[Congressional Record Volume 143, Number 160 (Thursday, November 13, 1997)]
[Senate]
[Pages S12689-S12692]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
NO ELECTRONIC THEFT (NET) ACT
Mr. LOTT. Mr. President, I ask unanimous consent that the Judiciary
Committee be discharged from further consideration of H.R. 2265 and,
further, that the Senate proceed to its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
A bill (H.R. 2265) to amend the provisions of title 17 and
18, United States Code, to provide greater copyright
protection by amending criminal copyright infringement
provisions, and for other purposes.
The PRESIDING OFFICER. Is there objection to the immediate
consideration of the bill?
There being no objection, the Senate proceeded to consider the bill.
Mr. HATCH. Mr. President, I rise in support of passage of H.R. 2265,
The No Electronic Theft [NET] Act. This bill plugs the ``LaMacchia
Loophole'' in criminal copyright enforcement.
Current sec. 506(a) of the Copyright Act contains criminal penalties
for willful copyright infringement for ``commercial advantage or
private financial gain.'' In U.S. versus LaMacchia, 871 F. Supp. 535
(D. Mass. 1994), defendant, a graduate student attending MIT,
encouraged lawful purchasers of copyrighted computer games and other
software to upload these works via a special password to an electronic
bulletin board on the Internet. The defendant then transferred the
works to another electronic address and urged other persons with access
to a second password to download the materials for personal use without
authorization by or compensation to the copyright owners. Because the
defendant never benefited financially from any of these transactions,
the current criminal copyright infringement could not be used.
Furthermore, the court held that neither could the federal wire fraud
statute, since Congress never envisioned protecting copyrights under
that statute. For persons with few assets, civil liability is not an
adequate deterrent.
It is obvious that great harm could be done to copyright owners if
this practice were to become widespread. Significant losses to
copyright holders would undermine the monetary incentive to create
which is recognized in our Constitution. Mr. President, I believe that
willful, commercial-scale pirating of copyrighted works, even when the
pirate receives no monetary reward, ought to be nipped in the bud. This
bill does that.
I will admit, Mr. President, that I initially had concerns about this
bill. I was afraid that the language was so broad that the net could be
cast too widely--pardon the pun--so that minor offenders or persons who
honestly believed that they had a legitimate right to engage in the
behavior prohibited by the bill would be swept in. What of the educator
who feels that his or her action is a fair use of the copyrighted work?
Although the bill is not failsafe, because of the severity of the
potential losses to copyright owners from widespread LaMacchia-like
behavior and the little time remaining in this session, on balance I
was persuaded to support the bill.
I place great store by the ``willfulness'' requirement in the bill.
Although there is on-going debate about what precisely is the
``willfulness'' standard in the Copyright Act--as the House Report
records--I submit that in the LaMacchia context ``willful'' ought to
mean the intent to violate a known legal duty. The Supreme Court has
given the term ``willful'' that construction in numerous cases in the
past 25 years, for example: U.S. versus Bishop, 412, U.S. 346 (1973);
U.S. versus Pomponio, 429 U.S. 987 (1976); Cheek versus U.S., 498 U.S.
192 (1991); and Ratzlaf versus U.S., 510 U.S. 135 (1994). As Chairman
of the Judiciary Committee, that is the interpretation that I give to
this term. Otherwise, I would have objected and not allowed this bill
to pass by unanimous consent. Under this standard, then, an educator
who in good faith believes that he or she is engaging in a fair use of
copyrighted material could not be prosecuted under the bill.
I am also relying upon the good sense of prosecutors and judges.
Again, the purpose of the bill is to prosecute commercial-scale pirates
who do not have commercial advantage or private financial gain from
their illegal activities. But if an over-zealous prosecutor should
bring and win a case against a college prankster, I am confident that
the judge would exercise the discretion that he or she may have under
the Sentencing Guidelines to be lenient. If the practical effect of the
bill turns out to be draconian, we may have to revisit the issue.
