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Title II would provide protection only against copying by others and would not give an exclusive right in the design itself. The term of protection would be for five years, renewable for one additional five-year term.

Infringement would include making, importing, selling or distributing for sale an article having a design copied from a protected design. Importantly however, an innocent seller or distributor would be an infringer only if he failed to reveal his source and then reordered the article after having received a personal written notice of the design protection. This is a greatly reduced level of liability when compared with that contained in Title I where a seller or distributor is liable as an infringer for the sale of a single unauthorized copyrighted work.

Design patent protection would continue to be available but a design patent and design protection under this title could not be maintained concurrently. Also, copyright protection for designs would be continued, except that if copyright protection and a design registration were obtained, the copyright protection would not extend to utilization of the design in the useful article protected by the design registration.

Today, original ornamental designs for useful articles may be eligible for federal protection under the patent laws or in some instances, under the copyright law. In recent years, however, it has been generally agreed that the design patent laws do not provide adequate protection against design piracy. Because of the relatively short-lived popularity of many designs, a patent in some cases cannot be secured quickly enough to provide any useful protection.

The expense in obtaining a design patent today results primarily from the fact that the Patent and Trademark Office must examine an application to determine whether it is "new, original, and ornamental". At the present time it takes almost two years to obtain a design patent. Until the patent is granted, the designer or manufacturer markets the designs at his own peril, subject to it being freely copied. The alternative of withholding the design from the market until the patent issues is impractical in many industries where styles change rapidly and may even be seasonal.

Since the Supreme Court decision in Mazer v. Stein in 1954, the Copyright Office has accepted an increasing variety of registrations for designs embodied in useful articles so long as they meet the criteria of being artistic. However, there are still many types of designs for which copyright protection is unavailable, for instance, furniture and appliances. Moreover, the term of protection in the proposed copyright law, life of the author plus fifty years, is much too long for industrial designs which have a relatively short commercial life.

To exemplify the problems that exist under current practice we note complaints from domestic manufacturers that their designs have been copied in certain foreign areas, particularly in the far east. The imitations are then imported into and sold in the United States where they often enjoy a considerable price advantage over the article produced in the United States. We believe that Title II fills the need for more effective protection for design originators from this type of unfair competition because it provides quick, inexpensive and short term protection for original designs.

The Department of Commerce favors this legislation. However, we would like to highlight some of our specific recommendations which will bring title II of the bill more in line with other intellectual property protection both nationally and internationally and will generally improve the protection offered.

Section 204(a) provides that protection for a design shall begin on the date when the design is first made public. In subsequent sections it is made clear that the design must be made public before an application for protection can be filed. This provision will put U.S. residents at a disadvantage if they desire to obtain protection of their design in foreign countries, many of which, for example Japan, refuse protection for a design which has been made public prior to the filing of an application for registration.

In order to prevent the possible loss of protection in foreign countries, it should not be required that the design be made public prior to registration. Instead, protection should commence on the date that the registration is published in the United States as provided for in section 212(a) of the bill. Protection which begins when the registration is published would provide notice to the public and would not penalize the person desiring to protect his design outside of the United States. This would also make Title II consistent with Title I which has eliminated the prior publication requirement for copyright protection.

Specific statutory language to effect this change will be submitted to the Congress at a later date.

Section 209 appears to limit an application to a single design. This limitation appears to be unnecessary. An application containing ten or twenty designs would be no more difficult to process than an application containing one design because no search of prior designs is necessary. A multiple design application would save the applicant paperwork, thus, save him time and money. It would also save the Administrator processing time over an equal number of single applications. This might result in a lower fee per design. As long as a separate fee is paid for each design contained in the application there would be no loss of revenue and both the applicant and the Administrator would benefit. We have therefore recommended that multiple design applications be permitted under this title.

Title II requires that the application be accompanied by a statement setting forth facts about the design, and that such statement must be under oath. Similar requirements in Title 35, United States Code, covering patent and trademark practices permit such required statements to be submitted with a written declaration in accordance with 18 U.S.C. 1001 making a false statement punishable by a fine or imprisonment and jeopardizing the validity of the document. We believe that such a provision should be applicable to the application for design registration. Therefore, such declaration should be permitted in lieu of an oath.

The present fee provisions of section 215 of this title are unacceptable to the Department of Commerce. In our opinion, the design registration system should be completely self-supporting because the benefits of the design registration system only accrue to the individual recipient of the registration. Thus, the public should not be expected to bear any portion of the expense of a design registration system.

