[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]


 
                  REMEDIES FOR SMALL COPYRIGHT CLAIMS

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON COURTS, THE INTERNET,
                       AND INTELLECTUAL PROPERTY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 29, 2006

                               __________

                           Serial No. 109-92

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov


                                 ______

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                       COMMITTEE ON THE JUDICIARY

            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois              JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina         HOWARD L. BERMAN, California
LAMAR SMITH, Texas                   RICK BOUCHER, Virginia
ELTON GALLEGLY, California           JERROLD NADLER, New York
BOB GOODLATTE, Virginia              ROBERT C. SCOTT, Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
DANIEL E. LUNGREN, California        ZOE LOFGREN, California
WILLIAM L. JENKINS, Tennessee        SHEILA JACKSON LEE, Texas
CHRIS CANNON, Utah                   MAXINE WATERS, California
SPENCER BACHUS, Alabama              MARTIN T. MEEHAN, Massachusetts
BOB INGLIS, South Carolina           WILLIAM D. DELAHUNT, Massachusetts
JOHN N. HOSTETTLER, Indiana          ROBERT WEXLER, Florida
MARK GREEN, Wisconsin                ANTHONY D. WEINER, New York
RIC KELLER, Florida                  ADAM B. SCHIFF, California
DARRELL ISSA, California             LINDA T. SANCHEZ, California
JEFF FLAKE, Arizona                  CHRIS VAN HOLLEN, Maryland
MIKE PENCE, Indiana                  DEBBIE WASSERMAN SCHULTZ, Florida
J. RANDY FORBES, Virginia
STEVE KING, Iowa
TOM FEENEY, Florida
TRENT FRANKS, Arizona
LOUIE GOHMERT, Texas

             Philip G. Kiko, General Counsel-Chief of Staff
               Perry H. Apelbaum, Minority Chief Counsel
                                 ------                                

    Subcommittee on Courts, the Internet, and Intellectual Property

                      LAMAR SMITH, Texas, Chairman

HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
ELTON GALLEGLY, California           JOHN CONYERS, Jr., Michigan
BOB GOODLATTE, Virginia              RICK BOUCHER, Virginia
WILLIAM L. JENKINS, Tennessee        ZOE LOFGREN, California
SPENCER BACHUS, Alabama              MAXINE WATERS, California
BOB INGLIS, South Carolina           MARTIN T. MEEHAN, Massachusetts
RIC KELLER, Florida                  ROBERT WEXLER, Florida
DARRELL ISSA, California             ANTHONY D. WEINER, New York
CHRIS CANNON, Utah                   ADAM B. SCHIFF, California
MIKE PENCE, Indiana                  LINDA T. SANCHEZ, California
J. RANDY FORBES, Virginia

                     Blaine Merritt, Chief Counsel

                         David Whitney, Counsel

                          Joe Keeley, Counsel

                          Ryan Visco, Counsel

                    Shanna Winters, Minority Counsel


                            C O N T E N T S

                              ----------                              

                             MARCH 29, 2006

                           OPENING STATEMENT

                                                                   Page
The Honorable Lamar Smith, a Representative in Congress from the 
  State of Texas, and Chairman, Subcommittee on Courts, the 
  Internet, and Intellectual Property............................     1
The Honorable Howard L. Berman, a Representative in Congress from 
  the State of California, and Ranking Member, Subcommittee on 
  Courts, the Internet, and Intellectual Property................     2

                               WITNESSES

Mr. Paul Aiken, Executive Director, Authors Guild
  Oral Testimony.................................................     4
  Prepared Statement.............................................     6
Ms. Jenny Toomey, Executive Director, Future of Music Coalition
  Oral Testimony.................................................    21
  Prepared Statement.............................................    23
Mr. Brad Holland, founding Board Member, Illustrators' 
  Partnership of America
  Oral Testimony.................................................    28
  Prepared Statement.............................................    31
Mr. Victor S. Perlman, General Counsel and Managing Director, 
  American Society of Media Photographers, Inc.
  Oral Testimony.................................................    34
  Prepared Statement.............................................    35

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of the Honorable Howard L. Berman, a 
  Representative in Congress from the State of California, and 
  Ranking Member, Subcommittee on Courts, the Internet, and 
  Intellectual Property..........................................    45
Prepared Statement of the United States Copyright Office.........    45


                  REMEDIES FOR SMALL COPYRIGHT CLAIMS

                              ----------                              


                       WEDNESDAY, MARCH 29, 2006

                  House of Representatives,
              Subcommittee on Courts, the Internet,
                         and Intellectual Property,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:07 p.m., in 
Room 2141, Rayburn House Office Building, the Honorable Lamar 
Smith (Chairman of the Subcommittee) presiding.
    Mr. Smith. The Subcommittee on Courts, the Internet, and 
Intellectual Property will come to order, and I will recognize 
myself for an opening statement, then the Ranking Member, and 
then the gentleman from California for an opening statement if 
he has one, as well. We appreciate the attendance of the 
gentleman from California because there's so much going on this 
afternoon. I know it's hard for Committee Members to get here.
    Before I make my introductory remarks, let me say to the 
panelists that this is, to my knowledge, the first time we have 
had a hearing on this particular subject. It is an important 
subject. It is almost a unique subject. But it also puts you in 
a good position because, as I mentioned to one of you a minute 
ago, you're not only expert witnesses, but you're also 
absolutely indispensable to the process. We probably will not 
have another hearing on this subject, so this is an important 
one and what you say will be considered by us as we move 
forward.
    The possibility of copyright infringement is an issue for 
all copyright owners. Title 17 of the U.S. Code provides for 
remedies for copyright infringement that vary, depending on the 
registration status of the work, the willfulness of the 
activity, and the particular standing of the infringer. There 
are also a number of defenses to actions that would reduce or 
eliminate damages, such as fair use or innocent infringement.
    However, the Copyright Act does not take into account an 
important issue for all copyright owners, the practicality of 
pursuing an infringement case when the infringer refuses to pay 
damages and the damage amount is likely low. In certain cases, 
the infringer refuses to pay any amount to compensate the owner 
for the infringement. In other cases, the infringer is willing 
to pay the proper amount of damages, but the two parties cannot 
agree on what is a reasonable amount. In either case, the cost 
of hiring an attorney and filing suit will easily exceed $5,000 
and, of course, can be a lot higher.
    When an infringer has stopped infringing use, what 
effective relief does the copyright have if the damages caused 
by the infringement is only, say, $500? While it would 
certainly be possible to hire an attorney to pursue the $500 in 
damages, it is simply not economically feasible for the 
copyright owner to pay $5,000 or more to recover only $500. 
Absent an effective remedy, many copyright owners with low-
value infringement claims view this disparity as a, quote, 
``get out of jail free'' card.
    This issue appears most often in the context of a certain 
category of users where the amount of damages is often low. 
These categories of work include photographs, illustrations, 
graphic arts, short stories, and articles. Works in other 
categories of uses, such as movies and music, may also face 
this dynamic, but they are more likely to have larger value 
infringement claims, which makes hiring lawyers more 
economically feasible.
    Some copyright owners with small value claims may simply 
want to be paid proper damages and have no interest in pursuing 
an effort to prove willful infringement or statutory damages. 
Why would someone not want to pursue statutory damages? The 
simple answer is that sometimes, it is better to turn a one-
time infringer into a regular customer than to obtain a one-
time payment and not have an ongoing customer.
    Possible options to create alternatives to exclusive 
Federal court jurisdiction to copyright infringement claims 
include use of State courts, small claims or otherwise; 
creation of a Federal version of State small claims court; use 
of the Copyright Royalty Board; use of dedicated administrative 
law judges; and the collection of numerous small copyright 
claims into larger filing brought by trade associations or 
other groups' representatives.
    Related to these five options are, one, whether any 
alternatives created are voluntary and/or mandatory for both 
the copyright owner and the infringer, and two, whether the 
defenses and possible infringement penalties, such as statutory 
damages, should apply to such alternatives.
    I look forward to hearing about the issue of small value 
infringement cases generally and if any alternative to the 
existing Federal court system is a viable option.
    I have been a longtime strong supporter of copyright owner 
rights. Payment for using the work of the copyright owner is 
crucial to promoting the continued development of new content 
for society's benefit.
    That concludes my opening statement and the gentleman from 
California, Mr. Berman, is recognized for his.
    Mr. Berman. Thank you very much, Mr. Chairman. I want to 
commend you for holding this hearing. I think the timing is 
especially good given our recently concluded hearing on the 
issue of orphan works.
    Alternative dispute resolution was raised by some in the 
orphan works context as a way to begin addressing some of the 
inequities that could result from a statutory change. However, 
there are multiple instances in the copyright context, as well, 
in which parties could benefit from forums other than Federal 
court to resolve copyright infringement claims. Today will 
provide an opportunity to discuss the advantages of offering 
alternative methods of resolving small copyright claims, even 
outside the scope of the orphan works provision.
    As the cost of litigation rises, I was wondering where you 
could do it for $5,000. Oftentimes, a copyright owner has to 
make a calculation that is entirely independent from whether 
the owner will prevail on the merits of the case. The owner 
must ask, is it worth it to pursue full-scale litigation when 
the damages or remedies wouldn't even cover the cost of the 
proceeding, much less provide any relief from infringing 
conduct?
    A number of proposals for resolving this dilemma have been 
suggested, ranging from the establishment of a small claims 
court to expanding the jurisdiction of the copyright royalty 
judges to determine copyright claims in an administrative 
dispute resolution proceeding. I caution that the goal here 
should not be to create an opportunity for forum shopping as a 
result of substance, but merely to create more simplified 
procedures that will resolve disputes at a lower cost.
    I look forward to hearing the witnesses describe 
circumstances in which they may forego a remedy because of the 
cost of bringing suit and whether they have any suggestion for 
reform. I doubt this will be the last we hear on this issue.
    I'd also like to work with the Chairman in pursuing a 
Copyright Office study on this issue. It's encouraging that in 
its written testimony, the office offers to study both how and 
to what extent copyright owners are injured from seeking relief 
due to the cost of litigation, and secondly, what changes in 
the law might be advisable to remedy the problem.
    Thank you, Mr. Chairman, and I yield back.
    Mr. Smith. Thank you, Mr. Berman.
    Does the gentleman from California wish to make an opening 
statement?
    Mr. Issa. No, Mr. Chairman. I just wish to thank you for 
holding this important hearing. I yield back.
    Mr. Smith. Thank you, Mr. Issa.
    The gentleman from South Carolina, Mr. Inglis?
    Mr. Inglis. No thank you, Mr. Chairman, but thank you for 
holding the hearing.
    Mr. Smith. You know, maybe I'll recognize you all regularly 
just to be able to hear that. [Laughter.]
    That sounds pretty good. I appreciate both of you all being 
here.
    Before I introduce our witnesses, would you please stand 
and be sworn in. Would you raise your right hand, and do you 
swear that the testimony you are about to give is the truth, 
the whole truth, and nothing but the truth, so help you, God?
    Mr. Aiken. I do.
    Ms. Toomey. I do.
    Mr. Holland. I do.
    Mr. Perlman. I do.
    Mr. Smith. Thank you, and be seated.
    Our first witness is Paul Aiken, the Executive Director of 
the Authors Guild since 1996. The Authors Guild is the nation's 
oldest and largest professional society of published authors, 
representing more than 8,000 writers. Mr. Aiken is a 1985 
graduate of Cornell Law School.
    Our next witness is Jenny Toomey, the Executive Director of 
the Future of Music Coalition. The Future of Music Coalition is 
a not-for-profit collaboration between members of the music 
technology, public policy, and intellectual property law 
communities. Ms. Toomey graduated from Georgetown University 
with an interdisciplinary major in philosophy, English, and 
women's studies. I have never heard of that combination before. 
It sounds good.
    Our third witness is Brad Holland, a self-taught artist and 
writer. Mr. Holland is a board member of the Illustrators' 
Partnership of America, a nonprofit organization dedicated to 
helping its illustrator members protect their intellectual 
property. Mr. Holland's work has appeared in Time, Vanity Fair, 
the New Yorker, the New York Times, the Wall Street Journal, 
and the Weekly Standard. He has painted CD covers for Ray 
Charles, Stevie Ray Vaughn, and Billy Joel. Mr. Holland has 
also been elected both the Society of Illustrators' Hall of 
Fame and the Alliance Graphic International. He is currently a 
visiting scholar at Virginia Commonwealth University.
    Our final witness is Victor Perlman, the General Counsel to 
the American Society of Media Photographers since 1995. In 
1996, he formally joined ASMP staff as Managing Director and 
the Society's first in-house General Counsel. Mr. Perlman 
received his Bachelor's degree in English from Franklin and 
Marshall College in 1967 and his law degree from the University 
of Pennsylvania in 1972.
    We welcome you all, and Mr. Aiken, we will hear your 
testimony first.

