7th Circuit Rules in Copyright and Database Protection Case

November 25, 2003. The U.S. Court of Appeals (7thCir) issued its opinion [13 pages in PDF] in Assessment Technologies v. Wiredata, a copyright infringement case. Judge Richard Posner wrote the opinion for the three judge panel, holding that extracting the data from an electronic database incorporated within a copyrighted program does not constitute copyright infringement.

See, related story titled "Posner Addresses Copyright Misuse" in TLJ Daily E-Mail Alert No. 788, November 28, 2003.

Background. There are three relevant sets of entities, and two relevant legal proceedings.

First, there are Wisconsin municipalities that collect data on real estate located in their jurisdictions, including address, owner's name, age of the property, its assessed valuation, and number and type of rooms. They collect this data in the format of handwritten notes on paper, and electronic files on individual assessors' laptop computers.

Second, there is Assessment Technologies (AT), which developed and copyrighted a software program titled "MarketDrive". AT obtained the paper notes and files of the municipalities; it converted the data contained in the handwritten notes and files into electronic format; it compiled the data into one database which it designed, containing 456 fields in 34 tables; and, it included this database in a program that it developed. AT licenses this program to the municipalities. It enables them to access and query the electronic database, and hence, more efficiently collect property taxes.

Wiredata, which is owned by Multiple Listing Services, wants the electronic data, but does not want to either collect it the way AT did, or pay AT to license it. It wants to obtain the electronic data from the municipalities, without payment. Three municipalities refused, citing copyright restrictions.

Proceedings Below. In a separate lawsuit, Wiredata filed a complaint in state court in Wisconsin against the three municipalities seeking the data. That lawsuit is pending.

In the present lawsuit, AT filed a complaint in U.S. District Court (EDWisc) against Wiredata alleging copyright infringement and theft of trade secrets.

The present case does not involve a breach of contract claim, even though the license agreement prohibits dissemination of the data contained in it. AT licensed the program to the municipalities, but the lawsuit is against Wiredata, with which it has no contractual relationship.

The District Court issued a permanent injunction against Wiredata, based on the copyright claim.

Ruling on Appeal. On appeal, Wiredata argued that the program lacks sufficient originality to be copyrightable. The Court rejected this argument. Posner wrote that "Copyright law unlike patent law does not require substantial originality. ... In fact, it requires only enough originality to enable a work to be distinguished from similar works that are in the public domain, ... since without some discernible distinction it would be impossible to determine whether a subsequent work was copying a copyrighted work or a public-domain work. This modest requirement is satisfied by Market Drive because no other real estate assessment program arranges the data collected by the assessor in these 456 fields grouped into these 34 categories, and because this structure is not so obvious or inevitable as to lack the minimal originality required ..."

Posner continued that the municipalities cannot give Wiredata a copy of the program, or the "database, that is, sorted into AT's 456 fields grouped into its 34 tables", without violating the copyright. However, it can "extract" the "raw data" and give that to Wiredata, without violating the copyright. The data, wrote Posner, is in the public domain. So, "From the standpoint of copyright law all that matters is that the process of extracting the raw data from the database does not involve copying Market Drive, or creating, as AT mysteriously asserts, a derivative work".

In Posner's words, "if WIREdata said to itself, ``Market Drive is a nifty way of sorting real estate data and we want the municipalities to give us their data in the form in which it is organized in the database, that is, sorted into ATís 456 fields grouped into its 34 tables,īī and the municipalities obliged, they would be infringing ATís copyright because they are not licensed to make copies of Market Drive for distribution to others; and WIREdata would be a contributory infringer (subject to a qualification concerning the fair-use defense to copyright infringement, including contributory infringement, that we discuss later). But WIREdata doesnít want the Market Drive compilation. It isnít in the business of making tax assessments, which is the business for which Market Drive is designed. It only wants the raw data, the data the assessors inputted into Market Drive. Once it gets those data it will sort them in accordance with its own needs, which have to do with providing the information about properties that is useful to real estate brokers as opposed to taxing authorities." (Parentheses in original.)

