PUBLIC HEARING
                                
                          at
               Andrew Mellon Auditorium
                   Washington, D.C.
                                
                                
                  September 23, 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

MICHAEL HOFFMAN, Department of Energy

MICHAEL S. SHAPIRO, National Endowment for the Humanities

TERRI SOUTHWICK, Patent and Trademark Office 


                     P R O C E E D I N G S


BRUCE LEHMAN:  Good morning and welcome to our last day of 
hearings on the preliminary report of the Working Group on 
Intellectual Property of the President's Information 
Infrastructure Task Force.  On behalf of Secretary of Commerce 
Ron Brown, I'd like to welcome everybody who's here at this early 
hour.

I'd also like to introduce the people on the Working Group or on 
the panel this morning and indicate that others may be coming as 
well.  The Working Group represents over 20 agencies of the 
Federal Government, and because of various schedules we can't 
always get everybody at every event at one time, but you can be 
assured that every agency represented on the Working Group will 
see the transcripts of all the hearings that we've had, in 
Chicago and Los Angeles and here, and they also will have all of 
the written comments as well for their review.  And the Working 
Group will be meeting to discuss and consider the various 
recommendations and changes and comments and so on that have been 
made to us during the course of these hearings on the Green 
Paper.

This morning, we have with us, starting from my left, Michael 
Shapiro, who is the General Counsel of the National Endowment for 
the Humanities; and Terri Southwick, who is an attorney in my 
office and is the principal draftsperson of the Green Paper; 
myself, Bruce Lehman, Assistant Secretary of Commerce; and 
Michael Hoffman from the Department of Energy.

Today's hearings will continue ones that we've already had, and 
will give participants an opportunity to air their views on the 
preliminary report and its recommendations.

In order that we can proceed expeditiously and finish this 
morning, we have asked each speaker to limit their time on the 
podium to 12 minutes.  This is necessary for us to ensure that 
everyone will get and have adequate time to present their views.  
A list of the witnesses was available at the table when you came 
in, and there's a schedule there of approximate times.  It's been 
our experience that we stick fairly close to those approximate 
times, but it happens that sometimes someone may cancel or we may 
end up engaged in a rather long dialogue with another witness 
asking questions, and so we can get off that schedule fairly 
easily.  And so we've asked that everyone be prepared to speak 
either a half-hour earlier or a half-hour later than the time on 
the schedule.

In order to proceed and to facilitate the hearing in a timely 
manner, we would request that witnesses at least sit fairly far 
down in the front so that you can come to the podium, when you're 
called, quickly.  This is a very large room -- much larger, 
obviously, than we need -- and it takes a long time to walk from 
the back.  We would appreciate it if witnesses would begin their 
testimony by identifying themselves and the organizations, if 
any, that they're representing.

There will be a computer screen here in the front, and when that 
computer screen is green, that means that you can begin your 
testimony and continue on with it.  It will turn yellow when two 
minutes are remaining, and then it will turn red at the very end.  
And when it turns red, at least unless we're involved in some 
type of questions with the panelist keeping you over, we'd very 
much appreciate it if out of courtesy to everyone else, if you 
would conclude your remarks at that time.

I would like to say also that we have extended the time for reply 
comments to October 21 of this year.  And if you want to read the 
comments that are -- have been submitted or you can look at them 
if you can go to the Scientific and Technical Information Center 
of the Patent and Trademark Office at Room 2C01, Crystal Plaza 
3/4, that's 2021 Jefferson Davis Highway in Arlington, Virginia.  
If you have any questions about the procedures or any of this, 
you can call Michael O'Neil, who is running the computer screen 
down here, for information about obtaining copies of the 
transcripts or anything that you might need.  His telephone is 
703-305-9300.

I don't think Ruth Ford is here this morning.  Ruth Ford is our 
press person.  If there are any press inquiries relating to this, 
you can call her at 703-305-8600.  And the fax number for Michael 
O'Neil is 703-305-8885.  You can call him or fax him, if you 
wish, to get a transcript of this hearing.  Those will be 
distributed.  I think it's for $25 each -- oh, we don't know what 
the fee is.  It depends on how much the cost of reproducing it 
is, but that will be available in about two weeks.  Also, it will 
be available on the Internet.  The actual written comments won't 
be available on the Internet.  Maybe eventually, we'll have that 
completely organized, but we haven't demanded that people give us 
their testimony in digitized form that's compatible with our 
system.  So for the time being, it's kind of hard to put written 
comments on the Internet.  Maybe in the future, we'll get that 
organized, but the transcript will be available of the hearing on 
the Internet.  Again, you can call Michael O'Neil for that.

Substantive issues should be addressed to Terri Southwick at 
703-305-9300.

With that, I would like to say, as we begin this last day of 
hearings, to re-emphasize that the Green Paper was a preliminary 
report, and I think the consensus now, as we enter our final, 
fourth day of hearings on this -- which have spanned the United 
States -- and we've heard, I think, really from every organized 
group that is affected by intellectual property and the National 
Information Infrastructure, and I think we can say that there's 
generally respect for our work, a realization that it was a 
well-meaning work product.  There have been people who agreed 
with it all.  There have been people who had extremely 
constructive comments and criticisms, and we will take those 
comments and criticisms to heart and study them very, very 
carefully.  I can assure you that the final paper that emerges, 
the White Paper, sometime after the first of the year, definitely 
will recommend -- you will see the influence of these hearings 
and these comments and the written comments on that White Paper.  

I think this is an excellent example of how democracy is at work.  
Yesterday, we got three people from the United Kingdom, and I'm 
really proud.  We have had a conference, an international 
conference of performing rights societies, here this week and 
we've had a number of people from other countries, and I'm really 
proud of showing off how our system works.  It can be really 
inclusive, but we hear everybody's point of view and we try as 
much as possible to take that into account in public 
policy-making in the United States.  And I really want to thank 
all of the -- I mean, there are many people that aren't here this 
morning that have been involved in the hearing, and I'd like to 
thank everybody for participating in this process.

Now, as we begin our last morning, I'd like to ask Steven J. 
Metalitz, Vice President and General Counsel of the Information 
Industry Association to come forward, please.

STEVEN METALITZ:  Thank you very much and good morning.  Ten 
months ago -- I know I should begin, actually, by introducing 
myself for the record.  I'm Steve Metalitz, General Counsel of 
the Information Industry Association.

Ten months ago, I had the privilege of being the first witness at 
the public hearing that this Working Group held on intellectual 
property and the National Information Infrastructure.  And my 
message at that point was that the Working Group was asking the 
right questions and that we were looking forward to working with 
you, to try to find some answers to those questions.

Today, I have the privilege of being the first witness at the 
last day of the hearings, which, as you've pointed out, Mr. 
Commissioner, have spanned the country.  And we've heard from all 
of the relevant parties.  And my message today is to tell you 
that, in our view, this process has been a great success.  And I 
say that not simply because the Information Industry Association 
agrees with many of the answers that you've given to the 
questions.  We do agree with many of those, although we have some 
areas of concern, but I think the message -- the reason for 
success -- is larger than that.  

I think you have succeeded -- this Working Group has succeeded in 
putting these issues on the map and putting them into the center 
of the debate over the National Information Infrastructure, 
rather than on the periphery, where I think it's fair to say they 
were ten months ago.  I think there's a broad consensus that 
these copyright issues must be addressed -- must be resolved -- 
if the National Information Infrastructure is to realize its full 
potential.  

That is not a new idea in this policy debate, but no group has 
done more than this Working Group to make it an established 
consensus, even among those who may disagree with some of the 
answers or more of the answers that you have proposed in the 
preliminary report to these questions.  So I did want to thank 
you for all the hard work that's gone into this report, that I 
know that the staff of the PTO -- Terri Southwick and others -- 
has devoted to it.  I think you can feel very proud of the work 
that's been done, and that it has been a success.

I've submitted written comments.  I've submitted them, along with 
90 other parties, so I will just briefly touch on a few topics 
this morning.

We fully agree with the Working Group that copyright and other 
existing intellectual property laws with some minor 
clarifications are up to the task of defining the exclusive 
rights and the legal remedies that apply in the digital 
environment.  IIA also agrees that advancing technology has a 
critical role to play in helping the participants in the 
information marketplace to manage those rights and to administer 
those remedies, for the benefit not only of information 
providers, but also for distributors and consumers of 
information.  Finally, we share your belief that effective 
education of the public about intellectual property rights is 
crucial to the successful development of the NII.

Let me turn briefly to the recommendations that your Working 
Group has made on statutory amendments to the Copyright Act.  I 
think it's important to emphasize, and I think the comments and 
the oral testimony reinforce this in force, that what the Working 
Group has recommended are clarifications of existing law.  I 
think this point has been misunderstood by some of the commenters 
and some of the participants of the hearings, and I think it's 
important to clarify it.  We've heard references to 
recommendations to expand exclusive rights, even recommendations 
to establish new exclusive rights.  I don't think that the 
Working Group has done any of those things.  It has, in fact, 
recommended some clarifications of rights that already existed in 
the Copyright Act, and that should be the lens through which the 
recommendations of the Working Group are viewed.

I think it's important for two reasons.  First, the 
Administration is very familiar in the international sphere of 
the problem of distinguishing between a clarification of an 
existing law and creating a new law, the problem of ex post 
application -- what will be the treatment of acts that take place 
before that clarification occurs?  The second reason I think it's 
important to stress this point is that sometimes some conclusions 
will be derived from false premises, if it's assumed that there 
are new rights and new exclusive rights created.  We've heard 
that it's also necessary to expand exceptions to exclusive rights 
in order to maintain the balance.  And I think that is a 
syllogism that proceeds from a false premise, because I don't 
think that the Working Group has intended to create any new 
exclusive rights.

To the extent that there is a value in amending the Copyright 
Act, to clarify the scope of exclusive rights, we have suggested 
that the Working Group consider looking at the reproduction 
right, the right to -- exclusive right to reproduce works in 
copies, as well as and, perhaps in preference to, the 
distribution right.  Many of the acts that are -- that give rise 
to the recommendation for clarification of the distribution right 
also clearly involve a reproduction of the copyrighted work, and 
the report very well summarizes some of the fact situations in 
which reproduction occurs.

We've got a few advantages into proceeding through the vehicle of 
the reproduction right.  One is it avoids the question of 
defining or debate over whether a particular distribution of a 
work has been made to the public, or whether even distribution or 
a performance has been made to the public.  Second, it may 
obviate the need for an expansion of the definition of 
publication which, as the Working Group notes, could have some 
problematic consequences with regard to mandatory deposit of 
works with the Library of Congress and in other areas.  The third 
advantage is that it may help to clarify the "first sale" 
situation somewhat, if the copy that is being received is viewed 
as a reproduction.  And fourth, the international impact may be 
positive of proceeding this way.

There is, unfortunately, not an international consensus on a 
distribution right.  Some countries in the Berne Convention do 
not provide for this and therefore do not provide for national 
treatment of distribution rights.  And perhaps a focus on 
clarifying the scope of the reproduction right, which all foreign 
countries do recognize, would help to advance the goal of 
achieving national treatment -- broader national treatment -- 
throughout the world.

Let me turn briefly to the issue of technological protection, 
which has been addressed in the statutory amendment proposals.  
The IIA agrees that the widespread use of encryption and other 
means of protecting copyrighted material from unauthorized 
access, reproduction or modification would go far to encourage 
widespread distribution of copyrighted material through advanced 
networks.  So we support the proposal to give a cause of action 
against those who manufacture or distribute products or perform 
services that are intended to defeat or circumvent these 
technologies.  We have proposed a couple of other items here.  
First, consideration of a noncopyright remedy as well as a 
copyright law remedy -- and there's precedent for that in the 
Communications Act and elsewhere.  And we know that some drafting 
questions have been raised about the scope of this provision, and 
we think those are worth serious consideration.

Just as important, perhaps, as the prohibition on circumvention 
of the anti-copying techniques, is the proposal on protecting 
copyright management information.  This type of information and 
technologies that embody it hold a lot of promise for the NII -- 
the promise of creating a very favorable environment for 
licensing transactions, drastically reducing the transaction 
costs that are involved.  So, it's just as important as 
protecting encryption.  It's the importance of protecting this 
copyright management information which will also be combined with 
the encryption.  The goal of copyright owners in this field is 
certainly not to prevent access to copyrighted material.  It is 
to encourage licensed access to copyrighted material -- 
authorized access -- and that's why this information is so 
critical.

We have proposed a few other points to look at in this field.  
First, whether there should be a civil action to protect 
copyright management information.  Your proposal is for a 
criminal offense.  Second, we've asked for a little further look 
at the concept of the digital linkage of copyright management 
information to the copyrighted work itself.  And finally, we 
encourage a somewhat more focused definition of copyright 
management information, so that this provision would protect what 
needs to be protected and not speak too broadly.

With regard to fair use, we were pleased to participate in the 
opening session of the Fair Use Conference earlier this week, and 
I won't repeat the comments that we made there, except to note 
that because of developments in technology, as well as 
developments in the marketplace -- the licensing practices, 
there's a very good prospect that the market will be shrinking 
the area which is necessary to resort to a fair use yardstick.  
And that yardstick is quite understandably frustrating, since it 
changes size and shape, depending on the situation in which it's 
invoked.  So the discussion of fair use should certainly proceed 
with that in mind.

On international questions, I think your report placed the proper 
emphasis on providing full national treatment throughout the 
world, and also the protection without any formalities, and the 
importance of establishing an internationally recognized 
distribution right or a right equivalent to that, whether it's 
for the reproduction right or distribution.

On technology questions, some of these were raised at the 
November hearing -- about standardization and copyright 
management and technology protection methods.  They were not 
addressed in the report, but certainly since the report, there's 
been a lot of discussion about a standardized copyright 
protection system along the lines of the serial copy management 
system.  We would encourage you to look -- to proceed with a 
great deal of caution in that area.  There are a lot of good 
reasons for the Government to abstain, at least at this point, 
from requiring any particular type of copyright management or 
protection technology.  There's a lot of competition and 
innovation in this field.  There's a very real security concern 
that was discussed at some length before the Security Issues 
Forum of the IITF.  And the analogy to the Audio Home Recording 
Act, we think, is not as close as some of your participants in 
this process have suggested -- the main difference being that 
that law dealt with a new technology just at its inception and 
here we have a very large installed base.  We already have, of 
course, not only a National Information Infrastructure, but one 
that relies to a greater and greater extent on advanced networks.

Finally, the question of education remains extremely important, 
but I think this Task Force has already made -- the Working Group 
has already made a very good start on that.  It used its bully 
pulpit to help start to spell out every American's stake in 
strong protection on intellectual property.  It's taken what's 
been terra incognita in this policy debate, put it on the map, 
and mapped it so that we have a road map for addressing some of 
these questions.

And for all of these reasons, we're very pleased and commend the 
work of the Working Group.  And we're looking forward to 
participation and further discussions.  Thank you.

MR. LEHMAN:  Thank you very much.  Don't go away, but I wanted to 
-- first, I noticed Mary Beth Peters is here and I wonder if she 
wouldn't mind coming forward.  If you want to hide in the 
audience, you can, but we'd very much like to have you be with 
us.  The Copyright Office has participated in the Working Group 
regularly.  Right now, Mary Beth is our new Register of 
Copyrights and is a little shorthanded, since she's trying to run 
the entire Copyright Office and do all of the work by herself, 
but you're welcome to come up, if you wish.  If you want to stay 
here, as I said yesterday, we had some people that -- the CIA had 
particularly wanted to sit in the audience and not identify 
themselves.

(Laughter.)

Anyway, you have a question, Terri?

MS. SOUTHWICK:  Mr. Metalitz, you spoke of the prohibition on 
circumvention devices.  At least one witness in this process has 
suggested that people other than, or in addition to, the 
copyright owners whose works are protected by techniques that are 
circumvented should have a cause of action.  Do you have a view 
on that?

MR. METALITZ:  Yes.  We think that's a worthwhile suggestion, and 
it also is congruent with what has been done in some of the other 
areas -- the Communications Act prohibition on black boxes 
intended to unscramble satellite transmissions, that can be 
invoked not just by the copyright owner, but another party to the 
transaction.

