We consider this legislation to be of critical importance to the United States, to U.S. trade and to the standing of this country within the world trading, as well as the copyright, community. I want to turn to some specific problems of three industry sectors not personally represented here, the software, music, and book publishing industries. But before I do, I wanted to summarize the position of the over 1,500 companies that we represent. First, we believe that adoption of this legislation in the fast-track bill is necessary to comply with our international obligations under the new GATT TRIPS agreement. Second, failure to do so will, in our judgment, undermine the ability of the United States to press other countries to implement the same sort of protection in their implementing legislation currently pending in many legislatures around the globe. Third, we are concerned that if restoration legislation is not adopted in this country, we may very well be a defendant in the first GATT case to be brought after the WTO goes into effect, and we fear that we may lose that case. This will be very damaging to the United States and to our reputation as a world leader in the copyright field. Welcome back, Mr. Chairman. Mr. HUGHES [presiding]. I apologize for the interruption but, unfortunately, I had to appear before the Rules Committee on pressing matters. Mr. SMITH. Mr. Chairman, you arrived at my most important point. Fourth, the trade stakes are huge. Mr. HUGHES. Eric, I thought somebody gave your testimony earlier today. Mr. SMITH. It was a fair use. Copying is the sincerest form of flattery, say the Chinese, so I was very honored. My colleagues will give you details and we can refer you to our written testimony on this point. In just the few countries we detail in our written statement, Russia, the other CIS States, States in Eastern Europe, in the Middle East, we already lose over $2 billion annually, a not insignificant part of which is attributable to this very issue. Mr. Chairman, any legislation which emanates from this Congress will benefit some and prejudice others. The job here is to carefully weigh the pluses and minuses. Some reliance users may indeed be prejudiced, though we believe the bills can and do minimize this prejudice, as is the job to be done here. But on balance, there is simply no question that the economic stakes in terms of revenue and jobs in this country is overwhelmingly on the plus side. One of our country's most productive industries is the software industry. As a new work, computer programs and-after all, we know that a computer program is but another form of literary work. We have known that for some time in this country. But other countries are just beginning to realize that. Many of these countries are just now according copyright protection to software. Many are not protecting software which is in existence before they join an international copyright treaty like the Berne Convention. This means that consumers continue to use unauthorized older versions instead of newer, protected versions. This hurts every U.S. software company. It hurts hardware companies because of reduction in sales in hardware. It hurts computer literacy. It holds back the market and it costs significantly in lost sales. And the harm is not just to PC software; mainframe and custom software is pirated and used in place of newer versions where critical code is stolen to create derivative software that infringes our citizens' creations. With us taking a strong and principled stand here in this country, we can leverage retroactive protection abroad. I almost entirely disagree with Mr. Karp on this point. I think the chances of us obtaining good retroactive protection is quite strong if we have this tool behind us. If they fail to do so willingly, we can take them to the GATT. As I note in our written statement, the music and book publishing industry is also adversely affected by this lack of protection abroad. Valuable repertoire from the 1950's and 1960's and laterto the extent that it is not protected in some countries-pop music of the 1940's, serious music is all available without permission and payment in the countries I named. Older editions of textbooks, great works of fiction, classics and popular works are available in unauthorized editions in these countries as we speak. Finally, Mr. Chairman, I want to emphasize that our members are all reliance parties. All of our companies make use of public domain works of one kind or another. All are potentially affected by this bill, not as so-called gainers abroad, but as parties that must adjust their practices to the restoration of copyright here. We have carefully weighed the pros and cons of both these bills, Mr. Chairman. In our capacity as reliance parties, as well as gainers abroad, our industries have concluded that they can live with the result, given provisions like the 1-year sell-off and various notice provisions and the limitations on remedies. We believe these