendina final disposition of the above

captioned action which was filed by Plaintiffs on March 7. 1975, in

the United States District Court for the Eastern District of

Wisconsin asking for a declaratory ruling and injunctive relief

against threatened prosecution of Plaintiff for alleaed violations

of 17 U.S.C. 88101(e) and 104.

et

Madison, Wisconsin 53703

Attorney For Plaintiffs

APPENDIX

116

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF WISCONSIN

SS ees ssseteensessesesssuumnsesiensetensteoeemne

DAVID L. HEILMAN and

E-C TAPE SERVICE, INC.,

A Wisconsin Corporation,

Plaintiffs,

“¥e~ AFFIDAVIT IN

SUPPORT OF

MOTION FOR

EDWARD H. LEVI, Attorney PRELIMINARY INJUNCTION

General of the United States

of America, his agents,

servants, employees, attorneys,

successors and all those

persons in active concert or

participation with them,

Defendants. Case No. 75-C-117

STATE OF WISCONSIN )

)ss

COUNTY OF MILWAUKEE)

DAVID L HEILMAN, being first duly sworn, on oath deposes

and says as follows:

1. That he is one of the Plaintiffs in the foreqoing

action and that he resides at 15660 Pomona Road, Brookfield,

Wisconsin,

2. That he was president of the Plaintiff corporation,

E-C Tape Service, Inc., at all times material hereto, until April

of 1976 when he resigned that position.

3. That the Plaintiff, £-C Tape Service, Inc., is a

corporation organized and existing under the laws of the State of

Wisconsin and had its corporate headquarters at 3695 North 126th

Street, Brookfield, Wisconsin.

4. That E-C Tape Service, Inc, has engaged in the business

of producing and marketing original anthologies of musical compositions

previously recorded by others,

5. That the anthologies produced by Plaintiffs contain

duplications only of selections which were recorded or "fixed" prior

to February 15, 1972,

APPENDIX

, 117

6. That prior to entering into said business activity,

affiant sought the advice of counsel concerning the legality of said

business, namely John Gower of Green Bay, Wisconsin, and the firm of

Whyte and Hirschboeck, S.C. of Milwaukee, Wisconsin, and that each

of them advised him that if he tendered for payment the statutory

compulsory license fee to the copyright proprietor that the re-recording

of said music was not in violation of any federal statute.

7. That the underlying musical compositions of selections

used in affiant's anthologies are protected by composition copyright

subject to the compulsory license provision of 17 USC §1(e).

8. That with respect to all selections used by Plaintiffs,

Plaintiffs have paid or tendered to the composition copyright holder

the two cents royalty as required by 17 USC §1(e).

9. That of the composition copyright holders whose composi-

tions have been used in Plaintiff's anthologies, 27 have accepted said

royalty payments while 127 have refused to accept said payments.

10. That 17 USC was amended by P.L. 92-140, 17 USC 101(e)

on October 15, 1971, and became effective on February 15, 1972, and

created a limited copyright in sound recordinas.

11. That after passage of P.L. 92-140, affiant sought the

advice of Whyte and Hirschboeck, S.C, who advised him that sound

recordings originally made prior to February 15, 1972, were not

afforded copyright protection under federal law and that P.L. 92-140

did not change this and that E-C Tape's activities were still not in

violation of any federal law.

12. That the Government Requlations Section, Criminal Division

of the United States Department of Justice, was of the same opinion

when it published a pamphlet entitled, "Copyright Protection of Sound

Recordings", dated April, 1973, and that a copy of the text of said

pamphlet and P.L. 92-140 are attached hereto as Exhibit "A" and made

a part hereof as if set forth at length.

APPENDIX

118

That within Exhibit "A" it is stated in part as follows:

a) Page 3: "A sound recording is eligible for

copyright protection only if the sound recording

is fixed and first published with the required

statutory copyright notice on or after February

15, 1972. P.L. 92-140, Section 3."

Fixation, "A series of sounds constituting a

sound recording is fixed when that complete

series is first produced on a final mester

recording from which copies can be made,"

37 C.F.R. 202.15a(b).

b) Page 4: "Effective date. The enactment does not

apply retroactively and does not affect in any way

rights with respect to sound recordings fixed

before February 15, 1972. Thus, P.L. 92-140

does not prohibit the unauthorized copying of

sound recordings fixed before February 15, 1972 "

c) Page 9: “First no Federal copyright violation can

exist under P.L. 92-140 unless the sound recording

copied was fixed and published on or after February

15, 1972. This automatically excludes such albums

as 'Golden Hits of the 60's','Frank Sinatra's

Greatest Hits' and ‘White Christmas’ by Bing

Crosby, etc., which were obviously fixed and

published before February 15, 1972."

4d) Page 13: “To receive Federal copyriqht protection,

a sound recording must be finally fixed and published

with proper notice of copyright on or after February

15, 1972. Supra, Section c(1). Proof of fixation

and publication may he provided by a recording

industry representative,”

13, That affiant's experience in the recording industry

spans a period of over six years, during which time he has produced

records and tapes and marketed records and tapes throughout the

United States.

