[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
THE CONSUMER AND INVESTOR ACCESS TO INFORMATION ACT OF 1999
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TELECOMMUNICATIONS,
TRADE, AND CONSUMER PROTECTION
of the
COMMITTEE ON COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
on
H.R. 1858
__________
JUNE 15, 1999
__________
Serial No. 106-49
__________
Printed for the use of the Committee on Commerce
U.S. GOVERNMENT PRINTING OFFICE
57-446CC WASHINGTON : 1999
------------------------------
COMMITTEE ON COMMERCE
TOM BLILEY, Virginia, Chairman
W.J. ``BILLY'' TAUZIN, Louisiana JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas RALPH M. HALL, Texas
FRED UPTON, Michigan RICK BOUCHER, Virginia
CLIFF STEARNS, Florida EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio FRANK PALLONE, Jr., New Jersey
Vice Chairman SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania BART GORDON, Tennessee
CHRISTOPHER COX, California PETER DEUTSCH, Florida
NATHAN DEAL, Georgia BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma ANNA G. ESHOO, California
RICHARD BURR, North Carolina RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California BART STUPAK, Michigan
ED WHITFIELD, Kentucky ELIOT L. ENGEL, New York
GREG GANSKE, Iowa THOMAS C. SAWYER, Ohio
CHARLIE NORWOOD, Georgia ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma GENE GREEN, Texas
RICK LAZIO, New York KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming TED STRICKLAND, Ohio
JAMES E. ROGAN, California DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING,
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland
James E. Derderian, Chief of Staff
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Telecommunications, Trade, and Consumer Protection
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL G. OXLEY, Ohio, EDWARD J. MARKEY, Massachusetts
Vice Chairman RICK BOUCHER, Virginia
CLIFF STEARNS, Florida BART GORDON, Tennessee
PAUL E. GILLMOR, Ohio BOBBY L. RUSH, Illinois
CHRISTOPHER COX, California ANNA G. ESHOO, California
NATHAN DEAL, Georgia ELIOT L. ENGEL, New York
STEVE LARGENT, Oklahoma ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming BILL LUTHER, Minnesota
JAMES E. ROGAN, California RON KLINK, Pennsylvania
JOHN SHIMKUS, Illinois THOMAS C. SAWYER, Ohio
HEATHER WILSON, New Mexico GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi JOHN D. DINGELL, Michigan,
VITO FOSSELLA, New York (Ex Officio)
ROY BLUNT, Missouri
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Baptiste, Donald, President and CEO, USADemocracy.com........ 61
Black, Edward J., President and CEO, Computer &
Communications Industry Association........................ 20
Casey, Timothy D., Chief Technology Counsel, Law and Public
Policy, MCI WorldCom....................................... 45
Henderson, Lynn O., President, Doane Agricultural Services
Corporation, on behalf of the Agricultural Publishers
Association................................................ 53
Horbaczewski, Henry, Vice President and General Counsel, Reed
Elsevier Inc............................................... 32
Neal, James G., Dean of Libraries, Johns Hopkins University
Libraries, Milton S. Eisenhower Library.................... 48
O'Brien, Gregory M., Chancellor, University of New Orleans,
on behalf of the National Association of State Universities
and Land Grant Colleges, the Association of American
Universities, and the American Council on Education........ 56
Pincus, Andrew J., General Counsel, Department of Commerce... 8
Politano, Frank, Trademark and Copyright Counsel, AT&T
Corporation................................................ 25
Rightmire, Matthew, Director of Business Development, Yahoo!
Inc........................................................ 28
Schlafly, Phyllis, President, Eagle Forum.................... 40
Material submitted for the record by:
Association of Directory Publishers, prepared statement of... 88
Carpenter, Jot D., Jr., Director, Federal Government Affairs,
AT&T, letter dated July 9, 1999, enclosing response for the
record..................................................... 91
Federal Trade Commission, prepared statement of.............. 78
(iii)
THE CONSUMER AND INVESTOR ACCESS TO INFORMATION ACT OF 1999
----------
TUESDAY, JUNE 15, 1999
House of Representatives,
Committee on Commerce,
Subcommittee on Telecommunications,
Trade, and Consumer Protection,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2123, Rayburn House Office Building, Hon. W.J. ``Billy''
Tauzin (chairman) presiding.
Members present: Representatives Tauzin, Oxley, Stearns,
Deal, Largent, Cubin, Shimkus, Blunt, Bliley (ex officio),
Markey, Boucher, Luther, Sawyer, Green, and McCarthy.
Staff present: Justin Lilley, majority counsel; Cliff
Riccio, legislative clerk; and Andy Levin, minority counsel.
Mr. Tauzin. The subcommittee will please come to order.
Members will be coming in as we commence, but I would like to
get started. We have a very large panel this morning.
The subcommittee meets today to discuss H.R. 1858, Consumer
and Investor Access to Information Act of 1999, which was
introduced by our own Chairman, Tom Bliley, and has received
strong bipartisan support from members of this committee.
Before we begin, I would like to extend a warm welcome to
Dr. Gregory O'Brien, Chancellor of the University of New
Orleans. We, of course, are delighted whenever we have a
hometown guest here, and it is particularly good to see
Chancellor O'Brien.
Given the intensified appeal and growth of the Internet, it
is no longer clear what information, what analysis is
proprietary and what is freely available to the public. Last
week I read about a case which clearly demonstrates why this
hearing is so important to the future of the Internet and
electronic commerce in general.
Amazon.com the online book retailer, has a page on its Web
site which lists the books on the New York Times best seller
list. For each book on the list, Amazon presents a picture of
the cover, the title, the name of author, the number of pages,
the list price, the Amazon price, and a box to click if you
want to purchase the book.
Moreover, you can click on another box to link to other
information about the book, including published reviews, a
biography of the author, a list of other books by the author
offered by Amazon, and links to similar books.
In short, Amazon has taken a simple list of best selling
books and converted it into quite a wonderful resource for
consumers. The New York Times, however, may not see it that
way. The Times believes that Amazon.com is somehow
misappropriating its property by identifying the books on the
New York Times best seller list. It has sent a demand letter to
Amazon.com, and Amazon.com has filed a declaratory judgment
action.
It is unclear whether the New York Times will prevail on
its copyrighted trademark theory. However, it is unquestionably
clear that the New York Times would prevail if broad data base
protection legislation were in place. In my opinion that would
be a troubling result.
It is true that the New York Times best seller list is
widely considered to be one of the most authoritative lists of
which books are selling the most in American bookstores, and
one must recognize the Times has invested resources in
assembling the list.
That does not alter the reality that the list is nothing
more than a collection of publicly available facts. The list
represents the results of a survey, and those results are no
less facts than the results of any other sampling done by
scientists and pollsters every day, and the facts, once
released, belong in the public domain.
Why should someone be civilly, not to mention criminally,
liable for making use of publicly available facts, particularly
in a free-speech society such as ours. The Times best seller
list is not a list that the newspaper editors believe to be
most worth reading; instead it purports to be a list of the
books the American public, rightly or wrongly, is choosing to
buy.
If the Times owns the identity of the books on its best
seller list then the NBA by analysis owns the identity of the
players with the highest scoring average. And United Airlines
owns the information about published prices on its flights to
New Orleans and NBC owns its broadcast schedule.
And if all these well-heeled entities own all this
information, then surely they can prevent an Internet company
from incorporating it in a larger data base to create a value
for consumers, such as Amazon.com's bestseller page, or an
electronic TV Guide, for that matter.
Let me make it clear that I don't think that people should
have access to trade secret information. People should not be
able to reproduce a copyrighted expression in a database. The
selection and arrangement of the data as opposed to the data
itself. Further, I don't think that companies should be able to
engage in unfair competition with respect to databases.
I should not be able to copy a database compiled by
Congressman Markey and publish it in substantially the same
form and manner which competes with his database. There may be
a narrow gap in the law that currently permits this in certain
circumstances, and that gap should be filled. For that reason,
I join my colleagues in cosponsoring Chairman Bliley's
legislation, but we must take care not to overprotect
databases.
As Alex Kozinski, a judge in the 9th circuit recently
wrote, overprotecting intellectual property is as harmful as
underprotecting it. Creativity is impossible without a rich
public domain. Nothing today likely since we obtained fire is
genuinely new. Culture, like science and technology, grows by
accretion, each new creator building on the works of those who
came before.
Overprotection stifles the very creative forces it is
supposed to nurture. This is a fascinating issue as evidenced
by a very diversified panel today. We just recently on this
committee completed our work on the WIPO legislation,
protecting intellectual property rights; and this committee has
some good experience in understanding the very delicate
relationship between fair use and protected use and protected
rights of intellectual property.
Today we expand upon that information base. We grow in
knowledge, and we ask you to share a little data with us today
on whether or not Mr. Bliley's bill, as we believe, is taking
the right cut in this very delicate balance.
We look forward to hearing our witnesses as to whether or
not, in fact, we have struck that right balance today.
The Chair in anticipation of Mr. Markey's arrival will
recognize the gentleman, Mr. Luther, if he is prepared for an
opening statement.
Mr. Luther. No thank you, Mr. Chairman. Thank you for
holding this hearing, and I do expect that Mr. Markey will have
an opening statement that he wishes to put into the record. I
do not have anything to add other than to thank you for holding
the hearing, and I look forward to the testimony. You are
indeed correct that this is a timely and important issue. Thank
you very much.
Mr. Tauzin. I thank the gentleman. With Mr. Markey it is
always a great expectation.
The Chair is now pleased to yield to the chairman of the
full committee, Mr. Bliley, for an opening statement.
Chairman Bliley. Mr. Chairman, thank you for holding this
hearing on H.R. 1858; and let me say at the outset that I thank
my colleagues for their support of this legislation.
This bill is a critical component of the committee's
electronic commerce agenda, and I look forward to working with
them on ensuring swift enactment.
For many years economists have wondered whether our
country's enormous investment in information technology, in
computers and advanced telecommunications networks, actually
increase productivity; but now even the economists are
believers. No less an expert than Alan Greenspan, chairman of
the Federal Reserve, recently observed that the current
economic prosperity we are enjoying in the United States is
largely attributable to our investment in information
technology.
Just the other day, the University of Texas released its
study titled The Internet Economy, which finds that in 1998
alone the Internet generated more than $300 billion in revenue
and was responsible for 1.2 million jobs. This is a mere 5
years after the birth of the World Wide Web.
To give my colleagues some sense of comparison, it took the
automobile industry 100 years to scale such heights. The
investment both public and private sectors have made in our
information infrastructure are finally paying dividends in
terms of allowing us to access and use information in a manner
unprecedented in history.
A farmer in the Virginia Piedmont is now able to access
from his home a wealth of information critical to his business.
He can learn about soil conditions, weather trends, new
pesticides, genetically enhanced seeds, and potential buyers in
distant States.
A soccer mom in suburban Richmond is able to do price
comparison on a new refrigerator, plan a family vacation, find
a support group for her child with special educational needs,
and even do her shopping.
All of the members of this committee are committed to
promoting electronic commerce. We want to preserve consumers'
privacy, protect security, and we want to promote the
deployment of bandwidth, but let's be clear about what this is
all about. It is about information and consumers' apparently
insatiable demand for it.
That is why today's hearing is so important. This hearing
will address a bedrock issue: Who will control information in
the information age? On the one hand, we need to make sure that
the compilers of information have sufficient incentive to
engage in their difficult, but essential, work.
But at the same time, we need to make sure that we do not
lock facts up; that we do not give anyone monopoly control over
facts, for if we were able to do that, we would greatly
restrict the ability of new firms to create innovative
databases incorporating those facts.
As a practical matter, this would limit many of the
wonderful uses of information the Internet permits. How do we
achieve this delicate balance? Does existing law get it right
or is some fine-tuning necessary? Can this fine-tuning be
accomplished in a manner that does not run afoul of the first
amendment of the Constitution or copyright laws?
My own view is that some targeted fine-tuning is needed,
and it is for that reason that I introduced H.R. 1858, the
Consumer and Investor Access to Information Act of 1999. I will
be interested in hearing from today's witnesses whether H.R.
1858 embodies the appropriate approach for attacking this
complex issue. Again, Mr. Chairman, thank you for holding
today's hearing, and I yield back the balance of my time.
Mr. Tauzin. Thank you. The Chair is now pleased to
recognize the ranking minority member of the subcommittee, Mr.
Markey, for an opening statement.
Mr. Markey. Thank you, Mr. Chairman, very much; and I would
like to commend you, Chairman Tauzin, for calling this hearing
today.
Mr. Chairman, the legislation that is the subject of
today's hearing is an attempt to strike an appropriate balance
between two important goals. The first goal is to halt the
outright theft or misappropriation of databases. Individuals
and entities spend time and effort to compile facts into
databases, and their efforts should be legally protected from
theft or misappropriation. I think everyone agrees with that
basic concept.
The second goal is to ensure that in protecting against
misappropriation, that Congress does not unwittingly stifle
commerce, legitimate research and creativity. This country's
economic future depends upon our Nation's ability to capture
the lion's share of information-age jobs. If we thwart the
ability of creative entrepreneurs to obtain and use facts to
create new products, we are hurting our prospects for
generating the knowledge-based markets we will need for job
growth in a post GATT, post-NAFTA world.
Balancing these two goals is no doubt going to be a
difficult task. Yet addressing these issues is an undertaking
that this committee and this Congress must press forward on in
order to put appropriate legal protections on the books for
marketplace participants, and these protections should serve to
both safeguard property from piracy and encourage competition
in the electronic environment for our consumers.
Not surprisingly, the effort developed in this committee to
balance these two legitimate policy goals treats databases as
key items in electronic commerce, and recognizes that two or
three people or 200 or 300 people can utilize exactly the same
underlying data yet attempt to create distinctive new products.
This ability to utilize the same facts and to create new
innovative services of products will be at the heart of our new
electronic economy. Obviously, the people who create new
databases or services from those root facts will want
protection against piracy and misappropriation, and they should
get that protection.
Creative expressive elements or originality should be
permitted copyright protection because this is the appropriate
role for copyright protection. However, such copyright
protection should not extend to the underlying facts
themselves.
Today we will hear from an expert panel, and I think that
the panel will help us to better fine-tune the balance struck
in the bill introduced by the chairman of the committee, Mr.
Bliley; and I hope that by the end of the day each member of
the committee will have a far better understanding of what
ultimately a final piece of legislation should look like. I
thank you, Mr. Chairman.
Mr. Tauzin. Thank you, Mr. Markey; and the Chair is now
pleased to recognize the Vice Chairman of the subcommittee, Mr.
Oxley, from Ohio.
Mr. Oxley. Thank you, Mr. Chairman. Before I make my
opening statement, I would like to congratulate the new free
throw champion for the House of Representatives, the last free
throw champion of this century, the gentleman from
Massachusetts, who converted 46 out of 50, one short of the
record, I might point out, but still a very strong performance.
Mr. Tauzin. Would the gentleman yield.
Mr. Oxley. I would be glad to yield.
Mr. Tauzin. We don't want any of you publishing that
information.
Mr. Oxley. My thanks to Chairman Bliley for H.R. 1858. This
legislation is the next logical step for the law in the digital
age. We are dealing with new digital technology and its use on
the Internet. That invention has become the social phenomenon
that will no doubt symbolize this decade.
Never before has it been so easy or so profitable to copy
the intellectual creations of another. The bill is a fine
addition to copyright law, bringing digital media under the
legal concept that has stood for decades.
Despite the modern nature of the technology we consider
today, the problem is as old as squatters in the old West who
claimed land as their own. Sometimes you need a digital sheriff
and a digital posse to keep everyone in line. I don't worry
that we will have less information as a result of this bill.
Those that create databases deserve some modicum of protection
of their work; that is what we seek to provide.
My committee, Finance and Hazardous Materials, will soon
hold a hearing on title II of this legislation which
specifically addresses stock data. We look forward to that in a
few weeks. With that, I yield back the balance of my time.
Mr. Tauzin. The Chair thanks the gentleman. The gentleman
from Illinois, Mr. Shimkus, is recognized for an opening
statement.
Mr. Shimkus. Thank you. As we found out last week in the
markup of H.R. 10, database security, sharing information,
trademark infringement, and privacy are at the core of the
debate of the future. Hence, the importance of this meeting and
this hearing.
I would like to take this time to personally extend my
welcome to one of my almost-constituents, Mrs. Phyllis
Schlafly. While she technically lives in Missouri, she rose to
prominence as a leader of the conservative movement in south
western Illinois. Phyllis, welcome to the hearing.
I apologize for missing the majority of the hearing, as I
am scheduled to work on the House floor as Chairman of the
Committee as a Whole, and with that, Mr. Chairman, I yield back
the balance of my time.
Mr. Tauzin. I thank the gentleman.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Cliff Stearns, a Representative in Congress
from the State of Florida
Mr. Chairman: This hearing on electronic database collection brings
us across the threshold of the undefined legal area of the Internet.
As all of us who use the Internet on a daily basis knows, the
remarkable growth of the Internet has largely been based on the lack of
legal encumbrances and the lack of multi-layered tax structures.
The Internet is the democratic dream of pursuing and making use of
information as the individual sees fit. But the question needs to be
asked: What propriety interests do web sites and database collectors
have from having the brunt of their offering to the public copied?
What are public facts that are free to retrieve and what does
creative originality really mean in the world of the Internet?
The Committee staff has given us a news story detailing the use of
the New York Times bestseller list by Amazon.com and the resulting
litigation from its use. I hope the witnesses address the case and give
us their view on whether the bestseller list is a propriety property or
whether it is a public fact.
I know I have seen other newspapers in the country use the New York
Times bestseller list. Have they done so on their own or have they
engaged in a contractual relationship with the Times to do so? If
Amazon.com or other web sites are prevented from using the list, do
they have the legal protections to copy the Times list and use it on
their own site and list it as a ``Famous Newspaper Bestseller List.''
Where is the law in this regard or where should it be through new
legislation?
I appreciate the work of Chairman Bliley in introducing a
constructive bill that attempts to seek the middle ground in this area
of database collection.
______
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress
from the State of Wyoming
Thank you, Mr. Chairman, for holding this legislative hearing on
H.R. 1858, the Consumer and Investor Access to Information Act of 1999.
This is a very timely hearing as the Subcommittee continues to
wrangle with issues related to the Internet and the information age in
general.
It is also timely in the fact that we have all heard so much lately
about the dispute between the New York Times and Amazon.com.
Because of the fact that this industry evolves at the speeds in
which it transfers information, it is extremely important that the
Subcommittee consider legislation that moves and adapts just as
quickly.
It is certainly my belief, and has long been the philosophy of many
of the members of the Subcommittee, that regulating the Internet and
the information gathered and disseminated on the Internet will only
harm this vibrant medium.
Where would Amazon.com, Yahoo!, Netscape, and other online
companies be if the sharing of information and data was stifled or
limited in any way?
H.R. 1858, I believe, walks that fine line in addressing what is
currently at issue, the misappropriation and piracy of databases,
without delving into issues that may or may not come up in the future.
To continue to keep information databases robust and allow
investors to feel reasonably secure that databases are protected,
Chairman Bliley's bill provides a distinction between the facts and
information that reside in the public forum and how that information
should or should not be shared and/or protected.
Ideally, it should be the marketplace--not government regulation or
legislation--that governs the information industry.
Absent that, H.R. 1858 is a reasonable solution to this problem.
Chairman Bliley should be commended for putting this initiative
forward.
Thank you, Mr. Chairman, I look forward to hearing from our
witnesses and yield back the balance of my time.
______
Prepared Statement of Hon. Gene Green, a Representative in Congress
from the State of Texas
Thank you Mr. Chairman for holding this hearing on database
information, the internet, and the future of electronic commerce and
access to information.
The internet is the network connection of the thousands of
different databases in our country and throughout the world. The
internet has become a part of our everyday lives. We use the internet
to accomplish everything from reading newspapers to researching
specific issues to searching for the scores of our favorite sports
teams. Everyday millions of Americans use a search engine such as,
America-On-Line or Yahoo to access the thousands of different
databases. Without any databases to provide this information the
internet would have never succeeded and we would not have the thriving
economy or the information explosion that we have today.
Accessing information on the internet is vital for our schools to
maintain the open access to educational materials and resources.
Schools spend thousands and thousands of dollars on purchasing access
licenses to these materials. If we go too far in protecting information
and databases will that hinder the access to educational materials or
the growth of the internet?
We are living in a digital age, where access to information is
vital to the continued growth of the internet. We do need to create a
balance in this area. We need to protect the work, the thousands of
hours it takes to compile and input information that companies have put
into developing these databases, while fostering the competition and
access necessary to keep the internet growing.
Again thank you Mr. Chairman for holding this hearing.
______
Prepared Statement of Hon. Thomas C. Sawyer, a Representative in
Congress from the State of Ohio
Mr. Chairman, I want to thank you and the Ranking Member, Mr.
Markey, for holding this legislative hearing today on H.R. 1858, the
Consumer and Investor Access to Information Act. I also want to thank
our witnesses for coming to testify on the merits of this legislation.
Intellectual property has been the driving force for innovation and
economic growth in the United States from the very beginning. In fact,
it is what has given us a basis and backbone to sustain a democracy.
Accordingly, at various points in our history, there has come a point
where there has been a pressing need to modify our national and
international intellectual property policies. We are, once again, at a
turning point in modernizing those laws for the digital era.
Contemporary technology has made it easier for copyrighted
materials to be pirated. Capturing such information and widely
distributing it without the consent of the author is illegal and should
continue to be. However, the Internet has also given us a means of
instantly tapping into information databases for a myriad of purposes--
from comparing prices of airline flights to getting the most up-to-date
information on medical treatments. In many instances, the publisher of
the database that was used as a search engine would like to have some
copyright protection for the information they collected. However, the
Supreme Court ruled earlier this decade that copyright protection does
not apply to databases that do not contain creativity or originality;
facts, ideas and discoveries are not protected. Therefore, what used to
have copyright protection because of a publisher's time and the amount
of financial investment that was put into the database no longer
applies.
Under H.R. 1858, pirating copyrighted material would still be
unlawful. The legislation would also make it illegal to duplicate an
existing database and using that information to compete against the
database's creator. I recognize the need to strike a balance with
respect to giving database publisher's protection. However, there is an
area that I think needs further clarification. If the average citizen
took a database or parts of a database from another source, newspaper
or magazine, and downloaded to their personal web page, not for
competing against the company who created the database, would that
person be in violation of the law under H.R. 1858? There seems to be
some confusion with this provision, and I think we need to clarify that
a little more for everyone.
I would also like to make a point that the opponents of this
legislation object to the provision that requires them to seek recourse
with the Federal Trade Commission if they believe their information has
been pirated or an entirely new database was not created using their
information. I hope the FTC's authority does not supersede contractual
agreements established between two parties, giving database publishers
the ability to also seek legal recourse through the courts.
Mr. Chairman these are a few points I wanted to mention. Once
again, thank you for holding this hearing this morning. As we all know
the Internet has profoundly reshaped the way we do things. As I said
before, I recognize there is a need to make modest changes to current
law to reflect the Internet's capabilities. However, it would be a
shame to regulate it to the point where basic information gathering and
competition is stifled.
Mr. Tauzin. I understand that Chancellor O'Brien is on his
way down. We will proceed with the panel.
By the way, Phyllis, we are not going to keep you to the
end, we are going to hear from you in the middle. We are
anxious to hear all of your testimony. For the record without
objection all members' written statements are made a part of
the record, and for the record all witnesses' written
statements are made a part of the record without objection.
Which means that we would like you to summarize your
statements, if you can, within what we call the 5-minute rule
and that little green and red light indicates when your time is
just about up.
Please summarize within 5 minutes the very key points of
your testimony in as conversational tone as you can so we can
engage you in the dialog. We will begin by recognizing a
frequent visitor to our subcommittee, Mr. Andrew Pincus,
general counsel of the Department of Commerce.
STATEMENT OF ANDREW J. PINCUS, GENERAL COUNSEL, DEPARTMENT OF
COMMERCE
Mr. Pincus. Thank you, Mr. Chairman. It is an honor to
appear before the subcommittee on this very important issue
related to our digital economy.
In the last Congress it was an honor under Secretary
Daley's leadership to work with you on the WIPO implementation
bill, and we think that bill was a tremendous achievement in
leading the world on the appropriate way, as Mr. Markey said,
to balance these two difficult interests; and we look forward
to working with Chairman Bliley and the members of the
subcommittee on this issue as it moves forward in this
Congress.
The issue of database protection is a matter of great
interest to a large number of Federal agencies for a variety of
reasons. The government collects, manages, and disseminates
massive amounts of information, perhaps more than any in the
world. We fund research that produces information, and in our
knowledge-based economy, information is key.
We, of course, want to do everything we can to continue our
remarkable economic growth; and we, therefore, want to maximize
incentives for data collection to expand the available universe
of information without putting in place any unjustifiable
obstacles to competition, innovation, or use of that
information.
And, of course, we want to be sure that any law enacted
complies with the Constitution. We have spent a great deal of
time developing an administration position that takes account
of these very perspectives, and I would like to summarize it.
It is set forth at length in my written statement.
We agree with Chairman Bliley and the other members of the
subcommittee that spoke that there is a gap in the law that
should be filled by new legislation. We support the enactment
of a statute to protect database creators against free-riding,
the wrongful taking and distribution of database material with
resulting infliction of commercial harm on the database
creator.
Digital technology permits the creation and distribution of
a large number of perfect copies of data files at the touch of
a button and therefore expands dramatically the risk that, in
the absence of adequate legal remedies, piracy, or the threat
of piracy, will deter investment in database creation.
Of course, we believe it is very important to craft this
legal protection carefully to optimize the benefits and to
minimize disruption of research activities, competition, and
innovation that is essential for our economy to continue to
grow. I know that the members of the subcommittee are sensitive
to those concerns, and H.R. 1858 clearly works at balancing
those competing concerns. We set out in the written testimony a
number of comments with respect to the specifics of the
legislation. Maybe I can highlight a few.
First is the question of how to enforce this new legal
right. We believe that a private right of action is necessary.
As in other areas where the question is how to provide a legal
environment that will provide an incentive for investment and
deter piracy, there is a need for certainty of enforcement; and
we are very concerned that the Federal Trade Commission will
not have the resources, given its other responsibilities, to
provide a level of enforcement that will be necessary to deter
the bad actors that are out there.
Second is the question of a term of protection. We believe
that, as in other areas of--where there is some intellectual
property like protection, there should be a protection for a
limited term of years; and we have said that we think 15 years
is really the outside limit.
Third, the question of protection of government data. We
agree with the basic premise of H.R. 1858 that government data
should not be protected, that if the public pays for it,
sponsors its collection, it should not have to pay for it
twice.
We think that H.R. 1858, perhaps, could be expanded to deal
with the question of government-financed collection of data
where there is a government--is not actually doing it itself,
and that is perhaps another area that we could work with you
on.
Finally, the question of fair use. We want to be sure that
whatever protections are ultimately put in law are tempered by
fair use protection that is at least as broad as the fair use
protection that is available under the copyright laws, and that
is an issue that we would like to work with you on.
To summarize, this is a complicated area. We would very
much like to work with the subcommittee as the legislative
process moves forward. We agree on the basic principles, but
there are some details that we would like to work with you on
further.
[The prepared statement of Andrew J. Pincus follows:]
Prepared Statement of Andrew J. Pincus, General Counsel, Department of
Commerce
Mr. Chairman and Members of the Committee: Thank you for this
opportunity to present the Administration's views on H.R. 1858, the
``Consumer and Investor Access to Information Act of 1999.''
i. introduction
As we have stated in the past, the Administration views database
protection legislation from a number of perspectives: as a creator of
data and a user of it; as an advocate both of economic incentives for
socially useful investment and of open, market-based competition free
from artificial barriers; and as an entity committed both to effective
law enforcement and to the First Amendment. Reconciling these
perspectives is difficult in any context. The digital economy's rapid
and unpredictable change makes this challenge even greater.
The Administration believes strongly in free markets, in which
firms can meet demand for new products and services without having to
overcome artificial barriers that keep consumers hostage to an
undesirable status quo. However, we also recognize that there are
circumstances in which markets need legal mechanisms in order to
function efficiently. The Feist decision 1 conclusively
eliminated one form of legal protection for databases. Undeniably,
Feist has altered the landscape, but the topography is still changing
in ways that pull in different directions as to the nature and extent
of protection that is needed.
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\1\ Feist Publications v. Rural Telephone Service Corp., 499 U.S.
340 (1991).
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In particular, the emerging digital environment has significant
implications for this issue. It has become commonplace to observe that
information is the currency of our economic age. That puts a premium on
designing a legal schema that creates sufficient incentives to maximize
investment in data collection--to expand the available universe of
information--without putting in place unjustified obstacles to
competition and innovation. Moreover, digital technology permits the
creation and distribution of a large number of perfect copies of data
files at the touch of a button. Those data files may constitute all, or
significant portions of, commercial databases. This new technology
expands the risk that, in the absence of adequate legal remedies,
piracy, or the threat of piracy, will deter investment in database
creation. For all of these reasons, it is important to calibrate new
private rights carefully--to optimize overall economic and social
benefits, to prevent unfairly undermining investments and agreements
premised on the current law, and to preclude new opportunities for
thwarting competition.
The U.S. Government has an unique stake in database legislation
because it collects, manages, and disseminates massive amounts of
information, possibly more information than any other entity in the
world. In all these processes, it interacts with the private sector in
a variety of ways. In addition, Federal agencies are engaged in funding
research that produces tremendous amounts of information that the
government does not undertake to manage itself.
These activities represent enormous investments in highly complex
knowledge management processes that are vital to human health, the
environment, national security, scientific progress, and technological
innovation--and, in turn, to the economy as a whole. Changes in ground
rules for the use and reuse of information must be designed to minimize
disruption of these critical activities and to avoid imposition of new
costs that could hinder research.
The sections which follow discuss the Administration's efforts to
study database protection and access issues (Part II) and summarize the
six principles that we believe should guide both domestic legislative
and international treaty efforts in this area (Part III). Next, we
elaborate on each principle, discussing the Administration's concerns
relating to that topic and particular provisions of H.R. 1858, as well
as some additional concerns with aspects of the bill. (Part IV).
The Administration congratulates Chairman Bliley and the other
members of the Committee involved in drafting H.R. 1858 for their
thoughtful efforts to draft a simple bill that is targeted on the
dangers of unchecked piracy. At the same time, the Administration has
had only a very limited amount of time to consider the provisions of
H.R. 1858. For that reason, the comments provided below are not as
extensive as other Administration analyses of database protection
issues or legislative proposals, such as H.R. 354. The Administration's
work on database protection has been an intensive, interagency effort
(as described in Part II below), and we have not yet been able to bring
all these resources to bear in our analysis of H.R. 1858. For that
reason, we hope that we may provide you, at a later date, with any
further comments that you may desire on this legislation.
ii. history of administration study of database issues
In response to legislative proposals in the Congress and
developments in the World Intellectual Property Organization (WIPO),
the Administration devoted substantial energy in 1998 and 1999 to
studying database protection and access issues. The Administration's
review of these issues has included a variety of mechanisms and fora:
The Patent and Trademark Office (PTO) held a public conference
on database protection and access issues on April 28, 1998.
During the spring and summer of 1998, a variety of Executive
Branch departments and agencies participated in an informal
working group on database issues led by the State Department,
the Office of Science and Technology Policy (OSTP), and the
PTO.
In January 1999, the National Research Council (NRC) held a
two-day conference on scientific databases at the Department of
Commerce. This conference was supported by the National Science
Foundation, the National Institutes of Health, and several
other agencies. 2 The NRC is expected to issue a
report this summer.
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\2\ Including the National Oceanic and Atmospheric Administration
(NOAA), the National Institute of Standards and Technology (NIST), the
U.S. Geological Survey, the Department of Energy, and the PTO.
---------------------------------------------------------------------------
Various officials in the Executive Office of the President
(including OSTP), the Department of Commerce (including PTO),
and the Justice Department have held informational meetings
with both proponents and opponents of database protection
legislation.
In addition to these efforts, the Administration has carefully
studied a wide range of reports, studies, legal opinions and
legislation on database protection and access from the United States,
Canada, Japan, and the European Union, as well as participating in
discussions of database protection issues at WIPO conferences in 1996,
1997, and 1998.
The Administration continues to discuss these issues with concerned
parties and to examine specific topics and areas where we believe
further information will help both the legislative process and any
future study of the effects of database protection that might be
mandated by legislation.
iii. general principles
On August 4, 1998, in response to Senate consideration of then-H.R.
2652, the Administration set out the principles that it believes should
govern database protection legislation.
Now, as then, Administration supports legal protection against
commercial misappropriation of collections of information. We believe
that there should be effective legal remedies against ``free-riders''
who take databases gathered by others at considerable expense and
reintroduce them into commerce as their own. This situation has arisen
in recent case law, and we believe that digital technology increases
opportunities for such abuses.
At the same time, the Administration has significant concerns with
provisions of H.R. 1858, both on policy grounds and because the
Constitution imposes significant constraints upon Congress's power to
enact legislation of this sort. From a policy perspective, the
Administration believes that legislation addressing collections of
information should be crafted with the following principles in mind:
1. A change in the law is desirable to protect commercial database
developers from commercial misappropriation of their database
products where other legal protections and remedies are
inadequate.
2. Because any database misappropriation regime will have effects on
electronic commerce, any such law should be predictable,
simple, minimal, transparent, and based on rough consensus in
keeping with the principles expressed in the ``Framework for
Global Electronic Commerce.'' 3 Definitions and
standards of behavior should be reasonably clear to data
producers and users prior to the development of a substantial
body of case law.
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\3\ A Framework for Global Electronic Commerce is available at:
http://www.ecommerce.gov/framewrk.htm.
---------------------------------------------------------------------------
3. Consistent with Administration policies expressed in relevant Office
of Management and Budget circulars and Federal regulations,
databases generated with Government funding generally should
not be placed under exclusive control, de jure or de facto, of
private parties.
4. Any database misappropriation regime must carefully define and
describe the protected interests and prohibited activities, so
as to avoid unintended consequences; legislation should not
affect established contractual relationships and should apply
only prospectively and with reasonable notice.
5. Any database misappropriation regime should provide exceptions
analogous to ``fair use'' principles of copyright law; in
particular, any effects on non-commercial research should be de
minimis.
6. Consistent with the goals of the World Trade Organization (WTO) and
U.S. trade policy, legislation should aim to ensure that U.S.
companies enjoy available protection for their database
products in other countries on the same terms as enjoyed by
nationals of those countries.
We believe that these principles also embody some of the
Constitutional concerns with legislation in this area. With these
principles in mind, we turn to an analysis of H.R. 1858.
iv. discussion
A. First Principle-- Protect against commercial misappropriation
A change in the law is desirable to protect commercial database
developers from commercial misappropriation of their database
products where other legal protections and remedies are inadequate.
As we have stated previously, the Administration supports enactment
of a statute to protect database creators against free-riding--the
wrongful appropriation and distribution of database material with
resulting infliction of commercial harm (loss of customers) on the
database creator. We believe that there is considerable, if not
complete, consensus that this kind of free-riding can occur without
additional legal protection for non-copyrightable databases and that
such legal protection is necessary to prevent a diminution in database
creation.4
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\4\ See, e.g., National Research Council, Bits of Power (1997) at
135; U.S. Patent and Trademark Office, Report on and Recommendations
from April 1998 Conference on Database Protection (1998) at 4-7; Letter
from Federal Trade Commission Chairman Robert Pitofsky to Congressman
Tom Bliley, September 28, 1998 at 6-7. See also Institute of
Intellectual Property, Tokyo, Japan, Database Protection on the
Borderline of Copyright Law and Industrial Property Law 5 (1998); Wendy
Gordon, Asymmetrical Market Failure and Prisoner's Dilemma in
Intellectual Property, 17 U. Dayton L. Rev. 853, 863-865 (1992)
(describing conditions when additional protection is needed); Dan L.
Burke, The Market for Digital Piracy, in Brian Kahin and Charles
Nesson, eds., Borders in Cyberspace (1997), 205 (describing databases
on the Internet as classic ``public good'' problem that may require
special law); J.H. Reichman and Pamela Samuelson, Intellectual Property
Rights in Data?, 50 Vanderbilt L. Rev. 51, 55 (1997) (critical of EU
Database Directive and H.R. 3531 of the 104th Congress, but recognizing
that risks of market failure may keep data production at ``suboptimal
levels''); M. Powell, The European Union's Database Directive: An
International Antidote to the Side Effects of Feist? 20 Fordham
International L. J. 1215, 1250 (1997).
---------------------------------------------------------------------------
Section 102 is the operative core of H.R. 1858 for databases
outside the securities markets; it provides the ``basic prohibition''
of this proposal to protect databases through a misappropriation
model.5 Section 102 prohibits unauthorized selling or
distribution of a ``database'' that is a ``duplicate'' of a prior
database ``collected and organized by another person'' where the new
database is sold or distributed ``in competition'' with the original
database. Section 101 provides definitions of these key concepts.
