[IP] FT opinion: European Database Directive stifles competition and innovation
Begin forwarded message:
From: Druce Vertes <druce@xxxxxxxxxxxxx>
Date: November 24, 2004 8:41:24 AM EST
To: dave@xxxxxxxxxx
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.
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