[Senate Hearing 106-539]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 106-539

 
THE COPYRIGHT OFFICE REPORT ON COPYRIGHT AND DIGITAL DISTANCE EDUCATION

=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                                   on

   THE LIBRARY OF CONGRESS COPYRIGHT OFFICE REPORT ON COPYRIGHT AND 
                       DIGITAL DISTANCE EDUCATION

                               __________

                              MAY 25, 1999

                               __________

                          Serial No. J-106-29

                               __________

         Printed for the use of the Committee on the Judiciary


                               


                    U.S. GOVERNMENT PRINTING OFFICE
65-338 CC                   WASHINGTON : 2000



                       COMMITTEE ON THE JUDICIARY

                     ORRIN G. HATCH, Utah, Chairman

STROM THURMOND, South Carolina       PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa            EDWARD M. KENNEDY, Massachusetts
ARLEN SPECTER, Pennsylvania          JOSEPH R. BIDEN, Jr., Delaware
JON KYL, Arizona                     HERBERT KOHL, Wisconsin
MIKE DeWINE, Ohio                    DIANNE FEINSTEIN, California
JOHN ASHCROFT, Missouri              RUSSELL D. FEINGOLD, Wisconsin
SPENCER ABRAHAM, Michigan            ROBERT G. TORRICELLI, New Jersey
JEFF SESSIONS, Alabama               CHARLES E. SCHUMER, New York
BOB SMITH, New Hampshire

             Manus Cooney, Chief Counsel and Staff Director

                 Bruce A. Cohen, Minority Chief Counsel

                                  (ii)
                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Hatch, Hon. Orrin G., U.S. Senator from the State of Utah........     1
Grassley, Hon. Charles E., U.S. Senator from the State of Iowa...     2
Leahy, Hon. Patrick J., U.S. Senator from the State of Vermont...     3
Ashcroft, Hon. John, U.S. Senator from the State of Missouri.....    11

                    CHRONOLOGICAL LIST OF WITNESSES

Statement of Hon. Marybeth Peters, Register of Copyrights and 
  Associate Librarian for Copyright Service, U.S. Copyright 
  Office, Library of Congress, Washington, DC....................     5

               ALPHABETICAL LIST AND MATERIALS SUBMITTED

Peters, Hon. Marybeth:
    Testimony....................................................     5
    Prepared statement...........................................    14



THE COPYRIGHT OFFICE REPORT ON COPYRIGHT AND DIGITAL DISTANCE EDUCATION

                              ----------                              


                         TUESDAY, MAY 25, 1999

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:07 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Orrin G. 
Hatch (chairman of the committee) presiding.
    Also present: Senators Grassley, Ashcroft, and Leahy.

 OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM 
                       THE STATE OF UTAH

    The Chairman. Well, good morning, and welcome to our 
hearing on The Copyright Office Report on Copyright and Digital 
Distance Education. Appropriately, we are streaming our 
proceedings here live on the Internet, so I extend a particular 
welcome to those in the virtual hearing room on the Net.
    The growth of distance education is very exciting. With the 
increasing sophistication of the Internet and other 
communication technologies, classrooms are no longer tied to a 
specific point in either space or time. Virtual classrooms are 
popping up all over the country, and indeed the world, where 
all kinds of people are interacting and learning through these 
new forms of media.
    True to its heritage, Utah is a pioneer among States in 
blazing the trail to the next century, making tomorrow's 
virtual classrooms a reality today. Fittingly, since it is home 
to one of the original six universities that pioneered the 
Internet, the State of Utah and the Utah System of Higher 
Education were recently ranked number one in their respective 
categories in PC Magazine's Fast-Track 100 List of Government 
and Educational Innovators.
    My own alma mater, Brigham Young University, was also named 
one of ``America's 100 Most Wired Colleges'' by Yahoo!, with 
Utah State University not far behind. Such national recognition 
reflects, in part, Utah's high-tech industrial base and the 
fact that Utah is the only State with a centrally coordinated 
statewide system for distance learning.
    I was pleased to host the Register of Copyrights at a 
distance education exposition and copyright roundtable that 
took place at the nerve center of that system, the Utah 
Education Network, where we saw many of the exciting 
technologies being developed and implemented in Utah by Utahns 
to make distance education a reality.
    Distance education holds great promise for students in 
States like Utah. Students in remote areas of my State are now 
able to link up to resources previously only available to those 
in cities or at prestigious educational institutions. For many 
Utahns, this means having access to courses or being able to 
see virtual demonstration of principles that, until now, they 
have only read about.
    At the event in Salt Lake City, Ms. Peters and I dropped in 
on a live online art history class hosted in Orem that included 
high school and college students scattered from Alpine in the 
north to Lake Powell in the south, nearly the full length of 
the State. And the promise of distance education extends far 
beyond the traditional student, making expanded opportunities 
available for working parents, senior citizens, and anyone else 
with a desire to learn.
    As exciting as distance education is, the copyright issues 
it raises are numerous and complex. Distance education will 
work only if teachers and students have affordable and 
convenient access to the highest quality educational materials. 
But without adequate incentives and protections, those who 
create these materials will be disinclined to make their works 
available for use in online distance education.
    The interests of educators, students and copyright owners 
need not be divergent. Indeed, I believe they coincide in 
making the most of this medium. That is why the Commerce 
Department's direction to the Copyright Office was that it 
conduct an in-depth study of how to promote distance education 
through digital technologies, while maintaining the appropriate 
incentives for authors and accommodating the needs of students, 
teachers and other academic users of copyrighted works.
    Today, the Copyright Office formally presents the results 
of its 6-month study of distance learning and the copyright 
law, as required by the landmark Digital Millennium Copyright 
Act, the DMCA. That Act implemented the WIPO treaties regarding 
copyright rules in the online environment and laid the basic 
copyright structure to foster the growth of electronic 
commerce. The report presented today reflects this committee's 
desire to understand more thoroughly the promise of distance 
education and technologies involved, the breadth and complexity 
of the issues, and how legislation may foster or impede the 
progress of technology in education. At this time I would like 
to submit the prepared statement of Senator Grassley.
    [The prepared statement of Senator Grassley follows:]

           Prepared Statement of Senator Charles E. Grassley

    Mr. Chairman, thank you for holding this hearing on the Copyright 
Office's Report on digital distance education. It's important that 
universities and other educational institutions can provide their 
students with distance learning options. Educational institutions in 
rural areas, like in my state of Iowa, should have increased 
opportunities to reach out to students that can't get to the classroom. 
Iowa, through the state-wide Iowa Communications Network, (``ICN''), 
has been a leader in using advances in technology to facilitate the 
sharing of educational resources among Iowa's communities and school 
districts. This network connects virtually every school district and 
higher education institution in Iowa, as well as Iowa Public 
Television, state agencies, federal agencies, Iowa National Guard 
sites, and our public libraries and hospitals. The ICN truly provides 
all Iowans, even those living in the most remote or rural areas, access 
to Iowa's outstanding educational opportunities and resources.
    With technological developments advancing at such a rapid rate, we 
need to take a close look at the copyright laws and make sure that they 
do not hamper online delivery of instruction. While it's important that 
we balance the interests of copyright owners and the users of their 
works, it's also important that distance learning continue to play a 
critical role in expanding educational opportunities for all 
individuals. So, I look forward to hearing about the Copyright Office's 
findings and recommendations, and I will be sure to review the Report 
carefully.

    The Chairman.I look forward to the testimony of the 
Register today and to hearing her findings and recommendations. 
We want to do the right thing with respect to the promotion of 
distance education. What we don't want to do is stand in the 
way of the development of new and exciting technologies or 
burgeoning markets by acting prematurely or without adequate 
information. I have great respect for the Register and 
tremendous confidence in her ability to advise this committee 
in this regard, and I look forward to learning more from her 
today and working with her in the future to see that we resolve 
these problems.
    We have placed a lot of burdens on you, Marybeth, but I 
think you are capable of taking care of it.
    So we will turn to the ranking member.

  STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE 
                        STATE OF VERMONT

    Senator Leahy. Mr. Chairman, I might say I don't think 
there is anything Ms. Peters couldn't handle, so I am delighted 
to have her here.
    I think the enactment of the Digital Millennium Copyright 
Act, the DMCA, was actually one of the outstanding 
accomplishments of the last Congress. I was pleased, Mr. 
Chairman, to work with you and others on the committee on that 
new law that updated and made necessary adjustments to our 
copyright law to comply with two new copyright treaties which 
had been consented to by the Senate and ratified by the 
President.
    As part of that new law, we asked the Copyright Office to 
conduct a study of the complex copyright issues involved in 
distance education and to make recommendations to us for new 
legislative matters. The DMCA last year started the process of 
updating the Copyright Act. The Copyright Office report 
released today on distance learning will help us complete that 
process.
    I noted in the May 1998 committee report for the DMCA that 
on receiving the Copyright Office's recommendations on digital 
distance education, it was my hope for this committee to hold 
hearings on the issue and move expeditiously to enact further 
legislation on the matter. I think Chairman Hatch deserves 
credit and praise for holding this hearing promptly on such an 
important issue.
    The Copyright Office, as is its custom, did a tremendous 
job. It conducted detailed public hearings and solicited public 
input. It worked closely with all of the stakeholders. I 
commend you, Ms. Peters, and I commend your terrific staff, 
particularly Shira Perlmutter, for their extraordinary work on 
this report.
    I had mentioned to you earlier before the hearing started, 
I wanted to thank you for meeting informally with a number of 
interested Vermonters at Champlain College, in Burlington, VT, 
in March. This is not always our best season, but you listened 
to their concerns on the issue.
    Champlain College is kind of a unique place, in that it has 
succeeded greatly in a number of areas. It has been offering 
online distance learning programs since 1993, with a number of 
online programs, including offering degrees in accounting, 
business, and hotel and restaurant management. This is 
something you and I discussed earlier this morning.
    The growth of distance learning is exploding. The report 
notes that, `` * * * by 2002, the number of students taking 
distance courses will represent 15 percent of all higher 
education students * * *'' That is an extraordinary number. The 
typical average distance learning student is 34 years old, 
employed full-time, has previous college, and more than half 
are women. This is something that is changing the whole face of 
education.
    These are people with busy schedules who need the 
flexibility that online programs offer--virtual classrooms 
accessible when the student is ready and free to log on. And 
then we have interactive distance learning, not the traditional 
passive approach of watching a lecture over the air.
    Vermont, you know, is just like Utah where you have many 
small towns and rural areas. The Vermont Telecommunications 
Plan which was just published identifies distance learning as 
critical to Vermont's development. That is why I worked to have 
included in the 1990 farm bill a significant amendment that 
authorized funding to provide distance education for rural 
Americans. It has helped schools throughout the Nation. For 
example, under the Leahy law, $300,000 went to the Grand Isle 
school system of Vermont for its distance learning program.
    You have pointed out that the computer is the most 
versatile of distance education instruments, both in the 
material that can be offered and the flexibility in access. 
When we enacted the present copyright law, we recognized the 
potential of broadcast and cable technology to supplement 
classroom teaching, and to bring the classroom to those who, 
because of their disabilities or other special circumstances, 
are unable to attend classes.
    We recognized the potential for unauthorized transmission 
of works harm the markets for educational uses of copyrighted 
materials. I think the present Copyright Act strikes a careful 
balance and has a very narrowly crafted exemption for distance 
learning. You have made recommendations that deserve our close 
attention for updating those provisions.
    So, Mr. Chairman, again I applaud you for doing this. I 
applaud you for making sure that the hearing is on the Net. I 
hope we can continue this practice on a more regular basis. 
Anybody who just goes to judiciary.senate.gov--you click on 
this week and, assuming it works, there you are.
    The Chairman. Well, we assume it works.
    Senator Leahy. The good-looking guy, for those who are 
watching, is Senator Hatch, and the bald guy is Pat Leahy.
    The Chairman. Well, that is the first time anybody has 
called me good-looking.
    Let's turn now to our distinguished witness, who really 
needs no introduction. Ms. Marybeth Peters is the Register of 
Copyrights and Associate Librarian for Copyright Services at 
the U.S. Copyright Office in the Library of Congress. This 
committee has long relied on Ms. Peters and her office for 
copyright expertise. Her knowledge, experience and insight have 
proven invaluable as we have sought to address the complexities 
of copyright legislation, and particularly the challenges of 
new technologies and the challenges of the digital revolution.
    Not surprisingly, the mandate she has been given by 
Congress with respect to the issue of copyright and digital 
distance education is not an easy one. I appreciate her efforts 
and those of her staff in conducting this study in the 
relatively short time frame provided under the statute, and I 
really look forward to hearing from you today.
    So let's turn to you, Ms. Peters, for your presentation, 
and we will then have some questions for you.

 STATEMENT OF HON. MARYBETH PETERS, REGISTER OF COPYRIGHTS AND 
  ASSOCIATE LIBRARIAN FOR COPYRIGHT SERVICES, U.S. COPYRIGHT 
          OFFICE, LIBRARY OF CONGRESS, WASHINGTON, DC