There may also be a problem of how broad the copyright standing 
is, if any person who employs a technology that is intended to be 
circumvented in bringing action without necessarily even showing 
that their particular work has been improperly accessed.  So we 
would encourage looking at giving noncopyright owners a cause of 
action, but not in the Copyright Act.

MS. SOUTHWICK:  Do you have an idea of who those noncopyright 
owners should be?

MR. METALITZ:  Well, there are quite a few network operators that 
may not have copyright interest in the material that travels over 
their network, but they may have a strong interest in preserving 
the integrity of anticopying technology that either they had made 
available or relies on their network.  These operators want to 
make their networks a very attractive place to come and shop for 
information, and if there's someone out there who is encouraging 
shoplifters and making it easier for them to walk off with this 
material, the network operator should have some remedy, even if 
that operator doesn't actually own the copyright information 
involved.

MS. SOUTHWICK:  Should that also include the manufacturer or 
creator of the protection device or protection technique?

MR. METALITZ:  That might well be worth considering, too.  I 
think that will probably be available under the Communications 
Act in the signal theft area and again, as long as these are not 
created in the Copyright Act, we think there may be a good reason 
for providing such fairly broad standing to remedy these 
problems.

MR. LEHMAN:  Does anybody else have any questions?  If not, I 
would be interested in a little follow-up on what you meant by 
digital linkage of copyright management affirmation, because of 
the deference to the other witnesses.  Thank you very much.

MR. METALITZ:  Thank you.

MR. LEHMAN:  Next, I'd like to ask Paul Aiken from the Authors 
League of America to come forward, please.  I see Ruth Ford is 
here now.  Would you stand up, Ruth?  If there are any press 
inquiries, you can address them to Ruth.  She's at the back of 
the room.

PAUL AIKEN:  Good morning.  I am Paul Aiken, representing the 
Authors League of America.  I am here to give this Working Group 
on Intellectual Property Rights our strong support for the 
proposed changes in copyright law contained in your draft report.

The Authors League, comprised of the Dramatists Guild and the 
Authors Guild, represents more than 13,700 book authors, 
journalists and playwrights.  Our members have won Nobel and 
Pulitzer prizes and national book awards, Tony, Emmy and Academy 
Awards, and countless other awards and prizes.  Their names are 
on best sellers lists, on theater marquees, bylines of our 
leading magazines and newspapers.

Our membership also includes many notable, but less well known, 
authors -- authors whose works contribute greatly to our national 
culture, whose works people routinely turn to for information, 
enrichment and entertainment.  If content is to be  king in the 
digital age, then our members are certain among the king makers.  
The League, formed in 1912, has filed numerous amicus briefs on 
copyright and free expression issues, and has, over the years, 
testified repeatedly before Administrative and Congressional 
bodies on copyright law.  Rarely has it faced issues as important 
as those addressed by this Working Group.  Copyright law must 
address digital technology, which presents a fundamental change 
in the manner in which literary works are distributed.  The skill 
and care with which the copyright law is amended will affect the 
rewards and efforts of authors for generations.

I'd like to talk about baseball for a moment.  Baseball's current 
difficulties, many believe, stem from an old Supreme Court 
decision in which it was decided, essentially, that baseball was 
our national pastime, not a business, and therefore was exempt 
from antitrust laws.  Baseball is a diversion far too important, 
too deeply embedded in the American soul, to be subject to the 
rules governing the oil, steel and railroad industries.  The free 
market was fine for many things, but it couldn't be trusted with 
Walter Johnson's right arm.  Many think we are suffering the 
consequences of that Supreme Court decision today.

We now hear arguments that something else is too important to be 
governed by the whims of a free market and too basic a need to be 
burdened with the weight of ownership.  Information should be 
free, we've heard, at least on the Internet.

It seems to be harmless.  A few taps on a keyboard and up pops a 
book.  A quick scroll through a few pages and there it is, the 
information you seek.  Read it, maybe take some notes or clip it 
for a term paper.  You no longer need that book.  A few more taps 
on the keyboard and it disappears.  The original copy of that 
book still resides on some file circuit -- perfect, untainted.  
Shouldn't that simple acquisition of information be free?  Who is 
harmed? What's the fuss about?  Shouldn't the information 
superhighway be a freeway?

The problem, of course, is that the labor and expense of an 
author and the publisher have been used without compensation.  
When a reader pays for a work, something extraordinary is 
communicated -- that the work has value.  Without that 
communication, who is to say what has value and what has none?  
Who will determine what should and shouldn't be published?  Who 
will pay for the effort and expense of creating a written work?  
To its great credit, the Working Group recognizes the need to 
protect copyright in the digital age and has devised a simple, 
elegant method to help assure that protection.

The Working Group proposes that a transmission right be added to 
the list of the copyright owner's exclusive distribution rights, 
and that the first sale doctrine be clarified to expressly 
exclude transmission as a right of the purchaser of the copy of a 
work.  Together, these proposed changes provide an effective 
framework for the on-line protection of copyright.  The Authors 
League firmly supports these proposals.  The League also approves 
of the proposed prohibition of devices that primarily act to 
defeat copy protection systems and proposed penalties for the 
fraudulent misuse of removal of copyright management information.  
Both are sensible steps toward a practical means of digital copy 
protection.

The Authors League respectfully takes issue, however, with a few 
of the Working Group's findings.  It is time to recognize that 
the publishing industry has, in only a few years, been altered in 
dramatic and profound ways.  Mergers and acquisitions have left 
few major publishers without a corporate parent.  If just one of 
these conglomerate CEOs decides to make a change in the 
boilerplate of his or her company's contracts, thousands of 
authors, signed proposals and numerous subsidiaries and imprints 
are affected.  If a few CEOs should coincidentally make such a 
change, the entire publishing industry effectively makes that 
contractual change.  Almost all authors have no real choice but 
to swallow hard and accept the new contractual term.  The playing 
field, never level, is now steeply pitched.  Only blockbuster 
authors can get their foot in.  There simply are far too few 
games in town.

Publishers seeking print rights, for example, now routinely 
insist upon rights to all electronic media, known or unknown, 
whether now existing or yet to be developed.  Authors are not 
being compensated for allowing these rights to unknown and 
uninvented media to be tied up.  How could they be?  What are the 
rights to an uninvented medium worth?  It's impossible to 
predict, and it certainly is not considered when a publisher 
contemplates its offer for an advance.  Advances are typically 
based on a book's projected first year income.  One year is scant 
time for the invention of new media.  You won't find a line on a 
publisher's profit and loss projection for income from media not 
yet known or invented.

Yet, one major publisher boldly introduced new boilerplate 
language this year that not only dictated the acquisition of 
rights to unknown and uninvented media, but also set royalty 
rates for these rights.  Imagine that.  These media are not yet 
known or invented.  No one could say what the cost of production 
or distribution will be or how great or small the profit margin 
will be, but this publisher could calculate what fair royalties 
would be -- five percent of its net.  This is a pittance in the 
publishing industry.  It should be an embarrassment for the 
publisher, but you can be certain that authors with inadequate 
sophistication or clout -- and a growing number of authors are 
now discovering that they no longer have sufficient clout -- are 
signing that contract every day.

The authors have recognized that this is, in part, a problem for 
antitrust law, but it also reflects a fundamental flaw in 
copyright law.  Publishers should not be able to acquire rights 
in media not yet known or invented.  Copyright law acknowledges a 
need to protect authors, who often lack bargaining strength or 
legal sophistication, from the unwitting or unwilling surrender 
of their rights.  An author can grant exclusive rights only in 
writing, for example.  This serves as a check against the 
careless granting of those rights.  An author also has a 
non-waivable right of termination of a grant of rights after 35 
years.  That the termination is non-waivable is telling -- a 
waivable right would have quickly been rendered meaningless by 
publishers' boilerplate contractual terms.  In a similar vein, 
authors should not be able to part with rights in media not yet 
known or invented because that ability is being seized and used 
against authors.  

There is no clearer sign that authors are not selling their 
manuscripts in a free, competitive market than this capture of 
rights to a media not yet known or invented.  Authors would not 
surrender these rights in a competitive market.  Simply put, this 
represents an uncompensated taking and we respectfully disagree 
with the Working Group's conclusion that this is a problem for 
contract law, not copyright law.  A main purpose of copyright law 
is to ensure that authors are compensated for their intellectual 
property rights -- authors who will never be meaningfully 
compensated for the granting of these rights to future media.  

We urge that the copyright law be amended to prohibit the 
granting of rights in unknown or uninvented media.

The League is apprehensive about the prospects of voluntary 
licensing on the Internet.  Our apprehension is based on what we 
view as a nearly complete failure to collect photocopy royalties 
in this country.  This failure has resulted from a lack of 
long-term planning and investment, and from unfavorable laws.  
The failure of copyright law with respect to photocopying could 
not be more apparent.  Right now, in offices within walking 
distance of this room, hundreds of office workers are borrowing 
their neighbor's Washington Post to make copies of today's 
crossword puzzle.  Others are freely copying scientific text, 
academic journals, photographs and magazines columns.  Students 
are busily copying chapters of textbooks, songbooks and scripts.  
Copy shops hum with the sound of infringement.  Is it any wonder 
that someone could seriously suggest that copyright is dying and 
that we're better off without it?

What is the harm from these petty infringements?  I'd like once 
again to talk about baseball.  Until a month ago, total baseball 
revenues, I'm told, were running at a clip of about $2 billion 
per year.  That's a staggering sum of money, enough money to 
inspire huge investment in batting helmets and balls, stadiums 
and logos, weight machines and orthopedists, peanuts and 
Crackerjack.  

$2 billion per year also happens to be a reliable estimate of the 
reasonably collectible photocopy royalties in this country.  This 
estimate comes from an expert on the subject, perhaps the 
foremost expert on the subject, John Willie Rudolf of Norway, who 
runs the world's most efficient photocopy royalty collection 
system.  He estimates that his organization will someday, as they 
collect photocopy royalties from more and more users, collect $7 
each year for every man, woman and child in Norway.  Already, 
Norway collects nearly $4 per capita.  Assuming that if Americans 
photocopy with the same gusto as Norwegians, this would amount to 
a nearly $2 billion industry.  Currently, we collect about 1 
percent of that $2 billion.  

An additional $2 billion in royalty income would spur an enormous 
investment in our information infrastructure.  Authors, and 
especially authors in nonfiction works, will suddenly find their 
works profitable.  Moreover, these authors would continue in 
their careers as writers, now that they're capable writers and 
would be attractive to the field.  More books and journals would 
be published.  The flow of information would dramatically 
increase, and respect for copyright law would be largely 
restored.  It's time for a thorough reexamination of the way that 
photocopy royalties are collected in America.

Authors fear voluntary licensing on the Internet because they've 
been burned before.  Some combination of voluntary, collective 
and compulsory licensing may be necessary to protect the 
integrity of the copyright.  The Authors League recommends that 
voluntary licensing on the Internet be monitored with extreme 
care.

Fair use -- particularly as it relates to the abilities of the 
public, as the Working Group has put it, opportunities on-line 
equivalent to their current opportunities off-line, to browse 
through copyrighted works in their schools and public libraries 
-- is of great concern to members of the Authors League.  Our 
members are enthusiastic and faithful users of the nation's 
public library system.  We view that system's vigorous health as 
crucial to the nation's cultural and economic well-being.  A 
compromise is needed, we recognize, to balance the needs of the 
public library users with those of copyright owners.  The key to 
that compromise is that library access to on-line sources of 
copyrighted works be truly equivalent to the traditional access 
to those works in our public libraries.

This portion of the League's statement was drafted in the main 
reading room of one of the world's great public libraries, the 
Research Library of the New York Public Library.  The Reading 
Room, as many of you know, is as inspiring as it is democratic.  
The room is easily 40 feet tall with an intricately carved wooden 
ceiling and enormous, large windows.  Row upon row of readers 
quietly work and take notes.  Researchers line up at a window to 
request materials and wait for their pickup numbers to appear on 
a digital board.  Countless significant and timeless works have 
been researched and created in that room.

The Reading Room has another important feature.  It takes 102 
steps to get from street level to the Reading Room by my count.  
If you make the effort to climb those steps, you can see almost 
any copyrighted work that the library has purchased, as long as 
someone else isn't using it.  Access to on-line materials that is 
truly equivalent to traditional access to materials requires 
traditional measures:   a trip to the library and the use of only 
as much access to on-line materials as the library has purchased.  
The balance between copyright holders and the users of public 
libraries is a delicate one.  Readers wishing to go on-line, 
using the library's access rights, must be in the libraries.  
Readers must continue to climb those steps.

The draft report reflects an enormous amount of effort and clear 
thought on a challenging subject.  The Authors League commends 
the Working Group for its good work and heartily endorses the 
bulk of the Group's findings and proposals.  On behalf of the 
Authors League, I would like to thank the Working Group and its 
chair, Mr. Lehman, for the opportunity to address you here today.

MR. LEHMAN:  Thank you very much.  I don't believe you were 
involved in our fair use meeting that we had the other day, but I 
think that's something you ought to become involved in, because 
it goes directly to that question that's raised about libraries.  
One of the things that we're hearing clearly is there seems to be 
a view among some people in the library community that it doesn't 
require a trip to the library to have fair use, free access to 
someone's work -- and this is exactly what we're trying to come 
to terms with in that context.  It's important for librarians who 
may not fully appreciate the concerns of authors here, from 
people such as yourself and people you represent, so I would 
invite you to be more involved in that.

MR. AIKEN:  Thank you.

MR. LEHMAN:  Are there any other questions?  Thank you very much.  
Next, I'd like to call on Arthur J. Levine on behalf of the 
American Federation of Musicians and American Federation of 
Television and Radio Artists, and I'd like to mention that Mr. 
Levine is one of the most distinguished copyright lawyers in the 
country and the world, and was the former Executive Director of 
CONTU, Commission on New Technological Uses of Copyrighted Works.  
And in many ways, we have modeled our proceedings after those 
that he devised some years ago.  So welcome, Mr. Levine.

ARTHUR LEVINE:  Thank you very much, Mr. Lehman.  I commend you 
on the good judgment of having on your staff two of our finest 
former staff members of CONTU, Mike Keplinger and Chris Meyer, as 
well as the other fine members of your staff.

My name is Arthur Levine.  I'm with the D.C. law firm of 
Finnegan, Henderson, Farabow, Garrett & Dunner.  I'm here today 
representing the American Federation of Musicians and the 
American Federation of Television and Radio Artists.  AFM and 
AFTRA's 350,000 combined members are the instrumentalists and 
vocalists whose performances are captured on sound recordings.  
My clients thank the Working Group for the opportunity to make 
known their views on intellectual property and the National 
Information Infrastructure.

Let me start by joining all of those individuals and 
organizations who have already commended you, Mr. Lehman, and 
your staff, on the excellent report which you have prepared.  
This has focused the debate thus far, and will continue to set 
the guidelines for the important discussions to follow over the 
next months.

AFM and AFTRA are extremely pleased that the report forcefully 
supports a performance right in sound recordings.  Without a 
performance right -- a right which all other copyright owners 
enjoy -- performers and record labels do not have the ability of 
licensing or refusing to authorize the distribution of their work 
over the air or by cable, digital or otherwise.  Nor do 
vocalists, musicians or recording companies receive compensation 
for those performances.

As you called it, this anomaly in the law is primarily the result 
of active opposition by broadcasters and others with a vested 
stake in the status quo.  As our domestic system of broadcasting 
grew, vocalists and musicians became more and more concerned with 
the extensive use of their performances by radio stations without 
compensation.  They have not found credible the argument of 
broadcasters that broadcasts of their performances promoted the 
sale of recordings and that thereby, performers were compensated.

The failure of Congress to enact a performance right to date has 
simply been a result of this broadcaster opposition, 
notwithstanding the recognition that such a right exists in most 
other civilized countries of the world and notwithstanding the 
fact that the Register of Copyrights, in a very thorough, 
well-reasoned monumental study of the subject in 1978, recognized 
the enactment -- recommended the enactment of the performance 
right.