In addition to my concern that the bill's scope might be too broad, I
wanted to make sure that the language of the bill would not prejudice
in any way the debate about the copyright liability of on-line and
Internet service providers. Mr. President, there are good arguments on
both sides of the issue, and I will shortly begin the process of
bringing the parties together to try to obtain a mutually agree-upon
solution to this problem. It is my understanding that representatives
of the OSP/ISP community and the fair use community were consulted
during the passage of the bill in the House. This tends to confirm my
judgment that the bill was not intended to affect the OSP/ISP liability
debate.
Finally, Mr. President, I would like to point out two areas that are
susceptible to interpretation mischief. First,
[[Page S12690]]
the bill amends the term ``financial gain'' as used in the Copyright
Act to include ``receipt, or expectation of receipt, of anything of
value, including receipt of other copyrighted works.'' The intent of
the change is to hold criminally liable those who do not receive or
expect to receive money but who receive tangible value. It would be
contrary to the intent of the provision, according to my understanding,
if ``anything of value'' would be so broadly read as to include
enhancement of reputation or value remote from the criminal act, such
as a job promotion.
Second, I am concerned about the interplay between criminal liability
for ``reproduction'' in the bill and the commonly-held view that the
loading of a computer program into random access memory [RAM] is a
reproduction for purposes of the Copyright Act. Because most shrink-
wrap licenses purport to make the purchaser of computer software a
licensee and not an owner of his or her copy of the software, the
ordinary purchaser of software may not be able to take advantage of the
exemption provided by sec. 117, allowing the ``owner'' of a copy to
reproduce the work in order to use it in his or her computer.
Many shrink-wrap licenses limit the purchaser to making only a single
backup copy of his or her software. Thus, under a literal reading of
the bill, the ordinary purchaser of computer software who loaded the
software enough times in the 180-day period to reach the more-than-
$1,000 threshold may be a criminal. This is, of course, not the intent
of the bill. Clearly, this kind of copying was not intended to be
criminalized.
Additionally, Congress has long recognized that it is necessary to
make incidental copies of digital works in order to use them on
computers. Programs or data must be transferred from a floppy disk to a
hard disk or from a hard disk into RAM as a necessary step in their
use. Modern operating systems swap data between RAM and hard disk to
use the computer memory more efficiently. Given its purpose, it is not
the intent of this bill to have the incidental copies made by the user
of digital work be counted more than once in computing the total retail
value of the infringing reproductions.
As you can see, Mr. President, I do not believe this is the perfect
bill, but it is a good bill that addresses a serious problem that has
the potential of very soon undermining copyright in many works, not
just computer software. I am confident that prosecutors and the courts
will make their decisions with the purpose of the bill in mind--the
elimination of willful, commercial-scale pirating of copyrighted works.
Mr. LEAHY. Mr. President, America's founders recognized and valued
the creativity of this Nation's citizens such that intellectual
property rights are rooted in the Constitution. Article I, section 8,
clause 8 of the Constitution states that ``The Congress shall have
power * * * [t]o promote the progress of science and useful arts, by
securing for limited times to authors and inventors the exclusive right
to their respective writings and discoveries.'' The Continental
Congress proclaimed, ``Nothing is more properly a man's own than the
fruit of his study.''
Protecting intellectual property rights is just as important today as
it was when America was a fledgling nation.
It is for this reason I am pleased that the Senate is considering
H.R. 2265, the ``No Electronic Theft [NET] Act of 1997.'' I introduced
the first legislation on this subject in 1995. The bill was the
``Criminal Copyright Improvement Act of 1995,'' and it stood as the
only legislation on this issue in the 104th Congress. I then made some
changes to that bill and introduced it this session as the ``Criminal
Copyright Improvement Act of 1997,'' S. 1044. Senator Kyl is an
original cosponsor of S. 1044 and I thank him for his support.
