SPEAKERS CONTENTS INSERTS
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89–463 PDF
2003
DATABASE AND COLLECTIONS OF INFORMATION MISAPPROPRIATIONS
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON COURTS, THE INTERNET,
AND INTELLECTUAL PROPERTY
OF THE
COMMITTEE ON THE JUDICIARY
AND THE
SUBCOMMITTEE ON COMMERCE, TRADE,
AND CONSUMER PROTECTION
OF THE
COMMITTEE ON ENERGY
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AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
SEPTEMBER 23, 2003
Serial No. 51
(Committee on the Judiciary)
Serial No. 108–46
(Committee on Energy and Commerce)
Printed for the use of the Committee on the Judiciary and the Committee on Energy and Commerce
Available via the World Wide Web: http://www.house.gov/judiciary
and http://energycommerce.house.gov
COMMITTEE ON THE JUDICIARY
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F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois
HOWARD COBLE, North Carolina
LAMAR SMITH, Texas
ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
WILLIAM L. JENKINS, Tennessee
CHRIS CANNON, Utah
SPENCER BACHUS, Alabama
JOHN N. HOSTETTLER, Indiana
MARK GREEN, Wisconsin
RIC KELLER, Florida
MELISSA A. HART, Pennsylvania
JEFF FLAKE, Arizona
MIKE PENCE, Indiana
J. RANDY FORBES, Virginia
STEVE KING, Iowa
JOHN R. CARTER, Texas
TOM FEENEY, Florida
MARSHA BLACKBURN, Tennessee
JOHN CONYERS, Jr., Michigan
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
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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
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SÁNCHEZ, California
PHILIP G. KIKO, Chief of Staff-General Counsel
PERRY H. APELBAUM, Minority Chief Counsel
Subcommittee on Courts, the Internet, and Intellectual Property
LAMAR SMITH, Texas, Chairman
HENRY J. HYDE, Illinois
ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
WILLIAM L. JENKINS, Tennessee
SPENCER BACHUS, Alabama
MARK GREEN, Wisconsin
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RIC KELLER, Florida
MELISSA A. HART, Pennsylvania
MIKE PENCE, Indiana
J. RANDY FORBES, Virginia
JOHN R. CARTER, Texas
HOWARD L. BERMAN, California
JOHN CONYERS, Jr., Michigan
RICK BOUCHER, Virginia
ZOE LOFGREN, California
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
BLAINE MERRITT, Chief Counsel
DEBRA ROSE, Counsel
DAVID WHITNEY, Counsel
MELISSA L. MCDONALD, Full Committee Counsel
ALEC FRENCH, Minority Counsel
COMMITTEE ON ENERGY AND COMMERCE
W.J. ''BILLY'' TAUZIN, Louisiana, Chairman
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MICHAEL BILIRAKIS, Florida
JOE BARTON, Texas
FRED UPTON, Michigan
CLIFF STEARNS, Florida
PAUL E. GILLMOR, Ohio
JAMES C. GREENWOOD, Pennsylvania
CHRISTOPHER COX, California
NATHAN DEAL, Georgia
RICHARD BURR, North Carolina
Vice Chairman
ED WHITFIELD, Kentucky
CHARLIE NORWOOD, Georgia
BARBARA CUBIN, Wyoming
JOHN SHIMKUS, Illinois
HEATHER WILSON, New Mexico
JOHN B. SHADEGG, Arizona
CHARLES W. ''CHIP'' PICKERING, Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
STEVE BUYER, Indiana
GEORGE RADANOVICH, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
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LEE TERRY, Nebraska
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ''BUTCH'' OTTER, Idaho
JOHN D. DINGELL, Michigan
Ranking Member
HENRY A. WAXMAN, California
EDWARD J. MARKEY, Massachusetts
RALPH M. HALL, Texas
RICK BOUCHER, Virginia
EDOLPHUS TOWNS, New York
FRANK PALLONE, Jr., New Jersey
SHERROD BROWN, Ohio
BART GORDON, Tennessee
PETER DEUTSCH, Florida
BOBBY L. RUSH, Illinois
ANNA G. ESHOO, California
BART STUPAK, Michigan
ELIOT L. ENGEL, New York
ALBERT R. WYNN, Maryland
GENE GREEN, Texas
KAREN McCARTHY, Missouri
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TED STRICKLAND, Ohio
DIANA DeGETTE, Colorado
LOIS CAPPS, California
MICHAEL F. DOYLE, Pennsylvania
CHRISTOPHER JOHN, Louisiana
TOM ALLEN, Maine
JIM DAVIS, Florida
JAN SCHAKOWSKY, Illinois
HILDA L. SOLIS, California
DAN R. BROUILLETTE, Staff Director
JAMES D. BARNETTE, General Counsel
REID P.F. STUNTZ, Minority Staff Director and Chief Counsel
Subcommittee on Commerce, Trade, and Consumer Protection
CLIFF STEARNS, Florida, Chairman
FRED UPTON, Michigan
BARBARA CUBIN, Wyoming
JOHN SHIMKUS, Illinois
JOHN B. SHADEGG, Arizona
Vice Chairman
GEORGE RADANOVICH, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
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LEE TERRY, Nebraska
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
DARRELL E. ISSA, California
C.L. ''BUTCH'' OTTER, Idaho
W.J. ''BILLY'' TAUZIN, Louisiana
(Ex Officio)
JAN SCHAKOWSKY, Illinois
Ranking Member
HILDA L. SOLIS, California
EDWARD J. MARKEY, Massachusetts
EDOLPHUS TOWNS, New York
SHERROD BROWN, Ohio
JIM DAVIS, Florida
PETER DEUTSCH, Florida
BART STUPAK, Michigan
GENE GREEN, Texas
KAREN McCARTHY, Missouri
TED STRICKLAND, Ohio
DIANA DeGETTE, Colorado
JOHN D. DINGELL, Michigan,
(Ex Officio)
C O N T E N T S
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SEPTEMBER 23, 2003
OPENING STATEMENT
The Honorable Lamar Smith, a Representative in Congress From the State of Texas, and Chairman, Subcommittee on Courts, the Internet, and Intellectual Property, Committee on the Judiciary
The Honorable Cliff Stearns, a Representative in Congress From the State of Florida, and Chairman, Subcommittee on Commerce, Trade, and Consumer Protection, Committee on Energy and Commerce
The Honorable Howard L. Berman, a Representative in Congress From the State of California, and Ranking Member, Subcommittee on Courts, the Internet, and Intellectual Property, Committee on the Judiciary
The Honorable Jan Schakowsky, a Representative in Congress From the State of Illinois and Ranking Member, Subcommittee on Commerce, Trade, and Consumer Protection, Committee on Energy and Commerce
WITNESSES
Mr. David Carson, General Counsel, Copyright Office of the United States, Library of Congress
Oral Testimony
Prepared Statement
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Mr. Thomas J. Donohue, President and Chief Executive Officer, Chamber of Commerce
Oral Testimony
Prepared Statement
Mr. Keith Kupferschmid, Vice President, Intellectual Property Policy and Enforcement Software and Information Industry Association, on behalf of the Coalition Against Database Piracy
Oral Testimony
Prepared Statement
Mr. William Wulf, President, National Academy of Engineering and Vice Chairman, National Research Council
Oral Testimony
Prepared Statement
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Letter to the Honorable F. James Sensenbrenner, Jr., Committee on the Judiciary and the Honorable W. J. ''Billy'' Tauzin, Committee on Energy and Commerce from Nils Hasselmo, President, Association of American Universities
Letter from Thomas J. Donohue, President and Chief Executive Officer, Chamber of Commerce of the United States of America to the Honorable Lamar S. Smith, Chairman, Committee on the Judiciary, Subcommittee on Courts, the Internet and Intellectual Property and the Honorable Cliff Stearns, Chairman, Subcommittee on Commerce, Trade and Consumer Protection of the House Committee on Energy and Commerce
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APPENDIX
Material Submitted for the Hearing Record
Statement of the Honorable W. J. ''Billy'' Tauzin
Statement of the Honorable Bart Stupak
Statement of the Honorable Barbara Cubin
Statement of the Honorable Gene Green
Statement of the Honorable Ted Strickland
Letter from Justin Hughes, Assistant Professor of Law, Benjamin N. Cardozo School of Law, Yeshiva University
Letter from Keith Kupferschmid, Counsel for CADP to the Honorable Lamar Smith, Chairman, Subcommittee on Courts, the Internet and Intellectual Property, Committee on the Judiciary and the Honorable Cliff Stearns, Chairman, Subcomittee on Commerce, Trade and Consumer Protection of the House Energy and Commerce Committee
Statement of Congressman John D. Dingell, Ranking Member, Committee on Energy and Commerce
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Statement of Congressman John Shimkus
DATABASE AND COLLECTIONS OF INFORMATION MISAPPROPRIATIONS
TUESDAY, SEPTEMBER 23, 2003
House of Representatives,
Subcommittee on Courts, the Internet,
and Intellectual Property,
Committee on the Judiciary,
and
Subcommittee on Commerce, Trade, and Consumer Protection,
Committee on Energy and Commerce,
Washington, DC.
The Subcommittees met, pursuant to call, at 4:08 p.m., in Room 2141, Rayburn House Office Building, Hon. Lamar Smith [Chairman of the Subcommittee on Courts, the Internet, and Intellectual Property] presiding.
Mr. SMITH. The Subcommittee on Courts, the Internet, and Intellectual Property will come to order along with the written permission of the Chairman of the Subcommittee on Commerce, Trade, and Consumer Protection.
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Before I recognize individuals for opening statements, let me just make a couple of comments. To my knowledge, this is the first time we have had such a joint hearing, and it is a privilege to do so with the Commerce Committee, one, because they are so important; but, two, because Cliff Stearns, the Chairman of their Subcommittee, is a personal friend and for a number of years, actually was a neighbor across the hall. And I miss seeing him on that hall.
In any case, I want to recognize Congressman Stearns, because we will be cochairs of this hearing today. My part will be opening statements and the testimony of the witnesses, an Congressman Stearns will preside during the question-and-answer period after that.
