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formation than any other entity in the world. In all these processes, it interacts with the private sector in a variety of ways. In addition, federal agencies are engaged in funding research that produces tremendous amounts of information that the government does not undertake to manage itself.
These activities represent enormous investments in highly complex, knowledge management processes that are vital to human health, the environment, national security, scientific progress, and technological innovation-and, in turn, to the economy as a whole. Changes in ground rules for the use and reuse of information must be designed to minimize disruption of these critical activities and to avoid imposition of new costs that could hinder research.
The sections which follow discuss the Administration's efforts to study database protection and access issues (Part II) and summarize the six principles that we believe should guide both domestic legislative and international treaty efforts in this area (Part III). Next, we elaborate on each principle, discussing the Administration's concerns relating to that topic and the range of possible solutions on which we believe interested parties should focus (Part IV). Finally, we offer some additional points that should be included in any database protection legislation.
II. HISTORY OF ADMINISTRATION STUDY OF DATABASE ISSUES In response to legislative proposals in Congress and developments in the World Intellectual Property Organization (WIPO), the Administration devoted substantial energy in 1998 and 1999 to studying database protection and access issues. The Administration's review of these issues has included a variety of mechanisms and fora:
• The Patent and Trademark Office (PTO) held a public conference on database
protection and access issues on April 28, 1998. • During the spring and summer of 1998, a variety of Executive Branch depart
ments and agencies participated in an informal working group on database issues led by the State Department, the Office of Science and Technology Pol
icy (OSTP), and the PTO. • In January 1999, the National Research Council held a two day conference
on scientific databases at the Department of Commerce. This conference was supported by the National Science Foundation, the National Institutes for
Health, and several other agencies.2 • Various officials in the Executive Office of the President (including OSTP),
the Department of Commerce (including PTO), and the Justice Department have held informational meetings with both proponents and opponents of
database protection legislation. In addition to these efforts, the Administration has carefully studied a wide range of reports, studies, legal opinions and legislation on database protection and access from the United States, Canada, Japan, and the European Union, as well as participating in discussions of database protection issues at WIPO conferences in 1996, 1997, and 1998.
The Administration continues to discuss these issues with concerned parties and to examine specific topics and areas where we believe further information will help both the legislative process and any future study of the effects of database protection that might be mandated by legislation.
III. GENERAL PRINCIPLES On August 4, 1998, in response to Senate consideration of then-H.R. 2652, the Administration set out the principles that it believes should govern database protection legislation.
Now, as then, Administration supports legal protection against commercial misappropriation of collections of information. We believe that there should be effective legal remedies against "free-riders” who take databases gathered by others at considerable expense and reintroduce them into commerce as their own. This situation has arisen in recent case law, and we believe that digital technology increases opportunities for such abuses.
At the same time, the Administration's concerns with the provisions of H.R. 354 are similar to those we expressed with respect to H.R. 2652, including the concern that the Constitution imposes significant constraints upon Congress's power to enact legislation of this sort. From a policy perspective, the Administration believes that
2 Including the National Oceanic and Atmospheric Administration (NOAA), the National Institute of Standards and Technology (NIST), the U.S. Geological Survey, the Department of Energy, and the PTO.
legislation addressing collections of information should be crafted with the following principles in mind:
1. A change in the law is desirable to protect commercial database developers
from commercial misappropriation of their database products where other
legal protections and remedies are inadequate. 2. Because any database misappropriation regime will have effects on electronic
commerce, any such law should be predictable, simple, minimal, transparent, and based on rough consensus in keeping with the principles expressed in the Framework for Global Electronic Commerce. Definitions and standards of behavior should be reasonably clear to data producers and users prior to
the development of a substantial body of case law. 3. Consistent with Administration policies expressed in relevant Office of Man
agement and Budget circulars and federal regulations, databases generated with Government funding generally should not be placed under exclusive
control, de jure or de facto, of private parties. 4. Any database misappropriation regime must carefully define and describe
the protected interests and prohibited activities, so as to avoid unintended consequences; legislation should not affect established contractual relation
ships and should apply only prospectively and with reasonable notice. 5. Any database misappropriation regime should provide exceptions analogous
to "fair use" principles of copyright law; in particular, any effects on non
commercial research should be de minimis. 6. Consistent with the goals of the World Trade Organization (WTO) and U.S.
trade policy, legislation should aim to ensure that U.S. companies enjoy available protection for their database products in other countries on the
same terms as enjoyed by nationals of those countries. With these principles in mind, we turn to an analysis of H.R. 354.
