In the case of a home taping video royalty pool, the majority of the works that are copied are U.S. works. That's rather clear.

If moneys from this pool are allocated only to French authors, U.S. works are helping to subsidize competitors.

If U.S. copyright owners are then also deprived of benefiting from two-thirds of the pool on national treatment grounds, serious questions about the effectiveness of the Berne Convention are raised, to say nothing of the obvious loss of hundreds of millions of dollars of royalties.

At the same time, it is not difficult to understand the reluctance of foreign countries to ship to the United States hundreds of millions of dollars a year.

Under the theory that the best defense is an offense, this unwillingness has been attributed to alleged inadequacies in U.S. law.

The implication is that if those inadequacies are remedied, the money will flow across the Atlantic. I really have some doubts about that. But at the same time, it may be desirable to remove smokescreens.

Today's hearing will explore what I believe to be a fascinating confluence of copyright law and trade. We have assembled an excellent roster of witnesses who can explain both the law and the economics.

I want to apologize for the delay today. But as you may know, we have today probably one of the most important votes that we will face in this Congress.

And you can imagine that Members are busy engaged in trying to make up their minds in meetings with leadership, with the President, with Cabinet members who are attempting to persuade them one way or another.

In any event, our distinguished ranking Republican will be along. He is in that kind of a conference. The Republicans have convened. At this time, the Chair would be very happy to recognize Don Edwards, the dean of the California delegation and the Chair of one of our outstanding subcommittees of the House Judiciary Committee.

Mr. EDWARDS. Thank you very much, Mr. Chairman. I'm looking forward to these hearings.

Insofar as California is concerned, there is nothing more important than intellectual property, the subject of this hearing.

Mr. HUGHES. And our distinguished Member from California likewise who used to represent most of you and who knows that perhaps in 10 years he will again, Howard Berman.

Mr. HOWARD BERMAN. Southern California is a concept. It's not a geography.

I have no initial comments except to again thank you for getting into this very important issue, Mr. Chairman.

Mr. HUGHES. Thank you, gentlemen. Our leadoff witness is Mihály Ficsor. He is the director of the Copyright Department of the World Intellectual Property Organization.

He is a native of Hungary, and thus like the director general and Prof. Peter Jaszi, a member of the global Hungarian copyright conspiracy.

He has previously served as a director general of the Hungarian Bureau for the Protection of Authors' Rights, as a law professor at

the University of Budapest, as an official of the Hungarian Minister of Justice, and as a municipal judge. A most distinguished public career.

He is a well-known authority and writer in the field of copyright and we are pleased to have him with us today.

We have greatly benefited, Director, from WIPO's experience and hope that the close ties the subcommittee has been establishing with the WIPO continue to grow.

Director Ficsor, welcome to the Subcommittee on Intellectual Property and Judicial Administration. It is an honor and a pleasure to have you with us.

We have received and we will make a part of the full record your complete text, which is excellent and very comprehensive.

We hope you can summarize for us so that we can get right to questions. But you may proceed as you see fit. I understand that you are accompanied this morning by Richard Owens and we welcome him also. Welcome..

STATEMENT OF MIHÁLY FICSOR, DIRECTOR, COPYRIGHT DEPARTMENT, PROPERTY

WORLD

INTELLECTUAL

ORGANIZATION (WIPO), GENEVA, SWITZERLAND

Mr. FICSOR. Thank you, Mr. Chairman, and members of the subcommittee. It is really a great privilege and pleasure to me to appear and testify today at this hearing. I thank you for the invitation both on behalf of my organization, WIPO, and on my own behalf.

The title and the contents of my written statement indicate that I understood that the hearing today would concentrate on the proposed protocol to the Berne Convention with respect to national treatment. Now I know, however, that we have had to deal also with the same questions concerning the new WIPO instrument on the protection of performers and producers of phonograms. With your permission, Mr. Chairman, at the end of my statement I will refer to that also.

The basic provision of the Berne Convention on national treatment is included in article 5(1). There are some exceptions in the text of the Berne Convention to that principle. The most important one is about the terms of protection, that is the duration of protection. And there are some three less important ones relating to questions of more or less marginal importance with respect to works of applied art, works protected on the basis of the so-called back door protection; that is, works of authors who are not nationals of Berne countries and are to be protected on the basis of publication only and with respect to droit de suite.

In the second part of my written statement, the various expressions used in the basic provision of the Berne Convention on national treatment-article 5(1) are analyzed in detail.

I'd like to underline only four elements of this basic provision of the Berne Convention here.

The first is that countries party to the Berne Convention are obliged to grant the same protection to foreigners as they grant to their nationals in respective to works for which those foreigners are protected under the convention.

"Works protected under the convention," this expression means, inter alia, that the productions concerned should correspond to the notion of literary and artistic works under the Berne Convention. We should note this because those who are ready to go to the limits of human imagination or perhaps even beyond that in trying to offer excuses for denying national treatment use more and more frequently the argument that the obligation to grant national treatment for certain categories of productions doesn't exist because those productions are not covered by the notion of literary and artistic works.

The second element I'd like to speak about of article 5(1) is that the obligation of member countries of the Berne Union to grant foreigners national treatment extends to "the rights which their respective laws do now or may hereafter grant to their nationals."

As we shall also discuss, this is one of the parts of the provision which is a kind of a battle field around the question of national

treatment.

Some "experts," are ready to give examples in this field that lawyers, if their abilities are not controlled by certain principles, are able to prove that black is white and vice versa, and they present really ingenious theories that certain rights are not given to foreigners that are given to nationals because those rights are not part of copyright, but they are some other rights.

