[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




            FAIR USE: ITS EFFECTS ON CONSUMERS AND INDUSTRY

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                COMMERCE, TRADE, AND CONSUMER PROTECTION

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 16, 2005

                               __________

                           Serial No. 109-78

                               __________

      Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

                               __________


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                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

RALPH M. HALL, Texas                 JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida             Ranking Member
  Vice Chairman                      HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky               SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia             BART GORDON, Tennessee
BARBARA CUBIN, Wyoming               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
HEATHER WILSON, New Mexico           BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona             ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING,       ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman           GENE GREEN, Texas
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania        JIM DAVIS, Florida
MARY BONO, California                JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                  HILDA L. SOLIS, California
LEE TERRY, Nebraska                  CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey            JAY INSLEE, Washington
MIKE ROGERS, Michigan                TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho          MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee

                      Bud Albright, Staff Director

        David Cavicke, Deputy Staff Director and General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

        Subcommittee on Commerce, Trade, and Consumer Protection

                    CLIFF STEARNS, Florida, Chairman

FRED UPTON, Michigan                 JAN SCHAKOWSKY, Illinois
NATHAN DEAL, Georgia                   Ranking Member
BARBARA CUBIN, Wyoming               MIKE ROSS, Arkansas
GEORGE RADANOVICH, California        EDWARD J. MARKEY, Massachusetts
CHARLES F. BASS, New Hampshire       EDOLPHUS TOWNS, New York
JOSEPH R. PITTS, Pennsylvania        SHERROD BROWN, Ohio
MARY BONO, California                BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  GENE GREEN, Texas
MIKE FERGUSON, New Jersey            TED STRICKLAND, Ohio
MIKE ROGERS, Michigan                DIANA DeGETTE, Colorado
C.L. ``BUTCH'' OTTER, Idaho          JIM DAVIS, Florida
SUE MYRICK, North Carolina           CHARLES A. GONZALEZ, Texas
TIM MURPHY, Pennsylvania             TAMMY BALDWIN, Wisconsin
MARSHA BLACKBURN, Tennessee          JOHN D. DINGELL, Michigan,
JOE BARTON, Texas,                     (Ex Officio)
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Adler, Prudence S., Associate Executive Director, Federal 
      Relations and Information Policy, Association of Research 
      Libraries..................................................    29
    Aiken, Paul, Executive Director, Authors Guild, Incorporated.    62
    Band, Jonathan, Netcoalition.................................    32
    DeLong, James, Senior Fellow and Director, Ipcentral 
      Information, Progress and Freedom Foundation...............    43
    Hirsch, Frederick, Senior Vice President, Intellectual 
      Property Enforcement, Entertainment Software Association...    56
    Jaszi, Peter, Washington College of Law, American University.    16
    Shapiro, Gary J., President and Chief Executive Officer, 
      Consumer Electronics Association...........................    22
    Sohn, Gigi B., President and Founder, Public Knowledge.......    36

             Additional Material Submitted for the Record:

Black, Edward J., President and CEO, Computer & Communications 
  Industry Association and the Open Source & Industry Alliance, 
  prepared statement of..........................................    88
Jaszi, Peter, Washington College of Law, American University, 
  letter dated November 22, 2005, to Hon. Cliff Stearns..........    97
Sun Microsystems, Inc., prepared statement of....................    98

                                 (iii)



 
            FAIR USE: ITS EFFECTS ON CONSUMERS AND INDUSTRY

                              ----------                              


                      WEDNESDAY, NOVEMBER 16, 2005

              House of Representatives,    
              Committee on Energy and Commerce,    
                       Subcommittee on Commerce, Trade,    
                                   and Consumer Protection,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:05 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Cliff 
Stearns (chairman) presiding.
    Members present: Representatives Stearns, Bono, Ferguson, 
Murphy, Blackburn, Barton (ex officio), Schakowsky, Ross, 
Towns, Green, DeGette, and Gonzalez.
    Also present: Representative Boucher.
    Staff present: Bud Albright, staff director; David Cavicke, 
general counsel; Andy Black, deputy staff director, policy; 
Chris Leahy, policy coordinator; Will Carty, professional 
staff; Julie Fields, special assistant to the deputy staff 
directory, policy; Terry Lane, press secretary; Larry Neal, 
deputy staff director, communications; Billy Harvard, clerk; 
Jonathan Cordone, minority counsel; and Jonathan Brater, 
minority staff assistant.
    Mr. Stearns. Good morning. I am pleased to welcome all of 
you to the Commerce, Trade, and Consumer Protection 
Subcommittee hearing on ``fair use.'' The principle of fair use 
is an important if not well defined component of copyright law. 
Simply stated, the fair use doctrine allows free use of 
copyrighted material for purposes such as comment and 
criticism, news, reporting, teaching, scholarship, and 
research. To determine whether a particular use is fair, four 
factors must be applied to the facts of the case. As with most 
simplifications, the devil is in the details and fair use is 
not short on details. The fair use doctrine is a list of 
factors applied after the fact and subject to broad 
interpretations by the courts, all copying is subject to 
challenge by the copyright holder. Fair use is a defense. The 
only way for someone to know whether a use is in fact a fair 
use is to finally resolve it through litigation. This can be 
costly and time consuming.
    Further, my colleagues, complicating the inherent tension 
surrounding fair use is a rapid advancement of digital media 
and the internet to allow flawless reproduction of creative 
material and light speed dissemination of that material across 
the globe almost instantaneously. Technologies such as 
browsing, linking, and streaming were not even imagined during 
the formative years of the fair use doctrine but now are at the 
heart of a debate involving fair use and the implications of 
rapidly involving technologies. I doubt we are going to solve 
all of these issues this morning. What I would hope is that we 
can have a reasoned and thoughtful examination of the law of 
copyright and fair use, how technology is making traditional 
fair use analysis and distinctions more nuanced, and how 
consumers are fairing in the middle of all of this.
    With today's hearing, I also would like to lay the 
groundwork for further examination of H.R. 1201, my colleague, 
Mr. Boucher's bill. H.R. 1201 would allow the circumvention of 
anti-piracy, encryption technology in cases when a user intends 
to make a fair use of the underlying work. The Digital 
Millennium Copyright Act passed in 1998 (DMCA) created civil 
and criminal penalties for circumventing encryption in other 
technology designed to prevent tampering or hacking into 
copyright material. But it also can prevent fair use. I believe 
the effects of the DMCA to lock out consumers from the proper 
and fair use of material is a perverse result of the law.
    Also known as digital rights management or DRM, the DMCA 
also extends its prohibitions to those who sell or trade in 
technology design to break encryption technology or circumvent 
it. My colleagues, Mr. Boucher's bill would allow for the 
development of technologies that assist consumers in fair use 
of copyrighted material. This is a noble pursuit but when we 
consider the real and growing threat of piracy and hacking, it 
becomes very obvious that such a policy could be easily 
exploited by criminals and hackers looking to make a fast buck 
on someone else's creative genius.
    While I would like to explore the issues of H.R. 1201 that 
seeks to remedy, I think the cleaner solution to this lies in 
technology and not necessarily legislation. On that note, I 
have a number of issues that I would like to discuss here 
today. The first question I have is whether we have gotten any 
closer to that technology that would allow a limited number of 
protective copies to be made of copyrighted protected works. 
According to Mr. Valenti, who represents the Motion Picture 
Association before the subcommittee last year, he said, ``Keep 
in mind that, once copy protection is circumvented, there is no 
known technology that can limit the number of copies that can 
be produced from the original.'' So I would like to know about 
the state of the technology in this area today. I cannot think 
that this is not a solvable problem even though it is a 
challenge. Why don't we make it the copyright equivalent to the 
race to the moon so to speak? We went to the moon 40 years ago. 
It seems to me technology should afford a means of limiting the 
number of copies we can make of a protected work. Absent 
promising news on the technology front, I assume we will have 
to allow the legislative process to work and see if that will 
yield a solution, although perhaps not the best one.
    In closing, as I said last year, I support fair and 
balanced intellectual property laws but I also understand that 
the rest of the world sometimes does not play by the rules. We 
have seen that in our hearings here many times. I believe there 
is a balance to be achieved here but I think technology is the 
best way to manage that balance and protect the rights of both 
the creators of works and the consumers who purchase, use, and 
improve upon them for the benefit of all.
    And so I welcome the witnesses today and I welcome the 
ranking member, Ms. Schakowsky.
    Ms. Schakowsky. Thank you, Mr. Stearns, for holding today's 
hearing on the fair use of copyrighted material in the digital 
age.
    Technological innovations have once again opened the door 
of our subcommittee to legislative arenas that would not have 
been imagined just a few years ago. The internet digitization 
of information and E-commerce have necessitated the updating of 
laws that have been rendered ineffective or perhaps become too 
stifling because of technological advances. Today's hearing 
focuses our attention on how the availability of copyrighted 
materials in digital format effects artists, consumers, 
researchers, librarians, and hosts of industries.
    Because of the unpredictability of where technology 
developments will take us tomorrow, we have to be careful on 
proposing to update laws. As we have seen in the past and as we 
will hear today about what has happened with the Digital 
Millennium Copyright Act or DMCA, closing loopholes could end 
up shutting doors to a range of innocent bystanders. With the 
passage of the DMCA in 1998 which was before I came to 
Congress, my colleagues made a significant attempt to contend 
with the new challenges that digital capabilities introduced to 
copyright law. The DMCA was meant to stop copyright 
infringement on new digital mediums. Unfortunately, by trying 
to predict where the ever-evasive nature of technology would 
take us, the DMCA was drafted with such broad strokes that it 
swept away the fair use provisions of the copyright law and has 
been abused by those who want to squelch competition in areas 
totally unrelated to copyrights. For example, manufacturers of 
garage door openers and toner cartridges have used the DMCA to 
try to prevent their competitors from developing alternative 
and cheaper models. Remember, they are not infringing on 
copyrights or violating any patents.
    Make no mistake about it, copyrights need to be protected 
and artists need to be compensated for the work. However, when 
a law pits artists against consumers, when millions of fans are 
called criminals, when companies can use the DMCA to prevent 
new products from coming to the market, when libraries may have 
to limit or charge for services they traditionally have 
provided for free, then in my view, the law needs to be fixed.
    I believe that Mr. Boucher's and Chairman Barton's bill, 
H.R. 1201, the Digital Media Consumer Rights Act has opened the 
door to meaningful discussions about the overreaching 
applications of the DMCA even with the new questions and 
concerns it raises. I have met with artist groups, consumer 
groups, technology developers and believe that we can work 
together to craft a remedy to the DMCA that would protect 
artist copyrights, consumer rights, competition, and 
technological innovation. This is an exciting time. We are at a 
technological crossroads that is changing how we think about 
commerce, art distribution, and traditional consumer 
protection. It is our responsibility as lawmakers to make sure 
all voices are heard in this debate.
    I am glad that we are here today with so many people who 
are affected by the DMCA and its effect on fair use. I look 
forward to your testimony.
    Thank you.
    Mr. Stearns. Ms. Blackburn?
    Ms. Blackburn. Thank you, Mr. Chairman.
    I had read through some of the testimony and just want to 
make just a couple of comments even though I basically have no 
voice today. It does not seem to shut me up much.
    I want to welcome our guests and thank you all for being 
with us and we are looking forward to hearing from you. I want 
to thank the chairman for the hearing today. I think it is a 
very important hearing. I think this is a critical, critical 
issue for our country.
    As I read your testimony, I find it is like when you say 
you cannot be a little bit pregnant so how do you go snip just 
a little bit of what somebody has created and where do you draw 
that line? It is like when my children were little, I would 
say, they would say something and it would be just a little 
white lie but little white lies lead to great big lies. And I 
think we have to begin to look at this issue not as just 
piracy, not as just snippets but we have to look at it as 
theft.
    And there is an underlying reason I think we have to do 
that. It is because you may call it fair use. One of my country 
music constituents in Tennessee looks at what you want to do 
and says this is fair use for technology to steal my work. And 
many in our creative community do that, look at it that way. I 
think that is dangerous. I think we have to be very careful in 
codifying something that would allow theft and it concerns me 
tremendously. It concerns me for the economic renaissance that 
I would love to see happen in this great Nation. And I see some 
of you laughing and shaking your head and that concerns me that 
you would make light of what is of great concern. The greatest 
asset this Nation has had is our constitution. The greatest 
asset this economy has ever had, ever had is the fact that 
private property ownership has been revered and has literally 
been held sacred.
    So I thank the chairman for holding the hearing. I thank 
each of you for being here. I look forward to talking with you, 
to questioning you, and to visiting you about this issue.
    Brother, I yield back.
    Mr. Stearns. I thank the gentlelady.
    Mr. Gonzalez?
    Mr. Gonzalez. Waive opening.
    Mr. Stearns. The gentleman waives opening.
    Mr. Ferguson?
    Mr. Ferguson. Thank you, Mr. Chairman. Thank you for 
holding this hearing. It is one that I hope will clarify what 
constitutes fair use in the consumer marketplace.
    This issue of fair use is commonly misunderstood, it is 
often misinterpreted, and most disturbingly from my point of 
view, it is easily distorted. As someone who represents a 
district of industries that are leaders in research and 
development whether that is in healthcare or telecommunications 
or communications or high tech, I am acutely aware of the 
importance of an intellectual property protection and the 
responsibility that we have to protect intellectual property 
rights ensuring productivity and innovation and the deployment 
of the most advanced technologies and medical solutions for 
people all around this country and around the world.
    My wife and I have four young children and we frequently 
find ourselves as the role of the judge among them in deciding 
what is fair and what is not fair. Needless to say, our 
interpretation ends up being a bit different from our four 
young kids' interpretation of what is fair. That being said, 
the notion of what is indeed fair can take on a life of its 
own, particularly in a court of public opinion. And as one of 
our witnesses today, Mr. DeLong wrote a few years back ``A 
party who successfully grabs the label of fairness is on the 
way to victory.''
    Unfortunately when debating the issue of fair use, the 
fairness label has been used inaccurately to the advantage of 
those who perpetuate piracy and to the detriment of the 
copyright owners and ultimately the American consumer. As 
Members of Congress, we have to discard the labels and the easy 
to digest talking points and focus on what is actually 
permissible under the law. First and foremost, what is the fair 
use principle mean and what is it intended to cover? Some have 
contended that each and every person who buys a copy of a 
copyrighted work, a DVD or a CD for instance has full license 
under the fair use doctrine to make as many copies as they want 
without regard to the nature of the copying or the ultimate 
exploitation of the work. This is simply untrue.
    The determination of fair use is always, always based on an 
examination of facts ``any particular case'' including 
consideration of the four factors in Section 107 of the 
Copyright Act. Even a fair use determination in the Sony 
Betamax case which many here claim is the touchstone of fair 
use was based on a careful balancing of the four factors and 
limited in its outcome to one specific act, time shifting.
    Another argument we will hear is that under the principle 
of fair use, the public should have the ability to circumvent 
copy protection measures on DVD's and CD's so long as it is for 
a ``non-copyright infringing use.'' This subjective narrow 
view, frankly an optimistic view not only makes a substantial 
leap of faith that those who are using hacking tools are doing 
do for personal use without intention to steal, but worse, it 
undercuts the goal of the DMCA which was to promote 
experimentation and development of technologies, a goal more 
important now than ever in the digital age which is in full 
bloom. Intellectual property is our country's greatest economic 
contributor. We should not devalue it by statutorily 
instituting a buy one get as many as you like free rule.
    At the end of the day, this hearing represents the 
beginning of what I hope will be a robust and healthy debate on 
the principle of fair use and intellectual property rights 
grounded in facts and not grounded in distortions.
    Thank you, Mr. Chairman, I yield back.
    Mr. Stearns. I thank the gentleman.
    Mr. Ross?
    Mr. Ross. Thank you, Mr. Chairman and Ranking Member 
Schakowsky for having this hearing here today.
    As a relatively new member of this committee, this is my 
first hearing on fair use and I am looking forward to the 
testimony of the witnesses and the dialog that follows.
    The copyright clause of the constitution authorized 
Congress to ``promote the progress of science and the useful 
arts by securing for limited times to authors and inventors the 
exclusive right to their writings and discoveries.'' The 
copyright law is ultimately commercial law. It protects the 
creator's right to financially exercise his or her intellectual 
property. The fair use doctrine was codified in the Copyright 
Act of 1976 where four criteria were established to determine 
whether unauthorized use of a work is fair use or whether it is 
an infringing use. The history of copyright law is a history of 
law adjusting to new technology. Often these laws cannot keep 
up with the state of technological advances. As we know, the 
internet and digital technology have created new possibilities 
for methods of distribution, of popular entertainment such as 
music and film in addition to enhancing academic studies.
    Determining how fair use is applied in this digital 
environment in the concept of appropriate fair use is something 
we as policymakers must carefully consider as we contemplate 
new laws to protect the interest of creators while maintaining 
access for consumers. In the past, traditional methods of 
copyright enforcement often involve the holder against a 
middleman. Illegal replication and distribution were more 
centralized in the activities of a bootlegger or an innocent 
infringer. Today, digital technology has cut out the middleman 
which makes copyright enforcement more challenging. In 
addition, as the public's consumption of digital products 
grows, the law and technology increasingly focus on digital 
means to protect copyright interest because of the great risk 
of piracy inherent in digital media exchanged over the 
internet. Thomas Freedman in his book, The World is Flat, talks 
in great depth about this very issue and the pros and cons 
involved in what the technology today is allowing us to do.
    Today, the House is scheduled to consider H. Con. 
Resolution 230, the resolution expressing the sense of Congress 
that Russia provide adequate and effective protection of 
intellectual property rights. The U.S. Trade Representative 
estimates that U.S. businesses lost $1.7 billion in copyright 
and other intellectual property theft in the Russian Federation 
in 2004, $1.7 billion lost in Russia alone in 2004, that's 
money that cannot be spent to further develop and enhance 
products and new innovation.
    The bill expresses concern about the failure of Russia to 
uphold international standards in the protection of 
intellectual property rights, a core American asset. This asset 
is not limited to the compensation received by those who create 
or publish material but also impacts the numerous jobs created 
throughout this country and the economic revenue communities 
depend on for further growth.
    Copyright itself is an engine of free expression because it 
supplies the economic incentive to create and disseminate 
ideas. I believe it is imperative that as more information and 
products become available in this digital environment, we do 
not weaken our laws which could result in making piracy easier 
and more prevalent.
    Again, thank you for having this hearing today and I look 
forward to hearing from those who have joined us.
    And with that, Mr. Chairman, I yield back my remaining 45 
seconds.
    [The prepared statement of Hon. Mike Ross follows:]
Prepared Statement of Hon. Mike Ross, a Representative in Congress from 
                         the State of Arkansas
    Thank you Chairman Stearns and Ranking Member Schakowsky for having 
this hearing today.
    As a relatively new member of this Committee, this is my first 
hearing on Fair Use and I am looking forward to the testimony of the 
witnesses and the dialogue that follows.
    The Copyright Clause of the Constitution authorized Congress ``To 
promote the Progress of Science and the useful Arts by securing for 
limited Times to Authors and Inventors the exclusive Right to their 
Writings and Discoveries.''
    Copyright law is ultimately commercial law; it protects the 
creator's right to financially exercise his or her intellectual 
property.
    The fair use doctrine was codified in the Copyright Act of 1976 
where four criteria were established to determine whether unauthorized 
use of a work is ``fair'' use, or whether it is an infringing use.
    The history of copyright law is the history of law adjusting to new 
technology. Often, these laws cannot keep up with the speed of 
technological advances.
    As we know, the Internet and digital technology have created new 
possibilities for methods of distribution of popular entertainment such 
as music and film in addition to enhancing academic studies.
    Determining how fair use is applied in this digital environment and 
the concept of appropriate fair use is something we, as policy makers, 
must carefully consider as we contemplate new laws to protect the 
interest of creators while maintaining access for consumers.
    In the past, traditional methods of copyright enforcement often 
involved the holder against a ``middleman.'' Illegal replication and 
distribution were more centralized in the activities of a 
``bootlegger'' or an innocent infringer.
    Today, digital technology has cut out the middleman, which makes 
copyright enforcement more challenging.
    In addition, as the public's consumption of digital products grows, 
the law and technology increasingly focus on digital means to protect 
copyright interests because of the great risk of piracy inherent in 
digital media exchanged over the Internet.
    Today, the House is scheduled to consider H. Con. Res. 230, a 
resolution expressing the Sense of Congress that Russia provides 
adequate and effective protection of intellectual property rights.
    The U.S. Trade Representative estimates that U.S. businesses lost 
$1.7 billion in copyright and other intellectual property theft in the 
Russian Federation in 2004.
    The bill expresses concern about the failure of Russia to uphold 
international standards in the protection of intellectual property 
rights, a core American asset.
    This ``asset'' is not limited to the compensation received by those 
who create or publish material, but also impacts the numerous jobs 
created throughout this country and the economic revenue communities 
depend upon for growth.
    Copyright itself is ``an engine of free expression'' because it 
supplies the economic incentive to create and disseminate ideas.
    It is imperative that as more information and products become 
available in this digital environment, we do not weaken our laws which 
could result in making piracy easier and more prevalent.
    Again, thank you for having this hearing today, and I look forward 
to hearing from those who have joined us.

    Mr. Stearns. I thank the gentleman.
    The chairman of the full committee, the distinguished 
gentleman from Texas, Mr. Barton.
    Chairman Barton. Thank you, Chairman Stearns for holding 
the hearing today.
    The doctrine of fair use has a long history in our country. 
I am glad that we have such a distinguished panel today to talk 
about it. It is extremely important to protect people's 
intellectual property and our copyright protections stem 
directly from our Nation's founding document, the Constitution. 
If you think back at the time the formers and framers of the 
Constitution were meeting, piracy involved sailors with 
cutlasses and cannons and a taste for gold. Their only worry 
with the law was that if it caught them they would hang them. 
With some notable exceptions, today's pirates are more likely 
to come armed with computers and pocket protectors. They still 
do not have much concern for legalities, however, and they 
still retain a taste for unarmed wealth. The framers did not 
anticipate the digital age but they did anticipate theft. It 
seems to me that they would have no problem identifying the 
modern pirates who steal other people's creative ideas and sell 
it.
    As this subcommittee has explored with hearings in the 
past, international and domestic intellectual property 
infringement is a real problem and we must vigorously prosecute 
those who break the laws that deal with those types of 
situations. I think, however, that the people who wrote the 
Constitution would recognize the difference between a pirate 
and a consumer. Copyright owners for example do not have 
eternal and complete control over their works. Over the years 
and with the Constitution as their guides, the courts have 
determined and Congress had codified certain restrictions 
including the fair use doctrine. Simply put, consumers are 
allowed to use copyrighted works without permission of the 
owner under certain limited circumstances. These limited 
circumstances have been a strength of our system, not a 
weakness. They allow consumers who pay for works appropriate 
access to and use of and I want to accentuate appropriate 
copyrighted works. At the same time, ownership rights have been 
secured in order to encourage creativity and innovation. 
America is a Nation that values ideas and the freedom of 
Americans to innovate and to invent is another of our great 
strengths and fair use is a fundamental part of that.
    I am concerned that some attempts to protect content may 
overstep reasonable boundaries and limit the consumer's legal 
options particularly in light of the emerging technologies that 
we are beginning to see in the marketplace. It boils down to 
this. I believe that when I buy a music album or a movie DVD, 
it should be mine once I leave the store. Who does not believe 
that? Does that mean that I have unlimited rights to use that 
DVD or that album? No, of course not, but the law should not 
restrict my fair use right to use my own property. Current law 
provides that I am liable for anything I do that amounts to 
infringement but current law also prevents me from making legal 
use of the content that is technologically locked even if I 
have the key. That just does not make sense to me. In defending 
this conflict, some say that fair use leads to piracy. Some 
even say that fair use is piracy. I do not believe that. I do 
not think it is. By definition, fair use is the use that does 
not infringe upon the owner's rights.
    I am very interested in the state of content technology, 
content protection technology. Is it effective? Has it limited 
consumer's fair use rights? How might these developments hurt 
consumers in the future? How is the consumer electronics 
industry been affected? How would it affect the research and 
scientific community? I look forward to finding some of the 
answers to these questions from our distinguished panelists 
today. I also look forward to a comprehensive discussion about 
the doctrine of fair use, its historic origins, its future, and 
the real world effects in the marketplace of today.
    Finally, I want to thank Mr. Boucher for his work on this 
issue and for helping to prepare us today in providing or at 
least recommend some of the witnesses that we're going to hear 
from. He is not on the subcommittee but has done important work 
in trying to protect consumers fair use rights.
    Thank you, Mr. Chairman for holding this hearing. I look 
forward to participating in it.
    [The prepared statement of Hon. Joe Barton follows:]
 Prepared Statement of Hon. Joe Barton, Chairman, Committee on Energy 
                              and Commerce
    Good morning. Thank you, Chairman Stearns, for holding this 
important hearing. The doctrine of ``fair use'' has a long history in 
our country, and I'm glad that we have such a distinguished panel to 
talk about the issue.
    It is extremely important to protect people's intellectual 
property, and our copyright protections stem directly from our nation's 
founding document. At the time that the Framers were meeting, piracy 
involved rogue sailors with cutlasses and cannon and a taste for gold. 
Their only worry with the law was that if it caught them, it would hang 
them. With some notable exceptions, today's pirates are more likely to 
come armed with computers and pocket protectors. They still don't have 
much concern for legalities, however, and they retain a taste for 
unearned wealth. The Framers didn't anticipate the digital age, but 
they did anticipate theft. It seems to me that they would have no 
problem identifying the modern pirates who steal other people's 
creative work and sell it. As this subcommittee has explored with 
hearings in the past, international and domestic intellectual property 
infringement is a real problem, and we must vigorously prosecute those 
who break the law.
    I think that the people who wrote the Constitution also would 
recognize the difference between a pirate and a consumer. Copyright 
owners, for example, do not have eternal and complete control over 
their works. Over the years and with the Constitution as their guide, 
the courts have determined--and Congress has codified--certain 
restrictions, including the ``fair-use'' doctrine. Simply put, 
consumers are allowed to use copyrighted works without permission of 
the owner under certain limited circumstances. These limited 
circumstances have been a strength of our system, not a weakness. They 
allow paying consumers appropriate access to, and use of, copyrighted 
works. At the same time, ownership rights have been secured in order to 
encourage creativity and innovation. America is a nation that values 
ideas, and the freedom of Americans to innovate and invent is another 
of our great strengths. Fair use is a fundamental part of that.
    I am concerned that some attempts to protect content may overstep 
reasonable boundaries and limit consumers' legal options, particularly 
in the light of the emerging technologies that we are beginning to see 
in the marketplace.
    It boils down to this: I believe that when I buy a music album or 
movie, it should be mine once I leave the store. Who doesn't believe 
that? Does it mean I have unlimited rights? Of course not. But the law 
should not restrict my fair-use right to use my own property.
    Current law provides that I am liable for anything I do that 
amounts to infringement, but current law also prevents me from making 
legal use of content that is technologically ``locked,'' even if I have 
the key. This doesn't seem to make sense. In defending this conflict, 
some say that fair use leads to piracy, or that it is piracy. No, it 
isn't. By definition, ``fair-use'' is a use that DOES NOT infringe on 
owners' rights.
    I am very interested in the state of content-protection technology. 
Is it effective? Has it limited consumers' fair use rights? How might 
these developments hurt consumers in the future? How has the consumer 
electronics industry been affected? How will it affect the research and 
scientific communities?
    I look forward to finding some answers to these difficult questions 
and to a comprehensive discussion about the doctrine of ``fair use,'' 
its historic origins, its future, and the real world effects in the 
marketplace.
    Finally, I want to thank Mr. Boucher for attending this hearing 
today to hear from our witnesses and discuss the topic. He is not on 
the subcommittee, but has done important work trying to protect 
consumers' fair use rights. I want to welcome him, and commend him for 
his leadership on the issue.
    Thank you, Mr. Chairman, and I yield back the balance of my time.

    Mr. Stearns. I thank the gentleman.
    Ms. DeGette?
    Ms. DeGette. Thank you, Mr. Chairman.
    I will not make a long opening statement. I would like to 
associate myself with a lot of the comments people have made. I 
was reading recently about Google is going to scan full text of 
books and put it on the internet. That really raises an issue 
about how far we go with the fair use doctrine and that is why 
I am so delighted that you have decided to schedule a serious 
of hearings on this issue. And I look forward not just to this 
hearing but also future hearings to see where we put the 
balance between fair use and copyright protection because 
really copyright protection is the bow work of the 
intellectual, artistic, and commercial flourishing in the last 
few centuries in this country.
    And I yield back.
    Mr. Stearns. The gentlelady yields back.
    Mr. Murphy?
    Mr. Murphy. I thank you, Mr. Chairman. I also thank you for 
holding this hearing.
    As an author myself and when I have the concerns about what 
is happening with text of books it--I know how much time it 
takes to put into a manuscript, sometimes hundreds of hours 
including research goes into preparing a book. And certainly in 
any case whether it is text books or whatever that book may be, 
to use them for the standard issues of reviews, critiques, and 
scholarship all within the bailiwick of what copyrights should 
allows. But as we look at the ease by which other people may 
copy material as the gentlelady was just saying whether it is 
making it available on line or whatever the case may be, it is 
a concern that those people who are out there trying to make a 
living by writing in essence we are taking away their ability 
to make a living when it is distributed whether they are 
singers or songwriters, recording artists, authors. I wonder 
what would happen if similar things were done to just tell 
other professions that we could simply take their services and 
access it for free and provide that free on line and no on 
could charge for it anymore. What good is it to have a 
specialty? What good is it to even work if we open that up to 
the marketplace?
    So I am pleased we are having this hearing. I look forward 
to getting some answer to this and how in this new world of 
technology we can indeed protect the efforts and the work of so 
many who put in so much time and research into their creative 
endeavors and we need to make sure that we protect their part 
of the economy as well.
    And I yield back the balance of my time.
    Mr. Stearns. The gentleman yields back.
    Mr. Green?
    Mr. Green. Mr. Chairman, I will waive opening statements 
and submit a statement to the record.
    Mr. Stearns. The gentleman waives.
    Ms. Bono?
    Ms. Bono. Thank you, Mr. Chairman. I would like to begin by 
thanking you so much for holding this hearing and the chairman 
of the full committee also for being so willing to hear me out 
all the time with my thoughts on this. I would like to thank 
our panelists for what is going to be a lively and spirited 
debate about something that is extremely important to us all.
    I just want to start by saying if we are going to talk 
about H.R. 1201, I am a staunch opponent and I hope we can 
certainly slow down this movement of this bill if not stop it 
all together. I speaking for myself as a consumer, I am also a 
copyright holder. I have personally three iPods. I have gone 
through 5 or 6 for whatever reason. My children each have gone 
through two iPods. Now when I put my iPod when I connect it to 
my computer, the same list of songs is downloaded from iPod to 
iPod to iPod. Now is that technology mutual? I do not think so. 
I think technology is benefiting. I am paying the songwriter. 
I'm paying the royalty once 99 cents to iTunes.
    So I think it is important to realize fair use is alive and 
well with these issues. What scares me the most is that the 
revolution that we are witnessing that my colleague talked 
about is a very, very exciting one for technology and for 
content providers. I have always said the inner key is the 
creator's greatest tool. I can, you know, we can talk about 
some song, we can hear it on the radio, we go home, we look it 
up on iTunes or either Yahoo, whatever we want, we find it and 
we hit enter and we have that song. But if we go forward with 
something like 1201 which basically guts DRM, Digital Rights 
Management, no longer allows this to work for us, it is going 
to stifle both technologies and the sale of intellectual 
property.
    So I have great concerns. And I often think about this 
fact. We have not talked about this with books. We do not say, 
okay, I just bought a new book, the great book on Lincoln's 
political leadership and if I ruin it, if I drop it in a puddle 
of water going to Dulles Airport, do I call the publisher and 
say I bought that book once, I want another one for free, that 
is fair use? This is something we should talk about. Why can't 
we? I have already paid for the intellectual property. I paid 
that writer for her work, why am I not entitled to a whole new 
book for free? But we do not think like that. I have already 
paid you once for property but the publisher and I do not want 
to send shutter through the publishing community right now. I 
know, you know, I am really speaking metaphorically here. But 
we are not talking about that. We pay the provider, we pay the 
content creator once, and we share that amongst multiple 
platforms.
    I think it is important when I talk to my colleagues about 
MP4 files, movie files, we as consumers have gone, all of us in 
this room have probably, every Super Bowl we go out and buy the 
latest, greatest biggest screen we can find and we brag about 
it to our friends, I have got a 60'' HDTV, you know, LCD screen 
whatever it is and this is what I have. But we're also now 
going to iPod style 1'' screens that we are all going to buying 
for Christmas for ourselves so we are going to be staring at 
these little teeny tiny screens. Thanks to digital rights 
management, we can download different movies, we can download 
different television programs. But if we make it legal to 
circumvent encryption technologies that allow us to have that 
on our personal player, we are going to stifle this whole 
globe.
    So I have great concerns. I think that there have been 
mistakes made, there are no questions. I think people have made 
mistakes in being way too proprietary with their technology and 
protecting their content. But I think we need to partner with 
industry, Mr. Chairman and work with them and shape with them 
policies that say you own this, you have got this once, you can 
move it to multiple platforms. But I think to say remove 
encryption technology, let people ahead and make--and if it 
happens to be pirated, if it happens to end up on the internet, 
oh, well it was not my fault. I think that is reckless and I 
think it is dangerous to this country.
    As my colleague said too, I believe our country is the 
greatest Nation on this earth because of intellectual property 
whether it is writing song, whether it is writing a book, 
whether it is creating a patent, whatever it is, I think we 
need to hold those things near and dear. And I think this is a 
very important issue and I am hoping again we look at 1201 and 
we do not undo something that is very important to our country. 
So I look forward to hearing all of you in the question and 
answer.
    And again, thank you, Mr. Chairman, I yield back my time.
    [The prepared statement of Hon. Mary Bono follows:]
Prepared Statement of Hon. Mary Bono, a Representative in Congress from 
                        the State of California
    Mr. Chairman, thank you for holding this hearing today.
    We are all very fortunate to live in a world where music, movies 
and other forms of entertainment are just a mouse click away. I've 
always maintained that the ``enter'' key is the entertainment 
industry's best friend if they manage to tap into this digital 
revolution.
    And yes, the onus is on this industry to adapt to the changing 
environment. But, they cannot make this successful transition if the 
federal government decides their intellectual property is free for the 
taking under the ``fair use'' doctrine.
    Mr. Chairman, there are some who suggest that technology will be 
stifled if Congress insists on protecting IP rights. I would assert 
just the opposite. Why would a company put financial resources behind a 
product that can be taken for free?
    Furthermore, under current law, technology and innovation are 
blossoming at the same time copyrights are protected. It seems as if 
there is a smaller, sleeker MP3 player or gaming device coming out 
every week! Even founders of the illegal Grokster see a successful 
business model predicated on copyright protection.
    Our country has a long tradition of protecting property rights and 
copyright. We have frowned upon ``takings'' without permission or due 
compensation. However, if Congress amends the DMCA, ``fair use'' will 
resemble ``unfair takings.''
    During recent debate, Congress rejected ``unfair takings.'' In a 
vote of 376-38, the House passed a bill to address the Supreme Court's 
flawed decision in the Kelo case. Both Republicans and Democrats from 
across the political spectrum agreed that the federal government could 
not use ``eminent domain'' for economic development purposes.
    It is my hope that in relation to the new digital era, Congress 
does not allow ``fair use'' to embody the haunting specter of Kelo's 
``eminent domain.'' If we are to allow ``fair use'' to run this course, 
we will not only undermine one of this nation's most important 
industries, but will also weaken our position in protecting 
intellectual property rights internationally.
    I am glad we have an opportunity to explore this issue today. 
Believe me, I want the Internet to serve as the portal to 
entertainment. There are many exciting advances on the horizon. But, I 
hope Members keep one thing in mind: Property is property, whether we 
are talking about private property or intellectual property or whether 
we are seeking to protect ranchers or rockers. That is the history of 
our great nation and we must continue in this tradition.
    Thank you and I yield back.

