House Commerce Subcommittee Approves Alternative Database Bill, 2/25/2004.

House Commerce Subcommittee Approves Alternative Database Bill

February 25, 2004. The House Commerce Committee's Subcommittee on Commerce, Trade, and Consumer Protection approved HR __, the "Consumer Access to Information Act of 2004".

The Subcommittee approved a "Committee Print". A bill has not yet been formally introduced. The print has no number or sponsor at this time.

Rep. Cliff Stearns (R-FL), the Chairman of the Subcommittee, presided at the mark up. He stated that the passage of this print does preclude Commerce Committee consideration of HR 3261, which the House Judiciary Committee amended and approved on January 21, 2004. The Commerce Committee has a sequential referral which expires on March 12, 2004.

Rep. Cliff Stearns Rep. Stearns (at right) also stated that "This legislation prohibits the misappropriation of databases while preserving unfettered consumer access to factual information".

The Commerce Committee print is a brief item that would give the Federal Trade Commission (FTC) a very limited authority to initiate a civil enforcement action, under the general prohibition of unfair and deceptive trade practices in interstate commerce, against certain misappropriators of hot news data.

It is unlikely that there is anyone anywhere who actually wants the FTC to bring this sort of action. Rather, this is part of a legislative strategy to derail the Judiciary Committee bill, HR 3261. Moreover, a very similar strategy was employed during the 106th Congress to derail another database bill that had been approved by the Judiciary Committee. It was not considered by the full House.

Summary of the Commerce Committee Print. The print is short and simple. Section 1 provides that the title of the bill is the "Consumer Access to Information Act of 2004".

Section 2 provides that "The misappropriation of a database is an unfair method of competition and an unfair or deceptive act or practice in commerce under section 5(a)(1) of the Federal Trade Commission Act (15 U.S.C. 45(a)(1))."

It then provides a definitional section that defines the class of misappropriations that are violations of the Federal Trade Commission Act (FTCA). It provides that "the term ``misappropriation of a database´´ means that--
(1) a person (referred to in this section as the ``first person´´) generates or collects the information in the database at some cost or expense;
(2) the value of the information is highly time-sensitive;
(3) another person's (referred to in this section as the ``other person´´) use of the information constitutes free-riding on the first person’s costly efforts to generate or collect it;
(4) the other person’s use of the information is in direct competition with a product or service offered by the first person; and
(5) the ability of other parties to free-ride on the efforts of the first person would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened."

This test is based upon the holding of the U.S. Court of Appeals (2ndCir) in National Basketball Association v. Motorola. The National Basketball Association (NBA) filed suit against Motorola over its sale of handheld pagers that provided NBA scores while games were in progress. The District Court entered an injunction that prohibited the transmission of these scores.

Judge Ralph Winter wrote in that opinion that "The crux of the dispute concerns the extent to which a state law ``hot-news´´ misappropriation claim based on International News Service v. Associated Press, 248 U.S. 215 (1918) (``INS´´), survives preemption by the federal Copyright Act and whether the NBA's claim fits within the surviving INS-type claims. We hold that a narrow ``hot-news´´ exception does survive preemption. However, we also hold that appellants' transmission of ``real-time´´ NBA game scores and information tabulated from television and radio broadcasts of games in progress does not constitute a misappropriation of ``hot news´´ that is the property of the NBA."

The Commerce Committee print essentially gives the FTC authority to bring actions under the FTCA that also constitute misappropriation of hot news within the holding of NBA v. Motorola.

Section 3 of the Commerce Committee print provides an exemption for ISPs. It provides that "No provider of an interactive computer service shall be liable under section 2 for making available information that is provided by another information content provider."

Finally, Section 4 of the Commerce Committee print provides that the only remedy for misappropriation, within the meaning of Section 2 of the bill, is a civil action by the FTC. The bill provides that "A misappropriation of a database under section 2 shall be treated as a violation of a rule defining an unfair or deceptive act or practice prescribed under section 18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B))."

It adds that the "Federal Trade Commission shall enforce this Act in the same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated into and made a part of this Act."

Notably, this committee print neither creates a new cause of action for database developers or owners, nor preempts any existing remedies. The bill simply provides that the FTC may take action against a database misappropriator, as defined by the bill.

The bill thus provides minimal protection for developers of one a small subset of all databases.

Legislative Strategy. Heretofore the FTC's role in intellectual property has been very limited, and almost entirely restricted to enforcement of antitrust laws, as for example, in its recent administrative action against Rambus. It has not enforced property rights in intellectual, or quasi intellectual, property. Civil enforcement has been a matter for private lawsuits. Criminal enforcement has been given to the Department of Justice (DOJ) and state prosecutorial entities. Moreover, the FTC has no criminal enforcement authority.

But then, this committee print likely has been passed, not because any database owners want to see it become law, or even because any database consumers or copiers want to see it enacted. Rather, it has likely been offered and passed as part of a legislative strategy to prevent another database protection bill, HR 3261, from becoming law.

There are Commerce Committee members, and constituent groups of the Commerce Committee, who have long sought to prevent a meaningful database protection bill from becoming law. In contrast, many Judiciary Committee members, and constituent groups of the Judiciary Committee, have long sought a database protection bill. See, TLJ news analysis titled "House Commerce and Judiciary Committees Vie for High Tech Leadership", June 15, 1999.

