THE FALL & RISE OF SWEAT OF THE BROW

COPYRIGHT AND COMPILATIONS - A BRIEF OVERVIEW

By GRAHAM A. KNIGHT, Corporate, Commercial/Trademarks Department

Intellectual Property Rights and Competition Law
Course Instructor: Richard Corley
Summer 1998
GS Law 6755.03

The rights accruing to authors of compilations, including data bases, exist in a context in which both intellectual property rights and competition considerations are present.

The purpose of this paper is to examine the interface of intellectual property law, in a copyright context, (focusing on rights relating to compilations), and competition considerations, with reference to developments in the United States, Canada and Europe. Finally, the paper will briefly examine recent initiatives being undertaken by the European Community and the impact of same on the United States and Canada.

Statutes providing rights in copyright are founded on a recognition that it is to society’s benefit to provide incentive for creation and innovation which is disclosed to the public. The motivation to create is enhanced by the reward of exclusivity, both in time and use, provided by copyright protection which protects the author by providing “the sole right to produce or reproduce [a] work …”.

Copyright thus provides a degree of monopoly which is limited by the width and breadth of the statute creating same. By limiting the duration of exclusivity, society achieves the benefits of innovation and consumer welfare by trading off short run individual exploitation privileges in return for long run benefits to society as a whole, ie. creating greater innovation.

While at first blush, competition considerations would appear to conflict with the monopolistic advantage of intellectual property rights, such is not necessarily the case. For example, innovation protected by intellectual property rights may lead to a continued downward shift in the price curve for a given good or service, a result greatly valued in a competitive context. The purpose of the Competition Act of Canada is to “…maintain and encourage competition in Canada…” The fruits of competition are innovation and consumer welfare, the same goals which drive the protection of intellectual property rights.

Given that the philosophy underlying both theories is arguably the same, why then are such regimes often characterized as being at odds? The answer would appear to lie in delineating the boundaries of intellectual property rights in such a manner as to ensure the incentive to and reward for innovation are maintained in an appropriate balance with what is perceived to be the long run public interest.

Compilations have historically achieved a somewhat awkward perch in the copyright regime.

Copyright legislation in general provides protection to authors for works which exhibit some evidence of creativity or inspiration, however small. The mere mechanistic compilation of facts lacks such required “spark” and has therefore been accommodated in copyright law more on the basis of a recognition that it is unreasonable for a third party who has expended no “sweat of the brow” to usurp the efforts of the compiler than on any argument seriously rooted in fundamental copyright principals. Compilations are therefore perhaps best characterized as an orphaned species which has found shelter under the wing of copyright legislation, notwithstanding that it has been generally acknowledged that proprietary interest in facts runs contrary to any notion of innovation or the public good.

Feist, the Void and the European Challenge
Under Section 103 of the United States Copyright Act, copyright includes compilation but such inclusion is governed by Section 102 of the same Act which requires “original works of authorship” before copyright protection is available.

The tension caused by the inclusion of compilations within the realms of copyright law reached a head in the United States Supreme Court decision of Feist decided in 1991.

In this case, the Respondent, Rural, provided localized telephone listings under government mandate gleaned from information provided by its subscribers. Feist Publications published telephone listings, on a broader geographic scale, which included Rural’s area. Feist would approach the local listing companies to seek licences to use their listings in the larger directory. All of the smaller companies agreed to license such information except Rural. Following Rural’s refusal, Feist appropriated the data, albeit with some modifications . While Rural prevailed initially, based on the “sweat of the brow” doctrine, the Supreme Court found in favour of Feist, (discarding a long line of precedent which in the Court’s view was simply based on misunderstanding), on the basis that the listings were facts and were therefore not copyrightable. In absence of copyright protection, they could therefore be no infringement. The case was of considerable importance for a number of reasons, including:

(i) the Court recognized the economic value of data bases;
(ii) the Court dealt a crushing blow to “sweat of the brow” by basing its reasoning on the Constitution and thereafter, having established originality as a prerequisite addressed the issue of compilation within the Copyright Act, thereby removing from Congress the ability to “fix” the decision by simply passing amendments to the Copyright Act;
(iii) the Court rationalized the ongoing originality/sweat of the brow dispute by stating:
“Copyright treats facts and factual compilations in a wholly consistent manner. Facts, whether alone or as part of a compilation, are not original and therefore may not be copyrighted. A factual compilation is eligible for copyright if it features an original selection or arrangement of facts, but copyright is limited to the particular selection or arrangement”.

