Intellectual Property and the National Information Infrastructure
A Preliminary Draft of the Report of the Working Group on Intellectual Property Rights
Bruce A. Lehman, Assistant Secretary of Commerce and Commissioner of Patents and Trademarks, Chair
INFORMATION INFRASTRUCTURE TASK FORCE
Ronald H. Brown, Secretary of Commerce, Chair
I. LAW 11
A. COPYRIGHT 11
1. SUBJECT MATTER AND SCOPE OF PROTECTION 11
a. ELIGIBILITY FOR PROTECTION 11
b. PUBLISHED AND UNPUBLISHED WORKS 15
c. WORKS NOT PROTECTED 18
d. CATEGORIES OF PROTECTIBLE WORKS 20
2. COPYRIGHT OWNERSHIP 28
a. TRANSFER OF OWNERSHIP 31
b. LICENSING 32
3. TERM OF PROTECTION 34
4. EXCLUSIVE RIGHTS 34
a. THE RIGHT TO REPRODUCE THE WORK 35
b. THE RIGHT TO PREPARE DERIVATIVE WORKS 37
c. THE RIGHT TO DISTRIBUTE COPIES 38
d. THE RIGHT TO PERFORM THE WORK PUBLICLY 42
e. THE RIGHT TO DISPLAY THE WORK PUBLICLY 44
5. LIMITATIONS ON THE EXCLUSIVE RIGHTS 44
a. FAIR USE 45
b. FIRST SALE DOCTRINE 53
c. LIBRARY EXEMPTIONS 56
d. EDUCATIONAL USE EXEMPTIONS 60
e. OTHER LIMITATIONS 61
6. COPYRIGHT INFRINGEMENT 65
a. GENERAL 65
b. INFRINGING IMPORTATION 72
c. CONTRIBUTORY AND VICARIOUS LIABILITY 73
d. CONFLICT OF LAWS 82
7. INTERNATIONAL IMPLICATIONS 82
a. BACKGROUND 82
b. THE INTERNATIONAL FRAMEWORK 85
c. COPYRIGHT HARMONIZATION 89
d. NATIONAL TREATMENT 90
e. PRIVATE COPYING ROYALTY SYSTEMS 94
f. MORAL RIGHTS 94
B. PATENT 95
C. TRADEMARK 102
D. TRADE SECRET 106
II. TECHNOLOGY 108
A. CONTROLLING ACCESS TO PROTECTED WORKS 108
1. CONTROLLING ACCESS AT THE SERVER LEVEL 109
2. CONTROLLING ACCESS AT THE FILE LEVEL 110
B. CONTROLLING USE OF THE WORK 112
C. AUTHENTICATING THE WORK 113
D. MANAGING RIGHTS IN THE WORK 114
E. DEVELOPMENT OF STANDARDS 116
III. EDUCATION 117
IV. PRELIMINARY FINDINGS AND RECOMMENDATIONS 120
A. LAW 120
1. DISTRIBUTION BY TRANSMISSION 120
a. THE DISTRIBUTION RIGHT 120
b. PUBLICATION 123
c. FIRST SALE DOCTRINE 124
d. OTHER RELATED AMENDMENTS 125
2. TECHNOLOGICAL PROTECTION 125
3. COPYRIGHT MANAGEMENT INFORMATION 130
4. PUBLIC PERFORMANCE RIGHT 131
5. FAIR USE 133
6. LICENSING 134
7. INTERNATIONAL 135
B. TECHNOLOGY 139
C. EDUCATION 140
In February 1993, President Clinton formed the Information Infrastructure Task Force (IITF) to articulate and implement the Administration's vision for the National Information Infrastructure (NII). The IITF is chaired by Secretary of Commerce Ronald H. Brown and consists of high-level representatives of the Federal agencies that play a role in advancing the development and application of information technologies. Guided by the principles for government action described in The NII Agenda for Action, the participating agencies are working with the private sector, public interest groups, Congress, and State and local governments to develop comprehensive telecommunications and information policies and programs that best meet the country's needs.
To drive these efforts, the IITF is organized into three committees: the Telecommunications Policy Committee, which formulates Administration positions on key telecommunications issues; the Committee on Applications and Technology, which coordinates Administration efforts to develop, demonstrate and promote applications of information technologies in key areas; and the Information Policy Committee, which addresses critical information policy issues that must be dealt with if the NII is to be fully deployed and utilized. In addition, the IITF recently established a Security Issues Forum to asses the security needs and concerns of users, service providers, information providers, State governments and others.
The Working Group on Intellectual Property Rights, which is chaired by Assistant Secretary of Commerce and Commissioner of Patents and Trademarks Bruce A. Lehman, was established within the Information Policy Committee to examine the intellectual property implications of the NII.
This Report represents the Working Group's examination and analysis to date. While it addresses each of the major areas of intellectual property law, it focuses primarily on copyright law and its application and effectiveness in the context of the NII.
To prepare this Report, the Working Group drew upon the expertise of its members from the Executive Branch and observers from the Legislative Branch. In addition, the Working Group received and considered views of the public.
The Working Group held a public hearing on November 18, 1993, at which 30 witnesses testified. The Working Group also solicited written comments and received some 70 statements during a public comment period which closed on December 10, 1993. Through this process, the Working Group heard from representatives of a wide variety of interested parties, including the computer software, motion picture, music, broadcasting, publishing and other information industries, as well as various electronic industries. Views of the academic, research, library and legal communities were also heard, as well as those of individual copyright owners and users.
The special intellectual property concerns and issues raised by the development and use of the NII are the subject of this Report; it does not attempt to address all existing intellectual property issues. Because of the legal nature of the subject, this Report uses certain words and phrases that may be unfamiliar to some readers or that do not have their ordinary meaning when used in the context of intellectual property law. The Working Group has attempted to identify these terms of art and provide their legal definitions.
The Working Group is issuing this Preliminary Draft of its Report to solicit public comment on the Report and, particularly, its preliminary findings and recommendations. An original and four copies of written comments should be submitted on or before September 7, 1994, to:
The Commissioner of Patents and Trademarks U.S. Patent and Trademark Office Box 4 Washington, D.C. 20231 Attention: Terri A. Southwick Attorney-Advisor Office of Legislative and International Affairs
Alternatively, comments may be submitted electronically to the following Internet address: [email protected]
Comments received will be available for public inspection at the Scientific and Technical Information Center of the U.S. Patent and Trademark Office, Room 2CO1, Crystal Plaza 34, 2021 Jefferson Davis Highway, Arlington, Virginia, between the hours of 9 a.m. and 4 p.m., Monday through Friday.
Reply comments may be submitted electronically or in writing no later than September 28, 1994.
This Report is also available on the IITF Bulletin Board. The Bulletin Board can be accessed through the Internet by pointing the Gopher Client to iitf.doc.gov or by telnet to iitf.doc.gov (log in as gopher). The Bulletin Board is also accessible at 202-501-1920 using a personal computer and a telephone modem. The Report may be found under "Speeches, Testimony and Documents" and is listed as "Intellectual Property Working Group Draft Report."
Public hearings will be held on this Report, and will be announced in the press, on the IITF Bulletin Board and in the Federal Register.
Intellectual property is a subtle and esoteric area of the law that evolves in response to technological change. Copyright law, in particular, responds to technological challenges for authors and copyright owners, from Gutenberg's moveable type printing press to digital audio recorders, and everything in between -- photocopiers, radio, television, videocassette recorders, cable television and satellites. The use of computer technology -- such as digitization -- and communications technology -- such as fiber optic cable -- has had an enormous impact on the creation, reproduction and dissemination of copyrighted works. The development of the National Information Infrastructure will merge computer and communications technology into an integrated information technology, and will generate both unprecedented challenges and important opportunities for the copyright marketplace.
A national information infrastructure already exists. Telephones, televisions, radios, computers and fax machines are used every day to receive, store, process, perform, display and transmit data, text, voice, sound and images in homes and businesses throughout the country. Fiber optics, wires, cables, switches, routers, microwave networks, satellites and other communications technologies connect telephones to telephones, computers to computers, and fax machines to fax machines. The NII of tomorrow will be much more than these separate communications networks; it will integrate them into an advanced high-speed, interactive, broadband, digital communications system. Computers, telephones, televisions, radios, fax machines, and more will be linked by the NII and will be able to communicate and interact with other computers, telephones, televisions, radios, fax machines and more -- all in digital format.
The NII has great potential to increase access to information and entertainment resources that will be delivered quickly and economically anywhere in the country in the blink of an eye. For instance, hundreds of channels of "television" programming, thousands of musical recordings, and literally millions of "magazines" and "books" can be made available to homes and businesses across the United States and, eventually, the world. It can improve the nation's educational and health care systems. It can enhance the ability of U.S. firms to compete and succeed in the global economy, generating more jobs for Americans. New job opportunities can also be created in the processing, organizing, packaging and dissemination of the information and entertainment products flowing through the NII.
Yet, the potential of the NII will not be realized if the information and entertainment products protectible by intellectual property laws are not protected effectively when disseminated via the NII. Owners of intellectual property rights will not be willing to put their interests at risk if appropriate systems -- both in the U.S. and internationally -- are not in place to permit them to set and enforce the terms and conditions under which their works are made available in the NII environment. Likewise, the public will not use the services available on the NII and generate the market necessary for its success unless access to a wide variety of works is provided under equitable and reasonable terms and conditions, and the integrity of those works is assured. All the computers, telephones, fax machines, scanners, cameras, keyboards, televisions, monitors, printers, switches, routers, wires, cables, networks and satellites in the world will not create a successful NII, if there is not content. What will drive the NII is the content moving through it.
The development of the NII is obviously neither the first nor the last technological challenge to copyright owners' ability to prevent unauthorized uses of their works. For instance, the advent of the photocopying machine caused great apprehension among copyright owners of printed works. But time, cost and quality were on the copyright owner's side. It was, and still is, more efficient and cheaper to buy an extra copy of most books than to photocopy them -- and the quality of a book from the original publisher is typically higher than that of a photocopy. The introduction of audio tape recorders also posed problems for copyright owners. But again, the physical attributes of the work made reproductions cheaper, but lower in quality -- until, of course, the introduction of digital audio recorders, which reproduce sound recordings both cheaply and with no degradation of sound quality. Congress responded to this threat to sound recordings with enactment of the Audio Home Recording Act of 1992, which combined legal and technological safeguards.
Advances in digital technology and the rapid development of electronic networks and other communications technologies raise the stakes considerably. Any two-dimensional work can readily be "digitized" -- i.e., translated into digital code (a series of zeros and ones). The work can then be stored and used in that digital format. This dramatically increases: the ease and speed with which a work can be reproduced; the quality of the copies (both the first and the hundredth "generation"); the ability to manipulate and change the work; and the speed with which copies (authorized and unauthorized) can be "delivered" to the public. Works also can be combined easily with other works into a single medium, such as a CD-ROM, which is causing a blurring of the lines that typically divide types of works.
The establishment of high-speed, high-capacity electronic information systems makes it possible for one individual, with a few key strokes, to deliver perfect copies of digitized works to scores of other individuals -- or to upload a copy to a bulletin board or other service where thousands of individuals can download it or print unlimited "hard" copies on paper or disks. The emergence of integrated information technology is dramatically changing, and will continue to change, how people and businesses deal in information and entertainment products and services, and how works are created, owned, distributed, reproduced, displayed, performed, licensed, managed, presented, organized, sold, accessed, used, and stored. This leads, understandably, to a call for change in the law.
Thomas Jefferson stated:
I am not an advocate for frequent changes in laws and constitutions. But laws and institutions must go hand and hand with the progress of the human mind. As that becomes more developed, more enlightened, as new discoveries are made, new truths discovered and manners and opinions change, with the change of circumstances, institutions must advance also to keep pace with the times. We might as well require a man to wear still the coat which fitted him when a boy . . . .
Our task is to determine whether the coat still fits in this new information age.
Our intellectual property regime must (1) recognize the legitimate rights and commercial expectations of persons and entities whose works are used in the NII environment, whether at their instance or without their permission, and (2) ensure that users have access to the broadest feasible variety of works on terms and conditions that, in the language of the Constitution, "promote the progress of science and the useful arts."
For more than two centuries copyright law, with periodic amendment, has provided protection for an increasing variety of works of authorship. The most recent complete revision of the law -- The Copyright Act of 1976 -- was enacted in response to "significant changes in technology [that had] affected the operation of the copyright law." The legislative history of the 1976 Act noted that those changes had "generated new industries and new methods for the reproduction and dissemination of copyrighted works, and the business relations between authors and users have evolved new patterns."
We are once again faced with significant changes in technology, and views on the appropriate response to these changes vary widely. There are some who argue that the Copyright Act is adequate without any modification. Others suggest that a complete overhaul of the intellectual property regime is in order. We believe that with no more than minor clarification and amendment, the Copyright Act, like the Patent Act, will provide the necessary protection of rights -- and limitations on those rights -- to promote the progress of science and the useful arts. There must be, however, effort in three disciplines -- the law, technology and education -- to successfully resolve the intellectual property issues raised by the development and use of the NII.
1. SUBJECT MATTER AND SCOPE OF PROTECTION
a. ELIGIBILITY FOR PROTECTION
The subject matter eligible for protection under the Copyright Act is set forth in Section 102(a):
Copyright protection subsists . . . in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.
From this provision, the courts have derived three basic requirements for copyright protection -- originality, creativity and fixation.
The requirements of originality and creativity are derived from the statutory qualification that copyright protection extends only to "original works of authorship." To be original, a work merely must be one of independent creation -- i.e., not copied from another. There is no requirement that the work be novel (as in patent law), unique or ingenious. While there must also be a modicum of creativity in the work, the level of creativity required is exceedingly low; "even a slight amount will suffice."
The final requirement for copyright protection is fixation in a tangible medium of expression. Protection attaches automatically to an eligible work of authorship the moment the work is sufficiently fixed. Congress provided considerable room for technological advances in the area of fixation by noting that the medium may be "now known or later developed."
The Copyright Act divides the possible media for fixation into "copies" and "phonorecords":
"Copies" are material objects, other than phonorecords, in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.
"Phonorecords" are material objects in which sounds, other than those accompanying a motion picture or other audiovisual work, are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.
According to the House Report accompanying the Copyright Act of 1976, Congress intended the terms "copies" and "phonorecords" to "comprise all of the material objects in which copyrightable works are capable of being fixed."
The form of the fixation and the manner, method or medium used are virtually unlimited. A work may be fixed in "words, numbers, notes, sounds, pictures, or any other graphic or symbolic indicia"; may be embodied in a physical object in "written, printed, photographic, sculptural, punched, magnetic, or any other stable form"; and may be capable of perception either "directly or by means of any machine or device 'now known or later developed.'"
All works created for placement on the NII or transmission through it will be "fixed" in a manner that requires their protection by copyright. In a digital format, a work is fixed in a series of zeros and ones, which fits within the House Report's list of permissible manners of fixation. Virtually all works also will be fixed in acceptable material objects. For instance, floppy disks, compact discs (CDs), CD-ROMs, optical disks, CD-Is, digital tape, and other digital storage devices are all stable forms in which works may be fixed and from which works may be perceived, reproduced or communicated by means of a machine or device.
The question of whether interactive works are fixed (given the user's ability to constantly alter the sequence of the "action") has been resolved by the courts in the context of video games and should not present a new issue in the context of the NII. Such works are generally considered sufficiently fixed. The sufficiency of the fixation of works transmitted via the NII, however, where no copy or phonorecord has been made prior to the transmission, is not so clear.
A transmission is not a fixation. While a transmission may result in a fixation, a work is not fixed by virtue of the transmission alone. Therefore, works transmitted "live" via the NII will not meet the fixation requirement, and will be unprotected by the Copyright Act unless the work is being fixed at the same time as it is being transmitted. The Copyright Act provides that a work "consisting of sounds, images, or both, that are being transmitted" meets the fixation requirement "if a fixation of the work is being made simultaneously with its transmission." To obtain protection for a work under this "simultaneous fixation" provision, the simultaneous fixation of the transmitted work must itself qualify as a sufficient fixation.
