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Professor, I just want to clarify which part of what you said represented the ACLU and which part didn't. I speak as an ACLU member who is puzzled that the ACLU is involved in this at all.

Mr. FRIEDMAN. Well, we're involved only to the extent that there is a concern about that copyright protection over technological change automatically plugs into criminal penalties.

Mr. FRANK. So the ACLU has no problem, you're saying, officially with some great protecting of copyright holders as long as it's not done criminally?

Mr. FRIEDMAN. That's correct.

Mr. FRANK. Then there's a civil right to pursue to recover?

Mr. FRANK. I'm glad to hear that. I should say that while I've been and continue to be a member of the ACLU, we don't always please each other and there's no need that we have to. I'm a little bit concerned about the invocation of the first amendment here by you and the Civil Liberties Union.

I think a great deal of the first amendment. I probably get in more political trouble over trying to defend it than anything else, and I would be loathe to have us do anything to impinge on the free dissemination.

I think to invoke it in a commercial dispute of this sort weakens it, frankly. I think by calling the first amendment into play on behalf of one side-no one is arguing that there won't be any refusal to disseminate, it seems to me. The question is, who's going to get a little more or less money. To argue that in some people's mind it would more adequately compensate one group rather than another in this commercial area-it seems to me it is a mistake to drag the first amendment into that. I think things can get worn out from overuse.

Mr. FRIEDMAN. Well, let me respond to that, because the best example I know, I was one of the counsel in the Nation case, the Ford Memoirs case, where the Nation used some excerpts out of Gerald Ford's memoirs—

Mr. FRANK. That's totally different from what we're talking about here.

Mr. FRIEDMAN. Well, what happened there was that Harper & Row, the publisher, said, "I want money from the Nation because the Nation disseminated this information and they didn't pay me and I'm the copyright owner," and the second circuit said, "That is fair use."

Mr. FRANK. If the Nation were renting out complete copies of the Gerald Ford manuscript we would have a case that would be relevant. Since it wasn't, we don't. That's just not the same thing. I liked the decision in the Nation case. That's precisely what I'm afraid of. I'm afraid you're going to persuade the people who are in the movie and the record industry that the Nation case was a threat to their right to get compensated from people who are using the first amendment. That's what you do to the first amendment when you open the door.

Mr. FRIEDMAN. But the fight between Harper & Row and the Nation was a compensation case. It was money between one rather than the other. The question is, to me, the way the problem gets structured is that the certain dissemination of information-

Mr. FRANK. Would you, as a lawyer, advise a client that the decision in the Nation case covers record rentals or movie rentals?


Mr. FRANK. Then you and I agree. It's not relevant. Don't try to scare people with it and make them be opposed to that when they shouldn't be.

Mr. FRIEDMAN. No, I'm not talking to a court. I'm talking to Congress which can modify the law to either allow or not allow certain copyright protection.

Mr. FRANK. Obviously you have a right to do that, although the courts' willingness to modify the law do not seem to differ greatly from our own, and I don't object to that. But the point I'm making and I think you reinforce my point-is neither you nor I think the Nation case is precedential in this situation.

Mr. FRIEDMAN. Absolutely not.

Mr. FRANK. And I think when you talk about the purely commercial dispute in which no threat to dissemination is really involved and we're talking about whether somebody gets a few bucks more or less-to say that that has first amendment implications, I think you're not going to persuade many of the people who are involved in this dispute to drop their claim for what they think is fair compensation by the first amendment. It's just going to make them mad at the first amendment. I don't think that's helpful to the first amendment. I'm trying to protect the first amendment here and I think for you to invoke it in this way is to undercut people's sense of what it means.

Mr. FRIEDMAN. The first amendment is not Hamlet in this play. It's Rosenkrantz and Gildensturn. It's a very minor role here, but it seems to me it's here because what the effects of this law would be is to reduce the number of exposures of this material to the consumer. The consumer is going to see fewer movies.

Mr. FRANK. I don't think price increase in most cases is a first amendment concern, and I don't want to see the first amendment be Rosenkrantz and Gildensturn. Who was it-Tom Stoppard who wrote the play "Rosenkrantz and Gildensturn are dead." I don't want that to happen to the first amendment. [Laughter.]

