Orrin Hatch

Mr. HATCH

Mr. HATCH. I am delighted to yield.

Mr. HATCH. It would be great if we could do that. That is my goal. I thank my colleague for being willing to stand up on that point with me. I voted against the Lautenberg amendment. I voted against it twice. Neither of those votes on Lautenberg won a majority of the Senate. But it finally passed with the tie- breaking vote of Vice President Gore. Still, I voted for the final bill. I have repeatedly made clear my desire to pass this bill. This is not an empty exercise for me. This is an important bill. So there is no question about that. Let me just say this: We have had a lot of crying, moaning, and groaning about background checks at gun shows. Let's just stop and think about it. If we had not had Brady, which required a 5-day waiting period, if we had not had this new demand for a 3-day waiting period, we could have already had a responsible system in place. We spent so much time on 3- to 5-day waiting periods that we haven't gotten the instant check system in place throughout the country. In other words, we haven't concentrated enough efforts on implementing the one thing that will really help us to identify and weed out the felons and others who are disqualified to purchase guns in the first place. Some would rather concentrate their efforts on this phony waiting period issue than address the real problem of identifying those who aren't allowed to own a firearm. The reason they would rather address the phony issue of a 3-day waiting period at gun shows is because gun shows only take place for 3 days. If you have a 3-day delay, it means basically there won't be any more gun shows. What does that mean? This is pretty important stuff. If you do not have the gun shows where legitimate, private sellers of guns can come and sell their weapons with appropriate background checks, which everybody in this body is willing to do--I have led the fight to do it--if you do not allow that to happen, then the private sellers of weapons are going to go into the streets, and those guns will all be sold on what will then be a much larger black market for guns. We have that already in our society. We ought to minimize it. The best way to do it is to have legitimate gun shows. There are some 4,000 of them in this country--legitimate gun shows where we have legitimate background checks that are done within a 24-hour period. And that will never happen as long as we keep playing political games, and seeking the political advantage that some people think they get by talking about 1 day, 2 days, or 3 day waiting periods. The key is to get an effective instant check system in place so we absolutely instantly can tell whether the purchaser of this weapon is somebody who is legitimately entitled to purchase the weapon. Having said all of that, having made it very clear that we intend to have conferees on this matter and that we intend to put this matter to bed, hopefully before the August recess, a lot depends on cooperation from the other side. As we know, we have lost a week and a half because of delays on the other side because they want their legislation considered on their terms, regardless of how important the appropriations bills are. We have had interference after interference on getting the work of the Senate done. And as important as all of that is, I think it is important that the American people know that the juvenile justice bill is about a lot more than guns. That is a minuscule part of the bill. We are talking about prevention and enforcement and assistance to local and State governments. S. 254, the Senate-passed bill, provides an infusion of funds to State and local authorities to combat juvenile crime. S. 254 provides approximately $1.1 billion annually to fight juvenile crime and prevent juvenile delinquency. We have $500 million for a juvenile accountability incentive block grant. States can use this grant to implement graduated sentencing sanctions which intervene early with appropriate penalties, so that at the first signs of delinquent or antisocial behavior take firm steps to get these kids back on the right track. They can build detention facilities for juvenile offenders, test juvenile offenders for drugs upon arrest, and require juvenile offenders to complete school or vocational training, among other reforms. S. 254 provides a 25-percent earmark of the juvenile accountability block grant for drug treatment, school counseling, and crime prevention. These are important, significant grants. They far supersede this almost feckless debate about guns. The Hatch-Leahy amendment provides $50 million for the States for juvenile judges, public defenders, and probation officers to reduce the backlog of juvenile cases. That is important. The juvenile Brady provision, which prohibits juveniles who commit a violent crime or serious drug felony as a juvenile from ever being able to buy a gun thereafter, is something almost everybody agrees with. We had it in the bill to begin with. We didn't need those on the far left who hate guns and who want gun control to tell us what to do in these matters. There is $75 million annually to help States upgrade juvenile felony records and provide school officials access to such juvenile felony records in appropriate circumstances. This may be the most important reform in the bill, because it gets these records to the police and prosecutors and judges who need the information to appropriately deal with repeat offenders. There is $435 million annually to the States for programs to prevent kids from getting into crime. Some of these are specifically targeted towards gangs in school. This is far more important than all of this harping about guns. There is $40 million to assess the effectiveness of youth crime and drug prevention efforts; a 3-year, $45 million demonstration project to provide alternative education to at-risk or problem juveniles; and an extension of the violent crime reduction trust fund through 2005, to ensure adequate funding for the administration of justice programs. In S. 254, the Senate-passed bill takes action to empower parents, the entertainment industry, and the general public to limit the exposure of children to violence. Specifically, this bill includes important provisions for the enforcement of industry rating systems. The Hatch-Brownback amendment--and I commend my distinguished colleague from Kansas for his leadership--to S. 254, which passed overwhelmingly, provides the entertainment industry with limited exemption from the antitrust laws. This provides the motion picture, recording, and video game industries the freedom to develop and enforce voluntary standards and enforcement mechanisms without fear of antitrust liability or government regulation. The Brownback-Hatch amendment allows the appropriate industries to enter into joint discussions, consideration, and agreement to ensure retail compliance with preexisting rating systems for both off-line and on-line content. We have a provision regarding marketing violence to children. The Brownback-Hatch amendment to S. 254 directs the Justice Department and the Federal Trade Commission to jointly examine the marketing practices of the video game, music, and motion picture industries to determine the extent to which violent material is marketed to children. The FTC is directed to report their findings to Congress within 9 months of enactment. And while I am pleased that President Clinton belatedly endorsed this idea, I should note that the Senate passed this three weeks before the President said a word about it. We have a National Institutes of Health study. The Brownback-Hatch amendment to S. 254 provides $2 million in funding to the National Institutes of Health to study the effects of violent entertainment on children. We know that is the cause of an awful lot of the problems.

Mr. HATCH. My feeling is that they will appoint conferees in July-- both leaders of the House and the Senate, the floor leaders--perhaps prior to the recess. My goal is to have this conference report voted on before we go out on the August recess; if not, then as soon as we can after we get back, but I hope before the August recess.

Mr. HATCH. I would be happy to yield.

Mr. HATCH. I have assurance from the House leaders they will appoint conferees.

Mr. HATCH. That is true. I know they have their hands full. I trust the statement of the leaders. If they do it then, that will be fine. That is consistent with what we have done in the past. I don't have any problem with that. Let me continue my remarks. The Hatch-Leahy amendment to S. 254, which passed overwhelmingly, encourages large Internet service providers to offer screening/filtering software to empower parents to limit access to material unsuitable for children. This amendment provides that within 12 months of enactment, large Internet service providers should provide the software either at no charge or at a fee not exceeding the cost to them. That is a very important part of this bill. We have an antiviolence public service campaign in this bill. The Republican education amendment to S. 254 provides $25 million annually to the National Crime Prevention Council and community-based organizations for a national public service campaign to prevent violence. We have a provision on Internet bombmaking. The Hatch-Feinstein amendment to S. 254 prohibits the teaching of bombmaking, including bombmaking instructions, on the Internet if there is reason to know the bomb will be used in violation of Federal law. We also get tough on violent juveniles and other violent offenders. We ensure that violent juveniles will be held accountable. Among other reforms, S. 254, with Republican amendments, contains the following: Project Cuff. The Hatch-Craig amendment provides $50 million to hire additional Federal prosecutors to prosecute gun crimes in Federal court to take advantage of stiff Federal sentences. We have full funding of the National Instant Check for background checks for firearm purposes. That is something that had to be done. We have not been concentrating on that as we should, because we keep playing games on guns instead of doing what should be done. We have an extension of the prohibition against juvenile possession of a handgun in the Youth Handgun Safety Act to semiautomatic rifles. The juvenile Brady provision, which I have already mentioned, prohibits firearm possession by juveniles who commit violent offenses. We have a bipartisan provision that requires safety locks or secure gun storage devices to be sold with a handgun. We have a minimum of 12 years in prison for those who discharge a firearm during the commission of a violent felony or drug trafficking crime. We have a minimum of 15 years in prison for those who injure a person during the commission of a crime of violence or a drug trafficking crime. We have a minimum of 3 years in prison for first-time offenders and a minimum of 5 years in prison for repeat offenders for those who distribute drugs to minors or sell drug in or near a school. We have an increase in the maximum penalty for knowingly possessing, transporting, or transferring stolen firearms, to 15 years in prison. We have an increase in the maximum penalty to 20 years for a juvenile who illegally brings a gun or ammunition to school with intent to carry or otherwise possess, discharge, or use the handgun or ammunition in the commission of a violent felony. We have an increase in penalties for illegal purchase of a firearm. We have an increase in penalty for committing crimes of violence while wearing body armor. We have a safe-and-secure-schools provision. These are very important. One would think that everything comes down to the Lautenberg amendment. That amendment didn't pass overwhelmingly. In fact, it didn't even have the support of a bare a majority in the Senate until the Vice President of the United States, as is his right, voted to break the tie. Safe and Secure Schools S. 254, with Republican amendments, will promote safe and secure schools, free of undue disruption and violence, so that our teachers can teach and our children can learn. S. 254 includes the following: Training for parents, teachers, and other interested members of the community for the identification of--and appropriate responses to-- troubled and violent youth. Innovative research-based delinquency and violence prevention and mentoring programs. Assistance to state and local school districts for comprehensive school security assessments. Assistance to state and local school districts to purchase school security equipment and technologies such as metal detectors, electronic locks, and surveillance cameras. Collaborative efforts with community-based organizations (including faith-based organizations) and law-enforcement agencies to provide effective violence prevention and intervention programs. Assistance to state and local school districts to establish and implement school uniform policies. Assistnce to state and local school districts to hire school resource officers, including community police officers. Incentives for States to detain juveniles found in possession of an illegal firearm for 24-hours to undergo evaluation. Incentives for schools to make school discipline records available to all schools, whether private or public, when students transfer between schools. Civil liability protection for teachers who discipline a violent student. Resources to States and localities to create anonymous hotlines to report possible acts of violence. I say in closing, I have been assured we will have conferees after we get back from this next recess. My goal, of course, if we can and if we get some cooperation from the other side on the floor, is to have that bill up before the August recess, so we can have this bill passed and hopefully signed by the President before school begins this year. I want to see that happen. It isn't going to happen if we keep playing games on guns. There is no point kidding ourselves about it. One side must not think they have a big advantage over the other on guns. We have to work in good faith to resolve these problems. And I believe we can. I have total confidence in my colleague, Senator Leahy from Vermont, who has worked with me assiduously on this matter. He has played a significant role. Senator Biden and Senator Feinstein, also on the other side, have worked very hard to try to have this bill completed. I know my colleague from Vermont and I will work very hard to get this bill done in the best way we possibly can that will bring everybody together in both the House and Senate and hopefully get a bill signed by the President. In any event, we intend to go forward. It is an important bill, probably in some respects the most important bill in this whole session of Congress, when one considers the needs of our nation's children. We need to address--as S. 254 does--ensuring safe schools, promoting ways to keep vile entertainment from our kids, preventing juvenile crime, and really addressing for the first time needed law enforcement with regard to violent juvenile crimes. I think we have taken too much time on this. I know we have an important appropriations bill on the floor, so I yield the floor at this time.

