Intellectual property issues: Protecting U.S. databases from piracy

In the past decade, recognition of the importance of "intellectual assets"-to both corporations and nations competing in the global economy-has surged. The truth is that the past few years have only hastened what was already a well-established transformation of the American economy. The dawn of the "Information Age" goes at least back to the 1950s when white collar workers-information processors-first outnumbered blue collar workers in the American work force.

Along with recognition of the importance of intellectual assets, strong interest has developed in intellectual property-copyrights, patents, trademarks, trade secrets and the like. The United States has successfully advocated the development of a stronger international system to protect intellectual property and continues to press for serious implementation and enforcement of intellectual property laws all over the world. At home, we have strengthened or expanded intellectual property law in a number of ways-some of them controversial. And more changes could be on the way. Following those developments is important for corporate executives because new laws can create pitfalls and opportunities.

One area in which U.S. intellectual property law might change in the near future is in database protection. This intellectual property issue should not be confused with the challenges of protecting the privacy of individuals and their personal data.

The question about database protection stems from the 1991 Feist decision in which the Supreme Court unanimously decided that a large database with an obvious organization-in this case, an alphabetical telephone book-had no copyright protection because it manifested no "creativity." The Feist decision came just as more and more database products were entering the marketplace and just as the Internet was producing a quantum change in the ability to copy and transmit those databases. Since Feist, several cases have suggested that database piracy could be a real problem in the future. Other countries have noted that their domestic copyright laws might have a similar shortcoming.

In 1996, the European Union issued a directive creating a special form of legal protection for databases. At the same time, various proposals began percolating in Congress to address the problem in our country. Two proposals were introduced in the House of Representatives. One, H.R. 354, is a refinement of a bill that passed the House twice in 1998. It came close to becoming law last year, but was ultimately taken out of a package of changes in U.S. intellectual property law adopted in October.

As presently drafted, H.R. 354 would give a database producer a cause of action for "misappropriation" when someone takes all or a substantial part of the database and causes material harm to the primary market of the database, or markets "related" to that primary market. The misappropriation approach is in the spirit of American cases that have held defendants liable when taking information hurts the commercial prospects of the party that developed the information.

More recently, a bill was introduced in the House Commerce Committee, H.R. 1858, that would give the Federal Trade Commission the power to go after database "free-riders" who take all or a discrete part of a commercial database for their own commercial uses without paying the database producer.

The administration, like most parties who have studied the issue, believes that the Feist decision produced a genuine gap in the incentive structure created by intellectual property laws. At the same time, we believe that any database protection law must be carefully crafted so that it does not disrupt scientific research and "transformative" uses of data in new products and services. The administration also believes that any database protection law in the United States should be relatively simple, transparent and have "fair uses" at least coextensive with the fair use doctrine under copyright law. Those are all important considerations for the First Amendment analysis of such a law as well.

For someone managing the information assets of a corporation, that kind of law could be an important development. First, the ultimate contours of a U.S. database protection law will affect how easily American companies enjoy protection in European countries under the European Union’s Database Directive. The Directive provides for "reciprocal" protection, so the European Union will have to determine that any U.S. law is comparable to the European database protection laws before American nationals will enjoy rights under the European laws. Second, the law could make it possible for companies to market datasets that they have previously kept in-house. For example, an executive at a large map company commented recently that his company might market its digitized geographic data-what’s used to generate its commercial maps-if it knew that there was some protection against the database being taken without compensation. Corporate executive need to consider ways in which any new database protection law might apply to a wide range of company assets-from sales contact and customer lists to datasets built into software. Finally, companies might need to think about the ways any new database protection law could expose them to liability for their present practices of acquiring information.

The present versions of H.R. 354 and H.R. 1858 can be found at www.thomas .loc.gov.