A simultaneous fixation (or any other fixation) meets the requirements if its embodiment in a copy or phonorecord is "sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration." Works are not sufficiently fixed if they are "purely evanescent or transient" in nature, "such as those projected briefly on a screen, shown electronically on a television or cathode ray tube, or captured momentarily in the 'memory' of a computer." Electronic network transmissions from one computer to another, such as e-mail, may only reside on each computer in RAM (random access memory), but that has been found to be sufficient fixation.
b. PUBLISHED AND UNPUBLISHED WORKS
Although prior to 1978, Federal copyright protection generally was available only for published works, such protection is now available for published as well as unpublished works. The Copyright Act provides a definition of "publication" to draw the line between published and unpublished works.
"Publication" is the distribution of copies or phonorecords of a work to the public by sale or other transfer of ownership, or by rental, lease, or lending. The offering to distribute copies or phonorecords to a group of persons for purposes of further distribution, public performance, or public display constitutes publication. A public performance or display of a work does not of itself constitute publication.
The definition was intended to make clear that "any form of dissemination in which a material object does not change hands -- performances or displays on television, for example -- is not a publication no matter how many people are exposed to the work." Therefore, unless otherwise published, a work only displayed or performed via the NII would not be considered "published" under the Copyright Act, no matter how many people have access to it. The House Report also states, however, that the definition was intended to clarify that the offering of copies or phonorecords to a group of, for instance, wholesalers, broadcasters or motion picture theater operators constitutes publication if the purpose of the offering is "further distribution, public performance, or display." Therefore, if sufficient numbers of actual copies of the work are offered to bulletin board system ("BBS") operators or others for upload onto systems on the NII, publication may occur.
The classification of a work as either published or unpublished has significant repercussions under the Copyright Act. For example:
. works that are published in the United States are subject to mandatory deposit in the Library of Congress;
. unpublished works are eligible for protection without regard to the nationality or domicile of the author;
. published works must bear a copyright notice if published before March 1, 1989;
. certain limitations on the exclusive rights of a copyright owner are applicable only to published works;
. deposit requirements for registration with the Copyright Office differ depending on whether a work is published or unpublished; and
. the duration of protection for works made for hire may be determined by the date of publication.
c. WORKS NOT PROTECTED
Certain works of authorship are expressly excluded from protection under the Copyright Act, regardless of their originality, creativity and fixation. Copyright protection, for example, does not extend to any "idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied" in such work. Thus, although a magazine article on how to tune a car engine is protected by copyright, that protection extends only to the expression of the ideas, facts and procedures in the article, not the ideas, facts and procedures themselves, no matter how creative or original they may be. Anyone may "use" the ideas, facts and procedures in the article to tune an engine -- or to write another article on the same subject. What may not be taken is the expression used by the original author to describe or explain those ideas, facts and procedures.
Copyright protection is not extended under the Copyright Act to works of the U.S. Government. A work of the U.S. Government may, therefore, be reproduced and distributed without infringement liability under U.S. copyright laws. Titles, names, short phrases, and slogans also do not enjoy copyright protection under the Copyright Act.
d. CATEGORIES OF PROTECTIBLE WORKS
The Copyright Act enumerates eight broad categories of protectible subject matter:
(1) literary works;
(2) musical works, including any accompanying words;
(3) dramatic works, including any accompanying music;
(4) pantomimes and choreographic works;
(5) pictorial, graphic and sculptural works;
(6) motion pictures and other audiovisual works;
(7) sound recordings; and
(8) architectural works.
Although many categories of works will be available via the NII, the majority of works currently available on computer networks such as the Internet are literary works.
"Literary works," are works, other than audiovisual works, expressed in words, numbers, or other verbal or numerical symbols or indicia, regardless of the nature of the material objects, such as books, periodicals, manuscripts, phonorecords, films, tapes, disks, or cards, in which they are embodied.
A musical work consists of the musical notes and lyrics (if any) in a musical composition. A musical work may be embodied in any form, such as a piece of sheet music or a compact disc. Musical works may be "dramatic," i.e., written as a part of a musical or other dramatic work, or "nondramatic," i.e., an individual, free-standing composition.
Generally, a dramatic work is one in which a series of events is presented to the audience by characters through dialogue and action as the events happen, such as in a play.
PANTOMIMES AND CHOREOGRAPHIC WORKS
This category was first added to the list of protectible subject matter in 1976. While pantomimes and choreographic works, such as dances, can be fixed in a series of drawings or notations, they are usually fixed on film or videotape.
PICTORIAL, GRAPHIC AND SCULPTURAL WORKS
A significant percentage of the works traveling through the NII will be pictorial and graphic works. Works in this category include:
[T]wo-dimensional and three-dimensional works of fine, graphic, and applied art, photographs, prints and art reproductions, maps, globes, charts, diagrams, models, and technical drawings, including architectural plans.
MOTION PICTURES AND OTHER AUDIOVISUAL WORKS
The Copyright Act provides definitions of "audiovisual works" and the subcategory "motion pictures."
"Audiovisual works" are works that consist of a series of related images which are intrinsically intended to be shown by the use of machines, or devices such as projectors, viewers, or electronic equipment, together with accompanying sounds, if any, regardless of the nature of the material objects, such as films or tapes, in which the works are embodied.
"Motion pictures" are audiovisual works consisting of a series of related images which, when shown in succession, impart an impression of motion, together with accompanying sounds, if any.
The House Report notes that the key to the subcategory "motion pictures" is the conveyance of the impression of motion, and that such an impression is not required to qualify as an audiovisual work.
An "architectural work" is "the design of a building, as embodied in any tangible medium of expression, including a building, architectural plans, or drawings." It includes the overall form as well as the "arrangement and composite of spaces and elements" in the design of the building.
Increasingly, works from different categories are fixed in a single tangible medium of expression. This will certainly be true as development of the NII progresses and the ability to create and disseminate interactive so-called "multimedia" or "mixed media" products increases.
A prefatory note may be warranted because of the manner in which these terms are used in the context of copyright law. The terms "multimedia" and "mixed media" are, in fact, misnomers. In these works, it is the types or categories of works included that are "multiple" or "mixed" -- not the media. The very premise of a so-called "multimedia" work is that it combines several different elements or types of works (e.g., text (literary work), sound (sound recording), still images (pictorial works), and moving images (audiovisual work) into a single medium (e.g., a CD-ROM) -- not multiple or mixed media. However, in recognition of the prevalent use of the term, this Report refers to this type of work as a "multimedia" work.
Multimedia works are not categorized separately under the Copyright Act; nor are they explicitly included in any of the eight enumerated categories. While most current multimedia works would be considered compilations, that classification does not resolve the issue of subject matter categorization.
Despite the fact that the Copyright Act enumerates eight categories of works, works that do not fit into any of the categories may, nevertheless, be protected. The list of protectible works in Section 102 is intended to be illustrative rather than exclusive. The House Report explains that the categories of works "do not necessarily exhaust the scope of 'original works of authorship' that the [Act] is intended to protect." However, absent the addition of a new category, a work that does not fit into one of the enumerated categories is, in a sense, in a copyright no-man's land.
Categorization of works (and, specifically, proper categorization) holds a great deal of significance under the Copyright Act. For instance, two of the exclusive rights granted in Section 106 apply only to certain categories of works. In addition, many of the limitations on rights in Sections 108 through 120 are not applicable to all types of works. Therefore, categorization of multimedia works is an important issue.
Generally, multimedia works include two or more of the following preexisting elements: text (literary works), computer programs (literary works), music (sound recordings), still images (pictorial and graphic works) and moving images (audiovisual works). The definition of "literary works" begins with the phrase "works, other than audiovisual works, . . . " Therefore, a reasonable interpretation is that text and computer programs that would otherwise be categorized as literary works may be considered part of an audiovisual work if included in a work of that type. Such is also the case with sound recordings. A music video is not categorized as both a sound recording and an audiovisual work; it is categorized as an audiovisual work. Thus, in the case of literary works and sound recordings, the "audiovisual works" category appears to "trump" the others. Audiovisual works also include still images -- at least related ones. Therefore, generally, multimedia works would likely be considered audiovisual works.
The somewhat strained analysis needed to find a category for multimedia works and the increasing "cross-breeding" of types of works demonstrate that categorization may no longer be useful. Its necessity is also questionable, except, perhaps, in the case of sound recordings, which are not granted the full panoply of rights. Consideration may be given to eliminating categorization under the Copyright Act in the future.
COMPILATIONS AND DERIVATIVE WORKS
A "compilation" is "a work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship." Directories, magazines and anthologies are types of compilations. A "derivative work" is a work "based upon" one or more existing works. A derivative work is created when one or more existing works is "recast, transformed, or adapted" into a new work, such as when a novel is used as the basis of a movie or when a drawing is transformed into a sculpture. Translations, musical arrangements and abridgments are types of derivative works.
The Copyright Act makes clear that the subject matter of copyright specified in Section 102 (literary works, musical works, sound recordings, etc.) includes compilations and derivative works. The copyright in a derivative work or compilation, however, extends only to the contribution of the author of the derivative work or compilation (the compiler), and does not affect the copyright protection granted the preexisting material. The copyright protection for an individual musical work, for instance, is not reduced or enlarged, or shortened or extended if the work is included in a compilation, such as a medley of songs. Copyright in a compilation or derivative work does not imply any exclusive right in the preexisting material employed in the compilation or derivative work.
2. COPYRIGHT OWNERSHIP
Under certain circumstances, the copyright in a work is not granted to the actual preparer of the work. In the case of "works made for hire," the employer of the preparer or the person for whom the work was prepared is considered the "author" for purposes of the Copyright Act. There are two types of works made for hire -- those prepared by an employee and those prepared by an independent contractor under special order or commission. The copyright in a work prepared by an employee within the scope of employment vests in the employer, and the employer is the author. The copyright in a work specially ordered or commissioned vests in the person for whom the work was prepared if the work falls into one of nine specified categories and if the parties expressly agree in writing that the work will be considered a work made for hire.
Copyright ownership, or ownership of any of the exclusive rights (or subdivision thereof), may be transferred to one or more persons, but the transfer must be in writing and must be signed by the transferor.
Copyright ownership entitles the copyright owner to:
(1) exercise the exclusive rights granted under Section 106;
(2) authorize others to exercise any of those exclusive rights; and
(3) prevent others from exercising any of those exclusive rights.
An important distinction to understand is the difference between ownership of a copyright in a work and ownership of a copy of a work. Ownership of a copy -- a material object in which a copyrighted work is fixed (e.g., a book, CD or videocassette) -- carries with it no interest in the copyright.
Ownership of a copyright, or any of the exclusive rights under a copyright, is distinct from ownership of any material object in which the work is embodied. Transfer of ownership of any material object, including the copy or phonorecord in which the work is first fixed, does not of itself convey any rights in the copyrighted work embodied in the object; nor, in the absence of an agreement, does transfer of ownership of a copyright or of any exclusive rights under a copyright convey property rights in any material object.
Ownership, possession or any other attachment to or relationship with a copy of a copyrighted work (including obtaining access to it through a computer network or other service) does not entitle one to exercise any of the exclusive rights of the copyright owner (e.g., to reproduce it or distribute it).
a. TRANSFER OF OWNERSHIP
A copyright in a work is divisible; the exclusive rights of a copyright owner may be transferred in whole or in part. A transfer of copyright ownership may occur through an assignment, exclusive license, mortgage "or any other conveyance, alienation, or hypothecation" of a copyright or any of the exclusive rights. A transfer of copyright ownership may be limited in time or in place, but it must be an exclusive transfer of whatever right or rights are involved (i.e., nonexclusive licenses are not considered transfers of ownership). Any of the exclusive rights in the work may be separately transferred and owned, and the owner of a particular right is considered the "copyright owner" with respect to that right.
In the case of any copyrighted work other than a "work made for hire," all transfers of copyright ownership (as well as all nonexclusive licenses) executed by the author of the work may be terminated by the author after 35 years. This right to terminate, intended to protect authors, cannot be waived by contract or other agreement. However, termination is not automatic; an author must assert his or her termination rights and comply with certain statutory requirements to regain copyright ownership.
The exclusive rights of a copyright owner may be licensed on an exclusive basis (i.e., copyright ownership in one or more rights is transferred by the copyright owner) or on a nonexclusive basis (i.e., the copyright owner retains ownership of the copyright and may grant similar licenses to others). A nonexclusive licensee is not a copyright owner and thus does not have standing to sue for any infringement of the copyright in the work by others.Unlike exclusive licenses, nonexclusive licenses need not be in writing.
Licensing issues are, and will continue to be, significant in the context of the development of the NII. Services on the NII will provide the opportunity for new uses for copyrighted works. If rights with respect to these new uses are not expressly granted or retained in license agreements, conflicts will arise between copyright owners and licensees. For instance, public display on a bulletin board system may not have been contemplated in licenses granting the public display right that were executed before the advent or proliferation of such systems. Failure to contemplate possible future developments, of course, is not a new problem, and is one based primarily in contract rather than copyright law. Whenever new technologies have produced a new use for works, courts have been called upon to decide whether the new use is covered by old licenses.
A variety of licensing methods will be possible as the NII develops. For instance, rights in copyrighted works offered via the NII may be licensed off-line or on-line. They may be licensed directly (through individual transactions between the rightsholder and the licensee) or through other licensing arrangements, such as voluntary collective licensing. Licensing of rights may be on a per-use, per-work or other basis.
The licensing of rights for the creation of multimedia works -- whose creators may wish to include dozens of preexisting works (or portions thereof) -- can be difficult. Because registration and copyright notices are not required for copyrighted works, identification of copyright owners alone can be complicated. The relative newness of the multimedia industry can result in an uncertainty on the part of copyright owners and multimedia creators with regard to appropriate terms and conditions for such uses.
3. TERM OF PROTECTION
Generally, a copyrighted work is protected for the length of the author's life plus another 50 years. In the case of joint works, copyright protection is granted for the length of the life of the last surviving joint author plus another 50 years. Works made for hire, as well as anonymous and pseudonymous works, are protected for a term of either 75 years from the year of first publication or 100 years from the year of creation, whichever is shorter. When the term of protection for a copyrighted work expires, the work is said to "fall into the public domain."
4. EXCLUSIVE RIGHTS
The Copyright Act grants to the copyright owner of a work a bundle of exclusive rights:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work;
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; and
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly.
These rights, in most instances, have been well elaborated by Congress and the courts. For the most part, the provisions of the current copyright law can serve the needs of creators, owners, distributors and users of copyrighted works in the NII environment. In certain instances, small changes in the law may be necessary to optimize the intellectual property component of the NII.
a. THE RIGHT TO REPRODUCE THE WORK
This fundamental right -- to reproduce copyrighted works in copies and phonorecords -- appears likely to be implicated in innumerable NII transactions. Indeed, because of the nature of computer-to-computer communications, it appears to be a right that will be implicated in most NII transactions. For example, when a computer user simply "browses" a document resident on another computer, the image on the user's screen exists -- under contemporary technology -- only by virtue of the copy that has been reproduced in the user's computer memory. It has long been clear under U.S. law that the placement of a work into a computer's memory amounts to a reproduction of that work (because the work may be, in the law's terms, "perceived, reproduced, or . . . communicated . . . with the aid of a machine or device").
In each of the instances set out below, one or more copies is made, and, necessarily, in the absence of a proof of fair use or other relevant defense, there is an infringement of the reproduction right:
. When a work is placed into a computer, whether on a disk, diskette, ROM, or other storage device or in RAM for more than a very brief period, a copy is made.
. When a printed work is "scanned" into a digital file, a copy -- the digital file itself -- is made.
. When other works -- including photographs, motion pictures, or sound recordings -- are digitized, copies are made.
. Whenever a digitized file is "uploaded" from a user's computer to a bulletin board system or other server, a copy is made.
. Whenever a digitized file is "downloaded" from a BBS or other server, a copy is made.
. When a file is transferred from one computer network user to another, multiple copies are made.
