Summary of Statement of Ms. Marilyn Winokur on Behalf of the Coalition Against Database Piracy on H.R. 354, the Collections of Information Antipiracy Act Before The House Judiciary Subcommittee on Courts and Intellectual Property
March 18, 1999
CADP is an ad hoc group composed of small and large U.S. database providers who have joined together to secure enactment of effective, fair federal database protection legislation. As a result of the efforts of CADP members and others in the U.S. database community, scientists, researchers, academicians, scholars, business people and consumers have ready access to a wealth of user-friendly, reliable and up-to-date information.
CADP's goal is simple and straightforward: the passage of legislation to deter piracy that causes commercial harm to database creators, while maintaining the traditional balance between the respective interests of the owners and users of informational products. The need for this legislation is underscored by (1) the vulnerability of databases to illegal copying and dissemination--especially in a digital environment; and (2) international developments--including the European Union's Database Directive.
The misappropriation approach set out in both H.R. 354 and in the versions passed twice by the House in the last Congress provides the necessary framework for a database protection law.
H.R. 354 contains the essential features of a database bill, such as (1) a prohibition against market harmful misappropriations of databases by competitors and non-competitors alike; (2) exemptions for the extraction or use of individual items and other insubstantial parts of databases--unless such acts occur repeatedly or systematically; (3) express language permitting a second comer from independently creating its own databases from the same sources as the original compiler; (4) an exclusion that precludes collections of information compiled by federal, state or local governments from claiming protection under the bill; and (5) a broad exemption for news reporting activities.
In the last Congress, the Collections of Information Act was amended time and time again to accommodate the interests of the user community. These included: (1) the adoption of special liability rules governing nonprofit violators; (2) an express statement that uses or extractions for nonprofit purposes are actionable only if they harm a protected collection of information's actual, not potential, market; (3) the elimination of the bill's criminal penalties for certain nonprofit employees acting within the scope of their employment; and (4) placing a fifteen year outer limit on the protections afforded under the bill.
Given the many changes made in the legislation in the last Congress to address the concerns of database users, any additional changes to last year's final bill must be viewed with great care and caution. We cannot so dilute the bill as to undermine its effectiveness as a tool against database piracy or risk comparability with the EU Directive.
Testimony of Ms. Marilyn Winokur, Executive Vice President of Micromedex on Behalf of
Micromedex and the
Coalition Against Database Piracy on H.R. 354, the
Collections of Information Antipiracy Act
before the
House Judiciary Subcommittee on Courts and Intellectual Property
March 18th, 1999
TABLE OF CONTENTS
I. Introduction 1
II. Brief Overview of the Database Industry 5
III. Vulnerability of Databases 6
IV. The Gap in U.S. Law 8
A. Copyright 9
B. Contracts 13
C. Misappropriations 15
V. The Time for Congress to Act is Now 16
A. Technological Threats 17
B. International Concerns 20
C. The Handwriting is On the Wall 22
VI. Key Components of a Database Protection Bill 25
A. H.R. 354 Contains the Essential
Features of a Fair and Effective
Database Protection Bill 27
B. H.R. 354 Contains Myriad Provisions
Designed to Protect Database User
Interests 35
C. Given the Many Changes Made in the
Legislation in the Last Congress to
Accommodate the Interests of Database
Users, Any Additional Changes--Including
New § 1403(a)(2)--Must Be Viewed With
Great Care and Caution 38
VII. Congressional Power to Enact H.R. 354 42
VIII. Conclusion 44
Appendix A
Written Statement of Marilyn Winokur, Executive Vice President of Micromedex on Behalf of the
Coalition Against Database Piracy on
H.R. 354, the Collections of Information Antipiracy Act
Mr. Chairman, my name is Marilyn Winokur. I am Executive Vice President of Micromedex, a leading publisher of clinical support databases and a subsidiary of the Thomson Corporation. I appear here today on behalf of the Coalition Against Database Piracy ("CADP"), of which the Thomson Corporation is a member.
The Coalition Against Database Piracy ("CADP") welcomes the opportunity to share with the
Subcommittee its views on why Congress should enact fair database protection legislation, in
general, and its views on H.R. 354, "The Collections of Information Antipiracy Act," in
particular.(1)
I. INTRODUCTION Mr. Chairman, CADP thanks you for your leadership in this important area. Our members are
especially grateful for your recognition of the crucial role that databases play in our information
society and the need for Congress to enact legislation to fill the gap in database protection under
U.S. law. CADP is an ad hoc group composed of small and large U.S. database providers who stand to
suffer grievous harm--and whose thousands of employees' jobs will be at risk--if fair and
effective federal database legislation is not enacted promptly. Its members include the American
Medical Association; The McGraw-Hill Companies; the National Association of Securities
Dealers; the Newsletter Publishers Association; the Newspaper Association of America; the New
York Stock Exchange; Phillips Publishing International, Inc; Reed Elsevier Inc.; Silver Platter
Information, Inc.; Skinder-Strauss Associates; the Software and Information Industry
Association; the Thomas Publishing Company; The Thomson Corporation; and Warren
Publishing, Inc. CADP's members are an integral part of the U.S. database community. Today, the United States
is the world leader in the creation and distribution of informational databases. Our members
employ or represent many thousands of editors, researchers, and others who gather, update,
verify, format, organize, index and distribute the information contained in their vast array of
database products. They also invest millions of dollars annually in the hardware and software
needed to manage these large bodies of information. Mr. Chairman, your bill, H.R. 354, addresses a basic unfairness in our legal system: its failure to
protect adequately the interests of those whose hard work and substantial financial investments
result in the creation and dissemination of valuable databases. H.R. 354 is about eliminating the
inequity in a legal regime that allows an unscrupulous competitor to copy with impunity the
contents of someone else's compilation and then destroy the first compiler's market by selling a
competing, less expensive product. It is also about rectifying the injustice that takes place when a
dishonest customer or a "cyberprankster"--without permission--electronically copies and makes
it freely available over the Internet. In sum, it is about helping restore fairness to the database
marketplace. CADP's goal is simple and straightforward: to deter piracy that causes commercial harm to
database creators, while maintaining the traditional balance between the legitimate interests of
owners and users of informational products. Mr. Chairman, your bill, H.R. 354, is a crucial step towards striking the correct balance between
the interests of both creators and users of collections of information. As discussed in greater
detail below, CADP believes that: (1) H.R. 354 contains the essential features of a database protection bill; and (2) Given that in the last Congress the Collections of Information Antipiracy Act was amended
time and time again to accommodate the interests of the user community, any additional changes
to last year's final bill must be viewed with great care and caution--otherwise, the bill may be so
diluted as to undermine its effectiveness as a tool against database piracy. CADP believes the time for congressional action is now. The risks to database creators will only
increase as our society becomes more and more dependent on computers and digitized
information and as technology provides new and more efficient ways to reproduce and distribute
information products. The need for prompt congressional action is also underscored by the recent
adoption of a database protection directive by the European Union ("EU").(2)
As discussed
below, unless the U.S. enacts a database protection law that the EU deems comparable to the
terms of its Directive, U.S. database producers will be at a distinct commercial disadvantage in
the EU and beyond. II. BRIEF OVERVIEW OF DATABASE INDUSTRY Databases available in this Information Age are a far cry from the traditional printed compilations
that have existed for centuries--both in terms of content and methods of delivery. U.S. databases
provide the world with information on everything from antidotes to poison, to prescription drugs,
to the keys to building safer cars, to comprehensive compilations of patents and related
information. They provide a vast array of comprehensive data vital to the successful operation of
our economy--including information about health, communications, finance, banking, business,
news, travel and defense. By giving consumers and professionals accurate, thorough, and up-to-date tools, database
creators play a crucial role in our information-driven society. The work that they do in collecting,
compiling, arranging, standardizing, correcting, indexing, updating, cross-referencing, and
verifying adds immense value to a mass of otherwise unintelligible, disparate data. Moreover,
the investments of database creators in creating, organizing, and maintaining these products