---------------------------------------------------------------------------
\5\ There has been much discussion among commentators about the
differences between a sui generis form of protection as was proposed in
H.R. 3531 in the 104th Congress and the ``misappropriation'' approach
proposed in H.R. 1858 (as well as H.R. 354). The Administration
believes that the misappropriation theory provides an appropriate model
for database protection in American law. The United States has
substantial case law on the misappropriation of information as a form
of unfair competition which should help courts interpret any database
protection law built on a misappropriation model. Placing database
protection in the framework of unfair competition will also allow
courts and commentators to draw appropriately from the rich body of
cases in trademark law and unfair business practices.
The Administration believes that any treaty on database protection
that emerges from ongoing discussions at the World Intellectual
Property Organization should permit each treaty signatory to provide
any mandated database property protection through the legal mechanism
most appropriate to its domestic law, whether through misappropriation,
sui generis protection, or a simple extension of their domestic
copyright and neighboring rights laws. The critical issue is not the
legal framework used, but whether the law provides private citizens
with comparable rights to protect their investments in different
jurisdictions.
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The drafters of H.R. 1858 have understood that the problem of
misappropriation includes the distribution of significant parts of
databases as well as entire databases. To address this problem, section
101(1) provides that a discrete section of a database ``may be treated
as a database.'' We recognize that the intent of this ``discrete
section'' provision is to protect identifiable subsections of databases
from wholesale misappropriations, but we very are concerned that this
definition could create liability for insubstantial distributions from
databases, particularly in the digital environment.
For example, the book edition of a national database of hotels
might subdivide hotels by state and city; in such a situation, we
understand that the intent of section 101(1) would be to create
liability when a competitor misappropriated all of the Sacramento,
California or Cincinnati, Ohio listings from the national database,
even though this might only be a small part of the national database.
But in a digitized form, the same national hotel database can have
discrete sections organized by state, by city, by neighborhood, by
quality rating, by hotel ownership or chain participation, by price, by
the availability of particular services (conference rooms of such a
size, gym facilities), etc.--so that many, if not most, distributions
of material from the database could trigger the ``discrete section''
provision.
Indeed, the coverage provided by section 101(1) appears likely to
be more subject to technological vicissitudes and manipulation by
private parties than a ``substantial'' taking measure, i.e., defining a
``database'' as a complete database and providing that a
``substantial'' distribution of material appropriated from it could
trigger liability. A substantial appropriation requirement has the
virtue of allowing courts to apply reasonable, evolving standards
against possible manipulation by private parties. Defining a database
to include a discrete subset of the database invites database producers
to format their products so as to make small amounts of the data appear
as ``discrete,'' therefore liability-triggering, subsets. We therefore
recommend against this approach.
By requiring ``extraction'' from a pre-existing database, the
definition of ``duplicate'' in section 101(2) seems intended to ensure
that the basic prohibition of section 102 would not create liability
for a database that was independently developed, but was nonetheless a
``duplicate'' (in the everyday meaning) of the pre-existing database.
We are not sure, however, that the definition achieves this purpose.
Imagine, for example, that a database was 98% independently gathered
material, but the remaining 2% came from ``extracting information from
[a pre-existing] database.'' It could be argued that the new database
``was made by extracting information from [the] other database.''
Because H.R. 1858 does not provide any express exception for
verification, it could also be said that a new database product ``was
made by extracting information from [another] database'' when, in fact,
all the new database producer did was to check the accuracy of its
independently collected work against the pre-existing database.
Of course, the scope of the basic prohibition of section 102
depends greatly on the interpretation given to ``in competition.''
Section 102(5) provides a bifurcated test for when a new database is in
competition with a pre-existing database. The first element requires
that the new database ``displaces substantial sales or licenses of the
database of which it is a duplicate.'' Our initial impression is that
this is similar to the standard we have advocated in relation to H.R.
354--that is, other conditions being met, there would be liability when
the new database causes ``substantial harm'' to the pre-existing
database's market.6 This approach also is consistent with
the standard under many states' general misappropriation laws.
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\6\ See Statement of Andrew J. Pincus before the Subcommittee on
Courts and Intellectual Property, Committee on the Judiciary, U.S.
House of Representatives, March 18, 1999, at 5. [hereinafter
Administration Statement on H.R. 354]
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The second element of the bifurcated test for ``in competition''
requires that the new database ``significantly threaten[s] the
opportunity to recover a return on investment'' in the pre-existing
database. We are concerned that this standard is too vague. Would a
significant threat to any return on investment be sufficient for
purposes of the test, or is this intended to be a reasonable return on
investment? Our concern with this element of the ``in competition''
test is the same as we have expressed elsewhere concerning the
``diminution of incentive'' test inspired by the National Basketball
Association v. Motorola case.7 While we agree that a
misappropriation law should be focused on acts that do, in fact, have a
tendency to reduce incentives in this manner, we think these types of
tests do not comport with our principle (described below) that a
database protection law should be predictable, simple, and transparent.
Because a competitor cannot be expected to know much about the
incentive structures that lead to the production of the first database,
such a competitor would have no way to judge in advance whether or not
her acts would ``threaten'' recovery of ``a return on investment,''
particularly where the statute does not say what kind of return on
investment.
---------------------------------------------------------------------------
\7\ 105 F.3d 841, 852 (2d Cir. 1997). For the Administration's
discussion of this issue, see Administration Statement on H.R. 354 at
5.
---------------------------------------------------------------------------
In addition, this test is problematic because it does not take
account of the cumulative effects of repeated acts of blatant piracy.
Suppose several different persons duplicated all or a substantial
portion of the database, but the effect of each duplication fell just
short of ``significantly threatening to the opportunity to recover a
return on the investment'' under the test. Cumulatively, however, these
acts would indisputably deny a return on an investment. Our fear is
that this standard, in comparison with a substantial harm approach,
will not provide appropriate incentives for people to invest in the
creation of databases. For these reasons, we believe that some
variation of a harm test can achieve the necessary purposes and be both
easier for private parties to understand and for courts to apply.
Finally, we have previously testified before the House Committee on
the Judiciary's Subcommittee on Courts and Intellectual Property that
while the Administration continues to believe that misappropriation for
commercial purposes should be the focus of any legislative efforts, we
recognize that some acts of duplication by individuals, when
systematic, could conceivably undermine the commercial market for a
database product. We are not familiar with any reported cases or
incidents of this kind, but we recognize that such harm could occur.
Such damage may occur when those acts become customary in a particular
economic sector or field of research. At present, if there is no
contract with the individual or her organization, the investor in a
database has no effective civil remedy against such acts.8
We believe that one of the greatest challenges in drafting database
protection legislation is providing database producers with some type
of protection against such patterns of repeated individual acts of
duplication without prohibiting uses of data by individuals that, in
the opinion of many, should be treated as ``fair uses'' permissible
under the First Amendment. We are not certain whether a balance can be
struck, but we note that section 102 does not address this problem. We
look forward to working with the Subcommittee and all concerned parties
on this problem as the legislation moves forward.
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\8\ 18 U.S.C. Sec. 1030 would appear to create some criminal
liability for database misappropriation by individuals in the on-line
environment. Subsection 1030(a) (2) (C) creates criminal liability when
a person ``intentionally accesses a computer . . . and thereby obtains
. . . information from a protected computer if the conduct involved an
interstate or foreign communication,'' while section 1030(a)(4) creates
criminal liability when a person ``knowingly and with intent to
defraud, accesses a protected computer without authorization . . . and
by means of such conduct . . . obtains anything of value'' in excess of
$5,000. We assume that the server holding a commercial database would
fall within the definition of a ``protected computer'' because it would
be ``a computer . . . which is used in interstate or foreign commerce
or communication [1030(e) (2)(B)]. Subsection 1030(g) also creates
civil liability where there has been a ``violation'' of the section.
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B. Second Principle--Keep it simple, transparent, and based on
consensus
Because any database misappropriation regime will have effects on
electronic commerce, any such law should be predictable, simple,
minimal, transparent, and based on rough consensus in keeping with
the principles expressed in the Framework for Global Electronic
Commerce. Definitions and standards of behavior should be
reasonably clear to data producers and users prior to the
development of a substantial body of case law.
The preceding section identified at least one of the ways in which
Title I of H.R. 1858 does not fulfill the Administration's goal of a
database protection law which is predictable and transparent. We also
believe that there are some additional aspects of H.R. 1858 which may
unnecessarily complicate the bill. For example, we are concerned that
some aspects of the definition of a ``database'' may complicate
application of the section 102, generating uncertainty and, possibly,
unnecessary litigation. The section 101(3) definition of
``information'' expressly excludes ``works of authorship,'' making
databases composed of such works ineligible for section 102 protection.
It is unclear whether the phrase ``works of authorship'' is intended to
apply only to original works of authorship under 17 USC 102 or if it is
intended to encompass non-copyrightable works which, nonetheless,
appear to be text written by identifiable authors (that is, ``non-
original'' works). For example, would real estate listings which may
lack sufficient creativity for copyright be ineligible for database
protection? Unless this is clarified, the express exclusion of ``works
of authorship'' may cause unnecessary litigation in defining protected
databases.
In the same vein, section 104(c)(2) would exclude from protection
any database integrated into a software program where the database is
``an element necessary to the operation of the computer program.'' We
appreciate the effort in section 104(c)(2) to distinguish data entries
from instructional software code, but a database embedded in software
will often be ``an element necessary to the operation'' of the software
in the sense that the software will stop running if the data entries
are not available as inputs to the software code; that the database is
``necessary'' to the operation of the software does not mean that it
should lose the possibility of being covered by a database protection
law.
Of considerable concern are the enforcement provisions for Title I.
While most, if not all other proposals for database protection, provide
for a private cause of action, only the Federal Trade Commission (FTC)
would be empowered to enforce the prohibition created in Title I of
H.R. 1858. On policy grounds, the Administration is very concerned
about both the lack of a private cause of action and the placement of
enforcement responsibilities with a single government entity. While
vesting exclusive jurisdiction in the FTC may reduce the risk of
abusive litigation, we believe that this is better addressed by
establishing suitable thresholds for private causes of action.
Placing enforcement of the law solely in the hands of a government
agency distinguishes H.R. 1858 from a wide range of laws which provide
for both a private cause of action and government enforcement (such as
antitrust law, computer crimes and eavesdropping). In short, Congress
has generally considered it wise to permit private parties to enforce
laws bearing on commerce. A database protection law will stimulate
database production only to the degree that it is perceived as having
meaningful enforcement. A database producer cannot be sure that a newly
charged government agency will protect its products from
misappropriation in the same way that the producer could plan to make
provisions to willingly defend its own investment.
Inasmuch as subsection 105(b) expressly preempts state laws
inconsistent with the bill's provisions, H.R. 1858 appears to eliminate
private causes of action that now exist under many state laws. This
replacement of private causes of action with exclusive government
enforcement could be considered a step backward by many. Even if the
enforcing government agencies had sufficient resources and expertise,
this development would not be in keeping with the Administration's
commitment to market mechanisms to develop the information economy. As
a general approach, we believe that is better for the government to
establish ground rules for interaction among private parties and then
allow enforcement of those rules by the private parties concerned.
C. Third Principle-- Preserve access to government data
Consistent with Administration policies expressed in relevant Office
of Management and Budget circulars and Federal regulations,
databases generated with Government funding generally should not be
placed under exclusive control, de jure or de facto, of private
parties.
Section 101(6) defines a ``government database'' as a database
``collected or maintained'' by any agency or instrumentality or the
United States or any database required to be collected or maintained by
Federal statute or regulation. Section 104(a)(1) then provides that the
basic prohibition does not extend to these databases. Section 104(a)(3)
further provides that where a Federal, state, or local government
substantially funds the creation or maintenance of a database, that
government may ``establish[] by law or contract'' that the resulting
database will not enjoy protection under the bill's basic prohibition.
As we have consistently stated, the Administration believes that a
database protection law generally should not protect government
investment in generating data. There are three reasons for this
conclusion. First, database protection proposals are premised on the
need to provide an incentive for investment in data gathering; in the
case of wholly government-funded information, no incentive is needed.
If a government decides that it is in the public interest to collect
information on smog levels, education scores, or solar flare activity,
it will do so. Second, there is a widespread sentiment that once data
generation has been paid for with government funds, taxpayers should
not have to pay ``twice'' for the same data. Finally, the U.S.
Government has historically pursued policies that strongly favor public
funding of the creation and collection of information. The
Administration believes that these policies have contributed greatly to
the success of America's high technology and information industries as
well as the strength of our democratic society. The Administration has
stated previously:
``Government information is a valuable national resource. It
provides the public with knowledge of the government, society,
and economy--past, present, and future. It is a means to ensure
the accountability of government, to manage the government's
operations, to maintain the healthy performance of the economy,
and is itself a commodity in the marketplace.'' 9
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\9\ Office of Management and Budget Circular A-130 Revised [Section
7.b, ``Basic Considerations and Assumptions''], available at: http://
www.whitehouse.gov/WH/EOP/OMB/ html/circular.html
---------------------------------------------------------------------------
The Administration believes that the free flow of government-generated
data is an important engine of economic growth; it will be an
increasingly important resource for any society intent on creating
jobs, businesses, and wealth in the ``Information Age.'' Often,
government-generated information is also critical to the health and
safety of the population; we must ensure that any database protection
law does not hamper the dissemination of such information.10
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\10\ The U.S. Government's position on the importance of the free
exchange of such data has been stated often, including in the ``Bromley
Statement'' on climate change information. See Data Management Global
Change Research Policy Statement, Office of Science and Technology
Policy, The White House, July 2, 1991.
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For these reasons, we believe that the definition of a ``government
database'' should be broadened to encompass all databases created on
behalf of the government or with substantial government funding --from
any level of government, not just Federal. The definition should be
broadened to encompass all government-generated information, whether
created as the result of direct government activity or as a result of a
government contract or grant. This matter should not be left to local,
state, and Federal agencies to decide.
Instead of drawing a distinction between information directly
generated by the government and information substantially funded by the
government, we believe that the focus should be on the funding source.
Information generated with public finances should be treated the same
regardless of the vehicle used to generate the information. We
recognize, however, that many valuable cooperative efforts involve
funding for a variety of sources and in these cases, it may be
desirable to give some recognition to the non-government
contributions.11 In exploring the need for such
flexibility,12 the Subcommittee should consider whether the
presumption should be reversed: instead of permitting agencies to
expressly ``opt-out'' of database protection in government contracts
and grants (section 104(a)(3)), it would be better to create a system
that allowed agency-by-agency express determinations ``opt-in'' in
favor of database protection for information generated with substantial
government funding.13
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\11\ One example is government agencies that offer their unique
capabilities to the private sector on a reimbursable basis. At the
Department of Energy, for example, these transactions can be
Cooperative Research And Development Agreements (CRADAs) which are
``100% funds-in'' agreements or ``Work for Others'' agreements or User
Faculty agreements: that is, the private entity provides 100% of the
operating funds for the research which is conducted at a government
laboratory. We believe that these privately funded research projects
could reasonably give rise to collections of information protectable
under a database protection law because in judging the equities of the
relative contributions to the final database product, there is little
or no government investment. Failure to provide protection in such
cases would discourage businesses from entering into these agreements.
This would sharply curtail the ability of the government to enhance the
competitiveness of the private sector.
\12\ The pending NRC Study may provide Congress and the
Administration with additional information on this issue.
\13\ This is in keeping with our recommendations in relation to
parallel provisions in H.R. 354. See Administration Statement on H.R.
354 at 8-9.
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In the other direction, our initial conclusion is that section 104
does not provide the best solution to the problem of ``capture.''
Section 104(2) implicitly indicates that government information
integrated into a private database continues to retain its exclusion
from section 102, such that third parties can copy the government
information without any risk of liability to the private database
producer. The Administration recognizes that this is one possible
approach to the specter of government information being ``captured'' in
private database products, but we believe that this approach may
substantially reduce the incentive for the creation of value-added
products using government-generated information and, thus, the ``flow''
of government information to the public.
Federal, state, and local governments generate tremendous amounts
of information. Historically, these same government agencies have not
done a commensurate job disseminating the information to the public.
Dissemination of government-generated data has always involved a mix of
public and private resources. Through the Congressionally mandated
Federal Depository Library Program, the Federal Government uses public
libraries, libraries of public universities, and libraries of private
institutions to make government-funded information widely available to
citizens. At the same time, in hundreds of cases ranging from the court
system to the U.S. Geological Survey, private entities gather raw,
government-generated data and then process, verify, and repackage the
data to produce value-added products which are then widely
disseminated.
Once there are such commercial products, any decisions to devote
public resources to disseminate the raw government data further must be
weighed against other demands for government resources.14 If
government-generated data does not remain available to the public from
government sources, there is the potential for capture of data, with
one or a few private entities becoming the ``sole source'' for
important data.
---------------------------------------------------------------------------
\14\ This same balance was expressed by Weiss and Backlund as
follows: ``On the one hand, this means that the Government should not
try to duplicate value-added information products produced by the
private sector. On the other hand, it means that the government should
actively disseminate its information--particularly the raw content from
which value-added products are created--at cost and not attempt to
exert copyright-like controls or restrictions.'' Peter N. Weiss and
Peter Backlund, International Information Policy in Conflict: Open and
Unrestricted Access versus Government Commercialization, in Brian Kahin
and Charles Nesson, eds., Borders in Cyberspace (1997), 300, 303.
---------------------------------------------------------------------------
When a U.S. Government work is integrated into a private, value-
added product, copyright law requires that the U.S. Government portion
remain unprotected and available for copying.15 The
Administration has considered whether a parallel solution to the
``capture'' problem with collections of information would be
appropriate: requiring private entities to identify government
information in their value-added products, and excluding such
information from any database protection schema. The problem with this
approach is that a private entity may make a considerable investment in
gathering government data from disparate sources, bringing it together,
and distributing it. This ``value-added'' would be lost--and the
incentive for it destroyed--if all the data could be freely
appropriated on the grounds that it is government-generated data in a
private database.
---------------------------------------------------------------------------
\15\ A disclaimer capturing the spirit of this requirement is that
found in the U.S. Industry and Trade Outlook (1998) published by
McGraw-Hill in cooperation with the Department of Commerce. The
disclaimer states: ``Portions of this publication contain work prepared
by officers and the employees of the United States Government as part
of such person's official duties. No copyright is claimed as to any
chapter or section whose designated author is an employee of the United
States Government, except that copyright is claimed as to tables,
graphs, maps or charts in any chapters or sections of this publication
if the sole designated source is other than the United States
Government.''
---------------------------------------------------------------------------
While the Administration is committed to finding ways to increase
public dissemination of government information and to avoid ``capture''
of data, we must recognize that these private entities perform a
valuable service, and may invest substantial resources, in the
production of data products. For this reason, the Administration has
advocated that private database producers provide clear notice of the
source of government data--so that users or would-be competitors may
turn to the original government source--in exchange for the right to
prevent wholesale misappropriation of government information embedded
in the private database.16 Given the realities of
dissemination of government information, we believe that this is a
better means to transition into wider dissemination of government data
by the government than the approach embodied in section 104.
---------------------------------------------------------------------------
\16\ We have suggested that, as a condition for any database
protection, a private database producer whose database includes a
substantial amount of government-generated data should be required to
note that fact with reasonably sufficient details about the government
source of the data. By this, we mean, for example, ``This database was
compiled with substantial amounts of data from the National Weather
Service, National Oceanic and Atmospheric Administration, Department of
Commerce, Washington, D.C.'' but not ``This database was compiled with
information from the Department of Defense.'' In other words, the
disclosure should reasonably direct the user to the government source.
Defendants could be given an express defense where the database
producer has included substantial amounts of government-generated
information and failed to make such a disclosure. See Administration
Statement on H.R. 354 at 10-11.
Such disclosures might also give government agencies a stronger
incentive to maintain the raw data and keep it available to citizens,
thus eliminating at least some sole source situations. Generally, we
are hopeful that the digital environment and the Internet will, over
time, make it possible for government agencies to provide more
government-generated information at less cost through public channels.
See id.
---------------------------------------------------------------------------
Section 101(6)(B) provides that databases collected or maintained
because of Federal statute or regulation would be excluded from section
102's protection. Perhaps the most powerful argument for excluding
``legally required databases'' from any database protection regime is
that the production of these databases requires no further incentive.
There is, however, an important distinction between legally required
databases that must be submitted to public authorities and those whose
preparation are legally required, but held privately by individuals and
institutions. The Administration has not reached any conclusion on
whether either kind of databases collected or maintained by requirement
of law should be excluded from any database protection regime
D. Fourth Principle-- Avoid unintended consequences
Any database misappropriation regime must carefully define and
describe the protected interests and prohibited activities, so as
to avoid unintended consequences; legislation should not affect
established contractual relationships and should apply only
prospectively and with reasonable notice.
Until the introduction of H.R. 1858, advocates of database
protection had proposed database protection terms of up to 25 years.
Given the speed at which new products are introduced in information
industries, critics have expressed the view that the 15-year or 25-year
terms in other database protection proposals were unnecessarily long.
The Administration currently believes that there is no single, optimal
term of protection for the wide range of products subject to protection
as ``databases'' or ``collections of information.'' 17 In
order to implement the suggestion, it will be necessary to specify the
acts that initiate the term of protection.
---------------------------------------------------------------------------
\17\ This is similar to economists' efforts to establish the
optimal term of protection for copyrighted works where, for example,
copyrighted software has a much shorter product cycle than copyrighted
books and films which retain significant commercial value for decades.
---------------------------------------------------------------------------
In the absence of strong indicators of the optimal term for an ex
ante incentive structure, the Administration has expressed the view
that there are virtues to a 15-year term of protection, as proposed in
H.R. 354, and that the Administration would be troubled by any efforts
to establish a term of protection exceeding 15 years. We do not support
the basic premise of H.R. 1858--that a codification of misappropriation
principles should provide an open-ended term of protection because
common law misappropriation principles do not impose any fixed duration
to such claims. We also believe that legislation must specify the acts
that initiate the term of protection.18 The codification of
these principles presents Congress with the opportunity and, in some
sense, the responsibility to draw limits on when misappropriation
claims should be entertained. Because any database protection law will
have some impact on the dissemination of information, we think that
time limits should be established, and we favor a term of protection no
longer than 15 years.
---------------------------------------------------------------------------
\18\ For the Administration's discussion of this issue, see
Administration Statement on H.R. 354 at 25-27.
---------------------------------------------------------------------------
Of course, there is a risk that attempts might be made to
circumvent the limitations caused by fixed term of protection. Because
users would be unable to differentiate between protected and
unprotected data, they would consequently be chilled in their use of
the unprotected data. We have suggested in the past that where the
database that is the subject of a litigation is the descendant of a now
unprotected database and has substantial elements in common with that
unprotected database, the defendant should be able to raise, as a
defense, that the most recent unprotected iteration of the database is
not reasonably publicly available. In other words, if Smith Industries
has been issuing the ``Smith Industrial Database'' annually since 1980,
and then in 1999 if Smith Industries sues someone for unauthorized
distribution of the ``1999 Smith Industrial Database,'' the defendant
can raise as a defense that the 1983 Smith Industrial Database is no
longer reasonably publicly available. If the 1983 database is
reasonably publicly available, there is no such defense.
E. Fifth Principle--Balance protection with permitted uses
Any database misappropriation regime should provide exceptions
analogous to fair use principles of copyright law; in particular,
any effects on non-commercial research should be de minimis.
Last summer, we expressed concern that then-H.R. 2652 lacked a
balancing mechanism analogous to the fair use doctrine in copyright
sufficient to address the wide range of circumstances in which
information is aggregated, used, and reused; we expressed the same
concern more recently in relation to H.R. 354. So it will come as no
surprise that the Administration is concerned that Title I of H.R. 1858
does not have a general ``permitted uses'' provision analogous to fair
use in copyright law.
Section 103(d) provides an exception directed at scientific,
educational, and research uses. We intend to examine this provision
more carefully, but initially we are concerned that this exception is
both ambiguous and overbroad. We note that section 103(d) shields the
activity of ``duplicat[ing] the same information''; it does not shield
distribution--the focus of the basic prohibition. As used in section
103(d), ``duplicates'' could be understood in either of two senses.
First, a scientific researcher could ``duplicate'' a database in the
sense of independently recreating the same database--but this type of
activity already falls outside the basic prohibition and is further
shielded by section 103(a). Second, ``duplicates'' could mean
reproduces, as when an educator leaves a hard-bound database on a
reserve shelf with instructions for his students to individually
photocopy the database for use in class.
It appears that this latter type of activity could be shielded by
section 103(d) because while the activity might be ``in competition''
with the database's sales (section 101(5)), section 103(d) requires a
higher barrier that it be in ``direct commercial competition.'' In the
circumstance described, the educator might be able to orchestrate a
pattern of extensive copying of a database and avoid all liability. The
phrase ``direct commercial competition'' creates a high barrier, such
that even if section 103(d) shielded ``duplicates and/or distributes,''
it appears that an educator e-mailing a database to 100 of his students
would still incur no liability--because her activities would not be in
direct commercial competition. We note that this type of conduct could
occur even without section 103(d) on the grounds that the basic
prohibition requires distribution ``to the public,'' an ambiguous
phrase that could be argued to exclude a distribution limited to
students in a particular class, members of a particular learned
society, or all members of senior executives of a corporation. In
respect to original works of authorship, these types of activities are
often well beyond the scope of the fair use doctrine of copyright law.
As discussed above, we believe that one of the greatest challenges in
drafting database protection legislation is providing database
producers with some type of protection against such patterns of
repeated individual acts of duplication without prohibiting uses of
data by individuals that should be permissible under the First
Amendment.
F. Sixth Principle--Ensure protection for U.S. companies abroad and
promote harmonization
Consistent with the goals of the World Trade Organization (WTO) and
U.S. trade policy, legislation should aim to ensure that U.S.
companies enjoy available protection for their database products in
other countries on the same terms as enjoyed by nationals of those
countries.
There has been some discussion in the United States about the
effects of the European Union's 1996 Database Directive (EU Directive)
on American database producers. The EU Directive requires European
Union Member States to provide sui generis protection for databases,
but denies this protection to nationals of any foreign country unless
that country offers ``comparable protection to databases produced'' by
EU nationals.19
---------------------------------------------------------------------------
\19\ This is established in Recital 56 of the EU Directive. Recital
56 also provides that a foreign national will enjoy database protection
when those ``persons have their habitual residence in the territory of
the Community.'' This may provide protection to American database
producers who have substantial business operations in EU Member States.
Pursuant to Article 11/3 of the EU Directive, a determination whether a
foreign state offers ``comparable'' protection must be made by the
European Council based on recommendations from the European Commission.
---------------------------------------------------------------------------
The Administration opposes such ``reciprocity'' requirements, both
domestically and internationally. We believe that commercial laws
(including intellectual property and unfair business practices laws)
should be administered on national treatment terms, that is, a
country's domestic laws should treat a foreign national like one of the
country's citizens. This principle is embodied in Article 3 of the
Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS Agreement) as well as more generally in the Paris Convention for
the Protection of Industrial Property and the Berne Convention for the
Protection of Literary and Artistic Works.
The Administration believes that Congress should craft U.S.
database protection legislation to meet the needs of the American
economy. A database protection law properly balanced for the robust
digital economy of the United States will serve as a model for other
countries that hope to build businesses, employment, and economic
activity in the new millennium.
At the same time, we believe that a misappropriation law along the
lines of H.R. 1858 or H.R. 354 (with proper attention to the concerns
we have identified with respect to each bill) will amply provide
protection ``comparable'' to that provided by national laws
implementing the EU Directive. From the perspective of a private
database producer, the question should be whether a U.S.
misappropriation law provides a cause of action and meaningful remedies
in the same range of situations in which the laws implementing the EU
Directive provide a cause of action and meaningful
remedies.20
---------------------------------------------------------------------------
\20\ The EU Directive is not a national law. It ``directs'' the
Member States of the EU to implement a legal framework. H.R. 1858 would
have to be compared, for example, to German, Dutch, and/or Italian law
to make the proper comparison of national law to national law. Such a
comparison is well beyond the scope of this statement.
---------------------------------------------------------------------------
For the reasons stated above, the Administration would oppose any
effort to put automatic reciprocity provisions into American law in
this area. In fact, United States Trade Representative Charlene
Barshefsky cited the reciprocity provision of the EU Directive as a
subject of concern in announcing the Administration's 1998 Special 301
Review. While we believe that a United States database protection law
should adhere to a national treatment model, the Administration would
support an appropriately crafted provision that would allow the
President to affirmatively deny database protection to foreign
nationals on the appropriate finding by Executive Branch agencies such
as the USTR and/or the Department of Commerce. This could, for example,
be achieved by statutory language or legislative history making
database protection for foreign nationals subject to USTR's Special 301
process.
G. Additional Issues
1. Administration Study
Section 108 of H.R. 1858 provides that the FTC will report to the
Congress on the effects of the database protection legislation not
later than 36 months of the date of enactment of the legislation. While
the Administration has advocated and continues to advocate the study of
the effects of any database protection legislation, we believe that an
interagency process would be preferable to analysis resting solely in
the hands of an agency, particularly the agency being called upon to
enforce the legislation. The Administrations believes that such a
government study should be conducted with the participation of the
Department of Commerce, the Office of Science and Technology Policy,
and the Department of Justice in consultation with the Register of
Copyrights. These agencies have, over the past few years, devoted the
most resources to the study of this issue and their expertise should be
utilized.
2. The Misuse Doctrine
The Administration supports the idea that the intellectual property
misuse doctrine should be extended to any database protection law, but
we have not had sufficient time to study the effects of the various
provisions of section 106(b). We note that these provisions appear to
expand the misuse doctrine from its traditional tests (for example,
subsections 106(b)(1), (3) and (6)) into relatively untested areas (for
example, subsection 106(b)(4)). We believe this requires careful
consideration.
I thank the Subcommittee for the opportunity to appear before you
today and look forward to working with you during the legislative
process. I would be pleased to answer any questions you may have at
this time.
Mr. Tauzin. Thank you.
Next is Edward Black, president and CEO of the Computer &
Communications Industry Association.
STATEMENT OF EDWARD J. BLACK, PRESIDENT AND CEO, COMPUTER &
COMMUNICATIONS INDUSTRY ASSOCIATION
Mr. Black. Mr. Chairman, Mr. Markey, members of the
subcommittee, thank you for having this hearing. I want to
express our support and gratitude to Chairman Bliley for
introducing H.R. 1858, the Consumer Investor Access to
Information Act, and to the core cosponsors, Chairman Tauzin,
Mr. Oxley, Dingell, Markey, and Towns.
We have now entered the information age. The issue before
us requires striking the proper balance between legislating to
halt the misappropriation or theft of databases and overly
broad legislative proposals that stifle creativity in commerce.
It is critical that Congress address the single issue that
it must confront, misappropriation, and not attempt to create a
broad regime of statutory protections that may well create more
harm than good. We should not expand or anticipate what is at
issue and open up this new electronic world to additional
regulation, uncertainty, and litigation.
Databases are compilations of facts, data and information.
Facts are always considered to be in the public domain. It is
this basic notion that allows two distinct authors to create
two databases out of the same set of facts.
The issue before the 106th Congress is the piracy, or the
misappropriation, of the databases. Databases and legislation
that address misappropriation, theft, or piracy are matters to
be addressed under the commerce clause.
Databases are items of commerce. The same facts used to
create one database may well be used to create others which
address the same subject matter, or they can be used to create
new databases that are different from the first. These other
databases can offer additional values or benefits to the
market, and can often transform the facts in such a way not
contemplated by the original creator.
The basic problem with an antipiracy solution based in
copyright law is that it necessarily grants the first organizer
a significant marketplace advantage. Copyright-like protection
would give the first organizer the right to control competition
and other transformative value added or downstream uses of the
information collected, as well as any worthwhile fraction of
the collection.
This may be particularly unwise in the information age. The
Internet makes it easier for the average person to seek and use
information from any subject or discipline. This is a great
development. Searching for and using information will become
even easier in the future so long as we do not do harm to the
exploding medium of the Internet.
Any legislation that restricts or constricts the Internet's
great benefit and its growth and utility must meet, we think, a
heavy burden of necessity; and further, it should not run afoul
of the law of unintended consequences. The Web is an evolving
medium, and its growth can best be assured with as little
government regulation as possible.
CCIA and its members have strongly resisted unnecessary
government regulation of the Internet. As a general rule, we
believe that the Internet will work best through self-
regulation and agreements reached voluntarily among those that
build and use it. Although people who create a work used by
others understandably want to benefit financially and recoup
their investment, we cannot support proposals that would confer
huge market control to one party simply because it was the
first to publish.
The bill before you today adequately addresses the problem
without conferring control of facts and information to an
individual which should properly reside in the public forum. It
does not restrict use of data compiled in database form from
being used in a second database. It avoids establishing a new
regime of onerous Federal regulation.
With the adoption of the first amendment over 200 years
ago, we have operated as a Nation that values the free flow of
facts and information. Now with the Internet just a few years
old, with information more available than ever, we should
promote in every way possible, not restrict, the flow of facts
and data in the information age. Mr. Chairman, thank you again
for the opportunity to testify today.
[The prepared statement of Edward J. Black follows:]
Prepared Statement of Edward J. Black, President and Chief Executive
Officer, Computer & Communications Industry Association
Chairman Tauzin, Ranking Democrat Markey, and members of the
Subcommittee, I am Ed Black, President of the Computer and
Communications Industry Association. CCIA is made up of small, medium
and large companies that market and sell computer equipment, software,
communications and network equipment, telecommunications and on-line
services, re-sellers, system integrators and others in related business
ventures. Our member companies employ well over half-million workers
and generate annual revenues in excess of $300 billion. Established
over 25 years ago, we are committed to ``Open Markets, Open Systems,
Open Networks and Full, Fair and Open Competition.'' Thank you for
inviting me to testify today and more importantly thank you for holding
this hearing on the critical issue of database protection.
Let me begin by expressing our support and gratitude to Chairman
Bliley for introducing H.R. 1858, the Consumer and Investor Access to
Information Act of 1999 and to his original cosponsors, Chairmen
Tauzin, Oxley and Ranking Democrats Dingell, Markey and Towns as well
as all of the other members of the House who have expressed support for
this legislation.
We have now entered the ``Information Age'' and we are faced with
the issue of striking the proper balance between legislating to halt
the misappropriation or theft of databases and overly broad legislative
proposals that stifle creativity and commerce. The fact is that we do
not adequately know what impact legislation on database development,
enacted today will have in the future. Therefore, it is critical that
Congress address the single issue that it must confront--
misappropriation--and not attempt to create a broad regime of statutory
protections that may well create more harm than good. If there is a
single guiding principle I could pass to you--the members of the
Commerce Committee--it is that any legislation on this subject should
address the discreet issue in controversy, address thoroughly, but we
should not expand or anticipate what is at issue and open up this new
electronic world to additional regulation, uncertainty and litigation.
Please keep in mind that databases are compilations of facts and
information. The ability of databases to find a place or niche in our
economy is based on the method of organization and the demand for the
underlying information. The bill you are currently considering and
other legislative proposals are attempts to strike the proper balance
between pirating another's work and promoting competition.
commerce clause v. copyright:
To the extent the issue before the 106th Congress is piracy or the
misappropriation of databases, this is not a matter to be solved in
Copyright Law. It seems clear that the ability to obtain a copyright
for a database is controlled by the Feist decision.1 In that
decision, the Supreme Court held that the Copyright Clause 2
of the Constitution protects only original works of authorship and does
not allow for protection of factual information or data. In determining
originality the Court required that (1) the author originally created
the work and (2) that it contain a minimal degree of
creativity.3 While it is important to remember that this is
the state of current copyright law today, as it applies to databases,
it does not mean that databases cannot obtain copyright protections.
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\1\ Feist Publications v. Rural Telephone Service Co., 499 U.S. 340
(1985)
\2\ U.S. Const. art. I, Sec.8, cl. 8.
\3\ Feist, 499 U.S. at 345.
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Yet while copyright protects the originality or expressive element
of databases, it does not protect the underlying facts used to create
the database. Facts are always considered to be in the public domain.
It is this basic notion which allows two distinct authors to create two
databases out of the same set of facts. This does not permit the second
author to copy the first's compilation and sell it in commerce. It also
does not allow the original author to lock-up the underlying facts used
in his/her compilation so that no other compilation could be created
and compete for acceptance in commerce.
It is for this very reason that we should recognize that databases
and legislation that addresses misappropriation, theft or piracy are
matters to be addressed under the Commerce Clause. Databases are items
of commerce and the same facts used to create one database may well be
used to create additional ones addressing the same subject matter.
However, it may be just as likely that these same facts would be used
to create new databases that are different from the first, that offer
additional values or benefits in a market or that transform the facts
in such a way not contemplated by the original creator. The ability to
take the same facts and make a new ``product'' is basic to the creation
and flow of commerce. To the extent that legislation is needed, it must
allow for two similar databases to compete as well as to take the
underlying information or facts and create new databases the
marketplace to determine the ``winner.''