. Under current technology, when a user's computer is being used as a "dumb" terminal to "look at" a file resident on another computer (such as a BBS or Internet host), a copy of the portion viewed is made in the user's computer. (Without such copying into the RAM or buffer of the user's computer, no screen display would be possible.) As long as the amount viewed is more than de minimis, it is an infringement unless authorized or specifically exempt.
b. THE RIGHT TO PREPARE DERIVATIVE WORKS
The copyright law grants copyright owners the right to control the abridgment, adaptation, translation, revision or other "transformation" of their works. A user who modifies -- by annotating, editing, translating or otherwise significantly changing -- the contents of a downloaded file creates a derivative work. (Although the law does not provide an exemption for the purely private creation of derivative works for personal use, such acts are largely undetectable by the law unless and until the derivative work is reproduced, distributed, publicly performed or publicly displayed.)
c. THE RIGHT TO DISTRIBUTE COPIES
Before addressing issues raised by the distribution right in the context of the NII, it is necessary to understand its application and shortcomings with respect to conventional modes of exploitation and infringement.
The right to distribute copies of works is substantially circumscribed by the "first sale" doctrine set out in Section 109(a):
Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.
This doctrine limits copyright owners' rights by making only the initial distribution of a particular copy of a copyrighted work subject to their control.
The first sale doctrine's importance in the NII context should not be underestimated: if a transaction by which a user obtains a "copy" of a work is characterized as a "distribution," then, under the current law, the user may be entitled to make a like distribution without the copyright owner's permission (and without liability for infringement). This may demonstrate the unintended consequence of characterizing many electronic disseminations as "distributions." Indeed, the system encompassed by Sections 106(3) and 109(a) appears to "fit" only "conventional" transactions in which possessory interests in tangible copies are conveyed in the first instance, for example, from publisher to wholesaler (exclusive distribution right applies) and thereafter from wholesaler to retailer (first sale doctrine denies publisher any control), from retailer to user (first sale doctrine denies publisher any control), and from user to user (first sale doctrine denies publisher any control). Electronic disseminations, by contrast, typically involve the proliferation of copies, with the "publisher" retaining its copy and the user acquiring a new one. This suggests that, under the current law, the reproduction right, rather than the distribution right, may be both more logically applicable and more legally appropriate (by virtue of its more limited exceptions).
One court decision has construed the unauthorized downloading of digitized photographic images by BBS subscribers as implicating the distribution right. The court's discussion in Playboy Enterprises Inc. v. Frena reflects some uncertainty over the meaning and scope of the various rights provided in Section 106:
Public distribution of a copyrighted work is a right reserved to the copyright owner, and usurpation of that right constitutes infringement . . . . [Playboy Enterprise's] right under 17 U.S.C. [[section]]106 to distribute copies to the public has been implicated by Defendant Frena [the bulletin board service operator]. Section 106(3) grants the copyright owner "the exclusive right to sell, give away, rent or lend any material embodiment of his work." There is no dispute that Defendant Frena supplied a product containing unauthorized copies of a copyrighted work. It does not matter that Defendant Frena claims it did not make the copies itself.
The court appears to have glossed over the reproduction right, apparently because of its uncertainty whether the operator of the bulletin board system could be held to have reproduced a work that was (a) uploaded by one subscriber and (b) downloaded by another. (As discussed below, the BBS operator publicly displayed the works by the same conduct, and was found liable by the court for infringing the display right.)
Whether the litigants in Playboy put the issue properly in dispute or not, the right to distribute copies of a work has traditionally covered the right to convey a possessory interest in a tangible copy of the work. Indeed, the first sale doctrine implements the common law's abhorrence of restraints on alienation of property by providing that the distribution right does not generally prevent owners of lawfully made copies from alienating them in a manner of their own choosing. It is clear that a Frena subscriber, at the end of a transaction, possessed a copy of a Playboy photograph, but it is rather less clear whether, under the current law, Frena "distributed" that photograph or the subscriber "reproduced" it (and, if the latter, whether current law clearly would have made Frena contributorily liable for the unauthorized reproduction.)
In a similar case, Sega Enterprise Ltd. v.MAPHIA,119 a court, on a motion for a preliminary injunction, made findings of fact regarding (a) the use of a bulletin board system to "make and distribute" copies of copyrighted video games, (b) the "unauthorized copying and distribution" of the games on the bulletin board, and (c) the profits made by the defendant from the "distribution " of the games on the bulletin board. The court's conclusions of law, however, did not specify infringement of the distribution right.
d. THE RIGHT TO PERFORM THE WORK PUBLICLY
The public performance right is available to all types of "performable" works -- literary, musical, dramatic, and choreographic works, pantomimes, motion pictures, and other audiovisual works -- with the exception of sound recordings. While some have urged that many NII transactions be characterized as "performances," it is important to understand:
. the definition of "perform" in the copyright law,
. that only "public" performances are covered by the copyright law,and
. the limitations set out in the statute that render the performance right ineffective in a variety of circumstances (mostly of a nonprofit nature).
A distinction must be made between transmissions of copies of works, transmissions of performances of works, and performances of works in the NII context. When a 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 has rather clearly not been performed. Thus, for example, a file comprising the digitized version of a motion picture might be transferred via the Internet without the public performance right being implicated. When, however, the motion picture is literally "rendered" -- by showing its images in sequence -- so that users with the requisite hardware and software might watch it with or without copying the performance, then, under the current law, a "performance" has occurred.
The "public" nature of a performance -- which brings it within the scope of copyright -- is sufficiently broadly defined to apply to multiple individual viewers who may watch a work being performed in a variety of locations at several different times. Courts have repeatedly imposed public performance infringement liability upon entities that, for example, develop novel modes of delivering motion picture performances to customers (and novel legal arguments as to why their performances are not "public").
e. THE RIGHT TO DISPLAY THE WORK PUBLICLY
The right to display a work publicly is extremely significant in the context of the NII. The analyses that attend the determination of whether a particular transmission might amount to a "distribution" or a "performance" are rarely necessary. To display a work means to "show a copy of it, either directly or by means of a . . . television image, or any other device or process . . . ." The definition of "display" clearly encompasses the behavior of, for instance, the defendant BBS operator in the Playboy case. Thus, when any NII user visually "browses" through copies of works in any medium (but not through a list of titles or other "menus" that are not copies of the works), a public display occurs. A display is "public" on the same terms as a "performance"; therefore, virtually all NII uses would appear to fall within the law's current comprehension of "public display."
5. LIMITATIONS ON THE EXCLUSIVE RIGHTS
The exclusive rights of copyright owners are not without exception. The Copyright Act specifies certain violations of a copyright owner's exclusive rights that the copyright owner cannot prevent.
a. FAIR USE
The most significant and, perhaps, murky of the limitations on a copyright owner's exclusive rights is the doctrine of fair use.
Fair use is an affirmative defense to any action for copyright infringement. It is potentially available with respect to all unauthorized uses of works in all media. If it is proven, then the use may continue without any obligation on the user's part to seek the permission of the copyright owner, pay royalties, or the like. The doctrine of fair use is rooted in some 200 years of judicial decisions and is, in general, most likely to be found when a user incorporates some of a pre-existing work into a new work of authorship._133 It is thus widely accepted, for example, that quotation from a book or play by a reviewer, or the capturing of copyrighted music in a television news broadcast is fair use. As one moves away from such favored uses into the area of uses that are -- for practical purposes -- competitive with the copyright owner's exploitation of the work, the ease of analysis shrinks (as the number of litigated cases grows).
Before examining the doctrine developed by the courts, it is useful to examine the statutory language concerning fair use. Section 107 of the Copyright Act provides:
Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include --
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or value of the copyrighted work.
The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.
The language may usefully be divided into two parts: the introduction, which is largely tautological ("fair use . . . is not an infringement of copyright"), and the analysis required by the second sentence. The recitation of assorted uses in the middle of the first sentence has been held neither to create a presumption that such uses are fair nor to prevent a fair use analysis from being applied to other "unlisted" uses.
The core of Section 107 is the second sentence, in which Congress elaborates a test little different from that articulated by Justice Story more than a century ago. It is clear that courts must evaluate all four factors in determining whether a particular use is fair, but may also take into account unenumerated "extra" factors, when appropriate.
THE PURPOSE AND CHARACTER OF THE USE
Although, as discussed below, the fourth factor has repeatedly been held to be the most important, the first factor often plays a major role in determining the result when a defendant asserts a fair use defense.
The first factor contrasts "commercial" uses with "nonprofit educational" uses. There is, of course, a continuum between these two opposites, with most uses not falling neatly into either the favored or disfavored pigeonhole. The weight of the factor may be inferred from the Supreme Court's very limited fair use jurisprudence: In the four fair use cases that it has decided, one noncommercial noneducational use was held fair, two commercial uses were held unfair, and one commercial use was held potentially fair.
In the Sony case, the Court announced a "presumption" that helps explains courts' near universal rejection of fair use claims in commercial contexts. It declared that all commercial uses were to be presumed unfair, thus placing a substantial burden on a defendant asserting that a particular commercial use is fair. The Campbell case made clear that the Sony presumption was of greatest applicability in the context of verbatim copying, thus giving greater leeway to commercial but transformative uses.
Indeed, "mere reproduction" has fared very badly in court under the Copyright Act, even in actual and ostensible educational contexts. Courts have denied fair use, for example, to:
. a teacher's reproduction, in text materials, of the copyrighted material of another teacher,
. a school system's practice of taping educational broadcasts for later use in classrooms, and
. off-campus copy shops' manufacture -- to teachers' specifications -- and distribution of photocopies of anthologies containing portions of textbooks and periodicals.
Taken together, these cases indicate that, for the most part, educational fair use is limited to the type of copying expressly authorized in the "classroom guidelines," a part of the legislative history incorporating provisions to which copyright owners and educators agreed.
THE NATURE OF THE COPYRIGHTED WORK
This second factor tends to play a smaller role than the first in fair use litigation. Courts have held that it weighs in the copyright owner's favor when works of fiction and unpublished works are copied, and in defendant's favor when factual works and published works are copied.
THE AMOUNT AND SUBSTANTIALITY OF THE PORTION USED
This is probably the least important factor, given that the taking of even a small amount -- if it is considered the "heart" of the work -- can lead to a finding of infringement. Indeed, the most cited copyright treatise devotes only some four sentences to its discussion:
The third factor listed in [[section]] 107 is "the amount and substantiality of the portion used in relation to the copyrighted work as a whole." This raises an issue discussed in a preceding section [concerning the quantum of copying that constitutes infringement], and may be regarded as relating to the question of substantial similarity rather than whether the use is "fair." This includes a determination of not just quantitative, but also qualitative substantiality. In any event, whatever the use, generally it may not constitute a fair use if the entire work is reproduced.
THE EFFECT OF THE USE
Courts have repeatedly identified this as the most important of the four factors. It is important to recall that it weighs against a defendant not only when a current market exists for a particular use, but also when a potential market could be exploited by the copyright owner. Harm in either market will, in most instances, render a use unfair.
The Supreme Court's decisions demonstrate the significant weight given this factor:
. In Sony, the absence of any market for home taping licenses, combined with the testimony of some copyright owners that they were indifferent to home copying, led the Court to conclude that there was no cognizable harm.
. In Harper & Row, the Court accepted the argument that the "scooping" of "Time" magazine's right to make the first serial publication of President Ford's memoirs, which caused cancellation of the magazine's contract with Harper & Row, caused harm to the copyright owner.
. In Stewart, performances of the movie palpably harmed the economic interests of the owner of the copyright in the underlying short story.
. In Campbell, the Court -- because the parody was "transformative" -- rejected the court of appeals' determination that the commercial purpose of the parody required its creator to overcome Sony's presumption of market harm.
It is reasonable to expect that courts would approach claims of fair use in the context of the NII just as they do in "traditional" environments. Commercial uses that involve no "transformation" by users will likely always be infringing, while nonprofit educational transformative uses will likely often be fair. Between these extremes, courts will have to engage in the same type of fact-intensive analysis that typifies fair use litigation and frustrates those who seek "bright lines" clearly separating the lawful from the infringing.
Courts in two cases decided to date concerning the unauthorized "uploading" and "downloading" of copyrighted materials have held that such uses were not fair uses. In the Playboy case, the court characterized the issue as whether "unrestricted and widespread conduct of the sort engaged in by the defendant bulletin board system operator (whether in fact engaged in by the defendant or others) would result in a substantially adverse impact on the potential market for or value of [Playboy's copyrighted photographs]," and determined that it would. This, in turn, led the court to conclude that there was market harm, and, thus, infringement.
In the other case, Sega Enterprise Ltd. v. MAPHIA,159 the court found that Sega established a prima facie case of direct and contributory infringement in the operation of the defendant's bulletin board system (where Sega's copyrighted video game programs were uploaded and downloaded). In issuing a preliminary injunction, the court found that each of the four factors weighed against a finding of fair use, but found that the fourth factor, in particular, weighed "heavily" against such a finding:
Based on Defendant's own statement that 45,000 bulletin boards like MAPHIA operate in this country, it is obvious that should the unauthorized copying of Sega's video games by Defendants and others become widespread, there would be a substantial and immeasurable adverse effect on the market for Sega's copyrighted video game programs.
Cases already decided in other contexts will give valuable guidance to courts confronted with NII-related cases. Just as courts have distinguished between home use of a VCR to make time-shifting tapes of materials broadcast over the air (fair use) and school systems' attempts to use VCRs to download broadcast instructional materials for the creation of an educational film library (not fair use), courts will subject users of copyrighted works available via the NII to like scrutiny. Educational uses that serve the same ends and are constrained in the same manner as the copying permitted under the Classroom Guidelines may be fair, while attempts to supplant the market for books, films, software and other materials by proliferating them without permission via the NII will likely be infringing.
Finally, it may be that technological means of tracking transactions and licensing will lead to reduced application and scope of fair use. Thus, one sees in American Geophysical Union v. Texaco Inc.,162 a court establishing liability for the unauthorized photocopying of journal articles based in part on the court's perception that obtaining a license for the right to make photocopies via the Copyright Clearance Center was not unreasonably burdensome.
b. FIRST SALE DOCTRINE
A fundamental tenet of copyright law, and another limitation on the exclusive rights, is the "first sale doctrine," which prevents an owner of copyright in a work from controlling subsequent transfers of copies of that work. Once the copyright owner has transferred ownership of a particular copy (a material object) embodying the work, the copyright owner's exclusive right to distribute copies of the work is "extinguished" with respect to that copy.
Section 109(a) of the Copyright Act provides:
Notwithstanding the provisions of section 106(3) [which grants copyright owners the exclusive right to distribute copies or phonorecords of a work], the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.
This limitation on the copyright owner's distribution right allows wholesalers who buy books to distribute those copies to retailers and retailers to sell them to consumers and consumers to give them to friends and friends to sell them in garage sales and so on -- all without the permission of (or payment to) the copyright owner of the work. The first sale doctrine does not allow the transmission of a work (through a computer network, for instance), because a transmission would necessarily also involve a reproduction of the work (which would not be exempt under Section 109). Moreover, a transmission does not appear to constitute a distribution of a copy under the current law.
The first sale doctrine allows the owner of a particular copy of a work to "dispose" of possession of that copy in any way -- for example, by selling it, leasing it, loaning it or giving it away. However, there is an exception to this exemption with respect to two types of works -- sound recordings and computer programs. 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 exceptions were enacted because of the ease with which reproductions of those works can be made at a lower cost than the original with minimum degradation in quality. The rationale for these exceptions may apply to other types of works as more types of works become available in digital format, and the "nexus" of rental and reproduction of those works "may directly and adversely affect the ability of copyright holders to exercise their reproduction and distribution rights under the Copyright Act."
A copyright owner's exclusive right to publicly display copies of a work is also limited by Section 109:
Notwithstanding the provisions of section 106(5) [which grants copyright owners the exclusive right to display publicly copies of a work], the owner of a particular copy lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to display that copy publicly, either directly or by the projection of no more than one image at a time, to viewers present at the place where the copy is located.
Thus, an art gallery that purchases a painting may publicly display it without liability. The owner of a particular copy of an electronic audiovisual game intended for use in coin-operated equipment may also publicly perform or display that game in that equipment.
This exemption from liability would not apply to the public display of a copy of a work on a bulletin board system or other computer or communications network, as more than one image would likely be displayed at a time (to different viewers) and viewers would not be "present at the place where the copy is located."
c. LIBRARY EXEMPTIONS
The Copyright Act provides that in certain circumstances and under certain conditions it is not an infringement of copyright for a library or archives, or its employees acting within the scope of their employment, to reproduce or distribute one copy or phonorecord of a work. The conditions of the library exemption are that (1) the reproduction or distribution is made without any purpose of direct or indirect commercial advantage; (2) the collections of the library are open to the public or available not only to researchers affiliated with the library, but also to other persons doing research in a specialized field; and (3) the reproduction or distribution of the work includes a notice of copyright.
