House Commerce Subcommittee Holds Hearing on Fair Use

November 16, 2005. The House Commerce Committee's (HCC) Subcommittee on Commerce, Trade, and Consumer Protection held a hearing titled "Fair Use: Its Effects on Consumers and Industry".

Fair use is an affirmative defense to copyright infringement. It is codified in the Copyright Act, at 17 U.S.C. § 107. Copyright falls within the jurisdiction of the House Judiciary Committee (HJC). However, the HCC takes an aggressive approach to jurisdiction. Moreover, it has successfully obtained a referral of HR 1201, the "Digital Media Consumers' Rights Act of 2005", to the HCC. Many HJC members are displeased with this activity of the HCC. See, story titled "Judiciary Committee Leaders Condemn Jurisdictional Power Grab" in TLJ Daily E-Mail Alert No. 924, June 23, 2004.

The primary purpose of HR 1201 is to modify the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA), at 17 U.S.C. § 1201, to provide a fair use exception. Most of the statements, testimony and questions at this hearing focused on fair use of digital works, and HR 1201. The HCC has not yet scheduled a mark up of this bill.

Perhaps Rep. Mike Ross (D-AR) reflected the attitude of the Commerce Committee members when he stated that "copyright law is ultimately commercial law".

HCC members expressed a range of opinions. While Rep. Joe Barton (R-TX), the Chairman of the HCC, and Rep. Rick Boucher (D-VA) are sponsors of HR 1201, the HCC also includes representatives of districts that are home to many in the entertainment industries.

Rep. Mary Bono (R-CA) called HR 1201 "reckless" and "dangerous". She said that it "basically guts DRM", and that "fair use is alive and well" without HR 1201.

Rep. Marsha Blackburn (R-TN) cautioned against codifying something that would enable theft of intellectual property.

Rep. Rick Boucher (D-VA), the lead sponsor of HR 1201, is a member of the HCC, but not its Subcommittee on Commerce, Trade and Consumer Protection. He was permitted to sit on the panel, and to question witnesses. He made no opening statement. However, TLJ spoke with Rep. Boucher on November 16 at another event. See, transcript.

Rep. Boucher said "There are a lot of activities that a person ought to be able to undertake to fully enjoy, in a lawful way, the content that he or she purchases, that today for technical reasons, and the force of law put behind the technical protection, that person can't do. So what I am simply trying to do is amend the law to say that a person can bypass the technical protection if they are doing so for a lawful purpose, in the exercise of a fair use right, or other legally protected right. And I think that is a very modest and very miner modification of the law which should be made. It would do nothing to encourage piracy. If a person bypasses for an unlawful end, that act would be just as illegal under my bill as its is under current law. So this would do nothing to encourage piracy."

Section 107 of the Copyright Act provides in full that "Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include  --
  (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
  (2) the nature of the copyrighted work;
  (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
  (4) the effect of the use upon the potential market for or value of the copyrighted work.
The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

However, while the Representatives and the witnesses offered their explanations of fair use, there was little discussion of the four pronged test of Section 107. Many offered interpretations of fair use that are not contained in the words of Section 107.

Gary Shapiro of the Consumer Electronics Association (CEA) argued that fair use "represents the balance between protection and innovation". It is really about not disincenting technological innovators, and not discouraging investment in technological innovation. See, prepared testimony [PDF].

James DeLong of the Progress and Freedom Foundation (PFF) explained that fair use really has to do with economic transaction costs. He said that with the development of the internet, transaction costs for IP transfers have declined. Thus, DeLong argued, fair use has become a "doctrine in search of a rationale". See, prepared testimony [PDF].

Peter Jaszi, a law professor and counsel to the Digital Future Coalition, argued that fair use allows copying where the "general cultural and economic benefits outweigh the costs they might impose on copyright owners". See, prepared testimony [PDF].

The CEA's Shapiro wrote that "American technological leadership -- particularly in the age of the Internet -- has relied largely on the assurance that our fair use doctrine has given to innovators and venture capitalists. But this may be changing."

"This is the essence of fair use -- giving consumers, innovators, and manufacturers the benefit of the doubt that the private, reasonable activity of consumers, and the productive activity of those inspired by copyrighted works is not ``necessarily unlawful.´´" He continued that "fair use is all that stands between inventors, investors, and consumers and a world in which all new products must be fully authorized, in advance, by any owner or distributor of any copyrighted material that a new device is able to store, reproduce, communicate or perform

The PFF's DeLong argued for a market approach to fair use. "We do not speak of the need for legal doctrines that fine tune the ``balance´´ between automobile manufacturers and drivers. We rely on the interests of all parties in interacting. ... This is, and should be, our model for intellectual property as well. Creators want to create, and they are desperately anxious to find markets for their works. Consumers want access to the works. The fundamental need is not for a ``balance,´´ whatever that might be, but for a working market system."

