SPEAKERS CONTENTS INSERTS Tables
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65–223
2000
UNITED STATES COPYRIGHT OFFICE AND SOUND RECORDINGS AS WORK MADE FOR HIRE
HEARING
BEFORE THE
SUBCOMMITTEE ON
COURTS AND INTELLECTUAL PROPERTY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
MAY 25, 2000
Serial No. 145
Printed for the use of the Committee on the Judiciary
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For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR S. SMITH, Texas
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
LINDSEY O. GRAHAM, South Carolina
MARY BONO, California
SPENCER BACHUS, Alabama
JOE SCARBOROUGH, Florida
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DAVID VITTER, Louisiana
JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
THOMAS E. MOONEY, SR., General Counsel-Chief of Staff
JULIAN EPSTEIN, Minority Chief Counsel and Staff Director
Subcommittee on Courts and Intellectual Property
HOWARD COBLE, North Carolina, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
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ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
WILLIAM L. JENKINS, Tennessee
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
MARY BONO, California
HOWARD L. BERMAN, California
JOHN CONYERS, Jr., Michigan
RICK BOUCHER, Virginia
ZOE LOFGREN, California
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
BLAINE MERRITT, Chief Counsel
VINCE GARLOCK, Counsel
DEBBIE K. LAMAN, Counsel
CHRIS J. KATOPIS, Counsel
ALEC FRENCH, Minority Counsel
EUNICE GOLDRING, Staff Assistant
C O N T E N T S
HEARING DATE
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May 25, 2000
OPENING STATEMENT
Coble, Hon. Howard, a Representative in Congress From the State of North Carolina, and chairman, Subcommittee on Courts and Intellectual Property
WITNESSES
Crow, Sheryl, artist, on Behalf of American Federation of Television and Radio Artists, American Federation of Musicians, AmSong, Artist Coalition
Goldstein, Paul, Lillick professor of law, Stanford Law School
Greene, Michael, president and CEO of Recording Academy, National Academy of Recording Arts & Sciences, Inc.
Hamilton, Marci, The Thomas H. Lee Chair in public law, Cardozo School of Law
Peters, Hon. Marybeth, Register of Copyright, Copyright Office of the United States, Library of Congress
Rosen, Hilary, president and CEO, Recording Industry Association of America, Inc.
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LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Berman, Hon. Howard H., a Representative in Congress From the State of California: Prepared statement
Bono, Hon. Mary, a Representative in Congress From the State of California: Prepared statement
Conyers, Hon. John, Jr., a Representative in Congress From the State of Michigan: Prepared statement
Crow, Sheryl, artist, on Behalf of American Federation of Television and Radio Artists, American Federation of Musicians, AmSong, Artist Coalition: Prepared statement
Delahunt, Hon. William D., a Representative in Congress From the State of Massachusetts: Prepared statement
Goldstein, Paul, Lillick professor of law, Stanford Law School: Prepared statement
Goodlatte, Hon. Bob, a Representative in Congress From the State of Virginia: Prepared statement
Greene, Michael, president and CEO of Recording Academy, National Academy of Recording Arts & Sciences, Inc.: Prepared statement
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Hamilton, Marci, The Thomas H. Lee Chair in public law, Cardozo School of Law: Prepared statement
Peters, Hon. Marybeth, Register of Copyright, Copyright Office of the United States, Library of Congress: Prepared statement
Rosen, Hilary, president and CEO, Recording Industry Association of America, Inc.: Prepared statement
APPENDIX
Material submitted for the record
UNITED STATES COPYRIGHT OFFICE AND SOUND RECORDINGS AS WORK MADE FOR HIRE
THURSDAY, MAY 25, 2000
House of Representatives,
Subcommittee on Courts and
Intellectual Property,
Committee on the Judiciary,
Washington, DC.
The subcommittee met, pursuant to call, at 10:03 a.m. in room 2141, Rayburn House Office Building, Hon. Howard Coble [chairman of the subcommittee] presiding.
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Present: Representatives Howard Coble, F. James Sensenbrenner, Jr., Elton Gallegly, Bob Goodlatte, William L. Jenkins, James E. Rogan, Mary Bono, John Conyers, Jr., Howard L. Berman, Rick Boucher, Zoe Lofgren, William D. Delahunt, and Robert Wexler.
Staff present: Blaine Merritt, chief counsel; Debbie Laman, counsel; Vince Garlock, counsel; Chris Katopis, counsel; Eunice Goldring, staff assistant; Alec French, minority counsel; and Sam Garg, minority counsel.
OPENING STATEMENT OF CHAIRMAN COBLE
Mr. COBLE. Good morning, ladies and gentlemen. The subcommittee will come to order.
Today we will tackle two very important issues. First, we are conducting an oversight hearing on the administration of the Copyright Office of the United States. The House Judiciary Committee is charged with the responsibility of overseeing the administration and operation of the Copyright Office of the United States. To that end, we will be reviewing the administrative activities and the funding and expenditures of the Copyright Office to ensure that it is utilizing its resources effectively.
The Copyright Office is a division of the Library of Congress. It performs several functions aside from its primary responsibility to examine and register copyright claims. These other functions include maintaining records regarding transfers and terminations of copyright, administering the Copyright Arbitration Royalty Panels, providing information to the public about copyright law and registration procedures, providing technical assistance to the Congress, assisting the domestic and international copyright community in copyright protection, and collecting works to be deposited in the Library of Congress. All members of the subcommittee are welcome to address any issues related to the administration of the Copyright Office of the United States.
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Secondly, we will discuss the issue of the recent amendment to the Copyright Act that added sound recordings to the list of works which are works made for hire. As many of you know, this amendment has caused some to criticize my colleagues, my staff, and me as having indulged in unfair, deceptive, and sneaky behavior. Unfortunately, the story circulating about the legislative history of the amendment is generously lace with deception. Hopefully, today we will reveal the truth.
Now let me say this to you, folks. We are going to be on a short leash today. I don't think the voting pattern from the Floor is going to be too disruptive, but we must be out of this room by 1:30. The Crime Subcommittee has a 2 p.m. hearing and the room must be assembled.
Having said that, the Chair will entertain opening statements from the Chair, the ranking member, the gentleman from California, and Mr. Conyers, the ranking member of the full committee. I invite other members to submit their statements in writing and they will be made part of the record.
Now let me visit with you a few minutes, folks, before I recognize Mr. Berman.
This issue is emotionally charged. And not unlike many emotionally charged issues, the truth has been bantered about recklessly. When asked to respond to the works for hire language last winter, I initially said it was my belief that the opponents of this language were overreacting. And my reasoning for having made that statement is that the Copyright Office has for years customarily registered sound recordings as works for hire. So my interpretation was that it was merely codifying existing practice. I saw no dramatic departure from the norm.
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Artists and spokesmen for artists, however, continued to express anxiety over the issue and I concluded that my calm interpretation did not assuage their comfort, nor did it resolve their problem. So I then decided to grant their request for this hearing.
I discussed that decision with Mr. Berman and with Chairman Hyde and they agreed with me that a hearing should be conducted, so here we are today.
Preparing the witness list was not unlike a disorganized fire drill. Just about every day we would remove this witness and insert this name in lieu thereof. I think we did a good job of accommodating requests to testify.
I am obliged to address the famous name provision of the Anti-Cybersquatting Consumer Protection Act. I read in one of the many articles that has been published featuring this issue that an artist or artist's spokesman indicated that this language really was not necessary for artists.
Folks, why then was my door knocked upon consistently—and I am sure Howard's door and our staffs door last fall—by lobbyists urging us to be sure to incorporate this language, claiming it is critical and is absolutely necessary for the well-being of the artists? Now that it has been incorporated, I am told that we didn't need it after all.
Me thinks they protest too much, but that will be for another time.
I believe some background about sound recordings as works made for hire is necessary to evaluate the new law.
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A work made for hire is a work prepared by an employee within the scope of his or her employment or a work specially ordered or commissioned for use as a contribution to a collective work or compilation if the parties expressly agree in a written instrument, signed by them, that the work shall be considered a work made for hire. The Copyright Act provides authors a right to terminate a grant of rights 35 years after the grant. The termination right, however, does not apply to works made for hire.
Since 1972, sound recordings have been registered by the Copyright Office, as I have mentioned earlier, as works made for hire even though they were not statutorily recognized as such prior to the enactment of the Intellectual Property and Communications Omnibus Reform Act of 1999. This statute included a provision that added sound recordings to the list of works eligible for work made for hire status.
Following the adoption of the provision last year, some artists have complained that the change is not a clarification of the law but has substantively affected their termination rights. And that is the purpose of the hearing today. We intend to explore this more fully.
Now, if you will, let me turn to the process by which this amendment became law.
To begin with, this amendment was not inserted on the last night of the satellite bill conference under the cloak of darkness. The truth is that the issue was raised a few days before the conference concluded—Thursday, I think—and then the conference concluded about the middle of the following week. So you are not talking about a 24-hour midnight visit on this.
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In addition, no one staffer inserted the amendment in the absence of review by other staffers and conferees. The truth of the matter is that two staffers broached the topic and it was openly discussed before the entire conference staff a few days before the conference concluded. As I said, I think that was the middle of the following week.
Each conference staffer had the opportunity to review the provision and to bring it to the attention of his or her member. Over the course of the next few days, no objections were raised by the members or the staff to the amendment. The Register of Copyrights was also consulted during this period.
Certainly, I am repeating myself a little bit, and pardon me for that but I need to do this for emphasis.
Certain news articles critical of the process were published following the enactment of the statute. Based on what I believe are ill-informed insights, some of these articles essentially questioned the integrity of the primary conference participants. I have little regard for those who personalized the differences in legislative debates. I can only hope the truth we seek today will offer some consolation to the individuals whose reputations, in my opinion, have been tarnished in the most mean-spirited of ways.
Another comment about process is in order. This leads me to believe, folks, that some here believe it is acceptable to question the integrity and credibility of Members of Congress and their staffs when they don't attain 100 percent of their legislative goals. This is an unacceptable way of doing business, especially when we have worked so well together in the past to achieve great accomplishments at the behest of artists, including the enactment of the Digital Millennium Copyright Act, the Sonny Bono Copyright Term Extension Act, the Copyright Damages Improvement Act, the No-Electronic Theft Act, and the Anti-Cybersquatting Consumer Protection Act.
