PUBLIC HEARING
                                
                          at
       The University of California, Los Angeles
                Los Angeles, California
                                
                  September 16, 1994
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
         Information Infrastructure Task Force
        Working Group on Intellectual Property

Bruce A. Lehman, Assistant Secretary of Commerce and Commissioner 
                of Patents and Trademarks, Chair 
                     P R O C E E D I N G S
                                     

MR. LEHMAN:  If I can have your attention, I think we're about 
ready to get underway.  The materials at the desk indicated that 
we would have opening remarks from 9:00 to 9:30, but I think that 
we came here to hear the witnesses today, not for them 
particularly to hear us.  So that's why we're giving ourselves a 
little bit of wiggle room here and we're starting at 9:10 instead 
of 9:00.  But I would like to make an opening statement about the 
hearings.  And first I'd like to start out by thanking UCLA for 
giving us this facility and providing parking, which is a rare 
commodity here in Los Angeles for us.  In this great institution, 
which is really in the heart of the area where the entertainment 
industry is on the West Coast, and very appropriate that we are 
here in this setting, and in a neutral setting like a university. 


     The Working Group on Intellectual Property Rights, which I 
chair, was established as part of the White House Information 
Infrastructure Task Force, set up by President Bill Clinton.  The 
Task Force is chaired, the whole Task Force, by Secretary of 
Commerce, Ron Brown, and has been created to articulate and 
implement the President's vision for the National Information 
Infrastructure.  Our Task Force is working with the private 
sector, public interest groups, Congress, and state and local 
governments to develop comprehensive telecommunications and 
information policies and programs that best meet our country's 
needs.  

     The preliminary draft of the report of our Working Group on 
Intellectual Property Rights is a Green Paper which I presume 
most of you have seen.  We've already distributed about 3,000 
copies of it.  This Green Paper is really our Working Group's 
first cut at examination and analysis of the intellectual 
property implications of the National Information Infrastructure.  
And let me say that this report was drafted after we began the 
whole process last fall with hearings and a public comment 
period.  We heard from over 60 members of the public.  And we had 
bi-weekly meetings of over 20 federal agencies who were part of 
the Working Group, which consists completely of federal 
officials.  And then we drafted this Green Paper.  And now we're 
having public hearings on it.  And it's interesting to me that 
we're finding a lot more specificity now in people's 
recommendations to us than last fall when we had just general 
public hearings.  So it's clear that already this Green Paper has 
really focused a lot of attention on these issues from interested 
participants in the United States.  And that's exactly what its 
purpose was. So, I think we're already achieving some success in 
our work.  And I'm sure that we'll achieve more after today's 
hearings when we get even more input from the public. 

     The Working Group, as I mentioned, issued our preliminary 
draft to solicit public comment.  And that's exactly what these 
hearings are about today; they're part of getting that public 
comment.  We've also asked for written comments, and we have 
already received a lot of those and I'm sure we'll receive more.  
We're having another set of hearings next week in Washington.  We 
had hearings on Wednesday in Chicago, hearings today in Los 
Angeles, and we'll be having hearings next week in Washington.  
And following these hearings, we will analyze the testimony that 
we've received and all the written comments so that we can take 
proper account of them in preparing our final report.  So we'll 
turn this Green Paper into, I don't know, I guess a white paper 
-- a final report that will take preliminary off the title so 
that we can -- and then we will have the input from as many 
people as possible.  We hope to produce that final report early 
next year -- hopefully shortly after the beginning of the year.  

     The National Information Infrastructure has the potential to 
make information and entertainment resources available quickly 
and economically anywhere in the country in the blink of an eye.  
Hundreds of channels of television programming, thousands of 
musical recordings, and millions of magazines and books, can be 
made available to homes and businesses around the United States, 
and eventually around the world.  Maybe I shouldn't say 
eventually, I think right now around the world.  It can improve 
the nation's education and health care systems.  It can enhance 
the ability of U.S. firms to compete and succeed in the global 
economy, generating more jobs for our citizens. New job 
opportunities can also be created in the processing, organizing, 
packaging and dissemination of the information and entertainment 
products that flow through the National Information 
Infrastructure.  And our job in government is to ensure that 
these potentialities are realized, that's why President Clinton 
set up this Task Force.  It was part of his promise to the 
American people to focus like a laser beam on our economy.  And 
we're focusing on this part of it, to try to tune the dials of 
public policy to make certain that this Information 
Infrastructure is all that it can be. 

     The NII of course is not just hardware.  It's not just 
computers, telephones, fax machines, cameras, scanners, 
keyboards, monitors, printers, etc.  The real significance of the 
NII, and I'm a little prejudiced on that perhaps as the 
intellectual property person in the Administration, but the real 
significance of it lies in the content moving through it.  But 
its potential will not be realized if that content is not 
protected effectively.  Owners of intellectual property rights 
will not be willing to make their intellectual property available 
in the National Information Infrastructure unless appropriate 
systems, both in the U.S. and in other countries, are in place to 
permit them to set and enforce the terms and conditions under 
which their works are made available.  Likewise, the public will 
not have the use of the NII, the full use, and generate the 
market necessary for its success unless a wide variety of works 
are available under equitable and reasonable terms and conditions 
and the copyright integrity of those works in ensured.  And this 
really goes to the issue of access.  The President and the 
Vice-President are very concerned about providing access, the 
full benefits to the widest number of people.  But they will not 
have that access unless we have a workable intellectual property 
system that assures that there will be content moving through the 
NII. 

     The principle recommendations of our preliminary report fall 
into three areas --  law, technology and education.  A brief 
identification of the recommendations is as follows:

     First, the principle legal conclusion in the area of law is 
that generally the existing copyright law is in good shape to 
deal with most of the issues that are likely to arise in the NII.  
Our copyright law is flexible to meet these needs.  However, we 
have identified a few important clarifications or modifications 
that we think would improve the situation.  

     Therefore, the preliminary report recommends first that we 
ensure that the delivery of copies of works, or phonorecords, via 
electronic transmission is an act of distribution -- so that it's 
not somewhere out in never never land.  

     Secondly, we believe that the law should be amended to 
prohibit devices or services that can defeat -- without 
authorization of a copyright owner or the law, I should add -- 
security measures that are intended to protect works of 
authorship in the National Information Infrastructure. 

     Thirdly, we have tentatively recommended to prohibit the 
introduction of fraudulent copyright management information or 
the fraudulent removal or modification of such management 
information. 

     In addition, we have recommended that Congress provide a 
performance right for sound recordings in the digital 
environment. 

     Fifth, we've acknowledged that fair use and related rights 
under Section 107 and 108 of our existing copyright law are 
extremely important to educators and librarians in order to 
provide them adequate access to works.  And therefore we have 
recommended that a conference on fair use be convened, which will 
be convened later this month in Washington, D.C. to develop 
guidelines on how fair use will apply to the digital environment. 

     Sixth, we do not believe that any further compulsory 
licenses are necessary or desirable in the context of the 
National Information Infrastructure.  

     And finally, we recognize the essential need to work at the 
international level to ensure that levels of protection are 
harmonized throughout the world and to ensure that the emerging 
Global Information Infrastructure will succeed as well as our 
National Information Infrastructure. 

     With regard to technology, our Working Group has tentatively 
recommended that where standards are needed that there should be 
no diminution of intellectual property rights or protection in 
the process of setting those standards.  

     With regard to education, our Working Group will sponsor a 
second conference after the fair use conference on intellectual 
property education.  The purpose of that conference will be to 
try to begin the process of developing curricula that may be used 
in schools and libraries.  Additional means of education, 
particularly those that use the NII itself, will also be explored 
and developed.  Participation in this conference, like the fair 
use conference, will be by invitation with principle groups that 
are interested and involved invited.  But of course all of these 
proceedings, as are these hearings today, will be open to the 
public.

     Today's hearing will focus on all of these issues that I've 
just described and will give participants an opportunity to air 
their views on the preliminary report and its recommendations.  
I'd like to say that the Working Group consisted of over 20 -- 
representatives of 20 departments and agencies of the federal 
government.  And in the interest of economy we haven't brought 
representatives of all 20 agencies here.  

     We have here today -- I'd like to take this opportunity to 
introduce the people from Washington who are here with me.  Terri 
Southwick is on my left.  She is the attorney on my staff who was 
the principle draftsperson of the Green Paper.  And she'll be 
available during the breaks to talk to people about it.  On my 
right is Michael O'Neil, who is handling all of the 
administrative matters for this hearing.  And if you have any 
problems involving that, or follow up involving that, you can see 
him.  In the back of the room I'd like Ruth Ford to stand up.  If 
there are any press people here, Ruth is our press officer.  And 
she'll be happy to help facilitate any of those inquiries. 

     Even though we had a large number involved in this, only the 
four of us came.  We are very interested in not wasting public 
funds and so -- but I want to assure you that the testimony will 
be transcribed today.  We have a court reporter here.  And it 
will be available to all of the members of the Working Group in 
all these 20 agencies to study and read.  And before we make 
final decisions on the final report they will have all had access 
to it. 

     A list of today -- because of the number of participants we 
have, we had to obviously put some time constraints on people's 
speaking time.  And so we've asked each speaker to limit their 
remarks to maximum of twelve minutes.  And this is necessary to 
assure that everybody can get their fair shake here.  I would say 
though that, to the extent that you can offer all of your remarks 
in less than twelve minutes that would be helpful, because it's 
nice to have a dialogue and give us an opportunity to ask 
questions.  And if there are questions that we have to ask, we'll 
ask them even if it goes over the twelve minute period.  But we 
are going to try to stick pretty much to our schedule.  We'd like 
to, and we've been pretty successful at that thus far in this 
process.  It would be helpful to give us a few minutes so that we 
can follow up with you. 

     A list of the witnesses was available out in the foyer.  And 
we have a schedule there.  Now, that schedule gives approximate 
times.  And so we would request that all the speakers be 
available at least a half hour earlier than the time scheduled -- 
because sometimes we have people that don't show up, 
cancellations, last minute cancellations, and we have to move the 
schedule up -- or of course a half hour later in case we get a 
little bit behind on our schedule. 

     Now I would appreciate it very much if each participant 
would begin their testimony -- I'm going to introduce you, but if 
you would help us also by identifying yourselves, give your name, 
and the organization that you are representing, if any.  Of 
course, it's perfectly fine just to represent yourself, too.  If 
time allows, as I indicated, we will try to ask questions.  And 
in our hearings in Chicago on Wednesday I think we had a nice 
dialogue and it all worked out pretty well. 

     Now we have a computer screen here on the stage that is in 
view of the witness at the podium here.  And it will serve as a 
traffic light.  When the green screen is lit you can start 
testifying and presenting your oral remarks.  And that green 
screen will be displayed for about ten minutes, or for ten 
minutes.   And then at the ten minute mark the amber, yellow 
light will come on and that will let you know that you have two 
more minutes.  And so hopefully you should start concluding or 
summarizing your remarks.  And then when the red light is on, 
we'd really like you to bring your remarks to an immediate close 
if you would -- unless we're engaged obviously in a dialogue 
where it's our fault that we've moved the time over. And then of 
course you can leave the podium and let the next person come 
forward.  If you have any questions on this hearing, or want to 
submit any written statement -- we didn't require that people 
submit written statements with their testimony, but we'd be happy 
to have them if you haven't already given them to us.  So I hope 
you'll contact Michael O'Neil, sitting right here, and make 
certain that he gets a copy of those written remarks.  

     The transcripts of the hearing will be available in about 
two weeks time.  And if you want to get a copy of the transcript 
please write or send a fax message to us to the attention of 
Michael O'Neil or Terri Southwick.  And their telephone number is 
703- 305-9300.  I would suggest that if you have some 
administrative things involving sending materials that you get in 
contact with Michael and not Terri.  If you have sort of 
substantive problems about this then you can talk with Terri.  
And their fax number is 703-305-8885.  The transcripts also will 
be available through the Internet on the IITF bulletin board, 
which is cited in the Green Paper.  And I'm not quite certain 
when we'll get those into the Internet, but we do intend to do 
that.  Copies of the transcript, and also of the written comments 
that have been submitted, and we have quite a few of them 
already, will be available for inspection in our Scientific and 
Technical Information Center, which is located in room 2C01 at 
2021 Jefferson Davis Highway in Arlington, Virginia, which is our 
headquarters.  

     That pretty much describes the background and the rules of 
the road here for these hearings.  I again want to thank UCLA for 
being such a fine host and offering us these very spacious and 
fine facilities.  And with that, I'd like to -- I think we're 
just at the scheduled opening time for the first witness, and I'd 
like to ask George Vradenburg, Executive Vice President of Fox, 
Incorporated, from right here in Beverly Hills, California, to 
come forward. 

GEORGE VRADENBURG:  Good morning, Mr. Chairman, Ms. Southwick, 
Mr. O'Neil.  My name is George Vradenburg.  I am Executive 
Vice-President of Fox, Inc.  Fox, Inc., just for purposes of 
background, is the parent company of Twentieth Century Fox, The 
Fox Broadcasting Company, Fox televisions stations, the FX cable 
networks, Fox Interactive, a sister company of Star Television, 
which is a Pan-Asian satellite network company operating out of 
Hong Kong, a sister company of TV Guide, Harper-Collins, Delphi 
Internet Services Corp., which is a computer on-line service 
company, and B Sky B, which is a U.K. satellite network company.  
Fox and its owned affiliated companies are vitally dependent for 
their health and growth on the strength of intellectual property 
regimes around the world.  Fox, as part of the MPAA, has 
submitted written comments through the Creative Incentive 
Coalition.  I won't repeat those here this morning.  Delphi 
itself has submitted comments through a computer on-line services 
company.  I won't repeat those here this morning. 

     As you know, Mr. Chairman, the United States copyright 
industries are one of the healthiest and fastest growing sectors 
of the American economy.  In 1991 the core copyright industries 
accounted for over $20 billion in revenues, 3.6 percent of the 
gross domestic product.  In recent years those industries have 
grown at close to three times the rate of the economy as a whole.  
Total copyright industry employment in 1991 stood at close to 
five percent of all U.S. employment.  And those industries 
delivered nearly $40 billion in foreign sales, a performance 
exceeded only by the aerospace and agricultural industries. 

     The strength and performance of our copyright industries is 
no doubt driven by America's culture of creativity, innovation 
and flexibility.  It is also driven, I submit, in significant 
part, by an intellectual property rights regime that promotes 
those values.  Our copyright laws effectively balance and promote 
the values of art and commerce by providing incentives not only 
for creativity and innovation, but also for the rapid 
commercialization and wide dissemination of original works of 
expression.  Our laws do this in several ways.  First by 
providing strong protection for original works of expression.  
Second, by providing to creators of original works, broadly 
defined and powerful exclusive rights of exploitation.  Third, by 
making available strong civil and criminal enforcement 
mechanisms.  Fourth, by encouraging in some cases mandating 
technological means of preventing unauthorized uses or 
reproductions.  Finally, and importantly in my view, our laws 
encourage the private transferability of the rights of copyright.

      Let me spend just one moment discussing this last point, 
because I believe it is the keystone to the power of our 
copyright regime.  The ability of individual rights holders, be 
they directors, writers, performers, musicians, or literary 
authors, to convey by contract their economic and other rights to 
a single rights holder creates I think a system of tremendous 
value and flexibility.  The value to the individual artist, who 
can sell all the fruits of his creative labors, or her creative 
labors, to others better able to exploit the values in his or her 
creation.  Value to those in whom the rights are concentrated who 
can combine the creative fruits of many individual creators 
without fear that any one individual can prevent the exploitation 
of the work of the others. 

     Flexibility to all rights holders in permitting the creation 
and exploitation of libraries of works in innovative ways 
unforeseen when the works were created without the necessity of 
re-clearing the rights.  Value and flexibility to consumers and 
to society in having available an increasing array of products 
and services embodying the works of our creative artists.  Under 
this country's laws the management of these rights is handled 
efficiently by private contract, individually or collectively 
bargained.  For the most part we do not employ collecting 
societies, which drain off resources into overhead and 
administration.  Resources which would otherwise be available for 
investment in new audio visual products.  And under our laws 
difficult creative issues, including those of paternity and 
integrity, are flexibly resolved through collective bargaining 
agreements between audio visual producers and major guilds.  

     An increasing number of professionals, I think both here and 
abroad, now recognize that it is not simply a coincidence that 
audio visual industries rooted in our country are flourishing 
while the copyright industries of other nations without our 
copyright traditions are not.  We should not lose sight of, 
indeed we should advocate, the power, value and contributions of 
our system in our international dealings.  We should also not 
lose sight of these advantages as we move into the world of 
digital recording and transmission, where the risks of 
unauthorized copying, performance and distribution are 
dramatically increased.  

     The Green Paper published by the Working Group wisely 
counsels the continued reliance on our existing domestic 
copyright system with only clarifying amendments.  I endorse the 
comments of the Creative Incentive Coalition, which with minor 
exceptions, endorse this approach and endorse the specific 
proposals of the Green Paper.  I'd only make the following points 
regarding international issues as a matter of emphasis to those 
comments.  

     First, the world of digital transmission is, as you noted, 
Mr. Chairman, in your opening remarks, global.  It is not defined 
or confined by the barriers of national geography or national 
copyright laws.  Once a work enters the digital information 
infrastructure it can, in nanoseconds, move to the transmission 
infrastructure of another nation.  Hence, the strength of our 
copyright regime and our powerful enforcement mechanisms will 
offer little solace to the copyright holder who, by authorizing 
the use of his or her work on our information infrastructure, has 
lost control over the international distribution of that work.  
Thus, in defining transmission, it should be made clear that an 
unauthorized transmission of a protected work from the U.S. to a 
foreign nation is a violation of U.S. law and can be remedied by 
U.S. courts.  

     Second, given the ease with which our works can be 
transmitted abroad is critical to the integrity of our National 
Information Infrastructure that that the information 
infrastructures of other nations respect under their laws, our 
works and our artists, and that they do so as they would their 
own.  That means that national treatment and high levels of 
international copyright protection must be a continuing, perhaps 
even more important, national objective in our international 
dealings in the digital world.  It also means that the rights 
conveyances employed in creating our works should be respected 
inside the intellectual property regimes of other nations.  The 
recently adopted North American Free Trade Agreement with Mexico 
reflects the international agreements we should be seeking in 
this area.  Absent adequate and effective foreign copyright 
protection abroad, and absent national treatment and contractual 
rights recognition abroad, our works can be electronically 
hijacked once they leave our shores.  What I mean by that is that 
imitators or copiers abroad can take our works, works of our 
innovators and inventors, without authorization or adequate 
compensation, thereby reducing the commercial value of innovation 
in this country and eroding incentives to invest and create jobs 
here. 

     Finally, just as we have a legitimate interest in foreign 
intellectual property laws, the level of their protection, the 
adequacy of their enforcement mechanisms, their respect for 
national treatment and contractual rights, so do the other 
nations of the world have a legitimate interest in our laws.  
This growing inter-dependence of national regimes, the tests as 
you noted in your opening comments, to the growing call for 
international harmonization of intellectual property regimes.  
There's great opportunity, and I submit great risk, in responding 
to the siren call.  The opportunities are obvious.  Heightened 
world wide protection for the creators of new and useful products 
means greater incentives worldwide for investment in original 
works of expression, to the betterment, quite frankly, of us all.  
The risks, I submit, are equally obvious.  In an effort to 
compromise with author's rights, and neighboring rights regimes, 
we might erode the strength and flexibility of our copyright 
regime.  Thus, I urge this committee to approach its 
international dealings with caution, with confidence in our 
approach to copyright,and resistant to any suggestion that we 
dilute the power and flexibility of our copyright regime.  

     In summary, I want to thank the Working Group for the 
opportunity to present my views here today.  And I want to 
express my support for the fine work reflected in the Green Paper 
under your leadership, Mr. Lehman.  Thank you very much.

MR. LEHMAN:  Thank you very much, Mr. Vradenburg.  When you 
talked about your concerns about, and maybe harmonization is a 
poor word to use, but the difficulty of course in getting 
international norms in the copyright area isn't something -- we 
can't just will it, we have to get the cooperation of other 
countries.  What are the specific areas that are of concern to 
you about the author's rights system let's say in Europe that you 
think give us really -- give you a hard time if we're going to 
try to pull the two systems together?

MR. VRADENBURG:  Well, I think the main concerns, obviously, the 
non-transferrable or non-waivable moral rights.  The problem, 
when we distribute a work today, less than -- I would say 
approximately forty percent now in the aggregate of the value of 
our works, is realized out of foreign regimes.  And the 
theatrical area, quite frankly, over fifty percent of the 
revenues are now realized internationally.  If in fact we make a 
product here and do it under a set of guild agreements negotiated 
here, and on the assumption that our rights regime applies to the 
creation of the copyright and the ownership of that work, and 
release it around the world and find that under the laws of other 
nations its distribution, its alteration, in any fashion is 
exploitation.  It can either be further taxed or can be 
restricted as a result of the rights regimes in other countries, 
then there is a loss to the revenues that we can achieve.  And as 
a consequence a diminution in the amount of investment we can put 
into the product.

MR. LEHMAN:  You're producing -- I assume your company is an 
international company and I assume you do produce product 
overseas right now --

MR. VRADENBURG:  We do produce overseas.

MR. LEHMAN:  And so you're producing product in some of these 
regimes right now, is that -- how are you -- 

MR. VRADENBURG:  The product produced overseas by and large is 
produced under our guild agreements and under contracts that are 
negotiated and executed here.  And they are built on the 
assumption that in fact the rights conveyances and the rights in 
that product are largely defined --

MR. LEHMAN:  So really the issue is to make certain that you can 
consolidate these rights by contract?

MR. VRADENBURG:  That's correct.

MR. LEHMAN:  That's really what it boils down to.

MR. VRADENBURG:  That is really the issue, the critical issue. 

MR. LEHMAN:  Okay.  I really appreciate it.  Thank you very much.

MR. VRADENBURG:  There's one other point on that score, and it's 
fairly obvious, and I know you recognize it.  There are still 
many countries of the world who have quite inadequate and 
ineffective copyright regimes.  And I'm not now just speaking of 
Europe and its moral rights, I'm thinking of other regimes around 
the world which simply do not recognize copyright in any 
effective or adequate way.  And I think that is still a very high 
priority.  There are growing parts of this world in Asia and 
Latin America which are tremendous potential markets for our 
products where quite frankly the level and adequacy and 
effectiveness of their copyright regimes is far below 
international norms.

MR. LEHMAN:  Well, your fellow Los Angelino, Mickey Kantor, who 
has come out to Washington and who did a fantastic job of sealing 
the deal on the GATT TRIPs Agreement, and now we're of course 
trying to see that Congress approves that.  So you might wish to 
make your views well known to people on Capitol Hill about that.

MR. VRADENBURG:  Mr. Kantor is aware of our views.

MR. LEHMAN:  Well, he, of course, knows it, but the people in 
Congress need to understand how important that treaty is to the 
U.S.  Thank you very much.

MR. VRADENBURG:  Thank you, sir.

MR. LEHMAN:  Actually, given the discussion of international 
matters, reminding me of an omission from my opening statement, 
I'd like to observe, for those people who are here in the 
audience, the presence of Mihali Ficsor, who is the head of 
copyright for the World Intellectual Property Organization.  Mr. 
Ficsor is in our audience and we welcome him to the United 
States.  And it does indicate that this process is not taking 
place in a vacuum, that we're under the eyes of the world in what 
we're doing here. 

     Next I'd like to ask Jonas Rosenfield, President of the 
American Film Marketing Association to come forward.  And he's 
accompanied by Lorin Brennan, Vice Chairman. 

JONAS ROSENFIELD:  Thank you, Mr. Chairman.  My name is Jonas 
Rosenfield.  I'm the President of the American Film Marketing 
Association.  We're an organization that represents a hundred and 
eight companies who are involved in the independent sector of the 
motion picture industry.  The very essence of the business that 
our members are involved in deals with the licensing of 
intellectual property rights all over the world, and the United 
States included.  So that we have a very strong interest in the 
whole question of intellectual property rights.  And some of it 
may be a little unique.  And I've asked Mr. Lorin Brennan, who is 
our Vice Chairman, to speak to these particular interests. We 
have submitted a paper, which is available.  Anyone who would 
like it can contact us and we will provide it to you.  I would 
like now to turn this over to Lorin Brennan.  Thank you.

LORIN BRENNAN:  Thank you, Jonas.  Just to repeat, my name is 
Lorin Brennan.  I'm the Vice Chairman of the American Film 
Marketing Association and the Chairman of the AFMA Legal 
Committee.  Mr. Chairman, good morning, Ms. Southwick, Mr. 
O'Neil, thank you for being here.  I've already -- AFMA has 
already submitted a paper to you describing our concerns about 
the NII.  And our particular concern about the robustness of our 
registration system here in the United States, the use of the 
Copyright Office, and why we believe that registration systems 
are going to be key to the functioning of the NII, especially for 
the licensing of rights on the NII.  

     I've already described that to you in our paper, but what 
I'd like to do here now is to elaborate on a point we made that 
may not have been clear.  And that's why we think that the 
concept of using data headers to manage the licensing of rights 
for works travelling in NII is not really going to be sufficient.  
It may be helpful to have a data header in which you identify an 
owner of rights or a key licensing distributor or agent, such as 
an expanded copyright notice that you have today.  But I would 
like to make it very clear that data headers will not be capable, 
in our view, in the current time, of managing the full licensing 
of rights on the NII.  

     There are two reasons for this.  What I'll call the volume 
problem and the volatility problem.  Let me give you an example 
and talk about the volume of information you're going to need to 
license rights and works.  You have to understand that there are 
two general models of licensing, what we could call per user 
licensing and per use licensing.  Per user is a hard copy 
business.  You hand someone the software program or a record.  
You don't care how many times they play it or that they use it 
because you're looking at the user to license the works.  The 
motion picture business is based on per use licensing.  Every 
public performance has a different use.  You go in to see a movie 
a second time you pay a second ticket.  You go to see a program 
on HBO you have a different use.  And so we have these different 
models of licensing.  Per user licensing means that you track 
five data models, or five data points in order to build your 
model.  You have to track the work, the use, the territory, the 
term, and a qualifier.  

