Directive 96/9/EC created a new right – the database right. The intention behind the Directive was to encourage and protect the investment in databases, indeed, it refers to this aim no less than eleven times. However, one of the difficulties in interpreting the extent of protection of this right is the lack of definitions contained in the Directive. As a consequence, the outcome of four references to the European Court of Justice, including one from the Court of Appeal, has been eagerly awaited.
Advocate General Stix‑Hackl published her Opinions on 8 June 2004. She has given a broad interpretation to the database right by:
maintaining that the entry requirements are low; and
interpreting the infringement provisions, with one exception, very widely.
In reaching her opinion, the Advocate General stressed that the database is an entirely new right. Therefore, it should be interpreted anew and not with reference to the Scandinavian and Dutch rights from which it was taken. Indeed, the Directive itself refers to the sui generis right, meaning “of its own kind”, in order to distinguish it from copyright.
The European Court of Justice may or may not follow the Advocate General’s Opinions. However, on the fundamental issues, this writer expects them to come to the same conclusion.
Facts in British Horseracing Board v. William Hill (C-203/02)
The British Horseracing Board is the governing authority for the British horseracing industry. The British Horseracing Board is concerned with the creation of the fixture list for each year’s horse racing in Great Britain, known as the Stud Book. It maintains an electronic database of racing information which contains, amongst other things, details of horses, owners, trainers, jockeys and information concerning fixture lists, including dates, times and runners. The cost and effort involved in constantly updating and verifying the data is significant. The British Horseracing Board makes the information available under licence to third parties for onward transmission. They alleged that William Hill had been making use of data from their database in William Hill’s Internet business for which it had no licence. Mr Justice Laddie held that The British Horseracing Board’s rights were infringed and granted an injunction ( RPC 612). On appeal, the Court of Appeal directed a reference to the European Court of Justice.
Facts in the Three Fixtures Marketing Cases
All three cases involve the same claimant, Fixtures Marketing, which is backed by the Football Association and others and handles the exploitation of the football fixtures lists for the Premier League, the Football League and the Scottish Football League. Before the start of each season, the fixtures lists are drawn up. The fixtures lists are set out both chronologically and by reference to each team participating in the relevant league. The pairs are indicated as X v. Y (e.g., Southampton v. Arsenal). The fixtures lists are exploited through Fixtures Marketing. In both Sweden (C-338/02) and Finland (C-46/02), Fixtures Marketing objected to the defendant’s use of the data in the fixtures lists in pools betting. The courts accepted that the fixtures lists were protectable as databases but accepted the defendant’s submissions that there was no infringement, in part because the data on the pools coupons came from various sources including daily newspapers, teletext and the football teams themselves. In Greece (C-444/02), the allegation made in interim proceedings was that the defendant used the data on its Internet site. References were made to the European Court of Justice in all three cases.
What is a Database?
Article 1(2) states:
“ ‘database’ shall mean a collection of independent works, data or other materials arranged in a systematic or methodical way and individually accessible by electronic or other means”.
The Advocate General gave the term “database” a wide meaning. She brushed aside the submission in the Fixtures Marketing cases that the data in the fixtures list was not “data” within the meaning of the Directive and stated that there was no requirement for a significant number of records to be held before the definition of a database was fulfilled.
She commented that the criterion that the data were “independent” meant that they must not be linked or must at least be capable of being separated without losing their informative content (which is why sound or pictures from a film are not covered by the database right).
Again, in the Fixtures Marketing cases, it was submitted that the database was not “systematically” or “methodically” organised because the football teams were paired by drawing lots. The Advocate General rejected this argument on the basis that the database did not just consist of such data, but included data such as the time and place of the matches. In doing so, she pointed out that the Directive does not require the data to be physically stored in an organised manner (21st recital). Therefore, it is sufficient if a structure is established for the data and the data are only organised following the application of a search programme, through sorting or indexation.
What Does the Database Right Protect?
There is no requirement for creativity in Article 1. This is only a requirement if the database is to qualify for copyright protection. In contrast, and as stated above, database rights protect the investment made in the database. In order to qualify for protection, the maker of the database must show that there as been:
“a qualitatively and/or quantitatively substantial investment in either the obtaining, verification or presentation of the contents [of the database] …” Article 7(1)
The key term here is “substantial investment”; the protection of the Directive will not kick in unless there has been such investment. The investment may be of human, technical or financial resources (7th recital) and/or the expenditure of time, effort and energy (40th recital).
The Advocate General stated that “substantial investment” should firstly be construed in relative terms, in that the actual costs expended should be considered, as should the scale, nature and contents of the database, relative to the investment made in databases in the same sector. Secondly, in order to be “substantial”, the investment had to be above a certain threshold. That threshold should be set low. If it were not, it would undermine the intended purpose of the Directive. However, the only indication given by the Advocate General as to where the threshold might lie, was to point to the 19th recital which states that a compilation of music recordings on a CD is not protected by the database right because it does not represent a substantial enough investment.
