Statement of Marybeth Peters
The Register of Copyrights
before the
Subcommittee on Courts, the Internet, and Intellectual Property
Committee on the Judiciary

United States House of Representatives
107th Congress, 1st Session

May 2, 2001

Report on the Copyright Office's Work


I am pleased to have the opportunity to provide the Subcommittee with a report on the Copyright Office's work to assure that our Nation maintains a strong and effective copyright system - one that serves both owners and users of copyrighted works. In this endeavor, issues of new technology and the ways in which technology affects users and copyright owners have been, and will continue to be, front and center on our agenda.

During the last fiscal year, the Copyright Office received 588,498 claims to copyright covering more than 800,000 works, and registered 515,612. The Office recorded 18,894 documents covering hundreds of thousands of titles, and the online public record grew with the cataloging of an additional 542,397 registrations. The Office forwarded 751,944 copies of works, with a net worth of $32,308,047 to the Library of Congress for its collections and exchange programs, including 217,829 pieces valued at $6,049,682 that were received from publishers under the mandatory deposit provisions of the copyright law. (1)

The Office responded to 383,513 requests from the public for copyright information, including more than 11,900 electronic mail requests; processed 18,087 filings from cable operators, satellite carriers, and manufacturers or importers of digital audio recording devices and media, and processed claims to the various royalty pools. The Licensing Division collected a total of $183 million in royalty fees (almost 88 percent received via electronic funds transfers) and distributed royalties totaling $367,824,476.

We continued the work Congress assigned to us in the Digital Millennium Copyright Act, including our first rulemaking on the Section 1201 anticircumvention provisions and the Section 104 report we will soon submit to Congress. I will address these and other policy and legal issues in my statement.

I. Public Service and Operational Improvement Initiatives

I first would like to provide the subcommittee with an overview of two very important, closely-aligned, initiatives the Office now has underway. Both initiatives - information technology planning and business process reengineering - will shape the Copyright Office's future and its service to the American people. Just as the copyright law has had to adjust to technological changes, our daily business operations and processes are challenged in similar ways.

1. Information Technology

We have begun a major reassessment and planning effort regarding our information technology (IT) systems. The Copyright Office relies on the collection, processing, storage and presentation of information to fulfill its duties under the U.S. Copyright Act. Information processing and products are critical in the registration of claims to copyright, the recordation of documents pertaining to copyrighted works, statutory licenses, and the Office's responsibilities as an agency of public record. Access to information is also the basis for the substantive policy and regulatory work the Office performs for the U.S. Congress and the executive branch.

Currently, the Copyright Office has more than 20 separate information systems. For the most part, they have been developed separately and do not support full information sharing and integration. Some rely on hardware that is aging and becoming increasingly vulnerable to failure.

Two principal factors will shape Copyright Office IT planning in the next few years. First, to serve our customers fully, the Office needs to have its current public services available online to the greatest extent possible. Second, we have just made a decision on the business process reengineering (BPR) option we will pursue to improve Copyright Office processes for registration, recordation, information dissemination and acquisitions of copies of works for the Library's collections. We will complete a BPR implementation plan this summer. This effort will result in significant changes and improvements to our current processes, organization, and facilities. In addition, the changes will rely heavily on the use of new technology, all of which will result in more effective and timely service to our customers.

Our original direction on reengineering was to work within the confines of our existing IT structure. The results of our reengineering work have shown us that we need to accelerate the Office's use of new technology, not only for the processes affected by reengineering, but for the entire Office. We need to undertake a fundamental transformation in our public services: from paper and hard-copy based processing to primarily electronic processing. Our processes must change from traditional manual capabilities to IT-enabled functions.

This year, through our Copyright Office Electronic Registration, Recordation and Deposit System (CORDS), we will electronically receive about 30,000 digital works for registration. This is about 5 percent of our total registrations. Now we must broaden our IT approach so that electronic receipt and processing become the primary way we register works. In the future, we will encourage that works submitted for registration be submitted online. Once they are submitted, we will use technology to a much greater extent than we have to process them quickly and ensure a timely public record.

This not only helps the Copyright Office provide better public services, but is also a key component of the Library's digital strategy which will allow more digital works to be acquired for the Library's collections through copyright registration and through the mandatory deposit provisions of Section 407 of the copyright law.

A newly-formed Copyright Office Information Systems Working Group has just begun its work. So that this critical initial planning can be completed and specific resource requirements identified, I have requested a modification in our Fiscal Year 2002 budget request and want to inform the Subcommittee of this change.

