LEGAL PROTECTION OF COMPUTER DATABASES ~ 1991 Losey 4919 words 17 pages RALPH C. LOSEY Subin, Shams, Rosenbluth & Moran, P.A. 111 N. Orange Ave., Suite 900 Orlando, Florida 32801 407-841-7470 407-648-4995 (fax) LEGAL PROTECTION OF COMPUTER DATABASES There are three main ways to protect all computer software, including computer databases: copyright, trade secret and contract. Ideally, all three of these legal means can be employed, along with other practical non- legal methods, to provide the maximum protection against the unauthorized copying and use (a/k/a "piracy") of a database. There are, of course, other legal theories that could be argued in a law suit to protect databases, such as unfair competition and conversion, however, these theories may be preempted by copyright law. See: Southern Bell Tel. & Tel. v. Associated Telephone Directory Publishers, 756 F.2d 801, 810 fn. 9 (11th Cir., 1985) (unfair competition); Financial Information, Inc. v. Moody's Investors Service, Inc., 808 F.2d 204 (2nd Cir. 1986) (misappropriation); The Law and Business of Computer Software; Supra, pg. 22-18 (misappropriation theories and preemption). There are also numerous ingenious non-legal or practical means and strategies which can be employed to prevent the unauthorized copying of a computer database. These practical methods include the deliberate placement of false or hidden data or "seeds", to facilitate the detection of copying. Eg.: Rockford Map Pub. v. Dir. Service Co. of Colorado, 768 F.2d 145, 147 (7th Cir., 1985) (Phony middle initials of names on a map spelled out Rockford Map Inc. when read from top of the map to the bottom). WHAT IS A COMPUTER DATABASE? The computer database is a new type of intellectual property of growing importance in today's world. Essentially it is a collection of information stored so that it can be selectively searched and the desired information retrieved using a computer. The Law and Business of Computer Software, Toedt Ed., Ch. 22, Computer Databases, H. Pearson, pg. 22-2, Clark Boardman (1990). As society moves further into the informational age the significance and dollar volume of database products should increase. Since this is a relatively new type of property, American law is having to rapidly evolve and create new standards and legal principles to try and protect against its misuse and theft. Databases have long existed in manual or book form. Contemporary examples of manual databases still abound, such as the phone book and many reference books, including legal reporters. The computer database is essentially an information compendium like a phone book which has been placed in a computer and thereby automated. When information is so computerized, however, there are many more ways for the information to be accessed, manipulated and used; the value of the database to users is thereby greatly enhanced. Some popular examples of computer databases include legal databases such as Westlaw and Lexis, and various business and scientific databases like those found on a computer network such as Dialog. COPYRIGHT LAW In order to have a framework for an analysis of the legal protection of computer databases, and to show the basic problems in trying to legally protect them from computer piracy, a thorough review of Copyright law is first necessary. The United States Copyright Office in its publication Circular 65: Copyright Registration for Automated Databases defines an automated database as a "a body of facts, data, or other information assembled into an organized format suitable for use in a computer and comprising one or more files." The federal Copyright statutes do not yet specifically list automated databases as a copyrightable subject matter. 17 USC 101, 102. Nevertheless, the Copyright Office follows case law and allows a computer database to be copyrighted as a literary work, even though they are not specifically included in the statutes. See Eg.: Lane v. First Nat. Bank of Boston, 687 F.Supp. 11 (D.C. Mass. 1988). The Copyright Office considers a computer database to be copyrightable as a "compilation". The law defines compilation as 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. 17 USC 101 Federal copyright law extends copyright protection to compilations as a form of literary work. 17 USC 103. In addition to computer databases, a compilation can be a collective work such as a periodical, anthology and encyclopedia, or a reference work such as a directory, index, map, telephone book, guide book, law reporter, catalog, chart, or racing guide. The "literary work" in a computer database which may be protected is composed of four parts: (1) selection of the contents; (2) the coordination of the contents internal to the program; (3) the arrangement of all of the elements of the database; and, (4) the contents itself. Computer Software, 2.08A(2)(c)(i), L.J. Kutten, Clark Boardman (1990). The copyright of a compilation may extend to one of these parts without including the others. Copyright law originates in Article 1, Section 8 of the Constitution of the United States which says that Congress shall have the power: To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right in their respective Writings and Discoveries. To implement this constitutional right Congress enacted copyright and patent laws. The copyright law was written to protect "original works of authorship". 