14, That based on affiant's experience in the recording

industry, it is common practive for an individual composer to sell

his composition to a publishing company, The publishina company in

turn attempts to induce a recording company to record the composition,

Commoniy, a recording company will own, as subsidiaries, one or more

publishing companies. Thus, frequently, as to a given recording, any

rights in the recording itself and the composition copyriaht are

subjects of common ownership.

APPENDIX

119

15. That in the last ten years the major recording companies

have gained control of 80% of the major copyrights of musicai composi-

tions by purchasing the large publishing houses or exercising control

in other ways.

16. That many of the major recording companies intentionally

conceal evidence cf their control over the publishers.

17. That the above captioned action was commenced on March

7, 1975, for declaratory and injunctive relief enjoining any criminal

prosecution for alleged violations of 17 USC S§101(e) and 104.

18, That on February 11, 1977, Assistant U.S. Attorney

William —. Callahan, Jr., in response to a question from this Court.

indicated that no criminal action would be brought against affiant

for alleged violations of 17 USC $1, 101(e) and 104.

19, That an indictment was filed on March 31, 1977, in

the Northern District of Illinois, Eastern Division, chargina affiant

with twenty-six counts in violation of 17 USC $81, 101(e) and 104;

and an additional, related ten counts in violation of 18 USC $1341,

and that a copy of this indictment is attached hereto as Exhibit "B"

and made a part hereof.

20. That there was a delay of twenty-two and one-half months

between May 15, 1975, the date of the alleged offenses and March 31,

1977, the date on which the indictment was returned, which delay was

unnecessary and attributable solely to the government.

21. That a result of the delay on the part of the government

to prosecute him, affiant has suffered substantial prejudice for the

following reasons:

a) That his assets have been depleted during said period

of time by civil litiqation with the record industry and he no longer

has funds with which to defend himself which would have been available

to him had the prosecution been brought on without unreasonable delay.

oe

APPENDIX APPENDIX

120 121

b) That he believes said delay was part of a deliberate, 26. That affiant faces a possible fine of $1,000 or five

purposeful and oppressive design for delay on the part of the government years of imprisonment for alleged violations of 18 USC $134).

to hinder him in his defense of this action. 27. That as a result of said pending Prosecutions, affiant

c) That he would have appealed the decision in E-C Tape v. has incurred large expenses for attorneys fees.

Kelly, (N.0. I11, 1975) 412 F. Supp. 249, had he known that the govern- 28. That as a result of said pending prosecutions, affiant

ment intended to prosecute him criminally in the future. has had to spend much of his time in court and in preparation for

22. That the following publishers listed in the indictment litigation.

are owned or controlled by the following record companies: | 29. That as a result of said pending prosecutions and

a) Jobete Music Company is owned or controlled by possible penalties, affiant and his family have suffered mental anguish.

Motown Records. 30. That this Affidavit is in support of a Motion For

b) Warner-Tamberlane Publishing Corp. is owned or ee : .

controlled by Warner-Electra-Atlantic Records, Preliminary Injunction.

c) Chapel Music Co. is owned or controlled by Dated this TW cay of June, 1977.

Polygram Records, Inc.

d) Warner Bros., Inc., is owned or controlled by

Warner-Electra-Atlantic Records.

e) Viva Music, Inc. is owned or controlled by

A & M Records.

f) Jondora Publishing Co. is owned or controlled

by Fantasy-Prestige Records.

Subscrib and sworn to before me

g) Elvis Presley Co. is owned or controlled by this MM day of June, 1977.

RCA Records.

h) Hill and Range Songs, Inc. is owned or controlled

by RCA Records. Ndtary Public, State of Wisconsin

. . My Commission @& #

23. That at the present time, there is no motion for

preliminary injunction pending before this Court.

24. That there is no motion for a preliminary injunction

pending before this Court because affiant has relied on the represen-

tation of the Office of the United States District Attorney as referred

to in Paragraph 18 above, as wel] as on the government pamphlet entitled {

"Copyright Protection of Sound Recordinas" as referred to in Paraqraph

12 above. '

25. That affiant faces a possible fine of $25,009 and one

year of imprisonment for alleged copyright infringements under 17 USC

§104.

APPENDIX

122

U. S. Dist. Court Eost Dit W:

sFa = en

UNITED STATES DISTRICT COURT .

MUL 14 i977

EASTERN DISTRICT OF WISCONSIN

ct O'clock ‘

RUTH W. LA FAVz, Cla.

DAVID L. HEILMAN and E-C

TAPE SERVICE, INC., a

Wisconsin corporation,

Plaintiffs,

Vv. DECISION AND ORDER

GRIFFIN B. BELL, Attorney General Civil Action

of the United States of America, No. 75-C-117

his agents, servants, employes,

attorneys, successors and all

those persons in active concert or

participation with them,

Defendants.