Like the Criminal Copyright Improvement Act of 1997, the NET Act of
1997 would close a significant loophole in our copyright law and
enhance the Government's ability to bring criminal charges in certain
cases of willful copyright infringement. By insuring better protection
of the creative works available online, this bill will also encourage
the continued growth of the Internet and our National Information
Infrastructure. It will encourage the ingenuity of the American people,
and will send a powerful message to intellectual property pirates and
thieves that we will not tolerate theft.
For a criminal prosecution under current copyright law, a defendant's
willful copyright infringement must be ``for purposes of commercial
advantage or private financial gain.'' Not-for-profit or noncommercial
copyright infringement is not subject to criminal law enforcement, no
matter how egregious the infringement or how great the loss to the
copyright holder. This presents an enormous loophole in criminal
liability for willful infringers who can use digital technology to make
exact copies of copyrighted software and other digitally encoded works,
and then use computer networks for quick, inexpensive and mass
distribution of pirated, infringing works. The NET Act would close this
legal loophole.
United States versus LaMacchia, 871 F. Supp. 535 (D. Mass. 1994), is
an example of the problem this criminal copyright bill would fix. In
that case, the defendant had set up computer bulletin board systems on
the Internet. Users posted and downloaded copyrighted software
programs. This resulted in an estimated loss to the copyright holders
of over $1 million over a 6-week period. Since the defendant apparently
did not profit from the software piracy, the Government could not
prosecute him under criminal copyright law and instead charged him with
wire fraud. The District Court described the student's conduct ``at
best * * * as irresponsible, and at worst as nihilistic, self-
indulgent, and lacking in any fundamental sense of values.''
Nevertheless, the Court dismissed the indictment in LaMacchia because
it viewed copyright law as the exclusive authority for prosecuting
criminal copyright infringement. The Court expressly invited Congress
to revisit the copyright law and make any necessary adjustments,
stating:
Criminal as well as civil penalties should probably attach
to willful, multiple infringements of copyrighted software
even absent a commercial motive on the part of the infringer.
One can envision ways that the copyright law could be
modified to permit such prosecution. But, ``[i]t is the
legislature, not the Court which is to define a crime, and
ordain its punishment.''
I introduced the Criminal Copyright Improvement Act of 1995 on August
4, 1995 in response to this problem. The NET Act is the result of our
efforts. It would ensure redress in the future for flagrant, willful
copyright infringements in the following ways: First, it amends the
term ``financial gain'' as used in the Copyright Act to include
``receipt, or expectation of receipt, or anything of value, including
the receipt of other copyrighted works.'' This revision would make
clear that ``financial gain'' includes bartering for, and the trading
of, pirated software.
Second, it amends Section 506(a) of the Copyright Act to provide that
any person who infringes a copyright willfully by the reproduction or
distribution, including by electronic means, during any 180-day period,
of one or more copies or phonorecords of one or more copyrighted works
with a total retail value of more than $1,000, shall be subject to
criminal liability.
A misdemeanor offense under the bill is defined as an offense in
which an individual reproduces or distributes one or more copies or
phonorecords of one or more copyrighted works with a total value of
more than $1,000.
The felony threshold under the bill is defined as an offense in which
an individual reproduces or distributes 10 or more copies of
phonorecords of 1 or more copyrighted works with a total retail value
of $2,500 or more.
Section (2)(b) of the bill clarifies that for purposes of subsection
506(a) of the Copyright Act only, ``willful infringement'' requires
more than just evidence of making an unauthorized copy of a work. This
clarification was included to address the concerns expressed by
libraries and Internet access to services because the standard of
``willfulness'' for criminal copyright infringement is not statutorily
defined and the court's interpretation have varied somewhat among the
Federal circuits.
This clarification does not change the current interpretation of the
word ``willful'' as developed by case law and as applied by the
Department of Justice, nor does it change the definition of ``willful''
as it is used elsewhere in the Copyright Act.
