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Intellectual Property and the National Information


Below is the Executive Summary of the National Information
Infrastructure Task Force draft report on intellectual property
rights. The complete report will be available on the IITF Bulle-
tin Board, accessible through the Internet by pointing the Gopher
Client to iitf.doc.gov or by telnet to iitf.doc.gov (log in as
gopher). For a paper copy, call (703) 305-9300 or write NII,
USPTO, Box 4, Washington, D.C. 20231-0001.

INTELLECTUAL PROPERTY AND
THE NATIONAL INFORMATION INFRASTRUCTURE

A PRELIMINARY DRAFT
OF THE REPORT OF THE WORKING GROUP
ON INTELLECTUAL PROPERTY RIGHTS

Executive Summary

INTRODUCTION

The Working Group on Intellectual Property Rights, chaired by
Assistant Secretary of Commerce and Commissioner of Patents and
Trademarks Bruce A. Lehman, was established as part of the White House
Information Infrastructure Task Force. The Task Force, chaired by
Secretary of Commerce Ronald H. Brown, was created to articulate and
implement the Administration's vision for the National Information
Infrastructure (NII). The Task Force is working with the private
sector, public interest groups, Congress and State and local govern-
ments to develop comprehensive telecommunications and information
policies and programs that best meet the country's needs.

The Preliminary Draft of the Report of the Working Group on
Intellectual Property Rights represents the Working Group's examina-
tion and analysis to date of the intellectual property implications of
the NII. While it addresses each of the major areas of intellectual
property law, it focuses primarily on copyright law and its applica-
tion and effectiveness in the context of the NII. The Working Group is
issuing the Preliminary Draft to solicit public comment prior to
issuing a Final Report. The Working Group will also hold public
hearings on the Draft.

BACKGROUND

The NII has great potential to increase access to information and
entertainment resources that will be delivered quickly and economical-
ly anywhere in the country in the blink of an eye. For instance,
hundreds of channels of "television" programming, thousands of musical
recordings, and literally millions of "magazines" and "books" can be
made available to homes and businesses across the United States and,
eventually, the world. It can improve the nation's education and
health care systems. It can enhance the ability of U.S. firms to
compete and succeed in the global economy, generating more jobs for
Americans. New job opportunities can also be created in the process-
ing, organizing, packaging and dissemination of the information and
entertainment products flowing through the NII.

The NII is much more than computers, telephones, fax machines, scan-
ners, cameras, keyboards, televisions, monitors, printers, switches,
routers, wires, cables, networks and satellites. What will drive the
success of the NII is the _content_ moving through it. Therefore, the
potential of the NII will not be realized if the content is not
protected effectively. Owners of intellectual property rights will not
be willing to put their interests at risk if appropriate systems --
both in the U.S. and internationally -- are not in place to permit
them to set and enforce the terms and conditions under which their
works are made available in the NII environment. Likewise, the public
will not use the services available on the NII and generate the market
necessary for its success unless access to a wide variety of works is
provided under equitable and reasonable terms and conditions, and the
integrity of those works is assured.

FINDINGS AND RECOMMENDATIONS

A. LAW

The Draft Report analyzes current copyright law and its application in
the NII environment. The Working Group concludes that, with the
following limited amendments and clarifications, the Copyright Act
will provide the necessary protection of rights in copyrighted works
-- and appropriate limitations on those rights.

1. DISTRIBUTION BY TRANSMISSION

a. THE DISTRIBUTION RIGHT

The Copyright Act gives a copyright owner the exclusive
right "to distribute _copies or phonorecords_ of the copy-
righted work" to the public. A copy or phonorecord is a
material object in which a copyrighted work is fixed, such
as a compact disc, a videocassette or a paperback book. It
is not clear that a transmission can constitute a distribu-
tion of copies of the work under the current law.

Yet, in the world of high-speed, communications systems, it
is possible to transmit a copy of a work from one location
to another. This may be the case, for instance, when a
computer program is transmitted from one computer to ten
other computers. When the transmission is complete, the
original copy remains in the transmitting computer and a
copy resides in the memory of, or in a storage device asso-
ciated with, each of the other computers. Therefore, this
transmission results essentially in the distribution of ten
copies of the work.