Let me recognize myself for an opening statement.
Today the Subcommittee on Courts, the Internet, and Intellectual Property and the Subcommittee on Commerce, Trade, and Consumer Protection will consider the discussion draft of the ''Database and Collections of Information Misappropriation Act.
I am sure many of you are wondering what can be said about database protection that hasn't already been said? However, after 8 years of debate, we are here to review draft legislation that embodies a compromise between the House Committees on the Judiciary and Energy and Commerce.
Electronic compilations and other collections of factual material are absolutely indispensable to the American economy. These information products place a wealth of data at the fingertips of business, professionals, scientists, scholars and consumers. Databases are essential tools for improving productivity, advancing education and training and creating a more informed citizenry.
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Developing, compiling, distributing and maintaining databases requires substantial investments of time, personnel and money.
Information companies must dedicate resources to gathering and verifying factual material, presenting it in a user friendly way and keeping it current.
U.S. firms have been the world leaders in this field, but several recent legal and technological developments threaten to erode incentives for investments needed to maintain and expand databases.
While the 1991 Supreme Court decision in Feist Publications reaffirmed that most commercially significant databases satisfy the originality requirement for protection under copyright, the court emphasized that this protection is necessarily thin.
Several subsequent lower court decisions have pointed out that current copyright laws cannot stop a competitor from lifting massive amounts of factual material from a copyrighted publication to use as a basis for its own competing product.
In cyberspace, technological developments represent a threat as well as an opportunity for collections of information. Copying factual material from a third party's collection and rearranging it to form a competing information product is cheaper and easier than ever.
The draft legislation before us today provides protection to databases and gives incentives to their creators to continue producing these invaluable tools. This legislation is a compromise. In fact, a key element is the misappropriation approach that is narrowly tailored to target bad actors while preserving the ability of consumers to access and use information.
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Mr. SMITH. Now, that concludes my opening statement, and the gentleman from Florida, Mr. Stearns, is recognized for his.
Mr. STEARNS. Thank you, Chairman Smith, for hosting this unprecedented joint hearing, and on behalf of my fellow Energy and Commerce Subcommittee Members, I want to thank you for the warm hospitality. We are delighted to be here.
The copyright clause of the United States Constitution states that ''Congress shall have the power to promote the progress of science and useful arts by securing, for limited times to authors, the exclusive right to their respective writings.'' .
This power is limited by subject matter, only writings and discoveries of authors may be protected, purposed material may only be protected to the end of promoting science and useful arts; and duration, writings may be protected for a limited time period.
While all three limitations are important, it is the subject matter limitation that is the central consideration underlying copyright protection.
For 7 years, there was a split in the courts about whether copyright protection would be afforded to only creative works or whether noncreative compilations of information could receive protection.
A minority of courts held that noncreative compilations of information could receive copyright protection under the judicial ''sweat of the brow'' doctrine.
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In 1991 the Supreme Court struck down the ''sweat of the brow'' doctrine. The court wrestled with the ostensible paradox that while facts are not copyrightable, compilation of facts generally are.
The Supreme Court explained that the key to understanding the seeming paradox was in understanding why facts are not copyrightable.
The court held that originality is the sine qua non of copyright law, without regard to the resources spent in collecting and assembling factual compilations.
A compilation is no more worthy of copyright protection than the underlying facts themselves, unless there is a modicum of creativity in the compilation. In other words, creative compilations of information would be protected by copyright. Noncreative compilations of information like the White Pages would not.
And that is why we are here today. Proponents of legislation argue that this decision left a gaping hole in the protection of their products. They believe the distribution capabilities of the Internet have exacerbated the need to fill this gap in protection. Opponents of the legislation see no shortcomings in the current law and believe that proponents of legislation have failed to demonstrate a concrete problem that requires a legislative solution. They believe contract, trespass, misappropriation, unfair competition, and the Computer Fraud and Abuse Act provide sufficient protection for noncreative databases.
It seems that while the opponents of the legislation would support a narrow misappropriation statute, they raise constitutional concerns about broader proprietary interest in factual information, and I share those constitutional concerns.
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I believe that Congress should not create property rights in facts. Specifically, I am concerned that the prohibition against making database information available has ambiguous terms that will chill the development of new databases and lead to further litigation. I am concerned that a database that is merely maintained and not necessarily collected would receive protection. How does this standard couple with the time sensitivity standard? Could the maintenance provision cause a court to have a liberal reading of time sensitivity?
I am most concerned about the way this legislation will impact scientific educational and research activities. I worry that the determination of what is customary is so vague, that it will only be resolved through costly litigation. This could put a real chill on important research activity.
As a result, I suspect none of us would like to see this.
And in conclusion, I look forward to a rigorous discussion of the constitutional issues such as the constitutional boundaries of noncreative database misappropriation legislation and the other issues I have raised earlier. I am pleased that we have the opportunity today to have these questions answered. I withhold comment on the draft of the bill until I can be certain that this draft strikes the appropriate balance between access to information, innovation, and protection against misappropriation.
It is plausible that such a balance may be unattainable. I am certain the discussion here today will assist us, and I look forward to hearing from our distinguished panel. And I thank again Chairman Smith for his hosting this joint Committee and his hospitality.
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Mr. SMITH. Thank you, Chairman Stearns.
Mr. SMITH. The gentleman from California, Mr. Berman, is recognized for his opening statement.
Mr. BERMAN. Thank you very much, Mr. Chairman, and without, at this point specifically, reacting to some of the comments of my colleague from Florida, I do note the former Chairman of this Subcommittee sitting in the back row there, Howard Coble, and there is something about database protection in Howard Coble that automatically come to mind for anyone who sat through the many hours of hearings and markups of this legislation in earlier Congresses. And we are still with the issue, and it is good to have Howard with us at this time.
I am open-minded on this issue, one of those rare issues that I am open minded on. And I look forward to the witnesses and understanding exactly what the draft does, how it differs from the earlier legislation offered by each Committee and studying the issue further. So I am glad you called this hearing, and I think this is an important issue for us to be dealing with and look forward to the testimony of the witnesses.
Mr. SMITH. Thank you, Mr. Berman.
Mr. SMITH. And I also thank you for pointing out that Mr. Coble is with us, and I would like to ask him, if Mr. Coble is still here, he is welcome to join us up at the table here. And we appreciate all that he has done on this issue to date.
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Mr. COBLE. I want to thank the gentleman from California for his kind words. Howard, thank you, but pardon my gravelly voice. I am just getting over a cold. And, Mr. Chairman, thank you for calling—this is—I don't think the gentleman from Florida and I are in synch on this, but this is a very important issue, Mr. Chairman. I thank you for having the hearing.
Mr. SMITH. Thank you, Mr. Coble.
The gentlewoman from Illinois, Ms. Schakowsky is recognized for her opening statement.
Ms. SCHAKOWSKY. Thank you, Chairman Smith, and I want to thank my Chairman, Chairman Stearns, for holding today's hearing on the database and collection of Information Misappropriation Act of 2003.
I really look forward to hearing the expert testimony from today's witnesses, their thoughts on the draft bill and the problems that the bill aims to address.
As we all know, this is a highly controversial issue that has been debated for several years by Members of both Committees. In my view, our copyright laws need to strike a very delicate balance between the interests of proprietors and consumers. Our laws must ensure that proprietors are rewarded for their work, while at the same time protecting the consumer's access to information. It is extremely important that we do not pass laws that prevent people from obtaining factual information. Database owners can already copyright their original selection, coordination and arrangement of facts.
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We need to explore the issue further to determine if the current protections are adequate. If they are not, legislative remedies must be narrowly tailored to solve identified problems. Sweeping legislation could hamper research and harm consumers.
I heard just in the last few days from Northwestern University, a University of my district, and they were supporting a letter from the president of the Association of American Universities that was written to Chairman Tauzin and Sensenbrenner that I would—if it hasn't already—like to ask unanimous consent to place the letter in the record.
Mr. SMITH. And without objection, that letter will be made a part of the record.
[The information referred to follows:]
A.eps
B.eps
C.eps
Ms. SCHAKOWSKY. Let me just quote a couple sentences. Quote, colleges and universities believe that any database protection legislation should provide narrowly focused protection that supports data integrity and response to demonstrable threats to the incentive to create databases without impeding access to the data and information upon which research and education programs depend.
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We have also heard from librarians who have been very careful in representing the consumer interests and researchers' interest, and I look forward to learning more about this important topic from today's witnesses. Thank you.
Mr. SMITH. Thank you, Ms. Schakowsky.
Mr. SMITH. Without objection, other Members' opening statements will be made a part of the record, and now I will introduce our witnesses today. Our first witness is David Carson, general counsel of the U.S. Copyright Office. Mr. Carson oversees the Office's regulatory activities, litigation and administration of the copyright law. He also serves as a liaison on legal and policy matters between the Copyright Office and Congress and other Government agencies. He is a graduate of Stanford University where he earned a master's degree in history, and Harvard Law School.
The next witness is Thomas J. Donohue, president and chief executive officer of the United States Chamber of Commerce. Prior to his current post, Mr. Donohue served for 13 years as the president and chief executive officer of the American Trucking Association. Mr. Donohue earned a bachelor's degree from St. John's University and his MBA from Adelphi University.
Our next witness is Keith Kupferschmid, vice president for Intellectual Property Policy and Enforcement for the Software and Information Industry Association. Mr. Kupferschmid is responsible for working directly with SIIA's intellectual property committee. He graduated from the University of Rochester in 1987 with a BS in mechanical engineering and from American University's Law School in 1993.
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Our last witness is William Wulf, who was elected president of the National Academy of Engineering in 1997. The NAE and National Academy of Sciences operate under Congressional charter to provide advice to the Government on issues of science and engineering.
Mr. Wulf is the author of over 100 papers and technical reports, has written three books and holds two U.S. patents. And I welcome you all. We have written statements from every one of our witnesses, and without objection, the complete statements will be made a part of the record.
Mr. SMITH. As you know, we expect you to limit your testimony to 5 minutes, and Mr. Carson, we will begin with you.
