25. LONG TERM FINANCIAL INVESTMENTS AND ARRANGEMENTS

25.1 THE PRINCIPLE

25.2. OWNING PREMISES

25.3. RESERVES

25.4. INDEMNITY FUNDS

25.1 THE PRINCIPLE

For example, in the late '80s, APRA bought a small building of commercial offices for an investment. Some might say that a society has no business being in the real estate rental industry, others would say that the Association controls an enormous amount of money at any one time and that it is prudent financial management to invest it in a manner likely to maximise its value to members.

The fact that the building was bought at the height of the real estate boom and that its value subsequently decreased considerably, together with the difficulty of obtaining commercial tenants during the recessionary period, is merely an example of the dangers of any speculative investment. No criticism is made of the fact that the investment lost money. The question is a larger one than that.

The members who were to receive distributions in the year of purchase were, in effect, deprived of a proportion of their income. When the investment is eventually realised, what arrangement will or can be made to ensure that they are compensated for that loss of income? When an investment such as this losses money over a period, those losses are met by those who are members in the year of the loss. How are or can they be compensated, when the investment eventually turns a profit? Is it really a lottery that simply benefits those who happen to be members at the time that the investment is realised?

It must be stressed that the Chief Executive and Company Secretary are determined that the Association will never again enter such investments. The reason of choosing the example of the APRA investment is merely that it is a useful, and already well-known, example of a difficulty that can potentially face all organisations that have a flux of membership.

25.2. OWNING PREMISES

As shown in Chapter 25, only APRA owns its own premises. This is not necessarily a matter of criticism. Indeed, it is the dream of many non-profit organisation to own its own premises and smote the problems of ever-escalating rents. The question is the same as that posed above. If several million is paid for a building in one year, how does that affect the distribution otherwise receivable by the members in that (and subsequent) years?

25.3. RESERVES

It makes very good corporate sense for any company, whether a collecting society or not, to hold reserves to ensure its survival in the event of unfavourable contingencies. Some of the comments made to the Inquiry suggested that it was somehow improper that collecting societies should maintain capital reserves rather than distributing as much as they could. This view is short-sighted.

It has been a criticism of CAL that it retained high levels of income in its early years. It is the finding of this Inquiry that this retention was well-advised until the board could be sure that the Society's future was certain. Now that it is so, the Society is distributing the reserves over a full sample cycle. Again, this is an example of the general criticism that future recipients of distributions receive a wind-fall at the expense of past would-have-been recipients.

25.4. INDEMNITY FUNDS

The point made above, need not be laboured. If the society provides on-going indemnities for users, maintaining an indemnity fund is a sensible precaution. It is appropriate for any self-insurer to take such precaution. That said, the societies must strive to implement mechanisms whereby the sums retained for indemnity purposes are fed back to the correct owners after a set period. The principle may be likened to that which underlies the royalty retention system used by record companies to protect themselves from paying artist royalties in respect of records that are returned.

26. THE USE OF INFORMATION TECHNOLOGY BY AUSTRALIAN COLLECTION SOCIETIES

26.1. GENERAL FINDINGS

26.2. COMMENTS

26.3. STRATEGIC PLAN

26.4. STAFFING

26.5. SECURITY AND BACKUP

26.6. CAPACITY PLANNING AND BUDGETS

26.7. TRAINING AND DOCUMENTATION

26.8. QUALITY OF SERVICE

26.9. REVIEW OF COLLABORATIVE DATA BASES AND I .T. SERVICES

Each of the five major collecting societies were visited to determine their use of Information Technology. After the initial visits and talking at some length with staff responsible for the computing within each organisation, the specialised Information Technology requirements were determined. Factual data on computer usage was decided to be best collected from a survey of Information Technology usage, designed by the review committee and answered by people from each Society.

Substantial effort went into creating a survey which would highlight the extent that technology was seen as part of core business, what budget priorities existed, what investment had been made in technological infra-structure (hardware, software, people and networking), as well as probing various aspects of "good management" practice. With respect to the latter, issues of security, organisational backup, staff training and user satisfaction were addressed.

The optimal result from the survey was to get the Societies to respond to questions on all the above issues in a simple way that would provide accurate answers. The survey was designed to "catch" issues that were missed in the initial meetings, and to cross reference each Society's use of Information Technology with the current understanding of their organisational needs.

26.1. GENERAL FINDINGS.

The most important finding from the investigations was that the Societies saw that Information Technology (IT) was critical to their operation. Most had invested in quality equipment and personnel to maintain their computing systems. All had an ongoing commitment and annual budget to support their IT operations. This differed from the frequently held misconception that IT was a peripheral tool in the societies. Rather, the truth is that each Society is a data processing operation, addressing the needs of legal contracts and producing accounting results.

The investigation examined whether each society was managing its IT areas well, whether their investment in data was secure and whether each society effectively uses IT to address the needs of its members. It was considered whether there has been a sufficient investment in IT, whether it is configured to make use of national and inter-national networked information resources, whether the commercial operation is kept secure and whether each society monitors the quality of IT service they provide. A comparative view of the results for critical IT activities is listed below.

26.2. COMMENTS

Of all societies surveyed, CAL have the strongest IT operation in place and have a clear strategy of organisational development. All Societies had invested in equipment and software appropriate to their current needs, though there was a common thread that "if we invested more in IT then we could collect more in royalties". The factor which was not clear from any of the societies, was how to determine how much to invest in IT (or how many royalties to attempt to collect) as the classic problem of "diminishing returns" becomes a limiting factor in determining the appropriate level of IT investment.

No organisation had connected to AARnet to make use of information bases (eg. Library catalogues or international music/film publishing databases) or to exchange information, though AMCOS and APRA are investigating whether a joint venture database is economically feasible. Future use of AARnet by CAL, AVCS and AMCOS is under consideration at this time. AMCOS was actively pursuing AARnet access and is probably connected to the international network by now.

Whilst the societies all worked towards collecting royalties for their members, all had developed their IT operations independently. The chance of being able to exchange data easily between societies pursuing similar goals is not ruled out, but will require planning quickly if this is a joint objective. Already most societies have substantial investment in specific databases and data formats to suit their specific needs. As investment in individual projects continues, flexibility to adapt existing systems to adopt or supply data to other societies will diminish.

The basic fact that no common index exists to uniquely identify work between societies, let alone between societies across countries, means that urgent attention is required to stop divergence and duplication of database efforts. It is recognised that this would be an enormous task.

All organisations realised that their databases were critical to their survival. To this end, the societies employed reasonable care with backup practices. All systems employed password protected user accounts, though only two (APRA and CAL) stated that they utilised password ageing to automatically expire their system's security passwords. Whilst operations remain confined "in house", existing security measures are adequate.

26.3. STRATEGIC PLAN

All organisations should have their IT staff write their own mission statement. There should then be discussions how the role that the IT staff sees matches the organisational goals that are set by the chief executive. This is worth doing regularly to ensure that IT efforts continue to be focussed on primary organisational business goals. The rate of change in the IT area is such that technological leverage to solve problems needs constant review.

The idea of developing IT systems to be able to collaboratively share data, or to have one computing centre providing IT services to several collecting Societies should be discussed in open forum. For this to be effective, each Society will require careful organisational strategic review to ensure that core business interests are protected, whilst attempting to maximise economies of scale arising from collaborative efforts.

The absence of a strategic plan from most societies implied that to date each society operated on a solitary basis, adopting new technologies upon demand of the internal users. This is sub-optimal because IT areas can easily get warped away from primary organisational goals through incremental decisions which appear reasonable in isolation.

Therefore, there exists the need for an organisational IT strategy for each society, which is reviewed annually in conjunction with the entire organisational strategy. The importance a strategic plan to ensure continued growth and a smooth development path cannot be over stated.

26.4. STAFFING

AVCS and PPCA must look seriously at appointing someone to be responsible for maintenance and development of their IT operations. There is a need for a single person to take responsibility for IT issues in each society. AVCS seem to share the responsibility across existing staff and PPCA use external contractors to good effect, however whilst data processing is critical to core business, it is prudent to ensure that at least 2 people understand the systems design, can keep the system operational in the short term and have a relationship the organisation which is long term. The risk of loosing the entire IT staff, either through resignation or misadventure, must be managed and minimised.

