[Federal Register Volume 61, Number 199 (Friday, October 11, 1996)]
[Notices]
[Pages 53386-53456]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-25030]
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DEPARTMENT OF JUSTICE
Antitrust Division
Public Comments and Plaintiff's Response; United States of
America v. The Thomson Corporation and West Publishing Company
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that Public Comments and
Plaintiff's Response have been filed with the United States District
Court for the District of Columbia in United States v. The Thomson
Corporation and West Publishing Company, Civ. Action No. 96-1415.
On June 19, 1996, the United States filed a Compliant seeking to
enjoin a transaction in which The Thomson Corporation (``Thomson'')
agreed to acquire West Publishing Company (``West''). Thomson and West
are two of the country's largest publishers of law books and legal
research materials. Thomson and West publish numerous competing legal
publications, including the only two annotated United States Codes and
the only two enhanced U.S. Supreme Court reporters. The Complaint
alleged that the proposed acquisition would substantially lessen
competition in the market for legal publications in violation of
Section 7 of the Clayton Act, 15 U.S.C. 18, and Section 1 of the
Sherman Antitrust Act, 15 U.S.C. 1.
Public comment was invited within the statutory 60-day comment
period. Such comments, and the responses thereto, are hereby published
in the Federal Register and filed with the Court. Charts appended to
the Public Comments have not been reprinted here, however they may be
inspected with copies of the Complaint, Stipulation, proposed Final
Judgment, Competitive Impact Statement, Public Comments and Plaintiff's
Response in Room 3233 of the Antitrust Division, Department of Justice,
Tenth Street and Pennsylvania Avenue, N.W., Washington. D.C. 20530
(telephone: 202-633-2481) and at the office of the Clerk of the United
States District Court for the District of Columbia, Third Street and
Constitution Avenue, N.W., Washington, D.C. 20001.
Copies of any of these materials may be obtained upon request and
payment of a copying fee.
Constance K. Robinson,
Director of Operations, Antitrust Division.
In the United States District Court for the District of Columbia
United States of America, 1401 H Street, NW, Suite 4000,
Washington, DC 20530 (202) 307-5779, State of California, State of
Connecticut, State of Illinois, Commonwealth of Massachusetts, State
of New York, State of Washington, and State of Wisconsin Plaintiffs,
v. The Thomson Corporation, and West Publishing Company Defendants.
Civil No. 96-1415 (PLF)
PLAINTIFFS' RESPONSE TO PUBLIC COMMENTS
I. Background
II. Response to public comments
A. Divestiture of the Publications Enumerated in the Decree
Adequately Protects Competition
1. Divestiture of competing products, not companies and
supporting infrastructure
2. Availability of legal editors
3. Divestiture products independent of a cross-referencing
``system''
4. California
5. Brand names
B. The Option to Official Reporter Contract States Provision is
Appropriate and Adequate Relief for the Violation Alleged in the
Complaint
1. California
2. Washington
3. Wisconsin
4. Other states
C. Divestiture of Auto-Cite and Lexis/Reed Elsevier's Option to
extend Critical Thomson Content Licenses Adequately Protects
Competition in the Comprehensive Online Legal Research Services
Market
1. TCSL
2. Product differentiation
3. Auto-Cite divestiture
4. Overall competition in the comprehensive online legal
research services market
D. The Star Pagination License Eases a Significant Barrier to
Entry and is Procompetitive
1. Validity of West's star pagination copyright claim
2. Abandonment of star pagination copyright claim
3. Text copyright
4. Other antitrust violations
5. Citation to first page of an opinion
6. Level of license royalty fees
7. Large publishers
8. Other markets
9. The need for a text license in unrelated to this merger
transaction
10. Selection of cases
11. Description of product or service
12. License fee per format
13. Challenges of West's copyright
14. The confidentiality provision is intended to protect the
licensee and could encourage procompetitive discounting
15. Arbitration
16. The Internet
17. License fee for books
18. Other comments regarding the star pagination license
E. Plaintiffs Used Appropriate Merger Analysis in Examining this
Merger
F. Plaintiffs Should Not Require Divestiture of the Juris
Database
1. There is no conflict of interest within the Department on
this matter
2. Familiarity with legal publishing industry
G. Miscellaneous Comments--unrelated to merger or unsupported by
the investigation
III. The Legal Standard Governing the Court's Public Interest
Determination
IV. Conclusion
Pursuant to the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h) (``Tunney Act''), the United States
and the attorneys general of the states of California, Illinois,
Massachusetts, New York, Washington, and Wisconsin hereby respond to
the public comments received regarding the proposed Final Judgment in
this case.\1\
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\1\ The State of Connecticut does not join in this Response to
Comments. Therefore, subsequent references to ``the governments'' or
``the plaintiffs'' refer only to the plaintiffs who have signed the
response.
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I
Background
On June 19, 1996, the United States Department of Justice (``the
Department'') and the seven plaintiff state attorneys general's offices
filed the Complaint in this matter. The Complaint alleges that
defendants Thomson Corporation (``Thomson'') and West Publishing
Company (``West''), in violation of Section 7 of the Sherman Act, 15
U.S.C. 18, proposed a merger that was likely substantially to lessen
competition.
[[Page 53387]]
Simultaneously with the filing of the Complaint, the plaintiffs
filed the proposed Final Judgment and a Stipulation signed by all the
parties that allows for entry of the Final Judgment following
compliance with the Tunney Act. A Competitive Impact Statement
(``CIS'') was filed and published in the Federal Register on July 5,
1996. The CIS explains in detail the provisions of the proposed Final
Judgment, the nature and purposes of these proceedings, and the
practices giving rise to the alleged violation.
As the Complaint and CIS explain, the merger as originally proposed
was likely to reduce or eliminate competition between Thomson and West
in several specific markets in three categories: enhanced primary law,
secondary law, and comprehensive online legal research services.
Complaint Secs. 24 and 25. The proposed Final Judgment is intended to
prevent the expected lessening of competition caused by the merger in
those specific markets.
As a remedy to particular competitive concerns in enhanced primary
and secondary law product markets, the Department, seven states,
Thomson, and West agreed to certain product divestitures, the mandatory
licensing of the internal pagination from West's National Reporter
System (``star pagination''), and, in the case of official reporter
contract states, an option to those states to obtain a new official
publisher and to require divestiture of Thomson's official reporter
assets.
These divestitures of enhanced primary and secondary law products
are also intended to protect consumers by ensuring continued vigorous
competition between Lexis-Nexis and WESTLAW in the ``comprehensive
online legal research services'' market after the merger, but the
plaintiffs agreed also to the extension of certain licenses to Lexis-
Nexis, a division of Reed Elsevier, Inc., and the divestiture of Auto-
Cite to address this concern.
The 60-day period for public comments expired on September 3, 1996.
As of September 23, 1996, plaintiffs had received comments from 26
persons.\2\
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\2\ The comments received as of September 23, 1996, are
attached, preceded by a list of the 26 commenters. The United States
plans promptly to publish the comments and this response in the
Federal Register.
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The comments come from a variety of sources. The most extensive
comments are submitted by Lexis/Reed Elsevier; Alan Sugarman, President
of HyperLaw, Inc. (``HyperLaw''); and Matthew Bender & Company, Inc.
(``Matthew Bender''). Lexis/Reed Elsevier is the owner of the only
existing competitor to West in the comprehensive online legal research
services product market. Alan Sugarman and Matthew Bender are currently
engaged in copyright litigation with West in the District Court for the
Southern District of New York. Other comments are from private
attorneys, librarians, individuals, non-profit organizations,
government organizations, and one anonymous commenter.
II
Response to Public Comments
In the legal publishing industry, there are a number of contentious
legal, business, and public policy issues being debated. Many of these
issues involve the merging parties or the Department of Justice. This
fact has generated a large number of comments that do not relate to the
specific law violations charged in the Complaint or even to the merger
in any way.
The Court's responsibility under the Tunney Act is to determine
whether entry of the proposed Final Judgment is ``within the reaches of
the public interest.'' United States v. Western Elec. Co., 993 F.2d
1572, 1576 (D.C. Cir.), cert. denied, 114 S. Ct. 487 (1993) (emphasis
added, internal quotation and citation omitted). The Court may not look
beyond the Complaint ``to evaluate claims that the government did not
make and to inquire as to why they were not made.'' United States v.
Microsoft, 56 F.3d 1448, 1459 (D.C. Cir. 1995) (emphasis in original).
Thus, comments that relate to conduct plaintiffs did not pursue are
beyond the scope of Tunney Act review for the reasons set forth fully
in section III, below.
Many of the comments raise issues not relevant to this merger or in
this Tunney Act proceeding. Rather, they are statements about:
--Other public policy issues in the legal publishing industry;
--Issues in litigation in other non-merger cases;
--Conditions in the legal publishing industry--unrelated to the
merger--that make it less competitive than the commenter believes it
could be;
--Arguments that plaintiffs should have brought a different case; and
--Individual complaints about behavior of one of the merging parties,
unrelated to the merger.
In general, this Response mentions these comments and explains why
they are not the proper subject of this proceeding. Where appropriate,
the comments are placed in context.
Each of the comments that is relevant to this Tunney Act proceeding
is addressed below. In general, they fall in three categories:
--Some comments raised relevant issues that the decree has already
resolved. Plaintiffs explain the proper interpretation of the decree
and demonstrate why this is the case.
--In three instances, comments raise issues of ambiguity in the decree.
To resolve the matter, plaintiffs have agreed with defendants on new,
clarifying language for the decree.
--Other comments make criticisms that simply are not warranted. For
example, they are premature, or go to matters that will happen after
the Final Judgment is entered, or are otherwise unfounded.
Because a number of the commenters adopted or replicated the
comments of other commenters, plaintiffs have organized this Response
by subject to avoid redundancy. An appendix list the comments submitted
and cross-references to the places where they are discussed in this
Response. Many of the arguments made by Lexis/Reed Elsevier in its
Motion to Intervene and accompanying papers were essentially comments
on the decree, or they repeated or elaborated their previous comments;
accordingly, such Lexis/Reed Elsevier arguments are addressed in this
Response.
A. Divestiture of the Publications Enumerated in the Decree Adequately
Protects Competition
Several commenters expressed concern that the divested publications
will not be viable without divestiture of additional products and
rights.\3\ Viability of divestiture assets is an important concern in
virtually every merger case, and plaintiffs in this case carefully
reviewed these issues and took steps in the proposed Final Judgment to
ensure viability of the divested publications. We believe that when the
terms of the proposed Final Judgment are carefully examined, it will be
clear that these concerns have been adequately addressed.
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\3\ Professor Robert Oakley, American Association of Law
Libraries; Cyndi A. Trembley, Association of Law Libraries of
Upstate New York; Alois V. Gross, Esq.; Gary L. Reback, Esq., Lexis/
Reed Elsevier; Kendall F. Svengalis, Rhode Island State Law Library;
James P. Love, Consumer Project on Technology.
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1. Divestiture of Competing Products, not Companies, and Supporting
Infrastructure
Professor Robert Oakley of the Georgetown Law Center comments as
Washington Affairs Representative of the American Association of Law
Libraries (``AALL''). The AALL stated, at
[[Page 53388]]
the beginning of the governments' investigation, that it was neutral on
the Thomson/West merger, and in its comment it reiterates that it
remains neutral. At the same time, the AALL questions certain aspects
of the proposed Final Judgment.
AALL states that some of its members are concerned that individual
titles are required to be divested rather than subsidiary companies.\4\
They think this may mean some individual titles will not continue to be
viable entities in the market after divestiture. They are concerned
that the divestiture products share a ``supporting infrastructure''
with other, non-divested products, and that at least some of the
divestiture publications are an essential component of a ``larger
system of legal research.'' Divestiture of such non-divested products
would mean ordering defendants to divest products where there were no
product overlaps.
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\4\ Similar comments were submitted by E. Scott Wetzel, CD Law,
Inc.
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Plaintiffs agree that the future viability of divestiture products
is a legitimate concern and assert that this concern is fully addressed
in the decree. The government's investigation examined the supporting
infrastructure of the parties very carefully. Except in the case of the
California Reports and Deering's California Code,\5\ production costs
are not formally allocated between or among Thomson products to an
extent sufficient to question the viability of individual products, and
plaintiffs discovered relatively little evidence of joint production of
Thomson products. This means such products can be viable on a stand
alone basis, provided the acquirer has the necessary editorial staff
and production infrastructure. For this reason, plaintiffs have ensured
that acquirers of divestiture products will have access to these
resources. The proposed Final Judgment provides that acquirers receive
all production assets of the divestiture products, including
intellectual property, work in progress, plates, films, master tapes,
machine-readable codes for CD-ROM production, existing inventory,
pertinent correspondence and files, a copy of the current subscriber
list, all related subscriber information, advertising materials,
contracts with authors, software, and, at the acquirer's option,
computers and other physical assets. Proposed Final Judgment at para.
II.B. Also at the acquirer's option, Thomson must agree to provide
transition production of the product on behalf of the acquirer
(essentially as a contract publisher) for a reasonable period of time
and a reasonable price.\6\ In order to facilitate divestiture,
provisions in the Proposed Final Judgment specifically say prospective
purchasers can have access to personnel, physical facilities, and
financial documents. Id. at para. II.E. And, the proposed Final
Judgment states that Thomson/West shall not interfere with any
negotiations by acquirers to make offers of employment to Thomson/West
employees whose primary responsibility is the production, sale or
marketing of divestiture products. Id. at para. II.F. Thomson/West must
preserve the divestiture products until divestiture is made, must not
reassign employees to avoid their being hired by acquirers, except for
transfer bids initiated by employees which must be reported to
plaintiffs. Id. at para. VIII.A-C. Finally, all divestitures are
subject to the approval of the United States with the consultation of
the state plaintiffs, and divestitures of state-specific products are
subject to the approval of the United States and the appropriate state
plaintiff. Approval of the divestitures will only be made if, to the
sole satisfaction of the appropriate plaintiffs, the divestiture
product(s) can and will be operated by the acquirer as viable, ongoing
product lines. Thus, the decree has properly addressed the issue of
viability of divested assets and contains adequate provisions to
protect viability.
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\5\ As explained below, both these products are to be divested
pursuant to the proposed Final Judgment.
\6\ Proposed Final Judgment at para. II.C. The acquirer will
control all pricing, promotion, sales, and order fulfillment. Id.
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2. Availability of Legal Editors
Gary L. Reback at the law firm of Wilson Sonsini Goodrich & Rosati
submitted comments on behalf of Lexis/Reed Elsevier. Reed Elsevier, the
Anglo-Dutch corporation that owns Lexis-Nexis, had 1995 revenues of
$5.8 billion. Lexis-Nexis is the sole competitor to West's WESTLAW
service. The comments of Lexis/Reed Elsevier express concern that there
is an inadequate supply of qualified legal editors to maintain the
divestiture products. In its Motion to Intervene and accompanying
papers, Lexis/Reed Elsevier claims that Thomson/West has a ``monopoly
in editorial staff.'' Memorandum in Support of Motion to Intervene at
22.
Plaintiffs agree that a capable editorial staff is needed to
continue these divested products. But a qualified purchaser of the
divestiture products can hire editorial staff pursuant to the
divestiture terms or secure them elsewhere in the market.
On the basis of our investigation, plaintiffs believe that the
divestiture products will attract a strong, capable buyer, which has
the capability to ensure their viability. Plaintiffs understand, from
the reports submitted pursuant to the proposed Final Judgment, that
several significant publishing firms, including Lexis/Reed Elsevier
itself, indicated interest in purchasing the divestiture assets. These
potential buyers already possess editorial staffs and publishing
infrastructure. Other possible buyers include firms that could hire
staff and create infrastructure to accompany the divestiture product.
Furthermore, the decree provides, as noted above, that the acquirer
of the divestiture products will have access to relevant Thomson
employees for purposes of making offers of employment. Of course, such
employees are free to decide whether or not to accept such an offer of
employment. But they may be expected to carefully consider whether
future prospects are better at the acquiring firm, if the product on
which they have worked is being divested.
In addition, there is market evidence of the ability of prospective
acquirers to obtain qualified legal editors. A number of legal
publishers and some states employ trained editorial staffs who
editorially enhance their respective law products. For example, Michie,
which is also owned by Reed Elsevier, employs an editorial staff which
enhances over 20 state code products. Another commenter, CD Law (a
company which has been very successful with its own Washington state
product) prepares headnotes for the official Washington state reports.
Another such example is the editorial staff at the Bureau of National
Affairs (``BNA''), which editorially enhances United States Law Week.
Similarly, the States of New York, Illinois, and Massachusetts write
their own headnotes for their official case reporters. Thomson uses
contract employees for some of its editing. The preceding is not
intended to be an exhaustive list, but is included only to provide
representative examples of the fact that qualified editorial staffs are
now widely employed, and there is no ``monopoly'' of legal editors, as
Lexis/Elsevier claims. A suitable publisher which uses the provisions
of the decree and other sources could assemble a capable editorial
staff.\7\
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\7\ The preceding discussion also addresses the argument of
Garth Saloner in his Declaration in Support of Lexis-Nexis'
Opposition to the Entry of the Proposed Final Judgment that
defendants will have a unique incentive to pay editors who work with
divestiture products more than the potential acquirer would in order
to interfere with an offer by the divestiture buyer. (Paras. 13-
16). Furthermore, the decree forbids the defendants to interfere
with the acquirer's attempt to hire personnel whose primary
responsibility encompasses a divested product.
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[[Page 53389]]
3. Divestiture Products Independent of a Cross-Referencing ``System''
Other comments suggested that the divestiture products are
integrated in a ``research system.'' Lexis/Reed Elsevier's Motion to
Intervene also raises this issue. See Declaration of Kendall F.
Svengalis in Support of Lexis-Nexis' Opposition to the Entry of the
Proposed Final Judgment Paras. 7-9.
Some of these comments relate to the viability of the divested
products, an appropriate Tunney Act comment. This was an issue the
plaintiffs considered carefully and concluded that divestiture of
independent products was sufficient. Other comments, however,
essentially suggest that the plaintiffs should have brought a different
case--one based on loss of competition between research systems. For
reasons stated in Section III, the latter sort of comment is not
appropriate in a Tunney Act proceeding.
The proposed Final Judgment is the culmination of an extensive
investigation by Plaintiffs. In the course of the investigation,
plaintiffs subpoenaed documents from defendants, deposed employees and
officers of defendants, and interviewed numerous law librarians, legal
publishers that compete against defendants, and other legal publishing
industry participants. Plaintiffs carefully examined whether
significant numbers of users of legal research tools consider Thomson's
``Total Client Service Library'' or ``TCSL'' \8\ to be a substitute for
West's ``Key Number'' system. See section II.C.1 below.
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\8\ The Total Client Service Library includes cross-references
that Thomson includes in many of its legal publications.
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In fact, most law schools do not teach that the TCSL and West Key
Number system are substitutes. This is true, for example at the
Georgetown University Law Center, at which Professor Oakley, who
commented on behalf of AALL, teaches.
Nor did our investigation reveal that competition between the
parties' individual products is based on competition between TCSL and
Key Numbers. Rather, the competition between individual products is
based primarily on substantive content in the publications. For
example, in new York, both firms have annotated statutes. They are
substitutes primarily because they both offer statutory text and
annotations to relevant case law. For case law reporters, both firms
offer case law publications that are substitutes primarily on the basis
of containing case law and editorial enhancements such as headnotes and
summaries. The parties' divestiture publications do compete in part
because they are enhanced with cross-references.
At the conclusion of the investigation of these issues the
Department carefully considered, under the prevailing legal standard,
the evidence supporting the theory that the merger harmed competition
between competing research systems, and determined that no further
action was warranted on the evidence before it.
After careful investigation, the governments decided that it would
not be necessary to divest all the publications to which divestiture
products are cross-referenced in order to keep the divestiture products
competitive. Lexis/Reed Elsevier complains that ``the Consent Decree
exacerbates the proposed acquisition's anticompetitive effects in its
failure to require Thomson to provide continued access to, and use of,
the portions of the Thomson system that the Department is not proposing
for divestiture.''
Divestiture products that contain cross-references to Thomson
products will still be able to include those cross-references. Thomson
has never objected to, and has in fact encouraged, cross-references (of
the kind contained in the TCSL) to their products by other publishers.
The governments' investigation revealed many instances of other
publishers cross-referencing to Thomson, West, and other firms'
publications. For example, Matthew Bender includes American Law Reports
(``ALR'') references in several of its publications. Thomson has
confirmed to the Department that it will continue this practice of open
citation to Total Client Service Library products.\9\ See attachment A.
Plaintiffs expect that the acquirer(s) of the divestiture products will
continue to be able to cross-reference Thomson publications, which will
help the divestiture products remain competitive.
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\9\ Professor Saloner maintains that ``new entrants'' are
unlikely to come into the markets for enhanced primary law products
even if postmerger prices increase, because the cost of developing
and introducing a cross-reference methodology for a small set of
products would be prohibitive. Declaration of Garth Saloner in
Support of Lexis-Nexis' Opposition to the Entry of the Proposed
Final Judgment Paras. 17 and 18. However, as explained above, a
``new entrant'' would be able to cite to the TCSL products and would
therefore not have to develop its own cross-reference methodology.
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Lexis/Reed Elsevier's comments express concern that Thomson will
charge monopoly prices for cross-referencing to ALR and other Thomson
publications that are part of the TCSL. This concern is unfounded as
Thomson has never claimed a proprietary interest in such cross-
references and has never charged a royalty for them. Lexis/Reed
Elsevier is also concerned that Thomson may ``save itself the cost of
maintaining ALR.'' The implication is that Thomson would stop
publishing this popular publication because ALR is a substitute for a
West product or products. This fear is not supported by substantial
evidence. See II.C.1.
Similarly, Lexis/Reed Elsevier comments that the acquirer of United
States Reports, Lawyers Edition will not have access to the annotations
at the back of each reporter. Plaintiffs disagree. The proposed Final
Judgment provides that defendants will divest to the acquirer the
annotations in existing volumes. Proposed Final Judgment at para. II.B.
The acquirer will be responsible for continuing to provide such
annotations in future volumes.
4. California
Mr. L. David Cole, an attorney in Beverly Hills, California, a
subscriber to Thomson's CD-ROM titles in California, is concerned that
the divestiture of Deering's California Code Annotated will separate it
from other titles such as California Reports, the Witkin Library, and
Miller & Starr, and that such separation will result in ``unintegrated
sets, thereby frustrating the reason for my choice of products * * *.''
He states, ``my * * * investment in Deering's and California Reports
will be rendered substantially less valuable when the related treaties
are no longer under common ownership and integrated.''
The precise issue identified by Mr. Cole's comment was considered
seriously during the investigation of potential competitive effects
caused by the Thomson/West merger--that is, whether any of the parties'
competing products involve such integration with other, non-competing
products that they could not after divestiture, compete in the
marketplace. Specifically, the issue of integration of Thomson's
California products was investigated and reviewed. It was determined by
the plaintiffs that Deering's Code and the California Reporter are
integrated sufficiently to indicate that they should both be
divested.\10\ On the other hand,
[[Page 53390]]
there was insufficient evidence that one or both of those two products
are sufficiently integrated, in the minds of consumers, with Witkin or
any other Thomson product, to warrant a challenge involving more
titles.
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\10\ The proposed Final Judgment requires immediate divestiture
of Deering's Code. The proposed Final Judgment also contemplates the
divestiture of California Reports; however, the concurrence of the
State Reporter of Decisions is an additional requirement before its
divestiture can occur.
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5. Brand Names
Mr. Alois V. Gross, an attorney in Minneapolis, Minnesota, comments
that trade names must be divested, including Lawyer's Cooperative,
Bancroft-Whitney, LawDesk, TCSL, and American Jurisprudence. He
believes these names carry valuable goodwill and brand recognition and
are essential to the divestiture products' viability. Where brand names
appeared important to the divestiture product, their divestiture has
been included. For example, Deering's Annotated California Code, Corbin
on Contracts, and United States Reports, Lawyers Edition, all will be
divested. The brand names Mr. Gross mentions cover a broad range of
products and are not those primarily associated with the specific
divestiture products.
B. The Option to Official Reporter Contracts States Provision is
Appropriate and Adequate Relief for the Violation Alleged in the
Complaint
Several commenters expressed concerns about the scope and terms of
the decree provision which requires Thomson to grant the Official
Reporter Contract States the option to terminate their Thomson
contracts for publishing official reporters.\11\
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\11\ L. David Cole, Esq.; Edward D. Jessen, California Advisory
Committee on Publication of Official Reports; Kathleen Jo Gibson,
New Mexico Compilation Commission; Karen Ehmer, Esq., Darby Printing
Company; E. Scott Wetzel, CD Law, Inc.; John H. Lederer, Esq.
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1. California
On August 7, 1996, Mr. Edward Jessen submitted comments as Official
Reporter of Decisions and Secretary of the Advisory Committee for
Publication of the Official Reports of the State of California. He
questioned whether the proposed Final Judgment adequately addressed the
fact that California Reports and Deering's California Codes share costs
and text and should be together to stay competitive. Lexis/Reed
Elsevier' Motion to Intervene and accompanying papers also expressed
this concern.
Deering's and its assets are required to be divested. California
Reports, and all its related assets, also must be divested if the
governing entity in California awards the official publisher contract
to another firm. Mr. Jessen is the head of that governing body. This
provision was inserted into the Final Judgment (Washington and
Wisconsin are treated similarly) for the sole purpose of allowing the
state governing bodies to concur in the need for divestiture of
official reported assets and to decide who should buy the official
reporter assets.
Plaintiffs believed this would be a superior approach to attempting
directly to require the abrogation and assignment of the contracts with
the state judicial branch entities.\12\ Therefore, the affected states
were effectively given the option to obtain full divestiture. Mr.
Jessen and his committee are given control over whether to require
divestiture of California's official reporter assets or continue with
Thomson. The committee can re-open bidding for the state contract, and
give significant weight to ownership of Deering's Code. This places
California in a similar position to its pre-merger position. This
action should satisfy Mr. Jessen's concerns completely.
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\12\ Darby believes that the official reporter assets of
official reporter contract states should also be immediately
divested. The part of proposed Final Judgment relating to the re-
opening of bidding of official state reporter contracts involves a
true option to the state governing bodies. These bodies are not
required to re-open bidding. The plaintiffs have no information on
the requirements that will be placed on bidders by the state
governing bodies. There is nothing in the proposed Final Judgment
insuring that Thomson will participate in bidding, or requiring
states to allow Thomson to participate. Even if Thomson were to
participate in a re-opened bidding process, there are no
restrictions in the proposed Final Judgment on the state governing
bodies' criteria or decision on what firm to pick as a new official
reporter or a state's decision to choose Thomson if the state
wishes.
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Mr. Jessen has now indicated he no longer has the concerns he
initially addressed. On September 17, 1996, Mr. Jessen sent a letter to
Thomas Greene, Senior Assistant Attorney General at the State of
California Department of Justice, in which he stated that, ``I now
fully support the proposed consent decree for the Thomson/West
transaction as sufficient to protect California's interests as far as
my office is concerned.'' (The entire correspondence is contained in
attachment B). This letter appended Mr. Jessen's September 16, 1996
letter to Brian Hall, President of the West Information Publishing
Group.
In his letter to Mr. Hall, Mr. Jessen stated,
I now understand that this issue was thoroughly investigated by
the California Attorney General's Office and by the United States
Department of Justice. I also understand that any sale of Deering's
and the other California products to be divested must be approved
under the consent decree by the California Attorney General's Office
and the United States Department of Justice, and that Thomson is not
free to select any purchaser of its choosing regardless of its
qualifications. I am confident that the California Attorney
General's Office and the United States Department of Justice will
exercise their powers of approval as provided in the proposed
consent decree to ensure that the purchaser of any divested product
will have the managerial, operational and financial capability to
compete effectively in the publication and sale of that product.
The plaintiffs agree that there is a nexus between California
Reports and Deering's California Code.
2. Washington
E. Scott Wetzel comments on behalf of CD Law, Inc. of Seattle,
Washington. CD Law publishes case law, administrative law, and other
Washington state legal materials on CD-ROM and the Internet. CD Law
comments that ``Thomson and West competed vigorously for the contract
to publish the official Washington state reports.'' Plaintiffs agree.
However, as CD Law concedes, Thomson and West were not the only
competitors for the contract--Darby, Michie, and CD Law also submitted
bids.
CD Law comments that ``there are virtually no publishers capable of
competing with West/Thomson'' and summarily dismisses companies such as
Darby and Michie. Darby currently holds the official reporter contracts
for Georgia and the Virginia Supreme Court, and recently was named the
successful bidder in Michigan, beating out Thomson among others. Darby
has in the past had the official reporter contract for Massachusetts
and Arkansas. Michie publishes numerous print and CD-ROM codes and case
reporters. Further, Michie is owned by Reed Elsevier, the second
largest legal publisher in the United States. In addition to these two
serious bidders, the governments' investigation revealed that there are
a number of other companies which have bid on and/or published official
reporters in other states and which possibly could bid in Washington.
CD Law is also concerned that defendants will not renew its
contract to write the headnotes for the official state reports. This
concern does not necessarily flow from the merger, as Thomson could
have decided not to renew the contract and instead to write its own
headnotes in the absence of the merger. In addition, CD Law is not
precluded from contracting with the successful bidder for a contract to
write headnotes in the event that the state of
[[Page 53391]]
Washington decides to exercise its option to terminate its contract
with Thomson and awards the contract to another bidder.
CD Law complains that it will not be able to compete with
defendants because its product will lack headnotes and case summaries;
however, even if Thomson does not contract with CD Law to perform these
editorial enhancements, CD Law has not explained why it cannot continue
to create the enhancements for its own CD-ROM products. The
governments' investigation revealed that CD Law has been a vigorous
competitor in Washington for a number of years, and CD Law has not
advanced any reasons why that should not continue to be the case.
3. Wisconsin
John H. Lederer, Esq., a retired attorney in Oregon, Wisconsin,
expresses concern that defendants will be the only bidders for the
Wisconsin official reporter contract. As noted above, the governments'
investigation revealed that a number of companies bid for various
official reporter contracts in a number of states. Any of these
companies potentially could bid for the Wisconsin contract.
4. Other States
Ms. Karen Ehmer comments on behalf of Darby Printing Company, a
printer of court opinions in a number of states. Darby asks that
Illinois, Massachusetts, and New York (where Thomson publishes other
official reporters) also be given the opportunity to re-open bidding
for official reporter contracts.
With respect to the official reporters for Illinois, Massachusetts,
and New York, competition for these was considered carefully by the
plaintiffs in the course of the investigation. This comment relates to
markets not included in the Complaint, and thus it is not an
appropriate Tunney Act comment. Plaintiffs note, however, that as Darby
knows (it was the official printer of Massachusetts opinions until 1995
when it lost the contract to Thomson), in these three states the states
themselves write the headnotes and summaries and make other editorial
judgments about content. Thomson acts as a printer, rather than an
editorial writer in these states. In these states, then, existing
editorial competition is only between the state and West. More
important, however, is that a court-ordered divestiture of assets is
not required for the state to choose a new printer that is capable and
adequate to replace Thomson. Printers do not also need to be law
publishers in order to compete. There are many printers that can do the
job, including Darby (e.g., in Massachusetts, or in Michigan where
Darby won the printing contract in 1995). Finally, plaintiffs note that
the state attorneys general's offices from Illinois, Massachusetts and
New York joined the Complaint and settlement.
Ms. Kathleen Jo Gibson comments on behalf of the New Mexico
Compilation Commission. The Commission wants the proposed Final
Judgment to include language giving New Mexico, and other states that
have official reporters, an option to re-open bidding similar to that
now in the proposed Final Judgment for California, Washington, and
Wisconsin. The Commission would also like a permanent, royalty-free
license to New Mexico court opinions reported by West.
The merger does not affect competition for the sale of official
reporters in New Mexico. Thus, it would be inappropriate to require the
relief requested by the New Mexico Compilation Commission. West has
been the official reporter of New Mexico opinions since 1933. Thomson
simply does not compete in New Mexico with an official reporter. In
fact, Thomson has not represented even potential competition with West;
according to the Commission, ``For a number of reasons, it is not
economical for small states such as New Mexico to contract with any
other publisher * * *'' New Mexico's dispute with West over the
copyrightability of West-reported New Mexico opinions likewise is not
related to any actual or potential competition likely to be lost as a
result of the Thomson/West merger.
C. Divestiture of Auto-Cite and Lexis/Reed Elsevier's Option To Extend
Critical Thomson Content Licenses Adequately Protects Competition in
the Comprehensive Online Legal Research Services Market
The complaint alleged that the merger could harm consumers by
adversely affecting competition in the comprehensive online legal
research services market. Specifically, there was a risk that Thomson,
a supplier of content to Lexis-Nexis, could use this position to harm
Lexis-Nexis and benefit WESTLAW (which Thomson would now own) in a way
that would harm consumers.\13\ In reviewing the situation created by
this merger, thus, the question is whether the Lexis-Nexis service
could be so degraded by Thomson's postmerger actions that consumers
(not Lexis/Reed Elsevier) would be hurt.
---------------------------------------------------------------------------
\13\ This ``vertical foreclosure'' risk is likely to lead to
anticompetitive effects on consumers, however, only to the extent
that Lexis/Reed Elsevier cannot take market actions to maintain
content adequate to allow it to be a vigorous competitor. If the
downstream firm (here, Lexis/Reed Elsevier) in a possible vertical
foreclosure situation can readily obtain its inputs (here, content)
from other sources, or develop the inputs itself, then there is no
antitrust violation (even though the downstream firm might prefer
simply to continue its existing source of inputs).
---------------------------------------------------------------------------
In reviewing how competition in this market functions, plaintiffs
observed that Lexis/Nexis and WESTLAW compete not only by offering
virtually identical data bases of court decisions, but also by offering
various, different secondary legal materials and a wide variety of non-
legal materials; their products are differentiated. Competition in the
market to date has resulted in two services that are partly similar,
partly differentiated and constantly changing. The merger does not
affect the similar part of the services--the text of court decisions.
Thus plaintiffs considered the effect on the differentiated portion of
the services. Plaintiffs noted that Lexis/Reed Elsevier itself, of
course, is a large multinational publishing corporation. Plaintiffs are
also aware that shortly after the Thomson/West merger announcement,
Lexis/Reed Elsevier entered a new arrangement with Matthew Bender
(another significant legal publisher) in which Matthew Bender's content
will be included in the Lexis/Nexis service. Plaintiffs also noted that
this market is evolving extremely rapidly--indeed, it virtually did not
exist before the Lexis-Nexis service was created in the 1970s.
In this context, plaintiffs evaluated a possible case and potential
relief. Prior to the governments' review of this merger, Thomson and
Lexis negotiated extensions of the most important licenses for Thomson
content, both legal and non-legal.\14\ Virtually all of the licenses
were extended for five additional years and generally at the existing
price, i.e., prices that had been negotiated when Thomson did not own
WESTLAW and thus could have no anticompetitive incentives with regard
to Lexis/Nexis. With the extensions, the average length of the licenses
was about seven years.
---------------------------------------------------------------------------
\14\ These licenses included the following materials: (1) Legal
publications (including Auto-Cite, ALR U.S.C.S., and AmJur2d); (2)
non-legal databases (including ASAP, Predicasts, and Investext); and
tax materials from Research Institute of America.
---------------------------------------------------------------------------
The plaintiffs thus evaluated whether additional relief was
necessary to ensure vigorous competition in this market. Two additional
protections were determined to be necessary. First, for certain key
non-legal data bases,
[[Page 53392]]
Thomson was required to offer to extend Lexis/Reed Elsevier's licenses
for an additional five years. These data bases (ASAP, Predicasts and
Investext) had been identified by Lexis/Reed Elsevier as particularly
significant. Second, Auto-Cite was required to be divested, so that
Lexis/Reed Elsevier could obtain it from a source independent of
Thomson (or buy it itself). These two provisions, together with the
previously negotiated license extensions, and the normal market
incentives and capabilities of Lexis/Reed Elsevier (such as those that
led it to a new partnership with Matthew Bender), should be sufficient
to maintain vigorous competition that would protect consumers in the
comprehensive online legal research services market.
Lexis/Reed Elsevier comments that these actions are not enough.
These arguments are not new. Plaintiffs heard them from Lexis/Reed
Elsevier during the investigation and investigated them extensively and
intensively.
Specifically, Lexis/Reed Elsevier makes two complaints. First, they
seek divestiture of TCSL. Second, they criticize the divestiture of
Auto-Cite. These points are essentially reiterated in their Motion to
Intervene.
1. TCSL
Lexis/Reed Elsevier complains that plaintiffs should have obtained
an additional divestiture--the TCSL--in order to enable Lexis/Reed
Elsevier to use the components of the TCSL to compete with WESTLAW's
Key Numbers and headnotes. Plaintiffs disagree. Plaintiffs carefully
considered this argument and all the evidence relevant to it--and found
it wanting. The information filed by Lexis/Reed Elsevier with its
Motion to Intervene itself demonstrates why this argument is without
merit.
Lexis/Reed Elsevier asserts that there are four ``portions of the
TCSL'' that are ``the most important * * * enhancements'' and that
Lexis/Nexis must license ``(i)n order to compete with Westlaw'': ``the
annotations found in ALR and Lawyer's Edition, the AmJur encyclopedia,
and Auto-Cite.'' Emrick Declaration para.7. In fact, the enhancements
that are important to Lexis/Reed Elsevier will continue to be
available. First, Lawyer's Edition is, of course, a divestiture
product. The new buyer, if other than Lexis/Reed Elsevier, certainly
will have every incentive that Thomson had to earn revenue by licensing
Lawyer's Edition to Lexis/Nexis. Second, Auto-Cite, too, is a
divestiture product. If Lexis is not the buyer of this product, it will
have access to Auto-Cite, as explained more fully in the next section.
Third, the claim that AmJur is essential to Lexis/Nexis is undercut by
Lexis/Nexis' own behavior. AmJur was only added to the Lexis/Nexis
service in February 1996 after Lexis/Nexis fitfully negotiated for it
over a course of several years.
Fourth, ALR is touted by Lexis/Reed Elsevier as a substitute for
West's Key Number system in finding cases. Emrick Declaration para.8.
But a document attached to the Emrick Declaration directly undercuts
this claim. This Thomson document reports on research with focus groups
of lawyers and librarians, addressing the issue of whether ALR is a
substitute for West Key Numbers. The results were that ``ALR was not
well received as being a place to start research'' even among groups
``where familiarity with ALR was skewed in ALR's favor.'' Emrick
Declaration Exhibit B at 11, 12.\15\ In focus groups of Lexis/Nexis
sales people, ``No one understood the analogy of ALR as a competitive
alternative to headnotes.'' Id. at 9.\16\
---------------------------------------------------------------------------
\15\ Among other points, it was also noted that ``[b]oth
attorneys and librarians view ALR as one of many available secondary
sources, often cited in the same category as law reviews and
treatises.'' Id. at 11. ``ALRs were not highly regarded as
definitive legal research.'' Id. at 12. Lexis sales people said that
``Attorneys mostly use ALR as a last resort * * *.'' Id. at 10.
\16\ Because the evidence does not support the proposition that
ALR is a substitute for West Key Numbers, there is no basis for the
claim in the Saloner Declaration (para. 11) that the price of ALR
will rise. Saloner assumed such substitutability.
---------------------------------------------------------------------------
There is simply insufficient evidence that ALR must be divested to
preserve competition with the West key number system. Under the Tunney
Act the Department has the duty to review the evidence and determine
the litigative prospects. Lexis/Reed Elsevier asks the court to adopt
this prosecutorial function.
2. Product Differentiation
Similarly, Lexis/Reed Elsevier argues that divestiture of TCSL is
necessary to allow Lexis/Reed Elsevier to offer a product that is
differentiated from that offered by defendants. Plaintiffs disagree.
The governments' investigation revealed that the Lexis-Nexis and
Westlaw services are today quite different and that Lexis-Nexis
continues to add new, non-Thomson publications and databases to its
service. In addition, we note that Lexis/Reed Elsevier, on its own, was
able to negotiate and extend its licenses for these components into the
next decade. For example, Lexis/Reed Elsevier negotiated a license for
ALR through 2002 and a license for AmJur2d through 2006. This may
provide an additional cushion for further differentiation of Lexis-
Nexis and addition of additional secondary sources. Furthermore, Lexis/
Reed Elsevier's joint venture with Matthew Bender, a leading legal
publisher with numerous primary and secondary law products, will
bolster its ability to continue to offer a good quality, differentiated
product. Finally, the proposed Final Judgment requires Thomson to grant
Lexis/Reed Elsevier the option to extend its License Agreements for
three non-legal databases--Investext, ASAP, and Predicasts \17\--which
are offered on Nexis, for an additional five years. Thus Lexis/Reed
Elsevier may, at its option, extend these contracts until 2010.
Proposed Final Judgment at para. X. (As with the legal publications
above, Lexis/Reed Elsevier and Thomson have already negotiated extended
contracts for these databases into the next decade.) In the judgment of
plaintiffs, this is sufficient time for Lexis/Reed Elsevier to seek
other sources, differentiate its product in other ways, or create
competing databases.
---------------------------------------------------------------------------
\17\ Investext is a collection of approximately 200 brokerage
house reports regarding individual equities and industries. ASAP is
an indexed consolidation of approximately 450 specialized industry
publications. Predicasts includes the following three databases: (1)
PROMT, an indexed database of over 1,100 trade and business
publications; (2) MARS, an indexed database that includes
information relating to advertising and marketing of consumer
products and services; and (3) Newsletter, an indexed international
database including 650 different newsletters from 165 publishers.
---------------------------------------------------------------------------
3. Auto-Cite Divestiture
Lexis/Reed Elsevier also comments that the proposed Final Judgment
``impairs Lexis-Nexis' contract rights to Auto-Cite, thus affirmatively
damaging its ability to compete.'' The plaintiffs disagree. As
explained above, Thomson has never discouraged citations to its
publications and the acquirer of Auto-Cite will be able to continue to
cite to defendants' publications, including ALR. In addition, the
acquirer of Auto-Cite will be bound by the terms of the existing
license between Thomson and Lexis/Reed Elsevier. Further, the
acquirer--if it is a firm other than Lexis/Reed Elsevier--has every
incentive to continue to offer Lexis/Reed Elsevier a competitive
citator rather than risk losing that revenue stream.
Lexis/Reed Elsevier further comments that defendants should have
been required to divest ``all rights and interests'' in Auto-Cite and
complains that
Thomson is thus not divesting itself of Auto-Cite at all: it is
retaining the database itself, the staff trained in its use; the
[[Page 53393]]
(apparently exclusive) right to use important elements of the
system, i.e., the cross-references and integration with the ALRs and
other Thomson products; and other important incidents of ownership,
such as the ability to sublicense.\18\
---------------------------------------------------------------------------
\18\ James P. Love of the Consumer Project on Technology
submitted a similar comment.
The governments' investigation revealed that Lexis/Reed Elsevier
needed to be able to license Auto-Cite and provide it on its system in
order to effectively compete in the comprehensive online legal research
service market. The proposed Final Judgment addresses this concern and
ensures that the acquirer of Auto-Cite will be able to continue to
provide Auto-Cite to Lexis/Reed Elsevier.
The proposed Final Judgment provides that the divestiture of Auto-
Cite:
Shall include the sale of all Auto-Cite trademarks and service
markets, the assignment of the Auto-Cite License Agreement, and
delivery of a transferrable royalty-free perpetual license of the
Auto-Cite case database as of the time of the divestiture and all
software, trade secrets, and know-how used in producing and updating
the Auto-Cite case database.
para.II.B. Thus, Thomson must divest to the acquirer everything it
needs to be able to continue to offer Auto-Cite to Lexis/Reed Elsevier,
other than new cases, which the acquirer can get from a number of
sources, including Lexis/Reed Elsevier.
Furthermore, the plaintiffs will ensure that Auto-Cite will be
acquired by a qualified bidder. The proposed Final Judgment provides
that the United States after consultation with the state plaintiffs
must be satisfied that: (1) The acquirer can and will operate Auto-Cite
as a viable, ongoing product; (2) the purchase is for the purpose of
competing effectively in the sale of Auto-Cite; and (3) the acquirer
has the managerial, operational, and financial capability to compete
effectively in the sale of Auto-Cite.\19\
---------------------------------------------------------------------------
\19\ Before Thomson offered Auto-Cite as a commercial product on
the Lexis online service, it used it internally for editorial
purposes. (The same is true of West's Insta-Cite service). The
governments' investigation revealed that entirely foreclosing
Thomson editors from internally using Auto-Cite for essential,
editorial purposes would harm its retained products, which would
clearly harm competition. Thus Thomson retains a copy of Auto-Cite
and can use that copy (though not, for example, the Auto-Cite
trademark).
---------------------------------------------------------------------------
Professor Saloner's concern that (1) ``the acquirer will merely be
given a license to the product, without the personnel that currently
produce Auto-Cite,'' and that (2) ``Lexis-Nexis has lost effective
access to Auto-Cite because of the failure to include critical
components of the service (e.g., prospective access to ALR) in the
divestiture'' are addressed above and also in Sections II.A.2 and
II.A.3 Declaration of Saloner Paras. 19-23.
Lexis/Reed Elsevier also complains that Thomson has not provided it
with basic information about Auto-Cite, including cost information, so
that it could ``evaluate and make a meaningful bid.'' Plaintiffs
investigated this complaint and requested additional information from
Thomson about the bidding process. The governments' inquiry revealed
that the bidding process is at an early stage. At this point, only non-
binding expressions of interest, not actual bids, have been requested
by defendants. A number of interested companies, including Lexis/Reed
Elsevier, have expressed interest in bidding.
During the next stage of the bidding process, prospective bidders
will receive a presentation by Thomson personnel and access to a due
diligence room containing proprietary documents. Ironically, because of
its confidential license agreements with Thomson, Lexis has access to
key data that no other bidder can obtain and therefore has more
information than any other bidder. Thus, prospective bidders will have
adequate information before formulating their bids.\20\
---------------------------------------------------------------------------
\20\ Lexis/Reed Elsevier's real concern appears to be that
Thomson could use its copy of the Auto-Cite database to improve
WESTLAW, West's comprehensive online legal research service.
