June 18
2021
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8th June 2021
Data, Tech & IP

Analysis: “CV-Online Latvia v Melons: In search of flexibilities under the Database Directive” by Sabine Jacques

Last Thursday, the Court of Justice handed down its decision in CV-Online Latvia v Melons (C-762/19) on whether the display of a third party’s database through a specialised search engine and redirecting users of the search engine to the original website constitute a ‘re-utilisation’ within the meaning of Article 7(2)(b) of Directive 96/9 and consequently, an infringement of the database sui generis right. Furthermore, the Latvian court asked whether the information contained in meta tags used on a search engine website fell within the scope of ‘extraction’ under Article 7(2)(a) of Directive 96/9. At the crossroads between intellectual property law and competition law, this case revisits the legality of meta search engines that allow searches to be made in databases belonging to others.

The scope and purpose of protection of the sui generis right for databases

To incentivise the establishment of data storage and processing systems within the EU territory and thereby contribute to the development of an EU information market (Innoweb, C-202/12, paragraph 35) the EU legislature introduced a database sui generis right.

As made clear by recitals 40 and 41 of Directive 96/9, the purpose of the database sui generis right is to ensure the protection of a substantial investment in the obtaining, verification or presentation of the contents of a database for a limited period by granting its right-holder the right to prevent unauthorised extraction and re-utilisation of the whole or a substantial part of the database’s contents. In this regard, the justification underlying Article 7 of Directive 96/9 is to ensure that whoever has undertaken financial risk in investing in the making of a database is protected against misappropriation of that investment (CV-Online Latvia, paragraph 22).

The meaning of ‘re-utilisation’ and ‘extraction’

By relying on its case law, the Court of Justice confirms that a broad interpretation must be given to the concepts of ‘re-utilisation’ and ‘extraction’ (Innoweb, paragraphs 33 & 34 and Directmedia Publishing, C‑304/07, paragraphs 31-32). This means that any act of appropriation or the unauthorised making available to the public of the result of the investment may result in acts of extraction or re-utilisation (The British Horseracing Board and Others, C-203/02, paragraph 51). This explains why in Innoweb, the Court had already held that reutilisation included someone operating a website enabling an indeterminate number of users to search the data contained in a third party’s database as this would inevitably undermine the investment of the maker of the database (Innoweb, paragraphs 40-42).

In the present case, the search engine harvests content from third parties’ databases and uses it to provide its own service. The appeal of this database is the ability to consult other freely accessible databases through one single search form, making this a specialised database. Additionally, to the indexing of other webpages, the specialised database copies these other webpages onto its own servers. This transfer of content and the making available of the content to the public without authorisation from the databases’ right-holders constitute measures of extraction and re-utilisation as prohibited by Article 7(1) Directive 96/9 if it has the effect of stripping the databases’ right-holders from means to recoup their investment in the making of the databases (CV-Online Latvia, paragraph 37).

Whether the activities of extraction and re-utilisation affect the investment of the maker of the database

What we are looking for is not just any possible harm made to the investment of the maker of the database but Article 7(1) Directive 96/9 and recital 42 thereof intends to prohibit situations where a significant detriment to the investment occurs whether evaluated qualitatively or quantitatively (British Horseracing Board and Others, paragraph 69). Furthermore, the Court had already established that where a specialised search engine carried out activities close to those of the maker of the database (akin to a parasitical competing product) then such activity creates a risk of harm to the database’s maker which could deprive him from the revenue which incentivised the creation of the database in the first place (Innoweb, paragraphs 41-43).

Whilst recognising that, in addition to providing competition, the activities of content aggregators contribute to the overall objective of stimulating the establishment of data storage and processing systems contributing to the development of the EU information market as such activities ultimately enhance the experience of users as the information is more easily searchable and structured (CV-Online Latvia, para 41).

These advantages need to be reconciled with the interests of database makers to be able to redeem their substantial investment. It is consequently for the referring court to verify two elements (CV-Online Latvia, paragraph 46):

  • whether the obtaining, verification or presentation of the information constitutes a substantial investment on behalf of the database maker; and
  • whether the activities of extraction and re-utilisation by the specialised search engine amount to a risk to the possibility of redeeming this substantial investment.

In search of balance…

Following the Opinion of Advocate General Szpunar (CV-Online Latvia, points 43-46), the Court instils flexibility in the application of the database directive. Instead of merely having to establish that the activities of the alleged infringer amount to the prohibited activities prescribed in Article 7(1) of Directive 96/9, courts must ascertain whether there is a potential risk to the investment of the database maker. This case is significant as it adds a requirement to the enforcement of database rights but it also only recognises direct harm made to the database maker’s investment and not any harm done to profits. In contrast to what we know under the IP Enforcement Directive where the approach to damages generally takes into consideration the profits lost by the IP owner and any unfair profits made by the infringer (Article 13). In so doing, the Court attempts at a recalibration of intellectual property rights with competition law. As both activities of the database makers and specialised search engines eventually contribute to the overall objective of the development of an EU information market, the Court agreed that both interests need to be balanced fairly. If the database maker’s right has potentially been weakened, it is to the benefit of users who have an improved experience, and of competitors given that database makers are not allowed to rely on the database directive to secure a dominant position in the relevant market.

The judgment can be found here.

 

Sabine Jacques is a Senior Lecturer in IP/IT/Media Law at the University of East Anglia

 

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