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[Senate Report 107-31]
[From the U.S. Government Publishing Office]

                                                        Calendar No. 66
107th Congress                                                   Report
                                 SENATE
 1st Session                                                     107-31

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

 
     TECHNOLOGY, EDUCATION AND COPYRIGHT HARMONIZATION ACT OF 2001

                                _______
                                

                  June 5, 2001.--Ordered to be printed

                                _______
                                

Mr. Hatch, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                         [To accompany S. 487]

    The Committee on the Judiciary, to which was referred the 
bill (S. 487) to amend chapter 1 of title 17, United States 
Code, relating to the exemption of certain performances or 
displays for educational uses from copyright infringement 
provisions, to provide that the making of a single copy of such 
performances or displays is not an infringement, and for other 
purposes, having considered the same reports favorably thereon 
with an amendment in the nature of a substitute and recommends 
that the bill, as amended, do pass.

                                CONTENTS

                                                                   Page
  I. Purpose..........................................................3
 II. Legislative history..............................................4
III. Vote of the committee............................................6
 IV. Section-by-section analysis......................................6
  V. Cost estimate...................................................16
 VI. Regulatory impact statement.....................................17
VII. Changes in existing law.........................................17

    The bill, as amended, is as follows:

SECTION 1. EDUCATIONAL USE COPYRIGHT EXEMPTION.

  (a) Short Title.--This Act may be cited as the ``Technology, 
Education, and Copyright Harmonization Act of 2001''.
  (b) Exemption of Certain Performances and Displays for Educational 
Uses.--Section 110 of title 17, United States Code, is amended--
          (1) by striking paragraph (2) and inserting the following:
          ``(2) except with respect to a work produced or marketed 
        primarily for performance or display as part of mediated 
        instructional activities transmitted via digital networks, or a 
        performance or display that is given by means of a copy or 
        phonorecord that is not lawfully made and acquired under this 
        title, and the transmitting government body or accredited 
        nonprofit educational institution knew or had reason to believe 
        was not lawfully made and acquired, the performance of a 
        nondramatic literary or musical work or reasonable and limited 
        portions of any other work, or display of a work in an amount 
        comparable to that which is typically displayed in the course 
        of a live classroom session, by or in the course of a 
        transmission, if--
                  ``(A) the performance or display is made by, at the 
                direction of, or under the actual supervision of an 
                instructor as an integral part of a class session 
                offered as a regular part of the systematic mediated 
                instructional activities of a governmental body or an 
                accredited nonprofit educational institution;
                  ``(B) the performance or display is directly related 
                and of material assistance to the teaching content of 
                the transmission;
                  ``(C) the transmission is made solely for, and, to 
                the extent technologically feasible, the reception of 
                such transmission is limited to--
                          ``(i) students officially enrolled in the 
                        course for which the transmission is made; or
                          ``(ii) officers or employees of governmental 
                        bodies as a part of their official duties or 
                        employment; and
                  ``(D) the transmitting body or institution--
                          ``(i) institutes policies regarding 
                        copyright, provides 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, and provides notice to 
                        students that materials used in connection with 
                        the course may be subject to copyright 
                        protection; and
                          ``(ii) in the case of digital transmissions--
                                  ``(I) applies technological measures 
                                that, in the ordinary course of their 
                                operations, prevent--
                                          ``(aa) retention of the work 
                                        in accessible form by 
                                        recipients of the transmission 
                                        from the transmitting body or 
                                        institution for longer than the 
                                        class session; and
                                          ``(bb) unauthorized further 
                                        dissemination of the work in 
                                        accessible form by such 
                                        recipients to others; and
                                  ``(II) does not engage in conduct 
                                that could reasonably be expected to 
                                interfere with technological measures 
                                used by copyright owners to prevent 
                                such retention or unauthorized further 
                                dissemination;''; and
          (2) by adding at the end the following:
          ``In paragraph (2), the term `mediated instructional 
        activities' with respect to the performance or display of a 
        work by digital transmission under this section refers to 
        activities that use such work as an integral part of the class 
        experience, controlled by or under the actual supervision of 
        the instructor and analogous to the type of performance or 
        display that would take place in a live classroom setting. The 
        term does not refer to activities that use, in 1 or more class 
        sessions of a single course, such works as textbooks, course 
        packs, or other material in any media, copies or phonorecords 
        of which are typically purchased or acquired by the students in 
        higher education for their independent use and retention or are 
        typically purchased or acquired for elementary and secondary 
        students for their possession and independent use.
          ``For purposes of paragraph (2), accreditation--
                  ``(A) with respect to an institution providing post-
                secondary education, shall be as determined by a 
                regional or national accrediting agency recognized by 
                the Council on Higher Education Accreditation or the 
                United States Department of Education; and
                  ``(B) with respect to an institution providing 
                elementary or secondary education, shall be as 
                recognized by the applicable state certification or 
                licensing procedures.
          ``For purposes of paragraph (2), no governmental body or 
        accredited nonprofit educational institution shall be liable 
        for infringement by reason of the transient or temporary 
        storage of material carried out through the automatic technical 
        process of a digital transmission of the performance or display 
        of that material as authorized under paragraph (2). No such 
        material stored on the system or network controlled or operated 
        by the transmitting body or institution under this paragraph 
        shall be maintained on such system or network in a manner 
        ordinarily accessible to anyone other than anticipated 
        recipients. No such copy shall be maintained on the system or 
        network in a manner ordinarily accessible to such anticipated 
        recipients for a longer period than is reasonably necessary to 
        facilitate the transmissions for which it was made.''.
  (c) Ephemeral Recordings.--
          (1) In general.--Section 112 of title 17, United States Code, 
        is amended--
                  (A) by redesignating subsection (f) as subsection 
                (g); and
                  (B) by inserting after subsection (e) the following:
  ``(f)(1) Notwithstanding the provisions of section 106, and without 
limiting the application of subsection (b), it is not an infringement 
of copyright for a governmental body or other nonprofit educational 
institution entitled under section 110(2) to transmit a performance or 
display to make copies or phonorecords of a work that is in digital 
form and, solely to the extent permitted in paragraph (2), of a work 
that is in analog form, embodying the performance or display to be used 
for making transmissions authorized under section 110(2), if--
          ``(A) such copies or phonorecords are retained and used 
        solely by the body or institution that made them, and no 
        further copies or phonorecords are reproduced from them, except 
        as authorized under section 110(2); and
          ``(B) such copies or phonorecords are used solely for 
        transmissions authorized under section 110(2).
  ``(2) This subsection does not authorize the conversion of print or 
other analog versions of works into digital formats, except that such 
conversion is permitted hereunder, only with respect to the amount of 
such works authorized to be performed or displayed under section 
110(2), if--
          ``(A) no digital version of the work is available to the 
        institution; or
          ``(B) the digital version of the work that is available to 
        the institution is subject to technological protection measures 
        that prevent its use for section 110(2).''.
          (2) Technical and conforming amendment.--Section 802(c) of 
        title 17, United States Code, is amended in the third sentence 
        by striking ``section 112(f)'' and inserting ``section 
        112(g)''.
  (d) Patent and Trademark Office Report.--
          (1) In general.--Not later than 180 days after the date of 
        enactment of this Act and after a period for public comment, 
        the Undersecretary of Commerce for Intellectual Property, after 
        consultation with the Register of Copyrights, shall submit to 
        the Committees on the Judiciary of the Senate and the House of 
        Representatives a report describing technological protection 
        systems that have been implemented, are available for 
        implementation, or are proposed to be developed to protect 
        digitized copyrighted works and prevent infringement, including 
        upgradeable and self-repairing systems, and systems that have 
        been developed, are being developed, or are proposed to be 
        developed in private voluntary industry-led entities through an 
        open broad based consensus process. The report submitted to the 
        Committees shall not include any recommendations, comparisons, 
        or comparative assessments of any commercially available 
        products that may be mentioned in the report.
          (2) Limitations.--The report under this subsection--
                  (A) is intended solely to provide information to 
                Congress; and
                  (B) shall not be construed to affect in any way, 
                either directly or by implication, any provision of 
                title 17, United States Code, including the 
                requirements of clause (ii) of section 110(2)(D) of 
                that title (as added by this Act), or the 
                interpretation or application of any such provision, 
                including evaluation of the compliance with that clause 
                by any governmental body or nonprofit educational 
                institution.

