32. JURISDICTION AND ROLE

OF THE COPYRIGHT TRIBUNAL

32.1. OMBUDSMAN OF COPYRIGHT COLLECTING SOCIETIES

32.2. JURISDICTION OVER ALL LICENSING SCHEMES

32.2.1. AN ALTERNATIVE AMENDMENT

32.3. JURISDICTION OVER ANCILLARY ASPECTS OF LICENSING SCHEMES

32.4. PROCEDURE OF THE TRIBUNAL

32.5. RECOMMENDATIONS

Consideration was given as to whether and in what ways the jurisdiction of the Copyright Tribunal might be amended to benefit both the members of the societies and the interests of licensees and/or the general public. Inquiry was made of the societies as to whether the Copyright Tribunal should have control over their:

• processes for dealing with licence applications;

• procedures for dealing with licensee inquiries;

• procedures for dealing with licensee complaints;

• procedures for dealing with licensor complaints;

• setting of licence fees;

• non-financial terms of agreements with licensors;

• use of undistributed funds;

• other matters not presently controlled by the Tribunal

32.1. OMBUDSMAN OF COPYRIGHT COLLECTING SOCIETIES

All of the societies were concerned that if the Tribunal were to be invested with a jurisdiction which covered licensee applications, inquiries and complaints generally, their time would forever be taken up with minor complaints and administrative matters. Moreover, it is highly doubtful that the Copyright Tribunal itself would wish to become a consumer complaints tribunal.

That said, it is clear from this Inquiry that there have been complaints about the societies from both rights owners and rights users. Some of these are well founded but many are a result of misunderstandings or lack of understanding. Where they are well founded, there is a need for an independent body to which persons can go when their communications with the society have been unrewarding.

If the Copyright Tribunal is not the right body to deal with otherwise unresolved issues relating to processes and procedures for dealing with -

* licence applications;

* licensor and licensee inquiries;

* licensor and licensee complaints;

then an appropriate body must be established.

It is recommended that there be established a position of Ombudsman Of Copyright Collecting Societies. This role may be only part time and may be best based within the Attorney General's Department. Alternatively, it may be preferable to position it as another arm of the Copyright Tribunal's (expanded) structure.

Certainly it is a role that must be seen to be independent of the societies themselves, so that both rights owners and users are assured of its independent stance. One cannot help but think that the recent controversy concerning PPCA would have been better dealt with by an early referral to such an entity so that the complaints and accusations could be dealt with rapidly and without unnecessary rancour, to the benefit of all parties and the industry generally.

The proposed Ombudsman's office could provide various resources including not only a facility for independent investigation but also alternate dispute resolution facilities. Where the Ombudsman makes a determination, if there is to be a right of appeal, it should be to the Copyright Tribunal, not the general courts.

The cost and funding of this role must be the subject of further and separate investigation but it seems appropriate that collecting societies contribute to the cost of such function - perhaps in proportion to the number and size of the references which concern them.

32.2. JURISDICTION OVER ALL LICENSING SCHEMES

All of the societies recognise the importance of having an independent body, such as the Copyright Tribunal, which is able to review collectively administered licensing schemes and set fees in the absence of the parties reaching their own agreement.

In principle, the Tribunal should have as wide a jurisdiction as possible in respect of licences and licence tariffs. This includes setting of licence fees and any non-financial terms of agreements with licensors, (including the equity or otherwise of sampling schemes and other methods for the identification of rights owners or quantification of payments). Similarly, the Copyright Tribunal should have jurisdiction whether or not the licence is statutory and whether or not it is a voluntary licence dealing with the public performance of literary, dramatic and musical works and sound recordings or in broadcasts and diffusions services. Such distinctions are of little value except to make the Tribunal an expert venue to which too few have jurisdictional access.

The Copyright Tribunal should have jurisdiction over all collectively administered licensing schemes. That its jurisdiction should be limited by the nature of the copyright material licensed, is specious.

It should be the appropriate forum for the variation, approval and interpretation of all licensing schemes, proposed/negotiated by collecting societies. It makes sense to allow as many aspects of the copyright administration function as possible, to come before the expert tribunal rather than the general court system.

For example, potential licensees and collecting societies may be unable to reach agreement as to:

(i) royalty rates;

(ii) whether particular uses are remunerable or not; and

(iii) appropriateness of sampling methods.

Where the parties are unable to reach agreement, either the society or the potential rights user, should have the right to approach the Tribunal. That a responsible body such as the Australian Council of Libraries and Information Services ("ICLIS") does not have that right in its dealings with CAL is anomalous and cannot be in the public interest.

All collecting societies' licence fees and conditions should be open to the potential scrutiny on the Tribunal simply because some arbitration mechanism is an essential requirement for the establishment of a working relationship between the society and users of its members' property.

The above principles apply regardless of whether the relevant rights are administered under voluntary or statutory licence.

32.2.1. An Alternative Amendment

If Government choses not to extend the jurisdiction of the Tribunal as suggested above, it should at least obtain a clarification of the definition of the term "licence". Owing to the definition of "licence" in section 136(1) it is arguable whether the Tribunal has jurisdiction over licensing schemes for :

(i) "music video", where the music video is produced for sale and not only for broadcast; and

(ii) Production Music, because the licence granted by AMCOS is to reproduce the sound recording, broadcast the sound recording and reproduce the musical work and the latter right is not covered by part (a) of the definition.

To overcome this uncertainty, it is recommended that the definition of "licence" should be amended along the lines of section 116(3) of the Copyright, Designs and Patents Act 1988 (UK) which defines "copyright licences" in the following terms: "licences to do, or authorise the doing of, any of the acts restricted by copyright."

32.3. JURISDICTION OVER ANCILLARY ASPECTS OF LICENSING SCHEMES

The Copyright Tribunal has the power under section 135J and section 135zw of the Copyright Act to make determinations relating to sampling. For example, Section 135J (3) provides:

The extent of copying of broadcasts and any other matters that are necessary or convenient to be assessed by use of a sampling system, shall be assessed by use of a sampling system determined by agreement between the administering body and the collecting society or, failing such agreement, by the Copyright Tribunal on application made by either of them.

This jurisdiction is however restricted to copying performed in educational institutions and thus really only relates to CAL and AVCS. Even then, the Act restricts the possible parties to the educational institution and the collecting society. A rights owner does not have the right to bring such a sampling grievance before the Tribunal.

It is recommended that the Copyright Tribunal have explicit jurisdiction to hear grievances about the equity of all processes used in the identification of rights owners and quantification of royalty payments. If the recommendation to establish an Ombudsman of Collecting Societies is accepted, Government should consider making this jurisdiction subject to such grievance being first subjected to the alternate dispute resolution procedures of the Ombudsman's office.

32.4. PROCEDURE OF THE TRIBUNAL

It was the view of most of the societies and other parties who made submissions to the Inquiry, that proceedings before the Copyright Tribunal are expensive, slow and unnecessarily legalistic. As such they are only considered as a last resort.

As it is, only APRA, which uses the Tribunal as an integral part of its enforcement procedures and has considerable experience before the Tribunal, was satisfied with the present procedures.

For example, pursuant to section 152A of the Copyright Act the Copyright Tribunal has the power, upon application, to determine the royalty payable by record manufacturers for recording musical works. It was the view of AMCOS that if the cost of making application to the Tribunal could be minimised and a strict time limit for the making of orders adhered to, the option of making application to the Copyright Tribunal for a determination on rates would be more practical.

Of course, how to make any court process less costly and more expeditious is a challenge and given the commercial significance of the matters determined by the Tribunal it is important that the procedures give each party an equal opportunity to be fully heard.

32.5. RECOMMENDATIONS

• That there be established the position of Ombudsman Of Copyright Collecting Societies.

• That the definition of "licence" in section 136(1) be amended.

• That the Tribunal have as wide a jurisdiction as possible in respect of licences and licence tariffs including the variation, approval and interpretation of all licensing schemes whether the relevant rights are administered under voluntary or statutory licence.

• That the Tribunal have the right to review determinations of the Ombudsman.

• That the procedures of the Tribunal be examined to see how matters might be dealt with, faster and more cheaply.

33. TRADE PRACTICES ISSUES AND COLLECTING SOCIETIES

33.1. AUTHORISATION BY THE TRADE PRACTICES COMMISSION

33.1.1. APRA

33.1.2. AMCOS

33.1.3. PPCA

33.2. SECTION 51 (3) OF THE TRADE PRACTICES ACT

33.3. ABUSE OF A MONOPOLY

33.4. POTENTIAL FOR COMPETITION

33.5. SHOULD DECLARED SOCIETIES ENJOY A MONOPOLY?

33.6. RECOMMENDATION TO PROMOTE SOCIETY REFORM

33.6.1. Introduction Of Criteria For "Qualified Societies"

33.6.2. Effect Of Being A Qualified Society

33.6.3. Certification

33.7. RECOMMENDATIONS

There is a fascinating range of approaches and attitudes shown by the collecting societies to any inquiry as to the effect of the Trade Practices Act upon their operations. As one might expect, each society vehemently argues that they are not in breach of the Trade Practices Act. Whether they are or not is a matter that is outside the Terms of Reference and no view is expressed.

