Summary Statement of BRUCE A. LEHMAN
ASSISTANT SECRETARY OF COMMERCE AND
COMMISSIONER OF PATENTS AND TRADEMARKS
ON H.R. 2180 AND H.R. 2281

Mr. Chairman and Members of the Committee, thank you for this opportunity to discuss the Administration's views on two separate matters of importance to copyright owners, Internet and on-line service providers and users of copyrighted works, namely, fostering the growth of international electronic commerce and curtailing infringement in cyberspace. I refer to H.R. 2281, the legislation for the implementation of the World Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO Performances and Phonograms Treaty. I also refer to H.R. 2180, a bill to deal with the complex issue of the extent of liability of Internet service providers (ISPs) and on-line service providers (OSPs) for copyright infringement in cyberspace. While the Administration believes that these two issues are separate, and that nothing in the two new WIPO treaties requires the Congress to specifically address the issue of OSP/ISP liability, we are pleased to see these two issues addressed simultaneously so long as the consideration of the OSP/ISP liability issue does not impair prompt consideration and passage of the Treaty implementation legislation.

Treaty Implementation Legislation: To develop its proposal for Treaty implementation legislation, the USPTO and the General Counsel of the Department of Commerce consulted widely with representatives of the various groups interested in the implementation of the Treaties. These groups included copyright owners and authors, computer and consumer equipment manufacturers, service providers and representatives users of copyrighted works such as educators and librarians. All of these groups contributed suggestions, orally and in writing, particularly in regard to the provisions for the implementation of the anticircumvention provisions of the Treaties. The provision on anticircumvention, which was finally adopted as the Administration's proposal and which was ultimately incorporated into H.R. 2281, is intended to protect the rights of copyright owners while encouraging the continued advancement of technology in a balanced manner that takes into account the needs and concerns of all interested parties and the importance of promoting the continuing growth of electronic commerce with its benefits for all members of American society.

In particular, in order to provide meaningful protection against unauthorized circumvention of technological protection measures, H.R. 2281 includes restrictions on the manufacture and distribution of devices and other technological means of circumventing such protection measures. These provisions have been drafted narrowly and carefully, however, to enable the continued development and use of technology for legitimate purposes. This is not the first time that Congress has been called on to strike a difficult but important balance between prohibiting the manufacture and distribution of devices and technologies that facilitate prohibited acts and ensuring that development and use of technologies and devices for legitimate purposes are not hindered. Such carefully drawn restrictions can be found, for example, in the prohibitions on circumvention of the Serial Copy Management System in 17 U.S.C. ' 1002, including a prohibition on devices that enable circumvention, and in the prohibition in 47 U.S.C. ' 605 on the manufacture, assembly, importation, sale or distribution of devices primarily of use in the unauthorized decryption of satellite programming.

The Liability Issue: I wish that we could present you with a solution to this perplexing issue that could be embraced by all of the parties -- both content and service providers. However, we are not able to do so. However, now that Congress has taken up the OSP/ISP liability issue again, the Administration believes that this issue should be approached with care. We, therefore, applaud the convening of this hearing for the consideration of H.R. 2180, the On-Line Copyright Liability Limitation Act which addresses this issue from a different perspective than did earlier bills. We urge the Congress to determine what, if any, action may be needed to resolve the dispute between the content and service providers. As was recommended in the Administration's Framework for Electronic Commerce, "The recently negotiated World Intellectual Property Organization (WIPO) treaties should be ratified. Issues of liability for infringement, application of the fair use doctrine, and limitation of devices to defeat copyright protection mechanisms should be resolved in a balanced way, consistent with our international obligations."

Statement of

BRUCE A. LEHMAN

ASSISTANT SECRETARY OF COMMERCE AND

COMMISSIONER OF PATENTS AND TRADEMARKS

ON H.R. 2180 AND H.R. 2281

before the

COMMITTEE ON THE JUDICIARY

SUBCOMMITTEE ON COURTS AND
INTELLECTUAL PROPERTY

UNITED STATES HOUSE OF REPRESENTATIVES

September 16, 1997

Mr. Chairman and Members of the Committee, thank you for this opportunity to discuss the Administration's views on two separate matters of importance to copyright owners, Internet and on-line service providers and users of copyrighted works, namely, fostering the growth of international electronic commerce and curtailing infringement in cyberspace.