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Let me say a word about the organizational events leading up to the hearing. During my tenure as chairman of this subcommittee, I have tried to remain diligently fair and balanced in my treatment of issues and interested parties, and I can say the same for my good friend who sits to my left, the gentleman from California. This hearing is no exception. Given the extensive criticism generated in the wake of the work for hire issue, I think we have bent over backwards to accommodate artists groups who expressed a desire to participate.
I confess, however, that I nearly reached my wit's end when one group intimated that it would produce more negative press if denied a seat at the witness table. Folks, I don't usually cotton to threats, but I have nonetheless today decided to err on the side of complete accommodation. As a result, we will have a hearing today where a witness panel is really unfairly skewed toward one perspective. To those of a different copyright persuasion, I apologize to you for that.
Now that I have addressed all the criticism of the past few months, let us focus on the policy implications of today's topic. I am confident that our hearing will allow for a full and complete airing of the views of both the recording companies and the artist groups. I look forward to the testimony of both sides. I must emphasize, however, that given the fractious nature of this controversy and the dwindling legislative schedule which remains, I am not enthusiastic about the prospects of exploring legislative responses to this issue—if warranted—during this session. But that will be for the day's end and the days ahead.
Let me conclude and then I will recognize the gentleman from California. And if you all will bear with me, I am going to be immodest.
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Mr. Bill Holland, who writes for Billboard, wrote recently—I don't have his permission to say this, but I think he will not admonish me—he wrote, ''Coble is viewed by Washington insiders as an even-handed chairman and is well liked throughout the copyright community, who supports creators and users.''
Again, pardon my immodesty, but as the late Dizzy Dean used to say, ''If it's true, it ain't bragging.'' [Laughter.]
Speaking of even-handed and reasonable people, I am now pleased to recognize the distinguished gentleman from California, the ranking member of the subcommittee, Mr. Berman.
Mr. Goodlatte has indicated that he has a 1-minute opening statement. Mr. Boucher has a 2-minute opening statement.
As Mr. Holland said, I am a fair-minded fellow. [Laughter.]
Mr. Rogan and Ms. Bono—folks, we need to confine it to at least 2 minutes.
I will put you on a short leash and time you, but not so with Mr. Conyers and Mr. Berman. Mr. Berman, you are recognized.
Mr. BERMAN. Thank you, Mr. Chairman. I love a long leash. It just goes to show you how unintended consequences can happen.
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Last night, Mr. Boucher and I were pumping gas together at a gas station down on South Capital Street. I am sure there are people in the press who think that we have our staff pump our gas for us, but we were both there doing it ourselves. Mr. Boucher mentioned to me that he would like to make a short opening statement. I, of course, did not get down here until my customary 5 minutes late and the chairman was already speaking. But I appreciate very much his willingness to demonstrate, once again, his fairness and his flexibility by deviating somewhat from his initial and customary process in this matter.
I have a somewhat lengthy opening statement, which I would like to be included in the record, Mr. Chairman. Copies are there. It sets out in some detail my view of this process. But rather than read that opening statement, I think I am just going to ramble for a little while and make a few points that I want to make about all this.
First, this is also a hearing about the Copyright Office, and I just want to indicate publicly as well as for the record that Marybeth Peters runs a wonderful operation that does a tremendous and important job on a number of different issues and she will be talking about some of that in her testimony today. But I just want to thank her for continuing to operate that office in such a professional, efficient, and effective manner.
Turning to the other issue, work made for hire, I have had the unfortunate situation of being in the minority for nearly 6 years, but it has been mitigated to a great extent by the fact that I have been ranking Democrat on two subcommittees, first on International Relations where Doug Bereuter was my chairman, and now on Intellectual Property with Howard Coble as my chairman. I believe in both situations I could only aspire in the role that one day under exercising our power to terminate control of this place and revert it to its rightful owners, I could only hope to aspire to be as fair and as bipartisan as these individuals have been in chairing their subcommittees.
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Mr. COBLE. The gentleman is allowed 10 extra minutes. [Laughter.]
Mr. BERMAN. The chairman is a man of tremendous integrity. This committee operates on a bipartisan basis. What happened last November was not a partisan effort, it was not a venal effort, it was not an effort to put something in the law under the belief that had the alternative been tried it might have failed and therefore would not have been successful.
I mentioned yesterday to a couple of folks that there is what has become somewhat hackneyed saying that the two things people should never watch being made are laws and sausages. It is not always a pretty process. It is a messy process. Sometimes it is an ''in the dark of the night'' process. But the notion that from that fact one drops to theories of conspiracies and paranoia about people's intentions is just fodder for those who want to increase cynicism about this process.
My opening statement in some detail tells the story of all this stuff. But when Howard Coble and his former chief of staff Mitch Glazier were pushing Jim Rogan's legislation on cybersquatting through—I think with Rick at that time as well—when it passed our committee, it dealt with protecting the domain names of people who had trademarks. It went to the Floor, there was no real controversy, and I started getting phone calls from people in Los Angeles—celebrities, recording artists—about the fact that their domain name had been taken by someone else, that material was appearing on those sites that was frequently defamatory or representing views that were not their views, that in a sense their good name was being abused by what was happening, and then they were being shaken down in order to reacquire the right for their own name.
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They asked me to try to help fix that situation. They didn't say to only do it if we could do it with hearings and full processes and giving everybody a great deal of notice. They asked me to please try to fix it.
I went to Chairman Coble and Mitch Glazier. Jim and I talked and Rick and I talked. You shouldn't have to trademark your own name in order to keep it from being usurped and taken. And in a manager's amendment on the Floor of the House, with very little discussion—if there were five Members of Congress who knew what was happening, I would be quite amazed—we fixed that particular problem. It wasn't at nighttime, it was in the afternoon, but it was in the dark of the afternoon.
People were quite happy. For Washington representatives of some of those same people to now attribute to us—and to the chairman most particularly because he has had the misfortune of having his name and Mitch Glazier has had the misfortune of having his name associated as the symbols of the process—a relatively last-minute fix of changes made by the Senate to that language, which required people to deal with how you could contractually exploit a person's domain name when the party was willing to have it exploited in order to promote a copyrighted work—well, even in a town where hypocrisy is the standard currency, such insinuations gives hypocrisy a bad name. I just want to make that clear.
In addition, bad things sometimes happen inadvertently. In a process which is messy and sometimes moving too quickly, consequences occur that we did not fully anticipate.
So in retrospect, having now spent a substantial amount of time looking at this particular issue, it is clear to me the change we made in specifically adding sound recordings to the law on works made for hire is not technical, not because the people who claimed it was technical believed otherwise, but because there are other people who weren't right there at the time who have a different view of the law. When there is one point of view about the law and another point of view about the law and both are reasonable and have legitimacy—they aren't absurd arguments or frivolous arguments—in effect dealing with something that in a sense codifies that one view of the law and thereby excludes, wipes out, and snuffs out the other view of the law is not a technical change in the law.
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So this hearing is being held. Hilary Rosen I have known for a long time. I have never, ever had occasion to be able to say that she has misrepresented anything in the context of her representation of the RIAA and I know a lot about what happened here and I continue to have tremendous faith in her representation. She has a point of view and she has an interest and all of that should be taken into consideration in evaluating her arguments, like every other argument made.
This is a pluralistic country and a pluralistic process. People come with their points of view and we are supposed to synthesize them. But no one ever misrepresented anything about this. But a mistake was made.
Now the question is, What do we do about it? We are going to have experts talking about this issue, so I am not going to synthesize those arguments. But let me say that in my mind the right way to end up here at some point is to get back to the status quo ante, the situation that existed before October or November 1999, whenever the exact date all this happened and the law was changed. But we need to do it in a way that doesn't hurt any of the parties involved in the sense of disadvantaging them from their positions before that time, to take the time to make sure we do it right.
By the way, this is one issue where we do have some time because what we are talking about is a the right to terminate that doesn't come into effect until 2013. You give your notice of intention to terminate long before that time, but the actual termination of the right doesn't exist until 2013, so we have a few weeks to look at this in a process that we now want to be especially careful doesn't have the unintended consequences that our earlier process had.
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That is where I hope we end up. That is where I think the parties have to talk to each other. I think getting away from the rhetoric of venality and conspiracy makes tremendous sense. And let's go on with the hearing.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Berman follows:]
PREPARED STATEMENT OF HON. HOWARD H. BERMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Chairman,
Thank you for calling this hearing today.
Initially, I want to address the less publicized aspect of our hearing today—oversight of the U.S. Copyright Office. On nearly a daily basis, this Subcommittee calls upon the Copyright Office for advice and counsel on a variety of copyright policy questions. The Copyright Office also ably handles a host of other, equally important functions—from providing foreign governments with copyright policy expertise to conducting arbitrations on copyright royalties. I just want to thank Mary Beth Peters and her fine staff for continuing to operate such a professional, efficient, and effective agency.
Turning to the work made for hire issue, I first want to disabuse people of the notion that the work for hire amendment was the product of some conspiracy between the recording industry and Members or staff of either House. Today's political environment is unfortunately marked by a tendency to assume the worst, and is populated by self-interested individuals who exploit that tendency. However, I know that no conspiracy or quid pro quo motivated the work for hire amendment, and any allegations to the contrary are unfounded.
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Mr. Chairman, I have always known you to be a man of the upmost integrity, fairness, and honor, and such allegations are an absolutely unwarranted attack upon your character.
The fact is that our Senate counterparts and I were aware of the proposal to include the work for hire amendment in the cybersquatting legislation that was rolled into the SHVIA conference report at the end of last Session. At that time, the legislation appeared to be a technical amendment; and ironically, we thought this amendment would effectuate a change in the cybersquatting bill desired by artists' groups.
We were presented with substantial evidence that work for hire clauses were standard in recording contracts. We further learned, and the Register of Copyrights confirmed, that both recording companies and recording artists customarily register their sound recordings as works made for hire. Thus, all appearances were that sound recordings were widely understood to be eligible for works made for hire status.