The circumstances under which a library may reproduce or distribute a copyrighted work without infringement liability include:
A library may reproduce and distribute a copy or phonorecord of an unpublished work reproduced in facsimile form if the sole purpose is preservation and security, and if the copy or phonorecord reproduced is currently in the collection of the library. The House Report notes that this right "would extend to any type of work, including photographs, motion pictures and sound recordings." However, the copy or phonorecord made must be in "facsimile form." A library may "make photocopies of manuscripts by microfilm or electrostatic process, but [may] not reproduce the work in 'machine-readable' language for storage in an information system." Thus, this exemption does not appear to allow for preservation in electronic or digital form, which, arguably, would not constitute "facsimile form" (unless, perhaps, the original copy in the collection was fixed in electronic or digital form).
A library may reproduce a published work duplicated in facsimile form solely for the purpose of replacing a copy or phonorecord that is damaged, deteriorated, lost or stolen, if the library has, after reasonable efforts, determined that an unused replacement cannot be obtained at a fair price. Again, the copy or phonorecord made must be in "facsimile form." The exemption does not allow for replacement of a published work by reproduction in digital form (at least when the original copy of the published work was not in digital form).
ARTICLES AND SHORT EXCERPTS FOR USERS
A library may make and distribute a copy of one article or other contribution to a copyrighted collection or periodical issue, or a copy or phonorecord of a small part of any other copyrighted work at the request of a user, subject to two conditions.
OUT-OF-PRINT WORKS FOR SCHOLARLY PURPOSES
A library may make and distribute a copy or phonorecord of an entire work if it has determined that a copy or phonorecord of the copyrighted work cannot be obtained at a fair price, subject to two conditions.
A library may reproduce and distribute by lending a limited number of copies of an audiovisual news program.
The Copyright Act allows a library to make single copies of copyrighted works and to enter into interlibrary lending arrangements, but prohibits copying "in such aggregate quantities as to substitute for a subscription to or purchase of [a copyrighted] work." CONTU developed guidelines to interpret the quoted phrase, which were later included in the House Report and Conference Report on the Copyright Act of 1976. The guidelines provide that a library may "borrow" not more than five copies per year of articles from the most recent five years of any journal title.
The exemptions granted under Section 108 extend only to isolated and unrelated reproduction of a single copy or phonorecord of the same material on separate occasions, and do not apply to (1) musical works; (2) pictorial, graphic, or sculptural works; or (3) motion pictures or other audiovisual works, except news programs.
Libraries may provide many works in digital format in the future. However, Section 108 does not permit libraries to convert printed works to a digital format without the authority of the copyright owners. Such conversion would constitute "reproduction" of those works, and would require the authorization of the relevant copyright owners.
d. EDUCATIONAL USE EXEMPTIONS
Section 110(1) exempts from infringement liability the performance or display of a copyrighted work in the course of face-to-face teaching activities by a non-profit educational institution in a classroom or similar setting.
Section 110(2) exempts from liability the transmission of a performance or display of a copyrighted work if (1) the performance or display is a regular part of the systematic instructional activities of the non-profit educational institution; (2) the performance or display is directly related and of material assistance to the teaching content of the transmission; and (3) the transmission is made primarily for reception in classrooms or similar places or by persons to whom the transmission is directed because of their disabilities.
Like the library exemptions, the educational use exemptions are provided in addition to the fair use and other general exemptions, which are also available to educational institutions.
e. OTHER LIMITATIONS
REPRODUCTION OF COMPUTER PROGRAMS
The rights of an owner of a copyright in a computer program are limited such that the owner of a particular copy of a computer program may make a copy or adaptation of the program as an "essential step" in using the computer program in a computer or for archival purposes. This limitation applies only with respect to "owners" of copies of programs, not licensees, borrowers or mere possessors.
CERTAIN PERFORMANCES AND DISPLAYS
Certain performances and displays are exempt from infringement liability under Section 110 of the Copyright Act, including:
. the performance or display of certain works in the course of religious services;
. the performance of certain works by governmental or non-profit agricultural or horticultural organizations;
. the performance of certain musical works in retail outlets for the sole purpose of promoting retail sales;
. the transmission of performances of certain works to disabled persons; and
. the performance of certain works at non-profit veterans' or fraternal organizations for charitable purposes.
The "communication of a transmission embodying a performance or display of a work by the public reception of the transmission on a single receiving apparatus of a kind commonly used in private homes" is also exempted if there is no direct charge to see or hear the transmission and the transmission is not further transmitted to the public. This exemption allows proprietors to play radios or televisions (i.e., to perform or display copyrighted works in those transmissions) in public establishments such as restaurants, beauty shops and bars. The applicability of this exemption is extremely fact-specific and what qualifies as a type of receiving apparatus "commonly used in private homes" will certainly change as home equipment merges (into, for example, radio/television/computer units) and becomes more sophisticated.
Section 112 provides that it is not an infringement of copyright for a "transmitting organization" that has the right to transmit to the public a performance or display of a work "to make no more than one copy or phonorecord of a particular transmission program embodying the performance or display" under certain conditions.
Section 111 and Section 119 are compulsory licensing provisions that allow cable systems and satellite operators to retransmit copyrighted programming without infringement liability if they pay a statutory licensing fee (which is then distributed among the copyright owners of the programming retransmitted). These, as well as other, provisions of the Copyright Act will have to be reviewed as the merger of creative, communications, and computer entities continues. For instance, a compulsory license under Section 111 is only available to a "cable system," which is defined as "a facility . . . that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations . . . ." Terms such as "network station," "independent stations," and "noncommercial educational station" are also defined and used in Section 111, and may warrant review in the future.
Compulsory licenses are also available for the public performance of nondramatic musical works by means of jukeboxes, for the use of certain works in connection with noncommercial broadcasting, and for the reproduction and distribution of nondramatic musical works in the course of making and distributing phonorecords of such works.
6. COPYRIGHT INFRINGEMENT
Anyone who, without the authorization of the copyright owner, exercises any of the exclusive rights of a copyright owner is an infringer of copyright. Thus, any activity that falls within the scope of the exclusive rights of the copyright owner is an infringement.
Copyright infringement is determined without regard to the intent or the state of mind of the infringer; so-called "innocent" infringement is infringement nonetheless. Moreover, although the exclusive rights refer to such rights with respect to "copies" (plural) of the work, there is no question that under the Act the making of even a single unauthorized copy may constitute an infringement.
Courts generally use the term "copying" as shorthand for a violation of any of the exclusive rights of the copyright owner (not just the reproduction right). Courts usually require a copyright owner to prove ownership of the copyrighted work and "copying" by the defendant to prevail in an infringement action.
Since there is seldom direct evidence of copying (witnesses who actually saw the defendant copy the work, for instance), a copyright owner may prove copying through circumstantial evidence establishing that the defendant had access to the original work and that the two works are substantially similar. Other indications of copying, such as the existence of common errors, have also been accepted as evidence of infringement.
The copying of the copyrighted work must be copying of protected expression and not just ideas; likewise, the similarity between the two works must be similarity of protected elements (the expression), not unprotected elements (the facts, ideas, etc.). The portion taken must also be more than de minimis.
The similarity between the two works need not be literal (i.e., phrases, sentences or paragraphs need not be copied verbatim); substantial similarity may be found even if none of the words or brush strokes or musical notes are identical. Various tests have been developed to determine whether there has been sufficient non-literal copying to constitute substantially similarity between a copyrighted work and an allegedly infringing work. Judge Learned Hand articulated the well-known "abstractions test," where the expression and the idea are, in essence, treated as ends of a continuum, with infringement found if the allegedly infringing work crosses the line delineating the two. Such a line, as Judge Hand recognized, is not fixed in stone; indeed, as he put it, its location must "inevitably be ad hoc . . . ." The "pattern" test has also been suggested, where infringement is found if the "pattern" of the work is taken (in a play, for instance, the "sequence of events, and the development of the interplay of characters").
The "subtractive" test -- which dissects the copyrighted work, disregards the noncopyrightable elements, and compares only the copyrightable elements of the copyrighted work to the allegedly infringing work -- historically has been the traditional method for determining substantial similarity. Following the 1970 Ninth Circuit decision in Roth Greeting Cards v. United Card Co., however, the "totality" test became popular for determining substantial similarity. The totality test compares works using a "total concept and feel" standard to determine whether they are substantially similar. Although predominantly used by the Ninth Circuit throughout the 1970s and 1980s, the test was used by other circuits as well. The Ninth Circuit further defined an "extrinsic/intrinsic" test in proof of substantial similarity in Sid & Marty Krofft Television Productions, Inc. v. McDonald's Corp.221 The intrinsic portion of the test measures whether an observer "would find the total concept and feel of the works" to be substantially similar. The extrinsic portion of the test, meanwhile, is an objective analysis of similarity based on "specific criteria that can be listed and analyzed." Thus, this test requires substantial similarity "not only of the general ideas but of the expressions of those ideas as well."
More recently, however, both the Ninth and Second Circuits have moved away from the totality test with respect to computer applications. In Data East USA, Inc. v. Epyx, Inc.225 the Ninth Circuit rediscovered "analytic dissection of similarities" in the substantial similarity determination of video games. Similarly, the Second Circuit in Computer Associates International, Inc. v Altai, Inc.226 fashioned an "abstraction-filtration-comparison test" for a computer program that combined Judge Learned Hand's "abstraction" test (to separate ideas from expression) and "filtration" reminiscent of traditional "subtraction" analysis in filtering protectible from non-protectible material.
In addition to the shifting tide of substantial similarity tests, there is dispute as to the appropriate "audience" for determining substantial similarity. The "ordinary observer test" alluded to in Arnstein v. Porter,227 and followed in a number of Second Circuit decisions considers the question of substantial similarity from the viewpoint of the "average lay observer." The Fourth Circuit, however, set forth a modified test in Dawson v. Hinshaw Music Inc., requiring the ordinary observer to be the "intended" audience for the particular work. Relying on decisions by both the Ninth and Seventh Circuits, the court in Dawson stated:
[i]f the lay public fairly represents the intended audience, the court should apply the lay observer formulation of the ordinary observer test. However, if the intended audience is more narrow in that it possesses specialized expertise, . . . the court's inquiry should focus on whether a member of the intended audience would find the two works to be substantially similar.
The challenge of this test, especially in more advanced technologies, is determining when, if ever, a work is not directed to an audience possessing specialized expertise.
The ability to manipulate works in digital format raises an issue with respect to infringement of the reproduction and derivative works rights. A copyrighted photograph, for instance, can be manipulated in the user's computer in such a way that the resulting work is not substantially similar to the copyrighted work (in fact, it may bear little or no resemblance to the copyrighted work upon which it was based). The initial input of the copyrighted work into the user's computer may be an infringement of the copyright owner's reproduction right, but the infringing (or noninfringing) nature of the resulting work is less clear. Although courts traditionally rely on a "substantial similarity" test to determine infringement liability, neither the meaning of "derivative work" nor the statutory standard for infringement appears to require an infringing derivative work to be substantially similar.
b. INFRINGING IMPORTATION
The exclusive right to distribute copies or phonorecords includes the right to limit the importation of copies or phonorecords of a work acquired outside the United States into the U.S. without the authority of the copyright owner. Such unauthorized importation, whether it be of pirated items (i.e., "copies or phonorecords made without any authorization of the copyright owner") or "gray market" products (i.e., those copies or phonorecords legally produced overseas for foreign distribution, but not authorized for the U.S. market), is an infringement of the distribute right.
The applicability of the importation provisions to the transmission of works into the United States via the NII (or GII) may be debated. Nevertheless, the importation right is an outgrowth of the distribution right, both of which refer to "copies or phonorecords." A data stream can contain a copyrighted work in the form of electronic impulses, but those impulses do not fall within the definition of "copies" or "phonorecords." Therefore, the transmission of copyrighted works via international communication links fails to constitute an "importation" under the current law because no "copies" or "phonorecords" are being imported. If an infringing literary work, for instance, was physically shipped into the U.S. in the form of a paper copy, a CD-ROM disk or even stored on a memory chip, then it could be an infringing importation if the above discussed conditions exist, but it would appear that Section 602, as currently written, could not be used to block the electronic transmission of such material.
c. CONTRIBUTORY AND VICARIOUS LIABILITY
Direct participation in infringing activity is not a prerequisite for infringement liability, as the Copyright Act grants to copyright owners not only the right to exercise the exclusive rights, but also the right "to authorize" the exercise of those rights. According to the House Report, the inclusion of the right "to authorize" was "intended to avoid any questions as to the liability of contributory infringers" -- those who do not directly exercise the copyright owner's rights, but "authorize" others to do so. Other than the reference to a copyright owner's right "to authorize" exercise of the exclusive rights, however, the Copyright Act does not mention or define "contributory infringement" or "vicarious liability," the standards for which have developed through case law.
If someone has the "right and ability" to supervise the infringing action of another, and that right and ability "coalesce with an obvious and direct financial interest in the exploitation of copyrighted materials -- even in the absence of actual knowledge" that the infringement is taking place, the "supervisor" may be held vicariously liable for the infringement. Vicarious liability is based on a connection to the direct infringer (not necessarily to the infringing activity).
The best known copyright cases involving vicarious liability are the "dance hall" cases, where vicarious liability was found when dance hall owners allowed the unauthorized public performance of musical works by the bands they hired, even when the owners had no knowledge of the infringements and had even expressly warned the bands not to perform copyrighted works without a license from the copyright owners.
"Contributory infringement" may be found when "one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another." Contributory infringement is based on a connection to the infringing activity (not necessarily to the direct infringer). A contributory infringer may be liable based on the provision of services or equipment related to the direct infringement.
A contributory infringer may be liable based on the provision of services related to the infringement. Courts have found contributory infringement liability, for instance, when a defendant chose the infringing material to be used in the direct infringer's work, and when a defendant was responsible for the day-to-day activities where the infringement took place.
Copyright owners may allege contributory infringement in NII-related cases against service providers, such as BBS operators. As noted earlier, the court in Playboy 247 found the BBS operator directly liable for the display of the unauthorized copies on the service, as well as the "distribution" of unauthorized copies to subscribers. However, another court recently cited the Playboy case in finding that the plaintiff had established a prima facie case of contributory infringement by a BBS operator. In Sega Enterprises Ltd. v. MAPHIA,248 the court issued a preliminary injunction against the BBS operator based on the operator's "role in copying [Sega's copyrighted video games], including provision of facilities, direction, knowledge and encouragement." The court found that the BBS operator had knowledge of the uploading and downloading of unauthorized copies of Sega's copyrighted video games and that it solicited the copying of the games.
Two recent libel decisions may provide additional guidance. In Auvil v. CBS "60 Minutes" the court held that a network affiliate which exercised no editorial control over the network broadcast (although it had the power to do so) served only as a conduit and was not liable for republishing defamatory statements. Despite the fact that the affiliate had some idea of the content and had access to the broadcast hours before it aired, the court refused to hold it liable for any defamation contained therein. The court found it unrealistic to force, in effect, the creation of editorial boards "which possess sufficient knowledge, legal acumen and access to experts to continually monitor incoming transmissions and exercise on-the-spot discretionary calls or face . . . million dollar lawsuits at every turn." The court borrowed reasoning from book seller cases -- "one who only delivers or transmits defamatory material published by a third person is subject to liability if, but only if, he knows or had reason to know of its defamatory character"255 -- finding "no logical basis for imposing a duty of censorship on the visual media which does not likewise attach to the print chain of distribution."
It should be noted, however, that in the Auvil case, the court found that the injured parties were not impaired by limiting conduit liability to those situations where culpability is established; "[t]he generating source, which in a national broadcast will generally be the deepest of the deep pockets, may still be called upon to defend." This likely would not be true in BBS cases, where the generating source -- a BBS subscriber -- may not have as deep pockets as the BBS operator and, in fact, may be unidentifiable.