I refer to H.R. 2281, the legislation for the implementation of the World Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO Performances and Phonograms Treaty. I also refer to H.R. 2180, a bill to deal with the complex issue of the extent of liability of Internet service providers (ISPs) and on-line service providers (OSPs) for copyright infringement in cyberspace. While the Administration believes that these two issues are separate, and that nothing in the two new WIPO treaties requires the Congress to specifically address the issue of OSP/ISP liability, we are pleased to see these two issues addressed simultaneously so long as the consideration of the OSP/ISP liability issue does not impair prompt consideration and passage of the Treaty implementation legislation.

Since 1990, WIPO had been working to update the Berne Convention for the Protection of Literary and Artistic Works and to provide improved protection for performers and producers of sound recordings. In fulfillment of this goal, the WIPO Diplomatic Conference on Certain Copyright and Neighboring Rights Questions met from December 2 to 20, 1996, and adopted two Treaties: the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. These Treaties will greatly facilitate the commercial applications of on-line digital communications over the global information infrastructure.

Before the United States can join these Treaties, they must be ratified by the U.S. following advice and consent by the Senate. In addition, the Congress must pass any needed implementing legislation. The President sent the Treaties to the Senate on July 28. The necessary implementing legislation, H.R. 2281 and S.1121, has been introduced in both Houses of Congress. While we firmly believe that nothing in these Treaties or the implementing legislation affects the issue of liability for particular acts of copyright infringement, the ISPs and OSPs are of the view that this issue needs to be resolved in parallel with the implementation of these Treaties. We applaud the Chairman for introducing H.R. 2180 with its fresh approach to resolution of the OSP/ISP liability issue and hope that this bill can be the basis for a constructive compromise.

Treaty Implementation Legislation

To comply with the obligations of the two treaties, several technical amendments to the U.S. Copyright Act are necessary. These amendments ensure that works from countries that join the new treaties, including works in existence on the date each treaty becomes effective for the United States, will be protected in the United States on a formality-free basis. H.R. 2281 amends four sections of the Copyright Act: (1) section 104, which specifies the points of attachment for works from other countries for protection in the United States; (2) section 104A, which protects preexisting works from other countries; (3) section 411(a), which makes copyright registration a precondition to bringing suit for infringement for some works, and (4) section 507(a), which specifies the limitation periods for criminal copyright infringement actions. The amendments made to these sections require some additions and changes in the definitions in section 101 of the Copyright Act.

Both of the new WIPO treaties also include provisions in their respective Articles 11 and 18 on technological protection measures (commonly referred to as the "black box" or "anti-circumvention" provisions). These provisions require Contracting Parties to provide "adequate legal protection and effective legal remedies against the circumvention of effective technological measures that are used by authors in connection with the exercise of their rights under this Treaty or the Berne Convention and that restrict acts, in respect of their works, which are not authorized by the authors concerned or permitted by law."

Both of the new WIPO treaties also include provisions on copyright management information. These provisions require Contracting Parties to protect copyright management information, which is defined under the Treaties as "information which identifies the work, the author of the work, the owner of any right in the work, or information about the terms and conditions of use of the work, and any numbers or codes that represent such information, when any of these items of information is attached to a copy of a work or appears in connection with the communication of a work to the public."

H.R. 2281 adds a new chapter, chapter 12, to title 17 of the United States Code, that would implement the two treaty provisions I have just described. This new chapter includes four sections -- (1) section 1201, which prohibits the circumvention of technical copyright protection measures; (2) section 1202, which protects copyright management information; (3) section 1203, which provides civil remedies for violations of sections 1201 and 1202; and (4) section 1204, which provides criminal remedies for violations of sections 1201 and 1202.

