SPEAKERS CONTENTS INSERTS
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62–506
2000
COLLECTIONS OF INFORMATION ANTIPIRACY ACT
HEARING
BEFORE THE
SUBCOMMITTEE ON COURTS AND INTELLECTUAL
PROPERTY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
ON
H.R. 354
MARCH 18, 1999
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Serial No. 54
Printed for the use of the Committee on the Judiciary
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR S. SMITH, Texas
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
BOB GOODLATTE, Virginia
ED BRYANT, Tennessee
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
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LINDSEY O. GRAHAM, South Carolina
MARY BONO, California
SPENCER BACHUS, Alabama
JOE SCARBOROUGH, Florida
JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
THOMAS E. MOONEY, SR., General Counsel-Chief of Staff
JULIAN EPSTEIN, Minority Chief Counsel and Staff Director
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Subcommittee on Courts and Intellectual Property
HOWARD COBLE, North Carolina, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
WILLIAM L. JENKINS, Tennessee
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
MARY BONO, California
HOWARD L. BERMAN, California
JOHN CONYERS, Jr., Michigan
RICK BOUCHER, Virginia
ZOE LOFGREN, California
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
MITCH GLAZIER, Chief Counsel
BLAINE MERRITT, Counsel
VINCE GARLOCK, Counsel
DEBBIE K. LAMAN, Counsel
ROBERT RABEN, Minority Counsel
EUNICE GOLDRING, Staff Assistant
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C O N T E N T S
HEARING DATE
March 18, 1999
TEXT OF BILL
H.R. 354
OPENING STATEMENT
Coble, Hon. Howard, a Representative in Congress from the State of North Carolina, and chairman, Subcommittee on Courts and Intellectual Property
WITNESSES
Duncan, Dan, Vice President, Government Affairs, Software & Information Industry Association
Henderson, Lynn, President, Doane Agricultural Services Company
Kirk, Michael, Executive Director, American Intellectual Property Law Association
Lederberg, Joshua, Professor, Sackler Foundation Scholar, The Rockefeller University
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McDermott, Terrence, Executive Vice President, the National Association of Realtors
Neal, James G., Dean, University Libraries, Johns Hopkins University
Peters, Marybeth, Register of Copyrights, Copyright Office of the United States, Library of Congress
Phelps, Charles, Provost, University of Rochester
Pincus, Andrew, General Counsel, United States Department of Commerce
Winokur, Marilyn, Executive Vice President, Micromedex, Inc.
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Duncan, Dan, Vice President, Government Affairs, Software & Information Industry Association: Prepared statement
Henderson, Lynn, President, Doane Agricultural Services Company: Prepared statement
Kirk, Michael, Executive Director, American Intellectual Property Law Association: Prepared statement
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Lederberg, Joshua, Professor, Sackler Foundation Scholar, The Rockefeller University: Prepared statement
McDermott, Terrence, Executive Vice President, the National Association of Realtors: Prepared statement
Neal, James G., Dean, University Libraries, Johns Hopkins University: Prepared statement
Peters, Marybeth, Register of Copyrights, Copyright Office of the United States, Library of Congress: Prepared statement
Phelps, Charles, Provost, University of Rochester: Prepared statement
Pincus, Andrew, General Counsel, United States Department of Commerce: Prepared statement
Winokur, Marilyn, Executive Vice President, Micromedex, Inc.
APPENDIX
Material submitted for the record
COLLECTIONS OF INFORMATION ANTIPIRACY ACT
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THURSDAY, MARCH 18, 1999
House of Representatives,
Subcommittee on Courts and
Intellectual Property,
Committee on the Judiciary,
Washington, DC.
The subcommittee met at 11:05 a.m. in Room 2226 of the Rayburn House Office Building, the Honorable Howard Coble, chairman of the subcommittee, presiding.
Members present. Coble, Sensenbrenner, Goodlatte, Jenkins, Pease, Rogan, Bono, Berman, Lofgren and Delahunt.
Staff present. Majority: Mitch Glazier, Chief Counsel; Vince Garlock, Counsel; Eunice Goldring, Staff Assistant; Minority: Bari Schwartz, Minority Counsel.
OPENING STATEMENT OF CHAIRMAN COBLE
Mr. COBLE. Good morning, ladies and gentlemen. My friend Howard Berman, the ranking member, is on his way. In fact, he has just entered the room so we can continue.
Initially I want to apologize to you all. We tried to have this hearing convened in Room 2141, the home of the full Judiciary committee, but it was already taken by another subcommittee. This is why you all are elbow to elbow today. Hold me harmless for that because we did try to get a larger room.
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The Subcommittee on Courts and Intellectual Property will come to order. Today the subcommittee is conducting a legislative hearing on H.R. 354, the Collections of Information Antipiracy Act, which strikes a balance as the information age arrives. The balance provides adequate protection to assure that there is an incentive of companies to invest in the development of collections of information without inhibiting members of the scientific, library and research communities from carrying on their work.
This bill, as a compliment to copyright law, relies on unfair competition principles to prevent a party from misappropriating another's collection of information. In the event a person misappropriates a substantial portion of another's collection of information to the extent it will harm the original collector's ability to compete the misappropriator would be subject to injunction and damages.
This bill is nearly identical to the legislation which passed the House of Representatives not once but twice last year. H.R. 354 differs from last year's legislation in two ways. First, it clarifies that the term of protection for a collection of information is limited to 15 years. Second, the bill adopts fair use language to clarify the permissible uses for scientific, educational and research purposes.
106TH CONGRESS
1ST SESSION
H. R. 354
To amend title 17, United States Code, to provide protection for certain collections of information.
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IN THE HOUSE OF REPRESENTATIVES
JANUARY 19, 1999
Mr. COBLE introduced the following bill; which was referred to the Committee on the Judiciary
A BILL
To amend title 17, United States Code, to provide protection for certain collections of information.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ''Collections of Information Antipiracy Act''.
SEC. 2. MISAPPROPRIATION OF COLLECTIONS OF INFORMATION.
Title 17, United States Code, is amended by adding at the end the following new chapter:
''CHAPTER 14—MISAPPROPRIATION OF COLLECTIONS OF INFORMATION
''Sec.
''1401. Definitions.
''1402. Prohibition against misappropriation.
''1403. Permitted acts.
''1404. Exclusions.
''1405. Relationship to other laws.
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''1406. Civil remedies.
''1407. Criminal offenses and penalties.
''1408. Limitations on actions.
''§1401. Definitions
''As used in this chapter:
''(1) COLLECTION OF INFORMATION.—The term 'collection of information' means information that has been collected and has been organized for the purpose of bringing discrete items of information together in one place or through one source so that users may access them.
''(2) INFORMATION.—The term 'information' means facts, data, works of authorship, or any other intangible material capable of being collected and organized in a systematic way.
''(3) POTENTIAL MARKET.—The term 'potential market' means any market that a person claiming protection under section 1402 has current and demonstrable plans to exploit or that is commonly exploited by persons offering similar products or services incorporating collections of information.
''(4) COMMERCE.—The term 'commerce' means all commerce which may be lawfully regulated by the Congress.
''§1402. Prohibition against misappropriation
''Any person who extracts, or uses in commerce, all or a substantial part, measured either quantitatively or qualitatively, of a collection of information gathered, organized, or maintained by another person through the investment of substantial monetary or other resources, so as to cause harm to the actual or potential market of that other person, or a successor in interest of that other person, for a product or service that incorporates that collection of information and is offered or intended to be offered for sale or otherwise in commerce by that other person, or a successor in interest of that person, shall be liable to that person or successor in interest for the remedies set forth in section 1406.
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''§1403. Permitted acts
''(a) EDUCATIONAL, SCIENTIFIC, RESEARCH, AND ADDITIONAL REASONABLE USES.—
''(1) CERTAIN NONPROFIT EDUCATIONAL, SCIENTIFIC, OR RESEARCH USES.— Notwithstanding section 1402, no person shall be restricted from extracting or using information for nonprofit educational, scientific, or research purposes in a manner that does not harm directly the actual market for the product or service referred to in section 1402.
''(2) ADDITIONAL REASONABLE USES.—
''(A) IN GENERAL.—Notwithstanding section 1402, an individual act of use or extraction of information done for the purpose of illustration, explanation, example, comment, criticism, teaching, research, or analysis, in an amount appropriate and customary for that purpose, is not a violation of this chapter, if it is reasonable under the circumstances. In determining whether such an act is reasonable under the circumstances, the following factors shall be considered:
''(i) The extent to which the use or extraction is commercial or nonprofit.
''(ii) The good faith of the person making the use or extraction.
''(iii) The extent to which and the manner in which the portion used or extracted is incorporated into an independent work or collection, and the degree of difference between the collection from which the use or extraction is made and the independent work or collection.
''(iv) Whether the collection from which the use or extraction is made is primarily developed for or marketed to persons engaged in the same field or business as the person making the use or extraction.
In no case shall a use or extraction be permitted under this paragraph if the used or extracted portion is offered or intended to be offered for sale or otherwise in commerce and is likely to serve as a market substitute for all or part of the collection from which the use or extraction is made.
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''(B) DEFINITION.—For purposes of this paragraph, the term 'individual act' means an act that is not part of a pattern, system, or repeated practice by the same party, related parties, or parties acting in concert with respect to the same collection of information or a series of related collections of information.
''(b) INDIVIDUAL ITEMS OF INFORMATION AND OTHER INSUBSTANTIAL PARTS.—Nothing in this chapter
shall prevent the extraction or use of an individual item of information, or other insubstantial part of a collection of information, in itself. An individual item of information, including a work of authorship, shall not itself be considered a substantial part of a collection of information under section 1402. Nothing in this subsection shall permit the repeated or systematic extraction or use of individual items or insubstantial parts of a collection of information so as to circumvent the prohibition contained in section 1402.
''(c) GATHERING OR USE OF INFORMATION OBTAINED THROUGH OTHER MEANS.—Nothing in this chapter shall restrict any person from independently gathering information or using information obtained by means other than extracting it from a collection of information gathered, organized, or maintained by another person through the investment of substantial monetary or other resources.
''(d) USE OF INFORMATION FOR VERIFICATION.—Nothing in this chapter shall restrict any person from extracting or using a collection of information within any entity or organization, for the sole purpose of verifying the accuracy of information independently gathered, organized, or maintained by that person. Under no circumstances shall the information so used be extracted from the original collection and made available to others in a manner that harms the actual or potential market for the collection of information from which it is extracted or used.
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''(e) NEWS REPORTING.—Nothing in this chapter shall restrict any person from extracting or using information for the sole purpose of news reporting, including news gathering, dissemination, and comment, unless the information so extracted or used is time sensitive and has been gathered by a news reporting entity, and the extraction or use is part of a consistent pattern engaged in for the purpose of direct competition.
''(f) TRANSFER OF COPY.—Nothing in this chapter shall restrict the owner of a particular lawfully made copy of all or part of a collection of information from selling or otherwise disposing of the possession of that copy.
''§1404. Exclusions
''(a) GOVERNMENT COLLECTIONS OF INFORMATION.—
''(1) EXCLUSION.—Protection under this chapter shall not extend to collections of information gathered, organized, or maintained by or for a government entity, whether Federal, State, or local, including any employee or agent of such entity, or any person exclusively licensed by such entity, within the scope of the employment, agency, or license. Nothing in this subsection shall preclude protection under this chapter for information gathered, organized, or maintained by such an agent or licensee that is not within the scope of such agency or license, or by a Federal or State educational institution in the course of engaging in education or scholarship.
''(2) EXCEPTION.—The exclusion under paragraph (1) does not apply to any information required to be collected and disseminated—
''(A) under the Securities Exchange Act of 1934 by a national securities exchange, a registered securities association, or a registered securities information processor, subject to section 1405(g) of this title; or
''(B) under the Commodity Exchange Act by a contract market, subject to section 1405(g) of this title.
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''(b) COMPUTER PROGRAMS.—
''(1) PROTECTION NOT EXTENDED.—Subject to paragraph (2), protection under this chapter shall not extend to computer programs, including, but not limited to, any computer program used in the manufacture, production, operation, or maintenance of a collection of information, or any element of a computer program necessary to its operation.
''(2) INCORPORATED COLLECTIONS OF INFORMATION.—A collection of information that is otherwise subject to protection under this chapter is not disqualified from such protection solely because it is incorporated into a computer program.
''(c) DIGITAL ONLINE COMMUNICATIONS.—Protection under this chapter shall not extend to a product or service incorporating a collection of information gathered, organized, or maintained to address, route, forward, transmit, or store digital online communications or provide or receive access to connections for digital online communications.
''§1405. Relationship to other laws
''(a) OTHER RIGHTS NOT AFFECTED.—Subject to subsection (b), nothing in this chapter shall affect rights, limitations, or remedies concerning copyright, or any other rights or obligations relating to information, including laws with respect to patent, trademark, design rights, antitrust, trade secrets, privacy, access to public documents, and the law of contract.
''(b) PREEMPTION OF STATE LAW.—On or after the effective date of this chapter, all rights that are equivalent to the rights specified in section 1402 with respect to the subject matter of this chapter shall be governed exclusively by Federal law, and no person is entitled to any equivalent right in such subject matter under the common law or statutes of any State. State laws with respect to trademark, design rights, antitrust, trade secrets, privacy, access to public documents, and the law of contract shall not be deemed to provide equivalent rights for purposes of this subsection.
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''(c) RELATIONSHIP TO COPYRIGHT.—Protection under this chapter is independent of, and does not affect or enlarge the scope, duration, ownership, or subsistence of, any copyright protection or limitation, including, but not limited to, fair use, in any work of authorship that is contained in or consists in whole or part of a collection of information. This chapter does not provide any greater protection to a work of authorship contained in a collection of information, other than a work that is itself a collection of information, than is available to that work under any other chapter of this title.
''(d) ANTITRUST.—Nothing in this chapter shall limit in any way the constraints on the manner in which products and services may be provided to the public that are imposed by Federal and State antitrust laws, including those regarding single suppliers of products and services.
''(e) LICENSING.—Nothing in this chapter shall restrict the rights of parties freely to enter into licenses or any other contracts with respect to the use of collections of information.
''(f) COMMUNICATIONS ACT OF 1934.—Nothing in this chapter shall affect the operation of the provisions of the Communications Act of 1934 (47 U.S.C. 151 et seq.), or shall restrict any person from extracting or using subscriber list information, as such term is defined in section 222(f)(3) of the Communications Act of 1934 (47 U.S.C. 222(f)(3)), for the purpose of publishing telephone directories in any format.
''(g) SECURITIES AND COMMODITIES MARKET INFORMATION.—
''(1) FEDERAL AGENCIES AND ACTS.—Nothing in this chapter shall affect—
''(A) the operation of the provisions of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) or the Commodity Exchange Act (7 U.S.C. 1 et seq.);
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''(B) the jurisdiction or authority of the Securities and Exchange Commission and the Commodity Futures Trading Commission; or
''(C) the functions and operations of self-regulatory organizations and securities information processors under the provisions of the Securities Exchange Act of 1934 and the rules and regulations thereunder, including making market information available pursuant to the provisions of that Act and the rules and regulations promulgated thereunder.
''(2) PROHIBITION.—Notwithstanding any provision in subsection (a), (b), (c), (d), or (f) of section 1403, nothing in this chapter shall permit the extraction, use, resale, or other disposition of real-time market information except as the Securities Exchange Act of 1934, the Commodity Exchange Act, and the rules and regulations thereunder may otherwise provide. In addition, nothing in subsection (e) of section 1403 shall be construed to permit any person to extract or use real-time market information in a manner that constitutes a market substitute for a real-time market information service (including the real-time systematic updating of or display of a substantial part of market information) provided on a real-time basis.
''(3) DEFINITION.—As used in this subsection, the term 'market information' means information relating to quotations and transactions that is collected, processed, distributed, or published pursuant to the provisions of the Securities Exchange Act of 1934 or by a contract market that is designated by the Commodity Futures Trading Commission pursuant to the Commodity Exchange Act and the rules and regulations thereunder.
''§1406. Civil remedies
''(a) CIVIL ACTIONS.—Any person who is injured by a violation of section 1402 may bring a civil action for such a violation in an appropriate United States district court without regard to the amount in controversy, except that any action against a State governmental entity may be brought in any court that has jurisdiction over claims against such entity.
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''(b) TEMPORARY AND PERMANENT INJUNCTIONS.—Any court having jurisdiction of a civil action under this section shall have the power to grant temporary and permanent injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent a violation of section 1402. Any such injunction may be served anywhere in the United States on the person enjoined, and may be enforced by proceedings in contempt or otherwise by any United States district court having jurisdiction over that person.
''(c) IMPOUNDMENT.—At any time while an action under this section is pending, the court may order the impounding, on such terms as it deems reasonable, of all copies of contents of a collection of information extracted or used in violation of section 1402, and of all masters, tapes, disks, diskettes, or other articles by means of which such copies may be reproduced. The court may, as part of a final judgment or decree finding a violation of section 1402, order the remedial modification or destruction of all copies of contents of a collection of information extracted or used in violation of section 1402, and of all masters, tapes, disks, diskettes, or other articles by means of which such copies may be reproduced.
''(d) MONETARY RELIEF.—When a violation of section 1402 has been established in any civil action arising under this section, the plaintiff shall be entitled to recover any damages sustained by the plaintiff and defendant's profits not taken into account in computing the damages sustained by the plaintiff. The court shall assess such profits or damages or cause the same to be assessed under its direction. In assessing profits the plaintiff shall be required to prove defendant's gross revenue only and the defendant shall be required to prove all elements of cost or deduction claims. In assessing damages the court may enter judgment, according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount. The court in its discretion may award reasonable costs and attorney's fees to the prevailing party and shall award such costs and fees where it determines that an action was brought under this chapter in bad faith against a nonprofit educational, scientific, or research institution, library, or archives, or an employee or agent of such an entity, acting within the scope of his or her employment.
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''(e) REDUCTION OR REMISSION OF MONETARY RELIEF FOR NONPROFIT EDUCATIONAL, SCIENTIFIC, OR RESEARCH INSTITUTIONS.—The court shall reduce or remit entirely monetary relief under subsection (d) in any case in which a defendant believed and had reasonable grounds for believing that his or her conduct was permissible under this chapter, if the defendant was an employee or agent of a nonprofit educational, scientific, or research institution, library, or archives acting within the scope of his or her employment.
''(f) ACTIONS AGAINST UNITED STATES GOVERNMENT.—Subsections (b) and (c) shall not apply to any action against the United States Government.
''(g) RELIEF AGAINST STATE ENTITIES.—The relief provided under this section shall be available against a State governmental entity to the extent permitted by applicable law.
''§1407. Criminal offenses and penalties
''(a) VIOLATION.—
''(1) IN GENERAL.—Any person who violates section 1402 willfully, and—
''(A) does so for direct or indirect commercial advantage or financial gain, or
''(B) causes loss or damage aggregating $10,000 or more in any 1-year period to the person who gathered, organized, or maintained the information concerned,
shall be punished as provided in subsection (b).
''(2) INAPPLICABILITY.—This section shall not apply to an employee or agent of a nonprofit educational, scientific, or research institution, library, or archives acting within the scope of his or her employment.
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''(b) PENALTIES.—An offense under subsection (a) shall be punishable by a fine of not more than $250,000 or imprisonment for not more than 5 years, or both. A second or subsequent offense under subsection (a) shall be punishable by a fine of not more than $500,000 or imprisonment for not more than 10 years, or both.
''§1408. Limitations on actions
''(a) CRIMINAL PROCEEDINGS.—No criminal proceeding shall be maintained under this chapter unless it is commenced within three years after the cause of action arises.
''(b) CIVIL ACTIONS.—No civil action shall be maintained under this chapter unless it is commenced within three years after the cause of action arises or claim accrues.
''(c) ADDITIONAL LIMITATION.—No criminal or civil action shall be maintained under this chapter for the extraction or use of all or a substantial part of a collection of information that occurs more than 15 years after the portion of the collection that is extracted or used was first offered for sale or otherwise in commerce, following the investment of resources that qualified that portion of the collection for protection under this chapter. In no case shall any protection under this chapter resulting from a substantial investment of resources in maintaining a preexisting collection prevent any use or extraction of information from a copy of the preexisting collection after the 15 years have expired with respect to the portion of that preexisting collection that is so used or extracted, and no liability under this chapter shall thereafter attach to such acts of use or extraction.''.
SEC. 3. CONFORMING AMENDMENTS.
(a) TABLE OF CHAPTERS.—The table of chapters for title 17, United States Code, is amended by adding at the end the following:
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''14. Misappropriation of Collections of Information
(b) DISTRICT COURT JURISDICTION.—(1) Section 1338 of title 28, United States Code, is amended—
(A) in the section heading by inserting ''misappropriations of collections of information,'' after ''trade-marks,''; and
(B) by adding at the end the following:
''(d) The district courts shall have original jurisdiction of any civil action arising under chapter 14 of title 17, relating to misappropriation of collections of information. Such jurisdiction shall be exclusive of the courts of the States, except that any action against a State governmental entity may be brought in any court that has jurisdiction over claims against such entity.''.
(2) The item relating to section 1338 in the table of sections for chapter 85 of title 28, United States Code, is amended by inserting ''misappropriations of collections of information,'' after ''trade-marks,''.
(c) PLACE FOR BRINGING ACTIONS.—(1) Section 1400 of title 28, United States Code, is amended by adding at the end the following:
''(c) Civil actions arising under chapter 14 of title 17, relating to misappropriation of collections of information, may be brought in the district in which the defendant or the defendant's agent resides or may be found.''.
(2) The section heading for section 1400 of title 28, United States Code, is amended to read as follows:
''§1400. Patents and copyrights, mask works, designs, and collections of information''.
(3) The item relating to section 1400 in the table of sections at the beginning of chapter 87 of title 28, United States Code, is amended to read as follows:
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''1400. Patents and copyrights, mask works, designs, and collections of information.''.
(d) COURT OF FEDERAL CLAIMS JURISDICTION.—Section 1498(e) of title 28, United States Code, is amended by inserting ''and to protections afforded collections of information under chapter 14 of title 17'' after ''chapter 9 of title 17''.
SEC. 4. EFFECTIVE DATE.
(a) IN GENERAL.—This title and the amendments made by this title shall take effect on the date of the enactment of this Act, and shall apply to acts committed on or after that date.
(b) PRIOR ACTS NOT AFFECTED.—No person shall be liable under chapter 14 of title 17, United States Code, as added by section 2 of this Act, for the use of information lawfully extracted from a collection of information prior to the effective date of this Act, by that person or by that person's predecessor in interest.
During today's hearing we will hear from an array of different witnesses, in and out of Government, commercial and non-profit entities, for and against the legislation. We are committed, as we always have been, to listen to any constructive suggestion which leads us to the best possible law for all.
Let me note at this time that we did extend an invitation to commercial entities who have raised concerns about the legislation. Unfortunately, they were not able to produce a witness to be here this morning but it is my understanding they have submitted a statement for the record. I wanted to mention this to you so you'll understand that no one has been shut off from this debate.
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I read an article over the holidays which described this legislation as Armageddon and insinuated that we rammed this bill through last year underhandedly and heavy-handedly. Now, I've been accused of having rocks in my head before but I've never been compared to a giant rock which will carelessly wipe out society. [Laughter.]
Mr. COBLE. What the author did not inform the reader was that he represented a client with a position on the bill, that he himself had testified at one of our two hearings we held on the legislation, and that we had considered and adopted some of the amendments he had suggested to us.
I point this out not to provoke a fight but to clarify our work. The way we do business, I have said many times: you don't need a visa to see us. Democrats on the one hand, Republicans on the other; you all can get through our doors on these intellectual property issues.
Again, I want to reiterate my staff and I, along with other members of the subcommittee, have met with dozens of parties on all sides of these issues and will continue to do so in the future. We have worked arduously to this end: to meet, gather and incorporate as many suggestions in the bill as we feel appropriate. I am committed to doing everything in our power to see that we complete this legislation this year and it is always better when we can do it together.
Now, before I recognize my friend from California let me get something off of my mind. Folks, I am an easy dog to hunt with. With my man of letters over there, I am an easy dog with whom to hunt. [Laughter.]
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Mr. COBLE. Mitch Glazier, our chief counsel, met with Mrs. Phyllis Schlafly's executive director regarding Mrs. Schlafly's concern about this bill encouraging the dissemination of private medical records. It is my belief that the bill does not so encourage such dissemination but Mr. Glazier agreed with Mrs. Schlafly's executive director that we would engage in dialogue and try to work this matter out prior to fighting our fights publicly.
Yesterday when I picked up the Washington Times I needed asbestos gloves to handle that radioactive article. Mrs. Schlafly's name appeared thereon and much of that article, my friends, was laced very generously with misinformation, with deception.
I guess what I resent most vividly is the fact that she accused me or she implied that I'm in the pocket of various special interests up here. That's an insult to me and it's an insult to the special interests she mentioned and she owes me an apology. For the record, I am not holding my breath until I get that apology. [Laughter.]
Mr. COBLE. But folks, having said all that, I don't expect everybody to agree with every piece of legislation that surfaces here but we proved last session of Congress that we could work these things out and I'm willing to do this now. But I felt obliged to mention that in case you all read that article yesterday, to know from where I'm coming. And if you didn't read it you may want to forget about it. [Laughter.]
Mr. COBLE. Having said that, I'm pleased to recognize the ranking member, Representative Berman, from California.
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Mr. BERMAN: Thank you, Mr. Chairman. Given the choice of siding with you or Phyllis Schlafly——[Laughter.]
Mr. Coble. Would the gentleman yield just a minute? What makes this so ironic is I probably vote identically with the way Ms. Schlafly wants me to vote a hundred percent of the time.
Mr. DELAHUNT. You should reconsider that, Mr. Chairman. [Laughter.]
Mr. COBLE. The gentleman from California.
Mr. BERMAN. Thank you, Mr. Chairman.
This truly is a momentous day. Not only are we having a hearing on one of the most exciting pieces of legislation ever to have been introduced in Congress but we are celebrating the anniversary of the birth of our chairman. I just wanted to have everybody know.
[Applause.]
Mr. COBLE. He hadn't ought to have said that.
Mr. BERMAN. I would sing Happy Birthday except I wouldn't want to be accused of being public funding of the arts. [Laughter.]
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Mr. BERMAN. Well, enough of that.
I want to express my appreciation for your leadership in addressing the database protection issue. There is widespread agreement in Congress that this issue deserves our prompt attention. Last year we passed this legislation twice in the House. Since then discussions with those who create databases and those who use databases have led to some significant improvements in the legislation. Most notably, as you mentioned, there is a new provision clarifying what constitutes a permitted act by users of databases for purposes of illustration, explanation, example, comment, criticism, teaching, research or analysis in an amount appropriate and customary for that purpose.
Taking the copyright analogy, the analogy here would be the fair use of protected materials. I support the legislation because I don't like the idea that simply because databases can not be copyrighted creators of databases should live without assurance that as a general matter they will be compensated for their efforts.
That's not to say that I don't have some questions about all the provisions of this bill, or that I don't agree that there remain serious concerns that we need to address. I've heard some of the concerns of the scientific and research communities and believe those concerns merit further discussion. Our hearing will be a major step toward that, I trust.
I understand the administration continues to have concerns which also I think have a great deal of merit to them. However, I recognize that there may be some here today that maintain strongly held views opposing any legislation in this area. They will pick at this provision and that provision and perhaps theoretically acknowledge a need to do something but there is nothing that they are for, and I have to disagree with that position.
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I think there are just and good reasons to provide protection from misappropriation to those who make substantial investments in the development of databases. Others have no right to a ''free ride'' simply because there is a gap in the law. It's not simply that I'm against ''free rides,'' it's that if we just continue to allow ''free riding,'' then the creators of databases won't have the incentive to continue developing these really incredibly important, new and valuable tools for our own societal advancement. And disincentivizing that kind of work is not in our country's interest.
So the concerns that are most meaningful to me, in terms of people's concerns about this bill, are those expressed with an appreciation of the need for Congress to act to protect databases from the inappropriate exploitation.
I think H.R. 354 is a very solid start toward that end and I look forward to hearing the views of each of our witnesses today. I expect that we will start thinking about how to resolve, if we can resolve, any of the differences that remain between those that have an interest in this issue, and I yield back my time.
Thank you, Mr. Chairman.
Mr. COBLE. I thank the gentlemen.
Folks, we have a busy day today. Normally the chairman and the ranking member are the only ones who want to speak but if others have brief opening statements I will recognize them.
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Mr. Sensenbrenner.
Mr. SENSENBRENNER. Mr. Chairman, I won't take very long but I do want to express my best wishes for a very happy birthday for the chairman. He asked for this to happen on his birthday. [Laughter.]
Mr. SENSENBRENNER. So he has no one to blame but himself.
But I also thank you for drawing my attention to the Washington Times article, which I must have missed yesterday. So I'm going to have to take a look at it. [Laughter.]
Mr. COBLE. Thank you, Jim.
The lady from California.
Ms. LOFGREN. I also wish you a happy birthday and thank you for scheduling this hearing early. I think this is important and, as my colleagues know, I have a number of issues that I hope will be considered by this committee. I think we can sort through them. I look forward to hearing those issues addressed. I only hope we can find the time to collaborate and address these issues successfully. I agree that we shall build this year and that will give us enough time to strike a balance.
Thanks again, Mr. Chairman.
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Mr. COBLE. I thank the gentlelady. You're right, I think the timing is important. We have a good time frame here in which to work.
The gentleman from Indiana.
Mr. PEASE. Mr. Chairman, I'm more than willing to join in the singing of Happy Birthday, assuming Mr. Berman has paid his ASCAP fees. [Laughter.]
Mr. COBLE. The gentleman from Massachusetts.
Mr. DELAHUNT. Let me add to those happy birthday sentiments and let me just say one thing. Mr. Chairman, any suggestion that you are beholden to any special interest—I want to make a matter of record and a public statement here because I can sense your anger and I'm sure it was justified—is absolutely absurd.
You know, your leadership in this committee during the 105th Congress resulted in legislation that we can all be proud of and you are to be commended for that.
You know, this bill is important not for its benefits to any special interest but because it benefits the American people. And I'm sure we'll hear testimony to that effect. That the maintenance and supporting of databases has led to remarkable advances in the quality of life for the American people. That's really what we are about. This subcommittee historically has been a committee that has worked in a bipartisan fashion and we will continue to do that.
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I think it's important to make that statement, put it out there on the record to let everybody know. I know there are some issues here that have to be addressed. We will sort them out and we'll come up with the right conclusion.
Thank you, Mr. Chairman.
Mr. COBLE. Thank you for your generous comments.
I guess one reason why I was so annoyed about the article, it implied not only that I'm on the take, by implication it implied that the rest of you who support this legislation are as well. And I apologize, folks, if I appeared overly angry but I can't conceal it.
Thank you, Bill, for your good comments.
The gentleman from the Roanoke Valley of Virginia, Mr. Goodlatte.
Mr. GOODLATTE. Mr. Chairman, I just want to apologize for not being here when we all observed the 29th anniversary of your 39th birthday. [Laughter.]
Mr. COBLE. Get him out of here. [Laughter.]
Mr. GOODLATTE. I'll cheer you up in that regard.
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And also to observe that obviously the interest in this issue and the work of this committee is not reflective just of the standing room only crowd we have today but we held hearings on encryption a couple of weeks ago and we had the same circumstance. So we may need to let the powers that be know that we need larger hearing rooms for this committee. We're where it's at.
Mr. COBLE. You weren't here when I said this, Bob: we did try to get 2141 but it was already taken.
Mr. DELAHUNT. That was bankruptcy, Mr. Chairman. I happen to serve on that subcommittee too. I chose to be with you today, though. [Laughter.]
Mr. COBLE. The gentleman from East Tennessee, Mr. Jenkins.
Mr. JENKINS. Thank you, Mr. Chairman. Obviously I missed something. I'm sorry. I guess I'll have to ask for a copy of the printed record to catch up here.
I look forward to this hearing today and obviously there's a great deal of interest.
Mr. COBLE. Thank you, Mr. Jenkins.
Since the gentleman from California and the gentleman from Indiana referred to the arts and since Howard mentioned my birthday, I'd be remiss if I didn't mention this—and I'm paraphrasing now, Bill—but the lyrics of the rock and roll song some years ago went thusly: 'Time marches on, time marches on, the young gets old, the old gets old, time marches on'. [Laughter.]
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Mr. COBLE. I'm afraid I'm in that latter category.
Folks, bear with us. It's going to be a long day. We have a full calendar of activity on the floor that will commence imminently, if it hasn't already started. I will ask you all, as I have done previously and you all have been very cooperative to this end, when you see that red light illuminate in your eyes you will know that your 5 minutes have elapsed. We're not going to keel-haul anybody for going over that but I urge you when you see that 5 minutes to try to wrap it up because our second panel consists of eight witnesses and it's going be a long time. We're probably going to be interrupted with votes on the floor, so we do need to finish this today.
I assure you your written testimony will be examined thoroughly and if you can keep your oral testimony within the 5 minute time frame we will be appreciative.
Our first witness will be the Honorable Marybeth Peters who is Register of Copyrights for the United States. She has also served as acting counsel at the Copyright Office and is chief of both the Examining and Information Reference divisions. She has served as a consultant on copyright law to the World Intellectual Property Organization and authored the general guide to the Copyright Act of 1976.
Our second witness is Mr. Andrew Pincus, who as the general counsel is the chief legal advisor for the Commerce Department. Beyond his legal responsibilities Mr. Pincus also serves as a senior policy advisor for the Secretary and the Department on a broad range of domestic and international issues, including electronic commerce, international trade, telecommunications, intellectual property rights, environmental issues, export controls and technology. Mr. Pincus holds a Bachelor of Arts Degree from Yale College in 1977 where he was graduated cum laude, and a law degree from Columbia University School of Law in 1981, where he was a James Kent scholar, a Harlan Fisk Stone scholar, and Notes and Comments Editor of the Law Review.
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Mr. Pincus, we did not receive your written testimony until last night so with your permission we may submit written questions to you in addition to the questions we put to you this morning.
Mr. PINCUS. I'd be pleased to answer them.
Mr. COBLE. Thank you, sir.
The subcommittee has copies of both witnesses testimony. Without objection they will be made a part of the record.
Ms. Peters, you may kick it off.
STATEMENT OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, COPYRIGHT OFFICE OF THE UNITED STATES, LIBRARY OF CONGRESS
Ms. PETERS. Thank you. I also have to start by wishing you a very happy birthday and hope that you have some fun activities planned for later in the day.
Mr. COBLE. This may end up being fun. [Laughter.]
Ms. PETERS. Mr. Chairman, members of the subcommittee, I'm pleased to testify today on the Collections of Information Antipiracy Act.
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In October 1997 I testified on a prior version of this bill. At that time I supported the enactment of new Federal protection for collections of information. While recommending further work on certain issues to better calibrate the balance that would maximize the public interest, the Copyright Office remains convinced of the need for legislation and believes that this bill represents substantial progress in achieving that balance.
The Office's support is based on the need to preserve adequate incentives for the production and dissemination of databases which are increasingly important both as a component of electronic commerce and as a tool for scientific, educational and technological development.
In our view there is a gap in legal protection which can not be satisfactorily filled through the use of technology alone. Existing bodies of law for protecting databases are all deficient in some respect. As to copyright, the Supreme Court's decision in Feist moves that some of the most investment intensive databases are no longer protected, while those that are receive only a narrow scope of protection. Other bodies of law protect only certain aspects of databases or protect them only in certain circumstances and lack uniformity or certainty.
This legal gap is compounded by the ease and speed with which a database can be copied and disseminated using today's digital and scanning capabilities. Producers are likely to react to their vulnerability by investing less in the production of databases or disseminating them less broadly.
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At the same time, because information is essential to the advancement of knowledge and culture, the risks of overprotection are equally serious. It is important not to inhibit or raise the cost of beneficial public interest uses. The ideal scope of protection should result in optimizing the availability of reliable information to the public.
Over the past year and a half considerable evolution has taken place in this bill, refining and clarifying its coverage. Many of the concerns, ours and others, have been addressed or ameliorated. My written statement discusses the changes incorporated in H.R. 354 that we see as most important. I will address only three of these here.
First, with respect to clarifying the boundaries of the prohibition there are three definitions of ''collection of information'' and ''potential market'' and there is an exclusion for information used to accomplish digital online communications. These definitions should prevent over-broad applications extending to products outside the standard conception of a database or to all markets that could someday enter. The exclusion for online communications insures that protection does not extend to functional network elements, thereby impeding the operation of the Internet.
Second, with respect to appropriate safeguards for beneficial uses, the exemptions for permitted acts have been expanded in a number of ways. Two are particularly important. The first broadens the exemption for non-profit educational, scientific or research uses to permit such uses as long as they do not directly harm the actual market. This change appropriately limits the liability situation where such uses pose a serious and immediate threat to the producer's investment, such as when a member of the market for which the database is intended downloads it without payment.
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The most far-reaching change is the new exception for ''additional reasonable uses''. The Copyright Office applauds the inclusion of this general flexible exception. Like the Fair Use doctrine of the copyright law it can serve as a safety valve, avoiding an overly strict application of the law. We continue to examine the effectiveness of the precise mix and functions of the elements set out in the exemption.
Third, a definite term of 15 years has been added. The language in this bill makes clear that a new term of protection resulting from the investment in the maintenance of a collection does not extend the term of the preexisting collection. Nevertheless, a practical problem which merits attention remains. How does the user obtain access to the old, preexisting version if the database exists only on line and it's continually updated?
As this important bill moves through the legislative process the Copyright Office would be pleased to assist the subcommittee and its staff in resolving the remaining issues.
Thank you very much.
[The complete statement of Ms. Peters follows.]
PREPARED STATEMENT OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, COPYRIGHT OFFICE OF THE UNITED STATES, LIBRARY OF CONGRESS
Mr. Chairman, members of the Subcommittee, I am pleased to testify today on the ''Collections of Information Antipiracy Act.'' In October 1997, I testified on a prior version of this bill, H.R. 2652. At that time, I stated the Copyright Office's support for the enactment of new federal protection for collections of information, while identifying some issues with regard to how such protection should be formulated.
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The basis for the Office's support was the 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. In our view, 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, we cautioned that the risks of over-protection were equally serious, since the free flow of information is essential to the advancement of knowledge, technology and culture. We saw the key to legislation as ensuring adequate incentives for investment, without inhibiting access for appropriate purposes and in appropriate circumstances.
Accordingly, the Copyright Office 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, we believed, could optimize the availability of reliable information to the public.
As introduced, H.R. 2652 represented a constructive first step toward achieving this result. We recommended further work on the bill's concepts and language, however, in order to resolve continuing concerns and better calibrate the balance needed to maximize the public interest. We identified as requiring particular attention the scope of the permitted acts and exclusions, and the issue of duration.
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During the course of consideration of H.R. 2652 in the last Congress, numerous changes were made. As passed by the House, the legislation incorporated several provisions responding to concerns we had identified, as well as many other amendments. H.R. 354 includes all of these changes, plus two other major additions: a clarification of the duration issue and a new exemption embodying certain fair use concepts. Over the course of the past year and a half, substantial progress has been made in developing and refining the coverage of the bill.
