At present, the government has no clear-cut authority to destroy infringing articles which have been seized or otherwise obtained in the investigation or prosecution of a tape piracy case or, for that matter, any criminal copyright infringement case. This lack of specific authority has resulted in critical storage problems for many F.B.I. and U.S. Marshals' offices throughout the country and poses the embarrassing possibility that the government may be ordered to return known infringing articles to a convicted defendant.

With proper amendments, H.R. 2223 could eliminate this most serious problem. We strongly urge the following revisions :

1. There should be added to Section 506 a new subsection which should be designated as:

(b) When any person is convicted of any violation of subsection (a), the court in its judgment of conviction shall, in addition to the penalty therein prescribed, order the forfeiture and destruction or other disposition of all infringing copies or phonorecords and all implements, devices, equipment or other articles of whatever kind used or intended to be used in the manufacture, use, or sale of such infringing copies or phonorecords.

Present subsections (b), (c), and (d) need to be redesignated as subsections (c), (d), and (e), respectively.

A conforming amendment should be made to Title 18, United States Code, Section 2318, so that it reads as follows:

Section 2318:

(a) (present Section 2318).

(b) When any person is convicted of any violation of subsection (a), the court in its judgment of conviction shall, in addition to the penalty therein prescribed, order the forfeiture and destruction or other disposition of all counterfeit labels and all articles to which counterfeit labels have been affixed or which were intended to have had such labels affixed.

(c) Except to the extent they are inconsistent with the provisions of this title, all provisions of section [new forfeiture section described below] Title 17, United States Code, are applicable to violations of subsection (a). 2. A new section should be added reading as follows:

(a) All copies or phonorecords manufactured, reproduced, distributed, sold, or otherwise used, intended for use, or possessed with intent to use in violation of section 506(a), and all plates, molds, matrices, masters, tapes, film negatives, or other articles by means of which such copies or phonorecords may be reproduced, and all electronic, mechanical, or other devices for manufacturing, reproducing, assembling, using, transporting, distributing, or selling such copies or phonorecords may be seized and forfeited to the United States.

(b) All provisions of law relating to (1) the seizure, summary and judicial forfeiture, and condemnation of vessels, vehicles, merchandise, and baggage for violations of the customs laws contained in Title 19, United States Code, (2) the disposition of such vessels, vehicles, merchandise, and baggage or the proceeds from the sale thereof, (3) the remission or mitigation of such forfeiture, (4) the compromise of claims, and (5) the award of compensation to informers in respect of such forfeitures, shall apply to seizures and forfeitures incurred, or alleged to have been incurred, under the provisions of this section, insofar as applicable and not inconsistent with the provisions of this section; except that such duties as are imposed upon the collector of customs or any other person with respect to the seizure and forfeiture of vessels, vehicles, merchandise, and baggage under the provisions of the customs laws contained in Title 19 of the United States Code shall be performed with respect to seizure and forfeiture of all articles described in subsection (a) by such officers, agents, or other persons as may be authorized or designated for that purpose by the Attorney General. Proposed Section 114 should be amended to provide for the copyright owner of a sound recording to have the right to make derivative works or it should be amended to clarify that persons other than the copyright owner do not have such a right absent consent of the copyright owner, notwithstanding the fact that the sound recording copyright owner would have no such right.

Section 114 limits the specific rights of a sound recording copyright owner to those granted to copyright owners by parts (1) and (3) of Section 106. That is, sound recording copyright owners have the right:

(1) to reproduce the copyrighted work in copies or phonorecords; and

(3) to distribute copies, etc.

The right to prepare derivative works based on the copyrighted work (part 2 of Section 106) is withheld from a sound recording copyright owner despite Section 103 which states that such works are copyrightable and despite the fact that sound recording copyright owners are entitled to make and copyright derivative works under present law, 17 U.S.C. § 7. There is a real possibility that an unauthorized duplicator who made a "derivative" work by slightly altering the original copyrighted sound recording would claim that he did so legally since the copyright owner is given no exclusive right to make derivative works.

This potential legal problem could be eliminated by including part (2) of Section 106 in the list in Section 114 of exclusive rights granted to a sound recording Copyright owner-an action which would grant to sound recording copyright owners no more rights than they presently possess. Section 506 should be amended accordingly to include part (2) of Section 106.