Until we revise our overall IT strategy to respond to our new business processes, I believe we should not proceed with funding for the CORDS Full Large-Scale Production System, as requested in our original submission. We do need to maintain the CORDS system so that we can continue to provide an electronic registration option for those now using it and others who wish to. Yet, we do not want to accelerate development of a large-scale CORDS production system until we establish an overall strategy for the electronic delivery of services.

Mr. Chairman, this morning the Library testified before the Senate Appropriations Subcommittee on Legislative Branch. In my testimony submitted to the subcommittee, I modified the Copyright Office's initial budget request to enable us to proceed with the IT initiative I have just outlined. I requested that we proceed as follows:

  • Permanently reprogram $620,000 savings from our Marking and Tagging security initiative in Fiscal 2001 to IT Planning and Development. In the current fiscal year, these funds would be used to conduct a requirements analysis which will provide us with an IT strategy that: supports reengineering, redevelops our aging systems and expands the electronic delivery of our public services. (Our Marking and Tagging requirements will continue to be met and security of materials will be one of the principal objectives in the IT requirements analysis.)

  • Based on the completed requirements analysis, in Fiscal Year 2002 begin systems analysis, design and development work. A multiple-award contract will be developed to rebuild and integrate our information systems to meet our new requirements. We plan to have this contract awarded by July 2002.

  • In Fiscal Year 2002, use the reprogrammed IT funds ($620,000) for IT contract management and CORDS user support to provide hands-on technical advisory assistance to our current and anticipated CORDS users.

I am hopeful, Mr. Chairman, that the Appropriations Committees will approve this reallocation of funding. It is critical to our ability to meet our statutory obligations and fully serve the American people in an increasingly digital environment. I will keep this Subcommittee informed of developments in this area.

2. Business Process Reengineering: Initial Implementation

The second initiative involves our initial steps to carry out our Business Processing Reengineering Implementation Plan. Last week, I gave approval to basic redesign options developed after an eight-month effort by a team of Copyright Office staff, facilitated by experts from PriceWaterhouseCoopers. We will now begin the process of developing an implementation plan. The plan will be implemented in phases beginning in fiscal 2002. The Copyright Office No-Year Account will fund the three-year implementation, except for furniture and furnishings.

We began our reengineering effort with the following objectives:

  • Improve operations and service that will achieve better processing times and create timely public records;

  • Enhance operational efficiency through the use of new or alternative technologies;

  • Contain the costs of registration, recordation and other services;

  • Strengthen security within the Copyright Office; and

  • Use staff and space more efficiently.

In our Fiscal 2002 budget request, we are asking for authority to spend $380,000 from our No-Year account for the first steps in reengineering implementation.

I am very optimistic as we begin our IT and reengineering work. These are clearly multi-year efforts and I look forward to continued discussions with the Subcommittee as they progress.

II. Review of FY 2000 Operational Activities and Ongoing Work

Registration, Recordation, and Cataloging Operations

As I reported at the beginning of my statement, in fiscal 2000 the Office processed 588,498 claims, representing more than 800,000 works, and registered 515,612 of these claims. Throughput time was and continues to be a concern. A large backlog of copyright claims continues to exist and processing time for the issuance of registration certificates remains at approximately six to seven months.

To address this backlog, the Examining Division continued to hire examiner staff to replace those lost through retirement and resignation. We have also begun an extensive backlog reduction effort, which is already resulting in a substantial decrease in the number of claims awaiting examination. This is an Office-wide imperative, and we are committed to continued progress this year.

In fiscal 2000, the Cataloging Division recorded 18,894 documents covering hundreds of thousands of titles. The Division implemented a number of new initiatives to reduce the length of throughput time for cataloging registrations and recording documents, including a successful Backlog Reduction Project which significantly reduced the number of multiple titles in documents awaiting entry into the online catalog.

The Documents Section received 384,826 titles this year, an increase of 97% over last year's receipts. The Section recorded 399,088 titles, an increase of 198% over last year's title clearances.

Statutory Licenses

On October 28, 1999, the largest distribution of copyright royalties to date was made totaling $321,665,999.86.

Satellite carrier royalty fees totaling $3,937,871.64 were distributed on January 13, 2000. This was a full distribution of funds covering the 1992, 1993, 1994, and 1995 funds. Soon after, another distribution of $792,975.53 occurred on January 27, 2000. This distribution was a partial distribution of the 1995, 1996, 1997, and 1998 DART royalty funds less a reserve held for Copyright Arbitration Royalty Panel (CARP) costs and amounts in controversy.

