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72–300 DTP








MAY 2, 2001

Serial No. 6

Printed for the use of the Committee on the Judiciary
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Available via the World Wide Web: http://www.house.gov/judiciary

For sale by the Superintendent of Documents, U.S. Government Printing Office
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Mail: Stop SSOP, Washington, DC 20402–0001

HENRY J. HYDE, Illinois
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
BOB BARR, Georgia
LINDSEY O. GRAHAM, South Carolina
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MARK GREEN, Wisconsin
DARRELL E. ISSA, California
MELISSA A. HART, Pennsylvania

JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
HOWARD L. BERMAN, California
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ADAM B. SCHIFF, California

TODD R. SCHULTZ, Chief of Staff
PHILIP G. KIKO, General Counsel
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Subcommittee on Courts, the Internet, and Intellectual Property
HOWARD COBLE, North Carolina, Chairman
HENRY J. HYDE, Illinois
BOB GOODLATTE, Virginia, Vice Chair
LINDSEY O. GRAHAM, South Carolina

HOWARD L. BERMAN, California
JOHN CONYERS, Jr., Michigan
ZOE LOFGREN, California
WILLIAM D. DELAHUNT, Massachusetts
MARTIN T. MEEHAN, Massachusetts
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ALEC FRENCH, Minority Counsel


MAY 2, 2001


    The Honorable Howard Coble, a Representative in Congress From the State of North Carolina, and chairman, Subcommittee on Courts and Intellectual Property


    The Honorable Marybeth Peters, Register of Cpoyrights, Copyright Office of the United States, The Library of Congress


    The Honorable Marybeth Peters, Register of Cpoyrights, Copyright Office of the United States, The Library of Congress: Prepared Statement
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    Statement by the Honorable John Conyers, Jr., Ranking Democrat Member, Committee on the Judiciary, U.S. House of Representatives


Wednesday, May 2, 2001
House of Representatives,
Subcommittee on Courts, the Internet, and Intellectual Property,
Committee on the Judiciary,
Washington, D.C.

    The Subcommittee met, pursuant to call, at 3:07 p.m., in Room 2141, Rayburn House Office Building, Hon. Howard Coble [Chairman of the Subcommittee] presiding.

    Mr. COBLE. Good afternoon. The Subcommittee on Courts, the Internet and the Intellectual Property will come to order.

    It is my belief, folks, that 5 minutes saved is 5 minutes earned, and that is the way we will do it today. We are on the floor now. There will be a vote imminently to be followed by at least one or two more votes, but I thought we could go ahead and get started.

    Mr. Berman, the distinguished gentleman from California, the Ranking Member, has assured me he will get here as soon as he can. So, Marybeth, we will proceed.
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    Today we are conducting an oversight hearing on the Copyright Office of the United States. The House Judiciary Committee is charged, as many of you know, 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 in 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 Panel, 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.

    The Copyright Office funds roughly two-thirds of its operations through fee receipts and the balance through appropriations. The Subcommittee will focus on how this money is allocated between the various functions of the Office and whether or not it is being utilized efficiently and effectively.

    Of particular concern to me, and I suspect other Members of the Subcommittee, is the reduction of the Copyright Office's net appropriation in each of the past 2 fiscal years; and, Madam Register, I suspect you share my concern on that matter. Sufficient funding is required in fiscal year 2002 to allow the Office to fullfil its public service responsibilities as well as to discharge the important new functions delegated to it by the Digital Millennium Copyright Act, popularly known as DMCA.
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    The Subcommittee will discuss the Copyright Office's implementation of projects to reengineer the Office's core business process and to modernize the information systems.

    The Subcommittee will also examine the policy issues raised by rulemakings and studies performed by the Copyright Office pursuant to recent legislation.

    This list of topics to be covered is by no means exhaustive. All Members of the Subcommittee are welcome to address any issues related to the administration of the Copyright Office of the United States.

    Now it appears we won't have a quorum perhaps even today, but they will get in touch you with subsequently, Ms. Peters. When Mr. Berman gets here, we will recognize him as well.

    But I am pleased to introduce our one and only witness, who is unknown to most of us in this room, the Honorable Marybeth Peters, who is the Register of Copyrights for the United States. She has also served as Acting General Counsel of the Copyright Office and is Chief of both the Examining and Information and Reference Divisions.

    She has served as a consultant on copyright laws to the World Intellectual Property Organization and authored The General Guide to the Copyright Act of 1976.

    As I have told her personally, I will say publicly, the Subcommittee has very much enjoyed the relationship that we have is experienced, Ms. Peters; and for that I commend you.
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    The gentleman from California, his timing is always right on the mark. We are pleased to recognize the distinguished gentleman from California, the Ranking Member, Mr. Berman.

    Mr. BERMAN. As I was saying—thank you, Mr. Chairman. Good afternoon, Ms. Peters; and thank you, Mr. Chairman, for calling the hearing.

    Mr. COBLE. If the gentleman would yield just a minute.

    Howard and I do this very informally. I called him earlier. I said Mr. Howard. He said Mr. Howard. So we agreed to abandon our friends on the floor.

    It is good to have you here, Howard.

    Mr. BERMAN. He usually is Howard the Good, and I am Howard the Bad.

    Mr. Chairman, again, I appreciate you calling the hearing because I think it is important we hear firsthand from the Copyright Office every year to ensure that our copyright process continues to go smoothly and efficiently. I am happy to have the Register here—Registrar or register?

    Ms. PETERS. Register.

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    Mr. BERMAN. That is funny. All right—the Register of Copyrights here today—it only took me 18 years to get that down—so we can make sure that the Copyright Office knows how much we appreciate its work and its commitment.

    The Copyright Office has done an admirable job of accommodating new congressional directives over the last few years, including new rulemaking on Section 1201 of the DMCA, maintaining a list of ISP agents whom copyright owners can notify if they find infringements of their materials on the Internet and adjusting to a new fee structure. We all look forward to the Section 104 report on e-commerce and copyright protections due to come out later this month.

    I also want to praise the Copyright Office for its international activities, including meeting with high-level officials and participating in programs on copyright and related rights all over the world. We have every right to be proud of our copyright process, and a productive exchange with other countries can only improve the strength of the copyright protection all over the world.

    I look forward to following up from last year's hearing, to learn how the plan to streamline registration and the recordation processes through business process reengineering is going and how online filing has improved as well as to get an update on compulsory license and CARPs and just to generally say that I, by and large, have very few experiences in dealing with different agencies of the Federal Government that are as positive as mine with the Copyright Office. I think a lot of that is due to your leadership, and it is great to have you here.

    Thank you, Mr. Chairman.
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    Mr. COBLE. I thank the gentleman.

    Mr. COBLE. Ms. Peters, we are pleased to have you, and you are now recognized.


    Ms. PETERS. Thank you, Mr. Chairman and Mr. Berman.

    I would like to begin with the overview of two very important, closely-aligned initiatives the Office has under way. Both initiatives—developing new information technology systems and reengineering our core business processes—will shape the Copyright Office's office and its services to the American public.

    We have begun a major reassessment and planning effort regarding our information technology systems. The Copyright Office relies on the implementation of information to fulfill its duties under the copyright act. Information processing and products are critical in the registration of claims to copyright, the recordation of documents pertaining to copyrighted works, statutory licenses and the Office's responsibility as an agency of public record. Access to information is also the basis for the substantive policy and regulatory work the Office performs for the Congress and for the executive branch of the government.

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    Currently, the Copyright Office has more than 20 separate information systems. For the most part, they have been developed separately and do not support full information sharing and integration. Some rely on hardware that is aging and becoming increasingly vulnerable to failure.

    Two principal factors will shape Copyright Office IT planning in the next few years. First, to serve our customers fully, the Office needs to have its current public services available online to the greatest extent possible. Second, we have just made a decision on the business process reengineering effort that we have been involved in. The option that we have adopted will improve our business processes for registration, for recordation, for information dissemination and for acquisition of copies of works for the Library's collections. This effort will result in significant changes and improvement in our current processes, organization and facilities. These changes will rely very heavily on new technology.

    Our original direction on reengineering was to work within the confines of our existing information technology structure. The results of our reengineering work have shown us that we need to accelerate the Office's use of new technology, not only for processes affected by reengineering but for everything that we do within office. We need to undertake a fundamental transformation in our public services. We need to go from paper and hard-copy based processing to primarily electronic processing. Our processes must change from the traditional manual capabilities to IT-enabled functions.

