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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

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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 is.

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 dig. ital 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.

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