The figures in the British Horseracing case and the Fixtures Marketing case both looked substantial, approximately £4 million and £11.5 million per year respectively. In the latter case, however, an argument was run that some or all of the investment was for a purpose other than creating the database i.e., it was created for organising sporting bets and was merely a by-product of another market. The Advocate General rejected this argument. The purpose of the investment was irrelevant.
The Advocate General also considered the three terms, “obtaining”, “verification” and “presentation”. The main thrust of the right was to protect the investment in the creation of the database, therefore, the Advocate General considered the term “creation” as an umbrella term for “obtaining, verification or presentation”.
She stated that the term “obtaining” should be understood in a wide sense. In the British Horseracing case, it was submitted that “obtaining” did not cover the production or generation of data, and, therefore, the database right did not cover the preparatory phase relating to the creation of a database. The Advocate General stated that it was sufficient if the creation of the data coincided with their collection and screening and was inseparable from it. She went on to state that the word “verification” does not only relate to verifying the existing contents of the database, it can also encompass the obtaining of data and their entry into the database. Finally, “presentation” covers both the presentation for users and the conceptual format.
Infringement of Substantial Parts of a Database
The definition in Article 7(1) further states that databases shall be protected from:
“…extraction and/or re-utilisation of the whole of a substantial part, evaluated qualitatively and/or quantitatively, of the contents of that database”.
n assessing what is a “substantial part” of a database, both what has been taken in terms of quantity and quality has to be assessed. Because the terms are cumulative, the Advocate General rejected the argument that there had to be a minimum threshold in terms of quantity. She stated that, in relation to any qualitative analysis, the technical or economic value of the database was relevant. A part of a database, while not being large in volume, could be substantial in terms of value e.g., in the field of sport, valuable characteristics might be completeness or accuracy. Economic value could be measured in terms of drop in demand to the maker of the database or the saving to a wrongdoer in not paying the licence fees. The Advocate General warned against setting the bar too high and noted that the reference to “significant detriment” being caused to the maker of the database (42nd recital) was too strict a criterion to apply.
In the Fixtures Marketing cases, the question arose as to whether the extracted data (taken each week) should be compared to the whole database or to the whole in the relevant week. The Advocate General stated that the comparison had to be made over the same period of time. Therefore, it was possible to aggregate all the parts affected each week over a whole season and then compare that with the database as a whole. If more than half of the games were involved, the affected part could be described as substantial. It could even be substantial if less than half was taken, but the proportion was higher in some divisions e.g. the Premier League.
What is Extraction?
The Directive provides:
“ ‘extraction’ ” shall mean the permanent or temporary transfer of all or a substantial part of the contents of a database to another medium by any means or in any form”. Article 7(2)(a)
The Advocate General stated that, in one sense, “extraction” has a wide meaning in that it covers not only the transfer to a data medium of the same type but also to one of another type. That means that the mere printing out of data falls within the definition of extraction. However, in another sense she gave it a narrow meaning, stating that it is confined to the direct exploitation of the database. Further, “extraction” presupposes knowledge of the database. On the wording, this would appear to be an unwarranted limitation as the Directive makes no reference to either direct or indirect extraction. However, the effect of this restricted interpretation is mitigated by the Advocate General’s definition of “re-utilisation”.
What is Re-utilisation?
The Directive states:
“ ‘re-utilisation’ shall mean any form of making available to the public all or a substantial part of the contents of the database by the distribution of copies, by renting, by online or other forms of transmission. The first sale of a copy of a database within the Community by the rightholder or with his consent shall exhaust the right to control resale of that copy within the Community.”Article 7(2)(b)
Unlike extraction, the Advocate General stated that “re-utilisation” also covers indirect means of obtaining the contents of a database and does not require access to, or knowledge of, the database. Whether the data is in the public domain or not does not preclude those parts of the database containing such data from also enjoying protection.
In support of this conclusion, the Advocate General pointed to the provision on exhaustion. She stated that the reference to “sale of a copy” presupposes a physical object. Thus, if re-utilisation happens in some way other than through a copy, there is no exhaustion.
Support for this far-reaching view is found in the 43rd recital which states that in relation to online transmission, the right is not exhausted either as regards the database or as regards a material copy of the database or of part thereof made by the addressee of the transmission. It is also consistent with the Advocate General’s own opinion given on May 27, 2004 in Peak Holding AB v. Axolin‑Elinor AB (C-16/03), a case on parallel imports of trademarked goods. In that case, she was of the opinion that the importation of the goods through customs and the offer for sale did not mean that they had been placed on the market. The trademark rights in the products were only exhausted when an independent third party obtained the right to make free use of the products.
As a consequence, the contents of the database can be protected even if the infringer obtains the data from an intermediate source such as newspapers or the Internet where those media source the data from the database. For example, the information supplied under licence from the British Horseracing Board and published daily in the newspaper, The Racing Post, cannot be substantially copied or repeated without a licence.
Infringement by Repeated Use of Insubstantial Parts of a Database
Article 7(5) does not permit:
“the repeated and systematic extraction and/or re-utilisation of insubstantial parts of the contents of the database implying acts which conflict with the normal exploitation of that database or which unreasonably prejudice the legitimate interests of the maker of the database”.