A similar result was reached in Cubby, Inc. v. CompuServe Inc.257 In that case, the court held that libelous material uploaded to a bulletin board system by a subscriber did not subject the BBS operator to damages for libel. The court determined that a BBS was a "distributor" (akin to a public library or bookstore) rather than a "republisher," and thus the operator was liable only if it "knew or had reason to know of the allegedly defamatory . . . statements" that had been uploaded.
Contributory infringement liability may also be based on the provision of equipment or other instrumentalities or goods used in or related to the infringement. The leading case is Sony Corp. v. Universal City Studios, Inc., a 5 to 4 decision by the Supreme Court in which the majority of the Court held that the manufacturer of videocassette recorders was not a contributory infringer for providing the equipment used in the unauthorized reproduction of copyrighted works. Borrowing a patent law principle, the Court reasoned that manufacturers of staple articles of commerce that are capable of substantial noninfringing uses should not be held liable as contributory infringers. The Court held:
[T]he sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses.
The Court determined that the key question was whether the videocassette recorder was "capable of commercially significant noninfringing uses." The Court also held that in an action for contributory infringement against a manufacturer of copying devices, "the copyright holder may not prevail unless the relief that he seeks affects only his programs, or unless he speaks for virtually all copyright holders with an interest in the outcome."
The dissent did not agree that the patent "staple article of commerce" doctrine of contributory infringement was applicable to copyright law. Recognizing the "concerns underlying the 'staple article of commerce' doctrine," the dissent concluded that "if a significant portion of the product's use is noninfringing, the manufacturers and sellers cannot be held contributorily liable for the product's infringing uses."
If virtually all of the product's use, however, is to infringe, contributory liability may be imposed; if no one would buy the product for noninfringing purposes alone, it is clear that the manufacturer is purposely profiting from the infringement, and that liability is appropriately imposed. In such a case, the copyright owner's monopoly would not be extended beyond its proper bounds; the manufacturer of such a product contributes to the infringing activities of others and profits directly thereby, while providing no benefit to the public sufficient to justify the infringement.
Other cases against producers or providers of the instrumentalities of infringement since Sony generally have not been successful. However, the court in the recent Sega case issued a preliminary injunction against a BBS operator who sold special copiers, the "only substantial use" of which was to copy Sega's copyrighted video games. The court found that Sega established a prima facie case of contributory infringement by the BBS operator based on the operator's "advertising, sale and distribution" of the video game copiers.
d. CONFLICT OF LAWS
Conflict of laws issues may arise in NII-related copyright infringement actions. Resolution of these issues determines what law the court should apply. If the infringer and the infringement are in the United States, the U.S. Copyright Act would apply. However, different situations may present themselves which will raise conflict issues. For instance, users in country A, where certain actions are not considered copyright infringements, may use works located on servers in country B, where such actions are. Which country's law controls the resolution of a copyright infringement dispute -- the country from which a copyrighted work is uploaded or to which it is downloaded, or the country where the host server is located? In the case of direct transmissions, which country's law applies -- the country of origin of the transmission or the transmitter, or the country of the reception? It may be that rights of the copyright owner are exercised in each country. These issues, however, may be no more problematic than the current conflict issues that arise due to the use of telephones, fax machines or modems in international commerce.
7. INTERNATIONAL IMPLICATIONS
Other countries -- including Finland, Japan and Sweden -- and the European Union are initiating their own studies of the means to promote the development of national information infrastructures. For example, on February 7, 1994, Swedish Prime Minister, Carl Bildt, addressed the Swedish Academy of Engineering Sciences and called for the creation of a national coalition to spearhead the development of an advanced Swedish information infrastructure. It is important to note that the task force which the Prime Minister is assembling will include, among others, representatives of the Ministry of Justice who will be responsible for the development of rules for the protection of intellectual property in the system. On March 3, 1994, Commissioner Bangemann, Vice President of the European Commission met with Secretary of Commerce Ronald Brown and Assistant Secretaries Bruce Lehman and Larry Irving to discuss the possibilities for U.S.-EU cooperation in regard to the NII.
Without taking into account, from the outset, rules for the effective protection of intellectual property, the development of the international information superhighway will be severely hindered. How disparate domestic information superhighways will evolve into a Global Information Infrastructure (GII) will depend on the rules of the road, and one of the most important of those sets of rules is ensuring protection for the works of intellectual property that moves through international channels and into the emerging national information infrastructures. Adequate and effective protection of intellectual property in international commerce must be ensured.
Development of the GII will make international copyright laws a concern for every user of the system. When the globe is blanketed with digital information dissemination systems, a user in one country will be able to manipulate information resources in another country in ways that may violate that country's copyright laws. Because copyright laws are territorial, and the standards of protection embodied in the international conventions leave room for national legislative determinations, acts that may be an infringement in one country may not be an infringement in another country. The complexity that such a system creates will make doing "electronic business" over the information superhighways difficult unless we move promptly to identify needs for protection and initiate efforts to work toward a new level of international copyright harmonization.
U.S. copyright industries are significant contributors to the United States' current trade accounts, reducing our balance of payments deficit by some $34 billion in 1990. Inadequacies in the present system of intellectual property protection for copyrights and neighboring or related rights and the consequent losses to these industries from piracy and from trade barriers arising from differences in forms of protection have been estimated to cause losses to these industries of $12 to 15 billion annually. Improved protection for copyrights and neighboring rights would contribute to reducing these losses and improving the balance of payments.
An important aspect of the participation of foreign entities through a GII in the United States domestic information infrastructure is the provision of adequate and effective intellectual property protection in the country wishing to participate. To the extent that participation in the NII can be linked to the provision of intellectual property protection, it will promote the ability of U.S. businesses to use the NII and the GII to communicate works to foreign consumers via other countries' information infrastructures. If we are to ensure that commercial enterprises will make full use of the capabilities of the NII to communicate and deliver information and entertainment products, there must be assurances that their intellectual property rights will be protected effectively under strong copyright laws in all countries participating in a GII.
However, in considering such linkages, careful consideration will have to be given to obligations under international intellectual property treaties and other international agreements such as the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT), especially in view of the recently completed Uruguay Round with its various intellectual property and market access provisions.
b. THE INTERNATIONAL FRAMEWORK
In the 1970's, then-U.S. Register of Copyrights Barbara Ringer observed that if Justice Story considered copyright to be the metaphysics of the law, then international copyright is its cosmology. That message is brought home to us in 1994 by the need to evaluate the applicability of copyright in the context of the complexities of international commerce in information and entertainment products via advanced information infrastructures.
First, we must understand that there is no such thing as an international copyright, but rather a system of international copyright law. There are several international treaties that link together most of the major trading nations of the world and provide nations with a means for protecting, under their own laws, each others copyrighted works and similar materials. This situation is further complicated because there are two major legal traditions applicable to the protection of what we in the United States regard as copyrighted works. To understand the complexities of the international copyright law system and the international treaties, it is necessary to have a basic appreciation of these two major legal regimes.
The United States and other countries that follow the Anglo-American legal tradition have "copyright systems," the principal focus of which is on protecting the author's economic rights. The theory of our system is that providing such protection will induce the creation of more works which will "promote the progress of science" and redound to the public benefit.
Countries that follow the civil law tradition, however, regard authors' rights as natural human rights, or part of one's right of personality. As a part of this tradition, the protection of so-called "moral rights" of the author is an essential part of the system. Moral rights normally include the right of an author to be named as the author of a work and the right to object to uses of the work which could bring dishonor or discredit on the author's reputation. In these civil law systems, moral rights reflect a part of the author's personality and are non-transferable, and may be not waivable. Economic rights, in many instances, may be subordinated to moral rights. Under these systems, only works which are original, in that they reflect the personality of the author, are entitled to protection. Productions that do not meet this originality requirement, but still merit some protection, are protected under a system of "neighboring rights." Needless to say, with such divergent theoretical bases sometimes the copyright and the authors' rights systems are in conflict. One of these areas of conflict is in the nature and level of rights for owners of neighboring rights.
Neighboring rights are similar to the rights protected by copyright or authors' rights and are applied to protect the rights of producers of phonograms, performers and broadcasters. Under the copyright system, many of the rights covered under neighboring rights are actually copyright rights. For example, under the U.S. copyright law, sound recording producers and performers are regarded as joint authors of sound recordings. Under droit d'auteur (or authors' rights) systems, such producers' and performers' rights would be protected as neighboring rights. Neighboring rights, while similar in economic character to authors' rights, are protected generally at a lower level and are entirely separate and distinct from the higher-level rights granted to authors.
The World Intellectual Property Organization (WIPO) is responsible for the administration of, and activities concerning revisions to, the international intellectual property treaties. The principal WIPO copyright conventions include the Berne Convention for the Protection of Literary and Artistic Works (Paris 1971) (hereinafter "Berne Convention"), the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (hereinafter "Rome Convention"), and the Geneva Convention for the Protection of Producers of Phonograms Against the Unauthorized Reproduction of their Phonograms (Geneva Phonograms Convention). WIPO also administers the Paris Convention for the Protection of Industrial Property (Stockholm 1967) which is not discussed in this report. UNESCO and WIPO jointly administer the Universal Copyright Convention (Paris 1971) (hereinafter "UCC"), which is a lower-level copyright convention that was negotiated in the years following World War II largely to bring the United States into the world of international copyright. Virtually all of the members of the UCC are also members of the Berne Convention, and by the terms of the conventions the Berne Convention governs relations between members of both.
The Berne Convention is the principal international copyright convention, and is the largest and most detailed. The United States joined the Berne Convention in 1989. While it is generally regarded as providing adequate international standards of protection, some believe that it should be updated account for advances in electronic communications and information processing technology. Its members come from the world's major legal traditions -- the Anglo-American common law copyright system and the European civil law droit d'auteur system. However, despite its level of detail, as previously noted, and in part because it must accommodate differing legal traditions, in some areas its standards may be insufficient to deal with the world of digital dissemination of copyrighted works.
The principal treaty for the protection of neighboring rights, the Rome Convention, was adopted in 1961, and is considered by many to include standards that are inadequate for dealing with the problems raised by current technological advances and the level of trade in the products and services affected by its operation. It provides for the protection of producers of phonograms against unauthorized reproduction of their phonograms, for performers to prevent certain reproductions and fixations of their performances and it provides limited rights for broadcasting organizations. It also provides for protection against certain "secondary uses" of phonograms, such a broadcasting, but it contains the ability for members to reserve on this right. The United States does not belong to the Rome Convention.
The Geneva Phonograms Convention provides for the protection of phonograms against unauthorized reproduction and distribution for a minimum term of 20 years. It does not provide for a performance right in sound recordings. The United States belongs to the Geneva Phonograms Convention.
WIPO has convened a Committee of Experts on a Possible Protocol to the Berne Convention to account for developments since the 1971 revision of the Convention, and a Committee of Experts on a New Instrument for the Protection of Performers and Producers of Phonograms to consider how to provide improved rights for performers and producers of phonograms.
c. COPYRIGHT HARMONIZATION
The performers and the kinds of performances to which neighboring rights apply are not universally agreed. This has led to divergent regimes for the protection of economically important rights, both among industrialized and developing countries. A consequence of this divergence is that U.S. performers and producers have been denied the ability to share in remuneration for the use of their products and performances in some countries. Heretofore, there has not been strong support for the establishment of a system of statutory performers' rights in the United States. Historically, this has been because of the opposition of producers who are concerned that the establishment of performers' rights could upset the balance of power among producers and performers in contractual negotiations and collective bargaining. Also, broadcasters have concerns over the possible implications that such a course of harmonization might have for the establishment of performance rights in sound recordings.
In addition to the traditional WIPO forum, other international bodies now have a significant role in intellectual property policy formulation. The recently-concluded Trade-Related Aspects of Intellectual Property Agreement (hereinafter "TRIPs Agreement") under the Uruguay round of trade negotiations in the General Agreement on Tariffs and Trade (hereinafter "GATT") sets significant standards for the protection of copyright and related rights. And most importantly, it contains provisions to ensure that parties to the TRIPs Agreement fully implement its obligations.
d. NATIONAL TREATMENT
The principle of national treatment is the cornerstone of the great international intellectual property treaties -- Berne and Paris. It is also the keystone of international trade treaties, including, of course, the GATT. It is of enormous significance to our copyright industries. Generally, the principle of national treatment means that under a nation's laws, a foreigner enjoys no lesser rights and benefits than a citizen of that nation receives, subject to the specific terms of the relevant international conventions. In other words, a German work as to which copyright enforcement is sought in the United States would be treated under the law exactly as if it were a U.S. work for the purposes of the copyright law.
However, some argue that rights should be granted only on the basis of reciprocity. This concept, called "material reciprocity," means that we should grant a right to a foreigner only if his or her country grants our citizens the same right. Under this scenario, the German citizen would only be able to obtain protection under the U.S. law to the extent that German law provided the same, or at least equivalent, rights to a U.S. citizen.
THE BERNE CONVENTION
Article 5(1) and 5(2) of the Berne Convention establish the principle of national treatment for works protected by copyright. Under Article 5(1), there is an obligation to grant to nationals of countries of the Berne Union national treatment in respect of the rights specifically covered by the Convention. This point is not disputed. However, with respect to any new rights which may be hereafter granted, some have taken the position that the national treatment obligation applies only to the minimum rights in the Convention.
THE ROME CONVENTION
The fundamental problem with the Rome Convention is that, while it generally imposes a national treatment obligation, it permits a number of reservations and exceptions that allow a Member to avoid that obligation for important rights otherwise provided for in the Convention. Article 3.1 of the TRIPs Agreement provides that "[i]n respect of performers, producers of phonograms and broadcasting organizations, this obligation [national treatment] only applies in respect of the rights provided under this Agreement." It also provides that a Member may avail itself of the "possibilities provided in . . . paragraph 1(b) of Article 16 of the Rome Convention . . ." relating to reciprocity for the broadcasting right in respect of phonograms.
THE TRIPS AGREEMENT
Additionally, the TRIPs Agreement includes a national treatment obligation. In respect of copyright the TRIPs national treatment provision incorporates the standards of the Berne Convention, but in respect of neighboring rights, it allows members to impose the exceptions to national treatment permitted by the Rome Convention. Permitting such exceptions can lead to problems in the implementation of a GII.
The NAFTA includes a very broad national treatment provision that does not include the possibility of making the broad exceptions provided for under the TRIPs agreement.
e. PRIVATE COPYING ROYALTY SYSTEMS
The manner in which portions of the audio and video private copying royalties that are collected in some European countries are distributed to claimants may prove to be an impediment to future development of the GII if a similar approach is adopted in respect of digital information dissemination systems. As an example, France's Law of July 3, 1985 (1985 Law) establishes a system of neighboring rights protection for performers, audiovisual communication enterprises, producers of phonograms and producers of videograms. The 1985 Law, inter alia, grants specified right holders an entitlement to equitable remuneration in respect of the private copying of their works. Some of the 1985 law's provisions are based on reciprocity and thus discriminate against, for example, foreign motion picture interests. Consequently, those provisions may be inconsistent with France's obligations under the Berne Convention and the UCC. If this pattern is followed in implementing future legislation, serious impediments to the development of the GII may arise.
f. MORAL RIGHTS
The author's moral rights are provided for under Article 6bis of the Berne Convention. The nature and scope of moral rights varies considerably from country to country. The fact that these rights are non-transferable may create difficulties for the commercialization of works in the NII environment. A current draft report of the multimedia study committee of the Japanese Institute for Intellectual Property suggests that there may be a need to either permit the specific waiver of the right of integrity or to limit its application in the digital world.
Development of the NII will depend upon, and stimulate innovation in, many fields of technology, especially computer software, computer hardware and telecommunications. An effectively functioning patent system that encourages and protects innovations in these fields of technology is, therefore, important for the overall success of the NII. The most significant issues related to the effects of the NII on the patent system include the impact the NII will have on the quantity and quality of information available from which to determine the patentability of inventions, as well as to judge the validity of patents.
The goals of the patent system are to encourage innovation and public disclosure of advances in technology. To this end, the patent system offers an incentive to inventors to publicly disclose their inventions in exchange for the exclusive right to prevent others from making, using or selling the patented inventions for 17 years.