WESTLAW's counterpart to Lexis-Nexis' Auto-Cite is called Insta-
Cite. Insta-Cite only offers a portion of what Auto-Cite offers--it
does not offer negative, indirect history before 1972 nor does it
offer cross-references to ALR. If Thomson does ``upgrade'' Insta-
Cite, it would be a procompetitive result. The governments'
investigation did not reveal--and even Lexis/Reed Elsevier has not
argued--that Auto-Cite has to be ``better than'' Insta-Cite for the
Lexis-Nexis service to compete with WESTLAW. Continued access to
Auto-Cite is sufficient. Further, West could have, absent the
merger, to fill in the Insta-Cite database.
---------------------------------------------------------------------------
4. Overall Competition in the Comprehensive Online Legal Research
Service market
Matthew Lee, Executive Director of Inner City Press/Community on
the Move (``ICP'') also expressed concerns about competition in the
comprehensive online legal research services product market. ICP
comments that the comprehensive online legal research service product
market was already an ``over-concentrated and anticompetitive'' duopoly
and faults plaintiffs for taking no action to change this situation.
ICP's complaint is unrelated to the merger. ICP's complaint essentially
seeks a Sherman Act section 2 monopolization case in the comprehensive
online legal research services market. Whatever the merits of such an
action, it is far beyond the scope of this Tunney Act proceeding on a
Clayton Act section 7 matter.
O.R. Armstrong submitted comments on behalf of Geronimo Development
Corporation, St. Cloud, Minnesota. Geronimo Development publishes a CD-
ROM format, Virginia case law, statutes and administrative materials,
along with U.S. Fourth Circuit and Supreme Court case law. Geronimo
claims that because Lexis will be weakened by the merger, West's
enhanced lower federal court case law monopoly therefore will be
strengthened. Plaintiffs disagree. Our response to Lexis' comments
relating to the merger's effect on it are above in II.C. However, even
if Geronimo's claim about weakening Lexis were true, the merger cannot
accurately be described as strengthening West's position in any
enhanced federal case reporters, because there is insufficient evidence
to support a successful allegation that Lexis is an actual or potential
competitor in that market.
D. The Star Pagination License Eases a Significant Barrier to Entry and
is Procompetitive
A number of commenters raised concerns about the decree provision
which requires defendants to grant licenses to star paginate to West's
National Reporter System publications.\21\ This license provision was
included in the proposed final judgment because West's prior refusal to
grant such licenses was a barrier to entry into some markets affected
by the merger, particularly emerging electronic forms (particularly CD-
ROM) of enhanced primary law and secondary law.
---------------------------------------------------------------------------
\21\ Lynn Warmath, Hirschler, Fliescher, Weinberg, Cox & Allen;
Alan D. Sugarman, HyperLaw, Inc.; Professor Robert L. Oakley,
American Association of Law Libraries; Alois V. Gross, Esq.; Gary L.
Reback, Esq., Lexis/Reed Elsevier; O.R. Armstrong, Geronimo
Development; Morgan Chu, Esq., Matthew Bender & Company; E. Scott
Wetzel, CD Law; Jose is. Rojas, Esq., Oasis Publishing Company,
Inc.; Eleanor J. Lewis, American Association of Legal Publishers;
Professor J.C. Smith, Artificial Intelligence Research Project; John
H. Lederer, Esq.; Kendall F. Svengalis, Rhode Island State Library;
James P. Love, Consumer Project on Technology; Norman S. Wolfe,
International Compu Research, Inc.
---------------------------------------------------------------------------
West's claim of copyright infringement by ``star pagination'' is
controversial. It has been the subject of litigation. In current
litigation the United States has stated its position that use of star
pagination does not constitute copyright infringement.\22\ If
[[Page 53394]]
that position prevails, then licenses pursuant to the decree will be
unnecessary. If that position does not prevail, then the license
provisions will reduce existing entry barriers and thus make these
markets more competitive.
---------------------------------------------------------------------------
\22\ The United States recently filed briefs to this effect in
Matthew Bender & Co., Inc. v. West Publishing Co., 94 Civ. 0589
(JSM) (S.D.N.Y.) and Oasis Publishing Co. v. West Publishing Co.,
No. 96-2887 (8th Cir.).
---------------------------------------------------------------------------
Because the issue of West's alleged pagination copyright has been
so controversial, this provision of the decree attracted a substantial
number of comments. Most of them are comments about this general public
policy issue and do not relate to harm caused by the merger and to the
violation alleged in the complaint. Each is discussed below.
1. Validity of West's Star Pagination Copyright Claim
Many of the commenters questioned the propriety of including the
Star Pagination License provision in the proposed Final Judgment.\23\
Specifically, these commenters believe that the license provision
somehow endorses West's claim that star pagination infringes its
copyright. This argument ignores the plain language of the decree.
---------------------------------------------------------------------------
\23\ Alan D. Sugarman, HyperLaw, Inc.; Alois V. Gross, Esq.;
Morgan Chu, Esq., Matthew Bender & Company; Jose is. Rojas, Esq.,
Oasis Publishing Company, Inc.; Eleanor J. Lewis, American
Association for Legal Publishers; Professor J.C. Smith, Artificial
Intelligence Research Project; Kendall F. Svengalis, Rhode Island
State Library; James P. Love, Consumer Project on Technology.
---------------------------------------------------------------------------
Language in the Stipulation, proposed Final Judgment, and
Competitive Impact Statement clearly states that the license provisions
created in settling this case shall not have any bearing, in any forum,
on any West intellectual property claim. This provision was added
specifically in anticipation that some persons might incorrectly infer
that the proposed star pagination license endorses West's star
pagination claim. If defendants ever attempt to use the Final Judgment,
or any pleading in this case, to support any intellectual property
claim in any other forum, any opposing party can simply cite the
relevant disclaimer language to rebut Thomson/West.
In addition, the proposed final judgment has been revised with the
addition of the following language to the disclaimer:
Defendants have agreed that they will not use the model license
contained in this Final Judgment, or the fact that any such license
was included in the Final Judgment, in any litigation or
negotiations with third parties to support the validity of their
position on star pagination.
2. Abandonment of Star Pagination Copyright Claim
Several of the commenters who made the foregoing point also argued
that plaintiffs should have insisted on total abandonment of the claim
that star pagination infringes West's copyright. For example, Morgan
Chu at the law firm of Irell & Manella submitted comments on behalf of
Matthew Bender. Matthew Bender cites two cases for the proposition that
this decree should require abandonment of star pagination claims;
however, these cases presented entirely different factual situations.
United States v. Borland International, Inc., 1992-1 Trade Cas. (CCH)
para. 69,774 (N.D. Cal. 1992), involved a merger of firms that
controlled competing database programs and related intellectual
property. Had Borland not been barred from pursuing Ashton-Tate's
copyright infringement claims against ``clones,'' the resulting
increase in concentration from the acquisition would have been
anticompetitive. Thus, the abandonment of infringement claims directly
addressed competitive harm posed by the transaction. In this case, the
deal does not combine two competing sets of intellectual property
rights; no one is seeking the right to star-paginate to Thomson
products. Therefore, Borland does not apply.
The relief in Hoechst AG, 60 Fed. Red. 49609 (F.T.C. 1995), was
even more narrowly drawn. Hoechst's acquisition of Marion Merrell Dow,
Inc. (``MMD''), put it in control of Cardizem CD, the dominant product
in the market for once-a-day Dilitiazem, which is used to treat, among
other things, high blood pressure and angina. Before the acquisition,
Hoechst and another firm had been developing a drug to compete with
Cardizem CD, and MMD had sued them for patent infringement. In ensuring
that the third company would be able to continue to develop the
competitive drug as effectively as it would have absent the merger, the
decree required dismissal of the infringement suit. Since Hoechst had
left the new drug in the other firm's hands and the infringement suit
was dismissed, there was no need for the sweeping relief obtained in
Borland.
Matthew Bender further comments that defendants should have been
forced to abandon West's star pagination claims because they will give
Thomson and West an unfair advantage in creating new products which
integrate Thomson's secondary law with West's primary law. Matthew
Bender argues that other publishers will not be able to compete with
these new, integrated products because of the star pagination claim.
However, Matthew Bender does not explain how the star pagination
license leaves it worse off. If it prevails in its litigation with
West, of course, Matthew Bender will not need a license at all to star
paginate. If however, it loses, the license ensures that Matthew Bender
will be able to obtain a star pagination license at a reasonable rate.
The creation of new, integrated products is a procompetitive
development, which the antitrust laws encourage. To the extent this
acquisition makes that creation possible, the proposed Final Judgment
should not prevent it.
3. Text Copyright
Mr. Sugarman claims the proposed Final Judgment unfairly benefits
Thomson/West in HyperLaw's private suit with defendants, for
infringement of a West (claimed) copyright in the text of cases
reported in West reporters. He apparently believes the proposed star
pagination license will be falsely characterized by West to sway and
mislead courts and the United States Congress, to persuade them to
adopt West's view of its copyright claim in the text of West-reported
cases. Plaintiffs disagree. The proposed Final Judgment does not
support or even address West's claim to a text copyright. The decree's
disclaimer language applies equally to any West text copyright claim.
4. Other Antitrust Violations
Mr. Sugarman states that, ``the Antitrust Division has punched a
free antitrust waiver ticket to West-Thomson. It will be able to throw
its weight around in the legal market without any concern as to
enforcement from the Antitrust Division.'' There is no support for this
statement. Thomson/West remains subject to full antitrust investigation
and enforcement on any conduct other than this specific merger.
Mr. Sugarman states, ``there is nothing in Hart-Scott-Rodino [the
premerger notification filing statute, codified at 15 U.S.C. 18a] that
prohibits the United States from initiating antitrust enforcement
action when it develops evidence of violation of the antitrust laws in
the course of a Hart-Scott-Rodino investigation.'' Plaintiffs agree. If
an antitrust violation unrelated to this merger were to be uncovered
during the course of the investigation, or in any other investigation,
the appropriate remedies would necessarily be sought in other fora, for
example, by challenging the conduct in a civil complaint, a grand jury
proceeding and/or indictment in a potentially criminal matter, by
amicus brief in a private suit, or by competition advocacy in
legislative or regulatory forums.
[[Page 53395]]
Mr. Sugarman worries that the Department, West and others
mischaracterize the star pagination license as ``resolv[ing] any
possible antitrust concern regarding the availability of star-
pagination licenses.'' We agree that such a statement, by itself, would
be a mischaracterization of the intended effect of the proposed
license. The plaintiffs believe only that the proposed license, along
with the other relief obtained in this settlement, resolves any
possible antitrust concerns arising from this merger. The plaintiffs
have no control over the mischaracterization of any part of the
proposed Final Judgment by any other person. However, the terms and
circumstances of the star pagination license are sufficiently clear to
make successful mischaracterizations of the kind that concerns Mr.
Sugarman highly unlikely.
5. Citation to First Page of an Opinion
Matthew Bender comments that it believes that West claims to have
``a copyright interest in the initial parallel citations (i.e., the
cite to the first page of a case) in the National Reporter System that
may be infringed when a competitor uses such citations.'' The
governments' investigation revealed that West claims it has a copyright
interest in such ``initial parallel citations,'' but concedes that
third party use of such citations is a fair use and as such is a
defense to infringement and that such citations are ``effectively in
the public domain.'' Further, West has never enforced such a copyright
interest, and defendants have stated that they have no intention of
enforcing such a copyright interest in the future. See Attachment A.
6. Level of License Royalty Fees
There were many comments on the level of the pagination license
fees. After carefully reviewing these comments and after obtaining more
information about license fees, the parties negotiated a revision to
the schedule of pagination license fees contained in the proposed Final
Judgment. With this revision, the fees per thousand characters would be
as follows:
1st year of a license
.............................................4 cents
2d year of a license
..............................................4 cents
3d year of a license
..............................................6 cents
4th year of a license
.............................................6 cents
5th year of a license
.............................................8 cents
6th year of a license
.............................................8 cents
7th year of a license
.............................................9 cents
Subsequent years
..................................................9 cents
This new schedule, compared to that in the initial proposal,
reflects the comments on the need for lower fees to more effectively
encourage new entrants. The new schedule has overall lower fees for
such entrants. Furthermore, the new schedule both begins at a lower
rate and allows a longer period in which a new entrant benefits from
low rates.
7. Large Publishers
A number of commenters express concerns that the star pagination
graduated royalty rate (license fee) structure will benefit only large
publishers.\24\ The revised fee structure is likely to result in entry
by some legal publishers, which should result in competition being
preserved and perhaps enhanced by new competition. The ``graduated''
structure is specifically aimed at encouraging entry of publishers who
are new or small, by providing a lower license price in the early
years. This should assist start-up firms with less capital in the early
years. Then, after the entrant has had a few years to establish its new
publication the rate levels off.
---------------------------------------------------------------------------
\24\ Lyn Warmath, Hirschler, Fliescher, Weinberg, Cox & Allen;
Alan D. Sugarman, HyperLaw, Inc.; Professor Robert L. Oakley,
American Association of Law Libraries; Gary L. Reback, Esq., Lexis/
Reed Elsevier; Morgan Chu, Esq., Matthew Bender; Jose is. Rojas,
Esq., Oasis Publishing Company; Eleanor J. Lewis, American
Association of Legal Publishers; John H. Lederer, Esq.; Kendall F.
Svengalis, Rhode Island State Law Library; James P. Love, Consumer
Project on Technology; Norman S. Wolfe, International Compu
Research, Inc.
---------------------------------------------------------------------------
It also should be remembered that the license fee is a function of
the number of cases for which star pagination is licensed. Thus, the
size of the total fee payment should be compared to the number of cases
and expected sales, not the size of the publisher. Finally, the license
provides that the fee is not to exceed the stated rates; therefore, the
license specifically allows for negotiation and payment of a lower fee.
8. Other Markets
Ms. Lyn Warmath, Library Director at Hirschler, Fliescher,
Weinberg, Cox & Allen in Richmond, Virginia expresses concern about the
level of the fee anticipated for the star pagination license. Ms.
Warmath calculates the license fees for various publications, for
example, she calculated the license to duplicate West's Federal
Supplement to be $632,000 in the first year. This product, however, is
not affected by the merger, so the relevance of this point is dubious.
Essentially, the plaintiffs' approach to this case is to encourage
competition in the enhanced primary and secondary law product markets
alleged in the Complaint where a star pagination license might be
useful. Simply, competition for federal reported case law (other than
the enhanced Supreme Court reporters for which divestiture is required)
is not affected by the merger of Thomson and West, because Thomson does
not publish products that compete with West's Federal Supplement or
Federal Reporter series. The proposed Final Judgment therefore
addresses the relief deemed necessary to preserve competition.
The Department has said publicly that it hopes the mandatory star
pagination license encourages entrants in other markets. These
generally pro-competitive results, if they occur, would be ancillary to
the remedy sought in the proposed Final Judgment.
9. The Need for a Text License Is Unrelated to This Merger Transaction
Mr. Sugarman insists that the proposed star pagination license
should also include a mandatory test license and a waiver of any
Thomson/West copyright claims on intermediate copying as long as any
published case does not include West head notes and summaries.
Similarly, Eleanor J. Lewis of the American Association of Legal
Publishers (``AALP''), comments on the unavailability of an archive of
federal judicial decisions. Norman Wolfe of International Compu
Research, Inc. (``ICRI'') comments that ``[t]here is no provision in
either the settlement document or the licensing agreement for obtaining
the full text of judicial opinions.'' Plaintiffs disagree with the
proposition that a text license should have been included in the
decree.
The relevant question is not what license would be the best
possible license to address all possible issues involving the legal
publishing industry in a vacuum. The proposed license is an attempt, in
connection with the other relief, to remedy the effect of this
particular merger. The straightforward purpose of the star-pagination
license is to open access to the de facto star pagination standard in
the markets alleged in the Complaint. A text license or intermediate
copying waiver is not necessary to address any competitive harms
flowing from this merger. In fact, in the enhanced primary case law
markets alleged in the Complaint for which the proposed star pagination
license is intended to encourage entry, court opinions are available to
potential entrants from the courts, so a text license and an
intermediate copying waiver are not necessary.
Mr. Sugarman insists that the Final Judgment include relief on the
issue of West's claimed text copyright merely because the text of
judicial opinions is difficult to obtain. HyperLaw alleges
[[Page 53396]]
that West has made it difficult to obtain opinions in some
jurisdictions and that this places firms like HyperLaw at a competitive
disadvantage. Plaintiffs agree that judicial opinions may be difficult
to obtain in some jurisdictions, and that this is an entry barrier to
some enhanced primary law markets. Complaint para.30. However, there is
no evidence that the merger of Thomson and West, or the proposed Final
Judgment, will affect in any way HyperLaw's ability to obtain the text
of judicial opinions. Mr. Sugarman states, ``Thomson was not only a
potential competitor in the creation of archives of opinions, but was
well on the way to doing so.'' Plaintiffs are unaware of any basis for
this assertion. The most likely broad-scope source of opinions
competing with West, in those instances where the difficulty in
obtaining opinions may be a barrier to competition, is Lexis/Reed
Elsevier. Moreover, in the enhanced primary law markets alleged in the
Compliant, the text of opinions is not difficult to obtain.
10. Selection of Cases
Mr. Sugarman complains that Section 1.03 of the proposed star
pagination license defines ``Licensee Case Reports'' as reports of
decisions ``selected for reporting by Licensees,'' and it therefore
will allow Thomson/West to refuse to license if it determines that the
potential licensee did not select the decisions, but instead copied the
selection of West, a state, or some other party. Ms. Lewis of the AALP
expresses concern that ``only licensing original compilations and
West's right to determine what is an original compilation'' will
undermine the purpose of the license. Matthew Bender comments, ``West
apparently can still challenge a licensee's use of star pagination if
West contends that the licensee has not made its own selection,
coordination, and arrangement of cases.'' Plaintiffs disagree.
The plaintiffs interpret the proposed license to mean that a
license must be issued for star pagination any set of cases selected by
the licensee, even if West or any other person had previously selected
a similar set of cases. Defendants have stated to plaintiffs that they
would not consider a CD-ROM product which included exactly the same
cases included in a West print reporter to be an infringement. Indeed,
Matthew Bender has introduced such a product and we are informed
defendants have not challenged it as a ``selection infringement.
Defendants would object to a print product which simply replicated a
West print reporter; however, there is no reason to expect entry into
print products and, in any event, CD-ROM products compete with print
products and thus provide competitive constraint.
11. Description of Product or Service
A number of commenters think the proposed star pagination license
should not unnecessarily require licensees to disclose competitive
product information to defendants in order to obtain a star pagination
license.\25\ For example, Eleanor Lewis of AALP comments, ``A licensee
should be required to disclose to West only the most general ideas
about the proposed use of the licensed materials.''
---------------------------------------------------------------------------
\25\ Alan D. Sugarman, HyperLaw; Morgan Chu, Esq., Matthew
Bender; Eleanor J. Lewis, AALP; Norman Wolfe, ICRI.
---------------------------------------------------------------------------
Plaintiffs agree. There is no requirement in the proposed license
that detailed information be disclosed. Section 1.03 merely requires
licensees to provide a short, general description of the licensee's
product or service to defendants, i.e., a title. This limited
disclosure is necessary so that it is clear what product is covered by
the license. Ultimately, the licensee must disclose what cases are
included in their product so that the license fee can be calculated.
This simple information is not the type that should or could be
considered sensitive competitive information, as the cases selected by
the licensee for publication will subsequently be public information.
12. License fee per Format
A number of comments maintain that the provision in the proposed
star pagination license that requires the payment of a separate license
fee for each format--books, CD-ROM, on-line or the Internet--erects too
high a barrier to potential entrants.\26\ However, the governments'
investigation indicated that many, perhaps most, prospective entrants
would only consider one medium--CD-ROM. One of the main objectives of
the licensing provision was to facilitate entry specifically into the
new technology/new product of CD-ROMs incorporating analytical material
and hypertext links to relevant primary law. Because enhanced primary
case law on CD-ROM competes with enhanced primary law in print, CD-ROM
entry should be sufficient (with the other relief in the decree) to
deter anticompetitive behavior by Thomson/West in either print or CD-
ROM.\27\
---------------------------------------------------------------------------
\26\ Alan D. Sugarman, HyperLaw; Morgan Chu, Esq., Matthew
Bender; Eleanor J. Lewis, AALP; James P. Love, Consumer Project on
Technology.
\27\ As reflected in the Complaint, Thomson and West do not
compete in the provision of enhanced primary case law in the online
medium. Although the plaintiffs are fully aware that several firms
desire to enter the provision of case law online and on the
Internet, entry into these mediums is not a remedy intended to be
addressed by the proposed star pagination license.
---------------------------------------------------------------------------
Addtionally, the governments' investigation revealed that for those
existing publishers who publish in more than one format, for example
CD-ROM and on-line, the latter medium is used primarily to provide
updates (new cases) and therefore does not duplicate the cases on the
CD-ROM and would not require multiple payment of the license fee.
13. Challenges to West's Copyright
Mr. Sugarman and Matthew Bender, who are currently engaged in
copyright litigation with West, contend that the prohibition in the
proposed star pagination license that bars licensees from challenging
the validity of West star pagination copyright claims ignores Lear v.
Adkins, 395 U.S. 653 (1969), and assures that no West copyright claim
will be challenged. Ms. Lewis states that the license ``requires
competing publishers to renounce their First Amendment right to express
their opinions about the Licensor's alleged copyright during the term
of the license.'' Mr. Wolfe of ICRI also comments regarding ``this
obvious abandonment of our First Amendment rights.'' Plaintiffs
disagree.
First, the prohibition in Exhibit B is limited to challenges only
to the star pagination claim, not to any other West copyright claim,
and is limited in time--only during the duration of the license.
Second, it is questionable as to whether the progeny or policy of Lear,
a patent case, applies to copyright licenses. See, e.g., Saturday
Evening Post Co. v. Rumbleseat Press, Inc., 816 F. 2d 1191 (7th Cir.
1987); Nimmer on Copyright Sec. 10.15[B] at 10-134-137 (questioning
Rumbleseat). In addition, this prohibition is much more narrowly
tailored than the broad no-challenge clauses courts have struck down in
patent-license contexts.
Third, this provision will not prevent challenges to the validity
of West's star pagination infringement claims; publishers may still
choose the option they have today--publish without a license and
litigate the star pagination copyright claim's validity. The proposed
Final Judgment simply provides prospective publishers with an entry
option they would not otherwise have.
Fourth, a licensee may exercise his First Amendment rights and
speak out publicly and lobby for changes relating to this issue.
[[Page 53397]]
14. The Confidentiality Provision Is Intended to Protect the Licensee
and Could Encourage Procompetitive Discounting
Mr. Sugarman, Ms. Lewis, and Mr. Wolfe comment that the
confidentiality provision in the proposed star pagination license will
permit Thomson/West to engage in preferential licensing and to continue
to engage in abusive licensing practices in secret. Plaintiffs
disagree. The confidentiality provision in the star pagination license
is intended to protect the product development and marketing plans of
the licensee, not any secrets of Thomson/West. Thomson/West's minimum
license terms are already public in Exhibit B. The company is required
to grant a license--in at least this favorable a form--to anyone who
wants one. Failure to fulfill this requirement and any licensing
obligation would be a violation of the Final Judgment and grounds for
contempt.
Concerns about secret, preferential licensing and abusive licensing
practices may in fact be concerns that Thomson/West might enter some
licenses that are more favorable to the licensee than Exhibit B. But
entering into licenses with more favorable terms will generally be
desirable and pro-competitive. Moreover, a ``most-favored-nation''
clause (one that states Thomson/West will not grant to any licensee a
more favorable license) would discourage pro-competitive discounting
that Thomson/West may undertake on its own in response to market
forces.
15. Arbitration
Mr. Sugarman states that provisions in the proposed star pagination
license requiring arbitration in West's home state will lead to bias in
favor of West on any arbitrated matter. Ms. Lewis agrees and comments
that arbitration should occur in Washington, D.C. or the home state of
the licensee. Mr. Wolfe comments, ``[i]t is not appropriate for the
jurisdiction for any dispute to be any place other than Washington,
DC.''
Plaintiffs disagree. Such provisions are standard in licenses which
are negotiated at arms length in the context of private business
transactions, and are usually included only for the convenience of
traveling. There is no reason to call into question the honesty,
integrity, or ability of any impartially appointed arbitrator based
solely on his or her location or citizenship in the State of Minnesota.
In addition, the decision of the panel of arbitrators is appealable to
the appropriate state or federal court.
16. The Internet
James P. Love of CPT comments that the ``license agreement is
written in such a way that the subscribers must agree to the terms of
the license, and Thomson must approve the license, making it extremely
unlikely that the citations will ever be available for browsing on the
Internet.'' We interpret Mr. Love's concern to be that the license
provisions to which a licensee's subscribers must agree may be used to
restrict some form of Internet publication of licensed material on the
Internet.
The possibility that Mr. Love suggests appears unrelated to the
acquisition. Provisions of this kind are conventional in intellectual
property licenses. Nothing would have prevented West, prior to the
acquisition, from insisting on such provisions in licenses. The
acquisition should not aggravate Mr. Love's concern, and therefore,
there is no need for the remedy to alleviate it. In short, this comment
addresses a public policy concern not related to the merger.
17. License Fee for Books
Mr. Sugarman claims that the proposed star pagination license is
ambiguous as to the license fee charged for books. Plaintiffs intended
that the fee would be paid by the licensee in the year the book is
printed. In other words, books first printed, then stored, and sold in
later years would not require additional fee payments for the later
years. In order to avoid any confusion, the language of the proposed
License Agreement will be modified. Defendants have agreed to the
following modification, which plaintiffs will include when we later
move the Court to enter the decree:
2.01. Star Pagination License. During the term of this
Agreement, subject to the terms and conditions hereof, including,
without limitation, the timely payment by Licensee to Licensor of
the licensee fees provided for in Section 2.03 hereof, Licensor
hereby grants to Licensee, and Licensee hereby accepts from
Licensor, a non-exclusive, non-transferable (except as specifically
provided in Section 6.05 hereof), limited License (i) * * * (iii) to
license and/or distribute such [Licensee Product(s)/Services(s)] to
Licensee Subscribers subject to Licensee Subscriber Limitations; * *
*
2.03 License Fees. In consideration of the license granted under
Section 2.01 hereof, Licensee shall pay Licensor the license fees
provided for in this Section 2.03; provided, however, that the
licensee fee for [print Licensee Product(s)] needed only be paid for
the year in which the [print Licensee Product(s)] are printed.
18. Other Comments Regarding the Star Pagination License
Mr. Sugarman believes that third party information providers should
be able to sell or license case law data which includes licensed star
pagination and text as long as the purchasers or licensees have entered
into or are subject to a pagination license agreement with Thomson/
West.\28\
---------------------------------------------------------------------------
\28\ Mr. Wolfe of ICRI offered a similar comment on behalf of
ICRI, which describes itself as ``a wholesale customer of legal
publishers with the rights to resell, as part of our product and for
the use of our product, case law data.''
---------------------------------------------------------------------------
Plaintiffs agree. Section 2.02 of the license addresses this point
specifically: ``nothing in this Agreement shall prohibit Licensee from
selling, leasing, licensing or otherwise transferring Licensee Case
Reports that contain Licensed NRS Pagination to third party information
providers, but such transfers shall not include or grant any right to
reproduce, publish, broadcast, distribute, loan, rent, lease, sell or
otherwise transfer, make available or use the Licensed NRS Pagination
contained in such Licensee Case Reports.'' Any third party information
provider that obtained a star pagination license could, of course, use
the transferred star pagination under its own license with Thomson/
West. There is nothing in the proposed license to the contrary.
Nevertheless, to clarify that the license fee need only be paid by the
publisher, and not also by the third party information provider,
plaintiffs proposed and defendants reviewed and agreed to the following
language:
2.01. Star Pagination License * * *. (iv) to have a third party
obtain, on behalf of Licensee, NRS Pagination from West Case Reports
contained in NRS Reporter publications and include such NRS
Pagination (which shall become Licensed NRS Pagination when so
included) in corresponding Licensee Case Reports contained in
[Licensee Product(s)/Service(s)].
Mr. Sugarman comments that Thomson/West should be required to agree
not to assert future database protection legislation and anti-RAM
copying claims against licensees, for use of star pagination. This
issue is specifically addressed in the proposed license in Exhibit B.
The proposed license ensures that Thomson/West will not contend that a
licensee's use of star pagination infringes any intellectual property
right. Section 2.01 also provides that ``Licensor [Thomson] shall not
challenge, under any present or future legislation, any use by the
Licensee of Licensed NRS Pagination if Licensee's use of same conforms
to the terms of this Agreement.'' (emphasis added).
[[Page 53398]]
Mr. Sugarman comments that the proposed Final Judgment should
require West-Thomson to negotiate star pagination licenses in good
faith. Plaintiffs disagree because the proposed Final Judgment requires
Thomson/West to grant the license contained in Exhibit B to the
Judgment to anyone who wants one; therefore, good faith is not
relevant. Any refusal to license would be punishable as contempt.
Mr. Sugarman states that the proposed star pagination license is
not an ``open license,'' ``* * * when it will be negotiated in private
and arbitrated in private pursuant to confidentiality provisions agreed
to by the Antitrust Division.'' Plaintiffs disagree. The proposed
license is in fact ``open'' within the common meaning of that word. The
terms are public and mandatory, and are attached the proposed Final
Judgment as Exhibit B. While it is true that negotiations with
potential licensees seeking more favorable terms than the proposed
license may be non-public, licenses arranged for under more favorable
terms will not cause an anticompetitive effect and in fact should be
pro-competitive.
Mr. Sugarman feels that the requirement in the proposed star
pagination license that licensees prominently display West internal
pagination should be deleted. In fact, Section 2.05 of the license
merely requires licensees to present NRS Pagination ``no less
prominently than any other unofficial pagination or pinpoint
locators.'' (emphasis added). Plaintiffs cannot determine what possible
anticompetitive effects, if any, could arise from this provision. Mr.
Sugarman does not state any.
Mr. Sugarman is concerned that the proposed star pagination license
does not include a mandatory license agreement for statutes. Star
pagination to West's statutes has not become an issue. We are aware of
no jurisdiction where it is conventional to cite to statutes by West
pages. A license agreement on the text of statutes themselves is not
called for in the context of the competitive issues raised in this
merger investigation. Statute text is available in every jurisdiction,
for every potential entrant, and in every product market involving
statutes affected by the merger.
E. Plaintiffs Used Appropriate Merger Analysis in Examining this Merger
Ms. Trembley comments that ``[i]n the past, Thomson practices have
made acquired products both more labor intensive and costly to
maintain.'' She is concerned that Thomson-owned products in the past
have had their price raised at a higher rate than West products.
Similarly, Mr. Marc Ames, an attorney in New York City, comments that
he has been involved in a lengthy billing dispute with Lawyers
Cooperative Publishing, a part of Thomson. He brings this to our
attention to ``point out and underscore a shift in attitude when
business becomes too large as the result of mergers and acquisitions.''
Past price increases by Thomson are beyond the scope of this merger
challenge. To the extent they indicate that price rises have resulted
when Thomson takes over specific competing products, evidence of past
price increases is useful as evidence that similar product pairings
should be prohibited.
Plaintiffs believe such pairings have been identified and
prohibited in this case by the required divestitures. Plaintiffs note
that it does not necessarily follow that a large firm always will
engage in harmful pricing or service practices to its customers.
Competition leads to lower prices and increased service, quality and
innovation. However, there is no way to prove a likely decrease in
competition due to a merger without first carefully examining the
factual details in specific product markets.
Mr. David C. Harrison, an attorney in Philadelphia, Pennsylvania,
asks how the Justice Department can approve the merger of ``the second
largest legal publisher with the largest legal publisher, giving the
new company a virtual monopoly.'' Even if it was true, a merger of the
second largest and largest legal publisher would not necessarily lead
to an irreplaceable reduction in competition in legal publishing.\29\
As stated above, increases in industry concentration is an important
indicator of possible anticompetitive effects of any merger, however,
courts require more before a merger challenge will be successful.
Generally, courts require provable relevant product markets and a lack
of likely substitutes or entry. The plaintiffs believe every plausible,
legally recognizable, anticompetitive effect of the Thomson/West merger
has been addressed in the Complaint and proposed Final Judgment.\30\
---------------------------------------------------------------------------
\29\ According to SIMBA/Cowles Professional Publishing
Information Report (1996) and Lexis' own figures, measured by sales
Thomson has been the number three legal publisher, behind Reed
Elsevier, owner of Lexis. Thomson owns many non-legal assets
unrelated to this merger. West is the largest legal publisher.
\30\ Lexis states that consumers are already feeling the loss of
competition because Thomson has stopped publication of the Illinois
Administrative Code, and that Thomson may be on the verge of
canceling its New Jersey Administrative Code. Mem. at 6. However,
Thomson's codes in Illinois and New Jersey do not compete in any
market alleged in the Complaint, nor do they compete with any West
product, as they are unenhanced. Moreover, the regulatory materials
contained in these products are freely available from the states and
entry into the publication of unenhanced state administrative codes
is unlikely to be difficult.
---------------------------------------------------------------------------
F. Plaintiffs Should not Require Divestiture of the JURIS Database
1. There is no Conflict of Interest Within the Department on This
Matter
Tax Analysts (``TA'') comments that the United States Justice
Department (``the Department'') should be forced to disclose the
contents of its former JURIS database in order to remove an alleged
barrier to entry described in paragraph 30 of the Complaint--that in
many jurisdictions case law is difficult to obtain. TA also believes
that because the Department's Civil Division, joined by West, is
defending a Freedom of Information Act (``FOIA'') (5 U.S.C. 552 et
seq.) request by TA for the JURIS database in another action, the
Department has an irreconcilable conflict of interest that causes the
Department to act against the public interest. TA filed a motion to
intervene in this Tunney Act proceeding on July 25, 1996, which was
denied by an order of Judge Richey of this Court.
TA is a non-profit vendor of publications relating to legal tax
issues, that logically wishes to obtain historic reports of legal
opinions and statutes cheaply, or for free, in order to offer these to
its customers. It applied for but was denied a FOIA request to obtain
the JURIS database.\31\ TA filed a FOIA action against the Department
in the District of Columbia in January, 1994, seeking an order
requiring disclosure of the database. West intervened. It sought to
protect its interest as the original provider of the case reports to
the Department; West continues to sell similar reports to its other
customers. The Department has been defended at all times in that matter
by attorneys of the Federal Programs Branch of the Civil Division. In
January 1996, Judge Kessler granted the partial motion of the
Department to dismiss the suit as it related to the status of the West-
supplied case reports as an ``agency record'' under FOIA. The order was
[[Page 53399]]
certified as final on April 1, 1996. Tax Analysts v. Department of
Justice and West Publishing Company, 913 F. Supp. 599 (D.D.C. 1996).
---------------------------------------------------------------------------
\31\ JURIS was established and used by the Department for
internal use by its many components for legal research. It licensed
case reports and statutes from West and made them available along
with other legal information and documents online across the
Department and other United States Government agencies. In an effort
to reduce costs, JURIS was discontinued in 1993, and replaced at the
Department with contracts for direct provision of case reports and
statutes from Lexis/Reed Elsevier and West.
---------------------------------------------------------------------------
TA was denied the database it sought because Judge Kessler held
that the Department did not control the West-supplied case reports,
which were provided under a contract with West. The contract restricts
the Department's right to use, dispose of, or transfer the database;
and it therefore does not qualify as an ``agency record'' for purposes
of disclosure under FOIA. Tax Analysts, at 604. At no time has the
Department asserted any proprietary or copyright interest in the
database, nor has it made any assertion on behalf of West's copyright
claim. The Department's defense in the FOIA matter is not related to
any conduct of Thomson or West relating to the merger. TA has appealed
Judge Kessler's ruling.
The Antitrust Division's unrelated investigation of the proposed
merger of Thomson and West began on March 12, 1996, pursuant to the
Clayton Antitrust Act, 15 U.S.C. 12 et seq. At all times, the
Department's investigation, challenge and settlement negotiations of
the Thomson/West matter have been conducted by attorneys of the Merger
Task Force of the Antitrust Division or their direct supervisors within
the Antitrust Division, and in direct coordination with several state
attorneys general's offices. At no time during the investigation or
subsequent challenge has the Department or any plaintiff made any
assertion relating to the JURIS database.
In the Tax Analysts defense, the Department seeks to protect
against unwarranted disclosures under FOIA and to protect against
violating its contract with a private entity. The Thomson/West merger
challenge and settlement, on the other hand, involves the public
interest reflected in the federal antitrust statutes for the
preservation of competition in markets affected by mergers. There is
simply no conflict or inconsistency between the public interests sought
to be protected by the two cases.
TA argues that the Department has an irreconcilable conflict of
interest resulting from its litigating relationship with West in the
Tax Analysts case. At all times the Department has conducted an
independent FOIA defense in the Tax Analysts case. West intervened on
its own initiative and has made its own pleadings and assertions. To
the extent West's views in that matter coincide with the Department's,
joint pleadings were appropriate for judicial economy.
West is not the Department's client in either this or the Tax
Analysts matter. TA avers that the Department has adopted the interests
of West in the Tax Analysts case, and substituted them for the public
interest. The Department has a clearly articulated and valuable role in
protecting the public interest against unwarranted FOIA disclosure and
breach of government contracts with private persons. Department
attorneys are strictly prohibited from representing other persons in
matters involving the United States. 18 U.S.C. 203. Moreover, West's
interest in the Tax Analysts case is commercial, while the Department
has no commercial interest whatsoever in the JURIS database.
There have been no Department attorneys involved at any time in
both matters. The first time any attorney from the Antitrust Division's
Merger Task Force (handing the Thomson/West matter) had any contact or
even knew the identity of any attorney from the Civil Division handling
the Tax Analysts matter was after Tax Analysts filed a motion to
intervene in this matter.
TA does not seek to protect rights that would be impaired by the
entry of the proposed Final Judgment. TA seeks relief directed at the
conduct of the Department and which would place requirements on it
alone. Essentially, TA seeks to prohibit a merger between two parties
unless and until another party not involved in the proposed merger
takes some affirmative action to increase competition (they believe) in
the legal publishing industry. The paragraphs in the Complaint towards
which TA points as examples of the harm not remedied by the proposed
settlement are pre-existing industry facts that will not be changed by
the merger. (See e.g., paragraph 30 of the Complaint, which states,
``[p]ast and/or current opinions simply are not available from many
courts, and in many others, obtaining access is costly and time-
consuming.''). In short, this is a public policy issue unrelated to the
merger.
2. Familiarity With Legal Publishing Industry
Another allegation made by TA is that the Department is unfamiliar
with the workings of the legal publishing industry, particularly with
the role of online legal publishing. The Department regularly
investigates, challenges, and reaches settlement with participants in
many industries in which it is not a participant. In order to develop
expertise in an industry for purposes of merger enforcement, the
Department uses past experience, examines documents, conducts
interviews and depositions, employs industry experts, and reviews
publicly available materials. These activities were all done in the
investigation of the Thomson/West merger.
In addition, during this merger investigation, an unprecedented
level of cooperation was established between the Department and several
states, and the expertise of seven state attorneys general's offices
was combined. The state attorneys general have joined in the Complaint
and proposed Final Judgment after participating in fact-gathering and
legal analysis. Two of the states, New York and California, devoted
full-time employees to the investigation throughout its duration. All
of the state governments provided valuable assistance due to their
intimate knowledge of state-related publications.
TA states the Department has mischaracterized existing competition
between Lexis and WESTLAW in the ``comprehensive online legal research
services'' market and argues that other small legal publishers exist.
However, the existence of small, online legal publisher has no impact
on the anticompetitive effects alleged to result from the Thomson/West
merger in the comprehensive online legal research services market in
which there are only two participants at this time.
G. Miscellaneous Comments--Unrelated to Merger or Unsupported by the
Investigation
A number of comments were received when raised concerns which are
either unrelated to the merger or asserted conclusions which were not
supported by the governments' investigation.
Ms. Cyndi A. Trembley, President of the Association of Law
Libraries of Upstate New York, comments, ``Thomson will have control of
a significant portion of the secondary sources that aid in interpreting
the law.'' Kendall F. Svengalis of the Rhode Island State Law Library
comments that defendants will control a large percentage of legal
publications, and that they therefore should have been required to
divest Lawyers Cooperative Publishing (``LCP'').
It is true that Thomson has owned and now owns, as a result of its
merger with West, a significant number of secondary law titles.
However, that fact alone is not grounds on which to base a merger
challenge under the antitrust laws. Elements of a legally recognizable
merger challenge include proving that the merging firms actually
compete with each other in one or more product markets and that the
effects of that competition will be lost and not replaced after the
merger. The burden is also on the enforcing agency or agencies
[[Page 53400]]
to show that there are insufficient substitutes for the products of the
merging firms, and that entry into the product market is difficult.
Thus, plaintiffs focused on competing legal publications. A torts
handbook does not compete with a contracts treatise, for example. In
the proposed Final Judgment, the plaintiffs require divestiture of one
of the parties' products in as many product markets as could plausibly
be alleged, or that the plaintiffs believed were likely to be
allegeable, in a litigated merger challenge.
Mr. Svengalis complains that some of the titles that defendants
must divest are relatively small and that only three states must be
given the option to rebid their respective official reporter contracts.
The fact that some parts of the divestiture list are small does not
mean that the entire settlement is inadequate.
Mr. Gross states that the bids (for divestiture products) should
not be limited to the entire list of divestiture products. The proposed
Final Judgment permits Thomson/West to package, initially, the
divestiture products in any manner it desires. The only requirements on
bidding for divestiture products are contained in the proposed Final
Judgment and relate to the need that the divestiture products are sold
to some person who will keep them viable and competitive. There is no
reason to believe (in fact it may be to the contrary) that the
divestiture products will be more viable and competitive in the hands
of two or more acquirers. In any event, the divestitures remain subject
to approval by the appropriate plaintiffs, who must agree that the
products will be kept viable.
There is no reason to believe that ``having more legal publishers
in the market will result in competitive pricing and higher quality of
law products for the consumer,'' as suggested by Mr. Gross. The relief
in this merger challenge addresses the expected loss of competition due
to Thomson and West no longer competing with each other. If all the
Thomson products go to one able firm, as long as there is no reduction
in competition resulting from the divestiture, then any competition
lost by the Thomson/West merger will be replaced and preserved.
Mr. Gross comments that Thomson should have to pay a license fee
for ALR cites on Auto-Cite, after Auto-Cite is divested. Plaintiffs
disagree. It is true that Auto-Cite includes ALR cites. However, there
is no requirement that the acquirer of Auto-Cite continue to include
ALR references. If the acquirer wants to, however, it is free to
continue them. Thomson may receive some incidental benefit to continued
ALR references at the option of the acquirer, but if Thomson cares
about the cites remaining on Auto-Cite, Thomson can negotiate on its
own a contract/license to place them there. The investigation of this
merger did not reveal sufficient evidence that the competitive value of
Auto-Cite derives from ALR references. Rather, Auto-Cite's value comes
from an accurate, up-to-the-date display of case citations, and an
accurate display of whether or not a case opinion is still good law by
showing the case's direct history.
Mr. Gross claims that the competition between West's Corpus Juris
Secundum (``CJS'') and Thomson's American Jurisprudence 2d
(``AmJur2d'') will be eliminated by the merger and therefore one of
them should be divested.\32\ Plaintiffs disagree. This comment does not
relate to any claim made in the Complaint and thus is not relevant. In
fact, while they are both referred to as ``encyclopedias,'' there was
insufficient evidence that CJS is a strong competitor for AmJur2d in
the minds or actual use of consumers.
---------------------------------------------------------------------------
\32\ A similar comment was submitted by Bartlett F. Cole, Esq.
---------------------------------------------------------------------------
Geronimo comments that the Complaint fails to address West's
monopoly in reporting enhanced lower federal (U.S.) court opinions.
Geronimo suggests four remedies designed to open up the market for
enhanced lower federal case law. This comment also relates to a market
not included in the Complaint and thus is not relevant. West reports
decisions of lower federal courts in its Federal Supplement and Federal
Reporter series. The Complaint does not include a count involving
enhanced lower federal case law because Thomson is not even a
participant in that market. There also is insufficient evidence to
allege that Thomson is an actual potential or perceived potential
competitor to West's alleged monopoly in enhanced lower federal case
law. That Thomson is a large company with financial resources and
editorial expertise does not make it a potential competitor.
Lexis/Reed Elsevier comments that plaintiffs in their press release
incorrectly calculated the sales of the divestiture products, in which
Lexis/Reed Elsevier claims is only $48 million. Plaintiffs disagree.
The $72 million figure was based upon information obtained from Thomson
about the sales of the divestiture products, including Auto-Cite, and
products related to the Official Reporter Contracts. Lexis/Reed-
Elseiver's reference to the lower figure apparently does not include
the retail revenues of Auto-Cite or the sales of Official Reporters and
related products.
Scott Wetzel of CD Law comments that ``the Washington States legal
publishing market is pervaded with anti-competitive practices that
include predatory pricing, exclusive contracts for certain legal
materials, and tying agreements. The Department consent decree does
little or nothing to prevent or ameliorate these practices.'' These
comments go beyond the allegations in the Complaint. Hence, they are
not relevant to the Tunney Act proceeding.
Matthew Lee for ICP complains that West does not offer ``any
program or provision for granting access to Westlaw and other West
resources to non-profits, particularly grassroots civil rights and
consumers' groups at reduced or waived fees.'' Whether defendants offer
such programs falls outside of the process of merger review and
analysis.
ICP also questions ``DOJ's long standing inter-relation with West,
particularly the selection of West as the DOJ's legal-materials
supplier after, largely due to West's anticompetitive behavior, the DOJ
abandoned its `Juris' project.'' Since discontinuing Juris, DOJ
attorneys have used both Lexis-Nexis and Westlaw. Further, if merely
using a product or service were grounds for concern, government
attorneys would be unable to investigate and analyze many of the
mergers that come before them.
