House Finance Subcommittee Approves Database Bill

(July 22, 1999) The House Finance Subcommittee approved by unanimous voice vote an amended version of HR 1858, a bill pertaining to theft of databases. The Subcommittee amended Title II of the bill, regarding protection of real-time market data.

Related Pages
Summary of Database Protection Bills.
HR 1858, as introduced 5/19/99.
Oxley amendment, adopted 7/21/99.

There are presently two competing bills pending in the House: HR 1858 IH and HR 354. Both deal with the appropriation of other people's databases. HR 1858, which is sponsored by members of the Commerce Committee, basically provides that databases will remain legally unprotected, with the one exception of real-time stock market data, which is the subject of Title II of the bill. Beyond this, HR 1858 basically provides no protection (beyond the possibility of an FTC civil proceeding). It also preempts state remedies and remedies remaining under the Feist decision.

The other bill, HR 354, the Collections of Information Antipiracy Act, creates a new Lanham Act type protection for those who develop databases. It is sponsored by members of the Judiciary Committee. It was approved by that Committee on May 25.

Title II of the HR 1858, which the Finance Subcommittee marked up on July 21, deals with real time market data. This is the stock price information developed and then sold by exchanges, such as the New York Stock Exchange. The NYSE then sells this real time data to brokerages and others. This is a major source of revenue for the exchanges. Currently, there is no law preventing the piracy of this data.

Rep. Tom Bliley (R-VA), the Chairman of the Commerce Committee, and sponsor of HR 1858, had this to say at the markup. "Title II of H.R. 1858 addresses the important role of databases in the stock market and the market information that these databases provide to today's investors. The bill protects the conduits of this vital information - namely the exchanges and other disseminators of stock prices - by providing a new federal remedy against pirates and hackers who could undermine the integrity and value of the databases they publish."

Rep. Oxley

Rep. Mike Oxley (R-OH), the Chairman of the Finance Subcommittee, and a cosponsor of HR 1858, presided at the hearing, and offered the substitute amendment. He stated that "this legislation is designed to protect the ability of the exchanges -- and other market information providers -- to continue to provide real-time market information today, subject to the oversight of the Securities and Exchange Commission. And it does so without creating a property right in that information. That is the key to ensuring that investors continue to have access to the data they need to make investment decisions every day."

The substitute amendment adopted by the Subcommittee contains several changes. Rep. Oxley summarized these at the markup.

"First, the amendment insures that Title II of the bill exclusively governs the unauthorized extraction, sale, distribution, or redistribution, or other dissemination of all market information, including both real-time and delayed information."

"Second, the amendment clarifies the preemption provision of the bill, specifying that the bill preempts state laws that provide rights that are different from, or in addition to the rights and remedies established in Title II or that are inconsistent with the bill. I understand there remains some concerns among some market participants with respect to this language. I want to work with them as we proceed to full committee to improve this language consistent with our attempt to provide an exclusive federal regime governing the regulation of securities market data collection and dissemination, building upon the goals and purposes of the federal securities laws that already governs those activities."

"The amendment strengthens the provisions that preserve the existing ability of parties to freely enter into contracts regarding real-time market data, and to enforce those contracts in state court."

"And finally, the amendment provides -- improves the provision permitting the Securities and Exchange Commission to promulgate rules regarding the extent to which market information is deemed to be real-time market information, insuring that those rules will be consistent with the broad provision of section 11A of the SEC Act, which governs the collection and dissemination of market information today."

Related Stories
House Finance Subcommittee Holds Hearing on Real-Time Market Databases, 7/1/99.
House Telecom Subcommittee Holds Hearing on Database Protection, 6/16/99.

On June 30, the Finance Subcommittee held a hearing on Title II of HR 1858. On June15, the Telecommunications Subcommittee held a hearing on the rest of the bill. The Telecom Subcommittee has yet to mark up the remainder of HR 1858. Then, the full Commerce Committee will mark up the bill.

