When I first saw “Jaws” it wasn’t exactly the film Steven Spielberg had in mind. That’s because I covered my eyes every time I heard John Williams’ ominous four-note “shark theme,” knowing someone was going to get it.

Fast-forward 30 years. The movie is still terrifying but 21st-century children don’t have to cover their eyes � they can have the DVD player do it for them. DVD players that use technology from a company called ClearPlay can automatically edit movies to remove objectionable content. “Cleaned-up” versions of major films are also available for purchase or rental from a variety of companies, such as CleanFlicks or CleanFilms.

Cleaning up movies is nothing new, of course. Feature films have been appearing in edited form on television for years. But now third parties are getting into the act, creating edited versions without the authorization � or creative input � of the filmmakers or copyright holders.

The editing companies call it freedom, the filmmakers call it censorship and the studios, at least in some cases, call it copyright infringement. Not surprisingly, litigation has ensued.

Last month President Bush signed the Family Entertainment and Copyright Act, which deals in part with the issue. The act has been reported as a congressional rubber stamp on censorship, but though that view makes for eye-catching headlines, it is not particularly accurate. The act has a number of parts, only one of which deals with content editing, and even that part deals only with one aspect of the controversy. In fact, the new law is a hard-fought compromise that takes some issues off the table and leaves others for the ongoing litigation to determine.

Broadly speaking, there are two kinds of companies offering “cleaned-up” movies: editors and filterers.

Companies like CleanFlicks are film editors. They purchase copies of movies, digitize them and have editors cut out those portions the companies deem offensive. Once the master is created, the company makes copies, which it sells or rents to its members.

Making copies of a movie and offering them for sale or rent, of course, is a plain violation of copyright law. To avoid this problem, editing companies buy multiple legal copies of each movie they offer so that they always retain a one-to-one ratio of “cleaned-up” copies to originals. Some editing companies package the original DVD along with the edited copy � sometimes in disabled form � so it is clear that each sanitized copy is backed up by a legitimately purchased original. Under this scheme, the editing companies argue that they cannot be doing harm to content owners. In fact, they assert that, by establishing a new audience for these movies, they are actually increasing revenues to the content owners. This argument ignores the fact that a copyright owner has the exclusive right to create and sell derivative works from its content. If a market exists for cleaned-up movies sold at a premium, the studios argue that it belongs to them, not the editors.

Filtering

Filtering, another technology for providing cleaned-up movie content, is less familiar. The leader here is ClearPlay, which licenses its technology to DVD player manufactures. A ClearPlay enabled player includes proprietary technology that enables the viewer to download “filters” and add them to the player before viewing a movie.

According to ClearPlay, the company has filters for more than 1,000 movies. Once a filter is installed for a particular film, the user can select from 14 different options to control precisely how the movie is displayed. By setting these options, the user can choose to exclude some or all profanity, nudity, violence, drug use and other kinds of content.

Once the filter is set up, the user puts an ordinary, unedited copy of a movie into the player, which edits out those portions the user has chosen to exclude. The editing happens inside the DVD player on the fly. No edited copy is ever made. In fact, ClearPlay does not sell movies at all.

‘Masking’ is a more advanced technology that can change the image on the screen to match a user’s preference.

In a now infamous display of the power of that technology a few years ago, one company showed a revised version of the “nude sketch” scene in “Titanic,” in which Kate Winslet magically appeared, not naked as in the original, but demurely clad in a virtual corset. Hollywood, it appears, was not amused and some commentators have suggested that this demo was one of the sparks for the current litigation. But because masking and filtering occur inside the DVD player and do not result in any actual copying of anything, ClearPlay would seem to be in a better position to avoid an infringement claim than a company that sells edited copies. As described below the Family Entertainment and Copyright Act makes that intuition explicitly a part of copyright law

Two Different ‘Hollywoods’

Commentators often refer to Hollywood as a single entity, but in this case Hollywood’s interests are represented by two different groups: the directors who make movies and the studios that own the copyrights.

These groups have different � though complementary � interests and legal positions. The litigation began when CleanFlicks sued several prominent directors, including Robert Redford, Martin Scorsese and Steven Spielberg, in Colorado federal court seeking a declaratory judgment that its activities were lawful. The suit was a preemptive strike, presumably designed to avoid a similar suit by the directors in California, which CleanFlicks no doubt felt would have been a less sympathetic venue.

The directors counterclaimed for violations of the Lanham Act (for false designation of origin and trademark dilution) and unfair competition under California law. They also moved to join various other content editors and filterers (including ClearPlay) as counterclaim defendants and to be represented by the Directors Guild of America.

Because the directors do not own the copyrights in the works at issue, they moved to join the studios as necessary defendants in the action seeking declaratory judgment of non-infringement. All of these motions were granted and the studios, which had until then avoided this fight, found themselves drawn in.

The studios and the directors are, in fact, slightly differently situated here. The Directors Guild of America complains that the clean-up companies are trading on its members’ names by wrongly associating them with versions of their films that they never approved. The filmmakers claim the re-edited films are generally less powerful or less interesting than the originals.

The guild’s claims are asserted against both the editing companies and the filtering companies, the theory being that filmmakers’ names and reputations are being harmed by their association with these “watered-down” versions.