STATEMENT OF DAVID CARSON, GENERAL COUNSEL, COPYRIGHT OFFICE OF THE UNITED STATES, LIBRARY OF CONGRESS
Mr. CARSON. Good afternoon, Chairman Smith, Chairman Stearns, Ranking Members Berman and Schakowsky. Members of both Subcommittees. Thank you for giving the Copyright Office the opportunity to testify at this hearing on the discussion draft of the Database and Collections of Information Misappropriation Act.
Our written testimony provides some historical perspective on database protection in the United States, briefly reviews the approach taken in the discussion draft and addresses some of the concerns that critics of database legislation have voiced thus far.
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In the few minutes that I have with you today, I would like to focus on the message that the Register of Copyrights has delivered in past testimony on database legislation, a message that is equally relevant today. Since the Supreme Court in the Feist case withdrew much of the protection that copyright law had previously offered to databases, the Copyright Office has perceived a need to provide adequate incentives for the production and dissemination of databases.
We believe the databases are important to our economy and culture, both as a component in the development of electronic commerce and as a tool for facilitating scientific, educational and technological advancement. We have long recommended an approach to database protection based on a misappropriation or unfair competition model rather than an exclusive property rights model.
At the same time, we have been concerned about the risks of overprotection. The free flow of information is essential to the advancement of knowledge, technology and culture, and we support legislation that, while ensuring adequate incentives for investment, would not inhibit access and use for socially beneficial purposes in appropriate circumstances.
The discussion draft represents a continuing evolution toward such an approach. We commend the leadership of those who have worked so hard to produce a draft that adopts this approach and takes into account the needs of producers of databases as well as users and members of the educational, scientific and research communities.
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While we have not had sufficient opportunity to study the discussion draft to permit us to offer any defensive views on this particular draft, we believe in general that it represents a major step in the direction of enactment of the type of balanced legislation that the Office has long recommended.
I should point out that our testimony on this issue in the past, as well as today, draws heavily on our 1997 Report on Legal Protection of Databases which contains a wealth of information on the subject, to which I commend you.
Since the Supreme Court's 1991 decision in Feist, only a thin layer of copyright protection remains for qualifying databases. In order to qualify, they must exhibit some modicum of creativity in the selection, arrangement or coordination of the data in them.
The protection is thin in that only the creative elements—the selection, coordination and arrangement of data—are protected by copyright. In no case is the data itself copyrightable.
One of the most significant cases in this area since Feist is the 2nd Circuit's 1997 decision in NBA v. Motorola. It is our understanding that the approach taken in the discussion draft is designed to codify the standards set forth in the NBA case. Our written testimony sets forth our analysis of the extent to which the discussion draft succeeds in this effort, and we believe that, by and large, it does succeed.
We do believe that further clarification may be necessary in some instances. For example, to determine whether the approach taken in the discussion draft is intended to codify nothing more than the hot news misappropriation doctrine discussed in the NBA case and the landmark 1918 Supreme Court decision in International News Services v. Associated Press.
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While the discussion draft requires that the unauthorized making available occur in a time-sensitive manner, courts would be instructed to consider the temporal value of the information in the database within the context of the industry sector involved in determining whether the time-sensitive requirement has been met.
This suggests that perhaps something beyond hot news would be protected, but further thought should be given to clarifying the circumstances under which such protection should be given.
We do believe that serious consideration should be given to protecting more than hot news, but on the other hand, to the extent that the legislation would go beyond protection of hot news, we are inclined to favor imposing some time limit on the duration of protection for a database.
As always, the Copyright Office stands ready to assist you in your further consideration of this proposal, and I will be pleased to answer any questions you may have.
Mr. SMITH. Thank you, Mr. Carson.
[The prepared statement of Mr. Carson follows:]
PREPARED STATEMENT OF DAVID O. CARSON
Good afternoon. Chairman Smith, Chairman Stearns, Congressman Berman, Congressman Schakowsky, Members of both Subcommittees, it is a pleasure to appear before you today. Thank you for giving the Copyright Office the opportunity to testify at this hearing on the discussion draft of the Database and Collections of Information Misappropriation Act.
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The Copyright Office has testified twice in recent years before the Subcommittee on Courts and Intellectual Property on legislation to protect databases. In the 105th and 106th Congresses, the Register of Copyrights testified in connection with the proposed Collections of Information Antipiracy Act. That bill was passed by the House in the 105th Congress but no action was taken in the Senate. In her testimony on that legislation and on a later version, the Register testified that there was a need to preserve adequate incentives for the production and dissemination of databases, which are increasingly important to the U.S. economy and culture, both as a component in the development of electronic commerce and as a tool for facilitating scientific, educational and technological advancement. She stated that there was a gap in existing legal protection, which could not be satisfactorily filled through the use of technology alone. This legal gap was compounded by the ease and speed with which a database can be copied and disseminated, using today's digital and scanning capabilities. Without legislation to fill the gap, publishers were likely to react to the lack of security by investing less in the production of databases, or disseminating them less broadly. The result would be an overall loss to the public of the benefits of access to the information that would otherwise have been made available.
At the same time, the Register cautioned that the risks of over-protection were equally serious, because (as already noted) the free flow of information is essential to the advancement of knowledge, technology and culture. She testified in support of legislation that would ensure adequate incentives for investment, without inhibiting access for appropriate purposes and in appropriate circumstances.
Accordingly, the Register recommended the restoration of the general level of protection provided in the past under copyright ''sweat of the brow'' theories, but under a suitable constitutional power, with flexibility built in for uses in the public interest in a manner similar to the function played by fair use in copyright law. Such balanced legislation could optimize the availability of reliable information to the public.
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In the intervening years, nothing has occurred to change the views of the Copyright Office. We continue to believe that balanced legislation should be enacted that would provide appropriate levels of protection for producers of databases, without unnecessarily impeding the free flow of knowledge and information.
The discussion draft represents a continuing evolution of the legislation addressing the protection of databases toward a pure misappropriation approach. In our previous testimony we expressed the view that misappropriation is the best approach to this issue and we commend the leadership of all of those who have worked so hard on this issue for their commitment to craft legislation that takes into account the needs of producers of databases as well as users and members of the educational, scientific and research communities. While we have not had sufficient opportunity to study the discussion draft to permit us to offer any definitive views on this particular draft, we believe in general that it represents a major step in the direction of enactment of the type of balanced legislation the Office has long recommended.
Much of what I say today will be based on the research and findings of the Register in her August 1997 Report on Legal Protection for Databases, which was prepared at the request of Senator Hatch, Chairman of the Senate Committee on the Judiciary. We are aware of no major developments since the time of that Report that have significantly altered the landscape with respect to legal protection for databases.
My testimony today will provide a historical perspective concerning the protection of databases in the United States, briefly review the approach taken in the discussion draft and address some of the concerns that critics of database legislation have voiced.
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I. THE HISTORY OF DATABASE PROTECTION IN THE UNITED STATES
In the terminology of the copyright law, a database is a ''compilation.'' The Copyright Act defines a compilation as ''a work formed by the collection and assembling of preexisting materials or of data . . .''(see footnote 1) Compilations were protected as ''books'' as early as the Copyright Act of 1790.
Over the course of the nineteenth century, two rationales developed for protecting compilations under copyright. The earliest cases identified the compiler's effort—''his own expense, or skill, or labor, or money''(see footnote 2)—as the critical contribution justifying protection. This type of analysis came to be known as the ''sweat of the brow'' doctrine. Analyses under sweat of the brow emphasized both the compilers' efforts and the copiers' ''unfair use of the copyrighted work, in order to save themselves the time and labor of original investigation.''(see footnote 3)
During the late nineteenth century, courts began to articulate another basis for copyright protection that generally differed from the labor/investment approach taken in cases involving compilations. In a series of decisions from 1879 to 1903, the Supreme Court held that the ''writings'' that could be protected under the Copyright Clause of the Constitution included ''only such as are original,''(see footnote 4) and indicated that creativity is a component of originality.(see footnote 5)
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The evolving doctrine of originality was applied by some courts in compilation cases, particularly cases involving compilations of textual materials such as law books. These cases identified the author's critical contribution justifying protection as his judgment in selecting and arranging materials.(see footnote 6)
This approach coexisted with, rather than supplanted, sweat of the brow cases. Sweat of the brow was applied to cases involving purely factual compilations, such as catalogs and directories.
On the question of the scope of protection afforded to compilations, there was somewhat greater uniformity in the case law. In compilation cases, regardless of the theoretical framework adopted to justify copyright protection, once the plaintiff's work was determined to be copyrightable, courts generally held a defendant to have infringed whenever material was copied from the plaintiff's work. Typically, there was no inquiry as to whether the particular material copied was protected by the plaintiff's copyright. To avoid infringement, a second-comer was required to go to the original sources and compile the material independently, without reference to the earlier work.(see footnote 7) A common thread running through many of these decisions was the court's desire to prevent the copier from competing unfairly with the compiler by appropriating the fruits of the compiler's efforts or creativity. In this sense, courts treated copyright protection for compilations much like a branch of unfair competition law.
In the Copyright Act of 1976, Congress included in the definition of ''compilation'' the first express statutory link between compilations and original works of authorship ''. . .that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes a work of authorship.''(see footnote 8) Cases under the 1976 Act were divided about the continuing viability of the sweat of the brow doctrine. Some circuits continued to apply it,(see footnote 9) while other circuits rejected it, requiring a showing of sufficient creativity in order to entitle a compilation to copyright protection.(see footnote 10) The Supreme Court resolved the split in the circuits in Feist Publications, Inc. v. Rural Tel. Serv. Co.(see footnote 11) In that case, the Supreme Court held that the white pages of a telephone directory (containing an alphabetical listing of all residents with telephone service in a defined geographic area) was insufficiently creative to merit copyright protection. The Court held that the requirement of creativity was not merely statutory, but rooted in the Copyright Clause itself.(see footnote 12) Thus, the sweat of the brow doctrine was laid to rest.