Judicial decisions in the United States, since Feist, have confirmed that scant protection is available to compilers of data bases. In the 1994 decision of Martindale-Hubbell , the Defendant Dunhill International appropriated information from Martindale-Hubbell’s list of lawyers and law firms without permission and successfully resisted Martindale-Hubbell’s action for copyright infringement and claims relating to the Lanham Act, given that the information taken was fact and therefore neither copyrightable, nor likely to confuse the public. In 1995, Skinder-Strauss brought an action against Massachusetts Continuing Legal Education Inc., (MCLE) for taking information from Skinder’s “Red Book”, a legal directory published since 1959. MCLE published a “Blue book” in 1994 utilizing the Plaintiff’s data. MCLE obtained summary judgment in relation to copyright claims of the Plaintiff, given that the extracted data, calendars etc. were fact and hence could not qualify for copyright protection. While the Defendant did not succeed, at a summary level, in relation to protection of Skinder’s compilation as a whole, the Court’s refusal, since Feist, to sympathize with claims based solely or primarily on compilations of fact.
While Feist was of great value in finally laying to rest, the originality/sweat of the brow debate, which had long existed in the copyright context, it provided no alternative to protect data base compilations. Further, while Feist dealt with white pages listings, (a compilation which is about as unoriginal as one could imagine), the weighty implications of such decision on the data base industry as a whole were immediately evident, and generated much in the way of academic comment and indeed draft legislation .

The data base industry in the United States is huge and represents significant investment to data base producers, and great advantage to users of same. To suggest that such industry be vulnerable to third parties who, in Professor Litman’s words “…simply steal the data and leave the base” , is untenable though it does focus on the important distinction between the protection of data, the real issue here and the protection of the base, which is often afforded copyright protection in relation to software. Freed by Feist from the constraints of endeavoring to justify data base protection on copyright principals, opportunity presents itself to creatively fashion legislative protection based upon a clear perspective of incentives to innovate balanced by healthy notions of competition including public policy considerations.

It is the writer’s view that the economic importance of data bases is such that failure to provide any legislative protection cannot logically be considered to lead to the end of such industry. It can however be presumed that, in absence of formal protection, the industry will take measures to protect itself, which could lead to sub-optimal results, particularly on the availability of information to the general public.

In response to the void left by Feist, the Database Protection and Intellectual Property Anti-Piracy Act of 1996 (originally H.R. 3531) was introduced May 23, 1996. This legislation was founded upon the commerce clause of the Constitution whereunder the Congress is empowered to regulate commerce . It is important, in review of such legislation to appreciate that database protection is now proposed to be achieved on a misappropriation basis, founded on unfair competition, not copyright principals. This being the case, it is prudent to “shed” copyright concepts, (fair use, for example), when considering such draft legislation as while such concepts may be imported to interpret or develop misappropriation legislation, they do not presently exist in such environment in the same manner as they do in copyright law.

Section 3 of H.R. 3531 provided protection to non governmental databases, excluding computer programmes “intended for commercial use” provided there was a “substantial investment of … resources” in the creation of the database. The eligibility for copyright was not a criteria.
Section 4 protected the owner from unauthorized use of the database relating in unfair competition in the marketplace, which protection stood whether the database was taken as a whole, or nibbled away at in smaller segments, to eventually achieve the same goal. While a wide range of prohibited acts were enumerated, the theme was anchored in competition principals. Section 5 permitted an authorized user to use part of the database for purposes inoffensive to Section 4.

Protection was afforded for a period of 25 years under Section 6. Changes to the whole database, of commercial significance, would attract protection for a new term.

Civil remedies, enunciated in Section 7, included injunctions, an obligation on the offending party to disgorge data improperly taken, an accounting for profits gleaned from anti-competitive behaviour, and the availability, in the Court’s discretion of treble damages. Criminal penalties were available in circumstances of wilful theft of data for commercial advantage, comprising of damages not greater than $250,000.00 and/or imprisonment for up to five (5) years, with such penalties doubling on further offences.

