Statement of Marybeth Peters
The Register of Copyrights
before the
Subcommittee on
Legislative Branch,
Committee on Appropriations
United States Senate
March 1, 2006
and
Committee on Appropriations
United States House of Representatives
March 10, 2006
109th Congress, 2nd Session
Fiscal Year 2007 Budget Request
Mr. Chairman and Members of the Committee:
Thank you for the opportunity to present the Copyright Office's Fiscal
Year 2007 budget request.
The Copyright Office is requesting the Committee's approval of four
program changes for the Copyright BASIC appropriation. There are three
offsetting collections authority changes and one in net appropriations.
In offsetting collections, we are requesting a $1,590,901 million decrease
in the Reengineering Program funding due to fewer funds in the no year
account, an $850,000 decrease due to a decrease in renewal receipts,
and a $600,000 increase due to an overall increase in receipts from
other service fees. In new net appropriation authority, the Office
requests $1 million to digitally image the pre-1978 public records
to mitigate the risk of loss and to make them available online.
I will discuss these requests in more detail, after I provide an overview
of the Office's work and accomplishments.
Review of Copyright Office Work and Accomplishments
The Copyright Office's mission is to promote creativity by sustaining
an effective national copyright system. We do this by administering
the copyright law; providing policy and legal assistance to the Congress,
the administration, and the judiciary; and by informing and educating
the public about our nation's copyright system. The demands in these
areas are growing and becoming more complex with the evolution and
increased use of digital technology.
I will briefly highlight some of the Office's current and past work
and our plans for FY 2006.
Policy
and Legal Work
We have continued to work
closely with the Senate Committee on the Judiciary, its Subcommittee
on Intellectual Property, and its House counterpart. In May, I testified
before the Senate subcommittee on international piracy of intellectual
property, highlighting the fact that piracy is one of the most enduring
copyright problems throughout the world and the Office's efforts,
together with other Federal agencies, to reduce piracy to the lowest
levels possible.
I also testified twice
last year on ways to modernize music licensing in a digital world.
In June, I testified before the House Subcommittee and in July, I
testified before the Senate Subcommittee. During the first hearing,
I focused on the possibility of permitting “music rights organizations” to
license on a consolidated basis both the public performance right
of a musical work as well as its reproduction and distribution rights.
In the second hearing, I considered alternative solutions to the
music licensing dilemma, including a blanket statutory license for
digital phonorecord deliveries. These hearings and meetings with
representatives of the affected industries produced a consensus that
Section 115 of the copyright law should be modernized to reflect
the needs and realities of the online world. However, there was no
agreement as to how such modernization should be structured and implemented.
Further work is needed in this area and I will continue to work with
the interested parties and Congress on legislative solutions to the
music licensing problem in this and the next fiscal year.
I testified before
the Senate Committee on the Judiciary in September to examine legal
and policy issues in the wake of the Supreme Court's June 27, 2005,
decision in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster,
Ltd. which clarified the doctrine of secondary liability as
it would apply to those who offer products and services in a way
that induces others to engage in copyright infringement. I testified
that the Court's ruling seemed to strike an appropriate balance between
the rights of copyright holders and the flexibility necessary to
enable and encourage technologists to continue to develop new products
and, thus, there was no immediate need for new legislation. I used
the word “seemed” because,
at the time of the hearing, only three months had passed since the
ruling and it was simply too early to tell whether Grokster would
provide sufficient guidance for the years and circumstances to come.
The Office implemented
a new preregistration system, as required by the Family Entertainment
and Copyright Act of 2005, Pub. L. No. 109-9, within the statutory
six-month time frame. Preregistration of an unpublished work being
prepared for commercial distribution allows a copyright owner to
bring an infringement action before the authorized publication of
the work and full registration, making it possible, upon full registration,
to recover statutory damages and attorney fees. The electronic preregistration
filing system became operational on November 15, 2005.
