PUBLIC HEARING at Andrew Mellon Auditorium Washington, D.C. September 22, 1994 INFORMATION INFRASTRUCTURE TASK FORCE WORKING GROUP ON INTELLECTUAL PROPERTY RIGHTS Bruce A. Lehman, Assistant Secretary of Commerce and Commissioner of Patents and Trademarks, Chair PANEL MEMBERS: BRUCE A. LEHMAN, Chairman, Assistant Secretary of Commerce and Commissioner of Patents and Trademarks MARK BOHANNON, Department of Commerce IRA SOCKOWITZ, Department of Commerce DIANE MARKOWITZ, Office of the U.S. Trade Representative KENNETH DINTZER, Department of Justice MICHAEL HOFFMAN, Department of Energy JERRY LINN, National Institute of Standards and Technology MICHAEL S. SHAPIRO, National Endowment for the Humanities PHYLLIS HARTSOCK, National Telecommunications and Information Administration HAROLD M. SCHOOLMAN, National Library of Medicine TERRI SOUTHWICK, Patent and Trademark Office P R O C E E D I N G S BRUCE LEHMAN: I'd like to begin the last round of hearings on the preliminary report on the National Information Infrastructure by introducing our Deputy Secretary of Commerce, David Barram, who will give an opening statement on behalf of Secretary of Commerce Ron Brown and the entire Commerce Department. I would like to say a word or two about Dave Barram. Dave Barram is no stranger to the information superhighway. He started his career in the computer business some years ago with Hewlett Packard Corporation and moved on to Silicon Graphics where he became Chief Financial Officer, and before coming into the Government, he was most recently Senior Vice President of Apple Computer, in charge of worldwide matters. And so I would like to introduce Dave Barram to welcome all of the participants in today's hearing to the Commerce Department. DAVID BARRAM: Thank you, Bruce, and good morning. I am pleased to welcome those of you who are here this morning. I want to welcome you to this very important forum on the protection of intellectual property rights on the NII. The potential of the National Information Infrastructure can't really be overstated. It is already impacting how we do business and how we plan for the economic challenges ahead. Information industries already support one tenth of our economy. And as you all know, many, many job opportunities will be created in the processing, packaging, organization, and dissemination of the information and entertainment products flowing through the NII. But its effects will be felt far beyond the economic sphere. It is really going to enrich our lives and help us meet our social objectives as well. I believe it will play a great role in the future of our nation's education and health care delivery systems. As we take on the difficult questions surrounding the development and deployment of the NII and the GII, I want to stress the value of hearings like these. Your input is critical to the success. We need your insight and we are listening. I have been working very closely with another Working Group on the issues of universal service and open access. These are also very tough issues. People are very passionate about them. As we travel around the country and listen to experts and industry leaders and regular folk talk about what these issues mean to them, we get all of these important issues raised and have gotten a lot of good advice from people. The subject of protecting intellectual property rights on the NII is an equally big issue and maybe even bigger. It is complex and it is contentious, but it is crucial that we find our way through this maze. It wasn't very long ago -- a couple of years ago -- that we talked a lot about the convergence of computers, communication, and content. Also, the talk over the last year has, in my view, really centered on communications on the network. But I think you can make the case that the driving force for the NII will be content. It is true that all of the wires, cables, computers, and networks in the world will not create a successful NII if there is no content, and content will not be the only driver, but we do know that it will play an enormous role. We also know that the full potential of the NII cannot be realized if information and entertainment products are not effectively protected. Few, if any, copyright holders will be interested in making their products available in an environment that does not protect their rights. At the same time, we must be careful that we don't choke the flow of information to the public. The public will not use the services available on the NII and generate the market necessary for its success unless it has access to a wide variety of works. That access must be provided under equitable and reasonable terms and conditions. So, we must strike a balance between these interests, as difficult as the balance is to achieve. As I leave you, I would like to leave a simple thought or share a simple thought. Our world is changing before our very eyes. What is today, wasn't a very short time ago, maybe even yesterday or the day before. And what is to come is not very clear to us. There are incredible changes in the world politically, economically, the way we behave, generational change in leadership. The NII is just one manifestation and one player in this incredible change that is taking place. Your work here is very, very important. And I encourage you to dream big. Because if we don't, the world will surely pass us by. We will lose our chance to be leaders in this extremely important technology. I want to be sure that I congratulate the Working Group on Intellectual Property Rights. We owe them a lot, particularly Bruce Lehman and his staff. And our thanks to you for providing such a clear and comprehensive outline of the problems that we face as we try to resolve these issues, and thanks for the leadership that you have shown by recommending solutions and convening these hearings. And to all the witnesses that will be here today and are here now and who testified at last week's hearings in Chicago and Los Angeles. You are also to be congratulated for your participation. Without your important contribution, the challenges we face would be overwhelming. You are shaping history itself, and for that you should be proud. Thanks for coming, and I wish you the best for a successful hearing. MR. LEHMAN: Thank you very much Deputy Secretary Barram. On behalf of the Working Group on Intellectual Property Rights, I would like to welcome everybody here today. I hope we have plenty of room in this hall. The hearing, of course, is to consider the draft report of the Working Group on Intellectual Property Rights. The Working Group on Intellectual Property Rights, which I chair, was established as part of the White House Information Infrastructure Task Force. The Task Force, chaired by Secretary of Commerce Ronald Brown, has been created to articulate and implement the Administration's vision for the National Information Infrastructure. The 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. As many of you know, we held a public hearing on these issues last November at which 30 people testified, and we received approximately 70 written comments. In July, we issued the Preliminary Draft of the Report of the Working Group on Intellectual Property Rights, which we dubbed the "Green Paper." It is the Working Group's first cut, and I want to emphasize that -- our first cut at the examination and analysis of the intellectual property implications of the National Information Infrastructure. While this preliminary report addresses each of the major areas of intellectual property law of patents, trademarks, and trade secrets, it focuses primarily on copyright law and its application and effectiveness for the NII. Our Working Group issued its report in preliminary draft form in order that we could solicit additional public comment. And to help us get that comment, we are holding these hearings. Last week we were in Chicago and Los Angeles and this week we are in Washington. And we also have been inviting written comments. We have received more than 100 written comments so far, and because of that we have extended the deadline for submission of reply comments to those initial comments to October 21. So you have until October 21 to get your reply comments in. Following these hearings and the receipt of all of the written comments, we will analyze the testimony and the comments so that we can take proper account of them in preparing our final report -- or our "White Paper" -- which will be issued early next year. The National Information Infrastructure has the potential to make information and entertainment resources available quickly and economically anywhere in our country, indeed in the world, 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 across the country and throughout the world. It can improve the nation's educational 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 Americans. New job opportunities can also be created -- and this is very important to this particular hearing -- in the processing, organizing, packaging, and dissemination of the information and entertainment products that flow through the National Information Infrastructure. Our job is to ensure that that potential is realized. The preliminary recommendations of our Green Paper fall into three areas -- law, technology, and education. With regard to law, the principal conclusion is that the copyright law -- the current copyright law -- is generally in good shape to deal with the many issues that are likely to arise under the NII. However, we have identified a few areas where we think clarifications or modifications in the existing copyright law might be needed. And the report identifies several of those. First, to ensure that delivery of copies of a work of authorship or of phonorecords that are delivered to a customer via electronic transmission are recognized as acts within the exclusive distribution rights of the copyright owners. Secondly, the report indicates that it may be necessary to prohibit devices or services that can defeat, without authorization of the copyright owner or the law, security measures that are intended to protect works flowing through the National Information Infrastructure. Thirdly, the report indicates that we may need to prohibit the introduction of fraudulent copyright management information or the fraudulent removal or modification of such management information. Fourthly, we recommend the creation of a performance right in sound recordings with respect to digital transmissions of performances. We also acknowledge that the fair use and related rights under Sections 107, 108, and 110 of the law are important to educators and librarians with respect to public access to works. And we convened a Conference on Fair Use, the first meeting of which was held yesterday in the Commerce Department auditorium, in an attempt to try to encourage users and owners of copyrighted works to develop voluntary fair use guidelines which would be applicable in the digital context. In addition, we concluded that there is no need for further compulsory licenses in the context of the National Information Infrastructure. Finally, we recognized that there is an essential need to work on the international level to ensure that levels of protection are harmonized in order to make certain that the potential of the Global Information Infrastructure will be met. With regard to technology, the Green Paper recommends that where standards are needed, there should be no diminution of intellectual property protection in the standard setting process. And finally, with regard to education, the Working Group will sponsor another conference, following the fair use conference, on intellectual property education. And the purpose of that conference will be to develop 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. And as with the Conference on Fair Use, participation in that education conference will be by invitation. But, as is the case with all of our proceedings, they will be open to the public. The hearing today will focus on these issues that I have just described and will give participants an opportunity to air their views on the preliminary report and its recommendations. Because of the number of participants, we have had to limit the time available to each speaker to a maximum of 12 minutes. This time limit is necessary to ensure that everyone wanting to participate will have equal time to present their views. And a list of the participants has been made available in the entryway to the hall. This schedule gives approximate times, so we would request that anyone who is going to be a speaker be prepared to speak either a half-hour earlier or a half-hour later than the time on the schedule. And I note we have already had one modification -- one person who is on the schedule who will not be appearing. So that means that we will be moving up a little bit. In order to facilitate the timely proceeding of the hearing, we would request, particularly since this is a very vast room, if the people who are going to testify would kindly move up to the front part of the room so that we don't have to wait for a half-hour while they walk from the back of the room. And when you begin your testimony, it would help us a lot if you would identify yourself, give your name, and organization, if any, which you might be representing. Now there is a computer screen down here, which you will see when you get up to the podium, and when the screen is green that means that you are free to start talking and present your testimony. That green screen will be on for ten minutes, and then at ten minutes it will turn yellow and that means you have got two minutes left, and then it turns red at the end. And we would really like it if you would conclude your comments at that time so that we can be fair to everybody else who is waiting to testify. If you can complete your remarks in less than 12 minutes, it would be nice for us because, and we found this true in the other hearings, we would very much like to have a dialogue, if we can, with the witnesses. Sometimes we even have to go over the 12-minute period where we have got burning questions that we have to ask, but obviously it helps to keep us on schedule if we can use up part of the 12 minutes for that purpose. The Working Group also may want to submit written questions later on if there is something we don't feel we can fully flesh out here. So please be prepared for that. Now, if you have any questions about the hearing or wish to submit any written statement in addition to your oral statement today, I hope you will please contact Michael O'Neil, who is seating right there. Will you stand up, Michael, so people can see you in the intermissions and what not? And transcripts of the hearing will be available, by the way, in approximately two weeks. Copies of written comments that have been submitted are available for inspection in the Scientific and Technical Information Center of the Patent and Trademark Office which is in Room 2C01 at 2021 Jefferson Davis Highway in Arlington. Now you can call Michael O'Neil, whom I just introduced, about more information about obtaining copies of the comments or the transcripts, and his telephone number is 703-305-9300. And his fax number is 703-305-8885. I would like to thank particularly the person who is sitting here on my left, Terri Southwick, who is an attorney with our office and more than any other person is responsible for the drafting of the first phase -- on behalf of the entire Working Group, which consisted of over 20 federal agencies -- of our Green Paper, and she has done an excellent job. And her number is the same as Michael O'Neil's, and if there is any substantive issue that you would like to take up, she is the person to talk to about it. As I indicated, the Working Group -- I would also like to -- I think Ruth Ford is here. If Ruth would stand up, please. If there is any press interest in this or media interest in it, Ruth Ford will be the press contact. As I indicated, the Working Group consisted of representatives from over 20 federal agencies, some of whom are also here today with us on the panel. Have no fear if they are not here they will be able to review the transcript. I want to -- some are in the audience. If those people want to come up here and sit in some of these chairs that are available here, you are welcome to do so. If you are too shy and don't want to ask questions, you don't have to do that either. But obviously, when we were out in Los Angeles and Chicago, since we are all very concerned about reducing federal expenditures, we didn't cart 20 or 30 different people over there with us. So those people will be reading the written transcript and many of them aren't here today also. So I would like to take the opportunity, though, to let the other people who are up here on stage today who do represent some of the other agencies to identify themselves, starting with Mark Bohannon. MARK BOHANNON: Thank you, Commissioner. My name is Mark Bohannon. I am the Chief Counsel for Technology at the Department of Commerce. IRA SOCKOWITZ: My name is Ira Sockowitz. I am the Special Counsel for the General Counsel in the Department of Commerce. DIANE MARKOWITZ: My name is Diane Markowitz. I am with the Office of Intellectual Property of the U.S. Trade Representative. KENNETH DINTZER: My name is Kenneth Dintzer. I am with the Antitrust Division of the Department of Justice. MR. LEHMAN: Does anybody else want to identify themselves, or do you want to be anonymous that is in the -- Michael, why don't you come up here and sit with us. MICHAEL SHAPIRO: Michael Shapiro of the National Endowment for the Humanities. MR. LEHMAN: Oh, I see. You have to get back to work. PHYLLIS HARTSOCK: Phyllis Hartsock, Deputy Chief Counsel, NTIA. MR. LEHMAN: I guess others will be in and out throughout the day. But that gives you an indication that this is not totally a Commerce Department project. We have involved everybody throughout the Federal Government who has an interest in this subject. The CIA people, I assume, aren't identifying themselves. With that, I would like to take the opportunity to ask our first witness to come forward, and that is Jack Valenti, President and Chief Executive Officer of the Motion Picture Association of America. Welcome, Mr. Valenti. JACK VALENTI: Where do you want me? MR. LEHMAN: At the podium, please. MR. VALENTI: Thank you very much, Mr. Secretary. I would like to compliment you all, you and your Working Group and Ms. Southwick, for the work that you have done in crafting this document. I think it is first class in every respect. I think it lays a very sturdy groundwork for a free, competitive, and workable National Information Infrastructure or highway, however you choose to designate it. So this Green Paper is first class. I don't know why all papers are green and white. Why not have a blue paper or a burnt orange paper? But let's try and do color next time, Mr. Secretary. I think what this Green Paper does illuminate, though, is that while magic new technology is going to be invading our landscape, not only here but around the world, technology is really a transport system. It is kind of like a flatbed truck. If you are driving down the highway with a flatbed truck that is carrying gold bullion, it is a very valuable cargo. If it is carrying garbage, it is not so valuable. And I think what this portends is that people don't buy wires and digital and head ends and all of the technology in its arcane form. What they buy and subscribe to and want to have come into their home is programming that they want to see, when they want to see it. Now there is no question that programming arises from creativity, and creativity's life is nourished by copyright. Without it, there would be stillbirth. And I think that it is a given that huge private investments are going to be required to give shape and form to this highway or this infrastructure. Governments, in my judgment, can't and ought not be using taxpayer funds to do this. Private investment is going to have to build it. But no one is going to invest any private money in something that they think they are not going to get some kind of a worthy return. And that means that copyrighted program ought to be and must be protected in the fullest sense of the word, which this Green Paper underscores very staunchly, I must say. Now, as far as we are concerned -- motion pictures, television, home video, and all the accouterments of those three elements that, who knows what will appear in the future -- I can state to you very simply what those goals are. And I might say they are confirmed, solidified, and endorsed by the Green Paper. And that is, number one, that the copyright law is, as you just said, fundamentally sound. Now, it is going to require some adjustments like protection for digital sound recordings, but legislative change in copyright should be handled much the way a very old man approaches his new bride on the wedding night -- with caution and apprehension. And I think that we need to keep that in mind. We dare not devastate, in my judgment, the statutory underpinnings which have, I think, from which spring our dominance of worldwide intellectual property. Number two, there has got to be security. A copyright has to be protected. Privacy measures, including anti-copying devices, have to be there or else creative material, the worth of it, will shrink rapidly if everyone can copy at will what they choose to. And three, I think this National Information Highway Infrastructure is genetically connected to the Global Information Infrastructure. And other nations ought to be encouraged to develop their own technological magic along the same lines as the United States. Roadblocks, restriction, trade and hedge rows, about which you are most familiar, are planted in front of us all over the world now like a thicket that we have to hack through with a legislative and governmental machete. We have to discard all of that. And I think you and your group are taking the lead in it. As far as we are concerned, too, I think that we believe in competition. We believe in access or market access. There ought not be anybody's hand on a funnel that is choking off so that other people can't get in. Access must be accorded to all in a free and competitive environment where the ultimate arbiters of what people want to see, choose, buy, and subscribe to are audiences, families, citizens. I am really quite fascinated in what I am saying up here and I could keep going for the rest of the 12 minutes, but I am stating very simply what we believe in. I embrace, and my colleagues and I embrace this Green Paper. We think, as I said in the beginning, it is first class and I salute everyone who had any part in it. And whatever we can do to make sure it finds its way through Congress and through the Chanceries of the World, we are anxious to do. And I think then we will have achieved the goal that Vice President Al Gore has set out for all of us, to which we subscribe and to which we want to attend in the future. Thank you very much. MR. LEHMAN: Thank you very much, Mr. Valenti. Last Friday in Los Angeles, one of the witnesses suggested that maybe we hadn't gone far enough on our recommendations -- regarding requiring anti-copying technology to be included in recording devices. We, in the report, do recommend that anyone who tries to defeat this technology be subject to copyright infringement claims, but we don't specifically mandate that some kind of SCMS system or something like that automatically be included in anything that can record a copyrighted work. Do you have a view on that? Should we consider that possibility? MR. VALENTI: Yes, I do, Mr. Chairman -- or Mr. Secretary. We are going into an age of technology that is both abstruse and magical. And no one today can tell you where it is all going to go. I have no idea. I asked one of the wisest men in our business -- I said, "Where are we going to be in five years?" He said, "Hell, I don't know, but I am positioning my company to grab hold of whichever curve is rising." Inherent in all of that is the protection of what you have created. And when you get into things like digital where the one thousandth copy is as pristine and pure with the same fidelity of sight, sound, and picture as the first copy, you are dealing with both a piece of magic and a piece of evil as far as creative people are concerned. I believe that the insertion of anti-copying legislation is an absolute must in the future. It is the only way you are going to be able to protect the worth and value of copyrighted material with all of this new invasion of magic, the like of which we simply can't forecast. MR. LEHMAN: That would not particularly, if we did that, stop people from still having full access to public domain works, would it? MR. VALENTI: I think that public domain means the copyright has run out. I am talking about material which is under copyright, which means it belongs to someone. An automobile belongs to someone. Someone can't come into my yard and take my car out and drive it for two weeks and bring it back to me, anymore than you ought to be able to use somebody's creative work without compensating them in some fair and equitable manner. MR. LEHMAN: Thank you very much. Does anybody else on the panel have any questions? MR. SOCKOWITZ: Mr. Valenti, I understand the need -- would you advocate in your belief for the need to protect these works from copying that every piece of machinery contain a device to prohibit the copying, such as serial copy management techniques? MR. VALENTI: I am not ready to offer you any specifics at this time because we are looking at this very, very carefully. When you are dealing with analog, it is one thing. When you are dealing with digital, you are on a totally different planet. And therefore, we have to be very careful about that. And I am hopeful that we are going to be able to present to you, Mr. Secretary, and to the Congress at the proper time, some specific ideas of how we ought to deal. I think this is going to be a problem of extraordinary dimensions in the future because digital is the newcomer on the scene and we ought to deal with that before digital actually is present and there are millions of digital machines around or digital transport systems and whatever. As you know now some of the telephone companies are going to be transporting digitized material to television sets and once they hit the set, then they drop off into analog where they can come through the set. This thing is crawling and crowding with problems that have to be looked at very carefully. And I would hope that, Mr. Secretary, you and your band of experts would join with us in trying to figure out how in the world are we going to protect the future of copyrighted material. MR. LEHMAN: Anybody else? If not, thank you very much. MR. VALENTI: Thank you very much. MR. LEHMAN: Next, I would like to call John Kelly, Vice President of Consumer Services, Recording for the Blind from Princeton, New Jersey. JOHN KELLY: What an eloquent first address. It is going to be hard for me to follow that. But the issue is equally impassioned, even if my remarks will not necessarily come across that way. Good morning. I am John Kelly, Vice President of Recording for the Blind. With our national headquarters in Princeton, New Jersey and 30 sites around the country, RFB is a national, non-profit, voluntary service organization serving as the educational library of America's blind and severely learning disabled for school-age, college, and graduate school students and working professionals. Thank you for the opportunity to speak this morning. I have submitted written remarks to the Green Paper and I refer you to that for a statement or for a discussion of the disability aspects of the NII. I would like to confine my words this morning to just two points, one more general and one fairly specific. But before I begin, just a word on Recording for the Blind by way of background. Recording for the Blind is the nation's largest educational library for the blind. We are serving individuals who are not just blind, but in fact all individuals who cannot read standard print because of a visual, perceptual, or other physical disability which prevents them from reading the printed word. Recording for the Blind focuses on reproducing and distributing, with permission, already published materials in accessible versions , standard recorded audio, and now increasingly electronic digital text for use by people with print disabilities on personal computers with adaptive equipment which will with speak back synthetic speech, create electronic Braille and screen character enlargement. Over 70,000 students and working professionals actively use our services. We are, in all modesty, the library for people with these disabilities. This year alone, Recording for the Blind will lend for free or on a non-profit basis over 225,000 copies of accessible versions of publishers' texts to over 40,000 print-disabled individuals. Needless to say, RFB works closely with copyright holders and relies on excellent relations with the educational publishing industry. My first point, more of a general nature on the NII, is this -- the advent of new information technologies obviously offers all individuals remarkable opportunities for access to an increased volume and altogether new types of information. At the same time, the introduction and consideration of new information systems affords our society the essential opportunity to respond to the needs of individuals with disabilities. In particular, we as a society are required ethically, philosophically, and increasingly legally to consider and provide for equally efficient and effective modes of accessed information for the hundreds of thousands of American students, professionals, and members of the general population who cannot read standard print. Clearly, we need an NII environment in which the manufacturers and owners of intellectual property are comfortable with the protection of their material. The greater of the assurances of protection, the freer the flow of information and the greater the benefit of all end users. However, as systems are developed to protect the copyright holder's material, we cannot afford to add further layers of inaccessibility to people with print disabilities to that information. Graphical user interfaces, for example, already pose significant problems for people with print disabilities in the use of electronic text. Nor can we allow ourselves to miss this excellent opportunity to improve the availability and flow of accessible information to people who cannot read standard print. RFB, for example, in partnership and coordination with other groups in the disability community and with the commercial publishing industry is already playing a leading role in the creation of international standards for accessible document design, the development of a national repository for electronic text information for people with print disabilities, the research and development of ways to represent scientific and mathematical notation in an accessible electronic form, and the work with the publishing industry to assure that accessible versions of texts are available when needed and that the intellectual property of the copyright holder is protected. As progress is made in developing guidelines for NII use of copyrighted works, we must assure that the requirements of efficient and effective accessible format production and distribution are equally provided for. And just as clearly, if this awareness raising happens at the outset, the resulting outcomes will flow much more smoothly. To paraphrase the Working Group's draft language on fair use, I would say -- as more and more works are available primarily or exclusively on-line, it is critical that print-disabled researchers, students, and members of the general public have opportunities on-line equivalent to the current opportunities available to non-disabled individuals off-line to browse through copyrighted works in their schools and libraries. My second point, and that on the very specific level, is one I said yesterday. In fact, I would like to reiterate what I said to the guidelines conference. RFB shares with the Working Group significant concerns regarding the ability of the limitations on copyright owners' exclusive rights to provide the public, including the print-disabled public, with adequate access to copyrighted works transmitted by way of the NII. With a few notable exceptions, which I cited yesterday, those being the hardware and software publishing communities and the school publishing communities, access to permissions and electronic source files for the production of accessible electronic versions of texts for use with electronic Braille, synthetic speech, and screen character enlargement has been lacking. Until accessibility for people with disabilities is built into the publishing process up front, that is until publishers provide for or produce their own Braille, large print, and audio compatible versions, the non-profit producers of these accessible versions must be given the opportunity of fair use to make what are otherwise totally inaccessible print books available to a population which has little or no use for the printed word, including the electronically printed word. Specifically, voluntary guidelines or only slightly modified legislation for fair library or educational use must be extended to include exemptions for libraries for the blind and print-disabled. The technology and use of which most often requires the reproduction and distribution of electronic copies for use in the production of Braille, synthetic speech, and screen character enlargement. Sufficient controls and safeguards barring unintended use through non-profit distribution, the assurance of no competition with print sales or electronic license