Hearing on the "Collections of Information Antipiracy Act"
Statement of
Joshua Lederberg
President-emeritus
Rockefeller University
on behalf of the
National Academy of Sciences
National Academy of Engineering
Institute of Medicine
and
American Association for the Advancement of Science
before the
Committee on the Judiciary
U.S. House of Representatives
18 March 1999
Introduction
My name is Joshua Lederberg. I have been asked to testify on behalf of the U.S. National Academy of Sciences, National Academy of Engineering, Institute of Medicine (the "Academies"), and the American Association for the Advancement of Science (AAAS). As you know, the three Academies were chartered by Congress to provide advice to the federal government and to the nation on scientific, technical, and medical issues. The AAAS is the umbrella organization for over 250 professional scientific and engineering societies in the United States, with more than 140,000 individual members. I was elected as member of the National Academy of Sciences in 1957 and am a charter member of the Institute of Medicine. I also am Fellow of the AAAS. My biographical summary is attached at the end of this statement.
I am grateful to have the opportunity to testify to you today about H.R. 354, the "Collections of Information Antipiracy Act." This proposed legislation concerns a topic about which the Academies, the AAAS, and indeed the entire research and education community, have an abiding interest and continuing concerns. It also is one that I have had the opportunity to consider from several pertinent perspectives: as a professor and former president at Rockefeller University; as a Nobel prize winning researcher in molecular biology, genetics, and bioinformatics; as an adviser to government science agencies and to scientific publishers; and not least as a creator and user of both commercial and nonprofit scientific databases. I remain an adviser to such enterprises, but I am here formally representing only the Academies and the AAAS. Nevertheless, it is this integration of perspectives and interests from the private sector, government, and academia that I believe is so important to balancing the interests in the pending legislation of both original database creators and providers on the one hand, and of all downstream users on the other.
I would like to make several points in this testimony:
Access to factual data is essential to furthering our understanding of nature, to medical and technical progress, and to the validation of scientific claims. The essence of the scientific method is relentless critical discourse; without it, the authenticity of knowledge claims rapidly deteriorates. Indeed, a thriving public domain for data, fostered by government policies that guarantee full and open access to data, benefits all downstream users, including the commercial database industry.
One of the major drivers for new database legislation in the United States is the reciprocity clause of the European Union's Directive on Databases. As discussed below, the Directive imposes strong economic and legal restrictions on the conditions of availability and use of factual data in databases in Europe. The Directive could have adverse consequences not only in Europe, but for cooperative U.S.-E.U. academic endeavors. Before adopting equivalent strong and unprecedented database protection in our country to satisfy a European reciprocity provision of questionable validity, it is essential to consider carefully the underlying rationale and potential impacts to our research and education base and to our economy.
Significant legal, technical, and self-help protection measures to counter database piracy are already available. There is no evidence of a crisis in the development of new commercial databases. While we support the adoption of new measures that are designed to address specific problems, such as wholesale database piracy, we are opposed to the creation of unprecedented and unjustified new rights in factual information that do not balance the legitimate competing interests.
Although we appreciate the two changes that were made to H.R. 2652 in H.R. 354, we find the bill as currently proposed to be unacceptable. We would like to draw the Committee's attention to the legislative proposal, "The Database Fair Competition and Research Promotion Act of 1999," which we support, as well as to the progress made on achieving a compromise on H.R. 2652 in negotiations sponsored by the Senate Committee on the Judiciary last summer.
The Academies and the AAAS remain committed to working with Congress on crafting a well reasoned and balanced database protection bill that serves the interests of our nation, and not just one segment of the publishing community.
I also would like to note at the outset that we are introducing into the official record several attachments to this testimony. The first, labelled Appendix A1, A2, and A3, presents an abridged selection of the Academies' analytical summaries and alternative proposals to Title V of H.R. 2281, the successor bill to H.R. 2652, which were submitted during the Senate Committee on the Judiciary negotiations last summer. The second is a September 4, 1999 letter from Professor Harvey Perlman of the University of Nebraska Law School to Senator Orrin Hatch about unfair competition law.
The Need to Maintain Our Traditional Public Domain for Factual Data
Scientific and engineering research drives our nation's progress. Society uses the fruits of such research to expand the world's base of knowledge and applies that knowledge in myriad downstream applications to create new wealth and to enhance the public welfare.
Indeed, the policy of the United States has been to support a vibrant research enterprise and to assure that its productivity is exploited for national gain. Thus, freedom of inquiry, the open availability of scientific data, and the open publication of results are cornerstones of our research system that U.S. law and tradition have long upheld.
The consequences of these wise policies has been spectacular. For many decades, the United States has been the leader in the collection and dissemination of scientific and technical data and in the discovery and creation of new knowledge. Our nation has used that knowledge more effectively than any other nation to support new industries and applications, such as the biotechnology industry and the discovery of new diagnostics and cures for hereditary and other diseases.
A necessary component of these past and continuing achievements has been the wide availability of scientific and technical data and information, ranging from raw or minimally processed data to cutting-edge research articles in newly developing fields. This information has been assembled as a matter of public responsibility by the individuals and institutions of the scientific and engineering communities, largely with the support of public funding.
Data are the building blocks of knowledge and the seeds of discovery. They challenge us to develop new concepts, theories, and models to make sense of the patterns we see in them. They provide the quantitative basis for testing and confirming theories and for translating new discoveries into useful applications for the benefit of society. They also are the foundation of sensible public policy in our democracy. The assembled record of scientific data and resulting information is both a history of events in the natural world and a record of human accomplishment.
The recent advent of digital technologies for collecting, processing, storing, and transmitting data has led to an exponential increase in the size and number of databases created and used. A hallmark trait of modern research is to obtain and use dozens or even hundreds of databases, extracting and merging portions of each to create new databases and new sources for knowledge and innovation. However, not only researchers and educators, but all citizens with access to computers and networks, constantly create new databases and information products for both commercial and noncommercial applications by extracting and recombining data and information from multiple sources. The rapid and continuous synthesis of disparate data by all segments of our society is one of the defining characteristics of the information age. The ability of individuals and organizations to use information in a wide variety of innovative ways is also a measure of success of the original data-collection efforts.
Progress in the creation and use of new knowledge for the national good depends both on the full and open availability of government and government funded data, and on fair and equitable availability of data from the private sector. By "full and open" we mean that data and information derived from publicly funded research are made available with as few restrictions as possible, on a nondiscriminatory basis, for no more than the cost of reproduction and dissemination. Fair and equitable availability of data from the private sector means that if commercial content providers receive enhanced protections in their databases, that preferential terms of access to and use of those data by researchers, educators, libraries, and other public-interest entities, firmly rooted in our Constitution and legal tradition, are retained and, when necessary, adapted to the digital and online environment. Moreover, legal rules must ensure that private firms cannot by contract and market power override the traditional Constitutional rights of access and use by the research and educational communities.
Why the United States Should Not Be Compelled to Follow a Flawed European Model for Database Protection
It is our view that any domestic legislation, such as H.R. 354 (or its predecessor drafts in this Committee), that seeks to impose the same or "equivalent" legislation to the E.U. Directive on Databases would be unacceptable. The sui generis Database Directive, adopted by the European Communities in March 1996, is an inappropriate model for the United States because of the following major problems:
The creation of an unprecedented, absolute exclusive property right in the contents of databases, which would decrease even public-interest access to data and reduce competition;
An overbroad definition of databases that potentially includes every information product that has heretofore been freely available from the public domain;
The use of other undefined terms and concepts, creating significant uncertainties in the law's scope and application;
The introduction of long and potentially perpetual terms of protection, with a resulting possibility of no evolving public domain from which previously compiled data could be freely used;
The absence of sufficient public-interest exceptions for the preservation of public-good activities such as research, education, and libraries, as well as significant curtailment of other users' rights;
No mandatory legal licenses or other limitations requiring sole-source providers to make data available on reasonable terms and conditions, with due regard for the preservation of competition and the public interests of research and education; and
The introduction of strong civil (and possibly even criminal) penalties for infringement that likely would have a chilling effect on the full and open exchange of data for research and educational purposes.
It is important to emphasize that these unwarranted restrictions have been placed on access to and subsequent uses of factual data, which traditionally have been in the public domain and, for good reason, have not been covered by copyright or other exclusive rights. Moreover, these restrictions apply as well to collections of "works of authorship" such as journals, textbooks, and anthologies, thus superseding copyright protection. In the case of the research and educational communities, the potential negative effects are exacerbated by the fact that most sources of scientific data are natural monopolies, either because the data contents are unique and not reproducible, as in the case of all observational data of transitory natural phenomena, or they are generated for esoteric niche markets that have a customer base too small to support more than one producer or supplier.
Our concerns are further amplified by the fact that the sui generis restrictions apply as well to publicly funded data in Europe and that this could lead to tremendous strains, or even the breakdown, in certain areas of scientific cooperation between the United States and Europe. Such cooperation is becoming increasingly important for accelerating scientific progress and for sharing costs in such areas as genomic research and global remote sensing studies, yet signs of this tension are already appearing in these important areas of research.
It is possible that the E.U. Directive's reciprocity clause will be found to violate the terms of existing intellectual property and trade conventions regarding national treatment of law requirements. However, even if a legal challenge to the reciprocity provision were to fail, other countries, especially those in the developing world, may begin to institute their own sui generis intellectual property rights without national treatment, and discriminate against foreign innovators. Such a result could quickly undermine the now universal norm of national treatment, which was a principal goal of the recent TRIPS agreement under GATT. Thus, the mere fact that the E.U. has adopted a flawed new legal regime for database protection and coupled it with an unwise, and possibly illegal, reciprocity requirement should not induce the United States to emulate it. Rather, our government should challenge the reciprocity provision and independently craft legislation that targets database piracy in a manner that reasonably balances all legitimate interests.
Legislative Alternatives to H.R. 354
We are pleased that the process of deliberating major changes to the U.S. intellectual property law for databases has become more open and appears to have slowed to a rational pace, that the E.U.'s sui generis model is no longer the sole option under consideration, and that the participation by representatives of major potentially affected end-user groups, as well as by a broader cross-section of the commercial database and information services industry, has become institutionalized. We especially wish to draw your attention to an alternative legislative approach, "The Database Fair Competition and Research Promotion Act of 1999," which was introduced into the Congressional Record by Senator Orrin Hatch, Chairman of the Senate Committee on the Judiciary, on January 19, 1999, and which we support, as well as to the outcome of Senate Judiciary Committee negotiations on database protection legislation last summer, in which some key concerns of the scientific and educational communities were addressed.
Before discussing these two important developments, we wish to note that we were encouraged by the two changes that already have been made to this Committee's previous version of this legislation, H.R. 2652 (and subsequently Title V of H.R. 2281), in H.R. 354: (1) trying to eliminate the potential for indefinitely prolonging the 15-year duration of protection in section 1408 (c), and (2) expanding the scope of the exemption for certain nonprofit educational, scientific, or research uses in section 1403 (a). The first revision addresses one of the Constitutional defects that was pointed out by various critics of last year's version of this bill; the second one responds to some of the concerns we had conveyed last year regarding the potential negative impacts of the legislation on public interest uses, generally, and on our nation's research activities, specifically. Despite these positive developments, we remain troubled by the scope and substance of a number of the provisions in H.R. 354, and by its approach to addressing the problem of database piracy overall, which seeks to maintain legal equivalency to the E.U. Database Directive.
As you know, in late July of last year, Senator Hatch invited representatives of the various stakeholder groups to participate in a series of closed negotiations, which lasted from the beginning of August until early October. This process resulted in a series of legislative drafts, culminating in a version dated October 5, 1998, which was introduced into the Congressional Record by Senator Hatch on January 19, 1999 as well (referred to as the "Hatch Database Draft" below). Because of the importance of this legislation to the interests of the research community, the Academies took the unusual step of participating directly in these negotiations. We submitted a series of analytical commentaries and specific alternative proposals (see Appendixes A1, A2, and A3 for an abridged selection of those submissions), almost all of which remain relevant to H.R. 354.
The other concerned parties to the negotiations, including a broad cross-section of nonprofit and industry organizations and companies, also submitted constructive proposals in good faith and these were given due consideration by the Senate Judiciary Committee. Perhaps most significant, the Administration provided a consensus critique of H.R. 2652 in an August 5, 1998 letter from the Department of Commerce General Counsel, Andrew Pincus, to Senator Hatch. In addition, the Department of Justice submitted a legal memorandum to Senator Hatch on July 28, 1998 regarding the Constitutional problems of the legislation, and the Chairman of the Federal Trade Commission, Robert Pitofsky, wrote to the Honorable Tom Bliley, Chairman of the House Committee on Commerce on September 28, 1998 concerning its the potential anticompetitive effects.