    Ms. Peters. Thank you. Before I begin, I would like to 
introduce my colleagues. Senator Leahy acknowledged Shira 
Perlmutter, our Associate Register for Policy and International 
Affairs, who, at the end of the week, will go to Geneva to work 
for the World Intellectual Property Organization for a year; 
and two members of her staff, Sayuri Rajapakse and Rachel 
Goslins, who, without their efforts, we would not have a 
report.
    The Chairman. Are you all going to Geneva?
    Ms. Peters. No, just Shira. And we also have David Carson, 
our general counsel, who provided wise advise to this report.
    Mr. Chairman, members of the committee, I am pleased to 
present the recommendations of the Copyright Office with 
respect to digital distance education. As you mentioned, in the 
Digital Millennium Copyright Act Congress charged us with the 
responsibility to study how to promote distance education 
through digital technologies, while maintaining an appropriate 
balance between the rights of copyright owners and the needs of 
users.
    The Office's report which we formally submit to the 
Congress today is the outcome of an intensive process of 
identifying stakeholders, holding public hearings and meetings 
around the country, soliciting comments, conducting research, 
and consulting with experts in various fields. This morning, I 
will give a brief overview of our conclusions and 
recommendations.
    As you know from the meetings in Utah, distance education 
in the United States is a vibrant and burgeoning field. While 
the concept dates back to the correspondence courses of the 
19th century, the capabilities of digital technologies to 
deliver instruction to students, removed from the instructor in 
time and space, has vastly increased its appeal and potential.
    Today's digital distance education involves copyrighted 
works being used in new ways, providing new benefits to 
students and teachers, but also posing new risks for copyright 
owners. Educational institutions and copyright owners see 
digital distance education as a potentially lucrative market. 
Licensing of copyrighted works in this market will be 
important. However, exceptions and fair use play a role.
    Our focus was on two specific exemptions in section 110 of 
the copyright law. These provisions were written more than 20 
years ago, before the advent of computer networks and personal 
computers. The question is whether they still strike the 
appropriate balance of interest.
    The analysis is complicated by the context, a time of rapid 
development in both technologies and markets. Many of the 
concerns on all sides stem from the inability to depend on 
effective functioning of technological protection and licensing 
mechanisms. The tools for both exist today. It will be clearer 
within the next few years how successfully they can be 
integrated into the real world of distance education.
    As a fundamental premise, the Copyright Office believes 
that emerging markets should be permitted to develop with 
minimal Government regulation. However, that does not mean that 
the law must remain fixed. When a statutory provision that is 
intended to balance the interests becomes obsolete due to 
changes in technology, it may require updating if the policy 
behind it is to continue. In our view, if that basic policy 
balance struck in 1976 is to continue, section 110(2) must be 
updated.
    We recommend several changes and additions to the law and 
legislative history. First, update the exemption to accommodate 
the technical requirements of digital transmissions over 
computer networks by making it clear that the term 
``transmission'' in section 110(2) covers such transmissions, 
and by expanding the rights covered by the exemption to include 
those needed to accomplish computer network transmissions to 
the extent technologically required.
    Second, eliminate the physical classroom requirement in 
section 110(2). Because digital distance education allows 
instruction to take place anywhere, this limitation has become 
obsolete. We recommend permitting transmissions to students 
officially enrolled in the course, regardless of their physical 
location.
    Third, add language that focuses more clearly on the 
concept of mediated instruction. This would ensure that the 
performance or display is analogous to the type of performance 
or display that would have taken place in a live classroom.
    Fourth, because digital transmissions pose greater risks to 
uncontrolled copying and dissemination, add a number of 
safeguards as conditions on the applicability of an expanded 
exemption. These include permitting the retention of transient 
copies only to the extent that they are necessary to accomplish 
the transmission, requiring the adoption of copyright policies 
and the provision of information materials that accurately 
describe and promote compliance with copyright law, and 
requiring the use of technological measures to reasonably 
protect against both unauthorized access and unauthorized 
dissemination of copyrighted works.
    Fifth, retain the current non-profit requirement for 
eligibility. Many called into question the advisability of 
keeping this requirement and suggested the need to require 
accreditation. However, we are not yet convinced that a change 
is desirable. Nevertheless, this is an important issue that 
deserves further consideration.
    Sixth, add a new provision to section 112, the ephemeral 
recordings exemption, in order to allow digital distance 
education to take place asynchronously. This would permit an 
educator to upload a copyrighted work onto a server, to be 
subsequently transmitted to a student under the conditions set 
out in section 110(2).
    Seventh, consider expanding the categories of works 
exempted from the performance rights beyond the current 
coverage of non-dramatic literary and musical works. This is 
one of the most difficult issues to resolve. On the one hand, 
pedagogical considerations militate against continuing to limit 
the types of works covered. On the other hand, the existing 
distinctions have been embodied in our law for more than 20 
years and they are based on the potentially greater market harm 
to dramatic works and audio-visual works. On balance, we 
suggest a compromise. Add audio-visual works, dramatic works, 
and sound recordings. However, allow performances of only 
reasonable and limited portions, not the entire work.
    In addition to these statutory recommendations, we 
recommend clarification of the fair use doctrine in legislative 
history. Because there is considerable confusion and 
misunderstanding about the doctrine, we believe it is important 
for Congress to confirm that fair use is technology-neutral and 
applies to activities in the digital environment, and to 
explain the function of fair use guidelines.
    Finally, concerns were raised about the problems in the 
functioning of licensing for digital distance education. We 
have not seen any evidence of a need to abandon or need to 
regulate licensing systems. Given the state of flux of online 
licensing and technology, and the decreasing influence of 
elements of fear and unfamiliarity, problems of delay and cost 
may subside to an acceptable level. We therefore recommend 
giving the market leeway to evolve and mature, and revisiting 
the issue in a relatively short period of time.
    Thank you. We really have enjoyed our experience, and we 
would be delighted to answer your questions and we look forward 
to working with you and members of the committee and the staff 
in any way that would be useful to you as this process moves 
forward.
    The Chairman. Well, thank you for your excellent comments. 
I was pleased to have you and the Associate Register join me in 
Utah last month for a day of technology demonstrations and a 
copyright roundtable discussion on the issue with Utah's 
education, library, copyright and high-tech communities.
    Can you tell us what impact your visit to Utah had in 
informing the Copyright Office's process and how the 
discussions generated by Utahns may have been helpful in coming 
to the conclusions that you outlined in your report here today?
    Ms. Peters. First, I would like to commend you for your 
staff in the excellent work that they did in putting together 
an extremely useful day. The demonstrations that were set up 
were extremely helpful to us. They showed where the technology 
was going, the various aspects that people were going into, and 
the evolution of partnerships among companies and educators. 
The programs that we saw were highly sophisticated and 
extremely innovative, so they gave us a better handle on where 
technology was going and where education was going.
    The roundtable discussion that you led off was, in 
particular, extremely constructive. We heard from a very wide 
range of perspectives, and the participants really interacted 
and generated new insights into the process by listening to 
each other. I think having an author, having a photographer, 
having a composer, having a publisher there made a huge 
difference. And it made a difference not only to us, but to the 
educators and librarians who were part of the process. We came 
back so high on the experience that Sayuri and Rachel, who were 
not able to join us, felt that they really had missed out on 
something extremely worthwhile.
    The Chairman. Well, thank you. At the roundtable discussion 
in Utah, we heard, as I viewed it, two disparate themes even 
from within the educational community. On the one hand were 
those who reported widespread problems in securing licenses for 
digital distance education and who urged a prompt congressional 
response to minimize those transaction costs. On the other 
hand, there were those who were encouraged by the progress of 
technology and emerging licensing mechanisms to facilitate 
education in the online environment, and urged Congress not to 
interfere with the progress.
    Now, can you tell us what you found regarding the 
marketplace evolution of new and emerging licensing mechanisms 
in this area, and the development of technological measures to 
protect copyright works?
    Ms. Peters. We think that our recommendations address both 
communities. Certainly, with regard to new licensing 
mechanisms, that are emerging. The collective societies do have 
new online systems that are in place. Publishers who do 
business in the educational markets are putting in place some 
very, very sophisticated licensing mechanisms. Many people are 
looking at attaching rights and licensing terms and conditions 
to the work itself. So there really are exciting things taking 
place with regard to licensing activities.
    With regard to technology, we learned from demonstrations 
and people who participated in our hearings that there is 
considerable growth, and, in fact, on the market today 
technologies that certainly control access and that control 
downstream copying. They are not in widespread use, but we are 
very optimistic that within the next few years that they will 
be widely deployed.
    I think a question remains on whether or not certain 
encryption technologies or controls are accepted from the 
American public. Since you come from a computer State, when 
encryption was introduced with regard to computer programs, the 
marketplace rejected that attempt. So we will have to see how 
that plays itself out. We think that with our recommendations, 
there would be an expanded exemption and that many of the 
concerns with regard to licensing would be addressed; that 
licensing is improving and technological protections are 
improving.
    The Chairman. Your recommendations are based on applying 
policies adopted in the 1976 Copyright Act----
    Ms. Peters. That is right.
    The Chairman [continuing]. Which presumed traditional 
classroom instruction mediated by a teacher to the new medium 
of the wired environment. To some, however, one of the reasons 
that distance education is so exciting is that it opens up 
methods for learning unlike anything available heretofore.
    Now, the technology is certainly revolutionary. We saw a 
lot of that that day. Classes do not necessarily exist in the 
same point of space or in time, and traditional notions of 
classrooms and textbooks, and even of teachers and libraries, 
are certainly stretched and possibly obliterated. Given that, 
could you explain why the assumptions and tradeoffs of 1976 
should apply with the same force in the new digital interactive 
environment?
    Ms. Peters. Actually, our recommendations don't totally 
preserve that. If you look at the legislative history in 1976, 
what the Congress was saying is that the methods of delivery to 
classrooms should cover the types of performances that were 
specified as being exempted. We looked at what is going on 
today and recognized that you had to expand that, and therefore 
we do include with regard to rights additional rights of 
reproduction and distribution to the extent that they are 
necessary to have the transmissions brought to the place where 
the student is.
    We do think that there is a place for exemption and a place 
for licenses. Many of the materials that are being used today 
are licensed and we believe should continue to be licensed. So 
we do think that the balance that the Congress achieved in 
1976, which is for instruction in a classroom, was a valid type 
of exemption, and we are trying to roll that forward to what is 
as close as possible to what took place in a classroom.
    So I would be on my computer at home and getting the 
lesson. It may not be a lecture. It may be an exercise with a 
poem, because I am studying literature and they may want to 
have me examine what that poem is. So we have, in fact, moved 
it forward, but we do want to place appropriate limits, those 
closer to the type of activity that you would have in the 
equivalent of a classroom.
    The Chairman. Thank you.
    Senator Leahy, we will turn to you.
    Senator Leahy. Thank you. Ms. Peters, you said in the 
report that the Copyright Office has a fundamental belief in 
the premise that emerging markets should be permitted to 
develop with minimal Government regulation.
    When we are dealing with the Internet, I agree with that 
because even when I sit down with some of the leaders in that 
industry, the people who have been the most innovative--Steve 
Case, Jerry Yang from Yahoo, Jim Barksdale, and others--and you 
say, well, what would you predict 5 years from now, you get a 
chuckle; we are trying to predict 5 months from now. We don't 
want Government to stifle this.
    With new broadband technologies, it will be fairly soon 
when on a rainy evening you decide you would like to watch a 
movie, you don't go to the video rental store. In 5 minutes, 
you can download a movie that you can order. All these things 
are so amazing and might be here shortly.
    The marketplace in many ways will set the right price for 
copyrighted works. I know that some educators noted problems 
with using copyright works in distance education programs, but 
I am wondering if we clarified when and how educators may use 
copyrighted works online in virtual classrooms or to supplement 
work in regular classrooms--if we clarified when and how they 
can do it, would that be helpful? Can we do that?
    Ms. Peters. Hopefully, you can draw the appropriate 
balance, and I think it would be extremely helpful. I think in 
our report, you find that many people complained about the 
inability to license. I have to say one of the interesting 
things that we learned in our hearings--we asked educators what 
they were having the most trouble in licensing and they said 
electronic rights. When we asked publishers what was the 
problem that they were having in putting together digital 
distance education packages, they said acquiring electronic 
rights.
    So authors are being very careful with regard to electronic 
rights, and I think that makes it difficult for both publishers 
and for educators. But I do think that if you make it clear 
that the computer and Internet networks can, in fact, deliver 
under appropriate safeguards material to students who are 
enrolled, wherever they may be, and if you add the additional 
categories but limit them, I think you will be doing a great 
service to community colleges and to many institutions, 
colleges, high schools, throughout the world.
    Senator Leahy. Haven't others tried to figure these things 
out, such as the Consortium of College and University Media 
Centers and CONFU, Conference on Fair Use? They have gotten 
together on some of these issues.
    Ms. Peters. That is right.
    Senator Leahy. Is it just wishful thinking that the 
educators, the publishers, the copyright users and others could 
get together on their own and agree on fair use guidelines 
rather than having legislation? And the reason I ask that 
question, just so you understand, I am perfectly willing to 
work for legislation, but I get very worried about legislating 
for a year or two something that is going to change 
substantially during the year or two that we are legislating.
    Ms. Peters. I actually am a firm believer of guidelines. 
What I do believe, though, is for guidelines to succeed, there 
has to be a congressional mandate. There has to be the Congress 
behind it saying, work on this, this is a good thing, you 
should be achieving this. As I said, it would help if the 
Congress could clarify the role of guidelines.
    I also think that a particular agency has to be charged 
with that, and the mandate has to be narrow, not everything in 
the world, and that the people who participate should be 
through the process throughout. It can't be a process where 
people keep coming and going. There has to be continuity and 
you have to work toward the end result that the Congress can 
then publish in a legislative report, but I happen to think 
that it is a good process.
    Senator Leahy. Well, the chairman and I are very interested 
in this whole area and we want to make it work. Again, I just 
say we have been very happy with the response from your office 
on this and the guidance from your office. It has been helpful. 
We are going into the century plotting new ground, but using 
200-year-old principles, many of which are very tried and true. 
So it is going to be fascinating.
    The Chairman. Thank you.
    Senator Ashcroft.
    Senator Ashcroft. Mr. Chairman, first of all, let me thank 
you for holding this hearing and for allowing me to participate 
in the request for this study which I think is valuable and 
productive.
    I would ask that I be able to submit for the record remarks 
which I had prepared, and I would like to use the balance of my 
time in questioning, if it is all right.
    The Chairman. Fine.
    [The prepared statement of Senator Ashcroft follows:]