A full distribution of the 1993, 1994, 1995, and 1996 cable television royalties and a $35 million dollar partial distribution for 1997 was made on May 25, 2000 totaling $39,185,398.32. Also, a full distribution of the Sound Recording Fund for 1999 DART royalties in the amount of $2,242,230.81 was made on June 15, 2000.

Outstanding royalty investments and interest totaled more than $614 million during the year, earning $32 million in interest. Deposits totaled approximately $183 million with 3,820 remittances (checks and electronic funds transfer) covering 21,243 statements of account. Electronic Fund Transfers (EFT) now account for 87.9% of royalty fee deposits.

The Office examined 16,293 cable statements of account and 251 amendments to these statements, 50 DART statements, 15 Satellite Carrier statements, and 1,729 Section 114 Notices. A total of $459,992.71 in additional royalties was recovered for copyright owners that would have otherwise been lost. In addition, staff responded to 1,048 licensing information requests.

Copyright Arbitration Royalty Panels (CARP) Proceedings

Recent CARP activities include the following:

  • The Librarian's order announcing the allocation of the royalty fees in the 1995, 1996, 1997, and 1998 Musical Works Funds was issued. These fees are paid to the Copyright Office by importers and manufacturers of Digital Audio Recording Devices and Media (DART) who distribute these products in the United States.

  • Written direct cases were submitted in April in the CARP proceeding to determine rates and terms for the Section 114 statutory license for public performance of sound recordings by eligible non-subscription services (webcasters) and the Section 112 statutory license to make ephemeral recordings of sound recordings for the purpose of making permitted public performances (such as webcasting). The CARP will convene on July 30.

  • The six-month negotiation period was announced for the adjustment of royalty rates and terms for the public performance of copyrighted sound recordings by preexisting subscription services and preexisting satellite digital audio radio services. The negotiation period began on January 9, 2001.

  • The six-month voluntary negotiation period was initiated for determining reasonable rates and terms for the public performance of sound recordings by new subscription services. The voluntary negotiation period began on February 12, 2001.

  • A notice of inquiry was published on the interpretation and application of the mechanical and digital phonorecord compulsory license (17 U.S.C. 115) to certain digital music services, namely what constitutes an incidental digital phonorecord delivery for purposes of the compulsory license. Initial comments were submitted on April 23, 2001.

  • A CARP proceeding was conducted to determine the distribution of the 1997 cable royalties among the copyright owners of movies, syndicated shows, and non-sports network programming. The arbitrators' report was submitted April 16, 2001 and is currently being reviewed by the Office.

Public Information and Copyright Education

The provision of information on copyright law and its application is a principal function of the Copyright Office. The demand for information on copyright is increasing, as the growth in the use of digital technology exposes more Americans to copyright issues in the course of their daily lives.

Last year, the Copyright Office responded to almost 400,000 public inquiries. The Copyright Office web site continued to play a key role in disseminating information to the copyright community and the general public, logging 9.4 million hits during the year, a 67 percent increase over the prior year. Numerous additions and enhancements were made to the web site throughout the year. The updated version of the copyright law with the latest amendments was made available in paperback book format and on the web site in both text and PDF formats, giving the public alternate ways to access the copyright law online. The public can also obtain copies of all the copyright registration forms which have been converted to fill-in versions so a copyright owner can complete the form on his or her personal computer for submission.

For the first time, the Copyright Office made it possible for the public to submit comments via the Internet in response to a rulemaking procedure dealing with the impact of Section 1201 of the Digital Millennium Copyright Act. All 235 initial comments and 129 reply comments received by the Office were posted on the web site for public review. As a part of the rulemaking on Section 1201, public hearings were held in Washington, D.C. and in Palo Alto, CA. Audio and written transcripts of these hearings were made available on the web site so that a much wider audience could benefit from the debate.

The total number of Office searches of our records to provide information (on copyright ownership, for example) increased. The number of titles searched was 63,250, an increase of 6.6% from the previous year while the number of search reports prepared, 7,413, declined 6.6%.

Security Program

The Copyright Office successfully completed several fiscal 2000 action items in the Library's Security Plan. Among the items accomplished were: laser-engraved ownership marking of compact disc and video cassette materials; secure transport of high-risk materials; and item bar code labeling and security tagging of book materials. This year we are continuing to focus on improvements in physical security, inventory, and preservation controls.