Although the direct negotiations of the stakeholder parties produced no major breakthroughs or compromise solutions, the final phases of the negotiations, as mediated by the Senate staff, resulted in the October 5, 1998 draft, which produced some far-reaching modifications to Title V of H.R. 2281. Most of these changes substantially implemented important aspects of the Academies' own position, the highlights of which may be summarized as follows:
The quasi exclusive property right approach of H.R. 2281 was ultimately abandoned in favor of a more reasonable "misappropriation" (unfair competition) approach (see Appendix B, a letter from Professor Harvey Perlman to Senator Hatch dated September 4, 1998, for a critique of why Title V of H.R. 2281--and the current H.R. 354--is not an unfair competition law). This was accomplished by conditioning liability on acts that "cause substantial harm to the actual or neighboring market" of database proprietors (section 1302 of the Hatch Database Draft, emphasis added) and by inviting courts, in the legislative history, to determine "substantial harm" in light of "whether the harm is such as to significantly diminish the incentive to invest in gathering, organizing, or maintaining the database" (see the proposed Conference Report Language on section 1302 in the Hatch Database Draft).
A full carve-out that would immunize customary scientific and educational activities was adopted in place of the weak exception provided under section 1303(d) of H.R. 2281, and the limited and unacceptable "fair use" approach that the Administration had recommended during the Senate negotiations. We considered a "fair use" approach, modeled on copyright law, as inadequate because other basic copyright immunities and exceptions, including the idea-expression dichotomy, are not carried over into the database protection environment. On the contrary, because the proposed database law would protect collections of facts and data that are ineligible for protection under our copyright law, most scientific activities that were previously permissible would become infringing acts under such a law. The burden would then be on scientists to show that a vague fair-use exception should excuse some of these infringing acts from whatever test of harm was adopted. In contrast, we successfully argued that traditional scientific activities should remain unhampered by any new database protection law, as the Administration's consensus position in the August 5 Pincus letter also maintained. To this end, §1304 of the final version of the Hatch Discussion Draft stated that "nothing in this chapter shall prohibit or otherwise restrict the extraction or use of a database protected under this chapter for the following purposes:
1) for illustration, explanation, or example, comment or criticism, internal verification, or scientific or statistical analysis of the portion used or extracted; and
2) in the case of nonprofit scientific, educational, or research activities by nonprofit organizations, for similar customary or transformative purposes" [emphasis added].
Only if a scientist were to cause substantial harm to the database maker by using unreasonable and non-customary amounts of the collection for a given purpose, or if the scientist in fact made a substitute for the original, or otherwise sought to avoid paying for the use of research tools devised as such, would liability kick in. Under this approach, the burden would be on publishers to show that scientists had crossed the line of permitted, traditional, or customary uses, which are immunized. Our operating principle that science should be left no worse off after enactment than it was before, would thus have been substantially implemented. This same line of reasoning extends to our preference for this language over that proposed in section 1403(a) of H.R. 354.
Additional immunities and exceptions favoring certain instructional and library uses of databases also were defined (see section 1307 of the Hatch Database Draft), although we believe that greater flexibility would need to be given educational users in this context.
The need for regulation of licensing terms and conditions was expressly recognized in a series of provisions requiring periodic studies of the misuse doctrine (see Sec. 4 and Proposed Conference Report Language, pages 36-37, in the Hatch Database Draft). It is our view, however, that these restraints on licensing should have been codified in the operative clauses of the Act itself.
The legislative history also clarified the definition of databases in ways that tended to exclude ordinary literary works, and it denied protection "to any ideas, facts, procedure, process, system, method of operation, concept, principle, or discovery, as distinct from the collection that is the product of investment protected by this Act" (see page 31 in the Hatch Database Draft). Again, in our view, it would be much better to codify this definition expressly in the Act itself.
We considered these revisions to Title V of H.R. 2281, while not necessarily optimal, to be representative of the progress that could be made in achieving a more balanced database antipiracy legislation. Nevertheless, there were other important provisions of the legislation that still required substantial work to make H.R. 2281, and its successor bill, H.R. 354, even marginally acceptable, including, among other:
the blanket prohibitions on traditionally legitimate commercial value-adding uses;
the retroactive application of the legislation;
the incomplete government data exemption, particularly for government databases disseminated by the private sector;
the excessive length of the term of protection in light of the breadth and depth of the scope of protection;
the absence of any reasonable limitations on the greatly increased market power granted by this legislation to sole-source data providers; and
the lack of adequate definitions regarding important terms.
Although both the extent of progress in the Senate, as well as the unresolved issues, indicate that a great deal more work would need to be done on H.R. 354 to bring it into some reasonable balance among all the legitimate competing interests, we believe a better alternative, as noted above, was introduced into the Congressional Record by Senator Hatch. Without going into extensive detail at this time about the relative merits of the two approaches, we wish to emphasize that we consider the approach taken in "The Database Fair Competition and Research Promotion Act of 1999" to be preferable because it:
Targets database piracy by using true unfair competition principles, without creating unprecedented new property rights in data and unwarranted control in downstream uses of data;
Maintains a reasonable balance between the interests of database producers and users, including legitimate and economically important value-adding activities;
Preserves essential public interest uses, including customary scientific, educational, and library activities;
Adheres to all Constitutional principles; and
Provides protection against monopolistic pricing by sole-source data vendors in situations where competition is not a de facto reasonable method of sustaining balance of economic interests.
We trust that you and your Committee will review this alternative carefully to make your own determinations. We believe it is especially worthy of note that this alternative is supported by an impressive array of not only research, educational, library, and consumer organizations and institutions, but by many commercial publishers and information service providers.
Later this spring, the National Research Council will publish two reports that will address in greater depth many of the fundamental issues regarding intellectual property rights in the networked environment, and reviewing the policy options for promoting access to and use of scientific and technical data for the public interest. Also toward the end of this year, AAAS will issue recommendations of an expert group it has convened on the connection between intellectual property and electronic publishing in science.
We hope that these studies will help promote a deeper understanding of the issues underlying the current debate, and we look forward to continuing to work with Congress in this important area. Thank you again for providing us with the opportunity to testify at this hearing.
BIOGRAPHICAL SUMMARY OF JOSHUA LEDERBERG
Joshua Lederberg, a research geneticist, is Sackler Foundation Scholar and President-emeritus of Rockefeller University in New York. Dr. Lederberg attended Columbia P&S Medical School, and he received his Ph.D. in microbiology at Yale. He served as professor of genetics at the University of Wisconsin, and then at Stanford School of Medicine, before coming to the Rockefeller University in 1978. His life-long research, for which he received the Nobel Prize in 1958 (at the age of 33), has been in genetic structure and function in microorganisms. He has been actively involved in artificial intelligence research (in computer science) and in the NASA experimental programs seeking life on Mars. He has also been a consultant on health-related matters for government and the international community, e.g., having had long service on WHO's Advisory Health Research Council. He has been a member of the National Academy of Sciences since 1957, was a charter member of the Institute of Medicine, and was elected Fellow of the American Association for the Advancement of Science in 1982. He has served as Chairman of the President's Cancer Panel, and of the Congress' Technology Assessment Advisory Council, as well as on numerous other consultative panels, including the regents of the National Library of Medicine. He received the U.S. National Medal of Science in 1989. From 1978 to 1990, Dr. Lederberg served as president of the Rockefeller University, where he continues his research activities in the genetics and evolution of bacteria and viruses.
Proposed Amendments to H.R. 2281: Explanatory Memorandum (Part 1)
Submitted by the
National Academy of Sciences
National Academy of Engineering
Institute of Medicine
for consideration by the
Senate Committee on the Judiciary
August 13, 1998
Explanatory Memorandum
(Part 1)
1. Serious Constitutional Infirmities of H.R. 2281
As proposed by H.R. 2281, Sections 1301 and 1302 attach liability for acts that "cause harm to the actual or potential market" of the protected investors (Section 1302), and the term "potential market" is defined to include "any market" for which the investor "has current and demonstrable plans to exploit or that is commonly exploited" by similarly situated producers" (Section 1302 (3)). The definition of "information" in Section 1301 (2) also brings "works of authorship" within the "harm to actual or potential market tests."
We believe these clauses conflict with both the First Amendment and the Copyright Clause of the Constitution. As the Department of Justice's Office of the Legal Counsel recently affirmed, to the extent that the proposed legislation "...would prohibit extractions or uses of substantial portions of factual compilations by direct competitors, it is much more likely to be held constitutional than if it would prohibit extractions or uses by potential consumers for noncommercial purposes. By contrast, if the provision were construed to provide protection against uses by potential consumers, and not simply direct competitors, it would appear to be of almost limitless scope and therefore to raise constitutional concerns that would appear insurmountable" (Memorandum for William P. Marshall, Associate White House Counsel, from William Michael Treanor, Deputy Assistant Attorney General, Office of Legal Counsel, U.S. Department of Justice, July 28, 1998, p. 8).
For some forty years, the late Professor Melville Nimmer, a leading authority in both copyright protection and First Amendment law, taught that copyright protection would violate First Amendment guarantees of free speech, were it not for the judicial exclusion of ideas and facts from the reach of the exclusive property rights granted to authors and artists. In 1976, Congress codified that exclusion in §102 (b) of the General Revision of Copyright Law, and in 1991, the Supreme Court, in Feist Publications, Inc. v. Rural Telephone Service, Co., reconfirmed the constitutional prohibition against an exclusive property right in either facts or ideas.
Proponents of H.R. 2281 openly concede that the "harm to actual or potential markets" test was drawn from §107 (4) of the 1976 Copyright Law, which codified the fair use provisions. This is a constitutionally fatal admission because the very purpose of §107 (4) is to confirm that protection of the author's market interests in both primary and secondary markets is the true goal of the copyright law's exclusive rights, exactly as Judge Frank declared in his famous opinion in Arnstein v. Porter (2d cir. 1943).
When transplanted to the database context, however, the protection of mere investment in databases that do not rise to the level of creative works of authorship against "harm to actual or potential markets" indirectly creates an exclusive property right in noncopyrightable collections of data, that governs both primary and secondary markets. Once collected, no one can make further use of the facts and data contained in the collection without the compiler's permission, even though Section 102 (b) of the Copyright Law states that facts and ideas are not fit subjects of an exclusive property right. True, H.R. 2281 does allow "independent creation" of databases in Section 1303 (b), and Section 1303 (d) exempts nonprofit educational, scientific, and research uses from liability for causing harm to "potential" markets. But such defenses in the proposed database regime are no more curative of these constitutional flaws than they would be in the copyright regime, for the reason that no one can constitutionally oblige all persons not to use facts or ideas that have been made available to the public. Facts and ideas that the copyright law must leave to unrestricted public use cannot constitutionally be withdrawn from public use under the First Amendment by a database law that protects against extraction and use on both primary and derivative markets.
In this connection, one should recall that the copyright law, unlike the patent law, does not protect against use as such of even the protected expression, as the Supreme Court established in Baker v. Selden (1879, reaffirmed in Feist). The protection of non-copyrightable data and facts against use on both primary and secondary markets thus impermissibly disrupts the balance established in the federal copyright and patent laws, which implement the constitutional Enabling Clause. Notwithstanding the public's right to use facts and ideas under the First Amendment and notwithstanding the constraints limiting Congressional action under the constitutional Enabling Clause, Sections 1302 and 1303 of H.R. 2281 create copyright-like protection for use of noncopyrightable matter; create a de facto derivative work right in noncopyrightable compilations; and prohibit transformative uses - however pro-competitive in nature - that harm this reserved or derivative market on the potential harm test.
No invocation of unfair competition law can disguise the fact that a "harm to actual or potential markets" test that does not focus on unfair or improper conduct expresses the language of exclusive property rights, which is exactly the function that §107 performs in the Copyright Law. In this connection, we have pointed out that scientific and research data frequently are physically or economically impracticable to regenerate from scratch, which only enhances the potential restraints on free speech under H.R. 2281 as it stands, by risking the withdrawal of facts and data as such from the public domain. From the policy perspective, the federal appellate courts have consistently declared that avoiding the costs of regenerating known facts and ideas constitutes a basic economic premise underlying the constraints on intellectual property protection deriving from both the First Amendment and the Enabling Clause.