In this action, plaintiff duplicators seek the follow-

ing relief: a declaration that 17 U.S.C. §§ l(e), 10l(e), and

104 are inapplicable to duplicators of songs fixed prior to

February 15, 1972, who tender the two-cent royalty to the compo-

sition copyright holder; a declaration that an interpretation of

those statutes which make the plaintiffs criminally liable for

duplicating sound recordings of songs fixed prior to February 15,

1972, renders the statutes unconstitutional; and an injunction

restraining the defendant U. S. Attorney General, his agents and

successors, from seizing the records and tapes of the plaintiffs

and from prosecuting the plaintiffs for alleged violations of

17 U.S.C. §§ 10l(e) or 104. Jurisdiction is present under 28 U.S.C.

§§ 1331 and 2201. The matter is before the court on cross motions

for summary judgment. For the reasons which follow, the defend-

ants' motion will be granted and the plaintiffs’ motion will be

denied.

Both the facts in this matter and the position of the

Court on the legal issues raised herein have already been fully

detailed in the decision and order of this Court rendered April 28,

APPENDIX

123

1975. At that time, this Court denied plaintiffs' motion for a

temporary restraining order and a preliminary injunction and

plaintiffs' request for the convening of a three-judge court.

See Heilman v. Levi, 391 F.Supp. 1106 (E.D. Wis. 1975). There

this court relied on four circuit euses” and determined that tape

duplicators are not entitled to avail themselves of the compulsory

licensing provision of 17 U.S.C. § 1(e) because such duplication

does not constitute a "similar use" of the composition and there-

fore their activities constitute infringement of the composition

copyright. The Court also determined that 17 U.S.C. § 101(e),

which imposes criminal sanctions pursuant to 17 U.S.C. § 104 as

to cases of "willful infringement for profit," embraces tape dup-

licators who tender the compulsory licensing fee. Furthermore,

the Court concluded that the meaning of "unauthorized" as used in

§ 101(e) is not so uncertain as to render the statute unconstitu-

tionally vague, and that the public notice given the plaintiffs

in January of 1975 through the trade press of the prospective op-

eration of the defendants’ decision to prosecute tape duplicators

did not violate any of plaintiffs’ due process rights.

The Court is mindful that the mere fact that a plain-

tiff's motion for a preliminary injunction is denied does not in

itself entitle the defendant to summary judgment. See 6 Part 2

Moore's Federal Practice % 56.17[30] (1976). However, the Court

in its earlier decision made an exhaustive study of the develop-

ment, amendments, and interpretation of the federal copyright

statutes involved. An examination of plaintiff Heilman's affida-

vit and the various exhibits and briefs filed in support of and

in opposition to the motions for summary judgment indicate that

there has been no change in the facts of this case nor in the ap-

plicable law which would warrant a.change in the Court's position.

In fact, recent developments in the law with reyard to cases seek-

ing to enjoin the Attorney General from prosecuting tape duplicators

for copying recordings fixed prior to February 15, 1972, have

APPENDIX

124

reinforced the defendants' position. See International Tape

Distributors, Ltd. v. Levi, 188 U.S.P.Q. 539 (D. D.C. 1975);

Stereo Tape Associates v. Levi, No. G 75-167 (W.D. Mich., May 14,

1976); Stereo Tape Associates v. Levi, No. 5-70687 (E.D. Mich.,

April 7, 1976); E-C Tape, Inc. v. Kelly, 412 F.Supp. 245 (N.D.

Ill. 1975); and Gramuglia v. Levi, No. 75-CV-549 (N.D. N.Y.

July 13, 1976). |

At the preliminary injunction stage of this litigation,

there were no genuine issues of material fact, nor are any such

factual disputes presented at this time that would preclude the

granting of summary judgment. See Rule 56(c), Fed. R. Civ. P.

Then, as now, plaintiffs admitted copying recordings fixed prior

to February 15, 1972, without authorization of the composition

copyright holder.

The plaintiffs' principal argument at this time is that

the decisions of the four circuits previously relied upon--Fame,

Jondora, Marks, and Duchess (cited in footnote "1")--are in error,

and as they are not binding on this court, plaintiffs urge ‘he

Court to re-evaluate its prior position. Plaintiffs argue that

they are not tape pirates in the usual sense of the term because

they copy only older record selections, many of which are commer-

cially unavailable, and because they offer the records in an an-

thology form centered around a particular theme. Plaintiffs contend

that because they offer the customer something new, and because

their customers are interested in the anthology rather tuan the

individual selection, they are not depriving other manufacturers

of a portion of their profit on successful records. Even assuming

that the customer is more interested in the anthology than in the

individual selection$, and that in fact other manufacturers are

not deprived of profits because the records are commercially un-

available otherwise, plaintiffs have misstated the issue. The

issue is not whether the plaintiffs are original or creative in

their arrangement of record anthologies, nor whether plaintiffs

APPENDIX

125

directly or indirectly compete with other recording companies.

The issue is whether the plaintiffs in the first instance have

the right to copy sound recordings fixed prior to February 15,

1972, without the authorization of the composition copyright holder.

This Court finds no relevance to the plaintiffs' later arrangement

of the duplicated songs. Originality of the anthologized arrange-

ment, that is, of the sequence of the various recordings, does not

negate the requirement of first obtaining authorized permission

from the copyright holder before duplicating the recording. Whether,

once the anthologizer has obtained the requisite permission to copy

the various recordings contained in the anthology, he is then en-

titled to copyright protection as to the original arrangement of

the anthology is a separate matter which need not be considered

here.

