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Databases rights in the open (banking) system. An out-of-the-box competition law perspective

Valeria Falce 

As the fourth industrial revolution overrides boundaries (between sectors, services and products) and traditional (legal and economic) categories, also the financial sector is shaken by the digital disruption. Data is collected, filtered and stored in a non-stop process of disaggregation, analysis and re-assemblage aimed at defining (direct or indirect) connections and homogenous categories of information. Each set represents a dynamic and interactive cluster, which is continuously nurtured to become a powerful instrument of experiment, proliferation and cross-usage, better classifying a client in terms of service preferences and risk aversion, tailoring services and conditions over time and orienting preference and choices also in other sectors. Whereas datasets become essential to enter new markets and operating therein, in the following it will be queried that in the new open data ecosystem mixed databases owned by Techfin operators may consolidate their (conglomerate) market position vis-à-vis banks and financial institutions and that, while awaiting for a specific EU response, the acquis communitaire may be invoked so as to neutralize the restrictive effects connected to the exploitation of the database rights vested therein, coming to the conclusion that in the open finance economy, the misuse doctrine may play a renewed role in balancing the interests of the Tech right owners together with those of the financial institutions and the market as a whole.

PAROLE CHIAVE: database - diritto della concorrenza

I diritti sui database nel sistema (bancario) aperto. Una prospettiva non convenzionale di diritto della concorrenza

Il settore finanziario è travolto dalla Quarta Rivoluzione Industriale al pari di ogni altro settore o ambito di attività. Nel nuovo ecosistema i dati raccolti, filtrati e rielaborati in un processo continuo ed ininterrotto di disaggregazione, analisi e riassemblamento consentono di classificare in tempo reale la clientela in termini di preferenze e propensioni, così di monitorarne, prevederne e condizionarne le scelte. Siccome le banche dati diventano uno snodo essenziale dei nuovi modelli di servizio, oggetto del presente saggio è verificare se ed in che misura i diritti sui dati rischino di sfociare in altrettanti abusi e se come antidoto le regole esistenti possano costituire un argine adeguato o se, piuttosto, non occorra ripensare il quadro normativo esistente.

Keywords: database – competition law – software


1. Introduction. - 2. EU (Tech-Fin) databases regulation. - 3. Property rights on Tech-fin databases. - 4. Tech-Fin databases and software protection. - 5. Tech-Fin databases and sui generis protection. - 6. Abuses of Tech-Fin database rights. - 7. A national endorsement. - 8. Conclusions. - NOTE

1. Introduction.

As the fourth industrial revolution overrides boundaries (between sectors, services and products) and traditional (legal and economic) categories [1], also the financial sector is shaken by the digital disruption. Deep changes are occurring in the Fintech era in terms of subjects (techfin), processes (modeled by IA), products/services (unbundled), markets (open, unstructured and disintermediated), models (coopetitive) and relationships (not anymore trustees) [2]. The driving forces orienting the financial revolution appear to be mainly twofold: the first ones is external and conglomeral, being characterized by a process of fintegration where actors [3] mastering extremely sophisticated digital techniques strategically enter the financial sector, coordinating their activities with those undertaken by banks and financial institutions; the second ones is internal and intra-sectoral, being characterized by a data-centric model endorsed by old and new actors in providing financial services at large, that is based on the collection, classification and use of massive personal [4], anonymous [5] and commercial data [6]. The ongoing process may be synthesized as follows. Online service platforms first ensure ease of communication and access to the markets for the exchange of goods and services by consumers/users and businesses [7]. Then, they leverage from the original function of decentralized and widespread interconnection, so as to actively enter new markets and provide new services as financial intermediaries. Last, they merge or strategically cooperate with financial institutions, through start-ups, partnerships, joint ventures [8], offering modular services and thus fully contributing the sharing economy [9]. In the new open ecosystem, ICT (Information and Communication Technology) and IOT (Internet of Things) technologies, Big Data analytics [10], user profiling techniques and artificial intelligence systems revolutionize the markets [11]-[12], redesigning their boundaries [13], dynamics and products [14]. As Techfin [15] fully belongs to the data and intelligent economy [16], data is collected [17], filtered and stored in a non-stop process of disaggregation, analysis and re-assemblage aimed at defining (direct or indirect) connections and homogenous categories of [continua ..]