bills strike a balance and urge you to work out the differences and include this legislation in the fast-track bill as soon as you can. [The prepared statement of Mr. Smith follows:] Testimony of Eric H. Smith Executive Director and General Counsel Joint Hearing Before The Subcommittee on Intellectual Property and Judicial Administration of the Judiciary Committee of the U.S. House of Representatives and The Subcommittee on Patents, Copyrights and Trademarks of the Judiciary Committee of the U.S. Senate on Copyright Restoration and Other Matters August 12, 1994 Summary Statement of Eric H. Smith Executive Director International Intellectual Property Alliance The U.S. copyright-based industries strongly support the adoption of a copyright restoration provision in the GATT Implementing Bill. Restoration of foreign copyrights that fell into the public domain for failure to comply with U.S. formalities is good public policy and a small price to pay for the very substantial monetary gains to U.S. authors, publishers and producers from having their copyrights "restored" (or protected for the first time) in many countries throughout the world. A U.S. failure to fully implement Article 18 of Berne and Articles 9(1) and 14.6 of TRIPS will (a) encourage our trading partners to continue "legal piracy" of our works, (b) result in losses of billions of dollars to U.S. authors, publishers and producers and (c) run the grave risk, we fear, of the U.S. being brought to a GATT dispute settlement proceeding and losing the case. Such loss may limit Congress's ability to then "fix" the problem. Most sectors of the copyright industry currently face major retroactivity problems in countries like Russia and the CIS states, the Baltics, Poland, Turkey, South Korea, Taiwan, Saudi Arabia, and the Gulf States, among others. Our industries in 1993 lost a total of over $2 billion due to piracy in these selected countries, a not insignificant portion of which is due to failure to "restore" protection for our copyrights. Cumulatively, since 1989 when the U.S. joined the Berne Convention, our industries have lost an estimated total of $7.3 billion due to piracy in these countries, a part of which is due to this lack of protection. While S. 2368 and H.R. 4894 have differences, both derive from the same structural and policy roots. Basically both bills provide a balance between the need to establish a "model" for foreign governments to restore copyright protection in U.S. works and the need to balance domestically the rights of foreign authors and persons who have relied on the formerly public domain status of the work. IIPA agrees with the Justice Department's Office of Legal Counsel that this legislation will pass constitutional muster. IIPA and its 1500 members urge the Committees and the Administration to reconcile the two bills and incorporate a provision in the GATT Implementing Bill. Messrs. Chairmen and Members of the Committees: My name is Eric H. Smith. I am Executive Director and General Counsel of the International Intellectual Property Alliance ("Alliance" or "IIPA"). I am joined by two of our members who are very significantly affected by the legislation that is the topic of this hearing. Jay Berman is the Chairman and CEO of the Recording Industry Association of America and Matt Gerson, MPAA Vice President, Congressional Affairs, is here on behalf of Jack Valenti, the Chairman and CEO of the Motion Picture Association of America. They will speak on the critical importance of this legislation to their industries. I will provide some overall background, briefly cover the impact on these two industries and on the computer software and music and book publishing industry, the other industry sectors in the IIPA. The IIPA is an umbrella organization formed in 1984 whose members consist of eight trade associations, each of which, in turn, represents a significant segment of the copyright industries in the United States. These associations are: American Film Marketing Association (AFMA) Business Software Alliance (BSA), Computer and Business Equipment Manufacturers Association (CBEMA), Motion Picture Association of America (MPAA), Recording Industry Association of America (RIAA). IIPA represents more than 1500 companies producing, publishing, and distributing throughout the world computers and computer software, motion picture, television programs and home videocassettes, music, records, CDs and audiocassettes, textbooks, tradebooks, reference and professional publications and journals. These companies are the leading edge of the world's high technology, entertainment and publishing industries. In a 1993 report commissioned by IIPA, the U.S. total copyright industries accounted for 5.6% of the U.S. Gross Domestic Product in 1991, employed new workers at three times the rate of the economy as a whole from 1987-1991 and contributed an estimated $36.2 billion in foreign revenues in 1991, making these industries among the U.S.' most important export sectors. |