ICP further maintains that ``DOJ should attempt to better inform
the affected public, especially the `retail' and low and moderate
income segment thereof, of pending DOJ merger reviews, such that the
DOJ can receive, and consider, comments from those who stand to be most
affected.'' First, the plaintiffs, during the investigation, sought to
receive very wide input from affected users, and in fact received
information from an unusually wide number of sources. Second, as
required by the APPA, plaintiffs have filed the requisite documents
with this Court and published them in the Federal Register and the
Washington Post. Furthermore, it would be impossible for plaintiffs to
identify all members of ``the affected public'' and then notify each of
these individual and entities of the proposed Final Judgment. In this
case, plaintiffs also personally notified many of the individuals and
companies who had been involved in the investigation of the proposed
Final Judgment.
Some commenters were concerned that politics played a role in
governments' investigation and
[[Page 53401]]
settlement of this matter.\3\ There is no political context to this
merger challenge or the proposed Final Judgment, and any comments
making such accusations are wrong. Recommendations of the settlement
reached were made by the Department's career professional staff. We
note that the Department of Justice is joined by seven state attorneys
general's offices in this matter, all of which are dedicated to
impartial law enforcement regardless of politics.
---------------------------------------------------------------------------
\33\ David C. Harrison, Esq.; John H. Lederer, Esq.
---------------------------------------------------------------------------
An anonymous commenter alleges that West is in collusion with the
United States Congress in the production of United States Code
Annotated (``U.S.C.A.''). The commenter says whatever company possesses
this privileged, insider relationship, whether it be West or Thomson,
enjoys an enormous and unwarranted market advantage. Plaintiffs
received no other information to support this anonymous allegation.
However, any condition of advantage enjoyed by West through its
relationships with the Congress or any judicial entity is not affected
by the merger of Thomson and West. Thomson may replace West in the
position of advantage, but existing competition between Thomson and
West is not changed. In any event, Thomson's annotated United States
Code product, United States Code Service, is a divestiture product
under the proposed Final Judgment.
III
The Legal Standard Governing the Court's Public Interest Determination
Once the United States moves for entry of the proposed Final
Judgment, the Tunney Act directs the Court to determine whether entry
of the proposed Final Judgment ``is in the public interest.'' 15 U.S.C.
16(e). In making that determination, ``the court's function is not to
determine whether the resulting array of rights and liabilities is one
that will best serve society, but only to confirm that the resulting
settlement is within the reaches of the public interest.'' United
States v. Western Elec. Co., 993 F.2d 1572, 1576 (D.C. Cir.), cert.
denied, 114 S. Ct. 487 (1993) (emphasis added, internal quotation and
citation omitted).\34\ The Court should evaluate the relief set forth
in the proposed Final Judgment and should enter the Judgment if it
falls within the government's ``rather broad discretion to settle with
the defendant within the reaches of the public interest.'' Microsoft,
56 F.3d at 1461. Accord, Associated Milk Producers, 534 F.2d at 117-18.
---------------------------------------------------------------------------
\34\ The Western Electric decision concerned a consensual
modification of an existing antitrust decree. The Court of Appeals
assumed that the Tunney Act was applicable.
---------------------------------------------------------------------------
The Court is not ``to make de novo determination of facts and
issues.'' Western Elec., 993 F.2d at 1577. Rather, ``[t]he balancing of
competing social and political interests affected by a proposed
antitrust decree must be left, in the first instance, to the discretion
of the Attorney General.'' Id. (internal quotation and citation omitted
throughout). In particular, the Court must defer to the Department's
assessment of likely competitive consequences, which it may reject
``only if it has exceptional confidence that adverse antitrust
consequences will result--perhaps akin to the confidence that would
justify a court in overturning the predictive judgments of an
administrative agency.'' Id.\35\
---------------------------------------------------------------------------
\35\ The Tunney Act does not give a court authority to impose
different terms on the parties. See, e.g., United States v. American
Tel. & Tel. Co., 552 F. Supp. 131, 153 n.95 (D. D.C. 1982), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983) (Mem.);
accord H.R. Rep. No. 1463, 93d Cong., 2d Sess. 8 (1974). A court, of
course, can condition entry of a decree on the parties' agreement to
a different bargain, see, e.g., AT&T, 552 F. Supp. at 225, but if
the parties do not agree to such terms, the court's only choices are
to enter the decree the parties proposed or to leave the parties to
litigate.
---------------------------------------------------------------------------
The Court may not reject a decree simply ``because a third party
claims it could be better treated.'' Microsoft, 56 F.3d at 1461 n.9.
The Tunney Act does not empower the Court to reject the remedies in the
proposed Final Judgment based on the belief that ``other remedies were
preferable.'' Id. at 1460. As Judge Greene has observed:
If courts acting under the Tunney Act disapproved proposed
consent decrees merely because they did not contain the exact relief
which the court would have imposed after a finding of liability,
defendants would have no incentive to consent to judgment and this
element of compromise would be destroyed. The consent decree would
thus as a practical matter be eliminated as an antitrust enforcement
tool, despite Congress' directive that it be preserved.
United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.
D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001
(1983) (Mem.).
Moreover, the entry of a governmental antitrust decree forecloses
no private party from seeking and obtaining appropriate antitrust
remedies. Thus, Defendants will remain liable for any illegal acts, and
any private party may challenge such conduct if and when appropriate.
If any of the commenting parties has a basis for suing Defendants, they
may do so. The legal precedent discussed above holds that the scope of
a Tunney Act proceeding is limited to whether entry of this particular
proposed Final Judgment, agreed to by the parties as settlement of this
case, is in the public interest.
Finally, the Tunney Act does not contemplate judicial reevaluation
of the wisdom of the government's determination of which violations to
allege in the Complaint. The government's decision not to bring a
particular case on the facts and law before it at a particular time,
like any other decision not to prosecute, ``involves a complicated
balancing of a number of factors which are peculiarly within [the
government's] expertise.'' Heckler v. Chaney, 470 U.S. 821, 831 (1985).
Thus, the Court may not look beyond the Complaint ``to evaluate claims
that the government did not make and to inquire as to why they were not
made.'' Microsoft, 56 F.3d at 1459 (emphasis in original); See also,
United States v. Associated Milk Producers, Inc., 534 F.2d 113, 117-18
(8th Cir. 1976), cert. denied, 429 U.S. 940 (1976).
Similarly, the government has wide discretion within the reaches of
the public interest to resolve potential litigation. E.g., United
States v. Western Elec. Co., 993 F.2d 1572 (D.C. Cir.), cert. denied,
114 S. Ct. 487 (1993); United States v. American Tel. & Tel. Co., 552
F. Supp. 131, 151 (D. D.C. 1982), aff'd sub nom. Maryland v. United
States, 460 U.S. 1001 (1983) (Mem.). The Supreme Court has recognized
that a government antitrust consent decree is a contract between the
parties to settle their disputes and differences, United States v. ITT
Continental Baking Co., 420 U.S. 223, 235-38, (1975), United States v.
Armour & Co., 402 U.S. 673, 681-82 (1971), and ``normally embodies a
compromise; in exchange for the saving of cost and elimination of risk,
the parties each give up something they might have won had they
proceeded with the litigation.'' Armour, 402 U.S. at 681. This Judgment
has the virtue of bringing the public certain benefits and protection
without the uncertainty and expense of protracted litigation. Armour,
402 U.S. at 681; Microsoft, 56 F.3d at 1459.
IV
Conclusion
After careful consideration of these comments, the plaintiffs
conclude that entry of the proposed Final Judgment will provide an
effective and appropriate remedy for the antitrust violation alleged in
the Complaint and is in the public interest. The Plaintiffs
[[Page 53402]]
have moved the Court to enter the proposed Final Judgment after the
public comments and this Response have been published in the Federal
Register, as 15 U.S.C. 16(d) requires.
Dated: September 23, 1996.
Respectfully submitted,
James K. Foster,
Minaksi Bhatt (DC Bar #434448),
Attorneys, U.S. Department of Justice, Antitrust Division, 1401 H
Street, N.W., Suite 4000, Washington, D.C. 20530, Tel: 202/514-8362.
For Plaintiff State of California:
----------------------------------------------------------------------
Kathleen E. Foote,
Deputy Attorney General, 50 Fremont Street, Suite 300, San
Francisco, CA 94105, (415) 356-6320.
For Plaintiff State of Illinois:
----------------------------------------------------------------------
Christine H. Rosso
For Plaintiff Commonwealth of Massachusetts:
----------------------------------------------------------------------
George K. Weber
For Plaintiff State of New York:
----------------------------------------------------------------------
Stephen P. Houck
For Plaintiff State of Washington:
----------------------------------------------------------------------
Tina E. Kondo
For Plaintiff State of Wisconsin:
----------------------------------------------------------------------
Kevin J. O'Connor
Appendix--Index of Public Comments and Response
------------------------------------------------------------------------
Comment Response
------------------------------------------------------------------------
Lyn Warmath, Library Director, II.D.6., II.D.7, II.D.8.
Hirschler, Fleischer, Weinberg,
Cox & Allen, Pp. 1-3 (pagination
license).
L. David Cole, Esq., Pp. 1-2 II.B.1.
(unintegrated products).
Alan D. Sugarman:
June 26 letter:
P. 1 (good faith negotiation) II.D.18.
P. 2 (text license).......... II.D.3., II.D.9.
Pp. 2-3 (level of license II.D.6., II.D.7.
fees).
P. 3 (copyright challenges).. II.D.13.
Pp. 3-4 (confidentiality of II.D.14.
license).
P. 4 (arbitration)........... II.D.15
P. 4 (selection of cases).... II.D.10.
Pp. 4-5 (text license)....... II.D.3., II.D.9.
P. 5 (license fee per format) II.D.12.
P. 5 (West pagination II.D.18.
display).
P. 5 (description of product) II.D.11.
P. 5 (book license fees)..... II.D.17.
P. 6 (third party providers). II.D.18.
June 28 letter:
Pp. 1-2 (selection of cases). II.D.10.
P. 2 (license for statutes).. II.D.18.
September 3 letter:
P. 2 (other antitrust II.D.4.
violations).
P. 2 (products divested)..... II.A.1.
P. 3 (good faith negotiation) II.D.18.
P. 4 (open licenses)......... II.D.18.
Pp. 5, 9 (confidentiality of II.D.14., II.D.18.
license).
P. 5 (level of license fees). II.D.6.
P. 5-8 (text license)........ II.D.9.
P. 8 (selection of cases).... II.D.10.
P. 8 (copyright challenges).. II.D.13.
Pp. 8-9 (license fee per II.D.12.
format).
P. 9 (third party providers). II.D.18.
P. 9 (arbitration)........... II.D.15.
Edward D. Jessen, Reporter of II.B.1.
Decisions, Supreme Court of
California, Pp. 2-3
(divestitures of products).
Professor Robert L. Oakley,
American Association of Law
Libraries:
P. 2 (divestiture of II.A.1.
products).
P.2 (editorial staffs)....... II.A.2.
P. 3 (``systems'')........... II.A.3.
Pp. 3-4 (level of license II.D.6., II.D.8.
fees).
Pp. 4-5 (copyright II.D.13.
challenges).
P. 5 (online competition).... II.C.4.
Cyndi A. Trembley, President, II.A.1., II.E., II.G.
Association of Law Libraries of
Upstate New York, P. 1 (merger
and pricing).
Kathleen Jo Gibson, New Mexico
Compilation Commission:
P. 1 (state reporters)....... II.B.4.
Pp. 1, 2 (text copyright).... II.D.3., II.D.9.
P. 2 (star pagination II.D.2.
copyright).
Karen Ehmer, Esq., Darby Printing
Company:
P. 1 (state reporters)....... II.B.4.
Pp. 1-2 (state reporters).... II.B.1.-3.
David C. Harrison, Esq.
P. 1 (merger)................ II.E.
P. 1 (political II.G.
considerations).
Alois V. Gross, Esq.:
August 12 letter:
Pp. 1-4 (brand names)........ II.A.5.
Pp. 4-5 (star pagination II.D.1., II.D.2.
copyright).
Pp. 5-6 (state reporters).... II.B.1.-3.
[[Page 53403]]
Pp. 6-7 (packaging II.G.
divestitures).
P. 7 (legal encyclopedias)... II.G.
August 20 letter:
Pp. 1-5 (brand names)........ II.A.5.
Pp. 2-3 (``systems'')........ II.A.3.
P. 4 (encyclopedias)......... II.G.
P. 5 (Auto-Cite)............. II.C.2., II.G.
Thomas F. Field, Publisher Tax
Analysts:
August 29 letter:
Pp. 1-8 (access to case law/ II.F.
Juris).
P. 8 (online competition).... II.C.
September 3 letter:
Pp. 1-2 (barriers to entry).. II.D.
Gary L. Reback, Esq., Wilson,
Sonsini, Goodrich & Rosati (for
Lexis-Nexis Division of Reed-
Elsevier):
Pp. 1-2, 7 (divestiture of II.A.1.
products).
Pp. 2-6 (``systems'')........ II.A.3.
Pp. 2, 8-9 (Auto-Cite)....... II.C.2.
Pp. 5-6 (editorial staffs)... II.A.2.
Pp. 7-8 (``systems'')........ II.C.1.
Pp. 10-11 (level of license II.D.6., II.D.8.
fees).
P. 12 (value of divestitures) II.G.
Anonymous, Pp. 2-3 (U.S.C.A.).... II.G.
Marc L. Ames, Esq., Pp. 1-3 II.E.
(merger).
O.R. Armstrong, President,
Geronimo Development
Corporation:
Pp. 2, 4-5 (pagination II.D.1., II.D.2.
copyright).
P. 2 (online competition).... II.C.1.-3.
Pp. 2-3 (monopoly in federal II.G.
case law).
Pp. 3-4 (text copyright)..... II.D.3.
P. 5 (Tax Analysts).......... II.F.
Morgan Chu, Irell & Manella LLP,
(for Matthew Bender & Company,
Inc.):
P. 9, 11 (initial parallel II.D.5.
citations).
P. 12 (star pagination II.D.1., II.D.2.
copyright).
P. 13 (integration of II.D.2.
products).
P. 13 (level of license fees) II.D.6., II.D.8.
P. 13 (license fee per II.D.12.
format).
P. 14 (selection of cases)... II.D.10.
P. 14 (description of II.D.11.
product).
Pp. 14-15 (copyright II.D.13.
challenges).
E. Scott Wetzel, CD Law:
Pp. 3-4 (Washington case law) II.B.2.
Pp. 4-5 (other antitrust II.G.
violations).
P. 6 (level of license fees). II.D.6., II.D.8.
P. 6 (copyright challenges).. II.D.13.
P. 6 (arbitration)........... II.D.15.
P. 6 (divestiture of II.A.1.
products).
Jose I. Rojas, Esq., Broad and
Cassel (for Oasis Publishing
Company):
August 27 letter:
P. 1 (star pagination II.D.1.
copyright).
P. 1 (copyright challenges).. II.D.13.
P. 2 (level of license fees). II.D.6., II.D.8.
August 30 letter:
P. 1 (level of license fees). II.D.6., II.D.8.
Eleanor J. Lewis, American
Association of Legal Publishers:
Pp. 1-4 (text license)....... II.D.3., II.D.9.
P. 4 (selection of cases).... II.D.10.
P. 4 (description of product) II.D.11.
Pp. 4-5 (level of license II.D.6., II.D.8.
fees).
P. 5 (license fee per format) II.D.12.
P. 5 (copyright challenges).. II.D.13
P. 5 (confidentiality of II.D.14.
license).
P. 5 (arbitration)........... II.D.15.
Professor J.C. Smith, Director, II.D.1., II.D.6.
Artificial Intelligence Research
Project, P. 2-3 (license
agreement).
John H. Lederer, Esq.:
P. 1 (``systems'')........... II.A.3.
P. 2 (level of license fees). II.D.6., II.D.8.
P. 2 (copyright challenges).. II.D.13.
P. 2 (state reporters)....... II.B.3.
Pp. 2-3 (political II.G.
considerations).
Professor Kendall Svengalis,
Rhode Island State Law Library:
Pp. 1-2, 5 (divestiture of II.A.1.
products).
Pp. 2, 5 (``systems'')....... II.A.3.
Pp. 3-4 (secondary law)...... II.G.
[[Page 53404]]
P. 4 (state reporters)....... II.B.1.-3.
P. 5 (level of license fees). II.D.6., II.D.8.
Matthew Lee, Executive Director,
Inner City Press/Community on
the Move:
Pp. 2-6 (online competition). II.C.2.
P. 8 (non-profit II.G.
organizations).
James Love, Director, Consumer
Project on Technology:
P. 1 (divestiture of II.A.1, II.A.3.
products).
P. 2 (``systems'')........... II.A.3.
P. 2 (editorial staffs)...... II.A.2.
P. 2 (license fee per format) II.D.12.
P. 2 (level of license fees). II.D.6., II.D.8.
P. 3 (Internet).............. II.D.16.
P. 3 (validity of copyright). II.D.1.
Norman Wolfe, International Compu
Research, Inc.:
P. 2 (level of license fees). II.D.6., II.D.8.
P. 2 (third party providers). II.D.18.
P. 2 (text license).......... II.D.9.
P. 2 (copyright challenges).. II.D.13.
P. 2 (description of product) II.D.11.
P. 3 (confidentiality II.D.14.
license).
P. 3 (arbitration)........... II.D.15.
Bartlett F. Cole, P. 1 II.G.
(encyclopedias).
Lexis-Nexis Opposition to the II.A.2.
Entry of the Proposed Final
Judgment, P. 22 (editorial
staffs).
Mary Brandt-Jensen Declaration:
Paras. 4, 7 (``systems'')... II.A.3.
para. 6 (text copyright)..... II.D.3.
para. 6 (level of license II.D.8.
fees).
para. 9 (online competition). II.C.1.-2.
Nicholas R. Emrick Declaration:
Paras. 7-12 (``systems'')... II.C.1.-2.
para. 13 (editorial staffs).. II.A.2.
Michael A. Jacobs Declaration:
Paras. 3-5, 9-12 (Auto-Cite II.C.3.
divestiture).
para. 13 (value of II.G.
divestiture).
Garth Saloner Declaration:
para. 7 (divestiture of II.A.1.
products).
Paras. 10-11 (ALR).......... II.C.1.
para. 12 (ALR)............... II.A.3
Paras. 13-16 (editorial II.A.2.
staffs).
Paras. 17-18 (``systems'').. II.A.3.
Paras. 19-23 (Auto-Cite).... II.C.2.
Kendall F. Svengalis Declaration:
Paras. 7-9 (``systems'').... II.A.3.
para. 11 (Auto-Cite)......... II.C.2.
para. 12 (divestiture of II.A.1.
products).
------------------------------------------------------------------------
The Thomson Corporation
September 18, 1996.
Via Facsimile 202 307 5802
Ms. Minaksi Bhatt,
U.S. Department of Justice, City Center Building, 1401 H Street,
NW., Washington, DC 20530.
Dear Ms. Bhatt:
I'm writing in response to your letter to Dale Collins and me of
September 13 asking for clarification of Thomson's position
regarding the use by competitors of first page citations to West
case reports.
As we discussed last Thursday, Thomson's position and belief is
that the use of first page citations by competitors or others is a
fair use under 17 U.S.C. Sec. 107--i.e., an otherwise infringing use
that, when analyzed under the four fair use factors set forth in
Sec. 107, is deemed ``fair.'' This is the same position consistently
taken by West. See West Publishing Company v. Mead Data Central,
Inc., 616 F.Supp. 1571, 1580-81 (D.Minn. 1985), affirmed, 799 F.2d
1219, 1228 n.3 (8th Cir. 1986), cert. denied, 479 U.S. 1070 (1987);
Oasis Publishing Company v. West Publishing Company, 924 F.Supp.
918, 926 (D.Minn. 1996).
The reason Thomson and West believe that the use of first page
citations is ``fair'' (while star paging is not) is that, as found
by the Court in Oasis, ``[a]lthough with either the parallel cites
or an internal cite form each case a user could sort West's cases
and determine West's arrangement, the former does not utterly
supplant the need for West's product while the latter does.'' 924
F.Supp. at 926. As a result of their belief regarding fair use,
neither Thomson nor West objects to the use of first page citation
by others, including competitors. Therefore, Thomson does not plan
to seek to prevent, by legal action, citation to the first page of
West case reports.
Additionally, I wish to confirm that Thomson has not in the
past, nor will it in the future, take any action to prohibit third
parties from cross-referencing any of its publications (including,
for example, ALR, Am Jur, or any of its treatises). Additionally,
our proposed divestiture agreement will, likewise, recognize the
right of the buyer to cross-reference Thomson publications.
I trust this responds to your questions. If not, please feel
free to call me.
Sincerely,
Michael S. Harris
MSH/kpf
cc: L Fullerton, Esq., C. Robinson, Esq., C. Conrath, Esq., J.
Foster, Esq., B. Hall, D. Collins, Esq., J. Schatz, Esq.
State of California, Department of Justice
September 12, 1996.
Edward W. Jessen,
Reporter of Decisions, Supreme Court of California, 303 Second
Street, South Tower, Eighth Floor, San Francisco, CA 94107.
[[Page 53405]]
Re: Thomson/West Merger, Proposed Settlement
Dear Mr. Jessen: Your letter of September 5, 1996 to Tom Greene
of this office expresses concern that the proposed judgment in
settlement of the Thomson/West merger might leave the Court without
effective competitors for the job of publishing the California
Official Reports. In particular, you noted that the integration of
the Official Reports with other editorially enhanced titles,
especially Deering's California Codes, renders a more competitive
product from the standpoint of both consumer appeal and the
efficiencies of joint editing. You are concerned that these assets
might be lost as a result of awards to separate publishers in the
divestiture process.
Historically, Thomson and West have bid competitively for the
right to publish the Official Reports. Safeguarding the ability of
the Court to rebid the Official Reports contract in a comparable
climate of competition following the merger was a primary aim of
this office in reaching the proposed settlement. Recognizing the
volume and complexity of the materials and the Court's special need
for accuracy and speed in publication, we required measures to
facilitate the transfer of Bancroft-Whitney's editorial expertise,
in addition to other provisions designed to promote the competitive
strength of any prospective new publisher.
From a practical financial standpoint, this office believes the
successor publishers of Deering's Codes and the other divested
California titles will likely be, and should be, strong, active
bidders for the right to publish the Official Reports, in the event
the court elects to rebid that contract. We expect to apply this
perspective in reviewing the competitive suitability of the
Acquirer(s) of the California titles under paragraph IV.C. of the
proposed judgment. In light of your concerns and consistent with our
own past practice, we will examine in some detail what concrete
plans, if any, the Acquirer has for taking on the Official Reports
publication.
We believe that this approach should produce a bidding climate
comparable to that enjoyed by the Court in past years. Moreover, it
should do so without disturbing the proposed settlement or
jeopardizing the prospective competitive benefits that it contains.
Sincerely,
Daniel E. Lungren,
Attorney General.
Kathleen E. Foote,
Deputy Attorney General.
cc: Craig W. Conrath (U.S. Dept. of Justice), Wayne D. Collins
(Shearman & Sterling)
Supreme Court of California, Office of the Reporter of Decisions
September 13, 1996.
Kathleen E. Foote,
Deputy Attorney General, Department of Justice, 50 Fremont St.,
Suite 300, San Francisco, CA 94105-2239
Dear Ms. Foote: Recently expressed concerns on the proposed
settlement for the Thomson/West merger have been substantially
mitigated by your September 12 letter, and by a verbal understanding
reached this week in a conversation with Wayne D. Collins and a
subsequent conference call with Brian Hall and two other Thomson
executives responsible for the California Official Reports. On that
basis, please consider the suggestions in my September 5 letter to
your office as moot.
This assumes, of course, that the verbal understanding reached
with Thomson will be reduced to writing over the next few business
days, consistent with the discussions.
The verbal understanding with Thomson provides that: (i) The
license for use of summaries and headnotes will be expressly
prospective in application, both as to material in existence on the
finality date for the consent decree and material yet-to-be-written
under the present publication contract; (ii) a license similar to
the one stated for summaries and headnotes will be provided for use
of the digest classification scheme for the California Official
Reports, notwithstanding possible divestiture of the digest; and,
(iii) a waiver of Thomson's right to withhold consent should
California exercise the option for a second one-year extension of
the present contract, and an express statement that exercising that
option waives no rights under the consent decree. (The above is
intended to be descriptive and is not necessarily reflective of the
precise language that will be employed.)
In combination with your September 12 letter, this understanding
satisfactorily addresses concerns relating to the California
Official Reports set forth in the advisory committee's August 7
public comment letter to Craig Conrath, and in my September 5 letter
to your office. On behalf of the Official Reports advisory
committee, thank you for your assistance.
Cordially,
Edward Jessen,
Reporter of Decisions.
cc: Justice Marvin Baxter, chair of advisory committee, Wayne D.
Collins, Shearman & Sterling, Brian Hall, Jim Fegen, Tom Trenkner,
members of the advisory committee.
Supreme Court of California, Office of the Reporter of Decisions
September 16, 1996.
Brian Hall,
President, West Information Publishing Group, 610 Opperman Drive,
P.O. Box 64526, St. Paul, MN 55164-0526.
Dear Brian: Thank you very much for your attention to my
concerns about the proposed consent decree relating to the Thomson/
West legal publishing transaction. Since Thomson is presently the
publisher of the Official Reports, it is my duty as the Reporter of
Decisions to ensure that the interests of the Supreme Court and the
people of California are protected by any agreement settling the
investigation.
My greatest concern was whether California's ability to select a
``substitute publisher'' would effectively be dictated by Thomson's
selection of a buyer for Deering's Codes. In particular, I was
concerned that the production synergies between Deering's and the
Official Reports are so great that the only substitute publisher
that could support the Official Reports was the publisher of
Deering's.
I now understand that this issue was thoroughly investigated by
the California Attorney General's Office and by the United States
Department of Justice. I also understand that any sale of Deering's
and the other California products to be divested must be approved
under the consent decree by the California Attorney General's Office
and the United States Department of Justice, and that Thomson is not
free to select any purchaser of its choosing regardless of its
qualifications. I am confident that the California Attorney
General's Office and the United States Department of Justice will
exercise their powers of approval as provided in the proposed
consent decree to ensure that the purchaser of any divested product
will have the managerial, operational and financial capability to
complete effectively in the publication and sale of that product.
Moreover, I was very glad to learn that the proposed decree
requires Thomson to reveal to any new purchaser of the divested
products information about the personnel whose primary
responsibilities are the editorial production of these products. I
also understand that the proposed decree prohibits Thomson from
interfering with any negotiations between the new purchaser and
Thomson employees whose primary responsibility is the production,
sale or marketing of the divested products. These requirements
should help ensure that a new buyer will be able to continue with
the products without any loss of continuity.
Finally, I was not aware that any buyer of Deering's or
substitute publisher of the Official Reports would be free to
provide the cross-references to ALR, AM Jur, Cal Jur and the other
Thomson publications that make up the other half of Thomson's
research system of cross-references. You have told me, however, that
Thomson has never asserted a copyright interest in these cross-
references and does not intend to do so in the future, so that a new
publisher of Deering's or the Official Reports would be free to
include these cross-references as they saw fit. I understand that
you have similar representations to the California Attorney
General's Office and the United States Department of Justice.
In light of this, my level of comfort with the transaction has
greatly increased. As we discussed, however, I have several more
concerns that I do not believe are addressed by the proposed decree
and that need to be resolved before I can fully support the proposed
settlement. First, I am concerned that there will be a ``gap'' in
the Thomson license to the State and the State's potential
introduction of any substitute publisher. Second, although Thomson
is required by the proposed decree to divest the California digest
in the event California finds a substitute publisher, I am concerned
that this does not give the State an adequate interest in the
Digest's classification scheme. Third, I am concerned that Thomson
may not consent to continue, at California option, as the publisher
of the Official Reports for a second one-year extension of the
existing
[[Page 53406]]
contract to begin November 1, 1997, as contemplated by our contract
extension agreement of April of this year.
Therefore, to fully satisfy my concerns, I ask that Thomson,
subject to whatever approvals are required from the California's
Attorney General's Office and the United States Department of
Justice, agree to the following:
Condition 1. Extend the license to California provided by
Section XI(C) of the proposed consent decree to include the use of
any intellectual property rights which Thomson holds pertaining to
the headnotes, case notes, and/or case summaries in the Official
Reports created through the end of the existing contract, including
any extensions pursuant to the April, 1996, agreement.
Condition 2. Include in the license to California provided by
Section XI(C) the use of the classification scheme of Thomson's
California Digest.
Condition 3. Agree to consent to the additional one-year
extension from November 1, 1997, to October 31, 1998, of the
existing publication contract of the California Official Reports as
provided in the publication contract extension agreement of April,
1996, if California elects to exercise its option to extend under
the extension agreement, and acknowledge that during any such
extension California retains all rights under Section XI of the
proposed consent decree to terminate the publication contract
without cause upon ninety days notice to Thomson.
If you agree to these three conditions, I will withdraw my
letter to Assistant Attorney Greene by sending him a copy of this
letter and your response, and fully support the proposed consent
decree as sufficient to protect California's interests as far as my
office is concerned.
Cordially,
Edward Jessen,
Reporter of Decisions.
WEST
September 16, 1996.
Edward W. Jessen,
Reporter, Supreme Court of California, Office of the Reporter of
Decisions, 303 Second Street, South Tower, Eighth Floor, San
Francisco, CA 94107.
Dear Ed: Thank you very much for your letter of September 16,
1996. As you know, we take your concerns very seriously. Your
satisfaction as a Reporter of Decisions with our performance on the
Official Reports and with the adequacy of the proposed consent
decree to protect the interests of your office is very important to
us. I am glad that we have had the opportunity to discuss your
concerns and resolve them to your satisfaction.
To that end, I am happy to agree on behalf of Thomson to the
three conditions set forth in your letter. In particular, subject to
whatever approvals are required from the California Attorney
General's Office and the United States Department of Justice,
Thomson (operating through the West Information Publishing Group)
agrees to do the following:
1. Extend the license to California provided by Section XI(C) of
the proposed consent decree to include the use of any intellectual
property rights which Thomson holds pertaining to the headnotes,
case notes and/or case summaries in the Official Reports created
through the end of the existing contract, including any extensions
pursuant to the April, 1996, agreement.
2. Include in the license to California provided by Section
XI(C) the use of the classification scheme of Thomson's California
Digest.
3. Agree in consent to the additional one-year extension from
November 1, 1997, to October 31, 1998, of the existing publication
contract of the California Official Reports as provided in the
publication contract extension agreement of April, 1996, if
California elects to exercise its option to extend under the
extension agreement, and acknowledge that during any such extension
California retains all rights under Section XI of the proposed
consent decree to terminate the publication contract without cause
upon ninety days notice to Thomson.
With these commitments in hand, I am delighted that you will now
be able to inform Assistant Attorney General Greene of your support
for the proposed consent decree.
We very much look forward to working with you in the future.
Respectfully,
Brian H. Hall.
Supreme Court of California
September 17, 1996.
Thomas Greene,
Senior Assistant Attorney General, Department of Justice, P.O. Box
944255, Sacramento, CA 94244-2550.
Dear Mr. Greene: Please regard my September 5 letter to you as
withdrawn. I now fully support the proposed consent decree for the
Thomson/West transaction as sufficient to protect California's
interests as far as my office is concerned.
This change in view results from discussions initiated by Brian
Hall, President of the West Information Publishing Group, to address
the concerns expressed in the September 5 letter, and also the
August 7 public comment letter to Craig Conrath, United States
Department of Justice. These discussions culminated in the attached
exchange of correspondence, which set forth provisions that will
significantly improve the commercial viability of the Official
Reports in the coming years.
Also contributing to my change in view is Kathleen Foote's
September 12 letter, which sets forth the perspective the Attorney
General will likely apply in reviewing the competitive suitability
of the acquirer of California divestiture titles.
In sum, my concerns have been satisfactorily addressed by the
discussions and correspondence that followed the September 6 letter.
Cordially,
Edward Jessen,
Reporter of Decisions.
cc: Brian Hall, Kathleen Foote
Certificate of Service
On September 23, 1996, I caused a copy of Plaintiffs' Response
to Public Comments to be served by first-class mail upon all parties
to this action, and a courtesy copy to be mailed to each commenter.
----------------------------------------------------------------------
Minaksi Bhatt
Public Comments
1. Lyn Warmath, Library Director, Hirschler, Fliescher, Weinberg,
Cox & Allen, P.O. Box 500, Richmond, VA 23218-0500
2. L. David Cole, Esq., 433 North Camden Drive, Beverly Hills, CA
90210
3. Alan D. Sugarman, President, HyperLaw, Inc, P.O. Box 1176,
Ansonia Station, New York, NY 10023-1176
4. Edward D. Jessen, Reporter of Decisions and Secretary to
California Advisory Committee on Publication of Official Reports,
Office of the Reporter of Decisions, 303 Second Street, South Tower,
San Francisco, CA 94107
5. Professor Robert L. Oakley (For American Association of Law
Libraries), Georgetown University Law Center, Edward Bennett
Williams Law Library, 111 G Street, NW, Washington, DC 20001
6. Cyndi A. Trembley, President, Association of Law Libraries of
Upstate New York, 557 Cutler Road, Homer, NY 13077
7. Kathleen Jo Gibson, Secretary and Clerk, New Mexico Compilation
Commission, P.O. Box 15549, Santa Fe, NM 87506
8. Karen Ehmer, Esq., Darby Printing Company, 6215 Purdue Drive,
Atlanta, GA 30336
9. David C. Harrison, Esq., 2100 Arch Street, Fifth Floor,
Philadelphia, PA 19103-1399
10. Alois V. Gross, Esq., 2219 Pillsbury Avenue, Minneapolis, MN
55404-3266
11. Thomas F. Field, Publisher, Tax Analysts, 6830 North Fairfax
Drive, Arlington, VA 22213
12. Gary L. Reback, Esq. (For Lexis-Nexis Division of Reed-
Elsevier), Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road,
Palo Alto, CA 94304-1050
13. Anonymous
14. Marc L. Ames, Esq., 225 Broadway, New York, NY 10007
15. O.R. Armstrong, President, Geronimo Development Corporation, 606
25th Avenue South, Suite 206, St. Cloud, MN 56301
16. Morgan Chu, Esq., (For Matthew-Bender & Company, Inc.), Irell &
Manella, 1800 Avenue of the Stars, Suite 900, Los Angeles, CA 90067-
4276
17. E. Scott Wetzel, CD Law, Inc., 1000 Second Avenue, Suite 1610,
Seattle, WA 98104
18. Jose I. Rojas, Esq. (For Oasis Publishing Company), Broad and
Cassel, 201 South Biscayne Boulevard, Miami, FL 33131
19. Eleanor J. Lewis, American Association of Legal Publishers, 282
North Washington Street, Falls Church, VA 22046
20. Professor J.C. Smith, Faculty of Law Artificial Intelligence
Research Project, The University of British Columbia, 1822 East
Mall, Annex 1, Vancouver, BC, Canada V6T 1Z1
[[Page 53407]]
21. John H. Lederer, Esq., 5678 Vineyard Road, Oregon, Wisconsin
53575
22. Kendall F. Svengalis, State Law Librarian, Rhode Island State
Law Library, 250 Benefit Street, Providence, RI 02903
23. Matthew Lee, Executive Director, Inner City Press/Community on
the Move, 1919 Washington Avenue, Bronx, NY 10457
24. James P. Love, Consumer Project on Technology, P.O. Box 19367,
Washington, DC 20036
25. Norman S. Wolfe, Vice President/General Manager, International
Compu Research, Inc., 1401 Dove Street, Suite 580, Newport Beach, CA
92660
26. Bartlett F. Cole, Esq., 1201 S.W. 12th Ave. Rm. 305, Portland,
OR 97205-1705
Hirschler, Fleischer, Weinberg, Cox & Allen
August 2, 1996.
By telecopier and first class mail
Mr. Craig Conrath,
Chief--Merger Task Force, Antitrust Division, United States
Department of Justice, 1401 H Street, Suite 4000, Washington, DC
20530.
Re: United States of America v. The Thomson Corporation and West
Publishing Company, No. 96 1415
Dear Mr. Conrath: I am writing to express my opposition to the
settlement in the acquisition of West Publishing Company by the
Thomson Corporation. I was initially pleased by the general terms of
the settlement until I read details of licensing fees for internal
pagination to West's National Reporter System. I was further alarmed
when a colleague did some arithmetic based on the fee schedule
described in the settlement agreement.\1\
---------------------------------------------------------------------------
\1\ Calculations are based on 1,000 characters of text equalling
38 characters across each of two columns and 50 lines on a page in a
random volume of Federal Supplement that contains 1583 pages. That
totals approximately 6,015,400 characters in the sample volume,
although some amount should be subtracted for West's proprietary
headnotes.
---------------------------------------------------------------------------
Using a random volume of the Federal Supplement reporter,
licensing the star pagination from a single volume of this one
reporter appears to be a bit less than $541. Multiplied by the 918
bound volumes in the set as of mid-July, star pagination for this
single set of reporters would start off in the general vicinity of
$496,000 annually. This does not even take into consideration the
addition of approximately 36 new volumes per year as well as the
increases built into the settlement agreement for the second and
third years. The settlement agreement provides $0.02 per year annual
increases per 1,000 characters and at first glance we seem to be
discussing mere pennies. The reality, however, is that we are
discussing astronomical amounts of money. Licensing this one title
for the second year will add approximately $632,000 to a small
business's production costs while licensing this one title for the
third year will add a further $774,000 to production costs. These
increases are nearly 22% and 37% over the first year's estimated
costs.
The first year's license fees alone are a staggering amount for
a small business to contemplate and few businesses can sustain
production increases like those described above. These licensing
fees will have a direct and critical impact on prices of potential
competing products.
I believe these facts merit repeating: So far, I have described
costs for one title. The license agreement, however, covers 19
titles:
------------------------------------------------------------------------
Number
Titles of
volumes
------------------------------------------------------------------------
Supreme Court Reporter......................................... 112
Federal Reporter 2d............................................ 999
Federal Reporter 3d............................................ 79
Federal Supplement............................................. 918
Federal Rules Decisions........................................ 164
Atlantic Reporter.............................................. 674
North Eastern Reporter......................................... 660
North Western Reporter......................................... 546
Pacific Reporter............................................... 913
South Eastern Reporter......................................... 467
Southern Reporter.............................................. 671
South Western Reporter......................................... 919
California Reporter 2d......................................... 286
California Reporter 3d......................................... 47
Illinois Decisions............................................. 355
New York Supplement............................................ 628
Bankruptcy Reporter............................................ 193
Military Justice Reporter...................................... 42
United States Claims Court Reporter............................ 26
Federal Claims Reporter........................................ 8
Veterans Appeals Reporter...................................... 8
--------
Total.................................................... 8,715
------------------------------------------------------------------------
West Publishing clearly stands alone as the single authoritative
source to provide precise licensing costs that take into account
characters of text in its national reporter system minus characters
of its secondary, proprietary headnotes. Over the last several weeks
I have repeatedly called West Publishing to inquire about exact
costs for one, two and three year license fees or even ballpark
figures for the same three-year period. Over the course of several
phone conversations, West Publishing's agent has replied that she
``has no idea,'' still ``does not know,'' or ``has not found that
information yet.'' Perhaps the figures are so unthinkable for a
small business to contemplate that public disclosure is not in
West's best interests.
While licensing fees in the range of $.09, $0.11 and $0.13 per
1000 characters initially might look like mere pennies, ``doing the
math'' actually presents an entirely different and untenable picture
to small, medium and even some large publishers.
I predict these licensing fees will lock out competitors and
virtually guarantee a monopoly for Thomson/West. Some of the
settlement clauses are reasonable. The licensing agreement, however,
is disastrous for legal information consumers, who in the end are
our country's everyday citizens and neighbors.
Yours truly,
Lyn Warmath,
Library Director.
L. David Cole
July 12, 1996.
Bancroft Whitney,
P.O. Box 7006, San Francisco, California 94126-7004.
Attention: Brian H. Hall, President West Information Publishing
Group
Dear Mr. Hall: As a user of Bancroft Whitney CD-ROMs (California
Reports, Deerings, Miller & Starr and California Transactions Forms)
for some time, as well as a less frequent user of West Publishing
CD-ROMS (U.S. Code Annotated), I was interested to learn of the
planned divestiture to which Thomson Publishing has apparently
agreed with the Antitrust Division of the United States Department
of Justice, as a result of its review of the acquisition of West
Publishing by Thomson. When I read the detail which accompanied your
letter of June 28, 1996, my interest turned to concern.
I subscribed to Deerings and the California Reports services on
CD-ROM from Bancroft Whitney, rather than two comparable sets from
West Publishing, primarily because of their integration to Miller &
Starr, which I use regularly in my practice. An additional incentive
was the potential further integration if I elected to subscribe to
Witkin. (Absent that integration, I would probably have chosen
West's services, based on its ``key number'' organization.) I
observe that neither Miller & Starr nor Witkin is to be included in
the divested products. The apparently piecemeal divestiture will
over time likely result in unintegrated sets, thereby frustrating
the reason for my choice of products, an important component of the
value to me of the California Reports and Deerings sets. I foresee,
unhappily, that my substantial (to me) investment in Deering and
California Reports will be rendered substantially less valuable when
the related treatises are no longer under common ownership and
integrated. Please consider this letter my protest of the piecemeal
divestiture which has apparently been agreed.
As the divestiture is apparently mandated by agreement with the
Antitrust Division, I am forwarding a copy of this letter to the
Antitrust Division as well, for its consideration, (the likelihood
of which, I acknowledge, is slight). However, as the divestiture
agreement is, at least from my perspective as a user of the divested
product, ill advised and potentially damaging, my protest is made to
the U.S. Department of Justice in the hope that it may be considered
if public or other comment with respect to the divestitures
contemplated.
I hope, without optimism, that my misgivings prove unfounded.
Very truly yours,
L. David Cole
LDC:jb
cc: U.S. Department of Justice
[[Page 53408]]
HyperLaw
June 26, 1996.
Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of
Justice, Suite 4000, 1401 E Street, N.W., Washington, D.C. 20530.
Dear Mr. Conrath: Although we have a number of concerns relating
to the approval by the Department of Justice of the merger of West
Publishing Company and The Thomson Corporation, this letter
addresses only the proposed compulsory license agreement for
internal pagination.
We conclude that the License Agreement form attached as Exhibit
B provides illusory benefits, is not drafted to protect the
interests of licensees, is an invitation for the Licensor to engage
in further abusive conduct, and is not in the public interest.
We believe that the Final Judgment needs to include an
obligation by West-Thomson to negotiate in good faith, an agreement
to not enter into discriminatory licensing agreements, and
affirmative statements as to what constitutes ``fair use'' in the
copying of West case reports when the only purpose of copying the
opinion is to remove identifiable West copyrighted material.
The proposed License Agreement is unacceptable. It seems to
assume that the Licensor will act in good faith. Based upon past
activities of the Licensor, this belief is completely unwarranted.
The License Agreement is riddled with one-sided provisions and
invitations for the Licensor to continue its anti-competitive
practices.
We urge the Department of Justice, as well as the plaintiff
Attorney Generals, withdraw consent to the Stipulation and Order
until the License Agreement is modified to remedy these substantial
problems.
It would appear that the Department of Justice in requiring
compulsory licensing was addressing the 1988 pagination licensing
agreement entered into between West and Mead at the conclusion of a
two week trial. Presumably, West is being required to offer to all
what was available only to Mead and now Reed-Elsevier/Lexis.
However, in 1988, West and Mead entered into two licenses in
connection with the settlement of the three pending actions: one
license covered internal pagination and the other license covered
the use of text copied by Mead from West books. In addition, the
1988 agreements were not an arms length negotiation, and moreover,
involved the only two companies in the industry.
Some have even suggested that the 1988 agreements were
themselves violative of the antitrust laws, and were nothing other
than agreements by the only two companies in the industry to work to
keep everyone else out.
Unfortunately, the compulsory licensing agreement crafted by the
Antitrust Division addresses only one of these two components, the
pagination issue, and even that in an completely impractical manner.
For opinions published in the last 75 years of West reporters,
West has asserted proprietary claims as to the opinion text. These
claims cover West's non-creative editorial enhancements, such as
judge authored changes to an opinion. These text claims are inherent
in the compilation copyright claims which have been constructed by
West and which West ominously waves when convenient for West to ward
off competition. West also claims that the temporary copying of
their case reports for the purpose of removing identifiable
copyrighted information is not fair use, and is a violation of their
copyright.
In order to buttress these claims, West is formulating and
pushing legislation. The two main components of the West legislative
program are the database protection bill now in Congress and the
anti-RAM copying provisions contained in another bill before
Congress. The database protection bill is supported by West
surrogates such as an ABA subcommittee chaired by a West employee
who promoted the original lawsuit by West against Mead and by the
West dominated Information Industries Association. The anti-RAM
copying provision can similarly be tracked to West initiatives in
executive department public/private committees and the IIA. The net
effect of these two provisions would be to make it a violation of
law to scan a West opinion from a book into a computer, delete the
West digests and summaries, and then publish the remaining text. We
note that for older opinions found only in West reporters, this is
the only practical way, and in many situations the only way, to
locate final older opinions.
Thus, at the very least, West must be required as a condition of
the merger, to agree not to attempt to assert copyright or any
future database protection act claim against those who (1) copy West
opinions for the purposes of removing copyrighted materials or (2)
copy West corrections and other non-creative material found in the
resulting text. Moreover, the pagination license should carry with
it a ``license'' for use of the text itself.
The problems presented by the License Agreement include:
1. An escalating royalty rate structure that will benefit only
the largest of legal publishers.
The royalty structure as presented will only be
meaningful in the market for smaller collection of cases where there
is one time publication, and only if the pagination license carries
with it a text license. At this time we will not comment further on
the rate structure because we expect that you will receive comments
from others. However, for most smaller CD-ROM publishers, a license
would not be cost effective and is prohibitive. For example, a
number of small CD-ROM publishers have databases of cases of
approximately 1 Gigabyte, and all do, or plan Internet availability.