     Let me give you an example of what this means with motion 
pictures.  You have to have a work, a motion picture.  You don't 
just have one version of a motion picture.  You may have a 
version that's the R rated version, the director's cut, the 
version that's edited for television.  And each one has to be 
tracked separately.  Assume you have three versions for the sake 
of our example.  You have the track the uses, there are different 
rights.  Our form agreements recognize nine different types of 
television.  If the NII continues, we won't have a primitive 
system in which there's only one use to access the program, but 
you may have cable systems that will have an encrypted program, 
you may have a video on demand system.  I don't know what those 
rights are going to be, but for my example assume we have five 
different types of uses.  Then we have to have the territory, or 
the area in which somebody works.  The key to copyright is 
exclusivity.  A cable system may want to have exclusive rights to 
deliver the work within its service area, for its head end.  And 
that may compete with a Bell South who wants exclusive rights to 
deliver in their areas.  We don't know how many territories there 
will be or whether territoriality will continue.  But for the 
purposes today, let's assume there are a hundred territories, and 
that's not even counting the two hundred separate broadcast 
markets in the U.S.  Then you have to know how long you can 
license it.  Three years, five years, etc.  Let me assume that 
there are three terms.  Then you have to worry about, if you 
will, qualifiers.  Is it Unix only, is it Dos, is it Nintendo, is 
it Sega.  If you look at these we have three pictures times five 
uses, that's fifteen different points, times a hundred 
territories is now fifteen hundred, times three different terms 
is forty-five hundred, times two qualifiers.  You have nine 
thousand different possible licensing combinations.  And each one 
has their own pricing point and how you can plan it and how it's 
going to be priced.  You're going to have to put in a database 
program just to manage searching for the user to know.  I've 
built programs like this, and I can tell you we've built one, an 
early version of Oracle, that brought it to its knees, for a PC 
based system.  You're going to have data headers, ten, twenty 
megabytes travelling with your work.  And at least today, trying 
to download ten megabytes takes a long time.  

     I know, Mr. Chairman, you mentioned the president's view of 
an instantaneous access.  If we try to use data headers to manage 
licensing, instantaneous is going to be a long time away.  Not 
only do you have the problem, you have the volatility problem.  
These licensing provisions change constantly.  You may want to 
move up the video window because you want to take advantage of a 
Christmas release.  The pay service may suddenly find that their 
program is more valuable, can they have an extra few months in 
which to show it during a period.  The free service wants to 
change so that they can show it during the sweeps period.  This 
is what we do during the day.  We get up in the morning, we go to 
the office, and we make these decisions.  It's a constant 
business. 

     Thinking that data headers can manage our businesses, if you 
will excuse me, is like asking lawyers and saying why can't you 
draft a partnership agreement on a computer, you don't need a 
lawyer, just push a button and I should have my agreement.  It's 
a constant business everyday.  So we don't think that data 
headers today are going to be sufficient to manage rights.  We 
have to have registers.  Registers are a place in which people 
who own rights can give notice that they own the works and that 
third parties can come and search those registers to determine 
that ownership. 

     We've presented a paper to you here describing what we think 
needs to be done.  We've suggested you expand your concept of 
copyright management information to include false information 
filed in public registers.  We've discussed here the problems we 
have right now as a legal matter, reconciling the obligations of 
Article 9 to the Copyright Act.  We've also told you why we think 
we need to work to expand for an international register, which we 
had supported.  I think that concludes my remarks right now, I 
don't want to take up anymore time, but if you have any questions 
I'd be happy to answer them.

MR. LEHMAN:  Thank you very much.  You talked about copyright 
registration and the Library of Congress.  I assume you're 
thinking that the best thing to do would be to mandate 
registration of all of this electronic data through the Library 
of Congress registration process? 

MR. BRENNAN:  Right now -- I mean, you're asking me two 
questions.  Right now it has a mandatory deposit requirement.  
Our association does not object to the mandatory deposit 
requirement.  Whether or not you need mandatory registration is a 
separate issue.  Right now we think that the situation need not 
be mandatory as long as legally you are given benefits to 
register, such as priority over a subsequent purchaser.  That 
today is sufficient incentive for people who want to register to 
register so that you don't need to mandate it right now. 

     I do think in terms of the Copyright Office you're going to 
have to expand the copyright system to allow you to track not 
only works, but to attract registrations as to persons, as to 
authors.  And you're going to have to electronically link that 
with the state UCC filing systems.  And then you're going to have 
to deal how you deal with registration internationally.  If you 
specific question is mandatory registration, I don't think we 
need that, provided that we still have legal incentives to 
register, such as priority over a subsequent transferee.

MR. LEHMAN:  We would have certain problems with mandating 
formalities under the Berne Convention, of course -- particularly 
as it regards foreign works.  It's conceivable that we could have 
a system like you described, or maybe multiple systems, 
presumably not a huge number of them, but it would also be 
basically a private sector system.  I think already you have -- 
for years and years I think you've been able to file scripts, or 
certain kind of written materials with the Writer's Guild, or 
Director's Guild, whatever, and that's kind of proof of your 
authorship.  You could conceivably -- conceivably your 
organization could set up such a system and manage it.

MR. BRENNAN:  We've done that already.  In fact, we've had a 
system on line for several years to track rights internationally.  
We face a problem where people don't know who owns particular 
rights.  In fact I had that happen three months ago in the 
Philippines.  Somebody took our picture, Total Recall, and was 
broadcasting it.  And we asked, where did you get the rights?  
And they said, oh, we got it from some guy out of Malaysia.  

     Our association has a private system under which if people 
are interested they can call us, we'll tell us who the person 
registered with us is, and at least a buyer can contact that 
person to determine who ownership is.  There is a deficiency with 
our system though.  It has no real legal effect.  Only a 
government can give us a legal benefit for making a registration.  
Legal benefit number one, priority over subsequent transfers.  
That's a crucial right now.  It preserves our BFP system that we 
use in the United States.  Benefit number two, perfection of 
security interest, so that a secure creditor can take priority in 
bankruptcy.  You can't do that with a private register. So we 
think private registers can be helpful, but we need a government 
to provide a legal benefit behind that register to give you a 
legal incentive to register.

MR. LEHMAN:  I assume then you -- you know, our report on page 
115 refers to the Library of Congress Electronic Copyright 
Management System that is being developed -- and that you are 
supportive of that?

MR. BRENNAN:  We were the first association to submit electronic 
information to the Library of Congress and we support that fully.

MR. LEHMAN:  One final question.  Since you placed a lot of 
emphasis on the capacity basically to track individual uses of 
works, I guess on a real time basis, you know, historically we've 
used the collective licensing to manage rights.  For example, 
rights in music.  Do you think that the need for collective 
licensing, at least as we've known it -- that is blanket 
licensing -- is going to diminish under the NII? 

MR. BRENNAN:  I think it very well may diminish.  As an 
association we're very skeptical of collective licensing for two 
reasons.  As a practical business matter that's our business, 
that's what we do everyday when we walk into the office.  So that 
moves us out of what our core business is.  Second reason we're 
concerned about that is that the NI -- the reason you had 
collective management is it's difficult to track analog copies.  
But if you're dealing in an electronic system, you may not have a 
need for this type of collective management.  People may want to 
do it.  They may find some benefit to it.  But we think that for 
the current situation people are going to want to use individual 
licensing.  We're also very concerned about collective management 
systems because they so easily fall from voluntary to compulsory.  
So right now I would say, although we're open to the suggestion, 
we view it with skepticism.

MR. LEHMAN:  Thank you very much.

MR. BRENNAN:  Thank you.

MR. LEHMAN:  Next I'd like to ask Jeff Barry to step forward, 
from Jeff Barry International. 

JEFF BARRY:  Good morning, Mr. Lehman, Ms. Southwick, Mr. O'Neil.  
Thank you for permitting me to be here.  I am a song writer.  
I've been a song writer my whole life, and a professional song 
writer since 1959.  And I know that your task is a very involved 
one.  And I speak today -- a week ago I also was elected 
President of the National Academy of Song Writers, which is a 
non- political group of song writers representing approximately 
three thousand members.  And I'm here today to speak from my 
experience as a song writer and to inform, so you can better make 
your decisions.  

     Song writers make their livelihood in two basic ways, from 
the sale of the records that their songs are on, and from the 
broadcasting, the transmission of the songs.  The coming of the 
digital future, which we all welcome, and it is wonderful and I'm 
sure is going to make all our lives better.  But song writers, as 
a group, and to the best of my knowledge the information I have 
received is there's somewhere between 150,000 and 200,000 song 
writers registered to the companies such as ASCAP, BMI, SESAC.  
So that's the approximate number of song writers who make their 
living in that manner.  And we have no core group.  

     I have tried to gather the factual information as best I 
can, and as far as I understand, the Federal Trade Commission 
disallows us to have a guild, or a union of any kind.  So we are 
all individuals.  We have no core voice.  And I'm sure you hear 
many, many sophisticated and powerful voices representing 
publishers and record companies who we create the material, the 
very material, that is the basis of the entire industry. 

     As I understand it, the Constitution has empowered Congress 
to protect authorship -- and our rights.  And it has been working 
so far.  And the thought of these laws being changed is a 
frightening thing to all song writers who, if we are left to 
negotiate individually for each recording of our songs, we must 
write songs, that's what we do, and if we are to negotiate with a 
record company for each usage of the songs, we will spend all our 
time negotiating.  And by the way, I really believe that we would 
be negotiating much in the way that workers at the lower economic 
levels of this country would be negotiating without a minimum 
wage law.  We would be at the mercy of the record companies, who 
would be in a position to dictate to us what we would receive. 

     The reason that being alone out there to negotiate with the 
record companies is frightening, the only evidence that we have 
as to what might happen if we were out there alone, as I said, 
the only evidence we have as to what might happen if we were out 
there alone negotiating with the record companies is the respect 
that they have shown for the current statutory rate, which by 
some coincidence the record companies have deemed to be -- that 
they will pay at three quarter rate.  And if we lose the very few 
precious protections we have, we would certainly be at their 
mercy.  And it is a frightening thing. 

     And in regard to public performance, as I believe the law 
states now, that any transmission of a musical work is a public 
performance.  We believe that this should continue to be the way 
it is.  And anything less than that would definitely be, in both 
instances, an erosion of our rights as authors that we now have 
granted to us.  And you state that you are much concerned with 
the rights of authorship, and I'm sure that you are sincere in 
your beliefs.  But I strongly suggest that you look at what the 
real on the ground, everyday results would be if we were left to 
our own devices. 

     The laws as they stand now have been working.  The record 
companies, everyone involved has prospered.  And I personally see 
no reason to change, certainly to diminish in any way our rights 
as authors.  That's really all I have to say.  I appreciate the 
opportunity to say it. 

MR. LEHMAN:  I think Ms. Southwick might have a question.

MS. SOUTHWICK:  I just wanted to clarify -- then what you are 
saying, and I don't think the report noted this, but that you are 
afraid of the elimination of Section 115, the mechanical license?

MR. BARRY:  Yes.  That is the only fragile protection we have.  
And even that seems to be disrespected.  And if we have no basis 
how are we to bargain with these giant monolithic international 
corporations.  They can say to us, take it or leave it, as they 
are saying now regarding the three quarter, on the statutory 
rate.  Take it or leave it.  If you don't we'll find someone else 
who will.  And they could, to the extreme, say if you would like 
us to use your songs, we will own the copyright, we will pay your 
some pittance for them, you will receive no royalties, take it or 
leave it.  If our current protection that the Congress has deemed 
-- I believe Congress was charged by the constitution to afford 
protection to authors.  And they have deemed this proper, this 
constantly escalating statutory rate.  If that was to be 
diminished, and certainly if it was to be eliminated, it is a 
giant step backward in the very protection that you said you are 
so concerned with in the rights of authorship.  

     We are talking about the music the world sings.  And 
writing, the creation of this music, is unique. Song writers 
definitely have a unique niche in the creative community in that, 
again, we don't have, and are not allowed to have, a guild or a 
union.  So it is divide and conquer.  And the laws as they stand 
do provide a modicum and a base of some security and protection 
for us.  And those were to be diminished again, or certainly if 
they were to be eliminated, we are virtually thrown to the 
economic wolves.  And I think we're all sophisticated enough to 
know what would happen. 

MR. LEHMAN:  Do you think it would be advisable for us to 
contemplate in our report somehow or other recommending 
legislation that would permit you to establish a guild or a union 
to deal with the market power of the record companies, because 
clearly that is the heart of your problem?  What I characterize 
-- hear you saying -- is that the existing performing rights 
society is on the performance right side, giving you some 
collective power in effect, but when you're on the mechanical 
side you're really lost.  Even a relatively influential composer 
is at the mercy of the big record company.  And so would it help 
you on the mechanical side if you were -- maybe if you were have 
-- to organize the same way guilds have in other parts of the 
industry?

MR. BARRY:  That might very well be the case.  I would not at 
this time like to commit to that until I can get more information 
and come to a conclusion.  I must say that the laws as they exist 
are fine, and if anything, why not have the statutory rate become 
a minimum as opposed to a maximum, much as the minimum wage.  
That would give us protection and a basis.  That would be the 
simplest thing to do.  But to take that away would certainly be a 
step backwards.  And it would be very confusing to me, to tell 
you the truth, as to why the Congress was to establish this and 
then have it taken away.  We certainly would have no protection.  
I respectfully submit that.

MR. LEHMAN:  Thank you very much. 

MR. BARRY:  Thank you for allowing me to be here.

MR. LEHMAN:  Next I'd like to call on Mr. Robert Simons, General 
Counsel of Dialog Information Services from Palo Alto. 

ROBERT SIMONS:  Good morning, Mr. Chairman, members of the Task 
Force.  It's a privilege to be here this morning and to comment 
on the fine piece of work that's begun the process of discussion 
-- the so-called Green Paper.  My name is Robert Simons and I am 
General Counsel of Dialog Information Services.  I want to 
describe Dialog in a nutshell for you in a moment.  But I also 
want to indicate that my testimony this morning will cover two 
aspects.  One is to underscore some of the preliminary 
conclusions and recommendations within the Green Paper that we 
strongly agree with and wish to applaud.  And so to point out 
some areas where we think that either the Green Paper did not 
adequately cover, or did not cover at all insofar as issues of 
concern to our industry. 

     As you may already know, Dialog was the first so-called 
on-line information retrieval service, growing out of efforts 
within Lockeed Corporation in the 1960's that we began our first 
commercial service in 1972.  Interestingly enough our very first 
on-line database was a database consisting of government data.  
The National Educational Research Database, or ERIC.   That 
remains what we call file number one on the Dialog system today.  
And we've had a long relationship with various government 
agencies in the offering and dissemination of government data, as 
well as other types of data. 

     Today, in 1994, we provide access to almost five hundred 
different databases covering virtually the entire array of 
information available to mankind including scientific and 
technical data, business data, news data, and we're finding also 
that data concerning intellectual property and image data are 
becoming the important things to our information users today.  
Not only are we the foremost largest on-line retrieval service in 
the United States, we have recently, last year, become affiliated 
with the largest data bank in Europe, the Data Star system over 
there as well.  So we know a little something about the 
information super highway.  In fact, we believe that we actually 
were helpful in blazing the trail and cutting down the trees over 
which the highway will be paved in the near future.

     We first of all wish to applaud the Task Force in its 
efforts and creation of the Green Paper and addressing the issues 
therein contained.  Clearly I wish to underscore the notion of a 
very strong copyright protection in this country, particularly in 
a digitized environment where we all know that copies are 
virtually indistinguishable from originals.  Clearly a strong 
copyright protection encourages the creation and public 
dissemination of information services and products.  And there 
probably can be very little disagreement with that.  And although 
the strong copyright law is at the root, we think, of creative 
authorship, we also believe that there are other factors that 
also contribute to creative authorship, including licenses and 
contractual agreements between parties.  So it's a whole mosaic 
of items that we think are really the underpinning or foundation 
of a strong NII. 

     One of the things that concerns about the current 
environment with the information superhighway, and particularly 
with Internet, is the dichotomy of the earliest users who seem to 
be making up the preponderance of users of the Internet today.  
As we all know, coming out of the Department of Defense and the 
National Science Foundation, the first people who have gravitated 
toward utilizing the Internet, have been of course, academitions 
and students.  That's the good news.  They've helped to 
proliferate the interest so that everyday virtually in the 
business section of virtually every major newspaper there's 
something to do about NII or the Internet.  The bad news is, of 
course, being college students to a large extent, they believe 
that if it comes from cyberspace it therefore must be free and 
unencumbered.  I myself am not that far out of college, a few 
decades, but I had very similar views when I was young as well, 
until I was married and had a family and a mortgage.  So 
certainly the educational component that was recommended within 
the Green Paper is a strong issue for us, and I'll comment on 
that in a moment. 

     We see the future, quite frankly, of the so- called 
information superhighway actually being a little different type 
of highway than we're accustomed to today.  And that is that we 
think this highway will consist of many different kinds of lanes.  
Lanes that will accommodate different types of users, or again, 
in the highway vernacular, different kinds of vehicles.  We think 
that many of these lanes of the future, if not most of the lanes, 
will probably be for commercial traffic, to aid in the 
competitiveness of our country much like the interstate highway 
system exists today.  And accordingly, we want to strongly 
support the encouragement of the private sector to lead the way 
in developing the information services and products that are 
going to make our country strong. 

     We are, in fact, the United States, is the largest exporter 
of electronic data.  And that has become a very key ingredient in 
our national and international trade, as I'm sure the Department 
of Commerce figures would indicate.  Private sector also should 
be encouraged to develop safeguards and security measures to 
ensure that authors and publishers get their just rewards by way 
of royalties and whatever attribution would be required and 
license agreements.  And therefore there is certainly some 
concern that we have today with the focus upon security 
procedures insofar as encryption is concerned. 

     Clearly the government has a right and a necessity to be 
able to combat crime, as it does now.  But we've seen within the 
last decade through enforcement and enactment of various acts 
that there are congressional concerns associated with permitting 
the government to have access to otherwise private 
communications.  One of the aspects right now concerning 
encryption.  And of course in contrast with the export 
regulations is that encrypted data that might go up on the 
Internet might automatically run afoul of a law because of the 
Internet's international characteristic.  And we've certainly 
seen some aspects of that in recent days. 

     So let me comment a little bit in underscoring some of the 
things within the Green Paper that we feel are right on and we 
encourage you to go forward with.  Certainly the establishment of 
the highway is going to be necessary and conducive and doing 
business throughout the world.  But similar to the international 
highway structure that was developed in the 50's we're a little 
bit concerned about the potential for the government to compete 
with the private sector.  Clearly when the government built the 
interstate highway system it let contracts out to private firms 
to bid to build the highway, and then private vehicles were 
permitted to travel over the highway.  What we're concerned about 
is that with the interest of the government today, not only might 
the government take a lead role in building the superhighway, but 
it also very well may wish to design the vehicles that move 
across it.  

     Under the guise of being enticed by the potential for 
revenues, we're quite concerned about the potential within the 
government to get into the retail information business, which we 
do not believe is a fundamental government role in this country.  
In fact, the headlines earlier this week about the desires of the 
Library of Congress give us a great deal for concern because we 
don't think that that is going to provide the proper incentives 
for authors and publishers.  Quite clearly it will be impossible 
for the private sector to compete with the government.  And we 
don't have the same accounting structures, and there's likely to 
be a great deal of difficulty with respect to products and 
services that currently exist were the government to get into the 
retail business. 

     So we think the focus should be on facilitating the entry of 
new commercial players within the marketplace.  And therefore the 
government can serve a best role perhaps by helping to establish 
reasonable rules of the road, which it does right now in the 
interstate system.  We think those reasonable rules should 
obviously involve the copyright policy.  

     We underscore the fundamental conclusion of the Green Paper 
that we need not tear up the Copyright Act and start from 
scratch.  Rather we think that a little tweak here and a little 
tweak there, much has already been recommended, would be of great 
help to the private sector and to the public sector users of the 
information super highway as well.  We also think the policies 
that provide rules concerning security and privacy would be very, 
very effective, including the comments on the Export 
Administration Act that I mentioned earlier. 

     We are concerned about issues such as operator liability.  
We've seen several cases already where the questions have been 
raised before the courts as to whose responsibility is it when 
users may want to follow the law in using various systems.  And 
we're quite concerned that through issues such as potential 
contributory infringement of vicarious liability that operators 
may become liable for the acts of their users.  We feel quite 
honestly that a small group of abusers should not dictate that 
operators become liable.  And therefore we would like to see much 
clearer rules that operators of systems that allow people to 
utilize their networks will be viewed much like public carriers.  
And that is that they're not responsible for the content. 

     We're also concerned about some of the recent reports 
concerning people who abuse these systems by giving false 
attribution to works.  We think that a set of rules regarding 
that -- those types of abuses would be very, very helpful. 

     We think that one other aspect of the government rule that 
would be extremely helpful in bringing us into the next century, 
and this is probably the most appropriate government rule, would 
be to help in educating the public with respect to the rules of 
the road, and particularly copyright.  It's certainly our view, 
by what we read insofar as academics and students using the 
Internet today, that there's very, very little fundamental 
knowledge about copyright law and respect for the work of authors 
and publishers.  We think that that's an area that's not been 
well communicated to the public.  And certainly that's an area in 
which the government could be a great deal of help.  We're 
involved and supportive of the efforts to modify the uniform 
commercial code, to recognize the enforceability of on-line 
contracts, and we would support that as part of the so-called 
rules of the road as well. 

     And finally, we don't believe that the government should 
over burden the private sector by virtue of compulsory licensing 
and encryption standards.  In fact, we're pleased with the more 
recent retrenchment, if you will, concerning such things as the 
clipper chip.  And again, avoiding competition with the private 
sector.  We believe that the best thing the government can do is 
encourage the private sector to make the appropriate investments 
and expand the use of the information super highway.  But let's 
be honest, it is a global environment, we all know that, we're 
hearing that this morning, and we've heard it other times.  And 
therefore what we do will not only lead the world, but we have to 
cooperate with the rest of the world in ensuring that this new 
technology is capable of not only benefitting society, but 
reaching everyone in society who might wish to have access to it. 

     Those are my prepared comments this morning, and I'd be 
happy to entertain any questions you have.  Let me make one 
further one that I forgot to write down.  And that is, we're very 
pleased, you may have become aware of the fact that Dialog has 
recently introduced the very first copyright clearance policy and 
feature on its system that's totally electronic.  It's called 
Dialog ERA, which stands for Electronic Redistribution and 
Archiving.  And although we have not submitted written comments 
because we support those of the Information Industry Association 
to which we belong, I did bring a copy this morning of a couple 
of brochures that deal with our Electronic Redistribution and 
Archiving.  As a private sector firm, we have been responsive to 
our customers and their desire to be able to move data around 
within their corporate environment, copyrighted data around, much 
in a similar way.

MR. LEHMAN:  Maybe you can just leave that with us.

MR. SIMONS:  Yes.  I'll be happy to do that. 

MR. LEHMAN:  I'd like to ask a couple of questions -- and the red 
light is on now -- because your testimony raises a number of 
interesting ones.  So if it's okay I'd like to -- we'll look at 
that.  First, it's my assumption that Dialog owns the copyright 
and relatively little of what flows through its system. 

MR. SIMONS:  That is correct.

MR. LEHMAN:  I know you have certain things that you are the 
copyright owners.

MR. SIMONS:  We would view ourselves as a value added 
redistributor of other's copyrighted data, yes.

MR. LEHMAN:  One of the major issues that has arisen is the 
question of the distribution right versus the right of public 
performance or display, in the digital context.  Now, that could 
cover any work.  But where it has particularly become an issue I 
think is with regard to music.  And you've heard some of that 
mentioned even here this morning.  We have been asked in Chicago, 
we had a number of witnesses to that effect, and we've heard one 
reference to that this morning.  I suspect we'll hear more.  It 
has been recommended that we make it -- actually a range of 
options.  But one recommendation is that we make it clear that 
all transmissions through the Internet constitute a public 
performance.  Now, were that to take -- were that to be the case, 
and there may be some who think they are right now under existing 
law, and so they may wish to achieve -- you know, to get judicial 
support for that position by litigating.  If that's the case, 
then it seems to me that services like yours would have to have, 
at least in the case of music, a license for the public 
performance of music.  Do you have a license right now?

MR. SIMONS:  No.  We don't deal in musical works at this time.  
However --

MR. LEHMAN:  Is there music in any of your works? 

MR. SIMONS:  Not today.  Not currently.

MR. LEHMAN:  But I assume you'll be transmitting multimedia works 
at some point which will include music. 

MR. SIMONS:  Indeed, we are considering those now.  And let me 
answer your question by saying we would not object to that 
concept.  We license our works right now through direct contracts 
with our information providers who hold the copyrights.  And 
therefore we are very strong supporters of licensing agreements 
and having the requisite authority in which to vend the data.  
Were it music, we would feel very much the same way.

MR. LEHMAN:  Who would pay the royalty?

MR. SIMONS:  Generally, we pay the royalty as part of our fees to 
the copyright proprietors once we have sold the services.

MR. LEHMAN:  So in other words, you are saying you are perfectly 
prepared to pay an ASCAP or BMI royalty when you start using --

MR. SIMONS:  We believe that's appropriate.  And we believe that 
authors and publishers should be compensated for their works -- 
and that the users should obviously pay for that as part of the 
end user price, yes.

MR. LEHMAN:  And is it your view then that your delivery of these 
services constitutes a public performance?