   TESTIMONY OF PAUL AIKEN, EXECUTIVE DIRECTOR, AUTHORS GUILD

    Mr. Aiken. Thank you, Mr. Chairman, and thank you for the 
opportunity to testify today on a matter of vital importance to 
American writers. The Authors Guild has had a 90-year history 
of contributing to debates before Congress on copyright law. It 
is an honor and a privilege to be here today for the Guild to 
continue to serve that role before this Subcommittee.
    I am here to make the case that a small claims court for 
copyright infringement, if properly done, is a good idea. The 
Guild has long had strong anecdotal evidence that writers had 
inadequate access to the courts to protect their property 
rights. We decided to try to quantify that evidence in 
preparation for today's hearing, so we conducted two surveys, a 
two-part survey of our membership, all of whom are published 
writers. We had a huge response. More than 1,200 completed each 
part of the survey.
    The results of the survey are appended to my written 
remarks, but here is the key result. Fifty-five percent of all 
respondents believe that creating a small claims court for 
copyright is a good idea. Seventeen percent opposed it. Twenty-
eight percent were neutral.
    The reasons authors support creating such a court are 
important and enlightening. They, as you might expect, cited 
reduced costs, convenience, and the ability to proceed without 
an attorney. Many also cited the deterrent effect of such a 
court and that it would increase respect for copyright.
    The reasons cited by those 17 percent of writers who did 
not think it was such a good idea are also enlightening. Sixty 
percent of these respondents said that such a procedure, a 
small claims procedure, would not be simple, effective, or 
inexpensive. That was their fear. Fifty-two percent also feared 
that it would increase their risk of being sued when they made 
fair use of someone else's work. Others cited the fear of 
frivolous and harassing suits, and many said the jurisdictional 
limit--we had proposed $2,000 to $3,000--was too low to be 
meaningful, and many also feared the competence of a small 
claims court to address copyright issues.
    We believe all these concerns can be addressed effectively. 
First and most importantly, we can avoid harassment suits by 
requiring a prima facie showing of copyright infringement 
before the defendant is obliged to appear. Most frivolous and 
harassing claims would certainly be caught by compelling the 
plaintiff to make a prima facie documentary showing of 
infringement. Failing such a showing, the court should be 
obliged to dismiss the suit with no requirement that the 
defendant appear or respond.
    Second, as a further jurisdictional prerequisite, there 
should be no substantial fair use defense apparent in the 
documents supporting plaintiff's prima facie case. Let's keep 
it simple. The small claims procedure should focus on clear 
copyright violations.
    Third, we should minimize complexity and cost by using mail 
and telephone procedures to the greatest extent permissible 
within the bounds of due process. This is hugely important to 
our members. The travel costs to a special court could swamp 
any remedy they might receive.
    Fourth, we should avoid delegating these procedures to 
inexperienced State courts. Instead, assure the competence of 
the court by affiliating it with the Copyright Office in some 
manner.
    Fifth, we should assure the effectiveness of the court by 
giving it access to the full panoply of remedies available, 
including statutory damages and by permitting it to issue 
injunctions in limited cases. If a plaintiff demonstrates that 
a defendant has repeatedly infringed the plaintiff's copyright 
with no colorable defense of fair use, then the court should be 
empowered to enjoin the defendant against further infringement 
of the plaintiff's registered work. Such an injunction, 
enforceable in an appropriate Federal district court, would 
serve as a powerful deterrent to future infringement.
    And finally, we believe that this should be the plaintiff's 
option to bring this sort of claim in small claims court. The 
defendant should not be able to opt out of it. That would 
render the court toothless. The defendant would tend to always 
run to the more expensive, burdensome procedure in order to 
avoid liability.
    If created with care, a small claims court for copyright 
infringement would allow individual authors much greater access 
to the courts to protect their property rights, appreciably 
enhancing market incentive to create the very works that the 
public values.
    I would like to thank this Subcommittee for holding this 
hearing and inviting us to participate. Thank you.
    Mr. Smith. Thank you, Mr. Aiken.
    [The prepared statement of Mr. Aiken follows:]

                    Prepared Statement of Paul Aiken




    Mr. Smith. Ms. Toomey?

TESTIMONY OF JENNY TOOMEY, EXECUTIVE DIRECTOR, FUTURE OF MUSIC 
                           COALITION

    Ms. Toomey. Thanks. Good afternoon. My name is Jennifer 
Toomey. I am a musician, entrepreneur, and activist. I speak to 
you today as a working artist, a copyright owner, and the 
Executive Director of the Future of Music Coalition. On behalf 
of the Future of Music, it is my honor to testify today on our 
perspective.
    FMC has not taken a firm position on this issue. We will, 
however, consider the question in the broader context of issues 
that are impacting the music community.
    In the past 6 years, we have learned that the legal, 
technical, and legislative music environment is a delicate 
ecosystem. Remedies that serve musicians' allies and music 
business institutions may sometimes undermine the position of 
individual musicians. Solutions that serve one class of 
musician may underserve another class of musician. We have 
therefore learned we must always proceed with caution when 
advocating new structures that impact upon the livelihoods of 
creators.
    Furthermore, musicians do not always have uniform views 
about the emerging digital marketplace and the opportunities 
and challenges therein. To illustrate this point, in the spring 
of 2004, Future of Music and the Pew Center for the Internet in 
American Life conducted an online survey to gauge musicians' 
opinions about copyright, file sharing, and music on the 
Internet. The results indicated that musicians are sharply 
divided about the impact of file sharing. Thirty-five percent 
of this sample agreed with the statement that file sharing 
services are not bad for artists because they help promote an 
artist's work. Twenty-three percent agreed with the statement 
that file sharing services are bad for artists because they 
allow people to copy an artist's work without permission or 
payment. Thirty-five percent of those surveyed agreed with both 
statements.
    Considering these conflicting views, it is difficult to 
give a definitive answer regarding what musicians think about 
the possibility of a small claims arbitration court for 
copyright infringement. In preparation for the hearing, I read 
Mark Lemley and Anthony Reese's proposal regarding these 
copyright disputes as well as the testimony of all the 
panelists and it seems that people are offering very measured 
and reasonable solutions. Speaking specifically to Mark Lemley 
and Anthony Reese's proposal, I am a little hesitant to 
speculate that this specific model would benefit all copyright 
owners, especially creators.
    First, the article addresses only one specific action, the 
filing of a suit against peer-to-peer file uploaders, a scope 
that is much narrower than even the positions of the 
individuals on this panel today. Since Lemley and Reese confine 
the argument to one context, we wouldn't want to speculate 
whether this legal procedure might also be practical in other 
contexts until we knew more.
    Second, the authors of the article do not appear to 
contemplate individual artists using this procedure to file 
copyright claims. The potential benefit from this proposal for 
musicians would be uncertain and possibly indirect, not 
necessarily bad, but still uncertain. Furthermore, the authors 
have not undertaken to analyze any of the potential harms to 
individual musicians from adopting this proposal or any 
variation to it.
    My comments here do not diminish the problem of copyright 
infringement to the music community nor do I mean to dismiss 
this proposal as presented, but I can say that in the 6 years 
the Future of Music has existed, I have never been contacted by 
a musician about this specific issue. I have been contacted 
about hundreds of other issues, but not this one.
    Therefore, a more important question for the hearing may be 
where the issue of copyright remedy falls within the hierarchy 
of current political issues facing musicians. Despite the 
diversity of views expressed by artists across the disciplines, 
there are some issues with very broad support and agreement. 
For example, the peer-to-peer haters and the peer-to-peer 
lovers would both likely be advocates for national health 
insurance for musicians and increased media diversity in low-
power radio. This is why FMC has worked on those issues.
    We have also worked on public performance rights, copyright 
reversion, payola, media ownership, and net neutrality, and 
these are all issues we are contacted about regularly. Also, 
orphan works, the database authentication and licensing 
solutions, and to these last three issues, FMC truly believes 
that centralized authentication structures must be created to 
give artists the ability to easily claim ownership of works in 
up-to-date, transparent, and publicly available databases and 
registries.
    Databases help independent and amateur artists gain 
recognition within the established music industry. For one 
example, Sound Exchange, which is the performance rights 
organization that administers the distribution of royalties for 
the public performance of sound recordings on most digital 
services, recently compared its database of sound recording 
artists with unclaimed royalties with another database, that of 
a company called CD Baby that distributes the music for about 
120,000 independent artists. When they compared their lists, 
they immediately identified 15,000 CD Baby artists with 
royalties to claim at Sound Exchange. This is just one example 
of the value of comparing two privately administered databases 
in the context of a clear licensing structure. Expanded public 
databases could greatly increase the identification of works 
and thus diminish the occurrence of orphan works.
    In conclusion, experience has shown us that when copyright 
works are authenticated and transparent publicly accessible 
databases, it makes it easier for users to obtain licenses. The 
easier the licensing process, the more money flows to artists. 
Legal remedy is a valued tool that copyright owners have in 
defending their intellectual property. FMC is unwilling to 
publicly advocate for any changes to copyright law that would 
impact this right until we were absolutely sure that the 
changes would be positive for musicians.
    Furthermore, it is unclear to FMC whether litigious or 
penalty-focused solutions would be more effective at 
compensating artists than solutions focused on this 
authentication and inexpensive licensing structures.
    Thank you again for inviting us to be part of this hearing 
today. I look forward to your questions.
    Mr. Smith. Thank you, Ms. Toomey.
    [The prepared statement of Ms. Toomey follows:]

                   Prepared Statement of Jenny Toomey

    Good afternoon. On behalf of the Future of Music Coalition, it is 
my honor to testify before the Subcommittee on Courts, the Internet, 
and Intellectual Property, and to add our perspective to this oversight 
hearing on ``Remedies for Small Copyright Claims.''
    This subject is complex, and it is not an issue on which FMC has 
taken a firm position. In the recent past we have made some prudent 
suggestions regarding the related question of orphan works at the US 
Copyright Office. We believe there is some value in restating some of 
these here today. We will also consider the question of ``remedies for 
small copyright claims'' in the broader context of issues that are 
impacting the music community. Finally, we hope to articulate what we 
have learned from organizing disparate music communities around key 
policy issues.
    To begin, I will provide a brief background about myself, and the 
Future of Music Coalition. My name is Jenny Toomey. I am a musician, 
entrepreneur and activist. I have released seven albums and toured 
extensively across the United States and Europe. For eight years, I co-
ran an independent record label called Simple Machines. For the past 
six years I have run the Future of Music Coalition. I speak to you 
today both as a working artist and as Executive Director of that 
organization.
    FMC is a national nonprofit education, research and advocacy 
organization that identifies, examines and translates the challenging 
issues at the intersection of music, law, technology and policy. Recent 
history has shown that technology has vastly increased opportunities 
for both artists and consumers, and facilitated the creation of 
efficient methods for promoting, distributing and selling music. FMC 
was founded in the midst of this technological paradigm shift, based on 
the strong belief that, in order to avoid replicating inefficient or 
unequal structures of the past, artists and artist advocates must be at 
the policymaking table to balance the traditional major label, 
technology and commercial radio players. This is our organizational 
mission and we are, therefore, quite honored to have our views included 
in today's discussion.