A change in the law is desirable to protect commercial database developers from commercial misappropriation of their database products where other legal pro
tections and remedies are inadequate. The Administration supports enactment of a statute to protect database creators against free-riding-the wrongful taking and distribution of database material with resulting infliction of commercial harm (loss of customers) on the database creator. Indeed, there is considerable, if not complete, consensus that this kind of free-riding can occur without additional legal protection for non-copyrightable databases and that such legal protection is necessary to prevent a diminution in database creation.3
Section 1402 is the operative core of H.R. 354, providing the “basic prohibition" of this proposal to protect collections of information through a misappropriation model.4 Section 1402 prohibits unauthorized commercial misappropriation of a sub
3 See, e.g., National Research Council, Bits of Power (1997) at 135; U.S. Patent and Trademark Office, Report on and Recommendations from April 1998 Conference on Database Protection (1998) at 4_7; Letter from Federal Trade Commission Chairman Robert Pitofsky to Congressman Tom Bliley, September 28, 1998 at 6–7. See also Institute of Intellectual Property, Tokyo, Japan, Database Protection on the Borderline of Copyright Law and Industrial Property Law 5 (1998); Wendy Gordon, Asymmetrical Market Failure and Prisoner's Dilemma in Intellectual Property, 17 U. DAYTON L. REV. 853, 863–865 (1992) (describing conditions when additional protection is needed); Dan L. Burke, The Market for Digital Piracy, in BRIAN KAHIN AND CHARLES NESSON, EDS., BORDERS IN CYBERSPACE (1997), 205 (describing databases on the Internet as classic public good” problem that may require special law); J.H. Reichman and Pamela Samuelson, Intellectual Property Rights in Data?, 50 VANDERBILT L. Rev. 51, 55 (1997) (critical of EU Database Directive and H.R. 3531, but recognizing that risks of market failure may keep data production at “suboptimal levels”); M. Powell, The European Database Directive: An International Antidote to the Side Effects of Feist? 20 FORDHAM INTERNATIONAL L. J. 1215, 1250 (1997).
* There has been much discussion among commentators about the differences between a sui generis form of protection as was proposed in H.R. 3531 in the 104th Congress and the “misappropriation" approach proposed in the present H.R. 354. The Administration believes that the misappropriation theory provides an appropriate model for database protection in American law. The United States has substantial case law on the misappropriation of information as a form of unfair competition which should help courts interpret any database protection law built on a misappropriation model. Placing database protection in the framework of unfair competition
stantial amount of a database; it also appears to prohibit unauthorized extraction or "use" of data from a database by an individual, no matter how the information is used.
We do not believe that protection of that breadth is appropriate in the database context. As a policy matter, we must weigh the need to protect database creators against the potential impact on scientific research in particular, and the dissemination of information within the society generally. It therefore makes sense to focus any prohibition on the precise activities that pose the commercial threat—"use” is simply too broad and ambiguous. Indeed, the breadth and ambiguity of the prohibition has required concerned parties to focus considerable attention on expanding the list of statutory exceptions to make clear that various activities would not be affected by the prohibition. We believe it more appropriate to narrow the prohibition so it is targeted on conduct like the troubling acts of commercial misappropriation identified in the Warren Publishing and similar cases.
H.R. 354's basic prohibition consists of three basic elements; imposing liability on any person who "extracts or uses in commerce" all or a substantial part of a database so as to cause "harm" to the “actual or potential market”. of the database creator. In our view, all three of these elements should be focused more precisely on the commercial free-riding situation.
To begin with, the "extract(s) or use[s]" language should be narrowed. One approach would be to limit the reach to a person who, without authorization “extracts for commercial distribution or distributes in commerce" all or a substantial part of a database. The substitution of “distribution” in place of "use” would clarify that the Act is directed at active behavior, rather than receptive activities such as viewing, reading, or analyzing. “Extracts for commercial distribution” would cover any rep lication preparatory to distribution in commerce. Distributes in commerce should be understood broadly, compatible with First Amendment concerns.
While the Administration continues to believe that misappropriation for commercial purposes should be the focus of any legislative efforts, we recognize that, when systematic, some acts that might be characterized as "extraction” (in other words, acts of duplication) by individuals could conceivably undermine the commercial market for a database product. We are not familiar with any reported cases or incidents of this kind, but we recognize that such harm could occur. Such damage may occur when those acts becomes customary in a particular economic sector or field of research. At present, if there is no contract with the individual or his/her organization, the investor in a database has no effective civil remedy against such acts. We believe that one of the greatest challenges in drafting database protection legislation is providing database producers with some type of protection against such patterns of repeated individual activity without prohibiting uses of data by individuals that most people believe should be treated as "fair uses” and without violating the First Amendment. We are not certain whether a balance can be struck. Our suggested
will also allow courts and commentators to draw appropriately from the rich body of cases in trademark law and unfair business practices.
The Administration believes that any treaty on database protection that emerges from ongoing discussions at the World Intellectual Property Organization should permit each treaty signatory to provide any mandated database property protection through the legal mechanism most appropriate to its domestic law, whether through misappropriation, sui generis protection, or a simple extension of their domestic copyright and neighboring rights laws. The critical issue is not the legal framework used, but whether the law provides private citizens with comparable rights to protect their investments in different jurisdictions.
