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Mr. BUTLER. I share many of the concerns of the gentleman from Michigan. I do think, however, his analogy is, as you suggest, imperfect. I don't know where we would get the security guards which guard against shoplifting to protect against copyright infringement.

But I really don't need to wait to hear from the Supreme Court and I really don't need more information. I am concerned about the theft of the property of copyright holders and I think the trend is readily apparent. I am satisfied the time to act in the video area is now, before the video recorders become so universal that the problem is insoluble. In fact, I think we had reached that point with the audio until the Betamax decision rescued them from that situation and now maybe the audio can ride in on the Betamax publicity, so I think it is the time to act. I wouldn't like to wait around much longer.

I am really not concerned about overtaxing the noninfringing taper. It seems to me that we have a similar problem in many areas of revenue. The one that occurs to me first is that we have a tax on gasoline, and yet for a long time recreational users were able to recover their money by petition or application. That is the way it was done in many States and a similar device, it seems to me, would be available for the noninfringing taper if it got to be an oppressive tax.

The problem which I have is, as the gentleman from Michigan would guess, I just don't like the Copyright Royalty Tribunal, the concept certainly, and if we have an imperfect analogy, we certainly have an imperfect agency in terms of distribution.

So my real problem, my only problem, is to develop a reasonable distribution mechanism, preferably extrajudicial, or preferably outside the legislative arena, outside the executive branch or whichever branch would handle it.

My question to you, to the panel is: What alternatives have we got, assuming that Congress, in its wisdom, imposes what we now call a tax, or today are calling a tax on the machinery and the tapes? Is there any other mechanism to collect the money, or is there any other mechanism for distributing it? I would appreciate your suggestions in that area.

Mr. Rose. I guess we would all have to agree that we don't have any to give you today. For one, I think the Department would like the opportunity to look at this. Perhaps there are others. Certainly they aren't reflected in any of the bills that you are considering, and that is one of the difficulties that leads to our present dilemma and the lack of guidance that we are giving you.

But I think we would all enjoy the opportunity to work both with the committee and people in the industry to see whether there aren't some less cumbersome alternatives to this particular proposal.

Mr. HODSOLL. I wonder, Mr. Butler, if I could add to that, and also I would fully agree with Mr. Rose that also to see what the appropriate balance is between statutory guidance and, if you will, regulatory rulemaking by whatever body is set up in terms of deciding what the amount of the tax is and how those revenues should be distributed, if indeed we go that way. I think these are very complicated trade-offs.

Mr. BUTLER. Let's assume the maximum statutory guidance. Suppose that whatever vehicle is selected, it is purely administrative. The problem with the recording industry is the distribution among the artists. Well, that tax may be one that we can't legislate extensively, but assume the maximum statutory guidance as to amount, the maximum statutory guidance as to timetable for distribution. Assuming all of those things, have you got something besides the CRT to suggest, or some other device other than the CRT? Mr. Wunder, you have an answer coming on here.

Mr. WUNDER. No; I really didn't.

Mr. BUTLER. I had the impression you felt one coming on.

Mr. WUNDER. I have been trying to think of one. I was trying to think about this for quite some time, Mr. Butler, and I come up with really no good ideas. I am trying to think of a way in which there could be simply a free-market approach where the buyers and sellers somehow got together in the marketplace, the tape manufacturers, and the copyright owners.

I always come up with problems in that area because I don't know if there is the same willingness to bargain and who has the most leverage in the free-market approach. The leverage problem, I guess, is the one that causes me the most difficulty.

I don't like the Copyright Tribunal either. I don't like the Government getting in and establishing the rates, but in this situation, as I indicated to Mr. Sawyer, unlike the cable copyright where my position was similar to your position, that there are willing buyers and willing sellers in the marketplace and they can get together and you could set up even an ASCAP/BMI-type situation, associations, guilds, I just do not have another answer for you. I would be interested to know if you have one.

Mr. BUTLER. I am asking the questions.