17 USC 102. Over the centuries Courts have looked to see if a work has "originality" or not to determine if it may receive copyright protection. Kamar Int'l v. Russ Berrie & Co., 657 F.2d 1059, 1061 (9th Cir. 1981) (originality is the sine qua non of copyrightability). Originality requires an author to contribute something more than a "merely trivial" variation which is recognizably "his own". Id. A work must show some "creativity", albeit only a minimal amount, in order to meet the originality test, and it is not subject to copyright if the work merely copies an existing work. See: Copyright Protection For Citations To A Law Reporter, Intellectual Property Law Review, pgs. 444-456, Norris Ed., 1988. This essential element of "creativity" is weak or completely absent in many manual reference works or computer databases. For example, what creativity is there in an alphabetical listing of stocks with prices? Another basic problem in protecting a database is that copyright law does not prohibit the copying of facts, even newly discovered or expensively acquired facts, nor does it prohibit the copying of ideas. Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 556, 105 S.Ct. 2218, 85 L.Ed2d 588 (1985) ("no author may copyright his ideas or the facts he narrates"); Kregos v. Associated Press, 731 F.Supp. 113, 117 (S.D.N.Y. 1990) (protecting facts would unreasonably limit the public's right to use information in the public domain); Mazer v. Stein, 347 U.S. 201 (1954) (distinguishes copyrights from patents and holds that copyright protects particular expressions of ideas, but not the ideas themselves). Copyright law can only provide protection to the arrangement and coordination of facts in a database, and even then there must be some originality to the collection and arrangement for it to be protected. See Eg.: 17 USCA 103 and cases cited therein. Typically the preparation of a database requires a significant expenditure of time, effort and money to cull and select information from many different sources (the "selection" aspect of the "selection, coordination and arrangement"), but little or no original creativity to express the facts, or arrange them. In these circumstances, where the compiler gathers and compiles raw facts, he did not create the facts, he just discovered or uncovered them, sometimes at great expense. So how can you prevent copying of the work? In order to lend copyright protection to merely factual databases, some courts have tried to move away from a strict application of the creativity test, to also employ an "industriousness" or "sweat of the brow" test to determine if the database is an "original" enough work to be afforded copyright protection. Southern Bell Tel. & Tel. v. Associated Telephone Directory Publishers, 756 F.2d 801, 809 (11th Cir. 1985). These Courts, spearheaded by Judge Learned Hand, found "originality" from the "labor and expense" expended to make the compilation, rather than from any real "creativity" of the author. Id.; Jeweler's Circular Publishing Co. v. Keystone Publishing Co., 274 fed. 932 (S.D.N.Y. 1921 (L. HAND, J.), aff'd, 281 F. 83 (2nd Cir. 1922), cert. denied, 259 U.S. 581, 42 S.Ct. 464, 66 L.Ed. 1074 (1922) (the first express "industriousness" standard case); West Publishing Co. v. Mead Data central, Inc., 799 F.2d 1219 (8th Cir. 1986); The Law and Business of Computer Software, Supra pg. 22-8. Under the sweat of the brow doctrine, copyright could prevent the unauthorized copying of facts in a database, if the compiler could show that sufficient effort went into the acquisition and selection of the data to make it original. The protection would lie even if the information compiled was public knowledge or otherwise not protected. Southern Bell Tel. & Tel. v. Associated Telephone Directory Publishers, Supra pg. 810. Other Courts, however, continued to analyze a database dispute by using traditional concepts of creativity, and criticized the "sweat of the brow" standard. Miller v. Universal City Studios, Inc., 650 F.2d 1365, 1369 (5th Cir. 1981); Lane v. First Nat. Bank of Boston, 687 F.Supp. (D.C. Mass. 1988). In the words of the Second Circuit Court of Appeals: To grant copyright protection based merely on the "sweat of the author's brow" would risk putting large areas of factual research material off limits and threaten the public's unrestrained access to information. Financial Information, Inc. v. Moody's Investors Service, Inc., Supra pg. 207. A recent unanimous decision of the United States Supreme Court has followed the Miller line of cases and sounded the death knell to Learned Hand's sweat of the brow doctrine. Feist Publications, Inc. v. Rural Telephone Services Co., Inc., 59 U.S.L.W. 4251 (March 26, 1991). In Feist the compilation was manual, it was the phone book, for which the phone company had made a valid copyright registration. The alleged infringer, Feist Publications, was found to have copied large portions of the white