A third area for concern is proposed Section 301 (pages 32–33), subparagraph (b), which states:

Nothing in this title annuls or limits any rights or remedies under the common law or statutes of any state with respect to:

(3) activities violating rights that are not equivalent to any of the exclusive rights within the general scope of copyright... including breaches of contract, breaches of trust, invasion of privacy, defamation, and deceptive trade practices....

We believe this language could be read as abrogating the anti-piracy laws now existing in 29 states relating to pre-February 15, 1972, sound recordings on the grounds that these statutes proscribe activities violating rights “equivalent to... the exclusive rights within the general scope of copyright. . . ." Certainly such a result cannot have been intended for it would likely effect the immediate resurgence of piracy of pre-February 15, 1972 sound recordings. (Note: in any event, there would be no effect on sound recordings produced after February 15, 1972, since it would appear that the states cannot constitutionally enforce their anti-piracy laws against the unauthorized duplication of these later recordings.) We therefore urge that Section 301(b) be amended to include a new subsection (4) as follows:

(4) Sound recordings fixed prior to February 15, 1972.

Proposed Section 506(a) should be amended to correct the disparity of sanetions between second-time infringers of sound recording and motion picture copyrights and second-time infringers of other copyrights. As written, Section 506(a) provides for a maximum $10,000 fine and three years imprisonment for secondtime infringers of all copyrights but sound recording and motion picture conyrights. Infringers of these latter two categories are subject, upon conviction of a second offense, to a maximum fine of $50,000 and two years imprisonment. We suggest that these latter infringements are sufficiently serious to warrant at least the same maximum imprisonment for second offenders as is applicable to second-time infringers of other copyrights, as well as the larger fine. The term of imprisonment prescribed should therefore be at least three years.

We support the substitution of "for purposes of commercial advantage or private financial gain" for the present requirement in 17 U.S.C. § 104 that, to be criminal, infringements must be done "for profit". The provision in present Section 104 for aiders and abettors has been removed, but these individuals will be liable to prosecution under 18 U.S.C. § 2.

From the standpoint of making deterrents meaningful beyond the financial deterrent and provide a penalty for those who can "take" financial losses as a cost of business, it is recommended that a maximum one-year term of imprisonment be Included in the sanctions under proposed Sections 116(d) and 506 (b), (c), and (d), all of which are provisions the Department supports.

We also note that Section 115, subparagraph (a) (1), states explicitly and with clarity what four courts of appeals have ruled is the scope of compulsory licensing under present law, namely, that absent authorization by the owner of a composition copyright, the duplication of a sound recording embodying a copy

1 Jondora Music Publishing Co. v. Melody Recordings, Inc., 506 F. 24 393 (CA. 3, December 27, 1974): Fame Publishing Co., Inc. v. Alabama Custom Tape, Inc. 507 F. 24 GRT (CA. 5. January 31. 1975): Duchess Music Corp. v. Stern 458 F. 24 1305 (CA. 9). certiorari denied, sub nom. Rosner v. Duchess Music Corp., 409 U.S. 847; and Edward B. Marka Music Corp. v. Colorado Magnetics, Inc., 497 F. 2d 289 (C.A. 10), certiorari denied, sub nom. Colorado Magnetics, Inc. v. Edward Marks Music Corp., 419 U.S. 1120.

righted musical composition is an infringement of the composition copyright even though the duplicator tenders royalty payments and otherwise attempts to comply with present compulsory licensing provisions. This is contained in the final sentence of subpargraph (a) (1), which reads:

A person may not obtain a compulsory license for use of the [nondramatic musical] work in the duplication of a sound recording made by another. Since this prohibition is not limited to copyrighted sound recordings, the effect is to prevent the operation of the compulsory license mechanism for making copies of any sound recordings embodying copyrighted musical compositions. The Department wholeheartedly supports this provision.

Section 804 deals with procedures before the tribunal which determines adjustment of copyright royalties and their distribution under specified sections of the Bill. We object to the provision in subsection (e) of this Section that the Senate Committee on the Judiciary and the House of Representatives Committee on the Judiciary may waive a requirement that a final decision in each proceeding be rendered by the tribunal within one year from the certification of the panel by the Register of Copyrights. The constitutional division of duties among the three principal branches of the government places in the Congress the legislative responsibilities. However, once a law has been enacted, it is for the Executive Branch to carry out the intents and purposes of the law as directed by the Congress. In our view, legislation, once enacted, should not be modified or waived by actions of a committee of the Congress. It is suggested that if waiver of the one-year requirement is desirable under particular circumstances, these circumstances be generally outlined in the Bill and that the tribunal be given authority upon good cause shown to extend the period of time for rendering decisions.

