10/23/97 HyperLaw, Inc.®
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HYPERLAW REPORT OCTOBER 23, 1997
H.R 2652 COLLECTIONS OF INFORMATION
SUBCOMMITTEE ON COURTS AND INTELLECTUAL PROPERTY
HOUSE COMMITTEE ON THE JUDICIARY
SPECIAL PURPOSE LEGISLATION DESIGNED TO PROTECT
WEST PUBLISHING COMPANY AND OTHER FOREIGN CONTROLLED UNITED STATES LEGAL PUBLISHERS
CONGRESSIONAL SUBCOMMITTEE RECOMMENDS PERPETUAL COPYRIGHT LIKE PROTECTION FOR 200 YEARS OF WEST PRIVATE COURT OPINIONS.
THE SUBCOMMITTEE REFUSES TO ADDRESS THE LONG RECOGNIZED NEED FOR AUTHORITATIVE, CITABLE, COMPLETE AND ACCESSIBLE ARCHIVES TO FEDERAL COURT OPINIONS FOR THE FUTURE.
APPEALS ARE PENDING IN THE SECOND CIRCUIT - WEST SEEKS TO SUBVERT THE JUDICIAL PROCESS BY OBTAINING THIS SPECIAL PURPOSE LEGISLATION.
NO REMEDIES FOR ANTI-TRUST VIOLATION AND MISUSE BY DATABASE PROVIDERS
OBSERVATIONS ON THE LEGISLATIVE PROCESS
Alan D. Sugarman
On October 23, 1997 the Subcommittee on Courts and Intellectual Property of the House Committee on the Judiciary holds a hearing on the latest attempt to pass special purpose legislation to privatize the publication of court opinions. In so doing, and in order to serve special interests, the Subcommittee proposes that 200 years of copyright law and principles are being tossed out the door.
This report, or rather essay, attempts to provide a broader perspective, as Congress readies to fast-track a database protection bill, a bill which has no widespread support.
Some things are clear - the raison d'etre for this bill is to protect the case reports of West Publishing and LEXIS. Although competitors, these companies are parties to secret cross-licensing agreements creating an effective monopoly in the publication of United States judicial opinions.
When database protection legislation was first conceptualized in Europe in the early 90's, the initial versions would have provided little comfort for West. Mindful of the destructive anticompetitive possibilities in database protection, the originally versions provided for limited duration protection, compulsory licensing, and database protection only if a newcomer could regenerate data from its original sources. Moreover, other balances were provided by the stronger European antitrust law. These protections did not survive. The weakening of the bill was done in closed door proceedings under lobbying pressures from the companies presumably including those now pressuring this subcommittee: the Dutch English company Reed-Elsevier and owner of Lexis, its new merger Dutch partner Wolters Kluwer (owner of legal publisher CCH), West Publishing, and the Canadian Thomson Company which now owns West.
See Reichman and Samuelson, at 84
The elimination of a requirement that the databases of fact be able to be regenerated is significant. Professors Reichman and Samuelson have observed that proponents always insist that "third parties always remain free to generate their own databases" and that "[e]ven the most avid apologists for the E.C. Directive concede that in such cases the investor's exclusive right necessarily vest in the data as such." Reichman and Samuelson, at 89.
Even the Thomson Reed Elsevier sponsored study by Tyson and Sherry cogently admits "the possibility of replicating the underlying data in a database is a key factor affecting the potential for market entry of new competitors", although these economists then back-track in footnotes to say that they really did not mean this part of their theory. (The nature of the Tyson/Sherry paper perhaps is illustrated in footnote 1 where they describe their sponsors, the Dutch-English company Reed Elsevier as "Reed Elsevier, Inc. of Newton, MA", and the Canadian Thomson as "The Thomson Corporation of Stamford, CT).
It is obvious to any observer that the bill exists primarily because of West and the bill's primary target for protection is their case law databases This is why West both in Europe and in this bill, has fought so hard to eliminate provisions that limit database protection if the data cannot be independently regenerated. The fact is that the 200 years of case law for which West wants a perpetual monopoly cannot be regenerated, even for recent years (and one reason why this cannot be done is under this subcommittee's bailiwick: the long obvious need for the federal courts to disseminate and archive authoritative and citable federal court opinions).
