developed countries of the world. Therefore, the claimed advantages of registration in expediting the litigation process are largely illusory. Of course, to the extent that copyright owners find registration an advantage in litigation, nothing in H.R. 897 will prevent them from continuing to register and have the benefits of the system. Mandatory registration is not necessary or appropriate as a means of building the Library's Collections Another argument used in favor of the existing system is that the mandatory deposit accompanying registration of a work assists the Library of Congress in building its collections. As you, Mr. Chairman, indicated in your floor remarks accompanying introduction of the bill, much of the material deposited in conjunction with Section 411 is of no value to the Library's collections and is exempted from the mandatory deposit requirement. This must certainly be true of the computer source code deposits which accompany software registrations. In addition, I would respectfully suggest Mr. Chairman, that the requirement that copyright registrants give up copies of their works to the Library without compensation constitutes a burden imposed on authors which has nothing to do with the purpose of the copyright system under Article I, Section 2 of the Constitution, to "promote progress of science and the useful arts, by securing for limited times to authors and inventors the exclusive rights to their respective writings and discoveries." Furthermore, the House Committee Report accompanying the 1976 Act makes it clear that section 407 requiring mandatory deposits on demand of the Library -- not section 411 dealing with registration - is the part of the Act intended to supply the Library of Congress with material for its collections. As this Committee's report accompanying the 1976 Act states: Under section 407 of the bill, the deposit requirements can be Mr. Chairman, to the extent that the Library of Congress has an interest in using the Copyright Act as a vehicle for enriching its collections, it is clear that Sec. 407 which remains untouched in H.R. 897 - will meet this need. However, I would like to note in passing, that Sec. 407 is not, itself, without its problems. To the extent that copyright owners are required to deposit with the Library, on demand, full copies of computer programs on magnetic disks which may contain valuable trade secrets which H.R. Rep. No. 94-1476, 94th Cong. 2d. Sess. at 150. become available to all users of the Library's reading room, the industry believes there is a potential for harm in the present system. The Relationship of the Copyright Act to the Uniform Commercial Code In general, the BSA supports the principal of federal preemption of state law regarding copyrights which is contained in section 301 of the Copyright Act. Section 301 preempts state law regarding "legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright...." The purpose of section 301, as we understand it, is to create a uniform law of copyright by prohibiting a patchwork of state laws which would disrupt the smooth functioning of the federal law copyright system. With adherence to the Berne Convention and the prohibition against formalities contained in that treaty, it is particularly important that states be discouraged from creating barriers to the smooth functioning of the copyright system. However, an over-broad interpretation of section 301 can impede efficient commerce in copyrighted products. This is the case with regard to the recent decisions of federal bankruptcy courts in National Peregrine, Inc. v. Capitol Federal Savings and Loan, 116 Bankr. 194 (Bank C.D. Cal. 1990) and Official Unsecured Creditors' Committee v. Zenith Productions, Ltd. 127 Bankr. 34 (Bank. C.D. Cal 1991). Neither of these cases involved state laws which created copyright or copyrightlike rights. Rather, the disputes involved were simply whether the Uniform Commercial Code would apply to security interests in transactions involving copyrights. Many start-up software companies must rely on bank or investor financing in order to enter the market place. Investors, banks and their attorneys are accustomed to securing their loans and investments under the state laws embodying the Uniform Commercial Code. These recent cases, requiring federal recordation of security interests, can only confuse investors and their counsel in cases involving intellectual property. This discourages easy access to capital by start-up companies, thereby limiting the very incentives to investment in copyrighted works which the Copyright Act is meant to foster. H.R. 897 clarifies the law to eliminate this confusion. BSA supports this clarification. The Structure of the Copyright Office and the Copyright Royalty Tribunal Much of H.R. 897 is directed at changes which are necessary to permit the substitution of ad hoc arbitration panels for the full time Copyright Royalty Tribunal in resolving disputes arising under the compulsory licenses contained in