He also discussed his transaction costs theory of fair use in his written testimony. "The most important issues of fair use, though, fit well into the market paradigm because they revolve around transaction costs. In many situations, the time and effort involved in obtaining permission to use material would be so out of proportion to the value of the use or to any possible harm to the creator that the only reasonable answer is, ``forget it.´´ The concept of transaction costs has received little explicit attention in the cases, but it seems to underlie much fair use analysis."

He added that "if the music company were to offer me a variety of price points, such as paying $20 for a CD that works in a CD player and can be downloaded onto a computer and a personal device, or paying only $15 for one that works only in my CD player, I would change my mind about fair use. The transaction cost rationale would have disappeared, and why should the light user subsidize the intensive one?"

Jonathan Band of NetCoalition (which represents Bloomberg, CNET, Google, and Yahoo) wrote that search engines, software development, and online creativity all rely upon fair use. See, prepared testimony [PDF].

He also argued that Google's scanning of library books under copyright is protected by fair use.

He also addressed digital rights management. "Entertainment companies understandably seek to prevent infringement of their works through the use of digital rights management systems. But such DRMs typically preclude fair uses as well as unlawful ones. As DRMs become more pervasive, Congress may need to consider mechanisms for preserving fair use. Additionally, Congress should exercise great care before mandating DRMs. Such technological mandates will not only limit fair use; they will also impede innovation."

Prudence Adler of the Association of Research Libraries complained that university libraries are negotiating licensing agreements that address activities that might otherwise be fair use activities. She wrote in her prepared testimony [PDF] there has been a notable shift by publishers to license their works to libraries in lieu of the purchase of these works by libraries. Licensing provides publishers with greater control in the use of their works -- how they are used, by whom and at what cost. Licensing access to copyrighted works versus the acquisition of the copyrighted work by libraries presents new challenges to both libraries and their patrons. Under license agreements, a library is bound by the terms of the agreement. These agreements do not necessarily reflect the privileges and exceptions of the Copyright Act such as fair use, preservation and interlibrary loan. For example, if libraries are unable through negotiation to include in the license terms the ability to perform preservation on copyrighted works, libraries can no longer exercise the rights that are otherwise available through the Copyright Act."

She did not state whether or not her group supports legislation that would impair the obligation of contracts.

See also, prepared testimony [PDF] of Paul Aiken, (Authors Guild), prepared testimony [PDF] of Frederic Hirsch (Entertainment Software Association), and prepared testimony [PDF] Gigi Sohn (Public Knowledge).

HR 1201. Rep. Boucher (at right) has been working since 2002 to enact this legislation, without getting to markup.

See stories titled "Reps. Boucher and Doolittle Introduce Digital Media Consumer Rights Act" and "Summary of the Digital Media Consumer Rights Act" in TLJ Daily E-Mail Alert No. 532, October 4, 2002; and story titled "Reps. Boucher and Doolittle Introduce Digital Fair Use Bill" in TLJ Daily E-Mail Alert No. 582, January 14, 2003. See also, stories titled "Chairman Barton Says Commerce Committee Will Mark Up Boucher Doolittle Bill in July", "House Commerce Committee's Primary Jurisdiction Over HR 107", and "Judiciary Committee Leaders Condemn Jurisdictional Power Grab" in TLJ Daily E-Mail Alert No. 924, June 23, 2004. See also, story titled "Reps. Boucher, Doolittle and Barton Reintroduce Digital Media Consumers' Rights Act" in TLJ Daily E-Mail Alert No. 1,111, April 8, 2005.

The bill would do several things. First, it would  require that certain information be placed on the labels of music discs, and that a violation would constitute an unfair or deceptive trade practice within the meaning of the Federal Trade Commission Act (FTCA). However, this is not the more important part of the bill. This provision is what gives the HCC jurisdiction.

Second, the bill would roll back the anti-circumvention provisions of the DMCA. Specifically, it would create fair use exceptions to the bans on circumvention of technological measures to protect copyrighted works. It would also provide an exception for scientific research into technological protection measures.

TLJ spoke with Rep. Boucher about the prospects for markup. He said that "The question really at this point is, can we get a markup of the bill. And, at the moment, we do not have one scheduled. We have said, Joe Barton has said, I have said, to the Motion Picture Association, that if it wants to have a broadcast flag authorized for action by the FCC, that it will need to do that within the context of establishing fair use rights for the purchasers of digital media. And so, the ball at the moment is really in the court of the Motion Picture Association. We are basically waiting for the MPAA to make a decision about whether having the broadcast flag is important enough for them to acknowledge the rights of the purchasers of digital media, and allow fair use rights to continue to thrive. And, we don't have an answer to that yet."