The
Office also conducted two studies in 2005. First, Senators Orrin
Hatch and Patrick Leahy
requested that we examine the issue of “orphan works,” copyrighted
works whose owners
are difficult or impossible to locate, to determine whether there
are compelling concerns that
merit a legislative, regulatory or other solution; and if so, what
type of solution could effectively
address these concerns without conflicting with the legitimate interests
of authors and right
holders. As part of our efforts to produce this study, the Office
collected over 850 written comments
from the public and held roundtable meetings with dozens of interested
parties in the summer
of 2005 in both Washington, D.C. and Berkeley, CA. The Report on
Orphan Works was
delivered to Congress in January 2006. Second, at the request of
Congress, we have also
conducted a study to examine the harm to copyright owners whose programming
is retransmitted
by satellite carriers under a statutory license in Section 119. This
report was also
delivered to Congress in January 2006.
In addition, the Office
has initiated its triennial rulemaking on exceptions from section
1201 prohibition on circumvention of technological measures that
control access to copyrighted works and has received public comments.
In addition, we will conduct hearings in Washington, D.C. and Palo
Alto, CA. to elicit further information from the public. The study
will be concluded in FY 2007, at which time, I will make my recommendations
to the Librarian of Congress on classes of works that should be exempted
from the section 1201 prohibition on circumvention.
We have also been actively
involved in the implementation of the Copyright Royalty and Distribution
Reform Act of 2004 (CRDRA), Pub. L. No. 108-419, which became effective
on May 31, 2005. This Act phases out the Copyright Arbitration Royalty
Panels (CARPs), a program administered by the Copyright Office, and
replaces them with a new Library program which is independent of
the Copyright Office and employs three full-time Copyright Royalty
Judges (CRJs) and three staff. This organization is known as the
Copyright Royalty Board. At the outset of the program, I worked diligently
with my colleagues to identify and recruit the three highly qualified
individuals who the Librarian appointed to the Board in January 2006.
The primary responsibilities
of the CRJs, as with the CARPs which preceded them, are to set rates
and terms for the various statutory licenses contained in the Copyright
Act and to determine the distribution of royalty fees collected by
the Copyright Office pursuant to certain of these licenses. The CRJs
have the additional responsibility to promulgate notice and recordkeeping
regulations to administer some of the statutory licenses. In accordance
with the rate setting schedule set forth in the law, the Board has
initiated three rate setting proceedings and it will conduct hearings
in FY 2007 to set rates for the transmission of sound recordings
over the internet.
We have worked closely
with the Board to insure a smooth transition from the old system
to the new and we have taken steps to conclude open and pending distribution
and rate setting proceedings that were commenced under the Copyright
Arbitration Royalty Panel (CARP) program. The conclusion of these
proceedings, however, does not end my involvement in the determination
of statutory rates and distributions of royalty fees. Under the Reform
Act, the Board must seek a legal opinion from me on any novel question
of copyright law and may seek a written determination on other material
questions of substantive law. Such determinations shall be binding
as precedent upon the Copyright Royalty Judges in subsequent proceedings.
During FY 2007, we will
continue to take an active role in a number of important copyright
cases, many of which challenge the constitutionality of various provisions
of the Copyright Act, and continue to provide ongoing advice to executive
branch agencies on international matters, particularly, the United
States Trade Representative, the Department of Commerce, and the
Department of State; and participate in numerous multinational, regional
and bilateral negotiations.
Registration and Recordation
Registration of
claims to copyright, including renewals, and recordation of documents,
such as assignments, security interests, and mergers, are critical
parts of the U.S. copyright system. Timely registration secures to
owners certain benefits and provides a public record of copyright ownership.
The Office has significantly improved its delivery times for these
services since 2001.
During FY 2005, the Copyright Office received 600,535 claims to copyright
covering more than a million works and registered 531,720 claims. The
Office maintained an average of 80-90 days to issue a registration
certificate, a significant improvement over processing times at the
beginning of the decade. We also reduced the average processing time
for the creation and posting of online copyright records by 50 percent.
The Copyright Office records documents relating to copyrighted works,
mask works, and vessel hull designs and creates records of those documents.
These documents frequently concern popular and economically significant
works. The Office recorded 11,874 documents covering more than 350,000
titles of works in FY 2005. The average time to record a document was
50-60 days.
These achievements took place during a period marked by a significant
investment of staff resources to reengineer Copyright Office processes
and to move online copyright records from legacy systems to a database
in Endeavor System's Voyager.