West has played with a deft slight of hand - on the one hand, its says that its case law databases can be independently regenerated, but then its says, "but don't put that in the law" because West well knows that the case law cannot be independently regenerated. And this committee looks the other way and does not want to touch that issue, for that would only expose Congress's historic failure to assure that federal court opinion publication is not handed over to the private sector. [West is most fortunate that by coincidence the same Congressional Committees oversee both the courts and intellectual property - that way West gets two bangs for each political contribution buck.] Thus, legislation like the Paperwork Reduction Bill of 1995 ignores the judicial branch.
If anyone doubts the underlying forces behind the bill, see what would happen if the bill were amended to suspend application to databases of court reports until such time as the federal district and higher courts electronically disseminated and archived all of their opinions with an official public domain citation. And since this is also the Subcommittee on "Courts", such an amendment would be even more appropriate. Then, we will see what crawls out from under the rock.
Another factor is that any database bill would be more anti-competitive in this country than in Europe because the role of U.S. antitrust law "in minimizing abusive exercises of intellectual property rights is quite limited as compared with even that of the European Community." Reichman and Samuelson, at 120. So, one would argue that before any database protection law is proposed, Congress also should remedy this important deficiency in United States law (assuming the anti-anti-trust jurists would let the Congress do so).
So, West is back again attempting to push through Congress a database protection bill so as to protect its publications of non-copyrightable public domain information, now joined by its newly vocal ally, Reed Elsevier. The bill was introduced on October 9, 1996 and hearings are scheduled for October 23, 1997. The report of the Copyright Office on this subject was silently released (without any review process of a draft as is customary) in August during the summer heat and the Martha's Vineyard vacations of law professors - but even that report does not support this draconian bill.
Thomson/West and Reed Elsevier/Lexis are rushing to push through this legislation because they fear that the United States Court of Appeals for the Second Circuit will soon rule that West has no valid copyright in its citations or in so called enhanced versions of court opinions. This will place an even hotter potato into the hands of the Subcommittee on Courts and Intellectual Property. In the case involving HyperLaw and Matthew Bender, West has lost on the citation issue, and in a separate ruling involving HyperLaw, West has lost on it overreaching claims to the copyright of court opinions.
One reason this potato would be so hot, of course, is that as noted above, this Subcommittee has jurisdiction to explore why the federal judiciary is dragging its heels on a public domain citation for court opinions, and, why, significantly, federal district courts (with two or three exceptions) continue to refuse to release to the public electronic versions of their court opinions five years after the courts began producing all opinions in electronic form. This of course goes to the heart of the West monopoly.
These federal district court opinions are available in citable useable and comprehensive form only from the Canadian Thomson Publishing (West) and the English-Dutch company Reed Eslevier (Lexis), and the other major publisher of federal district court case law is CCH, owned by the Dutch Company, Wolters Kluwer. However, last week it was announced that Reed Elsevier and Wolters Kluwer are merging which means that 95% of legal publishing will be tied into the copyright cartel established in 1988 by West and Lexis. One irony here, of course, is that when Thomson, Reed Elsevier, and Wolters Kluwer argue that United States legislation must be made consistent with European database provisions, they do no state that these same companies were the principle proponents for this protection in Europe.
Thus, one would question the description of the sponsor of this bill, Representative Coble in his remarks on the introduction of the bill:
"U.S. firms have been the world leaders in this field. They have brought to market a wide range of valuable collections of information that meet the information needs of businesses, professionals, researchers, and consumers worldwide. But several recent legal and technological developments threaten to cast a pall over this progress, by eroding the incentives for the continued investment needed to maintain and build upon the U.S. lead in world markets for electronic information resources."
Perhaps Representative Coble was misled by footnote 1 in the Tyson/Sherry article. But, there is no question that the muscle behind the passage of this bill comes from Thomson/West and Reed Elsevier individually and through the trade association they dominate, the Information Industries Association and their special purpose Coalition Against Database Piracy.
