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S.2368 provides specific guidance on the effect of restored copyright on derivative works, collective

works and compilations. The Administration believes that the provisions of S.2368 provide

better notice and certainty to users of works subject to restored copyright and will facilitate licensing

works where necessary.

The distinctions between the enforceability of copyright against a "reliance party" and other infringers are included in these bills to ensure that restoring copyright in works used by persons in the United States will not constitute a compensable taking within the meaning of the 5th Amendment of the Constitution. The Office of Legal Counsel of the Department of Justice has submitted for the record, an analysis of the 5th Amendment aspects of S.2368. To summarize the opinion, aspects of the draft legislation relating to the grace period, notice and immunity from liability for statutory damages and attomey's fees lead to the conclusion that the draft legislation would not constitute a taking of private property under the 5th Amendment. Although all of the factual instances that may develop in the future can not be determined at this time, the Office of Legal Counsel concluded that it knows of no set of facts that will produce a successful Takings Clause challenge to legislation with provisions corresponding to S.2368.

Although both H.R. 4894 and S. 2368 address the issue of reliance parties and the

constitutional takings issue, we believe that the approach in S. 2368 better ensures that a reliance party will have notice of which works are allegedly infringed, greater a certainty that acts engaged in during the grace-period will not be subject to a remedy, and more predictable exclusions for liability for statutory damages and attorney's fees. Each of these considerations is important for those persons and firms that now use works in the public domain in the United States.

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Anti-bootlegging

The practice of "bootlegging" live performances of U.S. artists is a significant problem that has, in the past, been addressed through various state anti-bootlegging laws, unfair competition laws and common law copyright protection. While performers have been able to seek relief against acts taking place in individual states, recourse against intemational trade in bootleg sound recordings has been difficult. This trade has become-more significant as bootleggers have become more sophisticated and also reflects the international character of performance tours. The sound recording industry estimates that t trade in bootleg recordings amounts to billions of dollars a year.

Enacting a federal anti-bootlegging statute will supplement the current enforcement provisions in state laws, provide some uniformity in rights and provide right owners the possibility of preventing imports of "bootleg" sound recordings. The absence of border enforcement against imports of "bootleg" sound recordings tends to make enforcement of copyright against imports of pirated sound recordings more difficult. Since the U.S. Customs Service does not normally enforce rights provided under various state laws, a federal law is an appropriate and important adjunct to efforts to address global piracy of sound recordings.

S.2368 includes both civil and criminal causes of action against bootlegging activity. Although H.R. 4894 initially included only a criminal cause of action, the revision of August 8, includes only a civil cause of action. In addition, H.R. 4894 covers music videos as well as sound recordings. The Administration supports coverage of music videos as well as sound recordings. However, we are somewhat concemed about the absence of a definition of "featured performer"--particularly in the context of a civil action, since standing to sue is a more significant issue in that context.

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The key objective with respect to anti-bootlegging is to achieve some uniformity in the rights provided and to ensure enforceability of those rights against imported "bootleg" products.

Term of Patent Protection

Finally, with respect to the term of patent protection, S.2368 reflects the Administration's proposal to amend the patent law to provide that the term of protection will commence on the date that a patent issues and will end 20 years from the date of the application for the patent. If a continuation application is filed, the term would be calculated from the date of the earliest U.S. application, the priority of which is claimed. The Administration supports a provision allowing for the extension of patent term for up to five years if the application has been the subject of an interference proceeding, a secrecy order, or successful appeal from the Board of Patent Appeals and Interferences. The Administration also supports the transition provisions and creation of a system for "provisional applications" that are included in S. 2368.

While I will defer to my colleagues from the Patent and Trademark Office to discuss the proposal in detail, I will make some general comments on the process for developing this approach to implementation of Article 33 of the TRIPS agreement. There is no question regarding whether some change in U.S. law is necessary to implement the Agreement. Since the Patent and Trademark Office, on average, takes 18-20 months to issue a patent a term of 17 years from grant would not be sufficiently long to meet our obligations under the Agreement.