Mr. FRANK. I don't want to claim extra credits for that. The point I'm making is, if that's the problem, it seems to me that in the normal course of events it is not first amendment case when somebody decides to raise or lower a price. You just said it was a first amendment issue because if it costs more there may be less dissemination. Are you saying that when they try and raise the price that they have first amendment problems?

Mr. FRIEDMAN. No, but they're not just raising the price. They can raise the price and I would agree that it's not a first amendment issue. This is Congress passing a law that allows them to raise the price and then the first amendment-because you have to worry about total exposures of material to the public.

Mr. FRANK. Would it be a first amendment issue if we say, as we have, that the NLRA applies to unions who are in the creative business? Have we violated the first amendment or impinged on it when we have granted to the guild or the photographers or the mail handlers' union the right to collective bargaining? It is national legislation that gives them the right to raise the price of

newspapers. I support it, but obviously you and I disagree. Collective bargaining, if it works well, is going to have to raise the price of newspapers. Is that a first amendment implication?

Mr. FRIEDMAN. You're always weighing a whole series of factors. You're weighing benefits to certain unions against price increases against exposure of a certain item to the public. I agree with that. In the union area it's easy because the benefit under those circumstances to a definable group is very there and Congress is concerned about that.

Now you're talking about a financial benefit only to the industry. You would reduce the number of exposures of this material to the public, and as I say, I don't think the first amendment is the key thing, but those first amendment considerations, if you want to call it exposure to the public, it seems to me that's something that Congress should consider in this situation.

Mr. FRANK. I'll yield back, and I appreciate your statement. I just want to close by saying that I really think it damages the first amendment for it to be lightly invoked. I don't want to deal with the first amendment as "Rosenkrantz and Gildensturn." I'm serious about that. I think we ought to use it when it's central and when it's important. I think a lot about the first amendment. I'd hate to see it be an issue in what is essentially a commercial dispute. I yield back, Mr. Chairman.

Mr. KASTENMEIER. The gentleman from California.

Mr. BERMAN. It struck me that you, perhaps on behalf of the ACLU or perhaps just speaking from a first amendment protection right, are now enunciating a balancing test for the first amendment. If the industry were in trouble, we could restrict the first amendment. I guess all of that just makes me think that the first amendment argument with respect to this issue is a pretty thin argument and leads me to the question that Mr. Glickman asked you about the economic arguments versus the intellectual underlying principles.

What is the intellectual argument other than the first amendment issue that has been discussed with Mr. Frank? What is the principle that argues against this legislation? What's the underlying, fundamental intellectual concept that should cause us to be against this bill?

Mr. FRIEDMAN. Well, I think that it abrogates a very important part of the copyright law, the first sale doctrine, which has been a very important part of our whole principle of dealing with property over a long period of time. And what this law would do is establish new controls by a copyright owner over rental of an object with which he has parted with all ownership interests, and we have never had that in the copyright law.

Mr. BERMAN. You know far more about the background of this than I do, but my impression is it's a bootstrap argument that you have this doctrine and therefore the intellectual argument against the bill is the existence of this doctrine which this bill seeks to amend or modify to some extent.

There are books now that come out on tapes and I know people who walk around listening to books with things in their ear. If I went out and bought a book and then read it into a tape and then

started producing that tape and selling that book like that, does existing law restrict my ability to do that?

Mr. FRIEDMAN. Yes. That's a performance. It would be covered by 106. It would either be two, which is a derivative work based on the copyrighted work-in other words, the audio reproduction of the words would be a derivative based on the original work. In other words, you're making something new.

Mr. BERMAN. It would be the same situation as if you took a VCR of a movie and made a copy?

Mr. FRIEDMAN. That's clearly covered by the existing law. That is a copy of the work. It's an audio copy, but it's still a copy of the work. And when you play it, it may be a performance. That's already covered by the law. But this really is a giant step.

