Judiciary
HomepageMr. Chairman, Members of the Subcommittee: I appreciate the opportunity to appear before you today on behalf of the Computer & Communications Industry Association (CCIA). My name is Ed Black and I am President of CCIA. We especially welcome the opportunity to address the issues related to H.R. 2441 because of their importance, far reaching consequences and complexity.
CCIA is comprised of leading manufacturers and providers of computer, information processing and communications-related products and services. CCIA's member companies represent a broad cross-section of the information and communications technology industry ranging from young, entrepreneurial companies to many of the largest in our industry. They collectively generate annual industry-derived revenues in excess of $180 billion.
CCIA's members are involved in all aspects of the National Information Infrastructure (NII), as leading builders of the network infrastructure, as providers of content and information services, and as manufacturers and providers of Internet servers, World Wide Web browsers, and terminal and storage equipment. Thus, CCIA is at the very heart of the emerging technologies which will bring the United States' NH into the 21st century.
Mr. Chairman, CCIA has closely followed the progress of the Administration's White Paper on Intellectual Property and the M. Upon publication of the Administration's earlier Green Paper, CCIA filed a comprehensive set of comments on the initial thinking of the Administration. At that time, CCIA raised a number of issues which we believe were not adequately addressed. Unfortunately, most of our concerns remained after the publication of the White PaPer. These include:
* THE IMPACT OF THE DIGITAL TRANSMISSION RIGHT,
þ LIABILITY OF ON-UNE INTERNET SERVICE PROVIDERS,
þ THE IMPORTANCE OF THE FIRST SALE DOCTRINE,
þ THE IMPACT ON THE FAIR USE DOCTRINE,
þ THE SCOPE OF THE ANTI-CIRCUMVENTION PROVISION FOR COPYRIGHT PROTECTION SYSTEMS, AND
þ THE INTERNATIONAL DIMENSIONS OF THIS PROPOSAL.
After reviewing the Administration's White Paper and the subsequent legislative proposal, H.R. ' . 2441, CCIA has significant reservations about the proposed legislation as currently worded as well as its omission of issues which we believe are crucial if we are to have a final legislative proposal which fairly and reasonably balances the rights and responsibilities of all parties.
BACKGROUND
CCIA believes that any final legislative proposal regarding changes in intellectual property must be designed with public expectations in mind, not despite them. Any new legal construct created or modified to protect the rights of copyright owners must vigilantly take into account the paramount and underlying purpose of the intellectual property laws: "to 12romote the id useful am--`
Mr. Chairman, I have been with the CCIA for over 10 years. During this period, I have seen this industry grow at an ever accelerating pace, and its various sectors converge. The historic telecommunications bill passed just two weeks ago will hasten this growth and convergence.
A key element to this growth has been our intellectual property system. On the one hand, it has given firms in the computer and communications industry the incentive to invest billions of dollars in research and development because we knew we would be able to reap the fruits of our labors. On the other hand, the 10? system has not given so much protection as to stifle competition by allowing firms to exercise excessive monopoly power based on their intellectual property portfolios. The notion of balanced intellectual property is found in the Constitution, in the intellectual property statutes passed by Congress, and in the judicial decisions applying these statutes.
Balanced intellectual property protection is just as important in the digital environment as it has been previously. We want creative content to be available on the NIL Interesting content will make consumers purchase more NH equipment and services, which will benefit CCIA members. Because strong intellectual property protection will increase content providers' willingness to make their content available on the NH, we support such protection. I should note that many CCIA members are also content providers in their own right, and hope to distribute their products via the NU.
At the same time, over-protection may undermine consumer demand for the NH. If on-line service providers are strictly liable for the infringements of their subscribers, they -,@ill pass the cost of this liability onto the consumers in the form of higher access fees. These higher fees will dampen use of the NH. Further, legislative changes which make software interoperability more difficult to achieve will decrease competition in the in)'rastructure of the National Information Infrastructure, again raising prices for the consumer.
