[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
                      DATABASE AND COLLECTIONS OF 
                     INFORMATION MISAPPROPRIATIONS

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

                             JOINT HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON COURTS, THE INTERNET,
                       AND INTELLECTUAL PROPERTY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY

                                AND THE

                    SUBCOMMITTEE ON COMMERCE, TRADE,
                        AND CONSUMER PROTECTION

                                 OF THE

                          COMMITTEE ON ENERGY
                              AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 23, 2003

                               __________

                             Serial No. 51

                      (Committee on the Judiciary)

                           Serial No. 108-46

                   (Committee on Energy and Commerce)

                               __________

         Printed for the use of the Committee on the Judiciary 
                and the Committee on Energy and Commerce


    Available via the World Wide Web: http://www.house.gov/judiciary
                  and http://energycommerce.house.gov







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_______________________________________________________________________
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                       COMMITTEE ON THE JUDICIARY

            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois              JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina         HOWARD L. BERMAN, California
LAMAR SMITH, Texas                   RICK BOUCHER, Virginia
ELTON GALLEGLY, California           JERROLD NADLER, New York
BOB GOODLATTE, Virginia              ROBERT C. SCOTT, Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
WILLIAM L. JENKINS, Tennessee        ZOE LOFGREN, California
CHRIS CANNON, Utah                   SHEILA JACKSON LEE, Texas
SPENCER BACHUS, Alabama              MAXINE WATERS, California
JOHN N. HOSTETTLER, Indiana          MARTIN T. MEEHAN, Massachusetts
MARK GREEN, Wisconsin                WILLIAM D. DELAHUNT, Massachusetts
RIC KELLER, Florida                  ROBERT WEXLER, Florida
MELISSA A. HART, Pennsylvania        TAMMY BALDWIN, Wisconsin
JEFF FLAKE, Arizona                  ANTHONY D. WEINER, New York
MIKE PENCE, Indiana                  ADAM B. SCHIFF, California
J. RANDY FORBES, Virginia            LINDA T. SANCHEZ, California
STEVE KING, Iowa
JOHN R. CARTER, Texas
TOM FEENEY, Florida
MARSHA BLACKBURN, Tennessee

             Philip G. Kiko, Chief of Staff-General Counsel
               Perry H. Apelbaum, Minority Chief Counsel
                                 ------                                

    Subcommittee on Courts, the Internet, and Intellectual Property

                      LAMAR SMITH, Texas, Chairman

HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
ELTON GALLEGLY, California           JOHN CONYERS, Jr., Michigan
BOB GOODLATTE, Virginia              RICK BOUCHER, Virginia
WILLIAM L. JENKINS, Tennessee        ZOE LOFGREN, California
SPENCER BACHUS, Alabama              MAXINE WATERS, California
MARK GREEN, Wisconsin                MARTIN T. MEEHAN, Massachusetts
RIC KELLER, Florida                  WILLIAM D. DELAHUNT, Massachusetts
MELISSA A. HART, Pennsylvania        ROBERT WEXLER, Florida
MIKE PENCE, Indiana                  TAMMY BALDWIN, Wisconsin
J. RANDY FORBES, Virginia            ANTHONY D. WEINER, New York
JOHN R. CARTER, Texas

                     Blaine Merritt, Chief Counsel

                          Debra Rose, Counsel

                         David Whitney, Counsel

              Melissa L. McDonald, Full Committee Counsel

                     Alec French, Minority Counsel
                    COMMITTEE ON ENERGY AND COMMERCE

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                      Ranking Member
FRED UPTON, Michigan                 HENRY A. WAXMAN, California
CLIFF STEARNS, Florida               EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio                RALPH M. HALL, Texas
JAMES C. GREENWOOD, Pennsylvania     RICK BOUCHER, Virginia
CHRISTOPHER COX, California          EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
RICHARD BURR, North Carolina         SHERROD BROWN, Ohio
  Vice Chairman                      BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
CHARLIE NORWOOD, Georgia             BOBBY L. RUSH, Illinois
BARBARA CUBIN, Wyoming               ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois               BART STUPAK, Michigan
HEATHER WILSON, New Mexico           ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
CHARLES W. ``CHIP'' PICKERING,       GENE GREEN, Texas
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania        TOM ALLEN, Maine
MARY BONO, California                JIM DAVIS, Florida
GREG WALDEN, Oregon                  JAN SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                  HILDA L. SOLIS, California
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho

                   Dan R. Brouillette, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

        Subcommittee on Commerce, Trade, and Consumer Protection

                    CLIFF STEARNS, Florida, Chairman

FRED UPTON, Michigan                 JAN SCHAKOWSKY, Illinois
BARBARA CUBIN, Wyoming                 Ranking Member
JOHN SHIMKUS, Illinois               HILDA L. SOLIS, California
JOHN B. SHADEGG, Arizona             EDWARD J. MARKEY, Massachusetts
  Vice Chairman                      EDOLPHUS TOWNS, New York
GEORGE RADANOVICH, California        SHERROD BROWN, Ohio
CHARLES F. BASS, New Hampshire       JIM DAVIS, Florida
JOSEPH R. PITTS, Pennsylvania        PETER DEUTSCH, Florida
MARY BONO, California                BART STUPAK, Michigan
LEE TERRY, Nebraska                  GENE GREEN, Texas
ERNIE FLETCHER, Kentucky             KAREN McCARTHY, Missouri
MIKE FERGUSON, New Jersey            TED STRICKLAND, Ohio
DARRELL E. ISSA, California          DIANA DeGETTE, Colorado
C.L. ``BUTCH'' OTTER, Idaho          JOHN D. DINGELL, Michigan,
W.J. ``BILLY'' TAUZIN, Louisiana       (Ex Officio)
  (Ex Officio)




                            C O N T E N T S

                              ----------                              

                           SEPTEMBER 23, 2003

                           OPENING STATEMENT

                                                                   Page
The Honorable Lamar Smith, a Representative in Congress From the 
  State of Texas, and Chairman, Subcommittee on Courts, the 
  Internet, and Intellectual Property, Committee on the Judiciary     1
The Honorable Cliff Stearns, a Representative in Congress From 
  the State of Florida, and Chairman, Subcommittee on Commerce, 
  Trade, and Consumer Protection, Committee on Energy and 
  Commerce.......................................................     2
The Honorable Howard L. Berman, a Representative in Congress From 
  the State of California, and Ranking Member, Subcommittee on 
  Courts, the Internet, and Intellectual Property, Committee on 
  the Judiciary..................................................     4
The Honorable Jan Schakowsky, a Representative in Congress From 
  the State of Illinois and Ranking Member, Subcommittee on 
  Commerce, Trade, and Consumer Protection, Committee on Energy 
  and Commerce...................................................     4

                               WITNESSES

Mr. David Carson, General Counsel, Copyright Office of the United 
  States, Library of Congress
  Oral Testimony.................................................     9
  Prepared Statement.............................................    11
Mr. Thomas J. Donohue, President and Chief Executive Officer, 
  Chamber of Commerce
  Oral Testimony.................................................    17
  Prepared Statement.............................................    18
Mr. Keith Kupferschmid, Vice President, Intellectual Property 
  Policy and Enforcement Software and Information Industry 
  Association, on behalf of the Coalition Against Database Piracy
  Oral Testimony.................................................    20
  Prepared Statement.............................................    23
Mr. William Wulf, President, National Academy of Engineering and 
  Vice Chairman, National Research Council
  Oral Testimony.................................................    40
  Prepared Statement.............................................    42

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Letter to the Honorable F. James Sensenbrenner, Jr., Committee on 
  the Judiciary and the Honorable W. J. ``Billy'' Tauzin, 
  Committee on Energy and Commerce from Nils Hasselmo, President, 
  Association of American Universities...........................     6
Letter from Thomas J. Donohue, President and Chief Executive 
  Officer, Chamber of Commerce of the United States of America to 
  the Honorable Lamar S. Smith, Chairman, Committee on the 
  Judiciary, Subcommittee on Courts, the Internet and 
  Intellectual Property and the Honorable Cliff Stearns, 
  Chairman, Subcommittee on Commerce, Trade and Consumer 
  Protection of the House Committee on Energy and Commerce.......    66

                                APPENDIX
               Material Submitted for the Hearing Record

Statement of the Honorable W. J. ``Billy'' Tauzin................    79
Statement of the Honorable Bart Stupak...........................    79
Statement of the Honorable Barbara Cubin.........................    80
Statement of the Honorable Gene Green............................    80
Statement of the Honorable Ted Strickland........................    80
Letter from Justin Hughes, Assistant Professor of Law, Benjamin 
  N. Cardozo School of Law, Yeshiva University...................    81
Letter from Keith Kupferschmid, Counsel for CADP to the Honorable 
  Lamar Smith, Chairman, Subcommittee on Courts, the Internet and 
  Intellectual Property, Committee on the Judiciary and the 
  Honorable Cliff Stearns, Chairman, Subcomittee on Commerce, 
  Trade and Consumer Protection of the House Energy and Commerce 
  Committee......................................................   107
Statement of Congressman John D. Dingell, Ranking Member, 
  Committee on Energy and Commerce...............................   151
Statement of Congressman John Shimkus............................   152


       DATABASE AND COLLECTIONS OF INFORMATION MISAPPROPRIATIONS

                              ----------                              


                      TUESDAY, SEPTEMBER 23, 2003

                  House of Representatives,
              Subcommittee on Courts, the Internet,
                         and Intellectual Property,
                                Committee on the Judiciary,

                                  and

                  Subcommittee on Commerce, Trade, 
                           and Consumer Protection,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The Subcommittees met, pursuant to call, at 4:08 p.m., in 
Room 2141, Rayburn House Office Building, Hon. Lamar Smith 
[Chairman of the Subcommittee on Courts, the Internet, and 
Intellectual Property] presiding.
    Mr. Smith. The Subcommittee on Courts, the Internet, and 
Intellectual Property will come to order along with the written 
permission of the Chairman of the Subcommittee on Commerce, 
Trade, and Consumer Protection.
    Before I recognize individuals for opening statements, let 
me just make a couple of comments. To my knowledge, this is the 
first time we have had such a joint hearing, and it is a 
privilege to do so with the Commerce Committee, one, because 
they are so important; but, two, because Cliff Stearns, the 
Chairman of their Subcommittee, is a personal friend and for a 
number of years, actually was a neighbor across the hall. And I 
miss seeing him on that hall.
    In any case, I want to recognize Congressman Stearns, 
because we will be cochairs of this hearing today. My part will 
be opening statements and the testimony of the witnesses, an 
Congressman Stearns will preside during the question-and-answer 
period after that.
    Let me recognize myself for an opening statement.
    Today the Subcommittee on Courts, the Internet, and 
Intellectual Property and the Subcommittee on Commerce, Trade, 
and Consumer Protection will consider the discussion draft of 
the ``Database and Collections of Information Misappropriation 
Act.
    I am sure many of you are wondering what can be said about 
database protection that hasn't already been said? However, 
after 8 years of debate, we are here to review draft 
legislation that embodies a compromise between the House 
Committees on the Judiciary and Energy and Commerce.
    Electronic compilations and other collections of factual 
material are absolutely indispensable to the American economy. 
These information products place a wealth of data at the 
fingertips of business, professionals, scientists, scholars and 
consumers. Databases are essential tools for improving 
productivity, advancing education and training and creating a 
more informed citizenry.
    Developing, compiling, distributing and maintaining 
databases requires substantial investments of time, personnel 
and money.
    Information companies must dedicate resources to gathering 
and verifying factual material, presenting it in a user 
friendly way and keeping it current.
    U.S. firms have been the world leaders in this field, but 
several recent legal and technological developments threaten to 
erode incentives for investments needed to maintain and expand 
databases.
    While the 1991 Supreme Court decision in Feist Publications 
reaffirmed that most commercially significant databases satisfy 
the originality requirement for protection under copyright, the 
court emphasized that this protection is necessarily thin.
    Several subsequent lower court decisions have pointed out 
that current copyright laws cannot stop a competitor from 
lifting massive amounts of factual material from a copyrighted 
publication to use as a basis for its own competing product.
    In cyberspace, technological developments represent a 
threat as well as an opportunity for collections of 
information. Copying factual material from a third party's 
collection and rearranging it to form a competing information 
product is cheaper and easier than ever.
    The draft legislation before us today provides protection 
to databases and gives incentives to their creators to continue 
producing these invaluable tools. This legislation is a 
compromise. In fact, a key element is the misappropriation 
approach that is narrowly tailored to target bad actors while 
preserving the ability of consumers to access and use 
information.
    Mr. Smith. Now, that concludes my opening statement, and 
the gentleman from Florida, Mr. Stearns, is recognized for his.
    Mr. Stearns. Thank you, Chairman Smith, for hosting this 
unprecedented joint hearing, and on behalf of my fellow Energy 
and Commerce Subcommittee Members, I want to thank you for the 
warm hospitality. We are delighted to be here.
    The copyright clause of the United States Constitution 
states that ``Congress shall have the power to promote the 
progress of science and useful arts by securing, for limited 
times to authors, the exclusive right to their respective 
writings.'' .
    This power is limited by subject matter, only writings and 
discoveries of authors may be protected, purposed material may 
only be protected to the end of promoting science and useful 
arts; and duration, writings may be protected for a limited 
time period.
    While all three limitations are important, it is the 
subject matter limitation that is the central consideration 
underlying copyright protection.
    For 7 years, there was a split in the courts about whether 
copyright protection would be afforded to only creative works 
or whether noncreative compilations of information could 
receive protection.
    A minority of courts held that noncreative compilations of 
information could receive copyright protection under the 
judicial ``sweat of the brow'' doctrine.
    In 1991 the Supreme Court struck down the ``sweat of the 
brow'' doctrine. The court wrestled with the ostensible paradox 
that while facts are not copyrightable, compilation of facts 
generally are.
    The Supreme Court explained that the key to understanding 
the seeming paradox was in understanding why facts are not 
copyrightable.
    The court held that originality is the sine qua non of 
copyright law, without regard to the resources spent in 
collecting and assembling factual compilations.
    A compilation is no more worthy of copyright protection 
than the underlying facts themselves, unless there is a modicum 
of creativity in the compilation. In other words, creative 
compilations of information would be protected by copyright. 
Noncreative compilations of information like the White Pages 
would not.
    And that is why we are here today. Proponents of 
legislation argue that this decision left a gaping hole in the 
protection of their products. They believe the distribution 
capabilities of the Internet have exacerbated the need to fill 
this gap in protection. Opponents of the legislation see no 
shortcomings in the current law and believe that proponents of 
legislation have failed to demonstrate a concrete problem that 
requires a legislative solution. They believe contract, 
trespass, misappropriation, unfair competition, and the 
Computer Fraud and Abuse Act provide sufficient protection for 
noncreative databases.
    It seems that while the opponents of the legislation would 
support a narrow misappropriation statute, they raise 
constitutional concerns about broader proprietary interest in 
factual information, and I share those constitutional concerns.
    I believe that Congress should not create property rights 
in facts. Specifically, I am concerned that the prohibition 
against making database information available has ambiguous 
terms that will chill the development of new databases and lead 
to further litigation. I am concerned that a database that is 
merely maintained and not necessarily collected would receive 
protection. How does this standard couple with the time 
sensitivity standard? Could the maintenance provision cause a 
court to have a liberal reading of time sensitivity?
    I am most concerned about the way this legislation will 
impact scientific educational and research activities. I worry 
that the determination of what is customary is so vague, that 
it will only be resolved through costly litigation. This could 
put a real chill on important research activity.
    As a result, I suspect none of us would like to see this.
    And in conclusion, I look forward to a rigorous discussion 
of the constitutional issues such as the constitutional 
boundaries of noncreative database misappropriation legislation 
and the other issues I have raised earlier. I am pleased that 
we have the opportunity today to have these questions answered. 
I withhold comment on the draft of the bill until I can be 
certain that this draft strikes the appropriate balance between 
access to information, innovation, and protection against 
misappropriation.
    It is plausible that such a balance may be unattainable. I 
am certain the discussion here today will assist us, and I look 
forward to hearing from our distinguished panel. And I thank 
again Chairman Smith for his hosting this joint Committee and 
his hospitality.
    Mr. Smith. Thank you, Chairman Stearns.
    Mr. Smith. The gentleman from California, Mr. Berman, is 
recognized for his opening statement.
    Mr. Berman. Thank you very much, Mr. Chairman, and without, 
at this point specifically, reacting to some of the comments of 
my colleague from Florida, I do note the former Chairman of 
this Subcommittee sitting in the back row there, Howard Coble, 
and there is something about database protection in Howard 
Coble that automatically come to mind for anyone who sat 
through the many hours of hearings and markups of this 
legislation in earlier Congresses. And we are still with the 
issue, and it is good to have Howard with us at this time.
    I am open-minded on this issue, one of those rare issues 
that I am open minded on. And I look forward to the witnesses 
and understanding exactly what the draft does, how it differs 
from the earlier legislation offered by each Committee and 
studying the issue further. So I am glad you called this 
hearing, and I think this is an important issue for us to be 
dealing with and look forward to the testimony of the 
witnesses.
    Mr. Smith. Thank you, Mr. Berman.
    Mr. Smith. And I also thank you for pointing out that Mr. 
Coble is with us, and I would like to ask him, if Mr. Coble is 
still here, he is welcome to join us up at the table here. And 
we appreciate all that he has done on this issue to date.
    Mr. Coble. I want to thank the gentleman from California 
for his kind words. Howard, thank you, but pardon my gravelly 
voice. I am just getting over a cold. And, Mr. Chairman, thank 
you for calling--this is--I don't think the gentleman from 
Florida and I are in synch on this, but this is a very 
important issue, Mr. Chairman. I thank you for having the 
hearing.
    Mr. Smith. Thank you, Mr. Coble.
    The gentlewoman from Illinois, Ms. Schakowsky is recognized 
for her opening statement.
    Ms. Schakowsky. Thank you, Chairman Smith, and I want to 
thank my Chairman, Chairman Stearns, for holding today's 
hearing on the database and collection of Information 
Misappropriation Act of 2003.
    I really look forward to hearing the expert testimony from 
today's witnesses, their thoughts on the draft bill and the 
problems that the bill aims to address.
    As we all know, this is a highly controversial issue that 
has been debated for several years by Members of both 
Committees. In my view, our copyright laws need to strike a 
very delicate balance between the interests of proprietors and 
consumers. Our laws must ensure that proprietors are rewarded 
for their work, while at the same time protecting the 
consumer's access to information. It is extremely important 
that we do not pass laws that prevent people from obtaining 
factual information. Database owners can already copyright 
their original selection, coordination and arrangement of 
facts.
    We need to explore the issue further to determine if the 
current protections are adequate. If they are not, legislative 
remedies must be narrowly tailored to solve identified 
problems. Sweeping legislation could hamper research and harm 
consumers.
    I heard just in the last few days from Northwestern 
University, a University of my district, and they were 
supporting a letter from the president of the Association of 
American Universities that was written to Chairman Tauzin and 
Sensenbrenner that I would--if it hasn't already--like to ask 
unanimous consent to place the letter in the record.
    Mr. Smith. And without objection, that letter will be made 
a part of the record.
    [The information referred to follows:]
    