% In contrast, the basic prohibition in what some have called the “minimalist" proposal put forward by some database users seems too narrow as a policy matter. See Section 1401 of "Pro posed Bill to Amend Title 17, United States Code, To Promote Research and Fair Competition in the Databases Industry,” Statement by Senator Orrin Hatch, Congressional Record , January 19, 1999, at S320. This minimalist basic prohibition appears to bar only misappropriation of an entire database, but to permit appropriation of a large percentage of the same database, even for a commercial purpose in competition with the database creator. There are also constitutional concerns with the minimalist approach, albeit not as serious as with H.R. 354.
6 Warren Publishing v. Microdos Data Inc., 115 F.3d 1509 (11th Cir. 1997) (en banc) cert. denied 118 S.Ct. 197 (1997).
718 U.S.C. 1030 would appear to create some criminal liability for database misappropriation by individuals in the on-line environment. Subsection 1030(a) (2) (C) creates criminal liability when a person “intentionally accesses a computer . . . and thereby obtains . information from an protected computer if the conduct involved an interstate or foreign communication," while 1030(aX4) creates criminal liability when a person “knowingly and with intent to defraud, accesses a protected computer without authorization . . . and by means of such conduct . obtains anything of values in excess of $5,000. We assume that the server holding a commercial database would fall within the definition of a "protected computer" because it would be "a computer . . which is used in interstate or foreign commerce or communication (1030(e) (2XB)). Subsection 1030(g) also creates civil liability where there has been a violation of the section.
language concerning “extraction for distribution"
and "distribution” does not address this issue; we look forward to working with the Subcommittee on this matter as the legislation moves forward.
Second, the Subcommittee should consider whether the requirement of "harm" in section 1402 should be elevated to “substantial harm" as a means of shielding de minimis activities from any possible liability. We know that some proponents of H.R. 354 have expressed concern about a "substantial harm" standard because they believe that judges would compare the standard unfavorably to copyright law, which requires only "harm." We agree that it is important to anticipate how judges would administer any new law, but we believe that a “substantial harm” standard is familiar to courts from other areas of American law.8 Appropriate legislative history could direct judges away from unintended comparisons to copyright law or areas of the law where “substantial harm" has been interpreted to impose a higher standard than intended in this bill.
At the same time, some critics of H.R. 354 have suggested that the proper trigger for liability is whether the misappropriation "so reduce[s] the incentive to produce the product or service that its existence or quality would be substantially threatened," a test from the National Basketball Association v. Motorola case. 9 While we agree that a misappropriation law should be focused on acts that do, in fact, have a tendency to reduce incentives in this manner, we think this "diminution of incentive" test is ill-suited as a component of the basic prohibition; it does not comport with the Administration's principle (described below) that a database protection law should be predictable, simple, and transparent. Because a database user cannot be expected to know much about the incentive structures that lead to production of databases, such a user would have no way to judge in advance whether or not her acts would satisfy a “diminution of incentive* test for liability. We also are concerned that the diminution of incentive” test requires much more complicated proofs than would be incurred with a harm test. 10 Accordingly, we believe that Congress should instead rely upon a "substantial harm" test or similar measure to serve as a workable proxy for the "diminution of incentive" test.
Third, we suggest reexamination of the concepts of "actual” and “potential” market. We are very concerned that, as presently drafted, these concepts are broader than market definitions used in other areas of the law, could be subject to manipulation by private entities, and could too easily expose legitimate business practices to substantial liability. We urge the Subcommittee to consider an objective definition tied to the product's current actual customer base or the market currently exploited by similar products or services. We are concerned that any broader definition might deter entrepreneurs from developing new products and services that add significant value and do not compete directly with the original database. Leaving room for transformative uses is critical in shaping the definition of the market as targeting the free-riding we wish to prohibit. We believe that the Subcommittee should con, sider, individually and perhaps in combination, the notions of “principal market” drawn from unfair competition law, and “neighboring market” proposed in the Senator Hatch draft.
