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artists, dramatists, motion picture producers and compilers. U.S. copyright industries accounted for about 5% of U.S. Gross Domestic Product (GDP), or over $450 billion in added economic value in 1999. In the last twenty years, the core copyright industries' share of GDP grew more than twice as fast as the rest of the economy. Should this trend continue as expected, the economic impact of the copyright industries will become an even more significant part of the American economy, emphasizing the need for strong copyright protection, and bringing to the fore increasingly challenging issues with which the copyright system must

deal.

Copyright Policy Challenges: Technological Change and the Digital Environment

of

Throughout the second half of the 20th century, the copyright law has had to adjust to a vast array technological changes. The challenges to copyright posed by the convergence of today's computer and communications technologies are more serious and far-reaching than those posed by the technological developments of the past. The current technologies have the potential to impact every right in the copyright

bundle.

The increasing use and distribution of digital information raise significant issues regarding access to and security of copyrighted works. For works available in electronic form, there is often no limit to the number of people who can access a work simultaneously through the Internet and alter or modify them with ease. The Constitution provides for intellectual property protection with the goal of promoting public access to knowledge and innovation. The information infrastructure of the World Wide Web and other computer networks requires careful maintenance of the public good and private interest balance that has guided U.S.

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Fiscal 2000 Accomplishments, Fiscal 2001 Focus and Fiscal 2002 Plans

Policy Responsibilities Under the Digital Millennium Copyright Act

A major focus of the Copyright Office's legislative efforts during fiscal 2000 and in fiscal 2001 continued to be the completion of tasks entrusted to us by Congress in the Digital Millennium Copyright Act (DMCA), P. L. 105-304. The DMCA placed several policy-related responsibilities on the Office, including specific studies and rulemakings.

The DMCA made a number of amendments to Title 17, including the addition of Chapter 12 of the copyright statute, which address technological protection and management systems for copyrighted works. Section 1201(a)(1) makes it unlawful to circumvent a technological measure that effectively controls access to a copyrighted work. However, the prohibition against circumvention does not apply to users of a copyrighted work which is in a particular class of works, if those users are, or are likely to be in the succeeding 3-year period, adversely affected by the prohibition in their ability to make noninfringing uses of that particular class of works.

The determination of what classes of works, if any, are subject to this exception is made by the Librarian of Congress on the recommendation of the Register of Copyrights, who conducts a rulemaking proceeding to identify any such classes of works. The initial rulemaking was begun in 1999. After consultation with the Assistant Secretary of Commerce for Communications and Information, the Register made her recommendation to the Librarian of Congress. He accepted the recommendation and published two classes of works subject to the exemption on October 27, 2000. Rulemaking proceedings are to be

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In the DMCA, Congress also asked the Copyright Office to study a number of important copyright issues. In May 2000, the Register and the Assistant Secretary of Commerce submitted a report on the effects of another exemption from the anti-circumvention provision in section 1201(a) of 17 U.S.C. which permits circumvention under certain circumstances for good faith encryption research.

This year we will complete a report for Congress examining the effects of the amendments made by Title 1 of the DMCA which are embodied in chapter 12 of Title 17 and the development of electronic commerce on the operation of sections 109 and 117 of the copyright law, and the relationship between existing and emerging technology and the operation of such sections. In addition, we are working closely with Congress on copyright issues related to distance education.

International Issues

In the international sphere, the Office continued to advise the United States Trade Representative and other executive branch agencies on international copyright matters. These efforts assure that foreign countries live up to their obligations under the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to provide adequate and effective intellectual property protection to U.S. rights holders. The Office also participated in the legal defense of provisions of the Copyright Act that were challenged in WTO dispute resolution proceedings under the TRIPS agreement.

The Copyright Office was a key participant in the World Intellectual Property Organization's norm setting activities, especially its effort to conclude a new multilateral treaty to protect the interests of performers of audiovisual works (e.g., screen and television actors). We anticipate this effort will continue and that the Office will participate in new WIPO norm setting activities in the areas of folklore/traditional

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In early fiscal 2001, the Office's International Copyright Institute and the World Intellectual Property Organization (WIPO) held an International Symposium on the Effect of Technology on Copyright and Related Rights at the Copyright Office. Officials and copyright experts from 17 countries participated. The program focused on the effect of technology on copyright and related rights, as well as on copyright protection and legislation in the United States. In fiscal 2002, the Copyright Office anticipates conducting at least one similar international program.

Copyright Arbitration Royalty Panel (CARP) Matters and Related Rulemakings

In fiscal 2000, the Office initiated two CARP proceedings to resolve controversies concerning the distribution of the 1993-1997 cable royalties and the 1995-1998 digital audio recording royalties. The CARP in the cable proceeding is scheduled to deliver its report in April. The CARP in the digital audio recording proceeding delivered its report to the Librarian for adoption. During fiscal 2001, CARPs are anticipated to determine rates and terms for the statutory license for digital transmission of performances of sound recordings by means of webcasting. Issues relating to the digital performance rights for sound recordings and musical compositions and to digital phonorecord deliveries of musical compositions will continue to occupy the Office during fiscal 2001 and fiscal 2002.

Licensing Activities

The Licensing Division administers the copyright law's compulsory licenses and statutory obligations. The Division records licensing documents and collects royalty fees from cable television operators for retransmitting television and radio broadcasts, from satellite carriers for retransmitting "superstation" and network signals, and from importers or manufacturers of digital audio recording equipment who distribute digital audio recorders and blank digital audio recording media in the United States. The Division serves as

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steward and trustee of the funds paid by the licensees, and invests the funds in interest-bearing securities of the U. S. Treasury. The funds are disbursed to copyright owners, or to agents representing them, under the direction of the Register of Copyrights. During fiscal 2000 the Office collected $182,756,467 in royalty fees for compulsory licenses and distributed $367,824,476. The Licensing Division deducts its operating costs from these royalty fees rather than from appropriated funds.

Registration, Recordation, and Cataloging Operations

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 to the Copyright Office and the copyright community. A large backlog of copyright claims continued to exist and processing time for the issuance of registration certificates remained at approximately six to eight months.

To address this backlog, the Examining Division continued to hire examiner staff, but examiner retirements and resignations left the division with a deficit of 11 examiners from its 1993 staffing level. We have begun an extensive backlog reduction effort in our Examining Division, which is already resulting in a significant decrease in the number of claims awaiting examination. This is an Office-wide imperative, and we are committed to significant progress this year.

In other efforts, the Examining Division concentrated on several automation initiatives in fiscal 2000, including transferring examining practices to an online format for easier access, and creating an automated production verification system, aimed at providing management with accurate production statistics to aid in workflow strategy and planning.

In fiscal 2000 the Cataloging Division recorded 18,894 documents covering hundreds of thousands