Organization and authored the general guide to the Copyright Act of 1976.

Our second witness is Mr. Andrew Pincus, who as the general counsel is the chief legal advisor for the Commerce Department. Beyond his legal responsibilities Mr. Pincus also serves as a senior policy advisor for the Secretary and the Department on a broad range of domestic and international issues, including electronic commerce, international trade, telecommunications, intellectual property rights, environmental issues, export controls and technology. Mr. Pincus holds a Bachelor of Arts Degree from Yale College in 1977 where he was graduated cum laude, and a law degree from Columbia University School of Law in 1981, where he was a James Kent scholar, a Harlan Fisk Stone scholar, and Notes and Comments Editor of the Law Review.

Mr. Pincus, we did not receive your written testimony until last night so with your permission we may submit written questions to you in addition to the questions we put to you this morning. Mr. PINCUS. I'd be pleased to answer them.

Mr. COBLE. Thank you, sir.

The subcommittee has copies of both witnesses testimony. Without objection they will be made a part of the record.

Ms. Peters, you may kick it off.

STATEMENT OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, COPYRIGHT OFFICE OF THE UNITED STATES, LIBRARY OF CONGRESS

Ms. PETERS. Thank you. I also have to start by wishing you a very happy birthday and hope that you have some fun activities planned for later in the day.

Mr. COBLE. This may end up being fun. [Laughter.]

Ms. PETERS. Mr. Chairman, members of the subcommittee, I'm pleased to testify today on the Collections of Information Antipiracy Act.

In October 1997 I testified on a prior version of this bill. At that time I supported the enactment of new Federal protection for collections of information. While recommending further work on certain issues to better calibrate the balance that would maximize the public interest, the Copyright Office remains convinced of the need for legislation and believes that this bill represents substantial progress in achieving that balance.

The Office's support is based on the need to preserve adequate incentives for the production and dissemination of databases which are increasingly important both as a component of electronic commerce and as a tool for scientific, educational and technological development.

In our view there is a gap in legal protection which can not be satisfactorily filled through the use of technology alone. Existing bodies of law for protecting databases are all deficient in some respect. As to copyright, the Supreme Court's decision in Feist moves that some of the most investment intensive databases are no longer protected, while those that are receive only a narrow scope of protection. Other bodies of law protect only certain aspects of databases or protect them only in certain circumstances and lack uniformity or certainty.

This legal gap is compounded by the ease and speed with which a database can be copied and disseminated using today's digital and scanning capabilities. Producers are likely to react to their vulnerability by investing less in the production of databases or disseminating them less broadly.

At the same time, because information is essential to the advancement of knowledge and culture, the risks of overprotection are equally serious. It is important not to inhibit or raise the cost of beneficial public interest uses. The ideal scope of protection should result in optimizing the availability of reliable information to the public.

Over the past year and a half considerable evolution has taken place in this bill, refining and clarifying its coverage. Many of the concerns, ours and others, have been addressed or ameliorated. My written statement discusses the changes incorporated in H.R. 354 that we see as most important. I will address only three of these here.

First, with respect to clarifying the boundaries of the prohibition there are three definitions of "collection of information" and "potential market" and there is an exclusion for information used to accomplish digital online communications. These definitions should prevent over-broad applications extending to products outside the standard conception of a database or to all markets that could someday enter. The exclusion for online communications insures that protection does not extend to functional network elements, thereby impeding the operation of the Internet.

Second, with respect to appropriate safeguards for beneficial uses, the exemptions for permitted acts have been expanded in a number of ways. Two are particularly important. The first broadens the exemption for non-profit educational, scientific or research uses to permit such uses as long as they do not directly harm the actual market. This change appropriately limits the liability situation where such uses pose a serious and immediate threat to the producer's investment, such as when a member of the market for which the database is intended downloads it without payment.

The most far-reaching change is the new exception for "additional reasonable uses". The Copyright Office applauds the inclusion of this general flexible exception. Like the Fair Use doctrine of the copyright law it can serve as a safety valve, avoiding an overly strict application of the law. We continue to examine the effectiveness of the precise mix and functions of the elements set out in the exemption.

Third, a definite term of 15 years has been added. The language in this bill makes clear that a new term of protection resulting from the investment in the maintenance of a collection does not extend the term of the preexisting collection. Nevertheless, a practical problem which merits attention remains. How does the user obtain access to the old, preexisting version if the database exists only on line and it's continually updated?

As this important bill moves through the legislative process the Copyright Office would be pleased to assist the subcommittee and its staff in resolving the remaining issues.

Thank you very much.

[The complete statement of Ms. Peters follows.]

PREPARED STATEMENT OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, COPYRIGHT OFFICE OF THE UNITED STATES, LIBRARY OF CONGRESS

Mr. Chairman, members of the Subcommittee, I am pleased to testify today on the "Collections of Information Antipiracy Act." In October 1997, I testified on a prior version of this bill, H.R. 2652. At that time, I stated the Copyright Office's support for the enactment of new federal protection for collections of information, while identifying some issues with regard to how such protection should be formulated.

