Journal of Law, Information and Science
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MARK DAVISON[*]
The Final Report of the United States Working Group on Intellectual Property Rights entitled ‘Intellectual Property and the National Information Infrastructure’ was released on the 5th September, 1995. If its recommendations are accepted by the US government, the Report will have a very significant impact on not only US copyright law, but copyright law throughout the world.
This article summarises and explains the Report’s recommendations. It goes on to comment on the potential effects of those recommendations. In doing so, it also notes some of the underlying assumptions of the Report and issues which the Report has either deliberately or unwittingly ignored. It concludes that the report has, to a large extent, responded to the perceived needs of copyright owners but paid little attention to the needs of copyright users.
The Final Report of the United States Working Group on Intellectual Property Rights entitled, “Intellectual Property and the National Information Infrastructure” (hereafter referred to as ‘the Report’) was released on 5th September, 1995. The Report deals with the intellectual property implications of new communications technology.[1] If it is accepted by the US Congress and incorporated into US legislation, it will inevitably have a significant impact on Australia. There are several reasons why this is so.
First, as a consequence of the principle of national treatment, dealings with Australian copyright material in the US will be dealt with on the basis of the new US law. Second, and more importantly, the US approach to copyright will almost certainly have a pervasive effect on national copyright regimes throughout the world, including that of Australia. This effect will be felt via both persuasion and pressure. The amount of copyright material that originates from the US and the economic importance of the US are such that any proposal for copyright which it adopts will have considerable persuasive force on other countries.
In addition, it is not unknown for the US to attempt to impose its views on intellectual property on other nations. This can occur via s 301 of the US Trade Act 1974 which provides for the identification by the US Trade Representative of those foreign nations that do not provide adequate and effective intellectual property protection for US copyright material. These nations can then be subjected to trade sanctions by the US. The implementation or a threat of implementation of such sanctions is likely to influence nations in their choice of copyright law. For example, in its Final Report on Computer Software Protection[2], the Australian Copyright Law Review Committee (hereafter referred to as ‘the CLRC’) went to some lengths to state that it was hopeful that its recommendation would reassure the US government that Australia should not be on a priority watch list for the purposes of s 301.[3]
Unilateral action such as that under s 301 will almost certainly be supplemented by attempts to alter multi-lateral international agreements to reflect US views on copyright. In particular, the Berne Convention and TRIPS will at some stage in the foreseeable future have to deal with the issues raised in the Report. Any alterations to those agreements would place an onus on Australia to adjust its copyright laws to reflect those alterations.
Consequently, close attention needs to be paid to the Report and the policy issues implicit within it. In particular, the CLRC’s present review[4] of the Copyright Act 1968 (Cth) (hereafter referred to as ‘the Act’) will undoubtedly pay close attention to the Report. It is to be hoped that the CLRC will not uncritically accept all of the recommendations made in the Report or all the assumptions implicit in it.
The next section of this article will provide a summary of the copyright issues addressed by the Report and the recommendations made to deal with them. Thereafter, some comments will be made about the recommendations and some of the underlying assumptions in the Report.
The Report considered the ‘special intellectual property concerns and issues raised by the development and use of the [US] NII [National Information Infrastructure]’.[5] In particular, it was concerned with the issues raised by the convergence of computer technology and communications. Technological developments in these areas have led and will increasingly lead to the situation where ‘users will be able to communicate and interact with other computers, telephones, televisions, radios, fax machines and more - all in digital form’.[6] Any material that can be converted to digital form either can now or will be able to be transmitted via and between any of these devices with astonishing speed and accuracy. Almost any two dimensional copyright materials can be converted to digital form and transmitted in this way. Hence, literary works, for example, can be converted into digital form (either by typing on a word processor or scanning into a computer) and sent via computer to any number of other computers with which it is connected. The receiving computer may be many thousands of miles away but it may receive the literary work within seconds. The beneficial effects of such technological advances are obvious as is the potential for abuse of copyright. This sending of work in digital form is commonly referred to as a ‘transmission’.