The recurrent education of key organisational personnel in the IT area should be budgeted for, probably on a bi-annual basis to ensure technological advances are learnt and incorporated into the organisation as appropriate.

26.5. SECURITY AND BACKUP

It is recommended that all organisations adopt an internal practice of changing user passwords on a 30 day interval. Ex-employee accounts should be immediately made secure by application of a new password. All issues of security and database access be thoroughly checked by every organisation before connecting to any external network, especially AARnet.

Although backup procedures described for all societies was thorough, off site archives of databases and on site use of fire resistant storage for backup media should be employed.

26.6. CAPACITY PLANNING AND BUDGETS

When IT is recognised to be core business, it is essential that budgeted expenditure appear before the organisational executive and that an indication of capacity expansion accompany the budget to keep the board abreast of real costs in the IT area. It is recommended that a detailed annual budget (as is done by all societies now) but with a 3-5 year projection of cost areas - depreciation - new purchases etc. be included in reports to the board. The budgets will be supported by the strategic IT plans. Board members will then be able to see current costs and future projected costs, whilst understanding the strategic directions intended.

26.7. TRAINING AND DOCUMENTATION

The importance of systems documentation, if only to leave an audit trail in case of disaster, needs more attention by all organisations. Whilst it occurs, it is generally reported as "at the direction of the User" etc. A central reference point for all organisational documentation should exist which holds a master copy of all materials. This should be the responsibility of a single person and the organisational executive needs have confidence that any aspect of the operation could be learnt from reference to the documentation stored. Much of this need not be locally written except where an application has been written specially and is probably therefore unique.

26.8. QUALITY OF SERVICE

Most responded that the organisation was small enough to cope with service issues on the spot. Whilst this is good service, it does not allow for users to sit and put on paper what they would like changed to improve quality. The issue here was not maintaining existing service levels, rather asking for suggestions of how to improve the existing service levels. It appeared that no organisations had asked their members/clients what could be improved in the service levels currently offered. This should be addressed, probably in conjunction with the next dividend distribution and could be as simple as a short 1 page, 3 - 5 question survey to ensure that members expectations are being addressed.

Feedback from members on levels of service expected is important to keep IT focussed on the goals which are not only important to internal staff, but are also important to the Society members.

26.9. REVIEW COLLABORATIVE DATABASES AND INFORMATION TECHNOLOGY SERVICES.

There is undoubtedly scope for some societies to share databases, probably share basic equipment and also share the cost of computing staff to keep systems operational. The issue of sharing what at first glance appears to be operations and data critical to each business is not too far fetched to be easily dismissed. Economies of scale in shared resources would mean that IT would cost each society less, thus allowing them to collect more material at current cost levels and in turn allow the return of greater dividends to their members. Thus, this is one way of addressing the issues of diminishing returns experienced by all societies.

The second advantage is that collaborative IT services should reduce the risk of being dependant upon a single person for the operational stability of the entire organisation. With a larger IT department servicing more than one society, the investment in a larger IT staff will allow for skills sharing between computer staff. This is not possible in the current small computer areas of individual societies.

Having databases built around a uniform system would allow each participating society to search for references on a wider scope across multiple databases as required. Access to a national collection of copyright references across all sections of the industry, must be more beneficial in tracking royalties payable to individual members than the disjoint current arrangement. Note that this is NOT a concept of a single database, but rather a collection of databases, as required, centrally administered and available to all.

The end result of this is to out-source the IT functions around data entry, storage and manipulation. This would allow each society to then concentrate on the business of royalty collection, free from the issues of technology, but remaining in control of funding and service levels provided by the IT service centre.

So the major advantages with the collaborative approach would be in reduced costs, reduced risk and ability to search on a wider scope without having the ongoing responsibilities of IT management.

The start-up costs for the above are significant. Major costs would stem from the differences inherit to each society and their established market niche. However the problems are solvable, (in fact have already been solved by each individual society) and the concept of centralised services are not new to the IT industry. The issues arising from a centrally administered resource, critical to an organisation have been successfully resolved (eg. company payroll / account out-sourcing) for some time. Assurances would be required to protect ownership of data and current investments.

The real issues are whether the cost of establishment for a centralised national database service would return sufficient benefits to be worth pursuing. An open forum discussion on this topic would be a first low cost step in a feasibility study.

27. MERGER OF SOCIETIES - ARE THERE TOO MANY?

27.1. STRUCTURAL AND FUNCTIONAL VARIANTS

27.2 MERGER OF PUBLIC PERFORMANCE RIGHTS

27.3. MERGER OF MUSIC COMPOSITION INTERESTS

27.4. CO-OPERATION NOT FUSION

27.5. OWNERSHIP OF THE SOCIETIES

27.6. COLLABORATIVE VENTURES

Users of copyright who must seek licences from the relevant copyright owners (or the societies that represent those owners) often voice their discontent as to the difficulty of dealing with disparate owners and societies, and call for a streamlining of that process.

One must ask whether the present system of maintaining several independent collecting societies is administratively efficient, in other words, whether the rights presently administered by the societies would be just as (or more) efficiently administered by combining one society with another. One must also question whether the alternatives are practicable.

It is the answer to the latter question that really determines the issue.

27.1. STRUCTURAL AND FUNCTIONAL VARIANTS

(i) represent one right, and only one class of owners relevant to that right;

(ii) represent one right, but all owners relevant to that right;

(iii) represent one category of rights, but only one class of owners relevant to those rights;

(iv) represent one category of rights, but all owners relevant to those rights;

(v) represent several categories of rights, but only one specific type of right owner; or

(vi) represent several categories of rights, and all owners relevant to those rights;

The society may also be, in effect, a joint venture of separate societies which band together for discrete, mutually advantageous purposes but maintain separate identities for all other purposes.

Perhaps the greatest determinant of society type, is 'accident of history' - social, political and technological. It is really only in countries in which copyright is newly introduced, that one has the opportunity of creating a collective administration based on rational principles of efficiency.

As was shown in Chapter 3 of this Report, the Australian societies have developed in a piecemeal fashion over many years, in response to different needs and as the initiative of various pressure groups. As a result, it is no wonder that they reflect a wide range of structures, functions and interests. For example, using the categories provided above, they may be described as follows:

AMCOS: Type (iii)

APRA: Type (ii)

AVCS: Type (ii)

CAL: Type (ii)

PPCA: now Type (ii) but was, until recently, Type (iii)

Although the above classification of the local societies may be subject to some debate, it is clear that none of them are Types (iv), (v) or (vi). It is the latter groups which make up the "super-societies" which exist in some overseas countries. It is also these latter groups that copyright users would prefer (particularly those in the newly emerging multi-media industry) as they are more likely to be able to offer a "one-stop shop" for licensing.

Accordingly, the existing societies were examined as to the possibility of efficient and compatible merger.

27.2. MERGER OF PUBLIC PERFORMANCE RIGHTS

One possibility for merger would be APRA with PPCA, as both license public performance rights. (This would create a type (iv) society.)

Neither is interested in such fusion and each represents a group of owners with separate legal and commercial interests. Certainly the experience of those European societies which collect both rights, is not a particularly happy one. (In Europe, there would appear to be a belief amongst the sound recording copyright owners that the writer/publisher interests dominate the collecting organisations and tend to treat them as "second class citizens" and that the publisher/composer interests are in essential conflict of interest with those of the record companies.)

There is no real likelihood of fusion between APRA and PPCA. The likelihood of record companies wanting to be a part of an organisation with publishers and composers on the board, is at best, remote. On the other hand, the publishers and composers would fear that their interests would be dominated by those of the record companies. Why would the membership of APRA wish to merge at this stage given the very sophisticated operation already working on their behalf. Merger happens between societies when members see mutual advantage. It is not driven by user convenience.

27.3. MERGER OF MUSIC COMPOSITION INTERESTS

The more obvious possibility for merger is AMCOS and APRA because they essentially represent the same sectors of the industry. (This would create a type (v) society.) Certainly, in some other countries, the mechanical right is also administered by the same organisation that administers the performing right.

It would be technically feasible for APRA to administer the mechanical right in musical works, but it would require:

(a) a policy decision on the societies' members in favour of such a change (which is, at the moment unlikely);

(b) significant changes to computer systems in order to administer the right in accordance with industry standards.