The position of the Copyright Office on H.R. 354 can be summarized as follows: We remain convinced that there is a need for new federal legislation to supplement existing law and provide adequate incentives for investments in databases. We are not aware of any changes in law or technology since my 1997 testimony that would warrant rethinking that conclusion.
As to the form that such legislation will take, we continue to prefer the misappropriation approach taken in H.R. 354 to an exclusive property rights model, for the reasons given in my prior testimony (a copy of which is attached). Moreover, in our view, the provisions of H.R. 354 represent a significant improvement over the provisions of H.R. 2652 as introduced. Many of our earlier concerns, and a number of concerns raised by others, have been addressed or ameliorated. Again, however, I stress that the sensitivity and importance of this subject matter demands great care in crafting a statutory balance. Several issues still warrant further analysis, among them the question of possible perpetual protection of regularly updated databases, and the appropriate mix of elements to be considered in establishing the new, fair use-type exemption.
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THE THRESHOLD QUESTION: THE NEED FOR LEGISLATION
In formulating our position on H.R. 2652, the Copyright Office considered carefully the threshold question of whether there is a need for new legislation to protect collections of information in the United States. We concluded then that new legislation was desirable, and that judgment still stands.
As explained in more detail in my prior testimony, and in the Office's August 1997 Report on Legal Protection for Databases, existing bodies of law for protecting databases are all deficient in some respect. As to copyright, the Supreme Court's 1991 decision in Feist means that some of the most investment-intensive databases are no longer protected, while those that do embody the requisite minimal creativity are entitled to only a narrow scope of protection. Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340 (1991). Other bodies of law protect only certain aspects of databases, or protect them only in certain circumstances, and lack uniformity or certainty. As a result, database producers are vulnerable to the taking of substantial portions of the fruits of their investment in ways that harm their markets.
Since the 1997 hearing, there has been no change in the courts' interpretation of copyright or other bodies of law that has significantly altered the legal landscape or ameliorated prior judicial applications of Feist. The cases that established a narrow scope of protection for databases under copyright law continue to have precedential effect, and to govern the public's understanding of the boundaries of permissible conduct.
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During the 105th Congress, this Subcommittee, the Committee on the Judiciary, and the full House of Representatives also recognized the need for legislation, as demonstrated by the passage of H.R. 2652 twice, once as a free-standing bill and once as Title V of H.R. 2281.
THE SUBSTANCE OF H.R. 354
The bill before you today reflects the considerable thought and consultation that went into the evolution of H.R. 2652 in the last Congress. H.R. 354 incorporates the provisions of H.R. 2652 in its ultimate form as it passed the House the second time. Many changes were made in that bill during the course of the legislative process. These changes included adding new definitions; clarifying the core prohibition; amending the ''permitted acts''; refining and expanding the exclusions; expanding the savings clauses for other bodies of law; establishing a set term of protection; and providing special protections against monetary or criminal liability for nonprofit institutions. In this Congress, two major changes have been added in H.R. 354 that address core concerns of user communities, one intended to avoid perpetual protection for dynamic databases, and the other to create a flexible defense for fair use-type uses.
I will not describe all of these changes here, but will discuss those the Copyright Office believes to be most important from a public policy perspective: clarification of the boundaries of the prohibited conduct; the coverage of the exceptions or ''permitted acts''; addition of savings clauses regarding copyright and antitrust law; duration; and the special protections for nonprofits.
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CLARIFYING THE BOUNDARIES OF THE PROHIBITION
As to the bill's general approach, H.R. 354 adopts the same misappropriation model as proposed in H.R. 2652. The Copyright Office continues to favor this approach, because it is more limited in its scope of coverage than an exclusive property rights model, and better tailored to the subject matter and the specific problem that has been identified. In addition, several changes made during the legislative process in the last Congress have clarified the boundaries of the prohibition in a beneficial way.
Most important was the addition of definitions for two of the terms used in the prohibition: ''collection of information'' and ''potential market'' (§1401). In my prior testimony, I stated that ''additional definitions may be advisable to clarify the scope of the prohibition . . ., but should not be included unless they can shed more light rather than create new ambiguity.'' These definitions meet that test; they serve to add precision and avoid potential overbreadth.
Definition of ''collection of information''
A number of concerns had been expressed about the lack of a definition of ''collection of information'' in H.R. 2652 as introduced. The concerns centered on the possibility that many items that would not fall within a standard conception of a database might be considered to qualify as a protected collection. A history book or even a novel might qualify, since each collects and brings together facts, ideas and words. Moreover, virtually any material in digital form could be considered a collection of digits. The new definition should rule out the possibility of such overbroad interpretations. It appropriately limits protection to those collections that are made up of items collected and organized ''for the purpose of bringing discrete items of information together in one place or through one source so that users may access them.'' By focusing on the purpose for which information is collected and organized, the definition excludes material brought together in order to communicate a message, tell a story, or accomplish a result. See H. Rep. No. 105–525, 105th Cong., 2d Sess. 13 (1998).
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Definition of ''potential market''
In my prior testimony, I supported the use of the term ''potential'' in delineating what type of market harm should be actionable. I stressed the need to give the term content, however, warning that ''[t]he mere possibility that a use could be licensed should not be sufficient, or the term would become circular.'' I advised that courts could look to the producer's business plans as well as customary industry practices, as they have done under copyright law.
The new definition of ''potential'' accomplishes just that result. It defines a ''potential market'' as one which a person has current and demonstrable plans to exploit or that is commonly exploited by persons offering similar products or services incorporating collections of information. The increased certainty provided by statutory language giving guidance to the courts is a positive step.
Exclusion for network functionality
Another important change made during the 105th Congress was the addition of an exclusion barring application of the prohibition to information used to accomplish digital online communications (§1404(c)). The Copyright Office supports this exclusion, which should ensure that protection for collections of information will not be extended inappropriately to functional network elements such as domain name tables and interface specifications, and thereby unintentionally impede the development and functioning of the Internet.
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APPROPRIATE SAFEGUARDS FOR BENEFICIAL USES
In my prior testimony, I noted the ''substantial dangers inherent in establishing legal rights involving the use of facts,'' and cautioned that ''[i]t is important not to inhibit or raise the cost of existing uses in the public interest . . . [and] avoid[] making access for legitimate purposes more difficult or expensive.'' This was one of the Copyright Office's principal concerns with the bill in its original form: were sufficient safeguards in place to ensure that that beneficial uses could continue unabated? Two expansions of the exceptions or ''permitted acts,'' one made toward the end of the last Congress and one appearing for the first time in H.R. 354, provide important additional safeguards.
Broadening of exception for nonprofit educational, scientific, or research uses
As initially drafted, the exception for nonprofit educational, scientific or research uses served a primarily symbolic value. While its inclusion in the bill constituted a legislative recognition of the value and importance of such uses, the exception was written in such a way as to simply restate in the affirmative that such uses were permitted as long as they did not cause market harm (which would not in any event have violated the prohibition). When H.R. 2652 was incorporated into H.R. 2281, this exception (now §1403(a)(1)) was broadened to permit such uses as long as they did not directly harm the actual market—thus ruling out liability for indirect harm, or harm to a potential market.
The Copyright Office supports this change. In our view, it appropriately limits liability for nonprofit public interest uses to the only situations where such uses pose a serious and immediate threat to the producer's investment—i.e., where the user is a member of the market for which the database is produced, and utilizes it without permission or payment. While a producer may need protection against a commercial competitor's preemption of a potential market, such a broad field of application does not seem necessary for nonprofit scientists and scholars.
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Addition of a flexible fair use-type exception
The most far-reaching change in the bill, added when H.R. 354 was introduced, is a new exception, entitled ''Additional Reasonable Uses'' (§1403(a)(2)). This section supplements the other, more specific exceptions, with a general, multi-factor balancing test turning on the concept of reasonableness. It permits an individual act of use or extraction of information for purposes of illustration, explanation, example, comment, criticism, teaching, research, or analysis, in an amount appropriate and customary for that purpose, if the act is reasonable under the circumstances. Four factors must be considered in determining reasonableness, relating to the commercial or nonprofit nature of the use or extraction, the defendant's good faith, the extent to which the defendant has added its own investment or creativity, and whether the plaintiff's collection was primarily intended for persons in the same field or business as the defendant. Finally, an outside limit of reasonableness is set: the portion taken from the collection must not be offered or intended to be offered in commerce and likely to serve as a market substitute for the original collection.
This exception has two particularly important applications in supplementing the coverage of the previous set of exceptions: as to nonprofit users, it can provide a defense, even when the activity directly harms the actual market for the database. In addition, it can provide a defense to commercial ventures for acts going beyond mere insubstantial uses, independent collection, or verification.
The Copyright Office applauds the inclusion of such an exception in the bill. In an area as important and delicate as this, involving legal restrictions on information, we believe the incorporation of a general, flexible defense is a wise policy choice. Like the fair use doctrine of copyright law, this provision can serve as a ''safety valve,'' avoiding an overly strict application of the law with potentially negative consequences. It allows courts to make judgments appropriate to the particular facts and circumstances, and recognizes that some uses should be permitted even if they do not strictly fall within explicit statutory bounds.
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In my prior testimony, I described how many of the concepts of copyright fair use are incorporated in various places throughout the bill; this new exception adds another concept from the first fair use factor that did not appear in earlier versions. The authorized purposes all involve activities that build on the contents of an existing collection, and provide the public with new thoughts or insights. In that respect, they are similar to the ''transformative'' uses favored under fair use. See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994).
The new exception differs from the structure of copyright fair use, however, in that it is not entirely determined by a balancing of factors. Certain elements are established as prerequisites, such as the authorized purposes and the requirement that the amount be limited to that ''appropriate and customary for that purpose.'' We continue to examine the mix of elements set out in the exception, their functions, and their relation to each other, and would be pleased to work with the Subcommittee on further shaping of the statutory language.
Amendments to other exceptions
Two other ''permitted acts'' were also modified in positive respects during the 105th Congress. The exception covering individual items and other insubstantial parts was amended by adding a sentence specifying that an individual item of information shall not itself be considered a substantial part of a collection (§1403(b)). This clarification ensures that a single but important item contained in a collection cannot be interpreted to be a qualitatively substantial part of the collection, due to its individual value.
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Finally, a concern we had expressed about the news reporting exception has been addressed. The exception now contains a carve-out, barring its application to a consistent pattern of takings of time sensitive information gathered by another news entity, for purposes of direct competition (§1403(e)). This language prevents the possibility that the type of activity held unlawful in International News Service v. Associated Press, 248 U.S. 215 (1918), would be sanctioned by the breadth of the exception.
NEW SAVINGS CLAUSES FOR COPYRIGHT AND ANTITRUST LAW
In its original form, H.R. 2652 contained a general provision specifying that it did not affect any rights or obligations under other bodies of law relating to information. During the legislative process, additional provisions were added providing more detail about the relationship of this new protection to such bodies of law, including copyright and antitrust (§1405(c), (d)). The Copyright Office believes these new provisions are an appropriate and useful addition to the bill.
The provision on copyright states explicitly that protection under the new law is independent of copyright, and does not affect any aspect of copyright protection, including limitations on rights such as fair use, in any work of authorship contained in or consisting of a collection of information. The provision further specifies that no greater protection is provided to any work of authorship contained in a collection than would otherwise be available to that work, other than a work that is itself a collection (which by definition would receive the new law's protection against misappropriation). This language should serve to confirm that the scope of copyright protection for compilations or for works of authorship contained in compilations will not change.
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The provision on antitrust law makes clear that protection under the new law does not limit in any way the constraints imposed by antitrust laws on the manner in which products or services may be provided to the public, including rules regarding single suppliers of products and services. This language addresses the ''sole source'' issue that has been raised in the course of debate. See Copyright Office Report on Legal Protection for Databases at 102–107. It ensures that relevant principles of antitrust law continue to apply to producers in governing how they can market databases that are the sole source of information. This provision should assist in preventing information from becoming unavailable to the public. To the extent that antitrust law may not adequately deal with particular conduct, further discussion may be warranted.
DURATION
The second major change incorporated into H.R. 354 relates to the issue of duration. Under H.R. 2652 as introduced, the prohibition had no set term of protection. While this was theoretically consistent with the bill's grounding in misappropriation law, I stated in my prior testimony that further study was needed to determine an appropriate measure for how long the prohibition should last. During the last Congress, a term of fifteen years was added, in the form of a limitation on the period of time during which a lawsuit can be brought.
The Copyright Office supports the addition of such a definite term. Fifteen years of protection provides substantial incentives for investments in collections of information. It also has the advantage of being consistent with the term provided in the European Union, increasing the likelihood of obtaining reciprocal protection in Europe for U.S. database producers. See Copyright Office Report on Legal Protection for Databases at 49; article 10 of Directive 96/9/EC of the European Parliament and of the Council of the European Union of 11 March 1996 on the legal protection of database (attached to Report as Appendix B).
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In the amended version of H.R. 2652, the term began to run from the date of the investment that qualified the collection for protection. In H.R. 354, the starting point is instead the date that the portion of the collection extracted or used was first offered in commerce, following the qualifying investment (§1408(c)). In the view of the Copyright Office, this change is an improvement. Investments in producing databases generally take place over a period of time, and it will be difficult to determine the precise point at which the investment became substantial enough to trigger protection. Nor would members of the public have any way to ascertain the status and progress of the producer's internal business activities.
Moreover, under the earlier ''date of investment'' approach, if further substantial investments were subsequently made before the database was placed on the market, those new investments could trigger additional terms. It is therefore preferable to start the clock running on a date that is clearcut and publicly ascertainable. Again, this approach is consistent with that of the European Union, which measures protection for publicly available databases from the January after the database was first made available to the public. European Directive, art. 10(2).
Even with this new definite term, however, concerns remain about the possibility of effectively perpetual protection. This is because the investment that triggers the prohibition in the bill may consist of maintenance of a pre-existing database. Accordingly, where a database is updated on an ongoing basis, new fifteen-year terms will begin to run whenever the update entails substantial investment and is offered in commerce. In other words, protection may be extended indefinitely.
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A new sentence was added in H.R. 354 to deal with this potential problem. It distinguishes between protection for the pre-existing database and protection for the updated version, clarifying that the fact that an investment in maintenance has resulted in a new fifteen-year term does not extend or renew protection for the pre-existing database itself. The public remains free to extract or use information from the pre-existing collection despite the continued protection for the later, updated version.
In our view, this sentence helps to avoid the specter of perpetual protection. It makes clear that the version of the database that has already been protected for a full fifteen-year term does not continue to be protected because of subsequent investments. Nevertheless, it does not completely resolve the issue. A practical problem remains: how does the user obtain access to the pre-existing version that can theoretically be freely used under the bill? If the database is in hard copy form, there may be no problem; the user can, for example, go to the library and use an old casebook. But if the hard copy is no longer available, or if the database exists only on-line and is constantly updated, it may be impossible to find and use a copy of the no-longer protected version. As a result, although protection is not perpetual in theory, it may be as a matter of reality.
The Copyright Office believes this issue merits further attention. During discussions in the Senate Judiciary Committee in the fall of 1998, consideration was given to the possibility of establishing a deposit system within the Copyright Office, in order to create a public record of databases for which protection has expired. While such a deposit system could be burdensome, and may have drawbacks as well as benefits, we are ready to work with the Subcommittee to examine this and alternative solutions.
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ADDITIONAL PROTECTIONS FOR NONPROFIT INSTITUTIONS
Three provisions were added to H.R. 2652 that further insulate nonprofit educational, scientific or research institutions, and libraries or archives, from inappropriate or disproportionate liability:
1. Inapplicability of criminal provisions (§1407(a)(3)). Criminal penalties are not available against employees or agents of such institutions, when acting within the scope of their employment.
2. Remission of damages (§1406(e)). Courts must reduce or remit entirely monetary relief if the defendant is an employee or agent of such an institution, who believed and had reasonable grounds for believing that the conduct was permissible.
3. Deterrent against frivolous lawsuits (§1406(d)). If an action is brought in bad faith against such an institution, or its employee or agent, courts are required to award costs and attorneys' fees to the defendant.
These provisions should go a long way toward ameliorating any possible chilling effect on nonprofits' activities. A nonprofit institution acting in good faith, with the belief that it is engaging in permissible conduct, will run little risk of substantial penalties other than an injunction. And a database producer will have to think carefully about the grounds for a lawsuit, or be subject to potentially serious financial consequences.
CONCLUSION
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H.R. 354 would establish consistent nationwide incentives for investments in collections of information, filling the gap left in the law in the wake of Feist. The bill represents substantial progress in legislative thinking, incorporating many positive evolutions from the initial form of its predecessor bill in the last Congress. These changes have added greater clarity and balance. The Copyright Office would be pleased to work with the Subcommittee to resolve remaining issues and concerns.
Mr. COBLE. Thank you, Ms. Peters.
Mr. Pincus, I inadvertently failed to advise the audience that you are with the Commerce Department. I think we all know that. Glad to have you with us.
Mr. PINCUS. Thank you, Mr. Chairman. It's an honor to appear before you today and also to be able to wish you a happy birthday.
Mr. COBLE. Thank you, sir.
STATEMENT OF ANDREW PINCUS, GENERAL COUNSEL, UNITED STATES DEPARTMENT OF COMMERCE
Mr. PINCUS. In the last Congress you and the other members of the subcommittee were responsible for a truly momentous accomplishment, enactment of the Digital Millennium Copyright Act. Under Secretary Daley's leadership, we in the Commerce Department were privileged to work with you on that important legislation and we're looking forward in this Congress to working with you on this legislation and the other matters in which we have a common interest.
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The issue of database protection is a matter of great interest to a large number of Federal agencies for a variety of reasons. The Government collects, manages and disseminates large amounts of information, perhaps more than any entity in the world. We fund research that produces information. We are very concerned and eager to continue the tremendous economic growth that we've experienced.
In our knowledge based economy information is key. We therefore want to maximize incentives for data collection to expand the available universe of information without putting in place unjustified obstacles to competition and innovation. And of course we want to be sure that any law enacted complies with the Constitution.
We spent a great deal of time developing an administration position that takes account of these varied perspectives. I'm afraid it's somewhat lengthy and I appreciate your making my full testimony part of the record, and I'll summarize the key parts this morning.
First, after exhaustive analysis we've concluded that there is a gap in the law that must be filled by new legislation. We support the enactment of a statute to protect database creators against free riding, the wrongful taking and distribution of database material with resulting infliction of commercial harm on the database creator.
Digital technology permits the creation and distribution of a large number of perfect copies of data files at the touch of a button and therefore expands dramatically the risk that in the absence of adequate legal remedies piracy or the threat of piracy will deter investment in database creation.
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Indeed, we believe, speaking to a lot of the affected interest groups, that there is considerable, if not complete consensus that additional legal protection is necessary to prevent a diminution in database creation. Of course it's important to craft this legal protection carefully to optimize the overall benefits and minimize disruption of research activities and prevent stunting of competition and innovation. I know the subcommittee is very sensitive to these concerns and we're very appreciative of the changes reflecting the differences between the bill before you this year and the bill passed by the House last year which respond to a number of these matters.
My written testimony comments in detail on a number of provisions of the bill. Let me just mention a few key points.
With respect to section 1402, which defines the conduct that may give rise to liability, we believe it is appropriate to narrow the prohibition to target more closely the troubling acts of misappropriation identified in Warren Publishing and similar cases. We therefore urge the subcommittee to focus on distribution and extraction for distribution as the wrongful conduct rather than on simple extraction for use.
Second, we urge the subcommittee to require substantial harm rather than just harm in order to be sure that de minimis activities will be shielded against liability.
We urge the subcommittee to reexamine the concepts of ''actual'' and ''potential'' market and consider instead a market definition tied to the product's actual customer base or the market currently exploited by similar products and services to avoid an over broad definition of the market that might limit transformative uses and other innovation and might restrict competition.
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With respect to Government data, we agree with you that Government investment in generating data generally should not be protected. We suggest that the exclusion contained in section 1404 be broadened to more clearly encompass data gathering funded by the Government.
There also is some concern that Government data might be captured by private database producers and we provide some suggestions in the testimony for addressing that potential problem.
We also want to be sure that H.R. 354's fixed protection term of 15 years can not be circumvented to provide perpetual protection for a database. I know that you are as concerned as we are that you sought to avoid this possibility by including an expressed prohibition against perpetual protection in section 1408. We suggest that the subcommittee address this issue by eliminating ''maintaining'' and ''organizing'' as bases for statutory protection.
The ''sweat of the brow'' doctrine that the Supreme Court rejected in its Feist decision protected industrious collection. We think that a statutory provision that protects either gathering or collecting would more closely replicate the pre-Feist protection as well as avoid the possibility that minor acts of maintenance might restart the 15 year clock.
Finally, with respect to the permitted use provision, we suggest a number of changes to make clear that judges will have flexibility equivalent to that under the Copyright Act to insure that liability is not imposed for protected uses of data.
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Thank you again for the opportunity to testify today and I look forward to answering your questions and working with you as the legislation moves through the process.
[The complete statement of Mr. Pincus follows.]
PREPARED STATEMENT OF ANDREW PINCUS, GENERAL COUNSEL, UNITED STATES DEPARTMENT OF COMMERCE
Mr. Chairman and Members of the Committee:
Thank you for this opportunity to present the Administration's views on H.R. 354, the ''Collections of Information Antipiracy Act.''
I. INTRODUCTION
The Administration views database protection legislation from a number of perspectives: as a creator of data and a user of it; as an advocate of both economic incentives for socially useful investment and open, market-based competition free from artificial barriers; and as an entity committed both to effective law enforcement and to the First Amendment. Reconciling these perspectives is difficult in any context. The digital economy's rapid and unpredictable change makes this challenge even greater.
The Administration believes strongly in free markets, in which firms can meet demand for new products and services without having to overcome artificial barriers that keep consumers hostage to an undesirable status quo. However, we also recognize that there are circumstances in which markets need legal mechanisms in order to function efficiently. The Feist decision(see footnote 1) conclusively eliminated one form of legal protection for databases. Undeniably, Feist has altered the landscape, but the topography is still changing in ways that pull in different directions as to the nature and extent of protection that is needed.
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In particular, the emerging digital environment has significant implications for this issue. It has become commonplace to observe that information is the currency of our economic age. That puts a premium on designing a legal schema that creates sufficient incentives to maximize investment in data collection—to expand the available universe of information—without putting in place unjustified obstacles to competition and innovation. Moreover, digital technology permits the creation and distribution of a large number of perfect copies of data files at the touch of a button and therefore expands dramatically the risk that, in the absence of adequate legal remedies, piracy, or the threat of piracy, will deter investment in database creation. For all of these reasons, it is important to calibrate new private rights carefully—to optimize overall economic and social benefits, to prevent unfairly undermining investments and agreements premised on the current law, and to preclude new opportunities for thwarting competition.
The U.S. Government has a unique stake in database legislation because it collects, manages, and disseminates massive amounts of information, possibly more information than any other entity in the world. In all these processes, it interacts with the private sector in a variety of ways. In addition, federal agencies are engaged in funding research that produces tremendous amounts of information that the government does not undertake to manage itself.
These activities represent enormous investments in highly complex knowledge management processes that are vital to human health, the environment, national security, scientific progress, and technological innovation—and, in turn, to the economy as a whole. Changes in ground rules for the use and reuse of information must be designed to minimize disruption of these critical activities and to avoid imposition of new costs that could hinder research.
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The sections which follow discuss the Administration's efforts to study database protection and access issues (Part II) and summarize the six principles that we believe should guide both domestic legislative and international treaty efforts in this area (Part III). Next, we elaborate on each principle, discussing the Administration's concerns relating to that topic and the range of possible solutions on which we believe interested parties should focus (Part IV). Finally, we offer some additional points that should be included in any database protection legislation.
II. HISTORY OF ADMINISTRATION STUDY OF DATABASE ISSUES
In response to legislative proposals in Congress and developments in the World Intellectual Property Organization (WIPO), the Administration devoted substantial energy in 1998 and 1999 to studying database protection and access issues. The Administration's review of these issues has included a variety of mechanisms and fora:
The Patent and Trademark Office (PTO) held a public conference on database protection and access issues on April 28, 1998.
During the spring and summer of 1998, a variety of Executive Branch departments and agencies participated in an informal working group on database issues led by the State Department, the Office of Science and Technology Policy (OSTP), and the PTO.
In January 1999, the National Research Council held a two day conference on scientific databases at the Department of Commerce. This conference was supported by the National Science Foundation, the National Institutes for Health, and several other agencies.(see footnote 2)
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Various officials in the Executive Office of the President (including OSTP), the Department of Commerce (including PTO), and the Justice Department have held informational meetings with both proponents and opponents of database protection legislation.
In addition to these efforts, the Administration has carefully studied a wide range of reports, studies, legal opinions and legislation on database protection and access from the United States, Canada, Japan, and the European Union, as well as participating in discussions of database protection issues at WIPO conferences in 1996, 1997, and 1998.
The Administration continues to discuss these issues with concerned parties and to examine specific topics and areas where we believe further information will help both the legislative process and any future study of the effects of database protection that might be mandated by legislation.
III. GENERAL PRINCIPLES
On August 4, 1998, in response to Senate consideration of then-H.R. 2652, the Administration set out the principles that it believes should govern database protection legislation.
Now, as then, Administration supports legal protection against commercial misappropriation of collections of information. We believe that there should be effective legal remedies against ''free-riders'' who take databases gathered by others at considerable expense and reintroduce them into commerce as their own. This situation has arisen in recent case law, and we believe that digital technology increases opportunities for such abuses.
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At the same time, the Administration's concerns with the provisions of H.R. 354 are similar to those we expressed with respect to H.R. 2652, including the concern that the Constitution imposes significant constraints upon Congress's power to enact legislation of this sort. From a policy perspective, the Administration believes that legislation addressing collections of information should be crafted with the following principles in mind:
1. A change in the law is desirable to protect commercial database developers from commercial misappropriation of their database products where other legal protections and remedies are inadequate.
2. Because any database misappropriation regime will have effects on electronic commerce, any such law should be predictable, simple, minimal, transparent, and based on rough consensus in keeping with the principles expressed in the Framework for Global Electronic Commerce. Definitions and standards of behavior should be reasonably clear to data producers and users prior to the development of a substantial body of case law.
3. Consistent with Administration policies expressed in relevant Office of Management and Budget circulars and federal regulations, databases generated with Government funding generally should not be placed under exclusive control, de jure or de facto, of private parties.
4. Any database misappropriation regime must carefully define and describe the protected interests and prohibited activities, so as to avoid unintended consequences; legislation should not affect established contractual relationships and should apply only prospectively and with reasonable notice.
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5. Any database misappropriation regime should provide exceptions analogous to ''fair use'' principles of copyright law; in particular, any effects on non-commercial research should be de minimis.
6. Consistent with the goals of the World Trade Organization (WTO) and U.S. trade policy, legislation should aim to ensure that U.S. companies enjoy available protection for their database products in other countries on the same terms as enjoyed by nationals of those countries.
With these principles in mind, we turn to an analysis of H.R. 354.
IV. DISCUSSION
G. First Principle—Protect against commercial misappropriation
A change in the law is desirable to protect commercial database developers from commercial misappropriation of their database products where other legal protections and remedies are inadequate.
The Administration supports enactment of a statute to protect database creators against free-riding—the wrongful taking and distribution of database material with resulting infliction of commercial harm (loss of customers) on the database creator. Indeed, there is considerable, if not complete, consensus that this kind of free-riding can occur without additional legal protection for non-copyrightable databases and that such legal protection is necessary to prevent a diminution in database creation.(see footnote 3)
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Section 1402 is the operative core of H.R. 354, providing the ''basic prohibition'' of this proposal to protect collections of information through a misappropriation model.(see footnote 4) Section 1402 prohibits unauthorized commercial misappropriation of a substantial amount of a database; it also appears to prohibit unauthorized extraction or ''use'' of data from a database by an individual, no matter how the information is used.
The Administration believes that any treaty on database protection that emerges from on-going discussions at the World Intellectual Property Organization should permit each treaty signatory to provide any mandated database property protection through the legal mechanism most appropriate to its domestic law, whether through misappropriation, sui generis protection, or a simple extension of their domestic copyright and neighboring rights laws. The critical issue is not the legal framework used, but whether the law provides private citizens with comparable rights to protect their investments in different jurisdictions.
We do not believe that protection of that breadth is appropriate in the database context. As a policy matter, we must weigh the need to protect database creators against the potential impact on scientific research in particular, and the dissemination of information within the society generally. It therefore makes sense to focus any prohibition on the precise activities that pose the commercial threat—''use'' is simply too broad and ambiguous.(see footnote 5) Indeed, the breadth and ambiguity of the prohibition has required concerned parties to focus considerable attention on expanding the list of statutory exceptions to make clear that various activities would not be affected by the prohibition. We believe it more appropriate to narrow the prohibition so it is targeted on conduct like the troubling acts of commercial misappropriation identified in the Warren Publishing and similar cases.(see footnote 6)
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H.R. 354's basic prohibition consists of three basic elements, imposing liability on any person who ''extracts or uses in commerce'' all or a substantial part of a database so as to cause ''harm'' to the ''actual or potential market'' of the database creator. In our view, all three of these elements should be focused more precisely on the commercial free-riding situation.
To begin with, the ''extract[s] or use[s]'' language should be narrowed. One approach would be to limit the reach to a person who, without authorization ''extracts for commercial distribution or distributes in commerce'' all or a substantial part of a database. The substitution of ''distribution'' in place of ''use'' would clarify that the Act is directed at active behavior, rather than receptive activities such as viewing, reading, or analyzing. ''Extracts for commercial distribution'' would cover any replication preparatory to distribution in commerce. Distributes in commerce should be understood broadly, compatible with First Amendment concerns.
While the Administration continues to believe that misappropriation for commercial purposes should be the focus of any legislative efforts, we recognize that, when systematic, some acts that might be characterized as ''extraction'' (in other words, acts of duplication) by individuals could conceivably undermine the commercial market for a database product. We are not familiar with any reported cases or incidents of this kind, but we recognize that such harm could occur. Such damage may occur when those acts becomes customary in a particular economic sector or field of research. At present, if there is no contract with the individual or his/her organization, the investor in a database has no effective civil remedy against such acts.(see footnote 7) We believe that one of the greatest challenges in drafting database protection legislation is providing database producers with some type of protection against such patterns of repeated individual activity without prohibiting uses of data by individuals that most people believe should be treated as ''fair uses'' and without violating the First Amendment. We are not certain whether a balance can be struck. Our suggested language concerning ''extraction for distribution'' and ''distribution'' does not address this issue; we look forward to working with the Subcommittee on this matter as the legislation moves forward.
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Second, the Subcommittee should consider whether the requirement of ''harm'' in section 1402 should be elevated to ''substantial harm'' as a means of shielding de minimis activities from any possible liability. We know that some proponents of H.R. 354 have expressed concern about a ''substantial harm'' standard because they believe that judges would compare the standard unfavorably to copyright law, which requires only ''harm.'' We agree that it is important to anticipate how judges would administer any new law, but we believe that a ''substantial harm'' standard is familiar to courts from other areas of American law.(see footnote 8) Appropriate legislative history could direct judges away from unintended comparisons to copyright law or areas of the law where ''substantial harm'' has been interpreted to impose a higher standard than intended in this bill.
At the same time, some critics of H.R. 354 have suggested that the proper trigger for liability is whether the misappropriation ''so reduce[s] the incentive to produce the product or service that its existence or quality would be substantially threatened,'' a test from the National Basketball Association v. Motorola case.(see footnote 9) While we agree that a misappropriation law should be focused on acts that do, in fact, have a tendency to reduce incentives in this manner, we think this ''diminution of incentive'' test is ill-suited as a component of the basic prohibition; it does not comport with the Administration's principle (described below) that a database protection law should be predictable, simple, and transparent. Because a database user cannot be expected to know much about the incentive structures that lead to production of databases, such a user would have no way to judge in advance whether or not her acts would satisfy a ''diminution of incentive'' test for liability. We also are concerned that the ''diminution of incentive'' test requires much more complicated proofs than would be incurred with a harm test.(see footnote 10) Accordingly, we believe that Congress should instead rely upon a ''substantial harm'' test or similar measure to serve as a workable proxy for the ''diminution of incentive'' test.
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Third, we suggest reexamination of the concepts of ''actual'' and ''potential'' market. We are very concerned that, as presently drafted, these concepts are broader than market definitions used in other areas of the law, could be subject to manipulation by private entities, and could too easily expose legitimate business practices to substantial liability. We urge the Subcommittee to consider an objective definition tied to the product's current actual customer base or the market currently exploited by similar products or services. We are concerned that any broader definition might deter entrepreneurs from developing new products and services that add significant value and do not compete directly with the original database. Leaving room for transformative uses is critical in shaping the definition of the market as targeting the free-riding we wish to prohibit. We believe that the Subcommittee should consider, individually and perhaps in combination, the notions of ''principal market'' drawn from unfair competition law, and ''neighboring market'' proposed in the Senator Hatch draft.
The Department of Justice notes that this legislation raises serious constitutional concerns that current copyright law does not raise. The Constitution itself provides for protection of copyright, in order to promote progress in science and the arts. Therefore, copyright and the First Amendment are intended to protect analogous values, and are aimed, in part, at similar and compatible objectives. The Copyright Clause and the Copyright Act permit protection only of an author's original expression, and do not authorize protection of facts. This comports with First Amendment principles. By contrast, the proposed prohibition in H.R. 354 would be directed against dissemination of facts. That measure as currently drafted likely would not survive constitutional scrutiny, at least in numerous applications. The constitutional concerns are related to the scope of the basic prohibition, discussed above, as well as the issues discussed below, including the range of permitted uses, resolution of the ''perpetual protection'' problem and the possibility of ''sole source'' situations, but the constitutionality of any law in this area will depend upon the particular statutory language adopted and therefore cannot be analyzed definitively at this time. We look forward to working with the Subcommittee to avoid constitutional infirmity.
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B. Second Principle—Keep it simple, transparent, and based on consensus
Because any database misappropriation regime will have effects on electronic commerce, any such law should be predictable, simple, minimal, transparent, and based on rough consensus in keeping with the principles expressed in the Framework for Global Electronic Commerce.(see footnote 11) Definitions and standards of behavior should be reasonably clear to data producers and users prior to the development of a substantial body of case law.
This principle informs all of our analysis. We believe that database legislation should be directed squarely at behavior that is widely acknowledged to be unfair and has been documented as a problem worthy of a legislative response. This will ensure that the legal system is not used to threaten litigation in borderline cases in a manner that may inhibit the flow of factual information and the vigor of free market competition.
We also believe that in introducing this new form of protection, some of the burden of promoting transparency and predictability should be borne by those who benefit. The legislation should not create an environment in which many kinds of database users must suddenly act at their peril. In particular, the Subcommittee might consider how a notice system could effectively warn database users when a database producer is asserting protection under the law. This will also help reduce the costs of identifying multiple cascading interests that are likely to aggregate more frequently in databases than in works of authorship. In this regard, we applaud the addition of the ''good faith'' of the defendant as a factor in allowing ''permitted use'' under section 1403 although, for reasons discussed below, we believe that our additional changes to the ''permitted use'' section may be needed.
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Rather than prescribing a particular approach and trying to address the difficulties of implementing it in legislation, we would prefer (again, in keeping with the Framework for Global Electronic Commerce principles) to assign to database publishers and users the responsibility of devising appropriate standards to identify and assert interests. While in paradigmatic cases, such as the circumstances in Warren Publishing, there may be no question about deliberate free-riding, the principle remains: users must have reason to believe that their acts are damaging to others. The ''good faith'' factor in H.R. 354 combined with private sector-developed standards for notice and disclosure would help ensure that the legislation works to condition behavior based on reasonable expectations and to avoid traps for the unwary.
C. Third Principle—Preserve access to government data
Consistent with Administration policies expressed in relevant Office of Management and Budget circulars and federal regulations, databases generated with Government funding generally should not be placed under exclusive control, de jure or de facto, of private parties.
1. Exemption of government data
The U.S. Government collects and creates enormous amounts of information, possibly more than any other entity in the world. State and local governments in the United States also gather and generate tremendous amounts of data. Broadly defined, government-generated data touches every sector of the economy and civic life. Government-funded data ranges from crime statistics to data on subatomic particles; from geological maps to court opinions; from immigration statistics to digital images of distant galaxies.(see footnote 12)
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The Administration believes that a database protection law generally should not protect government investment in generating data. There are three reasons for this conclusion. First, database protection proposals are premised on the need to provide an incentive for investment in data gathering; in the case of government-funded information, no incentive is needed. If a government decides that it is in the public interest to collect information on smog levels, education scores, or solar flare activity, it will do so. Second, there is a widespread sentiment that once data generation has been paid for with government funds, taxpayers should not have to pay ''twice'' for the same data.
Finally, the U.S. Government has historically pursued policies that strongly favor public funding of the creation and collection of information. The Administration believes that these policies have contributed greatly to the success of America's high technology and information industries as well as the strength of our democratic society. The Administration has stated elsewhere:
''Government information is a valuable national resource. It provides the public with knowledge of the government, society, and economy—past, present, and future. It is a means to ensure the accountability of government, to manage the government's operations, to maintain the healthy performance of the economy, and is itself a commodity in the marketplace.''(see footnote 13)
The Administration believes that the free flow of government-generated data is an important engine of economic growth; it will be an increasingly important resource for any society intent on creating jobs, businesses, and wealth in the ''Information Age.'' Often, government-generated information is also critical to the health and safety of the population; we must ensure that any database protection law does not hamper the dissemination of such information.(see footnote 14)
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H.R. 354 addresses the issue of government-generated data with the following section 1404(a) exclusion:
''Protection under this chapter shall not extend to collections of information gathered, organized, or maintained by or for a government entity, whether Federal, State, or local, including any employee or agent of such entity, or any person exclusively licensed by such entity, within the scope of the employment, agency, or license. Nothing in this subsection shall preclude protection under this chapter for information gathered, organized, or maintained by such an agent or licensee that is not within the scope of such agency or license, or by a Federal or State educational institution in the course of engaging in education or scholarship.''
The Administration believe that this provision serves the general policy goal of making all forms of government information available to the public, but we believe the language is too narrow to satisfy this goal fully.
To begin with, we suggest that the Subcommittee examine existing definitions of ''government information'' for more inclusive descriptions of government-sponsored data collection. For example, OMB Circular A–130 states that ''the definition of 'government information' includes information created, collected, processed, disseminated, or disposed of both by and for the Federal Government.''(see footnote 15) In particular, we believe that the present language does not adequately cover situations in which the government contracts for or provides grants for information gathering. For example, for reasons of accountability, several government contracts expressly state that the private entity is not an ''agent'' or ''licensee'' of the government, removing the data gathering from the ambit of section 1404(a). One way to address this would be to include language that information collected ''under government contract, grant, or other agreement'' is covered by section 1404(a). Another possibility would be inclusion of language making clear that the 1404(a) exclusion also applies to data gathering ''funded by the government.''
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In crafting broad statutory language that includes works created by government contract as government collections of information, a distinction should be drawn between (a) compilations of data made as a necessary element of a government-funded activity, and (b) compilations of data made by private entities over and above the activity being funded by the government. This appears to be the intent of the section 1404(a) language that:
''Nothing in this subsection shall preclude protection under this chapter for information gathered, organized, or maintained by [a government] agent or licensee that is not within the scope of such agency or license . . .''