The Report’s response to these issues was to take what it claimed to be a minimalist approach to copyright reform. It described the need for copyright reform by stating that ‘The coat is getting a little tight. There is no need for a new one, but the old one needs a few alterations.’[7]
The primary recommendation of the Report is that US copyright law be amended to reflect the fact that copyright materials can be transmitted and that some of the existing exclusive rights of copyright owners can be infringed by transmissions.
Under US law, a copyright owner has the exclusive right ‘to distribute copies . . . of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease or lending’.[8] This exclusive right is subject to a number of limitations such as the first-sale doctrine. This provides that the owner of a lawfully made copy may sell or otherwise dispose of the possession of that copy.[9] However, distribution of an unlawfully made copy will infringe the right.[10]
The Report recommends that the law expressly acknowledges that distribution can take place by way of transmission. The Report considers that such an amendment would clarify the law on the point. The concern is that it may be argued that no distribution has occurred because ‘the original or copy typically remains in the transmitting computer and a copy resides in the memory of, or in storage devices associated with, each of the other computers’.[11] As noted in the report, ‘the proposed amendment does not create a new right’[12] but merely clarifies what constitutes an exercise of that right. Indeed, there is already existing US case law on the point.[13]
The publication of copyright material is relevant to a number of matters in copyright law. Under US law, a publication of copyright material has not occurred unless and until a material object has changed hands.[14] The Report recommends that the definition of publication be amended to include transmission to the public. Again, the reason for this amendment is that transmissions do not involve the transfer of material objects.
The Importation Provision
US copyright law prohibits the importation of pirate or unauthorised copies of copyright material and parallel imports[15] for distribution.[16] The report recommends that transmission be treated as a form of importation in the same way as importation of tangible objects via air or sea (or road in the case of the US).[17] Again, this clarification is required as no material object is physically imported as a consequence of transmission.
Unlike most nations with strong copyright protection, the US does not provide a public performance right for sound recordings.[18] The Report recommends the introduction of such a right.[19] It also recommends that US copyright law reflect the possibility that public performance of works and sound recordings can be made by transmission.[20]
The US Copyright Act provides certain exemptions for copying by libraries and archives. At present, such copying does not include digital reproduction.[21] The Report recommends that this situation be altered. It recommends that libraries and archives be permitted to prepare 3 copies of works in digital form provided no more than 1 copy is in use at any time while the others are archived.[22] In addition, digital copies may be made for purposes of preservation.[23]
The Report also recommends certain exemptions for non-profit organisations ‘to reproduce and distribute to the visually impaired - at cost - Braille, large type, audio or other editions of previously published literary works in forms intended to be perceived by the visually impaired’.[24]
Criminal Offences
Under present US law, criminal penalties exist for wilful infringement of copyright done for the purposes of commercial or financial advantage. The Report recommends the expansion of criminal prosecution to include criminal liability for wilful multiple infringement even where there is no commercial motive for the infringement. In particular, wilful reproduction or distribution of copies with a retail value of $5,000 or more will render the infringer liable to criminal penalties.[25]
The Report noted that many copyright owners will use technological means to protect their works. These technological means include combinations of hardware and software devices such as the hardware device discussed in Autodesk Inc v Dyason[26] and software controlls on access to file servers and individual files.[27] Alternatively, encryption can be used to ‘scramble’ data that is being transmitted and make it unintelligible to those who do not have possession of encryption ‘keys’ to decrypt the data.[28] Other technological means of protecting copyright material are also discussed in detail in the Report.[29]
These technological means of protection can themselves be subject to technological means of defeating their operation. The Report recommends that legislation deal with this issue by prohibiting
‘the importation, manufacture or distribution of any device, product or component incorporated into a device or product, or the provision of any services, the primary purpose or effect of which is to avoid, bypass, remove, deactivate, or otherwise circumvent, without authority of the copyright owner or the law, any process, treatment, mechanism or system which prevents or inhibits the violation of any of the exclusive rights under Section 106’[30]