Secondly, plaintiffs have argued that this Court's in-

terpretation of 17 U.S.C. § l(e), the compulsory licensing section,

thwarts the purpose of compulsory licensing by fostering monopoly

in the recording industry. The granting of any copyright does

create a limited monopoly which is designed to benefit long-term

competitive interests. One commentator has remarked:

"* * * The Constitution's authorizativn to Congress to

grant patent and copyright protection represents a judgment

that, although short-range competitive interests would benefit

from immediate and free public access to technological and ar-

tistic innovation, to permit such access would destroy incen-

tive to innovate; new products and works would not be intro-

duced into the market and consequently the long-range competi-

tive situation would decline. The patent and ee

statutes, each in its own way, strike a balance etyeen these

long- and short-range competitive interests. * * *"

Accordingly, the compulsory license provision has been interpreted

to permit numerous artistic interpretations of a single written

composition, but not to permit the use of a recording of the com

position. See Shaab v. Kliendienst, 345 F.Supp. 589, 590 (D.D.C.

1972); Jondora Music Publishing Co., Inc. v. Melody Recordings,

Inc., 506 F.2d 393, 395 (3rd Cir. 1974), cert. denied 421 U.S. 1012

(1975).

APPENDIX

126

Along the same lines, the plaintiffs argue that because

frequently the large record companies own the publishing houses

which have control of the composition copyright, impermissible

tying arrangements result akin to those condemned under antitrust

laws. Plaintiffs assert that due to an oligopolistic recording

industry, the uncopyrighted product--the performance--is tiled to

the copyrighted product--the composition. This argument is an-

swered in the same way as the prior argument: new renditions of

the copyrighted composition are permitted, but mere copies of past

performances are prohibited. There is no analogy to impermissible

tying. To the extent that the plaintiffs attack the recording and

publishing industries as oligopolistic, the proper remedy lies in

an action for violations of the antitrust laws.

Thus, the plaintiffs have advanced no arguments or facts

which have persuaded this Court to depart from its earlier an-

nounced conclusion that ae a matter of law plaintiff duplicators

may not avail themselves of the compulsory licensing provision

of 17 U.S.C. § l(e) to avoid civil or criminal sanctions under

the Copyright Act, and that criminal sanctions imposed pursuant

to 17 U.S.C. §§ 101(e) and § 104 embrace tape duplicators who ten-

der the compulsory licensing fee. Plaintiffs admit that they were

given public notice in January of 1975 via the trade press of the

defendants’ decision to prosecute tape duplicators. The defend-

ants' decision to prosecute operated prospectively and was based

on the unanimous interpretation of the four circuit courts of ap-

peal which considered the question of the availability of 17 U.S.C.

§ 1(e) to tape duplicators. The defendants have not violated any

of the plaintiffs’ constitutional rights.

IT IS THEREFORE ORDERED that defendants' motion for

summary judgment be and it hereby is granted.

IT IS FURTHER ORDERED that plaintiffs' motion for summary

APPENDIX

127

judgment be and it hereby is denied.

Dated at Milwaukee, Wisconsin, this 1Y day of

pa 1977.

w-SSS

e . we strict Judge

APPENDIX

128

FOOTNOTES

Fame Publishing Co., Inc. v. Alabama Custom Tape, Inc., 507

F.2d 667 (Sth Bie 1975), cert. denied, 423 U. Ty 841 (i975);

Jondora Music Publishin Co., Ine. Vv. Melod Recordings, Inc.,

506 F.2d 393 (3rd Cir. foray: cert. denied, 421 U.S. Foi2

(1975); Edward B. Marks Music Corp. v. Colorado Magnetics,

Inc., 497 F.2d 285 (10th Cir. 197k, cert. denied, 419 U.s

T1720" (1975); and Duchess Music Corp. v. Stern, 458 F.2d i305

(9th Cir. 1972), cert. denied, E05 U.s. 847 71972)

Goldstein, "The Competitive Mandate: From Sears to Lear,"

59 Calif. L. Rev. 873 (1971).

APPENDIX

129

* S. Diss. ag — ou. Vou.

io?

K Ht it, &

UNITED STATES DISTRICT COURT JUL 14 1977

EASTERN DISTRICT OF WISCONSIN ot o'clock

RUTH W. LA FAVE, Clerk

DAVID L. HEILMAN and

E-C TAPE SERVICE INC.,

a Wisconsin corporation,

Plaintiffs,

Vv.

GRIFFIN B. BELL, Attorney

General of the United States ORDER

of America, his agents,

servants, employes, attorneys, C.A. No. 75-C-117

successors and all those persons

in active concert or partici-

pation with thea,

Defendants.

Plaintiffs have filed a motion for a preliminary

injunction seeking to enjoin prosecution of the plaintiffs

in the Northern District of Illinois, Eastern Division, or

any other forum for alleged violations of 17 U.S.C. §§ l,

10l(e) and 104, and 18 U.S.C. § 1341, pending final disposition

of the above-captioned action, in which plaintiffs sought a

declaratory ruling and injunctive relief against threatened

prosecution of the plaintiffs for alleged violations of

17 U.S.C. §§ 101(e) and 104.

In view of the granting of defendants’ motion for

summary judgment and the denial of plaintiffs' motion for

summary judgment on July 14, 1977, the plaintiffs' motion for

a preliminary iajunaction is dismissed as moot.