The license fee to West would start off at $180,000 per year and
grow year after year as a result of escalations and the natural
increase in database size. None of these companies can sustain these
royalty payments.
The licensing fee should be a one-time fee.
The licensing fee should be on a per opinion bases and
should be no more than $.05 per opinion (in our view, free) and
should be less for older opinions, and no fee for de minimis numbers
of opinions, for example, under 1000 opinions on a single CD-ROM.
The licensing fee should cover all media in which the
opinion is disseminated.
Licensees with products containing under 5000 opinions
should not be required to enter into a formal agreement, and royalty
payments will be deemed payable on publication, with or without an
agreement.
2. Prohibitions in the Agreement against licensees contesting
any West compilation copyright claims while licensing internal
pagination. This ignores Lear v. Adkins, 395 U.S. 653 (1969), and
assures that the West dubious copyrights will not be challenged.
``3.01 Copyrights. During the term of this Agreement, Licensees
(I) shall respect and not contest the validity of the copyrights
claimed by Licensor's arrangement of case reports in NRS Reporters
as expressed by NRS Pagination.* * *''
Licensees should be free to contest the validity of
West copyrights.
3. Confidentiality provisions which will permit West to engage
in preferential licensing and to continue to engage in abusive
licensing practices in secret.
See Section 4.01
Licensees should have the privilege to waive
confidentiality.
West should report all license agreements to DOJ.
There should be most-favored-nation clauses.
4. Provisions requiring arbitration in West's home state, and,
presumably in privacy.
See Section 6.07
Arbitration should not be private, unless elected by
the Licensee.
Arbitrations should be able to be held in Washington,
DC, at the Licensees option.
The decision of the Arbitrator should be appealable to
the US District Court for the District of Columbia.
5. Enabling West to limit licenses to what it considers in its
own discretion to be an original compilation. This limits the
meangingfulness of the license. In other words, a company such as
Oasis could not take a license to publish Florida Cases,
notwithstanding that the selection of these opinions contained
therein are made by the Florida courts, because West claims this is
an original compilation belonging to West. If the license as drafted
is approved, West will remain the monopoly publisher of opinions in
a substantial number of states and at the federal level.
``1.03 `Licensee Case Reports' shall mean Licensee's reports of
judicial decisions that are selected for reporting by Licensees in
[Licensee Product(s)/Service(s) and coordinated and arranged by
Licensee within [Licensee Product(s)/Services].''
The limitation needs to be removed. The West reporters
in most situations include only opinions that the authoring courts
indicate in one way or another as being suitable for publication.
In addition, the list of reporters in Section 1.02
should include all of the West state case reporters, and, where West
does not claim proprietary rights in a state reporter, that should
be clearly identified and West should publicly release rights
therein.
[[Page 53409]]
6. The pagination license does not extend to the text of the
opinions, thereby permitting West to continue its expansive
definition of arrangement and coordination and originality to
include factual corrections and changes made to individual opinions
by West and/or the courts.
The pagination license should also include a text
license, and a waiver of any West claims of intermediate copying, as
long as any published case does not include West headnotes and
summaries.
7. Provisions that will require the triple payment of license
fees--one fee for CD-ROM, one for the Internet or on-line, and
another for books.
The license should cover dissemination of the
information in all formats.
8. Requirements that the Licensee prominently display West
internal pagination in a way as to further the questionable market
position of the internal pagination.
2.05. Display of Licensed NRS Pagination. During the term of
this Agreement, if Licensee includes NRS Pagination as a part of any
Licensee Case Report, such Licensed NRS Pagination shall be
presented no less prominently (in terms of size, high-lighting,
underlining, etc.) than any other unofficial pagination or pinpoint
locators for the Licensee Case Report in question.
Section 2.05 should be deleted.
9. Requirements that the licensee disclose competitive product
information to West prior to consummation of the license agreement.
Detailed disclosure of product information would provide West with
advance plans of competitors.
``1.03. `Licensee Product(s)/Services]' shall mean [description
of Licensee Product(s)/Services]''
The licensees should only be required to disclose the
product in the most general terms. Why should the biggest competitor
receive prior information about all new products.
10. Ambiguous provisions as to the License charges for books. It
is not clear whether the payment applies only on first publication
of a book, or continues as long as the book is being marketed.
For book and CD-ROM products, the license with West
need only be in effect on the date of publication and would be paid
only as of the date of first publication.
In addition, it is very important that the following provision
be added to create a wide number of sources of paginated opinions to
supply smaller independent publishers:
Third party information providers may sell or license
case law data which included West pagination and text on a wholesale
basis as long as the purchasers or licensees of the data have
entered into or are subject to a pagination License Agreement with
West.
There is absoltely nothing in the factual circumstances to
indicate that West will negotiate fairly with licensees. To the
contrary, all evidence and history would suggest that West will
engage in obfuscatory and dilatory tactics, matched with continued
expansive intellectual property claims.
As noted above, the License Agreement must be viewed in the
context of the legisaltive programs actively pushed by West and its
surrogate organizations and association (such as the IIA and the ABA
Intellectual Property subcommittee) as found in the proposed
Database Protection Act and the Anti-RAM copying bill.
The License Agreement as presently drafted is not in the public
interest, and the DOJ should withdraw its consent until a fair,
arms-length agreement that reflects the past conduct of the parties
and the realities of publishing is negotiated.
We are continuing to ananlyze this provision and will provide
additional recommendations before the expiration of the 60-day
period.
Sincerely,
Alan D. Sugarman,
President, HyperLaw, Inc.
HyperLaw
June 28, 1996.
Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of
Justice, Suite 4000 1401 E Street, N.W., Washington, D.C. 20530.
Dear Mr. Conrath: In my letter to you two days ago concerning
the many problems with West's License Agreement form, I referred to
the following section in the agreement which permits West to vitiate
the agreement.
``1.03 `Licensee Case Reports' shall mean Licensee's reports of
judicial decisions that are selected for reporting by Licensees in
[Licensee Products(s)/Services(s) and coordinated and arranged by
Licensee within [Licensee Product(s)/Services].''
I understand that West representatives are now saying that this
provision does not mean what it says. It is clear to me: if the
Licensee does not itself select for reporting the decisions and then
also coordinate and arrange them, as defined by West in its own
confidential arbitrary discretion subject only to review by
confidential non-appealable arbitration in Minnesota, then West will
not grant a license.
To understand what this means, I quote to you the following from
a letter from West that is attached to the complaint in Oasis v.
West, about to be appealed to the Eighth Circuit.
``[W]est does not object to the use by a competitor of a
parallel citation to the first page of West case reports of judicial
decision independently selected by the competitor for inclusion in
its own reporter volume.''
``With respect to your question of whether West would enter into
a star pagination license agreement, the answer is yes. West has
entered into star pagination licenses with other publishers and
would be happy to discuss such a license with your client. However,
the terms of such licenses are individually negotiated and depend in
part upon the scope of the use contemplated by the licensees.
Therefore, I am unable to quote any type of price or even discuss
basic license terms without knowing more about your client's
intended product.''
Letter dated January 4, 1995 from Joseph M. Musilek, outside
litigation general counsel for West, responding to request ``Our
client would like to use not only the initial page numbers of each
case but also `star pagination' reflecting the pagination of the
Florida Cases as published by West under contract with the State of
Florida.''
It would seem that under the proposed License Agreement, West
would be able to continue to assert that Florida Cases is a West
selection of decisions, and deny a license to companies like Oasis
under Section 1.03, since the Licensee would, according to West, be
copying the West section. And, Oasis would not even be able to tell
anyone because it would be muzzled pursuant to the confidentiality
provisions accorded to West. Good public policy? I think not.
In response to our letter, others have noted to us that the
Department of Justice and the plaintiff Attorney Generals have
reserved the right to contest the copyright claims of West. I wish
to bring to your attention State of Texas v. West Publishing Co.,
882 F.2d 171 (5th Cir. 1989) which was a declaratory judgment action
brought by the Attorney General of Texas re West's claims to
ownership of chapter and section numbers of Texas statutes.
The Texas Attorney General's challenge was dismissed because
there was no case or controversy--the State of Texas was not deemed
to have met the justiciabilty standard that the state itself had the
immediate intent ability to itself publish the statutes. So, I am
having a hard time understanding how these attorneys general or even
the Department of Justice is going to challenge the West claims.
And, the United States has never intervened in the still pending
West v. Mead 1988 case, despite the obvious anti-competitive impact
of the settlement, nor has the United States ever taken the obvious
step of asking the court to make the agreements public, so that the
public can see just how much the public is being abused.
One would conclude that these reservation of rights by the
United States and the Attorneys General to contest West copyrights
is simple window dressing.
We also note that there is no statute license agreement
(something else covered in 1988 between West and Mead in their
secret settlement which it seems the Department of Justice and the
Attorney Generals felt was only important to Lexis and would not be
important to other publishers).
Sincerely,
Alan D. Sugarman,
President, HyperLaw, Inc.
HyperLaw, Inc.
Via Fax--202-307-5802
Copy by Federal Express and Hand Delivery
September 3, 1996.
Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of
Justice, Suite 4000, 1401 E Street, N.W., Washington, D.C. 20530.
Dear Mr. Conrath: This letter completes HyperLaw's comments to
the Department of Justice concerning the Consent Decree relating to
the merger of Thomson and West Publishing Company. This letter
should be read in conjunction with our letters of June 26, 1996 and
June 28, 1996.
[[Page 53410]]
The Consent Decree is not in the public interest and the
Department of Justice must withdraw its consent.
HyperLaw, Inc. publishes the opinions of federal appellate
courts on CD-ROM, and is thus a competitor of West. It also is a
supplier of tagged federal appellate opinions to Thomson. In
addition, HyperLaw has been threatened by West, which threats have
prevented HyperLaw from including West's star pagination in its
product and from copying public domain material from West reporters.
As United States District Judge John S. Martin found in Matthew
Bender & Company, Inc. and HyperLaw, Inc. v. West Publishing
Company, 94 Civ. 0589 (JSM), 1996 U.S. Dist. LEXIS 11091 (SDNY
August 5, 1996) (attached):
``[t]he Court finds that HyperLaw had a reasonable apprehension
of being sued by West over use of the West features at issue here at
the time that it filed the complaint.''
Among the factors the court considered was that ``Schatz [West
General Counsel] told Sugarman that his firm wins all his lawsuits
for West.'' The Court ``accept[ed] Sugarman's testimony that Schatz
made the comment in the context of a discussion about HyperLaw's use
of West features'' after noting that ``Schatz gave varying versions
of the time and place of the conversation in his deposition and
hearing testimony, and finally testified at the hearing that he was
not certain where the conversation took place.'' The Court also
found it relevant that ``Stephen Haynes, a senior executive and
attorney for West approached Sugarman at a convention and stated
that Sugarman was aiding and abetting infringement of West
copyrights * * *'' [This is the same Stephen Haynes that is the
chair of an ABA Database Protection subcommittee which authored a
1996 report in favor of database protection legislation.]
By filing a comprehensive complaint against West-Thomson, and
then proposing an ineffectual consent decree, the Antitrust Division
has provided the following benefits to West-Thomson:
Insulated West-Thomson from further antitrust enforcement by the
Department of Justice for the foreseeable future.
Sanctioned a license agreement which will be falsely
characterized by West-Thomson so as to enable West-Thomson to sway
and mislead Congress, the courts, and public opinion, as shown
below. Without a doubt, West-Thomson will use this license agreement
before Congress as a reason why a database protection action would
not be anticompetitive.
In a sense, the Antitrust Division has punched a free antitrust
waiver ticket for West-Thomson. It will be able to throw its weight
around in the legal market without any concern as to enforcement
from the Antitrust Division.
Indeed, the half-hearted inconsequential relief is so limited in
effect that we urge DOJ to withdraw its complaint and have no
consent decree, rather than perpetuate a meaningless remedy on the
public.
Lawyers Cooperative must be divested as an ongoing operating
entity, and, the License Agreement must be revised to provide in an
unambiguous way a meaningful and adequate remedy to the harms
described in the complaint, many of which pre-existed the merger.
We reject as ludicrous the position of the Antitrust Division
that in the Division must ignore preexisting violations of the
antitrust laws that are discovered during a merger approval
investigation.
The consent decree does not provide an adequate remedy to the
allegations in the complaint, is ambiguous (the ambiguity of the
license agreement has been documented in HyperLaw's previous
letters), and lacks any effective enforcement methodology.
If the Antitrust Division persists in its efforts to protect its
public relations posture and its political deal with West and
Thomson, we believe that even under the stringent standards of U.S.
v. Microsoft, the District Court should reject the consent decree.
The following excerpts are from U.S. v. Microsoft and describe what
the District Court judge may do. Of course, the Antitrust Division,
after consideration of the new information brought to its attention,
is in no way restricted by the limited discretion permitted to the
District Court.
``whether the remedy provided in the decree was adequate to the
allegations in the complaint''
``A district judge pondering a proposed consent decree
understandably would and should pay special attention to the
decree's clarity.''
``Similarly, we would expect a district court to pay close
attention to the compliance mechanisms in a consent decree.''
``When the government and a putative defendant present a
proposed consent decree to a district court for review under the
Tunney Act, the court can and should inquire, in the manner we have
described, into the purpose, meaning, and efficacy of the decree. If
the decree is ambiguous, or the district judge can foresee
difficulties in implementation, we would expect the court to insist
that these matters be attended to. And, certainly, if third parties
contend that they would be positively injured by the decree, a
district judge might well hesitate before assuming that the decree
is appropriate.''
U.S. v. Microsoft, 56 F.3d 1148 (D.C. Cir. 1995) [Because West
claims a copyright in its internal page numbers, and because
HyperLaw has not paid a citation tax to West so that it could insert
the page numbers in its database . . . assuming that West would
license the internal pagination for use in HyperLaw's CD-ROM
database of almost all of the opinions in recent Federal Reporters
and assuming that HyperLaw would sign the onerous agreement and
could afford the exorbitant up-front payments without any assurance
that it could increase prices and sales to cover such payments . . .
HyperLaw does not have the internal page numbers of this opinion in
its database, and is unable to cite to the internal page numbers
without locating an open public law library during the Labor Day
weekend.]
We conclude as follows:
The Consent Decree is defective ab initio and has little
remedial effect on a grossly anticompetitive merger.
To the extent the Consent Decree might provide a scintilla of
meaningful relief, it relies for enforcement on the good faith of
parties that in the past has never been shown. Between the signing
of the settlement and the present time, the Wilson Sonsini letter
shows that West-Thomson is not acting, and has no intent to act, in
good faith.
The Department of Justice has not the means or the will to
enforce even that scintilla of relief.
The Department of Justice in its description of the Consent
Decree has intentionally misrepresented the scope and effect of the
Consent Decree and the License Agreement.
The Antitrust Division has argued as a reason for its tepid
actions that in a merger approval under Hart-Scott Rodino, it is
circumscribed in addressing past antitrust wrongs. However, there is
nothing in Hart-Scott Rodino that prohibits the United States from
initiating antitrust enforcement action when it develops evidence of
violation of the antitrust laws in the course of a Hart-Scott-Rodino
investigation. Thus, there is no justification for the Division's
argument that a weak meaningless license agreement should be
gratefully accepted by the public merely because it remedies
problems that pre-existed (but are worsened by) the merger.
THE LICENSE AGREEMENT IS NOT AN ``OPEN LICENSE AGREEMENT AND IS
BEING MISREPRESENTED BY THE ANTITRUST DIVISION AND WEST TO FURTHER
THEIR MUTUAL SELF-INTEREST AND TO DECEIVE THE PUBLIC INTO BELIEVING
THAT THE CONSENT DECREE IS A ``VICTORY FOR ALL OF US'' AND
``RESOLVE[S] ANY POSSIBLE ANTITRUST CONCERN REGARDING THE
AVAILABILITY OF STAR PAGINATION LICENSES.''
DOJ's initial press release misdescribed the scope and
applicability of the Consent Decree and in particular called the
license agreement an ``open agreement.'' Nothing could be further
from the truth. Subsequent to our June letters, during a two hour
telephone conversation (described below in more detail) with you,
Larry Fullerton and others in the Antitrust Division, we reiterated
our displeasure with this mischaracterization, and the Division was
unable to provide a credible defense for its positions concerning
the license agreement.
Shortly thereafter, as part of its public relations campaign,
the Antitrust Division once again engaged in gross misrepresentation
of the license agreement in a letter and brief filed by the
Antitrust Division on August 5, 1996 before the United States
District Court for the Southern District of New York in Matthew
Bender & Co., Inc. and HyperLaw, Inc. v. West Publishing Company.
``Part of that settlement requires Thomson to license to other
law publishers the right to star paginate to West's National
Reporter System. . . . In announcing the settlement, the U.S.
Department of Justice stated: `Today's settlement, with its open
licensing requirement does not suggest . . . that the Department
believes a license is required for use of such pagination.' ''
Memorandum of United States Of American As Amicus Curiae In
Support Of The Proposition That Bender's Star
[[Page 53411]]
Pagination To West's National Reporter System Does Not Infringe Any
Copyright Interest West May Have In The Arrangement Of The National
Reporter System Volumes, p. 2, August 5, 1996, Matthew Bender & Co.
Inc. and HyperLaw, Inc. v. West Publishing Company, 94 Civ. 0589
(JSM), United States District Court, Southern District of New York
(DOJ New York Brief).
Among other things, it is inappropriate to describe the License
Agreement as an ``open'' agreement when it will be negotiated in
private and arbitrated in private pursuant to confidentiality
provisions agreed to by the Antitrust Division.
We also note that this continued misrepresentation in the August
5 brief occurred after our June letters and the two hour conference
in late July with you and other senior Antitrust Division counsel.
DOJ tossed out this self-serving public relations slow ball.
Then, West on August 24, 1996, exaggerated further this
mischaracterization in its response to the DOJ New York Brief:
``West had agreed, as part of its Proposed Final Judgment in
United States v. The Thomson Corp., No. 96-1415 (D.D.C. filed June
19, 1996), to license all other law publishers the right to star
paginate to West's National Reporter System publications--at
standardized royalty rates which the Antitrust Division approved as
commercially reasonable. While, as the Antitrust Division points
out, the inclusion of a star-pagination license in the Proposed
Filed Judgment does not mean that the Antitrust Division agrees with
West's position on star-pagination--it doesn't--the negotiation of
the Proposed Final Judgment does not mean that the Antitrust
Division agrees with West's position on star-pagination--it
doesn't--the negotiation of the Proposed Final Judgment does resolve
any possible antitrust concern regarding the availability of star
pagination licenses to West competitors.''
West Publishing Company's Memorandum Of Law In Opposition To The
Memorandum Of The Antitrust Division Of The Department Of Justice As
Amicus Curiae, August 24, 1996, Matthew Bender & Company, Inc. and
HyperLaw, Inc. v. West Publishing Company.
We were not aware that the Division was of the opinion that the
Proposed Final Judgment ``resolved any possible antitrust concern
regarding the availability of star-pagination licenses'' nor are we
aware of any basis that the rates are commercially reasonable. We
note that there has been no record created as to how the Division
arrived at the royalty rates, and how it may be commercially
reasonable in certain limited situations, and unreasonable in
others.
We believe that West-Thomson should be held to its posturing,
and the Licensee Agreement be renegotiated to resolve ``any possible
antitrust concern'' by making the agreement an open, practical,
reasonably priced agreement both in form and in substance.
WEST'S COPYRIGHT CLAIMS TO TEXT OF COURT OPINIONS, OPINION
ARCHIVES AND THE DATABASE PROTECTION ACT.
The DOJ Complaint fully recognized the importance of archives of
the text of legal opinions. Unfortunately, not only does the Consent
Decree not propose any relief with respect to this problem, but the
merger only increases the concentration in this area, by placing
into the combined entity the archives of West and the Thomson
Companies, and removing the Thomson Companies from its continuing
efforts to create and obtain its own archives of opinions. Quite
clearly, Thomson was not only a potential competitor in the creation
of archives of opinions, but was well on the way to so doing.
The License agreement provides for West to license the internal
pagination at an expensive license fee, but is singularly silent as
to whether a licensee as part of the license may obtain the text by
copying the opinion text from a West reporter. Moreover, no other
relief provided in the consent decree will have any measurable
impact on the dominance of West and Thomson in enhanced and
unenhanced case law.
What does the complaint state:
``Entry would be difficult for three reasons. First, successful
entry would require access to past and current court opinions and
statutes. Past and/or current opinions simply are not available from
many courts, and in many others, obtaining access is costly and
time-consuming.''
DOJ is correct in this regard. This paragraph of the complaint
although devoted to the West Thomson dominance in enhanced case law,
applies equally to unenhanced case law, particularly in those
jurisdictions, such as the federal courts (recipients of West's
largesse) at West's urging have acquiesced to West's being the
provider of the authoritative archive of federal court opinions. The
reasons set forth in Paragraph 19 are some of the factors relating
to the domination of on-line case law research described later in
the Complaint. [Paragraph 19 of the Complaint's lists those markets
where West and Thomson's compete in case law. This list is
substantially understated, since it only refers to enhanced case
law. For example, HyperLaw licenses to Thomson tagged case opinions
for the federal appellate courts which Thomson includes on CD-ROMs
of state case law in Texas, Louisiana, Mississippi, and Kansas.)
We understand that the American Association of Legal Publishers
is providing today to DOJ an analysis of its efforts to obtain
original copies of federal court opinions directly from the courts
for opinions from the 1960's and 1970's. This study shows that
opinions are simply missing from files, that court files are not
able to be found, that opinions are misfiled in the case files, that
the court archive centers limit the number of case files to as few
as three that may be viewed, and that the process if fraught with
delays, confusion and expense. It is sometimes difficult to obtain
even current court opinions and some federal courts of appeals do
not even make all of their published opinions available
electronically.
One reason that archives are such a competitive advantage is
that the incremental cost of publishing a CD-ROM treatise or
enhanced product with the full text of cited opinions is zero for a
company with an archive. In other words, the West incremental cost
is zero. It does not have to locate and copy the original opinions
and does not have to convert them to electronic form. Nor of course
does West have to pay a license fee to use the star-pagination.
What is the current position of West-Thomson on the issue of
copying court opinion text from West case reports? West's Response
to Matthew Bender's Rule 3(g) Statement (wherein Matthew Bender
recited undisputed facts in support of its motion for summary
judgment) filed August 19, 1996 in Matthew Bender & HyperLaw v. West
states as follows:
MATTHEW BENDER STATEMENT OF UNDISPUTED FACT: 40. West contends
that rival publishes, including Matthew Bender, are free to obtain
slip opinions directly from their issuing courts, but will incur
copyright liability by copying those opinions from a West reporter.
WEST'S RESPONSE: West cannot admit or deny this statement, which
is actually a hypothetical situation, rather than a ``fact,''
without having specific facts about how much copying has been done
from a West Reporter. This statement also incorrectly refers to
opinions rather than case reports.
To make matters worse, the DOJ New York Brief suggests that the
Antitrust Division is playing a double game here. First, the
Antitrust Division has at no time indicated its desire to file a
brief in support of HyperLaw's motion that will permit rival
publishers to copy the text of court opinions from West reporters.
Second, as anticipated in HyperLaw's June letters which referred to
West efforts to end-run the copyright laws by lobbying for database
protection legislation, DOJ states as follows in its brief:
``Copyright is not the only conceivable legal regime for
protecting the fruits of industrious collection. The Delegation of
the United States of America recently proposed to the World
Intellectual Property Organization an international treaty that
would provide to the ``maker'' of certain databases the exclusive
right to extract all or a substantial part of the contents, without
regard to copyrightability. World Intellectual Property
Organization, Preparatory Committee of the Proposed Diplomatic
Conference (December 1966) on Certain Sui Generis Protection of
Databases, CRNR/PM/7 (May 20, 1996). Legislation providing for such
protection has been introduced in Congress. See H.R. 3531, 104th
Cong., 2d Sess. (1996).
DOJ New York Brief, Page 6, Note 4.
Fortunately, because of widespread opposition, the Congressional
legislation has not gone anywhere. So, what has the Administration
done in this political season: on behalf of information industry
lobbyists and campaign contributors including West, with the seeming
support of the Antitrust Division, the Administration has put in
place an end-run around the United States Congress and the United
States Constitution by having international bodies composed of
member nations with constricted views of the public's right of
access to government information agree to a treaty that will then be
forced down Congress's throat.
If the Antitrust Division was merely being inartful in its
disregard of the West monopoly on text, and if it agrees that West
has and is
[[Page 53412]]
engaging in copyright misuse and anti-trust violations by asserting
claims in the text of court opinions drawn from West case reports in
West reporters, then we invite the Antitrust Division to: (1)
require the amendment of the License Agreement to specifically
include the right of the pagination licensee to copy the text of
court opinion from West case reports and (2) file an amicus brief in
support of HyperLaw's motion for declaratory relief permitting
competing publishers to copy the court opinion portion from West
case reports.
LICENSE AGREEMENT ISSUES DISCUSSED IN JULY MEETING
We also wish to follow up on the discussion we held in late July
concerning our two letters:
1. We specifically objected to the characterization of the
license agreement as an ``open'' license agreement. Thereafter, DOJ
repeated this mischaracterization twice in its filings in Matthew
Bender & HyperLaw v. West.
2. We discussed the effect of Section 1.03, which states:
``1.03 `Licensee Case Reports' shall mean Licensee's reports of
judicial decisions that are selected for reporting by Licensees in
[Licensee Product(s)/Service(s) and coordinated and arranged by
Licensee within [Licensee Products(s)/Services].''
Not one of the five senior Antitrust Division attorneys present
at the meeting disputed our interpretation that West would not be
required to license page numbers to publishers publishing all of the
opinions in a single West Reporter Series. I used as examples the
proposed Oasis CD-ROM of opinions found in West Florida Cases, and
HyperLaw's CD-ROM which includes almost all opinions appearing in
West's Federal Reporter.
3. The Antitrust Division argued that Lear v. Adkins, in
prohibiting no-contest provisions in license agreements, had been
narrowly construed in later opinions. However, there was no response
to our point that the public policy issues raised in Lear v. Adkins
remain valid and were even more relevant where the Antitrust
Division had negotiated a compulsory license to remedy destructive
anti-competitive behavior.
4. The Division argued that the no-contest provision was
narrowly drafted and would only relate to ``contest[ing] the
validity of the copyrights claimed by Licensor in Licensor's
arrangement of case reports in NRS Reporters as expressed by NRS
pagination'' and would not prohibit other objections to West
copyright claims. However, we pointed out that West linked all of
its claims to its compilation claims, and, that, all West had to do
was pull the license and take the licensee to a confidential
arbitration in Minnesota, so, that the effect of 3.01 was to
prohibit a broader range of contest.
5. The Division argued that the multiple license fee was not a
problem since it had determined that most publishers were not
intending to publish in multiple media. We pointed out that this was
a flatly incorrect statement and that most CD-ROM publishers are or
were planning to offer Internet versions. One example I provided was
CD-LAW in Washington. In addition, Law Office Information Systems
has announced that it would make its CD-ROM information available on
the Internet. The Department's position evidences a complete lack of
understanding of the information industry wherein the medium of
dissemination is irrelevant. In addition, the Division's response is
just plain illogical. If no publishers will publish in multiple
media, then West-Thomson would lose no revenues by permitting a
single license to cover publication in different media. The Division
cannot have it both ways.
6. The Division argued that the confidentiality provision were
for the protection of the licensee. That may be if the licensee
desires confidentiality, and, the Division was unable to explain why
the licensee would be forced to maintain confidentiality over its
objections. It is clear to us that the primary beneficiary of
confidentiality would be West-Thomson. Once again, the Division's
defense to accepting this provision is completely illogical.
7. We objected to the fact that providers of HyperLaw would be
unable to market star-paginated cases to third parties who would
then obtain a license from West, unless HyperLaw also obtained a
license from West. Thus, West would obtain two license fees for only
one public distribution. The Division staff argued that third-party
sales was permitted under Section 2.02. But, we think the staff has
misunderstood our objection. Only a third party provider who already
had a license would be able to engage in the wholesale sale of star-
paginated cases. This is like paying a double sales tax. Moreover,
HyperLaw, in order to sell star-paginated cases would have to both
sign the license agreement and thereby agree to dismissal of its
litigation against West. We think that the Division has completely
misconstrued the clear language of Section 2.02.
8. We addressed another issue not covered in our earlier
letters: Section 2.01 requires the Licensee to provide star-
paginated cases to customers, but only if the customer has signed a
Licensee Subscriber Limitations contractual agreement as described
in section 1.08. In other words, star-paginated cases will only be
available to customers who sign contracts similar to contracts
signed by Westlaw subscribers. West as part of the licensing will be
able to ask for copies of proposed license agreement and even
monitor that process and otherwise harass the publisher. Most
important, we noted that any star-paginated case law on the Internet
would be limited only to services with restricted access and who
obtained written agreements with each user. We noted the belief by
Emory Law School that it could obtain a star-paginated license for
its Federal Court of Appeals WEB pages was completely misplaced,
although, understandable in view of the DOJ's misleading press
releases. Here, the Division completely misunderstood the practical
impact of this provision.
In our prior letters, and during that conversation, we referred
several times to the fact that any and all ambiguity or arguable
ambiguity would be interpreted by West-Thomson in its own interests,
absent any concept of implied good faith. In all due deference to
the views of the Division staff, we do not believe that commercial
arbitrators from Minnesota will share the Division's view of the
License Agreement.
We have reviewed the letter submitted by Wilson Sonsini Goodrich
and Rosati on behalf of Lexis-Nexis, a Division of Reed Elsevier.
This letter describes conduct that to us would indicate a complete
variance by West-Thomson from the divestiture procedures outlined in
the Consent Decree. West-Thomson for example has ignored the
requirement to divest Auto-Cite and ignored requirements to permit
publishers acquiring divested products to hire West-Thomson
employees. We also understand from other sources that publishers are
not being permitted to purchase single products, but most also agree
to purchase the dog products which riddle the list of divested
products. Thus, even during this period where the Consent Decree is
under review and its actions are not subject to confidentiality,
West-Thomson is acting as expected, to narrowly and in bad faith
interpret each and every provision of the Consent Decree. No doubt,
it will do the same with the License Agreement.
Our comments focused on the license agreement. However, the
approval of the merger, without also requiring the divestiture of
Lawyers Cooperative is not in the public interest.
The divestiture of products with a revenue of only 48 million
dollars will have no significant competitive impact on legal
publishing in the future. We believe that most of these products
would have been consolidated with other West-Thomson products, left
without marketing or development resources to die on the vine, or
killed outright. Certainly, West-Thomson has no reason to fear
competition from any company that is foolish enough to purchase a
crippled divested product.
Absent significant modifications to the Consent Decree, we
believe that the public interest would be best served were the
Antitrust Division to seek dismissal of the Complaint without
prejudice.
We believe that the bad faith shown by West-Thomson as described
in the Wildson Sonsini letter and the mischaracterization of the
settlement as indicated in the West filing in the New York
litigation is sufficient reason standing alone for the Antitrust
Division to pull its consent.
Sincerely,
Alan D. Sugarman,
President, HyperLaw, Inc.
This letter could not be reprinted in the Federal Register,
however, they may be inspected in Suite 215, U.S. Department of
Justice, Legal Procedures Unit, 325 7th St. N.W., Washington, D.C.
at (202) 514-2481 and at the Office of the Clerk of the United
States District Court for the District of Columbia.
Supreme Court of California
August 7, 1996.
Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of
Justice, 1401 H Street, N.W., Suite 4000, Washington, D.C., 20530
[[Page 53413]]
Dear Mr. Conrath:
Standing of Advisory Committee
This comment on the proposed consent decree for merger of the
Thomson Corporation and West Publishing Company is submitted on
behalf of the California Advisory Committee on Publication of the
Official Reports.
The California Advisory Committee for Publication of the
Official Reports was appointed by the Chief Justice of California in
October 1995 to study the California Official Reports, solicit
publication proposals pursuant to the California Government Code,
and make recommendations concerning publication of the Official
Reports, including a recommendation as to the publisher. The
committee's recommendations are made to the California Supreme Court
and the contracting parties to the Official Reports publication
contract for the State of California (i.e., the Chief Justice of
California, the Attorney General, the Secretary of State, the
President of the State Bar, and the Reporter of Decisions).
The advisory committee consists of Supreme Court Associate
Justice Marvin R. Baxter, chair; Court of Appeal Associate Justice
J. Gary Hastings; Supervising Deputy Attorney General Linda Cabatic;
Chief Assistant Secretary of State Robert Jennings, Kenneth Drexler
for the President of the State Bar; Nanna Frye, Librarian for the
Fourth District Court of Appeal; and, Edward Jessen, Reporter of
Decisions.
Advisory Committee's Analysis of Proposed Consent Decree
The advisory committee met on July 15, 1996, to review how the
proposed consent decree would affect publication of the California
Official Reports. The committee concluded that the proposed consent
decree does not adequately preserve competition in California for
enhanced primary law products. (Primarily, present competition is
between Thomson's California Official Reports and West's unofficial
California Reporter, and between Deering's Annotated California
Codes and West's Annotated California Codes).
The economic reality of publishing enhanced primary law products
in California compels a continuing nexus between Deering's Codes and
the Official Reports following completion of the Thomas/West merger.
The advisory committee notes that there is no language in the
proposed consent decree to require continuation of the existing
nexus between Deering's Codes and the official Reports. (Relevant
language on page 19 of the proposed consent decree is as follows:
``Thomson shall transfer to the Official Reporter Contract State a
license, which shall be perpetual in term, sublicensable,
assignable,and royalty-free, to the use of any intellectual property
rights which Thomson holds pertaining to the headnotes, case notes,
and/or case summaries in the products at issue.'' This language does
not relate to the future; there is some doubt it will suffice to
maintain a nexus between Deering's Codes and the Official Reports
after completion of the merger and divestitures.
In California, Thomson and West presently have competing
enhanced primary law products. Each publisher pairs an enhanced
opinion products and an enhanced code product, and each also
publishes secondary law materials that combine with the enhanced
primary law products to form two competing systems of integrated
legal information. With the possible exception of New York, the
committee is unaware of any state that has competing systems of
legal information.
The economic importance to a publisher of such an integrated
system of legal information is that a portion of the editorial cost
of producing headnotes for the enhanced opinion product (i.e., the
California Official Reports and West's unofficial California
Reporter) can be allocated to the enhanced code product (i.e.,
Deering's Annotated California Codes and West's Annotated California
Codes), as well as to secondary law materials. The significant
nexus, however, is between the opinion and code products.
The proposed consent decree preserves West's economic advantage
of having enhanced primary law products within an integrated system
of legal information. It fails, however, to include provisions to
preserve the existing unity of Thomson's enhanced primary law
products within an integrated system of legal information.
Preservation of the existing unity of opinion and code products is
left to chance. The advisory committee believes that this situation
is not in California's public interest.
If Deering's Annotated California Codes cannot use the headnotes
from the California Reports as annotations in an enhanced code
product, the resulting increased editorial costs will lead to
uncompetitive pricing. Likewise, pricing for the California Official
Reports may increase unless a portion of editorial costs for
headnoting opinions can be allocated to other products.
If two competing lines of enhanced primary law products within
integrated systems of legal information are reduced to a single
Thomson/West integrated system, the economic reality is that no
publisher would be able to effectively compete with Thomson/West in
California. Rather than fostering competition, the consent decree
would lead to a market with a single dominant vendor.
Conclusion
The foregoing analysis reflects the consensus of the California
Advisory Committee on Publications of the Official Reports pursuant
to the committee's study of Official Reports publication. The
committee requests that the proposed consent decree be modified to
require that divestiture of Deering's Annotated California Codes be
linked in some manner to the California Official Reports.
For the advisory committee,
Edward W. Jessen,
Reporter of Decisions and Secretary to California Advisory Committee on
Publication of Official Reports.
American Association of Law Libraries
July 29, 1996.
Mr. Craig Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of
Justice, Suite 4000, 1401 H Street, N.W., Washington, D.C. 20530
Subject: Proposed Merger of West Publishing with Thomson Corporation
Dear Mr. Conrath: I am writing today to comment on the proposed
consent order in the sale of West Publishing Company to the Thomson
Corporation. The American Association of Law Libraries presented its
views on the merger at an earlier stage of the proceeding in a
letter to Ms. Anne Bingaman dated March 26, 1996. We appreciate the
attention the Department has given to this issue, and we very much
appreciate the effort the Department has made to respond to our
concerns. Nonetheless, in light of the proposed settlement, we do
wish to submit some additional comments for your consideration.
The American Association of Law Libraries is a nonprofit
educational organization headquartered in Chicago with nearly 5,000
members nationwide. Our members build legal and law-related
collections in over 1,900 libraries, and they respond to the legal
and governmental information needs of attorneys and law students,
judges and legislators, and the general public. We are almost
certainly the largest single identifiable consumer group for the
products of the companies involved. As our immediate past-President,
Patrick E. Kehoe, said when the merger was first announced: ``the
merger of Thomson and West will change legal publishing forever.''
The American Association of Law Libraries remains neutral on the
issue of the merger itself. In filing these comments A.A.L.L. does
not wish to be understood as opposing the sale of West to Thomson,
and nothing we say here should be construed in that manner. Rather,
the American Association of Law Libraries remains committed to the
larger goal of ensuring the continuation of high quality legal
information products at reasonable prices in a healthy competitive
environment. With that general goal in mind, A.A.L.L. would like to
comment on three aspects of the settlement including: the proposal
to sell selected individual titles from the publishers' inventory,
rather than selling off companies, the amount of the proposed
license fee for the use of star pagination from West's National
Reporter System, and the requirement in the license agreement that a
licensee relinquish their legal right to challenge West's claim of
copyright. We also want to reiterate our concern for the impact of
the sale on competition in the online environment.
The viability of individual titles. The proposed settlement
relies heavily on spinning off some 52 titles to maintain
competition in the legal publishing industry. With those sales as
the basis of the future competitive environment, it will be
essential that those titles are able to survive in the marketplace.
From the beginning of this process, the members of the American
Association of Law Libraries have been concerned about the impact of
the merger on their ability to choose among competing print products
and their ability to obtain the benefits of
[[Page 53414]]
competition in matters of product pricing and product quality (see
letter to Anne Bingaman, March 26, 1996, pp. 2-5). The settlement is
plainly responsive to those concerns since it proposes to maintain
the competitive environment by requiring the companies to sell off
those individual products where the impact of the merger on
competition would be the greatest.
Some members of our Association are concerned, however, about
the decision to require the sale of individual titles rather than
subsidiary companies. To them, it is not clear that individual
titles will continue to be viable entities in the market when
separated from the larger organizations of which they have been a
part.
First, the production of a complex legal title requires the
existence of a substantial supporting infrastructure. Most
obviously, it requires a trained and knowledgeable staff, skilled in
the identification and analysis of legal developments, whether
statutory or judicial, and skilled in the presentation of those
developments in a format that is useful to attorneys. Although the
settlement allows the purchaser to attempt to hire the staff that
has been involved in the creation of the titles in question, it is
by no means clear that staff would choose to leave a larger parent
organization to follow an individual stand-alone title.
The supporting infrastructure also includes production,
including design and layout, marketing and sales, computer support,
and printing. Each of these operations is substantial and is
frequently shared across product lines within a single company.
Again, it is not clear that it is economically viable to establish
this kind of production and printing support for a single title, or
even for a small group of titles that have been split off from a
larger company.
Second, at least some of the publications in question have long
been an essential component of a larger system of legal research.
The Total Client Service Library provides a system by which the many
products of Lawyer's Coop have been integrated into a research
system. Cross references among the products provide a helpful and
seamless way for the lawyer to move from one Lawyer's Coop product
to another, including the American Law Reports, American
Jurisprudence, 2d, and other practice materials that are not being
sold as part of the divestiture.
A booklet published by Lawyer's Coop in 1990 described Am Jr 2d,
ALR and USCS as being ``part of a comprehensive legal research
system.'' (See A Student's Guide to Am Jur 2d, ALR and USCS, Lawyers
Coop, 1990.) The booklet states: ``The comprehensive legal research
system published by Lawyers Cooperative Publishing covers everything
from on-point cases in both state and federal jurisdictions, to
principles of law, statutes, procedure, model forms, trial
techniques * * * in short, everything you need to handle almost any
legal matter. And since it is fully cross-referenced, you can go
quickly from one aspect of your matter to another with assurance
that no aspect will be overlooked.''
They then list as part of the ``system'' some fourteen separate
titles ranging from encyclopedias and form books to ALR, the USCS,
and Lawyers Edition, to several services and texts on specialized
legal topics. With extensive cross-referencing among these products,
it is again not clear that one or two can be pulled out, scrubbed
clean of the value-added cross-referencing, and then be expected to
stand alone in the market place. Pulled out of the system, they will
be different products, and the market may no longer find them to be
so desirable or so valuable.
The American Association of Law Libraries would very much like
to see further analysis on the issue of the viability of individual
titles and they would like to receive some assurance that those
titles will be able to continue to compete in the marketplace
following the merger.
Pricing of the license for use of the West pagination. The
association is concerned about the pricing of the proposed license
for the use of the pagination in the West Reporter system.
The Association has long believed that the system of citation to
legal publications should be in the public domain. In testimony on
behalf of the American Association of Law Libraries in favor of H.R.
4426 in the 102d Congress, Professor Laura Gasaway stated:
``Copyright protection should not extend to volume and page numbers
of these materials for two reasons: because page numbers lack
sufficient originality to merit protection, and [because] allowing
one publisher to control the means of citation to important public
domain materials gives that publisher the power to exclude others
from the market. Such protection would become a mechanism by which
one publisher could turn public domain materials into protected
materials that they can control.''
At the same hearing, the representative of Thomson Legal
Publishing was even more forceful. Accompanied by a representative
of Lawyers Cooperative, she argued that the copyright of legal
citation information had led to the monopolization of the
``publication of lower federal court opinions, statutory law in
Illinois and Texas and elsewhere, and the appellate case law of many
states.''
The proposed license illustrates the problem. The American
Association of Law Libraries welcomes the development of an open
structure for the pricing of West's citation information. But the
level of the pricing involved seems designed to accomplish precisely
what the proponents of H.R. 4426 feared: exclusion of others from
the marketplace. Nine cents does not sound like a great deal of
money until one does the math. But when the numbers are multiplied
out for some of the very large sets in the National Reporter System,
the price seems to us to be significant. Such pricing could be a
major barrier to using the data and entering the legal publishing
market to anyone except a very large existing enterprise.
The Association does note that this issue could become moot or
largely irrelevant if the courts and organs of legal scholarship
would accept a medium neutral/vendor neutral system of citation,
such as the one previously endorsed by this Association.
The Association takes no position on what the appropriate level
of pricing ought to to be. Nonetheless, in view of the Association's
interest in promoting a healthy competitive environment for access
to legal information, we believe that the level ought to be set such
that a prospective entrepreneur can enter the market, and with a
reasonable increment on its other costs add the system of pagination
to its new product. The current strikes us as excessive to meet that
goal.
The requirement that a licensee give up some of their legal
rights. The Association believes that the license approved by the
United States Department of Justice and the United States District
Courts for the District of Columbia should not contain a provision
that requires the licensee to give up its legal right to contest
West's claim of copyright in the system of pagination.
The proposed license agreement states in relevant part:
3.01. Copyrights. During the term of this Agreement, Licensee
(I) shall respect and not contest the validity of the copyrights
claimed by Licensor in Licensor's arrangements of case reports in
NRS Reporters as expressed by NRS Pagination. * * *
We understand why West-Thomson would want such a provision as part
of the agreement. However, in this case, the provision will have the
approval of the U.S. Department of Justice and approval is now being
sought from the United States District Court for the District of
Columbia as well. We see no reason why those organs of justice
should approve a provision requiring a licensee to give up a legal
right when they sign the agreement.
We respectfully request that this provision be stricken from the
proposed license.
Online competition. The Association remains concerned about the
impact of the merger on the market for online legal information.
In its earlier letter to the Department, the American
Association of Law Libraries expressed concern about the impact the
merger could have in the competition for online legal services,
citing the need that LEXIS has to acquire source data from existing
publications that will now be under the sole control of its chief
competitor. Insofar as the record shows, nothing has changed in this
regard.
The Order does direct the sale of one legal database--Auto-
Cite--and grants an option to extend the License Agreements for
Investext, ASAP, and Predicasts, three non-legal databases. But
nothing is said about access to other legal databases to which LEXIS
might want access such as state statutory materials, American Law
Reports Annotated, and other ancillary material such as the RIA Tax
Coordinator. We worry that if one company is the sole source for
certain important information, it could use that control to make its
competitor's product less desirable and thereby squeeze it out of
the market. In view of the fact that there are only two major
competitors in the market for online legal information, we believe
it is critical to address the issue of licensing, or equitable
access to such sole source information, in the final order.
The American Association of Law Libraries appreciates the
opportunity to comment again on the proposed merger of the two
[[Page 53415]]
largest legal publishers. This change in the legal publishing
landscape is almost certainly the most important development in the
field that any of us will see during our careers. It is critical to
do it in a way that maintains a competitive market for high quality
legal information products at reasonable prices.
If we may be of further assistance or answer any questions about
any of these matters, I hope you will not hesitate to call upon me
at (202) 622-9161.
Sincerely,
Robert L. Oakley.
Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of
Justice, Suite 4800, 1401 H Street, N.W., Washington, DC 20530
Dear Mr. Conrath: Even after taking the list of divested titles
into consideration, members of the Association of Law Libraries of
Upstate New York continue to feel concern over the potential
ramifications of the acquisition of West Publishing by Thomson. With
this purchase, Thomson will have control of a significant portion of
the secondary sources that aid in interpreting the law. In the past,
Thomson practices have made acquired products both more labor
intensive and costly to maintain. Updates to looseleaf sets from
Callaghan and Clark Boardman are updated routinely more than once a
year as Clark Boardman Callaghan titles. With the advent of online
services, the need for an increase in chapter and supplement
shipments has come into question. In addition, many former pocket
titles from Lawyers Cooperative have been converted to binder
formats which are more labor intensive to update.