    
    
    
    
    
                              ----------                              

    Ms. Schakowsky. Let me just quote a couple sentences. 
Quote, colleges and universities believe that any database 
protection legislation should provide narrowly focused 
protection that supports data integrity and response to 
demonstrable threats to the incentive to create databases 
without impeding access to the data and information upon which 
research and education programs depend.
    We have also heard from librarians who have been very 
careful in representing the consumer interests and researchers' 
interest, and I look forward to learning more about this 
important topic from today's witnesses. Thank you.
    Mr. Smith. Thank you, Ms. Schakowsky.
    Mr. Smith. Without objection, other Members' opening 
statements will be made a part of the record, and now I will 
introduce our witnesses today. Our first witness is David 
Carson, general counsel of the U.S. Copyright Office. Mr. 
Carson oversees the Office's regulatory activities, litigation 
and administration of the copyright law. He also serves as a 
liaison on legal and policy matters between the Copyright 
Office and Congress and other Government agencies. He is a 
graduate of Stanford University where he earned a master's 
degree in history, and Harvard Law School.
    The next witness is Thomas J. Donohue, president and chief 
executive officer of the United States Chamber of Commerce. 
Prior to his current post, Mr. Donohue served for 13 years as 
the president and chief executive officer of the American 
Trucking Association. Mr. Donohue earned a bachelor's degree 
from St. John's University and his MBA from Adelphi University.
    Our next witness is Keith Kupferschmid, vice president for 
Intellectual Property Policy and Enforcement for the Software 
and Information Industry Association. Mr. Kupferschmid is 
responsible for working directly with SIIA's intellectual 
property committee. He graduated from the University of 
Rochester in 1987 with a BS in mechanical engineering and from 
American University's Law School in 1993.
    Our last witness is William Wulf, who was elected president 
of the National Academy of Engineering in 1997. The NAE and 
National Academy of Sciences operate under Congressional 
charter to provide advice to the Government on issues of 
science and engineering.
    Mr. Wulf is the author of over 100 papers and technical 
reports, has written three books and holds two U.S. patents. 
And I welcome you all. We have written statements from every 
one of our witnesses, and without objection, the complete 
statements will be made a part of the record.
    Mr. Smith. As you know, we expect you to limit your 
testimony to 5 minutes, and Mr. Carson, we will begin with you.

STATEMENT OF DAVID CARSON, GENERAL COUNSEL, COPYRIGHT OFFICE OF 
             THE UNITED STATES, LIBRARY OF CONGRESS

    Mr. Carson. Good afternoon, Chairman Smith, Chairman 
Stearns, Ranking Members Berman and Schakowsky. Members of both 
Subcommittees. Thank you for giving the Copyright Office the 
opportunity to testify at this hearing on the discussion draft 
of the Database and Collections of Information Misappropriation 
Act.
    Our written testimony provides some historical perspective 
on database protection in the United States, briefly reviews 
the approach taken in the discussion draft and addresses some 
of the concerns that critics of database legislation have 
voiced thus far.
    In the few minutes that I have with you today, I would like 
to focus on the message that the Register of Copyrights has 
delivered in past testimony on database legislation, a message 
that is equally relevant today. Since the Supreme Court in the 
Feist case withdrew much of the protection that copyright law 
had previously offered to databases, the Copyright Office has 
perceived a need to provide adequate incentives for the 
production and dissemination of databases.
    We believe the databases are important to our economy and 
culture, both as a component in the development of electronic 
commerce and as a tool for facilitating scientific, educational 
and technological advancement. We have long recommended an 
approach to database protection based on a misappropriation or 
unfair competition model rather than an exclusive property 
rights model.
    At the same time, we have been concerned about the risks of 
overprotection. The free flow of information is essential to 
the advancement of knowledge, technology and culture, and we 
support legislation that, while ensuring adequate incentives 
for investment, would not inhibit access and use for socially 
beneficial purposes in appropriate circumstances.
    The discussion draft represents a continuing evolution 
toward such an approach. We commend the leadership of those who 
have worked so hard to produce a draft that adopts this 
approach and takes into account the needs of producers of 
databases as well as users and members of the educational, 
scientific and research communities.
    While we have not had sufficient opportunity to study the 
discussion draft to permit us to offer any defensive views on 
this particular draft, we believe in general that it represents 
a major step in the direction of enactment of the type of 
balanced legislation that the Office has long recommended.
    I should point out that our testimony on this issue in the 
past, as well as today, draws heavily on our 1997 Report on 
Legal Protection of Databases which contains a wealth of 
information on the subject, to which I commend you.
    Since the Supreme Court's 1991 decision in Feist, only a 
thin layer of copyright protection remains for qualifying 
databases. In order to qualify, they must exhibit some modicum 
of creativity in the selection, arrangement or coordination of 
the data in them.
    The protection is thin in that only the creative elements--
the selection, coordination and arrangement of data--are 
protected by copyright. In no case is the data itself 
copyrightable.
    One of the most significant cases in this area since Feist 
is the 2nd Circuit's 1997 decision in NBA v. Motorola. It is 
our understanding that the approach taken in the discussion 
draft is designed to codify the standards set forth in the NBA 
case. Our written testimony sets forth our analysis of the 
extent to which the discussion draft succeeds in this effort, 
and we believe that, by and large, it does succeed.
    We do believe that further clarification may be necessary 
in some instances. For example, to determine whether the 
approach taken in the discussion draft is intended to codify 
nothing more than the hot news misappropriation doctrine 
discussed in the NBA case and the landmark 1918 Supreme Court 
decision in International News Services v. Associated Press.
    While the discussion draft requires that the unauthorized 
making available occur in a time-sensitive manner, courts would 
be instructed to consider the temporal value of the information 
in the database within the context of the industry sector 
involved in determining whether the time-sensitive requirement 
has been met.
    This suggests that perhaps something beyond hot news would 
be protected, but further thought should be given to clarifying 
the circumstances under which such protection should be given.
    We do believe that serious consideration should be given to 
protecting more than hot news, but on the other hand, to the 
extent that the legislation would go beyond protection of hot 
news, we are inclined to favor imposing some time limit on the 
duration of protection for a database.
    As always, the Copyright Office stands ready to assist you 
in your further consideration of this proposal, and I will be 
pleased to answer any questions you may have.
    Mr. Smith. Thank you, Mr. Carson.
    [The prepared statement of Mr. Carson follows:]
                 Prepared Statement of David O. Carson
    Good afternoon. Chairman Smith, Chairman Stearns, Congressman 
Berman, Congressman Schakowsky, Members of both Subcommittees, it is a 
pleasure to appear before you today. Thank you for giving the Copyright 
Office the opportunity to testify at this hearing on the discussion 
draft of the Database and Collections of Information Misappropriation 
Act.
    The Copyright Office has testified twice in recent years before the 
Subcommittee on Courts and Intellectual Property on legislation to 
protect databases. In the 105th and 106th Congresses, the Register of 
Copyrights testified in connection with the proposed Collections of 
Information Antipiracy Act. That bill was passed by the House in the 
105th Congress but no action was taken in the Senate. In her testimony 
on that legislation and on a later version, the Register testified that 
there was a need to preserve adequate incentives for the production and 
dissemination of databases, which are increasingly important to the 
U.S. economy and culture, both as a component in the development of 
electronic commerce and as a tool for facilitating scientific, 
educational and technological advancement. She stated that there was a 
gap in existing legal protection, which could not be satisfactorily 
filled through the use of technology alone. This legal gap was 
compounded by the ease and speed with which a database can be copied 
and disseminated, using today's digital and scanning capabilities. 
Without legislation to fill the gap, publishers were likely to react to 
the lack of security by investing less in the production of databases, 
or disseminating them less broadly. The result would be an overall loss 
to the public of the benefits of access to the information that would 
otherwise have been made available.
    At the same time, the Register cautioned that the risks of over-
protection were equally serious, because (as already noted) the free 
flow of information is essential to the advancement of knowledge, 
technology and culture. She testified in support of legislation that 
would ensure adequate incentives for investment, without inhibiting 
access for appropriate purposes and in appropriate circumstances.
    Accordingly, the Register recommended the restoration of the 
general level of protection provided in the past under copyright 
``sweat of the brow'' theories, but under a suitable constitutional 
power, with flexibility built in for uses in the public interest in a 
manner similar to the function played by fair use in copyright law. 
Such balanced legislation could optimize the availability of reliable 
information to the public.
    In the intervening years, nothing has occurred to change the views 
of the Copyright Office. We continue to believe that balanced 
legislation should be enacted that would provide appropriate levels of 
protection for producers of databases, without unnecessarily impeding 
the free flow of knowledge and information.
    The discussion draft represents a continuing evolution of the 
legislation addressing the protection of databases toward a pure 
misappropriation approach. In our previous testimony we expressed the 
view that misappropriation is the best approach to this issue and we 
commend the leadership of all of those who have worked so hard on this 
issue for their commitment to craft legislation that takes into account 
the needs of producers of databases as well as users and members of the 
educational, scientific and research communities. While we have not had 
sufficient opportunity to study the discussion draft to permit us to 
offer any definitive views on this particular draft, we believe in 
general that it represents a major step in the direction of enactment 
of the type of balanced legislation the Office has long recommended.
    Much of what I say today will be based on the research and findings 
of the Register in her August 1997 Report on Legal Protection for 
Databases, which was prepared at the request of Senator Hatch, Chairman 
of the Senate Committee on the Judiciary. We are aware of no major 
developments since the time of that Report that have significantly 
altered the landscape with respect to legal protection for databases.
    My testimony today will provide a historical perspective concerning 
the protection of databases in the United States, briefly review the 
approach taken in the discussion draft and address some of the concerns 
that critics of database legislation have voiced.

      i. lthe history of database protection in the united states

    In the terminology of the copyright law, a database is a 
``compilation.'' The Copyright Act defines a compilation as ``a work 
formed by the collection and assembling of preexisting materials or of 
data . . .''\1\ Compilations were protected as ``books'' as early as 
the Copyright Act of 1790.
---------------------------------------------------------------------------
    \1\ 17 U.S.C. Sec. 101.
---------------------------------------------------------------------------
    Over the course of the nineteenth century, two rationales developed 
for protecting compilations under copyright. The earliest cases 
identified the compiler's effort--``his own expense, or skill, or 
labor, or money'' \2\--as the critical contribution justifying 
protection. This type of analysis came to be known as the ``sweat of 
the brow'' doctrine. Analyses under sweat of the brow emphasized both 
the compilers' efforts and the copiers' ``unfair use of the copyrighted 
work, in order to save themselves the time and labor of original 
investigation.''\3\
---------------------------------------------------------------------------
    \2\Emerson v. Davies, 8 F. Cas. 615, 619 (C.C.D. Mass. 1845).
    \3\ West Pub. Co. v. Lawyers' Co-operative Pub. Co., 79 F. 756, 772 
(2d Cir. 1897).
---------------------------------------------------------------------------
    During the late nineteenth century, courts began to articulate 
another basis for copyright protection that generally differed from the 
labor/investment approach taken in cases involving compilations. In a 
series of decisions from 1879 to 1903, the Supreme Court held that the 
``writings'' that could be protected under the Copyright Clause of the 
Constitution included ``only such as are original,''\4\ and indicated 
that creativity is a component of originality.\5\
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    \4\ In re The Trademark Cases, 100 U.S. 82, 94 (1879).
    \5\ Bleistein v. Donaldson Lithographing Co., 188 U.S. 239 (1903).
---------------------------------------------------------------------------
    The evolving doctrine of originality was applied by some courts in 
compilation cases, particularly cases involving compilations of textual 
materials such as law books. These cases identified the author's 
critical contribution justifying protection as his judgment in 
selecting and arranging materials.\6\
---------------------------------------------------------------------------
    \6\ See e.g., Edward Thompson Co. v. American Lawbook Co., 122 F. 
922, 924 (2d Cir. 1903)(focusing on ``skill and taste of the 
[plaintiff] in selecting or arranging'' materials); Lawrence v. Dana, 
15 F. Cas. 26, 28, 4 Cliff. 1 (C.C.D. Mass. 1869)(``copyright may 
justly be claimed by an author of a book who has taken existing 
materials from sources common to all writers, and arranged and combined 
them in a new form, and given them an application unknown before, for 
the reason that, in so doing, he has exercised skill and discretion in 
making the selections, arrangement, and combination . . .'').
---------------------------------------------------------------------------
    This approach coexisted with, rather than supplanted, sweat of the 
brow cases. Sweat of the brow was applied to cases involving purely 
factual compilations, such as catalogs and directories.
    On the question of the scope of protection afforded to 
compilations, there was somewhat greater uniformity in the case law. In 
compilation cases, regardless of the theoretical framework adopted to 
justify copyright protection, once the plaintiff's work was determined 
to be copyrightable, courts generally held a defendant to have 
infringed whenever material was copied from the plaintiff's work. 
Typically, there was no inquiry as to whether the particular material 
copied was protected by the plaintiff's copyright. To avoid 
infringement, a second-comer was required to go to the original sources 
and compile the material independently, without reference to the 
earlier work.\7\ A common thread running through many of these 
decisions was the court's desire to prevent the copier from competing 
unfairly with the compiler by appropriating the fruits of the 
compiler's efforts or creativity. In this sense, courts treated 
copyright protection for compilations much like a branch of unfair 
competition law.
---------------------------------------------------------------------------
    \7\ See, e.g., Williams v. Smythe, 110 F. 961 (C.C.M.D. Pa. 1901); 
List Publishing Co. v. Keller, 30 F. 772 (C.C.S.D.N.Y. 1887).
---------------------------------------------------------------------------
    In the Copyright Act of 1976, Congress included in the definition 
of ``compilation'' the first express statutory link between 
compilations and original works of authorship ``. . .that are selected, 
coordinated, or arranged in such a way that the resulting work as a 
whole constitutes a work of authorship.''\8\ Cases under the 1976 Act 
were divided about the continuing viability of the sweat of the brow 
doctrine. Some circuits continued to apply it,\9\ while other circuits 
rejected it, requiring a showing of sufficient creativity in order to 
entitle a compilation to copyright protection.\10\ The Supreme Court 
resolved the split in the circuits in Feist Publications, Inc. v. Rural 
Tel. Serv. Co.\11\ In that case, the Supreme Court held that the white 
pages of a telephone directory (containing an alphabetical listing of 
all residents with telephone service in a defined geographic area) was 
insufficiently creative to merit copyright protection. The Court held 
that the requirement of creativity was not merely statutory, but rooted 
in the Copyright Clause itself. \12\ Thus, the sweat of the brow 
doctrine was laid to rest.
---------------------------------------------------------------------------
    \8\ 17 U.S.C. Sec. 101.
    \9\ See, e.g., Illinois Bell Tel. Co. v. Haines & Co., 683 F. Supp. 
1204 (N.D. Ill. 1988), aff'd, 905 F.2d 1081 (7th Cir. 1990), vacated 
and remanded, 499 U.S. 944 (1991); Rural Tel. Serv. Co. v. Feist 
Publications, Inc., 916 F.2d 718 (10th Cir. 1990), reversed, 499 U.S. 
340 (1991).
    \10\ See, e.g., Financial Info., Inc. v. Moody's Investors Serv., 
Inc., 808 F.2d 204 (2d Cir. 1986), cert denied, 484 U.S. 820 (1987); 
Eckes v. Card Prices Update, 736 F.2d 859 (2d Cir. 1984); Worth v. 
Selchow & Richter Co., 827 F.2d 569, 572-73 (9th Cir. 1987).
    \11\ 499 U.S. 340 (1991).
    \12\ Id. at 346.
---------------------------------------------------------------------------
    What remains is a thin layer of copyright protection for qualifying 
databases. In order to qualify, they must exhibit some modicum of 
creativity in the selection, arrangement, or coordination of the data. 
The protection is thin in that only the creative elements (selection, 
arrangement, or coordination of data) are protected by copyright. 
Explanatory materials such as introductions or footnotes to databases 
may also be copyrightable. But in no case is the data itself (as 
distinguished from its selection, coordination or arrangement) 
copyrightable. The absence of uniform protection for noncreative 
databases is what has given rise to the calls for this legislation.

 ii. ldiscussion draft of the database and collections of information 
                          misappropriation act

    It is our understanding that the scope and applicability of the 
prohibitions in the discussion draft are designed to codify the 
standards set forth in the Second Circuit's decision in National 
Basketball Ass'n v. Motorola, Inc. (``NBA'').\13\ That case involved a 
state law misappropriation claim by the NBA against the maker of a 
hand-held pager which provided subscribers with scores and statistics 
of professional basketball games in progress.\14\ In analyzing the 
case, the court concluded that a ``hot news'' misappropriation claim 
under the theory of International News Service v. Associated Press \15\ 
(``INS'') would survive preemption by federal copyright law.\16\ The 
court enumerated five elements ``central to an INS claim.'' Those 
conditions are:
---------------------------------------------------------------------------
    \13\ 105 F.3d 841 (2d Cir. 1997).
    \14\ The case also involved a claim of infringement of the 
copyrights in the broadcasts of the games. That claim was rejected by 
the court because alleged infringement involved reproduction only of 
the uncopyrightable facts from the broadcasts, and not of the 
expression or descriptions of the games that constituted the 
broadcasts. 105 F.3d at 847.
    \15\ 248 U.S. 215 (1918).
    \16\ See 17 U.S.C. Sec. 301.