[[Page S12691]]
Third, the bill requires that any criminal proceeding brought under
the Copyright Act must commence within 5 years from the time the cause
of action arose. The current limit, as contained in section 507(a) of
the Copyright Act, is 3 years. This brings copyright crimes into
conformance with the statute of limitations for other criminal acts
under title 18 of the United States Code.
Fourth, the bill would insert new subsections in title 18 of the
United States Code requiring that victims of offenses concerning
unauthorized fixation and trafficking of live musical performances and
victims of offenses concerning trafficking in counterfeit goods or
services be given the opportunity to provide a victim impact statement
to the probation officer preparing the presentence report. The bill
directs that the statement identify the victim of the offense and the
extent and scope of the injury and loss suffered, including the
estimated economic impact of the offense on that victim.
The NET Act reflects the recommendations and hard work of the
Department of Justice and the Copyright Office. Specifically, Scott
Charney and David Green of the Department of Justice and Marybeth
Peters, Shira Perlmutter, and Jule Sigall of the Copyright Office
helped me on this legislation. The Department of Justice and the
Copyright Office provided valuable input as far back as 3 years ago,
when I introduced the first legislation on this subject, and they have
worked with me through the drafting of this year's Senate bill and with
me and all the interested parties on this year's House version to
ensure that the final product was one that could be widely accepted. In
fact, just today the Senate received a letter from the Department of
Justice providing its views on the NET Act and strongly supporting the
enactment of this legislation.
I also want to thank Mr. Hyde, Mr. Conyers, Mr. Coble, Mr. Frank, and
Mr. Goodlatte for their fine work on this matter.
By passing this legislation, we send a strong message that we value
intellectual property, as abstract and arcane as it may be, in the same
way that we value the real and personal property of our citizens. Just
as we will not tolerate the theft of software, CD's, books, or movie
cassettes from a store, so will we not permit the stealing of
intellectual property over the Internet.
I urge my colleagues to support H.R. 2265, and I ask unanimous
consent that a letter from the U.S. Department of Justice dated
November 7, 1997, be printed in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
U.S. Department of Justice,
Office of Legislative Affairs,
Washington, DC, November 7, 1997.
Hon. Orrin G. Hatch,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
Dear Mr. Chairman, This provides the views of the
Department of Justice on H.R. 2265, the ``No Electronic Theft
(NET) Act,'' which was passed by the House of Representatives
on November 4, 1997, and which we understand may shortly be
considered in the Senate. We strongly support enactment of
this legislation.
As introduced, H.R. 2265 built upon, and closely resembled,
S. 1044 and its predecessor bill that was introduced in the
104th Congress. The Department of Justice testified in
support of H.R. 2265 while the bill was being considered by
the House Judiciary Committee. We worked extensively with the
bill's sponsors to ensure that it would meet the concerns of
interested parties, including the Department of Justice, the
copyright community, and those non-profit organizations and
Internet Service Providers concerned about the possibility
that the new legislation might sweep too broadly. The result,
in our view, is an excellent bill that protects copyrights in
the digital age in a careful and balanced manner. The House-
passed bill accomplishes several important goals, including:
Permitting the Department to prosecute large-scale illegal
reproduction or distribution of copyrighted works where the
infringers act without a discernible profit motive, while
making clear that small-scale non-commercial copying
(copyrighted works with a total retail value of less than
$1,000) is not prosecutable under federal law;
Clarifying that ``willful'' infringement must consist of
evidence of more that the mere intentional reproduction or
distribution of copyrighted products;
Defining ``financial gain'' to include the ``receipt, or
expectation of receipt, of anything of value, including the
receipt of other copyrighted works,'' to ensure that persons
who illegally traffic in copyrighted works by using barter
rather than cash are covered by the statute;
Clarifying that ``reproduction or distribution'' includes
electronic as well as tangible means;
Extending the statute of limitations from three to five
years, bringing the criminal copyright statute into line with
most other criminal statutes;
Establishing a recidivist provision that raises penalties
for second or subsequent felony copyright offenses;
Recognizing victims' rights by allowing the producers of
pirated works to provide a victim impact statement to the
sentencing court; and
Enhancing the deterrent power of the copyright criminal
laws by directing the Sentencing Commission to amend the
Sentencing guideline for copyright and trademark infringement
to allow courts to impose sentence based on the retail value
of the good infringed upon, rather than the often lower value
of the infringing good.