To develop its proposal for Treaty implementation legislation, the USPTO and the General Counsel of the Department of Commerce consulted widely with representatives of the various groups interested in the implementation of the Treaties. These groups included copyright owners and authors, computer and consumer equipment manufacturers, service providers and representatives users of copyrighted works such as educators and librarians. All of these groups contributed suggestions, orally and in writing, particularly in regard to the provisions for the implementation of the anticircumvention provisions of the Treaties. The provision on anticircumvention which was finally adopted as the Administration's proposal and which was ultimately incorporated into H.R. 2281 is intended to protect the rights of copyright owners while encouraging the continued advancement of technology in a balanced manner that takes into account the needs and concerns of all interested parties and the importance of promoting the continuing growth of electronic commerce with its benefits for all members of American society.

In particular, in order to provide meaningful protection against unauthorized circumvention of technological protection measures, H.R. 2281 includes restrictions on the manufacture and distribution of devices and other technological means of circumventing such protection measures. These provisions have been drafted narrowly and carefully, however, to enable the continued development and use of technology for legitimate purposes. This is not the first time that Congress has been called on to strike a difficult but important balance between prohibiting the manufacture and distribution of devices and technologies that facilitate prohibited acts and ensuring that development and use of technologies and devices for legitimate purposes are not hindered. Such carefully drawn restrictions can be found, for example, in the prohibitions on circumvention of the Serial Copy Management System in 17 U.S.C. ' 1002, including a prohibition on devices that enable circumvention, and in the prohibition in 47 U.S.C. ' 605 on the manufacture, assembly, importation, sale or distribution of devices primarily of use in the unauthorized decryption of satellite programming.

I will now proceed to discuss both the technical amendments and the substantive provisions of H.R. 2281.

Changes to Section 101: Definitions.

H.R. 2281 amends section 101 of the copyright law to define "treaty party" as "any country or intergovernmental organization that is a party to an international agreement" and to define "international agreement" to include, inter alia, the two new WIPO Treaties. Definitions of the two new WIPO Treaties are also provided. In addition, a definition of "United States work" was added for purposes of amended section 411.

Changes to Section 104: Subject Matter of Copyright: National Origin.

Existing section 104 identifies the criteria that must be met for a work to qualify for protection under the U.S. copyright law (i.e., "points of attachment"). Among those protected under section 104 are nationals or domiciliaries of those countries with which we have an appropriate Treaty relationship. Section 104, as it is presently written, explicitly identifies those Treaty relationships, but does not refer to the two new WIPO Treaties. Therefore, section 104 must be amended to provide for points of attachment for the two new WIPO Treaties.

This bill amends section 104 so that all countries that have copyright relations with the United States would be referred to collectively by the term "treaty parties." This change, in conjunction with the amendments to section 101, which define "treaty party" and "international agreement," serves to ensure that the two new WIPO Treaties are covered by section 104. The bill also amends section 104 to extend protection to foreign works from any treaty party based on four points of attachment: nationality of the author, place of first publication of the work, place of fixation of the sounds embodied in a sound recording, and the situs of a constructed architectural work.

The way section 104 is presently written requires that it be amended each time U.S. treaty membership changes. By defining "treaty party" in section 101 and amending section 104 to refer to "treaty party," future changes in the treaties to which the U.S. is a party would not require changes to section 104. It is much clearer and less unwieldy to have a single set of criteria for eligibility in section 104 as proposed by this bill, rather than multiple overlapping criteria in a long list of complex definitions in section 101. If we join any future treaties, they can simply be added to the list of "international agreements" without any detailed amendments repeating the criteria for eligibility. The amendment to section 104 also makes clear that membership in the Geneva Phonograms Convention provides national eligibility for sound recordings only, not other types of works.

Changes to Section 104A: Copyright in Restored Works.