It is the area of pricing that is truly cause for concern. Ten
years ago, it was rare for maintenance of a Lawyers Cooperative
title to increase more than 9% a year excluding price spikes created
by revisions or new editions. Since Thomson acquired Lawyers
Cooperative, individual title maintenance often runs well over 25% a
year. This has not been true for West products. For example:
------------------------------------------------------------------------
Percent Percent
increase increase
1985 1995
------------------------------------------------------------------------
CBC: Bailey, Crimes of Violence: Rape............... 4.3 57.4
LCP:
Carmody-Wait...................................... 8.5 63.0
Foster, Law and the Family........................ 7.5 20.4
WEST: Devitt, Federal Jury Practice................. 1.4 10.2
------------------------------------------------------------------------
Your consideration of these factors in your continued review of
West's acquisition by Thomson will be appreciated.
Sincerely,
Cyndi A. Trembley,
President.
This letter could not be reprinted in the Federal Register,
however, they may be inspected in Suite 215, U.S. Department of
Justice, Legal Procedures Unit, 325 7th St., N.W., Washington, D.C.
at (202) 514-2481 and at the Office of the Clerk of the United
States District Court for the District of Columbia.
Darby Printing Company
August 9, 1996.
Mr. Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of
Justice, Suite 4000, 1401 H Street, N.W., Washington, D.C. 20530.
Dear Mr. Conrath: On behalf of Darby Printing Company I wish to
comment on the proposed consent degree entered in the merger of
Thomson Corporation and West Publishing Company.
After reviewing the documents filed in this anti-trust action,
we have two questions regarding the proposed settlement. First, why
were the states of Washington, Wisconsin, and California given the
option to rebid their contracts and not the states of Illinois,
Massachusetts and New York? These states also have enhanced case law
reporters which fit the two principle criteria as defined in
paragraph 21, beginning on page 8 of the Complaint, in that these
publications contain the entire body of case law for their
respective jurisdictions and they contain comprehensive written
descriptions of points of law within the opinions. As with the
states covered in the complaint, West and Thomson publish the
dominant enhanced case law reporters in the states of Illinois,
Massachusetts and New York.
Second, after having contacted those responsible for overseeing
the publication of the case law reporters in California, Washington,
and Wisconsin, there appears to be some confusion as to the
definition of ``option''. Is the option given to these states a true
option, in that these states may opt not to rebid the contracts, or
is it a mandate that these states rebid? The opinions of those
involved in making the decision in these states are split as to what
they are required to do under this proposed consent. Furthermore, if
the option is exercised will Thomson-West be allowed to participate
in the bid process?
Darby Printing Company believes that based on the Herfindahl-
Hirschman Index those states given the option to rebid their
respective case law contracts should be mandated to rebid those
contracts without the participation of the Thomson Corporation. The
HHI numbers, 4762 for California enhanced case law, an increase of
3866, 4521 for Washington enhanced case law, an increase of 996, and
5535 for Wisconsin enhanced case law, increased by 2424, as provided
in Appendix B of the complaint, prove that the post merger markets
in these states are very concentrated. It is our opinion that the
only way to create competition in these markets is to compel the
Thomson Corporation in effect to divest these products.
Thank you for your attention in this matter. We look forward to
hearing your response to our questions.
Sincerely,
Karen Ehmer, Esq.
Law Offices, David C. Harrison, Daniel M. Belov
July 2, 1996.
Janet Reno,
Attorney General, Department of Justice, Washington, DC 20530.
RE: Merger: The Thompson Corporation/West Publishing
Dear General Reno: I have just learned that Anti-Trust Division
has approved the merger of The Thompson Corporation (which is better
known as Lawyers Cooperative Publishing) with West Publishing. How
can the Justice Department approve the merger of the second largest
legal publisher with the largest legal publisher, giving the new
company a virtual monopoly?
It is this kind of nonsense that enrages Democrats who would
like to support President Clinton but are finding it increasingly
difficult to do so. He is becoming a Republican clone, as is his
administration. How can this merger be justified?
Very truly yours,
David C. Harrison
DCH: slh
ALOIS V. GROSS
August 12, 1996.
Mr. Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of
Justice, 1401 H Street N.W., Suite 4000, Washington, D.C. 20530.
Re: Public Comment, U.S. v The Thompson Corporation and West
Publishing Co., U.S. District Court for the District of Columbia,
Civil Action No. 96-1415
Dear Mr. Conrath: I have enclosed my Public Comment on the above
matter. I understand the enclosed comments and your reponses will be
published in the Federal Register and filed with the Court.
Please feel free to call me if you would like clarification of
anything in my Public Comment.
I am part of a group who is a prospective acquirier of
Divestiture Products. Although my private comments in this respect
have been directed in a separate letter to Mr. James Foster at the
U.S. Department of Justice, I have enclosed a copy of that letter
for your review as well.
Very truly yours,
Alois V. Gross
Enclosures/2
Public Comment on Proposed Final Judgment and Competitive Impact
Statement, U.S. v. The Thomson Corporation and West Publishing Co.,
U.S. District Court for the District of Columbia, Civil Action No. 96-
1415
I. Premise
The Proposed Final Judgment fails to attain its goal, as
required by the federal antitrust laws of eliminating the
anticompetitive effect that a merger of the two Defendants creates
[[Page 53416]]
in the legal publishing market. It should therefore be rejected by
the Court.
II. Argument
A. Tradenames Must Be Divested
Thomson/West is not required by the Proposed Final Judgment to
divest the ``Bancroft-Whitney'', ``LawDesk'', and ``Lawyers'
Cooperative Publishing'' tradenames currently owned by The Thomson
Corporation. These tradenames should be included in the list of
Divestiture Products in the Proposed Final Judgment (Exhibit A), but
they are not.
These tradenames carry valuable goodwill and brand market
recognition developed over many decades of legal publishing. They
will be essential in maintaining the confidence of customers and the
market share for the Divestiture Products identified with these
tradenames. Without these tradenames, the acquirer of such
Divestiture Products will have the same barriers to entry as a
start-up publication. With its vast financial, marketing, and
distribution resources. Thomson/West could easily overwhelm and
overpower the acquirer within months of divestiture.
To ensure the Divestiture Products remain viable, the goodwill
and market recognition associated with the ``Bancroft-Whitney'',
``LawDesk'', and ``Lawyers' Cooperative Publishing'' tradenames must
transfer with the Divestiture Products, and therefore these
tradenames must be divested by Thomson/West.
``Bancroft-Whitney'' is the tradename associated with the oldest
law publishing company in the country, established in California
nearly 150 years ago. ``Bancroft-Whitney'' is identified currently
with the products Thomson sells to the California legal market, and
will be vitally important to the successful acquirer of the
California-specific Divestiture Products.
Substantial current revenue brought to Thomson from its
``Bancroft-Whitney'' office is derived from the sale of products
listed as Divestiture Products, including Deering's California Codes
Annotated; California Appellate Reports (official); California
Reports (official); California Reports Advance Sheets (official);
and California Digest. Consequently, without the Bancroft-Whitney
tradename, the acquirer of these products is severely disadvantaged.
``LawDesk'' is also a tradename--for CD-ROM products--owned by
Thomson that is not included on the list of Divestiture Products in
the Proposed Final Judgment. It will be vitally important to the
successful acquirer of Divestiture Products sold in CD-ROM format
under the ``LawDesk'' tradename to maintain the market recognition
and goodwill associated with the ``LawDesk'' tradename.
CD-ROM based legal information is a growth market. Both Thomson
and West have CD-ROM product lines with tradenames associated with
these products. West uses the ``West'' tradename for its CD-ROM
products, and Thomson uses the ``LawDesk'' tradename for its CD-ROM
products.
Each of these tradenames (``LawDesk'' and ``West'') has a
substantial reputation in the CD-ROM legal information market.
``LawDesk'' CD-ROM products are the only major competitor to the
``West'' CD-ROM products in many markets.
Furthermore, Thomson's indication that it will be operating
under the familiar and powerful ``West'' tradename in the United
States following the merger (Thomson/West's merged organizational
name will be West Information Publishing Group), highlights the
probability that there will be little or no measurable loss to
Thomson from the divestiture of the tradename ``LawDesk''.
``Lawyers' Cooperative Publishing'', a tradename owned by
Thomson, is also excluded from the list of Divestiture Products in
the Proposed Final Judgment. ``Lawyers' Cooperative Publishing'' is
the tradename associated with the oldest continuously published
edition of the United States Supreme Court Reports--Lawyers Edition
(L Ed 2d)--which is listed as a Divestiture Product. ``Lawyers'
Cooperative Publishing'' is the tradename identified with this and
many other Divestiture Products that Thomson currently sells to the
national, federal, and many state legal markets. Transfer of this
tradename along with the Divestiture Products will be essential for
their success.
B. The Star Pagination System Needs No License
``Star-pagination'' is not universally considered to be a
definitive proprietary feature of the West National Reporter
System.* No licensing arrangement should be established or
sanctioned by the Court for ``star-pagination'' of the West National
Reporter System.
---------------------------------------------------------------------------
* See West Publishing Company v Mead Data Central, Inc. (1985,
DC Minn) 616 F Supp 1571, 227, USPQ 631, affd (1986, CA8 Minn) 799
F2d 1219, 230 USPQ 801, cert den (1987) 479 US 1070, 93 L Ed 2d
1010, 107 S Ct 962; Oasis Publishing Company v West Publishing
Company (D Minn 1996) ______ F Supp ______, 1996 WL 264773 (pending
litigation); Matthew Bender and Company, Inc. v West Publishing
Company (S.D.N.Y.) Docket No. 94-CIV-0589 (pending litigation).
---------------------------------------------------------------------------
Until such time as there is a definitive ruling, a licensing
scheme that is national in scope, such as the License Agreement
contained in the Proposed Final Judgment (Exhibit B), should not be
established or sanctioned by the Court.
By sanctioning the licensing of ``star-pagination'' by a merged
Thomson/West organization, the Court is establishing de facto
monopolistic proprietary rights, which by its very nature is
anticompetitive. The issue of the copyrightability of ``star-
pagination'' has no definitive ruling from the United States Supreme
Court or clear legislative coverage in the Copyright Act.
Moreover, by sanctioning such a licensing scheme for ``star-
pagination,'' the Court will be fostering a monopoly for a merged
Thomson/West organization and fostering anticompetitiveness in the
legal publishing market by giving judicial approval to the West
National Reporter System as the de facto official reporter system
throughout the United States.
C. Official Reports and Digests Must Be Divested
Without clearly stating it, the Proposed Final Judgment allows a
merged Thomson/West organization to retain and not divest the
Divestiture Products listed in Exhibit A.3 (official reports,
appellate reports, and advance sheets for California, Washington,
and Wisconsin) and Exhibit A.4 (digest of official reports for
California and Wisconsin).
The Proposed Final Judgment requires Thomson to offer
information on such publications only after the respective States
exercise their option to cancel their current contract to publish
the official reports (which the States are not required to do).
Thus, unless and until the respective States to which those
publications apply choose to cancel their respective contracts with
the merged Thomson/West organization, Thomson and West arguably are
not required to offer information regarding such products to
prospective bonafide acquirers.
Furthermore, if a merged Thomson/West organization is allowed to
maintain these contracts, this will have an anticompetitive effect,
since the Defendants also publish the major competing publications
in the pertinent markets. Therefor, the final judgment should
require Thomson to disclose to bonafide prospective acquirers all
pertinent information on these Divestiture Products, without regard
to whether the States cancel their current publishing contracts for
these products. The final judgment should also require Thomson to
divest these products: California Appellate Reports (official),
California Reports (official), California Reports Advance Sheets
(official), California Digest (of official reports and appellate
reports), Washington Appellate Court Reports (official), Washington
Supreme Court Reports (official), Wisconsin Official Reports,
Wisconsin Official Reports Advance Sheets, and Wisconsin Digest (of
official reports).
D. Bids Must Not Be Limited to Entire List of Divestiture Products
Only
The Proposed Final Judgment ambiguously allows Thomson to
require all prospective bonafide acquirers of Divestiture Products
to bid only on the entire list of Divestiture Products, rather than
on one or a group of the products. This has the anticompetitive
effect of allowing Thomson to refuse to offer important information
on individual Divestiture Products to prospective bonafide
acquirers. Secondly, this allows Thomson to refuse to consider an
offer on a single or group of Divestiture Products by a prospective
bonafide acquirer.
Competitiveness in the legal publishing market will be fostered
if Thomson is required to consider and in fact favor bids for
individual or groups of Divestiture Products over bids for all the
Divestiture Products. Having more legal publishers in the market
will more likely result in competitive pricing and higher quality of
law products for the consumer. Having a few very large legal
publishers in the market could result in anticompetitive pricing and
lower quality of law products for the consumer. Thomson should be
required to consider and favor bids for individual or groups of
Divestiture
[[Page 53417]]
Products over bids for all Divestiture Products.
E. Jurisprudence Publication Must Be Divested
The Proposed Final Judgment fails to eliminate the
anticompetitive effect of the merger of Thomson and West with regard
to jurisprudence publications, otherwise known as legal
encyclopedias. West publishes Corpus Juris Secundum (CJS); and
Thomson publishes American Jurisprudence 2d (Am Jur 2d).
These two publications are the only major national legal
encyclopedias in the United States legal market. Without divestiture
of one of these publications, the merged Thomson/West organization
will have a monopoly on the national legal encyclopedia market.
Since the West tradename is already associated with CJS, divestiture
of Am Jur 2d would more effectively satisfy the goal of ensuring
competition in the market place. Thomson should be required to
divest one of these two national legal encyclopedias to ensure a
competitive market.
Dated: August 12, 1996.
Respectfully submitted,
Alois V. Gross,
Minnesota Attorney No. 13322X, 2219 Pillsbury Avenue, Minneapolis, MN
55404-3266, Phone: (612) 871-4680.
Alois V. Gross
August 12, 1996.
Mr. James Foster,
Merger Task Forth, Antitrust Division, U.S. Department of Justice,
1401 H Street N.W., Suite 4000, Washington, D.C. 20530.
Re: Private Comments by Prospective Acquirer of Divestiture
Products, U.S. v The Thomson Corporation and West Publishing Co.,
U.S. District Court for the District of Columbia, Civil Action No.
96-1415
Dear Mr. Foster: I am part of a group who is a bonafide
prospective acquirer of Divestiture Products in the above matter. I
was recently informed by your office that private inquiries and
comments should be addressed to you. I wish this letter and your
response to it not be published in the Federal Register, nor filed
with the Court in the above matter. I have under separate cover sent
``Public Comments'' to Mr. Craig Conrath, as well as a copy of this
letter. I have also sent copies of this letter to the other
Plaintiffs in the above matter.
Thomson has in a very short time decimated the competition in
the legal publishing industry in the U.S., by following a course of
takeover of companies and aggressive downsizing. Following Thomson's
acquisition/takeover of Lawyers' Cooperative Publishing Company
(along with its then subsidiary companies--Bancroft-Whitney and
Research Institute of America) in 1989, Thomson ``downsized'' these
U.S. organizations, eliminating two-thirds of the Bancroft-Whitney
staff, as well as making severe reductions in the staff at the other
acquired U.S. companies. Thomson then similarly acquired and
substantially downsized other U.S. law publishers, such as Clark-
Boardman and Callaghan.
In the process of this U.S. industry takeover by a foreign
corporation, Thomson has been in a constant state of restructuring
and reorganization of its U.S. legal publishing dynasty. This
history of takeover by Thomson in the U.S. legal publishing industry
is important to view in the proper perspective Thomson's present
acquisition/takeover/``merger'' of West Publishing Company (West).
If the current Proposed Final Judgment is approved by the Court,
one result will be that the U.S. legal publishing industry will have
no real competition. Furthermore, Thomson's products for the U.S.
legal market will likely suffer in quality from decreased editorial
input. Its legal information products will likely have substantial
price increases due to a lack of any real price competition in the
market.
The Proposed Final Judgment does not require divestiture of
certain valuable tradenames currently identified with the
Divestiture Products. ``Bancroft Whitney'', ``LawDesk'', and
``Lawyers' Cooperative Publishing'' command tremendous goodwill and
brand market recognition in the legal publishing market. Brand
market recognition is essential for the viability of the Divestiture
Products in the legal publishing market. If a prospective purchaser
acquires Divestiture Products such as the California Appellate
Reports (official), California Reports (official), California
Reports Advance Sheets (official), California Digest and Deering's
California Codes Annotated without the accompanying tradenames long
associated with such product--``Bancroft Whitney'' and ``LawDesk'',
then they are at a severe competitive disadvantage against the
``West'' brand. Thus, if Thomson is successful in maintaining
ownership of the ``Bancroft Whitney'' and other tradenames, it will
obtain a de facto monopoly in any legal publishing market where
those tradenames hold clout.
Thomson has already indicated it will be using the familiar and
powerful ``West'' tradename in marketing its products in the U.S.
legal market, by announcing that its U.S. legal publishing operation
will change its name from Thomson Legal Publishing to West
Information Publishing Group. The ``West'' tradename has tremendous
goodwill and brand market recognition attached to it in the legal
publishing market. When familiar tradenames associated with legal
publishing in the U.S. are no longer available to competitors,
Thomson (with the ``West'' tradename) will achieve a de facto
monopoly. In California, for example, the ``West'' California
Reporter will continue to have the brand market recognition and
goodwill it always has had. Without the Official Reports'
accompanying ``Bancroft-Whitney'' goodwill and brand market
recognition, the perceived quality and resulting market share for
the Official Reports will likely decline.
The same argument applies to the statutory law publications in
California: without the accompanying ``Bancroft-Whitney'' goodwill
and brand market recognition, the perceived quality and resulting
market share of Deering's California Codes Annotated will surely
decline. As is, the Proposed Final Judgment will create a de facto
monopoly for Thomson/West in one legal publishing market after
another.
This reasoning applies equally to the legal CD-ROM product
market in the U.S. There are two major competing legal CD-ROM
product lines in the U.S.--the ``West'' CD-ROM products and the
``LawDesk'' CD-ROM products. In the interest of maintaining
competition and preventing a de facto Thomson monopoly, Thomson must
be required to divest one of these two major competing legal CD-ROM
trademarks.
``West'' is the tradename The Thomson Corporation has already
indicated that it will be relying on to advance its merged legal
publishing business throughout the United States. Therefor,
``LawDesk'' is the likely candidate for divestiture.
It is even more likely Thomson will replace its ``LawDesk'' CD-
ROM product line with the ``West'' CD-ROM product line, since
Thomson now owns the operating system software on which the ``West''
CD-ROM product line is based--Premise.* Thomson should be required
to divest the ``LawDesk'' tradename.
---------------------------------------------------------------------------
*The operating system software for the ``LawDesk'' CD-ROM
products (the base for the legal information that is stored there)
is Folio--owned by Folio Corporation. The operating system software
for the ``West'' CD-ROM products is Premise--owned by West * * * and
now Thomson.
---------------------------------------------------------------------------
Initially, after we wrote to request information from Thomson
and West on certain Divestiture Products, I was told in a telephone
conversation by Thomson that, unless we intended to make one bid on
all the Divestiture Product, Thomson was not obligated to--and would
not--make available any information at all on individual Divestiture
Products. This all or nothing approach is extremely anti-
competitive. Thomson should be required to disseminate information
and consider bids on any individual Divestiture Product.
In the ``Offering Memorandum-Selected Legal Products'' from
Thomson, there is absolutely no information--financial or
otherwise--concerning certain Divestiture Products such as the
various official reports and digests for the three jurisdictions
involved. When I then specifically requested by telephone this
information from Thomson, I was informed that it was not required to
give any information concerning the official reports or digests, or
any information other than what it included in the above-mentioned
Offering Memorandum. We intended to bid on some or all of the
official reports and digests. However, without financial and other
information, it is impossible to make an educated analysis of and
proposal for these Divestiture Products. Thomson should be required
to make information available on the official reports and digests,
and all Divestiture Products, to bona fide prospective bidders.
Furthermore, the financial and other information included in the
above-mentioned Offering Memorandum is misleading. It contains no
meaningful and historical presentation of the facts and figures. The
Divestiture Products have all seen changes in
[[Page 53418]]
their production since Thomson first acquired many of them in 1989,
in its acquition/takeover of Lawyers' Cooperative Publishing and
Bancroft Whitney. To obtain an understanding of the value of the
Divestiture Products, it is necessary to compare financial and other
information on the products both prior to Thomson's initial
acquisition of such products in 1989 and in the 7 years since its
ownership of such products. This is important because of the changes
in production that Thomson has implemented on these products since
its ownership of them.
The present value of the Divestiture Products is directly
related to how they have been produced both prior to Thomson's
acquisition of them and since that time--a time that has been filled
with substantial personnel reductions and shifting of resources
throughout the Thomson organization, all of which affects the value
of any Divestiture Products. Thomson should be required to disclose
to all bonafide prospective acquirers, financial and other
information on the Divestiture Products in a meaningful and
historical presentation from the time immediately prior to its
acquisition of such products in 1989 to the present time, with
proper supporting documentation.
Thomson initially established a deadline of August 8th for
submission of proposals for acquisition of the Divestiture Products.
On August 2nd, Thomson sent a letter indicating the deadline was
changed to August 15th. In light of the concerns and inquiries I
have expressed here, Thomson should be required to extend its
deadline on August 15th, until these concerns can be satisfactorily
resolved. As part of a group who is a bonafide prospective acquirer
of Divestiture Products, I ask that you apply to the Court for an
appropriate and necessary order to resolve the issues raised in this
letter.
I would like to speak with you at your earliest convenience
since Thomson's August 15th deadline for proposals is almost here.
Thank you.
Very truly yours,
Alois V. Gross
CC: Mr. Craig W. Conrath, Mr. James E. Doyle, Jr., Ms. Christine O.
Gregoire, Mr. Dennis C. Vacco, Mr. Scott Harshbarger, Mr. Jim Ryan,
Mr. Richard Blumenthal, Mr. Daniel E. Lungren
ALOIS V. GROSS
August 20, 1996.
Mr. Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of
Justice, 1401 H Street N.W., Suite 4000, Washington, D.C. 20530.
Re: Public Comment, U.S. v The Thomson Corporation and West
Publishing Co., U.S. District Court for the District of Columbia,
Civil Action No. 96-1415
Dear Mr. Conrath: The enclosed Public Comment on the above
matter is an addendum to my Public Comment sent to you on August
12th. I understand the enclosed comments and your responses will be
published in the Federal Register and filed with the Court.
Please feel free to call me if you would like clarification of
anything in my earlier Public Comment or this Public Comment
Addendum.
Very truly yours,
Alois V. Gross
Enclosure
Public Comment on Proposed Final Judgment and Competitive Impact
Statement, U.S. v The Thomson Corporation and West Publishing Co., U.S.
District Court for the District of Columbia, Civil Action No. 96-1415
(Addendum to Public Comment filed August 12, 1996)
I. Premise
The Proposed Final Judgment fails to attain its goal, as
required by the federal antitrust laws, of eliminating the
anticompetitive effect that a merger of the two Defendants creates
in the U.S. legal publishing market. It should therefor be rejected
by the Court.
II. Argument
A. Tradenames Must Be Divested
Thomson/West is not required by the Proposed Final Judgment to
divest the ``Total Client-Service Library'' (``TCSL''), ``A Practice
Systems Library Manual'', and ``American Jurisprudence'' (``Am
Jur'') tradenames currently owned by the Thomson Corporation. These
tradenames should be included in the list of Divestiture Products in
the Proposed Final Judgment (Exhibit A), but they are not.
These tradenames carry valuable goodwill and brand market
recognition developed over many decades of legal publishing. They
will be essential for maintaining the confidence of customers and
the market share for the Divestiture Products identified with these
tradenames. Without these tradenames, the acquirer of such
Divestiture Products will have the same barriers to market entry as
with a start-up publication. With its vast financial, marketing, and
distribution resources, Thomas/West could easily overwhelm and
overpower the acquirer within months of divestiture.
To ensure the Divestiture Products remain viable, the goodwill
and market recognition associated with the ``Total Client-Service
Library'' (``TCSL''), ``A Practice Systems Library Manual'', and
``American Jurisprudence'' (``Am Jur'') tradenames should transfer
with the Divestiture Products, and therefor these tradenames should
be divested by Thomas/West.
``Total Client-Service Library'' (``TCSL'') is a tradename
feature appearing in many Divestiture Products and other
publications currently produced by the Lawyers' Cooperative
Publishing (LCP) and Bancroft Whitney (BW) offices of Thomson. It is
a very useful reference tool for locating related primary and
secondary legal publications, by way of cross-reference citations.
(Currently, ``TCSL'' is used to cross-refer readers to other
publications produced by the LCP and BW offices of Thomas--a very
useful internal marketing feature.) The Divestiture Products obtain
value from the inclusion of the ``TCSL'' tradename feature. Without
continued inclusion of the ``TCSL'' feature in the Divestiture
Products, the acquirer of such products will be severely
disadvantaged in the market from the inability to cross-refer, and
``internally market'' other related legal products published by the
acquirer--in a manner that is both familiar to and valued by current
users of the Divestiture Products. Any change in these publications
following divestiture, whereby the ``TCSL'' feature is no longer
included, will likely be a severe disadvantage to the
competitiveness of such publications.
If Thomson/West desires to continue using the ``TCSL'' feature
in non-divestiture products, it should be required to license the
use of this tradename from the acquirer. The burden to license the
use of the ``TCSL'' tradename should be placed on Thomson/West
rather than on the acquirer, since the continued viability of
Divestiture Products is already questionable due to the inevitable
changes in their production following divestiture.
Any unnecessary burden, such as requiring the acquirer to
license the use of existing tradenames in Divestiture Products will
negatively affect the ability of the acquirer to maintain cost-
effective production of the Divestiture Products. Should such a
burden become too great for the acquirer, the ``TCSL'' tradename
feature could be eliminated from the Divestiture Products, with a
resulting negative impact on the competitiveness of such products.
In order to maintain the competitive survival of the Divestiture
Products, the ``TCSL'' tradename should transfer with such products
upon divestiture, with a license-back to Thomson/West for its
continued use of ``TCSL'' in non-divestiture products.
Similarly, ``A Practice Systems Library Manual'' is a tradename
associated with many Divestiture Products, and other non-divestiture
publications produced by the LCP and BW offices of Thomson/West.
This tradename appears in the titles of such publications. This
tradename is not included on the list of Divestiture Products, but
it should be.
The goodwill and brand market recognition associated with the
``A Practice Systems Library Manual'' tradename was developed over
many decades of legal publishing. The Divestiture Products currently
associated with this tradename obtain value from this tradename.
Without continued inclusion of this tradename in the Divestiture
Products currently associated with it, such products will be
competitively disadvantaged in the market. The same argument
regarding licensure of this tradename feature discussed above for
``TCSL'' applies equally here. If Thomson/West desires to continue
using this tradename in producing non-divestiture publications, it
should be required to license-back such tradename use from the
acquirer.
``American Jurisprudence'' (``Am Jur'') is the tradename
currently associated with one of the two national legal
encyclopedias in the U.S. that under the current divestiture plan
will both be owned by a merged Thomson/West. Both the tradename and
the encyclopedia (American Jurisprudence 2d) should be included on
the list of Divestiture Products in the Proposed Final Judgment, but
they are not. The encyclopedia was recommended for required
divestiture in a Public Comment filed August 12, 1996.
[[Page 53419]]
If American Jurisprudence 2d is divested as recommended, the
``Am Jur'' tradename will still be associated with certain non-
divestiture products owned by Thomson/West, including: Am Jur Legal
Forms, Am Jur Pleading and Practice Forms, Am Jur Proof of Facts,
and Am Jur Trials. Such related products should also be divested to
keep the Am Jur product line in tact and competitive. Alternatively,
Thomson/West should at the very least be required to license back
the tradename ``Am Jur'' from the acquirer of American Jurisprudence
2d, for continued use in Thomson/West's related ``Am Jur'' products.
B. Thomson/West Must Pay License Fee for ALR cites on Auto-Cite
Auto-Cite is a Divestiture Product that contains substantial
references to Thomson/West-owned legal publications, for which the
acquirer of Auto-Cite should be compensated on a license basis from
Thomson/West. The Proposed Final Judgment does not provide for a
license fee to be paid by Thomson/West to the acquirer of Auto-Cite,
but it should.
In particular, Auto-Cite contains the many thousands of
citations to case reports and annotations contained in Thomson/
West's American Law Reports (ALR) publications: ALR, ALR 2d, ALR
3rd, ALR 4th, ALR 5th, and ALR Federal. Developed over many years of
legal publishing, Auto-Cite derives competitive value from the
inclusion of citations to ALR case reports and annotations, since
such citations in their entirety currently appear in no other
electronic legal research product/service on the market.
Following divestiture of Auto-Cite, its competitive value
attributable to ALR citations will probably diminish in some degree
over time, since Thomson/West will in time likely add all ALR
citations and text to its Westlaw electronic legal research product/
service. Nevertheless, Thomson/West should be required to pay a
license fee to the acquirer of Auto-Cite, for inclusion of all
references to Thomson/West's ALR citations, since Thomson/West will
also obtain value from the continued inclusion of ALR citations in
Auto-Cite.
III. Conclusion
An overriding concern with the Proposed Final Judgment is that
it does not effectively maintain real competition in the U.S. legal
publishing industry, following this latest advance in Thomson's
calculated takeover of the industry and fracturing of product lines.
Valuable goodwill, brand market recognition, and product-line
customer loyalty currently associated with Divestiture Products will
likely suffer under the current divestiture plan. The current plan
makes no attempt to maintain the competitiveness of Divestiture
Products by requiring divestiture of and along entire product lines.
Moreover, the current plan also makes no attempt to maintain the
competitiveness of Divestiture Products by requiring divestiture of
and along company tradename lines, such as all ``BW'' products or
all ``LCP'' products.
Goodwill, brand market recognition, and customer loyalty
associated with entire product lines and interrelated publications
and services currently produced by the BW and LCP offices of Thomson
will be fractured following divestiture under the current plan. Some
of these BW and LCP products and services will be published by
Thomson/West, and some (Divestiture Products) will be published by
the acquirer(s), under the current plan.
Incongruously, the current plan leaves most products and entire
product lines presently produced by West under the familiar ``West''
tradename in tact and largely unscathed, with regard to goodwill,
brand market recognition, and customer loyalty. These are the
products and product lines that Thomson/West will continue to own
following divestiture under the current plan. While on the contrary,
the current plan fractures many product lines of which Divestiture
Products are presently a part. It also fractures the many tradenames
presently associated with Divestiture Products. The current plan
therefor places Divestiture Products and their acquirer at a severe
competitive disadvantage in the legal publishing market following
divestiture.
Under the Proposed Final Judgment, this fractured U.S. legal
publishing industry will continue with only one clear market
leader--Thomson/West--and a de facto monopoly in that organization.
Real competition in the U.S. legal publishing industry will likely
be gone forever under the current plan.
The Thomson/West merger-divestiture should be reevaluated with
an eye toward requiring Thomson/West to divest entire product lines
that share common tradenames. At the very least, all tradenames
currently associated with Divestiture Products should be divested
and transferred with those products.
Dated: August 20, 1996.
Respectfully submitted,
Alois V. Gross,
Minnesota Attorney No. 13322X, 2219 Pillsbury Avenue, Minneapolis, MN
55404-3266, Phone: (612) 871-4680.
Tax Analysts
September 3, 1996.
By Hand Delivery
Craig W. Conrath, Esq.
Chief, Merger Task Force, Antitrust Division, U.S. Department of
Justice, 1401 H Street, N.W., Suite 4000, Washington, D.C. 20530.
Re: United States v. The Thomson Corporation and West Publishing
Company, Case No. 1:96CVO1415 (U.S. District Court for the District
of Columbia)
Dear Mr. Conrath, I have read the comments of Lexis-Nexis
relating to the proposed final judgment in this case.
I agree with Lexis-Nexis' conclusion that the Department of
Justice has failed to provide the safeguards that are needed to
preserve competition in the market for enhanced case law. I also
agree with Lexis-Nexis' conclusion that the proposed final judgment
will result in substantially lessened competition in the markets
identified in the complaint.
I particularly agree with Lexis-Nexis' criticism of the failure
of the Department of Justice to take steps that would ``lower the
high barriers to entry that have caused such extreme market
concentrations'' in legal publishing. See comments, page 2. As a
small legal publisher, Tax Analysts is well aware of the existence
of these barriers to entry. For further information on this subject,
please see the comments that we submitted to you on August 29, 1996.
Tax Analysts opposes entry of the Proposed Final Judgment,
unless and until it is modified to eliminate the problems identified
in the Lexis-Nexis comments and in our own comments of August 29,
1996.
Best regards,
Thomas F. Field,
Publisher.
cc: Constance Spheeris, Esq., General Counsel, Tax Analysts
PUBLIC COMMENTS SUBMITTED BY TAX ANALYSTS: CIVIL ACTION NO. 96-1415
The United States, et al. v. the Thomson Corporation and West
Publishing Company
Mr. Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of
Justice, 1401 H. Street, N.W., Suite 4000, Washington, D.C. 20530.
Dear Mr. Conrath: Tax Analysts respectfully submits the
following comments regarding the Department of Justice's current
review of, and proposed settlement terms for, the acquisition of
West Publishing Co. (``West'') by the Thomson Corporation
(``Thomson''). As you know, Tax Analysts moved to intervene on July
25 in this matter and was denied. We reference by incorporation our
court filings in that proceeding, particularly for the legal basis
of our contentions.
One of the most serious barriers to competition in the legal
publishing industry is the unavailability to most publishers,
particularly newer and/or smaller publishers, of past or archival
case law. The seriousness of this barrier is evidenced by its
inclusion in the Department of Justice's (``the Department'' or
``Justice'') prima facie case in this action alleging
anticompetitive behavior against defendants Thomson and West. See
paragraph 30 of the Complaint. Despite this, the Department's
proposed Final Judgment does not provide a remedy for this
competitive barrier, which is serious enough to warrant inclusion in
its prima facie case. Tax Analysts submits that this omission makes
the proposed settlement incomplete and unworthy of judicial or
departmental approval, as the underlying monopolistic behavior of
West, not Thomson, remains unchecked.
The reason there is no remedy, we suggest, is because the
Department has locked itself into a collusive posture with West in
separate litigation over this very issue--public access to past case
law. In that litigation, Tax Analysts v. Department of Justice and
West Publishing Co., 913 F.Supp 599 (D.D.C. 1996), stayed pending
decision on appeal under F.R.Civ.Pro.54(b) in the U.S. Court of
Appeals, Case No. 96-5109, Justice is co-asserting West's
proprietary rights over the words of judges in United States federal
case
[[Page 53420]]
law. Thus, the Department has an irreconcilable conflict of interest
with respect to the availability of past case law, paragraph 30 of
the Complaint, because of its defensive position with West in co-
asserting a West proprietary interest in the past case law contained
in the JURIS database. This conflict clearly disables the Department
from fulfilling its statutory mandate under the Tunney Act because
it is unwilling or unable to provide a remedy to the anticompetitive
allegations contained in paragraph 30 of the Complaint.
As a result, the proposed Final Judgment is inadequate and
unacceptable and should be amended to provide a remedy, which is
readily available, to this very real and continuing barrier to
competition. Without access to past case law, there will be little
or no increase in competition in the legal publishing industry. It
is within Justice's authority to require the release of the past
case law contained in JURIS as part of the terms of approval of
Thomson's acquisition of West.
Tax Analysts urges the Department and the District Court to
order the public domain release of nonproprietary federal case law
and statutes contained in the JURIS database as a condition of
settlement in its antitrust review of Thomson's acquisition of West.
1. The Public Is Not Represented by Justice's Collusive Position
With West With Respect to Past Case Law
Because of Tax Analysts unique circumstances in litigating
against the Department of Justice to secure release into the public
domain of the only publicly developed database of archival case law,
JURIS, we are acutely aware of your department's inability to
represent the public interest because of its collusion with West in
co-asserting West proprietary rights to entirely public domain
information in case law contained in JURIS. This is also apparent in
the divergent and conflicting positions adopted by the antitrust and
civil divisions of the Department with respect to this issue. See
Appendix A, Memorandum of the United States of America as Amicus
Curiae in Support of the Proposition That Bender's Star Pagination
to West's National Reporter System Does Not Infringe Any Copyright
Interest West May Have in the Arrangement of the National Reporter
System Volumes, (``the Department's Memorandum''), at 5-15, 17.
Tax Analysts is the plaintiff in a Freedom of Information Act
suit which seeks to preserve and make freely available to the public
the nonproprietary portions of the Department's electronic database
known as JURIS. See Tax Analysts, supra. The nonproprietary portions
of JURIS contain the words in judicial opinions written by U.S.
judges and the statutes enacted by State and Federal legislatures.
The nonproprietary portions of the JURIS database do not contain
value-added information that could arguably be subject to
proprietary claims. For example, the nonproprietary portions of
JURIS do not contain page numbers, synopses or headnotes, nor do
these portions contain any West electronic formatting, search
software, or electronic searching capability. West's so-called
``stream format'' was eliminated by use of government-owned software
as the first step in creating JURIS. See Appendix A.
The JURIS database was electronically formatted by means of
government-owned software, written at public expense by government
employees, and applied at public expense by a third-party computer-
services contractor, West, to the nonproprietary portions of the
JURIS database. On the basis of its role as the computer-services
contractor to the Department, West claims proprietary rights in the
nonproprietary portions of the JURIS database; that is, the
unenhanced text of the judges' own words and the legislatures'
statutes. These claims, advanced in concert by West and the
Department, have thus far been successful in blocking release of the
JURIS database to the public.\1\
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\1\ On January 16, 1996, U.S. District Court Judge Gladys
Kessler granted the motions of the Department and West to dismiss
those portions of Tax Analysts' Complaint that relate to the
nonproprietary portions of the JURIS database. On April 1, 1996, the
Judge's ruling was certified as final, pursuant to Fed. Rule Civ.
Pro. 54(b). Tax Analysts has appealed. The appeal will determine
whether Judges Kessler and Richey erred in denying Tax Analysts'
repeated requests for discovery needed to oppose West's claims that
its computer services contract with Justice created proprietary
rights in the federal statutes and case law contained in the
nonproprietary portions of the JURIS system. Oral argument is set
for January 13, 1997. The remainder of the JURIS case has been
stayed, pending resolution of the appeal. Meanwhile, similar actions
are in preparation in other venues.
---------------------------------------------------------------------------
As a consequence, U.S. federal statutes and retrospective case
law in electronic form are unavailable as a practical matter to
smaller publishers seeking to enter the legal publishing market.
And, as paragraph 30 of the Complaint in this action make clear,
``successful entry [into the legal publishing market for enhanced
primary law] would require access to past and current court opinions
and statutes. Past and/or current opinions simply are not available
from many courts and in many others, obtaining access is costly and
time-consuming.''
The nonproprietary portions of the JURIS database--the words of
judges and legislatures--constitute a very valuable public asset.
JURIS is the only publicly owned database containing Federal and
State statutes and Federal case law. Until the nonproprietary
portions of the JURIS database are made available to the public,
including smaller publishers, there is ``unlikely to be entry by any
company offering enhanced primary law in any of the relevant product
markets identified. * * *'' See Complaint, paragraph 30.
It is clear from the proposed Final Judgment that the
Department's collusion with West in Tax Analysts, supra, renders it
unable to craft a fair settlement of third-party publishers in the
current monopolistic conditions in the legal publishing industry.
These conditions are almost entirely the result of West's
monopolistic control and assertions of proprietary rights over the
original, unenhanced words of judges in past case law. For small,
innovative publishers, the lack of access to past case law is
rightly alleged in paragraph 30 of the Complaint. The Department's
failure to require the release of nonproprietary federal case law
and statutes contained in JURIS, as a response to this prima facie
monopoly practice or claim, is untenable. The Department's JURIS
database is a readily available and appropriate remedy to this
competitive barrier. Tax Analysts believes that allowing this
situation to continue will do more harm to competition in the
industry than any existing remedy contained in the Final Judgment
will do to alleviate it.
But for the Department's decision to propound and support West's
assertions of proprietary rights over public domain case law in the
JURIS database, the nonproprietary portions of that database rightly
would be released into the public domain. Rather than encourage
competition in the legal publishing industry by requiring release of
this database by West and the Department, the Department continues
to collude with West by choosing to omit the release of JURIS from
the Final Judgment in this action.\2\
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\2\ Although Tax Analysts and others maintain that the mere
words of judges and legislators contained in case law and statutes,
stripped of West value-added enhancements, is entirely
nonproprietary, whether West holds any proprietary rights in the raw
data that it provided to Justice under contract for JURIS is
irrelevant here. Along with the other materials West and Thomson are
required to divest for purposes of approval, the Department is fully
empowered to require release into the public domain of the federal
case law and statutes contained in JURIS, regardless of what
portions are claimed as proprietary by the parties.
---------------------------------------------------------------------------
2. The Department Is Disabled From Representing the Public With
Respect to Access to Past Case Law
If the Department were truly acting in the public interest with
respect to access to past case law, it would require the release of
JURIS into the public domain as a condition of approval of Thomson's
acquisition of West. Collusion, including virtual co-pleading, in a
prior litigation with a current opposing party, to the detriment of
a current client--in this case, the American People, whom Justice
purports to represent in this Tunney Act antitrust review--violates
the very foundation of professional responsibility.\3\ By these
actions, Justice proves that it cannot represent the public interest
in gaining access to past case law. The archival case law contained
in JURIS, stripped of West enhancements, was and still
[[Page 53421]]
is available to Justice as a remedy here if it truly wishes to end
the monopolistic hold of West on past case law, and, therefore, on
the legal publishing industry as a whole. Justice's failure to
include this remedy in its Final Judgment speaks of its continued
collusion with West.
---------------------------------------------------------------------------
\3\ See, e.g. pleadings in Tax Analysts, supra:
(1) Defendants' Motions to Dismiss using almost identical
language and submitted to the court on the same day: (Justice,
February 14, 1994) ``* * * dismiss * * * to the extent Plaintiff
seeks disclosure of West licensed data.''; (West, February 14, 1994)
``* * * dismiss * * * insofar as it [Plaintiff] seeks to obtain West
licensed data.'' At no time was West-licensed data ever sought by
Tax Analysts in its FOIA request or in the subsequent litigation.
(2) West and Justice Joint Opposition to Plaintiff's Motion to
Establish Procedure for Resolution & Discovery on Agency Record
Issue, submitted to the Court on June 9, 1994.
(3) West and Justice joint statement as to undisputed facts and
disputed issues of fact and law, Appendix B to Joint Pleading
Pursuant to Order Dated May 6, 1994, dated May 27, 1994.
---------------------------------------------------------------------------
Release of JURIS is the simplest and quickest remedy to the
competitive harm caused by the lack of access to past case law.
Given the many millions of taxpayer dollars already spent on
computer services contractors such as West to provide the raw data
for JURIS, we urge the Department to include its release as a
condition of approval of Thomson's acquisition of West.
3. Only the Public Can Claim Rights in the Words of Federal Judges
Even though it is irrelevant whether West has proprietary rights
over the words of federal judges contained in the case law of JURIS
for the purpose of an antitrust settlement, as a matter of record,
it is important to examine who owns what in an electronic database.
While proprietary claims in the electronic or digital world are in a
state of change, some aspects of this emerging legal framework are
clear. First, it is settled that mere gathering or collecting is not
a copyrightable act, no matter how much ``sweat of the brow'' is
involved. See Feist Publications, Inc. v. Rural Telephone Service
Co., 499 U.S. 340 (1990). Conversely, Tax Analysts agrees that West
has a proprietary claim in its original, value-added enhancements to
case law, such as synopses and headnotes.
Second, it is also settled that despite the originality of any
compilation or arrangement, no one owns the actual information in
the database, particularly when the information originates from a
public entity, such as courts and legislatures. See Feist, supra, at
349, and Appendix A, the Department's Memorandum, at 5, 6, 11, 12,
14, 16, 17.
Third, in the digital world, value-added material--summaries,
search engines, other formatting designs, etc.--that is digitally
coded onto the raw data is easily removed. In the case of JURIS,
West's value-added materials had to be removed and Department JURIS
software procs inserted for the database to run the raw data, e.g.
case law and statutes, provided by West under contract. See Appendix
B. While West's enhancements may constitute value, they were never
an object of Tax Analysts' original FOIA request for the public
domain release of JURIS or of the subsequent litigation, nor are
they contemplated in these comments for release as a remedy to the
anticompetitive allegations in paragraph 30.
Simply put, the mere original words of judges and legislators in
the JURIS database, devoid of West material, is what is
appropriately available for release by Justice into the public
domain. No one `owns' these words except the public. The fact that
West provided to Justice for departmental input in JURIS the words
of judges in case opinions confers no proprietary right on West in
the cases themselves. ``Feist's thin copyright leaves facts
unprotected while protecting only creative selection and
arrangement. West's principle, in contrast, effectively protects
facts.'' Appendix A, the Department's Memorandum, at 15.
The following passage illustrates this point well:
An electronic database is any collection of information
maintained in a computer * * * How much of an online database can be
owned under copyright law? The answer is that a person who compiles
a database will have a copyright in the original `selection,
coordination, or arrangement' of that database. However, no one can
own the `facts' contained in the database, no matter how much work
he or she may have put into gathering those facts. This is because
facts are not originated by the database developer, but are an
independent part of the world apart from the developer, free to all
who want to use them. In other words, a database developer does not
create facts, he or she discovers them, and no one can copyright a
discovery. * * * This legal rule may not seem fair * * *
Nonetheless, it reflects a major limitation on copyright law, which
protects expressions of facts only, and not the facts themselves.
(emphasis added, except for ``discovers'')
Netlaw: Your Rights in the Online World, by Lance Rose (1995), p.
109-110.
