ILLUSTRATION Figure 1-The "Optimal" Level of Copyright Enforcement . . . TABLE OF CONTENTS APPENDICES .. 33 PAGE Appendix A: Impact of Information Technology on Copyright Law in the Use of Computerized Scientific and Appendix B: The Role of Transaction Costs in the Design of Royalty Pricing Schemes for STI, by Appendix C1: On the Optimal Provision of Journals Qua Excludable Public Goods: Summary and Major Findings, by J. A. Ordover and R. D. Willig, New York University and Bell Laboratories . Appendix C2: On the Optimal Provision of Journals Qua Excludable Public Goods (full text), by 1. EXECUTIVE SUMMARY AND CONCLUSIONS 1.1 ORIGIN OF THIS STUDY This study began in October, 1974, and has been sponsored by the Division of Science Information of the National Science Foundation. The problem seen at that time was that copyrighted works were being fixed in computer-readable media and the copyright law concerning the use of such works was unclear. The copyright law had not been fully revised since 1909, a time when the possibility of copies of literature fixed in media that would make the copies invisible to the unaided eye was unthinkable. A major issue in 1974 and for several previous years was whether a copyright owner deserved compensation when his work was first encoded into electronic form, or for the time it continued to be stored, or only upon each instance of a hard-copy being created. In addition, a sense of urgency had been created at Congressional hearings in 1967 with predictions that in the near future, hard copy distribution of technical books and scientific journals would be replaced by a single copy, converted into computerized form, being replicated at hundreds, perhaps thousands of remote terminals. The implications for copyright owners were severe. As a result of those conditions, what was desired was a multi-disciplinary, "policy-oriented" study which would clarify the issues, including the issue of economically-sound, technical mechanisms in such automated systems that would enable reporting of the data on which royalties could be based. However, the National Commission on New Technological Uses of Copyrighted Works (CONTU) was established at the very end of 1974, with the function of recommending to Congress changes in the copyright law with respect to uses of copyrighted works in conjunction with computers. In October, 1976, the General Revision of Copyright Law was enacted, which did much to clarify the rights of copyright owners to their works when fixed in any tangible medium, but did not finally resolve the issues of computer-readable works. CONTU has not yet submitted its recommendations to Congress, and the copyright laws with respect to computer-readable works will remain ambiguous until Congress acts on those forthcoming recommendations. This study analyzes the issues of copyright in computer-readable works and is pertinent to current policy considerations. 1.2 CONTENT OF THIS REPORT The purpose of this report is to present the results of the study, and to recommend mechanisms that will maximize the long-term availability of computer-based information. The subject of this study does not concern an activity in which there is a comprehensive or coordinated investment program aimed at achieving As an outcome of the evaluation of fundamentals, and of the historical 1.3 FINDINGS OF BASIC PRINCIPLES 1. The concept of common law copyright conforms to the philosophy 2. Due to the inherent rights in the copy, an intrinsic market 3. The principle of inherent ownership and consequent statutory 4. If free economic competition is possible, opportunities for it 5. Copyright protection assumes the concept of the quid pro quo 1 6. The dissemination of scientific and technical information should be maximized, subject to resource constraints, excepting where such principles as personal privacy, trade secrecy and national security take precedence. 7. There would be transaction costs attached to any market, including the market for intellectual property, even if there were no copyright protection. The trade-off in structuring a market is in the kinds of transaction costs a society is willing to tolerate, as well as in the size of such costs. All other things being equal, the size of transaction costs should be minimized. 8. Decisionmaking on copyright involves the achievement of a balance of equities between user needs and owner rights that should include consideration of the general public as well. 1.4 RECOMMENDATIONS FOR IMPLEMENTATION 1.4.1 Computer-Readable Data Bases 1. 2. 3. 4. Computer-readable data bases, whether compilations, collective works, or reference works of a single author should be copyrightable in any tangible medium of expression. Complete disclosure of the contents of the data base to the Copyright Office should be required, in some tangible medium, when the data base is initially registered. Deposit requirements for data-base updating should be satisfied by a yearly submission of a complete list of additions and deletions. At some multi-year interval, e.g. ten years, a complete re-disclosure should be made if the data base has been frequently updated. Clarification of what constitutes publication of a data base is needed when a data base is distributed only in computer-readable form via a terminal query system through one or a very few specifically-licensed computer systems. 1.4.2 Computer Programs 1. A computer program written by a person in a source language, with or without the assistance of a computer, generically qualifies as a work of authorship. An original computer program should be copyrightable in source language in any tangible medium of expression. Machine (object) code should not qualify as a source language. 2. Disclosure of the computer program upon copyright registration should be accompanied by definition and usage manuals for the computer language and dialect in which the program is written, if such information is not on file already with the Copyright Office. 3. The transformation of a copyrighted computer program into object code from source language should be considered to be the making of a copy, even if the translation requires the implementation of some housekeeping functions such as the selection of peripheral units, storage allocation and the assignment of absolute addresses. 4. The translation of a copyrighted computer program into a completely different source language (not just a dialect or variant) should constitute the authorship of a derivative work. 5. The duration of copyright protection for computer programs should be no less than the duration of protection of other original works of authorship, in order to promote the use of computer languages that can be expected to endure regardless of changes in hardware technology. 6. 7. Decisionmakers should be aware that assignment of computer programs to a particular category of copyrighted work forces the adoption of the limitations on exclusive rights already inherent in that category. For example, categorization of a computer program as a "literary work", rather than as a separate copyrightable category assigns to computer program users the exemptions to exclusive rights granted to users of literary works in Section 110 of the 1976 General Revision of Copyright Law. The flowchart of a computer program ought to be separately 1.4.3 Transfer of Ownership of Copies of Computer-Readable Works 1. Outright sale of computer-readable works, i.e. transfer of ownership of copies as distinguished from lease or rental with permissions, should be promoted so as to reduce transaction costs. 2. In order to effectively use a copyrighted computer-readable |