The bill amends section 104A(h) by adding the two new WIPO Treaties to the definitions of "date of adherence or proclamation" and "eligible country." It would also add a paragraph to the definition of "restored work" to ensure that a sound recording qualifies as a restored work where the source country for the sound recording is an eligible country solely because the source country adheres to the WIPO Performances and Phonograms Treaty.

Changes to Section 411(a): Registration and Infringement Actions.

In its current form, section 411(a) requires works to be registered with the Copyright Office before suit can be brought for their infringement, but exempts Berne Convention works whose country of origin is not the United States. The section must be amended to exempt works from members of the two new WIPO Treaties.

Amendments to section 411(a) reframe the registration requirement in the affirmative -- essentially the converse of the current section. In other words, the provision would state affirmatively that "United States works" must be registered before suit, with "United States works" defined as the converse of the current definition of works whose country of origin is not the United States. Similar to the changes in section 104, this section could be easily updated each time the United States joins another treaty, without the need to change several interrelated provisions of the Act.

Change to Section 507(a).

Currently, section 507(a) provides for a three-year statute of limitations period for all criminal copyright actions. Section 507(a) is amended to recognize exceptions to the three-year limitations period if expressly provided elsewhere in Title 17. New chapter 12 of Title 17 provides for a five-year criminal limitation period..

Section 1201. Circumvention of Copyright Protection Systems:

Section 1201 is divided into five main paragraphs. Paragraph (a) applies when a person has not obtained lawful access to a work for which the copyright owner has put in place a technological measure that effectively controls access to copies of that work It establishes a general prohibition against circumventing a technological protection measure that effectively controls access to a copyrighted work. The act of circumventing a technological protection measure put in place by a copyright owner to control access to a copyrighted work is the electronic equivalent of stealing a copy of a book from an author who has secured that copy. "Circumventing a technological protection measure" is defined in this paragraph as descrambling a scrambled work, decrypting an encrypted work, or otherwise avoiding, bypassing, removing, deactivating or impairing a technological protection measure. There are several requirements that must be met to be in violation of this prohibition: (1) the technological protection measure must be one that, in the ordinary course of its operation, requires the application of information, or a process or a treatment, with the authority of the copyright owner, to gain access to the work; (2) the work to which access is controlled by the technological protection measure must be a work that is protected under Title 17 (i.e., not a work that is in the public domain); and (3) the act of circumvention must have been done without the copyright owner's authority.

To protect and enforce the copyright owner's right to determine who may have access to the copyrighted work, paragraph (a) would also prohibit manufacturing, importing, offering to the public, providing or otherwise trafficking in any technology, product, service, device, component or part thereof that can be used to circumvent a technological protection measure that effectively controls access to a copyrighted work. A violation of this prohibition will occur only where one of three conditions is met. The technology, product, service, device, component or part thereof must: (1) be primarily designed or produced for the purpose of circumventing a technological protection measure that effectively controls access to a copyrighted work; (2) have only limited commercially significant purpose or use other than to circumvent a technological protection measure that effectively controls access to a copyrighted work; or (3) be marketed by the manufacturer, importer, person who offers it to the public, provides it, or otherwise traffics in it, or by another person acting in concert with him or her, for use in circumventing a technological protection measure that effectively controls access to a copyrighted work.

Paragraph (b) of section 1201 applies when a person has obtained lawful access to a copy or a phonorecord of a copyrighted work, but the copyright owner has put in place technological measures that effectively protect his or her right under Title 17 to control or limit further use of the copyrighted work. It would prohibit manufacturing, importing, offering to the public, providing or otherwise trafficking in any technology, product, service, device, component or part thereof that can be used to circumvent protection of a right under Title 17 afforded by a technological protection measure. Circumventing includes avoiding, bypassing, removing, disabling or otherwise impairing a technological protection measure. Under this paragraph, the technological protection measure must be one that, in the ordinary course of its operation, prevents, restricts, or otherwise limits the exercise of a copyright owner's right under Title 17. A violation of this section will occur only when one of three conditions are met: The technology, product, service, device, component, or part thereof must: (1) be primarily designed or produced for the purpose of circumventing technological protection measure that effectively protects a right under U.S. copyright law; (2) have only limited commercially significant purpose or use other than to circumvent protection afforded by such a technological protection measure; or (3) be marketed by the person who manufactures it, imports it, offers it to the public, provides it, or otherwise traffics in it, or by another person acting in concert with that person, for use in circumventing protection afforded by such a technological protection measure.