APRA has long argued that because it takes assignments, rather than licences (and is thus the owner rather than a licensee), the Act does not really affect it as only s.46 (1) could even be relevant. In spite of this approach, in certain cases brought by or against APRA, the Association's opponents raise the monopoly issue - even if it is only being used as a tactical tool.

All of the other societies are licensees and exercise various degrees of control over various rights. (See Rights Administered; Legal Basis).

All societies argue that they have never attempted, nor would never attempt, to prevent or hinder the entry of any person into any market. They argue that their whole purpose is to facilitate the lawful use of the relevant rights. As such, they supply a service to users which is cost efficient and simple; promotes increased competition in other markets; results in a supply of information to users so they can make informed choices; and promotes industry cost savings and ultimately lower prices. Their opponents argue that collecting societies are by their nature, monopolistic bodies that have the capacity to abuse that monopolistic position particularly through the imposition of restrictive licence terms or the operation of blanket licence schemes.

[There are two excellent background papers on this topic: the Trade Practices Commission's background paper entitled Application of the Trade Practices Act to Intellectual Property dated July 1991; and an article by Shaun McVicar entitled Copyright - Collecting Societies, Blanket Licences and the Misuse of Market Power, Arts and Entertainment Law Review, number 2 of 1992, pages 1-10, and number 3 of 1992, pages 1-8.]

33.1. AUTHORISATION BY THE TRADE PRACTICES COMMISSION

One way of avoiding TPC problems is by obtaining an approval or "authorisation".

33.1.1. APRA

The Association did, between 1975 and 1980, hold an interim authorisation from the Trade Practices Commission but the Association did not seek to obtain a final clearance on the basis that its legal advice was to the effect that it does not run the risk of breaching the Act.

33.1.2. AMCOS

In September 1975 AMPAL gave notice to the Trade Practices Commission for an interim clearance of certain contracts, arrangements or understandings to which it was a party or proposed to enter into, pursuant to section 92 (1) of the Trade Practices Act 1974.

No contracts have been submitted to the Commission since that date. Apart from the blanket licences, AMCOS is a party to at least fifty other agreements, including industry agreements and one-off agreements with users. The Society was of the view that it would be obliged to pay $7,500 per form for which approval was sought and that the cost of seeking approval would be simply prohibitive. Advice from the TPC is that the approval would be as to an 'overall course of conduct' rather than a particular form and that the above fee would be a one-time payment. In light of this the cost would in fact be quite reasonable.

33.1.3. PPCA

The Company has obtained an authorisation in respect of the public performance of records but was unsuccessful in its application relating to music videos.

33.2. SECTION 51 (3) OF THE TRADE PRACTICES ACT

Exceptions to the anti-monopoly provisions of the Trade Practices Act must be treated with due caution but Section 51 (3) of the Trade Practices Act presently provides an exemption in respect of certain dealings in copyright and largely relieves the societies of the need to seek an authorisation from the Trade Practices Commission.

The Hilmer Committee recently reviewed the Trade Practices Act and in particular, the scope of Part IV and recommended that the provisions of Part IV should apply to all bodies and societies and that the existing exemptions under Section 51 should be removed over a two to three year time span.

In respect of section 51 (3) of the Trade Practices Act, the Hilmer Committee stated that "It saw force in arguments to remove the current exemption ..." Nevertheless, it was "not in a position to make expert recommendations on the matter and recommends that the current exemption be examined by relevant officials in consultation with interested groups."

The core of section 51 (3) is that it acknowledges that intellectual property is a system based upon the ownership and control of exclusive rights and that there are public benefits in such a regime. It also recognises that

(i) exclusive rights can be used in such a way as to abuse market power, and that

(ii) such abuse would out-weigh the public benefits of exclusivity.

33.3. ABUSE OF A MONOPOLY

Certainly whenever a number of exclusive rights owners join together to form a licensing system, there is a potential for abuse and there is no doubt that each of the five collecting societies do have a dominant position in the market-place with respect to the types of rights that each controls. But the Trade Practices Act does not forbid potential misuse of power, it proscribes the taking of advantage of power in a market for the purpose of:

(a) eliminating or damaging a competitor in that or any other market;

(b) preventing entry to that or any other markets; or

(c) deterring or preventing competitive conduct in that or any other market.

[section 46 (1)]

It is important to recognise that CAL, AVCS, AMCOS and PPCA all administer (to varying degrees), statutory licences. In the majority of their licensing functions, they have no discretion to refuse a grant of a licence (except in the limited circumstance of non-payment of reasonable remuneration). After all, statutory licences were introduced largely to prevent monopolistic practices interfering with public access to otherwise exclusive rights. Insofar as licence schemes are statutory, the policy behind such schemes is compatible with the intention of section 46.

The Inquiry found no evidence of societies acting so as to eliminate or damage a competitor. The only evidence of 'preventing entry of a competitor to any relevant market' was the use of exclusive licence arrangements rather than non-exclusive ones. As the exclusive/non-exclusive distinction is central to the commercialisation of any intellectual property, it is hardly surprising or indeed problematic, that the owner of an exclusive right should exercise that right to permit another to administer the right on an exclusive basis. In other words, when a copyright owner exclusively licenses a society so as to allow administration on a collective basis, that transaction neither adds to nor detracts from the essentially exclusive nature of the relevant right. In any event, as all of the societies permit a rights owner to withdraw from the scheme upon certain notice, there is nothing preventing a competitor being established and persuading rights owners to serve the requisite notice and change societies.

Accordingly, there is little Trade Practices significance in whether a licence from an owner to a collecting society is exclusive or non-exclusive.

Moreover, whether the licences are exclusive or non-exclusive, the important competition factor is whether or not the practice of the society interferes with the ability of other companies to compete with the society by providing not the same services but services of the same type. It is illogical to suggest that there is a Trade Practices problem inherent in preventing one corporation accessing the same intellectual property as another, but it completely appropriate to cry "Trade Practices" if the activity of one corporation is designed to prevent others from entering the same field using intellectual property rights over which it has acquired control.

33.4. POTENTIAL FOR COMPETITION

It is particularly interesting to note that CAL's "worship" licence receives considerable competition from three licensing organisations which offer competitive licences (Word of Life International; Christian Copyright Licensing International; and LicenSing).

The existence of these three competitors to the CAL licence demonstrates that there is a very real opportunity for the supply of alternative licensing services within particular market niches. These competitive companies also demonstrate that if their services are sufficiently attuned to the market they can charge considerably more for their services than that charged by the larger collecting society.

In some instances, the exclusivity is sought by a society so that it can be sure of getting a percentage from all permissions granted in respect of a right, not just the non-profitable ones. For example, it is a severe impediment to the functioning of AMCOS that the fifteen largest record companies account directly to the publishers for mechanical income rather than through the collecting society. This may be seen as a great plus for those who argue for the ability of corporations to maximise their profits but it is clearly a practice that means that the overhead of running the collecting society must be borne by a diverse range of only peripheral licensing functions - ones that are not profitable to handle in other than a collective manner.

For as long as corporations see the relevant collecting society merely as an extension of their commercial operation, there will always be potential for conflict of interest, entrenchment of interests, the abuse of minority interests and the abuse of monopoly positions.

33.5. SHOULD DECLARED SOCIETIES ENJOY A MONOPOLY?

There is certain controversy as to whether Declared Societies should be given a monopoly over their relevant rights. The antagonism seems to largely come from rights owners who object to having a Declared Society licensing (or refusing to license) their rights, negotiating the terms of such licences, and collecting on their behalf. An example of this was provided to the Inquiry by the Combined Newspaper and Magazine Copyright Committee of Australia which represents "all major newspaper and magazine publishers in Australia".

In contrast, none of the user organisations who made submissions saw the monopoly of the Declared Societies to be a particular problem. After all, these groups have the benefit of dealing with only one agency when locating, negotiating and acquiring rights.

A statutory licence is generally granted to provide access to certain rights that the community (through the voice of Government) believes should be made available, without the normal commercial strictures. (That is not to say that the exploitation should not be on reasonable commercial terms, rather that there be no right to deny access or control.) The statutory education licences are a perfect example of this. In such cases, where the interests of the user are being placed above the interests of the rights owner, it is consistent for Government to demand that the statutory right be administered by one organisation. This assists the users for they have only the one organisation to deal with - the one-stop shop. Accordingly, it is highly efficient and cost effective for the rights users.

Beyond the statutory licence regime, there is no reason why a society should be given any monopolistic preference. If two or more companies wish to compete to attract rights owners and to set up the administration necessary to administer those rights and interests, they should be allowed to do so. It must be added that the position of Government licences, is based on principles different to those which apply to the educational statutory licences. The relationship between Government and a collecting society (such as CAL) is derived from negotiation. If the Government chose, it could negotiate an agreement with any collecting society for the use of its members' rights. If it so wished, it could adopt the rhetoric of competition and the free market rather than the present rhetoric of the natural monopoly. If it were to do so, it is difficult to see what advantage it would gain, beyond a degree of ideological purity. Being the supplier of licences to intellectual property is not the same as being a supplier of chairs. Any supplier can tender to furnish chairs to Government provided that it is the cheapest tenderer that can fulfil the functional requirements.

