no surprise that the Administration is concerned that Title I of H.R. 1858 does not have a general "permitted uses" provision analogous to fair use in copyright law. Section 103(d) provides an exception directed at scientific, educational, and research uses. We intend to examine this provision more carefully, but initially we are concerned that this exception is both ambiguous and overbroad. We note that section 103(d) shields the activity of "duplicat[ing] the same information"; it does not shield distribution-the focus of the basic prohibition. As used in section 103(d), “duplicates" could be understood in either of two senses. First, a scientific researcher could "duplicate" a database in the sense of independently recreating the same database-but this type of activity already falls outside the basic prohibition and is further shielded by section 103(a). Second, "duplicates" could mean reproduces, as when an educator leaves a hard-bound database on a reserve shelf with instructions for his students to individually photocopy the database for use in class.

It appears that this latter type of activity could be shielded by section 103(d) because while the activity might be "in competition" with the database's sales (section 101(5)), section 103(d) requires a higher barrier that it be in "direct commercial competition." In the circumstance described, the educator might be able to orchestrate a pattern of extensive copying of a database and avoid all liability. The phrase "direct commercial competition" creates a high barrier, such that even if section 103(d) shielded "duplicates and/or distributes," it appears that an educator e-mailing a database to 100 of his students would still incur no liability-because her activities would not be in direct commercial competition. We note that this type of conduct could occur even without section 103(d) on the grounds that the basic prohibition requires distribution "to the public," an ambiguous phrase that could be argued to exclude a distribution limited to students in a particular class, members of a particular learned society, or all members of senior executives of a corporation. In respect to original works of authorship, these types of activities are often well beyond the scope of the fair use doctrine of copyright law. As discussed above, 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 acts of duplication without prohibiting uses of data by individuals that should be permissible under the First Amendment.

F. Sixth Principle-Ensure protection for U.S. companies abroad and promote harmonization

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.

There has been some discussion in the United States about the effects of the European Union's 1996 Database Directive (EU Directive) on American database producers. The EU Directive requires European Union Member States to provide sui generis protection for databases, but denies this protection to nationals of any foreign country unless that country offers "comparable protection to databases produced" by EU nationals.19

The Administration opposes such "reciprocity" requirements, both domestically and internationally. We believe that commercial laws (including intellectual property and unfair business practices laws) should be administered on national treatment terms, that is, a country's domestic laws should treat a foreign national like one of the country's citizens. This principle is embodied in Article 3 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) as well as more generally in the Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and Artistic Works.

The Administration believes that Congress should craft U.S. database protection legislation to meet the needs of the American economy. A database protection law properly balanced for the robust digital economy of the United States will serve as a model for other countries that hope to build businesses, employment, and economic activity in the new millennium.

At the same time, we believe that a misappropriation law along the lines of H.R. 1858 or H.R. 354 (with proper attention to the concerns we have identified with re

19 This is established in Recital 56 of the EU Directive. Recital 56 also provides that a foreign national will enjoy database protection when those "persons have their habitual residence in the territory of the Community." This may provide protection to American database producers who have substantial business operations in EU Member States. Pursuant to Article 11/3 of the EU Directive, a determination whether a foreign state offers "comparable" protection must be made by the European Council based on recommendations from the European Commission.

spect to each bill) will amply provide protection_"comparable" to that provided by national laws implementing the EU Directive. From the perspective of a private database producer, the question should be whether a U.S. misappropriation law provides a cause of action and meaningful remedies in the same range of situations in which the laws implementing the EU Directive provide a cause of action and meaningful remedies. 20

For the reasons stated above, the Administration would oppose any effort to put automatic reciprocity provisions into American law in this area. In fact, United States Trade Representative Charlene Barshefsky cited the reciprocity provision of the EU Directive as a subject of concern in announcing the Administration's 1998 Special 301 Review. While we believe that a United States database protection law should adhere to a national treatment model, the Administration would support an appropriately crafted provision that would allow the President to affirmatively deny database protection to foreign nationals on the appropriate finding by Executive Branch agencies such as the USTR and/or the Department of Commerce. This could, for example, be achieved by statutory language or legislative history making database protection for foreign nationals subject to USTR's Special 301 process.

G. Additional Issues

1. Administration Study

Section 108 of H.R. 1858 provides that the FTC will report to the Congress on the effects of the database protection legislation not later than 36 months of the date of enactment of the legislation. While the Administration has advocated and continues to advocate the study of the effects of any database protection legislation, we believe that an interagency process would be preferable to analysis resting solely in the hands of an agency, particularly the agency being called upon to enforce the legislation. The Administrations believes that such a government study should be conducted with the participation of the Department of Commerce, the Office of Science and Technology Policy, and the Department of Justice in consultation with the Register of Copyrights. These agencies have, over the past few years, devoted the most resources to the study of this issue and their expertise should be utilized. 2. The Misuse Doctrine

The Administration supports the idea that the intellectual property misuse doctrine should be extended to any database protection law, but we have not had sufficient time to study the effects of the various provisions of section 106(b). We note that these provisions appear to expand the misuse doctrine from its traditional tests (for example, subsections 106(b)(1), (3) and (6)) into relatively untested areas (for example, subsection 106(b)(4)). We believe this requires careful consideration.

