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[House Report 108-421]
[From the U.S. Government Publishing Office]

108th Congress                                            Rept. 108-421
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 2

======================================================================

 
      DATABASE AND COLLECTIONS OF INFORMATION MISAPPROPRIATION ACT

                                _______
                                

 March 11, 2004.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Barton of Texas, from the Committee on Energy and Commerce, 
                        submitted the following

                             ADVERSE REPORT

                        [To accompany H.R. 3261]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 3261) to prohibit the misappropriation of 
certain databases, having considered the same, report 
unfavorably thereon with an amendment and recommend that the 
bill do not pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     1
Purpose and Summary..............................................     7
Background and Need for Legislation..............................     7
Hearings.........................................................    10
Committee Consideration..........................................    10
Committee Votes..................................................    10
Committee Oversight Findings.....................................    10
Statement of General Performance Goals and Objectives............    10
New Budget Authority, Entitlement Authority, and Tax Expenditures    10
Committee Cost Estimate..........................................    10
Congressional Budget Office Estimate.............................    11
Federal Mandates Statement.......................................    12
Advisory Committee Statement.....................................    12
Constitutional Authority Statement...............................    12
Applicability to Legislative Branch..............................    12
Section-by-Section Analysis of the Legislation...................    12
Changes in Existing Law Made by the Bill, as Reported............    15

                               AMENDMENT

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Database and Collections of 
Information Misappropriation Act''.

SEC. 2. DEFINITIONS.

  In this Act:
          (1) Collective work.--The term ``collective work'' means a 
        work, such as a periodical issue, anthology, or encyclopedia, 
        in which a number of contributions, constituting separate and 
        independent works in themselves, are assembled into a 
        collective whole.
          (2) Commerce.--The term ``commerce'' means all commerce which 
        may be lawfully regulated by the Congress.
          (3) Compilation.--The term ``compilation'' means a work 
        formed by the collection and assembling of preexisting 
        materials or of data that are selected, coordinated, or 
        arranged in such a way that the resulting work as a whole 
        constitutes an original work of authorship. The term 
        ``compilation'' includes collective works.
          (4) Database.--
                  (A) In general.--Subject to subparagraph (B), the 
                term ``database'' means a collection of a large number 
                of discrete items of information produced for the 
                purpose of bringing such discrete items of information 
                together in one place or through one source so that 
                persons may access them.
                  (B) Exclusions.--The term database does not include 
                any of the following:
                          (i) A work of authorship, other than a 
                        compilation or a collective work.
                          (ii) A collection of information that 
                        principally performs the function of 
                        addressing, routing, forwarding, transmitting, 
                        or storing digital online communications or 
                        receiving access to connections for digital 
                        communications, except that the fact that a 
                        collection of information includes or consists 
                        of online location designations shall not by 
                        itself be the basis for applying this clause.
                          (iii) A collection of information gathered, 
                        organized, or maintained to perform the 
                        function of providing schedule and program 
                        information for multichannel audio or video 
                        programming.
                          (iv) A collection of information gathered, 
                        organized, or maintained to register domain 
                        name registrant contact data maintained by a 
                        domain name registration authority, unless such 
                        registration authority takes appropriate steps 
                        to ensure the integrity and accuracy of such 
                        information and provides real-time, 
                        unrestricted, and fully searchable public 
                        access to the information contained in such 
                        collection of information.
                  (C) Discrete sections.--The fact that a database is a 
                subset of a database shall not preclude such subset 
                from treatment as a database under this Act.
          (5) Domain name.--The term ``domain name'' means any 
        alphanumeric designation which is registered with or assigned 
        by any domain name registrar, domain name registry, or other 
        domain name registration authority as part of an electronic 
        address on the Internet.
          (6) In concert.--A person acts ``in concert'' with another 
        person who makes a database available in commerce if the act of 
        making available in commerce is planned, arranged, coordinated, 
        adjusted, agreed upon, or settled between the two persons 
        acting together, in pursuance of some design or in accordance 
        with some scheme.
          (7) Information.--The term ``information'' means facts, data, 
        works of authorship, or any other intangible material capable 
        of being generated or gathered.
          (8) Internet.--The term ``Internet'' means the combination of 
        computer facilities and electromagnetic transmission media, and 
        related equipment and software, comprising the interconnected 
        worldwide network of computer networks that employ the 
        Transmission Control Protocol/Internet Protocol or any 
        successor protocol to transmit information.
          (9) Legal entity.--The term ``legal entity'' means a person, 
        other than an individual, including a firm, corporation, union, 
        or other organization, which is organized under the laws of the 
        United States, a State, the District of Columbia, or any 
        commonwealth, territory, or possession of the United States, or 
        the laws of a foreign country.
          (10) Maintain.--To ``maintain'' a database means to update, 
        validate, or supplement the information contained in the 
        database.
          (11) Making available in commerce to others.--The term 
        ``making available in commerce to others'' means making 
        available in commerce to--
                  (A) a substantial number of members of the public; or
                  (B) a number of persons that extends beyond--
                          (i) a family and its social acquaintances; or
                          (ii) those who could reasonably anticipate to 
                        have a database made available in commerce to 
                        them without a customary commercial 
                        relationship.
        A court may take into account repeated acts directed to 
        different persons by the same or concerted parties in 
        determining whether the limits imposed by subparagraph (B)(ii) 
        have been exceeded.