One of the difficulties with this test is the need to establish the primary purpose or effect of the device, product or service that is designed to defeat the technology in place to protect a work. If the primary purpose or effect is to circumvent protection systems for a lawful purpose, there will be no infringement. For instance, a device used to permit fair use of a technologically protected copyright work may not infringe the provision. It is likely that the US courts would be placed in a similar position to that in which common law courts have in general been placed when determining the copyright liability of manufacturers of recorders and other devices with the potential to be used to infringe copyright.[31]
Finally, the Report recommends restrictions on the dissemination of false information concerning copyright management information associated with a work.[32] This information includes such things as ‘the name of the copyright owner and the terms and conditions for uses of the work’.[33] While it is not and would not be compulsory for a copyright owner to provide such information, it is valuable in facilitating dealings with copyright works as its provision reduces transaction costs associated with arranging any dealings with the work. Consequently, the Report recommends the prohibition of ‘the provision, distribution or importation for distribution of copyright management information known to be false and the unauthorised removal or alteration of copyright management information’.[34]
On its face, each recommendation seems to be unexceptional and part of a minimalist approach to amending copyright in order to accommodate technological changes. However, some of the Report’s recommendations may have far-reaching effects. More importantly, many of the Report’s effects will flow from what it did not recommend and the assumptions that it adopted in making its recommendations. This section of the article looks at some of the Report’s potential effects.
One potential effect of the Report’s assumptions and recommendations is to prohibit reading and browsing literary works transmitted in digital form. Such an effect would, of course, constitute a huge increase in the rights of copyright owners at the expense of copyright users. This effect flows from an assumption made in the Report by the Working Group. The assumption is that works stored temporarily in the Random Access Memory (RAM) of a computer are, by that act of storage, reproduced.
In order to view a literary work on a computer screen, the work must be temporarily stored in the computer’s RAM. As soon as the computer is switched off, the work ceases to exist in RAM. Some US cases have adopted the position that when a work resides in RAM, a sufficient fixation occurs to justify the conclusion that the work has been reproduced.[35]
The Report does not challenge this view or examine the appropriateness of it. Indeed, it embraces this view.
‘The fundamental right to reproduce copyrighted works in copies and phonorecords will be implicated in innumerable NII transactions. Indeed, because of the nature of computer-to-computer communication, it will be implicated in most NII transactions. For example, when a computer user accesses a document resident on another computer, the image on the user’s screen exists - under contemporary technology - only by virtue of the copy that is reproduced in the user’s computer memory.’[36]
The effect of permitting temporary storage in RAM to be treated as reproduction then has the further effect that storing a work in RAM simply for the purpose of browsing through or reading it will constitute a breach of the exclusive right of reproduction unless the copyright owner has authorised the reproduction or some other statutory defence justifies the reproduction. The Report’s acquiesence in this position constitutes a very large shift in the balance between the rights of copyright owners and copyright users.
The situation is worsened by the Report’s recommendation that transmission be considered a means of distribution to the public. In addition to being a breach of the right of reproduction, the transmission of a work to the public would breach the right of distribution. Again, the transmission of a ‘copy’ to a computer’s RAM would constitute a breach of the right of distribution.[37]
One of the Report’s justifications for extending the right of distribution to embrace transmission is that this does not significantly expand the rights of copyright owners.
‘ . . . since transmissions of copies already clearly implicate the reproduction right, it is misleading to suggest that the proposed amendment of the distribution right would expand the copyright owner’s rights into an arena previously unprotected’.[38]
While this may be so, it is only because the Report chose not to critically consider the appropriateness of the US position on what constitutes reproduction. Further, the Report makes this comment:
‘Copies distributed via transmission are as tangible as any distributed over the counter or through the mail. Through each method of distribution, the consumer receives a tangible copy of the work.’[39]
The statement is correct if the work is stored in some permanent form such as ROM (Read Only Memory), floppy disk or even printed out from the user’s computer. It is not correct if it refers to transmissions to RAM.