With intellectual property, the user needs permission in respect of a particular work rather than a general species of work. For this reason, it makes sense for Government to adopt a system that is most convenient and efficient for its own needs: namely, a system by which it has to deal only with one organisation in order to acquire the rights that it requires. Rather than relying on competitive organisations to regulate the sensibilities of price and conditions, it is more efficient to ensure that the Copyright Tribunal has the right to determine such issues in the absence of agreement between the parties.

The answer for rights owners who object to the Government-conferred monopoly, is to recognise that such collecting societies are non-profit distributing companies and that, as members, they would be entitled to nominate representatives for the board and that they would be able to influence the policies of the organisation in the same way as every other rights owner. That a new collecting society established by group representing "all major newspaper and magazine publishers" would enhance competition and still assure the public benefit of access for governmental and educational copying, has yet to be established.

33.6. RECOMMENDATION TO PROMOTE SOCIETY REFORM

One approach is to say that no organisation (whether a collectively administered collecting society or not) should be exempt from the full rigour of the market principles imposed by the Trade Practices Act. That approach demands the phasing out of section 51 (3) exemptions. The implications of doing this involve interfering with the fundamental exclusive rights of intellectual property. Even if it were thought desirable, it may well be in breach of Australia's international treaty commitments under the Berne and Rome Conventions.

The other, and more positive contribution by Government, would be to see how it might persuade all societies to improve their structure, procedures and function so that they have an incentive for positive change, rather than maintaining a defensive posture in relation to Trade Practices issues. In other words, it is suggested that the Act can be used as a very directed carrot rather than a stick.

33.6.1. Introduction Of Criteria For "Qualified Societies"

It is recommended that the existing limited exemption accorded to collecting societies by Section 51 (3) of the Trade Practices Act remain (albeit in amended form) PROVIDED THAT each society brings its structure, procedures, functions and conduct within certain guidelines which will work to ensure that there is sufficient scrutiny of a society's conduct to protect its members, licensees, potential users, and owners of the relevant copyright.

It is emphasised that the compliance with such guidelines must be voluntary. After all, the societies are member-based organisations and those members must retain the decision as to whether they want to make changes and thus gain benefits, or whether they prefer to remain as they are. The choice must be theirs. For example, when AMCOS was asked about its attitude to enjoying the advantages of being a declared collecting society, its view was that the "monopoly problem" is more perceived than real and that the administrative inconvenience of becoming and operating as a Qualified Society, would outweigh any advantages.

The present Guidelines For Declared Collecting Societies provide an excellent starting place for the new guidelines. Obviously they would need to be altered to make them relevant. The matters that should be taken into account to ensure the good governance of societies include the following:

(i) That the society be a non-profit company limited by guarantee;

(ii) That all relevant rights owners have access to membership of the company (not just its services) and have equitable access to board membership and company control;

(iii) That the relevant rights owners be equitably represented on the board of the society;

(iv) That the maximum term of board membership be limited so as to inhibit entrenchment of interests;

(v) That the accounts of the company be annually audited;

(vi) That an Annual Report be provided to the Attorney General;

(vii) That Qualified status be able to be removed by the Attorney General, either on his/her own motion or upon the recommendation of the Ombudsman For Collecting Societies;

(viii) That it notify and obtain the approval of the Attorney General as to any intended rule changes;

(ix) That the society maintain a Cultural And Charitable Purposes Fund for the benefit of relevant rights owners and members.

33.6.2. Effect Of Being A Qualified Society

It is recommended that the TPA be amended so that societies which are Qualified Societies, and thus subject to the regular scrutiny of government, should be given the protection of section 51 (3) thus, in effect, placing them in the same position as they would have been if they had received authorisations from the Trade Practices Commission.

It is further recommended that, a society's input agreement should not be in breach of section 45 if the society is Qualified and the output agreement should not be in breach of section 45 if it is either (a) statutory or (b) approved by the Copyright Tribunal.

33.6.3. Certification

It is further recommended that it be provided that where there is a purported abuse of a Qualified Society's monopoly power, no action may be commenced in respect of that abuse, under heading of the TPA, without the prior certificate of the Attorney General.

33.7. RECOMMENDATIONS

• That guidelines be drawn up and an approval mechanism instituted, by which those collecting societies which can demonstrate that their structures, procedures, functions and conduct is within those guidelines, are accorded the status of "Qualified Societies".

• That such guidelines be drawn up in consultation with the Trade Practices Commission and the societies.

• That Qualified Societies retain the protection of Section 51 (3) of the Trade Practices Act.

• That a society's input agreement should not be in breach of section 45 if the society is Qualified and the output agreement should not be in breach of section 45 if it is either (a) statutory or (b) approved by the Copyright Tribunal.

• That where there is a purported abuse of a Qualified Society's monopoly power, the prior certificate of the Attorney General be a pre-condition to raising section 46 (1) in legal proceedings.

34. A COPYRIGHT COLLECTING SOCIETY

FOR THE VISUAL ARTS

34.1 INTRODUCTION

34.2 THE NEED FOR AN AUSTRALIAN VISUAL ARTS COLLECTING SOCIETY

34.2.1. Income For Visual Artists And Craftspeople, And Enforcement Of Their Rights

34.2.2. Understanding Of Legal Rights

34.2.3. Bargaining Power

34.2.4. Enforcement

34.2.5. Conclusion

34.3 VISCOPY

34.4 EFFICIENT COPYRIGHT CLEARANCES AND SERVICES FOR USERS OF COPYRIGHT MATERIAL IN ARTISTIC WORKS

34.4.1. Services Required By Major Collecting Institutions

34.4.2. Educational Users Of Copyright Material

34.4.3. Conclusion

34.5 ABORIGINAL AND TORRES STRAIT ISLANDER INTERESTS

34.5.1. Role Of A Collecting Society For Aboriginal And Torres Strait Islander Art

34.6 THE IMPACT OF NEW TECHNOLOGIES

34.7 AUSTRALIA'S STANDING IN INTERNATIONAL COPYRIGHT PRACTICE: LAW, TRADE AND CULTURAL AWARENESS

34.7.2 Arrangements With Overseas Copyright Collecting Societies

34.7.3. International Awareness Of Australian Culture

34.7.4. Conclusion

34.8 A SEPARATE COPYRIGHT COLLECTING AGENCY

34.9 THE FUNDING OF THE ESTABLISHMENT PERIOD

34.10 GOVERNMENT ASSISTANCE

34.10.1. Introduction

34.10.2. VISCOPY's Place In The Cultural Strategy

34.11 SEED FUNDING FROM THE FEDERAL GOVERNMENT

34.11.1. The Amount

34.11.2. Loan Or Cultural Investment?

34.12 STRUCTURE OF VISCOPY

4.13 RECOMMENDATIONS

34.1 INTRODUCTION

A centralised agency for the collection and distribution of copyright income is justified when administration of and access to rights is impracticable on an individual level. This is presently the case for visual artists in Australia. In the absence of a centralised, properly resourced collecting society, the owners of copyright in visual art are being deprived of income to which they are entitled, and copyright users are being deprived of the opportunity to obtain copyright clearances in an efficient and responsible manner.

There has been concern at the inadequacies of copyright protection in the Australian visual arts among the practitioners, administrators and lawyers who work in the cultural industry for over ten years. The legislative anomalies and economic disadvantages which visual artists suffer in comparison with their colleagues in other practices (in particular authors of literary and musical works) have made it extremely difficult for visual artists to achieve a satisfactory degree of professional independence.

That concern has resulted in a plethora of publications investigating and reporting on the legal, economic and social circumstances of the visual artist. Since the late 1980s much of this work (which has variously been funded by the Australia Council, the National Association for the Visual Arts ("NAVA"), CAL and State Arts Ministries) has advocated the establishment of a visual arts copyright collecting society.

No one of these reports has provided an irresistible argument for introducing a visual arts copyright collection society but for all that, they have all arrived at the same conclusion: Australia needs a collecting society for the visual arts. No more reports need to be written to establish to need and viability of such a society.

34.2 THE NEED FOR AN AUSTRALIAN VISUAL ARTS COLLECTING SOCIETY

34.2.1. Income For Visual Artists And Craftspeople, And Enforcement Of Their Rights

The loss of income from and control over the exploitation of copyright that flows from the disparate art practices, geographic decentralisation and low income level of visual artists, together with the concealment of the practice of copyright infringement which is tacitly condoned by the lack of any efficient administration, are characteristic of the visual arts sector of the cultural industry and market in copyright works.

Organisations such as NAVA, Craft Australia, professional organisations, the Australian Copyright Council, the Arts Law Centre of Australia and Aboriginal Arts Management Association ("AAMA") cannot meet the demand for the services they already provide and have no resources to extend these services to deal with the complex and widespread problems which face visual artists in the exploitation and administration of their copyright. Nor is their charter to do so.

It has been clearly established that Australian visual artists comprise an especially low-income earning group in the cultural sector notwithstanding the fact that they are also among the highest qualified groups of income earners.

As a result of these severe economic disadvantages, visual artists In this Report "visual artists" is used compendiously and includes craftspeople, designers, photographers, illustrators, black and white artists and fine artists.

lack the resources to supervise their rights, or to pay for the enforcement of them. Yet at the same time they are conscious of the practice of infringement of their works See Throsby and Mills When are you going to get a real job? (1989).

