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105th Congress                                            Rept. 105-551
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part 2
_______________________________________________________________________


 
                DIGITAL MILLENNIUM COPYRIGHT ACT OF 1998

                                _______
                                

 July 22, 1998.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


  Mr. Bliley, from the Committee on Commerce, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 2281]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Commerce, to whom was referred the bill 
(H.R. 2281) to amend title 17, United States Code, to implement 
the World Intellectual Property Organization Copyright Treaty 
and Performances and Phonograms Treaty, having considered the 
same, report favorably thereon with an amendment and recommend 
that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................    20
Background and Need for Legislation..............................    21
Hearings.........................................................    28
Committee Consideration..........................................    28
Roll Call Votes..................................................    28
Committee Oversight Findings.....................................    32
Committee on Government Reform and Oversight.....................    32
New Budget Authority, Entitlement Authority, and Tax Expenditures    32
Committee Cost Estimate..........................................    32
Congressional Budget Office Estimate.............................    32
Federal Mandates Statement.......................................    34
Advisory Committee Statement.....................................    35
Constitutional Authority Statement...............................    35
Applicability to Legislative Branch..............................    35
Section-by-Section Analysis of the Legislation...................    35
Changes in Existing Law Made by the Bill, as Reported............    68
Additional Views.................................................    85

    The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Digital Millennium Copyright Act of 
1998''.

SEC. 2. TABLE OF CONTENTS.

Sec. 1. Short title.
Sec. 2. Table of contents.

                 TITLE I--WIPO TREATIES IMPLEMENTATION

Sec. 101. Short title.
Sec. 102. Circumvention of copyright protection systems.
Sec. 103. Integrity of copyright management information.
Sec. 104. Civil remedies.
Sec. 105. Criminal offenses and penalties.
Sec. 106. Savings clause.
Sec. 107. Development and implementation of technological protection 
measures.
Sec. 108. Technical amendments.
Sec. 109. Effective date.

          TITLE II--INTERNET COPYRIGHT INFRINGEMENT LIABILITY

Sec. 201. Short title.
Sec. 202. Limitations on liability for Internet copyright infringement.
Sec. 203. Limitations on exclusive rights; computer programs.
Sec. 204. Liability of educational institutions for online infringement 
of copyright.
Sec. 205. Evaluation of impact of copyright law and amendments on 
electronic commerce and technological development.
Sec. 206. Effective date.

  TITLE III--EPHEMERAL RECORDINGS; DISTANCE EDUCATION; EXEMPTION FOR 
                         LIBRARIES AND ARCHIVES

Sec. 301. Ephemeral recordings.
Sec. 302. Limitations on exclusive rights; distance education.
Sec. 303. Exemption for libraries and archives.

                      TITLE IV--RELATED PROVISIONS

Sec. 401. Report by National Telecommunications and Information 
Administration.

                 TITLE I--WIPO TREATIES IMPLEMENTATION

SEC. 101. SHORT TITLE.

  This title may be cited as the ``WIPO Copyright Treaties 
Implementation Act''.

SEC. 102. CIRCUMVENTION OF COPYRIGHT PROTECTION SYSTEMS.

  (a) Violations Regarding Circumvention of Technological Protection 
Measures.--(1)(A) The Secretary of Commerce shall issue regulations 
prohibiting any person from circumventing a technological protection 
measure that effectively controls access to a work protected under 
title 17, United States Code, to the extent provided in this 
subsection, effective at the end of the 2-year period beginning on the 
date of the enactment of this Act.
  (B) During the 2-year period described in subparagraph (A), and in 
each succeeding 2-year period, the Secretary of Commerce, in 
consultation with the Assistant Secretary of Commerce for 
Communications and Information, the Commissioner of Patents and 
Trademarks, and the Register of Copyrights, shall conduct a rulemaking 
on the record to determine whether users of copyrighted works have 
been, or are likely to be in the succeeding 2-year period, adversely 
affected by the implementation of technological protection measures 
that effectively control access to works protected under title 17, 
United States Code, in their ability to make lawful uses under title 
17, United States Code, of copyrighted works. In conducting such 
rulemaking, the Secretary shall examine--
          (i) the availability for use of copyrighted works;
          (ii) the availability for use of works for archival, 
        preservation, and educational purposes;
          (iii) the impact of the application of technological 
        protection measures to copyrighted works on criticism, comment, 
        news reporting, teaching, scholarship, or research;
          (iv) the effect of circumvention of technological protection 
        measures on the market for or value of copyrighted works; and
          (v) such other factors as the Secretary, in consultation with 
        the Assistant Secretary of Commerce for Communications and 
        Information, the Commissioner of Patents and Trademarks, and 
        the Register of Copyrights, considers appropriate.
  (C) The Secretary, with respect to each particular class of 
copyrighted works for which the Secretary has determined, pursuant to 
the rulemaking conducted under subparagraph (B), that lawful uses have 
been, or are likely to be, adversely affected, shall waive the 
applicability of the regulations issued under subparagraph (A) for the 
ensuing 2-year period. The determinations made in the rulemaking shall 
not be admissible in any action to enforce any provision of this Act 
other than this paragraph.
  (2) No person shall manufacture, import, offer to the public, 
provide, or otherwise traffic in any technology, product, service, 
device, component, or part thereof, that--
          (A) is primarily designed or produced for the purpose of 
        circumventing a technological protection measure that 
        effectively controls access to a work protected under title 17, 
        United States Code;
          (B) has only limited commercially significant purpose or use 
        other than to circumvent a technological protection measure 
        that effectively controls access to a work protected under 
        title 17, United States Code; or
          (C) is marketed by that person or another acting in concert 
        with that person with that person's knowledge for use in 
        circumventing a technological protection measure that 
        effectively controls access to a work protected under title 17, 
        United States Code.
  (3) As used in this subsection--
          (A) to ``circumvent a technological protection measure'' 
        means to descramble a scrambled work, to decrypt an encrypted 
        work, or otherwise to avoid, bypass, remove, deactivate, or 
        impair a technological protection measure, without the 
        authority of the copyright owner; and
          (B) a technological protection measure ``effectively controls 
        access to a work'' if the measure, in the ordinary course of 
        its operation, requires the application of information, or a 
        process or a treatment, with the authority of the copyright 
        owner, to gain access to the work.
  (b) Additional Violations.--(1) No person shall manufacture, import, 
offer to the public, provide, or otherwise traffic in any technology, 
product, service, device, component, or part thereof, that--
          (A) is primarily designed or produced for the purpose of 
        circumventing protection afforded by a technological protection 
        measure that effectively protects a right of a copyright owner 
        under title 17, United States Code, in a work or a portion 
        thereof;
          (B) has only limited commercially significant purpose or use 
        other than to circumvent protection afforded by a technological 
        protection measure that effectively protects a right of a 
        copyright owner under title 17, United States Code, in a work 
        or a portion thereof; or
          (C) is marketed by that person or another acting in concert 
        with that person with that person's knowledge for use in 
        circumventing protection afforded by a technological protection 
        measure that effectively protects a right of a copyright owner 
        under title 17, United States Code, in a work or a portion 
        thereof.
  (2) As used in this subsection--
          (A) to ``circumvent protection afforded by a technological 
        protection measure'' means avoiding, bypassing, removing, 
        deactivating, or otherwise impairing a technological protection 
        measure; and
          (B) a technological protection measure ``effectively protects 
        a right of a copyright owner under title 17, United States 
        Code'' if the measure, in the ordinary course of its operation, 
        prevents, restricts, or otherwise limits the exercise of a 
        right of a copyright owner under title 17, United States Code.
  (c) Other Rights, Etc., Not Affected.--(1) Nothing in this section 
shall affect rights, remedies, limitations, or defenses to copyright 
infringement, including fair use, under title 17, United States Code.
  (2) Nothing in this section shall enlarge or diminish vicarious or 
contributory liability for copyright infringement in connection with 
any technology, product, service, device, component, or part thereof.
  (3) Nothing in this section shall require that the design of, or 
design and selection of parts and components for, a consumer 
electronics, telecommunications, or computing product provide for a 
response to any particular technological protection measure.
  (4) Nothing in this section shall enlarge or diminish any rights of 
free speech or the press for activities using consumer electronics, 
telecommunications, or computing products.
  (d) Exemption for Nonprofit Libraries, Archives, and Educational 
Institutions.--(1) A nonprofit library, archives, or educational 
institution which gains access to a commercially exploited copyrighted 
work solely in order to make a good faith determination of whether to 
acquire a copy of that work for the sole purpose of engaging in conduct 
permitted under title 17, United States Code, shall not be in violation 
of the regulations issued under subsection (a)(1)(A). A copy of a work 
to which access has been gained under this paragraph--
          (A) may not be retained longer than necessary to make such 
        good faith determination; and
          (B) may not be used for any other purpose.
  (2) The exemption made available under paragraph (1) shall only apply 
with respect to a work when an identical copy of that work is not 
reasonably available in another form.
  (3) A nonprofit library, archives, or educational institution that 
willfully for the purpose of commercial advantage or financial gain 
violates paragraph (1)--
          (A) shall, for the first offense, be subject to the civil 
        remedies under section 104; and
          (B) shall, for repeated or subsequent offenses, in addition 
        to the civil remedies under section 104, forfeit the exemption 
        provided under paragraph (1).
  (4) This subsection may not be used as a defense to a claim under 
subsection (a)(2) or (b), nor may this subsection permit a nonprofit 
library, archives, or educational institution to manufacture, import, 
offer to the public, provide, or otherwise traffic in any technology, 
product, service, component, or part thereof, which circumvents a 
technological protection measure.
  (5) In order for a library or archives to qualify for the exemption 
under this subsection, the collections of that library or archives 
shall be--
          (A) open to the public; or
          (B) available not only to researchers affiliated with the 
        library or archives or with the institution of which it is a 
        part, but also to other persons doing research in a specialized 
        field.
  (e) Law Enforcement and Intelligence Activities.--This section does 
not prohibit any lawfully authorized investigative, protective, or 
intelligence activity of an officer, agent, or employee of the United 
States, a State, or a political subdivision of a State, or a person 
acting pursuant to a contract with the United States, a State, or a 
political subdivision of a State.
  (f) Reverse Engineering.--(1) Notwithstanding the regulations issued 
under subsection (a)(1)(A), a person who has lawfully obtained the 
right to use a copy of a computer program may circumvent a 
technological protection measure that effectively controls access to a 
particular portion of that program for the sole purpose of identifying 
and analyzing those elements of the program that are necessary to 
achieve interoperability of an independently created computer program 
with other programs, and that have not previously been readily 
available to the person engaging in the circumvention, to the extent 
any such acts of identification and analysis do not constitute 
infringement under title 17, United States Code.
  (2) Notwithstanding the provisions of subsections (a)(2) and (b), a 
person may develop and employ technological means to circumvent a 
technological protection measure, or to circumvent protection afforded 
by a technological protection measure, in order to make the 
identification and analysis permitted under paragraph (1), or for the 
limited purpose of achieving interoperability of an independently 
created computer program with other programs, if such means are 
necessary to achieve such interoperability, to the extent that doing so 
does not constitute infringement under title 17, United States Code.
  (3) The information acquired through the acts permitted under 
paragraph (1), and the means permitted under paragraph (2), may be made 
available to others if the person referred to in paragraph (1) or (2), 
as the case may be, provides such information or means solely for the 
purpose of achieving interoperability of an independently created 
computer program with other programs, and to the extent that doing so 
does not constitute infringement under title 17, United States Code, or 
violate other applicable law.
  (4) For purposes of this subsection, the term ``interoperability'' 
means the ability of computer programs to exchange information, and of 
such programs mutually to use the information which has been exchanged.
  (g) Encryption Research.--
          (1) Definitions.--For purposes of this subsection--
                  (A) the term ``encryption research'' means activities 
                necessary to identify and analyze flaws and 
                vulnerabilities of encryption technologies applied to 
                copyrighted works, if these activities are conducted to 
                advance the state of knowledge in the field of 
                encryption technology or to assist in the development 
                of encryption products; and
                  (B) the term ``encryption technology'' means the 
                scrambling and descrambling of information using 
                mathematical formulas or algorithms.
          (2) Permissible acts of encryption research.--Notwithstanding 
        the provisions of subsection (a)(1)(A), it is not a violation 
        of the regulations issued under that subsection for a person to 
        circumvent a technological protection measure as applied to a 
        copy, phonorecord, performance, or display of a published work 
        in the course of an act of good faith encryption research if--
                  (A) the person lawfully obtained the encrypted copy, 
                phonorecord, performance, or display of the published 
                work;
                  (B) such act is necessary to conduct such encryption 
                research;
                  (C) the person made a good faith effort to obtain 
                authorization before the circumvention; and
                  (D) such act does not constitute infringement under 
                title 17, United States Code, or a violation of 
                applicable law other than this section, including 
                section 1030 of title 18, United States Code, and those 
                provisions of title 18, United States Code, amended by 
                the Computer Fraud and Abuse Act of 1986.
          (3) Factors in determining exemption.--In determining whether 
        a person qualifies for the exemption under paragraph (2), the 
        factors to be considered shall include--
                  (A) whether the information derived from the 
                encryption research was disseminated, and if so, 
                whether it was disseminated in a manner reasonably 
                calculated to advance the state of knowledge or 
                development of encryption technology, versus whether it 
                was disseminated in a manner that facilitates 
                infringement under title 17, United States Code, or a 
                violation of applicable law other than this section, 
                including a violation of privacy or breach of security;
                  (B) whether the person is engaged in a legitimate 
                course of study, is employed, or is appropriately 
                trained or experienced, in the field of encryption 
                technology; and
                  (C) whether the person provides the copyright owner 
                of the work to which the technological protection 
                measure is applied with notice of the findings and 
                documentation of the research, and the time when such 
                notice is provided.
          (4) Use of technological means for research activities.--
        Notwithstanding the provisions of subsection (a)(2), it is not 
        a violation of that subsection for a person to--
                  (A) develop and employ technological means to 
                circumvent a technological protection measure for the 
                sole purpose of performing the acts of good faith 
                encryption research described in paragraph (2); and
                  (B) provide the technological means to another person 
                with whom he or she is working collaboratively for the 
                purpose of conducting the acts of good faith encryption 
                research described in paragraph (2) or for the purpose 
                of having that other person verify his or her acts of 
                good faith encryption research described in paragraph 
                (2).
          (5) Report to congress.--Not later than 1 year after the date 
        of the enactment of this Act, the Assistant Secretary of 
        Commerce for Communications and Information shall report to the 
        Congress on the effect this subsection has had on--
                  (A) encryption research and the development of 
                encryption technology;
                  (B) the adequacy and effectiveness of technological 
                protection for copyrighted works; and
                  (C) protection of copyright owners against the 
                unauthorized access to their encrypted copyrighted 
                works.
        The Assistant Secretary shall include in such report 
        recommendations, if any, on proposed amendments to this Act.
  (h) Components or Parts to Prevent Access of Minors to the 
Internet.--In applying subsection (a) and the regulations issued under 
subsection (a)(1)(A) to a component or part, the court may consider the 
necessity for its intended and actual incorporation in a technology, 
product, service, or device, which--
          (1) does not itself violate the provisions of title 17, 
        United States Code; and
          (2) has the sole purpose to prevent the access of minors to 
        material on the Internet.
  (i) Protection of Personally Identifying Information.--
          (1) Circumvention permitted.--Notwithstanding the provisions 
        of subsection (a)(1)(A), it is not a violation of the 
        regulations issued under that subsection for a person to 
        circumvent a technological protection measure that effectively 
        controls access to a work protected under title 17, United 
        States Code, if--
                  (A) the technological protection measure, or the work 
                it protects, contains the capability of collecting or 
                disseminating personally identifying information 
                reflecting the online activities of a natural person 
                who seeks to gain access to the work protected;
                  (B) in the normal course of its operation, the 
                technological protection measure, or the work it 
                protects, collects or disseminates personally 
                identifying information about the person who seeks to 
                gain access to the work protected, without providing 
                conspicuous notice of such collection or dissemination 
                to such person, and without providing such person with 
                the capability to prevent or restrict such collection 
                or dissemination;
                  (C) the act of circumvention has the sole effect of 
                identifying and disabling the capability described in 
                subparagraph (A), and has no other effect on the 
                ability of any person to gain access to any work; and
                  (D) the act of circumvention is carried out solely 
                for the purpose of preventing the collection or 
                dissemination of personally identifying information 
                about a natural person who seeks to gain access to the 
                work protected, and is not in violation of any other 
                law.
          (2) Inapplicability to certain technological protection 
        measures.--This subsection does not apply to a technological 
        protection measure, or a work it protects, that does not 
        collect or disseminate personally identifying information and 
        that is disclosed to a user as not having or using such 
        capability.

SEC. 103. INTEGRITY OF COPYRIGHT MANAGEMENT INFORMATION.

  (a) False Copyright Management Information.--No person shall 
knowingly and with the intent to induce, enable, facilitate, or conceal 
infringement--
          (1) provide copyright management information that is false, 
        or
          (2) distribute or import for distribution copyright 
        management information that is false.
  (b) Removal or Alteration of Copyright Management Information.--No 
person shall, without the authority of the copyright owner or the law--
          (1) intentionally remove or alter any copyright management 
        information,
          (2) distribute or import for distribution copyright 
        management information knowing that the copyright management 
        information has been removed or altered without authority of 
        the copyright owner or the law, or
          (3) distribute, import for distribution, or publicly perform 
        works, copies of works, or phonorecords, knowing that copyright 
        management information has been removed or altered without 
        authority of the copyright owner or the law,
knowing, or, with respect to civil remedies under section 104, having 
reasonable grounds to know, that it will induce, enable, facilitate, or 
conceal an infringement of any right under title 17, United States 
Code.
  (c) Definitions.--As used in this section--
          (1) the terms ``distribute'', ``publicly perform'', 
        ``copies'', and ``phonorecords'' have the meanings given those 
        terms in title 17, United States Code; and
          (2) the term ``copyright management information'' means any 
        of the following information conveyed in connection with copies 
        or phonorecords of a work or performances or displays of a 
        work, including in digital form, except that such term does not 
        include any personally identifying information about a user of 
        a work or of a copy, phonorecord, performance, or display of a 
        work:
                  (A) The title and other information identifying the 
                work, including the information set forth on a notice 
                of copyright.
                  (B) The name of, and other identifying information 
                about, the author of a work.
                  (C) The name of, and other identifying information 
                about, the copyright owner of the work, including the 
                information set forth in a notice of copyright.
                  (D) With the exception of public performances of 
                works by radio and television broadcast stations, the 
                name of, and other identifying information about, a 
                performer whose performance is fixed in a work other 
                than an audiovisual work.
                  (E) With the exception of public performances of 
                works by radio and television broadcast stations, in 
                the case of an audiovisual work, the name of, and other 
                identifying information about, a writer, performer, or 
                director who is credited in the audiovisual work.
                  (F) Terms and conditions for use of the work.
                  (G) Identifying numbers or symbols referring to such 
                information or links to such information.
                  (H) Such other information as the Register of 
                Copyrights may prescribe by regulation, except that the 
                Register of Copyrights may not require the provision of 
                any information concerning the user of a copyrighted 
                work.
  (d) Law Enforcement and Intelligence Activities.--This section does 
not prohibit any lawfully authorized investigative, protective, or 
intelligence activity of an officer, agent, or employee of the United 
States, a State, or a political subdivision of a State, or a person 
acting pursuant to a contract with the United States, a State, or a 
political subdivision of a State.
  (e) Limitations on Liability.--
          (1) Analog transmissions.--In the case of an analog 
        transmission, a person who is making transmissions in its 
        capacity as a broadcast station, or as a cable system (as 
        defined in section 602 of the Communications Act of 1934), or 
        someone who provides programming to such station or system, 
        shall not be liable for a violation of subsection (b) if--
                  (A) avoiding the activity that constitutes such 
                violation is not technically feasible or would create 
                an undue financial hardship on such person; and
                  (B) such person did not intend, by engaging in such 
                activity, to induce, enable, facilitate, or conceal 
                infringement of a right under title 17, United States 
                Code.
          (2) Digital transmissions.--
                  (A) If a digital transmission standard for the 
                placement of copyright management information for a 
                category of works is set in a voluntary, consensus 
                standard-setting process involving a representative 
                cross-section of broadcast stations or cable systems 
                and copyright owners of a category of works that are 
                intended for public performance by such stations or 
                systems, a person identified in paragraph (1) shall not 
                be liable for a violation of subsection (b) with 
                respect to the particular copyright management 
                information addressed by such standard if--
                          (i) the placement of such information by 
                        someone other than such person is not in 
                        accordance with such standard; and
                          (ii) the activity that constitutes such 
                        violation is not intended to induce, enable, 
                        facilitate, or conceal infringement of a right 
                        under title 17, United States Code.
                  (B) Until a digital transmission standard has been 
                set pursuant to subparagraph (A) with respect to the 
                placement of copyright management information for a 
                category or works, a person identified in paragraph (1) 
                shall not be liable for a violation of subsection (b) 
                with respect to such copyright management information, 
                if the activity that constitutes such violation is not 
                intended to induce, enable, facilitate, or conceal 
                infringement of a right under title 17, United States 
                Code, and if--
                          (i) the transmission of such information by 
                        such person would result in a perceptible 
                        visual or aural degradation of the digital 
                        signal; or
                          (ii) the transmission of such information by 
                        such person would conflict with--
                                  (I) an applicable government 
                                regulation relating to transmission of 
                                information in a digital signal;
                                  (II) an applicable industry-wide 
                                standard relating to the transmission 
                                of information in a digital signal that 
                                was adopted by a voluntary consensus 
                                standards body prior to the effective 
                                date of this title; or
                                  (III) an applicable industry-wide 
                                standard relating to the transmission 
                                of information in a digital signal that 
                                was adopted in a voluntary, consensus 
                                standards-setting process open to 
                                participation by a representative 
                                cross-section of broadcast stations or 
                                cable systems and copyright owners of a 
                                category of works that are intended for 
                                public performance by such stations or 
                                systems.
          (3) Definitions.--As used in this subsection--
                  (A) the term ``broadcast station'' has the meaning 
                given that term in section 3 of the Communications Act 
                of 1934 (47 U.S.C. 153)); and
                  (B) the term ``cable system'' has the meaning given 
                that term in section 602 of the Communications Act of 
                1934 (47 U.S.C. 522)).

SEC. 104. CIVIL REMEDIES.

  (a) Civil Actions.--Any person injured by a violation of section 102 
or 103, or of any regulation issued under section 102(a)(1), may bring 
a civil action in an appropriate United States district court for such 
violation.
  (b) Powers of the Court.--In an action brought under subsection (a), 
the court--
          (1) may grant temporary and permanent injunctions on such 
        terms as it deems reasonable to prevent or restrain a 
        violation, but in no event shall impose a prior restraint on 
        free speech or the press protected under the 1st amendment to 
        the Constitution;
          (2) at any time while an action is pending, may order the 
        impounding, on such terms as it deems reasonable, of any device 
        or product that is in the custody or control of the alleged 
        violator and that the court has reasonable cause to believe was 
        involved in a violation;
          (3) may award damages under subsection (c);
          (4) in its discretion may allow the recovery of costs by or 
        against any party other than the United States or an officer 
        thereof;
          (5) in its discretion may award reasonable attorney's fees to 
        the prevailing party; and
          (6) may, as part of a final judgment or decree finding a 
        violation, order the remedial modification or the destruction 
        of any device or product involved in the violation that is in 
        the custody or control of the violator or has been impounded 
        under paragraph (2).
  (c) Award of Damages.--
          (1) In general.--Except as otherwise provided in this title, 
        a person committing a violation of section 102 or 103, or of 
        any regulation issued under section 102(a)(1), is liable for 
        either--
                  (A) the actual damages and any additional profits of 
                the violator, as provided in paragraph (2), or
                  (B) statutory damages, as provided in paragraph (3).
          (2) Actual damages.--The court shall award to the complaining 
        party the actual damages suffered by the party as a result of 
        the violation, and any profits of the violator that are 
        attributable to the violation and are not taken into account in 
        computing the actual damages, if the complaining party elects 
        such damages at any time before final judgment is entered.
          (3) Statutory damages.--
                  (A) At any time before final judgment is entered, a 
                complaining party may elect to recover an award of 
                statutory damages for each violation of section 102, or 
                of a regulation issued under section 102(a)(1), in the 
                sum of not less than $200 or more than $2,500 per act 
                of circumvention, device, product, component, offer, or 
                performance of service, as the court considers just.
                  (B) At any time before final judgment is entered, a 
                complaining party may elect to recover an award of 
                statutory damages for each violation of section 103 in 
                the sum of not less than $2,500 or more than $25,000.
          (4) Repeated violations.--In any case in which the injured 
        party sustains the burden of proving, and the court finds, that 
        a person has violated section 102 or 103, or any regulation 
        issued under section 102(a)(1), within three years after a 
        final judgment was entered against the person for another such 
        violation, the court may increase the award of damages up to 
        triple the amount that would otherwise be awarded, as the court 
        considers just.
          (5) Innocent violations.--
                  (A) In general.--The court in its discretion may 
                reduce or remit the total award of damages in any case 
                in which the violator sustains the burden of proving, 
                and the court finds, that the violator was not aware 
                and had no reason to believe that its acts constituted 
                a violation.
                  (B) Nonprofit library, archives, or educational 
                institutions.--In the case of a nonprofit library, 
                archives, or educational institution, the court shall 
                remit damages in any case in which the library, 
                archives, or educational institution sustains the 
                burden of proving, and the court finds, that the 
                library, archives, or educational institution was not 
                aware and had no reason to believe that its acts 
                constituted a violation.

SEC. 105. CRIMINAL OFFENSES AND PENALTIES.

  (a) In General.--Any person who violates section 102 or 103, or any 
regulation issued under section 102(a)(1), willfully and for purposes 
of commercial advantage or private financial gain--
          (1) shall be fined not more than $500,000 or imprisoned for 
        not more than 5 years, or both, for the first offense; and
          (2) shall be fined not more than $1,000,000 or imprisoned for 
        not more than 10 years, or both, for any subsequent offense.
  (b) Limitation for Nonprofit Library, Archives, or Educational 
Institution.--Subsection (a) shall not apply to a nonprofit library, 
archives, or educational institution.
  (c) Statute of Limitations.--No criminal proceeding shall be brought 
under this section unless such proceeding is commenced within five 
years after the cause of action arose.

SEC. 106. SAVINGS CLAUSE.

  Nothing in this title abrogates, diminishes, or weakens the 
provisions of, nor provides any defense or element of mitigation in a 
criminal prosecution or civil action under, any Federal or State law 
that prevents the violation of the privacy of an individual in 
connection with the individual's use of the Internet.

SEC. 107. DEVELOPMENT AND IMPLEMENTATION OF TECHNOLOGICAL PROTECTION 
                    MEASURES.