rights, a closed population of registered certified disabled individuals, and restrictions for use with Braille, synthetic speech, and screen character enlargement are easily agreed to. The Working Group already sees that people with economic disabilities should not be barred from the NII. I would have you expand that understanding to include people with print disabilities as well. What we are dealing with is really very simple -- accessible versions of information to people with print disabilities at the same time, with the same ease, and on the same terms of availability as is accorded to the general population. Again, thank you for this chance to speak. I will be glad to answer any questions. I know that while disability awareness is critical to our Federal Government and our whole nation that the presence even, or an understanding of what agencies serving print-disabled people with library materials, that understanding has not been generally made known to the Department of Commerce, and I think that is partially our fault as well. But again, I am glad for the chance to answer questions and work with you. MR. LEHMAN: Thank you very much, Mr. Kelly. This problem basically is a generic problem. It doesn't -- it may have a new dimension with the digital context, but right now, obviously, there is a great need and a need which has been fulfilled for many years to turn print works into Braille works. I am not aware that there is any kind of -- in fact, I am not aware of a single fair use case. There is nothing in the statute about that. How does that work now and does that work well now? MR. KELLY: In the current non-electronic environment, accessible format production, Braille, large print, and analog recorded audio, and increasingly digitally recorded audio follows the standard with-permission process. The publishers have traditionally been in the range of very happy to or grudgingly willing to consider this. We are not a big business for the publishers. In fact, we are not business at all. We are non-profit business. But publishers, very busy people as they are, often do not necessarily have the time to think through, "Is this a scary thing or not?" In traditional non-NII use, those permissions have been fairly forthcoming. When we enter the electronic text environment that willingness and awareness of publishers to think about this, especially in the very scary technological world now, has been not very forthcoming. As I said, the two exceptions are the hardware and software manufacturers. Interestingly, those who you would think have the most to lose have been the first and most forthcoming. We have blanket agreements for electronic text with IBM and Digital and Microsoft Press and Microsoft Corp. and Borlands and all those good hardware and software publishers. And the other exception is in the school environment where working with the individual publishers and with the AAP we have been very successful in arranging blanket agreements for accessible format production but using electronic source files from some of the largest publishing companies, the Addison Wesley's, the Scott Foresman's, the Harper Collins's. And we have negotiations going on with the other ones. It is in the electronic environment that we feel that there is a needed impetus because it is a scary environment. Publishers themselves don't know what is forthcoming in this environment and they often don't want to have to take the time to think about something as small as our use. MR. LEHMAN: Is part of the problem then that in the electronic environment there are so many publishers? It sounds like the big ones are working with you already. MR. KELLY: The big hardware/software ones and the big school ones are. Those are two small market segments. We are having terrible problems with the trade publishing companies and with other genre of materials. And specifically, this electronic technology offers us not only the opportunity to produce much more than we ever have but altogether new types of materials. We can bring reference works and academic journals and professional and scholarly journals into creation through this technology, materials which had never been available to any print-disabled person in any form before. And it is those areas, the reference publishers who just -- MR. LEHMAN: I want to ask another -- so we don't use up too much time. Just if I can have another follow-up question. One is it occurs to me that if there were some kind of clearinghouse, let's say at the Library of Congress, for obtaining these permissions, would that go a long way to solve your problem? MR. KELLY: And in that do I assume that the Library of Congress would have these permissions from all publishers in order to produce them? MR. LEHMAN: Well, this is just sort of a thought. And that is -- in other words, as an alternative to or in addition to expanded fair use doctrine or certain compulsory licensing, there would be established in the Library of Congress a clearinghouse where you could go to get permission and then the Library would at least hook you up or maybe contact on its own the publisher to help secure that permission. That would probably help an awful lot, wouldn't it? It would certainly indicate a public policy in favor -- MR. KELLY: I am reluctant to disagree with you because that is a nice model, but on the other hand our relations with the publishing community are excellent now. Publishers, if they are going to take the time to think about this is not too scary and they will give away the permissions, readily do so. Or we don't need a permissions clearinghouse. If the permissions are going to be forthcoming, the publishers are happy to give them to us directly. What we do need is greater awareness that these permissions should flow, not through a clearinghouse but directly, even. And I want to emphasize that publishers are educationally motivated and correctly and philosophically well-thinking. It is just an area of a lack of attention. And until -- the reason we are asking for these fair use guidelines or amendments is that until the time that they come around and realize that this is a way of doing business, we need to provide now adequate access to print-disabled individuals. Simply to get the materials flowing now. We have people who have been barred from access to information that the entire rest of the population has access to. And I am not saying the publishers won't come that way, but if they're not going to get there for another couple of years or another 10 years, then by that time hundreds of thousands of people are not having access to information. It is a real disability rights issue. MR. LEHMAN: Thank you very much, Mr. Kelly. Any questions? Thank you very much. Next, I would like to ask David Ostfeld, Chairman of the IEEE-US Activities' Government Activities Council and Vice Chairman of the Intellectual Property Committee of the IEEE, that is the Institute of Electrical and Electronic Engineers. DAVID OSTFELD: Thank you, Mr. Secretary. My name is Dave Ostfeld, as you said, and I am a volunteer. I speak for the Institute of Electrical and Electronic Engineers. The United States Activities Board, which represents approximately 240,000 engineers and scientists in the United States. There are others internationally. Of which those 240,000, about 80,00 work in this area. And I want to thank you for giving us the opportunity to come here today and talk to you. When I first started looking at my speech, I thought I ought to make an apology. The reason being that I looked at all the scholarly articles that had been written on your report and I thought my poor speech is almost not annotated, at least in the written form. And then I realized that as an engineer, the subject wasn't scholarly, the subject was, philosophically, what is the issue involved or what are the issues involved. And I am going to use a Far Eastern philosophical term that I actually used in testimony two days ago and that is, "Life is neddy neddy." It is not this and it is not that. And whenever you take a position that it is this or it is that, you usually run into life problems in trying to make those kinds of stands. Let me give you a couple of illustrations and obviously one of them today is going to become the re-opening of the Betamax case, but I will save that for a minute. The first one I would like to address is the issue of whether or not your report should address not only intellectual property rights, but the use of those intellectual property rights in causing virtual monopolies in some areas. And let me give you the prime illustration that we have and that is the increasing importance that we believe will occur in the NII for databases. The biggest producer of databases in the United States, I believe, is the United States Government, which can't copyright a thing. And they also, or at least our Congress doesn't appear doesn't appear to like to give away much money away these days. And what we have gotten into is a database creation by private industry in their own private search engines. And the only way you can get to many Government databases is through access through those search engines which are fairly expensive. We are certainly not saying do away with private industry and private search engines. If the NII is going to have any good at all, it has got to be private industry competing. But I would suggest to you that somehow we must make the Government databases raw data available on the NII to anyone who wants to be in competition on those databases, who wants to have a new plan or a new way of presenting it. And then let free competition take its toll. We are not advocating free access because we will never get the databases on the NII if we did. What we are suggesting is that a nominal, reasonable, cost-related charge be made for access to the Government databases so they can be put on the system and maintained on the system for access by everyone. The second example I would like to give today deals with time constants. Now this is one that is within your report, whereas the last one was not within your report. Time constants for innovation are shrinking, and algorithms and data itself are becoming more and more valuable, especially algorithms of change. We don't have any way to protect those at the moment. Like technology, the law must react. As the time affects the fast moving technology, expose the holes between intellectual property coverage that slower moving technology never knew were there. And what I am suggesting to you is, for example, technology moves so fast these days that a product life may have less physical time than the time it takes to get a patent. What that immediately does is it permits you to knock off that product, and especially if you have fast access to it on the NII. We are suggesting that perhaps it would be a good idea to review Item 4-A on page 20 of your report which concludes that no new forms of intellectual property are needed. We would suggest that for fast moving technology, maybe one or two are needed. And knowing the time constant of our Congress to anything radically new, I would suggest we are going to need a long lead time before, as you succinctly put it, we begin to feel the clothing get too tight on us with regard to restraints on the old intellectual property. Going on then, we do applaud your position on standards -- especially my committee and the intellectual property committee -- which are put on page 140, except for the conclusion about the antitrust guidelines. I don't think that conclusion is correct. We frankly think that if there is not a control of owners of standards by patent or copyright, who won't license and who participate in the process of standards, it is like setting the fox loose in the hen house. And we would therefore suggest that you perhaps legislate a misuse requirement into both the patent and the copyright statutes dealing with such knowing participation with the purpose being to guide a standard towards a monopoly position. By the way, in your Section 106(3) on page 121, we might have a suggestion on your definition there. Copyrighting standards for transmission raises the issue of is the transmission using the standard, the transmission of the standard. You may want to look at that language. We may be opening a previously closed door. Also, I am going to get into a little detail for a moment not in our written testimony. We believe an exception should be made to the amendment on Section 106(3) on page 121 in 109(a)(2) on page 125 if the copy transmitted is erased at the same time it is transmitted from the transmitting system. Also not in our written testimony, we believe clarification is needed for the definition of transmit on page 122. First, we think it should be harmonized with Section 106(3) on page 121, as amended. For example, is reproduction as used in the transmit definition the same as a copy as used in Section 106(3). Second, the word "fixed" may be inappropriate for the transmit definition as technology and speeds increase along the NII and as systems become smarter and more associative. We don't know how we think and I am not sure that in the next 10 to 20 years associative operations won't haze the definition of a fixed copy. Also, "place" is a peculiar word in that definition. Is a disk really a separate place from a RAM? No, no way. But what about how far ports have to be apart before they are really different places. Returning to the principle now of neddy neddy, not this and not that, and as I promised earlier in my discussion, the revisiting of the Betamax case, this time as a lawyer and not as an engineer speaking philosophically. I found the definitions, having fought through these criminal problems before in Congress, I found the definitions that you had vague from a civil point of view and I think unintentionally inhumane from a criminal point of view. And I keep thinking again of the father and the son finally having family time together because they can put them in the same cell in prison. I would suggest to you that that needs to be looked at. The IEEE-U.S.A. is not saying that free access to all data, which some people on the NII would say, is mandatory. As a matter of fact, we think we have a generation that needs to be re-schooled in the morals and ethics of theft. But at the same time, I don't think we should go quite as stiffly as you have gone in your current recommendation because we believe it will stifle technology as well as perhaps lead to prison situations that no one ever contemplated and indefiniteness with regard to copyright infringement that no one really wants when we are trying to move technologically forward and keep up with the rest of the world. We also believe that another review should be made of the copyright statutes with milder thoughts towards those who provide servers, or we may destroy the very persons we expect to build the NII for us. Their genius has carried the attempts that I personally as an engineer made before I became a lawyer in 1967, just trying to interface between computer systems to a high that I never really anticipated could happen in today's technology. And think what they can do with tomorrow. So I think if we burden them with inadvertent problems that they really can't control and don't give them a reasonable test and a reasonable way out, we may be cutting ourselves off from being technological leaders in the NII in the future. The rest of the suggestions, of course, in your very fine report -- and I do not mean to denigrate your report. I think it is a marvelous report. It took a lot of thought to go into it to come up with as great a piece as it is. The rest of the suggestions we certainly do support and ask only that you reconsider some of the ones that we have called out in this oral testimony, and we have a written testimony which we will update before the time period is over in order to further clarify our remarks. If there is anything we can do to help to deal with the technological issues, to give any advice, we will be more than happy to do so, either now or at any time you call on us. Thank you. MR. LEHMAN: Thank you very much, Mr. Ostfeld. I think you have made some very detailed recommendations and I think we are going to have to look at those in writing, and probably if we get back to you, at least from my point of view, it would be after the hearing. But maybe somebody else has some questions right now. Mark? MR. BOHANNON: Thanks. Dave, I was actually very interested in your comments on databases because I think that -- can you hear me okay? MR. OSTFELD: They were right. I mean, the first speaker, who I am used to seeing come up with a person who is much taller than he is when he comes on for the awards at the Academy Awards, said it right. This is a terrible room for acoustics going that way. MR. BOHANNON: My apologies. Let me try to talk more slowly then. I am very interested in your subject of databases, as I think the level of public discussion on the subject is at a very infinitesimal level right now. We need to have a much deeper discussion about how we do that. I may get back to you with some additional questions on that area, and particularly about rather than seeing this as just Governmental or just private sector, a challenge to you, the IEEE, the people you work with, to think about how we could think more creatively about public/private partnerships in this area and perhaps even joint ventures that build on what inevitably must be a commercial advantage to getting the information out while achieving and benefiting the taxpayer's investment originally in the materials that were produced. I think it is an area that needs a lot more discussion, and we may be having some follow-up questions with you in that area. MR. OSTFELD: I would be happy to try to field any we can and especially get into this area of change becoming the rule instead of the exception in today's marketplace. MR. DINTZER: On that subject, is it your suggestion that -- just so that I understand it a little better -- that the Government put raw data without any sort of search mechanisms or any sort of annotations or that they actually put a more structured -- a structure out there so that people can do searches just through the Government data? MR. OSTFELD: Obviously, any data file is going to have some organization associated with it. We are not talking about compression algorithms. I am not talking about anything more than simple data files. So that everyone knows what the fields are in the files. And then let private industry as a whole have access to it. Some people are going to have superior ways of organizing and presenting their data. Those people are the ones who are probably going to succeed and other people are going to use their private database entry systems. You call them -- you know use the server to call them instead of using the server to call the big data bank in the sky. But others are going to want to get to that raw data and have expressed it in our committee in the past in at least three different databases. And so what we are advocating is we need that entry. We need that entry to the big database in the sky that is there somewhere, maybe not even necessarily encoded except to these private engines. So the answer to your question is yes, access to the raw data. MR. LEHMAN: If there are no other questions, thank you very much. Next, is Sandra Walker here? If you would come forward please -- Sandra Walker, President of Visual Resources Association. And she is a Visual Resources Specialist in the Department of Art at the University of Tennessee. SANDRA WALKER: Good morning. And I hope you will forgive my voice this morning. Can you hear me? My name is Sandra Walker, and I am here today as President of the International Visual Resources Association to comment on the preliminary draft document. The Visual Resources Association is a group of over 700 professionals located in the United States and 20 foreign countries including slide and photograph curators, film and video librarians, media professionals, photo archivists, slide and microfilm producers, rights and reproduction officials, photographers, art historians, and others concerned with visual materials. As professionals associated for the most part with universities and museums which utilize visual resources in education, we are vitally concerned with the issues of copyright and fair use for teaching and scholarly research. While I believe this document is an excellent summary of existing copyright law applicable in the United States, I think the Working Group has not fully considered the implication of networking as it relates to class use by non-profit educational institutions. I am speaking in particular about distance learning applications as opposed to traditional face to face classroom situations. There is no exploration of how networked materials might be handled in relation to fair use guidelines and whether this type of use might even be considered to be fair use. Public performance, distribution and the first sale doctrine are mentioned, but not in relation to the application for non-profit organizations in a networked environment. As an example of how materials might be used in a networked environment for distance learning, an art history professor physically located in a university might wish to relate images of art works and related text to students physically located at other sites. Will this use of the information infrastructure be construed as fair use or copyright infringement? I feel that more attention needs to be devoted to implications of utilizing still and motion images as well as sound described as photo records in the draft document and so-called multimedia. As noted in the draft document, the term multimedia has different meaning in copyright law than the term has for educators and consumers. Educators and consumers generally accept multimedia to designate digital and/or analog materials from a variety of sources that range from sound and still and motion images linked together via computer interfaces that allow the user to utilize the multimedia program in a sequential order and sequential way. In some cases, it is technologically possible to gather images and/or text from so-called multimedia productions and create new multimedia productions or new reports. Does this type of use by non-profit educational institutions fall within fair use guidelines? How is usage affected by public performance rights or first-held doctrine? How will usage and innovation be monitored and controlled to protect intellectual property rights? Comparison of illustrations for scholarly research and teaching which are becoming available via the National Information Infrastructure need to be considered. Present copyright law includes various guidelines which are too restrictive for study of art works because pictorial, graphic, and sculptural works are excluded from the CONTU guidelines and because classroom guidelines limit fair use of illustrations to one illustration from any one source. This concept is also too limiting in other areas of study and research as the limitation of illustrated material could limit a scientific comparison of charts and diagrams, comparison of cultural diversity topics and illustrative materials which illuminate the study and research of historical topics. Comparative study and research fosters even-handed teaching rather than the promulgation of biased viewpoints. As described in the preliminary draft document, electronic transmission via the National Information Infrastructure or indeed the Global Information Infrastructure constitutes a copy or reproduction of the work transmitted as the information resides digitally within the user's computer. How does this definition of transmission and the subsequent copy affect usage of materials in non-profit educational institutions for teaching and scholarly research? As a pertinent analogy, if teachers wish to utilize a video tape in their classroom, the institution should purchase a copy of the video tape. When that video tape has been shown enough times to degrade the image quality, the institution must then purchase a new copy of the video tape. If a teacher or some institutional representative such as the librarian receives a computer transmission and therefore a copy according to the draft document definition of visual images and/or text, the digital quality of the image is retained and conceivably could be used indefinitely for teaching and scholarly research. How would this type of usage affect intellectual property rights and fair use guidelines? Both Vice President Gore in his speech in Buenos Aires in March of 1994 and Secretary of Commerce Brown in his New York City speech in April of 1994 mentioned as one of the goals for the year 2000 a network to connect every classroom, library, hospital, and clinic in the United States to the information highways, to connect every school and library in the world to the Internet, thus creating a "global digital library." If the definition of digital transmission constituting a reproduction or copy is allowed to stand, then these libraries and schools run the risk of infringing copyright when patrons browse the information, whether text or visual, that is becoming available in the "global digital library." This definition will also inhibit scholarly research and discussion in classrooms rather than the technology bringing images and information to classrooms that were heretofore available only to students who traveled to museums and other sites where original art works are located. As professionals associated for the most part with universities and museums, the Visual Resources Association is concerned with affordability of the information, whether textual or visual, which will become available on the National Information Infrastructure. We agree with the statement in the draft document that "some reasonable approach must be adopted to insure that the economically disadvantaged in this country are not further disadvantaged or disenfranchised by the information revolution. Public libraries and schools and the access to information that they provide have been important safeguards against this nation becoming a nation of information haves and have nots. We must insure that they continue to be able to assume that role." I would add that the members of our organization believe that compensation for intellectual property rights should not prohibit the use of visual of textual materials for teaching and scholarly research. Various guidelines and/or statutory changes to copyright law must be enacted to encourage rather than limit the development of on-line public access catalogs and dissemination of information for scholarly research and teaching in non-profit educational institutions. While most of our membership is located in institutional libraries or departments which specializes in image of art works, visual images are not limited to art classes, but may also be used in history classes, English literature classes, anthropology classes, classes exploring cultural diversity, and others. We feel that information on the National Information Infrastructure, whether visual images or text, should be available to benefit the broadest spectrum rather than an elite group of users. I appreciate the opportunity to comment on the draft document and look forward to more information from the Working Group. And again, I apologize for my voice this morning. MR. LEHMAN: Well, I am very sorry, and if it is too difficult to answer the questions, maybe we could respond in writing. MS. WALKER: If you have some questions, I welcome them. MR. LEHMAN: Does anybody have any questions? You raised a number of very significant issues and I know you were involved in our fair use conference yesterday and will continue to be involved, and I think we obviously would like, to the extent that voluntary guidelines are possible, to see them flushed out by the parties involved to develop an understanding of how the existing fair use doctrine applies to this area. To the extent that there are statutory changes that need to be made, then obviously that is something that is appropriate for the Working Group to consider and to recommend ultimately to the full Task Force and to the Congress, and we will undoubtedly be back to you with further questions to follow up. Thank you very much. MS. WALKER: Thank you. MR. LEHMAN: Next, I would like to ask Mr. Cy Coleman to step forward. Our notes say composer -- I should say world famous composer -- and member of the ASCAP Board of Directors. CY COLEMAN: It's not a whole book. It is wide print. Good morning Commissioner Lehman and members of the Working Group. My name is Cy Coleman and I am a composer. I am also a member of ASCAP and Vice President of ASCAP's Board of Directors. I appreciate the opportunity to appear before you today to discuss certain aspects of the preliminary draft report on intellectual property of the National Information Infrastructure. I have been involved with music all of my life. I have been fortunate enough to see my work gain recognition and popularity. I composed several pop standards such as "Witchcraft" and "The Best Is Yet To Come" before I began writing extensively for musical theatre. My first Broadway musical score "Wildcats" starred Lucille Ball and introduced Hayliff Meauthor. Later, I composed the score for "Sweet Charity", which included the songs "Big Spender" and "If My Friends Could See Me Now." My other musicals include "Seesaw", "Little Me", "On the 20th Century", "I Love My Wife", "Farming", and more recently I wrote the scores for "City of Angels" and the Will Rogers Follies. I have been honored with a number of Tony's, Emmy's, Grammy's, and an Oscar nomination. I am one of the few composers lucky enough to make a good living at my craft. A significant part of that living has come from public performance royalties collected and paid to me by ASCAP. In general, performing rights royalties account for about two thirds of all income to writers and composers of music. This revenue stream is vital to the continued viability of America's community of composers, whether they write pop, rock, country, rhythm and blues, Broadway, film, television, gospel, jazz, big band, Latin, symphony, rap, concert music, or all of the above. I am very enthusiastic about the opportunities presented to all of us by the information superhighway. I believe that the Working Group's labor on the preliminary draft is very good. It represents the timely recognition of the need to identify the challenges presented by the NII and to adopt our current copyright law to serve the new relationships between the creative community and the community of users which will develop as we race down the information superhighway. The Working Group has sought to strike a careful balance between the needs of users to access and utilize information which includes creative works and the rights of the creators and owners of those works to be fairly compensated for their use. The Working Group has gone a long way to achieve its goals to put America on a sound footing for the information future. However, one element of the preliminary draft concerns me. As I understand it, the recommendation is that when a musical work is transmitted in digital form and received in the user's computer without being simultaneously heard at the time of the transmission, the musical work may be deemed not to have been performed. Aside from being inconsistent with existing law, I fear it might all but eliminate the performing right for musical works transmitted over the NII. When a broadcast entity or cable system transmits a performance of a musical work and publicly performs that music, whether or not anyone is actually watching or listening to their television sets at the time, even if every viewer or subscriber is taping the program to be watched later rather than watching it at the time of its transmission, the music has been performed. If any of my songs were contained in any of those transmissions, I would expect to be paid a royalty for that performance. I see no reason to change this practice. Should the performing right I have always had in my musical works be eliminated merely because new technology in the form of NII is at hand? My creative effort and work remain the same. Eliminating the right to receive performance royalties would benefit no one and would seriously impair the ability of writers and composers of music to earn their living from exploitation of their works. The preliminary draft report also recommends that the existing distinction between the distribution right and the public performance right in musical works should be paved over on the information superhighway. The preliminary draft suggests that when a transmission of a musical work over the NII is both a performance and a distribution, the transmission would be considered either a performance or a distribution, but not both even though both rights are used. This recommendation contradicts the existing copyright law which grants the performing right and the distribution right independently, and it will confound the long established practice in the music industry whereby creators and owners of copyrights and music separately licensed performing and distribution rights. There are two problems I see. First, creators may well be denied performing rights royalties upon which we have come to depend for a significant portion of our income. Such a practice would jeopardize not only today's composers and authors but would seriously endanger the future of young American composers. The second difficulty I see is that the proposed change will severely disrupt the music industry. Right now, performing rights and distribution rights for musical works are separately licensed, and this system works well. It has adapted to changes in technology for