If I have learned anything over my years in the industry, it is that we always must do what is best for our customers. Short term efforts to maximize our profits at our customers' expense always lead to adverse long term consequences. Yes, we need good content on the NH to make the NH attractive to consumers. But, we also must take care not to make the N11 so expensive that the consumers cannot afford to use it. For this reason, CCIA has joined with others, such as the Digital Future Coalition, and is open to working with all groups necessary, in order to strike the right balance between the interests of content providers and consumers.
Our current system is not broken nor in danger of becoming broken because of technology. The greatest threat to the "magic" of our system will come from modifying our laws in a way which disrupts the delicate and necessary balance which has been the bedrock of our success. Does our complex structure of laws need v-pdating because of technological developmentscertainly they do. But the basic system is not broken, and we are concerned that if enacted without substantial modifications, H.R. 2441 would itself do more to break it, unintentionally, than is currently understood.
Our industry has the potential to be a cornucopia of growth and jobs, a veritable bottomless cookie jar. Let's not break the jar by letting one group try to grab too much too scon. We will all benefit enormously if we maintain our balanced system and take into account the legitimate rights of all of those involved, not just our most narrow, selfish and short run interests.
We are bewildered that any Congress, especially this one, would try to write anticipatory legislation imposing government solutions in areas where problems are only contemplated, or their shape is as yet ill-defined.
As Congress proceeds to adapt the copyright law to the electronic medium, it should take care to ensure that all the current specific rules allocating rights, responsibilities, liabilities and defenses remain viable, and to preserve the underlying and essential balance and fairness which have made our system so successful.
Some of the questions that need to be answered if we are to have positive and balanced legislation include:
þ Should "exclusive rights" as reflected currently in the Copyright Act be adapted to the necessity of producing and sharing of content in a digital marketplace?
þ Should those expecting to receive monetary rewards be expected to bear the expense of securing that reward, Le., the costs of technological enforcement?
þ What should be the scope of the "Fair Use" doctrine in the digital environment?
Should on-line service providers be liable for infringements by subscribers about which they have no notice?
Should copying technology be severely restricted, and what would the impact on technological innovation be if a new provision broadly prohibits the development of new technology, and what would be the concomitant market loss from such a prohibition?
The balance of CCIA's testimony will comment on the legislative proposal implementing the Administration's White Paj2er recommendations and the reservations we have about its scope.
DIGITAL TRANSNHSSTON RIGHT
The proposal to create a digital transmission right is clearly an important part of the legislation. CCIA is mindful of the fact that under current law it is not clear whether a transmission can constitute a distribution of copies of a work. Therefore, this legislation would amend the Copyright Act to expressly recognize that copies can be distributed to the public by transmissions and that such transmissions fall within the exclusive distribution right of the copyright owner. CCIA is not opposed to this concept in principle.
By modifying the distribution right, the proposed legislation makes clear that all of the exclusive rights enumerated in section 106 are affirmed in the digital medium Copyright owners are certainly entitled to protection of their works both under traditional distribution schemes and under future schemes which will evolve in electronic commerce. However, the proposed blanket transfer of rights related to the digital transmission right creates a number of difficulties for other important actors on the National Information Infrastructure, namely distributors of content and users of content.
LIABILITY OF ON-LINE SERVICE PROVIDERS
CCIA members are investing billions of dollars building the NH of the future. They are also introducing a wide variety of new electronic information products and services, including Internet access, on-line services, world wide hosting, and Internet servers, and other electronic platforms and services for users.
As the Chairman and Members of the Subcommittee are also aware, the courts are continuing to grapple with the application of the intellectual property laws in the new electronic world of bulletin boards, e-mail, Internet, and on-line information services. In addition to the issues of direct liability of users for copyright infringement, CCIA is concerned about the liability of operators, service providers and builders of information networks for the content they transmit.
CCIA, therefore, believes that the applicability of the doctrines of contributory infringement and vicarious liability to on-line and Internet services and products needs to be reexamined in the NU environment. CCIA met on several occasions with the Administration to express our concerns about liability. In fact, the White Papu specifically mentions these concerns on page 114. The White Paper's recommendation, however, "that the best policy is to hold the service provider liable"(page 117), is an unfortunate result.
