obtainable only in the source program, and not in the object code, then a separation of the programmer's expression from the hardware technology is promoted. Furthermore, even if popular source languages are altered or improved, the copyright proprietor retains the right to prepare derivative works, permitting him to update the program as required. 5.7.9 User Rights in Computer-Readable Works A computer program, and a computerized data base as well, are intended for use in conjunction with a computer. That is, a computer-readable work is used by entering it into a computer system and manipulating it through the logic of a computer. It seems reasonable to propose that the copyright proprietor should retain the exclusive right to the use of a computer-readable work in a computer. However, this study proposes a limitation on the exclusive right of use, in order to reduce transaction costs in connection with the transfer of ownership of copies of computer-readable works. This limitation is intended to operate through improved salability of computer programs and computerized data bases, considered immediately below. 5.8 IMPROVING SALABILITY OF COMPUTER-READABLE WORKS Several kinds of copyrighted works are offered for sale at retail. Books, maps, and sound recordings are typical of this class. The advantage of sale over lease or rental is that transaction costs are minimized. No agreement, except to pay the retail price, need be made. The buyer obtains ownership over the copy or phonorecord he has purchased, including the right to resell that copy, except for certain rights retained by the copyright owner. The retained rights include the rights to make and sell copies (with exemption for fair use, compulsory licenses, etc.), the right to prepare derivative works, and the rights to perform and display the work publicly. If the rights to computer-readable works could be defined in such a way as to promote the sale rather than lease of such works, transaction costs might be similarly minimized. This would be, certainly, in the public interest. 5.8.1 The Right to Ephemeral Recordings One of the problems in the sale of computer-readable works is the right of the buyer to copy for his own use. Here, "buyer" means the purchaser of a copy where ownership of the copy is transferred. For works published in paper, "use" simple means "reading" and no copying is required. For sound recordings, "use" means "playing" the recording on a playback mechanism, but again, no copying is required. For computerreadable works, copying into the computer is required in order to use, and in addition, archival copies are made in normal practice in case a copy in use is destroyed inadvertently. In Section 112 of the 1976 General Revision, the right to ephemeral recordings is recognized for a "transmitting organization." This means that a radio station or TV station has the right to record a performance that it is transmitting for its own internal purposes, for example, "for purposes of archival preservation or security." It seems reasonable to suggest that buyers of computer-readable works ought to have similar statutory rights of ephemeral recording in order to be able to effectively use what they have bought. It seems reasonable to suggest, also, that restrictions on the use of such ephemeral recordings ought to be imposed. For example, if a buyer resells the copy of the computer-readable work that he has bought, he ought to be required to destroy all ephemeral copies. The buyer ought to be able to resell no more than one copy of a computer-readable work if he had bought only one copy. Furthermore, the right of internal use should be distinguished from network use. The usage rights of a buyer should not include the right to make the work available to outsiders through a computer network or otherwise. The effect of the allowance for free internal use in situations of transfer of ownership means that there could be no performance royalty charged. If the seller wants the buyer to pay for each individual use of the computer-readable work, the seller would have to negotiate a lease or rental agreement with the buyer. For lease with per-use charges, the transaction costs are probably higher than for outright sale. 5.8.2 The Right to Make and Use Machine Code Similarly, the need of a buyer to copy a computer-readable work into a computer in order to use it requires that the buyer make object code out of the work. It seems reasonable to suggest, in order to promote the sale of computer-readable works and thereby reduce transaction costs, that a buyer be permitted, for his own use, to convert a computer-readable work to object code and to use the code in his own computer. 5.8.3 Differential Pricing Another concept which might induce an increase in sales rather than leases is differential pricing between individual buyers and institutional buyers. This concept has been described in Chapter 4 of this report as having a theoretical economic basis, and the concept is further described in Appendices C1 and C2. The concept, in general, has been described in terms of the sale of scientific journals, but there is no reason why the concept could not be adapted and utilized for the sale of computer-readable works, as proposed in Appendix D. In general, an individual buyer would be one with a single computer system and a small number of terminals. For the sale of computer programs, that is, computer-readable works that are typically manipulated by the arithmetic units of computer systems, an institutional buyer could be defined as one with a large number of computer systems on which the program might run or as one who could be expected to use the program to benefit many individuals. For the sale of computer-readable data bases or textual works, that is, works that are typically viewed at terminals with subsets being retrieved by users, an institutional buyer could be defined as one with a large number of internal (user) terminals attached to his system. 