SEC. 3. PROHIBITION AGAINST MISAPPROPRIATION OF DATABASES.

  (a) Liability.--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 forth 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.
  (b) Injury.--For purposes of subsection (a), the term ``inflicts an 
injury'' means serving as a functional equivalent in the same market as 
the database in a manner that causes the displacement, or the 
disruption of the sources, of sales, licenses, advertising, or other 
revenue.
  (c) Time sensitive.--In determining whether an unauthorized making 
available in commerce occurs in a time sensitive manner, the court 
shall consider the temporal value of the information in the database, 
within the context of the industry sector involved.

SEC. 4. PERMITTED ACTS.

  (a) Independently Generated or Gathered Information.--This Act shall 
not restrict any person from--
          (1) independently generating or gathering information 
        obtained by means other than extracting it from a database 
        generated, gathered, or maintained by another person; and
          (2) making that information available in commerce.
  (b) Acts of Making Available in Commerce by Nonprofit Scientific or 
Research Institutions.--Subject to section 9, the making available in 
commerce of a substantial part of a database by a nonprofit scientific 
or research institution, including an employee or agent of such 
institution acting within the scope of such employment or agency, for 
nonprofit scientific or research purposes shall not be prohibited by 
section 3 if the court determines that the making available in commerce 
of the information in the database is reasonable under the 
circumstances, taking into consideration the customary practices 
associated with such uses of such database by nonprofit scientific or 
research institutions and other factors that the court determines 
relevant.
  (c) Hyperlinking.--Nothing in this Act shall restrict the act of 
hyperlinking of one online location to another or the providing of a 
reference or pointer (including such reference or pointer in a 
directory or index) to a database.
  (d) News Reporting.--Nothing in this Act shall restrict any person 
from making available in commerce information for the primary purpose 
of news reporting, including news and sports gathering, dissemination, 
and comment, unless the information is time sensitive and has been 
gathered by a news reporting entity, and making available in commerce 
the information is part of a consistent pattern engaged in for the 
purpose of direct competition.

SEC. 5. EXCLUSIONS.

  (a) Government Information.--
          (1) In general.--Except as provided in paragraph (2), 
        protection under this Act shall not extend to--
                  (A) a database generated, gathered, organized, or 
                maintained by a Federal, State, or local governmental 
                entity, or by an employee or agent of such an entity, 
                acting within the scope of such employment or agency; 
                or
                  (B) a database generated, gathered, or maintained by 
                an entity pursuant to and to the extent required by a 
                Federal statute or regulation requiring such a 
                database.
          (2) Exception.--Nothing in this subsection shall preclude 
        protection under this Act for a database gathered, organized, 
        or maintained by an employee or agent of an entity described in 
        paragraph (1) that is acting outside the scope of such 
        employment or agency, or by a Federal, State, or local 
        educational institution, or its employees or agents, in the 
        course of engaging in education, research, or scholarship.
  (b) Computer Programs.--
          (1) Protection not extended.--Subject to paragraph (2), 
        protection under section 3 shall not extend to computer 
        programs, including any computer program used in the 
        manufacture, production, operation, or maintenance of a 
        database, or to any element of a computer program necessary to 
        its operation.
          (2) Incorporated databases.--A database that is otherwise 
        subject to protection under section 3 is not disqualified from 
        such protection solely because it resides in a computer 
        program, so long as the collection of information functions as 
        a database within the meaning of this Act.

SEC. 6. RELATION TO OTHER LAWS.