  (a) Statement of Congressional Policy and Objective.--It is the sense 
of the Congress that technological protection measures play a crucial 
role in safeguarding the interests of both copyright owners and lawful 
users of copyrighted works in digital formats, by facilitating lawful 
uses of such works while protecting the private property interests of 
holders of rights under title 17, United States Code. Accordingly, the 
expeditious implementation of such measures, developed by the private 
sector through voluntary industry-led processes, is a key factor in 
realizing the full benefits of making available copyrighted works 
through digital networks, including the benefits set forth in this 
section.
  (b) Technological Protection Measures.--The technological protection 
measures referred to in subsection (a) shall include, but not be 
limited to, those which--
          (1) enable nonprofit libraries, for nonprofit purposes, to 
        continue to lend to library users copies or phonorecords that 
        such libraries have lawfully acquired, including the lending of 
        such copies or phonorecords in digital formats in a manner that 
        prevents infringement;
          (2) effectively protect against the infringement of exclusive 
        rights under title 17, United States Code, and facilitate the 
        exercise of those exclusive rights; and
          (3) promote the development and implementation of diverse 
        methods, mechanisms, and arrangements in the marketplace for 
        making available copyrighted works in digital formats which 
        provide opportunities for individual members of the public to 
        make lawful uses of copyrighted works in digital formats.
  (c) Procedures for Developing and Implementing Technological 
Protection Measures.--The technological protection measures whose 
development and implementation the Congress anticipates are those 
which--
          (1) are developed pursuant to a broad consensus in an open, 
        fair, voluntary, and multi-industry process;
          (2) are made available on reasonable and nondiscriminatory 
        terms; and
          (3) do not impose substantial costs or burdens on copyright 
        owners or on manufacturers of hardware or software used in 
        conjunction with copyrighted works in digital formats.
  (d) Oversight and Reporting.--(1) The Secretary of Commerce, in 
consultation with the Assistant Secretary of Commerce for 
Communications and Information and the Register of Copyrights, shall 
review the impact of the enactment of section 102 of this Act on the 
access of individual users to copyrighted works in digital formats and 
shall report annually thereon to the Committees on Commerce and on the 
Judiciary of the House of Representatives and the Committees on 
Commerce, Science, and Transportation and on the Judiciary of the 
Senate.
  (2) Each report under paragraph (1) shall address the following 
issues:
          (A) The status of the development and implementation of 
        technological protection measures, including measures that 
        advance the objectives of this section, and the effectiveness 
        of technological protection measures in protecting the private 
        property interests of copyright owners under title 17, United 
        States Code.
          (B) The degree to which individual lawful users of 
        copyrighted works--
                  (i) have access to the Internet and digital networks 
                generally;
                  (ii) are dependent upon such access for their use of 
                copyrighted works;
                  (iii) have available to them other channels for 
                obtaining and using copyrighted works, other than the 
                Internet and digital networks generally;
                  (iv) are required to pay copyright owners or 
                intermediaries for each lawful use of copyrighted works 
                in digital formats to which they have access; and
                  (v) are able to utilize nonprofit libraries to obtain 
                access, through borrowing without payment by the user, 
                to copyrighted works in digital formats.
          (C) The degree to which infringement of copyrighted works in 
        digital formats is occurring.
          (D) Whether and the extent to which section 102, and the 
        regulations issued under section 102(a)(1), are asserted as a 
        basis for liability in claims brought against persons 
        conducting research and development, including reverse 
        engineering of copyrighted works, and the extent to which such 
        claims constitute a serious impediment to the development and 
        production of competitive goods and services.
          (E) The degree to which individual users of copyrighted 
        materials in digital formats are able effectively to protect 
        themselves against the use of technological protection measures 
        to carry out or facilitate the undisclosed collection and 
        dissemination of personally identifying information concerning 
        the access to and use of such materials by such users.
          (F) Such other issues as the Secretary of Commerce, in 
        consultation with the Assistant Secretary of Commerce for 
        Communications and Information and the Register of Copyrights, 
        identifies as relevant to the impact of the enactment of 
        section 102 on the access of individual users to copyrighted 
        works in digital formats.
  (3) The first report under this subsection shall be submitted not 
later than one year after the date of the enactment of this Act, and 
the last such report shall be submitted not later than three years 
after the date of the enactment of this Act.
  (4) The reports under this subsection may include such 
recommendations for additional legislative action as the Secretary of 
Commerce and the Register of Copyrights consider advisable in order to 
further the objectives of this section.

SEC. 108. TECHNICAL AMENDMENTS.

  (a) Definitions.--Section 101 of title 17, United States Code, is 
amended--
          (1) by striking the definition of ``Berne Convention work'';
          (2) in the definition of ``The `country of origin' of a Berne 
        Convention work''--
                  (A) by striking ``The `country of origin' of a Berne 
                Convention work, for purposes of section 411, is the 
                United States if'' and inserting ``For purposes of 
                section 411, a work is a `United States work' only 
                if'';
                  (B) in paragraph (1)--
                          (i) in subparagraph (B) by striking ``nation 
                        or nations adhering to the Berne Convention'' 
                        and inserting ``treaty party or parties'';
                          (ii) in subparagraph (C) by striking ``does 
                        not adhere to the Berne Convention'' and 
                        inserting ``is not a treaty party''; and
                          (iii) in subparagraph (D) by striking ``does 
                        not adhere to the Berne Convention'' and 
                        inserting ``is not a treaty party''; and
                  (C) in the matter following paragraph (3) by striking 
                ``For the purposes of section 411, the `country of 
                origin' of any other Berne Convention work is not the 
                United States.'';
          (3) by inserting after the definition of ``fixed'' the 
        following:
          ``The `Geneva Phonograms Convention' is the Convention for 
        the Protection of Producers of Phonograms Against Unauthorized 
        Duplication of Their Phonograms, concluded at Geneva, 
        Switzerland, on October 29, 1971.'';
          (4) by inserting after the definition of ``including'' the 
        following:
          ``An `international agreement' is--
                  ``(1) the Universal Copyright Convention;
                  ``(2) the Geneva Phonograms Convention;
                  ``(3) the Berne Convention;
                  ``(4) the WTO Agreement;
                  ``(5) the WIPO Copyright Treaty;
                  ``(6) the WIPO Performances and Phonograms Treaty; 
                and
                  ``(7) any other copyright treaty to which the United 
                States is a party.'';
          (5) by inserting after the definition of ``transmit'' the 
        following:
          ``A `treaty party' is a country or intergovernmental 
        organization other than the United States that is a party to an 
        international agreement.'';
          (6) by inserting after the definition of ``widow'' the 
        following:
          ``The `WIPO Copyright Treaty' is the WIPO Copyright Treaty 
        concluded at Geneva, Switzerland, on December 20, 1996.'';
          (7) by inserting after the definition of ``The `WIPO 
        Copyright Treaty' '' the following:
          ``The `WIPO Performances and Phonograms Treaty' is the WIPO 
        Performances and Phonograms Treaty concluded at Geneva, 
        Switzerland, on December 20, 1996.''; and
          (8) by inserting after the definition of ``work made for 
        hire'' the following:
          ``The terms `WTO Agreement' and `WTO member country' have the 
        meanings given those terms in paragraphs (9) and (10), 
        respectively, of section 2 of the Uruguay Round Agreements 
        Act.''.
  (b) Subject Matter of Copyright; National Origin.--Section 104 of 
title 17, United States Code, is amended--
          (1) in subsection (b)--
                  (A) in paragraph (1) by striking ``foreign nation 
                that is a party to a copyright treaty to which the 
                United States is also a party'' and inserting ``treaty 
                party'';
                  (B) in paragraph (2) by striking ``party to the 
                Universal Copyright Convention'' and inserting ``treaty 
                party'';
                  (C) by redesignating paragraph (5) as paragraph (6);
                  (D) by redesignating paragraph (3) as paragraph (5) 
                and inserting it after paragraph (4);
                  (E) by inserting after paragraph (2) the following:
          ``(3) the work is a sound recording that was first fixed in a 
        treaty party; or'';
                  (F) in paragraph (4) by striking ``Berne Convention 
                work'' and inserting ``pictorial, graphic, or 
                sculptural work that is incorporated in a building or 
                other structure, or an architectural work that is 
                embodied in a building and the building or structure is 
                located in the United States or a treaty party''; and
                  (G) by inserting after paragraph (6), as so 
                redesignated, the following:
``For purposes of paragraph (2), a work that is published in the United 
States or a treaty party within 30 days after publication in a foreign 
nation that is not a treaty party shall be considered to be first 
published in the United States or such treaty party, as the case may 
be.''; and
          (2) by adding at the end the following new subsection:
  ``(d) Effect of Phonograms Treaties.--Notwithstanding the provisions 
of subsection (b), no works other than sound recordings shall be 
eligible for protection under this title solely by virtue of the 
adherence of the United States to the Geneva Phonograms Convention or 
the WIPO Performances and Phonograms Treaty.''.
  (c) Copyright in Restored Works.--Section 104A(h) of title 17, United 
States Code, is amended--
          (1) in paragraph (1), by striking subparagraphs (A) and (B) 
        and inserting the following:
                  ``(A) a nation adhering to the Berne Convention;
                  ``(B) a WTO member country;
                  ``(C) a nation adhering to the WIPO Copyright Treaty;
                  ``(D) a nation adhering to the WIPO Performances and 
                Phonograms Treaty; or
                  ``(E) subject to a Presidential proclamation under 
                subsection (g).'';
          (2) by amending paragraph (3) to read as follows:
          ``(3) The term `eligible country' means a nation, other than 
        the United States, that--
                  ``(A) becomes a WTO member country after the date of 
                the enactment of the Uruguay Round Agreements Act;
                  ``(B) on such date of enactment is, or after such 
                date of enactment becomes, a nation adhering to the 
                Berne Convention;
                  ``(C) adheres to the WIPO Copyright Treaty;
                  ``(D) adheres to the WIPO Performances and Phonograms 
                Treaty; or
                  ``(E) after such date of enactment becomes subject to 
                a proclamation under subsection (g).'';
          (3) in paragraph (6)--
                  (A) in subparagraph (C)(iii) by striking ``and'' 
                after the semicolon;
                  (B) at the end of subparagraph (D) by striking the 
                period and inserting ``; and''; and
                  (C) by adding after subparagraph (D) the following:
                  ``(E) if the source country for the work is an 
                eligible country solely by virtue of its adherence to 
                the WIPO Performances and Phonograms Treaty, is a sound 
                recording.'';
          (4) in paragraph (8)(B)(i)--
                  (A) by inserting ``of which'' before ``the 
                majority''; and
                  (B) by striking ``of eligible countries''; and
          (5) by striking paragraph (9).
  (d) Registration and Infringement Actions.--Section 411(a) of title 
17, United States Code, is amended in the first sentence--
          (1) by striking ``actions for infringement of copyright in 
        Berne Convention works whose country of origin is not the 
        United States and''; and
          (2) by inserting ``United States'' after ``no action for 
        infringement of the copyright in any''.
  (e) Statute of Limitations.--Section 507(a) of title 17, United State 
Code, is amended by striking ``No'' and inserting ``Except as expressly 
provided otherwise in this title, no''.

SEC. 109. EFFECTIVE DATE.

  (a) In General.--Subject to subsection (b), the amendments made by 
this title shall take effect on the date of the enactment of this Act.
  (b) Amendments Relating to Certain International Agreements.--(1) The 
following shall take effect upon the entry into force of the WIPO 
Copyright Treaty with respect to the United States:
          (A) Paragraph (5) of the definition of ``international 
        agreement'' contained in section 101 of title 17, United States 
        Code, as amended by section 108(a)(4) of this Act.
          (B) The amendment made by section 108(a)(6) of this Act.
          (C) Subparagraph (C) of section 104A(h)(1) of title 17, 
        United States Code, as amended by section 108(c)(1) of this 
        Act.
          (D) Subparagraph (C) of section 104A(h)(3) of title 17, 
        United States Code, as amended by section 108(c)(2) of this 
        Act.
  (2) The following shall take effect upon the entry into force of the 
WIPO Performances and Phonograms Treaty with respect to the United 
States:
          (A) Paragraph (6) of the definition of ``international 
        agreement'' contained in section 101 of title 17, United States 
        Code, as amended by section 108(a)(4) of this Act.
          (B) The amendment made by section 108(a)(7) of this Act.
          (C) The amendment made by section 108(b)(2) of this Act.
          (D) Subparagraph (D) of section 104A(h)(1) of title 17, 
        United States Code, as amended by section 108(c)(1) of this 
        Act.
          (E) Subparagraph (D) of section 104A(h)(3) of title 17, 
        United States Code, as amended by section 108(c)(2) of this 
        Act.
          (F) The amendments made by section 108(c)(3) of this Act.

          TITLE II--INTERNET COPYRIGHT INFRINGEMENT LIABILITY

SEC. 201. SHORT TITLE.

  This title may be cited as the ``Internet Copyright Infringement 
Liability Clarification Act of 1998''.

SEC. 202. LIMITATIONS ON LIABILITY FOR INTERNET COPYRIGHT INFRINGEMENT.

  (a) In General.--Chapter 5 of title 17, United States Code, is 
amended by adding after section 511 the following new section:

``Sec. 512. Liability of service providers for online infringement of 
                    copyright

  ``(a) Digital Network Communications.--A service provider shall not 
be liable for monetary relief, or except as provided in subsection (i) 
for injunctive or other equitable relief, for infringement for the 
provider's transmitting, routing, or providing connections for, 
material through a system or network controlled or operated by or for 
the service provider, or the intermediate and transient storage of such 
material in the course of such transmitting, routing or providing 
connections, if--
          ``(1) it was initiated by or at the direction of a person 
        other than the service provider;
          ``(2) it is carried out through an automatic technical 
        process without selection of such material by the service 
        provider;
          ``(3) the service provider does not select the recipients of 
        such material except as an automatic response to the request of 
        another;
          ``(4) no such copy of such material made by the service 
        provider is maintained on the system or network in a manner 
        ordinarily accessible to anyone other than anticipated 
        recipients, and no such copy is maintained on the system or 
        network in a manner ordinarily accessible to the anticipated 
        recipients for a longer period than is reasonably necessary for 
        the communication; and
          ``(5) the material is transmitted without modification to its 
        content.
  ``(b) System Caching.--A service provider shall not be liable for 
monetary relief, or except as provided in subsection (i) for injunctive 
or other equitable relief, for infringement for the intermediate and 
temporary storage of material on the system or network controlled or 
operated by or for the service provider: Provided, That--
          ``(1) such material is made available online by a person 
        other than such service provider,
          ``(2) such material is transmitted from the person described 
        in paragraph (1) through such system or network to someone 
        other than that person at the direction of such other person,
          ``(3) the storage is carried out through an automatic 
        technical process for the purpose of making such material 
        available to users of such system or network who subsequently 
        request access to that material from the person described in 
        paragraph (1):
Provided further, That--
          ``(4) such material is transmitted to such subsequent users 
        without modification to its content from the manner in which 
        the material otherwise was transmitted from the person 
        described in paragraph (1);
          ``(5) such service provider complies with rules concerning 
        the refreshing, reloading or other updating of such material 
        when specified by the person making that material available 
        online in accordance with an accepted industry standard data 
        communications protocol for the system or network through which 
        that person makes the material available: Provided further, 
        That the rules are not used by the person described in 
        paragraph (1) to prevent or unreasonably impair such 
        intermediate storage;
          ``(6) such service provider does not interfere with the 
        ability of technology associated with such material that 
        returns to the person described in paragraph (1) the 
        information that would have been available to such person if 
        such material had been obtained by such subsequent users 
        directly from such person: Provided further, That such 
        technology--
                  ``(A) does not significantly interfere with the 
                performance of the provider's system or network or with 
                the intermediate storage of the material;
                  ``(B) is consistent with accepted industry standard 
                communications protocols; and
                  ``(C) does not extract information from the 
                provider's system or network other than the information 
                that would have been available to such person if such 
                material had been accessed by such users directly from 
                such person;
          ``(7) either--
                  ``(A) the person described in paragraph (1) does not 
                currently condition access to such material; or
                  ``(B) if access to such material is so conditioned by 
                such person, by a current individual pre-condition, 
                such as a pre-condition based on payment of a fee, or 
                provision of a password or other information, the 
                service provider permits access to the stored material 
                in significant part only to users of its system or 
                network that have been so authorized and only in 
                accordance with those conditions; and
          ``(8) if the person described in paragraph (1) makes that 
        material available online without the authorization of the 
        copyright owner, then the service provider responds 
        expeditiously to remove, or disable access to, the material 
        that is claimed to be infringing upon notification of claimed 
        infringements described in subsection (c)(3): Provided further, 
        That the material has previously been removed from the 
        originating site, and the party giving the notification 
        includes in the notification a statement confirming that such 
        material has been removed or access to it has been disabled or 
        ordered to be removed or have access disabled.
  ``(c) Information Stored on Service Providers.--
          ``(1) In general.--A service provider shall not be liable for 
        monetary relief, or except as provided in subsection (i) for 
        injunctive or other equitable relief, for infringement for the 
        storage at the direction of a user of material that resides on 
        a system or network controlled or operated by or for the 
        service provider, if the service provider--
                  ``(A)(i) does not have actual knowledge that the 
                material or activity is infringing,
                  ``(ii) in the absence of such actual knowledge, is 
                not aware of facts or circumstances from which 
                infringing activity is apparent, or
                  ``(iii) if upon obtaining such knowledge or 
                awareness, the service provider acts expeditiously to 
                remove or disable access to, the material;
                  ``(B) does not receive a financial benefit directly 
                attributable to the infringing activity, where the 
                service provider has the right and ability to control 
                such activity; and
                  ``(C) in the instance of a notification of claimed 
                infringement as described in paragraph (3), responds 
                expeditiously to remove, or disable access to, the 
                material that is claimed to be infringing or to be the 
                subject of infringing activity.
          ``(2) Designated agent.--The limitations on liability 
        established in this subsection apply only if the service 
        provider has designated an agent to receive notifications of 
        claimed infringement described in paragraph (3), by 
        substantially making the name, address, phone number, 
        electronic mail address of such agent, and other contact 
        information deemed appropriate by the Register of Copyrights, 
        available through its service, including on its website, and by 
        providing such information to the Copyright Office. The 
        Register of Copyrights shall maintain a current directory of 
        agents available to the public for inspection, including 
        through the Internet, in both electronic and hard copy formats.
          ``(3) Elements of notification.--
                  ``(A) To be effective under this subsection, a 
                notification of claimed infringement means any written 
                communication provided to the service provider's 
                designated agent that includes substantially the 
                following--
                          ``(i) a physical or electronic signature of a 
                        person authorized to act on behalf of the owner 
                        of an exclusive right that is allegedly 
                        infringed;
                          ``(ii) identification of the copyrighted work 
                        claimed to have been infringed, or, if multiple 
                        such works at a single online site are covered 
                        by a single notification, a representative list 
                        of such works at that site;
                          ``(iii) identification of the material that 
                        is claimed to be infringing or to be the 
                        subject of infringing activity that is to be 
                        removed or access to which is to be disabled, 
                        and information reasonably sufficient to permit 
                        the service provider to locate the material;
                          ``(iv) information reasonably sufficient to 
                        permit the service provider to contact the 
                        complaining party, such as an address, 
                        telephone number, and, if available an 
                        electronic mail address at which the 
                        complaining party may be contacted;
                          ``(v) a statement that the complaining party 
                        has a good faith belief that use of the 
                        material in the manner complained of is not 
                        authorized by the copyright owner, or its 
                        agent, or the law; and
                          ``(vi) a statement that the information in 
                        the notification is accurate, and under penalty 
                        of perjury, that the complaining party has the 
                        authority to enforce the owner's rights that 
                        are claimed to be infringed.
                  ``(B) A notification from the copyright owner or from 
                a person authorized to act on behalf of the copyright 
                owner that fails substantially to conform to the 
                provisions of paragraph (3)(A) shall not be considered 
                under paragraph (1)(A) in determining whether a service 
                provider has actual knowledge or is aware of facts or 
                circumstances from which infringing activity is 
                apparent: Provided, That the provider promptly attempts 
                to contact the complaining party or takes other 
                reasonable steps to assist in the receipt of notice 
                under paragraph (3)(A) when the notice is provided to 
                the service provider's designated agent and 
                substantially satisfies the provisions of paragraphs 
                (3)(A) (ii), (iii), and (iv).
  ``(d) Information Location Tools.--A service provider shall not be 
liable for monetary relief, or except as provided in subsection (i) for 
injunctive or other equitable relief, for infringement for the provider 
referring or linking users to an online location containing infringing 
material or activity by using information location tools, including a 
directory, index, reference, pointer or hypertext link, if the 
provider--
          ``(1) does not have actual knowledge that the material or 
        activity is infringing or, in the absence of such actual 
        knowledge, is not aware of facts or circumstances from which 
        infringing activity is apparent;
          ``(2) does not receive a financial benefit directly 
        attributable to the infringing activity, where the service 
        provider has the right and ability to control such activity; 
        and
          ``(3) responds expeditiously to remove or disable the 
        reference or link upon notification of claimed infringement as 
        described in subsection (c)(3): Provided, That for the purposes 
        of this paragraph, the element in subsection (c)(3)(A)(iii) 
        shall be identification of the reference or link, to material 
        or activity claimed to be infringing, that is to be removed or 
        access to which is to be disabled, and information reasonably 
        sufficient to permit the service provider to locate such 
        reference or link.
  ``(e) Misrepresentations.--Any person who knowingly materially 
misrepresents under this section--
          ``(1) that material or activity is infringing, or
          ``(2) that material or activity was removed or disabled by 
        mistake or misidentification,
shall be liable for any damages, including costs and attorneys' fees, 
incurred by the alleged infringer, by any copyright owner or copyright 
owner's authorized licensee, or by the service provider, who is injured 
by such misrepresentation, as the result of the service provider 
relying upon such misrepresentation in removing or disabling access to 
the material or activity claimed to be infringing, or in replacing the 
removed material or ceasing to disable access to it.
  ``(f) Replacement of Removed or Disabled Material and Limitation on 
Other Liability.--
          ``(1) Subject to paragraph (2) of this subsection, a service 
        provider shall not be liable to any person for any claim based 
        on the service provider's good faith disabling of access to, or 
        removal of, material or activity claimed to be infringing or 
        based on facts or circumstances from which infringing activity 
        is apparent, regardless of whether the material or activity is 
        ultimately determined to be infringing.
          ``(2) Paragraph (1) of this subsection shall not apply with 
        respect to material residing at the direction of a subscriber 
        of the service provider on a system or network controlled or 
        operated by or for the service provider that is removed, or to 
        which access is disabled by the service provider pursuant to a 
        notice provided under subsection (c)(1)(C), unless the service 
        provider--
                  ``(A) takes reasonable steps promptly to notify the 
                subscriber that it has removed or disabled access to 
                the material;
                  ``(B) upon receipt of a counter notice as described 
                in paragraph (3), promptly provides the person who 
                provided the notice under subsection (c)(1)(C) with a 
                copy of the counter notice, and informs such person 
                that it will replace the removed material or cease 
                disabling access to it in ten business days; and
                  ``(C) replaces the removed material and ceases 
                disabling access to it not less than 10, nor more than 
                14, business days following receipt of the counter 
                notice, unless its designated agent first receives 
                notice from the person who submitted the notification 
                under subsection (c)(1)(C) that such person has filed 
                an action seeking a court order to restrain the 
                subscriber from engaging in infringing activity 
                relating to the material on the service provider's 
                system or network.
          ``(3) To be effective under this subsection, a counter 
        notification means any written communication provided to the 
        service provider's designated agent that includes substantially 
        the following:
                  ``(A) A physical or electronic signature of the 
                subscriber.
                  ``(B) Identification of the material that has been 
                removed or to which access has been disabled and the 
                location at which such material appeared before it was 
                removed or access was disabled.
                  ``(C) A statement under penalty of perjury that the 
                subscriber has a good faith belief that the material 
                was removed or disabled as a result of mistake or 
                misidentification of the material to be removed or 
                disabled.
                  ``(D) The subscriber's name, address and telephone 
                number, and a statement that the subscriber consents to 
                the jurisdiction of Federal Court for the judicial 
                district in which the address is located, or if the 
                subscriber's address is outside of the United States, 
                for any judicial district in which the service provider 
                may be found, and that the subscriber will accept 
                service of process from the person who provided notice 
                under subsection (c)(1)(C) or agent of such person.
          ``(4) A service provider's compliance with paragraph (2) 
        shall not subject the service provider to liability for 
        copyright infringement with respect to the material identified 
        in the notice provided under subsection (c)(1)(C).
  ``(g) Identification of Direct Infringer.--The copyright owner or a 
person authorized to act on the owner's behalf may request an order for 
release of identification of an alleged infringer by filing--
          ``(1) a copy of a notification described in subsection 
        (c)(3)(A), including a proposed order, and
          ``(2) a sworn declaration that the purpose of the order is to 
        obtain the identity of an alleged infringer and that such 
        information will only be used for the purpose of this title, 
        with the clerk of any United States district court.
The order shall authorize and order the service provider receiving the 
notification to disclose expeditiously to the copyright owner or person 
authorized by the copyright owner information sufficient to identify 
the alleged direct infringer of the material described in the 
notification to the extent such information is available to the service 
provider. The order shall be expeditiously issued if the accompanying 
notification satisfies the provisions of subsection (c)(3)(A) and the 
accompanying declaration is properly executed. Upon receipt of the 
order, either accompanying or subsequent to the receipt of a 
notification described in subsection (c)(3)(A), a service provider 
shall expeditiously give to the copyright owner or person authorized by 
the copyright owner the information required by the order, 
notwithstanding any other provision of law and regardless of whether 
the service provider responds to the notification.
  ``(h) Conditions for Eligibility.--
          ``(1) Accommodation of technology.--The limitations on 
        liability established by this section shall apply only if the 
        service provider--
                  ``(A) has adopted and reasonably implemented, and 
                informs subscribers of the service of, a policy for the 
                termination of subscribers of the service who are 
                repeat infringers; and
                  ``(B) accommodates and does not interfere with 
                standard technical measures as defined in this 
                subsection.
          ``(2) Definition.--As used in this section, `standard 
        technical measures' are technical measures, used by copyright 
        owners to identify or protect copyrighted works, that--
                  ``(A) have been developed pursuant to a broad 
                consensus of copyright owners and service providers in 
                an open, fair, voluntary, multi-industry standards 
                process;
                  ``(B) are available to any person on reasonable and 
                nondiscriminatory terms; and
                  ``(C) do not impose substantial costs on service 
                providers or substantial burdens on their systems or 
                networks.
  ``(i) Injunctions.--The following rules shall apply in the case of 
any application for an injunction under section 502 against a service 
provider that is not subject to monetary remedies by operation of this 
section.
          ``(1) Scope of relief.--
                  ``(A) With respect to conduct other than that which 
                qualifies for the limitation on remedies as set forth 
                in subsection (a), the court may only grant injunctive 
                relief with respect to a service provider in one or 
                more of the following forms--
                          ``(i) an order restraining it from providing 
                        access to infringing material or activity 
                        residing at a particular online site on the 
                        provider's system or network;
                          ``(ii) an order restraining it from providing 
                        access to an identified subscriber of the 
                        service provider's system or network who is 
                        engaging in infringing activity by terminating 
                        the specified accounts of such subscriber; or
                          ``(iii) such other injunctive remedies as the 
                        court may consider necessary to prevent or 
                        restrain infringement of specified copyrighted 
                        material at a particular online location: 
                        Provided, That such remedies are the least 
                        burdensome to the service provider that are 
                        comparably effective for that purpose.
                  ``(B) If the service provider qualifies for the 
                limitation on remedies described in subsection (a), the 
                court may only grant injunctive relief in one or both 
                of the following forms--
                          ``(i) an order restraining it from providing 
                        access to an identified subscriber of the 
                        service provider's system or network who is 
                        using the provider's service to engage in 
                        infringing activity by terminating the 
                        specified accounts of such subscriber; or
                          ``(ii) an order restraining it from providing 
                        access, by taking specified reasonable steps to 
                        block access, to a specific, identified, 
                        foreign online location.
          ``(2) Considerations.--The court, in considering the relevant 
        criteria for injunctive relief under applicable law, shall 
        consider--
                  ``(A) whether such an injunction, either alone or in 
                combination with other such injunctions issued against 
                the same service provider under this subsection, would 
                significantly burden either the provider or the 
                operation of the provider's system or network;
                  ``(B) the magnitude of the harm likely to be suffered 
                by the copyright owner in the digital network 
                environment if steps are not taken to prevent or 
                restrain the infringement;
                  ``(C) whether implementation of such an injunction 
                would be technically feasible and effective, and would 
                not interfere with access to noninfringing material at 
                other online locations; and
                  ``(D) whether other less burdensome and comparably 
                effective means of preventing or restraining access to 
                the infringing material are available.
          ``(3) Notice and ex parte orders.--Injunctive relief under 
        this subsection shall not be available without notice to the 
        service provider and an opportunity for such provider to 
        appear, except for orders ensuring the preservation of evidence 
        or other orders having no material adverse effect on the 
        operation of the service provider's communications network.
  ``(j) Definitions.--
          ``(1)(A) As used in subsection (a), the term `service 
        provider' means an entity offering the transmission, routing or 
        providing of connections for digital online communications, 
        between or among points specified by a user, of material of 
theuser's choosing, without modification to the content of the material 
as sent or received.
          ``(B) As used in any other subsection of this section, the 
        term `service provider' means a provider of online services or 
        network access, or the operator of facilities therefor, and 
        includes an entity described in the preceding paragraph of this 
        subsection.
          ``(2) As used in this section, the term `monetary relief' 
        means damages, costs, attorneys' fees, and any other form of 
        monetary payment.
  ``(k) Other Defenses Not Affected.--The failure of a service 
provider's conduct to qualify for limitation of liability under this 
section shall not bear adversely upon the consideration of a defense by 
the service provider that the service provider's conduct is not 
infringing under this title or any other defense.
  ``(l) Protection of Privacy.--Nothing in this section shall be 
construed to condition the applicability of subsections (a) through (d) 
on--
          ``(1) a service provider monitoring its service or 
        affirmatively seeking facts indicating infringing activity 
        except to the extent consistent with a standard technical 
        measure complying with the provisions of subsection (h); or
          ``(2) a service provider accessing, removing, or disabling 
        access to material where such conduct is prohibited by law.
  ``(m) Rule of Construction.--Subsections (a), (b), (c), and (d) are 
intended to describe separate and distinct functions for purposes of 
analysis under this section. Whether a service provider qualifies for 
the limitation on liability in any one such subsection shall be based 
solely on the criteria in each such subsection and shall not affect a 
determination of whether such service provider qualifies for the 
limitations on liability under any other such subsection.''.
  (b) Conforming Amendment.--The table of sections for chapter 5 of 
title 17, United States Code, is amended by adding at the end the 
following:

``512. Liability of service providers for online infringement of 
copyright.''.