the past 100 years and will continue to do so. The effects of the preliminary draft have perhaps not been sufficiently considered. As I said before, I am sure that it doesn't mean to have an adverse impact on the creators and publishers of music and I believe eventually the consumer. I am sure that is not the intention. Indeed, I am encouraged by Commissioner Lehman's remarks to the 39th Congress of CISAC on September 19th, 1994. He emphasized the fact that the Green Paper is a preliminary draft which will benefit from input by all parties. I commend the Working Group for its approach in this regard, soliciting oral and written comment from all sectors. Furthermore, as I understand Commissioner Lehman on Monday, the recommendations in the Green Paper were not intended to negatively impact the existing performing rights of creators and copyright owners. On the contrary, our interests through performing rights societies must be protected, in Commissioner Lehman's words, "kept whole", and become the basis for growth in the next century. Rather than changing established practices for the NII, the patterns and practices which prevail in other media which transmit musical works should continue. Every transmission of a musical work to the public on the NII should be recognized as a public performance or display of that music. As I said when I began, the preliminary draft generally and properly attempts to strengthen protection for copyrighted works carried on the NII. I hope the framers of the Green Paper continue to examine these issues so that American music can continue to enjoy the popularity and esteem it has throughout the world today, a popularity which was earned only through the talent, dedication, and hard work, not to mention the need to eat, of the people who work in music. Thank you. MR. LEHMAN: Thank you very much, Mr. Coleman. I assume that you receive part of your income from the exploitation of mechanical rights as well? MR. COLEMAN: Of what? MR. LEHMAN: From mechanical rights? MR. COLEMAN: Yes. MR. LEHMAN: And the -- I think you have correctly characterized what I think was the Working Group's position and my position that there was not an intention to erode existing performance rights. What there was -- what is reflected in the issue of distribution by transmission, however -- was really an attempt, I think, to make certain that the capacity to exploit mechanical rights would remain. So I would like to ask you a question. Let's assume for purposes of argument that a transmission could be both a public performance and a delivery of a copy of a work. At the present time, when a copy of a work is delivered to a customer, that triggers the mechanical license. And I am assuming that you are not opposed to that, are you? You are not opposed to the capacity to receive mechanical rights as revenue when copies are delivered? MR. COLEMAN: What I think is that there is -- I am upholding the idea that there is a performance right and a distribution right. So that is it exactly. MR. LEHMAN: Thank you very much. Does anybody else have any questions? MS. SOUTHWICK: You noted that when a musical work is broadcast, that it is considered a public performance whether or not there are any end users who are actually listening to it. Is that correct? MR. COLEMAN: I said if the public performance is over television. MS. SOUTHWICK: Yes. MR. COLEMAN: And if somebody is there or they are not, it is still a performance. You know I perform for very few people myself. MS. SOUTHWICK: Right. But in that case, the work is capable of being heard if someone simply turns on their machine. Do you think that when the work is not capable of being heard, when it is simply distributed or disseminated through a wire and downloaded onto some device --whether it be a computer or other device for storage -- and there is no capability of hearing it through that transmission, that that should also be a public performance? MR. COLEMAN: That is a public performance, in my estimation. It is performance, whether it be heard later or not. When that performance comes through, that is a public performance in my estimation. MS. SOUTHWICK: Simply because it was delivered through a wire? MR. COLEMAN: Well, through a wire and sometimes through the air. However -- MS. SOUTHWICK: No, but my point is that when I buy a CD at Kemp Mill Records and it is distributed to me, there will be a performance eventually. MR. COLEMAN: But when you buy the CD, that is not the performance. You don't need a performance in a record store. MS. SOUTHWICK: Pardon me? MR. COLEMAN: In the record store, you don't need a performance. You can buy the record. MS. SOUTHWICK: How does that change when I am buying it through a wire? MR. COLEMAN: Because the performance has been given. The performance is there. MR. LEHMAN: Anybody else? Yes. MR. SOCKOWITZ: I would like to follow up on Ms. Southwick's point for a second. Perhaps I can just elucidate the point she was trying to make, because I think we have the same question. The question is, if we move more toward electronic commerce and some artists are already putting their works on the Internet, now currently usually free for sampling, but if we move towards electronic commerce and the record companies control the distribution, say through the advent of digital signaturing, then the delivery of the work itself may come electronically. So instead of Ms. Southwick having to go to the store to buy her CD, she can order it and it is transmitted modem to modem or server to remote PC, but it is in strictly binary form during its transmission -- which you don't hear through your PC or your speakers at the time you order it and receive it. How is that a public performance? MR. COLEMAN: Well, I am not a technician. And I can tell you this, that a performance is something that is done. And when a performance is there, I believe no matter how you wait or how it eventually resolves itself, that performance is there. MR. LEHMAN: Any other questions? Thank you very much, Mr. Coleman. MR. COLEMAN: Thank you. MR. LEHMAN: We really appreciate your coming. Our schedule at this point calls for a break and I would propose that we return -- well we have here 10:48. Why not round it off to 10:50. (Whereupon, at 10:32 a.m. a recess until 10:48 a.m.) MR. LEHMAN: Is Mr. Willis here? Michael Hoffman from the Department of Energy has joined us as one of the people who has been working on our Task Force. ALFRED WILLIS: My name is Alfred Willis, and I too am losing my voice. I am sorry about that. I am the head of the Arts Library at the University of California, Los Angeles. I am also the editor of Architronic, the Electronic Journal of Architecture, produced and distributed since 1992 by the Kent State University School of Architecture and Environmental Design. As a member of ARLIS/NA, the Art Library Society of North America, I am grateful for the opportunity afforded me to comment today on behalf of that society on the preliminary draft report. ARLIS/NA is a professional association of some 1,400 art librarians, visual resources curators, and dealers in both current and out of print publications in the arts. Our librarian members work in academic, public, museum, and private sector libraries, archives, and visual resources collections of all sizes. Many of these members work for and in institutions that are simultaneously major consumers and publishers of art information. The users of our members libraries and publications include not only students, teachers, curators, and practitioners of the arts and their history, but also their counterparts in practically all other fields of study as well as the general public. Arts information has a universal appeal and often contains imagery relevant to historical, analytical, or theoretical inquiry in areas as disparate as literature, drama, history, medicine, astronomy, sociology, anthropology, and film production. Recently, many members of ARLIS/NA have experienced increased demand for the materials they manage, especially images from authors and publishers of digital multimedia works. At the same time, we are experiencing strong demand for the delivery of digitized images and text from our core user group of creative artists and art historians. Not surprisingly, therefore, ARLIS/NA has a special appreciation for the potential of the NII for the difficulty of the task with which the Working Group on Intellectual Property Rights has been charged and for the urgent need for resolution of the issues raised by the Working Group if we are to sustain the cooperative partnerships between producers, distributors, and consumers of arts information that ARLIS/NA believes to be largely responsible for the notable richness and usefulness of North America's art libraries. Generally speaking, ARLIS/NA concurs with the comments on this preliminary draft report made earlier by the American Library Association and the Association of Research Libraries. In particular, we agree that the recommendations made in this report with respect to copyright of works distributed by transmission must be reconsidered because they are skewed in favor of copyright holders without simultaneously granting limitations to balance reasonably the purely financial interests of those holders with the interest of the public at large. By the public at large, I mean not only consumers of information disseminated by transmission, but also the authors of that information when they are no longer the holders of copyright to the works in which it is expressed. Authors generally have an interest in principle and often indirectly gain financially from the broadest and quickest possible distribution of their discoveries, opinions, or aesthetic inventions, as by the lending or subsequent sale at lower cost of books and journal issues. Publishers should be able to make a reasonable return on the first sale of material published by transmission without depriving readers and many authors of the benefits deriving from subsequent distributions essentially from the first sale doctrine as it is operated in the print environment. ARLIS/NA believes that precisely because publication can and already does take place by transmission, work so-published must be subject to exactly the same copyright provisions as similar works published by any other means. ARLIS/NA enthusiastically concurs with the concerns put forward just a little while ago by the International Visual Resources Association. Sandra Walker called attention particularly, and I would repeat, to the need for the Working Group further to study the implications of digital multimedia products and of ways to increase the effectiveness of educational applications of visual materials made possible by computer technologies. ARLIS/NA also endorses the call made by other groups for a second national commission on new technological uses of copyrighted works. Such a commission could investigate systematically the issues raised but not yet resolved by the Working Group in the light of results of actual experiments and technology and policy in real library and other settings. ARLIS/NA will not be the first to congratulate the Working Group on having produced an excellent summary of U.S. copyright and related law. We appreciate the short-term attractiveness of merely altering this law at this time rather than revising it thoroughly. However, at least some of our members believe that any advantage in doing so is dwarfed by the long-term disadvantage of continuing the enumerative approach to evolving what has become a patchwork law assembled out of special interests, antiquated definitions, and obsolescent scenarios. This approach seems to lead to anomalies like the proposed exclusion of the limitations placed on copyright by the first sale doctrine in the case of works published or even just sold by transmission. An exclusion which will result in a gutting of copyrights benefits to the public in precisely the proportion of work so published or sold to the total mass of publication on the market at any time. This proportion we see as likely to increase rapidly. Rather than persevering within the confines of narrow interpretation of legal phrasing, legislative history, and jurisprudence, the Working Group might find it beneficial to pay even more attention than it so far has to the spirit of copyright legislation and to do so with as little recourse as possible to the historically bound and ambiguous terminology in which this legislation as it stands today has been couched. Art librarians are very sensitive, for example, to the ambiguous meanings of copy, reproduction, and performance. These terms have entirely different literal and figurative meanings when applied to works whose aesthetic and/or informational content is expressed variously through textual, iconic, diagrammatic, oral, or hybrid representations. They remain ambiguous even in contexts where legal definitions are proposed. And they are especially ambiguous in discussions of electronic information sources. It is possible, I believe, to recast the philosophy and language of copyright law in more meaningful and more generally applicable terms. For example, instead of focusing in the future on the right to distribute copies, such law could focus on the essence originally contained in that right which is in reality no more than the now obsolescent strategy for limiting the number of potential simultaneous uses of a work to which copyright can be claimed. It should also be possible to control simultaneous use by such license agreements between producers and first purchasers of transmitted information as are already commonplace when CD ROMs are concerned or by royalty collection schemes without prohibiting or criminalizing any subsequent transmissions. Prohibitions and sweeping criminalizations of potentially innocent activities heretofore governed by principles of fair use would work to destroy the good relations that presently exist between copyright holders, individual buyers of copyrighted works, the libraries which constitute the main body of corporate buyers of such works, and library users. ARLIS/NA believes that this country and the world have more to gain from enhancing these relations through future provisions of copyright law than from thereby vitiating them. ARLIS/NA's members in the libraries and the book trade have long sustained good faith partnerships by hearing to the principles of fair use. We cannot imagine why they could not be sustained in the future world where some, many, or even all publications in our libraries are received by transmission and where principles of fair use would continue to impel them. In closing, please let me add a suggestion that the Working Group strengthen its recommendations under the rubric of education to call explicitly for university and museum libraries to become actively involved in educating the public about copyright provisions and issues particularly as they pertain to imagery. Awareness of an agreement on the ethics and not just the mechanics of fair use will become increasingly important as the NII and GII develop. Ultimately, ethics may be the only real protection authors and other copyright holders will have from fraudulent or infringing exploitation of their works. I really do believe that is perhaps the most important section of the whole document. The foregoing comments probably don't exhaust all of the concerns of ARLIS/NA's individual members with or an interest in evolving copyright law and the work of the Working Group on evolving copyright law and the work of the Working Group on Intellectual Property Rights. We all hope that this work will continue to be informed by broad public participation such as exemplified by this hearing today. And I thank you for listening. MR. LEHMAN: Thank you very much. Are there any questions? Thank you. Next I would like to ask Ellen Kirsh, Vice President, General Counsel, and Secretary of America Online, Incorporated. ELLEN KIRSH: Good morning. I would like to thank you for the opportunity to be here today and to compliment you for the fine job you did with the Green Paper. The on-line computer service industry is seriously concerned that the copyright laws currently in effect will stifle our industry and this important new method of communication and content delivery. Section 501 of the Copyright Act of 1976 provides that anyone who violates any of the exclusive rights of the copyright owner is an infringer of that copyright. In the Playboy Enterprises v. Frena case, this provision of the Copyright Act is interpreted to impose liability on a bulletin board system operator who claimed not to have knowledge of the infringing content on his bulletin board and further claimed to have promptly removed it when he obtained such knowledge. This strict liability standard has been imposed on print publishers of copyrighted materials, whether or not the publisher intended to infringe or had knowledge of the infringement. However, print publishers have the opportunity to review what they publish in advance of publication. This is not the case for on-line service providers. Our medium is interactive and participatory in real time. We have no means of knowing what will be made available on our services until it is posted there. The volume of content on our services is so great and comes constantly from so many sources that the publisher model of content control is totally unrealistic to those of us in the front lines. We are simply not publishers. We are something new and different from anything that we have known before. We are interactive service providers and we need new ideas and new rules in our new medium. Today, five percent of households in the United States currently access what we have come to call the Information Highway. Our collective goal as an industry is to move out of this niche market and reach the other 95 percent to make this technology truly a mass market tool. Our strategy at America Online has been to make access easy, simple, fun, and affordable. We see our future role as being as pervasive as television, telephone, and radio. We should not place restrictions on on-line service providers which will have the effect of limiting the access of consumers to the Information Highway. Interactive on-line services allow for the transmission of information in many ways. On America Online, messages may be public such as bulletin board postings or transmission of messages in an auditorium arrangements with a speaker and audience participation. They may be totally private such as E-mail or semi-private such as a limited access private area. American Online also has an instant message facility which allows two members to exchange information in a conversational mode that closely resembles a telephone conversation. The more than 1,000,000 subscribers to America Online all have the ability to send documents and messages to each other and to other users of the Information Highway. All of this happens instantaneously with the push of a button. Further distinguishing on-line service operators from print publishers is the sheer volume of contributors who are really the publishers of the information. A publisher deals with one author or perhaps a carefully selected screened group of contributors to a collection of works. Much time is invested in advance of publication with these authors on an individual basis. America Online has more than 1,000,000 subscribers, up from 300,000 a year ago. In contrast, we have about 675 employees. In America Online, each day we transmit 800,000 pieces of E-mail and 30,000 message board postings. We maintain 4,000 different message boards. There are 700,000 sessions conducted on America Online everyday by more than 1,000,000 members, and these numbers are probably low because we are growing by 100 percent every six to eight months. We deal with 620 billion bytes of information per week. We have 28 gigabytes of software alone posted on our service, which is about 200,000 software files. Access to the Internet adds another dimension to the quantity of information we make available to our subscribers. For example, our subscribers have access to over 12,000 additional message boards on the Internet, with another 60,000 to 70,000 daily postings. Our planned FTP link to the Internet will provide our members with 480 terabytes of constantly changing information. There is just no way America Online could reasonably maintain sufficient staff to work with all our "authors" and screen all content prior to its availability on our service unless we dramatically reduce the volume of content and the number of authors on our service or we hire a new, well-trained corp of censors to monitor the information which would be at a tremendous cost that would have to be passed on to our subscribers. There is simply no way we could perform these editorial services and charge our customers less than $10.00 a month. Less interaction, less content, and less affordable services for consumers would be our only option if we were forced to screen and supervise all of this content. On-line service operators are at a distinct disadvantage relative to print publishers or other traditional distributors of copyrighted materials because service operators have no effective way to minimize potential liability for copyright infringement. Unlike print publishers, service operators typically function as packagers of information and facilitators of communication and often cannot engage in any review of content prior to or subsequent to posting of content on the service. In addition, service operators cannot purchase a blanket license to cover all of the content, whether text, graphics, or music, which may be posted to the system by any member because they do not know of such content before it is posted and because such blanket licenses are not available. Even if the service operator could somehow prescreen content, the service operator could not guarantee that no infringing material would be posted on the system because there is no way for a service operator to know or identify all copyrighted material in existence. The on-line service provider member agreement and uploading procedure requiring members to have the right to post all material and our contracts with our independent content suppliers have these same requirements. At America Online, there is not one person or entity with access to our service who does not have the contractual obligation to avoid infringing on the copyright of any third party. Our terms of service agreement with our subscribers and our information provider agreements with our content providers clearly prohibit the use of any information which infringes the copyright of the third party. But this is not a fail-safe method. The only way for an operator to minimize risk would be to eliminate all member contributions to its on-line service and to own all of its own content. However, such a policy would greatly reduce the usefulness of on-line services as a new way of communicating and disseminating information. It would offend our traditional regard for the First Amendment rights of our subscribers by chilling free speech and free exchange of ideas and information. I predict this would result in the premature demise of the commercial exploitation of this media. While we do make reasonable efforts to provide forum, hosts, and guides at strategic places on our service, these hundreds of people are members of the on-line community, not employees of America Online. If the strict liability standard is not eliminated for the service operators and the on-line medium, the likely result will be the service operators will have to spend large amounts of time and resources defending themselves in every case where infringing material is posted on-line. A copyright owner whose rights have been infringed will likely search out the deepest pocket when seeking a remedy for the infringement and in most cases, the entity with the greatest resources in any case will be the service operator, not the uploader of the infringing content. This situation will create an undue financial burden on commercial service operators who have to compete with the free access Internet, where the likely situation is that no one can be sued for copyright infringement. More importantly, consumers will lose affordable access to these services when costs of litigation are passed on. The on-line service operators are in general agreement that the rights of copyright providers must be protected in the case of electronic distribution of copyright work. We accept that copyright owners must be able to stop unpermitted copying of their work in every medium. But we do not believe holding a service operator strictly liable makes economic or legal sense. Instead, we propose that the Copyright Act be revised to impose liability only on those service operators who have advance knowledge of infringing materials being posted on their systems and willingly allow it to be posted or those operators who once they learn of the alleged infringement fail to take timely action to conduct a reasonable investigation of the allegations and remove the infringing material promptly from their services. The law should also recognize the practical difficulty faced by an on-line service provider in verifying the legitimacy of a claim of copyright infringement. A standard of reasonable investigation followed by a good faith judgment of the proper course of action should be sufficient to protect the service provider from liability. It is my view that the on-line services industry should also be required to cooperate with a copyright owner when work has been infringed on its service by disclosing the identity of the member responsible for the infringement and by providing other reasonable assistance such as evidentiary support. On-line services represent a whole new category for the copyright law to address. We are not publishers and we are not common carriers. We should not try to fit round pegs into square holes jeopardizing the growth of this great medium to the great detriment of consumers. If we are required to prescreen content or review content subsequent to its posting in order to protect ourselves from liability, the consumers will be the ones to lose. We will be forced to have more expensive, less extensive services with none of the individual participatory and spontaneous qualities which have already made this medium so engaging for so many. Thank you. MR. LEHMAN: I would like to ask a question about your service. Do you play a role in the content and selection of what goes on or is it just simply a -- are you more like a broadcaster or like a common carrier or are you a mixture of both? MS. KIRSH: There are elements of both in the service because we have a service with a variety of content. Some content is put on the service by our subscribers. Other content is put on our service by entities with which we contract. And those entities essentially put content on the service. MR. LEHMAN: Where you have a controlling role or a direct involvement in the selection of the material that goes on-line, don't you think in that particular case that it would be appropriate to have the same standard of liability as any other similarly situated organization like a cable system or a broadcast kind of work? MS. KIRSH: We don't select the content. We select the information provider. In other words, if we contract with a newspaper, for instance, that newspaper is the entity which is, in fact, responsible for and is in control of the content. It is not America Online. MR. LEHMAN: Couldn't you get indemnification then from them as a part of your contract? MS. KIRSH: We would certainly seek to get indemnification from them, that is correct. MR. LEHMAN: Using an analogy to a broadcaster or even the cable system, these -- and cable is probably the better entity because there is a combination of services that are on cable. Certainly one area where clearly some of these operators should have liability is in the area of music. And they are paying music -- the performing rights society's blanket licenses for the use of some music that flow through their systems. Are you paying such a blanket license? Is music being distributed or brought to perform through America Online now too? Are you paying a blanket license fee, and if you aren't, do you think you should? What is your position on that? MS. KIRSH: Let me say right off the bat that I am by no means an expert in the copyright law. But my view of the music situation is that it is not clear whether we have performance rights being exercised when music is made available on-line. I am certain that there is some music on America Online because we have a million subscribers who are quite capable of uploading anything they want. As far as I know, we have no contract with an information provider that is specifically designed to put music on-line, but I could be wrong about that. I don't know that. I don't object to paying a royalty for the right to put music on our service, but I do -- I am concerned about whether ASCAP or BMI, for instance, are the right entities to be paying the license because it is not at all clear to me that it is their rights that are being exercised by the music which is available. And I think it is an area which needs clarification and certainly I am willing and I know that my counterparts in other companies are willing to explore this and to try to come to a proper arrangement. MR. LEHMAN: Ms. Southwick has a question. MS. SOUTHWICK: Last week when we were in LA, I read an article I thought -- MS. KIRSH: Pardon me? MS. SOUTHWICK: Pardon me? MS. KIRSH: I'm sorry, I just didn't hear the beginning of your question. MS. SOUTHWICK: Oh. Last week, when we were in Los Angeles, I read an article about a rock star who had started a -- had gone on-line -- I thought it was with America Online, but it may not have been -- and that this is a growing practice, that they have little bulletin boards available for fans to interact with stars. But the article said that in this particular case there was a lot of profanity and that the on-line service provider, whomever it was, had removed the profanity. Is that a practice with America Online? MS. KIRSH: At America Online, we have an essentially volunteer corp of guides and other individuals who are really essentially self-policing the areas of the service. And it is way too vast for America Online to have its own sort of in-house censors monitoring every area of the service. MS. SOUTHWICK: That was my question -- if you are able to remove profanity, wouldn't that same logic lead to you being able to remove infringing material? MS. KIRSH: Well first, we can't possibly remove all profanity. I mean not that we encourage it or that we would like to have that on our service. We really regard ourselves as a family consumer service. But it would be impossible for us to find and remove all profanity. By definition, in fact, there is private E-mail. And that we would never have even knowledge of what the content is. But even beyond that, it is way too vast of a service for us to begin to do that. And secondly, in the copyright area there is the added complication that we might not even recognize that there was an infringement. The biggest, I think, difficulty arises in the computer software area where there is just no way of knowing. Even if we went to the copyright office and we looked at the file source code for software, we wouldn't be able to identify from that if we were infringing. MS. SOUTHWICK: That was my next question, actually. When you say notice by a copyright owner, I gather from what you said that that would not be sufficient for you to take a work down -- that you want the ability to make your own investigation and then come to a good faith judgment as to whether -- or what happens during that period? If you have been notified by a copyright owner that there is an infringing work up on a bulletin board, what do you propose happening at that point while you are investigating and making your good faith judgment? MS. KIRSH: I think that there is some -- there obviously will be some infringing work, and this has happened that is just obviously infringing. I can tell from looking at it myself that this is not work that we have a right to have on our service. And it comes right off. And I think that is the first step. We have to make a good faith judgment ourselves. But in areas where it is just ambiguous and we can't tell whether there is infringing work, I think that it would make sense for us to be able to make the judgment on a case by case basis. As to whether we should leave it up and investigate or whether we should somehow remove it in a temporary way and then make an investigation, and that really needs to be -- we need to ask whoever is serving rights to that work to demonstrate to us that, in fact, it is their work and either that it is registered with the copyright office or that they have something else that we can rely on reasonably. This is a difficult area. I mean, I don't pretend to have all the answers. We also have a contract with our subscribers where they pay us for the right to put things up on that service. And we have to balance that contractual obligation with the competing rights of someone who claims that they don't have that right. MR. LEHMAN: Any other questions? Mr. Sockowitz? MR. SOCKOWITZ? Ma'am, when you say you are simply a conduit for these folks when they sign on to AOL, is there some notice during this sign-on period or prior to their use that informs them regarding infringement and the rights that they are not supposed to violate? MS. KIRSH: We have a terms of service agreement which is our contract with our subscriber. And I would be happy to provide a copy of that. Actually, we are right in the process of revising this now, which clearly prohibits the uploading of any content which they don't have