Copyright Office security initiatives planned for fiscal 2002 include incorporating Item Level Tracking and Inventory Control as part of the Copyright Office reengineering plan, creating in-process records at the point-of-entry, installing electronic access control to work areas, and installing a closed-circuit video system in the Mail Center.

III. Legislative and Policy Assistance

The Copyright Office continues to provide expert assistance in the legislative work of members of Congress and their staff, and to Executive Branch agencies in national and international copyright matters. I have attached an appendix to this statement which provides an update on the status of tasks the Copyright Office was delegated in the Digital Millennium Copyright Act (DMCA) and the Sonny Bono Copyright Term Extension Act.

Section 104 Study

We are about to provide Congress our report required under Section 104 of the (DMCA). The report evaluates the effects of the DMCA and the development of electronic commerce on the operation of Sections 109 and 117 of the copyright law, as well as the relationship between existing and emerging technology and the operation of those sections. Section 109 permits the owner of a particular copy to sell or otherwise dispose of that copy without the authority of the copyright owner. Commonly known as the "first sale doctrine," it is this section that permits lending of books by libraries as well as the sale of used books. Section 117 permits the owner of a copy of a computer program to make a copy or adaption of the program for archival purposes or as an essential step in utilizing the program. Specifically, we are reviewing whether Section 109 of the Copyright Act should be modified to make the first sale privilege apply expressly to digital transmissions of copyrighted works, whether an exemption is necessary for temporary incidental copies and whether the scope of the archival exemption under Section 117 should be expanded.

A public hearing on the issues related to the Section104 report was held in Washington, D.C. on November 29, 2000.

Distance Education

In May 1999, the Office concluded an intensive study on digital distance education through public hearings, comments and consultations with experts in various fields. The report made legislative recommendations on the promotion of distance education through digital technologies. Since issuance of this report, I have testified twice in the Senate, once before this Subcommittee, and last year before the Web-based Education Commission. At the request of the Senate Judiciary Committee, the Office has recently met with interested parties on distance education issues to identify issues of concern and potential areas of agreement in connection with legislation that has been introduced in the Senate and was the subject of a hearing in the Senate Judiciary Committee in March.

State Sovereign Immunity

At the end of its 1999 term, the U.S. Supreme Court issued opinions in Alden v. Maine, College Savings v. Florida Prepaid, and Florida Prepaid v. College Savings. Taken together, these opinions reshaped the scope of state sovereign immunity and Congress' authority to abrogate that immunity. Under the new regime, by invoking their immunity, States can escape the imposition of monetary damages for copyright infringement. Ever since those decisions, Congress has been struggling with how to reinstate full enforceability of the copyright law. The Copyright Office has worked closely with Congressional staff, the Patent and Trademark Office, and industry representatives in analyzing this problem and searching for a solution. Last year, this subcommittee held a hearing on this issue at which I testified. We continue to be involved in discussions relating to legislation on this issue that seems likely to be introduced this year.

Sound Recordings as Works Made for Hire

In the Intellectual Property and Communications Omnibus Reform Act of 1999, Congress added sound recordings to the categories of commissioned works which are eligible to be works made for hire. Subsequent to that enactment, a significant controversy arose concerning both the procedural history of the provision as well as its effect. On May 25, 2000, this subcommittee held a hearing on the issue at which I testified, and following that hearing H.R. 5107, the Work Made For Hire and Copyright Corrections Act of 2000, was enacted. (Public Law 106-379)

Representatives of recording artists and the record industry acknowledged that this legislation was only the first step in resolving the issue of sound recordings as works made for hire, and that further discussions should take place in an attempt to find a satisfactory resolution of the issue. If so, I would be pleased to assist in those discussions in any way that you see fit.

Copyright Technical Corrections and Housekeeping Amendments

The Office has also suggested a number of technical corrections and housekeeping amendments to title 17. Some of those amendments were included in the Work Made For Hire and Copyright Corrections Act of 2000. Others have been introduced as part of the Intellectual Property and High Technology Technical Amendments Act of 2001, S. 320, which has passed both the House and the Senate this year. Although the copyright amendments in both the House and Senate versions of the bill are identical, there are some differences in the provisions of the bill pertaining to patent law. We look forward to the resolution of those differences and the enactment of this legislation.

International Activities

The Copyright Office continues to work cooperatively with the Executive Branch on international matters -- most often with the United States Trade Representative (USTR), the Patent and Trademark Office, and the State Department.