The broad definitions of both "collection of information" (§1301 (1)) and "information" (§1301 (2)) aggravate these constitutional infirmities by drawing "works of authorship" into the realm of a competing and overlapping intellectual property right, and also by casting legal doubts upon the future ability of third parties to make untrammeled use of public domain matter. Anytime someone would use data, including historical data, that are made available to the public contained in a "collection of information" protected by the proposed law, that user would be exposed to claims that he or she will have harmed the database originator's actual or potential markets if that producer had also used the same or similar data. This broad risk of liability cannot fail to have a chilling effect on the use of known facts and noncopyrightable databases in both the commercial and noncommercial spheres; and it is of little consolation to researchers and educators that they must fear only harm they might cause to actual markets, rather than to potential markets, as well.
Moreover, the database originator has no obligation to license value-adding or transformative uses, and if the originator is a sole-source provider (as frequently occurs, especially in specialized scientific and technical niche markets), there is no incentive to bargain. As a practical matter, this means that once data are collected and used for one purpose, such as to prepare a compilation of poisons and antidotes, there will be a strong disincentive to use the same data for other purposes lest those uses violate the "harm to other markets" principle.
By the same token, database recompilers or value adders would incur the risk of lawsuits for infringement every time their new database resembles some pre-existing database, whether those data were used or not. Even the exception that permits anyone to make use of "insubstantial parts" of a collection of information is vitiated by the language inflicting liability for harm to the investor's "actual or potential market" (only the "actual market" in the case of nonprofit educational, scientific, or research uses under Section 1303 (d)). Because the user cannot know such matters in advance, the "potential harm" test emasculates the "insubstantial parts" exception in practice.
In contrast, a true unfair competition approach would attach liability only when the third party harmed the database maker's actual or potential market by improper, unfair, or dishonest means. Such an approach would not inhibit competitors who "harm" the market by honest and innovative means, and it would not impede true transformative uses that promote competition and the public interest in science and education.
The "actual or potential markets" test is thus so broad that it would hinder fair competition simply because every successful competitor harms a prior entrant's market by definition and because would-be competitors would never know in advance when the use or extraction of protected data may turn out to cause harm to some unknown potential market. In this and other respects, the "harm to markets" test actually cloaks a reserved market formula, in the manner of the exclusive rights to reproduce and to prepare derivative works granted by §106 (1), (2) of the 1976 Copyright Law. Use of this formula in the database context invites other industries to apply for similar protection against harm to their actual or potential markets; and the cumulative anti-competitive effects of recognizing such special-interest protectionist pleas could seriously undermine the ability of the United States to compete in an integrated global marketplace.
A. Curing the Constitutional Defects
The logical way to remove the constitutional defects identified above is to replace the "harm to actual or potential markets" test with a true misappropriation test. Such a test should forbid unfair, improper, or market-destructive conduct that deters future investment without creating a de facto exclusive property right in data and without unduly restricting public access - and especially educational, scientific, and research access - to facts and data that fall under the protective sway of the First Amendment. The new test also must avoid creating a de facto exclusive right in secondary, or derivative, markets by unduly inhibiting pro-competitive transformative uses that are carried out by honest or proper means. These goals, identified as being of crucial constitutional impact for both the Administration as a whole (see the letter from Andrew J. Pincus, General Counsel to the Department of Commerce, to Orrin G. Hatch, Chairman of the Senate Committee on the Judiciary, August 4, 1998, p. 3 (final bullet)), and the Department of Justice are achieved by our proposed amendments to H.R. 2281, as analyzed below.
2. Section 1302 - Prohibition Against Misappropriation
Because the "harm to markets" test is both unworkable and unconstitutional, the proposed amendment to Section 1302 recasts liability in terms of "unfair, improper, or market-destructive" conduct that "seriously harms or impairs the opportunities. . . to recoup . . . investment and turn a reasonable profit." This formula accurately reflects the misappropriation doctrine as it has evolved from I.N.S. v. A.P. (U.S. 1918) to Judge Winter's opinion in National Basketball Association v. Motorola, Inc. (2d cir. 1997). This formula, however, does not limit protection merely to time-sensitive data, as these cases might do, lest the compiler's incentive be too narrowly circumscribed.
According to Professor Harvey Perlman, former Dean of the University of Nebraska Law School and Reporter for the American Law Institute's Restatement (Third) of Unfair Competition (1993), the proposed revised standard does not unfairly limit access to information or unnecessarily raise issues of constitutional constraints on intellectual property laws. At the same time, it would become logical to delete works of authorship from the definition of "information" in 1307 (2), as we have done, and also to delete any further reference to "potential market" in Section 1301 (3). Until this change of formula in Section 1302 is agreed upon, however, we have retained some language limiting the definition of "potential markets" in Section 1301 (3) to "any market for an existing product or service."
3. Freeing Transformative or Competitive Uses in Section 1303 (g)
To avoid creating, directly or indirectly, an impermissible "reserved market" effect, in the manner of an exclusive right to prepare databases that are derived from an existing database, the proposed regime could simply confer a very short term of protection - say, two or three years. If, instead, a longer term is preferred, it must expressly forbid the making of value-adding compilations by unfair, improper, or market-destructive means, while expressly authorizing fair followers to invest in value-adding compilations that increase knowledge, improve existing collections of data, and lower prices in a more competitive environment. While legal criteria such as "unfair" and "improper" are necessarily open ended, they are terms of art drawn from centuries of domestic and foreign unfair competition law, to which courts have given meaning case by case. One could even protect the database maker's opportunities to exploit potential markets from unfair or improper conduct that impairs the incentive to invest.
Accordingly, our proposed amendments to §1303 (g) distinguish value-adding collections that compete in distant markets from those devised to compete in the same market segment as a protected database. With respect to distant markets, competitors should be allowed to extract and use even a substantial part of a protected database if they independently generate the remainder of the non-competing database and all subsequent updates, and if they also pay reasonable royalties from the date of extraction or use to the end of the specified term (currently fifteen years in the proposed legislation, which, it should be noted, we consider excessively long and not adequately justified). Under this approach, nothing prevents the originators from exploiting distant markets as quickly as possible, and presumably, with all the head start advantages that first comers seem inherently to possess in the database market. Moreover, second comers operating in distant markets cannot appropriate the originator's costs of inputs because they must pay reasonable royalties, based on such costs, while defraying their own costs of independently generating the remainder of the database (as re-configured to meet the needs of a distant market). Needless to say, unless the second comer also defrays the costs of updates, the non-competing database will soon become obsolete. Hence, there is no free-rider effect. At the same time, the first comer cannot invoke a misappropriation law to slow the pace of innovation on distant markets.
With respect to value-adding users who seek directly to compete on the same market segment as that of a protected database originator, it does seem necessary to defer the right to use a substantial part of such a database for a fixed period of lead time in which originators may seek to recoup costs and establish their trademarks. A three-year period of immunity seems more than adequate for this purpose, given the rapidity with which any given collection is likely to become obsolete, and it is worth noting that Japanese law has recently recognized a three-year head start with respect to the misappropriation of product designs.
Under our proposed amendments to Section 1303 (g) (2), moreover, a direct competitor would never be free to use all or virtually all of any protected database; that competitor would always have to compile both the remainder of the value-adding database and all updates or improvements; and he or she would always have to pay reasonable royalties for use of the underlying data to which value is added from the date of the use (i.e., after 3 years or more/until the end of the term (now fifteen years)). Once again, there is no free-rider effect, while competition is promoted without undermining either the incentive to invest or the incentive to innovate.
4. Defending Education, Science, Research, and Other Public-Good Users and Related Constraints on Licensing
The success of our basic research and education system is predicated on the unfettered access and use of factual information; on a robust public domain for data; and on easy re-use, recompilation, and transformative applications of data. It is important to emphasize that databases created and used in the pursuit of basic research and education typically are done for incentives other than economicfor the creation of new knowledge, the thrill of discovery, and the enhancement of professional status. As currently drafted, however, the proposed legislation places an overwhelming emphasis on protecting original investments and on enhancing purportedly necessary additional economic incentives to create new databases. At the same time, it undervalues the potential adverse effects on scientific and technical progress, as well as the more general economic and social costs inherent in restricting and discouraging the downstream applications and transformative uses of noncopyrightable databases.
Although the full extent and precise nature of potential impacts on our nation's research and education community from the proposed legislation are difficult to predict, what is certain is that the pending changes to the law portend very negative results. For reasons explained in this memorandum, we believe that if this bill is enacted in its present form, that the costs of data and related research will increase significantly, the public domain for data will be diminished unconstitutionally, transformative applications of data will be curtailed, the open availability of publicly-funded data will be compromised, and there will be large-scale lost opportunity costs for both research and education as a result of the multiplied transactional burdens.
In seeking to avoid unintended harm to education, research, and the national system of innovation on which U.S. technological pre-eminence depends, one must avoid two pitfalls at the outset. First, simple-minded analogies to the fair use exception in copyright law are likely to obscure the appropriate analysis for the database context. Second, any fair use-like exceptions for research and educational uses of protected data must be coordinated with the costs of accessing such data, especially in an online environment, lest higher prices for one be allowed to offset lower prices for the other.
Fair use, rooted in harm to reserved markets, is an appropriately minimalist exception to the exclusive rights of copyright law precisely because facts and ideas are left open to unrestricted use and the author's market interest extends only to protected expression. Moreover, when fair use occurs, that privileged use comes free of charge. In contrast, the misappropriation doctrine of unfair competition law creates no valid market interest, as previously explained, beyond legal protection against improper or market-destructive forms of conduct. Here, precisely because data and information are the lifeblood of science and education, there is a need to immunize most nonprofit uses of data for such purposes from any liability under a database law, except when those users engage in proscribed unfair, improper, or market-destroying conduct. Otherwise, educators, scientists, and researchers, who could previously use data and information contained in both copyrightable and noncopyrightable compilations without liability, would suddenly have to pay to use the same data when delivered under the new regime. However, we do recognize that some firms develop databases that are primarily research tools for science and education, and in such cases our proposal would require scientists and educators to pay the market price.
The second point in need of clarification is that any immunity for educational or scientific use of protected data must be carefully linked to, and coordinated with, express constraints on the licensing of the same data, especially in the online environment. Indeed, the prospects that providers will increasingly transmit databases to the public online is one of the arguments most relied upon to justify a new form of protection in the first place. Yet, a standard practice among online providers of information is to subdivide charges according to the type of use, with one fee typically charged for accessing the desired information in readable, unencrypted form, and another fee charged for downloading or other uses of the data once accessed. Unless the permissible range of both types of fees are coordinated by consistent, integrated legal rules, an exception for, say, science, cast in term of "use," may simply lead to demands for higher "access" charges than before.
Suppose, for example, that a private firm charges 2 utiles a frame for accessing its data and 4 utiles a frame for downloading it to an electronic receiver. If the receiver is a nonprofit scientific or educational institution, which is - we assume - exempt from the use charge under an immunities clause, that clause may not prevent the database provider from jacking up the cost of access to 6 utiles a frame, while nominally charging nothing for scientific or educational "use" as such. Science and education would nonetheless incur rising costs of data, limited only by the inability of the seller to sell its data beyond a certain price. Past experience with privatized Landsat data in the 1980s is not encouraging in this regard, however. In that case, the costs of access rose from $400 per frame to over $4,000 per frame, which resulted in well-documented adverse effects to earth science and remote sensing research (see, Bits of Power: Issues in Global Access to Scientific Data, National Academy Press, 1997, Chapter 4).
This does not mean that publishers who privately generate data of interest to science should waive all charges to science for accessing such data. On the contrary, researchers should be willing to pay a fair return on the publisher's investment in online delivery. What is needed are legal incentives (not just market incentives) for publishers to charge favorable or preferential access charges to nonprofit scientific and educational institutions and, where feasible, to differentiate their products for the profit and nonprofit sectors (see, Bits of Power, Chapter 4).
Another very important reason for regulating access to databases, especially in the online environment, is that scientists must avoid burdensome transaction costs when constructing complex databases from a multiplicity of sources. As recognized in the Administration's position, there is deep concern about a potential to "increase transaction costs . . . particularly in situations where larger collections integrate data sets originating from different parties or where different parties have added value to a collection through separate contributions," and also "where public investment has leveraged contributions from the private and nonprofit sectors" (Pincus letter, p. 2). The erection of artificial barriers to the use of multiple data sources would have highly negative consequences in research and education by discouraging data-intensive and interdisciplinary work that is so important to resolving many of our nation's most pressing problems.
