On balance, ПIA believes the copyright system would benefit from giving the Copyright Office greater independence from the Library of Congress. To advance this goal, it may not be necessary to change the way the Register is appointed. For example, enactment of section 104 of H.R. 897, which eliminates the Librarian's control over regulations issued by the Copyright Office, would increase the Office's independence, even if the Register continued to be initially appointed by the Librarian. But by the same token, changing the appointment method alone may be insufficient to relieve the Office of its current problem of serving inconsistent missions. In considering changes to the Office's status, the subcommittee should focus squarely upon the desired relationship between the Copyright Office and the Library of Congress, and then consider the range of institutional structures that could accommodate the desired relationship.

Regardless of who is given the power to appoint the Register of Copyrights,

the subcommittee should consider taking steps to safeguard the high level of professional competence which has characterized the Office for decades. Section 701 of the Copyright Act could be amended to require that the appointee be experienced and knowledgeable in the copyright law. While such a requirement, if directed to the President, probably could not be directly enforced, it would send a clear signal as to Congress' intent and as to the standards the Senate would use in carrying out its advice and consent role. Similar requirements can be found in legislation creating other advice and consent positions in both the legislative and executive branches. See, £.g., 44 USC section 301 (Public Printer "must be a practical printer and versed in the art of bookbinding"); 28 U.S.C. section 505 (Solicitor General must be "learned in the law").

OTHER PROVISIONS

IIA takes no position at this time on the other provisions of H.R. 897.

Section 101 of the bill would overturn two bankruptcy court decisions that pre-empted state Uniform Commercial Code provisions on recordation of security interests with respect to copyrighted materials. While IIA is unaware of any opposition to this provision, it has not had an opportunity to study the question nor to arrive at a formal position.

Section 105 of the bill includes conforming changes necessitated by repeal of sections 411(a) and 412 of the Copyright Act. In the short time since H.R. 897 was introduced, we have not had the chance to review the statute to see whether other conforming changes are required.

Title II of H.R. 897 abolishes the Copyright Royalty Tribunal and establishes arbitration royalty panels, under the supervision of the Register of Copyrights, to adjust royalty rates and order distributions under the statutory compulsory licenses. Since IIA member companies have had little contact with the CRT and, in their information businesses, are generally not subject to any of the compulsory licenses, we have no comments to offer upon these provisions.

Title III establishes the effective dates of the amendments made by H.R. 897. Since disputes continue to arise over the effect of legislative amendments upon cases pending on their effective date (e.g., pending Supreme Court cases on the 1991 Civil Rights Act), the subcommittee should consider spelling out, in legislative history if not in the text of the bill, the impact of repeal of sections 411(a) and 412 upon pending cases in which the copyright in question was not registered in a timely fashion, or at all, with the Copyright Office.

CONCLUSION

IIA appreciates the opportunity to comment on H.R. 897. Congress should take the opportunity to do now what it failed to do at the time of adherence to the Berne Convention, and repeal section 411(a). The repeal of section 412 would also enhance the effectiveness of our copyright regime, by further reducing the hurdles erected by the registration formality for copyright proprietors seeking to enjoy the full protection provided by the law. Changes in the status of the Copyright Office, particularly in relation to the Library of Congress, merit careful study, but ПIA takes no position at this time on the proposal to make the Register a Presidential appointee.

Mr. HUGHES. Mr. Peters.

STATEMENT OF STEVE PETERS, SENIOR CORPORATE COUNSEL, ADOBE SYSTEMS, INC., ON BEHALF OF SOFTWARE PUBLISHERS ASSOCIATION

Mr. PETERS. Mr. Chairman, thank you for the opportunity to appear this morning in support of H.R. 897. I am Steve Peters, senior corporate counsel for Adobe Systems. We create software for producing, printing and communicating electronic documents such as this product, Adobe Premiere, which can be used to edit videotape on a personal computer.