A further impact of the Report’s recommendations will be to have a negative effect on operators of bulletin board servers (BBS). These are computers that act as electronic noticeboards on the Internet. Members of the bulletin board can ‘post’ or ‘upload’ material to the BBS to be ‘downloaded’ from the BBS by other members of the bulletin board. There is obvious potential for the bulletin boards to be used to facilitate copyright infringement. On the other hand, they have a vital role to play in facilitating communications on the Internet. The liability imposed on BBS operators for copyright infringement that occurs via their bulletin boards will determine the extent to which they will fulfil their potential as facilitators of national and international communications.
Liability for copyright infringement has already been imposed on the operators of BBS in some cases in the US[40] although the basis of that liability is not clearly stated in those cases.[41] The Report declined to recommend that BBS operators be exempted from liability or subject to a higher standard for liability than other individuals.
‘The Working Group believes it is - at best - premature to reduce the liability of any type of service provider in the NII environment. On-line service providers currently provide a number of services. With respect to the allowance of uploading of material by their subscribers, they are, in essence, acting as an electronic publisher. In other instances, they perform other functions. No one rule may be appropriate. If an entity provided only the wires and conduits - such as the telephone company, it would have a good argument for an exemption if it was truly in the same position as a common carrier and could not control who or what was on its system.’[42]
The Report went on to canvass the possibility of reducing the liability of some BBS operators at a later time in some circumstances but went no further than saying that ‘such situations could and should be identified through discussion and negotiation among the service provider, the content owners and the government’.[43] The net result is that BBS operators are left with liability for any copyright infringement arising out of uploading or downloading any material to or from their bulletin boards. This leaves them with the options of ceasing to operate as BBS operators; undertaking the time-consuming, expensive and, possibly, impossible task of checking all communications for copyright infringement or taking the risk of being sued for copyright infringement. Effectively, the Report recommends that the operation of a BBS should be difficult and expensive and that there should be fewer of them. The implications of this for the distribution of information over the Internet are clear.
The Report’s recommendation that transmission of copies of works from overseas into the US be treated like any other importation also seems unexceptional on its face. But this is deceptively simplistic because of what constitutes a copy. There is no difficulty with the proposition that transmission of a work which is stored in some permanent form should constitute an importation. But if a transmission to RAM constitutes a copy and, thus, importation of a copy, the importation provisions may be breached even though no-one in the US has retained, in any meaningful sense, a copy of the work.
On a wider note, technological developments in communication raise some doubts as to the continued appropriateness of prohibiting parallel importing. Prohibitions on parallel importing permit copyright owners to create separate geographical markets[44] for their products and are justified on the basis of the investment by the copyright owner in that geographical area.[45] However, changes in technology now make or will soon make geography either irrelevant or largely irrelevant in the context of distribution of copyright material. Distribution of works can occur over vast distances in mere seconds. The costs of distribution are not closely related to distance and the arguments by copyright owners that they need exclusive rights within national borders will have less and less authority as technology improves. The minimalist approach of the Report fails to address this issue.
The recommendations concerning the public performance right for sound recordings are relatively innocuous. The concept of a public performance occurring by way of a transmission is easily enough understood, particularly as consumers will be able to ‘receive digital transmissions of sound recordings on demand - for performance in the home or downloading - from the so-called “celestial jukebox”’.[46] This means of on-demand consumption of sound recordings will rival and may take over from the established technology of cassette tapes and compact discs that are used on stereo equipment owned by consumers. Commercial operators that provide this on-demand transmission service in the future should clearly pay royalties for this use of sound recordings.