Mr. HATCH

Mr. HATCH. Mr. President, today I am pleased to rise, along with the ranking minority Member on the Judiciary Committee, Senator Leahy, to introduce a series of intellectual property related ``high-tech'' measures designed to promote the continued growth of these vital sectors of the American economy and to protect the interests and investment of the entrepreneurs, authors, and innovators who fuel their growth. It is no secret that high technology is the driving force in the American economy today. American technology is setting new standards for the global economy, from computer chip technology and computer hardware, to personal and business software applications, to Internet, multimedia and telecommunications technology, and even cutting-edge pharmaceuticals and genetic research. In my own state of Utah, these information technology industries contribute in excess of $7 billion each year to the State's economy and pay wages that average 66 percent higher than the state average. Their performance has placed Utah among the world's top ten technology centers according to Newsweek Magazine. Where Wired is a Way of Life, Newsweek, November 9, 1998, at 44. Similar success is seen across the country, with seven of the world's top ten technology centers located in the United States, and with American creative industries now surpassing all other export sectors in foreign sales and exports. Underlying all of these technologies are the intangible property rights-- copyrights, trademarks, patents, and trade secrets--that serve to promote creativity and innovation by safeguarding the investment, effort, and goodwill of those who venture into these fast-paced and volatile fields. Providing adequate protections for these intellectual property rights in the global high-tech environment is critical, particularly in the digital environment where electronic piracy is so easy, so cheap, and yet so potentially devastating to intellectual property owners--many of which are small entrepreneurial enterprises. In Utah, 65 percent of the information technology companies have fewer than 25 employees, and a majority have annual revenues of less than $1 million. Over half of Utah's information technology companies have been in business for less than 10 years, with nearly a quarter having opened their doors since 1995. Intellectual property is the lifeblood of these companies and others similarly situated throughout the country, and even a single instance of piracy may be enough to drive them out of business. What's more, without adequate international protection, these companies would simply be unable to compete in the global marketplace. That is why in the last Congress we enacted a number of measures to provide enhanced protection for intellectual property in the new global, high-tech environment. For example, last year Congress ratified two new landmark World Intellectual Property Organization (WIPO) treaties to update international copyright standards to respond to the challenges of the global economy and the digital, networked environment. In enacting the Digital Millennium Copyright Act (DMCA), Congress implemented these treaties in the United States by bringing our own copyright laws into the digital age and set the standard internationally for other nations to follow in amending their own laws to meet the requirements of the new WIPO treaties. In addition, as a part of that bill, we paved the way for new growth in online commerce by creating greater security for copyright owners and for the Internet service providers who transmit and store copyrighted works online. We also addressed new technologies, such as webcasting and satellite radio, to provide a copyright framework in which these new platforms can flourish. This year, Senator Leahy and I are continuing to focus our attention, and that of the Judiciary Committee, on important high-tech and intellectual property legislation. Already this year the Judiciary Committee has reported, and the Senate has enacted, legislation to extend the Satellite Home Viewer Act, which will enable the satellite industry to use new and emerging technology to provide competition in the multichannel video marketplace and allow satellite subscribers to receive local network stations by way of their satellite dishes for the first time. Today we are introducing a number of additional measures relating to technology and intellectual property to strengthen our laws further in order to provide both incentives to creativity and deterrents against infringement. Included among these are legislation that builds upon existing protections, including last year's measures to deter digital piracy, by raising the Copyright Act's limit on statutory damages, thereby making it more costly to engage in cyber-piracy and copyright theft. Also included is a measure to make technical ``clean-up'' amendments to the Digital Millennium Copyright Act in order to make its provisions clearer and more user-friendly. On the trademark side, Senator Leahy and I are introducing a bill to make the protection of famous marks easier and more efficient and to provide recourse for trademark owners against the federal government for trademark infringement. Finally, we are introducing Patent and Trademark Office reauthorization legislation to allow the PTO to better serve its customers--America's innovators and trademark owners--through the collection and retention of patent and trademark fees. It is our intention to turn to these bills in the Judiciary Committee prior to the July 4th recess at a Committee markup session dedicated solely to the consideration of intellectual property legislation. I expect these measures to be noncontroversial, and I look forward to working with my colleagues in the Senate as we bring these bills to the floor. the copyright damages improvement act of 1999 The Copyright Damages Improvement Act will provide strengthened protections for copyright owners and added deterrence against infringement by making it more costly to engage in digital piracy and copyright theft. In an age where electronic piracy costs next to nothing and where the distribution of pirated goods to locations around the world is as easy as the click of a button, we are faced with the danger that the costs of engaging in piracy will pale in comparison with the anticipated rewards. Last year we strengthened the Copyright Act's substantive protections to deter digital piracy in this global networked environment. The bill we are introducing today will make it more costly to infringe these and the Copyright Act's other substantive protections by raising the limit on statutory damages by 50 percent. Section 504(c) of the Copyright Act provides for the award of statutory damages at the plaintiff's election in order to provide greater security for copyright owners, who often find it difficult to prove actual damages in infringement cases--particularly in the electronic environment--and to provide greater deterrence for would-be infringers. The current provision caps statutory damages at $20,000 ($100,000 in cases of willful infringement), which reflects figures set in statute in 1988 when the United States joined the Berne Convention. The combination of more than a decade of inflation and revolutionary changes in technology have rendered those figures largely inadequate to achieve their aims. The Copyright Damages Improvement Act updates the statutory damage provisions to account for both these factors. Under the bill, the cap on statutory damages is increased by 50 percent, from $20,000 to $30,000, and the minimum is similarly increased from $500 to $750. For cases of willful infringement, the cap is raised to $150,000. In addition, the bill creates a new tier of statutory damages targeted at bad actors who engage in a repeated pattern or practice of infringement. In these cases, the court is authorized to award statutory damages up to $250,000. This will not mean that a court must impose the full amount of damages in any given case, or even that it will be more likely to do so. In most cases, courts attempt to do justice by fixing the statutory damages at a level that approximates actual damages and defendant's profits. What this bill does is give courts wider discretion to award damages that are commensurate with the harm caused and the gravity of the offense. At the same time, the bill preserves provisions of the current law allowing the court to reduce the award of statutory damages to as little as $200 in cases of innocent infringement and requiring the court to remit damages in certain cases involving nonprofit educational institutions, libraries, archives, or public broadcasting entities. Copyright Act Technical Corrections Senator Leahy and I are also introducing a general clean-up measure as a follow-up to the Digital Millennium Copyright Act and the Sonny Bono Copyright Term Extension Act, which were enacted at the end of the last Congress. This bill improves these bills to make them more user- friendly for copyright owners and those who make use of their works in accordance with the provisions of the Copyright Act. The Trademark Amendments Act of 1999 The Trademark Amendments Act will provide stronger and more efficient protection for trademark owners and consumers by making it possible to prevent trademark dilution before it occurs, by clarifying the remedies available under the federal trademark dilution statute when it does occur, by providing recourse against the federal government for its infringement of others' trademarks, and by creating greater certainty and uniformity in the area of trade dress protection. In 1995, Senator Leahy and I sponsored the Federal Trademark Dilution Act to provide a uniform federal cause of action for trademark dilution--the commercial use in commerce of a mark that dilutes, or ``whittles away,'' the distinctive quality of a famous trademark. Under this legislation, now codified as section 43(c) of the Lanham Act, the owner of a famous mark is able to protect the investment and consumer goodwill associated with his mark by preventing others from using the same or similar marks in ways that tarnish or blur the distinctiveness of his mark, even where such uses do not directly compete with the goods or services of the trademark owner. This new federal cause of action has been used increasingly in the high-tech, online environment as a means of combating cyber-pirates and shady dealers who register famous marks as Internet domain names, seeking to sell them at a huge profit to the legitimate trademark owners or to reap where they have not sown, trading on the goodwill of others by confusing consumers about their relationships to famous brand-names. This problem is particularly acute in the Internet context where the only assurance of quality or sponsorship may be the information found on a web page and the IP address that leads consumers there. On the whole, the Federal Trademark Dilution Act has been effective in achieving better protection for trademark owners and national uniformity in this area of the law. There are a number of areas, however, in which we can improve implementation of the law and its ability to protect both trademark owners and consumers. The Trademark Amendments Act of 1999 is designed to do just that. First, it authorizes the Trademark Trial and Appeals Board (TTAB) to consider dilution as grounds for refusal to register a mark or for cancellation of a registered mark. In Babson Bros. Co. v. Surge Power Corp., 39 USPQ 2d. 1953 (TTAB 1996), the TTAB held that it was not authorized by the Federal Trademark Dilution Act to consider dilution as grounds for opposition or cancellation of a registration. Thus, under current law a trademark owner may seek relief under the federal dilution statute only after dilution of the mark has occurred. And at least one circuit has held that likelihood of dilution is not enough, the trademark owner must prove actual dilution. The result is that the owner of a famous mark must stand idly by throughout the registration process and await recourse through costly litigation in federal court only after he has suffered harm to his mark. By specifically allowing the trademark owner to oppose registration or to petition for cancellation of a diluting mark, the bill we are introducing today will prevent needless harm to the goodwill and distinctiveness of many trademarks and will make enforcing the federal dilution statute less costly and time consuming for all involved. Second, the bill clarifies the trademark remedies available in dilution cases, including injunctive relief, defendant's profits, damages, costs, and, in exceptional cases, reasonable attorney fees, and the destruction of articles containing the diluting mark. In addition, our bill will amend the Lanham Act to subject the federal government to suit for trademark infringement and dilution. The federal government increasingly participates in the marketplace as a provider of goods and services in competition with private entities. In fact, the federal government owns a substantial number of trademarks registered with the Patent and Trademark Office (PTO), and the Lanham Act even allows the PTO Commissioner to waive the registration fees for federal agencies. As a trademark owner, the federal government enjoys the full panoply of rights under the Lanham Act, including the right to sue private citizens and businesses to enforce its rights under the Act. In contrast, in Preferred Risk Mutual Insurance Co. v. United States, 39 F3d 789 (8th Cir. 1996), the Eighth Circuit held that the federal government is immune from suit for trademark infringement absent an explicit waiver of sovereign immunity. Limited waivers of sovereign immunity exist for patent and copyright cases, as well as for cases involving protected plant varieties and semiconductor chip mask works. Congress has also explicitly abrogated state immunity from suit under the 11th Amendment for cases involving trademark, copyright, and patent infringement. Our bill will extend these same policies to the federal government, making it subject to suit for trademark infringement and dilution on the same terms and conditions as states under the Lanham Act. The bill we are introducing will also promote greater uniformity and certainty in the area of trade dress protection by requiring plaintiffs to demonstrate that an unregistered mark is not functional. While trade dress may be afforded protection and registered on the Principal Register if it serves as a trademark or service mark, protection under the Lanham Act does not extend to functional trade dress features-- those that are essential to compete in a given market--which are properly the subject of patent law. Where the plaintiff has demonstrated through the examination process that the trade dress is eligible for registration, the federal registration serves as prima facie evidence of the validity of the mark and the registration, and in effect as prima facie evidence of nonfunctionality. For those cases where the plaintiff asserting trade dress protection has not demonstrated eligibility for registration through the trademark examination process, a majority of courts require the plaintiff to prove nonfunctionality. A minority of courts, however, have held that functionality is an affirmative defense which must be proved by the defendant. Our bill creates uniformity by adopting the majority view, requiring the plaintiff to demonstrate nonfunctionality, either in the examination process or as an element of his case in seeking to enforce trade dress rights in litigation. This is consistent with the principles of federal trademark law and the common law, which requires plaintiffs to prove the essential elements of their case. Moreover, it will promote both certainty and competitive fairness by encouraging trade dress owners to register eligible designs and to seek patent protection for those that are ineligible due to functionality Finally, this bill makes a number of technical ``clean-up'' amendments relating to the Trademark Law Treaty Implementation Act, which was enacted at the end of the last Congress. the United States Patent and trademark office reauthorization act, fiscal year 2000 The fourth bill we are introducing today is designed to allow the PTO to better serve American innovators and trademark owners through the collection and retention of patent and trademark fees. Last year we enacted legislation to provide the PTO with the resources it needs to meet the demands of its workload and to limit the ability of Congress and the Administration to divert money from the PTO to unrelated federal programs--all while providing for an overall decrease in patent fees. The bill we are introducing today continues those policies by allowing the PTO to generate the revenue it needs to operate as a fully fee-funded agency and to retain those fees for use in its patent and trademark operations, without fee diversions or the creation of new surcharges. In the past, a substantial portion of patent fees revenues have been diverted in the budget process to pay for unrelated federal programs. The result has been substantial backlogs in patent pendency and a general inability to provide the type of service our nation's inventors pay for. I, along with several of my colleagues, have vigorously opposed this practice. The legislation we enacted last year went a long way to ensure that this practice would not continue. The legislation we are introducing today will continue this assurance by authorizing the PTO to raise just the revenues it needs to meet its program goals and retain those fees for use in its patent and trademark operations. The bill also makes available $116 million in fees from previous years, which the Administration has sought to withhold, and prohibits the imposition of unprecedented new surcharge fees sought by the Administration's budget to subsidize federal health and life insurance benefits for PTO employees. In the end, this legislation will promote a stronger, more efficient patent office and will mean, quite simply, that America's innovators and trademark owners will get what they pay for. Mr. President, I look forward to working with my colleagues to promote the progress of innovation in this country and the continued growth of the high-tech industrial base that has put our nation at the forefront of the global economy. Each of the bills we are introducing today will help to do that, and I urge my colleagues' support.