Paragraph (c) of section 1201 prohibits the importation, sale for importation or sale within the United States after importation by the owner, importer or consignee of any technology, product, service, device, component or part thereof covered by paragraphs (a) or (b). This paragraph further provides that violations of this provision are actionable under section 1337 of Title 19 of the U.S. Code, which authorizes actions by the International Trade Commission against unfair import practices.

Paragraph (d) of section 1201 provides that that section shall not have any effect on the rights, remedies, limitations or defenses to copyright infringement including fair use under Title 17. This provision is intended to ensure that none of the provisions in section 1201 affect the existing legal regime established in the Copyright Act, and resulting case law.

Paragraph (e) of section 1201 makes clear that the prohibitions in that section do not prohibit any lawfully authorized investigative, protective or intelligence activity by or at the direction of a federal, state or local law enforcement agency, or of a U.S. intelligence agency.

Section 1202. Integrity of Copyright Management Information:

Section 1202 is divided into four paragraphs. Paragraph (a) establishes a general prohibition against knowingly providing false copyright management information (CMI) or distributing or importing for distribution false CMI with the intent to induce, enable, facilitate or conceal a copyright infringement.

Paragraph (b) of section 1202 establishes a general prohibition against removing or altering CMI and against distributing or importing for distribution altered CMI or works in which CMI has been removed. There are three specific acts prohibited if they are committed without the authority of the copyright owner or the law, and if they are done knowing, or with respect to civil remedies, having reasonable grounds to know, that they will induce, enable, facilitate or conceal a copyright infringement: (1) intentionally removing or altering CMI; (2) distributing or importing for distribution CMI knowing that it has been altered without the authority of the copyright owner or the law; or (3) distributing, importing for distribution, or publicly performing works, copies of works, or phonorecords knowing that CMI has been removed or altered without the authority of the copyright owner or the law.

Paragraph (c) of section 1202 defines CMI. To fall within the definition, there is a threshold requirement that the information be conveyed in connection with the copyrighted work. The term "conveyed" is used in its broadest sense and is not meant to require any type of transfer, physical or otherwise, of the information. It merely requires that the information be accessible in conjunction with, or appear with, the work being accessed.

Paragraph (c) of section 1202 defines CMI as (1) the title of a work or other information that identifies the work; (2) the author's name or other information that identifies the author; (3) the copyright owner's name or other information that identifies the copyright owner; and (4) terms and conditions for use of a work. Numbers and symbols which refer to or represent the above information and links, such as embedded pointers and hyperlinks, to the above information are also included within the definition of CMI. As noted above, both treaties require that numbers and symbols be included within the definition of CMI. The phrase "[L]inks to such information" was included within the definition because often removing or altering a link to the information will have the same adverse effect as removing or altering the information itself. Finally, paragraph (c)(6) of the definition permits the Register of Copyrights to prescribe by regulation other information to be protected as CMI. To protect the privacy of users of copyrighted works, the Register of Copyrights may not require any information concerning users of copyrighted works.

Paragraph (d) of section 1202 makes clear that the prohibitions in the section do not prohibit any lawfully authorized investigative, protective or intelligence activity by or at the direction of a federal, state or local law enforcement agency, or of an intelligence agency of the United States.

Section 1202 does not mandate the use of CMI. It merely protects the integrity of CMI if a party chooses to use it in connection with a copyrighted work. It also should be noted that the definition of copyright management information does not encompass nor is it intended to encompass tracking or usage information relating to the identity of users of the works. The definition of CMI encompasses only that information associated with a work, such as the author's name, the copyright owner's name, copyright notice information, and title of the work. It would be wholly inconsistent with the purpose and construction of this bill to include tracking and usage information within the definition of CMI.

