If we don't have enough information, I would prefer us to do something that would stop that and go back at it again and undo the ninth circuit decision. I don't think it is in general a good idea for us to defer to the courts on questions of statutory interpretation. I think they have enough to deal with.

I think if there is an interim solution that is needed, I think it is more in keeping with the system for us to adopt something, saying it is an interim solution, and going back at it again, rather than letting the Supreme Court go ahead, as they have to in this case, and then I think we could go back and undo it.

I guess everybody agrees that the audio is getting a lot more economic damage than the video, but in terms of economic damage to the video, is the fast-forwarding, skipping commercials, the major damage that they are now claiming?

Mr. ROSE. That was the major argument that was made to me. Mr. FRANK. Is there any other form right now, because I have a suggestion that occurs to me, and I really do mean it seriously, and that is, it would seem to me if that were the case, the argument for putting royalties on those machines would apply only to machines that had fast-forwarding, so that if people wanted to sell video machines that didn't have a fast-forwarding device, there would be no argument for putting any liability on them at all.

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wonder if that seems at all feasible? People would then have a choice. They could buy a machine that would simply allow for the time substitution with no economic harm, or they could buy a fastforwarding one and pay a premium for that.

Mr. ROSE. This is the kind of issue that I think really deserves much more serious and intense examination than it has gotten. Mr. FRANK [presiding]. I asked two questions and got promoted. The chairman had to leave. I apologize for the lateral movement. I wonder, from the standpoint of the others, whether that might not have some merit if, in fact, the only economic harm that can even be conceptualized for the video recording is people not watching commercials. If you had a machine that didn't allow you to get rid of the commercials, would there be any argument for charging a premium on that?

Mr. HODSOLL. Well, if I may, I would like to add one thought to that. I think while that may be the case now, as one looks into the future there may well be other kinds of recordings. In some cities in the country, there are already springing up stores that lend out video tapes without commercials, and they can get copied, and that, in essence, also constitutes reduction of the revenues available.

Mr. FRANK. I appreciate that, and I am going to yield to the gentleman from Illinois in a minute, but I would agree that the people who lend them commercially clearly, in my judgment, ought to be subjected to some liability. That is just an anomaly and I can't think of any rational argument someone would make for not subjecting that to some liability.

The gentleman from Illinois.

Mr. RAILSBACK. I just wanted to say, Mr. Chairman, I think there is a dispute as to the future harmful effect of librarying, for instance, and I think you are going to see the video people make, or

at least attempt to make a case that librarying has potential impact that we have not yet been able to fully estimate or predict.

Í understand your question, and I think as the witnesses have indicated, clearly there is a need to get more economic information, but I assume that would be one of the functions of the tribunal. If we could fashion adequate guidelines, then maybe we would have given them the tools with which to work, except being understaffed and underequipped in other ways.

Mr. WUNDER. Let me respond, if I may. Your solution, it would seem to me, would be only for today, and I think it would be interesting, because you have two different technologies, but I think more to the point is that you look at the growth in sales of VCR's and compare them to, say, color television when it was first introduced, and it is slightly ahead.

So the market is growing, and you may be fashioning a remedy of short-lived usefulness.

Mr. FRANK. Even if you get greater penetration, what is the harm done if you have wider distribution without eliminating commercials in the home? I understand the lending out, and I think we ought to cover that, but what is the damage done? To whom is economic damage done with wider use of the VCR's if people still have to watch the commercials?

Mr. WUNDER. The librarying effect. It is the librarying effect that Mr. Railsback was talking about.

Mr. FRANK. And the assumption is that people would watch old programs rather than new programs?

Mr. WUNDER. The assumption would be, take "Gone With the Wind" or the "Wizard of Oz," which were widely recorded and libraried, what would be the economic value of those?

Mr. FRANK. Of showing the movie again?

Mr. WUNDER. Yes.

Mr. FRANK. I think the video disc industry, I assume would be an example.

Let me just ask again of the Justice Department, in terms of letting this go to the court, what is your view about our just sitting back and letting the Supreme Court go ahead with this?