pages from Rural Telephone Services Companies phone book. Feist Publication's repetition of four fictitious listings, or seeds, which Rural Telephone had planted in their white pages helped to prove that. Feist Publications included the names and addresses from Rural Telephone's white pages in its competing phone books. Rural Telephone argued that the white pages listing of names and addresses in its phone book, although admittedly facts, was still entitled to copyright protection. It contended that its efforts to obtain and select these facts should be protected, and that its competitor, Feist Publications, should be required to go to the same effort to obtain the information, and should not be allowed to benefit from its research and just copy the information. Id. at pg. 4252. The trial court agreed and entered a judgment for copyright infringement in favor of Rural Telephone. Rural Telephone Service Co., Inc. v. Feist Publications, Inc., 663 F. Supp. 214, 218 (1987). In an unpublished opinion the Tenth Circuit Court of Appeals affirmed, but the Supreme Court reversed holding: The `sweat of the brow' doctrine had numerous flaws, the most glaring being that it extended copyright protection in a compilation beyond selection and arrangement - the compiler's original contribution - to the facts themselves. ... `Sweat of the brow' courts thereby eschewed the most fundamental axiom of copyright law - that no one may copyright facts or ideas. ... they handed out proprietary interests in facts and declared that authors are absolutely precluded from saving time and effort by relying on facts contained in prior works. Id. at pgs. 4254-4255. The Supreme Court held that the white pages portion of the phone book was not entitled to copyright protection, even though the rest of the book was. Therefore Feist Publications, and anyone else, was free to copy the white pages. As Justice O'Connor concluded in her unanimous opinion: Because Rural's white pages lack the requisite originality, Feist's use of the listings cannot constitute infringement. This decision should not be construed as demeaning Rural's efforts in compiling its directory, but rather as making clear that copyright rewards originality, not effort. Id. at pg. 4257. Now that the sweat of the brow doctrine is dead, it is clear that raw facts in a database may not be protected by copyright, regardless of the time or expenses that went into locating them. Still, in many databases the data itself, or the particular expressions of the facts, may have been created by the author. In such cases the data has originality and can be protected. An example of this which is used by the Copyright Office is a full text bibliographic database. There the author not only selects the particular books to be included in the bibliography, but also the author himself writes his own description as to each of the books. Since the author himself created the entire contents of the database, both the selection and compilation aspect of the database, and the contents of the database, are subject to copyright protection. Even if the contents are raw facts, not new materials created by the author, the compilation aspects of the database (selection, coordination and arrangement) may still receive copyright protection. Copyright law prevents the copying of the coordination and arrangement of the facts, the format of data presentation and manipulation, provided that the format and means are original. This entails a consideration as to whether the coordination and arrangement are novel and unique, or whether the arrangement itself contains information. In a dispute between West Publishing Companies and Mead Data central, Inc., West's arrangement of case law was found to be original and entitled to copyright. West Publishing Co. v. Mead Data central, Inc., Supra at pg. 1226. The computer research service "Lexis", owned by Mead Data, competes with West Publishing's, "Westlaw", to provide computer assisted research services to lawyers. Both services use computers to locate and display case decisions on a computer screen. The first screen display of a case in both Lexis and Westlaw includes an identification of the citation to the case, thereby indicating the page on which the decision begins in the particular West Reporter. The judicial opinions are of course not copyrightable, and West concedes that Lexis and others may use the citation of a case and identify the first page without infringing West's copyright under the "fair use" copyright doctrine. Id. pg 1222; 17 U.S.C. 107. West does, however, claim a copyright to all of its page references, and it limits the fair use exception to the citation. In 1985 Lexis announced its intention to take page identification a step further by offering a service called "star pagination". This feature would insert in the Lexis opinion display the page numbers from West's National Reporter Systems publications. Only in this way could a Lexis user determine what West page number corresponded to the portion of an opinion viewed without having to physically refer to the West publication in which the opinion appears. Id. West sued for an injunction to