The Department, in its Memorandum in the Matthew Bender case,
explains the policy rationale behind this legal development:
This case [Matthew Bender & Co., Inc., v. West Publishing Co.]
like Mead before it, arose primarily because new technologies, new
means of managing information, became available, a frequent event in
the information age. We have seen, in on-line computer searchable
databases and in CD-ROM products, new ways of working with the raw
materials of legal research--case reports, statutes, and other
materials that once appeared only in print form. Neither we nor this
Court can predict what new technological developments will next year
or in the next decade further revolutionize the practice of law and
make the substance of law more readily available to all. By making
clear the limited scope of copyright protection for factual
compilations, Feist cleared the way for these creative developments.
It should be followed here. (emphasis added)
Appendix A, the Department's Memorandum, at 17.
Given this public representation in a court filing, the
Department surely knows that ``these creative developments'' will
occur only if ``the raw materials of legal research''--case law and
statutes--are universally available. Why, then, is the availability
of the raw material of legal research, the absence of which is part
of the Department's prima facie case against the defendants, not
made a condition of settlement in the proposed Final Judgment?
Moreover, the proprietary rights West claims, with Justice's
support, in the compilation or arrangement of federal case law in
JURIS is inapposite in a digital platform. There is no such thing as
one arrangement or compilation in an electronic format. Unlike the
print medium which permits presentation by only the arrangement
appearing in the order designed on the printed page, information
presented in digital media is accessible through a variety of entry
points. There is no ``Table of Contents,'' only a vast, chaotic
collection of digital bits, or data; analog material that has been
randomly digitized and is accessible as randomly. While electronic
formatting for search purposes is arguably copyrightable, West's
formatting is not part of JURIS.
4. Small Publishers Must Have Access to Past Case Law or They Will
Perish
The Department has demonstrated either wanton disregard or
benign neglect of smaller legal publishers in this antitrust review.
Not once is this dynamic and innovative segment of the industry
mentioned in any pleading or proposed order. We urge the Department
now to give fair attention to the critical competitive need of small
legal publishers to gain access to past case law, as they are the
ones most injured by the competitive barriers created by West's
monopoly. Without the ability to provide complete primary law
products with retrospective case law obtained at reasonable cost,
particularly in electronic format, small publishers will not be able
to launch primary law products on a competitive track with Thomson/
West. It is well known in our industry that West's ability to
maintain its monopolistic market position is largely based on its
government sanctioned assertion of proprietary rights over the raw
materials of legal research; viz., case law and statutes.
Indeed, as the attached statements of small publishers make
clear, many of them already have suffered commercially and been
forced to abandon projects because of their inability to gain access
to past case law. (Other publishers have informed us that they will
be sending to you directly their statements regarding this issue.)
These smaller publishers experienced the anticompetitive effects of
that monopoly when they tried to release new products. This is
detrimental to a healthy economic climate and will only continue
with the aggregated market share of Thomson/West. The Department has
rightly cited this competitive harm in paragraph 30 as part of its
prima facie case but has ignored the reality of its continuing harm
in the Final Judgment.
In short, without public domain access to past case law, the
legal publishing industry will become less and less competitive as a
result of Thomson's acquisition of West, as Thomson will also
acquire West's unsubstantiated and unproven proprietary claims to
past case law; including the largest national, publicly financed
electronic database of past case law that was maintained by the
Department for decades for internal legal research, JURIS.
The Department's role as the nation's antitrust law enforcer
mandates the formulation of an economic climate for the legal
publishing industry that fosters a truly competitive and fair
nonmonopolistic environment for all members of the industry. Public
access to government-generated raw data--case law and statutes--is
an essential component of such an economic environment:
The interest of the United States in ensuring the proper
preservation of that
[[Page 53422]]
balance [between protecting private ownership of expression and
establishing the free use of basic building blocks for future
creativity] also reflects the fact that it has primary
responsibility for enforcing the antitrust laws, which establish a
national policy favoring economic competition as a means to advance
the public interest''
Appendix A, the Department's Memorandum, at 2.
5. The Electronic Legal Publishing Industry Is Not a Duopoly
The Department's treatment of the electronic legal publishing
industry as a duopoly between Lexis and Westlaw and its exclusive
inclusion of Lexis/Nexis in the Final Judgment adds insult to injury
for smaller publishers. The fact that the Department was willing to
craft a special remedy for one third-party legal publisher, and
attempt to portray that publisher as the only competitor in
electronic publishing, is astonishing to industry members.
There are scores of small legal publishers engaged in new,
innovative, and entrepreneurial electronic products from CD-ROM to
internet-based products formatted from and for multimedia platforms.
Tax Analysts refers the Department to any of several listings of
these many legal publishers, including the Directory of Law-Related
CD-ROMS, 1996, Infosources Publishing. The Department demonstrates
little understanding of and concern for the less powerful elements
of the industry under review and, therefore, little regard for
offering appropriate remedies for the enormous competitive barriers
posed by West's monopolistic control over archival case law.
Tax Analysts is deeply concerned that the competitive damage
done to small, especially electronic, legal publishers will only
continue if the Department remains unwilling to address the
competitive barrier named in paragraph 30. We bring their concerns
to you because the cost of participation and legal representation
prohibits most of them from doing so independently. An antitrust
settlement that addresses only the competitive harm to consumers and
to the largest of the defendants' competitors is not a fair or just
settlement.
We urge you to reconsider the proposed Final Judgment so that
the anticompetitive experiences of third-party legal publishers
resulting from West's monopolistic control over past United States
case law, soon to be in the hands of Thomson, will be terminated by
this proceeding. There will not likely be another opportunity for
the Department to stop the monopolistic practices cited in the
Complaint. All members of the industry deserve the same deference
reserved in the Final Judgment for Lexis/Nexis.
We are pleased to provide these comments and look forward to
discussing them further with you.
Sincerely,
Thomas F. Field,
Publisher.
In the United States District Court for the Southern District of
New York
Matthew Bender & Co., Inc., Plaintiff, v. West Publishing
Company, Defendant. 94 Civ. 0589 (JSM)
Memorandum of United States of America as Amicus Curiae in Support of
the Proposition That Bender's Star Pagination to West's National
Reporter System Does Not Infringe any Copyright Interest West May Have
in the Arrangement of the National Reporter System Volumes
ANNE K. BINGAMAN,
Assistant Attorney General.
JOEL I. KLEIN,
Deputy Assistant Attorney General.
CATHERINE G. O'SULLIVAN, DAVID SEIDMAN,
Attorneys, U.S. Department of Justice 10th & Pennsylvania Ave. NW,
Washington, DC 20530, (202) 514-4510.
RALPH T. GIORDANO (RG0114),
Attorney, U.S. Department of Justice, 29 Federal Plaza, Room 3630, New
York, NY 10278-0140, (212) 264-0390.
Table of Contents
INTEREST OF THE UNITED STATES
STATEMENT
ARGUMENT
I. The Copyright On A Compilation Is Thin, Protecting Only Those
Components Of The Work That Are Original To The Author And Only
Against Copying Of Those Components
II. The Arrangement of Bender's Compilation of Cases Is Not A Copy
Of The Arrangement Of West's Compilation Of Cases
III. Bender's Star Pagination May Describe, But It Does Not Copy,
West's Arrangement Of Cases
CONCLUSION
Table of Authorities
Cases
Banks Law Publishing Co. v. Lawyers Co-operative Publishing Co., 169
F. 386 (2d Cir. 1909), appeal dismissed, 223 U.S. 738 (1911)
Callahan v. Myers, 128 U.S. 617 (1888)
Computer Associates International v. Altai, Inc., 982 F.2d 693 (2d
Cir. 1992)
Eggers v. Sun Sales Corp., 263 F. 373 (2d Cir. 1920)
Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S.
340 (1990)
Financial Information, Inc. v. Moodys Investors Service, Inc., 751
F.2d 501 (2d Cir. (1984)
Financial Information, Inc. v. Moodys Investors Service, Inc., 808
F.2d 204 (2d Cir. 1986), cert. denied, 484 U.S. 820 (1987)
Harper & Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539
(1985)
Hoehling v. Universal City Studios, Inc., 618 F.2d 972 (2d Cir.),
cert. denied, 449 U.S. 841 (1980)
Hutchinson Telephone Co. v. Fronteer Directory Co., 770 F.2d 128
(8th Cir. 1985)
International News Service v. Associated Press, 248 U.S. 215 (1918)
Jeweler's Circular Publishing Co. v. Keystone Publishing Co., 281 F.
83 (2d Cir.), cert. denied, 259 U.S. 581 (1922)
Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974)
Key Publications, Inc. v. Chinatown Today Publishing Enterprises,
Inc., 945 F.2d 509 (2d Cir. 1991)
Kipling v. G.P. Putnam's Sons, 120 F. 631 (2d Cir. 1903)
Leon v. Pacific Telephone Co., 91 F.2d 484 (9th Cir. 1937)
Lipton v. The Nature Co., 71 F.3d 464 (2d Cir. 1995)
Matthew Bender & Company v. West Publishing Co., 1995 WL 702389
(S.D.N.Y.) (``Bender I'')
Matthew Bender & Company v. West Publishing Co., 1996 WL 223917
(S.D.N.Y.) (``Bender II'')
National Business Lists v. Dun & Bradstreet, Inc., 552 F. Supp. 89
(N.D. Ill. 1982)
New York Times Co. v. Roxbury Data Interface Inc., 434 F. Supp. 217
(D.N.J. 1977)
Oasis Publishing Co. v. West Publishing Co., 924 F. Supp. 918 (D.
Minn. 1996), appeal docketed, No. 96-2887 (8th Cir. July 19, 1996)
Rand McNally & Co. v. Fleet Management Systems, Inc., 600 F. Supp.
933 (N.D. Ill. 1984)
Schiller & Schmidt, Inc. v. Nordisco Corp., 969 F.2d 410 (7th Cir.
1992)
Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984)
Twentieth Century Music Corp. v. Aiken, 422 U.S. 151 (1975)
West Publishing Co. v. Mead Data Central, Inc., 616 F. Supp. 1571
(D. Minn. 1985), aff'd, 799 F.2d 1219 (8th Cir. 1986), cert. denied,
479 U.S. 1070 (1987)
West Publishing Co. v. Mead Data Central, Inc, 799 F.2d 1219 (8th
Cir. 1986), cert. denied, 479 U.S. 1070 (1987)
Worth v. Selchow & Righter Co., 827 F.2d 569 (9th Cir. 1987)
Statutes
17 U.S.C. 101
17 U.S.C. 103(b)
17 U.S.C. 107(4)
17 U.S.C. 301
Other Materials
H.R. 3531, 104th Cong., 2d Sess. (1996)
Robert C. Denicola, Copyright in Collections of Facts: A Theory for
the Protection of Nonfiction Literary Works, 81 Colum. L. Rev. 516
(1981)
L. Ray Patterson & Craig Joyce, Monopolizing the Law: The Scope of
Copyright Protection for Law Reports and Statutory Compilations, 36
UCLA L. Rev. 719, 740-49 (1989)
[[Page 53423]]
United States v. The Thomson Corp., No. 96-1415 (D.D.C. filed June
19, 1996), Proposed Final Judgment, 61 Fed. Reg. 35250, 35254 (July
5, 1996)
U.S. Dept. of Justice, Press Release No. 96-287, 1996 WL 337211
(DOJ)
World Intellectual Property Organization, Preparatory Committee of
the Proposed Diplomatic Conference (December 1966) on Certain
Copyright and Neighboring Rights Questions, Proposal of the United
States of America on Sui Generis Protection of Databases, CRNR/PM/7
(May 20, 1996)
In The United States District Court For The Southern District of
New York
Matthew Bender & Co., Inc., Plaintiff, v. West Publishing
Company, Defendant. 94 Civ. 0589 (JSM)
MEMORANDUM OF UNITED STATES OF AMERICA AS AMICUS CURIAE IN SUPPORT OF
THE PROPOSITION THAT BENDER'S STAR PAGINATION TO WEST'S NATIONAL
REPORTER SYSTEM DOES NOT INFRINGE ANY COPYRIGHT INTEREST WEST MAY HAVE
IN THE ARRANGEMENT OF THE NATIONAL REPORTER SYSTEM VOLUMES
The United States submits this Memorandum to express its view that
Bender's star pagination to West's National Reporter System does not
infringe any copyright interest West may have in the arrangement of the
National Reporter System volumes. We believe that the Court will be
able to reach this conclusion without deciding disputed issues of fact
and that the conclusion will permit the Court to rule for Bender on the
critical issue in the parties' motions for summary judgment. This
Memorandum, however, was prepared before the parties served their
motions and without access to those portions of the summary judgment
record under protective order.
INTEREST OF THE UNITED STATES
The United States has a substantial interest in the resolution of
the issue discussed in this Memorandum. It has numerous
responsibilities related to the proper administration of the
intellectual property laws and to advancement of the public interest.
The standards for copyright protection embody a balance struck between
protecting private ownership of expression as an incentive for
creativity and enabling the free use of basic building blocks for
future creativity. See Twentieth Century Music Corp. v. Aiken, 422 U.S.
151, 156 (1975). The United States therefore has an interest in
properly maintaining the ``delicate equilibrium,'' Computer Associates
International v. Altai, Inc., 982 F.2d 693, 696 (2d Cir. 1992),
Congress established through the copyright law.
The interest of the United States in ensuring the proper
preservation of that balance also reflects the fact that it has primary
responsibility for enforcing the antitrust laws, which establish a
national policy favoring economic competition as a means to advance the
public interest. Moreover, the United States is a substantial purchaser
of legal research materials of the kind at issue in this case.
Finally, the United States has recently taken actions relating to
the issue discussed. On June 19, 1996, the United States, together with
seven states, filed an antitrust suit challenging the acquisition of
West Publishing Co. by The Thomson Corp., together with a proposed
settlement of that suit. Part of that settlement requires Thomson to
license to other law publishers the right to star paginate to West's
National Reporter System. United States v. The Thomson Corp., No. 96-
1415 (D.D.C. filed June 19, 1996), Proposed Final Judgment, 61 Fed.
Reg. 35250, 35254 (July 5, 1996). In announcing the settlement, the
U.S. Department of Justice stated:
Today's settlement, with its open licensing requirement does not
suggest * * * that the Department believes a license is required for
use of such pagination. The Department expressly reserves the right
to assert its views concerning the extent, validity, or significance
of any intellectual property right claimed by the companies [West
and Thomson]. The Department also said that the parties agree that
the settlement shall have no impact whatsoever on any adjudication
concerning such matters.
U.S. Dept. of Justice, Press Release No. 96-287, at 3-4, 1996 WL 337211
(DOJ) *2 (June 19, 1996). This Memorandum asserts those views.
STATEMENT
1. West Publishing Company (``West'') publishes the well-known
National Reporter System, which includes case reports of federal and
state courts in the United States. In particular, it is ``the only
entity to publish decisions of the United States Courts of Appeals and
United States District Courts in comprehensive book form,'' Matthew
Bender & Company v. West Publishing Co., 1995 WL 702389 at *1
(S.D.N.Y.) (``Bender I''), in the familiar Federal Reporter and Federal
Supplement series and other series. It also ``publishes the opinions of
New York state courts,'' id., in several series of volumes. West claims
copyright in these volumes.
Matthew Bender & Company (``Bender''), another publisher of various
legal materials, has prepared for publication in Compact Disk-Read Only
Memory (CD-ROM) format a work (the ``New York product'') which
includes, among other things, the text of opinions of the United States
Court of Appeals for the Second Circuit, four United States district
courts, and various New York state courts, all for a number of recent
years.\1\ Bender has inserted into the text of some of the opinions
appearing in its New York product--those also published in West's
volumes--information about the places in West's volumes where the text
may also be found. Bender provides the West volume and page number
where the beginning of each such case may be found; it also marks with
West page numbers the places in its text where page breaks occur in
West's publication of these opinions. In other words, Bender has star-
paginated to West's volumes. Bender II at *3 & n.2.
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\1\ Although West contends that a different Bender product, the
``Texas product,'' contains ``textual additions'' copied from West's
volumes, Matthew Bender & Company v. West Publishing Co., 1996 WL
223917 at *7 (S.D.N.Y.) (``Bender II''), it makes no such claims
regarding the New York product.
---------------------------------------------------------------------------
2. Bender sued West for a declaratory judgment that ``West does not
possess a federal statutory copyright in the pagination in West's
federal reporters or West's New York reporters,'' and that ``Bender
does not and will not infringe any copyright of West's by its current
and intended copying of the pagination from West's federal reporters
and West's New York reporters.'' Second Supplemental Complaint 9. West
moved to dismiss for lack of an actual controversy between the parties,
and this Court denied that motion on May 2, 1996. The parties agreed to
serve each other with motions for summary judgment on August 5, 1996.
West has contended that the pagination of its volumes reflects the
arrangement of cases in those volumes, that the arrangement is
protected by West's copyright, and that therefore star pagination to
West's volumes infringes West's copyrights. See, e.g., Oasis Publishing
Co. v. West Publishing Co., 924 F. Supp. 918, 922 (D. Minn. 1996),
appeal docketed, No. 96-2887 (8th Cir. July 19, 1996). These
contentions lie at the core of this case.
ARGUMENT
Bender's star pagination does not infringe West's copyright
interest in the arrangement of cases within the National Reporter
System volumes. To reach that conclusion, this Court need not determine
whether that arrangement rises to the level of originality necessary
for copyright protection. Even supposing the necessary level of
[[Page 53424]]
originality in West's arrangement, Bender does not infringe unless it
copies that which is protected. And only a discredited reading of
copyright law suggests that Bender copied West's arrangement of cases.
I. The Copyright on a Compilation Is Thin, Protecting Only Those
Components of the Work That Are Original to the Author and Only Against
Copying of Those Components
The Supreme Court has made clear that copyright protection for
compilations like West's is thin, far thinner than some courts had
previously assumed. Even if the arrangement of West's volumes is
protected by copyright, that protection extends no further than West's
original contributions.
In Feist Publications, Inc. v. Rural Telephone Service Co., 499
U.S. 340 (1990), which concerned copying from a telephone directory,
the Court addressed two fundamental tensions in copyright law. One is
between the principle that facts are not protected by copyright and the
principle that compilation of facts \2\ generally are protected. Id. at
344-45.\3\ The other is between the means of ``assur[ing] authors the
right to their original expression'' and the end of ``encourag[ing]
others to build freely upon the ideas and information conveyed by a
work.'' Id. at 349-50. The Court resolved those two tensions by
emphasizing that ``the copyright in a factual compilation is thin.''
The facts themselves are not protected because they are not the product
of an act of authorship. Id. at 349.
---------------------------------------------------------------------------
\2\ A compilation is defined as ``a work formed by the
collection and assembling of preexisting materials or of data that
are selected, coordinated, or arranged in such a way that the
resulting work as a whole constitutes an original work of
authorship.'' 17 U.S.C. 101.
\3\ The Copyright Act provides that ``[t]he copyright in a
compilation * * * extends only to the material contributed by the
author of such work, as distinguished from the preexisting material
employed in the work, and does not imply any exclusive right in the
preexisting material. The copyright in such work is independent of,
and does not affect or enlarge the scope, duration, ownership, or
subsistence of, any copyright protection in the preexisting
material.'' 17 U.S.C. 103(b).
---------------------------------------------------------------------------
The overriding principle is that ``copyright protection may extend
only to those components of a work that are original to the author,''
id. at 348, where the concept of originality encompasses both
independent creation and ``a modicum of creativity.'' Id. at 346. If
the words expressing facts are original, they are protected; another
author may copy the facts, but not the precise words. Id. at 348. But
if ``the facts speak for themselves,'' protectible expression exists,
if at all, only in ``the manner in which the compiler has selected and
arranged the facts,'' and then only the original selection and
arrangement are protected. Id. at 349. Because such a copyright is
thin, copying from the copyrighted work is not infringement ``so long
as the competing work does not feature the same selection and
arrangement.'' Ibid.
This holding has economic bite. The value of a factual compilation
may lie less in the compiler's selection and arrangement of the facts
than in the industriousness required to compile them, and the thinness
of the copyright may permit others to appropriate that value. As the
Court observed, while, at first blush, it ``may seem unfair,'' ibid.,
to permit that appropriation, ``[t]his result is neither unfair nor
unfortunate. It is the means by which copyright advances the progress
of science and art.'' Id. at 350.\4\
---------------------------------------------------------------------------
\4\ Copyright is not the only conceivable legal regime for
protecting the fruits of industrious collection. The Delegation of
the United States of America recently proposed to the World
Intellectual Property Organization an international treaty that
would provide to the ``maker'' of certain databases the exclusive
right to extract all or a substantial part of the contents, without
regard to copyrightability. World Intellectual Property
Organization, Preparatory Committee of the Proposed Diplomatic
Conference (December 1966) on Certain Copyright and Neighboring
Rights Questions, Proposal of the United States of America on Sui
Generis Protection of Databases, CRNR/PM/7 (May 20, 1996).
Legislation providing such protection has been introduced in
Congress. See H.R. 3531, 104th Cong., 2d Sess. (1996). The Supreme
Court long ago held that the common law of unfair competition or
misappropriation protected uncopyrighted news reports. International
News Service v. Associated Press, 248 U.S. 215, 239-40 (1918),
although the preemption provision of the Copyright Act, 17 U.S.C.
301, may limit such protection to the case of systematic
appropriation of ``hot'' news, Financial Information, Inc. v.
Moody's Investors Service, Inc., 808 F.2d 204, 208-09 (2d Cir.
1986), cert. denied, 484 U.S. 820 (1987). Trade secret law may also
provide some protection in appropriate circumstances. See Kewanee
Oil Co. v. Bicron Corp., 416 U.S. 470 (1974).
---------------------------------------------------------------------------
Feist repudiated a body of case law that had used the so-called
``sweat-of-the-brow'' theory to provide broad copyright protection for
factual compilations, thus protecting the fruits of mere industrious
collection. The Court specifically rejected Leon v. Pacific Telephone &
Telegraph Co., 91 F.2d 484 (9th Cir. 1937), and Jeweler's Circular
Publishing Co. v. Keystone Publishing Co., 281 F. 83 (2d Cir.), cert.
denied, 259 U.S. 581 (1922), precisely because these cases `'extended
copyright protection in a compilation beyond selection and
arrangement--the compiler's original contributions--to the facts
themselves.'' 499 U.S. at 352-53.\5\
---------------------------------------------------------------------------
\5\ Although the Court specifically rejected a 1922 opinion of
the Second Circuit, it also noted that the Second Circuit had since
``fully repudiated the reasoning of that decision.'' 499 U.S. at
360, citing Financial Information, Inc., v. Moody's Investors
Service, Inc., 808 F.2d 204, 207 (2d Cir. 1986), cert. denied, 484
U.S. 820 (1987); Financial Information, Inc. v. Moody's Investors
Service, Inc., 751 F.2d 501, 510 (2d Cir. 1984) (Newman, J.,
concurring); and Hoehling v. Universal City Studios, Inc., 618 F.2d
972, 979 (2d Cir.), cert. denied, 449 U.S. 841 (1980).
---------------------------------------------------------------------------
Feist also addressed whether the alphabetical arrangement of a
telephone book involved the ``quantum of creativity'' necessary for
copyright protection. 499 U.S. at 363-64. It therefore speaks to
whether West's arrangement of cases exhibits the necessary quantum of
creativity to permit copyright protection. But it is not necessary to
resolve that question to decided this case. It is enough that Feist
makes clear that even if West's arrangement is protected by copyright,
the protection resulting form that creativity does not extend beyond
arrangement to protect other components of a work.
II. The Arrangement of Bender's Compilation of Cases Is Not A Copy Of
The Arrangement Of West's Compilation Of Cases
No one seriously contends that Bender's CD-ROMs actually ``feature
the same . . . arrangement,'' Feist, 499 U.S. at 349, of cases as
West's National Report System, even in the limited sense of putting one
case before the other in a pattern identical, or even notably similar,
to the pattern found in West's volumes, let alone in a sense
encompassing the arrangement of text on pages within each case.\6\ This
is true
[[Page 53425]]
whether ``arrangement'' refers to the physical ordering of electronic
bits of information on Bender's CD-ROMs, to the order in which the
Bender computer software presents cases to the user, or to any other
concept of ``arrangement.'' Indeed, it is hard to see how there could
be any such contention.
---------------------------------------------------------------------------
\6\ In that respect, this case is unlike Callahan v. Myers, 128
U.S. 617, 660-61 (1888), where the infringing volumes of case
reports substantially duplicated the paging of the infringed
volumes. Cf. Banks Law Publishing Co. v. Lawyer's Co-operative
Publishing Co., 169 F. 386 (2d Cir. 1909) (implying same ordering of
cases but different pagination; star pagination used in allegedly
infringing work; held, no infringement), appeal dismissed, 223 U.S.
738 (1911). We note that the Callahan Court, following the lower
court, did not treat duplication of the paging as an independent
basis for finding infringement, apparently on the ground that
arranging and paginating the cases involved inconsiderable labor and
was not worthy of protection in and of itself. 128 U.S. at 662. The
Eighth Circuit has read Banks as turning on the official status of
the reporter whose works were copied. West Publishing Co. v. Mead
Data Central, Inc., 799 F.2d 1219, 1225 (8th Cir. 1986) (``Mead''),
cert. denied, 479 U.S. 1070 (1987). That reading has been strongly
criticized, id. at 1245-47 (Oliver, J., concurring in part and
dissenting in part); L. Ray Patterson & Craig Joyce, Monopolizing
the Law: The Scope of Copyright Protection for Law Reports and
Statutory Compilations, 36 UCLA L. Rev. 719, 740-49 (1989), and a
post-Banks case in the Second Circuit casts doubt on the Eighth
Circuit's reading, Eggers v. Sun Sales Corp., 263 F. 373, 375 (2d
Cir. 1920) (copying from plaintiff's publication of uncopyrightable
official report suggested by identity of pagination in defendant's
publication, ``but legally that is not of sufficient importance to
constitute infringement of copyright,'' citing Banks), but our
argument does not turn on the correct reading of Banks.
---------------------------------------------------------------------------
Courts routinely analyze whether an arrangement protected by
copyright has been impermissibly copied by looking at the two works and
comparing the ordering of material in the accused work with the
ordering of material in the allegedly infringed compilation. Seem,
e.g., Lipton v. The Nature Co., 71 F.3d 464, 470, 472 (2d Cir. 1995)
(plaintiff's arrangement of terms of venery protectible; defendant's
arrangement of 72 of these terms is ``so strikingly similar . . . as to
preclude an inference of independent creation'' when 24 of first 25
terms are listed in same order, and in four other places four or more
terms appear in the same order); Schiller & Schmidt, Inc. v. Nordisco
Corp., 969 F.2d 410, 414 (7th Cir. 1992) (office supply catalog not
infringed as compilation when plaintiff did not contend that defendant
copied ``the order of products or other typical features of a
compilation''); Key Publications, Inc. v. Chinatown Today Publishing
Enterprises, Inc., 945 F.2d 509, 515, (2d Cir. 1991) (no infringement
when arrangement of categories in business directory is protectible,
but facial examination reveals great dissimilarity between arrangement
in copyrighted directory and in allegedly infringing directory); Worth
v. Selchow & Righter Co., 827 F.2d 569, 573 (9th Cir. 1987)
(alphabetical arrangement of factual entries in trivia encyclopedia not
copied when trivia game organizes factual entries by subject matter and
by random arrangement on game card).
Infringement does not require exact identity of arrangement, but
only substantial similarity between the protectible components of the
copyrighted work and the corresponding components of the allegedly
infringing work. Key Publications, 945 F.2d at 514. Nevertheless, a
comparison may show some similarity of arrangement without suggesting
copying. Some similarity of arrangement may result not from copying,
but instead from common influences. Thus, for example, if Bender
arranges cases in strict chronological order, while West's arrangement
relies in part on chronology, there will be some similarity of
arrangement. But that level of similarity does not ``preclude an
inference of independent creation,'' Lipton, 72 F. 3d at 472, by Bender
of its arrangement of cases, or even suggest that Bender has copied
West's arrangement of cases, for it would suggest only the common
influence of chronology.
A comparison of Bender's New York product and West's volumes in
this case should be enough to decide the question of infringement of
arrangement in Bender's favor. Our examination of Bender's product did
not leave us confident that we understood the physical arrangement of
the cases on the CD-ROM itself, unobservable by the naked eye. However,
the computer program that allows the user to search for and read these
cases did not present them to us in an order that closely matched the
West ordering of cases. Thus, the Bender ``table of contents'' for the
decisions of the United States Court of Appeals for the Second Circuit
appeared to present all those decisions in strict chronological order
(with the order of cases decided the same day following no principle we
could discern). West can hardly tell the Court that it simply arranges
cases chronologically. West has only recently explained to another
federal district court its extensive departures from a chronological
order, thus persuading that court that the arrangement is sufficiently
creative to merit copyright protection. See Oasis, 924 F. Supp. at
924.\7\ Some cases also in West's volumes appeared in the Bender table
of contents in the same order as they appear in West's volumes
(although generally separated by other cases in the Bender table of
contents), while others appeared in an order that differed from West's.
The Bender and West arrangements are clearly different. Nothing
suggests that Bender's arrangement is a copy of West's arrangement.
---------------------------------------------------------------------------
\7\ As explained in Oasis, 924 F. Supp. at 924, West's
arrangement of Florida cases in the Southern Reporter in general
first separates cases by court level, then places the ``fully
headnoted opinions and jacketed memoranda'' (arranged
chronologically), before ``sheet memoranda,'' which in turn precede
``table dispositions'' (arranged alphabetically); West also makes
exceptions to these general principles. Purely chronological
ordering for a single court level would not separate by type of
disposition, would not arrange some dispositions alphabetically, and
would not make exceptions.
---------------------------------------------------------------------------
III. Bender's Star Pagination May Describe, But It Does Not Copy,
West's Arrangement of Cases
West relies on West Publishing Co. v. Mead Data Central, Inc., 799
F.2d 1219 (8th Cir. 1986) (``Mead''), cert. denied, 479 U.S. 1070
(1987), in order to argue that Star pagination impermissibly copies
West's arrangements despite clearly differing arrangement in the
allegedly infringing work. In Mead, a divided panel of the Eight
Circuit, ruling before Feist, concluded that a product that Star
paginated to West's volumes impermissibly copied West's arrangement of
cases. In effect, Mead holds that Star pagination, without more, is
sufficient copying of the arrangement to infringe.\8\ West had alleged
that ``the LEXIS Star Pagination Feature is an appropriation of West's
comprehensive arrangement of case reports in violation of the Copyright
Act of 1976.'' 799 F.2d at 1222. The district court granted a
preliminary injunction and the Eight Circuit affirmed.
---------------------------------------------------------------------------
\8\ In the recent Oasis decision, the district court in
Minnesota followed the court of appeals for its circuit. 924 F.
Supp. at 925-26.
---------------------------------------------------------------------------
Mead rests on the discredited ``sweat-of-the-brow'' theory of
compilation copyright and cannot be reconciled with Feist. As we show
below, to follow the Mead analysis is to eviscerate Feist, with
substantial, and undesirable consequences for the progress of science
and art in the modern technological era. This Circuit has not followed
Mead, and this Court should not do so now.
The Mead district court recognized that the arrangement of cases in
the Lexis database differed significantly from the West arrangement.
Faced with the argument that the Lexis ``star pagination will not
infringe West's arrangement because its random generated arrangement is
entirely different from West's arrangement * * * [and] star pagination
will not bring the arrangements closer together,'' West Publishing Co.
v. Mead Data Central, Inc., 616 F. Supp. 1571, 1579-80 (D. Minn. 1985),
aff'd, 799 F.2d 1219 (8th Cir. 1986), cert. denied, 479 U.S. 1070
(1987), the district court held that ``for infringement purposes,
[Mead] need not physically arrange it's [sic] opinions within its
computer bank in order to reproduce West's protected arrangements.''
616 F. Supp. at 1580. That is, it did not matter that Mead's work did
not ``feature the same * * * arrangement,'' Feist, 499 U.S. at 349, as
West's. As support for this pre-Feist holding, the court relied (616 F.
Supp. at 1580) on Rand McNally & Co. v. Fleet Management Systems, Inc.,
600 F. Supp. 933, 941 (N.D. Ill. 1984): `` `[D]atabases are simply
automated compilations--collections of information capable of being
retrieved in various forms by an appropriate search program[.] * * *
[I]t
[[Page 53426]]
us often senseless to seek in them a specific fixed arrangement of
data.' '' \9\
---------------------------------------------------------------------------
\9\ Rand McNally quoted those words from Professor Denicola.
Rand McNally also supported its denigration of arrangement as the
basis of protection for factual compilation by citing National
Business Lists v. Dun & Bradstreet, Inc., 552 F. Supp 89 (N.D. Ill.
1982), which expresses the view that because computers store
information ``without arrangement * * * [,] an emphasis upon
arrangement and form in compilation protection becomes even more
meaningless than in the past.'' 552 F. Supp. at 97.
If it were true that data in an electronic database necessarily
lacked arrangement, it would seem to follow that an electronic
database simply could not infringe the copyright-protected interest
in the arrangement of a compilation. Under Feist, the impossibility
of copying the arrangement does not allow one to prove infringement
without proof of copying. We doubt that it is true, however, since
data lacking any arrangement at all would be difficult to use.
---------------------------------------------------------------------------
Rand McNally, however, rests entirely on the theory Feist rejected:
``the basis for compilation protection is the protection of the
compiler's efforts in collecting the data.'' 600 F. Supp. at 941. While
the Feist Court thought selection and arrangement were the only
protectible elements in the typical factual compilation, the Rand
McNally court saw little significance to arrangement, relying on
Professor Denicola: `` `The creativity or effort that engages the
machinery of copyright, the effort that elicits judicial concern with
unjust enrichment and disincentive, lies not in the arranging, but in
the compiling. * * * The arrangement formulation * * * is dangerously
limited. At face value the rationale indicates that the entire
substance of a compilation can be pirated as long as the arrangement of
data is not substantially copied.' '' 600 F. Supp. at 941 (emphasis
added) (quoting Robert C. Denicola, Copyright in Collections of Facts:
A Theory for the Protection of Nonfiction Literary Works., 81 Column L.
Rev. 516, 528 (1981)). However limited, the ``arrangement'' formulation
is the Supreme Court's. Specifically referring to the very same article
by Professor Denicola, the Feist Court wrote, ``[e]ven those scholars
who believe that `industrious collection' should be rewarded seem to
recognize that this is beyond the scope of existing copyright law.''
499 U.S. at 360.
Nevertheless recognizing that West's case rested on the copying of
the arrangement of cases, the Mead district court found, without
further explanation, ``that [Mead] will reproduce West's copyrighted
arrangement by systematically inserting the pagination of West's
reporters into the LEXIS database. LEXIS users will have full computer
access to West's copyrighted arrangement.'' 616 F. Supp. at 1580. One
must look elsewhere for the reasons why the fact that Mead
systematically inserted the pagination means that Mead reproduced
West's arrangement.
On appeal, the Eight Circuit, which never questioned the district
court's recognition that the Lexis arrangement of cases different
significantly from the West arrangement, attempted to explain how Lexis
could copy West's arrangement while not arranging its cases as West
did. The court began by asserting that Mead's proposed star pagination
would infringe West's copyright in the arrangement because, in
combination with another feature of Lexis, it would permit Lexis users
``to view the arrangement of cases in every volume of West's National
Reporter System,'' 799 F.2d at 1227, even if users were not likely to
do so.\10\ But the court added that it would find infringement even
absent this capability. It is enough, the Court explained, that star
pagination communicates to users ``the location in West's arrangement
of specific portions of text,'' with the result that ``consumers would
no longer need to purchase West's reporters to get every aspect of
West's arrangement. Since knowledge of the location of opinions and
parts of opinions within West's arrangement is a large part of the
reason one would purchase West's volumes, the LEXIS star pagination
feature would adversely affect West's market position.'' Id. at 1228.
---------------------------------------------------------------------------
\10\ Under appropriate circumstances, users' actions might lead
to vicarious liability for infringement. But vicarious liability
must rest either on the alleged vicarious infringer's right to
control the conduct of the individual who actually performs the
infringement, Sony Corp. v. Universal City Studios, Inc., 464 U.S.
417, 437 (1984), or on an absence of substantial noninfringing uses,
id. at 442. Neither requisite has been, or could be, established
with respect to either Lexis or the Bender CD-ROMs.
---------------------------------------------------------------------------
Missing in the court's analysis is any explanation of how
communicating location--that is, describing West's arrangement--amounts
to copying West's arrangement. The court leapt directly from the fact
of the communication to the economic consequence of that communication.
Thus the vice of unauthorized star pagination, in the Eight Circuit's
eyes, is made clear. The vice is not that original expression is
copied; rather, it is that unauthorized star pagination permits unfair
appropriation of the fruits of industrious collection.\11\
---------------------------------------------------------------------------
\11\ Mead's protection of industrious collection is underscored
by the court's response to the argument that star pagination does
not infringe because citations to West page numbers are merely
statements of fact. In rejecting the argument, the Court said, ``The
names, addresses, and phone numbers in a telephone directory are
`facts'; though isolated use of these facts is not copyright
infringement, copying each and every listing is an infringement,''
799 F.2d at 1228, citing Hutchinson Telephone Co. v. Fronteer
Directory Co., 770 F.2d 128 (8th Cir. 1985). Hutchinson adopts
precisely the view of copyright rejected in Feist; it even relies on
Leon and Jeweler's Circular, 770 F.2d at 130-31, two cases
specifically rejected in Feist. See page 6 supra.
---------------------------------------------------------------------------
Feist, however, makes clear that, as a matter of copyright law,
this appropriation is not unfair, and that this test is not the proper
test of infringement. See page 6 supra. Assuming the copying of
protected arrangement, the resulting impact on West's market position
would properly be considered in addressing a fair use defense to
infringement. See 17 U.S.C. 107(4) (fair use analysis to consider ``the
effect of the use upon the potential market for or value of the
copyrighted work''). But under Feist it plays no role in a
determination of whether protected arrangement has been copied.\12\
---------------------------------------------------------------------------
\12\ In its infringement analysis, the Eight Circuit quoted the
Senate Report on the Copyright Act of 1976, as quoted in Harper &
Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 568
(1985): `` `[A] use that supplants any part of the normal market for
a copyrighted work would ordinarily be considered an infringement.'
'' 799 F.2d at 1228. Harper & Row, however, involved admittedly
verbatim copying of protected expression, 471 U.S. at 548-49, and
the issue was fair use.
---------------------------------------------------------------------------
There remains the fact that star pagination communicates to users
``the location in West's arrangement of specific portions of text.''
799 F.2d at 1228. A compilation copyright, however, protects original
components of the compilation against copying; it does not protect even
original components against description. Many ways of describing West's
volumes and their content other than star pagination would also
communicate such information. Essentially any index, any topical or
other table of contents, any concordance, or any other finding aid
would do so.\13\ But surely that does not mean that all such finding
aids would copy West's arrangement, even though they might be said to
describe that arrangement. An index is only an index, not a copy of the
book it indexes.\14\
---------------------------------------------------------------------------
\13\ We realize, of course, that the economic significance of
these finding aids differs substantially from the economic
significance of star pagination of a collection of case reports. The
pure finding aids no doubt do not reduce market demand for West's
products. But as we have just observed, such marketplace factors go
to fair use, not whether there is copying.
\14\ Few cases address infringement by indexing. In New York
Times Co. v. Roxbury Data Interface, Inc., 434 F. Supp. 217 (D.N.J.
1977), the district court denied a preliminary injunction against
publication of a personal name index to the New York Times Index.
Although the court determined the likelihood of success in light of
fair use factors, it noted that the ``personal name index differs
substantially from the Times Index, in form, arrangement, and
function,'' id. at 226 (emphasis added), even though it communicated
the locations in the Times Index at which particular personal names
could be found. The court greeted with incredulity the plaintiff's
argument ``that a copyrighted work cannot be indexed without
permission of the holders of the copyright to the original work.''
Id. at 224-25. See also Kipling v. G.P. Putnam's Sons, 120 F 631,
635 (2d Cir. 1903) (defendants ``were at liberty to make and publish
an index'' of copyrighted material).
---------------------------------------------------------------------------
[[Page 53427]]
Star pagination thus does not copy West's arrangement. To find
infringement despite the absence of copying of original expression, and
thus to protect its compilation from a competitor's description, West
must rely on some other principle. The alternative principle on which
West would rely, however, cannot be reconciled with Feist and if
adopted would eviscerate Feist. Feist's thin copyright leaves facts
unprotected while protecting only creative selection and arrangement.
West's principle, in contrast, effectively protects facts. It has
substantial implications for circumstances far beyond those of this
case.
In essence, West's principle is this: Where the arrangement of a
factual compilation is protected by copyright even though the facts are
not, it is infringement for another to publish the facts if those facts
include sufficient information to permit the protected arrangement to
be recreated, even though the allegedly infringing publication does not
itself recreate the protected arrangement. Indeed, if the ordering of
the first compilation were based on the facts in that compilation,
under West's principle it would seem to be infringement to obtain those
facts from another source and publish them in an original order.\15\ To
escape a claim that it copied the first compilation's arrangement, the
second compilation would have to leave out facts found in the first
compilation.\16\
---------------------------------------------------------------------------
\15\ Some compilations are arranged in orders not based on the
data found in the compilation. In Lipton, for example, the
compilation was arranged according to the compiler's esthetic
judgments. 71 F.3d at 470. The copyright on a volume of
Shakespeare's sonnets, all in the public domain, arranged in order
of the editor's judgment of esthetic merit would, we assume, protect
that original arrangement. Another editor could, without infringing
the copyright, copy the sonnets from that volume and publish them in
a different arrangement. But as we understand West's principle, it
would be infringement were the editor of the second volume to
include an appendix telling the reader the order in which the
sonnets appear in the first volume.
\16\ Even under Feist, there may be infringement if a creative
selection of facts is copied. We do not understand the star
pagination question here to raise an issue of protected selection,
so we simplify the analysis by abstracting from issues of selection.
---------------------------------------------------------------------------
A hypothetical example may clarify the implications of West's
principle. Suppose a firm obtains from the 1990 Census of the United
States data concerning every county in the United States and publishes
a compilation of those data, listing the counties in descending order
of one of the included data elements, the proportion of the population
consisting of males of ages 18 through 40. Suppose further that this
arrangement, which may meet the Feist test of originality and which may
interest those marketing products to adult males, is protected by the
firm's copyright on the compilation. Under Feist, another firm may copy
all the data from the first firm's compilation, while arranging its
compilation alphabetically by state and county. It may do so because
even though the arrangement of the first compilation is protected by
copyright, the data themselves are not, and the second compilation does
not ``feature the same * * * arrangement,'' Feist, 499 U.S. at 349, as
the first. But the second compilation contains all the information a
user needs to recreate the arrangement of the first, and so under
West's principle, creation of the second compilation would infringe the
copyright on the first.\17\ West's principle therefore protects the
facts themselves in many circumstances where Feist would leave them
unprotected.
---------------------------------------------------------------------------
\17\ To avoid infringing under West's principle, the publisher
of the second compilation would have to omit the data concerning the
proportion of the population consisting of males of ages 18 through
40, even though Feist would allow copying those data. And there
would be no infringement even under West's principle if the first
compilation arranged the counties in order of the first publisher's
assessment of the moral worthiness of the county's population, and
the second publisher listed the counties in a different order.
---------------------------------------------------------------------------
This case, like Mead before it, arose primarily because new
technologies, new means of managing information, became available, a
frequent event in the information age. We have seen, in on-line
computer searchable databases and in CD-ROM products, new ways of
working with the raw materials of legal research--case reports,
statutes, and other materials that once appeared only in print form.
Neither we nor this Court can predict what new technological
developments will next year or in the next decade further revolutionize
the practice of law and make the substance of law more readily
available to all. By making clear the limited scope of copyright
protection for factual compilations, Feist cleared the way for these
creative developments. It should be followed here.
CONCLUSION
Star pagination to West's volumes does not in itself infringe any
copyright interest West may have. The Court should therefore rule for
Bender.
Respectfully submitted.
Anne K. Bingaman,
Assistant Attorney General.
Joel I. Klein,
Deputy Assistant Attorney General.
Catherine G. O'Sullivan,
David Seidman,
Attorneys.
U.S. Department of Justice, 10th & Pennsylvania Ave., NW.,
Washington, DC 20530, (202) 514-4510.
Ralph T. Giordano (RG0114),
Attorney.
U.S. Department of Justice, 29 Federal Plaza, Room 3630, New York,
NY 10278-0140, (212) 264-0390.
This page could not be reprinted in the Federal Register, however,
they may be inspected in Suite 215, U.S. Department of Justice, Legal
Procedures Unit, 325 7th St., N.W., Washington, D.C. at (202) 514-2481
and at the Office of the Clerk of the United States District Court for
the District of Columbia.
Civic Research Institute, Inc.
July 31, 1996.
Certification
I, Arthur H. Rosenfeld, upon my oath depose and state:
1. I am the President of Civic Research Institute, Inc.,
(hereinafter referred to as ``CRI'') a publisher of legal materials,
located at 4490 U.S. Rout 27, PO Box 585, Kingston, NJ 08528.
2. CRI published professional reference materials for lawyers
and others including the following:
Correctional Law Reporter (``CLR''), a print on paper, bi-
monthly report on legal developments affecting prisons and jails. It
includes reports on new legislation and legislative trends and
recent court cases, on the federal level and in all of the states.
An annual subscription is $125. It is used by lawyers and other
professionals working in the criminal justice system and in private
practice.
Community Corrections Report on Law and Corrections Practice, a
print on paper bi-monthly that covers programs and legal
developments, as described in CLR above, affecting community
corrections. Price, $125 a year. It is used by lawyers and other
professionals working in community corrections and by lawyers in
private practice.
Juvenile Justice Update, same format, frequency and price as
above publications. It covers legal developments on all levels as
they do and programs involving juvenile crime and delinquency. It is
used by lawyers and other professionals working in the system and by
lawyers in private practice.
3. If CRI was able to obtain federal judicial opinions from
federal appellate courts at a reasonable price or for the cost of
transmission, we would publish compilations of the above
publications and others that would contain the full text of the
opinions referred to in those publications. These new publications
would be issued in an electronic format, such as CD ROM, and would
be a very useful service for our present subscribers and others in
the market we now serve.
