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DATABASE PROTECTION -- TILTING THE COPYRIGHT BALANCE - II DISTORTING THE MARKET IN GOVERNMENT INFORMATION November 18, 1996 (revised November 21, 1996) Alan D. Sugarman, President, HyperLaw, Inc. email@example.com
As the database protection treaty proposals careens forward for adoption in Geneva in December, 1996, it increasingly is apparent that many of the potential consequences have received little if any discussion or thought. One can predict that even if adopted in Geneva, the treaty will never be approved by the Senate in anything close to its present form and without major, extensive revision of United States antitrust laws and reform of the attitude of the Department of Justice concerning competition and intellectual property. The purpose of this monograph is to suggest a few areas that require thoughtful analysis before United States copyright law is turned on its end and fundamental balances relating to the role of the government in the dissemination of information are upset. Each of these areas could and should receive complete analysis. The database protection proposal is described as a *sui generis* proposal. The proposals are an entirely new type of intellectual property protection outside of the existing United States copyright laws. Because these proposal are so radical, discussion has proceeded in a factual vacuum based on theoretical concepts, without even identification of the kinds of databases deserving protection or the type of protection that is appropriate for each type. One impact of the database protection proposals will be to limit the availability of governmental and other previously public domain information, and increase the costs to consumers. Also, these database proposals are inimical to the free flow of information on the Internet. It is customary for legislators to require various regulatory agencies to conduct impact studies prior to the adoption of a governmental regulations. The database protection proposals have surfaced for passage without any analysis whatsoever of the impact on the dissemination of government information and information markets in general. Moreover, there has been no discussion of the competitive impact of these database proposals. Additionally, the premise that the United States should make its copyright law consistent with European database protections ignores the safety valve of compulsory licensing available in European antitrust law, which safety valve is not extant, except in theory, in United States jurisprudence. The database protection proponents (drawn from one segment of the information industry) focused on the resolution of their own problems without *any* regard whatsoever for the consequences on others in the information industry, on government, or on the public. EFFECT ON GOVERNMENT INFORMATION One of the most serious and troubling consequences of the extension of database protection is the creation of incentives for the transfer of control of many types of government information and information developed at public expense and required for the conduct of democracy. Effectively, database protection, as presently envisaged, would create inexorable market incentives for the transfer of public information into the hands of private companies. At present, copyrightability of government information is circumscribed by express provisions of the Copyright Act. As a result, there are reduced incentives, especially after *Feist,* for private companies to assume the government role of distributing and archiving government information in accessible manner. In other words, if private companies cannot obtain copyright protection for government information, then there are reduced incentives for private companies to discourage government agencies from disseminating government information in equitable fashion and creating and maintaining their own archives of government information. If private companies can receive protection of databases of information originated by the government, then market conditions are created that make it predictable that individual government agencies will divest themselves of the responsibility to disseminate, maintain and archive information. This is what most United States courts have done. The market dynamic that will cause database protection provisions to encourage the privatization of government information can be illustrated as follows: Government Agency has been collecting and archiving information for both internal use as well as for public use. Collection and compilation of this information has budgetary demands. Government Agency realizes that it can reduce budgetary requirements by letting private vendor collect and compile information, as long as Government Agency obtains right to use the vendor's information. Private vendor similarly sees opportunity to assert database protection over this compilation. It conceives of a Faustian bargain and pressures legislature and Agency to reduce spending by having the government stop compiling and archiving information. Private vendor offers Agency the Faustian deal: it will provide free or reduced access to the databases for the Agency staff, if vendor can tie up the data. The a Agency and database vendor have a win-win situation. Agency reduces budget by off-loading function of collecting, distributing and archiving data and gets free access to data -- in return, database vendor obtains a protected database of government information. Public has a lose-lose situation. Data that previously could not be copyrighted is now owned by database provider. Competitors no longer have access to data and prices rise. Other government agencies at the same and other government that use this data pay increased costs for information, since they do not receive the benefit of the deal. Thus, although taxes to fund that one Agency's budget goes down, net taxes increase. In addition, public users are now "taxed" even more for access to data, and some data is now priced out of the range of individual consumers. The scenario above accurately describes the environment relating to court opinions and statutory and regulatory information in the United States. In states where deals like this have been negotiated between court systems and West, the costs for access to legal information are substantially higher -- these deals are only possible by the copyright claims historically asserted by West that are subject to attack by post-*Feist* legal proceedings -- an West seeks the refuge of new and radical database protection laws. It is suggested that the database protection provisions will only serve to create other market distortions which will place every government agency at all levels of government under lobbying and financial pressures to "privatize" government information. Few government originators of information can refuse the Faustian bargains offered by information vendors, which focuses on direct costs and benefits to an individual agency, without regard to overall costs. Similarly, we have learned that similar analysis of the market power forces were reached in soon to be release a report of The National Research Council "Bits of Power," which apparently will state that “market forces are not capable of protecting the public good associated with open access for scientists and educators.” COMPULSORY LICENSING OF COPYRIGHTED DATABASES IN EUROPE. European copyright law provides more protection for factual databases than does United States law and the EEC has adopted a Database Directive -- however, European jurisprudence (in practice) recognizes the concept of abuse of a dominant market position based upon a copyright, and Europeans courts are willing to impose compulsory licensing, something which United States courts and antitrust enforcement agencies are *extremely* reluctant to do. Indeed, policy statement of the Antitrust Division of the Department of Justice seemed to suggest that monopolies are okay if based upon government granted copyrights. See below. An illustration is the April 6, 1995 EEC case of *Magill TV Guide Ltd.* relating to television listings in Ireland and Northern Ireland.