Here, again, one must not allow measures to maintain the unrestricted flow of scientific data to obscure the private publishers' right to a fair return on their investments. Rather, the object is to establish default rules that will encourage publishers and scientists to achieve bargained-for solutions without allowing the former to interrupt the flow of upstream data and without allowing scientists a free ride, either.
It follows from these general considerations that the scientific and educational communities need:
access to data on fair and reasonable terms and conditions;
the ability to use the data thus accessed for any research or educational purposes; and
freedom from contractual or technical interference with these privileges.
To achieve these goals, we have developed a number of proposed amendments bearing on research and educational uses in Section1303 (Permitted Acts) and we have placed amendments regulating access to data for scientific and educational purposes in Section 1305 (Relationship to Other Laws), because H.R. 2281 is organized in this way. Nevertheless, we repeat that the two sets of proposals must be read conjunctively, not disjunctively, if the scientific and educational enterprise is to be left unharmed. Moreover, these provisions also must be read in conjunction with other key provisions, especially the exception for government-funded data in Section 1304 and the provisions forbidding perpetual protection in Section 1308 (c).
Section 1303 - Permitted Acts
To immunize educational and scientific users from unintended harm, the following proposals have been advanced:
Section 1303 (a) - Individual Items of Information and Other Insubstantial Parts. Language has been added to prevent contractual overrides of the exception for insubstantial parts, viz:
INDIVIDUAL ITEMS OF INFORMATION AND OTHER INSUBSTANTIAL PARTS-
Nothing in this chapter shall prevent the extraction or use of an individual item of
information, or other insubstantial part of a collection of information that has
been made available to the public, in itself, and any contractual provision contrary
to the purpose of this provision shall be unenforceable as a matter of federal law.
Section 1303 (b) - Gathering or use of information obtained for other means.
This section allows anyone independently to generate the same collection of data that a protected database may contain. However, many types of data cannot be independently gathered because their sources are unique or time-dependent and cannot be recreated after the fact. In science, one major category of such data is observations of physical phenomena, such as climate trends or various natural disasters. Still other databases may not be recreated from scratch for reasons of commercial unpredictability, as, for example, might occur if a second comer had to launch a satellite, but the market for the resulting data were too small to allow that second provider to recoup such huge front-end costs.
In all such cases, "the ability to gather or use information obtained through other means," as suggested by Section 1303(b), is not a potential option, and no substitutes may be available at any price. To avoid the monopolistic stumbling blocks inherent in this situation, the proposed amendment prohibits a refusal to license, and it requires that the resulting licenses contain fair and reasonable terms. The revised text is as follows:
(b) GATHERING OR USE OF INFORMATION OBTAINED THROUGH OTHER MEANS - Nothing in this chapter shall restrict any person from independently gathering information or using information obtained by means other than extracting it from a collection of information gathered, organized, or maintained by another person through the investment of substantial monetary or other resources. However, when it becomes objectively impracticable, physically or economically, to independently gather information made available to the public, and no similar collection of information is available from other sources, the person who gathered the collection protected under this chapter shall not refuse to license the use or extraction of the information it contains on reasonable terms and conditions for any purpose whatsoever.
One should note that this soft, "sword of Damocles" approach does not penalize sole-source providers as such. It only kicks in when the data cannot practicably be regenerated and the sole-source provider overreaches. Even then, the uncertainty inherent in the default rule should normally stimulate the parties to bargain around it without resorting to the courts.
1303 [c] and [d] combined - NONPROFIT EDUCATIONAL, SCIENTIFIC, OR RESEARCH USES
The first step is to ensure that anyone can use any information to verify the accuracy of any collection, viz:
1303 (c) (i) USE OF INFORMATION FOR VERIFICATION- Nothing in this chapter shall
restrict any person from extracting information, or from using a collection of
information within any entity or organization, for the sole purpose of verifying the
accuracy of information independently gathered, organized, or maintained by that
any person or of information otherwise lawfully obtained under this Chapter.
The second provision expressly allows any statistical analysis, and it goes on to state the general rule allowing unrestricted use of information for research or education. This same provision goes on to establish the outer limit of this exemption, namely, the point at which a scientist or educator crosses the line by engaging in unfair, improper, or market-destructive conduct. The language is thus amended as follows:
Under no circumstances shall the information so used be extracted from the
original collection and made available to others in a manner that harms directly
the actual [or potential] market for the collection of information from which it is
extracted or used.
(ii) No person who, for educational, scientific, or research purposes, extracts or uses information gathered or collected by another person or entity shall incur liability under this chapter so long as such use or extraction does not by unfair, improper, or market-destructive means, seriously harm or impair the opportunities for that other person to recoup his or her investment and turn a reasonable profit.
The third provision applies only if there emerges a grey area where it is uncertain whether the educational or scientific use crosses the line into a prohibited use. In such cases, criteria drawn from the fair use provisions of copyright law may meaningfully be invoked. At the same time, we recognize the duty of scientists to pay for the use of commercial research tools developed by firms engaged in this specialized field. These provisions are as follows:
In determining the applicability of subsection (ii), courts may take into account:
the purpose and character of the use or extraction;
the nature of the protected collection of information, including the fact that it may have constituted a commercial research tool developed or sold by a firm substantially engaged in the production of such tools;
the amount and substantiality of the information used or extracted in relation to the product or service incorporating the collection of information;
and the effect of the use or extraction on the gatherers' opportunities to recoup their investments and turn a profit in the market for that same product or service.
At this point, we inject a possible alternative to the foregoing Section 1303 (c) (i), (ii), (iii), which is drawn from one of the solutions set out in the exceptions for stock market data, viz:
[Possible alternative to (ii) and (iii) above: (c) No person who for educational, scientific, or research purposes extracts or uses information collected or generated by another person or entity shall incur liability under this Chapter so long as such use or extraction is not part of a consistent pattern engaged in for the purpose of direct competition in the relevant market.]
In any event, the existing "harm to market test" is again deleted, viz:
(d) NONPROFIT EDUCATIONAL, SCIENTIFIC, OR RESEARCH USES- Nothing in this
chapter shall restrict any person from extracting or using information for
nonprofit educational, scientific, or research purposes in a manner that does not
harm directly the actual or potential market for the product or service referred
to in section 1202.
Finally, the application of this exception to all data - "published" or "unpublished" - is clarified, without impairing the operations of trade secret law, viz:
(iv) The fact that a collection of information is unpublished shall not of itself render impermissible the use or extraction of information otherwise allowed within the criteria set out in this provision, so long as that information has otherwise been made available to the public.
Section 1305 - Relationship to Other Laws: 1305 (e) - Licensing
At this point, we must necessarily connect the exceptions for research and educational uses just described with the need for research and educational users to gain access to data (especially in the online environment) on terms that do not vitiate or offset those same exceptions. As previously noted, when the private sector or other nongovernmental entities fund the generation or distribution of data that are made available to the public, the ability of scientists and educators to gain access to those data for public-good activities remains indispensable. Here the problem is that the ability of science and education to pay the going, commercial rates charged for access may not be commensurate with their resources or with the public interest in a strong, basic scientific and educational establishment. The solution is not to shunt the problems of science onto publishers, who have their own business risks to manage, but to ensure that publishers who benefit from legal protection of their databases charge scientific and educational users fair and equitable access fees that take account of the overriding public interest at stake.
When, accordingly, data not funded by government are made available to the public under a new law that protects investments in databases, that law should preclude the provider from denying access to (and use of) the data on fair and equitable terms and conditions for research or educational purposes. The law could also require that researchers and educators who thus obtain privately funded data should pay equitable compensation for these uses.
In such cases, the quantum of equitable compensation to be paid for access to such data for research and educational purposes should take account of: (1) the private vendor's costs of generating and delivering the data; (2) the user's ability reasonably and fairly to contribute to offsetting those costs while fulfilling its research or educational mission; and (3) the extent to which the activities in question are of a commercial or not-for-profit character. Whenever feasible, this calculus should always be made on the basis of a blanket or multi-use license permitting unrestricted access to and use of the data in question, and not on a pay-per-use basis, which would render data too expensive for these socially important classes of users.
It should remain clear that any person or entity that has gained access to data by means of these provisions would remain free to make any use of the data so obtained, for research or educational purposes, without further or additional payment to the data vendor beyond the equitable compensation just described. Data vendors accordingly should be prohibited from using technical measures or devices for the management of data or the rights therein, including telecommunications networks, computer programs, or encryption devices, to defeat or impede the research or educational activities governed by these principles. Similarly, attempts by data vendors to vary, contradict, or limit the stated conditions of access to data for research or educational purposes by contractual agreement should be deemed unenforceable on grounds of public policy.
These provisions are effectuated in Section 1305 (e), as we seek to amend it, and are reproduced below. In evaluating this indispensable proposal, one also should recall that the Administration implicitly supports such action when it calls attention to the need to reduce transaction costs in constructing complex databases. The proposed amendment, which applies only to access contracts with educational, scientific, and research entities, allows the unrestricted flow of upstream scientific data to continue, while promoting bargaining between the parties with a view to establishing price discrimination and, where, feasible, product differentiation.
Here is the proposed amendment in its entirety:
Section 1305 (e) - LICENSING
(1) Nothing in this chapter shall restrict the rights of parties freely to enter into
licenses or any other contracts with respect to the use of collections of
information, so long as those licenses or contracts are not inconsistent with the
policies and provisions implemented in this chapter, or in other federal intellectual
property laws, including Section 1303 (a), forbidding contracts that impede
extraction or use of insubstantial parts of protected collections, and Section 1305
(e) (2), concerning licenses or contracts governing access to protected collections
of information for educational, scientific, or research purposes.
(2) Whenever a given collection of information not substantially funded by government within the purview of Section 1304 above is made available to the public by electronic or other means, those who benefit from the protection of this Act must allow anyone to access that information for educational, scientific, or research purposes in exchange for fair and equitable compensation that takes into account
(i) the private vendor's cost of generating and delivering the relevant information;
(ii) the user's ability reasonably and fairly to contribute to offsetting those costs while fulfilling its educational, scientific, or research missions; and
the extent to which the activities in question are of a commercial or not-for-profit character.
Use or extraction of the information once accessed under this provision for nonprofit educational, scientific, or research purposes is not subject to additional charges, as provided in Sections 1303 (c) and (d) above.
[An alternative approach, based on the "sword of Damocles" clause mentioned above, is not discussed here because it fails to satisfy all the exigencies identified in the Administration's position, as set out in the August 4 Pincus letter].
[End of Part 1]
Other important amendments, including those bearing on government data, the public domain, and the term of protection
[To be continued]
Proposed Amendments to H.R. 2281: Synopsis, Corrections, and Text
Submitted by the
National Academy of Sciences
National Academy of Engineering
Institute of Medicine
for consideration by the
Senate Committee on the Judiciary
August 11, 1998
Synopsis of the Proposed Amendments to H.R. 2281
Section 1301 - Definitions
1301 (2) - Information. Inclusion of "works of authorship" in the definition of "information" is queried on constitutional grounds.
1301 (3) - "potential market" is limited to a "potential market for an existing product." However, we believe that any "potential market" test is unconstitutional, and propose a pure misappropriation test in Section 1302.
1301 (5) - We believe other definitions are desirable, including some for "extraction" and "use."
Section 1302 - Prohibition Against Misappropriation
We reject the "harm to market test" as unconstitutional and formulate liability in terms of "unfair, improper, or market-destructive" conduct that "seriously harms or impairs the opportunities for" investors "to recoup [their] investment and turn a reasonable profit." This formula replaces the language of a de facto exclusive property right with a true misappropriation standard that does not strike at fair followers.
Section 1303 - Permitted Acts
1303 (a) - Individual items of information and other insubstantial parts. The amendment prohibits contractual overrides of the right to use insubstantial parts of a database for any purpose (as occurs under the E.C. Directive).
1303 (b) - Gathering or use of information obtained through other means. The proposed amendment states expressly that when independent creation of data is not economically or physically practicable database owners must license the contents to anyone on fair and reasonable terms.
1303 (c) and (d) combined - Nonprofit educational, scientific, or research uses.
1303 (c) (i) - The amendment clarifies that anyone may extract or use information to verify the accuracy of any protected collection.
1303 (c) (iii) - Establishes an unrestricted right of statistical analysis and imposes on database providers a general duty not "to impede the extraction or use of information for nonprofit educational, scientific, or research purposes." No liability attaches for any such use or extraction unless effected by unfair, improper, or market-destructive means that seriously impair the opportunities to recoup investment and turn a profit.
