Mr. KASTENMEIER. So, Congressman Edwards and Congressman Mineta, you may proceed as you wish.

TESTIMONY OF HON. DON EDWARDS, A U.S. REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. EDWARDS. Well, thank you very much, Mr. Chairman, and thanks to the other members of the subcommittee for having this important hearing. Mr. Mineta and I and others from our part of the country feel that the passage of this legislation is critical to our Nation's continued leadership in the semiconductor field.

As I believe you pointed out, Mr. Chairman, the current laws do not give protection to the designs of semiconductors, and this is an open invitation to piracy. This bill sponsored by Mr. Mineta and me and our colleague from the same area, Ed Zschau, grants copyright protection and gives legal protection against piracy.

It also protects other firms by immunizing innocent infringers. And that is a new part of the bill since 1979 and assures compulsory reasonable royalty licenses, which is very important too, and also assures the right of others to use the designs for appropriate reverse engineering.

Mr. Chairman, there is no cost in this legislation. No new bureaucracy is created. There is unanimous support in the industry, the semiconductor industry, of this legislation. And I know of no substantial opposition, unlike our problem in 1979 where the industry engaged in semiconductor work were divided.

In summary, Mr. Chairman, the bill closes the gap in the current law. I believe it is a good law. There is an urgent need for its enactment. And I thank you very much for hearing me today. And I ask unanimous consent that if the article from the National Geographic has not already been printed in the record, it would be a useful addition to the record.

[The complete statement follows:]

PREPARED STATEMENT OF DON EDWARDS

I thank the distinguished Chairman and other members of this Subcommittee for holding hearings today on H.R. 1028, "The Semiconductor Chip Protection Act of 1983". As sponsor of this legislation, along with Congressman Mineta, Congressman Zschau, and others of our colleagues, I believe that passage of H.R. 1028 is critical to our country's continued leadership in the semiconductor field.

Because of the rapid change inherent in new technologies, protecting rights to those technologies can be very difficult. Current law fails to provide that protection to semiconductor chip innovations. In 1979, Mr. Chairman, you noted:

"There are many designs which are original but do not meet the standard of novelty required for patent protection and are also not eligible for copyright protection because they are not purely ornamental. The designs of circuits used in small computer devices fall within this unprotectable category.'

Since current laws do not give protection to semiconductor designs, chip innovations by one firm are subject to piracy by other firms. Because the pirate firm does not have the enormous development costs borne by the innovator, the pirate firm can undersell the innovator and flood the market with cheap copies of the chip. Such piracy is a clear threat to the economic health of our semiconductor industry. This, of course, has a ripple effect throughout our economy, with the impact becoming ever more critical as we continue an accelerated transition to a high-tech society.

H.R. 1028 will amend Section 101 of the Copyright Act of 1976 to grant copyright protection for the imprinted design patterns on semiconductor chips, thus giving innovating semiconductor firms legal protection against the pirating firms. If enacted into law, the bill will give semiconductor firms the needed incentives to invest in

research and development, by protecting them against the piracy of the results of that research and development. The bill also protects the legitimate interests of other firms by immunizing innocent infringers, assuring compulsory, reasonable royalty license when needed and justified, and assuring the right to the practice of reverse engineering for the purposes of teaching, analysis, or evaluation.

There is no administrative cost associated with the bill nor is there cost in lost tax revenue. No new bureaucracy is needed. In addition, the bill has the unanimous support of the affected industry and, to my knowledge, has no substantial opposition.

In summary, this proposed legislation will close a gap in our current copyright law. I believe it is a balanced, reasonable proposal, with due concern for the legitimate interests of chip designers and of chip users. I commend this Subcommittee for holding this hearing on this important measure. I ask permission to include in the record of the hearing my statement with a section-by-section analysis which appeared in the Congressional Record on February 24, 1983, and an article on semiconductor chips that appeared in the October, 1982, issue of the National Geographic. I look forward to the testimony of your expert witnesses and to your work on the bill. It has been my pleasure to have the opportunity to share my views with you.

Mr. KASTENMEIER. Does each member have the National Geographic article at his or her place? Then without objection, the text of the article will be reprinted in the appendix to this hearing. (See app. 2 at p. 355.)

Mr. EDWARDS. Thank you.

Mr. KASTENMEIER. I might also say that your colleague from the same area, Congressman Ed Zschau, was not able to make this hearing. But at a later point in time if he wishes to make a statement, we would be pleased to insert it.

TESTIMONY OF HON. NORMAN Y. MINETA, A U.S. REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. MINETA. Mr. Chairman, if I might go ahead and submit my full statement for the record, I would appreciate it.

Mr. KASTENMEIER. Without objection.

