Digital Online Content Conference
Progress and Freedom Foundation
April 18, 2002
Thanks Jeff, Progress & Freedom Foundation and George Mason for inviting me to participate in this important conference. I particularly welcome this opportunity to highlight some of the issues surrounding the application of copyright law to the digital environment.
When the IP provisions of Article I, Section 8 of the Constitution were adopted over 200 years ago, the Barbary Pirates were menacing U.S. and European merchant ships in the Mediterranean. Today, our nation faces domestic and foreign piracy of a different sort: the illegal duplication of software, music, DVDs, and other digitized information. This piracy comes with a high price. Last year U.S. copyright industries reported losses of nearly $22 billion due to piracy just from overseas.
Today, copyright owners are faced with the challenge of adapting to the digital revolution. The ease of making and distributing perfect copies of virtually every kind of work protected by copyright is putting strains on traditional modes of doing business.
The growing tide of piracy both in traditional form—tapes, CDs and other hard copies—as well as in new modes of distribution—the Internet—continues to cost the content industries billions of dollars every year.
To realize the potential of e-commerce for the distribution of all sorts of information products, from entertainment to education, from business software to databases for scientific research, providers must be confident that their products are safe from piracy. This development will enrich all of the participants: content providers, hardware and telecommunications providers and Internet users.
Providing this security requires both technological and legal means to enable copyright owners to protect their works. It also means that these same technologies and laws need to recognize that fair use means that some uses that might otherwise be infringing will be permitted.
To respond to these concerns and to adapt the copyright law to the digital environment, Congress passed the Digital Millennium Copyright Act, a carefully balanced law to ensure that content owners would enjoy the protection they need to put their works on the Internet, and that appropriate fair use is maintained for consumers, scientists and educators.
The inevitable progress of technology continues to present new challenges and opportunities. These developments include: peer-to-peer file sharing systems; broadband technology; webcasting, and the expansion of the Internet into every corner of the world.
The issues raised for the content community by these developments include topics like the application of the fair use privilege to the digital reproduction and distribution of works; file trading systems; the application of the first sale doctrine to digital distribution, and technical protection measures and rights management.
The fair use privilege is an important part of copyright law. This judge-made doctrine was first incorporated into the copyright law at the time of the 1976 general revision of the law. It has changed and evolved over time, in no small part due to the demands of changing technology.
The net result is that the law now tolerates some degree of copying of works, including in digital form. Typically, this copying has been of a private nature, for the use of the copier and the immediate circle of friends and family.
When dealing with paper copies or even analog copies on tape, the commercial impact of this sort of copying has been minimal. Indeed some studies have indicated that such copying may sometimes be commercially beneficial to copyright owners.
Thus, traditional fair use achieved a careful balance to enable owners of copies of works to use them for personal purposes and in ways that did not unduly harm the interests of copyright owners.
Digital copying and Internet distribution, however, significantly changed that balance. One simply cannot analogize the loading—or "ripping"—of a song or other work onto one's personal computer to making a tape-to-tape copy. The issue is much more complex because of the interconnectivity provided by the Internet.
Once a song is in digital form, it can be transmitted to anyone else connected to the Internet - be it one person or a thousand. The recipient gets a perfect digital copy with no degradation in quality, and the sender keeps his copy. And as the experience with peer-to-peer file distribution systems shows us, it can and possibly will be transmitted all over the world.
Napster, Morpheus, Grokster, and others are examples of these systems on the Internet. Instead of computer files being stored on, and distributed from, large, centralized "server" computers—which is how most of the authorized music distribution systems work—these systems allow individuals to ask for and obtain copies of files from others' personal computers if those individuals are using the same system. The computer file travels from a "peer" (a person's PC) to another "peer" without having to reside in an intervening storage facility.
In the United States, many see the Ninth Circuit's decision in the Napster case as affirming the view that when thousands or tens of thousands of copies are being made, it cannot reasonably be called "fair use" as we have traditionally understood it. The court made it clear that a for-profit business—even if it is not making any profits—which provides a system for wide-scale unauthorized copying of protected works is engaged in "commercial" activity that is not likely to be a fair use.
It has been proposed that one who lawfully acquires a digital version of a copyrighted work should be permitted to pass that copy, without making another, on to a second person just as that person may now do with a "hard" copy of a work under the first sale doctrine, codified in Section 109 of the Copyright Act. We concur in principle with this interpretation of Section 109.
There is, however, a significant difference between traditional acts of distribution and acts of digital distribution.
In a traditional distribution, the work is reproduced and only subsequently distributed. In a digital distribution, the act of reproduction is an intrinsic part of the act of distribution.
Because of the present limitations of digital technology and the difficulties in ensuring that the transmitting party had erased or otherwise destroyed the copy resident in the sending computer, I have serious reservations about the prudence of amending Section 109 to grant a blanket exception to digital distribution.
It is important to note that general principles of fair use will be applicable to the distribution by digital transmissions of a work just as it is to the distribution of a "hard copy." Consequently, when considering all of the fair use factors, a court might decide that certain digital distributions of works were fair, particularly if the sending party erased the copy in the sending computer, without the need for amending the Copyright Act.