                               I. Purpose

    S. 487, the ``Technology, Education And Copyright 
Harmonization Act of 2001,'' or the ``TEACH Act,'' updates the 
distance education provisions of the Copyright Act for the 21st 
Century. The Act allows students and teachers to benefit from 
deployment in education of advanced digital transmission 
technologies like the Internet, while introducing safeguards to 
limit the additional risks to copyright owners that are 
inherent in exploiting works in a digital format. This 
legislation has been crafted in a process that has ensured a 
broad consensus of affected parties.
    Education is the means by which we develop our nation's 
human resources. In this information age, marked by both 
cooperation and competition on a global scale, the ability of 
the United States to meet its domestic and international 
challenges and responsibilities is directly dependent on its 
educational capacity. That capacity in turn will be determined 
by the quality of our educational programs and their reach to 
all sectors of the public. For our nation to maintain its 
competitive edge, it will need to extend education beyond 
children and young adults to lifelong learning for working 
adults, and to reach all students of all income levels, in 
cities and rural settings, in schools and on campuses, in the 
workplace, at home, and at times selected by students to meet 
their needs.
    Digital distance education helps make this possible, 
whether in the traditional sense, when instructor and student 
are separated in place and perhaps time, or in new hybrids of 
traditional classroom education combined with online 
components. Increasingly, college students can submit class 
assignments by email and participate in discussions that 
connect students in a classroom with students beyond the 
classroom. Similarly, K-12 students can learn about the customs 
and cultures of other countries through real-time audiovisual 
conversations with pen pals from those countries; they can 
learn science in new ways by having scientific demonstrations 
and actual experiments conducted at distant locations brought 
to them in real time via the Internet. The National Science 
Foundation, the National Academy of Sciences, and other 
scientific societies and educational organizations are working 
hard to improve our nation's science and mathematics education; 
other groups are developing new ways to bring humanities and 
the arts to students and the broader public. Many of these new 
educational efforts draw on advances in information technology 
and digital networks.
    The TEACH Act amends sections 110(2) and 112 of the 
Copyright Act to facilitate the growth and development of 
digital distance education. The Act expands the exempted 
copyright rights, the types of transmissions, and the 
categories of works that the exemption covers beyond those that 
are covered by the existing exemption for performances and 
displays of certain copyrighted works in the course of 
instructional transmissions. Thus, for example, it allows 
transmissions to locations other than a physical classroom, and 
allows for performances of reasonable and limited portions of 
audiovisual works, sound recordings, and other works within the 
scope of the exemption. At the same time, it maintains and 
clarifies the concept of ``mediated instructional activities'' 
to which the exemption applies, and includes safeguards such as 
obligations to implement technological protection measures and 
limitations on the amounts of certain types of works that may 
be performed or displayed. The Act also amends section 112 of 
the Copyright Act to permit storage of copyrighted material on 
servers in order to permit the performances and displays 
authorized by section 110(2) to be made asynchronously in 
distance education courses.