  (a) Other Rights Not Affected.--
          (1) In general.--Subject to subsection (b), nothing in this 
        Act shall affect rights, limitations, or remedies concerning 
        copyright, patent, trademark, design rights, antitrust, trade 
        secrets, privacy, access to public documents, and misuse.
          (2) Right of contract.--Notwithstanding subsection (b), 
        nothing in this Act shall affect rights, limitations, or 
        remedies concerning the common law right of contract.
  (b) Preemption of State Law.--
          (1) Laws regulating conduct that is subject of the act.--On 
        and after the effective date of this Act, no State statute, 
        rule, regulation, or common law doctrine that prohibits or 
        otherwise regulates conduct that is prohibited or regulated 
        under this Act shall be effective.
          (2) Clarification of inapplicability to cases not involving 
        commercial competition.--Paragraph (1) shall not apply to 
        preempt actions under State law against a person for taking 
        actions that--
                  (A)(i) disrupt the sources of data supply to a 
                database; or
                  (ii) substantially impair the perceived accuracy, 
                currency, or completeness of data in a database by 
                inaccurate, untimely, or incomplete replication and 
                distribution of such data; and
                  (B) do not involve the person making available in 
                commerce the data from such database in competition 
                with such database.
  (c) Communications Act of 1934.--Nothing in this Act shall affect the 
operation of section 222(e) or any other provision of the 
Communications Act of 1934 (47 U.S.C. 151 et seq.), or shall restrict 
any person from making available in commerce or extracting subscriber 
list information, as such term is defined in section 222(h)(3) of the 
Communications Act of 1934 (47 U.S.C. 222(h)(3)).
  (d) Securities.--Nothing in this Act shall--
          (1) affect the operation of the Securities Act of 1933 (15 
        U.S.C. 78a et seq.), the Securities Exchange Act of 1934 (15 
        U.S.C. 78a et seq.), the Public Utility Holding Company Act of 
        1935 (15 U.S.C. 79a et seq.), the Trust Indenture Act of 1939 
        (15 U.S.C. 77aaa et seq.), the Investment Company Act of 1940 
        (15 U.S.C. 80a-1 et seq.), the Investment Advisers Act of 1940 
        (15 U.S.C. 80b et seq.), or the Securities Investor Protection 
        Act of 1970 (15 U.S.C. 78aaa et seq.), or the rules or 
        regulations thereunder;
          (2) affect the authority of the Securities and Exchange 
        Commission; or
          (3) apply to information with respect to quotations for, or 
        indications, orders, or transactions in, securities.
  (e) Misuse.--Judicial doctrines of misuse shall apply under this Act.

SEC. 7. CIVIL REMEDIES.

  (a) Civil Actions.--
          (1) Commencement of actions.--Any person who is injured by a 
        violation of section 3 may bring a civil action for such a 
        violation in an appropriate United States district court. Any 
        action against a State governmental entity may be brought in 
        any court that has jurisdiction over claims against such 
        entity.
          (2) Notice of commencement of actions and appeals.--Any 
        person who brings an action for such a violation, or who files 
        an appeal from any final decision on such an action, shall 
        transmit notice of such action or appeal to the Federal Trade 
        Commission, the United States Patent and Trademark Office, and 
        the Register of Copyrights, in accordance with subsection 
        (i)(1).
  (b) Temporary and Permanent Injunctions.--Any court having 
jurisdiction of a civil action under this section shall have the power 
to grant temporary and permanent injunctions, according to the 
principles of equity and upon such terms as the court may deem 
reasonable, to prevent or restrain a violation or attempted violation 
of section 3. Any such injunction may be served anywhere in the United 
States on the person enjoined, and may be enforced by proceedings in 
contempt or otherwise by any United States district court having 
jurisdiction over that person.
  (c) Monetary Relief.--
          (1) Actual damages and attributable profits.--When a 
        violation of section 3 has been established in any civil action 
        arising under this section, the plaintiff shall be entitled to 
        recover the actual damages sustained by the plaintiff as a 
        result of the violation and any profits of the defendant that 
        are attributable to the violation and are not taken into 
        account in computing the actual damages sustained by the 
        plaintiff. The court shall assess such profits or damages or 
        cause the same to be assessed under its direction. In assessing 
        profits the plaintiff shall be required to prove defendant's 
        gross revenue only and the defendant shall be required to prove 
        all elements of cost or deduction claims.
          (2) Additional damages.--In addition to actual damages, the 
        court may enter judgment for an additional amount not exceeding 
        2 times such actual damages after considering the following 
        factors:
                  (A) Whether the plaintiff notified the defendant of 
                the alleged violation and the defendant continued to 
                violate section 3.
                  (B) The willfulness of the defendant's conduct.
                  (C) Whether the defendant has a history of database 
                misappropriation.
                  (D) The defendant's ability to pay.
                  (E) Whether the alleged violation had a serious 
                negative financial impact on the plaintiff.
                  (F) Any good faith effort by the defendant to rectify 
                the misappropriation.
                  (G) Whether the assessment of additional damages is 
                necessary in order to deter future violations.
  (d) Impoundment.--At any time while an action under this section is 
pending, including an action seeking to enjoin a violation, the court 
may order the impounding, on such terms as it deems reasonable, of all 
copies of contents of a database made available in commerce or 
attempted to be made available in commerce potentially in violation of 
section 3, and of all masters, tapes, disks, diskettes, or other 
articles by means of which such copies may be reproduced. The court 
may, as part of a final judgment or decree finding a violation or 
attempted violation of section 3, order the remedial modification or 
destruction of all copies of contents of a database made available in 
commerce or attempted to be made available in commerce in violation of 
section 3, and of all masters, tapes, disks, diskettes, or other 
articles by means of which such copies may be reproduced.
  (e) Costs and Attorney's Fees.--The court in its discretion may award 
reasonable costs and attorney's fees to the prevailing party. The court 
shall award costs and fees if it determines that an action was brought 
or a defense was raised under this Act in bad faith.
  (f) Actions Against United States Government.--Subsections (b) and 
(d) shall not apply to any action against the United States Government.
  (g) Relief Against State Entities.--The relief provided under this 
section shall be available against a State governmental entity to the 
extent permitted by applicable law.
  (h) Limitation on Liability of Certain Entities.--
          (1) Limitation on liability.--No provider of an interactive 
        computer service shall be liable under section 3 for making 
        available information that is provided by another information 
        content provider.
          (2) Definitions.--In this subsection, the terms ``interactive 
        computer service'' and ``information content provider'' have 
        the meanings given those terms in section 230(f) of the 
        Communications Act of 1934 (47 U.S.C. 230(f)).
          (3) Construction.--For purposes of section 230 of the 
        Communications Act of 1934 and any other provision of law, the 
        provisions of this Act shall not be construed to be a law 
        pertaining to intellectual property.
  (i) Oversight of Civil Remedies by FTC and PTO.--
          (1) Notice.--The Federal Trade Commission, the Director of 
        the United States Patent and Trademark Office, and the Register 
        of Copyrights shall, by regulation, prescribe the form and 
        procedures by which persons shall transmit the notices required 
        by subsection (a)(2).
          (2) Oversight.--The Federal Trade Commission, the Director of 
        the United States Patent and Trademark Office, and the Register 
        of Copyrights shall review the actions conducted under this 
        section for the purposes of identifying instances in which 
        judicial interpretation of this Act adversely or otherwise 
        materially affects the administration of laws and policies 
        within their respective jurisdictions.
          (3) Amicus curiae briefs.--The Federal Trade Commission, the 
        Director of the United States Patent and Trademark Office, and 
        the Register of Copyrights may, in appropriate instances, file 
        briefs as friends of the court in appeals from final decisions 
        of actions under this section.
          (4) Reports.--The Federal Trade Commission, the Director of 
        the United States Patent and Trademark Office, and the Register 
        of Copyrights shall, within 18 months after the date of the 
        enactment of this Act, each transmit a report to the Committee 
        on the Judiciary and the Committee on Energy and Commerce of 
        the House of Representatives and the Committee on the Judiciary 
        and the Committee on Commerce, Science, and Transportation of 
        the Senate on their operations under this subsection. Such 
        reports shall include--
                  (A) a summary of any briefs filed under paragraph 
                (3);
                  (B) an explanation of the impact, if any, of the 
                judicial decisions reviewed on existing laws and 
                policies within the jurisdiction of the Commission, the 
                Director of the Patent and Trademark Office, or the 
                Register of Copyrights, as the case may be; and
                  (C) any recommendations for legislative or other 
                changes that the Commission, the Director of the Patent 
                and Trademark Office, or the Register of Copyrights, as 
                the case may be, considers appropriate.