        (i) Lthe plaintiff generates or collects information at some 
---------------------------------------------------------------------------
        cost or expense;

        (ii) Lthe value of the information is highly time-sensitive;

        (iii) Lthe defendant's use of the information constitutes free-
        riding on the plaintiff's costly efforts to generate or collect 
        it;

        (iv) Lthe defendant's use of the information is in direct 
        competition with a product or service offered by the plaintiff; 
        and

        (v) Lthe ability of other parties to free-ride on the efforts 
        of the plaintiff would so reduce the incentive to produce the 
        product or service that its existence or quality would be 
        substantially threatened.\17\

    \17\ 105 F.3d at 852.
---------------------------------------------------------------------------
A. LThe plaintiff generates or collects information at some cost or 
        expense.

    The first condition is codified in subsection 3(a)(1) of the 
discussion draft, which applies the prohibition against 
misappropriation only to databases that were ``generated, gathered, or 
maintained through a substantial expenditure of financial resources or 
time.'' The term ``maintained'' does not appear in the court's 
articulation of the first condition. However, the reference to 
``quality'' in the fifth factor could suggest a recognition that 
misappropriation applies not only to the initial creation but to the 
periodic update and verification of the product or service. One other 
variation from the exact language of the court is the requirement of a 
``substantial'' expense. The court used the arguably less demanding 
term, ``some.'' The discussion draft also equates ``time'' with ``cost 
or expense,'' which we believe is probably a defensible interpretation 
of the elements set forth in NBA.

B. LThe value of the information is highly time-sensitive.

    The second condition is codified in subsection 3(a)(1) of the 
discussion draft, which requires that the making available occur ``in a 
time sensitive manner.'' Section 3(c) of the discussion draft states 
that courts shall consider ``the temporal value of the information in 
the database, within the context of the industry sector involved'' in 
determining whether this condition is met. The discussion draft omits 
the term ``highly,'' although it is not clear how much difference that 
makes. The discussion draft appears to take a flexible approach to this 
condition, requiring consideration of the business context, but also 
allowing a court to consider whatever other factors it might deem 
relevant. This approach may well be the subject of initial uncertainty, 
until courts have provided guidance in applying the standard. In this 
respect, the discussion draft may go beyond the ``hot news'' doctrine 
addressed in NBA and INS.
    In its previous testimony, the Copyright Office noted with approval 
the application of a definite term of protection, beginning at the time 
the relevant portion of the collection is first used in commerce. The 
Office continues to have concerns about protection without a clear end 
point. However, the time sensitivity provisions of the discussion draft 
may address that concern, depending upon how they are interpreted. It 
may be that consideration should be given to clarifying the scope and 
application of the ``time sensitive'' component of this discussion 
draft. To the extent that it goes beyond ``hot news''--and in the past 
the Office has supported protecting more than ``hot news''--there may 
still be reason to consider some specific limitation on the duration of 
protection.

C. LThe defendant's use of the information constitutes free-riding on 
        the plaintiff's costly efforts to generate or collect it.

    The third condition is codified in subsection 3(a) of the 
discussion draft, which prohibits the ``mak[ing] available in commerce 
to others a quantitatively substantial part of the information in a 
database generated, gathered, or maintained by another person . . .'' 
While the term ``free- riding'' does not appear in the relevant portion 
of the text, the conditions described appear to be the practical 
equivalent. Moreover, the ``free-riding'' problem is addressed in 
subsection 3(a)(3).

D. LThe defendant's use of the information is in direct competition 
        with a product or service offered by the plaintiff.

    The fourth condition is codified in subsection 3(a)(2) of the 
discussion draft, which requires that the making available ``inflict[] 
an injury.'' That term is defined in subsection 3(b) as ``serving as a 
functional equivalent in the same market as the database in a manner 
that causes the displacement, or the disruption of the sources, of 
sales, licenses, advertising, or other revenue.'' Here the discussion 
draft expressly provides for direct competition and also requires the 
showing of at least some disruption in revenue to the compiler.

E. LThe ability of other parties to free-ride on the efforts of the 
        plaintiff would so reduce the incentive to produce the product 
        or service that its existence or quality would be substantially 
        threatened.

    The fifth condition is codified verbatim in subsection 3(a)(3) of 
the discussion draft. Thus, this legislation appears to codify the 
standards set forth by the Second Circuit.

                iii. lcriticisms of the discussion draft

    I understand that the discussion draft has been the subject of 
criticism. I would like to take this opportunity to address some of 
those arguments.

A. LConstitutionality

    It has been suggested that this legislation exceeds Congress' 
authority under Article I, section 8 of the Constitution. As you know, 
the Constitution provides explicit authority for the protection of 
copyright.\18\ As discussed earlier, the Supreme Court held in Feist 
that the Copyright Clause cannot serve as a basis of authority for the 
protection of noncreative databases. But Feist does not address whether 
some other basis for protection of such materials may exist. The most 
likely other basis is the Commerce Clause.\19\ At least one critic 
suggests that the Commerce Clause cannot serve this function. The 
Copyright Office disagrees.
---------------------------------------------------------------------------
    \18\ ``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.'' U.S. Const., Art. I, 
sec. 8, cl. 8.
    \19\ ``To regulate Commerce with foreign Nations, and among the 
several States . . .'' U.S. Const., Art. I, sec 8, cl. 3.
---------------------------------------------------------------------------
    It has long been accepted that Congress has the power to enact 
trademark legislation under the Commerce Clause, despite the fact that 
trademarks may be seen as a form of intellectual property; that 
trademark law protects material that does not meet standards for 
copyright and patent protection; and that the protection may last 
indefinitely. The Supreme Court's opinion in The Trademark Cases \20\ 
held unconstitutional an early attempt by Congress to enact a trademark 
law, based on a lack of Congressional power under either the Copyright 
Clause or the Commerce Clause. According to the Court, the Copyright 
Clause did not provide authority for the legislation because trademarks 
have different ``essential characteristics'' from inventions or 
writings, since they are the result of use (often of already-existing 
material) rather than invention or creation, and do not depend on 
novelty or originality.\21\ The Commerce Clause did not provide 
authority because the particular trademark law in question governed all 
commerce and was not limited to interstate or foreign commerce.\22\ The 
opinion suggested that similar legislation limited as to the type of 
commerce involved would pass constitutional muster under the Commerce 
Clause. Indeed, legislation consistent with the Court's interpretation 
of the Commerce Clause was subsequently enacted and has gone 
unchallenged since 1905.
---------------------------------------------------------------------------
    \20\ 100 U.S. 82 (1879).
    \21\ Id. at 93-94.
    \22\ Id. at 97.
---------------------------------------------------------------------------
    The Register's 1997 Report on the Legal Protection of Databases 
stated that ``To the extent that database protection promotes different 
policies from copyright protection, and does so in a different manner, 
it is similar to trademark law, and therefore seems likely to survive a 
constitutional challenge.'' The prohibition set forth in this 
discussion draft appears to meet that prescription. It is crafted to 
protect that which the NBA case held to be outside of copyright. Its 
focus is on unfair competition through the misappropriation of a 
commercial product that is the result of substantial expenditure of 
another's financial resources or time, in a way that inflicts 
commercial injury on that person, elements that are far removed from 
the core of copyright.

B. LSubpoena to Identify Violators

    The discussion draft includes a procedure similar to that in 17 
U.S.C. Sec. 512(h) to allow potential plaintiffs to learn the identity 
of those they believe have violated the provisions in this discussion 
draft. The Copyright Office believes that the section 512(h) subpoenas 
are a necessary and appropriate tool in copyright owners' struggle 
against infringement, particularly in the digital and online 
environments. However the discussion draft does differ in one 
significant respect: Section 512(h) requires the person seeking a 
subpoena to file with the clerk of the court a certain information 
about the claim of infringement that has given rise to the controversy 
that requires identification of the alleged infringer. This provision 
provides assurances that the subpoena is sought in good faith and that 
there is an objective basis for seeking it. The current discussion 
draft does not have any analogous safeguards. The Copyright Office 
recommends the inclusion of such a provision in this discussion draft.

C. LFair Use Exception

    We understand that some have suggested that this discussion draft 
is somehow flawed without the inclusion of a ``fair use'' exception, 
similar to the one that appears in the Copyright Act.\23\ In the past, 
the Copyright Office has supported inclusion of provisions similar to 
fair use in database protection legislation. However, the past 
legislative proposals provided for broader protection than is provided 
in this discussion draft. In providing for a narrower prohibition, the 
discussion draft may well obviate the need for a fair use-type of 
provision. It may well be that this discussion draft already 
incorporates most of the principles embodied in copyright fair use. The 
``purpose and character of the use'' \24\ is addressed by subsection 
3(a) of the discussion draft, which prohibits the ``making available in 
commerce,'' and in subsection 3(b), which makes clear that the 
prohibition extends only to inflictions of injury that serve as a 
functional equivalent in the same market as the database. The ``amount 
and substantiality of the portion used'' \25\ is also addressed in 
subsection 3(a), which requires ``a quantitatively substantial part of 
the information.'' Indeed, this provision is more permissive than fair 
use, which may not excuse the use of a quantitatively insubstantial 
portion that is qualitatively vital to the work. The ``effect of the 
use upon the potential market for or value of the copyrighted work'' 
\26\ is addressed by subsection 3(a)(3), requiring that the ability of 
others to free-ride threaten the ``existence or quality'' of the 
database, as well as subsection 3(b), with its strong requirement of 
market harm. Of course, the second fair use factor, ``the nature of the 
copyrighted work,''\27\ is inapplicable to a legal regime specifically 
designed to protect that which is denied copyright protection for lack 
of creativity. While we are strong proponents of fair use and 
understand the desire for such a provision in database protection 
legislation, we are not persuaded that such a provision is necessarily 
required when the prohibition itself serves the policies underlying 
fair use.
---------------------------------------------------------------------------
    \23\ See 17 U.S.C. Sec. 107.
    \24\ Sec. 107(1).
    \25\ Sec. 107(3).
    \26\ Sec. 107(4).
    \27\ Sec. 107(2).

---------------------------------------------------------------------------
D. LInternet Service Provider Liability

    There has been complaint that the discussion draft would subject 
internet service providers (``ISPs'') to liability unfairly. However, 
subsection 7(i) of the discussion draft explicitly insulates ISPs from 
liability unless their employees violate the prohibition while acting 
within the scope of their duties, actively direct or induce a violation 
of the prohibition, or receive a financial gain directly attributable 
to the violative conduct. It is not readily obvious to the Copyright 
Office how the ordinary use of ISPs' systems by their users could be 
within the scope of these few exceptions to the general rule that ISPs 
do not bear liability under this discussion draft. Moreover, it is 
notable that the discussion draft provides this benefit to ISPs without 
requiring them to abide by many of the conditions that appear in 
section 512 of the Copyright Act,\28\ such as taking down violative 
material in response to a notice or terminating the account of a repeat 
offender. Compared to section 512, this provision appears to be 
generous.
---------------------------------------------------------------------------
    \28\See 17 U.S.C. Sec. 512 (limiting the liability of qualifying 
ISPs for copyright infringement).

---------------------------------------------------------------------------
E. LAlleged Expansion of Intellectual Property Protection

    There is also apparently a somewhat amorphous criticism that this 
discussion draft would serve in furtherance of an alleged trend of 
expanding intellectual property protection without counterbalancing 
other interests. The Copyright Office sees no such trend. Indeed, the 
last few years have seen expansions of exceptions and limitations. For 
example, legislation has provided exceptions and limitations for 
digital distance education,\29\ use of works by the blind,\30\ and the 
aforementioned provisions for ISPs.\31\
---------------------------------------------------------------------------
    \29\ See 17 U.S.C. Sec. 110(2).
    \30\ See 17 U.S.C. Sec. 121.
    \31\ See 17 U.S.C. Sec. 512.
---------------------------------------------------------------------------
    A complete analysis of intellectual property protection includes a 
consideration not only of the provisions of the law, but also of the 
other factors which affect the incentive to create and the availability 
for use of protected materials. Most significantly, the dramatic growth 
of the use of digital technology and the Internet have made more 
materials available to more people than ever before. However, this 
technology has also created an avenue for the improper use of materials 
on a previously unimagined scale. Changes in the law to try to prevent 
or remedy these improper uses do not necessarily reflect a change in 
philosophy about the appropriate scope of protection and have not 
altered the fact that both authorized and unauthorized users of 
protected materials generally have greater opportunities to use the 
material of others than they did before these technological 
developments.

                            iv. lconclusion

    The discussion draft represents the latest in a series of 
legislative attempts to provide consistent, federal standards of 
protection for databases. As I noted at the outset, the Copyright 
Office is sympathetic to these efforts but does not, at this time, take 
a position on this legislation. As always, the Copyright Office stands 
ready to assist both Subcommittees and I will be pleased to answer any 
questions you may have.

    Mr. Smith. Mr. Donohue.

 STATEMENT OF THOMAS J. DONOHUE, PRESIDENT AND CHIEF EXECUTIVE 
                  OFFICER, CHAMBER OF COMMERCE

    Mr. Donohue. Thank you, Mr. Chairman. And Mr. Chairmans, 
all and Members, it is fun to appear before a joint Committee. 
You are never quite sure where the balance is. So we will keep 
an eye from this end as well.
    On behalf of the Chamber's 3 million business members of 
every size and every sector, I am pleased to come here today 
and to discuss this draft legislation. Let me briefly explain 
the two very important reasons why the Chamber is clearly 
opposed to this piece of legislation, and then we will gladly 
answer your questions.
    First, the Nation already has on the books, as many have 
already mentioned, the vast web of laws that protect database 
information, laws that even database producers themselves 
appear to be completely satisfied with. We have the benefit of 
contract intellectual property, copyrights, state of law 
misappropriation, trespass and Federal computer antihijacking 
statutes and numerous other protections that are on the books 
and in place.
    The Chamber's members, you will not be surprised, include 
many of the country's biggest producers and users of databases, 
and I would clearly tell you if they didn't think the law was 
protecting them because they would have clearly told me; but in 
fact, our Members have told us that this legislation is 
misdirected, in many ways, harmful and unnecessary.
    Proponents of the database legislation have yet to provide 
a real-world example of a database that isn't protected under 
current law. I agree under the discussion that the law has been 
strong and weak in various ends of the bookends, but clearly 
there is protection; and if we were to pass this draft 
legislation, there would be many new problems for all of us to 
face.
    It is remarkable that when you think about the enormous 
number of databases that our children use and we use and that 
all your staffs use every day, and the equally enormous number 
of opportunities for some kind of serious infringement is that 
no one here is telling you about one that has happened. Six 
years ago the Copyright Office told the Congress that they 
could pass legislation to add additional protection. The 
Congress has not, during that period of time, with the 
introduction of new technology, with people carrying 
Blackberries around on their belt so they can access all kinds 
of information, we haven't had these problems.
    This is a solution in search of a problem, and we ought to 
be very careful about that.
    Now, your mission in the Congress--the Congress has many 
missions, but in this instance it is to specifically identify 
and define the problem and then craft some legislation to fix 
it. I think you will have to spend the majority of your time 
looking for the problem.
    Let me go to the second concern I have, which is even more 
critical, and that is this legislation with its vague terms and 
allowance for excessive penalties--and I will say something 
about that at the end--would significantly add to the country's 
frivolous litigation nightmare.
    For example, if this legislation were enacted, an 
individual or an organization such as the Chamber could be sued 
for taking the text of existing laws and reformatting them to 
make them easier for people to understand. It could also stop a 
replacements part manufacturer from being able to compare and 
hence advertise their products as alternatives to other more 
expensive originals; and with the legislation's vague and 
expansive definition of the term time-sensitive, information--
time-sensitive information, an individual or an organization 
could be the target of a lawsuit for using information in a 
database that is decades old.
    Ladies and gentlemen, I think for a minute of where our 
society would be without sharing database information. We owe 
an incredible advances in medicine, science, technology and the 
arts to the availability of that information to researchers all 
over the place.
    That is not to say, however, that access to database 
information should necessarily be available free. When people 
reformat and lay it out in a usable and a helpful way, they can 
and should charge for it, and the user should pay for it.
    Passing this legislation--let me conclude--would put a 
chill on business investment, deprive consumers of new 
information products and threaten a litigation bonanza that we 
can't afford, and it would then put penalties that will 
quadruple the fines when the things we do in RICO statutes only 
triple them. This would be a very unfortunate piece of 
legislation.
    Thank you very much, Mr. Chairman.
    Mr. Smith. Thank you, Mr. Donohue.
    [The prepared statement of Mr. Donohue follows:]
              Prepared Statement of Mr. Thomas J. Donohue
                              introduction
    Chairman Stearns, Chairman Smith, Ranking Member Schakowsky, 
Ranking Member Berman and Members of the Committees. Thank you for the 
opportunity to be here today to testify on ``the Database and 
Collections of Information Misappropriation Act''.
    I'm Tom Donohue, President and Chief Executive Officer of the U.S. 
Chamber of Commerce, the world's largest business federation, 
representing more than 3 million businesses of every size, sector and 
region of the country.
    I have previously written to both Committees to express my serious 
concerns about the draft legislation. I ask that copies of my 
correspondence be made a part of the record.
    I recognize that the staffs of your two Committees have worked hard 
to address the concerns that the Chamber and others have expressed 
regarding this issue. Unfortunately, I believe that the draft Database 
and Collections of Information Misappropriation Act does not adequately 
address those concerns. Instead, this legislation continues to pose a 
serious threat to the business community, as well as to the academic 
and science community. I strongly urge you not to move forward with 
this legislation.
    Although the discussion draft has been shared with the public for 
barely three weeks, it has already attracted a firestorm of thoughtful 
criticism. Along with the Chamber's objections, additional detailed and 
persuasive criticisms have been lodged by an extraordinarily diverse 
array of public and private entities. When the U.S. Chamber of 
Commerce, Consumers Union, the American Conservative Union, Association 
of Research Libraries NetCoalition and the Eagle Forum, all join hands 
in opposition to a legislative initiative, it's fair to ask what could 
unite groups which so often see the world in very different ways.
    The reason why so many organizations are so concerned about the 
discussion draft is simple. There has been no threshold showing that 
there is a problem that needs to be addressed by legislation. However, 
there is enormous concern that were this draft enacted, it may well 
create enormous problems for information users and producers, stifling 
innovation and adding to the excessive litigation burdens already 
facing American businesses.
    We live in the ``Information Age'' - an age in which advances in 
information technology have helped fuel economic growth and enhanced 
productivity. Fundamental changes in basic information policy will 
affect virtually every American, as well as virtually every business, 
not just those commonly thought of as information companies.
    Our country's basic information policy provides that facts - the 
building blocks of information - cannot be owned. That historic policy 
was underscored in a unanimous 1991 Supreme Court decision Feist v. 
Rural Telephone. In that landmark case, the Supreme Court reaffirmed 
that the U.S. Constitution prohibits copyright protections for facts 
contained in a database. The Court concluded that the Constitution's 
objective of promoting ``the Progress of Science and useful arts'' is 
accomplished by ``encouraging others to build freely upon the ideas and 
information conveyed by a work.''
    The basic goal of copyright, indeed of all intellectual property 
law, is to encourage creative activity. That is why the Feist court 
underscored that intellectual property protection can only be provided 
to those portions of a database that reflect a minimal level of 
creativity. Notwithstanding this unanimous Supreme Court decision, 
however, proponents of broad database legislation continue to seek 
protection for information that they haven't created.
    That is not to say that access to these databases should 
necessarily be available for free. Indeed, the Chamber strongly 
believes that current protections, such as appropriate intellectual 
property protections, along with contract and licensing agreements and 
state trespass and misappropriation protections, as well as other 
protections, should be utilized and enforced. Companies need and 
deserve protection for the time, effort and expense that they undertake 
to create databases, but new intellectual property protections like 
those envisioned by the discussion draft are too broad and unnecessary.

