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generally cross-licensed throughout the industry, so everyone has access to everyone else's patent.

The only other area of protection was the one addressed earlier, the area of unfair competition based on the International News Service case and other cases that have followed, and that is such an undeveloped area of the law it's really a situation where a court more or less feels that the plaintiff has been harmed and the defendant did it, and therefore the court ought to award protection, but there is no rhyme or reason; sometimes cases go one way and other cases go another. So, really, obviously, the proprietary information is protected from the point of view that we don't let our process information out, but as Mr. Grove did explain, generally most of the companies in the industry have very similar kinds of processes, not exactly the same, but after a chip has been out for a year or two, maybe 6 months even, the processes have caught up to the point where the chip pirates can reproduce the same chip. So, none of the areas has been totally satisfactory, and of course, 98 percent of what's covered on one of these drawings is not protectable by patents.

Mr. KASTENMEIER. Unfair competition or any other, have you considered any other efforts to seek some sort of legal remedy through unfair trade practices or unfair competition?

Mr. BOROVOY. None that I know of, other than, of course, we did sue the Copyright Office, taking the position that present copyright laws should cover us.

Mr. SEVIN. I have something to add. We did seriously consider, we studied both of those designs and copies and seriously considered bringing suit against one or both. But our attorneys, after a thorough review of the applicable law, concluded that the law was not clear, not actually that good, and in either case we would be taking on a company about 20 times our size, and we concluded that discretion was the better part of valor.

Mr. KASTENMEIER. Do you recall under what theory you might have proceeded against them?

Mr. SEVIN. Unjust enrichment.

Mr. KASTENMEIER. If some form of statutory copyright protection was enacted, you made some reference in the patent situation and cross-licensing, would there be some-do you think there would be some similar licensing of competitors or assignment of rights that perhaps would permit the foreign corporation or some domestic corporation from using these circuitry designs?

Mr. GROVE. The answer to that is yes. Even today, even in the absence of legislation, we have gotten into agreements with certain companies from time to time where we permitted them the use of our designs, as if it was a copyrightable item, in return for certain considerations that we found equally valuable.

The problem today is that you are depending, if you wish, on the morality of the company. A company that considers that a moral approach versus photographic copying not a moral approach, will enter into that kind of a trade and another company won't. And that is a very tenuous ground to rely on when the stakes are tens of millions of dollars.

Mr. KASTENMEIER. Thank you. I'll yield now to the gentleman from California, Mr. Edwards.

Mr. EDWARDS. Thank you, Mr. Chairman. I really only have one question. We will have later this afternoon witnesses who I think are competitors of yours who are going to take a contrary position, although I have not seen their testimony. Can you anticipate what the nature of their objections to this bill will be and what would your response be to their objections to this bill?

Mr. GROVE. I would rather not anticipate the nature of their objections.

Mr. EDWARDS. Do we have any other nonanticipators? You must know that they are going to object.

Mr. GROVE. I found out when I entered the courtroom today. Mr. EDWARDS. Pardon?

Mr. GROVE. I found out when I entered the courtroom today. Mr. EDWARDS. Well, we only found out the day before yesterday ourselves.

Do any of the witnesses know what the objections are going to be?

Mr. BOROVOY. One thing, Mr. Edwards, I think we're all going to be here during whatever statements are made, and we would be pleased to reply afterwards.

Mr. EDWARDS. Thank you very much.

Mr. KASTENMEIER. I think that's a fair statement, Mr. Edwards. The witnesses are here. If there is a point to reply, or continued dialog on a question, I think perhaps the witnesses could then respond, or even at a later point in time, by written statement. Since we're not interested in foreclosing anybody, we hope to benefit from whatever differences there may be in connection with this matter.

The gentleman from California?

Mr. MINETA. Thank you, Mr. Chairman.

I'd first like to express my thanks to you for allowing me, a nonmember of the committee, to sit in on this hearing. Not being a lawyer, of course, I'm not on the Judiciary Committee.

I'd like to ask, where would this legislation help in terms of the illustrations you've given here of Toshiba, of the Russian copying that was done? Where does this law protect as far as being able to prevent them from copying and pirating the fruits of your R. & D. efforts?