Well, I don't know whether you are asking us to hold the record open or not, but this is the problem I have. I have been visited, as you might have guessed, by a number of people who have an interest in this, and they are not really interested in finding another solution. They are more interested in developing this revenue source for the benefit of the copyright owners.

That is why I am turning to the experts for a solution here. I have to admit I am not surprised, so I guess I can't be disappointed, but I certainly do still hope that you will come up with something. I would feel more comfortable supporting this legislation if I didn't have to go back to my reactionary constituency and tell them I had developed yet another third Federal agency program. So anything that occurs to you will be appreciated.

Mr. KASTENMEIER. Just a couple of questions.

I understand you have each testified in slightly different areas, but do you all agree with the testimony the other two have given, or do you wish to take exception to anything anyone else on the panel has stated?

Mr. Rose. I think we speak as one administration, Mr. Chair

man.

Mr. KASTENMEIER. Have you drawn a conclusion as to whether home taping for personal use is, in fact, a legal act? Have you made that conclusion, or have you not reached that conclusion?

Mr. Rose. I think if one states a conclusion on that issue, that becomes a starting point for the legislative policy judgment to be made, and that is a thing that we have explicitly tried to avoid this morning. As you have seen, the district court and the ninth circuit struggled very valiantly with that article III task that they each respectively had, and came to completely the opposite judgment on that precise issue, and since it is pending in the Supreme Court, I don't think we would care to state a conclusion on it on behalf of the administration this morning.

Mr. KASTENMEIER. If it is a policy matter, you do not wish to give us any guidance on it apparently; if it is a legal matter, it is your recommendation that we await the Supreme Court's decision. Is that not correct? A legal matter insofar as an interpretation of current law?

Mr. ROSE. Yes, that is right.

Mr. KASTENMEIER. Which may take a year, so far as we know. There was a characterization that the courts have been generous with respect to construing the law in favor of the copyright holders. I don't know that that is necessarily the case.

It has been the experience of this subcommittee in recent years, RCA v. Fortnightly, CBS v. Teleprompter, and Williams v. Wilkins were not of that character. They construed the law largely as exceptions or at least broadly for purposes of users rather than copyright holders, so we have no real guidance in terms of what the court may do in this case.

Would you not agree that it could go either way?

Mr. Rose. It certainly could go either way. I personally found the ninth circuit reasoning very persuasive, but it certainly is clear that the decision could go either way in the Supreme Court.

Mr. KASTENMEIER. If the Supreme Court were to reverse the ninth circuit and more or less uphold the district court-we will just assume that for the purpose of argument-would you then be persuaded that the matter ought to be dropped?

You wouldn't come in with a legislative remedy then, would you? Mr. ROSE. I think the point has been made by Mr. Railsback, I believe, that the Supreme Court case does not include the entire thrust of this legislation, particularly with respect to the audio matter, so that would still have to be dealt with, and I think you would certainly be under strong pressure from either side of this current argument to reconsider whatever the Supreme Court did. Mr. KASTENMEIER. I think legislative committees will be under strong pressure no matter what happens. Even if we presume to act, we will be under continual pressure, as the cable case suggest to us. I do not believe that our legislating in the area would reduce litigation. Our recent experience is that it would not reduce litigation. There would still be litigation.

Because the interests are so varied and because the economic force is to strong and so much is involved in terms of investment, I suspect we will neither see the end of litigation nor the end of pressure for legislation, even should we legislate.

Mr. SAWYER. Will the gentleman yield?

Mr. KASTENMEIER. Yes.

Mr. SAWYER. Again, I just wonder, I am not unsympathetic to the gentleman from Virginia, to his point of view, that something ought to be done. The thing that really kind of balks me is the Federal Government doing the collecting, and the CRT, and so on.

Is there a possibility, without attempting to detail this, of in effect levying an outright tax on, let's say, video cassettes, just to deal with one item, and then having the amount of revenue to the Government calculated and giving a tax credit to the copyright material producers that would, in effect, make it a wash deal as far as the Government was concerned, but which would get us out of the middle of it?