greatly reduce the time and effort consumers need to conduct important research and ensure the
reliability of the facts included. Without the hard work of database producers, vast amounts of
valuable and systematically organized information would be unavailable to many users who
themselves could not replicate the financial and human investments made by the database
compiler. Many American jobs depend on a healthy, vibrant U.S. database industry.(3)
III. VULNERABILITY OF DATABASES Although creating, maintaining and disseminating databases is expensive and time-consuming,
copying and distributing databases without permission is cheap and easy. The advent of digital,
high-speed computer networks adds greatly to the threat of piracy. Today, database pirates can
use widely available technologies to make and print unauthorized copies of electronic databases
and send them around the world. Internet users can duplicate and distribute large collections of
information with the click of a mouse and at a fraction of the enormous costs of their
development. This risk will only increase as our society becomes more dependent on computers
and digitized information, and as technologies provide new and even more efficient ways to copy
and distribute informational products. Without effective legal protection, databases are easy prey for parasitic competitors who are free
to unjustly--and harmfully--harvest the fruits of the creator's hard work. These risks are not
limited to competitors' market-destructive acts. For example, LaMacchia v. United States(4)
demonstrates that non-competitors can engage in activities that inflict serious commercial harm
on publishers. In LaMacchia, an MIT student uploaded commercial software (such as
WordPerfect and Excel) onto an electronic bulletin board.(5)
He encouraged others to download
these applications free of charge, and although unmotivated by any desire for pecuniary gain, his
actions cost the affected software developers over $1 million in losses.(6)
The indictment against
LaMacchia was dismissed because he acted without the commercial motive required in cases of
criminal copyright infringement.(7)
In response, Congress passed the "No Electronic Theft (NET)
Act."(8)
Regrettably, data pirates of all stripes have little to fear because existing U.S. law does not
effectively deter such blatantly unfair practices. It is time for Congress to fill this gap in U.S.
law. IV. THE GAP IN U.S. LAW Although existing legal doctrines--including copyright, contract, and misappropriation law--all
offer important protections, they are insufficient, particularly in today's digital world, to deter
database piracy effectively. As the Register of Copyrights, Marybeth Peters, told this
Subcommittee in the last Congress: While various bodies of law . . . protect database producers, each falls short in coverage. . . . The
bottom line is that in many circumstances there is no legal recourse for a database producer
when the essence of the value of the database, and the core of its investment, are taken without
permission or compensation. . . . Since Feist,(9)
the source and extent of legal protection for the
commercially valuable contents of databases has been uncertain, requiring reliance on a
patchwork of different, individually insufficient legal theories.(10)
New legal protection must be added to U.S. law to complement existing doctrines so that
database creators will have the incentive to continue making the enormous expenditures
necessary to produce, update and market reliable and innovative databases. A. Copyright Law For many years, database makers could take solace in the fact that some federal courts of appeals
recognized the so-called "sweat of the brow" doctrine under which copyright protection was
based on the compiler's significant hard work and investment in developing its compilation.(11)
In those circuits, "sweat of the brow" afforded compilers an important tool against the
unauthorized takings by "free riders." That is no longer the case. In Feist v. Rural Telephone Co., Inc., 499 U.S. 340 (1991), the Supreme Court discarded the
sweat of the brow approach under copyright law and made it clear that a compilation will enjoy
copyright protection only if it evinces sufficient "originality" in the manner in which its facts are
arranged, selected or coordinated.(12)
After Feist, the amount of time, effort and money expended
by a compiler is irrelevant to a determination of whether or not a work qualifies for copyright
protection. Feist also noted both that facts were not copyrightable and even where protection exists for
compilations, its scope is thin because it extends only to the original selection, arrangement and
coordination of the database. The message given to the database community by Feist was clear:
the factual contents of the database are not protected by copyright, and may be copied with
impunity by data pirates.(13)
Lower court interpretations of Feist have caused additional reasons for consternation in the
database community. First, inconsistent decisions have caused database owners to speculate
whether a federal court will afford a particular compilation any copyright protection at all.
Initially, some database creators thought that they could take solace in Feist's statement that "the
requisite level of creativity is extremely low; even a slight amount will suffice. The vast majority
of works will make the grade quite easily. . . ."(14)
Unfortunately, such has not always been the
case. For example, two federal appellate courts have reached profoundly different results with
respect to whether yellow page directories contain the necessary degree of originality to warrant
copyright protection. Compare Key Publications, Inc. v. Chinatown Today Publ'g. Enter., Inc.,
945 F.2d 509 (2d Cir. 1991) (copyright protection held to exist) with Bellsouth Adver. & Publ'g..
Corp. v. Donnelley Info. Publ'g.., Inc., 999 F.2d 1436 (11th Cir. 1993) (en banc) (coming to the
opposite conclusion), cert. denied, 114 U.S. 943 (1994). More recently, the United States Court of Appeals for the Eleventh Circuit set off alarm bells in
the database community when it ruled against Warren Publishing, a CADP member, in Warren
Publ'g., Inc. v. Microdos Data Corp., 115 F.3d 1509 (11th Cir. 1997), cert. denied, 118 S.Ct. 397
(1997). The court denied any form of meaningful copyright protection to Warren's Television
and Cable Factbook--a comprehensive directory of television and cable systems--despite the
fact that the selection of cable systems in the Factbook used a unique definition of "cable
system."(15)
This decision raises grave concerns that the level of originality required for copyright
protection may be far higher than the Supreme Court's language in Feist reasonably implied. Second, post-Feist cases underscore the fact even where compilations meet the originality test,
copyright law provides only "thin" protection and wholesale copying of the contents of these
labor-intensive works is condoned. As the Copyright Office's 1997 Report on the Legal
Protection of Databases states, "most of the post-Feist appellate cases have found wholesale
takings from copyrightable compilations to be non-infringing. The trend is carrying through to
district courts as well."(16)
Third, post-Feist cases give short shrift to two key characteristics typical of many valuable
databases--their thoroughness and the human and financial resources expended in creating and
marketing them. The greatest irony of all is that the more thorough the database, the more time, money and effort
that goes into making it--and hence the more valuable it may be to a user--the more likely it is a
court will find it lacks the requisite degree of originality to qualify for copyright protection.(17)
This result is inconsistent with sound public policy.(18)
In sum, after Feist and the demise of the sweat of the brow doctrine, it has become increasingly
clear that the copyright law is ill-equipped to protect informational products that are the result of
substantial human, technical and financial resources. B. Contracts Although private contracts are very valuable in protecting the works of database creators, they do
not provide protection at a level sufficient to induce the creation and distribution of diverse types
of databases of the diversity that are increasingly in demand today. Contract law suffers from
various infirmities, including: • it does not provide legal relief against malfeasors who have not entered into a binding
contract with a database provider. "Once the information is accessed by someone not
bound by the contract, any control over misuse is lost irrevocably;"(19)
and • it does not provide uniform coverage throughout the United States. While the contours of
contract law are roughly equivalent across the 50 states, there are important variances
among state contract schemes and there are circumstances under which the contract laws
of two sister states may provide different results if applied to the same legal problem;(20)
and • state law solutions are of decreasing value given the global nature of electronic
commerce. C. Misappropriation The common law tort of "misappropriation," derived from the Supreme Court's decision in
International News Service v. Associated Press, 248 U.S. 215 (1918), has had an uneven history,
at best, with respect to protecting copyrightable and uncopyrightable works from behavior that
might fall under the general rubric of "copying." Like the law of contract, the misappropriation doctrine is a creature of state law, and does not
provide database providers with uniform, nationwide protection. In fact, the state
misappropriation doctrine is even less uniform than state contract law. Moreover, state
misappropriation laws may be available only in extremely narrow circumstances, particularly in
light of the influential Second Circuit's recent decision in National Basketball Association v.