    A newly formed Copyright Office Information Systems Working Group has just begun its work. So that this critical initial planning can be completed and specific resources requirements identified, I have requested a modification in our fiscal year 2000 budget and want to inform the Subcommittee of this change. My written statement outlines these budget request modifications.
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    A requirements analysis is critical to our beginning in our IT work. In order to do that, I need to have fiscal year 2000 funds reprogrammed, and therefore I am asking that that reprogramming take place.

    The second initiative apart from IT involves our first steps to carry out our Reengineering Implementation Plan. Last week, I gave approval to the redesign concepts developed after an 8-month effort by a team of Copyright Office staff, facilitated by experts from Pricewaterhouse Coopers.

    The basic procedures now in use in the Copyright Office core public services have been the same for four decades. We will reengineer these processes so that the number of times that material is handled and moved around the Office will be greatly improved, and we will reduce the number of movements that we make. We believe that by shortening the processing time that everybody will benefit.

    What we will be doing is scanning registration applications and even deposits when feasible. We will encourage submissions of registration materials in digital form so that our staff can process them electronically.

    Having set our core reengineering concepts we are now beginning the implementation plan.

    I am very optimistic that our IT and reengineering work will result in major improvements in our public services. Clearly, these are multi-year efforts, and I look forward to continued discussions with the Subcommittee as they progress.
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    I want you to note, Mr. Chairman, the importance of maintaining the funds in the Copyright Office's No-Year Account so that our IT and business process reengineering initiatives can proceed. The funds in this account are made up of fees from those who use our services. These funds should be used to improve those services.

    On the verge of this very significant change, the Office continues to provide public service mandated to us by the Copyright Act. Last year, we received more than 573,000 claims that covered over 800,000 works. We recorded more than 19,000 documents that have several hundred thousand titles in them. We catalogued 542,000 registrations, thereby making the public record much larger than it has ever been.

    We forwarded more than 1 million copies from registration and mandatory deposit to the Library of Congress for its collections and exchange programs. The value of these copies was $38 million.

    The Office responded to almost 400,000 requests for public information. 12,000 of those came in on e-mail. And our web site is being used more and more each day.

    We collected $183 million in royalty fees and distributed $367 million in royalty fees.

    We are continuing to work with the Congress and to perform the tasks that are assigned to us in the Digital Millennium Copyright Act, including the first rulemaking under Section 1201 of Title 17. In the course of this rulemaking I concluded that there are some issues that may require further attention by Congress. In my statement I review these areas.
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    I have also attached to my written statement a table showing the status of the tasks given to us under the DMCA as well as under the Sonny Bono Copyright Term Extension Act.

    We are about to provide Congress with our report required under Section 104 of the DMCA. The report evaluates the effects made by the DMCA and the development of electronic commerce on the operation of two sections of the law, 109 and 117, as well, as the relationship between existing and emerging technology and the operation of those sections of the law.

    Specifically, we are reviewing whether Section 109 of the Copyright Act should be modified to make the first sale privilege apply expressly to digital transmissions of copyrighted works, whether an exemption is necessary for temporary incidental copies, and whether the scope of the archival exemption under Section 117 should be expanded.

    We are delayed in submitting the Section 104 study because of the work the Senate Judiciary Committee has asked us to undertake on a priority basis regarding digital distance education. We began last week and we are continuing as we speak to meet with interested parties to identify issues of concern and potential areas of agreement in connection with legislation that has been introduced in the Senate and will likely to be acted on very soon.

    Mr. Chairman, let me conclude by stating how appreciative I am of the support this Subcommittee and its staff has given the Copyright Office. There is a long history in working closely with this Subcommittee, and I look forward to again working with you in this Congress. Thank you.
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    Mr. COBLE. Thank, you Ms. Peters. Good to have you back with us.

    [The prepared statement of Ms. Peters follows:]


    I am pleased to have the opportunity to provide the Subcommittee with a report on the Copyright Office's work to assure that our Nation maintains a strong and effective copyright system—one that serves both owners and users of copyrighted works. In this endeavor, issues of new technology and the ways in which technology affects users and copyright owners have been, and will continue to be, front and center on our agenda.

    During the last fiscal year, the Copyright Office received 588,498 claims to copyright covering more than 800,000 works, and registered 515,612. The Office recorded 18,894 documents covering hundreds of thousands of titles, and the online public record grew with the cataloging of an additional 542,397 registrations. The Office forwarded 751,944 copies of works, with a net worth of $32,308,047 to the Library of Congress for its collections and exchange programs, including 217,829 pieces valued at $6,049,682 that were received from publishers under the mandatory deposit provisions of the copyright law.

    The Office responded to 383,513 requests from the public for copyright information, including more than 11,900 electronic mail requests; processed 18,087 filings from cable operators, satellite carriers, and manufacturers or importers of digital audio recording devices and media, and processed claims to the various royalty pools. The Licensing Division collected a total of $183 million in royalty fees (almost 88 percent received via electronic funds transfers) and distributed royalties totaling $367,824,476.
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    We continued the work Congress assigned to us in the Digital Millennium Copyright Act, including our first rulemaking on the Section 1201 anticircumvention provisions and the Section 104 report we will soon submit to Congress. I will address these and other policy and legal issues in my statement.


    I first would like to provide the subcommittee with an overview of two very important, closely-aligned, initiatives the Office now has underway. Both initiatives—information technology planning and business process reengineering—will shape the Copyright Office's future and its service to the American people. Just as the copyright law has had to adjust to technological changes, our daily business operations and processes are challenged in similar ways.

    1. Information Technology

    We have begun a major reassessment and planning effort regarding our information technology (IT) systems. The Copyright Office relies on the collection, processing, storage and presentation of information to fulfill its duties under the U.S. Copyright Act. Information processing and products are critical in the registration of claims to copyright, the recordation of documents pertaining to copyrighted works, statutory licenses, and the Office's responsibilities as an agency of public record. Access to information is also the basis for the substantive policy and regulatory work the Office performs for the U.S. Congress and the executive branch.
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    Currently, the Copyright Office has more than 20 separate information systems. For the most part, they have been developed separately and do not support full information sharing and integration. Some rely on hardware that is aging and becoming increasingly vulnerable to failure.

    Two principal factors will shape Copyright Office IT planning in the next few years. First, to serve our customers fully, the Office needs to have its current public services available online to the greatest extent possible. Second, we have just made a decision on the business process reengineering (BPR) option we will pursue to improve Copyright Office processes for registration, recordation, information dissemination and acquisitions of copies of works for the Library's collections. We will complete a BPR implementation plan this summer. This effort will result in significant changes and improvements to our current processes, organization, and facilities. In addition, the changes will rely heavily on the use of new technology, all of which will result in more effective and timely service to our customers.

    Our original direction on reengineering was to work within the confines of our existing IT structure. The results of our reengineering work have shown us that we need to accelerate the Office's use of new technology, not only for the processes affected by reengineering, but for the entire Office. We need to undertake a fundamental transformation in our public services: from paper and hard-copy based processing to primarily electronic processing. Our processes must change from traditional manual capabilities to IT-enabled functions.

    This year, through our Copyright Office Electronic Registration, Recordation and Deposit System (CORDS), we will electronically receive about 30,000 digital works for registration. This is about 5 percent of our total registrations. Now we must broaden our IT approach so that electronic receipt and processing become the primary way we register works. In the future, we will encourage that works submitted for registration be submitted online. Once they are submitted, we will use technology to a much greater extent than we have to process them quickly and ensure a timely public record.
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    This not only helps the Copyright Office provide better public services, but is also a key component of the Library's digital strategy which will allow more digital works to be acquired for the Library's collections through copyright registration and through the mandatory deposit provisions of Section 407 of the copyright law.

    A newly-formed Copyright Office Information Systems Working Group has just begun its work. So that this critical initial planning can be completed and specific resource requirements identified, I have requested a modification in our Fiscal Year 2002 budget request and want to inform the Subcommittee of this change.

    Until we revise our overall IT strategy to respond to our new business processes, I believe we should not proceed with funding for the CORDS Full Large-Scale Production System, as requested in our original submission. We do need to maintain the CORDS system so that we can continue to provide an electronic registration option for those now using it and others who wish to. Yet, we do not want to accelerate development of a large-scale CORDS production system until we establish an overall strategy for the electronic delivery of services.