Of course, we soon learned that artists' groups did not agree with the characterization of the work for hire legislation as a technical amendment. On November 18, I received a call from Jack Golodner with the AFL–CIO raising concerns about the work for hire language. He faxed me a copy of a letter that an LA law firm sent to Senators Boxer and Feinstein the previous day to express such concerns.
Unfortunately, both time and process did not allow any action at that point. The consolidated appropriations bill, within which the cybersquatting legislation with the work for hire language had been combined, was being debated on the House floor literally while Jack and I spoke. One half hour after he faxed me the letter, the House adopted the conference report to the appropriations bill. The Senate adopted it later that night.
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Having spent a considerable amount of time looking at this work for hire issue since last fall, I am now convinced that the inclusion of sound recordings as a enumerated category of works eligible for status as works made for hire was clearly not a technical amendment. Rather, it appears that, prior to the work for hire amendment, the eligibility of sound recordings for status as works made for hire was a grey area in law.
I believe the recording industry has some very credible and sincere arguments that, based on some sets of facts, sound recordings could fit within other, previously recognized categories of works eligible for work made for hire status—notably as contributions to collective works.
However, authors of sound recordings also have credible arguments that, based on other sets of facts, sound recordings would not have qualified as works made for hire prior to last session's amendment. I have read several compelling law review articles that share this opinion. Furthermore, at least two U.S. District Courts have recently opined that sound recordings do not fit within the statutorily recognized categories of works eligible to be works made for hire—though neither court opinion explains its reasoning in depth or addresses the possibility that sound recordings are contributions to collective works or compilations.
Where two interested groups have different legal positions regarding the meaning of the law, an amendment that resolves the law to the benefit of one party and to the detriment of the other cannot be termed technical. By clarifying this grey area of law in the way we did, Congress weakened the legal arguments available to authors of sound recordings that sound recordings cannot be works made for hire, and thus impaired their ability to exercise their termination rights.
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In an admittedly unusual legislative process, it is now the responsibility of this Subcommittee to decide whether a change we have already made to the copyright law reflects sound public policy. The Chairman has called this hearing today to help guide us in this decision, and I can assure all the witnesses that we will listen to them with open minds and a strong sense of this responsibility. For their part, I hope the witnesses, who represent parties on all sides of this issue, will concentrate on providing us with policy rationales for and against including sound recordings as a category of works eligible for status as works for hire.
After this hearing, I encourage all interested parties to come together and explore how to remedy this situation. I believe that such a cooperative solution is not only possible, but absolutely necessary, as no solution is likely to move without buy-in from both sides.
At least initially, the ideal solution would restore to the parties the legal rights and arguments they had prior to enactment of the work for hire amendment. Relatedly, such a solution would not prejudice the ability of the parties to claim that their previous position had been fully restored. Arriving at such a solution may be a long and difficult process, but we should not shirk away from the effort. Likewise, we should ensure that the process is fair and open, and does not happen in ''the dead of night.''
Once the parties have been made whole, so to speak, we can wrestle with the longer and harder task of either resolving the ambiguities in the law, and if such a resolution seems inappropriate legislatively, we can make a conscious decision to leave resolution of these issues to the courts.
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I pledge my assistance in hammering out a solution and likewise pledge to work with all parties that demonstrate an honest desire to craft a fair solution.
Mr. COBLE. Howard, I thank you for very interesting and meaningful background. Thank you for your generous words, as well.
As Mr. Berman very accurately pointed out and I failed to, we are not on a time table here. No one is holding a stop watch on us and we must not decide this by sundown today.
The gentleman from the Roanoke Valley, Mr. Goodlatte?
Mr. GOODLATTE. Mr. Chairman, thank you.
I first want to thank you for agreeing to hold this hearing today and for your willingness to examine the issue of sound recordings as works made for hire.
As a conferee on the Satellite Home Viewer Act enacted into law last year, I was actively involved in the deliberations surrounding the work for hire issue and supported the inclusion of language that clarified sound recordings as a work made for hire.
I recognize that that is a contentious debate between those who see this as a change from previous law and those who view this as simply clarifying existing law. Because I believe sound recordings are a contribution to a collective work, and that artists have for many years knowingly signed contracts that often include work for hire language, I fall into the latter category.
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Nonetheless, I look forward to hearing from both sides on this issue and learning more about why artists are opposed to codifying a designation that apparently has been referenced in recording contracts signed by those artists for some time.
Mr. Chairman, if I might use a little bit of that second minute you offered me, I want to second everything that has been said about your leadership of this subcommittee. I feel very strongly that what Mr. Berman said very accurately reflects—as does the quote you read from Billboard—your dedication to the cause of protecting creative works in this country and recognizing the value of copyright. I believe that virtually everyone on this committee stands strongly for the benefit of that.
I have introduced and you have passed through this subcommittee the NET Act, which is being used by a great many people today to try to push for greater protection of copyrighted works in the digital environment in which they have become increasingly endangered because of the ease with which they can be duplicated.
I thank you for holding this hearing. I wish to hear from those who take different points of view.
I yield back.
[The prepared statement of Mr. Goodlatte follows:]
PREPARED STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VIRGINIA
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Mr. Chairman, I want to thank you for agreeing to hold this hearing today, and for your willingness to examine the issue of sound recordings as works made for hire. As a conferee on the Satellite Home Viewer Act enacted into law last year, I was actively involved in the deliberations surrounding the work-for-hire issue and supported the inclusion of language that clarified sound recordings as a work-made-for-hire. I recognize that this is a contentious debate between those who see this as a change from previous law and those who view this as simply clarifying current law. However, because I believe that sound recordings are a contribution to a collective work, and that artists have for many years knowingly signed contracts that often include work-for-hire language, I fall into the latter category. However, I look forward to hearing from both sides on this issue and learning more about why artists are opposed to codifying a designation that apparently has been referenced in recording contracts signed by those artists for some time. Thank you, Mr. Chairman.
Mr. COBLE. Mr. Goodlatte and Mr. Berman are making an old man feel mighty good on a Thursday morning. I hope it continues.
The ranking member of the full committee, Mr. Conyers, is recognized.
Mr. CONYERS. Thank you, Mr. Chairman.
Could I begin by asking your permission to allow Karen McCarthy, our colleague from Missouri whose interests in this subject are very large, to join our panel merely as an observer, not to prolong the proceedings?
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Mr. COBLE. She may come forward, if she likes.
Mr. CONYERS. Thank you very much.
I am only going to take a few minutes, so I will skip all the commendations that have been passed around. I will second them, of course.
But we come here to deal with a subject about one group of creators who get ripped off more than anybody else in any other industry, recording artists. [Applause.]
It is about time we separate the people in the recording industry from the recording artists. I keep hearing from the recording industry about what the recording artists want. I know a few recording artists, and we will be checking this. This is appropriately a sensitive subject.
Number two, some people think this was an unintended consequence. People have been trying to make this change for years and there is nobody that is a veteran in this industry that doesn't know that. So to think that it happened inadvertently or that we just thought it was technical—okay.
The problem that we have is not just about the process, which has been explained very nicely, but the actual results surrounding the extension of the work for hire doctrine into sound recordings. There may be different views on how substantive the change in fact is, but there can be no disagreement that it is controversial and that it was made in a totally-unrelated conference agreement dealing with satellite transmissions under section 119 of the Copyright Act. There were no hearings, no markups, no consideration of any kind by the Members.
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I guess it was put in during daylight hours because that is when the Congress brought the measure up. But I contend, Mr. Chairman, that is not how this committee and this Congress should be writing our intellectual property matters. The normal process is too important.
So to my colleague and friend, Mr. Berman, who asked the question, ''What are we to do?'' I would like to answer right away that we should repeal this provision and start off by doing it right. That would be the fair thing to do since there have been no hearings or discussion about it. Let's just agree to remove it and begin the process all over again.
I believe that this change is a highly substantive one and one for which I find little agreement. It has been said by many that the entire concept of work for hire is inconsistent with the purpose of the constitutional framework on which intellectual property is built in the first place. It is the creative spirit, not the big money, not the business people, that creates original expression.
Substantively, this amendment terminates the copyright interests of recording artists and turns them over permanently to the record companies, which means that the artists who actually record the songs will never have the exclusive right to distribute, perform, or reproduce their own recordings.
While the record industries and recording artists disagree about whether the amendment really has a substantive effect or merely clarifies past practices, it should be noted that the Register of Copyrights appearing before us—a wonderful woman whose praises I second—has stated publicly that this change is far from technical. I believe there is scant authority to suggest that the change is merely technical, so we ought to put that one away very early on.
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So I would really like to make sure that we have the fair hearing that we are having. I am pleased that the subcommittee chairman has called this hearing and we have a balance of witnesses before us today.
I thank you very much, Chairman Coble.
[The prepared statement of Mr. Conyers follows:]
PREPARED STATEMENT OF HON. JOHN CONYERS, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN
We are here today because some webcasters want the government to intervene into the private marketplace, and order copyright holders to sell them their products at fixed rates. That type of government regulation—known as a compulsory license—is anathema to copyright law, and is given only in the rarest of circumstances when marketplace failure is clear.
No one cherishes the growth of the web more than this Committee or this member. No one sees the democratizing opportunities of more channels for more content more clearly. But the phenomenon of the web is not a license to take someone else's property which a compulsory license for ''over-the-air'' TV signals surely would be.
Intellectual property is property just like someone's real property. Even more important, according to some, because the creativity it unleashes enriches so many lives.
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Government regulation of intellectual property occurs almost never. In the 1970s, the cable industry was able to get a compulsory license for ''over the air'' signals only because it was a fledgling industry. In the 1980s the license was extended to the nascent satellite industry so as to set ground rules to protect against unfair duplicative distant network signals. Neither rationale exists for webcasting today. And both industries were required to adopt a series of government imposed regulations—such as must carry and educational broadcasting—in return.