SEC. 8. LIMITATION ON ACTIONS.

  No civil action shall be maintained under this Act unless it is 
commenced within 2 years after the cause of action arises or claim 
accrues.

SEC. 9. EXCLUSION FROM LIABILITY FOR EDUCATIONAL INSTITUTIONS AND 
                    RESEARCH LABORATORIES.

  (a) Exclusion.--Except as provided in subsection (d), no liability 
shall be imposed under this Act on--
          (1) any accredited nonprofit postsecondary educational 
        institution or any nonprofit research laboratory,
          (2) any employee of such educational institution or 
        laboratory acting within the scope of his or her employment, or
          (3) any student enrolled in such educational institution 
        acting in furtherance of the supervised activities or programs 
        of the institution,
by reason of activities undertaken for nonprofit education, scientific, 
or research purposes.
  (b) Accreditation.--For purposes of this section, accreditation shall 
be as determined by a regional or national accrediting agency 
recognized by the Council on Higher Accreditation or the United States 
Department of Education.
  (c) Nonprofit Research Laboratory.--For purposes of this section, a 
nonprofit research laboratory is a nonprofit research organization that 
is primarily engaged in basic or applied scientific research, or both, 
and that is a qualified organization as defined in section 41(b)(6)(B) 
of the Internal Revenue Code of 1986 for purposes of the research 
credit determined under section 41 of such Code.
  (d) Exception.--Subsection (a) does not apply to an institution, 
laboratory, employee of such institution or laboratory, or student of 
such institution to the extent that the institution, laboratory, 
employee, or student makes available substantially all of a database in 
direct commercial competition with a person who made the substantial 
expenditure described in section 3(a)(1).

SEC. 10. EFFECTIVE DATE.

  (a) In General.--This Act shall take effect on the date of the 
enactment of this Act, and shall apply to acts of making available in 
commerce on or after that date with respect to databases existing 
before, on, or after that date.
  (b) Prior Acts Not Affected.--No person shall be liable under section 
3 for making available in commerce on or after the date of the 
enactment of this Act a quantitatively substantial part of the 
information in a database in violation of that section, when the 
information was lawfully extracted from the database before the date of 
the enactment of this Act, by that person or by that person's 
predecessor in interest.

SEC. 11. NONSEVERABILITY.