This test also should be modified to account for government contractors and grantees who are neither licensees nor agents. In addition, standards for when preparation of a database is mandated by government contract could be developed from existing standards for when government agencies must collect data.(see footnote 16)
We also note that 1404(a) is currently worded so that data gathered by state-funded colleges and universities may enjoy protection under the bill. This same provision appeared in H.R. 2652 and the Committee report for that bill indicated that the statutory language was intended to ensure that ''institutions that happen to be government owned should not be disadvantaged relative to private institutions when producing databases . . .'' The Administration respectfully disagrees with this reasoning; we believe that public universities should fall within a broad definition of government institutions which generate collections of information. Instead of trying to draw a distinction between public universities and other government institutions, it might be more appropriate to concentrate on the distinction between public research and privately funded research at public institutions.(see footnote 17)
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Higher education institutions are also a fertile ground for situations in which a database's generation is partially funded by the government. In such circumstances, what is fair to the researcher and to the public? The Senator Hatch discussion draft would have placed outside the protection regime those databases ''the creation or maintenance of which is substantially funded by [a] government entity.''(see footnote 18) Without conducting a detailed analysis of the Senate discussion draft provisions, we believe in general that databases produced with substantial government funding should be treated like databases of government-generated data, at least in the absence of a specific contrary provision in the government contract, grant, or other agreement.
2. Dissemination of government-generated data and the potential for ''capture''
Once data has been generated with public funding, there remains the goal of disseminating that data as broadly as possible. For many government agencies, the responsibility to make government-generated information widely available is a statutory obligation.(see footnote 19) Dissemination of government-generated data has always involved a mix of public and private resources. Through the Congressionally mandated Federal Depository Library Program, the Federal Government uses public libraries, libraries of public universities, and libraries of private institutions to make government-funded information widely available to citizens. In hundreds of cases ranging from the court system to the U.S. Geological Survey, private entities gather raw, government-generated data and then process, verify, and repackage the data to produce value-added products which are then widely disseminated.
Once there are such commercial products, any decisions to devote public resources to disseminate the raw government data further must be weighed against other demands for government resources.(see footnote 20) If government-generated data does not remain available to the public from government sources, there is the potential for capture of data, with one or a few private entities becoming the ''sole source'' for important data.
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When a U.S. Government work is integrated into a private, value-added product, copyright law requires that the U.S. Government portion remain unprotected and available for copying.(see footnote 21) The Administration has considered whether a parallel solution to the ''capture'' problem with collections of information would be appropriate: requiring private entities to identify government information in their value-added products, and excluding such information from any database protection schema. The problem with this approach is that a private entity may make a considerable investment in gathering government data from disparate sources, bringing it together, and distributing it. This ''value-added'' would be lost—and the incentive for it destroyed—if all the data could be freely appropriated on the grounds that it is government-generated data in a private database.
On the other hand, not requiring that the government-generated data integrated into a private product remain outside the database protection schema creates the risk of ''capture.'' Many people believe that this is a significant danger in the case of published court opinions in which there are only two major private publishers.(see footnote 22) Even when government-generated data remains available to the public from the government, it may be much more difficult to obtain than the private, value-added product. If only because the government does not advertise, it may appear that the private entity is the sole source for the government-generated data (both in the raw or value-added form).
The Administration does not have any single proposal that will solve all of these issues. We do, however, have a few specific suggestions to address, to some degree, the capture and sole-source problems with government-generated data.
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First, we recognize the importance of keeping government-generated information in the public domain, and urge agencies whose grants, contracts, or other agreements involve a significant amount of data generation to include provisions in the grants, contracts, or other agreements that require grantees, contractors, and the like to make research results available to the public in a non-commercial form. The Administration would support language calling for a study to address this issue and offer recommendations to agencies, either individually or collectively, on how to improve non-commercial access to government-generated data resulting from research. At the same time, our recent experience with legislative mandates to amend OMB Circular A–110 counsels against any attempts at this time to impose any uniform access requirements on the wide range of government agencies.(see footnote 23)
Second, we believe that any database protection law along the lines of H.R. 354 should require any private database producer whose database includes a substantial amount of government-generated data to note that fact with reasonably sufficient details about the government source of the data. By this, we mean, for example, ''This database was compiled with substantial amounts of data from the National Weather Service, National Oceanic and Atmospheric Administration, Department of Commerce, Washington, D.C.'' but not ''This database was compiled with information from the Department of Defense.'' In other words, the disclosure should reasonably direct the user to the government source. Defendants could be given an express defense where the database producer has included substantial amounts of government-generated information and failed to make such a disclosure.
We believe that such a requirement (and defense) would eliminate some apparent sole source situations by pointing the database user to alternative sources for the information. If the worth of the database producer's product was truly in the ''value-added,'' consumers would stay with the private product. Such disclosures might also give government agencies a stronger incentive to maintain the raw data and keep it available to citizens, thus eliminating at least some sole source situations. Generally, we are hopeful that the digital environment and the Internet will, over time, make it possible for government agencies to provide more government-generated information at less cost through public channels.
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D. Fourth Principle—Avoid unintended consequences
Any database misappropriation regime must carefully define and describe the protected interests and prohibited activities, so as to avoid unintended consequences; legislation should not affect established contractual relationships and should apply only prospectively and with reasonable notice.
1. Prior contractual relationships
The Administration believes that any database protection law should expressly state that its provisions may not be used to enlarge or limit any rights, obligations, remedies, or practices under agreements entered into prior to the effective date of the law. This is especially important because today, many, if not most, commercially valuable databases are licensed rather than sold. The purpose of such statutory language would be to avoid unbalancing the contractual relationships that have been freely entered into before a database protection bill becomes law. This is a matter of notice and fairness. Providers of databases should not be permitted to assert limitations on use not contemplated at the time of the contract. Similarly, neither database users nor those under contract to produce databases should be able to take unfair advantage of a change in the law to assert rights where existing contracts (including government grants, contracts, or other agreements) may be silent.
2. Prospective Application
We agree wholeheartedly that there should be no liability for conduct prior to the statute's effective date. With respect to situations in which the investment in the database occurred prior to the law's effective date, the situation is more complex. Based on a strict economic analysis, coverage of such databases is not necessary—the investment occurred without the legal protection. On the other hand, there is some, albeit uncertain, legal protection now. Some incentive still exists deriving from copyright's limited protection, what people still believe to be copyright protection, and by state law. On balance, and especially in the context of a misappropriation approach, we believe that section 4 of H.R. 354 takes an appropriate approach toward this issue.
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3. The term of protection
Advocates of database protection have proposed database protection terms of up to 25 years. Alternative views have ranged from criticizing 15 years as too long to the minimalist bill's proposal for more limited rights of unlimited duration. The Administration currently believes that there is no single, optimal term of protection for the wide range of products subject to protection as ''databases'' or ''collections of information.''(see footnote 24)
In the absence of strong indicators of the optimal term for an ex ante incentive structure, we believe there are two virtues to the 15-year term of protection. First, it corresponds to the term of protection established in the European Union's Database Directive; this may facilitate emergence of an international standard while allowing us to concentrate on important issues like permitted uses and the flow of government-generated data. Second, we believe that 10–15 years roughly coincides with a substantial number of data producers beginning to maintain their records in digital formats. The presence of such digital archives of raw data is important in helping to avoid as many sole-source situations as possible.
Finally, the Administration would be troubled by any efforts—present or future—to establish a term of protection exceeding 15 years. While we recognize that there are and will be some data products which have substantial value after 15 years, the purpose of database protection legislation is to provide an incentive for the creation of new databases; we are doubtful that there are or will be many databases developed with a cost-recovery business plan going beyond 15 years.
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4. The ''perpetual protection'' problem
Some critics of database protection have claimed that while proposals like H.R. 354 call for a fixed term of protection (15 years in this case), they actually raise the specter of ''perpetual'' protection for non-copyrighted databases. We believe that this is a serious issue that requires careful consideration. The critics' concern about ''perpetual protection'' has two foundations.
a. ''Perpetual protection'' from ''maintaining'': the problem with the ''organizing'' and ''maintaining'' criteria
The first source of concern is the word ''maintaining'' in the basic prohibition. By including ''maintaining'' as a ground for protection, some database producers may assert that simply maintaining data collected long ago qualifies that data for continuing protection. H.R. 354 seeks to address this problem with the following provision that differs from H.R. 354's predecessor, H.R. 2652, in the bolded text:
''1408(c) Additional Limitation—No criminal or civil action shall be maintained under this chapter for the extraction or use of all or a substantial part of a collection of information that occurs more than 15 years after the portion of the collection that was extracted or used was first offered for sale or otherwise in commerce, following the investment of resources that qualified that portion of the collection for protection under this chapter that is extracted or used. In no case shall any protection under this chapter resulting from a substantial investment of resources in maintaining a pre-existing collection prevent any use or extraction of information from a copy of the pre-existing collection after the 15 years has expired with respect to the portion of that pre-existing collection that is so used or extracted, and no liability under this chapter shall thereafter attach to such acts or use or extraction.''
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The final sentence of section 1408(c) apparently is intended to eliminate the possibility of ''maintenance'' being used to perpetuate protection for data entries.
The Administration agrees with Chairman Coble that this potential problem must be addressed and appreciates the effort to respond to it. We are concerned, however, that this approach is too complex. We believe that a simpler, more predictable legal schema would be produced by eliminating ''maintaining'' as a ground for protection in the basic prohibition. In fact, we urge the Subcommittee to consider whether either ''maintaining'' or ''organizing'' is needed as an event triggering protection under the statute. We believe that substituting ''collecting'' for ''gathering'' and making it the sole basis for protected investment would address this perpetual protection issue and better focus the statute.
The present legislation is motivated by the need to correct the loss of protection for ''industrious collection'' under the ''sweat of the brow'' doctrine. Adding protection for ''organizing'' and ''maintaining'' would expand the protected investment well beyond what was historically allowed by the courts that embraced that doctrine. The Warren Publishing and similar cases involve collecting in the traditional sense, while there is no history or definition for ''organizing'' or ''maintaining.'' Some aspects of maintaining data such as checking and adding facts are really aspects of ''collecting'' and should be recognized as such. We also believe that ''collecting'' data captures much of the value in ''organizing'' data that can be lost to free-riders. Organizing that involves selection or judgment is protectable under copyright law, even after the decision in Feist. Therefore, inclusion of that term here is not necessary to provide an incentive for such activities. On the other hand, merely mounting a database on a server is part of maintaining it, but mounting data for access does not suffer from the free-riding problem of collecting (i.e., it is an expense that must be borne by the misappropriator as well as the original publisher). For all these reasons, we think it necessary to protect only ''collecting.''
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b. Concern for de facto ''perpetual protection''
We also believe that there is a potential ''perpetual protection'' problem that is more complicated. This problem is rooted in the need to provide some type of protection for revisions of databases. Legislation that provided protection to new databases but not to revisions of databases, would skew investment. There would be a disincentive to revise proven, useful databases in favor of creating new databases. Reassembling (largely) the same information in a new database would be inefficient not only for data gatherers, but for data users who—in order to use the most current data—would have to accustom themselves to the format of the new database. Therefore, any database protection legislation should offer protection for revisions of existing databases, so that new iterations of a protected database are themselves protected. But this means that eventually there may be unprotected data entries (from iterations of the database older than 15 years) intermingled with protected data entries (from more recent iterations).(see footnote 25)
''[N]o action can be maintained more than fifteen years after the investment of resources that qualified that portion of the collection of information that is extracted or used. This language means that new investments in an existing collection, if they are substantial enough to be worthy of protection, will themselves be able to be protected, ensuring that producers have the incentive to make such investment in expanding and refreshing their collections. At the same time, however, protection cannot be perpetual; the substantial investment that is protected under the Act cannot be protected for more than fifteen years. By focusing on that investment that made the particular portion of the collection that has been extracted or eligible for protection, the provision avoids providing on-going protection to the entire collection every time there is an additional substantial investment in its scope or maintenance.'' (Legislative Report)
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This gives rise to a potential problem. In the classic case of a copyrighted book, the text loses protection at the end of its term, although new, revised versions of the text may enjoy fresh periods of protection. This means that one can find unprotected texts of The Raven or Leaves of Grass in libraries all over the country. At the same time, new versions of these books can be under some copyright protection (including new introductions, abridgements, ''notes,'' artwork, etc.). It is possible to compare the two versions—old, unprotected and new, protected—side-by-side.
In the digital, on-line environment, content producers may choose not to sell copies of their works; access to a database may instead be licensed to users. The advantage is that the database user can receive the most current version of the compilation. The disadvantage is that the user may lack access to an old version of the database to compare old and new entries. The question is, how can a user, accessing only the newest version of a database that has gone through many iterations, distinguish unprotected data entries from protected data entries? In Appendix A we give a simple example of how this problem would arise.
While the Administration believes that the new language of section 1408(c) helps ensure that the bill provides no de jure perpetual protection, we remain concerned that the digital environment could produce de facto perpetual protection because users would be unable to distinguish protected and unprotected data and, therefore, would be chilled in their use of unprotected data.(see footnote 26) Such inadvertent extension of the protection afforded by H.R. 354 could exacerbate other concerns, including the ''sole source'' issue and the constitutionality of the law.
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There have been varied proposals to address this problem. One proposal has been to ''tag'' data entries so that older, unprotected data can be distinguished from protected data. We are not in a position to comment on the feasibility, whether technological or economical, of this suggestion. Another proposal—which is set out in the Senate discussion draft—would be the establishment of a deposit system to ensure that older, unprotected versions of the databases would be available to the public. We believe that the storage demands of such a deposit system would exceed anything the Copyright Office or the Patent and Trademark Office now handles. It is also not clear how the costs of such a deposit system should be apportioned.
At different junctures in this statement, we have recommended establishing express statutory defenses to remedy possible problems in a database protection; we make the same type of suggestion here. Where the database that is the subject of a litigation is the descendant of a now unprotected database and has substantial elements in common with that unprotected database, the defendant should be able to raise, as a defense, that the most recent unprotected iteration of the database is not reasonably publicly available.
In other words, if Smith Industries has been issuing the ''Smith Industrial Database'' annually since 1980, and then in 1999 if Smith Industries sues someone for unauthorized distribution of the ''1999 Smith Industrial Database'' the defendant can raise as a defense that the 1983 Smith Industrial Database is no longer reasonably publicly available. If the 1983 database is reasonably publicly available, there is no such defense.
The virtue in this approach in comparison to mandatory ''tagging'' or deposit systems is that it allows each private enterprise to determine how to make its now unprotected database available to the public. Moreover, the database producer does not have to make this final decision until the term of protection is over. Some concern has been expressed about this proposal by database producers who produce continuously updated databases; their situation in relation to this proposed defense merits examination. But, as we said above, we propose the defense when the protected database ''is the descendant of a now unprotected database and has substantial elements in common with that unprotected database.'' We believe that for many continuously updated databases, the most recent database would have almost no elements in common with their 15-year ancestor.(see footnote 27)
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5. The ''sole source'' problem
There has been much discussion of what is called the sole-source problem: that many markets for data will be supplied by only one database provider. The sole-source problem arises most acutely when one entity controls access to a unique, unreplicable collection of information, such as weather data that occurs once and cannot be replicated. This control may arise either purposefully, as with an exclusive contract with the data's original generator, or incidentally, when the data's original generator ceases to maintain it. Other practical sole-source situations can arise when an existing database operates as a natural monopoly; that is, it is possible, but not economically efficient, for someone else to build the dataset independently.
Even now, a sole-source may use contracts to preserve its market position against free riding by would-be competitors. Any form of database protection carries with it the possibility that it could further insulate a sole-source database provider against potential competition. Consequently, it will be important that any database protection legislation incorporate provisions that guard against the possibility that sole-source database providers will employ their new rights to the detriment of competition in related markets.
A partial answer to the sole-source problem is a savings clause such as the one in H.R. 354, providing that nothing in the bill operates to the detriment of federal antitrust law. Thus, for example, database owners would be as subject as any other economic actors to the application of the essential facilities doctrine, which prohibits owners of assets that are essential to the ability to compete in a market, and are not feasible to replicate, from refusing to deal with firms that need that access. On the other hand, this doctrine has been invoked relatively rarely, and understandably so: part of the incentive for the development of any valuable product or service is the hope that the product or service will be so attractive to consumers that it will become dominant. Regularly compelling access to valuable products and services could diminish their developers' incentives to invest in them in the first place.
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At the same time, in markets such as data collection and dissemination, where natural-monopoly characteristics suggest that consumer choice among competing database products and services will not be common, some safety valve over and above the rarely used essential-facility doctrine may be necessary to ensure that database providers are not able to deny access to firms that require it in order to compete in downstream markets. Additional possibilities include the development of doctrines comparable to the misuse doctrine in patent and copyright law or, in extreme cases, the idea/expression merger doctrine in copyright law.(see footnote 28)
As with some other problems we have identified above, however, much of the concern arising from the sole-source problem can be eased by defining both the protected activity and the prohibited conduct narrowly. If the bill protects only data collection and generation, it will be covering value-adding conduct that enhances welfare, even though only one firm may find it worthwhile to engage in collecting and disseminating a particular type of database. Similarly, to the extent that the bill prohibits only distribution and extraction for the purpose of distribution, while conversely permitting transformative uses of data, it would leave data providers free to add value and enter markets that the original data collector's work alone was incapable of serving.
E. Fifth Principle—Balance protection with permitted uses
Any database misappropriation regime should provide exceptions analogous to fair use principles of copyright law; in particular, any effects on non-commercial research should be de minimis.
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Given the difficulty of foreseeing how ''substantiality,'' ''extraction'' and other legislative terms will play out in a complex and rapidly changing environment, we expressed concern last summer that H.R. 2652 lacked a balancing mechanism analogous to the fair use doctrine in copyright sufficient to address the wide range of circumstances in which information is aggregated, used, and reused. We were especially concerned that the section 1203(d) exception for non-commercial research and educational uses did not ensure against disruption of legitimate non-commercial research, and that educational activities were not disrupted by the prohibition against commercial misappropriation. Last year, we also were concerned with equitable issues of access and use that may be especially important in markets exclusively served by a single data producer.
In reviewing the permitted acts provisions of H.R. 354 (section 1403), we would like to suggest, as an initial matter, that the Subcommittee rearrange the various ''permitted acts'' to move more clearly from absolutely shielded activities for all persons (such as use of insubstantial parts (1403(b)) to the more limited shields on activities set out in 1403(a)(2). We propose that the Subcommittee reorder section 1403 as shown in Appendix B. We believe that this reordering would provide legislation that is easier to understand and a clearer platform for full discussions on whether the permitted activities adequately address policy and constitutional concerns. This proposed reordering is separate from any substantive recommendations.
As to the substantive elements of the permitted acts section, the Administration is pleased that H.R. 354 limits the liability for nonprofit educational, scientific, and research purposes to uses that harm directly the actual market and that the legislation now includes as section 1403(a)(2)(A) provisions for ''additional reasonable uses'' similar to the fair use provisions of section 107 of the Copyright Act. However, we are concerned that the last sentence in section 1403(a)(2)(A) could be interpreted as overriding the criteria in section 1403(a)(2)(A) with a standard that differs in form but not in substance from the basic operating provisions of section 1402. The Administration would not agree with any intent to override a ''fair use''-like balancing test; on the other hand, if the last sentence of 1403(a)(2)(A) is intended only to restate the basic prohibition without disturbing the balancing test, it is extraneous language. We therefore recommend its deletion.
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We recognize the desire to avoid the precise fair use terminology of the Copyright Act in order to make clear that the legislation is grounded in misappropriation rather than intellectual property. However, in the interests of transparency and predictability, we believe that the fair use principles of copyright are a sound platform on which to build. Providing the safeguard of familiar fair use criteria can help minimize any unintended consequences of the untested basic operating provisions of section 1402. We believe that this would give courts the tools they need to do justice in particular situations.
The fair use factors may need to be framed or supplemented to allow courts to take into account that the subject matter is industrious collection rather than original expression, that the protected interest is purely economic, and that the proscribed behavior is a form of unfair competition. The provision would also have to be recrafted to focus on distribution, rather than use, if the basic prohibition were amended as we have suggested above. Courts might also be called on to recognize the unique conditions of some database markets. But we believe that the vast experience of courts in using the judicially-crafted principles of fair use should be built into database protection legislation. It is worth noting that in the 23 years since Congress codified the fair use factors, it has neither narrowed nor expanded these factors. While it may be appropriate to diverge from copyright fair use in creating the permitted uses regime for database legislation, the differences between the two should be clearly understood and recognized by concerned parties.
Finally, we would reiterate a point made earlier: the scope of the basic prohibition will determine the weight that the permitted uses section must bear in judging both the policy and constitutionality of any database protection legislation.
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F. Sixth Principle—Ensure protection for U.S. companies abroad and promote harmonization
Consistent with the goals of the World Trade Organization (WTO) and U.S. trade policy, legislation should aim to ensure that U.S. companies enjoy available protection for their database products in other countries on the same terms as enjoyed by nationals of those countries.
There has been some discussion in the United States about the effects of the European Union's 1996 Database Directive (EU Directive) on American database producers. The EU Directive requires European Union Member States to provide sui generis protection for databases, but denies this protection to nationals of any foreign country unless that country offers ''comparable protection to databases produced'' by EU nationals.(see footnote 29)
The Administration opposes such ''reciprocity'' requirements, both domestically and internationally. We believe that commercial laws (including intellectual property and unfair business practices laws) should be administered on national treatment terms, that is, a country's domestic laws should treat a foreign national like one of the country's citizens. This principle is embodied in Article 3 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) as well as more generally in the Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and Artistic Works.
The Administration believes that Congress should craft U.S. database protection legislation to meet the needs of the American economy. A database protection law properly balanced for the robust digital economy of the United States will serve as a model for other countries that hope to build businesses, employment, and economic activity in the new millennium.
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At the same time, we believe that a law along the lines of H.R. 354 (with proper attention to the concerns we have identified) will amply provide protection ''comparable'' to that provided by national laws implementing the EU Directive. From the perspective of a private database producer, a misappropriation law as discussed in both the last and current Congress would, we believe, provide a cause of action and meaningful remedies in the same range of situations in which the laws implementing the EU Directive provide a cause of action and meaningful remedies.(see footnote 30)
Although we believe that a law along the lines of H.R. 354 would provide American database makers with protection under the EU Directive's reciprocity provision, the Administration would, for the reasons stated above, oppose any effort to put automatic reciprocity provisions into American law in this area. United States Trade Representative Charlene Barshefsky cited the reciprocity provision of the EU Directive as a subject of concern in announcing the Administration's 1998 Special 301 Review.
While we believe that a United States database protection law should adhere to a national treatment model, the Administration would support an appropriately crafted provision that would allow the President to affirmatively deny database protection to foreign nationals on the appropriate finding by Executive Branch agencies such as the USTR and/or the Department of Commerce. This could, for example, be achieved by statutory language or legislative history making database protection for foreign nationals subject to USTR's Special 301 process.
G. Additional Issues
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1. Gradations of Criminal Liability
While we agree with Chairman Coble's decision to shield non-profit researchers and educators from any criminal liability under section 1407, we believe that the existing criminal provisions should be further refined, particularly by drawing a distinction between misdemeanor and felony conduct and requiring minimum amounts of damage under each. This will expand the range of charging options available to prosecutors. We have attached our recommendation for statutory language as Appendix C.
2. Data-Gathering Activities of Law Enforcement Agencies
We believe it is important to make clear that the legitimate data-gathering activities of law enforcement and intelligence agencies will not be affected by the bill. While we believe that intelligence gathering and national security activities are already shielded from liability by section 1402 in that these activities will not cause ''harm to the actual or potential'' market of the product, we propose an additional statutory provision and legislative history as shown in Appendix D to confirm that these activities fall outside the bill's reach.
3. Administration Study
The Administration believes that, given our limited understanding of the future digital environment and the evolving markets for information, it would be desirable to conduct an interagency review of the law's impact at periodic intervals following implementation of the law. Such a government study might be conducted jointly by the Department of Commerce, the Office of Science and Technology Policy, and the Department of Justice in consultation with the Register of Copyrights and other parties. We believe that such a study should not be limited to any one set of issues or concepts; rather, it should explore issues including: database pricing before and after enactment of the law; database development before and after enactment of the law; international protection for American database producers; the impact of the law on scientific research and education; access issues; and ''sole source'' databases.
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I thank the Subcommittee for the opportunity to appear before you today and look forward to working with you during the legislative process. I would be pleased to answer any questions that you may have at this time.
APPENDIX A
Imagine that in 2000, a database producer makes a database; we will designate the first twelve entries alphabetically:
A
B
C
D
E
F
G
H
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I
J
K
L
In 2003, it ''expands and refreshes'' the database, so that the first fifteen entries are as follows:
A
B
BB
C
D
E
F
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FF
G
H
I
J
K
KK
L
In theory, under H.R. 354 in the year 2016, all of the entries except BB, FF, and KK lose protection—and can be copied in their entirety. The problem is that if the database is provided via on-line services, there may be no means for the user to know which entries are unprotected because they were original entries and which entries are protected because they are the result of maintenance investment within the past 15 years. One commentator has suggested that new entries by electronically ''tagged,'' so that a user can readily determine what is protected and what is not, i.e.
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A
B
BB
C
D
E
F
FF
G
H
I
J
K
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KK
L
Another possible solution would be to require any database producer that wanted to enjoy protection for a revision of their database after the fifteen year period to make (or have made) the original, no longer-protected database available in a reasonable format. This would be the electronic equivalent of the old copy of Wuthering Heights in the public library. The original database need not be as available as the new version—just as old library books usually are not as available as books at retail stores, but it should reach some standard of public access.
APPENDIX B
H.R. 354—PROPOSED RE-WORDING OF THE PROVISIONS ANALOGOUS TO FAIR USE IN COPYRIGHT LAW
(with minimal edits)
Sec. 1403. Permitted Acts and Uses
(a) GATHERING OR USE OF INFORMATION OBTAINED THROUGH OTHER MEANS—
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Nothing in this chapter shall restrict any person from independently gathering information or using information obtained by means other than extracting it from a collection of information gathered, organized, or maintained by another person through the investment of substantial monetary or other resources.
(b) INDIVIDUAL ITEMS OF INFORMATION AND OTHER INSUBSTANTIAL PARTS—
Nothing in this chapter shall prevent the extraction or use of an individual item of information, or other insubstantial part of a collection of information, in itself. An individual item of information, including a work of authorship, shall not itself be considered a substantial part of a collection of information under section 1402. Nothing in this subsection shall permit the repeated or systematic extraction or use of individual items or insubstantial parts of a collection of information so as to circumvent the prohibition contained in section 1402.
(c) USE OF INFORMATION FOR VERIFICATION—
Nothing in this chapter shall restrict any person from extracting or using a collection of information within any entity or organization, for the sole purpose of verifying the accuracy of information independently gathered, organized, or maintained by that person. Under no circumstances shall the information so used be extracted from the original collection and made available to others in a manner that harms the actual or potential market for the collection of information from which it is extracted or used.
(d) NEWS REPORTING—
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Nothing in this chapter shall restrict any person from extracting or using information for the sole purpose of news reporting, including news gathering, dissemination, and comment, unless the information so extracted or used is time sensitive and has been gathered by a news reporting entity, and the extraction or use is part of a consistent pattern engaged in for the purpose of direct competition.
(e) TRANSFER OF COPY—
Nothing in this chapter shall restrict the owner of a particular lawfully made copy of all or part of a collection of information from selling or otherwise disposing of the possession of that copy.
Sec. 1404. Additional Reasonable Uses
(a) CERTAIN NONPROFIT EDUCATIONAL, SCIENTIFIC, OR RESEARCH USES—
Notwithstanding section 1402, no person shall be restricted from extracting or using information for nonprofit educational, scientific, or research purposes in a manner that does not harm directly the actual market for the product or service referred to in section 1402.
(b) GENERAL REASONABLE USES—
Notwithstanding section 1402, an individual act of use or extraction of information done for the purpose of illustration, explanation, example, comment, criticism, teaching, research, or analysis, in an amount appropriate and customary for that purpose, is not a violation of this chapter, if it is reasonable under the circumstances. In determining whether such a reasonable under the circumstances, the following factors shall be considered:
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(i) The extent to which the use or extraction is commercial or nonprofit.
(ii) The good faith of the person making the use or extraction.
(iii) The extent to which and the manner in which the portion used or extracted is incorporated into an independent work or collection, and the degree of difference between the collection from which the use or extraction is made and the independent work or collection.
(iv) Whether the collection from which the use or extraction is made is primarily developed for or marketed to persons engaged in the same field or business as the person making the use or extraction.
In no case shall a use or extraction be permitted under this paragraph if the used or extracted portion is offered or intended to be offered for sale or otherwise in commerce and is likely to serve as a market substitute for all or part of the collection from which the use or extraction is made.
(B) DEFINITION—For purposes of this paragraph, the term 'individual act' means an act that is not part of a pattern, system, or repeated practice by the same party, related parties, or parties acting in concert with respect to the same collection of information or a series of related collections of information.
Renumber sections 1404 and subsequent
Add to:
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Sec. 1401. Definitions
(5) INDIVIDUAL ACT—The term ''individual act'' means an act that is not part of a pattern, system, or repeated practice by the same party, related parties, or parties acting in concert with respect to the same collection of information or a series of related collections of information.
APPENDIX C
§1407. Criminal offenses and penalties
(a) Violation.—
(1) In General.—Any person who violates section 1202 willfully either
(A) for purposes of direct or indirect commercial advantage or financial gain, or
(B) causes loss or damage aggregating $100,000 or more during any 1-year period to the person who gathered, organized, or maintained the information concerned, or
(C) causes loss or damage aggregating $50,000 or more in any 1-year period to the person who gathered, organized, or maintained the information concerned, shall be punished as provided in subsection (b).
(2) Inapplicability.—This section shall not apply to any employee or agent of a nonprofit educational, scientific, or research institution, library, archives, or law enforcement agency acting within the scope of his or her employment.
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(b) Penalties.—
(1) Any person who commits an offense under subsection (a)(1)(A) shall be fined not more than $250,000 or imprisoned for not more than 5 years, or both;
(2) Any person who commits a second or subsequent offense under subsection (a)(1)(A) shall be fined not more than $500,000 or imprisoned for not more than 10 years, or both;
(3) Any person who commits an offense under subsection (a)(1)(B) shall be fined not more than $250,000 or imprisoned for not more than 3 years, or both;
(4) Any person who commits a second or subsequent offense under subsection (a)(1)(B) shall be fined not more than $500,000 or imprisoned not more than 6 years, or both;
(5) Any person who commits an offense under subsection (a)(1)(C) shall be fined not more than $100,000 or imprisoned not more than 1 year, or both.
(c) Victim Impact Statement.—
(1) During preparation of the presentence report pursuant to Rule 32(c) of the Federal Rules of Criminal Procedure, victims of the offense shall be permitted to submit, and the probation officer shall receive, a victim impact statement that identifies the victim of the offense and the extent and scope of the injury and loss suffered by the victim, including the estimated economic impact of the offense on that victim.
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(2) Persons permitted to submit victim impact statements shall include—
(A) persons who gathered, organized, or maintained the information affected by conduct involved in the offense; and
(B) the legal representatives of such persons.
APPENDIX D
POSSIBLE ADDITION TO §1403 TO ADDRESS NATIONAL SECURITY/INTELLIGENCE CONCERNS
Addition of new subsection (g) to §1403 Permitted Acts:
''(g) Nothing in this chapter shall prohibit an officer, agent, or employee of the United States, a State, or a political subdivision of a State or a person acting under contract of one of the enumerated officers, agents, or employees from extracting and using information as part of lawfully authorized investigative, protective, or intelligence activities.''
Proposed Legislative History to Accompany §1403(g):
Intelligence gathering and national security activities are already shielded from liability by section 1402 in that these activities will not cause ''harm to the actual or potential'' market of the product. Section 1403 (g) is offered to further clarify and confirm that these activities and law enforcement activities fall outside the bill's reach. Subsection 1403(g) is not intended to permit law enforcement or intelligence agencies to use commercially available databases without liability where the use occurs in normal ministerial functions or publicly-known activities of the agency, if such use would cause harm to the market as detailed in section 1402. For example, section 1403 (g) would apply to covert or undercover investigative or intelligence activities where the officer, agent, or employee may be called upon to access databases—physically or through computer networks—without the knowledge of the database producer or the owner (or license holder) of that copy of the database. Section 1403 (g) helps make it clear beyond any doubt that law enforcement and intelligence agencies can continue to conduct any lawfully authorized activities without becoming liable under this Act.
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Mr. COBLE. Thank you, Mr. Pincus. I commend each of you, you both beat the red light.
Ms. Peters, you base your view on the shortcomings of copyright law on several cases decided in the mid-1990's.
Since you testified on the prior version of this bill just a couple of years ago in 1997, there does not seem to have been any new cases that have ruled against database producers based on an overly narrow scope of protection. Is it not possible that there is no longer a problem and that courts are not following the highly restrictive cases?
Ms. PETERS. I would argue exactly the opposite. I think that the court decisions for the most part were predictable, that the precedent has been set by these court cases, that the producers of databases know what courts find as the scope of protection and users know what seems to be allowed; therefore you don't see such more cases. That doesn't mean that the scope of protection isn't too narrow. It's just that with the precedential weight of the existing cases, why should others bring similar cases and be defeated?
Mr. COBLE. Mr. Pincus, your testimony raises the issue of whether or not this legislation would pass constitutional scrutiny or muster.
Your discussion focuses however only on the Copyright Clause. The bill is based on the Commerce Clause. Would the Trademark Act be constitutional under this analysis?
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Mr. PINCUS. Mr. Chairman, I think my testimony compares the situation here to copyright but our constitutional analysis I think is based—the concern is a first amendment based concern. That while the presence of express Constitutional authorization for copyright requires some resolution between the first amendment and the Copyright Clause, the absence of express Constitutional authorization for this form of protection, and the fact that we're dealing here with facts as opposed to creative works, creates a greater first amendment problem.
Mr. COBLE. But is there a Constitutional authorization for the Trademark Act?
Mr. PINCUS I think we're not worried about Constitutional authorization in terms of the Commerce Clause power. We're more worried about the limits on the Commerce Clause power that would apply in this context because we're dealing with speech regarding facts as opposed to in the trademark context where we're really dealing with the statute that has at least as one of its principal goals preventing false speech, which would be the attribution of a trademark which has an implied meaning—''This is made by Company X'' on a product that isn't.
Mr. COBLE. Expand for me, if you will, Mr. Pincus, on why you believe the ''diminution of incentive'' test from NBA v. Motorola is ill suited to provide basic protection.
Mr. PINCUS. Our concern, Mr. Chairman, is that that's just a test that's very difficult for anyone who's thinking. Our goal is that the lines that are drawn between permitted and prohibited conduct be clear, as clear as they can. Obviously they can't be crystal clear in any context but that they be as clear as possible so that everyone knows where the lines are and we're not deterring conduct that is outside the scope of protection because people are afraid that they might be falling over the line.
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Here that test is really difficult for anyone to know ex ante how it will come out as opposed to a harm test, which is a much more straightforward test to apply. And we think especially a substantial harm test, as we urge, is a good enough proxy for the thought but something that's going to be a lot easier for courts to apply and people to figure out whether they've got a claim or not.
Mr. COBLE. Ms. Peters, would you like to be heard on either of those two questions I put to Mr. Pincus?
Ms. PETERS. No, it's okay. [Laughter.]
Mr. COBLE. I too beat the red light so I will yield to my friend from California, Mr. Berman.
Mr. BERMAN. I will not beat the red light but I will comply with it. [Laughter.]
Mr. BERMAN. Thank you, Mr. Chairman.
Just on the last exchange, Mr. Pincus, with the chairman, it just occurs to me—and it's probably an obvious answer, try not to make me look like the fool—what's the Constitutional basis for libel and slander laws, suing people for protected conduct which is false and defamatory and causes damages?
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Mr. PINCUS. What the court has said is that the Free Speech Clause doesn't protect false speech so false statements don't have Constitutional protection.
Mr. BERMAN. Has the court spoken on the issue of theft of—I assume a misappropriation theory is sort of a tort theft, taking somebody else's work for your own use. Have they spoken on this?
Mr. PINCUS. There are decisions. There's a Supreme Court case and there are lower court cases that have said that there can be a misappropriation tort in this context.
I think the concern here is the definition of the tort and how broad the scope is and our feeling is the more the wrong that's created is focused in on——
Mr. BERMAN. I've got you. Let me just finish the rest of your sentence and see if I have it right. If you focus on distribution rather than use you define market in your fashion more clearly. You think you have a better chance of avoiding a court saying 'No, this is too intrusive on protected activity.'
Mr. PINCUS. Right. We think that the focusing in on activity that really is in the mode of competitive harm, taking away the market from another person really gives you a lot more first amendment legs to stand on.
Mr. BERMAN. Say that one more time. Just that last sentence one more time.
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Mr. PINCUS. Focusing in on harm, the competitive harm that misappropriation really traditionally focused on, which is taking away markets from the creator, gets you a lot closer to things that would be okay under the first amendment.
I should hesitate to add, because I'm sure the Justice Department will want me to, that we couldn't opine on any particular measure until all the details were in place but we think that moves you much closer to a place where we're more comfortable.
Mr. BERMAN. And then a question also comes up, if the focus here is trying to do something to encourage people to do the work, to create the database, to gather the information, to be a resource for lots of important things, is the problem use, or is the disincentive that we're trying to avoid, is the incentive that we're trying to encourage, as effectively done by focusing on distribution as it is on use? You obviously think it is. I mean you're for the idea of the misappropriation theory but you want that changed but I'd like to hear what Ms. Peters thinks.
Ms. PETERS. I happen to like the test that we have. I think that it is narrowly drawn. I think that when you talk about extraction or use in commerce and you say ''all or a substantial part such as to cause harm to the actual or potential market'' and you now have more narrowly defined ''potential market'' that you have in effect narrowly defined it to the kind of free riding misappropriation type tort that we're trying to address.
Mr. BERMAN. Okay. What would be your criticism of this is a very nice test but what's wrong with that test? Can you accomplish the same thing? Forget all the different facets of it, just focus on the distribution rather than the use.
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Ms. PETERS. I think what you're saying is that extraction would be out and it's limited to what is distributed.
Mr. BERMAN. It's distribution and extraction for the purposes of distribution, is that what you're suggesting?
Mr. PINCUS. Right. To cover the situation where someone extracts it and is in cahoots with somebody else to distribute it, yes.
Ms. PETERS. I think that there are databases that are intended for narrow markets, particular markets, and if people can extract without limitation, where's the market? One of the purposes that people subscribe to a database for is to gain that information.
Mr. BERMAN. What does ''extract'' mean? I buy the database, I pay.
Ms. PETERS. That's it. That's my point. You must have authorized access to the database; you can't merely get unauthorized access and then extract.
Mr. BERMAN. So your focus is not simply on anti-competitive conduct. It's on people getting something for free that they should be paying for?
Ms. PETERS. It has to go to the goal that we're trying to achieve, to encourage investment so people will create. In order to encourage people to invest and create there has to be a market for the product, and we need to protect that market.