The Subcommittee amended and approved HR 1858 quickly and smoothly. Representatives Bliley, Oxley, and Ed Markey (D-MA) all spoke in favor of the bill. However, Rep. Robert Ehrlich (R-MD) reserved the right to offer amendments when the full committee takes up the bill. He stated that his concerns were the language regarding preemption of state law, and the definition of "market information processor." Rep. Oxley offered to work with Rep. Ehrlich on those matters in the interim.

Also, Rep. Markey said that the bill's one year statute of limitations on civil suits is too short. However, he offered no amendment. He is an original cosponsor of HR 1858.

He stated at the hearing that, "I support the language of Title II, although I believe that there may be some areas where the bill may need some additional work. For example, I would personally like to see a longer statute of limitations than the one year statute of limitations provided for in paragraph 5 of the bill for any private right of action. Those who are misappropriating a database are likely to attempt to conceal their actions. ..."

He continued: "I also understand that some more work may need to be done on the state preemption language." However, Rep. Markey then discussed HR 1714, an electronic signatures bill which was marked up at the same hearing. He was not clear as to whether he was commenting on the preemption language in HR 1714 or HR 1858. Both have preemption sections.

The Oxley amendment, and the bill as amended, were both approved by a unanimous voice vote. The members of the subcommittee who were present for the vote were Tom Barrett (D-WI), Brian Bilbray (R-CA), Tom Bliley (R-VA), Lois Capps (D-CA), Diana DeGette (D-CO), Robert Ehrlich (R-MD), Greg Ganske (R-IA), Ralph Hall (D-TX), William Luther (D-MN), Ed Markey (D-MA), Mike Oxley (R-OH), Bart Stupak (D-MI), and Heather Wilson (R-NM).  Bobby Rush (D-IL) participated in the meeting, but was not present at the time of the vote.

Opening Statement of Rep. Tom Bliley (R-VA).
Re: House Finance Subcommittee markup of HR 1858.
Date: July 21, 1999.
Source: House Commerce Committee.
Mr. Chairman, thank you for holding this markup on Title II of H.R. 1858, the Consumer and Investor Access to Information Act of 1999.

It has often been said that knowledge is power. Today, nowhere is that more evident than in our securities markets. The wealth of information accessible today has given investors greater autonomy and power over their finances than at any other time in the history of our markets.

The information that investors are able to gather via the Internet, from the ticker on the bottom of MSNBC, and from a multitude of electronic and other sources has coincided with a dramatic increase in online trading during the greatest bull market of our time. At the same time, our financial markets are evolving in ways that were hard to imagine just a few short years ago. We must protect the public's access to the information that is so fundamental to the functioning of those markets, in order to ensure the markets continued growth and evolution.

Today we are here to do just that. Title II of H.R. 1858 addresses the important role of databases in the stock market and the market information that these databases provide to today's investors. The bill protects the conduits of this vital information - namely the exchanges and other disseminators of stock prices - by providing a new federal remedy against pirates and hackers who could undermine the integrity and value of the databases they publish.

However, this legislation does not establish a new property right over facts and information. Rather, H.R. 1858 preserves the public's access to facts and information, such as stock prices, ensuring that American investors have the tools they need to invest and manage their finances as they see fit.

Mr. Chairman, I would like to commend your efforts in bringing this legislation before us today. The hearing that you held generated important comments from market participants including on-line brokers, exchanges, financial information providers, and consumer groups. I look forward to supporting the amendment you will offer today, which represents your hard work in addressing concerns raised by each of these market participants. I am pleased that the legislation already enjoys the support of the Securities and Exchange Commission, Consumers Union, and numerous market participants such as on-line brokers and financial information providers.

While there remain some issues that we will continue to work on as this legislation proceeds to the full Committee, I am confident that with the constructive participation of each of these interested parties, we will work out these issues and proceed quickly to consideration by the full House of Representatives.

I would like to thank Ranking Member Dingell, Subcommittee Ranking Member Towns, Mr. Markey, and the many other members from both sides of the aisle who have not only co-sponsored this legislation but worked with us to improve this important piece of legislation for America's investors.