If the law of contribute infringement and vicarious liability, as interpreted by the White Pam is applied to companies providing interactive services, these companies will be discouraged from providing such services or building the infrastructure for the NH due to the enormous risks of liability. The result might be an NH that only allows users to view data, not engage in twoway interactive communications that allow the uploading and manipulating of data. Moreover, such a standard for liability might also force on-line service providers to restrict access only to companies and individuals wining and financially able to indemnify themselves if their activities result in copyright infringements on their systems.
Some argue that the existing copyright law will change very little by this legislation In fact, there are three reasons why it is critical that the liability issue be addressed now" First, although it has been claimed that the existing law is only being "clarified" to add the concept of "transmission" to the definitions of publication and distribution in section 106 of the Copyright Act, the result of this "clarification" is that the simple act of transmitting material can now be viewed as an act of direct infringement. Second, the White Paper rejects an actual knowledge approach as discussed in the Netcom decision. Third, much troubling case law is being decided and the White Pa- Mr is being cited as authority in briefs and in court decisions.
Thus, CCIA believes that a legislative solution is needed to resolve the uncertainty and outline the reasonable actions that service providers can take to avoid liability. CCIA has been at the center of an industry wide attempt to draft statutory language which would seek to balance the rights and obligations of content providers, on-line service providers and users. We have also reached out our hand to other groups who are focused on these issues. We hope we can all work to a commonly acceptable solution.
FIRST SALE DOCTRINE
If Congress treats a transmission as a distribution, it should consider the applicability in the digital environment of the major exception to the distribution right: the First Sale doctrine. The First Sale Doctrine essentially allows the purchaser of a particular copy of a work to dispose of it as he or she pleases. There are limitations to this exception with respect to two types of works - computer programs and sound recordings. The owner of a particular copy of a computer program or a particular phonorecord of a sound recording may not rent, lease or lend that copy or phonorecord for the purpose of direct or indirect commercial advantage.
These limitations were enacted because of the possibility that reproductions of these works could be done at low cost with minimum degradation in quality. Some have argued that this limitation should be extended to all works in the digital environment. However, CCIA believes that before quick action is taken to implement such a concept, we should take a moment to reflect on the nature and future of this new technology.
Electronic distribution of works should not focus exclusively on fears of widespread illegal copying. We should also focus on the potential benefits of digital sales to everyone copyright owners, distributors of content and users. Congress should be mindful of the fact that, for example, a new emerging market of lawful, authorized distribution systems, which use transmissions as a vehicle for selling copyrighted works, is a valuable tool for everyone.
Now, some may argue, as does the White Pap= that the First
Sale doctrine limits only the copyright owner's distribution
right, and in no way affects the reproduction right. Thus,
it is suggested, the First Sale doctrine does not allow the
transmission of a copy of a work because presently the
transmitter retains the first copy of the work, while the
recipient of the transmission obtains a second copy of the
work. In a strictly technical sense, this is true under
today's technology However, such an analysis misses the heart
of the Y
argument and the importance of preserving an environment where new creative forms of electronic commerce can thrive. Why should we create a legal regime which would preclude a law-abiding citizen from transferring ownership of a copy of a digital work just as he or she currently can transfer a tangible work (a book you buy in the bookstore) to a relative or friend. The copyright holder is already well protected. Under current law it is not legal to make a copy of the original work for oneself and then transfer the original to another.
Therefore, CCIA believes that Congress should give careful consideration to ensuring that the First Sale doctrine is applicable to both works distributed by traditional means and by electronic means as long as the purchaser does not retain a copy of the original after sending it to a third party electronically.
FAIR USE
Although the House bill makes no reference to Section 107 of the Copyright Act, the Fair Use doctrine, CCIA is very concerned with the Fair Use analysis contained in the White PaM. The Paper's almost exclusive emphasis on Fair Use for educational purposes is very troubling. While CCIA certainly agrees that the Fair Use doctrine should apply to educational and non-profit institutions, it has never been the case that Fair Use is limited to or focused exclusively on non-commercial uses. Throughout the narrative of the White Papgr there exists a tendency to cite Supreme Court cases for the presumption that commercial uses are unfair. Yet, the Supreme Court has moved far away from that presumption as indicated in the recent cases Camgbell v. Ackff-R= and Esgerty
CCIA is even further ahirmed by the claim in the White Paper (page 82) that "it may be that technological means for tracking transactions and licensing will lead to reduced applications and scope of the Fair Use doctrine." The Fair Use doctrine has a longstanding history in the United States and we would ask that the Congress keep dose watch to ensure that the integrity of the Fair Use doctrine is not disturbed deliberately or inadvertently. The applicability of the Fair Use doctrine is just as important to digital works as it is to analog works.
