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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” will not be const rued to preeinpt 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.

Section 301(b)(3) is intended to exempt State unfair competition law from the preemptive effect of section 301 (a). Among the rights and remedies not preempted are those arising from the violation of rights "not equivalent to any exclusive rights within the general scope of copyright." These “not equivalent” rights are said by the bill to include "breaches of contract, breaches of trust, invasion of privacy, defamation, and deceptive trade practices such as passing off and false representation.” The problem we have is that this listing is incomplete, and the language is more limited than that which would describe the present scope of established State unfair competition law.

As a solution, we propose a more comprehensive and inclusive listing of unfair competition torts in subsection (b) (3). The proposed amendment:

(3) Activities violating rights that are not equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106, including breaches of contract, breaches of trust, invasion of privacy, defamation, and sets, trade practices, or courses of conduct which cause or are likely to cause confusion, mistake or deception, or which are likely to result in passing off, false or misleading representations, disparagement, wrongful disclosure or misappropriation of a trade secret or confidential information, or activities which otherwise coustitute unfair competition by misrepresentation or misappropriation.

In our opinion, this proposed amendment would more accurately state the range of unfair competition torts which are now regulated by the States, so that the examples listed will not be limiting.

It should be noted that the phrase "unfair competition by * * * misappropriation” is included in our amendment. Obviously, the **misappropriation" of all of the words of a literary work would be in the nature of copyright, and State laws in this area should be preempted. However, we do not believe that the entire body of State unfair competition law based upon the landmark Supreme Court decision in International News Serrice v. Associated Press (248 C.S. 215 (1918)) should be preempted. While some State decisions relying on the 718 case may be held inapplicable under section 301 (a), we believe that such a remedy should continue to be available for the type of conduct proseribed in the INS case.

Turning to the third point in title I, the proposed section 601. known as the manufacturing clause," essentially requires that English languace, nondramatic literary works by American domiciled authors must be printed in the United States or Canada. The present copyright statute does not include such a reference to Canada. The rationale for including Canada appears to be that wage standards in the United States and Canada are comparable.

We are opposed to the inelusion of Canada in this provision. Such an inclusion would be a unilateral concession which we believe should be withheld for possible use by the United States as negotiating leverare in seeking compensating benefits during multilateral trade negotiations. We note that both Houses of Congress indicated forcibly that

U.S. negotiators should obtain reciprocity for U.S. concessions when they enacted the Trade Act of 1977, at the end of the last Congress.

Additionally, including Canada in this provision would raise problems in our relations with other nations, in view of the most favored nation” obligations in the General Agreement on Tariff and Trade (GATT) and other treaties. Thus, enactment of the bill containing this provision might bring about the possibility of retaliation against the United States from countries other than Canada and might otherwise hamper our efforts to eliminate nontariff trade barriers in the interest of our overall international trade objectives.

If I may turn to title II of H.R. 2223, that would provide a new system for the protection of original ornamental designs of useful articles.

Designs eligible for protection under this title would have to be orig. inal. They cannot be staple or commonplace, or elements commonly used in the relevant trade, or dictated by utilitarian functions, or three dimensional features of wearing apparel. Ilowever, there would be no requirements that the design be new, and therefore no search of prior designs would be necessary in order to grant protection.

Title II would provide protection only against copying by others and would not give an exclusive right in the design itself. The term of protection would be for 5 years, renewable for one additional 5-year term.

Infringement would include making, importing, selling, or distributing for sale an article having a design copied from a protected design. Importantly however, an innocent seller or distributor would be an infringer only if he failed to reveal his source and then reordered the article after having received a personal written notice of the design protection.

This is a greatly reduced level of liability when compared with that contained in title I where a seller or distributor is liable as an infringer for the sale of a single unauthorized copyrighted work.

Design patent protection would continue to be available, but a design patent and design protection under this title could not be maintained concurrently. Also, copyright protection for designs would be continued, except that if copyright protection and a design registration were obtained, the copyright protection would not extend to utilization of the design in the useful article protected by the design registration.

