The conceptual basis for an industrial copyright should be purely and simply unfair competition based on the misappropriation rationale.

The ultimate point perhaps is that copyright law must encompass and balance the interests of three groups, the creator, the entrepreneur, and the public. With increasingly sophisticated new technology, the balancing process is becoming increasingly complex and difficult. That is why I contend that we must turn to fundamentals and establish a sound conceptual base for copyright law. To amend the present statute to provide protection for semiconductor chips would be to create an additional obstacle to the many that already stand in the way of needed reform.

Mr. Chairman, that concludes my formal remarks. I would be happy to attempt to answer any questions the members of the subcommittee may have.

[The statement of Mr. Patterson follows:]

PREPARED STATEMENT OF L. RAY PATTERSON, PROFESSOR OF LAW, EMORY UNIVERSITY

SCHOOL OF LAW

Mr. Chairman and members of the subcommittee: Having been a student of copyright law and its historical development for some 25 years, I appreciate this opportunity to appear before the subcommittee to express some ideas resulting from my studies.

One of the advantages of not representing any particular constituent is the opportunity to view a problem in terms of general rather than particular issues. I wish to take advantage of the opportunity and view the problem of copyright protection for semiconductor chips in the context of copyright and new technology. Consequently, my approach is a conceptual one.

There are two reasons for examining the concept of copyright in light of the problems that new technology poses: First, copyright law as it presently exists does not have a sound conceptual basis. Secondly, until and unless there is agreement on a sound conceptual basis, the problem of the application of copyright to new technology will continue to be resolved on an ad hoc basis, in all probability with consequences that Congress neither contemplated nor intended.

The ultimate issue is the problem of integrity in the law of copyright. By integrity, I mean consistency in the principles which the law encompasses. While consistency for its own sake is a virtue of small consequence, consistent principles for a body of law are essential for integrity in the interpretation and administration of that law.

The conclusions to which I have come are two: (1) It would be unwise for Congress to provide copyright protection for semiconductor chips by amendment to the present statute. The basis for this conclusion is that the present copyright statute purports to provide for an author's copyright. (2) The appropriate solution to the problem of protection for semiconductor chips is the creation of an industrial copyright, separate and distinct from the author's copyright. The basis for this conclusion is that copyright protection for semiconductor chips under the present statute would be to create another fiction for copyright and contribute to the conceptual confusion that has plagued copyright law for over two and a half centuries.

The route to reach these conclusions is a circuitous one, with many by-ways which there is no time to explore here. But a good starting point is to recognize that Anglo-American copyright in origin was the product of new technology, the printing press, which William Caxton introduced into England in the 1470's. The interesting point is that copyright existed for 300 years before it was applied to the product of other technology, the camera in 1865.

The 1865 act notwithstanding, Congress traditionally has granted copyright protection for the products of new technology with considerable reluctance. It was not, for example, until 1972 that Congress provided copyright protection for sound recordings. And even in the current statute, copyright for phonorecords is the most limited of the copyrights available under the act in that copyright for sound recordings precludes duplication, not imitation.

The relevant question here is this: Why has Congress been reluctant to grant copyright protection to new technology? The answer, I think, is the lack of a sound

conceptual basis for copyright law. If the fundamental principles are not agreed upon, there is no common ground for agreeing what to do, and no way of predicting what rules will emerge by way of judicial interpretation of ambiguous legislation. The most recent example is the Apple Computer case in which the Third Circuit gave an expansive reading to section 102(a) of the Copyright Act and in effect gave a judicial answer to the legislative question with which this subcommittee is now concerned. Apple Computer, Inc. v. Franklin Computer Corporation, 219 U.S.P.Q. 113 (3d Cir. 1983).