We expect a significant
decrease in renewal registrations in 2007, due to the expiration
of the renewal provision in the law. Renewal registrations only apply
to works that were copyrighted before January 1, 1978, the effective
date of the current copyright law. Before 1978, if a work was published
with the required notice of copyright or an unpublished work was
registered in the Copyright Office, it received an initial term of
copyright protection of 28 years, and a renewal term that initially
was 28 years and today is 67 years. To receive the renewal term,
a renewal registration had to be made in the last year of the initial
term, i.e., the 28th year. The last date for 28th year
renewals was December 31, 2005.
The law was changed in
1992 to make renewal registration voluntary. This law applies to
works copyrighted between January 1, 1964, and December 31, 1977.
There were certain benefits gained by renewing in the 28th year,
but if no renewal claim was registered in the 28th year
of the term, renewal was automatically secured on the last day of
that year. However, even if renewal is automatically secured, i.e.,
no renewal application was submitted in the 28th year
of the initial term of copyright, a renewal claim may be submitted
after the 28th year and some benefits flow from such a
registration. A number of such registrations are made each year and
we expect to receive two to three thousand renewals in this category
compared to the 16 to 18 thousand renewals we have been receiving
per year.
The President signed the Family Entertainment and Copyright Act (FECA),
Pub. L. No. 109-9, on April 27, 2005. As mentioned earlier, this legislation
amended the copyright law by the addition of a new provision, § 408(f),
establishing preregistration. Preregistration, as distinct from registration,
is available only for unpublished copyrighted works in categories that
the Register of Copyrights finds to have had a history of infringement
prior to commercial distribution. Unlike registration, preregistration
requires only an application which includes a description of the work
and a fee. Preregistration is an online service only; it is part of
the new information technology system called eCO (Electronic Copyright
Office). From April 2005 through the end of the fiscal year, the Office
completed intensive
work to prepare the electronic preregistration application form and
help text, and to do the related IT development, process analysis,
and training required to implement on November 15, 2005. Much of the
development work that was done for the preregistration system will
be applied directly to the electronic registration system that will
be piloted in April 2006.
Public
Information and Education
The Copyright Office responded to 362,263 requests for direct reference
services and electronically published thirty-nine issues of its electronic
newsletter NewsNet — a source that alerts over 5,000
subscribers to Congressional hearings, new and proposed regulations,
deadlines for comments, new publications,
other copyright-related subjects, and news about the Copyright Office.
The Office website continued
to play a key role in disseminating information to the copyright
community and the general public. The Office logged close to 30 million
external hits to key web pages in FY 2005, representing a 49 percent
increase over the previous year. The website received several
enhancements, including introduction of RSS (Really Simple Syndication)
feeds by which members of the public can receive instant notification
of updates and
revisions on pages that change frequently. There is a new history
page that includes biographies of former Registers of Copyright,
annual reports dating back to 1870, and previous copyright acts.
The website is also part of LCNet, a new gateway for members of Congress
and their staff.
Licensing
Activities
The Copyright Office administers certain provisions of the copyright
law's statutory licenses.
The Licensing Division collects royalty fees from cable operators
for retransmitting television and radio broadcasts, from satellite
carriers for retransmitting “superstation” and network signals, and
from importers and manufacturers of digital audio recording products
for later distribution to copyright owners. In calendar year 2005,
the Office collected $212.6 million in royalty funds and distributed
$150.7 million to copyright owners.
Reengineering Program
The Copyright Office's
seven-year Reengineering Program initiative is to redesign delivery
of its public services. This program is customer driven to prepare
our Office for the future growth in electronic submissions. The
Office had planned for the reengineering implementation to be completed
in the first half of FY 2007, to include moving staff offsite so
that its space in the Madison Building could be renovated in one
phase. However, due to infrastructure and offsite lease requirements,
the program cannot be completed until the third quarter of FY 2007.
The program has four major components—process, information technology,
facilities, and organization—that will be fully implemented
in FY 2007.
Process
Accomplishments in the
process component closely tracked IT development. Pilot projects
began in FY 2005 to test both the new processes and the new IT system,
eCO. In the Registration Pilot, several thousand actual copyright
registrations for motion pictures were made using most of the new
processes—incoming paper forms were scanned, hard copy deposits
were bar-coded and tracked, and all internal processing and correspondence
was done in the eCO system.