Research indicates three fundamental problems which confront visual artists in the exploitation of their copyright: lack of understanding of legal rights, weakness of bargaining position, and inadequate or ineffective enforcement mechanisms Publications which note these factors on the basis of research conducted into the financial status of visual artists, include:

Throsby and Mills, When Are You Going to Get a Real Job?, Australia Council (1989)

Baulch, Report on Copyright Fees for Visual Artists, Australian Copyright Council (1989)

Throsby and Thompson Individual Artists' Survey, Australia Council 1993 (to be published)

34.2.2. Understanding Of Legal Rights

Several national, government funded and professional organisations work to redress the difficulties which visual artists and craftspeople experience in getting information about their rights. The Australian Copyright Council, the Arts Law Centre of Australia and NAVA have long-established educational programs to facilitate professionalism and self reliance among practitioners in the visual artists.

Federal and State Crafts Councils, and professional organisations provide educational and advisory services to its members, and lobby for legislative change in their interests.

In respect of Aboriginal and Torres Strait Islander artists, who suffer particular economic and cultural hardship at the unauthorised exploitation of their works, (as to which, see below) the Aboriginal Arts AAMA has been vigilant in the education of its members and the enforcement of their rights by providing information and assistance to Aboriginal and Torres Strait Islander artists and arts organisations in relation to matters such as contractual arrangements, copyright, moral rights which affect the production and use of Aboriginal and Torres Strait Islander cultures.

However, notwithstanding all of their efforts, education on its own is not enough. None of these organisations which educate, inform and advise visual artists and craftspeople can redress the financial and bargaining disadvantages which visual artists and craftspeople suffer.

34.2.3. Bargaining Power

As has been noted above, visual artists and craftspeople fare far worse than comparable income earning groups. Specifically in the exploitation of their copyright as a potential income source, visual artists are at the behest of their contracting partners in negotiation who invariably enjoy far greater commercial power both because they are likely to be far better resourced, and because they are buyers in a buyers' market. Further, and perhaps partly as a result of this inequality of bargaining power, there is no industry standard, or minimum fee structure, for the reproduction of artistic works, as exists in other countries (such as the United Kingdom, France and Germany) where minimum recommended licence fees are set by visual arts copyright collecting societies.

Both the Australian Copyright Council and the Arts Law Centre of Australia have extensive experience in the provision of national legal services to the arts community. The most recently published Annual Reports of both the Australian Copyright Council and the Arts Law Centre indicate that in the 1992 financial year a major proportion of the inquiries dealt with concerned the visual arts (21% in the case of the Australian Copyright Council and 42% in the case of the Arts Law Centre of Australia); and that a large proportion of those inquiries concerned copyright-related matters. These services play an important role in addressing the imbalance but cannot be expected to overcome the commercial effect of economic disadvantage, namely a diminished ability to negotiate a fair remuneration from the reproduction of their creative work.

34.2.4. Enforcement

Whilst individual artists, have the legal authority to control the use that is made of their works, they rarely have the economic resources to commence legal proceedings to enforce those rights. The Johnny Bulun Bulun case (involving copyright infringements on t-shirts) sent a caution to infringers of copyright material in Aboriginal artistic works but infringement actions in the visual arts are unusual because visual artists and craftspeople are a dispersed, unmonied class, have no means to conduct a test case, and an account of profits in any single case is rarely likely to justify the expense of copyright infringement proceedings.

34.2.5. Conclusion

The precise economic impact of the loss of income to which visual artists and craftspeople are entitled, and of access to effective enforcement procedures, is impossible to calculate. However, the cultural industry statistics which are available indicate that the visual arts sector is a very substantial one Source: The Arts: Some Australian Data Australia Council, December 1991

As the already significant visual arts industry develops culturally and economically, on both a domestic and global level, artists' need for a responsible and effective agency to formulate minimum fees, set industry standards, collect and distribute their copyright income and foster a culture of respect of their rights, intensifies. The experience of visual artists in other countries, and the opinions of lead organisations in both the copyright and cultural sectors (funding bodies, progenitors of law reform, political organisations representing visual artists and visual artists themselves) unanimously indicate that the most appropriate way of dealing with these issues is by the establishment of a collecting society. In an age of mass reproduction, it is not only inefficient, it is practicably impossible, for artists to administer the full extent of their rights without the benefit of collective administration.

34.3 VISCOPY

To NAVA's credit, it has provided sustained support and pressure for the introduction of a visual arts copyright collecting society. It has established a company limited by guarantee named VISCOPY for the purpose. It exists. It is unfunded and unstaffed. For the moment, it is a corporate shell which needs slight restructuring and considerable funding.

34.4 EFFICIENT COPYRIGHT CLEARANCES AND SERVICES FOR USERS OF COPYRIGHT MATERIAL IN ARTISTIC WORKS

"The most startling and to some extent unexpected result of the .. inquiry was the widespread ignorance (among all participants in the industry) of copyright and the legal basis on which deals are negotiated...

Particularly where public bodies such as government departments and state galleries are involved, it was disappointing to see some practices being adopted that were so clearly unfair to artists and contrary to the aim of promoting artists' welfare. Tired arguments such as that the use will "promote" the artist and therefore should be free to the user were not uncommon. There was a reluctance on the part of users to assess the value of the use to them as licensees (rather than the perceived value of the use to the artist)." Libby Baulch Report On Copyright Fees for Visual Artists, Australian Copyright Council, November 1989, pp 1, 27

The wide geographical dispersal of visual arts practitioners and the very individual nature of their work, suggests that it is difficult for users to identify, locate and contact the rights owners. Currently, not only is it easy for irresponsible firms to break the law; it also commercially impractical for responsible industry participants to meet their legal obligations.

It is to the mutual benefit of copyright owners and users that copyright users have access to a comprehensive repertoire of works and an efficient licensing administration which can be integrated into the commercial activities of copyright users with minimum disruption. Under these circumstances copyright users can fulfil their legal obligations and adopt best copyright practice in the most efficient way.

34.4.1. Services Required By Major Collecting Institutions

Notwithstanding the traditional antagonism expressed by some users of copyright material, several major institutional users of copyright material in artistic works eagerly anticipate the establishment of a copyright collecting agency which can administer copyright uses and fees efficiently. Letters of support were provided from several of these. The National Gallery of Australia (Kevin Munn, Assistant Director, Access and Marketing who was delegated by the NGA Council in late 1993 to address its copyright policies) endorsed the proposal saying that it

"will be more efficient to clear copyrights through a collecting society which is situated in Australia.

To date the Gallery has assisted in the establishment of an Australian agency by hosting a seminar for Gerhard Pfennig, Executive Director of BILD-KUNST, Bonn; and we are taking the initiative to facilitate a visit to Australia by Rachel Duffield, Executive Director of the Design and Artists Copyright Society Ltd., London. In addition, an officer has been made available to liaise with NAVA as a Director of the Board."

Other strong letters of support were received from the Regional Galleries of New South Wales and the Queensland Art Gallery. The latter placed a rider on its support saying that "... the State and National Galleries should seek to adopt a uniform position on VISCOPY." Accordingly, and very usefully, the Queensland Art Gallery will be presenting a recommendation to the next meeting of the Council of Australian Art Museum Directors. (Letters from Museums Australia and the Museum of Contemporary Art are also foreshadowed.)

Besides the traditional image reproduction needs in collecting institutions, the recent and continuing trend of Australian collecting institutions to increase their merchandising activity reflects similar overseas practice and indicates a growing market in the exploitation of copyright in artistic works. In 1992 the gross merchandising sales of the five largest state galleries was $9.5 million. Nett merchandising activity of the seven largest state galleries was $2.2 million, and of regional galleries approximately $0.6 million Jane Spring Museums 1992: Art Museums and Public Galleries in Australia and New Zealand, Research Paper No. 9 Australia Council July 1993

As noted above, the National Gallery of Australia ("NGA") is developing a formal in-house copyright policy. The NGA has expressed its preference for VISCOPY to operate as a centralised agency to assist it to implement that policy.

In September 1993, NAVA commissioned a report into the feasibility of a proposed visual arts collecting society Guldberg op.cit.

34.4.2. Educational Users Of Copyright Material

As a separate 'scenario', Guldberg analysed the potential income from the exploitation of reprographic rights by educational institutions (currently administered by CAL in respect of literary works) of artistic works. As is discussed elsewhere in this Report, that potential income is currently constrained by s.135ZM of the Copyright Act. Using a sample of photocopied text provided by CAL, Guldberg found that more than 2% of the sample, yielded illustrated pages (not including graphs, diagrams, maps or line drawings). On the assumptions that CAL were willing to agree to a distribution to VISCOPY of the minuscule amounts currently collected for visual material, and that s.135ZM would be repealed in VISCOPY's fourth year, Guldberg estimated projected collections from this source of $200,000 in year 1 and $1.95 million in year 5.

It has been recommended elsewhere in this Report that s.135ZM be repealed and a statutory licence granted for educational copying. This has the advantage of making it clear that educational institutions have the right to copy and that CAL, acting as the agent of VISCOPY, would have the right to monitor and collect in respect of those uses. (Although Guldberg anticipated that such legislative amendments would not take place until VISCOPY's fourth year, such delay would only have the effect of increasing the amount of grant support that would be required to maintain the new Society in its establishment period.)