Posner also elaborated on the extraction techniques that could be used.

Posner also threw in an analogy to Westlaw's compilations of court opinions. "It would be like a Westlaw licensee's copying the text of a federal judicial opinion that he found in the Westlaw opinion database and giving it to someone else. Westlaw's compilation of federal judicial opinions is copyrighted and copyrightable because it involves discretionary judgments regarding selection and arrangement. But the opinions themselves are in the public domain (federal law forbids assertion of copyright in federal documents, 17 U.S.C. ß 105), and so Westlaw cannot prevent its licensees from copying the opinions themselves as distinct from the aspects of the database that are copyrighted." (Parentheses in original.)

Posner also rejected AT's argument that Wiredata is free to collect the public domain data from municipalities, as it did. Posner wrote that AT "has no legal ground for making the acquisition of that data more costly for WIREdata."

The Appeals Court reversed, and remanded to the District Court, with instructions to vacate the injunction and dismiss the copyright claim. The trade secrets claim remains.

At this point, Posner had decided the case. Nevertheless, he went on to discuss, and apparently rule upon, several other issues not before the Court.

First, he discussed the trade secrets claim. The District Court did not rule on the trade secrets claim, and hence, it was not an issue on appeal. Although, it might be litigated on remand. Nevertheless, Posner all but pre-judged the disposition of any trade secrets claim. Posner wrote that the trade secret claim is "incomprehensible".

Second, he wrote that "AT would lose this copyright case even if the raw data were so entangled with Market Drive that they could not be extracted without making a copy of the program." This would be "intermediate copying" that would be protected by fair use.

Third, he wrote that "if the only way WIREdata could obtain public-domain data about properties in southeastern Wisconsin would be by copying the data in the municipalities' databases as embedded in Market Drive, so that it would be copying the compilation and not just the compiled data only because the data and the format in which they were organized could not be disentangled, it would be privileged to make such a copy, and likewise the municipalities."

Economic Analysis. Posner also offered a little economic analysis.

Many of Judge Posner's other opinions in intellectual property cases contain substantial economic analysis. See, for example, opinion [11 pages in PDF] in Ty, Inc. v. Perryman, and related story titled "Posner Opinion Provides Economic Analysis of Trademark, Dilution & Cybersquatting" in TLJ Daily E-Mail Alert No. 524, October 7, 2002. See also, opinion of Judge Posner in Ty, Inc. v. Publications International Ltd., and related story titled "7th Circuit Rules in Copyright and Fair Use Case" in TLJ Daily E-Mail Alert No. 444, June 5, 2002.

The present opinion contains a little economic analysis. Posner did acknowledge that "The creation of massive electronic databases can be extremely costly, yet if the database is readily searchable and the data themselves are not copyrightable (and we know from Feist that mere data are indeed not copyrightable) the creator may find it difficult or even impossible to recoup the expense of creating the database." (Parentheses in original.)

But, he continued, that these arguments "have no relevance because AT is not the collector of the data that go into the database." The municipalities' assessors did "the footwork, the heavy lifting."

Posner's analysis ignores other economic costs incurred by database companies, such as AT, in establishing and maintaining contacts and relationships with myriad municipalities, periodically collecting handwritten notes and files, entering this data by hand, developing an electronic database, marketing their database products, and transacting with paying customers.

This case is Assessment Technologies of WI, Inc. v. Wiredata, Inc., No. 03-2061, an appeal from the U.S. District Court for the Eastern District of Wisconsin, D.C. No. 01-C-789, Magistrate Judge Aaron Goodstein presiding.

This opinion was written by Judge Posner, and joined by Judge Diane Wood and Judge Terence Evans. Whatever is the nature of random assignment of cases in the 7th Circuit, Judge Posner has ended up writing opinions in a disproportionate share of the intellectual property cases heard by the 7th Circuit.