Patent protection is available in the United States for inventions without differentiation as to the field of technology:
". . . any new and useful process, machine, manufacture, or composition of matter . . ." can be patented. However, unlike copyright protection, an inventor must specifically request protection by filing a patent application and demonstrating that the invention meets all of the statutory requirements of patentability. Specifically, an invention must be new, useful and nonobvious.295 In addition, the inventor must fully describe and disclose the invention in the patent application. 296
Once a patent application has been filed with the Patent and Trademark Office (PTO), the application is reviewed by an Examiner against the "prior art" to determine whether the patentability requirements of novelty ("new") and nonobviousness have been met. While there are instances where non-public information constitutes prior art, generally speaking, prior art includes information that is publicly available prior to the filing date of a patent application. An invention satisfies the novelty requirement if it has not been publicly disclosed prior to the filing date of the patent application. Novelty exists unless the prior art completely discloses the invention that is claimed by the patent applicant. An invention satisfies the nonobviousness requirement if a "person of ordinary skill in the art" would not have viewed the invention as obvious in view of the prior art at the time the patent application was filed.
The specific categories of prior art that are defined in Section 102 of the Patent Act can be used to deny the grant of a patent, or to invalidate a patent, on the grounds that the invention lacks novelty or is obvious. These include, generally speaking, patents issued by the United States or by other countries; printed publications distributed in the United States or abroad; evidence of public use or public disclosure of an invention in the United States; and evidence of a sale or offer to sell an invention in the United States. The NII will significantly improve the amount and availability of prior art. This, in turn, will have an impact on patentability determinations, whether made during the patent examination process or during challenges to patent validity through litigation in the Federal courts.
For example, a patent grants the owner the exclusive right to prevent others from making, using or selling the invention as it is defined in the patent. A patent owner must exercise these patent rights against alleged infringers or run the risk of not being able to do so if found to have waited too long. The patent owner has the burden of establishing patent infringement. Patent infringement is established by demonstrating that the accused product or process falls within the scope of the patent claims. A party accused of infringement can avoid liability by asserting that the patent does not cover, either literally or under the doctrine of equivalents, the accused product or process. The accused infringer can also assert that the patent is either invalid or unenforceable, or both.
Parties can challenge the validity of a patent in the Federal district courts or before the PTO. By statute, a patent is presumed valid. Thus, in district court, the party challenging patent validity must demonstrate through clear and convincing evidence that the patent fails to satisfy one or more of the statutory criteria of patentability (e.g., novelty, utility, obviousness, or adequate disclosure). This is most often accomplished by submitting new prior art which was not considered by the PTO Examiner. The accused infringer then argues that this new prior art anticipates the claimed invention (i.e. the invention is not new because someone else had done it before the inventor) or that the claimed invention would have been obvious to one of ordinary skill in the art based on this new "prior art."
Likewise, prior art impacts the enforceability of a patent. For example, parties can preclude the enforcement of a patent, without specifically addressing the patent's validity. This is accomplished by establishing that the patent owner either misused its patent rights, or committed a fraud on the PTO incident to obtaining patent protection. For example, if it can be shown that the inventor withheld material prior art from the patent office so as to commit fraud on the PTO, the patent may be found to be unenforceable against infringers, even if the patent satisfies all patentability requirements.
In each of these scenarios, prior art plays an important role both in defining the state of the art at the time a patent application is filed and in justifying conclusions on the patentability of an invention or the validity of a patent. Because of this, it is imperative that all sources of information that relate to an invention be integrated into patentability determinations.
Access to these sources of information, particularly patents and printed publications, has been vastly improved through the use of electronic or on-line database services. These services document the existence and content of patents and printed publications, and in some instances, provide access to the complete text and electronic images of such documents. It is important to recognize that the information that can be retrieved through these services invariably exists as an original, paper document disseminated through traditional publication channels (e.g., technical journals or publications, domestic and foreign patent documents).
The NII will dramatically change the way information is prepared and disseminated. It will improve the number, accessibility and quality of traditional on-line services. It will also foster creation of new forms of "electronic publications" that are different in character from traditional paper-based publications. Examples of such electronic publications could include electronic versions of traditional paper-based publications that supplement or reorganize presentation of the content of the paper-based publication; informally prepared information such as postings on electronic information forums and dissemination of news articles with technical content; and formally designed and developed electronic publications that are not printed on paper, but are entirely electronically disseminated.
Electronic publications such as these will supplement the wealth of publicly accessible information that is used in patentability determinations and validity challenges to issued patents. However, these new types of electronically disseminated documents are different in character from traditionally printed and indexed patents and publications. For example, the information contained in the disclosure of electronic documents may not be printed originally on paper, and as such, may have no tangible evidence regarding the date the information was first publicly disclosed or even as to its existence. No guidelines or industry standards presently govern the memorialization of either the contents or the date of public disclosure of information in such documents. The degree of distribution of, or public accessibility to electronic documents is not presently measured and may prove unmeasurable. Yet, these are key factors used to determine whether a document is in the prior art. In addition, the content of such documents, particularly informally created documents, may not be subject to any form of peer review or content screening. This, in turn, could influence the evaluation of information in electronic documents that could affect patentability. Likewise, these factors may also have a direct impact on the challenges made to the validity of an issued patent based on prior art.
A trademark is quite different from either a copyright or a patent. A trademark is any word, name, symbol or device, or any combination thereof, that serves to identify and distinguish the source of one party's goods or services from those of another party. A service mark is the same as a trademark, except that it identifies and distinguishes the source of services rather than goods. In this report, the terms "trademark" and "mark" are intended to refer to all types of marks.
The purpose of a trademark is twofold -- to identify the source of products or services and to distinguish the trademark owner's goods and services from those of others. As long as a trademark fulfills these functions, it remains valid. Trademark ownership rights in the United States arise through use of a mark. Continued use of a mark is necessary to maintain trademark rights. The owner of a trademark is entitled to the exclusive right to use the mark. This entitlement includes the ability to prevent the use, by unauthorized third parties, of a confusingly similar mark. Marks used by unrelated parties are confusingly similar if, by their use on the same, similar, or related goods or services, the relevant consumer population would think the goods or services come from the same source.
Unlike patent and copyright law, Federal trademark law coexists with state and common-law trademark rights. Therefore, registration at either the Federal or state level is not necessary to create or maintain ownership rights in a mark. For example, priority of trademark rights between owners of confusingly similar marks, regardless of whether the marks are Federally registered, is based upon first use of the mark.
Federal trademark law is embodied in the Lanham Act and is based upon the commerce clause of the Constitution. Therefore, to obtain a Federal trademark registration, in most cases the owner of a mark must demonstrate that the mark is used in a type of commerce that may be regulated by Congress. Additionally, the Trademark Law Reform Act of 1988 amended the Lanham Act to establish trademark rights, which vest upon registration following use of the mark in commerce, as of the filing date of a trademark application indicating a bona fide intent to use the mark in commerce.
Remedies against trademark infringement and unfair competition are available to trademark owners under both state and Federal law. In this regard, the owner of a Federal trademark registration has certain benefits. In a court proceeding, registration on the Principal Register constitutes prima facie evidence of the registrant's ownership of the mark. Registration on the Principal Register may also be used as a basis to block importation of infringing goods or to obtain remedies against a counterfeiter. The Lanham Act provides that under certain conditions the right to use a registered mark may become incontestable. Additionally, the Lanham Act provides for cancellation of registrations on certain grounds.
Existing legal precedent accepts electronic transmission of data as a service and, thus, as a valid trademark use for the purpose of creating and maintaining a trademark. Additionally, existing legal precedent applies the available remedies for infringement and unfair competition to such acts occurring through the unauthorized use of trademarks electronically. However, in the future, with widespread access to and use of the NII, both the legitimate and infringing electronic uses of trademarks may increase. Further, unfair competition may increase in the context of the NII to the extent that it may be easier to copy or remove trademarks from electronically transmitted information than from labeled products or from services identified in print media.
The first opportunity for a court to define the legal relationship between trademarks and the registration and use of site names on the Internet is presented in a recently filed action in Federal district court in the Southern District of New York. The owners of the MTV cable network ("MTV") have filed an action seeking injunctive relief and monetary damages from a former employee who is offering a daily report about the rock music industry on the Internet using the site name "mtv.com." MTV is alleging, inter alia, trademark infringement and unfair competition.
D. TRADE SECRET
Unlike many of the other forms of intellectual property protection previously mentioned, trade secrets are protected solely through state law, not Federal law. Trade secret protection is very limited. A trade secret holder is only protected from unauthorized disclosure and use of the trade secret by others and from another person obtaining the trade secret by some improper means.
There are several factors used to determine if subject matter qualifies as a trade secret. Among the factors considered are the extent of measures taken by the trade secret owner to guard the secrecy of the information and the ease or difficulty with which the information could be properly acquired or duplicated by others. Based on these considerations, the general rule is that subject matter cannot be successfully protected as a trade secret if it is widely distributed. However, if adequate security precautions are taken to ensure that access to the subject matter being distributed is treated as secret, the subject matter may still be considered a trade secret.
Whether trade secret owners distribute their trade secrets through the NII will largely depend on the extent that they believe that the secrecy of the trade secret will not be compromised by such a distribution. Consequently, if the NII is going to be used as a tool for disseminating trade secret information the NII must be equipped with adequate security measures to ensure that trade secrets distributed through the NII will remain secret.
In addition to the concerns regarding security precautions, issues of jurisdiction may also arise in the context of using the NII as a vehicle to transmit trade secrets. Because trade secret protection is protected by state law, not Federal law, which state law controls the resolution of a trade secrecy issue -- the place where the information is downloaded off the NII or the place where the trade secret owner first distributes the information via the NII for distribution -- may become an issue in trade secret disputes. These jurisdictional issues, however, are no more problematic than present jurisdictional issues associated with the distribution of trade secrets and can be adequately resolved by the choice of law rules presently codified in state law.
To some degree whether trade secret owners distribute their trade secrets through the NII may also depend on the type of information products and services being disseminated. For instance, it has been suggested that the most common way to protect software is through trade secret protection. Unlike most trade secret information, computer programs can be copied and used without the copier ever understanding or viewing the information in a comprehensible form. Although the trade secrecy problems associated with computer programs are not unique to the NII, the capabilities of the NII may cause these problems to become more prevalent.
Technology can be used to help protect copyrighted works against unauthorized access, reproduction, manipulation, distribution, performance or display. It can also be useful in the authentication of the integrity of copyrighted works and in the management and licensing of the rights in such works. Protection and management schemes based strictly on specific technologies may have limited usefulness due to the rapidly evolving nature of these technologies. Furthermore, if the systems developed are too cumbersome or complicated, consumers may reject works protected under such systems. However, to the extent that the marketplace will tolerate such measures, they can be useful in protecting copyrighted works.
Technology-based protection of digital works can be implemented through hardware, software or a combination thereof. It can be implemented at the level of the copyrighted work or at other, more distant levels. It can be used to prevent or restrict access to a work, as well as reproduction, adaptation, distribution, performance or display of the work.
A. CONTROLLING ACCESS TO PROTECTED WORKS
Unauthorized access to copyrighted works can be denied in two general ways: by restricting access to the source of the work, and by restricting manipulation of the electronic file containing the work.
1. CONTROLLING ACCESS AT THE SERVER LEVEL
Distribution of digital works can be controlled by controlling access to the source of the works -- information or data servers. Access to these servers can vary from completely uncontrolled access (e.g., the full contents of the server are accessible without restriction) to partially controlled access (e.g., unrestricted access is granted to only certain data on the server) to completely controlled access (e.g., no uncontrolled access in any form is permitted). Access control is affected through user identification and authentication procedures (e.g., log-in name and password) that deny access to unauthorized users to a server or to particular information on a server.
Nearly all information providers, including commercial on-line services such as Compuserve and America Online and dial-up private bulletin boards, not only control access to their systems but also vary the nature of that access depending on the information a user wishes to access (e.g., access to certain data is conditioned on paying a higher fee, having greater access rights, etc.). On the Internet, users can connect to public servers through protocols such as gopher, file transfer protocol (ftp), telnet or the world wide web (www). Some information providers on the Internet grant full unrestricted access to all the information contained on their servers. This means that anyone can access any data stored on the servers. Other information providers restrict access to users with accounts or grant only limited access to unregistered users. For example, using ftp a user can often log on as an "anonymous" user (e.g., a user for which no account has been created in advance), but access through anonymous ftp is limited to certain data. Of course, an information provider can elect not to provide uncontrolled access (e.g., permit only those with accounts to access the server), provided appropriate security measures are implemented.
Thus, control over access to a server may be used as one of the first levels of protection for the works found on it.
2. CONTROLLING ACCESS AT THE FILE LEVEL
A second level of control over protected works can be exerted through control measures tied to the electronic file containing the work. One type of restriction can be implemented through "rendering" or "viewing" software. Such systems require (1) a proprietary or unique file format that can only be read by certain software and that is developed or controlled by the information provider and (2) software that incorporates both a "control" measure to prevent viewing or use of a work without authorization from the information provider and "manipulation" functions to permit the user to view or use the work. Rendering or viewing software can be written to deny access if the user enters unauthorized identification or an improper password. Rendering software can also be written to deny access if the work is not an authorized copy (provided that sufficient information regarding authorized use is included in header information and it is sealed with a digital signature).
Another type of restriction is encryption. In its most basic form, encryption amounts to a "scrambling" of data using mathematical principles that can be followed in reverse to "unscramble" the data. Encryption technologies can be used to deny access to the work in a usable form. File encryption simply converts a file from a manipulatable file format (e.g., a word processor document or a picture file that can be opened or viewed by appropriate general purpose software packages) to a scrambled format. Authorization in the form of possession of an appropriate password or "key" is required to "decrypt" the file and restore it to its manipulatable format.
Encryption techniques use "keys" to control access to data that has been "encrypted." Encryption keys are actually numbers that are plugged into a mathematical algorithm and used to scramble data using that algorithm. Scrambling simply means that the original sequence of binary digits (i.e., the 1s and 0s that make up a digital file) is transformed using a mathematical algorithm into a new sequence of binary digits (i.e., a new string of 1s and 0s). The result is a new sequence of digital data that represents the "encrypted" work. Anyone with the key (i.e., the number used to scramble the data according to the specified mathematical algorithm) can decrypt the work by plugging the number into a program that applies the mathematical algorithm in reverse to yield the original sequence of digital signals. Although perhaps most commonly thought of as a tool for works transmitted via computer networks, encryption can be and is used with virtually all information delivery technologies, including telephone, satellite and cable communications. Of course, once the work is decrypted by someone with the key, there may be no technological protection for the work if it is stored and subsequently distributed in its "decrypted" or original format.
Requests for the export of cryptographic technologies are reviewed by the U.S. State Department. Although some cryptographic technologies used to encrypt communications are restricted from export, technologies used to identify and authenticate users and files are generally not restricted. There is an ongoing review of policies governing the export of computer and networking technologies, and there has been some relaxation of prior controls.
B. CONTROLLING USE OF THE WORK
Hardware and/or software can provide protection against unauthorized uses of copyrighted works. For instance, the Audio Home Recording Act requires circuitry in digital audio recording devices and digital audio interface devices that controls serial copying. The circuitry in the hardware is programmed to read certain coding information contained in the "digital subcode channel" of digital sound recordings and broadcasts. Based on the information it reads, the hardware circuitry will either permit unrestricted copying, permit copying but label the copies it makes with codes to restrict further copying, or disallow copying. The serial copy management system implemented by this circuitry allows unlimited first generation copying -- digital reproduction of originals (such as CDs distributed by record companies), but prevents further digital copying using those reproductions.
Systems such as these can be implemented through hardware, software or both, using the concepts discussed above (e.g., rendering software and encryption technology). For example, files containing works can include instructions used solely to govern or control distribution of the work. This information might be placed in the "header" section of a file or another part of the file. In conjunction with receiving hardware or software, the information, whether in the header or elsewhere, can be used to limit what can be done with the original or a copy of the file containing the work. It can limit the use of the file to read-, view-, or listen-only. It can also limit the number of times the work can be retrieved, opened, duplicated or printed.
C. AUTHENTICATING THE WORK
Mathematical algorithms can be used to create digital signatures that, in effect, place a "seal" on a digitally represented work. These algorithms can be implemented through software or hardware, or both. Digital signatures can play an important role in ensuring data integrity.