1303 (c) (iii) - Sets out legal criteria for determining the limits of the above-stated exemption (loosely drawn from the "fair use" provision of copyright law, but focused on improper harm to investment rather than markets); an exception to the exception for scientific use is made to recognize a duty to pay firms substantially engaged in the construction of databases as research tools.
1303 (c) - Alternative Proposal (simple model): This proposal exempts educational, scientific, or research uses and extractions of information from liability if "such use or extraction is not part of a consistent pattern engaged in for the purpose of direct competition in the relevant market."
1303 (c) (iv) - Under either approach, the above exemptions apply to all databases that have been made available to the public, without regard to whether or not the database has been "published" in the technical sense of the term.
Section 1303 (g) - Transformative Uses
These amendments seek to dispel the unconstitutional implications of creating reserved markets (on analogy to "derivative works" under copyright law) without sacrificing the database maker's incentives to compile and without creating a free-rider loophole. Specifically:
1303(g) (1) - Distant Markets: Allows competitors operating in distant markets to use even substantial parts of a protected database if they independently generate the remainder and all subsequent updates, and also pay reasonable royalties until the expiry of the term of protection (now 15 years).
1303 (g) (2) - Direct Competition: Allows competitors operating in direct competition (on the same market segment) to use a substantial part (but not all or virtually all of a protected collection) after a three-year lead-time period if they independently generate the remainder plus updates, and if they also pay reasonable royalties to the end of the term.
1303 (g) (3) - Non-Protected Sources: Reconfirms the rights of anyone to make a new database that incorporates less than a substantial part of another database.
1303 (g) (4) - Allows certain private uses of lawfully obtained information.
1303 (g) (5) - Preserves a general right to extract or use information for illustrative or explanatory purposes.
Section 1304 - Exclusions
Government collections of information
These amendments further refine the exclusion for government-funded data as follows:
1304 (a) (3) - reconfirms the right to replicate any government-funded data, wherever found (except as otherwise provided for state universities and stock exchanges).
1304 (a) (4) - limits payments to be charged for access to or use of government data to those established by federal laws and regulations.
1304 (a) (5) - requires value-adding private firms to make underlying government data available when not otherwise available elsewhere (and in the absence of a registration system).
1304 (a) (6) - ensures the public availability of data collected under statutory obligations.
Section 1304 (b) - Computer Programs
1304 (b) (2) - clarifies that the database law cannot affect the legal status of computer programs under other laws.
Section 1305 - Relationship to Other Laws
1305 (a) - Other rights not affected: This amendment expressly subjects the general principle respecting the independence of other laws to existing exceptions (b) and (c) and to new exceptions (d) and (e).
1305 (d) - Antitrust
Establishes "tying" as a prima facie antitrust violation; and expressly legitimates a defense of "misuse" of the rights created in the database bills;
expressly empowers non-profit educational and scientific organizations to bargain collectively concerning implementation of any aspect of the database law
1305 (e) - Licensing
Requires that contracts implementing database rights should not violate the policies and provisions governing both rights and duties under this law and under other federal intellectual property laws.
Allows educators, scientists, and researchers unrestricted access (online or otherwise) to both publicly and privately generated data in return for equitable compensation; sets out the criteria for determining such compensation; and reconfirms that no other charges shall apply to data accessed for educational or research purposes.
[(2 A) ALTERNATIVE PROPOSAL: In lieu of the above solution, creates a "sword of Damocles" clause requiring both access and end-user contracts (online or otherwise) to be made on reasonable terms and conditions, with due regard for science, research, education, free speech and competition; sets out criteria for evaluating reasonable fees for such uses; and reconfirms that no other charges shall apply to data accessed for educational or research purposes.]
Affirms that contracts varying these clauses are unenforceable.
Affirms that technical devices, including encryption devices, cannot be used to defeat these clauses.
Section 1307 (a) (1) - Criminal Offenses
The threshold for criminal liability is elevated from $10,000 to $50,000; also indicates that misdemeanors and felonies should be differentiated.
Section 1307 - Limitations on Actions
1308 (c) (1) - Additional Limitations [Term of Duration]: Three options are presented:
Option 1: The term of protection is left at 15 years only if our proposals on transformative uses [summarized above - Section 1303 (g)] and permitted acts [Section 1303] are accepted.
Option 2: Otherwise, Option 2 limits protection to a flat three-year head start (lead-time) period.
Option 3: This option would require registration for a full ten-year term, but allow protection of all unregistered databases for two years (NB: A registration system is not inconsistent with Option 1, and it would favor dissemination of scientific and research data).
1308 (c) (2) - Under any option, this clause ensures public access to all protected data at the end of the prescribed term, and it seeks to avoid the constitutional implications of perpetual protection for dynamic databases.
1308 (d) - Allows only prospective, not retroactive, protection.
Corrigenda of the
Text of Proposed Amendments
as Distributed on August 6, 1998
Corrigenda of the Text of Proposed Amendments as Distributed on August 6, 1998
Note: In the interest of providing a working draft of the proposed amendments as quickly as possible on August 6, some technical and substantive errors were made. The following Sections of the text distributed on August 6, 1998 have been revised and incorporated into the full text distributed on August 11, 1998, as set out below.
1. Section 1303 (c) (i) was erroneously described as Section 1303 (e i)
Sections 1304 (3), (4), (5), which further refine the exceptions for government-generated data, were improperly restricted in ways that are inconsistent with existing statutes and regulations. Consistent with the government's position paper of August 6, 1998, these sections have been redrafted and included in the full text below. The previous version is necessarily withdrawn from consideration.
Section 1305 (e) (2) [Option 2] omitted a necessary reference to freedom of speech. In any event, the government's position paper of August 6, 1998 would seem to mandate Option 1, as indicated in the Explanatory Memorandum.
Section 1307 (b) - It is further suggested that misdemeanors be distinguished from criminal penalties.
Full Text of the Proposed
Amendments
(including Corrigenda)
as of August 11, 1998
Full Text of the Proposed Amendments
(including Corrigenda, as of August 11, 1998)
All references are to H.R. 2281, as adopted on August 4, 1998, Title V--"Collections of Information Antipiracy Act."
[Additions to the Bill are underlined; deletions are struck through.]
Sec. 1301 Definitions
As used in this chapter:
(1) COLLECTION OF INFORMATION - The term collection of information means information that has been collected and has been organized for the purpose of bringing discrete items of information together in one place or through one source so that users may access them.
(2) INFORMATION- The term 'information' means facts, data, works of authorship, or any other intangible material capable of being collected and organized in a systematic way.
[NB: We question the inclusion of "works of authorship" here.]
(3) POTENTIAL MARKET- The term 'potential market' means any market for an
existing product or service that a person claiming protection under section 1202 has
current and demonstrable plans to exploit or that is commonly exploited by persons
offering similar products or services incorporating collections of information.
[NB: The significance of this change is much diminished under the general approach we have adopted, but we think it wise to preserve this proposed change in case our proposals fail to carry].
(4) COMMERCE- The term 'commerce' means all commerce which may be lawfully regulated by the Congress.
(5) PRODUCT OR SERVICE- A product or service incorporating a collection of information does not include a product or service incorporating a collection of information
gathered, organized, or maintained to address, route, forward, transmit, or store digital online communications or provide or receive access to connections for digital online communications.
[NB: Other definitions are needed, including the terms "use" and "extraction"]
Sec. 1302. Prohibition against misappropriation
Any person who extracts, or uses in commerce, all or a substantial part, measured either quantitatively or qualitatively, of a collection of information gathered, organized, or maintained by another person through the investment of substantial monetary or other
resources, so as by unfair, improper, or market-destructive means, to seriously harm
or impair the opportunities for that other person to recoup his or her investment and
turn a reasonable profit for cause harm to the actual or potential market of that
other person, or a successor in interest of that other person, for a product or
service that incorporates that collection of information and is offered or intended
to be offered for sale or otherwise in commerce by that other person, or a successor
in interest of that person, shall be liable to that person or successor in interest for
the remedies set forth in section 1306.
Sec. 1303. Permitted acts
(a) INDIVIDUAL ITEMS OF INFORMATION AND OTHER INSUBSTANTIAL PARTS-
Nothing in this chapter shall prevent the extraction or use of an individual item of
information, or other insubstantial part of a collection of information that has
been made available to the public, in itself, and any contractual provision contrary
to the purpose of this provision shall be unenforceable as a matter of federal law.
An individual item of information, including a work of authorship, shall not itself
be considered a substantial part of a collection of information under section 1302.
Nothing in this subsection shall permit the repeated or systematic extraction or use
of individual items or insubstantial parts of a collection of information so as to
circumvent the prohibition contained in section 1302.
(b) GATHERING OR USE OF INFORMATION OBTAINED THROUGH OTHER MEANS - Nothing in this chapter shall restrict any person from independently gathering information or using information obtained by means other than extracting it from a collection of information gathered, organized, or maintained by another person through the investment of substantial monetary or other resources. However, when it becomes objectively impracticable, physically or economically, to independently gather information made available to the public, and no similar collection of information is available from other sources, the person who gathered the collection protected under this chapter shall not refuse to license the use or extraction of the information it contains on reasonable terms and conditions for any purpose whatsoever.
1303 [c] and [d] combined - NONPROFIT EDUCATIONAL, SCIENTIFIC, OR RESEARCH USES
1303 (c) (i) USE OF INFORMATION FOR VERIFICATION- Nothing in this chapter shall
restrict any person from extracting information, or from using a collection of
information within any entity or organization, for the sole purpose of verifying the
accuracy of information independently gathered, organized, or maintained by that
any person or of information otherwise lawfully obtained under this Chapter.
No person shall invoke the protection provided by this chapter to prohibit the summarization or analysis of any collection of information by statistical or other scientific methods or to impede the extraction or use of information for nonprofit educational, scientific or research purposes.
Under no circumstances shall the information so used be extracted from the
original collection and made available to others in a manner that harms directly
the actual or potential market for the collection of information from which it is
extracted or used.
No person who, for educational, scientific, or research purposes, extracts or uses information gathered or collected by another person or entity shall incur liability under this chapter so long as such use or extraction does not by unfair, improper, or market-destructive means, seriously harm or impair the opportunities for that other person to recoup his or her investment and turn a reasonable profit.
In determining the applicability of subsection (ii), courts may take into account:
the purpose and character of the use or extraction;
the nature of the protected collection of information, including the fact that it may have constituted a commercial research tool developed or sold by a firm substantially engaged in the production of such tools;
the amount and substantiality of the information used or extracted in relation to the product or service incorporating the collection of information;
and the effect of the use or extraction on the gatherers' opportunities to recoup their investments and turn a profit in the market for that same product or service.
[Possible alternative to (ii) and (iii) above: No person who for educational, scientific, or research purposes extracts or uses information collected or generated by another person or entity shall incur liability under this Chapter so long as such use or extraction is not part of a consistent pattern engaged in for the purpose of direct competition in the relevant market.]
(d) NONPROFIT EDUCATIONAL, SCIENTIFIC, OR RESEARCH USES- Nothing in this
chapter shall restrict any person from extracting or using information for
nonprofit educational, scientific, or research purposes in a manner that does not
harm directly the actual or potential market for the product or service referred
to in section 1202.
(iv) The fact that a collection of information is unpublished shall not of itself render impermissible the use or extraction of information otherwise allowed within the criteria set out in this provision, so long as that information has otherwise been made available to the public.
(e) NEWS REPORTING- Nothing in this chapter shall restrict any person from extracting or using information for the sole purpose of news reporting, including news gathering, dissemination, and comment, unless the information so extracted or used is time sensitive, has been gathered by a news reporting entity for distribution to a particular market, has not yet been distributed to that market, and the extraction or use is part of a consistent
pattern engaged in for the purpose of direct competition in that market.
(f) TRANSFER OF COPY- Nothing in this chapter shall restrict the owner of a particular lawfully made copy of all or part of a collection of information from selling or otherwise disposing of the possession of that copy.
Transformative or Competitive Uses
Distant markets - Nothing in this chapter shall prevent any person from extracting or using a substantial part of the information in a collection protected under Section 1302 to form a new collection of information that is sold or distributed in different market segments from that in which the initial gatherer of the collection normally operates; provided that the person or entity making the aforesaid use or extraction shall have independently gathered the remainder of the non-competing collection, and of all subsequent updates or improvements of its contents, and that said person shall also pay reasonable royalties to the person or entity who made the relevant investments for the gathering of the information initially used or extracted, and such royalties shall accrue from the date of such use or extraction until the expiry of the term of protection set out in Section 1308 below.