    Mr. Chairman, this morning the Library testified before the Senate Appropriations Subcommittee on Legislative Branch. In my testimony submitted to the subcommittee, I modified the Copyright Office's initial budget request to enable us to proceed with the IT initiative I have just outlined. I requested that we proceed as follows:

 Permanently reprogram $620,000 savings from our Marking and Tagging security initiative in Fiscal 2001 to IT Planning and Development. In the current fiscal year, these funds would be used to conduct a requirements analysis which will provide us with an IT strategy that: supports reengineering, redevelops our aging systems and expands the electronic delivery of our public services. (Our Marking and Tagging requirements will continue to be met and security of materials will be one of the principal objectives in the IT requirements analysis.)
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 Based on the completed requirements analysis, in Fiscal Year 2002 begin systems analysis, design and development work. A multiple-award contract will be developed to rebuild and integrate our information systems to meet our new requirements. We plan to have this contract awarded by July 2002.

 In Fiscal Year 2002, use the reprogrammed IT funds ($620,000) for IT contract management and CORDS user support to provide hands-on technical advisory assistance to our current and anticipated CORDS users.

    I am hopeful, Mr. Chairman, that the Appropriations Committees will approve this reallocation of funding. It is critical to our ability to meet our statutory obligations and fully serve the American people in an increasingly digital environment. I will keep this Subcommittee informed of developments in this area.

    2. Business Process Reengineering: Initial Implementation

    The second initiative involves our initial steps to carry out our Business Processing Reengineering Implementation Plan. Last week, I gave approval to basic redesign options developed after an eight-month effort by a team of Copyright Office staff, facilitated by experts from PriceWaterhouseCoopers. We will now begin the process of developing an implementation plan. The plan will be implemented in phases beginning in fiscal 2002. The Copyright Office No-Year Account will fund the three-year implementation, except for furniture and furnishings.

    We began our reengineering effort with the following objectives:
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 Improve operations and service that will achieve better processing times and create timely public records;

 Enhance operational efficiency through the use of new or alternative technologies;

 Contain the costs of registration, recordation and other services;

 Strengthen security within the Copyright Office; and

 Use staff and space more efficiently.

    In our Fiscal 2002 budget request, we are asking for authority to spend $380,000 from our No-Year account for the first steps in reengineering implementation.

    I am very optimistic as we begin our IT and reengineering work. These are clearly multi-year efforts and I look forward to continued discussions with the Subcommittee as they progress.


Registration, Recordation, and Cataloging Operations

    As I reported at the beginning of my statement, in fiscal 2000 the Office processed 588,498 claims, representing more than 800,000 works, and registered 515,612 of these claims. Throughput time was and continues to be a concern. A large backlog of copyright claims continues to exist and processing time for the issuance of registration certificates remains at approximately six to seven months.
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    To address this backlog, the Examining Division continued to hire examiner staff to replace those lost through retirement and resignation. We have also begun an extensive backlog reduction effort, which is already resulting in a substantial decrease in the number of claims awaiting examination. This is an Office-wide imperative, and we are committed to continued progress this year.

    In fiscal 2000, the Cataloging Division recorded 18,894 documents covering hundreds of thousands of titles. The Division implemented a number of new initiatives to reduce the length of throughput time for cataloging registrations and recording documents, including a successful Backlog Reduction Project which significantly reduced the number of multiple titles in documents awaiting entry into the online catalog.

    The Documents Section received 384,826 titles this year, an increase of 97% over last year's receipts. The Section recorded 399,088 titles, an increase of 198% over last year's title clearances.

Statutory Licenses

    On October 28, 1999, the largest distribution of copyright royalties to date was made totaling $321,665,999.86.

    Satellite carrier royalty fees totaling $3,937,871.64 were distributed on January 13, 2000. This was a full distribution of funds covering the 1992, 1993, 1994, and 1995 funds. Soon after, another distribution of $792,975.53 occurred on January 27, 2000. This distribution was a partial distribution of the 1995, 1996, 1997, and 1998 DART royalty funds less a reserve held for Copyright Arbitration Royalty Panel (CARP) costs and amounts in controversy.
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    A full distribution of the 1993, 1994, 1995, and 1996 cable television royalties and a $35 million dollar partial distribution for 1997 was made on May 25, 2000 totaling $39,185,398.32. Also, a full distribution of the Sound Recording Fund for 1999 DART royalties in the amount of $2,242,230.81 was made on June 15, 2000.

    Outstanding royalty investments and interest totaled more than $614 million during the year, earning $32 million in interest. Deposits totaled approximately $183 million with 3,820 remittances (checks and electronic funds transfer) covering 21,243 statements of account. Electronic Fund Transfers (EFT) now account for 87.9% of royalty fee deposits.

    The Office examined 16,293 cable statements of account and 251 amendments to these statements, 50 DART statements, 15 Satellite Carrier statements, and 1,729 Section 114 Notices. A total of $459,992.71 in additional royalties was recovered for copyright owners that would have otherwise been lost. In addition, staff responded to 1,048 licensing information requests.

Copyright Arbitration Royalty Panels (CARP) Proceedings

    Recent CARP activities include the following:

 The Librarian's order announcing the allocation of the royalty fees in the 1995, 1996, 1997, and 1998 Musical Works Funds was issued. These fees are paid to the Copyright Office by importers and manufacturers of Digital Audio Recording Devices and Media (DART) who distribute these products in the United States.
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 Written direct cases were submitted in April in the CARP proceeding to determine rates and terms for the Section 114 statutory license for public performance of sound recordings by eligible non-subscription services (webcasters) and the Section 112 statutory license to make ephemeral recordings of sound recordings for the purpose of making permitted public performances (such as webcasting). The CARP will convene on July 30.

 The six-month negotiation period was announced for the adjustment of royalty rates and terms for the public performance of copyrighted sound recordings by preexisting subscription services and preexisting satellite digital audio radio services. The negotiation period began on January 9, 2001.

 The six-month voluntary negotiation period was initiated for determining reasonable rates and terms for the public performance of sound recordings by new subscription services. The voluntary negotiation period began on February 12, 2001.

 A notice of inquiry was published on the interpretation and application of the mechanical and digital phonorecord compulsory license (17 U.S.C. 115) to certain digital music services, namely what constitutes an incidental digital phonorecord delivery for purposes of the compulsory license. Initial comments were submitted on April 23, 2001.

 A CARP proceeding was conducted to determine the distribution of the 1997 cable royalties among the copyright owners of movies, syndicated shows, and non-sports network programming. The arbitrators' report was submitted April 16, 2001 and is currently being reviewed by the Office.

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Public Information and Copyright Education

    The provision of information on copyright law and its application is a principal function of the Copyright Office. The demand for information on copyright is increasing, as the growth in the use of digital technology exposes more Americans to copyright issues in the course of their daily lives.

    Last year, the Copyright Office responded to almost 400,000 public inquiries. The Copyright Office web site continued to play a key role in disseminating information to the copyright community and the general public, logging 9.4 million hits during the year, a 67 percent increase over the prior year. Numerous additions and enhancements were made to the web site throughout the year. The updated version of the copyright law with the latest amendments was made available in paperback book format and on the web site in both text and PDF formats, giving the public alternate ways to access the copyright law online. The public can also obtain copies of all the copyright registration forms which have been converted to fill-in versions so a copyright owner can complete the form on his or her personal computer for submission.

    For the first time, the Copyright Office made it possible for the public to submit comments via the Internet in response to a rulemaking procedure dealing with the impact of Section 1201 of the Digital Millennium Copyright Act. All 235 initial comments and 129 reply comments received by the Office were posted on the web site for public review. As a part of the rulemaking on Section 1201, public hearings were held in Washington, D.C. and in Palo Alto, CA. Audio and written transcripts of these hearings were made available on the web site so that a much wider audience could benefit from the debate.

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    The total number of Office searches of our records to provide information (on copyright ownership, for example) increased. The number of titles searched was 63,250, an increase of 6.6% from the previous year while the number of search reports prepared, 7,413, declined 6.6%.

Security Program

    The Copyright Office successfully completed several fiscal 2000 action items in the Library's Security Plan. Among the items accomplished were: laser-engraved ownership marking of compact disc and video cassette materials; secure transport of high-risk materials; and item bar code labeling and security tagging of book materials. This year we are continuing to focus on improvements in physical security, inventory, and preservation controls.