    Mr. Stearns. I thank the gentlelady.
    Mr. Towns?
    Mr. Towns. Thank you very much, Mr. Chairman and also thank 
you Member Schakowsky for arranging the hearing today.
    We will be addressing a very delicate topic this morning 
and I look forward to hearing from all of the witnesses. I am 
pleased to see the videogame industry represented here today. 
Any discussion of the impact of the fair use doctrine on 
consumers should include this important segment of the 
entertainment industry.
    The videogame industry has experienced significant growth 
in recent years and one reason for such growth is due to its 
meeting and often exceeding consumer expectations with regard 
to accessing and playing content. In 2004, the sale of computer 
and videogames in the United States topped $7 billion. And the 
global entertainment software market reached $25 billion. I 
look forward to this exciting vibrant industry to continue to 
flourish and to continue to meet the demands of its consumers. 
It must continue to be able to reasonably protect intellectual 
property. Further, it must have the confidence that Congress is 
not going to upset the balance that has resulted in a win-win 
situation for the videogame industry and its consumers.
    Today's hearing is also about how to best balance consumer 
demand for content with the copyright holders ability to 
protect that content. These are both important goals. But as I 
see it, the marketplace is working fairly well. Content 
companies are using technology to develop innovative ways to 
protect their intellectual property while allowing consumers to 
make their personal uses that they want to make. Sometimes the 
technologies are not perfect as we saw recently with some 
content protection technology. But we--but as we saw in that 
case and as we see it all the time, when new software is 
developed and released, the marketplace responds very quickly 
to consumer concern. So I firmly believe this is how the 
industry should be allowed to grow and we must allow it to be 
involved innovation.
    On that note, Mr. Chairman, I yield back the balance of my 
time and I am anxious and eager to be hearing from all of the 
witnesses. Thank you very much.
    Mr. Stearns. I thank the gentleman.
    Anyone else seek opening speech?
    [Additional statements submitted for the record follow:]
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming
    Thank you, Mr. Chairman, for holding this timely hearing on the 
fair use of copyrighted works. Copyright litigation has focused 
increasingly on digital media exchange and its inherent piracy risks. 
How these disputes are settled stands to impact in a very profound way 
the level and nature of consumer access to digital entertainment.
    Historically, copyright law has adapted in the face of new 
technologies, as have consumer expectations as to what constitutes fair 
use. When Congress passed the Digital Millennium Copyright Act (DMCA) 
in 1998, we could not possibly have foreseen the rapid advances in 
technology that would ensue in just a few short years.
    The public audience for digital entertainment has grown, along with 
technological restraints on the use of that entertainment. In 
particular, the ``anti-circumvention'' clause of the DMCA has allowed 
the content community to successfully limit the circumvention of 
digital copyright protections.
    Members of the content industry insist on the value of the DMCA for 
their continued ability to market and distribute their products. 
Consumer advocates, however, believe this protection regime jeopardizes 
their right to fair, noninfringing use of copyrighted works. This is 
one of many fair use issues likely to be brought up by today's 
panelists, who represent both the content community and consumer rights 
advocates.
    I hope today's hearing will help our committee better understand 
the growing tension between consumers, who desire to exercise the fair 
use of legitimately purchased products, and the rights of the content 
industry to restrain the reproduction and distribution of their 
copyright protected material.
    Thank you Mr. Chairman. I yield back the balance of my time.

  Prepared Statement of Hon. Gene Green, a Representative in Congress 
                        from the State of Texas
    I'd like to thank the Chairman and Ranking Member for holding this 
hearing today. This is an important and complicated issue. I'm glad 
we'll be adding to the knowledge we gained from the hearings we held 
last year through the members on the panel we'll hear from today.
    This bill does strike to the heart of one of the most significant 
debates for the future of the digital economy--the regulation of 
intellectual property.
    With all of its promise, the digital age has also brought a 
tremendous amount of intellectual property piracy--the software 
industry reports losing $11 billion a year to software piracy, the 
motion picture industry another $3-4 billion, and the recording 
industry $4.2 billion.
    What is scary to people who make software, movies, and music is 
that those are the figures only the ones they can calculate. Even more 
losses from online piracy exist, but are very difficult to calculate.
    Numerous studies support the theory that many producers have been 
severely hurt by online piracy. And this is one of the few industries 
that has a positive balance of trade, reducing our trade deficit.
    The question before us today is: how can rampant piracy crimes be 
stopped or contained while society's beneficial fair use rights are 
preserved?
    All the witnesses on the panel we're going to hear from today were 
watching the Supreme Court closely when they ruled in MGM V. Grokster. 
In this particular ruling, the Court emphasized that the intent with 
which Grokster created and marketed Peer to Peer file sharing software 
was what made them liable for copyright infringement. Not the 
technology itself.
    This committee does not have the luxury of such specific examples 
of the creation, use and intent of using such technology in front of 
us. Should we pass legislation on this issue, it will have a broad 
impact on these industries regardless of what the circumstances may be.
    I supported the Digital Millennium Copyright Act when Congress 
approved it, so I do get concerned when I hear reports of the DMCA 
being used to eliminate after-markets for a variety of replacement 
parts.
    What is the point of having digital rights management at all, if 
someone can create software to hack it, post his hacking software on 
the Internet, and software pirates in China download it and start 
cranking out bootleg copies of the latest feature films all in one day?
    Consumers may be right to complain that they cannot fast forward 
through previews on their DVDs. But if the software that allows them to 
fast forward could also allow piracy, I do not think that is the proper 
balance.
    As a final note, I would like to mention one section of HR 1201 
which falls directly under our jurisdiction--FTC labels for copy-
protected compact discs.
    I think the recording industry knows that sufficiently informing 
the public of any changes to the CD format is the right thing to do in 
the first place.
    The recording industry certainly has a right to copy-protect their 
products, but Americans have been buying CDs for well over a decade now 
and have come to expect their CDs will work in all CD drives and 
players.
    If new copy-protected compact discs do not work in consumers' CD 
players, the consumer reaction is likely to be very negative.
    I hope the parties involved can work together to avoid such 
situations.
    Mr. Chairman, thank you for holding this important hearing on the 
future of digital intellectual property protection.

 Prepared Statement of Hon. C.L. ``Butch'' Otter, a Representative in 
                    Congress from the State of Idaho
    Thank you for holding this hearing today, Mr. Chairman. In one 
respect, the issues of fair use and copyright protection are always 
changing, adapting to an ever-rapidly transforming technology market. 
Yet they always remain at the heart of the laws of this land.
    Less than a month ago, we met here to express our concern, 
frustration, and fear following the Supreme Court's decision in Kelo 
vs. City of New London. Our outrage was universal and our alarm 
widespread at the implications of the Court's ruling. And just two 
weeks ago we spoke loudly in favor of protecting private property, 
willing to fight tooth and nail if necessary, on the floor of the House 
when we passed the Private Property Rights Protection Act.
    To me this debate is no different, Mr. Chairman. And yet here we 
sit, no longer united in defense of the Fifth Amendment but in many 
ways trying to find a convenient exception to our laws which are laid 
so firmly on a foundation of private property rights. ``Fair use'' is 
often craftily disguised as a right and an entitlement, and we discuss 
it as though we are obligated to protect it. But deep down ``fair use'' 
is just another argument for taking someone else's property to use for 
our own convenience. This argument and the one we found so repulsive in 
Kelo are one and the same.
    Some are tempted to separate ``intellectual property'' from our 
general idea of private property, but intellectual property is no 
different than the dirt on my ranch in Idaho. Our entire concept of 
democracy is based on our right to own, to innovate, and to benefit 
from our work. Without protecting those rights and making it worthwhile 
to turn an idea into something more tangible, we would not be the 
nation we are today.
    As a believer in the free market system, this debate about ``fair 
use'' concerns me on another level. About twenty years ago, we had a 
similar debate when a new technology called the VCR hit the market. The 
implications of this new technology seemed devastating for the 
industry. But a marvelous thing happened: rather than allow government 
regulation to harm both industry and consumer, the industry responded 
to consumers' desire to see films at home and became innovative, 
building an economic empire in the video rental and retail industry as 
a result. Everybody won.
    While there are certainly differences in today's debate over fair 
use, I believe one principle is the same: Consumer demand, not 
government regulation should lead industry response.
    It seems to me that the entertainment industries again have an 
opportunity to work with the software and device manufacturers to 
develop and sell products that meet consumer demand. Protecting 
intellectual property investments is the key element in achieving 
cooperation. Without these protections, all of these industries will 
ultimately suffer.
    I believe consumers have a voice and should be heard. That does 
not, however, obligate the government to mandate the industry response, 
especially since we are discussing a luxury product--not a right or a 
basic necessity to life, but a luxury.
    In closing, I do not believe Congress should promote policies that 
stifle investment, nor do I believe that this debate on ``fair use'' 
should be allowed to carve out an industry in which the rights of 
property holders do not apply. We are obligated to protect private 
property, discourage theft, and encourage investment into intellectual 
properties, not the other way around.
    I look forward to the witnesses' testimony and thank the Chairman 
again for the opportunity to discuss this issue.

   Prepared Statement of Hon. George Radanovich, a Representative in 
                 Congress from the State of California
    I thank Mr. Chairman for holding this hearing today on Fair Use and 
its effects on consumers and the industry.
    Rapid advances in technology have increased tensions between the 
content community and consumers.
    At the heart of the issue is the tension between attempts by 
content owners to protect and control the use of their works by means 
of technology and the consumer's use of technology to make use of 
content under fair use.
    Private property and intellectual property rights have been an 
important part of this country's existence since the inception of the 
Constitution.
    Protecting the intellectual property of our artists, writers and 
inventors from illegal reproduction and distribution should important 
to all of us, because without protection of these works, we may not be 
blessed books, music, movies, and art that is made available to us year 
after year.
    I am interested to hear from our witnesses today on their views of 
fair use and whether they believe there is a technological solution 
instead of a legislative one?
     Thank you again Mr. Chairman for holding this hearing. In closing 
I would like to say that I'm sorry that the Recording Industry, Motion 
Picture Association and the National Association of Broadcasters could 
not be here to discuss their views on this matter with us.

    Mr. Stearns. If not, we will move to our witness and I want 
to welcome all of them this morning. We have Mr. Professor 
Peter Jaszi from the University, excuse me, Washington College 
of Law, the American University; Mr. Gary Shapiro, President 
and Chief Executive Officer Consumer Electronics Association; 
Ms. Prudence S. Adler, Associate Executive Director of the 
Federal Relations Information Policy Association of Research 
Libraries; Mr. Jonathan Band who is here on behalf of 
NetCoalition; Ms. Gigi B. Sohn, President and Founder of Public 
Knowledge; Mr. James DeLong, Senior Fellow and Director, 
IPCentral Information of Progress and Freedom Foundation; Mr. 
Frederick Hirsch, Senior Vice President, Intellectual Property 
Enforcement, Entertainment Software Association; and Mr. Paul 
Aiken, Executive Director of Authors Guild, Incorporated.
    So I wish to welcome all of you and we'll start out with 
you, Professor, your opening statement. Just turn the mike on 
and move the mike a little closer to you if you would be so 
kind.

STATEMENTS OF PETER JASZI, WASHINGTON COLLEGE OF LAW, AMERICAN 
  UNIVERSITY; GARY J. SHAPIRO, PRESIDENT AND CHIEF EXECUTIVE 
 OFFICER, CONSUMER ELECTRONICS ASSOCIATION; PRUDENCE S. ADLER, 
ASSOCIATE EXECUTIVE DIRECTOR, FEDERAL RELATIONS AND INFORMATION 
   POLICY, ASSOCIATION OF RESEARCH LIBRARIES; JONATHAN BAND, 
   NETCOALITION; GIGI B. SOHN, PRESIDENT AND FOUNDER, PUBLIC 
KNOWLEDGE; JAMES DELONG, SENIOR FELLOW AND DIRECTOR, IPCENTRAL 
INFORMATION, PROGRESS AND FREEDOM FOUNDATION; FREDERICK HIRSCH, 
   SENIOR VICE PRESIDENT, INTELLECTUAL PROPERTY ENFORCEMENT, 
 ENTERTAINMENT SOFTWARE ASSOCIATION; AND PAUL AIKEN, EXECUTIVE 
             DIRECTOR, AUTHORS GUILD, INCORPORATED

    Mr. Jaszi. Thank you. Mr. Chairman, Ranking Member 
Schakowsky, and members of the subcommittee, my name is Peter 
Jaszi and for the last 25 years, I have been teaching copyright 
here in Washington.
    So I am going to start by invoking academic privilege in 
trying to give a description of the fair use doctrine even more 
succinct than the chairman's elegant summary of a few moments 
ago. In essence, the doctrine provides that when the cultural 
or economic benefits that will flow to the public from an 
unauthorized use of copyrighted material outweigh the costs it 
will impose on the copyright owner, that use should be 
permitted. Fair use is not piracy. Fair uses are non-infringing 
uses, not merely tolerated infringements. The law does not just 
accept fair use but actively encourages it. Although fair use 
is sometimes described technically in terms of legal procedure 
as a mere affirmative defense, it functions in the real world 
analogue and digital as an important entitlement for students, 
artists, teachers, librarians, writers, entrepreneurs, 
musicians, programmers, and ordinary consumers.
    As Mr. Ross noted, fair use was first codified as part of 
the general revision of the Copyright Act in 1976 but it has 
been a part of U.S. copyright laws since the decision of Folsom 
against March in 1841. Thus for more than 150 years, the 
success, the unparalleled success of our copyright system has 
stemmed from the fact that strong protection for owners 
consistently has been balanced by use rights that to paraphrase 
the Supreme Court, encourage others to build freely upon 
preexisting works and make their own contributions to cultural 
progress. Moreover, as the court recently reaffirmed in Eldred 
against Ashcroft, the fair use doctrine is a mechanism, a 
crucial mechanism by which copyright law recognizes and 
implements the free speech values of the First Amendment.
    Major industries such as motion pictures, poplar music, and 
computer software have prospered in part because innovators 
have been free to copy important elements of their 
predecessor's work. Moreover it is because of fair use that we 
all can make many personal uses of the information products we 
purchase. Students can copy text or image from published 
sources to enhance a term paper or homework assignment. Music 
fans can combine selections from their record collections to 
make mixes for a family member's birthday. And it is the 
freedom to read, view, and listen to information products 
assured by fair use that enables many consumers to move from 
absorbing the words, images, and notes of others to making 
their own creations.
    The reach of copyright law is constantly expanding to 
provide longer terms of stronger protection against more kinds 
of unauthorized uses than at any point in history. More than 
ever than fair use matters now. In the courts, the doctrine is 
being creatively and robustly applied to guarantee fundamental 
fairness and balance and providing useful guiding precedence. 
In other quarters, however, fair use is threatened. Some 
academics complain that fair use is too vague or uncertain to 
be of real value to users. It would, however, be a serious 
mistake for Congress to codify the doctrine in greater detail, 
precisely because the enduring strength of fair use lies in its 
dynamism and adaptability to change circumstances. Instead, I 
believe the best answer to this objection is for various user 
communities to articulate clearly their own shared vision of 
best practices in fair use, a process that I am happy to say is 
beginning to get under way.
    Self help cannot address other threats to fair use such as 
those posed by anti-circumvention laws. Thus for example, a 
teacher who copies short film segments to show in class. This 
is a classic core example of fair use can still be liable under 
Section 1201 of the Digital Millennium Copyright Act if he or 
she bypassed the so called CSS Code with which commercial DVD's 
are sold. Such anomalies cry out for legislative regress. I 
would note that H.R. 1201, the Digital Media Consumer Rights 
Act of 2005 introduced by Representatives Boucher, Doolittle, 
and Barton illustrates the kind of legislation that would be 
well calculated to provide that regress.
    Thank you for your attention. I look forward to trying to 
answer whatever questions you may have about this vital aspect 
of American copyright.
    [The prepared statement of Peter Jaszi follows:]
Prepared Statement of Peter Jaszi, Washington College of Law, American 
                               University
    My name is Peter Jaszi. For the last 25 years, I have taught 
copyright at the Washington College of Law of American University, here 
in the District of Columbia. In recent years, I also have represented 
the Digital Future Coalition on various copyright policy 
issues.1 Today, however, I am testifying in my personal 
capacity about the critical importance of the ``fair use'' doctrine in 
American copyright law.
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    \1\ The DFC is a coalition of more than 30 trade associations, non-
governmental organizations and learned societies representing a broad 
cross-section of the educational, high-tech, consumer and creative 
communities in the United States; it was organized during the run-up to 
the Digital Millennium Copyright Act of 1998, and has continued to be 
active on current copyright policy questions.
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Summary
    In the two centuries following the enactment of the first Copyright 
Act in 1790, the United States enjoyed an unequaled and unbroken record 
of progress that gave us, on the one hand, educational institutions and 
research facilities that are preeminent in the modern world, and on the 
other, entertainment and information industries that dominate the 
global marketplace. Schools, libraries and archives benefited from the 
operation of our copyright system, and the public reaped the reward; 
likewise, expanding American publishing, motion picture, music and 
software businesses generated not only wealth but also less tangible 
forms of public good. And this was as it should be. From its inception, 
the copyright system has operated both as a strong force for cultural 
development and as a powerful engine of economic growth.
    The success of traditional U.S. copyright law was not due only to 
the unprecedentedly high levels of protection it has afforded to works 
falling within its coverage. That success also stemmed from the fact 
that strong protection consistently has been balanced against use 
privileges operating in favor of teachers, students, consumers, 
creators and innovators who need access to copyrighted material in 
order to make--or prepare to make--their own contributions to cultural 
and economic progress. To put the point more simply, the various 
limitations and exceptions on rights that traditionally have been a 
part of the fabric of copyright are not results of legislative or 
judicial inattention; rather, these apparent ``gaps'' in protection 
actually are essential features of the overall design. As the Supreme 
Court observed more than a decade ago, in its Feist decision, the 
limiting doctrines of copyright law are not ``unforeseen byproduct[s] 
of a statutory scheme . . .;'' in fulfilling its constitutional 
objective, copyright ``assures authors the right to their original 
expression but encourages others to build freely upon'' preexisting 
works. And, as the Court recently has reaffirmed in Eldred v. Ashcroft, 
these limiting doctrines are the mechanism by which copyright law 
recognizes and implements the values of free expression codified in the 
First Amendment.
    Today, more than ever, fair use matters. In the courts, the 
doctrine is being creatively applied to guarantee fundamental fairness 
and balance. In other quarters, however, fair use is under threat. But 
the doctrine (like the vision of balanced copyright law that it 
represents) deserves to be defended and supported. Some of that support 
can come from the Congress of the United States, but much of it must 
derive from the various user communities that depend on the doctrine 
for the opportunity to make their cultural and economic contributions 
to our society.
Some issues of terminology
    The term ``fair use'' can be used in two different ways--one loose 
and one more precise. Often, it is employed as shorthand to reference 
all the vital limitations and exceptions on the rights of copyright 
owners that are built into our system and have done so much to help 
fulfill the Constitutional objective of intellectual property: 
promoting the ``progress'' in ``Science and useful Arts.'' Over the 
years, U.S. copyright law has built up a catalogue of limitations and 
exceptions to copyright protection, including:

 The ``idea/expression'' distinction, which assures (among other 
        things) that copyright protection does not attach to the 
        factual contents of protected works;
 The ``first sale'' principle, codified in 17 U.S.C. Sec. 109(a), 
        which assures that (as a general matter) purchasers of 
        information products from books to musical recordings can sell 
        or lend their copies to others;
 A variety of specific exemptions for educational, charitable and 
        other positive public uses; and, most importantly,
 The doctrine codified in Sec. 107 of the Copyright Act, which 
        provides--in essence--that some other unauthorized uses of 
        copyrighted works, not specifically covered by any of the other 
        limitations just summarized, should be permitted rather than 
        punished because their general cultural and economic benefits 
        outweigh the costs they might impose on copyright owners.
``Fair Use'' under Sec. 107
    It is to this last doctrine to which the term ``fair use'' refers 
in its more precise sense, and it is to this doctrine and its 
importance that my remarks today will primarily be addressed. That is 
because fair use (in this sense) has a special place in the array of 
limitations and exceptions to copyright. Of all the doctrines noted 
above, it has the greatest potential to grow and change with new 
technological, economic and cultural circumstances. Whereas many of the 
statutory exceptions to copyright are static, fair use under Sec. 107 
is, by its very nature, adaptable and dynamic. For this reason, it 
operates as a kind of keystone in the edifice of our copyright system. 
It absorbs pressure from different sides (i.e., from copyright owners 
and copyright consumers), and in so doing it allows the structure to 
stand. Our fair use doctrine is unique--no other country has anything 
quite like it. Indeed, it functions as a kind of secret weapon in 
support of U.S. competitiveness in the international competitive 
marketplace. Fair use helps account for the innovative dynamism that 
has made our information industries the envy of the world.
    This particular concept of fair use has been a central and 
unquestioned feature of U.S. copyright law since 1841, when Joseph 
Story announced the doctrine in the case of Folsom v. Marsh. It was 
refined the courts in the century and a quarter that followed, and 
codified in 1976, as part of the general revision of the Copyright 
Act.2 That codification, however, had some unusual features. 
Rather than attempting to specify the contents of the doctrine, or to 
shape and regulate its future growth, the Congress merely provided a 
non-exhaustive list of four factors that (along with other 
unremunerated considerations) should be taken into account when a 
federal court is called upon to determine whether a particular 
challenged use of copyrighted material should be considered fair. When 
Sec. 107 was amended in 1992, to clarify that fair use applies to both 
unpublished and published works, its provisions retained this 
remarkable open texture. Thus, the dynamism of the doctrine has been 
preserved in the course of its codification. Today, in weighing the 
balance at the heart of fair use analysis, courts return again and 
again to two key questions:
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    \2\  107. Limitations on exclusive rights: Fair use
    Notwithstanding the provisions of sections 106 and 106A, the fair 
use of a copyrighted work, including such use by reproduction in copies 
or phonorecords or by any other means specified by that section, for 
purposes such as criticism, comment, news reporting, teaching 
(including multiple copies for classroom use), scholarship, or 
research, is not an infringement of copyright. In determining whether 
the use made of a work in any particular case is a fair use the factors 
to be considered shall include--
    (1) the purpose and character of the use, including whether such 
use is of a commercial nature or is for nonprofit educational purposes;
    (2) the nature of the copyrighted work;
    (3) the amount and substantiality of the portion used in relation 
to the copyrighted work as a whole; and
    (4) the effect of the use upon the potential market for or value of 
the copyrighted work.
    The fact that a work is unpublished shall not itself bar a finding 
of fair use if such finding is made upon consideration of all the above 
factors.

 Did the unlicensed use ``transform'' the material taken from the 
        copyrighted work by using it for a different purpose than the 
        original, or did it just repeat the work for the same intent 
        and value as the original?
 Was the amount and nature of material taken appropriate in light of 
        the nature of the copyrighted work and of the use?
    Among other things, both questions address whether the use will 
cause excessive economic harm to the copyright owner.
    In this connection, there also are some misconceptions about the 
reach of the fair use doctrine that should be noted and corrected:

 Fair use need not be exclusively high-minded or ``educational'' in 
        nature. Although nonprofit or academic uses often have good 
        claims to be considered ``fair,'' they are not the only ones. A 
        new work can be ``commercial''--even highly commercial--in 
        intent and effect and still invoke fair use for its use of 
        preexisting material. Most of the cases in which courts have 
        found unlicensed uses of copyrighted works to be fair have 
        involved projects designed to make money, including some that 
        actually have.
 Fair use doesn't have to be boring. A use is no less likely to 
        qualify as a fair one because the new work in connection with 
        which it occurs is effective in attracting and holding an 
        audience. If a use otherwise satisfies the criteria of the law, 
        the fact that it is entertaining or emotionally engaging should 
        be irrelevant to the analysis.
 A failed effort to clear rights doesn't inhibit a users' ability to 
        claim fair use. Everyone likes to avoid conflict and reduce 
        uncertainty. Often, there will be good reasons to seek 
        permissions in situations where they may not literally be 
        required. When a would-be user's good faith effort to do so 
        fails, he or she loses nothing in terms of fair use rights.
    It also is important to note that fair use is not, as sometimes has 
been suggested, a mere negative byproduct of the economics of rights 
clearance in the analog information marketplace, which can be expected 
to whither away with the transition to digital. Rather, it is a 
provision of copyright law that serves an affirmative cultural and 
economic mission. It is likely to be more important than ever in the 
new information era. Nor does it detract from the importance of fair 
use to assert, as its detractors sometimes do, that it is not a 
``right'' but merely an ``affirmative defense.'' This, I would suggest, 
is a legal quibble rather than a serious argument. The availability of 
an affirmative defense in a proceeding of certain factual circumstances 
is tantamount to a right to engage in the privileged conduct when those 
circumstances actually are present. In criminal law, ``self defense'' 
is classified as a defense for purposes of courtroom procedure. 
However, its recognition also functions as an affirmative authorization 
for some kinds of self-protective conduct the real world. The same 
analysis applies to fair use in copyright.
Fair use today
    Although fair use has been a prominent feature of U.S. copyright 
since the inception of the doctrine, it truly has come into its own in 
the last several decades. In this period that, copyright law has become 
dramatically more restrictive in other respects. The last twenty years 
have seen extensions of copyright term, an expansion in copyright 
scope, a dramatic development in secondary liability for copyright 
infringement, and dramatic increases in civil and criminal penalties. 
All these developments have contributed to the importance of 
maintaining a legal space in which socially and economically productive 
uses of protected material can occur without risk of liability. The 
courts have responded both by reaffirming the applicability of fair use 
in a number of traditional contexts (such as critical quotation and 
educational practice), and by adapting the flexible doctrine for a 
range of new purposes (including copying that promotes healthy market 
competition).
The benefits of a balance mediated by fair use
    It may be useful to provide some general illustrations of how the 
balance that is assured in our copyright law by the operation of fair 
use has served the twin goals of cultural and economic progress. It is 
common to note the self-evident proposition that the non-profit 
educational and library sector depends on limiting doctrines for many 
essential functions. Although schools and libraries are among the 
largest purchasers of copyrighted materials in the United States, their 
most typical and beneficial activities--from classroom teaching to 
scholarly research--would not be possible without the built-in fairness 
safeguard that fair use provides.
    It is less frequently noted that such major information industries 
as motion pictures and computer software came into being not despite 
the fact that filmmakers and programmers were free to copy important 
elements of their predecessors' work, but because of it. They have 
continued to prosper under these conditions; likewise, fair use also is 
critical to a wide range of practices within the book publishing and 
music industries. It would not be going too far to say that the 
creativity and innovation that copyright exists to promote are fueled 
as much by this strategic ``gap'' in the law as they are by its strong 
protections. Individual creative artists understand this point well 
from direct personal experience, even though large copyright-owning 
media companies sometimes lose sight of it. Although the entertainment 
industries are legitimately concerned about ``piracy'' of copyright 
works, it is important not to confuse the activities they rightly 
condemn with the ordinary, lawful exercise of the various use 
privileges, including fair use, that are conferred by the Copyright Act 
itself.
    Equally important, fair use operates to the direct and immediate 
benefit of ultimate information consumers. It is because of fair use 
(and other limiting doctrines) that we all can make a broad range of 
personal uses of the content of information products we purchase, 
without fear of legal liability. Because of fair use, students can copy 
texts or images from published sources to enhance a term paper or 
homework assignment and music fans can combine selections from their 
personal record collections to make ``mixes'' for a family member's 
birthday or anniversary celebration, all without any concern that by 
doing so they will violate traditional copyright principles. Nor is 
this all. Ultimately, it is the freedom to read, listen and view 
information products assured by fair use that enables many consumers of 
copyrighted content to become producers--to move from absorbing and 
repeating the words, images and notes of others to making their own 
creative contributions to the general store of cultural resources.
Some examples: fair use in filmmaking and film teaching
    For the last 18 months, my colleague Professor Pat Aufderheide (of 
the American University School of Communication) and I have been 
directing a project designed to investigate the ways in which 
documentary filmmakers interact with copyright law in the United 
States. Early on, we discovered how extensively and pervasively 
producer-directors in this increasingly popular medium must rely on the 
fair use doctrine if they are to fulfill their mission. Documentarians 
need fair use in order to quote limited amounts from copyrighted works 
(TV programs, literary texts, musical recordings, and other films). In 
turn, they need the right to quote to make critical comments about 
contemporary media, in order to illustrate the social and cultural 
phenomena they address in their films, to depict truthfully the often 
media-saturated environments in which their human subjects are found, 
and (sometimes) to illustrate important historical events through 
archival footage.3 When filmmakers' ability to employ fair 
use is frustrated (as is too often the case), their work suffers and 
their audiences are the ultimate losers.
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    \3\ The ``Untold Stories'' project is described at 
www.centerforsocialmedia.org/rock/index.htm
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    Another example of the importance of fair use comes from the 
educational context--specifically, the domain of media education. In 
our time, teaching media literacy is more important than ever, and 
various kinds of film and television studies courses are increasingly 
popular in institutions of higher and even secondary education. 
Effective teaching in this field, however, involves the use of visual 
illustrations to demonstrate an instructor's points about the content 
and style of audiovisual works under consideration. The most effective 
teaching often occurs in the classroom where a lesson juxtaposes 
numerous short clips from various media sources for purposes of visual 
comparison and contrast. In short, one can no more teach media studies 
course effectively without media clips than a literature course without 
selections from literary texts. Effective media studies teachers take 
advantage of fair use in order to assemble ``clip reels'' of examples 
to accompany their lectures and classroom discussions. When they are 
unable to do so, their students pay a price in terms of forgone 
learning opportunities.
The internal critique of fair use
    One potential threat to the survival of fair use as a useful tool 
for consumers and creators comes from an unexpected source--progressive 
commentators on copyright who argue that the doctrine simply does not 
go far enough, or fails to provide a level of clarity that would permit 
users to proceed with reasonable certainty. This argument overlooks, of 
course, the advantages (already noted) associated with a dynamic, 
flexible fair use doctrine. Unfortunately, however, this potentially 
self-fulfilling message has achieved considerable currency. Among the 
filmmakers with whom I have been working in recent months, for example, 
some individuals are reluctant to invoke fair use because either they 
themselves, or the ``gatekeepers'' (distributors, broadcasters, etc.) 
on whom they rely for access to audiences, cannot understand or will 
not place trust the doctrine. This is so, incidentally, despite the 
fact that in almost every court case where a documentary filmmaker has 
relied on fair use, the court has accepted this defense to a claim of 
infringement, thus shielding the defendant from liability.
    Even though it sometimes may be overstated, this friendly critique 
of fair use has a real foundation. Because of its situational nature, 
the applications of fair use to particular sets of circumstances are 
sometimes difficult to predict. The solution to this dilemma lies not 
with the Congress or the courts, but with disciplinary communities 
(filmmakers, historians, musicians, teachers, etc.) who rely on fair 
use. Each such community has the opportunity to articulate their shared 
understanding of what constitutes a reasonable level of unlicensed 
quotation from copyrighted works in particular contexts. Were they to 
do so in a balanced manner, after a full process of consultation, their 
conclusions would have great persuasive force. In this connection, I am 
pleased to say that this coming Friday, November 18, a group of 
national organizations representing independent documentary filmmakers 
will announce a ``Statement of Best Practices on Fair Use of 
Copyrighted Materials.'' 4
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    \4\ The organizations are the Association of Independent Video and 
Filmmakers, Independent Feature Project, International Documentary 
Association, National Alliance for Media Arts and Culture, and Women in 
Film and Video (Washington, D.C., chapter). I will supply the 
Subcommittee with copies of the Statement upon its release.
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The external threat to fair use
    In the last decade, one of copyright owners' most significant 
responses to the uncertainty of the new communications environment has 
been to develop digital rights management (``DRM'') tools (sometimes 
referred to as ``technological protection measures'' or ``TPMs'') to 
control access and use of texts, images and sounds in electronic 
formats, with the aim of preventing ``piracy'' and enabling new, and 
newly secure, forms of electronic information commerce on a ``pay-per-
use'' model. Inevitably, however, the risk that such DRM's may be 
hacked has loomed large in the concerns of copyright owners. From this 
concern has grown domestic and international political pressure for the 
creation of a new species of intellectual property protection: the so-
called anti-circumvention provisions that are the centerpiece of the 
1998 ``Digital Millennium Copyright Act'' (DMCA) in the United State, 
and of similar legislation elsewhere in the world. This new family of 
legal norms is not a development of copyright law, although it is 
superimposed on copyright; rather, it is a kind of ``paracopyright'' 
that provides for new rights, new remedies and--crucially--a new and 
exclusive set of exceptions. Thus, copyright's traditional limiting 
doctrines, including fair use, do not apply as such in this new and 
evolving legal space.
    The U.S. legislation makes relatively few concessions to the access 
interests of follow-on creators and innovators. This problem already is 
acute in fields (such as encryption research) where essential 
information is incorporated into copyright works that are made 
available only in digital formats. It will become increasingly 
significant in other fields (including scholarship, criticism and 
education) as literary texts and (especially) audiovisual works migrate 
to exclusive digital formats.5 Thus, for example, the 
ability of media teachers to assemble clip reels of short excerpts from 
commercially available copy-protected DVD's--a clear instance of fair 
use under copyright law--is threatened by the paracopyright regime of 
17 U.S.C. Sec. 1201. The narrow specific exceptions provided in the 
DMCA do not apply to this instance,6 nor is it clear that 
the special rulemaking procedure for devising a limited range of 
additional exceptions, specified in Sec. 1201(a)(1), could be 
successfully invoked by media teachers.
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    \5\ The problem is exacerbated by the fact that, by design, anti-
circumvention laws are insensitive to the distinction between the 
protected and unprotected elements of copyright works.
    \6\ In particular, the ``savings'' language of Sec. 1201 (c), as it 
is generally interpreted, does not give a film teacher the 
authorization to engage in circumvention for purposes of fair use. See 
Universal City Studios, Inc. v. Corley, 273 F.3d 429 (2d Cir. 2001).
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    Unlike the problem of uncertainty in fair use referred to in the 
preceding section of my testimony, the threat to fair use posed by 
anti-circumvention laws will require Congressional intervention if it 
is to be dispelled. H.R. 1201, the ``Digital Media Consumers Rights Act 
of 2005,'' as introduced by Representatives Boucher, Doolittle and 
Barton last March, is an example of legislation that would be well 
calculated to fulfill that important goal.
    Thank you for your attention to my views on this important 
doctrine, its place in U.S. copyright law, and the challenges that it 
currently faces.

    Mr. Stearns. I thank you, Professor.
    Mr. Shapiro, welcome.

                  STATEMENT OF GARY J. SHAPIRO

    Mr. Shapiro. Thank you for holding this incredibly 
important hearing and thank you all for listening, those of you 
who already expressed strong views actually on both sides.
    To us fair use remains a very thin line protecting 
consumers and innovators. Of course commercial piracy is 
harmful. And as Chairman Barton indicated, intellectual 
property protection is incredibly important. But in our rush to 
crack down on pirates, we risk gutting a critical consumer 
right, fair right, fair use. Fair use is the right freely, 
freely to use copyrighted material without the permission of 
the copyright owner. Fair use ensures innovation because it 
allows us to invent new products for the benefit of the public 
even though they do disrupt existing business models. Fair use 
protected the Betamax VCR when MPA members tried to ban its 
sale to consumers. Without fair use, we would have no VCR's no 
tape recorders, no DVR's, no iPods, no TiVo's, and no 
Slingboxes. You would not be able to find information on Google 
or forward an email. Each of these products and applications 
allows you to enjoy copyrighted works in ways that no one had 
anticipated and in ways which copyright holders at least 
initially did not like and they certainly did not authorize.
    American technological leadership in the age of the 
internet relies on the protection that fair use gives to 
innovators and to venture capitalists. But this protection is 
eroding. Until the Supreme Court's Grokster decision this year, 
technology innovators were playing under the Betamax decisions 
bright line rule. A product is legal if it is capable of 
substantial non-infringing uses including fair uses. The 
Grokster opinion added a new layer, a new inducement test which 
leads innovators unsure of the legal status of their products.
    The content industry's entire history is to challenge new 
technologies even after the Betamax decision MPA members 
successfully sued a competitor to TiVo into bankruptcy. Their 
complaint, that product allowed Americans to record, index and 
playback video content in their private homes. Similarly, the 
record companies sued and won against an internet site who 
helped consumers manage the music on the CD's that they already 
legitimately bought and owned. And today, record labels have 
threatened suit against new portable XM and Sirius radios 
already for sale, despite the fact that the music industry is 
paid with each one of these sales. The RIA also wants to lock 
down new digital radios and control consumer's ability to 
record free over the air radio programs in the privacy of their 
homes. Just 2 weeks ago in a hearing room down the hall, the 
head of the RIA said that Americans who record a song off a 
digital radio are guilty are piracy and should be subject to 
prosecution.
    The dark shadow of litigation hanging over the introduction 
of virtually any new product that manipulates content 
especially harms smaller entrepreneurs. Many are forced to 
change products or simply not offer them at all because they 
cannot afford the immense costs of copyright litigation even 
though they believe they could be vindicated in court.
    Now copyright law has repeatedly been strengthened by 
Congress and has never been so protective of the copyright 
monopoly. Our copyright term is not more than five times the 
length of the patent term and the penalties for infringement 
have been repeatedly and radically increased. Also what is 
considered infringing has also been expanded, so fair use is 
now all that protects inventors, investors, and consumers from 
an overregulated world, a world in which every use of every 
product must be authorized in advance by any copyright holder. 
And as the copyright monopoly expands, fair use needs to be 
strengthened not weakened. But instead, laws like the DMCA have 
reduced fair use as a defense for consumers and as a safe 
harbor for manufacturers.
    In response, Chairman Barton and Representatives Boucher 
and Doolittle have introduced H.R. 1201 to clarify the impact 
of the DMCA on fair use, ensure that consumer's cannot be 
liable for otherwise legal conduct, and codify the Betamax case 
as preserved by the Supreme Court in Grokster. Another 
provision of H.R. 1201, which is especially important after 
last week's news about copy protected CD's hiding a window for 
viruses, requires simply that record labels post warnings on 
copy protected CD's. This bill is more necessary than ever. We 
endorse H.R. 1201 as a sensible way to preserve consumer's 
autonomy and protect innovators in the 21st Century.
    By preserving fair use, we will ensure that piracy is not 
confused with the right of families to enjoy lawfully acquired 
content when and where they choose. You also ensure American's 
their fair use right to use the capabilities of new digital 
technologies to inform, communicate, and entertain. You will 
also ensure that any one copyright holder cannot dictate and 
control future innovations and you will increase the odds that 
the next iPod or TiVo will be invented in America.
    Americans should be able to use their property as they 
choose as long as they do not harm others. We tinker with our 
cars, we make music mix CD's from our collections, we look for 
new ways to experience the content we buy, the products we use 
and the new versions we create. Freedom to use our property is 
something we take for granted. With digital products like 
music, movies, and software, only fair use can give us that 
freedom autonomy because every use of a digital product creates 
a copy. Limiting fair use allows copyright owners to enter our 
private space and dictate how we can use our property within 
our own homes and vehicles. Fair use is at risk and remains the 
only line protecting consumers and allowing innovation. At the 
upcoming international CES in Las Vegas, the world will see 
2,500 companies----
    Mr. Stearns. I just need you to sum up.
    Mr. Shapiro. [continuing] unveil their most innovative 
products. These products shift content and time and space and 
allow you to manage it and they do disrupt existing business 
models.
    Thank you for holding this hearing on fair use. It is 
absolutely critical. And on behalf of the CEA and Home 
Recording Rights Coalition, I would be happy to work with you 
further.
    [The prepared statement of Gary J. Shapiro follows:]
    Prepared Statement of Gary J. Shapiro on behalf of the Consumer 
    Electronics Association and the Home Recording Rights Coalition
    In Robert Bolt's extraordinary 1960 play, A Man for All Seasons, 
Sir Thomas More, Chancellor of England, is challenged by his son-in-
law, Roper, for adhering to the law, rather than exercising his own 
authority:

Roper: So, now you give the Devil the benefit of law!
More: Yes! What would you do? Cut a great road through the law to get 
after the Devil?
Roper: I'd cut down every law in England to do that!
More: Oh? And when the last law was down, and the Devil turned 'round 
on you, where would you hide, Roper, the laws all being flat?
    For consumers and for technologists, Mr. Chairman, fair use is one 
of the last laws standing today. Most of the rest have been flattened 
by congressional enactments, mandatory licenses, and court decisions 
that threaten to concentrate all copyright authority in the hands of a 
few large companies, in a few large industries. On behalf of the 
Consumer Electronics Association 1 and its more than 2,000 
members, and the Home Recording Rights Coalition,2 of which 
I am the chairman, I thank you, Chairman Stearns, Ranking Member 
Schakowsky, and the Subcommittee for holding this hearing on the 
importance of fair use to consumers and industry.
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    \1\ CEA is the principal trade association of the consumer 
electronics and information technology industries and the sponsor of 
the International Consumer Electronics Show. CEA represents more than 
2,000 corporate members involved in the design, development, 
manufacturing, distribution and integration of audio, video, mobile 
electronics, wireless and landline communications, information 
technology, home networking, multimedia and accessory products, as well 
as related services that are sold through consumer channels. Combined, 
CEA's members account for more than $121 billion in annual sales. CEA's 
resources are available online at www.CE.org,
    \2\ The Home Recording Rights Coalition was founded in 1981 in 
response to legal and legislative threats to consumer enjoyment of new 
technologies. See www.HRRC.org.
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    Consumer fair use was the key to allowing consumer video recorders 
onto the U.S. market in the 1970s and 1980s--when members of the Motion 
Picture Association of America sought a court injunction against their 
sale to consumers. By a single vote, the Supreme Court held in 1984 
that ``time-shifting'' of complete works, by consumers for private 
noncommercial purposes, was fair use, even though it occurred without 
the authorization, or even over the objection, of the copyright owner. 
The Supreme Court's decision in this year's Grokster case makes this 
holding all the more important, because the Court has now said that 
inventors and distributors of new technology can be found liable for 
copyright infringement based on ``intent'' to induce infringing uses. 
Sony, the Court says now, escaped liability for marketing the first VCR 
only because it was not clear at the time that it was unlawful for a 
consumer to make and keep a home recording, as Sony's advertising 
encouraged them to do. In other words: without fair use, we would have 
no VCRs and no audio tape recorders, and today, we would have no TiVos, 
no DVD recorders, no iPods, and no Slingboxes.
    But the importance of fair use does not end with new products. 
Without it, I could not have shared with you the quotation with which I 
began my testimony--despite the fact that Mr. Bolt's play is now 45 
years old and that he himself died in England 10 years ago. Without 
fair use I could not have quickly found this information in the on-line 
Wikipedia, or retrieved it via Google. Without fair use I could not 
have quoted the lines of the play to CEA and HRRC members. Indeed, 
without fair use there would be very few web sites I could usefully 
visit, very few informative emails that I could send, and far fewer 
hardware and software products with which to learn and communicate.
The Nature of Fair Use
    Unlike the judge-created legal theories of secondary copyright 
liability, under which inventors and manufacturers can be held liable 
for the actions of others, fair use protection is statutory. It resides 
in Section 107 of the Copyright Act, and represents the consolidation 
of hundreds of years of common law precedent in which courts protected 
against the abuse of copyright owners' monopoly power. It has origins 
in our First Amendment, because free expression includes the right to 
build on the ideas and accomplishments of others. More generally, it 
represents the balance between protection and innovation that can be 
traced back to the granting clauses of our Constitution itself, in 
which the rights to patent and copyright protection are created for a 
limited time, to promote the progress of science and the useful arts.
    Fair use is a vital part of the bargain that our founders 
envisioned between artists and the public: artists get certain rights 
in the work they create; the public gets to use those works in fair and 
reasonable ways. Three years ago in Eldred v. Ashcroft, the Supreme 
Court said that fair use is not a triviality--it is one of the key 
provisions that keeps copyright law in harmony with the First 
Amendment. Fair use, the Court said, was a major reason why Congress 
had the discretion to extend the term of copyrights--because users' 
rights and autonomy were preserved by fair use.3
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    \3\ CEA and HRRC believe nevertheless that this discretion was 
exercised unwisely in this instance.
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    The concept of fair use is almost uniquely American. In most other 
societies, unauthorized uses must be the subject of enumerated 
exceptions to the copyright laws. In a rapidly changing technological 
and consumer environment, this is far from ideal. The truly innovative, 
popular new products, things like digital video recorders and iPods, 
allow consumers to enjoy copyrighted works in ways that no one had 
anticipated. No legislature could hope to lay out specific copyright 
exemptions for products like those before they are invented, and 
without an exemption, even investing in the development of a new 
product becomes far too risky. I think it is fair to say that American 
technological leadership--particularly in the age of the Internet--has 
relied largely on the assurance that our fair use doctrine has given to 
innovators and venture capitalists. But this may be changing.
The Importance of Fair Use
    Until the Supreme Court's Grokster decision this year, most 
innovators and venture capitalists had a concise view of the law as a 
``bright line'' test, based on language in the 1984 Betamax decision: 
If a new product has or is capable of substantial non-infringing uses, 
it is lawful to put it on the market. In this construct, a product 
designer or manufacturer understood that any product that had or was 
likely to have substantial fair uses was lawful. The Grokster opinion, 
however, seems to have turned this formulation on its head: Whether an 
intention to ``induce'' a copyright violation is found may now depend 
on whether any uses of the product, if they are urged and enabled by 
the manufacturer, investor, or distributor, are deemed unlawful as a 
matter of copyright law.
    The idea that product innovators, investors, and consumers should 
have to live in a world of only those uses authorized, in advance, by 
copyright proprietors, was exactly what the Supreme Court in the 
Betamax case said it wished to avoid. Such a regime would subjugate the 
intellectual property rights of patent owners, granted in recognition 
of their promotion of new technology, to the more easily obtained 
rights of copyright proprietors. The Betamax Court said that such a 
result would ``choke the wheels of commerce.'' In Grokster, the Court 
did not say that any such result would be preferable or justified. The 
Court pointed out that even though Sony's advertising for the Betamax 
VCR promoted uses such as the ``librarying'' of programs, such consumer 
conduct was not ``necessarily unlawful.''
    This is the essence of fair use--giving consumers, innovators, and 
manufacturers the benefit of the doubt that the private, reasonable 
activity of consumers, and the productive activity of those inspired by 
copyrighted works is not ``necessarily unlawful.'' Now that the Supreme 
Court, in order to get at some ``purposeful, culpable'' practices of 
free file sharing services, has cut down the other legal protections 
that technologists thought they enjoyed, fair use is all that stands 
between inventors, investors, and consumers and a world in which all 
new products must be fully authorized, in advance, by any owner or 
distributor of any copyrighted material that a new device is able to 
store, reproduce, communicate or perform.
The Threat To Fair Use
    Even before the Grokster case, some major motion picture studios 
were unwilling to accept the notion that the modern successors to the 
VCR could be marketed on an unauthorized basis. A competitor to TiVo 
was sued into bankruptcy in a case in which a complaint by three major 
studios attacked the basic recording, indexing, and playback features 
of a consumer home recorder. An entire chapter of the complaint brought 
by MGM, Orion Pictures, Fox Film Corporation, Universal City Studios 
Productions, and Fox Broadcasting specifically attacks standard 
features, found on any PVR product, as ``inducements'' to copyright 
violation:
        ``Defendants cause, accomplish, facilitate and induce the 
        unauthorized reproduction of Plaintiffs'' copyrighted works in 
        violation of law. *** The ReplayTV 4000 device provides 
        expanded storage, up to (currently) a massive 320 hour hard 
        drive, which allows the unlawful copying and storage of a vast 
        library of material. *** ReplayTV 4000's expanded storage and 
        sorting features organize disparate recordings into coherent 
        collections, and cause, facilitate, induce and encourage the 
        storage or ``librarying'' of digital copies of the copyrighted 
        material, which harms the sale of DVDs, videocassettes and 
        other copies, usurps Plaintiffs' right to determine the degree 
        of ``air time'' a particular program receives in various cycles 
        of the program's distribution....'' 4
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    \4\ Metro-Goldwyn-Mayer Studios, Inc. et al v. ReplayTV, Inc., U.S. 
District Court, Central District of California, Case No. 01-09801, 
Complaint of MGM, Orion Pictures, Twentieth Century Fox, Universal City 
Studios, and Fox Broadcasting,  24-25, November 14, 2001 (emphasis in 
original). Pleadings in this case can be found at http://www.eff.org/
IP/Video/Paramount_v_ReplayTV/.
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    This year, elements of the recording industry have threatened suit 
against innovative new, portable products that have been announced for 
the Sirius and XM satellite radio services--despite the fact that these 
products fall squarely under the protection of the Audio Home Recording 
Act, under which royalties are paid to the music industry and there is 
an express immunity from copyright suit. The Recording Industry 
Association also is seeking legislation to empower the Federal 
Communications Commission to ``lock down'' the functions of consumer 
radio receivers for the new Digital Audio Broadcasting service. Forty-
three years since the first audio cassette recorder came to the U.S. 
market, the recording industry still wants to deny consumers the 
ability to record radio programs in the privacy of their homes. In 
fact, just two weeks ago during an appearance down the hall from this 
hearing room, the head of the RIAA complained that ``the one-way method 
of communication [enabled by HD radio] allows individuals to boldly 
engage in piracy with little fear of prosecution.'' In other words, the 
RIAA believes that when you, your staff, and your constituents tape a 
song off the radio, you have engaged in piracy and ought to be 
criminally prosecuted.
    The campaign for copyright absolutism has not stopped with attacks 
on consumer devices and long-standing consumer practices. Just this 
year, major publishing groups filed suit against Google, which has been 
working with major university libraries, and others, to digitize 
libraries as a tool in aid of research and education. Google will not 
make entire works available without authorization, and will withdraw 
from the program any work as to which the copyright owner objects, 
these publishers, apparently, pursue this case only in the name of 
absolute control over use--a direct affront to the fair use doctrine.
The Encroachment Of Other Laws
    In 1998 the Congress passed the Digital Millennium Copyright Act 
(the ``DMCA''), which prohibits ``circumvention'' of technical measures 
used in aid of copyright protection. While this legislation made a bow 
toward the fair use doctrine, it did not clearly or explicitly provide 
that legality of the intended use under copyright law was a defense to 
violation of the DMCA.
    So, for example, a use that courts and commentators universally 
agree is fair--such as time-shifting a TV program to watch later--can 
be effectively made illegal by adding a technical lock to prevent that 
use. Time-shifting is legal, but if a consumer would have to violate 
the DMCA in order to exercise his or her right to do it, then the right 
becomes meaningless. As presently written, the DMCA therefore allows a 
single company to violate the balance of fair and unfair uses that the 
courts have developed over the past century. This consequence, perhaps 
unintended, has caused concern and uncertainty among consumers, small 
businesses, educators, librarians, and others. As you know, Chairman 
Barton and Representatives--Boucher and Doolittle have introduced--H.R. 
1201 to clarify the impact of the DMCA on the fair use doctrine, and to 
codify the elements of the Betamax case that were preserved by the 
Supreme Court in Grokster and--most presciently--to require that 
consumers be warned against Compact Discs to which copy protection 
technology has been applied. CEA and the HRRC have endorsed H.R. 1201 
as a sensible way to preserve consumers' autonomy and protect 
innovators in the 21st century.
Fair Use and Personal Autonomy
    Americans believe they should be able to use the things they buy in 
whatever way they choose, as long as their use doesn't injure others. 
We tinker with our cars. We put radios in the shower. We look for new 
ways to experience the content that we buy, the Internet that we use, 
and the new versions that we can create. The autonomy and the freedom 
to use what we buy is something we take for granted.
    For digital products like music, movies, and software, fair use is 
what gives us that freedom and autonomy, because every use of a digital 
product creates an incidental copy. Limiting fair use opens the door to 
copyright owners to enter our sphere of personal autonomy, and dictate 
how we can use the products that we buy within our own homes and 
vehicles.
    Americans who believe in speed limits still won't buy a car that's 
electronically blocked from going over 70 miles per hour. We trust 
people to use their cars responsibly; legal enforcement kicks in only 
when they don't. For music, movies, the Internet, and the digital 
products we use every day, fair use is what gives us that trust and 
autonomy, within our personal sphere, and saves legal enforcement for 
those who, as the Supreme Court said in Grokster, engage in clearly 
culpable conduct.
Fair Use And Creativity
    The last few years have seen the rebirth of the feature-length 
documentary as a popular and socially valuable art form. Yet, denying 
that fair use applies, copyright owners have demanded stiff royalties 
from documentary producers for every billboard, every whistled tune, 
and every cellphone ring that appears in their portrayals of real 
everyday life. Jonathan Caouette's acclaimed documentary Tarnation, 
which showed at the Cannes and Sundance film festivals this year, cost 
$218 to produce but required tens of thousands in licensing fees for 
incidental appearances of copyrighted material. Fair use, as it exists 
today, can and should help filmmakers like Jonathan Caouette get a fair 
deal. All that's missing is that these filmmakers know their rights and 
are not bullied into giving them up.
    Even if one will never become a film producer or a songwriter, the 
First Amendment protects our rights to receive expression, as well as 
to send it. A fully informed citizenry is at the core of our democracy. 
We cannot afford to have our information and, indeed, our own history, 
managed by corporations on a 100 percent authorized basis any more than 
we can afford to have our technology and innovation managed that way.
Fair Use Is A Check On Monopoly Power
    Given the relatively small number of mass media companies, and 
their size, it is daunting enough for a single corporation to control, 
in seeming perpetuity, a large portion of our cultural and historical 
heritage. It is even more daunting when these corporations band 
together as industry groups, and insist on the right to prescribe how 
their content will be enjoyed, and the technologies that can and cannot 
be used whenever any of their collective content is involved. We do not 
believe that either the Congress or the Supreme Court has envisioned 
them enjoying such power, but already they do.
    Already, content providers and distributors have been moving to 
announce in advance that they will ``license'' only technologies and 
techniques that are satisfactory to them, and will not license, or will 
challenge, others. Already, the ability of competitive manufacturers to 
benefit from a 1996 Telecommunications Act provision that Rep. Markey 
and former Chairman Bliley introduced, to assure that competitive 
products can work directly on digital cable and satellite systems, has 
been slowed by the centralized control over product licensing by a 
technology consortium owned by the cable industry, ``CableLabs.'' 
5
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    \5\ The legal rationale for such control is grounded in the 
copyright concerns of content providers.
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    In September, the motion picture industry announced that is forming 
a similar central laboratory, reporting directly to the CEOs of the 
major motion picture companies: ``MovieLabs.'' The purpose of 
MovieLabs, according to statements attributed to a senior studio 
executive, is to fill ``gaps in research on content protection left by 
consumer electronics companies and Silicon Valley.'' 6 In 
reality, though, the market for such new ``DRM'' technologies has been 
highly competitive and more than robust. Something more seems to be 
going on.
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    \6\ See, http://www.nytimes.com/2005/09/19/busi
ness/19film.html?ex=1127793600&en=fb357f94a7634723&ei=5070&emc=eta1
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    Thus far, DRM technologies have been licensed by the technology 
companies that develop them. Often, these companies are also developers 
of consumer products, and are reluctant to impose limitations on the 
usefulness of these products to consumers. Therefore they have 
negotiated with content providers about the nature and level of 
``protections'' to be applied. In resisting the power of movie and 
cable monopolists who have complete control over product distribution, 
their only argument has been based on fair use--not necessarily as a 
consumer right to engage in specific practices, but as a public policy 
expectation, deeply engrained in our law and jurisprudence, that 
consumers and technologists must be afforded space and freedom 
consonant with their roles in our society.
    These negotiations have escalated to congressional and regulatory 
proceedings. The only technology mandate in the DMCA, Section 1201(k), 
requires that certain analog VCRs to respond to Macrovision copy 
protection technology. It is, however, limited by ``encoding rules'' 
that strictly govern when this technology can and cannot be triggered. 
Similarly, the FCC's ``Plug & Play'' regulations for ``Digital Cable 
Ready'' devices acknowledge that an industry-wide license for products 
to attach to digital cable systems requires the mandatory application 
of certain copy protection technologies, but also strictly limits the 
circumstances in which these technologies can be triggered.
    These ``encoding rules'' do not state or approximate judicial 
outcomes; they are, rather, a set of expectations based on public 
policy. They are enormously difficult to negotiate and maintain in the 
face of the demands of copyright proprietors to control and 
specifically authorize every conceivable use of their products. In the 
case of the FCC regulations, the outcomes are open to review by the 
Commission whenever there is a new service, or a petition for a rule 
change. And the music industry--which negotiated the very first set of 
encoding rules with us and the Congress as part of the Audio Home 
Recording Act of 1992--is now trying to ignore the very AHRA rules it 
agreed to. It is asking the Congress for different and harsher 
impositions in new legislation, governing satellite and terrestrial 
broadcasts, that the industry has proposed to the House Judiciary 
Committee.
    It is only through the vitality of the fair use doctrine as a 
political expression of public policy that the concerted might and 
licensing pressure of the industries that sell and distribute content 
can be brought into some balance. This involves, of course, maintaining 
the vitality of Section 107 in the courts. It also requires, however, 
that the Congress maintain a legislative and policy balance with fair 
use in mind--

 That the Congress not conflate instances of mass, indiscriminate and 
        anonymous redistribution of works over the Internet with the 
        right of individuals and family groups to enjoy content in a 
        modern and flexible home or family network that may embrace 
        households in different regions.
 That the Congress should not allow the technical tools to create and 
        maintain such home networks to fall under the exclusive control 
        of those who sell or distribute content, solely by virtue of 
        their effective or concerted copyright monopolies.
    This Committee has played a key role in preventing or limiting such 
abuses. By holding today's hearing on the fair use doctrine, your 
Committee and this Subcommittee continue their leadership in protecting 
the American public, American innovation, and American culture. On 
behalf of CEA and the Home Recording Rights Coalition, I again thank 
you for holding this hearing, and pledge our continued cooperation with 
you and your staffs.

    Mr. Stearns. Ms. Adler?