MR. SIMONS:  I believe it certainly constitutes a commercial 
transaction.  Were it dealing in music, clearly I believe it 
would be a public performance, yes.  And I would think that the 
disadvantage to authors and publishers would be to allow others 
to engage in the transfer of copyrighted works, music or 
otherwise, through digitization without due compensation.  We 
think that would be disadvantageous.  We are not opposed to 
paying royalties.  We think that's why the on-line industry in 
particular has grown and fostered, because in fact there is a 
stream of revenue flowing back to the publishers and presumably 
back to the authors. 

MS. SOUTHWICK:  So when the work would constitute a distribution 
-- when musical works, sound recordings, may be sold through 
Dialog or other on-line services -- you would not object to 
paying two royalty fees then -- one to the holder, such as the 
Harry Fox Agency, of the distribution right for the composers as 
well as the record company.  And then once again for the same 
transaction, a royalty fee for a public performance to ASCAP, BMI 
or the other performing rights societies?

MR. SIMONS:  I haven't obviously given this a great deal of 
thought because we don't deal in music.  Clearly the former, the 
first analogy there would be absolutely no objection whatsoever.  
From those who we acquire the rights, they would negotiate a 
royalty, they would certainly be owing one.  As to the second 
point, indeed, we wouldn't necessarily object to that being 
viewed as a public performance.  However, in the data industry 
what happens is there is a whole stream of distribution in which 
the authors contract with the publishers, who contract then with 
us to distribute it.  And in fact it is our view that royalties 
are flowing all the way back by virtue of contracts.  And 
certainly an analogous system would not be something that we 
would oppose. 

MR. LEHMAN:  I would like to ask another question about databases 
-- it's getting a little short, but -- that is, I take it you 
favor fairly strong intellectual property protection in the 
databases themselves?

MR. SIMONS:  Absolutely.  Yes, sir.

MR. LEHMAN:  And we have a problem with the Feist case in that 
there's -- you know, the sweat of the brow doctrine is in a sense 
out of the window.  Do you think we should have some kind of 
stronger protection for the elements of data that are not 
protected under the Feist case?

MR. SIMONS:  No.  I'm actually a supporter of the Feist case in 
that I think that the issue in Feist that's been rarely 
discussed, except amongst lawyers, is the quality of the 
compilation of the data, which is expressed by the trademark 
associated with the database as opposed to the copyright.  I 
agree with the Feist decision, and I believe that we have not yet 
seen a wholesale infringement insofar as those databases of 
purely factual data that already exist.  In fact, there's a 
booming business in it and it's because of the trademark 
involved, the quality behind it. 

     The sweat of the brow is an important issue, but probably 
more so for trademark than copyright.  So I'm a supporter of 
Feist, and I don't think there's any problem that we've seen in 
the on-line industry subsequent to the Feist decision being 
decided.

MR. LEHMAN:  That you very much.  That was extremely interesting 
and helpful testimony.  Next I'd like to call Czeslaw Grycz from 
the School of Library and Information Sciences at the University 
of California Berkeley Extension in El Cerrito. 

CZESLAW JAN GRYCZ:   Good morning, Assistant Secretary Lehman, 
Ms. Southwick, Mr. O'Neil.  My name is Czeslaw Jan Grycz, and I'm 
retired recently from the University of California, Office of the 
President, where I was instrumental in establishing prototype 
projects involving the distribution of networked images and 
basically for the purpose of finding out a little bit more about 
the pedagogical and actual use of bitmapped images in a classroom 
and research environment.  I also co-authored the New Writers 
Official Internet Yellow Pages, which is a Yellow Pages 
compilation of selected Internet resources which are valued and 
looked at from the point of view of quality of content.  And 
these are selected and interesting Internet information 
resources.  It's aimed at the professional and academic market, 
but it shows any reader the breadth of subject matter and 
interests covered by the information resources presently on the 
Internet. 

     I'm currently also active in my capacity as founding 
director and executive secretary of the Wladyslawa Ponieski 
Charitable Foundation.  This is a California non-profit 
educational corporation, and it has received a sub-grant as part 
of an effort funded by the United States Agency for International 
Development.  And is actively engaged in providing support and 
technical advice to libraries and environmental information 
centers in six central and eastern european countries.  During 
the second year of this five year project, the Ponieski 
Foundation in collaboration with its contractor, the World 
Wildlife Fund, published this library's and environmental 
information center's directory in central and eastern Europe.  
This directory was facilitated through international network 
connections.  Indeed it may not have been possible had it not 
been for the existence of the Internet.  And it is presently 
available in electronic form on gopher sites in the United States 
and in Vienna, Austria.  I've also had the privilege of chairing 
the Working Group on electronic resources within the national 
initiative called Humanities and Arts on the Information Highway, 
whose report is available here at the front desk.

     So as you can see, I use the existing National Information 
Infrastructure daily in both my professional and personal private 
life.  And I appreciate this opportunity to address you and 
intend to make comments of a slightly more philosophical nature 
perhaps than some of my colleagues here.  I'll want to make 
comments on three aspects of your report on the global 
implications, the cultural implications and the fair use 
implications of the NII.  And I do so because I believe the 
deliberations of the Working Group and the Task Force are so 
important that they must be considered in the light of legal, 
technological, commercial, economic and cultural values.  And 
while I judge that the technical and commercial and legal issues 
have been elucidated in considerable detail and with erudition, 
the cultural values are less apparent in the draft document. 

     I want to commend the Working Group on Intellectual Property 
Rights for its attention on pages 85 and following to the 
implications of the NII for participating in and helping build a 
Global Information Infrastructure.  We've heard comments about 
that this morning already.  And in its recommendations on page 
135 and earlier, you detail the complexity of harmonizing 
disparate legal systems and national approaches to the protection 
of intellectual properties. 

     I believe the draft could do more, however, to emphasize the 
importance of funding and committed ongoing action and attention 
in resolving these particular complexities.  The network of 
networks we know of as the Internet is among the most effective 
means of disseminating practical democracy in action.  It is 
characterized by altruistic collaboration and exemplifies 
consensus building and collaborative decision making to the rest 
of the world as no other vehicle can. 

     Through this network travel the results of research and 
laboratory experiments, the considered judgments and thoughtful 
reactions of men and women who wish to build upon each other's 
work in a collaborative larger altruistic community.  And through 
this network the disenfranchised may be provided access to remote 
museum collections, libraries and collections of sound 
recordings.  The utility of the network for revitalizing commerce 
and education is enunciated in the Preliminary Draft of the 
Report of the Working Group on Intellectual Property Rights.  And 
it should also underscore the efficacy of the NII to promote 
democratic values to institutions, families and individuals, not 
only within the United States, but beyond.  

     Conversely, the network, especially for individuals living 
and working in third world and developing countries, empowers 
intelligent and qualified people to more effectively contribute 
to the fund of the world's knowledge banks, for it not only gives 
access to intellectual resources badly needed, but it also 
permits people in those countries to contribute their 
observations and research to a growing body of global information 
that is helping us understand the complex inter-relationship of 
factors influencing the quality of life on this planet.  If these 
services are to flourish, protections for professional publishers 
of intellectual property rights, through the adherence of 
copyright protections is absolutely essential.  This vision of 
the global implications suggests that the attention of the 
Working Group to write language encouraging not only the 
harmonizing of international copyright laws, which as was pointed 
out in the draft document, means reconciling different systems of 
law, but it also suggests an important responsibility to pressure 
in as many ways as possible the creation of laws in those 
countries in which no copyright systems yet exist.  This again 
was mentioned early in the morning and I think it's a very 
important mandate that the Task Force should send to the White 
House. 

     Moving to the cultural implications of the NII, reference to 
the use of the educational venues to inform the public about the 
NII appear to me to omit an important overall positioning of the 
cultural implications of the NII.  The protection of intellectual 
property rights on the NII has much to do with providing 
incentives for electronic access that can be given to our 
citizens and to citizens of the world, to the nation's rich 
archives, libraries, museums and repositories of culture.  Not to 
discuss this in a paper of this kind on intellectual property is 
an omission that may not appear to bear on the legal and 
technical explications that are the natural subject of this draft 
document.  But if those who are mandated to consider the 
implications of intellectual property and the National 
Information Infrastructure do not overtly and consciously attend 
to issues related to the nation's cultural endowment, then its 
focus is necessarily skewed.  The nation's cultural inheritance 
is minimized.  And the Task Force's ultimate determinations are 
not enriched by these essential values. 

     As it stands, the draft document sees education as a vehicle 
for providing and promoting its own interests rather than the 
essential environment within which the NII has been created and 
within which our citizens are grounded in the truths of their 
history.  I heartily encourage the Working Group, therefore, to 
include language that amends this potential misleading reading 
and suggest that one important source of information for such 
language might be in this draft document, humanities and arts on 
the information highways, a national initiative sponsored by the 
Getty Art History Information Program, the American Council of 
Learned Societies, and the Coalition for Network Information.  
Again, it is available on the front desk. 

     Finally, I applaud here that the Working Group assiduously 
avoided on page 133 and following any proscriptive actions that 
may tend to confine principles of fair use to educational and 
non- profit purposes.  As the working paper describes, these 
principles can be threatened in an electronic environment.  Just 
as the recommendations of the Task Force must necessarily uphold 
the rights of copyright and intellectual property owners, it has 
an equally important task to affirm mechanisms by which all 
Americans are guaranteed access, not only to the national 
network, but to the essential and valuable information resources 
it provides. 

     The conclusions of the White House Information 
Infrastructure Task Force Working Group on Intellectual Property 
Rights, as published in their document, will surely come to be an 
influential document which will help form the incentives for use 
of the NII to promote business and commerce.  In addition to 
addressing the salient technical and legal issues addressed in 
the current draft, and because of its pivotal importance in 
forming people's opinions about the NII and its uses, it needs 
also to be infused with a sense of the global and cultural values 
that the network so importantly effects. 

     While no suggestion is made that these considerations have 
not been considered by members of the Working Group, and indeed 
evidence shows that they have been, this speaker at least would 
encourage the authors to elaborate their overt references to 
these important aspects and values.  And I would recommend that 
your recommendations include:  (A) a mandate for appropriate 
action to pursue international reciprocity to copyright laws 
protecting American intellectual properties, (B) to guarantee the 
cultural values of the nation as embodied in its libraries, 
museums and archives, have a permanent presence on the NII, and 
(C) that it guarantee that the public will always be able to 
access not only the conduit but also the content of the NII for 
personal self-advancement and educational purposes.

MR. LEHMAN:  Thank you very much.  I think those remarks are very 
well taken about fitting the NII into a cultural context, and I 
hope we can take a look at emphasizing that more in our report.  
But, you heard earlier mention of the Library of Congress project 
that was publicized in the New York Times earlier this week, and 
one of the things that we're struggling with -- and I know the 
President is struggling with it, the Vice-President is struggling 
with it, too, because Vice-President Gore has indicated on many 
occasions that he really wants to, would like to, make the 
Library of Congress available to the world -- is how to do that 
and provide the kind of access that we want and at the same time 
obviously not completely dismantle the copyright system.  
Because, if the Library of Congress were available completely 
free of charge, without any restrictions -- since virtually every 
publication been produced, obviously a lot of public domain stuff 
now, but all copyrighted works are on it -- then it could 
virtually dismantle the whole economic structure that these 
publishing and so on has been built on.  How do we handle that?  
I mean, obviously there's a certain element of fair use, and 
we're going to try to flush that out, but I guess I don't see 
that it would a fair use to take everything that is in the 
Library of Congress and just send it all around the world on the 
Internet.  So how do we achieve that goal which you've described 
and balance that with copyright interests? 

MR. GRYCZ:  Well, I think there are two comments to be made here.  
First, in terms of supporting the copyright law itself, I think 
that's a particularly important underpinning that we need to 
encourage in as many ways as possible.  Because not only is it a 
hallmark for preserving and encouraging intellectual 
contributions, but also in the absence of a strong firm copyright 
law, it is replaced by contract law, which is much more limiting 
potentially than copyright law. The other side of the coin, in 
terms of the actual implementation of this, my colleague from 
Dialog talked about the NII having various lanes.  And I think 
that there probably will be various lanes, and some technical 
restrictions that might be foreseen where the access to 
information provided by the Library of Congress might primarily 
be in educational venues and through those kinds of institutions 
where its use is likely to be for educational purposes.  That's 
not a finished problem, because obviously there are 
down-streaming results.  But at least you'd have some 
institutions helping to preserve that, much the way they now 
restrict copying of copyrighted material.

MR. LEHMAN:  In other words, the database of something like the 
Library of Congress would be available institutionally, not just 
to every single PC user necessarily?  But you could come here to 
the University of California Los Angeles and at the library you 
would have access to it?  Now in theory I suppose there could be 
some kind of licensing mechanism there.  Would you object to 
that, that would provide some -- right now if a copy, we have 
libraries all over the country, and we don't have a situation 
where the Library of Congress buys one copy of a book and then a 
million -- you know, 30,000 libraries around the United States 
automatically get that copy for free.  They pay for their own 
copies.  I mean, would you object to some kind of a system of 
licensing that would provide some kind of a reasonable fee 
through the library that would be paid, say, through the Library 
of Congress to the rights owner whose works were stored there? 

MR. GRYCZ:  I would not object to such a fee.  It seems to me 
that the generation of revenue stream to repay intellectual 
effort is obviously of critical importance, and that licensing 
fees seem to be a vehicle that are useable. It's also clear that 
with an electronic environment there are a number of 
modifications of that licensing fee from the ones that we 
experience in print.  One could imagine for example something of 
a very timely nature having a more elevated licensing fee and 
something that is historical having a reduced fee.  There are 
ways of looking at those economic models.  Some people are 
working on them and I don't think yet we've agreed on any that 
work for every person.

MR. LEHMAN:  Well, thank you very much for your comments.  
They've raised some really important issues.  We've now reached 
our time for our break, and we allowed ourselves a generous 18 
minutes.  So I think we can reconvene in about five minutes for 
the next witness.  

(Whereupon, a short recess was taken.) 

MR. LEHMAN:  I'd like to get underway again if we could, please.  
Our next witnesses will be William Barlow, Assistant General 
Counsel to Times-Mirror Company here in Los Angeles, and Robert 
Steinberg, Intellectual Property Counsel to Times-Mirror from the 
law firm of Irell and Manila.  Welcome.  

WILLIAM BARLOW:  Thank you very much, Assistant Secretary Lehman.  
We are grateful to be here this morning and to add to our -- add 
comments to the valuable public hearing here.  Just as a way of 
background, I know that you're familiar with the Times-Mirror 
Company, but for the record we are members of the Association of 
American Publishers.  We are members of the Creative Incentive 
Coalition, and members of the Newspaper Association of America, 
and the Magazine Publishers of America.  So those groups have 
recognized some of the interests.  But we have interests 
particular to us as a publicly traded company.  We have a wide 
variety of holdings with newspapers, professional information 
such as Matthew Bender.  We are also moving and developing a 
consumer multimedia.  So we have divergent interests.  And as to 
the copyright laws, sometimes we are on two sides of the fence. 

     So we do want to let you know that we are very pleased with 
the efforts that have come out of the Working Group's NII Task 
Force.  And we are also, as a company, we're facing a lot of 
transition going into the information age, and the electronic 
digital age.  And we believe that now is the time.  So we 
appreciate the opportunity to address the aspects from an 
industry standpoint.  We'd like to focus on principally four, 
maybe five areas.  Those areas are -- the exclusive distribution 
right by transmission.  From the comments that we've heard we 
feel that we might have some interesting discussion there.  We'd 
like to look at the first sale doctrine.  We'd like to talk about 
the fair use, and then licensing issues as well.  

     I think what I'd like to do is I'd like to just start out on 
a lesser controversial area, and that is the first sale doctrine.  
As to that, we strongly agree with the Working Group's 
recommendation that they exclude transmission from the first sale 
doctrine.  And as we look at that we also feel tangentially that 
at some point they're going to have to evaluate in some sort of 
group the impact, at what point perhaps a hard copy, if it's 
generated from an electronic transmission, when that becomes 
unauthorized and how we might be able to best regulate the 
exclusive rights to reproduce.  Because obviously they have the 
right to print one copy, but if they start distributing it on 
down stream we need to look at that more carefully as to when an 
authorized copy become unauthorized. 

MR. LEHMAN:  If you -- if our preliminary recommendations were 
accepted, then you could provide for that in your licensing and 
basically control the making of copies and circumstances under 
which it would be authorized or unauthorized, couldn't you?  
Wouldn't that be one of the --

MR. BARLOW:  Through the transmission under the instructions, 
yes. 

MR. LEHMAN:  I mean if there's no first sale doctrine applying, 
then you have a right to control use of all the copies that are 
-- 

MR. BARLOW:  And maybe rightfully so.  That's where it should be, 
with the copyright owner as to how to release that.  So we do 
endorse that exclusion.  

     The other issue is fair use.  It is going to be difficult to 
get one side or the other because everybody has their opinions.  
But I think it's a delicate balance as to where the fair use 
plays.  And to preserve the public interest and access we realize 
the balance there.  But I think at this time the Times-Mirror 
Company does not believe, from all of our interests, that the 
current law needs to be modified.  And that we maybe need to 
explore, as concerned parties, how that might take place.  I know 
we have the hearings for the fair use.  And it's my understanding 
that those are associations that are participating and we will be 
represented through those means.  So we will participate there.  

     But I think that we want to make clear though that when you 
have public access that does not mean free access.  And I think 
the paper points that out in similar terms.  And I think that one 
of the concerns we have is we have newspapers.  And nobody prints 
out a newspaper, they don't reproduce it.  If we send it over 
on-line and make it available, people are going to browse that 
issue.  And I don't think that, given the nature of our products, 
magazines, newspapers, that browsing should be something that 
would be a fair use.  I think that we might be able to give up 
how much they can browse.  We might yield that right as to what 
they could take a look at, but we would want to retain that 
exclusive right for us as the copyright holders.  And we will 
address that a little bit further as we get into the transmission 
distribution.  But I think that we want to make it clear that 
fair use is an area where private usage does not equate to public 
use and public access. 

     And I think that we also want to be stressing the fact that 
educational and transformative uses in reality sometimes are not 
-- in their nature they can compete directly with public 
activities, or not for profit corporation activities.  And so we 
want to also make you aware that it does not mean that just 
because they have educational intent that they necessarily are 
used for educational purposes.  And I think that's self evident. 

     What we also would like to stress is licensing.  I think 
this is going to be the hottest area because we as an industry in 
whatever form will need to address that.  And we strongly agree 
that licensing should be done on a free market system.  And that 
compulsory licensing is something that we want to clearly stay 
away from.  Nonetheless, I think that there's been testimony 
already that there should be some sort of encouragement, an 
incentive given to make, one, forms available to discuss how that 
might take place or, two, give incentives to allow companies to 
file their copyrights, or make a clearance or put it on record as 
to who has what information.  I think that as we look in the 
multimedia side of our companies, that we are going to have a 
myriad of pieces of information that need to be licensed.  And 
our concern there is that we're going to try in good faith to do 
all the licensing and get permissions.  But at some point we may 
inadvertently take some copyrights and pass it on -- or material 
that is copyrighted and pass it on.  So I think that we might 
evaluate the degree to which we might have lesser or nominal 
penalties in the event that it occurs.  But in the same vein, to 
be aware that I think that if it's intentional or fraudulent then 
those penalties should apply. 

     I would like to spend some time on this exclusive 
distribution right, and I'm going to turn some time over to Bob, 
who really understands some interesting issues in this area. 

ROBERT STEINBERG:  Thank you, Bill.  First, let me say that we 
agree with the proposed amendment to 17 U.S.C. Section 106(3) to 
add "by transmission" to the statute.  I think that that's an 
effective change and a very helpful one.  We also agree, to be 
very clear, with some of the additional language to be added to 
the definition under 17 U.S.C. Section 101, the definition for 
"to transmit."  The addition we agree with is the language -- to 
transmit a reproduction is to distribute it by any device or 
process whereby a copy or a phonorecord of the work is fixed 
beyond the place from which it was sent.  

     Now there may be an amendment necessary here with some 
further thought that the "is" in that sentence may require a "may 
be."  In the context of the newspaper environment, what we're 
concerned about is that most people, as Bill had said, don't 
actually obtain a newspaper for saving purposes in the general 
market.  They actually browse a newspaper when they read it.  And 
that right to browse we believe is covered in the display right.  
The definition for transmit incorporates a performance or display 
right.  The last sentence, however, of the proposed change 
creates sort of a binary rule if you will that it's either to 
display and perform, or in the alternative, to reproduce, 
depending upon its primary purpose and effect.  We would 
recommend that both rights should apply.  And perhaps, I wasn't 
there during the other hearing, it's sort of similar to the music 
industry's concern concerning performance rights.  We, on the 
other hand, have a concern in the display rights.  Display being 
the right to protect against let's say informal browsing that 
people might do to have a newspaper on line, read it without 
actually requiring the actual reproduction. 

     In a sense, what we're asking for is two royalty payments, 
to be precise.  One on the display for browsing purposes as you 
read a newspaper.  And two, perhaps for later purposes, a royalty 
on the actual saving of the newspaper for later use, perhaps in a 
database form or just in a simple archive without any actual 
structure.  So with that in mind, we would recommend that 
everything up to the definition in transmit is acceptable except 
to us having that last sentence.  That seems to have a this or 
that approach to the definition of transmit. That's basically my 
comment on distribution.  

     Bill?  I might add one point here as a footnote.  The 
browsing issue obviously under the fair use context that Bill 
referenced earlier is also a similar concern for the same reason.  
So the two actually work hand in hand.

MS. SOUTHWICK:  Can I ask you, do you believe then that the 
transaction between you and your end user is always going to be 
both a display and a distribution, or might some customers only 
receive it as a distribution for their database and not the 
browsing or display, and others just the display?

MR. STEINBERG:  I think that's a good question.  I don't think it 
will be always this or that, it will really be up to the end user 
who receives the information to determine what they want to do 
with it.  Certainly in many cases filling up one's hard drive 
with a newspaper that's three weeks old may not be necessary.  On 
the other hand, if they want to save the newspaper and/or 
portions of it for later access because they were interested in 
one portion of it, then they want to reproduce it and save it for 
that purpose.  In this context both display and reproduction, in 
that example, are being implemented. 

MR. LEHMAN:  Would you have a notice, assuming this were in the 
law, would you have a little explanatory note that said this is 
-- we're giving you the right -- we're displaying the work for 
you and -- I mean, explaining that to the end users so that they 
would understand exactly what the rights involved were?

MR. STEINBERG:  I think the simplest answer is we would probably 
not go into much detail except give them the right to do either.  
And for a one time license fee, or whatever that cost is to 
obtain the content they would have the right to both display and 
if they chose to do so reproduce.

MR. LEHMAN:  But you'd make that clear so that for example if you 
weren't conveying the right to the distribution right, then they 
wouldn't be able to -- you might chose not to convey that right 
under certain circumstances.  If you found that there was some 
major commercial value in your being able to separate out the two 
rights you might wish to just in the notice say we're only 
conveying to you the -- or in the license, which would be some 
kind of a notice at the time they signed on, or keystroked into 
your service, you might say we're just giving you the right of 
public display here.  And you don't have the right to save this, 
save a copy of it.

MR. STEINBERG:  That is possible.  And that perhaps under that 
context the royalty fee would be less, since they weren't going 
to get the benefit of a later reproduction to archive or use for 
other purposes.  Under this test it might be difficult to 
determine what the real purpose was at the end user's side.  For 
example, to determine whether or not they received it for their 
purposes of reproduction or an actual display.  Of course having 
notice up front does help solve the problem a little bit.

MR. LEHMAN:  Well, the circumstances under which that would take 
place would be there might be some kind of a company that would 
make a business out of archiving this.  And you wouldn't want to 
just give them a single copy.  And you would say to them, you 
know, the digital technology permits you to cut off a given user 
if you wanted to.  And you might say in their case they would 
only get the right of public display unless they paid you more 
money for the right to receive a distributed copy. 

MR. BARLOW:  That would be right.  We'd like to have that 
control.  And could I just make one other comment.  And that is 
that on the Feist case I think that you had mentioned a question 
on that, I think that it's clear to me that we are interested in 
-- I know the sweat of the brow theory has kind of gone out the 
door, but as we look at that I think that there are some areas 
where the people do compile, it's very nominal.  For example, 
when we have a multimedia on line and you select from the 
newspaper the specific articles you want to look at and the issue 
kind of comes up in the context of the user selecting whether 
that is an actual copyrighted work by the virtue of having 
selected the criteria.  We feel that there isn't enough process 
and selectivity that goes into that to give rise to a copyright 
to that individual's underlying work.  We think though that we do 
support the idea that there are points when you have done enough 
of those, and in enough ways, that you would create some sort of 
copyright in your work.  But I think just selecting from the 
newspaper all articles that were on airplane crashes doesn't show 
enough creativity and initiative, but I think we will have to 
address as an appropriate forum where to do that.  But putting 
the page at the bottom of a case book, as we've seen and 
litigated, I don't think that gives rise to a copyright.

MS. SOUTHWICK:  Can I just make one clarification?  Is what 
you're saying then that you wish to have the rights -- the right 
to license your works either separately as the distribution right 
to an end user, or the display right, or both together, both 
display and the ability to distribute?

MR. STEINBERG:  That's right.  You said distribution right, I 
would assume you meant, in my context, reproduction right and the 
display right -- 

MS. SOUTHWICK:  Right.  That you would reproduce and distribute 
to the end user, or you would display to the end user, or you may 
display and reproduce and distribute to the end user.

MR. STEINBERG:  Precisely.  We see them as being two separate 
rights under Section 106, and that the copyright holder should 
have the exclusive rights to either and decide how to use them.

MR. LEHMAN:  Thank you very much.  Next I'd like to ask James 
Newton Howard to come forward. 