The growth of digital technology, as applied to the distribution 
system for sound recordings, makes the need for performance 
rights critical.  Digital audio broadcasting, cable, satellite, 
computer delivery of sounds, now allow the advantage of 
transmitting high quality digital sound without any of the 
transmission or quality problems associated with analog 
broadcasting.  These new distribution systems will allow users to 
access perfect digital transmissions on demand if they so desire, 
without ever buying a hard copy of the recording from a retail 
store.  Performers, whose compensation is now based principally 
on sales, will suffer the double indignity of (1) not being paid 
for the recordings, and (2) having someone else easily, quickly 
and cheaply, pirate their creative efforts in perfect copies.

Broadcasters have been direct and forceful -- although misguided 
-- in their opposition to a performance right.  Other groups have 
given lip service to supporting the right, but,  if I can vary 
the words of an old song, their lips tell us "yes, yes," but 
we're beginning to believe there's "no, no" in their eyes."

We urge all copyright owners to unqualifiedly recognize and 
support a performance right in sound recordings.

There's been a great deal of discussion of whether a transmission 
is a performance or a distribution, and whether those rights are 
mutually exclusive or whether a particular transmission can be 
both a performance and a distribution.  We believe it is probably 
premature at this early stage to enact legislation which may not 
contemplate future methods of transmissions and the uses made of 
those transmissions.  In our opinion, the courts are probably the 
proper venue to ultimately decide those questions.

We fully support the Working Group's recommendations that the 
copyright laws be amended to prohibit the importation, 
manufacture and distribution of devices and systems that defeat 
anti-copying devices.

We were particularly pleased that the draft report recognizes 
that the time has come to provide a greater level of protection 
to performers under the Berne Convention.  The failure of our 
Berne partners to provide national treatment for sound recordings 
has resulted in the loss of millions of dollars to U.S. 
performers.  In that endeavor, we wish you very good luck.

In conclusion, AFM and AFTRA believe that the draft report 
contains sound and necessary recommendations for the future uses 
of copyrighted works in the new information infrastructure.  We 
look forward to working with you in ensuring that all authors of 
copyrighted material are able to fully realize the fruits of 
their creativity, both domestically and internationally.

MR. LEHMAN:  Thank you very much.  Questions?

MS. SOUTHWICK:  That last statement about all owners of 
copyrighted works -- do you then support the notion that the 
copyright owner of the sound recording should have the exclusive 
right to publicly perform the work?  I'm asking only because we 
did hear testimony in Los Angeles -- I believe, of some artists 
-- who suggested that maybe only the artist should have the 
performance right.

MR. LEVINE:  That's a difficult question.  In those instances in 
which the artist is indeed the copyright owner, then obviously 
the artist should have that right.  It seems to me that's 
primarily a question of negotiation of who the owner of the sound 
recording is.  But where the owner of the sound recording is the 
record company, then whatever rights of lawful ownership should 
belong to the owner of the copyrighted sound recording.

MR. LEHMAN:  You have the advantage of representing two 
organizations -- or they have the advantage -- the organizations 
that you represent -- of the labor laws in the United States when 
you negotiate contracts.  And one of the problems that I find in 
harmonization of the continental and U.S. systems are that we 
place -- one major problem is that we place much more reliance to 
protect individual creators' rights, particularly in the context 
of a corporately produced work, in the hands of the collective 
bargaining process and labor unions, whereas the droit d'auteur 
concept tends to create more inalienable rights.  We're 
constantly struggling, without unsettling too much existing 
practices in each jurisdiction, to try to come together and sound 
harmonious in the national system.  I'm wondering if you have 
some comments on that.

MR. LEVINE:  We begin with two different types of systems.  As 
you recognize, the continental system, in which the author is 
given far greater emphasis in copyright.  The only way at this 
point for the working musician to deal effectively to protect his 
rights is through the collective bargaining process, and I have 
not, frankly, given a great deal of thought to how those two 
systems can be reconciled, the continental and the U.S. systems  
But I can unqualifiedly tell you that the U.S. system, as far as 
my clients are concerned, is not going to change in its approach 
to protection of musicians, vocalists and other performers on 
sound recordings.  This is too well established and is truly the 
only effective method that most -- the vast majority of musicians 
and vocalists can look to for adequate protection.

MR. LEHMAN:  Thank you very much.  Next, I'd like to ask Richard 
Rudick, Senior Vice President of John Wiley & Sons, and Heather 
Florence, from Bantam Doubleday, to come forward.  I guess you 
will both be at the podium together.  And you are representing 
the Association of American Publishers.

RICHARD RUDICK:  It's clear that you already know -- there's been 
a follow-the-rules to tell you who I am or rather who we are, and 
who we represent.  I'm Dick Rudick, Senior Vice President and 
General Counsel with John Wiley & Sons.  My colleague sitting 
next to me is Heather Florence of Bantam Doubleday Dell, and 
we're here on behalf of the American Association of Publishers -- 
AAP.

Our members are publishers in both print and electronic media, of 
fiction and nonfiction, literary works for consumer, business, 
education and scholarly reference markets throughout the entire 
world.  In the earlier hearings, you heard from others in our 
industry, including educational publishers.  Today, you'll hear 
from a scientific publisher and a trade publisher.

My company was founded during the administration of Thomas 
Jefferson.  It is best known as a publisher of college textbooks, 
primarily in the sciences, of scientific and technical books and 
journals, of books and subscription products for business 
professionals such as law, accounting, computer science, 
architecture, and increasingly electronic media products for 
those fields.  The fact that the development of print and 
electronic media products are integrated in each of the operating 
conditions, reflects the fact that we see our future as one in 
which the networks are part of the primary market in which 
economic viability -- we submit, the very existence of businesses 
and their products -- will depend.

It is said that there are two major aspects of the business.  One 
of these is human beings who come and go as they please.  The 
other is the copyrights we share with and acquire from other 
authors.  Abraham Lincoln's words as he was talking of patents 
are apt -- "The statute is the fuel of interest  to the fire of 
genius."

We agree with the central theme of the Working Group report, 
which is that the fundamental principles of the law, including 
the principles of fair use as set forth in Section 107.  Having 
said that, our task is to make modest changes, to promote 
understanding through conferences and education in order to adapt 
those principles so they work well in the digital networked 
environment.  Those who say that rights holders are seeking to 
enlarge their rights in the digital environment misconstrue what 
your report says, and they misunderstand what rights holders 
want.

Yesterday, I heard many of our speakers express fear that 
copyright protection in the digital network area would inhibit 
access.  We believe the reverse is true, and I would like as a 
concrete example to talk about how Wiley has addressed the issue 
of photocopying and document delivery.  If we put all of our 
works, every journal, every textbook, every printed product in 
the copyright clearance center's licensing programs, including 
its back (inaudible) clearance program, and by the way like Mr. 
Aiken who spoke a moment ago -- we wish that more users took 
advantage of America's collecting society.  We have put our 
journals into the electronic document delivery program offered by 
the Adonis (phonetic) consortium caller document delivery system.  
No one can say that he or she does not have access to a Wiley 
journal article or any of our other materials -- whether or not 
particular users have fair use, and whether or not the user needs 
or wants an entire journal subscription.

We are participating in a number of experiments in the on-line 
delivery of journal articles and are preparing to publish our 
first journal on the Internet.  All this is indicative of our 
desire and the industry's desire to serve our markets by making 
our materials available and in our ability to adapt to achieve in 
the environment.  And I think it proves that we're no enemy of 
those who want access.  But access must not be provided -- it 
doesn't need to be provided -- in the manner that destroys the 
market for our works.  I'd like to give you an example that has 
been happening and could continue to happen related to me and my 
colleagues at Wiley.

In the 1970s, a major state university system with 14 campuses 
and multiple libraries at each campus might have had a journal 
subscription for each of those libraries.  At the beginning of 
the 1980s, you would have expected one subscription to go to each 
campus.  That's the old-fashioned network, powered by the 
old-fashioned photocopying machine and people wearing sneakers.  
In the 1990s, we can expect one set for all campuses with copies 
distributed by fax.  You wonder why the price of journals has 
increased.  By the year 2000, you'll have one set of journals for 
the whole country.  And if there is one set to be sold, you'll 
know who the buyer will be -- it will be the taxpayer.

One way to help ameliorate this situation is a suggestion from 
the witness submission that provides Section 108(g)(2) be 
deleted.  Section 108(g)(2) states that the special rights of 
certain libraries under Section 108 don't apply to systematic 
reproduction, provided -- but nothing in this clause prohibits 
interlibrary loans which do not have as their purpose an 
effective substitute for subscription.

We didn't in 1976, we don't today object to genuine interlibrary 
loans.  Perhaps by the wealthier, larger institutions to the 
smaller, poorer one.  We don't want to stop those practices, but 
expanded document delivery and resource sharing have already 
begun to make a mockery of the original purpose -- and with the 
NII, a new dimension.  A single library could supply what would 
come to about up to five copies individually, in the same sense 
as if a technical journal article, easily, cheaply to every 
library in the country, destroying the market.  It doesn't make 
any sense.

We don't want expanded rights.  We want copyright preserved.  If 
we can do that the NII can be the vehicle to not make it 
(inaudible), but expand the information provided.  But publishers 
object to us having to compete with their own customers on the 
playing field that isn't level.  We object to those who say their 
purpose is research, scholarship, perhaps without realizing the 
implications of what they're doing, engaging in activities which 
are indistinguishable to users.

We would object if we have to invest in the development of 
products for dissemination on the Internet or otherwise, without 
having expectations of the trends which enable us to continue and 
expand that investment  And if we're not able to continue to 
expand that investment, it's not only our members that will be 
the losers.  It will be a loss for science, loss for education, 
loss for industry, loss for America.

HEATHER FLORENCE:  I'd like to spend just a few minutes and talk 
about the new technologies and the Green Paper as they relate to 
trade publishing -- trade as opposed to educational, 
professional, scientific or medical publishing.

Trade houses and imprints such as Bantam Doubleday Dell and 
others you've heard of like Simon & Schuster and Random House and 
many others still, notwithstanding Mr. Aiken's comments, have as 
their primary customer the general consumer, the average reader.  
Many of the trade houses are engaged in new media development 
with CD ROMs and on-line services.  And even those who are 
confident that the human desire to read books, as we've always 
known them for centuries, will not wane, realize that the 
publishing process will be transformed by the new technologies, 
regardless of the market.

The use of trade books in early education has increased in recent 
years with emphasis on whole language learning through reading.  
Basal readers include material licensed from trade publishers so 
that kids will find reading relevant and pleasurable.  Sometimes 
selections are a single short story or perhaps just a poem.  
Indeed, school book fairs are a big market for titles with 
tidbits of information like the Guinness Book of Records, and in 
the future it will be possible, and indeed likely, that teachers 
and parents will be able to pick up these snippets of information 
over the NII.

Almost every literate person is occasionally reading materials 
written by Mr. Aiken's group of authors -- a novel, using a 
dictionary or referring to a cookbook, a gardening guide, 
planning a trip or engaging in some other pastime -- that derives 
either vital or at least useful and pleasurable information from 
the books we publish.  Even to the extent we are seen by those 
inhabiting cyberspace as the last vestiges of an earlier age, our 
books are also being read by people who can't bear to separate 
themselves from the computer screen.

In time, more and more of our books will be read on computer 
screens, whether specifically designed laptop machines, like Sony 
is experimenting with the data diskman, or laptops that people 
travel with or desktop PCs.  Many of those are likely to be 
linked to the networks that will make up the NII. And ultimately, 
the copies that are read still in hard copy by those who will 
never want to abandon the look and feel of a book in their hands, 
may be delivered to customers through high speed networks, 
whether they're going to distribution centers, libraries, 
schools, bookstores, homes or offices.

Because we're aiming for a mass market, we cannot publish to 
order.  We gamble and we take risks.  For every successful 
literary novel, thriller, children's book, poetry collection, 
gardening guide, cookbook, you name it, the trade publisher has 
published a string of less successful books in the same genre or 
the same field.  Trade publishers today still take flyers in 
acquiring and publishing thousands of titles a year with the 
hope, sometimes small, that they can afford to create a viable 
market for them.  The majority of those titles, many of which are 
well reviewed and may even become library staples, sell minuscule 
numbers of copies and result in red ink in the books of these 
companies.

It is only because the public is willing to pay for the bigger 
sellers that our companies can continue to offer publishing 
opportunities to new writers and to new ideas.  Indeed, our 
industry is a microcosm of why the protection of intellectual 
property is essential if society is to continue to have access to 
new creations.

We are very glad that the working paper's premise and 
recommendations are reflective of these very realities, as well 
as the underlying Constitutional directive regarding copyright 
protection.

Among the very impressive characteristics of the Green Paper is 
its thoughtfulness and clarity in straddling the worlds of old, 
current and forthcoming technologies and accommodating them to a 
coherent legal construct.  Also straddling the old and the new is 
a subject I've chosen to emphasize today and it's been referred 
to by other speakers this morning:  copying machines.  Our 
written paper talks a little bit about the concerns of copying 
misuse today, and Mr. Aiken was very eloquent in that regard.  
But I want to take a minute to discuss our anxiety about the 
future.

Yesterday's slow, one copy at a time, where you have to stand by 
and feed in page by page and which produces continually inferior 
copies is indeed just that, yesterday's machine.  In contrast, 
here is the manufacturer's description of today's machine -- 
since you may not all have seen this in the Wall Street Journal 
several times this month, I'm going to take a minute to just 
quickly read it to you.  The facts say "scan it, color it, and 
highlight it, turn it all around and do the hokey-pokey with it, 
network it, image it, E-mail it, there are so many graphics you 
won't know what to do with it, bill it, sticker it, don't sweat 
it.  We guarantee your total satisfaction with it.  Distribute 
it, store it, Braille it, get creative with it, smooth talk it, 
fast walk it, lip smack it, fun love it or to cut a long story 
short, just document it."

It's a great ad.  It has run a couple of times, but it scares 
publishers to death.  And Xerox is not alone in developing these 
new generations of copiers, including those that will take a 
finished book and reproduce identical quality finished products 
without anybody standing by to turn the pages.  Moreover, as this 
ad touts, these new machines create digital versions of the work 
which can remain stored indefinitely and which facilitate the 
creation of derivative works, as well as transmission over and 
capture from the NII, in whatever version is available -- whether 
it's telco, cable or wireless, to either transmitter and/or 
receiver.

We believe that before it's too late and before this admittedly 
exciting technology swallows up copyright protection altogether, 
the equipment manufacturers must come to the table.  Manufacturer 
(inaudible) in the Sony decision, which is discussed in the Green 
Paper, needs to be revisited.  If there is to be an incentive for 
the equipment manufacturers to play a productive, rather than a 
destructive role in the protection -- and hence the creation of 
intellectual property -- they should have a stake in the outcome.  
At the least, we would ask that the final report highlight 
concerns about these new copiers and their links to the NII by 
calling on the manufacturers to devote efforts to develop the 
technological tools to facilitate copyright management and 
compliance.

Over and over, we hear and, indeed, we also say that the answer 
to the machine lies in the machine.  The Green Paper has the most 
cogent discussion of the nature of technological protection and 
management systems.  Its recommendations to bar the use of 
devices and systems to circumvent protected technology, and to 
penalize fraudulent use and/or removal of copyright management 
information are most welcome.

Yet, if the companies that unleash these machines enter the 
marketplace, a marketplace that already assumes a mere photocopy 
is no big deal -- or more accurately, doesn't even think about it 
-- if these companies have no incentive to develop the software 
and hardware systems, the management and technology will not 
happen, or at least the development will be mortally slow.  We 
hope that the final report will fill this gaping hole.

In your call for a broad-based campaign to educate the public 
about intellectual property rights, you specify a number of 
organizations, I think it's on page 118, that should play a 
leading role.  Some are not mentioned by name, such as the AAP, 
and we will, of course, also try to make significant 
contributions.  But how about the equipment manufacturers?  They 
should be summoned to this task.  Did you see any mention or hear 
me read any mention of attention to copyright in that ad -- full 
page -- that I held up?  Not a word.

In addition to the need to educate in schools and in libraries, 
let's take a look at the place most adults go every day -- the 
place of work.  AAP has had to litigate to confirm and enforce 
its intellectual property rights in the work place.  We urge that 
the equipment manufacturers who benefit from these business 
markets to the tune of billions of dollars a year be asked to 
play their part.