SEC. 203. LIMITATIONS ON EXCLUSIVE RIGHTS; COMPUTER PROGRAMS.

  Section 117 of title 17, United States Code, is amended--
  (1) by striking ``Notwithstanding'' and inserting the following:
  ``(a) Making of Additional Copy or Adaptation by Owner of Copy.--
Notwithstanding'';
  (2) by striking ``Any exact'' and inserting the following:
  ``(b) Lease, Sale, or Other Transfer of Additional Copy or 
Adaptation.--Any exact''; and
  (3) by adding at the end the following:
  ``(c) Machine Maintenance or Repair.--Notwithstanding the provisions 
of section 106, it is not an infringement for the owner or lessee of a 
machine to make or authorize the making of a copy of a computer program 
if such copy is made solely by virtue of the activation of a machine 
that lawfully contains an authorized copy of the computer program, for 
purposes only of maintenance or repair of that machine, if--
          ``(1) such new copy is used in no other manner and is 
        destroyed immediately after the maintenance or repair is 
        completed; and
          ``(2) with respect to any computer program or part thereof 
        that is not necessary for that machine to be activated, such 
        program or part thereof is not accessed or used other than to 
        make such new copy by virtue of the activation of the machine.
  ``(d) Definitions.--For purposes of this section--
          ``(1) the `maintenance' of a machine is the servicing of the 
        machine in order to make it work in accordance with its 
        original specifications and any changes to those specifications 
        authorized for that machine; and
          ``(2) the `repair' of a machine is the restoring of the 
        machine to the state of working in accordance with its original 
        specifications and any changes to those specifications 
        authorized for that machine.''.

 SEC. 204. LIABILITY OF EDUCATIONAL INSTITUTIONS FOR ONLINE 
                    INFRINGEMENT OF COPYRIGHT.

  (a) Recommendations by Register of Copyrights.--Not later than six 
months after the date of the enactment of this Act, the Register of 
Copyrights, after consultation with representatives of copyright owners 
and nonprofit educational institutions, shall submit to the Congress 
recommendations regarding the liability of nonprofit educational 
institutions for copyright infringement committed with the use of 
computer systems for which such an institution is a service provider, 
as that term is defined in section 512 of title 17, United States Code 
(as added by section 202 of this Act), including recommendations for 
legislation that the Register of Copyrights considers appropriate 
regarding such liability, if any.
  (b) Factors.--In formulating recommendations under subsection (a), 
the Register of Copyrights shall consider, where relevant--
          (1) current law regarding the direct, vicarious, and 
        contributory liability of nonprofit educational institutions 
        for infringement by faculty, administrative employees, 
        students, graduate students, and students who are employees of 
        such nonprofit educational institutions;
          (2) other users of their computer systems for whom nonprofit 
        educational institutions may be responsible;
          (3) the unique nature of the relationship between nonprofit 
        educational institutions and faculty;
          (4) what policies nonprofit educational institutions should 
        adopt regarding copyright infringement by users of their 
        computer systems;
          (5) what technological measures are available to monitor 
        infringing uses;
          (6) what monitoring of their computer systems by nonprofit 
        educational institutions is appropriate;
          (7) what due process nonprofit educational institutions 
        should afford in disabling access by users of their computer 
        systems who are alleged to have committed copyright 
        infringement;
          (8) what distinctions, if any, should be drawn between 
        computer systems which may be accessed from outside the 
        nonprofit educational systems, those which may not, and 
        combinations thereof;
          (9) the tradition of academic freedom; and
          (10) such other issues relating to the liability of nonprofit 
        educational institutions for copyright infringement committed 
        with the use of computer systems for which such an institution 
        is a service provider that the Register considers appropriate.

SEC. 205. EVALUATION OF IMPACT OF COPYRIGHT LAW AND AMENDMENTS ON 
                    ELECTRONIC COMMERCE AND TECHNOLOGICAL DEVELOPMENT.

  (a) Findings.--In order to maintain strong protection for 
intellectual property and promote the development of electronic 
commerce and the technologies to support that commerce, the Congress 
must have accurate and current information on the effects of 
intellectual property protection on electronic commerce and technology. 
The emergence of digital technology and the proliferation of 
copyrighted works in digital media, along with the amendments to 
copyright law contained in this Act, make it appropriate for the 
Congress to review these issues to ensure that neither copyright law 
nor electronic commerce inhibits the development of the other.
  (b) Evaluation by Secretary of Commerce.--The Secretary of Commerce, 
in consultation with the Assistant Secretary of Commerce for 
Communications and Information and the Register of Copyrights, shall 
evaluate--
          (1) the effects of this Act and the amendments made by this 
        Act on the development of electronic commerce and associated 
        technology; and
          (2) the relationship between existing and emergent technology 
        and existing copyright law.
  (c) Report to Congress.--The Secretary of Commerce shall, not later 
than 1 year after the date of the enactment of this Act, submit to the 
Congress a report on the evaluation conducted under subsection (b), 
including any legislative recommendations the Secretary may have.

SEC. 206. EFFECTIVE DATE.

  This title and the amendments made by this title shall take effect on 
the date of the enactment of this Act.

  TITLE III--EPHEMERAL RECORDINGS; DISTANCE EDUCATION; EXEMPTION FOR 
                         LIBRARIES AND ARCHIVES

SEC. 301. EPHEMERAL RECORDINGS.

  Section 112(a) of title 17, United States Code, is amended--
          (1) by redesignating paragraphs (1), (2), and (3) as 
        subparagraphs (A), (B), and (C), respectively;
          (2) by inserting ``(1)'' after ``(a)''; and
          (3) by inserting after ``114(a),'' the following: ``or for a 
        transmitting organization that is a broadcast radio or 
        television station licensed as such by theFederal 
Communications Commission that broadcasts a performance of a sound 
recording in a digital format on a nonsubscription basis,''; and
          (4) by adding at the end the following:
  ``(2) In a case in which a transmitting organization entitled to make 
a copy or phonorecord under paragraph (1) in connection with the 
transmission to the public of a performance or display of a work 
described in that paragraph is prevented from making such copy or 
phonorecord by reason of the application by the copyright owner of 
technical measures that prevent the reproduction of the work, the 
copyright owner shall make available to the transmitting organization 
the necessary means for permitting the making of such copy or 
phonorecord within the meaning of that paragraph, if it is 
technologically feasible and economically reasonable for the copyright 
owner to do so. If the copyright owner fails to do so in a timely 
manner in light of the transmitting organization's reasonable business 
requirements, the transmitting organization shall not be liable for a 
violation of the regulations issued under section 102(a)(1)(A) of the 
WIPO Copyright Treaties Implementation Act for engaging in such 
activities as are necessary to make such copies or phonorecords as 
permitted under paragraph (1) of this subsection.''.

SEC. 302. LIMITATIONS ON EXCLUSIVE RIGHTS; DISTANCE EDUCATION.

  (a) Recommendations by National Telecommunications and Information 
Administration.--Not later than 6 months after the date of the 
enactment of this Act, the Assistant Secretary of Commerce for 
Communications and Information, after consultation with representatives 
of copyright owners, nonprofit educational institutions, and nonprofit 
libraries and archives, shall submit to the Congress recommendations on 
how to promote distance education through digital technologies, 
including interactive digital networks, while maintaining an 
appropriate balance between the rights of copyright owners and the 
needs of users of copyrighted works. Such recommendations shall include 
any legislation the Assistant Secretary considers appropriate to 
achieve the foregoing objective.
  (b) Factors.--In formulating recommendations under subsection (a), 
the Assistant Secretary of Commerce for Communications and Information 
shall consider--
          (1) the need for an exemption from exclusive rights of 
        copyright owners for distance education through digital 
        networks;
          (2) the categories of works to be included under any distance 
        education exemption;
          (3) the extent of appropriate quantitative limitations on the 
        portions of works that may be used under any distance education 
        exemption;
          (4) the parties who should be entitled to the benefits of any 
        distance education exemption;
          (5) the parties who should be designated as eligible 
        recipients of distance education materials under any distance 
        education exemption;
          (6) whether and what types of technological measures can or 
        should be employed to safeguard against unauthorized access to, 
        and use or retention of, copyrighted materials as a condition 
        to eligibility for any distance education exemption, including, 
        in light of developing technological capabilities, the 
        exemption set out in section 110(2) of title 17, United States 
        Code;
          (7) the extent to which the availability of licenses for the 
        use of copyrighted works in distance education through 
        interactive digital networks should be considered in assessing 
        eligibility for any distance education exemption; and
          (8) such other issues relating to distance education through 
        interactive digital networks that the Assistant Secretary 
        considers appropriate.

SEC. 303. EXEMPTION FOR LIBRARIES AND ARCHIVES.

  Section 108 of title 17, United States Code, is amended--
          (1) in subsection (a)--
                  (A) by striking ``Notwithstanding'' and inserting 
                ``Except as otherwise provided in this title and 
                notwithstanding'';
                  (B) by inserting after ``no more than one copy or 
                phonorecord of a work'' the following: ``, except as 
                provided in subsections (b) and (c)''; and
                  (C) in paragraph (3) by inserting after ``copyright'' 
                the following: ``that appears on the copy or 
                phonorecord that is reproduced under the provisions of 
                this section, or includes a legend stating that the 
                work may be protected by copyright if no such notice 
                can be found on the copy or phonorecord that is 
                reproduced under the provisions of this section'';
          (2) in subsection (b)--
                  (A) by striking ``a copy or phonorecord'' and 
                inserting ``three copies or phonorecords'';
                  (B) by striking ``in facsimile form''; and
                  (C) by striking ``if the copy or phonorecord 
                reproduced is currently in the collections of the 
                library or archives.'' and inserting ``if--
          ``(1) the copy or phonorecord reproduced is currently in the 
        collections of the library or archives; and
          ``(2) any such copy or phonorecord that is reproduced in 
        digital format is not otherwise distributed in that format and 
        is not made available to the public in that format outside the 
        premises of the library or archives.''; and
          (3) in subsection (c)--
                  (A) by striking ``a copy or phonorecord'' and 
                inserting ``three copies or phonorecords'';
                  (B) by striking ``in facsimile form'';
                  (C) by inserting ``or if the existing format in which 
                the work is stored has become obsolete,'' after 
                ``stolen,''; and
                  (D) by striking ``if the library or archives has, 
                after a reasonable effort, determined that an unused 
                replacement cannot be obtained at a fair price.'' and 
                inserting ``if--
          ``(1) the library or archives has, after a reasonable effort, 
        determined that an unused replacement cannot be obtained at a 
        fair price; and
          ``(2) any such copy or phonorecord that is reproduced in 
        digital format is not made available to the public in that 
        format except for use on the premises of the library or 
        archives in lawful possession of such copy.''; and
                  (E) by adding at the end the following:
``For purposes of this subsection, a format shall be considered 
obsolete if the machine or device necessary to render perceptible a 
work stored in that format is no longer manufactured or is no longer 
reasonably available in the commercial marketplace.''.

                      TITLE IV--RELATED PROVISIONS

SEC. 401. REPORT BY NATIONAL TELECOMMUNICATIONS AND INFORMATION 
                    ADMINISTRATION.

  Not later than 6 months after the date of the enactment of this Act, 
the Assistant Secretary of Commerce for Communications and Information 
shall report to the Congress on appropriate mechanisms to encourage the 
development of access protocols, encryption testing methods, and 
security testing methods which would allow lawful access to, with 
appropriate safeguards to prevent the unlawful copying of, encrypted 
works. The Assistant Secretary shall include in such report 
recommendations on proposed amendments to this Act, if any, for 
achieving such result and for mechanisms to ensure that such 
safeguards--
          (1) would be developed pursuant to a broad consensus of 
        copyright owners and cryptographic researchers and security 
        administrators in an open, fair, voluntary standards-setting 
        process;
          (2) to the extent feasible, would protect copyright owners 
        against the unauthorized distribution or reproduction of their 
        encrypted works; and
          (3) would not limit encryption research, to the extent such 
        research is permitted by law as of the enactment of this Act.

                          Purpose and Summary

    The purpose of H.R. 2281, the Digital Millennium Copyright 
Act of 1998, is to implement two international treaties (i.e., 
the ``Copyright Treaty,'' and the ``Performances and Phonograms 
Treaty'') signed by the United States and more than 125 other 
countries before the World Intellectual Property Organization 
(WIPO). The Clinton Administration's WIPO Treaties implementing 
legislation would have amended Title 17 of the United States 
Code to grant copyright owners a new right against 
``circumvention'' of ``technological protection measures,'' and 
to establish new provisions dealing with the integrity of 
``copyright management information.'' As reported by the 
Committee on the Judiciary, H.R. 2281 included two titles: 
Title I would implement the two WIPO treaties; and Title II 
would provide for limitations on copyright infringement 
liability for on-line and other service providers.
    Title I of H.R. 2281, as reported by the Committee on 
Commerce, also would implement the WIPO treaties, but through 
free-standing provisions of law rather than as amendments to 
Title 17. Title II, as amended by the Committee on Commerce, 
includes comprehensive provisions addressing copyright 
infringement liability for on-line and other service providers. 
Title III, as added by the Committee on Commerce, would address 
ephemeral recordings, the use of computer and other networks to 
foster distance learning, and exemptions for libraries and 
archives to permit them to use the latest technology to 
preserve deteriorating manuscripts and other works. With these 
proposed revisions, the Committee believes it has appropriately 
balanced the interests of content owners, on-line and other 
service providers, and information users in a way that will 
foster the continued development of electronic commerce and the 
growth of the Internet.

                  Background and Need for Legislation

                          Legislative History

    Much like the agricultural and industrial revolutions that 
preceded it, the digital revolution has unleashed a wave of 
economic prosperity and job growth. Today, the information 
technology industry is developing versatile and robust products 
to enhance the lives of individuals throughout the world, and 
our telecommunications industry is developing new means of 
distributing information to these consumers in every part of 
the globe. In this environment, the development of new laws and 
regulations will have a profound impact on the growth of 
electronic commerce and the Internet.
    In recognition of these developments, and as part of the 
effort to begin updating national laws for the digital era, 
delegates from over 150 countries (including the United States) 
convened in December 1996 to negotiate the Copyright Treaty and 
the Performances and Phonograms Treaty under the auspices of 
the World Intellectual Property Organization (WIPO). In July 
1997, the Clinton Administration submitted the treaties to the 
Senate for ratification and submitted proposed implementing 
legislation to both the House and the Senate.
    On May 22, 1998, the Committee on the Judiciary reported 
H.R. 2281, the ``WIPO Copyright Treaties Implementation Act'' 
to the House. H.R. 2281 was sequentially referred to the 
Committee on Commerce for its consideration, initially for a 
period not to extend beyond June 19, 1998. Meanwhile, on May 
14, 1998, the Senate adopted S. 2037, the ``Digital Millennium 
Copyright Act.'' The Senate included provisions to explicitly 
authorize reverse engineering for purposes of achieving 
interoperability between computer products. The Senate also 
added a provision to ensure that librarians and archivists 
could use the latest technology to preserve deteriorating 
manuscripts and other works. It also added a so-called ``no 
mandate'' provision with respect to the design of consumer 
electronics, telecommunications, and computer products.
    On June 5, 1998, the Subcommittee on Telecommunications, 
Trade, and Consumer Protection held a legislative hearing on 
H.R. 2281. The Committee had been advised that both H.R. 2281, 
as reported by the Committee on the Judiciary, and S. 2037, as 
passed by the Senate, were ``compromises'' that enjoyed ``broad 
support.'' But it became apparent at the hearing that both 
bills faced significant opposition from many private and public 
sector interests, including libraries, institutions of higher 
learning, consumer electronics and computer product 
manufacturers, and others with a vital stake in the growth of 
electronic commerce and the Internet. In light of the serious 
concerns raised at the hearing, and in recognition of the 
complexity of the issues posed by the legislation, Chairman 
Bliley requested that the Committee's referral be further 
extended. The Committee's referral was subsequently extended, 
for a period not to extend beyond July 22, 1998.

                     Promoting Electronic Commerce

    The Committee on Commerce is in the midst of a wide-ranging 
review of all issues relating to electronic commerce, including 
the issues raised by this legislation. The growth of electronic 
commerce is having a profound impact on the nation's economy. 
Over the past decade, the information technology sector of our 
economy has grown rapidly and is seen by many as playing a 
leading role in the current economic expansion. According to 
The Emerging Digital Economy, a recent Department of Commerce 
report on electronic commerce, the information technology 
sector now constitutes 8.2 percent of the Nation's gross 
domestic product, up from 4.5 percent in 1985. At the end of 
1997, approximately 7.4 million Americans were employed in this 
field. It is expected that estimates of the total value of 
economic activity conducted electronically in 2002 will range 
from $200 billion to more than $500 billion, compared to just 
$2.6 billion in 1996.
    H.R. 2281 is one of the most important pieces of 
legislation affecting electronic commerce that the 105th 
Congress will consider. It establishes a wide range of rules 
that will govern not only copyright owners in the marketplace 
for electronic commerce, but also consumers, manufacturers, 
distributors, libraries, educators, and on-line service 
providers. H.R. 2281, in other words, is about much more than 
intellectual property. It defines whether consumers and 
businesses may engage in certain conduct, or use certain 
devices, in the course of transacting electronic commerce. 
Indeed, many of these rules may determine the extent to which 
electronic commerce realizes its potential.
    The Committee on Commerce's role in considering this 
legislation is therefore critical. The Committee has a long-
standing interest in addressing all issues relating to 
interstate and foreign commerce, including commerce transacted 
over all electronic mediums, such as the Internet, and 
regulation of interstate and foreign communications. This 
legislation implicates each of those interests in numerous 
ways.

 Understanding the Nexus Between Electronic Commerce and Intellectual 
                                Property

    The debate on this legislation highlighted two important 
priorities: promoting the continued growth and development of 
electronic commerce; and protecting intellectual property 
rights. These goals are mutually supportive. A thriving 
electronic marketplace provides new and powerful ways for the 
creators of intellectual property to make their works available 
to legitimate consumers in the digital environment. And a 
plentiful supply of intellectual property--whether in the form 
of software, music, movies, literature, or other works--drives 
the demand for a more flexible and efficient electronic 
marketplace.
    As electronic commerce and the laws governing intellectual 
property (especially copyright laws) change, the relationship 
between them may change as well. To ensure that 
Congresscontinues to enact policies that promote both of the above 
goals, it is important to have current information about the effects of 
these changes. For example, many new technologies for distributing 
real-time audio and video through the Internet function by storing 
small parts of copyrighted works in the memory of the recipient's 
computer. This technology is increasingly commonplace, but some 
providers of the technology are concerned that the making of these 
transient copies may subject them or their customers to liability under 
current copyright law. In another example, an increasing number of 
intellectual property works are being distributed using a ``client-
server'' model, where the work is effectively ``borrowed'' by the user 
(e.g., infrequent users of expensive software purchase a certain number 
of uses, or viewers watch a movie on a pay-per-view basis). To operate 
in this environment, content providers will need both the technology to 
make new uses possible and the legal framework to ensure they can 
protect their work from piracy.
    The Committee on Commerce believes it is important to more 
precisely define the relationship between intellectual property 
and electronic commerce, and to understand the practical 
implications of this relationship on the development of 
technology to be used in promoting electronic commerce. To that 
end, the Committee adopted an amendment that directs the 
Secretary of Commerce (the Secretary) to report on the effects 
of this legislation on the development of electronic commerce 
and the relationship between technology and copyright law. In 
the course of preparing the report, the Secretary is directed 
to consult with both the Assistant Secretary of Commerce for 
Communications and Information (given the Assistant Secretary's 
expertise in the area of telecommunications and information 
services and technologies) and the Register of Copyrights 
(given the Register's expertise in the field of copyright).

                      Prohibiting Certain Devices

    H.R. 2281, as reported by the Committee on the Judiciary, 
would regulate--in the name of copyright law--the manufacture 
and sale of devices that can be used to improperly circumvent 
technological protection measures. The Committee on Commerce 
adopted an amendment that moves the anti-circumvention 
provisions out of Title 17 and establishes them as free-
standing provisions of law. The Committee believes that this is 
the most appropriate way to implement the treaties, in large 
part because these regulatory provisions have little, if 
anything, to do with copyright law. The anti-circumvention 
provisions (and the accompanying penalty provisions for 
violations of them) would be separate from, and cumulative to, 
the existing claims available to copyright owners. In the 
Committee's judgment, it therefore is more appropriate to 
implement the treaties through free-standing provisions of law 
rather than codifying them in Title 17.
    Article 1, Section 8, Clause 8 of the United States 
Constitution authorizes the Congress to promulgate laws 
governing the scope of proprietary rights in, and use 
privileges with respect to, intangible ``works of authorship.'' 
As set forth in the Constitution, the fundamental goal is 
``[t]o promote the Progress of Science and useful Arts. * * 
*.'' In the more than 200 years since enactment of the first 
Federal copyright law in 1790, the maintenance of this balance 
has contributed significantly to the growth of markets for 
works of the imagination as well as the industries that use 
such works.
    Congress has historically advanced this constitutional 
objective by regulating the use of information--not the devices 
or means by which the information is delivered or used by 
information consumers--and by ensuring an appropriate balance 
between the interests of copyright owners and information 
users. For example, Section 106 of the Copyright Act (17 U.S.C. 
Sec. 106) establishes certain rights copyright owners have in 
their works, including limitations on the use of these works 
without their authorization. Likewise, Sections 107 through 121 
of the Copyright Act (17 U.S.C. Sec. Sec. 107-121) set forth 
the circumstances in which such uses will be deemed 
permissible, or otherwise lawful even though unauthorized. And 
Sections 501 through 511, as well as Section 602 of the 
Copyright Act (17 U.S.C. Sec. Sec. 501-511, 602) specify rights 
of action for copyright infringement, and prescribe penalties 
in connection with those actions.
    In general, all of these provisions are technology neutral. 
They do not regulate commerce in information technology, i.e., 
products and devices for transmitting, storing, and using 
information. Instead, they prohibit certain actions and create 
exceptions to permit certain conduct deemed to be in the 
greater public interest, all in a way that balances the 
interests of copyright owners and users of copyrighted works. 
In a September 16, 1997, letter to Congress, 62 copyright law 
professors expressed their concern about the implications of 
regulating devices in the name of copyright law. They said in 
relevant part:

          Although [they] would be codified in Title 17, [the 
        anti-circumvention provisions] would not be an ordinary 
        copyright provision; liability under the section would 
        result from conduct separate and independent from any 
        act of copyright infringement or any intent to promote 
        infringement. Thus, enactment of [the anti-
        circumvention provisions] would represent an 
        unprecedented departure into the zone of what might be 
        called paracopyright--an uncharted new domain of 
        legislative provisions designed to strengthen copyright 
        protection by regulating conduct which traditionally 
        has fallen outside the regulatory sphere of 
        intellectual property law.

    While the Committee on Commerce agrees with these 
distinguished professors, the Committee also recognizes that 
the digital environment poses a unique threat to the rights of 
copyright owners, and as such, necessitates protection against 
devices that undermine copyright interests. In contrast to the 
analog experience, digital technology enables pirates to 
reproduce and distribute perfect copies of works--at virtually 
no cost at all to the pirate. As technology advances, so must 
our laws. The Committee thus seeks to protect the interests of 
copyright owners in the digital environment, while ensuring 
that copyright law remain technology neutral. Hence, the 
Committee has removed the anti-circumvention provisions from 
Title 17, and established them as free-standing provisions of 
law.

                  Fair Use in the Digital Environment

    H.R. 2281, as reported by the Committee on the Judiciary, 
provided that ``[n]o person shall circumvent a technological 
protection measure that effectively controls access to a work 
protected under Title 17, United States Code.'' The Committee 
on Commerce devoted substantial time and resources to analyzing 
the implications of this broad prohibition on the traditional 
principle of ``fair use.'' A recent editorial by the Richmond 
Times-Dispatch succinctly states the Committee's dilemma:

          Copyrights traditionally have permitted public access 
        while protecting intellectual property. The U.S. 
        approach--known as ``fair use''--benefits consumers and 
        creators. A computer revolution that has increased 
        access to information also creates opportunities for 
        the holders of copyrights to impose fees for, among 
        other things, research and the use of excerpts from 
        published works. And digital technology--whatever that 
        means--could be exploited to erode fair 
        use.1
---------------------------------------------------------------------------
    \1\ Fair Use, Richmond Times-Dispatch, July 13, 1998, at A-6.

    The principle of fair use involves a balancing process, 
whereby the exclusive interests of copyright owners are 
balanced against the competing needs of users of information. 
This balance is deeply embedded in the long history of 
copyright law. On the one hand, copyright law for centuries has 
sought to ensure that authors reap the rewards of their efforts 
and, at the same time, advance human knowledge through 
education and access to society's storehouse of knowledge on 
the other. This critical balance is now embodied in Section 106 
of the Copyright Act (17 U.S.C. Sec. 106), which grants 
copyright holders a ``bundle'' of enumerated rights, and in 
Section 107, which codifies the ``fair use'' doctrine. Under 
the Copyright Act, ``fair use'' may be made of a copyrighted 
work ``for purposes such as criticism, comment, news reporting, 
teaching * * * scholarship or research'' under certain 
circumstances without the permission of the author.
    Fair use, thus, provides the basis for many of the most 
important day-to-day activities in libraries, as well as in 
scholarship and education. It also is critical to advancing the 
personal interests of consumers. Moreover, as many testified 
before the Committee, it is no less vital to American 
industries, which lead the world in technological innovation. 
As more and more industries migrate to electronic commerce, 
fair use becomes critical to promoting a robust electronic 
marketplace. The Committee on Commerce is in the midst of a 
wide-ranging review of all issues relating to electronic 
commerce, including the issues raised by this legislation. The 
digital environment forces this Committee to understand and, 
where necessary, modernize the rules of commerce as they apply 
to a digital environment--including the rules that ensure that 
consumers have a stake in the growth in electronic commerce.
    The Committee was therefore concerned to hear from many 
private and public interests that H.R. 2281, as reported by the 
Committee on the Judiciary, would undermine Congress'long-
standing commitment to the concept of fair use. A June 4, 1998, letter 
to the Committee from the Consumers' Union is representative of the 
concerns raised by the fair use community in reaction to H.R. 2281, as 
reported by the Committee on the Judiciary. The letter states in part:

          These newly-created rights will dramatically diminish 
        public access to information, reducing the ability of 
        researchers, authors, critics, scholars, teachers, 
        students, and consumers to find, to quote for 
        publication and otherwise make fair use of them. It 
        would be ironic if the great popularization of access 
        to information, which is the promise of the electronic 
        age, will be short-changed by legislation that purports 
        to promote this promise, but in reality puts a monopoly 
        stranglehold on information.