The irony of the Subcommittee's jurisdiction over the courts (which have had a long and deplorable tradition of leaving it to West to publish the authoritative and citable forms of court opinions) underscores the warped market incentives for the privatization of public domain governmental information which a database protection bill will solidify. In summary, providing the sweeping protection to databases of public information provides enormous incentives to private publishers to undermine permanent public archives of public information. I know this, you know this, but Congress does not want to know this.
Lets have hearings on the issue of how the federal courts under the aegis of the subcommittes handles dissemination of their opinions. The Sponsor of the bill states that "The goal is to stimulate the creation of even more collections, and to encourage even more competition among them." With respect to collections of court opinions, I can think of nothing that would be more effective than for this Subcommittee to recommend a bill that would require the federal courts to disseminate and archive their opinions in public domain, citable, and authoritative forms. Then no longer could the new Thomson-owned West Group force up the price of its federal court case reporters by over 12% a year. Let's hold hearing on that. Does West have a proprietary prospective right to continue to be the authoritative publisher of new federal court opinions? One would think so if you listen to this bill's supporters.
Yes, it is easy for the supporters to say that anyone can replicate a database by going back to the original source, but what if the original source -- the government -- no longer makes the information available in any practical way. Many government originators do not concern themselves with their own archives because, as one reason, the private publishers provide free and discounted access to the originator of the data, thereby removing all incentive for the originator of the data to establish reasonable available comprehensive archives. As Professors Reichman and Samuelson, state: "the existence of one complex database seems empirically to constitutes a de facto barrier to entry that is seldom overcome." Reichman and Samuelson, at 94. This is of course why federal judges recently turned down a public domain citation because they were, in the words of one federal judge "happy with the present system." As HyperLaw pointed out in opposing the WIPO treaty, expressly extending database protection to a database even if its contents have been obtained from a government agency, creates insidious market forces wherein private database will supplant public archives. See also Reichman and Samuelson, at 119.
Another irony is that when this same subcommittee in 1992 (then named the House Subcommittee on Intellectual Property and Judicial Administration), held hearings on a bill to exclude copyright protections for certain legal compilations, both West and its trade association argued against the bill for a number of reasons. First, they argued that the bill dismantled fundamental American laws. As Vance Opperman of West stated in his testimony to the Committee describing the Thomson Company (which had yet to acquire West):
"Perhaps more disturbing is the motive of the primary proponent of H.R. 4426. Lord Thomson and his foreign-based Thomson Corporation. We have all witnessed past efforts by foreign firms, acting under the guise of the U.S. Subsidiaries they have bought up, to alter or dismantle fundamental American laws for their own profits and at the expense of American jobs and prosperity."
1992 Hearings at 159.
At the 1992 hearing, the IIA (then and now dominated by West on intellectual property issues) further argued that "On Legal Grounds Congress Should Await Further Judicial Decisions Before Acting in Response to West v. Mead.". The IIA stated that:
"Allowing time for the development and elaboration of the law through judicial decisions would enable Congress to legislate if it chose to do so, far more wisely that in could possibly do today."
1992 Hearings at 221.
There are now two appeals directly on this issue pending before the Second Circuit involving Thomson/West. Reed Eslevier has filed an amicus brief supporting the position of Thomson/West and referring expectantly to hoped for database protection. These companies are desperate that the Congress act before a definitive statement is obtained from the courts. We shall see the IIA, not doubt try to wiggle out from under this today.
Of course, in 1992, West was betting that no competitor could manage to place these matters sub judice in a forum outside of Minnesota. But thanks to Matthew Bender and HyperLaw, that did occur and it is now West that is concerned about a definitive statement from the Second Circuit. West was betting on using the standing issue to keep the declaratory judgment claims out of court, hoping that it could persuade a court that there was no standing because of a lack of case or controversy. In other words, West was hoping that it could persuade courts that it could only be sued for a declaratory judgment if a competitor was actually producing a product and if the West threats were explicit. West did not succeed (as it had in a case brought by the State of Texas in State of Texas v. West Publishing Co., 882 F.2d 171 (5th Cir. 1989). So, now that is about to lose, it seeks protection from Congress.