The situation before us today is completely different. Internet companies may be new, but they are not struggling. They say they are competing against cable, satellite, and broadcasters, but it's the Internet companies that bring in billions from venture capitalists, advertisers, and the stock market. People are climbing all over themselves to invest in the Internet; getting in on an IPO for a high-tech company is ultimate investment dream. In fact, one of the biggest Internet companies, AOL, was worth $160 billion, and that's before it agreed to buy Time Warner. Together, they're worth $350 billion. Another, Yahoo, is worth $90 billion. Clearly, these companies can buy the content, they want, just as AOL bought Time Warner.
In any event, there's no evidence the free market is not working. If the Internet companies want content, they should negotiate for it the same way NBC negotiates for television shows or Ford negotiates for steel. And even if we did give Internet companies a license, we'd have to be certain we didn't let them copy the content they were rebroadcasting, or they'd have even more rights than cable and satellite do.
We're often asked not to regulate Internet companies, to let the market drive it. But now we're being asked to take someone else's private property for the benefit of those same companies. It can't go both ways: less regulation when it hurts, but more regulation when it helps. Giving Internet companies a compulsory license would be like the government storming someone's house and turning it into a hotel. Both involve the government requiring people to give up their property to everybody else, and I would oppose them both.
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Mr. COBLE. I thank the gentleman.
John, this may well be subject to interpretation, but I don't recall that efforts had been made to make this change in years gone by, but this could well be subject to interpretation.
Mr. BERMAN. Would the gentleman yield?
Mr. COBLE. I would yield to the gentleman from California.
Mr. BERMAN. John, I have been here for 18 years. Two points have been made by you and Mr. Goodlatte that I just feel compelled to respond to.
I have been here for 18 years and I have never been asked to support or push codifying sound recordings as a work for hire until the context of the cybersquatting legislation last November. I couldn't agree with you more on the role of recording artists, but I have never heard Hilary say that she is speaking for the recording artists. I wanted to make those two points.
As to the point Mr. Goodlatte made, the mere fact that it says in a contract something is a work for hire—I think it will become quite clear when we have this testimony that you can say it a thousand times, but that in and of itself does not make it a work for hire. Those are the two points I would make.
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Mr. CONYERS. Well, Mr. Chairman, now that we have made points on opening remarks, could I just observe that I didn't mention Hilary Rosen's name, number one. Number two, this issue started a little bit before Hilary Rosen came to her position, and the fact that it hasn't been brought to your attention or introduced as an amendment doesn't mean that this change hasn't been sought for quite awhile.
Mr. COBLE. The gentleman from California and the gentlelady from California, I believe said they would submit their statements for the record.
Does the gentleman from Wisconsin have an opening statement? Mr. Sensenbrenner?
Mr. SENSENBRENNER. No.
Mr. COBLE. The gentleman from Virginia, Mr. Boucher?
Mr. BOUCHER. Thank you very much, Mr. Chairman.
I have another hearing to attend at 11 and I will not be able to stay for the witnesses' testimony, so I very much appreciate your accommodating the brief statement from me and also from some of my other subcommittee colleagues.
I want to commend both Mr. Berman and Mr. Conyers for making the point that the change which took place in the statutory enactment last fall was not merely technical, was not merely codifying past practice, but was in fact substantive and did deprive a certain category of performers of a very important right.
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The category of performers are those who are performing works that are not collective in nature. So if you will, these are individual works.
These are also performers who sign the standard contract that is presented by recording studios which contains a clause that declares that the work is a work for hire. And if those two elements are present—it is not a collective work and that contract has been signed—then the effect of the statutory enactment last fall was to deprive those recording artists of their termination rights. That is very clear. And I think the testimony this morning, if it is fairly presented, will confirm that fact.
That right was not taken away in the normal legislative process. There was no bill, there were no hearings, there were no discussions before this subcommittee, there were no discussions in the full committee, or on the Floor of the House. The process by which that right was taken away may well have been inadvertent, and I am not going to suggest that it was done in the dark of night. It may well have been inadvertent, but nonetheless, an important and substantive right has been removed.
I would like to join with Mr. Conyers and Mr. Berman in urging that we move forward at the earliest possible time to restore that right. I think justice requires that and I look forward to working with them and hopefully with the subcommittee chairman in achieving that goal. [Applause.]
Thank you, Mr. Chairman. I appreciate your accommodating these remarks.
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Mr. COBLE. You are indeed welcome.
Ladies and gentlemen, if you would, I would appreciate it if you would hold your applause either in favor or in opposition. I think it's a good idea.
The gentlelady from California, Ms. Lofgren?
Ms. LOFGREN. Thank you, Mr. Chairman.
I just wanted to join with my colleagues, Messrs. Boucher, Conyers, and Berman, in urging that we do restore the state of the law to what it was before this change was made. I think that is the only way to move forward on the issue. And I do that without reaching a conclusion on the ultimate resolution of this issue because I think we need to have hearings and listen to everyone.
I would just note that it is clear that this was not a technical change. For those of us who were not on the conference committee—and that includes me—we were not aware of this. We believed and trusted that it was no more than a technical change.
Having said that, I want to come to the defense of the chairman of this committee. I have often described my service on this committee as a bipartisan island of sanity in a congressional sea of bipartisan madness. That is because we gave a chairman who is fair-minded, and who has always treated me with fairness and courtesy. I appreciate his leadership and his service. I know that he would never intentionally mislead anyone or do anything that was less than honorable.
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I have read the articles. I don't mind mentioning the name of Mitch Glazier, our former chief counsel. In my opinion, he has been maligned. I must say that in all the years I worked with Mitch, I found him to be an honorable, intelligent, decent individual who served his country honorably on this committee. In short he was someone who I really had a great deal of respect for.
I do believe we need to restore this provision as it was. I do not malign any member of this committee either publicly or privately. But I do believe that restoration is necessary in order to move forward. I thank the chairman for allowing me to say these words. The only objection I have is that you asked the audience not to applaud just before I spoke. [Laughter.]
I now yield back my time.
Mr. COBLE. I thank the gentlelady.
And I want to say to the audience, don't think I am being cranky. But a lot of times the applause can have a disruptive effect.
I thank the gentlelady from California.
The gentleman from Massachusetts?
Mr. DELAHUNT. Thank you, Mr. Chairman.
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I will be very brief. I just want to echo the sentiments expressed by everyone on this panel regarding yourself. Anyone who has worked with Howard Coble knows he is an individual who is scrupulously fair, honorable, and decent. And as my colleague from California, Zoe Lofgren, just indicated, he is someone who has led this committee in a very bipartisan way.
In fact, I would note, Mr. Chairman, that most of the kudos that are coming your way are coming from the Democratic side. I think that really underscores your leadership and your integrity and the kind of human being that he is.
Having said that, I would just make one observation. It is clear that this is more than a technical change. And for us, the best evidence of that is to look out and see that this is a crowded hearing room this morning. Clearly, it is more than technical.
However we did get here—and I, like others, did not serve on that conference committee and don't know how it happened—but however it happened, this may present an opportunity because clearly the marketplace is changing. We are now in the era of the Internet in which music is being digitized. Perhaps we have an opportunity to bring together and develop a consensus between the recording industry and the artists in the best interests of those stakeholders and at the same time serve in the best interests of the consumer and the American people.
[The prepared statement of Mr. Delahunt follows:]
PREPARED STATEMENT OF HON. WILLIAM D. DELAHUNT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MASSACHUSETTS
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Thank you, Mr. Chairman.
I think most of us would agree that it might have been better for us to have held this hearing before enacting a change in the law, rather than afterwards. But however we have come to this point, we are here, and I want to thank you for holding this hearing.
I know that some people have questioned your motives and integrity in regard to this issue, Mr. Chairman, and I want to say that those are people who do not know you as I do. You have always been scrupulously fair and honorable in your leadership of this subcommittee, and I think your readiness to devote a major portion of this hearing to the work-for-hire issue is only the latest confirmation of that.
I hope that everyone will use this opportunity to assist us in determining whether the law as it now stands is what will best serve the industry, the artists, and the consumer, in a marketplace that is changing with astonishing rapidity. And if the current law is not the best answer for the emerging marketplace, what are the solutions that we should be considering.
The fact is, Mr. Chairman, that however we got here, the advent of new channels for music distribution would eventually have required us to examine this issue. I recognize that there is a longstanding dispute between the artists and the industry over whether or not traditional sound recordings fit into one or another of the statutory categories as a work made for hire. But whatever the courts determine the law to be with regard to that question, it seems to me that new Internet-based technologies that allow the consumer to download individual selections have brought about a sea-change in the very concept of what a sound recording is. And old definitions that were written when a ''sound recording'' was a flat vinyl disk or a reel of magnetic tape may no longer apply.
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By the time termination rights reach the courts, the music industry will be something completely new. Will there be record companies in 2013? Will there be CDs?
The one thing we can be certain of is that people will still be writing music. And they will still be singing it.
Personally, I also believe there will always be a need for producers and promoters, even in the anarchic world of the Internet. Yet we don't know what recording companies will look like, or how their contractual relationships with artists will be structured.
It is hard enough to legislate for a marketplace that exists. It is much harder to legislate for a marketplace that is yet to come into being. Perhaps we cannot expect to do this. Perhaps it is our fate to lag behind innovation.
But if we cannot always guess correctly, we can at least try to foster a legal regime that will be hospitable to innovation and will fairly balance the interests of the various stakeholders and the public.
It is not our job to pick winners and losers. But it is our job to be sure that the laws promote a level playing field. That is what the Copyright Act seeks to do. Using such concepts as ''termination rights'' and ''work-for-hire'', it seeks, not to set the terms of the bargain between the artist and the label, but to afford each side some degree of leverage.
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It seeks to reward the recording company that takes risks by backing unknown artists. And it seeks to give successful artists of enduring hits the opportunity to renegotiate the deal at a later date.
Unless, of course, the product of their joint efforts is a work made for hire.
I am less concerned about the historical questions that are raised by this current controversy than about the policy question it has precipitated: does the present law strike the right balance? Should sound recordings be works made for hire, and, if so, under what circumstances?
The recording industry rightly points out that it is they who take the losses on recordings that never sell, and that they are entitled to recapture these losses when the other two make the Top 20. The artists rightly ask whether there are any limits to that logic, and whether a featured artist whose work is still selling 35 years later isn't entitled to strike a better deal.