prevent the introduction of this new pagination feature claiming it would infringe its copyright. Mead Data argued that the arrangement of the cases was not an original creation and thus was not copyrightable. West contended that the order and arrangement of the opinions in its reporters was sufficiently original and creative for a copyright. The trial court and Eighth Circuit Court of Appeals agreed with West and an injunction was entered prohibiting Lexis from introducing this feature. In the words of the Eighth Circuit: We conclude, as did the District Court, that the arrangement West produces through this process is the result of considerable labor, talent and judgment. As discussed above ..., to meet intellectual-creation requirements a work need only be the product of a modicum of intellectual labor; West's case arrangements easily meet this standard. Id. pgs. 1226-1227. Not all compilations, however, will meet even a minimal originality standard. Thus for example, if the selection, coordination and arrangement of data in a database is a mechanical task only, and represents no original authorship or creativity, it is not subject to copyright protection. The example given for this by the Copyright Office is the mere transfer of data from hard copy to computer storage. In other words, if you simply transfer data from one medium to the other, and do nothing creative in deleting portions or adding portions, then there is no original authorship to be protected. The Feist Publications case provides another example. The Supreme Court held that the alphabetical arrangement of names in the white pages was not entitled to copyright because: "there is nothing remotely creative about arranging names alphabetically ... It is not only unoriginal, it is practically inevitable." Feist Publications v. Rural Telephone Services Co., Inc., Supra at pg. 4257. This is similar to another copyright doctrine which is important to computer law: "functionality", whereby an aspect of a computer program will not be protected by copyright if it is merely utilitarian, rather than original. Lotus Development Corporation v. Paperback Software International, 740 F.Supp. 37, 52-58, 68 (D.C. Mass. 1990) (Lotus 123 interface was an original expression entitled to copyright and was not merely a utilitarian function). A recent decision by a federal Judge in New York shows another example where both the information selected, and form of presentation, were found to be unoriginal and thus not entitled to copyright. Kregos v. Associated Press, 731 F.Supp. 113 (S.D.N.Y. 1990). This involved a compilation of statistics on baseball pitchers which was created by George Kregos and published in newspapers nationwide. The statistics were presented in nine columns with one column for wins, losses, earned run average, etc. Associated Press began publishing a rival form in its papers which was virtually identical to Kregos' form. Kregos sued to try and stop the rival database from presenting the statistics in the same format. The Court found that there was no valid copyright of Krego's work because: (1) the data itself (baseball statistics) was in the public domain (facts); (2) the particular statistics selected for inclusion in the form were commonplace and required no creativity; and, (3) the format of display was not novel or unique, it was analogous to a blank form which conveys no information. In the words of the Court: Since an extremely limited number of ways to practically publish a pitching form exist, plaintiff's form does not exhibit the requisite selection or arrangement to receive protection.... (T)he facts ... are distinguishable (from other cases where copyright was upheld) due to the absence of true selection or arrangement by plaintiff in the case at bar... (T)he form is sufficiently analogous (to a blank form) in that it fails to convey information... Therefore, we also find plaintiff's form not copyrightable based on this doctrine. Id. pg. 120. There are a number of other drawbacks and limitations to copyright protection. For instance, if not properly perfected and registered a copyright can be waived and the work may enter the public domain. Also, there are certain exceptions to copyright, such as exceptions based on the mentioned "fair use" rule. Computer Software, 2.07(4)(c) and 2.08A(2)(c)(iii), L.J. Kutten, Clark Boardman (1990); Dow Jones & Co. v. Board of Trade of the City of Chicago, 546 F. Supp. 113 (S.D.N.Y. 1982); Telerate Systems, Inc. v. Caro, 689 F.Supp. 221 (S.D.N.Y. 1988). Another drawback pertains to the deposit requirements of copyright registration. 