                        II. Legislative History

    Section 110(2) of the Copyright Act was enacted in 1976 \1\ 
on the basis of a policy determination that certain 
performances and displays of copyrighted works in connection 
with systematic instruction using then-known forms of distance 
education should be permitted without a need to obtain a 
license or rely on fair use. The technological characteristics 
of digital transmissions have rendered the language of section 
110(2) inapplicable to the most advanced delivery methods for 
instruction. Without an amendment to accommodate these new 
technologies, the policy behind the 1976 Act would be 
increasingly diminished.
---------------------------------------------------------------------------
    \1\ Act of Oct. 19, 1976, Pub. L. No. 94-553, 90 Stat. 2549 (1976).
---------------------------------------------------------------------------
    At the same time, two factors recommend some recalibrating 
of the policy balance struck in 1976. The characteristics of 
digital transmission technologies present new educational 
opportunities, such as the ability to provide a media-rich, 
interactive educational experience to students unable to attend 
classes at the physical location of the institution. On the 
other hand, the ability of digital transmission technologies to 
disseminate rapidly and without control virtually infinite 
numbers of high quality copies, create new risks for the owners 
of copyrighted works used in distance education.
    In the five years leading up to the passage of the Digital 
Millennium Copyright Act (DMCA) in 1998,\2\ the application of 
copyright law to distance education using digital technologies 
was the subject of public debate and attention in the United 
States. Extensive discussions concerning the issue were 
conducted during Congress' consideration of the DMCA, but no 
conclusion was reached. Therefore, in section 403 of the DMCA, 
Congress directed the Copyright Office to consult with 
representatives of copyright owners, non-profit educational 
institutions, and non-profit libraries and archives, and 
thereafter to submit to 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.'' \3\ The 
recommendations were to include any legislation the Register of 
Copyrights considered appropriate to achieve that objective. 
The Copyright Office was specifically directed to consider the 
following issues: the need for a new exemption, the categories 
of works to be included in any exemption, the appropriate 
quantitative limitations on the portions of works that may be 
used under any exemption, which parties should be eligible for 
any exemption, which parties should be eligible recipients of 
distance education material under any exemption, the extent to 
which technological protection measures should be mandated as a 
condition of eligibility for any exemption, the extent to which 
the availability of licenses should be considered in assessing 
the eligibility for any exemption, and other issues the Office 
considered appropriate.
---------------------------------------------------------------------------
    \2\ Act of Oct. 28, 1998, Pub. L. No. 105-304, 112 Stat. 2877 
(1998).
    \3\ Id.
---------------------------------------------------------------------------
    The Copyright Office conducted an extensive and intensive 
process of identifying stakeholders, holding public hearings, 
soliciting comments, conducting research, and consulting with 
experts in various fields. On May 10, 1999, the Register of 
Copyrights formally presented the findings and recommendations 
of the Copyright Office to the Senate Judiciary Committee.\4\ 
Among other things, the Copyright Office recommended the 
following changes: elimination of the requirement of a physical 
classroom, clarification that the term ``transmission'' covers 
digital transmissions, expanding the rights covered by the 
exemption to include those needed to accomplish network 
transmissions, expanding the categories of works exempted from 
the performance rights beyond the current coverage of non-
dramatic literary and musical works, and creating new 
safeguards to counteract the risks imposed by digital 
transmissions.\5\
---------------------------------------------------------------------------
    \4\ Register of Copyrights, Report on Copyright and Digital 
Distance Education (1999).
    \5\ Id.
---------------------------------------------------------------------------
    Following careful review and consideration of the Copyright 
Office's findings and recommendations, the Chairman, Senator 
Hatch, joined by the Ranking Member, Senator Leahy, introduced 
S. 487, the ``Technology, Education and Copyright Harmonization 
Act of 2001,'' or the ``TEACH Act,'' \6\ on March 7, 2001, to 
implement many of the Copyright Office recommendations.
---------------------------------------------------------------------------
    \6\ S. 487, 107th Cong., 1st Sess. (2001). See 2000 Cong. Rec. S 
2008-2009 (daily ed. Mar. 7, 2001).
---------------------------------------------------------------------------
    On May 13, 2001, the Judiciary Committee held a hearing 
that focused on amendments to the copyright law proposed by the 
``TEACH Act.'' The Register of Copyrights, Ms. Marybeth Peters, 
testified on behalf of the Copyright Office. The Committee also 
heard testimony from Mr. Gerald A. Heeger, President of the 
University of Maryland College Park; Mr. Allan Adler, Vice 
President for Legal & Governmental Affairs for the Association 
of American Publishers; Mr. Richard Siddoway, Principal of the 
Utah Electronic High School; Mr. Paul LeBlanc, President of 
Malboro College, Vermont; and Mr. Gary Carpenter, Adjunct 
Professor of Law at American University, Washington, DC.
    On March 17, 2001, the Judiciary Committee met in executive 
session to consider S. 487. An amendment in the nature of a 
substitute was offered by the Chairman, Senator Hatch, together 
with the Ranking Member, Senator Leahy, which had been 
developed to implement the purposes of the TEACH Act, following 
extensive discussions with the education and copyright owner 
communities, and with further assistance from the Copyright 
Office. The substitute amendment was adopted by unanimous 
consent and the bill, as amended, was then ordered to be 
favorably reported to the full Senate by unanimous consent.

                       III. Vote of the Committee

    The Senate Committee on the Judiciary, with a quorum 
present, met on Thursday, May 17, 2001, at 10:00 a.m., to 
consider the Technology, Education and Copyright Harmonization 
Act of 2001. The Committee considered and accepted by unanimous 
consent an amendment in the nature of a substitute offered by 
the Chairman (for himself and Mr. Leahy). The Committee then 
ordered the Technology, Education and Copyright Harmonization 
Act of 2001 to be reported favorably to the Senate, as amended, 
by unanimous consent, with a recommendation that the bill do 
pass.

                    IV. Section-by-Section Analysis

Subsection (a): Short Title

    This section provides that this Act may be cited as the 
``Technology, Education and Copyright Harmonization Act of 
2001.''

Subsection (b): Exemption of Certain Performances and Displays for 
        Educational Uses