        ORGANIZING ARTISTIC COMMUNITIES AROUND KEY POLICY ISSUES
 
   In the past six years we have recognized that the legal, technical 
and legislative environment surrounding musicians is a delicate 
ecosystem. Remedies that serve musicians' allies and music business 
institutions may serve to undermine the position of individual 
musicians. Even less obvious, solutions that serve one class of 
musician may undermine or under serve another class of musician. We 
have, therefore, learned that there are very few black and white 
answers to the broad grey space we inhabit, and despite our deep desire 
for remedy and clarity, we must proceed with caution when establishing 
new structures that impact the livelihood of creators.
    Let me give you an example of the range of differences within the 
music community. FMC has had the opportunity to speak all over this 
country and the world. Generally, we are included in panel discussions 
with experts from other artistic and academic disciplines as the 
musicians' voice and are often asked, ``What do musicians think 
about...x?'' This question is simultaneously impossible and simple to 
answer. Impossible, as it would take years to document the variety of 
perspectives held by musicians on any issue. Simple, as the concept of 
complexity is easy to convey.
    For example, in response to the question, ``What do musicians think 
about the new digital marketplace?'' I can say:

          ``At this very moment there is one musician in an online chat 
        room collaborating with another musician on the other side of 
        the globe. That musician is recording synthetic sounds created 
        exclusively on her computer. These sounds are digitally 
        recorded and sent across the internet, and the completed 
        compositions are fixed in a flexible copyright with a Creative 
        Commons license and made available exclusively as free digital 
        tracks distributed through peer to peer networks.
          ``At the same time, there is another musician recording his 
        spinet on a turn-of-the-century Edison cone recording machine 
        that he purchased at a thrift store. He will fix these 
        compositions using an analog tape machine and the release the 
        album as a vinyl record with formally registered copyrights, 
        for sale only in brick and mortar record stores. When 
        interviewed, this artist will decry the technological 
        innovation that allows music fans to listen to his compositions 
        digitally in any order other than the one he established on the 
        record.''

    However disparate and extreme, these examples are an attempt to 
convey the range of valid perspectives held by individual members of 
the music community that we represent. They are also a means of 
implying the increased complexities that arise when legal or 
legislative solutions are proposed to serve the needs of more than one 
artistic discipline. Copyright law lives not only at the complex 
intersection of commerce and art, commerce and speech, commerce and 
ideas--but also at the complex intersection of art and art. Laws that 
protect illustrators must also serve composers and choreographers. We 
urge the committee to recognize this complexity as you proceed and 
include as many stakeholders as possible in the process.

                  SMALL COPYRIGHT CLAIMS AND MUSICIANS

    Second is the question of where the issue of small copyrights 
claims falls in the spectrum of complex policy issues musicians face. 
In preparation for this hearing I have read ``A Quick and Inexpensive 
System for Resolving Peer to Peer Copyright Disputes,'' by Mark Lemley 
and Anthony Reese. It seems to me a measured and reasonable proposal; 
however, I am hesitant to speculate that this model for small claims 
copyright disputes would benefit all copyright owners, especially 
creators. First, the article addresses one specific action--filing suit 
against P2P file uploaders--a scope that is much narrower than even the 
individuals represented on this panel. Since Lemley and Reese confine 
their argument to one context, we would not want to speculate whether 
this legal procedure might also be practical in the context of orphan 
works.
    Second, the authors of this article do not appear to contemplate 
individual artists using this procedure to file copyright claims. The 
potential benefits from this proposal for musicians would be uncertain 
and possibly indirect. Furthermore, the authors have not undertaken to 
analyze any potential harm to individual musicians from adopting this 
proposal or a variation of it.
    My comments do not mean to diminish the importance of the issue of 
illegal file trading or copyright infringement to the music community, 
nor do I mean to dismiss the proposal as presented. But I can say that 
in the six years that FMC has existed as an organization, hosting 
national policy summits and speaking about these issues, I have never 
once been contacted by an artist or an artist advocate about the 
problem of legal fees associated with copyright infringement cases. As 
such, we are unwilling to speculate on the benefits for our 
constituency. This proposal may serve as the platform for such future 
discussion and, if such an action is necessary, FMC would recommend the 
full public participation of the arts community before any such 
solutions be applied.

                ISSUES THAT UNITE THE ARTISTIC COMMUNITY

    Despite the diversity of views expressed by artists across 
disciplines it is also quite possible to find areas of common interest 
and platforms for collaborative change. There are many issues with 
broad support across disparate communities. For example, our digital 
musician and our musical Luddite from the previous example would both 
likely be advocates for national health insurance, increased media 
diversity, and low power radio. This is why FMC has worked on issues 
such as:

          Support for Public Performance Right for Sound Recordings. 
        Royalties are generated when a song is performed publicly; 
        whether on a radio station, at a sports event, on a jukebox, or 
        in a movie. In the US, these royalties are collected by ASCAP, 
        BMI and SESAC and distributed to the member songwriters, 
        publishers and/or composers. As an indication of the 
        significance of this revenue stream for musicians and the 
        industries that they support, ASCAP reported distributing over 
        $645 million to its members in 2005.\1\
---------------------------------------------------------------------------
    \1\ ``ASCAP Revenues up $50M in 2005'' Billboard, March 13, 2006
---------------------------------------------------------------------------
          While PRO royalties are distributed to songwriters and 
        composers for public performances for terrestrial radio play, 
        this right does not extend to the performers, recording artists 
        or the sound recording copyright owner.\2\ For example, when 
        you hear Patsy Cline singing ``Crazy'' on the radio, the 
        songwriter Willie Nelson is compensated through BMI, but the 
        estate of Patsy Cline is not compensated for that performance, 
        nor are the studio musicians and backing vocalists, nor the 
        record label, that brought that song to life.
---------------------------------------------------------------------------
    \2\ There are two copyrights assigned to a musical work: the 
underlying musical composition and sound recording. The composition 
(lyrics and music) has a public performance right, which is the right 
administered by the performance rights organizations ASCAP, BMI and 
SESAC. The sound recording (ie the performance of the musical work) 
does not have a performance right for non-digital performances in the 
US.
---------------------------------------------------------------------------
          This arrangement is the result of a long standing argument 
        made by terrestrial broadcasters that performers benefit from 
        the free promotion that they get by having their music played 
        on the radio, which broadcasters contend increases sales. As a 
        result, broadcasters have avoided paying a public performance 
        royalty to performers for decades.
          Contrast this with a performance on a digital platform. Just 
        as in traditional media, broadcasters of digital performances--
        webcasters, satellite radio, cable subscriber channels--must 
        obtain licenses from ASCAP, BMI, SESAC which compensate the 
        songwriters and publishers of the music they play. But because 
        of the Digital Performance in Sound Recording Act of 1995, they 
        also pay royalties to the performers. SoundExchange--the 
        performance rights organization established by the DPRA--issues 
        licenses to cable and satellite subscription services, non-
        interactive webcasters, and satellite radio stations, then 
        distributes the royalty payments directly to artists (45%) and 
        to the copyright owner (45%).
          As US broadcasters migrate to digital radio, harmonizing the 
        licensing rules that apply to various platforms offering 
        analogous products is more important than ever. As radio 
        switches from broadcasting in analog to digital signals, 
        industry engineers predict that incumbent radio station 
        licensees will be able to program an additional two to four 
        side-channels on their slices of spectrum, thus at least 
        tripling their opportunity to generate revenue. Despite the 
        digital nature of HD radio, the DPRA does not apply.\3\ 
        Therefore, all musical performances on these new HD radio 
        stations will not have a public performance right for sound 
        recordings. Unless Congress acts, incumbent broadcasters will 
        continue to exploit their exempt status that sets them apart 
        from other media providers.
---------------------------------------------------------------------------
    \3\ DRPA does not apply unless the terrestrial broadcaster chooses 
to use a side-channel to create a subscription service or an 
interactive service. In those cases, the radio station will pay the 
digital performance right to SoundExchange.
---------------------------------------------------------------------------
          FMC calls on Congress to modify the US Copyright Act to 
        establish a broad public performance right for sound 
        recordings, but it in a way that will not diminish existing 
        royalty structures that compensate composers, songwriters and 
        publishers. This modification would benefit creators, 
        compensate performers, establish licensing parity among media 
        providers and bring the United States' copyright standards in 
        line with other developed nations.
          Supporting Copyright Reversion and the Right to Reacquire: 
        Copyright reversion is a negotiable clause in contracts that 
        states the date when the copyrights revert to the creator. 
        Section 304(c) of the 1976 Copyright Act made US copyrights 
        revert to artists 35 years after creation despite contract 
        length. This law was passed to protect the rights of artists 
        who had made disadvantageous deals. In some European countries, 
        copyrights revert if a label fails to keep a record in print.
          An estimated 75 percent of the back catalog copyrights owned 
        by major record labels are currently out of print. This 
        practice reduces artists' ability to make a living by 
        functionally removing their essential right to make their work 
        available for sale. Artists who have signed away their 
        copyrights have no legal recourse. Signing away copyrights is a 
        basic condition of most record contracts.
          A 2005 report by the Council on Library and Information 
        Resources expressed the magnitude of this problem when it found 
        that significant numbers of historic recordings are not easily 
        accessible to scholars, students, and the general public for 
        noncommercial purposes. While some recordings are limited 
        because they only play on out-of-date technologies (cylinder 
        players, wire machines), copyright law also adds to this 
        problem since it allows only rights holders to make these 
        recordings accessible using current technologies (CD re-issues, 
        digital files), yet the rights holders appear to have few real-
        world commercial incentives to reissue many of their most 
        significant recordings.\4\
---------------------------------------------------------------------------
    \4\ ``Survey of Reissues of U.S. Recordings'', Tim Brooks, Council 
on Library and Information Resources and Library of Congress, August 
2005. http://www.clir.org/pubs/reports/pub133/contents.html
---------------------------------------------------------------------------
          While there are many barriers to copyright reversion in major 
        label contracts, there are a number of musicians, archivists, 
        and public domain advocates that have asked for more efficient 
        laws that would allow authors and creators to assert their 
        ownership rights when copyright owners fail to meet their 
        contracted obligations. In 2005, recording artist groups, 
        including FMC, called for reasonable legislation that would 
        give recording artists the right to reacquire their copyrighted 
        works if their record label had stopped making their records 
        commercially available.
          Updating Radio Payola Regulations: While various laws and 
        hearings from the 1960s-1970s muted the prominence of payola, 
        payola-like practices resurfaced in recent decades, but in a 
        more indirect form. Standardized business practices employed by 
        many broadcasters and independent radio promoters resulted in 
        what many consider a de facto form of payola.
          Under more recent payola-like practices, radio station group 
        owners established exclusive arrangements with ``independent 
        promoters,'' who acted as middle agents between the stations 
        and the record labels. On the station side, the indie promoter 
        guaranteed a fixed annual or monthly sum of money to the radio 
        station group or individual station. In exchange for this 
        payment, the radio station group agreed to give the independent 
        promoter first notice of new songs added to its playlists each 
        week. On the label side, the labels hired the indie promoters 
        to promote their records to certain stations and groups, since 
        they were aware that stations in the group also tended to play 
        mostly records that had been suggested by the independent 
        promoter. As a result of the standardization of this practice, 
        record companies and artists generally had to hire and pay 
        these independent promoters if they wanted to be considered for 
        airplay on those stations.
          The primary problem with payola for musicians is its 
        distorting effect on what gets played on the radio. Instead of 
        being judged on the merits of the performance and recording, 
        various forms of paid consideration and business relationships 
        determine what gets played on the air. In addition, payola 
        serves as a barrier to access to the public airwaves; the only 
        musicians that can benefit from radio airplay are those that 
        can afford to participate in this label/indie promoter/radio 
        station relationship.
          NY Attorney General Eliot Spitzer has been the most 
        aggressive at combating payola. Using the subpoena power of his 
        office to acquire evidence, his 2004-2006 investigation 
        uncovered quid pro quo relationships that were suspected to be 
        blatant violations of payola laws, including bribery in the 
        form of lavish gifts and trips given by labels to radio 
        stations and their employees in return for airplay of the 
        labels' songs. As a result of his investigation, two of the 
        four major labels have settled out of court, paying a total of 
        $15 million. Spitzer's investigation will continue in 2006.
          Senator Feingold has also attempted to address the problem. 
        In 2003, he introduced S. 221, the Competition in Radio and 
        Concert Industries Act. The bill addressed the anti-competitive 
        practices of some radio corporations that allegedly leveraged 
        their market power to shake down the music industry in exchange 
        for playing their songs. While this bill did not make it out of 
        committee, it delivered a message to the radio and concert 
        industry that any business practices that leveraged one 
        corporate arm against another at the expense of artists would 
        not be tolerated. FMC believes that Feingold's bill forced the 
        industry to move away from the independent promoter structure, 
        and create more firewalls between concert and radio divisions.
          FMC believes that payments made or consideration provided to 
        radio stations to influence playlists--other than legitimate 
        and reasonable promotional expenses--must be prohibited, unless 
        such payments are announced over the air. This includes 
        payments made through independent radio promoters and 
        considerations like free concerts or other services provided to 
        radio stations.
          FMC urges Congress to support the passage of S. 2058, the 
        Radio and Concert Disclosure and Competition Act, introduced by 
        Senator Feingold in November 2005. The bill extends definition 
        of payola to include pay for play practices and forces breakage 
        of links between concert promoters, venues and airplay. We also 
        urge the FCC to hold radio stations found accepting payola 
        accountable and apply appropriate penalties or fines.
          Media Ownership and Net Neutrality: One of the most 
        significant aspects of the transformation to a digital music 
        economy is rooted in the ``common carrier'' underpinnings of 
        the Internet. Because the Internet is essentially open, the 
        creator/artist has the right and the ability to make their work 
        available to potential consumers, and consumers. These 
        consumers, in turn, are able to access that work via a number 
        of legitimate, licensed platforms and services.
          This fundamental shift has revolutionized the music economy, 
        as artists are no longer forced to enter into negotiations with 
        record labels or participate in illegal payola-like practices 
        in order to access the marketplace. Similarly, music fans now 
        have a wide range of opportunities to access music, information 
        and content. This dynamic is one of the core reasons that music 
        released by independent labels has grown to an estimated 28 
        percent market share.
          The music community has very legitimate reasons to be 
        concerned both with the ownership rules that govern traditional 
        media and the new framework being developed by Congress to 
        govern broadband and other ``post-media'' technologies.
          Technology ensures that the traditional bottlenecks 
        separating artists from consumers can be overcome; now Congress 
        must ensure that innovation will continue, a competitive 
        marketplace for high speed services will develop and the basic 
        ability of the artist to access the Internet as a way of 
        reaching potential consumers will be written into law. FMC 
        urges Congress to: hold the line on radio consolidation; expand 
        and protect noncommercial media; ensure the transition to HD 
        radio benefits musicians and citizens and; understand the value 
        of network neutrality to copyright owners and music fans.

