like commercialism, that may weigh against a finding of fair use." Campbell, supra. The concept might be expressed more clearly and appropriately if the first factor were modified to mirror the first factor in Section 107 of the Copyright Act, referring to "the purpose and character of the use or extraction, including whether such use is commercial or nonprofit." With respect to the factor enumerated in subparagraph (iv), if there is a truly "transformative use" of the information at issue, AAP questions the relevance of whether the collection from which the use or extraction is made "is primarily developed for or marketed to persons engaged in the same field or business as the person making the use or extraction." This criterion apparently addresses situations where, even in the absence of a commercial marketing purpose on the part of either the secondary user, the secondary use of a database or its contents may potentially supersede the need for the original because the secondary user is within the community of intended users of the original. But, if the secondary use "merely supersedes the objects" of the original database source, rather than adding something new with a further purpose or different character, it would generally not be considered a "transformative use." Campbell, supra. Where the secondary use is a "transformative use," the fact that the secondary user is within the community of intended users of the database would not, in itself, appear to be meaningful. Finally, even if an act of use or extraction is determined to be reasonable and otherwise within the scope of the conditions under Section 1403(a)(2), the provision would, under no circumstances, apply where the used or extracted portion of a database "is offered or intended to be offered for sale or otherwise in commerce and is likely to serve as a market substitute for all or part of the collection from which the use or extraction is made." This prohibition is troubling because its terms would preclude the use of a database or its contents for the creation of any competitive product, even when such use is "transformative" rather than merely repackaging or republishing. Any use of particular pieces of data can be said to substitute for the portion of the database that is used. For example, extraction of Mark McGwire's hitting records from a baseball encyclopedia for use in a biography may, for the limited purpose of examining his statistical record, substitute for the Mark McGwire entry in the encyclopedia. The exclusion thus swallows the "reasonable use" rule. Moreover, this "market substitute" exclusion from the "reasonable uses" provision demonstrates the need for AAP's initial request to explicitly exclude works of a narrative literary nature from the definition of "collection of information?' and, therefore, from the scope of this legislation's misappropriation protection. Once again, for example, if a work of biography or history is considered a "collection of information? for purposes of this legislation, any subsequently-published biographical or historical work that covers the same subject and in any way uses the earlier work as a source of factual information would arguably be subject to claims of misappropriation, based simply on consumers' preference for the later work over the earlier one. This would be true regardless of the transformative nature of the later work's use of the information at issue. Such a result cannot be squared with the intended purpose of this legislation. AN ALTERNATIVE RESOLUTION AAP appreciates the difficulties in crafting a "fair use"-type provision which will function properly for the purposes of this legislation, and recognizes that such difficulties are compounded by the relative significance Section 1403(a)(2) is likely to have in balancing the many diverse interests affected by this legislation. To the extent that these difficulties might be somewhat alleviated (or at least not further compounded) by addressing elsewhere in the legislation the comparatively narrow stated concerns of book publishers regarding works of narrative literary prose,1 AAP suggests that, in parallel to the definitional change discussed above, the "News Reporting" provision in Section 1403(e) of H.R.354 should be amended as follows: (e) NEWS REPORTING AND TRANSFORMATIVE EDITORIAL USES-Nothing in this chapter shall restrict any person from extracting or using information for the sole purpose of (i) news reporting, including news gathering, dissemination, and comment unless the information so extracted or used is time sensitive and has been gathered by a news reporting entity, and the extraction or use is part of a consistent pattern engaged in for the purpose of direct competition; or, 1 AAP members continue to struggle with issues raised by the potential application of this legislation to special kinds of works of narrative literary prose, such as anthologies and critical editions. We hope to further explore these issues with the Subcommittee and its staff as they consider further revisions to H.R.354. (ii) publication as part of a work of narrative literary prose, unless such work, as a whole, is likely to serve as a market substitute for the collection of information from which the information is extracted or used. The proposed changes (in italics) to Section 1403(e), together with those urged by AAP with respect to the definition of "collection of information" in Section 1401(1), would clarify that a work of narrative literary prose should not, by itself, be considered a "collection of information" for the purposes of this legislation, and that the extraction or use of factual information from a database for publication as part of a work of narrative literary prose would not except in the unusual circumstances of direct market substitution of the database by such a work, present any basis for a claim of misappropriation by the owner of the database from which the information was extracted. CIVIL REMEDIES AAP questions the propriety