Mr. Chairman and Members of the Committee:

Thank you for inviting me to appear here today on behalf of the Association of American Publishers (“AAP”) to discuss S.487, the proposed “Technology, Education And Copyright Harmonization Act of 2001” (or the “TEACH Act”).

As the principal national trade association of the U.S. book publishing industry, AAP represents some 300 member companies and organizations that include most of the major commercial book publishers in the United States, as well as many small and non-profit publishers, university presses and scholarly societies.

AAP members publish hardcover and paperback books in every field of human interest. Among these members are the nation’s leading trade publishers, who produce a wide array of fictional and non-fictional literary works that include the “best sellers” enjoyed by millions of readers of all ages and backgrounds. Also among them are the nation’s leading educational publishers, who produce textbooks and other instructional and testing materials covering the entire range of elementary, secondary, postsecondary and professional educational needs.

While continuing to serve market demands for paper-based books and journals, many AAP members now operate Internet websites and produce computer programs, databases, multimedia products, and other electronic software for use online and in other digital formats. Many are also making substantial investments in the nascent “e-book” market, where the reader’s use and enjoyment of all kinds of literary works may be greatly enhanced through the added functionality that books in digital formats can offer when read on computer screens or through hand-held personal digital appliances.

Many AAP members are vigorously responding to the popular embrace of the Internet as an exciting new commercial and educational medium. They understand the medium’s unprecedented capabilities for flawless and instantaneous reproduction, distribution, performance and display of text, images and sounds on a global basis. Like other media industries, book publishers are rethinking and revising their business models to adjust to the opportunities and risks created by these capabilities in a marketplace of increasing competition and evolving consumer preferences. Confidence in their ability to exploit and enforce copyright interests in the digital online environment is a key factor in shaping these new business models.

Original AAP Objections to the Register’s Recommendation: Still Valid Today

The proposed legislation before the Committee today is based on the legislative recommendations contained in the Register of Copyright’s May 1999 “Report on Copyright and Digital Distance Education.” That report critically evaluated the educational community’s assertions that “outdated” provisions of copyright law, as well as extant copyright licensing practices and the deployment of technological protection measures by copyright owners, would hold back the development of Internet-based “distance education” unless Congress took action to mitigate their impact.

In July 1999 before the House Judiciary Subcommittee on Courts and Intellectual Property, and again in July 2000 before the Congressionally-mandated Web-Based Education Commission, AAP reviewed the state of Internet-based “distance education” as documented in the Register’s Report and concluded that the Register’s recommendations to amend current copyright law were (1) unnecessary to ensure the availability of diverse, high-quality online educational programs; (2) unjustifiable in the face of the bustling marketplace for the production of digital content; (3) unworkable insofar as they were contingent upon the deployment of technological safeguards not yet widely-available in the marketplace; and (4) unfair insofar as they ignored the exploding competition, collaboration and consolidation among for-profit and not-for-profit providers of online education programs.

Moreover, since no one has been advocating that Congress should enact legislation eliminating the need to pay for computers, software, Internet access, faculty salaries, costs of administrative personnel, and tuition in connection with online education programs, the AAP questioned why the costs of course content – and, therefore, the copyright owners who create and produce them – should stand alone among the necessary elements of online educational programs as exempt from payment of fair market prices for the value they provide in the competitive “distance education” marketplace.

Today, faced with Congressional consideration of proposed legislation embodying the Register’s legislative recommendations, AAP maintains that the objections it raised and the question it asked in response to previous consideration of the Register’s recommendations remain valid.

The proposed legislation is unnecessary - Although the “distance education” provision in Section 110(2) of the Copyright Act was written for instructional broadcast television, and does not really apply to Internet-based online education, current copyright law nevertheless provides adequate bases for the creation and acquisition of online digital content. In fact, the admittedly limited scope of the existing statutory exemption for “distance education” has been largely irrelevant to the growth of the marketplace because, in most instances (as documented in the Register’s Report), providers of online educational programs are able to:

* create their own digital content;

* digitize preexisting “public domain” materials;

* make “fair use” of preexisting third-party works; or,

* obtain licenses to use preexisting third-party works.

While the Register’s Report noted anecdotal evidence of licensing problems “primarily involving difficulty in locating owners, inability to obtain a timely response, and unacceptable terms,” it rejected any need for a legislative solution; concluded that many of these problems “should diminish with time and experience;” and recommended “giving the market for licensing of nonexempt uses leeway to evolve and mature.” (p.164-167).