As information was prepared for this essay, another irony was apparent, which is that the role of database providers today is far different than it was in 1980. No longer does one need to go to Lexis/Nexis to locate information about pending legislation, for such information is available on Thomas, the Congressional Internet Site. This is a significant change, and no doubt affects the income of database providers.
In the 70's and 80's, anyone attempting to enter the on-line database market had two capital intensive barriers: (1) the cost of the main-frame computers systems and associated data center, systems, and support staffs and (2) the cost of creating or funding national communications networks (remember Tymnet). By, 1990, the personal computer had reduced by orders of magnitude the capital required for (1) and by 1996, the Internet reduced the capital required for (2) also by orders of magnitude. Certainly, in the 70s and 80's these private database providers provided a valuable service. The question today is why would one use Westlaw or Lexis Nexis to obtain a recent SEC filing, a new United States Supreme Court opinion, or a just filed Congressional Bill when it is available for free (except taxes paid by the citizens) on the Internet. The database providers had their days where capital alone provided protection -- now, they are asking Congress to provide protection for an industry that has evolved in its basic economics and this seems wrong. The market should prevail.
What this bill should be titled is the "Protection Bill the for Database Industry Dinosaurs." Some may object to this latest statement, but Tyson/Sherry (see below) I think betray antiquated concepts about what it costs to provide an "on-line service" whatever that means in 1997. They say in footnote 20:
"Because the cost of setting up and operating an on-line service is significant, it is to be expected that the owner of a few databases would rather distribute them through another's on-line service and hence that the number of databases would grow faster than the number of on-line services."
It seems to me that Tyson/Sherry do not get the new paradigm -- an owner of a database has no need for an on-line service to reach all information users. All an information provider requires in order to provide world wide on-line access is a web page on the Internet. For $300 dollars a year in minimum costs, a database or information producer can reach all Internet users in the world Charging mechanisms are cheaply and economically available. Moreover, in the present Internet marketplace, sunk costs of providing access are included in the $300. As usage would go up, the database producer would pay an increased fee based on usage.
This presents a business challenge to Lexis because, other than its court opinions (many of which came from West case reporters), Lexis built its business on providing single access to multiple databases, many of which databases were copyrighted. But many of those providers may now (and have) established their own world-wide on-line access for pennies. This means Lexis can no longer grab 50% of the revenue for say posting new articles from a newspaper. And those information producers may cream the market by marketing high valued new information directly accessible to users, and keeping all the income. So when Reed Elsevier stock dropped by $350 million on the news of the court decision that West court opinions were not copyrightable, where do they go. Simple, to the United States Congress for protection.
The last significant database protection legislative attempt, in 1995, was a midnight amendment to the Paperwork Reduction Act, which resulted in its quick withdrawal and with no one willing to admit to submission of the "West Amendment" described as a bill with a paternity problem. Stunned by this defeat, West went back to the drawing boards and came back with a highly sophisticated approach which included formalistic studies, a copyright office study, industry funded professional analysis, campaign contributions, misnamed coalitions, and a broader international approach involving European legislation and treaty proposals using European allies. This is truly an impressive and sophisticated lobbying effort. Indeed, the prospect of database protection made West an attractive opportunity to foreign publishers, who then acquired West.
One thing West learned from 1995 was not to have the bill perceived as a West bill, and it has tried to hide its fingerprints. But, they are everywhere, (clearly on the Tyson/Sherry paper), and, we understand, that the day to day nagging lobbyists pestering the House Subcommittee staff are West lobbyists. What remains though is that this is special interest legislation driven by panicked companies who see the end of their 40% profit margins.