The factors in favour of such a move are probably a saving in overheads such as office accommodation and computer hardware, together with a marginal saving in staff costs. An intangible factor in favour of the move is probably a reduced level of public confusion about the role of collecting societies.

One factor working against such a proposal is undoubtedly the short term cost of integrating mechanical right licensing and distribution systems onto the APRA platform.

As discussed elsewhere in this Report, AMCOS and APRA are increasingly sharing information and resources but it is unlikely that a complete merger would bring significant economies to the operations of either organisation. In brief, given that:

• the societies cater to different user groups;

• the rights administered are completely different;

• those rights are owned by different parties; and

• mechanical right royalties and performing right royalties are licensed and accounted for in different ways.

None of these factors however, would prevent merger if the members of both societies so wanted. But is it desirable, anyway? Fusion would only result in a larger administration, and a more powerful, monopolistic, control of rights. Certainly, the European societies which administer both the reproduction and performing right have become large bureaucracies and are no longer models of efficiency.

27.4. CO-OPERATION NOT FUSION

There is a reasonable level of co-operation between the societies. As noted elsewhere, APRA provides log functions for PPCA, AVCS' distribution to music copyright owners is effected through AMCOS and PPCA, and AVCS' and AMCOS' sampling in educational institutions is conducted largely by CAL. (It is also foreshadowed that VISCOPY would contract CAL's services for this purpose.)

There is no inclination within the societies to merge, as opposed to co-operate. Given that each collecting society represents different copyright owner groups and different rights this is hardly surprising. It is valuable that each group of rights owners have an organisation that represents its particular interests.

As to the members interests, it is the experience of the multi-right European societies, that there would be the possibility of subjugation of one group of rights owners over a smaller group, conflict between members as to the size of distributions made to each class of membership and the possibility of cross-subsidies.

As to the public interest, this is more likely to be served if such conglomerations are avoided. Such "super-societies" would be likely to have bargaining power which is unduly in excess of the sum of their parts and this would have important Trade Practices disadvantages.

That said, as discussed in the previous chapter, there is considerable scope for increased Information Technology co-operation. Given the already foreseeable demands of the multi-media industry, this co-operation may not only be efficient, it may well become essential.

27.5. OWNERSHIP OF THE SOCIETIES

The other feature that must be remembered when gauging the practicability of society merger is that the societies are independent legal entities controlled by their members. Unless the Government were to undertake a most radical upheaval of the present law, there is no way that the societies can be forced to merge - or even co-operate. They do co-operate, when and if they perceive it to be in the interest of their members. That said, societies exist for the efficient administration of rights on behalf of the rights owners; they do not exist, as a primary purpose, to promote the interests of the users of those rights. That, is a desirable but merely secondary effect.

27.6. COLLABORATIVE VENTURES

Although society mergers are unlikely, it is certainly desirable that societies give thought to the ways that greater inter-society co-operation might improve the complexity and expense of the present licensing system. These possibilities would certainly be increased if the societies were to co-operate in the development of collaborative Information Technology services to achieve a collaborative data base. (See section 26.9 of this Report.)

Once there is a collaborative data base, it is a very small step to collaborative licensing. Both of these things would achieve real efficiencies for users of copyright although there would undoubtedly be substantial costs in establishing such a venture - a cost that presently would have to be met by the rights owners, not the rights users. The owners will have to be persuaded that the long term efficiencies would make such a changes cost-efficient. That is a matter for a separate study.

28. ROLE OF SOCIETIES IN PROMOTING LAW REFORM AND FORMULATION OF GOVERNMENT POLICY

28.1. AMCOS

28.2. APRA

28.3. AVCS

28.4. CAL

28.5. PPCA

All of the societies, except the PPCA, recognise that they have an important role in representing the interests of their members and potential members, in promoting debate on law reform issues and making representations to Government and related authorities.

28.1. AMCOS

AMCOS has played an important role in lobbying for retention of the import provisions of the Copyright Act; in lobbying and designing legislation to implement a blank tape levy to compensate copyright owners for lost revenue from home taping; and working for legislation to control CD Rental. It has also been working with the Department of Foreign Affairs and Trade to implement stricter copyright regimes throughout the region promote respect for copyright.

Recent submissions made on behalf of music publishers include those to the Copyright Convergence Group; to a request by the Attorney-General's Department on the question of the US government's proposal to postpone the meetings regarding the proposed Protocol to the Berne Convention and the Possible Instrument for Performers; responses to a submission made by the National Council of Libraries and Information Services to amend the Copyright Act; and to proposals put by the Australian Tape Manufacturer's Association.

28.2. APRA

As befits its responsibility as the largest collecting society and the representative of the largest number of rights owners, the Association plays an active role in the determination of government policy in areas relevant to the interests of its members. It does this by way of submissions to relevant government departments and inquiries, and by maintaining an on-going dialogue with government officers.

For example, it has made submissions to government, or to relevant inquiries, on the subjects of:

• the Blank Tape Royalty

• parallel importation rights

• moral rights

• rental rights

• convergence with communications technologies

28.3. AVCS

The Society has made submissions on the following issues in the current financial year:

• To the Attorney-General's Department on copying of audio-visual works in libraries, in response to the submission of the Australian Council of Libraries and Information Services (ACLIS);

• To the Minister for Justice and relevant members of Federal Parliament in all political parties on the need to urgently pass the Copyright Amendment (Re-enactment) Bill;

• To the Minister for Justice on the copying of audio-visual works by government departments and more generally for the services of the Crown; and

• To the Copyright Convergence Group on the implications of new technologies for copyright industries.

AVCS hosted a public meeting in May to discuss the need for a blank tape levy to compensate owners of copyright in audio-visual works for domestic copying.

28.4. CAL

CAL's role is not limited to licensing, collecting and distributing fees, but extends to promoting copyright law reform in areas relevant to its members.

One of the reasons for CAL's establishment in 1974 was to provide a united voice for authors and publishers in protecting their rights. CAL perceives an important element of its role to represent its members in consultations with government and in pressing for amendments to the Copyright Act that promote its members' interests. Examples are the amendments to the Act in 1989 introducing Part VB. More recently, CAL has been involved in negotiations with the Government in relation to the amendment of s.183 of the Copyright Act to provide the option of a sample scheme for government photocopying, submissions to the Copyright Convergence Group, and submissions in response to those made by ACLIS (Australian Council of Libraries and Information Services) to amend the Copyright Act.

28.5. PPCA

The Chief Executive of PPCA is aware of the range of issues relevant to the Company's licensing base and the welfare of the relevant rights owners. The principal issues of focus for the Company are: the lifting of the 1% ceiling on the fees that PPCA can charge; the impact of new technologies; and anomalies in the Copyright Act (including issues relating to protected-non protected recordings, the playing of radios in public places and the synchronisation of recordings in film).

29. EDUCATIONAL ACTIVITIES

29.1. EDUCATIONAL ACTIVITIES UNDERTAKEN AND PLANNED

29.1.1. AMCOS

29.1.2. APRA

29.1.3. AVCS

29.1.4. CAL

29.1.5. PPCA

29.2. CONCLUSION

29.1. EDUCATIONAL ACTIVITIES UNDERTAKEN AND PLANNED

Since their earliest days, collecting societies have always played an educational role. Sometimes this role is merely within the industry sector in which their relevant rights are created, and sometimes this commitment is made to a wider sector. In general, such educational activities are to be welcomed for they benefit not only members, but also all owners and users of the relevant rights and indeed, the public in general.

Each of the societies, with the exception of AVCS and PPCA have embraced the need to provide educational programs. Certainly those provided by AMCOS, APRA and CAL are extensive, not only in quantum but also in geographical coverage. AVCS and PPCA are both young societies and have had more pressing establishment priorities, but both now should be in a position to tackle this role to the benefit of the owners and the users of their relevant rights.

29.1.1. AMCOS

AMCOS is viewed by the public as the first point of inquiry for issues involving the reproduction of music. Hundreds of telephone and written inquiries are dealt with each week.

The external educational activities of the Society include:

(a) Public speaking and liaison

• Speaking at music industry seminars, colleges of advanced education, universities and conservatoria, media colleges, film schools and providing workshops at national music festivals.