Motorola, Inc., 105 F.3d 841 (2d Cir. 1997). There the Court indicated that given the breadth of
the Copyright Act's preemption provision, the misappropriation doctrine is only available in
those special and limited instances where, among other things, the information pirated is "time
sensitive" or "hot news," and the defendant directly competes with the plaintiff.(21)
As a consequence, the doctrine's value to database producers is quite limited. Many databases do
not disseminate "hot news," but instead contain information with far longer "shelf lives;" in fact,
the contents may be of historical, long-term value.(22)
Additionally, as Congress' recent
consideration of the NET Act reveals,(23)
commercial harm can be inflicted by competitors and
non-competitors alike. V. THE TIME FOR CONGRESS TO ACT IS NOW Mr. Chairman, the time for congressional action is now. Without appropriate legislative relief,
the accumulated effects of domestically sanctioned piracy will cause the shrinkage of the U.S.
database market, the loss of thousands of American jobs and the end of our worldwide
preeminence in this area. Ultimately, everyone loses as the availability of valuable information
products to the public decreases. A. Technological Threats The dawn of the Information Age has begun to change radically the way people do business. In
"the old days," commercial customs developed over appreciably longer periods of time. If a user
ordered a compilation from one of the CADP members, for example, it is very likely that papers
would be exchanged and goods would be shipped according to terms which both parties
understood from decades of trade usage. Imagine now that same transaction occurring at the speed of light as contract offers, acceptance
and performance occur not through the mails, but over fiber-optic networks. Commercial
practice--whether scrupulous or not--develops at a pace exponentially greater than that of just a
decade ago. By the same token, the destructive effects of piracy that we see right now soon will
become much, much worse, as the gap in our current law--a gap that Register of Copyrights
Peters stated "is leading to real world consequences"(24)
--becomes more and more apparent to
database pirates. Before long, the shortcomings of our legal framework will cause irreparable harm to the database
marketplace. Creating floppy disks (or, for that matter, CD-ROMs) requires little or no overhead
when compared to the cost of publishing and distributing a printed volume or of assembling the
data in the first instance. In Warren, for example, the Eleventh Circuit held that the copyright
law effectively allowed the defendant to appropriate the entire contents of the Factbook, from
which it then made a competing product. Similarly, in the ProCD case, the defendant loaded the
database onto the Internet, from whence it could be downloaded by anyone with the desire to do
so. In LaMacchia, the harm caused to the software owners from one pirate exceeded $1,000,000.
Our current legal regime does not effectively deter such piracy, and fact patterns like those in
Warren will proliferate unless Congress intervenes. The harm created by database piracy does not fall on the shoulders of producers alone; it inures to
the detriment of everyone. First, scientific and academic research will be curtailed. In the current
database market, many producers charge a much lower access fee (if any) to nonprofit institutions
such as universities, and recoup those losses in their sales to commercial entities.(25)
Price
differentiation makes economic sense, however, only if the for-profit market is secure and those
who can acquire the database cheaply do not provide it to those who would otherwise have paid
its original developer a higher price. As the cost of piracy becomes a greater part of doing
business, this tiered pricing structure will level out--forcing database owners to charge colleges
and libraries the same prices they ask of for-profit corporations. Protective legislation will
preserve current pricing flexibility, to the benefit of database owners and users alike. Second, as free-riders, database pirates--who have expended a fraction of the resources invested
by the original compiler--cannot be expected to spend the monies necessary to update the
contents they stole. The consequences of this failure to keep the data current could prove
devastating, particularly in cases involving health, safety or environmental data. In contrast,
legislative protection for these collections of information maintains an economic incentive for
compilers to keep their products accurate, current, and comprehensive and helps reduce piracy by
making it clearly illegal. B. International Concerns In March, 1996, the EU adopted a sui generis database protection directive.(26)
The Directive
constitutes an obvious effort by the EU to ratchet up its share of the world-wide database market,
primarily at the expense of U.S. database providers. Under the Directive, in general, database
companies outside of the European Union--such as those in the United States--gain no
protection from the Directive's provisions unless their own countries provide a level of protection
that the EU deems "comparable" to its own. Without comparable U.S. legislation, U.S. databases
will suffer a significant competitive disadvantage in the huge EU market: databases from EU
nations will enjoy the benefits of sui generis database protection and U.S. products will not.(27)
If
the U.S. does not act promptly, existing and future databases created in this country will be free
for the taking in EU member states, while EU-produced products or those pirated by EU
producers from the U.S. database market will be protected in the EU. Consistent with the EU's requirements, many of the United States' major trading partners in the
EU have already implemented comparable database protection laws. Belgium, Sweden, Austria,
Denmark, Finland, Germany, Spain, France and Great Britain have all passed database protection
legislation.(28)
As time passes, however, the vulnerability of United States databases will not be
limited to the EU alone. The U.S. may also suffer disadvantages in developing markets. Many Latin American countries, for example, have bilateral reciprocity-based relationships with
Spain, which will require the enactment of similar statutes. In addition, Eastern European
countries, either in the interest of gaining admission to the EU, or as a result of bilateral
agreements, will probably also pass database protection laws within the next few years. That was
certainly the prediction of Dr. Jorg Reinbothe--the European Commission official overseeing the
implementation of the Directive by EU member states--when he spoke at the spring 1998
conference on database protection sponsored by the U.S. Patent and Trademark Office. A clear trend among the nations of the world will emerge towards the enactment of reciprocity-based database protection legislation, most likely containing much more restrictive terms of use
than those present in H.R. 354. Prompt passage of a fair, effective database protection bill would
enable the U.S. to counter this trend and continue its leadership role at the World Intellectual
Property Organization in creating reasonable, workable treaties governing intellectual property
rights. C. The Handwriting Is On the Wall Congress must act promptly--before domestic and international piracy undermines U.S. world
leadership in database production.(29)
As Congress recognized when it passed the Semiconductor
Chip Protection Act, "a finding that an industry has done well in the past without legislative
protection does not mean that threats to present and future investments fall outside Congressional
concern."(30)
Congress has no obligation to wait until the harmful ripples created by the gaps in
current law become a tidal wave. As the Supreme Court recently noted, "[a]n industry need not