                ORPHAN WORKS AND DATABASE AUTHENTICATION

    Finally, on orphan works. While there may be unmeasured enthusiasm 
in the music community for remedies for small copyright claims such as 
the ones suggested by Lemley and Reese, it may be premature to address 
this issue before we solve the Copyright Office's larger question 
regarding orphan works. This is particularly important to FMC as orphan 
works is an issue that many of our constituents have raised and 
discussed in the recent years. In March 2005, FMC, AFTRA and AFM filed 
joint comments in the Orphan Works proceeding at the US Copyright 
Office.\5\ Our comments recommended that the US consider adopting a 
modified version of the Canadian Unlocatable Copyright Statute to allow 
creators and the public to use copyrighted works that are unavailable 
because the copyright owner is either unidentifiable or unlocatable. In 
addition, we asked the Copyright Office to issue a notice of inquiry 
examining the status of out-of-print sound recordings, something that 
is particularly important for musicians whose prior albums may not be 
available for sale.
---------------------------------------------------------------------------
    \5\ http://www.futureofmusic.org/news/orphanworks.cfm
---------------------------------------------------------------------------
    FMC also believes that much more must be done to increase 
authentication structures to give artists the ability to publicly and 
easily claim ownership of works in up-to-date, transparent, and 
publicly available databases and registries. Databases have recently 
helped identify independent and amateur artists who traditionally would 
have slipped through the cracks of recognition of the terrestrial music 
industry. For example, SoundExchange, which is the performance rights 
organization that administers the collection and distribution of 
royalties for the public performance of sound recordings on most 
digital services, compared its database of sound recording artists with 
unclaimed royalties with the database of a company called CD Baby that 
distributes the music of over 120,000 independent artists. When they 
compared their lists, they identified 15,000 CD Baby artists with 
royalties to claim. CD Baby then urged its members to sign up with 
SoundExchange to collect their royalties. This is just an example of 
the effectiveness of comparing two privately administered databases. 
Databases with similar qualities could greatly benefit with the 
identification of various works, thus diminishing the occurrence of 
orphaned works, and allowing for the continued circulation and use of 
existing copyrighted material.

                               CONCLUSION

    Experience has shown us that when ownership of copyrighted works is 
documented in transparent, publicly-accessible databases, it makes it 
easier for users to obtain licenses. The easier the licensing process, 
the more money that flows to artists. FMC continues to support systems 
that both respect copyright owners right to control their works while 
also incentivizing the maximum circulation of copyrighted works.
    Legal remedy is a valued tool that copyright owners have in 
defending their intellectual property. FMC is unwilling to publicly 
advocate for changes that would impact this right until we were sure 
that the impact would be positive for musicians. That said, it is 
unclear to FMC whether litigious, penalty-focused solutions would be 
more effective at compensating artists than solutions focusing on 
authentication and inexpensive licensing structures.
    Thank you again for inviting us to be part of today's hearing and I 
look forward to your questions.

    Mr. Smith. Mr. Holland?

TESTIMONY OF BRAD HOLLAND, FOUNDING BOARD MEMBER, ILLUSTRATORS' 
                     PARTNERSHIP OF AMERICA

    Mr. Holland. Thank you, Mr. Chairman. Chairman Smith, 
Ranking Member Berman, and Members of the Committee, last year, 
the Illustrators' Partnership filed a submission to the 
Copyright Office about the orphan works study. This was 
endorsed by 42 international arts organizations which 
represented a broad spectrum of popular artists, fine artists, 
medical and architectural illustrators, cartoonists, and 
educators who work both in the United States and overseas, so I 
am pleased to have an opportunity to say a few words about the 
subject of remedies for small copyright infringement.
    Wherever possible, artists have attempted to work on a 
traditional business model. Our work is commissioned by clients 
to whom we license initial rights for one-time usage for an 
agreed-upon price. Most artists retain their secondary rights, 
which with the advent of the digital era have been recognized 
as a potential stream of income and, therefore, a contested 
prize for any party that can obtain access to them.
    Now comes a proposal that risks transferring a vast body of 
these rights into an orphan works limbo by legalizing the 
infringement of any work whose creator is said to be hard to 
find. This would harm artists and photographers 
disproportionately because images are often published without 
identifying information, signatures may be illegible, and 
information can be removed by others.
    We have been told that this Committee plans to move ahead 
to create a small claims court--I'm missing part of my 
statement here. I'll move ahead to where--I've been told the 
Committee plans to consider the creation of a small claims 
court or arbitration mechanism to try to litigate the 
infringement cases that will follow.
    We strongly oppose the creation of such courts. The orphan 
works report states that a good faith, reasonably diligent 
search for a copyright holder will be, ``a very general 
standard,'' defined solely by the users themselves, many of 
whom may well have an interest in an unsuccessful search for 
the copyright holder. Absent a settlement by negotiation after 
the infringement has taken place, the copyright owner's sole 
recourse would be to bring an action before one of these 
courts.
    Copyright law is a Federal law, and as we understand it, 
there are only 11 Federal circuits in the country with 97 
United States district circuits. Would copyright holders have 
to travel to one of them every time we need to file a small-
dollar infringement claim? If so, we wouldn't be able to add 
travel and lodging expenses, and under the proposed limitation 
on remedies, the copyright owner would not even be able to 
obtain court costs or attorneys' fees, not even if the work had 
been preregistered. The orphan works amendment virtually 
guarantees that the cost of suing an infringer would exceed 
whatever sum the copyright owner would recover in a successful 
small claims action.
    By limiting remedies, the orphan works amendment will 
create a no-fault license to infringe, so let us look at a 
hypothetical small claims action that I might be obliged to 
bring in the future. In the 1990's, I licensed a series of 
pictures for one-time use for a corporate annual report. 
Copyright notice and credit are almost always omitted by art 
directors for annual reports and almost always for 
advertisements, in spite of the wishes of the artist to 
preserve his credit. Now, let's say I registered my copyright 
in the work as part of a group registration, the title of which 
was based on the annual report. I subsequently licensed some of 
these pictures for exclusive use in various ads in the United 
States and I make it a practice never to license my work for 
inexpensive or distasteful products.
    But let's say an infringer finds the annual report. He 
likes the pictures, sees no credit, and does a good faith 
search that fails to identify me as the owner of the copyright. 
He begins selling cheap t-shirts bearing my art. Under current 
copyright law, my remedies would include statutory damages, 
attorneys' fees, impoundment, and injunction for this flagrant 
infringement because it's damaged my exclusive right to license 
my work in high-end markets.
    But in small claims court, my remedy would be what? 
Reasonable compensation for use of my work on cheap t-shirts, 
and even this would be limited by whatever maximum the small 
claims court might set, and it would be constructed not to 
deprive the infringer of the profits he made in reliance on a 
so-called failure to locate me.
    Without the deterrent of statutory damages and attorneys' 
fees, and without a permanent injunction against repeat 
offenses by the same t-shirt seller, this experience would now 
act as an incentive for the infringer to exploit other 
uncredited, and therefore effectively orphaned, images by other 
artists. In effect, he has discovered that infringing artists 
is a rational business decision, and this, in turn, could 
inspire still more infringers.
    This clearly violates the three-step test of the Berne 
Convention, which states that exceptions to an author's 
exclusive rights should apply only to certain special cases, 
should not conflict with the author's normal exploitation of 
the work, and should not prejudice the author's legitimate 
interests. As legal scholars Jane Ginsburg and Paul Goldstein 
noted in their submission to the orphan works study, 
``Compliance with Berne/TRIPs is required by more than 
punctilio. These rules embody an international consensus of 
national norms that in turn rest on long experience with 
balancing the rights of authors and their various beneficiaries 
and the public. Thus, in urging compliance with these 
technical-appearing rules, we are also urging compliance with 
longstanding practices that have passed the test of time.''
    Creating a new form of legalized infringement without 
statutory remedies, even for registered copyrights, and then 
offering a small claims court as a solution to the wave of 
infringements that will result is not a workable approach. It 
will only serve to legitimize the taking of our copyrights. For 
these and other reasons, we would respectfully ask that this 
Committee consider the negative effects that orphan works 
legislation would have on free market transactions. The attempt 
to limit the damage by adding a burden of small claims court to 
our overworked Federal judiciary is simply not a viable 
approach.
    Now, after I submitted the written testimony, I got an e-
mail from Mr. Keely asking me to consider the issue simply as 
an abstract issue and not in the context of orphan works. We 
did consider it in the----
    Mr. Smith. Actually, he was also asking you to change your 
position on the small claims court, as well. [Laughter.]
    Mr. Holland. To be--let me explain for 1 second. We 
considered the issue of small claims court in the light of 
orphan works legislation because this Committee has already 
indicated its intent to move orphan works legislation quickly, 
and it seemed simply a rational thing to consider the 
possibility of the two in conjunction. Considered in the 
abstract, we'd have more questions, I think, than answers about 
how a small claims court would work for infringement cases.
    One question, for example, is it possible to fund and 
operate an entirely new Federal court system just to administer 
infringement cases?
    Two, if cases were scarce, would competent administration 
be affordable?
    Three, if cases were common, wouldn't it be settling in 
court issues that should be settled in the marketplace?
    Four, without discovery, how could a plaintiff be sure that 
the scope of an infringement was limited to a small-dollar 
issue?
    Five, how many authors would favor a small claims 
infringement court because they mistakenly think it would speed 
the resolution of small-dollar contractual claims, which as I 
understand it can already be handled in ordinary courts?
    And six, how many small claims cases would break down in 
meaningless resolution simply because of disputed or 
inconclusive testimony by the participants?
    We believe that copyrights as a form of private property 
should be protected as exclusive rights. Unlike, say, dry 
cleaning disputes or unpaid babysitter bills, copyright cases 
require special knowledge of Federal law and international 
treaties and they involve market decisions that no single 
judge, let alone many judges, would be qualified to decide, nor 
justified to resolve except in ordinary--when market solutions 
fail. In a burgeoning world of online libraries, databases, 
subscription services, and the like, the just resolution of 
even simple-seeming cases may require more than splitting the 
difference between contending parties.
    We are afraid that the creation of a small claims court 
would only lead down a slippery slope to a system where the 
seller is increasingly forced to deal with the user after the 
fact and creators would have to go to court more and more often 
just to get paid for the routine use of their work, which in 
some cases would simply mean the routine theft of their work.
    That is all I have to say, and I thank the Committee for 
your indulgence and the opportunity to express our opinion.
    Mr. Smith. Thank you, Mr. Holland. I was about to send you 
an e-mail asking you to conclude and you did, so thank you.
    [The prepared statement of Mr. Holland follows:]