            Summary
    Section 1(b) of the TEACH Act amends section 110(2) of the 
Copyright Act to encompass performances and displays of 
copyrighted works in digital distance education under 
appropriate circumstances. The section expands the scope of 
works to which the amended section 110(2) exemption applies to 
include performances of reasonable and limited portions of 
works other than nondramatic literary and musical works (which 
are currently covered by the exemption), while also limiting 
the amount of any work that may be displayed under the 
exemption to what is typically displayed in the course of a 
live classroom session. At the same time, section 1(b) removes 
the concept of the physical classroom, while maintaining and 
clarifying the requirement of mediated instructional activity 
and limiting the availability of the exemption to mediated 
instructional activities of governmental bodies and 
``accredited'' non-profit educational institutions. This 
section of the Act also limits the amended exemption to exclude 
performances and displays given by meansof a copy or 
phonorecord that is not lawfully made and acquired, which the 
transmitting body or institution knew or had reason to believe was not 
lawfully made and acquired. In addition, section 1(b) requires the 
transmitting institution to apply certain technological protection 
measures to protect against retention of the work and further 
downstream dissemination. The section also clarifies that participants 
in authorized digital distance education transmissions will not be 
liable for any infringement by reason of transient or temporary 
reproductions that may occur through the automatic technical process of 
a digital transmission for the purpose of a performance or display 
permitted under the section. Obviously, with respect to such 
reproductions, the distribution right would not be infringed. 
Throughout the Act, the term ``transmission'' is intended to include 
transmissions by digital, as well as analog means.
            Works subject to the exemption and applicable portions
    The TEACH Act expands the scope of the section 110(2) 
exemption to apply to performances and displays of all 
categories of copyrighted works, subject to specific exclusions 
for works ``produced or marketed primarily for performance or 
display as part of mediated instructional activities 
transmitted via digital networks'' and performance or displays 
``given by means of a copy or phonorecord that is not lawfully 
made and acquired,'' which the transmitting body or institution 
``knew or had reason to believe was not lawfully made and 
acquired.''
    Unlike the current section 110(2), which applies only to 
public performances of nondramatic literary or musical works, 
the amendment would apply to public performances of any type of 
work, subject to certain exclusions set forth in section 
110(2), as amended. The performance of works other than non-
dramatic literary or musical works is limited, however, to 
``reasonable and limited portions'' of less than the entire 
work. What constitutes a ``reasonable and limited'' portion 
should take into account both the nature of the market for that 
type of work and the pedagogical purposes of the performance.
    In addition, because ``display'' of certain types of works, 
such as literary works using an ``e-book'' reader, could 
substitute for traditional purchases of the work (e.g., a text 
book), the display exemption is limited to ``an amount 
comparable to that which is typically displayed in the course 
of a live classroom setting.'' This limitation is a further 
implementation of the ``mediated instructional activity'' 
concept described below, and recognizes that a ``display'' may 
have a different meaning and impact in the digital environment 
than in the analog environment to which section 110(2) has 
previously applied. The ``limited portion'' formulation used in 
conjunction with the performance right exemption is not used to 
connection with the display right exemption, because, for 
certain works, display of the entire work could be appropriate 
and consistent with displays typically made in a live classroom 
setting (e.g., short poems or essays, or images of pictorial, 
graphic, or sculptural works, etc.).
    The exclusion for works ``produced or marketed primarily 
for performance or display as part of mediated instructional 
activities transmitted via digital networks'' is intended to 
prevent the exemption from undermining the primary market for 
(and, therefore, impairing the incentive to create, modify or 
distribute) those materials whose primary market would 
otherwise fall within the scope of the exemption. The concept 
of ``performance or display as part of mediated instructional 
activities'' is discussed in greater detail below, in 
connection with the scope of the exemption. It is intended to 
have the same meaning and application here, so that works 
produced or marketed primarily for activities covered by the 
exemption would be excluded from the exemption. The exclusion 
is not intended to apply generally to all educational materials 
or to all materials having educational value. The exclusion is 
limited to materials whose primary market is ``mediated 
instructional activities,'' i.e., materials performed or 
displayed as an integral part of the class experience, 
analogous to the type of performance or display that would take 
place in a live classroom setting. At the same time, the 
reference to ``digital networks'' is intended to limit the 
exclusion to materials whose primary market is the digital 
network environment, not instructional materials developed and 
marketed for use in the physical classroom.
    The exclusion of performances or displays ``given by means 
of a copy or phonorecord that is not lawfully made and 
acquired'' under title 17 is based on a similar exclusion in 
the current language of section 110(1) for the performance or 
display of an audiovisual work in the classroom. Unlike the 
provision in section 110(1), the exclusion here applies to the 
performance or display of any work. But, as in section 110(1), 
the exclusion applies only where the transmitting body or 
institution ``knew or had reason to believe'' that the copy or 
phonorecord was not lawfully made and acquired. As noted in the 
Register's Report, the purpose of the exclusion is to reduce 
the likelihood that an exemption intended to cover only the 
equivalent of traditional concepts of performance and display 
would result in the proliferation or exploitation of 
unauthorized copies.\7\ An educator would typically purchase, 
license, rent, make a fair use copy, or otherwise lawfully 
acquire the copy to be used, and works not yet made available 
in the market (whether by distribution, performance or display) 
would, as a practical matter, be rendered ineligible for use 
under the exemption.
---------------------------------------------------------------------------
    \7\ Report on Copyright and Digital Distance Education at 159.
---------------------------------------------------------------------------
            Eligible transmitting entities
    As under the current section 110(2), the exemption, as 
amended, is limited to government bodies and non-profit 
educational institutions. However, due to the fact that, as the 
Register's Report points out, ``nonprofit educational 
institutions'' are no longer a closed and familiar group, and 
the ease with which anyone can transmit educational material 
over the Internet, the amendment would require non-profit 
educational institutions to be ``accredited'' in order to 
provide further assurances that the institution is a bona fide 
educational institution. It is not otherwise intended to alter 