be in its death throes before Congress may act to protect it."(31)
Recently, as part of the Digital
Millennium Copyright Act,(32)
Congress added a new and unprecedented safe harbor for online
service providers, intending to prevent any chilling effect that vicarious copyright liability would
have on the growth of digital networks.(33)
Enactment of this safe harbor was a pre-emptive strike
by Congress; it passed despite a lack of case law or empirical evidence demonstrating that online
service providers were "suffering" under the traditional, common law rules of secondary liability. As the Register of Copyrights testified before this Subcommittee, Congress has not historically required empirical evidence to legislate market conduct. This
includes the area of intellectual property, where exceptions as well as rights have over the years
been added, expanded or clarified based on individual cases or on concerns about future
applications of the law. . . . Congress should be able to take steps to prevent future harm, before
substantial damage is done to particular parties or, more importantly, the public interest
generally.(34)
In fact, in late 1997, the NET Act was enacted in direct response to a single federal court decision
that exposed an important gap in U.S. law. More specifically, Congress passed the NET Act "to
reverse the practical consequences of United States v. LaMacchia,(35)
which held . . . that criminal
sanctions available under titles 17 and 18 of the U.S. code for copyright infringement do not
apply in instances in which a defendant does not realize a commercial advantage or private
financial gain."(36)
Congress did not require proponents of the law to demonstrate "compelling
empirical evidence;" it acted because the "practical consequences" of the LaMacchia decision
would only worsen dramatically as technology continues to make piracy easier.(37)
VI. KEY COMPONENTS OF A DATABASE PROTECTION BILL Mr. Chairman, since its formation in early 1997, CADP has made known its commitment to the
adoption of balanced legislation that will deter piracy that causes commercial harm, but will not
result in adverse consequences for scientists, educators, news gatherers, and other database users.
Throughout this debate, CADP members have also urged that the provisions of any forthcoming
legislation maximize the likelihood that the European Union will find a U.S. database law in
conformity with the Directive, thereby ensuring that U.S. databases are protected in the European
Union. Early on, CADP also expressed its support for the sui generis approach contained in the EU
Directive; the draft World Intellectual Property Organization ("WIPO") treaty; and then-Chairman Moorhead's bill in the 104th Congress, H.R. 3531. We also noted our initial
uneasiness and uncertainty over the dramatic shift that H.R. 2652 represented from the sui
generis approach. As we told this Subcommittee in the last Congress, we would have preferred
instead that Congress use H.R. 3531 as its starting point--retaining its sui generis approach, but
modifying that proposal to meet legitimate concerns and questions raised regarding that bill. Nonetheless, our members now believe that the misappropriation approach adopted first in H.R.
2652 and now found in H.R. 354 is an approach that CADP can support. The misappropriation
model contained in H.R. 354 contains the necessary framework for fair and effective domestic
legislation. Its overall thrust is one with which we agree wholeheartedly: to protect investment
in the production and distribution of valuable collections of information by prohibiting harmful
misappropriations without chilling legitimate uses by news reporters, educators, scientists,
librarians, consumers and other users. We would like to share with the Subcommittee a number of specific comments with respect to
H.R. 354. A. H.R. 354 Contains the Essential Features of a Fair and Effective Database Protection Bill. 1. The heart of the bill--"prohibition against misappropriation"(38)
--would fill the gap in current
law by providing database owners with the means to combat data piracy. There are several key
facets to this provision, including its: • recognition that collections of information that result from the expenditure of substantial
monetary or other resources are deserving of legal protection separate and apart from the
important, yet limited protection afforded such databases under current law; • acknowledgment that commercial harm can be caused by competitors and non-competitors alike, and one need not have a commercial motive to inflict market damage; • focus on the harm suffered by the plaintiff rather than the identity of the offending actor. While
the bill contains numerous important, specific provisions limiting significantly the liability
exposure of nonprofit users,(39)
it does not give them a blanket exemption from liability; • explicit statement that an extraction or use of a quantitatively insubstantial, but
qualitatively substantial, part of a collection of information is actionable, where such
extraction or use creates commercial harm. This provision recognizes that a use or
extraction of a relatively small--but crucial--part of a collection can cause real harm to
the owner's actual or potential market. 2. For compelling reasons, H.R. 354 rejects the suggestion that protection should be limited to
"hot news" and recognizes that many collections of information are time sensitive and may have
short shelf lives. A "hot news" limitation would severely undercut the efficacy of any federal
misappropriation statute. For example, Warren Publishing's Factbook does not contain "hot
news," and a federal law that extends only to time-sensitive factual information would be of no
benefit to Warren and many other database publishers. Instead of a "hot news" requirement, H.R. 354 was amended last year to include a maximum 15-year term of protection. This change was made despite the fact that unfair competition
laws--including trademark and misappropriation statutes--historically have not had time limits
because protection under these types of laws attaches only as long as the product or mark retains
commercial value. Nonetheless, in response to concerns that the legislation could be read to
provide perpetual protection, it was amended to require that a lawsuit must be brought within 15
years from the time the: "investment of resources [was made] that qualified for protection that portion of the collection of
information that is extracted or used. . . . [P]rotection will not be perpetual; the substantial
investment that is protected under the Act cannot be protected for more than fifteen years. . . .
[T]he provision avoids providing ongoing [perpetual] protection to the entire collection of
information every time there is an additional substantial investment. . . ."(40)
The 15-year term in H.R. 354 is very much a compromise provision. As drafted, this provision
prevents database providers from exploiting fully those historical works whose commercial value
exceeds the 15-year time limit,(41)
and does not in any way guarantee 15 years of protection.
Protection exists only if the defendant's actions harm the market for the plaintiff's products and
in no circumstance does it extend beyond 15 years from the time the qualifying investment was
made.(42)
If the product's commercial value has expired, the defendant's conduct cannot harm the
plaintiff's market and is not actionable. Some databases will lose their commercial value long
before the 15-year period expires. Thus, H.R. 354's 15-year term is the outer limit for protection,
whereas copyright law guarantees copyright owners a far longer and fixed term of protection.(43)
Mr. Chairman, CADP urges the Subcommittee to rebuff any attempts to shorten the 15-year
provision and further inhibit the ability of various database providers to exploit their works.