Since the Subcommittee's May 2000 oversight hearing, the primary activity on the multilateral front was an effort to conclude a treaty to protect audiovisual performers, principally television and screen actors. A diplomatic conference held in Geneva, Switzerland in December 2000 failed primarily because of the inability of the U.S. and the European Union to resolve their differences on allocation of rights and the determination of choice of law. A decision will be made in September on whether to continue work on this.

Also last year, the Copyright Office assisted USTR before the World Trade Organization (WTO), in its defense of Section 110(5) of the Copyright Act against a challenge by the European Union (EU) that this exception for the public performance of copyrighted works in small businesses violated U.S. treaty obligations -- the Berne Convention and the TRIPS Agreement (Trade Related Aspects of Intellectual Property Agreement of the WTO). The WTO panel found that Section 110(5)(a) complied with U.S. treaty obligations but that the new subsection(b) violates those obligations. The U.S. has been given until July 7, 2001 to change its law or face sanctions.

The Copyright Office is one of the agencies involved in negotiating the Hague Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters. On May 15, we are hosting a roundtable discussion for representatives of copyright industries, copyright users, consumer organizations, and those involved in electronic commerce, to identify and discuss more fully the issues and problems associated with the draft convention. This roundtable will also be used to propose solutions that will aid the U.S. delegation to the first part of the Diplomatic Conference which is scheduled for June.

We continue to participate, as part of the U.S. delegation, in the ongoing work of WIPO and the WTO Council on TRIPS. This includes WIPO meetings on the protection of folklore, databases, and broadcasters, as well as the continuing effort to review the intellectual property laws of developing country members for compliance with TRIPS obligations.

Policy staff are members of the U.S. delegation to the Intellectual Property Negotiating Group of the Free Trade Area of the Americas. The goal of the negotiating group is to prepare and finalize an IP chapter for a Free Trade Area of the Americas Agreement. The overall agreement is due to be completed by 2005, a goal that was recently reaffirmed at the Summit of the Americas in Quebec. In addition, PIA staff were instrumental in the drafting of U.S. treaty proposals.

PIA staff were also instrumental in the drafting and negotiation of intellectual property provisions in a bilateral Free Trade Agreement with the Kingdom of Jordan. This successful negotiations established a pattern for ongoing FTA negotiations with Chile and Singapore.

The Copyright Office is on the inter-agency Special 301 Committee which considers and evaluates the adequacy and effectiveness of intellectual property protection and enforcement throughout the world. This annual process, which is established under U.S. trade law, is one of the tools used by the U.S. Government to improve protection for creators, inventors, and other holders of intellectual property rights.

Copyright Office staff also actively participate in bilateral negotiations and consultations. Last year, these included those held with Mexico, Paraguay, the People's Republic of China, South Korea, Bulgaria, the Bahamas, Malaysia, Taiwan, and Japan. We meet almost weekly with foreign officials and visitors interested in learning about the U.S. copyright system and exchanging information about topics of mutual concern.

IV. Rulemakings

Webcasting

Last December, the Office amended its regulatory definition of a "Service" for purposes of the statutory license governing the public performance of sound recordings by means of digital audio transmissions in order to clarify that transmissions of a broadcast signal over a digital communications network, such as the Internet, are not exempt from copyright liability under Section 114(d)(1)(A) of the Copyright Act. The broadcasters are challenging the ruling in federal court.

Anticircumvention Rulemaking

Under Section 1201(a)(1) of the DMCA, the Librarian of Congress is required to determine whether any particular classes of works are to be exempted from the anticircumvention prohibition on circumvention of technological measures that control access to works protected by copyright. Such technological measures include passwords, scrambling and encryption. This determination is made upon my recommendation after a rulemaking proceeding.

In response to the Office's public inquiry, we received nearly 400 comments and heard from representatives of more than 50 organizations at five days of hearings held in Washington, D.C. (May 1-3, 2000) and in Palo Alto, California (May 18-19, 2000).

The primary responsibility of the Register and the Librarian is to determine whether the implementation of technological protection measures has diminished the ability of individuals to use copyrighted works in ways that are otherwise lawful.

