STATEMENT OF

MICHAEL K. KIRK
EXECUTIVE DIRECTOR

AMERICAN INTELLECTUAL PROPERTY
LAW ASSOCIATION

BEFORE THE

SUBCOMMITTEE ON COURTS AND
INTELLECTUAL PROPERTY

COMMITTEE ON THE JUDICIARY

UNITED STATES HOUSE OF REPRESENTATIVES

ON

H.R. 2180, THE ON-LINE COPYRIGHT LIABILITY LIMITATION ACT

AND

H.R. 2281, THE WIPO COPYRIGHT TREATIES IMPLEMENTATION ACT

SEPTEMBER 17, 1997

Mr. Chairman:

I am pleased to have the opportunity to present the views of the American Intellectual Property Law Association (AIPLA) on H.R. 2180, the "On-Line Copyright Liability Limitation Act" and H.R. 2281, the "WIPO Copyright Treaties Implementation Act."

The American Intellectual Property Law Association is a 10,000 member national bar association whose membership primarily consists of lawyers in private and corporate practice, in government service, and in the academic community. AIPLA represents a wide and diverse spectrum of individuals, companies and institutions involved directly or indirectly in the practice of patent, trademark, copyright and unfair competition law, as well as other fields of law affecting intellectual property.

The digital revolution which has given us the Internet and other forms of digital distribution of information holds practically unlimited promise of bringing vastly greater amounts and richer varieties of information and entertainment to American consumers. Greater job opportunities, enhanced trade, and improved education systems are among its benefits. But the same technology which offers these opportunities brings new challenges which potentially threaten one of our Nation's most competitive industries. It has been estimated that America's creative communities contribute $250 billion each year to the U.S. Gross Domestic Product, support nearly 3 million American jobs, and account for more than $50 billion in exports and foreign sales each year, creating a handsome trade balance in products and services dependent upon copyright protection. The challenge is to find the appropriate legislative framework that will permit cyberspace to reach its full promise while protecting the rights of America's creative communities.

AIPLA therefore congratulates you, Mr. Chairman, for undertaking the difficult and thankless task of crafting laws that will allow us to achieve the full potential of the digital revolution. To that end, we strongly support passage of H.R. 2281 which would implement the Copyright Treaty and the Performances and Phonograms Treaty concluded this past December at a Diplomatic Conference convened by the World Intellectual Property Organization (WIPO). While we believe that H.R. 2180 raises a number of important questions regarding on-line copyright liability, we are not convinced that an appropriate case has been made for the need of such legislation at this time.

H.R. 2281, the "WIPO Copyright Treaties Implementation Act"

H.R. 2281 contains amendments to U.S. law which are necessary to implement the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. A number of the obligations contained in these treaties will require no change in U.S. law. These obligations duplicate some of those contained in the Agreement on the Trade-Related Aspects of Intellectual Property Rights (TRIPS) which the United States has already implemented. Thus, the amendments in U.S. law needed to implement the WIPO treaties are essentially limited to provisions to effect the articles dealing with technological measures of protection and copyright management information. Article 11 of the WIPO Copyright Treaty provides that:

"Contracting Parties shall provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures that are used by authors in connection with the exercise of their rights under this treaty or the Berne Convention and that restrict acts, in respect of their works, which are not authorized by the authors concerned or permitted by law."

Article 18 of the WIPO Performances and Phonograms Treaty provides a similar obligation for the benefit of performers or producers of phonograms.

Article 12 of the WIPO Copyright Treaty provides the following obligation regarding rights management information:

"(1) Contracting Parties shall provide adequate and effective legal remedies against any person knowingly performing any of the following acts: knowing, or with respect to civil remedies, having reasonable grounds to know, that it will induce, enable, facilitate, or conceal an infringement of any right covered by this treaty or the Berne Convention:

"(i) to remove or alter any electronic rights information without authority;

"(ii) to distribute, import for distribution, broadcast or communicate to the public, without authority, works or copies of works knowing that electronic rights management information has been removed or altered without authority."

"(2) as used in this Article, 'rights management information' means information which identifies the work, the author of the work, the owner of any right in the work, or information about the terms and conditions of use of the work, and any numbers or codes that represent such information, when any of these items of information is attached to a copy of a work or appears in connection with the communication of a work to the public."