On the other hand, the same problem arises concerning the issue of reproduction that has already been discussed elsewhere in this article. If the loading into RAM constitutes a reproduction, royalties will also have to be paid for exercising the copyright owner’s exclusive right of reproduction.[47]
In addition, the right of reproduction will be infringed regardless of whether the transmission is to the public or is a private transmission between two friends. In this respect the Report again fails to acknowledge the extent to which geography has become irrelevant in communications. Playing a sound recording for a friend will not necessarily mean inviting them to your home and sharing your personal space with them. It may be done by sharing your personal cyberspace with them by transmitting your favourite sound recording to them in their home.
While the Report provides some exemptions for libraries and archives, it fails to address some key issues for libraries. In particular the American Library Association has expressed its disappointment that the Report is silent on the question of the use of digital technology to expand distance learning opportunities.[48] The Report’s effective endorsement of the case law on reproduction creates real obstacles to taking advantage of such opportunities. Its only proposed solution is to encourage licence agreements between copyright owners and libraries rather than recommend specific statutory exemptions or statutory licences for libraries.[49] In other words, the public must pay copyright owners if it wishes to gain the advantages of new technology. The Report’s rationale for this seems to be that the market place should dictate the price to be paid for use of copyright works.[50] This is a questionable rationale given that the market place, left entirely to its own devices, would offer nothing to those who now or will in the future own copyright. The only reason copyright owners have any power in the market place is that Congress has granted them statutory rights which they can sell. The question is, “What should be the nature and extent of those rights?”. The answer to that question will dictate what happens in the market place and that answer is one that requires policy decisions to be made rather than avoided as seems to be the case with the Report.
While the Report’s recommendations on technological protection have some validity, they demonstrate that some double standards have been adopted in the Report’s preparation. One of the criticisms directed at these proposals was that they prevented access to work for use for legitimate purposes such as fair use. The Report’s response was that copyright owners have no obligation to provide access to their works.[51] This is correct. However, that does not justify the decision to increase the legal capacity of copyright owners to deny that access. Here we have a situation in which copyright users can, at present, lawfully use technology to increase their use of copyright material without cost. The Report says that the law should change to prevent what is presently lawful because of the consequences that might flow from maintaining the status quo. Yet, on the vital issue of what constitutes a reproduction, the Report is content to accept the existing law without any discussion of the consequences of accepting a technical view of reproduction that effectively grants copyright owners the exclusive right to read literary works in digital form. In short, the Report addresses the concerns of copyright owners that flow from technological changes but does little, if anything, to address the concerns of copyright users that flow from those changes.
The Report claims to be a minimalist one with its reference to alterations to the coat of copyright. In fact, by its recommendations and, more to the point, its lack of recommendations, the Report does far more than alter the coat of copyright. It effectively makes a new coat which is tailor-made for copyright owners and sends the bill for the tailoring to copyright users. It is to be hoped that the Report will be subjected to very close scrutiny in the US before any of its recommendations are passed into statute. It is also to be hoped that the CLRC will treat it with caution when the Australian report is prepared, rather than embrace its assumptions and pro-copyright owners’ perspective.
[*] Faculty of Law, Monash University
[1] The Report makes some recommendations concerning patents and trade marks. This article is restricted to examining the recommendations concerning copyright.
[2] ‘Computer Software Protection’ Copyright Law Review Committee, Commonwealth of Australia, 1995.
[3] Ibid at pp 30-31.
[4] The CLRC has been asked by the Minister for Justice to conduct a wide-ranging inquiry into the Act. The CLRC will report on some matters by the 29th February 1996 and the remainder of matters by 30 November 1997.
[5] The Report at p 7.
[6] Ibid at p 10.
[7] Ibid at p 309.
[8] 17 USC s 106.
[9] 17 USC s 109(a).
[10] The US provisions concerning distribution are roughly equivalent to ss 38 and 103 of the Act.
[11] Op cit at p 310.
[12] Ibid at p 311.
[13] Playboy Enterprises Inc v Frena 839 F Supp 1552 (MD Fla 1993).
[14] 17 USC s 101 (1988) ‘“Publication” is the distribution of copies or phonorecords of a work to the public . . .’