Assuming both owners of databases and the public accessing same will utilize any legislative privilege to its fullest extent, did this draft legislation succeed in balancing the incentive to innovate, and the public interest in a free flow of information?

As an initial observation, it is suggested that any sui generis legislation providing rules and consequences for ownership and use of databases is preferable to the uncertainty existing in the absence of same. Further, such initiative was consistent with meeting a looming European challenge in relation to reciprocity of legislation discussed later in this paper.

It is trite to note that databases are both time consuming and expensive to create and maintain and vulnerable to quick and inexpensive theft. Furthermore, those appropriating such information can profitably market same at a lower price, given that no development cost need be recouped. While the use of statistics is a sure way to encourage debate, in the six (6) years following Feist, it has been observed that “although both the number of databases and the number of database producers have continued to expand, … the growth rates for both of these measures slowed considerably … compared to the prior six (6) years”. While Tyson and Sherry do not suggest Feist is single handedly responsible for such statistics, it is not unreasonable to infer that Feist played some part.

Owners are now offered protection, on a defined basis with remedies, in a context which does not grant property in the facts themselves. This protection accompanied by passwords, online access and the like, should restore some investor confidence in the creation of databases. It is noted that Section 9 of H.R. 3531 also specifically respected contractual freedom in relation to the use of databases. It is suggested that the propensity to under provide services, to the detriment of both industry growth and public access to information, would be diminished by legislation akin to this draft.

Academic response to the introduction of H.R. 3531 was swift. While those commenting on the legislation recognized that Feist had removed legislative protection for databases, and were generally of the view that such compilations were deserving of some protection, there was by no means consensus as to the appropriate balance which should be struck. Further, many authors were of the view that while protection was justified, there was too much emphasis on implementing legislation, and too little thought directed toward the implications for the database industry of such legislation.

Further, although less obvious in some scholarly articles, the appropriate approach to balancing the public interest in access to, and relatively unrestricted dissemination of, information in a competitive environment, and the rights of database owners to protection was not clearly articulated. Specifically, does one stake out the appropriate interests of the public, and having defined the perimeter adjust the rights of database owners with a view to achieving equilibrium or does one commence from the opposite vantage point of appropriate protection, and adjust public interest accordingly? While in theory it may be argued that the “balance point” will be obtained from a cautious and well reasoned approach from either starting point, it is the writer’s view that where one “goes in” will tend to have a material impact on the conclusions reached at the end of an analysis.

This concern was identified by Jerry Campell in 1995 when he observed that much of the commentary on legislative initiatives was driven by the self interest of those making commentary and therefore more progress might be made if fundamental principles applicable to the debate were established at the outset and consideration flowed from same. In Campbell’s view, the public’s right to knowledge was the foundation upon which all further considerations should be based.

If it is fair to assert there is a reasonable liklihood of damage occurring if the balance between the privileges afforded to owners of compilations, and the rights of the public is improperly struck, then the author would suggest that Campbell is on the right track given that historically, markets have tended over time to take care of themselves.

Tyson and Sherry, while by no means fully endorsing H.R. 3531, after conducting some economic analysis concluded that the draft legislation was certainly preferable to no legislation and on balance was a worthwhile initiative.

Such views were not shared by Peter Jaszi who expressed concern that the legislation, in discarding copyright principals and building from the constitutional commerce powers was rapidly advancing the American public to a new legislative regime which respected the rights of the owners of compilations to the detriment, on balance, of the rights of the public in accessing such information. Jaszi expressed concern that the protection afforded to non governmental databases, given H.R. 3531’s recognition of extended protection given to amendments, would result in a perpetual advantage. The proprietary interest created by such a regime, would therefore both restrict access and increase costs of the public in accessing such information.

Finally, concern was expressed that the exceptions set out in Section 5 H.R. 3531 to access and use of such information were insufficiently defined to afford protection to “legitimate” education, research, and other non competitive initiatives which might, for example, utilize all (not part) of a database.

