B. Even a Substantial Diminution in the Value of Economic Interests Resulting from a Governmental In his Memorandum Tribe asserts that Congressional enactment of the proposed exemption will result in "losses to the owners of copyrights that are far beyond merely 'substantial 27/ and that such diminution in value constitutes a taking requiring just compensation to the owners. First, Tribe gives no factual support for that assertion and others like it throughout the Memorandum. Second, a substantial diminution in the value of property rights or economic interests does not in itself give rise to a compensable taking under the Fifth Amendment. The Supreme Court reiterated its view on this issue in a recent decision by citing two earlier cases in which the Court had sustained governmental regulations that resulted in diminutions in value of 75 28/ and 87 1/2 percent. As Professor Joseph Sax has observed: "Skepticism about the vitality of the diminution of value test would appear thoroughly justified." 29/ Moreover, the Supreme 28/ Penn Central Transportation Company v. City of New York, 438 U.S. at 131. 29/ Sax, Takings and the Police Power, 74 Yale L.J. 36, 44 (1964). After analyzing relevant Supreme Court cases, Professor Sax concluded: Court has recently reiterated that even though governmental action prevents "the most profitable use" of private property, "that is not dispositive" because "a reduction in the value of property is not necessarily equated with a taking." 30/ According to Professor Michelman, to determine whether a governmental action constitutes a compensable taking it is necessary to focus on the interest "injuriously affected" and to inquire what proportion of its value is destroyed: "If this proportion is so large as to approach totality, compensation is 31/ due; otherwise, not." In his Memorandum Tribe has not offered any substantiation for his assertions that the value of existing copyrights would be diminished by the proposed exemption; and (Footnote Continued) Id. at 53. 30/ "The diminution of value test gives a highly Andrus v. Allard, 444 U.S. 51, 66 (1979). See also Mugler v. Kansas, 123 U.S. 623, 664 (1887); United States v. Central Eureka Mining Company, 357 U.S. at 168. certainly there is no proof that the exemption for private use of VCR technology would result in the total destruction of the value of the copyrights. The Supreme Court has rejected mere speculation on the effect of governmental action on the marketability of 32/ property interests as the basis for a compensable taking.the next part, this memorandum directly challenges Tribe's factual assumptions about the effect of the proposed exemption on the economic interests of existing copyright holders. C. Economic Interests of Existing Copyright In In asserting that adoption of the proposed exemption would substantially dilute the value of the copyright holders' economic interests, Tribe fails to acknowledge two primary facts, while conceding a third, which suggest that no such dilution in value would result. First, there are a number of noninfringing uses of VCR technology for home movies, recording of noncopywritten material, playing of noninfringing video cassettes purchased or rented for that purpose, and industrial purposes have any impact on the value of the existing copyrights. - - none of which Second, 32/ Village of Euclid v. Ambler Realty Company, 272 U.S. at 96-601 0-82--10 as Tribe concedes, time-shifting technology - - the primary use for VCR will increase rather than decrease the size of television audiences.33/ Finally, and most significantly, copy right holders can negotiate with distributors and television networks for sufficient compensation to account for the use of VCR technology. In fact, the Nielsen television program rating system currently reflects actual VCR usage so that relevant information is available to permit such negotiations in the 34/ marketplace; and such information on VCR usage can be easily augmented. Because the marketplace can effectively operate to compensate copyright holders for VCR usage, a compulsory licens35/ ing or royalty scheme, which Tribe seems to favor,- would 33/ Tribe Memorandum at 22. The widespread use of VCRs for time shifting was acknowledged by a television network executive who stated in a recent issue of a news magazine: "With their recorders, people are assuming more control over their TV sets. Newsweek, Feb. 22, 1982, p.77. 34/ Professor Tribe incorrectly asserts that "there is no reliable way for advertisers to establish" VCR usage. Tribe Memorandum at 13. 35/ Id. at 20. Tribe's conclusions about the "success" of the Copyright Royalty Tribunal in compensating copyright holders are directly contrary to the views of the Tribunal's chairman, who has recommended its abolition, Copyright Office, The U.S. Patent and Trademark Office, and the Copyright Royalty Tribunal, Oversight Hearings Before the Subcommittee on Courts, Civil Liberties and the Administration of Justice of the House Committee on the Judiciary, 97th Cong., 1st Sess. 53 (1981)(testimony of Clarence L. James, Jr., Chairman, Copyright Royalty Tribunal), and the U.S. General Accounting Office, which has advised Congress of substantial problems in the organization result in twice-payment to copyright holders, costs that would be passed on to consumers of television broadcasting. The first payment would be in the form of increased prices for products to cover additional advertising costs. Such costs would be imposed by broadcasters because of larger television audiences that would result from VCR time-switching. The second payment would be like a tax in the form of the royalty or license fee imposed on video tapes or VCR equipment. Professor Sax has observed that "the costs of accommodating conflicting claims on the common resource network need not be 36/ borne by the public as a matter of constitutional law. One way of resolving the conflicting claims, according to Professor 37/ Sax, is through private negotiations. Such an approach can work where, as here, adequate information is available about the market, which allows distributors, broadcasters, advertisers, and copyright holders to negotiate compensation for VCR usage. Overlaying a royalty payment scheme on top of the operation of the market would result in a windfall for copyright holders. (Footnote Continued) and operation of the Tribunal. Id. at 94-102 (statement of Wilbur D. Campbell, Deputy Director, Accounting and Financial Management Division, General Accounting Office). 36/ Sax, Takings, Private Property and Public Rights, 81 Yale L.J. 149, 177 (1971). |