Now you say, well, all right, so we're taking a giant step. And my answer is, well, why are you taking this giant step? In other words, because the industry wants more money. Well, it seems to me that you've got to have a little better-to turn it around, there has to be a better argument than that. Well, we want more money. Mr. BERMAN. Well, I think that's a fair conclusion. I'm sure that's why the industry wants this bill and that's not a reason why Congress in and of itself should say yes to that bill. I guess the underlying concept or intellectual base is the notion that here are some property rights in this creation which, as we tend to look at things, they should be entitled to some compensation for. Because of this new technology and this new system that's developed, they're not getting compensated. And is that an equitable position? Yes, it may get them more money, maybe, and their economic health at the particular time they're asking for this is sort of irrelevant because I don't think-Lockheed and Chrysler notwithstanding-it's Congress' responsibility to bail out the record industry or the motion picture industry. The notion that they were in deep trouble because of this I'm not sure makes the fundamental argument for this bill a stronger one.

Mr. FRIEDMAN. Well, we have the manufacturing clause, the only purpose of which is to protect an economic interest that needs help, the printing industry. So I don't know that Congress-Congress can use the copyright laws to protect strict economic interests and provide protection or not protection depending on how it views it. That is not disturbing at all to me. We've done that all the way through in the copyright law.

My point to you is that when you do take a giant step and overturn a well-established law, you should think it through because then it does-it's not that there's a domino effect and everything else is going to fall, but it should be thought through as to what implication it has for a very broad range of creative control. And I just don't see how the movie industry has made any kind of plea that that giant step is necessary under existing circumstances.

Mr. BERMAN. This whole point about who's sharing in the benefits that are derived to the industry were this bill to pass-I recall but I'm not sure-I think there was a rather prolonged strike in the motion picture industry by one or more of the guilds.

Mr. FRIEDMAN. At least two of them.

Mr. BERMAN. Where the key fight was over royalties or residuals or some benefit that the industry had negotiated with the broad

casters, and now the directors, the writers, and others wanted a part of that pie.

Mr. FRIEDMAN. That's right.

Mr. BERMAN. And while I don't think they got anywhere near what they felt they wanted or should be getting, I do recall that there was a settlement where they got something. They established a principle of sharing in some part of that pie, and I had an impression in your answer to Mr. Mazzoli's question that they don't get any.

Mr. FRIEDMAN. No, no. They get-I saw some statistics that all the guilds and the craft unions together, in toto, get something like 14 percent. That's the figure I've seen, 14 percent go to the unions. But working the other way, I know in terms of the novelists and publishers whose material is used for the movies, the only way they share in that market is by getting a percentage of the producer's net profit which, because there's overhead and a lot of other things that go into that, is something they rarely achieve. I have not yet seen any contracts in which the publishers and novelists who start the ball rolling and whose original story is the basis for the movie get any specific share out of this market.

Mr. BERMAN. The writers don't?

Mr. FRIEDMAN. You're talking about the screen writers or the novelist on whose work the film is based? The screen writers are part of the guild and I think they get some small percentage as a result of the strike. But the total for directors, actors, screen writers and other craft unions, the figure I've seen is 14 percent out of VCR income.

Mr. BERMAN. Thank you. I yield back my time.

Mr. KASTENMEIER. But to clarify that, that is not 14 percent of the royalties?


Mr. KASTENMEIER. That's 14 percent of certain sales.

Mr. FRIEDMAN. That's correct.

Mr. KASTENMEIER. There is a distinction to be made.
Mr. BERMAN. It's residuals?

Mr. FRIEDMAN. Well, I think it was in Dorothy Schrader's testimony in support of the bill. She noted the percentage of-and I can't remember whether it was gross or net or distributor's gross or net, but that the craft unions and the ones we're talking about, the actors, directors, and screen writers, in toto, somehow the figure of 14 percent is the one that sticks in my mind. As I say, it's not a royalty. It's just a percentage of income.

Mr. MAZZOLI. Mr. Chairman, a lot of this sort of deals with the question that I was asking about whether or not the creative community gets some benefit from this or could therefore become more creative because it had more incentive. I wasn't really nailing it down that the actual writers and directors and producers and film actors would have to get x number of percent.

Am I wrong? If Hollywood gets the money, some of it goes into the pockets of the investors and stockholders, but wouldn't it be fair to say that the more attractive pie it is, the more writers will be hired, the more actors and more films will be committed to be made?

Mr. FRIEDMAN. Oh, I agree with that.

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