H.R. 3531 was amended and is now designated as H.R. 2652, introduced October 9, 1997. Same was passed by the House of Representatives May 19, 1998, and as at May 20, 1998, has been received in the Senate, read twice and referred to the Committee on Judiciary. The legislation is unchanged to the extent that it still prohibits the taking of “all or a substantial part” of information gathered, but has been significantly amended by Sec. 1203 to broaden Acts which fall outside the prohibition enunciated by the legislation. Permitted acts now include the taking of “insubstantial parts” of the database, the use of information for verification, and protection for non profit educational, scientific, or research uses, or for news reporting.

Notwithstanding these amendments, resistance to the legislation continues.

In correspondence to Representative Howard Coble, sponsor of H.R. 2625, Samuelson expresses continued concern that the legislation, and indeed the qualified support of same by Tyson and Sherry still continues to fail to strike an appropriate balance between the interests of compilation owners and the public in general.

Samuelson’s first concern is that the Tyson-Sherry report is suspect in that it does not appreciate intellectual property law and policy concerns upon which it opines. Primarily, Samuelson is of the view that Feist has been over emphasized in relation to its real impact on the state of the law, (and indeed business), in the United States. She notes that the U.S. copyright office had for some years prior to the decision in Feist begun to demand an element of creativity in applications for copyright claims relating to compilations and further that many of these claims were in fact meeting the “spark of originality” criteria required to meet the standard. In summary, it is her view that while protection for compilations may not be as strong as the industry would like, it is certainly not as weak as much of the post Feist commentary has indicated. Further, Samuelson has noted that owners of compilations are not isolated in seeking protection to protections afforded under copyright legislation, citing “Contract, trademark, trade secrecy and unfair competition law …” as other avenues of recourse against unauthorized taking of databases.

Secondly, Samuelson notes that the Tyson-Sherry report seriously under estimates the importance of the information in the public domain as a foundation for furthering research and innovation in the public sector. If one accepts that there are few advances to the benefit of society that are entirely new, it is logical to assert that such advances are often made possible by building upon information already available. This information is often in data bases. Therefore, providing too much protection for data bases may be detrimental to the interests of society to as great an extent as providing too little protection.

It has been noted that the major proponents of H.R. 2652 appear to be the largest data base owners. The Association of Research Libraries notes that between 1986 and 1996 while the consumer price index increased by 44% the costs of subscriptions to journals consisting of collections of information increased by 148%. This increase occurred in absence of statutory regulation. These statistics would suggest that a fresh imposition of monopolistic rights by legislation might well harm the public interest by driving costs associated with the attainment of such information even higher.

Samuelson is also concerned that the alleged threat to the position of data base owners has been supported by far too little hard economic data. She observes that remedial measures should not be instituted until the need for a remedy has been empirically established.

Fourthly, Samuelson observes that the threat of the European Directive has been overstated given that other remedies are available to data base owners, as noted above, and further given that she is not prepared to accept that the European Court would be prepared to countenance outright piracy of data bases from abroad. Finally, Samuleson is critical of the exceptions in H.R. 2652 relating to scientific, educational and news reporting purposes in that they are governed by parameters of “no harm to actual or potential markets” which qualification is ambiguous.

Samuelson closes her observations by ominously noting that only six parties have come forward in support of this legislation while hundreds are opposed . Two of the six parties are Reed Elsevier and Thompson, being very large publishing enterprises. It has been noted that Reed Elsevier’s profit margin in 1996 relating to database information approached 42%, (which it was noted exceeded Microsoft’s).

The message to be drawn from the foregoing would appear to be that there is material concern that the proposed legislation may well provide further strength for the already strong without commensurate benefit to the public.

As noted earlier, these developments are occurring in the shadow of a Directive from the European Union on the legal protection of databases, which Directive directed implementation before January 1, 1998 . The directive protects owners of data bases who are nationals of the European Community or companies, resident or genuinely carrying on business in the Community. It does not provide protection to non European data base owners whose country of residence does not offer reciprocal protection. Concern was expressed in the United States that this initiative would create an open invitation to the pirating of U.S. data bases in absence of such reciprocal legislation. In defence of and preparation for the implementation of this Directive it is assumed a number of companies may open enterprises in the Community to qualify for protection and avoid reliance on the passage of reciprocal legislation.
It is the European Community’s view that copyright in and of itself has provided insufficient protection for owners of compilation and that consequently such initiative is necessary. Further the Community notes that unfair competition rules do not exist uniformly, internationally, and that even in circumstances where same do exist, they are deficient to the extent that they do not provide protection but rather only offer a potential of a remedy when damage has already occurred.

