[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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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]
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
    \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
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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.''
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \7\ See Pub. L. No. 105-304, 112 Stat. 2860 Sec. 5123(a-d)(1998).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \13\ See id. art. 6, cl. 1-2.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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).
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
    \9\ H.R. 1858, Sec. 101(1).
---------------------------------------------------------------------------
``Information'' is defined as including any intangible material capable 
of being thus collected and organized, except for ``works of 
authorship.'' 10
---------------------------------------------------------------------------
    \10\ Id., Sec. 101(3).
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
    \11\ Id., Sec. 102.
    \12\ Id., Sec. 101(2).
    \13\ Id., Sec. 101(5).
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
    \19\ Id., Sec. 107.
    \20\ Id., Sec. 108.
    \21\ Id., Sec. 105(b).
    \22\ Id., Sec. 105(a), (c), (d).
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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:
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
 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
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
 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
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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).
---------------------------------------------------------------------------
    (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.
---------------------------------------------------------------------------
    \37\ Id., Sec. 106(b)(6).
    \38\ Id., Sec. 106(b)(2).
    \39\ Id., Sec. 106(b)(3).
    \40\ Id., Sec. 106(b)(4).
---------------------------------------------------------------------------
             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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \48\ See 17 U.S.C. Sec. 105.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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]''?
---------------------------------------------------------------------------
    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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \58\ See, e.g., Alcatel USA, Inc. v. DGI Techs., Inc., 166 F.3d 
772, 792 (5th Cir. 1999).
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
           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).
---------------------------------------------------------------------------
    (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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    (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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
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