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2. EU (Tech-Fin) databases regulation.

In the open banking system, tech operators are incentivize to enter the financial markets, with the view to enlarge the markets and increase competition [31]. However, despite these good intensions, the process of collecting and elaborating big data is reserved to few players, which rely on sufficient financial and technological resources needed to process in real time unlimited volumes of data and extract the highest economic value. The capacity to collect and analyze this unlimited volume of digital data belongs to techfirms only which make use of intelligent algorithms [32]. Such algorithms are able to identify connections, similarities, identities and differences, and ultimately offer to the market clusters of homogenous data which are constantly updated to provide the latest information [33]. At connected levels, instead, we find a multitude of new players and businesses making use of derivative data sets made available [34], in a dynamic and interactive way, in order to provide goods and services which may meet the needs of the society and may even create new ones. The gap between the different levels of the industrial sectors has grown: the economies of scale, characterizing the processes of collection and analysis of data, have experienced an acceleration as a consequence of the current concentrative processes [35]. These processes also lead to an accumulation and contamination of data, which could further justify action from a regulatory perspective. On the one hand, the recognition of certain phenomena or trends should not be confused with their evaluation. With this regard, it is important to refrain from applying to the digital ecosystem the equation according to which the specific capacity to process data automatically reflects the possession of market power. On the other hand, however, in the presence of certain market dynamics facilitated by the very structure of the market [36], the existence of exclusive and exclusionary rights benefiting those parties processing the data does not promote the competitive process but slows it down in an excessive and unjustified manner. The above consideration is far from being hypothetical. Fintech Digital and automated data collections resulting from such datification process [37], in fact, are likely to meet the EU definition of database under the Directive 96/9/CE, which is a “collection of independent works, data or other [continua ..]

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3. Property rights on Tech-fin databases.

What is doubtful on the other hand is to which extent Techfin datasets are worth of copyright protection. Under the Directive, the originality requirement is dependent on the activity of selection, organization and coordination of the collected materials [43], including raw information, news or even simple non aggregated data. Besides, such activities shall be conducted through the systemic and organic arrangement of the different elements – also collected via electronic processes – which must be made available [44]. In other words, the Directive recognizes diversity and originality in the structure [45] of the work considered as a whole, regardless of the single elements it consists of. This is enough to regard it as an intellectual creation. What is, then, the meaning of originality and creativity if it is accepted that a database is a product conceived for the market which responds to a specific demand and satisfies a precise need? Is it sufficient that the data be merely identified according to a personal, rectius individual, choice of the author, as a natural o legal person, regardless of the quality or aesthetic value obtained (Recital 15 and 16), or is it rather necessary something more (a quid pluris) than that? The answer is only partially given by the case-law. The legal concept of creativity does not correspond to those of creation, originality and absolute novelty, but it refers to the personal and individual expression of an objectivity belonging to the protected categories, so that, for an intellectual work to receive protection, it suffices that a creative act exists, even if minimal, susceptible of being externalized in the outside world. It thus follows that creativity cannot be excluded only because the work consists of simple ideas and notions, capable of being understood by people with expertise in the subject [46]. In brief, in relation to compilatory works, it suffices that the data be processed and organized by the author in a personal and autonomous way, for the choice or the arrangement of the materials. Conversely, the intellectual effort, the use of significant know-how for the creation of such a database, as well as the conferment of a certain degree of relevance to the content, become irrelevant factors. Such factors indeed are unable to justify copyright protection in the absence of an originality requirement in the choice and arrangement of the included [continua ..]