If you'll forgive me just one more second here -- I think our 
collective time has run out.  I just want to make a quick comment 
on the call that many have made that there be something like 
CONTU to deal with all the new technology.  And since I've talked 
a little bit about some of it, I'd simply like to say that my 
response to that, having followed the activities really as a 
consumer and as a user and as a person who lives in the country 
far away from the city, what the Working Group and the IITF have 
been doing is really remarkable.  The fact that there is a 
Presidential commission that includes representatives from local 
governments, state governments, libraries, educators -- I think 
that this process, the whole Administration process, is getting 
tremendous sophisticated thoughtful input from all the 
constituents  And I commend not only this Working Group, but all 
of them, for the number of public hearings and opportunities to 
contribute, participate.  I've had E-mail acquaintances with many 
people involved in the process from my farm in Connecticut ,and I 
understand why the process has really been the envy of the world.  
And our industry commends you for it.

Thank you.

MR. LEHMAN:  Thank you very much.  I know we're running a little 
behind here, but I want to ask a question of -- either one of 
you, for that matter.  Mr. Rudick said that if we ultimately -- 
the ultimate conclusion of lack of effective intellectual 
property protection for copies of work would be that there would 
be one copy and you know who would pay for it -- that is, the 
taxpayer, the Government.  That's ultimately probably true, and 
also obviously raises First Amendment implications and all kinds 
of other things, but one of the things that I'm struck with is 
that in dealing with the specific problem of recognition of 
intellectual property rights in libraries and by educational 
institutions, we have heard on a number of occasions of one of 
the reasons we need an expanded doctrine of fair use is because 
we're under financial pressure.  We don't have enough money, as 
much money, in our library budget.  We don't have as much money 
in our textbook budget.

Is the Association of American Publishers -- you obviously have 
lawyers here in Washington -- are you working on this problem?  
Because, I think money to support the public consuming sector is 
a very important part of maintaining, with respect to copyright.

MR. RUDICK:  Well, I think you have to separate the funding of 
education from the funding of materials that are needed by 
educators.  I think that the copyright management systems and the 
licensing programs that the Working Group feels should ultimately 
address some of the copyright issues we face will result in more 
efficient, more cost-effective supply of materials to the 
educational, scientific community.

The example I gave you about the journals on campus shows a 
vicious price spiral which, in part, is caused by lack of 
compliance.  And I think that what the Working Group advocates 
will have to address that problem.  And the association and its 
members are taking advantage of what there is to help address the 
problem now -- and I think the Copyright Clearance Center is a 
good example of that.

MR. LEHMAN:  But I take it simply -- and we don't have much time 
-- that the answer is no, that you're not really doing a lot to 
lobby state legislatures and others to purchase, to engage in the 
legitimate purchase of copyrighted works?

MR. RUDICK:  I don't think that's my answer.  Time is short and 
I'll submit a written response.

MR. LEHMAN:  Yes, and this is very important.  I'm thinking this 
is one of the things that we need to identify in the report --

MR. RUDICK:  Okay.

MR. LEHMAN:  because I think that generally speaking, we're not 
about taxpayer money here.  But it's becoming increasingly 
obvious to me that one of the great pressures for an expanded 
fair use doctrine is simply because we're seeing -- in the public 
sector, consumers of copyrighted works -- we're seeing the drying 
up of money.  And I think we may need to take note of that, and 
that's one of the reasons I'm asking this question -- to put it 
in our record.  Thank you.

MS. SOUTHWICK:  I don't have time for a question either, but if 
you could -- in written form -- also respond to the testimony of 
John Kelly that we heard yesterday, for Recording for the Blind, 
who suggested that when publishers do not themselves make 
available their material in a format -- Braille, recording or 
oversized type -- for the visually impaired, that there be some 
kind of either statutory or fair use guidelines -- ability for 
organizations such as his to produce those materials, so that the 
visually impaired have access to them as well.  If you can just 
respond to that in writing.

MR. RUDICK:  I'll do that.

MR. LEHMAN:  Next, I'd like to ask Stu Gardner from UTS Rendrag 
Publishing Company in Richmond, Virginia to come forward, please.

STU GARDNER:  Good morning, Commissioner.  My name is Stu 
Gardner.  I'm an artist, producer and a composer.  I've been the 
musical director for over 25 years for Bill Cosby, one of 
America's top entertainers.  The music I've written has been 
primarily for television, films, included in the music of TV 
programs, The Cosby Show, A Different World, and currently a 
television show, Living Single, and films such as "Faces," "Mr. 
Repo," and "Arizona Slim."  My greatest success in composing for 
television has been the music I wrote for The Cosby Show.  In 
addition to the show's themes which I've updated every season for 
eight years, I create the cues for each episode, as well as 
signature music for each particular character.  I'm especially 
proud of the contribution that I made to the success of The Cosby 
Show since the series has now been running in syndication for 
over five years.

I'm still being rewarded for my efforts every time the show is 
broadcast -- some are in states or in other parts of the world.  
Knowing that, I'm encouraged to write new music for new TV shows 
and new music for films, so that I can make a living as a 
composer.

I appreciate that you gave me this opportunity to state my 
concerns about part of the Green Paper.  The bulk of my income as 
a composer of TV theme and background music comes from my 
performance royalties.  I am concerned that one of the 
recommendations in the report will have a negative effect upon me 
and other composers who write for television and films.  The kind 
of music I write usually doesn't appear on records.  People hear 
it when they watch the shows and movies that I wrote for.  When 
those programs and films are broadcast, I receive performance 
royalties.  I rely on this money to pay my bills and support my 
family.

On rare occasions, composers may receive a small creative fee for 
their work.  However, most people who write for television do not 
get paid anything for composing music.  The music is usually 
owned by the producer of that show.  If we TV composers do not 
agree to their way of doing business, we don't get the job.  As a 
result of this business practice, when I do get a job composing 
for a TV show or film, the producer owns the copyrights of my 
music.  In return, my contract with the producer allows me to 
collect performance royalties.  Usually they are the only income 
I receive for my work.  If the producer decides to sell videos of 
the shows with my music in them, I don't receive a penny from 
those sales.

Because my livelihood depends so much on the performance of the 
music, it seems to me that the distribution of transmission 
concept in the Green Paper would prevent me from earning a 
living.  I've always been paid when my music is broadcast on 
television and cable.  It doesn't matter whether people are 
watching TV, when the show is being broadcast, or whether they 
tape it on their VCR and watch it later.  In either case, I get 
paid, as I should and because my music was performed.  Just 
because a new way to send my music into people's home has been 
developed which might involve their making a copy of it, my right 
to be paid for the performance of my work shouldn't change.

One of the other reasons that I wanted to speak to you today is 
because I want to thank you for stressing the importance of 
education about the rights of men and women who create things.  
That message is so important to get across, especially in urban 
communities.  I'm active in teaching youth in various schools and 
I have been an artist-in-residence in the Richmond public school 
system in Richmond, Virginia.  I've always tried to emphasize to 
my students that they must respect the rights of the creators.  
However, it is confusing to me that you talk about educating 
people about composers' rights in one place and then reduce 
existing rights in another.  If you change the law so that what 
has always been a performance right is no longer a performance 
right, I won't earn any money through my music.  I can't afford 
to lose any income from performing rights.  I have no financial 
incentive to keep on composing.

A copy of the TV show or film which my music is in can always be 
made, but I should get paid for the performance.  Even the 
producer or the publisher company should be paid for the 
copyright.  Please reconsider what you have suggested about the 
performing right so that I know what has always been mine in the 
past will also be mine in the future.

Thank you for listening to my remarks.

MR. LEHMAN:  Thank you very much, Mr. Gardner.  I think you make 
an eloquent statement about how people should get paid for what 
they do.  And the works that you compose are performed by 
musicians?

MR. GARDNER:  Of course.

MR. LEHMAN:  And those works are used over and over and over 
again when they're broadcast.  The Cosby Show is in syndication 
and it's been used many, many times and I'm sure that generates a 
lot of performing rights income to you.  But, about the 
performers -- particularly the -- and I would guess that they're 
almost all regular, journeymen musicians -- but what about the 
performers and especially background performers?  Shouldn't they 
get individual performance rights as well?

MR. GARDNER:  I'll have to give you some probably different 
information than you heard before.  The same musicians that 
perform the music on The Cosby Show, Different World, Living 
Single are still working with me.  These same musicians share in 
my residuals because they created a style that I needed.  I have 
jazz musicians.  I have hip-hop musicians, rock and roll 
musicians.  They're still in place.

MR. LEHMAN:  How do they share?  Can you explain how --

MR. GARDNER:  Yes, I can explain it because generally the scale 
is $209 for three hours.  I pay my musicians anywhere from $265 
to $268 for three hours.  I increased their scale on my own 
because I am one of the people who fight for the rights that 
musicians create the salary.

MR. LEHMAN:  Do you think they should have -- you have a 
statutory right.  Do you think they should have a statutory right 
too to receive compensation, because not everybody is as generous 
as you are.

MR. GARDNER:  Yes, I believe they should have rights.  I've had 
conversations with people like Stevie Wonder, Aretha Franklin, 
Gladys Knight.  All these people are fantastic singers, but the 
people who create the sound are the bass players, the keyboard 
players, the drummers, and I've constantly talked about this.  
I'm also a musician, so I'm wearing the shoes of both.  I believe 
that a lot of the sound is created by those people who are 
selected to create the sound.

I can give you a better example.  Chaka Khan, who is a very 
famous singer, she has at least six background singers who sound 
identical to her.  Vanessa Williams is one, Alyssa Morgan is 
another one.  And these people, because they were not 
compensated, formed their own record deals.  But I still think 
that if she had compensated these particular people, she'd still 
have the group together.

MR. LEHMAN:  Clearly, it's my impression from what you said that 
if you received the vast portion of your income and most people 
like you do, really, from the exploitation of the performance 
right and that is through ASCAP and BMI.  Are you a member of 
both --

MR. GARDNER:  Just BMI.

MR. LEHMAN:  Just BMI.  BMI royalties.  And you really don't get 
that much from the mechanical rights or the synchronization 
rights.  Can you give us some sense as to how much comes from 
what?  How much - - how valuable are your mechanical rights or 
your sync rights versus the mechanical rights?

MR. GARDNER:  With the Cosby Show and Different World it was 
tremendous, it was generous.  Mr. Cosby, knowing that I was --

MR. LEHMAN:  You're talking about sync rights?

MR. GARDNER:  Yes.  With the current show that I'm doing, I 
actually have no income.

MR. LEHMAN:  It's partly because Bill Cosby is a nice guy.

MR. GARDNER:  He is a nice guy.

MR. LEHMAN:  Actually, before I went into the federal government, 
I was on the D.C. General Hospital Board of Directors for eight 
years, and he came over to the hospital for the children and is 
very interested in kids.

MR. GARDNER:  I'd also like to make a statement, if I might.  Mr. 
Cosby, one of the reasons he hired me is because I'm a strong 
believer that one of the most useful weapons to fight ignorance 
and to fight crime is education, and I'm a strong believer in 
education.  I take time out of my daily life to go into schools.  
I adopt schools.  I give out scholarships.  I'm not a wealthy, 
wealthy man like Bill Cosby, but within my community I care about 
the young people.  And each time I can sit down and create 
something that they can benefit from, I use the money from its 
sales to give out scholarships.  I have a junior high school 
program in Richmond, Virginia at Henderson Middle School called 
Striving for Excellence, and whenever I sell any additional 
product I give $10,000 worth of scholarships to middle school 
students who, in other words, could not afford to go to college.  

I think if I don't have any income, that's going to stop a lot of 
kids from going to college and will put more guns on the streets, 
from the way I look at it.  Because these kids are very serious, 
and understand what I do.  And they respect me for what I do.  
And I'm constantly trying to teach them that what I do is 
protected by the federal government, so that I can earn a living, 
because they're constantly asking me, Hhow do you get paid?"  
"How do you get paid?"  You know, the kids want to know about the 
money.

MR. LEHMAN:  I agree.  But we're going to have to conclude.  We 
need to do more education to explain to children, and maybe as we 
develop our educational programs you can be part of that.  It's 
important that young people do understand how people get paid and 
let me say thank you for coming.  The Presidential Commission is 
going to make absolutely certain that you do not lose your stream 
of income, so the reason I asked about the mechanical and the 
synchronization rights, now that we're on the last day of 
hearings, I want to make it clear in this hearing that one of the 
things that we, I think -- one of the things that's coming out is 
that we do not have an adequate system of mechanical rights 
compensation for creators in this country today.  Over and over 
we've heard this.  We heard it from Los Angeles.  We're hearing 
it here.  We have this right in the law with the compulsory 
license that covers it and for some reasons it's just not 
generating any revenue for the creators now.  Maybe it's just 
because we shouldn't continue relying completely on the 
performance rights.  This is something I think we'll want to take 
a closer look at.

MR. GARDNER:  Thank you very much.

MR. LEHMAN:  Next, I'd like to ask Janice Hopkins Tanne to come 
forward, please?  I hope I pronounced your name correctly.

JANICE HOPKINS TANNE:  Good morning and thank you for allowing me 
to address this group.  My name is Janice Hopkins Tanne.  I am a 
writer and contributing editor of New York Magazine.  I am 
addressing you as President of the American Society of 
Journalists and Authors.  The Society congratulates the Working 
Group on its valiant and principled attempt to deal with the new 
challenges and opportunities presented by the National 
Information Infrastructure.  I am appearing before you to present 
our members' support for many of the important changes the 
Working Group has recommended and also to voice some of our 
members' concerns.

Let me tell you about the organization I represent.  The American 
Society of Journalists and Authors is the nation's leading 
organization of independent nonfiction writers.  It was founded 
in 1948 as the Society of Magazine Writers and has grown to 
include nearly one thousand outstanding free-lance writers of 
magazine articles, trade books and other forms of nonfiction 
writing.

We are the only organization of free-lance writers who are 
working professionals.  We have members in most states and many 
foreign countries and every member has met our exacting standards 
of professional achievement.  Among our members are people whose 
names you instantly recognize because their work has altered your 
lives.  Alex Haley's book, Roots, forever changed the way we 
think about the African-American experience.  Betty Friedan's The 
Feminine Mystique changed the lives of American women and men.  
Alvin Toffler's Future Shock foretold the changes we see about us 
every day.  Two of our members currently have books on the best 
seller list and you've probably seen Mary Higgins Clark's mystery 
novels there quite often.  The majority of our members are not 
household names, but you read their work every day.  At least 
half the articles in popular newsstand magazines, such as The 
Atlantic Monthly, Vogue, Esquire, are written by independent free 
lance writers who license their articles to the magazines.  Their 
articles inform us about finance, health, travel, and yes, even 
computers.

The American Society of Journalists and Authors strongly supports 
these amendments to the Copyright Act proposed by the Working 
Group:  to recognize that copies of works can be distributed to 
the public by electronic transmission; to recognize that such an 
electronic transmission should fall within the exclusive 
distribution right of the copyright owner; to include 
transmission in the definition of publication; to clarify the 
Copyright Act to make it clear that the first sale doctrine does 
not apply to the sale or disposal of a copy received by 
electronic transmission  We also favor controls at the server 
level -- such as CompuServe or America On-line -- to protect 
against unauthorized copying.  In addition, we support the 
Working Group's recommendation in favor of having encryption 
devices and other methods to prevent unauthorized copying; to 
prohibit the importation of devices to circumvent such copyright 
protection; to develop and protect copyright management 
information and to establish the Library of Congress electronic 
management system.  We also strongly endorse efforts to educate 
the public about intellectual property rights.  

The Society has some concerns about fair use.  Since this 
doctrine has been used on occasion to excuse the use of large 
sections of the writer's work and worse yet, to use it to convey 
sentiments that are diametrically opposed to what the writer had 
intended.  On the other hand, fair use of previously published 
material is extremely important for many nonfiction writers and 
journalists.  We also have some concerns about library use, 
leading to unauthorized copying.  We would welcome the 
opportunity to participate in further discussion of these issues.