                   Prepared Statement of Brad Holland



    Mr. Smith. Mr. Perlman?

 TESTIMONY OF VICTOR S. PERLMAN, GENERAL COUNSEL AND MANAGING 
    DIRECTOR, AMERICAN SOCIETY OF MEDIA PHOTOGRAPHERS, INC.

    Mr. Perlman. Mr. Chairman, Ranking Member Berman, 
distinguished Members of the Subcommittee, good afternoon. I 
thank you and your hard-working staff for the opportunity to 
present the views of professional photographers on this vital 
subject.
    I'm speaking today not only for the American Society of 
Media Photographers, but with the backing of virtually every 
major trade organization representing professional 
photographers in this country as well as the Graphic Artist 
Guild, which represents commercial illustrators and graphic 
artists. Anecdotally, I should mention that today marks the 
first time I can ever remember that my good friend and 
colleague, Brad Holland, and I have been on opposite sides of 
any issue affecting photographers and illustrators.
    Mr. Chairman, you described the problem perfectly in your 
introductory remarks. The facts here are really simple. 
Photographers and commercial artists produce huge numbers of 
copyrighted works. Infringements are constant, but suits are 
rare. Why? Because there is either not enough money at stake 
and/or the costs of litigating are too high.
    The Copyright Office has long recognized how 
disenfranchised photographers are under our copyright system. 
In my job, every year, I get hundreds, perhaps thousands of 
telephone calls and e-mails from photographers and members. The 
scenario is almost always the same. They discovered an 
infringement, they have made a demand, the infringer basically 
says, ``Sue me.'' The question is, ``What can I do?'' As a 
practical matter, my answer is usually ``nothing.'' Why not? 
Because the photographer can't get into court.
    Usually there is not enough money in controversy. The fees 
for licensing photographs and graphic images are typically in 
the hundreds perhaps to the thousands of dollars, depending on 
the level of usage required. All you have to do is go online to 
the websites of Corbis or Getty Images, register as a potential 
use customer, pick a picture, pick a use that you want to make 
for it, and click on the right boxes and you will get a license 
fee, and you'll find that those numbers are astonishingly low. 
That means that lawyers won't take the case on a contingent fee 
basis.
    It also means that the photographers and illustrators 
cannot afford to pay the hourly rates of copyright litigators. 
The numbers that I've heard so far today strike me as 
astonishingly low. The numbers that I see are typically in the 
mid- to high-five-figure and low-six-figure range to take a 
copyright infringement case through to completion.
    Even if they could get the lawyer to take the case on a 
contingent fee basis, most photographers can't afford to pay 
the out-of-pocket costs, including witness fees, expert witness 
fees, discovery, depositions, travel, et cetera, and many 
States have ethical rules that would prohibit the attorney from 
advancing those.
    Even if you got all the way past all of those hurdles, you 
still have the basic problem that you are going to have a huge 
investment of time, effort, and money and get back a small 
amount, and that's assuming that you have a solvent defendant.
    Eligibility for attorneys' fees is illusory. The promise of 
a refund somewhere down the line a couple of years later after 
you get on the train isn't worth anything if you can't afford a 
ticket to get on that train in the first place.
    Those are the hard costs. There are substantial soft costs. 
Photographers are basically sole proprietors. They have the 
choice of spending their time working or litigating. They can't 
do both. They don't have any back-office support to be able to 
do the work that is lost while they are dealing with the 
litigation matters.
    A classic example of that in the copyright context was the 
case of Rock and Roll Hall of Fame v. Chuck Gentile, which is a 
landmark case involving--a suit by the Rock and Roll Hall of 
Fame against Gentile because of a poster he took showing the 
building. He eventually won in the Sixth Circuit. Because of 
insurance and his assistance from ASMP, he didn't have to pay 
any money out of pocket. But the process of going through that 
litigation over a couple of years cost him his marriage, cost 
him his business, and drove him out of the photography business 
entirely.
    For lawyers and professionals, litigation is just 
litigation. It is another day at the office. For photographers 
and illustrators, copyright infringement cases are intensely 
personal.
    There are lots of potential solutions here. They have been 
described and put forth in the Copyright Office report. I think 
it's premature to try to deal with the details, but we would 
absolutely urge you to do what the Copyright Office report 
suggested and commission a study for the further investigation 
of this problem. This is probably the greatest legal challenge 
facing photographers today.
    Thank you for your time and consideration.
    Mr. Smith. Thank you, Mr. Perlman.
    [The prepared statement of Mr. Perlman follows:]

                Prepared Statement of Victor S. Perlman

    Mr. Chairman, Ranking Member Berman, and distinguished members of 
the Committee, I thank you for this opportunity to testify regarding 
the desperate need of professional photographers for some sort of 
structure that will give them the access to enforce their copyrights 
that they do not possess under the current system. I cannot think of 
any other issue that is of potentially greater importance to or impact 
on professional photographers.
    The American Society of Media Photographers' mission is to protect 
and promote the interests of professional photographers who make 
photographs primarily for publication. ASMP is the oldest and largest 
trade association of its kind in the world. However, it is important to 
note that my testimony today is made on behalf, not of just itself and 
its members, but of virtually every major trade association in the 
United States that represents the interests of freelance photographers.
    Freelance photographers create vastly larger numbers of copyrighted 
works than any other class of creators, yet they are the group that is 
the least able to access the protections theoretically afforded by the 
Copyright Act. The primary reasons for that sad fact are the extremely 
high cost of federal court litigation; the typically low amounts in 
controversy, when compared to the costs of litigation; the fact that 
most freelance professional photographers earn comparatively modest 
incomes; and the fact that many infringers are aware of this situation 
and use it to their advantage.
    Freelance professional photographers are small businesspeople who 
are typically sole proprietors. Their training and education often 
extend beyond college, and with the constant and meteoric changes 
occasioned by developments in technology, their costs of and need for 
continuing training are a demanding fact of life.
    Those same changes in technology also make the investment necessary 
to become and remain a professional photographer a staggering and 
constant burden. Where once a few camera bodies, lenses and strobes 
might be enough to get started, now multiple computers, monitors, 
scanners, and storage devices are absolute requirements, in addition to 
cameras, lenses and lights. Further, while a professional camera body 
used to cost a thousand dollars or so, new professional quality, 
digital camera bodies now cost many thousands of dollars, even after 
adjusting for inflation. For all of these reasons, professional 
photographers typically have limited financial resources at their 
disposal. The movie image of professional photographers based on David 
Hemmings driving a Rolls-Royce in Blow-Up is just that: a movie image. 
It is as close to reality as the bar scene in the first Star Wars.
    Every year, I receive hundreds of telephone calls and e-mails from 
our members and other professional photographers reciting similar 
stories: They have discovered an unauthorized use of a photograph. The 
image was registered before the infringement. The photographer has 
contacted the infringer and issued a demand. The infringer has refused 
to pay a licensing fee and/or cease the infringement. In essence, the 
infringer has said, ``So, sue me.'' The photographer wants to know what 
to do.
    In most cases, the practical answer is, sadly, ``nothing'' for the 
following reasons. First, and most importantly, the amount in 
controversy is likely to be only a few hundred to several thousand 
dollars. One need only go to the websites of major stock image houses 
like Getty Images or Corbis, (located respectively at http://
creative.gettyimages.com/source/home/home.aspx  and http://
www.corbis.com for confirmation: Simply register as a potential 
customer and go through the process of selecting an image and asking 
for the price for a hypothetical use.
    The relatively small size of the claim makes it next to impossible, 
as a practical matter, to find an attorney who will take the case. 
Although the Copyright Act provides for the possibility of an award of 
counsel fees against the defendant if and when the photographer wins, 
there is simply not enough money at stake for a decent copyright 
attorney to be interested in pursuing the case:

        1.  He or she does not want to antagonize a judge by taking up 
        the court's time with a case that would be in a municipal small 
        claims court if it were not for the fact of exclusive federal 
        jurisdiction over the subject matter.

        2.  There is no guarantee that the defendant will actually be 
        able to pay any award of attorney's fees.

        3.  The eligibility for statutory damages is of illusory value: 
        The court will always try to match the statutory damage award 
        to its best guess of the actual damages. And no matter whether 
        actual or statutory damages are at stake, proving them may cost 
        more in expert and consultant fees than the amount at issue.