JAMES NEWTON HOWARD:  Good morning, Mr. Chairman, Ms. Southwick, 
Mr. O'Neil.  I am James Newton Howard, and I write music for 
motion pictures.  I wrote the score for the Prince of Tides, 
Wyatt Earp, and the Fugitive, to list only a few.  Additionally I 
work in the record industry as a song writer and record producer.  
Thank you for allowing me to testify before you today and offer 
my comments on the preliminary draft report on intellectual 
property and the National Information Infrastructure.  

     First let me say that I am glad to see this Administration 
taking seriously the rapid advances of technology.  I am pleased 
that the President's and this Working Group's ambitious efforts 
will help ensure that Americans do not end up hitchhiking on the 
information superhighway.  The preliminary draft of the report of 
the Working Group gives me some comfort that my rights, and those 
of others like me, will not simply be hijacked.  As a creator I 
thank you for your support of the rights of owners of copyrighted 
works. 

     The preliminary draft reflects the Working Group's 
commendable effort to balance the competing interests of the 
various groups that have a stake in the NII -- those that will 
provide the services, the potential end users, and the owners of 
the copyrights and the works we would all like to see available 
on the NII.  The preliminary draft was obviously prepared with 
the best intentions and is quite thorough.  I believe, however, 
that the full impact of a few of the conclusions and 
recommendations have not been adequately considered.  

     I compose music, so I read the preliminary draft with an eye 
towards how the suggested changes will effect my colleagues and 
myself and I am troubled.  Much of the music I write is heard in 
motion pictures.  I helped to create the tension movie goers felt 
when Harrison Ford was being chased by that train in The 
Fugitive, and the anxiety we shared when Michael Douglas was 
trapped in a traffic jam in Falling Down.  I believe those movies 
would have been less effective without music.  And they would not 
have been the movies that they are with different music. 
Sometimes motion picture scores get a lot of attention and even 
sell a fair amount of recordings.  More often however revenue for 
my efforts is limited to the up front fees paid by the studio and 
performance royalties.  That is when the movie is broadcast on 
cable or network or local television, or pieces of the score are 
played on radio, I receive certain income from, in my case, 
ASCAP, which keeps track of those performances and accounts to 
me.  The security provides by performing rights royalty income 
allows me to continue doing what I do.  

     I can envision a time down the road when the technology of 
systems such as the NII may send conventional radio and 
television the way of the mimeograph machine.  That is why I am 
troubled that the preliminary draft says that transmissions of 
musical composition over the NII, similar to the way they are 
transmitted by radio and TV today, will not necessarily entitle 
creators to performance royalties.  The separate performing right 
may not be that significant to many creators of other types of 
works, either because their works are typically not performed, 
such as a novel, or because the right to publicly perform the 
work is licensed or sold as part of a package together with the 
rights to make and distribute copies.  Music however is in a 
class by itself when it comes to performing rights.  Due to the 
nature of music, the way the music industry developed, and the 
compulsory licensing provisions of the Copyright Act, composers 
jealously guard their performing right.  It is in many way the 
only guarantee of future income. Thus the proposal in the 
preliminary draft to change the law so that all transmissions of 
musical compositions are not performances may seriously harm the 
ability of composers and song writers to make a living and 
provide for their families.  Performance royalties give composers 
the wherewithal to continue during dry spells.  Absent such 
income many would be forced to give it up and find a "steady 
job."  Indeed the loss of these rights would make this difficult 
vocation so much more difficult that many talented composers may 
find the prospect so daunting that they will give up the 
profession and thus deprive our society of their creative 
contributions. 

     The right to publicly perform a work, and the right to 
distribute copies of the work are separate, and have been as long 
as I have been around.  I see no reason to change these basic 
rights.  But the preliminary draft recommends, in the NII 
context, that if a piece of music is transmitted to an end user 
who keeps a copy of it, both rights should not be involved.  
Rather the suggestion is that we look at the "primary purpose or 
effect" of the transmission.  If the primary purpose was to 
distribute a copy then the performance will be deemed not to have 
occurred.  The preliminary draft does not indicate why we need 
this change.  Furthermore, the preliminary draft seems to have 
overlooked the fact that the only people who will be 
significantly effected by this change are creators and owners of 
copyrights in music.  And they are likely to be severely harmed 
because they may, in many instances, be deprived of performance 
royalties.  Unfortunately the preliminary draft does not give 
composers or song writers much incentive to make their works 
available on the NII. 

     Here is how I see it.  The primary purpose and effect of any 
transmission of music is that the person transmitting it wants 
the person on the other end to hear it.  The ability to transmit 
that song or other musical work makes the service more valuable 
to consumers.  If the end user retrieves the work and may listen 
to it, he has received value.  If he also keeps a copy of the 
work to play over and over the value of that transmission is 
further increased.  Both the copy and the performance should be 
paid for.  This does not appear to require radical alteration of 
the way the music industry does business now. In contrast to 
familiar and orderly procedures, the proposed change will disrupt 
the entire music industry.  We all know where we stand now.  
Relationships are in place for the efficient licensing of and 
compensation for performance and separately reproduction and 
distribution of phono records.  But if the proposed amendment 
were adopted, if we substitute the existing system with a 
determination of the primary purpose or effect, I can see a time 
not too far off when every transmission of a musical work will 
cause confusion and debate.  When a transmission is both a 
performance and a distribution, who will decide what was the 
primary purpose or effect of the transmission, a judge?  

     The service provider will no doubt take whatever position 
will result in the most profit for the service.  The performing 
rights societies will say the primary purpose was to deliver a 
performance.  The recording industry will say the primary purpose 
was the distribution of the copy and thus cancel out the 
performance.  Creators will say how come I was better off without 
this new technology.  And things may be even worse.  As I 
lamented earlier, the preliminary draft suggests that whether or 
not a copy is made, perhaps every transmission of music to end 
users on the NII will not be considered a performance.  The 
preliminary draft does not explain the basis for this conclusion.  
But I am deeply concerned for myself and other composers and song 
writers that our music may be freely transmitted on the NII with 
absolutely no benefit to us.  If transmissions are not 
performances, creators of music will get nothing unless their 
works are copied.  And then statutory mechanical fees may be 
their only remuneration.  This possibility seriously endangers 
the future availability of music in this country on the NII and 
everywhere else.  

     It is curious that the same document which seeks to minimize 
performing rights urges that we amend the copyright law to extend 
the performance right to the use of sound recordings by digital 
transmission.  Certainly a right of public performance in sound 
recordings is fair and fully warranted in the digital world.  I 
am skeptical however that the owners of the copyrights and sound 
recordings will realize much benefit in view of the now 
questionable definition of public performance in the NII context.  

     Furthermore, it is critical that the performing right in 
sound recordings not be granted at the expense of the creators of 
the musical works underlying these recordings.  After all, 
without the music there would be no sound recordings.  The 
preliminary draft does not make clear that the performance right 
of sound recordings and digital transmissions must not replace or 
impinge upon the performing right in the underlying musical 
compositions. 

     I look forward to the final report of the Working Group, 
which will, I hope, reflect the interests and concerns I have 
expressed.  The NII technology presents vast opportunities for us 
as a nation.  But the goals of the NII cannot be achieved without 
fair consideration for the rights of all creators and copyright 
owners.  Thank you very much. 

MR. LEHMAN:  Thank you very much.  I don't really have any 
questions.

MS. SOUTHWICK:  I just have one.  When you say that the report 
does not make clear that the performance rights in sound 
recordings must not -- I'm not sure what your word was -- impinge 
or harm the performance rights in musical works, what are you 
talking about here?

MR. HOWARD:  We're talking about assurance that the performance 
rights that would be given to the artist do not take away from 
the performing rights of the creator of the music.

MS. SOUTHWICK:  But in practical terms, what are you talking 
about?  I mean, what would you suggest be done to ensure that?

MR. HOWARD:  Well, to be quite honest with you, I'd have to think 
about that a little further.  But I'd be happy to get back to you 
on that. 

MS. SOUTHWICK:  Thanks.

MR. LEHMAN:  Thank you very much.  Next I'd like to ask William 
Daniels of Paul and Stewart in Santa Monica to come forward 
please. 

WILLIAM DANIELS:   Mr. Chairman, Ms. Southwick, Mr. O'Neil, thank 
you for allowing me to speak today.  My name is Bill Daniels, and 
I'm actually somebody who has been watching the entertainment 
industry as a journalist and observer for about ten years.  First 
as a reporter for Variety and Daily Variety, and later as an 
executive in the entertainment insurance industry.  I spent the 
past few years in law school, actually, getting a late degree, 
studying some of the issues that your Task Force is investigating 
today.  And I'm really here to speak for myself and raise an 
issue that I know was commented on in Chicago and which was 
mentioned here during the testimony this morning -- and that has 
to do with the issue of operator liability and copyright as it 
applies to on-line systems such as CompuServe or bulletin board 
systems where users will upload copyright protected material 
which is then available for downloading by other users.  

     I know that from the Wall Street Journal, CompuServe in 
particular has been taking a public stance that they need some 
sort of adjustment in the burden of proof regarding liability.  
Basically copyright, the way I understand it, is if you infringe 
and you prove that, then there's an absolute liability.  And 
CompuServe's position is, well, we'd like a knowledge standard, 
we'd like to have some notice that there are people uploading and 
downloading copyright material before you hold us liable 
personally for publication and as infringers.  And if you don't 
give us that, we can't function properly because we're processing 
a tremendous amount of data every week.  And I believe the figure 
that they gave the Wall Street Journal was 160 million computer 
screens a week, which certainly sounds daunting.  The problem 
here I think is really one, a historical problem, it has to do a 
lot with the way that on-line systems have grown up.  
     Now, I was a subscriber on CompuServe probably back in 1986 
I believe.  And I remember then it was a fairly small sort of 
electronic community center type of service.  It was in the early 
days.  And there really -- the subscriber base was fairly low, 
the amount of material that was available was fairly limited.  
And the term electronic superhighway hadn't been invented yet, 
hadn't become a trendy term.  The bodies that were available to 
actually pay royalties or to make for an interesting market for 
intellectual property providers, they just weren't there.  So 
nobody really cared if you uploaded a computer program -- well, 
computer software, I'm sorry, has always been an issue of 
contention.  But say if I recorded a song on my music synthesizer 
and I used a midi interface and I digitized it and I took that 
file and uploaded it to CompuServe, there wasn't really a great 
deal of interest in the fact that I was doing that or other 
people were accessing it because there was a small market.  Well, 
right now there's a large lawsuit going on in New York which I 
know you're familiar with where a bunch of song writers decided 
that it wasn't right that CompuServe was able to charge 
subscribers to access their system and then for really no royalty 
to the song writer, but for a fee to CompuServe be able to take 
copyright material and essentially distribute it and republish it 
and have no benefit to the creator.  

     I don't believe -- I don't accept CompuServe's argument that 
it cannot act as a gatekeeper of its own system.  And I believe 
that if CompuServe and systems like that aren't held to account 
for the content in some fashion that they are distributing for a 
profit, we risk creating essentially electronic, not really free 
ports, but more like no copyright zones.  And these could exist 
anywhere in the world because of the nature of electronic 
communications. The precedent of allowing that sort of safe 
harbor for profit makers to profit from other people's enterprise 
I think is astounding.  And that's really the essence of my 
comment, which is -- it's an important issue that I understand is 
just beginning to surface, but I would strongly urge the Working 
Group to pay attention to it and perhaps stress it in the final 
draft. 

MR. LEHMAN:  Thank you very much.  I appreciate those comments.  
Next I'd like to ask Mary O'Hare, Chair of the Executive 
Committee of the Intellectual Property Protection Section of the 
State Bar of California to come forward. 

MARY O'HARE:   Good morning, Assistant Secretary Lehman, Ms. 
Southwick and Mr. O'Neil.  My name is Mary O'Hare.  I am Chair of 
the Executive Committee of the Intellectual Property Section of 
the State Bar of California, and am speaking on behalf of the 
Executive Committee.  The Executive Committee is the governing 
body of a voluntary section comprised of more than 4100 attorneys 
practicing in the various intellectual property fields of 
copyrights, trademarks, patents and trade secrets.  

     Assistant Secretary Lehman, since the last time that a 
member of our Executive Committee appeared in front of you at the 
hearings up in San Jose, eight short months ago, our organization 
has increased by more than ten percent.  Our section's numbers 
and those number increases are a testament not only to the 
importance of intellectual property in the world of law, but also 
to the linkage of California's economic growth through 
intellectual property.  The members of the section and the 
members of the Executive Committee hail from large, small and 
solo private practices, corporations, large and small businesses, 
and non-profit organizations.  Our members number among their 
California clients the full spectrum of individuals and 
businesses needed for the success of such an information 
infrastructure.  From hardware manufacturers and software 
application licensors to what is now commonly referred to as the 
content providers. Those content providers that we represent are 
as diverse as the one person games developer operating out of an 
apartment, a group of professors collaborating on a report, a 
medium size print publisher, and a multi-nation traditional 
motion picture and television production and distribution 
entities.  On behalf of all the members of our organization we 
wish to thank you for bringing important hearings once again to 
California.

     We commend your responsiveness to the key intellectual 
property issues of our times and your realization that California 
is a state figuring prominently in the preservation and growth of 
the nation's intellectual property treasures.  Rather than 
respond in detail to specific proposals set forth in the Green 
Paper, a task which we feel more appropriately left to individual 
members of the section, given the timing of these hearings, the 
Executive Committee will address today a few broad issues 
pertinent to or raised in the Green Paper.  

     First, it must be noted that the Constitutional provision of 
promoting the progress of science in useful arts has resulted in 
a nation of unparalleled creativity and innovation.  By providing 
such incentives as limited exclusive rights, our constitution has 
given the United States citizens access to creative works, from 
novels, to movies, to software applications -- and has given the 
United States its export jewels of technology and entertainment.  
Likewise, California's economic growth and health depend on the 
strength of its motion picture and television production 
industry, its computer software and service industry, as well as 
its electronic industry.  For example, those industries combined 
spent more than $27 billion in this state in the year 1992.  And 
it is no accident that those three of the four key high paying 
exporting industries in California, likely participants in the 
creation and viability of the NII, are dependent on the strength 
of intellectual property rights. 

     Second, we agree that the strong, unambiguous intellectual 
property protection is key to the formation of the national and 
Global Information Infrastructure.  Here at UCLA at a super 
highway summit in January that sentiment was expressed by one 
voice, that of the CEO of Sony of America, Mr. Schulhoff.  We are 
pleased that that is echoed and underscored by the Green Paper, 
these hearings, and its participants today, again at UCLA.  The 
Green Paper wisely supports our existing copyright regime and the 
principles upon which it is based.  No dramatic overhaul is 
required.

     Transmission does implicate the Section 106 rights.  And the 
Green Paper also wisely says that further study is needed to 
examine how certain changes in one section of the Copyright Act 
could impact on the reading of other sections.  And these 
hearings are part of that study. 

     While some with sort-sighted glee have predicted the death 
of copyright with the coming of digital age, the more appropriate 
prediction is that without a continued and strong intellectual 
property incentive to content providers the death of a meaningful 
NII will result.  Some analogies, although not perfect, highlight 
this point.  If the character of Ray Kinsella of the book 
Shoeless Joe and the movie Field of Dreams, did not build his 
field to the specifications that made the important -- they, the 
formers -- greats of baseball feel comfortable, then they would 
not have come to play.  In time the field might have been used by 
others, but never have reached its dream potential.  Likewise the 
information infrastructure, the superhighway to use the phrase 
that has slipped into our everyday language, may be built using 
wonderful technology and offer people opportunities of dollars of 
investment only to result, if we are not careful, in a 
superhighway that does not encourage widespread use by varied 
content providers.  There then will be no dream super highway or 
dream use of that highway.  

     We've learned in real life that when asphalt highways do not 
deliver to automobile drivers the expectation of safety, absent 
bandits, hijackers and snipers, these highways become ghost 
roads.  The traveller takes a slower, safer, perhaps less 
technologically efficient ride, or just stays home.  Here if the 
information super highway is fraught with hijackings and persons 
who want to and can take copyright properties out for 
unauthorized spins, then the highway may be filled only with chat 
travellers.  While on-line chat may be creative, and a novel 
substitute for telephones and letters, it does not meet the 
potential of the dream information infrastructure that this 
Administration and the Green Paper envisions.  We will then have 
glorious ghost roads that copyright owners will not come and ride 
on it. 

     These safety issues bring us to our third point.  In the 
digital age, clear, unambiguous copyright law constructs must be 
supported by technological protection.  Examples illustrate the 
point.  The dream and work of thousands of Californians might 
turn into a nightmare in the blink of an eye, transmission 
predicted in the advanced digital age.  Unauthorized duplication 
and distribution of the quality of the motion picture master 
representing the investment of millions of dollars and that work 
of thousands will be possible.  Both the software industry and 
the motion picture industry are well aware that earnings from 
creativity are really not usually made in a weekend, but rather 
in months and years of exploitation of rights.  Equally we must 
give and maintain incentive for the genius writer to produce the 
work that may finally teach the world the futility of war.  And 
we must be able to assure him that his message will not be 
electronically manipulated into an advocacy of combat. 

     Without commenting on the specifics proposed by the Green 
Paper, the Working Group is commended for raising the issue of 
technological protection and is urged to put real teeth into 
proposals regarding such protection.  We urge the group to 
carefully consider other comments submitted to the Working Group 
regarding additional technological protection devices. 

     Fourth, while the title of the Green Paper focuses on 
National Information Infrastructure, it correctly points out that 
transmissions will cross borders and ultimately we will have a 
Global Information Infrastructure.  The rules for the success of 
that infrastructure are no different than the rules of success 
for a national infrastructure.  The principles of national 
treatment have worked well and must continue.  Likewise for the 
benefit of our economy and that of other nations we are now so 
inter-dependently linked, we must encourage a high level of 
intellectual property protection in other countries.  And that 
goal must be part of a multi-national agreement implementing the 
Global Information Infrastructure.  

     Fifth, we endorse the Green Paper's observation that 
effective education about intellectual property rights is crucial 
to the success of the information infrastructure.  While that 
education is key for the kindergarten to high school groups, it 
is as important that our current opinion leaders, government 
representatives, and adult citizens who have immediate stake in 
the information infrastructure likewise are part of the 
educational process. Our citizens must understand that the ease 
of copying cannot and should not equate with the right to copy, 
distribute, display and perform another's work without 
permission.  

     Our system is based on a delicate balance of incentive 
rewards that build a body of creativity for the public good.  I 
recall recently a conversation with a true entrepreneur of the 
digital age and a man of vision.  He was questioning the fact 
that the use of part of a musical composition or reproduction of 
trademark logos and programs for CD ROMs or on on-line services 
might require a rights holder's permission.  He was not 
immediately thrilled with my discussion.  This same individual 
who publishes a valuable newsletter on one aspect of the 
potential national infrastructure for a yearly subscription fee 
of almost $500 understood immediately, however, the incentive 
nature of the intellectual property laws when we then discussed 
whether he would be happy to have people copying his articles in 
newsletters without paying for the right.  Knowing this 
individual I'll place my bets that our discussion and his 
leadership in the digital age will make him a supporter of 
intellectual property rights and the licensing of them in a free 
market atmosphere. 

     In the context of this discussion of education our committee 
proposes a bargain with this Working Group.  Two requests honored 
for two actions delivered by our committee.  First, we note that 
within the beltway miles from California there is a continuing 
need for such education in the offices of government.  We are 
encouraged that the Green Paper signals recognition by the 
Administration of the importance of intellectual property.  But 
the work of this Working Group cannot be seen by others in 
government as a nuisance, a side issue, or an afterthought in the 
debate concerning the building of telecommunication systems and 
information infrastructures.  If our government institutions 
still remember, and can resurrect that sign saying, it's the 
economy, it may be appropriate to put right under it one reading, 
and intellectual property is the key.  And make a few thousand 
copies of this sign for distribution on the desks of all 
Washington decision makers involved in the building of the GII. 

     Secondly, we've noted the written comments concerning the 
Green Paper are available and the comments concerning hearings 
relating to fair use and education will likewise be forthcoming.  
We urge, on behalf of the public and our section in California, 
that such comments be available to contemporaneous inspection not 
only in Washington, D.C. but in California.  Not all can afford a 
D.C. attorney or a trip to the Capitol.  We urge that the Working 
Group investigate technological means to give such access to 
California citizens.  In turn, our committee will work with you 
to determine the means to afford Californian's such access. Such 
access as quickly as possible for an organization such as ours 
will reach down to the benefit of discussions like these.  Since 
our members represent the panoply of interests possible in the 
digital age we are already familiar with the challenge of 
deciphering the Tower of Babble of different languages, 
approaches and viewpoints of industries and individuals involved 
in the coming convergence.  And because of that familiarity we 
may be able to aid in the discourse to find the best proposals. 

     Finally, we stand ready to cooperate with the Working Group 
and primary and secondary education institutes in California to 
begin immediately the task of bringing short real world 
presentations concerning intellectual property into the schools.  
The first efforts need not be ambitious.  An hour or two on 
copyrights given on the birthday of that great inventor and 
author, Thomas Jefferson, appear appropriate.  We need these 
efforts to begin immediately.  Who knows, in some classroom some 
future writer, scientist, computer designer, may be inspired by 
the presentation and thrilled by the incentives for creativity 
this nation provides.  The work of that future Thomas or Teresa 
Jefferson, and the benefit that his or her creativity brings to 
the world may have made your struggles here today to maintain the 
delicate balance regarding important intellectual property 
components worthwhile. 

     On behalf of our committee and our section, we would like to 
commend the Working Group for its focus on important issues and 
its willingness to invite full comment and hearing at the draft 
stage of an important document.  We would also like to thank 
personally Assistant Secretary Commissioner Lehman for his 
responsiveness in the past to concerns voiced by our committee 
and his support of our committee's educational goals to bring 
Washington to California.

MR. LEHMAN:  Thank you very much.  I appreciate your comments and 
actually, I think that what we'll do -- it's an excellent 
suggestion that we make this report available elsewhere -- and I 
think what we'll do is at least make it available to some -- 
we'll see about the difficulties, but maybe all -- of the patent 
depository libraries around the country we have, and certainly 
some of them in California.  And we'll try to do that as quickly 
as we can.  I think that's an excellent idea. 

MS. O'HARE:  Well that would be wonderful and our section would 
be glad to also act as one of those sources too, just for the 
members of the public as well. 

MR. LEHMAN:  Great.  Thank you very much.  Our next witness, and 
last witness of the morning, is Gloria Werner, testifying for the 
Association of Research Libraries.  And she is from -- we're in 
her home institution, the University of California, Los Angeles. 

GLORIA WERNER:  Right.  As you have said, I am Gloria Werner, 
University Librarian here at UCLA.  And I very much appreciate 
the opportunity to review and comment on this preliminary draft 
report of the Working Group. My comments really are made on 
behalf of the Association of Research Libraries, better known as 
ARL amongst my friends.  And this is really a not for profit 
organization representing 119 research libraries in the United 
States and Canada.  These are the largest libraries in the 
country, would include the Library of Congress, and so forth.  
ARL's mission is to identify and influence forces affecting the 
future of research libraries in the process of scholarly 
communication.  Its programs and services promote equitable 
access to and effective use of recorded knowledge in support of 
teaching, research, scholarship and community service.  

     ARL wants to commend the Working Group for presenting a 
variety of opportunities, such as this hearing and the upcoming 
hearings or meetings on fair use, and I was pleased to hear this 
morning about educational forums as well, to provide input to 
your deliberations.  Given the complexity of intellectual 
property issues, particularly in this new network based 
environment, it is critically important we feel that the views 
and needs of diverse user communities be heard, understood and 
accommodated.  We are also pleased that ARL and others in the 
library community will be participating in the upcoming fair use 
conference. 

     My testimony is endorsed by several other library and 
scholarly organizations as noted at the end of my written 
statement, which I will be giving you shortly.  Major library, 
educational and scholarly associations have reached very broad 
agreement on some fundamental principles related to intellectual 
property issues and the development of the NII.  And that 
includes endorsement of a document entitled Intellectual Property 
in Association of Research Libraries Statement of Principles. 
There is common agreement among the associations and groups on 
the following key concerns and recommendations as they relate to 
the preliminary draft report.  

     We really have two areas of concern.  First of all, the need 
to retain a balance, and I want to underline the word balance, of 
interests between the rights of copyright owners and users and 
second, the need to retain fair use and specific library 
reproduction and distribution rights in the NII.  But let me 
amplify a bit on these two points.  As noted by the Working 
Group, it is important to maintain the long standing balancing of 
interests so that "the Copyright Act will provide the necessary 
protection of rights and limitations on those rights to promote 
the progress of science in the useful arts."  The continuation of 
these balanced rights in an electronic environment is essential 
to the unimpeded flow of information and to the development of an 
information infrastructure that best serves the public interest.  
We disagree with several of the modifications proposed by the 
Working Group.  Many of the clarifications proposed reflect the 
interests of copyright owners, without similarly reflecting the 
needs of users.  We are disappointed with the apparent emphasis 
on protecting proprietary interests in the NII to the exclusion 
of user interests.  We are hopeful that based on these and other 
comments the next draft will benefit from more attention to 
maintaining the quality of balance, and I underline that word 
again, in the current copyright law, which serves the broad 
interests of American society. 

     We believe that the Working Group's interpretation of 
transmission, and the related recommendation, is troublesome.  
The recommendation that all transmissions fall within the 
exclusive distribution right of the copyright owner would greatly 
expand copyright owner rights as they now exist and would limit 
current and acceptable practices that we now experience 
throughout the libraries of this country. 

     Our second concern relates to retaining fair use --

MR. LEHMAN:  Could you describe what some of those are, those 
practices that you think we might be limiting with this?

