Monday, 24 July 2017

The Database Directive: Don’t reward investments with copyrights

On 24 May 2017, the European Commission (EC) launched a public consultation on the Database Directive (96/9/EC) – Deadline: 30 August 2017.

What does the consultation ask?

In the 1st section, ‘Overview of the database market‘, the EC tries to gain more insight into the database market by asking owners and users, of both private and public sector databases, about what types of database they publish and use.

In the 2nd section, ‘Impact on rightholders and users‘, the EC wonders if the Directive has helped to “improve the global competitiveness of the European database industry and increase the European production of databases”.

In the 3rd section ‘Application of the Database Directive and possible needs of adjustment‘, the EC starts by inquiring if the “original objectives of the Database Directive [are] still in line with the needs of the EU?”, to then ask more in-depth about:

  • the scope of the Directive (the EC basically wants to know if you think that the scope is too narrow, satisfactory, too broad, unclear or outdated. Unfortunately, you cannot combine choices, otherwise our answer would be a combination of : too broad, unclear and outdated);
  • the copyright protection (the EC inquires about your experience with the exceptions under Article 6 and wants opinions on the coherence of the Directive with the EU copyright acquis, the Directive on the re-use of public sector information [PSI Directive], EU’s open access policies and the objectives of the Data Economy Package); and,
  • the sui generis right (here the EC seem to have the most questions, as it looks at the CJEU case law, the exceptions, the access and (re-)use rights [also for publicly  financed databases], the protection term, etc.).

Last, but not least, the EC closes the questionnaire by asking how to “achieve an adequate balance between database owners’ rights and users’ needs?“. The EC itself puts forward the options of:

  1. making no changes;
  2. providing guidance to Member States on the sui generis protection; or
  3. amending the sui generis protection.

Read more below on where this Directive stems from and what can be said about this bad piece of legislation.

What’s the Directive all about?

The discussions on the draft Directive began in 1992, more than 25 years ago, following a ruling by the US Supreme Court in the so-called ‘Feist‘ case. In this case about data contained in a phone directory,  the Court decided to depart from the ‘sweat of the brow’ doctrine, which grants copyright protection based on one’s efforts (‘sweat’) in the creation of the work, and instead looked at the criteria of originality to assess the copyright protection. The result was that companies tried to pressure legislators to ensure protection for their databases. An attempt which failed in the US, but succeeded in Europe, as it led to the adoption of the Database Directive in 1996. This legal instrument offers a two-tiered protection to databases, as it ensures:

  1. copyright protection to ‘original databases’; and,
  2. sui generis protection to databases resulting from a ‘major investment’

The Court of Justice of the European Union (CJEU) explains that this sui generis protection of 15 years is “intended to ensure that the person who has taken the initiative and assumed the risk of making a substantial investment in terms of human, technical and/or financial resources in the setting up and operation of a database receives a return on his investment by protecting him against the unauthorised appropriation of the results of that investment” (§36).

Catherine Colston pointed out in 2001 that this Directive provides for “the strongest intellectual property protection other than a patent, and for subject matter (information) that carries none of the value-added originality nor novelty necessary for copyright or the grant of a patent”.

What can be said about the Directive?

To cut the story short, the Database Directive is not a success story.

Let’s take a closer look at what this Directive achieved (or rather failed to achieve) since it’s adoption.

Creating legal certainty to foster the growth of the EU database industry

The European legislator aimed to create legal certainty in an attempt to foster the growth of the EU database industry. Did it succeed in achieving this goal? No.

No legal certainty: Inge Graef and Martin Husovec remark that in the 20 years following the adoption of the Directive the CJEU spent a lot of time trying to clarify the Directive ranging from the notion of the relevant investment, the scope of the rights, to the exceptions, but until today a lot of aspects still remain unclear (p. 7).

No (positive) economic impact: The EC wanted to provide the EU database industry with a competitive edge, but this never materialised in practice. The EC acknowledged in its own 2005 evaluation report that “the economic impact of the ‘sui generis’ right on database production is unproven” (p. 5). Instead, this new right had an adverse effect, which is usually the case when granting additional rights, namely: it benefits the bigger players who are already active in the market. BEUC, the European consumer organisation, made this point in its response to the EC’s first public consultation back in 2006 as it explained that this Directive also impacts consumers because:

“it increases the barriers to entry for potential competitors in the database market, thus raising costs and stifling innovation to the detriment of, amongst others, the consumer.”

Outdated & useless exceptions: private use & teaching and scientific research

Just like with copyright, the legislator included a set of optional exceptions to both the copyright and sui generis protection granted in the Database Directive.

One of these exceptions allows for the “reproduction/extraction for private purposes of a non-electronic database“. Limiting the exception to non-electronic databases (remember telephone books) is ‘virtually a meaningless right‘ as Indranath Gupta explains (p. 159), or as Professor Hugenholtz put it a bit more bluntly in 2001, it’s kind of “ludicrous, impracticable and impossible to monitor” (p. 484).