              Prepared Statement of Senator John Ashcroft

    Mr. Chairman, I want to thank you for holding this hearing, and I 
want to thank Ms. Peters for her report and for her testimony here this 
morning. Distance learning holds tremendous potential for making 
quality education available to all students, especially students in 
rural areas in States like Missouri, Vermont and Utah. Just as the 
Internet has made it possible for businesses like Amazon.com to become 
tremendous successes without extensive brick and mortar facilities, the 
Internet has also removed the size of brick and mortar schoolhouses 
(and the distance between students and those schoolhouses) as 
constraints on providing quality education. Technology has unlocked the 
full potential of distance learning. Unfortunately, however, federal 
copyright law has limited distance learning from reaching its full 
potential.
    The copyright law's provisions on distance learning demonstrate the 
dangers of legislating in technology-specific terms. These provisions 
were included in the copyright law in 1976. Unfortunately, they reflect 
the state of distance learning in 1976. As a result, the provisions 
allow for display and performance of a copyrighted work but do not 
permit copying. By their very nature, digital technologies involve the 
creation of temporary copies. Accordingly, the law does not protect 
digital distance learning. The law also limits the exemption for 
distance learning in ways that may have made sense in 1976, but make 
absolutely no sense today. In 1976, most distance learning took place 
in classrooms, and the law limited the exemption to classroom settings. 
Today, the whole promise of digital distance learning is that it offers 
education opportunities outside the four walls of a classroom. In 
short, because the distance learning provisions were written in 
technology-specific terms, provisions designed to facilitate distance 
learning, now stand as an obstacle to effective digital distance 
learning.
    In an effort to unlock the full potential of distance learning, I 
introduced the Digital Copyright and Technology Education Act, S. 1146, 
in the last Congress. The provisions on distance learning in that bill 
would have vastly expanded the ability of educators to use the Internet 
for distance learning. Unfortunately, however, efforts to work out a 
compromise between the interested parties based on this language were 
not successful. With the help of Senators Hatch and Leahy, I was able 
to include an amendment in the Digital Millennium Copyright Act calling 
on the Copyright Office to conduct a study of distance learning and 
issue a report. Today's report is the product of that amendment.
    Based on my preliminary review, the report correctly recognizes 
that changes in the law are necessary for distance learning to reach 
its full potential. Specifically, the report recognizes that we must 
update the law to reflect the nature of digital technology. I am 
confident that this can be done without adopting technology-specific 
language that may not account for future technological advances. The 
report also recognizes that the limitation to classroom settings 
prevents distance learning from providing educational opportunities 
where they are most needed. In sum, I believe that the report provides 
the basis for legislation that will update the copyright law so it once 
again facilitates distance learning, rather than standing in the way. 
My one concern with commissioning a report, rather than resolving the 
distance learning issue in the last Congress, was that some parties 
would be tempted to obstruct stand-alone legislation. I look forward to 
working with my colleagues to ensure passage of common sense 
legislation to facilitate digital distance learning.

    Senator Ashcroft. Let me express to you my appreciation, 
Ms. Peters, for your work. I think there are major challenges 
which need to be confronted to try and make it possible for us 
to take advantage of technology, which now provides a broader 
range of opportunities for learning than we have had before.
    Some interested parties apparently have suggested that, 
``fair use'' is sufficient to take care of the problem of 
digital distance learning. However, this strikes me as 
inconsistent with the existing copyright law. If fair use were 
sufficient to take care of the problem of distance learning, 
why would we even have the existing provisions, for example, in 
section 110 recognizing an exemption for distance learning? 
Would you care to comment on that?
    Ms. Peters. Fair use is a wonderful doctrine. The problem 
is it doesn't always create predictability, and what we heard 
in our various meetings and hearings was tremendous confusion. 
And perhaps some people used works and went beyond fair use, 
but just as often people didn't use works because they felt it 
didn't meet the criteria of fair use.
    So I think what the goal is is to try to come up with what 
we believe are permitted uses that are acceptable and have an 
understanding of what that is. Normally, when you agree that 
certain things should be permitted, an exemption can be the way 
to go because you don't have to worry about predictability. And 
fair use has always been a backdrop where you weigh all of the 
evidence.
    So I think it is up to the committee to decide where it 
wants to go. Does it want to update an exemption or does it 
want to work in the area of fair use and maybe go in the area 
of guidelines or legislative history that clarifies better for 
the educational community what is and what is not fair use?
    Senator Ashcroft. I was pleased to see that you recommended 
eliminating the requirement that distance learning take place 
only in a classroom setting. This only makes sense because of 
the real promise that digital distance learning is providing 
education beyond the classroom. I understand that eliminating 
this limitation on the exemption would create potential for 
abuse.
    What other limitations on the exemption can help prevent 
such abuse?
    Ms. Peters. There are a number of things that are in our 
report; certainly, the use of technological protection 
measures, both with respect to gaining access to a work, which 
we did find that almost all educational institutions have in 
place, whether it is the use of passwords or PIN's or whatever. 
The more troubling piece is that you need to control the 
downstream copying, especially when entire works have been 
used, for example, an entire musical composition. There, again, 
there are technological protection measures that could prohibit 
additional copying, but they are not in widespread use. Our 
report recommends including both, to the extent that it is 
reasonable to do so.
    Senator Ashcroft. I understand that the current exemption 
exists and inures to the benefit of non-profit educational 
institutions. But as I look at the educational community, I see 
it in very serious transition, and some of the best schools 
delivering the best education at the lowest cost can be profit-
oriented institutions.
    Would you recommend that the committee visit that with a 
sort of critical eye? What if it is cheaper for the students? 
What if it generates greater student performance? What if 
profit institutions actually consume fewer of the cultural 
resources in providing good education to students? Should we be 
discriminating against the school because it does a better job 
merely because it is for-profit?
    Ms. Peters. This was one of the issues that created the 
greatest debate. We found that there were non-profit 
educational institutions that had for-profit online courses. We 
found that there were for-profit institutions that had not-for-
profit courses. We found that many institutions were forming 
partnerships with corporations and forming partnerships with 
each other.
    And there was tremendous testimony to the effect that a 
more appropriate criteria might be accreditation, whether it is 
an accredited institution or an accredited course. There was 
concern that I could call myself the Peters University and put 
my material up on the Net and sign up some people and make it 
available. And, you know, I have no accreditation and I might 
not be limited by good pedagogical techniques and I might be 
putting up a lot of entire musical compositions. So there was a 
lot of concern about even abuse in the non-profit.
    For us, first of all, in our mandate we were asked to 
consult with non-profit educational institutions.
    Senator Ashcroft. So that is our fault.
    Ms. Peters. Well, that is one piece, but we didn't limit 
ourselves to that, I will tell you.
    Senator Ashcroft. So in your good judgment, you----
    Ms. Peters. We decided we should hear from everybody. The 
second one is that the part of the law that we focused on, 
which is sections 110(1), face-to-face teaching activities, and 
110(2), which is like instructional broadcasting, both are 
limited to non-profit educational institutions. And so it 
wasn't that easy to update 110(2) and change the criteria for 
eligibility. But what we do say is that that is something you 
may want to look at it.
    Senator Ashcroft. If I might, Mr. Chairman, I just think 
that the line between profit and non-profit continues to be 
blurred more and more in our culture.
    Ms. Peters. We saw that, and what we found that was 
interesting is, on licensing, the copyright owners who 
license--if the request is for educational use, they do not 
make a distinction between whether the institution is for-
profit or non-profit.
    Senator Ashcroft. Of all the books that I have had the 
privilege of selling, my wife and I charge them the same. That 
is free, no extra charge for that evidence.
    Thank you, Mr. Chairman.
    The Chairman. Well, just one or two other questions, Ms. 
Peters. Educators have raised concerns that they may not be 
able to provide distance education students the same quality of 
instruction that they provide for face-to-face students. How do 
your recommendations address these concerns?
    Ms. Peters. Our intent with the recommendation was to 
certainly allow them to use materials on the Internet, and our 
recommendation with regard to portions of works with regard to 
audio-visual works and sound recordings and dramatic works, we 
think, could address some of that. Now, obviously, there is 
some need for licensing.
    The Chairman. Sure. Now, copyright owners have raised the 
concern that expanding section 110(2) would harm their markets 
both by interfering with licensing opportunities and by 
increasing the risks of unauthorized dissemination over the 
Internet. How do your recommendations address those concerns?
    Ms. Peters. Number one, with regard to the marketplace, 
they may have some legitimate concerns, and specifically the 
concern should be with those who are in the educational market. 
If you are an educational or an instructional publisher, then, 
in fact, that is your market and I would think that there are 
some additional concerns.
    With respect to concerns about leakage and downstream 
copying, I think it is the technology; it is the technology 
that would prevent downstream copying and the technology that 
would prevent unauthorized access that must be the answer.
    The Chairman. What are the international implications of 
your recommendations? Would they be consistent with the treaty 
obligations of the United States?
    Ms. Peters. We believe that our recommendations, if 
enacted, would meet the treaty obligations. There are two 
things that you look to. One is the Berne Convention, which has 
an article 10(2) that permits the utilization, to the extent 
justified by the purpose, of literary or artistic works by way 
of illustration in broadcast for teaching in a manner 
compatible with fair practice.
    The TRIP's text has an article that basically says that you 
can have restrictions and conditions as long as they don't 
interfere with the legitimate exploitation of the work or 
unreasonably prejudice the interests of the author. We think 
that recommendations would be permitted under both the Berne 
Convention and the TRIP's text.
    The Chairman. Well, thank you. What we are going to do is 
we will keep the record open for written statements that 
anybody wants to submit for the hearing record, and we will 
also keep the record open for questions from members of the 
committee. We will keep it open until the end of the week.
    Ms. Peters. Can I just mention to you that for people who 
are looking for the report, we will be distributing it today 
and we will have it on our Web site later today.
    The Chairman. That will be great. Well, this has been 
helpful and I think it moves us along the way toward some 
resolution here. We appreciate all the efforts you have made, 
and your staff and others who have worked so closely with you.
    Well, thanks so much.
    Ms. Peters. We appreciate it.
    [The prepared statement of Ms. Peters follows:]