• The production music department at AMCOS visits clients such as television stations, radio stations and recording facilities on a regular basis. The production music department has also been directly involved in speaking at various music industry functions and organising industry-specific seminars. For instance, APRA and AMCOS were involved in holding a joint seminar at the APRA offices in August 1991 where more than 40 television stations from around Australia attended.

• The print music consultant also conducts a national training program for schools and other music users. This usually coincides with attendance at AGB McNair training sessions for sample schools. This year, he is also a guest speaker at seminars to be held at various state capitals conducted by the Australian Copyright Council on music and copyright and copyright for choirs, orchestras and ensembles.

• Numerous conference papers are presented by society staff and articles on copyright and AMCOS are written for newsletters of industry publications.

• AMCOS has organised Print Music Trade Fairs for educational users (Brisbane 1989, Sydney 1990 and Perth 1991).

(b) Educational literature:

The society publishes an extensive number of information brochures and packages which are distributed to the public free of charge.

• In the audio and/or video reproductions area, publications include: Mechanical Copyright Application & Guide; Import Application & Guide; Special Event Video Licence & Guide; Information for Churches; Information for Dance Schools; Guide to Music Reproduction & the concept of copyright.

• The production music department has produced literature regarding copyright obligations and reporting procedures in response to the needs of clients and potential users.

• The Print Committee of AMCOS has prepared copyright guidelines on the use of sheet music for a wide range of music users. These guidelines are similar to the "Code of Fair Practice" published by the UK Music Publishers' Association in that they seek to give a practical interpretation to fair dealing principles in photocopying sheet music. These, together with the booklet "Music Copyright for Schools", which explains the AMCOS schools agreements and other music copyright issues for schools, are distributed nationally free of charge. AMCOS also deals with hundreds of general telephone inquires about print music copyright each week. They undertake copyright research for the general public, usually free of charge, and refer people requiring permission to the relevant publisher.

• There is also print & reprographic right information relating to: Amateur Musical Societies; Eisteddfods; Music Students; Private Music Teachers; Sheet Music for Choirs, Churches and community groups; Sheet Music for Orchestras, bands etc; Reprographic Licensing Agency List; Copying for liturgy under the educational licences.

These guidelines are regularly updated and guidelines on other topics are being prepared.

29.1.2. APRA

The Association runs seminars and workshops for its members regularly in all state capitals and throughout New Zealand. The Association also publishes a newsletter to its members and helps with other educational functions run by organisations such as the Australian Guild of Screen Composers. These activities are in addition to the normal day-to-day activities of the membership department. (It was noted in that regard that the department currently handles between 30 and 50 telephone inquiries per day from members or applicants for membership.)

The Association provides no formal educational activities for non-members but has expended a total of $129,000 over the past 5 years in running seminars and workshops for its members.

29.1.3. AVCS

In the very early phase of its operations the Society hosted a meeting in Sydney and one in Melbourne and spoke at a small number of meetings organised by industry associations. The members of some industry bodies were contacted directly by mail and articles describing the Society's operations were prepared for various newsletters. The educational activities were on a very small scale.

The Society then narrowed its focus and concentrated on identifying potential claimants and contacting them directly. Priority was given to explaining the scheme to beneficiaries presently entitled to the funds held on trust - over general education programs to the industry at large.

The Society does, however, accept occasional invitations to speak at seminars and workshops, notably the series of seminars conducted by the Australian Copyright Council.

As the Society has had to focus its attention upon the establishment of proper facilities for the operation of the broadcast copying scheme in the earlier years, it is understandable that it has not had the time or staff resources to provide a comprehensive program of educational seminars or events for its members and non-members. This is an area of service that the society must now look at developing.

29.1.4. CAL

CAL both undertakes educational activities itself, and funds other bodies to undertake such projects. It requires the bodies to whom it provides funding to undertake projects of benefit to authors and publishers generally, not only to CAL's current membership because it expressly recognises that as a young society, it's membership is not yet completely representative of its constituency.

CAL has provided funding for a large number of educational activities in the last five years. Most of these have been undertaken by bodies such as the Australian Society of Authors, the Australian Book Publishers Association and the Australian Copyright Council. These organisations make an annual report to CAL on the use of their funds. CAL has strict criteria for these funding purposes.

It is useful to note that one of the Society's recent projects was the Sampling Seminars for Members. These seminars were held as a consequence of members' misunderstanding of CAL's sampling procedures and explained to members why the sample was structured in its current form. Seminars were held in Sydney, Melbourne and Perth. Further seminars on the topic will be held in Brisbane and Sydney later in the year. (The Sydney seminar in August will introduce members to the new licence for corporations.) The target audiences for the seminars are CAL's members and other interested persons. No fee is charged for admittance.

CAL has also provided funding to establish the Centre for Copyright Studies at the Australian National University. One of the Centre's functions is to invite a visiting fellow to undertake lectures and media interviews in an effort to raise the awareness of CAL's members and others of issues in copyright protection.

CAL receives many requests for speakers from groups such as libraries, fellowship of writers, Rotary, church groups, (etc). CAL also participates in the seminars conducted by the Australian Copyright Council.

29.1.5. PPCA

PPCA has no written educational policy. To date, its educational services have been limited to internal staff training, sending educational material on copyright law to licensees and potential licensees, and the core work of responding to numerous telephone enquiries about public performance rights and the role of PPCA. The Executive Director also speaks at a number of conferences and seminars. To date, the Company has not arranged seminars and workshops of its own. It is intended to remedy this later in 1994. (Subjects planned, include: registration and distribution; copyright issues in the face of new technologies; the Copyright Convergence Report; the Moral Rights Paper.) This initiative is welcome.

The PPCA provides a questions and answers pamphlet on the use of sound recordings and another on the use of music videos. These are intended to answer the questions most commonly asked by the public.

The Company's staff take a huge number of telephone enquiries every year, mainly from the recipients of a letter from PPCA informing them of licensing needs. The Company is proud of the educational value of this telephone advice but it may reduce the enormous number of calls (and consequent staff time) if the Company were to initiate a regular external education program targeted at the greatest body of callers and the most commonly arising issues.

29.2. CONCLUSION

All of the societies would benefit from a formal review of their educational programs. APRA, CAL and AMCOS have certainly made considerable efforts but it appears that these efforts are reactive, rather than part of an educational strategic plan.

Such a review would consider the educational needs, not only of their members, but those of related sectors. Such programs assist members directly and also assist non-members to better understand the function and benefits of collecting societies and are an important means of reducing the suspicion about collecting societies that often stems from ignorance or misinformation. Moreover they have the effect of increasing the community knowledge of copyright related issues - an aim that is integral to the interests of all copyright owners and users.

30. FUNDING OF CULTURAL OR BENEVOLENT PURPOSES

30.1. AMCOS

30.2. APRA

30.3. AVCS

30.4. CAL

30.5. PPCA

30.6. COMMENT

30.7. CULTURAL AND SOCIAL SUPPORT ROLE FOR COLLECTING SOCIETIES

30.8. CULTURAL AND CHARITABLE PURPOSES FUND

30.9. FUNDING THE CCPF

It was important to learn whether the societies applied funds to purposes other than the general headings of Administration, Education and Distribution, such as general cultural purposes, awards, prizes, benevolent purposes and the like.

All of the societies were asked whether they intended to develop a greater cultural role. They were also asked whether there were there any government initiatives which would assist the society in performing this more expansive role.

Government cultural agencies such as the Australia Council were generally perceived as being irrelevant to the interests of the great majority of PPCA, AMCOS and APRA members. Their major source of funds is the popular music industry (including film music) - a sector of Australian culture in which the Australia Council has never played more than a token role.

Apart from that consideration, the music publishers on the board of both APRA and AMCOS see these societies as having an essentially commercial nature. AMCOS has never played a cultural support role (other than that flowing directly from its primary functions) and APRA is apparently cutting back on its contributions. This is hardly surprising as, over the last few years, the income of the music publishers has dropped and local managements have been under considerable pressure to achieve maximum collections. As controllers of these societies, they have little or no interest in supporting wider cultural purposes.

