Copyrights are awarded without economic rationale

James Boyle, an amazing academic copyfighter, has written a positively brilliant column for the Financial Times on the crazy way that IP policy gets made — without any evidence, without any followup. In particular, Boyle writes about database copyright, which Americans don't have and which Europeans do have — and how the European database industry is atrophying under this punishing regime that allows companies to own collections of facts.

Are database rights necessary for a thriving database industry? The answer is a clear "no." In the United States, the database industry has grown more than 25-fold since 1979 and – contrary to those who paint the Feist case as a revolution – for that entire period, in most of the United States, it was clear that unoriginal databases were not covered by copyright. The figures are even more interesting in the legal database market. The two major proponents of database protection in the United States are Reed Elsevier, the owner of Lexis, and Thomson Publishing, the owner of Westlaw. Fascinatingly, both companies made their key acquisitions in the US legal database market after the Feist decision, at which point no one could have thought unoriginal databases were copyrightable. This seems to be some evidence that they believe they could make money even without a database right. How? In the old-fashioned way: competing on features, accuracy, tied services, making users pay for entry to the database and so on.

If those companies believed there were profits to be made, they were right. Jason Gelman, one of our students, points out in a recent paper that Thomson's Legal Regulatory division had a profit margin of over 26% for the first quarter of 2004. Reed Elsevier's 2003 profit margin for LexisNexis was 22.8%. Both profit margins were significantly higher than the company average and both are earned primarily in the $6 billion US legal database market, a market which is thriving without strong intellectual property protection over databases. (First rule of thumb for regulators: when someone with a profit margin over 20% asks you for additional monopoly protection, pause before agreeing.)