        what's the problem? where is the ``gap'' in current law?
    The Chamber has always believed that the best way to legislate is 
to specifically identify and define problems, and then carefully craft 
legislation to deal with those particular real-world harms. Whenever 
Congress legislates - especially in an area with the broad 
ramifications such as those inherent in changing basic and long-
standing copyright and information policy - that legislation should be 
narrowly targeted to resolving a demonstrated real-world harm, with as 
little collateral damage as possible.
    In this arena, throughout the seven-year consideration of this 
issue, proponents of changing how our nation regulates information have 
yet to provide a real-world example of a database that can't be 
protected under current law. There are an astronomical number of 
opportunities daily for some kind of infringement. Yet the inability to 
cite gaps in the law is profoundly telling. Indeed, this inability to 
cite real gaps in existing laws underscores our concern that some 
proponents of broad database legislation seek to leverage dominance in 
existing markets into dominance in other markets - without having to 
gain these advantages via competition in the marketplace.
    Most persuasive to me is the reaction of the Chamber's members to 
the discussion draft. Our broad membership includes many of America's 
most significant database producers. These companies invest enormous 
sums of money producing creative, new information products. These 
companies currently enjoy myriad legal protections for their databases, 
including contract, copyright, state- law misappropriation, trespass, 
federal computer anti-hacking statutes and numerous other protections.
    If our Chamber members believed for a second that they couldn't 
protect their substantial investments in database production, they 
would be urging me to affirmatively fight for new law. Instead, I'm 
hearing that there is little or no upside for the business community in 
database legislation, and potentially a significant, anti-competitive 
downside.

                     threat of excessive litigation
    As you know, the Chamber has long been concerned about the threat 
excessive litigation poses to the economy and American business. This 
legislation, if enacted, would combine vague terms and excessive 
penalties to create a frivolous litigation nightmare for businesses of 
all industries.
    The reason for this begins with the core prohibition of the draft 
bill. Since the Supreme Court's 1918 decision in International News v. 
Associated Press, courts have awarded relief in what became known as 
``hot news'' misappropriation cases. That line of cases established the 
tort of misappropriation, and found that even factual data could be 
protected if the data met a series of tests, including that the data is 
``highly time sensitive''. The Court found in that case that wire 
stories were ``hot'' and protected for a few hours. Subsequent cases 
have found, for example, that sports scores are ``hot'' and potentially 
protected for a matter of minutes.
    The discussion draft, however, creates a new definition of ``time 
sensitivity'' in the context of this bill, significantly different than 
the ``time sensitivity'' that courts have been familiar with for more 
than eighty years under the International News line of cases. 
Specifically, this draft would potentially require courts to add the 
concept of ``value'' to the determination of time sensitivity.
    For example, this draft legislation works retroactively, ensnaring 
facts in databases that are conceivably decades old. The draft protects 
facts in encyclopedias, even though the lead-time in publishing means 
that data is generally months old before it reaches the bookstores. In 
short, it is impossible to state definitively what this core 
prohibition means - though it can be definitely stated that this 
prohibition bears only a superficial resemblance to the time-
sensitivity standard created by the Supreme Court in the International 
News case and expressly preserved in Feist.
    The courts would be forced to determine whether the proposed 
prohibition can be tightened to look like constitutionally sanctioned 
``hot news'' misappropriation and not like the copyright of facts 
forbidden by Feist. While the courts sort this out, the combination of 
vague terms, a private right of action, quadruple damages and 
incredibly expansive subpoena power would create a litigation bonanza 
that will chill investment and threaten business, depriving consumers 
of new information products.
                               conclusion
    On behalf of the Chamber, I want to thank you for the opportunity 
to share some of our more serious concerns regarding the discussion 
draft. The Chamber has always believed that the best way to legislate 
is to identify and define specific problems, and then carefully craft 
legislation to deal with them. While some urge ``moving beyond'' 
discussing the problem in order to legislate, we are convinced that, if 
there is to be legislation it should be narrowly targeted to resolving 
a demonstrated real-world harm, with as little collateral damage as 
possible.
    Appropriate information policy is critical to American business. 
While we may be willing to support compromise legislation carefully 
targeted to deal with specific, demonstrated ``gaps'' in existing law, 
there has been no demonstrated need for such legislation at this time.
    On behalf of American businesses and our three million members, I 
want to thank you again for inviting me to testify and share our 
concerns.

    Mr. Smith. Mr. Kupferschmid.

 STATEMENT OF KEITH KUPFERSCHMID, VICE PRESIDENT, INTELLECTUAL 
   PROPERTY POLICY AND ENFORCEMENT SOFTWARE AND INFORMATION 
   INDUSTRY ASSOCIATION, ON BEHALF OF THE COALITION AGAINST 
                        DATABASE PIRACY

    Mr. Kupferschmid. Chairman Smith and Stearns and Members of 
both Subcommittees, I appreciate the opportunity to testify 
before you today to discuss the need for legislation that 
protects America's databases from piracy. I also would like to 
especially thank Chairman Sensenbrenner and Chairman Tauzin for 
their strong leadership on this important issue and appreciate 
the commitment of the two Committees to work together to 
produce and enact meaningful database legislation.
    I am Keith Kupferschmid, vice president of intellectual 
property for the Software and Information Industry Association, 
and I am here today on behalf of the coalition against database 
piracy. CADP is a broad-based coalition that was formed for the 
sole purpose of pursuing enactment of a Federal law to prevent 
misappropriation of databases. Its members include large and 
small database producers who devote substantial resources to 
creating and distributing database products and services.
    The value of reliable and comprehensive databases that 
these companies make available to researchers, to businesses, 
to Government officials, to citizens is immeasurable. Farmers 
use databases to get weather and soil information; lawyers to 
rely on legal precedent; doctors to determine safe and 
effective medical procedures; workers to search for new jobs; 
pharmacists to understand drug interactions; home buyers to 
find the right house, and the list goes on.
    Database piracy is a major concern to America's database 
publishers. With the Internet and advances in technologies, 
databases can be easily stolen and made available to others in 
ways that cause great harm to the original database producer.
    Unfortunately, U.S. copyright law and other existing laws 
do not adequately protect against such piracy. A recent case, 
Schoolhouse versus Anderson, decided in 2002, demonstrates the 
glaring inadequacies of current law. In that case the defendant 
copied and posted on the Internet a minimum of 74 percent of a 
small magazine publisher's database of school information. 
Although the defendant admitted to copying the database, the 
court held that the defendant was not liable for copyright 
infringement.
    Shortly after that case, the plaintiffs in the case got out 
of the database business. This is just one example. There are 
many other cases, including Skinder-Strauss v. MCLE, EPM 
Communications v. Notara Warren Publishing v. Microdos, 
Ticketmaster v. Tickets.com and many others.
    In addition to the database piracy cases that have resulted 
in litigation, there are numerous other instances of piracy 
that never make it to the courtroom. Many database producers 
are simply unwilling to spend the significant amounts of money 
litigating questionable causes of action and in the process 
draw attention to the vulnerabilities of their company's 
databases.
    Clearly there is a definite and significant need for 
database protection legislation. In addition, the risk of 
potential future instances of database piracy and the adverse 
effects that piracy would have on investment in databases and 
consumer protection is certainly sufficient justification for 
Congress to enact database protection legislation.
    I would like to focus the remainder of my remarks on the 
draft legislation. The discussion draft reflects years of 
discussions and negotiations between the two Committee staffs 
and stakeholders. The draft legislation they have developed 
takes a very targeted and very narrow approach to addressing 
the problem of database piracy.
    It is based on a misappropriation approach that only covers 
the act of making a database available that causes significant 
commercial harm to the database producer. It protects the 
database itself, not the information or the facts in the 
database.
    The draft legislation creates a narrowly focused 
prohibition that applies only if ten criteria are met. These 
ten criteria, all of which must be satisfied, set a very high 
standard for qualifying for protection under this draft bill. 
This standard is even higher when one also considers the 
exceptions to liability that are contained in the draft.
    We believe that some of the substantive provisions of the 
draft will provide protection against database piracy while 
also accounting for the legitimate concerns of database users.
    However, we believe that some of the language contained in 
the draft requires clarification, notably the preemption and 
time sensitivity provisions, among others. We are also 
concerned that the discussion draft does not recognize database 
thefts that cause noncompetitive harms. We look forward to 
working with the two Committees to ensure that these concerns 
are addressed.
    We note that a few groups, many of whom were part of the 
process initiated by the two Committees to come up with a 
compromised text, have voiced their opposition to the 
discussion draft. The approach of the discussion draft, relying 
on a standard of misappropriation, is precisely the standard 
that was recommended by many of those who are now writing to 
express their concern. Their continued opposition amply 
demonstrates that they simply do not accept the conclusions 
that the chairmen have both reached: that Congress should 
legislate to improve legal protection available for databases.
    Our goal throughout this whole process has been to get 
narrowly targeted legislation that will address the problem of 
database piracy while also addressing the legitimate concerns 
of the database user community. To the extent that the 
opponents believe that the draft falls short of this goal, we 
continue to stand ready to address those concerns in exchange 
for their support for this important piece of legislation and 
their recognition that the bill must address the needs of the 
database publishing community.
    We look forward to working with the Congress and the other 
stakeholders to achieve a legislative solution that eliminates 
the unfairness we discuss today. Thank you again for all your 
work on this important legislation. I will be happy to answer 
any questions.
    Mr. Smith. Thank you, Mr. Kupferschmid.
    [The prepared statement of Mr. Kupferschmid follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Smith. Mr. Wulf.

   STATEMENT OF WILLIAM WULF, PRESIDENT, NATIONAL ACADEMY OF 
    ENGINEERING AND VICE CHAIRMAN, NATIONAL RESEARCH COUNCIL

    Mr. Wulf. Thank you, Mr. Chairman. Like my predecessors 
here, I am very grateful to have the opportunity to testify on 
this important legislation today. I should clarify that I am 
testifying on behalf of the U.S. National Academies. That is 
The Academy of Sciences, The Academy of Engineering, and 
institute of Medicine, but also on Behalf of the Association of 
American Universities, the American Library Association and the 
Association of Research Libraries.
    The proposed legislation concerns a topic about which the 
scientific research, education and library communities have had 
an abiding and continuing concern. For all of those 
communities, the free and open sharing of information is 
essential for progress, and that progress is in large measure 
responsible for our quality--you are improving quality of life. 
It is estimated that one half of our GDP growth is due to 
advances in science and technology. It is estimated that two-
thirds of our productivity growth, the real source of wealth 
creation, is due to advances in science and technology.
    A hundred years ago this year, the Wright brothers flew the 
first heavier-than-air aircraft. A hundred years ago this year, 
Henry Ford opened his mass production plant making affordable 
automobiles available to all of us. A hundred years ago this 
year, the average life expectancy of an American was 46. It is 
now 77 an increase of 31 years.
    On the light side, I suppose it is interesting to speculate 
how many of us in this room would be here if it weren't for 
those advances in science and technology.
    On the serious side, my point is that this is a system that 
one tampers with very carefully. An unintended consequence of 
well-intended legislation on the free and open sharing of 
information could have enormous implications on our prosperity, 
our health and indeed on our national security.
    I would just like to make a few points about the draft 
legislation. First of all, I want to acknowledge that, in fact, 
the draft has a number of significant improvements, and we are 
very grateful for that. I must admit that my own analysis is 
incomplete, but I believe that there are also still problems 
and ambiguities, some of which are in my written testimony. As 
a consequence, the Academy has remained committed to being 
helpful in producing a balanced and fair bill, assuming that 
one is deemed necessary.
    The key I think is that there are several principles that 
ought to inform the process of crafting any new legislation in 
this area, and I would like to focus the rest of my testimony 
on those principles.
    The first is that the public domain status of factual 
noncopyrightable information must be preserved. Any new 
protection regime should leave a wide buffer zone to ensure 
that factual information will not be subjected to proprietary 
claims.
    Two, only significant problems of unfair competition in 
market failure that have been proven should be addressed. And 
negative unintended consequences must be avoided.
    Three, a reasonable balance of interest among the 
stakeholders in an information economy should be maintained. 
Congress should proceed cautiously in creating new protection 
regimes, because once created, a new protection regime is 
virtually impossible to dismantle.
    Four, healthy competition in the information industry needs 
to be promoted, while the further strengthening of unwarranted 
monopolies should be avoided.
    Five, exclusive control by private parties over information 
in databases produced by the Government must be prevented.
    Six, new protection regimes should not create any doubt or 
controversy about the lawfulness of traditional and customary 
access to and use of factual information for not-for-profit 
science, research and education, effective exceptions must be 
adopted.
    And finely, the important role and function of our Nation's 
libraries must not be undermined.
    Before concluding, let me note that there is little 
evidence, as far as I can tell, since the last time we 
testified on this issue that databases or other collections of 
information are routinely stolen or that there is a significant 
market failure in the information industry for such products.
    Indeed, database producers have already enjoy a broad range 
of legal technological and self-help methods, many of which 
have been further strengthened in recent years, that protect 
the fruits of their investment.
    Nevertheless, the academies and the other organizations 
represented in this testimony remain committed to playing a 
constructive role in helping Congress to consider the issues of 
database protection in a way that is consistent with the 
principles I have identified above. Thank you.
    Mr. Smith. Thank you, Mr. Wulf. And thank you all for your 
very strong testimony today.
    [The prepared statement of Mr. Wulf follows:]
                   Prepared Statement of Wm. A. Wulf
                              introduction
    My name is Bill Wulf. I have been asked to testify on behalf of the 
U.S. National Academy of Sciences, the National Academy of Engineering, 
and the Institute of Medicine (the ``Academies''). As you know, the 
three Academies were chartered by Congress to provide advice to the 
federal government and to the nation on scientific, technical, and 
medical issues. My testimony is also being given on behalf of the 
Association of American Universities, the American Library Association, 
and the Association of Research Libraries.
    I am grateful to have the opportunity to testify to you today about 
the draft legislation called the ``Database and Collections of 
Information Misappropriation Act of 2003.'' This proposed legislation 
concerns a topic about which the scientific, research, education, and 
library communities have had an abiding interest and continuing 
concerns. Indeed, this is the third time that the Academies have 
testified on congressional legislation in this area since 1997, and 
both the Academies and their operating arm, the National Research 
Council (NRC), have published extensively on these issues over the past 
seven years. A list of recent relevant NRC reports and my biographical 
summary are provided at the end of this statement. Copies of the 
referenced NRC reports, as well as the Academies' previous testimony, 
letters to Congress, and background analyses that we have written on 
previous versions of this legislation, are available on request.
    Although I am authorized to speak only on behalf of the 
organizations that I represent here today, the issues I wish to raise 
with you pertain broadly to our nation's scientific, research, 
education, and library concerns. And although I do not address directly 
the important issues raised by this legislation for the commercial 
sector, which are the focus of other testimony before you, my remarks 
are cognizant of the broader implications to our nation's economic and 
social progress.
    My testimony makes the following points, which build on our 
previous analyses:

         LAs a matter of public policy, there are several 
        key principles that must inform the process of crafting any new 
        legislation in this area, including the following:

                1) LThe public-domain status of factual, non-
                copyrightable information must be preserved, and any 
                new protection regime should leave a wide buffer zone 
                to ensure that factual information will not be 
                subjected to proprietary claims.

                2) LOnly significant problems of unfair competition and 
                market failure that have been proven should be 
                addressed, and negative unintended consequences must be 
                avoided.

                3) LA reasonable balance of interests among all 
                stakeholders in the information economy should be 
                maintained. Congress should proceed cautiously in 
                creating new protection regimes, because once created, 
                a new protection regime is virtually impossible to 
                dismantle.

                4) LHealthy competition in the information industry 
                needs to be promoted, while the further strengthening 
                of unwarranted monopolies should be avoided.

                5) LExclusive control, either de jure or de facto, by 
                private parties over information and databases produced 
                by the government must be prevented.

                6) LNew protection regimes should not create any doubt 
                or controversy about the lawfulness of traditional and 
                customary access to and use of factual information for 
                not-for-profit science, research, and education. 
                Effective exceptions must be adopted.

                7) LThe important role and functions of our nation's 
                libraries must not be undermined.

         LThe draft legislation includes a number of 
        improvements over previous versions of this legislation that 
        have been introduced by the House Committee on the Judiciary 
        since 1996.