Many of our members are already eagerly participating in the new 
opportunities created by the NII and welcome increased protection 
of our work.  Almost all our members use computers and electronic 
technology to research and write articles and to transmit 
messages.  Nevertheless, we are concerned that copyrighted work 
needs far better protection on the NII than what now exists for 
photocopying copyrighted material.  While few people photocopy 
entire books, chapters and articles are routinely copied, even 
after the Kinko's case, a situation we hope can be avoided on the 
NII.

For example, an article I wrote for New York Magazine, "The Best 
Doctors in New York," was photocopied and sold on the streets.  
Neither I, nor the magazine, received a penny.  Such unauthorized 
copying is far easier in the electronic world.  Widespread 
photocopying of book chapters and magazine articles brings no 
benefit to the writer.  Yet, the service on CompuServe lists 
thousands of magazine articles which can be ordered from 
photocopying services, again, with no money coming to the writer 
who holds the copyright.  The situation is far different in many 
European countries where fees for photocopying are an important 
source of income for authors.  We hope there will be better 
protection for copyrighted work on the NII.  Outrageous 
violations of copyrights exist under our noses in this country on 
electronic services.  Many of our members have been astonished to 
find their work offered for sale when they hold the copyright.

For those of you who are not independent writers, let me explain 
the basics of magazine contracts.  It is a long-standing industry 
practice that the writer sells what is known as first North 
American serial rights, the right to publish the article in the 
magazine in North America, once.  The writer maintains the 
copyright and he or she often derives considerable further income 
from the licensing rights to other publications or the writer may 
use the article as part of the book.

Today, many writers are startled to learn popular magazines have 
sold their libraries of back issues to electronic services, 
although the writers hold copyright to many of the articles.  
Hundreds of these back issues are already available on-line and 
readers are charged to access individual articles.  For example, 
The Zip Data magazine data base on CompuServe charges users $1.50 
for each article they read.  A portion of that fee goes to the 
data base and a portion to magazine publishers.  I have never 
heard of a writer receiving a penny.

The American Society of Journalists and Authors applauds the 
Working Group's belief that licensing systems can be developed 
for the NII.  On- line services established billing systems, so 
we don't think this will be difficult.  We believe licensing 
systems are essential to encourage writers to continue their 
creative work and make it available to the public.

Until now, the copyright law has protected individual creativity 
to the nation's benefit.  The law is based on clear, 
Constitutional premise that this country aims to ensure the 
production of creative works by encouraging those who create 
them.  This specifically means economic and financial protection.

The licensing of specific publishing rights to book and magazine 
publishers is the source of writers' income.  We welcome 
revisions of the Copyright Act that will protect copyrights and 
writers' rights which are ever more threatened by the 
consolidation of book and magazine publishers, electronic 
services and entertainment companies.  Today, just five 
publishing companies together publish more than 60 of America's 
best-known magazines.  In many cases, it is no longer possible 
for a writer to choose the magazine that offers the most 
favorable terms.  The magazines all offer the same confiscatory 
terms because they are owned by the same company.  A similar 
situation holds in book publishing.

The Society's concerned about the Working Group's recommendation 
that licensing systems in the digital environment should be left 
to market forces.  Market forces are not equal when the 
negotiator on one side is a lone, free-lance writer and the 
negotiator on the other side is a billion dollar conglomerate 
that owns several magazine publishing companies and the book 
publishing firms and the entertainment companies.  I am not a 
lawyer, but I understand certain acts are forbidden because they 
are against public policy.  It is illegal, I believe, to sell an 
organ, such as a kidney, yet today, many writers face demands by 
publishers that they give up all rights to their work, not just 
electronic rights, because of publishers' uncertainty about the 
electronic future.  The contracts ask for all copyrights and 
other rights, exclusive rights to use and reuse in any and all 
media, by any and all means, formats, methods and technologies, 
whether now known or hereafter developed, without limitation 
throughout the universe, in perpetuity and without further 
compensation to anyone.

The American Society of Journalists and Authors and the Authors 
Guild has spoken out against this practice in a joint statement.  
Organizations and writers' groups have coordinated efforts to 
insist on additional fees for additional rights such as 
electronic rights.  As you may know, Travel Holiday, a Readers 
Digest publication, recently agree to pay writers additional fees 
for electronic rights and to renegotiate terms in future when 
electronic use becomes clearer.  This fair treatment will attract 
the best writers to Travel Holiday.

Free expression of ideas and the exchange of useful information 
is vital to our nation's freedom and economic well-being.  The 
American Society of Journalists and Authors believes, as a 
Working Group paper states, that information should be freely 
available under the NII, but that does not mean it should be 
free.  When you pick up the latest best seller by one of our 
members, you pay for it.  Part of that money goes to the writer 
as a royalty.  If, in the future, you read it on-line or down 
load it, it is only fair that you pay for that use and that a 
portion of that money goes to the writer.

We expect that most organizations who present their testimony to 
you will be publishers, information networks and lawyers.  We, 
the creators of the products they aim to sell, are grateful that 
you have taken the time to hear our voices.  The Constitution 
protects and fosters creativity.  The changes proposed by the 
Working Group are an important step toward continuing this 
protection in the electronic future.

Thank you.

MR. LEHMAN:  Thank you very much.  Would you explain the 
relationship of your organization to the Authors League?

MS. TANNE:  I'm sorry, I can't hear you.

MR. LEHMAN:  Could you explain the relationship of your 
organization to the Authors League?

MS. TANNE:  We have no relation.  I am sure we have many members 
in common.

MR. LEHMAN:  Is there a difference in the kinds of members 
between the two organizations?

MS. TANNE:  My organization tends to consist of magazine writers, 
and some also write books.  The Authors League, I believe, tends 
to consist of people who write books and plays, and perhaps some 
of them also write magazine articles.  So I expect there is some 
overlap.

MR. LEHMAN:  As I said to the representative of the Authors 
League, I think you might want to participate more in our fair 
use --

MS. TANNE:  We will indeed be interested.

MR. LEHMAN:  -- we're engaging in.  So we'll let you know about 
those meetings.  Are there any other questions?  Thank you very 
much.

MS. TANNE:  Thank you.

MR. LEHMAN:  In the interest of time, since we're running a 
little bit behind, we're going to cancel our break that is on the 
schedule, but there are other members of the Working Group 
yesterday who were sitting up here on the stage.  If you wish to 
come forward now, you can.  If you want to stay in the audience 
you can as well.  It's completely up to you.  Our next witness, 
then, we'll be asking to come forward is Michael Pollack, Vice 
President and General Counsel of Sony Music Entertainment.

MICHAEL POLLACK:  Good morning, Commissioner Lehman, panel 
members.  My name is Michael Pollack and I'm not Vice President 
and General Counsel.  I am Vice President and Senior Counsel of 
Sony Music Entertainment, Inc.  I have practiced law in the 
entertainment industry for more than 25 years.  I'm here 
primarily to focus on the international implications of the 
preliminary report as set forth on pages 135 through 139.

In short, I concur with the RIAA and strongly applaud the 
thought, scholarship and foresight of the Working Group and its 
timely recommendations regarding the international aspect of its 
report.  Your recognition that rules must be formulated to 
protect the economic rights of providers of entertainment and 
information products as the Global Information Infrastructure 
continues to develop.  And the solutions you suggest contain the 
blueprint for the survival of the recording industry and other 
copyright industries.

Throughout the 20th century, technologies have continued to 
change the way people receive and enjoy copyrighted material.  
Some examples -- motion pictures.  We used to go to theaters.  
Now we see it on free television -- and there's cable television 
and satellite television and there's HBO and Home Video and, more 
recently Pay-Per-View, video on demand.  Sound recordings -- we 
all remember analog disks.  Now they're compact disks.  We 
remember 8-tracks.  We now have analog cassettes and, hopefully, 
from my company's standpoint, mini disks.  And here, or almost 
here, are recordable CDs, CD Plus and CD ROMs.  Changes from the 
transmission era -- we had analog radio.  We now have digital 
audio cable networks.  Here or almost here, the celestial 
jukebox, pay-per-listen, audio on demand.  And of course, as has 
been recognized by our speakers -- and of course, the Working 
Group -- on-line computer services.  We have a particular concern 
about on-line computer services and I chair a committee at Sony 
Music called the Electronic Ethics Committee that deals with 
legal and ethical problems related to the use of on-line computer 
services.

New technologies can be a two-edged sword.  They pose new market 
opportunities, but unless the law keeps pace, can erode existing 
markets and allow for unauthorized and uncompensated use of 
copyrighted works.  The preliminary report recognizes that 
challenges posed by new technologies also have an international 
dimension.  The United States is the leading exporter of music 
and sound recordings.  Failing to adequately protect our works 
provides other nations with excuses to either similarly limit the 
scope of protection or restrict protection and compensation on 
the basis of reciprocity, rather than national treatment.  

Thus, I strongly concur with the conclusion of the Working Group 
that the time has come to bring protection of performers and 
producers of sound recordings into line with the protection 
afforded to creators of other works.  I commend the Working Group 
for recognizing the need for performance rights in sound 
recordings.  I believe that enacting a performance right for 
sound recordings will enhance the ability of U.S. trade 
representatives in multilateral and bilateral negotiations to 
expand the levels of copyright protection around the world -- not 
only for sound recordings, but also other forms of intellectual 
property.  American music is one of the most sought after 
commodities in the world.  Performance rights in sound recordings 
will clear the way for Americans to gain access to foreign 
performance royalty pools and improve our trade balance.

The music business is an international business, particularly for 
American superstars.  How important are foreign sales to 
prominent American recording artists?  Let me give you some 
examples from Sony's perspective.  Mariah Carey's most recent 
album is entitled "Music Box."  It's done fabulously well in the 
United States -- six times platinum.  Her U.S. sales represent 
less than 37 percent of her world-wide sales.  Bruce Springsteen, 
as popular an American icon as we can have -- his two most recent 
albums, which were released together -- approximately 70 percent 
of those sales were outside of the United States.  Michael 
Jackson -- the album "Dangerous" -- 75 percent of his sales have 
been outside the United States.  The soundtrack from the album 
"Philadelphia," a very American story -- 63 percent of the sales 
to date have been outside of the United States.  I could cite 
examples from other companies, although I don't have precise 
figures, but know it's true of Whitney Houston, with Kenny G, the 
Bodyguard, our most successful albums.  International sales are 
crucial.

In this new world of transmission, these fabulous results will be 
jeopardized unless there are adequate legal and technological 
safeguards in place.  The record industry was worth approximately 
$34 billion last year, nearly two-thirds of which resulted from 
foreign sales.  U.S. repertoire accounts for roughly 60 percent 
of all foreign sales, resulting in significant contribution to 
the United States balance of trade and the creation of thousands 
of jobs in creative manufacturing and distribution sectors.

The Global Information Infrastructures essentially create a 
single world-wide market for information and entertainment.  This 
network of networks is only as strong as its weakest link since, 
for example, a data base in China may be accessed by someone in 
Iowa.  In that regard, confirming the applicability of Section 
602 to the importation right of transmissions, as the Working 
Group has proposed, would be very helpful.

If copyright proprietors and creators are to be sustained in this 
global village, then the works that they create and distribute 
must remain within their control, both with respect to licensing 
transmissions and prohibiting unauthorized uses.  Effective 
control over transmissions contemplates both adequate rights and 
technical controls to ensure effective exercise.

The United States must move quickly to establish its domestic law 
consistent with these economic objectives -- that is, continuing 
to provide financial incentives for the creation and distribution 
of original works and to reach international consensus to 
safeguard the digital marketplace, a marketplace that will be 
dominated by U.S. creations  Given the dominance of U.S. creative 
industries, our trading partners have traditionally found 
numerous ways to avoid paying U.S. creators.  The opportunity for 
intervention and mischief will be greatly enhanced in the digital 
world, and it is thus critical to move quickly and forge an 
international discipline to both protect creators and to prohibit 
government intrusion into (inaudible).

Two final points.  As the Working Group recognizes, all works 
should be protected uniformly, regardless of the nationality of 
the author or the origin of the work.  National treatment is 
crucial.  And finally, on a personal level, I'm very glad that 
the Working Group recognizes the need for educating students on 
the importance of respect and protecting intellectual property 
rights.  Thank you for giving me the time to address you.

MR. LEHMAN:  Thank you very much, Mr. Pollack.  I have a question 
that you may have some expertise in.  It came up earlier in the 
hearing in Los Angeles and I'll try to clarify the factual issue 
-- the way mechanical royalties work in Europe.  It's my 
understanding that the European countries don't have a compulsory 
license for mechanical royalties as we do in the United States.

MR. POLLACK:  That's my understanding, too.

MR. LEHMAN:  Yet, we're hearing from songwriters in the United 
States that in Europe they receive -- I think it's a percentage 
of the whole album, as opposed to a payment per cut on the album.  
Can you flesh that out a little bit?  If you can't do it now, 
maybe you can supply us with some more information later on as to 
how the European system works.

MR. POLLACK:  I can try to do both.  My understanding is that 
rather than having a fixed dollar and cent amount, a percentage 
in many European countries -- a percentage is applied to the, 
what's called the PPD -- the published price for distributors -- 
and it varies from countries.  And I think it's best that I get 
you some information.

MR. LEHMAN:  Is that negotiated between -- is it a performing 
rights society who collects the money?  How do the mechanicals 
collect?

MR. POLLACK:  I don't know that I have expertise.  I'll take a 
shot at it.  In the past, there have been negotiations between 
the music publishers' representatives under a group called BEAM, 
and the record company representatives represented by the IFPI  
And on a periodic basis they would negotiate what this percentage 
should be -- of the price, the PPD -- insofar as computing 
mechanicals, and then by applying that royalty percentage to that 
base.  Whether or not there were any reductions, I'm not totally 
familiar with.  From that standpoint, you come out with a number 
that would represent the mechanical royalty payment that could -- 
now some countries, I believe, there's a combined function where 
you just have one society that collects both mechanical royalties 
and performance rights -- performance royalties -- unlike the 
United States where you have separate representatives 
representing different pieces of the music publishing pie.

I mean, in listening before to Mr. Gardner, who made a very 
impressive presentation, there was concern about performance 
royalties.  Under some of the guidelines that the Working Group 
has proposed, Mr. Gardner -- if performance royalties would be 
reduced, then -- I don't know that they would be reduced.  It 
might be getting extra distribution royalties.  And certain 
transmissions would clearly be distributions rather than 
performances.  But he would still be compensated because he is 
the writer.  He might get the money through a different agency -- 
and in this particular case, the Harry Fox Agency, possibly, 
instead of his performing rights society -- but he would still 
get the money.  He would not be hurt.

MR. LEHMAN:  You touched on a very  important issue there.  It's 
pretty clear from these hearings that songwriters or composers do 
not believe that that will happen.  And this suggests several 
things, and it does suggest that mechanical sources of revenue 
are not presently considered to be adequate.  I have heard 
they're very inadequate compared to the European system.  Yet, at 
the same time, there's not a particular focus on the part of the 
composers and songwriters dealing with that issue.  There's more 
of a concern that they will lose revenue if there's any threat to 
the stream of performance rights that are licensed through 
performing rights societies (inaudible) which as we said before, 
certainly nothing (inaudible) was intended to reduce the revenue 
stream on the part of members of the performing arts societies.

MR. POLLACK:  Can I just make a comment?  I think part of that is 
an education factor, because monies do get filtered through a 
music publishing company on the mechanical royalty side, and 
perhaps certain writers have substantial advances and they don't 
see the royalties flow.  Talking from a record company 
perspective, we see some of the numbers that are paid out in 
mechanical royalties, and I know I would be very happy on some 
records receiving the kind of money that that flow is at in that 
respect.

MR. LEHMAN:  Well, I think that's something we need to know more 
about and maybe do some follow up work, not only for the purposes 
of the Green Paper and understanding its impact and some of the 
recommendations, but also -- this is a very serious problem in 
terms of our international negotiations in trying to bring some 
sense of harmony to the world system so that we can have national 
treatment around the world, because we have a number of different 
systems and one of them is in the area of performance rights.  
Even the proposals that are contained in the Green Paper, the 
proposal presently pending in Congress supported by the 
Administration, really doesn't give the United States the same 
power as Europe.  It doesn't include some of the same performance 
rights that are contained there.  So, one of our most difficult 
tasks is to try to understand the differences between the 
Continental System and our system and try to make it more 
centralized in the copyright system -- maybe find some common 
ground together.  We'll be getting back.