    The Committee on Commerce felt compelled to address these 
risks, including the risk that enactment of the bill could 
establish the legal framework that would inexorably create a 
``pay-per-use'' society. At the same time, however, the 
Committee was mindful of the need to honor the United States' 
commitment to effectively implement the two WIPO treaties, as 
well as the fact that fair use principles certainly should not 
be extended beyond their current formulation. The Committee has 
struck a balance that is now embodied in Section 102(a)(1) of 
the bill, as reported by the Committee on Commerce. The 
Committee has endeavored to specify, with as much clarity as 
possible, how the right against anti-circumvention would be 
qualified to maintain balance between the interests of content 
creators and information users. The Committee considers it 
particularly important to ensure that the concept of fair use 
remains firmly established in the law. Consistent with the 
United States'' commitment to implement the two WIPO treaties, 
H.R. 2281, as reported by the Committee on Commerce, fully 
respects and extends into the digital environment the bedrock 
principle of ``balance'' in American intellectual property law 
for the benefit of both copyright owners and users.

                     Promoting Encryption Research

    H.R. 2281, as reported by the Committee on the Judiciary, 
provided no exception for the field of encryption research to 
the bill's broad prohibition against the circumvention of 
technological protection measures. Recognizing the importance 
of the field of encryption research to electronic commerce, the 
Committee on Commerce crafted a provision that provides for an 
exception to the bill's anti-circumvention provisions.
    The effectiveness of technological protection measures to 
prevent theft of works depends, in large part, on the rapid and 
dynamic development of better technologies, including 
encryption-based technological protection measures. The 
development of encryption sciences requires, in part, ongoing 
research and testing activities by scientists of existing 
encryption methods, in order to build on those advances, thus 
promoting and advancing encryption technology generally. This 
testing could involve attempts to circumvent or defeat 
encryption systems for the purpose of detecting flaws and 
learning how to develop more impregnable systems. The goals of 
this legislation would be poorly served if these provisions had 
the undesirable and unintended consequence of chilling 
legitimate research activities in the area of encryption.
    In many cases, flaws in cryptography occur when an 
encryption system is actually applied. Research of such 
programs as applied is important both for the advancement of 
the field of encryption and for consumer protection. Electronic 
commerce will flourish only if legitimate encryption 
researchers discover, and correct, the flaws in encryption 
systems before illegitimate hackers discover and exploit these 
flaws. Accordingly, the Committee has fashioned an affirmative 
defense to permit legitimate encryption research.

         Protecting Personal Privacy in the Digital Environment

    H.R. 2281, as reported by the Committee on the Judiciary, 
contains numerous protections to protect the rights of 
copyright owners to ensure that they feel secure in releasing 
their works in a digital, on-line environment. The Committee on 
Commerce, however, believes that in reaching to protect the 
rights of copyright owners, Congress need not encroach upon the 
privacy interests of consumers.
    Digital technology is robust and versatile enough that it 
can surreptitiously gather consumers' personal information, and 
do so through the use of software that is protected, or 
``cloaked,'' by a technological protection measure. And to the 
extent a consumer seeks to disable the gathering of such 
information, he or she may unwittingly violate the provisions 
of this bill. The Committee regards this as an extreme result, 
and believes that consumers must be accorded certain rights to 
protect their personal privacy.
    The Committee on Commerce adopted an amendment to strike a 
balance between the interests of copyright owners and the 
personal privacy of consumers. The amendment deals with the 
critical issue of privacy by creating a marketplace incentive 
for copyright owners to deal ``above board'' with consumers on 
personal data gathering practices. Indeed, the copyright 
community itself has expressed a strong desire to give 
consumers comfort in knowing that their personal privacy is 
being protected. The Committee views consumer confidence as 
critical to promoting a robust and reliable marketplace for 
electronic commerce. Once consumers are confident that their 
personal privacy is protected, this should all but eliminate 
the need for consumers to circumvent technological protection 
measures for the purpose of protecting their privacy. Copyright 
owners can help consumers to realize confidence in the digital 
environment by disclosing personal data gathering practices.

                                Hearings

    The Subcommittee on Telecommunications, Trade, and Consumer 
Protection held a hearing on H.R. 2281 on June 5, 1998. The 
Subcommittee received testimony from: Mr. Marc Rotenberg, 
Director, Electronic Privacy Information Center; Mr. Gary 
Shapiro, President, Consumer Electronics Manufacturers 
Association; Mr. Jonathan Callas, Chief Technology Officer, 
Network Associates, Inc.; Mr. Chris Bryne, Director of 
Intellectual Property, Silicon Graphics, Inc., representing 
Information Technology Industry Council; Mr. Robert Holleyman, 
CEO, Business Software Alliance; Ms. Hilary Rosen, President 
and CEO, Recording Industry Association of America; Mr. Walter 
H. Hinton, Vice President, Strategy and Marketing, Storage 
Technology Corp.; Mr. George Vradenburg, III, Senior Vice 
President and General Counsel, America OnLine, Inc.; Mr. Steve 
Metalitz, Vice President, International Intellectual Property 
Alliance, representing the Motion Picture Association of 
America; Mr. Seth Greenstein, representing Digital Media 
Association [listed on witness list]; Mr. Robert Oakley, 
Director of the Law Library, Georgetown University Law Center; 
and Mr. Charles E. Phelps, Provost, University of Rochester.

                        Committee Consideration

    The Subcommittee on Telecommunications, Trade, and Consumer 
Protection met in open markup session on June 17, 1998, and 
June 18, 1998, to consider H.R. 2281, a bill to amend Title 17, 
United States Code, to implement the World Intellectual 
Property Organization Copyright Treaty and Performances and 
Phonograms Treaty. On June 18, 1998, the Subcommittee approved 
H.R. 2281, the Digital Millennium Copyright Act of 1998, for 
Full Committee consideration, amended, by a voice vote. On July 
17, 1998, the Committee on Commerce met in open markup session 
and ordered H.R. 2281 reported to the House, amended, by a roll 
call vote of 41 yeas to 0 nays.

                            Roll Call Votes

    Clause 2(l)(2)(B) of Rule XI of the Rules of the House 
requires the Committee to list the recorded votes on the motion 
to report legislation and amendments thereto. A motion by Mr. 
Bliley to order H.R. 2281 reported to the House, amended, was 
agreed to by a roll call vote of 41 yeas to 0 nays. The 
following are the recorded vote on motion to report H.R. 2281, 
including the names of those Members voting for and against, 
and the voice votes taken on amendments offered to H.R. 2281.





                      Committee Oversight Findings

    Pursuant to clause 2(l)(3)(A) of Rule XI of the Rules of 
the House of Representatives, the Committee held a legislative 
hearing and made findings that are reflected in this report.

              Committee on Government Reform and Oversight

    Pursuant to clause 2(l)(3)(D) of Rule XI of the Rules of 
the House of Representatives, no oversight findings have been 
submitted to the Committee by the Committee on Government 
Reform and Oversight.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 2(l)(3)(B) of Rule XI of the 
Rules of the House of Representatives, the Committee finds that 
H.R 2281, the Digital Millennium Copyright Act of 1998, would 
result in no new or increased budget authority, entitlement 
authority, or tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 2(l)(3)(C) of Rule XI of the Rules of 
the House of Representatives, the following is the cost 
estimate provided by the Congressional Budget Office pursuant 
to section 402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 22, 1998.
Hon. Tom Bliley,
Chairman, Committee on Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2281, Digital 
Millennium Copyright Act of 1998.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mark Hadley 
(for federal costs), Pepper Santalucia (for the state and local 
impact), and Matt Eyles (for the private-sector impact).
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

H.R. 2281--Digital Millennium Copyright Act of 1998

    Summary: H.R. 2281 would amend existing copyright laws to 
implement two World Intellectual Property Organization (WIPO) 
treaties, limit the liability of Internet providers for 
copyright infringement by their customers, clarify the 
treatment of ephemeral recordings, and require the study of 
various issues related to copyrights and emerging technologies.
    Assuming the appropriation of the necessary funds, CBO 
estimates that implementing H.R. 2281 would result in new 
federal spending of about $2 million in fiscal year 1999 and 
less than $250,000 a year over the 2000-2003 period. Enacting 
the bill would establish new criminal penalties and thus could 
affect both receipts and direct spending. Hence, pay-as-you-go 
procedures would apply, but CBO expects that any changes in 
receipts and direct spending would not be significant.
    H.R. 2281 contains an intergovernmental and a private-
sector mandate as defined in the Unfunded Mandates Reform Act 
(UMRA), but the costs of the mandates would not exceed the 
thresholds in the law. (The thresholds are $50 million and $100 
million in 1996, respectively, indexed annually for inflation.)
    Estimated cost to the Federal Government: For the purpose 
of this estimate, CBO assumes that H.R. 2281 will be enacted by 
the end of fiscal year 1998, and that the estimated amounts 
will be appropriated by the start of each fiscal year. The 
costs of this legislation fall within budget function 370 
(commerce and housing credit).
    Title I of H.R. 2281 would amend U.S. copyright law to 
comply with two treaties produced by the December 1996 
conference of the WIPO--one regarding the use of copyrighted 
material in digital environments and the other dealing with 
international copyright protectionof performers and producers 
of phonograms. Title II would limit the liability for copyright 
infringement of persons who are providers of on-line services or 
network access. Title III would clarify the treatment of ephemeral 
recordings and exempt libraries and archives from some provisions of 
this bill. Title IV would require the National Telecommunications and 
Information Administration (NTIA) to submit a report on encryption 
testing methods and mechanisms to encourage access protocols.
    H.R. 2281 would require the Register of Copyrights, the 
Secretary of Commerce, the Assistant Secretary of Commerce for 
Communications and Information, and the NTIA to submit six 
reports on issues related to copyrights in the digital age, 
including encryption, distance learning, liability of 
educational institutions, personal identifying information, and 
electronic commerce. In addition, title I would require the 
Secretary of Commerce to issue regulations prohibiting any 
person from circumventing technological protection measures on 
copyrighted works. Assuming the appropriation of the necessary 
amounts, producing reports and promulgating regulations 
required by H.R. 2281 would increase federal spending by about 
$2 million in fiscal year 1999 and less than $250,000 a year 
over the 2000-2003 period.
    The bill would establish new criminal penalties and thus 
could affect both receipts and direct spending; therefore, pay-
as-you-go procedures would apply. Section 105 would establish 
criminal fines of up to $1 million for anyone attempting to 
circumvent copyright protection systems, or falsifying or 
altering copyright management information. Enacting this 
provision could increase governmental receipts from the 
collection of fines, but we estimate that any such increase 
would be less than $500,000 annually. Criminal fines are 
deposited in the Crime Victims Fund and are spent in the 
following year. Thus any change in direct spending from the 
fund would also amount to less than $500,000 annually.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act specifies pay-as-you-go 
procedures for legislation affecting direct spending and 
receipts. Enacting H.R. 2281 could affect both direct spending 
and receipts, but CBO estimates that any such changes would be 
insignificant.
    Intergovernmental and private-sector impact: Section 4 of 
UMRA excludes from the application of that act any legislative 
provisions that are necessary for the ratification or 
implementation of international treaty obligations. CBO has 
determined that title I of the bill fits within that exclusion 
because it is necessary for the implementation of the WIPO 
Copyright Treaty and the WIPO Performances and Phonograms 
Treaty.
    Title III of H.R. 2281, however, would impose a mandate on 
certain owners of copyrights who apply technical protections to 
works that prevent their reproduction. Title III would require 
copyright owners who employ mechanisms that prevent the 
reproduction of copyrighted works to make available to 
federally licensed broadcasters the necessary means to copy 
such works. Under current law, federally licensed broadcasters 
are authorized to reproduce copyright-protected material under 
specific conditions. Since this mandate would apply to both 
public and private entities that own copyrights, it would be 
considered both a private-sector and an intergovernmental 
mandate.
    However, the use of reproduction protections envisioned in 
the bill is not yet widespread. Furthermore, copyright owners 
may claim economic hardship or technological infeasibility to 
avoid the new requirement, and the costs of providing federally 
licensed broadcasters with the means to copy technically 
protected works would likely be modest. Therefore, CBO 
estimates that the direct cost of the new mandates would be 
well below the statutory thresholds in UMRA.
    Previous CBO estimate: On May 12, 1998, CBO transmitted an 
estimate of H.R. 2281 as ordered reported by the House 
Committee on the Judiciary on April 1, 1998. The Judiciary 
Committee's version of the bill included the first two titles, 
but did not require any of the reports required by the Commerce 
Committee's version. CBO estimated that enactment of the 
Judiciary Committee's version of H.R. 2281 would have no 
significant impact on the federal budget.
    Estimate prepared by: Federal Costs: Mark Hadley. Impact on 
State, Local, and Tribal Governments: Pepper Santalucia. Impact 
on the Private Sector: Matt Eyles.
    Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 2(l)(4) of Rule XI of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation

Section 1. Short title

    Section 1 establishes that this Act may be cited as the 
``Digital Millennium Copyright Act of 1998.''

Section 2. Table of contents

    Section 2 sets out the table of contents.

                 TITLE I--WIPO TREATIES IMPLEMENTATION

Section 101. Short title

    Section 101 establishes that the short title of Title I is 
the ``WIPO Copyright Treaties Implementation Act.''

Section 102. Circumvention of copyright protection systems

    As previously discussed in the background section to this 
report, the Committee was concerned that H.R. 2281, as reported 
by the Committee on the Judiciary, would undermine Congress' 
long-standing commitment to the principle of fair use. 
Throughout our history, the ability of individual members of 
the public to access and to use copyrighted materials has been 
a vital factor in the advancement of America's economic 
dynamism, social development, and educational achievement. In 
its consideration of H.R. 2281, the Committee on Commerce paid 
particular attention to how changing technologies may affect 
users' access in the future. Section 102(a)(1) of the bill 
responds to this concern.
    The growth and development of the Internet has already had 
a significant positive impact on the access of American 
students, researchers, consumers, and the public at large to 
informational resources that help them in their efforts to 
learn, acquire new skills, broaden their perspectives, 
entertain themselves, and become more active and informed 
citizens. A plethora of information, most of it embodied in 
materials subject to copyright protection, is available to 
individuals, often for free, that just a few years ago could 
have been located and acquired only through the expenditure of 
considerable time, resources, and money. New examples of this 
greatly expanded availability of copyrighted materials occur 
every day.
    Still, the Committee is concerned that marketplace 
realities may someday dictate a different outcome, resulting in 
less access, rather than more, to copyrighted materials that 
are important to education, scholarship, and other socially 
vital endeavors. This result could flow from a confluence of 
factors, including the elimination of print or other hard-copy 
versions, the permanent encryption of all electronic copies, 
and the adoption of business models that depend upon 
restricting distribution and availability, rather than upon 
maximizing it. In this scenario, it could be appropriate to 
modify the flat prohibition against the circumvention of 
effective technological measures that control access to 
copyrighted materials, in order to ensure that access for 
lawful purposes is not unjustifiably diminished.
    Given the threat of a diminution of otherwise lawful access 
to works and information, the Committee on Commerce believes 
that a ``fail-safe'' mechanism is required. This mechanism 
would monitor developments in the marketplace for copyrighted 
materials, and allow the enforceability of the prohibition 
against the act of circumvention to be selectively waived, for 
limited time periods, if necessary to prevent a diminution in 
the availability to individual users of a particular category 
of copyrighted materials.
    Section 102(a)(1) of the bill creates such a mechanism. It 
converts the statutory prohibition against the act of 
circumvention into a regulation, and creates a rulemaking 
proceeding in which the issue of whether enforcement of the 
regulation should be temporarily waived with regard to 
particular categories of works can be fully considered and 
fairly decided on the basis of real marketplace developments 
that may diminish otherwise lawful access to works.
            (a) Violations regarding circumvention of technological 
                    protection measures
    Section 102(a)(1) gives two responsibilities to the 
Secretary of Commerce. The first is to issue regulations 
against the circumvention of technological protection measures 
that effectively control access to a copyrighted work. The 
second is to convene a rulemaking proceeding and, in 
conjunction with other specified officials, to determine 
whether to waive the applicability of the regulations for the 
next two years with respect to any particular category of 
copyrighted materials.
    The Secretary's responsibility under subparagraph (A) is 
essentially ministerial. He or she is to simply recast, in the 
form of a regulation, the statutory prohibition against the act 
of circumvention of technological protection measures that 
effectively control access to copyrighted materials that was 
set forth in Section 102(a)(1) prior to its amendment.
    The Committee has chosen a regulatory, rather than a 
statutory, route for establishing this prohibition for only one 
reason: to provide greater flexibility in enforcement, through 
the rulemaking proceeding set forth in the subsequent 
subparagraphs of this subsection 102(a)(1). It does not intend 
to make any substantive change in the scope or meaning of the 
prohibition as it appeared in the bill prior its amendment, and 
it is not empowering the Secretary of Commerce to do so either. 
The regulation should conform in every particular to the 
provisions of the statute, which addresses all other relevant 
aspects of the regulatory prohibition, including exceptions 
(such as for privacy or for encryption research) as well as 
civil and criminal enforcement mechanisms and penalties. No 
additional definitions, limitations, defenses or other 
provisions may be added. The regulation is to take effect two 
years after the enactment of the statute.
    Subparagraph (B) sets forth the parameters of the 
Secretary's second responsibility: the convening of a 
rulemaking proceeding, consistent with the requirements of the 
Administrative Procedures Act. The goal of the proceeding is to 
assess whether the implementation of technological protection 
measures that effectively control access to copyrighted works 
is adversely affecting the ability of individual users to make 
lawful uses of copyrighted works. Many such technological 
protection measures are in effect today: these include the use 
of ``password codes'' to control authorized access to computer 
programs, for example, or encryption or scrambling of cable 
programming, videocassettes, and CD-ROMs. More such measures 
can be expected to be introduced in the near future. The 
primary goal of the rulemaking proceeding is to assess whether 
the prevalence of these technological protections, with respect 
to particular categories of copyrighted materials, is 
diminishing the ability of individuals to use these works in 
ways that are otherwise lawful.
    The main purpose for delaying for two years the effective 
date of the prohibition against circumvention of access control 
technologies is to allow the development of a sufficient record 
as to how the implementation of these technologies is affecting 
availability of works in the marketplace for lawful uses. The 
Committee also intends that the rulemaking proceeding should 
focus on distinct, verifiable and measurable impacts; should 
not be based upon de minimisimpacts; and will solicit input to 
consider a broad range of evidence of past or likely adverse impacts.
    The criteria listed in subparagraph (B) are illustrative of 
the questions that the rulemaking proceeding should ask. In 
each case, the focus must remain on whether the implementation 
of technological protection measures (such as encryption or 
scrambling) has caused adverse impact on the ability of users 
to make lawful uses. Adverse impacts that flow from other 
sources, or that are not clearly attributable to implementation 
of a technological protection measure, are outside the scope of 
the rulemaking. The rulemaking will be repeated on a biennial 
basis, and on each occasion, the assessment of adverse impacts 
on particular categories of works is to be determined de novo. 
The regulatory prohibition is presumed to apply to any and all 
kinds of works, including those as to which a waiver of 
applicability was previously in effect, unless, and until, the 
Secretary makes a new determination that the adverse impact 
criteria have been met with respect to a particular class and 
therefore issues a new waiver. In conducting the rulemaking 
proceeding, the Secretary must consult closely with the 
National Telecommunications and Information Administration, as 
well as with the Patent and Trademark Office and the Register 
of Copyrights.
    Subparagraph (C) spells out the determination that the 
Secretary must make at the conclusion of the rulemaking 
proceeding. If the rulemaking has produced insufficient 
evidence to determine whether there have been adverse impacts 
with respect to particular classes of copyrighted materials, 
the circumvention prohibition should go into effect with 
respect to those classes. Only in categories as to which the 
Secretary finds that adverse impacts have occurred, or that 
such impacts are likely to occur within the next two years, 
should he or she waive the applicability of the regulations for 
the next two years.
    The issue of defining the scope or boundaries of a 
``particular class'' of copyrighted works as to which the 
implementation of technological protection measures has been 
shown to have had an adverse impact is an important one to be 
determined during the rulemaking proceedings. In assessing 
whether users of copyrighted works have been, or are likely to 
be adversely affected, the Secretary shall assess users' 
ability to make lawful uses of works ``within each particular 
class of copyrighted works specified in the rulemaking.'' The 
Committee intends that the ``particular class of copyrighted 
works'' be a narrow and focused subset of the broad categories 
of works of authorship than is identified in Section 102 of the 
Copyright Act (17 U.S.C. Sec. 102). The Secretary's 
determination is inapplicable in any case seeking to enforce 
any other provision of this legislation, including the 
manufacture or trafficking in circumvention devices that are 
prohibited by Section 102(a)(2) or 102(b)(1).
    To provide meaningful protection and enforcement of the 
copyright owner's right to control access to his or her 
copyrighted work (as defined under Section 102(a)(1)), Section 
102(a)(2) supplements Section 102(a)(1) with prohibitions on 
creating and making available certain technologies, products 
and services used, developed or advertised to defeat 
technological protection measures that protect against 
unauthorized access.2
---------------------------------------------------------------------------
    \2\ The Committee has previously reported laws that similarly 
protect against unauthorized access to works. See, e.g., 47 U.S.C. 
Sec. 553(a)(2) (prohibiting the manufacture or distribution of 
equipment intended for the unauthorized reception of cable television 
service); 47 U.S.C. Sec. 605(e)(4) (prohibiting the manufacture, 
assembly, import, and sale of equipment used in the unauthorized 
decryption of satellite cable programming); see also H. Rep. No. 780, 
102d Cong., 2d Sess. (1992) (report accompanying H.R. 4567, which would 
have established the Audio Home Recording Act's anti-circumvention 
provisions as free-standing provisions of law).
---------------------------------------------------------------------------
    Specifically, Section 102(a)(2) prohibits any person from 
manufacturing, importing, offering to the public, providing, or 
otherwise trafficking in certain technologies, products, 
services, devices, components, or parts that can be used to 
circumvent a technological protection measure that otherwise 
effectively controls access to a copyrighted work. The 
Committee believes it is very important to emphasize that 
Section 102(a)(2) is aimed fundamentally at outlawing so-called 
``black boxes'' that are expressly intended to facilitate 
circumvention of technological protection measures for purposes 
of gaining access to a work. This provision is not aimed at 
products that are capable of commercially significant 
noninfringing uses, such as consumer electronics, 
telecommunications, and computer products--including 
videocassette recorders, telecommunications switches, personal 
computers, and servers--used by businesses and consumers for 
perfectly legitimate purposes.
    Thus, for a technology, product, service, device, 
component, or part thereof to be prohibited under this 
subsection, one of three conditions must be met. It must: (1) 
be primarily designed or produced for the purpose of 
circumventing; (2) have only a limited commercially significant 
purpose or use other than to circumvent; or (3) be marketed by 
the person who manufactures it, imports it, offers it to the 
public, provides it or otherwise traffics in it, or by another 
person acting in concert with that person with that person's 
knowledge, for use in circumventing a technological protection 
measure that effectively controls access to a copyrighted work. 
This provision is designed to protect copyright owners, and 
simultaneously allow the development of technology.
    Section 102(a)(3) defines certain terms used throughout 
Section 102(a). Subparagraph (A) defines the term ``circumvent 
a technological protection measure'' as meaning ``to descramble 
a scrambled work, to decrypt an encrypted work, or otherwise to 
avoid, bypass, remove, deactivate, or impair a technological 
protection measure, without the authority of the copyright 
owner.'' This definition applies to subsection (a) only, which 
covers protections against unauthorized initial access to a 
copyrighted work. Subparagraph (B) states that a technological 
protection measure ``effectively controls access to a work'' if 
the measure, in the ordinary course of its operation, requires 
the application of information, or a process or a treatment, 
with the authority of the copyright owner, to gain access to 
the work. In the Committee's view, measures that can be deemed 
to ``effectively control access to a work'' would be those 
based onencryption, scrambling, authentication, or some other 
measure which requires the use of a ``key'' provided by a copyright 
owner to gain access to a work.
            (b) Additional violations
    Section 102(b) applies to those technological protection 
measures employed by copyright owners that effectively protect 
their copyrights, as opposed to those technological protection 
measures covered by Section 102(a), which prevent unauthorized 
access to a copyrighted work. Unlike subsection (a), which 
prohibits the circumvention of access control technologies, 
subsection (b) does not, by itself, prohibit the circumvention 
of effective technological copyright protection measures.
    Paralleling Section 102(a)(2), Section 102(b)(1) seeks to 
provide meaningful protection and enforcement of copyright 
owners' use of technological protection measures to protect 
their rights by prohibiting the act of making or selling the 
technological means to overcome these protections and thereby 
facilitate copyright infringement. Subsection (b)(1) prohibits 
manufacturing, importing, offering to the public, providing, or 
otherwise trafficking in certain technologies, products, 
services, devices, components, or parts thereof that can be 
used to circumvent a technological protection measure that 
effectively protects a right of a copyright owner. As 
previously stated in the discussion of Section 102(a)(2), the 
Committee believes it is very important to emphasize that 
Section 102(b)(1) is aimed fundamentally at outlawing so-called 
``black boxes'' that are expressly intended to facilitate 
circumvention of technological protection measures for purposes 
of gaining access to a work. This provision is not aimed at 
products that are capable of commercially significant 
noninfringing uses, such as consumer electronics, 
telecommunications, and computer products--including 
videocassette recorders, telecommunications switches, personal 
computers, and servers--used by businesses and consumers for 
perfectly legitimate purposes.
    Thus, once again, for a technology, product, service, 
device, component, or part thereof to be prohibited under this 
subsection, one of three conditions must be met. It must: (1) 
be primarily designed or produced for the purpose of 
circumventing; (2) have only limited commercially significant 
purpose or use other than to circumvent; or (3) be marketed by 
the person who manufactures it, imports it, offers it to the 
public, provides it, or otherwise traffics in it, or by another 
person acting in concert with that person with that person's 
knowledge, for use in circumventing a technological protection 
measure that effectively protects the right of a copyright 
owner. Like Section 102(a)(2), this provision is designed to 
protect copyright owners, and simultaneously allow the 
development of technology.
    Section 102(b)(2) defines certain terms used solely within 
subsection (b). In particular, subparagraph (A) defines the 
term ``circumvent protection afforded by a technological 
protection measure'' as ``avoiding, bypassing, removing, 
deactivating, or otherwise impairing a technological protection 
measure.'' Subparagraph (B) provides that a technological 
protection measure ``effectively protects a right of a 
copyright owner'' if the measure, in the ordinary course of its 
operation, prevents, restricts, or otherwise limits the 
exercise of a copyright owner's rights. In the Committee's 
view, measures that can be deemed to ``effectively control 
access to a work'' would be those based on encryption, 
scrambling, authentication, or some other measure which 
requires the use of a ``key'' provided by a copyright owner to 
gain access to a work.
    With respect to the effectiveness of technological 
protection measures, the Committee believes it is important to 
stress as well that those measures that cause noticeable and 
recurring adverse effects on the authorized display or 
performance of works should not be deemed to be effective. 
Unless product designers are adequately consulted about the 
design and implementation of technological protection measures 
(and the means of preserving copyright management information), 
such measures may cause severe ``playability'' problems. The 
Committee on Commerce is particularly concerned that the 
introduction of such measures not impede the introduction of 
digital television monitors or new digital audio playback 
devices. The Committee has a strong, long-standing interest in 
encouraging the introduction in the market of exciting new 
products. Recently, for example, the Committee learned that, as 
initially proposed, a proprietary copy protection scheme that 
is today widely used to protect analog motion pictures could 
have caused significant viewability problems, including 
noticeable artifacts, with certain television sets until it was 
modified with the cooperation of the consumer electronics 
industry.
    Under the bill as reported, nothing would make it illegal 
for a manufacturer of a product or device (to which Section 102 
would otherwise apply) to design or modify the product or 
device solely to the extent necessary to mitigate a frequently 
occurring and noticeable adverse effect on the authorized 
performance or display of a work that is caused by a 
technological protection measure in the ordinary course of its 
design and operation. Similarly, recognizing that a 
technological protection measure may cause a problem with a 
particular device, or combination of devices, used by a 
consumer, it is the Committee's view that nothing in the bill 
should be interpreted to make it illegal for a retailer or 
individual consumer to modify a product or device solely to the 
extent necessary to mitigate a noticeable adverse effect on the 
authorized performance or display of a work that is 
communicated to or received by that particular product or 
device if that adverse effect is caused by a technological 
protection measure in the ordinary course of its design and 
operation.
    The Committee believes that the affected industries should 
be able to work together to avoid such problems. The Committee 
is aware that multi-industry efforts to develop copy control 
technologies that are both effective and avoid such noticeable 
and recurring adverse effects have been underway over the past 
two years. The Committee strongly encourages the continuation 
of those efforts, which it views as offering substantial 
benefits to copyright owners in whose interest it is to achieve 
the introduction of effective technological protection (and 
copyright management information) measures that do not 
interfere with the normal operations of affected products.
            (c) Other rights, etc., not affected
    Subsection (c) sets forth several provisions clarifying the 
scope of Section 102. Section 102(c)(1) provides that Section 
102 shall not have any effect on rights, remedies, limitations, 
or defenses to copyright infringement, including fair use, 
under Title 17. Section 102(c)(2) provides that Section 102 
shall not alter the existing doctrines of contributory or 
vicarious liability for copyright infringement in connection 
with any technology, product, service, device, component or 
part thereof. Section 102(c)(3) clarifies that nothing in 
Section 102 creates an affirmative mandate requiring 
manufacturers of consumer electronics, telecommunications, and 
computing products to design their products or their parts and 
components to affirmatively respond to any particular 
technological protection measure employed to protect a 
copyrighted work. Lastly, Section 102(c)(4) makes clear that 
nothing in Section 102 enlarges or diminishes any rights of 
free speech or the press for activities using consumer 
electronics, telecommunications, or computing products.
            (d) Exemption for nonprofit libraries, archives, and 
                    educational institutions
    Section 102(d) provides a limited exemption from the 
regulations issued pursuant to Section 102(a)(1)(A) to 
qualified nonprofit libraries, archives, and educational 
institutions. In particular, Section 102(d)(1) allows a 
nonprofit library, nonprofit archives or nonprofit educational 
institution to obtain access to a copyrighted work for the sole 
purpose of making a good faith determination as to whether it 
wishes to acquire a copy, or portion of a copy, of that work in 
order to engage in permitted conduct. A qualifying institution 
may not gain access for a period of time longer than necessary 
to determine whether it wishes to obtain a copy, or portion of 
a copy, for such purposes, and the right to gain access shall 
not apply for any other purpose. Section 102(d)(2) provides 
that the right to obtain access under this paragraph only 
applies when the nonprofit library, nonprofit archives, or 
nonprofit educational institution cannot obtain a copy of an 
identical work by other means, and such an entity may not use 
the exemption in this paragraph for commercial advantage or 
financial gain without penalty.
    Section 102(d)(3) seeks to protect the legitimate interests 
of copyright owners by providing a civil remedy against a 
library, archive, or educational institution that violates 
Section 102(d)(1). Section 102(d)(4) provides that this 
subsection may not be used as a defense to the prohibitions on 
manufacturing or selling devices contained in Sections 
102(a)(2) or 102(b). Finally, Section 102(d)(5) provides that a 
library or archive, to be eligible for the exemption in 
paragraph (1), must maintain its collections open to the public 
and available, not only to researchers affiliated with the 
library or archives or with the institution of which it is a 
part, but also to other persons doing research in a specialized 
field.
            (e) Law enforcement and intelligence activities
    Section 102(e) creates an exception for the lawfully 
authorized investigative, protective, or intelligence 
activities of an officer, agent, or employee of, the United 
States, a State, or a political subdivision of a State, or of 
persons acting pursuant to a contract with such an entity.
            (f) Reverse engineering
    Section 102(f) is intended to promote reverse engineering 
by permitting the circumvention of access control technologies 
for the sole purpose of achieving software interoperability. 
Section 102(f)(1) permits the act of circumvention in only 
certain instances. To begin with, the copy of the computer 
program which is the subject of the analysis must be lawfully 
acquired (i.e., the computer program must be acquired from a 
legitimate source, along with any necessary serial codes, 
passwords, or other such means as may be necessary to be able 
to use the program as it was designed to be used by a consumer 
of the product). In addition, the acts must be limited to those 
elements of the program which must be analyzed to achieve 
interoperability of an independently created program with other 
programs. The resulting product must also be a new and original 
work, in that it may not infringe the original computer 
program. Moreover, the objective of the analysis must be to 
identify and extract such elements as are necessary to achieve 
interoperability which are not otherwise available to the 
person. Finally, the goal of this section is to ensure that 
current law is not changed, and not to encourage or permit 
infringement. Thus, each of the acts undertaken must avoid 
infringing the copyright of the author of the underlying 
computer program.
    Section 102(f)(2) recognizes that, to accomplish the acts 
permitted under Section 102(f)(1), a person may need to make 
and use certain tools. The Committee believes that such tools 
are generally available and used by programmers today in 
developing computer programs (e.g., compilers, trace analyzers, 
and disassemblers). Such tools are not prohibited by this 
Section. But the Committee also recognizes that, in certain 
instances, it is possible that a person may need to develop 
special tools to achieve the permitted purpose of 
interoperability. Thus, Section 102(f)(2) creates an exception 
to the prohibition on making circumvention tools contained in 
Sections 102(a)(2) and 102(b)(1). These excepted tools can be 
either software or hardware. Once again, though, Section 
102(f)(2) limits any person from acting in a way that 
constitutes infringing activity.
    Similarly, Section 102(f)(3) recognizes that developing 
complex computer programs often involves the efforts of many 
persons. For example, some of these persons may be hired to 
develop a specific portion of the final product. For that 
person to perform these tasks, some of the information acquired 
through the permitted analysis, and the tools to accomplish it, 
may have to be made available to that person. Section 102(f)(3) 
allows developers of independently created software to rely on 
third parties either to develop the necessary circumvention 
tools, or to identify the necessary information to achieve 
interoperability. The ability to rely on third parties is 
particularly important for small software developers who do not 
have the capability of performing these functions in-house. 
This provision permits such sharing of information and tools.
    The Committee, however, recognizes that making such 
information or tools generally available could undermine the 
objectives of Section 102. Section 102(f)(3) therefore imposes 
strict limitations on the exceptions created in Section 102(f). 
Acts of sharing information and tools is permitted solely for 
the purpose of achieving interoperability of an independently 
createdcomputer program with other programs. If a person makes 
this information available for a purpose other than to achieve 
interoperability of an independently created computer program with 
other programs, then such action is a violation of this Act. In 
addition, these acts are permitted only to the extent that doing so 
does not constitute infringement, or violate other applicable law.
    Section 102(f)(4) defines ``interoperability'' as the 
ability of computer programs to exchange information, and for 
such programs mutually to use the information which has been 
exchanged. The seamless exchange of information is a key 
element of software interoperability. Hence, Section 102(f) 
applies to computer programs as such, regardless of their 
medium of fixation and not to works generally, such as music or 
audiovisual works, which may be fixed and distributed in 
digital form. Because the goal of interoperability is the 
touchstone of the exceptions contained in Section 102(f), the 
Committee emphasizes that nothing in those subsections can be 
read to authorize the circumvention of any technological 
protection measure that controls access to any work other than 
a computer program, or the trafficking in products or services 
for that purpose.
            (g) Encryption research
    As previously discussed in the background section to this 
report, the Committee views encryption research as critical to 
the growth and vibrancy of electronic commerce. Section 102(g) 
therefore provides statutory clarification for the field of 
encryption research, in light of the prohibitions otherwise 
contained in Section 102. Section 102(g)(1) defines 
``encryption research'' and ``encryption technology.'' Section 
102(g)(2) identifies permissible encryption research 
activities, notwithstanding the provisions of Section 
102(a)(1)(A), including: whether the person lawfully obtained 
the encrypted copy; the necessity of the research; whether the 
person made a good faith effort to obtain authorization before 
circumventing; and whether the research constitutes 
infringement or a violation of other applicable law.
    The Committee recognizes that courts may be unfamiliar with 
encryption research and technology, and may have difficulty 
distinguishing between a legitimate encryption research and a 
so-called ``hacker'' who seeks to cloak his activities with 
this defense. Section 102(g)(3) therefore contains a non-
exhaustive list of factors a court shall consider in 
determining whether a person properly qualifies for the 
encryption research defense.
    Section 102(g)(4) is concerned with the development and 
distribution of tools--typically software--which are needed to 
conduct permissible encryption research. In particular, 
subparagraph (A) provides that it is not a violation of Section 
102(a)(2) to develop and employ technological means to 
circumvent for the sole purpose of performing acts of good 
faith encryption research permitted under Section 102(g)(2). 
Subparagraph (B) permits a person to provide such technological 
means to another person with whom the first person is 
collaborating in good faith encryption research permitted under 
Section 102(g)(2). Additionally, a person may provide the 
technological means to another person for the purpose of having 
the second person verify the results of the first person's good 
faith encryption research.
    The Committee is aware of additional concerns that Section 
102 might inadvertently restrict a systems operator's ability 
to perform certain functions critical to the management of 
sophisticated computer networks. For example, many independent 
programmers have created utilities designed to assist in the 
recovery of passwords or password-protected works when system 
users have forgotten their passwords. Because Section 102 
prohibits circumvention without the authorization of the 
copyright owner, circumvention to gain access to one's own 
work, as a matter of logic, does not violate Section 102.
    The law would also not prohibit certain kinds of commercial 
``key-cracker'' products, e.g., a computer program optimized to 
crack certain ``40-bit'' encryption keys. Such machines are 
often rented to commercial customers for the purpose of quick 
data recovery of encrypted data. Again, if these products do 
not meet any of the three criteria under Section 102(a)(2) 
because these products facilitate a person's access to his or 
her own works, they would not be prohibited by Section 102.
    In addition, network and web site management programs 
increasingly contain components that test systems security and 
identify common vulnerabilities. These programs are valuable 
tools for systems administrators and web site operators to use 
in the course of their regular testing of their systems' 
security. The testing of such ``firewalls'' does not violate 
Section 102 because in most cases the firewalls are protecting 
computer and communications systems and not necessarily the 
specific works stored therein. Accordingly, it is the view of 
the Committee that no special exception is needed for these 
types of legitimate products.
    Finally, Section 102(g)(5) requires the Assistant Secretary 
of Commerce for Communications and Information to report to 
Congress, within one year of enactment, on the effect Section 
102(g) has had on the field of encryption research, the 
adequacy of technological protection for copyrighted works, and 
protection of copyright owners against unauthorized access.
            (h) Components or parts to prevent access of minors to the 
                    Internet
    The Committee is concerned that Section 102(a) might 
inadvertently make it unlawful for parents to protect their 
children from pornography and other harmful material available 
on the Internet, or have unintended legal consequences for 
manufacturers of products designed solely to enable parents to 
protect their children in this fashion. Section 102(h) 
addresses these concerns.
            (i) Protection of personally identifying information
    As previously stated in the background section to this 
report, Section 102(i)(1) is designed to ensure that if a 
copyright owner conspicuously discloses that the technological 
protection measure, or any work it protects, contains any 
personal data gathering capability, and the consumer is given 
the capability to curtail or prohibit effectively any such 
gathering or dissemination of personal information, then the 
consumer could not legally circumvent thetechnological 
protection measure. In addition, under Section 102(i)(2), if the 
copyright holder conspicuously discloses that the technological 
protection measure, or any work it protects, does not contain the 
capability of collecting or disseminating personally identifying 
information reflecting the on-line activities of a person who seeks to 
gain access to the work protected, then (once again) the consumer could 
not legally circumvent the technological protection measure.
    In both such circumstances, there would be no need for 
consumers to circumvent technological protection measures 
because conspicuous disclosures indicate whether data gathering 
is being conducted and if so, the capability for thwarting such 
privacy invasions is extended to consumers. Only if there is no 
disclosure of privacy-related practices, or instances where 
consumers are left without the capability to disable the 
gathering of personal information, could a consumer circumvent 
a technological protection measure to protect his or her own 
privacy.