  (a) In General.--If the Supreme Court of the United States holds that 
the provisions of section 3, relating to prohibition against 
misappropriation of databases, are invalid under Article I of, or the 
First Amendment to, the Constitution of the United States, then this 
Act is repealed, effective as of the date of the Supreme Court 
decision.
  (b) Termination.--Subsection (a) shall cease to be effective at the 
end of the 10-year period beginning on the date of the enactment of 
this Act.

                          PURPOSE AND SUMMARY

    H.R. 3261, the ``Database and Collections of Information 
Misappropriation Act'' creates comprehensive and perpetual 
protection for databases. The Committee ordered H.R. 3261 
reported unfavorably, with an amendment.

                  BACKGROUND AND NEED FOR LEGISLATION

The importance of databases to commerce

    One of the basic tenets of intellectual property law holds 
that facts are not copyrightable, recognizing the great need to 
widely disseminate factual information. To qualify for 
copyright protection a work must be original to the author and 
possess a minimal degree of creativity. It is a well-
established principle that no one may claim originality as to 
facts. Facts, by their very nature, are discovered, not 
created, and therefore, are part of the public domain.
    This policy has served commerce well. The culture of 
business and science involves using existing data in different 
ways, or combining existing data with newly generated data. 
Information is the foundation to advances in medical and other 
scientific research. It is also a fundamental element of 
innovation in products and services. Allowing scientists and 
businesses to access and use factual information propels 
society forward rather than relegating important resources to 
``reproducing'' the same information.

The ``sweat of the brow'' doctrine and Feist

    While the majority of courts through U.S. history had 
upheld the policy that facts are not copyrightable, a minority 
of courts granted copyright protection to factual compilations 
under the ``sweat of the brow'' doctrine. The courts reasoned 
that even in cases in which a database lacked creativity or 
originality, a publisher was entitled to protection because of 
the time and resources expended in collecting and organizing 
the information.
    In 1991, the Supreme Court in Feist Publications, Inc. v. 
Rural Tel. Ser. Co, 499 U.S. 340 (1991), rejected the ``sweat 
of the brow'' doctrine. The Court reaffirmed that originality 
is the central component of copyright. While explaining that 
the vast majority of factual compilations will pass the 
originality test, the Court emphasized that compilations of 
factual information would receive only limited protection. The 
Court explained that the copyright in a factual compilation 
extends only to the author's original contributions, not the 
facts or information conveyed.

History of congressional action

    The Feist decision started a debate as to whether database 
producers would continue to invest resources in the creation 
and maintenance of databases. This debate has been ongoing 
since the 104th Congress, with various versions of property 
rights and misappropriation bills moving between the Committee 
on Energy and Commerce and the Committee on the Judiciary.
    During those years, the proponents of the legislation have 
produced no compelling evidence that there is any danger to the 
continued prosperity of the database industry. In fact, a 2003 
report by Dr. Martha E. Williams entitled, The State of 
Databases Today, showed an increase in the total number of 
databases as well as an increase in the private sector's share 
of the database market. Since the Feist decision, the database 
market has grown 147%. The amount of information contained in 
the databases increased at an even greater rate, 363%. In 
addition, there has been a steady shift in database production, 
away from government and academic production and toward private 
sector production. In 1990, government databases made up 17% of 
the database market, academic databases made up 12%, and 
private sector databases made up 68%. By 2002, the private 
sector had grown to constitute 90% of the total database 
market.
    Further, there exist a number of state and Federal remedies 
to protect investments in databases. Those remedies include 
copyright, the Computer Fraud and Abuse Act, contract, and 
trespass to chattels. Database producers have been successful 
in protecting their products using these available remedies.