The basic problem with an anti-piracy solution based in copyright
law is that it necessarily grants the first author a significant
marketplace advantage. Any other party seeking to offer a competing
database in commerce would almost certainly have to obtain a license
from the original author. That gives the first party the right to
control competition and other transformative, value-added or downstream
uses of the information collected as well as any worthwhile fraction of
the collection. The effects on commerce are readily apparent where one
party can pick and choose whether anyone would compete with them.
impact on the internet:
This problem is especially acute in the information age. The World
Wide Web creates and publishes information in the blink of an eye. It
takes facts, owned by the public, and places them in a variety of
files, uses, compilations or databases for presentation to the
consumer.
Some of these compilations are derivative of another's work; some
may take the same facts and develop an entirely new product. But we all
must agree that it has never been easier for the average person to seek
and use information from any subject or discipline for almost any use
than it is now. We can be assured that the search and use of
information will become even easier in the future, so long as we do not
do harm to the exploding medium of the Internet. The growth of the web,
the amount of information it has currently, how much is being added at
any given time and how that information is being used may not be
quantifiable with any degree of certainty. We do know that the web will
become an increasingly significant tool for commerce, education and
research. Hence, any legislation that restricts or constricts its
growth and utility must be placed under heavy scrutiny. Furthermore,
this same legislation should be crafted so that it addresses the
problem at hand and does not run afoul of the law of unintended
consequences. The web in an evolving medium and its growth can best be
assured with as little government regulation as possible. Given the
choice between a proposal that confers control for a period of time and
over a myriad of uses for facts and information in the public domain.
Or a proposal that simply addresses the threat of ``parasitic'' conduct
by competitors that infringes on rights that exist in contracts or
Copyright law today; we should choose the narrower approach. H.R. 1858
accords the necessary protections to ensure vigorous and robust
competition in databases, protects the creation of new compilations or
databases and appears to do little harm to the growth and promise of
the world wide web.
CCIA and its members have strongly resisted government regulation
of the Internet. As a general rule, we believe that the Internet will
work best through self-regulation and agreements reached voluntarily
among those that build and use it. However, we must address a problem
which goes to the ability of providers and users to employ the Internet
to its fullest. No one can support piracy or the gross misappropriation
of another's work. People who create a work used by others
understandably want to benefit financially and to recoup their
investment. However, we cannot support proposals that would confer time
periods and market control to a one party simply because they were the
first to publish. Chairman Bliley's bill accomplishes the three goals
of penalizing those who pirate another's work, allowing those who
create to realize a benefit from their work and avoiding control of
currently developed markets as well as those to come ``downstream.''
All of this is accomplished without the crushing burden of federal
regulation of the Internet. It preserves the promise and the potential
of the Information Age.
the extent of database protection:
As I mentioned earlier, databases are compilations of facts and
information, these underlying components are in the public domain and
are generally available for any party to employ or exploit. The use of
facts are essential to the transfer of knowledge from one to another.
Hence, a second-generation publisher has always been allowed to extract
facts from a variety of sources, including existing compilations for
the purpose of creating a new compilation. While the organization of
facts and information into databases has become a highly critical issue
because of the development of the Internet and the explosion of
information sources online, we need to understand that both the
original creator of a compilation and those who produce a compilation
later can co-exist.
Furthermore, the person who first compiled facts into a compilation
has recourse if it is determined that someone has pirated the work. The
original creator of the compilation or database has protection under
our Copyright law. Even with the Feist decision regarding ``sweat of
the brow'' copyrights, compilations that demonstrate a level of
originality are still protected. Additionally, contract law, where
licensing agreements are used to protect against further dissemination,
can protect the compilation. This is a common tool for on-line
databases.
Third, there is the tort of misappropriation, which was recently
reviewed by the U.S. Court of Appeals for the Second
Circuit.4 In this case, the National Basketball Association
(NBA) claimed that the delivery of sports scores to fans through paging
devices was a misappropriation of its rights in its basketball games.
The defendant demonstrated that it gathered information from reporters
who keyed appropriate information into personal computers. Finding no
information proprietary to the NBA was taken and the NBA was not in the
pager sports score business, the court concluded there was no harm done
to the NBA and found for the defendant. Nevertheless, the tort of
misappropriation is a viable cause of action where the facts match the
criteria as enumerated in the NBA case. Finally, on-line databases can
be protected by technological means, as you may recall the Digital
Millennium Copyright Act (DMCA) prohibits the manufacture and sale of
devices that can circumvent technological protection measures.
---------------------------------------------------------------------------
\4\ National Basketball Association v. Motorola, Inc., 105 F.3d 841
(2d.Cir. 1997).
---------------------------------------------------------------------------
Therefore, despite the Feist decision, judicial remedies exist to
protect a compiler's creative work. It is also important to recognize
that since Feist, the number of published databases continued to
increase, as did their size. In the years immediately following Feist,
the current proponents of extensive database protections did not lobby
the Congress seeking protection. The ``database'' industry is healthy
and growing.
It was only when the European Commission (EC) adopted (in 1996) a
database directive that prohibited extraction of a substantial part of
another database did certain groups and interests lobby the Congress
for legislation. The purpose of the EC directive was to foster
development of databases in Europe to compete with those developed in
the United States. While the directive caused a great deal of concern,
there have always been ways to address the problem without further
legislation. First, any U.S. publisher would have its works protected
if it located a subsidiary in Europe. Second, the appropriate forum for
seeking relief from the EU directive is before the World Trade
Organization (WTO). It should be noted that since the 1996 adoption of
the EU directive, there has been very little evidence of significant
harm to the U.S. database interests.
While there may be a suitable rationale for bolstering defenses
against the piracy of databases, there is no evidence to support
proposals that confer significant marketplace advantages to one
database publisher over another.
specifics of h.r. 1858:
As I will discuss in this section, the Bliley bill provides a clear
line between database piracy and creating a new database. In that
regard it promotes certainty, a willingness to invest and avoids
litigation in which similar fact patterns could result in dissimilar
decisions.
In Title I of the bill, a duplicate of a database is one that is
``substantially the same,'' therefore minor changes for the purpose of
avoiding the penalties of this bill will not save the creator of the
second database. The second database need not be identical to trigger
action by the Federal Trade Commission (FTC). Additionally, the bill
recognizes that within one database, other databases may well exist and
therefore, pirating only a section of a larger database is again likely
to trigger FTC action. In order for liability to attach, there must be
competition between the two databases as defined in the bill; first a
substantial displacement or loss of sales and second, a significant
threat to the creator of the first database to recover a return on the
investment made in creating the first database.
This title does not create a new private right of action; rather
actions currently permissible under contract, trademark, copyright,
state common law on misappropriation remain available to the injured
party. The bill does grant to the FTC the right to bring a cause of
action to protect against database piracy.
Title II of the bill covers the discreet issue of information
concerning the buying and selling of securities, such as real time
stock quotes. It permits market information processors to require those
who use their services to obtain permission before disseminating that
information. It also protects those who gather the same information
independently to disseminate that information without seeking
permission.
Let me touch on other beneficial aspects of the Bliley bill.
It generally prohibits online service provider liability.
Assuming the online service provider did not place the
duplicate database on its system, the OSP cannot be held liable
under H.R. 1858.
It does not create a time period of protection during which
other and different databases using the same facts and
information could not be created. This promotes continued
investment in database creation and ensures that no party has
the ability to ``lock-up'' facts and information from the
public.
The Bliley bill only protects those databases created after
enactment. It correctly recognizes that there is no need to
provide an incentive to create something that already exists.
For these reasons, we urge the Subcommittee to report H.R. 1858
favorably and in the near future.
conclusion:
Mr. Chairman, we recognize that the members of the Commerce
Committee are confronted with a difficult decision. In addition to the
inter-committee dispute over jurisdiction, you will no doubt hear from
those who feel that the Bliley bill fails to address the issue of
piracy or misappropriation of databases. The fact of the matter is that
the bill before you today adequately addresses the problem without
conferring control of facts and information to an individual when it
should properly reside in the public forum. It also avoids restricting
the use of data compiled in one fashion from being compiled and used in
another. This is an issue best left to the marketplace, allowing the
consuming public to make the final determination.
Finally, this bill does not stray so far afield that it invites
consequences not adequately thought out. While it effectively addresses
and bolsters the defenses against database piracy, it does not
seriously hamper the flow of information and facts over the Internet,
nor does it constrict the development of new databases that will become
available on-line. The greatest danger that prompted CCIA to become
involved in this dispute was the threat legislation that attempted to
do too much would endanger the growth and development of the Internet.
To the credit of Chairman Bliley and his cosponsors, H.R. 1858 strikes
an appropriate balance and therefore encourages our continued movement
into the information age with little government regulation of the
Internet.
Mr. Chairman thank you again for the opportunity to provide our
views on this legislation.
Mr. Tauzin. Thank you, very much, Mr. Black.
The Chair would now like to recognize Mr. Frank Politano,
trademark and copyright counsel for AT&T.
STATEMENT OF FRANK POLITANO, TRADEMARK AND COPYRIGHT COUNSEL,
AT&T CORPORATION
Mr. Politano. Thank you, Chairman Tauzin. I am also an
adjunct professor of law at Seton Hall University School of Law
in New Jersey, where I teach intellectual property law and I
practiced in the field of intellectual property law for 25
years. I want to thank you all for this opportunity to testify
on behalf of AT&T regarding the Consumer and Investor Access to
Information Act of 1999.
My testimony will describe AT&T's views on what we consider
very important legislation. As you probably know, AT&T is among
the world's communications leaders providing voice, data, and
video telecommunication services to large and small businesses,
consumers and government agencies.
AT&T also provides domestic, international, local, and
Internet communication transmission services and cellular
telephone and other wireless services. We also now supply cable
transmission and distribution services throughout the United
States.
AT&T has had a long heritage of applying innovation to
develop and deliver communications services reliably; and it is
this tradition of innovation that has enabled us to provide
sophisticated services around the world to stay ahead of our
competitors.
You may be wondering why we are here today to testify about
database protection. We do not market databases for commercial
use. The reality, however, is that we depend upon and use
extensively databases throughout our business, and in order to
be successful we must use that information.
As has been just testified to, mastery of information is
accelerating the development of a new digital economy. Advanced
information technologies enable AT&T to gather, analyze, and
react to market data more efficiently and furnish
telecommunication services to satisfy our customers.
I want to emphasize that at AT&T we rely heavily on
databases of factual information in virtually every aspect of
our business, and that is outlined in my written testimony. I
won't get into all of the different ways that we use databases
in my oral comments.
I also want to emphasize that our scientists at AT&T
laboratories use factual data from many sources to perform
research. Research is vital to AT&T. Many people may not
realize this, but our AT&T laboratories files one patent per
day in the U.S. Patent and Trademark Office. And after checking
with our scientists, I can tell the committee that factual
information and databases are very important to practically
everyone of those patents.
We therefore feel strongly that a new law focused on
database piracy must be very carefully crafted to address
concerns of overprotection without unreasonably restricting
innovation, and particularly the law must allow for downstream
transformative uses of information such as the ones I have
described and are in my written comments.
We believe H.R. 1858 protects that necessary balance
between preserving protection in the database community and
promoting the growth of databases and innovation generally.
By protecting only against untransformed duplication for
public commercial exploitation, this bill affords protection
for the entire database or for a discrete section of the
database, but recognizes the unquestionable need for
transformative uses.
We also think that the legislation has an important safety
valve by recognizing the concept of database misuse, and we
think that it addresses important issues which allow for
Internet communications and communications under the
telecommunications act.
We believe that the legislation is well balanced, and we
appreciate the continued leadership of Chairman Bliley on
telecommunications and technologies matters and we applaud the
introduction of this bill. We want to particularly thank
Chairman Tauzin and the members of this subcommittee for
holding this hearing, and we look forward to working with each
of you to help enact this legislation.
I offer AT&T's assistance to the committee as well as my
own and I would be glad to answer any questions you may have.
[The prepared statement of Frank Politano follows:]
Prepared Statement of Frank Politano, General Attorney and Trademark
and Copyright Counsel, AT&T
My name is Frank Politano, and I am a General Attorney and
Trademark and Copyright Counsel for AT&T. I am also an Adjunct
Professor of Law at Seton Hall University School of Law in Newark, N.J.
where I teach intellectual property law. I have practiced in the field
of intellectual property law for 25 years. Thank you for this
opportunity to testify on behalf of AT&T regarding the Consumer and
Investor Access to Information Act of 1999.
My testimony will describe AT&T's views on this very important
legislation. AT&T is among the world's communications leaders,
providing voice, data and video telecommunications services to large
and small businesses, consumers and government agencies. AT&T provides
domestic, international, local and Internet communication transmission
services, and cellular telephone and other wireless services. We also
supply cable transmission and distribution services.
AT&T has a long heritage of applying innovation to develop and
deliver communications services reliably and it is this tradition of
innovation that has enabled us to provide sophisticated services around
the world to stay ahead of our competitors. AT&T Laboratories is one of
the premiere technology research facilities in the world and out of our
laboratories come at least one new patent filing per day, helping to
keep the United States competitive and at the frontier of
telecommunications and Internet services.
You may be wondering why AT&T is here today to testify about
database protection. While we do not market databases for commercial
use, the reality today is that we all depend on the efficient use and
management of information to be successful. Mastery of information is
accelerating the development of a new, digital economy. Advanced
information technologies have enabled AT&T to gather, analyze and react
to market data more efficiently. Furnishing telecommunications services
with the speed that satisfies customers requires efficient internal
systems. At AT&T, we rely heavily on databases of factual information
in virtually every facet of our business.
AT&T uses data from many sources throughout our business
activities, including marketing and sales, credit, collections, billing
and customer service. We use geographical and statistical market
information and demographic data, and we often combine this information
with compilations of factual information about existing and new
customers that we obtain from outside suppliers such as Dun &
Bradstreet. We use large volumes of data and factual information to
develop innovative new products and services. Because no single source
can meet all of our needs for data, we routinely combine pieces of
information we receive from one source with pieces of information from
other sources, and with data contained within our own business
operations. We then create ``customized'' databases such as targeted
marketing lists containing the piece parts of other databases that meet
our specific business needs.
A key component of AT&T's overall mission is the important
contributions that are made by AT&T Laboratories. Our scientists also
use factual data from many sources for research in a variety of areas.
We therefore feel strongly that a new law focused on database
piracy must be carefully crafted to address that important concern
without unreasonably restricting innovation, and particularly which
allows for and in fact encourages downstream ``transformative'' uses of
information such as the ones I've described. The Consumer and Investor
Access to Information Act does exactly that. H.R 1858 protects the
necessary balance between preserving protection for the database
community and promoting the growth of databases and innovation
generally. By protecting only against untransformed duplication for
public commercial exploitation, this bill affords protection for an
entire database or for a discrete section of a database but recognizes
the unquestionable need for transformative uses. Thus, while the bill
would protect against the narrow perceived gap in the law relating to
systematic, unauthorized commercial copying of databases, it does not
afford protection against productive, socially useful purposes that
transform rather than supercede the original. Significantly, this bill
will not have a chilling effect on innovation and scientific
development.
H.R. 1858 also features an important ``safety valve'' by
recognizing, in Section 106(b), the concept of database misuse, and
setting forth six, non-exclusive examples a court should consider in
determining misuse.
Another important feature of H.R. 1858 is that it recognizes and
maintains the many other forms of database protection that currently
exist while protecting against clearly defined direct misappropriation.
H.R. 1858 also contains three important provisions that are
particularly vital to the development of a robust, competitive digital
economy.
The first is the very important provision that addresses databases
related to Internet communications. The Internet is in fact a network
of databases, and information is made accessible through tables of
routers and a standardized system of IP addressing that enables the
Internet to work. If the original compilers of those ``databases''
exerted monopoly control over, or prohibited, downstream uses of the
information compiled in those databases, the future operation of the
Internet would be threatened. As an aside, we do believe that it is
important to make clear that all databases associated with the
operation of the Internet, including those related to the registration
of Internet domain names, are exempted from protection under this bill.
This important clarification will further strengthen the bill.
A second, vital provision exempts activities under the
Telecommunications Act from the scope of protection offered by the
bill. A primary purpose of the Telecommunications Act is to open the
local bottleneck to competition, and one necessary precursor to that
goal is that the incumbent local telephone companies must provide
access to its many databases of information, such as directory
assistance databases and call switching databases, to new local
carriers on nondiscriminatory terms and conditions. Conceivably, if the
original compilers of those databases (the local incumbents) were to
receive a new statutory right in those databases, it could be even
harder for new entrants such as AT&T to get reasonable access to those
systems.
Lastly, H.R. 1858 makes it clear that online service providers that
do not initially place duplicate databases in their networks will not
be liable under the statute. This provision ensures that those who are
building and managing digital networks are not deterred by the threat
of potential liability for the actions of others.
We do suggest that the legislative history make it clear that the
expression ``substantially the same'' in the definition of ``duplicate
of a database'' does not mean ``substantial similarity'' used in
copyright law as the test for copyright infringement. H.R. 1858 is
designed to protect against untransformative duplication that extracts
the bulk of facts from a database. Substantial similarity has a
different meaning: it refers to a defendant's having access to an
original work of authorship and the consequent improper appropriation
of the expressive elements of that work. The substantial similarity
test has been used to find infringement where the defendant has taken
only a few notes or a few lines of plaintiff's work--clearly not the
result intended by this legislation. This clarification should avoid
confusion and ambiguity by ensuring that a copyright law concept is not
applied to this statute, which is a law designed to protect against
unfair competition.
AT&T appreciates the continued leadership of Chairman Bliley on
telecommunications and technology matters and applauds the introduction
of H.R. 1858. We want to particularly thank Chairman Tauzin and the
Members of this Subcommittee for holding a hearing on this important
issue, and we look forward to working with each of you to help enact
this legislation. I offer AT&T's assistance to the Committee as well as
my own, and I would be glad to answer any questions you may have.
Mr. Tauzin. Thank you, very much, Mr. Politano.
I think this is the first time Yahoo! has ever appeared
before a congressional committee. Our next witness is Mr.
Matthew Rightmire, director of business development.
STATEMENT OF MATTHEW RIGHTMIRE, DIRECTOR OF BUSINESS
DEVELOPMENT, YAHOO! INC.
Mr. Rightmire. Chairman Tauzin, members of the
subcommittee, I am Matt Rightmire, director of business
development at Yahoo!. Thank you for the opportunity to appear
today on an issue that is close to our hearts but also those of
our competitors in our space, Lycos and ADVO and Excite, two
other major Internet portals are pleased to associate
themselves with this testimony.
Yahoo! is a global Internet media company that offers a
branded network of comprehensive information, communication and
shopping services to more than 60 million users worldwide each
month. As the first online navigational guide to the Web,
Yahoo! is the leading guide in terms of traffic, advertising,
household and business user reach, and is one of the most
recognized brands associated with the Internet.
The information technology economy, which has been a major
contributor to the U.S. economy recently, is based on the broad
availability and flow of information. It has developed in large
measure because of the favorable environment created by our
Nation's historical information policy--that no one may own the
facts or information.
As the Supreme Court said in Feist v. Rural Telephone
Service Company, all facts, scientific, historical,
biographical, and news of the day, are part of the public
domain available to every person.
The process of restricting the availability of information
in the information age is a cause of concern to anyone
interested in the future of the Internet. We could have the
most powerful computers, the most sophisticated search engines,
and fully operational broad band, but none of it will mean a
thing if there is not information to flow through those pipes.
Yahoo! is somewhat uniquely positioned to comment on this
issue. We have spent and continue to spend a great deal of
effort developing our own databases. At the same time, we
aggregate and disseminate large amounts of information from
other sources. In our view, legislating on the availability of
information is not unlike two porcupines making love: it has to
be done very carefully. And in both cases, there are
significant unintended consequences which have to be avoided.
We support the targeted approach of H.R. 1858 introduced by
Chairman Bliley, Tauzin, Oxley, and ranking members Dingell
Markey and Towns. It is balanced and measured, and we
appreciate the thought and effort that went into crafting this
compromise.
I mentioned the potential for unintended consequences in
legislating on this issue. Any type of information that is
currently provided on the Internet could be jeopardized by an
overly broad statute or one that does not adequately define
critical terms.
For example, as was reported in the Washington Post on June
5, the New York Times is challenging Amazon.com's use of the
Times best seller list. The best seller list is by definition a
database since it lists those books of which the most copies
have been sold.
While Amazon.com uses the list in its entirety, it is
doubtful that it is competing with the Times. It is also
doubtful that someone would not buy the Times just because the
best seller list happens to be available on Amazon.com. To the
contrary, Amazon.com's publication of the list is an effective
advertisement for the Times that probably works to its benefit.
The Internet has become known as a rich source of
information for price-conscious consumers. For example, it may
provide a service to consumers by disseminating lists of the
lowest air fares to various locations around the world. These
listings are often compiled from a variety of sources.
Notwithstanding that a handful of facts are collected from
each of several sources, and notwithstanding that the new
listing is more comprehensive than any set of facts on which it
is based, this collection of lower air fares could be
considered a misappropriation if the statutory language sweeps
too broadly. The effect of such uncertainty would be to chill
the collecting and providing of such information to consumers.
Even a reasonable-use provision comparable to fair use
under copyright law would not compensate for lack of clarity in
the definitions. It would require years of judicial
interpretation in order for those who develop transformative
uses of data to understand what we could and could not do.
The aggregating and dissemination of as many different
types of information as we can imagine would be subject to the
same chilling effect. Those who compile and analyze stock
information, restaurant and hotel rates, sports statistics,
listings of concert schedules from across the country, could be
dissuaded from continuing to provide this valuable information.
One of the wonders of the Internet is making available to
the average person a lot of information in a short time.
Parents of a 10-year-old child who has been diagnosed with a
serious disease may want to obtain as much information as
possible about the disease and quickly. If someone has
collected information from this particular disease from a
variety of sources, including a voluminous directory of all
diseases, should this constitute a misappropriation?
Should a collection of information regarding hospitals that
specialize in that disease be denied to those parents because
it involves taking important information from each of several
sources?
Mr. Chairman, this is directly antithetical to the
constitutional purpose of copyright, law which is to promote
the progress of science and useful arts.
Another strength of our medium is the development of new
enterprises, creative ideas, and fresh approaches to difficult
problems is limited only by our imagination. Do you want the
availability of facts or information on the Internet to depend
on a detailed legal review to require every Web site that
aggregates information to have its own general counsel.
As a creator of databases, we appreciate the need for
protection. One of Yahoo!'s most important assets is our
Internet directory, which has required significant resources to
assemble.
H.R. 1858 offers protection against those who would lift
someone else's database, but this is not the only protection
available. Existing copyright law gives database publishers
significant protection. In addition to copyright, database
publishers can rely on numerous other forms of protection
including trademark, trade secret, contract, State common law,
and technical protection.
One final point. H.R. 1858 has a critical provision which
protects Yahoo! and certain other search engines against
liability for linking to or listing categories of data. Absent
such a provision, Yahoo! and others could be liable simply for
acting like a card catalog of facts and information available
on the Internet.
If you have any questions that you would like to ask, I
will be available for questions.
[The prepared statement of Matthew Rightmire follows:]
Prepared Statement of Matthew Rightmire, Director of Business
Development, Yahoo! Inc.
Chairman Tauzin, Ranking Member Markey, and Members of the
Subcommittee, I am Matt Rightmire, Director of Business Development for
Yahoo! Inc. Thank you for the opportunity to appear before you today on
a subject very close to our hearts.
Yahoo! is a global Internet media company that offers a branded
network of comprehensive information, communication and shopping
services to 60 million users worldwide. As the first online
navigational guide to the Web, Yahoo! is the leading guide in terms of
traffic, advertising, household and business user reach, and is one of
the most recognized brands associated with the Internet.
The information technology economy, which has been a major
contributor to the U.S. economy, is based on the broad availability and
flow of information. It has developed in large measure because of the
favorable environment created by our nation's historical information
policy--that no one may own facts or information. As the Supreme Court
said in Feist v. Rural Telephone Service Co. ``all facts--scientific,
historical, biographical and news of the day . . . are part of the
public domain available to every person.
The prospect of restricting the availability of information in the
Information Age is a cause for concern to anyone interested in the
future of the Internet. We could have the most powerful computers, the
most sophisticated search engines, and a fully operative broadband
system, but none of it will mean much without the information to flow
over those lines.
Yahoo! is somewhat uniquely positioned to comment on this issue. We
have spent and continue to spend a great deal of effort developing our
own databases. At the same time, we aggregate and disseminate large
amounts of information. In our view, legislating on the availability of
information is not unlike two porcupines making love: it must be done
very carefully. And, in both cases, there are significant unintended
consequences which must be avoided.
We support the targeted approach in H.R. 1858 introduced by
Chairmen Bliley, Tauzin, and Oxley and Ranking Members Dingell, Markey
and Towns. It is balanced and measured and we appreciate the thought
and effort that went into crafting this compromise.
I mentioned the potential for unintended consequences in
legislating on this issue. Any type of information that is currently
provided on the Internet could be jeopardized by an overly broad
statute or one that does not adequately define critical terms.
For example, as was reported in The Washington Post on June 5,
1999, The New York Times is challenging Amazon.com's use of the Times'
bestseller list. The bestseller list is, by definition, a database
since it lists those books of which the most copies have been sold.
While Amazon.com uses the list in its entirety, it is doubtful that it
is competing with the Times. It is also doubtful that someone would not
buy the Times just because the bestseller list was published on
Amazon.com. To the contrary, Amazon's publication of the list is an
effective advertisement for the Times that probably works to its
benefit.
The Internet has become known as a rich source of information for
price conscious consumers. For example, it may provide a service to
consumers by disseminating lists of the lowest airfares to various
locations around the world. These listings are often compiled from a
variety of sources. Notwithstanding that a handful of facts are
collected from each of several sources, and notwithstanding that the
new listing is more comprehensive than any set of facts on which it is
based, this collection of low airfares could be considered a
misappropriation if the statutory language sweeps too broadly.
The effect of such uncertainty would be to chill the collecting and
providing of this information to consumers. Even a reasonable use
provision comparable to fair use under copyright law would not
compensate for lack of clarity in definitions. It would require years
of judicial interpretation in order for those who develop
transformative uses of data to understand what we could and could not
do.
The aggregation and dissemination of as many different types of
information as we can imagine would be subject to the same chilling
effect. Those who compile and analyze stock information, restaurant and
hotel rates, sports statistics, listings of concert schedules from
across the country, the cost of a wide variety of consumer items and
pertinent statistics about universities around the world could well be
dissuaded from continuing to provide this valuable information to
consumers.
One of the wonders of the Internet is making available to the
average person a lot of information in a short time. Parents of a 10
year old child who has been diagnosed with a serious disease may want
to obtain as much information as possible about the disease, and
quickly. If someone has collected information about this particular
disease from a variety of sources, including a voluminous directory of
all diseases, should this constitute a misappropriation? Should a
collection of information regarding hospitals that specialize in that
disease be denied to those parents because it involves taking important
information from each of several sources? Mr. Chairman, do we want to
require the individual creating these transformative uses to start the
research at ground zero or otherwise be relegated to a pay per fact
system? This would be directly antithetical to the Constitutional
purpose of copyright law which is ``to promote the progress of science
and useful arts.''
Another strength of our medium is that the development of new
enterprises, creative ideas, and fresh approaches to difficult problems
is limited only by our imagination. Do we want the availability of
facts or information on the Internet to depend on a detailed legal
review and to require every web site that aggregates information to
have its own general counsel?
Let me make clear that in virtually every case in which Yahoo!
places a database on the Internet, we license the information from the
originator or from one who has developed transformative uses of the
data. For example, Yahoo! gets information from Sports Ticker, which is
owned by ABC/ESPN which in turn collects the information from a variety
of sources. If legislation were to create in effect, a statutory
monopoly on facts, then these sources of information might dry up or
would only be available at monopoly prices. That could, just to pick
one example, make it impossible for Yahoo! to provide an analysis of
LSU football to those who might be interested but find themselves far
from their home state more often than they would like. As a creator of
databases, we appreciate the need for protection. One of Yahoo!'s most
important assets is our Internet directory, which has required
significant resources to assemble. H.R. 1858 offers protection against
those who would lift someone else's database. But this is not the only
protection available. Existing copyright law gives database publishers
significant protection. In addition to copyright, database publishers
can rely on numerous other forms of protection, including trademark,
trade secret, contract, state common law misappropriation, and
technological protection.
One final point. H.R. 1858 has a critical provision which protects
Yahoo! and other search engines against liability for linking to or
listing categories of data. Absent such a provision, Yahoo! and others
could be liable simply for acting like a card catalogue for facts and
information available on the Internet.
Mr. Chairman, Ranking Member Markey and Members of the
Subcommittee, this concludes my prepared testimony. I would be happy to
answer any questions that you might have.
Mr. Tauzin. Thank you.
The Chair is pleased to recognize Henry Horbaczewski, vice
president and general counsel of Reed Elsevier, Inc., located
in Massachusetts.
STATEMENT OF HENRY HORBACZEWSKI, VICE PRESIDENT AND GENERAL
COUNSEL, REED ELSEVIER INC.
Mr. Horbaczewski. Thank you for giving me this opportunity
to testify today. I am the general counsel of Reed Elsevier,
Inc. And I am testifying on behalf of the Coalition Against
Data base Piracy, an organization of many large and small
database makers to which we belong.
My company produces many databases, including Lexis/Nexis,
the Congressional Information Service, books in print and
industrial databases for the construction, manufacturing,
entertainment, oil, gas and petrochemical industries. So we
feel that we do have some experience in this field.
I first of all would like to thank the subcommittee for
recognizing the importance of protecting databases against
misappropriation. The boom in telecommunications and computers
has been largely driven by the demand for easier and faster
access to retrievable information, in other words databases;
and a law which does not protect databases or the database
creation process threatens the information economy itself.
I have submitted written testimony which outlines how
regrettably, we believe, H.R. 1858 does not protect the
database production process in some threshold ways. But I
thought in the short time available, it would be better if I
illustrated my concerns with specific examples.
For example, one of our subsidiaries, MDL, a relatively
small company which spends millions of dollars to produce
several biochemical databases that allow both commercial and
academic chemists to identify and electronically manipulate
molecular structures, MDL only has several hundred employees,
but they are quality jobs.
They have many, many Ph.D.s. Its commercial customers are
large pharmaceutical companies that use the databases for new
drug research and development. They pay license fees
established by market forces which are not insubstantial,
providing MDL with a revenue needed for investment to maintain
its databases and create new ones.
But MDL also licenses these databases to academic chemists.
The difference is that the not-for-profit users are charged a
differential fee structure, which is less than one-tenth of
what we charge our commercial customers. This greatly reduced
price is only possible because we legitimately restrict the
ability of our academic customers to use the databases for
commercial purposes.
Under H.R. 1858, we believe that this would change. Let's
assume, for example, a pirate took 50,000 of the approximately
70,000 bioactivity datasets in one of our databases and then
added several thousand databases from another source. The
resulting database would probably not be a duplicate as defined
by the bill and therefore the taking would not violate it.
In addition, we would no longer be able to give academic
institutions a reduced license fee for limited rights without
running afoul of the misuse definition in the bill. We would
have no recourse to prevent one of our giant commercial
customers from taking a single copy, even lawfully acquired,
and making it available over the Internet to hundreds of
thousands, even if its research scientists--because this would
not be a public distribution which is the only kind the bill
prohibits.
In fact, the purpose would be research and the company
could use our databases without any restrictions or payment to
us, even though the research was commercial and it was intended
to make money for the customer.
And finally, even though the piracy met the narrow
standards of the bill, MDL could not sue to obtain an
injunction to stop the bleeding, nor could it sue to get
compensation for its lost profits.
Instead it would have to depend on the FTC, which as Mr.
Pincus has pointed out, has limited resources and a different
mission to cure consumer fraud and antitrust violations, to see
whether they chose to investigate and prosecute, which I
understand is a 3 or 4 year process.
Even then, the best we could realistically expect would be
a consent decree in which the pirate promised never to do it
again, and we would receive nothing. Also it is significant
that the bill would not help U.S. database makers
internationally. We do not believe that H.R. 1858 is comparable
to the European Union directive on database protection; and,
therefore, American database producers would still be open to
illegal expropriation by their European competitors and
customers unless they are willing to locate part of their
database operations in Europe.
Now, there was a bill which would have protected U.S.
databases which passed the House largely without opposition
twice in the last Congress, and we would like to thank you, Mr.
Chairman and members of the subcommittee, for making that
possible.
We believe that that bill, while it required further
refinement to reflect users' concerns, did reflect more than 3
years of hearings and discussions and did balance users' and
producers' needs, and did substantially address administration
concerns and satisfy the European Union directive.
Also we believe it was based on sound economic principles.
We had an economic analysis conducted of last year's bill that
concluded that it not only preserved economic incentives for
database development but also guarantees access to users at
competitive prices.
While we urge the subcommittee to act quickly on this
issue, we hope that you would build on the progress that has
already been achieved. Thank you for your attention.
[The prepared statement of Henry Horbaczewski follows:]
Prepared Statement of Henry Horbaczewski, Senior Vice President and
General Counsel, Reed Elsevier, Inc., on Behalf of the Coalition
Against Database Piracy
Mr. Chairman and Members of the Subcommittee, thank you for the
opportunity to appear before you today. My name is Henry Horbaczewski,
Senior Vice President and General Counsel for Reed Elsevier Inc. I am
submitting this statement on behalf of the Coalition Against Database
Piracy (``CADP'') of which Reed Elsevier is a member. Mr. Chairman,
CADP welcomes the opportunity to share with the Subcommittee its views
on Title I of H.R. 1858, the Consumer and Investor Access to
Information Act of 1999. We will explain briefly why Title I fails both
to provide the incentive needed to encourage database producers to
create and disseminate their databases to the public and to create the
protection needed to shield database producers from piracy,
particularly in a digital world. We will also explain why Title I falls
far short of the ``comparability'' requirement in the European Union
(``EU'') Database Directive, thereby leaving U.S. database companies
vulnerable to piracy abroad and putting U.S. database producers at a
distinct competitive disadvantage to their counterparts in the EU.
CADP is an ad hoc group composed of small and large U.S. database
producers who have joined together to secure enactment of effective and
balanced federal database protection legislation. CADP's members
include the American Medical Association; The McGraw-Hill Companies;
the National Association of Securities Dealers; the Newsletter
Publishers Association; the Newspaper Association of America; the New
York Stock Exchange; Phillips Publishing International, Inc.; Reed
Elsevier Inc.; Silver Platter Information, Inc.; Skinder Strauss
Associates; the Software & Information Industry Association; the Thomas
Publishing Company; The Thomson Corporation; and Warren Publishing,
Inc.
CADP's members are an integral part of the U.S. database community.
Today, the United States is the world leader in the creation and
distribution of information databases. In fact, presently about two-
thirds of the world's databases are produced in the United States. Our
members employ or represent many thousands of editors, researchers, and
others who gather, update, verify, format, organize, index and
distribute the information contained in their vast array of database
products and services. They also invest millions of dollars annually in
the hardware and software needed to manage these large bodies of
information.
Together, CADP's members and others in the U.S. database industry
provide the world with information on everything from antidotes to
zoology and everything in between. They provide a vast array of
comprehensive data vital to the successful operation of our economy,
including information about health, communications, finance, banking,
business, news, travel and defense.
By giving consumers and professionals comprehensive, reliable, and
up-to-date tools, database creators play a crucial role in our
information-driven society. The effort they exert and the resources
they expend to collect, compile, arrange, standardize, correct, index,
update, cross-reference, and verify collections of information adds
immense value to a mass of unintelligible, disparate data typically
unusable by the public. Moreover, the investments of database producers
in creating, organizing, maintaining and disseminating their products
and services greatly reduce the time and effort consumers need to spend
to conduct important research and ensure the reliability of the facts
included. Without the hard work of database producers, vast amounts of
valuable information would be useless to many users. Despite the fact
that these individuals would have access to raw data, they could not,
or would not want to, expend the financial and human investments made
by the database compiler to assure that the database is comprehensive,
accurate, up-to-date, and convenient to use. Hundreds of thousands of
American jobs depend on a healthy, vibrant U.S. database industry.
CADP's goal is simple and straightforward: the passage of
legislation to deter piracy that causes commercial harm to database
creators, while maintaining the traditional balance between the
respective interests of the owners and users of information products.
CADP understands that the stated purpose of H.R. 1858 was to reach a
similar goal. Title I of H.R. 1858 clearly fails to do so. The so-
called ``balancing'' between database producers and database users
established by Title I is so heavily slanted toward database users,
that, if enacted, it would provide little more than a road map for
database pirates. Commercial law does not countenance thievery in other
areas, and it should not do so here.
Title I fails to provide database producers with sufficient
marketplace stability or security against piracy to encourage them to
create and disseminate their databases to the public. Consequently,
CADP cannot support Title I of this bill.
i. title i of h.r. 1858 does not provide meaningful protection to
database providers.