I guess what I would hope is that the creative community could get together on this issue. They are both indispensable elements of one of our greatest American success stories. Together they have brought music into the lives of billions of people the world over. Together they have created wealth, not only for themselves but for our economy.
Neither half of this partnership can prosper without the other. And I think it should be possible for them to sit down together and work this out.
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This hearing is part of that process, Mr. Chairman, and I hope it will point us in a positive direction. I feel great good will toward both of these communities, Mr. Chairman, as I know you do. And I want to do everything I can to bring them together so that the music will play on.
Mr. COBLE. I thank the gentleman from Massachusetts.
The gentleman from Florida?
Mr. WEXLER. Thank you, Mr. Chairman.
I will be brief and I, too, want to echo my friend from Massachusetts' comments with respect to you, Mr. Chairman.
If I could just offer an observation, however, as to the process, I serve on two committees—this committee and the International Relations Committee—and in the 3 plus years I have been here, I don't think a week goes by that we Democrats don't object to process in one form or another. There is probably not a week goes by that a bill or an amendment or something is done without what we Democrats in the minority think is a full hearing or appropriate consultation or what have you. I think from the point of view of the minority, at times it is meritorious in terms of the objection to process. But as to the high-mindedness of some of the objections to the process in this case—and I do respect them—to suggest that it is somewhat novel in this process just totally distorts what my experience has been.
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We are a Congress that gives out $50 billion in tax cuts without much of a discussion. So to be shocked that certain things may happen without the fullest of hearings to me is really just what goes on in this Congress. It doesn't make it good or bad, necessarily, it is just part of the process.
The one thing that I think is unique about the objection here, Mr. Chairman—if I may suggest—is that apparently some people believe this was a bipartisan violation of the process, which for me is somewhat unique in this process, because usually it is one side of the aisle complaining that the other side of the aisle violated the process.
So I guess this is, in this respect, novel in terms of my experience, because this is the first time that apparently there is an objection that there has been a bipartisan violation of the process. And as things go, if I put it on the scale, a bipartisan violation of the process—if it is in fact that—is probably a lot better than the things I have experienced for the last 3 years.
So I applaud this committee and the ranking member.
Mr. COBLE. I thank the gentleman from Florida.
The gentlelady from California has decided she does want to make an opening statement.
Ms. BONO. Thank you, Mr. Chairman.
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I thought I would jump into the party since everybody had something to say.
I, too, want to echo the sentiments I have heard from my colleagues on the other side and say that in my 2 years of being here and of knowing you, I think more highly of you than almost any Member of Congress. And not to speak for my late husband, but I know that Sonny felt that same way, too. This issue for me is a tough one and this is the first time I have had to try to figure out what Sonny would be doing. I first of all know that he would be lauding you and who you are.
But I also want to weigh in and echo what especially the gentlelady from California, Zoe Lofgren, has said. I agree, too, that we should restore the law to the way it was before the change in November.
Thank you, Mr. Chairman.
[The prepared statement of Ms. Bono follows:]
PREPARED STATEMENT OF HON. MARY BONO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Chairman, thank you for holding this oversight hearing on the works-made-for-hire issue. I appreciate your taking a second look on an issue that is both complicated and emotional. My hope is that this hearing will examine the ramifications of including sound recordings as a work-made-for-hire. The parties effected are both the individual artists and the record industry. I believe that the goal of these hearings should be to hear the individual arguments and hopefully suggest additional points that would bring all sides of this debate together and revisit the work-made-for-hire issue.
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The real issue at stake here today is the right of a featured artist to terminate the transfer of his or her copyright. The issue of termination is critical because artists and their heirs have a substantial financial and sentimental stake in ownership of their sound recordings. Without an appropriate termination point, sound recording works that have gained popularity over the years will not financially benefit those artists who created it.
Twenty-four years ago, this committee drafted the Copyright Act of 1976 which expanded the 1972 legislation that gave sound recordings copyright protection. In the past, sound recordings did not receive all copyright protections. Sound recordings were not specifically listed as a category of commissioned works that could be considered a ''work-made-for-hire, unless both parties expressly agreed to that fact in writing. The members of the House Judiciary Committee, who drafted the 1976 Copyright Act, spent two years in hearings debating the merits of what items should be included in the work-made-for-hire category. Sound recordings were not included in that category.
The 1976 Copyright Act intended to give a form of protection for authors. The goal of the 1976 Act was to give artists the right to terminate copyright assignments to record companies 35 years after the initial copyright transfers. The 35 year term was intended to protect authors who might transfer, for a small amount of money, the rights to a work that later became a major success.
These young artists who are desperate to sign a contract to a record company are the backbone of the recording industry. Any major artist had to make his or her start at the bottom as an unknown. The negotiation power the record company has over the music artist is staggering. The artist is so desperate to sign a contract for an album that the artists' concern for his future financial well-being and possible royalty rights are minimal. The current inclusion of sound recordings in the Works-made-for-hire provision would have a detrimental effect on these struggling artists.
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Before sound recordings were included on the list of works-made-for-hire, neither the artists nor the record companies knew of the importance, nor impact of including sound recordings in the category of a work-made-for hire. Therefore today, I will listen to the debate with a balanced view of what the impact is to both the artists and the record labels. Hopefully I will receive a better understanding of the facts and ramifications of the 1999 amendment to the 1976 Copyright Act.
Thank you again, Mr. Chairman, for studying this issue a second time. I am confident that both sides representing this issue will be fair in their assessments of the impact the work-made-for-hire classification has on their respective industries. I look forward to hearing both sides of this issue.
Mr. COBLE. I thank the gentlelady and I thank all the members for their opening statements.
Folks, I must remind you again that we must clear out of here by 1:30.
Marybeth, it is good to have you here. As Howard Berman said previously, you are our very able Register of Copyrights. Ms. Peters served as acting general counsel of the Copyright Office and as chief of both the examining and information and reference divisions.
Ms. Peters also served as a consultant on copyright law to the World Intellectual Property Organization and authored the General Guide to the Copyright Act of 1976. The subcommittee has copies of Ms. Peters' testimony.
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Madame Register, you are familiar with our 5-minute rule. And folks, I want to remind the subsequent witnesses of this as well. We have written statements of every witness. I am asking each witness to confine his or her oral testimony to 5 minutes. You will know when the 5 minutes have elapsed when the red light illuminates in your eye. Ms. Peters has a good track record of staying within the 5 minutes.
It is good to have you with us, Ms. Peters.
STATEMENT OF HON. MARYBETH PETERS, REGISTER OF COPYRIGHT, COPYRIGHT OFFICE OF THE UNITED STATES, LIBRARY OF CONGRESS
Ms. PETERS. Thank you, Mr. Chairman.
I want to thank you for those kind remarks. I certainly am pleased to be here. Given the interest of the committee in the second topic, work made for hire, I am going to keep my statement with regard to the Copyright Office rather brief and rely on the rather full statement that we submitted for the record.
This morning I am accompanied by three people from the Copyright Office, our very able General Counsel, David Carson, our Assistant General Counsel, Marilyn Kretsinger, and Sayuri Rajapakse, an Attorney Advisor in our Policy and International Affairs Office.
Obviously, the last 2 years—because of all of you—have been very busy ones for the Copyright Office. During the period between October 1998 and December 1999, you passed five bills, including the Digital Millennium Copyright Act, which actually made it very hard for us to keep up with one of our jobs, which is to publish the copyright law. Every time we were ready to publish it, you enacted new legislation. But at the moment, we are caught up and we have added sound recordings to section 101 as part of the work made for hire. So we will see whether we stay caught up.
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Obviously, the Digital Millennium Copyright Act was the most far-reaching legislation in copyright in the past 2 decades and it gave the Copyright Office many new duties and responsibilities which are really outlined in my testimony as Appendix 1. We found we were dealing with new issues with regard to web casting, that we have issues with regard to the anti-circumvention provisions of the DMCA, and that for the first time we are registering designs for vessel hulls. Despite our current staffing levels, we managed to take on all these responsibilities and I think to discharge our duties well.
Obviously, we completed our task in delivering the study on digital distance education where we had hearings across the country and had statements from more than 175 parties. And you held a hearing, as did the Senate.
We are currently involved in a very controversial and very interesting task of determining whether or not any particular class is or is not likely to be adversely affected by the technological protections that are used by copyright owners to control access to their work. We will be making a recommendation to the Librarian well before the deadline that he has to make a decision which is October 28th.
And with regard to the designs for vessel hulls, you have already amended that statute to make the legislation permanent. And I can tell you, as a result of making it permanent, the number of registrations have increased. So we now have 23, which you can look on our web site and see.
We are pleased that we have been able to continue to advise the Congress and the Nation on our issues and to provide valuable and timely assistance to the United States Trade Representative and other Executive Branch agencies. Obviously, we have worked fairly hard to try to get the two new WIPO treaties not only implemented and ratified in this country, but in other countries of the world. And we participate in many, many programs around the globe.
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Obviously, our main job is to create and maintain the official public record of copyright registrations and recorded documents and to administer various compulsory license and statutory obligations and, of course, oversee the Copyright Arbitration Royalty Panels. We have been busy in the past year. We registered over 600,000 claims that represented more than 800,000 works. We recorded almost 17,000 documents that contained hundreds of thousands of titles.
One of our jobs is to acquire works for the Library of Congress and we forwarded many copies of works that had a value of $36 million to the Library to be used in its collections and exchange programs.
As you can see from my written statement, the Copyright Office unfortunately continues to experience serious processing delays, especially in the examining and cataloging division. We have developed all kinds of plans to try to deal with this. We are basically trying traditional methods of overtime. We are hiring more people. We are in a reengineering process to streamline our processes. And of course, we are continuing to develop our electronic registration and recordation system.
Much time is spent with administering the Copyright Arbitration Royalty Panels. We have seven proceedings that are going on. Four involve the setting of rates and terms under various compulsory licenses. Three deal with distributing the royalty fees. And I can say in the recent past we have distributed more than $1 billion in royalties.
Our big thing in the past year has obviously been to implement the new fee schedule that we spent more than a year working on. We submitted a report to you in which I explained why we did not bring the basic registration up to full cost recovery, because we wanted to meet the goals of the copyright law and to make it fair and equitable for all copyright owners to be able to use the system.
