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November 18, 2005, 8:00 AM ET, Alert No. 1,256.
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House Commerce Subcommittee Holds Hearing on Fair Use

11/16. 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).

Rep. Rick BoucherHR 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."

More News

11/17. The Senate Commerce Committee (SCC) amended and approved S 687, the "Software Principles Yielding Better Levels of Consumer Knowledge Act". This bill, which is also known as the SPY BLOCK Act, pertains to spyware and other matters. See, SCC release.

Abernathy to Leave FCC

11/17. Federal Communications Commission (FCC) Commissioner Kathleen Abernathy announced that she will resign, effective December 9, 2005. President Bush has not yet nominated a replacement.

Kathleen AbernathyAbernathy (at right) used her resignation announcement [PDF] to articulate and advocate certain general principles regarding regulation of markets. However, she did not dwell on instances in which the FCC departed from these principles.

For example, she advocatedg "relying on competition, rather than regulation, as the best means of assuring that consumers get the telecommunications services they want at affordable rates."

She also wrote that "regulation is most effective when it deals with markets as they are -- not as they might once have been, and not as we would ideally like them to be".

She also wrote that "competitive markets depend on empowered consumers. Where consumers have choices, and the ability to make them, pervasive regulation is unnecessary. In line with this realization, we targeted regulation to those comparatively few situations in which marketplace competition and informed consumer choice do not increase consumer welfare."

She added that "For that reason, we have taken steps to make sure that emergency communications work reliably for us and for those who protect us, and we have provided parents with the information and tools needed to control their childrens’ multichannel TV viewing choices."

The FCC, in its May order regarding VOIP and 911, deprived consumers of the choice of whether or not to purchase E911 services with VOIP service.

The remaining three Commissioners all issued statements in which they praised her.

FCC Chairman Kevin Martin stated in a release [PDF] that "I have enjoyed working with Commissioner Abernathy since we joined the Commission together over four years ago. She has made valuable contributions to the agency during her tenure, and we have all benefited from her extensive knowledge of the communications industry."

Commissioner Michael Copps issued a release [PDF], and Commissioner Jonathan Adelstein issued a release [PDF], in which they praised Abernathy's personal qualities and character.

People and Appointments

11/17. The Senate Commerce Committee (SCC) approved the nominations of William Kovacic and Thomas Rosch to be a members of the Federal Trade Commission (FTC), by unanimous consent. See, SCC release.

11/17. President Bush nominated Richard Crowder to be the Chief Agricultural Negotiator at the Office of the U.S. Trade Representative (USTR). See, White House release.

Washington Tech Calendar
New items are highlighted in red.
Friday, November 18

The House may meet subject to the call of the Chair. See, Republican Whip Notice.

The Senate will meet at 9:00 AM for morning business. It will then consider HJRes 72.

9:00 AM - 4:00 PM. The Federal Communications Commission's (FCC) Consumer Advisory Committee will meet. See, FCC notice and agenda [PDF] of November 14, 2005, and notice in the Federal Register, October 26, 2005, Vol. 70, No. 206, at Page 61823. Location: FCC, 445 12th Street, SW.

10:00 AM. The House Ways and Means Committee will meet to HR 4340, the "United States-Bahrain Free Trade Agreement Implementation Act". Location: Room 1100, Longworth Building.

TIME? The Senate Finance Committee will meet in executive session immediately following a vote on the Senate floor to vote on S 2027, the "U.S.-Bahrain Free Trade Agreement Implementation Act". Location: __.

10:00 AM. The Senate Commerce Committee (SCC) will hold a hearing titled "Future of Science". The witnesses will be Peter Agre (Duke University), Eric Cornell (National Institute of Standards and Technology), James Heath (California Institute of Technology), and Samuel Ting (Massachusetts Institute of Technology). The SCC stated in a release that these witnesses will "address concerns that the U.S. is slipping in research, technology innovation, and education". Press contact: Melanie Alvord (Stevens) at 202 224-8456, Aaron Saunders (Stevens) at 202 224-3991, or Andy Davis (Inouye) at 202 224-4546. Location: Room 562, Dirksen Building.

10:00 - 11:30 AM. The Center for Democracy and Technology (CDT) will hold a briefing on the status of data security bills pending in the Congress. A late breakfast will be served. The speakers will be Ari Schwartz, David Sohn and Nancy Libin, all of the CDT. RSVP to David McGuire at dmcguire at cdt dot org or 202 637-9800 x106. Location: CDT, conference room, 11th floor, 1634 I St., NW.

12:00 NOON - 2:00 PM. The Progress and Freedom Foundation (PFF) will host a panel discussion titled "Gutenberg meets Google: The Debate About Google Print". The speakers will be Alan Davidson (Google), Allan Adler (Association of American Publishers), Keith Kupferschmid (Software & Information Industry Association), and Solveig Singleton (PFF). See, notice and registration page. Location: Room B-369, Rayburn Building, Capitol Hill.

Saturday, November 19

? The House may meet to take up motions to appoint conferees, and to approve conference reports. See, Republican Whip Notice.

Monday, November 21

2:00 PM. The Information Technology Association of America (ITAA) will host a webcast event titled "China Transactions: The IP Paradigm". The speakers will be Chris Cooper & Ken DeWoskin of Price Waterhouse Coopers. See, notice. For more information, contact Mark Uncapher at muncapher at itaa dot org.

Deadline to submit nominations to the Department of Commerce's (DOC) Technology Administration for its 2006 Commerce Science and Technology Fellowship (ComSci) Program. Only full time career federal employees in a professional or management series at the GS/GM-13 level or above are eligible. See, notice.

Tuesday, November 22

1:00 - 2:00 PM. The National Science Foundation (NSF) National Science Board will meet. The Board will discuss a report [12 pages in PDF] titled "National Science Board 2020 Vision for the National Science Foundation". See, notice in the Federal Register, November 16, 2005, Vol. 70, No. 220, at Pages 69604 - 69605. Location: NSF, Public Meeting Room 120, 4201 Wilson Boulevard, Arlington, VA.

Wednesday, November 23

Deadline to submit comments to the Internal Revenue Service (IRS) regarding its notice of proposed rulemaking (NPRM) regarding the source of income derived from international communications activity. See, notice in the Federal Register, September 19, 2005, Vol. 70, No. 180, at Pages 54859 - 54878.

Thursday, November 24

Thanksgiving Day.

There will be no issue of the TLJ Daily E-Mail Alert.

If the House has not already adjourned, the House will not meet from Thursday, November 24, through Friday, December 2.

The Federal Communications Commission (FCC) and other federal offices will be closed. See, Office of Personnel Management's (OPM) list of federal holidays.

Friday, November 25

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding closed captioning rules for video programming. See, notice in the Federal Register, September 26, 2005, Vol. 70, No. 185, at Pages 56150-56157. This NPRM is FCC 05-142 in CG Docket No. 05-231.

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to the notice of proposed rulemaking (NPRM) regarding the the specific relocation procedures applicable to Broadband Radio Service (BRS) operations in the 2150-2160/62 MHz band, which the FCC previously decided will be relocated to the newly restructured 2495-2690 MHz band. The FCC also seeks comment on the specific relocation procedures applicable to Fixed Microwave Service (FS) operations in the 2160-2175 MHz band. This NPRM is FCC 05-172 in ET Docket No. 00-258. See, notice in the Federal Register, October 26, 2005, Vol. 70, No. 206, at Pages 61752 - 61762.

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