MR. POLLACK:  We'll be more than happy to help you in any way we 
can.  Thank you very much again.

MR. LEHMAN:  Next, I'd like to ask Marilyn Bergman to come 
forward, please.  Ms. Bergman is the President of the American 
Society of Composers, Authors and Publishers, the oldest 
performing rights society in the United States and one which has 
traditionally had as its chief executive a working artist -- and 
Ms. Bergman is one of the leading such artists in America today.  
Welcome.

MARILYN BERGMAN:  Thank you.  Good morning, Mr. Lehman and 
members of the Working Group.  I'm Marilyn Bergman.  I'm a 
songwriter, a lyricist to be precise.  I'm also a member of ASCAP 
and since 1985 I've been a member of its Board of Directors.  I 
was deeply honored to be elected its president and I'm also on 
the executive committee of the music branch of the Academy of 
(inaudible) Sciences and yesterday I had the honor of being 
elected president of CISAC, a confederation of global performing 
arts societies.  I committed myself to doing my best to ensure 
that creative expression remains as free as possible and that 
creator's rights are further protected.

Before going further, I want to say that I've tried as much as 
possible to eliminate from this talk material that I know you've 
heard over and over.  I think opposition has been made clear to 
you and forgive me if some of this is redundant, but I've been 
told by accountants that it's important to put some of it in the 
record.  I'll try and get through it as quickly as possible.

MR. LEHMAN:  You can say whatever you like.  We can hear it a 
thousand times.  That's okay.

MS. BERGMAN:  Thank you.  I believe I speak for many creators and 
owners of copyrights in music when I say we look forward to the 
opportunities presented by the National Information 
Infrastructure.  That's why we applaud the Administration's 
timely recognition that the NII will soon be a reality and it's 
taking the initiative to identify the challenges and changes 
necessary to adapt, and in particular our copyright system, to 
this new technology, the new relationships it will create between 
the creative community users which will develop as we travel the 
information superhighway.

I have carefully read and reread the preliminary draft and I am 
both impressed by the depth and breadth of the study and 
encourage the Working Group in support of a strong intellectual 
property protection.  I particularly like the recommendation that 
we educate our young people about the intangible rights of others 
and the proposals for engineering solutions to superhighway 
robbery.  The preliminary draft reflects the Working Group's 
understanding that the success of the NII depends on the content 
available for transmission over it, and the content will depend 
on whether we, who are creators of the copyrighted works, are 
secure in the knowledge that our rights are protected.  The 
preliminary draft highlights many of those areas where we need to 
adapt the copyright law to maintain the strength and protection 
of intellectual property.

The preliminary draft recommends sound changes to ensure that the 
rights of creators are safeguarded in the NII context.  For the 
most part, the draft reflects the careful analysis of how 
copyrighted works might be used and misused in the NII context.  
It tries to anticipate and balance the needs of creators, service 
providers and end-users, so that the NII will work.

The Working Group did a remarkable job, in my opinion, for most 
of the interested parties.  I would expect and hope that creators 
of most works -- computer information service providers and 
would-be users -- are very pleased with the draft.  I appear 
before you today to bring your attention to a few areas where 
interested in the conclusions and recommendations that will have 
potentially adverse impact on creators and owners of copyrights 
of music and perhaps on the entire music industry.  I urge that 
these conclusions and recommendations be reconsidered in the 
final report.  As a songwriter, I understand all of the critical 
significance of the performing rights.  Performance rights 
royalties are the single largest source of income to creators of 
musical composition  Yet, to my dismay, the preliminary draft 
appears to take a step to seriously diminishing the performing 
right of music.

First, it posits the conduct of public transmission of the 
musical composition over the NII will be a public performance.  I 
believe that this issue is settled with the 1976 amendments to 
the Copyright Act.  Since that act came into effect, when the 
radio station transmits a broadcast of a song, a transmission 
which may or may not be listened to on receivers, that is a 
public performance of the music.  When a television network 
transmits a film which contains musical works to local 
broadcasters, it is a public performance.  The local broadcaster 
is performing and then transmits the network broadcast to 
viewers, and a cable television station system is performing and 
it re-transmits the broadcast to its subscribers.

The preliminary draft suggests that if a song is broadcast to end 
users over the NII, it may not be a performance.  How can that 
be?  And examples set forth on page 43 of the preliminary draft 
doesn't help explain this conclusion.  It states, and I quote, 
"when a copy of a work is transmitted over wires or satellite 
signals and digital forms so that it may be captured in the 
user's computer without being rendered or shown, it has rather 
clearly not performed."  This statement to me is directly 
analogous to saying that if I set my VCR to tape an hour of music 
videos on MTV while I sleep, MTV is not publicly performing those 
works.  And under the copyright law that simply is not true.  I 
see no reason to change that law in our technology.

The preliminary draft fails to reveal how or why such a 
conclusion is necessary to achieve the goals of the NII -- to 
disseminate the widest variety of information and entertainment 
works to the widest audience, while protecting the intellectual 
property rights of creators.  These goals do not depend on an 
attempt or an elimination of performing them.

I understand well that we need to add some language to the 
Copyright Act to adapt to changes and technology because a user 
will be able to download transmissions to the NII.  We must be 
able to account for this in millions of distributions of copies  
Accordingly, the preliminary draft recommends that the definition 
of distribution be amended to include distribution of copies by 
transmission.  I believe I speak for all creators when I concur 
that that amendment will protect the copyright owner's exclusive 
right to distribute copies of his or her works and will advance 
the goal of variety and access to works on the NII -- which 
brings me to the second point.

A user of the NII will be able to communicate with the system, 
retrieve a performance of a song into their home computers and 
listen to it.  The user will also have the opportunity at the 
same time to retain a copy of the work.  Whether or not he keeps 
a copy, the transmission will have implicated both the 
performance right and the distribution right.  Inexplicably, the 
preliminary draft proposes that under such circumstances,  if the 
primary -- "primary purpose or effect" of the transmission was to 
distribute a copy of the song, the transmission should be 
considered a distribution and not a performance.  

The Copyright Act provides that creators be authorized as to 
exploiting none, some or all of the exclusive rights granted to 
creators, and the proposed amendment would extinguish that right 
in the NII context as it applies to the separate rights to 
distribute copies of and publicly perform the work.  No 
explanation is offered as to why such amendment is necessary to 
take advantage of the NII technology.  When a transmission 
constitutes both a performance and a distribution of a copy, both 
rights should be credited and compensated as they are now and 
long have been.

This is a major issue for composers and writers of music.  Unlike 
other creators, Section 115 of the Copyright Act provides that 
owners of the copyrights of musical works must allow owners to 
make copies of our works, and the maximum price they may charge 
for said copies is set by law.  Accordingly, as we heard earlier, 
many of us rely heavily on performance rights income to make a 
living.  In contrast, creators of other types of works not 
subject to compulsory licensing have no pressing need to 
separately license their performing rights.  For example, the 
rights to distribute copies of and publicly perform motion 
pictures are historically licensed as a unit.  The creator sets 
one price and all rights necessarily go to the highest bidder as 
a package.  These creators can absorb the proposed change.  But 
if the proposed amendment were adopted, creators and owners of 
copyrights of musical works might well receive only mechanical 
license fees for most uses of their works in the NII.

In effect, the proposed amendment singles out the creators of 
copyright owners of music as the only class which will adversely 
be affected by the otherwise excellent proposals of the paper.  
This would be quite unfair, and I refuse to believe that it's 
what the Working Group intends.  I know it not to be so.

This might be best illustrated by an example.  Say Home Box 
Office broadcasts a special.  It contains songs.  Each time HBO 
carries that program, the writer or writers will receive 
performance royalties.  Many HBO subscribers may make video 
cassettes or recordings of the show -- which they can enjoy in 
years to come.  Was it the primary purpose and effect of the 
broadcast to transmit a performance or distribute copies?  
Certainly, it was the performance.

Now project the same scenario to the future.  The information 
superhighway is freely navigable.  The special's available on the 
NII, and the same people who would have taped the show on their 
VCR in 1994 retrieve it from the NII and retain a copy -- a 
digitally perfect copy -- in their system.  Did the primary 
purpose and effect of the transmission change as a result of 
technology?  I think not.  

The primary purpose and effect of every transmission of a musical 
work on the NII will be that someone, somewhere, at some time can 
enjoy the performance.  The primary purpose or effect of the test 
itself, in my opinion, will not work and will lead to years of 
litigation.  Who is entitled to decide what is the primary 
purpose or effect of any transmission?  From whose perspective 
should the decision be made -- that of the user, the service 
provider, the owner of the distribution right or the owner of the 
performing right?  The interested parties, I believe, will fight 
to establish that the primary purpose and effect of a particular 
transmission is that which best serves their interest.  In sum, 
this either/or recommendation is not acceptable.  The current law 
that says every right which is implicated in use must be right is 
adequate and perfect for NII users.

Thank you very much for this opportunity to speak to you and to 
draw your attention to these very real concerns of lyricists and 
composers and publishers of music.  I sincerely hope you will 
further consider the effect and impact of those new proposals 
will have on the future of music in this country and make 
appropriate adjustments to your conclusions and recommendations 
in an otherwise splendid report.  Thank you.

MR. LEHMAN:  Thank you very much.  Assuming that transmission 
through the Internet is a public performance, who or well, 
actually -- (inaudible), because we haven't determined that yet, 
existing network that is our National Information Infrastructure.  
I assume that some music is already being transmitted through 
this Internet, and I wonder -- are you licensing anybody in this 
context now, and who are you licensing?

MS. BERGMAN:  Believe me, I don't feel equipped to answer the 
question.

MR. LEHMAN:  If you could get back to us.

MS. BERGMAN:  I'd be happy.

MR. LEHMAN:  I think one very important thing for us to 
understand is exactly how the revenue flow is going to work here 
and who -- for example, in the context of a service, such as a 
CompuServe, Dialog and so on, testified before us earlier.  It's 
not clear to me whether they are the agent who will be paying a 
performing rights royalty or whether it will be services who they 
facilitate in video dial tone situations -- is it telephone 
companies that pay, is it the service that purchases the time 
billed through the video dial tone?  I think these are all 
important things that we need to flesh out and would appreciate 
it if you and your counsel will follow up on this.

MS. BERGMAN:  We'd be happy to.

MR. LEHMAN:  Thank you very much.

MS. BERGMAN:  Thank you.

MR. LEHMAN:  Next, I'd like to ask Hilary Rosen, President and 
Chief Operating Officer of the Recording Industry Association of 
America to come forward, please.

HILARY ROSEN:   Now I know why Marilyn Bergman is my favorite 
lyricist -- because I love the words "superhighway robbery."

Good morning, Commissioner, members of the Working Group.  My 
name is Hillary Rosen.  I'm President of the Recording Industry 
Association of America.  We're the trade association that 
represents over 90 percent of all sound recordings distributed in 
the United States.

I guess, first, I'd like to start by praising the Commissioner 
and other members of the Working Group and their staff for 
preparing this report ,and for your leadership on these issues.  
It's so important to have such strong leadership in the context 
of the larger government-related issues in the National 
Information Infrastructure.

The RIAA obviously supports the premise of the report that strong 
intellectual property protection will be the engine that drives 
the content of the NII.  We support virtually all of the 
recommendations in the report and we filed comments that give us 
-- that give you some more details on them.  

Principally, of course, number one, we are -- we believe that 
performance rights for sound recordings must be created in the 
United States.  Number two, we believe that the Copyright Act 
should be clarified so that works can be distributed, so that 
copies of works that are distributed to the public by 
transmissions are defined as reproductions.  We believe that 
there is a need for provision for technical protection of 
creative works --specifically, an amendment that would prohibit 
the importation, manufacture and distribution of anti-copying 
devices that defeat the anti-copying systems.  We would also 
suggest that the Working Group consider some mandatory inclusion 
of copyright management systems -- or at least provide some 
strong Government leadership to coordinate standards for 
management information systems -- in hardware which would read 
and react to systems that may be placed in the software.  And, of 
course, we support prohibiting fraudulent alteration of this 
information, and, obviously, the call for some effective public 
education about intellectual property rights.

I want to focus today on two specific issues.  And they're both 
sort of in this general area of performance or distribution.  The 
first is the report's discussion of the primary purpose or effect 
test.  We agree with the report's view that some transmissions 
constitute both a performance and a distribution.  However, we 
are concerned that the report suggests that the right must be 
defined as one or the other, based on a primary purpose or effect 
of the transmission.  There are many significant commercial 
activities that, in our view, would be free from liability under 
such a test, and we urge that that be reconsidered.  Obviously, 
if a sound recording performance right is not created, that task 
becomes even more problematic.

The second concern is, frankly, not of this panel's making, but 
it has been raised in so many contexts that we feel obliged to 
raise it at this hearing -- and that's the issue that the 
performing rights societies have raised repeatedly, suggesting 
that every transmission be considered a public performance.  In 
our view, frankly, this defies some marketplace logic.  We think 
that the marketplace needs much more flexibility in this 
definition distinction.

Frankly, we think that some transmissions are only a public 
performance.  We think that some transmissions may only be an act 
of distribution.  And we believe that some transmissions may be 
both.  And we think that the most important thing, of course, is 
that there be a seamless web of protection for all copyrighted 
works, so that the licensing structures can be flexible to adapt 
to any of those three scenarios.

I would give you just briefly an example of each.  The first:  
some transmissions that might only be a distribution.  Two easy 
examples would be a -- you may have read about some new 
technology where record stores are considering creating sort of 
an on-line inventory replacement system for CDs in their stores.  
Essentially, there may be a downloading warehouse somewhere in 
the middle of Iowa that could service every single Tower Record 
store around the country with replacement of inventory.  These 
are clearly situations that replace current manufacturing and 
distribution of existing compact disks, and in our view that kind 
of a transmission would only be a distribution.  A more 
in-the-home example would be:  America Online contracts with Sony 
Records to deliver the new Billy Joel record to its subscribers.  
It's downloaded in non-real time -- some high-speed duplication 
is created and recorded on the disk for the consumer.  Maybe it's 
done at 3:00 in the morning.  And you don't listen to it until 
you've actually got a copy or a reproduction in your hands to put 
on your own CD player.  We think that's purely an act of 
distribution, not a public performance.

Situations that would only be a public performance, I guess, are 
equally obvious.  The current Digital Cable Radio which acts in a 
high quality digital form over cable television, but fairly 
closely resembles a current broadcast situation.  There's no 
encouragement to copy.  There is a traditional kind of a 
broadcasting format.  We think that's only a public performance 
and not a distribution.

Finally, some things may be both.  We may have a situation where 
Digital Cable Radio or America Online creates an opportunity for 
a million subscribers or listeners to hear the new Billy Joel 
record, but for an extra fee, you'll get the code to unlock the 
encryption so that you can download it.  We think those two acts 
are probably going to need to be licensed separately.  A 
performance has taken place -- and so public performance rights 
should be paid, but a distribution is taking place as well -- and 
those rights should be honored.

So frankly, our concern is that there needs to be this seamless 
web of protection to be able to respond to whatever technology 
develops into.  And that's purely going to be a function of 
marketplace demand, consumer demand, and the creativity and ease 
with which licensing of copyrighted works can take place.

Finally, I just want to mention something about on-line service 
providers, because we had heard testimony before this Working 
Group by on-line service providers suggesting that they are not 
liable for unauthorized use of the copyrighted works.  Frankly, 
we reject that notion.  We know that there are forum editors on 
all the commercial services that exist today, particularly 
Prodigy, America Online, CompuServe.  There are many system 
operators who are actively editing those forums and files when it 
comes to the interest of those service providers.  If they can 
figure out a way to charge everybody to get onto their system, we 
think they can certainly figure out a way to make sure that 
copyrighted works are licensed and compensated for.

So that concludes my testimony.  I'll answer any questions.

MR. LEHMAN:  Thank you very much, Ms. Rosen.  Actually, we heard 
at least one or more of the on-line service providers -- in fact, 
one of them stated even in the situation where they put people on 
notice that a work -- that a transmission of a work -- was 
infringing, that they still should have an exemption.