Last October, the Copyright Office published the determination for the triennial period covered by this first rulemaking. Exemption to Prohibition on Circumvention of Copyright Protection Systems for Access Control Technologies; Final Rule, 65 Fed.Reg. 64556 (Oct. 27, 2000). I recommended to the Librarian that two classes of work be exempted from the prohibition against circumvention: (1) compilations consisting of lists of web sites blocked by filtering software applications; and (2) literary works including computer programs and databases, protected by access control measures that fail to permit access because of malfunction, damage or obsolescence. The Librarian accepted my recommendations and exempted those two classes of works. The exemptions set forth in the rule will be in effect until October 28, 2003, during which time we will conduct another inquiry into adverse impact on noninfringing use of copyrighted works protected by technological measures.

In the course of the rulemaking, I concluded that there are some issues that may require further attention by Congress. In my recommendation issued last October, I recommended that Congress consider amending Section 1201 to provide a statutory exemption for all works, regardless of what class of work is involved, that are protected by access control mechanisms that fail to permit access because of malfunction, damage or obsoleteness. I strongly urge that Congress consider such an amendment. Although I concluded that it was appropriate in the rulemaking to exempt literary works that are protected by such access control measures, I believe it would be more appropriate to address this problem through legislative action. As I stated in my recommendation to the Librarian:

Although this exemption fits within the parameters of the term "class of works'" as described by Congress, it probably reaches the limits of those parameters. The definition of the class does start with a Section 102 category of works -- literary works. It then narrows that definition by reference to attributes of access controls that sometimes protect those works -- i.e., the failure of those access controls to function as intended. But in reality, this exemption addresses a problem that could be experienced by users in accessing all classes of copyrighted works. This subject matter is probably more suitable for a legislative exemption, and the Register recommends that Congress consider amending Section 1201 to provide a statutory exemption for all works, regardless of what class of work is involved, that are protected by access control mechanisms that fail to permit access because of malfunction, damage or obsoleteness. Meanwhile, because genuine harm has been demonstrated in this rulemaking proceeding and because it is possible to define a class of works that fits within the framework of Section 1201(a)(1)(B), (C) and (D), the Register recommends that the Librarian exempt this class of works during the first three years in which Section 1201(a)(1) is in effect. But the fact that sufficient harm has been found to justify this exemption for this three-year period will not automatically justify a similar exemption in the next triennial rulemaking. In fact, if there were a showing in the next rulemaking proceeding that faulty access controls create adverse impacts on noninfringing uses of all categories of works, such a showing could, paradoxically, result in the conclusion that the problem is not one that can be resolved pursuant to Section 1201(a)(1)(C) and (D), which anticipates exemptions only for "a particular class of works." A legislative resolution of this problem is preferable to a repetition of the somewhat ill-fitting regulatory approach adopted herein. 65 Fed.Reg. at 64565.

I also recommended that Congress consider what should be the appropriate approach to take with respect to technological measures that control both access to works and copying and other uses of works. I noted:

The merger of technological measures that protect access and copying does not appear to have been anticipated by Congress. Congress did create a distinction between the conduct of circumvention of access controls and the conduct of circumvention of use controls by prohibiting the former while permitting the latter, but neither the language of Section 1201 nor the legislative history addresses the possibility of access controls that also restrict use. It is unclear how a court might address this issue. It would be helpful if Congress were to clarify its intent, since the implementation of merged technological measures arguably would undermine Congress's decision to offer disparate treatment for access controls and use controls in Section 1201.

At present, on the current record, it would be imprudent to venture too far on this issue in the absence of congressional guidance. The issue of merged access and use measures may become a significant problem. The Copyright Office intends to monitor this issue during the next three years and hopes to have the benefit of a clearer record and guidance from Congress at the time of the next rulemaking proceeding. 65 Fed.Reg. at 64568.

Finally, I observed that although a number of parties submitting comments and testifying in the rulemaking had urged that we define a "particular class of works" by reference to the users of particular works or the uses made of particular works, it does not appears that Section 1201 anticipates that a "class" can be defined in such a way. Rather, a class of works must be determined based upon attributes of the works themselves, and not by reference to some external criteria such as the intended use or users of the works. However, I acknowledged that the statutory language is arguably ambiguous, but concluded that in the absence of clarification by Congress, I could not accept the more expansive view of what a "particular class of works" could be. 65 Fed.Reg. at 64559-64561, 64562. I am not requesting clarification on this issue, because I believe that I correctly understood the statutory mandate. But I understand that others may disagree with this conclusion, and if you believe that my conclusion was incorrect, you may wish to consider legislation that would clarify what a "class" is.