Direct competition - Nothing in this chapter shall prevent any person from extracting or using a substantial part of the information in a collection protected under Section 1302 (but not all or virtually all of such information) to form a new collection of information that is sold or distributed in the same market segments in which the initial gatherer normally operates, provided that
such use or extraction occurs more than three years after the investment of resources that qualified the portion of the collection of information for protection under this chapter that is extracted or used;
that the person making such extraction or use shall independently have gathered the remainder of the competing collection and all subsequent updates or improvements of its contents;
and provided further that the person making such extraction or use shall also pay reasonable royalties to the person or entity that made the relevant investments for the gathering of the information initially used or extracted, from the date of such action to the expiry of the term of protection set out in Section 1308 below.
Nonprotected Sources - Nothing in this chapter shall restrict any person from extracting or using information from a collection of information protected under Section 1302 to form a new collection of information of which substantial part, measured either qualitatively or quantitatively, was obtained from a source other than the protected collection of information.
[The following clauses may be held in reserve pending the outcome of discussions
bearing on the afore-mentioned proposals:]
Nothing in this chapter shall restrict any person from condensing, abridging, or reconfiguring a collection of information protected under Section 1302, PROVIDED that the resulting collection of information is not distributed to the public.
Nothing in this chapter shall restrict any person from extracting or using information from a collection of information protected under Section 1302 and incorporating it in a work for illustrative or explanatory purposes.
Sec. 1304. Exclusions
(a) GOVERNMENT COLLECTIONS OF INFORMATION-
(1) EXCLUSION- Protection under this chapter shall not extend to collections of information gathered, organized, or maintained by or for a government entity, whether Federal, State, or local, including any employee or agent of such entity, or any person exclusively licensed by such entity, within the scope of the employment, agency, or license. Nothing in this subsection shall preclude protection under this chapter for information gathered, organized, or maintained by such an agent or licensee that is not within the scope of such agency or license, or by a Federal or State educational institution in the course of engaging in education or scholarship.
(2) EXCEPTION- The exclusion under paragraph (1) does not apply to any information required to be collected and disseminated--
(A) under the Securities Exchange Act of 1934 by a national securities exchange, a registered securities association, or a registered securities information processor, subject to section 1305(g) of this title; or
(B) under the Commodity Exchange Act by a contract market, subject to section 1305(g) of this title.
Nothing in this chapter shall prohibit any use of portions, however substantial, of
collections of information when those portions are replicated without significant
change or improvement from collections of information produced generated by
federal, state, or local governments, or otherwise substantially originated with
public funds, except as otherwise provided for educational institutions in Section
1304 (a) (1) and for the securities exchanges and contract markets covered by
Section 1304 (a) (2).
Whenever a given collection of information is substantially funded by government
and made available to the public, anyone seeking access to that information
information for educational, scientific, or research purposes must not be charged
any fees inconsistent with those authorized in the Paperwork Reduction Act of 1995,
amending 44 U.S.C. 35, and other applicable Federal laws and regulations.
Private firms that add value to government-funded collections of information
falling within Section 1304 (a) (1), (2) and that benefit from this Act when making the
resulting value-added collections available to the public, must allow anyone to
access the original collections funded by government government for educational,
scientific, or research purposes if such collections are not otherwise available to
the public for these purposes use and extraction; and in that event, such users must
not be charged any fees, including access fees, that exceed those authorized by the
Paperwork Reduction Act of 1995, and other applicable Federal laws and
regulations.
The exclusion under Section 1304 (a) (1) does not apply to any information required to be collected and disseminated by a non-government entity pursuant to a statute, regulation, or court order. Notwithstanding any provision of this chapter, such information must be made available to the public in accordance with the statute, regulation or order pursuant to which the information was collected.
(b) COMPUTER PROGRAMS-
(1) PROTECTION NOT EXTENDED- Subject to paragraph (2), protection under this chapter shall not extend to computer programs, including, but not limited to, any computer program used in the manufacture, production, operation, or maintenance of a collection of information, or any element of a computer program necessary to its operation.
(2) INCORPORATED COLLECTIONS OF INFORMATION- A collection of information that is otherwise subject to protection under this chapter is not disqualified from such protection solely because it is incorporated into a computer program.
The incorporation of a collection of information that is subject to protection under this chapter into a computer program shall not otherwise expand or diminish its legal status as a computer program under other laws or regulations.
Sec. 1305. Relationship to other laws
(a) OTHER RIGHTS NOT AFFECTED- Subject to subsections (b), (c) and (d), and (e), nothing in this chapter shall affect rights, limitations, or remedies concerning copyright, or any other rights or obligations relating to information, including laws with respect to patent, trademark, design rights, antitrust, trade secrets, privacy, access to public documents, and the law of contract.
(b) PREEMPTION OF STATE LAW- On or after the effective date of this chapter, all rights that are equivalent to the rights specified in section 1302 with respect to the subject matter of this chapter shall be governed exclusively by Federal law, and no person is entitled to any equivalent right in such subject matter under the common law or statutes of any State. State laws with respect to trademark, design rights, antitrust, trade secrets, privacy, access to public documents, and the law of contract shall not be deemed to provide equivalent rights for purposes of this subsection.
(c) RELATIONSHIP TO COPYRIGHT- Protection under this chapter is independent of, and does not affect or enlarge the scope, duration, ownership, or subsistence of, any copyright protection or limitation, including, but not limited to, fair use, in any work of authorship that is contained in or consists in whole or part of a collection of information. This chapter does not provide any greater protection to a work of authorship contained in
a collection of information, other than a work that is itself a collection of information, than is available to that work under any other chapter of this title.
(d) ANTITRUST-
Nothing in this chapter shall limit in any way the constraints on the manner in
which products and services may be provided to the public that are imposed by
Federal and State antitrust laws, including those regarding single suppliers of
products and services.
The relief provided under sections 1306 and 1307 shall not be available to a person who conditions the license or sale of a collection of information protected under this chapter on the acquisition or license of any other product or service or on the performance of any action not directly related to the license or sale, or who otherwise misuses a collection of information. [DFC]
It shall not be a violation of the antitrust laws or of any related trade regulation laws for nonprofit educational, scientific, or research organizations to bargain collectively with any persons or entities that benefit from the protections of this chapter concerning any rights, duties, liabilities, exceptions, or immunities arising from any provisions of this chapter.
LICENSING-
(1) Nothing in this chapter shall restrict the rights of parties freely to enter into
licenses or any other contracts with respect to the use of collections of
information, so long as those licenses or contracts are not inconsistent with the
policies and provisions implemented in this chapter, or in other federal intellectual
property laws, including Section 1303 (a), forbidding contracts that impede
extraction or use of insubstantial parts of protected collections, and Section 1305
(e) (2), concerning licenses or contracts governing access to protected collections
of information for educational, scientific, or research purposes.
[PREFERRED OPTION 1:]
(2) Whenever a given collection of information not substantially funded by government within the purview of Section 1304 above is made available to the public by electronic or other means, those who benefit from the protection of this Act must allow anyone to access that information for educational, scientific, or research purposes in exchange for fair and equitable compensation that takes into account
(i) the private vendor's cost of generating and delivering the relevant information;
(ii) the user's ability reasonably and fairly to contribute to offsetting those costs while fulfilling its educational, scientific, or research missions; and
the extent to which the activities in question are of a commercial or not-for-profit character.
Use or extraction of the information once accessed under this provision for nonprofit educational, scientific, or research purposes is not subject to additional charges, as provided in Sections 1303 (c) and (d) above.
[ALTERNATIVE OPTION 2, TO CONSIDER ONLY IF THE BILL IS OTHERWISE SATISFACTORILY AMENDED]
All licenses or other contractual agreements governing access to collections of information within this Act, regardless of the medium in which they are conveyed, or that impose restrictions on end users of such collections, shall contain fair and reasonable terms and conditions, with due regard for the public interest in education, science, research, freedom of speech, and the preservation of a competitive marketplace. In determining the reasonableness of any fees charged to access information for such purposes, the courts may consider:
the extent to which the information is not substantially funded by government within the purview of Section 1304 (a) and is made available to the public;
the private vendor's costs of generating and delivering the relevant information;
the user's ability reasonably and fairly to contribute to offsetting those costs while fulfilling its educational, scientific, or research missions; and
the extent to which the activities in question are of a commercial or not-for-profit character.
Use or extraction of the information once accessed under this provision for nonprofit educational, scientific, or research purposes is not subject to additional charges, as provided in Sections 1303 (c) and (d) above.
(3) With respect to collections of information that have been made available to the
public, Aany license or contractual agreement that attempts to contradict or limit
the conditions governing access to and use of such collections for educational,
scientific, or research purposes, as elsewhere set out in this chapter, shall be deemed
impermissible and unenforceable on grounds of public policy.
(4) Those who benefit from the protection of this chapter may not use technical measures or devices for the management of information or the rights therein, including telecommunications networks, computer programs, or encryption devices, so as unfairly or improperly to defeat or impede the educational, scientific, or research activities authorized by this chapter.
(f) COMMUNICATIONS ACT OF 1934- Nothing in this chapter shall affect the operation of the provisions of the Communications Act of 1934 (47 U.S.C. 151 et seq.), or shall restrict any person from extracting or using subscriber list information, as such term is defined in section 222(f)(3) of the Communications Act of 1934 (47 U.S.C. 222(f)(3)), for the purpose of publishing telephone directories in any format.
(g) SECURITIES AND COMMODITIES MARKET INFORMATION
[NB: the several new subsections under subsection (g) have not been added to this version due to time constraints and because we have no suggested revision to them.]
Sec. 1306. Civil remedies
(a) CIVIL ACTIONS- Any person who is injured by a violation of section 1302 may bring a civil action for such a violation in an appropriate United States district court without regard to the amount in controversy, except that any action against a State governmental
entity may be brought in any court that has jurisdiction over claims against such entity.
(b) TEMPORARY AND PERMANENT INJUNCTIONS- Any court having jurisdiction of a civil action under this section shall have the power to grant temporary and permanent injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent a violation of section 1302. Any such injunction may be served anywhere in the United States on the person enjoined, and may be enforced by proceedings in contempt or otherwise by any United States district court having jurisdiction over that person.
(c) IMPOUNDMENT- At any time while an action under this section is pending, the court may order the impounding, on such terms as it deems reasonable, of all copies of contents of a collection of information extracted or used in violation of section 1302, and of all masters, tapes, disks, diskettes, or other articles by means of which such copies may be reproduced. The court may, as part of a final judgment or decree finding a violation of section 1302, order the remedial modification or destruction of all copies of contents of a collection of information extracted or used in violation of section 1302, and of all masters, tapes, disks, diskettes, or other articles by means of which such copies may be reproduced.
(d) MONETARY RELIEF- When a violation of section 1302 has been established in any civil action arising under this section, the plaintiff shall be entitled to recover any damages sustained by the plaintiff and defendant's profits not taken into account in computing the damages sustained by the plaintiff. The court shall assess such profits or damages or cause the same to be assessed under its direction. In assessing profits the plaintiff shall be required to prove defendant's gross revenue only and the defendant shall be required to prove all elements of cost or deduction claims. In assessing damages the court may enter judgment, according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount. The court in its discretion may award reasonable costs and attorney's fees to the prevailing party and shall award such costs and fees where it determines that an action was brought under this chapter in bad faith against a nonprofit educational, scientific, or research institution, library, or archives, or an employee or agent of such an entity, acting within the scope of his or her employment.
(e) REDUCTION OR REMISSION OF MONETARY RELIEF FOR NONPROFIT EDUCATIONAL, SCIENTIFIC, OR RESEARCH INSTITUTIONS- The court shall reduce or remit entirely monetary relief under subsection (d) in any case in which a defendant believed and had reasonable grounds for believing that his or her conduct was permissible under this chapter, if the defendant was an employee or agent of a nonprofit educational, scientific, or research institution, library, or archives acting within the scope of his or her employment.
(f) ACTIONS AGAINST UNITED STATES GOVERNMENT- Subsections (b) and (c) shall not apply to any action against the United States Government.
(g) RELIEF AGAINST STATE ENTITIES- The relief provided under this section shall be available against a State governmental entity to the extent permitted by applicable law.
Sec. 1307. Criminal offenses and penalties
(a) VIOLATION-
(1) IN GENERAL- Any person who violates section 1302 willfully, and--
(A) does so for direct or indirect commercial advantage or financial gain; or
(B) causes loss or damage aggregating $10,000 $50,000 or more in any 1-year period
to the person who gathered, organized, or maintained the information concerned,
shall be punished as provided in subsection (b).