    Copyright Office security initiatives planned for fiscal 2002 include incorporating Item Level Tracking and Inventory Control as part of the Copyright Office reengineering plan, creating in-process records at the point-of-entry, installing electronic access control to work areas, and installing a closed-circuit video system in the Mail Center.


    The Copyright Office continues to provide expert assistance in the legislative work of members of Congress and their staff, and to Executive Branch agencies in national and international copyright matters. I have attached an appendix to this statement which provides an update on the status of tasks the Copyright Office was delegated in the Digital Millennium Copyright Act (DMCA) and the Sonny Bono Copyright Term Extension Act.
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Section 104 Study

    We are about to provide Congress our report required under Section 104 of the (DMCA). The report evaluates the effects of the DMCA and the development of electronic commerce on the operation of Sections 109 and 117 of the copyright law, as well as the relationship between existing and emerging technology and the operation of those sections. Section 109 permits the owner of a particular copy to sell or otherwise dispose of that copy without the authority of the copyright owner. Commonly known as the ''first sale doctrine,'' it is this section that permits lending of books by libraries as well as the sale of used books. Section 117 permits the owner of a copy of a computer program to make a copy or adaption of the program for archival purposes or as an essential step in utilizing the program. Specifically, we are reviewing whether Section 109 of the Copyright Act should be modified to make the first sale privilege apply expressly to digital transmissions of copyrighted works, whether an exemption is necessary for temporary incidental copies and whether the scope of the archival exemption under Section 117 should be expanded.

    A public hearing on the issues related to the Section104 report was held in Washington, D.C. on November 29, 2000.

Distance Education

    In May 1999, the Office concluded an intensive study on digital distance education through public hearings, comments and consultations with experts in various fields. The report made legislative recommendations on the promotion of distance education through digital technologies. Since issuance of this report, I have testified twice in the Senate, once before this Subcommittee, and last year before the Web-based Education Commission. At the request of the Senate Judiciary Committee, the Office has recently met with interested parties on distance education issues to identify issues of concern and potential areas of agreement in connection with legislation that has been introduced in the Senate and was the subject of a hearing in the Senate Judiciary Committee in March.
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State Sovereign Immunity

    At the end of its 1999 term, the U.S. Supreme Court issued opinions in Alden v. Maine, College Savings v. Florida Prepaid, and Florida Prepaid v. College Savings. Taken together, these opinions reshaped the scope of state sovereign immunity and Congress' authority to abrogate that immunity. Under the new regime, by invoking their immunity, States can escape the imposition of monetary damages for copyright infringement. Ever since those decisions, Congress has been struggling with how to reinstate full enforceability of the copyright law. The Copyright Office has worked closely with Congressional staff, the Patent and Trademark Office, and industry representatives in analyzing this problem and searching for a solution. Last year, this subcommittee held a hearing on this issue at which I testified. We continue to be involved in discussions relating to legislation on this issue that seems likely to be introduced this year.

Sound Recordings as Works Made for Hire

    In the Intellectual Property and Communications Omnibus Reform Act of 1999, Congress added sound recordings to the categories of commissioned works which are eligible to be works made for hire. Subsequent to that enactment, a significant controversy arose concerning both the procedural history of the provision as well as its effect. On May 25, 2000, this subcommittee held a hearing on the issue at which I testified, and following that hearing H.R. 5107, the Work Made For Hire and Copyright Corrections Act of 2000, was enacted. (Public Law 106–379)

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    Representatives of recording artists and the record industry acknowledged that this legislation was only the first step in resolving the issue of sound recordings as works made for hire, and that further discussions should take place in an attempt to find a satisfactory resolution of the issue. If so, I would be pleased to assist in those discussions in any way that you see fit.

Copyright Technical Corrections and Housekeeping Amendments

    The Office has also suggested a number of technical corrections and housekeeping amendments to title 17. Some of those amendments were included in the Work Made For Hire and Copyright Corrections Act of 2000. Others have been introduced as part of the Intellectual Property and High Technology Technical Amendments Act of 2001, S. 320, which has passed both the House and the Senate this year. Although the copyright amendments in both the House and Senate versions of the bill are identical, there are some differences in the provisions of the bill pertaining to patent law. We look forward to the resolution of those differences and the enactment of this legislation.

International Activities

    The Copyright Office continues to work cooperatively with the Executive Branch on international matters—most often with the United States Trade Representative (USTR), the Patent and Trademark Office, and the State Department.

    Since the Subcommittee's May 2000 oversight hearing, the primary activity on the multilateral front was an effort to conclude a treaty to protect audiovisual performers, principally television and screen actors. A diplomatic conference held in Geneva, Switzerland in December 2000 failed primarily because of the inability of the U.S. and the European Union to resolve their differences on allocation of rights and the determination of choice of law. A decision will be made in September on whether to continue work on this.
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    Also last year, the Copyright Office assisted USTR before the World Trade Organization (WTO), in its defense of Section 110(5) of the Copyright Act against a challenge by the European Union (EU) that this exception for the public performance of copyrighted works in small businesses violated U.S. treaty obligations—the Berne Convention and the TRIPS Agreement (Trade Related Aspects of Intellectual Property Agreement of the WTO). The WTO panel found that Section 110(5)(a) complied with U.S. treaty obligations but that the new subsection(b) violates those obligations. The U.S. has been given until July 7, 2001 to change its law or face sanctions.

    The Copyright Office is one of the agencies involved in negotiating the Hague Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters. On May 15, we are hosting a roundtable discussion for representatives of copyright industries, copyright users, consumer organizations, and those involved in electronic commerce, to identify and discuss more fully the issues and problems associated with the draft convention. This roundtable will also be used to propose solutions that will aid the U.S. delegation to the first part of the Diplomatic Conference which is scheduled for June.

    We continue to participate, as part of the U.S. delegation, in the ongoing work of WIPO and the WTO Council on TRIPS. This includes WIPO meetings on the protection of folklore, databases, and broadcasters, as well as the continuing effort to review the intellectual property laws of developing country members for compliance with TRIPS obligations.

    Policy staff are members of the U.S. delegation to the Intellectual Property Negotiating Group of the Free Trade Area of the Americas. The goal of the negotiating group is to prepare and finalize an IP chapter for a Free Trade Area of the Americas Agreement. The overall agreement is due to be completed by 2005, a goal that was recently reaffirmed at the Summit of the Americas in Quebec. In addition, PIA staff were instrumental in the drafting of U.S. treaty proposals.
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    PIA staff were also instrumental in the drafting and negotiation of intellectual property provisions in a bilateral Free Trade Agreement with the Kingdom of Jordan. This successful negotiations established a pattern for ongoing FTA negotiations with Chile and Singapore.

    The Copyright Office is on the inter-agency Special 301 Committee which considers and evaluates the adequacy and effectiveness of intellectual property protection and enforcement throughout the world. This annual process, which is established under U.S. trade law, is one of the tools used by the U.S. Government to improve protection for creators, inventors, and other holders of intellectual property rights.

    Copyright Office staff also actively participate in bilateral negotiations and consultations. Last year, these included those held with Mexico, Paraguay, the People's Republic of China, South Korea, Bulgaria, the Bahamas, Malaysia, Taiwan, and Japan. We meet almost weekly with foreign officials and visitors interested in learning about the U.S. copyright system and exchanging information about topics of mutual concern.



    Last December, the Office amended its regulatory definition of a ''service'' for purposes of the statutory license governing the public performance of sound recordings by means of digital audio transmissions in order to clarify that transmissions of a broadcast signal over a digital communications network, such as the Internet, are not exempt from copyright liability under Section 114(d)(1)(A) of the Copyright Act. The broadcasters are challenging the ruling in federal court.
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Anticircumvention Rulemaking

    Under Section 1201(a)(1) of the DMCA, the Librarian of Congress is required to determine whether any particular classes of works are to be exempted from the anticircumvention prohibition on circumvention of technological measures that control access to works protected by copyright. Such technological measures include passwords, scrambling and encryption. This determination is made upon my recommendation after a rulemaking proceeding.

    In response to the Office's public inquiry, we received nearly 400 comments and heard from representatives of more than 50 organizations at five days of hearings held in Washington, D.C. (May 1–3, 2000) and in Palo Alto, California (May 18–19, 2000).