Regrettably, Title I of H.R. 1858 does not offer database providers
any meaningful protection to help insulate their valuable information
products from piracy--especially in a digital environment where perfect
copies of databases can be made with the click of a button and sent to
others around the world instantaneously.
CADP respectfully submits, however, that such meaningful protection
is offered by H.R. 354, the Collections of Information Antipiracy Act.
As reported by House Judiciary Committee last month, H.R. 354
represents the culmination of three years of careful consideration of
this important issue. In fact, twice in the last Congress the House of
Representatives passed by unanimous consent database protection
legislation similar to the current version of H.R. 354. H.R. 354
remains fair and balanced and is also very much a compromise measure.
Since its initial introduction in October 1997, the legislation's
standard of protection has been narrowed time and again. Most recently,
both the Courts and Intellectual Property Subcommittee and the full
Judiciary Committee adopted a series of amendments to H.R. 354 in
response to various concerns raised by the Administration and database
users. According to the Administration, the resulting bill ``now
provides protection for research, educational and other [including
commercial] purposes . . . at least equivalent to `fair use' under the
copyright law.'' 1
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\1\ Letter of Andrew J. Pincus, General Counsel, U.S. Dept. of
Commerce, to the Honorable Henry Hyde, Chairman, House Committee on the
Judiciary, May 25, 1999.
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It is our opinion that Title I of H.R. 1858 does not provide any
significant protection against database piracy. Indeed, from the
Coalition's perspective almost every section of Title I raises a
concern of either ill-advised policy judgments or unintended
consequences. For many important reasons, therefore, some of which we
will outline briefly below, CADP believes that no new legislation is
better than the enactment of Title I of H.R. 1858.
ii specific concerns about h.r. 1858
A. Private Parties Cannot Sue to Defend Their Interests
Title I denies injured database producers the ability to file
lawsuits against those who misappropriate their products. Instead, it
places their fate exclusively in the hands of a federal agency--the
Federal Trade Commission (``FTC'')--which faces myriad demands on its
limited monetary and personnel resources. By definition, the FTC's
jurisdiction is expansive to begin with: it must contend with all types
of unfair competition and deceptive business practices.2
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\2\ Federal Trade Commission Act 15 U.S.C. Sec. 45(a)(2) (1998);
cf. H.R. Rep. No. 63-1142, at 18-19 (1914) (refusing to enumerate
prohibited acts of unfair competition in the Federal Trade Commission
Act, on the grounds that ``[i]t is impossible to frame definitions
which embrace all unfair practices. There is no limit to human
inventiveness in this field . . . If Congress were to adopt the method
of definition, it would undertake an endless task.'').
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Despite the broad range of regulated activity, however, the
voluminous statutes administered by the Commission generally fall into
two broad categories. First, the Commission administers statutes which
indirectly protect consumers by ensuring that the marketplace functions
properly--such as the Sherman and Clayton Acts. In these types of
cases, Congress has justifiably declined to leave the detection of
destructive market conduct solely to an agency with limited financial
and personnel resources. The market, and ultimately the consumer, is
better served by giving parties materially harmed by this conduct a
private cause of action. By giving the FTC sole power to implement its
operative provisions, Title I adopts a ``command and control'' approach
to the regulation of the database market. Given that this Committee has
recently looked askance at bureaucratically centered market regulation,
we are surprised that it has chosen such an approach.
The second category of statutes enforced by the Commission relates
to deceptive conduct that affects consumers directly, such as truth in
labeling, odometer laws, and credit card fraud. Such laws regularly do
not provide a right of action to the individual consumer. Instead, the
Commission, after investigation, acts to protect the interests of
consumers as a group after receiving complaints about a particular
practice or company.
Here, many potentially wrongful acts which Title I tries--but
fails--to prevent fall within the first category. By protecting the
producer from piracy--which is, by definition, an anticompetitive act--
a database protection statute indirectly protects consumers by: (1)
preventing market failure caused by free-riders and (2) encouraging
dissemination of as wide a variety of databases as consumer demand will
bear. These goals are much more effectively achieved through a private
right of action, as they are in the vast majority of intellectual
property as well as antitrust laws.
Moreover, as a practical matter, official movement within the FTC
regularly commences only after lengthy industry-wide investigatory
sweeps and numerous private complaints. Indeed, it is our understanding
that it is not unusual in complex or novel situations--or in cases
involving the application of new statutory authority--for the FTC to
investigate an alleged or suspected unfair practice for a full year
prior to initiating official action before an administrative law
judge.3 Current digital technology has given users the power
to eviscerate the market for a database in a fraction of that time. In
fact, the emergence of new information technologies has made the FTC's
job particularly difficult. The agency itself has warned that ``rapid
increases in . . . Internet fraud could reduce the ability of this
agency to achieve its consumer protection goals . . . Continued growth
of the merger wave and of competitive forces for change in important in
important sectors of the economy strain the agency's ability to meet
its goal of maintaining competition.'' 4 Without the ability
to go into court for timely relief, many victims of database piracy
will be out of business long before the Commission ultimately acts. It
is therefore absolutely essential that any meaningful database
protection regime contain a private right of action.
---------------------------------------------------------------------------
\3\ See Federal Trade Commission Act 15 U.S.C. Sec. 53(b) (1998).
Under this section, the FTC may go directly to a district court and ask
for immediate injunctive relief. This usually occurs if an unfair or
deceptive practice is obvious, ongoing or egregious. In cases that
would likely arise under H.R. 1858, a thorough investigation into the
potential violation as well as detailed analysis of the meaning(s) of
new and unfamiliar statutes would give the FTC stronger footing in case
of later appeal to the Federal Courts. The FTC's findings of fact from
administrative proceedings must be affirmed by a reviewing court if
supported by substantial evidence. See id. Sec. 45(c). A reviewing
court must also give substantial deference to FTC constructions of the
Federal Trade Commission Act reached by the Commission during
administrative adjudication. See Id. Sec. 57(e)(3)(a-b). During a
Section 13(b) proceeding directly to federal court, the FTC is given no
such deference. Thus, in cases that would probably arise under H.R.
1858, the FTC would undoubtedly prefer the more thorough, and lengthy,
administrative law path.
\4\ The FTC's Strategic Plan Under the Government Performance and
Results Act: FY 1997-2002 at ``Goal 1.''
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However, even if H.R. 1858 were revised to give private parties a
right of action, the legislation would still prove an unworkable model.
Indeed, the substantive provisions of the legislation as introduced
place such a high burden of proof on the agency that it appears
virtually impossible to imagine a situation in which market-destructive
activity could be halted.5 This is true even after taking
into account expedited procedures for temporary or permanent injunctive
relief available through the FTC in egregious and patently obvious
cases of unfair practice.
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\5\ Even if an action is ultimately brought, the FTC's would likely
view its task complete, as long as the database pirate promises not to
commit these acts in the future, since the Commission's regular
enforcement strategy is to settle cases via consent order. In exchange
for no admission of past wrongdoing, the defendant agrees to a court
order directing it to cease its allegedly wrongful conduct. From the
Commission's standpoint, these agreements efficiently restore balance
to the marketplace while preserving the Agency's resources for cases in
which the defendant insistently denies liability, or in which the
statutory violations are so egregious that justice dictates that the
Commission litigate the case thoroughly. Although perhaps a sound way
to use the Commission's limited resources, it provides scant comfort to
the database producer who has seen its product pirated; the wrongdoer
keeps its ill-gotten gains, while the producer is left with no remedy.
By virtue of this provision alone, Title I provides no deterrent to
wrongful conduct.
---------------------------------------------------------------------------
B. H.R. 1858 Provides Relief Only After an Injured Database Producer
Has Posted Its ``Going Out Of Business Sign''
Title I excuses far more extensive takings--and far more extensive
replication--of a producer's database than is reasonable, and than has
been traditionally permitted under U.S. laws governing other
intellectual property laws--whether patent, trademark, misappropriation
or copyright. It allows a thief to avoid liability by the simple
contrivance of cutting and pasting material to what they have
misappropriated so that the ``new database'' is not ``substantially the
same'' as the original database. In essence, this high standard
requires the FTC to establish that the new database is entirely
identical, or virtually identical, to the existing one in order to
prevail. For example, under H.R. 1858's ``substantially the same''
standard, a pirate could copy an alphabetical directory of restaurants
created by database producer ``A'' and merge them with a separate
alphabetical directory of restaurants created by database provider
``B.'' The pirate escapes liability because, although the new database
contains A and B's products in their entirety, it is ``substantially
the same'' as neither. Thus, by permitting activity analogous to the
use of a pair of scissors and a stapler, the legislation leaves the
producer without a remedy.
In addition, Title I of H.R. 1858 condemns only activity undertaken
in ``competition'' with the injured database. To be competitive, the
pirate must displace ``substantial'' sales or licenses, and
``significantly threaten'' the opportunity to ``recover a return'' on
investment. These two standards pose unduly high hurdles for database
owners and far exceed the already heightened ``material harm'' test set
forth in H.R. 354. In fact, the ``significantly threaten'' standard is
so high it renders the general prohibition utterly meaningless. For
instance, as long as a company remains in business and the product
remains for sale or license, the ``opportunity to recover a return''
exists.6 Significant harm exists, presumably, only when the
market for the database has been totally destroyed. Moreover, the fact
that the prohibition is limited to the displacement of substantial
sales or licenses insulates from liability wholesale copying of those
databases which are neither sold nor licensed, but which generate
revenues through the sale of advertising space--a growing source of
revenue for various database producers.
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\6\ The ``return'' threshold in H.R. 1858 would be inoperative in
any practical sense, even if Congress defined ``a return'' with
specificity. Database producers offer hundreds, if not thousands, of
discrete products and services. This, in itself, presents no problem.
What makes the Section 101(5)(B) threshold inoperative is that the
myriad of database products and services are produced under conditions
of common and joint costs which, in simple economics language, means
that total costs cannot meaningfully be allocated to the production of
individual products. Computing a rate of return, any rate of return,
becomes a meaningless exercise. This is not a novel conclusion. The
economic deregulation of a host of industries over the past twenty
years is due in large part to the inability of rate-of-return
regulation to generate results consistent with an incentive-driven
economic marketplace.
---------------------------------------------------------------------------
C. Title I Exempts an Intolerably Wide Range of Both Nonprofit and
Profit-Seeking Scientific, Educational and Research Takings.
CADP recognizes that nonprofit users should have somewhat more
leeway to appropriate the contents of a protected database than do
profit-seeking ones. Under H.R. 354, for example, nonprofit scientific,
educational and research takings are generally exempt only if they do
not materially harm the primary market for a database. Moreover, both
nonprofit and profit-seeking users may be totally exempt under H.R.
354's reasonable use exception. The distinction between eleemosynary
and profit-making entities is based, in part, on the widely accepted
premise that profit-seeking entities must and should be held to a
higher standard, because securing lawful, authorized access to the
products of others is part of the cost of doing business, whether those
products are tangible or intangible (as in the case of databases).
In contrast, Title I of H.R. 1858 draws no distinction between
nonprofit and profit-seeking scientific, educational or research uses.
Neither does it acknowledge that such unauthorized takings may injure
markets, or that profit-seeking and non-profit ``scientific,
educational [and] research'' entities, including companies,
institutions and individuals, are very important markets for many
database publishers. Instead, Title I offers database producers no
protection for those markets except in those exceedingly narrow
instances where the offending activity is part of a ``consistent
pattern engaged in for the purpose of direct commercial competition . .
.''
Under Title I, both damaging single or occasional acts of piracy
are tolerated, and the impact of such activity being or becoming
widespread is wholly ignored. A single act of misappropriation that
destroys a database's market--such as an individual uploading a
database onto the World Wide Web under the guise of accomplishing some
``research'' or ``educational purpose''--would go completely
unpunished. Indeed, even if particular acts of piracy are part of a
``consistent pattern,'' they are still permitted unless undertaken
``for the purpose of direct competition.'' This further limitation
would apparently exclude unauthorized dissemination within business
entities and institutions; takings motivated by a desire to avoid
payment of fees; piracy of databases in related markets; and whatever
else may be conjured up as mere ``indirect competition.''
D. H.R. 1858 Allows Government Entities to Lock Up Information
The bill, in section 101(6), exempts only federal government
databases from protection. State and local governments may claim
protection for data under the bill. As a matter of fundamental public
policy, we believe that this is an unwarranted imposition on the flow
of government information.
E. H.R. 1858 Hurts Small Information Businesses by Allowing Corporate
Users to Pay for Only One Copy of a Database
Title I of the bill prohibits only the sale or distribution ``to
the public'' of a database that duplicates another database and is sold
or distributed in commerce in competition with that database. The
breadth of this exclusion would permit many market harmful acts,
including dissemination of databases over closed electronic networks.
In addition, unauthorized distribution within business entities,
institutions, consortia, and other presumably nonpublic environments
would likely grow. For example, a large profit-seeking corporation that
scans an entire database into its computers and makes it available over
a corporate intranet to every employee would not violate the Act's
provisions.
F. Title I's Service Provider Liability Exemption Is Overly Broad
Section 106(a) of H.R. 1858 exempts service providers from any
liability for a violation, as long as they do not initially place the
offending database on its system or network, irrespective of whether
they receive a direct financial benefit. This is a far more extensive
exclusion than the detailed, conditional limitations on certain relief
accorded to service providers under the Digital Millennium Copyright
Act (``DMCA'')--passed less than a year ago--and in our view, is
unwarranted.7 We are aware, Mr. Chairman, that the Judiciary
Committee has indicated its intent to revise the Internet service
provider provisions now contained in H.R. 354, so that they more
closely resemble those found in the DMCA.
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\7\ See Pub. L. No. 105-304, 112 Stat. 2860 Sec. 5123(a-d)(1998).
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G. Misuse Provisions Invite Government Micro-management of Legitimate
Business Practices
Section 106(b) of the legislation precludes liability if the
``person benefiting from the protection accorded a database'' misuses
the protection. As an initial matter, it is far from clear how misuse
is relevant at all, as the FTC would have sole enforcement authority.
Presumably, the Commission acts to vindicate the public interest
(rather than private benefits) in database protection, and should not
be deterred by alleged misdeeds of the victimized parties. This
section's description of the ``factors'' in a judicial ``misuse''
inquiry are little more than barely disguised attacks on--and bases for
judicial regulation and indirect but potent FTC regulation of--pricing,
contracting, technology deployment, and other entirely legitimate
business practices. The section will cause protracted proceedings over
issues generally irrelevant to the question of database piracy. Its
provisions are so broad that any attempt by a publisher to protect the
investment in its database through password access, licensing terms, or
trade secret policies could easily present a factual dispute as to
whether the provider has ``misused'' its protection.
iii. h.r. 1858 does not provide protections equivalent to those
established in the eu database directive
In March 1996, the European Union adopted a Directive on the
protection of databases, which creates a new sui generis right similar
to copyright.8 The Directive constitutes an obvious effort
by the EU countries to increase their share of the growing global
database market, primarily at the expense of U.S. database providers.
Generally, under the Directive, databases created outside the European
Union are not protected from piracy unless the countries in which these
owners reside provide a level of protection that the EU Commission
deems ``comparable.'' 9 Without comparable U.S. legislation,
U.S. databases will not be protected from piracy in Europe, thereby
placing the U.S. database industry at a significant competitive
disadvantage in the huge EU market.10 Each day that passes
without fair, balanced and comparable U.S. legislation gives the EU
database-producing industry another leg up on its U.S. competitors.
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\8\ See Directive 96//EU of the Eur. Parl. and of the Council on
Legal Protection of Databases, art. 7, Feb. 5, 1996 [hereinafter EU
Directive].
\9\ See EU Directive, supra note 5, recital 56.
\10\ It appears the only other option for non-EU database producers
seeking to protect their products in Europe is to create a substantial
presence in Europe, which can be accomplished only at the expense of
U.S. jobs and tax revenues.
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Consistent with the EU's requirements, many of the United States'
major trading partners in the EU have already implemented comparable
database protection laws. Belgium, Sweden, Austria, Denmark, Finland,
Germany, Spain, France, and Great Britain have all passed database
protection legislation.11 As time passes, however, the
vulnerability of United States databases will not be limited to the EU
alone. The U.S. may also suffer disadvantages in developing markets.
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\11\ The Commission recently began the formal procedure for
bringing legal action against the remaining six states. Those states
not currently meeting their obligations can be expected to do so in the
near future.
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Many Latin American countries, for example, have bilateral
reciprocity-based relationships with Spain, which will require the
enactment of similar statutes. In addition, Eastern European countries,
either in the interest of gaining admission to the EU, or as a result
of bilateral agreements, will probably also pass database protection
laws within the next few years. Therefore, it is imperative that the
U.S. government act without further delay to establish law in this
country that is commensurate with U.S. traditions and practices, so
that the EU Commission can view it as providing protection that is
comparable to that afforded under the EU Directive.
There can be no doubt that the protection provided under H.R. 1858
falls well short of protection comparable to that provided in the EU
directive. Even a cursory comparison of Title I and the EU Directive
reveals its shortcoming in the context of EU comparability. The most
significant areas of difference between H.R. 1858 and the EU Directive
are found in the general prohibition provision, the limitations and
exceptions to the prohibition, and the remedies and means for
enforcement. A brief comparison of these provisions will illustrate
H.R. 1858's deficiencies.
With regard to the general prohibition, the protections against
database piracy in H.R. 1858 are much narrower than those set forth in
the EU Directive. The EU Directive provides EU-based database producers
and database producers from countries with comparable laws with an
exclusive right to authorize and prevent the extraction and re-
utilization of a protected database.
H.R. 1858 provides no such rights. Whereas the EU Directive applies
to the acts of extraction and utilization, H.R. 1858 only covers the
acts of sale and distribution.12 As already noted above,
Title I's limited prohibition is narrowed further by requiring that a
database be sold or distributed to the public, so that sales and
distributions within an organization or to small groups of people would
likely fall outside the bill's provisions. The prohibitions against
sale and distribution in H.R. 1858 are further limited in that they
only apply: (1) where the two databases at issue are identical or
virtually identical; (2) the database ``displaces substantial sales or
licenses of the database''; and (3) the database ``significantly
threatens the opportunity to recover a return on the investment'' of
the database. There is little doubt that the EU Commission would never
judge these provisions of H.R. 1858 as comparable protection.
---------------------------------------------------------------------------
\12\ See Council Directive, supra note 5, art. 5.
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With regard to the exceptions and limitations, those found in H.R.
1858 vastly exceed the ones enumerated in the EU Directive. The EU
Directive provides four exceptions, namely (1) a fair-use type
exception; (2) a private purpose exception; (3) a limited exception to
the extraction right for the purpose of illustration for teaching and
scientific research; and (4) a public security and judicial procedure
exception.13 Title I of H.R. 1858 contains many more
exceptions and limitations. In addition to certain generally accepted
limitations also found in H.R. 354--such for news reporting and law
enforcement activities--the bill also includes extremely broad
exceptions for service providers and those who merely claim that their
use is for scientific, educational, or research purposes. These
extremely broad exceptions, in conjunction with the limitations
discussed in the preceding paragraph, quite clearly weaken the general
prohibition to such an extent that it cannot be considered remotely
comparable to the rights afforded under the EU Directive.
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\13\ See id. art. 6, cl. 1-2.
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Finally, the remedies and means of enforcing the prohibitions in
H.R. 1858 pale in comparison to the European standard. The EU Directive
gives database producers the right to remedial action against acts of
piracy. As discussed in detail earlier, H.R. 1858 reserves that right
solely for the FTC. Accordingly, the remedies provided for under H.R.
1858 cannot be considered to be comparable to those found in the EU
Directive.
CADP does not advocate adopting a U.S. database protection law that
mirrors the EU Directive but ignores traditionally accepted U.S.
concepts of protecting intellectual property. At the same time,
however, the U.S. database industry cannot endorse enactment of a law
whose deficiencies in regard to adequate protection at home also
increase the discrepancies between U.S. and EU law.
conclusion
As stated above, H.R. 1858 fails to provide the protections
necessary to deter piracy of existing databases and to afford U.S.
database producers adequate incentive to create new valuable databases
and make them generally available. In particular, H.R. 1858 fails to
provide any meaningful protection to database owners and fails to
establish a level of protection necessary to ensure that U.S. databases
will be protected at home and abroad.
Consumers will not have access to databases that are not produced
or offered in commerce; the best way of ensuring an abundant supply of
databases tailored to varied needs at competitive prices is to assure
that database producers enjoy the incentives to produce and maintain
afforded by a market economy. Each day that passes increases the threat
that another company will have the products its has invested so many
resources to create stolen from it. We believe that both producers and
users will benefit much more from market stability and predictability,
goals which regrettably cannot be attained under the provisions of H.R.
1858.
Thank you again for the opportunity to present the views of CADP on
this important issue. I will be happy to answer any questions.
Mr. Tauzin. The Chair is now pleased to recognize Ms.
Phyllis Schlafly. Next will be Tim Casey and then will be James
Neal, in that order. Ms. Schlafly.
STATEMENT OF PHYLLIS SCHLAFLY, PRESIDENT, EAGLE FORUM
Ms. Schlafly. Mr. Chairman and members of the subcommittee,
Eagle Forum, a nationwide organization with some 80,000
members, compiles databases and uses database information
compiled by others. Among the important current issues we are
concerned about is the defense of the rights of patients to
access and control their own medical information.
We oppose granting special interests, expansive new Federal
rights to control databases. We also oppose expansion of the
Federal criminal justice system to cover routine business
disputes. Data-like facts belong to all of us, not merely to
the government or to special interests.
We all benefit from the transformation of facts and data
into interesting or valuable forums. Whether it is a comparison
of Mark McGwire's statistics to Babe Ruth's or an analysis of
real estate or automobile sales in a community, the free
market, not the Federal Government, should be guiding the
transformation of facts into useful forms.
We support your Commerce Committee bill, H.R. 1858, because
it protects the existing rights of individuals to extract
essential data such as their medical records. We support your
bill because it does not create draconian new Federal crimes
with respect to facts or databases.
Your Commerce Committee bill is far superior to H.R. 354,
recently approved by the Intellectual Property Subcommittee.
The Commerce Committee bill protects the right of individuals
to access data such as their medical records, and it does not
limit the right of access to or the extraction of data.
State laws guaranteeing the right of individuals to access
data, such as their medical records, remain intact under your
bill. When a family switches doctors or gets a second medical
opinion, it needs to access all of its medical records
immediately and transfer them to the new doctor.
No entity should have a proprietary interest that can
exclude this legitimate access. When families switch health
plans or doctors, they should not have to duplicate medical
tests because their initial health plan refuses to release
their records.
We also need unrestricted access to information about the
side effects of prescription drugs and vaccines. We oppose the
Intellectual Property Subcommittee bill which preempts these
fundamental rights of individuals. In response to criticism,
the Intellectual Property Subcommittee recently added section
1405(h), but that language only makes the matter worse.
The Intellectual Property Subcommittee bill is fatally
defective. The Commerce Committee bill is superior to the
Intellectual Property Subcommittee bill with respect to Federal
criminal law. It is undesirable to expand Federal criminal
jurisdiction over business disputes. The free market should
function through competition, not through the Federal criminal
court system.
Businesses should not be encouraged to demand that Federal
prosecutors bring actions against their competitors. Civil
court is where business disputes belong. The Intellectual
Property Subcommittee bill creates new prison sentences of 5
and 10 years and new Federal fines of $250,000 and $500,000 for
routine business activities that are now perfectly legal.
Neither the public nor the Federal court system benefits from
the creation of vast new Federal crimes.
We support the exclusion in your bill of statutory
protection for any database that has been misused. The doctrine
of misuse is well established in copyright law and your bill
wisely incorporates this doctrine.
The Intellectual Property Subcommittee bill on the other
hand conspicuously bestows legal entitlements on those who
misuse databases. Indeed, one of its original purposes was to
overturn a 9th circuit decision that it found database misuse
by the American Medical Association.
In light of the unanimous Supreme Court decision in Feist,
originality is a constitutionally protected, mandated
prerequisite for copyright protection. New Federal protections
for databases should be addressed by the Commerce Committee,
rather than the Subcommittee on Intellectual Property.
Databases of public domain facts are not a form of
intellectual property, nor should they be. There is no
intellectual property issue at stake with respect to databases,
and the attempt by the Intellectual Property Subcommittee to
create a new right in databases is contrary to the
Constitution.
Moreover, the sine qua non of intellectual property law is
to encourage the creation of works that might not otherwise be
created. But the Intellectual Property Subcommittee bill seeks
to protect databases already in existence for which no
incentive is necessary. That violates the very purpose of
intellectual property law and amounts to a giveaway to a few
special interests.
Thank you, Mr. Chairman, for this opportunity to discuss
the advantages of your bill.
[The prepared statement of Phyllis Schlafly follows:]
Prepared Statement of Phyllis Schlafly, President, Eagle Forum
Mr. Chairman and Members of the Subcommittee. I am Phyllis
Schlafly, president of Eagle Forum. Thank you for giving me this
opportunity to testify.
Eagle Forum, a nationwide organization with some 80,000 members,
both compiles databases and uses database information compiled by
others. Among the important current issues we are concerned about is
the defense of the rights of patients to access and control their own
medical information. We oppose new federal entitlements to special
interests, such as expansive new federal rights to control databases.
We also oppose expansion of the federal criminal justice system to
include routine business disputes. Eagle Forum has published numerous
reports on these topics.
Eagle Forum supports H.R. 1858 because, while it prohibits unfair
copying of databases, it does not prohibit the extraction of
information from databases. It is increasingly important for
individuals and small businesses to be able to extract information from
databases. Individuals, for example, need to access their own medical
data in order to obtain second and third medical opinions. We also need
unrestricted access to public-domain medical information to learn about
side effects of prescription drugs and vaccines. Analysts have
estimated that almost half of all Internet users have searched for
medical information online. We oppose any database legislation that
creates new barriers to legitimate access to medical data.
Small businesses likewise need access to data simply to survive in
our information-dominated society. We do not want new legislation that
encourages the monopolization of data or makes access to data suddenly
costly or impossible. Data, like facts, belong to all of us, not merely
to the government or to special interests. We all benefit from and use
the transformation of facts and data into interesting or valuable
forms. Whether it is a comparison of Mark McGwire's home run statistics
to Babe Ruth's, or an analysis of real estate or automobile sales in a
community, the free market rather than the federal government should be
guiding the transformation of facts into useful forms. No federal
database legislation should make it more difficult for us to obtain
legitimate access to data.
We support H.R. 1858 because it protects the existing rights of
individuals to extract essential data such as their medical records. We
support H.R. 1858 because it does not create draconian new federal
crimes with respect to facts or databases. We support H.R. 1858 because
it excludes from its protection those who misuse data. We support H.R.
1858 because it treats database issues as within the jurisdiction of
the Commerce Committee rather than the Subcommittee on Courts and
Intellectual Property.
On each of these important points, H.R. 1858 is far superior to
H.R. 354, which was recently approved by the Subcommittee on Courts and
Intellectual Property.
i. individuals' right to access data
Individuals must retain their right to access data such as their
medical records. Both Republicans and Democrats support this right. For
example, one year ago Vice President Gore declared in a commencement
address at New York University that ``you should have the right to
choose whether your personal information is disclosed; you should have
the right to know how, when, and how much of that information is being
used; and you should have the right to see it yourself, to know if it's
accurate.''
H.R. 1858 protects this right of individuals to access data such as
their medical records. It only limits the competitive sale or
distribution to the public of a copy of someone else's database. H.R.
1858 does not limit the right of access to or extraction of data. State
laws guaranteeing the right of individuals to access data such as their
medical records thus remain intact under H.R. 1858.
Let's look at an example. When a family switches doctors or obtains
a second medical opinion, it needs to access all of its medical records
immediately and transfer them to the new doctor. Many state laws
protect the right of families to gain access to their medical records,
and thus guarantee that a patient always has access to his medical
records. State laws ensure that patient access to medical records is
prompt, which is particularly important when a patient is seeking a
second medical opinion.
When it comes to medical information, no entity should have a
proprietary interest that can exclude legitimate access by others. When
families switch health plans or doctors, they should not have to
duplicate medical tests because their initial health plan refuses to
release their records. Federal legislation should not preempt state
laws that guarantee to patients the right to access their own medical
records. Special interests should not obtain federal entitlements to
databases that enable them to exclude access by others.
H.R. 1858 properly avoids preemption of state laws that assure
rights of access to medical records and other information. It is far
superior to H.R. 354, which preempts these fundamental rights of
individuals. Section 1405(b) of H.R. 354 preempts existing state laws
guaranteeing access to data, and thereby allows health care providers
to deny patients access to medical records. Under the doctrine of
expressio unius est exclusio alterius, H.R. 354 preempts state laws
guaranteeing an individual's right of access to his own records. While
H.R. 354 itself does not prohibit the extraction of an ``individual
item of information,'' its preemption of the state laws deprives the
patient of his right to access his own medical information.
In response to criticism, Section 1405(h) was recently added to
H.R. 354 to state that ``[n]othing in this chapter shall be construed
to authorize any person to . . . extract personally identifying
information, including medical information.'' But this addition only
exacerbates the central defect of H.R. 354 in prohibiting legitimate
access to information. Families need access to medical information, and
H.R. 354 improperly denies them such access.
New federal legislation concerning databases must limit itself to
the issue of unfair copying, not deny existing rights to access and
extract information. H.R. 1858 incorporates the best approach, while
H.R. 354 is fatally defective.
ii. avoidance of draconian new federal crimes
H.R. 1858 is far better than H.R. 354 with respect to federal
criminal law. It is undesirable to expand federal criminal jurisdiction
over business disputes. The free market should function through
competition, not through the federal criminal court system. Businesses
should not be encouraged to demand that federal prosecutors bring
actions against competitors. Civil court is where business disputes
belong, and it is a mistake to expand federal criminal law to
commercial disagreements.
In contrast to H.R. 354, H.R. 1858 admirably refrains from
establishing draconian new federal crimes in order to protect narrow
special interests. H.R. 354 creates new prison sentences of 5 and 10
years for routine business activities that are now perfectly legal.
H.R. 354 also creates new federal fines of $250,000 and $500,000 for
such activities. Neither the public nor the federal court system
benefits from the creation of vast new federal crimes that are designed
to police activities such as the posting of public domain medical
information or baseball statistics on the Internet.
Severe new criminal penalties are particularly inappropriate when
the legislation is ambiguous. New federal crimes that are framed in
ambiguous language have the effect of chilling lawful, beneficial
activity. The central provision of H.R. 354 is filled with ambiguous
terms such as ``substantial part,'' ``material harm to the primary
market or a related market,'' and ``intended to be offered in
commerce.'' It is impossible to predict how the courts would interpret
these terms, and thus criminal penalties of up to 10 years in prison
and $500,000 fines would have an unwarranted chilling effect on many
legitimate and valuable activities. H.R. 354 even includes a provision
to permit an alleged database owner to submit a ``victim impact
statement'' about his alleged business injury from someone else's use
of facts such as medical information or baseball statistics. H.R. 354
thereby attempts to transform competition into a federal crime, and
trivializes federal criminal law in the process.
H.R. 1858 uses clearer language than H.R. 354, and omits the
draconian new criminal penalties. H.R. 1858 thereby avoids the chilling
effects of H.R. 354, and avoids expanding federal criminal law to
include ordinary business disputes.
iii. exclusion of protection for misuse of data
We support the exclusion in H.R. 1858 of statutory protection for
any database that has been misused. The doctrine of misuse is well-
established in copyright law and H.R. 1858 wisely incorporates this
doctrine into this database statute as well. The rationale is simple:
misuse of rights over a database disqualifies the perpetrator from
legal protection. Our legal system disfavors providing relief to
wrongdoers under the doctrine of unclean hands. H.R. 1858 incorporates
this principle.
H.R. 354, however, conspicuously bestows legal entitlements on
those who misuse databases. Indeed, one of the original purposes of
H.R. 354 was to overturn a Ninth Circuit decision that had found misuse
by the American Medical Association (AMA) in control of a database. In
Practice Management Info. Corp. v. AMA, 121 F.3d 516 (9th Cir. 1997),
the Ninth Circuit denied the enforceability of an AMA copyright on the
medical billing CPT coding system because the AMA had ``misused'' its
copyright. As a result, the Ninth Circuit denied enforceability by the
AMA of exclusive rights to the CPT database.
It was only two months later that the predecessor to H.R. 354 was
introduced in the House, and six months later the AMA provided the key
testimony in support of that bill. H.R. 354 bestows special federal
entitlements even on those who are found to have misused their rights.
H.R. 354 is apparently designed to benefit special interests such as
the AMA by overfunding well-reasoned appellate decisions.
iv. database is a commerce issue, not an intellectual property issue
In the unanimous Supreme Court decision of Feist Publications v.
Rural Telephone Service, 499 U.S. 340 (1991), the Court held that:
``Facts, whether alone or as part of a compilation, are not original,
and therefore may not be copyrighted . . . [O]riginality is a
constitutionally mandated prerequisite for copyright protection.''
There is widespread agreement with this ruling, and it deserves credit
in promoting the information-based economy that has benefited everyone
in recent years.
In light of this unanimous decision, new federal protections for
databases, as compilation of facts, should be addressed by this
Subcommittee rather than the Subcommittee on Courts and Intellectual
Property. Automatically generated databases of public domain facts are
not a form of intellectual property, nor should they be. Rather,
databases are compilations of data useful to individuals and businesses
in commerce.
H.R. 1858 recognizes that unfair copying of a database should be
treated as an unfair or deceptive act or practice under section 5 of
the Federal Trade Commission Act. Section 107(c) of H.R. 1858
recognizes that there is no intellectual property issue at stake with
respect to databases. The attempt by H.R. 354 to create a new sui
generis intellectual property right in databases is contrary to the
Constitution. The extent to which the Constitution allows copyrights to
cover factual compilations has already been delimited by the Feist
decision.
Moreover, the sine qua non of intellectual property law is to
encourage the creation of works that might not otherwise be created.
The Constitution expressly includes this requirement in Article I,
Section 8, clause 8: ``To promote the Progress of Science and useful
Arts by securing for limited Times to Authors and Inventors the
exclusive Right to their respective Writings and Discoveries.'' The
Supreme Court has repeatedly affirmed that the plain meaning of this
clause is ``the conviction that encouragement of individual effort by
personal gain is the best way to advance public welfare through the
talents of authors and inventors in `Science and useful Arts.' '' Mazer
v. Stein, 347 U.S. 201, 219 (1954), which was quoted with approval in
Harper & Row Publishers v. Nation Enterprises, 471 U.S. 539, 558
(1985).
But H.R. 354 seeks to protect databases already in existence, for
which no incentive is necessary. Its retroactive application violates
the very purpose of intellectual property law, and thus amounts to a
giveaway to a few special interests. H.R. 1858 properly applies only to
a database ``that was collected and organized after that date.'' Thus
H.R. 1858 does not favor existing entrenched interests, and limits its
protections to databases to which the incentive applies.
v. need for a time limitation
Finally, I suggest that H.R. 1858 be modified to include a time
limitation on the protections provided by this Act. Not even copyright
or patent rights last forever; nor should new database rights be in
perpetuity. Databases are being compiled at an unprecedented rate, and
it is far from clear that new federal protections of databases are even
economically desirable.
The markets for databases of facts and other public domain
information appear to demand timely updates to the databases, so I do
not believe that new protections for old databases will promote
commerce.
Five years of federal protection should give a more than adequate
opportunity for a compiler of data to attain a return on its
investment. Thereafter the public should not be prohibited from copying
any uncopyrighted data for lawful and beneficial purposes.
Mr. Chairman, I am grateful for this opportunity to discuss the
advantages of H.R. 1858. I appreciate the Members of this Subcommittee
in drafting this superior legislation and holding this important
hearing. We look forward to working with this Subcommittee on this
legislation.
Mr. Tauzin. I thank the gentlelady. The gentlelady was
singing our jurisdictional song.
The Chair is now pleased to recognize Mr. Tim Casey, chief
technology counsel for law and public policy at MCI WorldCom.
STATEMENT OF TIMOTHY D. CASEY, CHIEF TECHNOLOGY COUNSEL, LAW
AND PUBLIC POLICY, MCI WORLDCOM
Mr. Casey. Thank you, Mr. Chairman and Mr. Bliley and other
members of the subcommittee. Thank you for inviting MCI
WorldCom to testify on behalf of H.R. 1858. As many of you have
recognized, H.R. 1858 takes the right approach to database
protection. It prevents the thefts of databases, but also
maintains the public's access to information that promotes
progress and innovation in this age of information.
My company builds and operates communications networks so
we understand the legitimate need for protection from the theft
of certain database products; but we also know very well what
can happen when protection goes too far. That is why we like
H.R. 1858 and its measured approach.
It doesn't start with overly broad protection and then
attempt to exempt or carve out every important type of database
or use of a database that anyone can think of. There are many
databases and many uses of databases that could be considered
harmful to the economy and the American public if protected in
such a broad form.
More importantly, we don't even know what they are yet, and
we should not have to try to figure this out in advance. In
relation to other legislation, we came up with an idea based on
my mom's own interest in genealogy, and that resulted in an
exemption for genealogical information. You can come up with a
thousand other examples of information that should be exempted
from overly broad protection, but the American public should
not have to be doing that in advance of this legislation.