Section 1203: Civil Remedies

Section 1203 on civil remedies is divided into three paragraphs. Paragraph (a) sets forth the general proposition that civil remedies are available for violations of sections 1201 and 1202. This paragraph establishes the jurisdiction for such civil actions as the "appropriate U.S. district court" and provides that for a person to have standing to bring a civil action in the district court that person must have been injured by a violation of section 1201 or 1202.

Paragraph (b) of section 1203 sets out the powers of the court that hears the case. It provides the court the ability to (1) grant temporary and permanent injunctions; (2) order the impounding of any device or product that is in the custody or control of the alleged violator and that the court has reasonable cause to believe was involved in a violation; (3) award damages; (4) allow the recovery of costs by or against any party; (5) award reasonable attorney's fees to the prevailing party; and (6) order the remedial modification or the destruction of any device or product involved in the violation that is in the custody or control of the violator or has been impounded.

Paragraph (c) of section 1203 is divided into five sections, each of which addresses the awarding of damages to the prevailing party. Paragraph (c)(1) establishes the general proposition that a person who violates section 1201 or 1202 is liable for either actual damages and any additional profits of the violator or statutory damages. Paragraphs (c)(2) and (c)(3) specify that the complaining party may finalize a choice between the two types of damage awards at any time until the final judgment is entered.

Paragraph (c)(2) provides that, when the prevailing party opts for actual damages, the court shall award to that party the actual damages suffered by the party as a result of the violations, as well as any profits of the violator that are attributable to the violation and are not taken into account in computing the actual damages.

Paragraph (c)(3) of section 1203 provides different statutory award amounts depending upon whether the civil action involves a section 1201 or 1202 violation. When the violation is a section 1201 violation and the prevailing party opts to recover an award of statutory damages, the prevailing party will be awarded statutory damages of not less than $200 or more than $2,500 per act of circumvention, device, product, component, offer or performance of service. When the violation is a section 1202 violation and the prevailing party opts to recover an award of statutory damages, the prevailing party will be awarded statutory damages of not less than $2,500 or more than $25,000 for each violation.

Paragraphs (c)(4) and (c)(5) set forth circumstances in which it would be appropriate to increase or decrease a damage award. Paragraph (c)(4) provides for an increased damage award when the violator is a repeat offender. Specifically, when the prevailing party establishes that a person violated section 1201 or 1202 within three years after a final judgment was entered against that person for another such violation, the award of damages may be increased to a sum of up to triple the amount that would otherwise be awarded. Paragraph (c)(5) provides that, when a violator of section 1201 or 1202 was not aware and had no reason to believe that its acts constituted a violation, the damage award may be reduced or remitted.

Section 1204: Criminal Penalties.

Section 1204(a) provides for the availability of criminal penalties for violations of sections 1201 and 1202. The standard applicable under this section is identical to the standard used in section 506 of the Copyright Act to establish criminal violations. Section 1204(a) also sets forth the penalties available for a criminal violations of sections 1201 and 1202 as "not more than $500,000 or imprisonment for not more than five years, or both." If the person who is found guilty of criminal violation of sections 1201 or 1202 is a repeat offender, section 1204 provides that penalties may be increased to "not more than $1,000,000 or imprisonment for not more than ten years, or both.".

Section 1204(b) provides for a five-year statute of limitations for criminal offenses under chapter 12.

Conforming Amendments and Effective Date

The bill includes conforming amendments necessary to reflect the addition of the new chapter 12. It also includes rather detailed provisions on the effective date which were necessary because the two Treaties have not yet entered into force and will not enter into force until three months after thirty States deposit their instruments of ratification or accession with the Director General of WIPO. Therefore, the exceptions are needed to ensure that the amendments that refer specifically to the two Treaties only become effective when the Treaties themselves become effective. In addition, each Treaty is referred to separately in this section, because it is possible that the two Treaties may enter into force at different times and the amendments particular to each Treaty are grouped together to ensure that the provisions relating specifically to one Treaty only become effective when that Treaty enters into force. Finally, the phrase "with respect to the United States" was added to ensure that, if the Treaties enter into force before the United States deposits its instrument of accession, the United States will not extend benefits to Member States of these Treaties until the United States itself becomes party to the Treaties.