The third element I'd like to mention here is that article 5(1) only speaks about the enjoyment of rights and not about exercise of rights as some other provisions of the Berne Convention do.

This is important to note because this may support the interpretation that the principle of national treatment does not extend to the question of transferability of rights and to the conditions national laws may establish; and there are some national laws which do establish conditions in great abundance concerning copyright

contracts.

This means that, in those respects, the general principles of private international law should be taken into account to determine which law is applicable.

The last element I'd like to mention is that the obligation to grant the same rights to foreigners as to nationals is not alone in this provision. It is added that also those rights should be granted that are described by the Berne Convention as minimum rights.

This is important to note because this should remind us that, from the very beginning of the existence of the Berne Convention until now, national treatment has always been coupled with the obligation of member countries of the Berne Union to grant at least certain rights established as minimum under the Berne Convention.

The history of the principle of national treatment from the establishment of international conventions, first in bilateral ones and then in the Berne Convention, until now, is reviewed in part III of my written statement.

Here, I only like to refer to one element: The Berne Convention has been revised several times. One of the most important objectives, if not the most important one, of those revision conferences was to update time and again the minimum level of protection prescribed by the Berne Convention. And, by means of increasing the

level of protection, possible conflicts between the principle of national treatment and the fact that certain basic rights were not granted in certain member countries or not in the same way— were eliminated regularly.

The last revision conference, however, took place in 1971. Since then, perhaps many more important developments have taken place than between 1886 and that year. And the fact that there has been no new revision has contributed to some discrepancies not only at the margins but in the very center of copyright protection. This may contribute to problems around the application of national treatment. I don't want to appear more naive than I really am. So I know very well that the fact that there are no appropriate international standards is not the only one. There are certain countries with negative balances in this field which are ready to use any good reasons, or even not very good reasons, to avoid the application of national treatment. But the updating of the international standard may contribute to eliminating some difficulties in the application of national treatment. And one of the most important objectives of the protocol to the Berne Convention is that.

In the last part of my written statement, I deal with new challenges to the principle of national treatment and with the proposals included in the working document of WIPO in this respect.

I'd like to deal here with the three most difficult cases, arguments and methods applied in this respect by various national laws.

The first case is that national treatment is denied or restricted on the basis of the allegation that the rights involved granted to nationals, mainly rights to remuneration, are not covered by copyright, but they are some other kinds of rights outside of copyright.

The working document analyzes two typical cases in this respect. The first is the case of public lending rights; granted for lending by public libraries of books and similar publications.

There is only one country in the world which grants national treatment with respect to that right, and that is Germany. In all the other countries where this right is recognized, national treatment is denied on the basis of the argument that this is not copyright but a kind of national cultural endowment.

The working document proves that this argument is wrong. What is involved is a certain use of protected rights. The right is granted in that respect. That is, it is a right in literary and artistic works. And that is-the protection of rights in literary and artistic works-the subject of the Berne Convention.

But at the same time, the working document also recognizes that there seems to be a de facto agreement now among the member countries of the Berne Union.

The other case discussed in the working document is the famous problem of home taping royalties.

I've said that there seems to be an agreement concerning public lending rights. If there is an aspect of copyright protection where there is no agreement, then home taping royalties is certainly one of those cases.

There are four categories of countries who are party to the Berne Convention. First, those countries which recognize national treatment in this respect. Second, those countries which recognize na

tional treatment but only after the deduction of a more or less high percentage of the payments for so-called general cultural purposes, national purposes. Third, those countries which do not grant national treatment but are ready to extend protection to foreigners on the basis of reciprocity. And finally, fourth, those countries which do not grant national treatment and do not accept even the idea of reciprocity.

The working document points out that what is involved in this case is one of the basic and most fundamental rights of the Berne Convention, and that there is no possible legal basis whatsoever to deny national treatment in this respect. What is more, the working document also points out that it can be deduced from article 9 of the Berne Convention that, in countries where widespread home taping prejudices the interests of writers and other copyright owners, such a payment should be introduced to reduce at least such prejudices to an acceptable reasonable level.

The working document finally deals with two ways to deny national treatment in an indirect way.

The first is to transfer the protection of certain works to sui generis protection systems which are not covered by the principle of national treatment. The working document mentions two legal techniques in this field.

The first is to apply an overly strict originality test and to leave those works which fail this test to a so- called safety net sui generis protection which is outside Berne and not covered by the principle of national treatment.

We can see such attempts with respect to data bases, for example.

The other technique is to establish neighboring rights for producers in parallel to the rights granted to authors in respect of the same works; neighboring rights which are not covered by the Berne Convention and perhaps even not by any other convention and in respect to which national treatment is not granted.

We can see such attempts first of all, in respect to audiovisual works.

Finally, the other method used is to prescribe in a national law that a certain percentage of income due to authors and other owners of copyright should be used for general cultural purposes. Of course, copyright owners are free to decide in that way. But if it is the law itself which prescribes the use of money due to individual copyright owners for general cultural purposes, national purposes, it is of course a violation of the principle of national treatment and also a violation of certain minimum standards under the Berne Convention.

After this analysis, the working document proposes three things. First, it proposes that the protocol should recognize, in addition to the four cases in the text of the Berne Convention, where exceptions are allowed to the principle of national treatment, also the fifth case in respect to public lending rights on the basis of a de facto agreement among the member countries of the Berne Union. It is considered as a kind of surgical intervention to remove the cancerous part and to try to prevent proliferation of the disease by this act. Because the second point of our proposal is that it should