Sound legislation should begin with a narrow scope of
protection and build on that base only to the minimal extent
necessary. Like H.R. 1858, it lays a solid foundation upon
which a new law can rest, not an unstable base. If the
legislation is not well structured, Congress will spend many
years trying to correct what could have been done right now.
H.R. 1858 contains exclusions and exemptions related to
computer programs and the Internet because it has to.
Telecommunications and the Internet depend heavily on databases
that could otherwise be protected and therefore closed off from
free public use. A narrow approach by its very nature allows
for derivations of those databases and uses that allow for
innovation to continue.
A broad approach, by contrast, sweeps in and thereby
prevents new and innovative uses of collections of information.
Let me try to explain that within the context of the Internet.
Most users of the Internet do not fully appreciate how much the
underlying networks depend on databases. These networks will
not operate without free and open access to thousands of
databases that are necessary for everything from call routing
to operator services to accurate billing. The Internet is just
a combination of network computers and their databases, and as
such is particularly dependent upon the open sharing of
information.
Internet protocol addressing, data packet routing,
conversion tables, protocol priority listings, file format
information, and domain name registries are just a few examples
of the type of functions performed within the Internet every
minute of every day through reliance on what are presently
publicly available databases, but which may not be if the wrong
choice is made in terms of the legislative approach.
The Internet protocol upon which all Internet
communications are based makes liberal use of databases. At the
application level where many electronic commerce resources will
reside and hopefully thrive, a wide variety of additional
protocols and application types are used that require open
access to open databases.
These types of data that must be shared to ensure that
Internet users can communicate effectively are as varied as the
applications themselves. People must be free to link to sites,
to frame to sites, to collect information for their own use and
to create new products and services such as the Yahoo! example
that Chairman Tauzin used earlier.
Open access to the databases underlying the operation of
the Internet has allowed it to grow and flourish. Any threat to
the open access poses an unacceptable risk to the feature of
this new medium and all the economic and societal benefits that
is promises.
H.R. 1858 is the correct approach because it does not
require that every critically important use of the database be
called out and exempted up front. We cannot and should not be
required to bear the burden of anticipating the future. H.R.
1858 does not require us to do this to the same extent and
assures that no self-interested party will be able to hold the
Internet hostage by locking up databases which are vital to its
operation.
As a pioneering leader in the communications industries,
MCI WorldCom believes that H.R. 1858 meets the need of both the
communication industries and the database industry without
unduly upsetting hundreds of years of legal principles. H.R.
1858 will prevent the outright theft of valuable databases
while leaving in place the access to information on which our
economy and our society will increasingly depend.
Thank you, Mr. Chairman and members of the subcommittee,
for inviting me to testify. I will be happy to take questions
later.
[The prepared statement of Timothy D. Casey follows:]
Prepared Statement of Timothy D. Casey, Chief Technology Counsel, MCI
WorldCom
Chairman of the Committee, Mr. Bliley, Subcommittee Chairman, Mr.
Tauzin, and other Members of this Subcommittee, thank you for inviting
MCI WorldCom to testify on behalf of H.R. 1858, the ``Consumer and
Investor Access to Information Act of 1999.''
As you, Chairman Bliley, and the cosponsors of this bill have
clearly recognized, the approach to database protection embodied in
H.R. 1858 strikes the appropriate balance between the need to prevent
the theft of collections of information and the equally important need
to maintain public access to information to promote progress and
innovation in this Age of Information--and beyond.
Although I am in the business of building and operating
communications networks, I clearly understand that those who are
engaged in the building of databases for a living must be provided some
limited protection against the misappropriation of their investments.
In contrast to H.R. 1858's measured approach, alternative attempts
at legislation began with an overly-broad scope of protection and then
exempted, or carved out, one existing or potential use after another.
To date, numerous examples continue to arise regarding uses of data
that may be considered harmful to the economy and the American public
if protected in this broad form.
It is a precept of sound legislation to begin with a narrow scope
of protection and to build on that core protection only to the minimal
extent necessary. Doing so lays a solid foundation upon which the new
law can rest; doing otherwise, results in an unstable base which
ultimately will not support the unwieldy structure above.
Though H.R. 1858 contains a number of exemptions, they have more to
do with the need to clarify that certain types of databases must
forever remain outside the scope of protection to be afforded. The
innumerable databases upon which modern telecommunications and the
Internet depend are one such example.
The principal risk associated with a broad scope of protection is
the actual or potential outlawing of value-added uses, commonly
referred to as ``transformative'' uses, which build on existing
collections of information. A narrow approach by its very nature allows
such innovation to continue, maintaining the public benefits flowing
therefrom. A broad approach, by contrast, sweeps in--and thereby
prevents--new and innovative uses of collections of information.
Most users of the Internet and telecommunications services--and
even many of the providers of such services--do not fully appreciate
the underlying communication networks' dependency on databases. These
networks will not operate without free and open access to thousands and
thousands of databases necessary for everything from call routing to
operator services to accurate billing. The Internet--which is just a
combination of network computers and their databases--is particularly
dependent upon the open sharing of information. Internet Protocol
addressing, data packet routing, conversion (look up) tables, protocol
priority listings, file format information, and domain name registries,
are just a few examples of the types of critical functions performed
within the Internet every minute of every day through reliance on what
are presently publicly available databases.
To communicate using the Internet, a host computer (meaning any end
point computer on the Net) must implement a layered set of
communications protocols comprising the Internet Protocol suite. These
include the Application Layer; the Transport Layer; the Internet Layer;
and the Link Layer.
At the application level, where many electronic commerce resources
will reside and hopefully thrive, a wide variety of protocols and
application types are used that require access to open databases. The
types of data that must be shared to ensure that Internet users can
communicate effectively are as varied as the applications themselves.
Increasingly, protocols implemented in the Transport Layer will be
relied upon to guarantee delivery of particularly important Internet
communications. The individuals and businesses depending on electronic
commerce for the accurate, timely delivery of their communications will
also depend on unencumbered access to the databases supporting all such
services.
Further, all these layers are based on Internet Protocol (IP),
which is itself a constantly evolving standard that depends on access
to publicly available databases.
Open access to the databases underlying the operation of the
Internet has allowed it to grow and flourish. Any threat to that open
access--however remote--poses an unacceptable risk to the future of
this new medium and all of the economic and societal benefits it
promises for every American.
H.R. 1858 is the correct legislative approach because it is
impossible to determine every critically important use of a database
that should be exempt from an overly broad legislative approach.
Indeed, we cannot--and should not--be required to bear such a burden,
and any legislative approach that imposes it will do more harm than
good. H.R. 1858 assures that no self-interested party will be able to
hold the Internet or the telecommunications networks hostage by locking
up any databases which are vital to other parties' operations.
As a pioneering leader in the competitive telecommunications and
Internet industry, MCI WorldCom believes that H.R. 1858 meets the needs
of both the communications industry and the database industry without
unduly upsetting traditional principles of intellectual property law.
H.R. 1858 will prevent the outright theft of valuable databases while
leaving in place the access to information upon which our economy--and
our society--increasingly depends.
Thank you, Mr. Chairman, members of the subcommittee, for inviting
me to testify today. I would be very happy to answer any questions you
may have.
Mr. Tauzin. Thank you, very much, sir.
The Chair is now pleased to welcome Mr. James Neal, dean of
libraries, Baltimore, Maryland, Johns Hopkins University
Libraries. Next will be Mr. Henderson and then Mr. O'Brien and
finally Donald Baptiste in that order. Mr. James Neal.
STATEMENT OF JAMES G. NEAL, DEAN OF LIBRARIES, JOHNS HOPKINS
UNIVERSITY LIBRARIES, MILTON S. EISENHOWER LIBRARY
Mr. Neal. Thank you, Mr. Chairman. I am testifying on
behalf of the Nation's major library association which
represents 80,000 librarians and libraries in every community
throughout North America. Thank you for this opportunity to
appear before the subcommittee on H.R. 1858.
We very much appreciate the leadership role that you,
members of the subcommittee, and the Full Committee on Commerce
have taken on issues relating to access to information in the
digital environment. The preservation and continuation of
balanced rights and privileges in the electronic environment
are essential to the free flow of information and to the
success of our library and education systems. As we construct
legislation for the volatile digital environment, we must
remember that there are only a few inches between a halo and a
noose.
H.R. 1858 strikes a balance between the interests of
selected database producers, while ensuring that legitimate and
appropriate access to factual information continues. Data and
information are the foundation of research, scientific, and
technology programs. And these facts are essential to how
members of our public use information in their daily lives.
To keep this balance, all sectors, public and private, must
rethink and reconfigure services and business models to meet
the challenges of a network environment. Last year this
subcommittee recognized that modified copyright and
intellectual property regimes would be a key component in how
these differing sectors adapt to the digital environment.
This is critically important that all proposals be
considered in light of the need for this balance and fairness
to all communities. The library community understands that
unauthorized digital copying can lead to piracy. We have
invested significant amounts in educational campaigns within
our communities and institutions, and we have purchased
technology to ensure that adequate safeguards are in place.
Libraries in the U.S. last year spent well over $2 billion
purchasing and licensing information. For example, the library
acquisitions budget this year at Hopkins is approximately $8
million, and we are spending over $1 million to online
resources, and this resource is growing.
My testimony brings your attention to three key aspects of
H.R. 1858. First, the need to preserve the fair use of
information and to keep factual information in the public
domain.
Second, the need to promote the progress of science,
education, and research. And third, the need to provide
safeguards against monopolistic pricing. For over 200 years the
information policy of this country has protected creativity,
not factual information. This policy has served us extremely
well and has allowed libraries and educational institutions and
the constituencies they serve to flourish.
Access to information data are the building blocks of
knowledge and are essential to the advancement of knowledge in
countless fields. Our democracy is based on the premise that
access to information, government information in particular,
not only leads to a more informed citizenry but strengthens our
Nation.
My second point. The success of our Nation's education and
research systems is dependent upon the ability of educators and
researchers to access data and information for multiple
purposes. Scientific and research progress depends upon the
ability to use public domain information, combine public and
proprietary data to create new databases, and reuse existing
data. Researchers typically create new knowledge by building
upon the works of others.
The provisions in H.R. 1858 appropriately encourage
scientific, educational, and research endeavors while at the
same time providing protection to the producers of databases
from commercial free-riding of their products and services. As
this debate continues, it is crucially important to understand
how our communities use information and engage in research
activities because these activities are not exercises in
commercial free-riding, but instead legitimate and legal
practice.
My third and final point. An increasing number of
databases, including those developed with Federal funding, are
only available from a single producer. Accessing these
resources can prove very problematic for members of the
research and education communities. With only one point of
access to a sole source database, the library has little
recourse in accessing that resource.
The publisher or producer of the database is not obligated
to permit transformative uses nor is there any leverage in
negotiating the license to moderate cost or permit downstream
activities. Provisions in H.R. 1858 provide reasonable terms
and conditions for the user community, and at the same time
give the producer economic benefits.
The library community is keenly aware of the problems
associated with the lack of competition, for example in the
journal area where we continue to experience skyrocketing
costs. Some context may be helpful. Between 1986 and 1996, the
consumer price index increased 44 percent. The price of health
care increased 84 percent. The cost of scholarly journals
increased 148 percent, more than three times the rate of
inflation and nearly twice the rate of growth in health care
costs, and the price to subscriptions to online databases grew
even more rapidly.
In an effort to resolve this expensive and unproductive
predicament, the library community has initiated projects to
inject competition and cost-based pricing into the marketplace.
To be successful, though, these efforts should not be thwarted
by protectionist changes to copyright and intellectual property
regimes. Instead, there should be, as demonstrated in
provisions of H.R. 1858, a focus on stimulating innovation and
competition.
We have witnessed a significant amount of consolidation in
the publishing arena within the last several years which has a
profound impact on our institutions and our users.
As there is a steady contraction in the number of
publishers which leads to diminished competition, we should be
extremely careful that new proposals that we enact can in no
way increase control over information resources.
H.R. 1858 appropriately recognizes this concern by
balancing the interest of users of databases with the needs of
publishers.
In closing, Mr. Chairman, we support fully the narrow and
targeted approach that is taken in H.R. 1858 to ensure that
there is no negative or unintended consequences for the public
and private sectors which properly rely on access to data in
government works.
We thank you and other members of the subcommittee for your
leadership, and we look forward to working with you on this
legislation.
[The prepared statement of James G. Neal follows:]
Prepared Statement of James G. Neal, Dean, University Libraries, Johns
Hopkins University on Behalf of the American Association of Law
Libraries, American Library Association, Association of Research
Libraries, Medical Library Association, and Special Libraries
Association
Mr. Chairman, I am James G. Neal, Dean, University Libraries, Johns
Hopkins University and Past President of the Association of Research
Libraries and a current member of the Executive Board of the American
Library Association.
I am testifying today on behalf of the nation's major library
associations: the American Association of Law Libraries, the American
Library Association, the Association of Research Libraries, the Medical
Library Association, and the Special Libraries Association.
Collectively, we represent 80,000 librarians in research, academic,
medical, public, law, state-based, and special libraries throughout
North America. Thank you for the opportunity to appear before the
Subcommittee to share our views of H.R. 1858, the Consumer and Investor
Access to Information Act of 1999.
Mr. Chairman, we very much appreciate the leadership role that you,
members of the Subcommittee, and the full Committee on Commerce have
taken on issues relating to access to information in the digital
environment. The preservation and continuation of balanced rights and
privileges in the electronic environment are essential to the free flow
of information and to the success of our library and education systems.
H.R. 1858, the Consumer and Investor Access to Information Act of
1999 strikes a balance between the interests of selected database
producers while ensuring that legitimate and appropriate access to
factual information continues. Data and information are the foundation
of all research, scientific and technology programs. And these facts
are essential to how members of the public use information in their
daily lives. The library and education communities rely on access to
information in all aspects of teaching and research including the
preservation of our cultural and scientific heritage. Such access is
integral to the success of the U.S. educational and research effort and
the United State's leadership in the global economy.
Mr. Chairman, to keep this balance, all sectors--public and
private--must rethink and reconfigure services, operations, and
business models to meet the challenges of the networked environment.
Last year, this Subcommittee recognized that new or modified copyright
and intellectual property regimes would be a key component in how these
different sectors adapt to the digital environment. The new models for
education, libraries, the scholarly and research communities, and
businesses should foster productive and mutually beneficial
relationships between public and private, commercial, and non-profit
sectors. Thus it is critically important that all proposals be
considered in light of the need for balance and fairness to all
communities.
The library community understands that unauthorized digital copying
can lead to piracy. We have invested significant amounts in education
campaigns concerning appropriate use within our institutions and
purchased technology to ensure that adequate safeguards are in place.
This is, of course, in addition to the acquisition of hundreds of
thousands of products and services.
Libraries spend well over $2 billion every year on purchasing and/
or licensing information. According to studies published in 1998 by the
National Center for Education Statistics (U.S. Department of
Education), the 8,981 U.S. public systems spent $789 million on library
materials, including electronic formats, in 1995. The 3,303 U.S.
academic libraries spent $1.3 billion on information services in all
formats. For example, the acquisitions budget for this year at Johns
Hopkins University is approximately $8 million with approximately
$950,000 devoted to online resources, and this number is growing. These
figures do not include hardware, software, network support and
equipment, or personnel. And importantly, these figures do not include
the financial, technological, and personnel resources devoted by
libraries to preserve information resources so that they are accessible
to the public over time.
My testimony focuses on three key aspects of H.R. 1858 which
support the continuation of the library community's important
activities.
the need to preserve the fair use of information and keep
factual information in the public domain;
promote the progress of science, education, and research; and
provide safeguards against monopolistic pricing.
The need to preserve the fair use of information and to keep factual
information in the public domain
For over 200 years, the information policy of this country has
protected creativity--not factual information. This policy has served
us extremely well and allowed libraries and educational institutions
and the constituencies they serve to flourish. This policy has also
allowed creators and publishers to flourish. Access to data and
information are the building blocks of knowledge and essential to
advancement of knowledge in countless fields. Our democracy is based on
the premise that access to information, government information in
particular, not only leads to a more informed citizenry but strengthens
our Nation. Provisions in H.R. 1858 will continue this tradition by
permitting the unfettered use of facts--information which is in the
public domain--while affording limited new protections to database
producers necessitated by digital technology. The focus of H.R. 1858 is
on direct competition, not mere use of facts, with the goal of
preventing displacement of databases by unfair, anti-competitive
practices.
The relatively recent explosion of digital technologies and their
quick adoption into all facets of our lives has resulted in an
unprecedented and growing number of databases. When coupled with the
rapid deployment of computer and related technologies, individuals may
obtain and use dozens of databases or sources of information, combine
this data with other information, and create new information--
information about personal investments, about community activities,
about our environment, and more. This activity not only sparks
creativity in the academic and research sectors but also presents
enormous new opportunities to one of the fastest growing sectors of our
economy, small business. H.R. 1858 permits these types of activities
and supports the growth of all sectors of the economy, not in any way
handicapping one sector at another's expense.
Promote the progress of science, education, and research
The success of our Nation's education and research systems is
dependent upon the ability of educators and researchers to access data
and information for multiple purposes. Scientific and research progress
depends upon the ability to use public domain information, combine
public and proprietary data to create new databases, and reuse existing
data. Researchers typically create new knowledge by building upon the
work of others. This practice, often described as, ``standing upon the
shoulders of giants'' is the basis for our Nation's global leadership.
Provisions in H.R. 1858 permit this practice--so fundamental to our
educational system--to continue.
Use, reuse, recompilation of data and information also lead to new
products and services in the public and private sectors. Entrepreneurs
use the information resources in libraries, oftentimes government
information, to develop new services of value in our information
economy. Overly broad protections in this arena would inhibit research
and innovation by putting new economic and use barriers in front of
researchers in a quickly moving global economy. Provisions in H.R. 1858
appropriately encourage scientific, educational, or research endeavors
while at the same time, providing protection to the producers of
databases from commercial free-riding of their products and services.
As this debate continues, it is crucially important to understand how
our communities use information and engage in research activities
because these activities are not exercises in any capacity of
commercial free-riding but, instead, are legitimate and legal
practices.
Provide safeguards against monopolistic pricing
An increasing number of databases, including those developed with
federal funding, are only available from a single producer. These
``sole source'' databases may contain historical data that cannot be
recreated or the economics of recreating some datasets may not be
feasible, such as generation of duplicate datasets from a myriad of
satellite sensors or real-time financial information. Accessing these
resources can prove problematic for members of the research and
education communities. With only one point of access to a sole source
database, the library has little recourse in accessing that resource.
The publisher or producer of the database is not obligated to permit
transformative uses, nor is there any leverage in negotiating the
license to moderate costs or permit downstream activities. Provisions
in H.R. 1858 provide reasonable terms and conditions for the user
community and at the same time, give the producer economic benefits.
The library community is keenly aware of the problems associated
with lack of competition in the journal arena where we are seeing
skyrocketing costs. Some context may be helpful. Between 1986 and 1996,
the consumer price index increased 44 percent. Over that same decade,
the cost of monographs increased 62 percent. The price of health care
increased 84 percent. And the cost of scholarly journals increased 148
percent--more than three times the rate of inflation and nearly twice
the rate of growth in health care costs. And the price of subscriptions
to online databases grew even more rapidly. The cost of information,
especially scientific research, is climbing at a rate far beyond the
means of buyers to pay. For example, serials spending in ARL libraries
is 152% higher in 1998 than the decade before.
In an effort to resolve this expensive and unproductive
predicament, the library community has initiated projects to inject
competition and cost-based pricing into the marketplace. To be
successful though, these efforts should not be thwarted by
protectionist changes to copyright and intellectual property regimes.
Instead, there should be, as demonstrated in provisions of H.R. 1858, a
focus on stimulating innovation and competition. These provisions
provide the owner of the database the assurance that there will
reasonable compensation for use of the database while ensuring that
there are appropriate terms and conditions on database access for
users.
A key indicator of our new global economy is the growing number of
mergers and acquisitions. We have witnessed a significant amount of
consolidation in the publishing arena within the last several years
which will have a profound impact on our institutions and how our users
access selected information resources in the future. This raises some
cause for concern. For example, one proposed merger considered by Reed
Elsevier and Wolters Kluwer foundered due to opposition from antitrust
authorities in Europe and the United States. Although no formal
complaints were filed by U.S. or European agencies, regulators did
indicate their serious concerns with the proposal. Of interest to these
deliberations are some of the discussions of the United States
Department of Justice, Antitrust Division, which considered the
implications of the proposed merger on U.S. interests and surfaced a
significant amount of new data. One finding by Mark McCabe, formerly
with the Antitrust Division, now Assistant Professor of Economic,
Georgia Institute of Technology, is that, ``journals sold by commercial
publishers indicate that prices are indeed positively related to firm
portfolio size, and that mergers result in significant price
increases.'' As there is a steady contraction in the number of
publishers which leads to diminished competition, we should be
extremely careful in enacting new proposals which in any way could
increase control over information resources. H.R. 1858 appropriately
recognizes this concern by balancing the interests of users of
databases with the needs of the publisher.
Finally, the U.S. Government is the largest producer of
information. Recently, a number of factors have led to federal agencies
outsourcing data activities to the private sector where, for example,
private sector partners create and possibly maintain a federally-funded
database for an agency. The number of public-private sector
partnerships is growing and the private sector is becoming more
involved in disseminating government data for agencies. Without
appropriate safeguards, this government information could be subject to
new protections and not available within the public domain as now
required by law. H.R. 1858 seeks to ensure that agencies do not permit
this information to be captured by private sector entities, leading to
a reduction in access and the robustness of the public domain. It may
be useful to explore additional means to ensure that publicly funded
information is accessible without more restrictions on use and reuse.
In closing Mr. Chairman, we fully support the narrow, targeted
approach taken in H.R. 1858 to ensure that there are no negative or
unintended consequences for the public and private sectors, including
libraries, that properly rely on access to data and government works.
There should be a careful balancing of interests to ensure that users
and providers of information are able to continue with current
practices while producers of databases receive new limited protections.
Such balancing entails a focus on anti-competitive practices in the use
of databases, not protection of facts or information. We thank you and
the other Members of this Subcommittee for your leadership on these
issues and look forward to working with you on this legislation.
organization biographies
The American Library Association is a nonprofit educational
organization of 57,000 librarians, library trustees, and other friends
of libraries dedicated to improving library services and promoting the
public interest in a free and open information society.
The American Association of Law Libraries is a nonprofit
educational organization with over 5,000 members dedicated to serving
the legal information needs of legislators and other public officials,
law professors, and students, attorneys, and members of the general
public.
The Association of Research Libraries is an Association of 122
research libraries in North America. ARL programs and services promote
equitable access to and effective use of recorded knowledge in support
of teaching, research, scholarship, and community service.
The Medical Library Association is an organization of over 3,800
individuals and 1,200 institutions in the health sciences information
field. MLA members serve society by developing new information delivery
systems, fostering educational and research programs for health
sciences information professionals, and encouraging an enhanced public
awareness of health care issues.
The Special Libraries Association is an international association
representing the interests of nearly 15,000 information professionals
in 60 countries. Special librarians are information resource experts
who collect, analyze, evaluate, package and disseminate information to
facilitate accurate decision-making in corporate, academic, and
governmental settings. The Association offers a myriad of programs and
services designed to help its members serve their customers more
effectively and succeed in an increasingly challenging environment of
information management and technology. SLA is committed to the
professional growth and success of its membership.
Mr. Tauzin. Thank you, very much. Mr. Chairman, this is
deja vu all over again. I am more and more convinced the
Internet is just a high tech bookmobile rolling through
America.
The next witness will be Mr. Lynn Henderson, president of
Doane Agricultural Services Corporation.
STATEMENT OF LYNN O. HENDERSON, PRESIDENT, DOANE AGRICULTURAL
SERVICES CORPORATION, ON BEHALF OF THE AGRICULTURAL PUBLISHERS
ASSOCIATION
Mr. Henderson. Thank you, Chairman Tauzin and members of
the subcommittee. I certainly appreciate the opportunity to
testify today. I am president of Doane Agricultural Services
Corporation, which for the last 80 years has been a leading
provider of economic forecasting services, information, and
computer software for farmers and ag related businesses.
Our radio program, Agri Talk, plays daily on 115 radio
stations with over a million listeners. I am also speaking on
behalf of the Agricultural Publishers Association, which is a
coalition of mostly small businesses who provide vital and
timely information to the nearly 3 million farmers who make up
the farm-related industries.
I am testifying today because H.R. 1858 does not protect us
against most piracy. Our agricultural forecasts products, it is
a database that is critical to farmers, particularly in today's
low-price times like we are facing. Our economists collect
volumes of raw data on acreage, production prices, and
livestock from USDA and other government agencies. Then we add
value by organizing, updating, and tailoring it specifically to
assist farmers in how to profitably market their crops.
Without significant protection for the labor, time, and
money involved here, we clearly will not have the resources to
do that in the future. And yet under H.R. 1858 if an important
part of the database, let's say the section on livestock only,
is extracted by pirates, I won't be protected. I am only
protected when the whole agricultural forecast database has
been duplicated, and even then H.R. 1858 is not much
protection.
This is a publication that we put out every year and it was
pirated last year, and that is why I have taken particular
interest in this issue. I found it on somebody else's Web site.
Under H.R. 1858, if the pirate had just altered the guide and
added a few small amounts of the data, they could have wiped
out my return on my investment for the thousands of hours that
our staff spends, the relationships that we have worked so hard
to have with firms to have them supply us with their data, and
the hundreds of thousands of dollars that we spend collecting
and compiling the information.
I think small businesses are particularly threatened under
H.R. 1858. As the many recent mergers in our industry indicate,
the face of agri business is changing and the number of
customers continue to shrink. Today we have licensing
agreements to sell multiple copies of our products. Under H.R.
1858 as I understand it, it only protects sale to the public.
They can buy one copy and, for example, our feed additive
compendium, upload it on their Ethernet or e-mail it to their
5,000 employees, and with a click of a mouse, the publisher is
out of business and has lost their market.
If I provide our databases as loss leaders so as to attract
customers, H.R. 1858 does not provide any protection
whatsoever. Just the other day a consortium of big businesses
offered me a nominal amount for important parts of my
inventory. They told me that they were going to give it away on
the Web just to attract eyeballs to their site, and if we could
not come to an agreement on the terms, they would just take my
database because of the lack of protection that we currently
have. Are we going back to the law of the jungle where there is
no protection, small from big, victim from thief? I should hope
not.
Further H.R. 1858 establishes protection in such a way I
practically have to be bankrupt before I can seek it. Under
this bill, I have to incur substantial damages threatening my
ability to recover return. By not granting the right to sue and
leaving us only to relying on FTC, should it ever get around to
pursuing my case, most all publishers will neither be able to
survive the piracy permitted by H.R. 1858 or attract investors
to maintain or build our businesses.
As you can tell as a small business person, I do not feel
that H.R. 1858 covers our needs, not only on the domestic but
on the international front. I welcome any questions from the
panel and would refer you to my written testimony.
[The prepared statement of Lynn O. Henderson follows:]
Prepared Statement of Lynn O. Henderson, President, Doane Agricultural
Services Company on Behalf of the Agricultural Publishers Association
Chairman Tauzin and Members of the Subcommittee: Thank you for the
opportunity to testify on H.R. 1858.
I am the President of Doane Agricultural Services Company, which
for the last 80 years has been one of the leading providers of
information, economic forecasts and computer software to the
agricultural sectors. Our radio program Agri Talk is carried each day
on 115 stations in the farm belt reaching nearly one million listeners.
I am also speaking on behalf of the Agriculture Publishers Association,
a coalition of mostly small businesses who provide vital and timely
information to the nearly 3 million individuals who make up America's
farming and farm-related industries.
Piracy comes in many forms, and is especially easy in this age of
electronic communication. I'm testifying today because H.R. 1858 does
not protect me against most piracy.
Our Agricultural Forecast product is a good example of a database
critical to farmers. Our economists collect volumes of raw data on
acreage, production prices, crops supply, and livestock from USDA and
other government agencies. Then we add value by, organizing, updating
and tailoring it specifically to assist farmers in how to profitably
market their crops. Without protection for the significant labor, time
and money involved here, we clearly will not have the resources to do
this. And yet under H.R. 1858, if an important part of the database,
most of the sector on live stock, for example, were extracted by
pirates, I wouldn't be protected H.R. 1858 only protects me when the
whole agricultural forecast product has been duplicated.
And even then, H.R. 1858 is not much protection. I have already
found Doane's Agri Marketing Services Guide for sale on some one else's
web site. Under H.R. 1858, if the pirate had just altered the guide to
add a small amount of data pirated from someone else, the pirate could
have wiped out my return on the thousands of hours our staff spent,
establishing relationships with firms so that they'd agree to
participate, and the hundreds of thousands of dollars we spent
collecting and compiling the information.
Small businesses are particularly threatened under H.R. 1858. Most
agricultural publishers are small businesses. As the many recent
mergers in this sector indicate, the face of agribusiness however is
starting to look like a consortium of many businesses. Today we have
licensing agreements to sell them multiple copies of our products.
Under H.R. 1858, which only protects sale ``to the public'' they can
buy just one copy of the Farm Chemical Handbook, upload it on their
Ethernet e-mail it to the 5,000 best customers, and with the click of a
mouse, deprive its publisher very important markets.
And, if I provide our databases for free as a loss leaders so as to
attract customers, H.R. 1858 doesn't provide any protection at all.
Just the other day, a big industry consortium offered me a nominal
amount for important parts of my inventory. They told me that they were
going to give it away on the web--just to attract eyeballs to their
site and that if I didn't want the money, they would just take the
databases. Are we going back to the law of the jungle where there is no
protection, big from small, victim from thief, etc.???
H.R. 1858 also threatens our markets in the scientific research
communities. Good farming, safe food, and finding markets for American
agriculture depends on research. Good research and good science depend
on our databases, such as the Insect Control Guide or the Agricola up
to the minute database of all the latest technological and scientific
developments, to name a few. Thus, both the non-profit and profit
making educational research entities are important markets for us.
By exempting works used in the name of science, research, or
education, H.R. 1858 not only severely harms our markets, but also
jeopardizes the very research it worships. If we must give away our
databases here, what revenue will support the making of the databases
on which agriscience and research depend?
Finally, H.R. 1858 establishes protection in such a way I
practically have to be bankrupt before I can seek it. Under this bill,
I have to incur ``substantial damages'' threatening my ability to
``recover a return''.
By not granting a right to sue and leaving us only to rely on FTC,
should it ever get around to pursuing our ``case'', most all
agricultural publishers will neither be able to survive the piracy
permitted in H.R. 1858 or attract investors necessary to maintain or
build their businesses.
Frankly, under H.R. 1858 I think all I'll be doing is spending time
and money trying to erase from the net even the few acts of piracy this
bill prohibits. The extreme exception in H.R. 1858 grants to OSPs,
seems to mean that they don't have to do any thing to clean up their
airwaves even when notified of prohibited acts there. If they won't
help, small businesses like agricultural publishers will clearly be
undone.
Now, I am all for competition and the free market, but I want to
meet my competitors in the marketplace, not see my product stolen and
then used to undersell me by someone who's invested in nothing but a
scanner. We would bring many of our printed services online if we had
protection. Label changes in herbicides, for example, must be
disseminated quickly for the safety of our farmers, their families and
the consumer.
Today one third of the farm industry uses the Internet. Three years
from now most will be online. If H.R. 1858 is the law by then, most of
today's agricultural publishers won't be there. Pirates will be. They
will make money of course, because under pricing us is easy when one
doesn't have to spend any money developing the database in the first
place and doesn't plan to spend any real money maintaining it. But will
they make good databases for farmers? I'd hate to depend on the
accuracy of a database on feed additive quality control information if
it was not based on substantial investment in keeping it up-to-date and
comprehensive.
However, no matter who's on the net, if H.R. 1858 becomes law, you
probably won't find help exploring possible markets beyond our national
borders. A European grain buyer planning his next move would benefit
greatly from access to Doane's information services concerning American
farm products. Although, today, we could expand our services via the
Internet, we cannot realistically pursue this avenue under H.R. 1858.
Last year's European Union directive gave European database producers
protection, leaving US businesses--in the absence of adequate
protection here--out in the cold. Today and even under this bill,
Europeans could just copy our guides and undersell them to our
potential customers abroad. We need legislation, which will help us
protect and pursue new markets. People might not have immediately
realized it, but meaningful protection for databases will help create
new markets for our farmers as well.
If I may, Mr. Chairman, I would like to submit for the record a
list of all 97 publications from the Agricultural Publishers
Association, who I represent here today, as well as a letter from last
year signed by all the major agricultural interest groups asking
Congress to pass a strong bill to protect databases from piracy.
Thank you for inviting me to come here today to tell you of how
database piracy is threatening all agricultural publishers and their
consumers, the American farmers.
Mr. Tauzin. Thank you very much, Mr. Henderson.
And now the gentleman that I welcomed in your absence, Mr.
Gregory O'Brien, the chancellor of the University of New
Orleans. Again, Mr. O'Brien, it is good to have a home boy
here.
STATEMENT OF GREGORY M. O'BRIEN, CHANCELLOR, UNIVERSITY OF NEW
ORLEANS, ON BEHALF OF NATIONAL ASSOCIATION OF STATE
UNIVERSITIES AND LAND GRANT COLLEGES, ASSOCIATION OF AMERICAN
UNIVERSITIES, AND AMERICAN COUNCIL ON EDUCATION
Mr. O'Brien. Thank you, Chairman Tauzin. On behalf of the
three associations that I represent, the Association of
American Universities, the American Council on Education, and
the National Association of State Universities and Land Grant
Colleges, we are pleased to testify on behalf of H.R. 1858.
Together these three associations represent over 1,500
colleges and universities. These colleges and universities
conduct the preponderance of our Nation's academic research.
They produce most of our Nation's Ph.D.'s, as well as
masters and professional students. They educate millions of
undergraduate students each year. These institutions understand
the need to protect databases, and they support legislation to
address unfair competition and database piracy.
Indeed, universities and colleges often are creators of
collections of information and therefore have a vested interest
in protecting the authenticity and the integrity of these
collections.
Let me state at the outset that I am not here as a legal
scholar, a copyright attorney, nor an information expert, but
as a university administrator concerned with maintaining the
breadth and quality of our university research and educational
programs. We appreciate the subcommittee's consideration of
H.R. 1858.
We believe the bill offers an excellent starting point for
addressing the database protection issue. The bill provides
protection against database piracy while at the same time
respecting our single core principle that we must maintain our
traditional access to and use of data and information as the
cornerstone of scientific and scholarly research, teaching, and
learning.
The higher education associations believe it is imperative
to preserve the constitutionally based premise of this Nation's
information policy, that no one may own facts or information,
only prevent the full, unfettered use of facts and information.
Mr. Rightmire referred to the Feist decision. That decision
goes on to state that the raw facts in a compilation may be
copied at will. This result is neither unfair nor unfortunate.
It is the means by which copyright advances progress of science
and art. This policy has served the country well.
The United States stands at the forefront of learning,
science, and technological advancement, and the Nation has
benefited richly from its leadership in international economic
competitiveness, life saving advances in medicine and health
care, technological superiority in defense, and in a rich
quality of life for all of our citizens.
We believe that the enlightened information policies of
this Nation have played a significant role in sustaining the
creativity and productivity of research and education programs
that have led to these benefits.
Congress should be wary of any legislation that threatens
the public domain status of facts and information because the
importance of access for research and education. Indeed, for
the effective functioning of our democratic society,
congressional decisions about the proper scope of protection
for compilations of information should emphasize caution and
access to information.
Based on this important principle, there are two critical
standards of any legislation to protect compilations of
information should meet. First, protection should be targeted
to deal with specifically identified wrongful conduct. Second,
protection should be addressed to clearly define subject matter
and to be limited to compilations as compilations and not to
the facts or information contained therein.
Let me discuss H.R. 1858 in the context of these standards.
First, any new protection should be targeted to deal with
specifically wrongful conduct. H.R. 1858 does just that. It
prohibits the dissemination to the public of a copy of a
database in a manner that causes substantial competitive harm.
This is a reasonable response to the concerns identified by
those who seek added protection for their databases.
Second, H.R. 1858 is intended to protect a clearly defined
class of databases and not the facts or the information
contained in those databases. However, we do believe there
could be some adjustments in the definition of databases to
clarify the distinction between other works that may have
certain characteristics of databases but should not be
considered as databases under that definition.
For example, the definition does not expressly exclude
works of nonfiction such as biographies and history articles
that could be considered as collecting discrete items of
information for the purpose of providing access to that
information. We recommend that this definition be clarified so
that such works would not be considered as compilations of
information.
Let me emphasize that we do not seek a free ride on the
work of others. As has been stated earlier, our institutions
pay for databases and will continue to do so. Our primary
concern is whether additional legal protection is necessary or
justified. Overly broad legislation threatens the traditional
educational and scientific activities which are essential to
the missions of our institutions and the progress of our
economy.