There is little communication between collecting societies and state or Federal funding bodies and there have been no discussions to promote a greater understanding of one another's role or to promote within the societies, a recognition of any more expansive cultural responsibility.

30.1. AMCOS

The Board assesses each proposal but generally considers this to be the role of the members rather than the Society. The Society has no written policy concerning the allocation of funds for cultural purposes.

That said, it has donated money to a limited number of purposes that may be described (somewhat broadly) as cultural purposes: Export Music Australia, Music New Zealand, Music New Zealand Forum, RIANZ Silver Scroll Award. These purposes would be described more accurately, as promotional rather than cultural.

30.2. APRA

APRA provides a considerable amount of money to cultural purposes. A breakdown of the Association's expenditure on cultural grants etc. from the 1.25% deduction referred to earlier, for the years 1992/3 and 1993/4 is provided in the materials accompanying this Report.

It is interesting that the WIPO Report notes that the "majority of (performing rights) organisations make use of the possibility of deducting not more than 10% from all royalties collected for cultural and social purposes. In certain cases, the percentage of the deduction is only 2, 3 or 5% but it is more frequently 10%."

The Society has no written policy concerning the allocation of funds for cultural purposes. The policy is a general one, simply, that the Board must consider that the purpose promotes the use or recognition of the members' works. It should be added that in recent years the Board has moved away from projects that have tended to benefit individual members (for example, assisting with commissions) in favour of projects that have a wider benefit for the membership at large. The Board is also considering giving a greater emphasis to the promotion of Australasian music abroad rather than just in Australia and New Zealand.

30.3. AVCS

The Regulations to the Copyright Act and the Attorney-General's Guidelines provide that gifts for cultural or benevolent purposes may not exceed a certain percentage of royalties attributable to an accounting period as stated in the Articles of Association (which are, in turn, approved by the Attorney-General).

Article 13 of the Articles of Association of the Society provides that such a sum as the Board considers proper may be set aside for special purposes (including cultural or charitable purposes) as the directors think conducive to furthering the interests of the Society but is not to exceed one per cent of receipts under Part VA and Part VB for that accounting period.

The Society does not see a significant role for itself in promoting culture through direct grant assistance or other general support. It does not regard itself as being well placed to select recipients for direct grants, nor does it consider it appropriate that it should seek to use funds held in trust for individual copyright owners for such purposes.

$9,500 has been allocated by the Society from 1992 and 1993 distribution periods as follows:

(a) 1992: Encore concert: $3,750

(b) 1993: Encore concert: $3,750

Australian Copyright Council: $2,000

The donation to the Australian Copyright Council was a contribution with several other organisations towards the cost of hosting a delegation from the National Copyright Administration of China. Given the Copyright Council's initiating role in founding the society, this would be churlish to criticise, but it illustrates the need for the development of appropriate policy.

The society has no policy by which benevolent or cultural allocations are to be made.

To date, the Society has not considered that the interests of the Society and its members and potential members can be furthered by allocating any substantial funds to cultural or charitable purposes. Given that the Society has been in existence for a relatively short period of time, it was undoubtedly important that the film and television industry recognise that the Society is channelling all of its resources into maximising the remuneration received for the use of audio-visual works by educational institutions while minimising deductions from the amounts collected to enable the largest possible sum to be distributed to the relevant copyright owners.

That said, the IBNR fund and the unidentified owners' trust fund is a very rich source of funds to which no one owner (except the actual owner) has real claim. It is to these funds that the society should look for the funding of its benevolent and cultural purposes. Rather than sending them back to a class of owners as a windfall, they would be an important source of funding for organisations that service those classes of owners (such as the Australian Copyright Council, the Arts Law Centre of Australia to name but two).

30.4. CAL

In the years 1990-1993, CAL allocated 5% of its total distribution for education and cultural purposes. In 1994, this "Distribution B" scheme is discontinued. An amount up to 1% of revenue will be allocated from operations expenditure for cultural purposes.

CAL funds the Centre for Copyright Studies at the Australian National University and has recently established a Copyright Advancement Fund, to be administered by the National Book Council.

CAL is the only Society with a carefully articulated cultural policy. It is an excellent document which provides a framework by which such funding decisions can be made.

30.5. PPCA

PPCA says that it provides no money for cultural purposes and has no publicly available written policy in this regard. That said, it does pay 12.5% of the distribution to the PPCA Trust.

The Trust Deed provides that performers, either individually or as a class may apply for funds for the following purposes:

(i) performance at concerts or for charitable institutions such as hospitals or homes for the aged; or

(ii) scholarships for the promotion and encouragement of musical and theatrical education; or

(iii) the promotion and encouragement of the performing arts to the general public; or

(iv) the aid or assistance of any beneficiary who, in the opinion of the trustees is unable to adequately maintain himself by his own professional exertions and other income.

Under the Trust deed, the PPCA nominates two members and the Musicians' Union of Australia and the Media Entertainment and Arts Alliance nominate one each. There appear to be no written policies in relation to the application of the Fund (except that the trust deed requires that two thirds of the fund be applied to musicians and one third to performers). It merely considers applications on an individual basis.

Since 1975, the Trust has distributed approximately $800,000 to the unions for the benefit of their members ($416,396 in the last five years).

30.6. COMMENT

Involvement of the societies in cultural and social support relevant to their rights owners, does not prevent individual members from also participating in such work. Rather it allows the individual members to participate in a structured, well articulated and focussed way.

Only PPCA and AMCOS do not acknowledge that they have any cultural role in the community other than their collection and distribution function for rights owners. This is perhaps a reflection of their structure in that both organisations are treated by their respective boards as merely a commercial extension of their members' operations. These societies take the attitude that decisions as to cultural and charitable spending are a matter for their individual corporate members.

In spite of its disavowal of such responsibilities, PPCA does have the PPCA Trust which makes sums available for cultural, industry support and charitable purposes. It is difficult to reconcile the Company's denial of any responsibility in this area with the fact that they pay a greater share of their net distributions to such purposes than any other collecting body. Given this conflict, it is easy to see how the cynics have described the payments by PPCA to the Trust as "paying off the unions".

The Inquiry has made no detailed examination of the operation of the Trust. What is apparent however, is that the system of written policy formulation, publication of grant procedures, written selection criteria, formal acquittal of grant procedures and formal reporting of awards of grant to the membership, are inadequate or non-existent and need to be addressed if the Trust is to maximise the benefit of the Fund.

The Company has taken the view, to date, that how the money in the Trust is allocated, is a matter for the Unions representing the beneficiaries. This should not be so. The PPCA has a fiduciary obligation to ensure the proper management and application of the fund and accordingly must accept that it must play an active role in implementing the matters referred to in the above paragraph.

Such funds have a wonderful potential to benefit the relevant community sector but if they are not to be viewed cynically, they must strive for and achieve, a faultless degree of transparency. High fiduciary standards are demanded of all trustees but where it is part of collective administration, a high degree of public reporting is to be expected. Urgent attention must be given to bringing the administration of the Trust up to the highest standards of public accountability.

30.7. CULTURAL AND SOCIAL SUPPORT ROLE FOR COLLECTING SOCIETIES

Collecting societies have an important representative and leadership role in their industry. As such they have a potentially important function in the development and maintenance of the culture of the country.

Where societies recognise this role, it is important that such allocations be according to a very carefully considered strategy. However, although all of the societies have in fact given money to cultural purposes, none do so in consultation with the Federal and State Government funding mechanisms. This failure alone, illustrates the piecemeal manner in which such funding is allocated, applied, and accounted for.

It is not suggested that government funding authorities should have any power over the way that collecting societies distribute such funds but it seems an extraordinary inefficiency in the application of such limited funds that there are no channels of communication between Government agencies and the societies, so that the cultural and social support expenditure of each party may be applied with maximum effectiveness. (The exception to this is AVCS which seems to have regular communication with the AFC, but as it does not have a policy or mechanism for cultural and social support, the relationship has had little or no impact in this area.)

APRA, AVCS and CAL have considerable undistributed funds (or funds that are not yet able to be distributed but have not yet been declared to be undistributable) and although they have in place plans to reduce these amounts (as discussed elsewhere in this Report), it is recommended that a portion of these funds should be allocated to cultural and social support purposes relevant to the rights owners represented by each society.