[15] See Davison, MJ, ‘The Market for Books: Open or Closed’ (1990) 18 ABLR 179 for a discussion of the nature and legality of parallel importing in Australia.
[16] 17 USC s 602(a) (1988); T.B. Harms Co v Jem Records Inc. 655 F Supp 1575 (DNJ 1987).
[17] Op cit at p 322.
[18] In Australia, the right in question is the exclusive right to cause the recording to be heard in public, s 85 of the Act. There may be some differences between this right and a right of public performance but they will not be explored in this article.
[19] Op cit at p 323.
[20] The sound recording in question can be transmitted in digital form to a computer with the capacity to ‘convert’ that digital form into sounds to be heard at the receiving end of the transmission.
[21] Op cit at p 328.
[22] Ibid at p 330.
[23] Ibid.
[24] Ibid at p 332.
[25] Ibid at p 334.
[26] Autodesk Inc v Dyason (No 1) [1992] HCA 2; (1992) 66 ALJR 233.
[27] Op cit at pp 264-266.
[28] Ibid at pp 267-270.
[29] Ibid at pp 264-290 generally.
[30] Ibid at pp 335-336.
[31] Eg CBS Songs Ltd v Amstrad Consumer Electronics [1988] UKHL 15; (1988) AC 1013.
[32] Op cit at pp 342-343.
[33] Ibid at p 342
[34] Ibid at pp 342-343.
[35] Eg Advanced Computer Services of Michigan Inc v MAI Systems Corp. 845 F Supp 356, 363 (ED Va 1994). The position in Australia is unclear. In the Full Court of the Federal Court of Australia, Sheppard J stated in obiter in Dyason v Autodesk Inc (1990) 24 FCR 149 at 177:
‘I have, however, serious misgivings whether it is appropriate to say that the transfer of the program to the random access memory itself constitutes either a reproduction or an adaptation.’
Beaumont J expressed a similar view at p 201 of the report although Lockhart J declined to comment (see pp 156-157). No definitive decision has been given on the point. Later decisions have declined to answer the question on the grounds that there is, at the least, an implied licence granted by a copyright owner of a computer program to the user of a legitimate copy of that program to use it by having it in RAM (eg Australian Computer Evaluation Consultants Pty Ltd v Datbury Pty Ltd (1995) AIPC 91-147). The question is still unresolved as to whether a ‘use’ of a computer program is a reproduction.
[36] Op cit at p 91.
[37] Ibid at p 310.
[38] Ibid at p 314. The same act of transmission may infringe both the rights of reproduction and distribution. The relevance of this is that different legal persons may own the different rights and both may bring action for infringement of the different rights.
[39] Ibid at p 315.
[40] See eg Sega Enterprises Ltd v MAPHIA 857 F Supp 679 (ND Cal 1994); Playboy Enterprises Inc v Frena 839 F Supp 1552 (MD Fla 1993).
[41] See Elkin-Koren, N, “Copyright Law and Social Dialogue on the Information Superhighway: The Case Against Copyright Liability of Bulletin Board Operators” (1993) 13 Cardozo Arts and Entertainment Law Journal 346 for a discussion of the basis of liability of BBS operators in the US.
[42] Op cit at p 175-176.
[43] Ibid at p 178.
[44] The word ‘market’ is not being used in a technical, economic sense in this context.
[45] See Davison op cit for a discussion of some of the justifications of prohibiting parallel importing.
[46] Op cit at p 322.
[47] An issue may arise as to which party is making the reproduction in these circumstances. For example, is it the owner of the ‘celestial jukebox’ or the receiver of the transmission or both? Alternatively one or other of the parties may be liable for authorising the relevant reproduction. For present purposes, it is sufficient to note that at least one party involved in the transmission would be liable.
[48] ALAWON Vol 4, No 80, Sept. 8 1995
[49] Op cit at pp 74-75.
[50] Ibid at p 74. ‘The market place should be allowed to develop whatever legal licensing systems may be appropriate for the NII’.
[51] Ibid at p 336.
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