Over its years of operation, CAL has developed sampling and collection techniques which cause least disruption to educational institutions in meeting their obligations with regard to reprographic use of copyright material. The promoters of VISCOPY intend that the society would co-operate with CAL in the sampling and collection functions to deliver a cost effective service whereby VISCOPY will distribute to its members income from reprography which CAL logs and collects from educational institutions. This is most sensible.

34.4.3. Conclusion

It is presently difficult for copyright users to identify and locate copyright owners efficiently to obtain their permission and negotiate a fee for the use of their work. It is hardly surprising that they are somewhat reluctant to bother. With copyright owners insufficiently resourced either to secure fair remuneration by bargain, or to enforce their rights against infringement, there has been little deterrent against unauthorised use, nor incentive for users to make the effort to meet their obligations.

The establishment of VISCOPY, will means that for some users, (in particular those who have not been paying for their use of visual art copyrights), their costs will increase. Moreover, all users will also have to become familiar with the new system for obtaining clearances. These however are matters that are justified in the interests of proper copyright administration and obtaining appropriate remuneration for copyright owners.

VISCOPY, particularly if it co-operates with the state and national collecting institutions and with CAL and AVCS, will enable copyright users to meet their obligations whilst at the same time ensuring that the rights owners receive fair remuneration for and maintain control over, the rights. It is a classic example of circumstances in which collective administration is desirable.

34.5 ABORIGINAL AND TORRES STRAIT ISLANDER INTERESTS

34.5.1. Role Of A Collecting Society For Aboriginal And Torres Strait Islander Art

In its chapter on cultural integrity and copyright, the 1988 Review Committee of the Aboriginal Arts and Crafts Industry ("the Altman Report") noted the following problems in enforcement of copyright in Aboriginal art:

(i) Lack of consistency in, and poor documentation of, Aboriginal art, particularly at the fine art level. The Committee noted that such documentation was of a poorer standard in exhibitions of Aboriginal art than those of non-Aboriginal art, that the importance of proper documentation extended beyond collectors and students of Aboriginal art to the promotion of a more informed understanding by the general public of visual artists' copyright, and that adequate documentation could play a role in establishing and safeguarding visual artists' copyright.

(ii) Continuing practice of infringement of artists' copyright. The Committee noted that notwithstanding the fact that Aboriginal artists have the same legal rights as other artists under Australian law, Aboriginal artists' rights have historically been more likely to be disregarded than the copyrights of non-Aboriginal artists. The Committee's view was that this was caused by widespread ignorance of copyright on behalf of both artists and would-be users of it.

(iii) Difficulties experienced by museums and art galleries in acquiring reproduction licenses for the use of Aboriginal art. Submissions made by collecting institutions suggested streamlining of procedures for the reproduction of artworks, particularly in respect of non-commercial reproduction for promotion of exhibitions, inclusion in catalogues and for educational purposes. The Committee noted that Aboriginal artists have suffered particular disadvantage because of their often remote location so that even when potential users of material wanted to obtain the artist's permission for use of their work, where an artist could not be located the result was either that their work was not used, or that it was used without permission. The Committee regarded either consequence as risking offence to both personal and artistic integrity. (This view was also supported by submissions made to the present Report.)

(iv) The lack of standard guidelines to assist with negotiations of fees. The lack of such guidelines resulted in complaints by copyright owners of unconscionable underpayment; and by users of unreasonably high demands.

(v) The prohibitive cost to individual copyright owners of bringing infringement actions. The Committee noted the unsuccessful approaches which had been made to Aboriginal legal aid services in Sydney and Melbourne on behalf of Aboriginal artists, and the limited resources of these organisations.

With the exception of the funding of AAMA, little has been done to improve the position of the Aboriginal artists as described in the Altman Report. Since then, the cases of Johnny Bulun Bulun, and other actions brought by Aboriginal artists for infringement of their copyright by the manufacture of t-shirts appropriating their designs, have been possible through the limited funding from North Australian Legal Aid Service, the Federal Government and the Australia Council to fund the odd case. Although these cases are important, they are not the stuff of systemic reform.

The Altman Report was not convinced that a specialist Aboriginal copyright collection agency was warranted notwithstanding the copyright related issues which impact specifically on the creative output of Aboriginal and Torres Strait Islander artists. There is no reason to divide the interests of Aboriginal and non-aboriginal artists. Both need such an organisation. Both can ensure that their respective interests are taken into account through a structure that ensures that the interests of all of the relevant rights owners are represented.

A visual arts collecting society will not compete with existing organisations; it will complement and supplement them. In time it may also be a useful additional source of funding to support them. For example, AAMA investigates copyright infringements and supports action taken by other agencies in test case infringement actions. It negotiates copyright clearances and fees for the use of their members' work. VISCOPY, by virtue its centralised nature, could co-operate and build on both aspects of this work by working together with AAMA on educational programs, and administering the rights which Aboriginal and Torres Strait Islander artists grant in consultation with AAMA. There must be consideration of the extremely complex religious, cultural and economic issues which exist in the market for the exploitation of Aboriginal art. It is suggested that VISCOPY would not seek to usurp AAMA's role as the primary educational and advisory resource for Aboriginal and Torres Strait Islanders, but rather would rely on AAMA's unique expertise in an equitable distribution of copyright fees for Aboriginal and Torres Strait Islander artists: work that AAMA is presently inadequately resourced to do.

Discussions were held with AAMA. These indicated that the establishment of VISCOPY is seen by their constituency as a positive contribution to the problems faced by aboriginal artists.

34.6 THE IMPACT OF NEW TECHNOLOGIES

Historically there has been a view that the major source of income for visual artists has been the sale of their original work. If this were once true, it is no longer for the vast majority of arts practitioners. Whilst this is not the place to give comprehensive coverage to the concerns of visual arts copyright owners with regard to the impact of new technologies, it is obvious that digital technology in particular has dramatically changed both the creation, storage, distribution, transmission, application and manipulation of copyright material. Now that technology such as CD-Rom can merge (converge) text and image without discrimination as to class of work or subject matter in which copyright subsists, it is axiomatic that artistic works should be treated in the same way as literary and musical works.

34.7 AUSTRALIA'S STANDING IN INTERNATIONAL COPYRIGHT PRACTICE: LAW, TRADE AND CULTURAL AWARENESS

Australia has a creditable record of commitment to international copyright conventions, particularly by its memberships of the Berne Convention, Universal Copyright Convention and most recently the World Trade Organisation.

Whilst none of these conventions requires copyright administration by a centralised agency, the lack of a visual arts collecting society limits the effectiveness of the enforcement of Australian visual arts copyright in the international arena which has, since the late 1970s, increasingly operated as a federation of national collecting societies.

34.7.1 GATT

Central to Australia's participation in the GATT is the improvement of its standing in the international trade in intellectual property works (from which it is argued benefits will flow to copyright owners). Without a sufficiently expert, efficient and comprehensive copyright agency to administer the rights and obligations which Australia assumes by virtue of its GATT membership, it denies itself the full benefit of its international participation, as well as denying the flow-on benefits to copyright owners.

34.7.2 Arrangements With Overseas Copyright Collecting Societies

There are visual arts collecting societies in over 30 countries. Each develops national standards of industry practice in the licensing of copyright to users, and each negotiates reciprocal arrangements for the international enforcement of their members' copyright. There are, for instance, such agencies in the United Kingdom, the United States, France, Germany, Canada, Japan, Scandinavia, South Africa and Eastern Europe. Each belongs to the Confederation of International Societies of the Graphic and Plastic Arts and Photographers (CIAGP), a subsidiary council of the Confederation of International Societies of Authors and Composers (CISAC).

On 6 June 1994 CIAGP resolved to offer VISCOPY reciprocal agreements with their societies as soon as it is operational. Moreover, the Chief Executive of the United Kingdom visual arts collecting society, DACS, has written to the Chairman of NAVA that DACS will hand over administration of the rights of Australian visual arts copyright owners to VISCOPY once it is established. Having the rights of Australians administered by a United Kingdom representative is clearly unsatisfactory and cannot continue.

With this international standing VISCOPY would be assured of an operational base and international presence, to which Australia is already entitled by its participation in the GATT. It is highly unlikely that an agency not exclusively concerned with the interests of copyright owners in artistic works would be accepted into CIAGP.

Guldberg analysed information relating to 10 overseas visual art collecting societies for 1988 to 1991. In summary, he found a trend rate of growth amongst them of 28.8% pa, and that the three largest activity areas were reproduction rights, resale right and reprography. Guldberg notes a "spectacular 70% jump" in reprography rights in 1991 and growth in revenue from cable and broadcasting rights. The growth of collections in all areas significantly or greatly exceeded the rate of inflation.

It is obviously impossible to apply overseas experience in any general or direct way to the Australian legislative, economic and cultural context, but the economic review of these agencies highlights what work can be done by visual arts collecting societies so long as they achieve critical mass quickly and are administered efficiently and by people with appropriate expertise.

The legal, cultural and economic benefits of CIAGP membership for VISCOPY will include:

(i) Income for, and a policing service against unauthorised exploitation of the works of, Australian artists internationally.

(ii) Promotion of responsible use of copyright internationally.

(iii) Practical recognition of Australia's status as a 'most favoured nation' trading partner in the international visual arts copyright market.

(iv) Development of the international market for the use of Australian copyright material.

All of these benefits are of particular importance to Aboriginal and Torres Strait Island visual artists, for the reasons set out above.