Other pilots included
the Deposit Selection Pilot, during which examiners successfully
made selection decisions for certain routine monographs and musical
works for the Library of Congress. In an Electronic Deposit Pilot,
selected publishers submitted electronic versions of works via the
internet, in preparation for electronic registration and possible
future deposit of electronic formats for the Library's collections.
As I mentioned earlier, the new preregistration service was implemented
in eCO with an online-only application and completely paperless process.
This service successfully uses Treasury's Pay.Gov for fee payments.
Information Technology
(IT)
During FY 2005, the Copyright Technology Office (CTO) continued to
work closely with the system development contractor SRA International,
on the analysis, design, and building of the new Copyright IT systems
infrastructure that will support the reengineered business processes.
The CTO also made further significant progress on the conversion of
the historical files of copyright registrations and recordations to
MARC format and the preparation for access to the records through the
Voyager system.
To ensure compliance with the Library's new system security regulation
and newly issued security directives, the Office established a Security
Review Board (SRB), made up of Copyright staff and consultants. During
the 10 weeks preceding the implementation of the Registration Pilot,
the SRB created a System Security Plan defining the security requirements,
conducted a risk assessment, carried out a security compliance test
and evaluation, and made recommendations to Copyright Office management
about the security status of the software for this pilot. As a result,
the Office received an interim authorization to operate and the system
moved to production.
In FY 2006, the Office plans to expand its implementation
of an on-line web portal—eCO Service—to allow the public to
apply for copyright services online and pay with a credit card or bank
account through Pay.Gov. Claims processing through the web portal will
initially be a pilot to allow for full testing of the system before
making it available to all the public in 2007. Additionally,
we will use eCO to search a Voyager database of copyright records dating
back to January 1, 1978.
In FY 2007 the Office plans to complete the IT component by transforming
eCO Service from a pilot to full operational capability for processing
copyright claims and issuing registration certificates, processing
statements of account for statutory licenses, processing acquisition
demands under section 407, and recording transfers, assignments, and
other documents.
Facilities
In November 2004, the
Library appointed a project manager funded by the Copyright Office
to oversee the Madison Building renovation project and coordinate
attendant swing space moves within Capitol Hill and offsite. The
Copyright Office hired a move management company to oversee the moves
offsite and back to the Madison Building. In late September 2005,
after an extensive search for temporary offsite lease space, the
Library signed occupancy agreements with Government Services Administration
(GSA) for space within two buildings in Crystal City, Va. In December
2005, an RFP was issued for construction of the offsite rental space.
A contract was awarded in February 2006 and construction began in
late February. Most of the Office's staff will move offsite in early
July 2006. The remaining operations and staff will be located in
the Adams and Madison buildings. We expect all staff to return to
the Madison renovated space in July 2007.
Organization
The Office completed new
and revised position descriptions to support the new processes for
most of the divisions in the new organizational structure. Preliminary
work was done to prepare for the “cross-walk” of staff from current
to new positions and from the current divisions and sub-units to
the new ones. The Office began drafting documents required for the
reorganization package as specified in Library of Congress regulations.
In FY 2007, the new organization and positions will be implemented,
coinciding with the return of the staff to the Madison Building and
the implementation of new processes.
FY 2007 Budget
Request
Reengineering
No new funding is needed
for reengineering for FY 2007. Rather, the Office is reducing its
offsetting collections base by $1,590,911 as a result of fewer funds
remaining in the no-year account.
Renewal
Receipts
With respect to renewal
registrations, the Office is reducing its offsetting collections
authority by $850,000 and five staff due to the fact that the number
of renewal registrations will decrease significantly in FY 2007.
When
renewal registration was required, the Office registered approximately
52,000 claims. Since the enactment of the automatic renewal provision
in 1992, the number of renewal claims have decreased each year. In
FY 2005, the Office received approximately 15,893 renewal claims
bringing in fees of approximately $1.2 million. In FY 2006, we believe
that amount will drop to about $500,000 and in FY 2007 to about $150,000.
Our records show that approximately 5,500 renewal claims were received
in October, November, and December 2004. This has decreased to 4,839
for the same period in 2005 and is expected to decline throughout
the rest of FY 2006.