Mr. GROVE. Let me take a layman's answer to your question; not being a lawyer either, I will turn it over to Mr. Borovoy after that. I think the most important factor from the enactment of this legislation would be merely the simple fact that it would be against the law to copy those chips. The overwhelming majority of us in this business are law-abiding people. It is not so much the threat of the prosecution and what would happen if, that keeps us from breaking the laws; it is that there is absolutely no rationalization about the rightness or wrongness of doing something when the law says that it is wrong. I have a feeling that at least some of those copies and I don't mean the Russian one among them-but I will venture that two of those copies that I am familiar, one of Mr. Sevin's and one of my examples, would not have taken place merely because the statute says that it's wrong. So right away some of the disreputable question-you know, the margin for error,

the margin for judgment being taken away, a billion dollar company is not going to be playing around with shady practices.

Mr. MINETA. So, it would not be criminal prosecution but a civil suit that would enable you to be involved in civil litigation against whoever is pirating those items that would be protected by this legislation once it becomes enacted?

Mr. GROVE. Rather than answering your question, let me pass that on to Mr. Borovoy also. My point is, my simple engineering approach to this is that in 90 percent of the cases that would take place today, it would not occur, and there would be no litigation, civil or criminal, merely by virtue of the fact that the law of the United States says that it is against the law.

Mr. KASTENMEIER. Would my colleague yield? I think probably Mr. Baumgarten, who is best able to answer both those questions, what sanctions there are under present copyright law or violation of copyright, that is to say, and also the international aspect of the U.S. copyright law, as far as foreign organizations are concerned. He will, I think, probably respond to that more fully than the present panel, even Mr. Borovoy, who is a lawyer, but Mr. Baumgarten is the one singular copyright expert in the room, and I think he'd give a full, definitive answer to your question.

Would you be willing to do that?

Mr. BAUMGARTEN. Certainly; do you want me to do it now? Mr. KASTENMEIER. It's up to you.

Mr. MINETA. I'd like to hear, if I might hear the implication of this legislation.

Mr. KASTENMEIER. Thank you, Mr. Baumgarten, if you could respond to the question. The panel need not leave. I think it's just for the purpose of describing the implications of copyright coverage for foreign organizations and foreign individuals, one and two, what the sanctions are, civil and/or criminal.

Mr. BAUMGARTEN. If the duplication occurred in a foreign country, the actual photoreproduction of the chip, our law would not make that unlawful in the foreign country. It might help in one very technical respect that I won't trouble you with, but the legitimacy of the duplication would be measured by the law of the country where the duplication occurred; however, the copyright owner of the chip, the American copyright owner, would be able to prevail upon the Customs Service, for example, to erect an importation prohibition to the bringing in of the unauthorized duplicates into this country. And the U.S. copyright owner would also be given certain rights in a civil action without relying upon the Customs Service to keep them out of the country, but it would not make the act of duplication itself in the foreign country actionable. I think they're more concerned with keeping them out of the country than anything else.

Of course, if the duplication went on in this country, then the very act of duplication would be unlawful.

The second question, as to the nature of the relief, it could be criminal or it could be civil. If a company engaged in unauthorized duplication repeatedly, willfully, and for profit, I'm sure the interested copyright owners might approach the Justice Department for criminal prosecution. The direct precedence for this is sound recording piracy, where Congress passed the Sound Recording

Amendment of 1971, gave protection to the phonograph record manufacturers, but piracy was so widespread the copyright owners felt they needed more clout, and the FBI has cooperated. So, it could be civil, it could be criminal.

With respect to the international aspect, the primary benefit would be to keep them out of the country.

Does that answer your question?

Mr. MINETA. Let's say it takes a year before the discovery is made that a component piece of this is something that has been pirated. I guess damages would then be something they could bring out in court?

Mr. BAUMGARTEN. I would hazard a guess-and I'm not certain, they may correct me on this, it's their industry-that they would be more interested in the possibility of importation exclusions and injunctive relief than they would be in securing actual monetary relief. In fact, it would probably be almost-well, it would be very difficult for them to prove specific monetary damages. The statute does give them statutory damages which they could, if they could get, even if they couldn't prove actual damages, but I would suspect they would be more interested in the customs bar and the possibility of injunctive relief.