[The complete statement follows:]

PREPARED STatement of Norman Y. MINETA

Mr. Chairman and the distinguished Members of the Subcommittee, I would like to thank you for allowing me to present my views on H.R. 1028, the Semiconductor Chip Protection Act of 1983, which Representative Don Edwards and I also introduced in the last two Congresses. H.R. 1028 would amend the Copyright law to provide ten-year protection for the mask work of a computer chip. Passage of this legislation is vitally important to the continued strength and viability of our electronics industry.

Integrated circuits or semiconductor chips contain hundreds of thousands of transistors, the basic building blocks of chips, photographically etched onto a silicon wafer. Each chip is typically a quarter-inch square. It is extremely important that the transistors fit on to the chip in the most efficient and economic manner possible. Designing the best layout or mask for these transistors is a time consuming and costly process, Often a company will spend millions of dollars to develop the mask work for a particular chip. It is this design or mask which the bill before us today seeks to protect.

Copyright protection is necessary because although it may take years and millions of dollars to develop a particular mask design, a foreign or domestic pirate company can copy this design in a short time, and at virtually no cost, through the process of microphotography. The pirate company can then flood the market with cheap copies of the chip because it does not have the development costs of the original company. If this type of mask theft is allowed to continue, companies will have no incentive to develop new mask designs and the quality of our electronics industry will fall. The United States lead in this vital industry will diminish.

Copyright protection for the mask is an expansion of the use of the Copyright law. However, it is not an illogical expansion and it is clearly the best possible solution to this immediate and serious problem.

Patent protection for the mask, a solution that has been suggested, is not possible. The Patent Act makes patents available for plants, ornamental designs, or novel items of utility. The mask design does not fall under any of these categories. It is not a plant. It is clearly not just ornamental. And the layout of transistors on a chip does not meet the standard of a unique invention.

However, the mask work can logically be defined as a "writing" under the Copyright Act. Examples of "works" similar to the mask design to which copyright protection has been extended include maps, blueprints, and film images, A mask work is similar to a motion picture in that it is a series of related images. In the case of a mask work, these are the images or masks that embody the pattern of the various layers of a semiconductor chip.

It is argued that the Copyright law does not cover items of utility and therefore the mask work should not be given copyright protection. However, the Copyright law has often been extended to many items of utility including belt buckles, telephone books, ashtrays, doorknockers, and advertisements.

When the Copyright Act was first enacted no one could even envision such a product as the mask work or a computer chip. Our laws must be adapted to fit the realities of our times. The extensions of Copyright protection to the mask work may be somewhat unique, but it does not conflict philosophically with the purpose of the Copyright law, which is to protect the author of a work while providing wide dissemination and use of the product.

Furthermore, the bill recognizes the unique properties of the mask work. First of all, the bill recognizes the commercial realities of the computer market by providing for only a ten-year copyright for the mask work.

Secondly, the bill contains a compulsory licensing provision that requires the owner of a copyright of a mask work to grant a compulsory license to any applicant who innocently purchases and illegally copied chip. This provision protects the innocent company who spends millions of dollars developing a computer around an illegally copied chip. Compulsory licensing is a just market solution to this potential problem.

In summary, I would just like to stress once again the importance of this legislation to the electronics industry, Copyright protection for the mask design is necessary immediately to prevent erosion of our leadership in this expanding and highly competitive industry.

It has been a pleasure sharing my views with you.

Thank you.

Mr. MINETA. Mr. Chairman, distinguished members of the subcommittee, I would like to thank you for allowing us to present our views on H.R. 1028. The Semiconductor Chip Protection Act of 1983, which Congressman Edwards and I have introduced, is similar to the bill we have introduced in the last two Congresses.

Passage of this legislation is vitally important to the continued strength and viability of our electronics industry and, more importantly, is needed to keep this country in the leading edge of the high-technology industry.

Copyright protection for the mask work of computer design is necessary to keep pirates from flooding the market with cheap copies of a chip developed by another company at considerable cost and time. If this type of mask theft is allowed to continue, companies will have no incentive to develop new mask designs and the quality of our electronics industry will fall.

A copyright protection for the mask is an expansion of the use of the copyright law. However, it is not an illogical expansion, and it is clearly the best possible solution to this immediate and serious problem.

The mask work can be logically defined as a writing under the Copyright Act. Examples of works similar to the mask design to which copyright protection has been extended include maps, blueprints, and film images. The mask work is similar to a motion picture in that it is a series of related images. In the case of the mask

work, these are the images or masks that embody the pattern of various layers of a semiconductor chip.

It is argued that the copyright law does not cover items of utility; therefore, the mask work should not be given copyright protection. However, the copyright law has been extended to many items of utility, including belt buckles, telephone books, ashtrays, doorknockers, and advertisements.