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4. Tech-Fin databases and software protection.

However, Techfin datasets are not intended to be used for a merely aesthetic or intellectual function; rather, they are perceived as having material utility, in light of the nature of the selected materials and the aim (typically informative) pursued. It seems reasonable to argue that the process of ‘functionalizing’ databases is in line with the process of extending to databases specific features of the protection of computer programs, under the Software Directive. The effect is to scale down certain aspects or problems, not yet clarified by the case law, which may arise when a database is implemented as a program [52]. In particular, the rights of economic exploitation of the creative collection are reserved to the employer (legal entities included) of the author every time the activity of creation falls within the tasks assigned to the employee and in all those cases where the work is carried out by following the employer’s instructions, unless different provisions agreed by the parties apply. Secondly, the owner of the database is entitled to exercise certain rights, such as the translation, adaptation, rearrangement and any other change of it, on the ground that only the database maker has the right to reproduce, present or demonstrate in public the results of the change. All these rights are not affected by the originality of the result, the prerogatives recognized to the author of the derived work, or the extent of the protection. Further, along the same lines of the Software Directive, the lawful user is entitled to implement certain actions, necessary to operate and access to the contents of the database, as well as to make a technical or normal use of it.

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5. Tech-Fin databases and sui generis protection.

In any case, the strength and relevance of Directive 96/9/CE, in the Data era, arises with and through the sui generis right. The new right [53], it is well known, aims at protecting the industrial interest – or, put differently, the economic investment and work done to assemble the relevant content, regardless of any consideration about merit, end use, quality or aesthetic value achieved. While systematic considerations suggest limiting access to copyright protection, the owner of an interactive and dynamic machine-generated dataset [54], which is the result of qualified investments [55], is surely entitled to invoke the sui generis right [56]. In connection to the substantial investment criterion, investments in fact can be material, financial or human (recital 40, para. 44 OPAP), and have to be measured on obtaining, verifying or presenting the contents [57] (a de minimis thresholds apply [58] both under a qualitative and a quantitative test [59]). Now, if one can doubt that obtaining data, that is collecting data [60], is conditioned to substantial resources, it is sure that substantial investments are required to verify the data, ensuring the reliability of the information contained, monitoring the accuracy of the materials collected when the database was created and during its operation [61]. This will include checking, correcting and updating the contents since these are ways of ensuring the contents’ reliability. Even if the database remains the same (the elements are not changed) as a result of the verification, it is still possible to prove a substantial investment. Once agreed that in terms of positive law the database rights apply in the new ecospace, the maker is awarded with a great exclusive power, considering that also repeated and systematic extraction of insubstantial arts (including Web Scraping) fall within the scope of the sui generis right. In other words, it is in the maker right the activity of so-called dedicated meta-search engines, which scrape specific web sites (often databases) according to users’ queries and present all the hits in one place so that users no longer need to consult the database as its contents are available in real time through the meta search engine [62]. So, also dedicated meta search engines, re-utilising the whole or a substantial part of the contents of a database, infringe the sui generis right [continua ..]

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6. Abuses of Tech-Fin database rights.