The United States has taken this threat seriously and in response to same introduced H.R. 2281, being the WIPO Copyright Treaties Implementation Act, introduced by Rep. Cobel, July 29, 1997. On June 24, 1998, Chairman Bliley of the House Committee on Commerce called for additional time in considering this implementing legislation to address unresolved fair use concerns. It is anticipated the House Committee on Commerce will address this legislation again prior to August 1998.
H.R. 2281 amends the United States Copyright Act to bring it into line with the European Initiative.
The Canadian Experience

The dissonance existing in the realms of copyright law in Canada was abundantly evident in the case of British Columbia Jockey Club et al v. Standen decided in the British Columbia Court of Appeal in 1985. In this infringement action, the Plaintiff prevailed in defending the copyright in its horse race paper arguing that the competing Defendant in publishing its “Special News” had made “substantial use of all of the essential facts compiled …” The Court relied on a passage from The Modern Law of Copyright which fixed the merit of the Plaintiff’s position on the usurping of “painstaking labour” required to produce the Plaintiff’s paper. The Appellant’s Counsel’s argument that one must distinguish between ideas and form did not prevail. While the result of the case may have achieved justice in some manner, it is respectfully submitted that the use of facts by the appellant ought not to have offended principals of copyright law. The case was evidence of the triumph of “sweat of the brow”.

The challenge to protected compilation of fact under copyright law was initiated by the Canadian Radio-television and Telecommunications Commission, (CRTC) in 1990, about a year prior to the Feist decision. The CRTC’s deliberations involved Bell Canada’s refusal to release certain factual subscriber information to the public. Interestingly, the crumbling edge of copyright compilation protection involved the records of monopolistic telephone service providers in both Canada and the United States. In 1992, the CRTC ruled that “raw listing information” compiled by Bell would not support copyright protection in absence of some further creative organizing of such data. No case law, (including Feist which had been decided by this time), was cited in support of the CRTC’s decision.

The Canadian Judiciary addressed these issues in the Federal Court of Appeal’s landmark decision of Tele-Direct v. American Business Information . The central issue in this litigation related to a claim of copyright, by Tele-Direct, in its compilation of the Yellow Pages, a telephone advertising directory. The Court examined the 1993 amendments to the Copyright Act, prompted by Canada’s desire to implement the North American Free Trade Agreement Act , which introduced “compilations” in Section 2, as a “mode or form of expression”. The Court also noted that the North American Free Trade Agreement, in Article 1705, protected works covered by Article 2 of the Berne Convention, which included, “compilations of data … which by reason of selection or arrangement … constitute intellectual creations, …”. . The Court fixed on the words “intellectual creations”, to found copyright protection on creativity and not sweat of the brow.

This Canadian decision is notable on a number of levels, including:

(i) The Court, as in the United States’ experience, recognized copyright in compilations, but only if sufficient originality is evident in the organization or presentation of the materials;
(ii) No copyright exists in facts alone;
(iii) A compilation is to be examined as a whole, rather than assessing the copyright ability of its various segments;
(iv) The Federal Court based its decision both on the correct approach to examining whether a compilation warranted copyright protection, and to the originality required, by applying the Ladbroke decision, being English jurisprudence. Feist was merely considered. At the same time, the Court remarked that Justice O’Connor’s observations in Feist, that “The standard of originality is low, but it does exist”, applies equally to the Canadian context. As a result of this, it would seem the Canadian jurisprudence has been positioned so that precedent from either English or American case law is available for consideration.

While Tele-Direct, like Feist, clarified the long standing uncertainty in the law as to the protection which was to be afforded to compilations, in a copyright context, it also left owners of databases without alternate protection and has therefore prompted the same debate about the rights of the public to information versus the rights of database owners to security, as has been ongoing in the United States. As with the U.S. experience, there has been a call for sui generis legislation in Canada.
In January of 1998, the Canadian Publishers’ Council expressed concern about the post Tele-Direct state of the law in Canada echoing sentiments expressed by the Information Technology Association of Canada. While the observations relate more to the disincentive for database owners to continue in the present climate, than to a balanced examination which includes the rights of the public, the Council calls for the institution of database protection in Canada either on copyright principals, misappropriation theory as is being utilized in the United States, or by sui generis legislation capable of meeting the European Community’s reciprocity standards, as discussed previously.