Mr. Rose. As a personal and professional matter, I share your view as to the respective roles of the courts and the Congress. I think, as a practical matter, this ultimate policy judgment regardless of whether the Supreme Court goes forward and decides this matter, or there is an interim legislative solution which moots that case, the matter is going to be decided here ultimately because these groups are going to be back here regardless of how that case

comes out.

Mr. FRANK. I agree, and I think that what happens then is, if we don't do anything at all and the Supreme Court decides, it would be very reasonable, I think we all agree given the state of information, the Supreme Court would have to go ahead with probably inadequate information, and we would very likely do something different than they did and you would get another set of headlines about "Congress Overturns Supreme Court," and that just doesn't seem to me to be particularly healthy all around in the system.

So I think there is something to be said for us doing something at least in the interim that staves off a Supreme Court decision

that everyone here seems to think would, of necessity, be only an interim decision. I just don't think it is a proper function for the Supreme Court to be making interim decisions while we are gathering more information.

Mr. Rose. I guess our real question is what the state of the economic evidence is or is likely to be, based upon which you will be able to legislate. That is really the critical question.

Mr. FRANK. Also, the case where there is the most pressing argument, I guess everybody here also agrees, for economic relief isn't before the courts at all, and that is the audio business. So whatever you think about the video case, it is clear there is very much less damage going on there now and it is a kind of reverse situation. The gentleman from Michigan.

Mr. SAWYER. I can't quite visualize that the Supreme Court is going to set up a system-I would assume they will pass on this use question. If anything, they will remand it to a district court to get some answers. I don't visualize the Supreme Court opinion solving what appears to be the problem as far as collection and allocation and all that sort of thing.

Mr. Rose. No; in the last analysis, as I say, I think the ultimate decision is going to be made here at one time or another. It is simply what the evidence is, based upon which you make an ultimate judgment here.

Mr. SAWYER. It strikes me, though, in handing down an opinion, the substance says there is no violation of the copyright law by home copying of video tape, or they will say there is a violation. Mr. RAILSBACK. Will the gentleman yield?

Mr. SAWYER. I yield.

Mr. RAILSBACK. The court of appeals, I believe, did remand to the district court.

Mr. SAWYER. They may do that, but I say the Supreme Court decision, I think itself, resolves that it is a violation.

Mr. FRANK. If the gentleman will yield, I think the perception is that it will have to decide whether there is or isn't a violation. Ultimately we are going to change that, I suspect, one way or another, and I don't know what is gained by having them resolve it in the interim.

Mr. SAWYER. Well, for one thing, I am not a fan of the Copyright Royalty Tribunal. As a matter of fact, we split here 3 to 4 one time on that whole question vis-a-vis cable broadcasting. Unfortunately, at that time there was only three, but now we have gotten rid of one of the four.

Mr. FRANK. It is 3 to 1, Hal. Let's take a quick vote right now. Mr. SAWYER. I don't like this whole scheme of getting the Federal Government between these people at the taxpayers' expense to be collecting and distributing and running a sort of ASCAP-type operation in the Federal Government. Every once in a while I just wonder why can't they just increase the price of what they are selling, or the copyright fees, to cover the obvious shrinkage, like a store raises the prices of its goods to cover shoplifting. Why don't they do that?

Mr. HODSOLL. Excuse me. If I may, Mr. Sawyer, I think there has been some evidence, particularly in audio, of increased prices for

records, and that does provide or could provide an additional stream of earnings to the record companies.

But what that also does is reduce the availability of records to a wide public at lower prices, which has consumer impact on it, so I think you have a trade-off there.

Mr. SAWYER. Maybe if we could avoid shoplifting, if you will, or reduce the price of goods over the counter in retail stores, maybe if we could reduce or eliminate the false bankruptcies on bank loans it would result in a reduction of interest rates and finance charges. But why? Those things are handled by market solutions. Banks charge an interest rate that is calculated to recoup so much percent that their experience tells them they are sustaining as a loss. I don't know why all of a sudden we have to create some Federal agency and a bunch of regulations to do what these other people who sustain lossed in the marketplace do to recover it.

Mr. WUNDER. Mr. Sawyer, it seems to me that, as I indicated in my prepared statement, the type of approach that you are considering is one that we think ought to be looked at. As you know, we supported your position, Mr Frank's position, on eliminating compulsory license cable for the reasons that you cite, that you could get willing buyers and willing sellers together in the marketplace. I am not so sure that this is an exactly analogous situation, especially in audio.