The implications and possible repercussions of the sui generis right exercise [65]-[66] in the financial environment are huge [67]. Whereas the open banking system supports the enlargement of the financial ecosystem, data rights may become a powerful instrument for tech operators to orient and direct bank activity, allowing intermediaries to extract and use only specific categories of data but not others. At present, one could suggest that competition toolbox [68] avoids any significant anticompetitive market effect, imposing special responsibilities on database owners who are granted a position of dominance and may be able to damage effective competition by preventing access to information markets or driving out existing competition. The Court of Justice has already clarified that the practice of refusal to license or deal (hence, the EU case law on the ‘exceptional circumstances’ could be plausibly invoked, from Magill to Tierce Ladbroke, from IMS to Microsoft [69]) single sources databases may qualify for an anticompetitive behavior and that the sui generis right must not be afforded in such a way as to facilitate abuses of a dominant position [70]. However, despite the virtues of competition law and policy, its toolbox scheme has proven not to be a bonne-a-tout-faire model: the definition of the relevant market can be elusive, the notion of economic power is questioned together with the features of the theory of harm [71]. If and when the dominant position conditions are lacking in one or more markets, it is the same sui generis right along with the prerogative that further compromise the functioning of the markets in which the access to Big Data in terms of volume, speed, variety, and value, are crucial. Should therefore the antitrust boundaries appear uncertain and almost blurred, then the misuse doctrine surely provides a safe harbor, having gained the status of a principle applicable to all areas of EU law [72], regardless dominance. Under such doctrine, in fact, a right cannot be enforced, if its exercise, even if formally respectful to the EU framework, occurs beyond its rational and in a manner determining an unjustified disproportion between the benefit of the right holder and the sacrifice to which the counterpart is subject. But when would the exercise of a database right fall in conflict with the abuse of [continua ..]

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7. A national endorsement.

These EU line of reasoning is matched at National level. In Italy, the theory of the abuse of law has in fact been investigated for a long time. Firstly by the doctrine that in view of the functionalization of the right to property (to claim its internal limitation nature or to recognize its exceptional character); then successively as a general category, while conforming to the relative law – in substance according to the “true law” – with the objective of verifying whether and under what conditions the exercise of a right constitute a deviation contrary, in the its ultimate purpose, to the principles of the legal system. The jurisprudence has over time demonstrated to decline such conditions considering them to have instead the following constituent elements: 1) the ownership of a subjective right by a subject; 2) the possibility that the concrete exercise of that right can be carried out according to a plurality of methods that are not rigidly predetermined; 3) the concrete action, even if formally respectful of the frame attributable to that right, is carried out according to censurable methods with respect to an evaluation criterion (legal or extrajudicial); 4) such modus operandi results in an unjustified disproportion between the benefit of the right holder and the sacrifice to which the counterpart is subject. The Achilles’ heel is clearly represented by the third condition which risks, in the absence of certain margins of interpretation, to lead to an arbitrary expansion of the scope of application of the theory. The Supreme Court has once again intervened, reassuring the interpreter. The constitutional value of the “private economic initiative” must be connected to the competitor “duty of solidarity” in the intersubjective relations pursuant to art. 2 of the Constitution, which is enriched and complete with the general canon of objective good faith and fairness. Hence the Constitutional Court deduced “the existence of a principle of bad-debt as a limitation to creditor claims”. The Supreme Court, noting its synergistic effectiveness with the general canon of objective good faith and fairness, attributes to the principle of bad-debt “a vis legislation and enriches it with positive content, including obligations (also instrumental), of protection of the person and things of the counterparty, thus functionalizing the mandatory relationship to the protection of the interests [continua ..]

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8. Conclusions.

Techfin is nurtured by “data fusion” [80], thus data, independently from its nature (either personal and anonimized or non-personal) and destination (actual and potential), become part of disruptive digital databases, each one qualifying a dynamic and interactive cluster, with the view either to study, experiment and classify, or to present and foreseeable trade among sectors and across borders [81]. Since Techfin datasets may meet the requirements for database protection under the EU regulatory system [82], while awaiting the reform of the Directive 96/9/CE or specific sandboxes proposals [83], its features shall be interpreted in order to avoid that the existence and exercise of database rights may erect excessive barriers to enter or fairly compete the Fintech arena [84]. To this end the abuse of right doctrine can be helpful to fill the huge gaps left in the European legal framework. If the relevant prerequisites occur, in fact, Techfin database makers operating on data markets would be continuing taking advantage of their contribution to the Fintech arena. However, they would be stopped from exploiting their rights anytime they are exercised beyond their ultimate goal, so as to distort competition, preempting financial institutions from competitively using techfin data, even if art. 102 TFUE prerequisites lack.

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