         LThere are still major problems and ambiguities in 
        the current draft bill that can and should be addressed, 
        assuming that the creation of a new statutory remedy is still 
        deemed necessary.

         LThe Academies and the other organizations 
        represented in this testimony remain committed to playing a 
        constructive role in helping Congress to consider the issues of 
        database protection in a way that is consistent with the 
        principles identified in this testimony and that avoids 
        negative unintended consequences.

                                 * * *

                           a. lkey principles

                1) LThe public-domain status of factual, non-
                copyrightable information must be preserved, and any 
                new protection regime should leave a wide buffer zone 
                to ensure that factual information will not be 
                subjected to proprietary claims.

    As we have noted in previous testimony on this issue, access to and 
use of factual data in the public domain is essential to furthering our 
understanding of nature, to the validation of scientific claims, and to 
the progress of science and our nation's system of innovation. The 
advent of digital technologies for collecting, processing, storing, and 
transmitting data has led to an exponential increase in the size and 
number of databases created and used. A hallmark trait of modern 
research is to obtain and use dozens or even hundreds of databases, 
extracting and merging portions of each to create new databases and new 
sources for knowledge and innovation.
    Not only researchers and educators, but all citizens with access to 
computers and networks, constantly create new databases and information 
products for both commercial and noncommercial applications by 
extracting and recombining public-domain data and information from 
multiple sources. The rapid and continuous synthesis of disparate data 
by all segments of our society is one of the defining characteristics 
of the information age. Moreover, the serendipitous nature of research 
and the need of scientists and others to make transformative uses of 
non-copyrightable facts are such that one cannot predict when or how a 
database will be used. The ability of individuals and organizations to 
use information in a wide variety of innovative ways is also a measure 
of success of the original data-collection efforts.
    Society uses the fruits of such research and innovation to expand 
the world's base of knowledge and applies that knowledge in myriad 
downstream applications to create new wealth and to enhance the public 
welfare. Indeed, the policy of the United States has been to support a 
vibrant research enterprise and to assure that its productivity is 
exploited for national gain. Thus, freedom of inquiry, the availability 
of scientific and other factual data in the public domain, and the open 
publication of results are cornerstones of our research system that 
U.S. law and tradition have long upheld.
    The results of these wise policies have been spectacular. For many 
decades, the United States has been the leader in the collection and 
dissemination of scientific and technical data and in the discovery and 
creation of new knowledge. Our nation has used that knowledge more 
effectively than any other nation to support new industries and 
applications, such as the biotechnology industry and the discovery of 
new diagnostics and cures for hereditary and other diseases.
    In addition to the critical importance to our progress in science 
and innovation for factual information to remain in the public domain, 
it also is essential for many other compelling American values and 
needs, including 1st Amendment rights of freedom of expression, the 
promotion of the information economy, democracy and good governance, 
and other public- interest uses by consumers and society generally.
    Because of the overriding importance of non-copyrightable factual 
information remaining in the public domain, any new legislation in this 
area must be limited to remedying unfair conduct in commerce rather 
than extending any exclusive property rights in the factual information 
itself.
    Where there is uncertainty or doubt about the effect of potential 
new legislation, Congress should be careful to err on the side of 
caution. When the subject matter consists of the fundamental building 
blocks of knowledge, science and expression, the cost of over-
protection far exceeds the cost of under-protection.

                2) LOnly significant problems of unfair competition and 
                market failure that have been proven should be 
                addressed, and negative unintended consequences must be 
                avoided.

    Proponents of new database protection legislation have long argued 
that the misappropriation of databases is a major problem in the U.S. 
information industry and that existing methods of protection and 
remedies are inadequate. We find both assertions to be of increasingly 
dubious validity.
    There is little evidence since the last time we testified on this 
issue before Congress that databases or other collections of 
information are routinely stolen or that there is massive market 
failure in the information industry. Indeed, database producers already 
enjoy a broad range of legal, technological, and self-help methods-many 
of which have been further strengthened in recent years-that protect 
the fruits of their investments. Available legal remedies at the 
federal level include traditional copyright law, new rights to prevent 
the circumvention of technological protection measures granted under 
the Digital Millennium Copyright Act, and the new Computer Fraud and 
Abuse Act. Under state law, many jurisdictions have a common law 
prohibition against misappropriation of ``hot news,'' and a claim for 
trespass to chattels to protect databases.
    Contracts and licenses are now used universally by database owners 
to make their products available under a range of custom-tailored, 
restrictive conditions. Technologies that protect digital databases and 
help enforce the existing statutory and contractual rights of owners 
are constantly being refined and strengthened, including such methods 
as encryption, online database access controls, software and hardware 
based trusted systems, and digital object identifiers and electronic 
watermarks. Indeed, these contracts and technologies are increasingly 
employed to limit uses of data and information that would otherwise be 
permitted by law. Congress should carefully monitor their use and 
consider whether limits on their use are needed to preserve the balance 
between access to and use of factual information and the incentives to 
invest in the collection of such information, both of which are 
essential to the vigorous growth of science and knowledge.
    Finally, market based protections of databases through self-help 
business practices such as frequent updating and customizing can help 
make misappropriation less effective. Taken together, these database 
protection methods have helped make the commercial database market 
expand successfully in the United States.
    The Academies, the Association of American Universities, the 
American Library Association, and the Association of Research Libraries 
nonetheless are committed to playing a constructive role in helping 
Congress to consider the issues of database protection in a way that is 
consistent with the principles identified in this testimony and avoids 
unintended negative consequences. The National Research Council reports 
referenced at the end of this testimony analyze the far- reaching 
negative implications to research and innovation that could result from 
legislation that is overly protective of data and non-copyrightable 
factual information.

                3) LA reasonable balance of interests among all 
                stakeholders in the information economy should be 
                maintained. Congress should proceed cautiously in 
                creating new protection regimes, because once created, 
                a new protection regime is virtually impossible to 
                dismantle.

    It is essential to consider fully and to promote a healthy balance 
of the interests of all the stakeholders in the information economy and 
society, including the general public. The trend in recent years has 
been to increase the breadth, depth, and length of all types of 
intellectual property protection. The creation of any new statutory 
rights, particularly for subject matter as sensitive as non-
copyrightable factual information, must be done in full cognizance of 
the interaction of these rights with other parallel rights conferred by 
other statutes to avoid negative synergistic effects. In this regard, a 
major concern for the research community, as discussed further below, 
are the potential negative effects on access to and use of databases 
from unbridled, highly restrictive licensing practices, especially 
through increasingly legitimized adhesion contracts (e.g., shrink-wrap 
and click-on licenses), in concert with any additional new statutory 
rights in databases.
    Further, history has demonstrated that once granted, intellectual 
property rights are rarely, if ever, reduced or limited. Thus, if there 
is uncertainty about the effect of any proposed new protection, it is 
important err on the side of caution and the preservation of the status 
quo.

                4) LHealthy competition in the information industry 
                needs to be promoted, while the further strengthening 
                of unwarranted monopolies should be avoided.

    The promotion of competition is primarily an economic issue of 
direct interest to our colleagues in industry, but the benefits of 
competitive prices and increased quality accrue to the public. It is 
important, nonetheless, to emphasize that a preponderance of scientific 
databases are produced by sole sources, whether in the public or the 
private sector. For example, the vast majority of observational data 
sets of phenomena in the natural world, as well as all unique 
historical factual compilations, can never be recreated independently 
and are therefore frequently available only from a single, original 
source. In other cases, scientific databases are de facto unique 
natural monopolies because the cost of producing the data and the 
potential market are such that the economics will not support multiple 
sources. Even when data that are similar, but not identical, to 
original research results or observations are available for use in non-
technical applications, researchers and educators are unlikely to 
consider an inexact replica of a database to be a suitable substitute 
if it does not meet fully the original specifications. For this reason, 
scientific databases are particularly prone to monopoly control. Any 
new legislation therefore must not enhance the market power of sole-
source providers in any segment of the information industry without 
adequate public-interest safeguards.

                5) LExclusive control, either de jure or de facto, by 
                private parties over information and databases produced 
                by the government must be prevented.

    Consistent with principle #1 above, the public domain status of 
governmental databases and other information products is a key factor 
for the success of our nation's research enterprise, as well as for 
other compelling national values and interests. Legislation that 
confers new rights on the private sector must fully exempt government 
databases from the scope of protection and avoid the possibility of 
exclusive capture by private-sector entities.

                6) LNew protection regimes should not create any doubt 
                or controversy about the lawfulness of traditional and 
                customary access to and use of factual information for 
                not-for-profit science, research, and education. 
                Effective exceptions must be adopted.

    Also in keeping with principle #1 above, it is important to provide 
clear immunity for customary non-commercial scientific, research, and 
educational uses from the scope of a database protection statute. Non-
profit institutions should not be required to have expert intellectual 
property counsel looking over the shoulder of every scientist and 
scholar. Customary activities should not be chilled. Because in the 
case of databases, facts themselves are at issue, the legislation 
should include an express presumption that such customary uses are 
exempt from liability and the burden of proof on the plaintiff of 
demonstrating a violation should be heightened.

                7) LThe important role and functions of our nation's 
                libraries must not be undermined.

    Libraries traditionally have served the important public-interest 
function of providing access to information to our nation's citizens, 
and performed essential preservation and archiving activities. Any new 
rights conferred by new legislation on database owners must not 
undermine the libraries' ability to continue its role as public-
interest intermediary for the access to and preservation of factual 
information resources.

                                 * * *

            b. preliminary comments on the draft legislation

    We have not had sufficient opportunity to analyze comprehensively 
the draft ``Database and Collections of Information Misappropriation 
Act of 2003.'' The issues and competing interests in this legislation 
are complex and difficult to reconcile. Although the process has been 
long and difficult, we believe that it has led to a deeper 
understanding of the issues, which was so palpably lacking when the 
first legislative proposal, based on the European Union's database 
directive, was introduced in 1996. It also has demonstrated the 
inherent problems with introducing any new rights in this 
Constitutionally sensitive area and the importance of addressing 
adequately the competing legitimate interests of the many stakeholders 
in the information economy, not only the economic interests of the 
originators of commercial databases.
    Our preliminary analysis of this new version of the legislation is 
consistent with the views expressed by the major university 
organizations in the September 9, 2003 letter from Nils Hasselmo, 
President of the Association of American Universities, to the two 
cognizant Committee Chairmen. We conclude that although improvements 
have been made over the previous legislative proposals introduced by 
the Committee on the Judiciary, very significant problems still remain 
to be resolved. Moreover, the current draft contains a number of new 
provisions whose intent and impact are ambiguous and which could have 
serious unintended consequences for the research and education 
enterprise.
    We appreciate, in particular, several improvements that have been 
made in response to the concerns expressed earlier by the Academies and 
other parties to this process. The move toward a standard of liability 
grounded more in unfair competition law and the elimination of some of 
the most unacceptable aspects of previous versions of the Committee on 
the Judiciary's proposed statutes, are certainly welcome. Among the 
specific improvements that we see are the elimination of qualitative 
substantiality, the effort to tie liability to direct competition in 
the same market as the existing database, the adoption of a knowledge 
requirement as a condition of liability, and a limitation to databases 
that require substantial effort to develop. The elimination of criminal 
penalties and the explicit recognition of the doctrine of misuse as a 
limiting factor on lawsuits are also positive developments.
    Although the discussion draft addresses some of the concerns we 
identified previously, many serious problems remain nonetheless, while 
new ambiguities have been introduced by the recent changes. We note 
here only the issues of greatest concern to the scientific, research, 
education, and library communities, consistent with the principles 
articulated above, and also incorporate by reference the additional 
concerns expressed in the September 9 letter from Nils Hasselmo. In 
particular:

         L With regard to the liability standard, the 
        discussion draft could confer perpetual ownership rights in a 
        wide variety of data by virtue of protecting investment based 
        on open-ended maintenance of a database. In addition, the 
        concept of ``making available to others'' appears to be overly 
        broad, posing a threat to customary collaborative work within 
        or among universities and research institutions. Moreover, a 
        minimal amount of harm-even one lost sale or a single lost 
        source of data-could lead to a finding of liability and to a 
        chilling of the use of public-domain factual information, 
        contrary to the values articulated under principle #1 above.

         LThe exception for educational, scientific, and 
        research institutions applies only if the institutions are 
        nonprofit and their ``making available'' is for nonprofit 
        purposes. This would discourage joint research and development 
        activities between nonprofit institutions and corporations. 
        Especially troubling is that the exception can be overridden by 
        a shrink- wrap or click-on license and render the exception 
        meaningless--a major concern noted under principles #3 and 6. 
        Any new legislation must preclude such a possibility. Finally, 
        we continue to urge that the burden of proof of demonstrating 
        that customary not-for- profit scientific, research, and 
        educational uses of factual information are unreasonable should 
        be a heavy one and should be borne by the plaintiff.

         LThe scope of the exclusion for government 
        information in the discussion draft is uncertain as well. It 
        appears that a publisher that incorporates government 
        information in its database could prevent others from making 
        available that government information - even if it is not 
        available from any other source, contrary to principle #5.

         LBy failing to address the problem of sole-source 
        databases, the discussion draft increases monopolists' control 
        over competitive uses of information. This is of particular 
        concern in the market for databases used in scientific research 
        and education, as noted under principle #4. The provision on 
        misuse, which could help mitigate harmful conduct of database 
        monopolists, lacks any guidance for courts to determine whether 
        misuse occurred. The misuse provision should specifically 
        address the issue of sole-source databases. H.R. 1858 contained 
        appropriate language in this regard.

    While we believe that the Committees have made progress on this 
legislation, it is clear that the current discussion draft is still not 
ready to be adopted and would introduce serious problems in its present 
form for many stakeholders in the information economy, including the 
scientific, research, educational, and library sectors.
    In closing, I would like to reiterate that the Academies, and all 
of the organizations I represent in my testimony today, have sought to 
play a constructive role in the congressional efforts to craft 
appropriate legislation in this complex and sensitive area. We look 
forward to working with Congress on this issue to develop a consensus 
on how best to move forward from here.
    Thank you again for providing us with the opportunity to testify at 
this hearing.

                                 * * *

    Recent relevant National Research Council reports, published by the 
National Academies Press and all freely available at: www.nap.edu :

    The Role of Scientific and Technical Data and Information in the 
Public Domain (2003)

    The Digital Dilemma: Intellectual Property in the Information Age 
(2000)

    A Question of Balance: Private Rights and the Public Interest in 
Scientific and Technical Databases (1999)

    Bits of Power: Issues in Global Access to Scientific Data (1997)