IT IS THEREFORE ORDERED that plaintiffs' motion for

a preliminary injunction be and it hereby is dismissed as moot.

Dated at Milwaukee, Wisconsin, this (X day of

fob <n

trict Judge

APPENDIX

130

JUDGMENT ON DECISION BY THE COURT CIV 82 (7-63)

United States District. Court

FOR THE

EASTERN DIST, OF WIS.

DAVID L. HEILMAN and E-C TAPE Civit ACTION FILE NO. 75-C-117

SERVICE, INC., a Wisconsin corporation

vs. JUDGMENT

GRIFFIN B. BELL Attorney General of the

United States of America, his agents, servants,

employees, attorneys, successors and all

those persons in active concert or participation

with them

on cross motions for summary judgment

This action came on for tyjet (hearing)/before the Court, onorable JOHN W. REYNOLDS

, United States District Judge, presiding, and the issues having been duly ttc

(heard) and a decision having been duly rendered, and the court having eranted

defendants’ motion for orig judgment

e

It is Ordered and Adjudged that t plaintiffs take nothing, and that the

action be dismissed on the merits.

Dated at Milwaukee, Wisconsin »this 14th day

of July , 1977 .

RUTH W. LA FAVE

ry of Court

by: —_ A uTbags

Deputy Clerk

APPENDIX

131

In the

Cited States Court of Appeals

For the Seventh Circuit

No. 77-1968

David L, HEILMAN, and E-C TAPE SERVICE, INC.,

a Wisconsin Corporation,

Plaintiffs-A ppellants,

U.

GRIFFIN B. BELL, Attorney General of the United States

of America, his agents, servants, employees, attorneys,

successors and all those persons in active concert of

participation with them,

Defendants-A ppellees.

Appeal from the United States District Court for the

Eastern District of Wisconsin.

No. 75-C-117—John W. Reynolds, Chief Judge.

ARGUED FEBRUARY 21, L978—DECIDED SEPTEMBER 6, 1978

Before FAIRCHILD, Chief Judge, CASTLE, Senior Cirenit

Judge, and SWYGERT, Circuit Judge.

CASTLE, Senior Circuit Judge. This appeal presents

to this court for the first time an issue which has

already been decided by four other circuits: whether the

compulsory license provision of the Copyright Act of

1909 can be used to prevent tape duplication of musical

recordings. The district court followed the result reached

by all of the other circuit courts and by several

\PPENDIN No. 77-1968

132

federal district courts in holding that tape duplicators

cannot avoid copyright infringement under the com-

pulsory license provision of the 1909 Act. We affirm.

I,

The facts of this case are not in dispute. Plaintiff

David L. Heilman was president of E-C Tape Service,

Inc. which sold tape and record “anthologies” consisting

of popular music selections originally recorded prior to

February 15, 1972. E-C Tape would obtain the original

recordings of the desired musical selections, duplicate

them onto blank records and tapes, and then sell the

duplications as part of a “new” package at prices ap-

proximately equal to that of the original recordings.

In 1975 the United States Attorney General an-

nounced that he intended to prospectively prosecute such

duplicators, or “tape pirates,” for willful infringement of

the federal copyright laws. 17 U.S.C. §§ 1(e), 101fe), and

104.! After receiving this notice, plaintiffs brought this

suit seeking a declaratory judgment tha. these

duplications did not violate the copyright laws and an

injunction prohibiting any future prosecution. In sup-

port of their request, plaintiffs noted that under the

1909 Act, it is settled that only the musical composition,

and not the recording thereof, is subject to copyright

protection. Further, once the composer authorized the

mechanical recording of his composition, the so-called

“compulsory license” provision of § l(e) allowed anyone

else to make “similar use” of the copyrighted composi-

tion upon giving appropriate notice and paying a royalty

of two cents to the composer for each copy of the new

recording produced. Although Congress amended the

copyright laws in 1971 to provide protection for the

recording itself, in this case the plaintiffs were careful

to duplicate only those selections originally recorded

before the February 15, 1972 effective date of that

' A complete revision of the federal copyright laws was

enacted October 19, 1976 to become efective January 1, 1978.

Ali citations in this opinion refer to the law prior to January.

1, 1978.

77-1968 APPENDIX

No. 7 133

amendment. Consequently, plaintiffs contend that since

they gave notice and tendered the royalty payments,

they did not infringe upon the composition copyright.

« The district court for the Eastern District of Wiscon-

sin denied plaintiffs’ request for a temporary restraining

order, preliminary injunction and the convening of a

three-judge court. 391 F.Supp. 1106. Subsequently,

criminal proceedings were filed against plaintiffs in the

Northern District of Illinois. On July 14, 1977, the

Eastern District of Wisconsin district court granted the

government's motion for summary judgment. 434

F Supp. 564. This appeal followed.

II.