The fault here is not that of Congress, but history, as a result of which copyright can be characterized as a schizophrenic legal concept. The copyright clause empowers Congress to secure to authors the exclusive right to their writings for limited times. One would assume from this language that copyright is intended to benefit authors. But the Supreme Court says this is not so. Copyright is intended primarily to benefit the public. Yet the copyright statute functions primarily to benefit the publisher or entrepreneur. The contradiction in constitutional language, court decisions, and congressional action has an explanation in the tortuous story of copyright development, which is reflected in the major conceptual weakness of current copyright law. That weakness is a dichotomy between form and function: in form copyright is an author's right, in function it is a publisher's right.

This dichotomy has created and continues to support the basic controversy over the concept of copyright: Is it a regulatory or a proprietary concept? The Supreme Court has answered the question. Copyright is a regulatory, not a proprietary concept, a statutory monopoly granted in the interest of the public. Yet, the answer has never been wholly accepted because of the characterization of copyright as an author's right. It is one thing to say that copyright for a publisher is a statutory monopoly, quite another to say that copyright for an author is a statutory monopoly. A person's writings are uniquely his own, for as an ancient Irish king is supposed to have said in resolving a copyright dispute: "To every cow her calf."

The point here is simply that the concept of copyright does not have a sound conceptual base because it encompasses two contradictory and antithetical ideas: a statutory monopoly of one's own creations. Thus, despite the insistence of the Supreme Court that copyright is a regulatory concept, the notion that it is in fact a proprietary concept persists, and it is this view of copyright that underlies the Apple Computer opinion. And it is this view that has been the basis for continually enlarging the statutory monopoly of copyright, on occasion unwittingly so.

One example will suffice to illustrate my point. In the 1790 Copyright Act, the exclusive rights given to the copyright owner were to print, reprint, publish, and vend the copyrighted works, books, maps, and charts. Until the 1909 act, these remained the exclusive rights for literary works. In the 1870 Copyright Act, Congress provided copyright protection for, among other things, statuary and models of works of fine art. The exclusive right given in connection with these works was the right to copy. In the 1909 Copyright Act, the exclusive rights given to all copyright works were the rights to print, reprint, publish, copy and vend all copyrighted works.

House Report 2222 indicates that Congress was not cognizant of the implications of the change. But it is one thing to give the copyright owner the exclusive rights to print, reprint, publish and vend a book. It is quite another to give him in addition the exclusive right to copy the book. And except for the notion that copyright is an author's right, there would have been no reason for the change. The consequences of the change, of course, were not felt until the advent of new technology in the form of the Xerox, and paradoxically this change in the 1909 act presented Congress with one of its most difficult problems in enacting the 1976 Copyright Act.

Despite its label as an author's right copyright is functionally a concept of statutory unfair competition based on the misappropriation rational that serves the entrepreneur better than the author, a point demonstrated by the work-made-for-hire doctrine and the conferring of statutory benefits on the copyright owner rather than the author. Indeed, there is only one provision of the 1976 Copyright Act that is of unique benefit to the author, the termination right, the origin of which can be traced back to the Statute of Anne of 1710, the English copyright act which served as the model for the American Copyright Act of 1790. And there are few who would argue that the work-made-for-hire doctrine is of benefit to the author.

To provide copyright protection for semiconductor chips by amending the present statute will be to widen the gap between the form and the function of copyright. To say that copyright for semiconductor chips is an author's copyright is to stretch fiction beyond both its rational and functional limits. More important, perhaps, Congress is not here dealing only with semiconductor chips, it is dealing with the problem of copyright for the products of new technology, of which the semiconductor chip is only the beginning.

The semiconductor chip bill, then, is only the pilot project and it is important to understand the essential difference between copyright protection for a book and a semiconductor chip. A book is a product, an end in itself. A semiconductor chip is both a product and a process, a means to an end. Copyright protection for the semiconductor chip in traditional terms can be analogized to a copyright for books that protects the printing press as well as the book.

My objection is not legal protection for semiconductor chips. My objection is protection for them in terms of an author's copyright. What I am suggesting is the creation of an industrial copyright designed for, and directed to, the problems that need to be resolved. To deal with these problems, an industrial copyright would have the characteristics of both copyright and patent, and would in effect be a quasi-patent right.