“If a patent or other form of intellectual property does confer market power, that market power does not by itself offend the antitrust laws. As with any other tangible or intangible asset that enables its owner to obtain significant supracompetitive profits, market power (or even a monopoly) that is solely "a consequence of a superior product, business acumen, or historic accident" does not violate the antitrust laws. Nor does such market power impose on the intellectual property owner an obligation to license the use of that property to others.”Then, the information complex proceeded to have legislation introduced a few months later on November 25, 1995. Representative Hyde with the co-sponsorship of database protection sponsor Representative Moorhead, introduced the "H.R. 2674. Intellectual Property Antitrust Protection Act of 1995 which would have undercut any compulsory licensing of copyrighted information in the United States. In his comments, Hyde neglected to mention Magill and lauded the Department of Justice position. "Comments of Rep. Hyde (on behalf of Rep. Moorhead and others) on Introduction of H.R. 2674. Intellectual Property Antitrust Protection Act of 1995. The evidence is clear: the information industry complex and former Representative Moorhead wish to pick and choose from those provisions in EEC law that would be most helpful to their narrow interests. The proponents of database protection wish to implement these overbroad provisions in the United States without amendment to the antitrust laws to provide the concomitant compulsory licensing. Indeed, these proponents seek to amend United States law to take away the power of compulsory licensing from any possibly wayward courts. The Department of Justice has shown by its inaction in respect to the abuse by West Publishing Company of exercising its dominant position in caselaw publishing that in its view no abuse is sufficient to justify compulsory licensing under current law. In practice, the compulsory licensing of copyrights that constitute an essential facility in the United States is more an intellectual fiction than a reality. Indeed, the Department of Justice in recent amicus briefs opposing the copyright in West star- pagination citations, included a footnote that says, in essence, that although the copyright law will not protect the West citations, the database protection treaty if adopted *will* provide protection to West. See note below. Moreover, in a pending Tunney Act proceeding, the Department of Justice is supporting a West promoted license of West citations without a license of the associated text of opinions, without even studying commercial feasibility of the license rates, and argues that it would be unable to obtain such a license in litigation. It is apparent that in the United States, there should be no adoption of a database protection provision without *explicit and broad* legislative provisions for compulsory licensing, provisions that have not been weakened in midnight sessions by the same information companies intent upon the present database property protections. THE UNFOUNDED ASSUMPTION THAT ALL DATA IS ENTITLED TO EQUAL TREATMENT The database protection provisions assume implicitly that all types of information are entitled to equal and similar protection, and assume that once the threshold for protection is met, there is no proportionality for the extent of protection provided. There is of course no rationale for these assumptions. To the extent not grounded in the constitutional copyright clause, there is no legal reason at all for either equality of protection or the absence of proportionality between the effort expended in compiling a database and the protection afforded. For example, as a policy matter one could easily conclude that information that is obtained through government contracts, franchises or concessions or produced by regulated monopolies such as television stations and telephone companies may not be entitled to the same type of protection as other types of information compiled by private funds from numerous private sources. Indeed, the Supreme Court in the *Feist* decision seemed to be cognizant of the monopoly status of the telephone companies claiming rights to telephone subscriber telephone numbers. Similarly, there is a concept in copyright law known as a "thin copyright" which limits the exercise of a compilation copyrights based upon the nature of the compilation. These concepts should be legislative directed in any database protection legislation. It is appropriate that any database protection provisions in the United States take into account these issues and that protection for certain kinds of data be limited in duration and scope, to the extent that protection is determined to be appropriate. CONCLUSION The foregoing are merely some of issues that need to be thoroughly analyzed before these radical provisions are made a part of United States law. The database protection treaty should be tabled until adequate policy and legal studies and legislative hearings are completed and appropriate antitrust revision provisions drafted. Alan D. Sugarman Notes: 1. HyperLaw’s WEB Site www.hyperlaw.com contains information that supplements this monograph. 2. The Department of Justice in it Amicus Brief filed October 3, 1996 in Matthew Bender and HyperLaw v. West, after arguing that West star-pagination of court opinions was not protected by United States copyright law, then suggests at footnote 4 that that the issue of copyrightability is academic and that any decision of the court will be rendered meaningless by database protection proposals:
"Copyright is not the only conceivable legal regime for protecting the fruits of industrious collection. The Delegation of the United States of American recently proposed to the World Intellectual Property Organization an international treaty that would provide to the "maker" of certain databases the exclusive right to extract all or a substantial part of the contents, without regard to copyrightability. World Intellectual Property Organization, Preparatory Committee of the Proposed Diplomatic Conference (December 1966) on Certain Sui Generis Protection of Databases, CRNR/PM/7 (May 20, 1996). Legislation providing for such protection has been introduced in Congress. See H.R. 3531, 104th Cont., 2d Sess. (1996).” The Department of Justice Amicus Brief October 3, 1996.