Plaintiffs’ main contention is that they have satisfied

the compulsory license requirements of § l(e) and

therefore cannot be prosecuted for copyright infringe-

ment. As noted above, four circuit courts have addressed

the precise issue of whether tape duplicators can avoid

copyright infringement by giving notice and paying the

two-cent royalty. Fame Publishing Co., Inc. v. Alabama

Custom Tape, Inc., 507 F.2d 667 (Sth Cir.), cert. denied,

428 U.S. 841 (1975); Jondora Music Publishing Co., Ine.

v. Melody Recordings, Inc., 506 F.2d 392 (8d Cir. 1974),

cert. denied, 421 U.S. 1012 (1975); Hdward B. Marks

Music Corp. v. Colorado Magnetics, Inc., 497 F.2d 285

(10th Cir. 1974) (en bane), cert. dented, 419 U.S. 1120

(1975); Duchess Musie Corp. v. Stern, 458 F.2d 1305 (9th

Cir.), cert. denied, 409 U.S. 847 (1972). In each case, the

court held that the compulsory license provision of § l(e)

was not available to tape duplicators. We adhere to the

reasoning of those courts.

As noted above, under the compulsory license provi-

sion of the 1909 Act, once the composer authorizes the

first recording of the copyrighted composition, anyone

who satisfies the notice and royalty requirements can

make similar use of the composition. The crucial ques-

tion in this case is whether duplication is a “similar

use.” The reasoning of the duplicators, as expressed by

Professor Nimmer, is that

the only portion of that which has been duplicated

which is protectible under the Copyright Act is the

APPENDIX No. 77-1968

134

musical composition itself, which is authorized for

use for recording purposes upon payment of the

statutory royalties.

NIMMER ON COPYRIGHT, § 108.4621 at 431 (1976). The

problem with this view is that it overgeneralizes the

scope of the compulsory license entitlement. by inter-

preting “similar use” as the equivalent of all “recording

purposes.” However, careful emphasis must be placed

upon the words “similar use” in order to adequately

protect the composer-copyright holder's protected in-

terest. The statutory scheme gives the composer the first

opportunity to benefit from his original composition.

This includes the right to gain from the initial recording

contract, the terms of which will be dependent upon the

recorder’s costs in making the recording (for example

the cost of hiring musicians and artists, and using

recording equipment) and upon the profits from selling

copies of the recording.

Once the copyright holder has benefitted by making a

recording of the composition, he must permit others who

pay the statutory royalty to similarly use the composi-

tion, 1.e., to “make a recording.” However, duplicating a

recording is not similar to making a recording of the

composition. The duplicator does not take the composi-

tion as “raw material” and go through the creative and

financial steps of producing a recording. Edward B.

Marks Music Corp. v. Colorado Magneties, Inc., supra at

288. The only similarity is in the end product which is

based upon the composition. There is no similarity in the

“use” of the composition. Also, while the difference

* Judge Weis of the Third Circuit gave an accurate example

of this distinetion:

To put the concept in a different setting—the court

reporier., who listens to the sound of a witness's voice,

makes notes on a stenotype machine and then types the

words on sheets of paper, makes use of the witness's oral

statements. A person who simply photocopies the trans-

cript does not make the same or a similar use of the

witness's voice sounds,

Jondora’ Music Publishing Co.. Inc... Melody Recordings,

Ine, supra at 395 n.10.

No. 77-1968 \PPENDIX

135

between making a recording and duplicating a record-

ing (making a recording of a recording) may seem

negligible semantically, the impact of the latter upon

the copyright interest of the composer is clear. The

copyright holder’s benefit is substantially reduced by the

inevitable lower profits which result from duplicators

who can re-record for a fraction of the original cost and

thus undersell the authorized recorder. Plaintiffs’ argu-

ment that the composer-copyright holder’s interest is

protected by the two-cent royalty payment is unconvinc-

ing. Accepting that position would distort the statutory

scheme since it would force the composer to forego the

full benefit of the presumably more lucrative arrange-

ment with the first recorder. Thus, we find that the

plaintiffs’ duplication of the original recordings is not a

“similar use” within the meaning of § l(e).°

Although plaintiffs and the dissenting opinions in the

four prior circuit court cases dispute this interpretation

of “similar use,” we find their arguments unpersuasive.

First, our interpretation effectuates the dual purposes of

the compulsory license provision: to encourage creativi-

ty by ensuring first recording benefits would accrue to

the composers and to avoid a monopoly whereby

copyright holders could exclusively and indefinitely con-

trol who would record their copyrighted compositions.

Fame Publishing Co., Inc. v. Alabama Custom Tape,

Inc., supra at 670. Our holding continues to avoid com-

plete composer control over who may record since

’ We take note of the statement of plaintiff Heilman that

composers often sell their compositions to publishing com-

panies who are_ in turn owned by recording companies.

(Heilman Affid. 114). Thus, a recorder is also the copyright

holder in many instances. We do not see why the recorder as

successor in interest should enjoy any less rights under a valid

copyright than the composer. However, even if the copyright

protection of the composition did diminish after assignment,

the interest of the composer secured by the copyright law

would still be harmed should the authorized recording be

duplicated. This follows since the composer would not be able

to demand as high a price for selling the composition for

recording if the recorder’s profits could be diminished by

duplication. Therefore, we do not distinguish between the

copyright holder as composer or recorder.