Mr. SAWYER. Isn't it, though, kind of an effort-take the bill H.R. 5705 that, in effect, puts a royalty fee or a tax, or whatever you might call it, on equipment. Isn't that really just kind of a method of trying to make somebody else raise their prices and give it back to you, rather than raise your own prices and thereby create a lot of tangle and web of bureaucracy and bureaucratic determinations? In other words, aren't you, by increasing let's say the price of a Betamax, let's say the price of video tapes, and then reimbursing that to the copyright, why doesn't the copyright owner just raise the price of his product and avoid all the duplicity and you are getting right to the same place?

Mr. ROSE. The copyright owner really doesn't have the same shot. I share all of your aversion to this particular scheme in terms of its operative impact, and that is exactly why I think we are where we are today in terms of our lack of enthusiasm for the proposed solution.

It is, however, to be honest about it, a very difficult matter to figure out. If this situation of home taping, audio or visual, is in fact determined to be as a policy matter something that should be protected and called copyright infringement, the normal way to go after that, given the normal tools available, would be to allow people to be pursued in their own homes for conducting this taping and to allow injunctive relief, and then to perhaps hold the manufacturers of these Betamaxes liable as contributory infringers.

By definition, in this debate, we have said that is not a politically or practically acceptable solution, so we are remitted to a kind of a substitute scheme. The one that has been developed has a lot of unattractiveness about it, which you very eloquently described, and I think one of the things this committee should look at is whether there are other possible solutions other than this kind of solution, but direct approach, to force somebody, because there is a copy

right violation going on, to raise the price of his product as opposed to enjoining the infringing use is really not, I think, a viable solution.

Mr. SAWYER. Well, in shoplifting, shoplifters are still people, but just from a policing point of view it obviously cannot be stopped beyond certain limits any way, and the cost of it is going to be built in or reflected in the operating overhead of a retail store.

Mr. Rose. I guess what we are suggesting is that the analogies in a number of respects seem a little imperfect.

Mr. SAWYER. I certainly have to agree with you that it is a highly complex mess. I just wrestled something awful with this cable broadcasting problem. I was at loggerheads with my staff, and they with me, and we changed our position a number of times. It was probably the most complicated problem I have seen since I have been here.

Mr. WUNDER. That was easy compared to this one.

Mr. SAWYER. I think because of the Betamax decision, much in the way of the Hinckley verdict, we react, and we react to the Betamax decision, whereas the real grievance, in my opinion, if there be one, is the audio.

First of all, I think the machines are a lot more available, in much bigger volume, and I can understand people taping a record they like and playing it over and over because they like to listen to it, but I can't quite visualize somebody taping a movie and watching it over and over, notwithstanding "Gone With the Wind," or "Wizard of Oz," or maybe even "E.T." It is like reading the same book twice. I don't doubt that some people will do it.

Mr. ROSE. There was a fellow who watched "Patton" 10 times, I think.

Mr. SAWYER. I can't imagine that it is a big field. But I think if we are going to start on this solution, we ought to really lay the video problem created by Betamax to one side and really address the audio problem, which I think is much more acute and widespread, and then in the meantime see what, if anything, develops in video.

But in any event, I couldn't agree more. I thank you very much for the great guidance you have given us.

I yield back the balance of my time.

As the gentleman from Massachusetts, who is great with good solutions about just taking away the jurisdiction of the court, he thinks we could solve the recent Cuban refugee problems with the space shuttle.

Mr. KASTENMEIER [presiding]. The gentleman from Michigan has yielded back his time.

The Chair ought to say that he has just returned from the full Committee on Interior which reported out a mammoth wilderness bill, Mr. James Watt notwithstanding.

Now I would like to recognize the gentleman from Virginia.
Mr. BUTLER. Thank you, Mr. Chairman.

We are prone here on the Hill to complain about the Justice Department being unavailable with its opinions. Well, today, we have you promptly here, and we thank you for that and will say we appreciate your guidance, whatever it is.

Mr. Rose. I agree, Mr. Butler.