In a study done in 1964, the $15 fee for the design registration under a bill similar to the present one, was found to be inadequate to provide 100% cost recovery. The $15 application fee would be even more inadequate today.

Rather than propose different fee levels for each of the functions specified in section 215 (a), the Department of Commerce proposes that section 215 be amended in its entirety to give the Administrator the discretion to establish charges sufficient to recover 100% of the cost of operation of the design registration system. A similar approach is currently being considered by Congress in various bills to revise the patent laws.

TESTIMONY OF RENE D. TEGTMEYER, ASSISTANT COMMISSIONER

FOR PATENTS, DEPARTMENT OF COMMERCE

Mr. TEGTMEYER. Mr. Chairman, I appreciate this opportunity to appear before your subcommittee to express the views of the Department of Commerce and its support for H.R. 2223 with certain modifications which I shall explain.

H.R. 2223 is the result of 20 years of extensive effort by the Copyright Office of the Library of Congress and the Congress itself to revise the copyright law. I understand that the testimony of the Register of Copyrights included a discussion of the background concerning this effort and an outline of the principal provisions of the bill. I will attempt not to be repetitive in this respect.

H.R. 2223 is divided into two titles: Title I, General Revision of the Copyright Law; and Title II. Protection of Original Ornamental Designs. As the Department views each title from a slightly different perspective, I would like to comment on them separately.

The Department of Commerce would like to highlight three specific areas in our comments on title I:

1. The lack of protection in U.S. Government works and the effect on one function of the Department of Commerce,

2. Preemption of State law with respect to unfair competition, and 3. The inclusion of an exemption for Canada in the manufacturing requirements.

First, proposed section 105, in prohibiting copyright protection for Government works, creates a special problem for the Department of Commerce. Under title 15, United States Code, chapter 23, the Secretary is required to establish and maintain a clearinghouse for the collection and dissemination of scientific, technical, and engineering information. This is done through the Department's National Technical Information Service, called NTIS.

As a matter of policy, chapter 23 in section 1153 requires that each of the services and functions provided be self-sustaining and selfliquidating, as much as possible, consistent with its objectives. The chapter specifically states its policy that the general public shall not bear the cost of publications and other services which are for the special use and benefit of private groups and individuals.

With the increased use of reprography, the difficulty of meeting the requirement to disseminate technical information on a basis that pays its own way has also increased. It is cheaper for a purchaser to buy one copy of an expensive technological publication and photocopy it rather than to buy the number of copies that are actually needed. The lack of copyright protection for most periodicals made available by NTIS makes this practice legal. If NTIS cannot recoup the cost of preparing and handling its publications, the dissemination of this material cannot be maintained on a self-sustaining and self-liquidating basis.

An example of the potential harm which could arise from this lack of copyright can be seen in the publication, "Directory of Computerized Data Files and Related Software Available from Federal Ageneies-1974."

This document was prepared in response to the large number of requests received for this information. It was prepared at NTIS expense. The approximately $150,000 cost of surveying Federal agencies to gather the information and publishing the directory was not reimbursed from appropriations. In order to recoup NTIS expenses, a price of $60 per copy was set for this 150-page directory. Anyone choosing to make and sell competing photocopies could do so for a fraction of this price. Thus, it was necessary for NTIS to risk substantial moneys to produce such a product in the absence of copyright protection.

Unauthorized photocopying is especially serious in connection with foreign sales; out of the eight largest customers of NTIS, seven are foreign entities which engage in such copying practices. It has also caused NTIS to be limited in pricing periodicals due to the much lower cost of duplication done by resale marketers and potential customers of Government works which are not copyrighted.

For these reasons, we believe that copyright protection should be provided for works distributed under chanter 23, title 15, similar to that provided under $ 290 (e), chapter 7(a), title 15, for standard reference data prepared by the Department of Commerce under the provisions of that chapter, or in the alternative that the Congress reconsider the statutory requirement that the services and functions provided under chapter 23 by NTIS be self-sustaining and selflianidating.

Turning to the question of preemption, we agree with the preemption of State copyright laws pursuant to section 301 (a), and with

the principle embodied in that section that there should be a single, Federal system for copyright. However, the language of subsection (b) (3) of section 301 should, in our view, be modified to make it clear that the phrase "all rights in the nature of copyright" will not be construed to preempt parts of the State law of unfair competition which are now codified in statute or established by Federal and State court decisions applying the common law.