The rights that these filmmakers are attempting to protect using the Lanham Act are generally referred to as “moral rights.” They include the right of an artist to protect a work after it has been sold. Such rights are a common feature of European copyright laws, but they do not exist in U.S. copyright law.

In the context of editing filmed entertainment, at least one court has held that an artist is entitled to use the Lanham Act to protect these kinds of reputation interests, 1 but in general the theory has not gained much traction in the United States. This would seem particularly true where, as here, the user has sought out edited or sanitized content for private use and so is unlikely to be confused as to the origin of the work.

The studios have a different basis for their Lanham Act claims. Most film editing companies distribute their cleaned-up products in “original” packaging, complete with trademarked studio logos and other identifying marks. The companies that distribute on VHS cassette, rather than DVD, generally record the edited version of the movie directly on to the original cassette, leaving the original label intact. The content, however, has changed.

The studios note that these edited versions are at least “second generation” copies, often from analog sources. Regardless of whether or not the movie has suffered creatively, it often will not meet the high technical standards of picture, sound and (in the case of DVDs) additional features that customers expect from studio product.

This is a fairly ordinary cause of action for trademark dilution under the Lanham Act, and one the studios are likely to win. As noted above, the filtering companies do not sell DVDs or VHS cassettes; they only sell software that modifies movies on the fly to prevent objectionable content from reaching the screen. Thus, the filtering companies do not use any studio trademarks or packaging and are not included in the studio’s Lanham Act claims.

Copyright Claim

The studios’ second claim asserted against the editing and filtering companies is a copyright claim. These companies create and distribute derivative works based on the studios’ copyrighted content and, in the case of the editing companies, make and distribute copies of those derivative works. The creation and sale of derivative works is one of the exclusive rights secured for copyright holders under the Copyright Law 2 and the studios base their copyright claims on the infringement of that right.

Again, this would be a fairly simple claim � at least as to the film editing companies � except that those companies always make sure that each edited copy is backed up with a legitimately purchased original. They thus argue that their activities are protected by the doctrines of fair use and “first sale.”

Fair use, they argue, permits the making of a single copy of each original movie purchased; the first sale doctrine permits the editing and resale or rental of these copies.

First sale is a doctrine that states, generally speaking and with some exceptions, 3 that once you have purchased a legitimate copy of a work in tangible form, you can do what you like with that copy without further permission from the copyright holder.

For example, if I purchase a copy of “Lady Chatterly’s Lover,” tear out the pages containing naughtiness, and resell my expurgated copy I am free to do so under the first-sale doctrine. Whether it is permissible to make a business out of doing this, particularly where it fills a market niche that would otherwise belong to the copyright holder, is a closer question.

The Act and the Litigation

The Family Entertainment and Copyright Act is a four-part amendment to the copyright law, only one part of which deals with these issues. 4 Sections 101 through 105 make it a federal crime to videotape a movie in a movie theater and also greatly increase the criminal penalties for willfully infringing a work “being prepared for commercial distribution” � that is, a pre-release work.

These changes are of major importance to the entertainment industry as they make it much easier to undertake federal prosecutions of the most common and commercially damaging large-scale pirates. Perhaps in exchange for this, ��201 through 202 (the Family Movie Act of 2005) amend the Copyright and Trademark Acts to make it explicit that “the making imperceptible, by or at the direction of a member of a private household, of limited portions of audio or video content of a motion picture, during a performance in or transmitted to that household for private home viewing, from an authorized copy of the motion picture,” or the creation or distribution of technology required to do so, constitutes neither copyright infringement nor, in and of itself, trademark infringement. 5

Thus, the Family Entertainment and Copyright Act addresses only the filtering companies, effectively putting an end to any argument that their conduct violates copyright or trademark law. It does not protect the editing companies. And it does not address the Lanham Act arguments against those companies directed at their allegedly misleading packaging. In fact, it does not even protect the masking companies, as the Family Movie Act explicitly states that adding or substituting material instead of merely rendering it “imperceptible” is not protected.

Thus, the only effect of this legislation is to permit ClearPlay to stay in business � a result that probably would have occurred anyway under existing copyright law.

Of course, there may be unforeseen consequences as well. For example, some digital video recorders give consumers the ability to automatically “skip over” commercials when watching television. At least one court has held, albeit in dicta, that this use constitutes the unauthorized creation of a derivative work and thus could be the basis for an infringement action. 6 The Family Movie Act seems to provide a safe-haven for at least some commercial skipping.

Stephen M. Kramarsky is a member of Dewey Pegno & Kramarsky specializing in complex intellectual property litigation.

Endnotes:

1. Gilliam v. American Broadcasting Cos., 538 F.2d 14, 17-19, 23 (2d Cir. 1976).

2. 17 U.S.C. � 106(2).

3. 17 U.S.C. � 109.

4. The full text of Family Entertainment and Copyright Act may be found at http://www.publicknowledge.org/content/legislation/s167/.

5. The other sections of Family Entertainment and Copyright Act reauthorize the National Film Preservation Board and correct a drafting error in 17 U.S.C. � 108(i).

6. In re Aimster Copyright Litigation, 334 F.3d 643, 647-48 (7th Cir. 2003).