The Liability Issue

I wish that we could present you with a solution to this perplexing issue that could be embraced by all of the parties -- both content and service providers. However, we are not able to do so. This complex issue stalled consideration of the Administration-sponsored NII Implementation bill last year. Also, last year at the request of former Chairman Moorhead, we worked hard with the interested parties to try to craft a solution. As I will explain, this attempt, like others, proved unsuccessful.

As we noted in the Administration's White Paper on Intellectual Property and the National Information Infrastructure, under existing law, OSPs and ISPs are subject to the same standard of liability as anyone else who, in violation of the copyright owner's distribution right, distributes a copyrighted work, whether by transmission or other means. A service provider may be held directly liable for its own acts of infringement. In addition, an OSP or an ISP may be found vicariously liable if that provider had the right and the ability to control another's act of copyright infringement and receives a direct financial benefit from that act, and may be found liable as a contributory infringer if the service provider knew of the infringing act and in some way induced, caused or materially contributed to the act.

During the development of the Treaties, specific provisions on temporary and incidental reproductions were discussed. These provisions were of significant concern to content providers, on-line and Internet service providers, users, and the academic community. However, specific provisions concerning these types of reproductions were not included in the Treaties because it was agreed that the scope of the reproduction right and possible exceptions to that right could be appropriately addressed through existing international standards established under the Berne Convention.

Both Treaties also contain provisions (Articles 10 and 16) that permit members to provide for exceptions to rights in certain special cases that do not interfere with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the author (e.g., "fair use".) The explanatory notes to the Treaties explain that these provisions "permit Contracting Parties to carry forward and appropriately extend into the digital environment limitations and exceptions in their national laws which have been considered acceptable under the Berne Convention." These provisions also "permit Contracting Parties to devise new exceptions and limitations that are appropriate in the digital network environment." The notes also explain that such a provision "neither reduces nor extends the scope of applicability of the limitations and exceptions permitted by the Berne Convention."

In an attempt to resolve the ISP/OSP liability issue during the consideration of the NII Implementation Bill, Representative Goodlatte convened a committee to devise an appropriate solution that all interested parties could accept. The work of this committee extended over several months and resulted in legislative language that was proposed in a Committee Print on May 15, 1996, but was never introduced because the committee members disagreed over the text of the liability provisions.

In August 1996, then-Chairman Moorhead requested the PTO to begin its own attempt to resolve the OSP liability issue. The PTO produced four versions of draft OSP/ISP liability language, held several briefings on issues and its draft language, and reviewed numerous written comments on the draft language. The PTO's effort to find a middle ground in the OSP liability issue culminated in draft language dated October 4, 1996. Despite the substantial progress reflected in that draft, the PTO postponed further efforts to resolve the OSP liability dispute because of Congressional adjournment.

Now that Congress has taken up the OSP/ISP liability issue again, the Administration believes that this issue should be approached with care. We, therefore, applaud the convening of this hearing for the consideration of H.R. 2180, the On-Line Copyright Liability Limitation Act which addresses this issue from a different perspective than did earlier bills. We urge the Congress to determine what, if any, action may be needed to resolve the dispute between the content and service providers. As was recommended in the Administration's Framework for Electronic Commerce, "The recently negotiated World Intellectual Property Organization (WIPO) treaties should be ratified. Issues of liability for infringement, application of the fair use doctrine, and limitation of devices to defeat copyright protection mechanisms should be resolved in a balanced way, consistent with our international obligations."

If requested, we will be pleased to work with both Houses of Congress to aid in the resolution of the issue, particularly with a view toward facilitating passage of the separate legislation needed to implement the new WIPO treaties. This concludes my prepared statement, and I will be pleased to answer any questions you may have.