I don't expect an answer, but it just strikes me there are other things we could think of in this thing that might handle this without getting us into something as horrendous as this CRT, whose chairman appeared here and asked to dissolve the whole agency. Mr. ROSE. I think the Secretary of the Treasury might be rapidly over here if we took that other approach, but certainly these are the kinds of things that we think additional time might give us an opportunity to look at and come back to you with a view on.

Mr. KASTENMEIER. I understand that you are offering to work with the committees and to study this issue.

Mr. ROSE. That is correct, Mr. Chairman.

Mr. KASTENMEIER. I yield further to the gentleman from Illinois. Mr. RAILSBACK. I am going to pass, Mr. Chairman.

Mr. KASTENMEIER. I yield to the gentleman from Massachusetts. Mr. FRANK. I just have one question I would like to ask Mr. Hodsoll, particularly, that I had forgotten to ask and I just noticed it here.

We have been focusing in the video area on the question of whether or not a specific showing of harm could be made, commercials foregone, et cetera, but I am reminded that there is a broader argument made, and I think, Mr. Hodsoll, you touch on it in your statement, which is that even if there is no specific harm and no specific loss from video taping, somebody is benefiting from watching those programs, and the creative people aren't getting the

money.

To what extent would you, and the others if you have a view, share the view that even if you can't show a specific loss, the fact is that through a new technology there is a further spread of this entertainment and the people who are watching it ought to have to pay the performers in some way, as I said, even if you can't show a specific loss of revenue? Is that part of the argument that you are making?

Mr. HODSOLL. I think my argument goes more to the potential loss in the future resulting from video, rather than to evidence of a specific loss right now. I think that there has to be shown a loss in order to compensate, because otherwise it is a wash.

Mr. FRANK. Well, there is an argument to be made that there are copyright holders and it is their product that has, in fact, created this entertainment value, and that they ought to be compensated, they ought to be paid for it, even if there was no loss in the more specific sense.

I have heard some people in the industry make that argument, and I am just wondering, because it may be hard to show a specific loss.

Mr. ROSE. Well, to the extent that there is additional value created, and to the extent you make the legislative policy judgment that this should be protected as part of it, that is the question.

Mr. FRANK. The first one is what I wanted to get a response on. Is there an argument to be made in terms of copyright policy and general equity that the performers, the creators, et cetera, the holders of the copyright, ought to benefit from the additional value being created, even if there was no specific loss shown?

Mr. Rose. I certainly would agree with that. There is an argument, a strong argument to be made, sure.

Mr. RAILSBACK. Will the gentleman yield?

Mr. FRANK. Yes, I yield to my friend from Ohio.

Mr. RAILSBACK. Let me give you an analogy, which is the sale of books. Somebody may pirate and reproduce books, and that may lend greater circulation to that author's work, and yet I think all of you would agree that as a matter of principle, we want to protect the author's rights, and even though we may not be able to prove harm in the reproduction of those books, there surely has been a violation of the theory behind copyright protection.

Mr. HODSOLL. I guess what I am saying is that if there were to be additional value to the copyright owner, then conversely, and maybe I am being just a bit Jesuitical, then conversely there is a loss, and that is what I mean by loss.

Mr. RAILSBACK. I see.

Mr. HODSOLL. Now, the degree of proof that one has to come to in order to show that loss is an entirely different question.

Mr. FRANK. If you are going to be Jesuitical I will have to be like my predecessor and pass.

Mr. KASTENMEIER. If that is all the questions, I would like to thank the panel for their presentations this morning.

We will undoubtedly be in touch with you further. As a conglomerate of issues moves forward, you will note that there are a couple Members of Congress who are very intrepid and wish to proceed forthwith into this legislative thicket without any further guidance on the matter, but assuming something of that sort does take place, we will obviously be in further touch with you. Mr. Rose. Thank you, Mr. Chairman.

Mr. KASTENMEIER. The Chair would now like to greet the Register of Copyrights, the Honorable David Ladd, and his staff. I will allow Mr. Ladd to introduce those who accompany him. We are very pleased to greet you again, as we have in the past, to the committee.

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