I was not always opposed to intellectual property rights over data. Indeed, in a book written before the enactment of the Database Directive, I said that there was a respectable economic argument that such protection might be warranted and that we needed research on the issue.5 Unfortunately, Europe got the right without the research. The facts are now in. If the European Database Directive were a drug, the government would be pulling it from the market until its efficacy and harmfulness could be rea.s.sessed. At the very least, the Commission needed a detailed empirical review of the directive's effects, and needs to adjust the directive's definitions and fine-tune its limitations. But there is a second lesson. There is more discussion of the empirical economic effects of the Database Directive in this chapter than in the six-hundred-page review of the directive that the European Commission paid a private company to conduct, and which was the first official doc.u.ment to consider the issue.

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That seemed to me and to many other academics to be a scandal and we said so as loudly as we could, pointing out the empirical evidence suggesting that the directive was not working. Yet if it was a scandal, it was not a surprising one, because the evidence-free process is altogether typical of the way we make intellectual property policy. President Bush is not the only one to make "faith-based" decisions.

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There was, however, a ray of hope. In its official report on the compet.i.tive effects of the Database Directive, the European Commission recently went beyond reliance on anecdote and industry testimony and did something amazing and admirable. It conducted an empirical evaluation of whether the directive was actually doing any good.

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The report honestly described the directive as "a Community creation with no precedent in any international convention."

Using a methodology similar to the one in this chapter on the subject, the Commission found that "the economic impact of the 'sui generis' right on database production is unproven.

Introduced to stimulate the production of databases in Europe, the new instrument has had no proven impact on the production of databases."6 46

In fact, their study showed that the production of databases had fallen to pre-directive levels and that the U.S. database industry, which has no such intellectual property right, was growing faster than the European Union's. The gap appears to be widening. This is consistent with the data I had pointed out in newspaper articles on the subject, but the Commission's study was more recent and, if anything, more d.a.m.ning.

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Commission insiders hinted that the study may be part of a larger--and welcome--transformation in which a more professional and empirical look is being taken at the compet.i.tive effects of intellectual property protection. Could we be moving away from faith-based policy in which the a.s.sumption is that the more new rights we create, the better off we will be? Perhaps. But unfortunately, while the report was a dramatic improvement, traces of the Commission's older predilection for faith-based policy and voodoo economics still remain.

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The Commission coupled its empirical study of whether the directive had actually stimulated the production of new databases with another intriguing kind of empiricism. It sent out a questionnaire to the European database industry asking if they liked their intellectual property right--a procedure with all the rigor of setting farm policy by asking French farmers how they feel about agricultural subsidies. More bizarrely still, the report sometimes juxtaposed the two studies as if they were of equivalent worth. Perhaps this method of decision making could be expanded to other areas. We could set communications policy by conducting psychoa.n.a.lytic interviews with state telephone companies--let current inc.u.mbents' opinions determine what is good for the market as a whole. "What is your emotional relationship with your monopoly?" "I really like it!"

"Do you think it hurts compet.i.tion?" "Not at all!"

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There are also a few places where the reasoning in the report left one scratching one's head. One goal of the database right was to help close the gap between the size of the European and U.S. database markets. Even before the directive, most European countries already gave greater protection than the United States to compilations of fact. The directive raised the level still higher. The theory was that this would help build European market share. Of course, the opposite is also possible. Setting intellectual property rights too high can actually stunt innovation. In practice, as the Commission's report observes, "the ratio of European / U.S. database production, which was nearly 1:2 in 1996, has become 1:3 in 2004."7 Europe had started with higher protection and a smaller market. Then it raised its level of protection and lost even more ground. Yet the report was oddly diffident about the possibility that the U.S. system actually works better.

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In its conclusion, the report offered a number of possibilities, including repealing the directive, amending it to limit or remove the "sui generis" right while leaving the rest of the directive in place, and keeping the system as it is. The first options are easy to understand. Who would want to keep a system when it is not increasing database production, or European market share, and, indeed, might be actively harmful? Why leave things as they are? The report offers several reasons.

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First, database companies want to keep the directive. (The report delicately notes that their "endors.e.m.e.nt . . . is somewhat at odds with the continued success of U.S. publishing and database production that thrives without . . . [such]

protection," but nevertheless appears to be "a political reality.") Second, repealing the directive would reopen the debate on what level of protection is needed. Third, change may be costly.

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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." Getting rid of the drug would reopen the debate on the search for a cure. Change is costly--true. But what is the purpose of a review if the status quo is always to be preferred?