Such action would seriously threaten the legislation's probability of meeting the EU Directive's
comparability requirement given the Directive's own 15-year term of protection.(44)
3. H.R. 354 leaves facts in the public domain; it "does not allow the producer of a collection of
information to 'lock up' individual pieces of information contained in the collection."(45)
Specifically, it exempts the extraction or use of individual items of information and other
insubstantial parts of collections of information--unless such acts occur repeatedly or
systematically in a commercially harmful manner.(46)
This subsection also makes clear that an
individual item of information, including a work of authorship, shall not itself be considered a
substantial part of a collection of information. 4. Section 1403(c) expressly permits a second comer to create independently its own database
from the same sources as the original compiler. The second comer is prohibited only from free
riding on the investment of the original compiler. In short, the bill supports fair competition in
the marketplace. 5. H.R. 354 protects access to government information by excluding collections of information
compiled by federal, state or local governments from protection. Section 1404(a) also expressly
denies protection to a database produced under an exclusive contract between a government
entity and a private party. Collections of information compiled by government employees, agents
or licensees acting within the scope of their employment, agency or license are similarly
exempted from protection. Databases produced at taxpayer expense are not protected by H.R.
354 and are free for all to acquire, store, and reproduce as they desire. In addition, H.R. 354's careful and thoughtful demarcation of non-government information
ensures that the public will have access to valuable products for many years to come. To
encourage the wide dissemination of government data to the user community, the bill grants
protection to value-added products containing government data, but does not take the underlying
government information out of the public domain. No one is precluded from going to a
government agency to obtain the underlying data. In addition, the bill correctly provides that the
exclusion for government databases should not apply to information required to be gathered by
securities, futures exchanges and clearing organizations operating under the "Securities and
Exchange Act of 1934" or the "Commodity Exchange Act."(47)
Without adequate protection for
the data streams which provide vital trading information to large, medium, and, especially, small
investors, the open distribution model used by these financial markets may contract drastically. 6. Section 1403(e) of H.R. 354 demonstrates the legislation's recognition of the "essential role
that the press plays in our constitutional system."(48)
This provision is intended to "neither inhibit
legitimate news gathering activities nor permit the labeling of conduct as 'news reporting' as a
pretext for usurping a compiler's investment in collecting information."(49)
CADP strongly
supports this provision in its current form; however, we would urge the Subcommittee to resist
any effort to broaden this exemption. CADP is concerned that too broad an exemption for news
reporting activities could lead to condoning activities that stray beyond traditional reporting and
commercially harm the owner of a collection of information. 7. H.R. 354 expressly provides that the bill's protections in no way affect rights and remedies that
may be available under other legal regimes, such as copyright and contract law. Section 1405
appears to ensure that result. 8. The bill evinces a keen sensitivity for the legitimate interests of the user community. To begin
with, H.R. 354 recognizes that the normal day-to-day activities of many users, including
librarians, scientists, students, researchers and educators, typically do not cause commercial harm
and therefore simply are not subject to the bill. "[The legislation] would not, for example,
prevent scientists from sharing data sets or publishing the results of their analysis of data, since
such acts do not ordinarily involve use in commerce that would harm the market for the
database."(50)
A student preparing a course-related research project could, for example, routinely
use part or even all of a database, inasmuch as such uses typically are not disseminated in a way
likely to cause harm to the producer's market. B. The pending legislation also contains a number of other provisions specifically protective of
the interests of the user community, especially nonprofit entities. In addition to the provisions
mentioned above,(51)
H.R. 354 contains myriad other provisions designed to protect user
interests. 1. H.R. 354 effectively incorporates prongs of the fair use test in § 107 of the Copyright
Act--separate and apart from the newly added reasonable uses provision. For example, the
amount and substantiality of the portion used and the effect of the use upon the potential market
are elements of the cause of action created by the bill. However, unlike copyright law where fair
use is an affirmative defense, under H.R. 354 the burden is on the plaintiff to prove: (l) the
existence of the taking of a substantial portion of his or her collection; and (2) harm to the
plaintiff's actual or potential market.(52)
2. The current bill allows scientists and others to make use of databases for the purpose of
internal verification.(53)
"This permitted act may be of particular importance to scientists and
other researchers, ensuring that they can check the results of their research, despite the fact that
doing so may entail the use of an entire database."(54)
3. H.R. 354 contains special liability rules governing nonprofit violators. If a nonprofit employee
violates the bill while acting within the scope of employment, but believes that his actions were
lawful, a court must reduce or eliminate any damages awarded.(55)
As a result, in "good faith"
cases, courts will not award monetary awards, but will only enjoin the entity from continuing
their harmful activities. 4. The current bill requires a database producer who brings a "bad faith" lawsuit against a
nonprofit to pay the nonprofit user's court costs and attorney fees.(56)
5. H.R. 354 exempts librarians, educators, or researchers acting within the scope of employment
from any criminal penalties.(57)
6. The current bill permits federal and state educational institutions to claim protection for their
databases even if they are taxpayer-funded.(58)
7. H.R. 354 allows users--for-profits and nonprofits alike--to continue to license information
products from database makers.(59)
8. H.R. 354 exempts from liability those collections of information gathered, organized or
maintained to access, transmit or store online communications.(60)
Thus, the databases which are
used by Internet servers to aid in the functional operations of the Internet retain their current legal
status. C. Given the many changes made in the legislation in the last Congress to accommodate the
interests of database users, any additional changes must be viewed with great care and caution. Mr. Chairman, as you are well aware, the "Collections of Information Antipiracy Act" was
amended time after time in the 105th Congress in response to concerns raised by the user
community. CADP did not object to those changes. Our members supported the final version of
the Collections of Information Act that was passed twice by the House in the last Congress. That
version was fair and effective; it carefully balanced the legitimate interests of database users and
providers. We are wary, however, that other changes beyond those incorporated into last year's final bill
may upset that fragile balance. We cannot so dilute the legislation as to (1) undermine its
effectiveness as a tool against database piracy; or (2) risk comparability with what is becoming
the world standard--the EU Directive. Thus, we remain fully committed to working with the
Subcommittee and other interested parties in resolving any additional legitimate concerns that
may persist, but must review any new changes with special care and caution. The database
community cannot--and will not--accept just any legislation. In that regard, we are weighing carefully your new "fair use" language.(61)
We recognize that
there is interest in the Administration and the user community for a new provision governing fair
or transformative uses. Clearly, the burden is on the proponents to demonstrate why the new
language is needed. This burden should not be met by vague claims about how the old language
fails to protect their ability to make "transformative," or "value-added" uses of the hard work of
the original compiler.(62)
If a second compiler "creates" a new product by using a substantial
portion of a protected collection of information and that use harms the market for the original
collection, then such use should be actionable. Users should not be free under the guise of
"transformative or "value-added" actions to make market-destructive uses of another's collection.
Should the Subcommittee determine that a new "fair use" provision is needed, we will work with
the Subcommittee and other interested parties to perfect the language in § 1403(a)(2). Mr. Chairman, we understand that there is a continuing interest among skeptics of the bill in
deleting or altering the reference to "potential market" in H.R. 354. CADP adamantly opposes
deletion of the "potential market" language from the bill. The legislation must provide protection
against harm to potential, as well as actual markets. Business people need to plan ahead.
