January 31, 1997

Mr. Ira C. Magaziner
Senior Advisor to the President
for Policy Development
The White House
Washington, D.C. 20500

Re: Comments on "Framework for Global Electronic Commerce"

Dear Mr. Magaziner:

The undersigned members of the Digital Future Coalition (DFC) welcome this opportunity to respond to the draft of "A Framework for Global Electronic Commerce, and to commend you and the interagency taskforce for reaching out for comments from a wide range of affected groups. The issues addressed in the draft are important ones, and provide a set of principles for the further development of policy relating to those issues are urgently required. The draft represents an excellent start on this crucial project, and we are pleased to be able to offer suggestions to further strengthen it.

Trade in Information Commodities and the Principle of Balance

To a significant extent, the goods traded by means of electronic commerce will be intangible information commodities. These are goods of a peculiar kind, in which there are both public and private stakes, and special considerations must be taken into account in determining how they will be bought and sold. Traditionally, the characteristics of the marketplace for such goods have been shaped by the laws of intellectual property in general, and copyright in particular. The DFC believes that, by and large, the existing intellectual property system of the United States has worked well to accommodate all stakeholders, and we would urge that any new legal infrastructure developed to facilitate electronic commerce must be equally well calibrated.

The DFC was organized in 1995 as a response to the White Paper of the IITF Working Group on Intellectual Property. Since that time, we have been active on domestic and international intellectual property issues relating to the networked digital environment. From its inception, the DFC has stressed the importance of extending into that new environment the principle of balance which has characterized American copyright law from its inception. As we stated in the proposed list of "Principles for Intellectual Property Protection in the GII," which we submitted to your office last September: "The guiding principle of United States copyright law and policy is 'to promote the Progress of Science and useful Arts....'" This goal will be achieved by a carefully balanced system that provides a financial incentive to authors and inventors, while also promoting access to copyrighted works. Indeed, the failure of the NII Copyright Protection Act of 1995 to achieve broad support in Congress or among affected interests reflected the widespread perception that the proposals it embodied lacked balance. The maintenance of this balance remains the primary concern of DFC today.

Suggested Revisions to the Set of Principles

Returning to the main theme of these comments, we would suggest that the already impressive list of "Principles" that initiates the body of the draft Framework should be revised to take specific account of the importance of balance in intellectual property law. In particular, we would suggest adding a new principle (5), stating that "Governments should recognize the unique qualities of intellectual property." Such a statement could be followed by exegesis of the philosophy of balance outlined above, and conclude with a recognition that where intellectual property is concerned, maximal or unqualified protection is not always to be preferred from the standpoint of public policy. Likewise, the discussion following existing principle (3) can and should be expanded to acknowledge that in a "harmonized legal framework" the important goal of "protecting intellectual property from piracy" must be offset against that of "assuring access to information," and that maintaining the accomodation of diverse interests that has characterized traditional intellectual property law is an important goal in itself.

Intellectual Property Values and Electronic Licensing -- a Potential Collision?

In addition, in the section of the report devoted to legal issues concerning the creation of a "'Uniform Commercial Code' for commerce conducted over the Internet," explicit consideration should be given to the potential impact of the enforcement of electronic licensing agreements on traditional intellectual property values. As the law of the U.S. now stands, there is a significant risk that limitations on copyright protection designed to promote balance may be preempted by terms and conditions incorporated in non-negotiated, on-line "point and click" license agreements. Many are concerned, for example, that the recent Seventh Circuit decision in ProCD v. Zeidenberg, 86 F.3d 1447 (enforcing "shrink-wrap" license provisions barring resdisclosure of public domain information), suggests that provisions in electronic licensing agreements could limit a licensee's opportunity to make "fair," or even exempt, secondary uses of licensed works.

Unfortunately, the ongoing effort by the American Law Institute and NCCUSL to draft "Article 2B" (relating to "Licenses") of a revised U.C.C. has failed --to date --to take into account such concerns about the maintenance of the balance struck in intellectual property law. We believe that your report would play an especially salutary role were it to identify this issue as one that should receive explicit treatment in any effort to devise a uniform national or global law of electronic sales.