A principle intellectual support for the proposals appears to be the Copyright Office August 1997 report and the Tyson/Sherry study commissioned by Thomson and Reed Elsevier (After industry lobbyists sabotaged the European initiative in 1995, it is not clear what independent intellectual support there is for the sausage produced by the process -- there is independent intellectual support for the concept of database protection.) The Tyson/Sherry study is a compilation of subjective opinion and anecdotal observations and it studiously avoid references to the protection of case law databases and appeals to the emotionalism of databases for "finding the cures for cancer and AIDs and maintaining the competitiveness of U.S. agriculture". Curiously, they do not discuss the case law databases which are the root of the concerns by their sponsors Thomson and Reed Elsevier. (At least the Copyright Office study was explicit in its references to West case law reports.)
And, no wonder. The Tyson/Sherry study is in economist never-never-land when they conclued "In most cases a potential entrant can get data from the same source as the original firm, in which case there is no public policy need to allow the new entrant to free ride on the original firm's investment." But the bill doesn't provide an exemption when a new entrant cannot get data from the same source as the original firm. Moreover, as to their clients' concern, were Tyson/Sherry to come back to reality and try to obtain 20 year old court opinions complete with corrections and amendments from real world dusty, unorganized, and incomplete court archives, then perhaps different conclusions would have been reached. Interestingly, Tyson/Sherry added footnotes (32-33) where they appear to say they do not really mean what they said,so perhaps they were aware of this defect in the intellectual underpinnings as it applied to their client. (I assume someone from the West Group read a next to the last draft and insisted upon these footnotes.)
I do say that I must admire the slight of hand and the references to database pirates and freeloaders. Perhaps Tyson/Sherry would wonder whether the pre-1988 executives of Lexis should have been subjected to a fine of "$500,000 or imprisonment for not more than 10 years" for copying court opinions from West books prior to 1988 because the data in the real world was not available from court records. Perhaps Tyson/Sherry might contemplate whether Lord Thomson himself might be subjected to these fines and imprisonment because his Lawyers Cooperative executives in 1995 similarly lifted Texas case law reports from West books, for the same reason of unavailability.
Economists have the easiest ride of any profession, since they never seem to be called to account for the policies made in the name of their erudite conclusions. For example, we know that industry paid economists predicted that the West-Thomson merger would have no deleterious effect on competition. Cynics such as this writer said that the merger would result in higher prices (this has happened), lower quality (this has happened), and the firing and dislocation of employees (this has happened too), but, the economists do not seem to have at hand a theory to explain this common-sense result. Of course, I am not an economist.
As to the bill, a lot of candy is passed out but this is a deceptive Halloween candy, for there are razor blades in each piece. For example, "nothing in this chapter shall restrict any person from extracting or using information for the sole purpose of news reporting." Let's figure that one out. How does that help if the information is then placed in a database of a news organization. Or, another sugar-coated bite is that "Nothing in this chapter shall restrict any person from extracting or using information for not-for-profit educational, scientific, or research purposes in a manner that does not harm the actual or potential market for the product or service referred to in section 1201." Of course, this is not going to help those public law librarians who are attempting to buy data from the private sector -- they will now see prices going up maybe 20% a year.
I particularly like the proviso that one can use another's database to "verify" ones own. Let's see, in other words, those that are big enough and already have databases can copy from each other (just as Lexis and West are tied into cross licensing arrangements) but, this still keeps the information oligopoly small (and now CCH is being admitted to the copyright cartel.) It is ok for West to verify it attorney database from Martindale Hubbell because West already has a database, but, a new entrant would in a sense not have the privilege.
There is nothing in the bill about the potential abuse of the data protection laws, of recovery of legal fees and damages to someone subjected to overarching claims of database monopolists, of compulsory licensing, and even of a term on the protection. What is an example of how these companies will engage in gross database abuse? In 1991, I asked West for permission to copy a few hundred case reports to use in a CD-ROM version of a real estate law book. After years of litigation and untold legal costs and sacrifice to me, when pinned against the wall, West suddenly changes position when in its brief last month it told the Second Circuit , balding lying, that "West has never objected to the copying, even by competitors, of individual case reports, notwithstanding their protection by copyright. It is only the threat of wholesale copying of reports by a 'free-riding' competitor that compels West to assert and defend its clear entitlement to protection under the Copyright Act." And, I might add to lobby in Europe and in Congress. [No doubt the Subcommittee will let representatives of one side of this litigation present oral testimony, either directly or through the IIA or their economists --- what about the other side?]