MS. ROSEN:  Completely.  And frankly, we pretty much think it's 
the cost of doing business.  We've seen in the rest of the 
intellectual property areas -- For instance, in the record 
industry -- that's my best experience -- we spend a lot of money 
on piracy and enforcement.  And as a practical matter, record 
companies believe that that's the cost of doing business -- is 
the ability to enforce their rights.  We think that those 
commercial service providers should consider the protection of 
intellectual property and works that are -- making sure they're 
operating within the context of the law as part of their cost of 
doing business.

MR. LEHMAN:  Thank you.  I appreciate your description of the 
various categories of digital transmission -- distributions as 
you see it -- and I encourage you, as I asked earlier, an earlier 
witness, to supply us with some follow-up material about exactly 
how their particular view of the public performance rights 
context would work.  I encourage everyone to provide that same 
kind of specificity -- as to who exactly pays what, what are the 
situations -- that you just provided.  So I appreciate that a 
great deal.  Thank you very much.  Next, I'd like to ask Frances 
Preston, President and Chief Executive Officer of Broadcast 
Music, Inc. to come forward.

FRANCES PRESTON:  My name is Frances Preston and I appear before 
you today as President and Chief Executive Officer of BMI.  I had 
the honor this week of being elected to the Executive Bureau of 
CISAC, and have served on the administrative council for 
approximately ten years.  BMI represents the public performing 
rights of over 150,000 songwriters, composers, music publishers 
in all 50 states and throughout the world.  There are 3 million 
musical works in the BMI repertoire.

First, let me thank the chair of the Working Group, the honorable 
Bruce Lehman, and his fine staff for their leadership in 
producing the Green Paper, and in developing the public hearing 
and written comment methodology.  BMI filed an extensive written 
statement, and I would ask that it be incorporated in the record 
or referred to for technical and legal understanding.  I am not 
an attorney, nor am I a technocrat.

BMI applauds the general message of the paper that protection of 
intellectual property will play a key role in the National 
Information Infrastructure.  And, as you state on page 7 of your 
report, "what will drive the NII is the content moving through 
it."  And I am here to protect that content.  I'm also here to 
urge the importance of not allowing the distribution by 
transmission right to adversely affect or be substituted for the 
performing right.  Let BMI's position be very clear.  We are not 
against the creation of a new distribution by transmission, as 
long as the current performing right continues to exist and 
songwriters are not harmed.  These rights must co-exist in the 
new world of digital technology.

In proposing changes to this nation's intellectual property 
system, I would ask that you not think in the terms of the 
superstar songwriters such as Paul Simon or Dolly Parton, Gloria 
Estefan, Aretha Franklin.  The average songwriter does not 
receive income from being an artist, nor does he receive income 
from touring or television appearances, commercial endorsements, 
sales of souvenirs, etc.  Any change in copyright law which will 
constrict or adversely affect the performing right will be 
disastrous to the songwriter's livelihood.  With all of the new 
technology, the songwriters and composers were anticipating more 
income due to the vast exposure that their music would have, and 
they are panicked at the prospect of losing money rather than 
earning more.

The copyright law fixes a maximum statutory mechanical rate per 
song to be paid songwriters and music publishers for each copy of 
the record or tape made or distributed.  If the statutory rate of 
6.6 cents per song is paid, the record sells 1 million copies, 
the composer and lyricist on each song would receive only one and 
two-third's cents per record sold or $16,000 each.  That is a 
minuscule portion of the sale price of an album or a cassette or 
a CD.  I do not propose to argue whether a created share record 
income is or is not fair.  I raise this for your consideration so 
that you may understand why performance royalties are so crucial 
to the economic survival of the right.

To the extent that the report merges the performing right with 
the distribution right or makes it contingent upon whether the 
transmission is digital or not, lyricists and composers will be 
seriously damaged.  The problem is clearly indicated on page 43 
of the report, which states "when the copy of a work is 
transmitted over wires or satellite signals in digital form so 
that it may be captured in a user's computer without being 
rendered or shown, it is rather clear it has not been performed."  
It's hard to visualize why a computer owner would have a musical 
work or an audiovisual work transmitted without any intention of 
being able to ultimately hear or to view the work.  The same 
paragraph distinguishes between a digitized version of the film 
which would not constitute a public performance and one where the 
motion picture is literally rendered by showing its images in 
sequence.  

To exempt digitized transmissions as being considered 
performances might well, in the long run, affect the performing 
rights of composers in other media.  The current technology being 
used to transmit radio, television, satellite and cable signals 
will, in the very near future, be replaced by digital 
transmissions.  By going from analog to digital transmission 
methods, content providers will be able to provide an endless 
supply of programming information and data.  For example, cable 
operators have advertised that they will soon be able to provide 
500 channels.  Why should cable operators, cable programmers, 
radio and television broadcasters and satellite carriers who now 
pay public performance fees in 1994, not be required to make such 
payments in the year 2000?

It has been suggested that in the future, record companies will 
be doing business in a new way, using digital transmissions to 
the public to distribute and sell their product.  Once such area 
will bring a digital transmission into the home, whether in real 
or compressed time, wherein an electronic device would record the 
transmission -- thereby creating a sound recording.  As set forth 
in our submission, this transmission to the public represents a 
public performance of the work and the songwriter/composer should 
be compensated for public performance.

Another scenario would be where a transmission is sent to a 
commercial establishment such as Tower Records --

MR. LEHMAN:  Could that also be a distribution?  Would you say 
that would be both?

MS. PRESTON:  Yes.  A distribution and a performance.  Another 
scenario would be where, as Hilary mentioned, a transmission is 
sent to a commercial establishment, such as Tower Records.  The 
transmission would be recorded onto a CD.  This involves a 
transmission to the commercial public and as such represents a 
public performance where the songwriter/composer should also be 
compensated for the performing right.

Under both scenarios, the record companies have elected a new way 
of doing business.  This new way of doing business involves the 
electronic transmission of musical works.  The copyright law 
provides that such transmissions to the public represent public 
performances.  Therefore, songwriters should be paid performing 
rights royalties from those choosing to do business in this new 
way.

If current copyright law does not clearly provide for right and 
distribution in this digital area for the record companies, the 
law should be clarified to provide for that right, in addition to 
the performing right in the underlying musical work.  Both rights 
should co-exist.  It should not be an either/or situation.

With the payment of a performing royalty, did it really put that 
much of a burden on the record companies?  Not in light of the 
huge savings over present methods of distribution.  No pressing 
costs, no sleeve, no jacket, no jewel box, no art work, no liner 
notes, no shipping costs, no overproduction of records in 
anticipation of high demand, no breakage, no returns.  The 
recognition of the performing right will have little effect on 
the record companies.  In any event, not to recognize the 
performing right would not be fair to composers and songwriters.  

The report appears to assume that if the composer lost the 
performing right for certain usages, this might be compensated by 
the royalties received by the composer for distribution.  This is 
certainly not true of TV and film composers -- for example, Stu 
Gardner, who you heard this morning.  With few exceptions, it has 
been the custom of the industry that the composers of music for 
film and television receive no royalties for the sale of 
videotapes.  This is true for the composers of background music, 
themes and scores.  It's also true for the composers of music for 
films which rely heavily on the songs for their appeals, such as 
"Mary Poppins" or "Beauty and the Beast."  If the performing 
right is taken from the composer or it is substantially eroded 
when a transmission is deemed to be a distribution, there is no 
substitute source of income which can conceivably repair the 
damage.

Music and theatrical films are already on the information 
highway.  Television programs will follow.  Consider the 
prospects of the composers of theme and background music for 
television.  Industry practice has been to reduce production 
costs by paying small fees to the composers in expectation that 
they will be compensated by their performance royalty.  The 
composer's income is already being affected by the fact that when 
American television programs are sold abroad, in many cases, the 
music is being stripped and being replaced by music of a local 
composer.  These composers cannot afford to lose United States 
performing rights income based on the fact that programming is 
brought to the public by new technology.

The Green Paper recommends a distinction be made between 
transmissions by limiting the performing right if the primary 
purpose or effect in the transmission is to distribute a copy or 
phonorecord of the work to the recipient of the transmission.  
Under the present law, a work is publicly performed if it is 
transmitted in such a way that it can be seen or heard by the 
general public, such as a broadcast, or by limited section of the 
public, such as cable transmissions which are available only to 
subscribers.  The transmission does not lose its characterization 
as a performance depending on the number of people who choose to 
receive the transmission.  Indeed, it would be a public 
performance even if no one heard the transmission.  

Endless litigation will result from the establishment of a 
primary purpose or effect test.  It is difficult to imagine a 
system that will read the minds of the senders of the 
transmission as well as those of the recipients.  If intent or 
motivation are to determine whether a transmission is a public 
performance or a distribution, the economics of the situation -- 
that is, the lowest price -- would dictate the answer.  Such a 
result will be that intellectual property rights will not be 
promoted.

The report is laudable insofar as it concludes that content will 
determine the success or failure of the NII.  Copyright plays a 
central role in protecting content.  Education, copyright 
management information, technology protection and international 
development are key subjects addressed in the report.  The 
conclusions generally are sound.  BMI supports them and stands 
ready to assist in their implementation.  But please, do not 
erode the copyright protection for performing rights in the NII.  
That would be a disastrous message to American creators, the 
public and the international community in general.

Thank you for letting me appear this morning.

MR. LEHMAN:  Thank you very much, Ms. Preston.  Thank you very 
much for being very explicit about how you view the performing 
right as applying to the different factual situations, because 
clearly, there's a -- you created a contrast to the testimony of 
Ms. Rosen.  And I think there's a distinct difference of opinion, 
particularly when it comes to the distribution/public 
performance, if you wish to use that characterization, of a work 
to a record retailer.  You very much view that can be, would be, 
both a distribution and a public performance.  You also 
indicated, though, that the public -- the liability for the 
public performance record would be in the record company.  But 
what about situations where music is delivered, say, to a service 
like Online America by a company that sets itself up to 
distribute directly to individuals?  Who would be liable for the 
payment of public performances in that situation?  Would it be 
the service that puts it together -- the albums or the music to 
be sent to individual subscribers, or would it be Online America, 
or would it be both?

MS. PRESTON:  We view the Internet as a series of networks, so we 
would be licensing CompuServe and Online America, and any other 
program services that came along.

MR. LEHMAN:  In this sense, it's a little bit like the position 
that you take vis-a-vis cable television?

MS. PRESTON:  I'm sorry, I can't hear.  I'm having a very 
difficult time hearing you for some reason.

MR. LEHMAN:  Right now -- cable television -- your position that 
you license both the cable television systems and the service 
providers.  For example, HBO -- they pay the license fee?

MS. PRESTON:  Yes, HBO pays the license fee.

MR. LEHMAN:  And also, the cable systems pay a license fee as 
well?

MS. PRESTON:  The local cable operator and the HBOs are both 
liable for the public performance.  HBO, at the present time, 
pays through to the viewer.  It pays a share of the local cable 
operator.  Should the local cable operator -- should HBO not have 
paid that through to the viewer, then the local -- should the HBO 
not have paid through to the viewer, then the local cable 
operator would be infringing if he carried HBO.

MR. LEHMAN:  I see, but also cable systems broadcast other 
services -- for example, public access channels.

MS. PRESTON:  Yes.

MR. LEHMAN:  So are you licensing --

MS. PRESTON:  We are presently in negotiation and have been in 
negotiation with the local cable operators now for several years.

MR. LEHMAN:  So that's a little up in the air --

MS. PRESTON:  That's right.  That is up in the air.

MR. LEHMAN:  -- as to who pays in that situation?

MS. PRESTON:  In the present situation, the local cable operator, 
for the public access, right now that is under negotiations.

MR. LEHMAN:  Thank you very much.  Were there any other 
questions?

MS. SOUTHWICK:  I would just ask that when the people submit 
information about the revenue flow, if we could also get the 
information on a per-transmission basis.  You said that for 
distributions, the songwriters/composers get one to two cents per 
record out of the total --

MS. PRESTON:  The rates vary.  We have a logging system there so 
radio, for instance, there's 10,000 radio stations in the country 
and it's impossible to find out if a record is playing every day.

MS. SOUTHWICK:  I thought you said one to two cents per record 
sold.  We were talking about distribution.

MS. PRESTON:  We're talking about mechanical royalties?

MS. SOUTHWICK:  Yes.

MS. PRESTON:  Yes, I said that if there were two songwriters on a 
particular song that there was the one and two third cents per 
record sold.  That is the statutory rate.

MS. SOUTHWICK:  My question is just -- you don't need to answer 
it now, but -- just simply, on a per-transmission basis, if a 
transmission to a single home were a distribution, I assume then 
that the songwriters would get that one -- and the mechanical 
rate applied -- they get the one to two percent.  How does that 
compare if the transmission to the single home were a performance 
-- how much the composer or songwriter might get for the 
performance to a single home?

MS. PRESTON:  It would be according to the money received from 
that particular server and would be divided -- the number of 
performances would be divided amongst the license fees received.

MR. LEHMAN:  That's a very interesting issue, both because the 
new emerging National Information Infrastructure presents a 
challenge to traditional collecting society practices -- doesn't 
necessarily challenge collecting societies, but it presents new 
opportunities as a means of distributing revenues and even, 
conceivably, for a means of pricing licenses, because obviously 
the capacity to meter individual uses of music means that you -- 
instead of setting a blanket fee that is a percentage of revenues 
-- could set, could establish a per-use fee.  Similarly, it 
enables you to meter the uses and therefore pay directly 
royalties to the individual composer whose works that are used.  
Is that something that you're looking at at BMI?

MS. PRESTON:  It is now.  We know every performance that the 
cable systems have, so we're able to pay on an actual per-play 
with the cable systems, so we know exactly what they're playing.  
We do monitor cable on a 24-hour-a-day basis, 365 days a year.

MR. LEHMAN:  Thank you very much.

MS. PRESTON:  Thank you.

MR. LEHMAN:  Finally, I'd like to ask Edward Murphy, President 
and Chief Executive Officer of the National Music Publishers' 
Association to come forward.

EDWARD MURPHY:  Good morning, everyone.  Good morning, 
Commissioner.  My name is Edward Murphy.  I answer to the 
President and Chief Executive Officer for the National Music 
Publishers' Association.  

Before I begin my prepared ten minutes, I'd just like to make a 
comment about Mr. Gardner's comments -- and that we certainly 
concur that mechanical royalty payments, we certainly believe, 
are truly understated in this country and by comparison to the 
international standards that have been set.  By way of example, 
the average payment today in the United States -- I would have to 
give you a general range -- for royalties payable for an album 
would be somewhere between -- let's say 50 cents per album.  In 
Europe, it's in the vicinity of 80 cents per album.  So we 
probably have somewhere in the range of 65 to 70 percent 
differential between the two systems, as we talk about bringing a 
balance of uniformity to the U.S. in relationship to the European 
standards.

MR. LEHMAN:  Why do you think that is?  What accounts for the 
difference?

MR. MURPHY:  Certainly, there are many reasons.  Within the 
European system, the rights -- that is, the author's rights -- 
are deposited within the societies and the societies have a 
mechanical division, a mechanical rights division.  And in 
England, similarly, they have a division.  Their PRS handles 
performing rights and the MCPS handles the mechanical rights.  
The rights are deposited within those organizations to negotiate 
as a group with the recording industry through the organization.  
I think they find that there is probably an equal, I think, 
structure on both sides.  Both the recording industry and the 
rights holders have equal authority to bargain, I think, with a 
sense of balance.

MR. LEHMAN:  So in effect, you have a collective society approach 
there, or possibly the elements of collective bargaining -- 
almost labor union -- approach that we don't have in the United 
States.

MR. MURPHY:  I think it varies somewhat from country to country, 
but of course, in the UK, you have a tribunal and the tribunal 
has reviewed the rate structure and has, if you will, endorsed 
the current rate that they use in the UK.  And, by example, say 
if the rate that's used in the UK must be the rate, there are no 
contracted or negotiated rate reductions, so-called controlled 
composition clauses don't apply within the UK by virtue of the 
edicts that have come forth from the tribunal in the UK.