of the language in Section 1406(c) which would authorize a court, as part of a final judgment or decree finding a violation of the bill's prohibition against misappropriation, to "order the remedial modification. . . of all copies of contents of a collection of information extracted or used in violation of the prohibition. Although this issue will obviously not have a direct impact on book publishers if our other proposals for revision are adopted, AAP nevertheless questions the propriety of the "remedial modification" concept insofar as we understand it to mean that the court would be authorized to order a defendant publisher to make editorial changes in the content of its collection of information. As a matter of form, we would note that this concept, if it is to be addressed at all, should be addressed under subsection (b), which deals with injunctions, rather than under subsection (c), which deals with "Impoundment." On the more important issue of substance, however, we would note that granting the court such authority may raise serious First Amendment questions regarding government censorship and compelled speech. For that reason, AAP would urge the deletion of this authority. AWARDS OF COSTS AND ATTORNEY'S FEES Although Subsection 1406(d) generally leaves to the discretion of the court whether to award costs and attorney's fees to the prevailing party in a civil action for misappropriation, it mandates such an award where the court determines that the civil action was brought “in bad faith" against a non-profit educational, scientific, or research institution, library, or archives, or an employee or agent of such an entity, acting within the scope of his or her employment. If the award mandate is intended to deter the filing of misappropriation lawsuits "in bad faith," AAP believes it should apply equally to all defendants in "bad faith" civil actions, regardless of their for-profit or non-profit status, since we are aware of no reason to believe that non-profit entities and their representatives require or deserve more protection from "bad faith" lawsuits than for-profit entities and their representatives. AAP's membership includes both for-profit and non-profit publishers, and it can see no sound public policy basis to distinguish among its members on the basis of their for-profit or non-profit status for purposes of the award mandate. On behalf of AAP, I want to thank you for the fair and open manner in which you have led the Subcommittee in crafting H.R.354 and previous versions of database protection legislation. We look forward to meeting with you and your staff to discuss these issues and other concerns that may arise as the legislative process proceeds. Sincerely, ALLAN R. ADLER, Vice President for Legal and Governmental Affairs. Hon. HOWARD COBLE, Chairman, ASSOCIATION OF AMERICAN Hon. HOWARD L. BERMAN, Ranking Member, House of Representatives, Washington, DC. UNIVERSITIES (AAU), Washington, DC, April 5, 1999. DEAR CHAIRMAN COBLE AND CONGRESSMAN BERMAN: The Association of American Universities, American Council on Education and National Association of State Universities and Land-Grant Colleges (the "higher education associations") are pleased to offer these comments on the Administration's testimony presented by Andrew J. Pincus, General Counsel of the Department of Commerce, at the March 18, 1999 hearing on H.R. 354 (the "Pincus Statement"). These comments are submitted for the record of that hearing in response to requests made by members of the Subcommittee at the hearing. The higher education associations agree wholeheartedly with the basic principles and concerns presented in the Pincus Statement. The position articulated by Mr. Pincus and the issues that he identifies are fully consistent with the principles and concerns set forth in the testimony of University of Rochester Provost Charles E. Phelps on behalf of the higher education associations. In particular, we share the Administration's views that: • The focus of new database protection legislation 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" (pages 5, 7-8). • Any database law "should be predictable, simple, minimal, transparent and based on rough consensus" (page 6). • The bill "must carefully define the protected interests and prohibited activities, so as to avoid unintended consequences" (page 6). • “[A]ny effects on non-commercial research should be de minimis.” (page 6). • The prohibition against "extraction" or "use" is not "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 society generally" (page 7). • "[A] simpler, more predictable legal schema would be produced by eliminating 'maintaining [and organizing and substituting 'collecting' for 'gathering'] and making it the sole basis for protected investment” (pages 23–24). • "Congress should craft U.S. database protection to meet the needs of the American economy," rather than crafting legislation to meet the perceived requirements of the European Directive (page 32). We also share the Administration's concerns (at 9) that the change from a requirement of "harm" to a requirement of "substantial harm" deserves careful consideration. We support such a change. The Administration and the higher education associations have identified similar concerns with the concepts of "actual" and "potential" market. Compare Pincus Statement at 10 with Phelps' Testimony at 10-11. We also are concerned by the concept of "neighboring market," and suggest that the Subcommittee limit the focus of H.R. 354 to "the primary market" or "a primary market" for the database product. We are considering with interest the suggestion by the Administration (at 12) suggesting the possibility of a notice system to warn users when a database producer is asserting protection under the law. We have not yet determined how such a notice system would work in this context, and what the effect of failure to include notice should be. We are also considering the Administration's suggestions with respect to government-produced