Section 103. Integrity of copyright management information

    Section 103 implements the obligation contained in Article 
12 of the Copyright Treaty and Article 19 of the Performances 
and Phonograms Treaty that contracting parties ``provide 
adequate and effective legal remedies'' against any person who 
knowingly and without authority removes or alters copyright 
management information (CMI), or who distributes, imports, 
broadcasts, or communicates to the public, works or copies of 
works knowing that such information has been removed or altered 
without authority.
            (a) False copyright management information
    Section 103(a) establishes a general prohibition against 
intentionally providing false copyright management information, 
as defined in subsection (c), and against distributing, or 
importing for distribution, false copyright management 
information.
            (b) Removal or alteration of copyright management 
                    information
    Section 103(b) establishes general prohibitions against 
removing or altering CMI, against distributing or importing for 
distribution altered CMI, and against distributing, importing 
for distribution or publicly performing works in which CMI has 
been removed.
            (c) Definitions
    Section 103(c) defines ``copyright management 
information.'' To fall within the definition, the information 
must be conveyed in connection with copies or phonorecords, 
performances or displays of the copyrighted work.
            (d) Law enforcement and intelligence activities
    Section 103(d) creates an exception for the lawfully 
authorized investigative, protective, or intelligence 
activities of an officer, agent, or employee of, the United 
States, a State, or a political subdivision of a State, or of 
persons acting pursuant to a contract with such an entity.
            (e) Limitations on liability
    Section 103(e) recognizes special problems that certain 
broadcasting or cable entities may have with the transmission 
of copyright management information. Under Section 103(e), 
radio and television broadcasters, cable systems, and persons 
who provide programming to such broadcasters or systems, who do 
not intend to induce, enable, facilitate or conceal 
infringement may be eligible for a limitation on liability for 
violation of the copyright management information provisions of 
Section 103(b) in certain, limited situations.
    In the case of an analog transmission, Section 103(e)(1) 
provides that an eligible person will not be held liable for 
violating provisions of subsection (b) if it is not 
``technically feasible'' for that person to avoid the violation 
or if avoiding the violation would ``create an undue financial 
hardship.'' Avoiding a violation of subsection (b) with respect 
to the transmission of credits that are of an excessive 
duration in relation to standard practice in the relevant 
industries (for instance, the motion picture and television 
broadcast industries) is one example of an activity that may 
``create an undue financial hardship'' under Section 103(e)(1). 
As indicated above, this limitation on liability applies only 
if such person did not intend, by engaging in such activity, to 
induce, enable, facilitate, or conceal infringement.
    Section 103(e)(2) provides a limitation on liability in the 
case of a digital transmission, and contemplates voluntary 
digital transmission standards for the placement of copyright 
management information. Separate standards are likely to be set 
for the location of copyright management information in 
different categories of works. For instance, the standard(s) 
for the location of the name of the copyright owner in a sound 
recording or musical work to be broadcast by radio stations may 
differ--and be set in a separate standard-setting process--from 
the standard for the location of such information in a motion 
picture to be broadcast by television stations.
    Paragraph (2)(A) provides that if a digital transmission 
standard for the placement of copyright management information 
for a category of works is set in a voluntary, consensus 
standard-setting process involving a representative cross-
section of the relevant copyright owners and relevant 
transmitting industry, including, but not limited to, 
representatives of radio or television broadcast stations, 
cable systems, and copyright owners of a category of works that 
are intended for public performance by such stations or 
systems, an eligible person will not be liable for a violation 
of subsection (b) if the copyright management information 
involved in the violation was not placed in a location 
specified by the standard for that information. The eligible 
person, however, cannot qualify for this limitation on 
liability if that person was responsible for the nonconforming 
placement.
    Section 103(e)(2)(B)(i) provides that until such a standard 
is set for a category of works, an eligible person will not be 
liable for a violation of subsection (b) if the transmission of 
the copyright management information would cause a perceptible 
visual or aural degradation of the digital signal. Section 
103(e)(2)(B)(ii) provides that during this time period before a 
standard is set, an eligible person also will not be liable if 
the digital transmission of the information would conflict with 
an applicable government regulation or industry standard 
relating to transmission of information in a digital signal, 
such as the regulation requiring the placement of closed 
captioning in line 21 of the vertical blanking interval (47 
U.S.C. Sec. 613; 47 C.F.R. Sec. 79.1). For purposes of this 
paragraph, however, the applicable industry-wide standard must 
be of a type specified in subparagraphs (2)(B)(ii) (II) or 
(III). The first type, defined in paragraph (2)(B)(ii)(II), 
includes only those standards that were adopted by a voluntary, 
consensus standards body, such as the Advanced Television 
Systems Committee, before the effective date of Section 103. 
The other type, defined in subparagraph (2)(B)(ii)(III), 
includes only those standards adopted in a voluntary, consensus 
standards-setting process open to participation by groups, 
including but not limited to a representative cross-section of 
radio or television broadcast stations, cable systems, and 
copyright owners of a category of works that are intended for 
public performance by such stations or systems.

Section 104. Civil remedies

            (a) Civil actions
    Section 104(a) sets forth the general proposition that 
civil remedies are available for violations of Sections 102 and 
103. This provision also establishes the jurisdiction for such 
civil actions as the ``appropriate U.S. district court'' and 
limits standing to those persons injured by a violation of 
Sections 102 or 103.
            (b) Powers of the court
    Section 104(b) defines the powers of the court hearing a 
case brought under Section 104(a).
            (c) Award of damages
    Section 104(c) is divided into five paragraphs, each of 
which addresses the awarding of damages to a prevailing party 
in an action brought under Section 104(a).

Section 105. Criminal offenses and penalties

            (a) In general
    Section 105(a) provides for criminal penalties for 
violations of Sections 102 and 103.
            (b) Limitation for nonprofit library, archives, or 
                    educational institution
    Section 105(b) exempts completely any nonprofit library, 
nonprofit archives, or nonprofit educational institution from 
the criminal penalties contained in subsection (a).
            (c) Statute of limitations
    Section 105(c) provides for a 5-year statute of limitations 
for criminal offenses.

Section 106. Savings clause

    Section 106 establishes that nothing in Title I in any way 
limits the applicability of Federal or State privacy laws 
relating to the use of the Internet.

Section 107. Development and implementation of technological protection 
        measures

    Section 107 establishes a mechanism for monitoring, 
evaluating, and informing the Congress of the impact of this 
legislation, especially on the key issue of the role of 
technological protection measures.
            (a) Statement of congressional policy and objective
    Section 107(a) expresses the sense of Congress that 
technological protection measures, developed by the private 
sector through voluntary, industry-led processes, will play a 
crucial role in the healthy development of the Internet and 
other new paths for dissemination of copyrighted materials. 
Such measures can facilitate lawful uses of such materials, 
while safeguarding the private property interests that are 
recognized by the copyright law. Section 107(a) thus identifies 
an open, voluntary, multi-industry process for expeditious 
implementation of these technological protection measures.
            (b) Technological protection measures
    Section 107(b) mandates at least three technological 
protection measures for implementation pursuant to Section 
107(a) that are especially important in achieving the full 
potential of the Internet and other digital media: (1) those 
that enable nonprofit libraries to continue in their critical 
role of lending copyrighted materials to individual patrons; 
(2) those that effectively protect against infringement of 
copyrighted materials; and (3) those that facilitate a 
diversity of legitimate uses, by individual members of the 
public, of copyrighted works in digital formats.
            (c) Procedures for developing and implementing 
                    technological protection measures
    Section 107(c) makes clear that Congress anticipates that 
the technological protection measures whose development and 
implementation are mandated pursuant to Section 107(a) will:be 
developed pursuant to a broad, private sector consensus; be made 
available on reasonable and non-discriminatory terms; and not impose 
substantial costs or burdens on copyright owners or on manufacturers of 
hardware and software used in conjunction with copyrighted works in 
digital formats.
            (d) Oversight and reporting
    Section 107(d) establishes an oversight process for 
monitoring the impact of this legislation, and specifically its 
anti-circumvention provisions, on the access of individuals to 
copyrighted materials in digital formats. For example, the 
Secretary would have to evaluate the extent to which Section 
102 and the regulations issued thereunder pose a serious 
impediment to the development and production of competitive 
goods and services. It specifically directs the Secretary of 
Commerce, in consultation with the Register of Copyrights and 
the Assistant Secretary of Commerce for Communications and 
Information, to report, over the course of the next three 
years, annually to the House Committees on Commerce and on the 
Judiciary, and the Senate Committees on Commerce, Science, and 
Transportation and on the Judiciary on the extent of that 
impact.

Section 108. Technical amendments

    Section 108 incorporates numerous technical amendments.
    Section 109. Effective date.
    Section 109 makes the effective date the date of enactment.

          TITLE II--INTERNET COPYRIGHT INFRINGEMENT LIABILITY

    The liability of on-line service providers and Internet 
access providers for copyright infringements that take place in 
the on-line environment has been a controversial issue. Title 
II of the Digital Millennium Copyright Act addresses this 
complex issue. Title II preserves strong incentives for service 
providers and copyright owners to cooperate to detect and deal 
with copyright infringements that take place in the digital 
networked environment. At the same time, it provides greater 
certainty to service providers concerning their legal exposure 
for infringements that may occur in the course of their 
activities.
    New Section 512 contains limitations on service providers' 
liability for five general categories of activity set forth in 
subsections (a) through (d) and subsection (f). As provided in 
subsection (k), new Section 512 is not intended to imply that a 
service provider is or is not liable as an infringer either for 
conduct that qualifies for a limitation of liability or for 
conduct that fails to so qualify. Rather, the limitations of 
liability apply if the provider is found to be liable under 
existing principles of law.
    The limitations in subsections (a) through (d) protect 
qualifying service providers from liability for all monetary 
relief for direct, vicarious and contributory infringement. 
Monetary relief is defined in subsection (j)(2) as encompassing 
damages, costs, attorneys' fees, and any other form of monetary 
payment. These subsections also limit injunctive relief against 
qualifying service providers to the extent specified in 
subsection (i). To qualify for these protections, service 
providers must meet the conditions set forth in subsection (h), 
and service providers' activities at issue must involve a 
function described in subsection (a), (b), (c), (d) or (f), 
respectively. The liability limitations apply to networks 
``operated by or for the service provider,'' thereby protecting 
both service providers who offer a service and subcontractors 
who may operate parts of, or an entire, system or network for 
another service provider.

Section 201. Short title

    Section 201 establishes the short title for Title II as the 
``Internet Copyright Infringement Liability Clarification Act 
of 1998.''

Section 202. Limitations on liability for Internet copyright 
        infringement