Of particular concern to this Department is the new form of copyright protec tion provided by Title II of the Bill. This new form of protection is a hybrid between design patents (35 U.S.C. § 171-173) issued for a period of up to 14 years by the Patent Office for new, original and ornamental designs of articles of manufacture and the copyright laws which provide for registration and issuance of certificates of copyrights for the writings of authors. The new protection that is provided under the Bill is not presently available under the copyright laws and can only be obtained through a design patent after an examination procedure which determines whether the ornamental design meets the criteria of patentability, including unobviousness in view of the prior art, as provided by 35 U.S.C. 102, 103. While the protection period as proposed for the new type of ornamental design protection is only a maximum of ten years as compared with the maximum of 14 years available for a design patent, it is granted without the need of meeting the novelty and unobviousness requirements of the patent statute.

A threshold consideration before finding that the needs are such that this new type of protection should be available is whether the benefits to the public of such protection outweigh the burdens. We believe that insufficient need has been shown to date to justify removing from the public domain and possible use by others of the rights and benefits proposed under the present Bill for such ornamental designs. We believe that design patents, as are granted today, are as far as the public should go to grant exclusive rights for ornamental designs of useful articles in the absence of an adequate showing that the new protection will provide substantial benefits to the general public which outweigh removing such designs from free public use. While it has been said that the examination procedure in the Patent Office results in serious delays in the issuance of a design patent so as to be a significant problem and damaging to "inventors" of ornamental designs of useful articles, the desirable free use of designs which do not rise to patentable invention of ornamental designs of useful articles are believed to be paramount. If the contribution made to the public by the creation of an ornamental design of a useful article is insufficient to rise to patentable novelty, the design should not be protected by law. The Department of Justice has consistently opposed legislation of this character.

To omit federal statutory protection for the form of a useful object is not to deny the originator of that form any remedy whatsoever. If he can prove that competitors are passing off their goods as the originator's by copying the product's design, he may bring an unfair competition action against such copyists. Crescent Tool Co. v. Kilborn & Bishop Co., 247 Fed. 299 (C.A. 2 1917). See, also, Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964), and Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234 (1964).

Quite apart from our opposition to the merits of Title II, we also oppose enactment of the design protection provisions of this Bill which would provide a new class of actions against the United States since the Bill proposes to amend Section 1498(a) to add the new type of design copyrights to the remedies available to inventors against the United States who have been issued United States patents when they are used by the United States without authorization of the owner. For example, by amending Section 1498(a) in this way, the Congress will be creating a completely new problem area fraught with difficulties for government procurement. Government contractors who "reverse engineer" alleged trade secrets in bidding competitively for government contracts would now be faced with the necessity of designing around the “packaging looks” of a product covered by a design copyright which may not rise to the stature of patentable novelty under the patent laws. Thus, the "non-utilitarian looks" of a vehicle which may not be protectable as a design patent would be given copyright-type protection under the Bill. We, therefore, strongly oppose the new type of protection proposed by Title II of the Bill.

Section 1498 (a) is also amended to provide for the first time for suits against the United States for unauthorized use of inventions, whether patented or unpatented. Thus, it would appear to permit a suit based on a trade secret containing an unpatented invention. This, also, we strongly oppose as inconsistent with limiting claims against the United States in 28 U.S.C. 1498 to those recognized by the patent and copyright laws. No adequate showing has been made that this type of protection, on balance, is in the public interest.

The provision in Section 220 whereby simultaneous snit can be filed against the Administrator who carries out the provisions of Title II (§ 230) and an alleged infringer of the design in that it subjects an alleged infringer to suit in the same action even though the threshold question whether a certificate can is ne under the provisions of the law has not been decided as between the Administrator and the applicant for registration is believed undesirable. While it is not likely that the issuance of certificates of registration will be frequently refused if certain basic requisites of applications are met, nevertheless, if a situation should arise of a refusal of issuance of a certificate of registration by an Administrator; this should require a separate and distinctive action to secure issuance thereof, especially since governmental functions should not normally be mixed with the proprietary enforcement functions of courts in adjudicating private rights and remedies.

Certain technical corrections appear indicated in Title II as follows:

P. 66, lines 22 and 23 appear reversed.

P. 73, line 22, “Section 311” should read—“Section 211".

P. 73, line 26, "mortgage" should read-"mortgagee".

Mr. KASTENMEIER. We would next like to call Mr. Rene D. Tegtmeyer, an Assistant Commissioner for Patents, representing the U.S. Department of Commerce. Would you please identify your colleagues.