Consideration of potential markets and derivative uses of database products are highly relevant
factors when a business decides to proceed with a particular project. As the Register of
Copyrights told this Subcommittee in October, 1997: [L]ooking only to actual markets would be too restrictive; those who invest in creating
information products should have some leeway to recoup their investment over time by
exploiting those products in various markets.(63)
It is essential that the "potential market" prong be retained in the legislation. Moreover, we will approach any change to the bill's "potential market" language with care and
caution, especially given that the legislation was amended last year to provide that harm to a
potential market is only a consideration with respect to for-profit uses. This is a significant
change inasmuch as the ability to market to a potential market is a relevant consideration in
business planning, irrespective of whether such a market is for-profit or nonprofit in nature. It
impacts directly on those database providers both in and out of CADP whose primary markets are
nonprofit--such as those who market to educational institutions. Nonetheless, in an effort to reach consensus on this legislation and speed it toward enactment, in
the past, CADP has expressed a willingness to consider the deletion of the reference to "current
and demonstrable plans" from the definition. CADP is willing--albeit with some reluctance and
trepidation--to once again consider such a deletion. We believe that this change, combined with
the existing case law interpreting the phrase "potential market," should put to rest all concerns
regarding the breadth of this phrase. VII. CONGRESSIONAL POWER Mr. Chairman, we believe a review of the text of the Constitution and relevant case law reveals
ample authority under the Commerce Clause (Art. 1, § 3, cl. 3) to support congressional
enactment of legislation such as H.R. 354. In the past, Congress has used its Commerce Clause
power in virtually every area of federal legislation ranging from civil rights to environmental to
trademark legislation. Applying this power in the current context is entirely consistent with past
congressional exercises of that authority. The constitutional history of our trademark laws
provides an extremely apt illustration of Congress's exercise of its Article I, section 3, cl. 3
power. Although it is now firmly established that the Commerce Clause forms the constitutional source
of power undergirding our trademark law, that was not always the case. In fact, that law was
voided by the United States Supreme Court in its landmark 1879 decision, the Trade-Mark
Cases, 100 U.S. 82 (1879). According to the Court, the first trademark law unconstitutionally
premised trademark protection on the Patent/Copyright Clause of the Constitution because
trademarks were neither "discoveries nor writings" as required by Art. 1, § 8, cl. 8. Significantly,
all subsequent federal trademark laws have been premised on the Commerce Clause.(64)
Congress may use its power under the Commerce Clause to enact legislation such as H.R. 354.
Trademarks are indicia of origin that regularly travel in and affect interstate commerce. It seems
equally clear that collections of information are items of commerce and it is beyond debate that
the U.S. database community provides a wealth of these informational products to users both here
and abroad. Just as Congress has chosen to protect trademarks under the Commerce Clause, it
has the power to protect valuable compilations that are the product of substantial effort and
money from harmful misappropriations. VIII. CONCLUSION Mr. Chairman, American database producers need legislation to protect them, and we need it
now. Our goal is not to "lock up" data, or prevent access to information; it is to protect our work
product from the commercial harm caused by free riders and thereby assure the continued
availability of valuable resources. Your bill represents a welcome and important step towards
accomplishing that goal. We look forward to working with you and your colleagues in enacting a
database protection quickly. Thank you for giving us the opportunity to share our views with
you. APPENDIX Appendix A 1. Warren Publishing, Inc.'s Television and Cable Factbook. The Factbook is a directory
containing business profiles of all U.S. cable TV systems, licensed broadcast video facilities (i.e.,
full-power TV stations) and related industries and services (program suppliers, equipment
manufacturers, regulatory agencies, et al.). The Factbook is comprised of 3 volumes totaling
more than 5,000 pages annually and also is available on CD-ROM. In addition to the print products, the databases used to produce the Factbook are widely used by
various sectors of the U.S. telecommunications business and academic communities. Warren
Publishing makes electronic sales of the Factbook databases to clients for analyses on their own
computers, and performs customized analyses upon commission by clients. Warren Publishing assigns 18-20 full-time employees to the Factbook. They gather, verify, edit
and format data for use in both the print and electronic versions. Two other people are employed
full-time for sales and fulfillment of customized reports and databases, representing more than
one-third of Warren's total workforce. In addition, Warren Publishing annually hires an average
of 10 independent contractors to input data from returned Factbook questionnaires. Warren
spends tens of thousands of dollars and man-hours each year on original research conducted
through mailed questionnaires and telephone surveys. 2. Reed Elsevier's MDL Information Systems ("MDL") produces a range of databases that, taken
together, offer chemists an electronic library that covers chemical suppliers and pricing, handling
and safety information for 100,000 chemical products, organic chemistry syntheses and
preparative methods, xenobiotic transformations and compounds, and structural and biological
activity data for 70,000 drugs. MDL is a U.S. based company with more than 330 employees
worldwide that creates, produces and distributes databases and computer programs used around
the globe by, among others, the pharmaceutical and chemical industries, as well as by
government and education organizations involved in basic scientific research. 3. The Thomson Corporation's POISINDEX. This invaluable database provides medical
professionals, usually emergency room physicians or poison control specialists, with immediate
access to comprehensive listings of toxicological information--a crucial tool to complement their
years of experience and training. Authorized users have unlimited access to this information at
their own facilities 24 hours a day, 365 days a year. POISINDEX enables them, for example, to
identify a substance that a child may have ingested and then to provide instructions for critical,
immediate care. Treatments guided by this specialized database have helped save thousands of
lives since POISINDEX was created over twenty-three years ago. POISINDEX contains about 1,000,000 entries describing substances such as drugs, chemicals,
commercial and household products and biological materials. More than 30 professionals with
training in nursing, pharmacology, toxicology and medicine are responsible for reviewing these
substances and obtaining pertinent information on them. In addition, more than 200 practicing
clinicians from over 20 countries participate in the editorial process as members of the
POISINDEX editorial board. The database lists each substance and up to four full-text
documents detailing its clinical effects, treatment measures, degree of toxicity and other relevant
information. Software engineers develop computer software to store, edit, sort and retrieve the
data and to maintain, test, produce and support the database. 4. Skinder-Strauss Associates' Lawyers Diary and Manual. Attorneys in New Jersey, New
York, Massachusetts, Florida and New Hampshire routinely use the Lawyers Diary, or Red Book,
as their daily reference and directory for information regarding courts, judges, government
agencies, and the members of the bar. Practicing lawyers rely upon its comprehensive and
accurate databases to assist them with their day-to-day communications, and many regard the Red
Book as their most essential source for this information. A third-generation, family-owned
business, Skinder-Strauss has more than 40 full-time employees who are actively engaged in the
daily activities of data collection, verification, editorial compilation, research and data entry. The
various databases managed by the company require contact with more than 400,000 individuals
and entities at least once a year. All contact and verification research is initiated by the company
through extensive direct mail, telemarketing and other proactive efforts. These initiatives involve
the expenditure of significant sums, thousands of man-hours and the pride and dedication of