Mr. HATCH

Mr. HATCH. Mr. President, today I am pleased to rise, along with the ranking minority Member on the Judiciary Committee, Senator Leahy, to introduce a series of intellectual property related ``high-tech'' measures designed to promote the continued growth of these vital sectors of the American economy and to protect the interests and investment of the entrepreneurs, authors, and innovators who fuel their growth. It is no secret that high technology is the driving force in the American economy today. American technology is setting new standards for the global economy, from computer chip technology and computer hardware, to personal and business software applications, to Internet, multimedia and telecommunications technology, and even cutting-edge pharmaceuticals and genetic research. In my own state of Utah, these information technology industries contribute in excess of $7 billion each year to the State's economy and pay wages that average 66 percent higher than the state average. Their performance has placed Utah among the world's top ten technology centers according to Newsweek Magazine. Where Wired is a Way of Life, Newsweek, November 9, 1998, at 44. Similar success is seen across the country, with seven of the world's top ten technology centers located in the United States, and with American creative industries now surpassing all other export sectors in foreign sales and exports. Underlying all of these technologies are the intangible property rights-- copyrights, trademarks, patents, and trade secrets--that serve to promote creativity and innovation by safeguarding the investment, effort, and goodwill of those who venture into these fast-paced and volatile fields. Providing adequate protections for these intellectual property rights in the global high-tech environment is critical, particularly in the digital environment where electronic piracy is so easy, so cheap, and yet so potentially devastating to intellectual property owners--many of which are small entrepreneurial enterprises. In Utah, 65 percent of the information technology companies have fewer than 25 employees, and a majority have annual revenues of less than $1 million. Over half of Utah's information technology companies have been in business for less than 10 years, with nearly a quarter having opened their doors since 1995. Intellectual property is the lifeblood of these companies and others similarly situated throughout the country, and even a single instance of piracy may be enough to drive them out of business. What's more, without adequate international protection, these companies would simply be unable to compete in the global marketplace. That is why in the last Congress we enacted a number of measures to provide enhanced protection for intellectual property in the new global, high-tech environment. For example, last year Congress ratified two new landmark World Intellectual Property Organization (WIPO) treaties to update international copyright standards to respond to the challenges of the global economy and the digital, networked environment. In enacting the Digital Millennium Copyright Act (DMCA), Congress implemented these treaties in the United States by bringing our own copyright laws into the digital age and set the standard internationally for other nations to follow in amending their own laws to meet the requirements of the new WIPO treaties. In addition, as a part of that bill, we paved the way for new growth in online commerce by creating greater security for copyright owners and for the Internet service providers who transmit and store copyrighted works online. We also addressed new technologies, such as webcasting and satellite radio, to provide a copyright framework in which these new platforms can flourish. This year, Senator Leahy and I are continuing to focus our attention, and that of the Judiciary Committee, on important high-tech and intellectual property legislation. Already this year the Judiciary Committee has reported, and the Senate has enacted, legislation to extend the Satellite Home Viewer Act, which will enable the satellite industry to use new and emerging technology to provide competition in the multichannel video marketplace and allow satellite subscribers to receive local network stations by way of their satellite dishes for the first time. Today we are introducing a number of additional measures relating to technology and intellectual property to strengthen our laws further in order to provide both incentives to creativity and deterrents against infringement. Included among these are legislation that builds upon existing protections, including last year's measures to deter digital piracy, by raising the Copyright Act's limit on statutory damages, thereby making it more costly to engage in cyber-piracy and copyright theft. Also included is a measure to make technical ``clean-up'' amendments to the Digital Millennium Copyright Act in order to make its provisions clearer and more user-friendly. On the trademark side, Senator Leahy and I are introducing a bill to make the protection of famous marks easier and more efficient and to provide recourse for trademark owners against the federal government for trademark infringement. Finally, we are introducing Patent and Trademark Office reauthorization legislation to allow the PTO to better serve its customers--America's innovators and trademark owners--through the collection and retention of patent and trademark fees. It is our intention to turn to these bills in the Judiciary Committee prior to the July 4th recess at a Committee markup session dedicated solely to the consideration of intellectual property legislation. I expect these measures to be noncontroversial, and I look forward to working with my colleagues in the Senate as we bring these bills to the floor. the copyright damages improvement act of 1999 The Copyright Damages Improvement Act will provide strengthened protections for copyright owners and added deterrence against infringement by making it more costly to engage in digital piracy and copyright theft. In an age where electronic piracy costs next to nothing and where the distribution of pirated goods to locations around the world is as easy as the click of a button, we are faced with the danger that the costs of engaging in piracy will pale in comparison with the anticipated rewards. Last year we strengthened the Copyright Act's substantive protections to deter digital piracy in this global networked environment. The bill we are introducing today will make it more costly to infringe these and the Copyright Act's other substantive protections by raising the limit on statutory damages by 50 percent. Section 504(c) of the Copyright Act provides for the award of statutory damages at the plaintiff's election in order to provide greater security for copyright owners, who often find it difficult to prove actual damages in infringement cases--particularly in the electronic environment--and to provide greater deterrence for would-be infringers. The current provision caps statutory damages at $20,000 ($100,000 in cases of willful infringement), which reflects figures set in statute in 1988 when the United States joined the Berne Convention. The combination of more than a decade of inflation and revolutionary changes in technology have rendered those figures largely inadequate to achieve their aims. The Copyright Damages Improvement Act updates the statutory damage provisions to account for both these factors. Under the bill, the cap on statutory damages is increased by 50 percent, from $20,000 to $30,000, and the minimum is similarly increased from $500 to $750. For cases of willful infringement, the cap is raised to $150,000. In addition, the bill creates a new tier of statutory damages targeted at bad actors who engage in a repeated pattern or practice of infringement. In these cases, the court is authorized to award statutory damages up to $250,000. This will not mean that a court must impose the full amount of damages in any given case, or even that it will be more likely to do so. In most cases, courts attempt to do justice by fixing the statutory damages at a level that approximates actual damages and defendant's profits. What this bill does is give courts wider discretion to award damages that are commensurate with the harm caused and the gravity of the offense. At the same time, the bill preserves provisions of the current law allowing the court to reduce the award of statutory damages to as little as $200 in cases of innocent infringement and requiring the court to remit damages in certain cases involving nonprofit educational institutions, libraries, archives, or public broadcasting entities. Copyright Act Technical Corrections Senator Leahy and I are also introducing a general clean-up measure as a follow-up to the Digital Millennium Copyright Act and the Sonny Bono Copyright Term Extension Act, which were enacted at the end of the last Congress. This bill improves these bills to make them more user- friendly for copyright owners and those who make use of their works in accordance with the provisions of the Copyright Act. The Trademark Amendments Act of 1999 The Trademark Amendments Act will provide stronger and more efficient protection for trademark owners and consumers by making it possible to prevent trademark dilution before it occurs, by clarifying the remedies available under the federal trademark dilution statute when it does occur, by providing recourse against the federal government for its infringement of others' trademarks, and by creating greater certainty and uniformity in the area of trade dress protection. In 1995, Senator Leahy and I sponsored the Federal Trademark Dilution Act to provide a uniform federal cause of action for trademark dilution--the commercial use in commerce of a mark that dilutes, or ``whittles away,'' the distinctive quality of a famous trademark. Under this legislation, now codified as section 43(c) of the Lanham Act, the owner of a famous mark is able to protect the investment and consumer goodwill associated with his mark by preventing others from using the same or similar marks in ways that tarnish or blur the distinctiveness of his mark, even where such uses do not directly compete with the goods or services of the trademark owner. This new federal cause of action has been used increasingly in the high-tech, online environment as a means of combating cyber-pirates and shady dealers who register famous marks as Internet domain names, seeking to sell them at a huge profit to the legitimate trademark owners or to reap where they have not sown, trading on the goodwill of others by confusing consumers about their relationships to famous brand-names. This problem is particularly acute in the Internet context where the only assurance of quality or sponsorship may be the information found on a web page and the IP address that leads consumers there. On the whole, the Federal Trademark Dilution Act has been effective in achieving better protection for trademark owners and national uniformity in this area of the law. There are a number of areas, however, in which we can improve implementation of the law and its ability to protect both trademark owners and consumers. The Trademark Amendments Act of 1999 is designed to do just that. First, it authorizes the Trademark Trial and Appeals Board (TTAB) to consider dilution as grounds for refusal to register a mark or for cancellation of a registered mark. In Babson Bros. Co. v. Surge Power Corp., 39 USPQ 2d. 1953 (TTAB 1996), the TTAB held that it was not authorized by the Federal Trademark Dilution Act to consider dilution as grounds for opposition or cancellation of a registration. Thus, under current law a trademark owner may seek relief under the federal dilution statute only after dilution of the mark has occurred. And at least one circuit has held that likelihood of dilution is not enough, the trademark owner must prove actual dilution. The result is that the owner of a famous mark must stand idly by throughout the registration process and await recourse through costly litigation in federal court only after he has suffered harm to his mark. By specifically allowing the trademark owner to oppose registration or to petition for cancellation of a diluting mark, the bill we are introducing today will prevent needless harm to the goodwill and distinctiveness of many trademarks and will make enforcing the federal dilution statute less costly and time consuming for all involved. Second, the bill clarifies the trademark remedies available in dilution cases, including injunctive relief, defendant's profits, damages, costs, and, in exceptional cases, reasonable attorney fees, and the destruction of articles containing the diluting mark. In addition, our bill will amend the Lanham Act to subject the federal government to suit for trademark infringement and dilution. The federal government increasingly participates in the marketplace as a provider of goods and services in competition with private entities. In fact, the federal government owns a substantial number of trademarks registered with the Patent and Trademark Office (PTO), and the Lanham Act even allows the PTO Commissioner to waive the registration fees for federal agencies. As a trademark owner, the federal government enjoys the full panoply of rights under the Lanham Act, including the right to sue private citizens and businesses to enforce its rights under the Act. In contrast, in Preferred Risk Mutual Insurance Co. v. United States, 39 F3d 789 (8th Cir. 1996), the Eighth Circuit held that the federal government is immune from suit for trademark infringement absent an explicit waiver of sovereign immunity. Limited waivers of sovereign immunity exist for patent and copyright cases, as well as for cases involving protected plant varieties and semiconductor chip mask works. Congress has also explicitly abrogated state immunity from suit under the 11th Amendment for cases involving trademark, copyright, and patent infringement. Our bill will extend these same policies to the federal government, making it subject to suit for trademark infringement and dilution on the same terms and conditions as states under the Lanham Act. The bill we are introducing will also promote greater uniformity and certainty in the area of trade dress protection by requiring plaintiffs to demonstrate that an unregistered mark is not functional. While trade dress may be afforded protection and registered on the Principal Register if it serves as a trademark or service mark, protection under the Lanham Act does not extend to functional trade dress features-- those that are essential to compete in a given market--which are properly the subject of patent law. Where the plaintiff has demonstrated through the examination process that the trade dress is eligible for registration, the federal registration serves as prima facie evidence of the validity of the mark and the registration, and in effect as prima facie evidence of nonfunctionality. For those cases where the plaintiff asserting trade dress protection has not demonstrated eligibility for registration through the trademark examination process, a majority of courts require the plaintiff to prove nonfunctionality. A minority of courts, however, have held that functionality is an affirmative defense which must be proved by the defendant. Our bill creates uniformity by adopting the majority view, requiring the plaintiff to demonstrate nonfunctionality, either in the examination process or as an element of his case in seeking to enforce trade dress rights in litigation. This is consistent with the principles of federal trademark law and the common law, which requires plaintiffs to prove the essential elements of their case. Moreover, it will promote both certainty and competitive fairness by encouraging trade dress owners to register eligible designs and to seek patent protection for those that are ineligible due to functionality Finally, this bill makes a number of technical ``clean-up'' amendments relating to the Trademark Law Treaty Implementation Act, which was enacted at the end of the last Congress. the United States Patent and trademark office reauthorization act, fiscal year 2000 The fourth bill we are introducing today is designed to allow the PTO to better serve American innovators and trademark owners through the collection and retention of patent and trademark fees. Last year we enacted legislation to provide the PTO with the resources it needs to meet the demands of its workload and to limit the ability of Congress and the Administration to divert money from the PTO to unrelated federal programs--all while providing for an overall decrease in patent fees. The bill we are introducing today continues those policies by allowing the PTO to generate the revenue it needs to operate as a fully fee-funded agency and to retain those fees for use in its patent and trademark operations, without fee diversions or the creation of new surcharges. In the past, a substantial portion of patent fees revenues have been diverted in the budget process to pay for unrelated federal programs. The result has been substantial backlogs in patent pendency and a general inability to provide the type of service our nation's inventors pay for. I, along with several of my colleagues, have vigorously opposed this practice. The legislation we enacted last year went a long way to ensure that this practice would not continue. The legislation we are introducing today will continue this assurance by authorizing the PTO to raise just the revenues it needs to meet its program goals and retain those fees for use in its patent and trademark operations. The bill also makes available $116 million in fees from previous years, which the Administration has sought to withhold, and prohibits the imposition of unprecedented new surcharge fees sought by the Administration's budget to subsidize federal health and life insurance benefits for PTO employees. In the end, this legislation will promote a stronger, more efficient patent office and will mean, quite simply, that America's innovators and trademark owners will get what they pay for. Mr. President, I look forward to working with my colleagues to promote the progress of innovation in this country and the continued growth of the high-tech industrial base that has put our nation at the forefront of the global economy. Each of the bills we are introducing today will help to do that, and I urge my colleagues' support.