                 Prepared Statement of Marybeth Peters

    Over the past five years, the application of copyright law to 
distance education using digital technologies has become the subject of 
public debate and attention in the United States. In the Digital 
Millennium Copyright Act of 1998 (DMCA), Congress charged the Copyright 
Office with responsibility to study the issue and report back with 
recommendations within six months. After an intensive process of 
identifying stakeholders, holding public hearings, soliciting comments, 
conducting research, and consulting with experts in various fields, the 
Office has issued this Report.
    Part I of the Report gives an overview of the nature of distance 
education today. Part II describes current licensing practices in 
digital distance education, including problems and future trends. Part 
III describes the status of technologies relating to the delivery and 
protection of distance education materials. Part IV analyzes the 
application of current copyright law to digital distance education 
activities. Part V discusses prior initiatives addressing copyright and 
digital distance education. Part VI examines the question of whether 
the law should be changed, first summarizing the views of interested 
parties and then providing the Copyright Office's analysis and 
recommendations.

               I. The Nature of Distance Education Today

    Distance education in the United States today is a vibrant and 
burgeoning field. Although it is far from new, digital technologies 
have fostered a rapid expansion in recent years, as well as a change in 
profile. The technologies used in distance education, the populations 
served, the institutions offering such programs, and the partnerships 
that have emerged differ in nature and scale from earlier models.
    The most fundamental definition of distance education is a form of 
education in which students are separated from their instructors by 
time and/or space. Distance education is utilized in some form at every 
level of the educational spectrum, with the most extensive use in 
higher education. An individual course may contain both classroom and 
distance education components. Digital technology is used extensively 
for varied purposes and in varied ways, depending on the intended 
audience for the course, and the availability and cost of the 
technology. The capabilities of the new technologies have made possible 
a more interactive experience that more closely parallels face-to-face 
teaching--in effect creating a virtual classroom. They have also made 
distance education courses more convenient and better suited to the 
needs of different students, including by providing the benefits of 
both synchronous and asynchronous methods.
    Distance education is reaching wider audiences, covering all 
segments of the population. The college audience is increasing 
particularly rapidly, in part due to responsiveness to the needs of an 
older, non-traditional student population, as well as students in other 
countries. Students also include professionals engaging in professional 
development or training, and retirees. The expansion of the field has 
led to changes among providers, with courses offered by both nonprofit 
and for-profit entities, on both a nonprofit and for-profit basis, and 
through varieties of partnerships among educational institutions and 
corporations. The federal government has been active in promoting the 
benefits of distance education, with recent legislation providing 
funding and recognition in various forms.
    Educational institutions offering distance education draw on 
library resources in several ways, including to provide support for 
online courses and to provide access to supplemental materials in 
digital form. Institutions are engaged in adopting copyright policies, 
training faculty and staff, and educating students about copyright law. 
They are increasingly seeking and obtaining formal accreditation.

                   II. Licensing of Copyrighted Works

    Although substantial licensing activities are taking place today in 
connection with the provision of materials to distance education 
students, so far relatively few licenses are requested or granted for 
digital uses. Most licensing relates to supplemental materials in 
analog form, or, increasingly, in digital form; the least common type 
of licensing is for digital uses of copyrighted works incorporated into 
the class itself. Most of the works licensed for digital use are 
textual materials; licenses for other types of content are much less 
frequent. As an alternative to seeking a license, an educational 
institution may avoid the use of preexisting copyrighted works in 
distance education courses, or may rely on exemptions in the copyright 
law. There is wide diversity in licensing procedures among educational 
institutions and copyright owners. In general, the more resources 
devoted to licensing, and the more centralized the responsibility, the 
more efficient and successful the process.
    Many educational institutions describe having experienced recurrent 
problems with licensing for digital distance education, primarily 
involving difficulty locating the copyright owner, inability to obtain 
a timely response, or unreasonable prices or other terms. The problems 
are reported to be most serious with respect to journal articles and 
audiovisual works. They appear to be exacerbated in the digital 
context, which may be explained in part by the perception of copyright 
owners that the risks of unauthorized dissemination are greater, and in 
part by the elements of novelty and unfamiliarity.
    A number of trends may facilitate the development of more effective 
digital licensing in the near future, including advances in technology 
used to protect works, the use of electronic copyright management 
information, and online licensing systems. New collective initiatives 
should also ease the licensing process for many types of uses. As 
digital uses become more common and familiar, copyright owners are 
becoming more flexible. It is difficult to predict the extent to which 
licensing problems will subside or how long the improvement will take, 
but given the current state of development of these trends, a more 
definitive evaluation will be possible in the next few years.

        III. Technologies Involved In Digital Distance Education

    Technology that facilitates licensing includes the ability to 
attach information to a work in digital format, and online rights and 
permissions services supporting a range of license and delivery 
functions. A number of different delivery technologies are used in 
distance education today, including traditional media used to carry 
digital information, such as digital television broadcasts or 
videoconferencing. These may be used in combination with digital 
network technology, such as computer connections between students and 
instructors.
    The computer is the most versatile of distance education 
instruments, since it can perform the same function as a television or 
telephone, but also provide more interactivity, deliver more content, 
and support more comprehensive services. Computers can be used to 
transmit texts and graphics, connect users in a variety of real-time 
and asynchronous dialogues, deliver messages between users, and receive 
both audio and video transmissions.
    There is no ``typical'' digital distance education course. 
Instructors sometimes build courses from scratch, and sometimes 
customize templates provided by commercial software. They may combine 
any or all of the technological tools available today, including e-
mail, threaded discussions, chat rooms, whiteboard programs, shared 
applications, streaming video or audio, video or audio files, course 
management infrastructure, links to websites, and interactive CD-ROM's 
and DVD-ROM's. In addition, programs for self-paced independent 
learning may be obtained from commercial vendors or through an 
educational institution.
    The need to provide technological security for copyrighted works in 
the digital environment has been recognized in all, sectors, not just 
for distance education. Technology companies and content providers are 
working to develop commercially viable protection technologies, and 
industries are collaborating to develop standards. Some technologies 
limit access to works; others prevent or detect uses of works after 
access. Each method varies in its cost and degree of security; although 
many are highly effective, none provides absolute certainty. The goal 
is to provide a high enough level of protection that the cost of 
circumvention outweighs the value of access to the material protected.
    Educational organizations can, and commonly do, limit access to 
students enrolled in a particular class or institution through several 
different methods used separately or in combination: password 
protection, firewalls, screening for IP addresses or domain names, 
hardware connections, encryption, or using CD-ROM's as a delivery 
mechanism.
    After access has been gained, however, material is available to 
students for further use, including downloading, or electronic 
distribution. Technologies that address such downstream uses do exist 
today, with several on the market, others expected to be released very 
soon, and others projected for release in the next year. Most, but not 
all, are designed to handle a single type of content. The most 
effective are secure container/proprietary viewer technologies, which 
allow copyright owners to set rules for the use of their works, which 
are then attached to all digital copies, and prevent anyone from making 
a use that is not in accordance with the rules. For example, students 
could be allowed to view the work or print a single copy, but not to 
save it to disk or distribute it to others electronically. Streaming 
formats, which do not facilitate the making of copies, and the use of 
low resolution digital copies, also offer some degree of protection 
against redistribution.
    Technologies for embedding information in digital works to identify 
and track usage are also in development and use, with the practice of 
digital watermarking the most effective. Using commercially available 
software or services, these identifiers can be used as a search object 
to find unauthorized copies of some types of works on the World Wide 
Web.
    Significant developments are occurring in all of these areas, and a 
few generalizations can be made. More efficient licensing mechanisms 
will become more widespread, and delivery systems will become more 
efficient, sophisticated and interoperable. Developments in protecting 
content are harder to predict. In the near future it will be 
technically possible to protect works against both unauthorized access 
and dissemination with a high degree of effectiveness. Because it 
remains to be seen whether technologies to prevent downstream uses will 
gain widespread market acceptance, the extent to which they will be 
available in practical form for use in digital distance education at 
any given point in time is unclear.