A digital signature is a unique sequence of digits that is computed based on (1) the work being protected, (2) the digital signature algorithm being used, and (3) the key used in digital signature generation. Generating a digital signature uses cryptographic techniques, but is not encryption of the work; the work may remain unencrypted so it can be accessed and used without decryption. In fact, digital signatures and encryption can be used simultaneously to protect works. Generally, a signature is computed for a copyrighted work first and then the work (including the seal) is encrypted. When the work is to be used, the work is decrypted, then the signature (i.e., the seal) is verified to be sure the work has not been modified (either in its original or encrypted form). If the work is never changed, the seal need never be removed or changed. If the work is changed, a new seal must be computed on the revised information.
Generating a digital signature is called "signing" the work. Both the digital signature and the public key are often appended to signed copyrighted works (or they may be stored in a header). The signature serves as a "seal" for the work because the seal enables the information to be independently checked for unauthorized modification. If the seal is verified (independently computed signature matches the original signature), then the copyrighted work is a bona fide copy of the original work -- i.e., nothing has been changed in either the header or the work itself.
D. MANAGING RIGHTS IN THE WORK
Software-based systems for tracking and monitoring uses of copyrighted works are contemplated in the development of the NII. Software-based systems may also be used to implement licensing of rights and metering of use. A combination of access controls, encryption technologies and digital signatures can be used by copyright owners to protect, license and authenticate their works on the NII. These security measures must be carefully designed and implemented to ensure that they protect the copyrighted works and are not defeated.
Information included in files can be used to inform the user about ownership of rights in a work and authorized uses of it. For instance, information can be stored in the header of a file regarding authorship, copyright ownership, date of creation or last modification, and terms and conditions of authorized uses. It can also support search and retrieval based on bibliographic records.
Electronic licenses may be used in connection with works offered via the NII. Electronic contracts may be analogous to the "shrink wrapped" licenses used for prepackaged software. Providers may inform the user that a certain action -- the entering of a password, for instance, to gain access to the service or a particular work, or merely the use of the service -- will be considered acceptance of the specified terms and conditions of the electronic license. Payments for such licenses also may be made via the NII.
The Library of Congress' Electronic Copyright Management System may be instrumental in rights management. The proposed system, which is under development, has three distinct components: (1) a registration and recordation system, (2) a digital library system with affiliated repositories of copyrighted works, and (3) a rights management system. The system will serve as a testbed to gain experience with the technology, identify issues, prototype appropriate standards, and serve as a working prototype if full deployment is pursued later.
E. DEVELOPMENT OF STANDARDS
Some level of interconnection, interoperability and standardization of telecommunications, computer, wireless, satellite, broadcast and cable TV technologies and networks may be essential to achieve the Administration's vision of the NII. Government, industry or the marketplace may desire or require certain technological standards related to the NII. There has been much discussion of standardization of encryption technology, protocols, interfaces, headers and electronic licenses for purposes such as interoperability, interconnectivity and ease of information management or use.
Effective education of the public about intellectual property rights is crucial to the successful development of the NII. There seems to be an attitude by some on the Internet, for instance, that you check your copyrights at the door when you enter that domain. There is a general lack of awareness by the public about intellectual property rights in their own works, as well as in the works of others. The task of education, however, is not without difficulty.
Perhaps the best places to start will be the schools, where millions of children will be connected to the NII. There is, however, no "national curriculum" to which a special section on NII-related intellectual property rights could be added. However, a development and distribution process for wide-spread intellectual property education can be established, by working with, among others, those responsible for defining the role the advanced information infrastructure will play in schools, as well as the state and national educational organizations involved in setting the educational principles and standards utilized in the curricula of more than 17,000 school districts throughout the United States.
A brief review of the major organizations involved in education technology for schools is set forth below. This list is not intended to be exhaustive. Efforts to effectively distribute an intellectual property education program will involve national, state and local organizations.
In addition to local school district officials, there are numerous educational organizations actively involved in devising plans and recommendations on how services available via the NII should be delivered and used by schools. The school audience to be reached includes students of all ages, as well as administrators, teachers and professors. Both public and private school systems must be involved.
The kindergarten to twelfth-grade (K-12) school audience to be educated about intellectual property and the NII can be broadly classified into three segments: learners, pre-service, and in-service or professional development. The "learners" segment consists of children who are in the school system. The "pre-service" segment includes students currently in the school system who will go on to become teachers. The "in-service" or "professional development" segment consists of those professionals who are currently teachers or education administrators. Each group must be reached. The teachers who are educated about intellectual property rights today will be replaced in the future by the children moving through the school systems now. A similar approach can be taken in defining the audience to be reached on the university and graduate school level.
An intellectual property education program could be developed by individual state school officials, or distributed to them for their consideration. The Council of the Chief State School Officers (CCSSO) could be helpful in that regard.
Other educational organizations could also be useful in the promotion of intellectual property education. These organizations include the National Education Association, the American Federation of Teachers, the National Board for Professional Teaching Standards, the National Association of Teachers Colleges, the American Association of Community Colleges, the National School Board Association, the National Association of Elementary School Principals, the National Association of Secondary School Principals, the National Association of Independent Schools , the National Council of Teachers of Mathematics, the National Council of Teachers of English, and the National Science Teachers Association. Contact with the National Parent Teachers Association may also prove useful in reaching the parents of school-age children.
Intellectual property education can also be incorporated into the plans and recommendations that are currently being developed by educational organizations on how educators can best utilize the NII. The National Education Goals Panel and the recently created National Educational Standards and Improvement Council ("NESIC") are both involved in the mission of promoting national education goals, including educational standards. As part of this effort, for example, the National Education Goals Panel is working on a set of principles for technology and how technology can be used in promoting education. Intellectual property education materials could be included as part of the Panel's principles under development in the area of staff and child development. Educational technology specialists in the Department of Education and other educational organizations, who share the objective of bringing the NII to schools, are also great resources.
The public library is another ideal place for intellectual property education. National library organizations, such as the American Library Association, the American Association of Law Libraries and the Special Libraries Association, could provide invaluable assistance. The nationwide network of 78 Patent and Trademark Depository Libraries could also be instrumental in the dissemination of intellectual property information to the public. Many of these depository libraries are affiliated with universities and colleges throughout the country.
Additional means of education, particularly those that use the NII itself, will also be explored and developed.
IV. PRELIMINARY FINDINGS AND RECOMMENDATIONS
These findings and recommendations represent the result of the Working Group's examination and analysis to date. While the findings and recommendations are preliminary, specific language is offered with any proposals for legislative change to elicit and facilitate more detailed public comment.
It is difficult for intellectual property laws to keep pace with technology. When technological advances cause ambiguity in the law, courts rely on the law's purposes to resolve that ambiguity. However, when technology gets too far ahead of the law, and it becomes difficult and awkward to apply the old principles, it is time for reevaluation and change. "Even though the 1976 Copyright Act was carefully drafted to be flexible enough to be applied to future innovations, technology has a habit of outstripping even the most flexible statutes."
The coat is getting a little tight. There is no need for a new one, but the old one needs a few alterations.
1. DISTRIBUTION BY TRANSMISSION
a. THE DISTRIBUTION RIGHT
The Copyright Act gives a copyright owner the exclusive right "to distribute copies or phonorecords of the copyrighted work" to the public. A copy or phonorecord is a material object in which a copyrighted work is fixed, such as a compact disc, a videocassette or a paperback book. It is not clear under the current law that a transmission can constitute a distribution of copies or phonorecords of a work. Yet, in the world of high-speed, communications systems, it is possible to transmit a copy of a work from one location to another. This may be the case, for instance, when a computer program is transmitted from one computer to ten other computers. When the transmission is complete, the original copy remains in the transmitting computer and a copy resides in the memory of, or in storage devices associated with, each of the other computers. The transmission results essentially in the distribution of ten copies of the work. Therefore, the Working Group recommends that the Copyright Act be amended to reflect that copies of works can be distributed to the public by transmission, and such transmissions fall within the exclusive distribution right of the copyright owner.
The Working Group recommends that the Copyright Act be amended to recognize that copies or phonorecords of works can be distributed to the public by transmission, and that such transmissions fall within the exclusive distribution right of the copyright owner. The Working Group recommends that Section 106(3) be amended to read as follows:
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending, or by transmission.
The Working Group also recommends other related amendments to the definition of "transmit" and the importation prohibitions.
A transmission is not necessarily a transmission of a performance or display of a work. A transmission may be a transmission of a reproduction of a work. Therefore, the Working Group recommends that the definition of "transmit" in Section 101 of the Copyright Act be amended to clarify that reproductions, as well as performances and displays, can be transmitted, and to delineate between those transmissions that are communications of performances or displays and those that are distributions of reproductions.
How to delineate between these types of transmissions is a difficult, but necessary, issue to resolve. The transmissions themselves hold no clues; one type often looks the same as the other during the transmission. To delineate between those transmissions that are communications of performances or displays and those that are distributions of reproductions, then, one must look at both ends of the transmission. Did the transmitter intend to communicate a performance or display of the work or, rather, to distribute a reproduction of the work? Did the receiver simply hear or see the work or, rather, receive a copy of it? If the transmitter intends to both communicate a performance or display and distribute a reproduction -- or if the receiver hears or sees a performance or display of the work and receives a copy of it, what is the transmission? The resolution of these issues should rest upon a "primary purpose or effect" analysis of the transmission.
The Working Group, therefore, recommends that the definition of "transmit" be amended to read as follows:
To "transmit" a performance or display is to communicate it by any device or process whereby images or sounds are received beyond the place from which they are sent. To "transmit" a reproduction is to distribute it by any device or process whereby a copy or phonorecord of the work is fixed beyond the place from which it was sent. In the case when a transmission may constitute both a communication of a performance or display and a distribution of a reproduction, such transmission shall be considered a distribution of a reproduction if the primary purpose or effect of the transmission is to distribute a copy or phonorecord of the work to the recipient of the transmission.
The Working Group also recommends that the prohibitions on importation be amended to reflect the fact that, just as copies of copyrighted works can be distributed by transmission in the United States, they can also be imported into the United States by transmission. Although we recognize that the U.S. Customs Service cannot, for all practical purposes, enforce a prohibition on importation by transmission, given the global dimensions of the information infrastructure of the future, it is important that copyright owners have the other remedies for infringements of this type available to them. Therefore, the Working Group recommends that Section 602 of the Copyright Act be amended to read as follows:
(a) Importation into the United States, whether by carriage of tangible goods or by transmission, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under section 106, actionable under section 501.
The legislative history to the Copyright Act makes clear that "any form of dissemination in which a material object does not change hands . . . is not a publication no matter how many people are exposed to the work." Thus, a transmission of a performance or display via the NII would not constitute publication, because, technically, a material object does not change hands. However, in the case of a transmission of a reproduction, the recipient of the transmission ends up with a copy of the work. Therefore, the Working Group recommends that the definition of "publication" in Section 101 of the Copyright Act be amended to include the concept of distribution by transmission:
"Publication" is the distribution of copies or phonorecords of a work to the public by sale or other transfer of ownership, or by rental, lease, lending, or by transmission. The offering to distribute copies or phonorecords to a group of persons for purposes of further distribution, public performance, or public display, constitutes publication. A public performance or display of a work does not of itself constitute publication.
c. FIRST SALE DOCTRINE
The first sale doctrine allows the owner of a particular, lawfully-made copy of a work to dispose of it in any manner, with certain exceptions, without infringing the copyright owner's exclusive right of distribution. It seems clear that the first sale model -- in which the copyright owner parts company with a tangible copy -- should not apply with respect to distribution by transmission, because under current applications of technology, a transmission involves both the reproduction of the work and the distribution of the reproduction. In the case of transmissions, the owner of a particular copy of a work does not "dispose of the possession of that copy or phonorecord." A copy of the work remains with the first owner and the recipient of the transmission receives a reproduction of the work. Therefore, to make clear that the first sale doctrine does not apply to transmissions, the Working Group recommends that Section 109 of the Copyright Act be amended to read as follows:
(a) (1) Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.
(2) This subsection does not apply to the sale or other disposal of the possession of that copy or phonorecord by transmission.
d. OTHER RELATED AMENDMENTS
The legislative changes outlined above give rise to some difficult issues. The term "distribute" (or a variant form of the term), which is not defined, is used more than 90 times in the Copyright Act. Moreover, the term is used in the definition of "publication," which, in its variant forms, is used more than 100 times. Therefore, care must be taken to identify and analyze all of the ramifications of a change in the Section 106 right to distribute.
The Working Group is in the process of completing that process and welcomes public comment in this regard. The Working Group is analyzing whether each of the limitations of the copyright owner's distribution right should apply with respect to distribution by transmission.
2. TECHNOLOGICAL PROTECTION
The ease of infringement and the difficulty of detection and enforcement will cause copyright owners to look to technology, as well as the law, for protection of their works. However, it is clear that technology can be used to defeat any protection technology provides. The Working Group finds that legal protection alone may not be adequate to provide incentive to authors to create and to disseminate works to the public, unless the law also provides some protection for the technological processes and systems used to prevent unauthorized uses of copyrighted works.
Sufficient protection cannot be gained through suits for contributory infringement. Under the Sony decision, a manufacturer is not liable for contributory infringement if the device is capable of a "substantial noninfringing use," even if the device is rarely or never put to those uses, and even if the use to which it is primarily put is infringing.
The Working Group finds that prohibition of devices, products, components and services that defeat technological methods of preventing unauthorized use is in the public interest. Consumers of copyrighted works pay for the acts of infringers. The price of copyrighted works for legitimate users is higher due to infringement losses suffered by copyright owners. The public will also have access to more works via the NII if copyright owners can more effectively protect their works from infringement.
Therefore, the Working Group recommends that the Copyright Act be amended to prohibit the importation, manufacture and distribution of devices, as well as the provision of services, that defeat anti-copying systems.
Legislation of this type is not unprecedented. The Copyright Act already protects sound recordings and musical works by prohibiting the circumvention of any program or circuit that implements a serial copy management system or similar system included in digital audio recording devices and digital audio interface devices. Section 1002 provides:
No person shall import, manufacture, or distribute any device, or offer or perform any service, the primary purpose or effect of which is to avoid, bypass, remove, deactivate, or otherwise circumvent any program or circuit which implements, in whole or in part, a [serial copy management system or similar system].
The Communications Act includes a similar provision:
Any person who manufactures, assembles, modifies, imports, exports, sells, or distributes any electronic, mechanical, or other device or equipment, knowing or having reason to know that the device or equipment is primarily of assistance in the unauthorized decryption of satellite cable programming, or is intended for any other activity prohibited by [Section 605(a)] shall be fined not more than $500,000 for each violation, or imprisoned for not more than 5 years for each violation, or both. For purposes of all penalties and remedies established for violations of this paragraph, the prohibited activity established herein as it applies to each such device shall be deemed a separate violation.
Precedent for this type of legislation is also found in the international arena. The North American Free Trade Agreement requires each party to make it a criminal offense to "manufacture, import, sell, lease or otherwise make available a device or system that is primarily of assistance in decoding an encrypted program-carrying satellite signal without the authorization of the lawful distributor of such signal . . . ." In 1988, the United Kingdom enacted legislation prohibiting the manufacture, distribution or sale of a device designed or adapted to circumvent copy-protection systems.
The Working Group recommends that Chapter 5 of the Copyright Act be amended to include the following new section 512:
No person shall import, manufacture or distribute any device, product, or component incorporated into a device or product, or offer or perform any service, the primary purpose or effect of which is to avoid, bypass, remove, deactivate, or otherwise circumvent, without authority of the copyright owner or the law, any process, treatment, mechanism or system which prevents or inhibits the exercise of any of the exclusive rights under Section 106.
The Working Group recommends other related amendments to provide civil causes of action and remedies for violations of the proposed prohibition. The Working Group recommends that Section 501 of the Copyright Act be amended to read as follows:
(a) Anyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 118 or of the author as provided in section 106A(a), or who imports copies or phonorecords into the United States in violation of section 602, is an infringer of the copyright or right of the author, as the case may be. Anyone who violates section 512 is an infringer of the copyright in a work that utilizes the process, treatment, mechanism or system which the violator's device, product, component or service circumvents.