PROPOSED NEW SECTION 1201 OF THE COPYRIGHT ACT
The new chapter 12-Copyright Protection and Management Systems - raises some additional concerns for CCIA. Although CCIA wholeheartedly supports attempts to pie`v@ent piracy of copyrighted works, we are concerned about the scope and consequences of Section 1201, circumvention of copyright protection systems, as drafted. The goal of the proposed section is to prohibit the importation, manufacture and distribution of devices that circumvent a system or process that prevent illegal copying of protected works. While the goal of preventing illegal copying is laudable, specific implementation of proposals to advance the goal should not be so broad as to swallow other equally important goals of the Copyright Act.
Not all copies are infringing copies. If a firm were to develop an encryption technology that prevented the making of copies, a system or device which was used to circumvent such encryption technology for purposes of making a backup copy permitted.vinder Section 117 might well run afoul of the new Section 1201. Also, appellate courts in several circuits have excused intermediate copying when the purpose of the copying was to achieve interoperability.
Responding partially to the concerns of CCIA and others, the Administration indicated that section 1201 would not prohibit an anticopying circumvention device "primarily intended and used for legal purposes." This, CCIA believes, is an unfortunate and inadequate answer. A device intended to unlock a lock-out mechanism or encryption system could have both a lawful and unlawful use depending on the intent of the actor. Technology is neutral in that sense. Thus, even if the device would, in fact, be used for a number of lawful purposes, it could not be known in advance of its manufacture whether it would be used 'primarily " for lawful or unlawful purposes. This is especially important as the language of Section 1201 focuses on the 'primary purpose and effect' of the system.
The Subcommittee should also be aware that Section 1201 changes the standard for contributory infringement liability established by the Supreme Court in Sony v. U My Studios. The court found that a copying device which has a substantial number of non- infringing uses is not subject to contributory infringement liability and therefore shields the manufacturer from suit.
Finally, many advocates of Section 1201 have noted its reference to 'without the authority of the copyright owner or the law.' Thus, supporters of the provision as drafted argue that Fair Use could be claimed. CCIA begs to differ - the Fair Use doctrine applies not to the act of disabling or circumventing but to the copying of the targeted work. The ability for many "Fair Uses' by "Fair Users' would be eclipsed at the outset.
We urge the Subconunittee to take a very close look at this provision and to make the substantive changes that are needed so as to ensure that it addresses only the stated goal which is to prevent illegal copying.
INTERNATIONAL DIMENSION
At this very moment, Mr. Chairman, the World Intellectual Property Organization (WIPO), the principal international body responsible for drafting and administering international copyright norms, is meeting to discuss most of the issues contained in H.R. 2441. According to CCIA's representative in Geneva, the Administration is forcefully advocating to WIPO the recommendations of the White Paper, without any mention of posse ible problems related to it. The fact that Congress has not acted is not inhibiting the Adminishation from representing its legislative proposals as the U.S. Government's position.
As you can gather from this testimony, CCIA believes that many of the Administration's recommendations are either fundamentally flawed or in need of substantial redrafting by Congress. Yet, the Administration is lobbying member governments of WIPO to move as quickly as possible to a full diplomatic conference, perhaps as early as September 1996, to conclude a new international copyright treaty on digital issues, as wen as other traditional issues. CCIA is very concerned about Ns expedited process. CCIA believes that a thorough Congressional examination of FLR- 2441 is critical to ensure balance and an acceptable outcome for all. Congressional deliberations should = be driven by the overly zealous international agenda of the Administration. We hope the Subcommittee will fulfill its key oversight role and prevent any premature adoption of an international digital agenda before a full and comprehensive domestic debate.