37 C.F.R. 202.20(C)(2)(vii). Printouts of the program source code and the database must be included with the registration. For long databases the registration requirement can be limited to the first and last twenty-five pages. If the program is IBM-PC or Apple Macintosh compatible, and is recorded on CD-ROM, or diskette, then under the Best Edition Statement supplement to the rules, you must submit both the printout of the code and data and the software itself. A potentially serious problem with the deposit requirement is that the print outs and software may be inspected or viewed by anyone upon request. Therefore if you have any trade secrets or other confidential information contained in the printout of the source code (source code is usually kept very secret) or database, or revealed in the operation of the software itself, your competitor could gain access to them by inspecting or viewing what you have deposited with the Copyright Office. The Copyright Office is sensitive to the danger of having trade secrets revealed in the deposit accompanying copyright registration. For this reason the Copyright Office now allows selected portions of up to 49% of the printout of the computer code to be marked out and hidden so that they cannot be read. There are limitations on this general rule in that the portions deleted cannot be so great as to prevent the Copyright Office from intelligently reviewing the registration. Another practical problem with the deposit requirement is that some databases are continually changing and being updated, and thus the deposits and registrations must continue. Although group registration on a quarterly basis is now permitted by the Copyright Office in certain circumstances to try and obviate this problem, several technical problems with such periodic group registrations remain. Another drawback in relying on copyright protection alone is that your copyrights can be weakened or waived if proper copyright procedures are not followed. Such procedures include the proper fixation and display of copyright notices and the registration of the copyright with the Copyright Office. The procedures and steps involved in registration of a computer database copyright can be complicated and involved, particularly when trade secret information is involved. Computer Software, 2.08A(4),(5),(6),(8), L.J. Kutten, Clark Boardman (1990). For this reason it is suggested that the assistance of competent computer law counsel be retained to assist in this process. With copyright law providing only limited protection to databases, and with all of the other problems inherent in copyright protection of a database, contract and trade secret law become all the more important to try and prevent the unauthorized copying of factual data in a database. TRADE SECRECY PROTECTION Adding trade secrecy protection to a database can provide significantly greater legal rights. Consider for instance the recent case of Florida Power & Light v. Util. Services, 550 So.2d 13 (Fla. 3rd DCA 1989) where the jury found that the defendant FP&L had stolen the plaintiff's trade secrets and awarded damages of $1.6 million. Under civil theft law, Chapter 812 Florida Statutes, this award was then trebled, for a total judgment against FP&L of $4.8 million. Essentially a trade secret is knowledge which a person or company acquires through its own efforts and which has some value to it. Typically, this knowledge is kept secret from competitors because it is felt that this information provides some type of competitive advantage. There is a uniform Trade Secret Act which has been enacted in many of the states of the country, including Florida. Chapter 688, Florida Statutes. Section 688.002, Florida Statutes, defines a trade secret to mean: information, including a formula, pattern, compilation, program, device, method, technique or process that: (a) derives independent economic value, actual or potential, not being generally known to, not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. The Uniform Trade Secret Act quoted above was adopted by Florida in 1988. Trade secrecy protection has, however, long existed as part of the common law. Restatement of Torts, (1939) (1st Ed.), 757 "Liability For Disclosure or Use of Another's Trade Secret"; Callman Unfair Comp., Trademarks & Monopolies, Ch. 14 (4th Ed.); Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 94 S.Ct. 1879, 40 L.Ed.2d 315 (1974); Cataphote Corp. v. Hudson, 444 F.2d 1313 (5th Cir. 1971). Since a computer database is a compilation which derives economic value, it is a type of intellectual property which has frequently received trade secrecy protection. Whether or not a court will find that a database is legally a trade secret frequently depends upon whether the compiler made reasonable efforts to maintain its secrecy. Telerate Systems, Inc. v. Caro, 689 F.Supp. 221, 232 (S.D. N.Y. 1988) (Describes sufficient efforts taken to protect computer trade secrets). Many of the trade secret cases involve a dispute between an employer and former employee over a common form of data compilation, a customer list. 28 A.L.R.3rd 17 "Customer List As A Trade Secret". Many employers consider their customer list to be their most valuable trade secret, and when an employee leaves and takes the list with him to compete against an employer, a suit frequently follows to have an injunction entered to make the employee return the list and not use those trade secrets. One such recent case is Unistar Corporation v. Child, 415 So.2d 733 (Fla. 3rd DCA 1982). The employer here sold diamonds and gems through "financial planners". Over three years they had screened 12,000 known planners and developed a list of 4,200 who were interested, and 1,850 