Article 19 of the WIPO Performances and Phonograms Treaty provides similar obligations for the benefit of performers or producers of phonograms.

We believe that H.R. 2281 properly implements these obligations by providing adequate legal protection and effective legal remedies in Sections 1201 through 1204 of new Chapter 12 of Title 17.

Section 1201 entitled "Circumvention of Copyright Protection Systems" directly implements the anti-circumvention obligations of the Treaties. Subsection (a)(2) prohibits certain devices that circumvent for the purpose of gaining unauthorized access to a work and subsection (b) prohibits certain devices that circumvent technological protection that controls, or limits exploitation of a work. Importantly, both subsections are limited in their application to any "technology, product, service, device, component, or part thereof" that (1) is primarily designed or produced for the purpose of circumventing a technological protection measure; (2) has only limited commercially significant purposes or uses other than to circumvent a technological protection measure; or (3) is marketed for use in circumventing a technological protection measure. Section 1201 also carefully preserves the other parts of Title 17 by specifically providing in subsection (d) that "Nothing in this section shall affect rights, remedies, limitations, or defenses to copyright infringement, including fair use."

We find the carefully delineated rights contained in H.R. 2281 to be a significant improvement over their predecessor provisions contained in H.R. 2441, 104th Congress. Section 1201 of H.R. 2281 is narrower and more targeted, representing significant changes over its predecessor, H.R. 2441, in response to concerns which have been expressed in the discussions over the past two years.

Section 1202 of H.R. 2281, entitled "Integrity of Copyright Management Information," implements the rights management information obligations contained in Articles 12 and 19 of the treaties. We note with approval that the prohibition on distributing or importing for public distribution false copyright management information now includes the requirement that there be an "intent" to induce, enable, facilitate, or conceal infringement. We believe this adequately addresses the concerns about the possibility of creating liability by innocent distribution of copies containing false copyright management information. We are also pleased to see that the architecture and functionality of the Internet and the World Wide Web have been recognized in the definition of copyright management information in Section 1202(c)(5) by including specific reference to identifying numbers or symbols referring to copyright management information and links to such information. This reflects the reality that the physical location of a copyrighted work may be different from the physical location of copyright management information which may serve as a means of access through pointing to the work via hyperlinking.

We believe that both Section 1203, which establishes a civil action for a violation of Section 1201 or 1202, and Section 1204, which makes it a criminal offense to violate Section 1201 or 1202, are reasonable and appropriate implementations of the treaties. We had expressed concern in the last Congress that the predecessor to H.R. 2281 did not provide criminal sanctions for circumventing technological protection measures and therefore are pleased to see that violations of section 1201 are now subject to such sanctions. Indeed, we believe that circumvention of such measures appears to pose an ever greater threat to the economic interests of copyright holders than the unauthorized alteration of copyright management information or the distribution of false copyright management information acts which were subject to criminal penalties in the predecessor bill.

AIPLA believes that our future prosperity will depend in large measure on adequate protection worldwide for intellectual property. As with the implementation of the TRIPs Agreement, the rest of the world will be watching the United States very closely to see how we implement our obligations under these treaties. If we fail to set an appropriate example, we can be certain that some of our trading partners will take note and follow suit with their implementing legislation. We must keep foremost in mind that the Internet is global in nature and that until all of the world community properly implements these treaties, a significant export of the United States will remain at risk. Accordingly, while issues have been and will continue to be raised in connection with this legislation which we should carefully consider, we should also recognize the speed with which the Internet is growing and that failure to promptly act may result in business decisions being taken that will frustrate the objectives of these two treaties.

H.R. 2180, the "On-Line Copyright Liability Limitation Act"

AIPLA is aware of the ongoing debate regarding the issue of on-line copyright liability. We are desirous that this issue be promptly resolved because, although it is not implicated by the implementation of the two recently-concluded WIPO treaties, we have no doubt but that an effort will be made to tie the progress of these two efforts together.

This brings us to a threshold consideration, Mr. Chairman, regarding the need for legislation such as H.R. 2180.