Although some licensing problems are still encountered in today’s marketplace, substantial progress toward making the licensing process more convenient and comprehensible for both parties has occurred since the Register’s Report was issued. Recent actions reported by AAP members bear out the Register’s prediction that such problems will continue to be addressed as the marketplace evolves and matures. For example:

* Houghton Mifflin’s College Division has upgraded its Permissions Department’s website so customers can submit permission requests by using online “fill-in-the-blank” forms or downloading PDF templates to fill out and submit by fax. At the same time, the College Division is conducting a pilot program with Copyright Direct, a permissions tool of Yankee Rights Management that permits users to obtain real-time permissions online. The College Division is also working with Reciprocal, a “secure system” provider for granting and holding permissions, which also provides “secure containers” that permit rights and permissions information to be carried online with the content to which its relates.

* Pearson Education’s Prentice Hall subsidiary has established a “Companion Website Gallery” which provides descriptions and links for an array of textbook-supporting websites that correlate additional learning activities with specific college textbooks. In addition, like several other AAP members, it has contracted with NetLibrary, an online provider of e-books, to make some of its college texts available for online access with full-text search capabilities. Computer Curriculum Corporation, a separate division of Pearson Education, also offers CCC Destinations Internet, a comprehensive online learning program that permits remote delivery of customized, essential skills education for adolescent and adult learners in community colleges, correctional education programs, and public housing education programs.

* Elsevier Science has established ScienceDirect, an online current awareness service with a “click-through” license that allows institutional subscribers to their print journals to have free remote online access to the most recent twelve months of journal issues on a rolling basis. If the subscriber allows all or selected members of the public to access its collections, the license allows such persons to access the journals online from workstations in the institutional facility.

* Thomson Learning’s Global Rights Group has established a website for online evaluation and disposition of permission requests for all Thomson Learning Higher Education and Lifelong Learning companies. The website cannot be used to order and purchase materials, but provides for the use of online permission request forms and a “Lookup” status check button for all materials produced by Thomson Learning’s ten higher education companies.

* Harcourt College Publishers, one of Harcourt General’s higher education companies, has established an Online Learning Center that utilizes the WebCT platform to deliver courses customized by instructors to accompany many of its main textbooks. Its Custom Publishing operation allows instructors to request modifications to the company’s own products, including removal of excess chapters, addition of instructor materials, institutional personalization, and the combination of several products into one. Archipelago Productions, another Harcourt higher education company, which develops multimedia courseware for distance and distributed learning, has announced alliances with WebCT and Blackboard, Inc., both well-known providers of online education platforms, to deliver Archipelago’s Online Courses in a hybrid “netCD” environment that leverages CD-ROM and Internet technologies to feature the presentation benefits of CD-ROMs and the interactivity of Web browsers embedded into the disks.

* Wiley InterScience is an online journals service through which John Wiley & Sons, a leading scientific publisher, allows all users to browse and search Tables of Contents of all of its journals online, and obtain online access to abstracts for all of its titles. Depending on the type of subscriber, the service can also offer online access to the full text of all subscribed journals.

The proposed legislation is unjustifiable - Proof that current copyright law has not produced what the Register would have called a “dysfunctional market” for the provision of online educational content was affirmed by the Register’s own characterizations of that marketplace, including the following:

Distance education in the U.S. is “a vibrant and burgeoning field” which the advent of digital and other new technologies for delivery has made “the focus of great creativity and investment.” (p.1)

“[T]he expanded audiences for these programs represent a potentially lucrative market, which the varied participants in the process, including both corporations and educational institutions, are seeking to tap.” (Id.)

“[D]igital technologies have fostered a rapid expansion in recent years, as well as a change in profile [in which] many more distance education courses are being offered than ever before, and the number is growing exponentially.” (p.9)

“Today’s distance education courses use digital technology extensively for varied purposes and in varied ways. The addition of digital technologies to the distance education palette has produced new models of learning, resulting in a richer and more interactive class environment.” (p.13)

The continuing vigor of the Internet-based “distance education” marketplace was reaffirmed more than a year after the issuance of the Register’s Report when the Web-Based Education Commission, in December of last year, reported that many private-sector providers are now shifting from producing content to aggregating instructional information and acting as “portals” for other content-based resources. Paradoxically, it also noted that, unless state and local educational agencies “create significant demand for innovative online learning materials, it may not be economically feasible for many online education content providers to stay in business.” (The Commission, which received testimony from the Register of Copyrights and other proponents of “updating” the copyright laws to facilitate Internet-based education, noted the anecdotal record of asserted problems, but did not urge legislative action to amend the copyright laws.)

