focused on the issue when it passed the 1976 revision. Secondly it is certainly appropriate for Congress to grant broad exemption under the copyright law to certain classes of users of copyrighted material. The copyright law already contains provisions for compulsory licenses and outright exemptions for persons who otherwise would be considered infringers. We have had a compulsary license for making records of copyrighted music for over 70 years, first in Section 1(e) of the 1909 law and now in Section 115 of the new law. Congress established a fee of 2 cents under the old law and 2-3/4 cents under the new law. Section 111 has a compulsary license provision for cable systems. Section 118 provides a special procedure for public broadcasting entities using certain types of literary works. More to the point, the statute has specific exemptions for certain kinds of uses which would otherwise be considered an infringement. Section 110 begins broadly that "notwithstanding the provisions of section 106 the following are not infringements of copyright:" Then follows outright exemptions for educational uses of certain works, religious uses, uses for charitable solicitation, uses in non-profit agricultural or horticultural fairs, uses directed to blind or handicapped persons and so on. Even though the uses would otherwise violate Section 106 rights, Congress determined that the uses specified in Section 110 should be permitted. Congress also specified other uses that would not lead to liability. In Section 504 (c)(2) Congress established certain minimum and maximum levels for statutory damages. For innocent infringers those who did not know their acts were infringements - the limits were $10,000 maximum to $100 minimum for all infringements of one work. But employees of libraries, schools or archives who made photocopies, thinking that it would be considered fair use but who were later found to be infringers are exempt from even the $100 minimum. (Since no profits are involved and it is difficult to determine actual damages, presumably such persons are totally exempt from any damage award). Thus there already exists in the statute precisely the type of exemption contemplated by S.1758. Reasons for the Proposed Bill As for the wisdom or desirability of the bill, I believe it is an entirely reasonable response to the new technology. In some ways it fits precisely within the already existing exemption in Section 110(5) which exempts any "communication of a transmission embodying a performance or display of a work by the public reception of the transmission on a single receiving apparatus of a kind commonly used in private homes..." In other words the reception of the TV signal is not a performance of the work, nor should a single recording of it for private home use. I think it is undesirable for the Ninth Circuit decision to stand for two related reasons: (1) ultimately the courts must invade the privacy of the home to determine what uses are being made by a consumer; (2) the measure of damages currently in force ment. Privacy: The Ninth Circuit decision finds that the recording of a copyrighted work by a videotape recorder is an infringeUnlike the situation where a person buys a cassette of a film in a store and pays a royalty on the purchase, the decision requires a consumer to pay for what he does at home. No matter how ingenious a remedy can be worked out, it is still necessary to determine what programs a consumer records to allocate damages or royalties. This is an entirely undesirable extention of government intrusion into the home even for the best of reasons. Remedy: The existing law simply cannot cope with the remedy now required after the Ninth Circuit decision. In theory each consumer must pay a minimum of $100 for each act of recording of each copyrighted show under Section 504 (c)(2). Or Sony must pay that amount on their behalf and charge consumers additional amounts to cover that cost. Obviously that is an absurd measure. But the law has nothing else available to it. To say the courts may fashion a remedy is no answer. The courts can only fashion a remedy within existing law which has the $100 minimum per act of infringement. Congress must step into the situation one way or another. Either it must reject the decision or give a court other alternate damage remedies to cover this unusual situation. But it cannot stand idly by. Senator DECONCINI. IS Senator Denton here? Senator D'AMATO. I do not believe he is. He is on the Floor. Senator DECONCINI. Our next panel of witnesses consists of Mr. Jack Wayman, senior vice president of Consumer Electronic Group; Mr. Joseph Lagore, president of Sony Consumer Products Co.; and Mr. Julius Kretzer, who will be introduced by Senator Denton. Also, I have a statement from Senator Heflin welcoming you here, Mr. Kretzer. Mr. Wayman is accompanied by Mr. Day. Is that correct? Senator DECONCINI. Very good. Mr. Wayman, would you please proceed? Mr. WAYMAN. If we may, could we have Mr. Lagore go first? Senator DECONCINI. Surely. Mr. Lagore, please go right ahead. STATEMENT OF JOSEPH LAGORE, PRESIDENT, SONY CONSUMER PRODUCTS CO., ACCOMPANIED BY DEAN DUNLAVEY, COUNSEL; IRA GOMBERG, GENERAL COUNSEL; AND