Mr. HATCH

Mr. HATCH. Mr. President, I commend Senators Jeffords, Roth, Kennedy, and Moynihan for going the extra mile to work out the provisions of this legislation. I am sure it was not easy; dealing with Medicaid and SSDI never is. As a veteran of many negotiations and collaborations with on disability issues, I see this legislation as a fine example of progressive policy that does not also beget more bureaucracy and irresponsible spending. I do not believe that improving life for those with disabilities and maintaining fiscal responsibility have to be mutually exclusive goals if we take the time to do it right. That is why I appreciated the modifications made in this bill prior to its reintroduction early this spring. I know my colleagues on the Finance Committee and my former colleagues on the Health and Education Committee worked very hard to accomplish this goal, and I think that, by and large, they have succeeded. They can be proud to have produced a bill with such solid bipartisan support. I might mention that Pat Morrissey of Senator Jeffords' staff was particularly responsive to my earlier questions and concerns. I would also like to acknowledge the helpful input I received from my own Utah Advisory Committee on Disability Policy. While this measure was particularly important to a number of the committee's individual members, I want to note for the record that the entire committee endorsed it and urged my support for the bill. I am pleased to be able to demonstrate that support today with an ``aye'' vote.

Mr. HATCH

Mr. HATCH. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. HATCH

Mr. HATCH. Mr. President, I have enjoyed the remarks of my colleague, my dear friend. In this body, he is certainly a champion for the trial lawyers, and certainly I have been as well. I intend to continue to stand up for trial lawyers, who do a great job for consumers in this country, but we are talking about a little bit of a different problem. Mr. President, I rise to express my support for the final passage of S. 96, the Y2K Act, as modified by S. 1138, the bipartisan Dodd-McCain- Hatch-Feinstein-Wyden-Gorton-Lieberman-Bennett amendment. This bill effectively addresses the very serious problems associated with the Y2K computer problem. As you know, Mr. President, what is now known as the Y2K problem arises from the inability of computers to correctly process the date after December 31, 1999. When January 1, 2000 arrives, the computers that cannot process that date will have a variety of problems, ranging from very mild glitches to severe breakdowns. In the technologically dependent world we live in, this creates obvious problems for both individuals and for any business that relies on computer technology at any point in its business. As a result of this problem, we face the threat of an avalanche of Y2K-related lawsuits that will be filed on or about January 3, 2000. Such an unprecedented wave of litigation will overwhelm the computer industry's ability to correct the problem. As I have said before, this super-litigation threat is real, and the consequences for America could be disastrous. Already, there have been more than 66 lawsuits, including 31 class actions, filed based on the Y2K problem. These suits are the beginning of a tsunami of litigation that could drown America. As a Senator from the State of Utah, I am extremely aware of the impact this problem will have on the economy of the United States, as well as that of the entire world. Utah stands with a number of other states as a leader in the technological boom that has fueled America's economic progress in recent decades. The future of Utah, and of all America, relies on our ability to continue in our role as the global technological leader. As I have said before, if we fail to counteract the negative effects of the Y2K problem, we will be killing the goose that lays the golden egg. Every dollar that industry has to spend defending itself from frivolous litigation is a dollar that cannot be spent on fixing the problem. The way to minimize the hardships caused by the problem on January 1st is to encourage remediation by the technology industry and to encourage mitigation by would-be plaintiffs, both before and after January 1st. This bill does precisely that. The Y2K bill provides powerful incentives for industry to fix the Y2K problem before it happens and to remedy problems once they occur. Contrary to what some opponents of the bill have alleged, there is absolutely nothing in the bill that would deny any aggrieved party the right to sue. Let me repeat this. There is nothing in the bill that would prohibit anyone from bringing a lawsuit. What the bill does is to create powerful incentives to fix problems before resort to the courts is necessary. It encourages remediation through the requirement of pre- litigation notice and by providing opportunities for alternative dispute resolution. The pre-litigation notice and pleading requirements also assist industry in fixing Y2K problems by requiring that prospective plaintiffs provide the information necessary for the defendant to understand and remedy the problem during the cure period. In addition to encouraging the computer industry to remediate the problem, this bill fosters action by both industry and consumers to avoid the problems caused by Y2K failures. This bill preserves contracts and State contract law, encouraging contracting parties to anticipate the possibilities of Y2K failure and to do all they can to avoid them. The bill also imposes a duty to mitigate, requiring prospective plaintiffs to do what they reasonably can to avoid damages occurring because of a Y2K failure. Some Senators have raised concerns about some of the provisions of the Y2K Act. Let me address some of these concerns. Specifically, some Senators have opposed to the punitive damages provision, the proportional liability provision, and the section dealing with the economic loss rule. In the past several days, however, we have also heard many of my colleagues set forth the reasons why these provisions are central to the effective operation of the bill in preventing the disaster that is imminent in the wake of extensive frivolous Y2K litigation. The punitive damages provision of the Y2K Act is essential in order to prevent the destruction of America' small businesses by excessive punitive damage awards. This section of the bill is extremely limited, as it applies only to small businesses. The bill simply does not impose a cap on punitive damages for any defendants other than small businesses. Opponents of this provision argue that punitive damages serve as a deterrent to misconduct, and that placing a cap on them will remove that deterrent. The punitive damage cap created by this bill does not remove any deterrent to misconduct. Punitive damage awards against small businesses will be limited to three times the amount awarded for compensatory damages or $250,000, whichever is less. FOr small businesses consisting of an individual whose net worth does not exceed $500,000 or a company with less than 50 employees, this is a significant deterrent of misconduct. In addition, there is no cap at all if the plaintiff establishes by clear and convincing evidence that the defendant acted with specific intent to injure the plaintiff. I cannot take seriously the argument that this formulation of punitive damages is too small to act as a deterrent. Treble damages or $250,000 is a significant piece of change to pay for a small business. In fact, I supported a similar cap for all businesses. But, in the spirit of bipartisan compromise, we agreed to limit the caps to small businesses. I understand that even the White House supported a similar small business cap provision in the products liability bill of two years ago. So what's the big deal? What the small business punitive damages cap does do is to protect our small businesses from utter destruction by excessive punitive damage awards. As last year's Rand Corporation study of punitive damages concluded, the United States has witnessed a substantial increase in the amount of punitive damage awards. Witness the recent May 10 punitive damage award by an Alabama jury of $581 million to a family that complained they were overcharged $1,200 for two satellite dishes. According to Rand, although punitive damages amounts to a minority of all damages awarded, the very size of these awards skewers the civil justice system. Even frivolous lawsuits are settled for fear of large judgments. This has led to what is termed ``jackpot justice.'' Lawsuits have been grossly transformed from a search of justice to a search of deep pockets. We have tried to counter this trend--at least for small businesses--in the Y2K Act. Speaking about ``jackpot justice''--the proportionate liability provision is intended to mitigate the quest for deep pockets by assuring fairness in the award of damages. Punishment must fit the crime and it is only fair that defendants should be liable only for the part of the damage that they cause. In an attempt to forge a bipartisan compromise, Senators McCain, Dodd, Wyden, Lieberman, Feinstein, Gorton, Bennett, and myself, agreed to the formulation of proportionate liability found in the Federal Private Securities Litigation Reform Act of 1995. This act was signed into law by the President several years ago--so it should be acceptable to the administration. Yet some opponents to this bill have spoken out against this provision. Opponents of this section of the bill apparently want some defendants to be liable for all damages, even if they were responsible only for a tiny fraction of the damage. That is the very definition of ``deep pockets.'' The Y2K Act would prevent this and that is why it is opposed by the trial attorneys. The act ensures that a defendant's liability in a Y2K action will be for the damage that they caused, and not for the damages caused by other defendants. Another section of the bill that is under attack is the class action section. Opponents of the bill say that this provision would federalize all State actions. This is a gross exaggeration. Let me explain. The class action provision is vital to the effective operation of the bill. Class actions are a significant source of abuse. I have seen this as chairman of the Judiciary Committee. Far too often, Federal jurisdiction is defeated by joining just one nondiverse class plaintiff--even if the overwhelming number of parties are from differing States. This wrecks the clear purpose of Federal Rule of Civil Procedure 23--to provide for a Federal forum ameliorates myriad state judicial decisions that are conflicting in scope and onerous to enforce. Now, as I stated before in this debate, I am a great proponent of federalism and the right of our States to act as what Justice Brandeis termed national laboratories of change. But it is axiomatic that a national problem needs an uniform solution. That is the justification for Congress' commerce clause power and its consequent promulgation of rule 23. That is the justification for the Y2K Act itself, in which the Y2K defect is clearly a national problem in need of a Federal answer. The economic loss section of the Y2K Act has also been the subject of some contention. Let me reiterate some of the arguments I made last Thursday on the Senate floor in opposition to the Edwards amendment which if passed would have weakened this section. The economic loss rule is already widely accepted and has been adopted by both the U.S. Supreme Court and by a majority of States. The rule basically mandates that when parties have entered into contracts and the contract is silent as to consequential damages--which is the contract term for economic losses--the aggrieved party may not turn around and sue in tort for economic losses. Under the rule, the party may only sue under tort for economic losses. Under the rule, the party may only sue under tort law when they have suffered personal injury or damage to property other than the property in dispute. In short, the Y2K Act's economic loss section ensures fairness in contract law by applying the rule already in use in most states to Y2K lawsuits. It prevents ``tortification'' of contract law by flagging an end run against terms of a contract agreed to by the parties. Let me also remind the critics of this bill that it is of limited duration. This bill is designed to specifically address the problems related to Y2K computer failures that will occur around the turn of the millennium. In keeping with this purpose, the bill has a sunset period, which means that the entire bill will only be in effect until January 1, 2003. Let me also make a variant of Pascal's wager. If these disputed provisions are harmful, as some critics contend, enacting them will do little harm because the bill will expire in 3 years. But if, as the supporters of this bill believe, these provisions are critical, not including them in the final bill could greatly harm the economy and our high tech industries. The choice is obvious. Both reason and equity require that these provisions remain in the bill. Some have expressed concern that President Clinton will veto this bill. I don't think he will. This bill can only solve the problems created by the Y2K problem. Its provisions encourage remediation and mitigation, and encourage solutions to problems. The President knows this. He knows that to sign the bill can only help our nation and the world. He knows that by vetoing the bill he will, at best, be doing nothing to solve the Y2K problem, and that at worst he will be contributing to it. If we are to be successful in solving this great problem before us, we must overcome our fear and pass the Y2K bill as a strong and effective piece of legislation. Again, I emphasize the importance of this bill to our nation's future. Without meaningful legislation addressing the Y2K problem and the deluge of litigation that will surely follow, our nation may suffer devastating consequences. The Y2K Act before the Senate today is that meaningful legislation. This is a bipartisan bill, created and shaped through cooperation on both sides of the aisle. I urge my colleagues to vote for its final passage.