As the old saying goes: "two wrongs do not make a right". It is regrettable if the money cannot be paid to the right individual but it does not ameliorate the situation by paying the money to the wrong one. Where the appropriate payee cannot be identified or found, it is recommended that a proportion of such moneys be used for the general interest of the relevant right group rather than putting such sums back into the general distribution pot as a windfall distribution to other owners.

30.8. CULTURAL AND CHARITABLE PURPOSES FUND

It is suggested that given their important representative role in their respective cultural sectors, all societies should be encouraged to establish a Cultural And Charitable Purposes Fund ("CCPF).

This fund would be used, not to fund awards nights or litigation expenses) but to provide support to the general sector of the industry which is represented by the relevant rights owners. For example, it could support writers/composers studios, travel grants, educational programs, scholarships, benevolent schemes supporting arts practitioners who suffer calamity, and so on.

The members of the arts and entertainment industry have a great tradition for generosity and the establishment of CCPFs would better ensure that the assistance was directed to those within the industry who would truly benefit from assistance. It would be a notable example of industry bodies taking care of their own.

30.9. FUNDING THE CCPF

It is suggested that all societies be encouraged to allocate a specific proportion of gross distributions to cultural purposes.

Further study needs to be done as to the exact percentages that would be appropriate but it is suggested that contribution be divided into two categories:

(i) a percentage of the distribution funds, and

(ii) a percentage of undistributable funds.

As to (i), each society should allocate between one and two percent of its distribution fund to its CCPF. (This sum is clearly feasible as both APRA and CAL already achieve this.)

As to (ii), any society with undistributable funds should be required to allocate fifty percent of such funds to its CCPF prior to returning the residue to the distribution pool. The latter percentage is high, but this merely reflects the fact that the principal reason that such money is not being paid through to the relevant rights owners is that those persons cannot be found or identified. Thus the fifty percent allocation is equitable because:

(a) The persons who are most entitled to the undistributable moneys are more likely to be non-members than members.

(b) Such a scheme will give all members of the industry sector access to support, and yet

(c) would still permit members of the society to gain a windfall benefit in addition to the income that their rights have actually earned.

This system will further encourage societies to identify and locate owners and will have the effect of answering the criticism that societies with large undistributed funds are acting from self-interest (and the interests of their largest and most powerful members) in maintaining such funds.

30.10 RECOMMENDATIONS

• that all societies be encouraged to allocate a specific proportion of gross distributions and the undistributable funds, to cultural purposes.

• that Declared Societies be required to allocate a specific proportion of gross distributions and the undistributable funds, to cultural purposes.

31. REVIEW OF THE COPYRIGHT ACT

AS IT AFFECTS COLLECTING SOCIETY

EFFICIENCY OR EQUITY

31.1. ADDITIONAL STATUTORY LICENCES

31.1.1. Multi-Media Statutory Licence

31.1.2. Educational Copying Of Artistic Works

3.2. JURISDICTION OF THE COPYRIGHT TRIBUNAL

31.3. AMENDMENT TO SECTION 152 (8)

31.4. MATTERS RECOMMENDED FOR FURTHER STUDY

31.4.1. Extended Audio Visual Licence

31.4.2. Audio Home Taping Statutory Licence

31.4.3. Amendments In Relation To The Part VA And Part Vb Schemes

31.4.4. Deeming Of Representation

31.4.5. Amendments In Relation To Literary Works

31.4.6. Amendments In Relation To Mechanical Licence Provisions

31.5. RECOMMENDATIONS

31.1. ADDITIONAL STATUTORY LICENCES

Consideration was given to the question of whether the introduction of any additional statutory licences would assist a society (and be in the interests of licensees and/or general public).

Statutory licences are in direct conflict with the system of exclusive rights dictated by the Berne Convention. There is little or no doubt that Government has the right to introduce compulsory licensing for the purpose of restricting possible abuses of monopoly power but "this would have to be the genuine purpose behind the measure, and not simply the pretext for abridging rights which states are obliged to protect under the Convention" (Ricketson, The Berne Convention for the Protection of Literary and Artistic Works, Kluwer, 1987, para 9.73).

It is recommended that the Government should not consider the imposition of statutory licences where commercial voluntary licences, collectively administered, are effective.

For example, in APRA's case, there is no need for the creation of a statutory public performance licence because there would be effectively no difference between the voluntary licence regime under which APRA presently operates. If there were any evidence of widespread inefficiency or corruption in the collective administration of the rights, or a demonstrable failure to grant licences to users who were prepared to pay equitable remuneration for their uses, there may be real reason to introduce a statutory right.

The introduction of statutory licences is a last resort and their introduction is only necessary where the public interest demands it. There is no evidence of such public interest.

Moreover, before any statutory licences are introduced, experience shows that statutory licences drafted without appropriate industry consultation are often unworkable and voluntary licences are required to replace them. For example, the statutory mechanical reproduction right administered by AMCOS has been largely superseded by the negotiation of an industry agreement (the ARIA, AMPAL/AMCOS Agreement). The CAL statutory licence has been largely by-passed by negotiated agreements between the collecting society and the representatives of the relevant users (such as the AVCC).

31.1.1. Multi-Media Statutory Licence

It is not recommended that a statutory right be introduced to grant access to copyright material for the purpose of multi-media exploitations. The producers of multi-media productions argue that it is too expensive and administratively burdensome having to obtain individual licences for each piece of copyright material that they want to use in their own work. That may be so, but it must be observed that film makers have managed to do it for years. In any event, it is too early in the development of the technology to do away with two hundred years of development of the copyright regime simply because the pioneers of multi-media are having difficulty working out a commercially viable means of structuring their new industry.

The other argument in favour of a statutory licence for multi-media is based on the philosophical stance that there is a right of access to and use of information. Such a position is in direct conflict with traditional copyright principles by which persons who put information into a material form, enjoy rights of control over the uses to which that form may be put. There would have to be a very detailed and cogent argument presented before such a 'right of access to and use of information' were accorded and that case has certainly not yet been made.

Moreover, there is no evidence that creating a statutory right is appropriate or necessary at this stage of the industry's development. If, one day, there is sufficient need, it is likely that either

• one of the existing societies (such as AVCS) will take responsibility for multi-media licensing, or

• the existing societies will set up a joint-venture society to administer the rights on behalf of the relevant rights owners.

As the commercial need increases, existing societies will negotiate a commercial resolution by which their members' rights can benefit from that new potential for income.

If the above recommendation against the introduction of a non-voluntary licence for multi-media product is ignored, it is most strongly recommended that, if such a licence was to be introduced, it should only apply to the reproduction of underlying works that have already been licensed for incorporation into film. The non-voluntary licence should not extend to underlying works which have not been previously licensed for inclusion in film. Where there has been no such prior licence, the permission of the rights-holder in the underlying works should still be obtained for inclusion in the multi-media product. In other words, the rights owner should maintain the absolute and exclusive right to determine when, how, by whom, and for how much, the first synchronisation/multi-media exploitation will occur.

31.1.2. Educational Copying Of Artistic Works

It is recommended that section 135 ZM be amended so as to permit CAL (or make it clear that it in fact has the right) to collect income in respect of artistic works at the same time as they are surveying educational institutions in respect of their use of literary works. There is no cogent reason why the owners of copyright in artistic works should be treated any differently from the owners of copyright in the literary work.

It is further recommended that the Copyright Act be amended so as to provide educational institutions with a statutory right to reproduce artistic works (other than those already covered by "fair dealing") subject to the payment of equitable remuneration to the copyright owner. (See "Visual Arts Collecting Society").

31.2. JURISDICTION OF THE COPYRIGHT TRIBUNAL

This Report recommends the expansion of the jurisdiction of the Copyright Tribunal. It is discussed at length in the following Chapter.

31.3. AMENDMENT TO SECTION 152 (8)

As discussed earlier in this Report, there is no good reason to maintain a 1% ceiling in section 152 (8). The owners of the rights in sound recordings should be able to negotiate with the broadcasters and in the event of inability to agree as to a rate, approach the Copyright Tribunal. This is a perfect example of where two commercial groups of similar power should be allowed to apply the conditioning forces of the market, without the intervention of Government through the imposition of this false ceiling.

