turn to the narrower perspective of the partisans. It seems to me that the narrower interests here are rather evenly balanced. The three principal copyright industries wish to see the law adjusted so that they can continue to enjoy the benefits of exclusive rights in markets which have been newly created by shifting and emerging technology. These are reasonable, appropriate positions for these industries to take. Then there are the countervailing interests of small business-owners who, relying on the public domain, have established businesses and have begun to enjoy some success doing something which no one in the copyright industries themselves apparently thought worthwhile in the past. Again, what these shop owners have done is not illegal, it is not immoral, and it does not deprive the copyright proprietors of something which was theirs. These small business-people are doing exactly what they are entitled and expected to do under copyright theory: making use of the public domain and advancing the public benefit. Consumers, meanwhile, benefitting generally from wider access to the subject matter of copyright, also wish in particular for the best price in the marketplace. All of these positions have some appeal; a compromise among them would seem appropriate. And yet the bills as drafted and introduced clearly contain little if anything in the way of a compromise. Industry spokesmen in these hearings have promised that they do not intend to gouge consumers or squeeze out the independent retail entrepreneurs if the legislation passes; but it is clear that they would have the power to do so bring the rental business to a halt if the bills pass - that they could and given the even balance among the positions of the narties I frankly cannot see why the industries should have that power. misgivings One classic compromise in copyright law, of course, is the compulsory license. You may remember, Congressman Kastenmeier, that when you asked me last summer for my general views on the compulsory license I said I had that I thought the compulsory license could become an excuse for avoiding hard decisions about copyright law while investing in solutions that would really satisfy no one but would offer a spurious appearance of fairness. My views on that subject remain generally the same. But there are cases in which a useful argument can be made for a compulsory license as a compromise, and I think it has been made and introduced in the form of an amendment to S. 32, the audio first sale bill. In effect, the compulsory license here would amount to an acceptable form of licensing at the source for home taping in some circumstances. In my opinion, it should be made absolutely clear that this license does not presuppose the general illegality of unlicensed home taping (or more generally, of unlicensed private duplication for personal use). I think it also should be made clear that this legislation operates prospectively; and perhaps it should be made clear as well that the bill would not affect non-commercial lending libraries and other institutions of that sort. With these amendments and clarifications, I think the audio first sale bill could be enacted without undue jeopardy to any interest from any perspective. The more difficult question, I think, is whether amendments and clarifications of that kind, if added to H.R. 1029 or S. 33, would then make that bill acceptable. I am inclined to think that they would. Indeed I think it would be a useful experiment to see what changes in the general shape of the motion picture industry might follow if, like the music industry, it were made the subject of a compulsory license with respect to some of its titles. Carefully drafted and explained, that kind of license might be incorporated into the video first sale bill. But I would suggest, Mr. Chairman, that this bill would then so closely resemble other home video taping bills now pending that it would be unwise to proceed without taking into account the broader spectrum of issues presented in those other bills. My conclusion, therefore, would be that the video first sale bill ought to await passage until it can be incorporated into whatever response Congress ultimately may make to the home video taping question at large. Thank you, Mr. Chairman, for listening to my comments. I am grateful for the chance to appear and I will be more than glad to answer questions on anything I have said. Mr. KASTENMEIER. Thank you very much, Professor Lange. Of course, to state that a bill is not necessarily dangerous is not a recommendation for its passage. Mr. LANGE. No, it is not. Mr. KASTENMEIER. You seem to think that the bills might be acceptable if they included a compulsory license. You probably know there are many who find the compulsory license very, very difficult to live with. Indeed, even the parties seeking this legislation, including the motion picture industry, have bitterly complained about it in terms of its relationship with the cable industry. You are aware of that? Mr. LANGE. Absolutely. Mr. KASTENMEIER. They want nothing more than to get rid of the compulsory licensing and yet you seem to presume they would accept it here, at least temporarily. Do you think the compulsory license is a good device to impose upon these parties? Mr. LANGE. Well, you may remember, Congressman Kastenmeier, last summer when I was here, you asked me then about the compulsory license and I said I thought, in general, compulsory licenses were undesirable for two reasons. One is, they don't work very well, they lead to a great deal of bickering; and second, I think they encourage compromises which really aren't satisfactory on any side, and which only briefly lend a spurious appearance of fairness. My general views about compulsory licenses are that they are a compromise and ought to be sparingly used. The problem, Mr. Chairman, arises from the dilemma of home taping, which I really do believe, to be fair about it, is so much at the heart of the movement behind both of these bills that it cannot be avoided. We really aren't talking about rentals and rental markets here. We are talking about a serious endemic problem in the marketplace for