Mr. HATCH

Mr. HATCH. Mr. President, today is Flag Day. Utahns, and indeed Americans all across our great country, revere the flag as the unique symbol of the United States and of the principles, ideals, and values for which our country stands. Who can forget the majestic image of the Marines raising Old Glory on the island of Iwo Jima during World War II or of school children pledging their allegiance to the American flag? Over the years, the love and devotion our diverse people have for the American flag has been reflected in the actions of our legislatures. During the Civil War, for example, Congress awarded the Medal of Honor to Union soldiers who rescued the flag from falling into rebel hands. During World War I, the National Conference of Commissioners on Uniform State Laws adopted the Uniform Flag Act that numerous state legislatures adopted to prohibit flag desecration. Congress declared the ``Star Spangled Banner'' to be our national anthem. In 1949, Congress expressed the love the American people for their flag by establishing June 14 as Flag Day. Congress also adopted ``The Pledge of Allegiance to the Flag'' and the manner of its recitation which millions of school children observe each school day. In 1968, Congress adopted a federal statute to prohibit flag desecration. More recently, Congress designated John Philip Sousa's ``The Stars and Stripes Forever'' as the national march. As with numerous societal interests that affect free speech, legislatures of 48 States and the federal government and the courts also have long respected society's interest in protecting the flag by balancing this interest against the individual's interest in conveying a message through the means of destruction of the flag instead of through the means of oral or written speech. The Supreme Court continues to strike the balance in favor of society's interests in public safety, national security, protection from obscenity, libel, and the protection of children even though these interests can and do implicate the First Amendment. In the 1989 case of Texas v. Johnson, however, the Supreme Court abandoned the traditional balance in favor of society's interest in protecting the flag and adopted an absolute protection for the individual's interest in communicating through the means of physically destroying the American flag. Congress responded to the Johnson decision with a statutory attempt to restore balanced protection to the physical integrity of the American flag--the Flag Protection Act of 1989. However, in the 1990 case of United States v. Eichman, the Supreme Court relied on the new rule it created in Johnson to reject statutory protection of the flag. The recent reintroduction of another flag protection statute, which has been introduced in prior Congresses, is also clearly unenforceable under the Johnson and Eichman precedents. Even Professor Lawrence Tribe, a defender of the statute struck down in Eichman, has stated that the reintroduced statute cannot be upheld under the new rule of Johnson and Eichman. Moreover, in the 1992 case of R.A.V. v. City of St. Paul, the Supreme Court clearly stated that it will no longer uphold statutory protection of the flag from desecration. Accordingly, the only realistic way to restore traditional balanced protection for the flag is with a constitutional amendment. In March of this year, Senator Cleland and I introduced Senate Joint Resolution 14, a constitutional amendment to protect the American flag. This amendment restores balanced protection to the flag by allowing Congress to prohibit only the physical desecration of the flag, while retaining the full existing freedoms for oral and written speech. Thus, a would-be flag burner would still be able to convey his particular message by speaking at a rally, writing to a newspaper, and voting at the ballot box. He would not, however, be able to burn a flag or to stuff a flag into a toilet, as has been done since the Johnson and Eichman decisions. Nearly 80 percent of the American people and 49 state legislatures support the constitutional amendment to restore balanced protection to the American flag. By sending this amendment to the States for ratification, Congress would help restore traditional balanced protection for the flag while protecting the robust freedom of expression that Americans enjoyed when the Marines raised the flag over Iwo Jima and when Congress created Flag Day.

Mr. HATCH

Mr. HATCH. The underlying bill does not change that. It does provide for an exception for statutory law. Where a State has a statutory provision, this bill does not change that. The Senator's position that intentional torts and common law fraud would not be remedied under this bill is incorrect.