MS. WERNER:  Well, let me think of an example.  At the moment, 
and before this technology came to light, there would be, let us 
say one of our students or faculty at a remote site, this could 
be a physician for example, and they would be in touch with us at 
a central site and we would photograph, or photocopy I should 
say, an article and send it to them.  We have many cases to show 
that we can do that now very efficiently via the Internet.  We 
scan articles and send it to someone.  And it is for their single 
fair use in our estimation.  And it's unclear to us, in reading 
the language as it relates to the transmission here, exactly how 
that is going to be interpreted.  This may end up being clarified 
when you have your fair use conference or forum.

MS. SOUTHWICK:  Well this came up in Chicago, too.  Is your 
reading of the report somehow that the fair use doctrine would 
not apply in the digital domain as well?

MS. WERNER:  I think what is troubling us, and we are not lawyers 
per se, when you talk about the distribution right being 
exclusively given to the copyright owner, then it's very murky to 
us then -- there's talk about fair use, but without any kind of 
specifics as to exactly what that means in an electronic 
environment there are a lot of question marks in our mind.  Does 
that make sense?

MS. SOUTHWICK:  Yes.

MS. WERNER:  Okay.  Well, here we go.  Our second concern does 
relate to fair use and specific library reproduction and 
distribution rights.  The Working Group appropriately notes that 
the Copyright Act exists for the benefit of the public and that 
it is critical that researchers, students and other members of 
the public, have opportunities on-line, equivalent to their 
current opportunities off-line, to browse through copyrighted 
works.  It is equally critical that they have on-line 
opportunities equivalent to their other opportunities off-line, 
to exercise such fair use rights in making individual copies of 
quotations, brief extracts from copyrighted works, or journal 
articles for research or scholarship purposes. As recently stated 
in the ARL statement of principles on intellectual property, fair 
use and other relevant provisions are the essential means by 
which teachers teach, students learn, and researchers advance 
knowledge.  Each year millions of researchers, students and 
members of the public benefit from access to library collections, 
access that is supported by fair use, the right of libraries to 
reproduce materials under certain circumstances, and other 
related provisions of the copyright law.  These provisions are 
limitations on the rights of copyright owners.  The loss of these 
provisions in the emerging information infrastructure would 
greatly harm scholarship, teaching and the operations of a free 
society. 

     I'd like to turn now to our specific recommendations.  
First, the draft report should include a strong statement on the 
opportunities and benefits to research and education that will 
emerge as the NII is more fully deployed.  I think in a way 
Professor Grycz stated this in terms of cultural values earlier 
today.  And I liked the sound of what he had to say.  Many of the 
Clinton-Gore Administration NII initiatives recognize the 
opportunities for transforming, research and education.  
Intellectual property issues are intertwined with the process of 
scholarly communication, research, education and life long 
learning.  Electronic information will play an increasingly 
important role in the future of education and learning and 
therefore lawful access to as well as encouragement to use these 
electronic materials will be necessary.  A discussion of the 
benefits and consequences to these communities that will result 
from changes to the Copyright Act with the full utilization of 
the NII is in our view essential.  

     Second, we request that the Working Group recommend 
strengthening the library provisions of the copyright law to 
allow for preservation activities, to use electronic or other 
appropriate technologies as they emerge.  Digital works of 
enduring value very definitely need to be preserved just as we 
have been preserving printed works. As with other formats, the 
preservation of electronic information will be the responsibility 
of libraries, and they will continue to perform this important 
social role.  The policy framework of the emerging information 
infrastructure must provide for the archiving of electronic 
materials by research libraries to maintain permanent collections 
and environments for public access. And, if the transmission 
right is given to copyright owners, there must be related 
limitations that allow for the exercise of fair use in Section 
108 rights.  

     Finally, to realize the opportunities of the NII, vis a vis 
libraries, education, research and scholarship, we are 
recommending an additional forum, such as a new national 
commission on new technological uses of copyright works.  What 
you know very well as CONTU and I'm going to call CONTU-2.  We 
feel that CONTU-2 would compliment the work of your Working 
Group.  Such a forum could provide the needed analysis and 
in-depth studies of the long term implications of new 
technologies and applications on intellectual property issues.  
It could also provide the means by which representation of all 
users and constituencies, including libraries, publishers and 
creators, is accomplished.  

     In closing, I should note that the ARL agrees with the 
Working Group recommendation that no more than minor 
clarification and amendment to the Copyright Act is needed at 
this time.  In a way, the success of the current system for 
users, creators and publishers, is evident just almost 
everywhere.  And I want to give you a few examples to highlight 
that point.  There are approximately 130,000 serials being 
published worldwide.  The copyright clearance center has tens of 
thousands of copyright owners that are in its database and have 
worked with them.  The amount of information is doubling every 
5.5 years.  There are many new electronic products from the 
current publishing community, thousands of scholarly outlets on 
the Internet.  Publishers are also initiating many experiments on 
the Internet, often with one or more libraries as partners, to 
test new delivery mechanisms, economic models, and user 
acceptance. There is probably no scholarly publisher of which I 
am aware who does not either have underway or is not planning, 
such an experiment.  And it is from these experiments that I 
think we are going to learn what really will happen in this new 
environment. 

     In short, this really is the most fertile time of publishing 
experimentation since the invention of the printing press and the 
journal.  Possibilities and opportunities abound.  In this time 
of transition we feel it is very important to recognize and build 
upon the strengths of the current system, which have stimulated a 
great deal of creativity and innovation, prior to undertaking any 
changes, however minor, that could disrupt or hamper the process 
of scholarly communication.

MR. LEHMAN:  Thank you very much.  I'd like to follow up on a 
couple of things that you discussed.  You mentioned the need to 
browse. 

MS. WERNER:  Yes.

MR. LEHMAN:  Are you thinking here primarily of browsing which 
takes place in a -- actually in, physically in, the library at a 
computer terminal by a patron that comes to your library?

MS. WERNER:  Well, we are seeing already that in the old days 
people came into our terminals and browsed paper.  Now they come 
in and they can browse on-line.  But increasingly more and more 
activity is taking place not necessarily just in the library, but 
in the laboratory, in a variety of environments that are not 
physically in the library.  We talk about the concept of a 
library without walls eventually, or a virtual library.  But, 
yes, there is a direct analogy to coming into libraries and 
browsing in print.

MR. LEHMAN:  Well, the reason I asked that is because I think 
that one of the major issues for libraries is where the activity 
of browsing, whatever it may be, takes place.  Because I think if 
you were here earlier this morning you may have heard some of the 
other witnesses talking, and in fact on specifically expressed 
concern, about the browsing issue.  When you start to -- when the 
library, in effect, starts then to send out, let's say under a 
fair use theory, copies of a work to multiple users outside the 
library physically, then you are really crossing, to some degree 
crossing a boundary that the print medium did not permit.  Where 
that external user might also be a purchaser of the service that 
the library itself had subscribed to.  And what I'm looking for 
is how do you draw that line between what is legitimately the 
commercial market of the service provider and what is the 
library's market.  And that is the difficulty.  And I think you 
would agree that there has to be some sort of line there.

MS. WERNER:  I do agree.  In fact, that is why we're really 
recommending this concept of a CONTU-2, because there are just so 
many details here that need some very neutral brokering amongst 
all the constituencies to iron out.  Let me go back to your 
question though.  At the moment, or in the print environment, any 
individual can subscribe to a journal.  And libraries subscribe 
to them also.  And I think there is a balance between what 
individuals decide to purchase because they really need them all 
the time, or they seek to use the library copy, which I'm afraid 
to say is usually more expensive, simply to get at one article 
every once in a while.  It isn't something they want to purchase 
and get on a routine basis. So we already have that split kind of 
environment.  How this will really work out in the electronic 
environment is just something we need to test and see. 

MR. LEHMAN:  Well, that was the purpose really of convening a 
fair use conference, is to start that dialogue.  And I would just 
say about the idea of a CONTU-2, and obviously we wouldn't -- 
that was a congressionally mandated commission, and of course 
Congress is free to do whatever it wants in that regard and we 
could make that recommendation in our report -- but one of the 
things that concerns us is that the clock is ticking very quickly 
on this information superhighway.  And the process of setting up 
a commission in itself can take years.  CONTU -- you know, you 
said that you'd have to get Congress to enact it, then the 
President has to appoint the members, and the commission to 
report.  So it can be ten years before there's any fruit from it.  
In the meantime, there could be an awful lot of chaos in that ten 
year period.  That's why I'm hoping that whatever is done or not 
done about that suggestion, that we can try to bring as much 
order into the process and flush out some of these concerns that 
librarians have in the near term.  So we can have a workable 
system as we may involve longer term solutions.

MS. WERNER:  Right.  Well as I say, we commend your effort on 
having this forum as it relates to fair use.  And to the extent 
you can pinpoint a number of these very vexing issues, I'd want 
simply also to say it's not just libraries that have been 
concerned with this, I hear this kind of discussion constantly 
among some of my legal friends in the media community.  It's just 
a great deal of uncertainty as it relates to implementation.  And 
so to the extent you can clarify the majority or all of it in the 
fair use forums, that will be fantastic.

MR. LEHMAN:  Thank you very much.  We really appreciate your 
coming here today.  That concludes our morning session.  We will 
reconvene here at 2:00 and we're scheduled to hear from Thomas 
White. 

(Whereupon, the hearing recessed, to reconvene at 2:00 p.m. this 
same day.)

AFTERNOON SESSION

MR. LEHMAN:  Mr. White, why don't you just begin. 

THOMAS WHITE:   Thank you.  Good afternoon, Secretary Lehman and 
Ms. Southwick.  My name is Thomas White.  I'm a consultant 
specializing in artist rights enforcement in the entertainment 
industries.  My clients include the estate of Fred Astaire, the 
estate of Orsen Wells and Stanley Kramer.  I was plaintiff's lead 
expert witness in the Paul Abdul case, and I am presently engaged 
as the lead expert witness for the estate of Charlie Chaplin in 
its current copyright infringement action. 

     In the limited time available, I would like to talk about 
what is in the Green Paper and what is absent from it.  Any 
discussion of this type that attempts to identify and recommend 
solutions to anticipated problems stemming from technology 
advancements must first recognize the more fundamental economic 
and property rights conflicts which could exist between creators 
of intellectual property on one hand and corporate interests, 
such as motion picture studios, major record companies and 
television networks on the other hand that systematically seek to 
dispossess creators of those economic and property rights. 

     Every new opportunity created by technology underscores for 
creators, such as screen writers, actors, directors, musicians, 
singers, record producers, song writers, film score composers, 
lyricists, dancers, choreographers, photographers and others, the 
reality that they will have little or no control with respect to 
how their artistic works or the excerpts or elements thereof will 
be used or exploited.  And that they will obtain little or no 
money from the sale of their works in those new markets. 

     The focus for major motion picture studios, television 
networks and record companies is uniform and intractable.  They 
demand all of the creators rights in all media, whether now 
existing or hereafter known, throughout the universe in 
perpetuity, as though ownership of someone else's creation is 
their absolute entitlement.  These same companies deny that they 
are fiduciaries of the creator or that they have any legal or 
ethical duty whatsoever to exploit the creator's work which are 
acquired under an exclusive grant of rights. 

     Multi-media companies, the entertainment industry's newest 
offshoot, take exactly the same approach.  The simple fact is, 
there is no business or legal reason why any entertainment 
company must own the copyright in the artistic works they sell 
but did not create. Are these companies providing a value which 
could possibly justify their all encompassing demands?  When you 
strip away the mystique and the hype of the motion picture 
studios, the major record companies, the television networks and 
now the multi-media companies, what you find is what they really 
contribute, investment capital.  With it you can buy all of the 
services you will ever need to make and sell a block buster 
motion picture, a hit record, or the most highly rated series on 
television, all of which will sooner or later be in high demand 
and instantly accessible on the information super highway. 

     The cost of money is quantifiable.  We know what interest 
rates are.  And bankers know how to factor risks into their 
lending rates.  What defies quantification is the unique element 
that only human creativity can contribute.  No corporation that 
has ever been organized in the history of the world has ever 
created copyrightable expression.  It is an affront to every 
creator that a corporation, or for that matter anyone other than 
the actual human creator, may assert itself as the author of a 
copyrightable work.  In Switzerland only the human creator 
themselves are entitled to own a copyrightable work, regardless 
of financial investment.  In Switzerland no one but the true 
creator can claim to be the author for copyright purposes.  The 
artistic and intellectual talent that will enlighten society, 
elevate and exponentially expand our experience and knowledge, 
preserve our values, and advance civilization cannot be 
manufactured and cannot be bought at any price.  Human creativity 
is truly our most precious national and global resource and it 
must be cherished and protected as such.  

     It is that priority which should be reflected in the Green 
Paper and adopted in NII legislation.  It is also that priority 
upon which our economic stability as a nation will either rise or 
fall in the future.  In the past the copyright industries have 
been able to depend upon marketing dominance to create artificial 
sales demand for mediocre and inferior products.  In the future 
however, with thousands of additional choices available to 
consumers throughout the world, the quality of the intellectual 
property products and services we create will be the determinant 
in their success and the strength of our domestic economy. 

     Creators, the only true authors, are entitled to and are 
worthy of, special legislative protection in order to be 
guaranteed that the artistic integrity of their works will be 
preserved and that a substantial portion of the income 
attributable to such works will accrue to their benefit. Congress 
knew, even in 1909, that creators of copyrightable expression 
were prejudiced by the disparity in their bargaining positions 
when selling their copyrighted works.  That's why two separate 
terms of copyright existed.  So the disadvantaged creator could 
terminate an undesirable transfer of copyright after the 
twenty-eighth year and enter into a new, more equitable 
arrangement thereafter.  The concept survived in the 1976 Act.  
Now creators only have to wait thirty-five years to recapture 
their rights when the corporation who demanded ownership isn't 
performing or simply can't be bothered to make a good faith 
effort.  

     It has been my experience that once a corporation has 
acquired the copyright in a work it will not voluntarily transfer 
the work back to the creator.  Even if it has no commercial work 
and has been lying fallow for decades.  The closest economic 
model for the equitable sharing of income between creator and 
corporation in the entertainment industries can be found in the 
music publishing business.  The most inexperienced creator, with 
no track record of achievement, recognition or success, will 
typically receive a minimum of fifty percent of the gross income 
derived from the use of his work.  If a creator retains copyright 
ownership, sales and administrative services can be independently 
obtained from music publishers for limited terms, typically three 
years, for a substantially lower percentage.  Music publishers 
also enjoy the distinction of not deducting phony interest 
charges, inflated distribution fees, or overhead expenses against 
the creator's royalty account. 

     In response to some issues raised in the Green Paper, I'll 
offer the following:

     Berne -- Despite the representations made by Congress in the 
Berne implementation Act of 1988, the United States does not even 
come close to compliance with the moral rights provisions of 
Article Six in the Berne convention.  The Green Paper's 
recommendation to diminish or waive moral rights is without merit 
and should be reversed. 

     Fixation -- It is critical to a correct understanding of the 
Copyright Act the distinction between the terms fixed and 
embodied.  The term fixed should not be used when referring to a 
copyrighted work which is embodied in a copy or a phonorecord.  A 
copyrightable work must be first fixed in a tangible medium of 
expression, for example, the creator's personal audio tape, a 
video tape from his camcorder, or his floppy disk.  The 
misapplication of those terms in the Green Paper has resulted in 
incorrect assumptions and recommendations. 

     Performing rights and sound recording -- The United States 
is losing billions of dollars in uncollected performing rights 
royalties.  It is my understanding that the United States will be 
compelled to comply with the terms of the Rome Convention through 
the Trips Agreement under GATT.  We must implement an across the 
board right for all types of sound recordings, regardless of the 
sound carrier or method or system of delivery.  The distinction 
between analog and digital as a basis for exclusion is nonsense. 

     The Home Audio Recording Act -- The minuscule royalties paid 
to sound recording and other copyright proprietors from hardware 
and blank tape manufacturers is completely inadequate and does 
not in any way compensate for displaced sales.  The creator's 
participation in subsequent distribution of these royalties is 
inadequate.  This legislation should not be used as an example of 
how the interests of technology, copyright proprietors and the 
public were properly harmonized. 

     Fair use -- Beyond ensuring that general on-line access is 
easily available to the public at a reasonable cost, further 
expansion of the fair use doctrine would erode the purposes for 
which copyrighted works are created.  History shows that 
copyright proprietors have the motivation to distribute their 
works to the public and to price their products within reach of 
the average person.  There will be no absence of cost effective 
information or viable choices available to consumers. Thank you.

MR. LEHMAN:  Thank you very much.  I wanted to ask you a 
question.  Earlier we heard from representatives of the song 
writers -- and you sort of touched on this -- about the 
inadequacy of existing mechanical royalties to protect them.  
Now, our report really doesn't deal so much with the existing 
technologies as an existing problem, but you sort of referred to 
it.  Do you think that there's a problem in that area, in some of 
these areas, in terms of artists being able to organize 
themselves collectively?  We have the Director's Guild and the 
Writer's Guild and so on in certain areas, Screen Actor's Guild, 
but others, such as song writers for example, aren't organized 
and don't have that ability.  Should we take steps legislatively 
to try to enable them to do that so they would be in a stronger 
position to deal with the large companies that they have to deal 
with?

MR. WHITE:  Well, I'll answer your first question first.  I think 
the mechanical royalty, that is the statutory mechanical rate 
under the Copyright Act, is lower than it should be.  European 
countries have a much higher royalty rate.  It's tied to the 
retail price of the phono records that are sold.  And I think it 
more adequately addresses the balance and value between what a 
sound recording and a performance in a sound recording is worth 
and what the underlying musical composition --

MR. LEHMAN:  But the reason for that is because in Europe you 
don't have a statutory rate, as I understand it.  I mean, Europe 
doesn't have -- most European countries don't really have 
mechanical licenses.  They have -- I think they have various 
kinds of collecting societies or guilds that negotiate those 
rates.  Isn't that --

MR. WHITE:  No, they are statutory.  But it's a percentage.  And 
it's not a mechanical rate that rises according to a collective 
bargaining between record companies and music publishing 
companies.  But the real point is that it's much higher than the 
United States rate is.  And it's more equitable sharing of the 
income between song writers and publishers on one hand and record 
companies and recording artists on the other hand. 

MR. LEHMAN:  Well, I'm not sure that -- I mean, I'll have to 
clarify that.  I'm not sure it is a statutorily set rate in most 
European countries, but we'll check into that. 

MR. WHITE:  With respect to your other question, I'm an advisor 
to the Board of Directors of the Society of Composers and 
Lyricists, who have attempted in the past to obtain collective 
bargaining status from the NLRB and were denied.  And I do think 
there is a problem.

MR. LEHMAN:  Why -- what was the reason given by the NLRB?

MR. WHITE:  Well, I'm chairing a committee on strategic planning 
right now, and that's one of the areas that we're looking into at 
present. 

MR. LEHMAN:  Conceivably, that could be dealt with statutorily if 
there's some problem there.

MR. WHITE:  Well, I can tell you that there is an organizational 
problem within the artistic community.  Certainly the guilds 
represent artists in their capacity, but I think in the larger 
sense, creators as a whole don't have the kind of representation 
that the copyright industries do in Washington.  They don't have 
pac funds; they don't have lobbyists.  They're not following 
closely the legislative issues.  And they only come out and 
appear before Congress so that their voices can be heard when the 
record companies or the film studios ask them to.   And under 
those circumstances it's usually that the corporate interests 
have taken the lion's share in the beginning stages of 
legislation of whatever economic benefit there is and whatever 
the remains are are distributed among creators.  But it's almost 
always a very small share.

MR. LEHMAN:  Ms. Southwick has a question. 

MS. SOUTHWICK:  You suggested that the mechanical rate is too 
low.  Would you propose eliminating the compulsory license under 
Section 115?

MR. WHITE:  There's nothing wrong with the compulsory license.  I 
know of cases where music publishers and creators object to the 
fair use provisions.  Parity for example.  I personally don't 
have a problem with a compulsory mechanical license after the 
first use.  I think that the benefits outweigh the costs.  On the 
other hand, the actual dollars that change hands I think is still 
disproportionate to what a song contributes to the consumer 
demand for a sound recording.  Because without the song you have 
no basis for making a commercially viable sound recording, at 
least in the record business that I'm familiar with.  I'm not 
talking about bird calls, I'm talking about popular recordings, 
opera, it's that material as the basis of popular music repritory 
that I'm referring to.  And I think the mechanical rate is simply 
too low and should be increased along the lines of what prevails 
now in Europe.  And I think most creators would feel far more 
satisfied with that to be along the international standards than 
the are presently, which they believe are artificially low.

MR. LEHMAN:  Thank you.  Next is Steven Ames Brown.  I forgot 
that some of the -- you know, we've sort of had a shift of our 
audience from this morning, and I just wanted to explain -- if 
you weren't here -- the timer.  We have a screen here, and it has 
-- it displays a yellow screen for ten minutes, then it turns 
amber for the last two minutes and then there's a red screen.  
That's to help you wrap up your remarks.

MR. BROWN:  There's no hook I hope.

MR. LEHMAN:  Obviously if we -- to the extent that you can use 
less than twelve minutes, then it helps us to ask more questions 
and have more of a dialogue without eating into the next person's 
time. 

STEVEN AMES BROWN:  I'll keep my comments as brief as I can.  
Thank you for the opportunity to appear before the Task Force.  
I'm here to comment on the Green Paper sections which propose 
amendments to the Copyright Act concerning the public performance 
of sound recordings. 

     I represent recording artists and small production companies 
in negotiations and litigation concerning their rights in sound 
recordings throughout most of the world.  I've been involved in 
the areas of artist representation, and the international 
administration of sound recordings rights for more than fourteen 
years.  I've negotiated, litigated, or at least reviewed more 
than three hundred artist agreements and nearly as many sound 
recording licensing agreements. 

     In preparing for my testimony here today, I reviewed the 
history of the sound recording performance right debate here in 
America. Historically, the debate has been case as an economic 
tug of war between the broadcasters who did not want to pay any 
performance royalties and the record labels which wanted the 
income.  Even viewed in that limited range, the Register of 
Copyrights recommended that a provision be inserted into the 
Copyright Act granting a full performance royalty for sound 
recordings.  I'm here today to discuss concerns which have been 
almost entirely ignored, the economic plight of the artists, the 
very people who create the records which are played on the radio 
and on television. 

     Virtually everybody who is engaged by a broadcaster to 
perform on air, at least at the unionized stations, is 
compensated for that service.  For instance, people who perform 
in commercials receive both a fee for the performance and 
residuals based on continual use of the work.  However, that is 
not true for the recording artists, whose records are played on 
the very same stations.  Unlike virtually every other performer, 
they do not receive an income stream from either the initial or 
continuing performance by broadcasters. 

     The response from the broadcasters has been blunt and 
specious, they simply retort that artists receive record 
royalties and public exposure from the playing of records on the 
air.  What has been lost in the debate is any substantive 
examination of how artists are actually paid. The reality is that 
just about 75 percent of all people who perform on a given record 
are only paid a flat fee as what's called a sideman.  It is rare 
that more than three out of ten performers are actually signed by 
the record company and given a contractual royalty.  Thus, 
generally seven or eight people out of every ten receive only the 
flat payment at the time the record is made, and those people 
never receive anything beyond that payment. 

     The financial figures are even bleaker when you consider 
that two of the three -- two or three performers who do have a 
contractual royalty generally don't receive any royalties because 
nine out of ten records never break even.  In sum, the vast 
majority of recording artists never receive any royalty payments. 

     Broadcasters will also point to another so- called 
intangible benefit from the broadcasting of records, public 
exposure.  They argue that recording artists make money from live 
concerts and therefore the use of their recordings on radio and 
on television should be considered a promotional use not worthy 
of compensation.  All one has to do is examine a simple recording 
to see that that argument has no merit.  I have here the compact 
disc insert for Michael Jackson's album Bad.  This album sold 
some ten million copies worldwide, and undoubtedly it earned 
millions of dollars for Michael Jackson.  However, what benefits 
flowed to the other performers who made this album?  If you work 
in the music industry, you don't even need to know these people 
to know the answer to that question.  The answer is simple, they 
received neither economic benefits nor promotional benefits from 
the public performance of Michael Jackson's album.  They got flat 
fees at the time the record was made and everyone else using the 
performance after that point got a free ride and only Michael 
Jackson's name is on the front of the cover and used on the 
radio.  I stopped counting the number of performers on this album 
after I reached thirty.  For these thirty plus individuals there 
will be no on-air promotion of their names, and no income from 
the continual performance of these recordings.  In sum, nothing, 
unless a sound recording performance right is added into the 
Copyright Act. 

     It is well worth noting that some fifty-six countries have 
full performance royalties for sound recordings.  Why are we 
decades behind these other countries in protecting our artists 
from uncompensated exploitation? The only opposition to 
performance royalty has been from broadcasters.  They do not want 
to pay for any of the programming they are currently getting for 
free.  Well, commercial broadcasting has spread throughout the 
world in the last few decades and countries where programming 
used to be a virtual monopoly now see commercial broadcasting 
flourishing, even with the obligation in fifty-six countries to 
pay for the performance of sound recordings. 

     It was certainly reassuring to find the Task Force 
recommendation on page 132 of the Green Paper that this inequity 
in copyright laws should be rectified and a full performance 
right should be given.  Your conclusion is fully supported by the 
research and the conclusions of all of the governmental officials 
before you who have been considering this same question for 
twenty years.  Certainly there will be those who appear before 
you and ask you that any performance royalty be limited to the 
digital domain.  There are compelling reasons why the performance 
right should cover live, analog and digital performances. 

     As your Green Paper correctly points out on page 94, many 
countries have conditioned the payment of performance royalties 
to foreign national upon a reciprocal royalty for their own 
nationals.  There are literally millions of dollars of potential 
foreign income which is lost to American performers because of 
our failure to offer a reciprocal performance royalty.  One only 
has to look at the huge levels of foreign income which are 
garnered by ASCAP and BMI on behalf of music composers and their 
publishers to see just how many hundreds of millions of dollars 
are collectable over time.  It should be remembered that we take 
in more money in America than we pay out to foreign composers for 
the simple reason that American music is dominant throughout most 
of the world. With an Administration so concerned about our trade 
deficit, why are these foreign funds being ignored?  We are 
subsidizing American broadcasters at the expense of foregoing 
collectable foreign income to help reduce our deficit.  