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The final result? Faced with what Commission staff members tell me was a tidal wave of lobbying from publishers, the Commission quietly decided to leave the directive unchanged, despite the evidence. The result itself is not remarkable. Industry capture of a regulatory apparatus is hardly a surprise. What is remarkable is that this is one of the first times any ent.i.ty engaged in making intellectual property policy on the international level has even looked seriously at the empirical evidence of that policy's effects.

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To be sure, figures are thrown around in hearings. The software industry will present studies showing, for example, that it has lost billions of dollars because of illicit copying. It has indeed lost profits relative to what it could get with all the benefits of cheaper copying and transmission worldwide and with perfect copyright enforcement as well. (Though the methodology of some of the studies, which a.s.sumes that each copier would have paid full price--is ridiculous.) But this simply begs the question. A new technology is introduced that increases the size of your market and decreases your costs dramatically, but also increases illicit copying. Is this cause for state intervention to increase your level of rights or the funds going toward enforcement of copyright law, as opposed to any other law enforcement priority? The question for empirical a.n.a.lysis, both before and after a policy change, should be "Is this change necessary in order to maintain incentives for production and distribution? Will whatever benefits it brings outweigh the costs of static and dynamic losses--price increases to consumers and impediments to future innovators?" The content companies might still be able to justify the extensions of their rights.

But they would be doing so in the context of a rational, evidence-based debate about the real goals of intellectual property, not on the a.s.sumption that they have a natural right to collect all the economic surplus gained by a reduction in the costs of reproduction and distribution.

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DOES PUBLIC INFORMATION WANT TO BE FREE?

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The United States has much to learn from Europe about information policy. The ineffectively scattered U.S. approach to data privacy, for example, produces random islands of privacy protection in a sea of potential vulnerability. Until recently, your video rental records were better protected than your medical records. Europe, by contrast, has tried to establish a holistic framework, a much more effective approach. But there are places where the lessons should flow the other way. The first one, I have suggested, is database protection. The second is a related but separate issue: the legal treatment of publicly generated data, the huge, and hugely important, flow of information produced by government-funded activities--from ordnance survey maps and weather data to state-produced texts, traffic studies, and scientific information. How is this flow of information distributed? The norm turns out to be very different in the United States and in Europe.

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In one part of the world, state-produced data flows are frequently viewed as revenue sources. They are often copyrighted or protected by database rights. Many of the departments which produce them attempt to make a profit or at least to recover their entire operating costs through user fees. It is heresy to suggest that the taxpayer has already paid for the production of this data and should not have to do so twice. The other part of the world practices a benign form of information socialism. By law, any text produced by the central government is free from copyright and pa.s.ses immediately into the public domain. The basic norm is that public data flows should be available at the cost of reproduction alone.

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It is easy to guess which area is which. The United States is surely the profit and property-obsessed realm, Europe the place where the state takes pride in providing data as a public service? No, actually, it is the other way around.

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Take weather data. The United States makes complete weather data available to all at the cost of reproduction. If the superb government Web sites and data feeds are insufficient, for the cost of a box of blank DVDs you can have the entire history of weather records across the continental United States. European countries, by contrast, typically claim government copyright over weather data and often require the payment of substantial fees. Which approach is better? I have been studying the issue for fifteen years, and if I had to suggest a single article it would be the magisterial study by Peter Weiss called "Borders in Cybers.p.a.ce," published by the National Academies of Science.8 Weiss shows that the U.S. approach generates far more social wealth. True, the information is initially provided for free, but a thriving private weather industry has sprung up which takes the publicly funded data as its raw material and then adds value to it. The U.S. weather risk management industry, for example, is more than ten times bigger than the European one, employing more people, producing more valuable products, generating more social wealth. Another study estimates that Europe invests 9.5 billion Euros in weather data and gets approximately 68 billion back in economic value--in everything from more efficient farming and construction decisions to better holiday planning--a sevenfold multiplier. The United States, by contrast, invests twice as much--19 billion--but gets back a return of 750 billion Euros, a thirty-nine-fold multiplier.

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Other studies suggest similar patterns elsewhere, in areas ranging from geospatial data to traffic patterns and agriculture. The "free" information flow is better at priming the pump of economic activity.

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Some readers may not thrill to this way of looking at things because it smacks of private corporations getting a "free ride"

on the public purse--social wealth be d.a.m.ned. But the benefits of open data policies go further. Every year the monsoon season kills hundreds and causes ma.s.sive property damage in Southeast Asia. One set of monsoon rains alone killed 660 people in India and left 4.5 million homeless. Researchers seeking to predict the monsoon sought complete weather records from the United States and Europe so as to generate a model based on global weather patterns. The U.S. data was easily and cheaply available at the cost of reproduction. The researchers could not afford to pay the price asked by the European weather services, precluding the "ensemble" a.n.a.lysis they sought to do. Weiss asks rhetorically, "What is the economic and social harm to over 1 billion people from hampered research?" In the wake of the outpouring of sympathy for tsunami victims in the same region, this example seems somehow even more tragic. Will the pattern be repeated with seismographic, cartographic, and satellite data?