the Copyright Act. None of these compulsory licenses apply to computer programs created by BSA member companies. Since our companies do not use the Tribunal mechanism, we believe that it would be inappropriate to comment on these proposed changes in the law. In connection with transferring functions of the Copyright Royalty Tribunal to the Register of Copyrights, the Register is made a Presidential appointee under the legislation. This presumably is to avoid constitutional problems with the Register's performance of Tribunal functions. As is the case with the other changes in the Tribunal mechanism, the BSA does not take a position on this issue because none of the compulsory licenses which give rise to the need for the Copyright Royalty Tribunal apply to works of BSA member companies. However, because of the importance of the Register of Copyrights and the Register's relationship with other agencies of the government-in international and other arenas we would encourage Congress and this subcommittee to consult with the appropriate representatives of the Executive Branch in reaching a decision on this issue. The Business Software Alliance appreciates this opportunity to testify on the provisions of H.R. 897, the Copyright Reform Act of 1993, as they impact our industry. Mr. HUGHES. Mr. Burger, welcome. STATEMENT OF JAMES S. BURGER, DIRECTOR, GOVERNMENT LAW FOR APPLE COMPUTER, INC., CHAIRMAN, PROPRIETARY RIGHTS COMMITTEE, COMPUTER BUSINESS AND EQUIPMENT MANUFACTURERS ASSOCIATION Mr. BURGER. Thank you, Mr. Chairman and members of the committee. My name is Jim Burger and I am director of law for Apple Computer, Inc. I am here today representing the Computer and Business Equipment Manufacturers Association-CBEMA-as chairman of its Proprietary Rights Committee. CBEMA, representing the leading U.S. providers of information technology products and services, strongly supports section 102 of the bill eliminating copyright registration as a prerequisite to bringing an infringement action. We are aware of the arguments of the value to the public of registration and deposit of works. However, computer registration, as you have heard already, plays no role in deposit of works. And, indeed, there is an alternative the Librarian has established for receiving computer program works in the forms that Mr. Peters explained. So the Library can get deposit absent this requirement for registration to bring a lawsuit. The computer application review process performed by the Copyright Office is not the proper place for determining the scope of copyright protection for these valuable computer program assets. Rather as is true, really, of all literary work copyright protection this is an evolving area of law, and it is best determined and actually is being determined today by Federal courts on the merits, not via a clerical review in the Copyright Office. Lastly, the two-tier U.S. system with its discrimination against U.S. authors really provides a poor example for developing countries which are trying to emulate our system in the hopes of developing a domestic software industry after the example of our very successful industry here. CBEMA also supports section 101 of the bill which would amend section 301(b) of the Copyright Act to overturn National Peregrine, Inc. v. Capitol Federal Savings & Loan Association. Peregrine has added confusion and difficulty to financing transactions by holding that sections 205 and 301 of the Copyright Act preempt State Uniform Commercial Code provisions for perfecting security interests in copyrights. Mr. Chairman, we agree with the statement in your remarks in the Congressional Record that Congress did not intend to preempt State U.C.C. provisions regarding perfection of security interests. Section 101 of the bill is a much needed clarification of the law. We also feel that this might be an appropriate time for Congress to consider clarifying its intent regarding the effect of section 205 of the act on State U.C.C. provisions that govern the priority of security interests. As pointed out in your introductory remarks, Mr. Chairman, and I quote, "Congress' intent in enacting the relevant provisions in section 205 was to provide a system for ordering the priority between conflicting transfers, not to preempt State procedures for ensuring that a secured creditor's rights are protected." Although we are not aware of any case that has raised the issue specifically, it is possible that a court could interpret sections 205 and 301 of the Copyright Act, even as amended by the bill, as preempting State U.C.C. provisions that govern the priority of security interests. We believe this is a question that merits further study by Congress. Those are the views we have developed on H.R. 897 in the 2 weeks since its introduction. I would be pleased to answer such questions as I can today and undertake to obtain answers to oth ers. Thank you, Mr. Chairman. Mr. HUGHES. Thank you, Mr. Burger. [The prepared statement of Mr. Burger follows:] |