AMERICAN INTELLECTUAL PROPERTY LAW ASSOCIATION
2001 JEFFERSON DAVIS HIGHWAY, SUITE 203, ARLINGTON, VIRGINIA 22202-3694

May 12, 1999

The Honorable Howard Coble
Chairman, Subcommittee on Courts
and Intellectual Property
Committee on the Judiciary
U.S. House of Representatives
Washington, D. C. 20515

Dear Mr. Chairman:

I am writing on behalf of the American Intellectual Property Law Association (AIPLA) to express the support of the Association for H.R. 1752, the "Copyright Damages Improvement Act of 1999" and for the efforts of you and Congressman Goodlatte to stimulate the implementation of the "No Electronic Theft (NET) Act of 1997," P.L. No. 105-147.

The AIPLA is a national bar association of nearly 10,000 members engaged in private and corporate practice, in government service, and in the academic community. The 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. Our members represent both owners and users of intellectual property.

Copyright Damages Improvement Act of 1999

H.R. 1752, the "Copyright Damages Improvement Act of 1999," would amend section 504(c ) of Title 17, United States Code, to adjust the statutory damages for copyright infringement, provide enhanced damages for repeat offenders, and eliminate a loophole in the bankruptcy law as it relates to copyright law.

The need for sanctions which will effectively deter copyright infringement has increased many fold as we have entered the digital era with the explosive growth of the Internet. The statutory damages of the copyright law were last adjusted in 1988 by Public Law 105-80. The legislation which led to this adjustment of the level of statutory damages provisions (H.R. 1623) was originally introduced on March 16, 1987. Since that time, inflation has decreased the deterrent effect of such damages by more than 47% (see Consumer Price Index - All Urban Areas, 1987 to 1999, Bureau of

Labor Statistics). Thus, this legislation merely restores the deterrent effect of such damages to the proportionately comparable level Congress fixed more than a decade ago and is long overdue.

Proposed new subsection 504(c )(2)(B) would permit a Court to award statutory damages of up to $250,000 per work in the case of repeat offenders. The damage which copyright owners can suffer by virtue of the illegal distribution on a global basis of their copyrighted works demands that statutory damages be increased to provide a sanction sufficient in magnitude to be an effective deterrent. In the context of repeat offenders who are shown to persist in a continued pattern of infringement, an award of statutory damages in the amount of $250,000 per work is certainly not excessive.

Section 3 of H.R. 1752 would add a new sentence at the end of Section 504(c ) to provide that "willful" infringement shall for the purposes of Chapter 5 of Title 11, United States Code, be considered to be "willful and malicious injury to the property of another." This amendment would preclude a willful copyright infringer from avoiding responsibility for a copyright infringement damages award by declaring bankruptcy. Section 523(a)(6) of Title 11, United States code, specifically provides that an individual debtor may not discharge a debt arising as a result of a willful and malicious injury by such debtor to another entity or the property of another entity. While a number of bankruptcy courts have found intentional copyright infringement qualifies to prevent the discharge in bankruptcy of the related damages judgement (See In re Pineau, 149 B.R. 239 (Bankr. D.Me. 1993); In re Elma, 112 B.R. 148 (Bankr. E.D.La. 1990); In re Gabaldon, 55 B.R. 431 (Bankr. D.N.M. 1985)), others have allowed copyright infringers to avoid the consequences of their behavior by ruling that willful infringement does not, without more, satisfy the willful and malicious standard of section 523(a)(6) (See In re Blankfort, 217 B.R. 138 (Bankr. S.D.N.Y. 1998); see also In re Watson, 117 B.R. 291 (Bankr. W.D.Mo. 1990)). The amendment which H.R. 1752 would make to section 504(c ) would prevent copyright infringers from avoiding liability under the bankruptcy laws for their actions by equating willful copyright infringement to "willful and malicious injury." This is a desirable change. Individuals who intentionally infringe the copyright of another should not be able to avoid responsibility for their actions.

No Electronic Theft (NET) Act

We applaud your conducting an oversight hearing on the implementation of the NET Act. Not only is the enforcement of authors' exclusive rights vital to ensure that they receive adequate compensation for their creativity in the United States, it is also important to set an example for our trading partners to encourage them to fully implement their enforcement obligations under the Agreement on Trade Related Aspects of Intellectual Property Rights. The Department of Justice has indicated that the current sentencing guidelines which are targeted for strengthening by the NET Act significantly understate the degree of economic harm inflicted on copyright owners by infringers.

As the U.S. Sentencing Commission's own data has indicated, most intellectual property criminals are not sentenced to any term of imprisonment, sending the signal that the fines are little more than a cost of doing business. It is past time for the sentencing guidelines to be revised to reflect the directive contained in the NET Act and the AIPLA appreciates and supports your initiatives in this area.

Thank you for your consideration of our views and we look forward to working with you on these important issues.

Sincerely,

Michael K. Kirk
Executive Director