Professor Lucie Guibault and Professor Andreas Wiebe found that the exception forextraction for the purposes of illustration for teaching or scientific research” is a “very significant example of dis-harmonisation”, seeing that “every Member State has its own interpretation of the underlying directive”. In their view “the exception is to all intents and purposes useless” (p. 11).

The Directive was clearly drafted with commercial interests in mind, and the exceptions demonstrate that it neglects the public interest and needs of educators and researchers.

Text and data mining: The sui generis barrier lifted, but only for research organisations and for scientific research

The sui generis protection restricts extraction and/or re-utilization of the whole or of a substantial part of a database: any (temporary) copies of a database made for TDM purposes infringe this protection. Therefore, an expert group on text and data mining (TDM) who advised the EC in the context of the copyright reform called for “the introduction of an exception on copyright and the sui generis database right” (p. 52). Luckily, the EC followed their suggestion by introducing a mandatory TDM  exception to copyright and the sui generis database protection.

However, the EC’s proposed TDM exception is limited toreproductions and extractions made by research organisations in order to carry out text and data mining of works or other subject-matter [note: e.g. databases] to which they have lawful access for the purposes of scientific research” (the TDM exception has more flaws,  as evidenced in our infographic). Therefore, those who cannot benefit from the TDM exception (journalists, start-ups, etc.) will still be tormented by the complexities of the Database Directive.

Conclusion: The story of a failed initiative

We support the idea that creativity needs to rewarded, but don’t agree with the concept that investments should get additional sui generis protection in copyright legislation.

With the introduction of the Database Directive the EU succumbed to the pressure to introduce a special copyright and property right regime for a specific industry. The review of this failed Directive comes at a time when the EU is set to repeat this mistake to please another industry calling for a special treatment: the newspaper publishers. Granting new rights as a quick fix for the issues faced by a specific sector seems to be a guilty pleasure of the EC, and with the publishing sector, they couldn’t resist either. In its proposal for a Directive on copyright in the Digital Single Market, the EC introduced the idea of granting newspaper publishers a new neighbouring right which would retroactively apply for 20 years (see our Article 11 infographic). What could possibly go wrong?

Looking at the Database Directive, the basic lesson it that these new rights come to the benefit of the larger market players and hurt smaller innovative players. This is no different for the press publishers right as evidenced by the experience of national implementations in Germany and Spain.

Imagine applying these arguments to a drug trial. The patients in the control group have done better than those given the drug, and there is evidence that the drug might be harmful. But the drug companies like their profits, and want to keep the drug on the market. Though ‘somewhat at odds’ with the evidence, this is a ‘political reality.'”
Prof. James Boyle, Duke University School of Law – 
Source: FT

The Database Directive also shows that once new rights are attributed they are almost impossible to repeal, even if they end-up missing their objective. The EC pointed out in its 2005 evaluation report that “the attachment to the new right is a political reality” (p. 25), and that “repealing the Directive altogether or repealing the ‘sui generis’ right in isolation would probably lead to considerable resistance by the EU database industry” (p. 5).

The result: the EC did not have the guts to withdraw the Directive or to just repeal the sui generis right,  even though their 2005 evaluation acknowledged the lack of any empirical data to prove its economic impact. The lesson to be learnt here for the discussions around the press publishers’ right is: quit while you’re ahead, because cleaning up the mess is impossible.

Germany and Spain are already confronted with collateral damage from their national ancillary copyright legislation, but if common sense strikes EU legislators it is not too late yet to reject this new extension of rights and to fend off the downward spiral of upholding bad legislation for the sake of pleasing some market players, as exemplified by the Database Directive.

Recently, 64 civil society and trade associations – representing publishers, journalists, libraries, scientific and research institutions, consumers, digital rights groups, start-ups, technology businesses, educational institutions and creator representatives – sent this open letter [PDF] to the Council and European Parliament asking ‘European lawmakers to oppose the most damaging aspects of the proposal, but also to embrace a more ambitious agenda for positive reform’, stressing, amongst other things, the need to “remove any creation of additional rights such as the press publishers’ right in Article 11”.

We hope that the EC will find the courage to properly fix the Database Directive, instead of neglecting the problems for another decade by choosing the ‘making no changes’ option (again).

It has the backing of the European Parliament, who pointed out that this Directive is “an impediment to the development of a European data-driven economy”, and called upon the EC to follow-up on policy options to abolish it (§108).

“Change is costly – true. But what is the purpose of a review, if the status quo is always to be preferred?”
Prof. James Boyle, Duke University School of Law – 
Source: FT

Herman Rucic is Senior Policy Manager in the secretariat of the Copyright 4 Creativity (C4C) coalition. He is Senior Policy Manager at N-square Consulting since September 2010.