We are living in a time when new technologies are making revolutionary changes in how we go about our daily lives and conduct our business. When I arrived in the Senate 26 years ago, I installed the latest technology to make it easy and inexpensive for Vermonters to contact me: I got an 800 number. I still have that 800 number, but now I get more e-mail messages from my constituents than I do telephone calls. In fact, at times, I get more e-mail messages than the Senate computer system is able to handle. It is then, when our computers are temporarily shut down from too much of a good thing, when I most appreciate how dependent we have become on this relatively new medium.

This committee examined the challenges to the music industry posed by new online technologies at a hearing almost a year ago. I am glad to see back before the Committee today several of the witnesses who testified at last year’s hearing and to welcome the other witnesses Senator Hatch has invited to join us today. While music has been at the forefront of the online copyright battles, the issues raised by the deployment of new software applications and new online services have even broader implications for other forms of copyrighted works.

For the copyright industries, to paraphrase a classic phrase: It is the best of times, it is the worst of times; it is the age of wisdom, it is the age of foolishness.

These are certainly good economic times for our copyright industries. Computer software, motion pictures, television programs, music, publishing and other copyright-based industries have proven to be a critical engine for our economy. According to the latest edition of a report by Economists Incorporated, in 1999, American copyright industries accounted for almost 5 percent of our gross domestic product, or over $450 billion, and employment in this sector grew more than three times as fast as the remainder of the U.S. economy. In the same year, the U.S. copyright industry led all other major industry sectors with over $79 billion in foreign sales and exports – even more than the automobile, car parts, aircraft or agricultural sectors.

The robust growth of these industries has been good for American workers and for our economy, and their continued success depends on strong copyright laws and effective enforcement of those laws. Every year, the copyright industries lose billions of dollars in lost revenue to hard goods piracy around the world. According to Forrester Research, one pirated product is made for every three legitimate products. Understandably, software manufacturers, the record companies, the movie producers, and the retailers, whose business is selling licensed copies of these copyrighted works, are concerned that these losses will accelerate as digital works are downloaded freely and without consideration to the owners of the products.

Over the past years, Senator Hatch and I, and others on the Judiciary Committee, have worked constructively and productively together to provide an adequate legal framework to protect our country’s intellectual property. Just in the last Congress, we were able to pass the Anticybersquatting Consumer Protection Act, the Patent Fee Integrity and Innovation Protection Act, the Trademarks Amendments Act, the Satellite Home Viewers Improvements Act, and the American Inventors Protection Act. These significant intellectual property matters were preceded by our work together forging a consensus on the Digital Millennium Copyright Act, the Copyright Term Extension Act, the PTO Reauthorization Act, the Trademark Law Treaty Implementation Act, the No Electronic Theft Act and others.

We have worked hard to craft intellectual property legislation that fulfills the promise of our Constitution not simply to secure rights for authors and inventors, but to do so in a way that "promotes the progress of science and the useful arts." Consequently, we have strived to ensure that our Copyright Law protects fair use and free speech and promotes consumer choice and technological innovation.

History has shown that new technologies may initially appear to trump intellectual property protection but, in the end, open new opportunities for artists, new sources of revenue for the copyright owner, and new choices for consumers. I am reminded of the battles in the early 1980's over the videocassette recorder. As recently documented in Digital Copyright, the motion picture industry initially predicted that the invention and marketing of the VCR would lead to the destruction of the American television and motion picture industries. Indeed, a representative of the American Federation of Television and Radio Artists told a congressional committee in 1982:

"Unless we do something to ensure that the creators of the material are not exploited by the electronics revolution, that same revolution which will make it possible for almost every household to have an audio and video recorder will surely undermine, cripple , and eventually wash away the very industries on which it feeds and which provide employment for thousands of our citizens."

Yet, as one author observed, "both the motion picture and television industries discovered that the videocassette recorder generated new markets for prerecorded versions of their material." [Jessica Litman, Digital Copyright (New York: Prometheus Books, 2001), pp. 106-07].

I am confident that the VCR’s history of success will repeat itself in this new era with these new issues. The copyright industries appear to have learned from this history and are making efforts to develop new business models that will flourish in the digital environment. We want to hear today from entertainment companies, online service providers and retailers about what they are doing to provide legitimate sources of copyrighted works online, and what obstacles remain.

The courts have ruled on the application of copyright law to Napster’s operations and there are additional court hearings in that case next week. This is not the place to re-litigate that case or the case against MP3.com.

At our last hearing, each witness was asked about Congress’s role here, and each witness then stated clearly that no congressional action was wanted or needed, and that the marketplace was the right place to resolve these matters. I would be interested in hearing from our witnesses how the marketplace is evolving, and how we are to make the best of these times.

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