The basis for the Office's support was the need to preserve adequate incentives for the production and dissemination of databases, which are increasingly important to the U.S. economy and culture, both as a component in the development of electronic commerce and as a tool for facilitating scientific, educational and technological advancement. In our view, there was a gap in existing legal protection, which could not be satisfactorily filled through the use of technology alone. This legal gap was compounded by the ease and speed with which a database can be copied and disseminated, using today's digital and scanning capabilities. Without legislation to fill the gap, publishers were likely to react to the lack of security by investing less in the production of databases, or disseminating them less broadly. The result would be an overall loss to the public of the benefits of access to the information that would otherwise have been made available.

At the same time, we cautioned that the risks of over-protection were equally serious, since the free flow of information is essential to the advancement of knowledge, technology and culture. We saw the key to legislation as ensuring adequate incentives for investment, without inhibiting access for appropriate purposes and in appropriate circumstances.

Accordingly, the Copyright Office recommended the restoration of the general level of protection provided in the past under copyright "sweat of the brow" theories, but under a suitable Constitutional power, with flexibility built in for uses in the public interest in a manner similar to the function played by fair use in copyright law. Such balanced legislation, we believed, could optimize the availability of reliable information to the public.

As introduced, H.R. 2652 represented a constructive first step toward achieving this result. We recommended further work on the bill's concepts and language, however, in order to resolve continuing concerns and better calibrate the balance needed to maximize the public interest. We identified as requiring particular attention the scope of the permitted acts and exclusions, and the issue of duration.

During the course of consideration of H.R. 2652 in the last Congress, numerous changes were made. As passed by the House, the legislation incorporated several provisions responding to concerns we had identified, as well as many other amendments. H.R. 354 includes all of these changes, plus two other major additions: a clarification of the duration issue and a new exemption embodying certain fair use concepts. Over the course of the past year and a half, substantial progress has been made in developing and refining the coverage of the bill.

The position of the Copyright Office on H.R. 354 can be summarized as follows: We remain convinced that there is a need for new federal legislation to supplement existing law and provide adequate incentives for investments in databases. We are not aware of any changes in law or technology since my 1997 testimony that would warrant rethinking that conclusion.

As to the form that such legislation will take, we continue to prefer the misappropriation approach taken in H.R. 354 to an exclusive property rights model, for the reasons given in my prior testimony (a copy of which is attached). Moreover, in our view, the provisions of H.R. 354 represent a significant improvement over the provisions of H.R. 2652 as introduced. Many of our earlier concerns, and a number of concerns raised by others, have been addressed or ameliorated. Again, however, I stress that the sensitivity and importance of this subject matter demands great care in crafting a statutory balance. Several issues still warrant further analysis, among them the question of possible perpetual protection of regularly updated databases, and the appropriate mix of elements to be considered in establishing the new, fair use-type exemption.

THE THRESHOLD QUESTION: THE NEED FOR LEGISLATION

In formulating our position on H.R. 2652, the Copyright Office considered carefully the threshold question of whether there is a need for new legislation to protect collections of information in the United States. We concluded then that new legislation was desirable, and that judgment still stands.

As explained in more detail in my prior testimony, and in the Office's August 1997 Report on Legal Protection for Databases, existing bodies of law for protecting

databases are all deficient in some respect. As to copyright, the Supreme Court's 1991 decision in Feist means that some of the most investment-intensive databases are no longer protected, while those that do embody the requisite minimal creativity are entitled to only a narrow scope of protection. Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340 (1991). Other bodies of law protect only certain aspects of databases, or protect them only in certain circumstances, and lack uniformity or certainty. As a result, database producers are vulnerable to the taking of substantial portions of the fruits of their investment in ways that harm their markets.

Since the 1997 hearing, there has been no change in the courts' interpretation of copyright or other bodies of law that has significantly altered the legal landscape or ameliorated prior judicial applications of Feist. The cases that established a narrow scope of protection for databases under copyright law continue to have precedential effect, and to govern the public's understanding of the boundaries of permissible conduct.

During the 105th Congress, this Subcommittee, the Committee on the Judiciary, and the full House of Representatives also recognized the need for legislation, as demonstrated by the passage of H.R. 2652 twice, once as a free-standing bill and once as Title V of H.R. 2281.

THE SUBSTANCE OF H.R. 354

The bill before you today reflects the considerable thought and consultation that went into the evolution of H.R. 2652 in the last Congress. H.R. 354 incorporates the provisions of H.R. 2652 in its ultimate form as it passed the House the second time. Many changes were made in that bill during the course of the legislative process. These changes included adding new definitions; clarifying the core prohibition; amending the "permitted acts"; refining and expanding the exclusions; expanding the savings clauses for other bodies of law; establishing a set term of protection; and providing special protections against monetary or criminal liability for nonprofit institutions. In this Congress, two major changes have been added in H.R. 354 that address core concerns of user communities, one intended to avoid perpetual protection for dynamic databases, and the other to create a flexible defense for fair usetype uses.

will not describe all of these changes here, but will discuss those the Copyright Office believes to be most important from a public policy perspective: clarification of the boundaries of the prohibited conduct; the coverage of the exceptions or "permitted acts"; addition of savings clauses regarding copyright and antitrust law; duration; and the special protections for nonprofits.

