MARLON Brando sits in the back of a taxi cab, close up against Rod Steiger. He's wearing a checked zipper and the skin around his eyes looks scarred; Steiger cuts a finer figure in hat, scarf, long coat and leather gloves. They talk about ambition, about work, about testifying in court. They argue and Steiger pulls a gun. Brando's face runs a gauntlet of emotions: surprise, disbelief, disappointment, a touch of pity. This is his brother, the man he has looked up to all his life. But it's also the man who destroyed his boxing career by persuading him to take a dive in a bout he could easily have won. Brando works up the rhythms of the dialogue, gesturing with his hand in front of his face.

"You don't understand. I could've had class. I could've been a contender. I could've been somebody, instead of a bum, which is what I am."

Certain lines of movie dialogue immediately sail off the silver screen and into the public consciousness. This, from On The Waterfront, is one of them. It's a beautifully cadenced short speech that somehow entirely embodies the tarnishing of the American Dream and one man's hard-won acceptance of the cards fate has dealt him. It is, anyone would argue, a truly fine piece of writing. And yet, if you read Brando's autobiography, Songs My Mother Taught Me, you would be given to believe that it's something he and Steiger whipped up on the spot.

"We did the scene his way several times," Brando writes, "but I kept saying, It just doesn't work, Gadg the nickname of director Elia Kazan, it really doesn't work.' Finally he said, All right, wing one.' So Rod and I improvised the scene and ended up changing it completely. Gadg was convinced and printed it."

The 1955 Oscar for Best Writing, Story and Screenplay, sitting today in the Martha's Vineyard home of Budd Schulberg, begs to differ. So too do the typed lines of dialogue on copies of the original shooting script. The words are undoubtedly Schulberg's, even if the performance - considered by many to be one of the greatest in screen history - is incontestably Brando's.

"Marlon did not improvise it," the writer, now 94 years old, has confirmed. "That's a grand myth. During the filming, he would improvise a word here and there, but he didn't change lines. He was good about it The scene was intact before we sent him the script."

While most actors would jump at the opportunity to mouth Schulberg's famous dialogue, few would relish the prospect of stepping into Brando's shoes. That, however, is currently the task facing Simon Merrells, who stars in a stage version of On The Waterfront, adapted from the original screenplay by Schulberg and Stan Silverman, and directed by Steven Berkoff.

Before transferring to the Pleasance as part of the Edinburgh Festival Fringe, this production premiered at Nottingham Playhouse, picking up excellent reviews in favour of Berkoff's distinctive, slow-motion, physical theatre techniques. Perhaps it's a smart move to opt for a stylised ensemble approach, given that the film features stand-out individual performances - not only Brando and Steiger, but Karl Malden, Lee J Cobb and Eve Marie Saint - and is imbued with a black-and-white, on-location sense of reality. In the theatre, it's impossible to see close-up the emotions as they play on the screen actors' faces. But, 54 years on, the dialogue remains the driving force of the story.

And yet for many Hollywood insiders, film historians and political commentators, that dialogue carries a stigma. On The Waterfront was made only a few years after Schulberg and director Kazan testified before the House Un-American Activities Committee (HUAC) at the height of America's anti-Communist hysteria. Unlike several of their peers, they "named names" as friendly witnesses. Careers were blighted and people were blacklisted; Schulberg and Kazan continued working, but were ostracised by many in the industry.

It's possible to read the film as a vindication of those who inform to the authorities. The target in the story is Mafia control of the longshoremen's union, but Brando's character, Terry Malloy, becomes a hero because he shrugs off pressure from friends and turns some of them in to the police. Considered on a wider level in the context of the HUAC hearings, the film becomes, for some viewers, a glorification of the squealer and its eight Oscar wins a reward from a cowardly, "purged" Hollywood.

Even decades later, when Kazan was given an Honorary Lifetime Achievement Award at the 1999 Oscars, some in the audience - including Steven Spielberg, Nick Nolte and Holly Hunter - either refused to applaud or to join the standing ovation. Schulberg, by his own admission, has had it easier over the years.

Schulberg has said: "Even though the academy's committee voted unanimously to give Kazan the award, I worried about how he'd be received. I felt he should have said more. I wish he had been up there longer. Those who sat there didn't know the story, couldn't have known what it was like."