Overall Fees Increased
Over the past two years, the overall fees collected for the Basic
Fund have gradually increased and are projected in FY 2007 to exceed
the normal receipts level of approximately $23 million by $600,000.
This is based on more dollars being received across all the fee products,
not from a change in the fee schedule. Based on this trend, the Office
requests a permanent $600,000 increase in offsetting collections authority.
Copyright
Records Preservation
The
Office requests funding to digitize the pre-1978 copyright records.
The key objectives of this record digitization project are (1) disaster
preparedness preservation of pre-1978 public records and (2) provision
of online access to those public records. Copyright records are vital
to the mission of the Library of Congress and the Copyright Office
and they are important to the public and the copyright industries
that are a significant part of the global economy. The pre-1978 records
document the ownership and copyright status of millions of creative
works. Loss of these sole-copy public records due to a site disaster
would trigger a complex and expensive intellectual property ownership
dilemma. Additionally, the unavailability of pre-1978 records online
has been raised as a major issue in the study on the problem of “orphan
works.”
During
FY 2005, the Copyright Office, with the Library's Office of Strategic
Initiatives, completed the Copyright Records Project study of the feasibility
of digitizing millions of these paper records and developing technical
approaches for integrating the resulting digital records with post-1977
digital records. The project team completed testing of vendor capabilities
to digitize and index sample records. A comprehensive report of the
project provided implementation strategies, cost estimates, and a recommendation
for how the conversion could be handled in two stages.
The first stage would cost approximately $6,000,000
over a six-year period and would achieve the preservation goal and
very basic online access. The second stage would add item level indexing,
enhanced searching and retrieval, costing between $5,000,000 and $65,000,000
depending on the extent of fields indexed. The Copyright Office is
requesting for FY 2007 the initial $1 million to begin the first stage.
Future Fee
Increase
On November 13, 1997,
Congress enacted the Technical Amendments Act, some provisions of
which are now codified in 17 U.S.C. §708. The law requires
the Register of Copyrights, whenever appropriate, to conduct a study
of costs incurred by the Office for the registration of claims, the
recordation of documents and other special services. On the basis
of the study and public policy considerations and subject to congressional
review, the Register is authorized to increase statutory and related
fees to recover reasonable costs adjusted for inflation. Furthermore,
the new fees should be fair and equitable and give due consideration
to the objectives of the copyright system.
The
last time the Copyright Office raised fees was July 2002. The basic
filing fee was set in 1999 and has not increased since that time.
Historically, a change in the charge for services usually causes
a drop in customer demand in the fiscal year following the increase
and then a gradual rise in demand over the next two years. The possibility
for raising fees was considered in 2001-2002. Because the Office
had just begun its reengineering project to implement electronic
registrations, and that project was to have been completed in 2006,
the fee increase was postponed to coincide with the implementation
of the new electronic system. However, since the implementation date
for the new system is now summer 2007, we believe that we should
move forward with a change to fees now.
I have received fee recommendations
based on a cost study developed by a task group. We
will complete
the required economic analysis and propose a schedule of fees to
Congress in March 2006 to be effective July 1, 2006. The
Office will publish a notice in the Federal Register to announce
a proposed fee schedule. Based
on a year's experience under the revised fee schedule and the new
business processes, the Office expects to adjust the mix of net appropriation
and offsetting collections authority in its FY 2008 BASIC budget
submission to Congress.
Conclusion
Mr. Chairman, I ask you to support the FY 2007 Copyright Basic budget
request for a permanent net decrease in offsetting collections for
the BASIC appropriation and a one time $1 million increase in net appropriations for
the Digital Imaging project.
Our FY 2007 budget will allow us to implement the final steps of
our Reengineering Program. Once implemented, the Office plans to further
reduce both its net appropriations and offsetting collections authority
in the FY 2008 budget request as well as adjust the net appropriations
and offsetting collections based on the implementation of new fees.
We appreciate your continued support for the Reengineering Project
that will transform the way we do business and meet the public's demand
for electronic services.
I thank the Committee for its past support of the Copyright Office
requests and for your consideration of this request in this challenging
time of transition and progress.
|