        4.  There is always the risk of not winning. That is always a 
        consideration for attorneys trying to decide whether to take a 
        particular case, especially where a contingent fee arrangement 
        is being considered; however, in this situation there is 
        nowhere nearly enough potential reward to counterbalance any 
        risk of loss.

        5.  The client/photographer cannot afford to pay the attorney's 
        fees up-front, and the amount in controversy means that 
        contingent fee arrangements are not available.

        6.  The client/photographer cannot afford to pay the costs of 
        litigation, separate from and in addition to attorney's fees, 
        such as expert witness fees, depositions, travel, etc. In many 
        states, even if the photographer is lucky enough to find a 
        lawyer who will take the case on a contingent fee basis, the 
        ethical rules prohibit the attorney from advancing the out-of-
        pocket costs.

        7.  Even if none of the above factors were true, the disruption 
        to the photographer's business and the emotional drain of years 
        of litigation are simply more than most sole proprietors can 
        afford. Attorneys are in the business of dealing with 
        litigation, and we are used to living with it--it is our job, 
        no more, no less. We often lose sight of the soft costs of 
        litigation. However, to individual creators who are parties to 
        litigation, the experience is intensely personal and emotional, 
        and it stays at the front of their minds every minute from the 
        beginning of the case to the end, and even long after. In 
        addition, the time spent working on the case is time that 
        cannot be spent on making or marketing photographs.

    As an example of the last point, you may recall the landmark case 
of Rock and Roll Hall of Fame v. Chuck Gentile. The case involved 
trademark and related claims asserted by the Rock and Roll Hall of fame 
based on the photographer's poster showing a photo of the Hall of Fame 
building. The photographer won in the 6th Circuit. Between the 
photographer's insurance and help from some fund-raising by ASMP, the 
photographer did not have to pay any costs of defense, himself. Despite 
that, when the case was over, the time and emotional demands of the 
litigation had destroyed his marriage, ruined his business, and forced 
him out of the photography profession entirely. The costs of federal 
litigation for an independent contractor are not limited to money--
years of investing time and energy in a single case are crippling to 
people whose sole source of income is their ability to create and 
market their work.
    Obviously, the time that it takes to litigate a case in the federal 
court system, from start to finish is, by itself, a major source of 
both hard and soft costs to photographers. The sheer passage of long 
periods of time forces the parties and their lawyers repeat many tasks. 
This requires the photographer to pay additional legal fees that would 
not be incurred if the case were disposed of quickly. It also forces 
the photographer to spend time unnecessarily repeating various tasks 
and meetings, time that would otherwise be spent making and/or 
marketing photographs.
    Another major source of both high legal fees and lost time is the 
vast amount of discovery that is available under our current system. 
That, combined with the interstices of procedure, allow a defendant 
with a deep pocket to put a sole proprietor plaintiff in the poor house 
through endless discovery requests, depositions and motions. The 
wealthy and/or corporate defendant is in a position to drive up the 
plaintiff's legal fees while forcing the plaintiff to choose between 
searching for and copying documents, on one hand, or working for a 
living, on the other.
    The Copyright Office has long recognized the particular needs of 
individual creators of copyrighted works and acknowledged the general 
unavailability of the protections of copyright to those people, as a 
practical matter. What ASMP would like to see, to correct that 
situation, is a revision to the system of copyright enforcement that 
would accomplish the following goal: Create a system of enforcement 
that would be efficient and affordable enough to allow the practical 
redress of claims involving a few thousand dollars or less.
    There are many possible ways to accomplish this and variations on 
how such a system could be structured. ASMP would support virtually any 
arrangement that would accomplish the desired goal. However, as a 
starting point for your consideration, we offer the following. In our 
view, to make the system truly efficient and affordable, it should be 
structured to require the parties to proceed pro se; lawyers should not 
be permitted to represent either side. Once attorneys enter the 
picture, the potential complexities and resultant costs escalate. This 
would essentially be ``People's Court'' for smaller copyright claims.
    The system should also permit only limited pre-trial discovery, if 
any. All relevant documents should be submitted by the parties to the 
court and each other before the hearing date. Discovery makes 
litigation more extended, complex and expensive.
    There should be a (comparatively) short time frame from complaint 
to answer to hearing to disposition.
    Hearings would be tightly controlled and of short duration. Where 
the parties are in distant locations from each other, hearings might 
even be conducted over video-conferencing systems rather than in 
person.
    Appeals should require the appellant to post a bond sufficient to 
cover the appellee's estimated attorney's fees for the appeal, in the 
event that the appellant lost the appeal.
    We are open to all possible ways of structuring a small copyright 
claims court system. However, our wish list would cap jurisdiction at 
$10,000., which is the limit for many large-city small claims courts.
    Our preference would also be that the judge be (or become) a 
copyright specialist by virtue of his or her assignment to a copyright-
specific small claims court or to an administrative law judge position 
affiliated in some fashion with the Copyright Office, perhaps along the 
lines of the Copyright Royalty Judge system. One of the big problems 
facing small copyright owners is the fact that many judges do not have 
much familiarity with copyright, and they are particularly unfamiliar 
with the customs and practices of pricing usage of commercial 
photographs and other commercial works of art. Presumably, having an 
adjudicator who deals with these areas of the law repeatedly would help 
to eliminate that problem.
    An alternative, although less desirable in our view, approach would 
be to change the jurisdictional provisions of the Copyright Act to 
allow state courts to hear copyright cases involving less than some 
specified figure, such as $10,000. That would solve some of the 
problems. However, if such cases were to be heard in state courts of 
general jurisdiction, much of the delay, expense and complexity of 
federal court litigation would remain. In addition, that approach would 
not address, and indeed would exacerbate, the problems of insufficient 
judicial copyright experience and expertise mentioned above. In 
addition, it would raise issues of obtaining jurisdiction over 
defendants outside the state.
    As I said at the beginning of this statement, virtually everyone in 
the copyright world has long recognized that photographers are uniquely 
disenfranchised from access to the copyright protections to which they 
are legally entitled. Anything that this Committee can do to help 
correct that situation would be of great benefit to photographers and 
greatly appreciated by them. Perhaps more importantly, this is one of 
those all too rare situations where Congress can really do ``the right 
thing,'' help the little guy, and make our legal system move a bit 
closer to a system of justice, not just of laws.
    Thank you for your time and consideration.