                 STATEMENT OF PRUDENCE S. ADLER

    Ms. Adler. Mr. Chairman, Ranking Member Schakowsky, and 
members of the subcommittee, I am Prudence Adler and I am 
speaking today on behalf of the Library Copyright Alliance or 
LCA. The LCA consists of five major library associations that 
represent over 139,000 libraries employing 350,000 librarians 
and other personnel throughout the United States. Our Nation's 
libraries spend over $2 billion each year on all forms of 
information, thus we seek to ensure that our patrons have 
effective and long term access to these information resources.
    Thank you for including libraries in this hearing today on 
fair use. Fair use is central to our ability to achieve many 
facets of our library missions. Each day teachers, students 
learn, researchers advance knowledge, and consumers access 
copyrighted information due to exceptions in the Copyright Act 
such as fair use. For libraries and for consumers the fair use 
doctrine is the most important limitation on the rights of the 
copyright owners. It is the safety valve if you will of the 
U.S. Copyright Law for consumers.
    Fair use balances the rights of authors, publishers, and 
copyright owners with society's need for the free exchange of 
ideas. Fair use provides the basis for our most important day 
to day activities in scholarship and education and safeguards 
our collective interest in the flow of information. Fair use 
has served us well because there is no fair use checklist. 
Importantly there is no bright line for fair use. Fair use is 
accessible, fair use is dynamic, it is inherently ambiguous and 
not easily defined but critically important in ensuring 
legitimate access to copyrighted work.
    In addition to fair use by library patrons on a daily 
basis, libraries also reply upon fair use to support a number 
of our activities such as print and electronic reserve and 
increasingly and more recently the digitization of copyrighted 
work.
    Publishers more recently have relied upon the licensing of 
copyrighted work in lieu of the acquisition of those works. 
Licensing provides publishers with greater control in the use 
of their work. How they are used, by whom, and at what cost. 
Under license agreements, a library is bound by the terms of 
that agreement and these agreements do not always reflect the 
exception and privileges of the copyright act such as fair use.
    As a result, we are witnessing an erosion of fair use and 
related library exceptions as licensing and technological 
controls built into licensed data bases can restrict the fair 
use rights of library users and of libraries. For example, 
technological controls can limit the numbers of copies of an 
article or the amount of text reproduced. It is important to 
note that once technological controls are built into a data 
base with copyrighted materials, it is very difficult if not 
impossible for libraries to negotiate exceptions in our license 
agreement.
    Moreover, if a license does not permit the preservation of 
copyrighted work and a library cannot exercise fair use through 
the license terms copyrighted works will be lost to future 
generations. Publishers had not undertaken preservation of 
copyrighted work. Instead it is libraries that preserve these 
works for future users. That is why the library community is a 
strong supporter of legislation to address these concerns, H.R. 
1201.
    In closing, fair use reflects copyrights laws first 
amendment based principles of free speech and provides the 
basis for our most important day-to-day activities. Fair use 
safeguards our collected interest, our Nation's interest in the 
flow of information which is in turn a source of cultural, 
historical, and economically valuable matters.
    Thank you.
    [The prepared statement of Prudence S. Adler follows:]
   Prepared Statement of Prudence S. Adler, Association of Research 
         Libraries on behalf of the Library Copyright Alliance
    My name is Prudence Adler and I am speaking today on behalf of the 
Library Copyright Alliance or LCA. The LCA consists of five major 
library associations--the American Association of Law Libraries, the 
American Library Association, the Association of Research Libraries, 
the Medical Library Association, and the Special Libraries Association. 
These five associations collectively represent over 139,000 libraries 
employing over 350,000 librarians and other personnel throughout the 
United States. These five associations cooperate in the LCA to address 
copyright issues that affect libraries and their patrons. Our Nation's 
libraries spend over two billion dollars each year on all forms of 
information; thus we seek to ensure that our patrons have effective and 
long-term access to these information resources.
    Thank you for including libraries in this hearing today on fair 
use. Fair use is central to our ability to achieve many facets of our 
missions. Libraries are essential to the communities that they serve 
and to our Nation. Libraries preserve and provide access to our 
cultural, historical and scientific heritage; support and encourage 
research, education and lifelong learning; and provide a venue for 
community engagement on a host of issues.
    Libraries, like many other sectors, are undergoing significant 
transformation in this rapidly evolving digital environment. Today, 
researchers, students and members of the public can engage in 
sophisticated searching and manipulation of information including ready 
access to data, sound and image files, and more. Increasingly, the data 
and information available is both current and historical as many 
libraries, and others such as Google, Yahoo, Microsoft, and the 
Internet Archive, digitize special collections that richly reflect the 
cultural and political history of our Nation.
    In this time of transformation, intellectual property policies have 
been and will continue to be central to the library community. 
Historically, the library community has relied on copyright law as the 
policy framework for balancing the competing interests of creators, 
publishers, and users of copyrighted works. Copyright law balances the 
rights of authors, publishers and copyright owners with society's need 
for the free exchange of ideas. Provisions in the Copyright Act 
including fair use and related exemptions for libraries and educational 
institutions allow libraries to achieve our mission of providing 
effective public access to and the preservation of information in all 
formats.
    Each day teachers teach, students learn, researchers advance 
knowledge, and consumers access copyrighted information due to 
exemptions in the Copyright Act such as fair use. Fair use permits the 
use of copyrighted material without permission from the copyright 
holder under certain circumstances. For libraries and indeed for 
consumers, the Fair Use Doctrine is the most important limitation on 
the rights of the copyright owner--the ``safety valve'' of U.S. 
copyright law for consumers.
    Fair use or Section 107 of the Copyright Act allows reproduction 
and other uses of copyrighted works for purposes such as criticism, 
comment, news reporting, teaching, scholarship and research. The 
statute sets forth four factors to be considered in determining whether 
a use is fair; including the character of the use, the nature of the 
work, the amount used in proportion to the whole, and the impact on the 
market for the work. Fair use has served us well because there is no 
fair use checklist. The four factors provide libraries and users alike 
with needed flexibility. And there is no need to import from other 
sections of the law the detailed list of conditions, prohibitions, and 
exclusions such as those found in the TEACH Act concerning distance 
education. Importantly, there is no bright line for fair use. Thus, 
fair use is dynamic, inherently ambiguous and not easily defined but 
critically important in ensuring legitimate access to copyrighted 
works.
    Library patrons routinely rely on fair use. A teacher, for example, 
might photocopy a few pages of a history text found in a library to 
hand out to her class. A student may include in a term paper a 
quotation from a novel checked out of a library while a researcher 
might give a copy of a journal article describing a laboratory 
technique to a technician who works for her. A small business owner may 
print out accounting tips from a website he accesses from a library 
computer. These are fair uses of copyrighted works.
    In addition to fair uses by library patrons, libraries rely upon 
fair use in support of a number of library activities. While U.S. 
copyright law does contain explicit exceptions for libraries and 
archives in Section 108, these exceptions do not cover every 
circumstance under which a library might need to use a work. Section 
108 specifically provides that ``[n]othing in this section . . . in any 
way affects the right of fair use as provided by section 107 . . .'' 
For example, library practices for both print and electronic reserves 
are based on fair use.
    For decades, libraries have provided access to materials selected 
by faculty as required or recommended course readings in a designated 
area of the library, with materials available to students for a short 
loan period and perhaps with additional restrictions to ensure that all 
students have access to the material. These materials are important to 
the course but do not warrant the purchase of an entire text by the 
student. Libraries have based these reserve reading room operations on 
the fair use provisions of the Copyright Act.
    More recently, as with other services, many libraries have 
introduced electronic reserves (e-reserves) systems that permit 
material to be stored in electronic form and accessed in the library or 
remotely by the student enrolled in the course. E-reserves systems are 
a more effective means to provide student access to needed copyrighted 
materials. E-reserves are an excellent example of the flexibility of 
fair use and demonstrate that it is technologically neutral in its 
application.
    Within the past decade, there has been a notable shift by 
publishers to license their works to libraries in lieu of the purchase 
of these works by libraries. Licensing provides publishers with greater 
control in the use of their works--how they are used, by whom and at 
what cost. Licensing access to copyrighted works versus the acquisition 
of the copyrighted work by libraries presents new challenges to both 
libraries and their patrons. Under license agreements, a library is 
bound by the terms of the agreement. These agreements do not 
necessarily reflect the privileges and exceptions of the Copyright Act 
such as fair use, preservation and interlibrary loan. For example, if 
libraries are unable through negotiation to include in the license 
terms the ability to perform preservation on copyrighted works, 
libraries can no longer exercise the rights that are otherwise 
available through the Copyright Act.
    Licensing and technological controls built into a licensed database 
can restrict the fair use rights of library users in a number of ways. 
Technological controls can limit the number of copies of an article 
copied or the amount of text reproduced. These amounts are controlled 
by the printing and downloading commands of the licensed database. Once 
technological controls are built into a database with copyrighted 
materials, it becomes difficult if not impossible for libraries to 
negotiate exceptions.
    Although libraries may preserve copyrighted works under Section 108 
of the Copyright Act, there may be times that libraries choose to 
preserve copyrighted works under Section 107, Fair Use. If a license 
does not permit the preservation of copyrighted works and a library 
cannot exercise fair use due to the license terms and/or technological 
controls, copyrighted works will be lost to future generations. 
Publishers have not undertaken preservation of copyrighted works. 
Instead, it is libraries that preserve these works for future users.
    In closing, fair use serves a critically important role in the 
library and educational arena and in all sectors, both public and 
private. Fair use, in addition to reflecting in copyright law First 
Amendment-based principles of free speech, provides the basis for our 
most important day-to-day activities in scholarship and education. Fair 
use safeguards our collective interest in the flow of information--
which is, in turn, a source of culturally and economically valuable 
knowledge.

    Mr. Stearns. Mr. Band?

                   STATEMENT OF JONATHAN BAND

    Mr. Band. Chairman Stearns, Ranking Member Schakowsky, and 
members of the subcommittee, NetCoalition appreciates this 
opportunity to testify on the importance of fair use through 
the internet.
    NetCoalition members believe in strong intellectual 
property protection. They own copyrights, patents, and 
trademarks and enforce them vigorously. Indeed, their most 
valuable assets are intellectual property. At the same time, 
NetCoalition members believe that overprotection of 
intellectual property is as harmful as under protection. 
Congress and the courts have carefully structured the copyright 
law to maintain the balance between the interest of authors and 
the control of their writings and supplied its competing 
interests in the free flow of ideas, information, and commerce.
    Fair use is an important means by which the copyright law 
maintains this balance. Fair use is particularly important in 
the digital environment where even the most basic functions 
require computers to make copies. Almost every activity on the 
internet involves copying, viewing a website, printing out a 
new article, responding to an email including an image from a 
website in a book report. I will provide three instances where 
fair use plays a critical role for internet companies, search 
engines, software development, and on line creativity. I then 
will discuss on threat to fair use.
    Search engines depend on fair use in their daily 
operations. A search engine firm sends out a software spider 
that crawls to websites and copies vast quantities of data into 
the search engine's data base. As a practical matter, each 
major search engine copies a large percentage of the entire 
worldwide web every few weeks to keep the data base current. 
Significantly, the search engines conduct all this copying 
without the permission of the website operators. The search 
engines believe that fair use permits this copying. In other 
words, the billions of dollars of market capital represented by 
the search engine companies are based primarily on fair use.
    The fair use status of search engines has been considered 
in one case, Kelly v. Arriba Soft. There the Ninth Circuit 
concluded that fair use allowed the copying performed by a 
search engine. We will be hearing from the Authors Guild about 
the Google print library project. At this point, I would like 
to just say that Google will only be displaying short snippets 
of copyright books to users. Also any copyright owner can opt 
out of the project simply by asking Google not to scan his book 
into its data base. Because of the snippets and the opt out 
Google print will not harm any authors and should be considered 
a fair use by the court.
    Fair use is also critical to the inner workings of the 
internet. The interoperability between the many components that 
make up the internet can often be achieved only if developers 
through reverse engine the different software components. 
Software reverse engineering typically requires the making of 
temporary copies. Several courts have found that fair use 
permits this copying. Fair use facilitates political and 
artistic discourse on the internet. Bloggers for example 
frequently quote from articles or other bloggers. The internet 
is also full of parody. NetCoalition members encourage and 
benefit from this robust creative activity.
    Entertainment companies understandably seek to prevent 
infringement of their works through the use of Digital Right 
Management Systems. But such DRM's typically preclude both fair 
and unfair uses. As DRM's become more pervasive, Congress may 
need to consider mechanisms for preserving fair use. 
Additionally, Congress should exercise great care before 
mandating DRM's. Such technological mandates will not only 
limit fair use, they will also impede innovation.
    In sum, as Congress fashions policies to protect the 
entertainment industry from large scale infringement over 
digital networks it must take care not to prevent lawful uses 
that enrich our lives.
    Thank you for your attention.
    [The prepared statement of Jonathan Band follows:]
     Prepared Statement of Jonathan Band on Behalf of NetCoalition
    NetCoalition appreciates this opportunity to testify before the 
subcommittee on the importance of fair use to the Internet. 
NetCoalition represents some of the Internet's most innovative 
companies, including Bloomberg, CNET Networks, Google, Interactive 
Corp., and Yahoo!. NetCoalition members believe in strong intellectual 
property protection. They own copyrights, patents, and trademarks, and 
enforce them vigorously. Indeed, their most valuable assets are 
intellectual property.
    At the same time, NetCoalition members agree with Judge Alex 
Kozinski that overprotection of intellectual property is as harmful as 
underprotection. See White v. Samsung Electronics, 989 F.2d 1512 (9th 
Cir.)(Kozinski, J., dissenting), cert. denied, 113 S.Ct. 2443 (1993). 
The Supreme Court explains that the intellectual property system 
requires a ``balance between the interests of authors and inventors in 
the control and exploitation of their writings and discoveries on the 
one hand, and society's competing interest in the free flow of ideas, 
information, and commerce on the other.'' Sony Corp. v. Universal City 
Studio, Inc., 464 U.S. 417, 429 (1984).
    Congress and the courts have carefully structured the copyright law 
to maintain this balance. Thus, while ``copyright protection subsists . 
. . in original works of authorship fixed in any tangible medium of 
expression,'' copyright does not ``extend to any idea, procedure, 
process, system, method of operation, concept, principle, or discovery 
. . .'' 17 U.S.C. 102. Similarly, the Supreme Court in Feist v. Rural 
Telephone, 499 U.S. 340 (1991), stated that ``the most fundamental 
axiom of copyright law'' is ``that no one may copyright facts . . .'' 
Id. at 353. Accordingly, ``raw facts may be copied at will.'' Id. at 
349.
    The fair use doctrine is another means by which the copyright law 
balances ``the competing concerns of providing incentive to authors to 
create and of fostering competition in such creativity.'' Kern River 
Gas Transmission Co. v. Coastal Corp., 899 F,2d 1458, 1463 (5th Cir.), 
cert. denied, 498 U.S. 952 (1990). The Supreme Court has described fair 
use as an ``equitable rule of reason which permits courts to avoid 
rigid application of the copyright statute when, on occasion, it would 
stifle the very creativity which that law is designed to foster.'' 
Stewart v. Abend, 495 U.S. 207, 237 (1990). Just two years ago, Justice 
Ginsburg termed fair use as one of copyright law's ``built-in First 
Amendment accommodations . . .'' Eldred v. Ashcroft, 123 S.Ct. 769, 788 
(2003).
    Fair use is particularly important in the digital environment, 
where even the most basic functions require computers to make copies. 
For example, for a user to view a website, the user's computer must 
make a temporary copy of the website in its random access memory. 
Almost every other activity on the Internet also involves the making of 
a copy: printing out an interesting article; responding to an email; 
including an image downloaded from a website in an elementary school 
book report.
    The balance of my testimony will address three instances where fair 
use plays a critical role for Internet companies: search engines, 
software development, and online creativity. My testimony then will 
discuss some of the threats to fair use.
                      fair use and search engines
    Internet companies rely on fair use in their daily operations. This 
reliance is most apparent with search engines, the basic tool that 
allows users to find information on the Internet. A search engine firm 
sends out software ``spiders'' that crawl publicly accessible websites 
and copy vast quantities of data into the search engine's database. As 
a practical matter, each of the major search engine companies copies a 
large (and increasing) percentage of the entire World Wide Web every 
few weeks to keep the database current and comprehensive. When a user 
issues a query, the search engine searches the websites stored in its 
database for relevant information. The response provided to the user 
typically contains links both to the original site as well as to the 
``cache'' copy of the website stored in the search engine's database.
    Significantly, the search engines conduct this vast amount of 
copying without the authority of the website operators. Although the 
search engines will respect an exclusion header, a software ``Do Not 
Enter Sign'' posted by a website operator, the search engines does not 
ask for permission before they enter websites and copy their contents. 
Rather, the search engine firms believe that the fair use doctrine 
permits their activities. In other words, the billions of dollars of 
market capital represented by the search engine companies are based 
primarily on the fair use doctrine.
                          kelly v. arriba soft
    The application of fair use to search engines has been considered 
in one case--Kelly v. Arriba Soft, 336 F.3d 811 (9th Cir. 2003). There, 
the Ninth Circuit concluded that the fair use doctrine permitted the 
copying performed by search engines.
    Arriba Soft operated a search engine for Internet images. Arriba 
compiled a database of images by copying pictures from websites, 
without the express authorization of the website operators. Arriba 
reduced the full size images into thumbnails, which it stored in its 
database. In response to a user query, the Arriba search engine 
displayed responsive thumbnails. If a user clicked on one of the 
thumbnails, she was linked to the full size image on the original 
website from which the image had been copied. Kelly, a photographer, 
discovered that some of the photographs from his website were in the 
Arriba search database, and he sued for copyright infringement. The 
lower court found that Arriba's reproduction of the photographs was a 
fair use, and the Ninth Circuit affirmed.
    With respect to the first of the four fair use factors, ``the 
purpose and character of the use, including whether such use is of a 
commercial nature,'' 17 U.S.C.  107(1), the Ninth Circuit acknowledged 
that Arriba operated its site for commercial purposes. However, 
Arriba's use of Kelly's images
        was more incidental and less exploitative in nature than more 
        traditional types of commercial use. Arriba was neither using 
        Kelly's images to directly promote its web site nor trying to 
        profit by selling Kelly's images. Instead, Kelly's images were 
        among thousands of images in Arriba's search engine database. 
        Because the use of Kelly's images was not highly exploitative, 
        the commercial nature of the use weighs only slightly against a 
        finding of fair use.
Kelly at 818.
    The court then considered the transformative nature of the use--
whether Arriba's use merely superseded the object of the originals or 
instead added a further purpose or different character. The court 
concluded that ``the thumbnails were much smaller, lower resolution 
images that served an entirely different function than Kelly's original 
images.'' Id. While Kelly's ``images are artistic works intended to 
inform and engage the viewer in an aesthetic experience,'' Arriba's 
search engine ``functions as a tool to help index and improve access to 
images on the internet . . .'' Id. Further, users were unlikely to 
enlarge the thumbnails to use them for aesthetic purposes because they 
were of lower resolution and thus could not be enlarged without 
significant loss of clarity. In distinguishing other judicial 
decisions, the Ninth Circuit stressed that ``[t]his case involves more 
than merely a transmission of Kelly's images in a different medium. 
Arriba's use of the images serves a different function than Kelly's 
use--improving access to information on the internet versus artistic 
expression.'' Id. at 819. The court closed its discussion of the first 
fair use factor by concluding that Arriba's ``use of Kelly's images 
promotes the goals of the Copyright Act and the fair use exception'' 
because the thumbnails ``do not supplant the need for the originals'' 
and they ``benefit the public by enhancing information gathering 
techniques on the internet.'' Id. at 820.
    With respect to the second fair use factor, the nature of the 
copyrighted work, the Ninth Circuit observed that ``[w]orks that are 
creative in nature are closer to the core of intended copyright 
protection than are more fact-based works.'' Kelly at 820. Moreover, 
``[p]ublished works are more likely to qualify as fair use because the 
first appearance of the artist's expression has already occurred.'' Id. 
Kelly's works were creative, but published. Accordingly, the Ninth 
Circuit concluded that the second factor weighed only slightly in favor 
of Kelly.
    The third fair use factor is ``the amount and substantiality of the 
portion used in relation to the copyrighted work as a whole.'' 17 
U.S.C.  107(3). The Ninth Circuit recognized that ``copying an entire 
work militates against a finding of fair use.'' Kelly at 820. 
Nonetheless, the court states that ``the extent of permissible copying 
varies with the purpose and character of the use.'' Id. Thus, ``if the 
secondary user only copies as much as is necessary for his or her 
intended use, then this factor will not weigh against him or her.'' Id. 
at 820-21. In Kelly, this factor weighed in favor of neither party:
        although Arriba did copy each of Kelly's images as a whole, it 
        was reasonable to do so in light of Arriba's use of the images. 
        It was necessary for Arriba to copy the entire image to allow 
        users to recognize the image and decide whether to pursue more 
        information about the image or the originating web site. If 
        Arriba copied only part of the image, it would be more 
        difficult to identify it, thereby reducing the usefulness and 
        effectiveness of the visual search engine.
Kelly at 821.
    The Ninth Circuit decided that the fourth factor, ``the effect of 
the use upon the potential market for or value of the copyrighted 
work,'' 17 U.S.C.  107(4), weighed in favor of Arriba. The court found 
that the Arriba ``search engine would guide users to Kelly's web site 
rather than away from it.'' Kelly at 821. Additionally, the thumbnail 
images would not harm Kelly's ability to sell or license full size 
images because the low resolution of the thumbnails effectively 
prevented their enlargement.
    Are other circuits likely to reach the same conclusion as the Ninth 
Circuit when reviewing the copying performed by search engines? They 
are, because the Ninth Circuit's fair use analysis relied heavily on 
the Supreme Court's most recent fair use decision, Campbell v. Acuff-
Rose, Music, Inc., 510 U.S. 569 (1994). Thus, Kelly correctly noted 
that Campbell held that ``[t]he more transformative the new work, the 
less important the other factors, including commercialism, become.'' 
Kelly at 818, citing Campbell at 579. Likewise, Kelly cited Campbell 
for the proposition that ``the extent of permissible copying varies 
with the purpose and character of the use.'' Kelly at 820, citing 
Campbell at 586-87. And Kelly followed Campbell's conclusion that ``[a] 
transformative work is less likely to have an adverse impact on the 
market for the original than a work that merely supersedes the 
copyrighted work.'' Kelly at 821, citing Campbell at 591. Perhaps most 
importantly, Kelly repeated the Supreme Court's articulation in 
Campbell and Stewart v. Abend, 495 U.S. 207, 236 (1990), of the 
objective of the fair use doctrine: ``This exception `permits courts to 
avoid rigid application of the copyright statute when, on occasion, it 
would stifle the very creativity which that law is designed to foster.' 
'' Kelly at 817.
                   fair use and software development
    Fair use is also critical to the inner workings of the Internet. A 
user's computer can access information stored on a distant server only 
because the software on the user's computer, on the server, and on all 
the computers in between, can communicate with one another. This 
interoperability often can be achieved only if the software developer 
can reverse engineer the products with which it seek to communicate. 
And because of the nature of software, this reverse engineering, this 
studying of the operation of an existing product, can require the 
making of temporary copies or translations of the existing program. 
Several courts have concluded that fair use permits the copying that 
occurs during the course of software reverse engineering. See Sega v. 
Accolade, 977 F.2d 1510 (9th Cir. 1992); Atari v. Nintendo, 975 F.2d 
832 (Fed. Cir. 1992); Sony v. Connectix, 203 F.3d 596 (9th Cir. 2000).
                fair use and creativity on the internet
    The Supreme Court has observed that the Internet is ``a unique and 
wholly new medium of worldwide communication.'' Reno v. ACLU, 521 U.S. 
844 (1997). It ``constitutes a vast platform from which to address and 
hear from a worldwide audience of millions of readers, viewers, 
researchers and buyers.'' Id. at 853. The Court marveled at the ``vast 
democratic fora of the Internet,'' id. at 868, including thousands of 
newsgroups, ``each serving to foster an exchange of information or 
opinion on a particular topic running the gamut from, say, the music of 
Wagner to Balkan politics to AIDS prevention to the Chicago Bulls.'' 
Id. at 851. Much of the commentary on newgroups and blogs involves 
quotations from articles or other commentators. Or it may consist of 
parodies of speeches or songs. Fair use makes this vital form of 
political and artistic speech lawful. And hyperlinking technology 
allows the commentator to link back to the original work. In this 
manner, the transformative fair use provides wider distribution to the 
original work. NetCoalition members encourage--and benefit from--this 
robust creative activity.
                          threats to fair use
    Entertainment companies understandably seek to prevent infringement 
of their works through the use of digital rights management systems. 
But such DRMs typically preclude fair uses as well as unlawful ones. As 
DRMs become more pervasive, Congress may need to consider mechanisms 
for preserving fair use. Additionally, Congress should exercise great 
care before mandating DRMs. Such technological mandates will not only 
limit fair use; they will also impede innovation. These activities 
permitted by the fair use doctrine must be distinguished from the 
unauthorized widespread distribution of entertainment content such as 
sound recordings and motion pictures.
    In sum, as Congress fashions policies to protect the entertainment 
industry from large-scale infringement over digital networks, it must 
take care not to prevent lawful uses that enrich our lives. The Supreme 
Court in a related context cautioned that ``the interest in encouraging 
freedom of expression in a democratic society outweighs any theoretical 
but unproven benefit of censorship.'' Id.

    Mr. Stearns. Ms. Sohn?

                    STATEMENT OF GIGI B. SOHN

    Ms Sohn. Chairman Stearns, Ranking Member Schakowsky, and 
members of the subcommittee, thank you for inviting me to 
participate in this very important hearing.
    For those of you who are unfamiliar with Public Knowledge, 
we are a non-profit organization that is dedicated among other 
things to ensuring that copyright laws are balanced. And 
balanced is the hallmark of our copyright system and fair use 
is a key component of that balance. The ability to access and 
use copyrighted works for certain limited uses has been a 
driver of creativity, technological innovation, and the broad 
dissemination of knowledge. For consumers, fair use has 
resulted in a greater choice of movies, music, videogames, and 
computer software, a wider variety of useful and inexpensive 
gadgets on which to play that content, and the ability to 
quickly and cheaply create their own contents which is 
happening more and more these days.
    But fair use is in great peril. For the past decade, the 
fair use rights of consumers, your constituents have been 
chipped away little by little. While technology has advanced 
and consumers have come to expect that they can enjoy the 
content they buy when and where they want where at the same 
time seeing a dedicated and forceful campaign to restrict what 
consumers can lawfully do with that content.
    The content industries have employed a variety of 
strategies in the campaign against fair use. First, their 
successfully championed Digital Millennium Copyright Act which 
prohibits the circumvention of technological protection 
measures even for lawful uses. Second, many content owners 
employ restrictive and user license agreements which limit fair 
use. Third, the industries are seeking Government mandated 
technological protection measures like the broadcast flag and 
digital radio content protection which would restrict a variety 
of fair uses of digital, TV, and radio and would make once 
interoperable devices incompatible. Finally the content 
industries have promoted permissions culture in which even the 
most incidental use of a copyrighted work requires a high 
licensing fee or leads to a lawsuit.
    What has the shrinking of fair use meant for consumers? 
Here are just some of the lawful personal uses that prohibited 
under the current regime, ripping songs from a copy protected 
CD, their personal computers, or an mp3 player; making a 
digital copy of a DVD for playback on a video iPod, cell phone, 
or other portable device; making a backup copy of a copy 
protected CD or DVD; playing legally download music on a 
competing mp3 player or computer; and removing from a computer 
malicious digital rights management tools like the now infamous 
Sony-BMG rootkit DRM. And let me just say a word about the DRM 
because I think there is a lesson here. My organization does 
not oppose digital rights management as long as it is 
marketplace driven as opposed to Government driven.
    The lesson to be learned there is that consumers did not 
like the restrictions and the spyware in that DRM and they were 
outraged and it caused Sony to pull that DRM from the shelf. 
This is in contrast to the iTunes fair play DRM which people 
have accepted for limits in that DRM. If you have a Government 
mandated digital rights management scheme like the broadcast 
flag for radio content protection, consumers cannot protect 
themselves in the marketplace or express themselves in the 
marketplace.
    So I urge you to reject all efforts in Government mandated 
technological protection measures. This committee has a great 
responsibility to make sure that innovation will not be stifled 
and that consumers will have the broadest legal use of their 
digital media and technology as is possible. I urge you to 
reject the premise that your constituents are pirates and 
thieves and that they will not buy digital content if it were 
provided to them at a reasonable price and with the flexibility 
they have come to expect. Indeed, they already do purchase such 
content. For example, DVD sales and rentals last year totaled 
$25 billion and in just a matter of weeks of its launch, iTunes 
sold $1 million TV programs for use on the video iPod. An RIA 
chief, Mitch Bainwol recently predicted that legitimate online 
song purchases could surpass CD retail markets by 2007.
    In my written testimony, I have supplied four suggestions 
for actions you can take to reinvigorate fair use in the 
digital age. The most important of these is to reform the DMCA 
so that it permits circumvention solely for lawful purposes. 
Congress can address this in two ways. It can pass legislation 
like H.R. 1201 which specifically permits such legal activity 
and it can clarify and strengthen the DMCA's triennial review 
process. Congress intended, expressly intended that this 
process be the fail safe mechanism that protected lawful uses 
from the unintended consequences of the DMCA, some of which we 
have heard about today. Instead, it has become a futile 
exercise for merely everyone seeking an exemption no matter how 
worthy.
    I urge the subcommittee to hold hearings on the triennial 
review process and a copyright office's standard for granting 
exemption.
    Thank you again for the opportunity to testify today. I 
look forward to your questions.
    [The prepared statement of Gigi B. Sohn follows:]
    Prepared Statement of Gigi B. Sohn, President, Public Knowledge
    Chairman Stearns, Ranking Member Schakowsky and other members of 
the Subcommittee, my name is Gigi B. Sohn. I am the President of Public 
Knowledge, a nonprofit public interest organization that addresses the 
public's stake in the convergence of communications policy and 
intellectual property law. I want to thank the Subcommittee for 
inviting me to testify on the vitally important issue of fair use and 
its impact on consumers and industry.
                                summary
    The hallmark of our copyright system is balance--creators and 
publishers receive a limited monopoly in their works in exchange for 
providing the public rights of access to those works. Fair use is a key 
component of that balance--permitting individuals to make limited, but 
important uses of copyrighted works without having to ask permission of 
the copyright holder.
    For over two hundred years, this balance, aided by fair use, has 
served creators, educators, libraries, consumers and the content and 
technology industries very well. It has resulted in greater creativity, 
greater innovation and greater consumer choice, and has invigorated the 
U.S. economy both for creative goods and technology.
    Over the past decade, however, a number of legal, technological and 
marketplace efforts by the content industry have put fair use in great 
peril. These efforts include laws like the Digital Millennium Copyright 
Act, which prohibits circumvention of technological protection measures 
even for lawful uses; end user license agreements (EULAs), that 
restrict fair use; government-imposed technology mandates like the 
broadcast flag, which put agencies like the Federal Communications 
Commission in charge of determining what technologies consumers can use 
to receive digital television and which also restrict fair uses of 
digital TV; and the rise of business practices that shrink fair use by 
requiring expensive licensing fees or denying permission for even the 
most incidental uses of copyrighted works.
    Congress can, and must, revitalize fair use for the digital age. 
While my list is not comprehensive, I suggest four places where 
Congress can start: 1) ensure that the DMCA protects fair use, whether 
it be through legislation such as H.R. 1201 or by instructing the 
Copyright Office to follow the express intent of Congress that the 
triennial review be a ``fail-safe'' mechanism the purpose of which is 
to protect non-infringing uses; 2) reject any and all efforts to impose 
government-mandated copy protection; 3) pass legislation that protects 
individuals who make a good faith effort to locate copyright holders 
who cannot be found and 4) monitor the Google Print litigation and 
other related matters to ensure that search engines can continue to do 
what they do best--provide consumers with a comprehensive ``card 
catalogue'' of all the world's information--whether the information is 
online or offline.
 consumers, creators and industry all benefit from a strong and vital 
                           fair use doctrine.
    Ever since the framers of the Constitution gave Congress the 
ability ``to promote the progress of science and the useful arts by 
securing for limited times to authors and inventors the exclusive right 
to their respective writings and discoveries . . .'' the hallmark of 
our copyright system has been balance. That balance ensures both strong 
protection for copyrighted works and unauthorized access to those works 
for certain limited uses. As the Supreme Court has stated ``[t]his 
protection has never accorded the copyright owner complete control over 
all possible uses of his work.'' 1 The idea behind this 
balance was simple--the framers understood that giving individuals the 
ability to access protected works would lead to even greater creativity 
and innovation.
---------------------------------------------------------------------------
    \1\ Sony v. Universal City Studios, 464 US 417, 463 (1984).
---------------------------------------------------------------------------
    One of the key guardians of this balance is fair use. Fair use is a 
doctrine developed in common law and codified at 17 USC  107 that 
permits individuals to make certain limited uses of copyrighted works 
without seeking permission from the copyright holder. The idea behind 
fair use is that creativity, knowledge-building, public criticism and 
innovation would be severely hampered, if not completely stifled, if 
artists, librarians, scholars, inventors and consumers had to seek 
permission from rights holders even for the most mundane use of a work.
    For most of the last two hundred years, this balance worked well 
for consumers, creators and both the content and technology industries. 
Because of fair use and the other limitations on copyright, the United 
States has been the unquestioned leader in the creation of artistic 
works from artists big and small, and our educational and research 
institutions are the envy of the world. Moreover, and particularly 
since the Supreme Court's ruling in Sony v. Universal City Studios, 
which ensured the growth of legal technologies, the U.S. has been the 
world leader in technological innovation, particularly as new digital 
technologies have taken the world by storm.
    The benefit of this balance to consumers has also been enormous. 
Consumers have greater choice of movies to watch, music to listen to, 
video games to play and computer software to use. They have a wide 
variety of useful and inexpensive gadgets on which to play those 
movies, music, games and software where and when they want. 
Importantly, those gadgets permit consumers to create their own movies, 
music and games. Who could imagine, even three years ago, that people 
would be viewing movies and television programs on their cell phones? 
Or that AOL would be selling old sitcoms online? Or, that as a recent 
Pew Internet and American Life poll showed, 57 percent of online teens 
would create their own content for the Internet? 2
---------------------------------------------------------------------------
    \2\ http://www.pewinternet.org/pdfs/PIP_Teens_Content_Creation.pdf
---------------------------------------------------------------------------
    Fair use has benefited everyone largely because of its flexible 
nature. Whereas 21 years ago the Sony Court talked about ``time 
shifting'' as a fair use, it is now commonly understood that the 
ability to play media on different machines in different places (space 
shifting) is a fair use as well. We must ensure that fair use remains 
flexible and vibrant in the digital age, so that new innovations will 
develop that enable new fair uses that we cannot foresee.
    Unfortunately, as I will discuss in the next section, the past 
decade has seen a shrinking of fair use in a way that has tipped the 
copyright balance not in favor of creators or consumers, but in favor 
of large content companies. New laws, technological tools and 
marketplace mechanisms are being used to limit legal uses of content 
beyond what the copyright law traditionally allows and beyond what the 
framers of the Constitution intended. If course corrections are not 
made soon, we will reverse the vibrant market for content and 
technology that has grown out of the traditional balance between 
control and access.
                fair use in the digital age is in peril
    The Supreme Court's decision in Sony confirmed what had been a 
common consumer expectation since the invention of audiotape--that it 
is fair use for consumers to use the content and technology they buy 
for personal uses. Despite the content industry's efforts to paint 
consumers as copyright thieves, enormous DVD sales and the growth of 
online music indicate that when good content is made available both 
offline and online at a reasonable price and with flexibility of use, 
consumers will buy it. Moreover, sales of personal video recorders 
(PVR) (like TiVo), MP3 players (like the iPod), wireless routers, 
portable DVD and video game players, and digital radios with playback 
(like XM to-go) indicate that what consumers expect and want to do with 
the content they buy is the ability to play it wherever and whenever 
they want. They also expect that the devices they own will work with 
one another--that a simple cable or port can, for example, connect a 
television set to a VCR or PVR or a computer to an MP3 player.
    Unfortunately, this expectation of flexibility, portability and 
interoperability for personal use is increasingly at risk. Even though 
our copyright law does not give copyright holders control over when, 
where and how a consumer uses the content she lawfully purchases, the 
content industry, in its zeal to control every use of its content, has 
employed a variety of legal, technological and marketplace mechanisms 
that limit consumers fair use of technology and content. They include:
Paracopyright: Laws that Enforce Technological Protection Measures
    The speed, ubiquity and relatively low cost of digital networks 
present greater opportunities for copyright holders to make their works 
available to a wider audience. However, they also present copyright 
holders with a tremendous challenge--how to protect those works from 
massive indiscriminate redistribution over those digital networks while 
at the same time giving the consumer flexibility to make lawful uses of 
the technology and content they purchase.
    The content industry has attempted to meet this challenge through 
use of technological protection measures, otherwise referred to as 
Digital Rights Management (DRM) tools. While Public Knowledge does not 
necessarily oppose these efforts, so long as they are not government 
mandated, to the extent that these tools eliminate certain fair uses, 
the law should not prohibit their circumvention for that purpose. For 
example, certain DRM-protected CDs prevent the ripping or copying 
function of personal computer in the hopes of preventing unauthorized 
file trading. In some instances, those CDs will fail to play entirely. 
Similarly, many DVDs will not play on Linux-operated computers. The 
DMCA prohibits a consumer from circumventing that DRM even to make an 
otherwise lawful personal use of the content they purchased. The DMCA's 
chilling effect on fair use and on free speech have been well 
documented.3
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    \3\ See http://www.chillingeffects.org/anticircumvention/
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    Thus, as digital technologies and accompanying protection measures 
become more pervasive, laws like the DMCA virtually eliminate consumer 
fair use for certain content. The existence of the so-called ``analog 
hole,'' which permits redigitizing of captured analog content, is cold 
comfort to the ordinary consumer, who doesn't know the analog hole from 
a hole in the wall. Although the content industry likes to tout the 
analog hole as the solution for limits on fair use imposed by the DMCA, 
it is now seeking a legislative vehicle to close the analog hole. 
Moreover, traditional copyright law does not judge fair use based on 
the technical methods by which it was made (using digital software or 
analog outputs); rather it looks to whether the use was otherwise 
lawful.
Licenses that seek to replace copyright law with contract law
    Another way that large corporate copyright holders seek to protect 
their works is through the use of so-called ``end user license 
agreements'' or EULAs. These are the windows of legal jargon that you 
see when trying to install or download software or other digital 
content (click-through licenses), or the terms you agree to when 
breaking the shrink-wrap on your newest piece of software (shrink-wrap 
licenses). Without any negotiation, you are asked to waive fair use and 
other rights reserved to you under the Copyright Act and agree to a 
list of restrictions, some of which can include a limitation on 
criticizing the work without the licensee's permission.
    The EULA that accompanied the Sony-BMG CDs with the now-infamous 
rootkit DRM (which left consumers vulnerable to viruses) provides a 
chilling example of the kind of restrictions consumers are subject to 
after, and without disclosure before, purchasing digital media. Some of 
the restrictions include:

 all rights terminate if a consumer fails to accept any update of the 
        protection software;
 all rights terminate as soon as a consumer files for bankruptcy;
 Sony-BMG reserves the right to exercise technological self-help 
        mechanisms against consumers, at any time, without notice;
 consumers have no right to transfer any digital copies or software;
 consumers are prohibited from reverse engineering, and changing, 
        altering, or creating derivative works; and
 consumers are prohibited from circumventing any restrictions that may 
        be imposed by the software, regardless of whether or not they 
        are ``access'' controls under the DMCA.
Government Mandates Limiting Access to Content via ``Authorized 
        Devices''
    A recent strategy of the copyright industries is attempting to 
ensure that every technology that can receive and retransmit its 
content is ``authorized'' to do so by the government. The idea works 
like this: if a television, radio, computer, or other digital device is 
not pre-approved to receive or record content, then the technology is 
either illegal or will be otherwise rendered incapable of doing so. 
These types of technological mandates impose serious limitations on the 
ability of consumers to make fair uses of content.
    The so-called digital television broadcast flag scheme, adopted in 
November 2003 by the FCC and vacated by the United States Court of 
Appeals for the District of Columbia last May, is a manifestation of 
this strategy. The flag scheme requires every device that can receive a 
digital television signal to read and obey a series of bits embedded in 
the signal that tell the device whether the content can be transmitted 
over the Internet. These devices, which include computers, cell phones 
and personal video recorders, in addition to TV sets, must be pre-
approved by the FCC.
    The broadcast flag scheme limits fair use in several important 
ways. For example, if I have a non-flag compliant (and therefore 
unauthorized) Personal Video Recorder (PVR) hooked up to my flag-
compliant (and authorized) digital television set, my PVR will not be 
able to make a perfectly legal personal copy of a ``flagged'' digital 
television program. The flag also prohibits excerpting of digital 
television programming and redistribution of some or all such 
programming over the Internet. Thus, if a congresswoman wants to send a 
digital clip of her performance on Meet the Press to staff in her 
district office, she cannot do so if the show's creator embeds a flag 
in the signal. Or, if a media watchdog group like the Parents' 
Television Council wants to post digital TV clips of its favorite and 
least favorite programs to its website, the broadcast flag would 
prohibit such activity.
    Not surprisingly, the motion picture studios are seeking to have 
the broadcast flag reinstated, and are also asking Congress to consider 
a technology mandate to close the so-called analog hole. This latter 
proposal would require every analog device to read and obey two copy 
protection technologies, and would impose a series of encoding rules 
that would prohibit certain fair uses of content.4 Moreover, 
closing the analog hole would eliminate the one safety valve for making 
fair use of digital content under the DMCA.
---------------------------------------------------------------------------
    \4\ Draft legislation, entitled the ``Analog Content Protection Act 
of 2005,'' was discussed at a November 3, 2005 oversight hearing 
entitled ``Content Protection in the Digital Age: The Broadcast Flag, 
High Definition Radio and the Analog Hole,'' before the House Judiciary 
Committee, Subcommittee on Courts, the Internet and Intellectual 
Property.
---------------------------------------------------------------------------
    Not to be outdone, the recording industry is seeking its own 
government-imposed technological mandate for new digital broadcast and 
digital satellite radio. Like Hollywood, they are seeking to place the 
FCC in charge of setting a standard for digital radio receivers that 
would prevent consumers from making recordings of digital radio for 
personal use.5 This would not only violate the Audio Home 
Recording Act, which specifically allows for recording of radio 
transmissions for personal use, but it would eliminate the decades-old 
practice of recording songs off the radio.
---------------------------------------------------------------------------
    \5\ Draft legislation, entitled the ``HD Radio Content Protection 
Act of 2005,'' was discussed at a November 3, 2005 oversight hearing 
entitled ``Content Protection in the Digital Age: The Broadcast Flag, 
High Definition Radio and the Analog Hole,'' before the House Judiciary 
Committee, Subcommittee on Courts, the Internet and Intellectual 
Property.
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D. Rise of the Permissions Culture
    Perhaps the most radical change with respect to how fair use is 
viewed and enforced involves neither law nor technology. Instead, it 
involves the increasingly common business practice of requiring 
permission for even the most incidental uses of copyrighted works. 
Sometimes obtaining that permission will require an obscenely high 
licensing fee. Other times, and particularly where the copyrighted work 
is to be criticized, a copyright holder will simply deny permission to 
use it. Often, and particularly if the subsequent work has a measure of 
success, those who rely on fair use can expect a lawsuit. In this 
``permissions culture'' the copyright balance is turned into one where 
the copyright holder has complete control and fair use becomes, as some 
have said, ``the right to hire a lawyer.'' As a result, creators are 
often forced to change or stop their work.
    A good example of the shrinking scope of fair use can be found in 
Professor Lawrence Lessig's book Free Culture. The example involves Jon 
Else, a documentary filmmaker who made a documentary about Wagner's 
Ring Cycle. The scene at issue involved stagehands at the San Francisco 
Opera who are playing checkers. In a corner of the room, the television 
program The Simpsons is playing. When the film was completed, Else 
sought to ``clear the rights'' to use the few seconds of The Simpsons. 
It not only took a good deal of effort to find the copyright holder, 
but when he did, Else was told that it would cost him $10,000 to 
include the clip. Rather than risk a lawsuit, Else edited The Simpsons 
out of that segment of the documentary, even though it set a particular 
mood for that scene.
    Many more examples of the chilling effect of the permissions 
culture can be found in an excellent report from the American 
University Center for Social Media and the Washington College of Law 
entitled Untold Stories: Creative Consequences of the Rights Clearance 
Culture for Documentary Filmmakers,6 and in the book Brand 
Name Bullies: The Quest to Own and Control Culture, written by Public 
Knowledge Board member and co-founder David Bollier.7
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    \6\ available at http://www.centerforsocialmedia.org/roc/index.htm
    \7\ available at http://www.brandnamebullies.com.
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          four ways to strengthen fair use in the digital age
    I agree with those who argue that our copyright law, which was last 
completely revised nearly 30 years old, is inadequate to address 
creativity in a world of ubiquitous digital networks. Thus, I would 
urge this subcommittee to adopt Professor Lessig's recommendation to 
this subcommittee in May 2004 that it ``recommend the establishment of 
a serious and balanced study, . . . to consider fully how best to 
adjust the protections of copyright to the digital age.'' 8
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    \8\  http://energycommerce.house.gov/108/Hearings/
05122004hearing1265/Lessig1985.htm
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    Regardless of the need to look at our copyright laws more 
comprehensively, I would like to suggest a number of ways Congress can 
help to revive fair use and bring back the balance to copyright the 
founders of our country intended.
1. Ensure the DMCA permits lawful uses
    As DRM tools become more pervasive and government imposed copy 
protection mandates become a possibility, it becomes increasingly 
important that those technological protection measures can be 
circumvented for lawful uses.
    This goal can be accomplished in two ways, neither of which is 
mutually exclusive. One way is for Congress to pass legislation like 
H.R. 1201, the Digital Media Consumers Right Act, which would permit 
circumvention of technological protection measures for lawful uses.
    A second way to accomplish this goal is for Congress to clarify and 
strengthen the DMCA's triennial review process. As I explained in great 
detail when I testified before this Subcommittee in May 2004, when 
Congress passed the DMCA, it made clear both through the plain language 
of the Act and the legislative history that it intended to preserve 
fair use through the ``fail safe'' mechanism of the triennial 
review.9 For the most part, however the Copyight Office, 
which is tasked with conducting that review, has ignored the express 
intent of Congress and has placed a higher burden on those seeking 
exemptions. The Copyright has also construed the term ``class of 
works'' too narrowly and favored particular business models over fair 
use in denying exemption requests.
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    \9\ http://energycommerce.house.gov/108/Hearings/
05122004hearing1265/Sohn1995.htm
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    This crimped interpretation of the plain language of the DMCA has 
twice caused the Assistant Secretary of Commerce, who is tasked with 
consulting with the Register on the review, to send a letter of protest 
to the Register. In 2003, the Assistant Secretary wrote:
        the standard set forth in the Notice of Inquiry (the "NOI") 
        imposes a significantly heightened burden on proponents of an 
        exemption, and is therefore inconsistent with the opportunity 
        that Congress intended to afford the user 
        community.10
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    \10\ Letter from Nancy J. Victory, Assistant Secretary of Commerce 
to Ms. Marybeth Peters Register of Copyrights, (Aug. 11, 2003), 
available at www.ntia.doc.gov/ntiahome/occ/dmca/dmca2003/
dmcaletter_08112003.html (footnotes omitted).
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    The result has been that after two triennial reviews, the Copyright 
Office has granted four extremely narrow exemptions. The Copyright 
Office has just commenced its third triennial review, and there every 
reason to expect that they will maintain their crimped view of the 
exemptions process without Congressional action. Therefore, this 
Subcommittee should take the opportunity to hold hearings on the 
triennial review process and to clarify that the burden of proof that 
should govern the process should be that embodied in the plain language 
of the DMCA.
2. Reject Government-Mandated Technological Protection Measures
    This Subcommittee should reject any and all efforts by the 
copyright industries to have the government mandate copy protection 
technologies and/or serve in the role of determining what technologies 
will succeed and which will fail. Such one size fits all technology 
mandates limit competition, consumer choice and consumers' fair use 
rights.
    First, I must distinguish government-imposed copy protection 
mandates like the broadcast flag from marketplace copy protection 
initiatives. The latter allows consumers to express themselves in the 
marketplace with regard to the level of copy protection that they find 
acceptable. This is what happened with computer software in the early 
1980's. Consumers rejected software with very restrictive copy 
protection, and the market adjusted.
    Comparing iTunes Fairplay DRM with the Sony-BMG CD rootkit DRM 
demonstrates why the market is the better determinant of the proper 
level of copy protection. While like any DRM, Fairplay can be 
circumvented by the most determined pirates, it provides a speed bump 
that allows for legal uses while keeping honest people honest. As a 
result, iTunes has been wildly popular with consumers. In contrast, 
consumers nearly revolted over the Sony rootkit DRM, which left their 
computers vulnerable to viruses. In a matter of days, Sony-BMG 
responded by first attempting to provide a security patch, and have now 
temporarily halted production of those affected CDs.
3. Fix the ``Orphan Works'' Problem
    Changing the permissions culture will be a long process, 
necessitating changes in business practice more than in the law. 
Strengthening fair use will certainly help--the more creators, 
educators and consumers feel comfortable relying upon fair use, the 
more they will be willing to do so, and so far, at least, the courts 
have largely ruled in favor of the user.
    One way that Congress can limit the negative effects of the 
permissions culture is to ensure that creators have access to so-called 
Orphan Works--works under copyright for which the rights holder cannot 
be found. Currently, the law does not protect an individual who 
conducts a good faith search for a copyright holder, but cannot find 
him. If the individual uses the work, and the copyright holder 
resurfaces, the user is subject to the full panoply of penalties the 
copyright law provides.
    Earlier this year, the Copyright Office undertook a procedure for 
collecting public comments on how to fix the orphan works problem, and 
their recommendations are due at the end of the year. Remarkably, the 
vast majority of commenters, representing large content companies, 
college artists and public interest groups like Public Knowledge, 
largely agreed that the copyright law should provide a defense for 
those who engage in a ``reasonable effort'' or ``good faith'' search 
for the owners of orphan works. While there was some disagreement 
around the edges, for the most part, the participants agreed that 
Congress should ensure that the inability to find a copyright holder 
should not be a deterrent to creators seeking to use those works.
4. Clarify Fair Use with Respect to Search Engines
    I trust that the members of the subcommittee are well aware of the 
debate and lawsuits surrounding the Google Print program. To review: 
Google is making digital copies of copyrighted and public domain works 
housed in five major libraries so that those copies can be searched 
using words and phrases from the books. When a search is requested for 
a work under copyright, a brief excerpt from the book appears, which 
includes the requested phrase surrounded by several lines of text. If 
Google were to digitize anything less than the entire book, the program 
would become useless --if you were the unlucky searcher who used a 
phrase that was not in the included text, you would not get the result 
you sought. The searcher is entitled only to a limited number of 
searches in the same document, and links to purchase the book are on 
each page of text.
    In Public Knowledge's opinion, the prospect that millions of books 
may soon be available to be indexed and searched is incredibly 
exciting. It not only promotes the founders' intent by increasing 
access to knowledge, but it also helps authors and publishers to 
promote their works by exposing them to anyone with an Internet 
connection. The Authors Guild and the American Association of 
Publishers disagree, and have sued Google alleging copyright 
infringement.
    This is not an open and shut legal case for either side. While it 
is generally understood and the courts have ruled that if a search 
engine gathers and indexes information already on the World Wide Web, 
that use is not infringing, the law is less clear with respect to 
information that is not already online. But the consequences of a court 
decision against Google could be staggering not only for that company 
and other search engines, but also for the future of the Internet 
itself. The Internet has become our virtual library--it is where we 
come to expect to find information about anything and everything. It 
has also become the great equalizer--bringing knowledge to rural and 
urban, rich and poor areas alike. If we limited access over the 
Internet only to that information that is only already available 
online, it would be like going to the Library of Congress and only 
being able access half of the books.
    Thus, I would urge this subcommittee to keep a close eye on the 
Google litigation to see if adjustments may need to be made in the 
future to protect the future of Internet searching and indexing and as 
a result, consumers ability to use the Internet to obtain the 
information they need and desire.
                               conclusion
    Fair use remains vital to maintaining the balance in copyright law 
that has long benefited consumers, creators, innovators and the content 
and technology industries. But fair use threatened with extinction 
unless Congress acts to revive and strengthen it for a world of digital 
technology and digital networks. I thank the Subcommittee for the 
opportunity to testify, and I look forward to your questions.

    Mr. Stearns. Thank you.
    Mr. DeLong?

                  STATEMENT OF JAMES V. DELONG

    Mr. DeLong. Thank you, Mr. Chairman, and members of the--is 
that on now?
    Mr. Stearns. Yes.
    Mr. DeLong. It is an honor to be here today. My name is 
James DeLong. I am a senior fellow with the Progress and 
Freedom Foundation which is a free market oriented think tank 
that studies the digital revolution and its implications for 
public policy. Within that context, I am the director of a 
project called the Center For the Study of Digital Property 
which is devoted to analyzing policies devoted or concerning 
intellectual property and we also go under the name 
IPCentral.Info and as a commercial, I urge you all to visit our 
website where we are engaged in spirited debates on many of 
these issues.
    My message here today is fairly simple and that is over the 
past 200 years, the U.S. has developed a system for producing 
creative works of all kinds that depends on institutions and 
property rights and markets. And you may recall I was here 
about 3 weeks ago discussing Kelo and in my mind, these are all 
one big happy sort of continuum there.
    In the legal literature, you have certainly heard it from 
some of my legally oriented colleagues here today. There is a 
lot of obsession about the need for balance between creators 
and consumers of intellectual property. It is sort of as if the 
two groups were engaged in a zero sum game and what one gained 
the other must lose. I regard this focus is misleading and we 
do not talk about the need for balance in most areas of 
national or economic life. We do not talk about the need to 
balance the interests of automobile manufacturers and drivers 
or farmers and food consumers and such. We assume that we can 
establish rules governing markets and promoting markets and 
that within this structure producers and consumers can find 
their own balance. And you know the balances differ from 
individuals. You know, that is the great thing about a market. 
The idea that you find very much in the academic literature 
that a court is supposed to sit there sort of a super weigher 
of costs and benefits and then allocate things according to the 
social good is a nightmare.
    Now this system has served us very well not just in 
producing automobiles and food but in producing creative works, 
an explosion of creativity in this country. And I might add 
that in those areas in which we have departed from the market 
system are those areas where we seem to be getting in the 
biggest trouble. You know areas like healthcare and like 
education and where you gentlemen and ladies are being held 
most responsible by the public for the failures in. Now 
obviously in the area of creative works technology is 
presenting us with new challenges.
    And creativity used to be protected by a combination of 
technological impossibility and law. You know it was not 
possible really to steal a book because it cost you more to 
copy it on the copying machine than to get it via printout. You 
know you could not copy music. Movies on film might as well 
have been locked in a vault.
    Technology has made perfect replication possible and very 
cheap and a very important block of our protective system is 
eroding. You know, it is simply an impossibility and we are 
struggling to develop new forms of protection both 
technological and legal.
    Now in my view, fair use is best viewed within this context 
of the market system in creative works. It is a doctrine 
designed primarily to smooth out the workings in the market 
where it really might now work. And this isn't a novel idea. I 
have an article in my files by Wendy Gordon going back to 1982 
suggesting market failure is an organizing principle here. So 
it has some political content, you know, keeping authors from 
suppressing bad reviews is an important component, encouraging 
dissemination of news, encouraging political discussions. But I 
think for the most part when you look back a the cases, you 
find that fair uses usually exist when the transaction costs of 
getting permission to use something are out of all proportion 
to the economic value to the user or out of all proportion to 
the harm of the producer. You know, occasionally you hear 
sometimes uses where somebody doing a TV show accidentally 
showed a snippet of a television program playing in the 
background and then had to cut it out because they could not 
get the licensing. Well that should be fair use. There is no 
harm to the producer in all and the costs are just inordinate.
    Now one of the main things going on in technology, the 
internet is ringing transaction costs out of the system and so 
to a great extent this leaves much of fair use of the doctrine 
sort of in search of a rational. I mean the combination of 
digital rights management and consumer pressure is providing 
marketplace solutions to the problems that used to have to be 
resolved by the courts. And, you know, as Gigi was mentioning, 
one of things quite extraordinary is the speed of reaction on 
this whole Sony business. You know a couple weeks and problem 
seems to be--I only know what I read in the news but the 
problem seems to be pretty well on the way to solution. You 
know, that is good. It is called the market working.
    But in this context, I think it is very important to 
emphasize two points, one, free use is or fair use is not 
necessarily free use. I was looking for the quote this morning, 
I could not find it from a guy who is the Director of 
University Press and thus is on the pro-author's side who was 
saying all active colleagues seem to think we get everything 
for free, that is called fair use. We you know that is not the 
way it is supposed to work.
    But it seems to me the most important thing in this is to 
urge the committee not to try to freeze rules based on the old 
technologies and the old ways of doing things. This will really 
only cripple things. And now for several years we hear comments 
about the content companies and their obsolete business models 
and all that sort of thing but in the real world as opposed to 
the world of academic extractions it seems to be the reverse of 
the truth, you know. As Ms. Blackburn and Ms. Bono pointed out 
the content field is electric with excitement and innovation 
and people pulling out all sorts of new things and figuring new 
things to sell you and all that. And, you know, people talk 
about the need for snippets of film and all that sort of thing. 
We are in a world where ring tones have suddenly become a 
multi-billion dollar industry.
    And believe me, you know, the happy thing about this is 
producers want to sell just as much as consumers want to 
consume and they will find a way. So in my mind, the people 
defending the old doctrines are actually the ones mirrored in 
old models and fearful of change. I think you should be very 
careful about imposing any rules on this. You should let the 
market work it out. And I think there need to be some rules on 
letting it work it out better but I think we will succeed and 
obviously I do not think you should codify existing doctrines 
of fair use.
    Thank you.
    [The prepared statement of James V. DeLong follows:]
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    Mr. Stearns. Mr. Hirsch?

                  STATEMENT OF FREDERIC HIRSCH

    Mr. Hirsch. Mr. Chairman, Ranking Member Schakowsky and 
members of the subcommittee, thanks very much for holding this 
hearing.
    I appreciate the opportunity to testify on behalf of the 
Entertainment Software Association regarding the fair use 
doctrine and how it impacts our industry and its consumers. It 
is the position of the ESA that current law properly balances 
consumer interest in using copyrighted works with the 
protections content owners needs to continue creating 
innovative entertainment products to consumers.
    The ESA members are the world's leading publishers of video 
and computer games including games for videogame consoles, 
personal computers, handheld devices, and the internet. ESA 
members produce more than 90 percent of the $7.3 billion in 
entertainment software sold in the United States in 2004. With 
annual worldwide revenues now exceeding $28 billion, our 
industry is one of the fastest growing entertainment sectors. 
The industry has more than doubled in size since the mid 1990's 
generating thousands of highly skilled jobs in the creative and 
technology field. Our industry makes a tremendous investment in 
its intellectual property, developing and launching a top game 
often required to a team of more than 100 professionals working 
for more than 3 years with development and marketing costs 
often running $10 million or more and in the coming years they 
foreseeably range as high as $25 to $40 million. Unfortunately, 
many of these titles fail to achieve profitability.
    Still the new generation of game consoles that will be 
launched over the next several months will require 
entertainment software publishers to risk even more significant 
levels of investment in gain development as the processing 
power of these new machines will permit more complex and 
realistic game design for further enhancing consumer's game 
playing experience.
    Having now told you a little bit about our industry, the 
real question I am here to answer is how the fair use doctrine 
relates to the entertainment software industry and its 
consumers. Fair use doctrine is a legal defense under copyright 
law that allows for limited uses of copyrighted materials in 
certain cases that would otherwise constitute infringement. 
Fair use has always been determined on a case-by-case basis. 
The fact of each case must be evaluated under the copyright 
statutes four various factors to determine if a particular use 
of copyrighting materials entitled to the fair use defense.
    It is important to be clear about what the fair use 
doctrine is not. Fair use is not a right. It is a defense. Fair 
use provisions in the Copyright Act codify nearly 200 years of 
judicial experience in balancing the rights of copyright owners 
and social interests in areas such as research and scholarship. 
And when Congress passed the Digital Millennium Copyright Act 
or the DMCA in 1998, it provided a similar balancing mechanism 
when it created a rulemaking process to issue exemptions when 
it is determined that non-infringing uses of copyrighted 
materials are being harmed or threatened by the DMCA's 
circumvention prohibition.
    Since the DMCA was enacted, two separate rulemakings have 
been conducted resulting in the prime location of a number of 
exemptions for certain uses and classes of work including two 
specific to the entertainment software industry. Perhaps more 
importantly since the DMCA's enactment, we have seen an 
explosion in the number and variety of innovative entertainment 
products and services that are available to consumers.
    The entertainment software industry has been a leader in 
using new technologies to develop creative business models to 
provide consumers a wide array of options for accessing games. 
Consumers can access and sample games through rental outlets, 
game websites, demo disks in game magazines, or play games on a 
variety of platforms and services such as online game 
environments, pay to play sites, or an episodic game format, 
and in many cases without even purchasing a full game. 
Consumers can play games on their computers, their television 
sets, dedicated handheld devices, their PDA's, and on their 
cell phones.
    Thus we think it is clear that the balancing mechanism by 
Congress widely adopting the copyright statute's fair use 
provisions and the DMCA are properly servicing the communities 
of copyright holders and consumers. Critics to the DMCA argue 
that its enforcement constrains the exercise of so called fair 
use rights and that consumer expectations are not being met. In 
the case of the entertainment software industry, this cannot be 
further from the truth. The protections reported by the DMCA 
are essential to the vitality and continued growth of our 
industry. This industry has invested heavily in technologies 
that both prevent or reduce game piracy and enable the industry 
to place games in the hands of consumers through many different 
platforms and modalities. Without the DMCA's protection for 
such technological measures, game publishers multi-million 
dollar investment in the development and marketing of new game 
products would become an exceedingly daunting proposition as 
our games would become immediately exposed to copying and 
abuse. And as this increased risk would undoubtedly inhibit the 
development of many new games, consumers would lose as well.
    ESA believes that the marketplace is where industry 
consumer expectations of our product use or access should be 
resolved. The entertainment software industry is a prime 
example of this marketplace principle, the fact that a product 
includes protection measures to prevent unauthorized copy and 
distribution has not affected its longstanding positive 
relationship with its consumers who have made our industry the 
fastest growing segment in the entertainment industry.
    Thank you.
    [The prepared statement of Frederic Hirsch follows:]
     Prepared Statement of Frederic Hirsch, Senior Vice President, 
 Intellectual Property Enforcement, Entertainment Software Association
    On behalf of the Entertainment Software Association (ESA) and our 
member companies, I thank you, Mr. Chairman, for this opportunity to 
discuss the Fair use doctrine and how it impacts the video game 
industry and its consumers. It is the position of the Entertainment 
Software Association that current law properly balances consumers' 
diverse interests in using copyrighted works with the protections 
content owners need to retain the incentive to continue creating and 
producing innovative entertainment products for consumers to enjoy.
    The ESA is the trade association serving the public affairs needs 
of the world's leading publishers of video and computer games, 
including games for video game consoles, personal computers, handheld 
devices, and the Internet. ESA members produced more than 90 percent of 
the $7.3 billion in entertainment software sold in the U.S. in 2004. In 
addition, ESA's member companies produce billions more in exports of 
American-made entertainment software, driving the $28 billion global 
game video game market. Entertainment software is a vibrant and growing 
segment of the American economy, providing highly skilled jobs and 
ever-increasing exports.
    Entertainment software companies invest significant amounts of 
capital in each of their games and the intellectual property that these 
represent. Developing and launching a top game often requires a team of 
more than 100 professionals working for more than three years, with 
development and marketing costs often running $10 million or more and 
may foreseeably range as high as $25-40 million in coming years. As 
with any hit-based industry, not all of these titles actually achieve 
profitability. Nonetheless, the demands of the game-playing market 
compel ESA members to continue to work even harder to develop faster 
and more exciting software, requiring larger investments in the 
programming and technology that will produce the effects and challenges 
that consumers seek. The new generation of entertainment software 
consoles that will be launched over the next several months will 
require entertainment software publishers to make even more significant 
levels of investment as the processing power of these new machines will 
permit more complex and realistic game design, further enhancing the 
game-playing experience for consumers.
                   i. what is the fair use doctrine?
    ``Fair Use'' is a legal defense under copyright law that allows for 
limited uses of copyrighted materials in certain cases that would 
otherwise constitute infringement of copyright. The fair use defense, 
one of the few exceptions to rights holders' exclusive rights, balances 
the public interest in scholarship, research, commentary and the like 
with the artist's interest in having the exclusive right to reproduce 
and distribute his or her work. When the use of a copyrighted work for 
such a purpose has been judged a ``fair use,'' it is not an 
infringement of the copyright, even if the use was made without 
permission of the copyright owner. Originally created by the courts, 
the fair use doctrine was codified in the 1976 Copyright Act.
    Fair use has always been determined on a case-by-case basis. There 
are no hard-and-fast rules that dictate that certain uses are always 
fair (or never fair). The statute lists four factors (although others 
can also be used) that must be considered in determining whether or not 
the use is fair:

 The purpose and character of the use. Title 17, Section 107 recites 
        examples such as copying for purposes of criticism, news 
        reporting, teaching, scholarship or research. But those 
        purposes do not automatically make a particular use a ``fair 
        use'' under the statute. Not every use by a library or 
        educational institution is necessarily a fair use under the 
        law;
 The nature of the copyrighted work in question;
 How much of the work is copied or otherwise used; and
 The effect of the use on the potential market for the work. This 
        includes not only the impact on the current market, but also 
        whether allowing the use (and others like it) could prevent a 
        new commercial market from developing.
    In examining particular circumstances of copying, courts consider 
the statutory defense using the four factors listed above. It was on 
this basis that the Supreme Court Betamax decision in 1984 ruled that 
private copying of over-the-air TV broadcasts for the purpose of time-
shifting was fair use. However, even that case did not apply the same 
rule to private taping of cable television or pay-TV broadcasts, nor 
did it address the copyright status of ``librarying'' (the practice of 
making a permanent copy of a television program), and no later court 
has cited the Betamax case as a basis for permitting ``private 
copying.'' Aside from a specific statutory provision that Congress 
enacted in 1992 regarding non-commercial home recording of music on 
cassette decks and the like, any other instance of personal copying 
must be evaluated under the statute's four factors, in light of the 
particular facts in the case at hand, to determine if it is entitled to 
the fair use defense.
    The same is true of so-called ``space shifting'' or ``platform 
shifting''--for instance, copying a video game so that it can be played 
on a different technological platform than originally intended by the 
copyright owner. Here too, the fair use defense applies only after 
consideration of all four statutory factors, in light of the particular 
facts of the case.
               ii. fair use is an exception, not a right
    The fair use doctrine codifies nearly two hundred years of judicial 
experience in balancing the rights of copyright owners with social 
interests in research, scholarship and the like. The doctrine has 
worked work well to accommodate these goals while retaining incentives 
for creators to create and for publishers to invest in bringing new 
copyrighted products to market. It was for this reason that Congress 
adopted the principles of the fair use analysis into the copyright 
statute.
    In recent years, with the emergence of digital technologies and the 
rapid deployment of the Internet, consumers have seen their ability to 
access, use, copy and transmit digital material vastly expanded. 
Consumers' use of these digital technologies has been a huge boon to 
the entertainment software industry, which benefited from consumers' 
increasing comfort with using computers and the Internet. 
Unfortunately, it has also led many computer and Internet users to 
abuse digital materials protected by copyright.
    In 1998, Congress enacted the ``Digital Millennium Copyright Act'' 
(DMCA). The DMCA was the foundation of an effort by Congress to 
implement United States treaty obligations and to move the nation's 
copyright law into the digital age. The DMCA implements two 1996 World 
Intellectual Property Organization (WIPO) treaties: the WIPO Copyright 
Treaty and the WIPO Performances and Phonograms Treaty. The foundation 
of this effort was to make digital networks safe places to disseminate 
copyrighted works for the benefit of consumers and copyright owners.
    Specifically, the treaties require legal prohibitions against 
circumvention of technological measures employed by copyright owners to 
protect their works. Congress determined that current law did not 
adequately protect digital works and that to promote electronic 
commerce and the distribution of digital works, it was necessary to 
provide copyright owners with legal tools to prevent widespread piracy. 
As a result, the DMCA implements the treaty obligations by creating new 
prohibitions in title 17 on the circumvention of technological 
protection measures that protect access to a copyrighted work and the 
manufacture or sale of devices that permit such circumvention.
    The most common critique of the DMCA has been that its enforcement 
constrains the exercise of fair use ``rights.'' However, no such rights 
are defined in the copyright statute, nor have any such rights been 
identified in U.S. case law. What U.S. law does provide for, through 
its codification of the fair use doctrine, is a certain degree of 
flexibility with respect to certain uses of copyrighted works that, 
although they may be infringing, may qualify for an exemption for the 
people engaged in such uses. This is the balancing mechanism that 
Congress wisely adopted and has served the communities of copyright 
holders and consumers so well over many years.
    Congress continued to retain the balancing of competing interests 
when legislating in the area of copyright protection. When Congress 
enacted the DMCA, it balanced the new provisions against circumvention 
of copyright protection measures by ensuring that consumers would 
continue to have the ability to make non-infringing uses of copyrighted 
works in the digital environment. Congress created a tri-annual rule-
making process to be conducted by the Librarian of Congress in 
conjunction with the Copyright Office to determine whether non-
infringing uses of copyrighted materials are being harmed or threatened 
as a result of the circumvention prohibitions in the DMCA and to 
formulate exemptions as necessary.
    Since the DMCA was enacted, two rule-makings have been successfully 
conducted. In each rulemaking, the Copyright Office held numerous 
hearings around the country, reviewed evidence and testimony from 
hundreds of interested parties and considered numerous proposals for 
new exemptions. In both proceedings, it found evidence that certain 
users were not able to make certain non-infringing uses of certain 
classes of works that it deemed, on balance, likely to benefit certain 
consumers and unlikely to impact copyright holders. As a result, the 
Librarian issued exemptions for such uses of those classes of works 
from the prohibition against circumvention of technological protection 
measures. Specific to the entertainment software industry, exemptions 
were granted for 1) malfunctioning or old computer programs failing to 
permit access and 2) video games in obsolete formats to the extent 
libraries and archives wish to make preservation copies.
    Unfortunately, because of the use of the term fair use ``rights'' 
in attacks on the DMCA, fair use and the DMCA are often contrasted as 
reflecting oppositional doctrines. Some point to recent cases, such as 
efforts to break the encryption of DVD movies and the well-publicized 
DMCA criminal case against a Russian programmer accused of 
circumventing the copy protection for Adobe System's e-books, as 
reasons to re-examine fair use. However, neither case has anything to 
do with that doctrine. In both cases, the defendants were charged with 
trafficking in tools that strip off encryption and leave formerly 
protected material ``in the clear'' for any use, fair or piratical. In 
fact, both fair use and the DMCA reflect Congressional efforts to adopt 
a level of protection for copyright, balanced against certain uses by 
consumers that may qualify either as exempt under fair use or non-
infringing under the DMCA.
iii. what effect does fair use have on the video game industry and its 
                               consumers?
    In our view, any debate in Congress over these issues should be 
predicated on a complete understanding of the ways the entertainment 
software industry has sought and succeeded in meeting the legitimate 
needs of our consumers. The video game industry is a leader in 
successfully meeting consumer expectations for access to, and use of, 
video game content.
    Our industry has always been digital and did not need to convert 
from older formats to the digital environment. As a result, 
entertainment software companies have, for years, been leaders in 
developing creative business models that provide consumers a wide array 
of options to sample and play games. Without built-in marketing 
vehicles like radio, film trailers, and music television, the video 
game industry has had to develop innovative marketing strategies to 
generate excitement in new game products. As a result, the industry has 
used a variety of approaches to allow consumers to sample and play 
parts of games and, in some cases, entire games prior to purchasing:

 Rental: Under federal law, console video games are the only form of 
        software that may be rented without the permission of the 
        copyright holder, and over the years video game rentals have 
        become a big business for retailers, allowing millions of 
        people to play games without purchasing them and generating 
        nearly $7 million dollars at retail in 2004.
 Game Websites: Our companies routinely make ``levels'' of games 
        available for free download on their own company sites, or 
        through independent game websites. Through these sites, 
        consumers can enjoy free access to games for a period of time 
        to play and to sample prior to purchase.
 Demo Disks: Game companies provide several levels of games to 
        publishers of gaming enthusiast magazines prior to or soon 
        after release in the form of CD-ROMs that are inserted into the 
        game magazines. From these demo disks, consumers can then 
        sample literally dozens of new and popular games for free on 
        their PCs.
    The video game industry has developed additional means and 
technologies to deliver game product to consumers for use in a variety 
of formats to accommodate different consumer preferences:

 Massive Multiplayer Online Games: An entire gaming culture has been 
        built around massive multiplayer games involving hundreds of 
        thousands of individuals. Consumers pay a monthly subscription 
        fee, usually between $10 and $15, to play with and against 
        players from all over the world.
 Free Games: More than 30 million Americans now play board, card, 
        trivia, and other casual games online at least once a month, 
        typically for free.
 Pay to Play: Other games are available online to play for an hourly 
        or daily fee.
 Episodic Games: Some games are delivered to consumers in episodes, 
        with players paying a fee to receive each new level.
    The entertainment software industry has a strong and proactive 
track record in voluntarily providing information about our products to 
customers. Consumers of video games have known and accepted for years 
that video game hardware systems and computer and video game software 
are copy-protected in various ways. For example, there is no legitimate 
expectation on the part of consumers to copy a PlayStation game for use 
on a GameCube or an Xbox, or to copy a PC game for use on a dedicated 
game console. Our industry's consumers know that the games they 
purchase are embedded with certain technological restrictions. The use 
of technological protection measures has not interfered with the 
entertainment software industry's ability to meet consumer expectations 
with regard to access, play, portability, and ability to make full use 
of a game title.
    A key factor to bear in mind is that game publishers are able to 
meet consumer demand for game products in these different forms and 
modes of access through the use of technologies that permit qualified 
or conditional access. Without such technologies, and most importantly, 
the ability to protect the integrity and use of such technologies, game 
publishers would be unable to respond to the increasing diverse 
consumer demand for game software on these many different platforms and 
modalities.
    The protections afforded by the DMCA are essential to the vitality 
and continued growth of the entertainment software industry. It 
prohibits: 1) the circumvention, or ``hacking,'' of technological 
measures that game publishers use to control access to and/or prevent 
piracy of their products, and 2) the development and distribution of 
tools to enable such hacking. Without this protection, the development 
and digital distribution of new game products would become an 
exceedingly daunting proposition because publishers would be placing at 
considerable risk the tens of millions of dollars spent in developing 
and marketing game products.
    Because of the nature of the game software business, technological 
protection measures are a critical element of game publishers' ability 
to distribute and market their products. Unlike some of the other 
content industries, where products either pass through a sequence of 
media or enjoy prolonged life cycles, the active sales cycle of a new 
game release is often only a few months long. It is therefore critical 
that the game industry provide its products maximum protection from 
piracy during the short window in which they have to sell copies of 
their games after release and recoup the millions of dollars invested 
in the development and marketing of these game products.
    This is the reason that our industry has invested heavily in 
technological protection measures, as these help to limit the damage 
that game publishers suffer from pirate versions of their games. For 
example, video game consoles have built-in access controls designed to 
prevent the playing of counterfeit versions of the games. These self-
help protection methods act as ``digital locks'' that regulate 
unauthorized access to the game content. The DMCA's legal protections 
for these measures provide additional remedies for our industry to use 
against those who would undermine the use of these measures by 
promoting their circumvention.
    Unfortunately, game publishers' technological protection measures 
are often circumvented and an unprotected version of a game may become 
available in the days following its release. The resulting copy is a 
perfect copy that can be available for any purpose, not just non-
infringing uses. In the digital world of today, the ``single copy'' 
will quickly become thousands (and ultimately, millions) of equally 
high-quality copies distributed instantly around the world. Billions of 
dollars worth of pirated entertainment software products are present in 
worldwide markets today and there are illegal devices such as ``mod 
chips'' and ``game copiers'' which circumvent access controls and allow 
for play of counterfeit games.
    The entertainment software industry remains concerned about 
attempts to chip away at the protections afforded by the DMCA and other 
statutes in the name of fair use. As noted earlier, the DMCA provides 
those interested in seeking exemptions to the application of its 
circumvention provisions with a process for doing so. Many have taken 
advantage of the last two rulemaking processes to proffer suggestions 
for exempt uses and some have obtained the exemptions they were looking 
for. Indeed, a new DMCA rulemaking process has recently begun and new 
proposed exemptions will undoubtedly be considered. The process works; 
there is no need to undermine the DMCA or other applicable statues at 
this time.
    Those who seek to weaken the DMCA's anti-circumvention provisions 
in order to promote so-called fair use ``rights'' may not be aware of 
the dangers that this poses to copyright holders, particularly the 
entertainment software industry. No technology exists to ensure that 
circumvention is done for only legitimate or non-infringing purposes. 
Any technology or device capable of ``enabling significant non-
infringing use'' may also be capable of permitting rampant piracy. More 
to the point, should Congress enact proposals to allow circumvention 
for purposes of making fair use or the making and distributing of 
circumvention devices for purposes of making fair use, ``mod chips'' 
and ``game copiers'' will be legal and this would be devastating to the 
video game industry.
                             iv. conclusion
    The ESA and its members strongly endorse the Congressional judgment 
that led to the codification of the Fair Use doctrine in the U.S. 
copyright statutes and the enactment of the DMCA. Each reasonably 
accommodates the needs and interests of copyright holders and the 
consumers of their products. We believe that the marketplace is where 
legitimate industry and consumer expectations over product use or 
access should be resolved. The entertainment software industry is a 
strong example of this marketplace principle--an industry whose 
products include protection measures to prevent unauthorized copying 
and distribution and whose positive relationship with their consumers 
since the inception of the industry has made us the fastest growing 
segment of the entertainment industry.
    As an industry that uses technology extensively to meets the 
challenge of ever-changing consumer demands, our industry would be 
unnecessarily and unfairly harmed by legislation aimed at altering the 
delicate balances embodied in Fair Use and the DMCA. Accordingly, we 
urge Congress to reject any efforts to erase the legal protections on 
which our members rely to bring innovative new entertainment software 
and technologies to the marketplace in forms and modalities designed to 
produce the highest levels of consumer satisfaction.

    Mr. Stearns. Thank the gentleman.
    Mr. Aiken?

                     STATEMENT OF PAUL AIKEN

    Mr. Aiken. Mr. Chairman, I am the Executive Director of the 
Authors Guild, the largest society of published authors in the 
country and we have a 90-year history of contributing to 
debates before Congress on the proper scope and function and 
copyright law. It is an honor and a privilege to be here today 
for the Authors Guild to continue to serve that role before 
this committee.
    When people discuss policy issues about copyrights, they 
often talk about balancing the public's interest against that 
as a rights holder. The public's interest is frequently cast in 
terms of the public domain. As is the overriding public benefit 
of copyright is the creation of materials that can be used for 
free. The public domain does provide a benefit to society but 
that is not the primary means by which the public benefits from 
copyrights, not by a long shot.
    Copyright allows authors and other rights holders to work 
in a free market economy. Copyright transforms author's 
creative efforts, their investment of countless hours of work 
on their manuscripts into marketable goods, licensable 
products. A fortunate and talented minority of prospective 
authors find publishers for their works. A published book of 
course is no guarantee of success. The authors and publisher's 
investments may be for naught but authors and publishers accept 
those risks and with a good book, some luck and a bit of 
marketing skill the authors and publishers investments will pay 
off in the marketplace and readers will value the book. That 
book and other books like it, the books that readers value, the 
books that the public, academic, and corporate libraries choose 
to acquire for their collection are the primary public benefit 
of copyrighting. I am speaking now of the book publishing 
industry but the same paragon applies to the newspaper, 
magazine, music, movie, and software industries. It is the 
products that result from the market created by copyrights that 
are the fundamental and appropriate public benefit of the 
copyright system that primarily and powerfully fulfills 
copyright's constitutional purpose of promoting the progress of 
science and the useful arts.
    It seems so obvious but people seem to lose their bearings 
when discussing copyrights. There is a market for food in this 
country which functions pretty well. No one seriously doubts 
that there is a public good in the existence of this system 
that one has to pay for a sack of potatoes does not mean that 
there is not a tremendous value to the public and the 
investments and the efforts of the farmer, distributor, and 
grocer in getting those potatoes to the store. We may wish 
those potatoes were cheaper, we may even want them to be free 
but none would argue the public benefit of a market for food is 
dependent on the availability of free potatoes.
    So it is with public domain. Public domain is a fine thing 
but it is and always has been merely a nice byproduct of the 
copyright system. The real public benefit of copyright easily 
90 percent of the value is the creation of progress promoting 
rights that the marketplace values.
    What does all of this have to do with fair use? The same 
sorts of arguments are brought to bear in fair use debates. We 
are told essentially that in order for copyrights to fulfill 
its constitutional purpose and provide a real public benefit, 
we have to make sure that their use is adequately bought. This 
misapprehends primary value of copyright and the role of fair 
use in the copyright system. Fair use has traditionally helped 
define the boundaries between commerce and free expression. 
Between the commercial incentives secured by copyright and the 
rights of free expression protected by the first amendment.
    Section 107 mediates between protected expression and free 
expression by setting forth four factors for the court to 
consider whether use is fair. Factors intended to permit the 
except, you know, copywriter rights needed for new creative 
expression so long as the effect on the commercial market for 
the work is minimal. And unfortunate use, result of the use of 
four factors to determine the balance of fair use is that fair 
use appears to be a bit mushy. Advocates of all stripes can and 
do read into fair use what they care to read into it.
    Search engine firms have discovered books. All the major 
firms now have book digitalization's under way. Google is 
looking at hooking with major American libraries and one 
British library in its massive book scanning and storage 
effort. Some of these libraries are offering Google only public 
domain books but the University of Michigan and reportedly 
Stanford are offering up works still protected by copyright. 
Google seems to have figured something out. There is a demand 
for searching these books, a demand that warrants the 
investment of a reported $200 million, a demand that Google is 
determined to satisfy because Google is a sensible profit 
seeking enterprise believing its investment will pay off and 
increase visitors to its sites and increased ad revenues.
    Google senses a competitive advantage in making copyrighted 
books searchable but Google says that is copying of these 
books, that its scanning of countless copyrighted volumes, and 
using optical character recognition technology to digitize the 
text of those works to create files to assemble into a new 
unimaginably vast data base that all that copying and use of 
these works would be fair use so it does not need a license 
from anyone for this copying. For good measure, it is handing 
over a digital copy of its--to its partner libraries and 
telling them it is okay to post the works on their website. 
That too it appears is to be considered fair use. And since no 
license is needed in Google's view, Google does not have to 
give rights holder contractual assurances of the security of 
the data base. Could a back up tape go straight from Google or 
one of its partner libraries unleashing a couple hundred 
thousand copyrighted works sent to the internet? It sure seems 
possible. We will have to trust that that is under control. The 
list of companies----
    Mr. Stearns. I just need you to sum up.
    Mr. Aiken. Sure. That lose critical data grows daily. We do 
not believe the courts will share Google's radical expansive 
and devastating view that the scope of fair--of the scope of 
fair use. At some point, we believe that Google will do the 
right thing and look to a licensing solution for the use it 
wants to make of these millions of works. That would be good 
news. A negotiated license could pave the way for a real online 
library, something far beyond the excepts Google intends to 
offer to its Google library program.
    Thank you.
    [The prepared statement of Paul Aiken follows:]
    Prepared Statement of Paul Aiken on behalf of the Authors Guild
    Mr. Chairman, I represent the Authors Guild, the largest society of 
published authors in the country. The Guild and its predecessor 
organization, the Authors League of America, have been leading 
advocates for authors' copyright and contractual interests since the 
League's founding in 1912. Among our more than 8,000 current members 
are historians, biographers, poets, novelists and freelance journalists 
of every political persuasion. Authors Guild members create the works 
that fill our bookstores and libraries: literary landmarks, bestsellers 
and countless valuable and culturally significant works with 
unfortunately modest sales records. We have counted among our ranks 
winners of every major literary award, including the Nobel Prize and 
National Book Award, as well as United States Presidents, members of 
the Senate and, no doubt, distinguished members of the House of 
Representatives.
    We have a 90-year history of contributing to debates before 
Congress on the proper scope and function of copyright law. It's an 
honor and a privilege to be here today, for the Authors Guild to 
continue to serve that role before this committee.
Copyright and the Public Interest
    When people discuss policy issues about copyright, they often talk 
about balancing the public's interest against that of the rightsholder. 
The public's interest is frequently cast in terms of the public domain, 
as if the overriding public benefit of copyright is the creation of 
material that can be used for free. The public domain does provide a 
benefit to society, but that's not the primary means by which the 
public benefits from copyright. Not by a long shot.
    Copyright allows authors and other rightsholders to work in a free 
market economy. Copyright transforms authors' creative efforts, their 
investment of countless hours of work on their manuscripts, into 
marketable goods, licensable products. A fortunate and talented 
minority of prospective authors finds publishers for their works. These 
authors enter into essentially joint venture agreements with their 
publishers, licensing the right to print and sell their works in 
exchange for an advance and the prospect of shared profits in the form 
of royalties. (Contrary to widely held belief, the advance is generally 
modest, merely defraying some of the author's investment of time and 
money in creating the manuscript.)
    A published book is no guarantee of success, of course, the 
author's and publisher's investments may be for naught. That's how it 
is in an entrepreneurial system, not all efforts pay off. But authors 
and publishers accept those risks, and with a good book, some luck and 
bit of marketing skill, the author's and publisher's investments will 
pay off in the marketplace, and readers will value the book.
    That book, and other books like it, the books that readers value, 
the books that public, academic, and corporate libraries choose to 
acquire for their collections, are the primary public benefit of 
copyright. I'm speaking now of the book publishing industry, but the 
same paradigm applies to the newspaper, magazine, music, movie and 
software industries. It's the products that result from the market 
created by copyright, the newspapers and movies and software programs 
that are still under the protection of copyright, that are the 
fundamental and appropriate public benefit of the copyright system, 
that primarily and powerfully fulfill copyright's constitutional 
purpose of ``promot[ing] the progress of science and [the] useful 
arts.''
    This seems so obvious, but otherwise clear-thinking people seem to 
lose their bearings when discussing copyright. There's a market for 
food in this country which functions pretty well. No one seriously 
doubts that there's a public good in the existence of this system. That 
one has to pay for a sack of potatoes doesn't mean there's not a 
tremendous value to the public in the investments and efforts of the 
farmer, distributor and grocer in getting those potatoes to the store. 
We may wish the potatoes were cheaper, we may want them to be free, we 
may even think that potatoes want to be free, but none would argue that 
the public benefit is dependent on free potatoes.
    Or take the Ford Foundation. It does, I'm sure, much good work. 
Some might argue that this is the public good that resulted from Henry 
Ford's company, that he and his family were able to endow this 
charitable institution. But the Ford Foundation's good works, 
significant as they are, pale in comparison to the public benefit of 
the Ford Motor Company's products, automobiles. Ford revolutionized the 
industry, bringing independent, speedy transportation within the reach 
of working families, and the public valued this product tremendously, 
responding by buying Ford's cars by the million. (Ford's other great 
product, of course--it's other great benefit to our society--is good-
paying, benefit-rich jobs.) The real public benefit of Ford is a direct 
result of the automobile market--cars that people value and the jobs to 
build those cars--the charity is just gravy.
    And so it is with the public domain. The public domain's a fine 
thing, but it is, and always has been, merely a nice by-product of the 
copyright system. The real public benefit of copyright, easily ninety 
percent of the value, is the creation of progress-promoting works that 
the marketplace values.
Fair Use & Authorship
    What does all this have to do with fair use? The same sorts of 
arguments are brought to bear on fair use debates. We're told, 
essentially, that in order for copyright to fulfill its constitutional 
purpose and provide a real public benefit, we have to make sure fair 
use is adequately broad. This misapprehends the primary value of 
copyright, as we've seen, and the role of fair use in the copyright 
system.
    Fair use, originally a judicial doctrine, now codified in Section 
107 of the Copyright Act, has traditionally helped define the boundary 
between commerce and free expression, between the commercial incentives 
secured by copyright and the right to free expression protected by the 
First Amendment.
    Authors are big fans of copyright, of course, because authors like 
to get paid, but they're also big fans of traditional, transformative 
fair use.
    Say an author is writing a history of The Great Depression and 
finds a recent article in which some scholar says that the Depression 
was caused by the stock market crash of 1929. This drives the author 
nuts, because she believes it's well established that the stock market 
crash was only one of several factors causing the Depression. She wants 
to quote from this article to show just how wrong-headed it is, but the 
article is protected by copyright and its author may not be inclined to 
grant her permission to excerpt the work. What does our historian do? 
She uses it anyway. She copies a reasonable amount of that article, 
enough to make her point, and puts it into her own book, surrounding it 
with her commentary and criticism. She demolishes that scholar's 
thesis, using his own words against him, and there's nothing that 
author can do about it.
    That author can do nothing about it, at least in terms of her use 
of his copyrighted work, because this is classical, transformative fair 
use of the original author's work. She's taken part of his copyrighted 
work and transformed it, including it in a new creative expression, 
something completely unlike his work. As a society, we see real value 
in this sort of transformative borrowing from another's work, it's a 
vital part of the marketplace of ideas that free expression is meant to 
encourage, and it's everywhere: book and movie reviews, of course; 
biographical and historical works; novels and plays; poetry and songs.
    Section 107 mediates between protected expression and free 
expression by setting forth four factors for a court to weigh in 
considering whether a use is fair, factors intended to permit the 
excerpting of copyrighted works needed for new creative expression, so 
long as the affect on the commercial market for the work is minimal. An 
unfortunate result of the use of four factors to determine the bounds 
of fair use is that fair use appears to be a bit ``mooshy.'' Advocates 
of all stripes can and do read into fair use what they care to read 
into it.
    Fair use is now often seen as another flavor of public domain, and 
that's perhaps one way to think of it, but it's of an entirely 
different nature than copyright's real public domain. Fair use doesn't 
mean free use of entire works--that's the realm of genuine public 
domain. Fair use, in fact, has been transmuted by some into free use or 
good use or any other use that some interest group, industry or 
corporation wants to make of copyrighted works without paying for them. 
This isn't, and shouldn't be, what fair use is about. If we keep our 
eye on the true role of fair use--permitting the creation of new 
creative expressions without harming the commercial market for the 
work--we won't lose our way.
The Idea/Expression Dichotomy
    I should mention one other important way in which copyright law 
accommodates the First Amendment. Courts have interpreted copyright law 
to protect creative expression in copyrighted works, but not the ideas 
contained in those works. When people speak of copyright preventing the 
free flow of ideas, they are wrong, flat out. Copyright encourages and 
speeds the flow of ideas.
    One prominent copyright scholar, Paul Goldstein of Stanford Law 
School, describes the idea/expression dichotomy as creating a vast 
commons coursing through every copyrighted work--the publicly held and 
freely copyable ideas the work contains. If a particular author has 
creatively expressed an idea so well that another feels compelled to 
copy that particular expression, then one needs permission, that is, a 
license. That's as it should be--well-crafted expression should be 
compensated, or the borrower should simply limit the excerpt to the 
bounds of fair use.
The Internet & Fair Use
    The Internet is often described as a disruptive technology. There's 
no doubt that that's true--just ask travel agents or those in the music 
industry. Authors and publishers have had a taste of this disruption, 
as used bookselling, a somewhat quaint enterprise before the Internet, 
has seen explosive growth online, certainly displacing some royalty-
paying sales of new books. That displacement will only grow with time.
    But the Internet also offers opportunities. Search engine firms 
have discovered books: all of the major firms now have book 
digitization efforts under way. Earlier this month, Microsoft announced 
an agreement with the British Library to scan 25 million pages from the 
library's collection. Those pages will be made available at MSN's Book 
Search site next year. It's just the start for Microsoft and the 
British Library, we're told, Microsoft is investing a reported $2 
million, just to get the ball rolling. Yahoo is also in the game, 
announcing last month that it's working with a group called the Open 
Content Alliance, which includes Adobe Systems, Hewlett-Packard, and 
the libraries of the University of California and the University of 
Toronto, to scan books that will be made available through Yahoo's 
search engine. Since that announcement, Microsoft has signed on, to 
make the books accessible through its search engine as well. In 
building their databases of books, the Microsoft and Yahoo efforts are 
properly sticking to scanning works that are in the public domain or 
those for which they receive permission.
    Not so with the mother of all book scanning and storage 
initiatives, Google Library. Google is working with four major American 
libraries, the libraries of Harvard, Stanford and the University of 
Michigan and the New York Public Library, and one British library, 
Oxford University's Bodleian Library. Some of these libraries are 
offering Google only public domain books, but Michigan and reportedly 
Stanford are offering up works still protected by copyright.
    Google seems to have figured something out: there's a demand for 
searching those books, a demand that warrants the investment of a 
reported $200 million. A demand that Google is determined to satisfy, 
because Google, a sensible, profit-seeking enterprise, believes its 
investment will pay off in increased visitors to its site, and 
increased ad revenues. Google senses a competitive advantage in making 
copyrighted books searchable.1We bet Google is right. If books were 
digitized and searchable on the Internet, we bet Google could turn a 
good profit by allowing its legions of users to search that database. 
And what a mind-boggling database: an assemblage of the nation's 
copyrighted books, the result of the efforts and investments of 
hundreds of thousands of authors and thousands of publishers, served up 
in handy excerpts by Google's computers.
    But here's the bad part. Google says that its copying of these 
books--that its scanning of countless copyrighted volumes, then using 
optical character recognition technology to digitize the text of those 
works to create files to assemble into a new, unimaginably vast 
database, surely one of the largest databases ever assembled--that all 
of that copying and use of these works, would be fair use, so it 
doesn't need a license from anyone for this copying. For good measure, 
it's handing over a digital copy to its partner libraries, and telling 
them it's OK to post the works to their websites. That, too, it 
appears, is to be considered fair use.
    Since there's no license needed, in Google's view, Google doesn't 
have to give rightsholders contractual assurances of the security of 
their database. Could a backup tape go astray from Google or one of its 
partner libraries, unleashing a couple hundred thousand copyrighted 
works onto the Internet? Sure seems possible. We're asked to trust that 
that's under control. The list of companies, meanwhile, that lose 
critical data grows daily. What successes do hackers have at breaking 
in to the sites of Google and its partner libraries? There'd be no 
contractual need to report this, so it would likely go unreported. 
Security experts tell us that most data losses to hackers go 
unreported, and we don't doubt it. No contract, no reporting, no 
control. ``Trust us'' security.
    What about other companies that want to do the same thing? When we 
first filed suit against Google, we mentioned to reporters our concern 
that others would see the same business opportunity and join in. 
Microsoft and Yahoo, as I've discussed, have since jumped in, but in a 
manner that appears to respect copyright. But if Google gets away with 
its vast database, Yahoo and Microsoft won't stand still. They'll make 
their own databases of copyrighted works, just to keep pace. They 
probably would be joined by Amazon, which has been investing heavily in 
its search engine, and has a strong interest in protecting its position 
in online bookselling.
    So we might have four or more companies, each pursuing private 
gain, digitizing the stacks of libraries. We'd have to trust each of 
them, naturally, and no doubt their partner libraries, not to misplace 
backup tapes or let down their guard against hackers.
    Specialized databases wouldn't be far behind. WebMD might want to 
digitize a couple medical libraries for excerpting by its users. Fair 
use, naturally. Veterinarians, chemists and electrical engineers have 
their needs and websites, too. Harry Potter readers, science fiction 
fans and Civil War buffs wouldn't be far behind. All one needs is a 
scanner and a few hundred dollars worth of software to get going with a 
workable system. These digital databases would all be secure, not to 
worry. Trust us, but don't audit us.
    What remedy would authors and publishers have if these databases 
are deemed to be fair use copies but one of them is hacked into or its 
collection of digital books otherwise finds its way onto the Internet? 
If we're fortunate, the negligent party would have substantial 
resources, but stating a claim against that entity might well be 
impossible. There's no license, so there's no breach of contract. We're 
postulating that the copy is a non-infringing fair use copy, so there'd 
be no remedy under copyright. And the defendant would have a strong 
argument that copyright law pre-empts any state law cause of action. 
Plaintiffs might well find themselves shut out.
    What about uses by the partner libraries? The only contractual 
obligation imposed on libraries--at least in the sample available to us 
from the University of Michigan contract with Google--allows the 
University of Michigan to use the works at its website. No mention in 
the contract of limiting browsers to so-called fair use snippets. The 
contract also contemplates sharing the works with other academic 
libraries. The threat to the market for academic books couldn't be 
clearer or more direct. If Google and the University of Michigan are 
correct in their interpretation of fair use law, then profit-minded 
publishers and royalty-seeking authors would be wise to abandon that 
market.
    What if the University of Michigan is wrong, and its uses overstep 
the bounds of fair use? Authors and publishers could just sue for 
damages, right? No, we'd probably be out of luck, as a state 
institution protected by the 11th Amendment, the University of Michigan 
is immune from damages claims under copyright law.
Fair Use & The Market for Online Delivery of Books
    Recent developments make it appear likely that Google intends to 
leverage its interpretation of fair use into more than just ad revenue 
profits. In the past few weeks, there has been a spate of 
announcements, from Amazon, Random House and Google, of various schemes 
for selling and renting the right to view books online. Whether readers 
will accept these business models is anyone's guess, but at some point, 
someone will likely discover the equivalent of iTunes for books, and 
online book sales or rentals will take hold.
    If Google can scan all copyrighted books into its databases as a 
fair use, then it may well establish its search engine as the dominant 
and unassailable portal to online books, the portal that readers and 
prospective buyers of online books would turn to first. It's not too 
much of a stretch to imagine that Google might do as any right-thinking 
corporation would, use that dominance to extract favorable terms, a 
high percentage of all proceeds derived from the sale or rental of 
books through its portal.
    In this way, and the irony certainly won't be lost on the 
publishing industry, Google could turn authors' and publishers' own 
works, their own vast libraries of works, against them, securing the 
upper hand for the indefinite digital future. All it takes is a couple 
hundred million dollars, and an expansive view of fair use.
The Role of Licenses
    Fortunately, it need not come to that. We don't believe the courts 
will share Google's radical, expansive, and devastating view of the 
scope of fair use. At some point, we believe that Google will do the 
right thing, and look to a licensing solution for the use it wants to 
make of these millions of works. It's too early to discuss what such a 
license would look like, but its general outlines might be guessable. 
Revenues, in the form of some reasonable split of advertising income, 
could be paid to authors and publishers. Rightsholders would have the 
right to review Google's security protocols, and Google would be 
obliged to contractually guarantee the security of its database. And a 
negotiated license could pave the way for a real online library--
something far beyond the excerpts Google intends to offer through its 
Google Library program.
    I would like to thank this Committee for holding this hearing and 
inviting us to participate.

