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I think it goes to the point that actually was raised by Mr. Hadl. And that is, to the extent that these are in fact issues that divide us based on money.

They are economic driven and all of the legal framework that is created around these needs to be taken away and we need to get down to the fundamental issue.

I, too, believe that the resolution of this, if it is to come, would therefore be more appropriately found in the GATT than in the exercise being undertaken under WIPO, though that is an important adjunct to this process.

What troubles me about that prospect, Mr. Chairman, and should trouble this subcommittee is the fact that the context is so inadequate in regard to the application of the principle of national treatment that it represents not the status quo, but in fact a step backward.

I'll speak in this regard particularly for U.S. producers of sound recordings.

Dunkel text is so inadequate that you could drive a truck through it in regard to the principle of national treatment as it applies to producers and performers of sound recordings.

It says in respect of performers, producers of phonograms and broadcasters this obligation-referring to national treatment-only applies in respect of the rights provided under this agreement.

It then goes on to say in article 4 regarding most favored nation, exempted from this obligation are any advantage, favor, privilege or immunity accorded by a party.

And in respect of the rights of performers, producers of phonograms and broadcasters any right not provided under this agreement.

This is about as narrow a rule of national treatment as one could conceive in the present circumstance. It takes us backward, Mr. Chairman.

The critical role for national treatment is that as we grapple individually as countries with these particular problems and we fashion domestic solutions designed to provide protection, but solutions that may differ.

Some as a result of theology that goes with copyright neighboring works. Some as a result of politics.

It's the imposition of national treatment that can solve those problems and settle those differences. Not exacerbate them.

Mr. HUGHES. My second question concerns the unique status of sound recordings in international intellectual property law.

As you have indicated, the Berne Convention does not require member countries to protect sound recordings. And I don't believe any European country does. Maybe you know of some, but we don't know of any.

With respect to sound recordings it seems irrelevant whether home taping or rental levies are Berne rights. The subject matter of sound recordings is outside the scope of the convention.

As you point out, the United States is not a member of the Rome Convention. And the Geneva Phonogram Convention doesn't appear helpful.

But the DART legislation does provide a home taping levy and we do have a rental right for sound recordings. My question is how

well have you fared in arguing reciprocity as a basis for asserting rights in Europe?

Mr. JASON BERMAN. Not well. Nor would I want to mislead you, Mr. Chairman, that to the extent that we have in place a series of increasing protections within our own domestic law-and hopefully within the near future we'll fill the gap-that that would in fact produce the desired result. Namely, that U.S. rightsholders would be entitled to compensation under schemes, particularly in the EC. I don't believe that for a minute.

It's something we would have to win. And therefore I think it's something we would have to win either in the GATT or in even a more appropriate forum than the GATT, which would be a face to face discussion with the EC where the variety of issues that divide the EC and the United States, not just in copyright but across a broad spectrum, would be made available for us as a process in give and take.

We have got to penetrate that cloak. These issues will not be resolved satisfactorily from the point of view of any U.S. rightsholder in any of these forums other than that.

Mr. HUGHES. Well, you may be right. Have you heard of the Canadian cultural exemption being used as a precedent for negotiations?

Mr. JASON BERMAN. I don't know that it has been used as a precedent.

I do know that in the current discussions that are going on in the EC regarding a directive, some of the parties have discussed the question of including in the TRIPS text and in the services text of the current GATT negotiation a provision similar to the cultural exemption.

It exists kind of like Bankro's ghost. It's out there in much the same way that the cultural exemption has existed in the Canadian Free Trade Agreement.

It's there. And to my knowledge, it hasn't been invoked. On the other hand, the cancer has spread to the NAFTA.

And my guess is that while we have a peculiar relationship with Canada-and the Canadians get very sensitive on this issue-it seems to me the Europeans could find the same reason to be as sensitive.

I do think it's something that we have to guard against unfortunately.

Mr. HUGHES. Mexicans ought to be very sensitive too.

Mr. JASON BERMAN. The Mexicans were sensitive. But interestingly enough, I think one of the great leaps forward in regard to NAFTA is the intellectual property provisions and the national treatment provision that would apply in our relationship with Mexico.

Yes. The Mexicans are sensitive and they have some reason to be sensitive. But I think those problems will be overcome.

Mr. HUGHES. OK. Thank you very much. Again you have been very helpful to us. Your testimony completes the testimony for the day.

It has been a very good day. Productive I think. And we thank you very much. This public hearing stands adjourned.

APPENDIXES

APPENDIX 1.-QUESTIONS CONCERNING A POSSIBLE PROTOCOL TO THE BERNE CONVENTION FOR THE PROTECTION OF LITERARY AND ARTISTIC WORKS, THIRD SESSION, GENEVA, JUNE 21-25, 1993, SUBMITTED BY RALPH OMAN, REGISTER OF COPYRIGHTS AND ASSOCIATE LIBRARIAN FOR COPYRIGHT SERVICES

PRELIMINARY REMARKS

1. This part (Part III) of the memorandum deals with three of the ten items on the program of the June 1993 (that is, the third) session of the Committee of Experts, namely with those mentioned in subparagraphs (vii) and (ix) of the decision of the Assembly of the Berne Union quoted in paragraph 5 of Part I of this memorandum (document BCP/CE/III/2-I, page 4) as "new items": "distribution right, including importation right," "enforcement of rights" and "national treatment." They constitute Chapters VIII, IX and X.

2. As discussed in paragraphs 6 and 9 of Part II of this memorandum (document BCP/CE/III/2-II, page 2), one of the "new items"-"distribution right, including importation right" is not completely new. Several aspects of the right of distribution (rental right, public lending right, importation right) were discussed in the memorandum prepared for the second session of the Committee of Experts. The subchapter on rental right and public lending right and the relevant passages of the report are reproduced in Part II. For the preparation of the relevant chapter of this document concerning the "new item," the results of the above-mentioned discussions have been taken into account.

3. Still another of the three "new items"-national treatment-is not completely new either. Although national treatment as a general question was not discussed as a separate subject in the memoranda prepared for the first two sessions of the Committee of Experts, the obligation to apply this basic principle of the Berne Convention was referred to in respect of the various categories of subject matter to be protected and of the various rights discussed (see paragraphs 31(v) and (vi), 68 to 70 of document BCP/CE/I/2 and paragraphs 93, 103, 11, 130 and 135 of document BCP/CE/V/3). The obligation to grant national treatment as emphasized particularly in the chapter on collective administration of rights (see paragraphs 16 and 168 of document BCP/CE/I/3); however, that chapter was not discussed by the Committee of Experts. The results of the discussions by the Committee of Experts on the application of the principle of national treatment have also been taken into account for the preparation of the relevant chapter of this document.

VIII. DISTRIBUTION RIGHT, INCLUDING IMPORTATION RIGHT

DEFINITIONS

4. In the present document, the notions mentioned in the following eight paragraphs are used according to the definitions set forth in the same paragraphs.

5. The "right of distribution" and its synonym, the "right of circulation," is the right to authorize any act where ownership or possession of one or more copies of the work changes or change hands; in the case of sale, gift, etc., it is ownership, whereas, in the case of rental and lending, it is possession that goes from one person to another. Naturally, ownership and possession may change hands simultaneously. As it will be seen, this right rarely exists in an absolute manner.

6. The "exhaustion of the right of distribution" is the termination of the right of distribution in respect of any copy of the work where ownership has been transferred for the first time by means of an implicit or explicit authorization of the au

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