            (a) In general
    Section 202(a) amends chapter 5 of the Copyright Act (17 
U.S.C. Sec. 501, et seq.) to create a new Section 512, titled 
``Liability of service providers for on-line infringement of 
copyright.'' New Section 512(a) applies to communications 
functions associated with sending digital communications of 
others across digital networks, such as the Internet and other 
on-line networks. It establishes a limitation on liability for 
infringements that may occur in the provision of services 
falling within the definition of subsection (j)(1)(A). The 
limitations on injunctive relief set forth in subsection 
(i)(1)(B) are applicable when the functions at issue fall 
within the provisions of subsection (a), and the service 
provider meets the threshold criteria of subsection (h). These 
threshold criteria apply to all of the liability limitations 
contained in new Section 512.
    Subsection (a) applies to service providers transmitting, 
routing, or providing connections for material, and some forms 
of intermediate and transient storage of material in the course 
of performing these functions. For example, in the course of 
moving packets of information across digital on-line networks, 
many intermediate and transient copies of the information may 
be made in routers and servers along the way. Such copies are 
created as an automatic consequence of the transmission 
process. In this context, ``intermediate and transient'' refers 
to such a copy made and/or stored in the course of a 
transmission, not a copy made or stored at the points where the 
transmission is initiated or received. The use of the term 
``transmitting'' throughout new Section 512 is not intended to 
be limited to transmissions of ``a performance or display'' of 
``images or sounds'' within the meaning of Section 101 of the 
Copyright Act.
    Subsections (a)(1) through (5) limit the range of 
activities that qualify under this subsection to ones in which 
a service provider plays the role of a ``conduit'' for 
thecommunications of others. This limitation on liability applies if: 
(1) the communication was initiated by or at the direction of a person 
other than the service provider; (2) it is carried out through an 
automatic technical process without selection of the material by the 
service provider; (3) the service provider does not select the 
recipients of the material except as an automatic response to the 
request of another; (4) no copy of the material made in the course of 
intermediate or transient storage is maintained on the system or 
network so that it is ordinarily accessible to anyone other than the 
anticipated recipients, and no copy is maintained on the system or 
network in a manner ordinarily accessible to the anticipated recipients 
for a longer period than is reasonably necessary for the communication; 
and (5) the content (but not necessarily the form) of the material is 
not modified in the course of transmission. Thus, for example, an e-
mail transmission may appear to the recipient without bolding or 
italics resulting from format codes contained in the sender's message.
    The term ``selection of the material'' in subsection (a)(2) 
means the editorial function of determining what material to 
send, or the specific sources of material to place on-line 
(e.g., a radio station), rather than ``an automatic technical 
process'' of responding to a command or request, such as one 
from a user, an Internet location tool, or another network. The 
term ``automatic response to the request of another'' is 
intended to encompass a service provider's actions in 
responding to requests by a user or other networks, such as 
requests to forward e-mail traffic or to route messages to a 
mailing list agent (such as a ``Listserv'') or other discussion 
group. The Committee intends subsection (a)(4) to cover copies 
made of material while it is en route to its destination, such 
as copies made on a router or mail server, storage of a web 
page in the course of transmission to a specific user, store 
and forward functions, and other transient copies that occur en 
route. The term ``ordinarily accessible'' is intended to 
encompass stored material that is routinely accessible to third 
parties. For example, the fact that an illegal intruder might 
be able to obtain access to the material would not make it 
ordinarily accessible to third parties. Neither, for example, 
would occasional access in the course of maintenance by service 
provider personnel, nor access by law enforcement officials 
pursuant to subpoena make the material ``ordinarily 
accessible.'' However, the term does not include copies made by 
a service provider for the purpose of making the material 
available to other users. Such copying is addressed in 
subsection (b).
    New Section 512(b) applies to a different form of 
intermediate and temporary storage than is addressed in 
subsection (a). In terminology describing current technology, 
this storage is a form of ``caching,'' which is used on some 
networks to increase network performance and to reduce network 
congestion generally, as well as to reduce congestion and 
delays to popular sites. This storage is intermediate in the 
sense that the service provider serves as an intermediary 
between the originating site and the ultimate user. The 
material in question is stored on the service provider's system 
or network for some period of time to facilitate access by 
users subsequent to the one who previously sought access to it. 
For subsection (b) to apply, the material must be made 
available on an originating site, transmitted at the direction 
of another person through the system or network operated by or 
for the service provider to a different person, and stored 
through an automatic technical process so that users of the 
system or network who subsequently request access to the 
material from the originating site may obtain access to the 
material from the system or network.
    Subsections (b)(1) through (b)(5) clarify the circumstances 
under which subsection (b) applies. Subsection (b)(1) provides 
that the material must be transmitted to subsequent users 
without modification to its content in comparison to the way it 
was originally transmitted from the originating site. The 
Committee intends that this restriction apply, for example, so 
that a service provider who caches material from another site 
does not change the advertising associated with the cached 
material on the originating site without authorization from the 
originating site.
    Subsection (b)(2) limits the applicability of the 
subsection to circumstances where the service provider complies 
with certain updating commands.
    Subsection (b)(3) provides that the service provider shall 
not interfere with the ability of certain technology that is 
associated with the work by the operator of the originating 
site to return to the originating site information, such as 
user ``hit'' counts, that would have been available to the site 
had it not been cached. The technology, however, must: (i) not 
significantly interfere with the performance of the storing 
provider's system or network or with intermediate storage of 
the material; (ii) be consistent with generally accepted 
industry standard communications protocols applicable to 
Internet and on-line communications, such as those approved by 
the Internet Engineering Task Force and the World Wide Web 
Consortium; and (iii) not extract information beyond that which 
would have been obtained had the subsequent users obtained 
access to the material directly on the originating site.
    Subsection (b)(4) applies to circumstances in which the 
originating site imposes a prior condition on access.
    Subsection (b)(5) establishes a notification and take-down 
procedure for cached material modeled on the procedure under 
new Section 512(c). However, this take-down obligation does not 
apply unless the material has previously been removed from the 
originating site, or the party submitting the notification has 
obtained a court order for it to be removed from the 
originating site and notifies the service provider's designated 
agent of that order. This proviso has been added to subsection 
(b)(5) because storage under subsection (b) occurs 
automatically, and unless infringing material has been removed 
from the originating site, the infringing material would 
ordinarily simply be re-cached.
    New Section 512(c) limits the liability of qualifying 
service providers for claims of direct, vicarious and 
contributory infringement for storage at the direction of a 
user of material that resides on a system or network controlled 
or operated by or for the service provider. Examples of such 
storage include providing server space for a user's web site, 
for a chatroom, or other forum in which material may be posted 
at the direction of users. Subsection (c) defines the scope of 
this limitation on liability. It also sets forth procedural 
requirements that copyright owners or their agents and service 
providers must follow with respect to notifications of 
claimedinfringement under subsection (c)(3). Information that resides 
on the system or network operated by or for the service provider 
through its own acts or decisions and not at the direction of a user 
does not fall within the liability limitation of subsection (c).
    New subsection (c)(1)(A) sets forth the applicable 
knowledge standard. This standard is met either by actual 
knowledge of infringement or, in the absence of such knowledge, 
by awareness of facts or circumstances from which infringing 
activity is apparent. The term ``activity'' is intended to mean 
activity using the material on the system or network. The 
Committee intends such activity to refer to wrongful activity 
that is occurring at the site on the provider's system or 
network at which the material resides, regardless of whether 
copyright infringement is technically deemed to occur at that 
site or at the location where the material is received. For 
example, the activity at an on-line site offering audio or 
video may be unauthorized public performance of a musical 
composition, a sound recording, or an audio-visual work, rather 
than (or in addition to) the creation of an unauthorized copy 
of any of these works.
    New subsection (c)(1)(A)(ii) can best be described as a 
``red flag'' test. As stated in new subsection (c)(l), a 
service provider need not monitor its service or affirmatively 
seek facts indicating infringing activity (except to the extent 
consistent with a standard technical measure complying with new 
subsection (h)), in order to claim this limitation on liability 
(or, indeed any other limitation provided by the legislation). 
However, if the service provider becomes aware of a ``red 
flag'' from which infringing activity is apparent, it will lose 
the limitation of liability if it takes no action. The ``red 
flag'' test has both a subjective and an objective element. In 
determining whether the service provider was aware of a ``red 
flag,'' the subjective awareness of the service provider of the 
facts or circumstances in question must be determined. However, 
in deciding whether those facts or circumstances constitute a 
``red flag''--in other words, whether infringing activity would 
have been apparent to a reasonable person operating under the 
same or similar circumstances--an objective standard should be 
used.
    New subsection (c)(1)(A)(iii) provides that once a service 
provider obtains actual knowledge or awareness of facts or 
circumstances from which infringing material or activity on the 
service provider's system or network is apparent, the service 
provider does not lose the limitation of liability set forth in 
subsection (c) if it acts expeditiously to remove or disable 
access to the infringing material. Because the factual 
circumstances and technical parameters may vary from case to 
case, it is not possible to identify a uniform time limit for 
expeditious action.
    New subsection (c)(1)(B) sets forth the circumstances under 
which a service provider would lose the protection of 
subsection (c) by virtue of its benefit from and control over 
infringing activity. In determining whether the financial 
benefit criterion is satisfied, courts should take a common-
sense, fact-based approach, not a formalistic one. In general, 
a service provider conducting a legitimate business would not 
be considered to receive a ``financial benefit directly 
attributable to the infringing activity'' where the infringer 
makes the same kind of payment as non-infringing users of the 
provider's service. Thus, receiving a one-time set-up fee and 
flat, periodic payments for service from a person engaging in 
infringing activities would not constitute receiving a 
``financial benefit directly attributable to the infringing 
activity.'' Nor is subsection (c)(1)(B) intended to cover fees 
based on the length of the message (e.g., per number of bytes) 
or by connect time. It would however, include any such fees 
where the value of the service lies in providing access to 
infringing material.
    New subsection (c)(1)(C) establishes that in cases where a 
service provider is notified of infringing activity by a 
copyright owner or its authorized agent, in accordance with the 
notification procedures of new subsection (c)(3), the 
limitation on the service provider's liability shall be 
maintained only if the service provider acts expeditiously 
either to remove the infringing material from its system or to 
prevent further access to the infringing material on the system 
or network. This ``notice and take-down'' procedure is a 
formalization and refinement of a cooperative process that has 
been employed to deal efficiently with network-based copyright 
infringement.
    The Committee emphasizes that new Section 512 does not 
specifically mandate use of a notice and take-down procedure. 
Instead, a service provider wishing to benefit from the 
limitation on liability under new subsection (c) must ``take 
down'' or disable access to infringing material residing on its 
system or network in cases where it has actual knowledge or 
that the criteria for the ``red flag'' test are met--even if 
the copyright owner or its agent does not notify it of a 
claimed infringement. On the other hand, the service provider 
is free to refuse to ``take down'' the material or site--even 
after receiving a notification of claimed infringement from the 
copyright owner. In such a situation, the service provider's 
liability, if any, will be decided without reference to new 
Section 512(c).
    At the same time, copyright owners are not obligated to 
give notification of claimed infringement in order to enforce 
their rights. However, neither actual knowledge nor awareness 
of a ``red flag'' may be imputed to a service provider based on 
information from a copyright owner or its agent that does not 
comply with the notification provisions of new subsection 
(c)(3), in which case the limitation on liability set forth in 
new subsection (c) may still apply.
    New Section 512(c)(2) provides that to qualify for the 
limitation on liability in new subsection (c), the service 
provider must designate an agent to receive notifications under 
new subsection (c)(1)(C). The designation, provided to the 
Register of Copyrights, and made available on the service 
provider's web site, is to contain certain information 
necessary to communicate with the service provider concerning 
allegedly infringing material or activity. The Register of 
Copyrights is directed to maintain a directory of designated 
agents available for inspection by the public, both on the web 
site of the Library of Congress, and in hard copy format on 
file at the Copyright Office. The Committee does not intend or 
anticipate that the Register will publish hard copies of the 
directory. The directory shall have entries for the name, 
address, telephone number, and electronic mail address of an 
agent designated by service providers. The service provider's 
designation shall substantially comply with these elements.
    New Section 512(c)(3) sets forth the procedures under which 
copyright owners and their agents may provide effective 
notification to a service provider of allegations of 
infringement on theprovider's system or network. New subsection 
(c)(3)(A) requires that to count as an effective notification, the 
notification must be in writing and submitted to the service provider's 
designated agent. New subsections (c)(3)(A)(i)-(vi) then set forth the 
information to be included in an effective notification. The standard 
against which a notification is to be judged is one of substantial 
compliance. New subsection (c)(3)(A)(i) provides that the notification 
must be signed by the copyright owner, or its authorized agent, to be 
effective. The requirement for signature, either physical or 
electronic, relates to the verification requirements of new subsections 
(c)(3)(A)(v) and (vi). New subsection (c)(3)(A)(ii) requires that the 
copyright owner identify the copyrighted work alleged to have been 
infringed. Where multiple works at a single on-line site are covered by 
a single notification, a representative list of such works at that site 
is sufficient. Thus, for example, where a party is operating an 
unauthorized Internet jukebox from a particular site, it is not 
necessary that the notification list every musical composition or sound 
recording that has been, may have been, or could be infringed at that 
site. Instead, it is sufficient for the copyright owner to provide the 
service provider with a representative list of those compositions or 
recordings in order that the service provider can understand the nature 
and scope of the infringement being claimed.
    New subsection (c)(3)(A)(iii) requires that the copyright 
owner or its authorized agent provide the service provider with 
information reasonably sufficient to permit the service 
provider to identify and locate the allegedly infringing 
material. An example of such sufficient information would be a 
copy or description of the allegedly infringing material and 
the so-called ``uniform resource locator'' (URL) (i.e., web 
site address) which allegedly contains the infringing material. 
The goal of this provision is to provide the service provider 
with adequate information to find and examine the allegedly 
infringing material expeditiously.
    New subsection (c)(3)(A)(iv) requires that the copyright 
owner or its authorized agent provide reasonably sufficient 
identifying information concerning the owner or its agent who 
submits the notification, such as an address, telephone number, 
and (if available) an electronic mail address so that the 
service provider may contact the complaining party. New 
subsection (c)(3)(A)(v) makes clear that the notification from 
complaining parties must contain a statement that the 
complaining party has a good faith belief that the allegedly 
infringing use is not authorized by the copyright owner, or its 
agent, or the law.
    New subsection (c)(3)(A)(vi) specifies that the 
notification must contain a statement that the information 
contained therein is accurate. The complaining party--be it the 
copyright owner, or an authorized representative--also must 
confirm under penalty of perjury, that it has authority to act 
on behalf of the owner of the exclusive right that is allegedly 
being infringed. The term ``perjury'' is used in the sense 
found elsewhere in the United States Code. See, e.g., 28 U.S.C. 
Sec. 1746; 18 U.S.C. Sec. 1621.
    New subsection (c)(3)(B) addresses the effect of 
notifications that do not substantially comply with the 
requirements of new subsection (c)(3). Under new subsection 
(c)(3)(B), the court shall not consider such notifications as 
evidence of whether the service provider has actual knowledge, 
is aware of facts or circumstances, or has received a 
notification for purposes of new subsection (c)(1)(A). However, 
a defective notice provided to the designated agent may be 
considered in evaluating the service provider's knowledge or 
awareness of facts and circumstances, if: (i) the complaining 
party has provided the requisite information concerning the 
identification of the copyrighted work, identification of the 
allegedly infringing material, and information sufficient for 
the service provider to contact the complaining party; and (ii) 
the service provider does not promptly attempt to contact the 
person making the notification or take other reasonable steps 
to assist in the receipt of notification that substantially 
complies with new subsection (c)(3)(A). If the service provider 
subsequently receives a substantially compliant notice, the 
provisions of new subsection (c)(1)(C) would then apply upon 
receipt of such notice.
    The Committee intends that the substantial compliance 
standard in new subsections (c)(2) and (c)(3) be applied so 
that technical errors (e.g., misspelling a name, supplying an 
outdated area code if the phone number is accompanied by an 
accurate address, supplying an outdated name if accompanied by 
an e-mail address that remains valid for the successor of the 
prior designated agent or agent of a copyright owner) do not 
disqualify service providers and copyright owners from the 
protections afforded under subsection (c). The Committee 
expects that the parties will comply with the functional 
requirements of the notification provisions--such as providing 
sufficient information so that a designated agent or the 
complaining party submitting a notification may be contacted 
efficiently--in order to ensure that the notification and take-
down procedures set forth in this subsection operate 
efficiently.
    New Section 512(d) addresses instances where information 
location tools refer or link users to an on-line location 
containing infringing material or infringing activity. The term 
``infringing activity'' means the wrongful activity that is 
occurring at the location to which the user is linked or 
referred by the information location tool, without regard to 
whether copyright infringement is technically deemed to have 
occurred at that location or at the location where the material 
is received. The term ``information location tools'' includes: 
a directory or index of on-line sites or material, such as a 
search engine that identifies pages by specified criteria; a 
reference to other on-line material, such as a list of 
recommended sites; a pointer that stands for an Internet 
location or address; and a hypertext link which allows users to 
access material without entering its address.
    New subsection (d) incorporates the notification and take-
down procedures of new subsection (c), and applies them to the 
provision of references and links to infringing sites. A 
service provider is entitled to the liability limitations of 
new subsection (d) if it: (1) lacks actual knowledge of 
infringement on the other site, and is not aware of facts or 
circumstances from which infringing activity in that location 
is apparent; (2) does not receive a financial benefit directly 
attributable to the infringing activity on the site, where the 
service provider has the right and ability to control the 
infringing activity; and (3) responds expeditiously to remove 
or disable the reference or link upon receiving a notification 
of claimed infringement as described in new subsection (c)(3). 
The notification procedures under new subsection (d) follow 
those set forth in new subsection (c). However, the information 
submitted by the complaining party under new subsection 
(c)(3)(A)(iii) is the identification of the reference or link 
to infringing material oractivity, and the information 
reasonably sufficient to permit the service provider to locate that 
reference or link.
    New Section 512(d) provides a safe harbor that would limit 
the liability of a service provider that refers or links users 
to an on-line location containing infringing material or 
activity by using ``information location tools,'' such as 
hyperlink directories and indexes. A question has been raised 
as to whether a service provider would be disqualified from the 
safe harbor based solely on evidence that it had viewed the 
infringing Internet site. If so, there is concern that on-line 
directories prepared by human editors and reviewers, who view 
and classify various Internet sites, would be denied 
eligibility to the information location tools safe harbor, in 
an unintended number of cases and circumstances. This is an 
important concern because such on-line directories play a 
valuable role in assisting Internet users to identify and 
locate the information they seek on the decentralized and 
dynamic networks of the Internet.
    Like the information storage safe harbor in Section 512(c), 
a service provider would qualify for this safe harbor if, among 
other requirements, it ``does not have actual knowledge that 
the material or activity is infringing'' or, in the absence of 
such actual knowledge, it is ``not aware of facts or 
circumstances from which infringing activity is apparent.'' 
Under this standard, a service provider would have no 
obligation to seek out copyright infringement, but it would not 
qualify for the safe harbor if it had turned a blind eye to 
``red flags'' of obvious infringement.
    For instance, the copyright owner could show that the 
provider was aware of facts from which infringing activity was 
apparent if the copyright owner could prove that the location 
was clearly, at the time the directory provider viewed it, a 
``pirate'' site of the type described below, where sound 
recordings, software, movies, or books were available for 
unauthorized downloading, public performance, or public 
display. Absent such ``red flags'' or actual knowledge, a 
directory provider would not be similarly aware merely because 
it saw one or more well known photographs of a celebrity at a 
site devoted to that person. The provider could not be 
expected, during the course of its brief cataloguing visit, to 
determine whether the photograph was still protected by 
copyright or was in the public domain; if the photograph was 
still protected by copyright, whether the use was licensed; and 
if the use was not licensed, whether it was permitted under the 
fair use doctrine.
    The intended objective of this standard is to exclude from 
the safe harbor sophisticated ``pirate'' directories--which 
refer Internet users to other selected Internet sites where 
pirate software, books, movies, and music can be downloaded or 
transmitted. Such pirate directories refer Internet users to 
sites that are obviously infringing because they typically use 
words such as ``pirate,'' ``bootleg,'' or slang terms in their 
URL and header information to make their illegal purpose 
obvious, in the first place, to the pirate directories as well 
as other Internet users. Because the infringing nature of such 
sites would be apparent from even a brief and casual viewing, 
safe harbor status for a provider that views such a site and 
then establishes a link to it would not be appropriate. Pirate 
directories do not follow the routine business practices of 
legitimate service providers preparing directories, and thus 
evidence that they have viewed the infringing site may be all 
that is available for copyright owners to rebut their claim to 
a safe harbor.
    In this way, the ``red flag'' test in new Section 512(d) 
strikes the right balance. The common-sense result of this 
``red flag'' test is that on-line editors and catalogers would 
not be required to make discriminating judgments about 
potential copyright infringement. If, however, an Internet site 
is obviously pirate, then seeing it may be all that is needed 
for the service provider to encounter a ``red flag.'' A 
provider proceeding in the face of such a ``red flag'' must do 
so without the benefit of a safe harbor.
    Information location tools are essential to the operation 
of the Internet; without them, users would not be able to find 
the information they need. Directories are particularly helpful 
in conducting effective searches by filtering out irrelevant 
and offensive material. The Yahoo! directory, for example, 
currently categorizes over 800,000 on-line locations and serves 
as a ``card catalogue'' to the World Wide Web, which over 
35,000,000 different users visit each month. Directories such 
as Yahoo!'s usually are created by people visiting sites to 
categorize them. It is precisely the human judgment and 
editorial discretion exercised by these cataloguers which makes 
directories valuable.
    This provision is intended to promote the development of 
information location tools generally, and Internet directories 
such as Yahoo!'s in particular, by establishing a safe harbor 
from copyright infringement liability for information location 
tool providers if they comply with the notice and take-down 
procedures and other requirements of new subsection (d). The 
knowledge or awareness standard should not be applied in a 
manner which would create a disincentive to the development of 
directories which involve human intervention. Absent actual 
knowledge, awareness of infringement as provided in new 
subsection (d) should typically be imputed to a directory 
provider only with respect to pirate sites or in similarly 
obvious and conspicuous circumstances, and not simply because 
the provider viewed an infringing site during the course of 
assembling the directory.
    New Section 512(e) establishes a right of action against 
any person who knowingly misrepresents that material or 
activity on-line is infringing, or that material or activity 
was removed or disabled by mistake or misidentification under 
the ``put-back'' procedure set forth in new subsection (f). 
Actions may be brought under new subsection (e) by any 
copyright owner, a copyright owner's licensee, or by a service 
provider, who is injured by such misrepresentation, as a result 
of the service provider relying upon the misrepresentation in 
either taking down material or putting material back on-line. 
Defendants who make such a knowing misrepresentation are liable 
for any damages, including costs and attorneys'' fees, incurred 
by any of these parties as a result of the service provider's 
reliance upon the misrepresentation. This subsection is 
intended to deter knowingly false allegations to service 
providers in recognition that such misrepresentations are 
detrimental to rights holders, service providers, and Internet 
users.
    New Section 512(f) provides immunity to service providers 
for taking down infringing material, and establishes a ``put 
back'' procedure under which subscribers may contest a 
complaining party's notification of infringement provided under 
new subsection (c)(3). The put-back procedures were added to 
balance the incentives created in new Section 512 for service 
providers to take down material against third parties' 
interests in ensuring that material not be taken down. In 
particular, new subsection (f)(1) immunizes service providers 
from any claim based on the service provider's good-faith 
disabling of access to, or removal of, material or activity 
claimed to be infringing. The immunity also applies where the 
service provider disables access to, or removes, material or 
activity based on facts or circumstances from which infringing 
activity is apparent. This immunity is available even if the 
material or activity is ultimately determined not to be 
infringing. The purpose of this subsection is to protect 
service providers from liability to third parties whose 
material service providers take down in a good faith effort to 
comply with the requirements of new subsection (c)(1).
    New subsection (f)(2) establishes a ``put back'' procedure 
through an exception to the immunity set forth in new 
subsection (f)(1). The exception applies in a case in which the 
service provider, pursuant to a notification provided under new 
subsection (c)(1)(C) in accordance with new subsection (c)(3), 
takes down material that a subscriber has posted to the system 
or network. In such instances, to retain the immunity set forth 
in new subsection (f)(1) with respect to the subscriber whose 
content is taken down, the service provider must take three 
steps.
    First, under new subsection (f)(2)(A), the service provider 
is to take reasonable steps to notify the subscriber promptly 
of the removal or disabling of access to the subscriber's 
material. The Committee intends that ``reasonable steps'' 
include, for example, sending an e-mail notice to an e-mail 
address associated with a posting, or if only the subscriber's 
name is identified in the posting, sending an e-mail to an e-
mail address that the subscriber submitted with its 
subscription. The Committee does not intend that this 
subsection impose any obligation on service providers to search 
beyond the four corners of a subscriber's posting or their own 
records for that subscriber in order to obtain contact 
information. Nor does the Committee intend to create any right 
on the part of subscribers who submit falsified information in 
their postings or subscriptions to complain if a service 
provider relies upon the information submitted by the 
subscriber.
    Second, pursuant to new subsection (f)(2)(B), the 
subscriber may then file a counter notification, in accordance 
with the requirements of new subsection (f)(3), contesting the 
original take down on grounds of mistake or misidentification 
of the material and requesting ``put back'' of the material 
that the service provider has taken down. If a subscriber files 
a counter notification with the service provider's designated 
agent, new subsection (f)(2)(B) calls for the service provider 
to promptly forward a copy to the complaining party who 
submitted the take down request.
    And third, under new subsection (f)(2)(C), the service 
provider is to place the subscriber's material back on-line, or 
cease disabling access to it, between 10 and 14 business days 
after receiving the counter notification, unless the designated 
agent receives a further noticefrom the complaining party that 
the complaining party has filed an action seeking a court order to 
restrain the subscriber from engaging in the infringing activity on the 
service provider's system or network with regard to the material in 
question.
    Subscriber counter notifications must substantially comply 
with defined requirements set forth in new subsection (f)(3). 
Notifications shall be signed by the subscriber physically or 
by electronic signature; identify the material taken down and 
the location from which it was taken down; include a statement 
under penalty of perjury that the subscriber has a good faith 
belief that the material was taken down as a result of mistake 
or misidentification of the material; and include the 
subscriber's contact information, as well as a statement 
consenting to the jurisdiction of a Federal district court and 
to accept service of process from the complaining party or the 
complaining party's agent. The substantial compliance standard 
is the same as that set forth in new subsections (c) (2) and 
(3).
    New subsection (f)(4) is included to make clear the obvious 
proposition that a service provider's compliance with the put-
back procedure does not subject it to liability for copyright 
infringement or cause it to lose its liability limitation with 
respect to the replaced material.
    New Section 512(g) creates a procedure by which copyright 
owners or their authorized agents who have submitted or will 
submit a request for notification satisfying the requirements 
of new subsection (c)(3)(A) may obtain an order for 
identification of alleged infringers who are users of a service 
provider's system or network. Under this procedure, the 
copyright owner or agent files three documents with the clerk 
of any Federal district court: a copy of the notification; a 
proposed order; and a sworn declaration that the purpose of the 
order is to obtain the identity of an alleged infringer, and 
that the information obtained will only be used to protect the 
owner's rights under this Title.
    Orders issued under new subsection (g) shall authorize and 
order the service provider expeditiously to disclose to the 
person seeking the order information sufficient to identify the 
alleged infringer to the extent such information is available 
to the service provider. The Committee intends that an order 
for disclosure be interpreted as requiring disclosure of 
information in the possession of the service provider, rather 
than obliging the service provider to conduct searches for 
information that is available from other systems or networks. 
The Committee intends that such orders be expeditiously issued 
if the notification meets the provisions of new subsection 
(c)(3)(A) and the declaration is properly executed. The issuing 
of the order should be a ministerial function performed quickly 
for this provision to have its intended effect. After receiving 
the order, the service provider shall expeditiously disclose to 
the copyright owner or its agent the information required by 
the order to the extent that the information is available to 
the service provider, regardless of whether the service 
provider responds to the notification of claimed infringement.
    New Section 512(h) sets forth two conditions that a service 
provider must satisfy to be eligible for the limitations on 
liability provided in new subsections (a) through (d). First, 
the service provider is expected to adopt and reasonably 
implement a policy for the termination in appropriate 
circumstances of the accounts of subscribers 3 of 
the provider's service who are repeat on-line infringers of 
copyright. The Committee recognizes that there are different 
degrees of on-line copyright infringement, from the inadvertent 
and noncommercial, to the willful and commercial. In addition, 
the Committee does not intend this provision to undermine the 
principles of new subsection (l) or the knowledge standard of 
new subsection (c) by suggesting that a provider must 
investigate possible infringements, monitor its service, or 
make difficult judgments as to whether conduct is or is not 
infringing. However, those who repeatedly or flagrantly abuse 
their access to the Internet through disrespect for the 
intellectual property rights of others should know that there 
is a realistic threat of losing that access.
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    \3\ In using the term ``subscribers,'' the Committee intends to 
include account holders that have a business relationship with the 
service provider that justifies treating them as subscribers, for the 
purposes of new Section 512, even if no formal subscription agreement 
exists. For example, ``subscribers'' would include students who are 
granted access to a university's system or network for digital on-line 
communications; employees who have access to their employer's system or 
network; or household members with access to a consumer on-line service 
by virtue of a subscription agreement between the service provider and 
another member of that household.
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     Second, a provider's system must accommodate, and not 
interfere with, standard technical measures used to identify or 
protect copyrighted works. The Committee believes that 
technology is likely to be the solution to many of the issues 
facing copyright owners and service providers in this digital 
age. For that reason, the Committee has included new subsection 
(h)(1)(B), which is intended to encourage appropriate 
technological solutions to protect copyrighted works. The 
Committee strongly urges all of the affected parties 
expeditiously to commence voluntary, inter-industry discussions 
to agree upon and implement the best technological solutions 
available to achieve these goals.
    New subsection (h)(1)(B) is explicitly limited to 
``standard technical measures'' that have been developed 
pursuant to a broad consensus of both copyright owners and 
service providers in an open, fair, voluntary, multi-industry 
standards process. The Committee anticipates that these 
provisions could be developed both in recognized open standards 
bodies or in ad hoc groups, as long as the process used is 
open, fair, voluntary, and multi-industry and the measures 
developed otherwise conform to the requirements of the 
definition of standard technical measures set forth in new 
subsection (h)(2). A number of recognized open standards bodies 
have substantial experience with Internet issues. The Committee 
also notes that an ad hoc approach has been successful in 
developing standards in other contexts, such as the process 
that has developed copy protection technology for use in 
connection with digital video disk players.
    New Section 512(i) defines the terms and conditions under 
which an injunction may be issued against a service provider 
that qualifies for the limitations on liability set forth in 
new subsections (a) through (d), but is otherwise subject to an 
injunction under existing principles of law. New subsection 
(i)(1) limits the scope of injunctive relief that may be 
ordered against a qualifying provider. New subsection (i)(2) 
identifies factors a court must consider in deciding whether to 
grant injunctive relief and in determining the appropriate 
scope of injunctive relief.
    New subsection (i)(1) is divided into two subparagraphs. 
New subparagraph (A) defines the scope of injunctive relief 
available against service providers who qualify for the 
limitations of liability set forth in new subsections (b), (c) 
or (d). Only three forms of injunctive relief may be granted. 
First, pursuant to new subsection (i)(1)(A)(i), the court may 
provide for the removal or blocking of infringing material or 
activity that is residing at a specific location on the 
provider's system or network. This is essentially an order to 
take the actions identified in new subsection (c)(1)(C) to 
``remove, or disable access'' to the material that is claimed 
to be infringing or to be the subject of infringing activity.
    Second, under new subsection (i)(1)(A)(ii), the court may 
order the provider to terminate the accounts of a subscriber 
4 of the provider's service who is engaging in 
infringing activity. And third, pursuant to new subsection 
(i)(1)(A)(iii), the court may, under appropriate circumstances, 
enter a different form of injunction if the court considers it 
necessary to prevent or restrain infringement of specific 
copyrighted material that resides at an identified on-line 
location. If a court enters an injunction other than that 
contemplated in new subparagraphs (A) (i) or (ii), the court 
must determine that the injunctive relief is the least 
burdensome relief to the service provider among those forms of 
relief that are comparably effective.
---------------------------------------------------------------------------
    \4\ See supra note 3.
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     New subsection (i)(1)(B) sets forth a different set of 
remedies available for injunctions against service providers 
qualifying for the limitation on remedies set forth in new 
subsection (a). In such cases, if a court determines that 
injunctive relief is appropriate, it may only grant injunctive 
relief in one or both of two specified forms. The first, 
pursuant to new subparagraph (B)(i), is an order to the service 
provider to terminate subscriber accounts that are specified in 
the order. The second form of relief, pursuant to new 
subparagraph (B)(ii) and available in cases in which a provider 
is engaging in infringing activity relating to a foreign on-
line location, is an order to take reasonable steps to block 
access to a specific, identified foreign on-line location. Such 
blocking orders are not available against a service provider 
qualifying under new subsection (a) in the case of infringing 
activity on a site within the United States or its territories.
    New subsection (i)(2) sets forth mandatory considerations 
for the court beyond those that exist under current law. These 
additional considerations require the court to consider factors 
of particular significance in the digital on-line environment. 
New subsection (i)(3) prohibits most forms of ex parte 
injunctive relief (including temporary and preliminary relief) 
against a service provider qualifying for a liability 
limitation under new Section 512. A court may issue an order to 
ensure the preservation of evidence or where the order will 
have no material adverse effect on the operation of the 
provider's network.
    New Section 512(j) provides definitions of the term 
``service provider'' as used in this Title, as well as a 
definition of the term ``monetary relief.'' Only an entity that 
is performing the functions of a ``service provider'' is 
eligible for the limitations on liability set forth in new 
Section 512 with respect to those functions.
    The first definition of a ``service provider,'' set forth 
in new subsection (j)(1)(A), narrowly defines a range of 
functions and applies only to use of the term in new subsection 
(a). As used in new subsection (a), the term ``service 
provider'' means any entity offering the transmission, routing 
or providing of connections for digital on-line communications, 
between or among points specified by a user, of material of a 
user's choosing without modification to the content of the 
material as sent or received. This free-standing definition is 
derived from the definition of ``telecommunications'' found in 
the Communications Act of 1934 (47 U.S.C. Sec. 153(48)) in 
recognition of the fact that the functions covered by new 
subsection (a) are essentially conduit-only functions. The 
Committee, however, has tweaked the definition for purposes of 
new subsection (j)(1)(A) to ensure that it captures offerings 
over the Internet and other on-line media. Thus, the definition 
in new subsection (j)(1)(A) not only includes ``the offering of 
transmission, routing or providing of connections,'' but also 
requires that the service provider be providing such services 
for communications that are both ``digital'' and ``on-line.'' 
By ``on-line'' communications, the Committee means 
communications over interactive computer networks, such as the 
Internet. Thus, over-the-air broadcasting, whether in analog or 
digital form, or a cable television system, or a satellite 
television service, would not qualify, except to the extent it 
provides users with on-line access to a digital network such as 
the Internet, or it provides transmission, routing, or 
connections to connect material to such a network, and then 
only with respect to those functions. An entity is not 
disqualified from being a ``service provider'' because it 
alters the form of the material, so long as it does not alter 
the content of the material. As a threshold matter, a service 
provider's performance of a particular function with respect to 
allegedly infringing activity falls within the ``service 
provider'' definition in new subsection (j)(1)(A) if and only 
if such function is within the range of functions defined in 
new subsection (j)(1)(A). For example, hosting a web site does 
not fall within the new subsection (j)(1)(A) definition, 
whereas the mere provision of connectivity to a web site does 
fall within that definition. The new subsection (j)(1)(A) 
definition is not intended to exclude providers that perform 
additional functions, including the functions identified in new 
subsection (j)(1)(B). Conversely, the fact that a provider 
performs some functions that fall within the definition of new 
subparagraph (A) does not imply that its other functions that 
do not fall within the definition of new subparagraph (A) 
qualify for the limitation of liability under new subsection 
(a).
    The second definition of ``service provider,'' set forth in 
new subsection (j)(1)(B), applies to the term as used in any 
other new subsection of new Section 512. This definition is 
broader than the first, covering providers of on-line services 
or network access, or the operator of facilities therefor. This 
definition includes, for example, services such as providing 
Internet access, e-mail, chat room and web page hosting 
services. The new subsection (j)(1)(B) definition of service 
provider, for example, includes universities and schools to the 
extent they perform the functions identified in new subsection 
(j)(1)(B). The definition also specifically includes any entity 
that falls within the first definition of service provider. A 
broadcaster or cable television system or satellite television 
service would not qualify, except to the extent it performs 
functions covered by (j)(1)(B).
    Finally, new subsection (j)(2) defines the term ``monetary 
relief'' broadly for purposes of this Section as encompassing 
damages, costs, attorneys' fees and any other form of monetary 
payment.
    New Section 512(k) clarifies that other defenses under 
copyright law are not affected and codifies several important 
principles. In particular, new Section 512 does not define what 
is actionable copyright infringement in the on-line 
environment, and does not create any new exceptions to the 
exclusive rights under copyright law. The rest of the Copyright 
Act sets those rules. Similarly, new Section 512 does not 
create any new liabilities for service providers or affect any 
defense available to a service provider. Enactment of new 
Section 512 does not bear upon whether a service provider is or 
is not an infringer when its conduct falls within the scope of 
new Section 512. Even if a service provider's activities fall 
outside the limitations on liability specified in the bill, the 
service provider is not necessarily an infringer; liability in 
these circumstances would be adjudicated based on the doctrines 
of direct, vicarious or contributory liability for infringement 
as they are articulated in the Copyright Act and in the court 
decisions interpreting and applying that statute, which are 
unchanged by new Section 512. In the event that a service 
provider does not qualify for the limitation on liability, it 
still may claim all of the defenses available to it under 
current law. New section 512 simply defines the circumstances 
under which a service provider, as defined in this new Section, 
may enjoy a limitation on liability for copyright infringement.
    New Section 512(l) is designed to protect the privacy of 
Internet users. This new subsection makes clear that the 
applicability of new subsections (a) through (d) is in no way 
conditioned on a service provider: (1) monitoring its service 
or affirmatively seeking facts indicating infringing activity 
except to the extent consistent with implementing a standard 
technical measure under new subsection (h); or (2) accessing, 
removing or disabling access to, material if such conduct is 
prohibited by law, such as the Electronic Communications 
Privacy Act.
    New Section 512(m) establishes a rule of construction 
applicable to new subsections (a) through (d). New Section 
512's limitations on liability are based on functions, and each 
limitation is intended to describe a separate and distinct 
function. Consider, for example, a service provider that 
provides a hyperlink to a site containing infringing material 
which it then caches on its system in order to facilitate 
access to it by its users. This service provider is engaging in 
at least three functions that may be subject to the limitation 
on liability: transitory digital network communications under 
new subsection (a); system caching under new subsection (b); 
and information location tools under new subsection (d). If 
this service provider (as defined in new subsection (j)(1)(A) 
in the case of transitory digital communications, or as defined 
in new subsection (j)(1)(B) in the case of system caching or 
information location tools) meets the threshold criteria 
spelled out in new subsection (h)(1), then for its acts of 
system caching defined in new subsection (b), it may avail 
itself of the liability limitations stated in new subsection 
(b), which incorporate the limitations on injunctive relief 
described in new subsection (i)(1)(B) and (i)(3). If it is 
claimed that the same company is committing an infringement by 
using information location tools to link its users to 
infringing material, as defined in new subsection (d), then its 
fulfillment of the requirements to claim the system caching 
liability limitation does not affect whether it qualifies for 
the liability limitation for information location tools; the 
criteria in new subsection (d), rather than those in new 
subsection (b), are applicable. New Section 512(m) codifies 
this principle by providing that the determination of whether a 
service provider qualifies for one liability limitation has no 
effect on the determination of whether it qualifies for a 
separate and distinct liability limitation under another new 
subsection of new Section 512.
            (a) Conforming amendment
    Section 202(b) amends the table of sections for chapter 5 
of the Copyright Act (17 U.S.C. Sec. 501 et seq.) to reflect 
the new Section 512, as created by this title.