The proposed legislation is unworkable -- While the Register recognized that an “updated” exemption must be conditioned on the application of effective technological safeguards in order to ensure that the balance of interests between copyright owners and users of works would be “comparable” to what Congress had carefully crafted into the existing exemption, this key element of the Register’s recommendation was effectively undercut by the Register’s observation that:

“Sophisticated technologies capable of protecting content against unauthorized post-access use are just now in development or coming to market, and may become widely available in the near future. But they are not there yet in a convenient and affordable form that can protect all varieties of works, and market uncertainties remain.” (p.141)

This situation has not substantially changed since the Register’s Report was issued in May 1999. At present, no one really knows the costs or other burdens involved in implementing the technological measures requirement in the proposed legislation. But, even if the necessary technological safeguards were widely-available in “a convenient and affordable form” in today’s market, copyright owners have, in the period since the issuance of the Register’s Report, acquired some legitimate reasons to entertain doubts about the willingness of many “non-profit educational institutions” to take on the full costs and responsibility of good-faith compliance in their implementation. Some of these reasons are based on the extent to which the Napster phenomenon, which two federal courts have enjoined as fostering ongoing instances of blatant copyright infringement on an unprecedented mass scale, has been chiefly pursued by students using campus-based Internet access and computer networks. Others may be based on the evident aversion and distrust directed toward legal prohibitions against circumventing such technological safeguards by representatives of the higher education community in hearings conducted last year by the U.S. Copyright Office. Still others may be based on the fear that recent rulings by the U.S. Supreme Court, which have barred lawsuits for damages against State entities for violations of federal statutory rights, have eliminated the primary incentive for public educational institutions to comply with legal standards that protect the rights of copyright owners.

The proposed legislation is unfair – The Register’s proposed retention of the existing exemption’s application to “nonprofit educational institutions” cannot be squared with the realities of the online education marketplace where, based on the following unequivocal finding by the Register, it would create unfair and unjustifiable inequities among providers of distance education programs:

“While mainstream education in 1976 was the province of nonprofit institutions, today the lines have blurred. Profit-making institutions are offering distance education; nonprofits are seeking to make a profit from their distance education programs; commercial entities are forming partnerships with nonprofits; and nonprofits and commercial ventures are increasingly offering competitive products.” (p.152-153)

In order to appreciate the continuing validity of this finding, consider the explosion of entrepreneurial activity involving the higher education community’s own efforts to create and market online education courses. For example, the following developments occurred after the issuance of the Register’s Report, as reported in weekly editions of the Chronicle of Higher Education last year:

* A for-profit company, Final-Exam.com, announced plans to sell Web-based study guides for survey-level college courses, using textbook authors and other scholars to edit and market them with the option of customization by professors from their own syllabi. (January 14, 2000)

* Following the examples of New York University, Columbia University and the University of Maryland University College, Cornell University announced creation of a for-profit subsidiary, “e-Cornell,” to market its online courses and materials online. (March 24, 2000)

* Together with five other leading educational and culture institutions, Columbia University announced the creation of a for-profit subsidiary, “Fathom,” to operate a website for marketing their respective “authenticated” original scholarly resources online. (April 14, 2000)

* Following the lead of Stanford University’s NextEd portal, Class.com, a for-profit subsidiary of the University of Nebraska at Lincoln, will be selling its online course content for high-school programs internationally, with eventual conversion of the content “to account for cultural differences.” (May 5, 2000).

* Rupert Murdoch’s News Corporation has entered a joint venture with Universitas 21, a network of 18 universities, to market custom-designed academic programs online to working college students. (June 2, 2000)

* Cognitive Arts, a for-profit entity, is working with Harvard Business School Publishing, a nonprofit subsidiary of the business school, to market online courses to entering students and to other business schools and corporations. (June 9, 2000)

For all of these reasons, AAP concludes that, regardless of the good intentions underlying the Register’s legislative recommendations, they were clearly at odds with the accompanying findings and observations based on the evidentiary record compiled by the Register. And, on the specific points discussed above, developments in the marketplace since the Register’s Report was submitted to Congress in May 1999 continue to undercut the recommendations, inasmuch as the requisite post-access technological protection measures are still not yet generally available for deployment in a convenient and affordable manner, and the “for-profit” v. “non-profit” distinctions among providers have – for all practical purposes – been all but obliterated in the marketplace.

