[The prepared statement of Mr. Peters follows:] Statement of the SOFTWARE PUBLISHERS ASSOCIATION before the Subcommittee on Intellectual Property and Judicial Administration of the House Committee on the Judiciary U.S. House of Representatives Mr. Chairman, thank you for the opportunity to appear this morning in support of H.R. 897, the Copyright Reform Act of 1993. I am Steve Peters, senior corporate counsel for Adobe Systems, Inc., a software company that develops, markets and distributes software products for producing, communicating and printing documents. I am appearing on behalf of the Software Publishers Association, which I will refer to as the SPA. The SPA is the principal trade association of the personal computer software industry, with a membership of over 1000 companies. Its members include large companies such as Adobe, Apple, Borland, IBM, Lotus, Microsoft, Novell, Symantec, and WordPerfect, as well as hundreds of small companies that develop and market business, consumer and educational software products. The U.S. software industry today is a $40.2 billion industry, with over 50% of its sales coming from international markets. The U.S. software industry currently commands a 75% share of the world-wide software market. It is one of the fastest-growing sectors of the U.S. economy, currently growing at the rate of 12.3% per year. It creates enormous benefits to the nation's economic vitality and balance of payments. The SPA supports H.R. 897, primarily because of the positive impact it will have on eliminating the industry-wide problem with software piracy, and on enhancing the economic viability of the industry in general. Specifically, the SPA supports Section 101 (relating to the recordation of security interests in copyrighted works), and Section 102 (relating to copyright registration provisions). The SPA takes no position, however, on Section 103, dealing with the General Responsibilities and Organization of the Copyright Office, or on Title II of the bill, dealing with the Copyright Royalty Tribunal. THE REGISTRATION REQUIREMENT Let me begin with a discussion of Section 102 of the bill -- the provision eliminating the registration requirement. Under this section, a copyright owner will no longer be required to register as a prerequisite to filing suit to enforce his or her copyright, or to recover statutory damages and attorneys' fees. The SPA supports this revision because it will have a significant impact in the war against software piracy. The SPA actively monitors the scope and extent of software piracy both in the United States and worldwide, and is engaged in significant efforts to deter such piracy, as well as to detect and prosecute piracy when and where it occurs. In the last two years the SPA has brought over 400 lawsuits and audits on behalf of its members against businesses, educational institutions, and other entities unlawfully using or distributing PC software. Piracy is a problem for all industries dealing with copyrighted products. But it is perhaps most destructive to the software industry. Three reasons set the software piracy problem apart from piracy directed at other copyrighted works: First, unlike other copyrighted products, software is exceptionally easy to reproduce, and the copy is identical in all respects to the original. Second, while most other copyrighted works are copied primarily so that someone can make money by distributing the illegal copies to others, software is frequently copied extensively by a single organization for its own internal use. Third, the relatively high retail value of most software, which reflects the research and development costs that go into producing these products, also increases the incentive to pirate. The extent of software piracy is enormous. Industry studies have indicated that, at a minimum, for each legal copy of software in circulation, another copy is pirated. The SPA estimates that revenue lost to software piracy worldwide amounts to billions of dollars each year. The software piracy problem is, quite literally, a national economic issue. Stealing software means stealing jobs. For this reason, the SPA believes that controlling piracy should be a major goal of U.S. policy makers. Passage of H.R. 897 would help meet this goal by greatly simplifying the process that allows the software industry to enforce its copyrights, and by providing the economic incentive to do so that is unavailable in so many cases. At present, a copyright owner cannot bring suit against an infringer until its copyright has first been registered with the U.S. Copyright Office. In addition, unless the owner registered before the act of infringement, the owner cannot recover the statutory damages and attorneys fees allowed by the Copyright Act. While these requirements may not sound burdensome, in practice the net effect of these rules is a significant adverse impact on the ability of the software industry to protect its assets against infringers. One of the primary reasons for this impact is that many software businesses (especially the newer and smaller startup businesses) are simply unaware that their rights and remedies under the Copyright Act are adversely affected if they do not promptly register their newly developed products. The basic scenario is a simple one, but is played out over and over again. Software developers are inventors, skilled craftsmen, and entrepreneurs. While the industry includes several large players, the majority of the software developed and marketed by the industry comes from small start-up/entrepreneurial ventures, often founded with almost no capital and little more than an idea. Their priorities are developing quality leading-edge software products, the kind that will keep the U.S. in the lead in this technology, not on complying with the formalities of the U.S. Copyright Office. As a consequence, they frequently pay little or no attention to copyright law until they learn that someone has infringed the copyright in their new product. It is only then that they learn that any legal proceedings must wait while they register their product, and that, in any event, they will be unable to recover statutory damages and attorneys' fees. Faced with a scenario where the legal fees may exceed the actual damages they could recover, they often decide that enforcement of their rights is simply not worth the price. A variation on this theme results from the rapid pace at which software products are revised, modified, and enhanced. Existing computer programs are frequently updated and enhanced to create new versions or releases, and new programs are frequently derivatives of older ones. Thus, registration of new versions is often overlooked, or there is confusion over when it is necessary to register a new version. This problem has arisen time and time again in the infringement lawsuits that the SPA files on behalf of its members. All too often an SPA investigation will reveal infringement of a member's software product, but after the member is contacted about participating in the lawsuit, it turns out that the product is not registered. At that point, the SPA's only options are to proceed without that member's participation or to delay filing the suit while the product is registered, and then to proceed without the ability to recover statutory damages or attorneys' fees. Because most of the lawsuits filed by the SPA are settled on the basis of statutory damages, this is a significant problem. This roadblock in the way of recovering statutory damages has a significant inhibiting effect on the industry's ability to enforce its copyrights and protect its products. Statutory damages may often constitute the only meaningful remedy available to a copyright owner for infringement of his or her work. With most industry products selling for a few hundred dollars, and many for less than that, the ability of a copyright owner to recover significant actual damages, as authorized by the Copyright Act, is greatly reduced. When this is coupled with the inability to recover attorneys' fees, what we see is a significant deterrent to copyright owners who seek to enforce their rights. The cause of this problem, mandatory registration, serves no useful purpose. It is a formality that is required only of U.S. claimants, and presents an often significant bureaucratic deterrent to filing and prosecuting litigation. Even for companies that are knowledgeable about the registration requirement (such as the SPA's larger members), there are several impediments to registration that often result in a conscious decision not to register. For example, many publishers are reluctant to register out of concern (real or imagined) over the possible disclosure of trade secrets |