the right to upload. So that clearly instructs them not to put material on the service which infringes the rights of third parties. It deals with much more than copyright violations, but it certainly covers them. MR. SOCKOWITZ: Is that -- now I belong to several on-line services and in many of them I use script files to access my account. I bypass all of that every time I sign on. So are your folks getting that once when they subscribe to your service or each time they sign on to your service? MS. KIRSH: They get it once when they sign on, although I mentioned that we were in the process of revising it and we are now discussing internally the mechanics of how we might have some at least notice screen that is a mandatory review of highlights of that. You know, I don't know exactly how that will sort out in terms of our future service offering, but now it is clearly -- it is something which a user must go access. It is not something which immediately comes on the screen every time the user signs on. MR. LEHMAN: I think it would be useful to have a copy of that contract if you could send it to Terri Southwick, please. MS. KIRSH: I would be glad to do that. MR. LEHMAN: If there are no other questions, we can move on. MS. KIRSH: Thank you. MR. LEHMAN: Thank you very much. Our next witness is Morton David Goldberg, Chair of the Copyright Committee of the Intellectual Property Organization. We may have misidentified you, so you can tell us who you are representing, Morton. MORTON DAVID GOLDBERG: Mr. Secretary, Ms. Southwick, ladies and gentlemen of the Working Group, I am, as the Secretary said, Morton David Goldberg of Schwab, Goldberg, Price and Dannay of New York. I appear for IPO, Intellectual Property Owners, whose copyright committee I chair. IPO was founded to represent the interests of owners of intellectual property in the United States and to raise the level of understanding of IP issues in this country. IPO members include approximately 100 large and medium size companies and 200 small businesses, universities, inventors, authors, executives, and attorneys. The relevant part of that is that that is large and small copyright owners and also large and small users. I will quickly but not cryptically summarize what I feel are the main points. And then to the extent that time permits, I will flesh them out. But I do encourage the Working Group and urge you to interrupt as I go through this because as in other forum, it is more important to deal with what is on your listener's mind than what is on the speaker's mind. IPO will be submitting a written statement to follow up. IPO does not applaud merely the work that went into the Green Paper. IPO applauds the Green Paper. Next main point in summary -- technological change does not do certain things to the copyright system. Technological change does permit doing certain things with the copyright system. Next, I think it is important to realize in context that today and through the 200 years of copyright system, the nay-sayers have failed to demonstrate that diminishing the incentives for authors and disseminators of copyrighted works in any way promotes a progress of science and useful arts. IPO certainly concurs in the Green Papers' recommendation to clarify the authors' copyright rights to make it more explicit that they include a transmission right. A clarified right of transmission would be a right to have a work sent to a recipient in intangible digital form, whether the transmission is initiated by the sender or the recipient and whether the transmission results in a fixation of the work permanently or even ephemerally. IPO recognizes the need also, as indicated in the Green Paper, that the statutory definition of a publication must be adjusted to accommodate the technology and the economics of the NII, but we do urge consideration of two important factors in that connection. One relates to Section 407 of the Copyright Act which provides both mandatory deposit with the Library of Congress of all published copyrighted works and certainly the change or the adjustment for clarification of the definition of publication in the context of the NII would have a significant effect on the scope of 407. Secondly, we think that it is important that the effect be considered that such a clarification of the definition would have on Section 104(A) of the Copyright Act, which requires that the U.S. give protection to unpublished works of all nationals, and to the extent that that provision is or might be significantly cut back, we would have to consider the ramifications for compliance with the provision of the Berne Convention, Article 31(A) that requires all Berne members to give what the Berne Union regards -- excuse me, to give protection to what the Berne Union regards as unpublished works, whether or not one Berne member, i.e., the U.S., considers them to be unpublished or published. MR. LEHMAN: Mr. Goldberg? MR. GOLDBERG: Yes. MR. LEHMAN: You said we could interrupt. MR. GOLDBERG: Please. MR. LEHMAN: Earlier, both here and in earlier hearings in Chicago and Los Angeles, we heard representatives from particularly the library community stressing that somehow or another there needed to be a balance in the copyright law providing the exclusive rights of the users. Now I am not certain exactly what they meant by that. They haven't completely fleshed it out. But that exclusivity for users for copyright indicated that there was -- I think the American Library Association actually went on record as opposed to the idea of exclusivity for copyright owners, indicating that there should be some specific statutory rates granted to users. Given the fact that we have our members -- that all international copyright trade is governed by the Berne Convention, what kind of flexibility, in your view, would we even have to accept those kinds of recommendations without falling out of compliance with the Berne Convention. MR. GOLDBERG: Well I think the paramount limitation would be Berne Article 9(2), which relates explicitly to reproduction and in spirit has been extended to relate to other rights as well. And that provision permits the Berne members to adopt exceptions to the exclusive rights. But those exceptions must be such as would not unreasonably prejudice the rights of the copyright owner and would not interfere with the normal exploitation of the work. That, I think, is the bench mark that would have to be considered in any legislative change, if there is to be legislative change. At the present time, I think there is general concurrence that our statute is in compliance with that provision. I would make a more specific comment on the proposal that apparently the manual suggested, but I don't have any details on that so I am not in a position to comment. MR. LEHMAN: Thank you very much. You might want to, in our reply comment area, take a look at the suggestions of the various library groups and it would be very helpful to have your comment getting back to us all. Thank you. MR. GOLDBERG: Generally, with respect to the remaining recommendations of the Green Paper -- especially its emphasis on the need to continue alliance and flexibility of the marketplace and voluntary licensing and other contractual arrangements -- I think that IPO is certainly in support of those provisions, especially as I say, the emphasis on voluntary licensing, contractual arrangements, and the flexibility of the marketplace. That concludes the summary. I would pause here once again for questions and then go on for the Working Group with details if there are no questions at the moment. Okay? The way in which the Green Paper deals with contract law I think is important. Namely, it does not recommend any change either in copyright law or in contract law. And contract law, as it relates to licensing, specifically the licensing of works on-line, especially for interactive use, is terribly important. If there is an on-line transmission made by one of the database providers, there is ordinarily no access without a license. I say ordinarily. There are ways, of course, of hacking in to take unauthorized access. But ordinarily, in order to obtain access there is license, and that license is a flexible instrument by which the rights and obligations of the parties can be adjusted. The Green Paper wisely builds on the existing system and does not urge an option under the [inaudible]. The things that particularly -- MR. LEHMAN: You don't think that something should be done -- you know, we have the shrink wrap license already in the sale of disks and so on. I assume that on-line services, in fact we heard such a license described where a notice comes up when you sign on, perhaps, that is something akin to a shrink wrap license. Do you think there is a need to somehow or other provide more statutory authority for shrink wrap type licensing? And if there is a need, can that be done federally or does that have to be done through state law? MR. GOLDBERG: Well, I think you are certainly raising an important question. I think you may be raising a question that is so significant that it goes far beyond the scope merely of the IP Working Group in the sense that all contracting arrangements with regard to user methods on-line have to be examined, whether or not they deal with copyrighted works with that information. If you are selling potatoes, you can effect that sale over the NII. The contractual arrangements relating to those and the electronic approximate interchange and the evidentiary aspects of how contracts are entered into, the battle of the forms, et cetera, in the electronic context, all of those are critically important issues. I would say that whatever resolution is made as part of the broader context would probably be the appropriate way to handle the IP concerns. But I just have not looked into that broad question. I had mentioned earlier the fact that technology does not do certain things. And one of the things that technology does not do in its changes are, as our history has indicated, the conversions of a new technology into something that provides free access to that new technological use on the part of the public. We can look at the history of still photography, motion pictures, sound recording, and all the rest and I think that those are appropriate indications. Again, I think the question of what technology does not do has to be looked at in the context of what technology also does and certainly it does provide the capability for identifying works, not as a mandatory precondition for disseminating copyrighted works. Identifying criteria should not be mandated lest we run afoul once again of the Convention Article 5(3). But technology does provide the capability of identifying -- at least of identifying criteria, the licensing arrangements, the counting, and so on. And my time is up, Mr. Secretary, but as I say, IPO will be submitting a written statement. MR. LEHMAN: All right. Are there any additional questions? We probably could go on for quite a lot longer. MR. GOLDBERG: I'm sorry? MR. LEHMAN: I said we probably could go along quite a bit longer, since you are one of our country's most eminent experts in copyright law, but we perhaps can have the dialogue in writing. Thank you very much. Next I would like to ask Ivan Bender, please, from the Consortium of College and University Media Centers, to come forward. IVAN BENDER: Thank you very much, Mr. Secretary and other members of the Working Group. At the outset, I would like to congratulate all of you on not only the job that you have done today, but last week when I attended the sessions in Chicago and yesterday in the fair use meeting. And I think that the timeliness of all of this is astounding. It couldn't have been better. And I compliment you not only for the hard work but the expertise, and we all look forward to the end result. Again, for the record my name is Ivan Bender. I am a copyright attorney in private practice in Chicago specializing in copyright issues raised by the educational use of copyrighted materials. I appear today in order to represent one of my clients, the Consortium of College and University Media Centers known as CCUMC, at least that is an easier way for me to say their name. The organization has among its members many of the leading colleges and universities in the United States and Canada and directly represents the interests of those institutions in the area of the media, and that would be the primary focus of my comments today. The term media has several definitions which was brought upon by the tremendous growth and developments in technology, the kind of technology which provides the potential of accessing all of the imaginable sources of information which are available. Although the more traditional definition of media was narrower, today it really encompasses all forms of expression, whether it is the written word, the spoken word, music, art, illustrations, or video or motion media as we refer to it today. All these components when utilized together in digital or other formats form what we refer to as multimedia. I am going to ask for the privilege of submitting formal remarks. The rest of my presentation is -- according to my notes, I will be submitting a short statement afterwards if allowed to do so. There are three areas of the Green Paper that we are concerned with. They are fair use, access, and education. I'll begin briefly by talking about fair use in as much as that issue is going to be debated extensively separately from today's hearings in your other sets of hearings on the NII report in general. But I want to reemphasize that our feeling is that guidelines in conjunction with either on-line or off-line use of media is essential. We disagree that another CONTU kind of commission be established to write guidelines. For some of the reasons the Assistant Secretary yesterday mentioned yesterday, in terms of a presidential kind of CONTU organization, we feel that the parties can resolve whatever differences they may have voluntarily and much more rapidly than would be the case otherwise. And perhaps one of the parts of the preamble to any various guidelines would make it mandatory to have those guidelines reviewed periodically such as when the present law was originally prepared and Section 1 had a mandatory five-year review with reference to inter-library loan. So it may well be that the guidelines should not be viewed as formed in granite for all time, especially since we can anticipate that the technology we know today may be outmoded tomorrow. Hopefully, that will not literally be the case. The next point I wish to address concerns access. We view the guidelines as being essential because it would allow teachers and students who are accessing materials to produce their own materials in many instances in terms of multimedia programs designed for classroom instruction. The guidelines will allow them to know what can be used under fair use and at what point compensation to the copyrighter is appropriate and necessary. But once that line is crossed and we reach the point where compensation is necessary, in the real world the way it works now is if an institution defines fair use for itself and then says okay at this point we are going to seek permission, that permission is very difficult, if not impossible, to obtain. It is not because a publisher or motion picture producer doesn't want to give permission -- no one knows where to go to get that permission. And even permission departments in very well organized publishing organizations which have those kinds of departments don't know how to deal with the new technology. So we need some kind of mechanism. Not necessarily something that has to duplicate or imitate the CCC or ASCAP, but some method by which the information necessary to be transmitted relative to the request for permission that some response be established. And I think in this regard the Government can play a major role in trying to establish something of that sort. MR. LEHMAN: You are familiar, I think, with the Library of Congress's electronic system that they are working on with ARPA, which would permit the information to be made available -- basically about copyright ownership and so on and so forth? MR. BENDER: That is a very major positive step. MR. LEHMAN: And earlier I asked one of the other witnesses about whether or not there might be a role for the Library of Congress to play as a clearinghouse for rights. Do you think there is such a role? MR. BENDER: I think potentially there is such a role, and I think at least the organization I am representing here today would go off on that. If that didn't work then perhaps something else would be refined and then in time replace that. But at least it would be a major step forward. The process now is not necessarily a failure or because publishers don't want to give permission. It is because they fail to communicate with each other. A lot of times it is a question of logistics. If you watch a video which you own at a college campus and try to obtain permission to take clips from it, just because you have a copyright notice does not give you the kind of information you need in terms of accessing the property party to give you that permission. The third point I wish to address briefly this morning is education. I am very enthused about the fact that there is going to be a separate conference which will direct its attention toward that issue. But let me take this opportunity to point out to the panel here today and the Working Group members who are here the kinds of things which are going on. The growth in copyright education in the last five years is phenomenal. And this has all come from the private sector. When I say the private sector, I don't necessarily mean copyright proprietors, but schools and libraries as well. They have done so much to educate themselves. Several years ago when I first got into this business, I would not have thought that to be the case. Educators do want to do the right thing. They want information. There isn't an educational conference of a major educational organization today when they hold their annual meetings that doesn't include a copyright workshop of one sort or another. You mentioned yesterday, Commissioner Lehman, that Educomm regularly publishes copyright information in its magazines or its periodicals. Many other organizations do the same. One of my clients three years ago set up, for example, an 800 number to make it possible for teachers and librarians and media directors to without charge access information. Now fortunately or unfortunately the person they were talking to was me. But the idea was to provide information immediately to them and to have a give and take over a given situation. A large part of my practice is putting on copyright information workshops for a variety of organizations. So my suggestion is this in terms of the final report --please look to the practice which is going on in the educational community and elsewhere now in terms of education. I think there is a lot you can take advantage of and a lot more we can take advantage of working with you and with the Government, not to say that the Government would run that. But because education is very important, and this, by the way, goes beyond the parameters -- excuse me, it is a little bit more specialized than the general parameters of the NII because my emphasis, of course, today is education of educators rather than the general public. But the points remain the same. And I think the systems and the principles are relevant whether you are talking about the public in general or specialized areas of the public such as the educational community. In addition to what I have said before in terms of education, I think it would be well if you could obtain examples of copyright policies which have been developed by educational institutions, and there are hundreds, literally hundreds of them. Some are colleges and universities, others are school districts. And it is amazing to see what they have done. Now I hasten to add that some of them are not very good. Others are quite good. Unfortunately, many school attorneys or attorneys representing school boards, although well versed in areas of school law, are not copyright experts, as I do not feel that I would be in a position to advise them in terms of the kinds of issues which they face daily. So some of these policies are not very good. Others, as I say, are very good. And I think that it would be well, in terms at least of your final report, to examine some of those and comment on ways in which perhaps this whole effort can be drawn together in a more uniform kind of way. That is the extent of my remarks this morning, and if you have any questions I would be very happy to answer them. MR. LEHMAN: Does anyone have anything? If you won't mind, since you probably know and could guide us to some of these policies, we might get back with you about that. MR. BENDER: Great. I can easily, if you would like. There is a packet of information which has already been put together and if Ms. Southwick would be willing, I will send that to her. I can't FAX it. It is too big. MR. LEHMAN: I think she would be delighted to have it. MR. BENDER: I will Federal Express it. I would be very happy to share that. MR. LEHMAN: Thank you very much. MR. BENDER: Thank you. MR. LEHMAN: Finally, this morning we have Brian Kahin, General Counsel of the Interactive Multimedia Association. BRIAN KAHIN: Mr. Chairman, members of the Working Group, I am Brian Kahin, General Counsel for the Interactive Multimedia Association, a 300-member trade association for the growing multimedia industry based in Annapolis. While IMA encompasses a wide variety of members, our testimony emphasizes the perspective of multimedia developers and publishers. Today, I will speak to the scope and focus of the report and then to our concerns about expansion of the distribution right. Multimedia developers and publishers are very sensitive to intellectual property issues because they acquire content, they integrate content, and they distribute content. They are both owners and users of intellectual property, positioned at different times at different points in the distribution chain. They deal with all forms of content, images, text, sounds, audio visual works, and computer programs in an increasingly multi-functional, increasingly networked environment. They inherit everybody's intellectual property issues compounded by the problems of clearing rights for a changing technological landscape with some poorly defined and speculative markets. So in one respect, we approach this topic with some humility and a reluctance to jump to specific solutions. We are also wary of any tinkering with the law that may exacerbate the risks and uncertainty of managing intellectual property rights in this complex environment. We are concerned that the title of the report, Intellectual Property and the National Information Infrastructure, is overly ambitious. Many important issues under that broad subject are addressed summarily or not at all. The report reflects the superhighway view of information infrastructure, big pipes through which simple, familiar objects shoot at high speeds. The real challenge and opportunity of information infrastructure lies in the rich, intelligent fabric between simple transport and simple content that digital technology makes possible, the many modes of interactivity, new ways of accessing information, hybrid forms of communications and publishing. These opportunities involve many issues of pressing concern to multimedia developers. The scope of patentable subject matter, the impact of patents on access to information, patent threat, patent office operations, and free grant publication of patent applications. These are tough controversial issues and some of them divide our membership. But they are central to the strategies and policies for realizing the NII. Another issue that arises in the context of IMA's work in cross platform compatibility is the relationship between intellectual property and interoperability, which is often cited as a principle feature of the NII. The broader the scope of patentable subject matter and the broader the scope of copyright protection, the more difficult it becomes for industries to work together on the consensual standards important to the NII. This has not been a problem in the telecommunications arena in the past because most rights holders were large companies willing to license on reasonable terms. However, the growing acquisition of increasingly broad patents by non-manufacturing entities ups the risks of conflict. Improvidently issued patents and submarine patents are a growing threat to rapid deployment of the infrastructure based on consensual standards. The drawn out negotiations over the many patents related to MPEG2 suggest the potential scope of this problem. Contract law, vital to mediating the use of intellectual property in a network environment, is conspicuously absent from the report. The relationship between copyright and contract merits special attention. Should a contractual relationship affect a determination of fair use? We are disappointed that despite the question about the need for standards for managing intellectual property and the initial request for comments, the report states without discussion that this issue is not within the purview of the Working Group. The need for such standards has been expressed by AAP, IIA, and many others. While individual industries might be expected to develop their own specifications, individual industries are not prepared to do so in a convergent, multi-industry environment. The scope of the undertaking, defining requirements, developing a transaction set, and architecting a syntax for handling transactions is daunting. It must fit with evolving specifications for EDI, object management, and distributed resource navigation while accommodating the many dimensions of managing intellectual property rights. The great amount of work required -- MR. LEHMAN: May I just ask you a question about that? We have heard the recommendations for CONTU Number 2. Would that be something that would be appropriate for some set up -- some kind of a group, commission or entity, appointed advisory body, something -- to work on that specific problem? MR. KAHIN: Certainly on the required part. That is the part that needs the greatest inter-industry coordination at the outset. Because there is such a blurring among the industries. There are so many industries involved that it really requires that kind of coordination just to develop the framework. What are the technical problems that need to be worked on? What kind of vocabulary do you need? What are the terms for managing different kinds of intellectual property in this environment? MR. LEHMAN: Is there a role for NIST in that, do you think? MR. KAHIN: I'm sorry? MR. LEHMAN: Would there be a role for NIST? MR. KAHIN: Yes, there would be a role for NIST and actually some of the digital library projects that ARPA and NSF have managed could in theory encompass that, especially the technical side that would come after developing the requirements. MR. LEHMAN: Thank you. MR. KAHIN: The great amount of work required and the need to coordinate among many different industries argues for federal support. Not federal standards but federal encouragement and support for coordinated work in this area. An issue that has concerned some multimedia developers is the scope of the adaptation right. Do I need permission to offer a view of somebody else's data through a lens filter template or add-on program? Is this preparing a derivative work even if no unauthorized copying or display? How do reconcile Galupe v. Nintendo on the one hand with Williams v. Artic and ART Reproductions v. Albuquerque on the other. I turn now to the recommendations from the report. First, let me observe that multimedia developers and publishers very much want content owners to feel secure in the network environment. We held the first and only workshop on technological strategies to protect intellectual property in April of 1993 and published the proceedings. We will probably support legislation along the lines of the report's recommendations to maintain the integrity of technologies and header information designed to protect and manage intellectual property. However, we are also very sensitive to the difficulties and costs of interpreting, negotiating, and managing rights, and we have concerns about the proposed expansion of the distribution right to include transmissions. Additional rights which overlap with or extend existing rights can create new burdens for agents, content integrators, and distributors. Established practices may be disrupted and the balance between stake holders, even among industries, may be shifted. While we greatly respect the rights of content owners, we do not believe that those rights should necessarily be enlarged at the expense of legitimate functions and services in the distribution chain. The potential for disrupting legitimate business expectations and public uses argues that new rights should be created only when clearly justified. The 1976 Act elegantly splits principle rights into the reproduction right on the one hand and the public display/public performance rights on the other. In the old analog world, these were mutually exclusive. Neither a display nor a performance involved a new fixation. So there was no reproduction incidental to a display. The CONTU report recognized that computers copy programs in the course of executing them and so recommended the essential step exception to the reproduction right embodied in Section 117. CONTU did not address the fact that the same incidental copy happens in displays of digital data, including digital images, but the same principle could apply. The ease of transmitting copies from one computer to ten others is cited in the report to justify expanding the distribution right. However, it is not clear what the real need for a new right is since the reproduction right is necessarily involved. Whether there is a mailing from the originating computer or a posting on a bulletin board computer and retrieval from the board by ten individual users. While it may be difficult or impractical to go after individual users, there is no discussion in the report of the desirability of holding bulletin board operators strictly accountable or liable. This issue is further confused by the report's assertion that images are displayed by a bulletin board system. This assumption, which was also the basis of the District Court's decision in Playboy Enterprises v. Frena, is technologically incorrect. In a conventional bulletin board system, files must be copied from the bulletin board system to the user's computer. The files are opened and displayed on the user's computer, not on the remote host. There would be a public display in the case of remote visualization over the Internet using the Telenet protocol where the display is generated in real time by the remote computer. When the technological nature of the transactions in Playboy v. Frena is properly understood as a reproduction, then it appears that the BBS operator is not an active infringer and is not liable unless contributory infringement can be established as was the case in Sega v. MAPHIA. The arguments against strict liability for bulletin boards, on-line services, and other services that mix communication and publishing functions should be recognized. As multimedia's products and services become increasingly networked, the opportunities and benefits of incorporating user generated information increase. A strict liability rule would stifle the development of hybrid publishing environments. Indeed, it would preclude participation by individuals and small entities in multi-publisher software environments because ultimately they would have to pay the high cost of immediately filtering and controlling their own communications. In conclusion, the report should be clear about its focus. It could focus explicitly on protecting content under copyright or it could deal comprehensively with how intellectual property systems interact with the long-term development of functionally enriched information infrastructure. The broad approach would require an understanding of the emerging business and service models, the technological characteristics of the distributed public information infrastructure, and the range of strategic and policy issues at stake. If you choose a more ambitious approach, whether by expanding the draft report or by viewing the report as the first in a series of related inquiries, we would be pleased to work with you. Thank you. MR. LEHMAN: Thank you very much. MR. BOHANNON: Brian, can you hear me okay? MR. KAHIN: Not very well. MR. BOHANNON: Let me ask you a question. Were you here earlier for some of the other testimony? MR. KAHIN: Yes, I was, but I must confess I was still working on my own. MR. BOHANNON: Fine. Let me try to ask the question in a way that allows for that. I was actually very interested in your discussion of the Playboy case because that has created some very serious questions in a variety of people's minds from various directions. Earlier, there was a discussion about the right of public performance and how music or a song may be conveyed. MR. KAHIN: I'm sorry, I didn't catch that. The right of a performance in how? MR. BOHANNON: In the transmission of a song or music over electronic technology. MR. KAHIN: Yes. MR. BOHANNON: Have you thought about this question -- whether in fact the same problems that underlie the reproduction question and translating that into the electronic environment could also be used to think about the question of public performance as well? MR. KAHIN: You mean if my views on display apply to public performance? MR. BOHANNON: Right. MR. KAHIN: I have not thought about that as