    The primary responsibility of the Register and the Librarian is to determine whether the implementation of technological protection measures has diminished the ability of individuals to use copyrighted works in ways that are otherwise lawful.

    Last October, the Copyright Office published the determination for the triennial period covered by this first rulemaking. Exemption to Prohibition on Circumvention of Copyright Protection Systems for Access Control Technologies; Final Rule, 65 Fed.Reg. 64556 (Oct. 27, 2000). I recommended to the Librarian that two classes of work be exempted from the prohibition against circumvention: (1) compilations consisting of lists of web sites blocked by filtering software applications; and (2) literary works including computer programs and databases, protected by access control measures that fail to permit access because of malfunction, damage or obsolescence. The Librarian accepted my recommendations and exempted those two classes of works. The exemptions set forth in the rule will be in effect until October 28, 2003, during which time we will conduct another inquiry into adverse impact on noninfringing use of copyrighted works protected by technological measures.
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    In the course of the rulemaking, I concluded that there are some issues that may require further attention by Congress. In my recommendation issued last October, I recommended that Congress consider amending Section 1201 to provide a statutory exemption for all works, regardless of what class of work is involved, that are protected by access control mechanisms that fail to permit access because of malfunction, damage or obsoleteness. I strongly urge that Congress consider such an amendment. Although I concluded that it was appropriate in the rulemaking to exempt literary works that are protected by such access control measures, I believe it would be more appropriate to address this problem through legislative action. As I stated in my recommendation to the Librarian:

Although this exemption fits within the parameters of the term ''class of works'' as described by Congress, it probably reaches the limits of those parameters. The definition of the class does start with a Section 102 category of works—literary works. It then narrows that definition by reference to attributes of access controls that sometimes protect those works—i.e., the failure of those access controls to function as intended. But in reality, this exemption addresses a problem that could be experienced by users in accessing all classes of copyrighted works. This subject matter is probably more suitable for a legislative exemption, and the Register recommends that Congress consider amending Section 1201 to provide a statutory exemption for all works, regardless of what class of work is involved, that are protected by access control mechanisms that fail to permit access because of malfunction, damage or obsoleteness. Meanwhile, because genuine harm has been demonstrated in this rulemaking proceeding and because it is possible to define a class of works that fits within the framework of Section 1201(a)(1)(B), (C) and (D), the Register recommends that the Librarian exempt this class of works during the first three years in which Section 1201(a)(1) is in effect. But the fact that sufficient harm has been found to justify this exemption for this three-year period will not automatically justify a similar exemption in the next triennial rulemaking. In fact, if there were a showing in the next rulemaking proceeding that faulty access controls create adverse impacts on noninfringing uses of all categories of works, such a showing could, paradoxically, result in the conclusion that the problem is not one that can be resolved pursuant to Section 1201(a)(1)(C) and (D), which anticipates exemptions only for ''a particular class of works.'' A legislative resolution of this problem is preferable to a repetition of the somewhat ill-fitting regulatory approach adopted herein. 65 Fed.Reg. at 64565.
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    I also recommended that Congress consider what should be the appropriate approach to take with respect to technological measures that control both access to works and copying and other uses of works. I noted:

  The merger of technological measures that protect access and copying does not appear to have been anticipated by Congress. Congress did create a distinction between the conduct of circumvention of access controls and the conduct of circumvention of use controls by prohibiting the former while permitting the latter, but neither the language of Section 1201 nor the legislative history addresses the possibility of access controls that also restrict use. It is unclear how a court might address this issue. It would be helpful if Congress were to clarify its intent, since the implementation of merged technological measures arguably would undermine Congress's decision to offer disparate treatment for access controls and use controls in Section 1201.

  At present, on the current record, it would be imprudent to venture too far on this issue in the absence of congressional guidance. The issue of merged access and use measures may become a significant problem. The Copyright Office intends to monitor this issue during the next three years and hopes to have the benefit of a clearer record and guidance from Congress at the time of the next rulemaking proceeding. 65 Fed.Reg. at 64568.

    Finally, I observed that although a number of parties submitting comments and testifying in the rulemaking had urged that we define a ''particular class of works'' by reference to the users of particular works or the uses made of particular works, it does not appears that Section 1201 anticipates that a ''class'' can be defined in such a way. Rather, a class of works must be determined based upon attributes of the works themselves, and not by reference to some external criteria such as the intended use or users of the works. However, I acknowledged that the statutory language is arguably ambiguous, but concluded that in the absence of clarification by Congress, I could not accept the more expansive view of what a ''particular class of works'' could be. 65 Fed.Reg. at 64559–64561, 64562. I am not requesting clarification on this issue, because I believe that I correctly understood the statutory mandate. But I understand that others may disagree with this conclusion, and if you believe that my conclusion was incorrect, you may wish to consider legislation that would clarify what a ''class'' is.
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    The Copyright Office assisted the Judiciary, as it is directed to do in 17 U.S.C. §701(b)(2), in several cases involving copyright issues. The Office gets involved in litigation in four different contexts: (1) when it is asked to assist the Department of Justice in defending a lawsuit in which the constitutionality of a federal copyright statute is challenged (as in Eldred v. Reno, discussed below), (2) on the rare occasions when the Office is sued (e.g., the challenge by broadcasters to the Office's ruling that transmissions of a broadcast signal over a digital communications network, such as the Internet, are not exempt from copyright liability under Section 114(d)(1)(A) of the Copyright Act), (3) when the office files suit pursuant to 17 U.S.C. §407 to compel the deposit with the Library of Congress of a work published in the United States, and (4) when the Office works with the Department of Justice in connection with an amicus curiae brief in litigation involving important issues of copyright law and policy. Some of the more significant cases in which the Office has been involved in the past year are discussed below.

Eldred v. Ashcroft (formerly Eldred v. Reno)

    The Copyright Office continues to assist the Department of Justice in a lawsuit challenging the constitutionality of the Sonny Bono Copyright Term Extension Act of 1998, which extended the duration of most copyrights by 20 years. Plaintiffs assert that the Act violates both the First Amendment and the clause in the Constitution which authorizes Congress to enact laws giving authors exclusive rights for ''limited times.'' The district court entered judgment on the pleadings upholding the constitutionality of the law, and plaintiffs appealed. The U.S. Court of Appeals for the District of Columbia Circuit affirmed (with one judge dissenting in part), finding that neither the First Amendment nor the Copyright Clause of the Constitution constrains Congress from extending for a period of years the duration of both existing and future copyrights. Eldred v. Reno, 239 F.3d 372 (D.C. Cir. 2001), aff'g. 74 F.Supp.2d 1 (D.D.C 1999) Plaintiffs have now petitioned for a rehearing and asked that such reconsideration be en banc. The government has been directed to respond to the petition and we are assisting the Justice Department in preparing that response.
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Universal City Studios, Inc. v. Corley (formerly Universal City Studios v. Reimerdes)

    The United States has intervened in the appeal of this judgment that the defendants violated 17 U.S.C. §1201, the anticircumvention provision added by the Digital Millennium Copyright Act, when they posted on the Internet a code that permits the circumvention of the Content Scrambling System (CSS) used to protect the content on digital versatile disks (DVDs) of motion pictures. The United States is intervening in the United States Court of Appeals for the Second Circuit to defend the constitutionality of Section 1201 and is urging affirmance of the district court's judgment. The Copyright Office has assisted the Department of Justice in this effort.

