6 November 2006
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Increasingly, a business's competitive edge will be linked to its ability to store and access information. Guernsey's recent Database Rights (Bailiwick of Guernsey) Ordinance 2005 provides enhanced protection to enable businesses to protect and maintain their information advantage in a competitive economy.
The 1996 EC Directive on the legal protection of databases recognised the high level of investment that often goes into developing collections of data. The directive sought to provide those who made substantial investments in databases with protection against unauthorised extraction or reutilisation of information from those databases. The directive was subsequently adopted into English law by the Copyright and Rights in Databases Regulations 1997.
In 2005, however, the scope of protection offered by the UK and EU database rights was curtailed severely by the decisions of the European Court of Justice (ECJ) and English Court of Appeal in British Horseracing Board & Ors v William Hill Organisation. The effect of these decisions was to exclude protection where the investment was in the creation of the data that forms part of the database, unless there had also been a further qualifying investment independent from the resources required to create the data. Some commentators have suggested that these decisions effectively neutered the protection available under the UK and EU rights.
The effect of the William Hill decision was particularly harsh on database owners, which now also no longer qualified for copyright protection as a result of changes made to the Copyright Designs and Patents Act 1988 (UK) (CDPA) when the Database Directive was adopted.
A database is now only protected by copyright if, by reason of the selection or arrangement of its contents, it "constitutes the author's own intellectual creation" (section 3A(2), CDPA). This is a higher threshold of originality than previously existed and would likely not be satisfied by, for example, an alphabetical list of restaurants in a given area.
Copyright protection may also be of limited value to those who invest in establishing a database, as they will not be the first owners of that right. Ownership of the copyright will have to be acquired specifically from the person or persons whose physical effort underlay development of the database.
When Guernsey was drafting its new IP laws, it considered specifically the impact of the William Hill decision and saw no justifiable reason for determining protection by reference to who created the content data. A policy decision was made that it should be irrelevant whether the development of a database involved the creation of original data or was based on pre-existing, independently created materials. The view was taken that the appropriate focus was on the substantiality or otherwise of the investment.
Section 3(1) of the Database Ordinance provides that, where there has been a "substantial investment" in the "collation" of the contents of a database, a database right will automatically subsist. The key distinction from the EU and UK regimes is that, in the Database Ordinance, 'collation' is defined as "obtaining (for example by the creating, finding, collecting, compiling, accumulating or assembling), organising (for example by the designing or selecting), verifying or presenting" (Section 19(1)).
Not only does Guernsey's database right apply in circumstances that may no longer attract EU or UK protection, it is also significantly stronger than the protection available in the US, where protection is limited to that available under the federal copyright legislation.
Once the qualifying criteria have been met, the Database Ordinance offers protection of a length and breadth equivalent to that available under the UK and EU rights: the owner of the database right acquires protection from unauthorised extraction or reutilisation of the whole or a substantial part of the database contents for a minimum of 15 years. Protection is also available against a systematic use or reuse of insubstantial parts of the database.
Section 8(1) of the Database Ordinance proscribes the geographical qualifications that must be satisfied for the Guernsey right to arise. In summary, a database may be eligible for protection if one or more of its 'makers' (the people who take the initiative and assume the risk of investment) habitually resided at the material time in the Bailiwick of Guernsey, Isle of Man or any European economic area (EEA) state (the 'qualifying territories'). The material time is the time when the database was made or, if the making extended over a period, a substantial part of that period.
Where the maker is a corporate entity, the residency requirement will be met if the entity was incorporated under the law of a qualifying territory, and also:
- had its central administration or principle place of business within the same qualifying territory;
- had its registered office within the Bailiwick of Guernsey or the Isle of Man, with the body's operations linked on an ongoing basis with the economy of any part of the bailiwick or (as the case may be) the Isle of Man; or
- had its registered office within the EEA, with the body's operations linked on an ongoing basis with the economy of any EEA state.
The Database Ordinance confers protection to all qualifying databases made before or after 1 January 2006. It is thus possible that there is a significant number of databases already existing in the UK and EU that qualify for the protection that only Guernsey has to offer.
Databases completed between 1 January 1991 and 1 January 2006 may be protected for 15 years from 1 January 2006. No act enacted before 1 January 2006 or pursuant to an agreement made before that date shall, however, be an infringement. Databases completed since the Database Ordinance came into force may enjoy 15 years' protection from the end of the calendar year in which the database was completed or was made available to the public, whichever is later.
The practical value of Guernsey's database continued #+ continuedright is obviously linked to an owner's ability to enforce the right against third parties. It is suggested that this objective can be readily achieved if the database and its management are located in Guernsey. Guernsey law may also be incorporated by reference in any contractual or website terms. Locating and managing a database offshore may not only make it easier to argue that any unauthorised extraction occurred from Guernsey and so is subject to its laws, it may also have certain fiscal advantages. Guernsey has no capital gains tax, no royalties tax and, from 2008, most companies will be subject to zero per cent corporate tax.
Guernsey's experience as an established and sophisticated financial services jurisdiction means there is a variety of structures and options available for maximising and monetising various tangible and intangible assets. With the introduction of Guernsey's new IP regime, Guernsey-domiciled companies or special purpose vehicles - such as protected cell companies and incorporated cell companies - can now be used to maximise both the earnings potential and protection available to a variety of IP rights, including databases. The Database Ordinance allows database owners to reclaim some of the value that was arguably lost following the William Hill decisions. The power of information has been restored. nTania Johnstone is head of IP at AO Hall