Our laws must be adapted to fit the realities of our times. The extension of copyright protection to the mask work may be somewhat unique, but it does not conflict philosophically with the purpose of the copyright law which is to protect the author of a work while providing wide dissemination and use of the product.

In summary, I would just like to stress once again the importance of this legislation to the electronics industry. Copyright protection for the mask design is necessary immediately to prevent erosion of our leadership in this expanding and highly competitive industry. Thank you very much, Mr. Chairman.

Mr. KASTENMEIER. We thank our colleagues for their presentation. May I ask what has happened during the past 4 years to the opposition. But as you know, among domestic corporations, and certain industries, there was opposition developed in 1979. How does it come about that these same companies today do not seem to have any reservations as far as we know?

Mr. EDWARDS. Mr. Chairman, I do not know what went on in the various companies, and I believe that there were two or three of them opposed back in 1979. But since 1979 these companies—and I know the names of them-have come to realize that there is a serious piracy problem. And a lot of the piracy comes from overseas from a country or two with which we have copyright treaties. And so they have made a complete turnaround and now, to the best of my knowledge, unanimously support the legislation. And these are big companies that were in opposition in 1979.

Mr. MINETA. Mr. Chairman, I might add that the innocent purchaser this time is protected so that as compared to the last time when there was what we thought was united support for the legislation, as you will recall at that hearing, we had testimony from the industry association and everyone was suprised at a company at that point that expressed opposition to the bill.

But since then, that opposition has disappeared. And I think it may be because of the protection that this legislation affords the innocent purchaser of pirated chips.

Mr. KASTENMEIER. You say there is language in the bill which goes to that point that was missing from the original bill presented in 1979? Is that an infringement?

Mr. EDWARDS. The current bill differs from the current legislation in three respects: it does include a provision for giving innocent infringement, it does provide for compulsory and reasonable licensing of pirated designs, and it provides for a shorter term of copyright of 10 rather than 75 years.

Mr. KASTENMEIER. There is no question that I think this would be useful legislation to the creators of these new designs and, chips. Maybe industry is best capable to answer this, but let me ask you anyway. Might this legislation come too late? Are we locking the

barn door after the horse has been stolen, so to speak, in the technology of this area?

Mr. MINETA. I do not believe so, Mr. Chairman. There are two parts to this. One, we have to bring current laws into the reality of the times. And I think at the same time that that serves as the foundation for what comes in the future as far as any technological advance. If there is any one area that the United States leads and our companies lead, it is in innovation.

It seems to me that it is something we have got to protect which is our asset, it is our ability to be innovative. Others may copy it, but it just seems to me that what is paramount to the interests of this country is to protect those who are innovative and who are really creating jobs for our own industries here as well as, more importantly, creating those in an export sense. And to me this legislation becomes vital in that respect.

Mr. KASTENMEIER. One other question that obviously impacts very heavily on this legislation is a recent judicial decision which is at odds with the Copyright Office. It is the decision rendered by Federal District Judge Hubert Will from Illinois that says that information stored on a silicon chip is in fact copyrightable. And he cites a case, Strohon v. Midway. I do not know if you are familiar with that decision, but if you are, does the ruling help or hinder your bill?

Mr. EDWARDS. Mr. Chairman, I know about that decision from Illinois. And there have been conflicting decisions on this issue: that is Apple v. Franklin, which holds the opposite. So there are court decisions which hold one way or the other. And the real problem, of course, is that the Copyright Office has not and will not accept semiconductor chip layouts for registration under their interpretation of the copyright law.

Mr. KASTENMEIER. So in that respect, while you endorse the principle embodied in your bill, it is not that helpful from the standpoint of resolving the issue?

Mr. EDWARDS. That is correct. The Will decision is not.

Mr. KASTENMEIER. A witness who will testify later says that his view is that the bill is not properly drafted, that the concept of chip protection should be proposed as a severable unitary measure, not as a piecemeal attachment to the Copyright Act. I wonder if you have any reaction to that argument?

Mr. MINETA. Well, let me again, Mr. Chairman, I am not a lawyer; my background is as an insurance broker, so I am not really sure how this relates to this bill. But if we are going to wait for a perfect bill to take care of everything that has to be dealt with in the copyright laws, none of us are going to be around. And in fact, the industry may not be around.

It just seems to me that even though it may be a piecemeal approach, we better darn well protect what we have now and not wait until someone comes along with a comprehensive complete bill dealing with all of the idiosyncracies and wants and desires and pressures that exist on this committee.

Mr. KASTENMEIER. I suppose another answer would be that if the witness can convince the committee that in some respect H.R. 1028 ought to be redrafted, that it can be drafted if it will be effective, if a convincing argument can be made.