Direct copyright infringement has traditionally been a matter of strict liability, and a long series of cases imposes liability, under appropriate circumstances, for acts of copyright infringement committed by others. Case law establishes two avenues for third party liability for copyright infringement: vicarious liability and contributory infringement. Thus, copyright law has historically included three types of liability: (1) liability based on direct infringement; (2) liability based on contributory infringement; and (3) vicarious liability ­ with a different standard for each type. These concepts are not unique to copyright law. The U.S. Supreme Court has pointed out that:

"The absence of such express language in the copyright statute does not preclude the imposition of liability for copyright infringement on certain parties who have not themselves engaged in infringing activity. For vicarious liability is imposed in virtually all areas of the law, and the concept of contributory infringement is merely a species of the broader problem of identifying the circumstances in which it is just to hold one individual accountable for the actions of another." Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 435 (1984)

Our threshold problem, however, is that it is difficult to identify jurisprudence which makes the issue of on-line liability a real problem as opposed to a perceived problem. There certainly seems to be no chilling effect on the growth of the Internet. It was reported in a Senate hearing earlier this month that Internet computer servers have grown from just over 200 in 1981 to 16 million today. We are not aware of any flood of lawsuits that would undercut this strong growth of the Internet. We are aware of only a dozen or so decisions dealing with copyright liability on the Internet, many involving operators of bulletin boards. We are not aware that a single On-line Service Provider (OSP) or Internet Access Provider (IAP) has ever been found liable for copyright infringement on the Internet. The courts have demonstrated their ability to interpret the copyright law flexibly, and in a manner which has produced fair results. Accordingly, while we applaud your effort to resolve this dispute, we cannot but wonder whether those advocating such legislation have adequately demonstrated the need for it. Do we have a solution in search of a problem?

We would, therefore, agree with the comments offered by Daniel Burton, the Vice President of Novell, at the Senate hearing. He acknowledged that while there is always the possibility of some court, in a future case, interpreting the copyright law in a way that might have a chilling effect upon OSPs and IAPs, until such a case is a reality, basing legislation on hypothetical chilling effects and purely speculative concerns may result in a remedy that is far worse than the ill it aims to cure.

Nonetheless, there has been considerable concern among OSPs and IAPs that they could be held liable under the doctrines of vicarious liability or contributory infringement. Moreover, concerns have been expressed that Internet transmissions result in the making of temporary copies by routers as the information passes through. While such copying is incidental to the function of transmission via the Internet, case law can be cited that would suggest that such incidental, temporary copying violates the exclusive rights of copyright owners. However, for the reasons expressed above, we believe that courts will not find any liability in such circumstances for unknowing, innocent activity. But the fact that there is at least the scintilla of a possibility has been cited as a reason for major concern. Thus, in evaluating the criteria of H.R. 2180 upon which an exemption would be granted, both the situations where vicarious liability might be applicable and those where direct infringement liability might be applicable have to be kept in mind, and one must ask how each criterion applies in each type of situation.

We emphasize this background and the underlying question to establish the context for the provisions in H.R. 2180, for it represents a potentially significant ­ and perhaps substantial ­ change to the overall structure of copyright law. Our comments are based on an awareness of this context and of the fact that the concepts and language in the exemption established by H.R. 2180 may affect the entire fabric of copyright law.

H.R. 2180 would add a new section 512 to the Copyright Law which is extremely broad in scope. Particularly in view of the absence of a clear demonstration for need, we do not believe that such a broad scope for the exemption is warranted. While we agree with your objective of aiming the exemption "essentially at passive, intermediary types of conduct" similar to those specified in the passive carrier exemption of section 111(a)(3) of the Copyright Act, we are not certain that the passive carrier exemption is an apt analogy for the nature and range of activities on the Internet.

Turning now to the specific provisions of H.R. 2180, it would appear that section 512 would withhold not only monetary damages, but also injunctive relief. Injunctive relief, especially preliminary injunctions, must be available to copyright owners in all cases. If a network operator is exempt from monetary damages for the infringing material in his computer and no injunctive relief is available, how is a copyright owner to obtain the removal of the infringing material? Injunctive relief has been one of the most important remedies historically available to copyright owners and ­ at the very least ­ it should be retained as a remedy for copyright owners in all cases. The availability of injunctive relief should not provide an undue opportunity for abuse since the issuance of an injunction is always at the discretion of the court.

We understand that the six paragraphs of subsection 512(a)(1) are in the conjunctive, and the exemption would not apply unless all six criteria are satisfied. We are concerned, however, that these criteria might be too easily satisfied, resulting in an exemption in circumstances where one is not warranted.