We believe the answer is legislation such as H.R. 1858 that
offers protection against unfair competition and database
piracy without jeopardizing the traditional principles of
access to information.
We commend the committee for proceeding carefully to craft
legislation targeted at solving the specific identified
problem. To act more broadly would result in legislation with
unintended consequences which would have a chilling effect on
research collaboration, educational enrichment, and economic
productivity. Thank you, Mr. Chairman.
[The prepared statement of Gregory M. O'Brien follows:]
Prepared Statement of Gregory O'Brien, Chancellor, University of New
Orleans, on Behalf of the Association of American Universities, the
American Council on Education, and the National Association of State
Universities and Land-Grant Colleges
I am Gregory O'Brien, Chancellor of the University of New Orleans.
I appreciate this opportunity to testify before the Subcommittee on
H.R. 1858, ``Consumer and Investor Access to Information Act of 1999.''
My testimony is presented on behalf of the Association of American
Universities, the American Council on Education, and the National
Association of State Universities and Land-Grant Colleges, which
together represent over 1,500 colleges and universities. The colleges
and universities that are members of these Associations conduct the
preponderance of the nation's academic research, produce most of its
Ph.D.s as well as Master's and professional students, and educate
millions of undergraduates each year. These institutions understand the
need to protect databases, and they support legislation targeted to
address unfair competition and database-piracy. Indeed, universities
and colleges often are creators of collections of information and have
a vested interest in protecting the authenticity and integrity of those
collections.
Let me state at the outset that I am not here as legal scholar,
copyright attorney, or information expert but as a university
administrator concerned with maintaining the breadth and quality of our
university research and education programs. We appreciate the
Subcommittee's consideration of H.R. 1858. We believe the bill offers
an excellent starting point for addressing the database protection
issue. The bill provides protection against database piracy, while at
the same time respecting our single core principle--that we must
maintain our traditional access to and use of data and information as
the cornerstone of scientific and scholarly research, teaching and
learning. The higher education associations believe it is imperative to
preserve the Constitutionally based premise of this nation's
information policy that no one may own facts or information or may
prevent the full, unfettered use of facts and information. As the
Supreme Court said in Feist, ``all facts--scientific, historical,
biographical, and news of the day . . . are part of the public domain
available to every person.'' Feist Pubs., Inc. v. Rural Telephone
Service Co. 499 U.S. 340, 348 (199 1), quoting Miller v. Universal City
Studios, Inc., 650 F-2d 1365, 1368 (5th Cir. 1981). ``[T]he raw facts
[in a compilation] may be copied at will. This result is neither unfair
nor unfortunate. It is the means by which copyright advances the
progress of science and art.'' 499 U.S. 340, 350 (1991).
This policy has served the country well. The United States stands
at the forefront of learning, science and technological achievement,
and the nation has benefited richly from this leadership in
international economic competitiveness, lifesaving advances in medicine
and health care, technological superiority in defense, and an enriched
quality of life for our citizens. We believe that the enlightened
information policies of this nation have played a significant role in
sustaining the creativity and productivity of the research and
education programs that led to these benefits. Congress should not
enact any legislation that could threaten this fundamental principle
that facts and information remain in the public domain. Because of the
importance of access to data for research and education--indeed, for
the effective functioning of a democratic society, Congressional
decisions about the proper scope of protection for compilations of
information should err on the side of caution and access to
information.
Based on this principle of preserving access to and use of facts,
we can identify two critical standards that any legislation to protect
compilations of information should meet: First, protection should be
targeted to deal with specifically identified wrongful conduct. Second,
protection should be addressed to a clearly defined class of materials
and should be limited to compilations as compilations, not the facts or
the information per se.
In the following discussion, I first provide an overview of the
basic academic activities that would be threatened by database
legislation that is overly broad in its protective mantle. I then
examine H.R. 1858 against the standards identified above.
I. The Academic Environment and Activities Potentially Impeded
byDatabase Legislation.
The research and teaching missions of colleges and universities are
fundamentally tied to information and the translation of information
into knowledge; through the production, analysis, verification,
interpretation, and dissemination of information, scientists and
scholars expand the frontiers of knowledge and transmit that ever-
expanding knowledge to colleagues and to students. The results of
research are publicly disseminated through articles, books, workshops,
conferences, and increasingly through digital networks as well.
Research results so disseminated are used by other scientists and
scholars--to build on, to critique, to re-examine and reinterpret.
Through the give and take over what may be initially conflicting data
or interpretations of data, new phenomena are understood and verified,
and knowledge is advanced.
The process of translating data into knowledge requires the open
exchange of information among allied scholars and critics alike.
Increasingly, research is conducted in teams, often from several
institutions. Data are drawn from multiple sources, recombined and
merged with new data to produce data sets that may lead to new and
unanticipated findings. Data sets vary from the results of a single
experiment, captured in a table in a single journal article, to the
vast databases of information compiled from meteorological remote
sensing instruments, geographic information systems, particle
accelerators, and systematic aggregations of research results to
produce databases of genomic, chemical, and medical information, and
much more.
Databases supporting research and scholarship are not limited to
the sciences. Databases supporting work in the humanities and social
sciences are proving increasingly essential to advancing knowledge in
these disciplines. Specialized dictionaries, annotated bibliographies
of worldwide research resources, census information, and compilations
of text citations are just a few of the systematic compilations of
information critical to humanistic and social science research.
In the academic community, databases are dynamic instruments; they
are not only sources of information, but they themselves--or components
of them--become ingredients in new products, both through the
combination of multiple contemporaneous data sets to produce
qualitatively new products, and through the re-analysis of prior data
from new perspectives provided by new findings or new analytic tools. A
scientist may apply a formula developed from his or her research to a
different set of data, yielding a different interpretation of those
data; multidisciplinary researchers may combine components from
physical, biological, chemical, and meteorological databases to
understand the dynamics of ecological systems; social scientists may
combine elements of demographic, economic, legal, and political
databases in comparative analyses of national or regional populations
worldwide.
Digital technologies are creating new analytic methods and tools at
a staggering pace, turning yesterday's possibilities into breathtaking
realities today. These breakthroughs have led to new discoveries in
medicine, engineering, and many other fields, leading to the creation
of entirely new commercial ventures and products. The future holds
enormous possibilities for enhanced research collaboration,
productivity, and economic development if researchers can rely on open
communication and ready access to data.
Such an environment can only serve to enrich the education of
students as well. Some of the best education is learning by doing and
by discovering, and students are increasingly using databases to draw
their own conclusions, duplicating the research process to learn
through discovery under the guidance of faculty.
For all of these research and educational activities, faculty and
students must be able to have open and easy access to compilations of
data of all sizes, from single research results to large databases, and
they must be able to work with these compilations--extracting,
combining, and aggregating sets of data-to advance the frontiers of
knowledge and educate students about those advances.
These academic uses of information do not require that all
information be free; indeed, universities now pay substantial sums for
commercial databases. But these uses do require sufficiently flexible
conditions of use, conditions that can be stultified by a proprietary
protection scheme that makes use, reuse, and recombination difficult
and militates against the ability to exchange information with
colleagues and students.
II. The Standards Against Which Legislation To Protect Compilations
Should Be Judged
In general, the Associations share the view of the Administration,
as expressed last year by the Department of Commerce, that ``any (law
to protect compilations and databases] should be predictable, simple,
minimal, transparent and based on rough consensus.'' Letter from Andrew
J. Pincus, General Counsel, Department of Commerce, to Senator Patrick
J. Leahy, August 4, 1998. In particular, we emphasize three important
criteria.
First, the protection should be targeted to deal with specifically
identified wrongful conduct, H.R. 1858 meets this criterion. The
prohibition against dissemination to the public of a copy of a database
in a manner that causes substantial competitive harm is a reasonable
response to the threats identified by those who seek added protection
for databases. The single clear theme we have heard throughout this
debate, and the single clearest need we can identify, is the need to
prevent pirates who copy databases and disseminate them as their own in
a manner that destroys the market for the original. The case for
additional protection has not been made. As we have said, Congress
should err on the side of our traditional and highly successful policy
of access to information.
Second, protection should be addressed to clearly defined subject
matter. If the goal is to protect incentives for the creation of large
databases that require extensive effort to develop and organize, the
legislation should be crafted to apply to just such works. The risk of
spillover into other types of works should be minimized. Further, it is
essential that the legislation protect the compilations as
compilations, not the facts or the information contained in the
compilations per se. While this is a difficult line to draw, it is
critical that it be drawn property.
H.R. 1858 comes close to meeting this goal, However, we do believe
there could be some adjustments to the definition of ``databases'' to
clarify the distinction between other works that may have
characteristics identified in that definition, but that should not,
themselves, be considered databases. For example, an individual history
book or scientific article might collect ``discrete items of
information'' for the ``purpose of providing access'' to them. It would
be unreasonable to contend, however, that such works should be
considered ``databases.''
I should emphasize that we do not seek a free ride on the work of
others. Legal and technical rules already exist to provide substantial
protection against such free riding. Our institutions pay for databases
and intend to continue to pay for databases. The relevant question is
whether additional legal protection is necessary or justified in light
of the threat overly broad legislation poses to traditional educational
and scientific activities. We believe the answer is legislation such as
H.R. 1858 that offers protection against unfair competition and
database piracy without jeopardizing access to information.
In seeking to preserve legitimate access to information, however,
we do not argue that scientific, educational and research institutions
should have the right to destroy the incentive to create a database by
broadly disseminating that database to the public. We do not understand
this to be permitted by the legislation, and would be happy to work
with the Subcommittee to clarify this issue.
We commend the Commerce Committee and its Telecommunications
Subcommittee for proceeding carefully to craft legislation targeted to
solving a specific problem. To do otherwise could result in legislation
with unintended consequences that could produce a chilling effect on
research collaboration, educational enrichment, and economic
productivity in the years ahead.
We appreciate the Subcommittee's leadership on this important
issue. The higher education associations stand ready to work with you
to support your efforts to achieve fair and balanced database
legislation.
Mr. Tauzin. Thank you, Mr. O'Brien.
Finally is Mr. Donald Baptiste, president and CEO of
USADemocracy.com.
STATEMENT OF DONALD BAPTISTE, PRESIDENT AND CEO,
USADEMOCRACY.COM
Mr. Baptiste. Good morning, Mr. Chairman and members of the
subcommittee. Thank you for the opportunity to testify before
you on the important issues of database piracy and public
access to information. This morning I would like to tell you
about USADemocracy.com, how we use information and databases
and also my concerns regarding inappropriate protection of
database publishers that could inhibit the free flow of
information.
USADemocracy.com is a free Internet service that
proactively notifies subscribers of pending legislation, allows
them to easily communicate their opinions to their
representatives, and automatically tracks the results of that
legislation.
During the development of that system, we had to choose
where we were going to gather the data that we would use to
populate our congressional database. We could have gathered
that data internally, as it is all publicly available for free
through a number of government and commercial sources.
However, we chose to purchase that information from a
database publisher because it was the most cost- and time-
efficient manner of gathering it. We bought the information not
for the value of the information as it was free and publicly
available, but for the value inherently and the ease of
extracting that data into our own internal database.
The market determined the fair value of that database and
the publisher was rewarded in their efforts in compiling it. I
do have concerns regarding any legislation that would grant
inappropriate protection to database publishers specifically on
the use of public information. Inappropriate legislation could
severely limit competition, artificially raise the cost of
databases, and in some cases grant monopoly to a small number
of firms.
We were fortunate that along with the option of gathering
that data internally, there were a number of database
publishers we could go to buy that database, thereby keeping
the cost associated with that affordable through healthy
competition.
How database piracy will be determined is also a concern of
mine. All of the databases we looked at were substantially
similar as would have been one internally as we are all using
the same public information. It will be extremely difficult to
determine where an alleged database pirate acquired the
information, as we are all dealing with the same general
information.
Allowing the courts to decide this is not a viable option
for a small startup. Just the threat of litigation will create
an artificial barrier to entry to the small startup firms which
have been the backbone of this Internet boom.
Any company raising capital to implement their ideas and
concepts must disclose any current legal proceedings they are
involved with as well any potential legal problems down the
road. If investors feel there will be a greater risk of legal
proceedings due to inappropriate legislation, it will make the
already difficult task of raising capital nearly impossible.
Therefore, Mr. Chairman, I ask you and the subcommittee to
act cautiously to ensure that information continues to flow
freely and unfettered to the companies and individuals that are
driving this economy. Thank you for the privilege of testifying
before you.
[The prepared statement of Donald Baptiste follows:]
Prepared Statement of Don Baptiste, CEO, USADemocracy.com
Good Morning Mr. Chairman and distinguished members of the
Subcommittee, my name is Don Baptiste and I am the Chief Executive
Officer of USADemocracy.com. I appreciate the opportunity to testify
before the Subcommittee this morning on the important issues of
database piracy and public access to information, I'll try to keep my
remarks brief and to the point.
USADemocracy is a comprehensive Internet resource for people
interested in politics and the legislative process. Our goals are to
educate the American public as to the activities of their elected
representatives on Capitol Hill and to provide a medium through which
our subscribers can communicate with Congress electronically. Our
company, like many other Internet companies, deals mainly in
information. We provide information that is already in the public
domain to our subscribers, at no cost to them, in a more usable format.
Any legislation that extends proprietary protections to database
publishers who use information in the public domain would make it
extremely difficult to continue providing our service efficiently and
at no cost.
While developing the software that runs USADemocracy.com we had to
determine the best way to populate our database. There were many
possible ways to obtain the information we needed. We could have called
each Congressional office and asked a number of preset questions. We
could have gone to each Congressional web page and ``mined'' the data.
We could have gone to a number of commercial web sites that also use
the same public information that we do and ``mined'' the data. We could
have ``mined'' the data from any number of print publications that
carry the same data that we do. Instead we simply purchased a database
of Congressional information because it was more cost and time
efficient than trying to gather it ourselves and because it was
provided in an easily useable format. We purchased the database because
there was value in its ease of use, not in the information itself.
In our case, the market determined the fair value of the database
of information. If current copyright law is excessively strengthened,
small businesses like ours could be subject to copyright infringement
lawsuits for utilizing existing databases to gather public information.
Furthermore, restrictive legislation would take the decision out of the
hands of the market and place it in the hands of government regulators
and the courts.
Restrictions on the free use of public information would also drive
up the price of databases for companies like USADemocracy.com as there
would be no threat of us compiling our own database. The options
discussed earlier would no longer be available. A monopoly would be
granted to the first firm to publish any public information. Even if we
gathered the data legally, there are only so many ways to display data.
Any format we choose would be ``substantially the same'' as everyone
else's. Additionally, there would be no way of proving how a company
obtained their data if it was already in the public domain. For a
start-up company, letting the courts decide is not a viable
alternative. The costs of potential litigation would prohibit companies
from even attempting to enter a market.
Public information is in fact just that, public. Proprietary
protections for database publishers would in essence bestow ownership
of previously public information. Any party who chooses to create a
database of information would then have ownership over that
information. These protections could apply to all types of information
from voting records and biographies of elected officials to batting
averages and vital statistics about your favorite baseball players. No
one owns a Congressman's voting record or Babe Ruth's lifetime batting
average and no one should. This is public information that should be
open and accessible to everyone.
Progress is based on the concept of taking existing creations and
ideas and improving them. This concept is one of the foundations of our
robust economy. Information is now more than ever the building block of
innovation and if we stifle the flow of information then we will stifle
growth and innovation in our society at large. Of utmost importance is
giving people the ability to disseminate and utilize information so
that they can make productive use of technological advancements like
the Internet, now and in the future.
Mr. Chairman, we are very fortunate to live at a time where such
great opportunity exists. I urge the Congress to be cautious while
enacting legislation on access to information to ensure that this age
of opportunity continues to flourish. Thank you for the privilege of
testifying before you.
Mr. Tauzin. Thank you very much.
We want to thank all of our witnesses. The Chair will now
recognizes himself for 5 minutes and members in order.
Let me first point out that you have laid out the conflict
rather well before us. As you know, the 1991 Supreme Court case
basically said that the sweat of the brow that went into the
collection of a database is not copyrightable, and yet it may
indeed deserve some protection.
Phyllis, you laid out the case for as tightly constructed a
protection system as possible so that it is not overbroad and
does not impinge upon the public's right to access their own
information and other information and data.
Others of you, Mr. Henderson, Mr. Horbaczewski, argued for
more broader protections as a Judiciary subcommittee has done,
I think, all of the way to almost copyrighting non-
copyrightable material today, and therein lies the conflict.
Mr. Pincus, you indicated that you thought that the bill's
definition of protected databases may be too broad. Most of
you, with rare exception, felt that Judiciary was too broad.
You felt our Commerce mark was too broad. Why?
Mr. Pincus. Well, it is really the interaction of two
provisions of the bill, the definition of database and the
definition of duplicate. Although it is true duplicate requires
that the database be substantially the same, the definition of
database says that--the last sentence, a discrete section of a
databases that contains multiple discrete items of information
may be treated as a database.
So our concern which we lay out in detail in that testimony
is that database owners might argue that even though a tiny
section was taken, that tiny section is actually a separate
database under this definition and therefore is entitled to
protection. So our concern is that that approach may actually
lead to a broader scope of protection with respect to this
element of the test than other tests which just say it is a
chunk of the database.
Mr. Tauzin. Are you suggesting that we narrow the
definition in some respect? Do you have suggested language for
us?
Mr. Pincus. I guess our suggestion is that of the
approaches that are out there, taking the database as one finds
it and requiring that a substantial chunk be taken allows for
more common sense judicial examination of whether there is
something that approached----
Mr. Tauzin. I think that was a yes?
Mr. Pincus. Yes, I guess so, Mr. Chairman.
Mr. Tauzin. Obviously, Mr. Henderson and Mr. Horbaczewski
would disagree and say that the protections are too limited
already. We have also heard some discussion from them as to
whether or not there ought to be a private right of action.
Mr. Baptiste indicated his concern about that. Obviously it
is a jurisdictional concern, but considering adding a private
right of action somewhere in this process does pose the problem
Mr. Baptiste pointed out. Yahoo! I assume at this point in its
development, Amazon.com and others, probably have some pretty
good legal teams on board and probably they are not going to be
terribly threatened when they get a letter threatening a
lawsuit.
But what about the new entrant who doesn't have that legal
team who gets that letter that says don't you dare do that, or
we will sue the pants off you, the threats to the free, fair
use of facts, of data in our society, does anyone want to hit
that for me? Mr. Politano?
Mr. Politano. I am at AT&T and we are not a little tiny
company; we are a little larger. And we get those threats and
we are troubled by them because, No. 1, it puts a chilling
effect on what we think that we can do.
No. 2, it leads to high litigation expenses and
uncertainty. No. 3, we have a very difficult problem in
educating our scientists and in educating our people what they
can and cannot do.
Mr. Tauzin. Mr. Politano, shouldn't Mr. Henderson have a
right to go to court and say someone has stolen my creativity?
Mr. Politano. I think he should have a right.
Mr. Tauzin. How can we do that and not create the kind of
fear that Mr. Baptiste has pointed to?
Mr. Politano. I think Mr. Henderson does have a right, and
I think that right already exists. He pointed out the marketing
services guide. If someone actually took that and put it up on
an Internet site, he would have a couple of claims against them
under current law. We would have a copyright infringement
claim. He might have a trademark infringement claim and perhaps
a claim under section 43 of the Lanham Act.
I think there are plenty of weapons that a potential
plaintiff can use, and I agree with Mr. Baptiste; and I just
want to say that even a large company such as AT&T is chilled
by overreaching legislation.
Mr. Tauzin. And this is a first amendment area. Phyllis
makes that case exceptionally well for Eagle Forum. This is an
information society and a free speech society. Why would the
administration want to create a new private right of action
here in this new, very delicate area. Mr. Pincus.
Mr. Pincus. That is really the only way that you are going
to create the kind of climate that you need for investment. I
think the way to deal with the problem of frivolous litigation
is to have clear standards and standards that allow that
breathing room so you are not slicing the onion so----
Mr. Tauzin. My time is up. We are not just talking about
frivolous litigation. We are talking about the chilling effect
of litigation threats on small entrepreneurs or even big ones,
but particularly the small ones, who don't have big legal
staffs and who are going to be literally thwarted in their
efforts to develop new services for America in this information
age. Aren't you concerned about that?
Mr. Pincus. We are concerned about it, and that is why we
think that the standards of liability should be clear. The best
protection is to spell out clearly in the statute what the
lines are and then the entrepreneurs pay a little bit of money
to the lawyers.
Mr. Tauzin. Mr. Markey.
Mr. Markey. Thank you, Mr. Chairman, very much.
First of all, I would like to thank Mr. Oxley for his
graciousness in conceding defeat in the 1999 free throws.
Forty-six out of 50 is quite an achievement. It has to be noted
that Mr. Oxley shot 47 out of 50 free throws last year. You can
only do it once, and it has to be monitored by one of the
personnel in the gym. Mr. Oxley had the highest score of the
20th century, and that will forever remain. Actually of the
millennium, the highest score, and I want to congratulate you,
Mr. Oxley, and we will begin a new millennium next year. You
are the Mark McGwire of this century, and we very much
appreciate your greatness.
Mr. Rightmire, at Yahoo! your corporation has spent
considerable time and effort and money in compiling databases
for use by consumers. These databases are obviously extremely
valuable assets at Yahoo!, and Yahoo! Markets itself as a
navigational guide to cyberspace.
Helping to organize facts floating around cyberspace is a
considerable task, but is extremely useful to consumers. My
question to you, Mr. Rightmire, is this: Why doesn't Yahoo!
seek the same protections for its databases that Reed Elsevier
is seeking? Why don't you want greater protection for all of
the effort that you have put into creating Yahoo!'s databases?
Mr. Rightmire. I would preface my answer by saying through
the exemption through part of the resource that we are
providing to consumers, to a certain degree we will be
protected. One of our primary assets is the database that you
referred to, the navigational tool that allows people to find
sites of interest on the Web. And through the exemption for
that data, we will have that asset relatively protected.
Now, at the same time that is only part of our business,
and the other portion that this bill begins to address is that
of transforming information that we acquire from over 400
content providers. Through relationships with those 400, we
acquire access to the lion's share of information that
consumers find valuable on the Web. We take that data, we
aggregate and integrate it and we present it to consumers in a
way that allows them access to a much more easy-to-navigate way
to information they have trouble finding elsewhere.
Without the provisions that this bill lays out, we would
have a hard time playing the role that we play on that side of
our business.
Mr. Markey. Thank you. Mr. Horbaczewski, will you comment
on what Mr. Rightmire just said.
Mr. Horbaczewski. I don't know how Yahoo! runs their
business. We have a hard enough time running our own, but I do
know that we have payrolls to meet and rent to pay and computer
rental payments to meet, and it would be difficult to explain
to all of those people that the check was not in the mail
because the person who took the information without paying for
it was either in a more glamorous line of business or had
tenure or was too important to pay for it.
I can only assume that Yahoo! has not invested in the way
that we have invested because it is--visiting sites and pulling
things off is a different process.
I have also understood that browsers such as Yahoo! help
people identify sites that contain information, they don't
necessarily kick in the door and empty the silver closet and
take all of the underlying data back, so I think we may be
talking apples and oranges.
Mr. Markey. Mr. Black, can you help us to distinguish
between these two?
Mr. Black. Through the Internet we are going through a
tremendous exploration of business models and practices, and
what works and what kind of businesses will operate in the
future we don't really know. And that is part of the reason we
are using caution in general.
I think MCI and Tim Casey talked about the use of databases
and the backbone--it is not just the information floating
along; it is basically part of the operation. I think we simply
look at the reality right now, and I think the case for harm
has not been made.
Is there some kind of chilling effect on the creation of
databases and the answer is the opposite. databases are being
created all over the place for all purposes. Now there may be
some business models that in previously created databases that
may need to adjust to that reality, but databases from a broad
public standpoint are not being inhibited from being created
for the public. I think that is a key factor to keep in mind.
Mr. Markey. Mr. Henderson?
Mr. Henderson. I could not disagree more heartedly with
that comment about databases not being created. I can tell you
in my case until this is resolved and until I can be assured
that nobody can, just scanning it off into cyberspace my
business can be protected, I put a halt on any further database
development in my company; and it is at the detriment of not
only my company but also the U.S. economy because we are
sitting on a wealth of information that could help farmers sell
crops and find better prices for their crops overseas because
of this wonderful new tool, the Internet; and I don't want
people to classify me as an anti-Internet person. I love it,
but I want to make sure that the rules that are on it take care
of everybody who creates things, are protected in this group.
I would like to make one other point and that is theft. I
have young kids and I try to teach them not to steal, a penny,
a dime, a dollar, $5. How much are we talking here? That is why
I want to get back to the substantial amount that is being
taken. It is a real difficult issue, and that is a major
concern I have here.
Mr. Markey. Thank you, Mr. Henderson. Every time you speak
four people's heads go like this, and every time Mr. Black
speaks, heads go like this. It is going to be a fascinating
hearing. Thank you.
Mr. Tauzin. The Chair recognizes the vice chairman of the
committee, Mr. Oxley, provided we end this syrupy mutual
admiration society.
Mr. Oxley. That will be easy.
Mr. Henderson, based on your testimony and your answers, do
you support the Judiciary Committee version of the bill?
Mr. Henderson. Yes, sir.
Mr. Oxley. Mr. Politano, your testimony indicated that AT&T
creates these customized databases, targeted marketing lists
and the like containing the pieces or parts of other databases
that meet your specific business needs. Is that a common
practice other than AT&T?
Mr. Politano. Yes. My understanding is that it is
throughout the industry.
Mr. Oxley. Do other companies use your database or parts of
your database as a piece of another database that is in their
business plan?
Mr. Politano. Occasionally by contract, but that is
relatively rare because of privacy concerns we have.
Mr. Oxley. Take us through how that would work in a
practical way, the contractual agreement.
Mr. Politano. Well, what happens, and my experience has
been that there are many databases out there and they are
proprietary, is that AT&T will contract with the owners of
these proprietary databases to either share the information
that is on the database or to allow the database to work in a
system, in a protocol, or in some aspect of an electronic
commerce.
It is largely done by contract. There are some databases
that are in the public domain that AT&T uses, but by and large
it deals with entities that have proprietary information in
databases, and they lend it to us or they sell it to us and we
want it because it is reliable. We believe it is up to date,
and we believe that it fits into our business practices.
Mr. Oxley. Do you sell or lend to other folks from your
database?
Mr. Politano. Occasionally we do. It is not a major aspect
of our business, but sometimes we do, yes.
Mr. Oxley. If you are already paying for that service, what
is the problem?
Mr. Politano. That is the point. We don't really see that
there is a problem. We think there is adequate protection now
regarding the way that the databases are used, and we certainly
encourage the claims that are made under current law, either
under contract law or trade secret law or occasionally under
unfair competition trademark infringement law.
Mr. Oxley. But Mr. Henderson obviously would not agree with
that assessment. Let's pass the microphone back to him, and
what is your perspective on what Mr. Politano just talked
about?
Mr. Henderson. First off, I would like to state that I
believe that the marketplace should be free; and I welcome
competition. I just want others to go through the process that
we have to go through to get things to a finished product.
Relative to working out contracts with Internet providers,
heavens, that is what we do. We just don't want people to take
it and put it on their site or take little pieces of it and a
little piece from somebody else. In the old days you could work
out a contractual arrangement and everything was taken care of,
but right now that is not the situation.
Mr. Oxley. Ms. Schlafly, is it your view that the Judiciary
Committee bill would limit people's access to their own medical
records?
Ms. Schlafly. Yes, that is my view and I do not think that
some entity, corporation, should have a proprietary ownership
of my visits to my doctor, what he prescribes and diagnoses and
make it difficult or costly for me to get out of there. So I
think that the medical records which are very valuable,
commercially so valuable in the present environment, have to be
available; and I don't think that somebody should own them and
be able to charge for them.
Mr. Oxley. Thank you. Mr. Baptiste, can you take us through
your ability to collect data, how the bill in the Judiciary
Committee would affect data as well as how this particular bill
would affect it?
Mr. Baptiste. I don't believe that the bill in front of
Commerce would really affect us gathering data because we could
do it through numerous sources that are available in D.C. or
continue just purchasing the data through a database.
The concern I would have if broader legislation was passed
is that we would not have the ability to do it ourselves, that
we would be forced to purchase that data, thereby artificially
driving the price up.
Mr. Oxley. Are you referring to the Judiciary Committee
version?
Mr. Baptiste. Not specifically. Just any broader
legislation. The Judiciary Committee has much stricter
regulations of data.
Mr. Oxley. Thank you, Mr. Chairman.
Mr. Tauzin. The gentleman from Ohio, Mr. Sawyer, is
recognized.
Mr. Sawyer. Thank you, Mr. Chairman. Mr. Pincus, I
apologize for not being here when you were offering your
testimony, but am I correct that you believe that the fair-use
protections provide greater protection for information users
than would be suggested by the bill? And can you give us an
example, if that is the case?
Mr. Pincus. Yes, I can give you two examples. We have a
number laid out in the testimony. The fair-use provision in the
bill is limited to three specified purposes: scientific,
educational or research uses, and copyright fair use has been
held to encompass a broader range of purposes.
And this provision, which is one of Section 103(d) in the
bill, provides an exemption for liability for duplication, and
it is not clear that that would extend throughout the entire
change of dissemination of information, and we are obviously
concerned that we make sure that there is not a cutoff of fair
use in the distribution chain.
Mr. Sawyer. Let me ask you, you talked about access to
civil redress and use for clear standards, and in your written
testimony you talked about the difficulty with the European
database directive. Am I correct that--you said that the
administration opposes reciprocity, per se, and that you would
simply go to national treatment terms? Does that answer the
concerns that Mr. Horbaczewski raised in terms of his worry
about the failure to have some harmonization with European
standards?
Mr. Pincus. Let me answer the question by explaining how.
We think that the process here should be that we should develop
a database law that we think is appropriate for us
domestically, and then we will obviously have to have a
conversation with the Europeans about whether they are willing
to declare that approach similar enough to extend protection
under their law to U.S. database producers. But we have our
trade arsenal if it should come to that and we would certainly
use those tools.
Mr. Sawyer. What a polite way to say it. Should I gather
from that then that while you don't support pure reciprocity,
that the whole notion of negotiated mutual recognition is
possible, and looking particularly at clear standards for
functional equivalents would make some sense if it is carefully
negotiated?
Mr. Pincus. I think so, Congressman, although I think our
view is that the Europeans have taken a very different approach
than in either this committee's bill or the Judiciary
Committee's bill. And we think it is more important to have
that domestic discussion and come to closure on what we think
domestically the right solution is and not worry so much how
the Europeans will react to that until we come to closure on
that and then have a discussion with them.
We think that it is likely that the range of things that we
are considering or that are likely to be enacted, we would have
a pretty strong case for convincing them that they should--it
is close enough to protect American database users under their
approach.
Mr. Sawyer. When you talk about clear standards in the case
of frivolous or potentially chilling lawsuits, can you expand
on that a little bit for us?
Mr. Pincus. One of the things that the chairman pointed
out, one concern that we have, which is how do you define a
protected database, and that is one issue we think is worth
further examination.
Another question is the term question. We think that there
should be a term that necessitates some other things, when does
the term start and some protections against artificially
extending it. We think those things should be spelled out with
some clarity.
The other element that has to be proven to establish a
violation under the bill is the competition test and that test
has two prongs. We are comfortable with the first prong, the
substantial harm, essentially. But the second step,
``significantly threatens the opportunity to recover return on
investment,'' we are worried may create a lot of uncertainty
about the person who gets the letters that the chairman
referred to, saying, ``cease or desist or we are going to file
a lawsuit,'' may have no idea whether that test is being met or
not, and we think that for that element substantial harm may be
enough to weed out cases that are too frivolous and there is de
minimus harm to get into court without having this other test
that is going to create a lot of uncertainty and worry.
Mr. Sawyer. Are there others who would like to respond to
that observation?
Mr. Horbaczewski. There are not too many of us here who
actually create databases. We have our payroll to meet every
week. We have our rent to pay every month, and the paths of
diplomacy are notoriously slow, so that it would comfort us to
avoid gratuitous conflicts with Europe which is, after all, a
large market, rather than hope in the fullness of time that
these things would be worked out at a higher level by people
who do not necessarily always listen to us.
The other fact is that free trade is a good thing and a
global economy is what we are looking at and unnecessary
disharmony between the laws of measured developed economic
areas are bad in themselves, so we would hope that whatever
comes out of this is something that is more conducive to a
single world market rather than severe disruptions when you
cross borders.
Mr. Sawyer. Thank you. Mr. Chairman, may I have a little
more flexibility.
Mr. Tauzin. Without objection, I will extend the
Congressman's time a minute.
Mr. Sawyer. Mr. Neal.
Mr. Neal. I was an advisor to the U.S. delegation at the
WIPO treaty in December 1996. I think it is noteworthy that at
that time WIPO made a decision not to pursue a database. It was
seen as perhaps the environment wasn't ready to deal with that.
Second, I am on a new international committee which is
monitoring database legislation internationally, and it is
noteworthy that in many countries this has not progressed, even
in the European Union, and I think we need to understand why
that has not happened. I think the context of developing a
database legislation that works for us is the right strategy.
Mr. Sawyer. Mr. Chairman, may I read into the record a
question that Mr. Green left? I am not sure that I need an
answer. He could not stay.
Mr. Tauzin. Before you do that, Mr. O'Brien, you were
trying to jump into this.
Mr. O'Brien. We seem to get lost. H.R. 1858 provides a very
good beginning step. It is cautious in its limitation, but it
does provide the protections that we need; and I think the
statement about starting here is right because in part our
traditions about access to information are fundamental in our
Constitution. That is not true everywhere in the world.
Mr. Tauzin. The gentleman would like to read a question.
Mr. Sawyer. Congressman Green of Texas wanted to pose the
question: Does H.R. 1858 go far enough to address the concerns
of groups like the National Association of Realtors, who
believe that this legislation does not go far enough to protect
their databases from commercial exploitation?
Mr. Tauzin. Yes, we have had a good discussion of that and
we will keep the record open after this hearing for the
submission of additional questions. For example, if you feel
that you would like to supplement your testimony with some
other examples, other information, you are free to do so.
Mr. Sawyer. Mr. Chairman, I thank the Chair very much.
Mr. Tauzin. The Chair now yields to the gentleman from
Virginia, Mr. Boucher, for a round of questions.
Mr. Boucher. Thank you very much, Mr. Chairman. I want to
commend you for having this timely hearing and saying that I
also am very supportive of the approach that has been put
forward by the Chairman of the Full Committee, Mr. Bliley, in
his legislation that is cosponsored by the balance of the
leadership of the Full Committee and the subcommittee.
Having had the opportunity to examine this issue, both in
the House Judiciary Committee and also in this committee, I
find more attractive the more narrow and targeted approach that
is offered by Chairman Bliley than the broader and problematic
approach that is embodied in Mr. Coble's legislation. In fact,
I really have some questions whether we need to legislate in
this area at all, at least for the time being.
Let me begin my questions by asking of any members of the
panel who would like to comment on this why it might not be a
better approach to examine in somewhat greater detail the
potential that the State common law cause of action for
misappropriation, as perhaps it might be better developed over
time in case law, could not be relied upon to provide the
protection to database creators that it is the goal of these
two separate items of legislation to provide?
Who would like to talk a little bit about the status of the
common law misappropriation cause of action as it might be
applied to this need?
Mr. Tauzin. The gentleman from Louisiana, Mr. O'Brien, is
excused from answering. We are not a common law State.
Mr. Boucher. Well, if he would like to comment on how the
civil law might address this, maybe we could incorporate that
cause of action into the Uniform Commercial Code.
I am very interested in the extent to which we might be
able to rely upon the remedies that are already a part of the
law to address this need. Obviously to the extent we do that,
we avoid the risk of unintended consequences of legislating.
Mr. Black, would you care to comment on this for starters?
Mr. Black. Mr. Boucher, State law obviously varies greatly,
and I would not want to get into a great deal of discussion on
any particular jurisdiction, but your point underlying it is
that the Internet is new; these claims for meeting redress are
fairly new; and it may be very appropriate to, in fact, allow
our Federal system to work its will, get some experimentation,
to find out what is the range of business models, what are the
nature of the problems, whether or not some of the companies
affected have an ability to adjust, whether various kinds of
legal protection which have been referenced here today are, in
fact, able to be modified or to grow into adequate remedies.
I think our support of the bill here is clear. It is on the
record, but I think our position clearly is if there is a bill,
this is the bill we would support, but some forbearance and
some examination of other options, I think, is certainly
justifiable.
Mr. Boucher. Mr. Horbaczewski?
Mr. Horbaczewski. Yes, I would like to point out that the
option of State law misappropriation in the current legal
climate is not available. There was a case, the NBA versus
Motorola case, where the court, taking account of the copyright
policy as enunciated by the Feist case, really truncated New
York misappropriation law and left a very narrow exception for
State misappropriation law which covers hot news only.