     The broadcasters do point out that only one of the world's 
major record companies is American owned, and therefore they say 
we shouldn't be too concerned about the position of the record 
companies. That very issued faced our NAFTA partner, Mexico.  
Mexico's solution was really quite simple.  Mexico only gives a 
performance right to the performers.  It is perfectly permissible 
under Article 12 of the Rome Convention to grant a royalty only 
to the performers.  Also, performers are treated equally, so each 
is entitled to a share of income, eliminating any disparity 
between those under contract and on the cover and those who are 
the sidemen or just the background singers. 

     That option is available to us as well if the only choice is 
between a performance royalty for artists or no performance 
royalty at all.  The broadcasters simply cannot argue that the 
performers who create their programming should not be compensated 
for the public use of their artistic achievements.  They cannot 
make that argument because their own collective bargaining 
agreements for their own employees require that everyone be paid.  
The only effect of a performance royalty for recording artists 
would have on broadcasters would be to compel them to treat all 
performers on their stations in the same way.  

     Indeed, it was not all that long ago that live music used to 
be broadcast.  Under the broadcaster's collective agreements with 
the musician's union, they had to pay those performers, and under 
the broadcaster's collective bargaining agreements with AFTRA 
they had to pay the singers.  In fact, they still have to pay 
musicians and singers who come into the studio or record 
performances specifically for broadcast.  More particularly, why 
should broadcasters be heard to complain at all about having to 
pay artists for using their performances on air?  By adding a 
performance right for sound recordings, not only will artisans 
finally receive a share of the money generated for broadcasters 
by their works, not only will our foreign trade deficit be 
reduced, by a very complicated and messy aspect of copyright law 
can be avoided. 

     The Green Paper at page 122 suggests that the definition of 
transmit be changed so that a distinction is made between a 
transmission which is a performance and a transmission which is a 
reproduction.  I recognize that the distinction which the 
proposed amendment draws would apply to all types of works and 
not just sound recordings, but its only purpose is to delineate 
between types of transmissions which violate the exclusive right 
to reproduce sound recordings and which transmissions are 
unprotected public performances.  Such a distinction would have 
no important purpose if performance rights in sound recordings 
were protected, just like the other categories of copyrighted 
works have that protection.  In such event an unauthorized 
transmission would violate a protected right, whether it was 
intended for the purposes of performance or distribution.  The 
distinction between the two types of transmission which the 
proposal draws is nearly metaphysical and can only cause unending 
bickering in the courts.  Once a performance royalty is in place, 
it hardly matter which exclusive right is infringed by an 
unauthorized transmission, since both types would be a wrongful 
act it doesn't matter. 

     The problem with the proposed amendment is that it 
undermines the white paper's conclusion on page 132 that 
performance rights in sound recordings should be recognized.  If 
a performance right in a sound recording is to be recognized, 
then it is counterproductive to amend the Copyright Act to 
delineate between unauthorized transmissions. Also, to make the 
amendment to the definition of transmission, which the Green 
Paper suggests on page 121, would have a very serious, although 
unintended, side effect.  While the suggested additional language 
on transmission was obviously not intended to erode any of the 
other exclusive rights in sound recordings, it would all but 
obliterate the production against unauthorized synchronization. 

     The synchronization of a work, such as dubbing a sound 
recording into a television program, is an exclusive right under 
Section 114(b).  As it stands now, it is a wrongful act for a 
broadcaster to synchronize a sound recording into a commercial or 
other audiovisual work. However, if you change the definition of 
transmission to exclude any duplication which is primarily 
directed toward performance, you destroy the protection against 
unauthorized synchronization.  This would create havoc for 
performers who would lose the right to determine when their 
performances should and should not be linked with products and 
with programs. In such a scenario, the voice of someone like Fred 
Astaire could be dubbed into an objectionable program, such as 
Tales From The Crypt, or a tabloid television program and nobody 
could stop the broadcasters.  If the amendment is made to the 
definition of transmission as the Green Paper suggests, there 
would be no performance right and the synchronization right would 
be lost as well.  That very issue is currently in front of the 
courts in the Second Circuit in Agee vs. Paramount 
Communications.  It is much better to amend Section 106, 
Subsection 3, by adding sound recordings to the list of works 
which are protected against unauthorized performance and to amend 
Section 114(a) to eliminate the public performance exclusion. 

     Let me just sum up by thanking the Task Force for its 
conclusion that a full performance right should be given to sound 
recordings and let me suggest that the Task Force's legislative 
proposal specifically address that subject by a recommendation to 
Congress that directly deals with this issue in Section 106(4), 
and that no proposals be made which dilute what little protection 
currently exists.  I'm sure the last thing the Task Force 
envisioned for its proposal was to reduce the protection for 
sound recordings that we now have.

MR. LEHMAN:  Thank you very much.  I would just point out that 
you're somewhat incorrect when you say that the only opposition 
to our proposal for performance rights in sound recordings comes 
from broadcasters.  That's not true.  It also comes from ASCAP 
and BMI.

MR. BROWN:  Let me just say, if I can, that when I said that what 
I meant to articulate was that was part of the prior debate under 
the '76 Act.  I haven't followed your current hearings and I 
haven't seen the submissions.  But when I read the legislative 
history in the prior Act I did not see that ASCAP or BMI itself 
directly objected.  They just didn't want their royalties 
diluted. 

MR. LEHMAN:  Well they've objected pretty strongly.  There's 
legislation pending right now on the Hill, and so we have sort of 
a split in the creative community. 

MR. BROWN:  Let me just say that if ASCAP and BMI were the 
collection societies they probably wouldn't be objecting so much.  
And if there were some assurance that their royalties wouldn't be 
diluted.  But remember, the full mechanical which are higher in 
Europe are in addition to the performance royalties.  There is no 
downward pressure on the amount.  The sum paid by broadcasters in 
Europe plus the money which is made in mechanical income, which 
is higher, none of that money has been touched by virtue of the 
fact that there's full protection for performers in virtually 
fifty-six countries.  So for ASCAP and BMI to complain, and I own 
publishing myself, I own my own publishing company, I am members, 
between my two divisions, with both ASCAP and BMI.  I don't see 
how their money is going to be diminished.  If anything it could 
be enhanced if we really started to pay attention to the artists 
who create this music and make sure that they had financial 
security.  I'm sorry, was there another question?

MS. SOUTHWICK:  Well, I just wondered -- you were talking about 
the non-featured artists who don't have contractual arrangements.  
I wasn't quite clear if you were proposing that performers then 
get a -- if there is a public performance right in sound 
recordings, that performers would get a statutory share or that 
the monies would simply flow through the copyright owner of the 
sound recording -- generally the record company -- to the artist.

MR. BROWN:  ASCAP and BMI call one half writer and one half 
publisher share.  There is no statutory enactment which requires 
that.  It's custom in the industry that that's how it's been 
split.  I would certainly have no objection which guarantees that 
it be split fifty-fifty. 

MS. SOUTHWICK:  But I'm talking about the performance right in 
the sound recording, which would be received by the copyright 
owner of the sound recording -- which would be the record 
company. 

MR. BROWN:  Fundamentally I do not agree that the owner of the 
sound recording copyright should receive this money.  One of the 
suggestions I made is that if the broadcasters don't want to pay 
the record companies, under the Rome Convention we can have a 
royalty which merely protects the performers.  We don't have to 
have the copyright proprietor receiving that money, and in most 
countries of the world they don't.  It goes through other 
societies and it's not handled by companies.  If you let the 
record company collect that money, with respect to the 
contractual artists, they will recoup their recording costs 
against that money.  The only way to make certain that that money 
flows to the featured performers, who aren't under contract, is 
to make absolutely certain the record companies don't touch their 
money, which is precisely what happens, for instance, with a 
publishing company with musical compositions.  

     If you get an advance from a publisher, the publisher cannot 
recoup that advance against your performance income from ASCAP or 
BMI.  You can't get that money out of ASCAP or BMI.  They will do 
everything they can to resist giving that money to anybody other 
than the person who actually created the work.  And the same 
thing should be true.  If you want to have a statutory protection 
I think that would be great.  Because I think the companies now 
are a lot more sophisticated than they were before.  I think 
they'll do everything they can to get the money and make sure 
that they keep as much of it as possible.

MR. LEHMAN:  I think we're going to have to move on.  Thank you.

MR. BROWN:  Thank you very much.

MR. LEHMAN:  Next is Glenn Gumpel, Executive Director of the 
Director's Guild of America.

GLENN GUMPEL:  Good afternoon.  I am pleased to make comments 
today in my capacity as a member of the Board of the Artist's 
Rights Foundation as well as the Executive Director of the 
Director's Guild of America.  We are pleased that the Working 
Group is taking testimony from interested parties in Los Angeles, 
since the development of the NII will have important impact on 
those in the entertainment industry and all of its many parts. 

     Clearly, much of what will be transmitted over the 
developing information super highways will be created by those in 
the motion picture and television industry.  Obviously the 
development of these new technologies require a review of the 
laws and regulations that heretofore have governed broadcast 
communications.  And we applaud the Working Group for 
systematically reviewing the aspects of copyright law that will 
require amendment. 

     We find ourselves in broad agreement with much of the draft 
report.  But we are greatly troubled by the tone and tentative 
conclusions of the report in regard to the issue of moral rights.  
In our view the draft report shows a disregard for artist's 
rights, while focusing entirely on ways to facilitate economic 
rights. The Artist's Rights Foundation, established in '91, joins 
under a single umbrella a number of the major artistic motion 
picture guilds.  My own Director's Guild as well as the Writer's 
Guild, the American Society of Cinematographers, the 
International Photographer's Guild, the Editor's Guild, the 
Screen Actor's Guild and the Society of Composers and Lyricists.  
All of these groups share a longstanding commitment to the notion 
that motion pictures are ultimately created by film artists and 
that the value and integrity of their work ought to be recognized 
and protected in legal form. 

     In the last few years in fact, the United States has taken 
major legislative steps in furthering the rights of artists.  
Visual artists have been granted explicit moral rights in 
domestic law.  And in joining the Berne Convention, the United 
States acknowledged that moral rights for all artists do exist in 
this country, though these rights are not recognized for, in a 
practical sense, available to film artists.  As you know, the 
Director's Guild was a passionate participant in the debates in 
Congress preceding the adoption of the Berne implementation 
legislation.  We were not happy with the conclusion that Congress 
reached, that a hodge-podge of existing federal and state 
statutes were sufficient to meet the minimal moral rights 
standards required of adhering nations.  However, we are now part 
of the Berne Convention and are bound by its treaty obligations.  
No question can or should be raised about that.  Article 20 of 
the Berne Treaty states, "The governments of the countries of the 
union reserve the right to enter into special agreements among 
themselves insofar as such agreements grant to authors more 
extensive rights than those granted by the convention or contain 
other provisions not contrary to this convention.  The provisions 
of existing agreements which satisfy these conditions shall 
remain applicable."  

     The draft report of the Working Group deals with 
international law issues at pages 85-95, 135-139, and refer 
specifically to moral rights at pages 94 and 95, and 138 and 139.  
The draft report properly acknowledges that there is a legal duty 
on the part of the United States to implement fully and 
faithfully the requirements in the Berne Convention, making 
reference to Article 20 quoted above. The author or rights holder 
should be able to realize fully the economic benefits flowing 
from the free exercise of his or her rights in any country 
participating in a GII.  This is required by Article Five of the 
Berne Convention.  To do otherwise, in either a Berne protocol or 
another agreement on copyright would be contrary to Article 20 
because it would be a derogation of rights existing under Berne. 

     Yet, while acknowledging the need to fully realize economic 
rights, the Working Group is proposing to further emasculate 
moral rights, which are equally emphasized in the treaty and to 
which all prohibitions against diminution apply.  Quoting from 
the report, "Concerns have been raised over the extent and scope 
of moral rights in the world of digital communications.  Some 
believe that the ability to modify and restructure existing works 
make moral rights more important than ever before.  Others take 
the view that moral rights must be rethought in the digital 
world.  We agree with this view.  New thought must be given to 
the scope, extent and waivability of moral rights in digitized 
information."  That's quoting from the report.  We believe in 
this regard the draft report veers dangerously away from formal 
legal obligations into which the United States has already ended.  
Are we to assume from this language that the draft report is 
advocating that the explicit protections established in domestic 
law for visual artists should be rethought?  Are we to assume 
that the draft report is advocating that the minimal moral rights 
standards achieved as part of the Berne implementation are now to 
be rethought? 

     We must keep in mind the purpose of a treaty is to govern 
reciprocal behavior among nations.  Were we to further diminish 
moral rights, however illegal that may be according to the 
treaty's provisions, how could we expect other nations to adhere 
to the terms of the treaty when it comes to respecting the 
interests of the United States?  We believe the language quoted 
above from the draft report should be struck in the report's 
final form.  

     We believe the obligation of the report in its final form 
must be to recognize the minimal moral rights standard exists in 
the United States and that any adaptations of law and regulations 
required in developing the NII must find ways to harmonize these 
rights.  We cannot hope in the international arena to move to 
higher levels of copyright protection while trying to scuttle 
rights established in domestic law and pledged as part of our 
legal treaty obligations.  Yet, this seems to be the direction in 
which the Working Group seems to be moving and obviously we think 
you ought to change your direction.

MR. LEHMAN:  Thank you.  What would, in your view, would be the 
minimum moral rights standard that we should establish 
statutorily in the United States -- just simply recognition of a 
moral right? 

MR. GUMPEL:  No.  I think what we're saying here, at least in 
this testimony, our view is that we shouldn't change whatever 
exists as moral rights today.  Whatever Congress found as far as 
the minimal moral rights scheme we shouldn't abrogate that.  
Obviously, as you are well aware from other meetings we've all 
had, that our view is that we should increase moral rights.  But 
at least for the purposes of your report and the NII, we just 
don't want to see any diminution.

MR. LEHMAN:  Thank you very much.  Next is Mr. David Guttman, a 
Los Angeles attorney. 

DAVID GUTTMAN:  Good afternoon.  I'm a Los Angeles Patent 
Attorney.  And my specialties are computer and international 
intellectual property protection.  My special interests are that 
I have worked in Japan.  I speak and read Japanese.  I've used 
Japanese computers and computer systems in my work.  I've written 
articles about the Japanese patent and copyright laws and 
trademark laws.  And I have also edited other treatises by other 
people in this area. The two topics that -- I have submitted a 
preliminary paper, but I also submitted to Mike O'Neil a 
supplemental paper today with additional attachments.  

     The two topics that I want to address today -- I would like 
you to pull back a little broader to broader policy issues and 
discuss two topics.  One is, it is my experience, and I believe 
that international intellectual property harmonization greatly 
benefits small inventors.  That is small authors, entrepreneurs.  
I know that many people say that the harmonization that we need 
to participate in in order to strengthen the laws in other 
countries is kind of a zero sum game between large and small 
organizations.  The large organizations benefit at the cost of 
the small American inventor, the small author.  I do not believe, 
in my experience, that that is true, and I'm going to address 
that. And the second topic I'm going to talk about is if the 
national information structure is achieved, what will it be like 
when we try to access that information in Japan.  Okay.  I think 
we have to address certain language problems early on in the 
policy planning, which I don't see in the report.  I think it's 
critical, particularly with respect to countries which I call the 
hard language countries.  Countries where it's very hard for us 
to learn and use particularly the writing system I'm thinking of 
in Japan. 

     So talking about the first topic, as I said, I've worked in 
Japan, and I also worked with Americans who want protection in 
Japan, who are licensing people.  As you know, in many fields of 
technology, in other areas too, in sports, in fashion, in many 
cases American companies are no longer the dominant companies.  
And in many cases where we're still surviving the actual 
manufacturing is often abroad. That's why if someone creates a 
product or a service it very well may be going to a foreign 
company for financing of research of development.  They may be 
going to a foreign manufacturer to co-develop a product.  And 
it's very important because when you go to such a foreign 
manufacturer or investor the very first question they want to 
know is what rights will I have in my country.  Of course they're 
interested in knowing what rights you have in America, but if 
they're going to be making it in Japan, for example, they don't 
want other Japanese manufacturers to make the same thing after 
they introduce it. 

     Also, most people know their own country's laws well and 
it's disappointing and kind of deflating to a licensing situation 
to say we don't have any rights in Japan because we couldn't 
afford to file.  Or, yes, we did file, but we didn't too good a 
job and we don't have a patent in Japan but we have one in the 
United States. In my experience, small inventors are the first to 
suffer when the laws are different from country to country, when 
the rules are -- I know you're a champion of what you call a 
user-friendly patent system.  I think Japan for a long time had a 
user- hostile patent system. 

     In 1982 I wrote an article about the Japanese patent and 
intellectual property laws, which I've attached to my 
supplemental paper, in which I pointed out many of the things 
that harm American applicants, particularly small entities.  
Reviewing that paper from 1982, today I see that thanks to the 
patent office and your efforts and the efforts of your staff, 
many of the laws in Japan have been changed to favor American 
inventors.  For example, the Japanese claiming system was 
changed, greatly broadened so that several inventions could be 
claimed in the same application.  That saves filing costs and 
prosecution costs for Americans.  The Japanese had a utility 
model law that we rarely used, but they filed hundreds and 
thousands of these utility models and that slowed down the 
application examination of our patent applications.  That system 
has been changed in Japan to no examination initially.  That 
saves a lot of time and it allows us to concentrate on the 
getting patents in Japan. 

     Also, as you know, the Japanese patent office, unlike the 
U.S. patent office, built a brand new building so that they could 
totally computerize it.  And applications are filed 
electronically in Japan, by modem, by disk, scanned in initially.  
That means you don't have to have the physical file in order to 
work on a case.  That is helping reduce the time for examination 
and of course makes it easier to publish the applications and 
probably later to access them. Increasing numbers of examiners 
have been added in Japan.  And also, at the time I wrote my 
article, there was no service mark protection, which was 
ridiculous because of course the Japanese patent office is there 
and should be promoting Japan as a service country, but they had 
no service mark protection.  Thanks to our criticism they adopted 
a service mark protection system.  And also there was no trade 
secret law.  Many times when I counselled clients about their 
rights in Japan they had already lost most of their rights.  But 
they had their secrets.  But Japan had no way of protecting 
secrets because they didn't have a trade secret statute.  And now 
they do, and I don't think it's really at the initiative of the 
Japanese alone.  And as you know, Japanese have adopted copyright 
amendments greatly strengthening intellectual property protection 
of computers, software and things like that.  

     So here we have a long list of things that Japan has done in 
the interest of harmonization.  And in response I also want to 
say that very rarely at their initiative, mostly at our urging.  
I think that American inventors, particularly small entities, 
have benefitted from these changes.  It does make it a lot 
easier.  You don't have to know the law as well to protect 
yourself in Japan.  And I really do think that we can't expect to 
get these benefits without also being willing to make some hard 
choices here in the direction of harmonization with other 
countries. 

     We have two areas that I'm greatly concerned about, the 
first to file system, for example, that everyone else has but we 
don't have.  And also the fact that a foreigner cannot prove 
invention abroad in the patent law.  I think we have to concede 
on those things.  And I think that those people that say that it 
would hurt small inventors and only help large inventors are not 
correct when they reject that proposal. 

     The second topic I want to talk about is the difficulty --

MR. LEHMAN:  I'd just point out, we have, as part of the TRIPs 
agreement, agreed to give foreign inventors the right to prove 
acts of invention abroad in our proceedings and will be changing 
our law.  That's part of the GATT fast track legislation.

MR. GUTTMAN:  Yes.  But I know that, first of all, we're not sure 
how that's going to work.  For example, other countries don't 
have the same type of discovery that we have.  Second of all, I 
would be the last person to stand here and say small inventors 
are going to benefit from having to conduct depositions in 
Germany or Russia or some other place.  Examining other people in 
foreign languages about inventions. I really personally do not 
know anybody that wants to expand the system in that direction.  
And I have also been told by people, for example in Japan, they 
don't want to see the system made fair that way because frankly 
they're not attorneys.  As you know, Japanese patent attorneys 
are not litigators, they're not lawyers in the American sense.  
They don't want to go all over the world examining people trying 
to figure out whether they faked laboratory books and things like 
that. As you know as a patent commissioner, administratively it's 
a nightmare to go that direction. 

     The second topic has to do with the fact that Japan is a 
hard language country.  What do we mean by a hard language 
country, Japan is easy to use as an example.  It takes two 
thousand characters to write the language.  Japan had the 
misfortune of being a neighbor of China, which did not have a 
very efficient language system.  And since it was the only 
language system they knew, they adopted Chinese for writing 
Japanese, a totally different language. English can be written in 
Chinese characters if we wished, but we'd all have to learn two 
thousand characters to write our language.  What this has to do 
with the NII is that if we look into the future and everybody's 
connected, America is going to be very accessible to a Japanese 
company.  For example, someone will be able to sit at his desk in 
Tokyo or Osaka and totally access all of our information, market 
information, patent information, copyright information, 
competitive information about publicly available information.  
But even, who has studied the Japanese language for years, will 
have great difficulty in accessing the Japanese system, even if 
we're all wired together. So I'd like to see us early on think 
about how can we make the system more feasible.  Now many people 
have come here and told you about problems but haven't offered 
solutions.  

     There's a very easy solution for that problem.  When people 
input the Japanese language today on computers, they input it 
phonetically.  In many cases they even input it with roman 
letters.  But the computers in Japan are programmed to use the 
roman letters to find the proper Japanese characters out of the 
two thousand and then the phonetics is thrown away and not stored 
on disk, not stored in the memory of the computer. All they have 
to do to facilitate our access to their system is to also store 
the phonetics that people type into the keyboards.  That will 
mean that the Japanese language will be accessible to American 
experts in roman letters.  Japanese can be written in roman 
letters.  There's no need to use Chinese characters.  The 
languages are separate, and for many years Japanese was written 
phonetically.  Around the year -- I think it was 1100, 1200, 
that's how it was taught to students.  When people talk on the 
phone in Japan they don't have any use of Chinese characters.  
They're speaking phonetically, which is easy to represent with 
roman letters. 

     So it is my proposal that if we're going to have access to 
Japanese information, which we need in order to compete in Japan, 
to balance trade, to have access, that we want the Japanese to 
store some of this information in roman letters, or in some other 
way that makes it more accessible to us. 

MR. LEHMAN:  Thank you very much.

MR. GUTTMAN:  You're welcome.

MR. LEHMAN:  Next, Anita Rivas. 

ANITA RIVAS:   Hi.  My name is Anita Rivas.  I'm an artist 
manager and attorney, and I've worked in the music business for 
many years, but I'm a recent law graduate from UCLA.  This 
statement is going to made on behalf of managers and artists. 

     We, the undersigned recording artists and artist 
representatives, agree with the Clinton Administration's 
preliminary draft on intellectual property and the National 
Information Infrastructure in that it is high time that Congress 
enact legislation that fully recognizes and protects the creative 
contributions of recording artists.  As the Task Force states in 
its report, this inequity must be rectified. 

     However, while the Task Force should be commended for 
granting a performance right to creators of sound recordings, 
under this report, artists will continue to be deprived of their 
full scope of rights.  

     While all other copyrighted works capable of being performed 
are given full copyright protection, the Task Force recommends a 
narrow interpretation of public performance rights as applied to 
sound recordings.  Although this may be appropriate within the 
context of the report, we think artists interests should be 
addressed as well. Digital transmission protection alone is not 
enough as its primary effect is to protect record companies from 
consumer downloading of music, thus preventing interference with 
their reproduction and distribution rights.  While digital audio 
protection also encompasses subscription services such as pay per 
listen, cable broadcasting, and audio on demand, recording 
artists would still be left without a legal right to collect 
public performance royalties from broadcasters and others who 
profit from publicly broadcasting artists' recorded and live 
performances on radio and television, in movies, and in 
establishments such as restaurants and nightclubs. 

     Instead, we suggest adopting the U.S. Copyright Office's 
position which for decades has urged Congress to create parity 
between U.S. and foreign recording artists.  This requires full 
copyright protection and the recognition of economic rights in 
analog and digital audio formats as well as live performances.  
In the words of former copyright registrar Barbara Ringer, "To 
leave creators of sound recordings without any protection or 
compensation for their widespread commercial use can no longer be 
justified." 

     Why should recording artists be treated differently than 
composers and all other creators?  When a sound recording is 
performed over the airwaves, why is the recording artist's vocal 
and musical performance legally and economically insignificant 
while the song writer's underlying composition is fully 
protected?  Why should composers collect hundreds of millions of 
dollars annually from broadcasters, while performers receive 
absolutely nothing for the commercial exploitation of their 
life's work? 

     There can be only one reason for such an illogical result.  
For years our society has bowed down to the special interests of 
broadcasters, as it did prior to the enactment of the 1976 
Copyright Act, by legally sanctioning discrimination between 
classes of similarly situated artists in order to provide 
continued free programming to the broadcasting industry. Not only 
does this hurt recording artists, but it also harms the U.S. 
economy.  According to the RIAA's statistics, the U.S. loses over 
$70 million annually in royalties owed by other countries to 
American artists.  This is because under international law, those 
countries which recognize performance rights in sound recordings 
only pay performers who are citizens of countries that also 
protect these rights.  Among these countries are Germany, France, 
Japan, Sweden, Austria, Chile, the U.K., Hungary, Zaire, 
Portugal, China and many others. 

     Radio broadcasters have always used the argument that they 
should be exempted from paying recording artists because air play 
generates record sales.  This is a ridiculous argument because 
composers also benefit from air play and record sales, yet they 
are compensated by broadcasters to the tune of hundreds of 
millions of dollars.  As a matter of fact, composers collect 
mechanical royalties on a per song basis for every record sold, 
while ninety percent of recording artists do not ever see a 
penny. 