Issues Regarding Specific Provisions in the Proposed Legislation

However, in the event that this Committee rejects the arguments presented by AAP and decides to seek enactment of legislation embodying the Register’s proposed amendments to the Copyright Act, AAP would urge Congress to revise S.487 so that, in practical application, the helpful “TEACH Act” acronym does not come to represent the “Technology, Education And Copyright Heist Act.”

To this end, we request that the following considerations should be clarified or otherwise explicitly embodied in the legislation:

The complete exclusion of works “produced primarily for instructional use” (p.2, lines 7-8) from the scope of Section 110(2), as it would be amended, is absolutely essential to ensure, as the Register’s Report noted, that the exemption does not “significantly cut into primary markets [of educational publishers], impairing incentives to create.” The exemption should not cover such works, and this exclusion should not be limited, conditioned or qualified in any way.

The exemption, as it would be amended, should be applicable only to an accredited “nonprofit educational institution” pursuant to established standards for accreditation in the relevant educational field. In keeping with the Register’s emphasis on tying the exemption to the concept of “mediated instruction” (i.e., described in the Register’s Report as “the type of performance or display that would take place in a live classroom setting… a use of the work as an integral part of the class experience, controlled by the instructor, rather than as supplemental or background information to be experienced independently”), the exemption should not apply to libraries, archives, scholarly societies, or “think tanks” because the activities of these entities generally do not constitute “mediated instruction.”

The “display of a work” (p.2, line 16) should be qualified, as is the performance of “any other work” (p.2, line 15), by the phrase “reasonable and limited portions” (or, better still, “reasonably limited portions”) so that it is clear the exemption does not permit such works to be displayed online in their entirety. In a recent submission to the U.S. Court of Appeals for the Second Circuit in its consideration of New York Times v. Tasini, the Register of Copyright explained that, even in the pre-Internet world of 1976, Congress anticipated that the newly-established “display” right could displace traditional means of reproduction and delivery of copies in the context of information networks, and understood that the “display” of a work online “could eventually provide libraries and individuals throughout the world with access to a single copy of a work by transmission of electronic images.” Although this realization had little significance in 1976, when Congress was creating an “instructional broadcast television” exemption from the display right, the expansion of that exemption to cover that right in the context of interactive digital networks could have extraordinary repercussions for the display of works which are not excluded from the exemption as works “produced primarily for instructional use.” For example, trade books in electronic formats would be vulnerable to the broadest claims of exemption, so that online courses in contemporary fiction or classic 20th century literature could allow readers to consume entire “best sellers” or a publisher’s most valuable backlist properties in the guise of “distance education” – cutting directly into the primary markets for “e-books.” Congress must recognize the new implications of “displaying” a textual work or database online, and limit them accordingly, consistent with the limited purpose in amending the exemption. In essence, this would permit a “fair use” display of the work online, consistent with the reasonable expectations of both the copyright and user communities. The failure of Congress to recognize the importance of this issue could have dire consequences for the nascent “e-book” market and for such diverse new related services as those provided by netLibrary (www.netlibrary.com), Ebrary (www.ebrary.com), Questia Media (www.questia.com/questia.html) and others. If, as in the case of a photograph, painting or even a short poem, Congress believes it is appropriate and not a danger to the copyright owner’s rights to permit the online display of the entire work, these considerations should be explicitly delineated in the exemption (e.g., perhaps through reference to codified terms such as “graphic, pictorial or sculptural works”). (See further discussion below regarding the “class session” language on p.3, line 2).

The statutory language should make clear that the exemption, as it would be amended, applies only to copies of a work that are already in digital form, and does not authorize the digitization, for example, of a print book through scanning (which would involve the exercise of the “adaptation” right). We understand this is the Register’s intention as embodied in the explicit, limited authority under Section 112 of the Copyright Act, as it would be amended, to make copies “embodying the performance or display to be used for the purpose of making transmissions authorized under Section 110(2).” However, the lack of authorization to digitize should be made explicit in the statutory language.

In addition to the requirements that the “transient copies” authorized under Section 110(2), as it would be amended, must be “created as part of the automatic technical process of a digital transmission” (p.2, lines18-19) and “retained for no longer than reasonably necessary to complete the transmission” (p.3, lines 15-17), the exemption should explicitly require that such copies must be non-accessible and secure against interception or reproduction. This will make the treatment of “transient copies” under this section more consistent with the treatment of such copies under Section 512 of the Copyright Act.