(2) INAPPLICABILITY- This section shall not apply to an employee or agent of a nonprofit educational, scientific, or research institution, library, or archives acting within
the scope of his or her employment.
(b) PENALTIES- An offense under subsection (a) shall be punishable by a fine of not more than $250,000 or imprisonment for not more than 5 years, or both. A second or subsequent offense under subsection (a) shall be punishable by a fine of not more than
$500,000 or imprisonment for not more than 10 years, or both.
[NB: Misdemeanors and felonies should be differentiated].
Sec. 1308. Limitations on actions
(a) CRIMINAL PROCEEDINGS- No criminal proceeding shall be maintained under this chapter unless it is commenced within three years after the cause of action arises.
(b) CIVIL ACTIONS- No civil action shall be maintained under this chapter unless it is commenced within three years after the cause of action arises or claim accrues.
ADDITIONAL LIMITATION - [Term of Duration]
[OPTION 1: If the treatment of transformative uses conforms to the proposals set out earlier, then the following provision may stand:
(c) (1) No criminal or civil action shall be maintained under this chapter for the extraction or use of all or a substantial part of a collection of information that occurs more than 15 years after the investment of resources that qualified the portion of the collection of information for protection under this chapter that is extracted or used.'.
[OPTION 2: If the treatment of the transformative uses does not conform to the proposals set out above, then the term of duration in Section 1308 (c) should not exceed three years.
[OPTION 3: Impose a registration requirement, with two years of protection if not registered and ten years of protection if registered. Registration also may affect remedies. (Modelled after the Semiconductor Chip Protection Act of 1984)]
[Under either option 1, 2 or 3, the following additional safeguards are required:]
1308 (c) (2) - When a substantial investment of new resources in updating or improving an existing collection of information that has already qualified for protection under this chapter should requalify parts of this same collection for another term of protection as provided above, then no person who extracts or uses all or a substantial part of the pre-existing information as previously configured shall incur liability under this chapter. Any person who obtains a renewed term of protection for updated or improved portions of an existing collection covered by this chapter as specified above shall make the pre-existing version available to the public on request, and for the mere costs of delivery, from the time when new acts of investment otherwise qualified the relevant part or parts of an existing collection for an additional period of protection. In no case shall the renewal of protection for any part or parts of an existing collection of information owing to the investment of new resources in upgrades or improvements, prevent any use or extraction of the pre-existing configuration at the expiration of the term prescribed above, and no liability under this Chapter shall thereafter attach to such acts of use or extraction.
1308 (d) Limitation on Retroactive Application
No criminal or civil action shall be maintained under this chapter for the extraction or use of all or a substantial part of a collection of information for which the investment of resources which qualified the collection of information for protection under this chapter occurred prior to the effective date of this Act.
SEC. 4. CONFORMING AMENDMENT.
The table of chapters for title 17, United States Code, is amended by adding at the end the following:
1301.
SEC. 5. CONFORMING AMENDMENTS TO TITLE 28, UNITED STATES CODE.
(a) DISTRICT COURT JURISDICTION- Section 1338 of title 28, United States Code, is amended--
(1) in the section heading by inserting 'misappropriations of collections of information,' after 'trade-marks'; and
(2) by adding at the end the following:
(d) The district courts shall have original jurisdiction of any civil action arising under chapter 12 of title 17, relating to misappropriation of collections of information. Such jurisdiction shall be exclusive of the courts of the States, except that any action against a State governmental entity may be brought in any court that has jurisdiction over claims against such entity.
(b) CONFORMING AMENDMENT- The item relating to section 1338 in the table of sections for chapter 85 of title 28, United States Code, is amended by inserting misappropriations of collections of information,' after `trade-marks,'.
(c) COURT OF FEDERAL CLAIMS JURISDICTION- Section 1498(e) of title 28, United States Code, is amended by inserting 'and to protections afforded collections of information under chapter 12 of title 17' after `chapter 9 of title 17'.
SEC. 6. EFFECTIVE DATE.
(a) IN GENERAL- This Act and the amendments made by this Act shall take effect on the date of the enactment of this Act, and shall apply to acts committed on or after that date.
(b) PRIOR ACTS NOT AFFECTED- No person shall be liable under chapter 12 of title 17, United States Code, as added by section 3 of this Act, for the use of information lawfully extracted from a collection of information prior to the effective date of this Act, by that person or by that person's predecessor in interest.
September 4, 1998
Revised Amendments to H.R. 2281 concerning
Permitted acts for scientific, educational and research purposes;
Exclusions;
Definition of "collections of information";
Licensing
Submitted by
the National Academy of Sciences
National Academy of Engineering
and the Institute of Medicine
for consideration by
the Senate Committee on the Judiciary
Explanatory Memorandum
In response to the discussions on August 19, we have further refined our previous submission concerning "permitted acts for scientific, educational, and research purposes" (dated August 19, 1998) as follows:
by adding a clause to Section 1303(c)(i)(C) to cover "illustration and explanation in the course of teaching or classroom instruction;" and
by adding a clause to Section 1303(c)(iii)(A) on the purpose and character of the use, to allow courts to consider "the extent to which such extraction or use is of a commercial nature or is intended for nonprofit educational or research purposes." This meets a need raised by the proponents at the last meeting.
However, we are unwilling to tinker with the rest of this provision, including the exception for verification, in order to cover the many colorful scenarios and hypotheticals pertaining to "rogue" scientists or publishers that proponents wish to cover by specific legislative enactments. We believe all the proponents' legitimate needs and concerns are covered by our Section 1302(c)(ii), which adopts solid criteria proposed by proponents themselves.
As representatives of the proponents have repeatedly observed, this is a new Act and neither side can or should attempt to legislate now about a myriad of unforeseen or unforseeable events. Rather, our object is to clarify the space in which science and education can legitimately operate without interference from publishers and without harming the publisher's legitimate commercial expectations. We have done this by creating standards (rather than rules) that allow scientists and educators to pursue the same activities that were previously legitimate under the copyright law, so long as they do not cross the line into the commercial territory protected by this Act. The guiding principle is that science and education should be left no worse off than they were before, and this is accomplished by our proposal. If proponents desire a compulsory arbitration clause for disputes arising in the research and education environment, we would consider that with attention.
We propose a new, basic exclusion of protection for discrete facts, ideas, principles, etc., as such, which would reinforce the definition of "collection of information." This appears as a new Exclusion, Section 1304(c).
As instructed, we have also added language to the legislative history regarding "Clarification of Definition - 1303 Collection of Information." Our proposal builds on points developed in preceding discussions, and also addresses the potential conflict with trade secret law.
We call your attention to the fact that our proposals concerning "permitted acts for scientific, educational, and research purposes" (§1303 (c)) must be correlated with the Academies' various proposals concerning licensing in our previous submission. These include:
1303(a) - Prohibition on contractual override of the insubstantial use exception;
1303(b) - No refusal to license on reasonable terms and conditions when a given collection cannot be independently regenerated (sole-source problem);
1305(e)(i) - All licenses must respect other federal laws;
1305(e)(2) - Compulsory license for access contracts affecting educational, scientific, and research entities;
1305(e)(3) - Licenses not to overrule exceptions or limitations provided by this Act;
1305(e)(4) - Technical measures and devices not to defeat or interfere with exceptions and limitations provided in this Act.
In this connection, we call your attention to our third alternative proposal for a general licensing clause under §1305(e)(2), in the event that our preferred option, a compulsory license for science and education, is not adopted. For convenience, we attach this third proposal to this submission as Alternative 3 to §1305(e)(2) - Licensing.
September 4, 1998
Academies' Revised Proposed Amendment to H.R. 2281 Concerning Permitted Acts for Scientific, Educational, and Research Purposes
[N.B.: Underlined text below is new.]
1303 (c) (i) Nothing in this chapter shall prohibit or otherwise restrict the extraction from or use of a collection of information protected under this chapter for the following purposes:
for the purpose of verifying the accuracy of information independently gathered, organized, or maintained by any person or of information otherwise lawfully obtained;
for the purpose of summarizing or analyzing a collection of information by statistical or other scientific method; or
for educational, scientific or research purposes, including illustration and explanation in the course of teaching or classroom instruction, so long as such use or extraction is not part of a consistent pattern engaged in for the purpose of direct competition in the relevant market.
(ii) A use permitted under subsection (i) of this section shall not be permitted if:
the amount of the collection of information extracted or used is more than is reasonable and customary for the purpose;
the extraction or use is intended, or is likely, to serve as a substitute for all or a substantial part of the collection of information from which the extraction or use is made; or
the extraction or use is part of a pattern, system, or repeated practice by the same, related, or concerted parties with respect to the same collection of information or a series of related collections of information.
(iii) In determining the applicability of subsection (c), courts may consider the following factors:
the purpose and character of the extraction or use, especially when it pertains to criticism, comment, teaching, scholarship, or research, and the extent to which such extraction or use is of a commercial nature or is intended for nonprofit educational or research purposes;
the nature of the protected collection of information and the purpose for which it was produced, including the fact that it may have constituted a commercial research or educational tool developed or sold by a firm substantially engaged in the production of such tools;
the amount and substantiality of the information used or extracted in relation to the product or service incorporating the collection of information; and
the effect of the extraction or use on the gatherers' opportunities to recoup their investment and turn a reasonable profit in the market for that same product or service.
Explanation
Together with other critics of H.R. 2281, we oppose any legislation that would engraft an exclusive property right on data, or collections of data. We believe that such a bill would contain serious constitutional infirmities, as raised by the July 28 Department of Justice memorandum and as noted in our Explanatory Memorandum of August 13. We do support a true misappropriation approach, such as the one that was put on the table in these negotiations, and we believe it could become a model for the rest of the world. It effectively resolves the problem of database piracy in a constitutionally sound manner; it is simple and adaptable to the evolving needs of the information economy; it could be extended to other industries without diminishing competition; and it does not threaten to disrupt science, education, and research.
Under any approach that might be adopted, however, we remain confident that Congress would not want to harm science and education in the ways that the Commerce and Justice Departments have deemed likely to occur under H.R. 2281 as it now stands. To help avoid such harm, we submit a carefully considered proposal for an amendment to Section1303(c) concerning permitted acts for scientific, educational, and research purposes.
This amendment builds on language that proponents of the bill have themselves used in other connections, and it also draws upon some of the teachings and practices of the fair use doctrine under copyright law. Our proposal safeguards research practices while ensuring that the free-riding practices that database providers most fear are made illegal. It also appears likely that many similar amendments dealing with the needs of other sectors - both commercial and noncommercial - will be needed, and will require considerable time and effort to work these out in the public interest.
We believe that under any circumstance, Congress would want to enact a bill that contains these minimal safeguards for science and education, and that it would not wish to put the national system of innovation at risk.
Section 1304 Exclusions
Insert new Section (c)
FACTS AND IDEAS AS SUCH.
In no case does the protection afforded a collection of information within the provision of this Act extend to any idea, facts, procedure, process, system, method or operation, concept, principle or discovery, as distinct from the collection that is the product of the investment protected by this Act.
Clarification of Definition
1301(1) COLLECTION OF INFORMATION. - The term "collection of information" means information that has been collected and has been organized for the purpose of bringing discrete items of information together in one place or through one source in order that users may access those discrete items.
Proponents' Proposed Addition
We believe further clarification is best treated in legislative history, such as - but not necessarily exactly the same as - that already in the House report. The statutory changed made here are matters of emphasis. The use of "in order" is to emphasize that the purpose of the collector is determinative. Thus, the fact that a user may consult a conventional history book to discover the dates of a king's reign does not convert that book into a "collection of information." Similarly, the use of "those discrete items" is to make absolutely clear that it is the collector's purpose to provide users with access to the items themselves, not merely to the collection, that is critical.
Opponents' Proposed Addition
In elaborating upon this definition, the guiding principle is that the Act is not meant to be infinitely elastic, but rather it is meant to apply only to collections of information that would be regarded as a "database" in the ordinary and conventional sense of the word. If a given production is not what would conventionally constitute either a print or electronic database, then courts may find that it is not a database for purposes of attracting protection under this Act.
Moreover, when any given collection of information qualifies for protection under this Act, it is understood that the protected element is the effort and expense of collection itself, and not the facts or ideas or discrete items it contains, including works of authorship as such (see proposed exception 1304 (c)). If the copyright law protects any discrete item or items included within a collection covered by this act, then that degree of copyright protection should suffice for the discrete item or items in question. There is, thus, no intention to augment or expand the protection that any such discrete item or items might obtain under the copyright law or other relevant laws, including state trade secret laws.