[[Page 53428]]
4. Our legal system depends on full and equal access to the law,
to all federal and state statutes, past and present, and to all
federal and state appellate court opinions, past and present, and it
is inconceivable to me that any private company can be allowed to
control access to these materials and charge whatever they choose to
charge for access when they are willing to grant it. It is contrary
to and undermines our system. Furthermore, even if there were some
arrangements that could be made that would make it proper for one
company to maintain such materials, it seems to me unwise and
against our national interests to allow such company to be a foreign
company subject to the control of another country.
I understand that if any statements made by me are knowingly
false, I am subject to punishment.
Arthur H. Rosenfeld,
President.
InfoSynthesis, Inc.
CERTIFICATE
I. Clayton R. Smalley, certify that I am President and Executive
Editor of InfoSynthesis, Inc., 10301 University Ave., N.E., Ste.
105, Minneapolis MN, 55434.
Since March, 1994, this Company has published USSC+ CD-ROM, a
CD-based collection of the full text of United States Supreme Court
decisions. Presently, the disc contains complete coverage of full
decisions by the Court from 1966 to date, together with assorted
earlier leading cases dating back to 1793--5000+ cases comprising
some 250 megabytes of data. The cases are searched and retrieved by
means of Folio Views(tm) software, the latter included at no extra
charge.
The cost of initial purchased of USSC+ is presently $145.
Semiannual optional cumulative supplements cost $95, and each
expands coverage of both older and newer cases.
Our present subscriber base is approximately 400, although we
are confident that it could be much higher if we had the funds for
extensive promotion.
We have recently made the cases in our collection accessible
over the World Wide Web (see http://usscplus.com), where they may be
searched and retrieved by use of the Folio Views Web Server. This
service is currently free, but a nominal fee (probably less than
$100 per year for unlimited access) will shortly be attached.
We have received many inquiries from customers and prospective
customers as to what other bodies of cases and statutes are
available. To date, we have had to respond to such inquiries that no
other databases are offered, primarily because West Publishing
Company, the sole present provider of printed versions of many state
and federal reporters, claims a copyright on the inner pagination of
its reporters. Although there has recently been word that West would
license such pagination to others, the fees to be charged are far to
high to be afforded by ``boutique'' electronic publishers such as
our company.
Because of what we conceive to be the clear superiority of the
Folio Views platform for search and retrieval purpose, particularly
when that platform is implemented in the manner we have developed
for USSC+, we believe we could be a significant competitor to other
much larger legal publishers in both the CD-ROM and World Wide Web
marketplace, particularly in the field of judicial decisions.
We currently obtain our information by scanning the official
``United States Reports'' version of the Supreme Court's opinions,
thereafter enhancing the text with the indexing, internal
segmentation, and ``hot links'' available through Folio Views
technology. The acquisition and editing of the underlying data is a
very expensive, exacting, and time-consuming process.
If the text of other bodies of federal and state judicial
opinions were available to us in electronic form, and the copyright
asserted by West were somehow eliminated as a barrier, we would be
very interested in offering for sale other federal and state
judicial decision databases, and are confident that our presence on
those markets would (as it has in the case of the Supreme Court)
lower the price of this information to the consumer by a factor of
at least ten (i.e., an order of magnitude). Such price reductions
are made possible by the recent advent of computer, CD, and internet
technologies, which are revolutionizing legal (and other)
publishing. The only barrier to that revolution remain the
availability of the underlying data.
Dated: August 6, 1996.
Clayton R. Smalley,
Pres., InfoSynthesis, Inc.
I, Peter Wayner, certify that I am the President of NewRay Inc.,
a Maryland corporation that marketted disks filled with court
opinions. These disks contained the electronic versions of the
opinions of the U.S. Supreme Court supplied by the Court itself
through the Hermes project. Unfortunately, the Court only released
data beginning in 1990. The easy access to this data made it
possible for me to offer the disk at a low price that was generally
under $40.00.
Many customers asked for a larger and more comprehensive
collection of opinions, but I was unable to supply them because I
did not have the funds to either scan in the past opinions or pay
for someone who could type them in. In the end, this prevented me
from serving the needs of the customer.
If the Department of Justice could release the electronic
versions of the case law that they control, I could easily produce a
high-quality disk with many advanced searching features for a low
price. It is silly for me to duplicate the work that was already
done at the tax payer's expense. The customer would be forced to pay
for the digitization twice--once in tax dollars and once by my
corporation.
Peter Wayner,
President.
28 August 1996
WILSON SONSINI GOODRICH & ROSATI
August 29, 1996.
via Federal Express
Craig W. Conrath, Esq.,
Chief, Merger Task Force, U.S. Department of Justice, Antitrust
Division, 1401 H. Street, Suite 4000, N.W., Washington, D.C. 20530
Re: United States v. The Thomson Corporation and West Publishing
Company Case No. 1:96CV01415 (U.S. District Court for the District
of Columbia)
Dear Mr. Conrath: On behalf of our client, Lexis-Nexis, a
division of Reed Elsevier Inc. (``Lexis-Nexis''), we submit these
comments concerning the Proposed Final Judgment in the above-
referenced case.\1\
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\1\ The economic analysis set forth herein was prepared in
extensive consultation with Garth Saloner, Magowan Professor of
Economics and Strategic Management, Graduate School of Business,
Stanford University.
---------------------------------------------------------------------------
This acquisition involves the combination of the largest
publisher of legal research materials (West Publishing Company) with
the second largest legal publisher (Thomson Corporation) in an
industry that is already highly concentrated. In permitting this
acquisition to proceed, the Department of Justice has failed to
achieve the level of safeguards necessary to preserve competition in
the markets identified in the Complaint. Indeed, it is almost
certain that the Proposed Final Judgment will result in
substantially lessened competition in these markets for legal
materials. Consumers will pay for this reduced competition through
increased prices, reduced choice, and reduced innovation.
There are three principal flaws in the Proposed Final Judgment.
First, West and Thomson are the only two companies that provide
editorially enhanced case reporters and codes in the relevant
product markets.\2\ Yet the Proposed Final Judgment requires West
and Thomson only to spin off the weakest of the overlapping
products, and even then they are spinning off what amount to nothing
more than product fragments. There is no chance (much less a
significant chance) that an actual or potential competitor could
take these fragments and put together a rival set of enhanced
products that could compete effectively with West-Thomson.
---------------------------------------------------------------------------
\2\ The Department's Competitive Impact Statement acknowledges
this. See 61 Fed. Reg. 35250, 35260 (``For both law reporters and
codes, Thomson and West provide unique, enhanced primary law
products. * * * There are no other codes or case law reporters in
the above markets that offer this set of enhancements to
consumers.'').
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Under these circumstances, the proposed acquisition never should
have been permitted to be consummated: its likely harm to
competition is obvious and inevitable. Even if the acquisition were
permitted to proceed, however, the Department could have taken steps
that would at least have ameliorated the acquisition's
anticompetitive consequences. In particular, the Department should
have required the divestiture of all of the essential Thomson
materials--particularly its American Law Reports (``ALRs'') and
American Jurisprudence 2d (``Am Jur'')--necessary for an acquiror to
offer enhanced primary law products that can compete effectively
with West-Thomson. By failing to do so, competition in the markets
for enhanced case reporters and codes will
[[Page 53429]]
wither, and monopoly in these markets is the likely outcome.
Second, the failure to require the effective divestiture of
Auto-Cite, Thomson's electronic citator product, will have a
substantial adverse effect in the market for comprehensive online
services. The Department's Complaint recognizes that ``a price
increase, reduction in quality and innovation, or loss of access''
to Auto-Cite would materially injure competition in the online legal
research market, in which Lexis-Nexis provides the only significant
competition to West. Complaint para. 60. Yet, as discussed in more
detail below, this is precisely the outcome that the Department has
endorsed in its Proposed Final Judgment.
Finally, other steps taken by the Department, including its
failure to lower the high barriers to entry that have caused such
extreme market concentrations, will exacerbate the acquisition's
anticompetitive effects. Each of these consequences of the Proposed
Final Judgment is discussed immediately below.
1. The Complaint recognizes that what distinguishes the West and
Thomson case law reporters and codes is that they are enhanced. The
Complaint identifies two significant features of such enhancements.
The first is that they contain ``comprehensive written
descriptions'' of the relevant law, which the Complaint refers to as
``headnotes'' and ``summaries'' (for case reporters) and
``annotations'' (for codes). See Complaint Paras. 20-21. The second
is that ``each product also contains cross-references to relevant
secondary law products or relevant case law in the same or other
jurisdictions.'' Id.
Through the combination of these summaries and cross indexes,
West and Thomson, prior to the acquisition, each had been able to
offer their enhanced primary law products as parts of a system. As
the Complaint reflects, West refers to its system as the West
National Reporter System. Thomson's system of enhancements and
cross-references is referred to as the Total Client-Service Library
(``TCSL''). In both instances, integration of these features into
case reports and codes provides the means for competitively
``enhancing'' the primary legal product.
Thus, for example, one of the product markets identified in the
Complaint is the provision of editorially-enhanced case reporters
for decisions by the United States Supreme Court. The West and
Thomson offerings in this market typify the way their products are
enhanced and cross-referenced, In the West version of the case
reporter, each reported Supreme Court decision begins with a series
of summary paragraphs (``headnotes'') regarding the holding of the
case. These headnotes are organized by an indexing system known as
Key Numbers. The Key Number system provides the principal means for
conducting research in West products across courts in the same
jurisdiction (for example, federal appellate and district court
decisions) and across jurisdictions. Through a comprehensive set of
digests organized by Key Numbers, the headnotes are collected and
reproduced for all of the states and for all levels of the federal
courts.
The Thomson system works quite differently. Prior to the
acquisition, Thomson published enhanced codes and case reporters in
just a small fraction of jurisdictions (for example, case reporters
in only six states, and the Supreme Court in the federal system). A
digest-based system therefore would have been inferior to the West
offering, inasmuch as it would have covered only a small fraction of
the potentially relevant case law.
Thomson accordingly took quite a different approach to its
enhanced products, as its Supreme Court reporter reflects. Although
each Supreme Court decision in the Thomson reporter, like the West
reporter, is preceded by summary paragraphs organized by subject
matter (for example, ``Administrative Law Sec. 77''), these subject
headings to not provide a means for cross-referencing decisions in
other jurisdictions. Indeed, Administrative Law Sec. 77 refers to
one subject in Thomson's Supreme Court reporter, but a different
subject, for example, in its California case reporter.
Instead of relying on such subject categories, the enhancements
in Thomson's Supreme Court reporter are organized principally around
a system of selective reporting, referred to as ``annotations.''
These annotations provide exhaustive coverage on selective, discrete
subjects. Thus, for example the back portion of each Thomson Supreme
Court reporter contains several annotations relating to subjects
addressed recently by a decision of the Supreme Court. In addition,
each Supreme Court decision in the volume begins (after a brief
summary of the case) with a prominent box denominated ``Total
Client-Service Library References.'' The box identifies other
annotations, collected in Thomson's ALR volumes, that relate to the
issues addressed in the opinion (as well as to other secondary
products published by Thomson) The annotations thus serve as the
springboard for comprehensive, cross-jurisdictional research in the
Thomson system, in the same way that Key Numbers provide such a
function in the West system.
As the Complaint recognizes, West and Thomas are able to charge
significantly more for their products because of their enhancement
systems. Unenhanced codes and case reporters sell for
``significantly less'' than the West and Thomson products. Complaint
Paras. 23-24. This increased value is predicted by economic theory,
which recognizes that users gain utility not just from the
components but because of the way they are interconnected. For
example, as Katz and Shapiro observed: ``Many products have little
or no value in isolation, but generate value when combined with
others. * * * We describe them as forming systems, which refers to
collections of two or more components together with an interface
that allows the components to work together.'' Michael L. Katz &
Carl Shapiro, Systems Competition and Network Effects, J. Econ.
Persp., Spring 1994, at 93.
The Complaint acknowledges (and the extraordinarily high HHIs
cited by the Department confirm) that West and Thomson provide
virtually the only enhanced primary case reports and codes in the
product markets identified in the Complaint. If the merger is
allowed to go through as proposed, competition in these markets will
be adversely affected. That is because some of the central
enhancements of the Thomson products--most notably, the ALRs that
are at their core--will remain under the control of West-Thomson.
Whereas divestiture of the ALRs (together with a relatively small
number of other Thomson publications such as Am Jur) would
potentially have enabled competition to continue, the Proposed Final
Judgment effectively permits West-Thomson to avoid any meaningful
threat of competition.
Competition will be adversely affected for two main reasons.
First, the merged company has an obvious incentive to eliminate
competition from whatever set of cross-references a competitor might
try to cobble together using the fragmentary Thomson products.
Control of important components of the Thomson system provides West-
Thomson with a ready means of doing so. For example, West-Thomson
can foreclose access to ALR (as well as other important elements of
the TCSL) to the purchaser of its divested assets. In so doing,
West-Thomson can destroy the effectiveness of the competitor's use
of the divested assets, and accordingly monopolize the market for
enhanced primary products.\3\
---------------------------------------------------------------------------
\3\ Under these circumstances, West-Thomson might continue to
provide ALR and other Thomson components as part of a bundle with
West products. It would do so, however, at monopoly prices.
Alternatively, as a monopolist, West-Thomson might decide to save
itself the cost of maintaining ALR. In that case, consumers would
face not only monopoly prices but also reduced variety.
---------------------------------------------------------------------------
Second, even if a competitor were somehow able to remain in
competition in these markets in the short run, control over ALR and
other Thomson references would enable West-Thomson to eliminate the
ability of the competitor to compete effectively in the long run.
Thus, West-Thomson could choose to maintain ALR and to continue to
offer access, but simply raise the price so as to extract it
monopoly rents in that way. Clearly the incentive for the merged
company is to charge a much higher price for ALR than Thomson does
as a stand-alone company competing with the West Key Number system.
Here too consumers would be harmed by having to face significantly
higher prices.\4\
---------------------------------------------------------------------------
\4\ Lexis-Nexis believes that, as between these two
alternatives, it is unlikely that West-Thomson will continue to
invest in both sets of classification systems. Moreover, whether it
integrates the two systems or simply eliminates the Thomson
products, it is undisputed that West-Thomson will control the only
comprehensive system of cross-references in the United States. With
the elimination of competition at the system level, West-Thomson is
likely to have enhanced leverage from its dominance in editorial
classification systems into related fields of legal information
publishing.
---------------------------------------------------------------------------
In the example of Thomson's Supreme Court reporter, therefore,
one alternative is that the competitor's product will amount to
nothing but a shell of the current Thomson offering. If West-Thomson
decides to foreclose access to its annotations altogether, what is
currently the back portion of each Thomson reporter will have to be
omitted, as
[[Page 53430]]
well as the annotation cross-references at the beginning of each
case. All that will remain are summary paragraphs organized in a way
that provides no means for researching decisions by any court but
the Supreme Court. Moreover, even if access to these annotations is
permitted, it will be at prices that permit West-Thomson to extract
its monopoly rent and that will harm consumers.\5\
---------------------------------------------------------------------------
\5\ Even for enhanced products within a single jurisdiction, the
Department appears to have overlooked critical facts relevant to the
question whether competition in the market will be adversely
affected. For example, the summary paragraphs that Thomson includes
in its California annotated code (and its California Digest) are
reproduced from the summaries that it prepares for its California
case reporters. The cost of developing these summaries accordingly
can be spread out over several products.
1The Proposed Final Judgment, however, provides for the
divestiture only of the California code--not of the case reporter or
digest (unless California elects to place them up for rebid). Yet
the Department appears to have made no factual finding that the
enhancement costs that profitably could be undertaken when allocated
among three sets of products, will be economically viable if
required to be undertaken separately for the California code alone.
---------------------------------------------------------------------------
2. Additional inadequacies in the Proposed Final Judgment
exacerbate these anticompetitive effects. First, the Complaint
recognizes that a significant barrier to entry in providing enhanced
legal products is the fat that ``a sophisticated editorial staff
would be needed to create the headnotes and summaries, as well as to
identify relevant cross-references to other sources of authority on
issues presented in each statute or current or historical case.''
Complaint para.31. The Department has not identified any actual or
potential entrant (and Lexis is not aware of any) with an editorial
staff trained in the Thomson headnote and indexing system. Nor is
Lexis aware of any actual or potential entrant with a trained
editorial staff capable of processing the volume of headnotes and
summaries required by the nine primary law products proposed to be
divested.
There are only two companies with trained editorial staffs of
that size: West and Thomson. Yet the proposed decree does not
require West-Thomson to spin off the divested products as part of a
viable operational entity. Instead, it simply invites prospective
purchasers to try to hire away personnel from West-Thomson. Final
Judgment para. IV.F.\6\ The Department makes no assessment that a
prospective purchaser is likely to succeed under these circumstances
in assembling a ``sophisticated editorial staff'' on the requisite
scale.
---------------------------------------------------------------------------
\6\ Notwithstanding this provision, Thomson has required
potential acquirors to agree, as a condition to receiving
information needed to bid on the divested assets, that they will not
solicit any West-Thomson employees for one year ``other than in
response to a bona fide advertisement for employment.'' In other
words, West-Thomson has been permitted to tie the hands of any
potential acquiror, and even the modest proposal of Paragraph IV.F
effectively has been nullified.
---------------------------------------------------------------------------
Presumably the Department's silence reflects the fact that any
such conclusion would be economically unsound. Preservation of West-
Thomson's (newfound) monopoly in editorial staff will permit it to
extract monopoly rents. West-Thomson therefore will have a
significantly greater financial incentive in retaining its staff
than any potential acquiror would have in attempting to hire them
away. At the same time, given expectations that West-Thomson will be
the stronger (if not only) long-term provider of enhanced legal
products, editorial staff would be unlikely to switch employers
absent significantly greater incentives from the potential acquiror.
There is accordingly no reason to expect that any potential acquiror
will be able to assemble the staff needed to offer meaningful
competition to the West-Thomson enhanced legal products.\7\
---------------------------------------------------------------------------
\7\ Indeed, any finding that personnel could be hired in the
requisite numbers would be plain error. In order to offer effective
competition to West-Thomson, it would be necessary for a competitor
to hire away not just a few individuals, but an entire editorial
staff. For the reasons stated above, however, West-Thomson has a
powerful economic incentive to retain its staff in order to preserve
its monopoly. These incentives, combined with an incumbent's pre-
existing advantages (such as seniority and pension benefits) make it
exceedingly unlikely that a competitor could offer terms that would
secure an editorial staff of the requisite size, training and
experience.
---------------------------------------------------------------------------
3. The second way in which the Consent Decree exacerbates the
proposed acquisition's anticompetitive effects is in its failure to
require Thomson to provide continued access to, and use of, the
portions of the Thomson system that the Department is not proposing
for divestiture. Ironically, the Final Judgment is careful to
preserve Thomson's continued right to use the enhancements from the
divested products in its retained products during a transition
period. See Final Judgment para. IV.D. Yet the Department has failed
completely to impose a reciprocal obligation on Thomson--even though
it is apparent, from the most cursory review of the proposed
divested products, that cross-references to annotations and indexes
in Thomson's retained products (ALR, AmJur, Witkin for California
law, and so forth) are at the core of the ``enhanced'' portion of
the proposed divested products.
It thus appears that the Department understands the Final
Judgment to permit West-Thomson to divest piecemeal the nine primary
law products without permitting continued use of relevant cross-
references and annotations that are an integral part of their
enhancements. At the same time, there is no finding by the
Department that an acquiror can develop or maintain effective
competition with the West-Thomson enhanced products through use of
only those components of the Thomson system that are included in the
divestiture. In the words of Katz and Shapiro, supra , the divested
primary law products ``have little or no value in isolation,'' but
rather ``generate[d] value when combined with others.'' The Proposed
Final Judgment permits West-Thomson to retain the crucial components
of the Thomson system to itself, while divesting only isolated
fragments from which no rival set of enhanced products can
effectively be developed.
4. The failure to ensure continued system competition not only
impairs competition in the primary law markets identified in the
Complaint, but also in the market for comprehensive online legal
research services. See Complaint para. 53 (identifying relevant
product market). West's most important means of product
differentiation in the online market is its integrated system of Key
Numbers and headnotes. In order to compete effectively, Lexis-Nexis
needs the ability to provide a competing system of enhancements.
To date, it has done so through the Thomson system of
enhancements, consisting of its Auto-Cite citation service and other
TCSL products. For example, when a user on the Lexis-Nexis system
wishes to check the continued viability of a particular case, Auto-
Cite provides not just the negative history of the case but also
references to ALR and other Thomson sources. By clicking on the ALR
reference, the user is taken immediately to the appropriate ALR
annotation.
The Proposed Final Judgment injures Lexis-Nexis' ability to
compete in two ways. First, by permitting West-Thomson to keep the
key components (indeed, most of the components) of Thomson's system
of enhancements, the Proposed Final Judgment effectively eliminates
Lexis-Nexis' ability to offer competition to the West enhancement
system. As discussed above, neither Lexis-Nexis nor any other actual
or potential competitor has any reasonable likelihood of being able
to develop the fragments being spun off into a viable ``non-West''
system. The Department in fact appears to have made no assessment
that Lexis-Nexis (or any other source available to it) will be able
to develop an alternative system. If the Department now purports to
have made such a finding, such a finding is factually unsupportable
and hence plain error.
Second, the Final Judgment impairs Lexis-Nexis' contract rights
to Auto-Cite, thus affirmatively damaging its ability to compete.
Under its existing contract, Lexis-Nexis has the right to use Auto-
Cite in its existing form, which includes cross-references to
sources such as ALR. Lexis-Nexis specifically bargained for the
right to prevent Thomson from being able to modify any of these
existing features without its consent.
By ``forcing'' West-Thomson to spin off its Auto-Cite license
with Lexis-Nexis, the Department has abridged these critical
contract rights. The acquiror of the existing Auto-Cite license
agreement will have no ability on its own to provide such features
(they are being retained, or course, by West-Thomson), and West-
Thomson has refused to confirm that the acquiror will be permitted
to continue to include such features after the divestiture. These
issues were specifically raised with West-Thomson; West-Thomson
refused to confirm that such rights would be included in the
divestiture; and the Department has endorsed West-Thomson's refusal.
The Department apparently thus intends for its Final Judgment to
strip Lexis-Nexis of these valuable contract rights (without
compensation for the taking), with a direct and substantial adverse
effect on its ability to compete in the online legal research
market.
5. In addition to impairing Lexis-Nexis' existing contract
rights, the Department's
[[Page 53431]]
description of the Auto-Cite divestiture in its press release and
other public statements has been substantially misleading. In the
Department's press release, and, indeed, in the Final Judgment
itself, it appears that West-Thomson is being required to divest
``all rights and interests'' in Auto-Cite, See, e.g., Proposed Final
Judgment para. II.B. These rights are defined as ``including'' (not
limited to) the ``delivery of a transferable royalty-free perpetual
license of the Auto-Cite case database.'' Id.
Nevertheless, in West-Thomson's Offering Memorandum, and in
subsequent communications with the Department, Lexis-Nexis has
confirmed that transfer of a (non-exclusive) license right (together
with the Auto-Cite trademarks and associated software and trade
secrets) is all that the Department intends to require West-Thomson
to divest. Thomson is thus not divesting itself of Auto-Cite at all:
it is retaining the database itself; the staff trained in its use;
the (apparently exclusive) right to use important elements of the
Auto-Cite system, i.e., the cross-references and integration with
the ALRs and other Thomson products; and other important incidents
of ownership, such as the ability to sublicense.
The Department has made no finding--and none can be made--that
an acquiror of the Auto-Cite license can provide effective
competition to West-Thomson with no trained staff, no ability to use
key elements of the Auto-Cite system, and no ability to use cross-
licenses as a means of enhancing the content accessible through the
database. The Complaint recognizes that Lexis-Nexis will be
materially injured in its ability to compete as a result of ``a
price increase, reduction in quality and innovation, or loss of
access'' to Auto-Cite. Complaint para. 60. All three consequences,
however, would be likely to flow from the Proposed Final Judgment.
Price increases would be likely because of the failure to require
divestiture of Auto-Cite as a viable, ongoing product line,
entailing additional expense, inter alia, in hiring and training
staff.\8\ Reduction in quality and innovation is likely because of
the failure to require divestiture of ownership rather than merely a
non-exclusive license with no ability to sub-license. And Lexis-
Nexis has lost effective access because of the failure to include
critical components of the service (e.g., prospective access to ALR)
in the divestiture.
---------------------------------------------------------------------------
\8\ The failure to spin off Auto-Cite as an ongoing product line
raises the same concerns regarding the ability to hire trained staff
that were discussed above.
---------------------------------------------------------------------------
Given these impairments in the ability to offer an effective
Auto-Cite product, one of three outcomes is likely, none of which is
beneficial to consumers. The first is that the absence of adequate
infrastructure would effectively preclude continued use of Auto-Cite
as a viable product, resulting in immediate and substantial injury
to competition in the online legal research market. The second is
that even if it were possible for Lexis-Nexis to offer an Auto-Cite
product (either directly or through license), it would be at such a
competitive disadvantage that West-Thomson would be well-positioned
to engage in behavior (repackaging Auto-Cite, bundling it with
Insta-Cite, and then pricing the products aggressively) designed to
drive it from the market.
The third potential outcome is that Lexis-Nexis (or some other
competitor) would offer a non-exclusive Auto-Cite product while
West-Thomson would offer a bundle of both an Auto-Cite clone and
Insta-Cite. Because of the influence of learning and network effects
in this market, consumers would likely gravitate towards West-
Thomson, a process that would become self-reinforcing as market
shares became more disproportionate. Lexis-Nexis or its licensor
would therefore have fewer resources to invest in the Auto-Cite
product, thereby further aggravating the increase in concentration
in the market. Whatever theoretical short-term efficiency gains
might be asserted for the cloning of Auto-Cite, therefore, would be
swamped by the adverse consequences of dramatically increased market
concentration. Instead of a market characterized by two strong
competitors, therefore, the only realistic outcome of the Proposed
Final Judgment would be to substitute a market structure
characterized by a single dominant player.
6. The Department has compounded these deficiencies regarding
Auto-Cite by its failure to enforce Paragraph IV.E of the Proposed
Final Judgment. That paragraph purports to require West-Thomson to
provide prospective purchasers with ``any and all financial,
operational, or other documents and information as may be relevant
to the divestiture.'' In fact, West-Thomson has provided virtually
no information regarding the Auto-Cite divestiture that would permit
any prospective purchaser to evaluate and make a meaningful bid on
the product. On the one hand, West-Thomson has refused to provide
even the most basic information regarding what is actually being
purchased. (What ownership rights is West-Thomson reserving? What
rights are included in the divestiture?) On the other hand, West-
Thomson has refused to provide any cost information regarding the
product, so that it was impossible to assess the product's
profitability. Yet prospective purchasers were required to ``bid''
under these (preposterous) circumstances. It is regrettable that,
having shown the foresight to include Paragraph IV.E in the Proposed
Final Judgment as an obviously necessary element, the Department now
appears to have no intention of enforcing it.
7. The Department recognizes that West's claim of a copyright in
the page-breaks of its case reporters has been a major barrier to
entry for potential competitors considering entry into the market
for enhanced primary products.\9\ Complaint para. 32. Inconsistently
with its own position in Matthew Bender & Co., Inc. versus West
Publishing Co., 94 Civ. 0589 (S.D.N.Y.), in which it has sought
leave to file an amicus brief contending that West's copyright claim
should not be enforced (and notwithstanding the extreme market
concentrations in the nine primary law product markets identified in
the Complaint), the Department did not require West to disclaim its
copyright claim. Such a step was taken, for example, by the
Department under the Bush Administration in connection with Borland
International's acquisition of Ashton-Tate. In the Ashton-Tate
acquisition, the barriers to entry were far lower, and of far
shorter duration, than those which West has been able to sustain in
the market for enhanced primary law products over the course of many
decades.
---------------------------------------------------------------------------
\9\ Even though West's copyright claim ultimately may (and
should) be found invalid, West successfully has used the threat of
litigation as a substantial deterrent to potential competition.
---------------------------------------------------------------------------
In this case, however, rather than requiring such a divestiture,
the Department claims that it has ``significantly lowered'' the
royalty rates for potential competitors' use of West's ``copyright''
page-breaks.\10\ As the Department is aware, however, that claim is
wrong. The Department claimed that Lexis-Nexis' current licensing
fee is 17 cents per thousand characters. That is not correct. It
appears that the Department's figure was derived from a very minor
license that West granted to Butterworths pertaining to case reports
for the U.S. Virgin Islands (with license fees of less than $2,000
per year).
---------------------------------------------------------------------------
\10\ See, e.g., Albert R. Karr, Thomson's Pact to Acquire Rival
Receives Government Approval, Wall St. J., June 29, 1996, at B10
(quoting Department as stating that under the settlement, ``the
rates that Thomson can charge when licensing the West page-numbering
system are capped at a `significantly lower' level than those
charged by West for Lexis-Nexis''). Accord, Maria Shao, Purchase of
West Publishing Approved; Buyer Agrees to Divest 50 Legal
Publications, Boston Globe, June 20, 1996, at 42; Sharon Smickle et
al., West Deal Gets U.S. Go-Ahead, Minneapolis Star-Tribune, June
20, 1996, at 1D.
---------------------------------------------------------------------------
In fact, the rates set forth in the Proposed Final Judgment are
approximately equal (but may under some circumstances exceed) the
current Lexis royalty rate.\11\ It is worth emphasizing that the
Lexis license was entered into only (i) after a Court of Appeals
decision had been entered in favor of West and against Lexis, but
(ii) before the Supreme Court's 1991 decision in Feist Publications
v. Rural Telephone, which rejected the principal rationale
underlying the Court of Appeals decision which found in West's
favor. The current Lexis rate therefore reflects the maximum rate
that West would have sought even after the successful conclusion of
litigation, and if Feist had never been decided. It seems unlikely
that any higher fees would have resulted from private negotiations
prior to the acquisition.\12\
---------------------------------------------------------------------------
\11\ To make matters worse, West-Thomson has taken the
unilateral position that, notwithstanding the fact that Paragraph
IX.A of the Proposed Final Judgment provides that ``defendants shall
grant to any third party'' the right to license star pagination at
rates beginning at $0.09 for the first year, Lexis-Nexis will be
charged $0.13 (the third-year rate) as its beginning rate. Lexis-
Nexis has brought this flagrant violation of the Proposed Final
Judgment to the attention of the Department, but is not aware of any
steps taken by the Department in response.
\12\ Other participants in the industry may well now accept
these rates, however, because West-Thomson's ability to raise
barriers to entry has been greatly strengthened by the proposed
acquisition. That is because, as is implicit in the Department's
submission, Thomson has not previously asserted a copyright claim in
the page breaks of its reporters. In the primary law markets that
are the subject of the Complaint (particularly those where Thomson
was the official reporter), therefore, other competitors could cite
to the specific page of the Thomson reporter without facing a
copyright claim. Now, because (for the reasons noted previously)
there is no substantial likelihood that there will be a viable
competitor to replace Thomson in the market for enhanced case
reporters, the ability of West-Thomson to raise barriers to entry in
these markets has been significantly strengthened.
---------------------------------------------------------------------------
[[Page 53432]]
8. One final point requires comment. The Department's press
release claimed that assets representing approximately $72 million
in sales were to be divested. As the Thomson Offering Memorandum
reflects, however, the divested assets generated sales of only
approximately $48 million. The press release thus overstates the
economic significance of the divested assets by 50%. Notwithstanding
the misleading nature of the Department's press release (which it
has been aware of for at least several weeks), the Department has
not seen fit to issue a corrective press release clarifying that
only approximately 4% ($48 million out of $1.1 billion) of the sales
of the number one and number two legal publishers are subject to
divestiture.\13\
---------------------------------------------------------------------------
\13\ This number actually significantly overstates the revenue
that a West-Thomson competitor is likely to receive from the
divested assets. As noted previously, this is the value of these
components as part of a unified system. As individual fragments,
they are likely to generate revenues that are only a fraction of
their sales under Thomson.
Sincerely,
Gary L. Reback.
Dear Sirs: Please consider the enclosed as comment offered in
regard to the consent decree entered in association with Thomson's
acquisition of the West Publishing Company or, alternatively, as
information bearing on anticompetitiveness in legal publishing
generally.
I apologize for the informality of the submission and for my
inability to provide my name.
Dear Sirs: In regards to the recent acquisition of West
Publishing Company by the Thomson Corporation, here is some
important information pertaining to the United States Code Annotated
(U.S.C.A.), a West publication which is the dominant commercial
compilation of federal statutes.
What needs to be understood is that U.S.C.A. is the product of a
collaboration between West and the Office of the Law Revision
Counsel of the United States House of Representatives (O.L.R.C.).
This collaboration has given West a significant advantage over its
competitors in this lucrative market.
When laws are enacted by Congress, and sometimes even before
they are enacted, Ed Willett, the head of the O.L.R.C., seen to it
that copies are quickly sent to West's Westbury, N.Y. office. There,
under the direction of Michael Pavesi, Assistant Managing Editor in
charge of the U.S.C.A., West employees ``classify'' the laws. This
means they determine what provisions of the United States Code are
affected by amending and repealing legislation and if, where and in
what form new statutes are to appear in the Code.
West faxes these proposed classifications to the O.L.R.C., which
reviews them and immediately reports any changes and/or corrections
back to West. At this point, West has the official U.S. Code
classifications, while its competitors do not. In a field where
speed of publication and conformity to official classification are
at a premium, this inside scoop virtually insures the dominance of
West's product.
Nor does the collusion end here. West editors do all the work
associated with the codification of the new law. They prepare the
various notes necessitated by the legislation (Amendment, Reference
in Text, Codification, etc.) as well as assigning headings where
needed and making decisions about credits. Once again, all of this
information is shipped to the O.L.R.C. where it will eventually
appear, virtually verbatim, in the U.S. Code. In the event that
major changes are to be made by the O.L.R.C., West is informed and
incorporates them into U.S.C.A.
Finally, when the O.L.R.C. prepares new or supplementary
editions of the U.S. Code, page proofs are sent to Westbury so that,
as with the classification and codification of new legislation, West
can be sure that it has the official version before any of its
competitors.
Whatever company possesses this privileged, insider
relationship, whether it be West or Thomson, enjoys an enormous and
unwarranted market advantage. It borders on scandal that any single
company is permitted to have a stranglehold on the market for
federal statutory law, especially when that stranglehold is
attributable exclusively to a sweetheart deal with an
instrumentality of the federal government.
P.S.--For obvious reasons, the writer wishes to remain
anonymous. Accordingly, the information in this letter has been left
deliberately vague. The full scope of the relationship described
herein can almost certainly be exposed with minimal investigation.
Marc L. Ames, Attorney at Law
July 9, 1996.
Philip Cody, Esq.,
Chief Attorney, U.S. Department of Justice, Anti-Trust Division, 26
Federal Plaza, 36th floor, New York, NY 10278
Re: Merger of Thompson Publishing Co. (which includes Lawyers'
Cooperative Publishing Co.) and West Publishing Co.
Dear Mr. Cody; I am advised that the Department of Justice
recently approved the merger between the two above captioned
companies for reasons that remain unclear to me.
In any event, as one who has practiced law for almost thirty
years I can tell you, without equivocation, that Lawyers' Coop and
West have always been arch competitors and have presented and
alternative for attorneys who sought information which these
companies marketed. More particularly, as you know, both companies
specialize in the publishing of legal research materials which are
indispensable to any viable law practice.
Most recently, I became involved in a dispute with the Lawyers'
Cooperative Publishing Co. over my account (017249-11801) which
contains a balance reflecting certain large purchases that I had
previously made of legal research materials on CD ROM as well as
other subscriptions. Prior to making those purchases I had arranged
with the Lawyers' Cooperative Publishing Co. to have all of the
materials to which I subscribe paid by one monthly payment.
Thereafter, at the time that the additional materials were sold to
me I was informed that this would raise my monthly payment of
approximately $125.00 only slightly, leaving it below $200.00 per
month. However, in my subsequent dealings with the company and
another salesman I was informed that the monthly payment must be
increased to the sum of $205.00 in order to cover all of my
outstanding charges for the various services and materials to which
I subscribe. I reluctantly consented to this increase believing it
would cover all of the materials.
Most recently, I was informed by somebody of Lawyers'
Cooperative Publishing Co. that I was being undercharged on a
monthly basis and that I should be charged $250,000 a month and
failing my paying that amount or the arrears of $505.54 my
subscriptions (apparently all of them) would be cancelled.
I thereafter wrote a letter to the President of Lawyers'
Cooperative Publishing a copy of which is enclosed. It is
regrettable that I shortly thereafter received a letter from Ms.
Margaret Cook, the Delinquent Accounts Manager advising me my
subscriptions had been canceled! A copy of that letter is well
enclosed. There followed shortly on heels of Ms. Cook's
correspondence a letter from Ms. Michele Miller also of the
Account's Receivable Department, advising me I had given them
authorization during May of 1994 to raise the monthly amount of my
installment to $250.00 beginning with the September installment and
she would accordingly charge my bank account (despite the
cancellation of my subscriptions). I never authorized them to charge
my bank account directly the sum of $250,000, monthly as a copy of
the agreement enclosed will show. Ms. Miller's letter is obviously
in error to put it euphemistically.
The point of my writing this letter is not to show you that such
a company can make mistakes but rather to point out and underscore a
shift in attitude when business becomes too large as the result of
mergers and acquisitions. In years gone by it was eminently clear to
me that the Lawyers' Coop would do everything in its power to
straighten out and adjust any misunderstanding with one of its
customers. This is apparently no longer the case because the company
feels that it has the market cornered. More particularly, I point to
the fact that West always presented an alternative to the materials
published by Lawyers' Coop however now that the company has been
acquired, any disagreement with Lawyers Coop leaves me without the
alternative of seeking refuge with West and visa-versa.
Thus, the poor consumer is left at an inordinate disadvantage
and the acquisition of the West Publishing Company by the Thompson
Legal Publishing group should not be and should not have been
approved.
[[Page 53433]]
As you are no doubt aware, law book publishing companies stand in a
rather unique position in relation to their customers. The materials
sold to customers are often of a extremely high price. Moreover,
these materials are supplemented very regularly at an additional
cost--generally a very substantial additional cost! Further, if one
does not choose to subscribe to the supplementation he is paying a
rather exorbitant fee for materials which when initially purchased
are current but which soon become worthless if not kept up-to-date.
In the circumstances the Justice Department should be extremely
circumspect about approving any mergers among law book publishers
that are giants and competitors, and which virtually control the
field.
I sincerely believes in this instance you have left me and
others with very little alternative in our dealings and urge that
you do all necessary to reverse whatever action you have taken and
undo the approval of this consolidation and merger.
I sincerely hope that you will give your attention to this
matter in earnest and advise me of your thinking and any action
taken herein.
Sincerely yours.
Marc L. Ames
Marc L. Ames
Attorney at Law
June 24, 1996.
Mr. James Lupisella,
Lawyers Cooperative Publishing, Aqueduct Building, Rochester, NY
14694
Dear Mr. Lupisella: As stated during our conversation as an
inducement to purchase materials from your company I was told that
one easy monthly payment of $205.00* charged to my bank account
would take care of all payments required in connection with the open
items on my account including supplementation. I made clear that I
did not want my monthly obligation to exceed that sum. I was assured
it would not.
---------------------------------------------------------------------------
*Initially stated to be less.
---------------------------------------------------------------------------
Your recent letter threatening to terminate my subscription
unless I cough up another $100/month is irksome, problematic and
otherwise unappealing. Perhaps this is diagnostic of internal
problems the consequences of which will be visited upon attorneys
such as myself by reason of your recent acquisition of West.
By copy of this letter sent to Mr. Bryan Hall, the president of
your company, I am requesting that someone in a higher position then
yourself be in touch with me concerning this potential controversy
and public relations problem.
Sincerely,
Marc L. Ames,
MLA/is
Lawyers Cooperative Publishing
July 1, 1996
Marc L. Ames,
225 Broadway Rm 3005, New York, NY 10007
Re: Account #017249 11801
Dear Mr. Ames: Your subscriptions have been cancelled!
Recently we advised you that failure to pay on your account
would result in cancellation of your subscriptions. Your failure to
respond precipitated that action.
To prevent your library from becoming outdated, forward a check
for $505.54. This will allow us to put your subscriptions back in
line.
If you have made payment arrangements with our office or have
forwarded the amount indicated above within the last 30 days, please
disregard this letter.
Margaret Cook,
Delinquent Accounts Manager, 1-800-231-3120.
P.S. To make payment as convenient as possible, we will accept
Visa, Mastercard, Discover and American Express. Simply fill out the
information requested below:
Visa/MC/Disc/AE Account # ---------------------------------------------
Expiration date -------------------------------------------------------
Total amount paid -----------------------------------------------------
Authorized signature --------------------------------------------------
Lawyers Cooperative Publishing
January 11, 1995.
Re: Account Number 01724911801
Dear Client: Please consider this letter as a reminder that our
terms are net 30 days.
The amount due on your account is $463.47. According to our
records a portion of this amount includes items which are 60 days
past due. Please use the enclosed envelope to mail your payment.
If you have made payment arrangements with our office, or have
forwarded your check within the past 30 days, please disregard this
letter.
Thank you.
Lori Smith,
Regional Collection Manager, 1-800-231-3120-ext 6482
P.S. To make payment as convenient as possible, we will accept
Visa, Mastercard and American Express. Simply fill out the
information requested below:
Visa/MC/AMEX Account---------------------------------------------------
Expiration Date--------------------------------------------------------
Total Amount paid------------------------------------------------------
Authorized Signature---------------------------------------------------
Geronimo Development Corporation
September 3, 1996.
Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, United States
Department of Justice, Suite 4800, 1401 H Street, N.W., Washington,
D.C. 20530
RE: United States v. The Thomson Corporation and West Publishing
Company Case No. 1:96CV01415 (U.S. District Court for the District
of Columbia)
Dear Mr. Conrath: Geronimo Development Corporation, a Virginia
corporation hereinafter ``Geronimo''), 1 submits the following
Comments regarding the Final Judgment in the above matter.
Geronimo publishes, exclusively in CD-Rom format, Virginia case
law, statutes and administrative materials, along with U.S. Fourth
Circuit and U.S. Supreme Court cases. We compete directly with two
giants, West Publishing Company and the Michie division of Reed-
Elsevier, and with a small electronic, publisher, DiscSense,
Incorporated.
The Complaint identifies nineteen product markets in which West
and Thomson compete directly and identifies anti-competitive
consequences of the merger in those product markets. The Final
Judgment addresses those concerns. Comments from other parties
address and express the concerns we have over the issues raised in
the Complaint (most notably the comments from Gary L. Reback,
counsel for Lexis-Nexis, and Robert S. Oakley on behalf of the
American Association of Law Libraries [``AALL'']).
Our major concern is that the Complaint ignores the fact that
West has a monopoly in the market for enhanced primary law products
for the lower federal courts (the Federal District Courts and the
Circuit Courts of Appeal). Only West publishes a complete set of
enhanced opinions for these decisions. Although the Lexis online
service includes all of the same opinions, West's monopoly is not
broken thereby. The Complaint notes that online legal research
services are ``not good substitute(s)'' for enhanced primary law
products because they don't provide users with editorial analyses.
West has actively maintained its monopoly. For example, despite
the decision in Feist Publications, Inc. v. Rural Telephone
Services, Inc., 499 U.S. 340, 111 S. Ct. 1282 (1991), West continues
to claim that the interior page numbers of cases reported in its
publications are entitled to protection under the copyright laws.
West will not unequivocally state that the first page citation to
cases in its reporters is in the public domain. West claims that its
``enhancements'' to the official text of decisions, including the
correction of typographical errors, are entitled to copyright
protection.\2\ Finally, West actively opposes the adoption by any
court of a public-domain citation system.\3\
To compete in this market while avoiding litigation, a potential
competitor would need to obtain the original text of all the
decisions from all federal courts, convert that text into digital
format for either printing or electronic publication, create a new
citation system, prepare headnotes and correlate such headnotes into
a digest or encyclopedia. This is a daunting, if not impossible,
task.
As noted at Paragraph 30 of the Complaint, accessing opinions in
the product markets identified in Paragraph 19 is difficult because
``past and/or current opinions simply are not available from many
courts, and in many others, obtaining access is costly and time-
consuming.'' Because the lower federal courts have relied upon West
for such a long time, it is likely that access to the original
copies of these opinions would be even more difficult than in the
state courts identified in Paragraph 19.\4\
The only entities with the financial ability and publishing
expertise to produce and market a competing federal product would be
other large legal publishers. After the West-Thomson merger, there
will be one less potential competitor; possibly, none. Further, as
noted in the comments of Lexis-Nexis and
[[Page 53434]]
AALL, this merger poses a threat to the continued viability of
Lexis-Nexis, which is the only other source of the text of the
decisions of the lower federal courts (albeit, electronic and
``unenhanced''). Thus, if the merger is allowed in its present form,
West's monopoly over federal reports will be strengthened.
15 U.S.C. Sec. 18 prohibits mergers.
``* * * where in any line of commerce or in any activity
affecting commerce in any section of the country, the effect of such
acquisition may be substantially to lessen competition, or to tend
to create a monopoly.''
If an acquisition that might ``tend to create a monopoly'' is
prohibited, then certainly an acquisition that would strengthen an
existing monopoly must likewise be banned. The evil to be prevented,
lessened competition, is the same in both instances.
Nothing in the Final Judgment addresses West's monopoly over
federal case law. The provisions dealing with the licensing of
interior page numbers will not foster competition in this market
(see below). Three provisions should be added to the Final Judgment
to encourage competition in this market:
1. Require West/Thomson to acknowledge that the text of court
decisions reported in its products is in the public domain,
regardless of trivial enhancements thereto, and to disclaim any
copyrights in such text.
This would lower, slightly, the major barrier to entry into the
market for primary lower federal case law, encouraging competition
which might offset the harmful effects of this merger.