much as I should. I handled a hypothetical and I have not followed the Compuserve case. MR. LEHMAN: Any further questions? We are finished with our morning session, and we are scheduled to reconvene at roughly 1:40 p.m. (Whereupon, the hearing was recessed at 12:02 p.m. to reconvene at 1:44 p.m. this same day.) (Reconvened.) MR. LEHMAN: If we have any people from the Working Group who are in the audience, please feel free to come and sit up here on stage. It is good PR so that people know we have some different Government agencies represented. Are you coming, Michael? Are you going to come up here? Okay. Good. Welcome to the afternoon session of our hearings at our second-to-the-last day of hearings on the Working Group on Intellectual Property Rights of the Information Infrastructure Task Force. I would like to just repeat for those who weren't here this morning some of the ground rules for the hearings. We have allotted 12 minutes for each witness and in order to help us and help the witness in trying to keep to that, we have a computer monitor down here that will have a green screen on it. And when the green screen is on, you can just talk away, and that screen will be lit for ten minutes. And then it will turn yellow in the last two minutes, and that is notice that you should try to summarize. And then it will turn red, and we would like you to conclude your remarks at that time after 12 minutes. To the extent that you can finish your remarks in less than 12 minutes, it would be helpful to us, because we have found that with a lot of the witnesses it is useful to have a little bit of dialogue. Now, to the extent that we need to do that, we can probably go over the 12 minutes, but obviously out of fairness to everybody else, if we can do that within the 12-minute period, it is preferable. So if you can leave us a few minutes, it would be very helpful. Also, I would like to note that we have extended our deadline for reply comments to the papers that have been submitted on the Green Paper to October 21 for those of you who are interested in giving us more information in a written manner. I am Bruce Lehman. I am the chair of the Intellectual Property Working Group from the Department of Commerce. And I would like to observe the fact that over 20 federal agencies have been a part of this Working Group. Some of them are here today. Some were here this morning that aren't here this afternoon, and some are here this afternoon that weren't here this morning. But all of the 20 agencies will receive the transcript that we have available today and for all of the hearings, plus all of the written comments, so that everyone in the Working Group will be able to have the benefit of the thoughts that are expressed in these hearings. We will be meeting -- the entire Working Group -- to have discussions and go over the comments that are made. I think it is very important to emphasize that the preliminary report about which people are commenting is a preliminary report. And I must say, I have personally found the comments that have been made in the hearings to be extremely useful and extremely helpful. And you can be absolutely certain that there will be some probably significant modifications in the preliminary report before it is made a final report sometime after the end of the year. So I would like to invite my colleagues who are with me today to introduce themselves -- who are a part of the Working Group, starting with Michael Shapiro. MR. SHAPIRO: Michael Shapiro, National Endowment for the Humanities. MS. SOUTHWICK: I am Terri Southwick from the Patent and Trademark Office. MR. LINN: Jerry Linn, National Institute of Standards and Technology. MS. MARKOWITZ: Diane Markowitz, Office of the U.S. Trade Representative. MR. DINTZER: Kenneth Dintzer from the Antitrust Division of the Department of Justice. MR. LEHMAN: Are there any other people that are just too shy to be up here that want to identify themselves from the Working Group that are in the audience? No? Wait, yes. DR. SCHOOLMAN: Harold Schoolman from the National Library of Medicine. MR. LEHMAN: With that, I would like to ask our first scheduled witness for this afternoon, if she is here, to please step forward -- and that is Janet Hurrell from the Author's Licensing and Collecting Society of the United Kingdom. JANET HURRELL: I'm Janet Hurrell, Secretary General of the Author's Licensing and Collecting Society, the Collecting Society in Great Britain for writers of all categories, script, literary, and scientific. I thank the Department of Commerce for allowing me to convey comments on behalf of British writers. May I congratulate the drafters of the report of the Working Group on Intellectual Property Rights entitled "Intellectual Property and the National Information Infrastructure," otherwise referred to as the Green Paper, for the exceedingly thoughtful and useful document that has been produced. In particular, we are encouraged by the recognition that if intellectual property is not effectively protected when carried through the National Information Infrastructure then the potential of the infrastructure may not be realized. It is indeed courageous and farsighted of the United States Government to have progressed so far along the route to creating conditions necessary for a successful information infrastructure. It is, I believe, fortuitous for British writers that the CISAC 39th Congress was held in Washington in the week of these hearings enabling as it does their voice to be heard. I believe this is of particular value as British writers belong in the common law copyright system while at the same time they operate partially in the civil law system through membership of the European Union. Our comments in this submission are, of course, of a generalized nature, and a more detailed comment will be filed as a written submission. We share the view that the advent of electronic dissemination of information does not, of itself, change any of the principles of copyright law, and therefore, does not of itself necessitate radical changes. But modification and development are likely and we think it must be said new ways of looking at things may evolve. We believe that the effects of the new information infrastructure on copyright will essentially involve the exercise of rights and more particularly the practical management of rights, identification, marking, control, invoicing, collection, and distribution. I draw attention to the term multimedia, which as the drafters of the Green Paper point out, is a misnomer. Multimedia refers to the multiplicity of categories of work, not the multiplicity of the media. This is possibly one of the crucial points in development of a national information infrastructure in the digital age in that rights management will become very difficult to control and it will be very difficult to produce a fair and equitable record and reward system if different rights are handled in totally different ways. Further, given that the national information infrastructure is likely to be in fact a Global Information Infrastructure, a multiplicity of categories of rights being handled in a multiplicity of different ways in different countries seems to us to be the recipe for chaos. But at the very least, it could lead to concentration of reward in the hands of the most powerful, with the least strong removed from the equation. If the concentration of reward were to reside in the hands of the most powerful, the consequences for cultural aspects of the information infrastructure and easy public access to it are considerable. If, for example, a salary status of the content provider were to become the norm and the European concept of droit d'auteur were to be swallowed up, we believe that this could lead to a dilution of national cultural achievement and a possible closing of the doors to those who cannot pay. I will now turn to international aspects referred to in the Green Paper. As you may be aware, the DG-15 of the European Commission held a hearing in July of this year to consider the implications of digital technology on intellectual property legal systems and intellectual property rights management. Some similar conclusions to the Green Paper were reached, notably that radical changes to the existing copyright systems were not desirable. There was a consensus for evolution not revolution, as well as a consensus that compulsory licensing is not an answer. We are pleased that recognition is made in the Green Paper that an important aspect of the participation of foreign entities through a Global Information Infrastructure in the United States domestic information infrastructure is the provision of adequate and effective intellectual property protection in the country wishing to participate. We trust that this would be expected to work both ways. Note is made in the Green Paper that there may be problems in the TRIPs Agreement over the point that members are able to impose the exception to national treatment permitted by their own convention. We are pleased that it is noted that problems arise through operation of different systems. The paper also says that ways must be found to span the differences between the continental and the Anglo-American systems, which we believe to be one of the crucial factors for effective management of intellectual property rights on a global scale. We applaud all steps taken to cooperate and coordinate positions such as those taken by Commissioner Bangemann and the Secretary of Commerce. Other non-European Union countries, particularly Japan, are attacking the questions and should be part of the discussions. Clearly there are matters of detail in the Green Paper which cannot be covered in an oral hearing of this nature, but there are a few separate aspects to which we gave our comments. Moral rights. It is disappointing that more emphasis is not given to moral rights in the paper. In the digital environment, the right of integrity is under severe threat. It is not only a threat to the integrity of the creator of an artistic work, but equally to the integrity and authenticity of scientific writers. Moral rights, by their nature, are the most difficult to protect and possibly the only way is through strong author societies acting in the framework of copyright management of the superhighways. Emphasis is given in the Green Paper to education and it is here, perhaps, that education can play a part so that people can learn to respect moral rights. Then I move to the use of certain terms such as fair use and private use. Both seem to us to be in a precarious position in the digital environment with its multiple applications. The lines between private use and public use become blurred and we believe that it will be difficult to sustain the fair use for libraries and the educational use exceptions. The term, out of print, also loses its meaning. When will an electronic version be out of print? When might rights revert to the creator? Are these questions relevant in the digital age? In education, the revolution in teaching methods that has been fed by the new technologies has led in Britain to licensing for reprography and off air recording from the television. Copyright owners should encourage their works and not seek to hinder, but -- like all other educational suppliers -- should be paid. And in the digital world, access to everything will be so much easier. The reprography license and the off air recording license for education in the United Kingdom have produced partnerships of a different kind between publishers and authors and between broadcasters, performers, and other rights owners which work, or have worked, and are working quite well as long as each party is able to receive fair enumeration. Still thinking of the blurring of the terms such as fair use and private use, it might be useful here to refer to a concept that ALCS put forward in its response to a questionnaire issued by DG-15 before the July hearing, and it is that of a use right. Professor Huvenhoffs of Amsterdam University also made reference to such a possible right to compliment copyright at the same hearing. MR. LEHMAN: What was the right again? MS. HURRELL: Use right. You know, it is a payment for all the different types of uses. The questions of transmission and reproduction are addressed at length in the paper, and the notion of use right might well be brought into this discussion. I will conclude my remarks with a reference to copyright management and technology. The recommendations refer to interoperability and interconnecting of networks. It refers also to standards. We believe that collecting societies have a key role to play in this area. Tracking systems and identification on their own are only partially the answer. We believe that a partnership of interests will be necessary and that as far as the creators are concerned, their most effective means of reward is likely to be through collective management of their interests by collecting societies with their experience of volumes of data and the mobility of their members. Mr. Chairman, may I thank you for the opportunity to present views from writers as seen from the other side of the Atlantic and hope that we have been able to add something to the debate. MR. LEHMAN: Thank you very much. Is your Author's Licensing and Collecting Society something that is really a counterpart to the Copyright Clearance Center in the United States, primarily licensing reprographic rights? MS. HURRELL: It is partially that. The exact organization in the United Kingdom is, in fact, the Copyright Licensing Agency, which was set up as a partnership by publishers and authors together and ALCS was the operative part of that. But we are more than that in that we also license, collect, and distribute for retransmission by cable, rented rights, private copying rights where they exist and from where they exist. MR. LEHMAN: So licensing rights other than music. MS. HURRELL: We are only literary and dramatic. MR. LEHMAN: I see. You have had a lot of experience in the United Kingdom, of course, adjusting the common law system to the droit d'auteur system in Europe, and you referred to that. One of the issues that has come up during the course of these hearings is the suggestion on the part of quite a few people that we have maybe even stronger formalities in the United States in this area of digital transmission of works. For example, we could have a mandatory registry at the Copyright Office in the Library of Congress of digital works. That would seem to me, though, to constitute formalities which, again, aren't permitted under the Berne Convention. Would it be a good idea to do that? Should we rethink the Berne Convention in that regard, or can we just rely on voluntary compliance in your view? MS. HURRELL: I think this question of voluntary compliance is a very difficult one. As you know, moves are being made to look at identification numbers and unique numbering systems, both in the audio/visual world and in the book publishing world. We know that the Japanese have made reference to voluntary registration. I don't quite understand how that all would work. But I don't have any strong views on voluntary or the mandatory registration. MR. LEHMAN: Thank you very much. By the way, when you referred to use right, you were referring to use right that would vest in the copyright owner, not a use right that would vest in the user, I am assuming. MS. HURRELL: No, no, no. Not at all to be vested in the user. No, in the copyright only. MR. LEHMAN: Because we had a number of people this morning and in Chicago and Los Angeles who criticized us for not recognizing more of a use right for the users. MS. HURRELL: No, no. Not at all. Maybe we should find another word for it. MR. LEHMAN: Are there any other questions? If not, thank you very much. MS. HURRELL: Thank you. MR. LEHMAN: Next, is Chris Barlas here from British Copyright Council? CHRIS BARLAS: My name is Chris Barlas, and I represent the British Copyright Council of the United Kingdom. The British Copyright Council is the official organization that represents the interests of the United Kingdom copyright holders to the British government. It is a voluntary organization whose influence comes from its constituent members. These members between them represent the interests of almost the entire United Kingdom copyright community, writers, composers, performers, visual artists, computer programmers, photographers, and book publishers. At least twice a year, we have major meetings with representatives of the British government and their consultations with us are reflected in their approach to copyright legislation. As you know, some years ago our Copyright Act was completely revised and resulted in the 1988 Act. This Act was specifically framed to address the new technologies then emerging. It is in this context that we welcome the Green Paper from the working party on intellectual property rights. It is a thorough and well-considered report that contains much that is interesting. We applaud the sections on technology, believing in the necessity of record and reward systems though the amounts of data that are likely to be generated may well be extremely difficult to manage. We also applaud the call for better copyright education, something we in Britain are already actively engaged in. What I am going to present today is a European view of the situation. I shall not go into too much detail, but it may well be that some of the things I have to say do not sit well with American sensibilities. I should also like to mention that I am a writer, not a lawyer, so I shall avoid entering many detailed legal comments. We have legal advisors at the BCC, and they will, I hope, be filing some written comments of a more juridical nature. As you know, and the report points out, in Europe there are two rights regimes, the Anglo-American system that we have in Britain and the droit d'auteur system that is used in the rest of Europe. This was not problematic until the advent of the single market and the European Union. A harmonization program was, therefore, initiated to bring the two regimes into some sort of alliance. The basic disparity between the two systems has been becoming more and more clear with the issue of each European Commission directive. One of the most recent on term of protection, bringing this down to a period of life plus 70 years for creators, is causing considerable confusion at the moment. However, the principle is commendable to bring European copyright law into line with the highest form of protection available within the European Union. It means that no one has to sacrifice a right in the name of harmonization. It is, as I say, a commendable way of doing things and one that I hope the United States will bear in mind when framing any changes to their law in the light of the NII. I say this because the speed of change in the new digital environment is frightening. I have just been attending the 39th CISAC Conference where rights holders from all over the world were represented. There was a feeling of stupefaction at the rate of change. One moment you have a physical product like a book or a record and the next moment it is dematerialized and seems to have vanished. The rights, I am afraid, often seem to have vanished with the physical object. At the CISAC Conference, it was said by Paul Van Doren from DG-15 of the European Commission that Europe is six months behind the U.S. in terms of preparation for the digital world. Yes, we have had the Bangemann report and the Colfal announcement, but I know that we are not being as swift as the United States. Six months, I would remind you, is a long time in contemporary computer culture. It is the time in which computers gain a third in power and drop a third in price. In the context of preparing for the NII, six months could be crucial. I would ask you to remember that in your deliberations. As I said, I am a writer, not a lawyer. And along with my European colleagues in the creative industry, I value a particular tradition. It is the tradition of the free lance, the independent voice. In this tradition, the writer or composer or performer or visual artist produces a work that is then licensed to a producer or publisher or whomever for exploitation. We value, in fact, our rights and seek to protect them very strenuously. As Charles Platt the British copyright expert has written, "Publishers and authors of all disciplines are partners." This is true also of much of the audio visual industry in the United Kingdom where writers ordinarily retain their rights. The truth is, we creators are partners, not employees. I mention this because of the tradition of writing for hire that exists here in the United States. This tradition by which the creator's work automatically becomes the property of the employer, the producer or the publisher, might be seen by many as an ideal system to simplify the management of rights in the new digital environment. All the rights would be in a few hands and could be traded and sold at ease. There would be no problems with creators' feelings or conditions. Rights would be just like anything else you can trade, pork bellies. But of course rights to intellectual property are not like anything else. Rights represent the creative mind at work, part of the inalienable rights of men and women. This leads naturally to the question of moral rights. In the Green Paper, we read in the section on recommendations that new thought must be given to the scope, extent, and waivability of moral rights in digitized information. I hope that does not mean the weakening of moral rights. If it does, it is not a position we can tolerate. We said so to the Japanese when they proposed it. We say it here. Moral rights have been fought for for many years by creators in Europe. We are not prepared to sacrifice them simply because the new digital environment makes them difficult to protect. Moral rights exist not because creators wish to be difficult, though of course some are, but because they are and must be the original protectors of the musical, literary, and visual inheritance. If creators are deprived of their ability to protect their work, posterity will be the loser. Authenticity is also addressed in the Green Paper, and is clearly a subject linked to the above. However, authenticity goes beyond a mere technical problem. In fact, authenticity goes to the heart of the debate. Since the development of printing, we have become used to trusting what appears blocked out in ink on paper. While we may joke about not believing everything we read in the papers, we do not expect to be able to change the message at will. That is why I believe the issue of moral rights cannot be so easily consigned to more thought with the expectation that they may be jettisoned. Moral rights are what make the need for authentication so self-evident. While I said I would not venture far into juridical territory, I do want to say something about national treatment. The fact that we have evolved a system of national treatment is due to our collective ability to protect works internationally. National treatment exists because we trust each other. Reciprocity exists because we don't trust each other enough. In the new digital environment, we must be able to assure all parties of international protection. Therefore, international agreement, as to the definition and recognition of intellectual property rights in the context of digital usage, is essential to the effective establishment and maintenance of those rights. As you may know, there has recently been a minor problem between the United States and Britain in the domain of document delivery. If we do not get our international agreement right and agree to protect each other's intellectual property on an equal basis, the recent fracas will seem like a calm summer afternoon. There must be international collaboration in formulating and implementing such definitions and recognition. We need, in fact, a common juridical language or the new digitized environment. I would also like to say a word about the proposed transmission right. We believe strongly that the rendition of protected material into digital form constitutes reproduction within the meaning of Article 9(1) of the Berne Convention. And therefore, electronic transmission of such digitized renditions, in any form whatsoever, should be an exclusive right of the owner of the rights and the material which has been digitized. Further, we think that such transmission should constitute an act that requires the permission of the rights owner of the transmitted material, not only in the country of the initial transmission but also in every country of reception of that transmission. Finally, I would like to make some remarks about how Europe and the United States might proceed together down the electronic highway. I am here today because a colleague sent me a copy of the Green Paper some weeks ago. I would not have known about it otherwise. I found out about the hearings by logging on to the excellent U.S. PTO server here in Washington. I know and welcome the fact that at the highest level there has been cooperation between the U.S. Government and the European Commission. But governments and commissions don't know everything. I believe this process needs to take place in a wider international forum if it is to be consensual in the context of the emerging Global Information Infrastructure. Finally, Mr. Lehman says he wants to issue the definitive report from this working party early next year. I understand the need for that in terms of the American administration, but I do wish there was more time to take more soundings in Europe and perhaps elsewhere to make sure the NII becomes part of, not master of the Global Information Infrastructure. Thank you, Mr. Chairman, for the opportunity to present these views on behalf of the British Copyright Council. MR. LEHMAN: Thank you very much for coming all this way and sharing those views with us. I think Ms. Southwick has a question. MS. SOUTHWICK: I'm sorry, this is actually a little beyond what you spoke about, but I wondered if you had any experience with the law in the UK that prohibits the manufacturing of devices that defeat anti-copying techniques. MR. BARLAS: Indeed. We have this law. In fact, there is another part of our law, 17-2 of our Copyright Act, which actually makes it a restricted act to load anything into a computer. So the digitization of material itself is a restricted act in the UK. Personally, I don't have too much experience of that part of the law, but I think it is something that we do think is important, and I think I understand why you are asking it. It is the question of having, I think, what are technically known as Dongles in computers that prevent getting around copyright protection systems. Does that answer your question sufficiently? I certainly think it is something that we approve of. MR. LEHMAN: If there are no other questions, thank you very much. Next, I would like to ask Ann Harkins, Co-Director of the Creative Incentive Coalition to come forward, please. ANN HARKINS: Good afternoon, Mr. Commissioner and members of the Working Group. My name is Ann Harkins and, along with Joe Waz, I represent the Creative Incentive Coalition. CIC consists of copyright owners, proprietors, and users who came together to preserve the incentive to create embodied in our copyright system and to improve public understanding of the importance of copyright to our economy and to our society. In that spirit, CIC is pleased to participate in this hearing. The Green Paper provides a thoughtful analysis of existing copyright protections and how they might be clarified to address emerging technologies. CIC applauds the Administration's recognition of the critical role of copyright in the development of the NII. Every participant in the NII, those who build the wire line and wireless networks and the equipment attached to those networks, those who create the information and entertainment products that flow across the networks, and those who consume those products all benefit from the Constitutional mandate that the creative incentive should be preserved. Two hundred years of strong copyright law provides the groundwork for creative expression, the free flow of information, and technological advancement that are the hallmarks of our society and of the world. These attributes, in turn, lay the foundation for the information superhighway. Ultimately, the value of the NII, its ability to deliver social progress and economic growth, will depend directly on insuring strong copyright protection. In the Administration's vision, the NII is an advanced communications and computing system that will enable people to access information and communicate with each other easily in any medium, anytime, anywhere. This broad vision depends upon the availability of creative works, and it is copyright that provides the incentive for that creative genius to flourish. Many of the works that people will access via the NII are copyrighted -- the books, newspapers, magazines, and scientific journals that students, scholars, disabled people, the elderly, and the public at large will read on their TV screens or computers; music and sound recordings from symphonies to rap to books on tape that people listen to; the art works from distant museums and exhibits that people will enjoy at home; the reference works, databases, and information products that scholars, government officials, and business people rely upon to conduct research, enhance their performance and make plans and decisions, as well as the software that enables them to do so; the American films and television programs that are favorites around the world; the video games that provide entertainment and education to people of all ages; and the as-yet unconceived multimedia creations that we will all enjoy. The creative copyright community invests time, talent, effort, and billions of dollars each year in creating and distributing these works. Our copyright system provides time-tested, flexible mechanisms for promoting the dissemination of these works across broader audiences. It also provides the opportunity for copyright owners to recoup their enormous financial and creative investments. It must be preserved. There has been a lot of talk in this debate about haves and have nots. I think it is important to remember that if we don't protect a copyright, we will all be have nots, because the content will not be provided. The NII provides both a promise of the wonderful, exciting future and a threat of abuse to copyright owners. Digital networks will make it faster and easier to transmit copyrighted works. Copying and other forms of infringement will be easier, cheaper, and harder to detect. Digital technology also makes it easier for the integrity of copyrighted works to be compromised. In addition to significant concerns about infringement, tampering with copyrighted works could harm those relying on the integrity and authenticity of the information they use. The CIC has made specific comments in its written paper with regard to the individual recommendations of the Working Group. Let me just mention a few today. Transmissions via network result essentially in the copying of the work and the distribution of copies to each of the receiving computers or storage devices. While CIC notes that transmissions via networks are considered reproductions under current law, we agree with the Working Group that a clarifying amendment may be appropriate. With regard to the proposed analysis of the primary purpose or effective transmissions, we would suggest that that might be something you would want to spend a little more time with as it is kind of an ad hoc subjective analysis. We agree with the Working Group's recommendation to clarify that the first sale document does not apply to the sale or other disposal of copied works by electronic transmission. There is much discussion of technological fixes, if you will. Chips that will prevent the copying or reproduction or distribution of certain kinds of works. CIC would simply like to urge you to support and encourage the private sector to develop encryption techniques, systems for encoding and identifying works, and other technologies that permit or enhance the ability of copyright owners and proprietors to control the distribution of their works. Yesterday, during the Fair Use Conference, and last week in Los Angeles, a question was raised about mandated technological protection systems. CIC would like to reject that notion and suggest that the Government should accommodate rather than mandate. CIC agrees with the Working Group's recommendation that the Copyright Act be amended to prohibit manufacture and distribution of devices as well as the provision of services that defeat or circumvent anti-copying or other copyright management systems. The international sphere -- as a general matter, we would observe that the way that America handles the broad range of intellectual property issues raised by advanced information infrastructures will set an example for the world. If we do not ensure that intellectual property is well protected here, other nations surely will not feel compelled to offer stronger protections. And our country as a major net exporter of works protected by copyright would be the biggest loser. We applaud Commissioner Lehman's approach about education and educating the public about copyright. At yesterday's Fair Use Conference, educators in math and science articulated beautifully that greater understanding of and respect for copyright in the digital age will help, because each one of us has the potential to be the beneficiary of copyright protection. The Working Group's Green Paper has already made an important contribution to public awareness. Plans to convene a forum and help develop educational curriculum will take