At the moment, there is a single Federal principle at work
here which is superior to everything else which is the court's
judgment in Feist that only creativity should be protected by
copyright. Unless there is a competing Federal principle,
unless there is a Federal recognition that interstate commerce
requires the protection of investments in databases, there is--
there is no room----
Mr. Boucher. Mr. Horbaczewski, I am not talking about a
Federal cause of action in this case but whether or not State
law and the traditional cause of action for misappropriation
might provide a remedy. I gather that we have had one decision,
and I think that was by a Federal court that held that in a
particular case the NBA was a party to that lawsuit, that there
was not a factual framework that would justify application of
the misappropriation cause of action.
But to my knowledge, that is the only litigation that we
have had that begins to address this subject, and I am
wondering if another consensus might be derived if enough cases
are pursued at the State level.
Mr. Casey, would you care to comment on that?
Mr. Casey. Yes, I would. In fact, I think if you look at
trade dress law, the Supreme Court has spoken on the issue of
State misappropriation law quite a few times, and in the Sears
v. Stiffel case and the Comco v. Daybright case and the Batono
Boat case which is a lot more recent, and it said very clearly
that States have the right to set misappropriation laws as long
as they do not conflict with patent or copyright laws.
And the problem with the New York case is that it
conflicted with copyright law. So as long as the State does not
go too far so as to usurp the protection granted by the Federal
Government, it is more than free to set the laws regarding
misappropriation.
And if the States have not done so, it is the States'
issue, and many States have done so and there are laws
available in those States that the database owners can take
advantage of. They just have chosen not to do so, and they are
looking for Federal protection to make up for that, and I don't
know if that is necessarily the right way to go.
Mr. Tauzin. The Chair will extend the gentleman's time. I
want to put on the table the gentleman's discussion with the
question of predictability. In this fast-moving age, does in
fact the gentleman's remedy of letting the courts in common law
and civil jurisdictions work it out fit? The Chair yields back
to the gentleman.
Mr. Boucher. I thank the chairman very much for that
observation. What I would like to do is move to another subject
matter. I am basically putting this notion on the table whether
or not we might be able to rely on an existing cause of action.
Mr. Tauzin. Would the gentleman yield. I would very much
appreciate it, we are going to be looking at suggestions for
some kind of cause of action here. I would deeply appreciate if
those that have an inclination to do so think about this and
write us or include some new testimony.
What is the answer to his question? Can the common law
right satisfy this answer? Civil law, for example, other
jurisdictions, the code, that most of us have adopted in
commercial law, the common commercial code, will it satisfy it
somewhere? Is it predictable enough for us to wade through all
of the procedural fights over whether the venue is established
in this or that case and whether or not it is properly
structured? Or do we need in this bill somewhere to decide on
whether or not there ought to be some sort of civil cause of
action? I yield back to my friend. We will keep the record open
30 days.
Mr. Boucher. I thank the chairman very much for that.
A second question that I have--and I would pose this to
anyone who would care to respond--relates to whether or not as
a part of the Bliley legislation, should we decide to enact
that, we need to address the liability of online service
providers in those instances where third parties use their
facilities either to post or to transmit material that would be
found to be in violation of the Bliley standard.
We did this in the last Congress with respect to
copyrighted material, and those rules are very clear. But
Chairman Bliley's bill is not a copyright bill. And so my first
question I would pose is whether or not in the minds of our
panelists the principles announced in the last Congress with
regard to that set of liabilities would be applicable to
conduct under Chairman Bliley's bill? I think the answer is no.
You may have a different opinion.
If the answer is no and we would need to address that issue
separately, would there be general support for simply
incorporating the principles that we adopted in the last
Congress with regard to copyright and appending that to the new
standards that are set for database protections in Chairman
Bliley's measure? Mr. Casey.
Mr. Casey. Well, when we met in 1995, we first talked about
the need for protecting service providers from copyright
legislation. And as you know, intellectual property protection
often operates in a vacuum that is oblivious to the
consequences of wherever that protection might occur. And that
is what happened when the administration originally introduced
the bill. The white paper and the bills associated with that
related to WIPO copyright protection, and it is the same thing
here with respect to other legislation. It doesn't take into
account all of the consequences.
The difference, though, between the copyright bill, the
Digital Millennium Copyright Act, and this particular case is
that the scope of the affected parties is much broader. Whereas
you could point to certain activities on the Internet such as
storing material on a server or storing material within your
computer before you looked at a Web site that created problems
related to reproductions under the copyright act or derivations
under the copyright act, you have a different set of rules that
apply to these databases.
And you have many, many more things incorporated into how
the databases are used. It is not just the Internet service
providers that are making use of the databases, but it is the
users themselves. It is the application programs that are
running on top of the Internet. It is the protocols that stand
behind the Internet and that operate completely independent of
the service providers.
So there are many more aspects that are incorporated. So to
attempt to take the whole exemption and notice and take down
structure of the whole DMCA perhaps is going too far, but there
are some applications where exemption is a proper way to go
about dealing with this particular issue, to make sure that
there is no question at all that certain viable databases are
completely carved out and left alone from any form of
protection so that we do not hinder that form of our commerce.
Mr. Boucher. So I gather that the answer is if we enact the
Bliley legislation, we should have a provision that addresses
the liability of online service providers, conduit providers,
and others in the stream of distribution whose facilities might
be used by third parties to post illicit material. Is that
correct?
Mr. Tauzin. I believe that is in our bill.
Mr. Politano. Section 106 (a) begins to address that, and I
think it is a good idea that is in there because essentially
AT&T is a pipe or conduit.
Mr. Boucher. Let me ask this question: To the extent that
it is reflected in the legislation, how effective is that
provision? And should we simply enact it as it stands or is it
in need of modification to meet other needs?
Mr. Casey. I think it could be expanded considerably,
although it is a very, very good start. But it needs to take
into account more than just the service provider activities in
order to provide a full and complete exemption that will be
necessary in order to make sure that the Internet continues to
operate as it presently does. And I would be happy to work with
the committee to derive the right language for that.
Mr. Boucher. The House Judiciary Committee in addressing
that issue added a provision that speaks only to the liability
of conduit providers and does not address the general liability
of other people in the chain of distribution. It doesn't
address Internet access providers and Web site operators and
bulletin board operators.
I am wondering if there is a general sense that if we
legislate in that area, that we ought to be somewhat more
comprehensive and address not just conduit providers but the
other providers as well.
Mr. Casey. Yes, I would agree that we do need to be.
Mr. Boucher. Thank you, Mr. Chairman. I appreciate the
extra time.
Mr. Tauzin. The Chair will yield additional time to any
other member. The Chair recognizes himself quickly.
Mr. Pincus, what is your view of that? Should that
liability protection be expanded to include others in the pipe?
Mr. Pincus. We have not actually taken a position on the
OSP question as it applies here. I think we want to study it
carefully. There are some kinds of databases, the databases
that Mr. Black referred to, that are used for the running of
the Internet that we obviously want to carve out completely
regardless of who uses them, and the bill does that.
And I think we want to see what kind of OSP-like people
there are that have to be protected, but we have not yet
engaged in that exercise.
Mr. Tauzin. Use that 30 days wisely and communicate to us.
Mr. Baptiste?
Mr. Baptiste. Yes. If comprehensive protection is not
granted to online service providers and basically the conduit
of the information that is housed on Web sites, it would create
another barrier to entry for startups because when we went to
go and host our site or get online service, they would say,
what are you doing, is there any additional liability that I
will be taking on because of your actions that I may not be
aware of at all.
Mr. Tauzin. Would you go as far as Mr. Casey and Mr.
Boucher have suggested, expanding it to bulletin boards, et
cetera?
Mr. Baptiste. I think comprehensive protections need to be
in place to make sure that we have free access to the services
we need to run a business.
Mr. Tauzin. Mr. Horbaczewski.
Mr. Horbaczewski. Since I seem to be one of the only two
representatives of the people who make them instead of take
them----
Mr. Tauzin. Please be aware that the chairman did invite
others. You are the only two brave souls that walked in here.
Mr. Horbaczewski. The attitude expressed toward OSP
liability reminds me of the old song, I just put them up, who
cares where they come down, that is not my department.
But from the point of view of creator of databases, the
notice and take down protection is absolutely essential to us
because that is the only way to get effective remedies for a
pirated database that goes up on the Internet.
Frankly in exchange for that, we are happy to give up
immunity from liability to online service providers even if it
might be more than they technically actually need. And so I
would encourage the committee to encourage the OSP language as
close to the Digital Millennium Copyright Act as possible.
Mr. Tauzin. Let me point out while Mr. Casey is preparing
to respond, section 106 does have the broad language. It covers
any provider of telecom services or information services, but
it has a qualifier if such provider did not initially place the
database that is the subject of the violation on a system or
network controlled by such provider or operator. So it is
limited in that regard. It would take language to expand it if
we wanted to do that.
Mr. Casey is recognized.
Mr. Casey. As actually one of the initial developers of the
idea for notice and take down in legislation for the copyright
bill, the reason that it worked there and the reason why notice
and take down may not work here is because in the copyright
context what is copyrightable is very well set out.
We have a lot of traditional case law that establishes what
is subject to copyright protection. The problem that we have in
the database context, a database can be anything. It can be
three words; it can be a thousand words. It can be a collection
of a small amount of information or a large amount of
information.
It is really up to the person who produces that set of
information to decide what that database is going to be. And
the definitions that we have of databases are very broad. They
don't have qualitative or quantitative restrictions on them.
So in order to have notice and take down, the problem you
run into is that under that system the person who receives the
notice doesn't bother to investigate or look into why they
received the notice; they simply take the information down.
So you can have in the absence of very strong rules
regarding exactly when you can be sent a notice regarding what
kind of database infringement, you could have an equally
chilling effect where every time you put something up, you get
a notice and off it comes. I don't know if that is the right
approach we want to have.
So if we are going to do that, we need to be careful in
terms of what types of databases exactly can be subject to the
protections.
Mr. Tauzin. Mr. Neal?
Mr. Neal. Citizens of this country very often depend on
their libraries for access to electronic databases. And a lot
of that use is governed by license agreements that we sign with
the publishers. And it is noteworthy in response to Congressman
Boucher's original question that contract law is State-based.
And so I think there is a relevance there to the question
that you originally raised in terms of how libraries behave and
how we serve our users.
Mr. Tauzin. And a final thought, we have chosen not to
engage in this legislation with language dealing with false or
fraudulent databases, and I would like your thoughts on that.
Should there be or should we engage in that exercise in this
legislation or not? Your comments as you use this 30 days to
advise us. Mr. O'Brien?
Mr. O'Brien. Perhaps a general comment again. I think the
strength of H.R. 1858 is that it is fairly cautious in an area
where there is an explosion of new approaches. One of the
concerns that we have is in the academy, and much of what we
develop in scientific research, takes manipulating information
from a previous database and putting a new form of analysis on
it, and I think the approach in H.R. 1858 provides the caution
and the protection, but it does not go so far as to have the
chilling effect on scientific inquiry.
Mr. Tauzin. Thank you. Mr. Markey?
Mr. Markey. Just one quick question again just for Mr.
Pincus. If you could help me to focus in on the fair-use
question and the administration's perspective. There are
obviously going to be many circumstances where people will
reuse information in databases that ought to come under some
legal rubric analogous to the concept of fair use in copyright.
Does the administration support adding this concept into our
database legislation as an explicit provision governing
permitted uses of databases?
Mr. Pincus. Absolutely. We think that it is very important
that in whatever database legislation is finally enacted there
be a fair-use provision that is at least as broad as the
copyright fair-use provision, and it may be appropriate for it
to be broader in certain ways.
Mr. Markey. Does the Judiciary Committee version of this
legislation contain a provision which you believe covers this
subject adequately or would you like additional refinement of
that?
Mr. Pincus. When I testified before the subcommittee of the
Judiciary Committee, we had some concerns about the Judiciary
Committee formulation. But as the bill was reported to the full
committee, those concerns were addressed. The language was
changed, and so we think that language does mirror or take up,
make sure that the same protection is there as in the copyright
world.
Mr. Markey. Could you do better?
Mr. Pincus. Well, you can always do better. That is why we
are here. The question is if you do that, what are you doing on
the investment incentive side, and that is the question of how
that balance has to be struck.
Mr. Markey. Thank you.
Mr. Tauzin. Thank you, Mr. Markey. Obviously this is an
exercise in finding the right balance. You have illuminated our
thought a great deal, and we thank you. I will give you a
chance if you have any final thoughts. Ms. Schlafly?
Ms. Schlafly. I would just like to point out that it is
important that you go slow in this expanding area of the
Internet, but the Judiciary Committee bill, 354, is really a
dramatic change. It is an attempt to get around the Feist
decision and other decisions. It is an attempt to create a
copyright in databases without using the word copyright, to
create a property right, intellectual property and databases
when it is not intellectual property; and that is really quite
dramatic. I would hope that the Congress would follow your
leadership in going in a very cautious way in this whole
expanding area.
Mr. Tauzin. The staff commented if you ever need a job on
the staff, you have defined our jurisdictional arguments very
well. Mr. Black.
Mr. Black. One brief comment on the private right of action
issue. In that regard, we actually toyed with is this something
that maybe we can support and some limited concern about FTC. I
think what we wind up looking at and what is going on in
Congress with Y2K, the same problems well articulated in there
in terms of frivolous and uncertainty, creating a lot of
concern throughout, given the nature of this area. I think we
wind up saying we really shouldn't go there yet.
Mr. Tauzin. Mr. Horbaczewski?
Mr. Horbaczewski. Mr. Chairman, as a representative of
commercial makers, I just beg the committee to move quickly on
this issue. There are investments that have to be made; there
are lead times and plans that we have suffered under
considerable uncertainty for the last 3 years. I would hope
that this would not drag on until the next session.
Mr. Tauzin. I would agree with you. I think predictability
is very important. Mr. Neal.
Mr. Neal. I think the issue of fair use is very critical in
the finalization of this bill. I think it is very important to
look very critically at the fair-use provisions in H.R. 354. I
still think there is some important work there.
Mr. Tauzin. You are preaching to the choir there. This
committee has a huge interest in fair use.
Let me say finally again that we are faced on this
committee with the extraordinary implications of the Internet
on our lives and how we deal with questions of intellectual
property rights and fair use and the flow of information. This
committee generally errs on the side of the free flow of
information. It errs on the side of working out in the
marketplace rather than government dictating the terms. It
generally errs on the side of protecting this free speech
society which we think has done so much for freeing the world
of tyrants, and we appreciate your thoughts on how to make this
cut and balance as carefully as we can.
Phyllis, you mentioned, we are deeply concerned about
property rights, and balancing that is critical. We will do our
best with your help. Use the 30 days wisely. Please come back
to us. We thank you. The hearing stands adjourned.
[Whereupon, at 12:20 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Prepared Statement of the Federal Trade Commission
The Federal Trade Commission is pleased to have this opportunity to
offer this Statement concerning H.R. 1858, the Consumer and Investor
Access to Information Act of 1999.1 The Commission is
responding to Subcommittee Chairman Tauzin's June 11, 1999 letter,
requesting agency views on Title I of H.R. 1858, as an official request
of a Congressional Subcommittee.2
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\1\ Although this Statement makes general reference to ``H.R.
1858,'' it is directed solely to Title I of the Bill. Title II of the
Bill is directed to securities market information.
\2\ See Commission Rule 4.11(b), 16 C.F.R. Sec. 4.11(b).
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H.R. 1858 has four primary objectives: (1) protecting substantial
private investments in collecting and organizing original databases
from certain forms of free-riding by sellers and distributors of
duplicate databases; (2) permitting competition by those who
independently collect and organize rival databases; (3) preserving
access to information contained in databases for legitimate
journalistic, law enforcement, scientific, educational and research
purposes; and (4) denying protection to database owners who seek to
misuse such protection for anticompetitive purposes.
Databases play an important role in promoting innovation and
advancing knowledge in the information age. Further, the emergence of
new digital technologies has greatly increased the accessibility and
usefulness of many databases. However, these same technologies have
also created opportunities for free-riding and misuse. The resulting
public policy challenge is to ensure that the law continues to provide
adequate incentives for database owners both to produce databases and
to allow sufficient access to those databases and the information that
they contain. This challenge is further complicated by the ongoing
nature of innovation, which requires both protecting the incentives of
those who are first to compile a particular type of database and
preserving the opportunities of those who seek to transform existing
databases into new, useful compilations or other products.
The Commission has experience formulating policy and remedies
involving similar kinds of challenges. During the Commission's 1995
Hearings on Global and Innovation-Based Competition, industry,
academia, and legal practitioners provided extensive testimony
concerning the intersection of competition, intellectual property, and
innovation policy. More recently, in cases such as In re Softsearch
Holdings, Inc.,3 In re Automatic Data Processing,
Inc.,4 and In re Provident Cos., Inc.,5 the
Commission has considered the potentially anticompetitive effects of
the increased market power that can result from consolidation among
database owners and vendors.
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\3\ 5 Trade Reg. Rep. (CCH) para. 24,171 (F.T.C. July 28, 1997)
(consent decree) (as condition to merger of only two databases with
certain oil production data, merged firm required to lease data at
reasonable rates to establish a competitor as a second source).
\4\ 5 Trade Reg. Rep. (CCH) para. 24,006 (F.T.C. March 27, 1996)
(consent decree) (as condition to settling charges that the defendant's
acquisition of a rival provider of information services to salvage
yards was intended to monopolize various markets within the salvage
yard information management industry, defendant required to divest the
computer systems and salvage yard parts trading network it acquired in
order to establish a competitor as a second source).
\5\ No. 991-0101, 64 Fed. Reg. 27,991 (F.T.C. May 24, 1999)
(proposed consent decree, subject to public comment) (as condition to
merger of two disability insurance companies, merged firm would be
required to continue to submit insurance data to an independent entity
responsible for aggregating and disseminating industry-wide actuarial
information, with the goal of ensuring that adequate data would be
available to existing competitors and to new entrants).
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Drawing from such experiences, the Commission provided comments on
an earlier proposal for legislative protection of databases in letters
to the Chairman and the Ranking Member of the House Committee on
Commerce last fall.6 In those letters, the Commission stated
that ``[a]dditional legal protections for databases may well be
warranted, especially in light of the ease of piracy of some
databases.'' At the same time, the Commission highlighted several
``areas of concern that may warrant further study,'' particularly
regarding possible unintended, deleterious effects on competition and
innovation that could arise from broad or ambiguous database protection
legislation.
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\6\ Identical letters from Federal Trade Commission to House
Committee on Commerce Chairman Tom Bliley and Ranking Member John D.
Dingell, dated September 28, 1998. The letter to Chairman Bliley is
attached.
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This Statement derives from the same considerations that informed
the Commission's letters last year. It first provides a brief overview
of H.R. 1858. It then summarizes the general issues of intellectual
property and competition policy and the specific concerns raised by the
Commission last year. The Statement then highlights several respects in
which H.R. 1858 appears responsive to those concerns. It also, however,
identifies several possible problems and ambiguities with the Bill that
may warrant further examination. Finally, the Statement addresses the
proposal in H.R. 1858 to assign enforcement responsibility to the
Commission and notes the significant new burden it would place on the
Commission's resources.
i. overview of h.r. 1858
H.R.1858 is designed to provide additional legal protections to
databases that are not entitled to protection under copyright law
following the Supreme Court's decision in Feist Publications v. Rural
Telephone Services,7 which abolished ``sweat of the brow''
copyright protection for non-creative, factual compilations. Although
H.R. 1858 is based on a misappropriation model,8 the Bill
addresses core issues similar to those that arise in the context of
intellectual property policy, as well as antitrust policy. These issues
involve how best to protect both the ability of initial innovators to
realize returns on their investments in developing a database and the
ability of follow-on innovators to access databases to serve as
building blocks for ongoing innovation competition.
---------------------------------------------------------------------------
\7\ 499 U.S. 340 (1991).
\8\ The Supreme Court has described the tort of misappropriation as
taking material that has been acquired as the result of organization
and the expenditure of labor, skill, and money, and then appropriating
that material and selling it as one's own. International News Serv. v.
Associated Press, 248 U.S. 215, 239 (1918). Although state law varies,
a plaintiff asserting a misappropriation claim has generally been
required to prove five elements: (i) the plaintiff generates or gathers
information at a cost; (ii) the information is time-sensitive; (iii) a
defendant's use of the information constitutes free-riding on the
plaintiff's efforts; (iv) the defendant is in direct competition with a
product or service offered by the plaintiffs; and (v) the availability
of other parties to free-ride on the efforts of the plaintiff or others
would so reduce the incentive to produce the product or service that
its existence or quality would be threatened. National Basketball Ass'n
v. Motorola, Inc., 105 F.3d 841, 845 (2d Cir. 1997).
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The Bill defines a database as follows:
``a collection of discrete items of information that have been
collected and organized in a single place, or in such a way as
to be accessible through a single source, through the
investment of substantial monetary or other resources, for the
purpose of providing access to those discrete items of
information by the users of the database. However, a discrete
section of a database that contains multiple discrete items of
information may also be treated as a database.'' 9
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\9\ H.R. 1858, Sec. 101(1).
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``Information'' is defined as including any intangible material capable
of being thus collected and organized, except for ``works of
authorship.'' 10
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\10\ Id., Sec. 101(3).
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The Bill generally prohibits the selling or distributing to the
public in commerce of a ``duplicate'' database ``in competition with''
an original database.11 To be a ``duplicate,'' the second
database must be ``substantially the same'' as the original, and must
have been made by extracting information from the
original.12 To be ``in competition with'' the original, the
second database must ``displace[] substantial sales or licenses of the
original'' and ``significantly threaten[] the opportunity to recover a
return on the investment'' therein.13
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\11\ Id., Sec. 102.
\12\ Id., Sec. 101(2).
\13\ Id., Sec. 101(5).
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This prohibition is subject to an exception for certain specified
``permitted acts,'' 14 similar to the fair use defense in
existing copyright law,15 and to exclusions that reserve to
the public domain government databases and databases required by law,
databases related to Internet communications, computer programs,
individual facts and other individual intangibles, and
telecommunications subscriber list information.16 H.R. 1858
also exempts from liability telecommunications and information services
and facilities providers who act only as conduits for the publication
of duplicate databases.17 In a provision that appears to
have its origins in patent misuse and copyright misuse caselaw, H.R.
1858 denies database protection to those who ``misuse''
it.18
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\14\ Id., Sec. 103.
\15\ 17 U.S.C. Sec. 107.
\16\ H.R. 1858, Sec. 104. The exclusion of protection for databases
required for Internet communications is essential to maintain the open
networking practices that have facilitated the dramatic growth of
electronic commerce in recent years. Computer programs may be protected
by copyright, and otherwise protectable databases are not denied
protection merely because they are included in computer programs.
Telecommunications subscriber list information remains subject to FCC
regulation under the Communications Act of 1934.
\17\ H.R. 1858, Sec. 106(a).
\18\ Id., Sec. 106(b).
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As to enforcement, the Bill vests what the Commission understands
to be exclusive jurisdiction in the Commission to enforce, implement by
rule-making, and seek remedies for violations of its basic
prohibition.19 The Bill also calls upon the Commission to
report to Congress on its effects within three years.20
Subject to a limited preemption of inconsistent State law,21
the Bill preserves Federal and State antitrust, intellectual property,
communications, and contract law.22
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\19\ Id., Sec. 107.
\20\ Id., Sec. 108.
\21\ Id., Sec. 105(b).
\22\ Id., Sec. 105(a), (c), (d).
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ii. the background to this statement: intellectual property and
antitrust policy and the commission's comments on prior proposed
database protection legislation
As noted above, H.R. 1858 raises core issues of how to protect both
investments in databases and access to databases similar to those at
the intersection between intellectual property and antitrust policy. It
is well recognized that despite the apparent tension between the
antitrust and intellectual property laws, the two bodies of law share
the common purpose of promoting innovation and enhancing consumer
welfare.23 Intellectual property law provides incentives for
first-generation innovation by protecting innovators from unfair free-
riding. Antitrust law recognizes that certain misuses of intellectual
property rights may harm competition by, for example, permitting a
monopolist to leverage its market power from the market covered by the
patent or copyright into other markets, or to foreclose a competitor's
or second-generation innovator's access to an important
input.24
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\23\ Atari Games Corp. v. Nintendo of America, Inc., 897 F.2d 1572,
1576 (Fed. Cir. 1990); United States Department of Justice & Federal
Trade Commission, Antitrust Guidelines for the Licensing of
Intellectual Property Sec. 1.0 (1995).
\24\ See generally Antitrust Law Developments (Fourth) at 282-85,
953-81 (1997).
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H.R. 1858 presents issues about how to strike this delicate
balance. As the Commission stated in its letters last year, a
legislative remedy that effectively and accurately targets free-riders
on databases appears desirable. Databases play an integral role in many
facets of our economy, and collecting and organizing factual data is
often an expensive and complex process. Free-riding by those who merely
copy and resell or give away existing databases may reduce incentives
for database providers to create new databases or to introduce existing
databases in new media that can more effectively deliver more
information to consumers. As recent cases such as ProCD v. Zeidenberg
25 and Warren Publishing v. Microdos Data Inc.26
show, the proliferation of digital technologies has rapidly reduced the
costs and difficulty associated with copying and distributing vast
amounts of data, thereby facilitating free-riding. Although it may be
too early to tell, current protections and remedies for database
misappropriation, such as those available under contract and copyright
law, may be inadequate.
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\25\ 86 F.3d 1447 (7th Cir. 1996) (holding that the defendant's
copying of the contents of a CD-ROM database of 3,000 telephone
directories and resale of it in an online format violated the licensing
agreement accompanying the CD-ROM).
\26\ 115 F.3d 1509 (11th Cir.) (en banc), cert. denied, 522 U.S.
963 (1997) (holding that the defendant's copying of a cable system
directory and reselling of it in a software format did not constitute a
copyright violation because of the uncreative nature of the directory).
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In crafting legislation to protect the incentives of first-
generation database producers, however, it is important to keep in mind
the need to preserve opportunities and incentives for follow-on
innovators, who may need access to the initial innovation for use as a
stepping stone.27 Last year, the Commission expressed
several concerns regarding the potential effects on competition of the
database protection legislation then proposed, Title V of H.R. 2281
(the ``Collections of Information Antipiracy Act''). The Commission
highlighted the following dangers inherent in ambiguous language that
could be read to preclude certain reasonable uses of existing databases
to produce new products or services of value to consumers:
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\27\ See generally Federal Trade Commission Staff, Anticipating the
21st Century: Competition Policy in the New High-Tech, Global
Marketplace, vol. I, ch. 6 (May 1996).
15-Year Term. The 1998 bill limited the civil and criminal
liability that it created to a term of 15 years from the date
of ``the investment of resources that qualified the portion of
the [database] for protection under this chapter that is
extracted or used.'' The Commission questioned whether 15 years
was too long a term, given that information technology product
cycles are typically short and misappropriation law has
typically protected only investment in gathering ``hot,'' i.e.,
short-term valuable, information.28 The Commission
also highlighted the uncertainties involved, particularly for a
potential defendant, in attempting to apply any fixed term that
runs from the point of ``investment of resources'' in a
database, given that such investment is often ongoing.
---------------------------------------------------------------------------
\28\ See, e.g., National Basketball,105 F.3d at 845 (``the
surviving `hot-news' INS-like claim is limited to cases where [inter
alia] the information is time-sensitive'').
---------------------------------------------------------------------------
Substantiality of Duplication. The 1998 bill generally
prohibited the extraction of ``all or a substantial part,
measured either quantitatively or qualitatively, of a
collection of information . . . so as to cause harm to the
actual or potential market for that other person . . . '' The
Commission highlighted the vagueness of a ``quantitatively or
qualitatively . . . substantial'' test, and the chilling effect
its uncertainty could have on a potential defendant. The
Commission suggested that copyright precedent could not
properly be applied by analogy, since such precedent is
premised on the facts/expression dichotomy that is unique to
copyright, typically looking for copying of expression that
minimally ``exceeds that necessary to disseminate the facts,''
29 or making stylistic judgments 30 that
are alien to non-expressive collections of data.
---------------------------------------------------------------------------
\29\ See, e.g., Harper & Row Pub., Inc. v. National Enter., 471
U.S. 539, 564 (1985); Salinger v. Random House, 811 F.2d 90, 98 (2d
Cir. 1987); see also Iowa State Univ. Research Found. Inc. v. American
Broadcasting Co., 621 F.2d 57, 61-62 (2d Cir. 1980) (use involving 8%
of a videotape held to be substantial).
\30\ See, e.g., New Era Pubs. Int'l v. Carol Pub. Group, 904 F.2d
152, 158 (2d Cir. 1990).
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Potential Competition. The 1998 bill proposed to protect
claimants of database protection against competition by
duplicators not only in markets actually exploited by the
claimant before entry by the duplicator, but also in
``potential market[s]'' that the claimant specifically planned
to or might typically be expected to exploit in the future. The
Commission highlighted ambiguities in this provision which
could have a chilling effect on follow-on users, and noted that
it appeared to provide more protection for databases than is
available for works protected by existing copyright and
misappropriation laws. Most importantly, the Commission
expressed concern that by effectively enabling a database owner
to exclude others from entering a secondary market without even
entering such a market itself, the 1998 bill could conflict
with a fundamental shared policy of intellectual property and
antitrust policy: encouraging ``the creation of transformative
works.'' 31
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\31\ Luther R. Campbell, aka Luke Skywalker v. Acuff-Rose Music,
Inc., 510 U.S. 569, 579 (1994) (finding a transformative work to be a
fair use under copyright law); see also Restatement (Third) of Unfair
Competition, Sec. 38, cmt. c, at 412-13 (noting general limitation of
misappropriation law to the originator's primary market).
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Single-Source Databases and Anticompetitive Misuse of Database
Protection. The Commission highlighted the ``increased
potential for anticompetitive conduct where there exists only a
monopoly source for a particular type of information.'' The
Commission noted the risk that database protections that
entrench such monopolies may facilitate such anticompetitive
practices as charging supracompetitive prices, restricting
output, leveraging market power into other markets and denying
essential inputs of information to competitors.32
The Commission cautioned that ``antitrust law cannot alleviate
all of the potential competitive problems associated with sole-
source databases,'' since antitrust law permits certain uses of
lawfully acquired monopoly power and the essential facilities
doctrine of antitrust law has been limited in its application
thus far.33
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\32\ Sole source databases have been the subject of substantial
litigation concerning allegations of anticompetitive conduct by a
monopolist. In its 1998 letters, the Commission cited two examples
involving telephone directories: Great Western Directories v.
Southwestern Bell Tel. Co., 63 F.3d 1378 (5th Cir. 1995), modified, 74
F.3d 613 (1996), and Direct Media Corp. v. Camden Tel. and Telegraph
Co., 989 F. Supp. 1211 (S.D. Ga. 1997).
\33\ For discussion of the essential facilities doctrine, see,
e.g., MCI Communs. Corp. v. AT&T, 708 F.2d 1081, 1132 (7th Cir.), cert.
denied, 464 U.S. 891 (1983). For extensive discussion of whether, when,
and how to mandate access to competitively significant inputs, see
Federal Trade Commission Staff, Anticipating the 21st Century:
Competition Policy in the New High-Tech, Global Marketplace, vol. I,
ch. 9 (May 1996).
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The Commission's letters last year concluded by suggesting three
key areas in which the 1998 bill might be improved:
(1) limiting the term of protection to less than 15 years and
precluding perpetual protection for databases that are
maintained on an ongoing basis;
(2) defining more clearly the degree of copying required to trigger
liability; and
(3) excluding ``potential competition'' protection and/or strengthening
``fair use'' type defenses.
iii. the responsiveness of h.r. 1858 to the commission's concerns
H.R. 1858 differs significantly from the former H.R. 2281. Although
the Commission notes several concerns with H.R. 1858 in the next
Section, the Bill appears responsive to several of the Commission's
original concerns.
(a) Substantiality of Duplication. Instead of asking whether a
qualitatively or quantitatively substantial amount of data has been
extracted from the original database, H.R. 1858 asks whether the two
databases are ``substantially the same.'' 34 No formulation
appears possible that would exclude an element of judgment, but this
new formulation appears clearer than that of the 1998 bill, and reduces
the risk that data, as distinct from the database as a whole, will be
protected.
---------------------------------------------------------------------------
\34\ H.R. 1858, Sec. 101(2).
---------------------------------------------------------------------------
The Bill further provides that ``a discrete section of a database
that contains multiple discrete items of information may also be
treated as a database.'' 35 This provision also raises
issues of judgment: how many is ``multiple''? The closest the Bill
comes to answering that question is elsewhere in its definition of
``database,'' in which it requires that a database reflect ``the
investment of substantial monetary or other resources.'' If this is
interpreted as requiring a reasonable common sense determination of
substantiality, small sections of databases that lack real independent
value will be excluded. Thus, the Bill appears to require that the
alleged ``database'' be both (i) discrete and (ii) substantial in terms
of what went into it. Furthermore, the ``discrete section'' provision
does not mandate that such a section be deemed a database; instead, it
``may'' be treated as such. If this is interpreted to allow room for
reasonable judgment as to whether the section is ultimately best
characterized as a database as opposed to a mere extract, it appears
that overprotection of minor elements of a database can be avoided.
---------------------------------------------------------------------------
\35\ Id., Sec. 101(1).
---------------------------------------------------------------------------
(b) Potential Competition. The Bill does not expressly protect
database creators with respect to markets that they might potentially
enter, and requires that the duplicate database ``displace[]
substantial sales or licenses of the database.'' 36 That
which does not yet exist is not normally said to be ``displaced.''
Accordingly, this provision appears to require that there actually be
``sales or licenses'' of the original database in the market in which
the two compete before the duplicate competes therein. In this respect,
H.R. 1858 appears fully responsive to the concerns voiced by the
Commission last year.
---------------------------------------------------------------------------
\36\ Id., Sec. 101(5)(A).
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(c) Single-Source Databases and Anticompetitive Misuse of Database
Protection. H.R. 1858 addresses the monopoly and misuse issues raised
by the Commission last year in Section 106(b). Consistent with the
general policy that factual databases should not be protected more than
copyrighted and patented works, this provision looks to copyright and
patent misuse precedent as a potential guide.37 It also
specifically addresses issues of monopolistic pricing and output
limitations on sole source databases,38 leveraging of
monopoly power into new markets,39 and denial of essential
facilities.40 In these respects, it appears highly
responsive to the Commission's concerns. However, Section 106(b) also
raises several novel issues of interpretation, discussed in the next
Section, which may give rise to uncertainty and litigation.
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\37\ Id., Sec. 106(b)(6).
\38\ Id., Sec. 106(b)(2).
\39\ Id., Sec. 106(b)(3).
\40\ Id., Sec. 106(b)(4).
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iv. substantive issues arising under h.r. 1858
In searching for an appropriate balance between protection and
access to stimulate both first- and second-generation database
production and use, the substantive provisions of the Bill (Sections
101 to 106) make several choices and employ several concepts that may
warrant further study. The principal areas that appear likely to give
rise to concerns or ambiguities are noted below:
(a) Term of Protection. H.R. 1858 contains no term limit to
database protection. This absence eliminates the ambiguities noted by
the Commission in the case of ongoing database
maintenance,41 but heightens concerns regarding possible
perpetual protection. If protection under the Bill were indeed
perpetual, databases would in a sense be more protected than
copyrighted or patented innovation, and the balance between protection
and competition would be tilted against competition.
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\41\ A similar ambiguity may remain: Section 109, the effective
date provision, provides that the Bill applies to the sale and
distribution after its enactment of a database collected and organized
thereafter. Whether databases initially created before the effective
date but updated thereafter will be grandfathered is unclear.
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On the other hand, certain other terms, discussed further below,
might operate to limit the term of protection as a practical matter. As
the Commission noted in its 1998 letters, the common law of
misappropriation has generally limited protection to relatively short
terms despite the lack of a statutory term limit.42 The ``in
competition with'' requirement of Section 101(5) of H.R. 1858 limits
protection to that necessary to prevent a ``significant[] threat [to]
the opportunity to recover a return on the investment in the collecting
or organizing of the duplicated database.'' Under this provision, it
appears that once a database creator that has already recovered its
``return on investment,'' it is no longer entitled to the protection
afforded by H.R. 1858.43 Similarly, the misuse defense of
Section 106(b), which, for sole source databases, may effectively
condition protection on reasonable licensing or sale
terms,44 might provide grounds for limiting protection of
old databases. Nonetheless, as drafted, the Bill provides no clear term
limitation to protection on which a potential defendant could readily
rely.
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\42\ See supra, note 28.
\43\ As noted below, determining what constitutes a ``return on
investment'' within Section 101(5)(B) will require interpretation and
judgment.
\44\ See H.R. 1858, Sec. 106(b)(2).
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The perpetual protection danger and the issue of whether some form
of safe harbor can be constructed to protect those seeking to duplicate
old databases may merit further study.