         IV. Application of Copyright Law To Distance Education

    Different copyright rights are implicated by different educational 
activities, depending in part on the technologies used. When a 
performance or display of a work is accomplished by means of a digital 
network transmission, temporary RAM copies are made in the computers 
through which the material passes, by virtue of the technological 
process. As a result, not only the rights of public performance or 
display are implicated, but also the rights of reproduction and/or 
distribution. This does not mean that the use is necessarily an 
infringement. Permission to use the work could be granted by the 
copyright owner, either through an express license or implied from the 
circumstances. If not, the use may fall within one of the various 
exemptions in the Copyright Act.
    Three exemptions together largely define the scope of permitted 
uses for digital distance education: two specific instructional 
exemptions in section 110, and the fair use doctrine of section 107. 
Sections 110(1) and (2) together were intended to cover all of the 
methods by which performances or displays in the course of systematic 
instruction take place. Section 110(1) exempts the performance or 
display of any work in the course of face-to-face teaching activities. 
Section 110(2) covers the forms of distance education existing when the 
statute was enacted in 1976, exempting certain performances or displays 
in the course of instructional broadcasting. Both subsections contain a 
number of limitations and restrictions. In particular, the section 
110(2) exemption from the performance right applies only to nondramatic 
literary and musical works (although the display right exemption 
applies to all categories of works). Section 110(2) also contains 
limitations on the nature and content of the transmission, and the 
identity and location of the recipients. The performance or display 
must be made as a regular part of systematic instructional activity by 
a nonprofit educational institution or governmental body; it must be 
directly related and of material assistance to the teaching content; 
and it must be made primarily for reception in classrooms or places of 
instruction, or to persons whose disabilities or other special 
circumstances prevent their attendance in classrooms, or to government 
employees.
    As written, section 110(2) has only limited application to courses 
offered over a digital network. Because it exempts only acts of 
performance or display, it would not authorize the acts of reproduction 
or distribution involved in this type of digital transmission. In 
addition, students who choose to take a distance course without special 
circumstances that prevent their attendance in classrooms may not 
qualify as eligible recipients.
    Fair use is the broadest and most general limitation on the 
exclusive rights of copyright owners, and can exempt distance education 
uses not covered by the specific instructional exemptions. It is 
flexible and technology-neutral, and continues to be a critical 
exemption for educational users in the digital world. It requires 
courts to examine all the facts and circumstances, weighing four 
nonexclusive statutory factors. While there are not yet any cases 
addressing the application of fair use to digital distance education, a 
court's analysis will depend on elements such as the subject matter of 
the course, the nature of the educational institution, the ways in 
which the instructor uses the material, and the kinds and amounts of 
materials used. Guidelines have in the past been negotiated among 
interested parties to provide greater certainty as to how fair use 
applies to education; such guidelines for certain analog uses were 
included in legislative history around the time of enactment of the 
Copyright Act.
    Other exemptions in the Copyright Act may exempt some distance 
education uses in limited circumstances, but do not significantly 
expand the scope of permitted instructional uses in a digital 
environment. These include the ephemeral recordings exemption in 
section 112, the limitations on exclusive rights in sound recordings in 
section 114, and the exemption for certain secondary transmissions in 
section 111. Compulsory licenses could permit distance educators to use 
some works in limited ways, but are not likely to be much used.
    Two titles of the DMCA are also relevant, one providing limitations 
on the liability of online service providers and the other establishing 
new technological adjuncts to copyright protection. While these 
provisions do not affect the scope of permitted digital distance 
education uses, they add a degree of security for both educational 
institutions and copyright owners disseminating and licensing material 
in the digital environment, and may relate to exemptions in various 
respects. New section 512 of the Copyright Act provides greater 
certainty that educational institutions providing network access for 
faculty, staff, and students will not, merely by doing so, become 
liable for infringing material transmitted over the network. New 
Chapter 12 contains a prohibition against various forms of 
circumvention of technological measures used by copyright owners to 
protect their works, and a provision protecting the integrity of 
copyright management information.
    The international context raises two separate issues: treaty 
obligations and the impact of any amendments abroad. The major treaties 
that impose obligations on the United States with respect to copyright 
are the Berne Convention and the TRIP's Agreement. Both contain rules 
governing the permissibility of exceptions to copyright owners' rights. 
Any new or amended exemption for distance education should be drafted 
to be compatible with these standards. In addition, the enactment of 
any new exemption will have an impact abroad, primarily due to 
doctrines of choice of law. When an educational institution in the 
United States transmits courses to students in other countries, it is 
unclear whether U.S. law will apply to such transmissions, or the law 
of the country where the transmission is received, making it difficult 
for educators to determine what uses of works are permissible. Other 
countries are also making or considering amendments to their copyright 
laws to address digital distance education.

    V. Prior Initiatives Addressing Copyright and Digital Distance 
                               Education

    Two different initiatives begun in 1994 sought to develop 
guidelines interpreting the application of fair use to educational uses 
through digital technology. One group, initiated by the Consortium of 
College and University Media Centers (CCUMC) and the Agency for 
Instructional Technology, issued a set of guidelines in 1996 addressing 
the use of portions of copyrighted works in educational multimedia 
projects created by educators or students as part of systematic 
learning activity at nonprofit educational institutions. The other 
group, established by the Conference on Fair Use (CONFU) convened by 
the Administration's Information Infrastructure Task Force, prepared 
draft guidelines relating to the performance and display of copyrighted 
works in distance learning classes of nonprofit educational 
institutions, not including asynchronous delivery over computer 
networks. CONFU considered both sets of guidelines as proposals, but 
did not formally adopt them. A number of organizations and companies, 
however, have endorsed one or both sets of guidelines, or use them as a 
reference.
    In 1997, the issue of copyright and digital distance education was 
raised in Congress by the introduction of bills in the House and Senate 
proposing an amendment to section 110(2). The amendment would have 
clarified that the exemption covered digital transmissions, and would 
have broadened its scope, removing the limitation on categories of 
works covered, adding the right of distribution, and removing the 
requirement that the transmission be made primarily for reception in 
classrooms and by people unable to attend classrooms. No floor action 
was taken on these bills, but they became the subject of discussion in 
the Senate during consideration of the WIPO Copyright and Performances 
and Phonograms Treaty Implementation Act. After intensive discussions 
among interested parties, it became clear that many complex and 
interrelated issues were involved that could not be given adequate 
consideration in the time available. Congress therefore provided for a 
longer-term study in section 403 of the DMCA.