Section 301 (b) (3) is intended to exempt State unfair competition law from the preemptive effect of section 301 (a). Among the rights and remedies not preempted are those arising from the violation of rights "not equivalent to any exclusive rights within the general scope of copyright." These "not equivalent" rights are said by the bill to include "breaches of contract, breaches of trust, invasion of privacy, defamation, and deceptive trade practices such as passing off and false representation." The problem we have is that this listing is incomplete, and the language is more limited than that which would describe the present scope of established State unfair competition law. As a solution, we propose a more comprehensive and inclusive listing of unfair competition torts in subsection (b) (3). The proposed amend

ment:

(3) Activities violating rights that are not equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106, including breaches of contract, breaches of trust, invasion of privacy, defamation, and acts, trade practices, or courses of conduct which cause or are likely to cause confusion, mistake or deception, or which are likely to result in passing off, false or misleading representations, disparagement, wrongful disclosure or misappropriation of a trade secret or confidential information, or activities which otherwise constitute unfair competition by misrepresentation or misappropriation.

In our opinion, this proposed amendment would more accurately state the range of unfair competition torts which are now regulated by the States, so that the examples listed will not be limiting.

It should be noted that the phrase "unfair competition by *** misappropriation" is included in our amendment. Obviously, the "misappropriation" of all of the words of a literary work would be in the nature of copyright, and State laws in this area should be preempted. However, we do not believe that the entire body of State unfair competition law based upon the landmark Supreme Court decision in International News Service v. Associated Press (248 U.S. 215 (1918)) should be preempted. While some State decisions relying on the INS case may be held inapplicable under section 301 (a), we believe that such a remedy should continue to be available for the type of conduct proscribed in the INS case.

Turning to the third point in title I, the proposed section 601. known as the "manufacturing clause," essentially requires that English language, nondramatic literary works by American domiciled authors must be printed in the United States or Canada. The present copyright statute does not include such a reference to Canada. The rationale for including Canada appears to be that wage standards in the United States and Canada are comparable.

We are opposed to the inclusion of Canada in this provision. Such an inclusion would be a unilateral concession which we believe should be withheld for possible use by the United States as negotiating leverage in seeking compensating benefits during multilateral trade negotiations. We note that both Houses of Congress indicated forcibly that

U.S. negotiators should obtain reciprocity for U.S. concessions when they enacted the Trade Act of 1974, at the end of the last Congress.

Additionally, including Canada in this provision would raise problems in our relations with other nations, in view of the "most favored nation" obligations in the General Agreement on Tariff and Trade (GATT) and other treaties. Thus, enactment of the bill containing this provision might bring about the possibility of retaliation against the United States from countries other than Canada and might otherwise hamper our efforts to eliminate nontariff trade barriers in the interest of our overall international trade objectives.

If I may turn to title II of H.R. 2223, that would provide a new system for the protection of original ornamental designs of useful articles.

Designs eligible for protection under this title would have to be original. They cannot be staple or commonplace, or elements commonly used in the relevant trade, or dictated by utilitarian functions, or three dimensional features of wearing apparel. However, there would be no requirements that the design be new, and therefore no search of prior designs would be necessary in order to grant protection.

Title II would provide protection only against copying by others and would not give an exclusive right in the design itself. The term of protection would be for 5 years, renewable for one additional 5-year

term.

Infringement would include making, importing, selling, or distributing for sale an article having a design copied from a protected design. Importantly however, an innocent seller or distributor would be an infringer only if he failed to reveal his source and then reordered the article after having received a personal written notice of the design protection.

This is a greatly reduced level of liability when compared with that contained in title I where a seller or distributor is liable as an infringer for the sale of a single unauthorized copyrighted work.

Design patent protection would continue to be available, but a design patent and design protection under this title could not be maintained concurrently. Also, copyright protection for designs would be continued, except that if copyright protection and a design registration were obtained, the copyright protection would not extend to utilization of the design in the useful article protected by the design registration. Today, original ornamental designs for useful articles may be eligible for Federal protection under the patent laws or in some instances, under the copyright law. In recent years, however, it has been generally agreed that the design patent laws do not provide adequate protection against design piracy. Because of the relatively short-lived popularity of many designs, a patent in some cases cannot be secured quickly enough to provide any useful protection.

The expense in obtaining a design patent today results primarily from the fact that the Patent and Trademark Office must examine an application to determine whether it is "new, original, and ornamental." At the present time it takes almost 2 years to obtain a design patent. Until the patent is granted, the designer or manufacturer markets the design at his own peril, subject to it being freely copied. The alternative of withholding the design from the market until the patent issues

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