(b) Section 101(3): Exclusion of Collections of ``Works of
Authorship'' from Protection. Section 101(3) defines ``information'' as
excluding ``works of authorship,'' and thereby excludes collections of
works of authorship from the Bill's database protection regime. This
provision appears ambiguous as to whether the phrase ``works of
authorship'' is intended to incorporate by reference caselaw under the
Copyright Act, 17 U.S.C. Sec. 102. It would be useful to clarify this
ambiguity, and also to clarify the purpose of this
exclusion.45
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\45\ Under existing copyright law, no such distinction is made
between compilations of works of authorship and other compilations. For
each, Feist denies protection based on the ``sweat of the brow,'' but
there may be protection if the work involved in compilation meets the
statutory requirement of originality. See, e.g., Publications Int'l
Ltd. v. Meredith Corp., 88 F.3d 473, 480 (7th Cir. 1996) (``The
creative energies that an author may independently devote to the
arrangement or compilation of facts may warrant copyright protection
for that particular compilation. This also extends to the compilation
of preexisting materials that is the work product of others. There is
no dilution of the originality requirement, for a compilation's
originality flows from the efforts of `industrious collection' by its
author.'') (citations omitted). See also 17 U.S.C. Sec. 101 (``The term
`compilation' includes collective works.'').
---------------------------------------------------------------------------
(c) Section 101(5): The ``In Competition With'' Requirement. As
noted above, the requirement in H.R. 1858 that a duplicate be ``in
competition with'' the original database to give rise to potential
liability appears responsive to the Commission's concerns about prior
proposals that might have protected database owners with respect to
markets that they have yet to enter. The requirement that ``the
opportunity to recover a return on the investment in the collection or
organizing of the duplicated database'' be ``significantly
threaten[ed]'' 46 also appears consistent with the
underlying policy goals: the purpose of protection is to provide an
appropriate incentive for database creation, not opportunities for
monopoly profits over and above those necessary to stimulate
production.
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\46\ H.R. 1858, Sec. 101(5)(B).
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The more difficult issue, which may merit further study, is what
level of return should be protected. The insertion of the word
``reasonable'' before ``return'' may be appropriate as a start to
encourage those administering the Bill to develop standards and
precedents regarding what level of return is reasonable and can be
expected. Precedents and principles from the utility regulation context
could be consulted in this regard.47
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\47\ Similar criteria have been used in the regulated utility
context. Experience in that context indicates that determining what is
a reasonable return on investment requires judgments concerning the
appropriateness of the utility's valuation of its assets, appropriate
rates of depreciation and the appropriate rate of return to compensate
for the level of business risk in the market concerned. Since Federal
Power Commission v. Hope Natural Gas Co., 320 U.S. 591 (1944), in which
the Supreme Court described the rate-setting process as one of
``pragmatic adjustments,'' id., at 602, and ``balancing of the investor
and the consumer interests,'' id., at 603, courts have generally been
highly deferential to regulators in this area, recognizing that ``[t]he
economic judgments required in rate proceedings are often hopelessly
complex and do not admit of a single correct result.'' Duquesne Light
Co. v. Barasch, 488 U.S. 299, 314 (1989).
---------------------------------------------------------------------------
(d) Sections 101(6) and 104(a): Government Databases. Following the
lead of the Copyright Act,48 the Bill appropriately avoids
creating private rights that would take government-created or
government-funded information and databases out of the public domain.
At the same time, the Bill recognizes that private investment in
compilations that include substantial government data may be worthy of
protection. In Section 104(a)(3), the Bill also helpfully preserves the
ability of government entities to minimize uncertainty by establishing
specific rules to govern specific databases by law or by contract. It
is not readily apparent why the exclusion of government information
from database protection is generally limited (under the present Bill
as under the Copyright Act) to federal government information; as a
matter of general policy, it appears desirable to keep state, local and
foreign government-created information in the public domain as well.
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\48\ See 17 U.S.C. Sec. 105.
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Under Section 104(a)(2), as under Section 105 of the Copyright Act,
the most difficult issue likely to arise is the severance issue: when
and how should private investment in a database containing
predominantly government information be compensated? Under the
Copyright Act, the copyright holder must establish ``substantial
similarity between those elements [excluding governmental data and
organization], and only those elements, that provide copyrightability
to the allegedly infringed compilation.'' 49 The federal
courts of appeals are currently split on the application of this test
to a single factual issue: the incorporation into competing databases
of West Publishing Company's star pagination from its database of
judicial opinions.50 This and similar issues may be expected
to arise under H.R. 1858.
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\49\ Matthew Bender & Co., Inc. v. Hyperlaw, Inc., 158 F.3d 693,
704 (2d Cir. 1998) (citation and quotation marks omitted), cert.
denied, 522 U.S. 3732 (1999).
\50\ Compare id. (finding insufficient similarity and denying
infringement) with West Pub. Co. v. Mead Data Central, Inc., 799 F.2d
1219 (8th Cir. 1986), cert. denied, 479 U.S. 1070 (1987); see also
Oasis Pub. Co. v. West Pub. Co., 924 F. Supp. 918, 922-25 (D. Minn.
1996) (maintaining that the Eighth Circuit case remains good law after
Feist).
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(e) Section 103: Permitted Acts. Section 103 appears intended to be
the Bill's equivalent to the fair use defense in copyright. Unlike
Section 107 of the Copyright Act, however, Section 103 limits its
permitted acts to four specific enumerations. This poses a danger that
additional valuable transformative uses that might emerge in the new
information economy and cannot currently be specifically anticipated
might be stifled. A broader provision along the lines of Section 107 of
the Copyright Act that would provide a general defense for
substantially transformative uses appears to merit serious
consideration; 51 such a provision could use the current
enumeration in Section 103 or a similar enumeration as a non-exclusive
starting point.
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\51\ The Copyright Act provision cannot provide a complete model
for the Bill, since it builds into the affirmative fair use defense
considerations of substantiality of copying and displacement of sales
of the copyrighted work that have their analogs in Sections 101 and 102
of the Bill. However, its open-ended approach, citing a non-exclusive
list of permissible ``purposes such as criticism, comment, news
reporting, teaching (including multiple copies for classroom use),
scholarship, or research,'' 17 U.S.C. Sec. 107, enables courts to focus
on the underlying policy of ``balancing the need to provide individuals
sufficient incentives to create public works with the public's interest
in the dissemination of information,'' Hustler Magazine Inc. v. Moral
Majority Inc., 796 F.2d 1148, 1151 (9th Cir. 1986), rather than
focusing on specific categories.
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In addition, several aspects of the specific subsections of Section
103 raise questions. Section 103(a) usefully clarifies that the
independent creation of an identical database is not prohibited.
The law enforcement exception in Section 103(c) appears plainly
appropriate with respect to government officers, agents or employees.
The interpretation of the phrase ``lawfully authorized investigative,
protective, or intelligence activities'' is, however, unclear. Is it
intended to be narrowly limited to governmental action for the purpose
of preventing, detecting or prosecuting crime? Or does it encompass a
broader array of activities, such as disseminating information to the
public on the whereabouts of convicted or alleged violent sexual
offenders, commercial sale of private intelligence information, or
dissemination by private entities of information received from law
enforcement officials? 52
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\52\ For example, Section 6254(f)(3) of the California Government
Code requires that law enforcement agencies publish upon request ``the
current address of every individual arrested by the agency and the
current address of the victim of a crime, where the register declares
under penalties of perjury that the request is made for a scholarly,
journalistic, political, or governmental purpose, or that the request
is made for investigation purposes by a licensed private investigator .
. . '' Does Section 103(c) exempt from liability private entities who
receive databases under this provision and then publish them, or is the
exception limited to law enforcement officials? Also, is the law
enforcement officials' compliance with the California statute itself a
``lawfully authorized investigative, protective, or intelligence
activit[y]''?
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Data gathering and dissemination in many of these contexts raises
significant privacy and, in some cases, First Amendment concerns. For
example, in United Reporting Pub. Corp. v. California Highway
Patrol,53 the Ninth Circuit declared unconstitutional a
California law 54 restricting the permitted uses of arrestee
identity and address information provided by law enforcement agencies
to non-commercial uses (plus media reporting). The case is now pending
before the Supreme Court.55 The effects of Section 103(c) on
such First Amendment and privacy issues appear to merit further study.
---------------------------------------------------------------------------
\53\ 146 F.3d 1133 (9th Cir. 1998).
\54\ Cal. Gov. Code Sec. 6254(f)(3), supra, note 52.
\55\ See Los Angeles Police Dep't v. United Reporting Pub.
Corp.,119 S. Ct. 901 (1999) (granting a writ of certiorari to review
the Ninth Circuit's decision).
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The limitation of Section 103(d)'s exemption for ``scientific,
educational or research uses'' to uses that are not ``part of a
consistent pattern engaged in for the purpose of direct commercial
competition'' with the database creator also gives rise to a
potentially troublesome ambiguity: it is not clear how the undefined
term ``direct commercial competition'' compares with the ``in
competition with'' element of the basic prohibition, which, as
discussed above, appears limited (as suggested in the Commission's 1998
letters) to actual (as distinct from potential) competition. Unless
there is a specific policy goal to be served by using a different term,
it would be helpful to simplify matters by using the same term in both
sections.
Similarly, whereas the basic prohibition applies to ``sell[ing] or
distribut[ion],'' 56 Section 103(d) refers instead to
``duplicat[ion]'' as the exempted act. This exemption could be read
literally as valueless--it exempts an activity, mere duplication, that
is not prohibited--leaving scientific, educational and research users
of databases without an equivalent to the fair use protection that they
enjoy with respect to copyrighted materials.57 Clarity would
be better served, and the danger of chilling legitimate scientific,
educational and research activities would be lessened, by specifying
the circumstances in which the prohibited acts--selling and
distributing--are exempted.
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\56\ H.R. 1858, Sec. 102.
\57\ See, e.g., 17 U.S.C. Sec. 107's inclusion of the duplication
and distribution of ``multiple copies for classroom use'' within its
partial enumeration of fair uses.
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(g) Section 106(b): Misuse Defense. As discussed above, the misuse
defense created by Section 106(b) appears responsive to concerns
expressed by the Commission last year regarding potential
anticompetitive uses of database protection. The policy concerns
underlying antitrust law suggest that misuse defenses should be no less
available in response to database protection claims than they are in
response to copyright and patent infringement claims. In addition, the
equitable principle traditionally underlying misuse defenses, the
``unclean hands'' doctrine,58 suggests that the defense
could be used to deny protection to database creators who misuse their
databases in other ways, such as denying consumers access to personal
information about themselves contained on the database.
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\58\ See, e.g., Alcatel USA, Inc. v. DGI Techs., Inc., 166 F.3d
772, 792 (5th Cir. 1999).
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Section 106(b)(6) assists in the interpretation of the misuse
provision as a whole by directing attention to patent and copyright
misuse precedents. In addition, three of the factors identified by the
Bill as relevant to a determination of misuse--the reasonableness of
sale or licensing terms for sole source databases,59 tying
of database licensing or sale with other products or
services,60 and prevention of access to necessary
information 61--correspond to three established concerns of
antitrust policy identified in the Commission's letters last year:
monopolistic pricing and output limitation, leveraging of monopoly
power, and denial of access to essential facilities. These provisions
are far from self-executing: for example, the question of what
licensing or sale terms are ``reasonable'' under Section 106(b)(2)
raises issues similar to those discussed above in relation to Section
101(5)(B)'s ``return on investment'' criterion. But caselaw exists in
most of these areas that might be useful in developing appropriate
principles to guide application of these provisions.62
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\59\ H.R. 1858, Sec. 106(b)(2).
\60\ Id., Sec. 106(b)(3).
\61\ Id., Sec. 106(b)(4).
\62\ See, e.g., Morton Salt Co. v. G.S. Suppiger, 314 U.S. 488
(1942) (patent misuse: where a patent is used, by means of tying, to
secure monopoly power over products or services outside the scope of
the patent's protection, a court will not enforce the patent in such a
way as to assist such efforts); B.B. Chem. Co. v. Ellis, 314 U.S. 495,
498 (1942) (patent misuse: same, and all infringement suits will be
denied until patent misuse is ``fully abandoned''); Alcatel, 166 F.3d
at 793 (copyright misuse: where a plaintiff ``has used its copyrights
to indirectly gain commercial control over products [the plaintiff]
does not have copyrighted, then copyright misuse may be present'');
Practice Mgmt. Information Corp. v. American Medical Ass'n, 121 F.3d
516, 521 (9th Cir. 1997) (copyright misuse: conditioning a copyright
license on the licensee's promise not to use a competitor's products
constituted misuse), modified on other grounds, 133 F.3d 1140 (1998);
Triad Sys. Corp. v. Southeastern Express Co., 64 F.3d 1330, 1337 (9th
Cir. 1995) (copyright misuse: where a plaintiff merely forbids outright
copying of its copyrighted software, and does not attempt to prohibit
legitimate reverse engineering of competing software, there is no
copyright misuse).
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In other respects, however, the misuse provision appears novel and
potentially ambiguous. First, its subsections merely list factors to be
considered in making the ultimate determination of whether ``misuse''
has occurred. ``Misuse'' itself is not defined, and the intent of
Section 106(b)(6)'s instruction to consider copyright and patent misuse
doctrine to ``the extent to which [it] may appropriately be extended to
the case or controversy'' is unclear. It may be useful to clarify
whether it is intended as an open-ended delegation to consider whether
databases should be more or less protected than copyrights or patents
and to adjust misuse precedents from those contexts accordingly, or
whether the intention is to mandate consistency with those precedents
unless specific factual issues render them inapplicable in the
particular case. If the former, a determination of ``misuse'' threatens
to become highly subjective: the whole point of the basic prohibition
is to create a degree of exclusivity that the database creator can
exploit for profit, but how much exploitation is too much? If the
latter, significant distinctions between the misappropriation-style
database rule and the intellectual property regimes of patent and
copyright law may be neglected. For example, the filing of an
infringement action can never be misuse under patent law precedent,
while the filing of database protection lawsuits that assert claims
that cannot be readily verified at the Patent and Trademark Office
(since databases do not have to be registered) could be a highly
effective and anticompetitive way of erecting barriers to entry in the
database industry.
The role of the six enumerated factors is also unclear. Read
literally, Section 106(b) consigns them to be considered ``among other
factors'' in determining the ultimate issue of misuse, but can any one
of them suffice alone? For example, can perfectly lawful
``technological measures'' taken to prevent unlawful copying, which
then have the side-effect of frustrating permitted research or news
media uses, constitute ``misuse'' pursuant to Section 106(b)(1), or
does the term ``misuse'' itself entail some notion of wrong-doing?
63 By its nature, an assertion of database protection may
well raise barriers to entry in a relevant database market; under what
circumstances might the ``manner of asserting'' data protection rights
amount to misuse pursuant to Section 106(b)(5)?
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\63\ In last year's Digital Millennium Copyright Act, Congress
addressed the use of technological measures to control access to
copyrighted works. The new 17 U.S.C. Sec. 1201 attempts to balance
protection against infringement with access for legitimate uses by (1)
prohibiting ``circumvention'' (e.g., descrambling or decryption) of
technological access control measures, and (2) instructing the
Librarian of Congress to exclude from that prohibition, and to publish,
works whose protection thereby would adversely affect noninfringing
uses.
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Also, when must the misuse occur? Is the determination to be made
in the individual case, i.e., whether the database protection claimant
has injured the alleged violator by misuse, or over the whole course of
the claimant's conduct, such that, for example, improper frustration of
the ability of researchers to engage in permitted acts could result in
forfeiture of protection as against all-comers, including direct
commercial competitors? The latter alternative, which may be suggested
by the text of Section 106(b)(1), could potentially provide an
effective incentive to ensure access to databases for non-profit and
other permitted users who might not themselves be in a position to
complain of misuse or risk litigation. Existing copyright and patent
misuse doctrine generally denies all enforcement against infringement
while misuse persists, but allows the intellectual property owner to
revive its rights by purging itself of the misuse.64
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\64\ See, e.g., B.B. Chem. Co., 314 U.S. at 498 (patent misuse:
``It will be appropriate to consider [the patentee's] right to relief
when it is able to show that it has fully abandoned its present method
of restraining competition in the sale of unpatented articles and that
the consequences of that practice have been fully dissipated.'');
Alcatel, 166 F.3d at 792, n. 81 (copyright misuse: ``A finding of
misuse does not . . . invalidate plaintiff's copyright. Indeed, . . .
``[plaintiff] is free to bring a suit for infringement once it has
purged itself of the misuse.' '') (citation omitted).
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v. the commission's proposed role under h.r. 1858
The most noteworthy remaining feature of the Bill, and one that
distinguishes it from all other proposals that the Commission has
reviewed and from existing intellectual property and misappropriation
laws, is that it assigns enforcement authority to the
Commission.65 This proposed assignment raises several
issues.
---------------------------------------------------------------------------
\65\ H.R. 1858, Sec. 107.
---------------------------------------------------------------------------
(a) Absence of criminal liability. Unlike the 1998 bill, H.R. 1858
does not create any new criminal liability. Although willful copyright
infringers can incur criminal liability,66 misappropriation
and other laws concerning the copying and dissemination of factual
information have traditionally been purely civil. This tradition
reflects First Amendment concerns and a salutary general policy
favoring freedom of information. Moreover, the interpretive issues
noted in Section V above and the residual ambiguities that are inherent
in the enterprise of crafting a new legal regime to protect formerly
unprotected works raise the concern that the threat of criminal
liability could chill innovation and competition as a result of
uncertainties in the law. It therefore appears appropriate to exclude
criminal liability from the Bill.
---------------------------------------------------------------------------
\66\ 17 U.S.C. Sec. 06(a).
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(b) Is a private civil right of action excluded? Section 107 of
H.R. 1858 confers jurisdiction on the FTC, but it does not expressly
address whether a private right of action may be maintained to enforce
the basic prohibition of Section 102. The Commission tentatively
interprets the Bill, in the light of Supreme Court precedent on implied
rights of action,67 as excluding any private civil right of
action: the Bill appears to intend that database owners harmed by
duplicates address their complaints to the Commission instead of the
courts. However, the Bill is also somewhat ambiguous: Section 106(b)
directs ``a court,'' rather than the Commission, to consider a list of
factors in determining the merits of a misuse defense. Express
clarification of legislative intent in this regard could avert future
litigation.
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\67\ See, e.g., Meghrig v. KFC Western, Inc., 516 U.S. 479, 487-88
(1996) (``where Congress has provided `elaborate enforcement
provisions' for remedying the violation of a federal statute, . . .
``it cannot be assumed that Congress intended to authorize by
implication additional judicial remedies for private citizens suing
under' the statute.'') (citation omitted).
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(c) FTC Enforcement. The Bill would entrust the Commission with its
enforcement. The Commission appreciates the confidence of Congress and
the recognition of the Commission's experience with the underlying
policy issues that this appears to reflect. The Commission also
appreciates that the threat of private actions could be used by market
incumbents to threaten potential entrants, potentially raising
difficult issues for courts called upon to interpret the misuse defense
in Section 106(b).
However, the enforcement burden would appear to be considerable,
particularly if the Commission were the sole statutory
enforcer.68 No federal administrative agency has previously
had jurisdiction over claims of misappropriation or infringement of
intellectual property-type rights, and the scope of issues that might
arise in the emerging information economy under such a new legal regime
is not easy to forecast. As noted above, the Bill would raise several
complex rule-making and adjudicative issues, including assessing
substantiality of investment, degree of copying, disaggregation of
governmental and private content in databases, what constitutes misuse,
and the effects of the duplicate database on the original database
creator's market and returns to investment.
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\68\ If, as the Commission understands, state common law
misappropriation suits involving databases will generally be preempted
under Section 105(b), such cases would be effectively federalized and
further add to the enforcement burden.
If called upon to enforce the legislation, the Commission would, of
course, exercise its best judgment as to enforcement priorities.
Section 107(d) provides that the Commission ``shall prevent''
violations ``in the same manner, by the same means, and with the same
jurisdiction, powers and duties as though all applicable terms and
provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.)
were incorporated into and made a part of this title.'' This appears to
incorporate by reference the Commission's enforcement discretion under
Section 5(b) of the FTC Act, which instructs the Commission to issue a
complaint respecting a violation ``if it shall appear to the Commission
that a proceeding by it in respect [of the violation] would be to the
interest of the public.'' It is well established that this standard
gives the Commission wide latitude in the allocation of its scarce
enforcement resources. See, e.g., Federal Trade Commission v.
Universal-Rundle Corp., 387 U.S. 244 (1967); Encyclopedia-Britannica,
Inc. v. Federal Trade Commission, 605 F.2d 964 (7th Cir. 1979), cert.
denied, 445 U.S. 934 (1980); see also Montgomery Ward & Co. v. Federal
Trade Commission, 379 F.2d 666 (7th Cir. 1967) (court of appeals has no
general authority to second-guess Commission's determination of what is
in the public interest); Action on Safety and Health v. Federal Trade
Commission, 498 F.2d 757 (D.C. Cir. 1974) (Commission's decision to
deny intervention to consumer protection organization was an agency
action committed to agency discretion and therefore exempt from
judicial review). Although the factors enumerated in Section 106(b) are
addressed to ``a court'' rather than the Commission, the potential for
misuse and competitive implications more generally would appear to be
appropriate considerations in this context.
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Finally, Section 108 would create a further, reporting
responsibility for the Commission. Under the jurisdiction conferred by
Section 6 of the Federal Trade Commission Act, the Commission has
substantial experience with gathering information, holding hearings and
issuing reports on important matters of competition and consumer
protection policy. The importance of the issues dealt with in the Bill,
and the policy questions regarding the optimal balancing of access and
protection that it raises, suggest that ongoing study could be
valuable.
conclusion
H.R. 1858 strives to strike a balance between protecting database
producers from unfair free-riding and preserving factual information in
the public domain and allowing transformative uses of databases and
fair competition. Like traditional antitrust and intellectual property
policy, it aims to stimulate both first- and second-generation
innovation in the interests of consumers.
The Bill demonstrates a responsiveness to competition concerns
raised by the Commission last year in its definitions of the basic
prohibition, permitted uses and exclusions, and the misuse defense.
However, each of these definitions also gives rise to ambiguities and
potential concerns, and the differences between the permitted uses
under the Bill and the fair use defense in copyright may also warrant
further examination.
The Bill's omission of criminal liability appears appropriate,
given its potential chilling effects on speech, innovation and
competition in this context. Its assignment of authority to the
Commission would impose a significant new burden on the Commission's
resources.
In sum, the Bill's approach to database protection applies sound
general principles underlying antitrust and intellectual property
policy to difficult issues raised by the emerging information economy,
but raises several issues that may warrant further examination. The
Commission stands ready to assist the Subcommittee or the full House
Committee on Commerce in that examination if called upon.
______
Prepared Statement of Association of Directory Publishers
The Association of Directory Publishers (ADP) thanks Chairman
Tauzin for the invitation to submit the following statement for the
record in connection with the June 15, 1999, hearing of the
Telecommunications, Trade, and Consumer Protection Subcommittee on H.R.
1858, the ``Consumer and Investor Access to Information Act of 1999.''
The Association of Directory Publishers (ADP) is a century-old
international trade association of over 180 independent telephone
directory publishers employing thousands of individuals throughout the
country. ADP members provide consumers with telephone directories that
include white and yellow pages listings, plus community information.
These products are indispensable links in the communications network
that binds communities together.
Consumers have benefited greatly from the competition that ADP's
members have brought to the directory industry. Many of the innovations
independent publishers have introduced are now standard in directories
today. They were the first to introduce coupons and maps to directory
products. Independent publishers created the first community sections
with helpful local information, such as frequently called service and
government numbers, school information, sports schedules, and seating
diagrams for auditoriums and stadiums. Recently, independent publishers
were the first publishers to add zip codes to the white page listings,
again expanding the usefulness of directories. These enhancements were
quickly copied by phone company publishers, thus making all phone books
more useful to consumers and businesses.
The Association of Directory Publishers supports the inclusion of
two sections in H.R. 1858 that will ensure the ``status quo'' for
subscriber list information. These provisions would ensure that
directory publishers continue to have access to subscriber lists (name,
address and phone number) under the ruling by the Supreme Court in
Feist Publications v. Rural Telephone Service Co., 499 U.S. 340 (1991)
and Sec. 222(e) of the Communications Act.
Specifically, the applicable provisions in H.R. 1858 are the
following:
Sec. 104 (e) Subscriber List Information.--
Protection for databases under section 102 does not extend to
subscriber list information within the meaning of section
222(f) of the Communications Act of 1934 (47 U.S.C. 222(f)).
Nothing in this subsection shall affect the operation of
section 222(e) of such Act, under which a telecommunications
carrier provides, upon request, subscriber list information for
the purposes of publishing directories in any format under
nondiscriminatory and reasonable rates, terms, and conditions.
Sec. 105(d) Communications Act of 1934.--
Nothing in this title shall affect the operation of the
Communications Act of 1934 (47 U.S.C. 151 et seq.) or the
authority of the Federal Communications Commission.
As directory publishers, ADP members need complete and up-to-date
subscriber list information to produce their products. Local phone
companies must gather this information as part of providing local phone
service, and they therefore have sole access to such information and
monopoly control over it.
The local phone companies' directory publishing arms currently
control 93% of the directory market, and the telephone companies have
long used their control over subscriber list information to restrict
our competitive access to this essential data. Their anti-competitive
practices include unreasonable prices, refusal to sell updates, and
even outright refusal to sell listings at any price or on any terms.
In response to years of anticompetitive behavior by phone companies
and through the leadership of this Committee, Congress included
language in the historic 1996 Telecommunications Act to ensure
competition in the telephone directory business. In the new Section
222(e), Congress enunciated in plain terms the right of independent
publishers to access subscriber list information under reasonable
rates, terms and conditions. Sections 222(e) and 222(f)(3) of the
Communications Act provide:
Subscriber List Information.--Notwithstanding subsections (b), (c),
and (d), a telecommunications carrier that provides telephone
exchange service shall provide subscriber list information gathered
in its capacity as a provider of such service on a timely and
unbundled basis, under nondiscriminatory and reasonable rates,
terms, and conditions, to any person upon request for the purpose
of publishing directories in any format. [47 U.S.C. 222(e)]
Subscriber List Information.--The term ``subscriber list
information'' means any information--
(A) identifying the listed names of subscribers of a carrier and
such subscribers' telephone numbers, addresses, or primary
advertising classifications (as such classifications are
assigned at the time of the establishment of such service), or
any combination of such listed names, numbers, addresses, or
classifications; and
(B) that the carrier or an affiliate has published, caused to be
published, or accepted for publication in any directory format.
[47 U.S.C. 222(f)(3)]
The legislative history on this provision clearly documents the
abuses ADP members suffered over the past decade. Some examples
include: local exchange carriers charging excessive and discriminatory
prices, requiring the purchase of listings on a bundled statewide basis
when independent publishers needed only listings for one community,
and, in some cases, outright refusals to sell listings or updates. Sec.
222(e) was enacted to prevent telephone companies from exercising their
de facto monopoly over essential factual information--which arises
entirely as a byproduct of their provision of regulated local telephone
exchange service--to restrict or prevent competition in the unregulated
and potentially competitive directory advertising business. See, e.g.,
House Rept. 104-204, Part 1, pp. 89-90; 142 Cong. Rec. E184 (daily ed.
Feb. 6, 1996)(statement of Rep. Paxon); 142 Cong. Rec. H1160 (daily ed.
Feb. 1, 1996)(statement of Rep. Barton).
In enacting this provision in 1996, the Commerce Committee and
Congress intended to build on independent publishers' pre-existing
ability to copy published listings, as authorized under the 1991 Feist
case. The statute was meant to promote reasonable licensing agreements,
not revoke the ability of independent publishers to copy listings in
cases where licensing agreements are not concluded.
The Feist case is named for Tom Feist, who is an ADP member. Mr.
Feist was left with no choice but to copy listings in order to provide
consumers a convenient, one-book directory covering eleven different
service areas, because one of the telcos refused to license its
listings to him. The Supreme Court ruled in Feist's favor, concluding
that ``[f]acts, whether alone or as part of a compilation, are not
original and therefore may not be copyrighted.'' (Feist Publications v.
Rural Telephone Service Co., 499 U.S. 340, 350 (1991)). Nor could the
phone company secure a copyright in its compilation of these facts,
because the coordination and arrangement of telephone listings in
alphabetical order is ``not only unoriginal, it is practically
inevitable.'' (Id. at 363) Moreover, the Court noted that the phone
company's selection of listings lacked the requisite originality
because the state required the company to publish the names and numbers
of its subscribers as a condition of its monopoly franchise. (Id.)
Without Sections 104(e) and 105(d), which exclude subscriber list
information from H.R. 1858, it could be argued that an independent
publisher's use of such information violates Sec. 102's prohibition
against distribution of duplicates.
The need for independent publishers to continue to rely on the
ability to access listings--as affirmed by the Supreme Court in Feist--
is best demonstrated by the fact that the abuses this subcommittee
sought to end in enacting Section 222(e) continue unabated today. When
reasonable licensing arrangements cannot be worked out with the phone
companies, independent publishers are left with no alternative but to
exercise the ``last resort'' option of doing what Tom Feist did and
copy listings out of the phone company's book.
ADP believes that many local phone companies are violating Section
222(e). Actual examples of such illegal conduct include:
Phone companies continue to earn profits only a monopolist can
get away with. While one local phone company has testified that
it earns a 1,300% profit when selling its listings for 4 cents/
listing, other local phone companies garner even more excessive
profit margins because they sell listings for far more--40, 50,
60, 75 cents, even as much a 1.67 per listing.
Local phone companies charge different prices for the exact
same listing depending on how the publisher intends to use the
directory. For instance, some local phone companies triple
their price if the listing will be used in more than one
printed directory and charge still more if the listing will be
used in a CD-ROM directory.
Several local phone companies simply won't provide updates to
ADP members--these are new connects, disconnects and changes of
address. Other local phone companies do provide updates, but
impose unreasonable prices and restrictions.
Since the Telecommunications Act of 1996 was passed, a new and
economically threatening problem has arisen for independent directory
publishers. Incumbent local exchange carriers (ILECs) are now
collecting subscriber list information from competitive local exchange
carriers (CLECs) as a condition of interconnection agreements. While
many ILECs have regularly passed these listings on to their own
publishing affiliates, unfortunately, many ILECs have steadfastly
withheld these CLEC listings from independent publishers, and even
refused to pass them on when directly requested by a CLEC.
ADP members are fearful that even more egregious abuses would occur
without Feist. The prices telephone companies charge independent
publishers to license listings now are constrained, as a practical
matter, primarily by the right of independent publishers to copy white
pages listings. If that right were removed and copying deemed a
misappropriation, then Congress' goal of ensuring reasonable pricing
under Section 222(e) of the Communications Act will be seriously
undermined.
The Copyright Office has recognized the special circumstances
relating to phone listings in its August 1997 Report on Legal
Protection for Databases. In cases involving sole source data, of which
telephone subscriber information is a ``prototypical example,'' the
Copyright Office observes, ``[u]nless the producer chooses to make such
data freely available, it is simply not possible for anyone else to
obtain it independently.'' (Copyright Office Report, 1997, p. 102)
Dr. Laura D'Andrea Tyson similarly has noted the special
circumstances relating to telephone listings in her study, Statutory
Protection for Databases: Economic & Public Policy Issues. She
observes, ``the factual situations of the Feist case [i.e., telephone
listings] are in reality much closer to the kinds of concerns addressed
in the antitrust law under the rubric of so-called ``essential
facilities'' than they are to the kinds of concerns raised by a typical
`database piracy' case.'' She concludes, ``[w]hen data is generated by
a government-created monopolist, it is not appropriate to allow the
monopolist to control database products building on that data.'' (Tyson
and Sherry, 1997, pp. 24-25)
ADP appreciates the inclusion of Sections 104(e) and 105(d) in the
bill. These provisions will preserve the policy established by Congress
in Sec. 222(e), as well as allow publishers access to listings, in
accordance with the Feist decision.
______
AT&T
Washington, DC 20036
July 9, 1999
The Honorable W.J. Tauzin
Chairman
Subcommittee on Telecommunications, Trade and Consumer Protection
316 Ford House Office Building
Washington, D.C. 20515
Re: H.R. 1858
Dear Chairman Tauzin: In response to your questions at the June 16
hearing on H.R. 1858, the Consumer and Investor Access to Information
Act of 1999, AT&T's witness, Mr. Frank Politano, would like to submit
additional material for inclusion in the hearing record. This material
is attached.
If there is anything additional that AT&T can do to be helpful to
you and the members of the Subcommittee as work continues on H.R. 1858,
please do not hesitate to contact me.
Sincerely,
Jot D. Carpenter, Jr.
Attachment
cc: The Hon. Thomas J. Bliley, Jr.
The Hon. Edward J. Markey
Additional comments of AT&T following the June 15 hearing of the
Telecommunications, Trade and Consumer Protection Subcommittee of the
House Commerce Committee on H.R. 1858:
1. section 104(b) databases related to internet communications
As we stated in our written testimony, we believe that it is
important to make clear that all databases associated with the
operation of the Internet are exempted from the scope of the bill. The
current exemption for ``the function of addressing . . .'' arguably
includes the Internet domain name zone files, which must be replicated
across many parties to ensure the proper functioning of the Internet.
But it should also expressly include databases related to the
assignment and registration of Internet domain names. A clarification
of this nature would protect these databases from commercial ownership
and preserve the proper functioning of the Internet. It would also
ensure that companies have access to information vital to police their
brands and identify trademark infringements. It is also important that
this clarification be made in a way that allows for changes that may be
made to Internet naming schemes in the future. Internet domain naming
schemes are an evolving area (being worked at the Internet Engineering
Task Force, for example).
Proposed addition to 104(b):
(3) in the course of assigning or registering Internet
addresses or domain names
2. Should Congress rely on existing state misappropriation laws to
address the issue of database protection?
During the hearing, Chairman Tauzin invited witnesses to comment
further on the adequacy of current state laws in this area. AT&T has
considered this issue carefully and does not believe state
misappropriation laws adequately or appropriately address the issue.
Reliance on state misappropriation laws would lead to inconsistent
results, forum shopping and is antithetical to national treatment of
intellectual property matters.
State common law unfair competition doctrine has sometimes provided
a remedy for ``misappropriation'' claims usually relating to the narrow
issue of dissemination of ``hot news''. The current federal copyright
statute, however, preempts state law claims that enforce rights
``equivalent'' to exclusive copyright protections when the work at
issue falls within the scope of copyright protection.
Federal copyright law has thus narrowed the cognizable claims under
state law and, as recently expressed in National Basketball Ass'n v.
Motorola, Inc., 105 F. 3d 841 (2 Cir. 1997), has limited state
misappropriation claims to ``hot news'' cases where each of the
following elements must be met: (1) a plaintiff generates information
at a cost; (2) the information is time sensitive; (3) the defendant is
in direct competition with the plaintiff, (4) the defendant uses the
information to free-ride on the plaintiff's efforts; and (5) the
ability of other parties to free-ride on the plaintiff's efforts would
so reduce the incentive to produce the generic or product featuring the
information that its existence or quality would be substantially
threatened.
While Motorola may provide adequate protection for ``hot news'', we
understand the desire to protect beyond the ``hot'' period. It is
unclear whether the states would be willing to push beyond the hot
period. This would take time and create uncertainty. Reliance on state
law to vest exclusive rights in works that Congress intended to be in
the public domain would violate constitutional principles and encourage
states to legislate further misappropriation laws that would certainly
conflict or be inconsistent with each other. This would lead to a
welter of different substantive laws, remedies and procedures and would
encourage forum-shopping.
If a new property right is to be created, AT&T believes a federal
substantive law should be enacted to provide uniform application and
remedies.
3. a private cause of action?
AT&T is not convinced that H.R. 1858 should provide a private cause
of action because of the very real possibilities of needless litigation
and the consequent burdens and chilling effect this would have on all
companies, large and small.
However, if Congress does decide to adopt a private cause of
action, it should consider following the British rule of loser pays
all--namely, the litigant that lost a claim brought under the statute
would pay not only its attorney fees and costs but also those of the
prevailing party. This would have two ameliorative consequences. First,
it would encourage parties to adhere to the law for fear of losing a
lawsuit and its attendant economic consequences. Second, it would
discourage needless and frivolous litigation because a potential
plaintiff would refrain from bringing an action unless it felt
reasonably certain of success and not facing the risk of paying the
defendant's attorney fees and costs.
4. section 106 service provider liability
Lastly, we suggest that H.R. 1858 include its own definition of
services provider, rather than relying on definitions in the
Communications Act, to make it clear that the limitation of liability
in Section 106(a) covers Internet service providers, which are not
necessarily providers of telecommunications services or information
services as defined in existing law. We would therefore propose
striking the parenthetical reference to the Communications Act in
Section 106(a), and adding a new definition of ``services provider'' in
Section 101, as follows:
(6) SERVICES PROVIDER.--The term ``services provider'' means
any person or entity that operates a facility or offers a
capability for the electronic transmission, generation,
acquisition, storage, transformation, processing, retrieval,
utilization or making available of information.