I am appearing on behalf of the Software Publishers Association, which I will refer to as the SPA. The SPA has over a thousand members, including large companies such as Adobe, Apple, IBM, Lotus, Novell, and Microsoft, as well as hundreds of smaller companies. The SPA is the largest trade association of the software industry. We support section 102 regarding copyright registrations and section 101 regarding the recordation of security interest in copyrighted works, but take no positions on the other issues.

The SPA supports section 102, which eliminates the registration requirement, for two principal reasons: first, it will be a significant aid in the fight against piracy; and, second, it will eliminate a burdensome requirement which is particularly harsh on individual entrepreneurs, small companies and U.S. claimants.

Under section 102 a copyright owner will no longer be required to register a copyright in order to file suit or to get the benefits of statutory damages and attorney's fees. We think this change will have a major impact on the war against software piracy. Our industry is extremely vulnerable to piracy because anybody with a personal computer can make a perfect copy of one of our products with just a few keystrokes. Conservative estimates place revenue lost by U.S. software companies to piracy in the billions of dollars annually. Stolen software costs jobs, threatens R&D budgets, and increases cost for legitimate consumers. The SPA estimates that software piracy cost 60,000 jobs in the software and retail industries last year.

Passage of section 102 would help control piracy by simplifying the process of enforcing copyrights and providing economic incentives to do so that often aren't available today. Although the registration requirement may not sound burdensome, it does have a devastating effect on the ability of software companies to enforce their copyrights.

And compliance is costly. My company spent over $400,000 in the last 3 years complying with registration requirements.

The registration requirement is especially harmful to the individual entrepreneurs and small startups that are vital to our industry. Many of them simply don't know about the requirement. Their focus is creating quality products and technologies and not complying with the formalities of copyright law. They often learn about the registration requirement when it is too late, which is after their product has been infringed, and absent the benefits of statutory damages and attorney's fees they often decide that enforcement is simply not worth the price.

Even when they file a registration on the first version of a product, they often fail to register subsequent versions. The SPA has encountered these scenarios repeatedly, and 400-plus lawsuits and audits that it has pursued on behalf of its members in the past 2 years.

Mandatory registration serves no useful purpose. In the computer area we don't think it is useful to the acquisitions for the Library because what we submit for the Library is this product, and what we submit with our copyright registration is a printout of source code that only a few people in the country can read and understand.

The SPA supports section 101 regarding the recordation of security interests for two primary reasons. First, it will reduce confusion and uncertainty in the software and financial industries, and second, it will remove a barrier to financing for software companies. Section 101 would confirm that security interests don't have to be recorded by the Copyright Office, thereby allowing secured parties to perfect their rights under the U.C.C.

Recent court decisions have created a lot of uncertainty over how to perfect a security interest in computer software by requiring filings with the Copyright Office. These decisions have resulted in overlapping and inconsistent systems by requiring secured creditors to conduct searches and record security interests with the Copyright Office and local Secretary of State. Čommercial financing transactions require quick access to accurate filing information, which Copyright Office recording systems weren't really established to provide. These burdens on the searching and filing process have a chilling effect on financial transactions for software companies.

A bigger problem for lender security is the different systems for establishing priority under the U.C.C. and the Copyright Act. The simple and effective rule of the U.C.C. is that the first to file wins. This provides the security that lenders need. Under the Copyright Act the first to sign wins, as long as it is recorded within 30 days, or 60 days for documents that are signed abroad. As a result of this, no lender can really be assured of security without waiting 60 days, because their interests could be preempted by a later filing of an earlier signed document. Section 101 would advance the economic viability of our industry by providing certainty to lenders and removing some barriers to capital.

The U.S. software industry is one of the bright stars of the American economy today. Passage of section 102 would help our industry play its role in creating new jobs and improving the U.S. economy by permitting software companies to take full advantage of the protection afforded by the Copyright Act.

Passage of section 101 would provide a financial stimulus by reducing confusion and uncertainty and removing a barrier to financing. Every dollar that we lose because of piracy, complying with these procedural requirements, and failed financing is a dollar that we can't use to support the R&D we need to stay ahead in this industry.

Thank you, and I will be happy to answer any questions, Mr. Chairman.

Mr. HUGHES. Thank you very much, Mr. Peters.