The Working Group recommends that Section 503 of the Copyright Act be amended to read as follows:
(a) At any time while an action under this title is pending, the court may order the impounding, on such terms as it may deem reasonable, of all copies or phonorecords claimed to have been made or used in violation of the copyright owner's exclusive rights, and of all plates, molds, matrices, masters, tapes, film negatives, or other articles by means of which such copies or phonorecords may be reproduced, and of all devices, products or components claimed to have been imported, manufactured or distributed in violation of section 512.
(b) As part of a final judgment or decree, the court may order the destruction or other reasonable disposition of all copies or phonorecords found to have been made or used in violation of the copyright owner's exclusive rights, and of all plates, molds, matrices, masters, tapes, film negatives, or other articles by means of which such copies or phonorecords may be reproduced, and of all devices, products or components found to have been imported, manufactured or distributed in violation of section 512.
The Working Group also recommends that Section 506 of the Copyright be amended to read as follows:
(a) Criminal Infringement. -- Any person who infringes a copyright willfully and for purposes of commercial advantage or private financial gain shall be punished as provided in section 2319 of title 18.
(b) Forfeiture and Destruction. -- When any person is convicted of any violation of subsection (a), the court in its judgment of conviction shall, in addition to the penalty therein prescribed, order the forfeiture and destruction or other disposition of all infringing copies or phonorecords and all implements, devices, products, components or equipment used in the manufacture of such infringing copies or phonorecords infringement.
The proposed prohibition on the importation, manufacture and distribution of devices, products and components, and the provision of services, that circumvent anti-copying systems is intended to assist copyright owners in the protection of their works. Copyright owners who use anti-copying systems to protect their works may bring actions for infringement against persons who, inter alia, manufacture or distribute devices whose primary purpose or effect is circumvention of those systems. The Working Group recognizes, however, that copyright owners may wish to use such systems to prevent the unauthorized reproduction, for instance, of their works, but may also wish to allow some users to deactivate the systems. Therefore, the proposed legislation prohibits only those devices or products, the primary purpose or effect of which is to circumvent such systems without authority. That authority may be granted by the copyright owner or by limitations on the copyright owner's rights under the Copyright Act.
Standing to bring actions for violations of the proposed legislation is granted only to copyright owners whose works are protected by the system that the violator's device, product, component or service circumvents; the manufacturers of anti-copying systems defeated by violators may not bring actions for the defeat of such systems.
The Working Group is not without some concerns regarding this proposal, particularly with regard to works whose term of copyright protection expires but are still protected by anti-copying systems, and works in the public domain. However, the Working Group believes the "primary purpose or effect" standard will allow for the distribution of devices that deactivate the anti-copying systems used in such works, and that the benefits of the proposed legislation outweigh the possible problems.
3. COPYRIGHT MANAGEMENT INFORMATION
In the future, the copyright management information associated with a work -- such as the name of the copyright owner and the terms and conditions for uses of the work -- may be critical to the efficient operation and success of the NII. The public should be protected from fraud in the creation or alteration of such information. Therefore, the Working Group recommends that the Copyright Act be amended to prohibit fraudulent inclusion of copyright management information and fraudulent removal or alteration of such information. The Working Group recommends that Section 101 of the Copyright Act be amended to include the following definition:
"Copyright management information" means information associated with a copyrighted work, including, but not limited to, the name and other identifying information of the copyright owner, the terms and conditions for uses of the work, and identification codes such as an ISBN number.
The Working Group also recommends that Section 506 of the Copyright Act, which contains the prohibitions against fraudulent copyright notices and fraudulent removal of copyright notices, be amended to include the following new subsections (g) and (h):
(g) Fraudulent Copyright Management Information. -- Any person who, with fraudulent intent, digitally links with a copy of a copyrighted work copyright management information that such person knows to be false, or who, with fraudulent intent, publicly distributes or imports for public distribution any work with which copyright management information that such person knows to be false is linked, shall be fined not more than $2,500.
(h) Fraudulent Removal of Copyright Management Information. -- Any person who, with fraudulent intent, removes or alters any copyright management information digitally linked with a copy of a copyrighted work shall be fined not more than $2,500.
4. PUBLIC PERFORMANCE RIGHT
Transmissions of sound recordings may eventually replace the current forms of distribution of phonorecords. In the very near future, consumers will be able to receive digital transmissions of sound recordings on demand -- for performance in the home or for downloading -- from the so-called celestial jukebox. The legal nature of such transmissions -- whether they are performances or distributions -- has been widely debated. As discussed above, the Working Group recommends that Section 106 of the Copyright Act be amended to make clear that copies or phonorecords can be distributed by transmission. The Working Group also recommends that a "primary purpose or effect" test be used to determine whether a transmission is a performance (or display) or a distribution. However, many of these transmissions will clearly constitute exercise of the public performance right -- a right which the Copyright Act fails to grant to copyright owners of sound recordings.
The lack of a public performance right in sound recordings under U.S. law is an historical anomaly that does not have a strong policy justification -- and certainly not a legal one. Sound recordings are the only copyrighted works that are capable of being performed that are not granted that right. Therefore, to play a record on the radio without infringement liability, a radio station must get a license from, and pay a royalty to, the copyright owner of the underlying musical work (i.e., the person or entity who owns the rights in the notes and the lyrics), but it does not have to obtain permission from, or pay a license fee to, the copyright owner of the sound recording or the performer on the record. The Working Group believes that it is time to rectify this inequity.
The Working Group notes that the Administration supports two bills introduced in Congress that would grant a limited performance right to sound recordings. The bills, H.R. 2576 and S. 1421, would add to the exclusive rights of a copyright owner in a sound recording the right to perform or authorize the performance of the sound recording by "digital transmission." The right granted in the bill is not the full performance right granted to other copyrighted works. For instance, the legislation would not change the law with respect to live public performances. It would also not touch analog transmissions -- the transmissions currently received over the radio. It would only grant a right with respect to transmissions in a digital format -- those that pose the greatest threat to the copyright owners of sound recordings.
5. FAIR USE
The Working Group has significant concerns regarding the ability of the limitations on copyright owners' exclusive rights -- particularly those limitations found in Sections 107 (fair use), 108 (library exemptions) and 110(1) and (2) (educational uses) -- to provide the public with adequate access to copyrighted works transmitted via the NII. As more and more works are available primarily or exclusively on-line, it is critical that researchers, students and other members of the public have opportunities on-line equivalent to their current opportunities off-line to browse through copyrighted works in their schools and public libraries.
The Copyright Act exists for the benefit of the public. To fulfill its constitutional purpose, the law should strive to make the information contained in protected works of authorship freely available to the public. "Freely available," of course, does not necessarily mean "available free." The Working Group does not believe that authors should be required to donate access time to their works on-line, but some reasonable approach must be adopted to ensure that the economically disadvantaged in this country are not further disadvantaged or disenfranchised by the information revolution. Public libraries and schools, and the access to information that they provide, have been important safeguards against this nation becoming a nation of information "haves" and "have nots." We must ensure that they continue to be able to assume that role.
Guidelines for library and educational use of printed matter and music were voluntarily adopted by diverse parties and set out in the House and Conference reports accompanying the 1976 revisions to the Copyright Act. While the principles should still be applicable, it is difficult and, perhaps, inappropriate, to apply the specific language of some of those guidelines in the context of digital works and on-line services.
Therefore, the Working Group will sponsor a conference to bring together copyright owner and user interests to develop guidelines for fair uses of copyrighted works by and in public libraries and schools. To increase the productivity of the conference, the number of participants will be limited. However, attendance at the conference will be open to the public. Those wishing to participate in the conference should send a one-page request to Terri A. Southwick, Attorney-Advisor, Office of Legislative and International Affairs, U.S. Patent and Trademark Office, Box 4, Washington, D.C. 20231. Requests must be received by July 25, 1994, and should include a brief description of the interests that would be represented at the conference by the requestor.
The location and date of the conference will be announced in the press, on the IITF Bulletin Board, and in the Federal Register.
With limited exceptions, intellectual property law leaves the licensing of rights to the marketplace. In certain circumstances, particularly where transaction costs are believed to dwarf per-transaction royalties, Congress has found it necessary to provide for compulsory licenses. The Working Group finds that under current conditions, additional compulsory licensing of intellectual property rights is neither necessary nor desirable. Transaction costs -- and the attendant savings from compulsory licensing -- can be minimized in a digital environment. The marketplace should be allowed to develop whatever legal licensing systems may be appropriate for the NII.
There is little dispute that worldwide high-speed digital communications networks will have an enormous effect on the way in which works of authorship will be created, stored, communicated to the public, distributed and paid for. This communication revolution is now bringing new opportunities and new challenges to creators and users of intellectual property. The full implementation of the NII and the GII will have an immense effect on our economy, and implementation of such systems internationally will have an equally broad impact on world-wide commerce. We must be committed to finding the means to preserve the integrity of intellectual property rights in the materials that will flow in the commerce created in this environment. This is a daunting challenge in the context of the U.S. domestic market. Today we are faced with an even greater challenge, to lay the groundwork for an international basis which ensures that the digital revolution will not disadvantage those whom we seek to protect.
As we move toward a world where dissemination of entertainment and information products through on-demand delivery services operating through interactive digital information communications networks is the norm, it may be necessary to harmonize levels of protection under disparate systems of copyright, authors' rights and neighboring rights, and consideration should be given to ways to bridge the gaps among these systems.
If the GII as well as national NIIs are to flourish, then the intellectual property rights that will undergird the economic structure supporting these infrastructures must unequivocally be granted in national legislation fully on the basis of national treatment for all rights and benefits. However, there is some controversy over the scope of the national treatment obligation under the Berne Convention and its application to what some may regard as newly created rights and subject matter. Similar questions arise under other international copyright and neighboring rights conventions as will be later discussed.
U.S. copyright legislation has granted rights that some may regard as new rights -- rental rights in computer programs, sound recordings, and musical works embodied in sound recordings -- exclusively on the basis of national treatment. The United States has instituted a system of royalties on blank digital audio recording media and digital audio recorders. Benefits from these rights have all been granted on the basis of full national treatment. We believe that this is consistent with our obligations under the Berne Convention and other international intellectual property and trade treaties and agreements.
The author or rights holder should be able to realize fully the economic benefits flowing from the free exercise of his or her rights in any country participating in a GII. This is required by Article 5 of the Berne Convention. To do otherwise in either a Berne Protocol or another agreement on copyright protection would be contrary to Article 20 because it would be a derogation of rights existing under Berne and not be an Agreement to "grant to authors more extensive rights than those granted by the Convention, or contain other provisions not contrary to this Convention" as provided for under Article 20. To protect new works or to grant new rights in respect of those or presently protected works on the basis of reciprocity, would be contrary to the letter and the spirit of the Convention.
As the GII continues to develop through the international interconnection of NIIs, rules must be formulated to protect the economic rights of providers of entertainment and information products. Such rules should be based on principles of national treatment along the lines of the following:
1. Each country participating in the GII shall accord to nationals of another country participating in the GII no less favorable treatment than it accords to its own nationals with regard to all rights and benefits now, or hereafter, granted under its domestic laws in respect of literary and artistic works or fixations embodying such works.
2. Benefits shall include the same possibility to exploit and enjoy rights in the national territory of a country participating in the GII as the respective country grants to its own nationals.
3. No country participating in the GII shall, as a condition of according national treatment, require rights holders to comply with any formalities in order to acquire rights in respect of literary and artistic works or fixations embodying such works.
One of the most important issues will be what is the nature of a dissemination of a work or a fixation of a work in digital format? Is it a public performance of the work or fixation, an act of reproduction, or a distribution? How do rules concerning the right of importation apply in a digital environment? Just as these questions are critical in the domestic context, they are equally acute in the context of international treaties and harmonization of laws.
Additionally, the issue of multimedia works will take on an important international dimension. If these are regarded at the international level as works in a new, separate category, the issue of their coverage under the existing conventions and the rule of national treatment will be open to debate. If, however, they are subsumed into the existing categories of works, establishing meaningful rules internationally will be simplified.
Further study to determine what other rights may need to be adapted to the emerging digital environment are underway both in domestic and international fora. However some issues merit identification here, and one of those is the level of protection to be accorded to sound recordings.
Many believe that the time has come to bring protection for performers and producers of sound recordings into line with the protection afforded to the creators of other works protected under the Berne Convention. This includes providing high-level standards for rights and benefits granted on the basis of national treatment. This is necessary for a number of reasons. First, there is no just reason to accord a lower level of protection to one special class of creative artists. Second, the extent of international trade in sound recordings makes it imperative that standards of protection be harmonized at a high level. Third, and perhaps most importantly, the digital communications revolution -- the creation of advanced information infrastructures -- is erasing the distinctions among different categories of protected works and sound recordings and the uses made of them.
Concerns have been raised over the extent and scope of moral rights in the world of digital communications. Some believe that the ability to modify and restructure existing works make moral rights more important than ever before. Others take the view that moral rights must be rethought in the digital world. We agree with this view. New thought must be given to the scope, extent and waivability of moral rights in digitized information.
The harmonization issues most relevant to the NII arise in the context of WIPO efforts to establish a Possible Protocol to the Berne Convention (Berne Protocol) and a Possible New Instrument for the Protection of Performers and Producers of Phonograms (New Instrument). In the Berne Protocol, the relevant activities concern the protection of computer programs as literary works, protection for databases as compilations of information other than works, the possible elimination of compulsory licensing for broadcasting, and special provisions for the use of materials in digital distribution systems. In the New Instrument, the most relevant issues are the possible establishment of a public performance right for sound recordings (possibly limited to digital broadcasting) and the possibility of a digital distribution or dissemination right for sound recordings.
To attain the needed level of protection internationally, we must find ways to span the differences between the continental droit d'auteur and neighboring rights systems and the Anglo-American copyright systems. An essential element of this effort will be to harmonize levels of protection by establishing standards that can be implemented through either system.
Interoperability and interconnectivity of networks, systems, services and products operating within the NII will enhance its development and success. Standardization of copyright management (standardized header information and format, for instance) as well as technological protection methods (such as encryption) may also be useful. The question of whether any standards should be established, either through government regulation or industry consensus, however, is not within the purview of this Working Group. The issue of what those standards should be, if established, is similarly outside the scope of the area of inquiry of the Working Group. If a standard is established, however, protection of intellectual property rights used in that standard is of concern to this Group.
The intellectual property rights implications of the standards-setting process are not new with the development of the NII. The Federal Communications Commission, for instance, has established standards in related areas without interfering with the legitimate rights of intellectual property rights owners.
The Working Group finds that in the case of standards to be established, by the government or the private sector, the owner of any intellectual property rights involved must be able to decline to have its property used in the standard, if such use would result in the unauthorized exercise of those rights. If the rights holder wishes to have its intellectual property as part of the standard, an agreement to license the necessary rights on a nondiscriminatory basis and on reasonable terms may be required. In the case of de facto standards, arising out of market domination by an intellectual property rights holder, unfair licensing practices can be dealt with through the antitrust laws.
Effective education of the public about intellectual property rights is crucial to the successful development of the NII. Therefore, the principles of intellectual property law must be taught in our schools and libraries. Educational efforts to increase the public's awareness of their own intellectual property rights, as well as those of others, will increase respect for those rights. Clearer guidelines with respect to the exclusive rights of copyright and other intellectual property rights holders, as well as the limitations on those rights, will make compliance with the law easier.
Following its conference on fair use, the Working Group will sponsor a second conference on intellectual property education. The purpose of that conference will be to develop curricula that may be used in schools and libraries. Additional means of education, particularly those that use the NII itself, will also be explored and developed. To increase the productivity of the conference, the number of participants will be limited. However, attendance at the conference will be open to the public. Those wishing to participate in the conference should send a one-page request to Terri A. Southwick, Attorney-Advisor, Office of Legislative and International Affairs, U.S. Patent and Trademark Office, Box 4, Washington, D.C. 20231. Requests must be received by July 25, 1994, and should include a brief description of the interests that would be represented at the intellectual property education conference by the requestor.
The location and date of the conference will be announced in the press, on the IITF Bulletin Board, and in the Federal Register.