Mr. HATCH. Mr. President, I appreciate the remarks of my colleague, and I appreciate what he is trying to do. This bill is trying to resolve what really are unlimited litigation possibilities. If we don't pass this bill, that could really wreck our computer industry and wreck our country and would make it even more difficult to get the computer industry and everybody involved in Y2K problems to really resolve these problems in advance of the year 2000. I rise to oppose the Edwards amendment, which basically strikes the economic loss section of S. 96, the Y2K bill. I have followed carefully the debate of the bill. And, as of now, it is the Dodd-McCain-Hatch-Feinstein-Wyden substitute, S.1138, that we are now debating. My observation is that during this debate there has been much confusion over the economic loss section. Let me attempt to clarify this matter. It is important to note that the economic loss rule is a legal principle that has been adopted by the U.S. Supreme Court and by most States. The rule basically prevents ``tortification'' of contract law, the trend that I view with some alarm. The rule basically mandates that when parties have entered into contracts and the contract is silent as to ``consequential damages,'' which is the contract term for economic losses, the aggrieved party may not turn around and sue in tort for economic losses. Thus, the expectation of the parties are protected from undue manipulation by trial attorneys. The party under the rule may sue under tort law only when they have suffered personal injury or damage to property other than the property in dispute. The economic loss rule exists primarily or principally because of the importance of enforcing contractual agreements. If the parties can circumvent a contract by suing in tort for their economic losses, any contract that allocates the risk between the parties becomes worthless. The absence of the economic loss rule would hurt contractual relations and create an economic and unnecessary economic cost to society as a whole. It would encourage suppliers to raise prices to cover all of the risks of liability and would encourage buyers to forego assurances as to the quality of the product or service. If anything goes wrong, simply sue the supplier under tort law. The economic loss rule also reflects the belief that the parties should not be held liable for the virtually unlimited yet foreseeable economic consequences of their actions, such as the economic losses of all the people stuck in traffic in a car accident. In light of this, most States apply the rule without regard to privity, and the vast majority of States that have considered the rule have applied it not only to products but to the services as well with some exceptions for ``professional services,'' such as lawyers and ``special relationships''. Why then should Congress codify the economic loss rule with regard to Y2K actions or litigation? First, adopting the economic loss rule helps identify which parties have the primary responsibility of ensuring Y2K compliance. It is one of the major goals of the Y2K legislation to encourage companies to do all they can to avoid and repair Y2K problems, and adoption of the economic loss rule helps us to do exactly that. Second, adoption of the economic loss rule preserves the parties' ability to enter into meaningful contractual agreements and preserves existing contracts. Parties who suffer personal injury or property damage, other than to the property at issue, could still sue in tort, or in contract, while those suffering only economic damages would be able to sue in contract. Third, adoption of the rule would strengthen existing legal standards. We have the rule in this bill, and there is very good reason to have it in this bill. By strengthening existing legal standards, we would avoid costly and potentially abusive litigation as a result of the Y2K failures. That is what we are trying to avoid. This bill only lasts 3 years. It then sunsets. The bill's purpose is to get through this particularly critical time without having the Federal courts and the State courts overwhelmed by litigation, yet at the same time providing people with a means of overcoming some of these problems. That is the whole purpose of this bill. If this amendment is adopted, that whole purpose will be subverted. It is not a loophole at all, as Senator Edwards contended. If we change this rule and adopt this amendment, we surely will have courts clogged, we surely will have undue and unnecessary litigation, and in the end we surely are not accomplishing what we need to accomplish--encouraging the companies to do what is right and to get the problems solved now. That is what we want to do. This bill will do more toward getting that done than anything I can think of. Lastly, adoption of the economic loss rule would establish a uniform national rule applicable to Y2K actions. This would help to avoid the patchwork of State legal standards that would otherwise apply to Y2K problems and actions. The subtle and complex idiosyncrasies and the rule's applications by the various States strongly indicate the need for a uniform national rule with regard to Y2K actions. Without a uniform rule, which we have in this amendment, every issue concerning Y2K liability may have to be litigated in each different State. This increases the already enormous costs of Y2K litigation. As I stated, the Supreme Court has adopted and endorsed the economic loss rule, which has greatly influenced State law. The leading case is East River S.S. Corp. v. Transamerica Delaval, Inc. In that case, the company that chartered several steamships sued the manufacturer of the ship's turbine engines in tort for purely economic damages, including repair costs and lost profits caused by the failure of the turbines to perform properly. In a unanimous decision, the Supreme Court denied recovery in tort under the economic loss rule. The Court's ruling was based in large part on the propriety of contract law over tort law in cases involving only economic loss. The Court goes on to say: The distinction that the law has drawn between tort recovery for physical injuries and warranty recovery for economic loss is not arbitrary and does not rest on the ``luck'' of one plaintiff in having an accident causing physical injury. The distinction rests, rather, on an understanding of the nature of the responsibility a manufacturer must undertake in distributing his products. When a product injures only itself the reasons for imposing a tort duty are weak and those for leaving the party to its contractual remedies are strong . . . Contract law, and the law of warranty in particular, is well suited to commercial controversies of the sort involved in this case because the parties may set the terms of their own agreements. The manufacturer can restrict its liability, within limits, by disclaiming warranties or limiting remedies. In exchange, the purchaser pays less for the product . . . The Court's ruling was also based on the fact that allowing recovery in tort would extend the turbine manufacturer's liability indefinitely: Permitting recovery for all foreseeable claims for purely economic loss could make a manufacturer liable for vast sums. It would be difficult for a manufacturer to take into account the expectations of persons downstream who may encounter its product. In this case, for example, if the charterers-- already one step removed from the transaction [which included the shipbuilder in between]--were permitted to recover their economic losses, then the companies that subchartered the ships might claim their economic losses from delays, and the charterers' customers also might claim their economic losses, and so on. ``The law does not spread its protections so far.'' Let me turn to state law cases. The leading case on this issue is Huron Tool and Engineering Co. v. Precision Consulting Services, Inc., 532 N.W.2d 541 (Mich. Ct. App. 1995). In Huron, the Michigan Court of Appeals held that the Economic Loss Rule barred plaintiff's fraud claim against a computer consulting company to recover purely economic loss caused by alleged defects in a system provided under contract. The court explained: The fraudulent representations alleged by plaintiff concern the quality and characteristics of the software system sold by defendants. These representations are indistinguishable from the terms of the contract and warranty that plaintiff alleges were breached. Plaintiff fails to allege any wrongdoing by defendants independent of defendant's breach of contract and warranty. Because plaintiff's allegations of fraud are not extraneous to the contractual dispute, plaintiff is restricted to its contractual remedies under the UCC. The circuit court's dismissal of plaintiff's fraud claim was proper. Hotels of Key Largo, Inc. v. RHI Hotels, Inc., 694 So.2d 74, 77 (Fla.Ct. App. 1997), holding that the Economic Loss Rule barred plaintiff's fraud claim seeking to recover economic loss caused by the defendant's failure to promote the plaintiff's hotel per contractual agreement, says: ``[W]here the only alleged misrepresentation concerns the heart of the parties' agreement simply applying the label `fraudulent inducement' to a cause of action will not suffice to subvert the sound policy rationales underlying the economic loss doctrine.''. Raytheon Co. V. McGraw-Edison Co., Inc., 979 F Supp. 858, 870-73 (E.D. Wisc. 1997), holding that the Economic Loss Rule barred tort claims, including strict-responsibility, negligent, and intentional misrepresentation claims, brought by purchaser of real property against seller to recover purely economic loss caused by environmental contaminants in the soil says: ``[T]he alleged misrepresentations forming the basis of Raytheon's fraud claims are inseparably embodied within the terms of the underlying contract . . . [Therefore,] Raytheon cannot pursue its fraud claims.'' AKA Distributing Co. V. Whirlpool Corp., 137 F.3d 1083, 1087 (8th Cir. 1998), holding under Minnesota law that the Economic Loss Rule barred plaintiff's fraud claim based on defendant's statements that the plaintiff would be engaged as a vacuum-cleaner distributor for a long time despite one-year contract says: ``[I]n a suit between merchants, a fraud claim to recover economic losses must be independent of the article 2 contract or it is precluded by the economic loss doctrine.'' Standard Platforms, Ltd v. Document Imaging Systems Corp., 1995 WL 691868 (N.D. Cal. 1995, an unpublished opinion holding that the Economic Loss Rule barred plaintiff's fraud claim based on defects in Jukebox disk drives manufactured by defendant says: ``In commercial settings, the same rationale that prohibits negligence claims for the recovery of economic damages also bars fraud claims that are subsumed within contractual obligations. . . . [Plaintiff's] fraud claim is precluded because it does not arise from any independent duty imposed by principles of tort law.'' This rule regarding intentional torts is not new but is in fact a restatement of old principles separating contract law from tort law. In general, breach of contract, intentional or otherwise, does not give rise to a tort claim; it is simply breach of contract. Thus many courts in addition to those above have held, without mentioning the Economic Loss Rule, that claims such as fraud emerging only from contractual duties are not actionable. See, e.g., Bridgestone/Firestone, Inc. V. Recovery Credit Services, Inc., 98 F.3d 13 (2d Cir. 1996), holding under New York law that plaintiff's fraud claim against a collection agency to recover funds collected by the defendant under contract with the plaintiff was not actionable where the fraud claim merely restated the plaintiff's claim for breach of contract: ``[T]hese facts amount to little more than intentionally-false statements by [the defendant] indicating his intent to perform under the contract. That is not sufficient to support a claim of fraud under New York law.'' In sum, the application of the Economic Loss Rule to intentional torts, such as fraud, is best summarized by the U.S. Court of Appeals for the Eighth Circuit in AKA Distributing Co., listed above: A fraud claim independent of the contract is actionable, but it must be based upon a misrepresentation that was outside of or collateral to the contract, such as many claims of fraudulent inducement. That distinction has been drawn by courts applying traditional contract and tort remedy principles. It has been borrowed (not always with attribution) by courts applying the economic loss doctrine to claims of fraud between parties to commercial transactions.-- AKA Distributing Co., 137 F.3d at 1086 (internal citations omitted). In sum, the economic Loss provision in the Y2K act is not a radical provision or change in law. That is why I oppose its removal from the bill, which in essence the Edwards amendment would accomplish. This is not a simple problem. This is something that we have given a lot of thought to. For those who believe we should have unlimited litigation in this country because of alleged harms, this is not going to satisfy them. For those who really want to solve the Y2K problem and to save this country trillions of dollars, the amendment of the distinguished Senator from North Carolina will not suffice. The amendment of the Senator from North Carolina, attempts to freeze the State law of economic losses--freeze it in place. However, the States are not uniform in this area. One of the things we want to accomplish with this Y2K bill --which is only valid for 3 years, enough to get us through this crisis--is to have uniformity of the law so everybody knows what the law is and everybody can live within the law and there will be incentives for people to solve the problems in advance, which is what this bill is all about. The purpose of the Y2K Act is to ensure national uniformity. A national problem needs a national solution. That is why we need the national economic loss doctrine or rule, based on the trends in State law towards them. We do need uniformity if we are going to solve this problem, or these myriad of problems, in ways that literally benefit everybody in our society and not just the few who might want to take advantage of these particular difficulties that will undoubtedly exist. We all know they will exist. The remediation section of this bill gives a 3-month time limit to resolve some of these problems. We hope we can. On the other hand, we don't want to tie up all of our courts with unnecessary litigation. I have to emphasize again that this bill has a 3-year limit. This provision ends in 3 years. That is not a big deal. It is a big deal in the sense of trying to do what is right with regard to the potential of unnecessary litigation that this particular Y2K problem really offers. Let me just mention, I know the distinguished Senator from North Carolina is aware that his own State has adopted the economic loss rule. Let me raise one particular case in North Carolina, the MRNC case. Let me offer a few comments on this case. Specifically, with respect to what losses are recoverable in the products liability suit, North Carolina's court recognized that the state follows the majority rule and does not allow the recovery of purely economic losses in an action for negligence. It cites a number of cases which I ask with unanimous consent be printed in the Record. At issue in this case is whether MRNC suffered economic loss. Central to the resolution of this issue is what constitutes economic loss. The court noted that when a product fails to perform as intended, economic loss results. Economic loss is essentially ``the loss of the benefit of the users bargain.'' ``[T]he distinguishing central future of economic loss is . . . its relation to what the product was supposed accomplish.'' So economic loss should be available for only contract claims. Tort law should not be allowed to skirt contract law. In other words, contract law should not be ``tortified.'' This is what the Y2K Act codifies. Economic loss should not be allowed in cases where a contract exists. This is the law of North Carolina and most states. I ask unanimous consent these matters be printed in the Record at this particular point.

Mr. HATCH. Mr. President, this amendment basically is, in my opinion, too broad and too vague to provide guidance. It would cause more litigation, and what we are trying to do is prevent litigation that literally is unjustified. This amendment does not take into account the practical reality that the standard of care is determined as part of the case. Thus, how would a plaintiff know what the pleading requirements are under S. 96 for specificity? How would they know that? If it simply depends on the allegation of the plaintiff, then no plaintiff would fall under the requirements of this bill. This could result in tremendous abuse. Talk about loopholes, this would be the biggest loophole of all in the bill. The fact of the matter is, what we are trying to do in this bill is avoid litigation. The distinguished Senator from North Carolina talks about protecting the little guy out there, and the way that is done generally is through class actions, where the little guy gets relatively little, but those in the legal profession make a great deal. That is what we are trying to avoid, a pile of class actions that are unjustified under the circumstances where the manufacturers and all these other people go into the bunkers and get a bunker mentality rather than resolving these problems in advance. The whole purpose of this bill is to get problems resolved, to get our country through what could be one of the worst economic disasters in the country's history. The Y2K bill before us sets an important criteria for fixing the problems. There needs to be specificity in plaintiffs' pleadings--in fact, both plaintiffs' and defendants' pleadings--so glitches can be fixed before litigation. This amendment would allow ``reasonable care standards,'' which must be shown in negligence cases. It does not have to be pleaded with specificity. This would defeat the very purpose of this act, which is trying to get us to be more specific so those who have problems will be able to rectify those problems and remediate those problems. The goal here is to solve problems, not allow any one side or the other to get litigation advantage. We are not trying to give the industries litigation advantage. We are not trying to give big corporations litigation advantage. We are trying to solve problems. I commend all of those on this bill who have worked so hard to do so. If we accept this amendment, my gosh, we will not only not solve problems, we will not have specificity in pleadings, we will never know what is really going on, and we will have massive class actions all over this country that will tie this country in knots over what really are glitches that possibly could be corrected in advance. I yield the floor. Several Senators addressed the Chair.