A&M Records v. Napster

    The Copyright Office was instrumental in the preparation and filing of an amicus brief for the government with the Ninth Circuit Court of Appeals in the Napster case. The defendant operates a file-trading service that provides a means for users of the service to exchange digital files of sound recordings. A number of record companies and music publishers sued, claiming that their copyrighted sound recordings had been copied and distributed through the defendant's system and that the defendant is vicariously liable and a contributory infringer of its copyrights. The defendant argued, inter alia, that Section 1008 of the Audio Home Recording Act (AHRA) insulated it from liability in this case. The government's brief was filed solely to address that issue and argued that AHRA does not cover the activities of Napster's users. In upholding the district court's decision to issue a preliminary injunction against Napster (although instructing the district court to modify that injunction), the Ninth Circuit agreed that the AHRA does not cover the activities of Napster's users and offers no safe harbor for Napster.
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Raquel v. Education Management Corporation

    The Office proposed to the Solicitor General that an amicus curiae brief be submitted to the Supreme Court in support of a petition for a writ of certiorari in Raquel v. Education Management Corporation, 196 F.3d 171 (3d Cir. 1999), cert granted, vacated and remanded, 121 S.Ct. 376 (2000). The U.S. Court of Appeals for the Third Circuit had dismissed Raquel's copyright infringement suit based on its conclusion that Raquel had made misrepresentations of material facts in its application for copyright registration. The Office concluded that the court had misunderstood the Copyright Office's registration practices. To clarify what those practices are, it published a Statement of Policy in the Federal Register on July 5, 2000, clarifying how the Office addresses the issues that the Third Circuit had misunderstood in its decision. The Office worked with the Department of Justice to prepare an amicus curiae brief in support of Raquel's petition for certiorari, and we urged that the Supreme Court grant certiorari, but immediately vacate the decision below and remand the case to the Third Circuit, rather than hear argument on the merits. The Court followed that recommendation.

Other Litigation

    The Copyright Office also participated in discussions with the Department of Justice relating to other amicus briefs and proposed amicus briefs in cases involving copyright issues, and worked with the Department of Justice in a successful lawsuit to compel a publisher to deposit a serial with the Library of Congress.

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Fiscal 2002 Budget Request

    As I mentioned, we are facing particularly important budget decisions for fiscal 2002 that will determine whether we are able to provide the public services copyright owners and the users of copyrighted works require. Because of the importance of our fiscal 2002 budget request to the Office, I would like to review the overall request with the subcommittee.

    First, to enable us to serve Congress and the American people fully, it is critical that the Office's net appropriation be increased from $9.2 million to $12.8 million—$1 million less than the fiscal 1999 net appropriation of $13,771,000. We have growing policy support requirements to Congress and the Executive Branch, as well as a growing regulatory workload from passage of the DMCA, that require adequate resources. We have had reductions in our appropriations in each of the last two years—with a reduction of more than $2 million last year.

    The Office is requesting $12,836,815 in net appropriations and $21,880,000 in offsetting collections authority. This represents a $3,668,843 million net appropriation increase over the fiscal 2001 net appropriation of $9,167,972. The increase is needed to preserve the No-Year account from a further reduction and to fund $1,668,843 for mandatories and price level changes. The Copyright Office request for its Offsetting Collections Authority represents a decrease of $1,620,000 from $23,500,000 to $21,880,000. The decrease is based on projected annual revenue receipts of $21,500,000 and expending $380,000 from the No-Year account.

Copyright No-Year Account and Fee Projection for Fiscal Year 2002
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    The No-Year account was established by the Technical Amendments Act, P. L.105–80 and holds fees which have been paid by those who use Copyright Office services. We want to use the funds in the No-Year account to improve our public services to those who pay these fees. Our principal use of the No-Year account will be for development of our information technology systems and Business Process Reengineering implementation. We need to insure that adequate funds remain in the account for these critical public service improvements.

    The No-Year account balance at the end of the last fiscal year was $4,289,902. The Copyright Office does not expect to add any funds to this account this year. The Office might need to use up to $2 million from its No-Year account funds to make up the shortfall caused by the fiscal 2001 net appropriation reduction.

Status of Future Fee Adjustments

    Approximately two-thirds of the Copyright Office budget is funded by fee receipts, primarily fees paid for registering copyrighted works in the Office. The 1997 Technical Amendments Act gives the Register the authority to recommend copyright fees based on certain criteria, with Congress retaining the authority to disapprove a fee increase. In setting fees, the law directs the Register to conduct a study of costs for the service provided. Based on the study, and subject to congressional review, the Register is authorized to fix fees at a level not more than necessary to recover reasonable costs incurred for services plus a reasonable adjustment for inflation. Congress specifically mandated that the fees should also be ''fair and equitable and give due consideration to the objectives of the copyright system.'' These objectives include creating a comprehensive public record of copyright ownership and obtaining works for the use of the Library of Congress for its collections or its exchange programs.
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    The Copyright Office went through an elaborate and extensive process in establishing the present fees, which became effective on July 1, 1999. This process included hiring two contractors to conduct a cost study and to provide expertise in the new ''Federal Managerial Cost Accounting Standards.'' Since raising fees each year would be costly and disruptive, we indicated that the current fees have a minimum duration of three years. This decision was widely publicized.

    In July 1999, we implemented a new fee schedule which included raising our basic registration fee by 50%, from $20 to $30. This fee increase has resulted in fewer copyright registrations, which negatively affects our copyright registration system, our public record of copyright ownership, and the Library of Congress collections.

    The Office is now in the process of assessing the current fee schedule to determine if fee adjustments are warranted for fiscal 2002. Even if the Office were to implement a fee increase on July 1, 2002, it would not affect the fiscal 2002 fee receipt projection since the new fees would be in place for just the last quarter of the fiscal year. Past experience has shown that we would see a high incidence of ''short'' fees submitted in that quarter. Based on this historical evidence, the fiscal 2002 fee receipt forecast is the same as fiscal 2001. Given receipts received in the first half of this year, the Office may see a higher level of receipts for Fiscal Year 2001 than originally forecasted.


    Mr. Chairman, I remain most grateful for the support the Subcommittee continues to give the Copyright Office. This support enables us to continue to fulfill our important mission of fostering American creativity through an effective and strong copyright system that benefits both copyright owners and those who use copyrighted works.
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    Mr. COBLE. Ms. Peters, did the Library submit the Copyright Office fiscal year 2002 budget request as you structured it?

    Ms. PETERS. Yes, I am pleased to say that it did.

    Mr. COBLE. Well, I am pleased to hear that because I think it is important that the Librarian—and I don't mean to be dictating how he does his job—but I think it is important that the Librarian support the Copyright Office request. I am pleased to hear this.

    Now, you touched on it in your concluding remarks regarding the submission of the report as required by DMCA. You did not, however, give me a date. You may not be able to. Can you give us an approximate date when that report will likely be submitted?

    Ms. PETERS. As soon as we can. We have to get through what we are doing on digital distance education, and then we have also been given a task with regard to State sovereign immunity. As soon as we finished those tasks we will go back to it. Hopefully, in the month of May. We have every intention to get it to you this month.

    Mr. COBLE. Very well.

    Explain, Ms. Peters, your thinking on how the Office intends to use the funds in the No-Year Account?

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    Ms. PETERS. As I mentioned in my oral statement, the No-Year Account is made up of money from fees that people who use our services have paid; and we believe that that money needs to be used to make those services better. Our two efforts that I outlined, business process reengineering, we want to basically start the first phase of business process reengineering program with the use of those funds. The other very significant use of those funds will be to increase our IT systems so that we are responsive to the needs of our clients in this, the 21st century. So it is business process reengineering and information technology systems.

    Mr. COBLE. Well, the gentleman from California and I have discussed in some detail about the diversion of fees from the Patent and Trademark Office, and I have the same concern with these—they are user fees, am I not correct?

    Ms. PETERS. Yes.

    Mr. COBLE. Not one brown penny of tax dollars are in the coffers.

    Ms. PETERS. Not in the No-Year Account, no.

    Mr. COBLE. Pardon?

    Ms. PETERS. Not in the No-Year Account.

    Mr. COBLE. It is my belief that that diversion should be terminated, and we will proceed to that end.
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    Let me recognize the gentleman from California, Mr. Berman.

    Mr. BERMAN. Thank you, Mr. Chairman.

    We are having a hearing on digital music in a couple of weeks. Because of the constraints on the number of witnesses and the divergent views on the whole subject, you are not going to be testifying. But I am curious on your thoughts on this whole issue of online music and it being the performance, it being a distribution with the reproduction copy, how that plays. All of a sudden we are in a new world dealing with these complicated license issues, and I am curious—my guess is that will be one of the issues we get into at that hearing. I am curious about your views.

    Ms. PETERS. The issue of—I don't know whether to call them temporary copies or incidental copies that are caused to come about when you stream for a musical performance has come up in our Section 104 report. It is also part of a notice of inquiry that we have out to the public with regard to the Section 115 compulsory license, specifically, a request that we got from the Recording Industry Association of America to look at what are called I think one is limited downloads and the other one is incidental—that is not the right word. I think it is the buffer copies.