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Mr. BERMAN. Mr. Pincus?
Mr. PINCUS. I guess I have a couple of responses. One is another assistance help in the first amendment analysis that one gets by focusing on only covering wrongs that would stop the data from being created in the first place. So as close as you can get to that category, then the measure can partially be justified as a speech encouraging measure, which means you're enhancing the total information out there because these people without the statutory protection wouldn't be putting the information out, wouldn't be creating the information at all. That's just one point I wanted to make on the first amendment analysis.
I think the question about obviously focusing on distribution or extraction for distribution leaves some potential wrongdoing uncovered. I think our concern is that the price of covering that wrongdoing is not only problematic Constitutionally, it's also problematic in terms of researchers and other activities and really puts a lot of pressure, if you will, on the permitted use provisions and created a dynamic in the last Congress of really a desire to expand those provisions and sort of identifying specific areas and then covering them. And that it might be a sort of a better way to cut the baloney, if you will. To say we're not going to worry that much about uses, we're going to focus on distribution because, after all, the cases that have been pointed to as concerns are cases in which there has been a competitive distribution.
Mr. BERMAN. Thank you, Mr. Chairman.
Mr. COBLE. Thank you.
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The gentleman from Indiana.
Mr. PEASE. Thank you, Mr. Chairman.
Ms. Peters, can you give us an update, a status report, on discussions in the World Intellectual Property Organization on the subject of database protection and how this proposal would be consistent or inconsistent depending on how far those discussions have gone?
Ms. PETERS. The debate is stalled in the World Intellectual Property Organization.
As you probably know, the European Union has put forward a proposal for database protection that matched its directive and the United States has put forward one. The United States is now going the misappropriation route rather than a property route.
I believe that the United States needs to craft a solution that fits the United States, and I strongly support the misappropriation approach.
If we're able to craft legislation that suites our purposes, that has the appropriate balance I think it will serve the world greatly because it will offer an additional model that many countries might find more attractive than the one that the Europeans have. I think the models are comparable. And, I think that many people are waiting to see what the United States does. If we were to pass legislation you would see movement in the World Intellectual Property Organization to create a worldwide system that would benefit the producers of databases in all countries.
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Mr. PEASE. Mr. Pincus?
Mr. PINCUS. I agree very much with Ms. Peters comments that the United States should craft a system that works for us. And I think our position in the World Intellectual Property Organization is that it should not specify a particular way to implement the protections, that the treaty process should look toward requiring a level of protection and then leave it to individual countries to implement those with a particular kind of legal regime that fits their own domestic law.
Mr. PEASE. Would you anticipate that further delay by the United States in addressing this issue would allow the issue to be coopted by others and perhaps addressed in a way that is not consistent with the way the United States would prefer?
Ms. PETERS. It could. We have the leading database industry in the world; the longer that we put off granting protection, the more we'll be seen as not setting a very great example.
Frankly, to be honest, I don't think that there will be much activity in the World Intellectual Property Organization until the United States acts.
Mr. PEASE. Mr. Pincus?
Mr. PINCUS. I think it would be useful to our position to show there already is a sui generis approach out there that's done and enacted. It would be useful to show that there is an alternative that actually is a law somewhere so that when we make our argument that I stated in response to your last question, that there are different ways of doing this, we actually have another way of doing it out there that we can point to.
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Mr. PEASE. I appreciate that.
Thank you, Mr. Chairman.
Mr. COBLE. The gentlelady from California.
Ms. LOFGREN. Thank you, Mr. Chairman. I think this testimony has been very helpful, permitting us to wrap our minds around the issues remaining.
Given the tremendous progress made with the redraft, as I understand you, Mr. Pincus, the last thing we want to do now is create a statute that is deficient constitutionally and doesn't protect anybody. So I think it is well worth our efforts to try to avoid that and come up with something that will survive a court test that will be stable itself and thus lend stability to the marketplace.
As I understand it, you're really suggesting that the more we define this in terms of a market, the safer we're going to be in terms of the first amendment issues. I'm wondering, looking at section 1402 of the bill, specifically the phrase, ''measured either quantitatively or qualitatively actual or potential market,'' whether that language in your judgement, if it could be tightened in some way would help us define the market more precisely and assist us with the first amendment issues?
Mr. PINCUS. Yes, Congresswoman. We especially focus in our testimony on the actual or potential market because there is a lot of concern that both of those terms could be, unless defined very tightly, susceptible to manipulation. I mean, for example, ''actual market,'' how is that test met? If a database creator has a web site that offers licenses in lots of different markets even though there aren't really any sales in them does that mean that all of those are actual markets or potential markets? Add that leads to sort of a gold rush phenomenon where people staked claims broadly but actually only are serving a much narrower market, but it prevents others from competing to serve those markets.
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So that's why with respect to actual or potential market we suggest a definition that's tied to either the actual market actually being served or some objective test of a commonly served market by the product to avoid that kind of staking out of a broader area.
Ms. LOFGREN. I'm sorry, I have not yet read your full written testimony. Do you have actual language, you suggested in your testimony, in that regard?
Mr. PINCUS. We suggest those concepts specifically. We don't have actual language but I don't think it would be that hard and we'd be certainly happy to work with you to figure out what some language might be.
Ms. LOFGREN. One of the things of concern is misappropriations standard. The court uses this standard when it makes a determination. But part of the value of giving protection for the effort to create a database is the certainty that what you've created and worked to accomplish is in fact yours.
So my concern is the potential for variability in court decisions that might really be unpredictable at least to some extent, and that would undercut the value of the database to its creator. Do you have any ideas on how we may give more certainty to judicial decision-making to avoid such a result?
Mr. PINCUS. Well, we've tried in the written testimony to give a number of specifics about areas that we believe that could happen because it works both ways, of course. You want the database creator, as you say, to know what the universe is that's protected. So that can help calibrate the investment. That also obviously helps for the first amendment analysis as well. So we have a number of suggestions.
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I think some of the terms here obviously have a meaning and that's useful. And to the extent that the statute is drafted to call upon common law misappropriation concepts that provides a whole body of knowledge out there that courts can look to to interpret it. So I think even apart from changing the terms there is that to fall back on which is very useful.
Ms. LOFGREN. Finally, for Ms. Peters, and for you, Mr. Pincus, as well, if you have a view, please consider the fact that in this Internet world that information, and sometimes misinformation, travels rapidly through this virtual world. There are concerns whenever anything is done, with regard to IP or copyright, that the nature of the Internet will change. How, in your judgement, would passage of this bill, even if tightened up in some of the ways we've discussed, change the Internet as it looks today to the consumer Internet user, if it would change it at all?
Ms. PETERS. My guess is and my hope is that it wouldn't necessarily change it that much. It is true that people have important databases on the Internet and they may use technological protections but that's going to happen with all types of works as we get more and more into electronic commerce.
Much of what you see on the Internet is put on there by the creator of the material, and I don't think that is necessarily going to change. When you have browser software you send your search and it gathers the information that people want you to have. So from the very beginning I had thought that people who want to make information totally available totally for free are going to do that and there's going to be a lot of that. Then there are other products that are going to have more limited terms and conditions of use and I don't see this bill as changing that phenomenon.
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Mr. PINCUS. I think it will actually, as we say in the prepared testimony, encourage the availability of more information. I think some of these arguments were made last year—I know the subcommittee is familiar with them—in the WIPO debate. But I think it was the administration's view in that context and it's our view here that having clear protections that really work to the people who are considering whether to invest money in creating new information products, if you will, is the best way to encourage this new transmission medium has a lot of content to go over the wires.
Ms. PETERS. I should have said what he said. [Laughter.]
Ms. LOFGREN. Given that we have a large panel I'll yield back.
Mr. COBLE. I thank the lady.
The gentleman from California, Mr. Rogan.
Mr. ROGAN. Mr. Chairman, thank you. First I want to apologize for being tardy, as often happens when members have competing hearings. Mr. Chairman, I'd like to pass on questions at this time.
Mr. COBLE. Very well, I appreciate that.
Mr. Delahunt, the gentleman from Massachusetts.
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Mr. DELAHUNT. Just to segue and maybe restate differently the point pursued by my friend from California—I think the problem that she alludes to will have to be dealt with for any creative work, which I think really argues for supporting an environment that continues to promote state-of-the-art encryption so that we really don't face these problems. Would you like to comment, Mr. Pincus, on that particular——[Laughter.]
Mr. DELAHUNT. That was the question that was whispered in my ear.
Mr. PINCUS. We'd like to try as much as possible. Saying anything about encryption——[Laughter.]
Mr. PINCUS. Our policy is to do that consistent with law enforcement.
Mr. DELAHUNT. I just wanted to make a point, Mr. Pincus. [Laughter.]
Mr. PINCUS. I do.
Mr. DELAHUNT. And I'm trying to win some support over here to my right.
I think it was you, Ms. Peters, who indicated that you don't anticipate any action by the World Intellectual Property Organization until we do something here in this country?
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Ms. PETERS. I think we are a critical player. And if we're still stalling or not resolving it doesn't serve WIPO well.
Mr. DELAHUNT. As I'm sure you remember, during the 105th Congress we heard a lot of debate and a lot of diverse perspectives regarding WIPO, and it required a huge effort to formulate legislation in that regard.
Given the scenario where we cannot resolve the differences and we do nothing during the course of the 106th Congress, are we in any danger in terms of this particular issue as it relates to the global market?
Ms. PETERS. I would say yes on two fronts. One, you already have a European directive that is in force in many countries of Europe where protection is not going to be given to our databases that are not protected by copyright and therefore could put our databases at a competitive disadvantage. And I believe that countries that have a gap in their law like the United States their databases are at risk.
Mr. DELAHUNT. So the reality is that it is incumbent upon not just this committee but this Congress to produce something that is legitimate and valid and maintains that comparative advantage I think you alluded to, Mr. Pincus. Is that a fair statement?
Ms. PETERS. I'm ever hopeful that this committee is going to be able to resolve the difficulties.
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Mr. DELAHUNT. Thank you very much. I'm going to ask just a few wind up questions to Mr. Pincus, since you are from Commerce, and these are easy questions. [Laughter.]
Mr. DELAHUNT. They have nothing at all to do with encryption.
In terms of the significance to our economy can you in any way quantify what this issue really means in terms of the United States economy and our balance or trade or imbalance of trade, if you will.
Mr. PINCUS. Well, it's clear—and we actually released a report last April that we're going to update this year—that the information technology sector as a sector is one of the key drivers of our economic growth. It's one of our most vibrant export industries and anything we can do to keep that industry strong—and I should say on the technology side the cost reductions are one of the key factors that have limited inflation. So anything we can do to keep that sector of our economy strong and growing is something that's going to help keep our economy on the tremendous course that it's been on.
Mr. DELAHUNT. The need to address this issue, you would suggest, is important in keeping that economy in a vigorous forward motion?
Mr. PINCUS. Well, I guess I'd say it's not called The Information Age for nothing. [Laughter.]
Mr. DELAHUNT. That's a great answer, Mr. Pincus.
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Mr. PINCUS. Our economy is an information based economy right now and anything we can do to create, to keep new sources of information feeding into the economy and being exploited creatively by the people who do that has got to help us.
Mr. DELAHUNT. One final question. You indicated that the Government really is probably the most significant creator of databases in the world. Does the Government as a matter of course utilize databases that have been developed and created in the private sector?
Mr. PINCUS. The Government creates databases and certainly Government scientists and others do use private databases, yes.
Mr. DELAHUNT. Therefore, if we don't maintain a high level in terms of our databases the Government itself would be at a disadvantage in terms of all aspects of our national policy. Am I overstating or is that a fair observation?
Mr. PINCUS. I think it's clearly important. The other observation I think is that a lot of Government data—the Government doesn't disseminate a lot of its data to the public, intermediaries do and it's obviously important that that data get out. We couldn't afford—you all wouldn't want to appropriate the money that it would take to get that data out, although the Internet makes that somewhat easier. But getting value added, getting intermediaries to add the value and to disseminate the information is important.
Mr. DELAHUNT. Asking the question it occurred to me that the data that we're constantly requesting from governmental agencies—I'm talking about this institution, Congress—is enormous. And here we are as members of the House of Representatives making significant policy decisions in all aspects of our national life, predicated on the information that we received both from the public sector and the private sector as far as our database is concerned.
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Mr. PINCUS. I think that's right.
Mr. DELAHUNT. Thank you.
Mr. COBLE. Thank you, folks. Today has the trappings of a very beneficial hearing and the questions put to you all and your responses have gotten us off on the right foot, I think. We will be in touch subsequently, I'm sure. Thank you both for being here.
If the second panel will come forward I will introduce them as you make your way to the table.
Our first witness is Mr. James Neal, who is the Dean of the University Libraries at Johns Hopkins University. Previously he was dean at the University Libraries at Indiana University and held administrative positions in the libraries at Penn State, Notre Dame and the City University of New York. For the past 4 years he has chaired the Information Policies Committee and the Copyright Working Group of the Association of Research Libraries. He had been selected by ACRL's 1997 Academic Research Librarian of the Year.
Our second witness is Mr. Terrence McDermott, who is Executive VP at The National Association of Realtors. The National Association of Realtors is the Nation's largest professional association, representing nearly 700,000 members in all aspects of the real estate industry. Mr. McDermott has more than 25 years experience in media and publishing. He attended the Loyola University in Chicago and received a Bachelor of Arts Degree in organizational development from the National College of Education in Evanston, Illinois. He also served on the visiting faculty of the Radcliffe College Publishing Program and the Northwestern University's Medill School of Journalism.
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Our third witness is Marilyn Winokur, Executive Vice President, Micromedex, Inc. Micromedex is well known for its creation of new, pioneering products and is a leading publisher of computerized information systems for health care and environmental health and safety. She has been with the company since its formation in 1974. Ms. Winokur received her Bachelor of Science Degree from the University of Pennsylvania and her MBA from the University of Denver.
Our next witness is Professor Joshua Lederberg, who is a research geneticist and a Sackler Foundation scholar and President Emeritus at the Rockefeller University in New York. He is testifying today on behalf of the National Research Council. In 1958, Dr. Lederberg received the Nobel Prize in physiology and medicine. Dr. Lederberg is a member of the National Academy of Sciences and a charter member of the Institute of Medicine. He was educated at the Columbia and Yale Universities, where he pioneered in the field of bacterial genetics with the discovery of genetic recombination in bacteria. He has been awarded numerous honorary Doctor of Science and MD degrees and the LLB from the University of Pennsylvania.
Our next witness is Mr. Lynn Henderson, who is President and CEO of the Doane Agricultural Services Company in St. Louis, Missouri. Founded in 1919 by D. Howard Doane, the 80 year old company is a leading provider of marketing and management information for agricultural producers and agribusinesses. Doane publishes educational books and provides market consultation and customized communication for several agribusiness clients. Mr. Henderson, as a matter of interest, was reared on a grain livestock farm in Iowa. And he's an alumnus of Iowa State University at Ames.
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Our next witness on this panel is Mr. Mike Kirk, Executive Director of the American Intellectual Property Law Association. It's good to see you again, Mr. Kirk. Mr. Kirk served as Deputy Assistant Secretary of Commerce and Deputy Commissioner of Patents and Trademarks from May 1994 through March 1995. In 1993 Mr. Kirk also served as the Acting Assistant Secretary of Commerce and Acting Commissioner of Patents and Trademarks. Mr. Kirk earned his Bachelor of Science in electrical engineering at the Citadel in 1959, his juris doctor in 1965 from Georgetown University Law Center and his Master of Public Administration in 1969 from the Indiana University.
I say to Mr. Pease, we have several from your State today, Mr. Pease.
Mr. PEASE. We're well served accordingly.
Mr. COBLE. Our next witness is Mr. Charles Phelps, who moved to the University of Rochester in 1984 as Director of Public Policy Analysis Program, a graduate program offered by the Department of Political Science in conjunction with the Department of Economics. In 1989 he left that position to become chair of the Department of Community and Preventive Medicine in the School of Medicine and Dentistry. He served in that role until 1994 when he was selected for his current position as provost of the University of Rochester. As provost Mr. Phelps oversees the entire academic activity of the university, including all teaching and research in each of the university's six schools. Mr. Phelps trained in business economics at the University of Chicago with a PhD in 1973 emphasizing the economics of health care following his BA degree from Pomona College in Claremont, California in 1965 and an MBA in Hospital Administration from the University of Chicago in 1968.
Folks, I apologize for these detailed introductions but I think it's important that you all, as well as we, know the background of these witnesses.
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Our final witness is Mr. Dan Duncan, who serves as vice President for Government Affairs at the Software & Information Industry Association, a group formed in January 1999 through a merger of the former Software Publisher's Association and the Information Industry Association. SIAA represents some 1,400 companies involved in the production and distribution of software and information products, especially those targeted to the digital marketplace. Mr. Duncan has responsibility for the overall management of SIIA's Government affairs program, including implementation of strategies to achieve the Association's policy goals.
Mr. Duncan has a strong academic background in international affairs, including a study project in Germany as a Junior Fulbright Scholar, a Masters Degree in German from Harvard University and post-graduate study in international law and economics at the Johns Hopkins University School of Advanced International Studies in both Bologna, Italy and Washington, D.C..
We have written statements from each of the witnesses on this panel and ask unanimous consent that they be submitted in their entirety at the end of the record.
Ladies and gentlemen, it's good to have you all with us. If you will, be ever alert of the red light as it illuminates into your faces.
We will start, Mr. Neal, with you.
STATEMENT OF JAMES G. NEAL, DEAN, UNIVERSITY LIBRARIES, JOHNS HOPKINS UNIVERSITY
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Mr. NEAL. Thank you, Mr. Chairman.
I'm James Neal, Dean of the University Libraries at Johns Hopkins University. I'm testifying today on behalf of five of the Nation's major library associations. Collectively we represent 80,000 librarians in research, academic, law, medical, public, State based and special libraries throughout North America. We serve millions and millions of users across this country every day.
I very much value this opportunity to appear before the subcommittee again to share our views on H.R. 354. As indicated, the full statement will be included in the record.
Mr. Chairman, proponents of this legislation will argue that the concerns of the library and education communities have been addressed by this new bill, and we certainly appreciate that H.R. 354 includes new provisions which seek to address some of the objections that were raised in the debate last year on H.R. 2652. These new provisions notwithstanding with others in the public and private sectors, we have significant continuing concerns about H.R. 354.
I would like to also introduce in the record a position statement that has been endorsed now by over 125 organizations, institutions and companies, and the number is expanding rapidly.
Mr. COBLE. Without objection it will be done.
[The information referred to follows:]
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POSITION STATEMENT
The corporations, educational institutions, non-profit organizations and trade associations listed below are users as well as creators in the compilation and value-added transformation of databases. The Information Age and digital technology provide researchers and consumers across the globe with a unique opportunity to continue to create, maintain, and use new and innovative databases that are essential to science, education, business, and the overall economy.
Because databases are items of commerce in their own right, and are critical tools for facilitating electronic commerce, research and education endeavors, we support Federal legislation carefully tailored to provide database publishers with sufficient protection against incentive-eliminating piracy. Conversely, we oppose legislation which would grant the compiler of any information an unprecedented right to control transformative, value-added, downstream uses of the resulting collection or of any useful fraction of that collection.
The basic information policy of this country—a policy that has existed since the writing of the Constitution—has served us extremely well. The policy is that the building blocks of all information—facts, as distinct from the copyrightable manner in which they are expressed—cannot be owned.
The particular legislative approach that has been considered by the House Judiciary Committee in the past three Congresses would mark a fundamental change in our nation's information policy. The problems raised by this change to commerce and competition were recognized by the Department of Justice, the Department of Commerce, and the Federal Trade Commission last year in separate letters to Congress identifying their concerns with H.R. 2652 considered by the 105th Congress. H.R. 354, the Collections of Information Antipiracy Act, is modeled on last year's bill and does not resolve these concerns.
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We support Federal legislation that will not harm legitimate research activities and small businesses, but will—
prevent unfair competition in the form of parasitic copying;
preserve the fair use of information;
promote the progress of science, education and research;
protect value-added publishers and their customers; and
provide safeguards against monopolistic pricing.
We look forward to working closely with all Members of Congress to craft well-reasoned, targeted and balanced legislation that will punish database pirates without jeopardizing the thriving commerce in information long at the core of America's economic, scientific and intellectual life.
Amazon.com, Inc.
Amdahl Corporation
American Association for the Advancement of Science
American Association of Law Libraries
American Association of Legal Publishers
American Association of State Colleges and Universities
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American Committee for Interoperable Systems
American Council on Education
American Film Heritage Association
American Library Association
American Meteorological Society
American Society of Agronomy
American Statistical Association
Americans for Tax Reform
Art Libraries Society of North America
Association of American Physicians and Surgeons
Association of American Universities
Association of Research Libraries
Association of Systematics Collections
AT&T
Ball Research, Inc.
Bell Atlantic
Big 12 Plus Libraries Consortium
Bloomberg Financial Markets
Brown University
California Institute of Technology
Case Western Reserve University
CDnow, Inc.
Charles Schwab & Co., Inc.
Citizens' Council on Healthcare
College Art Association
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Columbia University
Commercial Internet eXchange Association
Computer & Communications Industry Association
Computer Professionals for Social Responsibility Conference on College Composition and Communication
Consortium of Social Science Associations
Consumer Electronics Manufacturers Association
Consumer Project on Technology
Cornell University
Council of Graduate Schools
Council on Governmental Relations
Crop Science Society of America
Diamond Multimedia Systems, Inc.
Digital Future Coalition
Digital Media Association
Duke University
Dun & Bradstreet
Eagle Forum
Electronic Frontier Foundation
Enso Audio Imaging, Inc.
Excite
Florida Coastal School of Law
Geocities
Global Music Outlet, Inc.
Harvard University
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Home Recording Rights Coalition
Information Technology Association of America
Inktomi
Internet Society
Iowa State University
Kent State University
Linda Hall Library of Science, Engineering and Technology
Louisiana State University
Lycos
Massachusetts Institute of Technology
MCI WorldCom
Medical Library Association
Missouri Council on Library Development
Montana State University
Music Library Association
National Association of State Universities and Land-Grant Colleges
National Council of Teachers of English
National Initiative for a Networked Cultural Heritage
National Writers Union
NetRadio Network, Inc.
Netscape Communications Corporation
North Carolina State University
Northwestern University
Oklahoma State University
Omnibot
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Online Banking Association
Pennsylvania State University
Queens Borough Public Library, NY
RealNetworks, Inc.
Rice University
Rutgers University
Soil Science Society of America
Special Libraries Association
Spinner Network, inc.
Stanford University
StorageTek
Syracuse University
Tunes.com
U.S. WEST
United States Catholic Conference
University at Stony Brook, State University of New York
University Corporation for Atmospheric Research
University of Arizona
University of California System
University of Chicago
University of Cincinnati
University of Colorado
University of Delaware
University of Florida
University of Kansas
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University of Kentucky
University of Michigan
University of Missouri-St. Louis
University of Missouri-Columbia
University of New Orleans
University of North Carolina—Charlotte
University of Southern California
University of Tennessee, Knoxville
University of Texas at Austin
University of Utah
University of Virginia
University of Washington
University of Wisconsin-Madison
University System of Maryland
Utah Agricultural Experiment Station
Utah State University
Vanderbilt University
Visual Resources Association
Washington University, St. Louis
Wells Anderson Legal Tech Services
Yahoo! Inc.
Yale University
Mr. NEAL. Thank you.
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We believe that there are other alternative approaches that could address the interests of those seeking additional protections for databases while maintaining the important balance between producers and users. We support a more targeted approach, a more narrow approach to additional protections for collections of information.
Let me highlight our concerns with H.R. 354. It is noteworthy that these points also reflect the analysis and correspondence provided to the Members of Congress by Department of Commerce, the Federal Trade Commission and the Department of Justice.
First, the legislation is over broad in scope and it represents in many ways a radical departure from the current intellectual property framework that protects expression, not investment. There is clearly a Constitutional obligation in this country of protecting expression rather than facts.
H.R. 354 would overturn our 200 years of information policy in this country which has consistently supported unfettered access to factual information. Indeed H.R. 354 would provide more protection to databases and collection than is available for copyrighted works.
Second, provisions in H.R. 354 would allow a producer or publisher unprecedented control over uses of databases, including downstream transformative use of facts and Government works in the collection. The success of our Nation's systems of education and scholarship depend upon the ability to use public domain information to combine public and proprietary data to create new databases and to reuse existing data. Researchers typically create new knowledge by building upon the work of others.
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The use of the terms ''qualitatively'' and ''quantitatively substantial'' leave the librarian and researcher in a quandary. Why? Because the librarian and researcher have no way of knowing which bits of information the producer considers qualitatively or quantitatively substantial. These provisions would greatly discourage the use, re-use and recompilation of data. The FTC shares these concerns.
Third, the exemption for education and research activities are improved but they remain far too narrow. H.R. 354 includes a new provision for reasonable uses which did not appear in the earlier bill. This provision is certainly a step in the right direction in addressing one of the serious concerns of the library community yet the provision as drafted falls short of what we in the library and academic community require to conduct a wide range of our currently permitted research and educational activities.
Section 1403 states that ''no person shall be restricted from extracting or using information.'' Very often libraries and educational institutions are the only market for particular databases or collections. Thus by definition research use of the content of such collections could be held to ''harm directly the actual market'' making the exemption of little practical value for the vast bulk of research and educational uses.
In addition, the new reasonable use exemption applies only to an ''individual act of use or extraction of information.'' Researchers routinely build upon prior knowledge. This entails limited use of particular data items. It does not entail copying entire databases and competing head to head in the commercial marketplace. That is not how we conduct ourselves in libraries or in the research community. This current practice would not be covered by this new exemption.
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Fueling our concern with this provision is the claim by proponents of the legislation that any harm, even one lost sale, could trigger liability under this statutory regime.
Fourth, the term of protection is, in effect, perpetual, at least for dynamic compilations is electronic form, despite the language that seeks to remedy this problem.
A new provision in H.R. 354 attempts to correct the situation identified in its predecessor. Proponents argue that the mere maintenance of a collection on a server should trigger another 15 year cycle of protection. The new language, however, falls short of fully addressing our concerns. Where dynamic electronic databases are concerned, the older versions, as a practical matter, may be unavailable—making the right of access after 15 years recognized in the language, a hollow one.
Even if the new language were to be interpreted to permit librarians and researchers to extract 15 year old data items from the current version of the collection, there is no system in place where a librarian or user can determine which portion of a database is more than 15 years old, thus no longer subject to protection. It is staggering to imagine the implications of thousands and thousands of researchers and librarians across the country trying to determine if each and every use was permitted.
Fifth, the provision relating to Government information requires modification to ensure a continued robust public domain and to ensure that information in Government mandated databases is not covered by this legislation.
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Many statutes mandate the collection and dissemination of certain types of data: securities information, environmental data, labor statistics, for example. Under the terms of this legislation companies which provide data to the Government could exert property rights over this data.
Significant collections of Government mandated information which have been publicly available could become unavailable, available only for a fee or available with significant restraints on use and re-use.
Sixth, provisions do not address concerns regarding sole source databases and provisions in the bill could lead to increased transaction costs in data use as identified by the Department of Commerce.
Mr. Chairman, in conclusion, we believe that if this legislation is enacted in its current form and with the current approach it could fundamentally change the research enterprise and how members of this community use information and at significant cost.
The approach taken in H.R. 354 could lead to a licensing framework where facts, Government information and other information could not be used without permission and additional cost for use.
The ability to tightly control uses of information, including downstream and transformative uses could be at odds with the culture of building upon prior research and could undermine the basic mechanisms of scientific and educational data exchange.
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We look very forward to working with the subcommittee on these issues to ensure the appropriate balance among all the communities and sectors so that we have good legislation adopted.
[The complete statement of Mr. Neal follows.]
PREPARED STATEMENT OF JAMES G. NEAL, DEAN, UNIVERSITY LIBRARIES, JOHNS HOPKINS UNIVERSITY
Mr. Chairman, I am James G. Neal, Dean, University Libraries, Johns Hopkins University and Past President of the Association of Research Libraries and a current member of the Executive Board of the American Library Association. I was a member of the U.S. delegation to the World Intellectual Property Organization in December 1996 as well.
I am testifying today on behalf of five of the Nation's major library associations: the American Association of Law Libraries, the American Library Association, the Association of Research Libraries, the Medical Library Association, and the Special Libraries Association. Collectively, we represent 80,000 librarians in research, academic, law, medical, public, state-based, and special libraries throughout North America. I very much appreciate the opportunity to appear before the Subcommittee again to share our views of H.R. 354, the ''Collections of Information Antipiracy Act.''
Mr. Chairman, we appreciate that H.R. 354 includes two new provisions which seek to address some of the concerns raised during the debate last year on H.R. 2652. These new provisions notwithstanding, with others in the public and private sectors, we have significant continuing concerns with H.R. 354. We believe that H.R. 354 as drafted would benefit a small number of companies while providing no comparable benefits to libraries and the public they serve. The preservation and continuation of balanced rights and privileges in the electronic environment are essential to the free flow of information.
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We do believe, however, that there are other alternative approaches that could address the concerns of those seeking additional protections for databases while maintaining the important balance between producers and users. We support a more targeted approach to additional protections for collections of information and would be pleased to work with members of the Subcommittee to achieve such legislation.
Let me detail our concerns with H.R. 354. It is important to note that many of our concerns are reflected in the analyses and correspondence provided to members of Congress by the Department of Commerce (DOC, August 4, 1998), the Federal Trade Commission (FTC, September 28, 1998), and the Department of Justice (DOJ, July 28, 1998). Most if not all of these concerns remain valid, given the similarity between H.R. 2652 and H.R. 354.
KEY CONCERNS
The legislation is overbroad in scope and it represents a radical departure from the current intellectual property framework that protects expression, not investment.
Provisions in H.R. 354 would allow a producer or publisher unprecedented control over the uses of information including downstream, transformative use of facts and government works in the collection.
The exemption for education and research activities, although improved, remains far too narrow.
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The term of protection is in effect, perpetual, at least for dynamic compilations in electronic form, despite the addition of language that seeks to remedy this problem.
The provision relating to government information requires modification to ensure a continued, robust public domain and to ensure that information in government-mandated databases is not covered by this legislation.
Provisions in H.R. 354 do not address concerns regarding sole source databases. And,
Provisions in the bill could lead to increased transaction costs in data use as noted by the Department of Commerce.
1) The legislation is overbroad in scope and it represents a radical departure from the current intellectual property framework that protects expression, not investment.
There is a constitutional obligation in the United States of protecting expression rather than facts. This imperative is based on a legal foundation that stimulates innovations in the public and private sectors, supports the educational process, and ''promotes the progress of Science and the useful arts.'' The new regime proposed in H.R. 354 constitutes a radical departure from our current system—a regime that would permit the protection of factual information by virtue of the investment made in collecting the data. H.R. 354 would overturn over 200 years of our Nation's information policy which has consistently supported unfettered access to factual information. The Department of Justice noted that an earlier version of this legislation ''would instead also provide protection to ordinary facts, which are not now subject to copyright protection and may be unsuited to such protection as a matter of constitutional law.''(see footnote 31) Indeed, H.R. 354 would provide more protection to databases and collections than is available for copyrighted works.
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Given this significant departure from current policy, it is crucially important that, as the bill moves through the legislative process, a far more narrow, targeted approach be taken to ensure that there are no negative or unintended consequences for a vast public and private sector, including libraries, that properly relies on access to data and government works.
To that end, it will be important to better define key terms. For example, the Department of Justice commented that, ''. . . many of the critical, proposed statutory terms are not well-defined. Because of the ambiguity of many of these terms, it is impossible to know for certain how wide-ranging H.R. 2652's applications would be.''(see footnote 32)
H.R. 354 has not remedied this serious concern. Key terms and concepts remain undefined. For example, what constitutes ''a substantial part, measured quantitatively or qualitatively?'' What threshold qualifies as ''investment of substantial monetary or other resources?'' What is ''harm'' to the actual or potential market?''
2) Provisions in H.R. 354 would allow a producer or publisher unprecedented control over uses of a database including downstream, transformative use of facts and government works in the collection.
The success of our Nation's education and research systems is dependent upon the ability of researchers to access data and information for multiple purposes. Scientific and research progress depends upon the ability to use public domain information, combine public and proprietary data to create new databases, and reuse existing data. Researchers typically create new knowledge by building upon the work of others. This practice, often described as, ''standing upon the shoulders of giants'' is the basis for our Nation's global leadership in the research and education arenas which fuels all sectors of the economy. Surely, we want this long-standing practice to continue and not be disrupted.
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Researchers need access to large and small amounts of data. Yet H.R. 354 prohibits the extraction, or use in commerce, of ''a substantial part, measured either quantitatively or qualitatively, of a collection of information. . . .'' By allowing the database producer to prevent reuses of ''qualitatively'' substantial parts of a database, the legal standard which is at the heart of H.R. 354, the bill effectively prevents the reuse of any information. Why? Because the researcher has no way of knowing which bits of information the producer considers ''qualitatively substantial.'' As noted by the FTC, ''users might not be able to judge whether a particular use of information is qualitatively substantial.''(see footnote 33) The FTC states that, ''this definition may not give a user sufficient guidance to reasonably determine whether a particular use of a collection of information would be quantitatively substantial enough to trigger civil and potentially criminal liability.''(see footnote 34)
In addition, libraries have yet another concern with the broad sweep of this legislation. If we have made information lawfully available to a researcher, can we or the researcher be held liable for subsequent reuse of that information by third parties? Unless this ambiguity is resolved in the negative, the chilling effect on the research enterprise will be further exaggerated.
In sum, these provisions would greatly discourage the use, reuse, and recompilation of data—the foundation of the research and education enterprise and would prevent libraries from supporting these endeavors.
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3) The exemption for education and research activities, although improved, remains far too narrow.
H.R. 354 includes a new provision for ''reasonable uses'' which did not appear in H.R. 2652. This provision is a modest step in the right direction in addressing a serious concern of the library community, and we do appreciate its inclusion in H.R. 354. Yet, the provision as drafted falls short of what the library and academic communities require to continue to conduct a wide range of research and education activities.
Section 1403 states that ''no person shall be restricted from extracting or using information for nonprofit educational, scientific, or research purposes in a manner that does not harm directly the actual market for the product or service.'' Very often, however, libraries and educational institutions are, in fact, the only market for particular databases or collections. Thus by definition research use of the content of such collections could be held to ''harm directly the actual market'' making the exemption of little practical value for the vast bulk of research and educational uses.
In addition, the new reasonable use exemption applies only to an ''individual act of use or extraction of information done for illustration, explanation, example, comment, criticism, teaching, research, or analysis, in an amount appropriate and customary for that purpose.'' As already noted however, researchers routinely build upon prior knowledge by using selected items from particular databases on multiple occasions over time. This practice would not be covered by the exemption. I would note that this practice, so crucial to the research enterprise, entails limited, selective use of particular data items; it does not entail copying entire databases and competing head to head in the commercial marketplace with the producer of the first database.
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Finally, the new reasonable use exception is limited according to certain criteria. The fourth criteria states, ''whether the collection from which the use or extraction is made is primarily developed for or marketed to persons engaged in the same field or business as the person making the use or extraction.'' Most uses in the library and education communities would fall outside the scope of this exemption because as noted above, many times, the library and education communities are the only market for these collections.
Fueling our concern with this provision is the claim by proponents of the legislation that any harm, even one lost sale, could trigger liability under this statutory regime.
We do appreciate the inclusion of language that would reduce or remit monetary relief if an individual in a nonprofit educational, scientific, or research institution or library or archives believes that his or her conduct was permissible. Nevertheless, the exemption under this new regime for nonprofit institutions would not permit the library and education communities to engage in many activities that are lawful today.
4) The term of protection is, in effect, perpetual, at least for dynamic compilations in electronic form, despite the addition of language that seeks to remedy this problem.
A new provision in H.R. 354 attempts to correct a serious problem identified in its predecessor, H.R. 2652. Proponents argue that the mere maintenance of a database or collection on a server should trigger another 15 year cycle of protection. The new provision in H.R. 354 attempts to correct this serious problem, by making older versions of databases available for use even though newer ones remain protected. The new language, however, falls short of fully addressing our concerns. Where dynamic electronic databases are concerned, the older versions may, as a practical matter, be unavailable—making the right of access recognized in the new language a hollow one.
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Even if the new language were to be interpreted to permit librarians and researchers to extract 15-year old data items from the current or updated version of the database in which they are contained, there is no system in place whereby a librarian or user can determine which portion of a database is more than fifteen years old, thus no longer subject to protection. And if such a system could be established, as was debated last fall during the negotiations sponsored by Sen. Hatch, implementation would be impractical and the economic implications for libraries and educational institutions would be enormous. A library would need to check every use of information contained in a database to determine when the information was entered into the collection thus when it was no longer subject to protection. The burden on the institutions would be costly and extremely time consuming to discharge. It is staggering to imagine the implications for thousands of researchers and libraries across the country trying to determine if each and every use was permitted.
Finally, the FTC notes that ''it is unclear that a 15-year term is necessary in order to protect incentives to produce all types of databases.' ''(see footnote 35) In particular, in some high-tech markets, product cycles are 6–18 months. The useful commercial life of some data, like stock prices, can expire in a matter of hours, if not minutes. The Commission also comments that the limited legal protection afforded to information to date has been provided only to time sensitive or ''hot'' information such as current stock quotations, sports statistics, and the like.
Thus, the new language incorporated in H.R. 354 does not solve one of the fundamental problems of database legislation of this type. Like its predecessor, the practical effect of H.R. 354 would be to jeopardize the continued existence of a vital ''public domain'' of information. Under such legislation, the movement of information from commercial sources would be slow and uncertain, at best. At the same time, as explained below, the approach taken in such legislation would threaten the continued availability of public domain government information for general public use and—specifically—for research and educational purposes.
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5) The provision relating to government information requires modification to ensure a continued, robust public domain and to ensure that information in government-mandated databases is not covered by this legislation.
The library community supports the intent of the drafters to make more government information publicly available without restriction. Yet it will be important to ensure that the significant part of the universe of government information—data collected under statutory mandate—is not subject to these protections in any final legislation.
Many statutes mandate the collection and dissemination of certain types of data, e.g. securities information, environmental data, and labor statistics. This information is part of the public record and should be available for all to use. Moreover, the number of public and private partnerships in data collection is increasing. Under the terms of this legislation, companies which provide data to the government could exert property rights over this data. Thus some government information would become the intellectual property of private companies. Significant collections of government-mandated information which have been publicly available could become unavailable, available for a fee, and/or available with significant constraints on use and reuse.
This latter point is especially important. These companies would have the ability to exert downstream control over information in government-mandated databases under the terms of this bill. For example, almost any kind of transformative use, such as abstracting from one of these databases or combining some of the data from one collection with information from other sources to create a new and useful database, could trigger liability for third parties. The Department of Commerce states, ''It is important that legislation not create inappropriate opportunities of incentives to ''capture'' government information or government-funded data with relatively small investments in maintenance, organization, or supplemental data.''(see footnote 36)
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6) Provisions in H.R. 354 do not address concerns regarding sole source databases.