Today, original ornamental designs for useful articles may be eligible for Federal protection under the patent laws or in some instances, under the copyright law. In recent years, however, it has been generally agreed that the design patent laws do not provide adequate protection against design piracy. Because of the relatively short-lived popularity of many designs, a patent in some cases cannot be secured quickly enough to provide any useful protection.

The expense in obtaining a design patent today results primarily from the fact that the Patent and Trademark Office must examine an application to determine whether it is "new, original, and ornamental." At the present time it takes almost 2 years to obtain a design patent. Until the patent is granted, the designer or manufacturer markets the design at his own peril, subject to it being freely copied. The alternative of withholding the design from the market until the patent issues

is impractical in many industries where styles change rapidly and may even be seasonal.

Since the Supreme Court decision in Mazer v. Stein in 1954, the Copyright Office has accepted an increasing variety of registrations for designs embodied in useful articles so long as they meet the criteria of being artistic. However, there are still many types of designs for which copyright protection is unavailable, for instance, furniture and appliances. Moreover, the term of protection in the proposed copyright law, life of the author plus 50 years, or even the present law, 28 years, is much too long for industrial designs which have a relatively short commercial life.

To exemplify the problems that exist under current practice we note complaints from domestic manufacturers that their designs have been copied in certain foreign areas, particularly in the Far East. The imitations are then imported into and sold in the United States where they often enjoy a considerable price advantage over the article produced here. We believe that title II fills the need for more effective protection for design originators from this type of unfair competition berause it provides quick, inexpensive, and short-term protection for original designs.

The Department of Commerce favors this legislation. However, we would like to highlight some of our specific recommendations which will bring title II of the bill more in line with other intellectual property protection both nationally and internationally and will generally improve the protection offered.

Section 204(a) provides that protection for a design shall begin on the date when the design is first made public. In subsequent sections it is made clear that the design must be made public before an application for protection can be filed. This provision will put U.S. residents at a disadvantage if they desire to obtain protection of their design in foreign countries, many of which, for example, Japan, refuse protection for a design which has been made public prior to the filing of an application for registration.

In order to prevent the possible loss of protection in foreign countries, it should not be required that the design be made public prior to registration. Instead, protection should commence on the date that the registration is published in the United States as provided for in section 212(a) of the bill. Protection which begins when the registration is published would provide notice to the public and would not penalize the person desiring to protect his design outside of the United States. This would also make title II consistent with title I which has eliminated the prior publication requirement for copyright protection.

Specific statutory language to effect this change will be submitted to the ('ongress at a later date.

Section 209 appears to limit an application to a single design. This limitation appears to be unnecessary. An application containing 10 or 20 designs would be no more diflicult to process than an application containing 1 design because no search of prior designs is necessary. A multiple design application would save the applicant paperwork, thus, save hiin time and money. It would also save the Administrator processing time over an equal number of single applications. This might result in a lower fee per design. As long as a separate fee is paid

for each design contained in the application there would be no loss of revenue and both the applicant and the Administrator would benefit. We have therefore recommended that multiple design applications be permitted under this title.

Title II requires that the application be accompanied by a statement setting forth facts about the design, and that such statement be under oath. Similar requirements in title 35, United States Code, covering patent and trademark practices, permit such required statements to be submitted with a written declaration in accordance with 18 U.S.C. 1001 making a false statement punishable by a fine or imprisonment and jeopardizing the validity of the docunent. We believe that such a provision should be applicable to the application for design registration. Therefore, such declaration should be permitted in lieu of an oath.

The present fee provisions of section 215 of this title are unacceptable to the Department of Commerce. In our opinion, the design registration system should be completely self-supporting because the benefits of the design registration system only accrue to the individual recipient of the registration. Thus, the public should not be expected to bear any portion of the expense of a design registration system. Their benefits are too remote.

In a study done in 1964, the $15 fee for the design registration under a bill similar to the present one, was found to be inadequate to provide 100-percent cost recovery. The $15 application fee would be even more inadequate today.

