Yahoo! is a global Internet media company that offers a branded network of comprehensive information, communication and shopping services to more than 60 million users worldwide each month. As the first online navigational guide to the Web, Yahoo! is the leading guide in terms of traffic, advertising, household and business user reach, and is one of the most recognized brands associated with the Internet.

The information technology economy, which has been a major contributor to the U.S. economy recently, is based on the broad availability and flow of information. It has developed in large measure because of the favorable environment created by our Nation's historical information policy-that no one may own the facts or information.

As the Supreme Court said in Feist v. Rural Telephone Service Company, all facts, scientific, historical, biographical, and news of the day, are part of the public domain available to every person. The process of restricting the availability of information in the information age is a cause of concern to anyone interested in the future of the Internet. We could have the most powerful computers, the most sophisticated search engines, and fully operational broad band, but none of it will mean a thing if there is not information to flow through those pipes.

Yahoo! is somewhat uniquely positioned to comment on this issue. We have spent and continue to spend a great deal of effort developing our own databases. At the same time, we aggregate and disseminate large amounts of information from other sources. In our view, legislating on the availability of information is not unlike two porcupines making love: it has to be done very carefully. And in both cases, there are significant unintended consequences which have to be avoided.

We support the targeted approach of H.R. 1858 introduced by Chairman Bliley, Tauzin, Oxley, and ranking members Dingell Markey and Towns. It is balanced and measured, and we appreciate the thought and effort that went into crafting this compromise.

I mentioned the potential for unintended consequences in legislating on this issue. Any type of information that is currently provided on the Internet could be jeopardized by an overly broad statute or one that does not adequately define critical terms.

For example, as was reported in the Washington Post on June 5, the New York Times is challenging Amazon.com's use of the Times best seller list. The best seller list is by definition a database since it lists those books of which the most copies have been sold. While Amazon.com uses the list in its entirety, it is doubtful that it is competing with the Times. It is also doubtful that someone would not buy the Times just because the best seller list happens to be available on Amazon.com. To the contrary, Amazon.com's publication of the list is an effective advertisement for the Times that probably works to its benefit.

The Internet has become known as a rich source of information for price-conscious consumers. For example, it may provide a service to consumers by disseminating lists of the lowest air fares to various locations around the world. These listings are often compiled from a variety of sources.

57-446 99-3

Notwithstanding that a handful of facts are collected from each of several sources, and notwithstanding that the new listing is more comprehensive than any set of facts on which it is based, this collection of lower air fares could be considered a misappropriation if the statutory language sweeps too broadly. The effect of such uncertainty would be to chill the collecting and providing of such information to consumers.

Even a reasonable-use provision comparable to fair use under copyright law would not compensate for lack of clarity in the definitions. It would require years of judicial interpretation in order for those who develop transformative uses of data to understand what we could and could not do.

The aggregating and dissemination of as many different types of information as we can imagine would be subject to the same chilling effect. Those who compile and analyze stock information, restaurant and hotel rates, sports statistics, listings of concert schedules from across the country, could be dissuaded from continuing to provide this valuable information.

One of the wonders of the Internet is making available to the average person a lot of information in a short time. Parents of a 10year-old child who has been diagnosed with a serious disease may want to obtain as much information as possible about the disease and quickly. If someone has collected information from this particular disease from a variety of sources, including a voluminous directory of all diseases, should this constitute a misappropriation?

Should a collection of information regarding hospitals that specialize in that disease be denied to those parents because it involves taking important information from each of several sources? Mr. Chairman, this is directly antithetical to the constitutional purpose of copyright, law which is to promote the progress of science and useful arts.

Another strength of our medium is the development of new enterprises, creative ideas, and fresh approaches to difficult problems is limited only by our imagination. Do you want the availability of facts or information on the Internet to depend on a detailed legal review to require every Web site that aggregates information to have its own general counsel.

As a creator of databases, we appreciate the need for protection. One of Yahoo!'s most important assets is our Internet directory, which has required significant resources to assemble.

H.R. 1858 offers protection against those who would lift someone else's database, but this is not the only protection available. Existing copyright law gives database publishers significant protection. In addition to copyright, database publishers can rely on numerous other forms of protection including trademark, trade secret, contract, State common law, and technical protection.

One final point. H.R. 1858 has a critical provision which protects Yahoo! and certain other search engines against liability for linking to or listing categories of data. Absent such a provision, Yahoo! and others could be liable simply for acting like a card catalog of facts and information available on the Internet.

If you have any questions that you would like to ask, I will be available for questions.