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What remains is a thin layer of copyright protection for qualifying databases. In order to qualify, they must exhibit some modicum of creativity in the selection, arrangement, or coordination of the data. The protection is thin in that only the creative elements (selection, arrangement, or coordination of data) are protected by copyright. Explanatory materials such as introductions or footnotes to databases may also be copyrightable. But in no case is the data itself (as distinguished from its selection, coordination or arrangement) copyrightable. The absence of uniform protection for noncreative databases is what has given rise to the calls for this legislation.
II. DISCUSSION DRAFT OF THE DATABASE AND COLLECTIONS OF INFORMATION MISAPPROPRIATION ACT
It is our understanding that the scope and applicability of the prohibitions in the discussion draft are designed to codify the standards set forth in the Second Circuit's decision in National Basketball Ass'n v. Motorola, Inc. (''NBA'').(see footnote 13) That case involved a state law misappropriation claim by the NBA against the maker of a hand-held pager which provided subscribers with scores and statistics of professional basketball games in progress.(see footnote 14) In analyzing the case, the court concluded that a ''hot news'' misappropriation claim under the theory of International News Service v. Associated Press(see footnote 15) (''INS'') would survive preemption by federal copyright law.(see footnote 16) The court enumerated five elements ''central to an INS claim.'' Those conditions are:
(i) the plaintiff generates or collects information at some cost or expense;
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(ii) the value of the information is highly time-sensitive;
(iii) the defendant's use of the information constitutes free-riding on the plaintiff's costly efforts to generate or collect it;
(iv) the defendant's use of the information is in direct competition with a product or service offered by the plaintiff; and
(v) the ability of other parties to free-ride on the efforts of the plaintiff would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened.(see footnote 17)
A. The plaintiff generates or collects information at some cost or expense.
The first condition is codified in subsection 3(a)(1) of the discussion draft, which applies the prohibition against misappropriation only to databases that were ''generated, gathered, or maintained through a substantial expenditure of financial resources or time.'' The term ''maintained'' does not appear in the court's articulation of the first condition. However, the reference to ''quality'' in the fifth factor could suggest a recognition that misappropriation applies not only to the initial creation but to the periodic update and verification of the product or service. One other variation from the exact language of the court is the requirement of a ''substantial'' expense. The court used the arguably less demanding term, ''some.'' The discussion draft also equates ''time'' with ''cost or expense,'' which we believe is probably a defensible interpretation of the elements set forth in NBA.
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B. The value of the information is highly time-sensitive.
The second condition is codified in subsection 3(a)(1) of the discussion draft, which requires that the making available occur ''in a time sensitive manner.'' Section 3(c) of the discussion draft states that courts shall consider ''the temporal value of the information in the database, within the context of the industry sector involved'' in determining whether this condition is met. The discussion draft omits the term ''highly,'' although it is not clear how much difference that makes. The discussion draft appears to take a flexible approach to this condition, requiring consideration of the business context, but also allowing a court to consider whatever other factors it might deem relevant. This approach may well be the subject of initial uncertainty, until courts have provided guidance in applying the standard. In this respect, the discussion draft may go beyond the ''hot news'' doctrine addressed in NBA and INS.
In its previous testimony, the Copyright Office noted with approval the application of a definite term of protection, beginning at the time the relevant portion of the collection is first used in commerce. The Office continues to have concerns about protection without a clear end point. However, the time sensitivity provisions of the discussion draft may address that concern, depending upon how they are interpreted. It may be that consideration should be given to clarifying the scope and application of the ''time sensitive'' component of this discussion draft. To the extent that it goes beyond ''hot news''—and in the past the Office has supported protecting more than ''hot news''—there may still be reason to consider some specific limitation on the duration of protection.
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C. The defendant's use of the information constitutes free-riding on the plaintiff's costly efforts to generate or collect it.
The third condition is codified in subsection 3(a) of the discussion draft, which prohibits the ''mak[ing] available in commerce to others a quantitatively substantial part of the information in a database generated, gathered, or maintained by another person . . .'' While the term ''free- riding'' does not appear in the relevant portion of the text, the conditions described appear to be the practical equivalent. Moreover, the ''free-riding'' problem is addressed in subsection 3(a)(3).
D. The defendant's use of the information is in direct competition with a product or service offered by the plaintiff.
The fourth condition is codified in subsection 3(a)(2) of the discussion draft, which requires that the making available ''inflict[] an injury.'' That term is defined in subsection 3(b) as ''serving as a functional equivalent in the same market as the database in a manner that causes the displacement, or the disruption of the sources, of sales, licenses, advertising, or other revenue.'' Here the discussion draft expressly provides for direct competition and also requires the showing of at least some disruption in revenue to the compiler.
E. The ability of other parties to free-ride on the efforts of the plaintiff would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened.
The fifth condition is codified verbatim in subsection 3(a)(3) of the discussion draft. Thus, this legislation appears to codify the standards set forth by the Second Circuit.
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III. CRITICISMS OF THE DISCUSSION DRAFT
I understand that the discussion draft has been the subject of criticism. I would like to take this opportunity to address some of those arguments.
A. Constitutionality
It has been suggested that this legislation exceeds Congress' authority under Article I, section 8 of the Constitution. As you know, the Constitution provides explicit authority for the protection of copyright.(see footnote 18) As discussed earlier, the Supreme Court held in Feist that the Copyright Clause cannot serve as a basis of authority for the protection of noncreative databases. But Feist does not address whether some other basis for protection of such materials may exist. The most likely other basis is the Commerce Clause.(see footnote 19) At least one critic suggests that the Commerce Clause cannot serve this function. The Copyright Office disagrees.
It has long been accepted that Congress has the power to enact trademark legislation under the Commerce Clause, despite the fact that trademarks may be seen as a form of intellectual property; that trademark law protects material that does not meet standards for copyright and patent protection; and that the protection may last indefinitely. The Supreme Court's opinion in The Trademark Cases(see footnote 20) held unconstitutional an early attempt by Congress to enact a trademark law, based on a lack of Congressional power under either the Copyright Clause or the Commerce Clause. According to the Court, the Copyright Clause did not provide authority for the legislation because trademarks have different ''essential characteristics'' from inventions or writings, since they are the result of use (often of already-existing material) rather than invention or creation, and do not depend on novelty or originality.(see footnote 21) The Commerce Clause did not provide authority because the particular trademark law in question governed all commerce and was not limited to interstate or foreign commerce.(see footnote 22) The opinion suggested that similar legislation limited as to the type of commerce involved would pass constitutional muster under the Commerce Clause. Indeed, legislation consistent with the Court's interpretation of the Commerce Clause was subsequently enacted and has gone unchallenged since 1905.
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The Register's 1997 Report on the Legal Protection of Databases stated that ''To the extent that database protection promotes different policies from copyright protection, and does so in a different manner, it is similar to trademark law, and therefore seems likely to survive a constitutional challenge.'' The prohibition set forth in this discussion draft appears to meet that prescription. It is crafted to protect that which the NBA case held to be outside of copyright. Its focus is on unfair competition through the misappropriation of a commercial product that is the result of substantial expenditure of another's financial resources or time, in a way that inflicts commercial injury on that person, elements that are far removed from the core of copyright.
B. Subpoena to Identify Violators
The discussion draft includes a procedure similar to that in 17 U.S.C. §512(h) to allow potential plaintiffs to learn the identity of those they believe have violated the provisions in this discussion draft. The Copyright Office believes that the section 512(h) subpoenas are a necessary and appropriate tool in copyright owners' struggle against infringement, particularly in the digital and online environments. However the discussion draft does differ in one significant respect: Section 512(h) requires the person seeking a subpoena to file with the clerk of the court a certain information about the claim of infringement that has given rise to the controversy that requires identification of the alleged infringer. This provision provides assurances that the subpoena is sought in good faith and that there is an objective basis for seeking it. The current discussion draft does not have any analogous safeguards. The Copyright Office recommends the inclusion of such a provision in this discussion draft.
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C. Fair Use Exception
We understand that some have suggested that this discussion draft is somehow flawed without the inclusion of a ''fair use'' exception, similar to the one that appears in the Copyright Act.(see footnote 23) In the past, the Copyright Office has supported inclusion of provisions similar to fair use in database protection legislation. However, the past legislative proposals provided for broader protection than is provided in this discussion draft. In providing for a narrower prohibition, the discussion draft may well obviate the need for a fair use-type of provision. It may well be that this discussion draft already incorporates most of the principles embodied in copyright fair use. The ''purpose and character of the use''(see footnote 24) is addressed by subsection 3(a) of the discussion draft, which prohibits the ''making available in commerce,'' and in subsection 3(b), which makes clear that the prohibition extends only to inflictions of injury that serve as a functional equivalent in the same market as the database. The ''amount and substantiality of the portion used''(see footnote 25) is also addressed in subsection 3(a), which requires ''a quantitatively substantial part of the information.'' Indeed, this provision is more permissive than fair use, which may not excuse the use of a quantitatively insubstantial portion that is qualitatively vital to the work. The ''effect of the use upon the potential market for or value of the copyrighted work''(see footnote 26) is addressed by subsection 3(a)(3), requiring that the ability of others to free-ride threaten the ''existence or quality'' of the database, as well as subsection 3(b), with its strong requirement of market harm. Of course, the second fair use factor, ''the nature of the copyrighted work,''(see footnote 27) is inapplicable to a legal regime specifically designed to protect that which is denied copyright protection for lack of creativity. While we are strong proponents of fair use and understand the desire for such a provision in database protection legislation, we are not persuaded that such a provision is necessarily required when the prohibition itself serves the policies underlying fair use.
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D. Internet Service Provider Liability
There has been complaint that the discussion draft would subject internet service providers (''ISPs'') to liability unfairly. However, subsection 7(i) of the discussion draft explicitly insulates ISPs from liability unless their employees violate the prohibition while acting within the scope of their duties, actively direct or induce a violation of the prohibition, or receive a financial gain directly attributable to the violative conduct. It is not readily obvious to the Copyright Office how the ordinary use of ISPs' systems by their users could be within the scope of these few exceptions to the general rule that ISPs do not bear liability under this discussion draft. Moreover, it is notable that the discussion draft provides this benefit to ISPs without requiring them to abide by many of the conditions that appear in section 512 of the Copyright Act,(see footnote 28) such as taking down violative material in response to a notice or terminating the account of a repeat offender. Compared to section 512, this provision appears to be generous.
