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 antipiracy 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. Ás 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.