34.7.3. International Awareness Of Australian Culture

The arts sector sells Australia overseas both as exports of works of art and as tourism. As has been noted above, inadequate enforcement mechanisms provide a tacit licence for the unscrupulous and unremunerated exploitation of copyright material. On an international level this has several consequences. First, it obscures the cultural complexity of Aboriginal and Torres Strait Islander Art; second, it hampers the potential for visual artists to achieve international recognition. On a national economic level it prevents Australia from maximising the economic potential of the cultural sector, because copyright users are prone to exploit copyright work without accreditation, or use other material altogether if a copyright owner is too difficult to find. Both the artist and Australia suffer.

34.7.4. Conclusion

At a time when participants in international affairs are increasingly identified as bloc territories, it is crucially important that Australia is represented in the international forum to the same level as are other countries, if only to guarantee its standing. In the field of international intellectual property law and practice the industry has increasingly organised itself around the centralised collecting agencies, whose charter and expertise are the representation of the interests of the classes of copyright owners who are their members. Those agencies are anxious for the establishment of VISCOPY for the mutual benefits they perceive this will provide their members, and the uniformity of copyright practice internationally. This view is consistent with the rights and obligations Australia has negotiated for itself at the level of international law. It needs a complementary mechanism to give those rights and obligations practical effect.

34.8 A SEPARATE COPYRIGHT COLLECTING AGENCY

Given that a copyright society for the visual arts is necessary, the question must be asked whether it needs to be a stand-alone society or whether its function could be undertaken by an existing society. The recommendation of this Report is that the society have a separate structure and management. The reasons are as follows:

(i) Copyright collecting societies have traditionally represented the legal and economic rights of copyright owners according to the areas in which those rights owners operate. Collecting societies achieve credibility with both rights holders and rights users through their expertise in representing their members' interests. Each class of copyright owner has different interests, not always compatible. Accordingly, a collective administration must be owned and administered by representatives of the relevant rights owners - the artists.

(ii) Copyright collecting societies are complex commercial and cultural institutions. One of the primary objectives of any responsible copyright collecting agency is to minimise operating costs without jeopardising its members' interests, and as this Report has discussed, there are only limited economies of scale which a collecting society can achieve by merging.

VISCOPY can benefit from many of the investments and progress which existing agencies have made in their operations and thereby reduce its establishment and running costs, but existing agencies cannot afford to represent copyright owners in artistic works without either neglecting the administration of their members' interests, or charging more for the services they provide. In other words, there are limited economies of scale across industries.

(iii) Distinct commercial practices exist in the cultural sector around particular art forms. Accordingly, copyright collecting societies need to provide services which are appropriate to the rights and practices of copyright owners, and obligations and practices of copyright users. In particular, copyright collecting societies develop sophisticated databases which can store detailed information about the works, analyse information gathered about use of those works, and calculate distribution to rights holders of fees collected from rights users. Therefore, whilst there can be scope for clear scale economies within industries (making it sensible to establish a single collection agency within the visual arts), there is less scope for economies across industries, and therefore no economic justification for merging the activities of a visual arts collecting society with those of another.

(iv) A separate visual arts collecting society would be well placed to represent the interests of Aboriginal and Torres Strait Islander visual artists. The Society would not only collect fees on behalf of such owners but would be able to co-operate with existing organisations and extend the educational work they undertake to educate the owners and users of copyright in such works.

(v) Copyright collecting societies for the visual arts in other countries are run independently from other copyright collecting societies (for the reasons set out above). They set national standards, fees and tariffs, and negotiate international arrangements through a federation of visual arts collecting societies. Australia needs to be included in this federation in order to reap the maximum potential of international copyright protection for Australian visual arts copyright owners. This could be jeopardised if a visual arts collecting society were established within another collecting society in Australia.

34.9. THE FUNDING OF THE ESTABLISHMENT PERIOD

As shown earlier in this Report, the traditional way for funding the establishment of a collecting society is through the investment, loan or gift of moneys from leading corporate entities within the relevant industry sector. This is not available to visual artists. They lack an alliance with any commercial organisation of financial substance. Unlike owners of copyright in books, sound recordings, musical works and literary works, by the nature of the practice of visual arts, the visual arts has no equivalent to the Australian Record Industry Association ("ARIA") or the Australian Book Publishers Association and Australian Society of Authors ("ABPA" and "ASA" respectively).

CAL is the only collecting society that has a potential role in assisting with the establishment of VISCOPY. It has already made a loan of $30,000 to NAVA to fund the consultancy which resulted in the Serventy Report. This loan has been written off and is therefore best viewed as a grant that the Society has already made towards the establishment of the new Society. To expect CAL or AVCS to contribute by way of further major grants is unrealistic. They represent a particular group of rights owners that may sometimes include, but is certainly not synonymous with, the rights owners represented by VISCOPY. Existing societies:

(a) cannot be required or expected to fund (whether by way of loan or otherwise) the establishment of any third party organisation, let alone one that has little to do with its own legal objects, and

(b) would be subject to considerable criticism from its own membership if it were to spend large sums on the establishment of an organisation that was not for the benefit of its general membership.

The owners of copyright in artistic works in Australia therefore suffer under a dual economic disadvantage in comparison with other copyright owners: they lack both a copyright collecting society and a potential industry investor in one.

Copyright collecting societies are expensive to establish and to administer. In considering the following projections, it must be taken into account that they are predicated upon the repeal of s. 135ZM and the introduction of a statutory educational licence. Accordingly, any delay in introducing those amendments will necessarily affect the projections and thus the financial viability of the society.

Source: HH Guldberg Income Research for proposed VISCOPY Collection Agency Sydney 1993

One praiseworthy feature of the VISCOPY proposal which NAVA has submitted to the Government is that its expenditure projections take advantage of the scope for co-operation with:

• sister collecting societies (for example access to CAL's database and computer software; splitting administration of reprography of artistic works between CAL for its collection and VISCOPY for its distribution. CAL has agreed to co-operate in this.),

• support organisations (AAMA with respect to arrangements for Aboriginal and Torres Strait Islander artists, the Arts Law Centre of Australia, NAVA and the Australian Copyright Council with regard to educational programs),

• overseas societies and

• major collecting institutions.

But even with expenditure at the minimum required for viability, as Table 1 shows, the estimated funding requirement of VISCOPY is $380,000 for the first year.

What overseas and Australian experience shows is that the success (which will include self-funding status) of a copyright collecting agency depends on guaranteed resources and achieving critical mass in its early years. Guldberg's analysis confirms that VISCOPY can achieve the latter so long as it has the former.

The Federal Government is the only body with the resources to enable VISCOPY to become properly established.

34.10 GOVERNMENT ASSISTANCE

34.10.1. Introduction

Overseas, governments have made financial contribution to the establishment of copyright collecting societies where appropriate. For example, this has happened in the visual arts in Germany and Canada. Both organisations are now self-funding.

There is no reason in principle why governments should not fund copyright collecting societies. The relevant questions for Government relate to establishing a need for such investment, the feasibility of the aims of the society under consideration and proximity to Government's policy concerns in the relevant sector.

It is appropriate for the Government to contribute support to this disadvantaged community sector on three levels: financial, legislative and political.

34.10.2. VISCOPY's Place In The Cultural Strategy

In anticipation of the National Cultural Policy to be delivered later this year, the most accessible expression of the Government's focus is probably contained in the objectives outlined by Senator McMullan when he was Minister for the Arts, and the ALP's 1993 Federal Election policy. Those objectives are:

(i) Co-ordination of the cultural activities of different Federal departments.

(ii) Encouragement of co-operation between organisations working in the same field.

(iii) Maximising the industry and economic benefits to be gained from cultural activity.

(iv) Making the best use of the revolutions in communications and technology.

(v) Acknowledging the pluralist nature of Australian society.

(vi) Improving access to cultural activity for participants and consumers.

(vii) Conservation of Australia's cultural heritage in all of its diversity, and encouragement and assistance to what is distinctly Australian.

VISCOPY gives the Government the opportunity to implement each of these objectives.

34.11. SEED FUNDING FROM THE FEDERAL GOVERNMENT

The primary objective of a copyright collecting society is to secure maximum income for its members on an equitable distribution. Government allocation of funds to a project which encourages financial independence for a comparatively deprived community within an important economic and cultural sector of industry is an appropriate contribution for Government to make.

The objectives of VISCOPY are entirely consistent with the Federal Government's objectives in its support for the arts. VISCOPY will contribute to the strengthening of financial independence of the visual arts sector, improve artists' revenue, provide an orderly framework for the exploitation of copyright by users, protect works of cultural heritage and promote Australian visual arts to the world.

Experience in both Australia and overseas shows conclusively that the success of a copyright collecting society depends very much in its early years on having sufficient financial support - and that this support must be patient. However, as both CAL and AVCS show, collecting societies can be self-funding given sufficient early critical mass and financial security.

Unlike all other classes of copyright owner, the owners of visual art copyrights lack a potential institutional investor who has either access to funds, or security for funds, or the means to expect no return on investment, for five years.

Accordingly, it is recommended that the Government provide seed funding for the establishment of a collecting society for the visual arts. The funds which VISCOPY needs are small and short term in comparison with the long term significance of the project for the practice of visual arts in Australia, for the international awareness of Australia's culture, and for Australia's standing in international intellectual property law and practice.