Both a “repeated” and a “systematic” extraction or re-utilisation are required. A database is protected from a repeated and systematic act when it is carried out at regular intervals e.g., weekly or monthly. The Advocate General therefore was of the opinion that if the interval is less and the affected part small, the act will have to be carried out more frequently to fulfil the requirements of the Directive.
The upper limit to what is “insubstantial” is obviously something that is not substantial. But the only guidance which the Advocate General gave as to where the lower limit is set is to say that it is derived from the general principle in the Directive that the database right does not cover individual data. Taken to its logical conclusion, this would mean two or more pieces of data. Of course, the other provisions would have to apply i.e., the use would have to conflict with the normal exploitation of the database and unreasonably prejudice the maker of the database (see below).
The Directive protects investment in the database, thereby securing the remuneration of the maker of the database (48th recital). With this in mind, the Advocate General stated that the expression “normal exploitation” is intended to cover both the effect on the technical usability of the database and also the pure economic effect on the maker, whether caused by a competing product in the same market, or by the exploitation of a potential market not exploited by the maker, or which cannot be exploited by the maker of the database. As to where the threshold lies, there is a “conflict” with the “normal exploitation” of the database as soon as there is any conflict with its exploitation i.e., even where the negative effects are on a limited scale.
Finally, the Advocate General stated that the expression “unreasonably prejudice” should not be defined too strictly. It is sufficient if the acts of the defendant damage the legitimate interests of the maker of the database to a certain extent. As before, the economic value of the contents of the database is the starting point for an assessment and therefore both the impact on the maker’s existing and potential markets should be assessed. Whether the prejudice is unreasonable, depends on the facts of the individual case.
For dynamic databases i.e., those that are constantly being updated, the Directive provides for a rolling right, the term of which is constantly renewed. The new database will qualify for it own term of protection when:
“any substantial change … to the content of a database … result[s] in the database being considered to be a substantial new investment …” Article 10(3)
This provision led to an ingenious argument being deployed by William Hill. They submitted that they did not infringe under Article 7(5), because they merely took one insubstantial part of a sequence of different, though interrelated, databases and never from the same one. The Advocate General rejected this argument. The new database is protected (if there has been substantial investment in it). The old database, in effect, disappears.
The “Database-ness” Argument
William Hill submitted that the database right only protects acts which make use of the arrangement of the contents of the original database or take advantage of the way in which the maker has rendered the contents individually accessible. Since they did neither, they did not infringe (the so-called “database-ness” argument). The Advocate General stated that the infringement provisions protect data even if it is compiled in an altered or differently structured way.
This conclusion exposes the central tension in the Direction between protecting the database itself and the data it contains. However, if this were not the case, the purpose of the Directive would be undermined.
The Directive gives very broad rights to the owners of databases, enabling them to protect their databases and exploit them, knowing that they can effectively protect them from those who wanted to take advantage of the information, its accuracy and completeness.
In some quarters there may be a backlash against these Opinions, in particular voicing concerns about the potential to create monopolies in raw data where those data come from a single source and that those monopolies can be perpetual where contained within a dynamic database. However, this is not the fault of the Opinions, but directly the result of the wording of the Directive.
The potential consequences can be clearly demonstrated using the facts in the Fixtures Marketing cases. The data on the pools coupons comes from various sources including daily newspapers, teletext and the football teams themselves. All this data will have been sourced indirectly from the Fixtures Marketing database at one stage or another. Under the Advocate General’s interpretation of the Directive, it will be no defence to say that the information was sourced from publicly available information. In contrast it should be noted that this argument was accepted by the Swedish and Finnish courts. Defendants will, therefore, have to rely upon other arguments, e.g., that no unreasonable prejudice has been caused to the database maker, in order to prove that use of such data is not an infringement.
When these fears were raised by some of the parties in the proceedings, the Advocate General’s solution was to emphasise that protection does not cover the data in the database and therefore she proposed a narrow interpretation of the Directive in that respect. However, it is not clear how she intended to implement such a principle and how, indeed, it should be applied given her broad interpretation of the Directive.
It should be noted that the fair use provisions are very limited and, although recourse could be had to competition law to enforce access by way of a licence where there is an abuse of a dominant position, this has limited application. The recent case of IMS Health GmbH & Co. OHG v. NDC Health GmbH & Co. KG (C-418/01, decision of the European Court of Justice on April 29, 2004) involving the tracking and selling of pharmaceutical and healthcare product sales data, is a rare example.
For the database owner, policing their rights will, as ever, be difficult, particularly where electronic copying is so easy. Owners will, in this as in other areas, have to give consideration to rights management, possibly making use of electronic encryption methods to put in place, for example, pay-per view systems on the Internet. In doing so, they should be aware that there is no reciprocal protection for databases outside the Community (although attempts have been and are continuing to be made in the United States to legislate for the protection for databases).
In conclusion, the balance struck in the Opinions is very much in favour of the owners of databases. The decision of European Court of Justice is awaited with much interest.
First published in the June 2004 issue of World Data Protection Report.