Mr. MINETA. Mr. Baumgarten, in your response you said that customs "might" prohibit the products coming in. Why would you even say "might" if it were in violation of U.S. law, and would not be absolute?

Mr. BAUMGARTEN. First of all, customs would have the authority under the new statute. The impetus to the exclusion would have to come from the copyright owner, and the copyright owner might have to record certain statements at the various ports of entry, there would have to be discovery that an unauthorized shipment was coming in, and then customs would have to be persuaded that what was coming in was in fact an infringement, but the clear authority remains in the statute, it's just a question of proof. Mr. MINETA. Thank you very much.

Mr. KASTENMEIER. Counsel?

Mr. LEHMAN. Mr. Baumgarten, do design protection statutes which exist in other countries now, protect computer chip designs, and if so, would the United States have a statute of this nature, would that offer the possibility under reciprocal agreements of international protection?

Mr. BAUMGARTEN. Let me answer the second question first, please. I haven't studied this carefully. I think-let's talk about the Railsback bill, because that's essentially the one prospective design copyright bill we have-I'm not sure that Mr. Railsback's bill would protect without some modification because that bill does refer to ornamental design of useful articles, and I'm not sure these would be considered ornamental, even though they are not strictly functional. But it certainly could be adjusted to meet that. The design protection laws in foreign countries, they vary greatly, and I don't purport-I can talk about their copyright laws, but I doubt if very many foreign copyright laws would be considered to cover this. But whether foreign copyright laws as opposed to design patent laws would protect it, I would prefer not to hazard a guess as to that. I suspect as is true in many cases, the technology has

really developed so much in this country that the issue hasn't arisen in the foreign countries yet.

Mr. BOROVOY. England is the only country where I think there might be protection.

Mr. LEHMAN. Then this would, though, if the United States would pass this statute, this would become then the subject of consideration, I assume, by the Burns Convention?

Mr. BAUMGARTEN. That was the technical thing I wanted to avoid. Certainly if the United States, at a practical, political level, if the United States decided clearly to make these types of devices subject to copyright, that would have tremendous impact within the very meaning, and upon members of the Universal Copyright Convention. There's also a technical aspect of that referring to the fact that, if I could say it briefly, generally the rule in international copyright is that protection in foreign countries doesn't depend upon whether it is protected in its own country, so that the Soviet Union and Japan and Britain were to protect these types of work with their copyright law, the fact that we did not wouldn't prevent them from going ahead and doing so. There's a technical exception to that which says that they don't have to protect the work longer than the term given to the class of work in its country of origin. If the term in this country were zero, then they wouldn't have to protect it for longer than zero. But there's a conceptual question about whether the word "class of works" would include this type of device. If it did, then protection of the amendment offered by Mr. Mineta and Mr. Edwards would help protecting against activities which go on abroad, that's clearly true. But I think their principle concern right now is getting the protection here for its own sake. Mr. KASTENMEIER. Mr. Mooney?

Mr. MOONEY. Just briefly, while Mr. Baumgarten is a member of the panel, the question arises in Mr. Sevin's testimony with regard to the layout of designers and the fact that they are very creative persons and that they obviously make a tremendous contribution to the development of this particular design. The question arises, to whom should the copyright run? Is it possible in the development of what becomes a chip to single out any particular person or persons who should be entitled to the copyright?

Mr. BAUMGARTEN. Mr. Mooney, one of the questions we had, and I think it's been answered to my satisfaction, perhaps Mr. Borovoy could translate it in his general testimony into legal terms and satisfy me even further, I think it becomes clear that the effort of the layout designer in selecting which way to do things and which lines run where is something which is rather unfettered by the purpose of the chip and the designer could do it several different ways and the way he chooses to do it is something that they want to protect. And it's also my understanding that what you see on the chip, if I can speak in a layperson's terms, is the product of that layout designer's efforts, and they would wish to continue that protection from its paper form to its appearance on the chip.

As to who it should run to, I would assume that most of these designers are employees for hire, so the protection would run to the company rather than to the individual author, and does in fact run to the company today to the extent the drawings are copied.

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