    Mr. Smith. At this point, I am going to turn the Chair over 
to Congressman Stearns, and we will continue with the hearing.
    Mr. Stearns. I thank my colleague, and I certainly would 
defer to him to start with his questions.
    Mr. Smith. Thank you, Mr. Chairman. Mr. Carson, let me 
direct my first question to you, and this goes to page 8 of Mr. 
Wulf's prepared testimony, and he mentions several examples of 
serious problems with the proposed legislation, and let me read 
you the first two and ask you to tell us why they are or are 
not serious problems.
    Now, he says, first with regard to the liability standard 
the discussion draft could confer perpetual ownership rights in 
a wide variety of data by virtue of protecting investment based 
on open-ended maintenance of a database. And second, the 
exception for educational, scientific and research institutions 
arise only if the institutions are nonprofit and their making 
available is for nonprofit purposes.
    Do you consider those to be serious problems, and if not, 
why not?
    Mr. Carson. We understand the concern, Mr. Chairman. 
However, we are not certain how serious they are in the context 
of this bill. Let's take the first one. Would this discussion 
draft confer perpetual ownership rights? We don't think so, and 
we don't think so primarily because of one of the requirements 
that the unauthorized making available in commerce has to occur 
in a time-sensitive manner.
    As we stated in our testimony, there is, we think, some 
ambiguity in the current draft that suggests what is meant by 
that. If, as we understand, this is simply a codification of 
the ``hot news'' doctrine, then we don't see how there can be 
any conceivable problem with perpetual ownership rights. If it 
goes beyond ``hot news,'' then we really have to give it 
further thought and have a clear understanding of what is meant 
by this time-sensitive component and the elaboration that a 
court should consider the temporal value of the information in 
the database within the context of the industry sector 
involved. That, we think, does need some amplification and 
clarification, and depending on where that leaves us, we may or 
may not have some kind of problem.
    On the second aspect, whether the restriction of the 
exception for educational, scientific and research institutions 
to nonprofit institutions is a problem, I guess my first 
reaction to that would be that while we think it is a good 
thing that this legislation--this proposed legislation--would 
have an exclusion for nonprofit educational scientific and 
research institutions, when you look at the scope of the 
prohibitions set forth in section 3, which is clearly addressed 
to competitive activity which is serving as a functional 
equivalent in the same market as the data base--the 
proprietor's database--it is really hard to imagine too many 
situations, if any, when a nonprofit, scientific or educational 
research facility would be engaging in an act which would even 
implicate that primary prohibition.
    So that would be the first part of my answer, and the 
second part would be--we think there is a distinction between 
nonprofit institutions and for-profit institutions. If you are 
in this business for a profit, then maybe you should be on the 
same playing field as any other for-profit actors.
    Mr. Smith. Thank you, Mr. Carson.
    Mr. Kupferschmid, in the appendix to your prepared 
testimony, you give several examples of databases that are not 
currently protected by copyright law. Two of the examples you 
gave are the directory of information on U.S. cable television 
systems, and the second was a Massachusetts lawyer diary and 
manual.
    My question for you is why should they be protected? And my 
question for Mr. Donohue and Mr. Wulf is why not?
    Mr. Kupferschmid. One of the cases you are talking about, 
Warren Publishing v. Microdos, was a case involving a cable 
directory, and in that case Microdos came along and copied and 
sold the database in competition with Warren, a typical case of 
free riding, the exact type of situation we are trying to 
address here.
    Since that case has come down Warren Publishing has taken 
steps to try to protect themselves. What they have done is they 
have now put a shrink wrap license around the cable directory, 
because they feel that is pretty much the only way that they 
can protect themselves.
    I think it is quite interesting that because there is no 
law to protect themselves and they have taken this step, they 
have gotten this directory sent back to them from libraries and 
from others who do not want to adhere to the shrink wrap 
agreement. They won't open it up. So what that means is because 
there is no law and because Warren Publishing has had to take 
these steps to protect themselves, in essence, there is 
information that is not getting out there. And that is because 
there is no law and they have had to use other means to protect 
themselves. If there were a law, then presumably they would not 
have to do that and----
    Mr. Smith. Thank you. Mr. Donohue and Mr. Wulf, very 
briefly, why shouldn't we protect that directory and that--
directory of information U.S. cable television systems and the 
Massachusetts lawyer diary and manual? Why shouldn't we protect 
those databases?
    Mr. Donohue.
    Mr. Donohue. I believe that there is enough law on the 
books to give most companies the protection that they would 
need. What we are doing here, when you think about the 
Internet, when you think about the databases that are 
available--and there are millions of them--what we are doing 
here is talking not about the facts, as my colleague said here, 
but about the format, how they are put together. And certain of 
those things ought to be paid for. If they are not paid for 
appropriately, then the law which we now have should be used to 
protect those that are injured.
    To put together a new piece of legislation, to run around 
and look within those millions of databases for somebody that 
has been harmed is--in some ways this is getting ridiculous, 
because we are looking around for a problem for this solution.
    Mr. Smith. Mr. Donohue, if current law was not sufficient, 
would you support legislation that would close that loophole?
    Mr. Donohue. If I saw it and it made sense and if there was 
a serious enough problem to be resolved, of course.
    Mr. Smith. Okay. Thank you, Mr. Donohue, and thank you, Mr. 
Chairman.
    Mr. Stearns. I thank my colleague.
    Mr. Carson, let me just follow up here a little bit with 
what my colleague talked about. Now, you expressed the view 
that misappropriation is the best approach to this issue. 
Right?
    Mr. Carson. That's correct.
    Mr. Stearns. And so when you say misappropriation, you are 
talking about products versus rights of facts. Is that a good 
interpretation of what misappropriation is? In other words, you 
are saying misappropriation as a rule could be used to say that 
the facts themselves as developed could be used as property, 
products. No? Why don't you define misappropriations for me.
    Mr. Carson. No. Misappropriations--in fact on the opposite 
end of the spectrum from the property right--is an aspect of 
unfair competition, Mr. Chairman, and therefore the--basically 
the focus of a misappropriation claim would be the act of 
competition, the taking of someone else's database and using it 
in competition with them.
    Mr. Stearns. Okay. Now, in the Supreme Court International 
News Service v. Associated Press, do you believe that it is 
necessary for that approach to closely track the language that 
is in that decision?
    Mr. Carson. I don't think it is necessary, Mr. Chairman. I 
think it is probably the minimum. It is my understanding that 
this discussion draft, in fact, is an attempt and not a bad 
attempt to track the language in the INS decision and 
subsequently the NBA decision which also follows that, but it 
doesn't necessarily have to be that narrow.
    Mr. Stearns. And yet in the Supreme Court decision with 
Feist, it says no copyright protection for noncreative 
databases no property right. Now, does that go against what you 
just said?
    Mr. Carson. Not at all. It is talking about copyright. We 
are not talking about copyright here. We are talking about an 
entirely different species of protection.
    Mr. Stearns. So you would agree that what the bill in 
tracking the INS decision is the appropriate way to go?
    Mr. Carson. We would think that that is an appropriate way 
to go, I think, is how I would put it.
    Mr. Stearns. An appropriate way.
    Okay. Mr. Donohue, how do you respond to the specific 
example cited by Mr. Kupferschmid of court cases that have not 
offered protection to databases? And we hear all the time, you 
know, that there is no protection for these databases. What 
would be your response that the courts are not helping out?
    Mr. Donohue. Well, we have a couple of examples here of 
legal situations that narrowed the scope of what is protected, 
and therefore, it is seen to be not helping out. The issue 
here, you know, we have gone through a phenomena over the last 
10 years in this country in the expansion of databases that are 
no longer held in our hand. We look at them on the screen or we 
pull them off from an electronic system. We have gone through 
the whole question of taxing and how do you pay for these 
issues and the protection and privacy.
    This issue is so small compared to everything else, I would 
not argue with you, Mr. Chairman, that you somewhere can find 
someone that was injured; but the preponderance of evidence is 
that the benefits far outweigh the loss in terms of what is 
happening with this valuable information without intentionally 
injuring anybody's economic well-being. What is the benefit for 
our society versus--and you have to ask a question, why do we 
really want this legislation? Do we want it because every day 
people have economic loss or intellectual property loss? Or do 
we want it because certain people are looking for a way to 
perhaps capture information for their own economic gain? And I 
am not suggesting that that is the only interest here.
    What I am suggesting is that our members, AT&T and Yahoo 
and Bloomberg and Schwab and people that maintain extraordinary 
databases are saying, Tom, we are not being injured. We don't 
really think this legislation is going to help. And what it is 
going to be is a retirement opportunity for certain class 
action or mass action or straight-action lawyers. We don't need 
this type of new legislation, because we don't have a problem 
to fix.
    I wouldn't argue, though, Mr. Chairman, that a very smart 
guy from a good organization that it itself is divided on this 
issue can't find an exception or a circumstance where somebody 
was injured.
    Mr. Stearns. My time has expired. You probably could have 
touched on the fact that the bill allows for quadruple damages.
    Mr. Donohue. I said that in my testimony.
    Mr. Stearns. Okay.
    Mr. Berman.
    Mr. Berman. Thank you, Mr. Chairman. Just to clarify, Mr. 
Donohue, you are not saying that there is something inherently 
wrong when people try to capture information for their economic 
gain, are you?
    Mr. Donohue. No. As a matter of fact, that is what I 
represent on a fair and equitable way without disadvantaging 
others through the use of the Government.
    Mr. Berman. Mr. Carson, the ACLU writes in opposition to 
the draft legislation they raise first amendment concerns, 
which I think the Committees should appropriately--should 
consider and give way to, but they also state that the 
copyright clause of the Constitution stands as an affirmative 
bar to protection of unoriginal compilations of facts and that 
therefore the draft bill violates the copyright clause. While 
Chairman Stearns didn't quite say that in his opening 
statement, he came pretty close to saying that. What does the 
Copyright Office think of this assertion that the copyright 
clause of the Constitution prevents Congress from protecting 
facts and that the bill attempts to evade an important 
Congressional limitation on--constitutional limitation on 
Congressional power?
    Mr. Carson. Mr. Berman, clearly the copyright clause 
prevents Congress from protecting facts through the vehicle of 
the copyright laws, and there is a pretty good argument that 
the copyright clause might as well prevent Congress from 
protecting databases through conferring a property right that 
is essentially the same as a copyright on database producers; 
but the copyright clause does not speak to Congress's power 
under the commerce clause to regulate competition in this 
industry if what the legislation is in fact regulating is that 
competition and is not conferring exclusive rights, which is 
the copyright package and which is what the copyright clause, 
in fact, addresses.
    Mr. Berman. Thank you.
    Dr. Wulf, you argue that new database legislation is 
unnecessary because the DMCA copyright laws, trespass actions 
and contracts provide database producers with adequate 
protection, yet many of the organizations that you represent 
today advocate in other contexts rolling back the DMCA, 
weakening copyright law and placing Government limitations on 
the freedom to contract in the form of compulsory licenses and 
things like that.
    Isn't there an inconsistency between these positions? The 
organizations you represent appear to be proposing that we take 
away the very protections that they assert through you, provide 
adequate protection to database creators. Will they support 
strong database legislation if they succeed in rolling back 
protection in these other areas?
    Mr. Wulf. I think inflating the two issues is probably a 
mistake. You are absolutely right, there are organizations 
which have differing views from my own on some of these issues. 
I happen to have been an entrepreneur who spun out from a 
university and started a software company and intellectual 
property rights in software which is very much a gut issue for 
me.
    Mr. Berman. I don't think I inflated the two issues. I 
think the organization you represent has.
    Mr. Wulf. I am representing those organizations with 
respect to this particular bill and not with respect to 
everything that they have ever said or done.
    Look, I think the essential point here is--and by the way, 
you probably know that in earlier testimony we said--we, the 
academies, not everybody I represent here, said that we thought 
there was potentially a gap that needs to be filled. Things 
have happened since then. We need to now, I think, stand back 
very carefully and ask whether the things that have happened, 
like the Digital Millennium Copyright Act, have closed that gap 
to the point where this legislation is no longer needed. I was 
not advocating not doing it. I am advocating taking a very 
careful look.
    Mr. Berman. At whether or not the DMC----
    Mr. Wulf. Whether that gap still exists.
    Mr. Berman. And if it doesn't, it is because the Digital 
Millennium Copyright Act may have closed that gap.
    Mr. Wulf. And the Computer Fraud and Abuse Act and new 
technology in cryptography and, you know, a lot of things. It 
is not the one thing.
    Mr. Berman. Thank you very much, Mr. Chairman. I yield 
back.
    Mr. Stearns. I thank the gentleman.
    Mr. Keller, my colleague from Florida.
    Mr. Keller. Thank you, Mr. Chairman. Let me begin with Mr. 
Kupferschmid. I was taking some notes when Mr. Donohue was 
speaking. He said there is no real world example of a database 
not protected under current law. I got the gist of his 
testimony was there is not really a problem, because you have 
the adequate existing laws to cover it. If you were speaking to 
a sixth grade class, what would you say is a real word example 
they could relate to that is not protected by existing law?
    Mr. Kupferschmid. Well, the example I would give them would 
probably be Ticketmaster v. Tickets.com, because that involved 
concert information. So why not go with that since we are 
dealing with a teenage crowd here. In that case, Tickets.com 
originally deep-linked to the information in Ticketmaster's Web 
site. Ticketmaster didn't want them to do that, so they were 
able to use technology to prevent them from deep-linking. The 
technology didn't work because Tickets.com then came and sent 
out a Spider, Robot, Web Crawler, whatever you want to call it, 
and copied the information and put it into their database. So 
Ticketmaster then sues Tickets.Com since the technology didn't 
work.
    Well, Ticketmaster then sues for four claims. They sue for 
copyright infringement, misappropriation law, breach of 
contract and also trespass law. Guess what? They lost on all 
four claims. They lost on copyright because there was no 
copyrightable expression in the concert data that was taken. 
They lost on misappropriation, because there is a ``hot news'' 
misappropriation requirement, and the information was not 
considered to be time-sensitive or highly time-sensitive under 
that criteria.
    Under breach of contract theory, there was held to be no 
contract. This was just a Web page with terms and conditions at 
the end. Browse wrap licenses like that are usually not 
enforceable.
    And lastly in trespass, this was the same court that heard 
the trespass claim in the eBay Bidder's Edge case; but yet, 
they turned around and said there was no damage to a server or 
any type of damage to hardware that Ticketmaster had and 
therefore there was no trespass. So they tried technology, it 
didn't work. They tried contract, it didn't work. They tried 
misappropriation. They tried trespassing. They tried copyright. 
All out of luck. They lost. That is a typical case.
    Mr. Keller. That is a sophisticated sixth grade class. All 
right. In fairness to the other side, Mr. Donohue let me ask 
you a tough question here. You argue that there is essentially 
not a problem, because existing laws offer protection in a 
database. At least that is how I inferred your testimony. 
However, I understand that some opponents, including I guess 
some of your members such as Bloomberg, are making arguments in 
court now such as the day star versus 20th century case, the 
one they signed on to, that the current protections provided by 
contracts, State laws on trespass and the Computer Fraud and 
Abuse Act should be precluded from protecting databases.
    How do those two positions coexist?
    Mr. Donohue. A sixth grade answer?
    Mr. Keller. I hope so. That is all I can understand up 
here.
    Mr. Donohue. My first argument is there is not a repetitive 
compelling problem of any size or shape that would compel the 
Congress of the United States to act and pass new legislation. 
My second issue is that we heard what the court didn't do and 
regularly doesn't do with the occasional case that it gets. I 
think that deserves some consideration in terms of maybe what 
is happening is people are using, for the most part, 
information that should be available. I make no argument for 
even a sixth grader that there aren't occasional problems that 
we would all feel badly about, but we don't need a massive new 
set of legislation that is going to give the trial lawyers a 
whole new retirement program just to deal with those occasional 
issues. Thank you very much to the sixth grade.
    Mr. Keller. Well, if this legislation had the 
misappropriations standard, which I think you previously wanted 
and didn't have, the quadruple penalties and had a couple of 
other things that were changed, would this be something that 
you think would merit support or do you think it is just a 
fatally flawed idea from the get-go?
    Mr. Donohue. Well, for the reasons I expressed, I rather 
think it is flawed. Of course, any time the Congress and the 
Committee with smart people like this change a piece of 
legislation around and narrow its scope, we would always look 
at it and we would look at it thoughtfully.
    What I am commenting on is the draft that was put before 
us, and that would be a mistake for this Committee to advance.
    Mr. Keller. Thank you, Mr. Chairman. I have nothing 
further.
    Mr. Stearns. I thank my colleague.
    The Ranking Member on the Commerce Consumer Protection and 
Trade, we welcome her, Ms. Schakowsky.
    Ms. Schakowsky. Mr. Kupferschmid, Mr. Donohue said that he 
has members of his association which has taken a very strong 
position against this legislation who themselves have 
databases, and I am trying to understand then what the 
difference is between the interest that you represent and the 
interest--and I would welcome Mr. Donohue's comment as well. If 
one segment doesn't have a problem, are you just finding--you 
know, as Mr. Donohue has suggested--a couple of examples but 
that industry wide it is not a major problem that needs our 
addressing?
    Mr. Kupferschmid. I think the difference between the number 
and the types of database producers that we represent compared 
to the chamber of commerce, I think it is significantly 
different. We have in our coalition here 70 companies that are 
pure database producers that are supportive and they know that 
there is a need for legislation. I won't speak for the Chamber. 
I will let Mr. Donohue speak for himself, but I highly doubt 
that there is that number of companies in his association 
interested in this issue. I know he referenced the fact that we 
are divided on this issue. Nothing could be further from the 
truth. I mean, SIIA and CADP are very supportive of database 
legislation protection, and recognize the need for it. The 
coalition against database piracy, which involves members like 
Dow Jones, eBay, the Newspaper Association of America, McGraw-
Hill, the National Association of Realtors, and smaller 
companies like Carfax and Berkshire Publishing, they are all 
supportive and there is they believe that there is a definite 
need. These are companies that their business is producing 
databases.
    Ms. Schakowsky. Mr. Donohue.
    Mr. Donohue. Thank you very much for the opportunity to 
comment. First, we have more than 3 million members. We have a 
majority of the major database holders as our members. The list 
that you have been submitted on the other side has 14 
subsidiaries of one company, has a number of people, who I 
think if they had an opportunity to review this legislation 
might have another view, but let me say, Congresswoman, that 
the interesting thing about my job is not dealing with the 
Congress, because that is easy.
    It is dealing with my members. But the great majority of 
our members have made it very clear that an added legislation 
that opened up this litigation problem and that made it more 
difficult for people to use their product and access their 
information would be a difficulty for them. And if the 
Committee would like, I would be very happy to give you an 
extensive list. I think it would be a little longer than the 
one over here.
    Ms. Schakowsky. Thank you. I am looking at the letter from 
the American Civil Liberties Union, and one of the issues that 
they raise is the issue of subpoena powers. They say subpoena 
powers pose serious privacy concerns. Section 7 of the bill 
gives database owners broad subpoena powers with no judicial 
discretion. A clerk must grant a subpoena as long as the 
proposed subpoena ``is in proper form,'' and that ``the 
accompanying declaration is properly executed.'' there is no 
prescription for due process protections or even a requirement 
that an applicant may prime fascia demonstrate that a proposed 
defendant has, indeed, violated the law before violating her 
privacy.
    This lack of privacy related safeguards seem ripe for 
abuse. I don't know if it is Mr. Carson, Mr. Wulf who would 
want to comment on that.
    Mr. Carson. Yes. This is an issue that goes certainly 
beyond this particular bill. And let me make clear that we have 
no particular position whether such a provision is appropriate 
in database legislation. I think we would need to hear the case 
to be made for that. But to the extent that you are referring 
to a controversy that is very much in the air with respect to 
section 512 of title 17, which does have the process that you 
described, we are quite familiar with that and we think most of 
the complaints that you have just described frankly have very 
little to them when you peek beneath the hood.
    The fact of the matter is that the types of problems that 
people have claimed exist in that respect first of all are to 
some extent obviated by the protections that are built into 
section 512 of title 17, some of which are not in this 
discussion draft, and we think that if you continue to consider 
such a provision in this discussion draft you need to consider 
including such provisions--in particular provisions that 
require that before you get the subpoena you file something 
with the court that lays out the basis for your need, including 
identifying what work is being infringed and where you can find 
the infringing material.
    Beyond that, though, what you have described, if you think 
about it, isn't so very different from what happens every day 
in civil litigation. Subpoenas are issued by attorneys in civil 
litigation without any judge reviewing them. They can seek 
information about third parties. The third party has no right 
even to be aware that it is being sought from the person to 
whom the subpoena is directed until after the fact. So what you 
are describing is simply a matter of fact, every day in civil 
litigation in this country.
    Mr. Kupferschmid. If I could just supplement what David 
said, and I agree with everything that he said. To give some 
context to this, the subpoena provision that is in this bill 
was drafted at the very outset when the negotiations over this 
draft legislation had first started. As we all know, a lot has 
changed over that period of time. But at the time when this 
provision was drafted the ISPs were supportive of this exact 
provision that is in the bill. Like I said, I know a lot has 
changed in the legal regime certainly within those 3 years, but 
this remains to be an important provision to database 
producers. We will be, willing to discuss changes to it or to 
address their concerns, as I mentioned before, if that is 
necessary.
    Ms. Schakowsky. Did you want to say anything?
    Mr. Wulf. I am not a lawyer and so I would be happy to 
respond in writing if that would be all right. I must admit 
that what I just heard, however, as a layman scares me.
    Ms. Schakowsky. It is disturbing, isn't it?
    Mr. Wulf. Yes.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    Mr. Stearns. Gentleman from New Jersey, Mr. Ferguson.
    Mr. Ferguson. Thank you, Mr. Chairman. I am not a lawyer 
either, thankfully. We are beating up on lawyers a good bit 
today and I usually will jump right in there. I have the AT&Ts 
of the world in my district. I also have Reed Elsevier, 
Martindale Hubbell in my district. They obviously are coming at 
this issue from different sides. I think some very good points 
have been made quite articulately by our panel today, and I 
appreciate all of your testimony. My concern is with this 
chilling effect that we have heard talked about and actually if 
I am not mistaken it has been cited on both sides of this 
debate and this conversation. And to Mr. Donohue I wanted to 
kind of engage you a little bit on this.
    As I have said, I wholeheartedly agree with you and the 
Chamber on the need for tort reform, for less litigation, for 
all of the above and you know I have been a loyal foot soldier 
in that battle and will continue to be.
    Mr. Donohue. Thank you, sir.
    Mr. Ferguson. And I certainly can appreciate the desire to 
stay away from increased litigation, increased frivolous 
lawsuits, et cetera, in the future. And I agree that frivolous 
lawsuits, litigation trial lawyers, et cetera, have had a 
chilling effect on business job creation, et cetera, in a whole 
host of areas. My concern is that--and the way I am seeing this 
kind of break down a little bit and also with what I have heard 
in our own office, from folks in my district on various sides 
of this, is that the folks who are somewhat in the database 
business, like the AT&Ts of the world, but who have many other 
business interests are not as interested in this legislation or 
certainly not supportive of it because they see it as more of a 
litigation magnet rather than a protection for their business. 
And the folks at, say, Martindale Hubbell, for instance, and 
Reed Elsevier, this is their entire business. So they are much 
more interested in these protections that they would be 
afforded and their products would be afforded under this 
legislation. And my question, I guess, is what about the 
chilling effect on the database collection and management 
companies? What about the--I guess we are talking about--we 
have discussed a little bit about a problem that may or may not 
exist. But some of what we do in the Congress, as you know, is 
trying to preempt problems that may exist in the future. Maybe 
we see examples of now, but may become much worse. And there 
are companies who would probably be doing a lot more 
investment, a lot more work, a lot more with regard to database 
collection and providing products to their customers, but maybe 
aren't doing so today because they know they don't have the 
protections.
    What are your thoughts on kind of the opposite kind of 
chilling effect?
    Mr. Donohue. Well, first one sentence to say thank you for 
your appreciation of the legal questions here and the 
possibility that this draft would create far more legal 
difference of opinion and therefore far more cost and, by the 
way, in those circumstances much less likely for people to 
invest in database expansion. Second, I think you have to look 
at the record, and the record is that the database business and 
the products they are producing become more sophisticated, more 
expansive and more helpful every day. And the question is, and 
you could ask that sixth grade class about it because they even 
use it, the question is what benefit would we get in size and 
scope to encourage investment, to expand databases or to make 
us more comfortable with this legislation? And I think there 
have been some good arguments made here. But I think that the 
potential, talking about potential difficulty is far more 
expansive than the potential benefit.
    If somebody came back and brought a lot of these 
extraordinary people that run this business in here and they 
laid out a whole series of economic and intellectual property 
and business difficulties, I would listen because you know 
what, those people would be my members. But that is not what is 
going on right now. And I understand that you have a split in 
your district. But it is pretty clear that we ought not fix it 
if it is not broken.
    Mr. Ferguson. But what we are hearing from a number of 
folks, 70 some folks or however many, even it was five, that 
say that there is a problem.
    Mr. Donohue. Right. Then I would want to dissect the 
problem a little more carefully and I would recommend that 
before you passed a piece of legislation that will affect the 
information base of an information based economy that is 
absolutely dependent on it for economic expansion and the 
creation of future jobs in this country.
    Mr. Ferguson. Very quickly, Mr. Chairman. I know my time is 
up. You talked about the vague terms of the draft bill and the 
excessive penalties. I think there probably is going to 
continue to be a very healthy debate on that. I think probably 
a lot of us who maybe agree with some points on one side would 
agree with other points on the other side. If some of those 
issues were resolved, if this were narrowed and sharpened a 
little bit, could you see an instance where you could be 
supportive of this bill?
    Mr. Donohue. You know I testify a lot here and I like to be 
very clear, not, you know, take some of the points that others 
do. But allow me the protection of saying I would have to see 
it and talk to my members. But from everything I see now, I am 
opposed to and it would have to be significantly changed.
    Mr. Ferguson. I know my time is up.
    Mr. Donohue. Thank you very much.
    Mr. Stearns. I thank the gentleman. Mr. Boucher, the 
gentleman from Virginia.
    Mr. Boucher. Well, thank you very much, Mr. Chairman. I 
want to thank these witnesses for being with us today and 
sharing your views on the subject. You have presented to us 
well prepared and thoughtful testimony.
    We find ourselves, I think, at a fairly curious juncture 
here. The bill that is before us in draft form is said to be a 
compromise between the Commerce and Judiciary Committees. I 
have the privilege of serving on both of those Committees. I 
may be the only Member here who has that opportunity, and I 
have had some conversations with many Members of the Commerce 
Committee in particular about this measure, and I don't believe 
there is a single Member of the Commerce Committee who is 
prepared to support this bill. And so I find it very curious 
that it is being presented today as a compromise measure with 
the two Committees participating and putting forward this 
consensus draft. I really find it to be very much to the 
contrary.
    I oppose this measure also, and I want to commend Mr. 
Donohue in particular for his statement today. I think it was 
compelling. I think it was incisive. I think he hit all the 
right points. The remedies that are available under copyright, 
under trespass, under misappropriation, under contract law 
itself have proven successful in the cases that have been 
litigated in protecting databases where there were genuine 
harms that would arise from the taking of facts within that 
database. To legislate at this point, I really think, in the 
absence of a clearly delineated problem that requires a 
solution, is simply mischievous and would create an anti-
competitive effect, potentially locking away facts that are 
available to the public today and, at a minimum, requiring that 
people pay for facts that are free and available for public use 
presently.
    And then, as many Members and some of the witnesses have 
indicated, there are very substantial constitutional concerns 
about this measure. So put me down among the opponents. I think 
the best course we could take is to put this aside and go on to 
our more urgent legislative business.
    Having said that, I just want to ask a couple of questions 
and, Mr. Carson, I am going to direct these to you. First of 
all, I am a little bit perplexed by your answer about the 
subpoenas. What the bill authorizes is subpoenas being issued 
before any lawsuit has been filed. Now, you talked about the 
normal discovery process in which lawyers issue subpoenas in 
civil litigation. But you know there is a fundamental 
difference between that kind of circumstance and the 
circumstance presented by this bill. In the circumstance you 
cite a lawsuit is pending. And in that pending litigation, if 
the person to whom a subpoena is directed believes that there 
is some impropriety in that discovery, he has the opportunity 
to go to the judge before whom that case is pending and seek an 
order that protects him from this abusive and improper 
discovery. That happens all the time in our litigation. Under 
the provisions of this bill that could not happen.
    Mr. Carson. Not at all true, Mr. Boucher. Not at all true. 
And again I am focusing primarily on what we find in section 
512.
    Mr. Boucher. What is not at all true?
    Mr. Carson. It is not at all true that someone under this 
bill would be at a disadvantage with respect to someone who is 
the subject of a subpoena in pending litigation.
    Mr. Boucher. How does a person under this bill go to a 
judge and say, Judge, protect me from the issuance of this 
subpoena or from having to comply with the requirements of this 
subpoena? How do you do that? You would agree, would you not, 
that you can do that this regular civil litigation?
    Mr. Carson. You can do it under 17 USC section 512 and 
although I haven't studied the provision in this discussion 
draft and I am certainly not here to suggest that it needs to 
be in here--we have no view on it--assuming that this does 
track what is in section 512, the subpoenas issued pursuant to 
section 512 are subject to the Federal Rules of Civil 
Procedure. In fact, under section 512 people have gone to the 
District Court here in Washington to seek protection.
    Mr. Boucher. But you would have to go ab initio. You would 
have to initiate your own proceeding before the court while 
there is no judge sitting overseeing that case.
    Mr. Carson. That is not how it works, Mr. Boucher.
    Mr. Boucher. Well, you and I have a difference of opinion 
about that and it is obviously something that would need to be 
examined. I would continue this discussion with you except that 
I have one other question of you and my time is almost up.
    I find another series of provisions in this bill to be 
curious and I wonder how they can coexist. Perhaps you can help 
me with this. One of those is the requirement of time 
sensitivity before the protections this bill would extend to 
database creators would apply. The other is the fact that this 
bill is made retroactive. Can you give me an example of a 
database that contains facts where the protection of those 
facts is required because of their time sensitivity, where that 
database is already in existence?
    Mr. Carson. Mr. Boucher, I actually hadn't studied the bill 
to the point where you saw the retroactivity provision. We have 
already expressed our concern about the vagueness of the time 
sensitivity provision.
    Mr. Boucher. I appreciate that you are not prepared to 
answer the question.
    Mr. Carson. No, Mr. Boucher. That is not exactly what I 
said, sir.
    Mr. Boucher. Well, go ahead if you have an answer.
    Mr. Carson. I have said already we have problems with the 
time sensitivity provision because we think it is ambiguous and 
we have already expressed that if the time sensitivity thing 
carries over for a long period of time there may be problems.
    Mr. Boucher. Thank you, Mr. Carson. Thank you, Mr. 
Chairman.
    Mr. Stearns. Ms. Baldwin. Yes.
    Ms. Baldwin. Thank you, Mr. Chairman. Thank you all for 
being here today. I appreciate your testimony. As the people 
have been asking questions before, there has been disclosure, 
so I am a lawyer, but much more importantly, I am the 
granddaughter and niece of scientists and both belong to one 
the organizations that Mr. Wulf is representing today. I also 
represent a major research university, the University of 
Wisconsin, Madison campus, and so have very strong concerns 
about the impact of this on the conduct of science.
    But before--just as a--given the draft in front of us, 
there is a question of course of the need for this legislation. 
If there is need for additional protection for digital 
databases, I would think that those could ultimately benefit 
universities and university research efforts both by providing 
greater incentives to create databases and providing additional 
protection for university created databases. But obviously I 
have heard a lot of very generalized concerns from the 
scientific community about the potential harmful effects of 
overprotection of databases.
    Mr. Wulf, if you can, somewhere between the sixth grade 
level and the post-doctoral level, elaborate on some of your 
concerns about the overprotection of databases and its impact 
on the conduct of science, and especially I want to tease out 
some details from you, if you can identify some real or 
hypothetical examples of what might be in store if this 
legislation were to pass as is.
    Mr. Wulf. I think something--let me address an issue that 
you mentioned and that is the value potentially to universities 
and to researchers of having protection in databases. I have 
spent about two-thirds of my career in academia and something 
that is kind hard for people to understand sometimes is that 
the real motivation, the real inducement for academics to do 
research is not financial. It is rather peer recognition, and 
that tends to argue in favor of as much free flow of 
information to your peers as possible. So I am not at all sure 
that in fact additional restrictive legislation here would be 
beneficial.
    The term ``chilling'' has been used a couple of times here, 
and I think that is another point that needs to be made. 
Academics tend to be risk averse. And we will of course never 
know what they decide not to do because there might be a 
potential litigation. But academics will, by and large, stay as 
far away as possible from the potential of litigation. So again 
we are talking about lost opportunities. We are talking about 
opportunity costs. Those are very hard to measure. But one 
should never make the mistake of thinking that because they are 
hard to measure they are not real. They are very real.
    I think some of the kinds of issues that we worry about 
include access to Government generated information. We worry 
about access to information generated by sole sources. Much of 
the scientific data that is collected is observational and it 
happens at a moment in time with an instrument being available. 
It is not reproducible. And if that kind of information became 
inaccessible because of excessive protection, it could have a 
tremendously chilling effect on the conduct of research. We 
typically--I shouldn't say typically. Often, often enough to be 
scary--cannot predict what the use of a database will be. The 
existence of the ozone hole over Antarctica was verified using 
databases which had been collected for an entirely different 
purpose at an entirely different time with no anticipation of 
this kind of use.
    So if access to information that you could not predict 
would be needed, were restricted, we might not still know about 
the existence of this enormously environmentally dangerous 
ozone hole.
    Does that help?
    Ms. Baldwin. Yep. Thank you.
    Mr. Stearns. Mr. Delahunt.
    Mr. Delahunt. Mr. Wulf, I appreciate the concerns that you 
articulated. You used the term ``risk averse and chilling 
effect.'' I will tell you what my concern is, that database 
providers are for profit corporations, and capital oftentimes 
is risk averse. And I thought Mr. Donohue's observations were 
correct. You know, his judgment there is not a problem. We hear 
that there was a case, I think it was the Schoolhouse case and 
other cases that Mr. Kupferschmid referred to or alluded to 
during the course of his testimony. It is my belief that there 
is a problem. But clearly there is a perception among the 
database community that there is a problem. I know if I were to 
invest or I know if I were, you know, corporate management and 
I had capital to invest, I would be looking for new 
opportunities to diversify. And the concern that I have is all 
of these great achievements that really have come about because 
of database and access to information we will not maintain that 
here in the United States, we will not maintain the level of 
current data to give us a competitive advantage. And the kind 
of research that the academies have been interested in will be 
provided by our, you know, European data providers, data 
companies. That is the concern that I have.
    Now, I think that is a potential problem that impacts 
exactly what you are talking about because I sense that--and we 
are only starting to see in the aftermath much of what was 
accomplished in terms of the advances that I and others have 
alluded to was based on work that was protected prior to the 
Fist case. Now we find ourselves in uncharted waters here, and 
what I am concerned about is the potential for, again, these 
data--the database industry diversifying and not investing the 
kind of resources that are necessary to maintain that absolute 
current state of data and access to information that provides 
our scientific community and our economy the kind of advantages 
that we have enjoyed. I don't know. Would you care to comment 
or anyone for that matter?
    Mr. Wulf. Well, I could only repeat myself. We clearly have 
an innovation system in this country that works. It is an 
innovation system which is fed by the basic research done in 
our academic research universities. We just need to be very 
careful that we don't destroy that in the process. The point I 
tried to make in my oral testimony was----
    Mr. Delahunt. Right, and just let me interrupt because we 
don't have a lot of time. But I agree with that. And I think 
you testified and it was my understanding that this particular 
draft that is before us was generated as a result of the 
various groups whom you testify in behalf of and others sitting 
down and trying to develop a consensus so that the concerns you 
express are addressed. Now, presumably, fine-tuning is 
required. But I guess the bottom line question is who is right? 
Is it Mr. Kupferschmid or is it Mr. Donohue? You know, is there 
a problem? If there is a perception of a problem, you know 
what, there is not a lot of folk that are going to be running 
out looking to invest in database.
    Mr. Kupferschmid. If I could interject here, I mean there 
are actually numbers that bear that out. In 1996, the EU data 
base directive was passed. Since that time the percentage of 
U.S.-produced databases has shrunk from 69 percent to 60 
percent .
    Mr. Delahunt. Well, this is the kind of information I think 
that this Committee needs. And Mr. Donohue?
    Mr. Donohue. Well, if you take the primary--the company 
that has really been behind a lot of this discussion, Reed 
Elsevier, they have made 20 some acquisitions since 1991, spent 
in excess of $7 billion and a lot more than that. Those are the 
numbers that I have here, and their operating margins are still 
annually over 20 percent. So one might understand why they want 
to protect their product. But they certainly think it is a good 
business because they keep expanding it every year and they are 
getting a hell of a return. I might buy some stock now that I 
am looking at this.
    Mr. Delahunt. Well, I will take a look myself. But I guess 
my question is these new acquisitions, are they an effort to 
diversify to protect themselves from the kind of liability that 
I presume they fear that they have, so that, you know, if their 
stuff continues to get pirated or if any of it gets pirated 
they are out of--you know, they continue to survive. I don't 
know. Now, I know that you read that Wall Street Journal, you 
know, religiously. And maybe you can tell us whether those 19 
acquisitions were an effort to diversify or are they just 
simply building on the so-called core business?
    Mr. Donohue. Well, Congressman, if we were on their board 
we would have encouraged the acquisitions because they did 
diversify their fact base to attract a broader group of fact 
users. But that is not the question here and, as my colleague 
said, this isn't an argument about fact. This is an argument 
about structure and access to that fact. And what I am having 
difficulty with is the question of where is the problem? Now--
--
    Mr. Delahunt. Well, there was a problem in that Schoolhouse 
case. 74 percent, that web of laws that you were referring to 
in your testimony certainly didn't protect that individual.
    Mr. Donohue. Well, then maybe we ought to go back and look 
at the case and maybe find out, maybe it didn't deserve to be 
pro-investigated. Look, I think this joint Committee has done a 
very useful thing here, because you are having what amounts to 
a colloquy on the subject, which--and I want to congratulate 
you on that and tell you I think that is essential and I think 
you have learned a couple of things, that we are worried about 
the litigation side of this, that we are very concerned about 
finding the problem before we get the solution, and that there 
is legitimate concern on the part of some people about going 
forward that they protect their assets. Well, what role should 
the Committee and the Congress have in that and what is in 
place to do it now, and I think it has been a good discussion 
and I appreciate the opportunity to participate.
    Mr. Kupferschmid. If I could respond. I think Mr. Donohue 
has done a marvelous job sort of redirecting the questions and 
staying on script. But this isn't about you know, one company. 
This isn't just about, Reed Elsevier. There are lots of other 
companies, a lot of mom and pop companies like Schoolhouse, 
like Berkshire Publishing, like Carfax, other smaller database 
producers that are having problems with database piracy. These 
are companies that really put all their money, all their 
investment into this one database and if this database is 
pirated they are out of luck and they are out of business. And 
so this is not just a one company issue. Like I said earlier, 
there are lots of members of CADP and they are all supportive.
    What I have heard today is that I honestly don't think we 
can come up with enough examples to ever satisfy Mr. Donohue. 
He refers to the occasional case. We have got lots and lots of 
cases and there are a lot of other cases that never make it 
into the courtroom because the database producers are worried 
about precisely what you are talking about, that people aren't 
going to invest in the company or invest in the database if 
they know how vulnerable the database is. And, you know, there 
are thousands of realtors out there worried about their 
databases being on pornography sites. It is a totally different 
type of concern here. But there is definitely a problem here 
that needs to be addressed.
    Now, if Mr. Donohue doesn't want to recognize that, no 
matter how many examples we give, I just feel that we will 
never be able to satisfy him.
    Mr. Stearns. The gentleman's time has expired. We certainly 
are at a consensus we are not going to have a second round, and 
we are going to let Chairman Smith close. Oh, okay. Yes, okay. 
Someone has just come in. Ms. Lofgren, we welcome your 
questions.
    Ms. Lofgren. Thank you and apologies for my lateness. It is 
United Airlines' fault. Let me just ask, I guess Mr. Carson or 
whoever wants to answer it. This is not the first time that we 
have visited this issue. And when last we passed something 
through Judiciary, I filed a lone dissenting view that in my 
judgment the measure we passed was--didn't meet the 
constitutional standard. And actually I was sort of a fan of 
the sweat of the brow doctrine. I thought it was a very nifty 
little doctrine that served us well for many years. But we no 
longer have that available. And I just--I am still not getting 
how we can create a property right out of something that cannot 
be copyrighted. And how we are--how this solves this problem. 
Can anyone answer that for me?
    Mr. Carson. The answer is that no one is proposing that you 
do that, Congresswoman Lofgren. This is not a property right. 
This is based on an unfair competition, misappropriation scheme 
which deals with wrongful use of someone else's database in 
competition with them. It is not an exclusive rights model such 
as you find in copyright.
    Ms. Lofgren. Well, I understand that. But ultimately I 
think it dodges the question, which is in order to protect 
something you have to have a property right that cannot be 
created, that I can see. I mean how do you get past that?
    Mr. Carson. You get past it by not giving anyone a property 
right. This bill doesn't create any property rights whatsoever. 
It is a right against unfair competition by people who use your 
material in the same realm that you are using it in direct 
competition with you in a way that threatens to destroy your 
ability to continue in business.
    Ms. Lofgren. Well, I think that is a great creative answer, 
but I don't think it really answers the question. I don't know 
if anyone else wants to address it but I think that is the meat 
of what we face here.
    Mr. Kupferschmid. Well, I will jump in here. I mean the 
bill itself in the prohibition itself, forgetting about the 
exceptions or exclusions in the bill, the bill itself has 10 
requirements that any database producer must meet before their 
database even gets protected here. I mean that pales in 
comparison to previous legislation that has been out there, 
where legislation would prevent use or extraction. It covered 
the potential market here. It has got to be the functional 
equivalent in the same market. I mean that is a long ways from 
potential market or related market that were in previous bills. 
It doesn't cover use of data or information or accessing a 
database. All it does is cover making available a database in a 
way that causes commercial harm, and then commercial harm is 
even defined by a very high standard such that it has got to 
substantially threaten the incentive to produce the database to 
begin with. Along with lots of
    other--you know, there are nine other requirements here 
that I haven't even mentioned, so there is a very high standard 
in the bill. Then when you do include the exceptions and the 
exclusions here, it would be pretty difficult to prove that 
there has actually been a violation here.
    Mr. Donohue. So what we have here then is a limited 
experience of a problem and a piece of legislation seeking to 
solve that limited problem which has 10 standards and therefore 
is probably not going to help very many people, and we have 
clearly a divided industry, database industry, looking at the 
legislation. I still think we have a solution looking for a 
problem, and I hope we can be very careful in what we do.
    Mr. Kupferschmid. With, these 10 criteria here we intended 
to try to attempt to address the Chamber and other people's 
concerns. In fact, when this whole process started back in 2001 
the Chamber and the Libraries and the University Committee and 
others provided a document to both Committees, and I will quote 
exactly from that document in which they said they would 
support a true misappropriation bill. For example, one which 
closely follows the historic standards laid out in NBA v. 
Motorola which would be constitutional and would not stifle 
innovation, would not impede scientific progress and would not 
ultimately hurt the growth of exciting new database products.
    Well, we heard the message 3 years ago, or 2 years ago. 
Here we are. We have got a misappropriation-based approach. One 
based on NBA v. Motorola, and we are still hearing the same 
message. It is a little frustrating because I am not sure what 
else we can do.
    Ms. Lofgren. I am not sure there is anything you can do. 
Mr. Wulf, you looked like you wanted to say something.
    Mr. Wulf. Well, I just--since you weren't here earlier, let 
me repeat a little bit of what was in my oral testimony. It is 
estimated that half of the growth in the GDP is due to the 
innovation system, the advances in science and technology, two-
thirds of the growth in productivity due to the advances in 
science and technology. I am just a little bit concerned here 
that a small amount of damage to that innovation system in 
order to protect some pretty isolated cases where this might be 
useful or appropriate is not the right trade-off.
    Ms. Lofgren. Thank you very much. And given the lateness of 
the hour, I will yield back the remainder of my time.
    Mr. Stearns. I thank the gentlelady. Mr. Smith will 
conclude. I will make just a general comment. Mr. Kupferschmid, 
I think you have made a very strong argument and passionate. 
Mr. Wulf is saying, you know, between the Digital Millennium 
Copyright Act, the Computer and Fraud Act, as well as I guess 
contract law dealing with trespasses, we should move very slow. 
So maybe just a comment to you is to more narrowly define, 
tailor your misappropriation statute and maybe come back again 
at it is a possibility.
    But at that I would look to my distinguished Chairman, 
thank him again for his hospitality here having this joint 
hearing and allow him to have the last word.
    Mr. Smith. Thank you again, Mr. Chairman. Mr. Chairman, I 
may have detected a very narrow thread of agreement here. 
Admittedly it is probably only a nanometer wide, but it is 
there. And it is this, that no one denies that there are at 
least some databases that should be protected that are not 
protected. Mr. Donohue and Mr. Wulf feel that those are 
isolated cases and that we don't need legislation to address 
them because they are not as widespread as Mr. Kupferschmid and 
Mr. Carson believe.
    What I wanted to do, Mr. Carson and Mr. Kupferschmid, is to 
read part of your testimony or at least refer to part of your 
testimony and ask Mr. Donohue and Mr. Wulf to reply and then 
you can respond to their comments. The point here is that the 
proposed legislation does erect very high hurdles, very high 
standards that have to be met before anybody is liable for 
piracy of databases.
    Mr. Carson mentioned in his written testimony that 
basically the legislation codifies the five elements of the 
Motorola case. Mr. Kupferschmid mentioned in his testimony that 
the draft legislation creates a narrowly focused prohibition 
that applies only if 10 criteria are met. So my question really 
for Mr. Donohue and Mr. Wulf is that, can you think of any 
example of someone who would meet all these requirements, all 
these criteria and still be liable for piracy of databases? In 
other words, aren't these pretty narrowly drawn and maybe your 
concerns are unwarranted?
    Mr. Donohue first, then Mr. Wulf.
    Mr. Donohue. Thank you, Mr. Chairman. I have observed 
during my recent tenure at the Chamber over 6 years the work of 
plaintiffs lawyers up close, and they can find the history of 
the world written on the head of a pin, and we are creating a 
piece of legislation with extraordinary penalties in it that 
will open up a new retirement program.
    Mr. Smith. If we set aside the penalties and just focus on 
the criteria though, are there any of those criteria that you 
feel are too broad?
    Mr. Donohue. I don't have the 10 criteria here sir but I 
would just say very specifically, if there is overwhelming 
evidence of economic and intellectual property loss because of 
behavior against databases I have not seen it. If it is there 
we want to see it and we would be helpful.
    Mr. Smith. Okay, good. Mr. Carson, can you respond very 
quickly or perhaps Mr. Kupferschmid?
    Mr. Carson. Mr. Chairman, I don't have fact patterns at my 
fingertips, maybe Mr. Kupferschmid does, where I can tell you I 
know of real world cases that would fall into this. Again there 
was the INS case, there was the NBA case. That is what these 
are taken from. So certainly there have historically been such 
cases.
    Mr. Smith. Exactly. Thank you.
    Mr. Kupferschmid.
    Mr. Kupferschmid. Certainly the goal of this bill was to 
provide a very narrowly tailored misappropriation free riding 
type approach to database piracy, something that would address 
the concerns of the database user community while also 
providing fairly narrow protection. I think the bill comes 
pretty close to that mark and the cases that we have described, 
I think, in most cases although, I don't know all the facts in 
those cases--would be covered by the draft bill under those 
instances. I also don't think that any existing uses or the 
manner in which the database user community, make available 
databases would be altered all under this bill.
    Mr. Smith. Okay. Thank you, Mr. Kupferschmid. Mr. Donohue, 
if I could ask a final favor of you. Could you get back to us, 
take a look at those criteria, because if we move ahead we 
might well want to narrow the bill some more. I don't know. I 
don't want to speak for the Chairman, but we would be 
interested in your views as to which of those criteria you feel 
are too broad.
    Mr. Donohue. I would be glad to.
    [The information referred to follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Mr. Smith. Okay. Thank you again, Mr. Chairman.
    Mr. Wulf. Let's see. Could I just jump in with a 10-second 
one here because I would second what Tom Donohue said. I would 
just like to add to that that we need to look at this in the 
light of the developments that have happened since the last 
time we went around this race track. Things have changed. The 
environment has changed, and so we need to be very careful that 
we take into account those changes.
    Mr. Smith. Okay. Thank you, Mr. Chairman.
    Mr. Stearns. I thank my distinguished colleague. And with 
that, we thank the witnesses very much for your enthusiastic, 
energetic testimony, and we look forward to continuing 
discussion.
    With that, the Committees are adjourned.
    [The prepared statement of Mr. Dingell follows in the 
Appendix]
    [The prepared statement of Mr. Shimkus follows in the 
Appendix]
    [Whereupon, at 5:50 p.m., the Subcommittees were 
adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