Paragraph (A) would require that, to qualify for the exemption, a person must not have initially placed the material on-line. We fear that the architecture of the Internet and the diversity of activities make this criterion somewhat problematic. It could well be the copyright owner who "initially places the material on line." Infringing activity which involved the subsequent copying and retransmittal of material already on line would not seem to cause loss of the exemption from liability. Indeed, infringing conduct is more likely to involve moving infringing material already placed on the Internet by the copyright owner to a site from which infringing activity such as transmission and distribution occurs.

The second criterion would require that, for a person to be eligible for the exemption, that person not generate, select or alter the content of the material. The difficulty with this terminology is that it can be argued that an infringer does not generate, select or alter the content of the material. The content is generated, selected or altered by the creator of the work; the subsequent infringer (merely) places the material on a bulletin board from which it may be downloaded.

Paragraph ( C ) requires that a person not determine the recipients of the material. No bulletin board operator, even those who provide only infringing material, determines the recipient of any given work. A bulletin board service offers an array of material from which subscribers choose that which they wish to receive. The fact that the bulletin board operator does not determine which subscribers receive the infringing material should not necessarily lead to an exemption from liability.

We believe that the criterion set forth in paragraph (D) is consistent with the rules developed by the courts for vicarious liability. However, the concept of financial benefit as defined in vicarious liability case law does not cover situations such as where a non-profit organization owns or operates the web site or other on-line site or transmission facility. For-profit organizations might also be able to avoid disqualification pursuant to this criteria through creative pricing plans which would exclude financial benefit "directly attributable to a particular act of infringement." Care should be taken to insure that those who profit from infringing activity may not avoid liability simply by resorting to such devices.

A person would lose the exemption under paragraph (E) if that person sponsored, endorsed, or advertised the material in question. While the endorsement of the particular infringing material is certainly a justification for denying an exemption from liability, we are concerned that the exemption would not be denied where an individual advertises a site containing infringing material rather than the infringing material itself. It might be that such a person would qualify for the exemption since there was no endorsement of specific material. We would suggest that this criteria take into account a rule of proportionality in the sense that an individual promoting a site containing a large number of infringing works, e.g., 25% of the total, should not qualify for the exemption.

With respect to the criterion contained in paragraph (F), we are troubled by the fact that it is in the disjunctive. Thus, it would appear that a person could still qualify for the exemption where they knew that they were transmitting or providing access to infringing material as long as they were prohibited by law from actually accessing the material.

Subparagraph 512(a)(2) would condition injunctive relief in the case of contributory infringement to acts which were "technically feasible and economically reasonable to carry out." What may not be "economically reasonable" for an infringement involving transmitting or making available a single article in a journal could be very different for an infringement involving a complete motion picture, sound recording, or computer program scheduled for release in two weeks. If the expense of complying with an injunction were several thousand dollars, that might not be economically reasonable for an article contained in a seldom-read journal. However, that same amount would be minuscule compared to the damage from widespread distribution of a soon-to-be-released film, sound recording, or computer program. Again, perhaps a proportionality principle would be appropriate, defining the concept of "economically reasonable" so as to take into account both the cost of compliance as well as the potential damages which would be suffered by a copyright owner. However, it is not clear that specific consideration of economic reasonableness need be mandated by the criterion inasmuch as courts, in balancing the equities in determining whether to grant an injunction, take this concept into consideration.

In addition, we note that as long as the criterion in paragraph (F) is in the disjunctive, subsection 512(a)(2) could provide little or no incentive for service providers to respond quickly when infringements have been reported to them. The worst thing that could happen in that case would appear to be an injunction. This would not be sufficient in cases where great damages could be incurred by copyright owners because of less than responsive action on the part of service providers so as to prevent further damage. Once notice has been given, monetary damages should be available against a service provider that failed to respond in a reasonable time frame.

Mr. Chairman, while we remain hesitant about the need for legislation providing a safe haven for network operators regarding on-line liability, we believe that H.R. 2180 has raised a number of interesting questions. Indeed, discussion of these questions in hearings such as this should not only clarify the need for such legislation, or the lack of such need, but also focus on the appropriate scope of such legislation should such a need exist. While we have not yet developed specific language to address the problems we have identified, we would be pleased to work with you and your in any way we can should you conclude that legislation is needed.