    We haven't reached conclusion on either of these issues. The comments came in just a week ago last Monday with regard to our perhaps rulemaking activity in the area of incidental phoneorecord deliveries under 115. There are reply comments coming in. So I am not sure where we are going to come out or at this point exactly what we are going to say other than to let you know that it is a serious issue. And certainly what we have heard over and over again is if music is performed through the radio there is one right that is involved, the performance right. However, if that same performance goes through a webcast, arguably it not only has the performance right involved it also has the reproduction right and perhaps the distribution right involved.
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    So from certain people's perspective what was one economic event dealing with one licensing organization all of a sudden is more than that; and the question is, should it be? We haven't really come to grips with what the answer to that should be.

    Mr. BERMAN. All right. Refresh my memory—a sound recording in the traditional sense is made, then copies are sold in record stores. There is a distribution there, right?

    Ms. PETERS. If you are dealing in the physical environment, yes, that is the reproduction and distribution right.

    Mr. BERMAN. Are those two separate rights, reproduction and distribution?

    Ms. PETERS. In many countries' laws there is only a reproduction right, and the distribution right is implied. In our copyright law, they are separate rights. But usually when you authorize someone to reproduce a work it is contingent on that the copies made are distributed. But for us it is a Section 106(1) reproduction, 106(3) distribution. But I was—actually, I focused it a little bit differently, and I probably shouldn't have. I think I kind of mixed up Sections 114 and 115, I think I mixed them up, now that you asked your question, performance right and preproduction and distribution rights. So maybe I should put it in writing and get it to you clearly.

    [The information referred to follows:]
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    Mr. BERMAN. But you mentioned you have some reports coming.

    Ms. PETERS. We have. Certainly the issue that has been raised with regard to streaming, which is performance and whether or not it also invokes reproduction and distribution. Then we also have issues with regard to the 115 license, which is a reproduction and distribution license.

    Mr. BERMAN. Okay. Do we have a few more minutes? Should we come back.

    Mr. COBLE. We have probably 8 or 9 minutes now, and there will be one 5-minute vote after this vote. You want to go, Howard, and come back? Or do you want to try to wrap it up now? Your call. We can do either one.

    Mr. BERMAN. Let me try—do you have more questions, too?

    Mr. COBLE. It might be better if we come back. I have a couple more questions.

    Why don't we do that? You all stand easy, and Howard and I will go vote. We will return imminently. Probably within 15 minutes I am thinking we ought to be back here—15, 20 minutes. So we will stand in brief recess.
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    Mr. COBLE. We will resume our hearing. Mr. Berman is on his way back.

    While we are waiting for Howard to return, Madam Register, let me ask you this question: What is the current status of and your new plans for CORDS, your electronic registration program?

    Ms. PETERS. CORDS is developing nicely. It is on track. We register—we hope to register about 30,000 claims through CORDS this year. They are digital dissertations. They are music that comes in as M P-3 files that are submitted through The Harry Fox Agency. We are starting to do electronic books.

    What has changed about CORDS is, instead of just taking that as a project and pushing it forward to full development, we recognized that our efforts needed to be broader. We needed to look at how do we make ourselves an electronic office with CORDS as a part of it. So everything we have done will continue; to add additional works, and additional clients to use the system. But we are going to look at our overall IT strategy to see the role that CORDS should play and come up with a plan that looks at all of our systems includeing CORDS. But it will be maintained and continue to grow while we do this.

    Mr. COBLE. Do you know I told someone a couple weeks ago I spoke to about the diverting of fees from the Patent and Trademark Office; and one of my friends from the Appropriations Committee said, I wish you wouldn't use the word ''divert.'' I said, fine, I can replace that with the words ''legalized larceny.'' she said, oh, no, I like divert better.
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    But I think legalized larceny fully applies to your shop as well as Patent and Trademark Office, Ms. Peters; and I am very concerned about the diverting of those fees. And you and your able general counsel who sits behind you, if you all have any suggestions, please let us know. Because that is going to be a front burner issue with us.

    I spoke with the President about it, in fact, 10 days ago. And I don't mean to be—you never know who is listening to you, and I don't mean to put the President on the spot, but he seemed to be very understanding, and he seemed to share my concern. I don't want to see that in the Post tomorrow that I can quoting the President as defending him, but he said this just doesn't seem right. And it doesn't seem right with these exclusive user fees that all of a sudden become fair game for everybody who wants to appropriate here, there and yonder, but we will talk about that in more detail.

    Let me ask you this, Ms. Peters—this will be the easiest question of the day—do your staff have any recommendations for legislation that our Committee generally or our Subcommittee specifically should consider?

    Ms. PETERS. Well, we certainly had some trouble in one rulemaking. We made some suggestions that you might want to look at to make our next round of rulemaking a little bit easier for us. And that really dealt with looking at the difference—well, looking at the technology that is used on DVDs which seems to be both access controls and copy controls when the law itself makes a huge difference in the way you treat access controls and copy controls. I recognize that is a very difficult issue.

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    We also had problems in defining a particular class of work and suggested if you had any help for us in defining that work since we defined it in a way that certainly the user community was very unhappy with, and if we were wrong we thought that maybe you could tell us the way we should be going.

    The last one had to do with one of the exemptions that we actually did create for controls, access controls that malfunction or that become obsolete. We exempted them, but we suggested that the problem might be larger than the group that we dealt with this time, which was literary works including data bases and computer programs; and if it was larger it might not fit within any particular class of work. It might apply to all classes. If that was true, you might want to consider an exemption to be added to Section 1201(2)(1). So we have those.

    We also have some recommendations that will probably be coming out of our Section 104 study. So those will be forthcoming to you.

    Mr. COBLE. Good, and we can continue to have dialogue about that as we go along.

    Ms. PETERS. Certainly as we go forward, you know in dealing with Section 115 and music online, if we find that there are problems in working it out in today's online environment, we certainly would be making recommendations to you for potential changes perhaps.

    Mr. COBLE. Very well. That is my final question.

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    Mr. Berman, again your timing is impeccable, and you are recognized.

    Mr. BERMAN. Well, thank you.

    First, Mr. Chairman, I would ask unanimous consent to be able to offer the statement of the Ranking Democrat on the Judiciary Committee, Mr. Conyers, on this subject.

    Mr. COBLE. Without objection.

    Mr. BERMAN. Ms. Peters, some have suggested that the Copyright Office itself, rather than privately run collectives, should operate as an agent for collecting and distributing performers' royalties under the webcasting license. I am interested in what you think of that proposal, what concerns you have about that idea, whether you think it makes sense and how you think it would compare in terms of efficiency with the present system.

    Ms. PETERS. Can I ask you a question before I answer?

    Mr. BERMAN. As long as I don't have to answer it.

    Ms. PETERS. No, you need to. Are you referring to the statutory license part of webcasting or the other part, which is more a negotiated license and there may be some collective administrative organizations that are involved?

    Mr. BERMAN. Well, I was thinking about the statutory license, but I don't know what the folks who asked me to ask that question were thinking, meaning my staff.
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    Ms. PETERS. Well, let me try to answer both.

    Mr. BERMAN. Statutory license I think.

    Ms. PETERS. Let me just start by saying that, with regard to statutory licenses that we oversee and where there is a copyright arbitration royalty panel system that is in place to basically adjust our rates or terms and for the money that we take in under certain licenses to distribute that money, I think that those licenses where we take the money in tends to be very efficient because they are very narrow with regard to what the activity is and how the system works.

    So given all the money that we manage to take in and that funds the office's activities, I think it is a very efficient way, but statutory licenses are not the solution of choice, generally. It costs about 3 percent of the money that is taken in in the royalty pool to run those licenses.

    With regard to the licenses where we don't take the money in, in other words, the money goes directly to the parties but we still have responsibility to make sure that the license works, you know, the question may be whether or not the money should come in the Copyright Office; and I don't really have a response to that.

    If you were going to go beyond that and you were going to say something like the negotiated license parts and performing rights societies and those types of organizations, we would never want to get involved with those kinds of organizations because they actually make the statutory licenses work better. If we did not have performing rights organizations representing the large number of publishers and large number of performers and actually helping with distributing the money, it would cost a tremendous amount more. And if we were to take over, I should tell you that performing rights organizations——.
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    Mr. BERMAN. That is what I am asking. I am talking about in those situations, as it applied to the webcasting license. There is a debate going on.