Moreover, the bill and its never-never land economist supporters ignore the costs and delay that would be imposed on new database entrants attempting to litigate a belief that a database claim is invalid. These entrants might not wish to risk seizure of equipment and data and 10 year prison terms and half a million dollar sanctions [not to speak of legal expenses and other burdens] because they do not believe that a single company, and its oligoploistic licensees, should monopolize the law.
So, from a technical point of view, and comparing this bill to the crafted copyright legislation that used to be submitted before industry got a permanent seat at the drafting table, this bill is pathetic in any attempt made to balance the equities. It is more of a sound bite bill -- which ignores the underlying market distortion and undercuts of long-standing U.S. copyright law and slow judicial interpretation.
The number of technical and substantive issues ignored include: counter-balancing remedies by providing meaningful remedies for database protection abuse, setting a reasonably low barrier to establish standing and abuse, enhancing anti-trust remedies for abusing a position in data protection and copyright (remember that all database litigation will include a copyright claim), providing punitive damages where data protection abuse is shown, creating exceptions where data archives cannot be independently obtained, creating an affirmative obligation for database owner to respond in good faith to good faith inquiries from those seeking to copy portions of a database (the refusal being deemed to be per se misuse -- patent and copyright owners in general have not been held to this standard but they have done something creative), limiting retroactive applicability since no purpose is served thereby, establishing market incentives so that government information producers are not induced to abandon their responsibilities to disseminate and archive -- these would all be hallmarks of a bill where all interests are considered by the drafters. But, of course, who here is really looking after the public interest. It is almost as if industry puts in the bill, and the public after the initial shock and dismay gets a few days to react.
Let's remember a few things. Original compilations are protected under current law. Original creative material in databases is protected under current law.
Anyone with a CD of telephone numbers or yellow page listings should ready themselves to burn them, or be prepared to spend ten years in jail.
1. Doug Obey and Albert Eisele, West: A Study In Special Interest Lobbying, The Hill, February 22, 1995. Article discussing defeat of West promoted amendment to The 1985 Paperwork Reduction Act to obtain database protection legislation. http://www.hyperlaw.com/hill3.htm
2. U.S. Copyright Office, Report on Legal Protection for Databases (August 1997). http://lcweb.loc.gov/copyright/more.html#rpt
3. Laura D'Andrea Tyson and Edward F. Sherry, Statutory Protection For Databases. http://www.infoindustry.org/ppgrc/doclib/grdoc015.htm. (Tyson/Sherry Paper)
4. J.H. Reichman and Pamela Reichman and Samuelson,, Intellectual Property Rights in Data?, 50 Vanderbilt Law Review 51 (1997).
5. Hearing Before the Subcommittee on Intellectual Property and Judicial Administration of the Committee on the Judiciary, 102 Congress, Second Session, on H.R. 4426, Exclusion of Copyright Protection for Certain Legal Compilations", May 14, 1992, Serial No. 105 (the "1992 Hearing").
6. The HyperLaw Web Site. http://www.hyperlaw.com. Extensive archive of documents related to HyperLaw v. West, Database Protection, Citation Reform, the West-Thomson merger. The text of the opinions on appeal to the Second Circuit are contained on this site.
Copyright 1997 HyperLaw, Inc. A reproduction license with attribution is permitted to all except that this license is not extended to the Thomson Corporation, Reed Elsevier, Walters Kluwer, the Information Industries Association, and any consultant, employee (other than non-management employees earning less than $100,000 a year and making the copy for their own use or use by other similar employees), agents (including the Coalition Against Database Piracy), and/or attorneys of the foregoing. These persons may apply for a reproduction license by e-mailing firstname.lastname@example.org.
Alan D. Sugarman is the President of HyperLaw, Inc. He has been working for broad public access to authoritative law since 1991. HyperLaw is a co-plaintiff in a copyright declaratory judgment action against West, which is now on appeal before the United States Court of Appeals for the Second Circuit. For details, see http://www.hyperlaw.com.