I thank the Subcommittee for the opportunity to appear before you today and look forward to working with you during the legislative process. I would be pleased to answer any questions you may have at this time.

Mr. TAUZIN. Thank you.

Next is Edward Black, president and CEO of the Computer & Communications Industry Association.

STATEMENT OF EDWARD J. BLACK, PRESIDENT AND CEO, COMPUTER & COMMUNICATIONS INDUSTRY ASSOCIATION Mr. BLACK. Mr. Chairman, Mr. Markey, members of the subcommittee, thank you for having this hearing. I want to express our support and gratitude to Chairman Bliley for introducing H.R. 1858, the Consumer Investor Access to Information Act, and to the core cosponsors, Chairman Tauzin, Mr. Oxley, Dingell, Markey, and Towns.

We have now entered the information age. The issue before us requires striking the proper balance between legislating to halt the misappropriation or theft of databases and overly broad legislative proposals that stifle creativity in commerce.

20 The EU Directive is not a national law. It "directs" the Member States of the EU to implement a legal framework. H.R. 1858 would have to be compared, for example, to German, Dutch, and/or Italian law to make the proper comparison of national law to national law. Such a comparison is well beyond the scope of this statement.

It is critical that Congress address the single issue that it must confront, misappropriation, and not attempt to create a broad regime of statutory protections that may well create more harm than good. We should not expand or anticipate what is at issue and open up this new electronic world to additional regulation, uncertainty, and litigation.

Databases are compilations of facts, data and information. Facts are always considered to be in the public domain. It is this basic notion that allows two distinct authors to create two databases out of the same set of facts.

The issue before the 106th Congress is the piracy, or the misappropriation, of the databases. Databases and legislation that address misappropriation, theft, or piracy are matters to be addressed under the commerce clause.

Databases are items of commerce. The same facts used to create one database may well be used to create others which address the same subject matter, or they can be used to create new databases that are different from the first. These other databases can offer additional values or benefits to the market, and can often transform the facts in such a way not contemplated by the original creator.

The basic problem with an antipiracy solution based in copyright law is that it necessarily grants the first organizer a significant marketplace advantage. Copyright-like protection would give the first organizer the right to control competition and other transformative value added or downstream uses of the information collected, as well as any worthwhile fraction of the collection.

This may be particularly unwise in the information age. The Internet makes it easier for the average person to seek and use information from any subject or discipline. This is a great development. Searching for and using information will become even easier in the future so long as we do not do harm to the exploding medium of the Internet.

Any legislation that restricts or constricts the Internet's great benefit and its growth and utility must meet, we think, a heavy burden of necessity; and further, it should not run afoul of the law of unintended consequences. The Web is an evolving medium, and its growth can best be assured with as little government regulation as possible.

CCIA and its members have strongly resisted unnecessary government regulation of the Internet. As a general rule, we believe that the Internet will work best through self-regulation and agreements reached voluntarily among those that build and use it. Although people who create a work used by others understandably want to benefit financially and recoup their investment, we cannot support proposals that would confer huge market control to one party simply because it was the first to publish.

The bill before you today adequately addresses the problem without conferring control of facts and information to an individual which should properly reside in the public forum. It does not restrict use of data compiled in database form from being used in a second database. It avoids establishing a new regime of onerous Federal regulation.

With the adoption of the first amendment over 200 years ago, we have operated as a Nation that values the free flow of facts and information. Now with the Internet just a few years old, with information more available than ever, we should promote in every way possible, not restrict, the flow of facts and data in the information age. Mr. Chairman, thank you again for the opportunity to testify today.

[The prepared statement of Edward J. Black follows:]

PREPARED STATEMENT OF EDWARD J. BLACK, PRESIDENT AND CHIEF EXECUTIVE OFFICER, COMPUTER & COMMUNICATIONS INDUSTRY ASSOCIATION

Chairman Tauzin, Ranking Democrat Markey, and members of the Subcommittee, I am Ed Black, President of the Computer and Communications Industry Association. CCIA is made up of small, medium and large companies that market and sell computer equipment, software, communications and network equipment, telecommunications and on-line services, re-sellers, system integrators and others in related business ventures. Our member companies employ well over half-million workers and generate annual revenues in excess of $300 billion. Established over 25 years ago, we are committed to "Open Markets, Open Systems, Open Networks and Full, Fair and Open Competition." Thank you for inviting me to testify today and more importantly thank you for holding this hearing on the critical issue of database protection.

Let me begin by expressing our support and gratitude to Chairman Bliley for introducing H.R. 1858, the Consumer and Investor Access to Information Act of 1999 and to his original cosponsors, Chairmen Tauzin, Oxley and Ranking Democrats Dingell, Markey and Towns as well as all of the other members of the House who have expressed support for this legislation.