data. Our initial reaction is to agree that a database owner claiming protection should be obligated to identify the source of government-created data included in the database with sufficient detail that it may be easily found by the user. We are concerned, however, by the Administration's suggestion that databases created by state universities and colleges should be subject to the same exclusion of protection as databases created by other governmental agencies. The higher education associations do not believe that the relationship between state universities and state governments is relevant to the policy questions of database ownership and protection. Both public and private universities need access to database information to support their research and teaching missions; this is the focus of the higher edu cation testimony presented by Provost Phelps. But it is also the case that universities, public and private, should be accorded the same appropriately crafted database protection that other database owners are granted when universities elect to market databases they have created. Public universities and colleges should not be placed at a disadvantage compared to their private counterparts. The relationship between certain state universities and state governments should not be used as a basis for an inappropriate policy outcome. The higher education associations share the Administration's concern about de facto perpetual protection. Compare Pincus Statement at 24-27 with Phelps testimony at 15. We also agree with the suggestion (at 27) that a database proprietor who seeks protection for a database that has been protected in an earlier form for 15 years be required to make the older, unprotected, database available. We disagree, however, that this requirement be limited to newer databases that have "substantial elements in common" with their ancestor. If this condition is placed on the defense, a user will not be able to determine whether the defense is available. Further, the obligation to make the ancestor available will further the public's interest in the availability of information and may still be useful to the user. We also disagree with the suggestion (at 38) that the old database need not be "as available" as the new version. Congress should not invite those seeking expanded database protection to engage in a game of cat and mouse to the detriment of public access. The higher education associations agree with the Administration's proposal (at 29-31) to harmonize the "additional reasonable uses" section with fair use law. We prefer, however, the implementation contained in the Phelps testimony (at 12-14) to the language offered by Mr. Pincus. We are particularly concerned that the language presented by Mr. Pincus' retains the "individual act" limitation, which effectively nullifies the exception. We also continue to support a clear exception for nonprofit educational, scientific and research activities such as that proposed at page 12 of the Phelps testimony. We share the Administration's concern about non-competitive suppliers of database products. Compare Pincus Statement at 27-29 with Phelps testimony at 1415. We agree that it is "important that any database protection legislation incorporate provisions that guard against the possibility that sole-source database providers will employ their new rights to the detriment of competition in related markets." Pincus Statement at 28. We also believe there is a real threat that the newfound protection could be exploited in a manner that leads to unreasonable costs for information products. Congress should not enact legislation that creates market-distorting power in the market for information products. Avoiding such a market impact is especially important with respect to database protection legislation, where the lack of a bright line between data and databases requires particular assurances that Constitutionally mandated access to information is preserved. We agree with the Administration that antitrust law alone is not sufficient to address this issue and believe a creative approach is necessary. We commend to the Subcommittee the approaches suggested at page 15 of the Phelps testimony and the recognition of a misuse defense suggested by Mr. Pincus (at 28). In light of the uncertainties about the effect of the proposed legislation and the dynamic but uncertain evolution of the digital environment, we support Mr. Pincus' suggestion (at 34-35) that the bill provide for ongoing monitoring of the effects of the legislation. Although it is critical that database legislation be, from the outset, carefully crafted, specifically targeted and protective of core principles of information access, the studies proposed by the Administration will provide valuable opportunities for evaluation and review. There are certain issues identified by the higher education associations in the Phelps testimony that are not addressed by the Administration. Without attempting to present an exhaustive list, these include issues such as the need for a clear definition of protected collections (Phelps testimony at 7-8), concerns with the standard of substantiality (Phelps testimony at 8-10), the need for a clear exception for nonprofit activities (Phelps testimony at 11-12), the need to ensure that institutions that act as online service providers are not subjected to liability for the conduct of users of their systems (Phelps testimony at 15-16), and clarification of the provisions relating to monetary relief and criminal liability (Phelps testimony at 16–17). We believe our proposals to address these issues are fully consistent with the goals presented by the Administration. We commend the Subcommittee for the open, deliberate, and thoughtful process you are employing to develop legislation governing the important, complicated issues concerning database protection. We appreciate this opportunity to comment on the Administration's proposals, and we look forward to continuing to work with |