The Judiciary Committee activity has been, in part, a reaction to the 1991 opinion of the Supreme Court in Feist Publications, Inc. v. Rural Telephone Service Co. and its progeny, including Warren Publishing, Inc. v. Microdos Data Corp., 115 F.3d 1509 (11th Cir. 1997), Mid America Title Co. v. Kirk, 59 F.3d 719 (7th Cir. 1995), and Skinder-Strauss Assocs. v. Massachusetts Continuing Legal Edu., Inc., 914 F. Supp. 665 (D. Mass. 1995).

The Feist opinion , which is also reported at 499 U.S. 340, rejected the "sweat of the brow" basis for protecting compilations of data under copyright law, and held that some compilations of data are not protected under copyright law. Feist involved telephone directories that collected and arranged names and phone numbers. The Court reasoned that facts, such as phone numbers, are not copyrightable, and that the compilation of names and numbers lacked sufficient creativity to merit copyright protection.

One reason that the Commerce committee print gives authority to the FTC under the FTCA is that the Commerce Committee has jurisdiction over the FTC and FTCA, but not the intellectual property law, or the DOJ. It is a bill that has been drafted to give the Commerce Committee jurisdiction.

The Commerce Committee did obtain a sequential referral of HR 3261 on February 11, but this is only a 30 day referral that expires on March 12. It enables the Commerce Committee to delay the full House from considering the bill for 30 days.

However, if the full Commerce Committee promptly were to pass the committee print, then the House Rules Committee would be faced with requests from two Committees for consideration of competing bills on the same subject. This is not an enviable position for the Rules Committee, or the House leadership. They would prefer to see the two Committees produce a joint product.

During the 106th Congress members of the Commerce Committee employed this strategy. The Judiciary Committee passed a meaningful database protection bill, HR 354, the "Collections of Information Antipiracy Act". The Commerce Committee then passed an illusory database protection bill, HR 1858, the "Consumer and Investor Access to Information Act of 1999". It too gave token authority to the FTC. The full House then took no further action.

At the beginning of the 107th Congress Rep. Billy Tauzin (R-LA) and Rep. James Sensenbrenner (R-WI), who had just become Chairmen of the Commerce and Judiciary Committees, collaborated to reach a compromise bill. HR 3261 is the product of this process, and Rep. Tauzin and Rep. Sensenbrenner are cosponsors.

Now, at the very moment that Rep. Tauzin steps down as Chairman, the Commerce Committee resumes the legislative strategy that it employed during the 106th Congress.

Judiciary Committee Bill, HR 3261. On January 21, 2004, the House Judiciary Committee amended and approved HR 3261, the "Database and Collections of Information Misappropriation Act" by a roll call vote of 16-7. This bill codifies a cause of action for misappropriation of certain databases. The Committee reported the bill on February 11. See, Report No. 108-421.

See also, story titled "House Judiciary Committee Approves Database Protection Bill", also published in TLJ Daily E-Mail Alert No. 822, January 23, 2004.

The basic prohibition provides recourse in a wider range of misappropriations. The key language, which is found in Section 3, provides that "Any person who makes available in commerce to others a quantitatively substantial part of the information in a database generated, gathered, or maintained by another person, knowing that such making available in commerce is without the authorization of that other person (including a successor in interest) or that other person's licensee, when acting within the scope of its license, shall be liable for the remedies set for in section 7 if (1) the database was generated, gathered, or maintained through a substantial expenditure of financial resources or time; (2) the unauthorized making available in commerce occurs in a time sensitive manner and inflicts injury on the database or a product or service offering access to multiple databases; and (3) the ability of other parties to free ride on the efforts of the plaintiff would so reduce the incentive to produce or make available the database or the product or service that its existence or quality would be substantially threatened."

HR 3261 also provides a private right of action.

Rep. Boucher. TLJ spoke with Rep. Rick Boucher (D-VA). Rep. Boucher (at right) is a member of both the Commerce Committee and the Judiciary Committee (as well as its Subcommittee on Courts, the Internet and Intellectual Property). He has been a leading opponent of database protection proposals coming from the Judiciary Committee.

He stated that while there may have been more support for stronger database protection legislation in previous Congresses, there is only one active proponent today -- Reed Elsevier. Basically, he argues that many database developers have realized that "more traditional remedies have proven successful", such as remedies in copyright, contract, trespass to chattels, and the tort of misappropriation.

Rep. Boucher stated that there is not a single example of a database that this "deserving of protection" that is not already adequately protected by an existing remedy.

In contrast, he stated that the Judiciary Committee bill is "broadly opposed" by companies such as Yahoo and Bloomberg, by business groups such as the Chamber of Commerce, and by library groups and universities.

Rep. Boucher stated that he would not be surprised to see the full Commerce Committee approve the Commerce print unanimously, as early as next week. Then, there would be two bills before the Rules Committee. Hypothetically, the Rules Committee could send one bill to the floor, but not the other, or allow one bill to be offered as an amendment to the other. However, he predicted that "given the dramatically different approach of the two bills", the House leadership will decide not to let either come to the House floor.

He elaborated that "my sense is that the leadership will take a look at this and decide that this is not an issue that is worthy of floor time". He added that "the leadership of the House does not like to bring bills to the floor where the legislation is likely to fail".

Disclosure. TLJ develops and maintains, but does not publish or sell, various collections of data. Readers may wish to consider this in assessing the objectivity of any TLJ stories about database protection legislation.