    Mr. Stearns. I thank the gentleman.
    I will start with the questioning here and Professor Jaszi, 
let me start with you. I am in my home and I have got a CD or a 
DVD, do I have the right to make a single copy in your opinion, 
for my own personal use? It turns out that I have a--I live in 
Washington, DC, and I have a home in Florida and occasionally I 
want to listen to music in Washington and I find it is in--up 
here and so I will make a copy. Can I make a copy either for a 
DVD or a CD? Do you think that is a legitimate use that I 
should have a right to do?
    Mr. Jaszi. Insofar as copyright law which incorporates the 
principle of fair use is concerned, I think the answer to that 
question is unqualifiably yes.
    Mr. Stearns. Okay. Do I have right to do more than one copy 
because I also, perhaps let us say, I am just postulating, I 
have another house, a beach house. Can I make a third copy, a 
second copy? So then I would have the original plus a copy in 
Washington and now I have a copy at my beach house.
    Mr. Jaszi. Again, as long as you are working within the 
zone of personal use, I think the answer is yes.
    Mr. Stearns. Could I go so far to extend, extrapolate that 
and say that I have a right depending upon my location, my car, 
my iPod, my homes, can I continue to make copies for my 
personal use forever for the different locations?
    Mr. Jaszi. We are talking here about your own personal----
    Mr. Stearns. Okay. What about my family, my sons, I have 
three boys. Let us say, you know, I have got this neat song I 
think you would like, can I make copies and give it to them?
    Mr. Jaszi. I think that is a much more difficult case.
    Mr. Stearns. Okay. And so you would not think that that is 
not correct.
    Mr. Jaszi. Not necessarily.
    Mr. Stearns. Okay. Ms. Bono had mentioned all these iPods 
that she and her daughters have. And my son, each of my sons 
has an iPod and right now they cannot go from iPod to iPod with 
their songs so Scott cannot give his collection to one son and 
he cannot give to another but Sony as I understand it, the--
their MPT 3 you can do that. Is that acceptable for my sons to 
trade songs between them? I do not mean one song to download 
maybe 100 songs from one----
    Ms. Bono. Would the chairman yield?
    Mr. Stearns. Yes.
    Ms. Bono. Excuse me, but you can go iPod to iPod absolutely 
with the use of one PC.
    Mr. Stearns. Okay.
    Ms. Bono. So you connect both iPods to that same PC.
    Mr. Stearns. Okay. So I stand corrected, you can go from 
iPod to iPod. I mean is that acceptable in your opinion that 
her daughters or my son can go from iPod to iPod?
    Mr. Jaszi. Again, I think that as long as we are talking 
now about copying for use outside the personal media space of 
the original consumer, wholesale copying along those lines 
cannot easily be justified under the doctrine of fair use. I 
would make, I would reach a different conclusion if the 
question were related to the sharing of a single song that was 
of particular interest to one user who wanted----
    Mr. Stearns. Okay.
    Mr. Jaszi. [continuing] affirmatively to make----
    Mr. Stearns. Jack Valente, he is head of the Motion Picture 
Association at our last hearing said he says it is incorrect 
and it is against the law. He wants to be sure that it is fully 
understood that you cannot even make one copy and he mentioned 
not even for one for personal use. So you seem to be 
disagreeing. Does anybody disagree with the Professor here 
strongly and would like to comment?
    Mr. DeLong?
    Mr. DeLong. Yes. It seems to me that this problem which is 
obviously very difficult under fair use doctrine where you are 
trying to assess the costs and benefits and everything is very 
easily solvable in a market and that is that if you want one 
copy, you are going to pay less than the person who wants 2, 3, 
or 20. And, you know, problem solved. If your children each 
want copies, you know, they will pay a little more than the 
person who only wants one. It is simply trying to see that----
    Mr. Stearns. Your solution is to say you cannot make any 
copies unless you get reimbursed from--that there should be a 
flag in the CD, a DVD that----
    Mr. DeLong. Yes.
    Mr. Stearns. [continuing] says bingo my son wants to make a 
copy, he has got to get the password and pay, instead of 99 
cents, he can pay 50 cents.
    Mr. DeLong. Yes. Believe me they will event ways of doing 
this. They will event two for one. There could be all sorts of 
ways of doing this. But the fundamental question is well two, 
one why should the person who needs very light use subsidize 
the whole family of somebody else. And second, why get 
embroiled in it as a legal doctrine? Why get the courts 
embroiled in it when the market will solve it----
    Mr. Stearns. Well, Mr. DeLong, your point is well taken 
because my sons then go to their friends and they pretty soon 
if they are visualizing themselves after the Thanksgiving 
dinner downloading to their iPods or their MP3 iPod type Sony's 
then they would probably do it with their friends.
    You know I have said from the beginning, I said it in my 
opening statement, there must be some technological way to 
solve this problem with a flag so that maybe if we have the 
final solution that you can do one copy, if you try to do more 
than one copy, then you have to go ahead. Does anybody care 
to--yes, Mr. Shapiro?
    Mr. Shapiro. Yes, Chairman Stearns, the Audio Recording Act 
actually it was a negotiated agreement if you will between the 
music industry and the technology industry and they basically 
agree that you can make an unlimited number of copies off an 
original but no copies from that copy. Now this was done before 
the internet and it was a reasonable compromise which everyone 
agreed upon and Congress actually enacted and it kind of set 
the standard. But I think moving to distinguish here, the law, 
although I would like to agree with Professor Jaszi, the law is 
basically unclear. We do not know. I was at--a reporter asked 
me the question yesterday at a press conference, the exact same 
question you asked, you know, can I tell my readers that they 
can make copies? Well before the Supreme Court, the content 
industry lawyer argued that you can of course you can make a 
copy of your own CD. And indeed when Congress considered 
earlier legislation, they talked about the right to record off 
a radio. There was a four colloquy where it was absolutely 
clear that you had the right to record off the radio. But some 
in the content community have taken a legal position that is 
absolutely unacceptable to make any authorized copies and there 
is really no such thing as fair use in that area. I think there 
is a better way. The law can resolve some things but I think 
Congressman Bono said it well. I mean there are certain issues 
in morality stealing is stealing is stealing. And morality 
sometimes takes over here and is not--the law can only go so 
far. Sharing some music with a friend to the extent that it 
exposes that friend to a new artist is not a bad thing. They 
may go out and buy that CD. It also may displace the sale. It 
is a balancing test but you need the ability to do that and you 
do have to have the constraint of morality.
    Mr. DeLong. But sharing a new taste is a good thing too and 
we don't say you should get the ingredients for free. I mean, 
you know, fair use and free use are entirely different things 
and the fact is, you know, when technology is ringing the 
transaction costs out of these, we are far better off just to 
rely on markets than to put courts in position as being central 
planners as to what is fair.
    Mr. Stearns. My time has expired.
    Ms. Schakowsky?
    Ms. Schakowsky. Although one can copy a Martha Stewart 
recipe and pass it on to others freely.
    Mr. DeLong. Well there are--I did not say we were going to 
solve all the tough issues.
    Ms. Schakowsky. Okay, all right. I wanted to ask Ms. Adler, 
I am very concerned about lots of uses but primarily I am 
concerned about libraries which I think are fundamental to our 
democracy in so many important ways and to our history. And so 
I wanted to follow up on some of the things you said.
    You stated that libraries are being forced to shift from 
purchasing work to getting access licenses from--for use from 
publishers. Are publishers stopping libraries from buying 
books? Are you being pushed into license agreements because of 
fear of copyright infringement? So if you could explain that a 
bit?
    Ms. Adler. Certainly, I think it is a combination of 
factors as we saw the rise in the availability of information 
in electronic form particularly in the context of journals. 
Publishers move from predominately print based offerings to 
electronic particularly we also see the rise of E-books, 
electronic books that are beginning to be introduced more and 
more in libraries. That is not to say we still do not have 
large number of volumes and tangible books in our libraries but 
predominately the use is licensing and as I mentioned, it is 
because it provides greater certainty to the publisher as to 
how that information will be used and protected. Typically you 
will see in our libraries that we will be negotiating licenses 
on behalf of an individual institution or through Consortia and 
it is in that context that we will try and imbed in our license 
agreements as many exceptions that match or mirror what is in 
the Copyright Act as possible but that is a very, very 
difficult and uphill battle for us to achieve.
    Ms. Schakowsky. And is it possible that these licenses may 
end up requiring that you charge patients fees for services 
that otherwise you provide for free? I mean do you foresee that 
as a potential problem or not?
    Ms. Adler. That is not--the way the library fortunately or 
unfortunately, the library community seeks to make access to 
information as transparent as possible to our users. Our goal 
is for them to have the most effective and easy access as 
possible. And so what we try and do through our license 
agreements is to make sure that they do not have problems 
accessing that information and that there would be additional 
charges then for example. We will absorb those in the license 
agreement on behalf of our user community so that we do 
everything that we can to make sure that there are not 
additional----
    Ms. Schakowsky. Well let me ask you this. Would that put 
additional financial burdens then on libraries?
    Ms. Adler. Absolutely.
    Ms. Schakowsky. Okay.
    Ms. Alder. Without question.
    Ms. Schakowsky. And you also raised the issue of 
preservation of materials. Could you elaborate on that a bit? I 
mean that ought to be a concern I think to all of us if that is 
a major function of libraries and that we could potentially 
lose that function.
    Ms. Adler. It is an enormous concern for the library 
community. The library community, that is our charge, that is 
our mission to provide long-term effective access and 
preservation of all information regardless of format from 
cuneiforms on up to electronic resources and it has become such 
an issue for us as we move to licensing these resources where 
we do not have the tangible item per se to preserve. And if 
there are conditions in a license that prohibit us from 
preserving those electronic resources, there is nothing that we 
can do about that. And most recently, the Mellon Foundation 
came out with a call to the community that they see this as a 
crisis and that they are hoping that all sectors both private 
and public and foundation, the foundation community deal with 
this crisis and preservation of our information resources.
    Ms. Schakowsky. Thank you.
    I wanted to ask Mr. Aiken or just have him comment on 
something. My understanding is that in addition to consumers 
that there actually are authors who seem to support the Google 
print project. I just wanted to read you a quote from a Chicago 
author. I represent a part of Chicago. It says ``Dear Google, 
your search engine is the primary way that people find their 
way to my website and consequently my book. I asked my 
publisher for my book to be included in Google print. I was 
told they did not do that. Lack of exposure is the primary 
reason that at book like mine would fail in the marketplace. 
Please let me know if I can do anything to help.'' And I 
understand there are dozens of testimonials like this on 
Google's website and on the bloggs and so I am wondering why we 
cannot just deal with this opt out for authors and allow others 
who would support this idea to go forward?
    Mr. Aiken. There are of course tens of thousands of authors 
out there. It is no surprise that Google has been able to find 
a dozen or two that that----
    Ms. Schakowsky. Well, first of all, let me say that some I 
think have found Google. I mean you are making it sound like 
they have scouted around to find those so----
    Mr. Aiken. I do not know the circumstances under which 
those----
    Ms. Schakowsky. Okay.
    Mr. Aiken. [continuing] appeared at Google's website.
    Ms. Schakowsky. Right.
    Mr. Aiken. There is nothing inconsistent with having works 
be available on line and being licensed for that use. We are 
not opposed to the idea of making books searchable online. We 
are opposed to it being uncontrolled without a proper license. 
Because a Google collection copyright is a search engine 
exception to copyright and any search engine large and small 
and there are dozens would be able to take advantage of it. And 
the security concerns are real and on the internet we think it 
could easily lead to widespread piracy.
    Ms. Schakowsky. Thank you.
    Mr. Stearns. The gentleman from Texas.
    Chairman Barton. Thank you, Mr. Chairman.
    I mean it is obvious I am a supporter of fair use and my 
name is on the bill along with Congressman Boucher and 
Congressman Doolittle so I am biased here.
    But I have a question to those of you that oppose the bill. 
If I go to Wal-Mart or Best Buy or Home Depot, almost anyplace 
that sells video and audio equipment, I can get home recorders, 
I can get CD burners, I can get blank tapes, I can get blank 
CD's. Should we outlaw those devices? Anybody think we ought to 
outlaw them? Let the record show nobody said we ought to outlaw 
them.
    Ms. Bono. Can I answer since I am opposed to the bill?
    Chairman Barton. Well if we cannot outlaw those, those can 
all be used. Those of you that oppose the concept of fair use 
those can be used to make a copy of something. And according to 
the most radical opponents of the bill, you cannot make a copy 
of anything. There is no fair use. And that just flies in the 
face of reality. It flies in the face of the marketplace. It--
you know, everybody in this country is a criminal and I just do 
not believe that. So I do not know why we cannot agree to find 
a compromise where--I do not want the folks that Ms. Blackburn 
and Ms. Bono and others supports so strongly, the creative 
people in this country, I want their copyrights protected. I 
want their creativity protected but current law codifies that 
you can make a limited number of copies of certain things for 
your own personal use. I just do not see why we cannot somehow 
find a meeting of the minds on this.
    Let me ask my friend, Mr. Shapiro, is it technologically 
possible for your industry to create and manufacture and sell 
equipment and the materials that are used in that equipment 
that would technologically allow a small number of copies but 
it would be a small number. Is that technologically possible?
    Mr. Shapiro. I will answer that of course, I just want to 
answer your first question actually but I will answer both very 
quickly.
    Chairman Barton. Well I appreciate that. It is so kind of 
you.
    Mr. Shapiro. You know what has happened in the last couple 
of weeks is emphasized the importance of 1201 because now the 
fixes that are being put up by Microsoft and things like that, 
they are actually, I believe they are violations of the Digital 
Millennium Copyright Act because you have to circumvent the 
copyright protection scheme just to basically save your 
computer. So I think if 1201 was ever important, it is much 
more important in these last 2 weeks because a lot of people's 
computers are in jeopardy. And in a sense, some companies are 
in a sense violating the law to protect people's computers. Now 
that is not the observed result that Congress intended but it 
does make 1201 more important.
    In terms of the ability of any of our 2,000 member 
companies of the Consumer Electronics Association to actually 
come up with the types of products you are talking about, there 
are technologies which I am sure can be--and products can be 
built to limit the number of copies. There are challenges 
though obviously because you could always somehow make an 
analogue copy of something and pass it along and things like 
that and there is always, you know, if you build a better 
mousetrap you do get smarter mice. I think you really have to 
rely upon the fact is distinguishing what is a commercial 
purpose from a private purpose.
    Chairman Barton. But even if it is a private purpose, I 
agree you cannot make unlimited copies. If I have for Christmas 
if I--it's not legal for me to go buy one CD and then burn it 
for all 40 of my relatives. You know, that is a private use 
but, you know, I think it is okay if I buy one and burn one for 
my home and one for my car or one for my condo in Washington 
and, you know, but I am not trying to let people under fair use 
set up a commercial operation. That is not what this bill is 
about.
    Mr. Shapiro. Under the Audio and Recording Act, Congress 
has decided that for digital audio copies at least you can make 
an unlimited number of copies off of one CD but you may not 
make any copies of those copies but actually the equipment is 
now designed and set up that way. Plus when you buy a digital 
audio home recording product, you are actually paying a royalty 
that goes to the copyright owners. You are paying for the 
hardware and that money is collected and divided among 
copyright owners. So in a sense, Congress has actually 
addressed the question about directly in the Digital Home 
Recording Act. I think the questions are coming up now because 
those that entered that deal want to look at it again and 
obviously the internet has had an impact.
    Chairman Barton. I want to ask Mr. Hirsch a question. First 
it is just a personal question. Are you any relation to a Steve 
Hirsch who went to Johns Hopkins and went to graduate school 
with me at Perdue?
    Mr. Hirsch. No, I do not believe so.
    Chairman Barton. Okay, well, he is a good guy so. I am sure 
you are good guy, too. That was not to imply that you were not.
    My question to you is your trade association, the products 
that the folks that are in your association manufacture and 
sell who gets royalties from their sale? Royalties or residuals 
or things like this?
    Mr. Hirsch. It is the people who own, the creators of the 
game, the people who own the copyright in the game.
    Chairman Barton. But if their licensed in other countries, 
the creator gets that, I mean does everybody who participates 
in the creation get a royalty or just a very few of the people?
    Mr. Hirsch. Well it is a--copyright is a collective 
enterprise in the game development business and it is generally 
the game developing company or the----
    Chairman Barton. Well for example if you have the Madden 
football game, does Mr. Madden get a royalty? Does every NFL 
player who's represented in the videogame get a royalty or does 
the creator of the software package get a royalty or do all of 
those people?
    Mr. Hirsch. Well, I mean the royalty schemes for various 
games operated differently. Obviously to some extent, to the 
extent that third party intellectual property, their 
likenesses, the trademarks, et cetera that are being 
incorporated into a game, there are royalties that are 
generally paid out to the owners of this----
    Chairman Barton. But the point I am driving at in the video 
industry, if Tom Cruise does a movie or Lucille Ball did the I 
Love Lucy Show, their contracts allow that if that is shown on 
TV or repeated or shown in the movies again, they can get some 
residual or some royalty. But in the music business if George 
Strait records a song and it is played on the radio, the 
songwriter and maybe the producer gets the royalty or the 
residual but Mr. Straight does not. He only gets when they sell 
his record or sell his CD or whatever it is he gets a one time 
payment but he does not get, it does not keep coming over and 
over again. And in your--so in your business, these fees that 
are accrued, I am just trying to figure out who gets them? Is 
it just the producer that gets them or does everybody in the 
chain get them?
    Mr. Hirsch. It is the company that created the game so that 
the employees of that company would obviously benefit to the 
extent that that company is able to recoup its investment.
    Chairman Barton. Okay. My time has expired, Mr. Chairman, 
thank you.
    Mr. Stearns. Mr. Gonzalez?
    Mr. Gonzalez. Thank you very much, Mr. Chairman.
    And let me start off I guess with an observation. We are 
talking about the anti-circumvention clause and the exception 
carved out for fair use and I do not see why we have to do 
violence to either and I know the chairman of the full 
committee would like for some sort of technological fix or 
compromise and hopefully we can do that. For you all, the 
interested parties and with vested interests to rely on us to 
come up with that, I think can be a little dangerous 
experiment. But we did recognize one thing. I think we call 
agree that when it comes to proprietary rights, it is going to 
be very difficult for someone to go out there to protect them 
by trying to sue them or enforce them, millions of times over 
because that is what we are talking about now is that 
technology has empowered individuals to collect, copy, and 
disseminate information like never before. So it is real hard 
legally to try to enforce that right in that type of 
environment.
    So my first question will go to the Professor and then the 
second question everyone for their own opinion and read on the 
thing. And I'm looking here at Mr. Band's written testimony. 
The Supreme Court explains that intellectual property system 
requires a ``balance between the interests of authors and 
inventors and the control and exploitation of the writings and 
discoveries on one hand and society's competing interests in 
the free flow of ideas, information, and commerce on the other. 
The question to the good professor is can technology by 
empowering individuals, millions and millions with the ability 
of course to copy, disseminate, store, reproduce, do all these 
things, at some point, do you just reach this particular 
juncture where fair use is rendered or let's say protecting or 
proprietary rights is rendered meaningless by fair use. That is 
going to be the question. I mean can technology move us forward 
to where you have so many individuals that are capable of 
compromising whatever this proprietary right was in the past 
that the environment is totally changed. That the law and the 
principles that underlie proprietary rights is actually going 
to be changed fundamentally. Can technology do that in this 
particular instance? I say no but I want to hear your opinion.
    And then to the rest of you and quickly of course because--
but I was given the additional time because I had no opening 
statement and I appreciate that, Mr. Chairman. What is the 
objectionable behavior we are really trying to address? I heard 
individuals today saying that you know this could impact 
artists, teachers, students, librarians, documentary 
filmmakers, but really is that the case? Now I have heard Mr. 
Shapiro and I think he said well the distinction would be 
between private and commercial use. And that sounds good and I 
am not real sure where we would go with that but that does 
sound pretty solid. But then I heard Ms. Adler say that the 
technological or tech controls do impact the practical use and 
application of fair use. So that is something else that we 
never think about. Well and maybe this is a way that we can 
protect it but by allowing that, then it does impact legitimate 
fair use. So that question goes what is the objectionable 
behavior we are really trying to address realistically and I do 
not want you all to go and use Chairman Stearns' son and his 
iPod and such. I really want to know what we are here all 
about. But first, Professor, is it Jaszi or----
    Mr. Jaszi. Jaszi, yes.
    Mr. Gonzalez. Jaszi.
    Mr. Jaszi. Thank you very much. It is a wonderful question 
and I think the answer may put me a little bit at odds with 
some of my colleagues at this table and perhaps with some of 
the members here today as well because I do not believe, in 
fact, that information environments or copyright law are 
undergoing a fundamental cataclysmic change as a result of 
changes in technology. There have, in fact, been changes in 
technology including changes in technology which have put 
greater and greater power to reproduce and to distribute into 
the hands of individuals throughout the history of information 
markets. And copyright law has not had to be remade in each of 
those cases. In fact, I think, the enforcement problem that you 
reference in your question is part of a much larger issue like 
the income tax system. The copyright system works and functions 
only on the basis of ultimate respect by consumers. No amount 
of enforcement whether it is technological or legal will ever 
make those who wish not to disobey or who choose to disregard 
copyright into law-abiding citizens. That is, I think in the 
end a hopeless project whether it is to be accomplished by 
draconian technological or by draconian legal means. The 
greatest risk as far as I can see in the current arms race that 
is taking place between copyright owners and copyright users 
around technologies and digital rights management is that 
gradually the public is losing its respect for this critical 
aspect of our legal system. And when that respect is gone, then 
no amount of enforcement and no amount of technical ingenuity 
will bring it back.
    Can I take a crack at your other question, too, because I 
think that the concern that I tried to articulate is precisely 
the concern that resides with the practices of a wide range of 
user groups who have always been able in the past to make use 
of fair use, to add value to what has gone before and to 
control new content to the commonwealth of available material. 
And I gave the example of the teacher who wants to use film 
clips in a classroom as an example of a situation in which 
traditional copyright fair use would apply but no exception is 
likely to be available under the Digital Millennium Copyright 
Act. So one can multiply those examples in terms of students, 
in terms of young musicians who are coming up and trying to 
learn their trade by imitating and copying the styles of others 
before they develop styles of their own. We can multiply those 
examples.
    I want if I can to take a certain amount of issue with Mr. 
DeLong's earlier statements that this is really all about 
markets and transaction costs. That vision of fair use really 
approximates where the courts and the academic world were 20 
years ago. And since then over the last two decades there has 
been a consistent movement in the courts and in the academic 
world toward a recognition that fair use is not simply about 
greasing the wheels of the market but about promoting cultural 
progress in all of its forms. And that is why the courts have 
moved more and more to the formativeness standard in their 
analysis of fair use issues. So I think it would be a mistake 
to think of this only in terms of anti-piracy enforcement on 
the one hand or the facilitation of markets on the other. Much 
more is at stake here. What is at stake is literally the future 
of our culture.
    Ms. Bono. Would the gentleman yield for clarification?
    Mr. Gonzalez. Sure. I have only 16 seconds but if the 
others would still attempt to answer the underlying question of 
the objectionable behavior, yes, Ms. Bono.
    Ms. Bono. Yes or no, I'm sorry to--has there ever been a 
case brought against a classroom for showing a snip of a film?
    Mr. Jaszi. I am sorry I----
    Ms. Bono. Has there ever been a case brought against a 
teacher for showing a clip of a film in a classroom?
    Mr. Jaszi. No, but there were many who bought----
    Ms. Bono. Thank you.
    Mr. Jaszi. Can I finish the answer, please? There were many 
law-abiding features----
    Ms. Bono. I'm sorry----
    Mr. Jaszi. [continuing] forego the practice because of the 
DMCA.
    Mr. Stearns. The gentleman's time has expired.
    Ms. Blackburn?
    Ms. Blackburn. Thank you, Mr. Chairman.
    I am going to see if the voice will hold out for this a 
couple of points about Chairman Barton's questions on 
equipment. No one is seeking to outlaw equipment that allows 
creators and inventors to grow in craft and bring forward an 
idea and craft a trade to create a product like a songwriter or 
a musician to create something to get it ready to move to the 
marketplace where it can be a commodity that does have an 
economic value. We also want to be sure that those that create 
that product such as individuals that Mr. Shapiro works with 
have the ability to retain the right to be paid and compensated 
for their ideas that do become tangibles and commodities and 
deserve to be paid.
    Professor Jaszi, I think if I had been one of your students 
you and I would have feisty debates. I think that when I hear 
someone use the word draconian and apply that in a 
constitutional framework that it is of concern to me. I do not 
think there is anything draconian about the constitution of 
this Nation or about the Fifth Amendment and I would, a yes or 
no will do on this, I would think that you probably agree with 
the Kelo decision if I am understanding what you are saying 
today.
    Mr. Jaszi. I am sorry, what----
    Ms. Blackburn. Do you agree with the Kelo decision from the 
Supreme Court? Are you not familiar with that decision?
    Mr. Jaszi. What? I am not hearing very well, I am afraid.
    Ms. Blackburn. Kelo, K-e-l-o.
    Mr. Jaszi. No, I am not familiar with that decision.
    Ms. Blackburn. You are not familiar with that. I would 
recommend to you and Mr. Chairman, I would like to submit for 
the record, I do not think this has been submitted, an article 
by Mr. DeLong that I actually read last night and I have got it 
on my desk pertaining to the Kelo decision. I would like to 
submit that article for the record.
    [The article follows:]

                       [Release 1.7 August 2005]

               One Degree of Separation: Kelo & H.R. 1201
                           By James V. DeLong
    Everyone knows the game Degrees of Separation, where one finds the 
connection between two seemingly distant people.
    The same game works for seemingly unrelated policy issues. For 
particular example: it takes only a single hop to get from the recent 
eminent domain case Kelo v. New London to H.R. 1201, a bill on 
intellectual property and technological protection measures (TPM) in 
the U.S. House of Representatives.
    The Fifth Amendment to the Constitution says that private property 
may be taken for public use only if just compensation is paid. The 
phrase ``public use'' has always been assumed to be a limitation, 
meaning that a state cannot take for a strictly private use, simply 
transferring property from A to B, even if it compensates A.
    In Kelo, the Supreme Court addressed the issue whether this long-
standing assumption has any real content, and its answer was ``not 
much.'' New London took Ms. Kelo's house because it wanted to transfer 
the property to a redevelopment authority, which had some grandiose 
plans for the area. This was good enough to meet the public use 
requirement, said the Court, since: ``For more than a century, our 
public use jurisprudence has wisely eschewed rigid formulas and 
intrusive scrutiny in favor of affording legislatures broad latitude in 
determining what public needs justify the use of the takings power.''
    Of course, it would be pretty hard to fail a test that requires 
nothing but some sanctimonious verbiage. As Justice Scalia said in an 
earlier case: ``Since [a harm-preventing] justification can be 
formulated in practically every case, this amounts to a test of whether 
the legislature has a stupid staff.''
    Kelo has been met by a rush of criticism from both left and right, 
most of it refreshingly Adam Smithian. The gist is that it is simply 
not a proper function of government to decide that B can make better 
use of property than A. If this happens to be true, then the free 
market provides the perfect remedy--let B buy it.
    Perhaps there is also a growing sense that the government raven for 
pork to distribute to favored constituencies is already out of control 
in spending tax money, and that giving it carte blanche to redistribute 
property in general is the road to perdition. (If this sense is not 
growing, it certainly should be.)
    But at least Ms. Kelo got paid for her property. Pending before the 
U.S. Congress at this very moment is a bill designed to take property 
from a bunch of As and give it to a bunch of Bs, only without paying a 
cent to the As. And it, too, relies on a test composed of sanctimonious 
verbiage that could be failed only by the deeply stupid.
    The bill is H.R. 1201, the Digital Media Consumers' Rights Act of 
2005, and the background is the Digital Millennium Copyright Act, which 
is section 1201 of the Copyright Act (hence the H.R. number). The DMCA 
makes it illegal to crack technological protection measures (TPM)--
commonly called encryption--used to protect copyrighted content. The 
DMCA also makes illegal the distribution of code cracking tools.
    H.R. 1201 would repeal this ban insofar as the code cracker or the 
toolsmith wanted to obtain, or help others obtain, access for purposes 
of making ``noninfringing use'' of a work.
    There are indeed lots of noninfringing uses of copyrighted works, 
most of them created by the courts under a doctrine called ``fair 
use.'' The doctrine is a grabbag--it includes such uses as excerpts for 
book reviews; some transformative uses, whereby a work forms a 
foundation for broader efforts; political commentary. There is a dash 
of transaction cost thinking--it can be fair to photocopy an article 
for educational purposes if getting permission is a long and arduous 
process.
    Because of the variety of purposes crowded into the doctrine of 
fair use, it would be is a dull code cracker indeed who could not 
attach a plausible claim of fair use to almost any work. Want to write 
a class essay on ``Images of the Mafia in American Art?'' Surely this 
commentary entitles you to get The Sopranos by hacking into the 
encryption that protects HBO. Want to compose ``Variations on a Theme 
of the Grateful Dead"? Then hack your iPod to access the raw code of 
their music.
    Note that such arguments would justify not just hacking by the nerd 
elite, but mass distribution of code-cracking tools. And, of course, 
once the tools are available, or the decrypted copies are available, 
then there is no way of controlling them. And the IP involved has then, 
for all practical purposes, been seized from all the As who used to own 
it and redistributed to all the Bs.
    No one, including the backers of H.R. 1201, is so dumb as not to 
know that this would be the effect. Their precise goal is to abolish IP 
rights in favor of some mystical commune wherein all IP is free as the 
air and creators are compensated by government. Like the New Haven 
Redevelopment Authority, they have a grandiose plan.
    Current fair use doctrines were invented in a different 
technological age. They need to be rethought to fit contemporary 
circumstances, and this is indeed happening in the marketplace. 
Consumers are making known that they want some ability to copy CDs, for 
example, and the TPM people are setting up systems that allow it, to a 
limited extent.
    Other new divisions of property rights between creators and 
consumers are being negotiated out through marketplace experimentation. 
The last thing needed is a heavy-handed legislature deciding that it 
can decree how this complex territory should be redeveloped, and then 
trampling over both property rights and market processes.
    Ms. Kelo lost in the Supreme Court, but Congress need not replicate 
the error.