us farther. This important effort should not be delayed for completion of the final report or the ongoing conference on fair use. Respect for the property of others, whether tangible or intangible, can be taught at every level of our society. High school students may not want to do the exegesis of tests on fair use, but they can certainly be told that copyright is cool and begin to understand why. In a piece this morning on NPR about the Creative Incentive Coalition and its efforts to promote understanding about copyright, it ended with the music from "Mission: Impossible." Let me just remind all of us why we must make that possible -- that education effort you have undertaken and the importance of copyright to be inculcated at every level of our society. Copyright industries make a large and growing contribution to our economic welfare and to our balance of payments in the international trade. The core copyright industries grew at close to three times the rate of the economy as a whole between 1977 and 1991. Total copyright industry employment in 1991 stood at 4.8 percent -- 5.5 million people -- or 1 in every 20 jobs. This economic and job growth will be enhanced by the NII if the law protects the property rights of those who create and distribute copyrighted works. Generating the content that will fuel the information pipeline will require billions of dollars of investment. That investment risk will only be taken if copyright is secure. CIC remains committed to working with the Working Group and the Information Infrastructure Task Force to understand the importance of copyright in the development of the NII, and I would be happy to answer any questions. MR. LEHMAN: Thank you very much. You were here, I think, and heard the two previous witnesses from the United Kingdom, and something has come up. We heard from an organization called the Artists' Rights Foundation in Los Angeles, which testified last week there, and we particularly heard from our European colleagues that we don't give enough credence to moral rights in the United States and that moral rights are particularly necessary because of the ability to modify and change works and so on in a digital environment, and I wonder if the Creative Incentive Coalition has any advice or thoughts on that issue? MS. HARKINS: Well, we have stated briefly in our written comments that we think that your approach with the international/national treatment is a good idea. The Coalition itself has not taken a specific position on moral rights. MR. LEHMAN: Mr. Linn, from the National Institute of Standards and Technology. MR. LINN: If I understood you correctly, you commented on the analysis of what constitutes transmission and commented that that was rather ad hoc. Would you elaborate on that? MS. HARKINS: Well, a test as to the primary purpose and effect would end up making an individual analysis as to the purpose of an individual who was putting the transmission in play. I think that to do that analysis at every juncture or every potential infringement would result in an essentially non-enforceable situation. MR. LINN: Okay. Thanks. MR. LEHMAN: Are there any other questions? If not, thank you very much. Our next witness on the schedule list was to be Jay Ward Brown from the Newsletter Publishers Association, and he, unfortunately, is not able to be here. So, we can get back on our time schedule if Gary Shapiro, Chairman of the Home Recording Rights Coalition, would come forward. GARY SHAPIRO: Thank you, Commissioner Lehman and members of the Working Group. My name is Gary Shapiro. I am group vice president of the Electronics Industries Association, and I am also chairman of the Home Recording Rights Coalition. On behalf of both groups, I am pleased to appear again before your panel. It is our members, the members of the Electronics Industries Association, who will make the products that consumers will use to access the information superhighway. These products serve as the visible and tangible public link to the work of the creative community. The electronics industry will manufacture the hardware or the so-called information appliance which will receive, access, and store intellectual property. Our members' interest is simply in creating and selling products which consumers want. We foster new technologies by providing leadership and resources and setting voluntary technical standards and working with regulators to insure that these standards succeed. We have taken the lead in setting standards for television, including closed captioning and electronic broadcasting, and FM radio. We are involved in pending proceedings with respect to high definition television, cable compatibility, and digital audio radio. We set scores of technical standards a year, and that is why in part that intellectual property and the NII are very important to us. The Home Recording Rights Coalition, as you may recall, was formed in 1981 after the U.S. Court of Appeals for the 9th Circuit ruled that selling video recorders to consumers was contributory copyright infringement. The Coalition includes manufacturers, retailers, and consumers and others who are interested in personal, non-profit use of consumer electronics recording equipment. The Coalition has opposed legislation that would restrict the rights of consumers to make recordings at home for private, non-commercial purposes or that would impose general levies on home recorders or blank media. Several years ago, as technology posed new issues, the Coalition adopted basic principles for evaluating legislative proposals. First was consumer equity. Any regulation should primarily benefit consumers. Second is promotion of new technology. Government regulation should enhance access to new technologies. And third is legal certainty. The right to use and sell consumer recording products should be preserved and clarified. In accordance with these principles in 1992, we opposed the Motion Picture Anti-Piracy Act as unduly broad and vague and lacking any recognition of fair use. In the same Congress, we supported the Audio Home Recording Act which set a conditional recording access standard for digital audio recorders and digital audio interface devices. Most fundamentally, we believe that copyright law must remain primarily addressed to the public interest. It must balance incentives for proprietors and legitimate expectations of users. Nothing about the NII should upset this balance. With respect to home recording of entertainment, the Home Recording Rights Coalition believes that neither law, policy, nor technology has offered any cause for departure from the principles and holding of Sony v. Universal City Studios. We also believe that the Audio Home Recording Act, enacted in 1992 and favorably cited by the Working Group and several commentors, represents a careful and successful balancing of interests and policies that ought not be disturbed. In terms of some of the Green Paper proposals as to fair use, we are against any curtailment of fair use rights with respect to time shifting or video programming in accordance with present consumer practice. The Working Group suggests that consumers might be required in the future to pay for rights that are now freely enjoyed. With respect to home recording of entertainment, we see no evidence supporting such a contraction of fair use. In the past century, various creators of entertainment have tilted at each advance in technology from the radio to the television. Even recently, the audio tape recorder, the audio cassette recorder, the VCR, and the digital audio recorder have been opposed although they later brought new opportunities, markets, and revenues to entertainment industries. These benefits to the creative community occurred without any appreciable or necessary trimming of fair use principles or their application. The NII offers opportunities for new technical and contractual relationships among proprietors and users, hence new modes of authorization. The essence of fair use, however, is the ability to use or copy without authorization or liability. We believe that the availability of new authorization modes in some context should not change the essence or application of fair use. The Working Group draft seems to suggest that fair use may be scaled back because it is not really a right, rather it is an affirmative defense to claims for copyright infringement. In our view, fair use is not merely a defense to copyright infringement. Rather, fair use is the public's intellectual property magna carta. Rights that consumers now have should not be taken away. The social cost of interpreting and applying fair use principles through litigation has gone up tremendously. The fair use rights now in the Copyright Act were established by litigation. But today, a contributory infringement suit can proclaim life or death for a mass market product, or perhaps for an entire technology. It is for this reason that the Home Recording Rights Coalition adopted the third principle that any new legislation should preserve and clarify consumer recording rights. I am still a lawyer and I believe that litigation has its place. Law suits directly addressed to commercial conduct, for example, the unauthorized mass duplication of computer programs for commercial advantage, may be both predictable and efficient in their result. But when consumer products and practices are tested through a suit for contributory infringement, the outcome for the manufacturer may depend upon the conduct of others and how it is measured and evaluated. Thus, the prospect of litigation often leads to empty shelves frustrating manufacturers, retailers, consumers, and the creative community. Therefore, in addition to favoring the preservation of fair use principles, we favor approaches that would minimize the reliance on contributory infringement suits for testing and applying these principles. As to the draft provision on technological circumvention, we have concerns about the preliminary draft's technological circumvention provision because it could be applied to devices for home recording. Our problems are similar to those we had with the Motion Picture Anti-Piracy Act. We are fundamentally concerned over any anti-circumvention provision lacking a definition or reference to a positive technical standard. We also believe the draft proposal is lacking in three basic respects related to fair use. First, the draft attempts a facsimile of fair use by stating the authorization can be construed to exist as a matter of law. Yet the essence of fair use is that it need not be authorized. Second, the draft does not provide for any way to actually secure fair use for its approximation to consumers. Third, the draft relies for enforcement on and encourages copyright infringement litigation which, in so far as we are concerned, is a step in the wrong direction. We supported the Audio Home Recording Act because it contains an express exemption from copyright bay suit. It also relies on a technical regime with characteristics lacking in a draft proposal. These characteristics are, one, positive technical standards against which compliance can be measured. Second, compatibility with existing and future technologies, compatibility among technical protection schemes, and reasonable cost of implementation. The draft proposal, by contrast, allows any copyright proprietor to apply and require full compliance with the copy protection scheme without regard to cost or whether that system is compatible with the existing technologies or even with other technical protection schemes. Third, systems must operate without degrading quality of either the original or the copy. Copy protection schemes in the past have been found to interfere with the quality delivered to consumers. Yet, under the draft provision, compliance would be mandatory, even with technical protection systems that degrade quality. The Audio Recording Act protects customary fair use rights by defining the circumstances in which restrictive codes may be applied. The draft provision has no such definition. Devices are either legal or they are outlawed. If a device is outlawed for one use, how can it still be sold for another use, even if those uses were held to be fair. This is a flaw with making a right to technical protection a part of the copyright right. Fourth, the Audio Recording Act also exempts from copyright suit the products it covers. It is enforced instead by unique remedies crafted for and appropriate to the purpose. The Working Group draft provision cannot accommodate such an exemption from suit unless and until it firmly defines the technology and product it covers. Finally, before the Kory Act, Congressional committees inquired into the licensing status of mandated technology. If conformance to proprietary technology is to be mandated, Congress should consider the potential consequences. Congress could decline to mandate conformance with technologies that are proprietary or it could assure the availability of licenses on reasonable, non-discriminatory terms. Neither outcome is available if the law simply makes the right to impose a mandatory technical scheme a part of any and all copyright rights. As to the paper's new exception to the first sale doctrine, we question the fairness and workability of the new exception proposed. Electronic purchasing and distribution of copyrighted materials may supplement or ultimately replace traditional sales channels such as record and video stores. The methods of delivering books or movies to the consumer should not determine whether they are covered by the first sale doctrine. Likewise, the method used by consumers to lend or resale their copies of such books or movies should not matter for the purpose of the first sale doctrine. Of course, if electronic transfers are used for commercial piracy, copyright proprietors already have legal recourse to assert claims of infringement. As to the proposed transmission right, we question whether the new right of transmission is truly necessary. Transmission, logically, is merely a species of distribution. Indeed, the Working Group observes that courts already find current law sufficient to impose liability for infringing transmissions as a violation of the distribution right. The preliminary draft would redefine the transmission right as a type of reproduction so as to limit defenses and rights traditionally available. But before any new rights are created, one should consider whether actual harm to copyright interest justifies disturbing the balance between claims and defenses. The fact that a right technically can be curtailed doesn't mean that it should be curtailed. In conclusion, we appreciate the efforts of the Working Group to engage the public in a critical review of the adequacy of existing laws in light of new technologies. Like other commentors, we of course have specific concerns. But we applaud Commissioner Lehman and the rest of the Working Group for so rigorously opening up this initiative to public comment. We look forward to continuing to participate in the process. MR. LEHMAN: Thank you very much. Ms. Southwick? MS. SOUTHWICK: I had one question, Mr. Shapiro. When you talk about amendment of the first sale doctrine and that the first sale doctrine should not depend upon how the consumer receives the product, were you reading our amendment to say that if you received the work through a transmission that the first sale doctrine would not apply? MR. SHAPIRO: Well actually we spent a little bit of time trying to figure it out, and I am sure that it will be clarified in the future. But for example, if you paid $20.00 to buy a book in the book store, you know that you can lend that book out. If you paid $20.00 to receive that book through an electronic transmission, does your right to lend that product out all of the sudden go away? And that is the type of question we have. MS. SOUTHWICK: If I can just clarify one point. This has come up in the hearings before, and our intention with the amendment to the first sale doctrine was simply to clarify that the further distributions that are available to consumers under the first sale doctrine would not include distribution by transmission, since they would not be parting with the copy they received. When they further transmit it, they would be retaining a copy, and therefore, the first sale doctrine would not apply. It has nothing to do with the means by which they received the copy. You could receive a copy through a transmission and still exercise your first sale. MR. SHAPIRO: I appreciate that. But if I purchased an electronically transmitted book, does that mean that I do not have the right to elect to retransmit that then to someone else, even if I delete the copy in my stored area? MS. SOUTHWICK: Well, as we wrote it in the preliminary draft report, yes, because in fact you are not further retransmitting the copy that you purchased. Right. The first sale doctrine would not apply. But the first point that you made in your prepared remarks, I think, was a misinterpretation of what we said about -- it doesn't matter how you get it. If you get it through a transmission, you can still take advantage of the first sale doctrine, just not by further transmission. MR. LEHMAN: Does anybody else -- ? Yes. MR. DINTZER: Based on this clarification, what would your organization's position be? MR. SHAPIRO: Well, we are very -- our history with the first sale doctrine is we spent a few years in Congress protecting it for video rentals and it certainly, I think, made a difference in the ultimate evolution of the VCR and the creation of video stores. So we would look very carefully at that first sale. We will provide further elaboration in the written comments. MR. LEHMAN: Anybody else? If not, thank you very much. Mark Bohannon from the Technology Administration has just joined us Next, I would like to ask Allan Arlow, President and Chief Executive Officer of the Computer and Communications Industry Association to come forward, please. ALLAN ARLOW: Thank you. Good afternoon. My name is Allan Arlow, I am president and CEO of the Computer and Communications Industry Association. I appreciate having the opportunity to present our members' views on the Working Group's Green Paper on intellectual property. CCIA is comprised of video manufacturers and providers of computer information processing and communications related products and services, and our members will be involved in all aspects of the NII as providers of content and information services and as terminal and storage equipment manufacturers and as providers of many other services and products not yet commercially available. We commend the Working Group for its role in bringing about a vigorous public debate on the issues arising from adaption of the current concepts of intellectual property to the digital era. We believe that intellectual property rights, especially copyrights, will be important in insuring the growth and viability of the NII. IP rights not only provide creators with incentives to create, but also promote the sharing of vast amounts of information and ideas to the good of both the general public and other creators. CCIA believes that the future viability of the NII depends on the appropriate balance between the protection of the rights of copyright owners and the public interest. While much of the Green Paper is constructive and positive, due to brevity of my statement I do not have time to discuss the many important recommendations made by the Working Group with which we concur. Rather, I will confine my remarks to those areas where we feel the Green Paper fails to undertake a full examination of all of the IP issues involved in employing and building the NII. Any examination of IP and the NII must not only examine the impact of intellectual property rights on content providers, but also the impact on the development of transport infrastructure and the many users, public and private, of this future network of networks. Moreover, CCIA believes that unobstructed market entry typified by open systems and interoperability is central to the development of the NII. In my remaining allotted time, I would quickly like to touch on four areas that we found to be a problem in the Green Paper. They are the infringement liability for service providers on the NII, the proposed amendment to the first sale doctrine that was just discussed and I will be glad to provide my comments on later, fair use, and interoperability. Our written submission also highlighted our serious concerns with the technology protection chapter of the Green Paper and some international issues, which we do not have time to go into today. Although the Green Paper discusses case law relating to contributory and direct infringement as well as defamation cases, it does not analyze the impact of these cases on the development of the NII. In fact, the authors seemed to suggest that mere transportation of works across the NII should trigger either direct infringement liability or the requisite knowledge for contributory infringement liability. We are very concerned about the implications of such a position, if that is indeed the case, because some NII service providers may be mere passive conduits, simply acting as a pipeline through which works travel under the command of subscribers or users. If the law sets too strict a level of liability for contributory infringement on NII service providers, then the NII will be crippled in its infancy. By supplying two-way interactive systems, NII service providers will have thousands, if not millions, of digital transmissions occurring simultaneously. All of these communications are potential copyright infringements. Without protecting them from suits for contributory infringement, the NII will be nothing more than one nationwide, one-way, broad band system for passive viewing and the United States will have missed an opportunity to immensely improve the lives of its citizens and the productivity of its work force. We recommend that certain passive transport or common carrier exceptions similar to one presently available to cable companies under Section 111(c)(3) should be considered by the Working Group for certain new services that would be offered to NII service providers. An example of such a service would be video dial tone, a basic platform for delivering video programming to end users. This service, which the telephone companies will make available, will be offered to multiple service providers on a non-discriminatory common carrier basis. Although CCIA did not discuss the Working Group's proposed changes to the first sale doctrine in our earlier written submission, I would like to take a moment to explain why, after further consideration, CCIA disagrees with the Working Group's recommendation that it be added to a Section 109(a) of the Copyright Act and the statement that the first sale doctrine does not apply to the sale or other disposal of the possession of the copy or former record of transmission by transmission. As you know, the first sale doctrine essentially allows the purchaser of a particular copy of a work to dispose of it as he or she pleases. In the Green Papers the authors state that in the case of transmissions, the owner or a particular copy of a work does not dispose of the possession of that copy. While it may be true that in some cases a transmitting party may choose to send a copy of a downloaded work and at the same time keep a copy of the original, it is also true that the transmitting party can erase his or her own copy of the work. In the second case, the transmitting party holds only a copy temporarily while viewing the work on a computer screen. We see no reason why the first sale doctrine should not apply to this second example. I would like to point out two examples of the negative impact of this proposed modification of the first sale doctrine. Many NII service providers plan in the coming months to sell products via digital transmissions that are just as tangible as any product purchased in the store. NII service providers will provide the customer with the opportunity to purchase a movie by downloading a copy onto video tape. Most on-line computer services provide the user with the opportunity to download software to their computer for a purchase fee. If this change in the first sale doctrine was made, it would jeopardize a consumers legitimate right to further distribute a lawfully acquired and paid for copy of a downloaded movie or file, choking off an important new method of distributing works in the emerging NII. A new industry designed to revolutionize the way we live cannot flourish if we base our laws on a presumption of public criminality. While it is laudable that the Green Paper attempts to link universal access to the NII with fair use access by schools and libraries to works on the NII, the Green Paper has two significant deficiencies. It leaves the reader with the inaccurate impression of the limits of fair use and it fails to fully explore the current stated fair use law and the importance of fair use to all works in the digital era. As a result of the Green Paper's primary focus on education and library uses, the Working Group recommended the convening of a conference solely on fair use of copyrighted works by and in public libraries and schools. We understand that such a conference took place yesterday. And although we believe that issues related to fair use of copyrighted works in the academic and public library arena are important, we also recommend that the Working Group convene a broader conference. One which focuses on the applicability of fair use to all works, be the uses commercial or not. I would like to make two final points about the Green Paper's treatment of fair use. Interestingly, and perhaps not surprisingly, the paper does not discuss a number of significant court cases that have found reverse engineering in general and disassembly in particular to be permissible fair uses, Atari v. Nintendo and Sega v. Accolade. Second, the Green Paper examination of the four statutory factors of Section 107 of the Copyright Act appears to conclude that only transformative commercial uses and most educational uses are fair uses. Moreover, the Green Paper elevates the commercial nature of the use to a presumption against a finding of fair use. We cannot agree with the Green Paper's narrow interpretation of fair use, either from the perspective of the 1976 Copyright Act, the legislative history accompanying the Act, or from our review of recent Supreme Court decisions interpreting the fair use doctrine. The High Court made it quite clear in Campbell v. Acuff Rose that there is no presumption that a commercial use is unfair. In Campbell, the High Court stated that by giving virtually dispositive weight to the commercial nature of the parody, the Court of Appeals was in error. Lastly, the CCIA believes that the Working Group missed an important opportunity to provide some guidance on the relationship between intellectual property and standards. By devoting only a page to the subject, the Green Paper neglects one of the most fundamental building blocks of the NII, interoperability. As one of the founding members of the Corporation for Open Systems, CCIA believes that unobstructed market entry and vigorous competition are central to a viable NII. Full and open competition on the NII and the benefits that the public will derive therefrom are achievable only through open systems and interoperability. We believe that one of the greatest barriers to the development of the NII would be the existence of proprietary interfaces and certain critical points along it. Proprietary interfaces can hinder both competition to the owner of the interface and competition among providers of non-competing services that attach to the interface. Certainly, every company should have the opportunity to develop its own proprietary implementation of the interface specification. However, broad intellectual property rights and critical interface specifications will permit companies to control access to the interface which in turn will allow them to lock in customers and lock out competitors. Ladies and gentlemen, I realize that my time is near up, and therefore, I would like to conclude by thanking the Working Group for holding these public hearings and we stand ready to work with you to improve the recommendations in the preliminary draft of the Green Paper. And we appreciate the opportunity of having been here today. Our members do have considerable technical expertise, and we would be pleased to provide that aspect of our knowledge to assist the Working Group. Thank you. MR. LEHMAN: Thank you very much. You have a question? MS. SOUTHWICK: One quick question. When you say you are concerned about proprietary rights in critical interfaces, are you suggesting that -- one, when is something critical, I guess is one of my questions -- and two, that those who create these critical interfaces should be denied or have their intellectual property rights taken away if it becomes critical? MR. ARLOW: I think one of the aspects in determining how one determines a critical interface is to look at various constructs of what the network looks like. I believe that a paper was done along these lines a little while back which discussed or identified certain places, for example, between a piece of terminal equipment and the network, between computer and software, and the like. And there are a number of Working Groups throughout the telecommunications industry, for example, and at various places in the software industry that work on various standards. The way I try to explain it to lay people is to talk about the fact that people should be able, obviously, to copyright the design of a couturier suit or dress, but the idea of a hanger upon which everybody has to put their clothing should be something which is not, you know, owned by one particular party. And so what we are saying is that there are going to be various groups which are going to be getting together to try to design these standards and that people who come up with these interface standards should be working through these groups to make it possible for everybody to put their materials on that. MS. SOUTHWICK: Right. But if they don't, and then they don't agree to that, are you suggesting a compulsory license or a complete denial of intellectual property rights in their works -- or what? MR. ARLOW: I think that as we see the public interest develop, we are going to have to see certain balances. This may require compulsory licensing in some cases. It may very well be that as you deconstruct, so to speak, the aspect of a creative endeavor, that you are able to discern which portions of those should be protectible and which should be available to the general public. I think what is going to happen is you are going to have to see as a need to serve the public interest that certain aspects may have to be balanced off because traditionally we have seen that rights that vest in an individual with respect to creation are there to support a larger public interest right. That the right to own a creative product is not one which is completely absolute but which is a function of the public interest. And as we grow this network and it has to be available to people rich and poor, we have to make sure that there is a certain balancing act that takes place in this process. MR. LEHMAN: I think Dr. Linn from NIST has a question. MR. LINN: Your industry participates in voluntary standards and you were one of the initial members of COS, are you suggesting that you don't believe the voluntary standards process is going to address open public interfaces for the NII? MR. ARLOW: What we hope is that voluntary processes will be satisfactory for this purpose. I think sometimes there is a role for Government to play. Not in mandating practices but in merely having a jaw-boning effect of sitting in and observing the process. I think what that does is it keeps people from occasionally sandbagging so that while they are slowing down the process of collegiality, they are trying to get an edge up in the marketplace. MR. LINN: Thanks. MR. LEHMAN: You know, Mr. Shapiro referred to the need for positive technical standards and in view of what you have just said, is there a role -- or perhaps should there be a statutory role, maybe even an advisory role or something more -- built in for the National Institutes of Standards and Technology? MR. ARLOW: I think it is worthwhile for them to have, perhaps, a participatory role, a role to watch. I would hope that we don't come to a situation where somebody has to stand in and do it like binding arbitration. That is probably the closest thing I could describe and, of course, that is probably a pretty sloppy analogy to describe how you come to some kind of conclusion with respect to that. But I think that they should be aware and be able to sit in on the process although I don't think it should be one where they mandate the process. MR. LEHMAN: Well, one of the reasons I asked that is I think that the FCC has been -- in terms of setting technical communication standards for communications equipment, the FCC has been pretty successful over the years, and we don't have anything like that in the copyright side and yet increasingly we are being told by people that standards are necessary for the exchange of copyrighted works. And that is why I suggest maybe there should be some similar kind of standard-making entity. It seems like we already have one, sort of, in this, but they would have to be given some regulatory role. MR. ARLOW: The extension of interface standards to the area of copyrighting I think is something beyond my individual area of expertise and I have to defer to our copyright counsel who would be able to navigate the ins and outs of that a bit better than I. MR. LEHMAN: Thank you very