The Working Group recommends that Section 106 of the Copy-
right Act be amended to reflect the fact that copies of
works can be distributed to the public by transmission, and
that such transmissions fall within the exclusive distribu-
tion right of the copyright owner. The Working Group also
recommends that the definition of "transmit" in Section 101
of the Copyright Act be amended to delineate between those
transmissions that are communications of performances or
displays and those that are distributions of reproductions.
When a transmission may constitute both a communication of a
performance or display and a distribution of a reproduction
(such as when a phonorecord of a sound recording is distrib-
uted and the recipient may listen to it while it is being
downloaded), the Working Group recommends that such a trans-
mission be considered a distribution of a reproduction if
the _primary purpose or effect_ of the transmission is to
distribute a _copy or phonorecord_ of the work to the recip-
ient of the transmission.

The Working Group also recommends that the prohibitions on
importation be amended to reflect the fact that copies or
phonorecords of copyrighted works can be imported into the
United States by transmission. Although the Working Group
recognizes that the U.S. Customs Service cannot, for all
practical purposes, enforce a prohibition on importation by
transmission, given the global dimensions of the information
infrastructure of the future, it is important that copyright
owners have the other remedies for infringements of this
type available to them.

b. PUBLICATION

The legislative history to the Copyright Act makes clear
that any form of dissemination of a work in which a _materi-
al object_ does not change hands is not a "publication" of
the work, no matter how many people are exposed to it. Thus,
a transmission of a performance or display via the NII would
not constitute publication, since a material object does not
change hands. However, in the case of a transmission of a
reproduction, the recipient of the transmission ends up with
a copy of the work. Therefore, the Working Group recommends
that the definition of "publication" in Section 101 of the
Copyright Act be amended to include the concept of distribu-
tion by transmission.

c. FIRST SALE DOCTRINE

The first sale doctrine allows the owner of a particular,
lawfully-made copy of a work to dispose of it in any manner,
with certain exceptions, without infringing the copyright
owner's exclusive right of distribution. In the case of
transmissions, a copy of the work remains with the first
owner (and the recipient of the transmission receives a
reproduction of the work); the owner does not dispose of his
or her copy. Therefore, the Working Group recommends that
Section 109 of the Copyright Act be amended to make clear
that the first sale doctrine does not apply to transmis-
sions.

2. TECHNOLOGICAL PROTECTION

The ease of infringement and the difficulty of detection and
enforcement will cause copyright owners to look to technology, as
well as the law, for protection of their works. Technology can be
used to help protect copyrighted works against unauthorized
access, reproduction, manipulation, distribution, performance or
display. It can also be useful in the authentication of the
integrity of copyrighted works and in the management and licens-
ing of the rights in such works. However, it is clear that
technology can also be used to defeat any protection that tech-
nology provides.

Therefore, the Working Group recommends that the Copyright Act be
amended to prohibit the importation, manufacture and distribution
of devices (or any component or circuitry incorporated into any
device or product), or the offering or performance of any ser-
vice, the primary purpose or effect of which is to avoid, bypass,
remove, deactivate, or otherwise circumvent, without authority of
the copyright owner or the law, any process, treatment, mechanism
or system which prevents or inhibits the exercise of any of the
exclusive rights under Section 106. The Working Group also
recommends other related amendments to provide civil causes of
action and remedies for violations of the proposed prohibition.

3. COPYRIGHT MANAGEMENT INFORMATION

In the future, the copyright management information associated
with a work -- such as the name of the copyright owner, and the
terms and conditions for uses of the work -- may be critical to
the efficient operation and success of the NII. The public should
be protected from fraud in the creation or alteration of such
information. Therefore, the Working Group recommends that Section
506 of the Copyright Act be amended to prohibit fraudulent
copyright management information and fraudulent removal or
alteration of copyright management information.

4. PUBLIC PERFORMANCE RIGHT

Sound recordings are the only copyrighted works that are capable
of being performed that are not granted a public performance
right. The Working Group believes that it is time to rectify this
inequity. The Working Group notes that the Administration sup-
ports two bills introduced in Congress that would grant a limited
performance right to sound recordings. The bills, H.R. 2576 and
S. 1421, would add to the exclusive rights of a copyright owner
in a sound recording the right to perform or authorize the
performance of the sound recording by "digital transmission." The
right granted in the bill is not the full performance right
granted to other copyrighted works. For instance, the legislation
would not change the law with respect to live public performanc-
es. It would also not touch analog transmissions -- the transmis-
sions currently received over the radio. It would only grant a
right with respect to transmissions in a digital format -- those
that pose the greatest threat to the copyright owners of sound
recordings.