One hopes not.

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The European att.i.tude may be changing. Compet.i.tion policy has already been a powerful force in pushing countries to rethink their att.i.tudes to government data. The European Directive on the Reuse of Public Sector Information takes large strides in the right direction, as do studies by the Organization for Economic Co-operation and Development (OECD) and several national initiatives.9 Unfortunately, though, most of these follow the same pattern. An initially strong draft is watered down and the utterly crucial question of whether data should be provided at the marginal cost of reproduction is fudged or avoided. This is a shame. Again, if we really believed in evidence-based policy making, the debate would be very different.

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BREAKING THE DEAL 64

What would the debate look like if we took some of the steps I mention here? Unfortunately there are very few examples of evidence-based policy making, but the few that do exist are striking.

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In 2006, the government-convened Gowers Review of intellectual property policy in the United Kingdom considered a number of proposals on changes to copyright law, including a retrospective extension of sound recording copyright terms.10 The copyright term for sound recordings in the United Kingdom is fifty years.

(It is longer for compositions.) At the end of the fifty-year period, the recording enters the public domain. If the composition is also in the public domain--the great orchestral works of Beethoven, Brahms, and Mozart, for example, or the jazz cla.s.sics of the early twentieth century--then anyone can copy the recording. This means we could make it freely available in an online repository for music students throughout Britain--perhaps preparing the next generation of performers--or republish it in a digitally cleansed and enhanced edition. If the composition is still under copyright, as with much popular music, then the composer is still ent.i.tled to a licensing fee, but now any music publisher who pays that fee can reissue the work--introducing compet.i.tion and, presumably, bringing down prices of the recording.

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The recording industry, along with successful artists such as Sir Cliff Richard and Ian Anderson of Jethro Tull, wished to extend the fifty-year term to ninety-five years, or perhaps even longer--the life of the performer, plus seventy years. This proposal was not just for new recordings, but for the ones that have already been made.

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Think of the copyright system as offering a deal to artists and record companies. "We will enlist the force of the state to give you fifty years of monopoly over your recordings. During that time, you will have the exclusive right to distribute and reproduce your recording. After that time, it is available to all, just as you benefited from the availability of public domain works from your predecessors. Will you make records under these terms?"

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Obviously, fifty years of legalized exclusivity was enough of an incentive to get them to make the music in the first place. We have the unimpeachable evidence that they actually did. Now they want to change the terms of the deal retrospectively. They say this will "harmonize" the law internationally, give recordings the same treatment as compositions, help struggling musicians, and give the recording industry some extra money that it might spend on developing new talent. (Or on Porsches, shareholder dividends, and plastic ducks. If you give me another forty-five years of monopoly rent, I can spend it as I wish.) 69

Change the context and think about how you would react to this if the deal was presented to you personally. You hired an artist to paint a portrait. You offered $500. He agreed. You had a deal. He painted the painting. You liked it. You gave him the money. A few years later he returned. "You owe me another $450,"

he said.

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You both looked at the contract. "But you agreed to paint it for $500 and I paid you that amount." He admitted this was true, but pointed out that painters in other countries sometimes received higher amounts, as did sculptors in our own country. In fact, he told you, all painters in our country planned to demand another $450 for each picture they had already painted as well as for future pictures. This would "harmonize" our prices with other countries, put painting on the same footing as sculpture, and enable painters to hire more apprentices. His other argument was that painters often lost money. Only changing the terms of their deals long after they were struck could keep them in business.

Paying the money was your duty. If you did not pay, it meant that you did not respect art and private property.

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You would find these arguments absurd. Yet they are the same ones the record industry used, relying heavily on the confusions against which this book has warned. Is the record companies'

idea as outrageous as the demands of my imaginary painter? It is actually worse.

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The majority of sound recordings made more than forty years ago are commercially unavailable. After fifty years, only a tiny percentage are still being sold. It is extremely hard to find the copyright holders of the remainder. They might have died, gone out of business, or simply stopped caring. Even if the composer can be found, or paid through a collection society, without the consent of the holder of the copyright over the musical recording, the work must stay in the library. These are "orphan works"--a category that probably comprises the majority of twentieth-century cultural artifacts.

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