Although the bill permits individuals to collect information independently in order to compete in the commercial marketplace, such independent collection often is virtually impossible or is economically infeasible. Historical data or data for field experiments are two common examples. We understand that tackling this issue is extremely difficult. But by failing to address the sole source issue, the bill could create monopoly control over information of certain kinds.
For libraries and users there would be little recourse. The publisher or database producer is not obligated to permit transformative uses in a license nor is there any leverage in negotiating the license to moderate costs or permit downstream activities.
7) Provisions in the bill could lead to increased transactions costs in data use as noted by the Department of Commerce.
Finally, the library community shares the concern included in the Department of Commerce letter regarding the increased costs in use of data. The library community acquires and licenses well over $2 billion of information resources each year. We do not seek information for free and we understand that unauthorized digital copying can lead to piracy. America's libraries depend, in part, upon the well-being of those publishers. Throughout our history, libraries have been among the most voracious, lawful acquirers of published works. But we cannot support legislation that would impose new economic and administrative burdens on our institutions and on the Nation's research enterprise.
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As noted in the Administration's letter of August 4, 1998 there are grounds for concluding that aspects of the ''Collections of Information Antipiracy Protection Act,'' ''may increase transaction costs in data use, particularly in situations where larger collections integrate datasets originating from different parties or where different parties have added value to a collection through separate contribution of gathering, refining, and/or maintaining the data. This is especially important for large-scale data management activities, where public investment has leveraged contributions from the public and non-profit sectors.''(see footnote 37)
In closing Mr. Chairman, we believe that if this legislation is enacted in its current form and with the current approach, it would fundamentally change the research enterprise and how members of this community use information and at what cost. The approach taken in H.R. 354 could lead to a licensing framework where facts, government information, and other information could not be used without permission and with additional costs for each use. The ability to tightly control uses of information including downstream, transformative uses would be at odds with a culture of building upon prior research and could undermine the basic mechanisms of scientific and educational data exchange.
Another model which has widespread support in the library, education, and commercial sectors is a more narrowly tailored bill. This draft, the Database Fair Competition and Research Promotion Act, is focused on outlawing the parasitical copying of commercial databases. This alternative would prohibit a person from fully duplicating a database and then engaging in head to head competition in the marketplace. It also would bar non-commercial online distribution of large quantities of data extracted from commercial databases. In addition, the draft tackles the thorny issue of sole source databases and monopolistic practices. And finally, and most importantly the draft bill would permit transformative, downstream uses of information contained in protected databases.
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We look forward to working with the Subcommittee on these issues to ensure the appropriate balance between all communities and sectors.
The American Library Association is a nonprofit educational organization of 57,000 librarians, library trustees, and other friends of libraries dedicated to improving library services and promoting the public interest in a free and open information society.
The American Association of Law Libraries is a nonprofit educational organization with over 5,000 members dedicated to serving the legal information needs of legislators and other public officials, law professors, and students, attorneys, and members of the general public.
The Association of Research Libraries is an Association of 122 research libraries in North America. ARL programs and services promote equitable access to and effective use of recorded knowledge in support of teaching, research, scholarship, and community service.
The Medical Library Association is an organization of over 3,800 individuals and 1,200 institutions in the health sciences information field. MLA members serve society by developing new information delivery systems, fostering educational and research programs for health sciences information professionals, and encouraging an enhanced public awareness of health care issues.
The Special Libraries Association is an international association representing the interests of nearly 15,000 information professionals in 60 countries. Special librarians are information resource experts who collect, analyze, evaluate, package and disseminate information to facilitate accurate decision-making in corporate, academic, and governmental settings. The Association offers a myriad of programs and services designed to help its members serve their customers more effectively and succeed in an increasingly challenging environment of information management and technology. SLA is committed to the professional growth and success of its membership.
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Mr. COBLE. Thank you, Mr. Neal.
Mr. McDermott.
STATEMENT OF TERRENCE McDERMOTT, EXECUTIVE VICE PRESIDENT, THE NATIONAL ASSOCIATION OF REALTORS
Mr. MCDERMOTT. Thank you, Mr. Chairman.
My name is Terry McDermott. As mentioned, I'm Executive Vice President of the National Association of Realtors. In that capacity I represent not only our 750,000 Realtor members but our 1,600 Realtor boards throughout the country and the 900 multiple listing services that we use to provide real estate information to all of our practitioners, buyers and sellers, and increasingly directly to consumers.
Our concern and our strong support for this bill is to allow us to continue to take one of the oldest and most significant databases in this country, founded in 1887 in San Diego, California, and continue to provide it to the marketplace as an orderly market tool, and to allow consumers to use MLS data from our database in order to make a more significant considered purchase in home ownership in this country.
As you all know, in 1998 we reached our third consecutive year of record existing home sales, 4.8 million, and almost 68 percent of home ownership levels in this country. We feel that the MLS system is one of the information resources why that market continues to grow and why this country continues to have the highest rate of home ownership.
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Our concern and our strong support of this bill is based on the fact that real estate as an industry is extremely information sensitive and intensive. It does have significant intrinsic value. It also represents—the information itself represents a contractual agreement between the lister, or the home seller, and the agent. When it exists within the confines of our database it is in fact protected by that contract, it is protected by State licensing laws, and indeed it is protected by the code of ethics of the National Association of Realtors.
So the consumer sharing that data has many guarantees of protection of information and both its use for immediate service and its downstream use. If someone is allowed without the ability for us to recoup that information or protect it to strip it and use it for other information all of those protections for the consumer disappear.
Although we were founded in 1887 in the era of the quill pen and the typewriter, we have in fact today launched the Multiple Listing Service onto the Internet in 1997. Today Realtor.com, which is the collective information base of all the Realtor listings in the United States and represents 90 percent of the homes for sale in the United States, is in the top 20 Internet sites on the entire World Wide Web. We, in fact, have 475 million hits a month and service 7 million consumers in their search for housing throughout the United States.
We did that aggressively but also knowing under current law that we had some potential downstream liability for the theft or the piracy of that data. We have been challenged in court three times and currently have been successful. However, as everyone on the panel knows, protecting and adjudicating that on a copyright law basis is both lengthy and extremely expensive.
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We think the ability to use the Internet to again take a hundred year old database and its intention and to continue to provide the marketplace with an orderly market tool that makes housing more accessible to the American people, that makes it less expensive to obtain, and gives us not only the highest rate of home ownership but a method of home ownership which is in fact enviable to most other real estate economies and markets throughout the world is definitely something that needs protecting.
We also want to protect the future. Six months in Internet days is 20 years in other markets and we want to be able to assure that as we develop more data and we are able to bring electronic commerce to the real estate transaction that we're able to utilize information to make the real estate transaction less expensive and more effective for the consumer.
That we'll be able to do so without concerns that we are in fact exposing even more sensitive information about that process to people who would use it for their own commercial ends without approval by the people who own it, either the owner of the property or the realtor who owns the contract listing, and not be able to use it to effectively enter into commercial relationships in which they had no participation and in fact have no liability.
The National Association of Realtors obviously strongly is in support of open competition, strongly in support of the protection of copyright and trademark laws. Obviously the term Realtor itself is well protected by that law and has been for more than a hundred years. But we also feel that we all need the protection in this new age of being able to aggressively pursue opportunities on the Internet without concern that others would take advantage of our relationship with the client and take significant advantage of the value of the data downstream.
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Thank you, Mr. Chairman.
[The complete statement of Mr. McDermott follows.]
PREPARED STATEMENT OF TERRENCE MCDERMOTT, EXECUTIVE VICE PRESIDENT, THE NATIONAL ASSOCIATION OF REALTORS
Good Morning. My name is Terry McDermott I am the Executive Vice President of the National Association of REALTORS (NAR). We represent over 730,000 REALTORS involved in all aspects of the real estate industry nationwide. I would like to speak to you today about the ''Collections of Information Antipiracy Act.'' First of all, I would like to thank Chairman Coble and Congressman Berman for their introduction of H.R. 354, as well as those members of the subcommittee who have cosponsored the bill. I want to assure you of NAR's commitment to support its passage this year.
Real estate is information sensitive. As reliance on sources of information increases, so does their value. REALTORS have long used compilations of data relating to property listings collected by the Multiple Listing Services (MLS) located throughout the United States. In addition, NAR offers information on property listings to the public through its REALTOR.COM website. These services and long time practices are threatened by entities who pirate this information and utilize it to the detriment of REALTORS. H.R. 354 would prohibit this harmful practice.
REALTORS believe in and welcome healthy competition. We do not believe that the ability to press a button and copy listings to another's site is healthy. It is, in fact unhealthy for both our profession and the consumer. REALTOR.COM gives the consumer a huge database of information useful to their homebuying and selling process. There are many competing sites operating today which utilize legal and fair methods to obtain their listings.
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REALTORS abide by a strict Code of Ethics which provides a higher standard of care to consumers and punishment for wrongdoing. NAR believes that it is the right of the REALTOR and the homeowner to decide where their listing should appear. It is on this relationship that the whole process is based. REALTORS are proud of the trust they earn from consumers as a result. H.R. 354 would support homeowners and REALTORS by prohibiting unscrupulous parties from seizing the fruits of this relationship, and utilizing them in an unfair and inappropriate way.
NEED FOR ADDITIONAL PROTECTION
REALTORS invest substantial resources in obtaining, developing, and maintaining real estate listings. Indeed, these listings are the essence of the business of real estate. H.R. 354 would prohibit a competitor from extracting a substantial number of those listings and using them in a manner which harms REALTORS. The bill would provide a complement to copyright, and represents a minimalist approach to the prevention of unfair duplication and marketing.
MLS information is pirated for many purposes. Listing information is copied to a competitor's site as their own. They may sell advertising banners and may demand commission splits from listing agents for referrals of buyers. Non-real estate entities may want this information for business referral purposes. H.R. 354 would prohibit the misappropriation of REALTORS valuable commercial collections of real estate property listings by pirates who would grab them, repackage them, and market them to the detriment of REALTORS.
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Consumers can also be effected by this misappropriation. A licensee has a fiduciary duty of care to the home seller or buyer. They are obligated to follow the laws and regulations of their jurisdictions. A pirating entity has no contractual or legal obligation to the homeowner or the consumer at all. There would be no protection of their identity or address. A pirated listing may not be subject to regulation, and thus the consumer would be without protection. So, although the bill is intended to protect a compiler's commercial interest, it may also provide consumer protections in the case of real estate listings.
While REALTORS will continue to rely on federal copyright law, state contract law, and underlying licensing agreements to protect our enormous investment in real estate listings, we feel that the gaps in this protection can best be filled by a new federal statute which will complement copyright law.
H.R. 354, the ''Collections of Information Antipiracy Act,'' will prohibit the misappropriation of our valuable listing data in a balanced and fair approach which maintains and reinforces existing protections for research and educational uses of information. In addition, the bill has been strengthened in the area of the ''fair use doctrine'' to make clear that the new protections under this statute would not effect that doctrine.
Armed with the certainty that H.R. 354 would provide, REALTORS could be expected to maintain the most comprehensive real estate site in the world. This bill will ensure the value that a real estate listing provides to the public. It will promote the continued investment and upgrading of internet-based real estate sites and increased access to the consumer In short, the bill will serve to broaden the consumers' ability to access information by protecting the collectors' investment in compiling that information.
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BACKGROUND
Multiple Listing Services (MLS)
The multiple listing service is one of the most valuable sources of information in the real estate industry. The compilation of data in an MLS is a valuable asset that needs to be recognized as such and protected.
A multiple listing service is a system for the orderly correlation and dissemination of information about real property listed for sale with real estate agents who participate in the system. An MLS also allows participants to make offers to other participants to ''cooperate'' in the sale of a property. Typically, these offers of cooperation consist of a listing broker's offer to compensate another agent if the latter procures a ready, willing, and able buyer for the property.
MLS's are quite pro-competitive. Real estate agents who participate in an MLS are not limited to marketing the properties of sellers who have hired them to sell their properties. Such agents can seek to sell, and earn a fee on the sale of, properties listed with other real estate agents. Further, with many MLS's placing their listings on websites, such as REALTOR.COM, a prospective home purchaser can easily access information about a wide variety of properties for sale rather than just those listed with a particular agent with whom the purchaser may be working. Property sellers also benefit from wider exposure of their properties to potential buyers than would be possible without the MLS. Thus, the system serves to benefit sellers, buyers, and real estate agents alike.
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In order to prevent dissemination of MLS information by participants to unauthorized persons, MLS's claim copyright protection for the MLS database. They also adopt rules which limit the extent to which MLS participants can use and distribute MLS information. Limitation of dissemination of MLS information is necessary to shield property sellers from direct inquiries about the property and from bombardment by solicitations for a variety of products and services attendant to real estate transactions, such as moving companies or home inspectors.
Today approximately 900 multiple listing services operate nationwide. The first multiple listing service was set up in 1887 by brokers in San Diego, California, though it wasn't called that at the time. At approximately the same time, an MLS started in Cincinnati, Ohio. In 1907, a year before the National Association of REALTORS was founded, the term multiple listing service was first used.
In 1968, the Long Island Board of REALTORS made one of the first attempts at a computerized MLS. It failed due to the expensive and cumbersome equipment. In 1972, the Baltimore Board of REALTORS instituted a centralized, computerized system for compiling MLS information. Starting as paper listings copied into binders, multiple listing services have developed into sophisticated electronic databases utilized nationwide for instantaneous dissemination and viewing by the real estate industry.
REALTOR.COM
REALTOR.COM is an effort to bring this sort of instant and wide variety of listings to the public. Our website contains over 1.2 million homes for sale. Each listing can be brought up by community, price, size and several other factors which the consumer chooses. Most listings contain photographs of the property. This site provides the consumer with the breadth of information desirable to assist in the home purchase. Last month, over 6 million consumers visited REALT0R.COM and 11.5 million home searches were conducted. These results are clear evidence of the viability and success of real estate web sites.
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Both REALTOR.COM and MLS's are services which require constant maintenance and updating. They are expensive to maintain. Listings which become stale and outdated are useless to both the consumer and the REALTOR. State real estate regulations often require the listings to remain up to date. Thus the information contained on these sites is quite valuable to many different parties. The temptation to pirate this information has already been too great for some to avoid.
CASE SUMMARIES
Although legal actions under copyright law have been successful to date, they were based on the wholesale copying and use of real estate listings. Courts held that the inclusion of purely descriptive terms and abbreviations caused the works to have the requisite ''creativity'' to obtain copyright protection. REALTOR.COM and other internet real estate sites have rendered most of the historical abbreviations extinct. In addition, with the focus and publicity that these legislative efforts have given this issue, smart pirates may be emboldened to attempt the misappropriation of partial listing information, sticking to the facts. This uncertainty is exactly what H.R. 354 would address.
In Montgomery County Association of REALTORS (MCAR) v. Realty Photo Master, 878 F. Supp. 804 (D. Md. 1995), aff'd, 91 F.3d. 132,1996 WL 412584 (4th Cir. 1996) (Unpublished Disposition), the defendants copied the MLS database, added photos of the listed properties, and sold the resulting product.
Like many other MLS's, MCAR's system consisted of a computerized database containing information about the various properties for sale listed with MLS participants. In 1988, RPM developed and began offering to MLS participants a software system which digitized and downloaded, to a real estate agents personal computer, photographs of homes that were offered for sale. In order to identify and photograph properties listed for sale in the system, RPM needed to gain access to the MCAR MLS. RPM persuaded an MLS participant to provide such access, and was then able to integrate its electronic photo display and distribution service. RPM then sold its database of computerized photos of homes to several MLS participants. RPM also sold software which allowed participants to simultaneously access the MLS-provided information about the home (such as the features and price of the property, the listing broker's identity and the terms of cooperation offered by the listing broker) and the RPM-provided photographic images of the home.
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Upon discovering that RPM had access to the MLS database, MCAR sued RPM alleging that RPM's use of its database constituted copyright infringement. The district court held that the computerized MLS database was copyrightable and that the copyright and copyright registration secured by MCAR were valid. The court rejected RPM's claim that the MLS database was a mere collection of simple facts about the properties listed for sale. RPM claimed that like the white pages telephone directory in Feist Publications, Inc. v. Rural Tel. Ser. Co., 499 U.S. 340 (1991), the MLS should not be entitled to copyright protection. However, the district court held that the MLS database possessed the ''minimal degree of creativity'' required by Feist. In particular, the court pointed to the ''marketing puffery'' in the property listings (''elegant updated home, close to DC lines, gorgeous private backyard, lovely sunroom off LR'') and the ''unique and elaborate system of abbreviations'' employed by MCAR in the database. Thus, the court held that inclusion of factual data about the homes listed (address, style, age, floor plan, price) did not negate the copyright protection to be afforded the original presentation and arrangement of the information.
The district court's conclusion was consistent with the result in another post-Feist MLS-copyright case, San Fernando Valley Board of REALTORS, Inc. v. Mayflower Transit, Inc., No. CV 91-5872-WJR (Kx) (C.D. Cal. 1993), where the court held that the manner in which listings were selected for inclusion in the Board's MLS database, and the information about each listing which was included, made the MLS database entitled to copyright protection and copyrighted.
Significantly, the district court did not reach the question of whether RPM violated MCAR's copyright. Although RPM conceded that it downloaded the MLS database into its computer, it gained access to the database through an agreement with an MLS participant. The court noted that the rules applicable to MLS participants authorized them to disclose MLS data to ''persons essential to the conduct of the participant's business''; thus, an issue was raised as to whether RPM's downloading was or was not authorized. A finding that there was such authorization would, of course, preclude copyright infringement liability.
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This ruling was unfortunate because the matter of infringement was at least as significant as the question of copyrightability of the MLS compilation. While unauthorized wholesale, intact electronic reproduction of the entire MLS database would almost certainly constitute prohibited copying, it was less clear whether more limited reproduction of only certain aspects or items of information in the database would constitute copying prohibited by the Copyright Act. This uncertainty works against associations with copyrighted databases.
The Collections of Information Antpiracy Act would address the uncertainty created by the judicial decisions. It would create clear guidelines on what constitutes unfair duplication of compilations of information, and it would provide appropriate remedies for wrongdoing. In conclusion, the National Association of REALTORS once again thanks the sponsors of H.R. 354, and pledges its support for early passage and enactment of the bill into law.
Mr. COBLE. Thank you, Mr. McDermott.
Ms. Winokur.
STATEMENT OF MARILYN WINOKUR, EXECUTIVE VICE PRESIDENT, MICROMEDEX, INC.
Ms. WINOKUR. Mr. Chairman, I wish to extend my appreciation to you and the members of the subcommittee for allowing me to testify today on behalf of the Coalition Against Database Piracy, or CADP. CADP is an ad hoc group composed of small and large U.S. database providers who have joined together to secure enactment of effective, fair database protection legislation.
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I am Marilyn Winokur, Executive Vice President of Micromedex, located in Englewood, Colorado, and a member of the Thomson Corporation's Health Care Information Group. Micromedex provides comprehensive databases of drug information, toxicology, emergency and acute care, occupational medicine, chemical safety and industrial regulatory compliance.
I appear before you today as a businessperson, not as a lawyer. I don't know the magic words that will provide database producers the protection that is needed. I just know that protection is needed. What I want to do is provide you and members of the subcommittee some sense of the enormous financial and human investments made in the creation of our databases and, more specifically, to convey some sense of the potential life threatening consequences if our databases are ripped off.
Today more than 4,000 facilities in over 90 countries rely on Micromedex's knowledge bases. The Micromedex editorial board, comprising more than 450 practicing experts world wide, reviews and edits all information presented, compiled from the most current peer reviewed medical journals available.
Some of the subcommittee may be familiar with our Poisindex database as well as the Physician's Desk Reference, or PDR, or our sister company, Medical Economics. Poisindex provides medical professionals, usually emergency room physicians or poison control specialists, with immediate access to comprehensive listings of toxicological information, a crucial tool to complement their years of experience and training. Authorized users have unlimited access to this data 24 hours a day, 365 days a year in their own facilities.
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Poisindex contains more than a million entries describing substances such as drugs, chemicals, commercial and household products and biological threats. This database enables medical professionals, for example, to identify a substance that a child may have ingested and then to provide instructions for critical immediate care. Treatments guided by this special database have helped save thousands of lives since Poisindex was created 25 years ago. The database lists each substance with its ingredients and links it to documents detailing its clinical effects, treatment measures, degree of toxicity and other relevant information.
Not only do clinicians within the hospital setting and poison control centers rely on the integrity of the data, many Government agencies use the databases in the treatment of people and environmental management. The risks faced by U.S. forces in Saudi Arabia during Desert Storm were not limited to the threat of conventional warfare. The conditions, including poisonous snakes and exotic plants, presented problems specific to the desert locations. Warfare agents and risks of potential problems from contact with solvents, fuels, chemicals used regularly by the military were of added concern.
Micromedex provided the military with Poisindex and other databases for use by the Air Force Tactical Air Command in Army field hospitals. In addition, telephone consulting services by three physicians and five pharmacists, all Micromedex employees with more than 10 years of experience in toxicology, were made available during Desert Storm.
Other recent events in which our databases played an important role included the Oklahoma City bombing, the Olympics in Atlanta, the California and Mississippi floods and the Montana train derailment.
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As members of the subcommittee may now see, it is not necessarily melodramatic to say that the reliability, accuracy and thoroughness of Poisindex are a matter of life and death. That is why database producers can not and should not be under threat from pirates.
Twenty-five years worth of data management and investment makes the Micromedex collection comprehensive and credible for clinicians' use. With our extensive review process and evolving medical practices, the content is constantly updated and evaluated. It is unlikely that someone who pirates the database would maintain such accuracy and the results could be deadly. And if our valuable information can be taken for free what incentive does Micromedex have to continue the investment in its data integrity.
Again, Mr. Chairman, your commitment to a fair and balanced database protection bill is appreciated by database producers. If Poisindex, PDR and other important databases are to continue to exist into the 21st Century, legislation is needed and it is needed now. CADP looks forward to working with you and the subcommittee, and I'll be pleased to address questions that you may have.
Thank you.
[The complete statement of Ms. Winokur follows.]
PREPARED STATEMENT OF MARILYN WINOKUR, EXECUTIVE VICE PRESIDENT, MICROMEDEX, INC.
SUMMARY
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CADP is an ad hoc group composed of small and large U.S. database providers who have joined together to secure enactment of effective, fair federal database protection legislation. As a result of the efforts of CADP members and others in the U.S. database community, scientists, researchers, academicians, scholars, business people and consumers have ready access to a wealth of user-friendly, reliable and up-to-date information.
CADP's goal is simple and straightforward: the passage of legislation to deter piracy that causes commercial harm to database creators, while maintaining the traditional balance between the respective interests of the owners and users of informational products. The need for this legislation is underscored by (1) the vulnerability of databases to illegal copying and dissemination—especially in a digital environment; and (2) international developments—including the European Union's Database Directive.
The misappropriation approach set out in both H.R. 354 and in the versions passed twice by the House in the last Congress provides the necessary framework for a database protection law.
H.R. 354 contains the essential features of a database bill, such as (1) a prohibition against market harmful misappropriations of databases by competitors and non-competitors alike; (2) exemptions for the extraction or use of individual items and other insubstantial parts of databases—unless such acts occur repeatedly or systematically; (3) express language permitting a second comer from independently creating its own databases from the same sources as the original compiler; (4) an exclusion that precludes collections of information compiled by federal, state or local governments from claiming protection under the bill; and (5) a broad exemption for news reporting activities.
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In the last Congress, the Collections of Information Act was amended time and time again to accommodate the interests of the user community. These included: (1) the adoption of special liability rules governing nonprofit violators; (2) an express statement that uses or extractions for nonprofit purposes are actionable only if they harm a protected collection of information's actual, not potential, market; (3) the elimination of the bill's criminal penalties for certain nonprofit employees acting within the scope of their employment; and (4) placing a fifteen year outer limit on the protections afforded under the bill.
Given the many changes made in the legislation in the last Congress to address the concerns of database users, any additional changes to last year's final bill must be viewed with great care and caution. We cannot so dilute the bill as to undermine its effectiveness as a tool against database piracy or risk comparability with the EU Directive.
STATEMENT
Mr. Chairman, my name is Marilyn Winokur. I am Executive Vice President of Micromedex, a leading publisher of clinical support databases and a subsidiary of the Thomson Corporation. I appear here today on behalf of the Coalition Against Database Piracy (''CADP''), of which the Thomson Corporation is a member.
The Coalition Against Database Piracy (''CADP'') welcomes the opportunity to share with the Subcommittee its views on why Congress should enact fair database protection legislation, in general, and its views on H.R. 354, ''The Collections of Information Antipiracy Act,'' in particular.(see footnote 38)
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I. Introduction
Mr. Chairman, CADP thanks you for your leadership in this important area. Our members are especially grateful for your recognition of the crucial role that databases play in our information society and the need for Congress to enact legislation to fill the gap in database protection under U.S. law.
CADP is an ad hoc group composed of small and large U.S. database providers who stand to suffer grievous harm—and whose thousands of employees' jobs will be at risk—if fair and effective federal database legislation is not enacted promptly. Its members include the American Medical Association; The McGraw-Hill Companies; the National Association of Securities Dealers; the Newsletter Publishers Association; the Newspaper Association of America; the New York Stock Exchange; Phillips Publishing International, Inc; Reed Elsevier Inc.; Silver Platter Information, Inc.; Skinder-Strauss Associates; the Software and Information Industry Association; the Thomas Publishing Company; The Thomson Corporation; and Warren Publishing, Inc.
CADP's members are an integral part of the U.S. database community. Today, the United States is the world leader in the creation and distribution of informational databases. Our members employ or represent many thousands of editors, researchers, and others who gather, update, verify, format, organize, index and distribute the information contained in their vast array of database products. They also invest millions of dollars annually in the hardware and software needed to manage these large bodies of information.
Mr. Chairman, your bill, H.R. 354, addresses a basic unfairness in our legal system: its failure to protect adequately the interests of those whose hard work and substantial financial investments result in the creation and dissemination of valuable databases. H.R. 354 is about eliminating the inequity in a legal regime that allows an unscrupulous competitor to copy with impunity the contents of someone else's compilation and then destroy the first compiler's market by selling a competing, less expensive product. It is also about rectifying the injustice that takes place when a dishonest customer or a ''cyberprankster''—without permission—electronically copies and makes it freely available over the Internet. In sum, it is about helping restore fairness to the database marketplace.
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CADP's goal is simple and straightforward: to deter piracy that causes commercial harm to database creators, while maintaining the traditional balance between the legitimate interests of owners and users of informational products.
Mr. Chairman, your bill, H.R. 354, is a crucial step towards striking the correct balance between the interests of both creators and users of collections of information. As discussed in greater detail below, CADP believes that:
(1) H.R. 354 contains the essential features of a database protection bill; and
(2) Given that in the last Congress the Collections of Information Antipiracy Act was amended time and time again to accommodate the interests of the user community, any additional changes to last year's final bill must be viewed with great care and caution—otherwise, the bill may be so diluted as to undermine its effectiveness as a tool against database piracy.
CADP believes the time for congressional action is now. The risks to database creators will only increase as our society becomes more and more dependent on computers and digitized information and as technology provides new and more efficient ways to reproduce and distribute information products. The need for prompt congressional action is also underscored by the recent adoption of a database protection directive by the European Union (''EU'').(see footnote 39) As discussed below, unless the U.S. enacts a database protection law that the EU deems comparable to the terms of its Directive, U.S. database producers will be at a distinct commercial disadvantage in the EU and beyond.
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II. Brief Overview of Database Industry
Databases available in this Information Age are a far cry from the traditional printed compilations that have existed for centuries—both in terms of content and methods of delivery. U.S. databases provide the world with information on everything from antidotes to poison, to prescription drugs, to the keys to building safer cars, to comprehensive compilations of patents and related information. They provide a vast array of comprehensive data vital to the successful operation of our economy—including information about health, communications, finance, banking, business, news, travel and defense.
By giving consumers and professionals accurate, thorough, and up-to-date tools, database creators play a crucial role in our information-driven society. The work that they do in collecting, compiling, arranging, standardizing, correcting, indexing, updating, cross-referencing, and verifying adds immense value to a mass of otherwise unintelligible, disparate data. Moreover, the investments of database creators in creating, organizing, and maintaining these products greatly reduce the time and effort consumers need to conduct important research and ensure the reliability of the facts included. Without the hard work of database producers, vast amounts of valuable and systematically organized information would be unavailable to many users who themselves could not replicate the financial and human investments made by the database compiler. Many American jobs depend on a healthy, vibrant U.S. database industry.(see footnote 40)
III. Vulnerability of Databases
Although creating, maintaining and disseminating databases is expensive and time-consuming, copying and distributing databases without permission is cheap and easy. The advent of digital, high-speed computer networks adds greatly to the threat of piracy. Today, database pirates can use widely available technologies to make and print unauthorized copies of electronic databases and send them around the world. Internet users can duplicate and distribute large collections of information with the click of a mouse and at a fraction of the enormous costs of their development. This risk will only increase as our society becomes more dependent on computers and digitized information, and as technologies provide new and even more efficient ways to copy and distribute informational products.
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Without effective legal protection, databases are easy prey for parasitic competitors who are free to unjustly—and harmfully—harvest the fruits of the creator's hard work. These risks are not limited to competitors' market-destructive acts. For example, LaMacchia v. United States(see footnote 41) demonstrates that non-competitors can engage in activities that inflict serious commercial harm on publishers. In LaMacchia, an MIT student uploaded commercial software (such as WordPerfect and Excel) onto an electronic bulletin board.(see footnote 42) He encouraged others to download these applications free of charge, and although unmotivated by any desire for pecuniary gain, his actions cost the affected software developers over $1 million in losses.(see footnote 43) The indictment against LaMacchia was dismissed because he acted without the commercial motive required in cases of criminal copyright infringement.(see footnote 44) In response, Congress passed the ''No Electronic Theft (NET) Act.''(see footnote 45)
Regrettably, data pirates of all stripes have little to fear because existing U.S. law does not effectively deter such blatantly unfair practices. It is time for Congress to fill this gap in U.S. law.
IV. The Gap in U.S. Law
Although existing legal doctrines—including copyright, contract, and misappropriation law—all offer important protections, they are insufficient, particularly in today's digital world, to deter database piracy effectively. As the Register of Copyrights, Marybeth Peters, told this Subcommittee in the last Congress:
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While various bodies of law . . . protect database producers, each falls short in coverage. . . . The bottom line is that in many circumstances there is no legal recourse for a database producer when the essence of the value of the database, and the core of its investment, are taken without permission or compensation. . . . Since Feist,(see footnote 46) the source and extent of legal protection for the commercially valuable contents of databases has been uncertain, requiring reliance on a patchwork of different, individually insufficient legal theories.(see footnote 47)
New legal protection must be added to U.S. law to complement existing doctrines so that database creators will have the incentive to continue making the enormous expenditures necessary to produce, update and market reliable and innovative databases.
A. Copyright Law
For many years, database makers could take solace in the fact that some federal courts of appeals recognized the so-called ''sweat of the brow'' doctrine under which copyright protection was based on the compiler's significant hard work and investment in developing its compilation.(see footnote 48) In those circuits, ''sweat of the brow'' afforded compilers an important tool against the unauthorized takings by ''free riders.'' That is no longer the case.
In Feist v. Rural Telephone Co., Inc., 499 U.S. 340 (1991), the Supreme Court discarded the sweat of the brow approach under copyright law and made it clear that a compilation will enjoy copyright protection only if it evinces sufficient ''originality'' in the manner in which its facts are arranged, selected or coordinated.(see footnote 49) After Feist, the amount of time, effort and money expended by a compiler is irrelevant to a determination of whether or not a work qualifies for copyright protection.
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Feist also noted both that facts were not copyrightable and even where protection exists for compilations, its scope is thin because it extends only to the original selection, arrangement and coordination of the database. The message given to the database community by Feist was clear: the factual contents of the database are not protected by copyright, and may be copied with impunity by data pirates.(see footnote 50)
Lower court interpretations of Feist have caused additional reasons for consternation in the database community. First, inconsistent decisions have caused database owners to speculate whether a federal court will afford a particular compilation any copyright protection at all. Initially, some database creators thought that they could take solace in Feist's statement that ''the requisite level of creativity is extremely low; even a slight amount will suffice. The vast majority of works will make the grade quite easily. . . .''(see footnote 51) Unfortunately, such has not always been the case. For example, two federal appellate courts have reached profoundly different results with respect to whether yellow page directories contain the necessary degree of originality to warrant copyright protection. Compare Key Publications, Inc. v. Chinatown Today Publ'g. Enter., Inc., 945 F.2d 509 (2d Cir. 1991) (copyright protection held to exist) with Bellsouth Adver. & Publ'g. Corp. v. Donnelley Info. Publ'g., Inc., 999 F.2d 1436 (11th Cir. 1993) (en banc) (coming to the opposite conclusion), cert. denied, 114 U.S. 943 (1994).
More recently, the United States Court of Appeals for the Eleventh Circuit set off alarm bells in the database community when it ruled against Warren Publishing, a CADP member, in Warren Publ'g., Inc. v. Microdos Data Corp., 115 F.3d 1509 (11th Cir. 1997), cert. denied, 118 S.Ct. 397 (1997). The court denied any form of meaningful copyright protection to Warren's Television and Cable Factbook—a comprehensive directory of television and cable systems—despite the fact that the selection of cable systems in the Factbook used a unique definition of ''cable system.''(see footnote 52) This decision raises grave concerns that the level of originality required for copyright protection may be far higher than the Supreme Court's language in Feist reasonably implied.
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Second, post-Feist cases underscore the fact even where compilations meet the originality test, copyright law provides only ''thin'' protection and wholesale copying of the contents of these labor-intensive works is condoned. As the Copyright Office's 1997 Report on the Legal Protection of Databases states, ''most of the post-Feist appellate cases have found wholesale takings from copyrightable compilations to be non-infringing. The trend is carrying through to district courts as well.''(see footnote 53)
Third, post-Feist cases give short shrift to two key characteristics typical of many valuable databases—their thoroughness and the human and financial resources expended in creating and marketing them.
The greatest irony of all is that the more thorough the database, the more time, money and effort that goes into making it—and hence the more valuable it may be to a user—the more likely it is a court will find it lacks the requisite degree of originality to qualify for copyright protection.(see footnote 54) This result is inconsistent with sound public policy.(see footnote 55)
In sum, after Feist and the demise of the sweat of the brow doctrine, it has become increasingly clear that the copyright law is ill-equipped to protect informational products that are the result of substantial human, technical and financial resources.
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B. Contracts
Although private contracts are very valuable in protecting the works of database creators, they do not provide protection at a level sufficient to induce the creation and distribution of diverse types of databases of the diversity that are increasingly in demand today. Contract law suffers from various infirmities, including:
it does not provide legal relief against malfeasors who have not entered into a binding contract with a database provider. ''Once the information is accessed by someone not bound by the contract, any control over misuse is lost irrevocably;''(see footnote 56) and
it does not provide uniform coverage throughout the United States. While the contours of contract law are roughly equivalent across the 50 states, there are important variances among state contract schemes and there are circumstances under which the contract laws of two sister states may provide different results if applied to the same legal problem;(see footnote 57) and
state law solutions are of decreasing value given the global nature of electronic commerce.
C. Misappropriation
The common law tort of ''misappropriation,'' derived from the Supreme Court's decision in International News Service v. Associated Press, 248 U.S. 215 (1918), has had an uneven history, at best, with respect to protecting copyrightable and uncopyrightable works from behavior that might fall under the general rubric of ''copying.''
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Like the law of contract, the misappropriation doctrine is a creature of state law, and does not provide database providers with uniform, nationwide protection. In fact, the state misappropriation doctrine is even less uniform than state contract law. Moreover, state misappropriation laws may be available only in extremely narrow circumstances, particularly in light of the influential Second Circuit's recent decision in National Basketball Association v. Motorola, Inc., 105 F.3d 841 (2d Cir. 1997). There the Court indicated that given the breadth of the Copyright Act's preemption provision, the misappropriation doctrine is only available in those special and limited instances where, among other things, the information pirated is ''time sensitive'' or ''hot news,'' and the defendant directly competes with the plaintiff.(see footnote 58)
As a consequence, the doctrine's value to database producers is quite limited. Many databases do not disseminate ''hot news,'' but instead contain information with far longer ''shelf lives;'' in fact, the contents may be of historical, long-term value.(see footnote 59) Additionally, as Congress' recent consideration of the NET Act reveals,(see footnote 60) commercial harm can be inflicted by competitors and non-competitors alike.
V. The Time for Congress to Act is Now
Mr. Chairman, the time for congressional action is now. Without appropriate legislative relief, the accumulated effects of domestically sanctioned piracy will cause the shrinkage of the U.S. database market, the loss of thousands of American jobs and the end of our worldwide preeminence in this area. Ultimately, everyone loses as the availability of valuable information products to the public decreases.
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A. Technological Threats
The dawn of the Information Age has begun to change radically the way people do business. In ''the old days,'' commercial customs developed over appreciably longer periods of time. If a user ordered a compilation from one of the CADP members, for example, it is very likely that papers would be exchanged and goods would be shipped according to terms which both parties understood from decades of trade usage.
Imagine now that same transaction occurring at the speed of light as contract offers, acceptance and performance occur not through the mails, but over fiber-optic networks. Commercial practice—whether scrupulous or not—develops at a pace exponentially greater than that of just a decade ago. By the same token, the destructive effects of piracy that we see right now soon will become much, much worse, as the gap in our current law—a gap that Register of Copyrights Peters stated ''is leading to real world consequences''(see footnote 61)—becomes more and more apparent to database pirates.
Before long, the shortcomings of our legal framework will cause irreparable harm to the database marketplace. Creating floppy disks (or, for that matter, CD–ROMs) requires little or no overhead when compared to the cost of publishing and distributing a printed volume or of assembling the data in the first instance. In Warren, for example, the Eleventh Circuit held that the copyright law effectively allowed the defendant to appropriate the entire contents of the Factbook, from which it then made a competing product. Similarly, in the ProCD case, the defendant loaded the database onto the Internet, from whence it could be downloaded by anyone with the desire to do so. In LaMacchia, the harm caused to the software owners from one pirate exceeded $1,000,000. Our current legal regime does not effectively deter such piracy, and fact patterns like those in Warren will proliferate unless Congress intervenes.
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The harm created by database piracy does not fall on the shoulders of producers alone; it inures to the detriment of everyone. First, scientific and academic research will be curtailed. In the current database market, many producers charge a much lower access fee (if any) to nonprofit institutions such as universities, and recoup those losses in their sales to commercial entities.(see footnote 62) Price differentiation makes economic sense, however, only if the for-profit market is secure and those who can acquire the database cheaply do not provide it to those who would otherwise have paid its original developer a higher price. As the cost of piracy becomes a greater part of doing business, this tiered pricing structure will level out—forcing database owners to charge colleges and libraries the same prices they ask of for-profit corporations. Protective legislation will preserve current pricing flexibility, to the benefit of database owners and users alike.
Second, as free-riders, database pirates—who have expended a fraction of the resources invested by the original compiler—cannot be expected to spend the monies necessary to update the contents they stole. The consequences of this failure to keep the data current could prove devastating, particularly in cases involving health, safety or environmental data. In contrast, legislative protection for these collections of information maintains an economic incentive for compilers to keep their products accurate, current, and comprehensive and helps reduce piracy by making it clearly illegal.