    Ms. PETERS. It is really hard, because I have to ask David. We are actually now involved in a CARP on the webcasting license. I am not sure how much it has cost. He doesn't have it with him, either.

    For us, performing rights organizations do a lot of things including enforce rights, and we don't do that. They also assist in the statutory license. It is hard for me to figure out what the question is with regard to webcasting because that is one of the licenses where we really don't take in the money——.

    Mr. BERMAN. Right.

    Ms. PETERS [continuing]. And that is sound recordings.

    Mr. BERMAN. By and large, you don't want—you are saying you don't want—.

    Ms. PETERS. The other thing, this isn't music as music. It is sound recordings. So it is not like an ASCAP or BMI. It is really a collective that really the record companies would have on behalf of performers.

    I can't really answer that, whether or not—how much it cost to administer that particular collective or how much it cost to run it through. But we are not saying we want it. We don't want it. We want the most efficient system that there possibly can be for a statutory license. The goal is to get the money to the people who deserve the money, and they should get as much money as they possibly can. However that works out, whether under statutory license, or not, we support.
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    Mr. BERMAN. Okay. Will information technology and other computer upgrades that you are planning right now better enable the Copyright Office to receive and process notices from webcasters seeking to use webcasting compulsory license? And how soon will you be able to achieve that goal, if so?

    Ms. PETERS. You mean that the people, who want to use the webcasting statutory license today who file on paper and they want to file electronically?

    Mr. BERMAN. That is what we are hearing.

    Ms. PETERS. I am not sure that they made that known to us—that they wanted to do that. If that were a priority we could look at it, but it is part—our plan is to have all of these systems electronic within the next 2 or 3 years. If there is a particular problem and you wanted us to look into it, we would be glad to look into it for you.

    Mr. BERMAN. Okay. I think that is it.

    Ms. PETERS. Can I ask a question of you? One of the things that we have heard from some—I don't know—some people believe that some of our records are not available online quick enough. If that is a problem, you can tell us; and we can look at what we can do to make that better.

    Mr. BERMAN. Here I think the specific thing, if I understand it, was that some of the webcasters wanted to be able to send electronic notices.
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    Ms. PETERS. So they want to file and send it in electronically. Okay. We can look into that for you.

    Mr. BERMAN. Thank you, Mr. Chairman. No further questions.

    Mr. COBLE. Thank the gentleman from California.

    Madam Register, for the purpose of clarification, what I previously alluded to the diverting of fees, I believe you and the Copyright Office refer to that as reduced appropriations or reduction in appropriations, do you not?

    Ms. PETERS. Yes.

    Mr. COBLE. One and the same, really. I think the Patent and Trademark Office——.

    Ms. PETERS. They are totally fee funded. Therefore, it is really diversion of user fees. We actually have a combination of user fees plus appropriated money. It is the user fees that go into the No Year Account, so when they reduce the appropriated amount and when we take money out of user fees for nonuser fee activities, you can call it a reduction in appropriation or you can call it a diversion of user fees for nonuser fee activities.

    Mr. COBLE. I think we are talking about the same matter.

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    We are pleased to have the gentlelady from Wisconsin, Ms. Baldwin, join us. Do you have questions for the Register?

    Ms. BALDWIN. Thank you, Mr. Chairman.

    I had extraordinarily bad timing in having missed your testimony, but I am leafing through it.

    The one question that may have already been covered before I walked into the room related to your office's convening parties to discuss areas of agreement on distance education at the direction of the Senate Judiciary Committee. You may have already answered that, but I would like to get an update of the status of that, who you are convening, what you have agreed on.

    Ms. PETERS. We haven't really agreed on anything at this point. The Copyright Office in 1999 at the request of the Congress and the Digital and Copyright Agency did a study on digital distance education. That study had a variety of recommendations, including recommendations for changing the law. A bill was introduced by the Senate I think on March 7th, and a hearing was held on March 13th. At that hearing, it became clear that educators and copyright owners had some things that they would like to see changed. In one case, they may not have liked to see a bill, but if there was going to be a bill they had concerns that needed to be addressed, and we were asked to try to work out those differences.

    We started last Thursday at about 6 at night and have gone on since; and, as we speak, the parties are continuing to try to resolve the issues that each side has identified. So there is the educational community on one side and all the copyright owners on the other, and hopefully they will be able to reach agreement, and that will form the basis of the bill. But we are not there right now.
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    Ms. BALDWIN. Can you—are you at liberty to tell us some of the identified issues that each brought to the table and your——.

    Ms. PETERS. I will give you an example.

    Ms. BALDWIN [continuing]. View of prospects for success on this?

    Ms. PETERS. I think they have every reason to try to reach consensus. It has always been if the parties can sit down and agree on things, basically let someone like myself recommend what the legislation should be or leave it to—I don't want to say chance but a way in which they haven't worked it out so that it works well for both of the affected parties.

    One of the issues that was there had to do with there is an exemption so that you cannot use in digital distance education any material that is primarily intended for instructional activity. So if it is marketed as to be used as instructional activity in a classroom or in a digital distance education class setting, that is the primary market, so it shouldn't be subject to an exemption. The copyright owners thought that instructional material was too narrow and thought it should go to educational material. The education community felt that there should be no limitation. It shouldn't have instructional material in there at all.

    I don't know where they are going to come out, but where I think it is now is instructional material support used over the Internet, something like that. So it is somewhat narrower than instructional material. I don't know how—but that is where it is at this moment. They haven't signed off on anything.
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    There are some other concerns about what kind of technology assurances institutions need to make to copyright owners in order to make them feel secure in the use of their material.

    There were—at the moment, it looks like there was an issue on who would be the eligible institutions. The way it was worded, at our recommendation, was nonprofit educational institutions, which is what the existing exemption says. There was concern that a lot of people on the Internet cannot really be a bona fide institution and could qualify for the exemption; and so there was a recommendation to add ''accredited''. At the moment, it is ''nonprofit accredited''. We are aware, not in our negotiations, but there is concern by the for-profit community, like the University of Phoenix, that it be expanded to them. I don't think our group is going to expand it, but it is possible, as it moves into the Senate, that it will be expanded.

    So I think each side has about 13 issues. I just gave you a few. I think that they are working very productively and cooperatively in a manner in which I think education can benefit, but copyright owners do not face undue risk.

    Ms. BALDWIN. Thank you for that update. That is all.

    Mr. COBLE. I thank the gentlelady.

    Ms. Peters, we thank you for your testimony. The Subcommittee appreciates your contribution today.
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    This concludes the oversight hearing on the United States Copyright Office. The record will remain open for 1 week. We appreciate your attendance.

    The Subcommittee stands adjourned.

    [Whereupon, at 4:15 p.m., the Subcommittee was adjourned.]

MAY 2, 2001


    I would like to commend the Copyright Office for its tremendous efforts over the past few years to enforce the copyright laws. The lines in copyright used to be in black and white, but the advent of technology has turned them gray.

    While the Internet provides limitless opportunities for the spread of information, it also allows the unlimited copying and distribution of copyrighted works without the payment of royalties. And thanks to services like Napster, the American public has become addicted to obtaining music and other content for free off the Internet and may not easily give up that privilege. Despite this pressure to let content roam free, the Copyright Office has done a remarkable job in the past few years of studying such timely issues as the anti-circumvention of copyright protection technology and the streaming of content over the Internet.
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    The Office also is playing an instrumental role in helping Congress ensure that the copyright laws apply equally to private citizens and the States. Sovereign immunity can no longer be used as an excuse for infringement.

    At the same time, the Office is addressing the needs of copyright users through its efforts to promote digital distance education. These efforts will enable schools and universities to teach their students anywhere on the globe while respecting the parameters of intellectual property rights.

    Unfortunately, many have criticized the Office for issuing decisions that strictly apply the copyright laws to works on the Internet. It's important to remember that the Copyright Office is neither pro-copyright nor anti-copyright; it is Congress that has made the determination to extend copyright protection to digital works. The Copyright Office interpreted the laws that we wrote and should not be criticized for clarifying our intent.

    On a final note, thanks in part to this Subcommittee and the explosion of technology, the Copyright Office's workload has increased dramatically. I hope we can all work with congressional appropriators to give the Office the additional resources it needs to continue serving its customers in a timely and professional manner.