But what we do know is this binary numbers future is coming. It will have large impact, as well as both sublime and dislocating effect, on millions of Americans. It is the mandate of the Congress to peer beyond the veil, to make sensible and required judgments about how to make absolutely sure that America's grandest trade asset, its intellectual property, is protected in an era of technology so magical it verges on fantasy.

The legislation, H.R.2441, introduced by Chairman Moorhead, Congresswoman Schroeder and Congressman Coble sets forth with admirable clarity the fence line boundaries beyond which intellectual property is put to hazard.

This committee knows full well the broad global sweep of American intellectual property which in 1994 produced over $45 billion in international sales, and is that rarity, a producer of surplus balance of trade, a phrase seldom heard in the corridors of the Congress. These creative works are the jewels in America's trade crown. To protect these delicate products in cyberspace is of transcendent importance. For if you cannot protect what you own, you own nothing.

The motion picture industry is eagerly crossing the threshold of this exciting digital world. MPAA fully embraces this legislative measure as a needed step in updating the copyright law for this new environment. My sole reason for being here today is to offer, with respect and necessity, three specific recommendations, without which the bill will shrink the adequacy of intellectual property protection.

The first is quite important. Each year pirates and thieves the world over try to plunder the greenhouse of intellectual property. And each year those of us in the creative community spend millions of dollars to stand guard against this thievery, to punish violators, to move swiftly against those who are responsible, to make it risky and expensive for pirates to ply their trade. One key weapon in our anti-piracy arsenal is technology itself: electronic locks of various kinds that seek to prevent high-tech burglars from breaking, entering, and plundering our intellectual property.

As the bill is currently drafted, there are no criminal penalties applied to those who would circumvent copyright protection technology. This is a defect, indeed the only significant defect of which I am aware, that must be fixed.

The provisions of this bill that protect copyright protection technology are of paramount importance to content providers. We need to apply technological security measures to protect our property against unauthorized copying and distribution. These self-help measures will be our first line of defense against cyber-pirates. The copyright law can only provide sanctions when and if we are able to identify infringers. Technological security measures can stop the piracy before it happens.

But all security measures, no matter how sophisticated, can be circumvented by clever hackers. Therefore, the law must provide clear and effective sanctions against those who would violate the security of the NII. This requires more than mere civil remedies. Criminal sanctions are essential. Too many NII bandits, some operating totally in the underground economy, will scoff at the threat of civil damages, which many regard as simply a cost of doing business. There must be criminal penalties attached to deliberate, systematic acts of circumvention if such acts are to be seriously lessened.

The Communications Act now provides criminal penalties for unauthorized decoding of satellite signals and for the theft of cable services. Similar criminal sanctions must be available to effectively deter those who would make it their business to circumvent copyright protection technology. Without criminal sanctions, our first line of defense against cyber-theft will be porous and ineffectual.

My second recommendation is to resist those who are clamoring for a copyright exemption for on-line service providers. On-line service providers and others have a key role to play in freeing cyberspace of the taint of copyright lawlessness. Accountability for copyright violations committed by users is as essential for advancing this indispensable goal.

Who is responsible if a valuable copyrighted work is downloaded from a provider, and then copied on a digital video machine from which thousands of copies can be made, the last copy as pure and pristine as the first? And if no one can be held responsible, then who and what is to prevent the flood that will surely follow? This is a loophole larger than a parade of eight-wheelers through which a dam-busting avalanche of violations can rupture the purpose of your bill every day.

Although there has been much said about the dire consequences of applying existing standards of copyright liability to on-line service providers, in truth, there is as yet no evidence of any disfunction in the statute that requires fixing. No court has found an on-line service provider to be guilty of infringement except where the provider participated in infringing activity or was actually aware of infringing activity carried out by a user of the on- line service. Despite what you have heard, there is no imminent threat of debilitating damages against "innocent" on- line service providers.

There may be a need for certain adjustments in the copyright law regarding on-line services. In fact, MPAA, participating with twenty-two other media organizations in the Creative Incentive Coalition, has initiated discussions with on-line service providers to identify problems that confront both content owners and on-line services, and to formulate solutions where problems are found. This dialog has produced a greater understanding on both sides for the problems associated with protecting intellectual property in the on- line environment. Ultimately, we may come to you with legislative suggestions. But, for the time being, I urge you to not to act precipitously, before the evidence is in, and before the problems have been certified.

The third recommendation concerns Fair Use. Widely accepted and observed Fair Use guidelines have been developed under existing law. They serve the vital interests of both copyright owners and users.

Some argue that the existing Fair Use guidelines must be revised and made more "flexible" for the digital environment. As part of the process that generated the bill here under discussion, various groups representing educators, content providers, public interest groups and the general public have met in various fora to discuss how existing concepts of Fair Use will apply in cyberspace, and whether changes are required. As with the on-line issue, all the evidence is not yet in; the problems, if there are problems, have not been certified.

I urge you not to legislate solutions before the problems are fully known. We do know that intellectual property must be protected, for it is essential for our future intellectual and economic well being. We also know, after two years of public meetings, thousands of pages of public comment, and a comprehensive and scholarly White Paper, that a very few, modest amendments to our copyright laws are needed to protect intellectual property distributed through the national information infrastructure. Let us do what we know must be done, now, and work together to determine whether more is needed in the future.

Mr. Chairman, I don't believe any of these three recommendations are unworthy. To the contrary, they are essential to your task of creating the protective shield which safeguards precious property.

Once more I congratulate the leadership and the membership of this Committee. You are striding into the future briskly and you are making that journey not one minute too early. Technology moves with terrifying speed. If the traffic rules are explicit and understandable, and accompanied by common-sense protective designs, this technology will be an incalculable boon to America, a shot in the arm to our international competitiveness, and a stimulus to our creative industries. If not, then the information superhighway, cyberspace, the Internet, call it what you will, technology will collapse the great wonder of intellectual property. The country will be the loser. Big time.

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