The Department of Justice believes that the differences
between S. 1044, as introduced, and H.R. 2265, as passed by
the House of Representatives, are not significant. We
therefore recommend that the Senate expedite final passage of
this important piece of legislation by adopting the House-
passed bill before the end of the first session of the 105th
Congress.
Please do not hesitate to contact us if we may be of
additional assistance in connection with this or any other
matter. The Office of Management and Budget has advised that
there is no objection from the standpoint of the
Administration's program to the presentation of this report.
Sincerely,
Andrew Fois,
Assistant Attorney General.
Mr. KYL. Mr. President, I am proud to support H.R. 2265, the No
Electronic Theft [NET] Act which is the companion bill to S. 1044, the
Criminal Copyright Improvement Act of 1997, introduced by Senator Leahy
and myself.
H.R. 2265 passed the House of Representatives earlier this week and
now has the opportunity to obtain Senate approval and be sent to the
President before we adjourn for the session. The bill is supported by
the Department of Justice, the U.S. Copyright Office, and the Software
Publishers Association, which is the leading trade association of the
computer software industry, representing over 1,200 companies that
develop and market software for entertainment, business, education, and
the Internet.
H.R. 2265 will help combat software piracy by closing a major
loophole in federal law, which was highlighted by the case of United
States v. LaMacchia, 871 F.Supp. 535 (D. Mass. 1994). Under current
law, a showing of financial gain is required to prove criminal
copyright infringement. In LaMacchia, the defendant maliciously pirated
software which resulted in an estimated loss to the copyright holders
of over $1 million in just over 6 weeks. Because LaMacchia did not
profit from the software piracy, he could not be prosecuted under
criminal copyright law.
Because much software piracy on the Internet apparently occurs
without the exchange of money, the so-called ``LaMacchia loophole''
discourages law enforcement from taking action against willful,
commercial-scale software pirates out to gain notoriety, not money.
In sum, this bill extends criminal infringement of copyright to
include any person--not just those who act for purposes of commercial
advantage or private financial gain--who willfully infringe a
copyright. Specifically, the bill: (1) expands the definition of
``financial gain'' to include the expectation of receipt of anything of
value--including the receipt of other copyrighted works; (2) sets
penalties for willfully infringing a copyright by reproducing or
distributing (including electronically), during any 180-day period, one
or more copies of one or more copyrighted works with a total retail
value of more than $1,000; (3) extends the statute of limitations for
criminal copyright infringement from three to five years; (4) punishes
recidivists more severely; (5) extends victims' rights with regard to
criminal copyright infringement; and (6) directs the Sentencing
Commission to determine sufficiently stringent guidelines to deter
these types of crimes.
H.R. 2265 is needed to help protect the interests of the entire
software industry by protecting against the unauthorized copying and
distribution of
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computer programs. In 1996, piracy cost the software industry over $2
billion in the United States and over $11 billion around the world.
Mr. President, the United States is the world's leader in
intellectual property. We export billions of dollars of copyrighted
works every year. Our creative community is a bulwark of our national
economy. By addressing the flaw in our copyright law that LaMacchia has
brought to light, H.R. 2265 sends the strong message that we value the
contributions of writers, artists, and other creators, and will not
tolerate the theft of their intellectual endeavors.
I urge my colleagues to join me in supporting this important piece of
legislation.
Mr. LOTT. Mr. President, I ask unanimous consent that the bill be
considered read a third time and passed; that the motion to reconsider
be laid upon the table; and that any statements relating to the bill
appear at the appropriate place in the Record.
The bill (H.R. 2265) was read the third time and passed.
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