31.4. MATTERS RECOMMENDED FOR FURTHER STUDY

Each of the societies was asked what amendments they perceived would be assist them to more effectively and efficiently administer their relevant rights. These are set out below. It is noted that Government is already aware of most of these and indeed is presently working on several of them.

The Inquiry was instructed to desist from making recommendations in respect of the following issues. However, they are presented because they are issues perceived by the Societies as being of importance, and because they provide a useful checklist for potential reform and development. They are matters that must be considered in the context of any future comprehensive review of the Copyright Act and in light of the other copyright-related studies presently before Government.

31.4.1. Extended Audio Visual Licence

The video cassette recorder has meant that audio-visual works can be easily and inexpensively copied without the authority of copyright owners.

There is little doubt that the use of video recorders for time shifting does not easily permit of voluntary licensing. Not only are there hundreds of thousands of such video recorder users, the number of copyright owners in any audio-visual product and the complexity of the division of rights in these products, is vast. It is certainly not in the public interest for domestic VCR users to be in breach of the Copyright Act every time they use their equipment. At the moment the statutory licence administered by AVCS permits only educational taping.

Similarly, it is anomalous that CAL should have recently negotiated a licence scheme with Government as to photocopying while similar audio-visual copying remains unlicensed and unlawful. This too should be the subject of further inquiry. AVCS argues that this points to a need for an additional compulsory licence scheme if copyright owners are to be compensated for the use of their work. It may be so, but it would be advisable for a feasibility study to first carried out to see if AVCS could obtain the necessary licensing rights by way of a joint venture with the other societies (AMCOS, APRA and PPCA) to perform the function, thus avoiding the need for a statutory licence.

31.4.2. Audio Home Taping Statutory Licence

The statutory licence that needs to be introduced forthwith is the home audio taping licence. This has been a subject of legislation and High Court litigation but the path is now reasonably clear. This is not the forum for further debate of the need for the blank tape levy/tax. There has been extensive industry consultation and debate, the collecting society is already formed (as a Declared Society) and the implementary legislation should be reintroduced without delay.

31.4.3. Amendments In Relation To The Part VA And Part Vb Schemes

Four years of experience in administering the Scheme indicates to CAL, various amendments which would promote a more effective administration of the scheme:

(i) Repeal of Record-Keeping System

The Copyright Act provides that an educational institution may elect to participate in the scheme on the basis of either the record-keeping system or the sampling system. Currently there are twenty-six educational institutions which participate in the record-keeping system, and a change to record-keeping is occasionally threatened in negotiations with educational authorities which operate under sampling regimes.

Given the onerous nature of full record keeping requirements, record-keeping can inherently lead to under reporting of broadcast copying by an educational institution. For this reason, it is not in the best interests of the owners of the relevant copyright for educational institutions to be able to elect to adopt this system.

The record-keeping system was apparently included in the Part VA Scheme to accommodate the anticipated small number of institutions that copy only infrequently. A sampling scheme can also accommodate these institutions. The sampling system as recently introduced into the university sector places universities into groups depending upon whether they are small, medium or large copiers of broadcast material. This system could be made even more sophisticated with the introduction of zero-tariff licences for very infrequent copiers. Such a system would obviate the need for institutions to forward nil returns each quarter. The Society is willing to offer zero-tariff licences, with appropriate safeguards, should the record-keeping system be repealed.

(ii) Profit-Making Educational Institutions

An educational institution as defined in Section 10 of the Copyright Act excludes an institution that is conducted for the profit, direct or indirect, of an individual or individuals. CAL wants the definition of educational institution be broadened for the purposes of Parts VA and VB of the Copyright Act to include profit-making educational institutions. This is for the following reasons:

(a) it can be assumed that there is widespread copying of audio-visual items from television and radio broadcasts by such institutions for their educational purposes. By virtue of the difficulty in identifying the correct rights holders, it can be assumed that the majority of such broadcast copies have been made without the permission of the relevant copyright owner. Accordingly, members of the Society and other relevant copyright owners are not being remunerated for the use of their rights; and

(b) by having a statutory scheme which imposes the payment of equitable remuneration upon educational institutions which fall within the definition of Section 10 while ignoring profit-making educational institutions, it in effect penalises traditional non-profit-making educational institutions in financial terms.

(iii) Removal of Technology-Based Distinctions

Section 135E of the Copyright Act enables an educational institution to make a copy of a broadcast or any film, sound recording or work incorporated in the broadcast without infringing copyright in the broadcast or other works or subject matter included in it. The scope of the scheme is confined by specific references to methods of technology and means of delivery.

This general issue has been the subject of detailed examination by the Convergence Committee and it is not the place of this Report to traverse that territory.

31.4.4. Deeming Of Representation

To introduce such a scheme would be the inverse of a statutory licensing scheme. It is an important characteristic of voluntary licensing schemes that participation be voluntary. For example, there is a certain anger shown by some owners of copyright in literary works who believe, mistakenly, that CAL grants licences in respect of the works of non-members. This demonstrates a misunderstanding of the existing system but also demonstrates that there would be a section of relevant owners who would object most strongly to having such control of their exclusive rights appropriated by a collecting society.

31.4.5. Amendments In Relation To Literary Works

CAL proposes several amendments to the Copyright Act to assist it in administering the copyright rights of its members:

(i) Government Copying

The introduction of sampling provisions similar to the provisions for education, into s.183 of the Copyright Act. At present, Commonwealth government departments notify copying to CAL. The Society argues that this is administratively inefficient and is likely to lead to significant under-reporting of copying. AMCOS however, is concerned that the concept of copying "for the purposes of the Crown" needs careful consideration to ensure that commercial activities such as the use of sheet music by police/military bands, or recording of music, does not fall within the scope of the provision.

(ii) Educational Copying

Until the educational institution forwards CAL a remuneration notice, CAL is unable to carry out inspection to determine if copying is taking place. This means that the administration and supervision of the statutory licence is dependent upon the decision to comply by the institution rather than any power of the Society. Further consideration needs to be given as to why this protection for the recalcitrant, should remain.

(iii) Library Copying

The Society believes that it is now timely to reconsider the free copying provisions for libraries. Libraries have extensive free copying privileges which, in the context of high speed and digital copying technology, may no longer be relevant.

Libraries are adopting a commercial approach to document delivery services and their services compete directly with the services offered both by the copyright owners and commercial document delivery services. To allow libraries to continue to use a statutory exception to provide a business advantage is surely not the purpose of the provisions.

If public policy requires that certain libraries continue to copy without payment to copyright owners for the purpose of assisting individuals in research and study, then perhaps the UK approach of identifying "prescribed libraries" should be considered. The UK Act provides that the library copying provisions apply to libraries and archives as prescribed by regulations made by the Secretary of State. This approach allows for greater flexibility in determining which libraries are entitled to copy without payment to copyright owners and for what purposes.

(iv) Copying for External Students

Distance Education courses, such as open learning, are becoming more and more popular and will continue to rise in popularity. We can no longer cling to our image of children in the middle of the desert, Flying Doctor overhead, hunched over their wireless sets, doing their French lesson before hopping of their horse to check the fences. Nowadays, the distance learning student is just as likely to be living in the inner city. It often is more accurately described as Home Learning rather than Distance Learning.

For example, universities currently offer open learning courses via broadcasts from the ABC. Students enrolled in such courses are sent a package of photocopied materials to use as study and research aids. The view of the educators is that any copyright material included in such packages can be copied under the fair dealing exemption, in s.40 of the Act. The wording of the section is unclear, but in any case this exemption needs reconsideration, particularly as this type of copying will increase significantly when students are provided with their course materials electronically.

(iv) New Technologies

The introduction of new technologies will continue to have an enormous effect on the use of CAL's members' works. It is important that Government clarify the extent to which electronic reproductions are included in existing statutory licences (both remunerable and non-remunerable) in the Copyright Act. To this end, the Report of the Convergence Committee must be awaited.

It was the view of the Copyright Law Review Committee in its draft Report on Computer Software that these rights are not currently included in the scope of these licences, but that the licences should be extended to include them. The CLRC appears to make no distinction between remunerable licences (such as those for education and government) and non-remunerable licences (such as for libraries).