E. Alleged Expansion of Intellectual Property Protection
There is also apparently a somewhat amorphous criticism that this discussion draft would serve in furtherance of an alleged trend of expanding intellectual property protection without counterbalancing other interests. The Copyright Office sees no such trend. Indeed, the last few years have seen expansions of exceptions and limitations. For example, legislation has provided exceptions and limitations for digital distance education,(see footnote 29) use of works by the blind,(see footnote 30) and the aforementioned provisions for ISPs.(see footnote 31)
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A complete analysis of intellectual property protection includes a consideration not only of the provisions of the law, but also of the other factors which affect the incentive to create and the availability for use of protected materials. Most significantly, the dramatic growth of the use of digital technology and the Internet have made more materials available to more people than ever before. However, this technology has also created an avenue for the improper use of materials on a previously unimagined scale. Changes in the law to try to prevent or remedy these improper uses do not necessarily reflect a change in philosophy about the appropriate scope of protection and have not altered the fact that both authorized and unauthorized users of protected materials generally have greater opportunities to use the material of others than they did before these technological developments.
IV. CONCLUSION
The discussion draft represents the latest in a series of legislative attempts to provide consistent, federal standards of protection for databases. As I noted at the outset, the Copyright Office is sympathetic to these efforts but does not, at this time, take a position on this legislation. As always, the Copyright Office stands ready to assist both Subcommittees and I will be pleased to answer any questions you may have.
Mr. SMITH. Mr. Donohue.
STATEMENT OF THOMAS J. DONOHUE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, CHAMBER OF COMMERCE
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Mr. DONOHUE. Thank you, Mr. Chairman. And Mr. Chairmans, all and Members, it is fun to appear before a joint Committee. You are never quite sure where the balance is. So we will keep an eye from this end as well.
On behalf of the Chamber's 3 million business members of every size and every sector, I am pleased to come here today and to discuss this draft legislation. Let me briefly explain the two very important reasons why the Chamber is clearly opposed to this piece of legislation, and then we will gladly answer your questions.
First, the Nation already has on the books, as many have already mentioned, the vast web of laws that protect database information, laws that even database producers themselves appear to be completely satisfied with. We have the benefit of contract intellectual property, copyrights, state of law misappropriation, trespass and Federal computer antihijacking statutes and numerous other protections that are on the books and in place.
The Chamber's members, you will not be surprised, include many of the country's biggest producers and users of databases, and I would clearly tell you if they didn't think the law was protecting them because they would have clearly told me; but in fact, our Members have told us that this legislation is misdirected, in many ways, harmful and unnecessary.
Proponents of the database legislation have yet to provide a real-world example of a database that isn't protected under current law. I agree under the discussion that the law has been strong and weak in various ends of the bookends, but clearly there is protection; and if we were to pass this draft legislation, there would be many new problems for all of us to face.
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It is remarkable that when you think about the enormous number of databases that our children use and we use and that all your staffs use every day, and the equally enormous number of opportunities for some kind of serious infringement is that no one here is telling you about one that has happened. Six years ago the Copyright Office told the Congress that they could pass legislation to add additional protection. The Congress has not, during that period of time, with the introduction of new technology, with people carrying Blackberries around on their belt so they can access all kinds of information, we haven't had these problems.
This is a solution in search of a problem, and we ought to be very careful about that.
Now, your mission in the Congress—the Congress has many missions, but in this instance it is to specifically identify and define the problem and then craft some legislation to fix it. I think you will have to spend the majority of your time looking for the problem.
Let me go to the second concern I have, which is even more critical, and that is this legislation with its vague terms and allowance for excessive penalties—and I will say something about that at the end—would significantly add to the country's frivolous litigation nightmare.
For example, if this legislation were enacted, an individual or an organization such as the Chamber could be sued for taking the text of existing laws and reformatting them to make them easier for people to understand. It could also stop a replacements part manufacturer from being able to compare and hence advertise their products as alternatives to other more expensive originals; and with the legislation's vague and expansive definition of the term time-sensitive, information—time-sensitive information, an individual or an organization could be the target of a lawsuit for using information in a database that is decades old.
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Ladies and gentlemen, I think for a minute of where our society would be without sharing database information. We owe an incredible advances in medicine, science, technology and the arts to the availability of that information to researchers all over the place.
That is not to say, however, that access to database information should necessarily be available free. When people reformat and lay it out in a usable and a helpful way, they can and should charge for it, and the user should pay for it.
Passing this legislation—let me conclude—would put a chill on business investment, deprive consumers of new information products and threaten a litigation bonanza that we can't afford, and it would then put penalties that will quadruple the fines when the things we do in RICO statutes only triple them. This would be a very unfortunate piece of legislation.
Thank you very much, Mr. Chairman.
Mr. SMITH. Thank you, Mr. Donohue.
[The prepared statement of Mr. Donohue follows:]
PREPARED STATEMENT OF MR. THOMAS J. DONOHUE
INTRODUCTION
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Chairman Stearns, Chairman Smith, Ranking Member Schakowsky, Ranking Member Berman and Members of the Committees. Thank you for the opportunity to be here today to testify on ''the Database and Collections of Information Misappropriation Act''.
I'm Tom Donohue, President and Chief Executive Officer of the U.S. Chamber of Commerce, the world's largest business federation, representing more than 3 million businesses of every size, sector and region of the country.
I have previously written to both Committees to express my serious concerns about the draft legislation. I ask that copies of my correspondence be made a part of the record.
I recognize that the staffs of your two Committees have worked hard to address the concerns that the Chamber and others have expressed regarding this issue. Unfortunately, I believe that the draft Database and Collections of Information Misappropriation Act does not adequately address those concerns. Instead, this legislation continues to pose a serious threat to the business community, as well as to the academic and science community. I strongly urge you not to move forward with this legislation.
Although the discussion draft has been shared with the public for barely three weeks, it has already attracted a firestorm of thoughtful criticism. Along with the Chamber's objections, additional detailed and persuasive criticisms have been lodged by an extraordinarily diverse array of public and private entities. When the U.S. Chamber of Commerce, Consumers Union, the American Conservative Union, Association of Research Libraries NetCoalition and the Eagle Forum, all join hands in opposition to a legislative initiative, it's fair to ask what could unite groups which so often see the world in very different ways.
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The reason why so many organizations are so concerned about the discussion draft is simple. There has been no threshold showing that there is a problem that needs to be addressed by legislation. However, there is enormous concern that were this draft enacted, it may well create enormous problems for information users and producers, stifling innovation and adding to the excessive litigation burdens already facing American businesses.
We live in the ''Information Age'' - an age in which advances in information technology have helped fuel economic growth and enhanced productivity. Fundamental changes in basic information policy will affect virtually every American, as well as virtually every business, not just those commonly thought of as information companies.
Our country's basic information policy provides that facts - the building blocks of information - cannot be owned. That historic policy was underscored in a unanimous 1991 Supreme Court decision Feist v. Rural Telephone. In that landmark case, the Supreme Court reaffirmed that the U.S. Constitution prohibits copyright protections for facts contained in a database. The Court concluded that the Constitution's objective of promoting ''the Progress of Science and useful arts'' is accomplished by ''encouraging others to build freely upon the ideas and information conveyed by a work.''
The basic goal of copyright, indeed of all intellectual property law, is to encourage creative activity. That is why the Feist court underscored that intellectual property protection can only be provided to those portions of a database that reflect a minimal level of creativity. Notwithstanding this unanimous Supreme Court decision, however, proponents of broad database legislation continue to seek protection for information that they haven't created.
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That is not to say that access to these databases should necessarily be available for free. Indeed, the Chamber strongly believes that current protections, such as appropriate intellectual property protections, along with contract and licensing agreements and state trespass and misappropriation protections, as well as other protections, should be utilized and enforced. Companies need and deserve protection for the time, effort and expense that they undertake to create databases, but new intellectual property protections like those envisioned by the discussion draft are too broad and unnecessary.
WHAT'S THE PROBLEM? WHERE IS THE ''GAP'' IN CURRENT LAW?
The Chamber has always believed that the best way to legislate is to specifically identify and define problems, and then carefully craft legislation to deal with those particular real-world harms. Whenever Congress legislates - especially in an area with the broad ramifications such as those inherent in changing basic and long-standing copyright and information policy - that legislation should be narrowly targeted to resolving a demonstrated real-world harm, with as little collateral damage as possible.
In this arena, throughout the seven-year consideration of this issue, proponents of changing how our nation regulates information have yet to provide a real-world example of a database that can't be protected under current law. There are an astronomical number of opportunities daily for some kind of infringement. Yet the inability to cite gaps in the law is profoundly telling. Indeed, this inability to cite real gaps in existing laws underscores our concern that some proponents of broad database legislation seek to leverage dominance in existing markets into dominance in other markets - without having to gain these advantages via competition in the marketplace.
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Most persuasive to me is the reaction of the Chamber's members to the discussion draft. Our broad membership includes many of America's most significant database producers. These companies invest enormous sums of money producing creative, new information products. These companies currently enjoy myriad legal protections for their databases, including contract, copyright, state- law misappropriation, trespass, federal computer anti-hacking statutes and numerous other protections.
If our Chamber members believed for a second that they couldn't protect their substantial investments in database production, they would be urging me to affirmatively fight for new law. Instead, I'm hearing that there is little or no upside for the business community in database legislation, and potentially a significant, anti-competitive downside.
THREAT OF EXCESSIVE LITIGATION
As you know, the Chamber has long been concerned about the threat excessive litigation poses to the economy and American business. This legislation, if enacted, would combine vague terms and excessive penalties to create a frivolous litigation nightmare for businesses of all industries.
The reason for this begins with the core prohibition of the draft bill. Since the Supreme Court's 1918 decision in International News v. Associated Press, courts have awarded relief in what became known as ''hot news'' misappropriation cases. That line of cases established the tort of misappropriation, and found that even factual data could be protected if the data met a series of tests, including that the data is ''highly time sensitive''. The Court found in that case that wire stories were ''hot'' and protected for a few hours. Subsequent cases have found, for example, that sports scores are ''hot'' and potentially protected for a matter of minutes.