5. FAIR USE

The Working Group has significant concerns regarding the ability
of the limitations on copyright owners' exclusive rights --
particularly those limitations found in Sections 107 (fair use),
108 (library exemptions) and 110 (1) and (2) (educational uses) -
- to provide the public with adequate access to copyrighted works
transmitted via the NII. As more and more works are available
primarily or exclusively on-line, it is critical that research-
ers, students and other members of the public have opportunities
_on-line_ equivalent to their current opportunities _off-line_ to
browse through copyrighted works in their school and public
library. Public libraries and schools historically have been
safeguards against the United States becoming a nation of infor-
mation "haves" and "have nots." We must ensure that they continue
to be able to assume that role.

Guidelines for library and educational use of printed matter and
music were voluntarily adopted by diverse parties and set out in
the House and Conference reports accompanying the 1976 revisions
to the Copyright Act. While the principles should still be
applicable, it is difficult and, perhaps, inappropriate, to apply
the specific language of some of those guidelines in the context
of digital works and on-line services. Therefore, the Working
Group will sponsor a conference this summer to bring together
copyright owner and user interests to develop guidelines for fair
uses of copyrighted works by and in public libraries and schools.
While participation in the conference will be by invitation, the
public may attend.

6. LICENSING

With limited exceptions, intellectual property law leaves the
licensing of rights to the marketplace. In certain circumstances,
particularly where transaction costs are believed to dwarf per-
transaction royalties, Congress has found it necessary to provide
for compulsory licenses. The Working Group finds that under
current conditions, additional compulsory licensing of intellec-
tual property rights is neither necessary nor desirable. The
marketplace should be allowed to develop whatever licensing
systems may be appropriate for the NII.

7. INTERNATIONAL

There must be adequate and effective protection for entertainment
and information products delivered via the global information
infrastructure (GII). This protection should be granted on the
basis of national treatment -- without regard to the origin of
the transmission or the nationality of the author. An appropriate
intellectual property rights regime to protect the content
transmitted over the GII is an essential condition precedent if
the full benefits of the GII are to be enjoyed.

To attain the needed level of protection internationally, we must
also find ways to span the differences between the continental
_droit d'auteur_ and neighboring rights systems and the Anglo-
American copyright systems. An essential element of this effort
will be to harmonize levels of protection.

B. TECHNOLOGY

Interoperability and interconnectivity of networks, systems, services
and products operating within the NII will enhance its development and
success. Standardization of copyright management (standardized header
information and format, for instance) as well as technological protec-
tion methods (such as encryption) may also be useful. However, intel-
lectual property rights should not be diminished in the standard-
setting process, unless agreed to by the owners of such rights.

C. EDUCATION

Effective education of the public about intellectual property rights
is crucial to the successful development of the NII. Therefore, the
principles of intellectual property law must be taught in our schools
and libraries. Educational efforts to increase the public's awareness
of their own intellectual property rights, as well as those of others,
will increase respect for those rights. Clearer guidelines with
respect to the exclusive rights of copyright and other intellectual
property rights holders, as well as the limitations on those rights,
will make compliance with the law easier.

Following its conference on fair use, the Working Group will sponsor a
second conference on intellectual property education. The purpose of
that conference will be to develop curricula that may be used in
schools and libraries. Additional means of education, particularly
those that use the NII itself, will also be explored and developed.
Participation in the conference will be by invitation, but all pro-
ceedings will be open to the public.

***

The Working Group is soliciting public comment on the Preliminary
Draft. The public may submit written comments to the Commissioner of
Patents and Trademarks on or before September 7, 1994. Reply comments
may be submitted until September 28, 1994. Comments may also be
submitted electronically to an Internet address.

The Working Group expects to hold public hearings on the Preliminary
Draft in Washington, D.C., Chicago and Los Angeles. The details of
these hearings will be announced at a later date. The Working Group
will also hold conferences in Washington, D.C., on library and educa-
tional uses of copyrighted works and on intellectual property educa-
tion. Participation in the conferences will be by invitation only, but
the proceedings will be open to the public.
 
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