    Mr. Smith. Mr. Aiken, let me address a couple of questions 
to you, but before doing so say that I thought that the survey 
that you conducted of the 1,200 authors was particularly 
useful. I know it took a lot of time and probably cost some 
money, but I thought that was very informative in a lot of ways 
and appreciate you all doing so.
    You answered my first question, which is did you think that 
small claims court should be voluntary for both the copyright 
owner and the accused infringer and you said, no, you thought 
it ought to be mandatory. Otherwise people can abuse the 
system.
    My second question, though, is do you think there ought to 
be a cap on damages or not in a small claims court?
    Mr. Aiken. I think there should be a cap on damages. When 
we presented to our members in the survey, we suggested $2,000 
or $3,000 might be the cap. The comments several made on that 
was that, while a small claims court is a good idea, that's too 
small to be useful, and they suggested something like $10,000 
might be a more appropriate limit.
    The first part of the survey, which was not appended to my 
remarks because a lot of it was not that useful, but there was 
some useful information and of those members who had wanted to 
file suit but hadn't, they valued their claims--59 percent 
valued their claims at $10,000 or less.
    Mr. Smith. It gives you an idea of where it might be.
    Mr. Aiken. Exactly.
    Mr. Smith. What would you do, if attorneys were involved, 
what would you do about attorneys' fees? Would you have them as 
part of the----
    Mr. Aiken. That should be available as a remedy in the 
small claims court, just as it is in Federal district court.
    Mr. Smith. Okay. Thank you, Mr. Aiken.
    Ms. Toomey, I know you feel that we should cast our net 
wider than just this one remedy, but let me focus on the small 
claims court for the time being. Do you feel, and actually some 
similar questions, do you feel that it should be voluntary or 
mandatory if we did have the small claims court as a remedy?
    Ms. Toomey. I think Mr. Aiken made a good case for that, 
for the idea that it would have to be mandatory if you were 
going to do it.
    Mr. Smith. And would you agree generally with the cap, as 
well?
    Ms. Toomey. It's very, very hard to say. Again, the music 
is used in a very different way than written works are and 
images are and illustrators are and so I'm not sure that I 
would say that----
    Mr. Smith. It may be that one size doesn't fit all in that 
regard.
    Mr. Holland, I know you opposed the idea of the small 
claims court for some, I think, tenable reasons, but what I was 
going to do was ask you to respond to the poll that Mr. Aiken 
took where the vast majority, for instance, of authors agreed 
that creating a small claims court was a good idea. They can't 
all be wrong, can they?
    Mr. Holland. If I remember Mr. Aiken's statistics, 55 
percent of them favored a small claims court.
    Mr. Smith. And 17 percent opposed----
    Mr. Holland. Seventeen percent disfavored it, and there was 
28 percent that was neutral, am I correct?
    Mr. Smith. That's pretty good memory. That's exactly right.
    Mr. Holland. Okay. I would think that some of them who are 
neutral on the subject probably just don't know what to think. 
I would also wonder--I know, first of all, there's a difference 
between, say, illustrators and writers. If someone is 
infringing Doris Kearns Goodwin, they will be infringing her 
probably in the same area that she writes in. They're not going 
to take Doris Kearns Goodwin's work and put it on an annual 
report cover. Illustrators have a totally different situation. 
Our infringement is more likely to be taken into the commercial 
market.
    Mr. Smith. My guess, though, is if you had a small claims 
court for authors and others, that illustrators might well want 
to jump on the bandwagon.
    Mr. Holland. May I respond?
    Mr. Smith. Sure.
    Mr. Holland. Because I think Vic Perlman did an excellent 
job of explaining what most of us feel about this. I have no 
question that if you were to go to most illustrators, they 
would probably--first of all, a lot of illustrators would 
confuse infringement cases with contractual disputes. Most of 
the artists that I know aren't so much infringed as they have 
problems getting paid by some cheapskate client, and a lot of 
them think that they would have to go to court--I mean, they 
think an infringement court might do them benefit in that area.
    Mr. Smith. Okay, thank you. Good answers.
    Mr. Perlman, after what you said about attorneys' fees, I 
now know why you recommended what you did, and you're probably 
right. You talked about five or possibly six figures. I used a 
four-figure example. I think that was wishful thinking, because 
I think attorneys' fees charge a lot and oftentimes too much.
    But your suggestion for the small claims court excludes any 
role for attorneys, and like I say, I think I know why. Don't 
you think there are going to be some instances where that 
should--if the party wants legal advice, should be able to get 
legal advice?
    Mr. Perlman. Conceptually, yes. The problem is as soon as 
we start bringing attorneys in, the complexity increases, the 
costs increase. And what I was looking at was basically 
People's Copyright Court. However, we would absolutely support 
virtually any relief that we could get in this area, except 
perhaps changing the jurisdictional laws so as to allow State 
courts to handle copyright claims. We simply don't believe they 
have the expertise for that.
    Mr. Smith. Thank you, Mr. Perlman.
    I am going to squeeze in one last question to Mr. Holland. 
Mr. Holland, is there anything we could do to a small claims 
court concept that would make you more comfortable with it or 
not?
    Mr. Holland. Well, my comfort or discomfort wouldn't speak 
on behalf of thousands and tens of thousands of illustrators, 
designers, medical illustrators, popular artists, sign artists. 
I wouldn't presume to even comment on something that would 
affect the careers of so many different people without first 
finding out how they would respond to it and explaining it to 
them in rational ways. It's one thing to go to people and say, 
yes, you're having trouble getting paid by clients. Would a 
small claims court benefit you? Yes. Everyone will say, sure, 
of course because some might take advantage of it.
    I think your surveys, Mr. Aiken, indicated that, what was 
it, 33 percent of those said they would actually use the court 
if it existed?
    Mr. Smith. I think it was, yes, it was about a third said 
they would use it.
    Mr. Holland. Yes, something like that.
    Mr. Smith. My time is up. The figure that I liked the best, 
of course, was that over three times as many supported it as 
opposed it. That's, I think, somewhat interesting.
    The gentleman from California, Mr. Berman, is recognized 
for his questions.
    Mr. Berman. It's so tough, because on the one hand, the 
attorneys charge too much, but when they decide to charge based 
on a percentage of the recovery, they try to outlaw it. 
[Laughter.]
    There's an interesting juxtaposition between the 
illustrators and the photographers as represented here. The 
illustrators, Mr. Holland doesn't like the small claims 
procedure because he sees it primarily as tied to an orphan 
works proposal that he really can't stand. The photographers 
have some concerns about the orphan works proposals, but 
they're so unsatisfied with their access to the copyright law 
that they're looking for a way apart from the orphan works 
issue to be able to get a recovery. So even though you both 
have some real concern about orphan works, you come down 
differently on this issue. Anyway----
    I guess I have one question, but it's a long one. Ms. 
Toomey, on page 11 of your testimony, you note that it's 
premature to address remedies for small copyright claims before 
we solve the Copyright Office's larger question regarding 
orphan works, and many of your members have raised the orphan 
works issue. So I am wondering, do your members envision that 
they will be a resurfacing owner in the orphan works context? 
Is that what they're concerned about, or are they comfortable 
with pursuing any resulting dispute from such resurfacing in 
Federal court?
    Along the same lines for Mr. Perlman, we've heard members 
of your association say that a small claims court or ADR 
proceeding must be developed in conjunction with any orphan 
works proposal. So I guess for the whole panel, what's the time 
line for this Committee? Is there a time line to address a 
legislative solution for remedies for small copyright claims in 
the context of orphan works?
    Mr. Aiken. First, I'd like to say that we have major 
problems with the orphan works proposal, as well. We see this 
as a separate issue and we think it should move on a completely 
separate track from the orphan works proposal. We would agree 
with a lot of the criticisms we've heard of orphan works as 
proposed, but we think that this is a completely separate 
issue.
    Ms. Toomey. I agree. I agree with that. I also think that, 
for us, orphan works have a number of different issues. One of 
the ways that orphan works tends to come up at, say, the Future 
of Music Conference or when we're--in our testimony with AFTRA 
and the AF of M earlier this year is the way that orphan works 
has made uncertainty in the marketplace about using certain 
types of copyrights and also recognition of some copyrights. 
That's why I talked a lot about the authentication database.
    The fact of the matter is that it's not simply whether you 
can find the owners of licensed orphan works, but also who 
actually has the right to execute them. There are works that 
are orphaned simply because the owner of the copyright doesn't 
make them available. So we have actually--we had a very long 
list of issues with regards to the orphan works proceeding.
    Mr. Berman. Well, that shouldn't be within the definition 
of orphan works, that the creator decides not to make it 
available.
    Ms. Toomey. It's not the creator, it's the copyright owner. 
So if an artist licenses their record to a label and the label 
allows it to go out of print and the artist wants to put it 
back in print and the public would like to get it but----
    Mr. Berman. I hear a work for hire issue underlying all of 
this.
    Mr. Holland. Yes. My question would be whether we would be 
considering this issue at all if it weren't for the concurrent 
orphan works legislation. Our main concern is that----
    Mr. Berman. The photographers would say we should be.
    Mr. Holland. I would agree, but it hasn't come up 
previously. I mean, as the Chairman indicated, this is the 
first time this has been brought up, and to me, it doesn't seem 
like it can be an accident that it came up at the same time as 
orphan works, because our problem with orphan works is that 
it's not exclusively limited----
    Mr. Berman. No, no, I think there's no doubt that--I think 
in large part because of the photographers, this issue of 
resolving disputes in a way that's effective for certain kinds 
of copyright owners in the orphan works context led to a 
discussion of this, but that doesn't mean it's automatically 
and necessarily linked to it. I mean, that's what I'm 
wondering. Should it be?
    Mr. Holland. I think it's inevitable that it will be, 
because if this Committee proceeds as indicated to move this 
legislation along, then I think we have to consider the small 
claims court in light of the potential passage of orphan works 
legislation. To consider it as a totally isolated incident--a 
totally isolated circumstance, we would have to know whether 
we're applying existing copyright law or the copyright law as 
it will be once orphan works legislation is passed, because the 
orphan works legislation is somewhat misnamed. A true orphan 
works amendment would apply only to old work whose authors were 
hard to find. This will literally apply to any work, any 
artist's work that can't be identified or where names have been 
removed.
    This will mean artists who do work next year, who are doing 
work right now, it will be retroactive and apply to all the 
people who did work ever since 1978, when they were promised by 
the Copyright Office that their work would receive protection 
whether they marked it and identified it and registered it or 
not. I mean, we were guaranteed basic protections for the last 
30 years.
    In a sense, this becomes a ``never mind'' provision, saying 
that everything that we've said for the last 30 years is off 
the books now and your work can be exposed if someone can't 
find you. So it's not exactly an orphan works legislation.
    In the Netherlands, for example, I think the Auteursvid 
[sic.--Autersrecht], if I remember correctly, it's article 19.1 
or something, makes a specific provision for the copyrights 
dealing with family photos, for example. So that particular 
issue of copyright infringement is simply taken off the table 
by a precise carve-out for that. I don't see why that couldn't 
be done for orphan works without exposing the work of everybody 
who's working right now.
    Mr. Perlman. I'm trying not to use the ``O'' word. 
[Laughter.]
    I believe that the two need to work in parallel. Unless 
there were a guarantee that there would be an overall solution 
of the small claims court/ADR problem for copyrights generally, 
I think there also needs to be the pursuit of the same issue in 
connection with the orphan works discussions that we have 
ongoing right now. I would imagine that if there were, in fact, 
solutions provided in both, that the orphan works having 
started first would probably have its provisions overridden by 
a repeal of the ADR/small claims court provision of whatever 
orphan works legislation might become enacted, that it would be 
repealed by the enacting legislation for an overall copyright 
ADR/small claims court.
    Mr. Smith. Thank you, Mr. Perlman.
    The gentleman from California, Mr. Issa, is recognized for 
his questions.
    Mr. Issa. Thank you, Mr. Chairman.
    Well, it's very clear that although the Chairman has 
announced that this may be the only hearing on small claims, 
we're clearly going to have another hearing at some point on 
orphan works, and perhaps we did today. [Laughter.]
    The level of concern is duly noted, though, and I share the 
fact that orphan works and how to fix the problem is complex, 
to say the least.
    But going back to the small claims part of it, and this is 
a broad question because I don't know that it was answered, if 
in a perfect world you had an administrative agency rather than 
a small claims court, one that would be similar to, for 
example, International Claims, where you have patents who make 
something outside the United States, you have in additional the 
ITC, an additional court you can go to to get an injunctive 
relief, and it's strictly administrative, would this be of 
value?
    And I'm not suggesting another piece of legislation, but 
I'm hearing your concerns, particularly Ms. Toomey, your 
concerns that you have some people that like it, but they're 
just as afraid they'll be sued under it as the other direction. 
Is it, in fact, the administrative details that bothers you and 
if hypothetically it was an administrative remedy, would that 
suit your purposes just as well?
    Ms. Toomey. For me?
    Mr. Issa. I'll start with you, please.
    Ms. Toomey. I think the danger here is that copyright 
exists at a very complicated intersection, not simply of art 
and culture, or art and speech, or art and a million other 
things. It also rests at the very complicated area of art and 
art, and creating a law that's going to solve this for 
illustrators, photographers, musicians, and authors, I think is 
going to be very difficult and I think it would be premature to 
suggest anything until we knew a lot more about it, and I think 
almost everyone on the panel has said something to that effect.
    I would say specifically as an example, within music, 
within the exact same band, depending on the different laws, 
copyright laws as well as the administration structures that 
pay artists for different aspects of their work, a law that 
helps a songwriter might hurt a side man. A law that helps an 
orchestra might hurt an individual artist. And these kinds of--
--
    Mr. Issa. Right, but if I can interrupt you----
    Ms. Toomey. Oh, I'm sorry.
    Mr. Issa [continuing]. We're not talking about changing the 
law here. We're simply talking about bringing small claims to a 
small claims court or to an administrative law judge 
specifically designed to bypass the normal Federal court if it 
is below a certain amount. We cannot fix the questions of 
orphan works here. We cannot fix the contractual problems that 
exist within your industry. I've never met a songwriter who 
didn't hate the people he took his royalties from. [Laughter.]
    I once had dinner with Francis Ford Coppola, and trust me, 
he hated the people that brought Godfather I, II, and III to 
the market and said so in very, very specific ways of how they 
had tried to destroy his art. We're not going to solve those 
here today.
    The question really is, when you have what to someone is de 
minimis in damages but to an artist is significant--let's call 
it $500 to $50,000--we are looking at whether or not there's a 
way to give relief that would not involve $35,000 in attorneys 
for a $2,500 claim. My question, very narrowly, is if not the 
small claims court, then how do you feel about an 
administrative, paper-only type of procedure if the dollars are 
below a certain amount?
    Mr. Aiken? Thank you for your head-shaking. It allowed me 
to call on you. [Laughter.]
    That sounds precisely like what we need here, that a paper-
only approach makes a lot of sense. It would be accessible to 
authors across the country by mail. It could make decisions 
based on whether or not there's a prima facie showing, pretty 
much what we had laid out in our testimony could be handled 
very effectively and efficiently, we believe, by an 
administrative proceeding like that.
    Mr. Issa. Now, since I got a head-shake there, I'll do the 
follow-up question, which is, as we all know, when you have an 
administrative procedure, the losing party, particularly the 
defendant, has a right to remove it in an appeal or some other 
process to the next level. I would assume that your follow-up 
would be that there would have to be a safeguard that if you 
choose that remedy, you pay for that remedy as the person not 
taking the administrative remedy and that that also would meet 
your concerns, that if they take it to the next level and it 
does cost $35,000, it'll be borne by the losing party. Let me 
rephrase that. The person who removed it.
    Mr. Aiken. Precisely. You've made my argument well. Thank 
you.
    Mr. Issa. Okay. If the Chairman will indulge, if anyone 
else wanted to answer to that, otherwise, I will yield back my 
non-remaining time. [Laughter.]
    Mr. Perlman. I would like to comment. I'm sort of like the 
kid in the candy shop here because we've been so desperate for 
so long to get some kind of access to the legal system that 
there is a wide panoply of relief, all of which would be 
wonderful for us, and certainly the administrative law 
proceeding is something that we put forth in our prepared 
statement as one of the alternatives. Absolutely, we would love 
that.
    Mr. Issa. Okay. Thank you, Mr. Chairman. Once again, thank 
you for holding this hearing.
    Mr. Smith. Thank you, Mr. Issa.
    Mr. Holland, let me just revisit one subject real quickly. 
I don't want to leave a wrong impression. You read something 
into our having a hearing on orphan works in close time to 
having this hearing today. That was not intentional. It may 
have been subconscious, but it wasn't necessarily intentional, 
so don't read too much into that.
    In any case, we thank you all for your testimony today. 
It's very helpful on a subject, like I say, which is a first 
impression for us, but nevertheless an important one. Thank you 
again.
    We stand adjourned.
    [Whereupon, at 3:02 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