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The discussion draft, however, creates a new definition of ''time sensitivity'' in the context of this bill, significantly different than the ''time sensitivity'' that courts have been familiar with for more than eighty years under the International News line of cases. Specifically, this draft would potentially require courts to add the concept of ''value'' to the determination of time sensitivity.
For example, this draft legislation works retroactively, ensnaring facts in databases that are conceivably decades old. The draft protects facts in encyclopedias, even though the lead-time in publishing means that data is generally months old before it reaches the bookstores. In short, it is impossible to state definitively what this core prohibition means - though it can be definitely stated that this prohibition bears only a superficial resemblance to the time-sensitivity standard created by the Supreme Court in the International News case and expressly preserved in Feist.
The courts would be forced to determine whether the proposed prohibition can be tightened to look like constitutionally sanctioned ''hot news'' misappropriation and not like the copyright of facts forbidden by Feist. While the courts sort this out, the combination of vague terms, a private right of action, quadruple damages and incredibly expansive subpoena power would create a litigation bonanza that will chill investment and threaten business, depriving consumers of new information products.
CONCLUSION
On behalf of the Chamber, I want to thank you for the opportunity to share some of our more serious concerns regarding the discussion draft. The Chamber has always believed that the best way to legislate is to identify and define specific problems, and then carefully craft legislation to deal with them. While some urge ''moving beyond'' discussing the problem in order to legislate, we are convinced that, if there is to be legislation it should be narrowly targeted to resolving a demonstrated real-world harm, with as little collateral damage as possible.
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Appropriate information policy is critical to American business. While we may be willing to support compromise legislation carefully targeted to deal with specific, demonstrated ''gaps'' in existing law, there has been no demonstrated need for such legislation at this time.
On behalf of American businesses and our three million members, I want to thank you again for inviting me to testify and share our concerns.
Mr. SMITH. Mr. Kupferschmid.
STATEMENT OF KEITH KUPFERSCHMID, VICE PRESIDENT, INTELLECTUAL PROPERTY POLICY AND ENFORCEMENT SOFTWARE AND INFORMATION INDUSTRY ASSOCIATION, ON BEHALF OF THE COALITION AGAINST DATABASE PIRACY
Mr. KUPFERSCHMID. Chairman Smith and Stearns and Members of both Subcommittees, I appreciate the opportunity to testify before you today to discuss the need for legislation that protects America's databases from piracy. I also would like to especially thank Chairman Sensenbrenner and Chairman Tauzin for their strong leadership on this important issue and appreciate the commitment of the two Committees to work together to produce and enact meaningful database legislation.
I am Keith Kupferschmid, vice president of intellectual property for the Software and Information Industry Association, and I am here today on behalf of the coalition against database piracy. CADP is a broad-based coalition that was formed for the sole purpose of pursuing enactment of a Federal law to prevent misappropriation of databases. Its members include large and small database producers who devote substantial resources to creating and distributing database products and services.
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The value of reliable and comprehensive databases that these companies make available to researchers, to businesses, to Government officials, to citizens is immeasurable. Farmers use databases to get weather and soil information; lawyers to rely on legal precedent; doctors to determine safe and effective medical procedures; workers to search for new jobs; pharmacists to understand drug interactions; home buyers to find the right house, and the list goes on.
Database piracy is a major concern to America's database publishers. With the Internet and advances in technologies, databases can be easily stolen and made available to others in ways that cause great harm to the original database producer.
Unfortunately, U.S. copyright law and other existing laws do not adequately protect against such piracy. A recent case, Schoolhouse versus Anderson, decided in 2002, demonstrates the glaring inadequacies of current law. In that case the defendant copied and posted on the Internet a minimum of 74 percent of a small magazine publisher's database of school information. Although the defendant admitted to copying the database, the court held that the defendant was not liable for copyright infringement.
Shortly after that case, the plaintiffs in the case got out of the database business. This is just one example. There are many other cases, including Skinder-Strauss v. MCLE, EPM Communications v. Notara Warren Publishing v. Microdos, Ticketmaster v. Tickets.com and many others.
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In addition to the database piracy cases that have resulted in litigation, there are numerous other instances of piracy that never make it to the courtroom. Many database producers are simply unwilling to spend the significant amounts of money litigating questionable causes of action and in the process draw attention to the vulnerabilities of their company's databases.
Clearly there is a definite and significant need for database protection legislation. In addition, the risk of potential future instances of database piracy and the adverse effects that piracy would have on investment in databases and consumer protection is certainly sufficient justification for Congress to enact database protection legislation.
I would like to focus the remainder of my remarks on the draft legislation. The discussion draft reflects years of discussions and negotiations between the two Committee staffs and stakeholders. The draft legislation they have developed takes a very targeted and very narrow approach to addressing the problem of database piracy.
It is based on a misappropriation approach that only covers the act of making a database available that causes significant commercial harm to the database producer. It protects the database itself, not the information or the facts in the database.
The draft legislation creates a narrowly focused prohibition that applies only if ten criteria are met. These ten criteria, all of which must be satisfied, set a very high standard for qualifying for protection under this draft bill. This standard is even higher when one also considers the exceptions to liability that are contained in the draft.
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We believe that some of the substantive provisions of the draft will provide protection against database piracy while also accounting for the legitimate concerns of database users.
However, we believe that some of the language contained in the draft requires clarification, notably the preemption and time sensitivity provisions, among others. We are also concerned that the discussion draft does not recognize database thefts that cause noncompetitive harms. We look forward to working with the two Committees to ensure that these concerns are addressed.
We note that a few groups, many of whom were part of the process initiated by the two Committees to come up with a compromised text, have voiced their opposition to the discussion draft. The approach of the discussion draft, relying on a standard of misappropriation, is precisely the standard that was recommended by many of those who are now writing to express their concern. Their continued opposition amply demonstrates that they simply do not accept the conclusions that the chairmen have both reached: that Congress should legislate to improve legal protection available for databases.
Our goal throughout this whole process has been to get narrowly targeted legislation that will address the problem of database piracy while also addressing the legitimate concerns of the database user community. To the extent that the opponents believe that the draft falls short of this goal, we continue to stand ready to address those concerns in exchange for their support for this important piece of legislation and their recognition that the bill must address the needs of the database publishing community.
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We look forward to working with the Congress and the other stakeholders to achieve a legislative solution that eliminates the unfairness we discuss today. Thank you again for all your work on this important legislation. I will be happy to answer any questions.
Mr. SMITH. Thank you, Mr. Kupferschmid.
[The prepared statement of Mr. Kupferschmid follows:]
Mr. SMITH. Mr. Wulf.
STATEMENT OF WILLIAM WULF, PRESIDENT, NATIONAL ACADEMY OF ENGINEERING AND VICE CHAIRMAN, NATIONAL RESEARCH COUNCIL
Mr. WULF. Thank you, Mr. Chairman. Like my predecessors here, I am very grateful to have the opportunity to testify on this important legislation today. I should clarify that I am testifying on behalf of the U.S. National Academies. That is The Academy of Sciences, The Academy of Engineering, and institute of Medicine, but also on Behalf of the Association of American Universities, the American Library Association and the Association of Research Libraries.
The proposed legislation concerns a topic about which the scientific research, education and library communities have had an abiding and continuing concern. For all of those communities, the free and open sharing of information is essential for progress, and that progress is in large measure responsible for our quality—you are improving quality of life. It is estimated that one half of our GDP growth is due to advances in science and technology. It is estimated that two-thirds of our productivity growth, the real source of wealth creation, is due to advances in science and technology.
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A hundred years ago this year, the Wright brothers flew the first heavier-than-air aircraft. A hundred years ago this year, Henry Ford opened his mass production plant making affordable automobiles available to all of us. A hundred years ago this year, the average life expectancy of an American was 46. It is now 77 an increase of 31 years.
On the light side, I suppose it is interesting to speculate how many of us in this room would be here if it weren't for those advances in science and technology.
On the serious side, my point is that this is a system that one tampers with very carefully. An unintended consequence of well-intended legislation on the free and open sharing of information could have enormous implications on our prosperity, our health and indeed on our national security.
I would just like to make a few points about the draft legislation. First of all, I want to acknowledge that, in fact, the draft has a number of significant improvements, and we are very grateful for that. I must admit that my own analysis is incomplete, but I believe that there are also still problems and ambiguities, some of which are in my written testimony. As a consequence, the Academy has remained committed to being helpful in producing a balanced and fair bill, assuming that one is deemed necessary.
The key I think is that there are several principles that ought to inform the process of crafting any new legislation in this area, and I would like to focus the rest of my testimony on those principles.
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The first is that the public domain status of factual noncopyrightable information must be preserved. Any new protection regime should leave a wide buffer zone to ensure that factual information will not be subjected to proprietary claims.
Two, only significant problems of unfair competition in market failure that have been proven should be addressed. And negative unintended consequences must be avoided.
Three, a reasonable balance of interest among the stakeholders in an information economy should be maintained. Congress should proceed cautiously in creating new protection regimes, because once created, a new protection regime is virtually impossible to dismantle.
Four, healthy competition in the information industry needs to be promoted, while the further strengthening of unwarranted monopolies should be avoided.
Five, exclusive control by private parties over information in databases produced by the Government must be prevented.
Six, new protection regimes should not create any doubt or controversy about the lawfulness of traditional and customary access to and use of factual information for not-for-profit science, research and education, effective exceptions must be adopted.
And finely, the important role and function of our Nation's libraries must not be undermined.
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Before concluding, let me note that there is little evidence, as far as I can tell, since the last time we testified on this issue that databases or other collections of information are routinely stolen or that there is a significant market failure in the information industry for such products.
Indeed, database producers have already enjoy a broad range of legal technological and self-help methods, many of which have been further strengthened in recent years, that protect the fruits of their investment.
Nevertheless, the academies and the other organizations represented in this testimony remain committed to playing a constructive role in helping Congress to consider the issues of database protection in a way that is consistent with the principles I have identified above. Thank you.