We have now entered the "Information Age" and we are faced with the issue of striking the proper balance between legislating to halt the misappropriation or theft of databases and overly broad legislative proposals that stifle creativity and commerce. The fact is that we do not adequately know what impact legislation on database development, enacted today will have in the future. Therefore, it is critical that Congress address the single issue that it must confront-misappropriation—and not attempt to create a broad regime of statutory protections that may well create more harm than good. If there is a single guiding principle I could pass to you-the members of the Commerce Committee it is that any legislation on this subject should address the discreet issue in controversy, address thoroughly, but we should not expand or anticipate what is at issue and open up this new electronic world to additional regulation, uncertainty and litigation.

Please keep in mind that databases are compilations of facts and information. The ability of databases to find a place or niche in our economy is based on the method of organization and the demand for the underlying information. The bill you are currently considering and other legislative proposals are attempts to strike the proper balance between pirating another's work and promoting competition.

COMMERCE CLAUSE V. COPYRIGHT:

To the extent the issue before the 106th Congress is piracy or the misappropriation of databases, this is not a matter to be solved in Copyright Law. It seems clear that the ability to obtain a copyright for a database is controlled by the Feist decision. In that decision, the Supreme Court held that the Copyright Clause2 of the Constitution protects only original works of authorship and does not allow for protection of factual information or data. In determining originality the Court required that (1) the author originally created the work and (2) that it contain a minimal degree of creativity.3 While it is important to remember that this is the state of current copyright law today, as it applies to databases, it does not mean that databases cannot obtain copyright protections.

Yet while copyright protects the originality or expressive element of databases, it does not protect the underlying facts used to create the database. Facts are always considered to be in the public domain. It is this basic notion which allows two distinct authors to create two databases out of the same set of facts. This does not permit the second author to copy the first's compilation and sell it in commerce. It also

'Feist Publications v. Rural Telephone Service Co., 499 U.S. 340 (1985)

2U.S. Const. art. I, Sec.8, cl. 8.

3 Feist, 499 U.S. at 345.

does not allow the original author to lock-up the underlying facts used in his/her compilation so that no other compilation could be created and compete for acceptance in commerce.

It is for this very reason that we should recognize that databases and legislation that addresses misappropriation, theft or piracy are matters to be addressed under the Commerce Clause. Databases are items of commerce and the same facts used to create one database may well be used to create additional ones addressing the same subject matter. However, it may be just as likely that these same facts would be used to create new databases that are different from the first, that offer additional values or benefits in a market or that transform the facts in such a way not contemplated by the original creator. The ability to take the same facts and make a new "product" is basic to the creation and flow of commerce. To the extent that legislation is needed, it must allow for two similar databases to compete as well as to take the underlying information or facts and create new databases the marketplace to determine the "winner."

The basic problem with an anti-piracy solution based in copyright law is that it necessarily grants the first author a significant marketplace advantage. Any other party seeking to offer a competing database in commerce would almost certainly have to obtain a license from the original author. That gives the first party the right to control competition and other transformative, value-added or downstream uses of the information collected as well as any worthwhile fraction of the collection. The effects on commerce are readily apparent where one party can pick and choose whether anyone would compete with them.

IMPACT ON THE INTERNET:

This problem is especially acute in the information age. The World Wide Web creates and publishes information in the blink of an eye. It takes facts, owned by the public, and places them in a variety of files, uses, compilations or databases for presentation to the consumer.

Some of these compilations are derivative of another's work; some may take the same facts and develop an entirely new product. But we all must agree that it has never been easier for the average person to seek and use information from any subject or discipline for almost any use than it is now. We can be assured that the search and use of information will become even easier in the future, so long as we do not do harm to the exploding medium of the Internet. The growth of the web, the amount of information it has currently, how much is being added at any given time and how that information is being used may not be quantifiable with any degree of certainty. We do know that the web will become an increasingly significant tool for commerce, education and research. Hence, any legislation that restricts or constricts its growth and utility must be placed under heavy scrutiny. Furthermore, this same legislation should be crafted so that it addresses the problem at hand and does not run afoul of the law of unintended consequences. The web in an evolving medium and its growth can best be assured with as little government regulation as possible. Given the choice between a proposal that confers control for a period of time and over a myriad of uses for facts and information in the public domain. Or a proposal that simply addresses the threat of “parasitic” conduct by competitors that infringes on rights that exist in contracts or Copyright law today; we should choose the narrower approach. H.R. 1858 accords the necessary protections to ensure vigorous and robust competition in databases, protects the creation of new compilations or databases and appears to do little harm to the growth and promise of the world wide web.

CCIA and its members have strongly resisted government regulation of the Internet. As a general rule, we believe that the Internet will work best through self-regulation and agreements reached voluntarily among those that build and use it. However, we must address a problem which goes to the ability of providers and users to employ the Internet to its fullest. No one can support piracy or the gross misappropriation of another's work. People who create a work used by others understandably want to benefit financially and to recoup their investment. However, we cannot support proposals that would confer time periods and market control to a one party simply because they were the first to publish. Chairman Bliley's bill accomplishes the three goals of penalizing those who pirate another's work, allowing those who create to realize a benefit from their work and avoiding control of currently developed markets as well as those to come "downstream." All of this is accomplished without the crushing burden of federal regulation of the Internet. It preserves the promise and the potential of the Information Age.