B. International Concerns
In March, 1996, the EU adopted a sui generis database protection directive.(see footnote 63) The Directive constitutes an obvious effort by the EU to ratchet up its share of the world-wide database market, primarily at the expense of U.S. database providers. Under the Directive, in general, database companies outside of the European Union—such as those in the United States—gain no protection from the Directive's provisions unless their own countries provide a level of protection that the EU deems ''comparable'' to its own. Without comparable U.S. legislation, U.S. databases will suffer a significant competitive disadvantage in the huge EU market: databases from EU nations will enjoy the benefits of sui generis database protection and U.S. products will not.(see footnote 64) If the U.S. does not act promptly, existing and future databases created in this country will be free for the taking in EU member states, while EU-produced products or those pirated by EU producers from the U.S. database market will be protected in the EU.
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Consistent with the EU's requirements, many of the United States' major trading partners in the EU have already implemented comparable database protection laws. Belgium, Sweden, Austria, Denmark, Finland, Germany, Spain, France and Great Britain have all passed database protection legislation.(see footnote 65) As time passes, however, the vulnerability of United States databases will not be limited to the EU alone. The U.S. may also suffer disadvantages in developing markets.
Many Latin American countries, for example, have bilateral reciprocity-based relationships with Spain, which will require the enactment of similar statutes. In addition, Eastern European countries, either in the interest of gaining admission to the EU, or as a result of bilateral agreements, will probably also pass database protection laws within the next few years. That was certainly the prediction of Dr. Jorg Reinbothe—the European Commission official overseeing the implementation of the Directive by EU member states—when he spoke at the spring 1998 conference on database protection sponsored by the U.S. Patent and Trademark Office.
A clear trend among the nations of the world will emerge towards the enactment of reciprocity-based database protection legislation, most likely containing much more restrictive terms of use than those present in H.R. 354. Prompt passage of a fair, effective database protection bill would enable the U.S. to counter this trend and continue its leadership role at the World Intellectual Property Organization in creating reasonable, workable treaties governing intellectual property rights.
C. The Handwriting Is On the Wall
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Congress must act promptly—before domestic and international piracy undermines U.S. world leadership in database production.(see footnote 66) As Congress recognized when it passed the Semiconductor Chip Protection Act, ''a finding that an industry has done well in the past without legislative protection does not mean that threats to present and future investments fall outside Congressional concern.''(see footnote 67) Congress has no obligation to wait until the harmful ripples created by the gaps in current law become a tidal wave. As the Supreme Court recently noted, ''[a]n industry need not be in its death throes before Congress may act to protect it.''(see footnote 68) Recently, as part of the Digital Millennium Copyright Act,(see footnote 69) Congress added a new and unprecedented safe harbor for online service providers, intending to prevent any chilling effect that vicarious copyright liability would have on the growth of digital networks.(see footnote 70) Enactment of this safe harbor was a pre-emptive strike by Congress; it passed despite a lack of case law or empirical evidence demonstrating that online service providers were ''suffering'' under the traditional, common law rules of secondary liability.
As the Register of Copyrights testified before this Subcommittee,
Congress has not historically required empirical evidence to legislate market conduct. This includes the area of intellectual property, where exceptions as well as rights have over the years been added, expanded or clarified based on individual cases or on concerns about future applications of the law. . . . Congress should be able to take steps to prevent future harm, before substantial damage is done to particular parties or, more importantly, the public interest generally.(see footnote 71)
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In fact, in late 1997, the NET Act was enacted in direct response to a single federal court decision that exposed an important gap in U.S. law. More specifically, Congress passed the NET Act ''to reverse the practical consequences of United States v. LaMacchia,(see footnote 72) which held . . . that criminal sanctions available under titles 17 and 18 of the U.S. code for copyright infringement do not apply in instances in which a defendant does not realize a commercial advantage or private financial gain.''(see footnote 73) Congress did not require proponents of the law to demonstrate ''compelling empirical evidence;'' it acted because the ''practical consequences'' of the LaMacchia decision would only worsen dramatically as technology continues to make piracy easier.(see footnote 74)
VI. Key Components of a Database Protection Bill
Mr. Chairman, since its formation in early 1997, CADP has made known its commitment to the adoption of balanced legislation that will deter piracy that causes commercial harm, but will not result in adverse consequences for scientists, educators, news gatherers, and other database users. Throughout this debate, CADP members have also urged that the provisions of any forthcoming legislation maximize the likelihood that the European Union will find a U.S. database law in conformity with the Directive, thereby ensuring that U.S. databases are protected in the European Union.
Early on, CADP also expressed its support for the sui generis approach contained in the EU Directive; the draft World Intellectual Property Organization (''WIPO'') treaty; and then-Chairman Moorhead's bill in the 104th Congress, H.R. 3531. We also noted our initial uneasiness and uncertainty over the dramatic shift that H.R. 2652 represented from the sui generis approach. As we told this Subcommittee in the last Congress, we would have preferred instead that Congress use H.R. 3531 as its starting point—retaining its sui generis approach, but modifying that proposal to meet legitimate concerns and questions raised regarding that bill.
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Nonetheless, our members now believe that the misappropriation approach adopted first in H.R. 2652 and now found in H.R. 354 is an approach that CADP can support. The misappropriation model contained in H.R. 354 contains the necessary framework for fair and effective domestic legislation. Its overall thrust is one with which we agree wholeheartedly: to protect investment in the production and distribution of valuable collections of information by prohibiting harmful misappropriations without chilling legitimate uses by news reporters, educators, scientists, librarians, consumers and other users.
We would like to share with the Subcommittee a number of specific comments with respect to H.R. 354.
A. H.R. 354 Contains the Essential Features of a Fair and Effective Database Protection Bill.
1. The heart of the bill—''prohibition against misappropriation''(see footnote 75)—would fill the gap in current law by providing database owners with the means to combat data piracy. There are several key facets to this provision, including its:
recognition that collections of information that result from the expenditure of substantial monetary or other resources are deserving of legal protection separate and apart from the important, yet limited protection afforded such databases under current law;
acknowledgment that commercial harm can be caused by competitors and non-competitors alike, and one need not have a commercial motive to inflict market damage;
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focus on the harm suffered by the plaintiff rather than the identity of the offending actor. While the bill contains numerous important, specific provisions limiting significantly the liability exposure of nonprofit users,(see footnote 76) it does not give them a blanket exemption from liability;
explicit statement that an extraction or use of a quantitatively insubstantial, but qualitatively substantial, part of a collection of information is actionable, where such extraction or use creates commercial harm. This provision recognizes that a use or extraction of a relatively small—but crucial—part of a collection can cause real harm to the owner's actual or potential market.
2. For compelling reasons, H.R. 354 rejects the suggestion that protection should be limited to ''hot news'' and recognizes that many collections of information are time sensitive and may have short shelf lives. A ''hot news'' limitation would severely undercut the efficacy of any federal misappropriation statute. For example, Warren Publishing's Factbook does not contain ''hot news,'' and a federal law that extends only to time-sensitive factual information would be of no benefit to Warren and many other database publishers.
Instead of a ''hot news'' requirement, H.R. 354 was amended last year to include a maximum 15-year term of protection. This change was made despite the fact that unfair competition laws—including trademark and misappropriation statutes—historically have not had time limits because protection under these types of laws attaches only as long as the product or mark retains commercial value. Nonetheless, in response to concerns that the legislation could be read to provide perpetual protection, it was amended to require that a lawsuit must be brought within 15 years from the time the:
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''investment of resources [was made] that qualified for protection that portion of the collection of information that is extracted or used. . . . [P]rotection will not be perpetual; the substantial investment that is protected under the Act cannot be protected for more than fifteen years. . . . [T]he provision avoids providing ongoing [perpetual] protection to the entire collection of information every time there is an additional substantial investment. . . .''(see footnote 77)
The 15-year term in H.R. 354 is very much a compromise provision. As drafted, this provision prevents database providers from exploiting fully those historical works whose commercial value exceeds the 15-year time limit,(see footnote 78) and does not in any way guarantee 15 years of protection. Protection exists only if the defendant's actions harm the market for the plaintiff's products and in no circumstance does it extend beyond 15 years from the time the qualifying investment was made.(see footnote 79) If the product's commercial value has expired, the defendant's conduct cannot harm the plaintiff's market and is not actionable. Some databases will lose their commercial value long before the 15-year period expires. Thus, H.R. 354's 15-year term is the outer limit for protection, whereas copyright law guarantees copyright owners a far longer and fixed term of protection.(see footnote 80)
Mr. Chairman, CADP urges the Subcommittee to rebuff any attempts to shorten the 15-year provision and further inhibit the ability of various database providers to exploit their works. Such action would seriously threaten the legislation's probability of meeting the EU Directive's comparability requirement given the Directive's own 15-year term of protection.(see footnote 81)
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3. H.R. 354 leaves facts in the public domain; it ''does not allow the producer of a collection of information to 'lock up' individual pieces of information contained in the collection.''(see footnote 82) Specifically, it exempts the extraction or use of individual items of information and other insubstantial parts of collections of information—unless such acts occur repeatedly or systematically in a commercially harmful manner.(see footnote 83) This subsection also makes clear that an individual item of information, including a work of authorship, shall not itself be considered a substantial part of a collection of information.
4. Section 1403(c) expressly permits a second comer to create independently its own database from the same sources as the original compiler. The second comer is prohibited only from free riding on the investment of the original compiler. In short, the bill supports fair competition in the marketplace.
5. H.R. 354 protects access to government information by excluding collections of information compiled by federal, state or local governments from protection. Section 1404(a) also expressly denies protection to a database produced under an exclusive contract between a government entity and a private party. Collections of information compiled by government employees, agents or licensees acting within the scope of their employment, agency or license are similarly exempted from protection. Databases produced at taxpayer expense are not protected by H.R. 354 and are free for all to acquire, store, and reproduce as they desire.
In addition, H.R. 354's careful and thoughtful demarcation of non-government information ensures that the public will have access to valuable products for many years to come. To encourage the wide dissemination of government data to the user community, the bill grants protection to value-added products containing government data, but does not take the underlying government information out of the public domain. No one is precluded from going to a government agency to obtain the underlying data. In addition, the bill correctly provides that the exclusion for government databases should not apply to information required to be gathered by securities, futures exchanges and clearing organizations operating under the ''Securities and Exchange Act of 1934'' or the ''Commodity Exchange Act.''(see footnote 84) Without adequate protection for the data streams which provide vital trading information to large, medium, and, especially, small investors, the open distribution model used by these financial markets may contract drastically.
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6. Section 1403(e) of H.R. 354 demonstrates the legislation's recognition of the ''essential role that the press plays in our constitutional system.''(see footnote 85) This provision is intended to ''neither inhibit legitimate news gathering activities nor permit the labeling of conduct as 'news reporting' as a pretext for usurping a compiler's investment in collecting information.''(see footnote 86) CADP strongly supports this provision in its current form; however, we would urge the Subcommittee to resist any effort to broaden this exemption. CADP is concerned that too broad an exemption for news reporting activities could lead to condoning activities that stray beyond traditional reporting and commercially harm the owner of a collection of information.
7. H.R. 354 expressly provides that the bill's protections in no way affect rights and remedies that may be available under other legal regimes, such as copyright and contract law. Section 1405 appears to ensure that result.
8. The bill evinces a keen sensitivity for the legitimate interests of the user community. To begin with, H.R. 354 recognizes that the normal day-to-day activities of many users, including librarians, scientists, students, researchers and educators, typically do not cause commercial harm and therefore simply are not subject to the bill. ''[The legislation] would not, for example, prevent scientists from sharing data sets or publishing the results of their analysis of data, since such acts do not ordinarily involve use in commerce that would harm the market for the database.''(see footnote 87) A student preparing a course-related research project could, for example, routinely use part or even all of a database, inasmuch as such uses typically are not disseminated in a way likely to cause harm to the producer's market.
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B. The pending legislation also contains a number of other provisions specifically protective of the interests of the user community, especially nonprofit entities. In addition to the provisions mentioned above,(see footnote 88) H.R. 354 contains myriad other provisions designed to protect user interests.
1. H.R. 354 effectively incorporates prongs of the fair use test in §107 of the Copyright Act—separate and apart from the newly added reasonable uses provision. For example, the amount and substantiality of the portion used and the effect of the use upon the potential market are elements of the cause of action created by the bill. However, unlike copyright law where fair use is an affirmative defense, under H.R. 354 the burden is on the plaintiff to prove: (l) the existence of the taking of a substantial portion of his or her collection; and (2) harm to the plaintiff's actual or potential market.(see footnote 89)
2. The current bill allows scientists and others to make use of databases for the purpose of internal verification.(see footnote 90) ''This permitted act may be of particular importance to scientists and other researchers, ensuring that they can check the results of their research, despite the fact that doing so may entail the use of an entire database.''(see footnote 91)
3. H.R. 354 contains special liability rules governing nonprofit violators. If a nonprofit employee violates the bill while acting within the scope of employment, but believes that his actions were lawful, a court must reduce or eliminate any damages awarded.(see footnote 92) As a result, in ''good faith'' cases, courts will not award monetary awards, but will only enjoin the entity from continuing their harmful activities.
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4. The current bill requires a database producer who brings a ''bad faith'' lawsuit against a nonprofit to pay the nonprofit user's court costs and attorney fees.(see footnote 93)
5. H.R. 354 exempts librarians, educators, or researchers acting within the scope of employment from any criminal penalties.(see footnote 94)
6. The current bill permits federal and state educational institutions to claim protection for their databases even if they are taxpayer-funded.(see footnote 95)
7. H.R. 354 allows users—for-profits and nonprofits alike—to continue to license information products from database makers.(see footnote 96)
8. H.R. 354 exempts from liability those collections of information gathered, organized or maintained to access, transmit or store online communications.(see footnote 97) Thus, the databases which are used by Internet servers to aid in the functional operations of the Internet retain their current legal status.
C. Given the many changes made in the legislation in the last Congress to accommodate the interests of database users, any additional changes must be viewed with great care and caution.
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Mr. Chairman, as you are well aware, the ''Collections of Information Antipiracy Act'' was amended time after time in the 105th Congress in response to concerns raised by the user community. CADP did not object to those changes. Our members supported the final version of the Collections of Information Act that was passed twice by the House in the last Congress. That version was fair and effective; it carefully balanced the legitimate interests of database users and providers.
We are wary, however, that other changes beyond those incorporated into last year's final bill may upset that fragile balance. We cannot so dilute the legislation as to (1) undermine its effectiveness as a tool against database piracy; or (2) risk comparability with what is becoming the world standard—the EU Directive. Thus, we remain fully committed to working with the Subcommittee and other interested parties in resolving any additional legitimate concerns that may persist, but must review any new changes with special care and caution. The database community cannot—and will not—accept just any legislation.
In that regard, we are weighing carefully your new ''fair use'' language.(see footnote 98) We recognize that there is interest in the Administration and the user community for a new provision governing fair or transformative uses. Clearly, the burden is on the proponents to demonstrate why the new language is needed. This burden should not be met by vague claims about how the old language fails to protect their ability to make ''transformative,'' or ''value-added'' uses of the hard work of the original compiler.(see footnote 99) If a second compiler ''creates'' a new product by using a substantial portion of a protected collection of information and that use harms the market for the original collection, then such use should be actionable. Users should not be free under the guise of ''transformative,'' or ''value-added'' actions to make market-destructive uses of another's collection. Should the Subcommittee determine that a new ''fair use'' provision is needed, we will work with the Subcommittee and other interested parties to perfect the language in §1403(a)(2).
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Mr. Chairman, we understand that there is a continuing interest among skeptics of the bill in deleting or altering the reference to ''potential market'' in H.R. 354. CADP adamantly opposes deletion of the ''potential market'' language from the bill. The legislation must provide protection against harm to potential, as well as actual markets. Business people need to plan ahead. Consideration of potential markets and derivative uses of database products are highly relevant factors when a business decides to proceed with a particular project. As the Register of Copyrights told this Subcommittee in October, 1997:
[L]ooking only to actual markets would be too restrictive; those who invest in creating information products should have some leeway to recoup their investment over time by exploiting those products in various markets.(see footnote 100)
It is essential that the ''potential market'' prong be retained in the legislation.
Moreover, we will approach any change to the bill's ''potential market'' language with care and caution, especially given that the legislation was amended last year to provide that harm to a potential market is only a consideration with respect to for-profit uses. This is a significant change inasmuch as the ability to market to a potential market is a relevant consideration in business planning, irrespective of whether such a market is for-profit or nonprofit in nature. It impacts directly on those database providers both in and out of CADP whose primary markets are nonprofit—such as those who market to educational institutions.
Nonetheless, in an effort to reach consensus on this legislation and speed it toward enactment, in the past, CADP has expressed a willingness to consider the deletion of the reference to ''current and demonstrable plans'' from the definition. CADP is willing—albeit with some reluctance and trepidation—to once again consider such a deletion. We believe that this change, combined with the existing case law interpreting the phrase ''potential market,'' should put to rest all concerns regarding the breadth of this phrase.
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VII. Congressional Power
Mr. Chairman, we believe a review of the text of the Constitution and relevant case law reveals ample authority under the Commerce Clause (Art. 1, §3, cl. 3) to support congressional enactment of legislation such as H.R. 354. In the past, Congress has used its Commerce Clause power in virtually every area of federal legislation ranging from civil rights to environmental to trademark legislation. Applying this power in the current context is entirely consistent with past congressional exercises of that authority. The constitutional history of our trademark laws provides an extremely apt illustration of Congress's exercise of its Article I, section 3, cl. 3 power.
Although it is now firmly established that the Commerce Clause forms the constitutional source of power undergirding our trademark law, that was not always the case. In fact, that law was voided by the United States Supreme Court in its landmark 1879 decision, the Trade-Mark Cases, 100 U.S. 82 (1879). According to the Court, the first trademark law unconstitutionally premised trademark protection on the Patent/Copyright Clause of the Constitution because trademarks were neither ''discoveries nor writings'' as required by Art. 1, §8, cl. 8. Significantly, all subsequent federal trademark laws have been premised on the Commerce Clause.(see footnote 101)
Even in the absence of confusion, the potency of a mark may be debilitated by another's use. This is the essence of dilution. Confusion leads to immediate injury. While dilution is an infection which, if allowed to spread, will eventually destroy the . . . mark. The concept of dilution recognizes the substantial investment the owner has made in the mark and the commercial value and aura of the mark itself, protecting both from those who appropriate the mark for their own gain. H.R. Rep. No. 104–374 at 3 (1995) (emphasis added).
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The Commerce Clause provides the constitutional basis for the anti-dilution statute; it does the same for the Collections of Information Antipiracy Act.
Congress may use its power under the Commerce Clause to enact legislation such as H.R. 354. Trademarks are indicia of origin that regularly travel in and affect interstate commerce. It seems equally clear that collections of information are items of commerce and it is beyond debate that the U.S. database community provides a wealth of these informational products to users both here and abroad. Just as Congress has chosen to protect trademarks under the Commerce Clause, it has the power to protect valuable compilations that are the product of substantial effort and money from harmful misappropriations.
VIII. Conclusion
Mr. Chairman, American database producers need legislation to protect them, and we need it now. Our goal is not to ''lock up'' data, or prevent access to information; it is to protect our work product from the commercial harm caused by free riders and thereby assure the continued availability of valuable resources. Your bill represents a welcome and important step towards accomplishing that goal. We look forward to working with you and your colleagues in enacting a database protection quickly. Thank you for giving us the opportunity to share our views with you.
APPENDIX A
1. WARREN PUBLISHING, INC.'S Television and Cable Factbook. The Factbook is a directory containing business profiles of all U.S. cable TV systems, licensed broadcast video facilities (i.e., full-power TV stations) and related industries and services (program suppliers, equipment manufacturers, regulatory agencies, et al.). The Factbook is comprised of 3 volumes totaling more than 5,000 pages annually and also is available on CD–ROM.
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In addition to the print products, the databases used to produce the Factbook are widely used by various sectors of the U.S. telecommunications business and academic communities. Warren Publishing makes electronic sales of the Factbook databases to clients for analyses on their own computers, and performs customized analyses upon commission by clients.
Warren Publishing assigns 18–20 full-time employees to the Factbook. They gather, verify, edit and format data for use in both the print and electronic versions. Two other people are employed full-time for sales and fulfillment of customized reports and databases, representing more than one-third of Warren's total workforce. In addition, Warren Publishing annually hires an average of 10 independent contractors to input data from returned Factbook questionnaires. Warren spends tens of thousands of dollars and man-hours each year on original research conducted through mailed questionnaires and telephone surveys.
2. REED ELSEVIER'S MDL Information Systems (''MDL'') produces a range of databases that, taken together, offer chemists an electronic library that covers chemical suppliers and pricing, handling and safety information for 100,000 chemical products, organic chemistry syntheses and preparative methods, xenobiotic transformations and compounds, and structural and biological activity data for 70,000 drugs. MDL is a U.S. based company with more than 330 employees worldwide that creates, produces and distributes databases and computer programs used around the globe by, among others, the pharmaceutical and chemical industries, as well as by government and education organizations involved in basic scientific research.
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3. THE THOMSON CORPORATION'S POISINDEX. This invaluable database provides medical professionals, usually emergency room physicians or poison control specialists, with immediate access to comprehensive listings of toxicological information—a crucial tool to complement their years of experience and training. Authorized users have unlimited access to this information at their own facilities 24 hours a day, 365 days a year. POISINDEX enables them, for example, to identify a substance that a child may have ingested and then to provide instructions for critical, immediate care. Treatments guided by this specialized database have helped save thousands of lives since POISINDEX was created over twenty-three years ago.
POISINDEX contains about 1,000,000 entries describing substances such as drugs, chemicals, commercial and household products and biological materials. More than 30 professionals with training in nursing, pharmacology, toxicology and medicine are responsible for reviewing these substances and obtaining pertinent information on them. In addition, more than 200 practicing clinicians from over 20 countries participate in the editorial process as members of the POISINDEX editorial board. The database lists each substance and up to four full-text documents detailing its clinical effects, treatment measures, degree of toxicity and other relevant information. Software engineers develop computer software to store, edit, sort and retrieve the data and to maintain, test, produce and support the database.
4. SKINDER-STRAUSS ASSOCIATES' Lawyers Diary and Manual. Attorneys in New Jersey, New York, Massachusetts, Florida and New Hampshire routinely use the Lawyers Diary, or Red Book, as their daily reference and directory for information regarding courts, judges, government agencies, and the members of the bar. Practicing lawyers rely upon its comprehensive and accurate databases to assist them with their day-to-day communications, and many regard the Red Book as their most essential source for this information. A third-generation, family-owned business, Skinder-Strauss has more than 40 full-time employees who are actively engaged in the daily activities of data collection, verification, editorial compilation, research and data entry. The various databases managed by the company require contact with more than 400,000 individuals and entities at least once a year. All contact and verification research is initiated by the company through extensive direct mail, telemarketing and other proactive efforts. These initiatives involve the expenditure of significant sums, thousands of man-hours and the pride and dedication of those so engaged.
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5. PHILLIPS BUSINESS INFORMATION, INC. provides a broad range of information products for distinct business markets, including more than 35 directory and directory related products. For example, the Phillips Satellite Industry Directory and accompanying Satellite Industry Directory Buyers Guide is just the type of informational product that, given the fast growing satellite marketplace, is vital to maintaining our leadership in the global arena. It links the reader to more than 6,000 decision-makers in satellite operations, equipment manufacturing, transmission service, broadcasting, and more.
The directory also provides users with exhaustive industry profile sections which include service offerings, key personnel, and contact information. It also offers easy-to-use index pages detailing satellite systems, satellite operators, services offered, and geographic locations, and includes listings of industry regulators, agencies and companies providing satellite products and support services. In addition, Phillips' Satellite Industry Directory is the first to offer a web site index to leading companies in the satellite industry.
Compiling this directory requires one full-time project manager and up to one dozen freelance researchers to gather, inspect, and update more than 6,000 names, addresses and telephone numbers, plus an independent contractor to assist with programming.
6. THOMAS PUBLISHING CO., located in New York City, has published industry information products for a century. Its 400 employees, with a payroll of more than $21,000,000 per year, publish 24 major buying guides, 29 product news magazines, two product information exchange services, a magazine on factory automation, three software comparison guides, and a publication to help buyers select the most cost-efficient transportation modes for their inbound freight. Its Register of American Manufacturers compiles purchasing information about 155,000 companies, classified under more than 60,000 product and service headings.
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The Thomas directories are primarily supported by advertising. In that connection, independent entities throughout the United States solicit advertising orders, provide advertising related material, as well as editorial information to the company. Those organizations are paid in excess of $50,000,000 for their services.
7. THE AMERICAN MEDICAL ASSOCIATION'S (AMA) Physician Masterfile. This comprehensive database contains information regarding approximately 800,000 physicians, including both AMA members and non-members. Its physician demographic data—including state medical licensing and educational information—helps protect the public from fraud and abuse by enabling the ready confirmation of the credentials of those holding themselves out as physicians. The Physician Masterfile's unique physician identifiers allow many industries to bring up-to-date information to physicians regarding the availability of new drugs and their side effects, and to protect the public in the event of drug recalls by the Food and Drug Administration.
8. THE MCGRAW-HILL COMPANIES is a global publishing, information, media, and financial information services conglomerate with 16,000 employees located in over 40 states and 30 countries. The McGraw-Hill Companies has developed and publishes a significant number of databases for the education, construction, business, industry, financial and professional markets, which are available in print or electronically through online services, over the internet or on CD–ROM. Millions of professionals, analysts, researchers, investors and students rely on databases produced by The McGraw-Hill Companies to make critical decisions.
For example, the Standard & Poor/DRI's US Central Database(USCEN) includes 23,000 series of U.S. economic, financial and demographic statistics. Coverage includes data on U.S. trade, population, production, income, housing, employment, and finance. USCEN is one of the largest available economic databases in the world. Substantial collections of information begin in the 1940's; some date as far back as 1900. Major private source data from both DRI and third-party sources—including public information—gives the database added value. Like many of Standard & Poor/DRI's economic databases, there is significant commercial value associated with access to complete and accurate historical data, particularly when analyzing trends in the economy over time.
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9. THE NEW YORK STOCK EXCHANGE, INC. (''NYSE'') is the world's largest stock exchange for the trading of equity products. As an agency-auction market, the NYSE brings together public buyers and public sellers, giving both the maximum opportunity to interact and trade directly with each other without the unnecessary expense of first having to trade with a dealer. By bringing all buyers and sellers together at a central location, the buyers and sellers interact to arrive at a point where the highest bidder meets the offer of the lowest seller, thereby achieving efficient pricing that is the standard relied upon worldwide. Prices and quotations for 3,400 listed securities are dynamically updated and made available to thousands of vendors, broker-dealers and investors and to over 100 countries.
The NYSE licenses(see footnote 102) its real-time database to brokerage houses and on-line securities traders; market data vendors such as Reuters and Bloomberg, television networks like CNBC, dozens of internet sites, and individual investors. Moreover, NYSE has helped set an industry trend of disseminating market data to the widest possible audience. For example, in 1997, it was the first market to make real-time market data available on cable television. Non-professional investors can receive NYSE real-time market data for $5.25 month. In addition, market data more than 15 minutes old is available without charge on the NYSE's website (www.nyse.com), as well as numerous other internet sites.
Mr. COBLE. Thank you, Ms. Winokur.
Professor Lederberg.
STATEMENT OF JOSHUA LEDERBERG, PROFESSOR, SACKLER FOUNDATION SCHOLAR, THE ROCKEFELLER UNIVERSITY
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Mr. LEDERBERG. I'm grateful, Mr. Chairman, for this opportunity to comment on behalf of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine, [the ''Academies''], as well as the Association for the Advancement of Science. Our written testimony for the record will elaborate on the legal issues.
With my own voice I offer you the perspectives of a professor, former president of Rockefeller University, from a long career as a researcher in molecular genetics and bioinformatics, as an advisor to Government science agencies and scientific publishers; and not least as a creator and active user of both commercial and not-for-profit scientific databases. I've been an advisor to some of these enterprises, including some that Ms. Winokur is very familiar with but I'm here formally representing only the Academies and the AAAS.
Access free of unreasonable incumbrance to and use of factual data is essential for furthering our understanding of nature, the medical and technical progress to the validation of scientific claims and the kinds of things Ms. Winokur was just talking about. Indeed, the currently thriving public domain for data fostered by Government policies that nourish research and guarantee full and open access to data benefits all downstream users, including the commercial database industry.
At this time, barring instances of gross piracy, there is no crisis in the development of new databases, commercial or otherwise. Significant legal, technical and self help protection measures to protect proprietary databases are already available. We support the adoption of new diplomatic initiatives and new legal measures as may be needed to address egregious wholesale database piracy. However, we are opposed to responses to those grievances which go beyond solving that problem and would erect unprecedented and unjustified new rights in factual data. These would undermine our Nation's successful research and education system and put a heavy hand on the scale of legitimate competing interests.
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We appreciate the changes to H.R. 354 since last year's bill but along with the administration and other critics—and I was particularly impressed by Mr. Pincus's testimony—we find that the legislation as currently proposed still needs some remediation.
Our objections to H.R. 354 in its current form include an overly and unnecessarily broad scope of protection for factual data, one that would supersede copyright for collections of works of authorship; an insufficient carve-out for not-for-profit scientific and educational users; an incomplete Government data exemption, particularly for Government databases disseminated by the private sector; the retroactive application of the legislation; the unduly long term of protection in light of the breadth and depth of the scope of protection; the blanket prohibitions on traditional, legitimate commercial, value-added uses; the lack of reasonable limitation on the inordinate market power conferred by this legislation on sole source data providers; and absent or vague definitions of important terms.
There was reference to understanding ex ante what the boundaries of the legislation would be. I will confess to understanding what ex ante means perhaps unique among my biological colleagues, but I also feel that I need advice of counsel in trying to understand exactly what is and what is not permitted and that's the core of many of the problems that we face here.
Together with a broad cross section of research, education, library and consumer groups, as well as many commercial publishers and database providers, to encourage legislation we prefer alternative legislation such as The Database Fair Competition and Research Promotion Act of 1999. That targets database piracy by focusing on true unfair competition principles without creating unprecedented new property rights in data and unwarranted controls in downstream uses of data, maintains a reasonable balance between the interests of database producers and users, including legitimate and economically important value adding activities, preserves essential public interest uses, including customary scientific, educational and library activities, adheres to our Constitutional principles and provides protection against monopolistic pricing by sole source data vendors in situations where competition breaks down as a preferred approach to balancing economic interests.
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If this simpler and properly focused alternative is not taken then a much more complex bill like the one that was in the course of being drafted in the Senate Judiciary Committee negotiations last summer would need to be used.
The Academies and the AAAS remain committed to working with Congress and with you on developing a well reasoned and balanced database protection bill that serves the interests of our Nation.
Thank you.
[The complete statement of Mr. Lederberg follows.]
PREPARED STATEMENT OF JOSHUA LEDERBERG, PROFESSOR, SACKLER FOUNDATION SCHOLAR, THE ROCKEFELLER UNIVERSITY
INTRODUCTION
My name is Joshua Lederberg. I have been asked to testify on behalf of the U.S. National Academy of Sciences, National Academy of Engineering, Institute of Medicine (the ''Academies''), and the American Association for the Advancement of Science (AAAS). 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. The AAAS is the umbrella organization for over 250 professional scientific and engineering societies in the United States, with more than 140,000 individual members. I was elected as member of the National Academy of Sciences in 1957 and am a charter member of the Institute of Medicine. I also am Fellow of the AAAS. My biographical summary is attached at the end of this statement.
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I am grateful to have the opportunity to testify to you today about H.R. 354, the ''Collections of Information Antipiracy Act.'' This proposed legislation concerns a topic about which the Academies, the AAAS, and indeed the entire research and education community, have an abiding interest and continuing concerns. It also is one that I have had the opportunity to consider from several pertinent perspectives: as a professor and former president at Rockefeller University; as a Nobel prize winning researcher in molecular biology, genetics, and bioinformatics; as an adviser to government science agencies and to scientific publishers; and not least as a creator and user of both commercial and nonprofit scientific databases. I remain an adviser to such enterprises, but I am here formally representing only the Academies and the AAAS. Nevertheless, it is this integration of perspectives and interests from the private sector, government, and academia that I believe is so important to balancing the interests in the pending legislation of both original database creators and providers on the one hand, and of all downstream users on the other.
I would like to make several points in this testimony:
Access to factual data is essential to furthering our understanding of nature, to medical and technical progress, and to the validation of scientific claims. The essence of the scientific method is relentless critical discourse; without it, the authenticity of knowledge claims rapidly deteriorates. Indeed, a thriving public domain for data, fostered by government policies that guarantee full and open access to data, benefits all downstream users, including the commercial database industry.
One of the major drivers for new database legislation in the United States is the reciprocity clause of the European Union's Directive on Databases. As discussed below, the Directive imposes strong economic and legal restrictions on the conditions of availability and use of factual data in databases in Europe. The Directive could have adverse consequences not only in Europe, but for cooperative U.S.–E.U. academic endeavors. Before adopting equivalent strong and unprecedented database protection in our country to satisfy a European reciprocity provision of questionable validity, it is essential to consider carefully the underlying rationale and potential impacts to our research and education base and to our economy.
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Significant legal, technical, and self-help protection measures to counter database piracy are already available. There is no evidence of a crisis in the development of new commercial databases. While we support the adoption of new measures that are designed to address specific problems, such as wholesale database piracy, we are opposed to the creation of unprecedented and unjustified new rights in factual information that do not balance the legitimate competing interests.
Although we appreciate the two changes that were made to H.R. 2652 in H.R. 354, we find the bill as currently proposed to be unacceptable. We would like to draw the Committee's attention to the legislative proposal, ''The Database Fair Competition and Research Promotion Act of 1999,'' which we support, as well as to the progress made on achieving a compromise on H.R. 2652 in negotiations sponsored by the Senate Committee on the Judiciary last summer.
The Academies and the AAAS remain committed to working with Congress on crafting a well reasoned and balanced database protection bill that serves the interests of our nation, and not just one segment of the publishing community.
I also would like to note at the outset that we are introducing into the official record several attachments to this testimony. The first, labelled Appendix A1, A2, and A3, presents an abridged selection of the Academies' analytical summaries and alternative proposals to Title V of H.R. 2281, the successor bill to H.R. 2652, which were submitted during the Senate Committee on the Judiciary negotiations last summer. The second is a September 4, 1999 letter from Professor Harvey Perlman of the University of Nebraska Law School to Senator Orrin Hatch about unfair competition law.
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THE NEED TO MAINTAIN OUR TRADITIONAL PUBLIC DOMAIN FOR FACTUAL DATA
Scientific and engineering research drives our nation's progress. Society uses the fruits of such research 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 open availability of scientific data, and the open publication of results are cornerstones of our research system that U.S. law and tradition have long upheld.
The consequences of these wise policies has 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.
A necessary component of these past and continuing achievements has been the wide availability of scientific and technical data and information, ranging from raw or minimally processed data to cutting-edge research articles in newly developing fields. This information has been assembled as a matter of public responsibility by the individuals and institutions of the scientific and engineering communities, largely with the support of public funding.
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Data are the building blocks of knowledge and the seeds of discovery. They challenge us to develop new concepts, theories, and models to make sense of the patterns we see in them. They provide the quantitative basis for testing and confirming theories and for translating new discoveries into useful applications for the benefit of society. They also are the foundation of sensible public policy in our democracy. The assembled record of scientific data and resulting information is both a history of events in the natural world and a record of human accomplishment.
The recent 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. However, 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 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. 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.
Progress in the creation and use of new knowledge for the national good depends both on the full and open availability of government and government funded data, and on fair and equitable availability of data from the private sector. By ''full and open'' we mean that data and information derived from publicly funded research are made available with as few restrictions as possible, on a nondiscriminatory basis, for no more than the cost of reproduction and dissemination. Fair and equitable availability of data from the private sector means that if commercial content providers receive enhanced protections in their databases, that preferential terms of access to and use of those data by researchers, educators, libraries, and other public-interest entities, firmly rooted in our Constitution and legal tradition, are retained and, when necessary, adapted to the digital and online environment. Moreover, legal rules must ensure that private firms cannot by contract and market power override the traditional Constitutional rights of access and use by the research and educational communities.
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WHY THE UNITED STATES SHOULD NOT BE COMPELLED TO FOLLOW A FLAWED EUROPEAN MODEL FOR DATABASE PROTECTION
It is our view that any domestic legislation, such as H.R. 354 (or its predecessor drafts in this Committee), that seeks to impose the same or ''equivalent'' legislation to the E.U. Directive on Databases would be unacceptable. The sui generis Database Directive, adopted by the European Communities in March 1996, is an inappropriate model for the United States because of the following major problems:
The creation of an unprecedented, absolute exclusive property right in the contents of databases, which would decrease even public-interest access to data and reduce competition;
An overbroad definition of databases that potentially includes every information product that has heretofore been freely available from the public domain;
The use of other undefined terms and concepts, creating significant uncertainties in the law's scope and application;
The introduction of long and potentially perpetual terms of protection, with a resulting possibility of no evolving public domain from which previously compiled data could be freely used;
The absence of sufficient public-interest exceptions for the preservation of public-good activities such as research, education, and libraries, as well as significant curtailment of other users' rights;
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No mandatory legal licenses or other limitations requiring sole-source providers to make data available on reasonable terms and conditions, with due regard for the preservation of competition and the public interests of research and education; and
The introduction of strong civil (and possibly even criminal) penalties for infringement that likely would have a chilling effect on the full and open exchange of data for research and educational purposes.
It is important to emphasize that these unwarranted restrictions have been placed on access to and subsequent uses of factual data, which traditionally have been in the public domain and, for good reason, have not been covered by copyright or other exclusive rights. Moreover, these restrictions apply as well to collections of ''works of authorship'' such as journals, textbooks, and anthologies, thus superseding copyright protection. In the case of the research and educational communities, the potential negative effects are exacerbated by the fact that most sources of scientific data are natural monopolies, either because the data contents are unique and not reproducible, as in the case of all observational data of transitory natural phenomena, or they are generated for esoteric niche markets that have a customer base too small to support more than one producer or supplier.
Our concerns are further amplified by the fact that the sui generis restrictions apply as well to publicly funded data in Europe and that this could lead to tremendous strains, or even the breakdown, in certain areas of scientific cooperation between the United States and Europe. Such cooperation is becoming increasingly important for accelerating scientific progress and for sharing costs in such areas as genomic research and global remote sensing studies, yet signs of this tension are already appearing in these important areas of research.
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It is possible that the E.U. Directive's reciprocity clause will be found to violate the terms of existing intellectual property and trade conventions regarding national treatment of law requirements. However, even if a legal challenge to the reciprocity provision were to fail, other countries, especially those in the developing world, may begin to institute their own sui generis intellectual property rights without national treatment, and discriminate against foreign innovators. Such a result could quickly undermine the now universal norm of national treatment, which was a principal goal of the recent TRIPS agreement under GATT. Thus, the mere fact that the E.U. has adopted a flawed new legal regime for database protection and coupled it with an unwise, and possibly illegal, reciprocity requirement should not induce the United States to emulate it. Rather, our government should challenge the reciprocity provision and independently craft legislation that targets database piracy in a manner that reasonably balances all legitimate interests.