H.R 3261

    H.R. 3261 raises Constitutional questions. It defies the 
parameters articulated by the Supreme Court in the Feist 
decision. It attempts to relyon the Commerce Clause of the 
United States Constitution to do what the Intellectual Property Clause 
prohibits. In doing so, H.R. 3261 would create a host of problems 
involving the free use of factual information. This has significant 
repercussions for scientific research, academic development, and 
innovation in products and services in a wide range of industries.
    The Supreme Court has held that the Intellectual Property 
Clause of the Constitution precludes the copyright of facts. 
The Supreme Court has also stated that Congress cannot avoid 
the particular requirements of one specific Constitutional 
provision by relying on the general authority of the Commerce 
Clause. The Court went on to explain that permitting that type 
of Congressional action would eradicate the limitation on 
Congress' power contained in a limiting Clause.\1\ The Office 
of Legal Counsel of the Justice Department (DoJ) reached this 
very conclusion with regard to database legislation when 
considering an earlier version of the legislation.\2\
---------------------------------------------------------------------------
    \1\ See Railway Labor Executives' Ass'n v. Gibbons, 455 U.S. 457 
(1982) (explaining that if Congress had the power to enact nonuniform 
bankruptcy laws pursuant to the Commerce Clause, the Court would 
eradicate from the Constitution a limitation on the power of Congress 
to enact bankruptcy laws required under the bankruptcy Clause)
    \2\ See Memorandum from William Michael Treanor, Deputy Assistant 
Attorney, United States Department of Justice, to William P. Marshall, 
Associate White House Counsel (July 28, 1998).
---------------------------------------------------------------------------
    Proponents of the legislation have long pointed to the law 
of trademark as evidence that Congress has the power to enact 
legislation under the Commerce Clause when the Supreme Court 
has rejected the protection under the Intellectual Property 
Clause. However, the Supreme Court struck down the first 
trademark law, enacted under the Intellectual Property Clause, 
because the Intellectual Property Clause applied to writings 
and discoveries.\3\ The Court explained trademarks were 
neither. In contrast, databases are clearly writings and in 
fact generally receive limited copyright protection. They 
unquestionably fall within the scope of the Intellectual 
Property Clause, and Congress is therefore barred from enacting 
copyright-type protection for databases under the Commerce 
Clause.
---------------------------------------------------------------------------
    \3\ See U.S. v. Steffens, 100 U.S. 82 (1879).
---------------------------------------------------------------------------
    The bill has other fundamental flaws. H.R 3261 provides a 
database producer perpetual protection for information in a 
database. It protects investment not just in the creation of 
the database, but also in the mere maintenance of a database. 
Routine updates would extend this protection indefinitely. H.R. 
3261 also has a very liberal time sensitivity provision. So 
much so that it barely resembles time sensitivity provisions 
developed in misappropriation law. The time sensitivity 
provision in H.R 3261 would protect information as long as it 
retains commercial value. In contrast, true misappropriation 
protection, like that articulated by the Supreme Court in INS 
v. AP, 248 U.S. 215 (1918) and by the Second Circuit in NBA v. 
Motorola Inc., 105 F.3d 841 (2nd Cir. 1997), provides limited 
protection for time sensitive information. In the INS case, 
protection extended for several hours; in the NBA case, 
protection extended for minutes. In contrast, the perpetual 
protection provided by H.R. 3261 even goes beyond the duration 
limits to protection under copyright law.
    Further, many of the terms in H.R. 3261 are ambiguous and 
are certain to lead to litigation. This will put a chill on the 
use of factual information and in turn, the creation of 
innovative information products and services based on this 
information. The availability of double damages will only 
exacerbate this. There is also a real concern that database 
producers could use the right of action provided in the Act as 
an anticompetitive tool.

Committee action

    The Committee opposes creating a new and untested 
protection for factual information when harm has not been 
demonstrated and there exist a number of Federal and state 
remedies to protect databases. As explained above, the 
Committee also questions the Constitutionality of H.R. 3261.
    Because of the limited nature of the referral, the 
Committee on Energy and Commerce was unable to address the many 
problems raised by the bill as reported by the Committee on the 
Judiciary. Instead, the Committee introduced and passed H.R. 
3872, the Consumer Access to Information Act of 2004. H.R 3872 
offers more limited protection to databases while preserving 
consumer access to factual information.
    H.R. 3872 is based on the 2nd Circuit Court of Appeals 
decision in NBA v. Motorola. It sets forth the following five 
factor test to establish a claim for misappropriation: (1) a 
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 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. The bill provides that a violation of 
the act will be treated as an unfair or deceptive act or 
practice, enforced by the Federal Trade Commission under the 
Federal Trade Commission Act, 15 U.S.C. 57a(a)(1)(B).
    H.R 3872 will offer protection for database producers while 
preserving important access to factual information. H.R 3872 
should also pass Constitutional scrutiny because it tracks the 
strict misappropriation standards set forth by both the Supreme 
Court and the 2nd Circuit Court of Appeals.

                                HEARINGS

    The Subcommittee on Commerce, Trade, and Consumer 
protection held a joint hearing with the Committee on the 
Judiciary's Subcommittee on Courts, the Internet, and 
Intellectual Property on a discussion draft of what would 
become H.R. 3261 on September 23, 2003. The Subcommittee 
received testimony from: David Carson, General Counsel,United 
States Copyright Office; Thomas J. Donohue, President and CEO, Chamber 
of Commerce; Keith Kupferschmid, Vice President, Intellectual Property 
Policy & Enforcement, Software & Information Industry Association; and 
William Wulf, President, National Academy of Engineering and Vice 
Chairman, National Research Council.

                        COMMITTEE CONSIDERATION

    On March 3, 2004, the Committee met in open markup session 
and ordered H.R. 3261 unfavorably reported to the House, with 
an amendment, by voice vote, a quorum being present.

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. 
There were no record votes taken in connection with ordering 
H.R. 3261 unfavorably reported. A motion by Ranking Member 
Dingell to order H.R. 3261 unfavorably reported to the House, 
with an amendment, was agreed to by a voice vote.

                      COMMITTEE OVERSIGHT FINDINGS

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held a legislative 
hearing and made findings that are reflected in this report.

         STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

    H.R. 3261 creates comprehensive and perpetual protection 
for databases.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
3261, the Database and Collections of Information 
Misappropriation Act, would result in no new or increased 
budget authority, entitlement authority, or tax expenditures or 
revenues.

                        COMMITTEE COST ESTIMATE

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  CONGRESSIONAL BUDGET OFFICE ESTIMATE

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, March 8, 2004.
Hon. Joe Barton,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3261, the Database 
and Collections of Information Misappropriation Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Melissa E. 
Zimmerman (for federal costs), Sarah Puro (for the state and 
local impact), and Paige Piper/Bach (for the private-sector 
impact).
            Sincerely,
                                      Elizabeth M. Robinson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

H.R. 3261--Database and Collections of Information Misappropriation Act

    H.R. 3261 would allow parties who create or maintain 
information databases to file civil suits in a United States 
district court against parties who misuse those databases. The 
bill would require the United States Patent and Trademark 
Office, the Federal Trade Commission, and the Register of 
Copyrights to accept and review notices submitted by 
individuals filing such suits. Under the bill, each agency also 
would be required to write a report regarding the impact of the 
law with recommendations for change. CBO estimates that 
implementing H.R. 3261 would have no significant effect on 
spending subject to appropriation and would not affect direct 
spending or revenues.
    H.R. 3261 contains an intergovernmental mandate as defined 
in the Unfunded Mandates Reform Act (UMRA) because it would 
preempt state laws that protect the collection of information; 
however, CBO estimates that the resulting costs, if any, would 
not be significant and would not exceed the threshold 
established in UMRA ($60 million in 2004, adjusted annually for 
inflation).
    H.R. 3261 would create a new private-sector mandate as 
defined in UMRA by prohibiting any person from making a 
substantial part of information in certain databases available 
to the public in commerce without proper authorization. 
Currently, certain types of information that may be contained 
in a database are not protected by copyright law, and such 
information may not be protected under individual state laws. 
H.R. 3261 would impose a mandate by creating a federal law of 
misappropriation that would subject to civil penalties any 
person who, without authority, makes a substantial portion of 
the information in a database publicly available. To avoid such 
penalties, a person must obtain the consent of the database 
owner through a licensing or similar agreement. The person's 
ability to obtain a license from the proper authority would 
depend in part on the potential effects of such a license on 
competition with the licensor's database products or services. 
The cost of complying with the mandate could be either the cost 
of the license or the revenue forgone by not making the 
information publicly available.
    CBO cannot estimate the total cost of the mandate because 
we do not have enough information to determine the scope and 
impact of the prohibition against misappropriation of certain 
databases. While court decisions have identified collections of 
information that failed to meet the creative expression 
standard under existing copyright law, those decisions are of 
limited use in identifying all of the types of collections to 
which H.R. 3261 could extend protection. Database providers may 
have been unaware of unauthorized use or, even if aware of such 
activity, may not have chosen to test their rights in court.
    On February 10, 2004, CBO transmitted a cost estimate for 
H.R. 3261 as ordered reported by the House Committee on the 
Judiciary on January 21, 2004. The two versions of the 
legislation are identical, as are the cost estimates.
    The CBO staff contacts for this estimate are Melissa E. 
Zimmerman (for federal costs), Sarah Puro (for the state and 
local impact), and Paige Piper/Bach (for the private-sector 
impact). The estimate was approved by Robert A. Sunshine, 
Assistant Director for Budget Analysis.

                       FEDERAL MANDATES STATEMENT

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, and subject to the discussion above, 
the Committee finds that the Constitutional authority for this 
legislation may be provided in Article I, section 8, clause 3, 
which grants Congress the power to regulate commerce with 
foreign nations, among the several States, and with the Indian 
tribes.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    Section 1 establishes the short title of the Act as the 
``Database and Collections of Information Misappropriation 
Act.''

Section 2. Definitions

    Section 2 sets forth definitions of terms used in the 
legislation, including ``collective work,'' ``database,'' and 
``making available in commerce to others.''

Section 3. Prohibition against misappropriation of databases

    Section 3 prohibits the making available to others of a 
quantitatively substantial part of the information in a 
database generated, gathered, or maintained by another person, 
with knowledge that the making available is without the 
database producer's authorization, if (a) the database was 
generated, gathered, or maintained through a substantial 
expenditure of financial resources or time; (b) the making 
available occurs in a time-sensitive manner, considering the 
temporal value of the information in the database within the 
context of the industry sector involved; (c) the making 
available inflicts injury on the database by serving as a 
functional equivalent in the same market as the database in a 
manner that causes displacement of sources of revenue; and, (d) 
the ability of parties to ``free-ride'' on the efforts of the 
plaintiff so reduces the incentive to produce or make available 
the database that its existence or quality is substantially 
threatened.