the eligibility criteria. Nor is it intended to limit or affect 
any other provision of the Copyright Act that relates to non-
profit educational institutions or to imply that non-accredited 
educational institutions are necessarily not bona fide.
    ``Accreditation'' is defined in section 1(b)(2) of the 
TEACH Act in terms of the qualification of the educational 
institution. It is not defined in terms of particular courses 
or programs. Thus, an accredited nonprofit educational 
institution qualifies for the exemption with respect to its 
courses whether or not the courses are part of a degree or 
certificate-granting program.
            Qualifying performances and displays; mediated 
                    instructional activities
    Subparagraph (2)(A) of the amended exemption provides that 
the exemption applies to a performance or display made ``by, at 
the direction of, or under the actual supervision of an 
instructor as an integral part of a class session offered as a 
regular part of * * * systematic mediated instructional 
activity.'' The subparagraph includes several requirements, all 
of which are intended to make clear that the transmission must 
be part of mediated instructional activity. First, the 
performance or display must be made by, under the direction of, 
or under the actual supervision of an instructor. The 
performance or display may be initiated by the instructor. It 
may also be initiated by a person enrolled in the class as long 
as it is done either at the direction, or under the actual 
supervision, of the instructor. ``Actual'' supervision is 
intended to require that the instructor is, in fact, 
supervising the class activities, and that supervision is not 
in name or theory only. It is not intended to require either 
constant, real-time supervision by the instructor or pre-
approval by the instructor for the performance or display. 
Asynchronous learning, at the pace of the student, is a 
significant and beneficial characteristic of digital distance 
education, and the concept of control and supervision is not 
intended to limit the qualification of such asynchronous 
activities for this exemption.
    The performance or display must also be made as an 
``integral part'' of a class session, so it must be part of a 
class itself, rather than ancillary to it. Further, it must 
fall within the concept of ``mediated instructional 
activities'' as described in section 1(b)(2) of the TEACH Act. 
This latter concept is intended to require the performance or 
display to be analogous to the type of performance or display 
that would take place in a live classroom setting. Thus, 
although it is possible to display an entire textbook or 
extensive course-pack material through an e-book reader or 
similar device or computer application, this type of use of 
such materials as supplemental reading would not be analogous 
to the type of display that would take place in the classroom, 
and therefore would not be authorized under the exemption.
    The amended exemption is not intended to address other uses 
of copyrighted works in the course of digital distance 
education, including student use of supplemental or research 
materials in digital form, such as electronic course packs, e-
reserves, and digital library resources. Such activities do not 
involve uses analogous to the performances and displays 
currently addressed in section 110(2).
    The ``mediated instructional activity'' requirement is thus 
intended to prevent the exemption provided by the TEACH Act 
from displacing textbooks, course packs or other material in 
any media, copies of phonorecords of which are typically 
purchased or acquired by students for their independent use and 
retention (in most post-secondary and some elementary and 
secondary contexts). The Committee notes that in many secondary 
and elementary school contexts, such copies of such materials 
are not purchased or acquired directly by the students, but 
rather are provided for the students' independent use and 
possession (for the duration of the course) by the institution.
    The limitation of the exemption to systematic ``mediated 
instructional activities'' in subparagraph (2)(A) of the 
amended exemption operates together with the exclusion in the 
opening clause of section 110(2) for works ``produced or 
marketed primarily for performance or display as part of 
mediated instructional activities transmitted via digital 
networks'' to place boundaries on the exemption. The former 
relates to the nature of the exempt activity; the latter limits 
the relevant materials by excluding those primarily produced or 
marketed for the exempt activity.
    One example of the interaction of the two provisions is the 
application of the exemption to textbooks. Pursuant to 
subparagraph (2)(A), which limits the exemption to ``mediated 
instructional activities,'' the display of material from a 
textbook that would typically be purchased by students in the 
local classroom environment, in lieu of purchase by the 
students, would not fall within the exemption. Conversely, 
because textbooks typically are not primarily produced or 
marketed for performance or display in a manner analogous to 
performances or display in the live classroom setting, they 
would not per se be excluded from the exemption under the 
exclusion in the opening clause. Thus, an instructor would not 
be precluded from using a chart or table or other short excerpt 
from a textbook different from the one assigned for the course, 
or from emphasizing such an excerpt from the assigned textbook 
that had been purchased by the students.
    The requirement of subparagraph (2)(B), that the 
performance or display must be directly related and of material 
assistance to the teaching content of the transmission, is 
found in current law, and has been retained in its current 
form. As noted in the Register's Report, \8\ this test of 
relevance and materiality connects the copyrighted work to the 
curriculum, and it means that the portion performed or 
displayed may not be performed or displayed for the mere 
entertainment of the students, or as unrelated background 
material.
---------------------------------------------------------------------------
    \8\ Id. at 80.
---------------------------------------------------------------------------
            Limitations on receipt of transmissions
    Unlike current section 110(2), the TEACH Act amendment 
removes the requirement that transmissions be received in 
classrooms or similar places devoted to instruction unless the 
recipient is an officer or employee of a government body or is 
prevented by disability or special circumstances from attending 
a classroom or similar place of instruction. One of the great 
potential benefits of digital distance education is its ability 
to reach beyond the physical classroom, to provide quality 
educational experiences to all students of all income levels, 
in cities and ruralsettings, in schools and on campuses, in the 
workplace, at home, and at times selected by students to meet their 
needs.
    In its place, the Act substitutes the requirement in 
subparagraph (2)(C) that the transmission be made solely for, 
and to the extent technologically feasible, the reception is 
limited to students officially enrolled in the course for which 
the transmissions is made or governmental employees as part of 
their official duties or employment. This requirement is not 
intended to impose a general requirement of network security. 
Rather, it is intended to require only that the students or 
employees authorized to be recipients of the transmission 
should be identified, and the transmission should be 
technologically limited to such identified authorized 
recipients through systems such as password access or other 
similar measures.