much. Oh, sorry. MR. DINTZER: Based on what you said about the first sale doctrine, a potential outcome of something like this would be an on-line second-hand store where it would buy used software, videos, and then distribute them on-line as well. And I was wondering, would that fit into an acceptable thing in your framework? MR. ARLOW: I would -- answering my question, I would think yes. What comes to mind is the fact that my daughter shops at a store in Evanston, Illinois called Secondhand Tunes where she buys CD recordings, tapes, and the like. And I would imagine that, as I said, if you don't have a presumption of criminality in society, if you assume that people given the opportunity will follow the law, that you have to look at the NII as another means to distribute. The example which I was going to give with respect to VDT and the transmission of a copyrighted work would be that, for example, let's say I want to buy a copy of the movie Cinderella and give it to my nephew or niece who live out in Seattle. What I would do would be to call them up on the telephone and say your Uncle Allan is going to be sending you a movie as a present. And then I would be able, for example, to purchase it from the local Blockbuster for whatever the price was to purchase the movie, have it downloaded into my computer, digitized, resend it to my brother who lives out in Seattle to give to his child and then erase the copy because I would have no use or want for it personally and because I would be purchasing it under the idea that I would be forwarding it to my niece and nephew. And perhaps I couldn't drop it in the mail because I was running a little late and had forgotten their birthday or whatever. And that would be an example of where I would see a use of the NII well outside of what you have described in this doctrine. MR. LEHMAN: Thank you very much. Next, I would like to ask Robert Oakley from the American Association of Law Libraries to come forward, please. ROBERT OAKLEY: Good afternoon. My name is Robert Oakley. I am the Director of the Law Library and Professor of Law at the Georgetown University Law Center. I am here this afternoon testifying on behalf of the American Association of Law Libraries. The major points in my remarks have also been endorsed by several other library associations including the American Library Association, the Association of Academic Health Science Library Directors, the Association of Research Libraries, the Medical Library Association, and the Special Libraries Association, as well as by the National Humanities Alliance and the Commission On Preservation and Access. I have submitted a fuller version of this statement for the record. Information about the organizations that have endorsed my remarks is appended to that version. The American Association of Law Libraries would first like to commend the Working Group and Commissioner Lehman for confronting and providing a forum for the discussion of some of the most difficult issues involved in creating the National Information Infrastructure. I will address three areas raised by the draft report. First, the proposal to expand the right to disseminate a work to include dissemination by means of transmission, second, the issues related to access to information by users and libraries, and third, issues of licensing. First, we have not been persuaded by the draft report that an expansion of the distribution right to include transmissions is needed. If, however, such a right is created, we believe that it must be balanced by appropriate limitations to insure access to information by information users and libraries. The draft report proposes to amend the distribution right to include distribution by transmission. It is said that this change is necessary because "it is not clear under the current law that a transmission can constitute a distribution of copies." But other parts of the report make it clear that such a change is not needed. For example, on pages 36 and 37, the report argues that it has long been clear under U.S. law that the placement of a work into a computer's memory amounts to a reproduction of that work. The report then sets out several allegedly infringing examples, including uploading, downloading, and transfers over the network, and concludes that in such cases there is an infringement of the reproduction right. Moreover, on page 44, the report argues that most works on the NII are protected by the public display right. The report concludes that when any NII user visually browses through copies of works, a public display occurs and that virtually all NII uses would appear to fall within the laws current comprehension of public display. Finally, the report points out on page 40 that one court construed the downloading of digitized images as implicating the distribution right, even without the proposed expansion. Taken altogether, we believe the Working Group has not made a clear and convincing case for expanding the distribution right. As the report itself shows, such allegedly infringing activities as may be conducted by transmissions are already protected under the reproduction right, the public display right, or the distribution right. Under the circumstances, we see no justification for adding to the exclusive rights of copyright owners. If nonetheless the Working Group still wishes to expand the distribution right, we believe the change must be accompanied by limitations to insure access to information by library users. The library community has consistently argued that with the exception of the preservation sections of Section 108, that part of the statute authorizing certain library activities is neutral as to format. An interlibrary lending transaction that is otherwise lawful is not rendered unlawful merely because the delivery mechanism is electronic rather than paper. Representatives of the publishing industry do not agree with this analysis. If a new right is added now to give copyright owners the right to control distribution by transmission, it will be important for libraries and those whom they serve to define how the legitimate functions of libraries fit into the new right. Our second concern is that the report should include a more explicit discussion of the needs and rights of information users and libraries. Libraries are essential to the American democratic society where education and learning are available to all, not just to an aristocratic elite. This idea that anyone in America can get the information they need simply by going into a library is threatened by the kind of technological controls over information now being developed and discussed at length in the draft report. If implemented, these controls will potentially give copyright owners a complete monopoly, allowing them to dictate who will have access to information and on what terms. Gone will be any notion of fair use. Gone will be libraries serving the community. Gone will be a society without an information elite. In its place we will have a society where users who can afford to pay will pay by the screenful. These systems are poised to insure the construction of a society of information have's and have not's based solely on the ability to pay. We believe it is essential to use the law to gain control over these systems and to reaffirm the rights of information users to the fair use of information on the NII and the rights of libraries to meet the needs of their users. To that end, we commend the Working Group for its recognition that fair use will continue to exist in the NII. We further commend the Working Group for its statement 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 in their schools and public libraries. But fair use is more than browsing. That is simply the floor below which fair use cannot fall. We recognize the difficulty of defining fair use in a new environment. Because of that, we were disappointed that the issue was originally relegated to a one-day conference. We were pleased, therefore, to learn that the fair use conference is not intended to have several meetings. It is critical to take the time necessary to insure a reasoned approach to this difficult problem. If the issue cannot be brought to a conclusion under the auspices of the Working Group, then we do recommend the formal creation of a CONTU-2 to address the problem. Beyond fair use, we believe that the Working Group should go further than it has to address the issues concerning the legitimate activities of libraries under Section 108 of the Act. In my testimony before you last year, I explained that the limitation of the preservation sections of 108 to single copies in facsimile form was hindering the progress of library preservation efforts. The preservation problem is nothing short of a national cultural crisis. Virtually everything printed or written on paper since the 1820's is deteriorating and the life expectancy of the paper is substantially less than the duration of copyright ranging from 50 to 75 years. It is quite literally true that in many cases the copyright laws are protecting works far long than the books themselves will survive. National preservation standards require a minimum of three copies, an archival master, a use master, and a use copy. Plainly, these widely accepted standards exceed what is permitted under Section 108 of the Act. Moreover, technology is moving away from microfilm and toward digital technology as an accepted means of preservation. As a result, Sections 108(b) and (c) have become basically irrelevant to the problem of preserving the historical record of America. These sections must be amended and strengthened to allow libraries to proceed lawfully with this important work. Finally, as stated before, the rest of Section 108 is neutral as to format. We must, therefore, disagree with the blanket conclusion of the Working Group that Section 108 does not permit libraries to convert printed works to digital format without the authority of copyright owners. Section 108 speaks only in terms of copies. Excepting B and C, it does not say copies in facsimile form. It does not say copies but not electronic copies. We believe the section is clear. So long as the library is operating within the limits authorized by the statute, the library may make copies in any format. We urge you to change this statement to more accurately reflect the text of the statute. Third, we agree with the Working Group that licensing will be an important means for resolving many of the issues concerning the use of proprietary works in the electronic environment. We don't agree, however, that statutory licensing should be eliminated from the discussion at such an early stage. Licenses have come into increasing use for library acquisition of all types of electronic information. However, too often such licenses fail to take into account uses permitted under the Copyright Act. Licenses should not be used to contract around otherwise legitimate uses of proprietary material. Further, we do not agree with the Working Groups conclusion that additional compulsory licensing of intellectual property is neither necessary nor desirable. We do not wish to be read here as necessarily advocating a new statutory license. Rather, we think it is simply too early in the discussion to have reached that conclusion and to remove one of the options from further consideration. The models of the Audio Home Recording Act and other forms of statutory license are interesting and ought to be discussed. Again, we thank you for the opportunity to participate in this forum. We look forward to continuing to work with you and others as this important discussion continues. Thank you. MR. LEHMAN: Thank you, Mr. Oakley. Does anyone have any questions? I want to thank you for the specificity of some of your recommendations, because while we have heard from some of the other library associations of their concerns, you have been particularly specific in yours, and it helps us to do our work better and I appreciate that. MR. OAKLEY: Good. MR. LEHMAN: Thank you very much. With that, we are running about ten minutes behind. Maybe we can take a five minute break instead of a ten minute break and be back in about five minutes. (Whereupon, at 3:11 p.m. a recess until 3:19 p.m.) MR. LEHMAN: I'd like to ask Lucretia McClure from the Medical Library Association and the Association of Academic Health Science Directors to come forward, please. LUCRETIA McCLURE Good afternoon. My name is Lucretia McClure. I am Librarian emirate of the Edward G. Minor Library of the University of Rochester Medical Center in Rochester, New York. It is a privilege to be here and to present comments on the Working Groups report, Intellectual Property and the National Information Infrastructure. The Medical Library Association and the Association of Academic Health Sciences Library Directors have endorsed the testimonies of the American Library Association and the Association of Research Libraries that were presented at the Chicago and Los Angeles hearings. My comments today represent the views of the Medical Library Association and the Association of Academic Health Science Library Directors and address the role of librarians and the NII in support of our nation's health care. The Medical Library Association is a professional organization of more than 5,000 individuals and institutions in health sciences information. MLA members serve society by developing new health information delivery systems, fostering educational and research programs for health sciences information professionals, and encouraging an enhanced public awareness of health care issues. Through its programs and publications, MLA encourages professional development of its membership, whose foremost concern is dissemination for those in research, education, and patient care. The Association of Academic Health Sciences Library Directors is composed of the Directors of 142 accredited U.S. and Canadian medical schools belonging to the Association of American Medical Colleges. Its goals are to promote excellence in academic health sciences libraries and to insure that the next generation of health practitioners is trained in information seeking skills that enhance the quality of health care delivery. These two health sciences library associations agree on these following issues. First, balance. The rights of users and the rights of creators of information must be balanced in the National Information Infrastructure. The use of information is a basic right guaranteed by the United States Constitution and furthers the purpose of copyright to promote the progress and the useful arts. Second, access. Access to information in the NII will be diminished unless the policy maintains the rights of the public presently established in areas of fair use, classroom use, and library use. The draft report suggests that copyright owners will have unlimited protection for their property in a digital environment, and the public can obtain it only at a specific price. Access to information and knowledge is essential for the health professional in the practice of medicine and is equally important to the individual citizen seeking information concerning his own health. Third, CONTU. We were delighted to learn yesterday that there will be a continuing conference on fair use guidelines and the Medical Library Association is pleased to participate. We also join the other library associations in requesting that in the future a second permission on new technological uses of copyrighted works be established. The present copyright law is technology neutral and therefore may be applied to intellectual content, whatever the format or container of information. A new commission would benefit all concerned by preparing guidelines for library and fair use of electronic transfer and distribution of information, just as it successfully did for borrowing materials from other libraries, making copies for library use, et cetera. I have been a practicing librarian in a health sciences academic library for 30 years and have had the opportunity to see how physicians, nurses, researchers, and students use information and literature. Existing knowledge is the very foundation in which research is developed, on which young people learn, and on which patients receive treatment. Research on availability and use of health information in hospital libraries provides evidence that use of that information contributes to higher quality care of patients, to reduction in the number of laboratory tests, and to shorten length of hospital stay. One such study conducted in 15 hospitals in Rochester, New York area showed that 98 percent of the physicians agreed that having current information led to better clinical decisions. Surely, this is an example of the value of information to health professionals and the patients they serve. Continued availability of information must be maintained for the benefit of the citizens of this country. Fair use and specific library reproduction and distribution rights must be retained in the NII. The Clinton Administration indicates that libraries and educational institutions will play a major role in assisting the public in the use of resources available over the NII. My understanding of the administrations goal is to connect every school and library to NII by the turn of the century, thus insuring that students and citizens can tap NII for job and health information, for access to the world's great libraries, and for democratic participation. This access will not be possible if the rights of citizens are limited because the format in which the information is contained has changed. The copyright law allows fair use of the intellectual content of materials, and that must not change because the container is electronic rather than print. It is essential that researchers, students, health professionals, and the general public be able to use the on-line equivalent of their current opportunities to browse through copyrighted works and to exercise their fair use rights in making individual copies of quotations, brief extracts, or journal articles for fair use or scholarly purposes. Let me give you an example. Today, a medical student comes into the library to read and study. Then he picks up a scientific journal. He can scan through the whole issue, take notes on anything he needs, perhaps read one or two articles. Then he finds something that is of great value to him and he makes copies of those pages for further study. That is his right under fair use. If that same right is denied him because that material comes in an electronic form, then that student will be denied that information and we will have failed to provide for him the resources needed in his education. Librarians have a long tradition of upholding the principles of copyright. As a practitioner, I consider it part of my job, as do my colleagues, to inform our faculty and students of their rights under fair use and to encourage them to use these rights to the fullest. I also clearly and specifically identify for them their responsibilities in the use of intellectual property. Librarians take seriously their obligations in working with information, knowledge, literature, and its transfer and dissemination and that will not change because technologies bring new modes and formats. In closing, I would emphasize that we are just at the beginning of a powerful means of enriching the lives of our citizens through the expansion of information access and delivery via the National Information Infrastructure. We recognize how valuable this can be in the realm of health information. Therefore, we must not allow the wonders of technology to limit the rights of users to benefit from the potential that is the NII. The Medical Library Association and the Association of Academic Health Sciences Library Directors appreciate and thank you all for the opportunity to comment on the draft report. We stand ready to work with others in the library and scholarly communities to develop a policy for the Information Infrastructure that will strengthen the constitutional purpose of copyright and benefit all of our citizens. Thank you. MR. LEHMAN: Thank you very much, Ms. McClure. Are there any questions? I want to thank you for your comments and again thank you for the specific examples that you gave about fair use, because that is the sort of thing I think that we need to flesh out and it was always our intention that the Fair Use Conference -- we wouldn't just have one session, but in fact we would start to break the issue down into Working Groups that would actually be able to deal with the very kinds of factual circumstances that you outlined, and then hopefully develop some common understanding about what fair use is in that area, much as we have now in print. That was always our intention. And we would also like to say with regard to the issue of exclusivity, one thing you learn in a process like this is that how much -- even given all the modern communications and all of our language skills that are so highly perfected today -- how there can still be a misunderstanding about things. And certainly I don't believe that the Working Group believes nor are we recommending that copyright owners have perpetual exclusivity over everything forever. The copyright right is basically an exclusive right, and there have always been exceptions to it. It is not perpetual. It doesn't last forever. We are basically simply trying to adopt traditional principles which are balanced in our country to modern technology. So we will take a very close look at our rhetoric in the report and see if we can't give it some more balance before we issue the final report. MS. McCLURE Well, as you may know, the medical library world has been at the forefront of using technology in its libraries and wants to be right there with the rest of the world in taking advantage of what those technologies can bring. We are just concerned about the fact that in all of our reports we hear a lot about authors and publishers and manufacturers and other people, but we don't hear a lot about the students. So I wanted to make a point today that we need to consider what this kind of information means to the student and the fact that he must have access to it. MR. LEHMAN: Thank you very much. Next I would like to ask Nicholas Alexander Lowe, Director of Legal and International Affairs for the Performing Rights Society of the United Kingdom, to come forward. NICHOLAS ALEXANDER LOWE: Good afternoon. My name is Nicholas Alexander Lowe. And as you said, I am Director of Legal and International Affairs at the Performing Rights Society in London. The Performing Rights Society is the British equivalent of ASCAP or BMI or CISAC. I am a solicitor of the Supreme Court of England and a solicitor of the Courts of Ireland. May I deal, please, with two points on the preliminary draft, and first, the international aspects. The NII is unlikely to remain national for very long, if ever. Two principle issues arise because of its international aspects. Firstly, how rights are to be accorded to the works of foreign authors? Should they be on the basis of national treatment or the basis of reciprocity? And secondly, how to span the differences between the droit d'auteur, the system in continental Europe, and the Anglo-American systems. Your recommendation in the preliminary draft is that rights be accorded on the basis of national treatment. I agree with that. To do otherwise would be contrary to the Berne Convention and would rapidly, in my view, produce chaos. Reciprocity would not work. Information will be so freely flowing that to have to check on each occasion that transmission takes place what rights were granted in the country of the author would be administratively impossible. At page 139 of the preliminary draft, you refer to the need to span the differences between the Anglo-American system and the droit d'auteur. This may seem daunting, but actually is not. The problem should not be overstated in this regard. The UK and Ireland are the only two countries of the European Union which have the Anglo system, if I may call it that, yet the directives of the European Commission apply to all member states. We have had recently the cable and satellite directive, the rental directive, and the term of protection directive, all of which are copyright directives, and there are more in the pipeline. The directives are commonly misunderstood. They are not laws. They are merely instructions. I say merely, but they are in fact instructions given by the commission to the governments of the member states and which have to be interpreted by those governments and then enacted into their domestic laws. Britain and Ireland has to enact the directives in accordance with the Anglo-American system and the other countries enact them in accordance with the droit d'auteur. The system works and those who over stress the difficulties forget the realities. The proof of the pudding is genuinely in the eating in this case. These international aspects lead me to my next point. The copyright law has a number of bases. The Constitution of the United States, the Statue of Queen Anne, the Berne Convention, to name a few. But there is a thread which runs through the Anglo-American system and that is that copyright is not just one right. It is a bundle of rights. The right to perform in public. The right to copy. The right to publish, and so on. These rights can even have different owners. So it is clear that they are distinct and separate and can co-exist together. They are only collectively referred to as the copyright. That principle seems to be under attack in the preliminary draft. In your recommendations at page 122, you propose that when a transmission over the NII may constitute both a communication of a performance and a distribution of a reproduction, then one of the rights should be excluded from protection. The criterion for which right should remain protected is the primary purpose or effect of the transmission. Now may I make four comments on that which I hope can shed some light on my concern. Firstly, I am not qualified to comment on U.S. law, and I hesitate to do so. But on the plain reading of the English language in the law, the existing law appears to be perfectly satisfactory as it stands. I can tell you that our researchers in the UK, which is the other element of the Anglo-American system, leads us to the conclusion that the performing right in the UK is sufficient as it stands in the context of the new technologies. Secondly, to exclude one right simply because two may apply to a particular act is contrary to the whole basis of copyright law. That copyright is a bundle of different rights, all enforceable, all distinct, and with the possibility of separate owners. Thirdly, how is the decision made on primary purpose or effect of transmission to be taken? And when is the test to be applied? Is it to be taken prior to the transmission so that the relevant right owner has the opportunity to license, or is it to be after when the effect may be known but when it may be too late to license the act in question? Or is it to be taken say a week later or a month later, when any copy may have already been raised having been listened to once or maybe never at all? It seems to me that this could be a recipe for chaos. Fourthly, as I said earlier, the NII will rapidly give way to the GII. Suppose it were possible to send signals by satellite directly into homes on each side of the Atlantic? This is just around the corner. It is already possible in the United Kingdom to receive signals on cable simultaneously with their transmission in Atlanta and in New York. So direct to home is just a short step away. If the transmission takes place in the United States, the primary purpose or effect test will have to be applied, and it may be applied so that no public performance takes place. If the transmission comes the other way, if the broadcast is from the United Kingdom, it will be a broadcast under English law, and it will be licensable as part of the performing right. So what you end up with are two identical acts in the GII where the transmission is going one way in one case and in the other way in the other case, which would have different results. And I would submit that there is a great danger there that if you end up with two different results within the same GII system, then again chaos could occur. Those are my four points, Mr. Commissioner. Thank you for giving me the opportunity to present them. MR. LEHMAN: Thank you very much. Are there any questions? If not, thank you very much for sharing this. It is a wonderful thing about the modern world that we can have public hearings in one country and share information and hear from citizens of another. Next, I would like to ask Jessica Litman, Professor of Law at Wayne State University, to come forward, please. JESSICA LITMAN: My name is Jessica Litman. I am a professor of law at Wayne State University. These are my views, not the University's. I want to thank you for giving me the opportunity to speak this afternoon. I have filed written comments on the Green Paper, and I know we are short of time and it is a very long day. So I am not going to repeat any of the points I made in those comments, but I want to add a couple of additional things. First, copyright law has never given copyright owners control over all of the uses of their works. Instead, the law has given copyright owners exclusive rights over uses that lend themselves to public commercial exploitation. So in 1790, copyright owners had the exclusive right to print, reprint, publish, and bend. Today, they have the exclusive rights to reproduce, adapt, distribute, perform publicly, and display publicly. Rights over essentially consumptive uses, like the right to read or see or listen to or discuss or think about or lend or resell or display privately or perform privately are rights that have been reserved the public. That is copyright laws essential balance. The public gives copyright owners exclusive rights that encourage them to create, develop, and disseminate protected works, but it keeps for itself the rights to make uses of those works. And that is how copyright promotes the progress of science in useful arts. The distinction is what Professor Ray Patterson refers to as the distinction between use of the copyright, which is owned by the copyright owner, and use of the work. The right to use the work belongs to members of the public. So the public is not giving out copyrights to encourage authors to appropriate all of the rents that a given creation might yield. The copyright system is designed, instead, to assist authors in earning enough profit to first of all enhance the creative environment enough to stimulate them to create works in the first place, and second to encourage them to make their works available to the rest of us. If they make a killing, that is great. But it isn't the system's purpose. Copyright rights are limited because the system is designed to benefit all of us in a variety of creativity enhancing ways. My basic objection to the draft report is that as I read it it does not seek to preserve that balance. Indeed, it actively seeks to upset it by enhancing copyright owners control over individuals ordinary uses of protected works. Okay? The Green Paper does this in some cases by suggesting amendments. We have heard some comment today about the recommendation that the first sale doctrine be repealed in connection with transmissions and also some comments in connection with the recommendation that devices or services that assist people in defeating copy protection be completely prohibited. The Green Paper does this in other cases by marginalizing statutory privileges as less significant than they are or should be. As with the crab treatment of the fair use doctrine, and we heard a lot of comment about that. And it does this finally by endorsing controversial interpretations of current law, most notably the Green Paper presents the 9th Circuit's opinion in MAI Systems v. Peak Computer that an actionable reproduction occurs whenever a work is loaded into a computer's random access memory, as in line with clear, well-settled case law when it is not. The draft report then uses that characterization as a springboard for converting acts that under the statutory scheme ought properly to be viewed as displays and in most cases private displays into copyright infringements. Now, for the most part the Green Paper doesn't acknowledge that its view of the law is giving copyright owners rather more control over uses of their works. So it doesn't justify its choice to take from the public rights and privileges that the public currently has. And to the extent it does offer reasons for enhancing rights in the copyright bundle, it relies on arguments, again, that we have heard repeated today that stronger copyright protection is required in order to entice authors and copyright owners to make their work available over the NII. And I doubt that. The report's working model for the NII is the current Internet now. As members of the Working Group or the audience who have made use of their Internet access are no doubt aware, whatever deficiencies the Net suffers from, and there are many, there is surely no lack of content. Usenet News all by itself is probably the world's deepest time sync, and there is, in addition, a lot of high quality commercially distributed material on the Internet and paid subscriptions to on-line Internet access services are increasing at an absolutely astonishing rate. Of course copyright owners were prefer to have the strongest possible protection for their intellectual property. That goes without saying. I attended the public hearing you had in Virginia last November and I heard a variety of representatives of copyright owner interests testify that they wanted and needed the strongest possible