V. Litigation

The Copyright Office assisted the Judiciary, as it is directed to do in 17 U.S.C. 701(b)(2), in several cases involving copyright issues. The Office gets involved in litigation in four different contexts: (1) when it is asked to assist the Department of Justice in defending a lawsuit in which the constitutionality of a federal copyright statute is challenged (as in Eldred v. Reno, discussed below), (2) on the rare occasions when the Office is sued (e.g., the challenge by broadcasters to the Office's ruling that transmissions of a broadcast signal over a digital communications network, such as the Internet, are not exempt from copyright liability under Section 114(d)(1)(A) of the Copyright Act), (3) when the office files suit pursuant to 17 U.S.C. 407 to compel the deposit with the Library of Congress of a work published in the United States, and (4) when the Office works with the Department of Justice in connection with an amicus curiae brief in litigation involving important issues of copyright law and policy. Some of the more significant cases in which the Office has been involved in the past year are discussed below.

Eldred v. Ashcroft (formerly Eldred v. Reno)

The Copyright Office continues to assist the Department of Justice in a lawsuit challenging the constitutionality of the Sonny Bono Copyright Term Extension Act of 1998, which extended the duration of most copyrights by 20 years. Plaintiffs assert that the Act violates both the First Amendment and the clause in the Constitution which authorizes Congress to enact laws giving authors exclusive rights for "limited times." The district court entered judgment on the pleadings upholding the constitutionality of the law, and plaintiffs appealed. The U.S. Court of Appeals for the District of Columbia Circuit affirmed (with one judge dissenting in part), finding that neither the First Amendment nor the Copyright Clause of the Constitution constrains Congress from extending for a period of years the duration of both existing and future copyrights. Eldred v. Reno, 239 F.3d 372 (D.C. Cir. 2001), aff'g. 74 F.Supp.2d 1 (D.D.C 1999) Plaintiffs have now petitioned for a rehearing and asked that such reconsideration be en banc. The government has been directed to respond to the petition and we are assisting the Justice Department in preparing that response.

Universal City Studios, Inc. v. Corley (formerly Universal City Studios v. Reimerdes)

The United States has intervened in the appeal of this judgment that the defendants violated 17 U.S.C. 1201, the anticircumvention provision added by the Digital Millennium Copyright Act, when they posted on the Internet a code that permits the circumvention of the Content Scrambling System (CSS) used to protect the content on digital versatile disks (DVDs) of motion pictures. The United States is intervening in the United States Court of Appeals for the Second Circuit to defend the constitutionality of Section 1201 and is urging affirmance of the district court's judgment. The Copyright Office has assisted the Department of Justice in this effort.

A&M Records v. Napster

The Copyright Office was instrumental in the preparation and filing of an amicus brief for the government with the Ninth Circuit Court of Appeals in the Napster case. The defendant operates a file-trading service that provides a means for users of the service to exchange digital files of sound recordings. A number of record companies and music publishers sued, claiming that their copyrighted sound recordings had been copied and distributed through the defendant's system and that the defendant is vicariously liable and a contributory infringer of its copyrights. The defendant argued, inter alia, that Section 1008 of the Audio Home Recording Act (AHRA) insulated it from liability in this case. The government's brief was filed solely to address that issue and argued that AHRA does not cover the activities of Napster's users. In upholding the district court's decision to issue a preliminary injunction against Napster (although instructing the district court to modify that injunction), the Ninth Circuit agreed that the AHRA does not cover the activities of Napster's users and offers no safe harbor for Napster.

Raquel v. Education Management Corporation

The Office proposed to the Solicitor General that an amicus curiae brief be submitted to the Supreme Court in support of a petition for a writ of certiorari in Raquel v. Education Management Corporation, 196 F.3d 171 (3d Cir. 1999), cert granted, vacated and remanded, 121 S.Ct. 376 (2000). The U.S. Court of Appeals for the Third Circuit had dismissed Raquel's copyright infringement suit based on its conclusion that Raquel had made misrepresentations of material facts in its application for copyright registration. The Office concluded that the court had misunderstood the Copyright Office's registration practices. To clarify what those practices are, it published a Statement of Policy in the Federal Register on July 5, 2000, clarifying how the Office addresses the issues that the Third Circuit had misunderstood in its decision. The Office worked with the Department of Justice to prepare an amicus curiae brief in support of Raquel's petition for certiorari, and we urged that the Supreme Court grant certiorari, but immediately vacate the decision below and remand the case to the Third Circuit, rather than hear argument on the merits. The Court followed that recommendation.

