TESTIMONY

MR. THOMAS J. DONOHUE, PRESIDENT AND CEO,

UNITED STATES CHAMBER OF COMMERCE

REGARDING THE DISCUSSION DRAFT ENTITLED

"DATABASE AND COLLECTIONS OF INFORMATION

MISAPPROPRIATION ACT"

BEFORE

THE HOUSE ENERGY AND COMMERCE COMMITTEE'S SUBCOMMITTEE

ON

COMMERCE, TRADE AND CONSUMER PROTECTION

AND

THE HOUSE JUDICIARY COMMITTEE'S SUBCOMMITTEE ON

COURTS, THE INTERNET AND INTELLECTUAL PROPERTY

September 23, 2003

Introduction

Chairman Stearns, Chairman Smith, Ranking Member Schakowsky, Ranking Member Berman and Members of the Committees. Thank you for the opportunity to be here today to testify on "the Database and Collections of Information Misappropriation Act".

I have previously written to both Committees to express my serious concerns about the draft legislation. I ask that copies of my correspondence be made a part of the record.

I recognize that the staffs of your two Committees have worked hard to address the concerns that the Chamber and others have expressed regarding this issue. Unfortunately, I believe that the draft Database and Collections of Information Misappropriation Act does not adequately address those concerns. Instead, this legislation continues to pose a serious threat to the business community, as well as to the academic and science community. I strongly urge you not to move forward with this legislation.

Although the discussion draft has been shared with the public for barely three weeks, it has already attracted a firestorm of thoughtful criticism. Along with the Chamber's objections, additional detailed and persuasive criticisms have been lodged by an extraordinarily diverse array of public and private entities. When the U.S. Chamber of Commerce, Consumers Union, the American Conservative Union, Association of Research Libraries NetCoalition and the Eagle Forum, all join hands in opposition to a legislative initiative, it's fair to ask what could unite groups which so often see the world in very different ways.

The reason why so many organizations are so concerned about the discussion draft is simple. There has been no threshold showing that there is a problem that needs to be addressed by legislation. However, there is enormous concern that were this draft enacted, it may well create enormous problems for information users and producers, stifling innovation and adding to the excessive litigation burdens already facing American businesses.

We live in the "Information Age" - an age in which advances in information technology have helped fuel economic growth and enhanced productivity. Fundamental changes in basic information policy will affect virtually every American, as well as virtually every business, not just those commonly thought of as information companies.

Our country's basic information policy provides that facts - the building blocks of information - cannot be owned. That historic policy was underscored in a unanimous 1991 Supreme Court decision Feist v. Rural Telephone. In that landmark case, the Supreme Court reaffirmed that the U.S. Constitution prohibits copyright protections for facts contained in a database. The Court concluded that the Constitution's objective of promoting "the Progress of Science and useful arts" is accomplished by "encouraging others to build freely upon the ideas and information conveyed by a work."

The basic goal of copyright, indeed of all intellectual property law, is to encourage creative activity. That is why the Feist court underscored that intellectual property protection can only be provided to those portions of a database that reflect a minimal level of creativity. Notwithstanding this unanimous Supreme Court decision, however, proponents of broad database legislation continue to seek protection for information that they haven't created.

That is not to say that access to these databases should necessarily be available for free. Indeed, the Chamber strongly believes that current protections, such as appropriate intellectual property protections, along with contract and licensing agreements and state trespass and misappropriation protections, as well as other protections, should be utilized and enforced. Companies need and deserve protection for the time, effort and expense that they undertake to create databases, but new intellectual property protections like those envisioned by the discussion draft are too broad and unnecessary.

What's the problem? Where is the "gap" in current law?

The Chamber has always believed that the best way to legislate is to specifically identify and define problems, and then carefully craft legislation to deal with those particular real-world harms. Whenever Congress legislates - especially in an area with the broad ramifications such as those inherent in changing basic and long-standing copyright and information policy - that legislation should be narrowly targeted to resolving a demonstrated real-world harm, with as little collateral damage as possible.

In this arena, throughout the seven-year consideration of this issue, proponents of changing how our nation regulates information have yet to provide a real-world example of a database that can't be protected under current law. There are an astronomical number of opportunities daily for some kind of infringement. Yet the inability to cite gaps in the law is profoundly telling. Indeed, this inability to cite real gaps in existing laws underscores our concern that some proponents of broad database legislation seek to leverage dominance in existing markets into dominance in other markets - without having to gain these advantages via competition in the marketplace.

Most persuasive to me is the reaction of the Chamber's members to the discussion draft. Our broad membership includes many of America's most significant database producers. These companies invest enormous sums of money producing creative, new information products. These companies currently enjoy myriad legal protections for their databases, including contract, copyright, state-law misappropriation, trespass, federal computer anti-hacking statutes and numerous other protections.

If our Chamber members believed for a second that they couldn't protect their substantial investments in database production, they would be urging me to affirmatively fight for new law. Instead, I'm hearing that there is little or no upside for the business community in database legislation, and potentially a significant, anti-competitive downside.

Threat of Excessive Litigation

As you know, the Chamber has long been concerned about the threat excessive litigation poses to the economy and American business. This legislation, if enacted, would combine vague terms and excessive penalties to create a frivolous litigation nightmare for businesses of all industries.

The reason for this begins with the core prohibition of the draft bill. Since the Supreme Court's 1918 decision in International News v. Associated Press, courts have awarded relief in what became known as "hot news" misappropriation cases. That line of cases established the tort of misappropriation, and found that even factual data could be protected if the data met a series of tests, including that the data is "highly time sensitive". The Court found in that case that wire stories were "hot" and protected for a few hours. Subsequent cases have found, for example, that sports scores are "hot" and potentially protected for a matter of minutes.

The discussion draft, however, creates a new definition of "time sensitivity" in the context of this bill, significantly different than the "time sensitivity" that courts have been familiar with for more than eighty years under the International News line of cases. Specifically, this draft would potentially require courts to add the concept of "value" to the determination of time sensitivity.

For example, this draft legislation works retroactively, ensnaring facts in databases that are conceivably decades old. The draft protects facts in encyclopedias, even though the lead-time in publishing means that data is generally months old before it reaches the bookstores. In short, it is impossible to state definitively what this core prohibition means - though it can be definitely stated that this prohibition bears only a superficial resemblance to the time-sensitivity standard created by the Supreme Court in the International News case and expressly preserved in Feist.

The courts would be forced to determine whether the proposed prohibition can be tightened to look like constitutionally sanctioned "hot news" misappropriation and not like the copyright of facts forbidden by Feist. While the courts sort this out, the combination of vague terms, a private right of action, quadruple damages and incredibly expansive subpoena power would create a litigation bonanza that will chill investment and threaten business, depriving consumers of new information products.

Conclusion

On behalf of the Chamber, I want to thank you for the opportunity to share some of our more serious concerns regarding the discussion draft. The Chamber has always believed that the best way to legislate is to identify and define specific problems, and then carefully craft legislation to deal with them. While some urge "moving beyond" discussing the problem in order to legislate, we are convinced that, if there is to be legislation it should be narrowly targeted to resolving a demonstrated real-world harm, with as little collateral damage as possible.

Appropriate information policy is critical to American business. While we may be willing to support compromise legislation carefully targeted to deal with specific, demonstrated "gaps" in existing law, there has been no demonstrated need for such legislation at this time.

On behalf of American businesses and our three million members, I want to thank you again for inviting me to testify and share our concerns.