    Mr. Stearns. So ordered.
    Ms. Blackburn. Thank you. And Mr. DeLong, I thank you for 
that. I thought it was very insightful and I agree one degree 
of separation between Kelo and the affront to private property 
rights there and to intellectual property rights. I think we 
have to be very, very careful how we approach this issue.
    Mr. Shapiro, you can never play poker, my friend, your face 
tells the whole story.
    Mr. Shapiro. That is what my poker mates say.
    Ms. Blackburn. Yes, I am sure. We have--your industry's 
content and tech industries have been working together for a 
long time to create products that meet consumer demand and 
desires and I wish that we could see more participation between 
you guys and some of the content producers. I would like to see 
more participation. We would like for everybody to get along 
and----
    Mr. Shapiro. Can I respond?
    Ms. Blackburn. No, you may not. But there is a lot of 
discussion around to level one which would essentially allow 
consumers to hack through the content protection in the name of 
fair use. And sir, that is very--of great concern to me. So I 
have got to question for you. As we are looking at this and 
looking to address this issue because sure everybody is 
concerned about what would be an allowed use and then what 
oversteps and becomes theft. So do you think that the method 
currently provides enough flexible options for individuals that 
want to look at in home use and do you think that we need to 
actually go in here and legalize hacking tools and theft tools? 
Do you think we need to do that?
    Mr. Shapiro. I am not sure I understand your question but I 
will answer what I think I heard. I think you asked about the 
marketplace providing solutions to some of these problems.
    Ms. Blackburn. It seems to provide a lot of options right 
now.
    Mr. Shapiro. And I think the market--if you look at Apple 
iTunes and some of the evolving--and I assume mostly you are 
talking about the audio world, music services. I think the 
marketplace is quickly----
    Ms. Blackburn. Audio and video both.
    Mr. Shapiro. I am sorry?
    Ms. Blackburn. Go ahead, I am sorry.
    Mr. Shapiro. I think the marketplace is quickly providing 
solutions. I think the music industry made a very bad mistake 
by just selling CD's and not giving consumers any options on 
them and fighting the internet. Now they have turned around, it 
is a little late but it is happening because most people want 
to do the good thing. And we have worked with the content 
community. Jack Flint and I set up the group that created the 
DVD standard which is a basic standard that by all accounts has 
worked very well. And you did say that no one is seeking to 
block equipment. That is totally not true. Indeed the RIA is 
pushing legislation which would make this Delphi-XM product 
illegal. They are trying to say you can only record for 30 
minutes continuously. That would deny me the opportunity to 
listen to this hearing on XM radio played back later. So there 
is a whole bunch of products that have been tried to make 
illegal. I could talk about Clear Play, I could talk about 
Replay. I could talk about the VCR itself. There are so many 
products which would have been thrown off the market and some 
of them were. Replay was in bankruptcy, its product does not 
exist. Its competitor TiVo does simply due to litigation. So, 
yes, the content community does want to make all these products 
illegal.
    Thank you.
    Ms. Blackburn. Okay, thank you.
    Mr. Band, if I can come to you for just a moment. In your 
testimony, you have a sentence in there as the DRM's become 
more pervasive, Congress may need to consider mechanisms for 
preserving fair use. Does NetCoalition support or oppose H.R. 
1201?
    Mr. Band. Congresswoman, NetCoalition currently does not 
have a position on that specific piece of legislation but we 
are worried about the general phenomenon of DRM and the 
possibility that it could have a chilling effect on fair use 
and other lawful uses so, you know, as the legislative process 
moves forward, you know, we may have to take a specific 
position but currently we are more concerned about the general 
pattern and we are also concerned about things like the 
broadcast flag which would be again technological mandates. We 
are concerned about the precedent that that sets for Congress 
regulating technology. You know we heard a lot about the 
marketplace but that would certainly be an instance of Congress 
fiddling with the marketplace.
    Ms. Blackburn. Okay, thank you.
    I yield back.
    Mr. Stearns. Ms. Bono--no, excuse me.
    Ms. Bono. Thanks, Mr. Chairman.
    Mr. Stearns. Mr. Ferguson, I beg your pardon, Mr. Ferguson.
    Mr. Ferguson. Let me just give you my thanks. Some of you 
are really lucky that Marsha Blackburn does not have her voice 
today. We are not but some of you are.
    Chairman Barton asked a question before about technology 
and VCR's and CD burners and whatnot and asked if we should 
make them illegal and I have not had a chance to ask him where 
he was going with that. But clearly nobody thinks we should 
make illegal devices or technologies that have a perfectly 
lawful use. It is sort of like asking somebody the question 
should we make cars illegal because they might be used as a 
getaway vehicle in a bank robbery. Well of course not, they 
have a perfectly legitimate use. We should not make them 
illegal but that does not mean that those devices do not also 
have an illegitimate use or perhaps a use which is not legal. I 
just thought that would be worth sharing.
    A couple of questions, one for Ms. Sohn, first, thank you 
all for being here today and this is a really vigorous debate 
and I am glad that we are having it. Ms. Sohn, you and perhaps 
others have kind of described this balance between the rights 
of copyright owners and the rights of consumers and how, I do 
not know if you specifically have said this but some have said 
you may subscribe to this that that balance has kind of been 
thrown out of whack a little bit. And based on that claim, 
those who are putting forth that claim have asked Congress to 
kind of correct that imbalance in favor of consumers. I do not 
see how consumers are being harmed by the current copyright 
system, by the regime that is currently in place. I mean if 
anything, current copyright regime seems to have provided 
consumers with more copyrighted works available in more formats 
at more varied price points offering greater flexibility than 
at any time in history. I mean just several years ago you could 
not go buy a $15 DVD much less get a song for 99 cents from 
iTunes. You could not get last nights episodes of The Office on 
demand for a buck. You could not download an audio book. All of 
these new offerings for consumers depend on digital rights 
management technology of one kind or another. In light of this, 
I do not know how someone can contend that DRM's adversely 
effect fair use. It seems to me that without DRM's a lot of 
this content would not even be there. Consumers would not have 
these products to make fair use of at all.
    I just want to ask you if you could perhaps talk about how, 
explain to me how gutting 1201 can possibly be to the advantage 
of the consumer when frankly it will discourage industry from 
placing a lot of these products in the stream of commerce to 
begin with.
    Ms. Sohn. Well I have to say I agreed with just about 
everything you said.
    Mr. Ferguson. Well we are making progress.
    Ms. Sohn. And we are making progress absolutely but there 
is one caveat to that. And that caveat is that the ability to 
make fair use is limited by some of those digital rights 
management tools. Now I will reiterate for about the hundredth 
time is that my organization does not oppose digital rights 
management. But the problem is to the extent that some of those 
tools diminish or limit people's fair use ability, ability to 
make fair use or products. There needs to be a very narrow 
exception for lawful uses of the circumvention rule and that 
I----
    Mr. Ferguson. How is the bill that we are talking about a 
narrow exception? I mean that is the most optimistic view of, 
you know, we are talking about--some folks are saying well this 
bill would just open the door a crack like this but it would do 
nothing to prevent the next person from kicking that door wide 
open.
    Ms. Sohn. Look, pirates do not rely on fair use, okay. I 
mean, you know, pirates will do what they do whether there is, 
you know, fair use or not or whether there is DRM or not.
    Mr. Ferguson. But that--now it seems to be----
    Ms. Sohn. What this bill does--let me--if you would not 
mind if I finished, what this bill does is allow people who 
want to make legitimate uses of digital products to do so. And 
the criminals will still be subject to all the strong 
enforcement, all the strong penalties of copyright law.
    Mr. Ferguson. I have limited time. I want to ask Mr. Band a 
question. I am going to start a new website. I am going to call 
it Snoogle. All right. And I am going to copy all of Google's 
technology and their artwork and their search results verbatim. 
I am going to make a perfect digital copy except I am going to 
change the spelling. I am going to call my site something 
completely different from Google, I am going to call it 
Snoogle. It is an educational site. Is there a problem with 
that?
    Mr. Band. Yes, that would be a trademark violation.
    Mr. Ferguson. Have you trademarked Snoogle?
    Mr. Band. No, but I think it would be likely to confuse 
consumers and then that is the touchtone issue with trademark 
law is it likely to confuse consumers. Now it is conceivable 
that you might be able to make a fair use because there is a 
fair use defense in trademark and, you know, you would be able 
to try to convince a court that that would be----
    Mr. Ferguson. It is just for me but I mean obviously I 
would not be able to keep somebody else from using it too. If 
it is just for me that would be okay, right?
    Mr. Band. No.
    Mr. Ferguson. Why, if there is a fair use, if it is just 
for my own personal use.
    Mr. Band. Well personal use--there is no--fair use in 
trademark is different from fair use in copyright.
    Mr. Ferguson. Okay.
    Mr. Band. And there again you are putting it on website.
    Mr. Ferguson. I am not a lawyer as I appreciate your 
enlightening me on it.
    Mr. Band. In any event, you are making it, you are putting 
it on a website and making it publicly available so there is a 
possibility that it would be confusing to consumers and that 
would be the issue that the court would have to look at.
    Mr. Ferguson. So it is Google's intellectual property?
    Mr. Band. That is right.
    Mr. Ferguson. That they want protected and they do not want 
to stolen.
    Mr. Band. Under trademark law that is right.
    Mr. Ferguson. Fair enough. I think my time is up.
    Mr. Stearns. The gentleman's time has expired.
    Ms. Bono?
    Ms. Bono. Thank you, Mr. Chairman.
    I have so many notes here, I appreciate it. Mr. Shapiro, 
you talked about the Delphi little handset you have there which 
I own a couple myself. But is there not in fact a paradigm of 
business that allows for the broadcast of music and that is 
different from the business model of buying music? Does the--
does it change? I am listening to broadcast satellite radio, 
digital radio whatever it is going to be and suddenly now I own 
this song. Is that perhaps a violation of two different 
agreements though that I as a songwriter for one, publisher for 
two, performer for three perhaps, are there not two different 
sets of rules that adhere to in broadcast as to a purchase of 
music?
    Mr. Shapiro. My understanding the rules governing copyright 
and broadcast are somewhat, in fact, very different than some 
of the others and there is really two types of digital 
broadcast. There is a national satellite footprint which is XM 
and Sirius----
    Ms. Bono. Right.
    Mr. Shapiro. [continuing] in competition with each other 
and then there is the local emerging one called HD Radio but 
both are very, very threatened by the proposals before Congress 
now.
    Ms. Bono. Well they are threatened but there is also some 
sort of confusion again as the copyright holder not a performer 
but if I were--and something that Chairman Barton was talking 
about was performance royalties and there is a difference 
between performance mechanicals, songwriters. There is a whole 
bunch of different sets. The music business is so very 
complicated. But you are changing simply by recording that 
music from a broadcast right to purchase rights. And there is 
some sort of confusion with that No. 1. But also you are 
concerned your sole concern when you just spoke was the sale of 
these gizmos. It is not the sale of--you are not talking about 
protecting the guy. You are upset because gee we might not be 
able to market all of these great devices that are going to 
come to market based upon exploiting intellectual property.
    Mr. Shapiro. Well Congressman Ferguson talked about all 
this tremendous growth of intellectual property and creativity. 
I kept thinking it is all created by technology and that is 
what allows it. And in a sense they are mutually dependent 
industries they----
    Mr. Ferguson. What----
    Mr. Shapiro. Would the gentleman yield? All the creative 
new intellectual property has been created by technology? It 
has allowed it to occur. What I am saying is that they are 
symbiotic industries. This great growth in technology has 
allowed a renaissance in creativity which has gone a little bit 
less corporate in more individuals so every American and 
everyone in the world is a creator. It is phenomenal. And that 
is what the----
    Ms. Bono. That is the point. Reclaiming my time.
    Mr. Shapiro. I am sorry.
    Ms. Bono. It is--no, please do not apologize. It is great 
ideas. I do not care whether you are creating technology or you 
are creating music or movies or a book, it is great ideas that 
we are all trying to protect. You are also trying to protect 
the sale of hardware based upon the great ideas and that I 
think is my colleague's point as well. Also the Chairman 
mentioned earlier iPods and he was trying to explain to me or 
staff was that technologically I was wrong about iPod to iPod. 
I said iPod to iPod via a PC or some sort of central 
dissemination point which is true. Not only that now you can go 
into BMW, BMW is now marketing a spot for your iPod so nobody, 
I do not know a single copyright holder, I do not know a single 
songwriter, single author who is saying I do not want people to 
enjoy my work. I do not want you to enjoy it in your house, in 
your car, in your kitchen, on the airplane ride here. I do not 
know a single person who has said that. And I a little bit take 
offense to Ms. Sohn saying that we are calling our constituents 
thieves and pirates because we are not saying that at all.
    You know, but my biggest question and I would like to go 
right down the row yes or no if we can. Is it imperative that 
we pass this this year or can we give this a year or two to 
work out and let the market work its place. I will preface that 
by saying Mr. Shapiro said is it is imperative now because of 2 
weeks in light of what Sony did. Sony has a patch out there. 
They have done a mia copa, we all have it, we have all seen it. 
There is a patch out there to put that genie back in the 
bottle. So under you know, sort of removing that argument 
because of Sony, do we have to do this now? Can the market 
continue to evolve into answering some of these solutions for 
us? So if we could start with the Professor and yes or no can 
we give it a year or two to look at this and work at it a 
little bit more?
    Mr. Jaszi. My answer would be that if possible that 
legislation should be enacted now.
    Ms. Bono. Okay, thank you.
    Mr. Jaszi. We have had 7 years----
    Ms. Bono. Okay, if we can do it--I am sorry but a yes or no 
down the row would be great.
    Mr. Shapiro. It is never too early to do the right thing.
    Ms. Adler. I would echo the previous two, the answer is 
yes. Thank you.
    Mr. Band. As I said before, NetCoalition does not have a 
position on 1201 but if we are taking more time on 1201, we 
definitely should take more time on the broadcast flag and 
other digital rights mandates.
    Ms. Sohn. Yes, we should pass 1201 and we should let the 
market work.
    Mr. DeLong. 1201 would not only legitimize the idea of fair 
use it would----
    Ms. Bono. Yes or no, I'm sorry. I made the guys I am 
opposing say yes or no so I----
    Mr. DeLong. You should give it another century.
    Mr. Hirsch. We agree. We think that you should let the 
marketplace work this out.
    Mr. Aiken. The Authors Guild has no position on this.
    Ms. Bono. All right, so obviously as one would expect with 
a--yes, 5 to 2, well gee did it start out that way? We will not 
mention that. But again, I--my last question is for Ms. Adler.
    How do you preserve books? Why--I think that there is 
really in your argument to me there is a huge underlying issue 
of the tangible versus non-tangible. How do you--does a 
publisher give you a second copy of a book or if somebody 
destroys a book is the publisher--do they have to give you 
another book for free?
    Ms. Adler. No. The item that is in our collection is what 
we work with. And we preserve tangible items under very 
different circumstances. There is Section 108 of the copyright 
allows us under certain circumstances to preserve books and 
different formats under different circumstances. And sometimes 
we look to fair use to preserve as well if there are 
circumstances under 108 that do not help us preserve those 
items. But in the case of books where the Copyright Act 
explicitly gives us that privilege, if you are asking how do we 
physically go about it, there are a number of techniques that 
we undertake related to preservation. Many books printed early 
in the century were printed on acidic paper and they are 
deteriorating very quickly.
    Ms. Bono. Okay. But that is also public domain anyway by 
now. Correct?
    Ms. Adler. Not necessarily, some are, some are not. And 
what we are trying to do, there is in fact a program that the 
National Endowment for the Humanity supports called the Brittle 
Books Initiative which is now focused on both books microform 
and digital as a way of preserving these cultural resources in 
our libraries for future generations of users.
    Ms. Bono. So does that--but does that involve the whole 
copy of that copy where the artist----
    Ms. Adler. Yes.
    Ms. Bono. [continuing] does not receive anything?
    Ms. Adler. Yes, because the library has purchased that 
information resource previously. And we have legitimately 
purchased it tangibly and have the rights to do that under the 
Copyright Act.
    Ms. Bono. But if you had to buy a new book, would you ask 
the author to exempt that purchase from his right to earn money 
off of that new book, if you were to buy a second copy?
    Ms. Adler. We often do buy second copies in libraries.
    Ms. Bono. And do you pay the author for that work, the 
second copy?
    Ms. Adler. Usually we are not buying through--from authors 
directly in libraries, we are buying through large publishing 
companies then those royalties will go through the publishing 
companies back to the author.
    Ms. Bono. So you do not ask for some sort of exemption 
because you have already bought the intellectual property 
portion of it once before. Correct?
    Ms. Adler. We have not--we have bought the book, we have 
not bought the intellectual property that the author may have. 
We have certain exemptions to use it legitimately through the 
Copyright Act.
    Ms. Bono. Thank you. Mr. Chairman, I see that my times has 
expired. Thank you.
    Mr. Stearns. The gentlelady's time expired.
    We have the author of the bill who is not a member of the 
subcommittee but a member of the full committee and we are 
going to allow Mr. Boucher to ask questions. Mr. Boucher?
    Mr. Boucher. Well Mr. Chairman, thank you very much for 
recognizing me even though not a member of the subcommittee and 
I also want to thank you and Chairman Barton for scheduling 
this hearing to examine the importance of fair use to all 
people in our society. I want to say a particular word of 
thanks to the witnesses for taking their time with us this 
morning and particularly thank those who in the course of their 
comments have mentioned the need to enact H.R. 1201.
    H.R. 1201 really proceeds from a fairly straightforward 
assumption and that is when people purchase digital media, they 
should be able to use that media for lawful purposes and 
technical protection measures should not be put in their way as 
long as the purpose for which they intend to use the CD or the 
DVD or other media they purchased is entirely lawful and would 
not in any way violate the copyright law.
    I was particularly taken by the comments of Ms. Sohn during 
her testimony in which she outlined a number of instances in 
which people who purchase media would need to be able to bypass 
a technical protection measure to use that media fully and to 
completely enjoy the rights that should go to the purchaser of 
that product any time that media is bought. Do you happen to 
have that list with you again? I would like for you just to 
emphasize that both for the record and to the members of the 
subcommittee if you happen to have it handy.
    Ms. Sohn. Absolutely, and I would also include Professor 
Jaszi's example that teachers try to use excerpts of DVD's and 
cannot do that without violating the DMCA. But let me repeat 
the list. A consumer cannot rip songs from copy protected CD's 
to their personal computers or iPods. A consumer cannot make a 
digital copy of a DVD for playing back on their video iPods, 
cell phone, or other portable device. A consumer cannot make a 
backup copy of a copy protected CD or DVD. A consumer cannot 
play legally downloaded music on a competing mp3 player or 
computer so if you, you know, buy iTunes, you cannot play it on 
a Real Player and vice versa. And finally, a consumer cannot 
remove from a computer malicious digital rights management 
tools which may have spyware in them like the now infamous Sony 
BMG root kit DRM. So that is just, I think that is just six or 
seven but there are a lot more which I would be happy to 
provide if the subcommittee would so want.
    Mr. Boucher. Well thank you very much, Ms. Sohn. I think 
those are good and graphic examples of why the technological 
protection measure provisions of Section 1201 stand in the way 
of the ability of digital media purchasers to use the media in 
lawful forms in a manner that enhances their enjoyment in the 
work and therefore the value in the work itself.
    Let me get members of the panel to respond to what is 
typically the argument raised in opposition to H.R. 1201 and 
that is that somehow if 1201 is adopted and technical 
protection measures can be bypassed for lawful purposes, that 
this change in the law rebalancing as I think it is the rights 
between the owner of the content and the user of the content 
would somehow encourage piracy. I mean this is the argument 
that we hear that allowing bypass for a lawful use would 
therefore encourage people to bypass for unlawful uses. Who 
would like to respond to that argument? Mr. Shapiro?
    Mr. Shapiro. I can only respond by saying I have no clue 
the connection with piracy, it just does not exist. But I do 
want to add one to Gigi's list which is my personal favorite 
and one of the reasons I do this with such passion is that when 
you are watching a movie, a DVD, to fast forward through the 
ads for the upcoming movies is something you should be able to 
do. And that is something we hear from a lot of frustrated 
consumers who buy DVD players and they want to know why they 
cannot.
    Mr. Boucher. All right, thank you.
    Mr. Band?
    Mr. Band. Even though NetCoalition does not have a specific 
position on H.R. 1201, I just wanted to note that before we 
heard about CSS which is the encryption system on DVD's and we 
heard about the huge market for DVD's which I think someone 
said was about a $25 billion market now, it turns out that 
there is an easy way to get around CSS. It is called DECSS, and 
it is widely available on the internet. If you were to do a 
Google search, you would probably find, you know, 300,000 sites 
on the internet where DECSS can be downloaded not withstanding 
the fact that it is widely available, you still have this $25 
billion market. So I think the point is is that most people 
want to follow the law and even though there are--there is a 
way to break the law using DECSS to circumvent the DVD's for 
unlawful purposes, most people choose not to do that.
    Mr. Boucher. Well let me simply underscore that H.R. 1201 
clearly says that the only time a person may bypass technical 
protection is if they are doing so for a lawful purpose, for 
example exercising a lawfully protected fair use right. If a 
person is bypassing for an unlawful purpose in order to commit 
piracy of the work, that person is just as guilty under H.R. 
1201 as he would be under current law. And that being the case, 
I really do not see any validity at all to the argument that if 
1201 is adopted it would encourage piracy. The act of piracy 
would remain just as unlawful under this bill as it currently 
is.
    The gentleman who raised his hand, I am so far away I 
cannot see your sign.
    Mr. Hirsch. Rick Hirsch with the Entertainment Software 
Association.
    Mr. Boucher. Yes.
    Mr. Hirsch. My job at ESA, among many things, is I am 
responsible for our enforcement programs with respect to piracy 
of game product. And, you know, one of the consequences of 
permitting, I thought the exercise that Chairman Stearns 
engaged in with the Professor at the beginning was very 
interesting because we kept moving the line along in terms of 
the many different copies that could be made. At what point 
would something cross over the line from fair use into non-
authorized use that is not fair. Part of the problem here from 
an enforcement standpoint is that permitting circumvention of 
access controls for certain purposes albeit legitimate 
threatens to open the flood gates to piracy and it is not that 
every consumer is a pirate, it is just from an enforcement 
standpoint we cannot be in everybody's homes to determine 
whether--what purpose they are putting these uses to. And the 
way we deal with that, and believe me we are--our industry is a 
real confluence of technology companies and software and 
content companies so we seek to address that through the use of 
technology to promote the uses that the game community is 
seeking.
    Mr. Boucher. Well I appreciate your comment and my time has 
expired.
    Let me simply say that it is hard for me to imagine that if 
the law is on the books in very clear form saying that to 
bypass for an illegal purpose is illegal, that somehow adopting 
that law allowing bypass for legal purposes would in any way 
encourage the illegal use.
    Mr. Chairman, I thank you again for having the hearing and 
permitting me to ask questions. And I thank the witnesses for 
their participation.
    Mr. Stearns. I thank the gentleman.
    We are now out of time with--there is no one else that 
seeks any further recognitions or questioning. We want to thank 
your forbearance in all the members. I would just note that a 
parting comment that I have as chairman that if we had a 
unified DRM system that was clear and conspicuous for 
consumers, it is a possibility that some of this could be 
resolved and in all deference to the chairman so I would say to 
industry that sometimes if you do not want legislation, just 
work together to get this unified DRM system that all consumers 
can understand.
    With that, the subcommittee is adjourned.
    [Whereupon, at 12:20 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
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                                                  November 22, 2005
The Honorable Cliff Stearns
Chairman
Subcommittee on Commerce, Trade and Consumer Protection
Committee on Energy and Commerce
United States House of Representatives
Washington, D.C. 20515-6115
    Dear Mr. Chairman: Thank you for giving me the opportunity to 
appear last week at the hearing on the effect of fair use on consumers 
and industry. In my prepared testimony, I promised to transmit the 
Documentary Filmmakers' Statement on Best Practices in Fair Use after 
it was released on November 18. Please find copies attached to this 
letter for the members of the Subcommittee. In addition, I have 
transmitted an electronic copy to Mr. Billy Harvard.
    Owing to the acoustics in the room, I did not hear the name of the 
case when Representative Blackburn questioned me. Having reviewed the 
webcast and of course recognized the Supreme Court precedent about 
which she asked, I would like to take this opportunity to respond 
substantively to her.As you know from my testimony, I favor the 
preservation of copyright fair use through HR 1201, the Digital Media 
Consumers' Rights Act. But it does not follow that I also endorse the 
majority's position in Kelo v. City of New London, 125 S. Ct. 2655 
(2005).
    In my view, there is no simply reason to suppose that there should 
be a correlation between advocacy for American citizen's fair use 
rights and support for governmental takings of private land.The two 
legal disciplines, throughout history, have been unrelated, and real 
property jurisprudence has never been viewed as precedent for copyright 
(or vice versa). Thus, it is no surprise that experts in the copyright 
legal community have not given much consideration or credence to 
suggestions of any impact of Kelo on copyright.
    In any event, organizations such as the American Conservative 
Union, which have been highly critical of Kelo as an invasion of 
property rights, also have endorsed the approach of HR 1201 as one well 
calculated to safeguard the person freedoms of American citizens.There 
is no contradiction here. This is because real property and 
``intellectual property'' are entirely distinct in their origins, their 
goals, and their subject-matter. Contrary to the suggestions of Mr. 
DeLong of PFF at the hearing, tangible property and intellectual 
property are as fundamentally distinct not just as apples and oranges, 
but as potatoes and poetry.
    Copyright is a newcomer to the field of property rights, invented 
by legislatures and courts over the last few centuries to serve the 
goal of encouraging creativity in society.By striking contrast, the 
ancient institutions of real property are grounded in the physical 
reality of scarcity and the ethical concept of stewardship. Because 
land is finite in amount and subject to overuse, Anglo-American law 
always has assigned rights in particular parcels to individuals (the 
King, a grantee or a purchaser of title) in order to assure that the 
resource is maintained. Intangible words, music and images are neither 
naturally scarce nor vulnerable to waste. In fact, the real value of 
information actually grows when it is shared. As Jefferson put it, 
mental productions are like a candle flame: ``He who receives an idea 
from me, receives instruction himself without lessening mine; as he who 
lites his taper at mine, receives light without darkening me.''
    Thus, copyright assigns private property rights in only some 
intangible mental productions, and then only to the limited extent 
judged necessary to provide incentives for creators. This conservative 
approach is made manifest in the U.S. Constitution, which, by its terms 
authorizes Congress to provide intellectual protection only for a 
``limited term". (Rights in real property, by contrast, last forever.) 
Moreover, Congress is authorized to provide no more protection than is 
necessary to fulfill the goal of ``promoting Science and the Useful 
Arts."
    The bundle of rights that Congress has given copyright owners, as 
embodied in section 106 of the Copyright Act, is partial and incomplete 
when compared with the authority enjoyed by landowners. Moreover, even 
the finite rights that the Copyright Act gave content owners are 
further limited by the affirmative rights that following sections give 
to consumers and citizens. These include, of course, the right to make 
``fair use'' of a copyrighted work that was the subject of last week's 
hearing. Section 106 of the Copyright Act begins by noting that all of 
the listed rights of a copyright owner are ``Subject to sections 107 
through 122,'' i.e., the explicit limitations and exceptions to those 
rights as enacted by Congress. Likewise, section 107, which codifies 
fair use, is characterized as imposing ``Limitations on exclusive 
rights'' of copyright owners. Thus, fair use is not a ``taking'' of 
rights of a copyright owner. Rather, Section 107 clarifies that a 
copyright owner does not have any right to preclude, control, or 
license fair uses. To put it simply, if the right has not been granted 
to the copyright owner, then fair use remains the right of our 
citizens.
    H.R. 1201 does not create a new fair use right and it doesn't put 
Congress in the position of deciding now what constitutes fair use. 
That has been and will remain a decision for judges to make.The bill 
only assures that American citizens will be able to continue to make 
the same kinds of educational, personal and artistic uses of existing 
material that have been permitted for at least the last 165 years. H.R. 
1201 preserves the freedom of ordinary consumers to use technology and 
digital content they lawfully have acquired. It is only fair they enjoy 
this freedom, especially because its exercise in no way diminishes the 
commercial value of a Hollywood movie or an RIAA member's music on a 
CD.
    Finally, contrary to Mr. Aitken's assertion at last week's hearing, 
the ``public domain'' is not a byproduct of copyright but the natural 
state of affairs that copyright has partially displaced. If anyone has 
standing to complain (metaphorically) about government ``takings'' of 
rights to art, literature, and music, it is members of the public, who 
have seen use rights such as ``fair use'' diminished by recent 
legislation (including the anti-circumvention provisions of the Digital 
Millennium Copyright Act).By introducing H.R. 1201, Representatives 
Boucher, Doolittle and Barton have taken an important step to restore 
these culturally vital public entitlements.
    Thank you again for providing me with the opportunity to 
participate in the hearing.
            Sincerely yours,
                Peter Jaszi, Professor of Law and Director,
                 Glushko-Samuelson Intellectual Property Law Clinic
cc: Ranking Member Schakowsky
   Representative Blackburn
              Prepared Statement of Sun Microsystems, Inc.
    Thank you for the opportunity to submit our views for the record. 
Sun Microsystems is an industry leader in the development of highly 
scalable, highly reliable network systems and services. Our 
technologies power the world's most important markets. Sun's philosophy 
of sharing innovation and building communities is at the forefront of 
the next wave of computing: the Participation Age.
    Central to Sun's success has been our commitment to fostering the 
Internet as a place of innovation, creation, and communication. It is 
our belief that industry and government should each do their best to 
keep it that way.
    Twenty years ago the Court ruled in the Sony Betamax decision that 
devices capable of substantial non-infringing uses were legal, even if 
such devices could be used in copyright violations. As Justice Breyer 
wrote in a concurring opinion in the Grokster case, ``There may be 
other now unforeseen non-infringing uses that develop for peer-to-peer 
software, just as the home-video rental industry (unmentioned in Sony) 
developed for the VCR.'' His point--stopping technologies when they are 
young and evolving could kill off great promise and benefits that lie 
down the road. That is why the Court specifically focused on bad 
behavior while leaving the old Sony standard alone. Exactly right--
don't constrain the technology; constrain bad actors.
    Innovation has flourished, and this country has reaped the rewards, 
because Internet technologies enable the rapid, widespread, and often 
anonymous flow of information. Combine that free flow with advances in 
digital media--photography, video, music--and you have an amazing 
opportunity for wide-scale experimentation and creative expression.
    Just think: Two decades ago, home computers brought us a revolution 
called desktop publishing. Now home users have the tools to create 
professional-quality movies and music--and a way to share them with 
others. This has opened up new markets and new revenue streams for 
content owners and software developers among others. It has also helped 
us continue the march forward into new realms of expression--artistic, 
political, academic, and personal. Much of this progress owes its 
existence to fair use.
    Lately, though, the Internet has become a place of conflict and 
contention. Why? Because people are worried about what happens to 
content that carries a copyright. If it is easy to copy and transmit, 
how can we make sure artists are compensated, as they should be, for 
their creative work?
    Just as important, how can we do so without quashing 
experimentation and innovation?
    Artists should be compensated. There is no question about that. But 
in our rush to defend their rights, we should not overrlook the second 
question. We believe public policy should encourage innovation and 
free-speech. It should, as always, seek to balance the rights of 
individuals with the greatest public good. As Justice Breyer noted, 
``copyright's basic objective is creation and its revenue objectives 
but a means to that end.'' (That is why, for instance, copyright 
protection does not last forever. More is gained in the long run from 
sharing.)
    One of the great values of the Internet is that it has become a 
forum for borrowing, mixing, developing, and tinkering. After all, in 
both science and art, innovators build on each other's work. In the 
words of director Martin Scorsese, ``The greater truth is that 
everything--every painting, every movie, every play, every song--comes 
out of something that precedes it . . . It's endlessly old and 
endlessly new at the same time.'' We must not make the mistake of 
entrenching the endlessly old at the expense of the endlessly new.
    So the developing discipline of digital rights management, or DRM, 
needs to respect experimental, standing-on-the-shoulders-of-giants 
aspects of the Internet. DRM technology should be designed to respect 
legitimate needs and current rights of honest users (including backups, 
format changes, excerpting, and so on).
    While the Internet certainly makes managing the rights for movies 
and music more complex, we believe that it is sounder economic and 
social policy to foster the architectural, business, political, and 
public freedoms that have enabled the Internet to be a place of 
innovation than it is to overly restrict the flow of digital 
information in an effort to meticulously account for every instance of 
the use of content.
    What's more, the free flow of information is fundamental to 
democracy. In the shift to new forms of media and communication, 
neither technology nor law should limit the public's rightful access to 
information. Again, if we can go back to the intellectual well one more 
time, Justice Breyer rightly acknowledged that ``the copyright laws are 
not intended to discourage or to control the emergence of new 
technologies, including (perhaps especially) those that help 
disseminate information and ideas more broadly or more efficiently.'' 
Very true. So where do we go from here? We think there is a broad set 
of solutions in which the rights of content creators can be balanced 
with the common public interest in order to foster vibrant innovation. 
To that end, we would like to propose the following principles of 
digital rights management:

 Innovation flourishes through openness--open standards, reference 
        architectures, and implementations.
 All creators are users and many users are creators.
 Content creators and holders of copyright should be compensated.
 Respect for users' privacy is essential.
 Code (both laws and technology) should encourage innovation.
    Fair use is an important value in American jurisprudence. We want 
to encourage such usage, for academic purposes, for criticism, for 
parody --- and for uses we have not yet even considered. Yet in a 
technical world that enables perfect digital copies, fair use can 
terrify content owners. So there will need to be a balance struck: one 
that enables fair use, but also enables ways of determining who has 
abused the system.
    Some content owners are pressing for DRM systems that would fully 
control the users' access to content, systems with user tracking that 
limit access to copyrighted material. We instead prefer an 
``optimistic'' model whose fundamental credo is `trust the customer.' 
Excessive limitation not only restricts consumer rights but also 
potential, as such solutions strongly interfere with the creation of 
future works and fair use of copyrighted content.
    In an ideal world, solutions should encourage information flow, 
including the capability for creating future works. Certainly there 
will always be ``leakage'' and illegal behavior. Where that occurs 
there should be diligent enforcement of owners' legitimate rights. BUT, 
we think it is better that solutions provide auditing and accounting 
paths that, while respecting privacy of honest users, also permit 
copying, manipulation, and playback.
    Systems that encourage the user to play with digital material, to 
experiment, to build and create, will be a win for consumers, for 
technology developers, and for content producers. The Supreme Court has 
spoken to these issues on various occasions and it did so with 
restraint most recently in the Grokster case. Now it is up to 
technologists, artists, developers, users, and rightsholders to move 
ahead in a balanced and forward-looking manner. If we do, it will be a 
win for the Internet and for society.

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