5.8.4 Data Base Access Services A special type of institutional buyer must be noted. The independent data-base access service employs a computer-readable data base, and for a use-dependent fee, permits outsiders to obtain printouts of subsets of the data base at external user terminals. The data base access service is providing derivative works to outsiders through the printouts, as well as displaying the work publicly, two rights which are reserved to the copyright holder under Section 106. In order to make the concept of outright sale useful to independent data base access services, these services would have to be given statutory permission to display computer-readable works publicly and to prepare derivative works. It is not clear that copyright proprietors would want to give up these rights in this situation. 5.9 SUMMARY The issue of computer-readable works was raised significantly in Senate hearings in 1967. Predictions of vast changes in methods of production and distribution of works alerted publishers and authors to the need for language in the copyright law which protected their works in computers. The predictions were premature, but technically feasible, and within the realm of possibility, depending on many social, economic, and psychological factors. The 1976 General Revision clarified rights in works fixed in any tangible medium, but the insertion of Section 117, because of the establishment of CONTU, continued certain ambiguities. The 1976 Act abolishes common law protection for fixed, but unpublished works and provides statutory protection instead. The most important act assuring maximum Federal protection is registration of the copyright and deposit of the necessary copy. Disclosure through this act is an important quid pro quo for Federal protection. The Register of Copyrights is entitled to make rules allowing the deposit of identifying information instead of complete copies for certain classes of work. The principle of maximum information transfer would seem to demand complete disclosure for scientific and technical information. Data bases should be copyrightable in any medium of expression. Clarification is needed as to what constitutes publication for a data base distributed only in computer-readable form to one or a small number of computer systems that provide user-access via a terminal query. There is a need to review the possibility of monopoly pricing in computer-readable, data-base access services. Some of these data bases are relatively nonsubstitutable, and competitive entry in the field may be difficult. Compulsory licensing may be a remedy but innovation should not be stifled. Computer programs should be copyrightable in human-readable form (source language) in any tangible medium of expression. The object code should be protectable as a copy of a computer program, but not as an original copyrightable computer program by itself, because it fails to disclose anything substantial. Material defining the language of a computer program should be disclosed at time of registration. For most computer programs, copyright protection is sufficient because the programs contain no innovative concepts. Further study may be worthwhile to determine the value of protecting the innovative concepts that might be contained. The duration of copyright for computer programs should be no less than the duration of protection of other works. This should promote the writing of programs in enduring languages. The definition of a program converted to a new source language as a derivative work will help extend the life of programs. There is a need to insure a user's rights in computer-readable works if the user has purchased the work in outright sale. The sale of copyrighted works rather than lease or rental should be promoted as being lower in transaction costs. A buyer needs the right to make sourcelanguage copies for his internal use and the right to make and use object code. The buyer would not be permitted to resell more than the number of copies he had purchased nor make the work available externally to others on a computer network without permission. At the time of resale, extra copies would have to be destroyed. 6. POLICYMAKING FOR COPYRIGHT In the course of this project, it was recognized that if conclusions were to be drawn about the applicability of copyright to computer-readable works, then decisionmaking with respect to other kinds of copyrightable works ought to be researched. Therefore, an historical analysis was undertaken, and the fundamental principles and concepts underlying copyright were reviewed. This historical and conceptual study has been found to be extremely useful. It has elucidated the principles of political philosophy and economics on which copyright is based. It has clarified the roles of the separate branches of the Federal Government in copyright policymaking and demonstrated their interactions. It has identified the impact of incremental technological change, thereby showing decisionmaking under increasing complexity. Finally, it has enabled copyright policymaking to be placed in the matrix of decisionmaking in general, thereby making possible an identification of the political system models with which it is most closely associated. 6.1 COPYRIGHT AND OTHER PROPERTY RIGHTS The history of copyright presents evidence that an essential point at issue, regardless of the technology involved, is the definition of the boundaries of the property right. In this, copyright is not much different than other kinds of property, tangible or intangible. In addition, with the property right is typically associated reciprocal responsibilities. An example of the conception of property rights in this manner is presented by Walter Lippmann in The Public Philosophy; in which the concept of quid pro quo is stated to be fundamental to our system of government: "Early in the history of Western society, political thinkers "A contract is an agreement reached voluntarily, quid quo pro Copyright appears at first glance to be encumbered with many kinds of |