those so engaged. 5. Phillips Business Information, Inc. provides a broad range of information products for
distinct business markets, including more than 35 directory and directory related products. For
example, the Phillips Satellite Industry Directory and accompanying Satellite Industry Directory
Buyers Guide is just the type of informational product that, given the fast growing satellite
marketplace, is vital to maintaining our leadership in the global arena. It links the reader to more
than 6,000 decision-makers in satellite operations, equipment manufacturing, transmission
service, broadcasting, and more. The directory also provides users with exhaustive industry profile sections which include service
offerings, key personnel, and contact information. It also offers easy-to-use index pages detailing
satellite systems, satellite operators, services offered, and geographic locations, and includes
listings of industry regulators, agencies and companies providing satellite products and support
services. In addition, Phillips' Satellite Industry Directory is the first to offer a web site index to
leading companies in the satellite industry. Compiling this directory requires one full-time project manager and up to one dozen freelance
researchers to gather, inspect, and update more than 6,000 names, addresses and telephone
numbers, plus an independent contractor to assist with programming. 6. Thomas Publishing Co., located in New York City, has published industry information
products for a century. Its 400 employees, with a payroll of more than $21,000,000 per year,
publish 24 major buying guides, 29 product news magazines, two product information exchange
services, a magazine on factory automation, three software comparison guides, and a publication
to help buyers select the most cost-efficient transportation modes for their inbound freight. Its
Register of American Manufacturers compiles purchasing information about 155,000 companies,
classified under more than 60,000 product and service headings. The Thomas directories are primarily supported by advertising. In that connection, independent
entities throughout the United States solicit advertising orders, provide advertising related
material, as well as editorial information to the company. Those organizations are paid in excess
of $50,000,000 for their services. 7. The American Medical Association's (AMA) Physician Masterfile. This comprehensive
database contains information regarding approximately 800,000 physicians, including both AMA
members and non-members. Its physician demographic data--including state medical licensing
and educational information--helps protect the public from fraud and abuse by enabling the
ready confirmation of the credentials of those holding themselves out as physicians. The
Physician Masterfile's unique physician identifiers allow many industries to bring up-to-date
information to physicians regarding the availability of new drugs and their side effects, and to
protect the public in the event of drug recalls by the Food and Drug Administration. 8. The McGraw-Hill Companies is a global publishing, information, media, and financial
information services conglomerate with 16,000 employees located in over 40 states and 30
countries. The McGraw-Hill Companies has developed and publishes a significant number of
databases for the education, construction, business, industry, financial and professional markets,
which are available in print or electronically through online services, over the internet or on CD-ROM. Millions of professionals, analysts, researchers, investors and students rely on databases
produced by The McGraw-Hill Companies to make critical decisions. For example, the Standard & Poor/DRI's US Central Database(USCEN) includes 23,000 series of
U.S. economic, financial and demographic statistics. Coverage includes data on U.S. trade,
population, production, income, housing, employment, and finance. USCEN is one of the largest
available economic databases in the world. Substantial collections of information begin in the
1940's; some date as far back as 1900. Major private source data from both DRI and third-party
sources--including public information--gives the database added value. Like many of Standard
& Poor/DRI's economic databases, there is significant commercial value associated with access
to complete and accurate historical data, particularly when analyzing trends in the economy over
time. 9. The New York Stock Exchange, Inc. ("NYSE") is the world's largest stock exchange for the
trading of equity products. As an agency-auction market, the NYSE brings together public
buyers and public sellers, giving both the maximum opportunity to interact and trade directly
with each other without the unnecessary expense of first having to trade with a dealer. By
bringing all buyers and sellers together at a central location, the buyers and sellers interact to
arrive at a point where the highest bidder meets the offer of the lowest seller, thereby achieving
efficient pricing that is the standard relied upon worldwide. Prices and quotations for 3,400 listed
securities are dynamically updated and made available to thousands of vendors, broker-dealers
and investors and to over 100 countries. The NYSE licenses(65)
its real-time database to brokerage houses and on-line securities traders;
market data vendors such as Reuters and Bloomberg, television networks like CNBC, dozens of
internet sites, and individual investors. Moreover, NYSE has helped set an industry trend of
disseminating market data to the widest possible audience. For example, in 1997, it was the first
market to make real-time market data available on cable television. Non-professional investors
can receive NYSE real-time market data for $5.25 month. In addition, market data more than 15
minutes old is available without charge on the NYSE's website (www.nyse.com), as well as
numerous other internet sites. 2. 0 See Directive 96//EC of the Eur. Parl. and of the Council on the Legal Protection of
Databases, Feb. 5, 1996 [hereinafter EU Directive]. 3. 0 Appendix A contains examples of databases produced by CADP members. These
examples help to illustrate the importance of these products to our society. 4. 0 871 F. Supp. at 535 (D. Mass. 1994). 5. 0 Id. at 536. 6. 0 Id. at 536-37. 7. 0 Id. at 545. 8. 0 Pub. L. No. 105-147 (1997). Significantly, the NET Act offers no protection to
uncopyrightable databases. 9. 0 Feist Publications, Inc. v. Rural Telephone Service Co., 499
U.S. 340 (1991). 10. 0 The "Collections of Information Antipiracy Act": Hearing on
H.R. 2652 before the Subcomm. on Courts and Intellectual Property
of the House Comm. on the Judiciary, 105th Cong., 1st Sess.,
Statement of Marybeth Peters, Register of Copyrights, at 3-4
(Oct. 23, 1997) (emphasis added) [hereinafter Peters Statement].
See also H.R. Rep. No. 105-525, at 6-8 (1998). 11. 0 "Throughout the nineteenth and well into the twentieth
centuries, U.S. courts consistently recognized copyright
protection for labor-intensive works of information . . ." The
"Collections of Information Antipiracy Act": Hearing on H.R.
2652 Before the Subcomm. on Courts and Intellectual Property of
the House Comm. on the Judiciary, 105th Cong., 1st Sess.,
Statement of Professor Jane Ginsburg, Morton Janklow Professor of
Law, Columbia University, at 5 (Oct. 23, 1997) (footnotes
omitted) [hereinafter Ginsburg Statement]. 13. 0 See Id. at 349 (describing the exposure of factual content to unauthorized copying). 14. 0 Feist, 499 U.S. at 345. 15. 0 Warren Publ'g., 115 F.3d at 1520. 16. 0 United States Copyright Office, Report on Legal Protection of
Databases at 17 (1997) [hereinafter Copyright Office Report]. 17. 0 Cf. Warren Publ'g., Inc. v. Microdos Data Corp., 115 F.3d at
1518 (stating that by selecting the "entire relevant universe
known to it," Warren made its directory commercially useful and
therefore forfeited the protection of the Copyright Act). 18. 0 Copyright Office Report, supra note 16 at 75 ("A database of
meteorological, environmental or medical information, for
example, must be comprehensive, accurate, and up-to-date, or the
results could be injurious to health or safety. . . . Subjective
selection or a unique arrangement may impede the database's
utility or ease of access."). 19. 0 The "Collections of Information Antipiracy Act": Hearings on
H.R. 2652 Before the Subcomm. on Courts and Intellectual Property
of the House Comm. on the Judiciary, 105th Cong., 2nd Sess.,
Statement of Robert E. Aber, Senior Vice President and General
Counsel, the NASDAQ Stock Market, Inc., on behalf of the
Information Industry Association, at 9 (Feb. 12, 1998).
Moreover, it has been recognized that "Even contract law has
significant limitations when mass-marketed information products
are sold to persons not in privity with the makers." J.H.
Reichman and Pamela Samuelson, Intellectual Property Rights in
Data, 50 Vand. L. Rev. 51, 137 (1997). 20. 0 Compare Bussard v. College of St. Thomas, 200 N.W.2d 155 (Minn.