who had signed on as dealers. Unistar spent over $800,000 to compile this list! Several Unistar employees left together and formed a competing business using the lists which they took with them. Unistar's sales then fell 84%, from $440,000 to $70,000 per month. Unistar sued for an injunction, and the former employees defended by claiming that the financial planners listed are all available to the public and the lists were not trade secrets, and that there was no agreement that the employees would keep the lists secret. The court ruled for the employer, Unistar, and found that the lists were trade secrets because: ... (they are) indeed the distillation of a larger list of financial planners, reflecting considerable effort, knowledge, time, and expense on the part of the plaintiff. The customer lists were periodically updated and when the new list was provided the old list was destroyed. The marketing representatives were instructed to keep the computer lists at their desks and not take them out of the office. Id., pg. 734. The Court also held that even though there was no express contract requiring non-disclosure of the trade secret, such an agreement was not necessary, it would be implied based upon the confidential employer- employee relationship between the parties. Id. pg. 735. Conversely, other cases have held that if parties have a written contract to treat certain information as a trade secret, and not to disclose it, then even if the information does not legally qualify as a trade secret, the parties can still be required to keep it secret. Concept, Inc. v. Thermotemp, Inc., 553 So.2d 1325 (Fla. 2nd DCA 1989). But See: Kansas Gas & Electric v. Eye, 789 P.2d 1161 (Kan. 1990) (even though contracts prohibited the disclosure of confidential information concerning the safety record of a nuclear power plant, public policy favored its free dissemination). Without such an agreement, however, the information in question must legally qualify as a trade secret to be entitled to protection. In one case the court held that a customer list taken by an employee without a written contract was not a trade secret and so refused to grant the employer's request for an injunction. Templeton v. Creative Loafing Tampa, Inc., 552 So.2d 288 (Fla. 2nd DCA 1989). The lists considered in the Creative Loafing case were of potential and actual advertisers for the magazine employer. The trial court found that these lists were trade secrets, but the appellate court reversed holding: In our view, the lists in question do not qualify as trade secrets entitled to injunctive protection. There is no evidence that they are the product of any great expense or effort, that they are distillations of larger lists, or that they include information not available from public sources. Id. pg. 289. The court also pointed out that the employee had testified that he had independently compiled the list himself, and had not copied or taken it from his employer. Id. pg. 290. Outside of the employee/employer relationship, where a database is licensed to others, it may still have and retain a trade secrecy status, if it is sold with the condition that the licensee of the database maintain the secrecy of the information. PROTECTION BY CONTRACT A seller of the database can require that any purchaser enter into a written contract as a condition of purchase of the database. For example, in order to try and circumvent Feist, the publisher of a computerized phone book could refuse to sell or give the database to anyone unless they first entered into a written agreement. That written agreement could expressly provide that the purchaser will not disclose the names and addresses contained in the database to anyone but authorized users, nor make any copies or unauthorized use of the information. Typically this takes the form of a License Agreement between the preparer/licensor of the database and the user/licensee of the database. A License Agreement is unlike a typical purchase and sale agreement in that ownership of the product involved, the computer program, remains in the licensor. The licensee merely purchases the right to use the program. The licensee's right to use the program can be limited in any number of ways. The most important limitations typically are that licensee can only use the program on one or a select number of computers, the licensee may not make any copies of the program, and the licensee has to keep confidential certain information about the program or the database. Many other types of limitations or rights and reservations can be contained within the license agreement between the parties. CONCLUSION In any license of a computer database of significant value copyright protection alone should not be relied upon to prohibit unauthorized copying. As the Feist case makes clear, copyright may not apply to protect the data. Trade secrecy protection and an express written agreement between the vendor and consumer are necessary to try and protect the database. If as expected information continues to grow in value and importance as a commodity in our society, then the proliferation of license and secrecy agreements is likely. THE END.