Section 203. Limitation on exclusive rights; computer programs

    Section 203 effects a minor, yet important, clarification 
in Section 117 of the Copyright Act (17 U.S.C. Sec. 117) to 
ensure that the lawful owner or lessee of a computer machine 
may authorize an independent service provider--a person 
unaffiliated with either the owner or lessee of the machine--to 
activate the machine for the sole purpose of servicing its 
hardware components.

Section 204. Liability of educational institutions for online 
        infringement of copyright

            (a) Recommendations by Register of Copyrights
    Section 204(a) directs the Register of Copyrights to 
consult with representatives of copyright owners and nonprofit 
educational institutions and to submit to the Congress within 6 
months after enactment of the bill recommendations regarding 
the liability of nonprofit educational institutions for 
copyright infringements that take place through the use of the 
institution's computer system or network, where the institution 
qualifies as a ``service provider'' under the provisions of 
this Title. Included in the Register's report are to be any 
recommendations for legislation that the Register considers 
appropriate.
            (b) Factors
    Section 204(b) sets forth specific considerations that the 
Register shall take into account, where relevant, in 
formulating recommendations to the Congress.

Section 205. Evaluation of impact of copyright law and amendments on 
        electronic commerce and technological development

    As previously stated in the background section to this 
report, the Committee believes it is important to more 
precisely evaluate the relationship between intellectual 
property and electronic commerce, and to understand the 
practical implications of this relationship on thedevelopment 
of technology to be used in promoting electronic commerce. Section 205 
enables Congress to make that evaluation.
            (a) Findings
    Section 205(a) finds that Congress must have accurate and 
current information on the effects of intellectual property 
protection on electronic commerce and technology.
            (b) Evaluation by Secretary of Commerce
    Section 205(b) directs the Secretary of Commerce, in 
consultation with the Assistant Secretary of Commerce for 
Communications and Information and the Register of Copyrights, 
to evaluate the effects of this legislation on the development 
of electronic commerce and associated technology, as well as 
the relationship between existing and emergent technology, on 
the one hand, and existing copyright law, on the other.
            (c) Report to Congress
    Section 205(c) directs the Secretary of Commerce to submit 
a report to Congress, within one year of enactment, on the 
evaluation required pursuant to Section 205(b).

Section 206. Effective date

    Section 206 establishes the effective date for Title II as 
the date of enactment.

  TITLE III--EPHEMERAL RECORDINGS; DISTANCE EDUCATION; EXEMPTION FOR 
                         LIBRARIES AND ARCHIVES

Section 301. Ephemeral recordings

    Section 301 amends Section 112 of the Copyright Act (17 
U.S.C. Sec. 112) to address two issues concerning the 
application of the ephemeral recording exemption in the digital 
age. The first of these issues is the relationship between the 
ephemeral recording exemption and the Digital Performance Right 
in Sound Recordings Act of 1995 (DPRA). DPRA granted sound 
recording copyright owners the exclusive right to perform their 
works publicly by means of digital audio transmission, subject 
to certain limitations, particularly those set forth in Section 
114(d). Among those limitations is an exemption for non-
subscription broadcast transmissions, which are defined as 
those made by terrestrial broadcast stations licensed as such 
by the Federal Communications Commission. (17 U.S.C. 
Sec. 114(d)(1)(A)(iii), (j)(2)). The ephemeral recording 
exemption presently privileges certain activities of a 
transmitting organization when it is entitled to transmit a 
performance or display under a license or transfer of copyright 
ownership or under the limitations on exclusive rights in sound 
recordings specified by Section 114(a). The Committee believes 
that the ephemeral recording exemption should apply to 
broadcast radio and television stations when they make non-
subscription digital broadcasts permitted by DPRA. The 
Committee has therefore changed the existing language of the 
ephemeral recording exemption (redesignated as Section 
112(a)(1)) to extend explicitly to broadcasters the same 
privilege they already enjoy with respect to analog broadcasts.
    The second of these issues is the relationship between the 
ephemeral recording exemption and the anti-circumvention 
provisions that the bill adds as Section 102 of this 
legislation. Concerns were expressed that if use of copy 
protection technologies became widespread, a transmitting 
organization might be prevented from engaging in its 
traditional activities of assembling transmission programs and 
making ephemeral recordings permitted by Section 112 for 
purposes of its own transmissions within its local service area 
and of archival preservation and security. To address this 
concern, the Committee has added to Section 112 a new paragraph 
that permits transmitting organizations to engage in activities 
that otherwise would violate the regulations to be issued under 
Section 102(a)(1) in certain limited circumstances when 
necessary for the exercise of the transmitting organization's 
privilege to make ephemeral recordings under redesignated 
Section 112(a)(1). By way of example, if a radio station could 
not make a permitted ephemeral recording from a commercially 
available phonorecord without violating the regulations to be 
issued under Section 102(a)(1), then the radio station could 
request from the copyright owner the necessary means of making 
a permitted ephemeral recording. If the copyright owner did not 
then either provide a phonorecord that could be reproduced or 
otherwise provide the necessary means of making a permitted 
ephemeral recording from the phonorecord already in the 
possession of the radio station, the radio station would not be 
liable for violating the regulations to be issued under Section 
102(a)(1) for taking the steps necessary for engaging in 
activities permitted under Section 112(a)(1). The radio station 
would, of course, be liable for violating the regulations to be 
issued under Section 102(a)(1) if it engaged in activities 
prohibited by that Section in other than the limited 
circumstances permitted by Section 112(a)(1).

Section 302. Limitation on exclusive rights; distance education

            (a) Recommendations by National Telecommunications and 
                    Information Administration
    Section 302(a) directs the Assistant Secretary of Commerce 
for Communications and Information to consult with 
representatives of copyright owners, non-profit educational 
institutions, and nonprofit libraries and archives and to 
submit recommendations to the Congress no later than 6 months 
after the date of enactment of the bill on how to promote 
distance education through digital technologies, including 
interactive digital networks, while maintaining an appropriate 
balance between the rights of copyright owners and the needs of 
users. Where appropriate, the Assistant Secretary shall include 
legislative recommendations to achieve those objectives.
            (b) Factors
    Section 302(b) specifies considerations which the Assistant 
Secretary of Commerce for Communications and Information shall 
take into account in formulating such recommendations.

Section 303. Exemption for libraries and archives

    Section 303 allows libraries and archives to take advantage 
of digital technologies when engaging in specified preservation 
activities.

                      TITLE IV--RELATED PROVISIONS

Section 401. Report by the National Telecommunications and Information 
        Administration

    Section 401 requires the Assistant Secretary of Commerce 
for Communications and Information to submit a report to 
Congress, within six months on enactment, on appropriate 
mechanisms to encourage the development of access protocols, 
encryption testing methods, and security testing methods which 
would allow lawful access to, with appropriate safeguards to 
prevent the unlawful copying of, encrypted works.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italic, existing law in which no change is proposed 
is shown in roman):

TITLE 17, UNITED STATES CODE

           *       *       *       *       *       *       *


CHAPTER 1--SUBJECT MATTER AND SCOPE OF COPYRIGHT

           *       *       *       *       *       *       *


Sec. 101. Definitions

  Except as otherwise provided in this title, as used in this 
title, the following terms and their variant forms mean the 
following:
          An ``anonymous work'' is a work on the copies or 
        phonorecords of which no natural person is identified 
        as author.

           *       *       *       *       *       *       *

          [A work is a ``Berne Convention work'' if--
                  [(1) in the case of an unpublished work, one 
                or more of the authors is a national of a 
                nation adhering to the Berne Convention, or in 
                the case of a published work, one or more of 
                the authors is a national of a nation adhering 
                to the Berne Convention on the date of first 
                publication;
                  [(2) the work was first published in a nation 
                adhering to the Berne Convention, or was 
                simultaneously first published in a nation 
                adhering to the Berne Convention and in a 
                foreign nation that does not adhere to the 
                Berne Convention;
                  [(3) in the case of an audiovisual work--
                          [(A) if one or more of the authors is 
                        a legal entity, that author has its 
                        headquarters in a nation adhering to 
                        the Berne Convention; or
                          [(B) if one or more of the authors is 
                        an individual, that author is 
                        domiciled, or has his or her habitual 
                        residence in, a nation adhering to the 
                        Berne Convention;
                  [(4) in the case of a pictorial, graphic, or 
                sculptural work that is incorporated in a 
                building or other structure, the building or 
                structure is located in a nation adhering to 
                the Berne Convention; or
                  [(5) in the case of an architectural work 
                embodied in a building, such building is 
                erected in a country adhering to the Berne 
                Convention.
        For purposes of paragraph (1), an author who is 
        domiciled in or has his or her habitual residence in, a 
        nation adhering to the Berne Convention is considered 
        to be a national of that nation. For purposes of 
        paragraph (2), a work is considered to have been 
        simultaneously published in two or more nations if its 
        dates of publication are within 30 days of one 
        another.]

           *       *       *       *       *       *       *

          [The ``country of origin'' of a Berne Convention 
        work, for purposes of section 411, is the United States 
        if] For purposes of section 411, a work is a ``United 
        States work'' only if--
                  (1) in the case of a published work, the work 
                is first published--
                          (A) in the United States;
                          (B) simultaneously in the United 
                        States and another [nation or nations 
                        adhering to the Berne Convention] 
                        treaty party or parties, whose law 
                        grants a term of copyright protection 
                        that is the same as or longer than the 
                        term provided in the United States;
                          (C) simultaneously in the United 
                        States and a foreign nation that [does 
                        not adhere to the Berne Convention] is 
                        not a treaty party; or
                          (D) in a foreign nation that [does 
                        not adhere to the Berne Convention] is 
                        not a treaty party, and all of the 
                        authors of the work are nationals, 
                        domiciliaries, or habitual residents 
                        of, or in the case of an audiovisual 
                        work legal entities with headquarters 
                        in, the United States;

           *       *       *       *       *       *       *

                  (3) in the case of a pictorial, graphic, or 
                sculptural work incorporated in a building or 
                structure, the building or structure is located 
                in the United States.
        [For the purposes of section 411, the ``country of 
        origin'' of any other Berne Convention work is not the 
        United States.]

           *       *       *       *       *       *       *

          A work is ``fixed'' in a tangible medium of 
        expression when its embodiment in a copy or 
        phonorecord, by or under the authority of the author, 
        is sufficiently permanent or stable to permit it to be 
        perceived, reproduced, or otherwise communicated for a 
        period of more than transitory duration. A work 
        consisting of sounds, images, or both, that are being 
        transmitted, is ``fixed'' for purposes of this title if 
        a fixation of the work is being made simultaneously 
        with its transmission.
          The ``Geneva Phonograms Convention'' is the 
        Convention for the Protection of Producers of 
        Phonograms Against Unauthorized Duplication of Their 
        Phonograms, concluded at Geneva, Switzerland, on 
        October 29, 1971.
          The terms ``including'' and ``such as'' are 
        illustrative and not limitative.
          An ``international agreement'' is--
                  (1) the Universal Copyright Convention;
                  (2) the Geneva Phonograms Convention;
                  (3) the Berne Convention;
                  (4) the WTO Agreement;
                  (5) the WIPO Copyright Treaty;
                  (6) the WIPO Performances and Phonograms 
                Treaty; and
                  (7) any other copyright treaty to which the 
                United States is a party.

           *       *       *       *       *       *       *

          To ``transmit'' a performance or display is to 
        communicate it by any device or process whereby images 
        or sounds are received beyond the place from which they 
        are sent.
          A ``treaty party'' is a country or intergovernmental 
        organization other than the United States that is a 
        party to an international agreement.

           *       *       *       *       *       *       *

          The author's ``widow'' or ``widower'' is the author's 
        surviving spouse under the law of the author's domicile 
        at the time of his or her death, whether or not the 
        spouse has later remarried.
          The ``WIPO Copyright Treaty'' is the WIPO Copyright 
        Treaty concluded at Geneva, Switzerland, on December 
        20, 1996.
          The ``WIPO Performances and Phonograms Treaty'' is 
        the WIPO Performances and Phonograms Treaty concluded 
        at Geneva, Switzerland, on December 20, 1996.

           *       *       *       *       *       *       *

          A ``work made for hire'' is--
                  (1) * * *

           *       *       *       *       *       *       *

          The terms ``WTO Agreement'' and ``WTO member 
        country'' have the meanings given those terms in 
        paragraphs (9) and (10), respectively, of section 2 of 
        the Uruguay Round Agreements Act.

           *       *       *       *       *       *       *


Sec. 104. Subject matter of copyright: National origin

  (a) Unpublished Works.--The works specified by sections 102 
and 103, while unpublished, are subject to protection under 
this title without regard to the nationality or domicile of the 
author.
  (b) Published Works.--The works specified by sections 102 and 
103, when published, are subject to protection under this title 
if--
          (1) on the date of first publication, one or more of 
        the authors is a national or domiciliary of the United 
        States, or is a national, domiciliary, or sovereign 
        authority of a [foreign nation that is a party to a 
        copyright treaty to which the United States is also a 
        party] treaty party, or is a stateless person, wherever 
        that person may be domiciled; or
          (2) the work is first published in the United States 
        or in a foreign nation that, on the date of first 
        publication, is a [party to the Universal Copyright 
        Convention] treaty party; or
          (3) the work is a sound recording that was first 
        fixed in a treaty party; or
          (4) the work is a [Berne Convention work] pictorial, 
        graphic, or sculptural work that is incorporated in a 
        building or other structure, or an architectural work 
        that is embodied in a building and the building or 
        structure is located in the United States or a treaty 
        party; or
          [(3)] (5) the work is first published by the United 
        Nations or any of its specialized agencies, or by the 
        Organization of American States; or
          [(5)] (6) the work comes within the scope of a 
        Presidential proclamation. Whenever the President finds 
        that a particular foreign nation extends, to works by 
        authors who are nationals or domiciliaries of the 
        United States or to works that are first published in 
        the United States, copyright protection on 
        substantially the same basis as that on which the 
        foreign nation extends protection to works of its own 
        nationals and domiciliaries and works first published 
        in that nation, the President may by proclamation 
        extend protection under this title to works of which 
        one or more of the authors is, on the date of first 
        publication, a national, domiciliary, or sovereign 
        authority of that nation, or which was first published 
        in that nation. The President may revise, suspend, or 
        revoke any such proclamation or impose any conditions 
        or limitations on protection under a proclamation.
For purposes of paragraph (2), a work that is published in the 
United States or a treaty party within 30 days after 
publication in a foreign nation that is not a treaty party 
shall be considered to be first published in the United States 
or such treaty party, as the case may be.

           *       *       *       *       *       *       *

  (d) Effect of Phonograms Treaties.--Notwithstanding the 
provisions of subsection (b), no works other than sound 
recordings shall be eligible for protection under this title 
solely by virtue of the adherence of the United States to the 
Geneva Phonograms Convention or the WIPO Performances and 
Phonograms Treaty.

Sec. 104A. Copyright in restored works

  (a) * * *

           *       *       *       *       *       *       *

  (h) Definitions.--For purposes of this section and section 
109(a):
          (1) The term ``date of adherence or proclamation'' 
        means the earlier of the date on which a foreign nation 
        which, as of the date the WTO Agreement enters into 
        force with respect to the United States, is not a 
        nation adhering to the Berne Convention or a WTO member 
        country, becomes--
                  [(A) a nation adhering to the Berne 
                Convention or a WTO member country; or
                  [(B) subject to a Presidential proclamation 
                under subsection (g).]
                  (A) a nation adhering to the Berne 
                Convention;
                  (B) a WTO member country;
                  (C) a nation adhering to the WIPO Copyright 
                Treaty;
                  (D) a nation adhering to the WIPO 
                Performances and Phonograms Treaty; or
                  (E) subject to a Presidential proclamation 
                under subsection (g).

           *       *       *       *       *       *       *

          [(3) The term ``eligible country'' means a nation, 
        other than the United States, that--
                  [(A) becomes a WTO member country after the 
                date of the enactment of the Uruguay Round 
                Agreements Act;
                  [(B) on such date of enactment is, or after 
                such date of enactment becomes, a member of the 
                Berne Convention; or
                  [(C) after such date of enactment becomes 
                subject to a proclamation under subsection (g).
        For purposes of this section, a nation that is a member 
        of the Berne Convention on the date of the enactment of 
        the Uruguay Round Agreements Act shall be construed to 
        become an eligible country on such date of enactment.]
          (3) The term ``eligible country'' means a nation, 
        other than the United States, that--
                  (A) becomes a WTO member country after the 
                date of the enactment of the Uruguay Round 
                Agreements Act;
                  (B) on such date of enactment is, or after 
                such date of enactment becomes, a nation 
                adhering to the Berne Convention;
                  (C) adheres to the WIPO Copyright Treaty;
                  (D) adheres to the WIPO Performances and 
                Phonograms Treaty; or
                  (E) after such date of enactment becomes 
                subject to a proclamation under subsection (g).

           *       *       *       *       *       *       *

          (6) The term ``restored work'' means an original work 
        of authorship that--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) is in the public domain in the United 
                States due to--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) lack of national eligibility; 
                        [and]
                  (D) has at least one author or rightholder 
                who was, at the time the work was created, a 
                national or domiciliary of an eligible country, 
                and if published, was first published in an 
                eligible country and not published in the 
                United States during the 30-day period 
                following publication in such eligible 
                country[.]; and
                  (E) if the source country for the work is an 
                eligible country solely by virtue of its 
                adherence to the WIPO Performances and 
                Phonograms Treaty, is a sound recording.

           *       *       *       *       *       *       *

          (8) The ``source country'' of a restored work is--
                  (A) a nation other than the United States;
                  (B) in the case of an unpublished work--
                          (i) the eligible country in which the 
                        author or rightholder is a national or 
                        domiciliary, or, if a restored work has 
                        more than 1 author or rightholder, of 
                        which the majority of foreign authors 
                        or rightholders are nationals or 
                        domiciliaries [of eligible countries]; 
                        or

           *       *       *       *       *       *       *

          [(9) The terms ``WTO Agreement'' and ``WTO member 
        country'' have the meanings given those terms in 
        paragraphs (9) and (10), respectively, of section 2 of 
        the Uruguay Round Agreements Act.]

           *       *       *       *       *       *       *


Sec. 108. Limitations on exclusive rights: Reproduction by libraries 
                    and archives

  (a) [Notwithstanding] Except as otherwise provided in this 
title and notwithstanding the provisions of section 106, it is 
not an infringement of copyright for a library or archives, or 
any of its employees acting within the scope of their 
employment, to reproduce no more than one copy or phonorecord 
of a work, except as provided in subsections (b) and (c), or to 
distribute such copy or phonorecord, under the conditions 
specified by this section, if--
          (1) * * *

           *       *       *       *       *       *       *

          (3) the reproduction or distribution of the work 
        includes a notice of copyright that appears on the copy 
        or phonorecord that is reproduced under the provisions 
        of this section, or includes a legend stating that the 
        work may be protected by copyright if no such notice 
        can be found on the copy or phonorecord that is 
        reproduced under the provisions of this section.
  (b) The rights of reproduction and distribution under this 
section apply to [a copy or phonorecord] three copies or 
phonorecords of an unpublished work duplicated [in facsimile 
form] solely for purposes of preservation and security or for 
deposit for research use in another library or archives of the 
type described by clause (2) of subsection (a), [if the copy or 
phonorecord reproduced is currently in the collections of the 
library or archives.] if--
          (1) the copy or phonorecord reproduced is currently 
        in the collections of the library or archives; and
          (2) any such copy or phonorecord that is reproduced 
        in digital format is not otherwise distributed in that 
        format and is not made available to the public in that 
        format outside the premises of the library or archives.
  (c) The right of reproduction under this section applies to 
[a copy or phonorecord] three copies or phonorecords of a 
published work duplicated [in facsimile form] solely for the 
purpose of replacement of a copy or phonorecord that is 
damaged, deteriorating, lost, or stolen, or if the existing 
format in which the work is stored has become obsolete, [if the 
library or archives has, after a reasonable effort, determined 
that an unused replacement cannot be obtained at a fair price.] 
if--
          (1) the library or archives has, after a reasonable 
        effort, determined that an unused replacement cannot be 
        obtained at a fair price; and
          (2) any such copy or phonorecord that is reproduced 
        in digital format is not made available to the public 
        in that format except for use on the premises of the 
        library or archives in lawful possession of such copy.
For purposes of this subsection, a format shall be considered 
obsolete if the machine or device necessary to render 
perceptible a work stored in that format is no longer 
manufactured or is no longer reasonably available in the 
commercial marketplace.