Mr. SMITH. Thank you, Mr. Wulf. And thank you all for your very strong testimony today.
[The prepared statement of Mr. Wulf follows:]
PREPARED STATEMENT OF WM. A. WULF
INTRODUCTION
My name is Bill Wulf. I have been asked to testify on behalf of the U.S. National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine (the ''Academies''). As you know, the three Academies were chartered by Congress to provide advice to the federal government and to the nation on scientific, technical, and medical issues. My testimony is also being given on behalf of the Association of American Universities, the American Library Association, and the Association of Research Libraries.
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I am grateful to have the opportunity to testify to you today about the draft legislation called the ''Database and Collections of Information Misappropriation Act of 2003.'' This proposed legislation concerns a topic about which the scientific, research, education, and library communities have had an abiding interest and continuing concerns. Indeed, this is the third time that the Academies have testified on congressional legislation in this area since 1997, and both the Academies and their operating arm, the National Research Council (NRC), have published extensively on these issues over the past seven years. A list of recent relevant NRC reports and my biographical summary are provided at the end of this statement. Copies of the referenced NRC reports, as well as the Academies' previous testimony, letters to Congress, and background analyses that we have written on previous versions of this legislation, are available on request.
Although I am authorized to speak only on behalf of the organizations that I represent here today, the issues I wish to raise with you pertain broadly to our nation's scientific, research, education, and library concerns. And although I do not address directly the important issues raised by this legislation for the commercial sector, which are the focus of other testimony before you, my remarks are cognizant of the broader implications to our nation's economic and social progress.
My testimony makes the following points, which build on our previous analyses:
> As a matter of public policy, there are several key principles that must inform the process of crafting any new legislation in this area, including the following:
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1) The public-domain status of factual, non-copyrightable information must be preserved, and any new protection regime should leave a wide buffer zone to ensure that factual information will not be subjected to proprietary claims.
2) Only significant problems of unfair competition and market failure that have been proven should be addressed, and negative unintended consequences must be avoided.
3) A reasonable balance of interests among all stakeholders in the information economy should be maintained. Congress should proceed cautiously in creating new protection regimes, because once created, a new protection regime is virtually impossible to dismantle.
4) Healthy competition in the information industry needs to be promoted, while the further strengthening of unwarranted monopolies should be avoided.
5) Exclusive control, either de jure or de facto, by private parties over information and databases produced by the government must be prevented.
6) New protection regimes should not create any doubt or controversy about the lawfulness of traditional and customary access to and use of factual information for not-for-profit science, research, and education. Effective exceptions must be adopted.
7) The important role and functions of our nation's libraries must not be undermined.
> The draft legislation includes a number of improvements over previous versions of this legislation that have been introduced by the House Committee on the Judiciary since 1996.
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> There are still major problems and ambiguities in the current draft bill that can and should be addressed, assuming that the creation of a new statutory remedy is still deemed necessary.
> The Academies and the other organizations represented in this testimony remain committed to playing a constructive role in helping Congress to consider the issues of database protection in a way that is consistent with the principles identified in this testimony and that avoids negative unintended consequences.
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A. KEY PRINCIPLES
1) The public-domain status of factual, non-copyrightable information must be preserved, and any new protection regime should leave a wide buffer zone to ensure that factual information will not be subjected to proprietary claims.
As we have noted in previous testimony on this issue, access to and use of factual data in the public domain is essential to furthering our understanding of nature, to the validation of scientific claims, and to the progress of science and our nation's system of innovation. The advent of digital technologies for collecting, processing, storing, and transmitting data has led to an exponential increase in the size and number of databases created and used. A hallmark trait of modern research is to obtain and use dozens or even hundreds of databases, extracting and merging portions of each to create new databases and new sources for knowledge and innovation.
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Not only researchers and educators, but all citizens with access to computers and networks, constantly create new databases and information products for both commercial and noncommercial applications by extracting and recombining public-domain data and information from multiple sources. The rapid and continuous synthesis of disparate data by all segments of our society is one of the defining characteristics of the information age. Moreover, the serendipitous nature of research and the need of scientists and others to make transformative uses of non-copyrightable facts are such that one cannot predict when or how a database will be used. The ability of individuals and organizations to use information in a wide variety of innovative ways is also a measure of success of the original data-collection efforts.
Society uses the fruits of such research and innovation to expand the world's base of knowledge and applies that knowledge in myriad downstream applications to create new wealth and to enhance the public welfare. Indeed, the policy of the United States has been to support a vibrant research enterprise and to assure that its productivity is exploited for national gain. Thus, freedom of inquiry, the availability of scientific and other factual data in the public domain, and the open publication of results are cornerstones of our research system that U.S. law and tradition have long upheld.
The results of these wise policies have been spectacular. For many decades, the United States has been the leader in the collection and dissemination of scientific and technical data and in the discovery and creation of new knowledge. Our nation has used that knowledge more effectively than any other nation to support new industries and applications, such as the biotechnology industry and the discovery of new diagnostics and cures for hereditary and other diseases.
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In addition to the critical importance to our progress in science and innovation for factual information to remain in the public domain, it also is essential for many other compelling American values and needs, including 1st Amendment rights of freedom of expression, the promotion of the information economy, democracy and good governance, and other public- interest uses by consumers and society generally.
Because of the overriding importance of non-copyrightable factual information remaining in the public domain, any new legislation in this area must be limited to remedying unfair conduct in commerce rather than extending any exclusive property rights in the factual information itself.
Where there is uncertainty or doubt about the effect of potential new legislation, Congress should be careful to err on the side of caution. When the subject matter consists of the fundamental building blocks of knowledge, science and expression, the cost of over-protection far exceeds the cost of under-protection.
2) Only significant problems of unfair competition and market failure that have been proven should be addressed, and negative unintended consequences must be avoided.
Proponents of new database protection legislation have long argued that the misappropriation of databases is a major problem in the U.S. information industry and that existing methods of protection and remedies are inadequate. We find both assertions to be of increasingly dubious validity.
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There is little evidence since the last time we testified on this issue before Congress that databases or other collections of information are routinely stolen or that there is massive market failure in the information industry. Indeed, database producers already enjoy a broad range of legal, technological, and self-help methods-many of which have been further strengthened in recent years-that protect the fruits of their investments. Available legal remedies at the federal level include traditional copyright law, new rights to prevent the circumvention of technological protection measures granted under the Digital Millennium Copyright Act, and the new Computer Fraud and Abuse Act. Under state law, many jurisdictions have a common law prohibition against misappropriation of ''hot news,'' and a claim for trespass to chattels to protect databases.
Contracts and licenses are now used universally by database owners to make their products available under a range of custom-tailored, restrictive conditions. Technologies that protect digital databases and help enforce the existing statutory and contractual rights of owners are constantly being refined and strengthened, including such methods as encryption, online database access controls, software and hardware based trusted systems, and digital object identifiers and electronic watermarks. Indeed, these contracts and technologies are increasingly employed to limit uses of data and information that would otherwise be permitted by law. Congress should carefully monitor their use and consider whether limits on their use are needed to preserve the balance between access to and use of factual information and the incentives to invest in the collection of such information, both of which are essential to the vigorous growth of science and knowledge.
Finally, market based protections of databases through self-help business practices such as frequent updating and customizing can help make misappropriation less effective. Taken together, these database protection methods have helped make the commercial database market expand successfully in the United States.
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The Academies, the Association of American Universities, the American Library Association, and the Association of Research Libraries nonetheless are committed to playing a constructive role in helping Congress to consider the issues of database protection in a way that is consistent with the principles identified in this testimony and avoids unintended negative consequences. The National Research Council reports referenced at the end of this testimony analyze the far- reaching negative implications to research and innovation that could result from legislation that is overly protective of data and non-copyrightable factual information.
3) A reasonable balance of interests among all stakeholders in the information economy should be maintained. Congress should proceed cautiously in creating new protection regimes, because once created, a new protection regime is virtually impossible to dismantle.
It is essential to consider fully and to promote a healthy balance of the interests of all the stakeholders in the information economy and society, including the general public. The trend in recent years has been to increase the breadth, depth, and length of all types of intellectual property protection. The creation of any new statutory rights, particularly for subject matter as sensitive as non-copyrightable factual information, must be done in full cognizance of the interaction of these rights with other parallel rights conferred by other statutes to avoid negative synergistic effects. In this regard, a major concern for the research community, as discussed further below, are the potential negative effects on access to and use of databases from unbridled, highly restrictive licensing practices, especially through increasingly legitimized adhesion contracts (e.g., shrink-wrap and click-on licenses), in concert with any additional new statutory rights in databases.
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Further, history has demonstrated that once granted, intellectual property rights are rarely, if ever, reduced or limited. Thus, if there is uncertainty about the effect of any proposed new protection, it is important err on the side of caution and the preservation of the status quo.
4) Healthy competition in the information industry needs to be promoted, while the further strengthening of unwarranted monopolies should be avoided.
The promotion of competition is primarily an economic issue of direct interest to our colleagues in industry, but the benefits of competitive prices and increased quality accrue to the public. It is important, nonetheless, to emphasize that a preponderance of scientific databases are produced by sole sources, whether in the public or the private sector. For example, the vast majority of observational data sets of phenomena in the natural world, as well as all unique historical factual compilations, can never be recreated independently and are therefore frequently available only from a single, original source. In other cases, scientific databases are de facto unique natural monopolies because the cost of producing the data and the potential market are such that the economics will not support multiple sources. Even when data that are similar, but not identical, to original research results or observations are available for use in non-technical applications, researchers and educators are unlikely to consider an inexact replica of a database to be a suitable substitute if it does not meet fully the original specifications. For this reason, scientific databases are particularly prone to monopoly control. Any new legislation therefore must not enhance the market power of sole-source providers in any segment of the information industry without adequate public-interest safeguards.
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5) Exclusive control, either de jure or de facto, by private parties over information and databases produced by the government must be prevented.
Consistent with principle #1 above, the public domain status of governmental databases and other information products is a key factor for the success of our nation's research enterprise, as well as for other compelling national values and interests. Legislation that confers new rights on the private sector must fully exempt government databases from the scope of protection and avoid the possibility of exclusive capture by private-sector entities.