Rather than propose different fee levels for each of the functions specified, the Department of Commerce proposes that section 215 be amended in its entirety to give the Administrator the discretion to establish charges sufficient to recover 100 percent of the cost of operation of the design registration system. A similar approach is currently being considered by Congress in various bills to revise the patent laws.

Mr. KASTENMEIER. Thank you, Mr. Tegtmeyer. Who is the administrator under this particular provision?

Mr. TEGTMEYER. The administrator would be designated by the President if the bill were passed in the form it is.

Mr. KASTEN MEIER. Is it presumed that such an administrator would be separate or part of the Copyright Office or the Patent Office or what?

Mr. TEGTMEYER. The assumption is that the administrator would be with the Patent and Trademark Office in the Department of Commerce.

Mr. KASTEN MEIER. Why are we unable to modify the patent laws to otherwise effect more reasonable treatment of design applications so that this whole title would be unnecessary, so it could be handled under the present law?

Mr. TEGTMEYER. We presently have that objective, to reduce that pendency for utility and design patents to 18 months. Even though that time is lagging a little bit we expect that that wait will be reduced to 18 months in the very near future. The reason for requiring that length of time is the fact that we must examine the application to determine if it meets the criteria set forth in the present statute and this cannot be done during the short period in which you can register a design.

Mr. KASTENMEIER. Would the administrator be under the Commissioner of Trademarks and Patents for the purpose of direction?

Mr. TEGTMEYER. I'm not attempting to presume that the President would in fact designate the Patent and Trademark Office as administrator but it would presumably be placed there, under the Commissioner of Patents and Trademarks, if it was placed there at all.

Mr. KASTENMEIER. Are you satisfied that title II is to be considered a part of the general revision of the copyright law or do you think it more appropriate that it ought to be considered by itself?

Mr. TEGTMEYER. We are satisfied that it is to be considered as a general part of the copyright laws.

Mr. KASTENMEIER. Do I understand that the revisions that you suggest are unlike patents in that you would go by first to file criteria rather than a first to invent?

Mr. TEOTMEYER. We're talking about a requirement in order to obtain protection as to origination, the party that originates the design and filed and application therefore could obtain the protection; nothing wonkl prevent someone else from initiating the same design and also obtaining the same protection.

Mr. KASTENMEIER. I read your statement which says that instead protertion should commence on the day that the registration is published as a deviation from the theory that a copyright patent protection is other than the rest of the world, it is in essence a first to file protection or, in this situation, publication rather than the first use of a design?

Mr. TEGTMEYER. Yes, in some respects.

Mr. KASTENMEIER. This is a matter of understanding, I guess. You state that the designs to be eligible would have to be original, however, there are no requirements that the design be new. What is the distinction, the practical distinction, for our purposes?

Mr. TEGTMEYER. The distinction would be that if you originated a design that somebody else originated in the past or created in the past, then you may still obtain protection so long as you were not copying the former individual's design and you developed it totally independently through your own originality.

Mr. KASTENMEIER. I see. The other part of your testimony, do I understand, that unlike others who have testified, you support retention of the manufacturing clause basically so it can be used essentially as a negotiating factor?

Mr. TEGTMEYER. I think our views are very similar to those of the Department of State. There is an opportunity here to use exceptions to the manufacturing clause for the purposes of negotiation in multilateral trade negotiations when they take place. Such negotiations are beginning to take place now and will begin on a more formal basis later in the year.

Mr. KASTENMEIER. Maybe I misunderstood. I understood them to sug. gest that the existence of the manufacturing clause causes us a great deal of difficulty. I did not understand that they wanted it retained to nse as leverage for future negotiations.

Mr. TEGTMEYER. We would agree with the elimination of the manufacturing clause over possibly a period of time as they indicated in response to your question. Our point about negotiations was primarily that, if the manufacturing clause was to stay and if Canada was to be placed in it, we ought to obtain some compensation for aulding the exemption for Canada in multilateral trade negotiations.

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