Mr. TEGTMEYER. Thank you, Mr. Chairman. With me today are David Allen and Rosemary Bowie, both of whom are from the Commerce Department and in particular from Patents.

Mr. KASTEN MEIER. I notice you have a prepared statement. You may proceed.

[The prepared statement of Mr. Tegtmeyer follows:]

STATEMENT OF RENE D. TEGTMEYER, ASSISTANT COMMISSIONER FOR PATENTS, U.S. DEPARTMENT OF COMMERCE

Mr. CHAIRMAN: I appreciate this opportunity to appear before your subcommittee to express the views of the Department of Commerce and its support for HR. 2223 with certain modifications which I shall explain.

HIR. 2223 is the result of 20 years of extensive effort by the Copyright Office of the Library of Congress and the Congress to revise the copyright law. I understand that the testimony of the Register of Copyrights included a discus sion of the background concerning this effort and an outline of the principal provisions of the bill. I will not attempt to be repetitive in this respect.

H.R. 2223 is divided into two titles; Title I, General Revision of the Copyright Law and Title II. Protection of Original Ornamental Designs. As the Department views each title from a slightly different perspective, I would like to comment on them separately this morning.

The Department of Commerce would like to highlight three specific areas in our comments on Title I:

1. The lack of protection in U.S. government works,

2. Preemption of state law with respect to unfair competition, and 3. The inclusion of Canada in the manufacturing requirement.

PROTECTION OF GOVERNMENT WORKS

First, proposed section 105, in prohibiting copyright protection for government works, creates a special problem for the Department of Commerce. Under Title 15. United States Code, Chapter 23, the Secretary is required to establish and maintain a clearinghouse for the collection and dissemination of scientific, technical and engineering information. This is done through the Department's National Technical Information Service, called NTIS.

As a matter of policy, Chapter 23 requires that each of the services and funetions provided be self-sustaining and self-liquidating, as much as possible, consistent with its objectives. The Chapter specifically states its policy that the general public shall not bear the cost of publications and other services which are for the special use and benefit of private groups and individuals.

With the increased use of reprography, the difficulty of meeting the requirement to disseminate technical information on a basis that pays its own way has increased. It is cheaper for a purchaser to buy one copy of an expensive technological publication and photocopy it rather than to buy the number of copies that are actually needed. The lack of copyright protection for most periodicals made available by NTIS makes this practice legal. However, if NTIS cannot recoup the cost of preparing and handling its publications, the dissemination of this material cannot be maintained on a self-sustaining and self-liquidating basis. An example of the potential harm which could arise from this lack of copyright can be seen in the publication, "Directory of Computerized Data Files and Related Software Available from Federal Agencies-1974". This document was prepared in response to the large number of requests received for this information. It was prepared at NTIS expense. The approximately $150,000 cost of surveying Federal agencies to gather the information aud publishing the directory was not reimbursed from appropriations. In order to recoup NTIS expenses, a price of $60 per copy was set for this 150-page directory. Anyone choosing to make and sell competing photocopies could do so for a fraction of this price. Thus, it was necessary for NTIS to risk substantial moneys to produce such a product in the absence of copyright protection.

Unauthorized photocopying is especially serious in connection with foreign sales; out of the eight largest customers of NTIS, seven are foreign entities which engage in such copying practices. It has also caused NTIS to be limited in pricing its periodicals due to the much lower costs of duplication done by resale marketers and potential customers of government works which are not copyrighted.

For these reasons, we believe that copyright protection should be provided works distributed under Chapter 23, Title 15 of the United States Code, similar to that provided under § 290 (e), Chapter 7(a), Title 15, for standard reference data prepared by the Department of Commerce under the provisions of that Chapter, or in the alternative that the Congress reconsider the statutory requirement that the services and functions provided under Chapter 23 be self-sustaining and self-liquidating.

PREEMPTION

Second, we agree with the preemption of State copyright laws pursuant to section 301(a), and with the principle embodied in that section that there should be a single, federal system for copyright. However, the language of subsection (b)(3) of section 301 should, in our view, be modified to make it clear that the phrase "all rights in the nature of copyright" (italics added) will not be construed to preempt parts of the State law of unfair competition which are now codified in statute or established by Federal and State Court decisions applying the common law.