CLARIFYING THE BOUNDARIES OF THE PROHIBITION

As to the bill's general approach, H.R. 354 adopts the same misappropriation model as proposed in H.R. 2652. The Copyright Office continues to favor this approach, because it is more limited in its scope of coverage than an exclusive property rights model, and better tailored to the subject matter and the specific problem that has been identified. In addition, several changes made during the legislative process in the last Congress have clarified the boundaries of the prohibition in a beneficial way.

Most important was the addition of definitions for two of the terms used in the prohibition: "collection of information" and "potential market" (§ 1401). In my prior testimony, I stated that "additional definitions may be advisable to clarify the scope of the prohibition but should not be included unless they can shed more light rather than create new ambiguity." These definitions meet that test; they serve to add precision and avoid potential overbreadth.

Definition of "collection of information"

A number of concerns had been expressed about the lack of a definition of "collection of information" in H.R. 2652 as introduced. The concerns centered on the possibility that many items that would not fall within a standard conception of a database might be considered to qualify as a protected collection. A history book or even a novel might qualify, since each collects and brings together facts, ideas and words. Moreover, virtually any material in digital form could be considered a collection of digits. The new definition should rule out the possibility of such overbroad interpretations. It appropriately limits protection to those collections that are made up of items collected and organized "for the purpose of bringing discrete items of information together in one place or through one source so that users may access them." By focusing on the purpose for which information is collected and organized, the definition excludes material brought together in order to communicate a message, tell

a story, or accomplish a result. See H. Rep. No. 105-525, 105th Cong., 2d Sess. 13 (1998).

Definition of "potential market"

In my prior testimony, I supported the use of the term "potential" in delineating what type of market harm should be actionable. I stressed the need to give the term content, however, warning that "[t]he mere possibility that a use could be licensed should not be sufficient, or the term would become circular." I advised that courts could look to the producer's business plans as well as customary industry practices, as they have done under copyright law.

The new definition of "potential" accomplishes just that result. It defines a “potential market" as one which a person has current and demonstrable plans to exploit or that is commonly exploited by persons offering similar products or services incorporating collections of information. The increased certainty provided by statutory language giving guidance to the courts is a positive step.

Exclusion for network functionality

Another important change made during the 105th Congress was the addition of an exclusion barring application of the prohibition to information used to accomplish digital online communications (§ 1404(c)). The Copyright Office supports this exclusion, which should ensure that protection for collections of information will not be extended inappropriately to functional network elements such as domain name tables and interface specifications, and thereby unintentionally impede the development and functioning of the Internet.

APPROPRIATE SAFEGUARDS FOR BENEFICIAL USES

In my prior testimony, I noted the "substantial dangers inherent in establishing legal rights involving the use of facts," and cautioned that "[i]t is important not to inhibit or raise the cost of existing uses in the public interest. [and] avoid[] making access for legitimate purposes more difficult or expensive.” This was one of the Copyright Office's principal concerns with the bill in its original form: were sufficient safeguards in place to ensure that that beneficial uses could continue unabated? Two expansions of the exceptions or "permitted acts," one made toward the end of the last Congress and one appearing for the first time in H.R. 354, provide important additional safeguards.

Broadening of exception for nonprofit educational, scientific, or research uses

As initially drafted, the exception for nonprofit educational, scientific or research uses served a primarily symbolic value. While it inclusion in the bill constituted a legislative recognition of the value and importance of such uses, the exception was written in such a way as to simply restate in the ffirmative that such uses were permitted as long as they did not cause market harm (which would not in any event have violated the prohibition). When H.R. 2652 was incorporated into H.R. 2281, this exception (now § 1403(a)(1)) was broadened to permit such uses as long as they did not directly harm the actual market-thus ruling out liability for indirect harm, or harm to a potential market.

The Copyright Office supports this change. In our view, it appropriately limits liability for nonprofit public interest uses to the only situations where such uses pose a serious and immediate threat to the producer's investment-i.e., where the user is a member of the market for which the database is produced, and utilizes it without permission or payment. While a producer may need protection against a commercial competitor's preemption of a potential market, such a broad field of application does not seem necessary for nonprofit scientists and scholars.

Addition of a flexible fair use-type exception

The most far-reaching change in the bill, added when H.R. 354 was introduced, is a new exception, entitled "Additional Reasonable Uses" (§ 1403(a)(2)). This section supplements the other, more specific exceptions, with a general, multi-factor balancing test turning on the concept of reasonableness. It permits an individual act of use or extraction of information for purposes of illustration, explanation, example, comment, criticism, teaching, research, or analysis, in an amount appropriate and customary for that purpose, if the act is reasonable under the circumstances. Four factors must be considered in determining reasonableness, relating to the commercial or nonprofit nature of the use or extraction, the defendant's good faith, the extent to which the defendant has added its own investment or creativity, and whether the plaintiff's collection was primarily intended for persons in the same field or business as the defendant. Finally, an outside limit of reasonableness is set: the por