   Prepared Statement of the Honorable W. J. Billy Tauzin, Chairman, 
                    Committee on Energy and Commerce
    Thank you Mr. Chairman for holding this hearing today. It is always 
a pleasure to work with my colleagues at the Judiciary Committee. I 
value the insights the members of your Committee bring to the issues 
over which we share jurisdiction.
    The database issue has been around for some time now. I remember 
the first bill being introduced in the 104th Congress and reaching a 
peak of contention in the 106th Congress. At that time there was a 
stalemate between these two Committees. Each Committee passed its own 
bill - staking out its own position on the issue. Neither Committee was 
willing to move toward the other. When I took the gavel at Energy and 
Commerce and Chairman Sensenbrenner took over at the Judiciary 
Committee, we decided we would work through this issue in a different 
way. The two Committees have worked amicably towards a draft bill - and 
I believe this is a credit to the fine members on both Committees.
    So here we are today . . . We devoted 2 1/2 years of resources to 
get a draft piece of legislation and to get that legislation before the 
two Committees for a full and fair vetting of the issues. And that is 
what I expect today - a fair hearing on the issues involved. I do not 
expect the issue to be less contentious than it has been in the past 
but I do expect it will take on a new civility due to the cooperative 
nature in which the two Committees have been working.
    We have a distinguished panel of witnesses with significant 
expertise on these issues. The witnesses on the panel have been active 
in the database debate over the last several Congresses and are no 
strangers to those of us who have followed the debate. I look forward 
to hearing your perspectives on the draft legislation and drawing on 
your expertise as we talk through the issues before us. I thank you all 
for being here this afternoon and yield back the balance of my time.