The essential problem to which the industrial copyright would be directed is industrial piracy. One of its major advantages would be that it would provide an opportunity to provide new remedies not appropriate for the author's copyright. An industrial copyright statute, for example, could create an action in the nature of the common law qui tam action authorizing an action on behalf of the copyright owner by the United States Attorneys, with half of any recovery going to the United States. Precedent for the qui tam type action is found in the Copyright Act of 1790, which was based on the pure qui tam action in the Statute of Anne. Moreover, such a statute would provide an opportunity for considering the public interest, since the fair use doctrine, the major protection for the public interest in the present statute, has little meaning when applied to semiconductor chips.

My argument for an industrial copyright statute is twofold: First, it would provide more effective protection for industry because it would rest on an unadulterated predicate: statutory unfair competition based on the misappropriation rationale. A sound and generally accepted predicate would be protection against judicial misinterpretation resulting from a free choice of competing principles to govern a particular decision that the confused concept of copyright presently provides.

Secondly, such a statute would be a major step toward establishing a sound conceptual basis for the traditional author's copyright. It would provide a basis for cleansing the copyright law of provisions dealing with problems of no consequence to the creative author, but which serve to dilute his protection. I have always thought, for example, that the failure to give recognition to the moral right of the author is one of the major deficiencies of our copyright law. Authors and artists in a very real sense are the persons who teach us to appreciate beauty in which we find the values that give quality to life by creating the conscience which impels us to strive for justice and equality. They merit protection for their efforts, and the failure to provide better protection I attribute to the confused concept of copyright.

The conceptual basis for an author's copyright should be protection for the reputation as well as the profit of the author, predicated on the fact that creative works are an expression of the author's personality. The conceptual basis for an industrial copyright should be purely and simply unfair competition based upon the misappropriation rationale.

To round out the scheme, there should be an additional type of copyright, one to protect the entrepreneur who enables the author to secure his profit, that is the publisher, or one who produces works that have no one author, e.g. television broadcasts, the exemplar of which is the work made for hire. This could be characterized as a commercial copyright.

The ultimate point, perhaps, is that copyright law must encompass and balance the interest of three groups: the creator, the entrepreneur, and the public. With increasingly sophisticated new technology, the balancing process is becoming increasingly complex and difficult. That is why we must return to fundamentals and establish a sound conceptual base for copyright law. To amend the present statute to provide protection for semiconductor chips would be to create an additional obstacle to the many that already stand in the way of needed reform.

Mr. KASTENMEIER. Thank you for that very provocative and enlightening commentary.

As I understand it, you are suggesting that we should return to, more or less, the original, fundamental concept of copyright. At least we should not further erode the original concept of copyright, reflecting the necessity of protecting the author's work and writings. You see that as distinguished from an industrial type of work that should be protected; but we should not presume that it is copy

right in the traditional sense or that copyright ought to be used to protect that right. Is that analysis correct?

Mr. PATTERSON. Yes, sir, that is correct.

Mr. KASTENMEIER. There are other formulations and suggestions. For example, it has been submitted that we have a design protection, and that the protection should be perhaps for 10 years. What would your comment be about these suggestions as contrasted with the conceptual industrial copyright that you speak of?

Mr. PATTERSON. Mr. Chairman, I think that the design approach is an attempt to do in a sense what I am suggesting, but I think it does not do it in a direct way, in the way that you could deal with the problem if, say, we are dealing here with an industrial copyright and not simply design protection. To say that you are dealing with design protection I think is to engage in further fiction and to further create confusion, certainly on a conceptual basis.

My point here is that a semiconductor chip, for example, needs legal protection, but the protection that it needs is protection against misappropriation by competitors. I think it is entirely appropriate that the term of such a copyright should be limited to say 10 years, but when you start talking about the design protection, you get into this problem of protection for design for useful articles which heretofore Congress has rejected and which the courts have rejected because of the monopoly problem.