WILLIAM BAKER, VICE PRESIDENT, COMMUNICATIONS Mr. LAGORE. Mr. Chairman, my name is Joseph Lagore, president of Sony Consumer Products Co., a division of Sony Corp. of America. I have been in the consumer electronics industry for more than 20 years, and for the past several years I have been responsible for marketing the Sony Betamax machine as well as other Sony products. With me today is Mr. Dean Dunlavey, an attorney with Gibson, Dunn, Crutcher of Los Angeles. Also with me are Ira Gomberg, our general counsel, and Mr. William Baker, our vice president of communications. Sony is very pleased to have this chance to testify here before this committee. The proposed legislation you are considering is, in our opinion, of great importance. It is important not only to our industry, but it is also very important, we believe, to consumers, small businessmen across the country, and to many others who benefit either directly or indirectly from the availability of this technology. Additionally, the controversy that provides the basis for this proposed legislation raises questions affecting the privacy of all citizens of this country. Our paramount concerns are these: One, the court ruling intrudes on the privacy of the American citizen in his own home. The hundreds of editorials, columns, cartoons, and other media comment supportive of the consumer's position in this matter have focused on this important aspect. This book beside me has that information [indicating book]. Two, what we are talking about here is videotaping for private, noncommercial use of programing broadcast over public airwaves. There are more than 1,000 publicly licensed television stations in existence today, and in excess of 1,500 more are planned for the immediate future. These stations provide literally millions of hours of programing, offering consumers a very wide choice. Under Federal law, these stations are required to serve the public interest, convenience, and necessity, and their broadcasts are for the use of the general public. Why should consumers be forced to watch what is broadcast over public airwaves only at the time networks or the creators of these programs deem fit? Why should those who work during the day or during prime time be denied the opportunity to tape a program for viewing at another time? Surveys show that the majority of the people who own a Betamax use it primarily for this time shift capability. Three, we should not lose sight of the fact that many copyright holders, including sports, educational, religious, and entertainment producers, are all on record in court documents that they have no objection to consumers privately recording their presentations for home use. Indeed, aside from Universal and Walt Disney, no one else in the entire movie industry has been concerned enough to bring suit, complain to Sony, or identify themselves with the suit that resulted in this court ruling, and Disney Productions has now dropped a subsequent suit against all other VCR manufacturers and distributors, a suit currently being pursued by Universal alone. Four, we are talking about a product that contributes an estimated $3 billion annually to the American economy, and this figure is growing. It allows viewers to record educational, informational, and religious programs. With the addition of a portable camera, it enables consumers to make home movies. In short, it enriches the quality of life of millions of Americans. Sony's tape plant in Alabama employs 1,800 of the 6,000 men and women who work for our company in America. They make a significant percentage of the 25 to 30 million videotapes sold in the United States each year. But other companies are also involved in tape manufacturing, and if this industry were curtailed the job losses could be significant. Five, allowing the current legal ruling to stand without needed clarification means that consumers who own or use VCR equipment are considered as law breakers and could conceivably be subjected to recall of their machines. While Universal in its public statements has expressed no interest in harassing consumers, in the courts it has demanded an injunction against further sales of new machines and even asked for a recall of all the machines already sold to consumers. Consider the job implications for dealers, shippers, sales personnel, and many others if the court grants these demands. Six, to ban this equipment would surely have a dangerously negative impact on technological innovation and development in this country. Traditionally, when a product is banned or restricted in its use, it is because it has been found harmful to the user. In the present case, no harm of any kind has been demonstrated to consumers or to any other industry, only benefits. Sony has pioneered in this field since it created the first home videotape recorder in 1965. Through 1971, when we introduced the U-matic video recorder, up to the present Betamax format, which was introduced in 1975, our capital investment in R. & D. has been considerable. So has that of the many other companies now in the field. From the first, our technology has been well received and very much utilized by the entertainment industry. Some say it has revo |