He wants me if he can keep me in line
At issue are a small number of copies which sell DVD "sanitizing" services. The basic model for these companies is pretty similar. They buy a retail copy of a movie, import it into some video editing software, and remove what they find offensive. They then market these as cleaned-up versions of the films, more suitable for young viewers.
It seems to me that there's a blunt copyright violation going on here for those companies which market the videos for sale or rental. You've created an unauthorized copy of the vast majority of the work for commercial purposes. Copyright violation, do not pass go, do not collect any dollars. Yes, all the companies are careful to also buy a retail copy of the movie, to minimize economic harm to the producers, and that is one aspect considered under fair use. But I don't think there's much of a chance it outweighs the fact that they are editing and reselling something which is not theirs to edit or resell.
What, though, of the company which does this on a "subscription" basis? AMC didn't go into enough detail on this business model, unfortunately. But it seems to me that there might be a loophole if what you sell is a "service" instead of a "product." Clearly, I am allowed to make my own cleaned up edit of a movie I personally buy. I don't see why letting someone else do the editing for me would change things. I don't know if it's possible (or practical) to run a legal business in this manner, but I'm curious. (My hunch is that it's allowable, but probably not practical, since the letter of the law would suggest that the movie would have to be recut from scratch for every new clean copy made.)
And then there's CleanPlay, who markets a specialized DVD player and a software DVD with the codes for what portions of the movie might be found objectionable in what ways. (The end user can then decide what to watch... gimme a full order of sex, with a half side of violence, hold the F-bomb.) It works with any regular off-the-shelf DVD (if they've coded it). I just can't see any way this is a violation. Essentially, they're selling an unofficial viewer's guide, but they're not copying the original work. If this is illegal, so are concordances and Cliffs Notes.
So that's the legal end. The IP and artistic end gets hairier.
UPDATE: The President has signed the "Family Entertainment and Copyright Act" (PL 109-9), which expressly makes these sanitizing services legal, particularly the software-based ones. At the same time, there's no protection for the sale or rental of these copies, only for editing them "by or at the direction of a private household." So there's still some undetermined area as far as the business model.
It also increases the penalties on for-profit movie piracy, and prerelease theft, reauthorizes LC's National Film Preservation Board and Foundation, and gives libraries and archives a bit more latitude in dealing with orphan works (i.e. works where we can't locate the copyright holder).
So if you're scoring at home, or even if you're alone, that's Small Conservative Businesses 4, Large Liberal Businesses 2, You 1.