Prepared Statement of the Honorable Howard L. Berman, a Representative 
     in Congress from the State of California, and Ranking Member, 
    Subcommittee on Courts, the Internet, and Intellectual Property
    Mr. Chairman,

    It is especially good timing to have this hearing on alternative 
dispute resolution mechanisms immediately after the orphan works 
hearing. ADR was raised by some in the orphan works context as a way to 
begin addressing some of the inequities that could result from a 
statutory change. However, there are multiple instances in the 
copyright context as well in which parties could benefit from forums 
other than federal court to resolve copyright infringement claims. 
Today will provide an opportunity to discuss the advantages of offering 
alternative methods of resolving small copyright claims even outside 
the scope of the orphan works provision.
    As the cost of litigation rises, oftentimes a copyright owner has 
to make a calculation that is entirely independent from whether the 
owner will prevail on the merits of the case. The owner must ask: Is it 
worth it to pursue full scale litigation when the damages or remedies 
wouldn't even cover the cost of the proceeding, much less provide any 
relief from infringing conduct?
    A number proposals for resolving this dilemma have been suggested, 
ranging from the establishment of a small claims court to expanding the 
jurisdiction of Copyright Royalty Judges to determine copyright claims 
in an administrative dispute resolution proceeding. I would caution 
that the goal here should not be to create an opportunity for forum-
shopping as a result of substance, but merely a to create more 
simplified procedures that will resolve disputes at a lower cost. I 
look forward to hearing the witnesses describe circumstances in which 
they may forgo a remedy because of the cost of bringing suit, and 
whether they have any suggestions for reform. I doubt this is the last 
we will hear on this issue.
    I also would like to work with the Chairman in pursuing a Copyright 
Office study on this issue. It is encouraging that in its written 
testimony, the Office offers to study both 1) how and to what extent 
copyright owners are hindered from seeking relief due to the cost of 
litigation, and 2) what changes in the law might be advisable to remedy 
the problem.
                               __________
        Prepared Statement of the United States Copyright Office

    The Copyright Office is pleased to present the Subcommittee with 
its observations on the issue of remedies for small copyright claims.
    In preparing the Report on Orphan Works which the Office released 
two months ago, the Office was told by a representative of 
photographers that a new mechanism is needed to adjudicate small 
copyright infringement claims because the cost of litigating in federal 
courts is prohibitively expensive in many cases.\1\ While the Office 
did not believe that this issue relates directly to the problem of 
orphan works or to the Office's proposed solution to that problem, the 
Office observed in its Report on Orphan Works that:
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    \1\ See Comment of Professional Photographers of America, March 25, 
2005, pp. 11-13, submitted in Copyright Office Study on Orphan Works 
[available on the Copyright Office website at http://www.copyright.gov/
orphan/comments/OW0642-PPA.pdf] [hereinafter ``PPA Comment''].

        We are sympathetic to the concerns of individual authors about 
        the high cost of litigation and how, in many cases, the 
        individual creator may have little practical recourse in 
        obtaining relief through the court system, particularly against 
        infringements involving small amounts of actual damages. This 
        problem, however, has existed for some time and goes beyond the 
        orphan works situation, extending to all types of infringement 
        of the works of individual authors. While there are some 
        mechanisms in place to help address the problem, such as 
        enforcement by collective organizations or timely registration 
        to secure the availability of statutory damages and attorneys 
        fees, we believe that consideration of new procedures, such as 
        establishment of a ``small claims'' or other inexpensive 
        dispute resolution procedure, would be an important issue for 
        further study by Congress. It is not, however, within the 
        province of this study on orphan works.\2\
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    \2\ United States Copyright Office, Report on Orphan Works 114 
(Jan. 2006)

    In subsequent discussions over proposed legislation to address the 
orphan works problem, photographers have repeated their assertion that 
a new procedure and forum for adjudicating small copyright claims is 
necessary. While the Office does not believe that it is necessary or 
even advisable to address this issue in the context of orphan works 
legislation, the Office continues to believe that the issue deserves 
the attention of Congress. If the Subcommittee believes it would be 
helpful, the Office would be pleased to study the issue in a way 
similar to the way in which the Office studied the orphan works problem 
itself, and to report to Congress its findings as to (1) whether, how, 
and to what extent authors and copyright owners are hindered or even 
prevented from seeking relief for infringements of their copyrights due 
to the cost of litigation under the current system, and (2) if the 
current system does not provide adequate procedures and remedies for 
the adjudication of small copyright claims, what changes in the law 
would be advisable to ensure that authors and copyright owners are 
able, as a practical matter, to seek remedies for infringements of 
their works.
    Anyone who has litigated a case--whether as a party or as counsel--
in the federal courts knows that the costs of litigation are beyond the 
means of many Americans. Attorneys typically charge hundreds of dollars 
per hour for their services, and it is our understanding that 
contingency fee arrangements in copyright cases are relatively rare. In 
a typical civil case, after pleadings, discovery, motion practice and 
trial (as well as possible appeals), attorney's fees can run to tens of 
thousands of dollars or more, and other costs can run to thousands of 
dollars or more.\3\ If, as the Professional Photographers of America 
have told us, photographers generally earn about $30,000 a year,\4\ 
then assertions that they are unable to take advantage of the remedies 
offered by the federal courts may well be credible.\5\ It is legitimate 
to ask whether the federal courts are hospitable to most small claims.
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    \3\ If expert witnesses are used, as is not uncommon in copyright 
cases, additional thousands of dollars or more in expenses can be 
incurred.
    \4\ PPA Comment 10.
    \5\ It may be worth noting that in diversity actions, the minimum 
amount in controversy required to invoke the jurisdiction of the 
federal courts is $75,000. 28 U.S.C. Sec. 1332(a).
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    Of course, there are provisions built into the copyright law that 
are designed in part to provide even the copyright owner of modest 
means with a reasonable prospect of recovering not only compensation 
for infringement but also the expenses of litigation in a successful 
infringement suit. Unlike most areas of the law, copyright law permits 
a court to award a reasonable attorney's fee to a successful plaintiff 
(or defendant).\6\ Moreover, a copyright owner may elect to receive an 
award of statutory damages of up to $30,000 per infringed work--and up 
to $150,000 per work in cases of willful infringement--in lieu of 
actual damages and profits.\7\
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    \6\ 17 U.S.C. Sec. 505.
    \7\ 17 U.S.C. Sec. 504(c). Attorney's fees and statutory damages 
are available to plaintiffs only in cases where the copyright in the 
work was registered prior to the commencement of the infringement or 
within three months after first publication of the work. 17 U.S.C. 
Sec. 412.
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    It is reasonable to ask whether these provisions offer sufficient 
incentive and sufficient assurance that the copyright owner will be 
able to afford the cost of litigation. In the past couple of weeks we 
have asked representatives of authors and ``small'' copyright owners 
about their experience in litigating infringement claims. We have heard 
assertions that in many cases it simply is not worthwhile to bear the 
expense of federal litigation no matter how meritorious the claim may 
be. We are not in a position at this time to evaluate the accuracy of 
those assertions, but it is not difficult to imagine that in many cases 
an author or copyright owner engaging in a rational analysis of the 
costs and benefits of litigation will conclude that in light of the 
modest value of his or her infringement claim and the relatively high 
cost of litigation, it makes no sense to pursue that claim.
    Although the copyright law offers the advantages described above to 
copyright owners who pursue claims of infringement, another provision 
of the law arguably provides a disincentive to pursue small claims. 
Section 1338 of Title 28 of the United States Code confers upon the 
federal district courts exclusive jurisdiction over claims of copyright 
infringement. As a general proposition, the longstanding exclusive 
jurisdiction of the federal courts in this area is an important and 
positive feature of our system. Copyright law is federal law, and 
confining copyright cases to the federal courts is more likely to 
ensure consistency of decision-making. It is probably also fair to say 
that, as a general proposition, the quality of decision-making in the 
federal courts exceeds that found in many state courts.
    But, as noted above, federal litigation tends to be expensive. 
While pro se litigation is possible in the federal courts, as a 
practical matter in most cases it requires the assistance of an 
attorney to navigate the civil procedure and substantive law. Although 
state court systems offer small claims courts, which handle claims of 
up to a few thousand dollars and are more congenial to pro se 
litigation, the federal courts offer no such alternative. As a result, 
because authors and copyright owners, unlike most other litigants, have 
no choice but to pursue their claims in federal court, the costs of 
federal litigation may weigh more heavily on them than on most others.
    The Copyright Office expresses no definitive views on the extent to 
which the current system hinders the ability of authors and copyright 
owners to pursue small infringement claims, but from the foregoing 
discussion it is clear that there are serious questions about the 
effectiveness of the current system that merit further study.
    Some have also asserted that the existing system for adjudication 
of copyright infringement claims can in some cases be too burdensome 
for defendants who are accused of infringement. While it is not 
difficult to imagine that a wealthy plaintiff in a copyright 
infringement suit could make the litigation very costly for a defendant 
of modest means, the Office is not aware whether this has in fact been 
a significant problem.
    If it is the desire of the Subcommittee, the Office would be 
pleased to conduct a study--in a way similar to the way in which it 
conducted its study on orphan works--that would seek and evaluate 
information on the nature and scope of the problem and, if the problem 
appears to require further Congressional attention, would recommend 
possible solutions. Among the information that such a study might seek 
would be:

          Statistical (if it exists) and anecdotal evidence as 
        to the extent to which authors and copyright owners have 
        foregone asserting claims of infringement due to the cost of 
        litigation or other factors relating to the currently available 
        fora and remedies.

          Information about the range of amounts in controversy 
        in suits for copyright infringement filed in the federal 
        courts.

          Information relating to the range of costs that 
        authors and copyright owners have borne in pursuing claims of 
        infringement, especially in cases involving relatively modest 
        amounts in controversy.

          Information about the practice of the courts in 
        awarding attorney's fees in copyright suits, especially in 
        cases involving relatively modest amounts in controversy, 
        including the frequency with which attorney's fees are awarded, 
        the extent to which the awards are equal to the actual 
        attorney's fees expended by the prevailing party and the extent 
        to which such awards are collected.

          Information about existing use of alternative dispute 
        resolution mechanisms in addressing copyright infringement 
        claims.

          The extent to which collective administration and 
        licensing resolves problems related to enforcement of copyright 
        in cases involving relatively small amounts in controversy, and 
        where such activity has been successful in ameliorating the 
        high costs of litigation in federal court.

          The extent to which trade associations, guilds, 
        professional associations and other groups of copyright owners 
        have been able to provide legal services or otherwise assist 
        members in resolving copryight disputes involving relatively 
        small claims.

    To the extent that such a study might find problems that need to be 
addressed, the study would consider possible legislative or other 
action. Possible alternatives might include:

          Amending the statute that confers exclusive 
        jurisdiction over copyright matters on the federal courts, in 
        order to permit state courts (e.g., small claims courts) to 
        hear copyright infringement claims where the amount in 
        controversy is small.

          Providing for an administrative proceeding, perhaps 
        in the Copyright Office, for determination of small copyright 
        infringement claims.

          Establishing streamlined procedures for adjudication 
        of small copyright infringement claims in the federal courts.

          Measures to facilitate the use of alternative dispute 
        resolution, such as arbitration and mediation.

    The fact that the Copyright Office has identified such possible 
solutions does not mean that the Office would necessarily endorse any 
of them following a careful study. Indeed, even without the benefit of 
further study it is apparent that there are benefits as well as 
disadvantages to each of these approaches.
    As always, the Copyright Office stands ready and eager to assist 
the Subcommittee on this and other copyright matters.

                                 
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