6) New protection regimes should not create any doubt or controversy about the lawfulness of traditional and customary access to and use of factual information for not-for-profit science, research, and education. Effective exceptions must be adopted.
Also in keeping with principle #1 above, it is important to provide clear immunity for customary non-commercial scientific, research, and educational uses from the scope of a database protection statute. Non-profit institutions should not be required to have expert intellectual property counsel looking over the shoulder of every scientist and scholar. Customary activities should not be chilled. Because in the case of databases, facts themselves are at issue, the legislation should include an express presumption that such customary uses are exempt from liability and the burden of proof on the plaintiff of demonstrating a violation should be heightened.
7) The important role and functions of our nation's libraries must not be undermined.
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Libraries traditionally have served the important public-interest function of providing access to information to our nation's citizens, and performed essential preservation and archiving activities. Any new rights conferred by new legislation on database owners must not undermine the libraries' ability to continue its role as public-interest intermediary for the access to and preservation of factual information resources.
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B. PRELIMINARY COMMENTS ON THE DRAFT LEGISLATION
We have not had sufficient opportunity to analyze comprehensively the draft ''Database and Collections of Information Misappropriation Act of 2003.'' The issues and competing interests in this legislation are complex and difficult to reconcile. Although the process has been long and difficult, we believe that it has led to a deeper understanding of the issues, which was so palpably lacking when the first legislative proposal, based on the European Union's database directive, was introduced in 1996. It also has demonstrated the inherent problems with introducing any new rights in this Constitutionally sensitive area and the importance of addressing adequately the competing legitimate interests of the many stakeholders in the information economy, not only the economic interests of the originators of commercial databases.
Our preliminary analysis of this new version of the legislation is consistent with the views expressed by the major university organizations in the September 9, 2003 letter from Nils Hasselmo, President of the Association of American Universities, to the two cognizant Committee Chairmen. We conclude that although improvements have been made over the previous legislative proposals introduced by the Committee on the Judiciary, very significant problems still remain to be resolved. Moreover, the current draft contains a number of new provisions whose intent and impact are ambiguous and which could have serious unintended consequences for the research and education enterprise.
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We appreciate, in particular, several improvements that have been made in response to the concerns expressed earlier by the Academies and other parties to this process. The move toward a standard of liability grounded more in unfair competition law and the elimination of some of the most unacceptable aspects of previous versions of the Committee on the Judiciary's proposed statutes, are certainly welcome. Among the specific improvements that we see are the elimination of qualitative substantiality, the effort to tie liability to direct competition in the same market as the existing database, the adoption of a knowledge requirement as a condition of liability, and a limitation to databases that require substantial effort to develop. The elimination of criminal penalties and the explicit recognition of the doctrine of misuse as a limiting factor on lawsuits are also positive developments.
Although the discussion draft addresses some of the concerns we identified previously, many serious problems remain nonetheless, while new ambiguities have been introduced by the recent changes. We note here only the issues of greatest concern to the scientific, research, education, and library communities, consistent with the principles articulated above, and also incorporate by reference the additional concerns expressed in the September 9 letter from Nils Hasselmo. In particular:
> With regard to the liability standard, the discussion draft could confer perpetual ownership rights in a wide variety of data by virtue of protecting investment based on open-ended maintenance of a database. In addition, the concept of ''making available to others'' appears to be overly broad, posing a threat to customary collaborative work within or among universities and research institutions. Moreover, a minimal amount of harm-even one lost sale or a single lost source of data-could lead to a finding of liability and to a chilling of the use of public-domain factual information, contrary to the values articulated under principle #1 above.
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> The exception for educational, scientific, and research institutions applies only if the institutions are nonprofit and their ''making available'' is for nonprofit purposes. This would discourage joint research and development activities between nonprofit institutions and corporations. Especially troubling is that the exception can be overridden by a shrink- wrap or click-on license and render the exception meaningless—a major concern noted under principles #3 and 6. Any new legislation must preclude such a possibility. Finally, we continue to urge that the burden of proof of demonstrating that customary not-for- profit scientific, research, and educational uses of factual information are unreasonable should be a heavy one and should be borne by the plaintiff.
> The scope of the exclusion for government information in the discussion draft is uncertain as well. It appears that a publisher that incorporates government information in its database could prevent others from making available that government information - even if it is not available from any other source, contrary to principle #5.
> By failing to address the problem of sole-source databases, the discussion draft increases monopolists' control over competitive uses of information. This is of particular concern in the market for databases used in scientific research and education, as noted under principle #4. The provision on misuse, which could help mitigate harmful conduct of database monopolists, lacks any guidance for courts to determine whether misuse occurred. The misuse provision should specifically address the issue of sole-source databases. H.R. 1858 contained appropriate language in this regard.
While we believe that the Committees have made progress on this legislation, it is clear that the current discussion draft is still not ready to be adopted and would introduce serious problems in its present form for many stakeholders in the information economy, including the scientific, research, educational, and library sectors.
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In closing, I would like to reiterate that the Academies, and all of the organizations I represent in my testimony today, have sought to play a constructive role in the congressional efforts to craft appropriate legislation in this complex and sensitive area. We look forward to working with Congress on this issue to develop a consensus on how best to move forward from here.
Thank you again for providing us with the opportunity to testify at this hearing.
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Recent relevant National Research Council reports, published by the National Academies Press and all freely available at: www.nap.edu :
The Role of Scientific and Technical Data and Information in the Public Domain (2003)
The Digital Dilemma: Intellectual Property in the Information Age (2000)
A Question of Balance: Private Rights and the Public Interest in Scientific and Technical Databases (1999)
Bits of Power: Issues in Global Access to Scientific Data (1997)
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Mr. SMITH. At this point, I am going to turn the Chair over to Congressman Stearns, and we will continue with the hearing.
Mr. STEARNS. I thank my colleague, and I certainly would defer to him to start with his questions.
Mr. SMITH. Thank you, Mr. Chairman. Mr. Carson, let me direct my first question to you, and this goes to page 8 of Mr. Wulf's prepared testimony, and he mentions several examples of serious problems with the proposed legislation, and let me read you the first two and ask you to tell us why they are or are not serious problems.
Now, he says, first with regard to the liability standard the discussion draft could confer perpetual ownership rights in a wide variety of data by virtue of protecting investment based on open-ended maintenance of a database. And second, the exception for educational, scientific and research institutions arise only if the institutions are nonprofit and their making available is for nonprofit purposes.
Do you consider those to be serious problems, and if not, why not?
Mr. CARSON. We understand the concern, Mr. Chairman. However, we are not certain how serious they are in the context of this bill. Let's take the first one. Would this discussion draft confer perpetual ownership rights? We don't think so, and we don't think so primarily because of one of the requirements that the unauthorized making available in commerce has to occur in a time-sensitive manner.
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As we stated in our testimony, there is, we think, some ambiguity in the current draft that suggests what is meant by that. If, as we understand, this is simply a codification of the ''hot news'' doctrine, then we don't see how there can be any conceivable problem with perpetual ownership rights. If it goes beyond ''hot news,'' then we really have to give it further thought and have a clear understanding of what is meant by this time-sensitive component and the elaboration that a court should consider the temporal value of the information in the database within the context of the industry sector involved. That, we think, does need some amplification and clarification, and depending on where that leaves us, we may or may not have some kind of problem.
On the second aspect, whether the restriction of the exception for educational, scientific and research institutions to nonprofit institutions is a problem, I guess my first reaction to that would be that while we think it is a good thing that this legislation—this proposed legislation—would have an exclusion for nonprofit educational scientific and research institutions, when you look at the scope of the prohibitions set forth in section 3, which is clearly addressed to competitive activity which is serving as a functional equivalent in the same market as the data base—the proprietor's database—it is really hard to imagine too many situations, if any, when a nonprofit, scientific or educational research facility would be engaging in an act which would even implicate that primary prohibition.
So that would be the first part of my answer, and the second part would be—we think there is a distinction between nonprofit institutions and for-profit institutions. If you are in this business for a profit, then maybe you should be on the same playing field as any other for-profit actors.
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Mr. SMITH. Thank you, Mr. Carson.
Mr. Kupferschmid, in the appendix to your prepared testimony, you give several examples of databases that are not currently protected by copyright law. Two of the examples you gave are the directory of information on U.S. cable television systems, and the second was a Massachusetts lawyer diary and manual.
My question for you is why should they be protected? And my question for Mr. Donohue and Mr. Wulf is why not?
Mr. KUPFERSCHMID. One of the cases you are talking about, Warren Publishing v. Microdos, was a case involving a cable directory, and in that case Microdos came along and copied and sold the database in competition with Warren, a typical case of free riding, the exact type of situation we are trying to address here.
Since that case has come down Warren Publishing has taken steps to try to protect themselves. What they have done is they have now put a shrink wrap license around the cable directory, because they feel that is pretty much the only way that they can protect themselves.
I think it is quite interesting that because there is no law to protect themselves and they have taken this step, they have gotten this directory sent back to them from libraries and from others who do not want to adhere to the shrink wrap agreement. They won't open it up. So what that means is because there is no law and because Warren Publishing has had to take these steps to protect themselves, in essence, there is information that is not getting out there. And that is because there is no law and they have had to use other means to protect themselves. If there were a law, then presumably they would not have to do that and——
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Mr. SMITH. Thank you. Mr. Donohue and Mr. Wulf, very briefly, why shouldn't we protect that directory and that—directory of information U.S. cable television systems and the Massachusetts lawyer diary and manual? Why shouldn't we protect those databases?
Mr. Donohue.
Mr. DONOHUE. I believe that there is enough law on the books to give most companies the protection that they would need. What we are doing here, when you think about the Internet, when you think about the databases that are available—and there are millions of them—what we are doing here is talking not about the facts, as my colleague said here, but about the format, how they are put together. And certain of those things ought to be paid for. If they are not paid for appropriately, then the law which we now have should be used to protect those that are injured.
To put together a new piece of legislation, to run around and look within those millions of databases for somebody that has been harmed is—in some ways this is gett