                   VI. Should Current Law Be Changed?

                      a. the views of the parties
    The educational community (including both educators and academic 
libraries) believes that a change in the law is required to optimize 
the quality and availability of forms of distance education that take 
full advantage of today's technological capabilities. Members of this 
community argue that fair use is uncertain in its application to the 
digital environment, and that the exemptions in section 110 are 
outmoded and do not extend to the full range of activities involved in 
digital distance education. They report that licensing for such uses is 
not working well, and therefore does not offer a satisfactory 
alternative. Some educators also note that distance education is 
already an expensive proposition, involving substantial start-up and 
maintenance costs, and warn that adding the cost of licensing fees for 
copyrighted materials could make it prohibitive.
    Copyright owners, on the other hand, do not believe statutory 
amendment is necessary or advisable, pointing out that digital distance 
education is flourishing under current law. They see the fair use 
doctrine as strong and healthy, and are concerned that expanding the 
section 110 exemptions would harm both their primary and secondary 
markets. They assert that more efficient licensing systems are 
developing, and that the reported difficulties in obtaining permissions 
will ease with time and experience. Finally, they argue that educators 
who wish to use preexisting copyrighted content in their courses should 
regard licensing fees as one of the costs of distance education, 
comparable to the purchase of the necessary hardware and software.
    There is virtual unanimity that the doctrine of fair use is fully 
applicable to uses of copyrighted works in the digital environment, 
including in distance education. (This does not mean that all agree as 
to which digital distance education activities would qualify as fair.) 
As to the role of guidelines, the messages were mixed. Many copyright 
owners recommend pursuing the development of guidelines regarding the 
fair use of copyrighted materials in digital distance education, and 
suggest that further discussion could be productive in achieving 
greater mutual understanding and certainty. Educational and library 
groups were less positive, expressing varying views. Some educators see 
guidelines as valuable guides to decisionmaking; other participants are 
critical of the concept or doubtful about the efficacy of any results.
    As to the specific instructional exemptions, copyright owners argue 
that section 110(2) should not be changed. They are concerned that a 
broadening of the exemption would result in the loss of opportunities 
to license works for use in digital distance education--a new, growing, 
and potentially lucrative market. They urge that Congress not foreclose 
the potential market by legislating prematurely or overbroadly.
    The other major concern of copyright owners is the increased risk 
of unauthorized downstream uses of their works posed by digital 
technology. When works are distributed in digital form, once a student 
obtains access, it is easy to further distribute multiple copies to 
acquaintances around the world. Depending on the type of work involved 
and the amount used, the result could be a significant impact on the 
market for sales of copies.
    Most educational and library groups, in contrast, support a 
broadening of section 110(2). They view fair use alone as either not 
clear enough or not extensive enough in its application. Their primary 
goals are to avoid discrimination against remote site students in their 
educational experience vis-a-vis on-site students; to avoid 
discrimination against new technologies vis-a-vis old ones; and to 
avoid the difficulties in licensing that many describe having 
experienced. In general, the educational community seeks the following 
changes: (1) elimination of the concept of the physical classroom as a 
limitation on the availability of the exemption; (2) coverage of rights 
in addition to performance and display, at least to the extent 
necessary to permit digital transmissions; and (3) expansion of the 
categories of works covered, by broadening the performance right 
exemption to apply to works other than nondramatic literary and musical 
works. Some would go further, advocating an exemption that allows 
educators to do anything by means of digital transmission that they can 
do in the classroom under section 110(1). Libraries in particular also 
seek exemptions for additional activities, stressing the importance of 
being able to give access to electronic reserves and other resource 
materials in order to provide a high-quality educational experience for 
students at remote sites.
    As to the risks involved, educational institutions are willing to 
take steps to safeguard the security of the materials they disseminate. 
In fact, they point out that they already make such efforts; the use of 
password protection and other access controls is widespread. Many also 
require compliance with copyright policies and inform students, faculty 
and staff about the law. Finally, educators believe that licensing 
should continue to play some role in distance education.
                    b. analysis and recommendations
    The analysis of whether the law should be changed is complicated by 
the context: a time of rapid development in both technologies and 
markets. While such rapid development is a hallmark of the digital age, 
in the area of distance education we are at a particularly crucial 
point in time. Sophisticated technologies capable of protecting content 
against unauthorized post-access use are just now in development or 
coming to market, although it is not clear when they will be widely 
available in a convenient and affordable form that can protect all 
varieties of works. Meanwhile, licensing systems for digital distance 
education are evolving, including online and collective licensing 
mechanisms, and initial fears are beginning to ebb.
    Many of the concerns on all sides stem from the inability to depend 
on the effective functioning of technological protections and licensing 
mechanisms. If technology were further along, broadened exemptions 
could be less dangerous to copyright owners; if licensing were further 
evolved, broadened exemptions could be less important for educators. 
The technical tools for both exist today; it will be clearer within the 
next few years how successfully they can be integrated into the real 
world of distance education. Given the timetable of the legislative 
process, the question is what steps Congress can and should take in the 
interim.
    Over the course of this study, numerous issues have been raised and 
discussed. Given the limited time allotted, the specific mandate for 
the Register to consider primarily ``the need for an exemption from 
exclusive rights of copyright owners for distance education through 
digital networks,'' and the origin of that mandate in proposed 
amendments to section 110(2), our analysis focuses on the appropriate 
treatment under copyright law of materials delivered to students 
through digital technology in the course of mediated instruction. We do 
not address other uses of copyrighted works in the course of digital 
distance education, including student use of supplemental or research 
materials in digital form; the creation of multimedia works by teachers 
or students; and the downloading and retention of materials by 
students. Such activities, although an important part of digital 
distance education, do not involve uses analogous to the performances 
and displays addressed in section 110(2).
    As a fundamental premise, the Copyright Office believes that 
emerging markets should be permitted to develop with minimal government 
regulation. When changes in technology lead to the development of new 
markets for copyrighted works, copyright owners and users should have 
the opportunity to establish mutually satisfactory relationships. A 
certain degree of growing pains may have to be tolerated in order to 
give market mechanisms the chance to evolve in an acceptable direction. 
At some point, however, existing but dysfunctional markets may require 
adjustments in the law. Timing is therefore key.
    The desire to let markets evolve does not mean that the law must 
remain frozen. Where a statutory provision intended to implement a 
particular policy is written in such a way that it becomes obsolete due 
to changes in technology, the provision may require updating if that 
policy is to continue. Doing so may be seen not as preempting a new 
market, but as accommodating existing markets that are being tapped by 
new methods. In the view of the Copyright Office, section 110(2) 
represents an example of this phenomenon.
    The exemptions in sections 110(1) and (2) embody a policy 
determination that performances or displays of copyrighted works in the 
course of systematic instruction should be permitted without the need 
to obtain a license or rely on fair use. The technological 
characteristics of digital transmissions have rendered the language of 
section 110(2) inapplicable to the most advanced delivery method for 
systematic instruction. Without an amendment to accommodate these new 
technologies, the policy behind the law will be increasingly 
diminished.
    At the same time, it must be borne in mind that existing law was 
crafted to embody a balance of interests between copyright owners and 
users of works. In order to maintain a comparable balance, the coverage 
of an exemption cannot be expanded without considering the impact of 
the expansion on markets for copyrighted works. If the law is updated 
to address new technology, the risks posed by that technology must be 
adequately taken into account.
    Updating section 110(2) to allow the same activities to take place 
using digital delivery mechanisms, while controlling the risks 
involved, would continue the basic policy balance struck in 1976. In 
our view, such action is advisable.
    Other amendments have been suggested that would go further, and 
entail varying degrees of change in legislative policy. These include 
expanding the exemption to cover more categories of works or additional 
exclusive rights beyond those necessary for digital delivery, and 
otherwise resolving problems experienced in the licensing process. 
Here, the elements of timing and burden of proof are critical. From a 
pedagogical perspective, these suggested expansions are desirable. From 
a copyright owner's perspective, they endanger primary or secondary 
markets for valuable works. The question should not be whether users 
have established a need to expand the exemption, any more than whether 
copyright owners have established a need to retain its limits, but 
rather whether given current conditions, the policy balance struck in 
1976 should be recalibrated in certain respects.
    We conclude that some policy recalibration may be appropriate at 
this point, relating primarily to categories of works covered. In other 
areas, we believe that existing restrictions should be retained and 
markets permitted to evolve, subject to further review. Critical to 
this conclusion is the continued availability of the fair use doctrine 
as a safety valve.
1. Recommendations as to statutory language
    In order to accomplish the goal of updating the language and the 
policy balance of section 110(2), the Copyright Office offers the 
following recommendations:
    (a) Clarify meaning of ``transmission.'' It should be clarified 
through legislative history that the term ``transmission'' in section 
110(2) covers transmissions by digital means as well as analog.
    (b) Expand coverage of rights to extent technologically necessary. 
Because the exemption in its current form permits only acts of 
performance and display, digital transmissions over computer networks 
would not be excused. We therefore recommend expanding the scope of the 
rights covered, in order to add those needed to accomplish this type of 
transmission. The rights of reproduction and/or distribution should not 
be added in their entirety, but only to the extent technologically 
required in order to transmit the performance or display authorized by 
the exemption.
    (c) Emphasize concept of mediated instruction. An exemption that 
includes elements of the reproduction right so as to allow a student to 
access individual works asynchronously raises an unintended problem. If 
an entire work can be viewed on a computer screen, repeatedly, whenever 
a student chooses and for an indefinite duration, the performance or 
display could conceivably function as a substitute for the purchase of 
a copy. In updating section 110(2), it is therefore critical to ensure 
that the performance or display is analogous to the type of performance 
or display that would take place in a live classroom setting. This 
might be accomplished by amending paragraph (A) of section 110(2), 
which requires the performance or display to be ``a regular part of * * 
* systematic instructional activities,'' to focus on the concept of 
mediated instruction. Additional language could specify that the 
performance or display must be made by or at the direction of an 
instructor to illustrate a point in, or as an integral part of, the 
equivalent of a class session in a particular course.
    (d) Eliminate requirement of physical classroom. In its current 
form, section 110(2) requires transmissions to be sent to a classroom 
or similar place normally devoted to instruction, or to persons who 
cannot attend a classroom. The nature of digital distance education, 
where the goal is to permit instruction to take place anywhere, makes 
this limitation conceptually and practically obsolete. Eliminating the 
physical classroom limitation would better reflect today's realities.
    At the same time, it is important to retain meaningful limitations 
on the eligible recipients; the performances or displays should not be 
made available to the general public. We recommend permitting 
transmissions to be made to students officially enrolled in the course, 
regardless of their physical location. Since today's digital and 
scrambling technologies allow transmissions to be targeted more 
precisely, the requirement should be added that the transmission must 
be made solely, to the extent technologically feasible, for reception 
by the defined class of eligible recipients.