In principle, there should be an extension of the scope of remunerable licences in this way (provided that appropriate rates and definitions of electronic use could be agreed with the licensee groups). Given the inevitable expansion of electronic copying and transmission, the extension of the scope of non-remunerable licences to include electronic copying would need to be most persuasively argued. Such a development would act unfairly against rights owners who have a proper expectation of receiving fair remuneration for the use of their rights.

Software also exists which enables sheet music to be printed out from MIDI files as well as technology which allows the scanning and printing of sheet music. These issues directly affect the rights of sheet music publishers and highlight the need for further consideration of the issues raised in Chapter 15 of the CLRC Draft Report on Computer Software Protection. The possibility of extending the rights of publishers to control the graphic reproduction of works and editions in a digital environment must be further considered.

31.4.6. Amendments In Relation To Mechanical Licence Provisions

(i) Abolition Of The Statutory Licence

Some foreign countries have eliminated "non-voluntary" licences. The removal of the statutory licence would mean copyright owners would have the right to deregulate the licence fee. For example, one might see a famous composer demanding a high mechanical reproduction fee for a "cover" while a less well known composer demanded a smaller one.

Interestingly, AMCOS observes that there is little obvious practical difference in the way licensing operates in countries with voluntary systems and those with compulsory licences. The Society points out that in the United Kingdom where the system has changed to voluntary licensing, there has been no major change in practice nor in the royalty rate as the licensing of the reproduction of musical works into records has been centralised through MCPS. The rate is referable to the Copyright Tribunal.

The significant difference between the United Kingdom situation and the Australian, is that AMCOS does not conduct centralised licensing. Without either the statutory licence or centralised licensing, it would be very difficult for small publishers to monitor and control the licensing of their works into records. Both publishers and composers would suffer.

At present the industry agreement is based on the statutory provisions. Without that mechanism, certain Trade Practices problems would surely arise. The statutory licence is generally introduced to prevent companies from acquiring a monopoly in any particular group of rights or abusing that monopoly position. The rationale has not changed.

(ii) Bootleg, pirate and counterfeit sound recordings

AMCOS seeks amendment to section 55 (1) to make it clear that the manufacture of bootleg, pirate and counterfeit sound recordings is exempt from its ambit. There is no public policy benefit in forcing the collecting society to grant a licence for the mechanical reproduction of a musical work in situations in which it has a reasonable belief that the grant of licence will result in the sale of bootleg, pirate or counterfeit records.

Similarly the Society seeks the extension of section 55 (2) beyond its present coverage of "adaptations" of the musical work. If adaptations of a work can be prevented by the withholding of a licence on the ground that it debases the work, it should be open to the owner of the rights in that work to withhold a licence if it has a reasonable belief that the quality of the record embodying the work will debase it.

For example, many of the bootleg, pirate and counterfeit records presently on the market are of very inferior technical quality. In an age when moral rights is recognised as a significant issue, should not a composer have the right to say, "I do not want my work debased by being on this inferior recording"? The Society argues that the discretion to determine whether a recording falls within the exclusions should be granted to the copyright owner of the musical work, along with an exception that the copyright owner or its licensee cannot be held in breach of Part IV of the Trade Practices Act for exercising its discretion. (As matters stand, there is a conflict between the obligations imposed on AMCOS by the statutory licence and the Government and the societies' commitment to fighting piracy.)

(iii) Definition of "record"

AMCOS argues that the Copyright Act definition of "record" should be amended so that it is clear which forms of new technology will be subject to the statutory licence in section 55(1). For example, some multi-media products appear to fall under the definition of "record" but can also embody a cinematograph work or computer program, and this creates difficulties in determining not only the rate but even the correct licensing body.

(iv) Extension Of Term Of Copyright Protection

The EEC has recently enacted a term of copyright protection for rights holders with the EEC of life plus seventy years. So that Australian rights holders are accorded equitable protection in foreign territories, AMCOS argues that Australia must give urgent consideration to an extension of the Australian copyright term.

For example, AMCOS' equivalent collecting societies in the EEC only accord protection on a reciprocal basis and therefore Australian rights holders are granted fifty years protection in the EEC and not seventy whereas AMCOS must collect on behalf of European owners for the longer period.

(v) Bulletin Board Responsibility

AMCOS is concerned that the recent explosion of Bulletin Boards and their ability to provide access to copyright works without remuneration to owners is interfering with their ability to collect on behalf of rights owners. It argues that further consideration should be given by Government to amending the Copyright Act so that Bulletin Board operators are made clearly liable for authorising reproductions of unlicensed copyright material which is down-loaded by subscribers.

There are already numerous Bulletin Boards operating in Australia which contain MIDI files, musical works and literary works that are unlicensed. Litigation has been instituted in the United States by music publishers and AMCOS' equivalent society, The Harry Fox Agency, against CompuServe, a Bulletin Board operator, alleging authorisation of reproductions of unlicensed musical works. Owing to the nature of Bulletin Boards, which have been classified in prior litigation in the United States as "electronic bookstores" or "libraries", there may be difficulties in showing authorisation. The relevant collecting societies in Australia would be confronted with the same difficulties if they attempted to enforce their members' rights. As was decided by the plaintiffs in the CompuServe litigation, it would be impractical for AMCOS to pursue the persons uploading the unlicensed musical works onto the Bulletin Board. Although the person carrying out the upload function is directly responsible for the breach of rights, he or she is usually difficult to identify. On the other hand, the commercial gatekeeper, such as CompuServe, is both identifiable and accessible.

(vi) A Distribution Right

At the moment the Copyright Act confers no exclusive distribution right. AMCOS argues that the introduction of such a right, which includes an importation right, would assist collecting societies to protect the rights of their members.

The very limited value of the sections which preceded sections 37 and 38 was highlighted in a submission by The Copyright Owners' Reproduction Society Ltd to the Spicer Committee in 1959. In the Report of the Copyright Law Review Committee, 1959, the Committee recommended that the onus should be on the importer, seller or dealer to prove he did not have knowledge that the work concerned was an infringement of copyright. This recommendation was not adopted in the 1968 Act. AMCOS seeks that this issue be revisited and that consideration be given to amending sections 37 and 38 so to incorporate the recommendations of the Copyright Law Review Committee, 1959.

Alternatively, AMCOS seeks that the Act be amended so as to grant an exclusive distribution right (which includes an importation right). This would mean that sections 37 and 38 could be reworded to allow rights holders and their collecting societies, a more effective means of enforcement. It argues that, at the very least, the drafting error in section 38 should be amended. (In its present state, AMCOS may not succeed in an action against an unlicensed retailer under section 38 because of the interpretation given to the section in International Writing Institute Inc v Rimila Pty Limited & Anor (1993) AIPC 91-035 by Lockhart J. at 39,748-39,749.)

(vii) Customs Powers Under Section 135

AMCOS and PPCA seek wide ranging powers to be given to Customs to deal with copyright infringing and counterfeit material, such as pirate, bootleg and counterfeit sound recordings and audio-visual articles, which are imported into Australia.

In Europe, IFPI (International Federation of the Phonographic Industry) was the first industry body to enter a Memorandum of Understanding with the Customs Co-operation Council, which contains guidelines on the relationship between the two bodies, and to draft model legislation granting Customs suitable powers to aid the music industry in monitoring sound recording piracy. A similar relationship between Customs and the music industry is sought in Australia. When legislation is drafted to implement TRIPs, there should be consultation with industry bodies and AMCOS, along with MIPI, to take advantage of their knowledge as to the system of importing copyright and trade mark infringing sound recordings.

31.5. RECOMMENDATIONS

• That Government should not consider the imposition of statutory licences where commercial voluntary licences, collectively administered, are effective.

• That section 135 ZM be amended or repealed so as to permit CAL to collect income in respect of artistic works at the same time as they are surveying educational institutions in respect of their use of literary works.

• That educational institutions be provided with a statutory right to reproduce artistic works (other than those already covered by "fair dealing") subject to the payment of equitable remuneration to the copyright owner.

• That there be no statutory licence introduced to grant access to copyright material for the purpose of multi-media exploitations.

• That further inquiry be made as to the matters raised by the Societies as to how the Copyright Act might be amended to improve their effectiveness and efficiency.

• That the jurisdiction of the Copyright Tribunal be expanded. (See following Chapter.)