Mr. HATCH. Mr. President, I understand what the distinguished Senator from North Carolina is attempting to do. He is a very skilled lawyer, and a very good lawyer, and from my understanding primarily a plaintiffs' lawyer in the past. I have been both a defense and plaintiffs lawyer, and I presume maybe he has also, and I have a lot of respect for him and I understand what he is trying to do. The fact of the matter is, we have a 3-year bill here, that sunsets in 3 years, that is trying to solve all kinds of economic problems in our country that could cripple our country and cause a major, calamitous drop in everything if we do not have this bill, plus it could destroy our complete software and computer industry in a short period of time if we get everything tied up in litigation in this country because we are unwilling to pass this bill with this amendment on, that we have worked so hard, with Senator Dodd, to bring about. If we do not pass this bill with this amendment, as amended by this amendment, the Dodd-McCain-Hatch-Feinstein-Wyden amendment--and Sessions amendment--I apologize for leaving out Senator Sessions' name. He has worked hard on this bill. But if we don't pass this bill with this language in it, then I predict we will have undermined the very purposes we are here to try to enforce. This bill is an important bill. This bill assures every aggrieved party his day in court. It does not end the ability to seek compensation. What it does, however, is to create procedural incentives that for a short time delay litigation in order to give companies the ability to fix the problem without having to wait for a judgment from some court--which could take years. But in this particular case, I want to remind all that the bill sunsets in 3 years. It is limited in a way that prevents what would be catastrophic losses in this country, unnecessary losses if this bill is enacted. That is why we should quit playing around with this bill and get it passed. I don't care that the President of the United States says, he is not going to veto this bill. He would be nuts to veto it. This is a bipartisan bill. This amendment is a bipartisan amendment, and it has been worked out over a very long period of time and through a lot of contentious negotiations. We finally arrived at something here that can really solve these problems. Sincerely motivated as is the distinguished Senator from North Carolina, I hope our colleagues will vote this amendment down, because it will really undermine, at least in my opinion and I think in the opinion of many others, what we are trying to do here. What we are trying to do here is in the best interests of our country. I yield the floor.

Mr. HATCH. Mr. President, parliamentary inquiry. Does this amendment modify the prior amendment; does it supersede the prior amendment?

Mr. HATCH. Will the Senator yield on that point?

Mr. HATCH. That is what the Senator's amendment does. But in this total, overall bill, there is a statutory compensation, statutory exemption. Most States--in fact, I think virtually all States--have consumer fraud statutes that provide for the right to sue that allow for economic loss if there is an intentional fraud or criminal violation.

Mr. HATCH. Will the Senator yield?

Mr. HATCH. The McCain bill doesn't affect that. If fraud is committed consumers in most states will be able to recover even economic losses under state statutes. This is not altered by the Y2K Act. So, if there is fraud committed or a criminal act committed, you are going to be able to have all your rights, even in States like North Carolina, where they codify the economic loss rule. So that is not affected by this bill at all. The only thing that will be affected by this bill, if your amendment is adopted there will be an increase of wide open and aggressive litigation. Without your amendment, we will not have a uniformity of rule that will help us to get to the bottom of this matter. So with regard to the count on fraud, with regard to real fraud, or statutory fraud, with regard to criminal acts, the defendants will still be liable for what the distinguished Senator believes they should be liable for.

Mr. HATCH

Mr. HATCH. Mr. President, I rise today to support what will be offered as the bipartisan amendment to S. 96, the Y2K Act. I also rise to oppose Senator John Kerry's alternative to the Y2K Act. The Y2K Act has gone through significant and myriad changes. In the spirit of constructive compromise, Senators of both parties have come together to work out their differences to produce S. 1138, the bipartisan Dodd-McCain - Hatch - Feinstein - Wyden - Gorton-Lieberman- Bennett amendment. Why? Because these and other Senators realize the importance of resolving a potential Y2K litigation crisis. These and other Senators have placed the vitality of the nation over any exaggerated loyalty to one political party. Y2K-related lawsuits pose the greatest danger to industry's efforts to fix the problem. All of us are aware that the computer industry is feverishly working to correct--or remediate, in industry language--Y2K so as to minimize any disruptions that occur early next year. What we also know is that every dollar that industry has to spend to defend against especially frivolous lawsuits is a dollar that will not get spent on fixing the problem and delivering solutions to technology consumers. Also, how industry spends its precious time and money between now and the end of the year--either litigating or mitigating-- will largely determine how severe Y2K-related damage, disruption, and hardship will be. Many fear that if Congress does not act, the American high tech industry, a leader in the world and a significant source of our exports, will be severely damaged. This is particularly true for the economies of cutting-edge high tech states--such as my home state of Utah--whose private sector is a leader in the information revolution. Why retard the industry that has led the recent boom of the American economy? Why kill the goose that lays the golden egg? Let me restate what I have said on numerous occasions. The potential financial magnitude of the Y2K litigation problem is enormous. To understand this enormity, we should consider the estimate of Capers Jones, Chairman of Software Productivity Research, a provider of software measurement, assessment and estimation products and services. Mr. Jones suggests that ``for every dollar not spent on repairing the Year 2000 problem, the anticipated costs of litigation and potential damages will probably amount to in excess of ten dollars.'' The Gartner Group estimates that worldwide remediation costs will range between $300 billion to $600 billion. Assuming Mr. Jones is only partially accurate in his prediction--the litigation costs to society will prove staggering. Even if we accept The Giga Information Group's more conservative estimate that litigation will cost just two dollars to three dollars for every dollar spent fixing Y2K problems, overall litigation costs may total $1 trillion. Even then, according to Y2K legal expert Jeff Jinnett, ``this cost would greatly exceed the combined estimated legal costs associated with Superfund environmental litigation . . . U.S. tort litigation. . .and asbestos litigation.'' Perhaps the best illustration of the sheer dimension of the litigation monster that Y2K may create is Mr Jinnett's suggestion that a $1 trillion estimate for Y2K-related litigation costs ``would exceed even the estimated total annual direct and indirect costs of all civil litigation in the United States,'' which he says is $300 billion per year. These figures should give all of us pause. At this level of cost, Y2K-related litigation may well overwhelm the capacity of the already crowded court system to deal with it. Looking at a rash of lawsuits--there already have been 66 Y2K lawsuits filed nationwide and the number is growing--we must ask ourselves, what kind of signals are we sending to computer companies currently engaged in or contemplating massive Y2K remediation? What I fear industry will conclude is that remediation is a losing proposition and that doing nothing is no worse an option for them than correcting the problem. This is exactly the wrong message we want to be sending to the computer industry at this critical time. I believe Congress should give companies an incentive to fix Y2K problems right away, knowing that if they don't make a good-faith effort to do so, they will shortly face costly litigation. The natural economic incentive of industry is to satisfy their customers and, thus, prosper in the competitive environment of the free market. This acts as a strong motivation for industry to fix a Y2K problem before any dispute becomes a legal one. This will be true, however, only as long as businesses are given an opportunity to do so and are not forced, at the outset, to divert precious resources from the urgent tasks of the repair shop to the often unnecessary distractions of the court room. A business and legal environment which encourages problem- solving while preserving the eventual opportunity to litigate may best insure that consumers and other innocent users of Y2K defective products are protected. The bipartisan compromise amendment accomplishes these ends. It is significant to note that the Chair and Vice-Chair of the Senate's Special Committee on the Year 2000 Technology Problem, my good friends and respected colleagues Robert Bennett and Christopher Dodd, endorse the bipartisan amendment. Both these Senators have developed great expertise in Y2K and related matters during their leadership of the special committee. They were instrumental in crafting the compromise amendment. The Kerry proposal, on the other hand, is partisan. As I understand it, it was in part drafted with the White House. It has not been endorsed by one Republican. While I firmly believe that Senator Kerry and other Democrat Senators who crafted the amendment sincerely believe that they are doing good, their amendment clearly eviscerates the protections established by S. 96. It reduces the incentives created in the bill for reducing litigation and resolving Y2K problems outside the court room. Let me explain. The Kerry Amendment significantly weakens the class action section of S. 96. Class actions are a significant source of abuse. I have seen this as Chairman of the Judiciary Committee. Both plantiffs and defendants' attorneys have all too often been successful in rigging the system. Far too often, sweetheart deals are entered into whereby the plaintiff's attorneys negotiate huge fees, the defendants buy litigation peace through a nation-wide class action settlement that acts as res judiciata and bars all, even meritorious, future litigation, and class members are given mere trifles, such as coupons for products that hardly can be considered just compensation. Far too often, Federal jurisdiction is defeated by joining just one nondiverse class plaintiff--even if the overwhelming number of parties are from differing states. This wrecks the clear purpose of Federal Rule of Civil Procedure 23--to provide for a Federal forum for class actions where the litigation problem is national in scope. A federal forum ameliorates myriad state judicial decisions that are conflicting in scope and onerous to enforce. Now, I am a great proponent of federalism and the right of our states to act as what Justice Brandeis termed national laboratories of change. But it is axiomatic that a national problem needs an uniform solution. That is the justification for Congress' Commerce Clause power and its consequent promulgation of Rule 23. That is the justification for the Y2K Act itself, in which the Y2K defect is clearly a national problem in need of a Federal answer. Because of the short 2 or 3 year timespan for litigation, all of these problems are magnified in the Y2K context. There already have been filed 31 Y2K class action lawsuits with all the attendant problems associated with class action abuse. Before all is said and done, I expect many more to be filed. S. 96 deals with the problems generated by class actions in two ways: first, a certification requirement to demonstrate a common material defect is mandated. This assures that class action joinder is available only if common questions of law and fact exist. Second, minimal diversity is allowed. Thus, a substantial number of parties must be from different states and joinder of one or two nondiverse parties cannot defeat Federal jurisdiction. Moreover, to assure that Federal courts are not saturated with class actions independently filed or removed from state court, the amount in controversy must be over one million dollars. To its credit, the Kerry Amendment adopts the common material defects showing requirement. But it is silent as to the need for minimal diversity to assure that the Federal courts will have jurisdiction over what is after all a national problem. To be sure, I am aware that the Judicial Conference opposes this provision fearing a substantial increase in Federal class actions. But I am also aware of their tendency to overreact. They made no study of the issue. Their concerns were mere ipse dixits, statements made as true with no foundation as to their truth. To the contrary, the nonpartisan Congressional Budget Office has made a study of both S. 96, the bill reported out of Commerce, and S. 461, the Hatch-Feinstein Y2K measure, the bill reported out of the Judiciary Committee. Both bills have nearly identical provisions. Concerning the class action provisions of S. 461, CBO first recognized that because of the incentives found in the bill it expects ``that parties to lawsuits would be encouraged to reach a settlement. Thus, we anticipate that many lawsuits would not result in trial, which can be [time-consuming] and expensive.'' CBO went on and noted that ``some class action lawsuits could be shifted from state to federal court under S. 461 because the bill would ease restrictions for filing such actions in Federal court.'' What is important, however, is their ultimate conclusion: ``On balance, CBO estimates that the savings from eliminating trials for many lawsuits would more than offset any increased costs that might be incurred from trying additional class action lawsuits in federal court.'' (My emphasis). In other words, in the only study done of the class action issue, it is concluded that the Y2K Act's class action provision would not result in the flooding of the federal courts with unneeded and expensive litigation. A provision of S. 96 that the Kerry Amendment actually strikes is the punitive damages limitation provision. Now both S. 96 and S. 461 contained caps on punitive damage awards. The caps applied to all prevailing parties and limited punitive damages to the greater of three times compensatory damages or $250,000, or the lesser of that amount if a small business was the defendant. The reason for these caps are clear. Runaway punitive damages have hindered economic growth and productivity nationwide. Businesses are often forced to settle spurious suits when faced with millions in punitive damages. Thus, prices for goods and services are unnecessarily raised with consumers suffering the most. Because of the concentrated time period, this problem will be magnified for Y2K actions. The bipartisan Dodd-McCain-Hatch-Feinstein amendment modifies the punitive damage provision. In the spirit of compromise, the caps were limited to small business and individuals with a net worth of less than $500,000. There were two reasons for this change. The first is that small businesses and most individuals would be ruined by immense punitive dmamages. The other reason is that punitive damages in this situation do not serve the intended deterrent effect. In fact, insolvency and bankruptcy creates a counterincentive to remediate Y2K glitches. Why would a small business voluntarily notify customers of potential Y2K defects if the business could face ruin for its good citizenship? But Senator Kerry even opposes this watered down provision. The reason for Senator Kerry's opposition for even this moderate provsion is that even caps for small business would allegedly reduce the deterrent effect of those damages. Surely, however, the prospect of treble damages provides adequate incentives for companies that need monetary threats to make efforts at compliance. The current, unlimited punitive regime simply encourages suits by lawyers who hope to hit the lottery, while driving up the settlement value of insubstantial claims. Let me turn to the proportionate liability section of S. 96. It is good to see that Senator Kerry has moved closer to our position. Prior drafts of his amendment completely weakened this provision. Senator Kerry's latest attempt in most respects is verbatim the same as the bipartisan amendment. The system of modified proportionate liability in S. 96 makes sense as a matter of both equity and of litigation management. Based on the already existing proportionate liability provision of the Federal Private Securities Litigation Reform Act of 1995, it ensures that defendants will not be forced to pay for injuries that are not their fault. It discourages specious lawsuits because plaintiffs' lawyers will not be able to take advantage of the archaic joint and several liability doctrine whereby a deep-pocket defendant will inevitably have to pay the entire judgment so long as a jury can be persuaded to find it is even one percent responsible. And the proportionate lability section will avoid coercive settlements prevalent in a joint and several liability scheme. The Kerry provision essentially adopts the proposal in S. 96, which recognizes that it is unfair to assume that defendants should be forced to pay for damages that are not their fault. But the Kerry draft also eliminates proportionate liability if the defendant fails to inform the plaintiff of a potential Y2K problem before December 31, 1999. This is true even if the defendant business demonstrates that it was innocent, or had no knowledge of the defect. Suppose a retailer, having no reason to believe the manufactured product sold was defective, could not and did not notify the purchaser of the Y2K defect. In that case the retailer would be subject to joint and several liability under Kerry. The result is that deep-pocketed defendants who are subject to strike suits will have to assume that they face limitless liability, and, therefore, will have no choice but to pay a coercive settlement, even if the defendant was innocent of any knowledge of the defect. The Kerry Amendment duty to mitigate requirement has been so limited that it will not encourage remediation. The amendment provides that plaintiffs cannot recover damages for injuries that they could have reasonably avoided in light of information provided to the plaintiff by the defendant. It does not impose such a limit if the plaintiff obtained the relevant information from third parties or other sources. The provision in the Kerry Amendment is much more narrow than the general common law of the duty to mitigate. If the plaintiff in fact obtained information from any source that would have allowed it to avoid injury, it makes no sense to allow the plaintiff to ignore that information, to suffer the injury, and then to force someone else to pay its damages. There is another significant problem with the Kerry Amendment. The amendment eliminates all intentional torts--except where the tort involves fraud or misrepresentation about the product--from the scope of S. 96's codification of the Economic Loss Rule, regardless of the relationship between the parties. This exemption would significantly narrow existing law in many states and undermine the purpose of the Rule in cases involving two contracting parties. Breach of contract, intentional or otherwise, does not generally give rise to a tort claim; it is simply breach of contract. The Economic Loss Rule thus prevents tort remedies--such as lost profits and other economic losses--where the parties were in privity and could have negotiated consequential damages and other economic losses. The rapidly emerging trend, therefore, among the States is to apply the Economic Loss Rule to bar fraud claims where those claims merely restate claims for breach of contract. The Rule does not, however, bar fraud claims arising independent of a contract. Additionally, the Kerry Amendment would significantly override State law and allow recovery of economic loss in cases of intentional torts even where such recovery would be prohibited by State law. This seems to create a new cause of action for recovery of economic loss in cases of intentional torts and is unacceptable. The Kerry Amendment also would apply the Economic Loss Rule to only actual defects and not anticipated failures. Thus many lawsuits based on anticipated failures would not fall under the Economic Loss Rule. Finally, the Kerry Amendment carve-out for noncommercial suits will permit a huge range of abusive actions. Carving out noncommercial suits--including class actions--will permit a huge range of abusive actions. Abusive class actions on behalf of consumers are one of the greatest dangers in the Y2K area because such suits are easily created and controlled by plaintiffs' lawyers. While the Kerry Amendment does apply the minimum injury certification requirement to individual class actions, it does not apply to the proportionate liability and other substantive provisions in such cases. Besides, why should not consumers get the benefit of the bill's terms, which will speed remediation and negate the need for costly lawsuits, as CBO opined. It is clear that the Kerry Amendment has serious flaws. I sincerely believe that Senator Kerry and the sponsors of his amendment are well- meaning. Their goals are in harmony with ours. But they are mistaken if they believe that their proposal would solve the Y2K problem. That is why I ask all Senators to support S. 96, as modified by S. 1138, the Dodd-McCain-Hatch-Feinstein amendment.