It is our understanding that, consistent with the previous discussion of the “mediated instruction” concept in point 2 above, the language on p.3, line 2 referring to “an integral part of a class session” is intended to ensure that the online display of a work pursuant to the exemption, as it would be revised, is limited to reasonable portions of such work as would be used in a typical, off-line live class setting, rather than the entire work. This should be clarified by amending the cited phrase to refer to something like “an integral part of a class session, and in no larger portion than might reasonably be expected to be used in a single such session…” Once again, the point is to generally bar the online display of a work in its entirety.

With respect to the requirements in paragraph (E) concerning the “policies regarding copyright” which must be instituted by the transmitting body or institution, a requirement should be added for adoption of a policy and procedure regarding termination of those who abuse this exemption to engage in repeated copyright infringements, and to require that those who rely on this exemption must affirmatively respond to “standard technical measures” of the kind used to protect copyright and referred to in Section 512(i) of the Copyright Act. Congress should also compare the requirement to “provide informational materials to faculty, students, and relevant staff members that accurately describe, and promote compliance with, the laws of the United States relating to copyright” to a similar requirement for universities seeking to limit their liability for copyright infringement under Section 512(e)(1)(C) of the Copyright Act, and assess compliance with the latter requirement.

With respect to the requirement to apply “technological measures” on p.4, line 5, the legislation should clarify what is intended by the phrase “reasonably prevent” and should provide some objective criteria for evaluating compliance. In addition to “unauthorized access to and dissemination of the work,” the provision should require that such measures must also “reasonably prevent” unauthorized downloading, printing or otherwise copying of the work as well. In its current form, the proposed legislation provides no mechanism or standard for enforcing the requirements relating to technological measures, or any other requirements of the exemption, as it would be amended. The requirements are meaningless without a meaningful capability to enforce them.

The requirement at p.4, lines 8-10, to ensure that the transmitting body or institution “does not intentionally interfere with technological measures used by the copyright owner to protect the work” sets an impossibly high evidentiary standard for proving violations. The word “intentionally” should be deleted from the cited phrase to establish an affirmative obligation to not interfere; if this is unacceptable to Congress, then, at a minimum, the requirement should be amended to require that the body or entity “do nothing that reasonably could be expected to interfere” with such measures. This would at least provide an objective standard by which to assess compliance.

In addition to the requirements already in the proposed legislation, State entities that assert the exemption, as it would be amended, should be considered with respect to such transmissions to have waived their Eleventh Amendment sovereign immunity for purposes of any related copyright infringement lawsuit concerning the transmitted performance or display of a copyrighted work. Without such a requirement, such entities may feel little obligation to comply with the “technological measures” or other limiting requirements of the exemption, given their current immunity from damage suits for copyright infringement under recent Supreme Court rulings.

With respect to the U.S. Copyright Office’s implementation of requirements for a report and conference under Section 4 of the proposed legislation, it would be appropriate to add such matters as the treatment of technological measures in digital distance education programs and other matters of concern to copyright owners with respect to such programs, so that implementation is based on a balanced examination of the concerns of owners and users of copyrighted works in digital formats.

Conclusion

As documented in the Register’s Report and through subsequent developments during the past year, the marketplace for producing high-quality content for Internet-based higher education programs is a diverse, dynamic and expanding world of evolving experimentation, collaboration and innovation. Rapid technological change is producing revolutionary rethinking of business and academic models, related institutions, and the whole educational enterprise.

While providers may occasionally have problems with copyright and related licensing issues, these instances are the by-product of marketplace “growing pains,” rather than the result of inadequate copyright law, and have in no way denied Internet providers of higher education the opportunity to produce exciting new educational experiences for a broad range of students through digital technologies.

If Congress is looking for ways to ensure the availability of high-quality digital content for Internet-based “distance education,” AAP believes that it should express its largesse through the provision of funding, tax credits and other financial means of support to various public and private entities for the production and acquisition online educational content. Otherwise, there is ample time and reason to let the flexibility of the marketplace, with the inherent checks and balances of competition, work out continuing copyright and content quality issues without the intrusion of government mandates. As long as legal copyright protections are adequate to meet the needs of such new applications, AAP believes that policy-makers can look to the marketplace to solve most other problems.

If, however, Congress determines to go forward with legislation based on the Register of Copyright’s recommendations regarding the revision of Sections 110(2) and 112 of the Copyright Act, AAP urges Congress to make the clarifications discussed above and to call upon the AAP for assistance in ensuring that the resulting legislation properly balances the interests of owners of copyrighted works with those of the users of such works.