Additional safeguards to counteract new risks

    The digital transmission of works to students poses greater 
risks to copyright owners than transmissions through analog 
broadcasts. Digital technologies make possible the creation of 
multiple copies, and their rapid and widespread dissemination 
around the world. Accordingly, the TEACH Act includes several 
safeguards not currently present in section 110(2).
    First, a transmitting body or institution seeking to invoke 
the exemption is required to institute policies regarding 
copyright and to provide information to faculty, students and 
relevant staff members that accurately describe and promote 
compliance with copyright law. Further, the transmitting 
organization must provide notice to recipients that materials 
used in connection with the course may be subject to copyright 
protection. These requirements are intended to promote an 
environment of compliance with the law, inform recipients of 
their responsibilities under copyright law, and decrease the 
likelihood of unintentional and uninformed acts of 
infringement.
    Second, in the case of a digital transmission, the 
transmitting body or institution is required to apply 
technological measures to prevent (i) retention of the work in 
accessible form by recipients to which it sends the work for 
longer than the class session, and (ii) unauthorized further 
dissemination of the work in accessible form by such 
recipients. Measures intended to limit access to authorized 
recipients of transmissions from the transmitting body or 
institution are not addressed in this subparagraph (2)(D). 
Rather, they are the subjects of subparagraphs (2)(C).
    The requirement that technological measures be applied to 
limit retention for no longer than the ``class session'' refers 
back to the requirement that the performance be made as an 
``integral part of a class session.'' The duration of a ``class 
session'' in asynchronous distance education would generally be 
that period during which a student is logged on to the server 
of the institution or governmental body making the display or 
performance, but is likely to vary with the needs of the 
student and with the design of the particular course. It does 
not mean the duration of a particular course (i.e., a semester 
or term), but rather is intended to describe the equivalent of 
an actual single face-to-face mediated class session (although 
it may be asynchronous and one student may remain online or 
retain access to the performance or display for longer than 
another student as needed to complete the class session). 
Although flexibility is necessary to accomplish the pedagogical 
goals of distance education, the Committee expects that a 
common sense construction will be applied so that a copy or 
phonorecord displayed or performed in the course of a distance 
education program would not remain in the possession of the 
recipient in a way that could substitute for acquisition or for 
uses other than use in the particular class session. 
Conversely, the technological protection measure in 
subparagraph (2)(D)(ii) refers only to retention of a copy or 
phonorecord in the computer of the recipient of a transmission. 
The material to be performed or displayed may, under the 
amendments made by the Act to section 112 and with certain 
limitations set forth therein, remain on the server of the 
institution or government body for the duration of its use in 
one or more courses, and may be accessed by a student each time 
the student logs on to participate in the particular class 
session of the course in which the display or performance is 
made. The reference to ``accessible form'' recognizes that 
certain technological protection measures that could be used to 
comply with subparagraph (d)(D)(ii) do not cause the 
destruction or prevent the making of a digital file; rather 
they work by encrypting the work and limiting access to the 
keys and the period in which such file may be accessed. On the 
other hand, an encrypted file would still be considered to be 
in ``accessible form'' if the body or institution provides the 
recipient with a key for use beyond the class session.
    Paragraph (2)(D)(ii) provides, as a condition of 
eligibility for the exemption, that a transmitting body or 
institution apply technological measures that reasonably 
prevent both retention of the work in accessible form for 
longer than the class session and further dissemination of the 
work.
            Transient and temporary copies
    Section 1(b)(2) of the TEACH Act implements the Register's 
recommendation that liability not be imposed upon those who 
participate in digitally transmitted performances and displays 
authorized under this subsection by reason of copies or 
phonorecords made through the automatic technical process of 
such transmission, or any distribution resulting therefrom. 
Certain modifications have been made to the Register's 
recommendations to accommodate instances where the 
recommendation was either too broad or not sufficiently broad 
to cover the appropriate activities.
    The third paragraph added to the amended exemption under 
section 1(b)(2) of the TEACH Act recognizes that transmitting 
organizations should not be responsible for copies or 
phonorecords made by third parties, beyond the control of the 
transmitting organization. However, consistent with the 
Register's concern that the exemptions should not be 
transformed into a mechanism for obtaining copies,\9\ the 
paragraph also requires that such transient or temporary copies 
stored on the system or network controlled or operated by the 
transmitting body or institution shall not be maintained on 
such system or network ``in a manner ordinarily accessible to 
anyone other than anticipated recipients'' or ``in a manner 
ordinarily accessible to such anticipated recipients for a 
longer period than is reasonably necessary to facilitate the 
transmissions'' for which they are made.
---------------------------------------------------------------------------
    \9\ Id. at 151.
---------------------------------------------------------------------------
    The liability of intermediary service providers remains 
governed by section 512, but, subject to section 512(d) and 
section 512(e), section 512 will not affect the legal 
obligations of a transmitting body or institution when it 
selects material to be used in teaching a course, and 
determines how it will be used and to whom it will be 
transmitted as a provider of content.
    The paragraph refers to ``transient'' and ``temporary'' 
copies consistent with the terminology used in section 512, 
including transient copies made in the transmission path by 
conduits and temporary copies, such as caches, made by the 
originating institution, by service providers or by recipients. 
Organizations providing digital distance education will, in 
many cases, provide material from source servers that create 
additional temporary or transient copies or phonorecords of the 
material in storage known as ``caches'' in other servers in 
order to facilitate the transmission. In addition, transient or 
temporary copies or phonorecords may occur in the transmission 
stream, or in the computer of the recipient of the 
transmission. Thus, by way of example, where content is 
protected by a digital rights management system, the 
recipient's browser may create a cache copy of an encrypted 
file on the recipient's hard disk, and another copy may be 
created in the recipient's random access memory at the time the 
content is perceived. The third paragraph added to the amended 
exemption by section 1(b)(2) of the TEACH Act is intended to 
make clear that those authorized to participate in digitally 
transmitted performances and displays as authorized under 
section 110(2) are not liable for infringement as a result of 
such copies created as part of the automatic technical process 
of the transmission if the requirements of that language are 
met. The paragraph is not intended to create any implication 
that such participants would be liable for copyright 
infringement in the absence of the paragraph.