APPENDIX No. 77-1968

136

anyone who satifies the notice and royalty provisions is

free to hire musicians, artists, and equipment and make

a recording of a _ previously recorded composition.

However, our holding also protects the composer-

copyrightholder who can realize the full benefit of his

arrangement with the recorder of the original version.

Second, we recognize that certain congressional

reports on the 1971 amendments to the Copyright Act

indicate that some members believed there was no ac-

tion for copyright infringement available against

duplicators prior to the creation of a copyright interest

in the recording itself. S. Rep. No. 92-72, 92d Cong., Ist

Sess. (1971); H.R. Rep. No. 92-487, 92d Cong., lst Sess.

(1971); 1971 U.S. Code Cong. & Admin. News 1567.4

However, we are not bound by congressional interpreta-

tion of a prior existing law. United States».

Southwestern Cable Co., 892 U.S. 157, 170 (1968). This is

particularly true given the substantial length of time

between the congressional session which produced the

1909 Act and that which produced the amendments of

1971. Edward B. Marks Music Corp. v. Colorado

Magnetics, Ine., supra at 289. Moreover, Congress must

necessarily deal with broad policy questions and, conse-

quently, was free to determine that additional protection

was needed to protect the recordings themselves. The

fact that the 1971 amendments afforded such protection,

however, does not interfere with our holding on the

narrow issue as to what constitutes “similar use” with

respect to protection of the composition.

' Subsequently, according to reports published during con-

sideration of the 1976 amendments to the federal copyright

laws. congressional interpretation of the 1909 Act shifted:

The basic intent of this sentence is to make clear that a

person is not entitled to a compulsory license of copy-

righted musical works for the purpose of making an

unauthorized duplication of a musical sound recording

originally developed and produced by another. It is the

view of the Committee that such was the original intent of

the Congress in enacting the 1909 Copyright Act, and it

has been so construed by the 3rd, 5th, 9th, and 10th

Circuits ...

H.R. Rep. No. 94-1476, 94th Cong., 2d Sess. 108; 1976 U.S.

Code. & Admin. News 6153.

No. 77-1968 \PPENDIN

137

Third, our holding is supported by the overwhelming

weight of judicial authority. In addition to the four cir-

cuit court cases noted above, several federal district

courts have also concluded that the compulsory license

provision of § l(e) is not available to tape duplicators.

E-C Tapes, Inc. v. Kelly, 412 F.Supp. 245, 248 (N.D.

Ill. 1975); International Tape Distributors, Ltd. v. Levi,

188 U.S.P.Q. 5389 (D.D.C. 1975). See also Stereo Tape

Associates Ine. v. Levi, (W.D. Mich. May 14, 1976, Civ.

No. 75-167); Stereo Tape Associates, Inc. v. Levi, (E.D.

Mich. November 7, 1975, Civ. No. 5-70687); United

States v. Bodin, 375 F.Supp. 1265, 1269 (W.D. Okla.

1974); Aeolian Co. v. Royal Music Roll Co., 196 F. 926,

927 (W.D. N.Y. 1912). Plaintiffs’ citation of Goldstein v.

California, 412 U.S, 546 (1973), is misplaced. In that

case, the Supreme Court was concerned with whether

the supremacy clause barred states from protecting the

recording itself from tape duplicators. In contrast, here

we are dealing with the copyright interest of the

composer-copyrightholder and not the interest of the

recorder alone. Consequently, we agree with earlier

courts that Goldstein is distinguishable. Jondora Music

Publishing Co., v. Melody Recordings, Inc., supra at 396

& n.12.

We also find no merit in plaintiffs’ argument that they

were making a new product by arranging the

duplications in an anthology format. According to this

argument, plaintiffs would also be free to make a copy

of a copyrighted nonrecorded composition, which would

not be subject to the § l(e) proviso, and publish it in a

book of sheet music with other compositions provided

they could point to a central organizing theme. Such a

result is obviously improper under the copyright laws.

Nor do we accept plaintiffs’ policy argument that they

assist the public in obtaining older selections which

were unavailable or unavailable in a certain medium. If

a market exists for these selections, plaintiffs should be

able to negotiate with the copyright holder to duplicate

the recordings at a fair price. Therefore, we find that

the compulsory license provision of the 1909 Act does

not protect the plaintiff duplicators from infringing the

copyright in the composition.

\PPENDIN No. 77-1068

138

ITI.

In the course of finding the compulsory license provi-

sion of § l(e) to be unavailable to plaintiffs, we have sub-

stantially answered the anon issue in this case:

criminal charges under 17 U.S.C. §§ 101(e) and 104 may

be brought against tape duplicators who have attempted

to comply with § l(e). This follows since § 101(e) clearly

states that “interchangeable parts” such as tapes and

record discs are to be considered copies of the

copyrighted composition for purposes of copyright in-

fringement. § 101l(e) further provides that the

“unauthorized manufacture, use, or sale of such _ in-

terchangeable parts shall constitute infringement of the

copyrighted work.” Since there was no express

authorization and the § l(e) compulsory license is un-

available, plaintiffs were “unauthorized” and, conse-

quently, subject to all remedies relating to infringement

including criminal penalties under § 104.