The Department of Justice notes that this legislation raises serious constitutional concerns that current copyright law does not raise. The Constitution itself provides for protection of copyright, in order to promote progress in science and the arts. Therefore, copyright and the First Amendment are intended to protect analogous values, and are aimed, in part, at similar and compatible objectives. The Copyright Clause and the Copyright Act permit protection only of an author's original expression, and do not authorize protection of facts. This comports with First Amendment
8 Substantial harm is a familiar standard applied by courts in a variety of circumstances. See, e.g., Gulf & Western Industries, Inc. v. United States, 615 F.2d 527 (D.C. Cir 1979) (enunciating standard for when disclosure of commercial information in government's possession would cause substantial harm to competitive position of private firm); Miami Herald v. SBA, 670 F.2d 610 (5th Cir. 1982) (same standard); Simmons v. Diamond Shamrock Corp., 844 F.2d 517 (8th Cir. 1988) (determining whether
failure to comply with ERISA reporting and disclosure requirements caused substantial harm); Warner Bros. v. U.S. ITC, 787 F.2d 562 (Fed. Cir. 1986) (ITC temporary exclusion order depends on showing of immediate and substantial harm in the absence of such relief); Olson v. Stotts, 9 F.3d 1475 (10th Cir. 1993) (substantial harm standard used for liability in delay in medical care) . . . not to mention the use of "substantial harm” as a standard in preliminary injunction cases. See, e.g., N.A.A.C.P. v. City of Mansfield, 866 F.2d 162, 166 (6th Cir. 1988).
9105 F.3d 841, 852 (2d Cir. 1997)
10 Evidence that the defendant had not diminished the plaintiff's incentive to produce the database could, however, be the same type of evidence that shows how “transformative” the defendant's product is and how far its sales are from the original product's market. In this way, the same evidence might enter a litigation under an appropriately broad “permitted uses” sec
principles. By contrast, the proposed prohibition in H.R. 354 would be directed against dissemination of facts. That measure as currently drafted likely would not survive constitutional scrutiny, at least in numerous applications. The constitutional concerns are related to the scope of the basic prohibition, discussed above, as well
as the issues discussed below, including the range of permitted uses, resolution of - the "perpetual protection" problem and the possibility of “sole source" situations, but the constitutionality of any law in this area will depend upon the particular statutory language adopted and therefore cannot be analyzed definitively at this time. We look forward to working with the Subcommittee to avoid constitutional infirmity. B. Second Principle-Keep it simple, transparent, and based on consensus
Because any database misappropriation regime will have effects on electronic commerce, any such law should be predictable, simple, minimal, transparent, and based on rough consensus in keeping with the principles expressed in the Framework for Global Electronic Commerce.11 Definitions and standards of behavior should be reasonably clear to data producers and users prior to the devel
opment of a substantial body of case law. This principle informs all of our analysis. We believe that database legislation should be directed squarely at behavior that is widely acknowledged to be unfair and has been documented as a problem worthy of a legislative response. This will ensure that the legal system is not used to threaten litigation in borderline cases in a manner that may inhibit the flow of factual information and the vigor of free market competition.
We also believe that in introducing this new form of protection, some of the burden of promoting transparency and predictability should be borne by those who benefit. The legislation should not create an environment in which many kinds of database users must suddenly act at their peril. In particular, the Subcommittee might consider how a notice system could effectively warn database users when a database producer is asserting protection under the law. This will also help reduce the costs of identifying multiple cascading interests that are likely to aggregate more frequently in databases than in works of authorship. In this regard, we applaud the addition of the "good faith" of the defendant as a factor in allowing “permitted use" under section 1403 although, for reasons discussed below, we believe that our additional changes to the permitted use" section may be needed.
Rather than prescribing a particular approach and trying to address the difficulties of implementing it in legislation, we would prefer (again, in keeping with the Framework for Global Electronic Commerce principles) to assign to database publishers and users the responsibility of devising appropriate standards to identify and assert interests. While in paradigmatic cases, such as the circumstances in Warren Publishing, there may be no question about deliberate free-riding, the principle remains: users must have reason to believe that their acts are damaging to others. The "good faith” factor in H.R. 354 combined with private sector-developed standards for notice and disclosure would help ensure that the legislation works to condition behavior based on reasonable expectations and to avoid traps for the unwary. C. Third Principle -- Preserve access to government data
Consistent with Administration policies expressed in relevant Office of Manage: ment and Budget circulars and federal regulations, databases generated with Government funding generally should not be placed under exclusive control, de jure or de facto, of private parties.
1. Exemption of government data The U.S. Government collects and creates enormous amounts of information, possibly more than any other entity in the world. State and local governments in the United States also gather and generate tremendous amounts of data. Broadly defined, government-generated data touches every sector of the economy and civic life. Government-funded data ranges from crime statistics to data on subatomic particles; from geological maps to court opinions; from immigration statistics to digital images of distant galaxies. 12
11 A Framework for Global Electronic Commerce is available at: http://www.ecommerce.gov/ framewrk.htm.
12 Conceptually, a distinction can be drawn between data “gathered" and data "generated.* The decennial Census gathers data about Americans; the Hubble telescope gathers astrophysical data by capturing images of events that have already occurred in distant parts of the Universe. In contrast, when the U.S. Government established the "zip code” system, it generated data that did not exist before. The government generates data in the form of new legal opinions, new tax tables, new databases of each day's recipients of Medicare or Medicaid payments. We refer to