which there really isn't any antecedent and for which there is no antecedent remedy that I can see as appealing. In a case like that, experimenting with responses that are, frankly, compromises, seems to me to be not a bad thing. I already said I am capable of changing my mind, and more than willing to do so, and if somebody can come up with something better, I can assure you I will sign on for it readily, but in the context of home taping I don't think that the copyright law ought to reach into the home, if it can possibly avoid doing so. I think it is a bad precedent. There, I think the compulsory licensing is a sensible solution to a very taxing dilemma. That is all I am saying here. Mr. KASTENMEIER. Well, with respect to that question, you raise the argument that section 106 is not designed to prohibit home duplication for personal use. It is designed to prohibit reproduction for commercial purposes, and you distinguish between the two words. Mr. LANGE. Yes. Mr. KASTENMEIER. Well, I have no reason to disagree with your statement that both of these bills have their roots in home taping; that is to say, both audio and video first sale doctrine changes. That being the case, would we not be wise to wait until Universal Studios versus Sony is decided, since that decision may offer some guidance on the legalities of the whole home taping problem? Mr. LANGE. I would welcome that kind of delay, and I would welcome it doubly if then, and I don't mean to be presumptuous, but if then you actually, the subcommittee, Congress-could address the question of home taping in a plenary way and at once. I think that home taping is a most critical issue which, if not addressed and resolved, really is in danger of jeopardizing an important part of the intellectual property system. I don't like these piecemeal approaches. I have tried to deal with this fairly and take it in its own terms to see it as the subject of potential compromise which could work or which alternatively would not work great harm, but to me, frankly, Mr. Chairman, dealing with home taping in the way these bills propose to do is like scheduling a patient with a strangulated hernia for an emergency lobotomy. You can get to the problem if you make that approach, but you will damage or potentially damage the tissue substantially in the passage. And I think it would make a good deal of sense to wait and to address the problem more directly. Mr. KASTENMEIER. That being the case, why do you then suggest to us that these bills which modify the law by one means or another, such as compulsory licensing are satisfactory to you? Mr. LANGE. I make the suggestion for this reason, Mr. Chairman: In the rental context, there is a problem which we are told is going on and if the compulsory license is attached and particularly if the broader kind of license that I have suggested here today were worked out for these bills, I think, Mr. Chairman, that we would come close to a copyright provision of the kind that ultimately will recommend itself, in any event, more generally for home taping, but we might have the advantage of seeing it in experimental form for a year or two or several, before the broader home taping questions can be resolved. I am making a judgment with which I concede I am myself somewhat uncomfortable, but it is a judgment I can defend if I treat it as an experiment. I would prefer to wait, and I don't hesitate to say so, but I can see it as an experiment with a compulsory license attached simply because, as I say, I think that is the nature of the response that home taping ultimately is likely to have. Mr. KASTENMEIER. I am wondering if the differences between the audio question and the video question are enough to treat the matters somewhat differently? For the purpose of argument, you indicated that the rentals may pose questions which the companies that are the proprietors cannot really respond to; but I don't know that that is particularly true in video. It may be true in audio. I say that because a studio can say, “We have gone into all the various markets: cable television, network television, theater runs, foreign sales, and on and on. We have added the prerecorded video cassette market, but we are having so much difficulty, not just with the sale of the cassettes, but in the subsequent rentals and possible home reproduction and duplication of them, that I think we will just cut out this market." So it is within their power to respond to the problem that they may perceive or to judge what they want to do. Is the question perhaps whether they want to have their cake and eat it, too, in that sense? Mr. LANGE. It is, Mr. Chairman, in the sense that they have the legal power under the act to do that and it is consistent with the way they market. They have alternative markets. But the problem, I think, for that industry is that they have marketed these types now long enough and to an appetite now so healthy and growing, that as a practical matter, I am not sure that they actually can withdraw from that market. I dislike being grand about what the people would do. Heaven knows I don't know what the people would do, but the few people I know who rent tapes would be most distressed if they found suddenly that they could no longer rent them. I have a hunch that there would be a tremendous hullabaloo in consequence of an effort to respond to the market that way. That is not the case in the audio recording or sound recording or music rental market. There barely is a market there. I think most people in that marketplace have some uneasiness that what they are doing is not entirely correct. But in the video rentals, I am not sure that the market, as a practical matter, could be withdrawn just now. Mr. KASTENMEIER. Well, there is a difference between the two, certainly. Mr. LANGE. There is. Mr. KASTENMEIER. Thank you very much for your comments. Mr. DEWINE. Thank you, Mr. Chairman. Professor, you made an interesting comment concerning the health of the motion picture industry. I wonder if you could react to my comment about that. It seems to me that the health or lack of health of the motion picture industry is really not our concern-maybe indirectly, but |