VISCOPY will not need open-ended funding. Its progress should be monitored, and funding could be adjusted accordingly. The research referred to in this Report indicates that VISCOPY is an ultimately self-funding proposal.

As to the quantum or duration of Government support, under the present legislative regime it would be irresponsible to suggest that such support be less than four years with $380,000 in year 1 (calendar year 1995) and up to $1.1 million over four years, as presently sought by VISCOPY. However, Government can minimise its financial contribution to the establishment of the society by immediately enacting the recommendations made herein for the repeal of section 135 ZM and the introduction of a statutory licence for the reprographic use of copyright material in artistic works.

The prompt introduction of these legislative measures would enable Government to reduce its financial support to just $700,000 over the first two years of the Society's existence (see Guldberg, Table 3.5, para 3.6).

34.11.1. The Amount

The confidential Business Plan prepared by NAVA in December 1993 is a useful document in that it sets out the likely income and expenditure of VISCOPY in its initial years. Such projections can only be a matter of considered surmise but the cost projections which are provided in the business plan appear reasonable as do the relevant explanatory notes. The plan anticipates expenditure in year one of $403,000; year two, $380,000; year three, $404,000; year four, $441,000; and year five, $462,000.

If there is a criticism to be made of these projections, it is that there has been insufficient moneys budgeted for the marketing and promotion of the new society. The present plan implies that it will be the responsibility of the CEO to promote the society and this is not necessarily the most effective approach. The success of the society is going to be affected greatly by the success of the early marketing strategy and program. To this end, a further $40,000 per year for the first two years should be budgeted towards marketing expenses. Thus the projected expenditure for year one would be $443,000 and year two, would be $420,000.

Given the above, it is suggested that the Government support in year one should be $400,000, and year two, $300,000. The greater amount is recommended in the first year to take into account the start-up capital costs and the fact that little earned income can reasonably be expected in the first year.

34.11.2. Loan Or Cultural Investment?

It is recommended that Government not treat its contribution to establishment costs as some species of loan. To saddle the new organisation with this size of debt would be to give it birth with one hand and cripple it with the other. A preferable strategy would be, at break-even point, to require an amount equivalent to fifty percent of the Government's grant to be paid into the Society's Cultural and Benevolent Fund and the remaining fifty percent to be expended on informing the relevant rights owners about the society and its services. (One of the problems that this Report has highlighted in respect of the existing societies, is that many of their problems are perceived rather than real and that much of the misinformation concerning them would be overcome by better targeted and more comprehensive programs to inform the relevant community about the society's goals, machineries and achievements. Government can help the new Society get it right.)

34.12. STRUCTURE OF VISCOPY

To ensure full accountability, it is recommended that VISCOPY should conform with the prescriptions and procedures of declared copyright collecting societies and the criteria set out in this Report for Qualified Societies.

In particular, it is strongly recommended that no organisation should have the ongoing right to appoint members to the board of the company. All members must have the right to board membership and no one organisation should have an automatic right to membership or control. In particular, although NAVA is to be congratulated in taking the leading role in the campaign for a collecting society for the visual arts, it should have no entrenched place in the structure of VISCOPY beyond the Society's first year of operation. It is a means of providing an equitable and transparent collective administration for all relevant rights owners.

34.13. RECOMMENDATIONS

• That VISCOPY to be included in the National Cultural Strategy

• That s.135ZM of the Copyright Act be immediately repealed.

• Amendment to Part VB of the Copyright Act to provide a statutory licence for the reprography by educational institutions of artistic works which accompany text

• That the Government provide seed funding for the establishment of a collecting society for the visual arts.

• Commitment to fully accountable seed funding for VISCOPY for a minimum of seven hundred thousand dollars over two years and a maximum $1.1 million over five years, depending on the speed with which s. 135ZM is repealed and the statutory educational copying right is introduced.

• That Government not treat its contribution to establishment costs as some species of loan but rather require that at break-even point, the Society be required to pay an amount equivalent to fifty percent of the Government's grant into the Society's Cultural and Benevolent Fund and to spend the remaining fifty percent on informing the relevant rights owners about the society and its services.

• Declaration of VISCOPY as a declared copyright collecting society to administer the rights subject of statutory licence subject only to appropriate review of its Articles and Memorandum so as to ensure equity of membership, control and accountability and its compliance with the criteria set out in this Report for Qualified Societies.

• That no organisation have the ongoing right to appoint members to the board of the company. All members must have the right to board membership and no one organisation should have an automatic right to membership or control.

35. NEW TECHNOLOGIES

35.1. AMCOS

35.2. APRA

35.3. AVCS

35.4. CAL

35.5. PPCA

It is in this area that there seems to be a need for further study.

There are currently over 20 million Internet users. 2.2 million computers are connected to the 'net' which links 27000 networks in 70 countries. The number of users is doubling annually. (Figures for growth rate vary widely.) [Source: The Global Connection, Draft ASTEC Report 1994]

In the USA all undergraduate students get a 'net' address and many are avid users. Although there are "copyright" reminders on many of the items available on the net, the "ethics" on the net seem to be that everything is free and should be made freely available to all especially the socially and economically disadvantaged and those in remote areas where access to information services is otherwise poor.

As the price/performance of computers continues to improve the possibilities for collecting, transmitting and receiving music of good quality across the net increase. In a news report on ABC television on 29th June, there was a report of the first "record" company (in the USA) who had decided to "publish" a work on CompuServe, a commercial branch of the Internet, instead of cutting and distributing records. The sound quality, given the appropriate computer equipment, is reported to be much better than that of the average CD.

On a home Macintosh computer costing less than $A4000 very good quality sound can now be received and enjoyed. The ability to send a 'file' containing sound to all 20 million net users exists now, or to 'post' sound to a newsgroup from which anyone who cares can 'take' a copy. American students are using the net to 'broadcast' new and original music because it is free and fun.

The net is currently more used for the dissemination of printed matter and whole books, magazines and articles are being scanned in for pick up by any net member. As communications bandwidths improve sound and visual images will be transmitted more frequently.

At the recent Copyright Convergence Conference, held in Sydney on 23rd June 1994, it was obvious that although many participants understood the possibilities, few understood the way in which copyright dues could be collected.

Multi-media is another new emerging technology that is providing challenges to copyright collecting agencies. With multi-media being used in many teaching and home productions, APPLE's multimedia software, Quick-time is free to all who ask, it will be more difficult to collect copyright dues than currently envisaged. The extent to which Distance Education will use sound, book, film and video clips has not been quantified and is increasing rapidly. Also there is a growing trend towards the delivery of "continuing" education and private education providers all of whom are heavily investing in multi-media techniques for delivery.

The attitude of each of the Collecting Societies under review to new technologies differs fairly widely.

It is strongly recommended that, as a matter of urgency, further study is made of the impact of new technologies on copyright collecting societies and potential new methods of collection.

35.1. AMCOS

The Chief Executive of AMCOS, is following the impact of new technologies on his business very closely. He is experimenting with the Internet personally in an attempt to gain a further understanding of the facilities available.

35.2. APRA

APRA Executives appreciate many of the issues involved in collecting dues under the new technological environment but, like many others, are unsure of the effect it will have on their business.

35.3. AVCS

AVCS, like many enterprises, does not appear to appreciate the extent of facilities for electronic interchange that are already provided by the Internet. The Chief Executive, believes that as the Internet is covered by copyright, a way will soon be found to enable dues to be collected.

35.4. CAL

Of all the collecting societies, CAL appears to have the best grasp of the implications of new technologies on their business. CAL's Chief Executive, has followed the development of processes to collect copyright dues under the new technologies. Whilst not yet having all the answers, he is well informed of the issues and overseas initiatives to find solutions.

35.5. PPCA

The Executive Director of PPCA has a very good understanding of the impact of new technology on the record industry. He participates in several UK and European industry forums and is actively trying to increase his personal understanding of the use of technologies such as the Internet.

RECOMMENDATION

• That, as a matter of urgency, further study is made of the impact of new technologies on copyright collecting societies and potential new methods of collection.

APPENDIX ONE

STRUCTURE OF INQUIRY

MADE OF

EACH SOCIETY

A. GENERAL OUTLINE:

• WHAT ARE COLLECTING SOCIETIES?

• WHAT DOES EACH DO?

• HOW DO THEY DO IT?

• FOR WHOM DO THEY DO IT?

• DO THEY DO IT FAIRLY?

• DO THEY DO IT EFFICIENTLY?

• WHAT LEGISLATIVE CHANGES WOULD ASSIST THE SOCIETIES?

• WHAT IS THE FUTURE OF THE SOCIETIES?