LEGISLATIVE ALTERNATIVES TO H.R. 354
We are pleased that the process of deliberating major changes to the U.S. intellectual property law for databases has become more open and appears to have slowed to a rational pace, that the E.U.'s sui generis model is no longer the sole option under consideration, and that the participation by representatives of major potentially affected end-user groups, as well as by a broader cross-section of the commercial database and information services industry, has become institutionalized. We especially wish to draw your attention to an alternative legislative approach, ''The Database Fair Competition and Research Promotion Act of 1999,'' which was introduced into the Congressional Record by Senator Orrin Hatch, Chairman of the Senate Committee on the Judiciary, on January 19, 1999, and which we support, as well as to the outcome of Senate Judiciary Committee negotiations on database protection legislation last summer, in which some key concerns of the scientific and educational communities were addressed.
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Before discussing these two important developments, we wish to note that we were encouraged by the two changes that already have been made to this Committee's previous version of this legislation, H.R. 2652 (and subsequently Title V of H.R. 2281), in H.R. 354: (1) trying to eliminate the potential for indefinitely prolonging the 15-year duration of protection in section 1408 (c), and (2) expanding the scope of the exemption for certain nonprofit educational, scientific, or research uses in section 1403 (a). The first revision addresses one of the Constitutional defects that was pointed out by various critics of last year's version of this bill; the second one responds to some of the concerns we had conveyed last year regarding the potential negative impacts of the legislation on public interest uses, generally, and on our nation's research activities, specifically. Despite these positive developments, we remain troubled by the scope and substance of a number of the provisions in H.R. 354, and by its approach to addressing the problem of database piracy overall, which seeks to maintain legal equivalency to the E.U. Database Directive.
As you know, in late July of last year, Senator Hatch invited representatives of the various stakeholder groups to participate in a series of closed negotiations, which lasted from the beginning of August until early October. This process resulted in a series of legislative drafts, culminating in a version dated October 5, 1998, which was introduced into the Congressional Record by Senator Hatch on January 19, 1999 as well (referred to as the ''Hatch Database Draft'' below). Because of the importance of this legislation to the interests of the research community, the Academies took the unusual step of participating directly in these negotiations. We submitted a series of analytical commentaries and specific alternative proposals (see Appendixes A1, A2, and A3 for an abridged selection of those submissions), almost all of which remain relevant to H.R. 354.
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The other concerned parties to the negotiations, including a broad cross-section of nonprofit and industry organizations and companies, also submitted constructive proposals in good faith and these were given due consideration by the Senate Judiciary Committee. Perhaps most significant, the Administration provided a consensus critique of H.R. 2652 in an August 5, 1998 letter from the Department of Commerce General Counsel, Andrew Pincus, to Senator Hatch. In addition, the Department of Justice submitted a legal memorandum to Senator Hatch on July 28, 1998 regarding the Constitutional problems of the legislation, and the Chairman of the Federal Trade Commission, Robert Pitofsky, wrote to the Honorable Tom Bliley, Chairman of the House Committee on Commerce on September 28, 1998 concerning its the potential anticompetitive effects.
Although the direct negotiations of the stakeholder parties produced no major breakthroughs or compromise solutions, the final phases of the negotiations, as mediated by the Senate staff, resulted in the October 5, 1998 draft, which produced some far-reaching modifications to Title V of H.R. 2281. Most of these changes substantially implemented important aspects of the Academies' own position, the highlights of which may be summarized as follows:
The quasi exclusive property right approach of H.R. 2281 was ultimately abandoned in favor of a more reasonable ''misappropriation'' (unfair competition) approach (see Appendix B, a letter from Professor Harvey Perlman to Senator Hatch dated September 4, 1998, for a critique of why Title V of H.R. 2281—and the current H.R. 354—is not an unfair competition law). This was accomplished by conditioning liability on acts that ''cause substantial harm to the actual or neighboring market'' of database proprietors (section 1302 of the Hatch Database Draft, emphasis added) and by inviting courts, in the legislative history, to determine ''substantial harm'' in light of ''whether the harm is such as to significantly diminish the incentive to invest in gathering, organizing, or maintaining the database'' (see the proposed Conference Report Language on section 1302 in the Hatch Database Draft).
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A full carve-out that would immunize customary scientific and educational activities was adopted in place of the weak exception provided under section 1303(d) of H.R. 2281, and the limited and unacceptable ''fair use'' approach that the Administration had recommended during the Senate negotiations. We considered a ''fair use'' approach, modeled on copyright law, as inadequate because other basic copyright immunities and exceptions, including the idea-expression dichotomy, are not carried over into the database protection environment. On the contrary, because the proposed database law would protect collections of facts and data that are ineligible for protection under our copyright law, most scientific activities that were previously permissible would become infringing acts under such a law. The burden would then be on scientists to show that a vague fair-use exception should excuse some of these infringing acts from whatever test of harm was adopted. In contrast, we successfully argued that traditional scientific activities should remain unhampered by any new database protection law, as the Administration's consensus position in the August 5 Pincus letter also maintained. To this end, §1304 of the final version of the Hatch Discussion Draft stated that ''nothing in this chapter shall prohibit or otherwise restrict the extraction or use of a database protected under this chapter for the following purposes:
1) for illustration, explanation, or example, comment or criticism, internal verification, or scientific or statistical analysis of the portion used or extracted; and
2) in the case of nonprofit scientific, educational, or research activities by nonprofit organizations, for similar customary or transformative purposes'' [emphasis added].
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Only if a scientist were to cause substantial harm to the database maker by using unreasonable and non-customary amounts of the collection for a given purpose, or if the scientist in fact made a substitute for the original, or otherwise sought to avoid paying for the use of research tools devised as such, would liability kick in. Under this approach, the burden would be on publishers to show that scientists had crossed the line of permitted, traditional, or customary uses, which are immunized. Our operating principle that science should be left no worse off after enactment than it was before, would thus have been substantially implemented. This same line of reasoning extends to our preference for this language over that proposed in section 1403(a) of H.R. 354.
Additional immunities and exceptions favoring certain instructional and library uses of databases also were defined (see section 1307 of the Hatch Database Draft), although we believe that greater flexibility would need to be given educational users in this context.
The need for regulation of licensing terms and conditions was expressly recognized in a series of provisions requiring periodic studies of the misuse doctrine (see Sec. 4 and Proposed Conference Report Language, pages 36–37, in the Hatch Database Draft). It is our view, however, that these restraints on licensing should have been codified in the operative clauses of the Act itself.
The legislative history also clarified the definition of databases in ways that tended to exclude ordinary literary works, and it denied protection ''to any ideas, facts, procedure, process, system, method of operation, concept, principle, or discovery, as distinct from the collection that is the product of investment protected by this Act'' (see page 31 in the Hatch Database Draft). Again, in our view, it would be much better to codify this definition expressly in the Act itself.
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We considered these revisions to Title V of H.R. 2281, while not necessarily optimal, to be representative of the progress that could be made in achieving a more balanced database antipiracy legislation. Nevertheless, there were other important provisions of the legislation that still required substantial work to make H.R. 2281, and its successor bill, H.R. 354, even marginally acceptable, including, among other:
the blanket prohibitions on traditionally legitimate commercial value-adding uses;
the retroactive application of the legislation;
the incomplete government data exemption, particularly for government databases disseminated by the private sector;
the excessive length of the term of protection in light of the breadth and depth of the scope of protection;
the absence of any reasonable limitations on the greatly increased market power granted by this legislation to sole-source data providers; and
the lack of adequate definitions regarding important terms.
Although both the extent of progress in the Senate, as well as the unresolved issues, indicate that a great deal more work would need to be done on H.R. 354 to bring it into some reasonable balance among all the legitimate competing interests, we believe a better alternative, as noted above, was introduced into the Congressional Record by Senator Hatch. Without going into extensive detail at this time about the relative merits of the two approaches, we wish to emphasize that we consider the approach taken in ''The Database Fair Competition and Research Promotion Act of 1999'' to be preferable because it:
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Targets database piracy by using true unfair competition principles, without creating unprecedented new property rights in data and unwarranted control in downstream uses of data;
Maintains a reasonable balance between the interests of database producers and users, including legitimate and economically important value-adding activities;
Preserves essential public interest uses, including customary scientific, educational, and library activities;
Adheres to all Constitutional principles; and
Provides protection against monopolistic pricing by sole-source data vendors in situations where competition is not a de facto reasonable method of sustaining balance of economic interests.
We trust that you and your Committee will review this alternative carefully to make your own determinations. We believe it is especially worthy of note that this alternative is supported by an impressive array of not only research, educational, library, and consumer organizations and institutions, but by many commercial publishers and information service providers.
Later this spring, the National Research Council will publish two reports that will address in greater depth many of the fundamental issues regarding intellectual property rights in the networked environment, and reviewing the policy options for promoting access to and use of scientific and technical data for the public interest. Also toward the end of this year, AAAS will issue recommendations of an expert group it has convened on the connection between intellectual property and electronic publishing in science.
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We hope that these studies will help promote a deeper understanding of the issues underlying the current debate, and we look forward to continuing to work with Congress in this important area. Thank you again for providing us with the opportunity to testify at this hearing.
BIOGRAPHICAL SUMMARY OF JOSHUA LEDERBERG
Joshua Lederberg, a research geneticist, is Sackler Foundation Scholar and President-emeritus of Rockefeller University in New York. Dr. Lederberg attended Columbia P&S Medical School, and he received his Ph.D. in microbiology at Yale. He served as professor of genetics at the University of Wisconsin, and then at Stanford School of Medicine, before coming to the Rockefeller University in 1978. His life-long research, for which he received the Nobel Prize in 1958 (at the age of 33), has been in genetic structure and function in microorganisms. He has been actively involved in artificial intelligence research (in computer science) and in the NASA experimental programs seeking life on Mars. He has also been a consultant on health-related matters for government and the international community, e.g., having had long service on WHO's Advisory Health Research Council. He has been a member of the National Academy of Sciences since 1957, was a charter member of the Institute of Medicine, and was elected Fellow of the American Association for the Advancement of Science in 1982. He has served as Chairman of the President's Cancer Panel, and of the Congress' Technology Assessment Advisory Council, as well as on numerous other consultative panels, including the regents of the National Library of Medicine. He received the U.S. National Medal of Science in 1989. From 1978 to 1990, Dr. Lederberg served as president of the Rockefeller University, where he continues his research activities in the genetics and evolution of bacteria and viruses.
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Mr. COBLE. Thank you, Professor.
Mr. Kirk.
STATEMENT OF MICHAEL KIRK, EXECUTIVE DIRECTOR, AMERICAN INTELLECTUAL PROPERTY LAW ASSOCIATION
Mr. KIRK. Thank you, Mr. Chairman.
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I'm pleased to have the opportunity on behalf of the 10,000 members of the American Intellectual Property Law Association, first of all, to wish you a happy birthday, and secondly, to express our views on H.R. 354.
The need to protect databases created through the investment of time and money against free riders who would copy them has been clearly established. Feist reversed nearly two centuries of copyright law jurisprudence under which American courts protected against copying databases created by a compiler's investment of time, effort and money. After Feist the more comprehensive and complete a database, the less likely that meaningful, if any, protection under copyright law will exist.
Other forms of protection, as was noted earlier today, simply do not fill in the gap created by Feist, leaving the investment in the creation of databases for use by businesses, researchers and educators at risk.
Another compelling reason for enactment of H.R. 354, in our opinion, is the European Database Directive, which requires European member states to implement a sui generis form of protection for databases on a reciprocal basis. A database created in the United States by a company with insufficient European presence will only receive protection under the directive if the United States offers comparable protection to EU databases. This directive was motivated by the imbalance in the investments in the database sector between the community and other countries.
Just last month the European Union again signaled its intention to modify its IP laws to help European industry, in this case to encourage greater efforts in the creation and patenting of computer software. The message to us is clear: the EU is committed to amending its IP laws to strengthen the international competitiveness of European industry. We believe the United States can afford to do no less.
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H.R. 354 reflects continuing efforts by you and members of the subcommittee, Mr. Chairman, to fill this void created by Feist. It continues the misappropriation approach for the protection of databases first set forth in the last Congress in H.R. 2652. It protects against the free rider who harms the market of the database creator through the sale of products generated by the taking of a substantial part of the creator's database.
At the same time this protection is carefully balanced with limitations and exclusions including a newly added ''fair use type'' exemption permitting use or extraction for teaching, research or analysis if reasonable under the circumstances; a clarification that extraction of individual fact is not precluded; and an express confirmation that nothing in the bill restricts the use of such information for news reporting; Government-generated information, computer programs and information used to facilitate the functioning of the Internet are also excluded. Finally, another new provision in H.R. 354, commented upon earlier, establishes a 15 year term by precluding any action for the extraction or use of a collection of information that occurred more than 15 years after that collection was first offered for sale.
AIPLA recognizes that the incentives provided in H.R. 354 must be balanced to assure that access to information for educational and research needs is not unduly inhibited. However, to ensure that these balancing exceptions and limitations do not create uncertainty for the creators of databases or their users—and I would say undue uncertainty—we would suggest that guidelines and illustrative examples be included in the report language of this bill.
If I might digress just a moment, there will be no bright lines. That simply is not going to happen. Both sides can argue, I think, that the line is not clear and should move one way or the other. In the final analysis, however, there will be judgements as to where the line is to be drawn and the court will have to determine that. That exists today in the copyright law and many other fields of law.
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Mr. Chairman, you and the other members of the subcommittee have made significant strides toward the balanced measure that we need to fill the void created by Feist. We believe that H.R. 354 will re-establish the incentives for continued American leadership in the field while addressing the legitimate needs of users. H.R. 354 is fundamentally sound and should be promptly enacted.
Thank you, sir.
[The complete statement of Mr. Kirk follows.]
PREPARED STATEMENT OF MICHAEL KIRK, EXECUTIVE DIRECTOR, AMERICAN INTELLECTUAL PROPERTY LAW ASSOCIATION
Mr. Chairman:
I am pleased to have the opportunity to present the views of the American Intellectual Property Law Association (AIPLA) on H.R. 354, the ''Collections of Information Antipiracy Act.''
The AIPLA is a national bar association of approximately 10,000 members engaged in private and corporate practice, in government service, and in the academic community. The AIPLA represents a wide and diverse spectrum of individuals, companies and institutions involved directly or indirectly in the practice of patent, trademark, copyright, and unfair competition law, as well as other fields of law affecting intellectual property.
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INTRODUCTION
The AIPLA supports the protection for collections of information or databases as set forth in H.R. 354. We expressed our support for H.R. 2652, the predecessor of this bill, in conjunction with hearings held in October 1997 and February 1998. The legislation has undergone significant revisions since our earlier expressions of support to address concerns raised by the educational, scientific and research communities as well as by the Administration and the Register of Copyrights. Although we have a few suggestions regarding specific provisions of the legislation, they relate principally to report language. We believe that you have done an admirable job in crafting a balanced approach to provide the needed incentives for the continued creation of databases in the United States as well as to ensure their protection in our major foreign markets.
THE NEED FOR DATABASE PROTECTION
The AIPLA believes that the need for protection of databases, created through the considerable investment of time and money, against those who would copy them without permission or compensation is settled. The Supreme Court's rejection of the ''sweat of the brow'' basis for protecting compilations under copyright in Feist Publications v. Rural Telephone Service Co., 449 U.S. 340 (1991) marked a sea change in the protection of databases. As detailed in Section I of the Report on Legal Protection for Databases (Report) prepared by the Copyright Office in 1997, for nearly two hundred years prior to Feist, American courts protected databases under copyright law against copying based on the compiler's investment of time, effort and money. After Feist, a compilation or database can be protected under copyright only if the selection, coordination, or arrangement of its contents satisfies the creativity standard of the copyright law. The reality of the gap created by Feist can perhaps best be appreciated when one realizes that the more comprehensive and complete and therefore valuable a database is, the less judgment will frequently be exercised in the selection, coordination or arrangement of its content and consequently the less likely that meaningful (if any) protection under copyright law will exist. Surely the adequacy of the existing regime for protecting databases under copyright must be questioned when it presumably grants greater protection to a smaller, highly selective database of arguably less general utility than to a large, all inclusive database of more general utility.
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The problem is further compounded by the impact of Feist on the scope of copyright protection for databases. Stating that copyright in a factual database is ''thin,'' the Supreme Court observed in Feist that a subsequent compiler is free to use the facts contained in another person's database as long as the selection and arrangement are not copied. In Bellsouth Advertising & Publishing Corp. v. Donnelly Information Publishing, Inc., 999 F2d 1436 (11th Cir. 1993), the Eleventh Circuit held, in a case where copyrightability had been stipulated by the parties, that the copying of all of the names, addresses and telephone numbers of advertisers in the plaintiff's yellow pages did not infringe, because the plaintiff's selection, coordination and arrangement was either unprotectable or not copied. The Report observes that most of the post-Feist appellate cases have found wholesale taking of information from copyrightable compilations to be non-infringing and that district court cases are trending in this direction.
Whether the problem is that databases simply do not possess the requisite creativity in their selection, coordination or arrangement to qualify for copyright protection or whether the problem is more that copyright in databases is ''thin,'' the incentive to invest in the compilation and collection of large amounts of information and data for use by businesses, researchers and educators is at risk.
Other forms of protection for databases cannot close the gap created by Feist. Trade secret law is only available to protect databases used inside a business where the requisite level of secrecy can be maintained. Disclosure of a database through sale or an online service precludes resort to trade secret protection. While contract law has been used to protect databases against unauthorized use, the lack of privity with unrelated third parties and the lack of uniformity of contract law from one state to the next reduce its effectiveness.
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State common law misappropriation is also mentioned as a possible basis for protecting databases, especially after the Second Circuit's decision in National Basketball Association v. Morotola, Inc., 105 F2d 841 (2d Cir. 1997). However, that case called for the information to be time-sensitive, or ''hot,'' a criteria that could be fatal for the protection of a comprehensive, historical collection of information. Also, as with other forms of state law, the law of misappropriation which varies widely from state to state, would deny database compilers the uniformity and certainty needed to justify the substantial investments required for many of today's most useful databases.
Finally, technological protection is increasingly being looked to by database publishers. While technological protection may be an increasingly important means of protecting databases in the digital era, it is not a complete answer. Such means affect ease of use, increase costs, can be circumvented, do not prevent the use of a database that someone improperly obtains, and is primarily effective only for databases in electronic form.
There is another compelling reason for enactment of H.R. 354 and that is the European Database Directive adopted in 1996. The Directive requires the member states of the European Union to implement a sui generis form of protection for databases. Under the directive, an EU national or habitual resident who creates a database through substantial investment is given the right to prevent the extraction and/or re-utilization of all or a substantial part of the database. A database created in the United States by a company with insufficient European presence will only receive protection under the Directive if the United States offers comparable protection to EU databases. Failure of the United States to provide the arguably comparable protection of H.R. 354 will mean that United States-based database vendors will be increasingly placed in a disadvantageous competitive position vis-a-vis their EU counterparts in the large EU information market.
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The issuance of the Database Directive was motivated in part by concern about the ''very great imbalance in the level of investment in the database sector . . . between the Community and the world's largest database-producing countries.'' This willingness on the part of the European Union to promote investment in important market sectors was evidenced again just last month in ''The follow-up to the Green Paper on the Community Patent and the Patent System in Europe.'' Noting that
6% of all patent applications in the United States are for computer programs as compared to less than 2% of Europe,
75% of the 13,000 European patents covering software are held by very large non-European companies, and
investments in developing information technology and software programs are approaching $40 billion annually,
the European Commission stated its intention to present, as soon as possible, a draft Directive to harmonize and clarify the patentability of computer programs and to encourage EU members of the European Patent Convention to take steps to modify that Convention to remove computer programs from the list of unpatentable inventions. The message is clear: the European Union is committed to amending EU intellectual property laws to strengthen the international competitiveness of European industry. The United States cannot afford to do less to promote its international competitiveness in the database arena.
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The AIPLA is not alone in its conclusion that there is a need for protection of databases. The Clinton Administration
''. . . supports legal protection against commercial misappropriation of collections of information . . . there should be effective legal remedies against 'free riders' who take databases gathered by others at considerable expense and reintroduce them into commerce as their own.'' (August 4, 1998 letter to Senator Patrick Leahy from Department of Commerce General Counsel Andrew Pincus)
In her testimony before this Subcommittee in October 1997, Register of Copyrights Marybeth Peters stated that the general level of protection previously available for databases under the ''sweat of the brow'' copyright approach should be restored and that the Copyright Office agrees that legislation to address the shortcomings in current law is desirable.
THE PROTECTION PROVIDED BY H.R. 354
The provisions of H.R. 354 reflect the continuing efforts by you, Mr. Chairman, to craft a balanced solution to fill the void which currently exists in the protection available for databases. H.R. 2652, as originally introduced in the 105th Congress, first set forth the misappropriation approach for the protection of databases. This approach, with clarifications, is continued in section 1402 of H.R. 354. It establishes civil and criminal remedies against any person who extracts, or uses in commerce, all or a substantial part of a collection of information gathered, organized or maintained by another person, so as to harm that other person's market for a product or service using that collection. Most of the improvements reflected in H.R. 354 over H.R. 2652 as introduced were already incorporated into H.R. 2652 in the version that passed the House last year.
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Sections 1403 and 1404 set forth a number of permitted acts, limitations and exclusions to strike a balance with the prohibition set forth in 1402. Thus, section 1403—
provides that use or extraction of information for non-profit educational, scientific or research purposes that does not harm the actual market for the database creator's products is permitted.
provides a ''fair use-type'' exemption from section 1402's reach for an ''individual act'' of use or extraction for illustration, explanation, example, comment, criticism, teaching, research or analysis, if ''reasonable under the circumstances,'' along with four factors to aid in determining reasonableness. The exemption would not apply if the extracted information is offered for sale and is likely to be a substitute for the creator's database.
clarifies that the prohibition of section 1402 does not reach individual items of information—facts—unless part of a scheme to circumvent the prohibition.
clarifies that anyone is free to collect the same facts and information from different sources.
permits the use of a database within an organization to verify the accuracy of information independently compiled by another.
permits use of information for news reporting, unless the information is time sensitive, was gathered by a news entity, and is used for direct competition.
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Section 1404 excludes from the prohibition of section 1402—
collections of information created by or for a government entity, with certain exceptions,
computer programs, and
collections of information used to address, route, or transmit digital online communications to facilitate the proper functioning of the Internet.
The relationship of H.R. 354 to other laws is set forth in section 1405. In addition to expressly clarifying that nothing in H.R. 354 affects the rights, obligations, limitations, or remedies with respect to federal IP and antitrust laws as well as trade secret, privacy and contract law, section 1405 expressly pre-empts state rights equivalent to the rights contained in section 1402.
Section 1406 establishes civil remedies for a violation of section 1402, including temporary and permanent injunctions, monetary relief, and the destruction of copies of information extracted or used in such a violation. The bill provides special protections for non-profit, educational, scientific, and research institutions by providing for the award of costs and attorney's fees for actions brought against them in bad faith and the reduction or elimination of any monetary relief against the employees of such organizations who, with reasonable grounds, believed that their conduct did not violate section 1402. Section 1407 sets out the criminal sanctions for a willful violation of section 1402, but exempts their application to employees of nonprofits acting within the scope of their employment.
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Finally, section 1408 sets forth limitations on the commencement of both civil and criminal actions, including a limitation on bringing any action for the extraction or use of a collection of information that occurs more than 15 years after it was first offered for sale or used in commerce.
SUGGESTIONS FOR CLARIFICATIONS
AIPLA believes that the prohibition against the misappropriation of collections of information in section 1402 is well crafted. At the same time, we recognize that the incentives provided by this protection must be balanced to ensure that the continued availability of information for educational and research needs is not unduly inhibited. We compliment you, Mr. Chairman, for the careful balancing act evidenced in H.R. 354. We offer only a few comments for clarifications in the report.
As a general matter, we note that the exceptions provided in section 1403, to the acts prohibited by section 1402, do not require that the copy of the collection of information from which an extraction is made and used be a lawfully-acquired copy. In this regard, we note that the exception contained in section 6 of H.R. 3531 required that the person extracting from a database be a lawful user of that database.
Turning now to the specific exceptions, we recognize that the Administration and others have argued that the bill should provide exceptions analogous to ''fair use'' principles of copyright law, in particular to minimize any affects on non-commercial research. While we do not oppose such exceptions as a matter of principle, we would urge that any such exceptions be carefully crafted so as to not unduly dilute the incentives provided in section 1402 for the creation of databases.
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In this regard, we recognize that the four factors listed in section 1403(a)(2)(A) to assist in determining whether a use or extraction of data is ''reasonable under the circumstances'' must necessarily be flexible. Too much flexibility, however, will result in uncertainty as to where the line is drawn for both database creators and users. For example, as regards the third factor, the inclusion of some illustrative examples or guidelines in the report regarding what degree of ''difference'' would (and would not) lead to a determination that an extraction was reasonable would be most helpful.
Similarly, in the fourth factor, further clarification of the purpose of the term ''primarily'' would be desirable. Would extraction from a database by a person in a business different from that for which the database was primarily developed, but which business was nonetheless a very significant user of the database, be exonerated by this factor?
In the last paragraph of section 1403(a)(2)(A), we would assume that the phrase ''offered . . . otherwise in commerce'' would not literally require an extracted portion to be offered in commerce. We would hope that the paragraph would deny the exception, for example, to a for-profit entity that extracted portions of a database for use internally as a substitute for purchasing copies. Clarification would be helpful.
Finally, a word about the term of protection accorded to a collection of information. Section 1408(c ) provides that nothing shall prevent the use or extraction of information from a collection of information after 15 years from the date on which it was first offered for sale. The obvious question, in this era of electronic databases which are constantly updated with new information which would qualify for protection, is how will one determine what is 15 years old and therefore freely useable? We understand that there was some discussion last year of creating a deposit system within the Copyright Office. We believe that such a solution could be the answer, provided that a practical system could be developed that would not be unduly expensive or burdensome for database creators or users.
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CONCLUSION
Mr. Chairman, the evolution of the legislation to fill the void left by the Feist decision has taken us ever closer to our goal. With H.R. 354, the AIPLA believes that we are indeed very near the balanced approach needed to reestablish the incentives for continued American leadership in the field while addressing the legitimate needs of users. We are ready to work with you and with other interested individuals and organizations to resolve any remaining issues to facilitate the prompt enactment of this important and needed legislation.
Mr. COBLE. Thank you, Mr. Kirk.
Mr. Phelps.
STATEMENT OF CHARLES PHELPS, PROVOST, UNIVERSITY OF ROCHESTER
Mr. PHELPS. Thank you, Mr. Chairman, members of the subcommittee. I appreciate this opportunity to present the views of three major higher education associations on H.R. 354.
First, I want to thank you for your responsiveness to our previous concerns. You've made a number of changes in your bills over the last year and H.R. 354 contains further improvements in accepted uses for university research and educational purposes. We acknowledge and thank you for your responsiveness. Therefore, at the risk of seeming ungrateful, I must state that we believe that more work needs to be and yet can be done expeditiously.
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A single core principle directs our thinking on database use and protection: the preservation of access to facts as a part of the public domain for use by all. Our longstanding national information policy has fostered the unfettered flow of information for research and education and has served this Nation well.
As the Supreme Court said in Feist, ''all facts—scientific, historical, biographical, and news of the day . . . are part of the public domain available to every person.'' ''The raw facts and the compilation may be copied at will. This result is neither unfair nor unfortunate. It is the means by which copyright advances the progress of science and art.''
The U.S. leads the world in science and technology. The Nation benefits economically, militarily and in the quality of life and the products of economic research and advanced education.
Moreover, the higher education enterprise itself is one of the most successful sectors of the economy. The quality of U.S. higher education has attracted far more students from abroad than has that of any other country in the world. Perhaps only professional basketball has succeeded more in international competition than higher education. We should not put that success at risk.
Given the importance of our national research and educational enterprise and the role that our enlightened national information policy plays in sustaining the creativity and productivity of this enterprise we believe Congress should always move to protect access to information and to preserve the ability of science, scholars and educators to use information to advance their research and education missions. If in doubt, you should err on the side of access.
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To preserve access to information we believe that the database protection legislation should meet three critical standards. First, the protection should only target specifically identified wrongful conduct rather than establishing a broad prohibition against use. Second, protection should apply only to clearly defined classes of materials, to compilations and not the facts they comprise. And third, the protection available for compilations in this domain should not exceed that now provided for original creative works of authorship through copyright law.
We believe that H.R. 354 does not yet meet these standards. Our specific concerns are the following: first, the prohibition on extraction or use in commerce is unreasonably broad and grants substantial control over information itself long after it is extracted from the protected collection. The term ''use'' has no meaningful bound and could cover virtually any academic conduct involving the information.
At each step of the way in using information a professor or student will be required to know the origins of and the investment in the information, whether it represents a quantitatively or qualitatively substantial part of the collection, whether the specific use is licensed and whether the use harms a market. While there might be enough attorneys to guide us through this legal maze as we carry out our academic work, we could not afford them.
I have seen Ms. Winokur's written statement on behalf of the Coalition Against Database Piracy and agree with her that the real threat to the database industry are unscrupulous competitors and cyber-pranksters, but I do not believe you need H.R. 354 in its current form to address those threats. I believe you need only a focused bill perhaps making extracted material available to others in a manner that is likely to serve as a market substitute for the original collection.
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Second, the definition of ''protected collection'' is so broad that it literally covers almost any academic publication, including and article, a textbook, or a report in a scientific study with its accompanying data. It should be narrowed in the text of the bill. I understand from the written statements that the Copyright Office agrees with this goal. We do disagree with the Office's belief that the language in the bill now accomplishes that and my written testimony does provide alternative approaches.
Third, liability under H.R. 354 should not be triggered where a taking is either quantitatively or qualitatively insubstantial. The essence of compilation is quantity. If you protect the quantitatively insubstantial you protect the facts themselves. A single fact or several are just facts, no matter how important. In order for liability to attach, the taking must be quantitatively substantial. Further, the material that is taken must itself be the result of substantial effort and investment that the bill protects.
Fourth, the bill's concept of market harm far exceeds the traditional bounds of misappropriation and unfair competition law and provides database proprietors with the ability to define markets and thus liability. Harm should focus on the dissemination of a market substitute. If extraction is prohibited it should be limited to extraction that causes substantial harm to the primary market.
Fifth, the bill's exceptions for educational activities and other reasonable uses contain conditions that substantially restrict their usefulness. For example, the non-profit academic exception is conditioned on the absence of ''direct harm to the actual market.'' That sounds fair until you realize that direct harm means non-payment of the fee and ''from actual market'' can be anything that the proprietor wants. That is far from the result the Copyright Office says is appropriate, to quote: ''Where such use is a serious and immediate threat to the producer's investment.'' And the user is a member of the market for which the database is produced.
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Sixth, the bill fails to protect the public against unreasonable market power from compilations not readily available from competitive sources and fails to secure access to older, no longer protected versions of protected compilations. This could lead to a death trap of perpetual protection. Again, I understand that the Copyright Office agrees that further work on these issues may be needed.
The bill also does not protect for institutions that act as on line service providers from unreasonable liability for the conduct of third parties. And all universities and colleges serve this function for their community.
My written statement amplifies these concerns and proposes specific solutions. When you consider the threat that overly broad protection poses to the foundation of the scientific, academic and research communities we hope you will give our proposals full consideration. We'd be most happy to work with you to clarify the language.
Thank you.
[The complete statement of Mr. Phelps follows.]
PREPARED STATEMENT OF CHARLES PHELPS, PROVOST, UNIVERSITY OF ROCHESTER
I am Charles E. Phelps, Provost of the University of Rochester. I appreciate this opportunity to testify before the Subcommittee on H.R. 354, ''The Collections of Information Antipiracy Act.'' My testimony is presented on behalf of the Association of American Universities, the American Council on Education, and the National Association of State Universities and Land-Grant Colleges, which together represent over 1,500 colleges and universities. These Associations understand the need to protect databases, and they support legislation targeted to address unfair competition and database piracy. Indeed, universities and colleges often are creators of collections of information.
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We very much appreciate the revisions to H.R. 2652 contained in H.R. 354 that seek to address concerns raised about acceptable uses of databases and the potential for perpetual protection of databases. We are concerned, however, that the protections provided to collections of information in H.R. 354 remain overly broad in a number of key respects that will impede the core academic activities of research and teaching. We are prepared to work with the Subcommittee and with other interested parties to develop a consensus approach that can be supported by all.
We approach the issue of database protection with a single core principle: Because data and information are the cornerstone of scientific and scholarly research, teaching and learning, we believe it is imperative to preserve the fundamental premise of this nation's information policy that no one may own facts or information, or may prevent the full, unfettered use of facts and information. As the Supreme Court said in Feist, ''all facts—scientific, historical, biographical, and news of the day . . . are part of the public domain available to every person.'' Feist Pubs., Inc. v. Rural Telephone Service Co., 499 U.S. 340, 348 (1991), quoting Miller v. Universal City Studios, Inc., 650 F.2d 1365, 1368 (5th Cir. 1981). ''[T]he raw facts [in a compilation] may be copied at will. This result is neither unfair nor unfortunate. It is the means by which copyright advances the progress of science and art.'' 499 U.S. 340, 350 (1991).
This policy has served the country well. The United States stands at the forefront of learning, science and technological achievement, and the nation has benefited richly from this leadership in international economic competitiveness, lifesaving advances in medicine and health care, technological superiority in defense, and an enriched quality of life for our citizens. We believe that the enlightened information policies of this nation have played a significant role in sustaining the creativity and productivity of the research and education programs that led to these benefits. Congress should avoid any legislation that could threaten this fundamental principle that facts and information remain in the public domain. Educators and researchers should not be required to have an attorney on call at all times. Wherever decisions are to be made about the proper scope of protection for compilations of information, Congress should err on the side of caution and access to information.
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Based on this principle, we can identify several critical standards that any legislation to protect compilations of information should meet: First, protection should be targeted to deal with specifically identified wrongful conduct. Second, protection should be addressed to a clearly defined class of materials and should be limited to compilations as compilations, not the facts or the information per se. Third, the protection available for compilations of information should be no broader, or stronger, than the protection available for original, creative works of authorship.
Regrettably, H.R. 354 fails to meet these standards. We do not lightly conclude that, as written, H.R. 354 threatens to chill research and education and to place information in the control of a limited number of commercial interests. But we do conclude that we cannot support H.R. 354 in its current form.
Our three associations and their member colleges and universities have the following specific concerns.
H.R. 354's prohibition on ''extraction or use in commerce'' is unreasonably broad and grants substantial control over information itself, long after it is extracted from a protected collection. The bill should focus its prohibition on one who makes extracted material available to others in a manner that is likely to serve as a market substitute for the original collection. Certain extraction may also be prohibited.
The definition of a protected collection is so broad that it literally covers almost any publication, including an article, a textbook, or the report of a scientific study (with accompanying data). It should be narrowed in the text of the bill.
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Liability under H.R. 354 should not be triggered where a taking is quantitatively or qualitatively insubstantial or where the portion that is taken was not the subject of substantial investment.
The bill's concept of ''market harm'' far exceeds the traditional bounds of misappropriation and unfair competition law and provides database proprietors with the ability to create markets, and thus, liability.
The exception for non-profit educational activities contains a broad, vague condition that vitiates its protection.
The exception for other reasonable uses is insufficiently flexible, and contains conditions that greatly limit its benefit.
The bill fails to protect the public against unreasonable market power from compilations that are not readily available from competitive sources.
The bill should secure access to older versions of protected compilations, in order to prevent perpetual protection.
The bill does not protect institutions that act as online service providers from unreasonable liability.
The bill lacks clear exemptions from liability for non-profit teaching activities, akin to the exemptions in Copyright Act section 110.
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In the following statement, the Higher Education Associations provide an overview of the basic academic activities that are threatened by H.R. 354. We then amplify the three standards we have identified. Finally, we discuss our specific concerns with the bill and offer suggestions for improving the legislation. It is important to stress that these suggestions are not presented as a menu from which a few items may be chosen. We believe that each of the fundamental issues discussed below should be addressed in order to preserve the flow of information and the progress of science and learning.
I. THE ACADEMIC ENVIRONMENT AND ACTIVITIES THREATENED BY H.R. 354
The research and teaching missions of colleges and universities are fundamentally tied to information and the translation of information into knowledge: through the production, analysis, verification, interpretation, and dissemination of information, scientists and scholars expand the frontiers of knowledge and transmit that ever-expanding knowledge to colleagues and to students. The results of research are publicly disseminated through articles, books, workshops, conferences, and increasingly through digital networks as well. Research results so disseminated are used by other scientists and scholars—to build on, to critique, to re-examine and re-interpret. Through the give and take over what may be initially conflicting data or interpretations of data, new phenomena are understood and verified, and knowledge is advanced.
The process of translating data into knowledge requires the open exchange of information among allied scholars and critics alike. Increasingly, research is conducted in teams, often from several institutions. Data are drawn from multiple sources, recombined and merged with new data to produce data sets that may lead to new and unanticipated findings. Data sets vary from the results of a single experiment, captured in a table in a single journal article, to the vast databases of information compiled from meteorological remote sensing instruments, geographic information systems, particle accelerators, and systematic aggregations of research results to produce databases of genomic, chemical, and medical information, and much more.
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Databases supporting research and scholarship are not limited to the sciences. Databases supporting work in the humanities and social sciences are proving increasingly essential to advancing knowledge in these disciplines; specialized dictionaries, annotated bibliographies of worldwide research resources, census information, and compilations of text citations are just a few of the systematic compilations of information critical to humanistic and social science research.
In the academic community, these databases are dynamic instruments: they are not only sources of information, but they themselves—or components of them—become ingredients in new products, both through the combination of multiple contemporaneous data sets to produce qualitatively new products, and through the re-analysis of prior data from new perspectives provided by new findings or new analytic tools. A scientist may apply a formula developed from his or her research to a different set of data, yielding a different interpretation of that data; multidisciplinary researchers may combine components of databases from physical, biological, chemical, and meteorological data to understand the dynamics of ecological systems; social scientists may combine elements of databases of demographic, economic, legal, and political information in comparative analyses of national or regional populations worldwide.
Some of the best education is learning by doing and by discovering, and students are increasingly using databases to draw their own conclusions, duplicating the research process to learn through discovery under the guidance of faculty.
For all of these research and educational activities, faculty and students must be able to have open and easy access to compilations of data of all sizes, from single research results to large databases, and they must be able to work with these compilations—extracting, combining, and aggregating sets of data—to advance the frontiers of knowledge and educate students about those advances.
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These academic uses of information do not require that all information be free; indeed, universities now pay substantial sums for commercial databases. But these uses do require sufficiently flexible conditions of use, conditions that can be stultified by a proprietary protection scheme that makes use, reuse, and recombination difficult and militates against the ability to exchange information with colleagues and students.
II. THE STANDARDS AGAINST WHICH LEGISLATION TO PROTECT COMPILATIONS SHOULD BE JUDGED
In general, the Associations share the view of the Administration, as expressed last year by the Department of Commerce, that ''any [law to protect compilations and databases] should be predictable, simple, minimal, transparent, and based on rough consensus.'' Letter from Andrew J. Pincus, General Counsel, Department of Commerce, to Senator Patrick J. Leahy, August 4, 1998 (the ''Pincus Letter''). In particular, we emphasize three important criteria.