     Broadcasters and the government must stop treating 
performers like second class creators.  Their contribution is 
just as valid as that of the composer.  Not to underestimate the 
significance of the writer, but the public listens to radio and 
watches music programming because they want to hear and see their 
favorite recording artists perform. 

     Contemporary music is driven by the performer.  Think of 
recording artists such as Elvis, Frank Sinatra, Barbara 
Streisand, Jim Morrison, En Vogue.  These artists are best known 
for their performances of songs written by others.  Our culture 
identifies songs with performers.  For example, one would 
associate the hit song "I Will Always Love You" with performer 
Whitney Houston, not the composer, Dolly Parton.  This is because 
it is the performer that defines and embodies the music.  Who 
would call a radio station to request the latest sheet music? 

     In the early days of the recording industry, very few 
performers ever wrote their own songs.  After being abused by the 
music industry, many blues, R&B, jazz and rock acts were left on 
the streets.  Had there been a BMI or ASCAP that collected on 
behalf of these performers, paying all royalties directly to the 
recording artist, they might not have had such dismal endings. In 
contemporary music, often the performer and the composer are the 
same person.  However, most bands have only one writer amongst 
several performers.  This often creates friction as one member is 
receiving income while the others are starving. 

     The problem is that there are only a few sources of income 
for bands.  Record deals rarely churn out royalties.  Touring 
usually costs bands money.  If one member writes, all that is 
left to split is merchandising.  This is not much for a band to 
live on, and it is even more obscene when the single greatest 
source of revenue goes to one member of the band.  Meanwhile, the 
other performers have sacrificed and struggled for years to get 
to the point in their career where their music has commercial 
value.  These artists deserve to be compensated.  If full 
performance rights were granted, the distribution of income would 
be more fair and balanced. 

     In closing, we the recording artists and artist 
representatives strongly urge you, the White House Task Force, to 
rethink your position which excludes recording artists from the 
legal protections granted to all other artists in this country.  
We also challenge you to consider the domestic and international 
economic repercussions of treating U.S. recording artists as an 
inferior class of creators. Along with film, sound recordings are 
one of America's greatest contributions to the world's modern 
culture.  In fact, sixty percent of the music used by the rest of 
the world is created by American recording artists.  Our 
government should recognize these artistic and economic 
accomplishments with the enactment of a full performance right 
for the authors of sound recordings.

      In addition to this statement, I'd like to read two remarks 
from a San Francisco song writer and performer and also an artist 
manager.  This one is from Miles Orkin of MCM and The Monster in 
San Francisco:  "Having headlined at a Clinton campaign benefit 
in 1992 I would find it sadly ironic if the White House Task 
Force recommends legislation that negatively impacts the same 
group of people, that is the music performers, that played a role 
in getting the president elected.  Politics aside, the bottom 
line is that the current royalty system is blatantly unfair and 
the Task Force will be remiss if it doesn't recognize the 
performance artist contribution to the creation of intellectual 
property." 

     And this is a quick one from a manager:  "As far as I'm 
concerned, all parts make up the whole.  Everyone involved should 
be protected, recognized, compensated fairly and equally.  For 
the business of music seeing and hearing is believing.  It goes 
hand in hand."

     And lastly, I'd like to list some of the artists and 
managers represented by this statement.  I collected these 
signatures in two days.  These are all faxes.  I'll turn these in 
at the end.  I have Gold Mountain representing The Meat Puppets, 
The Breeders, Dinosaur Jr., The Beastie Boys, Nirvana, Redd 
Kross, Velocity Girl, Beck, Sonic Youth, The GoGos, Hole, Gigolo 
Aunts, Lemonheads;  TAB Management representing The Butthole 
Surfers and Todies; Firstars Management representing Sting, Grin, 
Mozart, Alanah Myles, Squeeze, Art Porter, Bela Fleck, Belinda 
Carlisle, Fleshtones, Middlemen, Nine Below Zero; Rebal Waltz 
Music representing The Offspring, Korn, Social Distortion;  Paul 
V representing Perry Farrell, Porno For Pyros, Extra Fancy; REN 
Management representing The The, Primal Scream, Ned's Atomic 
Dustbin, Stabbing Westward; Lindy Goetz Management representing 
The Red Hot Chili Peppers, Candlebox, Paul Westerberg.  SPI 
Management, Concrete Blond, Def FX; Atomic Communications Group, 
Pato Banton, Night Ranger, King Sunny Ade, Mother's Finest;  
Industrial Management representing Jellyfish, Robben Ford, Pray 
For Rain, Penelope Houston, Clouds, Tarnation, Mermen, Chris Von 
Sneidern; Bill Grahm Presents Management representing Taj Mahal, 
Lucy's Fur Coat, Love Battery.  I have another page, but that's 
it,.  Sorry.  Thank you.

MR. LEHMAN:  Thank you.  I would just point out to your friend 
that worked for the President that he is the first President in 
the history of the United States to favor performance rights in 
sound recordings.  And --

MS. RIVAS:  I voted for Clinton and I actually organized that 
benefit.

MR. LEHMAN:  And this was done in the digital context because 
that seemed to be the most likely area where in fact we could get 
the establishment of these rights.  But that legislation is 
pending on the Hill right now and we seem to be, as with so many 
other things, having a difficult time getting Congress to agree 
with that.  So you might want to address your comments to the 
Hill as well, in addition to us. 

MS. RIVAS:  I just think the problem is that there's not a 
recording artists organization representing their interests.  And 
that's probably why the broadcasters have such an easy time 
influencing Congress.

MR. LEHMAN:  Well I think that's probably part of it.  There are 
about 10,000 radio broadcasters in the country and they're a 
pretty powerful group.  Next is Neil Smith. 

NEIL SMITH:  Good afternoon Assistant Secretary Commissioner 
Lehman, Ms. Southwick.  I'm an attorney in San Francisco 
specializing in copyright and all aspects of intellectual 
property with the firm of Limbok and Limbok.  I'm appearing here 
in my individual capacity as an interested member of the 
intellectual property bar.  

     I want to first thank the Working Group for holding these 
hearings on the West Coast, and for its efforts to put the 
report, these comments, and other materials on the information 
highway so we may get them by modem rather than having to travel 
to Washington to participate in public comments on legislation.  
I look forward to the days in the not too distant future when 
we'll have a digital hearing with screens and speakers in our own 
offices so we won't have to even travel here.  We urge you to 
continue to do so, hold hearings here where possible. 

     I want to commend the Working Group for their detailed 
background study of the law in all areas of intellectual 
property, and all the work and thought that went into the Working 
Group report.  It is very difficult to look ahead to what changes 
are taking place, and particularly what changes will take place 
in technology and communications in the future and try to write 
legislation to plan to protect intellectual property in forms and 
against infringement, in ways which have not yet even been 
devised.  I want to note that the courts have done remarkably 
well under our existing judicial system of adopting existing, 
some say old, laws to new fact situations and new technology.  
And it is much more difficult to try to change the law to fit 
prospective fact situations than it is to let the law develop on 
a case by case basis as new technology and new intellectual 
property is developed and new ways are found for infringing or 
testing the limits.  When the coat gets tight, to use the analogy 
of Thomas Jefferson quoted in the report, the courts will often 
stretch the fabric and adapt and apply the law or will tell us in 
those often used words of all of our courts, particularly the 
Supreme Court, that the law can be stretched only so far and if 
you want another result go to Congress for legislation to change 
the law. 

     I submit that in many areas of intellectual property law and 
particularly copyright law, we are not there yet.  And that the 
law has worked quite well in evolving to cover new technologies 
and new fact situations.  The computer bulletin board case, Sega 
vs. Maphia, discussed in the Working Group report, in which I 
represented the plaintiffs, is a case in point.  Is a bulletin 
board owner or systems operator who encourages the uploading of 
copyrighted and trademark material to the bulletin board and 
encourages users of the bulletin board to download such material 
guilty of copyright and trademark infringement. 

     The court in the Sega case, in granting a preliminary 
injunction, held there was a likelihood of success that the 
plaintiff would prevail in establishing that the uploading and 
receipt of copies of copyrighted video games is copyright 
infringement.  And that the downloading by the user of 
unauthorized copies would be infringement.  So the board owner 
and systems operator would be likely to be held to be a 
contributory infringer for encouraging and making the games 
available for downloading. The court did not need the concept of 
infringement by transmission, the old coat worked rather well.  
Technologically speaking, there is a copy made at the receiving 
end of each transmission.  I want to note that in most cases of 
transmission there will be that all important copy at the 
receiving end.  So that there may be limited need for 
transmission to be an exclusive right, and thus an act of 
infringement by itself. 

     If the goal is to protect against the rare transmission in 
the sense of broadcast, which is like the proverbial tree falling 
in the forest making a sound when nobody is there to hear it, 
that is no copy is made at receiving end, and there may well be a 
need to do that, but it should be looked at as akin to another 
right, like a performance right or a display right, as the 
Working Group is doing for public performances in sound 
recordings.  To assure that the exclusive right to transmit 
should be granted for each type of work.  It may well be 
appropriate for all types of work, but I submit that it should be 
studied this way rather than treating transmission as broad 
distribution rights for all works.  

     I also want to commend the Working Group for the recognition 
that much of the problem of lack of respect for intellectual 
property is a cultural development, which can be aided by 
education, particularly of America's youth.

MR. LEHMAN:  Can I -- I apologize.  I was just looking at the 
citation that you gave in our report.  Did you say that you 
favored a performance right instead of the distribution right?

MR. SMITH:  I don't want to take a position with respect to 
favoring one thing or another in that regard.  But what I'm 
suggesting is you're treating transmission -- transmission should 
be treated as a performance right, or like a right like a 
performance right, looking at the individual works and whether it 
should be applied to those individual works, rather than treated 
in the overall as a right of copying, like a copying right. 

MR. LEHMAN:  In the Maphia case that you referred to, I think the 
court specifically talked about the use of a bulletin board 
system to make and distribute copies.  They weren't really 
talking about a public -- they were talking about a distribution 
--

MR. SMITH:  That's correct.

MR. LEHMAN:  And in a sense, that's what we're proposing to do in 
this -- to sort of statutorize that concept and make it clear.

MR. SMITH:  That's correct.  The court in that case did not need 
it.  What I'm suggesting is that you look at the copying -- the 
transmission right as you would a right of public performance or 
a right applying to particular works, rather than as an act of 
copying.  Because copying is taken care of by the fact that there 
is and will be a copy at the receiving end.  And it should be 
treated that way.  What I think the report does is it grants what 
is essentially a broadcast -- an exclusive right against 
broadcasting across the board to all works, which may be 
appropriate.  But as we've seen by some of the other testimony, 
that should be considered on a type of work by type of work 
basis.

MS. SOUTHWICK:  Let me get this right, then.  The court, in your 
case, when talking about the video games, found that there was 
unauthorized copying and distribution of the games on the 
bulletin board.  You would disagree with that, that there was an 
unauthorized performance, not --

MR. SMITH:  No, no.  I'm saying that under the existing law, 
using the concept of copying, there is infringement.  And that 
the law does not, in that area, does not need to be expanded in 
order to take care of that problem.

MS. SOUTHWICK:  But you believe your video games were copied and 
distributed as the court found?

MR. SMITH:  Of course.  And there is infringement in the making 
of the copy, in the existence of the copy at the receiving end.  
Either on the board for an uploaded copy, or at the user's 
terminal for a downloaded copy.  And that the law takes care of 
that problem.  There was a suggestion in some comments in the New 
York Times when the report was released that this was needed in 
order to take care of that problem.  I think the law adequately 
takes care of that problem with respect to that. 

     Let me just make a couple of other remarks.  With respect to 
the cultural development of the ability of people to copy, the 
ease with which copy could be made and the familiarity of 
copying, and I think that's a cultural development in our 
society.  And one of the difficulties with protecting 
intellectual property on the information highway is another 
cultural aspect of our society, and that is the anonymity that 
the information highway provides, both to the party who uploads, 
or posts material on the bulletin board or on the information 
highway, or the user who may download it. 

     A computer bulletin board, just like a public bulletin 
board, or a New York subway car, or a Los Angeles freeway 
perhaps, may well quickly fill up with graffiti, offensive or 
proprietary material, as long as the person who puts it there can 
stay anonymous.  You don't see infringing -- well, offensive, 
scandalous or discriminatory writings on walls where there's a 
lot of traffic or a security camera where you see what's going 
on.  Although computer bulletin boards have grown up permitting 
this anonymity, it may be that we need to develop a protectionist 
caller identification or personal identification system.  So 
there's at least some accountability for one's infringing acts at 
one level.  At least in a confidential sense.  Not that it should 
be public, but it should be available so there's at least some 
accountability with respect to that.  I think that would solve 
some of the problems with respect to non-intellectual property 
issues.  Defamation, viruses, and some of the other things.  And 
I commend you with your protection of copy management systems and 
some of that because I think that will help with respect to that. 

     You have a challenging, albeit extremely interesting task 
ahead.  I look forward to the excellent results which such a 
thoughtful study as the report of the Working Group and these 
hearings should provide.  Thank you.

MR. LEHMAN:  Ms. Southwick has a question. 

MS. SOUTHWICK:  When you say that the reproduction right will 
take care of it when you're talking about hard copies and your 
video games -- let's say they are pirated copies and sold on the 
street, would you consider the reproduction rights sufficient to 
take care of that activity, or do you consider that implicating 
both the reproduction right of copyright owner as well as the 
distribution right? 

MR. SMITH:  Well I think that certainly impacts both rights.

MS. SOUTHWICK:  But you think when the same thing is done through 
a wire, it implicates only the reproduction -- or as your court 
said, both reproduction --

MR. SMITH:  Well, the court dealt only with the aspects of 
copying and the transmission and the production of a copy.  I 
would agree that the public performance right may well be 
violated in that situation. 

MS. SOUTHWICK:  But not the distribution right?

MR. SMITH:  The distribution right -- certainly in that case, the 
distribution right would be violated because there is a 
distribution of a copy.

MS. SOUTHWICK:  Right -- in the Maphia case.

MR. SMITH:  In the Maphia case.

MR. LEHMAN:  That's really what we were trying to get at in our 
distribution by transmit -- exactly that situation.

MS. SOUTHWICK:  The Maphia situation.

MR. LEHMAN:  But you seem to be disagreeing with --

MR. SMITH:  No, I think that you can do it with respect to the 
types of works, rather than with respect to all works.  And look 
at later on in the --

MR. LEHMAN:  You mean we should give audiovisual works a 
distribution right, and games, but not other things? 

MR. SMITH:  No.  It may well be appropriate for everything.  But 
I think it should be considered in the context of -- like a 
distribution right, or like a public performance right.  Because 
a transmission right is akin to that.  In some cases I think if 
the transmission amendment were to pass it would grant an 
exclusive transmission right to all works with respect to that, 
and it may well be appropriate, but it should be looked at in 
terms of -- like it should be looked at as a right granted to 
individual types of works, rather than a blanket -- 

MR. LEHMAN:  Well, we tried to make that distinction by 
establishing a primary purpose of effect test.  So that if you 
intended to broadcast the work, for example, you clearly wouldn't 
be transmitting it.  If you intended to send -- the Maphia case 
that you argued -- to actually distribute a copy via the 
Internet, the NII, then obviously you would be implicating a 
distribution right.

MR. SMITH:  That certainly makes it an easier case.  The 
difficulty is of course with looking to the primary purpose and 
intent and the muddiness of trying to determine those standards.

MR. LEHMAN:  Thank you very much.  Next is Mr. Eugene Volokh, a 
professor at UCLA.

EUGENE VOLOKH:  Hello.  My name is Eugene Volokh.  I'm an acting 
professor at UCLA Law School.  I teach copyright and 
constitutional law.  And I've also been a computer programmer 
from about 1980 to '92.  And I still own actually half of a 
computer business that sells copyrighted software which I wrote.  
So my interest in copyright law is both academic and personal.  
My comments will be brief and general, although I'd be happy to 
flush them out further if you like.  

     I generally agree with much of what the report says.  But I 
think it fails to deal with one very important issue, and that's 
the liability of service providers for infringements by their 
users.  It has, I think, a very good exposition of the existing 
state of the law.  But one thing that I've been hoping for was 
some further -- some proposals on further refinements of the law, 
refinements that I think are particularly important. 

     It seems to me that excessive liability in this area, the 
liability of service providers for infringements by their users, 
whether denominated as contributing infringement or direct 
infringement, as was the case in the Playboy case, is a major 
impediment to growth and to the utility of cyberspace.  And I 
think it's critical that copyright law be modified, or at least 
clarified, to make the basis for liability narrower and more 
precise. 

     This covers a lot of different possible defendants.  I think 
a lot more than many realize.  The bulletin board operators.  
There are services like Prodigy, CompuServe.  I don't see any 
particular reason why it wouldn't apply to owners of Internet, 
for example, the UC system, which takes a role in the Internet in 
providing the hardware and often some of the software.  Perhaps 
even people who create or moderate discussion groups.  They're 
all potentially liable.  Certainly under the rather vague law as 
it now exists for copy infringement by others. 

     And I generally think, with a few exceptions, that such 
contributing liability is -- first, it's unfair.  And second, I 
think it's very much not in the society's interest.  And this 
factoring in the very legitimate interest of the copyright owners 
and the benefits the copyright provides to all of society as well 
as the individual copyright owners. 

     It's not fair because basically it imposes liability on what 
are often innocent parties.  While the law sometimes does it, I 
think that's something that should generally be avoided.  And 
I'll explain -- I'll give some analogies where I think -- which I 
think are apt where it is avoided.  And it's not in society's 
interest because it encourages over- censorship and 
over-monitoring in a medium that I think has a good claim for 
needing a lot more freedom than is going to present. I don't deny 
that contributing infringement actions are some proper in some 
situations.  The Sega v Maphia case is a very good example.  And 
I think it's a very good example because the bulletin board 
operator actively helped people infringe copyrights.  And 
actively solicited copyright infringement.  

     But the law, as the report points out, doesn't clearly limit 
infringement actions to these areas.  Playboy v. Frena for 
example essentially imposed a strict liability standard, that so 
long as the board itself was engaged in making a copy, it didn't 
matter that the owner of the bulletin board was unaware of this.  
Now this may very well correctly reflect the law as it is today 
because, as the report points out, innocent infringement is still 
infringement.  But I think that perhaps points out a flaw in the 
law.  And I don't see any reason why the law should be this way 
as to services that essentially sort of a common carrier.  And 
copyrighter I assume can't sue the phone company when someone 
make an infringing copy using a fax, even if it is done over a 
phone line, and even in the process of the faxing, the process of 
the transmission, there is perhaps an intermediate copy made 
somewhere in one of the computers of the phone company.  That's 
just not done because we realize that it's not particularly fair 
to burden the phone company with this.  And that it is 
prohibitive for the phone company to try to minimize this sort of 
copying.  It ends up just being a transfer mechanism from the 
phone company and from the subscribers to the copyright owners.

     And I think that this common carrier model is the model that 
should correctly be applied to pretty much all of these kinds of 
service providers.  The report makes some very good analogies to 
liable law, where I think there is sort of a saner model as 
exemplified by the CBS case.  But the report also correctly 
points out that there is some distinctions which would make it 
inapplicable.  For example, liable is a tort that requires 
(inaudible), copy infringement is not.  And although itself 
relied on deep pockets of the actual infringer, which may not be 
present for the electronic providers. 

     But even if I'm wrong as to my judgment of the law, even if 
the law is actually as protective of the provider as I think it 
ought to be, the very vagueness of the law encourages 
over-censorship, and encourages hesitance by electronic 
providers, hesitance in -- sometimes hesitance in coming on the 
highway, and also lack of hesitance in censoring messages that 
might even possibly be copyright infringements and open them up 
to liability. 

     Let me also make one other suggestion.  And that's that such 
a clarification, which is what I'm proposing, sort of a 
clarification of a rather narrow form of contributor infringement 
liability, might actually be an apt political compromise as well.  
I've seen a lot of discussion about this among net users and 
specifically among copyright -- practitioners and copyright 
scholars.  Now obviously they're a very limited -- a limited 
section of society, but there's been a lot of resistance to many 
of the reports, recommendations, and many of the perceived 
broadenings of copyright protection, which as I said, I generally 
agree with, that are present in the report. I've also seen a lot 
of concern with the potentially broad scope of the contributor 
infringement doctrine.  And to the extent that there is concern 
about flack coming from that particular part of the population, 
those particular interest groups, limiting and codifying the 
doctrine might make the proposed amendments as a whole, all the 
amendments proposed by the report, more palatable as a political 
matter. 

     So that's basically the extent of my suggestions.  The one 
other thing I want to mention is actually after I had prepared my 
comments, I observed that there are comments of on-line service 
providers that take more or less the same path as I do.  This may 
make my comments actually duplicative, but to the extent I have 
anyway, I'd like to weigh in on the on- line service provider's 
side. 

MS. SOUTHWICK:  I just have one question.  You mentioned that 
your theory would have the problem of the lack of a deep pocket 
--

MR. VOLOKH:  Exactly.  Some copyright owners might --

MS. SOUTHWICK:  -- but wouldn't it also have the problem of -- 
not only is it possible for the direct infringer, if you're 
assuming that the service provider is not also a direct 
infringer, to be anonymous or extremely difficult to even 
identify, let alone that the pockets may not be deep, and that 
the copyright owner may be then totally without remedy for a 
complete, perhaps, injury to his work?

MR. VOLOKH:  Fair enough.  It's quite possible.  Much depends I 
think on the particular sub-medium.  As I understand it, much 
Internet traffic is not anonymous, although it could be made 
anonymous.  It may be that the really serious infringements are 
more likely to end up being anonymous. And it may be that some 
copyright owners get shafted.  And I think it's too bad, as I 
said, I'm a copyright owner myself, I hate to see that happen.  
But it's not clear that making innocent parties liable is the 
solution.

MS. SOUTHWICK:  Do you see the state of the law right now -- with 
the contributory infringement standard as it stands -- actually 
making on-line service providers hesitant to enter in the market?

MR. VOLOKH:  Well, as it happens I have to see, frankly.  Today, 
I don't think this is so.  But this is important because there 
have been, essentially the Maphia case and the Playboy case, and 
some related cases, in the liable area.  If indeed that's the 
extent of it, if either nobody will sue us, which I think is 
unlikely, or everybody else loses, all other plaintiffs lose, I 
think so.  I think it will start with the small bulletin boards, 
which are run by people without much of a financial interest.  
And I think it might -- certainly if you see a suit because 
somebody on a UC node sent out a message that ended up being an 
infringement, UC probably won't shut down its access to the 
Internet, but it will very substantially limit the openness of 
access that it has.

MR. LEHMAN:  I want to point out too that you also have an added 
protection under existing law in that statutory damages, it's 
within the discretion of the court to decide on the amount of the 
statutory damages.  And it doesn't mean that they have to be the 
maximum amount at all.  And there's a lot of capacity to deal 
with the equities in this kind of a situation.

MR. VOLOKH:  Fair enough.  I'd like to suggest though that a lot 
of the defendants, especially a lot of potential defendants, 
might not be very much sort of palliated by the process that some 
court somewhere in its discretion might only award a very small 
amount rather than tens of thousands of dollars.

MR. LEHMAN:  Thank you very much.

MR. VOLOKH:  You're welcome.  Thank you.

MR. LEHMAN:  Next Mike Malone, President of the San Diego 
Software Council. 

MIKE MALONE:  Mr. Secretary, Madam Counsel, I thank you for the 
opportunity to speak before you.  My name is Michael Malone and 
I'm the Chief Executive Officer of Griffin Software Corporation, 
which employs exactly 18 people.  I'm also the President of the 
San Diego Software Industry Council, which represents hundreds of 
software companies and thousands of employees.  And I'm speaking 
on behalf and in support of the Alliance to Promote Software 
Innovation, which represents the industry as a whole in the 
United States.  And let me say also that our industry is totally, 
absolutely, one hundred percent dependent on the protection of 
intellectual property. 

     The digital information revolution, commonly called the 
National Information Infrastructure, is underway and is a going 
concern.  Because of the ease, speed, versatility and reliability 
of creating and transmitting digital information, we believe that 
it will be the pathway of choice for business and commerce as 
well as for personal and cultural communications.  While much of 
the talk about the NII resolves around hardware, it is essential 
to understand that makes the whole system really work is 
software.  Fiber optic networks and digital information hardware 
without software is incapable of responding to commands or 
forwarding even the simplest e-mail message. 

     Software does this in two ways.  First, it helps the user 
navigate massive amounts of digital information to locate or 
create that which is useful or desired.  Secondly, once a 
decision is made to send or receive information, it is the 
software that actually pulls that information through the 
computer switches and wires that are the physical network.  As 
communications and computer technologies become more powerful and 
less expensive, we will expect them to do more for us and 
software will be the key to making that happen. 

     We congratulate you on your comprehensive and thorough 
analysis of the intellectual property issues which must be 
considered in our national discussion on the NII.  The draft 
report is a welcome and timely and valuable contribution, which 
sets the stage for further deliberation of a complex universe of 
issues.  We are also grateful for the opportunity to appear to 
present our views. 

     We believe the NII raises three general issues.  Number one, 
government policies and the relevant legal regimes should create 
incentives for authors and creative individuals to produce the 
hardware and software that will comprise the infrastructure 
itself.  We agree fully with the draft report that intellectual 
property laws are the best means to create these incentives. For 
creators to make their wares available over networks they must be 
secure against misappropriation.  This can involve apply 
encryption or other access- control devices to the content, and 
then making the content available to approved users, through the 
network, upon authorized access.  We fully support the draft 
report's recommendations in this area.  For networks to be used, 
both the user and the content owner must have certainty about the 
means, as well as the terms and conditions of contracts and 
licenses for accessing content.  The American software and 
computing industry is poised to contribute to the establishment 
of easy to use and affordable information networks.  We believe 
the composite of NII networks will gain consumer acceptance only 
if they are jam-packed with creative content and services of all 
kinds that are practical, affordable, and easy to access.  
Conversely, it will fail if it's merely an alternate means of 
sending messages and watching television and playing games. 