Interestingly, the Council applauds the Canadian initiative to join the W.I.P.O. Literary and Dramatics Work Treaty apparently ignoring the requirement of “intellectual creation” which the Federal Court of Appeal fixed upon in Tele-Direct.

The author has not been able to identify any pending Canadian legislation which would meet the challenge of the recent European Directive. One might well speculate that given Canada’s rather minimal position as a player in database industries, compared to that of the United States and the European Community, that Canada may well be observing developments abroad with a view to adopting and enacting appropriate legislation once the larger players have fixed on their position.

The European Experience
The production of databases in the European Community was examined in the Magill decision which involved lists of television programs published in viewing guides. Three separate television guides were published in Ireland and Northern Ireland, each providing listings and commentary for two separate stations. In 1986 Magill T.V. Guide published a listing for all six channels and was initially enjoined by the Irish Court from continuing the practice, based on copyright infringement.

The decision of the Court followed an examination of intellectual property rights in interface with competition principles, specifically as legislated in Sec. 86 of the Treaty of Rome , as amended. It is noteworthy that in the European Community, matters of copyright are left to the various nations comprising the Union. Consequently while the Commission argued in the Court of First Instance that the listing should not be afforded copyright protection, the decision of the Irish Court, in matters of Irish copyright law, was respected in the decision which followed from the European Court of Justice. For the purposes of this paper however, it is noted that the Commission’s position on the protection which ought to be afforded to such collections of facts is not dissimilar to the themes running through Feist and Tele-Direct.

In this case, the abuse of dominance provisions of Sec. 86 were invoked notwithstanding the respect for the monopolistic privileges afforded to copyright holders, because three publishers of two channel telephone guides, were, by their refusal to permit licensing of their information, extending their copyright protection unreasonably by blocking the emergence of a new product, (the six channel guide), in a market in which there was demand from the public, and in which market they did not compete.

Given the predominant theme of integration in the European Community, it is reasonable to anticipate that in the future copyright legislation within the community will move toward standardization.

Observations
The privileges afforded to copyright and the manner in which such privileges are regulated by legislation can be traced to times when the sophisticated electronic accumulation of data simply did not exist. The legislation, like any legislation, endeavoured to properly address circumstances which existed at the time same was passed. The virtual explosion of the information industry has brought with it new challenges which ought to be seen as normal in any area where society is developing rapidly. Stated another way, the present problems existing with compilations should not be seen as a fault with, or failure of, the various copyright regimes but rather matters requiring regulation or rules which until recently had not been anticipated or heretofore been necessary. To endeavour to cling to tools which are no longer effective is a counter productive exercise. Therefore, it is the author’s view that resources should be focused on appropriately constructing regulation which continues to accommodate the evolution of society by allowing for free flow of information, while at the same time maintaining incentive to create databases, and legitimate protection for the owners of same.
The recent challenge created by the European Directive, regardless of the intentions underlying same, or its true impact on the United States and Canada, should be welcomed given that it has provided legitimate urgency in creating and implementing legislation to meet the needs of present day society. Prior to this external threat, progress at copyright reform has been, at best, sluggish.

Finally, the author would note that the interface between legitimate rights of intellectual property holders and notions of healthy competition policy may well have been made more difficult by the continuing notion of copyright representing intellectual property. It would seem that the concept of property brings with it certain notions of exclusivity which have unduly complicated issues discussed in this paper and perhaps even been counter-productive to the legitimate aspirations of holders of copyright, whether or not one views compilations as properly being within such regime.

It is proposed that revisting concepts of intellectual property, characterized instead as intellectual privilege might well expedite the attainment of appropriate equilibria in the various competing concerns by recognizing that the reward for innovation, or indeed perhaps sweat of the brow, will be recognized and protected, but on the basis that the limited protection afforded is a privilege granted against a back drop of the interests of society as a whole. I believe Campbell’s proposed starting point is sound and that progress could be made in this area by carving out from the rights afforded to the public areas of privilege for the protection of data base owners.

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The above is not intended to constitute legal advice. Please contact a lawyer to clarify your legal rights.