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Obviously, we focus on our web site, trying to make as much information as we possibly can available to the public. As you can see, we have made a number of contributions that I am proud of. And I am proud of the employees of the Copyright Office. Obviously there is much to be done and we look forward to working with you in the years ahead.
Thank you.
What I would like to do now is turn to my statement on sound recordings as works made for hire.
Mr. COBLE. And for the record, Ms. Peters is being allowed 10 minutes because she is wearing two hats.
Please proceed, Ms. Peters.
Ms. PETERS. Thank you.
I am pleased to testify on the issue of sound recordings as works made for hire.
When I was first asked about a possible amendment last year, my immediate reaction was that performers would not be pleased because works made for hire is always an emotional issue. But I thought that the amendment would actually reflect existing industry practice. Having had the opportunity to reflect on the issue, and having had the opportunity to hear the views of virtually everyone, I can now assure you that the issues are far from simple and straightforward, and the amendment has stirred up passions beyond anything I could have imagined.
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Let me begin with some of the historical and legal context behind the amendment and also my views on whether the amendment was appropriate and whether further legislative action should be taken.
The issues are complicated and involve several principles of copyright law. I refer you to my written testimony for a more complete account.
I believe that the amendment was a substantive change in law, as we have heard this morning, not a technical amendment as some have claimed. However, I believe the amendment was a reasonable and good faith attempt to address genuine problems faced by record companies' concerns about possible threats to their ability to continue to exploit the sound recordings they have invested in and distributed.
I also believe that the amendment prospectively deprived performers of important rights that authors have always enjoyed. Termination rights are the reason people care whether a sound recording can be a work made for hire. The issue is whether performers, whose performances are recorded and distributed by record companies, should have a right to terminate their contracts 35 years after the sound recording is released.
The copyright law gives authors the right to terminate their grants of rights in their works after 35 years in furtherance of an important goal of copyright law to protect the author against unfavorable transfers by giving him the opportunity to renegotiate his contract if the work has been successful in order to obtain a greater share of the profits. This right has its origin in the longstanding concept of a renewal copyright term, which was replaced in 1978 with a right of termination.
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Although most works are subject to rights of termination, works made for hire are not. Works made for hire historically have been works created by employees in the course of their employment. In such cases, the employer of the person who creates a work is deemed the author. Because the employer is the author in the eyes of the law, the person who actually created the work does not enjoy a right of termination.
Courts broadly construed the concept of employment for hire before 1978 and generally included commissioned works within that definition. The 1976 Revision Act substantially cut back on work made for hire by dividing the definition of such work into two prongs: those done by employees within the scope of their employment, and the second category, specially ordered or commission works, which could be works made for hire if the work falls within one of nine categories, which include among other categories, motion pictures, contributions to collective works, and compilations, but only if all the parties agree in writing that it is a work made for hire.
Although sound recordings were not among these nine categories, record companies and recording artists typically have signed agreements providing that they are works made for hire. Record companies and some recording artists have registered sound recordings as works made for hire. One theory that record companies say they have relied on is that sound recordings are released in the form of albums and therefore qualify as works made for hire because they are contributions to collective works.
Despite this longstanding practice and despite the collective work rationale, the addition last year of sound recordings as a tenth category is a substantive change. I understand the reasons why record companies sought the amendment. If a sound recording is not a work made for hire, there will usually be a number of people who could be considered authors of any single sound recording. Each author would have a right to terminate the record company's rights after 35 years. This is a qualified right. Among other things, unless all the authors join in the termination, the record company can continue to exploit the work.
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However, the terminating author would also have the right to license his rights to another record company. In that case, the first record company might lose all incentive to continue distributing the recording, since there would be another company who could also distribute the identical work.
While I don't oppose the amendment, per se, I am not persuaded that it achieves the appropriate balance. I believe that those who contribute substantial authorship to a sound recording should not be deprived of the right of termination. I agree that an unfettered termination right enjoyed by all performers and co-authors may well be unworkable and make many sound recordings unmarketable after 35 years. But a carefully calibrated termination right, restricted to the major contributors of authorship in a sound recording—such as featured artists and possibly the record producer—should have relatively little negative impact and would retain an important right that authors generally enjoy.
I therefore recommend that the subcommittee consider refining the recent amendment by excluding the contributions of these key contributors from work for hire status.
Thank you.
[The prepared statements of Ms. Peters follow.]
PREPARED STATEMENT OF HON. MARYBETH PETERS, REGISTER OF COPYRIGHT, COPYRIGHT OFFICE OF THE UNITED STATES, LIBRARY OF CONGRESS
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Mr. Chairman and Members of the Subcommittee: I appreciate the opportunity to testify at this Oversight Hearing. My statement reviews our operations, major accomplishments and challenges.
The last two years have been very busy ones for the Copyright Office not only because of increased legislative mandates but also because of the changing nature of activity in certain areas of title 17. The adoption of new fees also increased the Office's work load. Despite the fact that its staffing levels remained about the same, the Office managed to make great strides in accomplishing these new responsibilities.
The Office responded aggressively to new Congressional directives including those contained in the Digital Millennium Copyright Act of 1998. This legislation, the most far reaching copyright bill in two decades, gave the Office new duties and responsibilities in the areas of liability limitations for infringement of copyright in a digital environment, for digital performance rights in sound recordings, and protection for vessel hull designs. In addition, the Office continued its role of advisor to Congress on national and international issues, and provided valuable and timely assistance to the United States Trade Representative and other executive branch agencies. The Office also continued to create and maintain the official public record of copyright registrations and recorded documents, administered the various compulsory licenses and statutory obligations, and provided technical, legal, and educational copyright assistance throughout the world. The Office took major steps forward in its systematic development and implementation of the CORDS system, a fully automated registration and deposit system, successfully implementing during the past year an innovative system-to-system communications capability for electronic submission of copyright claims and deposits for digital dissertations from the office's largest remitter. Additionally, the Office continued to make progress in providing a higher level of security for materials submitted for copyright registration.
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In fiscal year 1999, the Copyright Office received approximately 619,022 claims to copyright representing over 800,000 work, of which 594,501 were registered. It recorded a total of 16,447 documents covering hundreds of thousands of titles. It forwarded more than 603,000 copies of works, with a value of more than $36 million dollars to the Library of Congress for its collections and exchange programs.
The Office processed 21,299 filings from cable operators, satellite carriers, and manufacturers and importers of digital audio recording devices and media, and processed claims to the various royalty pools. The Licensing Division collected a total of $214,888,724.96 in royalty fees (almost 85 percent in the form of electronic funds transfers through the automated Clearing House of a Fedwire transfer), and distributed royalties in the amount of $172,284,737.60,
When we last reported to you in 1998, we stated that we had lost ground in providing some essential copyright services, and observed that we had a significant arrearage with registration in some cases taking between six and eight months. We outline in part III of this statement what steps the Office is taking to reduce this arrearage.
Our focus this year is on:
1. Progress in fulfilling legislative directives;
2. Implementation of new fees;
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3. Improving our service by providing more timely registration of claims and recordation of documents;
4. Making more information available to the public electronically;
5. Acquiring materials through mandatory deposit; and
6. Administration of compulsory licenses and CARP's.
I. PROGRESS IN FULFILLING LEGISLATIVE DIRECTIVES
During the period between October, 1998 and December 1999, Congress passed five bills, some of them addressing separate acts, concerning copyright. Several of these acts gave the Office major new responsibilities in developing and implementing new procedures and regulations and conducting studies or reports for Congress on critical and often controversial new and emerging areas of copyright law. The Office finds itself faced with new and challenging legal questions about webcasting, anticircumvention, and design protection for vessel hulls.
A. Overview of Certain Recently Enacted Legislation
Recently enacted legislation that has had a major impact on the Copyright Office's workload includes:
1. The Digital Millennium Act (DMCA).
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The DMCA allowed the United States to ratify two new international treaties. It also confirms and clarifies the historic and vital role of the Copyright Office by affirming in statutory language the Copyright Office's longstanding role in copyright policy and international matters.
Title I of the DCMA added a new chapter 12 to title 17 United States Code, which among other things prohibits circumvention of access control technologies employed by or on behalf of copyright owners to protect their works. Specifically, new subsection 1201(a)(1)(A) provides, inter alia, that ''No person shall circumvent a technological measure that effectively controls access to a work protected under this title.'' Subparagraph (B) limits this prohibition. It provides that anticircumvention ''shall not apply to persons who are users of a copyrighted work which is in a particular class of works, if such persons are, or are likely to be in the succeeding 3-year period, adversely affected by virtue of such prohibition in their ability to make noninfringing uses of that particular class of works under this title'' as determined in a rulemaking by the Librarian of Congress acting upon my recommendation. This prohibition on circumvention becomes effective two years after the date of enactment, on October 28, 2000.
Title II of the DMCA limits certain online infringement liability for Internet service providers. Specifically, subsection 512(c) provides limitations on service provider liability with respect to material residing, at the direction of a user, on a system or network that the service provider controls or operates, if the conditions set forth in subsection 512(c)(1) are satisfied.
Title V of the DMCA, establishes a new chapter 13 to title 17 which creates sui generis protection for certain original designs of vessel hulls and sets the terms, conditions, and limitations of design protection, including the rights granted to the designer or owner of the design, mandatory registration of designs with the Copyright Office, and enforcement of rights. Protection for registered vessel hull designs lasts for a period of ten years measured from the earlier of the date of registration with the Copyright Office or the date on which the design is first made public, and concludes at the end of the tenth calendar year. Unlike copyright law where registration is not a prerequisite to protection, registration of an otherwise eligible vessel hull design must be made with the Copyright Office within two years of the design being made public. Failure to make timely registration results in loss of protection. Notice must be attached to a protected design, and while failure to attach proper notice does not terminate protection, it does affect remedies in an infringement action.
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2. The Sonny Bono Copyright Term Extension Act.
This Act extends the term of copyright for most works to the life of the author plus 70 years. It similarly extends for an additional 20 years the terms of anonymous and pseudonymous works, works made for hire, and works in their renewal terms.