• DO THEY BENEFIT THE CULTURAL ECONOMY OF AUSTRALIA

B. QUESTIONS OUTLINE:

1. BACKGROUND

• historical background

• legal structure

• management plan

2. JURISDICTION

• geographical jurisdiction of the society

• offices and staff outside Australia

• supervision of the territory

3. RIGHTS ADMINISTERED

• the rights administered by the society

• legal relationship between society and rights owners

• whether the right administered is voluntary or non-voluntary

• degree of monopoly control by the society of the right administered

• equity of treatment of members

• degree of control over the right that is retained by a member

• licensor indemnity

• effect of new technology on the rights administered

• "non-voluntary" versus "collective administration"

4. MEMBERSHIP

• classes of society membership

• number of members

• methods used to attract and enlist new members

• published information for copyright owners

• eligibility requirements

• fees and/or commission charged

• activeness of membership

• representativeness of membership

• services or benefits provided

• annual report

• communication with members

5. GOVERNING BOARD

• size of board

• means of election

• degree of member representation

• voting power between board members

• term of board membership

• remuneration of board members

• frequency of meetings

• attendance at meetings

• record keeping

• delegations to staff

6. ACCOUNTS

• ease of comprehension

• frequency of audit

• reporting requirements

7. COLLECTION OF REVENUE

• gross sum collected

• collection income received from overseas sources

• role of non-members

• number of licences granted each year

• number of individual works licensed each year

• description of licensees

• geographical location of licensees

8. OWNER IDENTIFICATION

• processes/techniques used to identify copyright owners

• processes/techniques review systems

• criticisms of the processes/techniques

• training of those who participate in the processes/techniques

• role of Copyright Tribunal in determining the processes/techniques

• cost of the identification process, relative to the royalty it generates

• plans to change the identification processes/techniques

9. DISTRIBUTIONS

• processes/techniques used to quantify royalties

• frequency of distributions

• qualifications of recipients

• the distribution process

• proportion of gross income distributed to members

• use made of undistributed income not spent on direct administration

• use of undistributed money where owner unidentified or located

• use of escrow or trust accounts

• amount distributed to overseas copyright owners

• quality of accounting for royalties collected by the society?

10. THE SETTING OF RATES FOR COPYRIGHT USAGES

• the process by which the society sets the rates of fee/royalty

• equity of the rate setting process

• recommendations as to how the rate setting process might be improved

• degree of government control over the licensing procedures

• relevance and effectiveness of the Copyright Tribunal

• published material available as to the rates and how those rates are struck

11. ENFORCEMENT

• policing of rights performed by the society

• maintenance of a fighting fund for dealing with infringement cases

• enforcement policy

• role in promoting law reform and government policy formulation

12. COMPUTER ADMINISTRATION

• computer hardware/software appropriateness and efficiency

• computer location

• ownership

• administration

13. ADMINISTRATIVE EXPENDITURE

• technique for determining administrative deduction

• percentage of gross income spent for administrative purposes

• number function and location of staff

• cost effectiveness of overseas administrative expenses

• staff entertainment or amenities

• overseas travel

• cars

• awards night or like functions

• executive remuneration

• ownership value and indebtedness of premises

• sharing of administrative resources

• membership or affiliation fees

• loans to any other organisation or person

• co-operation or merger of societies

• declared collecting societies

14. EDUCATIONAL ACTIVITIES

• educational activities undertaken and planned

• target audience

• amount of funds contributed by society

• criteria used to select educational programs

• criteria are used to determine success

• reporting criteria

• international treaty or society rules

15. TAXATION

• tax status

• treatment of foreign copyright owners

• society as tax collector

16. FOREIGN SOCIETIES

• affiliation with international network of collecting societies

• reciprocal arrangements

• basis of distributions

• proportion of the society's income paid overseas

• proportion of the society's income received from overseas

• terms upon which overseas distributions are made and received

• efficiency of foreign societies in representation of local society

• deductions by the local society prior to overseas remittance

• deductions by the overseas society prior to Australian remittance

• role of umbrella organisations

• standardisation of documentation with overseas societies

• use of electronic data transfer and processing between societies

17. TRADE PRACTICES ACT

• impact of the monopoly provisions of the TPA on society operations

• registration of agreements with the Trade Practices Commission

• amendments to TPA for the good governance of the society

18. COPYRIGHT ACT

• role of Copyright Tribunal

• jurisdiction of the Copyright Tribunal

• amendment to role or jurisdiction of Copyright Tribunal

• introduction of any additional statutory licences

• amendments to the Copyright Act necessary

19. NEW TECHNOLOGIES:

• effect of emerging and new technologies

APPENDIX TWO

CONTACTS AND SUBMISSIONS

These were written to and asked if they had views that they wished to put to the Inquiry. Many simply didn't reply; others made initial contact and said that they would make a written submission - and didn't; others did make useful submissions.

The following organisations were contacted, or having heard about the Inquiry from other sources, made contact of their own initiative.

KEY: * = no response; PA = personal attendance/meeting; TR = telephone response; WR = written response; WR&ampS = written response and submission.

APPENDIX THREE

ADDITIONAL COLLECTING SOCIETIES

The focus of this Report is the five major collecting societies. There are at least three other licensing/collecting societies in Australia. They are newly established and the ambit of their operation is limited to the licensing of religious music for use in worship.

These organisations are:

Word Of Life Pty Limited

MediaCom Associates Inc (LicenSing)

Christian Copyright Licensing Pty Limited

Each of the above provided responses to the Inquiry questionnaire but the commissioners decided that the focus of the Report should be the five major societies. Accordingly, the commissioners have been supplied with the above responses in the supporting information and materials which accompanies the Report.

APPENDIX FOUR

GLOSSARY

ABPA: Australian Book Publishers Association

ACLIS: Australian Council of Libraries and Information Services

AEROS database: Australian Electronic Record Ordering System

AMMF: Australian Music Managers Forum

ANZ Music Copyright Agency: predecessor to AMCOS

ARIA: Australian Record Industry Association

ASA: Australian Society of Authors

ASCAP: American Society of Composers , Authors and Publishers

assignment: transfer of ownership of rights

Attorney-General's Guidelines: Rules developed by the Attorney General's Department by which the Declared Societies are required to operate

AMPAL: Australian Music Publishers Association Limited

AVCC: Australian Vice-Chancellors' Committee

BIEM: the international society of mechanical copyright owners

BillBoard: American music magazine

Blank Tape Levy: Mechanism for rewarding the copyright owners whose works are reproduced by home taping of records and broadcasts

blanket licence: a licence relating to a species of copyright material cf. a licence for an individual work or recording, usually permitting use of such material for a set fee, irrespective of the which particular item within the species is used. The royalty liability is not directly related to the number of works used.

BMI: Broadcast Music Inc

PRS: British Performing Right Society

CAE: Compositeur-Auteur-Editeur, the composers authors and publishers register maintained by SUISA

CD Rom: An optical compact disc which is written at the factory and can only be read - not altered by the viewer/listener

CIAGP: Confederation of International Societies of the Graphic and Plastic Arts and Photographers , a subsidiary council of CISAC

CISAC: Confederation of International Societies of Authors and Composers

collective administration: a system of copyright administration whereby owners of rights authorise collective administration organisations to administer their rights, that is, to monitor the use of the works concerned, negotiate with prospective users, give them licences against appropriate fees and, under appropriate conditions, collect such fees and distribute them among the owners of rights..

CORS: Copyright Owners Reproduction Society Limited , predecessor to AMPAL

DACS: Designers and Artists Copyright Society (U.K.)

cover recordings: recording by a performer other than the composer of the work

cue sheet: document that lists all music in a program, the order of performance, the time each performance rubs, the names of the work's composers and publishers and performing rights society affiliations

Declared Societies: collecting societies which are formally declared under the Copyright Act and which operate pursuant to the Attorney General's Guidelines

dormant repertoire: works which are registered with the society but which have not been reported as having been exploited for many years.

EDI: Electronic Data Interchange

fiches internationales: international system of index cards indicating details of a work, author, the author's number, publisher/sub-publisher details, performing right %s and mechanical rights %s

Grand Rights: the right to perform or broadcast a dramatico-musical work, an oratorio or long choral work, or a work in association with ballet

IDC: Inter-Departmental Committee

IFPI: the International Federation of Phonograph Producers

IFRRO : International Federation of Reproduction Rights Organisations

Independent: a record company that is not owned by one of the Major companies

Library recordings: also known as Production Music

licence: permission to use one of the rights which is within the exclusive control of the copyright owner

Major: One of the six largest record companies in the country: BMG, Sony, EMI, Festival, Polygram and Warner Music

MCPS : UK mechanical copyright society

mechanical royalty: the royalty paid for the right to reproduce a work in a recording

MIDI files: discs of digitally sampled sounds which can be manipulated

NAVA: National Association for the Visual Arts

neighbouring rights:

non-profit companies limited by guarantee: companies that do not have a shareholding and in which persons become members by guaranteeing that in the event that the company is wound up and the liabilities of the company exceed its assets, they will pay an agreed sum towards to deficit: usually $20. They are "non-profit" in that any profits made by the company must be spent on the objects of the company rather than paid out to the members.

PACCS: Private Audio Copyright Collecting Society

PPD: Published Price to Dealers

Production Music: library or mood music

RROs: Reproduction Rights Organisations

RIANZ: Record Industry Association of NZ

RRA: royalty rate advice

Small Rights : all performing rights that are not Grand Rights

statutory or compulsory licence: a licence granted by statute whereby a person can use a copyright, irrespective of the owner's wishes, provided that the user fulfils the statutory pre-conditions for such use

statutory rate: the term used to describe the fee set by the Copyright legislation as being payable in respect of the compulsory licence permitting the reproduction of a musical or literary work in a sound recording

SUISA : the Swiss performance collecting society

synchronisation: the embodying of music in the sound-track of a film

WIPO: World Intellectual Property Rights Organisation