Section 4. Permitted acts

    Section 4 provides the act shall not restrict acts of 
making available of the information in a database by: (a) any 
person who independently generates or gathers information; (b) 
a nonprofit scientific, or research institution, for nonprofit 
scientific or research purposes, if a court determines that the 
making available in commerce of the information is reasonable 
under the circumstances; (c) by the act of hyper-linking of one 
online location to another or providing of a reference or a 
pointer in a directory or index; or (d) for the primary purpose 
of news reporting, including news and sports gathering, 
dissemination, and comment, unless the information is time-
sensitive and has been gathered by a news-reporting entity, and 
the making available is part of a consistent pattern engaged in 
for the purpose of direct competition.

Section 5. Exclusions

    Section 5(a) provides that protection under the legislation 
does not extend to a database generated, gathered, organized, 
or maintained by a governmental entity or pursuant to, and to 
the extent required by, a Federal statute or regulation 
requiring such a database. The section does not preclude 
protection for an employee or agent acting outside of the scope 
of employment or agency. Neither does it preclude protection 
for a governmental educational institution, or its employees or 
agents, in the course of engaging in education, research, or 
scholarship.
    Section 5(b) excludes computer programs from protection. 
However, databases incorporated in a computer program are not 
precluded from protection.

Section 6. Relation to other laws

    Subject to the preemption provision of section 6(b), 
section 6(a) preserves the rights, limitations and remedies of 
copyright, patent, trademark, design rights, antitrust, trade 
secrets, privacy, access to public documents, misuse, and 
contract. Section 6(b) preempts state law that prohibits or 
otherwise regulates conduct that is prohibited or regulated 
under the Act. However, it does not preempt for cases not 
involving commercial competition. Specifically, these are 
actions under State law involving the disruption of the sources 
of data supply to a database or impairment of the perceived 
accuracy, currency or completeness of a database by inaccurate, 
untimely, or incomplete replication or distribution of the 
database.
    Sections 6(c) and (d) include savings clauses for the 
Communications Act of 1934 as well as securities laws, 
regulations, and market data.
    Section 6(f) applies judicial doctrines of misuse to the 
Act.

Section 7. Civil remedies

    Section 7 provides for enforcement of the legislation. 
Section 7(a) creates a private right of action. Any person who 
brings an action under this section, must submit notice of the 
commencement of the action, or any derivative appeal, to the 
Federal Trade Commission (FTC), the United States Patent and 
Trademark Office (PTO), and the Registry of Copyrights (RoC). 
The agencies shall, by regulation, prescribe rules by which 
notice must be transmitted. Sections 7(b) and (c) provide that 
relief for a violation of section 3, may be in the form of 
temporary of permanent injunctions or actual damages and 
attributable profits. The court may double the damages after it 
considers whether: the violation continued after notice by the 
plaintiff; the conduct was willful; the defendant has a history 
of database misappropriation; the defendant is able to pay; the 
violation has had a negative financial impact on the plaintiff; 
there were any good faith efforts by the defendant to rectify 
the misappropriation; or double damages are necessary to deter 
future violations.
    Section 7(d) provides for impoundment of all copies of 
contents of the database made in violation of section 3, at the 
court's discretion. Neither injunctive relief nor impoundment 
is a remedy available against the Federal government. All 
relief under section 7 is available against state entities to 
the extent permitted by applicable law.
    Section 7(e) provides for costs and attorney's fees to the 
prevailing party, at the court's discretion.
    Section 7(h) provides a limitation on liability for a 
provider of interactive computer service for making available 
information that is provided by another information content 
provider. Interactive computer service and information content 
provider have the same meanings given to the terms under 
section 230(f) of the Communications Act of 1934.
    Section 7(i) provides oversight authority to the FTC, PTO 
and RoC for purposes of identifying instances in which judicial 
interpretations of this Act materially affects the 
administration of laws or policies in their respective 
jurisdictions. It also permits each agency to submit amicus 
curiae briefs and requires them to report to Congress on any 
briefs filed and the impact of any decisions on their areas of 
jurisdiction.

Section 8. Limitation on actions

    Section 8 provides that no civil action shall be maintained 
under the act unless it is commenced within 2 years after the 
cause of action arises or claim accrues.

Section 9. Exclusion from liability for educational institutions

    Section 9 excludes from liability under the act accredited 
nonprofit post-secondary educational institutions, nonprofit 
research laboratories, and employees or students associated 
with each. The exclusion does not apply if any shielded entity 
makes available substantially all of a database in direct 
commercial competition with a database owner as described in 
section 3.

Section 10. Effective date

    Section 10 provides that the Act shall take effect on the 
date of the enactment of the Act, and shall apply to violations 
on or after that date with respect to databases existing 
before, on, or after that date.

Section 11. Nonseverability

    Section 11 provides that if, within 10 years from the date 
of enactment, the U.S. Supreme Court holds that the provisions 
of section 3 are invalid under article I of, or the First 
Amendment to, the Constitution, the Act is repealed effective 
as of the date of the Supreme Court decision. The provision 
sunsets ten years from the day of enactment of the act.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    This legislation does not amend any existing Federal 
statute.

                                
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