FT opinion: European Database Directive stifles competition and innovation

[David Farber <dave () farber net>]

Begin forwarded message:

From: Druce Vertes <druce () streeteye com>
Date: November 24, 2004 8:41:24 AM EST
To: dave () farber net
Subject: for IP: FT opinion: European Database Directive stifles 
competition and innovation

http://news.ft.com/cms/s/4cd4941e-3cab-11d9-bb7b-00000e2511c8.html

James Boyle: A natural experiment

Imagine a process of reviewing prescription drugs which goes like this:
representatives from the drug company come to the regulators and argue 
that
their drug works well and should be approved. They have no evidence of 
this
beyond a few anecdotes about people who want to take it and perhaps some
very simple models of how the drug might affect the human body. The 
drug is
approved. No trials, no empirical evidence of any kind, no follow-up. Or
imagine a process of making environmental regulations in which there 
were no
data, and no attempts to gather data, about the effects of the 
particular
pollutants being studied. Even the harshest critics of drug regulation 
or
environmental regulation would admit we generally do better than this. 
But
this is often the way we make intellectual property policy.

So how do we decide the ground-rules of the information age? 
Representatives
of interested industries come to regulators and ask for another heaping
slice of monopoly rent in the form of an intellectual property right. 
They
have doom-laden predictions, they have anecdotes, carefully selected to
pluck the heartstrings of legislators, they have celebrities who 
testify -
often incoherently, but with palpable charisma - and they have very, 
very
simple economic models. The basic economic model here is “If you give 
me a
larger right, I will have a larger incentive to innovate. Thus the 
bigger
the rights, the more innovation we will get. Right?” Well, not exactly. 
Even
without data, the models are obviously flawed - copyrighting the 
alphabet
will not produce more books, patenting E=MC2 will not yield more 
scientific
innovation. Intellectual property creates barriers to, as well as 
incentives
towards, innovation. Clearly the “more is better” argument has limits.
Extensions of rights can help or hurt, but without economic evidence
beforehand and review afterwards, we will never know. In the absence of
evidence on either side, the presumption should obviously still be 
against
creating a new legalised monopoly, but still the empirical emptiness of 
the
debates is frustrating.

This makes the occasion where there actually is some evidence a time for
celebration. What we really need is a test case where one country 
adopts the
proposed new intellectual property right and another does not, and we 
can
assess how they are both doing after a number of years.

There is such a case. It is the “database right.” Europe adopted a 
Database
Directive in 1996 which both gave a high level of copyright protection 
to
databases, and conferred a new “sui generis” database right even on
unoriginal compilations of facts. In the United States, by contrast, in 
a
1991 case called Feist, the Supreme Court made it clear that unoriginal
compilations of facts are not copyrightable. (The case is not as
revolutionary as it is claimed to be. Most of the appeals courts in the
United States had long held this to be the case. In fact, a tenet of 
the US
intellectual property system is that neither facts nor ideas can be 
owned.)
Since 1991 the U.S. Congress has managed to resist frenzied attempts by 
a
few database companies to create a special database right over facts.
Interestingly, apart from academics, scientists and civil libertarians, 
many
database companies, and even those well-known communist 
property-haters, the
U.S. Chamber of Commerce, oppose the creation of such a right. They 
believe
that database providers can adequately protect themselves with 
contracts,
technical means such as passwords, can rely on providing tied services 
and
so on. Moreover, they argue that strong database protection may make it
harder to generate databases in the first place; the facts you need may 
be
locked up. The pressure to create a new right continues, however, aided 
by
the cries that US must “harmonise” with Europe. So here we have our 
natural
experiment. Presumably the government economists are hard at work both 
in
the US and the EU, seeing if the right actually worked? Umm.... No.

...

If the database right were working, we would expect positive answers to
three crucial questions. First, has the European database industry’s 
rate of
growth increased since 1996, while the US database industry has 
languished?
(The drop off in the US database industry ought to be particularly 
severe
after 1991 if the proponents of database protection are correct; they 
argued
the Feist case was a change in current law and a great surprise to the
industry.)

Second, are the principal beneficiaries of the database right in Europe
producing databases they would not have produced otherwise? Obviously 
if a
society is handing over a database right for a database that would have 
been
created anyway, it is overpaying - needlessly increasing prices for
consumers and burdens for competitors. This goes to the design of the
right - has it been crafted too broadly, so that it is not being 
targeted to
those areas where it is needed to encourage innovation?

Third, and this one is harder to judge, is the right promoting 
innovation
and competition rather than stifling it? For example, if the existence 
of
the right allowed a one-time surge of newcomers to the market who then 
to
use their rights to discourage new entrants, or if we promoted some 
increase
in databases but made scientific aggregation of large amounts of data 
harder
overall, then the database right might actually be stifling the 
innovation
it is designed to foment.

Those are the three questions that any review of the Database Directive 
must
answer. But we have preliminary answers to those three questions and 
they
are either strongly negative or extremely doubtful.



-------------------------------------
You are subscribed as interesting-people () lists elistx com
To manage your subscription, go to
 http://v2.listbox.com/member/?listname=ip

Archives at: http://www.interesting-people.org/archives/interesting-people/