Other Litigation

The Copyright Office also participated in discussions with the Department of Justice relating to other amicus briefs and proposed amicus briefs in cases involving copyright issues, and worked with the Department of Justice in a successful lawsuit to compel a publisher to deposit a serial with the Library of Congress.

VI. Copyright Office Budget

Fiscal 2002 Budget Request

As I mentioned, we are facing particularly important budget decisions for fiscal 2002 that will determine whether we are able to provide the public services copyright owners and the users of copyrighted works require. Because of the importance of our fiscal 2002 budget request to the Office, I would like to review the overall request with the subcommittee.

First, to enable us to serve Congress and the American people fully, it is critical that the Office's net appropriation be increased from $9.2 million to $12.8 million -- $1 million less than the fiscal 1999 net appropriation of $13,771,000. We have growing policy support requirements to Congress and the Executive Branch, as well as a growing regulatory workload from passage of the DMCA, that require adequate resources. We have had reductions in our appropriations in each of the last two years - with a reduction of more than $2 million last year.

The Office is requesting $12,836,815 in net appropriations and $21,880,000 in offsetting collections authority. This represents a $3,668,843 million net appropriation increase over the fiscal 2001 net appropriation of $9,167,972. The increase is needed to preserve the No-Year account from a further reduction and to fund $1,668,843 for mandatories and price level changes. The Copyright Office request for its Offsetting Collections Authority represents a decrease of $1,620,000 from $23,500,000 to $21,880,000. The decrease is based on projected annual revenue receipts of $21,500,000 and expending $380,000 from the No-Year account.

Copyright No-Year Account and Fee Projection for Fiscal Year 2002

The No-Year account was established by the Technical Amendments Act, P. L.105-80 and holds fees which have been paid by those who use Copyright Office services. We want to use the funds in the No-Year account to improve our public services to those who pay these fees. Our principal use of the No-Year account will be for development of our information technology systems and Business Process Reengineering implementation. We need to insure that adequate funds remain in the account for these critical public service improvements.

The No-Year account balance at the end of the last fiscal year was $4,289,902. The Copyright Office does not expect to add any funds to this account this year. The Office might need to use up to $2 million from its No-Year account funds to make up the shortfall caused by the fiscal 2001 net appropriation reduction.

Status of Future Fee Adjustments

Approximately two-thirds of the Copyright Office budget is funded by fee receipts, primarily fees paid for registering copyrighted works in the Office. The 1997 Technical Amendments Act gives the Register the authority to recommend copyright fees based on certain criteria, with Congress retaining the authority to disapprove a fee increase. In setting fees, the law directs the Register to conduct a study of costs for the service provided. Based on the study, and subject to congressional review, the Register is authorized to fix fees at a level not more than necessary to recover reasonable costs incurred for services plus a reasonable adjustment for inflation. Congress specifically mandated that the fees should also be "fair and equitable and give due consideration to the objectives of the copyright system." These objectives include creating a comprehensive public record of copyright ownership and obtaining works for the use of the Library of Congress for its collections or its exchange programs.

The Copyright Office went through an elaborate and extensive process in establishing the present fees, which became effective on July 1, 1999. This process included hiring two contractors to conduct a cost study and to provide expertise in the new "Federal Managerial Cost Accounting Standards." Since raising fees each year would be costly and disruptive, we indicated that the current fees have a minimum duration of three years. This decision was widely publicized.

In July 1999, we implemented a new fee schedule which included raising our basic registration fee by 50%, from $20 to $30. This fee increase has resulted in fewer copyright registrations, which negatively affects our copyright registration system, our public record of copyright ownership, and the Library of Congress collections.

The Office is now in the process of assessing the current fee schedule to determine if fee adjustments are warranted for fiscal 2002. Even if the Office were to implement a fee increase on July 1, 2002, it would not affect the fiscal 2002 fee receipt projection since the new fees would be in place for just the last quarter of the fiscal year. Past experience has shown that we would see a high incidence of "short" fees submitted in that quarter. Based on this historical evidence, the fiscal 2002 fee receipt forecast is the same as fiscal 2001. Given receipts received in the first half of this year, the Office may see a higher level of receipts for Fiscal Year 2001 than originally forecasted.

VII. Conclusion

Mr. Chairman, I remain most grateful for the support the Subcommittee continues to give the Copyright Office. This support enables us to continue to fulfill our important mission of fostering American creativity through an effective and strong copyright system that benefits both copyright owners and those who use copyrighted works.

1. Corrected since original submission.