Schulberg's testimony before HUAC can in no way be interpreted as evidence of right-wing sensibilities. A lifelong Democrat (who had indeed joined the Communist Party for a spell during the 1930s), he better than most knew about the evils of Stalinism at the time. His father was BP Schulberg, head of Paramount Pictures and a rare liberal among the Hollywood elite; his mother was Adeline Jaffe, sister of film producer Sam Jaffe and a tireless charity worker among the poor, who had visited the Soviet Union in 1931. The young Budd was a fan of Russian writers such as Maxim Gorky and Isaac Babel. He contends to this day that his HUAC cooperation was driven, in part, by the knowledge that the writers he admired had been killed or silenced by Stalin.

Even before his 1951 hearing, Schulberg had surely proved his patriotic allegiances to the Stars and Stripes. As a US serviceman at the tail end of the second world war, he worked with director John Ford, assembling Nazi film footage of atrocities, including gassing in a concentration camp in Belarus, to be used in evidence at the Nuremberg trials. He was also given the task of arresting German film-maker Leni Riefenstahl - director of Triumph Of The Will - at her Bavarian chalet.

"I tried to calm her down," was how he described the scene a few years ago. "She gave me the usual song and dance. She said, Of course, you know, I'm really so misunderstood. I'm not political.'"

Marlon Brando, Communist witch-hunts, Nazi concentration camps, Leni Riefenstahl already a picture is building of a life less ordinary. But this doesn't cover the half of it where Budd Schulberg is concerned; he and key moments in 20th-century history are close companions. The young Hollywood prince got a job as a junior writer working with a declining F Scott Fitzgerald in the 1930s. In 1941, at the age of 27, he wrote What Makes Sammy Run, perhaps the best novel ever to get behind Hollywood's boardroom doors, even if its painful truths lost him his job at MGM. Legends abound concerning his stand-up fights with Ernest Hemingway and John Wayne. Verbally, he could also go toe-to-toe with Dorothy Parker at the Algonquin.

Aside from On The Waterfront, he wrote another classic screenplay, A Face In The Crowd (1956), and two novels, The Harder They Fall (1947) and The Disenchanted (1950). He set up an inner city writers' workshop after the 1964 Watts Riots. He was at the Ambassador Hotel in Los Angeles waiting for Robert Kennedy the night the presidential candidate was assassinated and was one of the people who caught hold of the killer, Sirhan Sirhan. As a boxing correspondent, he became friends with Muhammad Ali, supported the champ when he was stripped of his title over his protest against participating in the Vietnam war and had a ringside seat at the famous Rumble in the Jungle in Zaire. He also writes on the sport for the Sunday Herald.

Given the undeniably liberal bent of so much of Schulberg's career, and the fascination with human morality and the corruption of the spirit that runs through his work, perhaps Terry Malloy is not the key to unlocking On The Waterfront. Perhaps Brando's performance and those dominating lines divert our attention from Father Pete Barry, played by Karl Malden.

This character is based on a real Jesuit priest, John Corridan, who introduced Schulberg to the waterfront bars where the writer did his hands-on research, spending time swapping stories and listening intently to the longshoremen in the Chelsea area of New York City. The no-nonsense, chain-smoking, crusading priest opened Schulberg's eyes further to the corruption and racketeering that terrorised the working lives of the men at the docks.

"We've learned now that the International Longshoreman's Association was totally in the hands of the mob," Schulberg once explained. "They were killers and thieves. Corridan was really filling a vacuum and trying to guide the rebel longshoremen into making some effort to win back their young and make a real living. This went on for several years and I hung in with these people. I love these people "

Consider another scene from On The Waterfront, one less lauded in movie history than Brando's "contender" speech. Malden stands up after performing the last rites for a man killed "accidentally" when a load crushes him in the hold of a ship. He begins to speak as the workers stand around, leaning on crates of Irish whiskey. "Some people think the crucifixion only took place on Calvary," he says. "They'd better wise up. Taking Joey Doyle's life to stop him from testifying is a crucifixion. Dropping a sling on Kayo Dugan because he was ready to spill his guts tomorrow - that's a crucifixion. And every time the mob puts a crusher on a good man and tries to stop him doing his duty as a citizen - it's a crucifixion."

He gets into his stride as a preacher, but is shot from above, from behind the heads of the dockers, out on his own as a couple of stones are thrown at him. A close-up of Brando's face shows that Terry Malloy's conscience is starting to stir. "Boys," intones Malden, "this is my church and if you don't think that Christ is down here on the waterfront, you've got another guess coming." Emotions escalate, Brando throws a punch at a heavy, and the priest's part in setting Malloy on a new road is complete.

Schulberg, a Jewish writer, gets to the spiritual heart of the story via a Catholic character. "Eighty per cent of it is Corridan's words," he admitted during a lecture a few years ago. "All I did was put it in a more dramatic context." Unlike Brando in his autobiography, Schulberg gives credit where it is due.