Here's a business puzzler for you: Who owns the stock quotations? Are they the property of the stock exchanges that administer the market, or the individual traders who "create" it by buying and selling stocks?
That turns out to be a hot issue these days, thanks to our peripatetic friend the Internet. As data swirl around the new Information Economy, the ability to establish property rights -- and charge a fee every time someone accesses a particular piece of data -- has become a big business.
It's like staking claims in a gold rush, this matter of defining ownership rights in cyberspace. The smallest changes in boundaries can end up costing hundreds of millions of dollars. So, inevitably, different lobbying groups are taking their claims to Congress and battling over precisely where the property lines should be drawn.
Take the matter of stock quotes. The New York Stock Exchange has been charging users a penny every time they access a "real-time" stock quote. They recently announced a plan to cut those fees to 0.75 cents, but for big brokerage concerns, it still adds up to a lot of money. The discount broker Charles Schwab, for example, says it paid the NYSE nearly $20 million last year. Overall, the Securities Industry Association reports that the NYSE, Nasdaq and other exchanges took in $413.7 million from sale of market data in 1998, up from $358 million the previous year.
The NYSE says it doesn't want any new property right but simply a congressional endorsement of its longstanding practice of selling stock quotations. Its executives argue that the quotes exist only because of the market-making power of the exchange, and that they should be free to sell that product.
"The trading floor is a factory floor, and we're in the business of manufacturing prices," says Robert G. Britz, an executive vice president of the NYSE. Putting it another way, he says, "The brokerage firms send us wheat and we turn it into bread."
Nonsense, argue Schwab and other brokers that must pay for the information. They contend that the market information belongs to everyone. They don't object to paying a modest user fee. But they insist that stock quotes are facts, like car accidents or the weather, which anyone should be free to report instantly -- without having to pay a fee.
What worries some big financial-data firms, such as Bloomberg, is that the NYSE and Nasdaq might someday try to assert ownership, not simply of real-time quotes but of the historic database of past transactions. In that event, Bloomberg might have to pay a fee whenever it summarized the price history of a particular stock. (An NYSE spokesman says the exchange has no plans to do anything like that.)
A House Commerce subcommittee is scheduled to hold a hearing today, debating the merits of the issue. The committee chairman, Virginia Republican Tom Bliley, is backing a measure that would protect the stock exchanges from hackers and pirates -- but wouldn't let them stake any ownership claim over the information in their databases. An alternative bill, sponsored by North Carolina Republican Howard Coble, would give the stock exchanges and other concerns more control over databases.
The stock market quotes are just one example of the "intellectual property" issues that arise in the new Information Economy.
Take sports scores. Several years ago, the National Basketball Association claimed, in effect, that it owned the scores to basketball games while they were being played. The NBA sued Motorola, which was transmitting the scores in real time over its pager network. But a federal appeals court sided with Motorola two years ago, arguing that the NBA had no proprietary right to the scores.
Or consider historical sports data, of the kind beloved by fans. Should Major League Baseball be able to assert a property right to the fact that Ted Williams batted .406 in 1941? Some analysts think the Coble bill would give data collectors the power to protect a compilation of batting averages -- or an index of poisons, for that matter. Bliley's bill, in contrast, would require a database company to add more creativity to its package -- allowing a user, say, to compare Williams with other left-handed hitters in the American League -- before getting protection.
The danger is that in cyberspace -- where information can be copied and retransmitted instantly -- no one will own anything. Everything will be free for the picking.
Congress will be struggling over the next few months to find a balance between simple facts, which should belong to everyone, and creative compilations of those facts -- which should belong to the people who do the work. Intellectual property protection is important -- it's the incentive that encourages writers to turn simple words into books, and musicians to turn random notes into songs. But finding the right balance won't be easy.
The intellectual property debate now gathering strength in Congress is the kind of complicated issue that only a lawyer could love. But the rest of us, who have a big stake in the outcome, should start paying attention.