The issue of patent term has been under discussion in the United States at least since 1966 when a Presidential Commission recommended adoption of a 20-year from application term. That discussion intensified when the negotiations on Patent; Harmonization under the auspices of the World

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Intellectual Property Organization (WIPO) began in 1986 and later in the TRIPS context. In 1992, the Advisory Commission on Patent Law Reform issued a report to the Secretary of Commerce recommending adoption of a term of 20 years from the date of the first complete U.S. application and calculating the term from the filing date of the first complete application. Moreover, legislation has been pending in the last 4 sessions of Congress providing for a 20-year from application term of protection.

The provisions of S.2368 are consistent with the advice received from most representatives of the private sector over many years. While some may argue in favor of the certainty resulting from a term calculated from the grant of a patent, such a system encourages delay on the part of applicants. In addition, the potential for "submarine" patents, i.e., patents issuing years after a particular technology has become the basis for an industry, would continue to create uncertainty among those firms relying on technology that suddenly becomes subject to patent protection.

Conclusion

The Administration's proposal on implementation of the Agreement on Trade-Related Aspects of Intellectual Property is reflected in S. 2368. We are certainly receptive to recommendations from Congress on that proposal and H.R. 4894 contains many constructive approaches to this complex task. This joint hearing will also provide an important source of additional information as we work together to complete the task of preparing legislation for Congressional consideration.

Mr. HUGHES. Mr. Schroeder.

STATEMENT OF CHRISTOPHER SCHROEDER, COUNSEL TO THE ASSISTANT ATTORNEY GENERAL, OFFICE OF LEGAL COUNSEL, U.S. DEPARTMENT OF JUSTICE

Mr. SCHROEDER. Thank you, Mr. Chairman.

It is a pleasure to appear before the joint subcommittees today for the first time, although I must say when I started work at the Office of Legal Counsel, I did not anticipate being drawn into a copyright and patent matter.

We, at the Office of Legal Counsel, don't claim expertise in these areas, but we do claim some expertise in matters of constitutional law. And at the request of the USTR, we have prepared an opinion analyzing whether proposed amendments to the U.S. copyright law that would restore U.S. copyright protection for certain foreign copyrighted works would result in a taking of private property under our fifth amendment. We have issued that opinion and submitted it as our testimony.

I was one of the principal authors of that opinion and I am here today to answer any questions Members may have about it.

I am not going to review it in detail. I would just say that the opinion makes three major findings.

First, the proposals we reviewed as amendments to U.S. copyright law, if enacted, we concluded are constitutional on their face. Any conceivable takings problem can only arise when specific individuals, reliance parties, make specific claims based on the application of the statute to their-the actual facts of their own situation. Second, because of this need to have specific, concrete facts, some of which won't even exist until the statute goes into effect and we see what happens, and because the Supreme Court's taking analysis relies on in its own words, on an ad hoc factual inquiry, it is impossible to say with total assurance that no one would ever possess a valid takings claim.

However, third, despite this inevitable margin of uncertainty, we conclude it is highly unlikely that such a valid claim would ever exist, and we are aware of no facts-as opposed to hypothetical scenarios-that would support such a valid claim. This legislation, which seeks to balance and adjust the competing benefits and burdens of an area of economic interaction, would come to the Federal courts with a heavy presumption of constitutionality.

Provisions of the legislation substantially soften the adverse economic effects it would have. And some form of copyright restoration has been under consideration by the Congress for some time.

All these factors weigh heavily in the Court's present takings analysis in favor of the legislation. These are our basic findings. As I say, I am here to answer any specific questions that you may care to put to me about details of it, but I think for present purposes, that brief summary will suffice for my oral comments.

Thank you.

[The prepared statement of Mr. Schroeder follows:]