[DOCID: f:hr551p2.105]
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105th Congress                                            Rept. 105-551
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part 2
_______________________________________________________________________


                DIGITAL MILLENNIUM COPYRIGHT ACT OF 1998

                                _______


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

_______________________________________________________________________

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

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 2281]

      [Including cost estimate of the Congressional Budget Office]

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

                                CONTENTS

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

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

SECTION 1. SHORT TITLE.

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

SEC. 2. TABLE OF CONTENTS.

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

                 TITLE I--WIPO TREATIES IMPLEMENTATION

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

          TITLE II--INTERNET COPYRIGHT INFRINGEMENT LIABILITY

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

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

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

                      TITLE IV--RELATED PROVISIONS

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

                 TITLE I--WIPO TREATIES IMPLEMENTATION

SEC. 101. SHORT TITLE.

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

SEC. 102. CIRCUMVENTION OF COPYRIGHT PROTECTION SYSTEMS.

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

SEC. 103. INTEGRITY OF COPYRIGHT MANAGEMENT INFORMATION.

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

SEC. 104. CIVIL REMEDIES.

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

SEC. 105. CRIMINAL OFFENSES AND PENALTIES.

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

SEC. 106. SAVINGS CLAUSE.

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

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

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

SEC. 108. TECHNICAL AMENDMENTS.

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

SEC. 109. EFFECTIVE DATE.

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

          TITLE II--INTERNET COPYRIGHT INFRINGEMENT LIABILITY

SEC. 201. SHORT TITLE.

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

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

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

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

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

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

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

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

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

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

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

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

SEC. 206. EFFECTIVE DATE.

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

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

SEC. 301. EPHEMERAL RECORDINGS.

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

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

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

SEC. 303. EXEMPTION FOR LIBRARIES AND ARCHIVES.

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

                      TITLE IV--RELATED PROVISIONS

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

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

                          Purpose and Summary

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

                  Background and Need for Legislation

                          Legislative History

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

                     Promoting Electronic Commerce

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

 Understanding the Nexus Between Electronic Commerce and Intellectual
                                Property

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

                      Prohibiting Certain Devices

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

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

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

                  Fair Use in the Digital Environment

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

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

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

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

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

                     Promoting Encryption Research

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

         Protecting Personal Privacy in the Digital Environment

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

                                Hearings

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

                        Committee Consideration

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

                            Roll Call Votes

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

<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>

                      Committee Oversight Findings

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

              Committee on Government Reform and Oversight

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

   New Budget Authority, Entitlement Authority, and Tax Expenditures

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

                        Committee Cost Estimate

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

                  Congressional Budget Office Estimate

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

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

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

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

                       Federal Mandates Statement

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

                      Advisory Committee Statement

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

                   Constitutional Authority Statement

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

                  Applicability to Legislative Branch

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

             Section-by-Section Analysis of the Legislation

Section 1. Short title

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

Section 2. Table of contents

    Section 2 sets out the table of contents.

                 TITLE I--WIPO TREATIES IMPLEMENTATION

Section 101. Short title

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

Section 102. Circumvention of copyright protection systems

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

Section 103. Integrity of copyright management information

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

Section 104. Civil remedies

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

Section 105. Criminal offenses and penalties

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

Section 106. Savings clause

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

Section 107. Development and implementation of technological protection
        measures

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

Section 108. Technical amendments

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

          TITLE II--INTERNET COPYRIGHT INFRINGEMENT LIABILITY

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

Section 201. Short title

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

Section 202. Limitations on liability for Internet copyright
        infringement

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

Section 203. Limitation on exclusive rights; computer programs

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

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

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

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

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

Section 206. Effective date

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

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

Section 301. Ephemeral recordings

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

Section 302. Limitation on exclusive rights; distance education

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

Section 303. Exemption for libraries and archives

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

                      TITLE IV--RELATED PROVISIONS

Section 401. Report by the National Telecommunications and Information
        Administration

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

         Changes in Existing Law Made by the Bill, as Reported

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

TITLE 17, UNITED STATES CODE

           *       *       *       *       *       *       *

CHAPTER 1--SUBJECT MATTER AND SCOPE OF COPYRIGHT

           *       *       *       *       *       *       *

Sec. 101. Definitions

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

Sec. 104. Subject matter of copyright: National origin

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

           *       *       *       *       *       *       *

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

Sec. 104A. Copyright in restored works

  (a) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

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

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

Sec. 112. Limitations on exclusive rights: Ephemeral recordings

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

           *       *       *       *       *       *       *

Sec. 117. Limitations on exclusive rights: Computer programs

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

CHAPTER 4--COPYRIGHT NOTICE, DEPOSIT, AND REGISTRATION

           *       *       *       *       *       *       *

Sec. 411. Registration and infringement actions

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

           *       *       *       *       *       *       *

             CHAPTER 5--COPYRIGHT INFRINGEMENT AND REMEDIES

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

           *       *       *       *       *       *       *

Sec. 507. Limitations on actions

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

           *       *       *       *       *       *       *

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

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

           *       *       *       *       *       *       *

            ADDITIONAL VIEWS OF SCOTT KLUG AND RICK BOUCHER

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

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

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

                                   Scott Klug.
                                   Rick Boucher.

                                <greek-d>