                              ----------                              

   Prepared Statement of Representative Bart Stupak, Subcommittee on 
                Commerce, Trade and Consumer Protection
    I appreciate this joint committee forum to discuss this bill- and 
want to express my concerns with moving forward with such legislation.
    In today's information age, databases are the tools that make vast 
amounts of facts and information understandable and manageable.
    The facts the databases rely upon are public domain. Facts cannot 
be owned.
    But this bill seeks to do just that- to grant the compiler of a 
database unprecedented ownership rights to facts.
    Current law is sufficient to deal with the misappropriation of 
information or infringement upon creative works.
    The broad opposition to this bill, ranging from consumer groups to 
database producers themselves, is very telling.
    If a need existed for such legislation, surely multiple database 
producers would be clamoring for such a bill, rather than expressing 
major concerns.
    To move this bill forward would be to move the flow of facts and 
information backwards, and would disadvantage consumers.
    I certainly believe that this hearing is informative, but do not 
believe that any further steps should be taken on this bill to advance 
it.
    Thank you.

                              ----------                              

           Prepared Statement of Representative Barbara Cubin
    Thank you to both Chairmen for their commitment to working together 
on this issue and holding this hearing today. It is important that the 
discussion continue, as we seek to determine what, if any, remedy would 
be most appropriate.
    I would also like to thank the distinguished panelists that have 
joined us today. Your testimony is valuable and essential in furthering 
the debate on database management and protections.
    A well balanced policy in this and every realm is an important goal 
for Congress. While this debate has historically dead ended in its 
search for that balance, it does not mean we should forego our efforts 
altogether.
    One's creation, original or compilation, should certainly be 
afforded rights and protections. It is equally important, particularly 
in today's world of ever changing and exponentially growing 
technological advances, that these protections not inhibit further 
development and available options.
    Again, I thank the panelists and am certain that today's testimony 
will further illuminate the path that this legislation must take in a 
timely manner.
    I thank the Chairman again and yield back the remainder of my time.

                              ----------                              

            Prepared Statement of Representative Gene Green
    Thank you to our Chairmen and Ranking Members for holding this 
hearing on the need for expanded legal protection for databases. I 
appreciate our witnesses coming before us today to give us their views 
on this draft legislation.
    This country has a long-honored tradition of considering factual 
information part of the public domain. In fact, the ability of 
scientists and researchers to have unrestricted access to this public 
information has contributed to the tremendous innovation on which this 
country's economic strength rests.
    For several years now, the database industry has come to Congress 
with their concerns about database piracy and the effect that it will 
have on the industry's willingness to invest sufficiently in new 
products.
    While I understand their concerns, my initial thought is that these 
concerns seem a little premature considering that the digital age has 
only contributed to the proliferation of databases. And, to date, I 
have not seen any real evidence of investment in databases being 
stymied.
    Even if we assume that this threat to the database industry is 
real, I have questions about the necessity of enacting such a broad 
piece of legislation to protect them. In the past, the Energy and 
Commerce Committee has approved legislation to narrowly address this 
very issue, and I question why we are not taking a similar approach 
today.
    Again, I thank our witnesses for appearing before us today. I look 
forward to your testimony and the light that it will shed on this 
important issue.

                              ----------                              

Prepared Statement of the Honorable Ted Strickland, a Representative in 
                    Congress From the State of Ohio
    Thank you Mr. Chairman. Briefly, I would like to express my 
reservations regarding the Database and Collections of Information 
Misappropriation Act. I have heard from a number of interested parties 
about their concerns with this legislation and I hope this hearing 
encourages Congress to continue thinking about legislation that would 
create broad new protections for databases.
    In the 106th Congress, I supported H.R. 1858, the ``Consumer and 
Investor Access to Information Act of 1999.'' This bill was more 
narrowly written to create new protections against the selling or 
distributing of duplicated databases in interstate and foreign 
commerce. While H.R. 1858 would have offered new legal protections for 
database owners, these protections would not have limited the American 
public's access to information. It may be that additional protections 
for database owners are worthy of pursuit. However, facts that are part 
of the public domain should remain so and I hope we are careful to 
ensure we preserve the public's access to data and information and 
avoid unintended consequences as this debate continues.
    I think the Database and Collections of Information 
Misappropriation Act of 2003 is too broad. I fear it would change our 
current information policy to a point where we could stifle innovation, 
hamper scientific progress and get in the way of development in the 
electronic commerce marketplace.
    Again, thank you Mr. Chairman.

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                               __________
           Prepared Statement of Congressman John D. Dingell
    Chairman Stearns and Chairman Smith, the debate over whether 
adequate legal protections exist to protect current databases and 
provide incentives to the creation of new and more valuable databases 
is an extremely contentious issue that has been debated in our 
respective Committees for several years. Databases are essential to 
ensuring the rapid search and retrieval of the enormous amounts of 
facts and other forms of information that are available, especially 
through the Internet. In fact, the Internet not only provides access to 
already created databases, but it has helped spur a remarkable growth 
in the number of databases, such as movie directories and loan 
comparison charts. Between 1990 and 2002, the number of database 
entries in the comprehensive Gale Directory of Databases has increased 
147 percent. Moreover, the amount of information contained in such 
databases has increased 363 percent.
    I note that this explosive growth in the number of databases has 
occurred despite the claims of the proponents of the draft legislation 
that ``no meaningful legal protection of databases currently exists.'' 
I find it dubious that companies would invest vast amounts of financial 
resources in developing new databases if legal protections were 
nonexistent.
    In fact, significant legal protections already exist for databases. 
For example, the original selection, coordination, and arrangement of 
facts in a database are protected by copyright law. Additionally, 
databases already receive protection under the Computer Fraud and Abuse 
Act, the Digital Millennium Copyright Act, and various state laws such 
as trespass to chattels, breach of contract, and misappropriation.
    Notwithstanding the legal protections available, limited gaps in 
current law may exist. If such gaps are found, it is incumbent upon 
Congress to take a focused legislative approach as we attempted to do 
in the 106th Congress with H.R. 1858, the ``Consumer and Investor 
Access to Information Act of 1999.'' This bill was narrowly crafted to 
provide limited protection to database producers against wholesale 
misappropriation of their work. Importantly, it would also have allowed 
the public to continue to have unfettered access to facts that are in 
the public domain.
    Unfortunately, the draft Database and Collections of Information 
Misappropriation Act of 2003 takes the opposite approach. It would 
create broad new rights for database owners and dramatically alter our 
current information policy. Much like its predecessors, the draft bill 
has serious flaws and would stifle the development of a robust 
electronic commerce marketplace. It would create a quasi-property right 
in facts themselves, granting the compiler of information an 
unprecedented right to control value-added, downstream uses of the 
resulting collection. It would also establish an unprecedented subpoena 
process that would undoubtedly lead to abuse.
    I must caution those who support broad new protections for 
databases. Electronic commerce has prospered in the United States in 
part because of our basic information policy - that facts, the building 
blocks of all information products, cannot be owned. Facts are part of 
the public domain. They do not owe their origin to an act of 
authorship. It is important that facts remain available for everyone to 
use and that Congress does not legislate in a way that would restrict 
the public's access to facts.

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