Legislative proposals—supported by some copyright owners—that would require computer and electronics manufacturers to include copyright-protection technologies in their products has been the subject of considerable discussion. Supporters of such an approach have said that it could be promoted on the grounds that stronger copyright protection would spur the development of the Internet.
The immediate impetus for the legislation stems from concerns that Hollywood studios are unwilling to broadcast movies on over-the-air digital television without consumers being able to copy them on digital recorders and upload them to the Internet.
Recently, Sony Pictures Entertainment and Warner Brothers agreed to use so-called "5C" technology created by Intel, Matushita, Toshiba, Sony and Hitachi that includes watermarks on cable and satellite broadcasts. Disney and other studios have declined to sign on because the agreement does not cover over-the-air transmissions. They argue that legislation is necessary to address such broadcasts.
Some content owners believe they need more protection than is already provided in the DMCA. Such an approach is highly unpopular with the computer and software manufacturers, and to a lesser extent with electronics manufacturers. I am told the Information Technology Industry Council, the Business Software Alliance, the Digital Media Association and the Consumer Electronics Association oppose such an approach.
Many argue that providing appropriate protection for copyrighted works that are transmitted by digital technology is a prerequisite for the distribution of these products on the Internet, and for digital over-the-air broadcasts.
Negotiations are presently underway among hardware manufacturers and content owners to develop improved means for protecting online content, which I believe would encourage creativity and promote the development of a broader range of services for consumers in the Internet and broadband technologies.
Before Congress rushes into the imposition of a legislative solution, I hope its Members will grant more time for the free market to find its own middle ground.
Lastly, I'd like to spend a few minutes touching on content protection as it relates to the international arena.
Intellectual property has become increasingly vital to our nation's economic competitiveness, our standard of living, and our global security. IP industries represent the largest single sector of the American economy and employ over 4 million Americans. Copyright industries are creating jobs at three times the rate of the rest of the U.S. economy.
Under the American Inventors Protection Act of 1999, the under secretary of commerce for intellectual property is directed to advise the president, through the secretary of commerce, and all federal agencies, on national and international intellectual property policy issues, including intellectual property protection in other countries. My office is also authorized by the AIPA to provide guidance, conduct programs and studies and otherwise interact with foreign intellectual property offices and international intergovernmental organizations on matters involving the protection of intellectual property.
In keeping with this directive, we continue to be active in a number of different venues to streamline and strengthen protection for IP. Through our office, we: help negotiate and work with Congress to implement international IP treaties; provide technical assistance to foreign governments that are looking to develop or improve their IP laws and systems; train foreign IP officials on IP enforcement; draft and review IP sections in bilateral investment treaties and trade agreements; advise the Office of the U.S. Trade Representative on intellectual property issues in the World Trade Organization; and work with USTR and industry on the annual review of IP protection and enforcement under Section 301 of the Trade Act of 1974. The USPTO also serves as co-chair of the National Intellectual Property Law Enforcement Coordination Council, which coordinates domestic and international IP law enforcement among federal and foreign entities.
Our goal in the international arena is to move toward greater consistency in intellectual property protection around the world. Just as the framers of the Constitution created standard intellectual property rules for the nation, we are working to develop consistent rules for the rest of the world.
With respect to copyrights, we continue to work to bring copyright law in line with the digital age. Back in 1996, the USPTO led efforts to adopt the two WIPO "Internet treaties"—the WIPO Copyright Treaty (WCT) and the WIPO Performers and Phonograms Treaty (WPPT). Both treaties establish important new international norms related to the right to make a work available to the public through interactive media. They also provide for the protection of copyright management information and technological measures used to protect copyrighted works. The United States has made the entry into force of these treaties one of our top IP priorities, and we are very pleased that the WCT entered into force last month and that the WPPT will do so on May 20, 2002.
As might be expected, a significant part of our international efforts at the USPTO are devoted to strengthening IP enforcement abroad and combating IP piracy. With the growing importance of intellectual property assets, the need for enforcement of these rights abroad has increased substantially. For example, IP protection is critical for U.S. exports, with more than 50 percent of our exports now dependent on some form of IP protection.
Because American IP owners compete in a global marketplace, we need to expand our efforts to promote IP protection internationally. We need to make sure that American IP owners and law enforcement authorities have sufficient legal tools to fight piracy. We also need to provide technical assistance to foreign entities on drafting and implementing effective IP laws and training on enforcement of IP rights. The USPTO has a dedicated team of professionals in our Office of Legislative and International Affairs doing just that.
Earlier I mentioned the USPTO co-chairs, along with the assistant attorney general for the Criminal Division, an interagency group called NIPLECC. Created by Congress in 1999, NIPLECC helps to coordinate and enhance enforcement-training activities across a broad range of federal agencies. Its members also include the under secretary of state for economic and agricultural affairs, the deputy United States trade representative, the commissioner of customs, and the under secretary of commerce for international trade. During my tenure as under secretary and director, I intend to put this enforcement tool to its maximum possible use.
I have barely scratched the surface of some of the major issues that will be facing policymakers in the coming months. As we negotiate our way through the shoals of these and other difficult questions, this conference can be a key tool in giving us—at all levels of government—your valuable insights, combined with your real-world perspective on these key issues.
I congratulate you on your efforts, and I look forward to availing myself and benefiting from your work product.