It addresses concerns of libraries and researchers about the unavailability, for 20 additional years, of works that are no longer commercially available. A new exemption allowing libraries and archives to use the works for preservation, scholarship, or research during the last 20 years of the copyright term is embodied in section 108(h) of the copyright law.
This same legislation also contained the ''Fairness in Music Licensing Act of 1998'' which broadens existing exemptions to the public performance right in broadcast music (sec.110(5) of title 17, United States Code) for qualifying establishments, primarily restaurants, bars, and retail businesses depending on their square footage or total number and size of loudspeakers or audiovisual ''devices,'' and provided the business does not charge the customer to listen to the broadcast.
B. New Procedures and Regulations.
The Copyright Office has aggressively undertaken these new responsibilities. Our progress is discussed more fully below and the status of each responsibility is illustrated on a separate chart.(see footnote 1)
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1. Anti-circumvention Rulemaking (Title I of DMCA)
The Librarian of Congress is required to make a determination as to whether or not particular classes of works are to be exempted from the anti-circumvention prohibition on access. This determination is to be made upon the recommendation of the Register of Copyrights in a rulemaking proceeding. The determination thus made will remain in effect during the succeeding three years. In making her recommendation, the Register of Copyrights is to consult with the Assistant Secretary for Communications and Information of the Department of Commerce and report and comment on the Assistant Secretary's views. 17 U.S.C. §1201(a)(1)(C).
The Office published a Notice of Inquiry seeking comments and held hearings early this month in Washington, D.C. and last week at Stanford University Law School in Palo Alto, California. Post hearing reply comment are due June 23, 2000. The Office will then evaluate and assess the evidence gathered.
2. Designation of Agent for Online Service Providers (Title II of the DMCA)
To take advantage of the Online Copyright Infringement Liability Limitation Act, service providers must designate agents whom copyright owners may notify if the owners believe their work is being infringed. The name and address of the agent must be filed with the Copyright Office and also posted on the service provider's website. Title II of the DMCA became effective on enactment; consequently, the Office had to act immediately. It published interim regulations on November 3, 1998, on an emergency basis, and stated that it would publish a Notice of Proposed Rulemaking at a later date. 63 Fed. Reg. 59233. In later meetings with the parties using the system, they indicated that the interim system was operating effectively, and the Office has continued to operate under these regulations. The Copyright Office maintains a list of the filings which are accessible on its website. As of May 12, 2000, approximately 2,121 agents had been designated.
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3. Vessel Hull Design Protection (Title V of DMCA)
Shortly after passage of the DMCA, the Copyright Office began establishing the registration system for vessel hull designs. Recognizing the need for immediate implementation (because enforcement of rights under the new chapter 13 requires first obtaining a registration), the Office quickly took steps to establish a workable registration system. It established an internal task force to determine what needed to be done. The Office also consulted with representatives of the marine manufacturing industry, academics, and the Coast Guard. A new registration form, Form D–VH, to be used for all applications for registrations of vessel hull design was created and interim regulations were published on July 7, 1999. 64 Fed. Reg. 36,576 (1999). We received our first application for registration on July 29, 1999. So far the Office has received 23 design claims and registered 21. Most of the 23 were submitted after protection was made permanent on November 29, 1999.
4. Notice for Libraries and Archives (Copyright Extension Act)
While granting libraries and archives an exemption under §108(h)(1), the law makes it clear that a library or archive may not use a work under this subsection if: (A) the work is subject to normal commercial exploitation; (B) a copy or phonorecord of the work can be obtained at a reasonable price; or (C) the copyright owner or its agent provides notice to the Copyright Office in accordance with Copyright Office regulations that either of the conditions set forth in (A) and (B) applies. The Copyright Office published interim regulations with requests for comments on December 30, 1998. 63 FR. 71785. Comments were due by February 15, 1999 and reply comments by April 1, 1999. The Office has not yet published final comments; no notice has been recorded under the interim regulation.
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C. Completion of Reports Requested in DMCA
1. Report on Copyright and Digital Distance Education
The DMCA required the Copyright Office to prepare a report for Congress on the promotion of distance education through digital technologies, including interactive digital networks. To assist the Office in analyzing the relevant issues and in preparing its recommendations, on December 23, 1998, the Office requested comments from all interested parties, including representatives of copyright owners, nonprofit educational institutions, and nonprofit libraries and archives (63 FR 71167). In addition, a series of three public hearings were held in Washington, D.C. (January 26–27, 1999), Los Angeles, CA (February 10, 1999), and Chicago, IL (Feb 12, 1999). Over 175 individuals and interest groups responded in writing or in person at the hearings.
The Copyright Office released its report on ''Copyright and Digital Distance Education'' at a hearing of the Senate Judiciary Committee held on May 25, 1999. On June 24, 1999, this Subcommittee held its hearing on the report. The report is available on the Office's website and through the Government Printing Office.
The Office made several recommendations including: (1) that section 110(2) be updated to permit digital transmissions over computer networks; (2) elimination of the physical classroom requirement permitting transmissions to students officially enrolled in the course, regardless of their physical location; (3) adding language that focuses more clearly on the concept of mediated instruction; (4) adding safeguards to minimize the greater risks of uncontrolled copying and distribution posed by digital transmission; (5) retaining the current ''nonprofit'' requirement for education institutions seeking to invoke the exemption; (6) adding a new provision to the Copyright Act to allow digital distance education to take place asynchronously; and (7) expanding the categories of works exempted from the performance right beyond the current coverage of non-dramatic literary or musical works, adding other types of works but allowing performances of only reasonable and limited portions. The Office further recommended that Congress provide clarification of the fair use doctrine in legislative history to confirm that the doctrine applies in the digital environment, and to explain the function of fair use guidelines. No legislation has been introduced implementing the Office's recommendations.
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2. Report on Effects of Encryption Research
The DMCA also required the Copyright Office and the National Telecommunications and Information Administration (NTIA) of the Department of Commerce to prepare a report for Congress on the effects on encryption research of section 1201(g) of title 17. Section 1201 establishes a prohibition on the act of circumventing technological measures that effectively control access to a copyrighted work. Subsection 1201(g) provides an exemption for this prohibition for certain acts of encryption research. The prohibition is scheduled to go into effect on October 28, 2000. The Office and NTIA solicited and received public comments. This joint report has been sent to Congress. It is now available on both the NTIA's and the Copyright Office's websites.
3. Report on Protection for the Designs of Vessel Hulls
The Office had been required to prepare a joint report with the Patent and Trademark Office evaluating the effects of the Vessel Hull Design Protection Act at one year and two year intervals after the effective date of this legislative. The Copyright Office had completed a draft of the first report which was being reviewed when Congress amended this Act on November 29, 1999, and rescinded the requirement. Under this amendment the Act is no longer set to expire in two years, and the Office is not to issue a report until November 1, 2003.
Report on Effects of Title I and Development of Electronic Commerce
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Section 104 of the DMCA directs the Register of Copyrights and the Assistant Secretary for Communications and Information of the Department of Commerce to submit to the Congress no later than 24 months after the date of enactment a report evaluating the effects of the amendments made by title I of the Act and the development of electronic commerce and associated technology on the operation of sections 109 and 117 of title 17, United States Code, and the relationship between existing and emerging technology and the operation of those sections.
A Notice of Inquiry initiating this study has been completed by the Office and the Department of Commerce and should be published in the Federal Register in the near future.
4. Conditions in Motion Picture Industry
The Comptroller General in consultation with the Register of Copyrights is to study the conditions in the motion picture industry that gave rise to §4001 and the impact of §4001 on the motion picture industry. GAO has begun its study. The Office has engaged in consultation with the GAO and expects that these consultations will continue.
D. Ongoing Legislative Concerns
In its exhaustive review of title 17 in order to update the Copyright Office's publication of this title in its Circular 92, the Office identified a number of areas where amendments, most purely technical, should be made. It has forwarded these amendments to the Senate and the House.
E. International Activities
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1. Ratification of two new international World Intellectual Property Organization (WIPO) treaties. The DMCA allowed the United State to ratify both the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. Both of these treaties known as ''the Internet Treaties,'' deal with significant digital issues. The Copyright assisted the Congress and the Executive Branch in the efforts necessary to implement and notify these treaties. The United States deposited its instruments of ratification with the World Intellectual Property Organization on September 14, 1999.
2. Dispute brought in World Trade Organization. Office staff provided technical assistance to the U.S. Trade Representative in the defense of a claim against the United States brought in the World Trade Organization by the European Union. The dispute concerned section 110(5)(a) and (b) of the U.S. Copyright Act, which the European Union alleged violated the U.S.'s international treaty obligations. Staff from the Copyright Office assisted in drafting the written submissions to the Dispute Settlement Body of the WTO, and participated in consultations and oral arguments before the Dispute Resolution Panel on behalf of the United States. In May of this year, the Panel issued a decision in the case, finding that section 110(5) subsection (a) of the U.S. Copyright Act was in compliance with all of the U.S. obligations, but that subsection (b) violated certain provisions of the TRIPs Agreement and the Berne Convention. The United States has two months from the date of formal publication of the decision (which has not yet occurred) to decide whether it will appeal the Panel's findings.
3. Law Enforcement Coordination Council. In September, 1999, President Clinton signed into law the Treasury/Postal Appropriations Bill, which created the ''National Intellectual Property Law Enforcement Coordination Council (''NIPLECC''), which is comprised of executive branch law enforcement agencies, as well as the Department of Commerce's, International Trade Division, the Patent and Trademark Office, the U.S. Trade Representative and the State Department. It is chaired by the Patent and Trademark Office and the Justice Department. By statute, the NIPLECC is required to consult with the Register of Copyrights on law enforcement matters relating to copyrights and related matters. The Register and her staff have been involved at all levels of the NIPLECC's development, including discussing the appropriate scope of responsibility and action plan of the NIPLECC, drafting proposals and participating in meetings of the principals.