    (e) Add new safeguards to counteract new risk. Because the 
transmission of works to students in digital form poses greater risks 
of uncontrolled copying and distribution, a broadened exemption could 
cause harm to markets beyond the primary educational market. It is 
therefore critical, if section 110(2) is expanded to cover digital 
transmissions, that safeguards be incorporated into the statute to 
minimize these risks. We recommend including a number of safeguards as 
conditions on the applicability of the exemption: First, any transient 
copies permitted under the exemption should be retained for no longer 
than reasonably necessary to complete the transmission. Second, those 
seeking to invoke the exemption should be required to institute 
policies regarding copyright; to provide informational materials to 
faculty, students, and relevant staff members that accurately describe 
and promote compliance with copyright law; and to provide notice to 
students that materials may be subject to copyright protection.
    Third, when works are transmitted in digital form, technological 
measures should be in place to control unauthorized uses. In order to 
effectively limit the risks to copyright owners' markets, these 
measures should protect against both unauthorized access and 
unauthorized dissemination after access has been obtained. The 
exemption should require the transmitting institution to apply such 
measures, described in simple and technology-neutral language. Because 
no technology is one hundred percent effective, only measures that 
``reasonably'' prevent these acts should be required. In addition, the 
law should impose an obligation not to intentionally interfere with 
protections applied by the copyright owners themselves. If copyrighted 
works are to be placed on networks, and exposed to the resulting risks, 
it is appropriate to condition the availability of the exemption on the 
application of adequate technological protections.
    (f) Maintain existing standards of eligibility. An educational 
institution must be ``nonprofit'' to be eligible for the exemption in 
section 110(2). There was extensive debate over the appropriateness of 
retaining the ``nonprofit'' requirement, and/or adding a requirement of 
accreditation. In the area of digital distance education, the lines 
between for-profit and nonprofit have blurred, and the issue has arisen 
as to how to guarantee the bona fides of an entity that is entitled to 
the exemption at a time when anyone can transmit educational material 
over the Internet. The Copyright Office is not convinced at this point 
that a change in the law is desirable, given the policy implications of 
permitting commercial entities to profit from activities using 
copyrighted works without compensating the owners of those works; the 
potential inconsistency with other provisions of the Act, including 
section 110(1), that refer to ``nonprofit educational institutions''; 
and the DMCA mandate to consult specifically with nonprofit educational 
institutions and nonprofit libraries and archives. This is nevertheless 
an important and evolving issue that deserves further attention.
    (g) Expand categories of works covered. One of the most difficult 
issues to resolve is whether to expand the categories of works exempted 
from the performance right beyond the current coverage of nondramatic 
literary and musical works. On the one hand, pedagogical considerations 
militate against continuing to limit the types of works covered. On the 
other hand, the existing distinctions have been embedded in the law for 
more than twenty years, based on the potentially greater market harm to 
works such as dramatic works or audiovisual works. The question is why 
this policy judgment should be altered now.
    The main categories of works that could be affected by an expansion 
are audiovisual works, sound recordings, and dramatic literary and 
musical works. In terms of primary markets, educational licensing may 
represent a major source of revenue only for educational videos. The 
potential effect on secondary markets, however, remains a serious 
concern for all such works. This concern has been exacerbated beyond 
the threats perceived in 1976 by the capacities of digital technology. 
For entertainment products like motion pictures, transmission could 
well substitute for students paying to view them elsewhere, and if 
digital copies can be made or disseminated, could affect the broader 
public market.
    The considerations are different for sound recordings than for 
other categories. Because there was no public performance right for 
sound recordings when section 110(2) was enacted in 1976, educators 
were free to transmit performances of sound recordings to students 
(assuming the use of any other work embodied in the sound recording was 
authorized by statute or license). When owners of sound recordings were 
granted a limited public performance right in 1996, there was no 
discussion of whether sound recordings should be added to the coverage 
of section 110(2). This issue thus represents a new policy question 
that has not yet been considered, rather than a potential change in a 
judgment already made.
    It is the exclusion of audiovisual works, however, about which 
educators express the strongest concern, in part due to difficulties in 
obtaining licenses for digital uses from motion picture producers. 
Moreover, as digital distance education uses more multimedia works, 
which incorporate audiovisual works and may be considered audiovisual 
works themselves, the failure to cover this category may have an 
increasing impact.
    On balance we suggest a compromise. If audiovisual and other works 
are added, it should be done in a limited way, with greater 
restrictions than section 110(2) currently imposes. Thus, section 
110(2) could be amended to allow performances of categories in addition 
to nondramatic literary and musical works, but not of entire works. An 
expanded exemption should cover only the performance of reasonable and 
limited portions of these additional works.
    It is important to note that under the current language of section 
110(2), the portion performed would have to be the subject of study in 
the course, rather than mere entertainment for the students, or 
unrelated background or transitional material. This requirement, 
combined with the limitation on the amount of the work that could be 
used, should further serve to limit any impact on primary or secondary 
markets. It nevertheless may be advisable to exclude those works that 
are produced primarily for instructional use. For such works, unlike 
entertainment products or materials of a general educational nature, 
the exemption could significantly cut into primary markets, impairing 
incentives to create.
    (h) Require use of lawful copies. If the categories of works 
covered by section 110(2) are expanded, we recommend an additional 
safeguard: requiring the performance or display to be made from a 
lawful copy. Such a requirement is already contained in section 110(1) 
for the performance or display of an audiovisual work in the classroom.
    (i) Add new ephemeral recording exemption. Finally, in order to 
allow the digital distance education that would be permitted under 
section 110(2) to take place asynchronously, we recommend adding a new 
subsection to section 112, the ephemeral recordings exemption. The new 
subsection would permit an educator to upload a copyrighted work onto a 
server, to be subsequently transmitted under the conditions set out in 
section 110(2) to students enrolled in her course. The benefit of the 
new subsection should be limited to an entity entitled to transmit a 
performance or display of a work in digital form under section 110(2). 
Various limits should be imposed similar to those set out in other 
subsections of section 112, including the requirements that any such 
copy be retained and used solely by the entity that made it; that no 
further copies be reproduced from it (except the transient 
technologically necessary copies that would be permitted by section 
110(2)); that the copy be used solely for transmissions authorized 
under section 110(2); and that retention of the copy be limited in 
time, remaining on the server in a form accessible to students only for 
the duration of the course. In addition, the reproduction should have 
to be made from a lawful copy. Finally, the entity making the 
reproduction should not be permitted to remove technological 
protections applied by the copyright owner to prevent subsequent 
unlawful copying.
2. Clarification of fair use
    Because there is confusion and misunderstanding about the fair use 
doctrine, including the function of guidelines, we believe it is 
important for Congress to provide some clarification. The statutory 
language of section 107 is technology-neutral, and does not require 
amendment. But if any legislative action is taken with regard to 
distance education, we recommend that report language explicitly 
address certain fair use principles.
    First, the legislative history should confirm that the fair use 
doctrine is technology-neutral and applies to activities in the digital 
environment. It might be useful to provide some examples of digital 
uses that are likely to qualify as fair. It should be explained that 
the lack of established guidelines for any particular type of use does 
not mean that fair use is inapplicable. Finally, the relationship of 
guidelines to fair use and other statutory defenses should be 
clarified. The public should understand that guidelines are intended as 
a safe harbor, rather than a ceiling on what is permitted.
    Although flexibility is a major benefit of the fair use doctrine, 
the corollary is a degree of uncertainty. This drawback is exacerbated 
by the context of new technologies, where little case law is available. 
In the analog world, efforts such as the photocopying and off-air 
taping guidelines have proved helpful in giving practical guidance for 
day-to-day decisionmaking by educators. The Copyright Office believes 
that additional discussion among the interested parties of fair use as 
applied to digital distance education could be productive in achieving 
a greater degree of consensus. In the past, efforts to develop 
guidelines have been successful where a consistent group of 
participants worked within a structure established under the auspices 
of a government agency, with some direction provided by Congress.
3. Licensing issues
    The fact that digital technologies impose new costs on delivering 
distance education does not itself justify abandoning or regulating the 
long-standing licensing system. Digital distance education entails the 
use of computer hardware and software, and the employment of trained 
support staff, all of which cost money. Digital distance education may 
also entail the use of preexisting copyrighted works. This content is 
at least as valuable as the infrastructure to deliver it, and 
represents another cost to be calculated in the equation.
    The critical question here is whether the markets in which distance 
educators participate are dysfunctional, and if so, to a degree that 
calls for a legislative remedy. While the problems experienced in 
licensing are not unique to digital distance education, they are 
heightened in the digital context due to factors such as fear about 
increased risks; lack of certainty as to the scope of pre-digital 
transfers of rights; and general unfamiliarity with new uses. Many of 
these factors should diminish with time and experience, and there are 
some indications that this is already happening. In addition, online 
and collective licensing for digital uses will increasingly facilitate 
transactions. Nevertheless, problems will persist for the foreseeable 
future, as long as risks are perceived as high or benefits low.
    One of the problems identified by educators has special 
characteristics that can block the functioning of the marketplace. 
Where the owner of the work simply cannot be located, there is no 
opportunity to negotiate. Particularly because the problem of such 
``orphan works'' may become more acute due to longer copyright terms 
and the expanded audience for older works made possible by digital 
technology, we believe that the time may be ripe for Congressional 
attention to this issue generally.
    We have not otherwise seen sufficient evidence of a need for a 
legislative solution moving away from the general free market approach 
of current law. Given the state of flux of online licensing systems and 
technological measures, and the waning influence of the elements of 
fear and unfamiliarity, problems of delay and cost may subside to an 
acceptable level. At this point in time we recommend giving the market 
for licensing of nonexempted uses leeway to evolve and mature. Because 
the field of digital distance education is growing so quickly, and 
effective licensing and technologies may be on the horizon, we suggest 
revisiting the issue in a relatively short period of time.
4. International considerations
    In making these recommendations, the Copyright Office is mindful of 
the constraints of U.S. treaty obligations. In our view, the relevant 
criteria of the Berne Convention and the TRIP's Agreement are 
fundamentally in harmony with domestic policy considerations. We 
believe that our recommendations are fully consistent with these 
criteria, and would not alter the fundamental balance of either section 
110(2) or 112, which have been part of U.S. law for more than twenty 
years.
    The balance struck in U.S. law will have an importance beyond our 
borders, both through its potential application abroad and as a model 
for other countries examining the issue. Whether a distance education 
transmission initiated in one country and sent to a student in another 
country constitutes an infringement, falls within a collective or 
compulsory licensing scheme, or is exempted, will depend on which 
country's law a court applies. This means both that the scope of the 
exemptions in the U.S. Copyright Act may have an impact on foreign 
markets for U.S. works, and that U.S. copyright owners and users have 
an interest in the scope of exemptions or statutory licensing rules 
adopted in foreign laws.

    The Chairman. With that, we will adjourn until further 
notice.
    [Whereupon, at 10:52 a.m., the committee was adjourned.]

                                


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