1972) (excluding evidence of prior negotiations when determining
whether an agreement is integrated) with Masterson v. Sine, 436
P.2d 561 (Cal. 1968) (looking to all relevant circumstances
including prior negotiations to determine whether an agreement is
integrated). 21. 0 See National Basketball Ass'n. v. Motorola, Inc., 105 F.3d 841
(2d Cir. 1997) (emphasis added). 22. 0 See H.R. Rep. No. 105-525, at 11 (1998) (recognizing the
commercial value of investments that need to be made in order to
create databases). See also infra note 40 and appendix A
(discussing examples of CADP members' historical databases). 23. 0 See discussion supra page 7. 25. 0 The "Collections of Information Antipiracy Act": Hearing on
H.R. 2652, Before the Subcomm. on Courts and Intellectual
Property of the House Comm. on the Judiciary, 105th Cong., 1st
Sess., Statement of Dr. Laura D'Andrea Tyson, Law and Economics
Consulting Group, at 15 (Oct. 23, 1997). 26. 0 The Directive embodies a two-tiered approach to database
protection. First, it requires compilations to meet an
"intellectual creation" standard in order to receive copyright
protection. EU Directive, supra note 2, art. 3. Second, it
creates sui generis protection for databases that prohibits the
unauthorized extraction of substantial aspects of a database
produced as a result of substantial investment. Id., art. 7. 27. 0 It appears the only other option for non-EU databases to gain
protection in the EU, given the somewhat ambiguous language in
the Directive, is for their producers to create a substantial
presence in Europe, at the expense of jobs in the United States. 29. 0 Cf. H.R. Rep. No. 92-487, at 3 (1984) (describing with approval
the U.S. semiconductor chip industry's position as a world
leader, as well as the industry's stress on innovation and
development-friendly pricing structures). 30. 0 H.R. Rep. No. 92-487, at 3 n.5. The position of database
producers bears a striking similarity to that of semiconductor
chip manufacturers. Cf. id. at 2-3 (describing how the cost of
duplicating a chip design runs at less than one thousandth of the
cost of original development); id. at 4 (describing how other
bodies of law, such as patent and copyright, could not protect
chip design). 32. 0 Pub. L. No. 105-304 (1998). 33. 0 S. Rep. No. 105-190, at 19-20 (1998). 34. 0 Peters Statement, supra note 10, at 7. 35. 0 871 F. Supp. 535 (D. Mass. 1994). 36. 0 H.R. Rep. No. 105-339, at 3 (1997) (internal citations
omitted). 37. 0 Id. at 3-4. 39. 0 For example, section 1403 of H.R. 354 permits nonprofit uses that do not "harm directly
the actual market for the product or service." Thus, H.R. 354 draws a distinction between for-profit and nonprofit uses inasmuch as the former encompasses harm to the actual or potential
market and the latter reaches only harm to the actual market. Moreover, if the nonprofit acted in
good faith and within the scope of employment, section 1406(e) requires a reviewing court to
reduce or remit damages entirely. The worst thing that can happen to a nonprofit which
impermissibly uses database contents is that a court requires it to cease and desist. 40. 0 H.R. Rep. No. 105-525, at 21 (emphasis added). 42. 0 In this regard, CADP has no objection to the new language in § 1408 (c) of H.R. 354
designed to further clarify that the legislation shall not provide perpetual protection to collections
of information. 43. 0 The term is generally life of the author plus seventy years. 44. 0 See EU Directive, supra note 2, at art. 10 (term of protection) and art. 11 (reciprocity
requirement). 45. 0 H.R. Rep. No. 105-525, at 14. 46. 0 § 1403(b). 47. 0 As the Committee Report accompanying H.R. 2652 noted, this provision is necessary to
preclude these financial entities from being deemed agents or exclusive licensees of the Securities
and Exchange Commission or the Commodities Futures Trading Commission. See H.R. Rep.
No. 105-525, at 17. 48. 0 H. Rep. No. 105-525, at 16. 49. 0 Id. 50. 0 H.R. Rep. No. 105-525, at 13. 52. 0 H.R. 354 § 1402 (Prohibition against misappropriation); see
also Peters Statement, supra note 10, at 7 (discussing that the
prerequisites of "substantial part" and harm to the "actual or
potential market" are not elements of an affirmative defense). 54. 0 Peters Statement, supra note 10, at 7. See also H.R. Rep. No.
105-525, at 14-15. 56. 0 § 1406(d). 57. 0 § 1407(a)(2). 58. 0 § 1404(a)(1). 59. 0 § 1405(e). It's worth repeating here that licenses with
nonprofit institutions often allow access at prices substantially
below those paid by their commercial counterparts, and are
frequently free of charge. See Copyright Office Report, supra
note 16, at 25 (noting that database producers either charge
nothing or charge "greatly reduced fees" to nonprofit and
educational users). 60. 0 § 1404 (c). CADP believes that as currently written, this
provision is overbroad. It could be read to exclude collections
of information regarding the Internet itself, such as a directory
of web links. Therefore, we urge the Subcommittee to amend this
provision as follows: on page 9, line 9, delete all that appears
after "maintained" and insert in lieu thereof the following: "to
perform the function of addressing, routing, forwarding,
transmitting, or storing digital online communications or the
function of receiving connections for digital online
communications."
61. 0 § 1403 (a)(2).
62. 0 For example, proponents of this type of change should demonstrate why it is needed given that (1) H.R. 354 already contains the elements of fair use like provisions, see, e.g., supra pages 33-36, and (2) the bill does not prohibit: (a) any use or extraction that does not harm the collection's market; or (b) any use where any resulting harm is indirect or collateral. See, e.g., H. Rep. No. 105-525 at 8 (discussing that the legislation is not intended to cover indirect harm to the market for a product).
63. 0 Peters statement, supra note 10, at 13-14.
64. 0 Significantly, just three years ago, Congress used it's Commerce Clause powers to enact a form of unfair competition legislation to protect intangible rights in investment from misappropriation or "free-riding." In 1995, it passed the "Federal Trademark Dilution Act," Pub. L. No. 104-98, which prohibits the use of a famous name in a manner that dilutes the name despite the absence of consumer confusion:
Even in the absence of confusion, the potency of a mark may be debilitated by another's use. This is the essence of dilution. Confusion leads to immediate injury. While dilution is an infection which, if allowed to spread, will eventually destroy the . . . mark. The concept of dilution recognizes the substantial investment the owner has made in the mark and the commercial value and aura of the mark itself, protecting both from those who appropriate the mark for their own gain. H.R. Rep. No. 104-374 at 3 (1995) (emphasis added).
The Commerce Clause provides the constitutional basis for the anti-dilution statute; it does the same for the Collections of Information Antipiracy Act.
65. 0 As a market for securities, NYSE must make its data available pursuant to Section 11A of the Securities and Exchange Act of 1934, and its contracts for the provision of real-time data streams are monitored closely by the SEC. The SEC approves the contracts and the fees that the NYSE charges for market data, requiring that the Exchange make its market data available on terms that are fair, reasonable, and not unreasonably discriminatory.