Mr. HATCH

Mr. HATCH. Mr. President, I rise to submit a Senate Resolution recognizing June 22, 1999, as ``National Pediatrics AIDS Awareness Day.'' I am sponsoring this resolution today with my colleague Senator Boxer from California and 52 of our other colleagues of the Senate. Senator Boxer and I are cochairs for the 10th anniversary of the Elizabeth Glaser Pediatric AIDS Foundation, which promises to be a wonderful event. But, more importantly, through the generosity of many individuals and organizations, substantial funds will be raised to further the research necessary to defeat this disease which threatens so many lives--including children. Infection of children with the human immunodeficiency virus (HIV) is very different than infection in adults. Infected children get sick faster; their immune systems may deteriorate more quickly; treatment protocols are very different; and they often involve more complications. Almost all children with HIV infection have acquired the virus from their mothers. In the late 1980s and early 1990s, before preventive treatments were available, an estimated 1,000-2,000 babies were born with HIV infection each year in the United States. Today, because of scientific and medical breakthroughs in pharmaceutical therapies, the mother-to-infant transmission rate has dropped from 43% in 1992 to 8% in 1997. The investment in prevention alone has resulted in avoiding an estimated 656 HIV infections and saves $105.6 million in medical care costs. Thus we are indeed seeing results from the time, energy, and resources being expended to fight this dreaded disease. My hat is off to those front line researchers and clinicians who have devoted themselves to this task. While significant advances have been made in decreasing pediatric HIV infection, we must continue to work tirelessly to develop an HIV vaccine that will enable the safe and effective immunization of children and adults. We must better understand why HIV/AIDS disproportionately affects children of color and find cures to eradicate this epidemic. For our children living with HIV, we must provide them with the best possible therapeutic and social support to ensure their long, high quality life. I urge all senators to join me on June 22 at the National Building Museum to celebrate the successes which have been achieved in fighting HIV and AIDS among our youth and to renew our pledge to fight this disease until it disappears from the face of this earth.

Mr. HATCH

Mr. HATCH. The problem with the language is that it's too vague. For the past two days, I have asked OSD, the Army General Counsel, and the real Property Administrator at the Department of Education to tell me how a local school district could benefit from the President's proposal that is in this provision of the bill. They could not explain it to me. I ask unanimous consent to have printed in the Record a copy of my letter to the Army General Counsel.

Mr. HATCH

Mr. HATCH. Mr. President, I rise today to introduce the Semiconductor Investment Act of 1999. I am joined by Senators Baucus, Feinstein, Kyl, Robb, and Bingamin. This bill is designed to help the American semiconductor industry compete globally by shortening the depreciable life of semiconductor manufacturing equipment from 5 years to 3. The U.S. semiconductor industry employs more than 275,000 Americans, sells over $67 billion of products annually, and currently controls 55 percent of the $122 billion world market. Its products form the foundation of practically every electronic device used today. Growth in this industry translates directly into new employment opportunities for American workers and to economic growth for the nation as a whole. The American semiconductor industry is a success story because it has invested heavily in the most productive, cutting-edge technology available, and currently spends 14% of its revenues on research and development and 19% on capital investment. Unfortunately, Mr. President, our semiconductor industry is threatened. While the equipment used to manufacture semiconductors has a useful life of only about 3 years, current tax depreciation rules require that cost of the equipment be written off over a full 5 years. The Semiconductor Investment Act would correct this flaw, Mr. President, by allowing equipment used in the manufacture of semiconductors to be depreciated over a more appropriate 3-year period. Given the massive level of investment in the semiconductor industry, accurate depreciation is critical to industry success. The key reason for this 3-year depreciation period is that the equipment used to make semiconductors grows technologically obsolete more quickly than other manufacturing equipment. Research indicates that semiconductor manufacturing equipment almost completely loses its ability to produce sellable products after less than 3 years. Today's 5-year period simply doesn't reflect reality. A quicker write-off period would help semiconductor manufacturers finance the large investment in equipment they need for the next generation of products. The National Advisory Committee on Semiconductors reinforced this conclusion. Congress founded the committee in 1988, and it consisted of Presidential appointees from both the public and private sectors. In 1992, the committee recommended a 3-year schedule would increase the industry's annual capital investment rate by a full 11 percent. By comparison, Japan, Taiwan, and Korea employ much more generous depreciation schedules for similar equipment, and all three nations provide stiff competition for America's semiconductor manufacturers. For example, under Japanese law, a company can depreciate up to 88 percent of its semiconductor equipment cost in the first year, while United States law permits a mere 20-percent depreciation over the same period. When multinational semiconductor firms are deciding where to invest, a depreciation gap this large can be decisive. This legislation will help ensure that America's semiconductor industry retains its hard-earned preeminence, a preeminence that yields abundant opportunities for high-wage, high-skill employment. Mr. President, my home State of Utah, provides an outstanding example of the industry's job-creating capacity. Thousands of Utahns earn their living in the State's flourishing semiconductor industry. Firms such as Micron Technology, National Semiconductor, Intel, and Varian have reinforced Utah's strong position in high-technology industries. With the fair tax treatment this bill brings, all Utahns can look forward to a more secure and prosperous future. Mr. President, the Semiconductor Investment Act of 1999 will help level the playing field between U.S. and foreign semiconductor manufacturers, and provides fair tax treatment to an industry that is one of the Nation's greatest success stories of recent years. I hope that my fellow Senators will join me in supporting this legislation. Mr. President, I ask unanimous consent that the bill be printed in the Record.