I think by viewing this as an industrial copyright, we can recognize directly that we do have a monopoly problem and we want to deal with that problem directly.

Mr. KASTENMEIER. One of the problems I have at this point in history, assuming that there is a need to do something in that area and assuming that we started with the approach that you suggest, is we would have to start at zero. That is to say, we would have to redesign or define for the first time what is industrial copyright, who shall administer such a new right, and the general parameters of it. This might cause a very considerable delay in rethinking the whole matter through. Assuming there is some urgency about this, what would your comments be in that connection?

Mr. PATTERSON. My first thought is of the Apple Computer case. My impression-and I must confess I haven't had time to analyze the Apple Computer case as thoroughly as I would like-but my impression there is that that case does essentially what the proposed copyright bill is to do under the present copyright statute. Now, I assume that case will go up to the Supreme Court and what the Supreme Court will do, of course, I don't know, but if that decision stands, I think that the semiconductor industry has protection under the third circuit opinion in the Apple Computer case.

Mr. KASTENMEIER. From your perspective and our perspective, that may still suggest a sense of urgency. If indeed we agree with you that it should not be copyright protection, we are nonetheless confronted with a sense of urgency. And a decision may be necessary that runs counter to what you have said here this morning? Mr. PATTERSON. Well, if I may make one observation here, Mr. Chairman, I think the Apple Computer case is an excellent example of the problem I have been talking about, that is, the confused concept of copyright, because the Apple Computer case was decided under the present statute and it is the result of a very expansive

reading of section 102(a). So, unless Congress steps back and deals with the problem more directly, I see a further expansion of the copyright monopoly through judicial decisions which Congress neither intended nor contemplated when it passed the copyright bill. Mr. KASTENMEIER. Yes; to simplify, the lead paragraph in the New York Times of September 2 reported as follows:

In an important victory for major computer and software manufacturers a federal court of appeals has ruled that all computer programs can be copyrighted, even if they are an integrated part of the computer circuitry.

Mr. PATTERSON. Yes, sir.

Mr. KASTENMEIER. That would tend to expand the impact of that to obviously the area that we are considering here?

Mr. PATTERSON. Yes, sir, and I do not think Congress contemplated that problem when it passed the present copyright statute. Mr. KASTENMEIER. I would certainly agree with that and

Mr. PATTERSON. This is why I contend, even at the cost of some delay, that Congress should give serious consideration to the creation of the industrial copyright, and I must say, Mr. Chairman, I do not think it would be as difficult to draft that legislation as may first appear, because I think the principles are all in history and we can simply go back to history.

Mr. KASTENMEIER. Thank you very much, Mr. Patterson.

I would like to yield to my colleague, Mr. Sawyer.

Mr. Sawyer.

Mr. SAWYER. Thank you, Mr. Chairman.

What would be the practical difference between an industrial copyright as you visualize it and the proposed amendment to the copyright law including these chips? What would it do differently? Mr. PATTERSON. It would be a more limited monopoly than the copyright monopoly that we have under the current statute. Mr. SAWYER. In what way?

Mr. PATTERSON. Well, for example, the current statute says that the term of the copyright shall be the life of the author plus 50 years, or in the case of a work made for hire, 75 years from the date of publication or 100 years from the date of creation.

Mr. SAWYER. So, let's say we reduce it to 10 years. What are the other differences?

Mr. PATTERSON. The major difference I think would be that you would recognize that the industrial copyright is not the product of an author. It would be analogous to the work made for hire under the present copyright statute.

Now, I think that you can get better protection for industry with what I would characterize as an industrial copyright than you can get by amending the present Copyright Act, because as I have said earlier, I think that creates further confusion.

Mr. SAWYER. Let's say we change the term to 10 years. What else as a practical matter, would it do differently?

Mr. PATTERSON. I am sorry, sir, I don't know exactly what you mean by that.

Mr. SAWYER. What different attributes would it carry. What different protection would it carry. Why would it be different, assuming we made the term of years different?