     There are three basic challenges posed to law and policy by 
these developments.  First, digitization offers easy and 
inexpensive methods to create an unlimited number of perfect 
copies.  Second, digitized information can be instantaneously 
uploaded and downloaded by an unlimited number of users.  Third, 
information in disparate media can be converted into a single 
digital stream and can be easily manipulated to create a variety 
of new works.  
     
     As the draft report correct states, the critical element of 
the solution is ensuring that works delivered via networks 
receive full protection under intellectual property laws. The 
computer software industry, which has dealt with digitized works 
since its inception, is familiar with this need.  This industry 
was built upon the foundation of strong copyright laws.  And it 
is maintained through vigorous enforcement of such laws, 
including education. Intellectual property laws provide our 
industry's principal, and often only safeguard against those who 
would appropriate our products without permission or 
compensation.  It is imperative that the NII give full attention 
and respect to these fundamental rights which constitute our 
industry's major inducement and incentive for conducting further 
research and additional investment in innovation. 

     We are convinced that the copyright law, by protecting 
authors' intellectual creations, regardless of their form, is 
well-suited to protecting software and other types of works as we 
enter the digital age. The form of fixation and distribution of a 
work, digital, analog or any other form, should not determine 
rights in the work under the law.  Digital delivery of a work 
through a network does not alter the fundamental right of 
copyright that reproduction, modification and distribution of 
works may only be done with the author's permission. 

     Thus, for us, the draft report's most important contribution 
is its recognition that intellectual property rights are 
critically important to a flourishing NII.  Moreover, the draft 
report clearly establishes the proposition that a full debate of 
the policy issues surrounding the NII must squarely address 
questions of intellectual property law.  Having said this, we do 
see one area of the law where change may be appropriate.  We 
would support the suggestion made in the draft report of 
exploring possible amendments that would make it a criminal and 
civil offense to manufacture, import, sell, lease, use or possess 
a technical device or computer program products, hardware or 
software, the purpose of which is to circumvent either the 
security of the NII or any other security measures included in 
the NII, or in copyrighted works themselves, to safeguard the 
integrity of the works.  

     We also understand some groups have proposed collective 
administration of rights with respect to products distributed via 
networks.  The history of our industry, and that of other 
copyright based industries, is that efficient licensing and 
distribution systems have evolved over time in response to 
consumers' needs and market focus.  Our experience to date has 
been with individual transactions governed by contracts.  We have 
had very little experience with collective administration of 
rights.  We are certain however that given the many unique 
characteristics of computer software, the compulsory licensing of 
software would not be appropriate. 

     On behalf of Griffin Software, who has spent the last 
eighteen months putting together childrens' products on both 
CD-ROM and floppy disk utilizing copyrighted content from major 
Hollywood studios and copyright authors of childrens' books, 
cartoons and animated feature films, we are putting together 
those deals on a contract licensed basis.  And we are taking care 
of that on a commercial basis, not on a compulsory licensing 
basis. 

     The technology in the computer and software industry is 
changing at an unprecedented rate.  Even this month Pacific Bell 
has announced that you can get an ISD connection to your home for 
only $24.95 a month.  That's new news.  Next month that will be 
old hat.  From a business perspective, the precise contours of 
the NII are still uncertain.  No one individual, company or even 
industry can be sure how the many technological and economic 
choices are going to take shape.  The challenge for the 
government and private sector in the successful development and 
deployment of the NII is that nothing be done that might 
accidentally retard the development of new technologies or 
fossilize technology at yesterday's levels by prejudicing the 
rights of intellectual property owners. 

     To sum up, we believe that the rationale for protecting 
authors and other right holders under copyright laws remain 
unchanged in a digital environment, regardless of the form of the 
works or how such works may be distributed.  To this end, we 
believe that decisions about law and policy should be governed by 
the following principles:

     One -- Copyright law is and should remain the principal and 
preferred form of protection for all works, whether or not they 
are distributed in traditional forms, in a shrink wrap software 
box, or via the networks. Two -- A wholesale change in the law is 
not needed, nor is it appropriate. Three -- The author or other 
right holder of a digital work should have the same basic rights 
as the rights attached to works fixed and distributed in 
traditional forms, including the exclusive right to reproduce and 
modify the work, to incorporate the digitized work in whole or in 
part in other works, to upload, transmit, distribute, display, 
perform and download the work electronically.  And works, 
including in my area -- multi-media products, may be distributed 
only with the consent of the author and the other right holders.  
Four -- Right holders should retain the right to decide whether 
to license their works and enforce their rights collectively or 
individually.  Compulsory licensing of any intellectual property 
rights should be avoided.  Five -- Unauthorized access to 
content, including by means of defeating technological 
safeguards, should be a crime.

     I have one final comment about the performance rights.  I've 
been listening to some of the discussions and testimony and it is 
clear to me in the same way that I distribute software in shrink 
wrap packages at computer stores, and in bookstores, and music 
stores, we regard the network -- the NII -- as a distribution 
medium and not a performance.  And if we do our job properly, do 
our job properly, we will be compensated for actual use and/or 
performance of those rights and we'll pay royalties accordingly. 

     In closing, we would like to thank you for providing us with 
the opportunity to present this statement and for opening the 
dialogue between the government and the private sector.  As the 
NII continues to evolve rapidly we look forward to having the 
opportunity to work with you and others in the Administration in 
addressing the many issues that have been raised here today.  
Thank you.

MR. LEHMAN:  Thank you very much, Mr. Malone. 

MS. SOUTHWICK:  I just have one question.  You mentioned the 
works that you just completed.  Were these multi-media works that 
you were discussing?

MR. MALONE:  Yes.

MS. SOUTHWICK:  And you were able to clear the rights?  We've 
heard some comment from people, including in our last hearing, 
about the difficulty of clearing rights in multi-media works.  
And it seems as though the marketplace is starting to evolve 
where that is easier and people are starting to have a better 
idea of what to charge and what to pay.  Was that your 
experience?

MR. MALONE:  Yes.  It's a huge issue.  And what we've noticed in 
the last 18 months specifically, or 24 months, is that Hollywood, 
the software industry, the toy industry, and even the cable 
television and the broadcast media, are clashing, are 
congregating in the middle trying to figure out a way to do 
business.  It takes a long time to figure out that particular 
formula.  And we have, through commercial or negotiated 
contracts, figured out ways to compensate everybody that we all 
felt fairly with.  But it was difficult and it's not an easy 
issue.  And I don't think the resolution is completely clear yet.  
But I think it should be dealt with on a commercial basis. 

MS. SOUTHWICK:  Thank you.

MR. MALONE:  Thank you. 

MR. LEHMAN:  Thank you.  Next is Milt Olin, Senior Vice President 
of Business and Legal Affairs of A&M Records. 

MILTON OLIN:  For the record, Milton Olin.  First of all, I guess 
I'd like to say, similarly to all others here today, that I'm 
personally grateful and honored to have the opportunity to speak 
to you all and discuss the report.  In going through it, I've 
been impressed seriously with the comprehensive nature of it and 
scholarship, and I think you're really to be commended.  

     In doing so, I also have to point out that I'm considerably 
daunted by the prospect of speaking to you folks about copyright 
law and other matters of this nature because even though I'm an 
attorney practicing in the entertainment business, I don't think 
I'm an expert.  There are probably scores of people you could 
bring up here to talk to you about the Copyright Act who would 
have encyclopedic knowledge.  But just taking off on something 
your last speaker said, the issue of multi-media licensing of 
recorded music and things like this, this is where I'm in on the 
cutting edge of what's going on right now.  And that's frankly 
what I have to talk about.  I think what you're doing to create a 
roadmap for all of us, in terms of dealing with these issues and 
having some understanding, is critical to all of us moving 
forward and taking full advantage of the opportunities that will 
be available.  

     And I think I should point out that one of the -- as others 
have said -- the notion of the acceptance of a performance right 
in a sound recording is critical.  It's something which frankly 
we appreciate very much.  I know it's a struggle on the Hill.  I 
don't know how that will turn out.  But I think, frankly, it's 
important that all of us understand, or that I impart to you my 
feeling, that this issue is critical right now, because if we 
don't establish this both in the minds of the businesses that are 
around and the consumers, it will be very hard to get to a point 
where we can ever get back to discuss this issue in the 
information highway.  

     And while I guess I remain optimistic that we'll be able to 
forge some sort of an agreement with respect to this issue in the 
context of -- you know, making a deal if you will, I don't think 
I'll ever understand why it is that there isn't a performance 
right in the sound recording.  I just don't get it.  It doesn't 
seem to make sense.  And I think that one of the previous 
speakers made that point.  Obviously the notion that you can now 
transmit or broadcast in the digital quality makes all the 
difference in the world in terms of how we deal with this 
performance right.  

     I would also like to say that in reviewing the report there 
are a number of other points that I find common ground with.  For 
example, I think the need to try as best we can to come up with 
some international harmonization of copyright law and of, for 
example, the performance right -- as somebody else has pointed 
out -- in terms of conforming this with other territories.  And 
as we do this, I think the United States, as I understand it 
certainly and you guys would know better than I -- but we're so 
far ahead of other countries in how we're dealing with these 
issues and the fact that we're having these hearings and we're 
focusing on it.  And, in fact ,businesses are growing up right 
and left that are taking advantage of it.  If we get to a 
position where we can make some rules and establish some 
precedent which can be taken in the international community -- to 
the international community -- I think we'll be well along.  

     I would point out that in the record business we've 
developed an international source code that appears on the 
digital copies of records, which has been useful to us, for 
example, in any piracy.  And that's something which was 
established and really accepted by all of the international 
companies very, very easily, because it made sense for all of 
them.  I also think that the issue of protections will need to be 
discussed in the context of an international solution as well.  
Whether it's encryption technology, description technology or 
what have you, I think we should be focusing on that. 

     The issue that I need to bring up, as presenting for us at 
A&M a concern, has to do with the primary purpose test, which I 
assume that you've had other conversations about earlier today.  
I won't quote the report, but from our point of view, any 
transmission which results in there being a copy at the other end 
of that transmission is, in fact, something which copyright ought 
to protect as a reproduction.  Something which is the core of the 
Copyright Act -- to be able to make copies.  I won't fuss with 
the distribution transmission side for a moment.  But frankly, I 
mean, that is an unauthorized copy and something which we think 
we need to control, notwithstanding what the primary intent of 
the transmission was.  I mean, if you have a situation which 
somebody is broadcasting something to 10 million people, and 10 
thousand people are making a copy of it, can we argue either that 
there wasn't an intent on the part of the transmitter or that the 
primary purpose wasn't to make a copy?  I think that what that 
points out is, in my mind, the need for us to develop some system 
which in an organic and perhaps -- I don't know how to describe 
it any other way -- where we cover all the bases, where we 
understand that this is something which ought to be protected, 
this is something where the exclusive rights have been granted to 
somebody.  And we need to figure out some way to make certain 
that those rights are protected. 

     The last point I guess I would make is in looking through 
the report and thinking about it in the context of my business, 
it appears to me that the whole Act , which I guess is really -- 
1909, 1972 are the places where it's stepped from -- needs to be 
looked at in the context of the digital age.  There are issues 
having to do with multi-media licensing, where the audio-visual 
work definition I think needs to be looked at, the mechanical 
licensing provisions and the compulsory nature of them with 
respect to digital transmission.  These kinds of things will, I 
think, need to be looked at as we look at a broader review of the 
Act.

     That's it for me.  Thank you very much. 

MR. LEHMAN:  What characterizes the multi-media environment in a 
mechanical license --

MR. OLIN:  Nothing in mechanical licensing.  I wasn't describing 
-- two separate points.  If you look at the limitation on the 
right of a license of a sound recording, it talks about the 
ability to put it into an audio-visual work.  And I think that 
the description of the audio-visual work doesn't really 
specifically hit on the head of CD-ROM or something.  It's more a 
multi-media interactive product.  I think we understand that we 
have that right.  I'm just suggesting that it would need to be 
clarified in the context of looking at the whole Act.

MR. LEHMAN:  Is that something, just for our information, that 
you're -- to understand the business, that you're -- at A&M 
Records -- planning to be involved in?

MR. OLIN:  Yes we are. 

MR. LEHMAN:  Are you planning to move into multi-media?

MR. OLIN:  Yes we are.

MR. LEHMAN:  And you contemplate that you will be delivering 
these multi-media products to customers via the NII?

MR. OLIN:  Ultimately, I think that that's where the business 
will go.  I mean, I think that you'll have hard copies of them, 
too, obviously, whether it's a CD-ROM or Phillips -- which is a 
company that we're involved with -- has CD-I's.  But there will 
be both.  And frankly, while we're looking towards the creation 
of these products right now, we're withholding looking at the 
distribution and transmission ends of it until we can see where 
the law is frankly. 

MR. LEHMAN:  To the extent that works ultimately became 
audio-visual, multi-media works, wouldn't that to some degree 
make the performance right problem go away because the 
performance right does attach to the audio-visual work?

MR. OLIN:  If you had nothing but audio-visual works, obviously 
that would be the case -- although I haven't thought about it 
clearly enough to think if there would be a distinction.  But in 
the context of the performance in a digital environment of sound 
alone, you'd still need that right. 

MR. LEHMAN:  Yes, I understand that.  I'm just thinking as a 
practical -- because I'm wondering if the new technology will 
mean that everything will be sort of sent out on the wire as an 
audio-visual, multi-media product.

MR. OLIN:  Well it's -- all zeroes and ones isn't -- I mean, 
that's the problem in thinking about this is that everything -- 
the rules are entirely changed when you have zeroes and ones.

MS. SOUTHWICK:  Are you contemplating delivering just the audio 
product directly to the consumer at some time?

MR. OLIN:  We haven't yet.  We haven't yet contemplated that.  In 
fact, we've been very concerned even about posting on bulletin 
boards because of the potential problems you have with people 
even in an authorized sense downloading that, what happens with 
it.  So A&M has taken a very slow road on that.  And in thinking 
about it -- this is just the future, I mean -- somebody was 
talking about the multi-media and the licensing provisions.  The 
way that's happening right now with everyone talking with 
everyone -- he made a great point -- you know, everybody is now 
trying to figure out where the middle ground is, how you can do 
business together.  And that's the same thing with respect to 
digital transmission.  We'll need rules.  We can't do it without 
having protections and rules.

MR. LEHMAN:  Thank you very much.  Finally, I'd like to call on 
Robert Hadl, Vice President and General Counsel of MCA. 

ROBERT HADL:  Thank you.  Mr. Chairman, members of the Working 
Group, my name is Robert Hadl.  I'm Vice President and General 
Counsel of MCA.  MCA is a diversified entertainment company with 
interests in motion pictures, television, recorded music, theme 
parks and book publishing.  MCA is also involved with others in 
cinemas and cable networks.  I should point out that Mr. Al 
Teller, Chairman and CEO of the Music Entertainment Group of MCA, 
is a member of the advisory committee, or advisory council, 
appointed by President Clinton to assist the Information 
Infrastructure Task Force in determining and implementing the 
Administration's vision for the National Information 
Infrastructure.  I am pleased to appear before you today and 
would like to focus on three issues in the time allotted to me.  
I have a short statement and then will answer any questions you 
might have. 

     First, I want to commend the Working Group, and particularly 
its chairman, Bruce Lehman, Assistant Secretary of Commerce and 
Commissioner of Patents and Trademarks, for its leadership in 
focusing on copyright law and its application and effectiveness 
in the context of the NII. The preliminary draft of the Working 
Group is a first-rate assessment and review of the problems 
facing intellectual property owners by the development and use of 
the NII.  

     In particular I want to support the proposal made by the 
Working Group that the right of distribution extends to all 
transmissions of works whether such transmissions are 
performances, displays, or reproductions.  In the areas of motion 
pictures, television films and prerecorded music, the 
distribution of reproductions of such works may well take place 
by an electronic transmission from a central location to 
individual homes.  If this occurs, it will be unnecessary to 
visit the local video shop or record store to purchase a hard 
copy of the motion picture or sound recording.  It is critical 
that the law protect copyright owners against such electronic 
distribution systems to the same extent that distributions of 
hard copies are protected today.  Thus, a clarifying amendment to 
the Copyright Act to ensure the distribution of works through 
electronic transmission falls within the exclusive distribution 
right of the copyright owner appears appropriate. 

     Second, the draft report considers the problems posed by the 
manufacture and distribution of devices that defeat or circumvent 
anti-copying or other copyright management systems.  It concludes 
that it is in the public interest to amend the Copyright Act to, 
and I quote, "prohibit the importation, manufacture and 
distribution of devices, as well as the prevention of services 
that defeat anti-copying systems."  I believe the report is 
excellent on that point, but needs to go further.  It needs to go 
further beyond prohibiting individuals from tampering with 
anti-copying systems.  By imposing a negative prohibition in the 
Copyright Act, the report seeks to prevent others from 
interfering with affirmative actions taken by copyright owners to 
protect their works from unauthorized uses.  

     The fundamental flaw in this approach is that it is assumed 
that all anti-copying systems are unilateral in scope and can be 
triggered by copyright owners alone.  The report fails to 
recommend that manufacturers include technological devices in 
their equipment and machines that ensure the availability of 
anti-copying systems to copyright owners.  The recent enactment 
by Congress of the Audio Home Recording Act of 1992 demonstrates 
this point.  Under the new Act, Congress required all 
manufacturers and importers to assure that all digital audio 
machines distributed in the United States were equipped with a 
serial copy management system.  This system is not unilateral in 
scope, but bilateral, in that it requires the introduction both 
of elements within the software at the copy and/or source, and of 
specific copy-inhibiting features in the corresponding hardware 
that will be triggered by the software when received at the 
recorder end.  Thus, Congress recognized it was necessary to 
impose mandatory as well as prohibitory rules in the Audio Home 
Recording Act if anti-copying schemes were to be successful.

      The necessity for mandating such schemes appears obvious.  
Individual manufacturers of hardware are unlikely to place such 
devices in their machines on a voluntary basis.  Further, even 
assuming that some manufacturers may be prepared to insert such 
devices on a voluntary basis, the antitrust laws prohibit any 
collective agreement or joint action by copyright owners and 
manufacturers seeking to mandate the inclusion of such devices in 
all machines, including those of manufacturers who are not 
prepared to accept such voluntary restraints.  Thus, at least in 
the areas of private copying and home taping, it appears that 
legislation is necessary if bilateral systems are to provide 
effective anti-copying protection against unauthorized uses and 
reproductions. 

     I would urge the Working Group, therefore, to expand its 
recommendations to require, in selected cases, that 
manufacturers, importers, and distributors of digital machines 
and equipment capable of reproducing copyrighted works include in 
their machines and equipment devices that will respond to anti- 
copying codes included in software distributed by copyright 
owners.  

     Third, and last, the Working Group has correctly placed 
emphasis on the international aspects of the NII.  The increased 
significance to United States copyright owners of the 
international market has become readily apparent.  Many motion 
pictures now earn more than fifty percent of their theatrical 
revenues from the international market outside the United States 
and Canada.  That is a marked increase from the historical norm, 
which ranged about thirty-three and a third percent.  Similar 
increases have occurred in the areas of home video, television 
and prerecorded music.  Thus the international market is a 
burgeoning and critical element in the return which copyright 
owners calculate when making investments in new products.

     Open and free international markets are therefore vital to 
the continued success of software products produced in the United 
States.  Nevertheless, the restrictions faced by copyright owners 
who market products in the European Union -- such as quotas, 
subsidies and the refusal by the European Union countries to 
accord national treatment to works copyrighted in the United 
States -- are harmful and unjustified restraints.  More 
importantly, these barriers to free trade may discourage software 
producers from making their products available for distribution 
on the NII's of those countries that impose such barriers.  

     The failure of the GATT Agreements to address the 
outstanding issues between the United States and the European 
Union places renewed emphasis on the need to harmonize the 
disparate copyright and neighboring rights regimes of the two 
parties and to establish common rules governing the scope of 
protection afforded their respective nationals.  The Working 
Group should focus its energies on this important aspect of 
copyright protection and encourage agreements that will permit 
the development of a worldwide Global Information Infrastructure 
open to nationals of all countries on a non-discriminatory basis.  
No aspect of its work is more important. Thank you for your time 
and attention.

MR. LEHMAN:  Thank you very much, Mr. Hadl.  You talked about, in 
fact probably your most significant suggestion, was that we 
include a requirement for copy-code protection of some sort, or 
SCMS-type protection in the sale of equipment.  And you said in 
selective cases this -- that these anti-copying codes should be 
embedded in equipment.  What kind of selective cases did you have 
in mind?

MR. HADL:  Well, I'm thinking particularly of the situation as in 
the Audio Home Recording Act.  By selected cases I would mean 
private copying, where people can make copies in their homes.  
There are new machines coming in the digital area -- digital 
video disc machines, digital video recorders -- and it seems to 
me that we're going to have to address sooner than later how we 
deal with those problems.

MR. LEHMAN:  How would we define those machines?  I mean, maybe 
you could even give us some language on that at some point.  You 
don't have to answer it right now. 

MR. HADL:  Well, I don't know that I could give you the language 
today.  But I think it would be broad enough to include machines 
capable of reproducing copyrighted works -- which could include 
even computers.  It would depend.  But I think that we are going 
to need to consider the bilateral aspect of this problem. 

     At the present time, for example, in the home video market 
with respect to audio-visual works, there's a system called 
Macrovision.  You may have heard of it.  Some studios use it; 
others choose not to.  But Macrovision is essentially a 
unilateral system, because it works with something called the 
automatic gain control in most machines that are manufactured -- 
not all, but most.  So you, as a copyright owner, can 
unilaterally decide whether to encode your prerecorded video tape 
which you distribute through video shops, and then people are not 
able to copy that if the automatic gain control of those machines 
operates that way.  With digital, Macrovision doesn't work.  And 
you're going to have to go to some kind of SCMS system -- which 
is a bilateral system -- so that unless that device is in the 
machine there's nothing you can do.

MS. SOUTHWICK:  With the SCMS system there was - - there are 
standards.  The machines must be able to interpret and act upon 
certain signals.  And when you say -- to require manufacturers of 
digital machines to include a component, or be able to respond to 
anti- copying codes -- on that side of the bilateral approach, 
are there standards?  I mean, it would be kind of --

MR. HADL:  You're going to have to develop -- as they did with 
the audio.  There was an elaborate technological basis which I 
think the National Institutes of --

MR. LEHMAN:  National Institutes of Science and Technology. 

MR. HADL:  Right, right -- helped formulate.  And that would be 
necessary in this area as well because you would want every 
manufacturer to know whether or not they were in compliance or 
not.  They'd have to know what the standard was so they could put 
the code in the machine.

MS. SOUTHWICK:  Which codes they would have to respond to.

MR. HADL:  Precisely.  That would be part of this.  That would 
have to be done.

MR. LEHMAN:  They're on -- we have representatives of NIST, by 
the way, on our Working Group, involved in the preparation of 
this.  And we have a separate Applications Committee of the NII 
Task Force headed up by Arati Prabhakar, who is the Director of 
NIST. 

MR. HADL:  The main point I just want to stress is that these are 
bilateral, not unilateral.  And therefore -- we certainly support 
and applaud the notion that people shouldn't be able to 
circumvent anti-copying devices or technology if the copyright 
owner so includes it.  But you have to go backwards one step and 
say, well, what do you have to do to see that you can actually 
get it included.  Otherwise it doesn't make much sense to tell 
people not to tamper with something that doesn't exist in the 
first place. 

MR. LEHMAN:  Thank you very much.

MR. HADL:  Thank you.

MR. LEHMAN:  That concludes our witness list today.  And I just 
would like to again say thank you to the University of 
California, Los Angeles for providing us with these very fine 
facilities, and the sound system and all that goes with it.  We 
will be concluding these hearings next week in Washington on, I 
think it's Wednesday -- Thursday and Friday, I'm sorry.  We'll 
have two days of hearings on Thursday and Friday for everybody on 
the East Coast or any other place in the country that wasn't able 
to get to us in Chicago or Los Angeles. 

     I think we've had an extremely broad range of views that 
have been represented.  And I can assure all of the witnesses, 
any of them that are still here, there are definitely going to be 
changes in our preliminary report, on the basis of the comments 
that we have heard, before it becomes a final report.  And so 
these really -- this really has, from our point of view, been a 
very successful enterprise.  

     We're going to see if we can't make the comments available 
in at least some of the patent depository libraries, particularly 
here on the West Coast, so people will be able to have access to 
them.  And the transcript of the hearing itself will be available 
on the Internet, as well as -- I indicated earlier you can get 
copies of it by writing or faxing to us at -- the telephone 
number is 703-305-9300, and you can ask for Michael O'Neil.  And 
the fax number is 703-305-8885.  You might make that to his -- 
put your request to his attention.  If you want to write to us 
you can write to -- or if you want to come and view the 
transcripts or the comments in Washington, they're available 
right now or -- I believe right now, everything that we have, at 
the Scientific and Technical Information Center of the Patent and 
Trademark Office, Room 2C01 at 2021 Jefferson Davis Highway in 
Arlington, Virginia. 

     So with that we will review the comments.  We'll have two 
days of hearings next week.  We will study the extensive -- I 
think we've received nearly 100 written comments already.  And we 
hope to make our report a final report sometime after the first 
of the year so that Congress will have an opportunity to consider 
-- have a full Congress to consider -- whatever legislative 
recommendations we make. 

     I want to thank everybody for participating in this hearing 
who is still here.  Thank you. 

(Whereupon, at 4:02 p.m., the hearing concluded.)