[The prepared statement of Matthew Rightmire follows:]

PREPARED STATEMENT OF MATTHEW RIGHTMIRE, DIRECTOR OF BUSINESS
DEVELOPMENT, YAHOO! INC.

Chairman Tauzin, Ranking Member Markey, and Members of the Subcommittee, I am Matt Rightmire, Director of Business Development for Yahoo! Inc. Thank you for the opportunity to appear before you today on a subject very close to our hearts. Yahoo! is a global Internet media company that offers a branded network of comprehensive information, communication and shopping services to 60 million users worldwide. As the first online navigational guide to the Web, Yahoo! is the leading guide in terms of traffic, advertising, household and business user reach, and is one of the most recognized brands associated with the Internet.

The information technology economy, which has been a major contributor to the U.S. economy, is based on the broad availability and flow of information. It has developed in large measure because of the favorable environment created by our nation's historical information policy-that no one may own facts or information. As the Supreme Court said in Feist v. Rural Telephone Service Co. "all facts-scientific, historical, biographical and news of the day... are part of the public domain available to every person.

The prospect of restricting the availability of information in the Information Age is a cause for concern to anyone interested in the future of the Internet. We could have the most powerful computers, the most sophisticated search engines, and a fully operative broadband system, but none of it will mean much without the information to flow over those lines.

Yahoo! is somewhat uniquely positioned to comment on this issue. We have spent and continue to spend a great deal of effort developing our own databases. At the same time, we aggregate and disseminate large amounts of information. In our view, legislating on the availability of information is not unlike two porcupines making love: it must be done very carefully. And, in both cases, there are significant unintended consequences which must be avoided.

We support the targeted approach in H.R. 1858 introduced by Chairmen Bliley, Tauzin, and Oxley and Ranking Members Dingell, Markey and Towns. It is balanced and measured and we appreciate the thought and effort that went into crafting this compromise.

I mentioned the potential for unintended consequences in legislating on this issue. Any type of information that is currently provided on the Internet could be jeopardized by an overly broad statute or one that does not adequately define critical terms. For example, as was reported in The Washington Post on June 5, 1999, The New York Times is challenging Amazon.com's use of the Times' bestseller list. The bestseller list is, by definition, a database since it lists those books of which the most copies have been sold. While Amazon.com uses the list in its entirety, it is doubtful that it is competing with the Times. It is also doubtful that someone would not buy the Times just because the bestseller list was published on Amazon.com. To the contrary, Amazon's publication of the list is an effective advertisement for the Times that probably works to its benefit.

The Internet has become known as a rich source of information for price conscious consumers. For example, it may provide a service to consumers by disseminating lists of the lowest airfares to various locations around the world. These listings are often compiled from a variety of sources. Notwithstanding that a handful of facts are collected from each of several sources, and notwithstanding that the new listing is more comprehensive than any set of facts on which it is based, this collection of low airfares could be considered a misappropriation if the statutory language sweeps too broadly.

The effect of such uncertainty would be to chill the collecting and providing of this information to consumers. Even a reasonable use provision comparable to fair use under copyright law would not compensate for lack of clarity in definitions. It would require years of judicial interpretation in order for those who develop transformative uses of data to understand what we could and could not do.

The aggregation and dissemination of as many different types of information as we can imagine would be subject to the same chilling effect. Those who compile and analyze stock information, restaurant and hotel rates, sports statistics, listings of concert schedules from across the country, the cost of a wide variety of consumer items and pertinent statistics about universities around the world could well be dissuaded from continuing to provide this valuable information to consumers.

One of the wonders of the Internet is making available to the average person a lot of information in a short time. Parents of a 10 year old child who has been diagnosed with a serious disease may want to obtain as much information as possible about the disease, and quickly. If someone has collected information about this particular disease from a variety of sources, including a voluminous directory of all dis

eases, should this constitute a misappropriation? Should a collection of information regarding hospitals that specialize in that disease be denied to those parents because it involves taking important information from each of several sources? Mr. Chairman, do we want to require the individual creating these transformative uses to start the research at ground zero or otherwise be relegated to a pay per fact system? This would be directly antithetical to the Constitutional purpose of copyright law which is "to promote the progress of science and useful arts."

Another strength of our medium is that the development of new enterprises, creative ideas, and fresh approaches to difficult problems is limited only by our imagination. Do we want the availability of facts or information on the Internet to depend on a detailed legal review and to require every web site that aggregates information to have its own general counsel?