In this connection, it is understood that the protection provided by this Act cannot be used to hinder or obstruct the reverse engineering of secret, unpatented innovation by honest or proper means. The purpose of reverse engineering would normally be to reveal the unprotectable facts, ideas, methods, concepts, systems, principles, or discoveries that are expressly excluded from this Act by our proposed amendment to Section 1304 (c), above. In the event that activities pertaining to the practice of reverse engineering by proper means should conflict with a claim of database protection under this Act, a presumption of validity logically attaches to the activities in question. This presumption recognizes the competitive and economic functions that reverse engineering by proper means perform, and of the constitutional underpinnings courts have developed with regard to such activities [see Restatement, Third, of Unfair Competition, section 43, comment b, which states: "Similarly, others remain free to analyze products publicly marketed by the trade secret owner and, absent protection under a patent or copyright, to exploit any information acquired through such 'reverse engineering.' A person may also acquire a trade secret through an analysis of published materials or through observation of objects or events that are in public view or otherwise accessible by proper means.", at 493.]. However, such a presumption becomes rebuttable whenever the end product resulting from the practice of reverse engineering tends to substitute for or commercially exploit the contents of a protected database, or when it adversely affects the ability of a database maker to recoup their investment and turn a reasonable profit in the market for a given collection of information.
Section 1305(e)(2) - Licensing in General - Third Alternative Proposal
(2) No license or other contractual agreement governing access or use of collections of information within this Act shall contain terms or conditions, including charges for access or use, that are contrary to the public interest in the promotion of education and research or in the preservation of a competitive marketplace. If a court as a matter of law finds that a term or condition is impermissible under this section, the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the impermissible term, or it may so limit the application of any impermissible term as to avoid any violation of this section. In determining whether a term or condition is impermissible under this section the courts may consider:
the extent to which the information contained in the collection was or was not originally funded by government within the purview of Section 1304 (a) and the extent to which it was initially developed for public purposes;
the private vendor's costs of generating and delivering the relevant information and the extent to which the use by the person granted access to the collection of information is likely to seriously diminish the likelihood that the vendor will have a fair opportunity to recoup his or her investment and turn a reasonable profit in the market for which the collection of information was initially offered or intended to be offered for use;
(iii) the extent to which requiring the user to contribute to the costs of acquiring or maintaining the collection will hamper education or research or adversely affect competition; and
(iv) the extent to which the user's activities are of a commercial or not-for-profit character.
Use or extraction of the information once accessed under this provision for nonprofit educational, scientific, or research purposes is not subject to additional charges, as provided in Sections 1303 (c) and (d) above.
March 16, 1999
The Honorable Orrin G. Hatch
Chairman,
Committee on the Judiciary
U. S. Senate
Washington, DC 20510
The Honorable Patrick Leahy
Ranking Member
Committee on the Judiciary
U.S. Senate
Washington, DC 20510
Dear Senator Hatch and Senator Leahy:
I am writing to express my concern with the database protection provisions of HR 2281 as they passed the House of Representatives. I understand that similar database legislation will be considered by your committee. I will outline below my reasons for urging you to support changes in the legislation. I am a Professor of Law at the University of Nebraska College of Law. I have taught in the field of unfair competition and intellectual property for over 30 years, and I have a casebook in the field that has been widely adopted by law schools throughout the country. I also served recently as co-reporter for the American Law Institute's Restatement, Third, of Unfair Competition. I do not regard myself as partial to either the creators or users of intellectual property (I am both a creator and a user) but my study of the history of intellectual property protection convinces me that intellectual and industrial progress depends on achieving a proper balance between creators and users. HR 2281, as it currently stands, does not, in my opinion, strike the proper balance and thus may jeopardize our national interest.
Currently, the information industries of the United States are the envy of the world. It does not require an empirical study to recognize that current law, without systematic protection for databases, has created a legal climate conducive to the development and commercialization of databases of all kinds. To be certain, databases in the digital environment may be more vulnerable to copying and unfair exploitation, and the United States must be vigilant to protect this important industry. However, the central lesson of our intellectual property laws is that the level of creative activity can be adversely affected by too much legal protection for intellectual output as well as by too little.
The problem is well illustrated by Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340 (1991), the Supreme Court case that held "sweat of the brow" databases were not protected by copyright law and which led, in part, to the efforts to enact a database bill. In Feist, the defendant wanted to combine the white pages of 11 small rural telephone companies into an area-wide directory. Of the eleven companies, only the plaintiff refused to license the use of its directory. The court held there was no copyright protection for plaintiff's directory. Protection of the plaintiff's database in this case could have resulted either in (1) no area-wide directory which would have been a loss to consumers, or (2) a license payment to the plaintiff that would have created less incentive for defendant to produce the directory. Moreover, it is important to recognize that the defendant was willing to invest in developing its area-wide directory even though there was no datebase protection available to it.
The challenge confronting Congress in considering additional database protection is how to enhance the current level of protection in order to encourage additional investment without at the same time unduly increasing the costs of acquiring the information in the first place. In doing so, it would appear to me that two fundamental options are available in fashioning this additional protection. The first is to model the statute after the copyright and patent statutes and create a sui generis intellectual property regime for databases. The second is to address in more narrow terms the types of behavior on the part of second-users that are particularly unfair and disruptive of investments in databases. This second approach would model itself after the law of unfair competition.
There are lessons to be learned about a property approach. The copyright law confers a property interest in an artist's expression. However, in order to achieve a proper balance, Congress added a general fair use privilege and an elaborate set of specific privileges for particular industries. HR 2281 goes much further than the copyright regime by providing protection for the underlying data within a database rather than the "expression" of that data. This broader scope should require even closer attention to the types of privileged uses that are necessary to achieve a proper balance and to assure no disruption in the creative process. Protecting the data itself is much more analogous to the type of protection accorded by the patent system. In the patent system where the property right extends to the ideas incorporated in the invention, Congress demanded proof of a significantly high level of invention and established an elaborate pre-issuance examination process. Moreover, the patent system, in return for the property interest, demands of the inventor full disclosure of the invention-a disclosure that would be unlikely to occur in the absence of the offer of patent protection.
Although HR 2281 appears to create a sui generis property interest in databases, it lacks either the carefully refined set of privileges evidenced in the copyright statute or the high level of invention and the return benefit of disclosure of the patent laws. Thus the current database protection proposal departs significantly from the balances that intellectual property law has adopted to enhance progress in science and the useful arts. In doing so, it runs the risk of diminishing the advantage the United States now possesses in intellectual creativity.
Let me turn to the provisions of HR 2281 to explain my concerns in more detail. Section 1302 prohibits "misappropriation" of collections of information and thus purports to implement an "unfair competition" approach to the protection issue. However, the language of the section extends far broader protection than the normal rules of unfair competition. The most problematic language in this section is that which makes an extraction or use from a protected database actionable if it causes harm to the "actual or potential market" of the original. "Potential market" is defined in § 1301 as one that the owner "has current and demonstrable plans to exploit or that is commonly exploited by persons offering similar products or services . . . ." This carves out for the originator a monopoly in broad terms. A database owner by documenting an intention to exploit all markets of economic significance and by designating a market-development agent to constantly explore economic opportunities would appear to be able to foreclose almost all markets. Moreover, it is not clear to what time frame the "current and demonstrable plans" language relates. A second-user who through its own sweat of the brow or creativity develops an entirely new and innovative use for an existing database might be foreclosed from exploiting that market if the originator, upon learning of this new market, made its own "current and demonstrable plans". Thus it is conceivable that a market innovator could be uprooted from a market by the originator. This will serve to discourage innovation and is a significant departure from any unfair competition model.
The language of § 1303 establishes permitted uses. Rather than assuring a proper balance, this provisions may make matters worse. Subsection (e) regarding news reporting is the subsection most closely aligned with traditional notions of unfair competition in the copying of information unprotected by copyright or patent. It permits extraction and use of information for news reporting purposes, "unless the information . . . is time sensitive, has been gathered by a news reporting entity for distribution in a particular market, has not yet been distributed to that market, and the extraction or use is [part of a consistent pattern]. This subsection describes the activity present in International News Service vs. Associated Press, 248 U.S. 215 (1918), from which the misappropriation doctrine is derived. It describes the type of conduct that destroys the original market for the work and thus significantly reduces the incentive to produce the work in the first place.
The difference between subsection (e) and subsection (d) which relates to educational, scientific, or research uses is striking. For these latter uses, which I submit are as important as news reporting, a much more limited use is permitted-one that does not directly harm the actual market of the originator. This is a much narrower privilege than accorded news reporting and the scope of and the time for determining the "actual" market are unclear. I think a number of questions can be fairly asked: First, how will courts distinguish between news gathering and reporting on the one hand and research and scientific publication on the other, since in a central sense scientific research and publication is the gathering and reporting of news. Second, assuming one can draw a distinction between publishing in the New York Times and publishing in the New England Journal of Medicine, why would one want to do so?
Such a limit on scientific research is dangerous. Assume Company A collects sufficient data to support a new drug application for the treatment of a particular disease. Company B uses the data, verifies it is accurate, but manipulates the database to demonstrate that in fact the new drug has significant side-effects. Company A's database itself has value because it could be licensed to others wanting to produce the drug, but the subsequent research by Company B harms the actual market of Company A and is thus in violation of the Act.
The potential social costs of this broad privatizing of information are multiplied by the breathtaking scope of the definition of "collection of information" which covers, at least, all of the raw data upon which education and scientific research is based and by the fact that HR 2281 provides protection for the underlying facts and ideas in a database as well as the database itself. For example, a literal reading of HR 2281 would make any book based on scientific research a "product or service that incorporates that collection of information" under § 1302 and thus any use of the data to challenge the thesis of the book (which might thereby harm the actual market for the book) would violate the Act. This would be an incredible interference with the free marketplace of ideas and a destructive blow to scientific progress.
The absence of any privilege in § 1303 for transformative uses other than for news reporting and education and scientific research coupled with the broad definition of "potential market" means that every transformative use of an existing collection of information resulting in new uses or new innovations is vulnerable to a claim of violation and the threat of litigation or enforced payments.
I understand that providing protection for databases does not inevitably result in exclusion of others from their use. First, potential second-users can theoretically regenerate the database by collecting the data from original sources. Given the scope of the definition of "collections of information," there will be many instances in which the economic returns from the data will be sufficiently small or risky to make regeneration infeasible. Many significant databases appear to be single source collections. Consider the array of fossils collected by Louis and Mary Leaky from Olduvai Gorge in Africa thought to show the evolution of human life This array would seem to be a "collection of information" under the act and would be impossible to regenerate.
Potential users, of course, can negotiate with database owners for use of the database and can arrive at a fair market royalty for each use. In terms of creating overall incentives for investments in intellectual creativity, however, such licensing arrangements are at best a wash. Any additional incentive license fees provide to the originator to invest in the original database detracts from the incentives on others to invest in utilizing the database for new and socially useful purposes. For example, in government sponsored research, license fees for access to databases are likely to be passed on to the granting agency which will either require additional tax resources or result in less supported research. Moreover, owners of databases will retain an incentive to deny use entirely to any user who might undermine the validity or market value of products, services, or scientific theories based on the protected database.
In addition to these important policy issues, the breadth of protection provided in this bill may raise issues of constitutional dimension. Although I acknowledge that the constitutional limits on Congress in providing protection are far from clear, the protection of ideas and factual information that can not qualify for patent protection raises serious questions, both under the Article I, Section 8 and under the First Amendment. The reverse engineering of publicly available ideas and information by competitors is an important element of a competitive marketplace and may have constitutional underpinnings. In any event, I remain convinced that the regime of narrowly focused protection for intellectual property coupled with protection of a public domain of ideas and information have served our economy and our country well.
For these reasons, I hope your committee will consider HR 2281 with a cautious eye, one focused on the need for achieving a careful balance by prohibiting conduct that is demonstrably unfair and destructive of incentives to create but also by clearly permitting uses that assure intellectual progress. I believe it would be possible in relatively short order to draft a provision modeled on unfair competition principles that would provide sufficient protection to enhance incentives for innovation. Providing broader protection and at the same time achieving an appropriate balance would require a long and careful study of the nature and scope of appropriate permitted uses to preserve both educational and scientific inquiry and also competitive vitality. Such an approach would also need to carefully consider limiting protection to the effort necessary to create the database while assuring that the underlying ideas and facts themselves remained in the public domain.
Sincerely,
Harvey Perlman
Professor of Law