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4. Continued Effort to Advise and Train Others to Improve Copyright Protection. The Office continued to participate in many international activities including the meeting of the Governing Bodies of the World Intellectual Property Organization and that organization's meetings of the Standing Committee on Copyright and Related Rights. In the Standing Committee discussion has focused on a new treaty for performers of audiovisual works (screen actors) and on potential new treaties for broadcasters and for producers of databases. Additionally, the Office assisted the United States Trade Representative in its many bilateral and multilateral activities.
The Office continued its program of international development cooperation through its International Copyright Institute, by meeting with many foreign delegations and high level officials and by participating in many programs on copyright and related rights held in countries all over the world.
The International Copyright Institute and the World Intellectual Property Organization's Worldwide Academy jointly hosted a ''Worldwide Seminar on Copyright and Related Rights'' in Washington, D.C. for participants from fifteen countries during the week of March 17–24, 1999. The objectives of the program were to discuss current and future copyright protection and to exchange experiences among the participants and U.S. experts. In particular the seminar focused on the new WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty, and the impact of new technology on the protection and enforcement of copyrights. Experts from both government and the private sector presented a series of talks on United States copyright law and practice. In addition, participants presented reports on the state of intellectual property protection in their countries.
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The Office participated in WIPO seminars in Kazakhstan, Kyrgyzstan, Namibia, Australia, and in New Delhi, Calcutta and Hyderabad, India; and in USAID and Department of Commerce programs in Kyrgyzstan and Egypt.
The Office was also represented at the meeting of the Global Business Dialogue in Paris where the Register commented on the Intellectual Property Draft Paper and at the WIPO International Conference on Electronic Commerce and Intellectual Property and at MIDEM.
II. IMPLEMENTATION OF NEW COPYRIGHT OFFICE FEES AND THEIR IMPACT ON THE OFFICE
A. Implementation of New Fees
In July, 1997, anticipating enactment of a new fee system, the Copyright Office began the process of determining the costs of registering claims, recording documents and providing related services. It hired two consulting firms with expertise in cost accounting and the new Federal Managerial Coast Accounting Standards and established a Copyright Office Fee Analysis Task Group.
As enacted by Congress, the new fee provisions contained specific directions as to how the Copyright Office should adjust its fees. They were:
1. The Register shall conduct a study of the costs incurred by the Copyright Office for the registration of claims, the recordation of documents, and the provision of services. This study should also consider the timing of any increase in fees and the authority to use such fees consistent with the budget.
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2. On the basis of the study, and subject to congressional approval, the Register is authorized to fix fees to recover reasonable costs incurred for the services provided plus a reasonable adjustment for inflation.
3. The fees should also be fair and equitable and give due consideration to the objectives of the copyright system.
4. The Register must then submit a proposed fee schedule with the accompanying economic analysis to Congress for its approval. The Register may institute the new fees 120 days after the schedule is submitted to Congress unless Congress enacts a law within the 120 day period stating that it does not approve the schedule.
The Office contacted representatives of interested parties to invite them to discuss the forthcoming fee increases and identify their members' concerns. A number met with the Register; others submitted comments. The Office published a Notice of Proposed Rulemaking (NOPR) with two or more possible fee schedules and formally sought public input through a public hearing held on October 1, 1998, and a comment period. After considering the studies, the operational and policy issues and the input from the public, on February 1, 1999, the Register sent Congress a detailed analysis and proposed fee schedule. This report explained why careful evaluation of all relevant data led the Office to conclude that the basic registration fee could not be set to recover the full cost of registering a work, if it is to be reasonable, fair, and equitable and consider the objectives of the copyright system. It recommended recovery of Copyright Office costs for most other services. After receiving the report, Congress had 120 days to enact legislation rejecting the proposal, or the fees could go into effect. No such legislation was enacted; therefore, the Office published a new fee schedule on June 1, 1999, which went into effect July 1, 1999.(see footnote 2) The Office announced that this fee schedule would remain in effect for at least three years.
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B. Operational Impact of the New Fee Schedule
As detailed fully in the Office's Annual Report for 1999, the Office made significant efforts to inform the public of the fee change. Despite these efforts, 90 percent of the cash receipts received in the first week after the new fees went into effect contained insufficient funds. This percentage was reduced to about 50 percent by the end of the fiscal year. Currently, almost a year after the new fees went into effect, almost 15 percent of cash receipts are still insufficient.
C. Relationship to Copyright Office Appropriation.
The Copyright Office collects fees for registration of copyright, recordation of documents and other services. Since fiscal year 1998 the Office has used its authority to earn interest on its Deposit Accounts( prepaid fees), which is deposited into a no year account. These funds are available to fund authorized activities within the level of appropriation. Effective July 1, 1999, the Office increased the cost of filing a basic registration from $20 to $30.
In fiscal year 1999, the Office collected $16,699,846 in copyright fees. The fees earned by the Copyright Office are deposited in a Copyright Office account in the U.S. Treasury. Earned fees are included when determining the level of appropriations for the Copyright Office. In fiscal year 1999, the Copyright Office received $34,891,000 in direct appropriations and authority to spend receipts. For fiscal year 2000 this level is $37,485,014. This appropriation supports 478 permanent staff and 23 temporary employees.
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III. IMPROVING OUR SERVICE BY PROVIDING MORE TIMELY REGISTRATION OF CLAIMS AND RECORDATION OF DOCUMENTS.
As noted above, the Copyright Office continues to experience serious processing arrearages, particularly in the Examining and Cataloging Divisions. The Office has developed and initiated a plan to streamline its registration and recordation processes through business process re-engineering. Further development of the Copyright Office Electronic Registration, Recordation and Deposit System (CORDS) will also help. In the short term, the Office has used overtime and hiring of temporaries to reduce arrearages in its examining and cataloguing divisions in order to expedite the registration of copyright claims and recordation of transfers and other documents pertaining to copyright. More importantly it is in the process of hiring new permanent staff in those areas. Such action is critical to further reduction.
A. Business Process Re-engineering of Copyright Office Registration and Recordation Processes
In fiscal year 2000, the Copyright Office initiated plans to re-engineer its processes. Authors, other copyright owners, users of copyrighted works, copyright industries, libraries, and members of the public rely on the Office's records of registered claims in copyrighted works and recorded documents concerning ownership of works. The value of the records is greatest when up-to-date information on new works is available to the public in a timely manner. Copyright owners also need timely issuance of certificates.
Re-engineering will accomplish the following objectives:
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Improve operations and service to achieve better processing times and create timely public records;
Improve response times to requests from the public;
Enhance operational efficiency through use of new technologies;
Contain costs of registration, recordation and other services;
Strengthen security within the Copyright Office; and
Use staff and space more efficiently.
The Copyright Office prepared a Request For Quote (RFQ), received bids, convened an evaluation panel to rate them, and made a selection which has been submitted to the Library's Office of Contracts and Logistics for negotiation. The firm that is selected will provide for the Office a project plan, a baseline of existing operations, an analysis of current workflow, alternative plans for re-engineering of business processes, an implementation plan for the process selected by the Office, and procedures manuals. A Project Manager, who is an expert in Copyright Office procedures, will be responsible for working with the contractor, Copyright Office managers, staff and labor organizations during the study to coordinate the day-to-day implementation of the agreed-upon changes.
B. Further Development of CORDS
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There was noteworthy progress in the Office's major automation initiative, CORDS, which enables electronic copyright registration and deposit of works in digital form. The CORDS system facilitates copyright registration and deposit process for online works by copyright claimants, helps the Copyright Office streamline its internal registration processes, improves efficiency, through-put time and internal security, and will provide the Library of Congress with new copyrighted works in electronic form for its digital collections. Almost 15,000 claims were received and processed electronically through CORDS during calendar year 1999. They were received from CORDS test partners: the University of Phoenix (study guides), American Geophysical Union, American Mathematical Society, and MIT Press/Journals Division (Ejournals), Adobe Systems (computer programs) and American National Standards Institute (standards).
CORDS testing and implementation during the year focused on successful establishment of system-to-system communications with the Office's largest copyright remitter—UMI Company (recently renamed Bell and Howell Information and Learning corporation)—for electronic receipt and processing of claims for digital dissertations. This was a significant CORDS milestone; there was fully automated processing—both front-end preparation by claimants and full back-end electronic processing by the Copyright Office, with complex interfaces to six other major systems. In 1999, the Corporation for National Research Initiatives (CNRI) continued its research and development work on CORDS with support from the Copyright Office and DARPA (Defense Advanced Research Projects Agency) which funds a small part of the associated research to evaluate and refine the architectural components that can be applied to digital libraries and any registry system. In January of 1999, a three-year Extension of the Memorandum of Agreement with DARPA was approved for continued CORDS research and development work by CNRI during 1999–2001.
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In the year 2000, the Copyright Office is initiating another major CORDS partnership with the Harry Fox Agency, a subsidiary of the National Music Publishers Association, for electronic claims and deposits of musical works on behalf of music publishers. Other CORDS partnerships are being planned and developed as well.
The Office is continuing to develop ''Mixed CORDS,'' for receipt of electronic claims with hard copy deposit; more than two dozen potential test partners are eagerly awaiting test implementation of Mixed CORDS which is scheduled for later this year.
IV. IMPROVING COMMUNICATION TO THE PUBLIC
A. Overview
In fiscal year 1999, Copyright Office staff handled over 426,800 requests for information. The Office is continuing to implement a number of improvements to enhance public service including making more information available electronically. These improvements move the Office forward to a future that will permit instant access to its records and informational material and reduce distribution of paper copies. The Office also increased its acceptance of Electronic Fund Transfers.
A good example of the Office's electronic communication is seen in the way the Licensing Division and the General Counsel's Office responded to inquiries regarding various aspects of the Satellite Home Viewer Act in anticipation of satellite carriers ''shutting off'' satellite service of network stations to subscribers as a result of an injunction. The federal order required satellite carriers to drop certain network signals received by nearly 1.5 million subscriber by October 8, 1998.(see footnote 3)
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A ''hotline'' for callers was established to obtain a copy of the Copyright Office's Satellite Network Television factsheet. The factsheet was made available via the internet, FAX-on-demand, or by mail. This approach provided immediate information to the public, utilized staff in an efficient and effective manner, and was widely publicized in trade publications. A similar method was used upon passage of the Satellite Carrier Improvement Act.
B. Improvement in Communication with the Public