intellectual property protection. The Green Paper endorses just about every single request that I heard copyright owner interests make without any indication that those requests were subjected to critical scrutiny to ascertain that they were, in fact, in the public interest. And so notwithstanding all of the praise that witnesses today have heaped on the report and the Working Group's efforts thus far, I would like to suggest that the Working Group rethink its role somewhat. Current stakeholders have very able lawyers. Some of you had extraordinarily distinguished careers as lawyers for current stakeholders before you became public servants, and you know how persuasive and effective your former colleagues can be. This past November, a bunch of them made requests to enhance their client's shares of the intellectual property pie, typically at the expense of individual members of the public. What I think is needed now is for someone to act as the copyright lawyer for the public. To examine these proposals as one would if the public had retained one as its copyright lawyer and said here is a proposal. Is this in my interest? The library associations are here purporting to speak for the public. And surely, they speak for the public's ability to use the NII and libraries. The NAB has filed comments purporting to speak for the public and it will surely press the public's interest in watching free broadcast television over the NII, but nobody involved in drafting this report seems to have seriously examined the interests of the public in general, and that surely needs to be done before the Working Group can come up with a workable legislative proposal. Okay, let me tell you finally the sorts of concerns I believe a copyright lawyer for the public would raise. Instead of repealing the first sale doctrine in the context of transmissions, I believe an attorney for the public would seek to strike that. Instead of marginalizing fair use to a minor privilege defined by expressed limitations and specific guidelines spelled out in an unyielding multi-party negotiation, I believe the public's copyright lawyer would seek to enhance it. Instead of endorsing a view of the law that portrays every single appearance of a protected work in a computer's random access memory as a potential infringement, I believe that the public's copyright lawyer would seek an amendment expressly privileging individuals using their computers for ordinary reading, viewing, or listening to authorized copies of copyrighted works. And instead of proposing a broad prohibition of devices or services that defeat technological copy protection, I would expect the public's copyright lawyer to seek to distinguish between legitimate and illegitimate uses for such devices, and to be careful to preserve the public's ability to use them legitimately. I thank the members of the Working Group for their time. MR. LEHMAN: Thank you very much. Now you have heard a couple of the previous witnesses from the United Kingdom talk about the droit d'auteur system and the U.S. copyright system. You heard the witnesses from the United Kingdom talk about the difference between the European system, the droit d'auteur system, and our system. Generally speaking, the droit d'auteur system provides even greater rights for the copyright owner, and indeed really doesn't have this concept of balance. When we tried to get a Global Information Infrastructure in which we have some common understanding between the Anglo-American system, and particularly the American system, and the European system, how do you fit your concept of this very strong right of the public which really doesn't exist in the European system? How do you fit that into the global system? Should we just go our own way and not worry about the Berne Convention or what? MS. LITMAN: In fact, most countries other than the United States don't necessarily cover transmissions in their copyright systems rather than their neighboring right systems. And while they have stronger rights in the sense of reproduction rights and indeed performance rights, and indeed a stronger moral right and right of integrity than we have here, there are ways in which the United States system of rights is much stronger. What we are going to have to do is figure out a way to adjust all of our loss to each other because we are an international community. But I think it is not accurate to depict U.S. law as more limited, especially with regard to new uses and new technologies than its European counterparts. MR. LEHMAN: Any other questions? If not, thank you very much Next I would like to ask Charles D. Ossola from the American Society of Media Photographers to come forward, please. CHARLES OSSOLA: Good afternoon, Mr. Chairman and members of the panel. I appreciate the opportunity to be here. I am ASMP's general counsel, and I represent that organization on matters related to protection of rights of its members under the copyright laws. ASMP is the nation's leading trade association of professional photographers working in the publication arena. Founded in 1944, ASMP's 5,000 members throughout the United States and 37 countries produce the world's finest publication photography. The work of ASMP members has been for over 50 years and continues to be published in magazines, newspapers, books, and now every other conceivable type of media and means of transmission including CD ROM and computer networks. All categories of copyrightable works have their unique qualities and photography is no exception. Since photography's distinctive characteristics are directly relevant to creation and operation of a National Information Infrastructure, I will preface my specific remarks about the draft report with a brief discussion of the unique qualities of photography. Its most distinctive characteristics are its universality and versatility. By universality, I refer to the power of photography to communicate information, emotion, and perspective without regard to and without constraint by the language, nationality, race, age, ethnic origin, sexual orientation, or political or philosophical inclination of either the photographer or the person who sees his or her image. Photography is, in short, a type of universal language that everyone speaks and that in turn speaks to them. It is photography's universality as a medium of communication that creates its other distinguishing feature, its versatility. Photography created for one purpose can be used and is used for any number of other purposes without ever changing the image. In this sense, photographs are strikingly different from text, which almost always has to be edited or adapted in order to be usable for another purpose. A memorable photograph of the U.S. Capitol, for example, may be shot for a reference work but can be used as is for a calendar, travel brochure, corporate report, or CD ROM product, all without taking the time or trouble to change the photograph at all. This presents opportunities and problems for photographers, especially when photographs can be and are scanned with the aid of digital technology and are easily integrated into a broad array of commercial products. Photographs, because of the distinctive qualities to which I refer, are among the most infringed of all of copyrightable works. At the same time, photographers are among the most vulnerable copyright owners due primarily to two factors. One is simply the sheer volume of copyrightable works produced by this country and indeed the world's photographers, particularly those shooting for publication, as do ASMP members, they can and do create more copyrightable works in a day than most authors do in a year or even in a lifetime. Each active ASMP member produces many thousands of copyrightable works a year and hundreds of thousands over a career. The sheer volume of this creative output, again, presents special and unique challenges for photographers seeking to protect their intellectual property. Second, photographs largely exist outside of the copyright registration system. There is no central repository of the many millions of photographs created each year by publication photographers, either in the copyright office or anywhere else. Since the critically important remedies, statutory damages, and attorney's fees are, as the law now stands, entirely dependent upon registration of copyrightable work prior to infringement, photographers find themselves without the remedies to protect their rights. If the Copyright Reform Act pending before Congress is enacted, photographers will at least have the remedies necessary to safeguard the integrity and commercial value of their works. But even if that bill is enacted -- and Mr. Chairman, it is fiercely resisted by many of those testifying before this tribunal -- photographers will in no doubt remain, in Barbara Ringer's words, among the most vulnerable and poorly protected of all beneficiaries of the copyright law. It is with this perspective that we offer the following comments on the draft report. First, ASMP supports the proposal to amend Section 106(3) to make explicit the distribution of works by transmission as an exclusive right of the copyright owner. Photographs are now transmitted to customers and users via electronic means and ASMP expects that reliance upon computer networks to review photographs and to obtain those for which a license is needed will steadily grow. ASMP has itself acted to facilitate this process of transfer by transmission by creating a subsidiary of the Media Photographer's Copyright Agency that was established to promote the licensing of millions of photographs owned by ASMP members into electronic and print media. Transfer of these images will occur through computer disk at the outset, but on-line transmission will shortly be underway in early 1995 to publishers, multimedia producers, and other users of photography. The transmission right is going to be necessary in order to enable transmission of photographs to be adequately protected. Second, ASMP urges the Working Group to expand it examination of the implications of the NII to include the effectiveness now and in the future of the remedies provided for under the Copyright Act. As ASMP has made clear during its support of the Copyright Reform Act, most photographers and indeed most individual creators in this country are effectively excluded in the registration system and now lack the remedies needed to protect themselves. Even if the pending legislation is enacted and statutory damages and attorney fees become available to all deserving litigants, the question of whether the Act's remedies are workable and effective in the NII will be an enduring one. Already, it is questionable in our view whether the Act's current remedies, even including statutory damages and attorney fees, are as a practical matter effective when an infringement has been committed through a computer network. While recent decisions such as the Frena case suggest that the operator of the network is liable, there are many unreported cases in which ASMP has knowledge of widespread infringement through networks that are not pursued because there is no practical and affordable way to pursue them. For example, it may be possible to identify the hundreds of persons that downloaded a photograph put on the network by an unauthorized party, but it is often impossible to determine what uses, if any, were made by those who downloaded the image. Not only is the prospect of suing hundreds of persons on the network uninviting on its face, it is economically infeasible because they might well be determined to be innocent infringers in any event. Rights and remedies are, and always have been, inexplicably intertwined in copyright as in other areas of the law. The Working Group is looking hard at whether we need to redefine rights in the digital age, and has rightly concluded thus far that we should in certain respects. It should now go further and examine whether the remedies available for copyright infringement should be changed to adapt to the new environment. Closely related to remedies is whether other means of assuring compliance with the copyright laws need to be devised or encouraged. That is ASMP's purpose in creating NPCA. To offer users an effective affordable means for licensing photography into new consumer and commercial products. It may be that enforcement by individual copyright owners becomes increasingly impractical. And the collective licensing mechanisms must be relied upon to induce computer network users and other users in the digital age to comply with their obligations under the copyright laws. The long history of antitrust battles that marked collective licensing of music in the past is not, however, an inviting prospect for the future. If collective licensing by individual authors is to occur, the question of antitrust immunity will have to be examined, and we respectively suggest that it begin to be examined by this panel. ASMP has two specific proposals with respect to the Working Group's recommendations. First, the removal or alteration of what the draft report refers to as copyright management information and of copyright notice should be actionable in civil litigation under the Copyright Act. ASMP reads the draft report as proposing to subject these practices to criminal liability only under Section 506. Given the great difficulty in persuading Assistant U.S. Attorneys to pursue or indeed pay any attention to criminal enforcement actions against copyright infringers, this amendment is likely to be only marginally useful in practice or as a deterrent. If removal or alteration of a copyright notice or other indicia of ownership can be challenged in a civil action under the Copyright Act with a full panoply of remedies available under Sections 102 through 105, then respect for these notices may over time be encouraged. Secondly, and lastly in terms of our specific suggestions, we encourage the panel to look closely at the derivative work right under Section 106(2), particularly with respect to how derivative work liability will be determined in a digital environment. It is easy and inviting to take a digital copy of a photograph and manipulate it such that no reasonable fact finder would view the end result as substantially similar. Yet the prevailing law is that substantial similarity must be proved before infringement under derivative work right can be found. As the technology and case law now stand, the person performing this manipulation will probably have to make an intermediate copy and may therefore run afoul of the reproduction and display rights. But that is not always true, and indeed we have found it not to be true in situations in which the party having the copy has at least an implied license to make a digital copy for purposes of editing or colorization or whatever else it may do. It may then go beyond that implied license to create a digitally manipulated image, and this is not limited to photography, that does not resemble to the naked eye to the ordinary observer the original, and indeed is not substantially similar as the law is now defined. We think that under current law, it might be difficult to maintain that that is, in fact, a violation of the derivative work right. And obviously we have our point of view if a photograph is manipulated and used for another purpose as to whether it is or isn't. MR. LEHMAN: Is that a derivative work then? It is almost as if you have taken the alphabet and rearranged the letters differently -- the same alphabet that someone else used. Is it really a derivative work if there is no substantial similarity at all? It certainly is not in competition. How is it violating any of the rights of the original author? MR. OSSOLA: I think you are raising a fair question. I think if the work is based on -- if you start with a digitized photograph that has a beautiful beach scene and you end up with a beautiful beach scene with cars on it and other people inserted in it and the sky is changed and the clouds are removed and other digital manipulations done, and this is happening all the time, is that a derivative work under the current definition? Is it based on? Sure it is. Sure it is a derivative work. I think it depends on what you do with it. But what I am positing is a situation which is now common, and which we expect to be more and more common, in which the starting point is the digitized image. What comes after it is based on it quite literally. Whether doing that is actionable, I think is something given these vast powers and this digital media is something that is happening and needs to bear looking at. Is it or should it be an infringement? I think that is the question the panel might want to examine. I think now it might be quite difficult to say that is a violation of the derivative work right. With that, I will stop, and if there are any questions, I will be happy to entertain them. MR. LEHMAN: Thank you very much. I assume that you don't agree with the previous witness then that there is a public interest that constrains us to go the other way and offer more or freer access to photographers' works. MR. OSSOLA: Mr. Chairman, I think that the access is distinguishable from use, particularly commercial use. And I think that what you are hearing from not only the organization that I represent, but from other copyright owners is not the review of access of information, whether it be an image or other copyrightable work, but rather its use. I think that certainly if someone is previewing photographs for use in a commercial product, the process of previewing them is something that, in fact, ASMP through its subsidiaries is seeking to encourage it. But when that preview leads to use, and why preview unless use is intended, and that is just not limited to photographs, that is where the concern arises and the invitation to do that and the ease with which it can be done and the lack of effective remedies for dealing with consequences which greatly concern us is something that I think this panel should look hard at in terms of its recommendations, particularly in the area of remedies. MS. SOUTHWICK: I just have one question. Because of the use of the substantial similarity test by courts when you have a derivative work situation, do you think, under current law, the derivative works right is subsumed by the reproduction right, as it is interpreted? MR. OSSOLA: I think as it is interpreted now, the answer is yes. MR. LEHMAN: Thank you very much. MR. OSSOLA: Thank you very much. MR. LEHMAN: I would like to next call on William Ellis, Washington Intellectual Property Counsel to IBM, testifying on behalf of the Computer and Business Equipment Manufacturers Association. WILLIAM ELLIS: Mr. Chairman, my name is William Ellis. I am the Washington Intellectual Property Counsel for International Business Machines Corporation. I appear before you today on behalf of the Computer Business Equipment Manufacturers Association -- CBEMA. I would like to thank you for allowing CBEMA to comment orally on the IP Green Paper. CBEMA represents the leading U.S. providers of information technology products and services. Its members had worldwide revenue 259 billion dollars in 1993. They employ more than one million people in the United States. We congratulate you on your comprehensive and thorough analysis of the intellectual property issues which must be considered in our national debate on the National Information Infrastructure. We believe there are three areas of law and policy, each of which is identified in the draft report, which must be considered for the NII to become a functioning reality. First, the law should create incentives for authors and creative individuals to produce both the content that will be distributed on the NII and the tools for accessing that content. That means the hardware and the software that in aggregate will comprise the infrastructure. We believe and agree fully with the draft report that intellectual property laws are the best means to create these incentives. Second, once the network is created, products and tools will be put on the network only if the right holder is assured that its works and services will not be misappropriated. This can involve applying encryption or other access control device to the content and then making the content available to the approved user through the network upon authorized access. And we fully support the draft report's recommendations in this area. Third -- well, I will skip that. We fully endorse the draft report's two principle themes and conclusions. They are: rights accruing to authors under our intellectual property laws are not determined nor are they diminished by the fact that the work is acquired in digital form and delivered by means of transmissions. We fully agree with the Working Group's principle conclusion that a major overhaul of our intellectual property system is not necessary to assure the efficient evolution of the NII. We also strongly endorse its fundamental conclusion that only with minor clarifications and amendments, copyright law is adequate to ensure the availability and protection of works and materials on the NII. We agree with the draft report's conclusions that the technological means must be implemented as early as possible to mitigate the exposure to misuse and misappropriation of the works made available through the networks. We support the draft report's recommendations for technological means to guarantee the integrity of works and to urge immediate action in this area. In our minds, the first and indispensable step to ensuring that information networks are replete with content and services is to provide the rights holders the means to ensure the integrity of their works and products and services. We believe there is a strong public interest in ensuring that works distributed over the network are treated the same as works distributed through other means. To do otherwise would kill any motivation to create works for the network. Digital delivery of a work through a network does not alter the fundament rule of copyright that reproduction, modification, and distribution of an author's works may only be done with his permission. In sum, we believe that the form of a work -- digital, analog, or otherwise -- should not determine rights in the work under the copyright law. Nor do we see any public interest that would change the role of patented technology in the NII. We support the continued reliance on the well-established voluntary standards systems to provide NII standards. The voluntary systems already maintain the sound patent policy of requiring a right holder that agrees to have his patented technology incorporated into a standard to also agree to negotiate licenses on reasonable terms and on a non-discriminatory basis. Unfortunately, some treat intellectual property issues in the NII discussion as a collateral issue, a poorly understood matter which stands in the way of a more important objective. These attitudes are simply wrong. Intellectual property protection is the very foundation for the NII, providing necessary incentives and rewards for the development of the infrastructure and the content and the technology. We do have a very specific comments on the report. We fully support the explicit recitation of the transmission right and the copyright law. We have viewed such an amendment as a clarification of something that is already in the law rather than an addition of a new right. Note, though, that we do not believe that it is helpful to tie the operation of the transmission right to whether or not it is made to the public. Likewise, we support the explicit recognition that copies of works distributed by transmission across U.S. borders into the U.S. is an importation. Regarding the amendment to the definition of publication in Section 101, we believe that such tinkering must be done with care. It must be clarified that not every work distributed over the network will be subject to the mandatory deposit provisions in the Copyright Act. The right holder must be able to clearly retain the right to maintain a work as unpublished and to conduct private transactions. We support the limitation of the copyright first sale doctrine to make it explicit that the doctrine does not grant a right to transmit or retransmit. We strongly support the draft report's recommended amendments to make it a violation of the Act to import, manufacture, and distribute devices which are used primarily to defeat technological devices that protect the work against infringement. Owners of works will simply refuse to put their works on the network unless they feel confident that there will be a low potential for the misappropriation of their works. But the Act should not lock right holders into using any one copy-protect technology to the exclusion of others. We support the proposed changes in Section 101 and 506 regarding the protection of copyright management information. However, care must be taken to ensure that any and all copyright management activity is purely voluntary on the part of the right holder, and that includes any dealings with collective administrations -- which must be set up by the marketplace and not by the Government. Regarding possible changes to the fair use doctrine for students, educators and libraries, we believe that the current balance of rights between developers and users is the correct one. Any shift in this balance must be done with great caution and only after full public debate. We support the draft report's finding that compulsory licensing of intellectual property rights is not only not required, but would be counterproductive. The marketplace should be allowed to develop whatever legal licensing systems may be appropriate for the NII. The Working Group should consider what means are necessary to establish that the on-line contracts and electronic signatures used on the NII are fully enforceable. Such clarification will be necessary to facilitate growth of content on the NII. A business simply cannot be conducted without valid, enforceable contracts. Internationally, we strongly support the draft report's statement that national treatment must be applied to all rights, now or hereafter granted, in respect of literary and artistic works. We note, however, that unless these rights and their enforcement are relatively uniform from country to country, particularly with respect to the transmission right, so that authors can be assured that their works will be protected across borders, authors simply won't authorize the transmission of their works on the NII or the GII. Regarding standardization, we believe that there is a legitimate role for standard setting as the NII develops in order to ensure the ability of systems on the network to exchange information without degradation of content. Our industry's experience indicates, however, that such standards are most effectively established through voluntary, industry-led efforts. The copyright and other intellectual property laws prevent the taking of privately owned intellectual property for use in standards, and we fully endorse that result. The owner of intellectual property must have the right to decline to have its property incorporated into a standard. To do otherwise would remove the marketplace checks and balances between the individual intellectual property owner and dominant industry groups. However, if the owner of proprietary technology does agree to allow the incorporation of his technology into an open systems NII standard, he must also agree that he will license that proprietary technology on reasonable and non-discriminatory terms. We thank you for this opportunity to comment. MR. LEHMAN: Thank you very much. Are there any questions? Thank you very much, Mr. Ellis, for your statement. Finally, John Kamp, Senior Vice President of the American Association of Advertising Agencies. JOHN KAMP: Thank you very much. Although I represent what people oftentimes think of as Madison Avenue, I spent the first decade of my professional life as a college professor. And the first thing I learned about 20 years ago was never, never, never teach a class at 4:00 in the afternoon, particularly on a rainy day. It is just too late to keep attention. So, I start by thanking you for your attention, and in return I promise you that although I am an attorney, I will use no polysyllabic words or Latin words. I won't preach to you. What I hope I can do is to give you some new thoughts that will cause you to want to stay awake on this rainy day. I will also be brief. I won't use up my time. If we have some questions, we'll go. First, the ad, in effect. The American Association of Advertising Agencies is comprised of over 2,000 offices throughout the United States. Although advertising is the defining occupation, advertising agencies provide a full range of marketing services to clients including public relations, direct marketing, and promotion. Currently, the 4A's agencies are in the forefront in the interactive marketing research and development, and they will provide significant service to clients as the interactive and other marketing opportunities made available by the information highway become a reality. Indeed, the 4A's is a founding member of the so-called coalition to support information and entertainment for free. And it is made up of several advertising trade associations and major companies, including Proctor and Gamble, the biggest consumer product manufacturer in the world. As you know, America's mass media are the envy of the world. They have evolved through the productive cooperation of advertising agencies, advertisers, broadcasters, cablecasters, the entertainment industry, telecommunications industry, and including the Government and panels like this. While the emerging media exemplified by the information highway will require new relationships, advertising and related marketing techniques will continue to play a crucial role in the delivery of valuable program service to American consumers. At the same time, advertising will continue to provide the constants it always provides, information to consumers most importantly, stimulating the development of new and innovative products and services and lowering prices. As in the past, the protection of intellectual property on the NII will be as critical to marketers as to everyone else in the new media. I will make a few comments in some of the most obvious areas, and I expect that the advertising community will be providing more specific guidance as this process goes along. Our primary message today is intended to be positive and supportive of the thrust of the Green Paper. We agree with the tentative conclusion that the intellectual property coat is getting a little tight, but it really needs alteration, not replacement. The essential theory that these property rights must be maintained in much the same way as in other contexts and other media is correct. Moreover, we agree that the standards that exist today for broadcasting similar media provide the appropriate grid for the eventual digital environment of the NII. However, we respect the fact that the new media may bring many new problems. We are particularly concerned that the thieves, thugs, and highwaymen, if you will, will be more difficult than ever to both identify and to apprehend in the new cyberspace. We also recognize that every new medium seems to bring out new versions of the same old scams and con games that ever before were known to men and women. Thus, as we expressed in a recent meeting with Janice Stieger, the Chairman of the Federal Trade Commission, this industry will cooperate with the law enforcers later, as well as the law and policy makers now, to try and keep the highway safe for both commercial and personal uses. Indeed, we are investigating the need to reinforce and perhaps make similar alterations, if you will, to our successful self-regulatory system that operates under the auspices of the National Advertising Division of the Better Business Bureau. As you know, advertising incorporates valuable intellectual property. The integrity of trademarks, copyright, art work, slogans, advertising claims must all be maintained. The protection of advertising copy and illustrations as well as all other aspects of brands and brand images are essential for advertising agencies and their clients. As the Green Report notes, the use of the NII will require that existing laws be reviewed and evaluated to ensure that the law will protect all intellectual property, both published and transmitted over the media. For example, product brand names and identifiable images must not be used on the NII without expressed permission. The opportunity for consumer confusion is very real, leading to harm, serious harm, underlying the basic product image. In closing, the advertising community is a major stakeholder in the security, integrity, and reliability of information transmitted on the NII. Marketing professionals have the technical, financial, and communication skills to meet the challenges of the new media and to ensure that it will become available to all citizens, including the so-called information haves and the information have nots. In the early days of television, people bought TV's, and television broadcasting became a modern mass medium because they loved the programming. Advertising made that programming possible. If the new media we concern ourselves with today are to become mass media, advertising must play a major role, and through your efforts the highway will be safe and secure for all. Thank you very much. MR. LEHMAN: Thank you very much, Mr. Kamp. Are there any questions? Thank you very much. That concludes our hearings this afternoon. We will reconvene at 9:00 in the morning in this same room for the final set of witnesses. (Whereupon, at 4:26 p.m. the hearing was adjourned to reconvene tomorrow at 9:00 a.m.)