Subsection (c): Ephemeral Recordings

    One way in which digitally transmitted distance education 
will expand America's educational capacity and effectiveness is 
through the use of asynchronous education, where students can 
take a class when it is convenient for them, not at a specific 
hour designated by the body or institution. This benefit is 
likely to be particularly valuable for working adults. 
Asynchronous education also has the benefit of proceeding at 
the student's own pace, and freeing the instructor from the 
obligation to be in the classroom or on call at all hours of 
the day or night.
    In order for asynchronous distance education to proceed, 
organizations providing distance education transmissions must 
be able to load material that will be displayed or performed on 
their servers, for transmission at the request of students. The 
TEACH Act's amendment to section 112 makes that possible.
    Under new subsection 112(f)(1), transmitting organizations 
authorized to transmit performances or displays under section 
110(2) may load on their servers copies or phonorecords of the 
performance or display authorized to be transmitted under 
section 110(2) to be used for making such transmissions. The 
subsection recognizes that it often is necessary to make more 
than one ephemeral recording in order to efficiently carry out 
digital transmissions, and authorizes the making of such copies 
or phonorecords.
    Subsection 112(f) imposes several limitations on the 
authorized ephemeral recordings. First, they may be retained 
and used solely by the government body or educational 
institution that made them. No further copies or phonorecords 
may be made from them, except for copies or phonorecords that 
are authorized by subsection 110(2), such as the copies that 
fall within the scope of the third paragraph added to the 
amended exemption under section 1(b)(2) of the TEACH Act. The 
authorized ephemeral recordings must be used solely for 
transmissions authorized under section 110(2).
    The Register's Report notes the sensitivity of copyright 
owners to the digitization of works that have not been 
digitized by the copyright owner. As a general matter, 
subsection 112(f) requires the use of works that are already in 
digital form. However, the Committee recognizes that some works 
may not be available for use in distance education, either 
because no digital version of the work is available to the 
institution, or because available digital versions are subject 
to technological protection measures that prevent their use for 
the performances and displays authorized by section 110(2). In 
those circumstances where no digital version is available to 
the institution or the digital version that is available is 
subject to technological measures that prevent its use for 
distance education under the exemption, section 112(f)(2) 
authorizes the conversion from an analog version, but only 
conversion of the portion or amount of such works that are 
authorized to be performed or displayed under section 110(2). 
It should be emphasized that subsection 112(f)(2) does not 
provide any authorization to convert print or other analog 
versions of works into digital format except as permitted in 
section 112(f)(2).
            Relationship to fair use and contractual obligations
    As the Register's Report makes clear ``critical to [its 
conclusion and recommendations] is the continued availability 
of the fair use doctrine.'' \10\ Nothing in this Act is 
intended to limit or otherwise to alter the scope of the fair 
use doctrine. As the Register's Report explains:
---------------------------------------------------------------------------
    \10\ Id. at xvi.

          Fair use is a critical part of the distance education 
        landscape. Not only instructional performances and 
        displays, but also other educational uses of works, 
        such as the provision of supplementary materials or 
        student downloading of course materials, will continue 
        to be subject to the fair use doctrine. Fair use could 
        apply as well to instructional transmissions not 
        covered by the changes to section 110(2) recommended 
        above. Thus, for example, the performance of more than 
        a limited portion of a dramatic work in a distance 
        education program might qualify as fair use in 
        appropriate circumstances.\11\
---------------------------------------------------------------------------
    \11\ Id. at 161-162.

    The Register's Report also recommends that the legislative 
history of legislation implementing its distance education 
requirements make certain points about fair use. Specifically, 
this legislation is enacted in recognition of the following:
          a. the fair use doctrine is technologically neutral 
        and applies to activities in the digital environment; 
        and
          b. the lack of established guidelines for any 
        particular type of use does not mean that fair use is 
        inapplicable.\12\
---------------------------------------------------------------------------
    \12\ Id.
---------------------------------------------------------------------------
    While the Register's Report also examined and discussed a 
variety of licensing issues with respect to educational uses 
not covered by exemptions or fair use, these issues were not 
included in the Report's legislative recommendations that 
formed the basis for the TEACH Act. It is the view of the 
Committee that nothing in this Act is intended to affect in any 
way the relationship between express copyright exemptions and 
license restrictions.
            Nonapplicability to secure tests
    The Committee is aware and deeply concerned about the 
phenomenon of school officials who are entrusted with copies of 
secure test forms solely for use in actual test administrations 
and using those forms for a completely unauthorized purpose, 
namely helping students to study the very questions they will 
be asked on the real test. The Committee does not in any way 
intend to change current law with respect to application of the 
Copyright Act or to undermine or lessen in any way the 
protection afforded to secure tests under the Copyright Act. 
Specifically, this section would not authorize a secure test 
acquired solely for use in an actual test administration to be 
used for any other purpose.

Subsection (d): PTO Report

    The report requested in subsection (d) requests information 
about technological protection systems to protect digitized 
copyrighted works and prevent infringement. The report is 
intended for the information of Congress and shall not be 
construed to have any effect whatsoever on the meaning, 
applicability, or effect of any provision of the Copyright Act 
in general or the TEACH Act in particular.

                            V. Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 29, 2001.
Hon. Orrin G. Hatch,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 487, the Technology, 
Education, and Copyright Harmonization Act of 2001.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Ken Johnson 
(for federal costs) and Paige Piper/Bach (for the private-
sector impact).
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

S. 487--Technology, Education, and Copyright Harmonization Act of 2001

    S. 487 would exempt from copyright laws the digital 
transmission of literature, music, and other material in 
educational settings, if certain conditions are met. Copyright 
laws are administered by the Copyright Office. The bill also 
would require the Patent and Trademark Office (PTO) to report 
to the Congress within six months of enactment on the range of 
technologies that are available to protect the copyrights of 
material that is accessible in digital form.
    Based on information from the Copyright Office and the PTO, 
CBO estimates that implementing S. 487 would have a negligible 
on the operating budgets of those agencies. The bill would not 
affect direct spending or receipts; therefore, pay-as-you-go 
procedures would not apply.
    S. 487 contains no intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act (UMRA) and would impose no 
costs on state, local, or tribal governments. However, the bill 
would impose a private-sector mandate as defined by UMRA on 
copyright owners. S. 487 would limit the right of copyright 
owners to collect compensation under copyright law for use of 
certain secondary materials by educators in long distance 
classes over the Internet. The bill would clarify existing law 
to exempt such materials used in digital distance learning from 
copyright control. According to information from the Copyright 
Office and industry sources, compensation currently received by 
copyright owners from the use of those materials is minimal. 
CBO estimates, therefore, that the direct cost of the mandate 
would fall well below the annual threshold established by UMRA 
for private-sector mandates ($113 million in 2001, adjusted 
annually for inflation).
    The CBO staff contacts for this estimate are Ken Johnson 
(for federal costs) and Paige Piper/Bach (for the private-
sector impact). This estimate was approved by Peter H. 
Fontaine, Deputy Assistant Director for Budget Analysis.

                    VI. Regulatory Impact Statement

    In compliance with paragraph 11(b)(1), rule XXVI of the 
Standing Rules of the Senate, the Committee, after due 
consideration, concludes that S. 487 will not have significant 
regulatory impact.

                      VII. Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
S. 487, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                         UNITED STATES CODE

           *       *       *       *       *       *       *

                         TITLE 17--COPYRIGHTS

           *       *       *       *       *       *       *

            CHAPTER 1--SUBJECT MATTER AND SCOPE OF COPYRIGHT

Sec.
101. Definitions.