           *       *       *       *       *       *       *


Sec. 112. Limitations on exclusive rights: Ephemeral recordings

  (a)(1) Notwithstanding the provisions of section 106, and 
except in the case of a motion picture or other audiovisual 
work, it is not an infringement of copyright for a transmitting 
organization entitled to transmit to the public a performance 
or display of a work, under a license or transfer of the 
copyright or under the limitations on exclusive rights in sound 
recordings specified by section 114(a), or for a transmitting 
organization that is a broadcast radio or television station 
licensed as such by the Federal Communications Commission that 
broadcasts a performance of a sound recording in a digital 
format on a nonsubscription basis, to make no more than one 
copy or phonorecord of a particular transmission program 
embodying the performance or display, if--
          [(1)] (A) the copy or phonorecord is retained and 
        used solely by the transmitting organization that made 
        it, and no further copies or phonorecords are 
        reproduced from it; and
          [(2)] (B) the copy or phonorecord is used solely for 
        the transmitting organization's own transmissions 
        within its local service area, or for purposes of 
        archival preservation or security; and
          [(3)] (C) unless preserved exclusively for archival 
        purposes, the copy or phonorecord is destroyed within 
        six months from the date the transmission program was 
        first transmitted to the public.
  (2) In a case in which a transmitting organization entitled 
to make a copy or phonorecord under paragraph (1) in connection 
with the transmission to the public of a performance or display 
of a work described in that paragraph is prevented from making 
such copy or phonorecord by reason of the application by the 
copyright owner of technical measures that prevent the 
reproduction of the work, the copyright owner shall make 
available to the transmitting organization the necessary means 
for permitting the making of such copy or phonorecord within 
the meaning of that paragraph, if it is technologically 
feasible and economically reasonable for the copyright owner to 
do so. If the copyright owner fails to do so in a timely manner 
in light of the transmitting organization's reasonable business 
requirements, the transmitting organization shall not be liable 
for a violation of section 102(a)(1) of the WIPO Copyright 
Treaties Implementation Act for engaging in such activities as 
are necessary to make such copies or phonorecords as permitted 
under paragraph (1) of this subsection.

           *       *       *       *       *       *       *


Sec. 117. Limitations on exclusive rights: Computer programs

  [Notwithstanding] (a) Making of Additional Copy or Adaptation 
by Owner of Copy.--Notwithstanding the provisions of section 
106, it is not an infringement for the owner of a copy of a 
computer program to make or authorize the making of another 
copy or adaptation of that computer program provided:
          (1) * * *

           *       *       *       *       *       *       *

  [Any exact] (b) Lease, Sale, or Other Transfer of Additional 
Copy or Adaptation.--Any exact copies prepared in accordance 
with the provisions of this section may be leased, sold, or 
otherwise transferred, along with the copy from which such 
copies were prepared, only as part of the lease, sale, or other 
transfer of all rights in the program. Adaptations so prepared 
may be transferred only with the authorization of the copyright 
owner.
  (c) Machine Maintenance or Repair.--Notwithstanding the 
provisions of section 106, it is not an infringement for the 
owner or lessee of a machine to make or authorize the making of 
a copy of a computer program if such copy is made solely by 
virtue of the activation of a machine that lawfully contains an 
authorized copy of the computer program, for purposes only of 
maintenance or repair of that machine, if--
          (1) such new copy is used in no other manner and is 
        destroyed immediately after the maintenance or repair 
        is completed; and
          (2) with respect to any computer program or part 
        thereof that is not necessary for that machine to be 
        activated, such program or part thereof is not accessed 
        or used other than to make such new copy by virtue of 
        the activation of the machine.
  (d) Definitions.--For purposes of this section--
          (1) the ``maintenance'' of a machine is the servicing 
        of the machine in order to make it work in accordance 
        with its original specifications and any changes to 
        those specifications authorized for that machine; and
          (2) the ``repair'' of a machine is the restoring of 
        the machine to the state of working in accordance with 
        its original specifications and any changes to those 
        specifications authorized for that machine.

           *       *       *       *       *       *       *


CHAPTER 4--COPYRIGHT NOTICE, DEPOSIT, AND REGISTRATION

           *       *       *       *       *       *       *


Sec. 411. Registration and infringement actions

  (a) Except for [actions for infringement of copyright in 
Berne Convention works whose country of origin is not the 
United States and] an action brought for a violation of the 
rights of the authorunder section 106A(a), and subject to the 
provisions of subsection (b), no action for infringement of the 
copyright in any United States work shall be instituted until 
registration of the copyright claim has been made in accordance with 
this title. In any case, however, where the deposit, application, and 
fee required for registration have been delivered to the Copyright 
Office in proper form and registration has been refused, the applicant 
is entitled to institute an action for infringement if notice thereof, 
with a copy of the complaint, is served on the Register of Copyrights. 
The Register may, at his or her option, become a party to the action 
with respect to the issue of registrability of the copyright claim by 
entering an appearance within sixty days after such service, but the 
Register's failure to become a party shall not deprive the court of 
jurisdiction to determine that issue.

           *       *       *       *       *       *       *


             CHAPTER 5--COPYRIGHT INFRINGEMENT AND REMEDIES

Sec.
501.  Infringement of copyright.
     * * * * * * *
512.  Liability of service providers for online infringement of 
          copyright.

           *       *       *       *       *       *       *


Sec. 507. Limitations on actions

  (a) Criminal Proceedings.--[No] Except as expressly provided 
otherwise in this title, no criminal proceeding shall be 
maintained under the provisions of this title unless it is 
commenced within 5 years after the cause of action arose.

           *       *       *       *       *       *       *


Sec. 512. Liability of service providers for online infringement of 
                    copyright

  (a) Digital Network Communications.--A service provider shall 
not be liable for monetary relief, or except as provided in 
subsection (i) for injunctive or other equitable relief, for 
infringement for the provider's transmitting, routing, or 
providing connections for, material through a system or network 
controlled or operated by or for the service provider, or the 
intermediate and transient storage of such material in the 
course of such transmitting, routing or providing connections, 
if--
          (1) it was initiated by or at the direction of a 
        person other than the service provider;
          (2) it is carried out through an automatic technical 
        process without selection of such material by the 
        service provider;
          (3) the service provider does not select the 
        recipients of such material except as an automatic 
        response to the request of another;
          (4) no such copy of such material made by the service 
        provider is maintained on the system or network in a 
        manner ordinarily accessible to anyone other than 
        anticipated recipients, and no such copy is maintained 
        on the system or network in a manner ordinarily 
        accessible to the anticipated recipients for a longer 
        period than is reasonably necessary for the 
        communication; and
          (5) the material is transmitted without modification 
        to its content.
  (b) System Caching.--A service provider shall not be liable 
for monetary relief, or except as provided in subsection (i) 
for injunctive or other equitable relief, for infringement for 
the intermediate and temporary storage of material on the 
system or network controlled or operated by or for the service 
provider: Provided, That--
          (1) such material is made available online by a 
        person other than such service provider,
          (2) such material is transmitted from the person 
        described in paragraph (1) through such system or 
        network to someone other than that person at the 
        direction of such other person,
          (3) the storage is carried out through an automatic 
        technical process for the purpose of making such 
        material available to users of such system or network 
        who subsequently request access to that material from 
        the person described in paragraph (1):
Provided further, That--
          (4) such material is transmitted to such subsequent 
        users without modification to its content from the 
        manner in which the material otherwise was transmitted 
        from the person described in paragraph (1);
          (5) such service provider complies with rules 
        concerning the refreshing, reloading or other updating 
        of such material when specified by the person making 
        that material available online in accordance with an 
        accepted industry standard data communications protocol 
        for the system or network through which that person 
        makes the material available: Provided further, That 
        the rules are not used by the person described in 
        paragraph (1) to prevent or unreasonably impair such 
        intermediate storage;
          (6) such service provider does not interfere with the 
        ability of technology associated with such material 
        that returns to the person described in paragraph (1) 
        the information that would have been available to such 
        person if such material had been obtained by such 
        subsequent users directly from such person: Provided 
        further, That such technology--
                  (A) does not significantly interfere with the 
                performance of the provider's system or network 
                or with the intermediate storage of the 
                material;
                  (B) is consistent with accepted industry 
                standard communications protocols; and
                  (C) does not extract information from the 
                provider's system or network other than the 
                information that would have been available to 
                such person if such material had been accessed 
                by such users directly from such person;
          (7) either--
                  (A) the person described in paragraph (1) 
                does not currently condition access to such 
                material; or
                  (B) if access to such material is so 
                conditioned by such person, by a current 
                individual pre-condition, such as a pre-
                condition based on payment of a fee, or 
                provision of apassword or other information, 
the service provider permits access to the stored material in 
significant part only to users of its system or network that have been 
so authorized and only in accordance with those conditions; and
          (8) if the person described in paragraph (1) makes 
        that material available online without the 
        authorization of the copyright owner, then the service 
        provider responds expeditiously to remove, or disable 
        access to, the material that is claimed to be 
        infringing upon notification of claimed infringements 
        described in subsection (c)(3): Provided further, That 
        the material has previously been removed from the 
        originating site, and the party giving the notification 
        includes in the notification a statement confirming 
        that such material has been removed or access to it has 
        been disabled or ordered to be removed or have access 
        disabled.
  (c) Information Stored on Service Providers.--
          (1) In general.--A service provider shall not be 
        liable for monetary relief, or except as provided in 
        subsection (i) for injunctive or other equitable 
        relief, for infringement for the storage at the 
        direction of a user of material that resides on a 
        system or network controlled or operated by or for the 
        service provider, if the service provider--
                  (A)(i) does not have actual knowledge that 
                the material or activity is infringing,
                  (ii) in the absence of such actual knowledge, 
                is not aware of facts or circumstances from 
                which infringing activity is apparent, or
                  (iii) if upon obtaining such knowledge or 
                awareness, the service provider acts 
                expeditiously to remove or disable access to, 
                the material;
                  (B) does not receive a financial benefit 
                directly attributable to the infringing 
                activity, where the service provider has the 
                right and ability to control such activity; and
                  (C) in the instance of a notification of 
                claimed infringement as described in paragraph 
                (3), responds expeditiously to remove, or 
                disable access to, the material that is claimed 
                to be infringing or to be the subject of 
                infringing activity.
          (2) Designated agent.--The limitations on liability 
        established in this subsection apply only if the 
        service provider has designated an agent to receive 
        notifications of claimed infringement described in 
        paragraph (3), by substantially making the name, 
        address, phone number, electronic mail address of such 
        agent, and other contact information deemed appropriate 
        by the Register of Copyrights, available through its 
        service, including on its website, and by providing 
        such information to the Copyright Office. The Register 
        of Copyrights shall maintain a current directory of 
        agents available to the public for inspection, 
        including through the Internet, in both electronic and 
        hard copy formats.
          (3) Elements of notification.--
                  (A) To be effective under this subsection, a 
                notification of claimed infringement means any 
                written communication provided to the service 
                provider's designated agent that includes 
                substantially the following--
                          (i) a physical or electronic 
                        signature of a person authorized to act 
                        on behalf of the owner of an exclusive 
                        right that is allegedly infringed;
                          (ii) identification of the 
                        copyrighted work claimed to have been 
                        infringed, or, if multiple such works 
                        at a single online site are covered by 
                        a single notification, a representative 
                        list of such works at that site;
                          (iii) identification of the material 
                        that is claimed to be infringing or to 
                        be the subject of infringing activity 
                        that is to be removed or access to 
                        which is to be disabled, and 
                        information reasonably sufficient to 
                        permit the service provider to locate 
                        the material;
                          (iv) information reasonably 
                        sufficient to permit the service 
                        provider to contact the complaining 
                        party, such as an address, telephone 
                        number, and, if available an electronic 
                        mail address at which the complaining 
                        party may be contacted;
                          (v) a statement that the complaining 
                        party has a good faith belief that use 
                        of the material in the manner 
                        complained of is not authorized by the 
                        copyright owner, or its agent, or the 
                        law; and
                          (vi) a statement that the information 
                        in the notification is accurate, and 
                        under penalty of perjury, that the 
                        complaining party has the authority to 
                        enforce the owner's rights that are 
                        claimed to be infringed.
                  (B) A notification from the copyright owner 
                or from a person authorized to act on behalf of 
                the copyright owner that fails substantially to 
                conform to the provisions of paragraph (3)(A) 
                shall not be considered under paragraph (1)(A) 
                in determining whether a service provider has 
                actual knowledge or is aware of facts or 
                circumstances from which infringing activity is 
                apparent: Provided, That the provider promptly 
                attempts to contact the complaining party or 
                takes other reasonable steps to assist in the 
                receipt of notice under paragraph (3)(A) when 
                the notice is provided to the service 
                provider's designated agent and substantially 
                satisfies the provisions of paragraphs (3)(A) 
                (ii), (iii), and (iv).
  (d) Information Location Tools.--A service provider shall not 
be liable for monetary relief, or except as provided in 
subsection (i) for injunctive or other equitable relief, for 
infringement for the provider referring or linking users to an 
online location containing infringing material or activity by 
using information location tools, including a directory, index, 
reference, pointer or hypertext link, if the provider--
          (1) does not have actual knowledge that the material 
        or activity is infringing or, in the absence of such 
        actual knowledge, is not aware of facts or 
        circumstances from which infringing activity is 
        apparent;
          (2) does not receive a financial benefit directly 
        attributable to the infringing activity, where the 
        service provider has the right and ability to control 
        such activity; and
          (3) responds expeditiously to remove or disable the 
        reference or link upon notification of claimed 
        infringement as described in subsection (c)(3): 
        Provided, That for the purposes of thisparagraph, the 
element in subsection (c)(3)(A)(iii) shall be identification of the 
reference or link, to material or activity claimed to be infringing, 
that is to be removed or access to which is to be disabled, and 
information reasonably sufficient to permit the service provider to 
locate such reference or link.
  (e) Misrepresentations.--Any person who knowingly materially 
misrepresents under this section--
          (1) that material or activity is infringing, or
          (2) that material or activity was removed or disabled 
        by mistake or misidentification,
shall be liable for any damages, including costs and attorneys' 
fees, incurred by the alleged infringer, by any copyright owner 
or copyright owner's authorized licensee, or by the service 
provider, who is injured by such misrepresentation, as the 
result of the service provider relying upon such 
misrepresentation in removing or disabling access to the 
material or activity claimed to be infringing, or in replacing 
the removed material or ceasing to disable access to it.
  (f) Replacement of Removed or Disabled Material and 
Limitation on Other Liability.--
          (1) Subject to paragraph (2) of this subsection, a 
        service provider shall not be liable to any person for 
        any claim based on the service provider's good faith 
        disabling of access to, or removal of, material or 
        activity claimed to be infringing or based on facts or 
        circumstances from which infringing activity is 
        apparent, regardless of whether the material or 
        activity is ultimately determined to be infringing.
          (2) Paragraph (1) of this subsection shall not apply 
        with respect to material residing at the direction of a 
        subscriber of the service provider on a system or 
        network controlled or operated by or for the service 
        provider that is removed, or to which access is 
        disabled by the service provider pursuant to a notice 
        provided under subsection (c)(1)(C), unless the service 
        provider--
                  (A) takes reasonable steps promptly to notify 
                the subscriber that it has removed or disabled 
                access to the material;
                  (B) upon receipt of a counter notice as 
                described in paragraph (3), promptly provides 
                the person who provided the notice under 
                subsection (c)(1)(C) with a copy of the counter 
                notice, and informs such person that it will 
                replace the removed material or cease disabling 
                access to it in ten business days; and
                  (C) replaces the removed material and ceases 
                disabling access to it not less than 10, nor 
                more than 14, business days following receipt 
                of the counter notice, unless its designated 
                agent first receives notice from the person who 
                submitted the notification under subsection 
                (c)(1)(C) that such person has filed an action 
                seeking a court order to restrain the 
                subscriber from engaging in infringing activity 
                relating to the material on the service 
                provider's system or network.
          (3) To be effective under this subsection, a counter 
        notification means any written communication provided 
        to the service provider's designated agent that 
        includes substantially the following:
                  (A) A physical or electronic signature of the 
                subscriber.
                  (B) Identification of the material that has 
                been removed or to which access has been 
                disabled and the location at which such 
                material appeared before it was removed or 
                access was disabled.
                  (C) A statement under penalty of perjury that 
                the subscriber has a good faith belief that the 
                material was removed or disabled as a result of 
                mistake or misidentification of the material to 
                be removed or disabled.
                  (D) The subscriber's name, address and 
                telephone number, and a statement that the 
                subscriber consents to the jurisdiction of 
                Federal Court for the judicial district in 
                which the address is located, or if the 
                subscriber's address is outside of the United 
                States, for any judicial district in which the 
                service provider may be found, and that the 
                subscriber will accept service of process from 
                the person who provided notice under subsection 
                (c)(1)(C) or agent of such person.
          (4) A service provider's compliance with paragraph 
        (2) shall not subject the service provider to liability 
        for copyright infringement with respect to the material 
        identified in the notice provided under subsection 
        (c)(1)(C).
  (g) Identification of Direct Infringer.--The copyright owner 
or a person authorized to act on the owner's behalf may request 
an order for release of identification of an alleged infringer 
by filing--
          (1) a copy of a notification described in subsection 
        (c)(3)(A), including a proposed order, and
          (2) a sworn declaration that the purpose of the order 
        is to obtain the identity of an alleged infringer and 
        that such information will only be used for the purpose 
        of this title, with the clerk of any United States 
        district court.
The order shall authorize and order the service provider 
receiving the notification to disclose expeditiously to the 
copyright owner or person authorized by the copyright owner 
information sufficient to identify the alleged direct infringer 
of the material described in the notification to the extent 
such information is available to the service provider. The 
order shall be expeditiously issued if the accompanying 
notification satisfies the provisions of subsection (c)(3)(A) 
and the accompanying declaration is properly executed. Upon 
receipt of the order, either accompanying or subsequent to the 
receipt of a notification described in subsection (c)(3)(A), a 
service provider shall expeditiously give to the copyright 
owner or person authorized by the copyright owner the 
information required by the order, notwithstanding any other 
provision of law and regardless of whether the service provider 
responds to the notification.
  (h) Conditions for Eligibility.--
          (1) Accommodation of technology.--The limitations on 
        liability established by this section shall apply only 
        if the service provider--
                  (A) has adopted and reasonably implemented, 
                and informs subscribers of the service of, a 
                policy for the termination of subscribers of 
                the service who are repeat infringers; and
                  (B) accommodates and does not interfere with 
                standard technical measures as defined in this 
                subsection.
          (2) Definition.--As used in this section, ``standard 
        technical measures'' are technical measures, used by 
        copyright owners to identify or protect copyrighted 
        works, that--
                  (A) have been developed pursuant to a broad 
                consensus of copyright owners and service 
                providers in an open, fair, voluntary, multi-
                industry standards process;
                  (B) are available to any person on reasonable 
                and nondiscriminatory terms; and
                  (C) do not impose substantial costs on 
                service providers or substantial burdens on 
                their systems or networks.
  (i) Injunctions.--The following rules shall apply in the case 
of any application for an injunction under section 502 against 
a service provider that is not subject to monetary remedies by 
operation of this section.
          (1) Scope of relief.--
                  (A) With respect to conduct other than that 
                which qualifies for the limitation on remedies 
                as set forth in subsection (a), the court may 
                only grant injunctive relief with respect to a 
                service provider in one or more of the 
                following forms--
                          (i) an order restraining it from 
                        providing access to infringing material 
                        or activity residing at a particular 
                        online site on the provider's system or 
                        network;
                          (ii) an order restraining it from 
                        providing access to an identified 
                        subscriber of the service provider's 
                        system or network who is engaging in 
                        infringing activity by terminating the 
                        specified accounts of such subscriber; 
                        or
                          (iii) such other injunctive remedies 
                        as the court may consider necessary to 
                        prevent or restrain infringement of 
                        specified copyrighted material at a 
                        particular online location: Provided, 
                        That such remedies are the least 
                        burdensome to the service provider that 
                        are comparably effective for that 
                        purpose.
                  (B) If the service provider qualifies for the 
                limitation on remedies described in subsection 
                (a), the court may only grant injunctive relief 
                in one or both of the following forms--
                          (i) an order restraining it from 
                        providing access to an identified 
                        subscriber of the service provider's 
                        system or network who is using the 
                        provider's service to engage in 
                        infringing activity by terminating the 
                        specified accounts of such subscriber; 
                        or
                          (ii) an order restraining it from 
                        providing access, by taking specified 
                        reasonable steps to block access, to a 
                        specific, identified, foreign online 
                        location.
          (2) Considerations.--The court, in considering the 
        relevant criteria for injunctive relief under 
        applicable law, shall consider--
                  (A) whether such an injunction, either alone 
                or in combination with other such injunctions 
                issued against the same service provider under 
                this subsection, would significantly burden 
                either the provider or the operation of the 
                provider's system or network;
                  (B) the magnitude of the harm likely to be 
                suffered by the copyright owner in the digital 
                network environment if steps are not taken to 
                prevent or restrain the infringement;
                  (C) whether implementation of such an 
                injunction would be technically feasible and 
                effective, and would not interfere with access 
                to noninfringing material at other online 
                locations; and
                  (D) whether other less burdensome and 
                comparably effective means of preventing or 
                restraining access to the infringing material 
                are available.
          (3) Notice and ex parte orders.--Injunctive relief 
        under this subsection shall not be available without 
        notice to the service provider and an opportunity for 
        such provider to appear, except for orders ensuring the 
        preservation of evidence or other orders having no 
        material adverse effect on the operation of the service 
        provider's communications network.
  (j) Definitions.--
          (1)(A) As used in subsection (a), the term ``service 
        provider'' means an entity offering the transmission, 
        routing or providing of connections for digital online 
        communications, between or among points specified by a 
        user, of material of the user's choosing, without 
        modification to the content of the material as sent or 
        received.
          (B) As used in any other subsection of this section, 
        the term ``service provider'' means a provider of 
        online services or network access, or the operator of 
        facilities therefor, and includes an entity described 
        in the preceding paragraph of this subsection.
          (2) As used in this section, the term ``monetary 
        relief'' means damages, costs, attorneys' fees, and any 
        other form of monetary payment.
  (k) Other Defenses Not Affected.--The failure of a service 
provider's conduct to qualify for limitation of liability under 
this section shall not bear adversely upon the consideration of 
a defense by the service provider that the service provider's 
conduct is not infringing under this title or any other 
defense.
  (l) Protection of Privacy.--Nothing in this section shall be 
construed to condition the applicability of subsections (a) 
through (d) on--
          (1) a service provider monitoring its service or 
        affirmatively seeking facts indicating infringing 
        activity except to the extent consistent with a 
        standard technical measure complying with the 
        provisions of subsection (h); or
          (2) a service provider accessing, removing, or 
        disabling access to material where such conduct is 
        prohibited by law.
  (m) Rule of Construction.--Subsections (a), (b), (c), and (d) 
are intended to describe separate and distinct functions for 
purposes of analysis under this section. Whether a service 
provider qualifies for the limitation on liability in any one 
such subsection shall be based solely on the criteria in each 
such subsection and shall not affect a determination of whether 
such service provider qualifies for the limitations on 
liability under any other such subsection.

           *       *       *       *       *       *       *


            ADDITIONAL VIEWS OF SCOTT KLUG AND RICK BOUCHER

    Although we support the House Commerce Committee's changes 
and improvements to H.R. 2281, the Digital Millennium Copyright 
Act of 1998, we remain troubled by the implications of this 
legislation.
    In its original version, H.R. 2281 contained a provision 
that would have made it unlawful to circumvent technological 
protection measures that effectively control access to a work, 
for any reason. In other words, the bill, if passed unchanged, 
would have given copyright owners the legislative muscle to 
``lock up'' their works in perpetuity--unless each and every 
one of us separately negotiated for access. In short, this 
provision converted an unobstructed marketplace that tolerates 
``free'' access in some circumstances to a ``pay-per-access'' 
system, no exceptions permitted.
    In our opinion, this not only stands copyright law on its 
head, it makes a mockery of our Constitution. Article I, 
Section 8, Clause 8 is very clear in its directive: ``The 
Congress shall have Power * * * To Promote the Progress of 
Science and useful Arts, by securing for limited Times to 
Authors and Inventors the exclusive Right to their respective 
Writing and Discoveries.'' (emphasis added). Congress has 
limited these rights both in terms of scope and duration. In 
interpreting the Copyright Clause, the Supreme Court has said:

          The monopoly privileges that Congress may authorize 
        are neither unlimited nor primarily designed to provide 
        special private benefit. Rather, the limited grant is a 
        means by which an important public purpose may be 
        achieved. It is intended to motivate the creative 
        activity of authors and inventors by the provision of a 
        special reward, and to allow the public access to the 
        products of their genius after the limited period of 
        exclusive control has expired. The copyright law, like 
        the patent statutes, makes reward to the owner a 
        secondary consideration. Sony Corporation v. Universal 
        City Studios, Inc., 464 U.S. 417, 429 (1984) (emphasis 
        added).

    The anti-circumvention language of H.R. 2281, even as 
amended, bootstraps the limited monopoly into a perpetual 
right. It also fundamentally alters the balance that has been 
carefully struck in 200 years of copyright case law, by making 
the private incentive of content owners the paramount 
consideration--at the expense of research, scholarship, 
education, literary or political commentary, indeed, the future 
viability of information in the public domain. In so doing, 
this legislation goes well beyond the rights contemplated for 
copyright owners in the Constitution.
    The Klug amendment, representing a compromise between those 
on the content side and ``fair use'' proponents, simply delays 
this constitutional problem for a period of two years. 
Delegating authority to develop anti-circumvention regulations 
to the Secretary of Commerce was a means to eliminate the 
stalemate that existed, but it is not, by itself a comment on 
the need for limitations on this anti-circumvention rights. It 
also strikes us that Congress is not acting prudently by 
passing a law guaranteed to create lifetime employment for 
attorneys and copyright specialists, given the constitutional 
and definitional problems already identified.
    What we set out to do was to restore some balance in the 
discussion and to place private incentive in its proper 
context. We had proposed to do this by legislating an 
equivalent fair use defense for the new right to control 
access. For reasons not clear to us, and despite the WIPO 
Treaty language ``recognizing the need to maintain a balance 
between the rights of authors and the larger public interest, 
particularly education, research and access to information * * 
*,'' our proposal was met with strenuous objection. It 
continued to be criticized even after it had been redrafted, 
and extensively tailored, in response to the myriad of piracy 
concerns that were raised.
    The compromise amendment that Representative Klug 
ultimately offered at full committee is silent on the 
applicability of traditional copyright limitations and 
defenses, though it does give ``information users'' the ability 
to argue that the application of technological protection 
measures adversely impacts their ability to access information. 
This diminution in availability includes both access under 
license terms and traditional free access to information. Our 
expectation is that the rulemaking will also focus on the 
extent to which exceptions and limitations to this prohibition 
are appropriate and necessary to maintain balance in our 
copyright laws.
    In view of this legislation's overwhelming attention to the 
regulation of devices in other contexts, it should be clearly 
understood that the Section 102(a)(1) amendment addresses 
conduct only and does not delegate to the Secretary of Commerce 
the power to regulate the design of devices.
    Moreover, the bill, by its terms (like the WIPO treaties), 
covers only those measures that are ``effective.'' Pursuant to 
this limitation, an amendment we offered which was adopted at 
subcommittee clarified that device and component designers and 
manufacturers are not under any legal obligation to respond to 
or to accommodate any particular technological protection 
measure. Without such clarification, the bill could have been 
construed as governing not only those technological protection 
measures that are already ``effective'', such as those based on 
encryption, but also those that might conceivably be made 
``effective'' through enactment of the legislation. This result 
would be a far cry from governing ``circumvention.'' For 
similar reasons, it was clearly understood in the full 
committee consideration that a measure is not ``effective'', 
and consequently not covered by this bill, to the extent that 
protecting the measure against circumvention would cause 
degradation of the otherwise lawful performance of a device or 
authorized display of a work.
    In the end, this legislation purports to protect creators. 
It may well be that additional protections are necessary, 
though we think the 1976 Copyright Act is sufficiently flexible 
to deal with changing technology. Whatever protections Congress 
grants should not be wielded as a club to thwart consumer 
demand for innovative products, consumer demand for access to 
information, consumer demand for tools to exercise their lawful 
rights, and consumer expectations that the people and expertise 
will exist to service these products.

                                   Scott Klug.
                                   Rick Boucher.