The Principle of Balance in International Intellectual Property Law

When the 160 nations of the World Intellectual Property Organization (WIPO) met last month in Geneva, they affirmatively underscored the importance of a balanced approach to copyright law in the preamble to the "New Copyright Treaty," which states that the parties have agreed to its substantive provisions "[r]ecognizing the need to maintain a balance between the rights of authors and the larger public interest, particularly education, research, and access to information, as reflected in the Berne Convention." Likewise, in an "agreed statement" which the United States was instrumental in inserting into the record of the Diplomatic Convention, the delegates stated that: "It is understood that the provisions of the [new treaty] permit Contracting Parties to carry forward and appropriately extend into the digital environment limitations and exceptions [to proprietors' rights] in their national laws which have been considered acceptable under the Berne Convention. Similarly, these provisions should be understood to permit Contracting Parties to devise new exceptions and limitations that are appropriate to the digital network environment."

The DFC applauds the draft framework's emphasis on the need to "discourage the inappropriate use of devices and services to defeat anti-copying systems." We believe that the focus of any new regulation relating to technologcial safeguards should be on prohibiting and penalizing the act of circumvention, rather than prohibiting socially and economically valuable technologies which may be capable of misuse. We note that the language adopted by the WIPO Diplomatic Convention has such a focus, and we urge that the United States should follow the same approach in domestic legislation with respect to the inappropriate use of devices and services to defeat anti-copying technology.

We also assume that the discussion of "Copyright" in the final version of the draft framework will reflect the outcome of the meetings in Geneva. With respect to this section of the draft, we note as well that the delegates to the Diplomatic Convention agreed to defer for an indefinite period any action on new regimes for the sui generis protection of databases." It is the position of the DFC that any international or domestic action on proposals for such protection must await a full airing of the difficult issues they present --a discussion which has not yet occurred in the United States.

In addition, we note that the listing of outstanding issues in the penultimate paragraph of the section may (inadvertently) be too narrowly drawn in two important respects. First, the scope of permissible uses of copyrighted materials (including uses in education and science) is determined not only by the doctrine "fair use," but also by various specific exceptions and limitations written into the Copyright Act, including those of Sections 108 and 110. Second, the doctrine of "fair use" itself is applicable to a broader range of uses than the draft paragraph suggests, including certain important commercial activities.

Privacy Concerns and Copyright Management Information

In a related vein, we note that like issues relating to the law of sales, those relating to the law of personal privacy are necessarily intertwined with intellectual property considerations. From its inception, the DFC has stressed the various respects in which articulation of new intellectual property regimes in cyberspace could threaten privacy values. One good example arises where so-called "Copyright Management Information" (CMI) is concerned. As broadly defined, CMI could be limited only to data about authorship, ownership or terms and conditions for use of a work. It could also be defined, however, to encompass facts about the use history of that work, including records relating to the preferences of particular consumers. If, as the draft suggests, the integrity of CMI is to be afforded legal protection, it is important that the definition of protected data be narrowly drawn so as to exclude such usage records.

In this connection, we would point out that the definition of "rights management information" incorporated in the two treaties concluded at the recent WIPO Diplomatic Convention apparently has been drafted to achieve this result. A simlarly restrictive definition should be incorporated into any domestic legislation on the subject. More broadly, it is important that the issue of what sort of CMI should be protected against modification or deletion be explicitly raised in the section of the framework paper devoted to "Privacy" concerns.

Additional Suggestions

In addition to the suggestions made above, there are several other respects in which the generally excellent draft Framework could be further improved. Specifically:

• In the section on "Content," it would be desirable to recognize explicity that our aim should be to promote the free flow not only of commercial entertainment and information products, but also that of proprietary material generated by schools, libraries and others in the not-for-profit sector, as well as useful public domain information.

• Likewise, the regulatory issues referred to in the "Content" section affect more than just businesses, as demonstrated by the intense involvement of the library and educational communities in the debates surrounding the recent Communications Decency Act.

• The "Technical Standards" section correctly points out the potential downside of premature standardization and the potential misuse of standards as non-tariff trade barriers. Lack of proper balance in the IP system would enable firms to exert excessive control and create such negative situations.

• In addition, the section on "Technical Standards" should stress the importance of interoperability to the development of the Internet and Internet-related products. It also should oppose interpretation of intellectual property or contract law in a manner which inhibits interoperability.

• Any discussion of the problem of OSP liability should include a reference to the fact that many non-commercial institutions, such as libararies and educational institutions, function as OSP's within the definition offered in the first footnote to the draft report.

• Finally, we would suggest that as the framework paper is revised, other agencies expert in issue areas identified in it (beyond those already included in the impressive list of participants in the interagency taskforce) be consulted as well. These might include the Department of Education and the Bureau of Export Control.

Respectfully submitted,

Alliance for Public Technology
American Association of Law Libraries
American Association of Legal Publishers American Committee for