           *       *       *       *       *       *       *

Sec. 110. Limitations on exclusive rights: Exemption of certain 
                    performances and displays

    Notwithstanding the provisions of section 106, the 
following are not infringements of copyright:
          (1) performance * * *
          [(2) performance of a nondramatic literary or musical 
        work or display of a work, by or in the course of a 
        transmission, 
        if--]
          (2) except with respect to a work produced primarily 
        for instructional use or a performance or display that 
        is given by means of a copy that is not lawfully made 
        and acquired under this title, and the transmitting 
        governmental body or nonprofit educational 
        institutional knew or had reason to believe was not 
        lawfully made and acquired, the performance of a 
        nondramatic literary or musical work or reasonable and 
        limited portions of any other work, or display of a 
        work, by or in the course of a transmission, 
        reproduction of such work in transient copies or 
        phonorecords created as a part of the automatic 
        technical process of a digital transmission, and 
        distribution of such copies of phonorecords in the 
        course of such transmission, to the extent 
        technologically necessary to transmit the performance 
        or display, if--
                  (A) [the performance or display is a regular] 
                the performance or display is made by or at the 
                direction of an instructor as an integral part 
                of a class session offered as a regular part of 
                the systematic instructional activities of a 
                governmental body or a nonprofit educational 
                institution; and

           *       *       *       *       *       *       *

                  [(C) the transmission is made primarily for--
                          [(i) reception in classrooms or 
                        similar places normally devoted to 
                        instruction, or
                          [(ii) reception by persons to whom 
                        the transmission is directed because 
                        their disabilities or other special 
                        circumstances prevent their attendance 
                        in classrooms or similar places 
                        normally devoted to instruction, or
                          [(iii) reception by officers or 
                        employees of governmental bodies as a 
                        part of their official duties or 
                        employment;]
                  (C) the transmission is made solely for, and, 
                to the extent technologically feasible, the 
                reception of such transmission is limited to--
                          (i) students officially enrolled in 
                        the course for which the transmission 
                        is made; or
                          (ii) officers or employees of 
                        governmental bodies as part of their 
                        official duties or employment; and
                  (D) any transient copies are retained for no 
                longer than reasonably necessary to complete 
                the transmission; and
                  (E) the transmitting body or institution--
                          (i) institutes policies regarding 
                        copyright, provides 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, and provides notice to 
                        students that materials used in 
                        connection with the course may be 
                        subject to copyright protection; and
                          (ii) in the case of digital 
                        transmissions, applies technological 
                        measures that reasonably prevent 
                        unauthorized access to and 
                        dissemination of the work, and does not 
                        intentionally interfere with 
                        technological measures used by the 
                        copyright owner to protect the work.

           *       *       *       *       *       *       *

Sec. 112. Limitations on exclusive rights: Ephemeral recordings

    (a) Notwithstanding * * *

           *       *       *       *       *       *       *

    (e) Statutory License.--(1) A transmitting * * *

           *       *       *       *       *       *       *

    (10) Nothing in this subsection annuls, limits, impairs, or 
otherwise affects in any way the existence or value of any of 
the exclusive rights of the copyright owners in a sound 
recording, except as otherwise provided in this subsection, or 
in a musical work, including the exclusive rights to reproduce 
and distribute a sound recording or musical work, including by 
means of a digital phonorecord delivery, under sections 106(1), 
106(3), and 115, and the right to perform publicly a sound 
recording or musical work, including by means of a digital 
audio transmission, under sections 106(4) and 106(6).
    (f) Notwithstanding the provisions of section 106, and 
without limiting the application of subsection (b), it is not 
an infringement of copyright for a governmental body or other 
nonprofit educational institution entitled to transmit a 
performance or display of a work that is in digital form under 
section 110(2) to make copies or phonorecords embodying the 
performance or display to be used for making transmissions 
authorized under section 110(2), if--
          (1) such copies or phonorecords are retained and used 
        solely by the body or institution that made them, and 
        no further copies or phonorecords are reproduced from 
        them, except as authorized under section 110(2);
          (2) such copies or phonorecords are used solely for 
        transmissions authorized under section 110(2); and
          (3) the body or institution does not intentionally 
        interfere with technological measures used by the 
        copyright owner to protect the work.
    [(f)] (g) The transmission program embodied in a copy or 
phonorecord made under this section is not subject to 
protection as a derivative work under this title except with 
the express consent of the owners of copyright in the 
preexisting works employed in the program.

           *       *       *       *       *       *       *

Sec. 802. Membership and proceedings of copyright arbitration royalty 
                    panels

    (a) Composition of Copyright Arbitration Royalty Panels.--A 
copyright arbitration royalty panel shall consist of 3 
arbitrators selected by the Librarian of Congress pursuant to 
subsection (b).

           *       *       *       *       *       *       *

    (c) Arbitration Proceedings.--Copyright arbitration royalty 
panels shall conduct arbitration proceedings, subject to 
subchapter II of chapter 5 of title 5, for the purpose of 
making their determinations in carrying out the purposes set 
forth in section 801. The arbitration panels shall act on the 
basis of a fully documented written record, prior decisions of 
the Copyright Royalty tribunal, prior copyright arbitration 
panel determinations, and rulings by the Librarian of Congress 
under section 801(c). Any copyright owner who claims to be 
entitled to royalties under section 111, 112, 114, 116, or 119, 
any transmitting organization entitled to a statutory license 
under [section 112(f)] section 112(g), any person entitled to a 
statutory license under section 114(d), any person entitled to 
a compulsory license under section 115, or any interested 
copyright party who claims to be entitled to royalties under 
section 1006, may submit relevant information and proposals to 
the arbitration panels in proceedings applicable to such 
copyright owner or interested copyright party, and any other 
person participating in arbitration proceedings may submit such 
relevant information and proposals to the arbitration panel 
conducting the proceedings. In ratemaking proceedings, the 
parties to the proceedings shall bear the entire cost thereof 
in such manner and proportion as the arbitration panels shall 
direct. In distribution proceedings, the parties shall bear the 
cost in direct proportion to their share of the distribution.

           *       *       *       *       *       *       *

                                  
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