Plaintiffs’ main argument on this issue is that this con-

clusion is improper given the changing state of the

copyright laws in recent years. Plaintiffs contend that

the criminal penalties for infringement of musical com-

position copyrights were added to § 101(e) with the

amendments of 1971 which, as noted above, was a time

when Congress felt duplicators could not be infringers if

they complied with § l(e). Accordingly, plaintiffs reason,

Congress only intended for the criminal sanctions to

reach those who failed to pay the statutory royalties.

This argument was dealt with in depth by the district

court in its denial of plaintiffs’ motion for a preliminary

injunction. Chief Judge Reynolds reasoned that

legislative history normally is consulted only when the

statute is unclear and, as noted above, such is not the case

with § 101(e). 391 F.Supp. at 1112. See Stern v. United

States Gypsum, Inc., 547 Kod 1329, 1835 (7th Cir.), cert.

denied, 434 U.S. 975 (1977). Also, the district court

noted that by amending § 101(e), Congress was merely

expanding remedies for infringement and was not con-

cerned in this section with what constituted infringe-

ment. 391 F.Supp. at 1118. We find this reasoning per-

suasive. We also find guidance in § 38 of the Sound

No. 77-1968 APPENDIX

139

Recording Act of 1971. That section made the 1971

amendment to § 101(e) effective immediately upon enact-

ment while expressly barring retroactive application

only to the amended § l(f) which gave copyright

protection to recordings. Thus, while pre-February 15,

1972 recorders could not claim a copyright interest in

their recordings, there is nothing in the statute which

prohibits the criminal penalties of §§ 101(e) and 104

from being applied to tape duplicators who have

infringed upon the composer's copyright.

For the reasons stated above, the judgment of the dis-

trict court is affirmed.

AFFIRMED,

SWYGERT, Circuit Judge, dissenting. I respectfully dis-

sent. I am essentially in agreement with the views ex-

pressed by Judge Gibbons, dissenting in Jondora Music

Publishing Co. 0. Melody Recordings, Inc., 506 F.2d 392

(3d Cir. 1974), as well as with Judge Godbold’s views,

dissenting in Fume Publishing Co. v. Alabama Custom

Tape, Ine., 507 F.2d 667 (5th Cir. 1975).

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Cireuit

* Of course, §§ 101(e) and 104 require proof that the

infringement was willful and for profit. We express no

opinion on the ability of the government to prove its case in

any criminal prosecution.

\PPENDIN

140

Up.t try Jugs, "SLIe

J-dge Swygert Dissenting

United States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

September 6 19 78

——s

Before

Hon. _ THOMAS E. FAIRCHILD, CHIEF JUDGE

Hon. _ LATHAM CASTLE, SENIOR CIRCUIT JUDGE

Hon. _ LUTHER M. SWYGERT, CIRCUIT JUDGE

DAVID L. HEILMAN and E-C TAPE SERVICE, INC.,

a Wisconsin corporation,

Plaintiffs-Appellants. Appeal from the United

States District Court

No. 77-1968 vs. for the Eastern

District of Wisconsin.

GRIFFIN G. BELL, Attorney General of the No. 75-C-117

United States, his agents, servants, employegs,JOHN W. REYNOLDS, JUDGE.

attorneys, successors and all those persons

in active concert or participation with

them,

Defendants-Appellees.

This cause came on to be heard on the transcript of the record

from the United States District Court for the Eastern District of

Wisconsin, and was argued by counsel.

On consideration whereof, it is ordered and adjudged by this

court that the judgment of the said District Court in this cause

appealed from be, and the same is hereby, AFFIRMED, with costs,

in accordance with the opinion of this court filed this date.

APPENDIX

141

United States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

October 5 , 19.28

Before

Hon. THOMAS E. FAIRCHILD, Chief Judge

Hon, =, ATHAM CASTLE, Senior Circuit Judge

Hon. LUTHER _M,SWYGERT, Ci te Jud

DAVID L. HEILMAN, and E-C TAPE )

SERVICE INC., a Wisconsin Corporation,

Plaintiffs-Appellants, Appeal from the United

States District Court

No. 77-1968 Vs. for the Eastern District

GRIFFIN B. BELL, Attorney General of the of Wisconsin.

United States of America, his agents. No. 75-C-117,

servants. employees, attorneys, successors John W. Reynolds. Chief Judg

and all those persons in active concert or )

participation with them, )

Defendants-Appellees. )

On consideration of the petition for rehearing and suggestion

for rehearing in banc filed in the above-enritled cause y plaintiffs-

appellants, no judge in active service has requested a te thereon,

and a majoyity of judges on the original panel have voted to deny the

rehearing. Accordingly,

IT IS ORDERED that the aforesaid petition for rehearing be, and

the same is hereby, DENIED.

* Circuit Judge Luther M. Swygert voted to grant the petition for

rehearing.