Let me make clear that in virtually every case in which Yahoo! places a database on the Internet, we license the information from the originator or from one who has developed transformative uses of the data. For example, Yahoo! gets information from Sports Ticker, which is owned by ABC/ESPN which in turn collects the information from a variety of sources. If legislation were to create in effect, a statutory monopoly on facts, then these sources of information might dry up or would only be available at monopoly prices. That could, just to pick one example, make it impossible for Yahoo! to provide an analysis of LSU football to those who might be interested but find themselves far from their home state more often than they would like. As a creator of databases, we appreciate the need for protection. One of Yahoo!'s most important assets is our Internet directory, which has required significant resources to assemble. H.R. 1858 offers protection against those who would lift someone else's database. But this is not the only protection available. Existing copyright law gives database publishers significant protection. In addition to copyright, database publishers can rely on numerous other forms of protection, including trademark, trade secret, contract, state common law misappropriation, and technological protection.

One final point. H.R. 1858 has a critical provision which protects Yahoo! and other search engines against liability for linking to or listing categories of data. Absent such a provision, Yahoo! and others could be liable simply for acting like a card catalogue for facts and information available on the Internet.

Mr. Chairman, Ranking Member Markey and Members of the Subcommittee, this concludes my prepared testimony. I would be happy to answer any questions that you might have.

Mr. TAUZIN. Thank you.

The Chair is pleased to recognize Henry Horbaczewski, vice president and general counsel of Reed Elsevier, Inc., located in Massachusetts.

STATEMENT OF HENRY HORBACZEWSKI, VICE PRESIDENT AND GENERAL COUNSEL, REED ELSEVIER INC.

Mr. HORBACZEWSKI. Thank you for giving me this opportunity to testify today. I am the general counsel of Reed Elsevier, Inc. And I am testifying on behalf of the Coalition Against Data base Piracy, an organization of many large and small database makers to which we belong.

My company produces many databases, including Lexis/Nexis, the Congressional Information Service, books in print and industrial databases for the construction, manufacturing, entertainment, oil, gas and petrochemical industries. So we feel that we do have some experience in this field.

I first of all would like to thank the subcommittee for recognizing the importance of protecting databases against misappropriation. The boom in telecommunications and computers has been largely driven by the demand for easier and faster access to retrievable information, in other words databases; and a law which does not protect databases or the database creation process threatens the information economy itself.

I have submitted written testimony which outlines how regrettably, we believe, H.R. 1858 does not protect the database production process in some threshold ways. But I thought in the short time available, it would be better if I illustrated my concerns with specific examples.

For example, one of our subsidiaries, MDL, a relatively small company which spends millions of dollars to produce several biochemical databases that allow both commercial and academic chemists to identify and electronically manipulate molecular structures, MDL only has several hundred employees, but they are quality jobs.

They have many, many Ph.D.s. Its commercial customers are large pharmaceutical companies that use the databases for new drug research and development. They pay license fees established by market forces which are not insubstantial, providing MDL with a revenue needed for investment to maintain its databases and create new ones.

But MDL also licenses these databases to academic chemists. The difference is that the not-for-profit users are charged a differential fee structure, which is less than one-tenth of what we charge our commercial customers. This greatly reduced price is only possible because we legitimately restrict the ability of our academic customers to use the databases for commercial purposes.

Under H.R. 1858, we believe that this would change. Let's assume, for example, a pirate took 50,000 of the approximately 70,000 bioactivity datasets in one of our databases and then added several thousand databases from another source. The resulting database would probably not be a duplicate as defined by the bill and therefore the taking would not violate it.

In addition, we would no longer be able to give academic institutions a reduced license fee for limited rights without running afoul of the misuse definition in the bill. We would have no recourse to prevent one of our giant commercial customers from taking a single copy, even lawfully acquired, and making it available over the Internet to hundreds of thousands, even if its research scientistsbecause this would not be a public distribution which is the only kind the bill prohibits.

In fact, the purpose would be research and the company could use our databases without any restrictions or payment to us, even though the research was commercial and it was intended to make money for the customer.

And finally, even though the piracy met the narrow standards of the bill, MDL could not sue to obtain an injunction to stop the bleeding, nor could it sue to get compensation for its lost profits. Instead it would have to depend on the FTC, which as Mr. Pincus has pointed out, has limited resources and a different mission to cure consumer fraud and antitrust violations, to see whether they chose to investigate and prosecute, which I understand is a 3 or 4 year process.

Even then, the best we could realistically expect would be a consent decree in which the pirate promised never to do it again, and we would receive nothing. Also it is significant that the bill would not help U.S. database makers internationally. We do not believe that H.R. 1858 is comparable to the European Union directive on