First, the protection should be targeted to deal with specifically identified wrongful conduct. We respectfully believe that it is not good policy to adopt a broad, catch-all prohibition, which is subject to potentially broad but ambiguous exceptions that are subject to judicial construction and application. Such an approach will ensure that any activity that arguably falls within the scope of proscribed conduct will need to be evaluated by attorneys. Researchers, educators and scientists perform functions that serve vital public purposes. They should not be required to have an attorney looking over their shoulder at all times. I can assure you that, while this might be good for our attorneys, it will not be good for scholarship or for science.
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Second, protection should be addressed to a clearly defined class of materials. If the goal is to protect incentives for the creation of large databases that require extensive effort to develop and organize, the legislation should be crafted to apply to just such works. The risk of spill-over into other types of works should be minimized. Further, it is essential that the legislation protect the compilations as compilations, not the facts or the information contained in the compilations per se. While this is a difficult line to draw, it is critical that it be drawn properly.
Third, in no respect should the protection available for compilations of information be broader, or stronger, than the protection available for original, creative works of authorship. Similarly, the exceptions and privileges applicable to the new legislation should be no narrower in any respect than the exceptions and privileges applicable to copyrighted works. Given the importance of the free flow of information to learning and science, there can be no justification for granting broader protection for compilations than exists for creative, copyrighted works.
III. FUNDAMENTAL CONCERNS WITH H.R. 354
A. The Legislation Should Not Broadly Target the ''Use'' of Information.
The conduct proscribed by the H.R. 354's operative prohibition, ''extraction or use in commerce'' is unreasonably broad and creates a danger that database proprietors will be permitted to exercise substantial control over information itself, long after it is extracted from their protected collection. By including ''use'' as a prohibited act, H.R. 354 violates our first and third standards.
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The term ''use'' has no meaningful bound. Copyright law does not even prohibit ''use;'' rather it prohibits five defined acts (reproduction, public distribution, creation of derivative works, public performance and public display). 17 U.S.C. §106. ''Use'' conceivably covers may acts fully permitted by copyright law (including reading, research, lecturing about, discussing, using to support debate, etc.). Indeed, any activity involving information from a collection is a form of ''use.''(see footnote 103) At each step of the way, a professor or student would be required to know, on pain of liability (i) whether the information originated in a protected collection of information, (ii) whether the collection was gathered, organized, or maintained by another person through the investment of substantial monetary or other resources, (iii) whether the information used represents a quantitatively or qualitatively substantial part of collection from which the information originated, (iv) whether the specific use is the subject of a license to use the information, (v) the actual and potential markets for the collection of information, (vi) whether the specific use will cause harm to one of the actual or potential markets, and (vii) whether the conduct falls within one of the several exceptions to the rights granted by the legislation. Many of these questions will require knowledge of unknowable facts. Many will require knowledge and understanding of ever-developing judicial interpretation. This simply makes no sense. It is a boon to lawyers. It will be a bane to scholarship, science and education.
Proposed Alternative. We submit that database legislation should be targeted at specific wrongful conduct. We understand and accept the need to limit the ability of competitors or others who would offer a true substitute collection from free riding on the work of the originator. This purpose may be served by creating a cause of action against one who extracts substantial portions of a collection and makes the extracted material available to others in a manner that is likely to serve as a market substitute for the original collection.(see footnote 104) This is comparable to the approach recommended last year by the Administration—''there should be effective legal remedies against 'free-riders' who take databases gathered by others at considerable expenses and reintroduce them into commerce as their own.'' Pincus Letter at 1. It also is comparable to the approach taken by the alternative ''Fair Database Competition'' bill placed into the Congressional Record for discussion purposes by Senator Hatch on January 19, 1999.(see footnote 105) The central focus of any legislation should be to prevent free-riding competition in the marketplace.
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We also understand that there is a desire simply to prohibit unauthorized extraction of information from protected collections. The concern, as we understand it, is that a user should not be allowed to avoid paying for access to a collection that has been developed at great cost and effort by the proprietor. We submit that this concern is likely to be addressed adequately by methods of protection in common use today, including technical restrictions on access and contract. Further, we are concerned that a prohibition directed solely at extraction moves dangerously close to the creation of an intellectual property right in information qua information. As the Supreme Court said in Feist, facts are in the public domain; they ''may be copied at will;'' it is the means by which the progress of science and art are advanced. Feist, 499 U.S. at 348, 350 (emphasis added).
Notwithstanding this compelling authority, in the interest of compromise, we are willing to work with the Subcommittee do develop an appropriately tailored prohibition on unauthorized extraction when that extraction will cause a substantial injury to the incentive necessary to undertake the investment and effort of creation. We believe the strongest argument for such a prohibition lies within the primary market for the collection. If the primary market is destroyed, there will be little incentive for creation. See Restatement (Third) of Unfair Competition, §38, comment c. (''Appeals to the misappropriation doctrine are almost always rejected when the appropriation does not intrude upon the plaintiff's primary market.'') It is not clear that the same is true of subsidiary markets. See point III.D., below. Again, we stress that if Congress is to err in setting the scope of this new legislation, it should err on the side of caution and the public domain.
Further, the extraction should not be merely an extraction of some information from the collection, it should be an extraction that captures the sweat and effort of the originator. We discuss this substantiality standard in part III.C., below.
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We do not propose that the analysis end with the definition of the scope of prohibited conduct. Just as the Copyright Act contains exceptions that, in appropriate circumstances, permit conduct that falls within one of the exclusive rights, so too should appropriate exceptions be included in legislation to protect collections of information. Thus, there will be highly beneficial non-profit activities and transformative activities that deserve encouragement and protection. We discuss these exceptions below. However, it is critical that the bill start from a clearer, and narrower concept of prohibited conduct.
B. The Legislation Should Clearly Define Protected ''Collections.''
The bill protects ''collections of information,'' which are broadly defined as ''information that has been collected and organized for the purpose of bringing discrete items of information together in one place or through one source so that users may access them.'' This definition is so broad that it literally covers almost any publication, including an article, a textbook, the report of a scientific study (with accompanying data), or even, for those of you who are lawyers, a casebook. Each of the foregoing collect information, arguably discrete items of information, for the purpose of making the information accessible. Thus, this definition is inconsistent with our second standard—clarity of subject matter.
Last year's House Report on identical language in H.R. 2652 made clear that the bill is not intended to add to the copyright protection available for articles, texts and reports. The Supreme Court recognized almost 120 years ago in Baker v. Selden that
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The very object of publishing a book on science or the useful arts is to communicate to the world the useful knowledge which it contains. But this object would be frustrated if the knowledge could not be used without incurring the guilt of piracy of the book.
101 U.S. 99, 103 (1880). It reiterated this identical statement in Feist, 499 U.S. at 350. Rather, it is our understanding that the bill is intended to fill a hole in the protection available to large collections that require great effort undertaken for the purpose of gathering and presenting the collection as a collection. Unfortunately, the text of the bill fails to achieve the desired goal. We are not comfortable leaving such an important issue to legislative history.
Proposed Alternative. The definition of protected collections should be modified to make clear that protected collections encompass only compilations that comprise a large number of discrete facts or other items of information collected from numerous sources with the expenditure of substantial monetary or other resources. The term ''database'' used in the Fair Database Competition Act and Senator Hatch's Discussion Draft more accurately captures the type of protected work than the term ''collection of information'' used in H.R. 354. Further, the definition should expressly exclude textbooks, articles, biographies, histories, other works of narrative prose, specifications, and other works that include items of information ''combined and ordered in a logical progression or other meaningful way in order to tell a story, communicate a message, represent something or achieve a result,'' as set forth in the House Report on H.R. 2652.
C. To Be Actionable, an Extraction Should Take Material that Is Quantitatively and Qualitatively Substantial and Should Appropriate the Effort and Investment of the Creator of the Original Collection.
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The quantum of misappropriation that triggers liability under H.R. 354 is unreasonably broad in two key respects. First, the bill improperly prohibits a taking even if the taking is quantitatively or qualitatively insubstantial. Second, the bill may be read to prohibit a taking even if the portion taken was not the subject of substantial investment (as long as other material in the collection was the subject of such investment). Only a taking that is both quantitatively and qualitatively substantial, and that appropriates content embodying substantial investment by the creator, should fall within the scope of protection. Any other rule violates the core principle that should govern H.R. 354—it grants to the originator of a collection the ability to claim a monopoly on facts themselves.
Section 1402 prohibits an extraction or use of a ''substantial part'' of a protected collection. Pursuant to section 1402, the substantiality standard is satisfied if the part is either quantitatively or qualitatively substantial. This standard grants inappropriately broad protection.
There is no justification for protecting a part of a collection that is not quantitatively substantial. The essence of ''collection'' that is protected by H.R. 354 is the substantial investment necessary to gather large quantities of data or other information from disparate sources. It simply makes no sense to subject a user to potential liability for removing small quantities of material, regardless of how important ''qualitatively'' they may be. Indeed, such small quantities are precisely the individual items of data or information that should not be the subject of protection. A single fact, two facts or three facts remain simply facts, regardless of how ''qualitatively'' important they are.(see footnote 106)
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Likewise, there is no justification for prohibiting the appropriation of even a large quantity of material that is qualitatively insubstantial. The oft-stated rule of de minimis non curat lex is as simple as it is wise. The law should not concern itself with trifles. If the extracted material is qualitatively unimportant, there should be no cause of action.
The bill also lacks appears to lack a requirement that there be a nexus between the protected investment in the collection and the taking. It is the investment that should be protected, not the facts themselves. A cause of action should exist only if the defendant has taken content embodying a substantial amount of protected effort. This is best illustrated by example. Consider a large database of information, half of which was taken by the compiler from a pre-existing, public domain database that required very little effort by the creator of the large database. A user whose only extraction is of the pre-existing material should not be subject to liability even if the extracted material qualifies as qualitative and quantitatively ''substantial.'' Granting protection to that which was not the subject of the creator's substantial investment does not serve the purpose this bill seeks to serve.
Moreover, extending protection to such material would extend protection far beyond the analogous protection extended by copyright law. Copyright law protects only the creator's own expressive contribution. Thus, for example, a copyright in a derivative work does not extend added protection to the underlying material on which the derivative work was based. 17 U.S.C. §103(b). If the underlying material is in the public domain, it is fully lawful to extract the underlying material from the derivative work. Similarly, the protection for a work (including a work that is not derivative work) does not extend to material not created by the author. See, e.g., Computer Assocs. Intern., Inc. v. Altai, Inc., 982 F.2d 693, 710 (2d Cir. 1992) (excluding from copyright protection elements of a work taken from the public domain, each of which ''is free for the taking and cannot be appropriated by a single author even though it is included in a copyrighted work''); Gates Rubber Co. v. Bando Chem. Indus., Inc., 9 F.3d 823, 837 (10th Cir. 1993) (''a court must filter out [from copyright infringement analysis] all unoriginal items of a [computer] program, including those elements found in the public domain.'').
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Proposed Alternative. Only a taking that is both quantitatively and qualitatively substantial should be prohibited. Further, a cause of action should exist only if the defendant has taken content embodying a substantial amount of protected effort.
D. The Market Harm Standard Is Undefined and Far Exceeds the Injury Cognizable in Unfair Competition Law.
It is our understanding that the ''market harm'' standard is intended to be very broad, including as market harm even non-payment of a license fee. Such a standard essentially places the definition of ''actual markets'' within the control of the proprietor and means that each activity involving information taken from a collection may be unlawful. This standard is inconsistent with long-standing principles of unfair competition and misappropriation law. Instead, it approaches the very concepts of intellectual property law from which this legislation is intended to depart.
If ''market harm'' means lost license fees, the proprietor merely needs to identify all possible uses and structure a set of licenses to capture different fees for different uses. Even if the proprietor does not at first have such a licensing structure, once a use is discovered or otherwise identified, the proprietor can easily establish a new form of license. At that time, the market becomes an ''actual market.''
The bill's inclusion of ''potential markets'' merely exacerbates the problem. The proprietor need not even create the license structure, it need only demonstrate that it might do so.
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The concepts of ''actual'' and ''potential'' markets are both unacceptably broad and extend far beyond traditional unfair competition and misappropriation law. As the Third Restatement of Unfair Competition states:
the recognition of exclusive rights in intangible trade values can impede access to valuable information and restrain competition. . . . The recognition of exclusive rights may thus deny to the public the full benefits of valuable ideas and innovations by limiting their distribution and exploitation. In addition, the principle of unjust enrichment does not demand restitution for every gain derived from the efforts of others. . . . The better approach, and the one most likely to achieve an appropriate balance between the competing interests [between protection and access], does not recognize a residual common law tort of misappropriation.''
Restatement (Third) of Unfair Competition, §38, comment b at 409, 411 (emphasis added). Accordingly, courts
''have recognized that broad application of the unjust enrichment rationale in a competitive marketplace would unreasonably restrain competition and undermine the public interest in access to valuable information. . . . In most of the small number of cases in which the misappropriation doctrine has been determinative, the defendant's appropriation, like that in [AP v. INS], resulted in direct competition in the plaintiff's primary market. . . . Appeals to the misappropriation doctrine are almost always rejected when the appropriation does not intrude upon the plaintiff's primary market.
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Id. at 412–13. In short, traditional misappropriation law remedies harm to plaintiff's ''primary market,'' not ''actual'' or ''potential'' markets.
The bill's use of broad market harm concepts departs radically from the misappropriation doctrines that the bill is supposed to adopt. Rather, the use of such broad terms effectively creates a new species of quasi-intellectual property law, one that threatens to access to information.
Proposed Alternative. Concerns over the breadth of market definition can be significantly ameliorated if the actionable conduct proscribed by the bill is limited as described in Part III.A. The bill should prohibit the further dissemination of substantial quantities of extracted material in a manner that is likely to serve as a market substitute for the original in plaintiff's primary market. Further, if extraction of substantial quantities of material is itself to be prohibited, it should be limited to extractions that cause substantial harm to plaintiff's primary market. Substantial harm should not simply mean lost licensing fees.
E. The Exception for Non-Profit Educational Activities Contains a Broad, Vague Condition that Vitiates its Protection.
Subsection 1403(a) includes an exception for non-profit educational, scientific or research uses that addresses some of the concerns of the education community. However, the exception is limited to those uses that do ''not harm directly the actual market for the product or service.'' Unfortunately, as discussed in Part III.D., above, this limitation may be so broad that it destroys the exception of much of its value.
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As discussed in Part III.D., the term ''actual market'' is infinitely flexible, and can mean anything the proprietor wants it to mean. All the proprietor must do is declare the existence of a license to cover a particular use or type of use, and it has created an ''actual market.'' Further, there is no explanation of how ''direct harm'' differs from any other kind of harm. The House Report on H.R. 2652 stated that even loss of license fees was intended to constitute a ''direct'' harm.
Further, because the provision is crafted as an exception, the burden of proving that conduct qualifies for protection likely falls upon the educational institution. The burden should fall on plaintiff to demonstrate that wrongful conduct has occurred.
In other words, subsection 1403(a) provides a database proprietor with sufficient ammunition to eliminate the exception entirely, and foreclose the very educational, scientific and research activities that should be preserved. At the very least, the application of the exception to any case of nonprofit use can be subjected to costly litigation, which itself threatens to chill these important activities.
Proposed Alternative. To ensure that nonprofit educational, scientific and research activities receive appropriate protection, two changes should be made to the bill. First, the scope of protection should be narrowed, as discussed in Parts III.A. through III.D., above. This will ensure that educational, scientific and research activities are only subject to liability when they are the primary market for the original collection of information and the activity causes substantial harm to that market. To make this absolutely clear, we would support language such as ''under no circumstances shall non-profit educational, scientific or research activity that would otherwise violate this chapter constitute a violation of this chapter if plaintiff fails to bear the burden of proving that the activity is causing substantial harm to the primary market for its protected collection of information.'' Second, even in these circumstances, courts should have the discretion, through consideration of a flexible ''reasonable use'' exception, to consider the facts and circumstances of the particular case. See Part III.F., below.
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F. The Exception for Other Reasonable Uses Is Insufficiently Flexible, and Contains Conditions that Greatly Limit its Benefit.
The exception in paragraph 1403(a)(2), for ''other reasonable uses,'' represents an improvement over H.R. 2652. However, it is constrained by absolute conditions that restrict its usefulness and that limit its application beyond the considerations applied in traditional copyright fair use analysis. Thus, it does not serve its intended purpose and results in protection for compilations that is greater than that provided by copyright.
Unlike the fair use exception in copyright law, which provides courts flexibility to consider all relevant factors for virtually any kind of use, the ''reasonable uses'' provision contains absolute conditions that restrict that flexibility. A more flexible approach, coupled with a narrowing of section 1402, is necessary.
Individual Acts. The most notable limitation in paragraph 1403(a)(2) is the limitation to ''an individual act of use or extraction of information.'' An ''individual act'' is defined as an act that ''is not part of a pattern, system or repeated practice by the same party, related parties, or parties acting in concert with respect to the same collection of information or a series of related collections of information.'' Of course, by its nature, scholarship, teaching, and research require repeated acts and patterns of acts. Thus, many of the acts that should be covered by a reasonable use exception fall outside of the scope of the exception as written.
There is no justification for limiting this exception to a single act of extraction or use. The extraction of a quantum of information has the same impact regardless of whether it occurs in a single act, or as part of several acts. Courts have the flexibility to aggregate multiple acts that are part of a pattern or repeated practice by related parties in their consideration of the exception. That should be sufficient to ensure that the exception is not abused.(see footnote 107)
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Amount of Extracted Material. The exception is not available if the amount extracted is more than is ''appropriate and customary'' for the purpose. Although this is a factor considered in copyright fair use analysis, it is not an absolute condition for application of the fair use doctrine. It is easy to envision a situation in which more than ''appropriate and customary'' is extracted, but the excess extraction does not have a significant effect on the market, or may have been extracted by accident or on the basis of a misapprehension of what was needed. Alternatively, the particular purpose may not have a ''customary amount.'' There is no justification for courts to be required to bar use of the exception if the amount extracted exceeds an amount that is ''appropriate and customary.'' As in copyright fair use, the amount of the taking should be a factor that is considered like all other relevant factors.
Market Substitution. The exception may not be applied if the extracted material is offered in commerce and is likely to serve as a market substitute for the collection. Such activity is not an automatic, absolute bar to a finding of copyright fair use. It should not be an automatic, absolute bar to the reasonable use exception here.
Every day, material is extracted from collections and used in research and other academic work. The extracted material is often transformed by the extensive effort and energy of the original extractor, who develops, selects, and organizes the material to make it useful to others in the field. The resulting work could be a breakthrough in science, social science, philosophy, economics, medicine or any one of scores of other fields. It may not even take the form of a compilation or database. The resulting work may have far greater value to others in the field than the original, undigested database. As a result of the work, others may not need to duplicate the extractor's efforts, and the resulting work may ''substitute'' for the broad, undigested database. This is precisely the type of work that should be encouraged, not sanctioned.
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Proposed Alternative. A ''reasonable extraction and use'' exception should be crafted which is similar to the copyright fair use exception and which does not contain absolute bars to its application. For example, the factors should include the nature of the use, amount of the material extracted or used, and effect on the market for the work. Sub-factors may be identified, including (i) the extent to which the extraction or dissemination is commercial or nonprofit, (ii) if the extracted material is incorporated into an independent work or collection, the extent of transformation, (iii) whether the amount of material extracted is appropriate and customary for the purpose of the extraction, (iv) whether any resulting collection is marketed to persons engaged in the same field or business as the extractor, and (v) the extent to which a resulting collection that is offered in commerce is likely to serve as a significant market substitute in the primary market for the original collection. Courts should also be instructed to take into account that the nature of the collection, as a collection of facts, is ordinarily entitled to less protection against fair use than an original work of creative authorship under copyright law.
This reasonable use exception should be combined with the narrower scope of protection discussed in Parts III.A. through III.D.
G. The Bill Should Protect the Public against Unreasonable Market Power from Compilations that Are Not Readily Available from Competitive Sources.
The public ordinarily is protected from unreasonable prices arising from a seller's unconstrained market power through the operation of the marketplace. If excessive prices are charged, large profits will be earned, which in turn will encourage the entry of competitors. Unfortunately, there are many reasons that this mechanism might not work for compilations of information. The information contained in a compilation may not be readily available from competing sources. It may be under the control of the compilation provider; it may be historical information that is no longer available to the public; or it have been collected at substantial cost over a long period of time, creating a barrier to competitive entry. In these cases, providing the protection contemplated by H.R. 354 could grant substantial market power, resulting in excessive prices for information and returns greater than that needed to stimulate development of the information products. As the Federal Trade Commission cautioned in its September 28, 1998 comments on last year's Collections of Information Antipiracy Act, ''policies the further entrench the market power of single-source data providers could have an unintended potential for anticompetitive conduct.''
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In its consideration of granting these new rights over information products, Congress should ensure that such power is not created. There is no public policy justification for granting super-competitive market power to the providers of information products. The incentive to create will be maintained by providing reasonable returns, not monopoly returns. Conversely, as discussed at the beginning of this statement, there are strong public policy reasons to ensure that information is made available to the public on a reasonable basis.
Antitrust law does not provide adequate protection against market power that may be created by legislation. The Federal Trade Commission recognized this point in its comments last year. Market power is not per se unlawful under the antitrust laws. It may be gained in numerous ways that are lawful, including the granting of rights by Congress. Even if charging high prices or imposing unreasonable terms did violate the law, it is extremely difficult and expensive to bring an antitrust case. Such suits are not viable protection from the market power that this bill creates.
Proposed Alternative. There are several possible approaches to address the issue of unreasonable market power. For example, the bill could encourage database proprietors to charge reasonable royalties by providing that it shall be a complete defense to an action that plaintiff did not make the compilation available for a reasonable royalty. Alternatively, the bill could limit the available remedy to a reasonable royalty in cases in which competitive sources of the information in the compilation did not exist. These limitations should apply with respect to any extraction right that is included in the bill and to the incorporation of information into a transformed product (to the extent such conduct remains actionable under section 1402).
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H. The Bill Should Secure Access to Older Versions of Protected Compilations, in order To Protect Against Perpetual Protection.
The revision of section 1408(c), which provides that investment in the maintenance of an existing compilation cannot extend the term of protection for that compilation, is a valuable addition to the bill. We are concerned, however, that it is only a partial solution to ensuring that the bill does not result in perpetual protection for continually updated compilations. It does little good for the bill to end protection for an old compilation if the compilation is no longer accessible by the public. Access to older versions of compilations that have fallen into the public domain should be preserved.
Proposed Alternative. One means of preserving access, of course, is to create a registration and deposit system using the Copyright Office. This approach would have the advantage of the Copyright Office's experience in protecting access and would ensure that protection would be contingent on access following expiration of protection. However, this approach would entail administrative costs that Congress may not wish the public to bear.
Another approach that could work would be to require the party seeking protection under the Act to maintain expired versions of the compilation in a manner freely accessible to the public. Failure to comply with this requirement would preclude protection for more recent revised versions of the compilation. In order to ensure that the public is aware that earlier versions are available, the proprietor of a database should be required to include a notice with the compilation setting forth the year protection was first claimed and, after older versions become available, where they may be found.
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I. The Bill Should Ensure that Institutions that Act as Online Service Providers Are Not Subjected to Liability.
As the higher education community pointed out in last years' debate on H.R. 2281, the Digital Millennium Copyright Act, universities and colleges frequently offer their students and faculty access to the Internet and other computer networks. Congress recognized that these institutions could not reasonably be held accountable for the online conduct of such persons who infringe copyrights. It is even more difficult for an institution providing such online services to differentiate between the facts and information that form the basis of academic discourse, and protected ''compilations.''
Unfortunately, as it is now drafted, a system that transmits or stores a collection or a part of a collection could be said to be ''using'' that collection. Even narrowed as recommended in Part III.A., a system that is used to disseminate extracted material could be said to be participating in the dissemination. Such a result would not be appropriate, and for all of the reasons discussed in the debate last year, should be expressly precluded.
The prohibitions of H.R. 354 should be targeted at the person or entity engaging in the specifically proscribed conduct, not on intermediaries whose systems or networks are used by those persons or entities to transmit information. The bill should make clear that no liability attaches to such intermediaries.
Proposed Alternative. The Senator Hatch's Discussion Draft and the Fair Database Competition Act both include a provision making clear that online service providers are not subject to liability. This provision should be included in H.R. 354. In addition, universities and colleges need language making clear that the conduct and knowledge of faculty members and graduate students engaged in research or teaching activities will not be imputed to the institution.
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J. Non-Profit Teaching Activities Should Be Granted a Clear Exemption from Liability, Akin to the Exemption in Copyright Act Section 110.
Non-profit teaching activities are entitled to clear exemptions from liability under Copyright Act section 110(a)(1) & (2). These provisions of copyright law make clear that it is not an infringement to perform, display or transmit a copyrighted work in the course of instruction by a non-profit educational institution. These exemptions are not subject to the risk of fact-intensive litigation that surrounds more general claims of fair use. In keeping with the principle that H.R. 354 should not offer protection that is not available to copyrighted works under copyright law, similar exceptions should be provided for compilations protected by H.R. 354.
Proposed Alternative. The extraction and dissemination of information for purposes of display or distribution to pupils in the classroom (or the distance education equivalent) should be granted a clear exception from liability.
IV. TECHNICAL CONCERNS
In addition to the major substantive concerns discussed above, the Higher Education Associations have a few comments of a more technical drafting nature. We assume that the first two are simply drafting oversights.
A. Overly Broad Monetary Relief.
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The bill provides for monetary relief that is significantly greater than that provided under copyright law. As drafted, subsection 1406(d) mandates recovery of ''defendant's profits not taken into account in computing the damages sustained by the plaintiff.'' Curiously, however, the subsection does not contain a critical limitation contained in Copyright Act section 504(b), after which it was modeled. Specifically, recoverable profits are limited to those ''that are attributable to the infringement.'' Similarly, subsection 504(d) permits a defendant to prove and deduct ''the elements of profit attributable to factors other than the copyrighted work.'' The analogous language is not found in subsection 1406(d). It is inconceivable that H.R. 354 contemplates the recovery of all of the violator's profits, relief that far exceeds that available under copyright law.
B. Limitations on Penalties and Criminal Liability for Non-Profit Educational Institutions.
The Higher Education Associations appreciate the two limitations of liability for employees and agents of non-profit educational institutions contained in the bill. Section 1406(e) provides for the reduction of monetary relief in cases in which the defendant is the employee or agent of a non-profit educational institution acting in good faith. Section 1407(a)(2) precludes criminal penalties against the employee or agent of a non-profit educational institution. In each case, the provision applies to employees or agents of educational institutions, but inexplicably fails to provide equivalent protection to the institution itself. It is certainly possible that suit will be brought directly against a non-profit educational institution in its own right, rather than against an employee or agent. Each of these limitations should expressly apply to the institution as well as to its agents and employees.
C. The Protection of State University Databases under Section 1404(a).
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As we noted at the outset of this statement, universities and colleges are not only users of compilations of information, they also act as creators of collections that should be protection to the same extent as collections created by commercial providers. In this statement, we have argued for specifically targeted protections for collections of information. Whatever level of protection Congress ultimately deems appropriate should be available to universities and colleges on the same terms. Moreover, there is no reason to discriminate against state universities and colleges when they act as creators. For these reasons, we appreciate the recognition that collections developed by state educational institutions are not precluded from protection under section 1404. We are concerned, however, that the language ''in the course of engaging in education or scholarship'' might be misconstrued to exclude research or other activities of the institution. For that reason, we suggest that the final nine words of paragraph 1404(a)(1) be stricken.
Mr. COBLE. Thank you, Mr. Phelps.
Mr. Duncan.
STATEMENT OF DAN DUNCAN, VICE PRESIDENT, GOVERNMENT AFFAIRS, SOFTWARE & INFORMATION INDUSTRY ASSOCIATION
Mr. DUNCAN. Thank you, Mr. Chairman. You've already described me and my trade association so I won't go into that again.
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I had hoped, Mr. Chairman, that we could all come here today and offer you a nice, big birthday cake of recognition and compromise on database protection but from what I'm hearing from the administration and from some of the continued opponents of this legislation it seems they're constructing a cake that's made more of aspartame. It may look good and it may even taste good at first bite but there's not a whole lot of substance to what they're proposing.
The database industry is very concerned. It is concerned because, as many of us have already noted and the subcommittee found out, there is no general Federal protection for databases.
The industry is also concerned because of what's going on overseas. The fact of the matter is that nine EU nations have already enacted a database law. Each of those database laws has a reciprocity provision in it. That means that no database that's not located in another European Union nation or in a nation that has a comparable law will ever be protected. That's a threat to trade. One that's so great that last year the USTR noted that threat to the American database industry in its special 301 report.
I want to go over briefly what H.R. 354 does do and what it does not do. Let's say what it does not do first. It does not create rights like copyright. It does not prevent use of databases. It will only allow a court to stop the misappropriation of somebody else's property if that piracy has the ability, the proven ability, to harm a market for a database.
It does not take facts out of the public domain but rather, encourages database owners to seek out facts and make them available to the general public in comprehensive, useful, reliable and accurate formats and products.
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It does not interfere with legitimate first amendment rights of free speech, commentary, criticism or the exchange of ideas.
Courts have balanced these kinds of protections against first amendment rights for many, many years and we would trust—I think we should trust—in the courts that they will do a good job of doing so once this legislation becomes law.
It also doesn't interfere with the operations of the Internet.
What this bill does do, Mr. Chairman, is allow a very limited ability for a database owner to stop further market threatening activities only after he has invested substantial resources in creating a database and offer that database in commerce, and only after the harmful activity has been proven.
It clarifies that anyone is free to gather facts and data from any place other than such a database and go on to create their own collection of information. It promotes even greater access to and dissemination of Government information. It assures that freedom of the press is maintained and it preserves the sanctity of laws regarding privacy protection, antitrust and contract.
But even this limited protection is further constrained under the bill, Mr. Chairman. There are broad concessions already provided to educators, scientists, researchers, libraries and their patrons. There's a big general fair use provision in this bill. There are special concessions for verification of a person's own data by using another database, which is an important activity for the scientific and research community.
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It limits the harm standard applicable to these users only to activities that directly affect the actual market for the database.
There are no statutory damages under this bill as there are under copyright law, Mr. Chairman. There are no criminal penalties that can ever be assessed against an educator, researcher or scientist. And there's a mandatory reduction of actual damage awards for those types of users which, as anybody who has ever tried to go into court and get actual damages, understands how hard that is to begin with. And these are the only damages that a database producer is ever likely to recover. These users also will be awarded court costs and attorneys fees should a database producer be found to have brought a false claim.
There's also a further constraint on this limited right, Mr. Chairman. It alters the traditional notions of unfair competition and misappropriation laws and it does put a term limitation here. Normally there are no term limitations on these kinds of laws because the protection lasts as long as the market value of the item to be protected lasts.
There has been some talk also about alternative legislation and in reading over some of the written statements I want to see if I can't clear up some confusion.
This legislation has never been introduced. It was mentioned in a floor statement by Mr. Hatch on the 19th of January along with two other bills, one of which, Mr. Chairman, was your bill from last year. He put them forth simply as examples as to how we might want to address the database problem. But there's a big difference between what you have done, Mr. Chairman, along with your colleagues on the subcommittee, and what that bill proposes, and let me just go over a couple of those items.
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The harmful activity standard in that legislation is limited only to duplication of a database. That means entirely copying the whole database. I believe that is a prohibited activity under the copyright law today, even after Feist, and I don't really see that this gets us much in terms of protecting what is really needed to be protected in terms of investment in databases.
It also limits to 3 years the time that a database owner would have to bring such a suit against harm. And if there is concern from the other side about prices rising because of protection for databases you can imagine what will happen if producers think they have only 3 years to try and recoup the total investment they put into a database before it can be harmed and taken away from them.
It would also prevent database owners from stopping misuse of their products and services by the non-profit community until a clear pattern and practice of abuse has been established and that abuse must be for purposes of direct competition or of avoiding payment of ''reasonable fees.''
Mr. Chairman, SIIA feels that H.R. 354 is duly balanced and fair but we also feel that the time to act is now. We are cautious about the new provision under section 1403[a][2]. We are looking forward to hearing what the proponents of that particular language really seek to gain. We feel it may open a very wide door to potential mischief, not only because it benefits non-profit users but also for-profit users. SIIA feels the bill is more than fair and balanced without this addition.
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Most importantly, however, action to pass database protection law must come quickly. A similar bill, as you noted, was passed twice last year by the full House under the suspension calendar. All interested parties have had more than ample time to express their views and have them fairly considered by the subcommittee and your colleagues in Congress. Without this law industry will suffer, fewer databases will be produced, maintained and widely marketed.
The database industry is looking to Congress to pass a law that protects property and encourages creative innovation. That is what this debate is really about. That is what this bill would accomplish. Without such a law the database industry, its customers and the overall U.S. economy will eventually pay the price.
Thank you, Mr. Chairman.
[The complete statement of Mr. Duncan follows.]
PREPARED STATEMENT OF DAN DUNCAN, VICE PRESIDENT, GOVERNMENT AFFAIRS, SOFTWARE & INFORMATION INDUSTRY ASSOCIATION
SUMMARY
Good morning, Mr. Chairman and Members of the Subcommittee, thank you for the opportunity to testify on H.R. 354, the Collections of Information Antipiracy Act. I am Dan Duncan, Vice President for Government Affairs at the Software & Information Industry Association (SIIA). First off I would like to express SIIA's appreciation for your continued leadership, Mr. Chairman, in pursuing a fair and balanced statute to protect collections of information, or what are commonly known as databases.
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The Software & Information Industry Association was formed in January of this year through a merging of the Software Publishers Association and the Information Industry Association. SIIA represents some 1400 companies that produce information and software products. As such, SIIA's members have a strong interest in the creation and further development of intellectual property laws, including copyright, patents, trademarks, and protection for databases.
What brings us here today is the inadequate state of our laws regarding the protection of databases. Developments in technology and in the legal framework here and in other parts of the world have increased the urgency with which action must be taken. Congress in the past has readily taken action when confronted with these circumstances. Statutes such as the Digital Millennium Copyright Act and the No Electronic Theft Act, enacted in the 105th Congress, illustrate this institution's ability to a create legislation that is balanced, but also forward looking.
This bill, which is essentially the same legislation that passed the House twice last Congress, sets out a misappropriation approach to protecting databases. The bill would allow a database provider the ability to bring suit against a party that used a substantial portion of a product in a manner that affected the producer's ability to continue exploiting an actual or potential market for that product or a service of which it is a part.
As is well known, this is quite a distance from where we started. Early on, a rights-based protection similar to the type the Europeans have adopted, was considered and abandoned. The database community did not oppose this step because we recognize the need to take into account important societal principles concerning the free flow of information. Within this legislation a number and variety of exclusions and exemptions have been established that take these principles into account.
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H.R. 354 also has some new provisions in it. Subsection 1408(c) clarifies that the protection under this bill will last for only 15 years. SIIA supports this clarification, while also noting that under traditional doctrines of misappropriation, protection lasts as long as the product or service has value in the market. One new provision we cannot support at this time is in subsection 1403(a)(2), ''Additional Reasonable Users.'' While this provision appears similar to language found in the Copyright Act's section 107, SIIA fears that it may open the door to wide potential mischief.
As our Founders understood, and as is reflected in much of their handiwork in our Constitution, markets operate optimally when a predictable legal framework exists. The database community awaits the Congress' action to bring a reasonable and balanced piece of legislation to fruition.
INTRODUCTION
Good morning, Mr. Chairman and Members of the Subcommittee, and thank you for the opportunity to testify before you today on H.R. 354, the Collections of Information Antipiracy Act. My name is Dan Duncan, and I am Vice President for Government Affairs at the Software & Information Industry Association (''SIIA''). SIIA appreciates your continued leadership, Mr. Chairman, in establishing a fair and balanced law to protect databases, or collections of information, and sees your introduction of H.R. 354 as yet another important step in accomplishing that goal.
My remarks today will be brief and to the point: America's database producing community and its customers need a new federal law to protect databases that are otherwise noncopyrightable, and a law very much like H.R. 354 should accomplish that goal. Such a statute is absolutely critical if this important industry sector is to continue creating and maintaining high-quality, accurate and reliable products and services to meet the ever-growing market demand for comprehensive collections of information. Without such a law, market instability will only grow, due to a combined fear of unfair competition and unstoppable piracy.
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SIIA AND ITS INTEREST IN DATABASE PROTECTION LEGISLATION
The Software & Information Industry Association was formed in January of this year through a merger of the former Software Publishers Association and the Information Industry Association. SIIA represents some 1400 companies that produce valuable information and software products crucial to the growth and value of electronic commerce. As such, SIIA and its members have a strong interest in establishing laws to protect all types of intellectual property, including copyrighted works, patents, trademarks and otherwise noncopyrightable databases.
The Association counts among its members the majority of the world's database producers, including The McGraw-Hill Companies, Reed-Elsevier, Inc., and The Thomson Corporation, as well as many small and medium-sized owners of collections of information, such as SilverPlatter, Inc. SIIA also represents the interests of a large number of other organizations whose primary business lies outside the area of database production but that nevertheless provide important collections of information as a function of their operations—the securities and commodities markets being prime examples of these types of organizations. SIIA is also a member of the Coalition Against Database Piracy, whose representative is also testifying today.
As Congress has repeatedly recognized in the last few years, new technologies present a growing threat to the ability of intellectual property owners to adequately guard against unfair competition and piracy. SIIA members strongly supported passage of the Digital Millennium Copyright Act and the No Electronic Theft (NET) Act in the 105th Congress. These are only two examples of instances in which this Subcommittee and its colleagues recognized a need to act quickly to ensure market stability by strengthening our laws.
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Database owners are asking for no more and no less. Demand is growing for more and more information in digital formats, but at the same time, the technologies associated with the Internet are making it easier for collections of information to be copied and redistributed without the original owner's knowledge or permission. Yet, as I will outline below, the current U.S. legal environment is at best uncertain, and America's database owners face a clear commercial threat from overseas.
More and more, these companies are reassessing whether they should risk having their products widely distributed in digital formats that are so easily pirated. As their willingness to provide wide access to these valuable, reliable and accurate information products begins to falter, other industries will also suffer. For example, many software producers will have to forego business opportunities to create and market their products and services that aid in search and retrieval of information contained in databases.
Thus, it is SIIA's goal and commitment to you, Mr. Chairman, to work hard to see that a fair and balanced bill to protect collections of information is enacted in the 106th Congress. It will benefit the database industry and its customers and will create even more opportunities for ancillary industries to grow and prosper.
STATUS OF INADEQUATE PROTECTION AND THE THREAT FROM ABROAD
Collections of information are of increasing importance and value in the Information Age. These compilations of facts and data are expensive and time-consuming to build and maintain, yet their value to researchers, business professionals, government officials, and everyday citizens is immeasurable. Whether the database is a directory of names and addresses, a collection of agricultural, medical or economic data, or a compilation of laws and court decisions, it is most likely used extensively everyday by someone who needs to make a decision and to do so quickly and confidently.