Within the other societies within Europe, the rights are vested 
within the society.  They have the society as the ultimate 
bargaining power and the controlled composition clauses generally 
do not apply.  So within the U.S. you have a bargaining situation 
which does belong in an exchange of contractual understanding 
that has brought the U.S. rate from the ceiling of 6.60 to -- I 
would estimate something in the vicinity of about 4 cents, maybe 
4.4 cents.  It's difficult to give you an exact answer, since 
we're not privileged to all the control composition agreements 
and the effect that they may have, since they're not licensed 
through the Harry Fox -- or the subsidiary of NMPA.  And where 
they have direct agreements, they do not license them through us, 
so I wouldn't know.  But where we do have songs which are on the 
same album where those control rates are often asked to be 
applied, which we simply bring down the rate and, of course, to 
the unhappiness of many of the songwriters and, certainly, 
publishers.

MR. LEHMAN:  I think the important thing to understand is that 
the mechanical license, compulsory license system that we have, 
in effect, makes it impossible for you to have that kind of 
collective administration and collective bargaining with the 
record companies.  Otherwise, you would have antitrust 
constraints.  You wouldn't have the benefit of the labor law that 
would cover you, because you're not organized workers.  Your 
publishers are, in effect, individuals.

MR. MURPHY:  Yes, sir, but as you know, we come first before 
Congress and ask for permission to negotiate with the recording 
industry, and after we've reached some sort of a general 
conclusion, we come back again with our findings.  And then there 
are hearings that are then held in order to codify, and we don't 
set the rates.  We certainly wouldn't do that, but we certainly 
do enter into negotiations with the blessing, if you will.

MR. LEHMAN:  I understand that.

MR. MURPHY:  That does set the ceiling, but not a floor.

MR. LEHMAN:  I don't want my comments on this to imply I'm making 
any judgments about it -- it's just to get a better understanding 
of the situation.  And the reason I'm asking about this is 
because this is a major -- I don't know if it's major -- it's one 
of the areas of contention or difference between the U.S. and 
some of our trading partners.  And in our international 
negotiations, the harm is in the world's copyright structure.  We 
are being asked to change our system, so we have to understand 
the differences between our system and theirs.  And if we're 
going to respond to that, we have to figure out a way to deal 
with our trading partners.

I'm sorry for the interruption.  We should probably start the 
time over again.

MR. MURPHY:  Well, thank you very much for the opportunity.  The 
National Music Publishers' Association is pleased to have this 
opportunity to present its views on the Administration's Green 
Paper on "Intellectual Property and the National Information 
Infrastructure."  NMPA is the principal trade organization of the 
American music publishing community.  It has more than 500 
members and is one of the largest and active publishing entities 
in the world.

Music publishers own and administer copyrights in musical works.  
Our business is grounded in copyright.  Our industry revenues and 
the income of writers and composers we represent are generated by 
payments or royalties earned through authorized uses of our 
works.

Throughout its history, NMPA has promoted the American copyright 
system through efforts to ensure that the copyright law serves 
the public interest, while maintaining the incentive to create.  
This role has kept NMPA in the forefront of legislation, legal, 
educational initiatives relating to copyright and new 
technologies.  NMPA played a central role in legislative efforts 
leading to enactment of the 1976 Copyright Act and the Berne 
Convention Implementation Act.  We led music recording and 
consumer electronics industry efforts to the passage of the Audio 
Home Recording Act.

Over the years, NMPA and its licensing subsidiary, Harry Fox 
Agency, has supported litigation seeking to clarify rights and 
obligations under the current copyright law.  In keeping with the 
growing importance of foreign markets to the U.S. music industry, 
NMPA plays an important and extremely active role in the 
international music publishers' organizations and regularly 
participates in WIPO meetings, including the Committee of Experts 
discussions of Berne Protocol and the New Instrument issues.

Based on the summary of our experience as a vocal advocate for 
the adequate and effective intellectual property rights 
protection, NMPA is convinced that a rational development of 
domestic and international regimes for the protection of 
copyrights in a digital environment is essential -- is the 
essential copyright challenge for the remainder of this century.

NMPA applauds the Working Group's recognition of the critical 
role copyright protection must play in building a successful and 
dynamic NII.  Copyright provides the indispensable incentives 
that encourage the creation and widespread dissemination of 
information and the entertainment products that are the content 
of the NII.  We believe that the NII will work best for the 
creators and the copyright owners, as well as for the educators, 
students, commercial users and other consumers of works, where 
the copyright rules of the road are clear -- paving the way for 
the marketplace to serve everyone.

We agree with the Working Group that new rules of the road are 
not required.  In virtually every instance, clarification of the 
application of the provisions of the current copyright law to the 
NII environment is all that is warranted.  We reviewed the Green 
Paper's preliminary recommendations in detail and the written 
comments filed earlier this month.  I would like to take the 
opportunity to summarize our views on three issues of particular 
importance to the music publishers -- clarification of the 
distribution right, fair use and the role of the copyright 
management information in promoting the successes of NII.  

First, the distribution right.  NMPA strongly supports the 
Working Group's recommendation that the Copyright Act be amended 
to recognize explicitly that copies or phonorecords of works can 
be distributed to the public by transmission, and that such 
transmissions fall under the exclusive distribution right of the 
copyright law.  Section 106 of the Copyright Act currently grants 
the copyright owner the exclusive right to distribute copies or 
phonorecords of copyrighted works to the public by sale or other 
transfer of ownership or by rental, or by lending.  Music 
publishers believe this statutory language is properly 
interpreted to extend to control of the distribution of the works 
via NII.  And, as cited in the Green Paper, the few courts that 
have been called upon to consider the issue have accepted 
theories of infringement liability that have implicated, directly 
or indirectly, the distribution right.

Yet today copies of hundreds of protected musical works are being 
delivered via NII without authorization and without compensation 
to composers and copyright owners.  Music publishers have 
responded to the unauthorized uploading, storage and downloading 
of their works in a class action suit of copyright infringement 
against the bulletin board service operator.  This significant 
case, supported by NMPA's licensing subsidiary, the Harry Fox 
Agency, is currently before the Federal District Court for the 
Southern District of New York, pending class certification.

The music publishing community is confident that a copyright 
owner's right to control the reproduction and distribution of 
works via the NII ultimately will be vindicated in the courts.  
As you know, however, the civil litigation process moves slowly 
while technology speeds ahead.  Moving forward now to make 
explicit that works can be distributed by transmission will 
clarify both the rights of the copyright owners and the 
obligations of the entities engaged in transmission of protected 
works to the public.  It will reduce the potential for further 
resource draining litigation and create certainty in the law.  
And it will pave the way for the licensed, authorized uses and 
the increased availability of works that is sure to follow to the 
benefit of the public at large.

Consistent with this proposal -- clarification of the 
distribution right -- the Working Group further has recommended 
that the definition of transmit in Section 101 of the Copyright 
Act be amended to provide that reproductions of works, as well as 
the performance and displays, can be transmitted.  NMPA supports 
these suggested changes insofar as it is intended to make clear 
that copies of the work can be distributed to the public by 
transmission.  

We must disagree, however, with the Working Group's suggestion 
that a definition of transmission contain a test for 
distinguishing, in every instance, between transmissions that 
constitute a public distribution and those works that constitute 
a public performance or display of work.  NMPA believes that the 
imposition of a test to determine whether a transmission 
constitutes a public performance or distribution of a work is 
unwarranted.  In particular, we believe the primary purpose or 
effect test proposed in the Green Paper would substantially 
undermine the established law related to the scope of public 
performance rights in musical works.

The courts have developed an extensive and coherent body of law 
interpreting both what is public and what is performance for the 
purposes of the Copyright Act.  The music publishing community 
sees no need to disturb this body of law.  To do so could call 
into question the existing licensing practices and relationships, 
and create havoc rather than certainty as to the use of works on 
the NII.  NMPA assumes that the Working Group's primary 
recommendation is designed to avoid litigation and foster 
fairness and predictability in arrangements among rights owners 
and transmitters.  NMPA and its members support this goal without 
question.  We have serious reservations, however, as to whether 
the primary purpose or effect test would be of any benefit in 
this regard.  In fact, it would cause confusion which might and 
could spawn needless litigation.

NMPA music publishing members believe that NII offers 
unprecedented opportunities for making musical works available 
for the public.  It is in the economic interest of our members, 
and of the writers we represent, for our works to be transmitted, 
to be received by the public, for a fair return.  We want the 
digital marketplace to work.  We believe that it would prove 
irrelevant to the transmitters of works and the end users or the 
consumer whether licensees are viewed by the copyright owner as a 
compensation for public performance or a public performance and a 
distribution of a work.  This would not be a departure from the 
current situation where in many cases both synchronization fee 
and a performance fee is paid.

What will be important as to whether the license fees are 
reasonable and the means of obtaining the necessary 
authorizations are not overly burdensome.  To illustrate, in our 
industry, the compulsory mechanical license embodied in Section 
115 of the Copyright Act serves as a basis for licenses between 
music publishers and the record companies, in connection with the 
making and distribution of cassettes and CDs embodying musical 
works.  A consensus draft of legislation of the digital 
transmission of sound recordings of musical works earlier this 
year proposed clarifying the application of mechanical licenses 
to the distribution of recorded music by NII.  Such an 
arrangement would mean that in many instances, a transmitter 
could obtain a single agreement with a record company, the 
authorization to distribute a sound recording embodying a musical 
work.  Appropriate royalties would be paid to the music copyright 
owner,  just as such royalties are now paid when a record or a CD 
is sold.  We point to this example in light of the 
Administration's statement concerning Section 115 licenses.  To 
underscore, Section 115 tends to continue to promote the 
accessibility -- accessibility of musical works in the age of 
on-line distribution.

The second point I'd like to address this morning is the 
application of fair use doctrine in the NII context.  Perhaps 
more than any other aspect of the intellectual property in the 
NII, a discussion of fair use issues has been clouded by some 
unfortunate rhetoric.  References to the ever-widening toll-free 
lanes of the information highway and statements that appear to 
interpret free availability of works to mean the works will be 
available free raises legitimate concerns among copyright owner 
groups.  Libraries and educators, on the other hand, express the 
fear that restrictions of on-line access to the material would 
lead to a society of information haves and have nots.

Yesterday, the Commission opened the first session of the Fair 
Use Conference bringing together representatives of copyright 
owners' interests, librarians and educators.  The dialogue 
initiated promises to clear the air and to offer a productive 
forum in which to attend to the public interest in preserving 
copyright, promoting availability of information, can, and I'm 
sure will, be served.

We look forward to the coming weeks to participating in the 
Conference efforts to explore the possible development of NII 
fair use guidelines for our schools and our libraries.  We wish 
to emphasize, however, our view that the NII demands neither the 
creation of a new right or new or expanded fair use privileges.  
Fair use provisions codified in Section 107 are proving capable 
of maintaining an appropriate balance between interested creators 
and copyright owners on the one hand and the users of works on 
the other.  NMPA does not believe legislative changes in this 
area are warranted.  

This brings me to our third and final point that I'd like to 
address today -- the value of copyright management information 
promoting the goals of NII.  Many who have called for broader 
fair use privileges in the NII context have argued the need to 
obtain copyright authorizations can erode the benefit of the NII 
by limiting access to works or by denying the speed and 
convenience a network might offer or otherwise afford.

We believe that check balancing can and should be available to 
overcome these concerns and to allow the marketplace to promote 
the flow of NII content.  Specifically, NMPA believes that 
development of a voluntary, industry-wide system for expressing 
or conveying copyright management information is very essential 
to the effective operation of NII.  This issue is a priority for 
NMPA and we are pleased that the Working Group's primary 
recommendations take into account this very important issue.

Encoded information identifying a work and its copyright owner 
will serve as the license plate number for content delivered by 
NII.  Such information will enable copyright owners to monitor 
the use of their works and will facilitate licensing.  Standard 
codes also have the potential to be employed for the public's 
benefit in the identification of materials which are in the 
public domain.  But those potential benefits will be available 
only -- only if the copyright management information provided 
accompanies the work as it travels  the NII.

NMPA urges the Working Group to recommend, in its White Paper, 
measures to encourage research and cooperation in developing 
voluntary standard codes appropriate to the needs of the 
copyright holders and user groups affected, and to require 
entities transmitting works to include copyright management 
information as a part of their transmission.

Mr. Lehman, NMPA believes that the Green Paper provides a very 
thoughtful review of the existing copyright protection and a 
sound basis from which to pursue consideration for the modest 
legal reform that will support the development of NII.  We 
applaud your efforts, as well as those of the Deputy 
Commissioner, Michael Kirk, and capable attorney-advisors in the 
PTO's Office of Legislative and International Affairs, and the 
representatives of many interested agencies that participated in 
the Working Group.  We look forward to the round of comments, and 
review of the Working Group's White Paper and its 
recommendations.  Thank you, Commissioner.

MR. LEHMAN:  Thank you very much, Mr. Murphy.  I think I've asked 
all my questions at the beginning.

MS. SOUTHWICK:  Mr. Murphy, I would just ask that -- I know you 
were here earlier -- that's okay -- but if you would also provide 
us with some kind of information about the revenue flow -- 
between the mechanicals and the performances.  For instance, you 
mentioned receiving 50 cents per album, and an earlier witness 
had indicated that the songwriter only got one to two cents, so 
--

MR. MURPHY:  Sure.  Maybe I could offer some comments here.  The 
standard agreement between publishers and writers in the past has 
often been determined to be a 50-50 split of the mechanical 
revenues.  Of late, today, I think -- 75 to the writers and 25 
goes to the publishers.  So we'd be happy to give you that 
information.  If we take a standard 6.6 cents -- or if it were 
half the statutory rates, then that would be split -- 3 cents, 
approximately, between the two, around a 50 percent ratio.  And 
today, I would think, I've asked some of my publishers what they 
normally give to the writers and it's often 4 cents, and 2 cents 
would go to the publisher.  So they have 75 percent rates rather 
than 50-50.

MS. SOUTHWICK:  That's per song, right?

MR. MURPHY:  Per song.  The per song is on the cents percent, but 
on the total cost of an album, considering there are 
approximately, on average, 11 to 12 cuts per album -- that's how 
they came up with the numbers I gave you before, which was the 
difference between 50 cents per album versus 80 cents per album 
in Europe.  There are many variations that I'd be happy to show 
you, if you'd like to see how those numbers come about.

MR. LEHMAN:  It would be helpful to have some follow-up on that, 
and maybe the standard agreement, too.

MR. MURPHY:  Sure, sure.

MR. LEHMAN:  Thanks.  Thank you very much.  This closes our 
hearings.  It's been a very successful four days of hearings.  
We've heard from just about every group that's going to be 
affected by intellectual property and the National Information 
Infrastructure.

I would just repeat that we will now have until October 21 to 
file -- or for anyone to file -- reply comments, either to the 
written comments which are available for public inspection or to 
the statements made in the public hearings.  A transcript of this 
public hearing will be available in about two weeks time.  You 
can call 703-305-9300 and ask Michael O'Neil about receiving a 
copy of the transcript.  It will probably also be available on 
the Internet.

Following the 21st of October, we will then do a thorough review 
of all of the oral testimony, the transcript and the written 
comments.  The Working Group, consisting of all 20 Federal 
agencies, will reconvene through a series of meetings.  We will 
discuss what we've heard and then, some time -- I'm not going to 
be exact, because it partly depends on how much material there is 
to look at and just how quickly we can digest it -- we will then 
issue our Final Report after the end of the year.

Now, there will be on-going activities, even after that Final 
Report is issued.  Our fair use activities may go forward and in 
fact, we may find a need to continue -- even have a Part II or 
whatever of the report -- at some time or another.  I think that, 
hopefully, in January -- shortly after the first of the year -- 
we will be in a position to to at least -- present to the entire 
Information Infrastructure Task Force, pretty comprehensive 
thinking about intellectual property in the National Information 
Infrastructure and also then be in a position to recommend what 
we hope to be fairly modest and widely acceptable changes to the 
statutory law to the Congress.

I'd like to thank everybody for their participation in this very 
successful project thus far.

(Whereupon, at 12:10 p.m., the hearing was concluded.)