In many instances, especially with older materials, the text of
decisions in the West federal publications is the only printed
version of the decision. The only citation to a decision of a lower
federal court allowed by the Harvard Blue Book is the West cite. The
rules of all state and federal courts require that citations to
lower federal court decisions cite the West reports.\5\ Clearly,
West's federal decisions represent the de facto official text of
this fundamental body of law. It is inconceivable that the official
text of the decisions of the federal courts would not belong to the
people.
2. Require West/Thomson to allow third parties to retrieve the
public domain portions of federal case law from West's print and/or
electronic publications, and require West/Thomson to acknowledge
that the inadvertent and temporary copying of materials in which
West legitimately possesses a copyright during such retrieval
constitutes ``fair use'' under copyright law.
By itself, an acknowledgment by West/Thomson that the text of
federal court decisions contained in its reports is in the public
domain will not foster competition because West/Thomson would be
able to utilize current copyright law to thwart potential
competitors from retrieving the text in any efficient manner
(scanning and optical character recognition or direct extraction
from CD-Rom databases). The only alternative for a potential
competitor would then be to manually key in the text.
A competitor could digitally scan the pages of the printed
reports and convert the text into computer format with optical
character reading software. Such software allows the user to
``preview'' a page of text on the computer screen and to mark those
portions (such as headnotes, West Key numbers, etc.) which should
not be processed. However, current copyright law can be interpreted
to hold that the image of the page in the computer's memory, and
thus the image on the monitor, is itself a copy (See MAI Sys. Corp.
v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993), cert. dism'd
114 S.Ct. 671 (1994). Potential competitors would, of course,
exclude West/Thomson's copyrighted materials from their finished
product, and the only reason for displaying such materials
temporarily on their computer monitors would be for the purpose of
identifying them in order to exclude them. Thus, West/Thomson should
be required to acknowledge that such ``copying'' falls within the
``fair use'' exclusion of U.S. copyright law.
Of course, scanning public domain materials from printed text
and converting them into digital format is absurdly inefficient in
light of the fact that the public domain text already exists in
digital databases on West's CD-Rom products. Nothing could be
simpler than for a competitor to ``download'' the public domain text
from West's digital products for use in preparing a new electronic
or print publication. Such an act, however, would surely assure a
lawsuit from West/Thomson claiming violation of copyright in the
database containing the public domain text, or violation of the
license agreement pursuant to which the electronic media was
accessed. Unfortunately, the law in this area is not sufficiently
clear that a competitor could hazard such litigation.
The copyright office considers a computer database to be
copyrightable as a ``compilation.'' Copyright law extends protection
to compilations as a form of literary work. 17 U.S.C. Sec. 103. When
the compilation is composed of public domain materials, copyright
protection may extend to the selection and arrangement of the
materials, but it does not extend to the materials themselves.
Feist, supra.
The medium on which material is recorded is irrelevant to the
question of whether it is in the public domain. There is no question
that the text of the U.S. Constitution, recorded in ink on a piece
of paper, could be copied by anyone. Recording the same document on
a floppy disk should not take it out of the public domain. Further,
there is no question that a page containing the Constitution within
a book (a ``compilation'') could be copied--even if the book itself
was copyrighted. Likewise, placing the Constitution into a database
(also a ``compilation'') should not remove it from the public
domain, even though the database itself might be copyrightable.
Unfortunately, many opinions from U.S. courts reveal a lack of
understanding of computer technology, much less the application of
copyright law to electronic information. Would-be competition will
be chilled by the threat of litigation. Thus, in order to encourage
competition in this long-monopolized market, West/Thomson should be
required to allow third parties to retrieve the public domain texts
from the West CD-Rom databases.
3. Require West/Thomson to abandon claims that its internal page
numbers are entitled to copyright protection.
The Eighth Circuit has held that West has a copyright in the
arrangement of cases in its National Reporter System and that the
internal page numbers of those books ``reflect and express'' this
copyright, so that commercial use of those numbers infringes West's
copyright in the arrangement. West Publishing Co. v. Mead Data
Central, Inc., 799 F.2d 1219 (8th Cir. 1986), cert. denied, 107
S.Ct. 962 (1987), aff g. 616 F.Supp. 1571 (D. Min. 1985). This
decision, combined with West's de facto monopoly in the enhanced
primary law of the lower federal courts, severely limits competition
in this market.
The legal theories trotted out to support the decision in West
break down upon closer examination. The Eighth Circuit granted
copyright protection to interior page numbers because they
``express'' the arrangement of the cases in a volume. However, the
Court also states ``West concedes that citation to the first page of
its reports is a noninfringing `fair use' * * * so these citations
are not at issue here.'' Certainly the arrangement of the cases in a
volume could be easily reproduced using the first page citations--
which the Court does not protect. Consider the publisher who wishes
to reproduce the cases as arranged in a West volume, but wants to
use a page size that is somewhat larger than the page size used by
West. In order to reproduce the arrangement, this publisher will
refer to the first page citation (which West says is in the public
domain), rather than any of the interior page numbers. Clearly, the
interior page numbers have no value in protecting the arrangement of
the cases in the West publications, they only serve to indicate
where the page breaks fall in a particular report.
Further, while the Court allows West's claim of a copyright in
the arrangement of cases within a volume, it ignores the fact that
the arrangement of cases within a reporter is totally irrelevant to
the use of those cases. No lawyer or judge I have ever known has
ever read all of the cases, front to back, within a report. No case
in a reporter is any more or less ``important'' than any other case
to the researcher. West's ``arrangements'' serve no purpose other
than to provide a means of removing public materials from the public
domain.
While nothing that West does not and cannot claim any copyright
in the judicial opinions themselves, the Court in West elaborated at
length on the time and effort expended by West in preparing these
reports, revealing that the true rationale for its decision was the
``sweat of the brow'' theory. However, in 1991 the Supreme Court
opinion in Feist destroyed the ``sweat of the brow'' theory.
In light of the foregoing, it is clear that West's claim of
copyright in the interior page numbers lacks any continuing
legitimacy, and is being used solely to strengthen its monopoly over
the publication of decisions of the lower federal courts. Requiring
West/Thomson to license these page numbers is not a solution to a
problem; it is an
[[Page 53435]]
abdication of responsibility. If West/Thomson has a legitimate
copyright in the interior page numbers, then they should be allowed
to charge whatever they want and to license them to whomever they
wish, without coercion from DOJ. If West/Thomson does not have a
legitimate copyright in the page numbers, then competitors should be
allowed to use them for free. DOJ should institute litigation for
the purposes of deciding the legitimacy of the copyright claim,
rather than `duck'' the issue by requiring West/Thomson to license
them at a specified price.
4. DOJ should comply with the Freedom of Information Act
(``FOIA'') request made by Tax Analysts, Incorporated of Falls
Church, Virginia, which seeks release of the public domain portions
of tapes of federal cases contained in the now-defunct Juris
database.
The Tax Analysis FOIA request is the subject of an appeal
pending in the United States Court of Appeals for the District of
Columbia. The decision on appeal was rendered by Judge Gladys
Kessler of the Federal District Court for the District of Columbia,
the same Court which is now reviewing this merger. In that appeal,
DOJ is a Co-Appellee with West, taking the position that a large
electronic archive of predominately public domain material should
not be released to the Appellant. That position is at odds with
DOJ's acknowledgment in the Complaint that the difficulty or
impossibility of obtaining opinions is one of the barriers to entry
in primary case law markets. DOJ's contrary positions on this issue
should be reconciled, or in the alternative, a neutral party should
be designated to represent the public interest in this matter.
Lest we forget: At issue in this proceeding is not some mean
commercial commodity, not forest products, or steel, or computer
programs. At issue is the Law; the fuel that fires the flame of
freedom; the vehicle by which free people govern themselves. The Law
belongs to no one, it belongs to all. It was purchased for us with
patriot's blood; we have a sacred duty to hand it down, unshackled,
to generations yet to come.
Thank you for your attention to our concerns. Please don't
hesitate to contact me if you wish to discuss any of the points
raised or would like additional information.
Sincerely,
O.R. Armstrong,
President.
Footnotes
\1\ About Geronimo:
Virginia's open access to its primary law materials enabled
Geronimo to enter the legal publishing business in 1991. The printed
volumes of Virginia Supreme Court and (until recently), when West
was awarded the publishing contract) Virginia Court of Appeals
reports contain no claim of copyright whatsoever. Further, the
contract for publication of the Virginia Code provides that the text
of the statutes, along with catch lines and title, chapter and
article headings are not copyrightable by the publisher.
Though we were the first to offer a stand-alone computerized
research system for Virginia law, Michie (a subsidiary of Lexis-
Nexis) and then West soon brought out competing products. Later, a
small electronic, publisher, DiscSense, Inc. also entered the fray.
Since we were a new, small company, and we could not out-market
the giants, our plan was to make our product easier to use, price it
significantly lower than the competition, provide more databases and
offer technical support. The plan worked. Our product was chosen, in
head-to-head competition, for installation in all Commonwealths'
Attorneys' offices throughout Virginia.
The real beneficiaries of this competition are all the
attorneys, judges, prosecutors, government officials, law
enforcement agencies, inmates, libraries, title companies, banks,
and private citizens who are able to easily and economically access
most of the law which applies to the citizens of the Commonwealth of
Virginia.
\2\ For example, the Complaint in West Publishing Company v.
Mitchell Gross, Civil Action CV2071, Northern District, Georgia
(1993) alleges, inter alia, that the Defendant violated West's
copyrights by wholesale copying of its books. The Complaint states
at pages 3-4.
Each Southern Reporter case report contains the following
editorial enhancements created entirely by West: (a) West citation
of the case; (b) case synopsis, including summary of the facts, the
court's holding and the procedural history of the case; (c) numbered
headnote(s) summarizing portions of the opinion relating to specific
points of law, including the editorial designation of the statutes
that relate to each headnote; (d) topic designations for each
headnote; (e) topic designations for each headnote with individual
``Key Number System'' registered trademark symbols (keys) and
numeric designations (key numbers) to which headnotes are
referenced; (f) miscellaneous information prepared by West inserted
within the text of the judicial opinion including parallel
citations, corrections and cross-reference numbers relating back to
corresponding headnote numbers; and (g) at the conclusion of each
West case report, a West trademark, the symbol of a key enclosing
the words ``West Key Number System.''
(Emphasis supplied)
\3\ It should be noted that the House of Delegates of the
American Bar Association passed a resolution at its recent Annual
Convention urging all courts to adopt a public-domain citation
system in which the court would assign the citation at the time a
decision is issued and the paragraphs in the text would be numbered.
\4\ In this regard, it is our understanding that the American
Association of Legal Publishers has recently submitted to DOJ a
study of the difficulties encountered in attempting to obtain
original copies of opinions from the 1960's and 1970's from the
federal courts. The study reveals that opinions are missing from
files, that files are missing from filing cabinets, that opinions
are mis-filed, that the courts limit the number of case files (to as
little as three) which may be accessed, and that delay, confusion
and expense hamper the process.
\5\ West's domination of the federal market is so pervasive that
most courts require attorneys to provide citations to West products
(federal and state). Attorneys purchasing a competing product would
still need to access West products for these citations. Thus,
successful marketing of a competent product would require
significantly lower pricing, reducing the return on the investment
in the competing product, stifling competition.
Irell & Manella LLP
August 31, 1996
Via Federal Express
Craig W. Conratrh,
Chief, Merger Task Force, Antitrust Division, 1401 H Street, N.W.,
Suite 4000, Washington, D.C. 20530
Re: United States v. The Thomson Corporation and West Publishing
Company, No. 96-1415 (D.D.C.)
Dear Mr. Conrath:
Introduction
Matthew Bender & Company, Inc. submits the following comments in
opposition to the terms of the Proposed Final Judgment in the above-
mentioned matter relating to ``star pagination.'' These comments are
intended to supplement and amplify comments made by Lexis-Nexis in a
letter dated August 30, 1996.
As the Department is well aware, defendant West Publishing
Company claims that its copyright interests are infringed by
competitors who use ``star pagination'' to West's reporters. The
Complaint identifies this assertion of an intellectual property
right as a significant barrier to entry into the relevant legal
publishing markets. Moreover, the Department, acting as an amicus in
copyright litigation between Matthew Bender and defendant West
Publishing Company in the Southern District of New York, has
recently expressed its views on behalf of the United States that
West's copyright claim is without merit. Yet despite recognizing
that West has imposed a barrier to entry through the erroneous
assertion of a legally cognizable intellectual property interest,
the Department has not sought to remove that barrier. Rather, the
Proposed Final Judgment seeks to ameliorate the problem by mandating
that West offer a license to its non-existent rights. Not only does
this solution not remove the barrier to entry, it creates new anti-
competitive effects through license terms that would cause harm both
to licensees and to other potential competitors of the merged
Thomson/West entity in the markets at issue. Matthew Bender
accordingly urges that the proposed Final Judgment not be approved
by the Department or the Court without modification to prohibit
Thomson/West from enforcing any alleged rights with respect to star
pagination.
The Importance of Star Pagination
Matthew Bender is one of this country's leading publishers of
legal secondary literature, including such well known treaties as
Moore's Federal Practice, Nimmer on Copyright, Collier On
Bankruptcy, and Weinstein's Evidence. In recent years, Matthew
Bender has offered many of its titles
[[Page 53436]]
on CD-ROM. In order to remain competitive in the legal secondary
source market, Matthew Bender must offer its CD-ROM titles in
conjunction with pertinent primary materials. By having primary
materials available together with secondary sources, a person using
Matthew Bender's legal secondary source product will be able to
move, at the touch of a button, from a citation to a primary source
to the primary source itself. Thus, for example, if Moore's Federal
Practice cites a particular page of an appellate decision as stating
a particular holding, a person using an integrated CD-ROM product
will be able to go from citation to the cited portion of the
opinion, and then go back to the treatise (or to another authority
cited in the opinion). Consumers of legal products benefit from this
integration of secondary and primary sources through improved
secondary source products.
In order to integrate judicial opinions with the existing base
of legal secondary literature, and to make them competitive primary
sources in their own right, those judicial opinions must include
information about the location of page breaks from the version of
the opinion appearing in the National Reporter System published by
defendant West Publishing Company. This page break information is
typically provided via the efficient shorthand of ``star
pagination.''\1\
---------------------------------------------------------------------------
\1\ The Compliant recognizes this business reality. See
Complaint para. 43 (``Particularly for CD-ROM products, where it is
possible to include both primary and secondary law products on the
same CD-ROM, the ability to include star pagination is an important
competitive factor.'').
---------------------------------------------------------------------------
It is necessary to provide information about the location of
page breaks in West's reporters for three primary reasons: (1) to
allow users of Matthew Bender products to cite cases in the form
that is mandated by law, practice and necessity; (2) to allow users
of Matthew Bender products to locate the portion of a judicial
opinion that is cited in a secondary or primary source; and (3) to
allow the integration of primary sources with secondary sources that
contain pinpoint citations to West's reporters.
The necessity of providing information about the page breaks in
West's reporters emerges from many factors. West's federal reporters
(i.e., Federal Cases, Federal Reporter, Federal Reporter--Second
Series, Federal Reporter--Third Series, Federal Supplement, Federal
Rules Decisions and Bankruptcy Reporter) are the de facto official
reporters of the U.S. district courts and courts of appeals and thus
are the standard citation source for the bench and bar. Only West
publishes in book form a comprehensive collection of the published
decisions of the lower federal courts. Consequently, the rules
adopted by many of the federal courts require that citations in
briefs be to the appropriate volume and page number of West's
federal reporters. See e.g., Third Cir. R. 28.3(a). The preeminent
legal citation manual also requires citation to West's federal
reporters, including pinpoint citation. See generally the Bluebook;
A Uniform System of Citation at 34-36, 165-67 (15th ed. 1991) (the
``Bluebook''). The Bluebook citation form, which the legal community
regards as setting the standards for citations in legal writing, has
been formally adopted by the local rules of various courts, thereby
further extending the official status of West's federal reporters.
See, e.g., Eleventh Cir. 28-2(k).
The de facto official status of citations to the volume and page
numbers of West's federal reporters is further reflected in their
use as the standard citation form in the printed opinions of the
United States Supreme Court and the printed slip opinions of the
lower federal courts. In the United States Reports, for example, the
government's official reporter of Supreme Court decisions, citations
to lower federal court decisions almost invariably consist of a
citation to the volume and appropriate page numbers, including the
pinpoint citation, of the West federal reporter in which the
decision and pertinent passages were published.
The primacy of citations to West state court judicial reports is
also a condition dictated by the requisites of legal practice. The
judicial decisions of at least nineteen state court systems are not
currently published in any ``official'' reporter. See Robert C.
Berring, On Not Throwing Out the the Baby: Planning the Future of
Legal Information, 83 Cal. L. Rev. 615, 633 n.66 (1995). Citations
to judicial authority in states such as Texas are by necessity to an
unofficial reporter, such as the reporters in West's National
Reporter System. In yet other states, West is the official reporter.
For example, in Florida, West publishes the official Florida Cases,
which is a collection of Florida judicial opinions reprinted--
including volume and page numbers--from West's Southern Reporter. A
citation to Florida's ``official'' reporter is thus identical to a
citation to West's ``unofficial'' Southern Reporter.
Even in the remaining states, such as New York, where there are
non-West ``official'' reporters of judicial opinions (owned, in this
case, by Thomson's subsidiary, Lawyers Cooperative Publishing Co.),
law and practice nonetheless require parallel citations to West's
New York reporters. For example, the rules adopted by certain
federal courts require citations to West's New York reporters. See,
e.g., D.C. Cir. R. 28(b). The Bluebook (which, as noted above,
various local rules of court adopt by reference) also requires
citation to West's New York reporters, including pinpoint citation,
in documents submitted to federal and state courts. See id. at 195-
97. In accord with the standards promulgated by the Bluebook,
citation to West's National Reporter System volumes, including
pinpoint citation, is considered by the legal community to be the
proper method of citation in memoranda of law submitted to the
federal and state courts. Indeed, the Bluebook requires citation to
West's reports of state judicial opinions in the National Reporter
System in documents submitted to federal and state courts in every
single state. See generally Bluebook at 169-216.
In sum, the bench and bar must (and do) cite to West's
reporters. Pinpoint citations to West's National Reporter System
volumes are thus ubiquitous in the U.S. state and federal corpus
juris, in submissions to the courts, as well as in the vast
secondary literature about our laws. Information about the location
of page breaks in West National Reporter System volumes has thus
become a standard frame of reference for discussion, debate and
advocacy about the law of this country. Primary sources that do not
contain information about the location of page in West's National
Reporter System volumes are cut-off from this ubiquitous frame of
reference.
West's Use of Its Alleged Copyright To Destroy Competition
As the Complaint recognizes, a significant barrier preventing
Matthew Bender and other potential competitors from using star
pagination to create better secondary source products, and to create
new enhanced primary source products, has been erected by West's
assertion of claims that star pagination infringes West's purported
copyright in the arrangement of its reporters. See Complaint
Paras. 32, 43. West aggressively pursues litigation against
competitors who use star pagination. It also relies on
jurisdictional machinations to make that litigation more expensive
for those competitors and to confine examination of its alleged
copyright interest in star pagination to its home base.
West's first action of this type was its successful litigation
against Mead Data Central to enjoin Mead's intended inclusion of
star pagination in the Lexis database. That suit resulted in the
much-criticized West Publishing Co. v. Mead Data Central, Inc., 799
F.2d 1219, 1227 (8th Cir. 1986), cert, denied, 479 U.S. 1070 (1987)
decision, in which a two-judge majority of an Eighth Circuit panel
held, over a vigorous dissent, that the internal page numbers of
opinions published in West reporters are subject to copyright, and
that a competitor that provided star pagination to those internal
page numbers was liable for copyright infringement.\2\
---------------------------------------------------------------------------
\2\ The matter came before the Eighth Circuit on interlocutory
appeal of a grant of preliminary injunction. The case settled before
a decision was rendered after trial on the merits.
---------------------------------------------------------------------------
The West v. Mead decision has been roundly denounced by
copyright scholars,\3\ the U.S. Copyright Office,\4\ and most
recently
[[Page 53437]]
by the U.S. Department of Justice,\5\ as wrongly decided and clearly
overruled by the subsequent U.S. Supreme Court decision in Feist
Publications, Inc. v. Rural Tel. Service Co., 499 U.S. 340, 111 S.
Ct. 1282 (1991) which uprooted the ``sweat-of-the-brow'' copyright
doctrine undergirding West v. Mead.
---------------------------------------------------------------------------
\3\ See, e.g., William F. Patry, Latman's The Copyright Law 63,
n.212 (1986) (case is ``a most extreme misreading'' of the Copyright
Act); 1 Nimmer on Copyright Sec. 3.03 (``this case extends
compilation copyright too far''). Two scholars devoted a hundred-
page article to criticizing the West v. Mead case and decrying the
majority's position as disturbing ``a century-and-a-half of
precedent dating from the Supreme Court's first copyright decision,
Wheaton v. Peters, in 1834.'' L. Ray Patterson & Craig Joyce,
Monopolizing the Law; The Scope of Copyright Protection for Law
Reports and Statutory Compilations, 36 UCLA L. Rev. 719, 723 (1989).
In Feist Publications, Inc. v. Rural Tel. Service Co., 499 U.S. 340,
111 S. Ct. 1282 (1991), the Supreme Court cites repeatedly to the
Patterson and Joyce article in reaching the conclusion that no
compilation copyright protected the telephone book there at issue.
See Feist, 499 U.S. at 347, 348-349, 351, 361-362, 111 S. Ct. at
1288, 1289 (twice), 1291, 1296 (twice).
\4\ The Register of Copyrights (the senior official of the U.S.
government charged with the formulation of copyright policy)
testified before Congress regarding proposed legislation to amend
the U.S. Copyright Act to clarify that there is no copyright in the
volume and page numbers of judicial reporters that in the view of
the Copyright Office, West v. Mead was a ``substantial departure''
from ``150 years of settled contrary precedent.'' Testimony of Ralph
Oman, Exclusion of Copyright Protection for Certain Legal
Compilations: Hearings on H.R. 4426 Before the Subcomm. on
Intellectual Prop. and Judicial Admin., 102nd Cong., 2d Sess.,
Serial No. 105 at 6, 12 (1992). He further elaborated that even if
that ruling had been consistent with previous doctrine, its reliance
on sweat-of-the-brow considerations means that Feist ``tolled the
death knell'' for West v. Mead. Id. at 6. In fact, the Copyright
Office labeled H.R. 4426 ``unnecessary legislation'' on the basis
that the old Eighth Circuit ruling represented bad law post-Feist.
Id. at 31.
\5\ On August 20, 1996, the Department filed a memorandum amicus
curiae on behalf of the United States in Matthew Bender & Co., Inc.
v. West Publishing Co., 94 Civ. 0589 (JSM) (S.D.N.Y.) arguing that
West v. Mead ``rests on the discredited `sweat-of-the-brow' theory
of copyright and cannot be reconciled with Feist. * * * [T]o follow
the [West v.] Mead analysis is to eviscerate Feist, with
substantial, and undesirable, consequences for the progress of
science and art in the modern technological era.'' Memorandum of
United States of America as Amicus Curiae at 10-11 (filed August 20,
1996). The Department's brief is discussed in greater detail below.
---------------------------------------------------------------------------
Nonetheless, the West v. Mead decision has not yet been
explicitly overturned, and West has in fact continued its use of
litigation to prevent competitors from using star pagination. See,
e.g., Matthew Bender & Co., Inc. v. West Publishing Co., 39
U.S.P.Q.2d 1079, 1082 (S.D.N.Y. 1996) (noting ``West's history of
litigation against other legal publishers'' and its employees'
testimony ``that they do not know of any companies that have used
West's star pagination that West has not sued''); Susan Hansen,
Fending Off the Future, American Lawyer 73, 73 (September, 1994)
(``West's lawyers have earned a reputation for menacing letters and
quick-strike lawsuits, hunting down infringers from coast to coast.
One by one, `copyists,' as [Vance] Opperman[, West's president,]
likes to call them, have been marched into court and crushed.'').
Having succeeded before Feist in obtaining one favorable ruling
in its home forum, West has attempted even past Feist to prevent
courts outside the Eight Circuit for examining its ``scarecrow''
copyright. As Professor Craig Joyce, a strong critic of the Mead
decision, explained to Congress:
The West Publishing Company is an able litigator. If it decides
on a `preemptive strike,'' it sues competitors asserting the right
to use `its' identifying matter--that is, the matter for which it
claims protection by virtue of the Mead case--in the federal trial
court for the District of Minnesota, the very jurisdiction in which
it filed and won in Mead. For quite proper reasons, West likehood of
success in that court, or anywhere in the Eight Circuit, is very
high.
If, however, West is sued elsewhere by a potential competitor
seeking to employ in its own works the identifying matter in which
West claims ownership, West can in all likelihood get the case
transferred to the District of Minnesota. Again, West's chances
there are good.
Exclusion of Copyright Protection for Certain Legal Compilation:
Hearings on H.R. 4426 Before the Subcomm. on Intellectual Prop, and
Judicial Admin., 102nd Cong., 2d Sess., Serial No. 105 at 39-40
(1992) (footnotes omitted) (emphasis original).
Recently, West's project of confining examination of its
pagination copyright to the Eight Circuit has been implemented
through the attempted manipulation of federal jurisdiction. In two
declaratory judgment actions brought by Matthew Bender against West
in the Southern District of New York, Matthew Bender & Co., Inc. v.
West Publishing Co., 94 Civ. 0589 (JSM) (S.D.N.Y.) and matthew
Bender & Co., Inc. v. West Publishing Co., 95 Civ. 4496 (JSM)
S.D.N.Y.) (seeking declarations that Matthew Bender's use of star
pagination does not infringe any West copyright), West moved to
dismiss for lack of subject matter jurisdiction on the ground that
the actions allegedly do not involve actual controversies.\6\ After
extensive discovery, briefing and oral argument on the
jurisdictional issue, the court denied West's motions, see Matthew
Bender & Co., Inc. v. West Publishing Co., 39 U.S.P. Q.2d 1079,
1082 (S.D.N.Y. 1996), as well as West's subsequent motion for
reconsideration or interlocutory review. West's failed
jurisdictional ploy delayed adjudication of the merits by at least
two years and caused significant litigation costs.
---------------------------------------------------------------------------
\6\ To underscore West's desperation to avoid a decision outside
the Eight Circuit, West originally took the remarkable position in
Matthew Bender v. West that the action should be dismissed, or
transferred to Minnesota, on the ground of improper venue because
West--the nation's largest legal publisher--purportedly ``does not
do business in the Southern District of New York.'' See Report of
parties' Planning Meeting dated March 8, 1994 at 6.
---------------------------------------------------------------------------
The purposes animating West's attempts to evade the jurisdiction
of the Southern District of New York become clear when evaluated in
light of West's conduct in a concurrent proceeding now on appeal
from the United States District Court for the District of Minnesota
to the Eight Circuit--Oasis Publishing v. West Publishing Co., CV3-
95-563. In that action, West has taken a dramatically contrary
stance regarding the conditions under which justiciability is
established for the purpose of obtaining an advisory ruling in its
forum-of-choice regarding a hypothetical product.
In Oasis, plaintiff Oasis Publishing, Inc., a CD-ROM publisher,
initiated suit against West in the United States District Court for
the District of Florida seeking a declaration that West does not
have a copyright in the page numbers contained in Florida court
decisions published in West's Southern Reporter and that Oasis'
intended use of star pagination to West's Southern Reporter in
Oasis' planned CD-ROM product will not infringe West's copyright.
West responded to the Oasis complaint by moving to dismiss the
declaratory judgment claim for lack of a justiciable controversy and
alternatively to transfer the action from Florida to the District of
Minnesota. Before ruling on West's motion to dismiss, the court
granted West's motion to transfer the case to the District of
Minnesota.
Once West succeeded in transferring the Oasis case to Minnesota,
West withdrew its motion to dismiss for lack of a justisiable
controversy. It did so even though there had been no intervening
change in the facts or law. But West did not simply withdraw its
motion. Rather, it entered a stipulation filed with the Minnesota
court in which it dismissed ``with prejudice'' from its answer the
affirmative defense that the case was not justiciable and all
allegations in West's answer based upon that defense. In other
words, once West successfully transferred the case to Minnesota,
West not only withdrew its motion challenging justiciability, but
actively attempted to expunge the issue from the record.
After West in effect stipulated to jurisdiction, the parties
submitted cross-motions for summary judgment on Oasis' copyright
declaratory judgment claim. Just four weeks after oral argument,
West's jurisdictional strategy to obtain a favorable opinion from
its forum-of-choice paid off. The Minnesota court followed the much-
criticized West v. Mead and granted West's motion for summary
judgment. See Oasis Publishing Co. v. West Publishing Co., 924 F.
Supp. 918, 925-926 (D. Minn. 1996). In rendering its opinion, the
court below never examined the existence of subject matter
jurisdiction.\7\
---------------------------------------------------------------------------
\7\ On appeal, neither party in Oasis intends to discuss the
threshold jurisdictional issue. West is attempting to cover up its
attempted manipulation of the District of Minnesota's jurisdiction
by refusing to consent to Matthew Bender briefing the issue to the
Eighth Circuit. See Letter of Joseph Musilek to Elliot Brown, dated
July 22, 1996 (``West Publishing Company, like Oasis, has no
objection to Matthew Bender filing an amicus curiae brief in the
Eighth Circuit on the merits of the appealed issues. However, West
does not consent to an amicus brief on any jurisdictional or
justiciability issue.'')
---------------------------------------------------------------------------
In sum, a comparison of West's actions in response to Matthew
Bender's New York declaratory judgment actions with its stance in
the Oasis case suggests that West's simultaneous assault on
jurisdiction outside the Eighth Circuit and attempted stipulation to
jurisdiction in the Eighth Circuit is based on a deliberate strategy
to confine examination of its alleged copyright in star pagination
to courts in the Eighth Circuit. This strategy decreases the
likelihood that the Mead decision will be critically examined, and
increases costs for potential challengers of West's copyrights who
must engage in lengthy jurisdictional fights against a well-heeled
and aggressive adversary.
In its recently filed opposition to Matthew Bender's motion for
summary judgment in Matthew Bender v. West, West has taken its game
playing to new heights--contending, despite numerous public
statements to the contrary, that it has a copyright interest in the
initial parallel citations (i.e., the cite to the first page of a
case) in the National Reporter System that may be infringed when
[[Page 53438]]
a competitor uses such citations.\8\ See West Publishing Company's
Memorandum of Law In Opposition To Plaintiff Matthew Bender &
Company's Motion For Summary Judgement at 5 (``West has not conceded
that copying of first page citations by Matthew Bender is non-
infringing.'') (emphasis original). West apparently wishes to
backtrack from its admissions and leave the door open to suing a
competitor for infringement based on its use of initial parallel
citations.
---------------------------------------------------------------------------
\8\ West's counsel have repeatedly admitted that no such
copyright interest exists. See, e.g., Statement of West's outside
counsel, James E. Schatz, Transcription of American Association of
Law Libraries 1995 Annual Meeting at Pittsburgh, Pennsylvania, July
15-20, 1995 at 14 (``West has made it very clear it has no objection
to, never has, doesn't now and never will to the use of initial West
citations, the volume and first page number by other publishers or
by anybody else.''; ``[T]he initial citations are in the public
domain because West has no objection to anybody using them. West has
said that for a long time. West has basically said that since
1876.''); Transcript of Hearing, In the Matter of the Amendment of
Supreme Court Rules: Electronic Archive of Appellate Opinions, Rules
and Orders, Case No. 95-01 (March 21, 1995) at 114:6-8, 118:13-14
(``The volume and first page number of every case report published
by West is in the public domain.''; ``West's volume and initial page
number are matters of public domain'') (testimony of West's counsel
Brady Williamson); Supplemental Brief of West Publishing Co., In the
Matter of the Amendment of Supreme Court Rules: Electronic Archive
of Appellate Opinions, Rules and Orders, Supreme Court of Wisconsin,
Case No. 95-01 (April 3, 1995), at 8 (``Since West has no objection
to the use of initial citations to its case reports, even by its
competitors, those initial citations are effectively `in the public
domain.' '').
---------------------------------------------------------------------------
In the summary judgment proceedings in Matthew Bender v. West,
the Department filed an amicus curiae brief in that suit on behalf
of the United States arguing, that ``Bender's star pagination to
West's National Reporter System does not infringe any copyright
interest West may have in the arrangement of the National Reporter
System.'' Explaining why the Department had taken the unusual step
of filing an amicus brief at the district court level in a copyright
action, the Department explained,
The United States has a substantial interest in the resolution
of the issue discussed in this Memorandum. It has numerous
responsibilities related to the proper administration of the
intellectual property laws and to advancement of the public
interest. The standards for copyright protection embody a balance
struck between protecting private ownership of expression as an
incentive for creativity and enabling the free use of basic building
blocks for future creativity * * *. The United States therefore has
an interest in properly maintaining the ``delicate equilibrium'' * *
* Congress established through the copyright law.
The interest of the United States in ensuring the proper
preservation of that balance also reflects the fact that it has
primary responsibility for enforcing the antitrust laws, which
establish a national policy favoring economic competition as a means
to advance the public interest. Moreover, the United States is a
substantial purchaser of legal research materials of the kind at
issue in this case.
Finally, the United States has recently taken actions relating
to the issue discussed. On June 19, 1996, the United States,
together with seven states, filed an antitrust suit challenging the
acquisition of West Publishing Co. by The Thomson Corp., together
with a proposed settlement of that suit. Part of that settlement
requires Thomson to license to other law publishers the right to
star paginate to West's National Reporter System. United States v.
The Thomson Corp., No. 96-1415 (D.D.C. filed June 19, 1996),
Proposed Final Judgment, 61 Fed. Reg. 35250, 35254 (July 5, 1996).
In announcing the settlement, the U.S. Department of Justice stated:
Today's settlement, with its open licensing requirement, does
not suggest * * * that the Department believes a license is required
for use of such pagination. The Department expressly reserves its
right to assert its views concerning the extent, validity, or
significance of any intellectual property right claimed by the
companies [West and Thomson]. The Department also said that the
parties agree that the settlement shall have no impact whatsoever on
any adjudication concerning such matters.
U.S. Dept. of Justice, Press Release No. 96-287, at 3-4, 1996 WL
337211 (DOJ) *2 (June 19, 1996). This memorandum asserts those
views.
Memorandum of United States of America as Amicus Curiae, Matthew
Bender & Co., Inc. v. West Publishing Co., 95 Civ. 0589 (JSM)
(S.D.N.Y.) at 1-2 (citations omitted) (``U.S. Amicus Memorandum'').
As a result of West's substantive positions and procedural game
playing, potential competitors in the primary and secondary legal
product markets, use star pagination at the risk that they will be
sued by West for copyright infringement. The Department recognizes
this reality. See Competitive Impact Statement, 61 Fed. Reg. 35250,
35261-62 (July 5, 1996) (``[E]xisting or potential participants in
the markets for primary law products cannot offer products with star
pagination without the threat of costly infringement litigation.'').
As the former President and COO of Thomson Electronic Publishing,
testified before Congress in 1992 on behalf of numerous Thomson
legal publishing entities,\9\ the West v. Mead Data Central
``decision has made it commercially impossible for Thomson or anyone
else to publish, with page number citations, the decisions of the
lower federal courts * * *.'' Exclusion of Copyright Protection for
Certain Legal Compilations: Hearings on H.R. 4426 Before the
Subcomm. on Intellectual Prop. and Judicial Admin., 102nd Cong., 2d
Sess., Serial No. 105 at 82 (1992) (testimony of Kathryn M.
Downing); see also Gary Wolf, Who Owns the Law?, Wired 98, 138 (May
1994) (``West's provisional victory [in West Publishing] has kept
other electronic publishers at bay.''). From an antitrust
perspective, West's repeated, even dogged, attempts to assert its
baseless copyright have greatly reduced competition by erecting a
huge barrier to entry in legal publishing markets.
---------------------------------------------------------------------------
\9\ Ms. Kathryn M. Downing testified on behalf of Thomson
Professional Publishing, Lawyers Cooperative Publishing Company,
Clark Boardman Callaghan Company, Bancroft-Whitney Company, Research
Institute of America Inc., Warren, Gorham and Lamont and Thomson
Electronic Publishing. In 1995, Ms. Downing left Thomson to serve as
Matthew Bender's CEO.
---------------------------------------------------------------------------
Neither the Department Nor the Court Should Approve the Final
Judgment Unless It Is Modified To Preclude The Merged Entity From
Enforcing its Alleged Star Pagination Copyrights
In light of the foregoing, the deficiency in the Proposed Final
Judgment's remedy to West's star pagination claims becomes
apparent.\10\ The Complaint recognizes that West's assertion of its
claim that star pagination infringes its copyright has an
anticompetitive effect by serving as a barrier to entry into the
relevant markets. See Complaint Paras. 32, 43. The Department
further recognizes that West's copyright claim is baseless. See
generally U.S. Amicus Memorandum. Yet, the Department has not taken
the obvious and desirable step of removing that barrier by
forbidding West from asserting its baseless copyright interest as a
tool to stifle competition. This failure flies in the face of the
Department's recognition that West's copyright claim is baseless. It
also deviates from the remedies the federal government has demanded
in other merger cases. See, e.g., Hoechst AG: Proposed Consent
Agreement, 60 Fed. Reg. 49609, 49611 (September 26, 1995) (filed by
FTC); United States v. Borland Int'l. Inc., 56 Fed. Reg. 56096
(October 31, 1991). In both Hoechst AG and Borland, Int'l., the
government conditioned approval of the merger on the consent of the
merging entity not to enforce an intellectual property right. In
neither of those instances did the government dispute the validity
of the intellectual property at issue. One is therefore left to
wonder why the government has chosen to settle for less where it
believes that the intellectual property interest asserted is
invalid.
---------------------------------------------------------------------------
\10\ Neither the Complaint, the Proposed Final Judgment nor the
License addresses the use by competitors of initial parallel
citations to West's National Reporter System. This is not surprising
given West's public statements that initial parallel citations are
in the ``public domain.'' Nevertheless, in light of the position
that West has taken in Matthew Bender v. West, the Department should
put an end to this game playing and not approve the merger unless
Thomson/West agrees that it will never assert that any of its rights
have been infringed by a competitor's use of initial parallel
citations.
---------------------------------------------------------------------------
Matthew Bender believes that the Department should not let
Thomson/West consummate their merger unless Thomson/West agrees that
it will not seek to enforce any star pagination copyrights.\11\ In
its
[[Page 53439]]
Competitive Impact Statement, the Department recognizes that, in
light of the proposed Thomson/West merger, it is critical to lower
the barriers to entry in legal publishing markets to maintain the
vigorous competition that currently exists. 61 Fed. Reg. at 35263.
Moreover, Matthew Bender believes that the maintenance of vigorous
competition after the consummation of the Thomson/West merger
requires elimination of the barrier to entry caused by the erroneous
assertion of the star pagination copyright for reason not mentioned
by the Department in its Competitive Impact Statement. By merging
West's virtual monopoly position in enhanced primary law products
with Thomson's capability in secondary law products, the merged
Thomson/West entity will be able to use its market power in the
enhanced primary law product markets to gain an unfair competitive
advantage in the secondary law product markets. No longer will West
have to develop its own secondary law products. Instead, Thomson/
West will be able to marry West's primary law products with
Thomson's secondary law products to create products that competitors
in the secondary law product markets cannot match without the right
to use West's star pagination. The newly achieved strength of
Thomson/West in the secondary law product markets will thus greatly
increase the anticompetitive effects of continued attempts to
enforce West's star pagination copyright.
---------------------------------------------------------------------------
\11\ Recent reports suggest that Thomson has done a complete
flip-flop on this issue. Thomson previously backed legislation to
amend the U.S. Copyright Act that would have removed the star
pagination barrier by clarifying there is no copyright in the volume
and page numbers of judicial reporters. See generally Exclusion of
Copyright Protection for Certain Legal Compilations: Hearings on
H.R. 4426 Before the Subcomm. on Intellectual Prop. and Judicial
Admin., 102nd Cong., 2d Sess., Serial No. 105 at 91 (1992) (Thomson
supports legislation because it ``would overrule the West [v. Mead]
decision and enable Thomson and others to publish . . . primary
legal texts.'') (Testimony of Kathryn Downing). West's then outside
counsel and later president, Vance K. Opperman, proving yet again
the lengths to which West will go to protect its sham copyright,
outrageously derided the bill as an attempt by Canadian Thomson to
rob an American company's assets. See, e.g., Prepared Statement of
Vance Opperman, id. at 159 (``Perhaps more disturbing is the motive
of the primary proponent of H.R. 4426, Lord Thomson and his foreign-
based Thomson conglomerate. We have all witnessed past efforts by
foreign firms, acting under the guise of the U.S. subsidiaries they
have bought up, to alter or dismantle fundamental American laws for
their own profit and at the expenses of American jobs and
prosperity.''); see also Testimony of Minnesota Congressman James
Ramstad, id. at 5 (``The legislation being considered today
represents an effort by one of the largest and most powerful foreign
conglomerates in the world, led by an English lord, to win in the
U.S. Congress what it knows it cannot win in the courts.''). The
prospect of merger appears to have caused Thomson to adopt West's
views on star pagination. See Vera Titunik, That Was Then, This Is
Now, American Lawyer 21 (April 1996) (quoting Thomson's general
counsel Michael Harris as saying, ``We believe star pagination is
copyrightable''). Accordingly, Matthew Bender expects that Thomson
will continue West's aggressive assertion of claims that star
pagination infringes West's copyrights.
---------------------------------------------------------------------------
For these reasons, the Thomson/West merger presents a compelling
example of the need to condition government approval of a merger on
an agreement not to enforce an alleged intellectual property right.
The merger here, like the mergers in Hoechst AG and Borland Int'l,
increases concentration in already concentrated markets. However,
unlike those cases, the intellectual property right at issue is
baseless, and the merger itself increases the harm from assertion of
the intellectual property right.
The Department is apparently under the impression that the
proposed mandatory license will fulfill the objective of removing
the barrier to entry caused by West's assertion of the star
pagination copyright. For several reasons, the Department is wrong.
First, the terms of the license are so onerous that few, if any,
competitors of West will be able to take advantage of it. As noted
in the letter submitted to the Department by Lexis-Nexis, the
pricing is very high (of course, any fee for what even the
Department recognizes is a non-existent right is too high). Indeed,
if the information cited by Lexis-Nexis is correct, the price is
being set at a level that West negotiated as a settlement after its
courtroom victory in West v. Meed.\12\ In light of the Supreme
Court's decision in Feist, it is inconceivable that West could
insist on that high a royalty again.\13\ The license is also not
absolute. West apparently can still challenge a licensee's use of
star pagination if West contends that the licensee has not made its
own selection, coordination and arrangement of cases. See License at
para. 1.03.\14\ And, as discussed more fully below, the license
contains at least two terms that will reduce, not enhance, a
licensee's ability to compete with Thomson/West in the marketplace.
See License para. 1.04 (which effectively requires a licensee to
preview its products for Thomson/West) and para. 3.01 (requiring the
licensee not to challenge West's copyright during the term of the
license). Matthew Bender submits that, under these conditions, the
Department cannot and should not rely upon the mandatory license
feature of the Proposed Final Judgment as a vehicle for preserving
vigorous competition in legal publishing markets following a
Thomson/West merger.
---------------------------------------------------------------------------
\12\ The problem is exacerbated by the term calling for a
payment of fees for every ``format.'' License para. 2.03. This means
that licensees will have to repay fees each time they make their
content available in a new format, so that the CD-ROM, HDCD and
Internet versions of a work each will require a repayment of fees
for the same data. This provision will discourage licensees from
servicing their installed base as it migrates to new formats and act
as a barrier to providing products in all but the most popular
formats.
\13\ Nonetheless, West has already demonstrated, in a brief
filed in the Matthew Bender v. West litigation, that it will attempt
to use these License terms against adversaries by contending that
the royalties are ``rates which the Antitrust Divisions approved as
commercially reasonable,'' and that ``the negotiation of the
Proposed Final Judgment does resolve any possible antitrust concern
regarding the availability of star pagination licenses to West
competitors.'' West Publishing Company's Memorandum Of Law In
Opposition To The Memorandum Of The Antitrust Division Of the
Department Of Justice As Amicus Curiae at 1 (filed August 26, 1996)
(emphasis added).
\14\ West has left the License intentionally ambiguous as to
whether it applies if a licensee creates a compilation of cases that
West contends mirrors West's selection of cases. For example, if a
licensee created a compilation that contains the same selection of
opinions as found in West's Federal Reporter (i.e., all published
federal appellate opinions), West could contend that those opinions
were not independently ``selected for reporting by Licensee,'' para.
1.03, and therefore are beyond the purview of the License.
---------------------------------------------------------------------------
Finally, Matthew Bender notes that the Proposed Final Judgment
will actually result in positive injury to third parties who compete
with the merged Thomson/West entity. The star pagination License
Agreement mandated by Section IX of the Proposed Final Judgment
effectively requires licensees to provide West with an advance
description of the product or service in which they intend to
include star pagination. See License para. 1.04. Thomson/West will
thus be in a position to modify its products to address the
enhancements offered by its competitor even before its competitor's
product can be sold. Not only will this give Thomson/West a
competitive advantage over the particular competitor seeking a
license, but it will also give an advantage over other competitors
in the market who will have to wait until the new product is sold to
develop a competitive response.
The star pagination license also results in positive injury to
third parties who compete with Thomson/West because it provides that
``[d]uring the term of this Agreement, Licensee (i) shall respect
and not contest the validity of the copyrights claimed by Licensor
in Licensor's arrangements of case reports in NRS Reporters as
expressed by NRS Pagination; * * * .'' License Sec. 3.01. This
provision will effectively prevent a licensee form challenging
West's copyright.\15\ This not only harms the licensee by subjecting
it to an expensive, highly restrictive license for a non-existent
copyright, but it harms all competitors of Thomson/West and all
consumers of legal research material because it reduces the
likelihood that an effective court challenge will be mounted that
invalidates West's copyright claims. Thus, the Proposed Final
Judgment simultaneously fails to take the opportunity that now
exists to remove the artificial barrier to entry caused by West's
improper assertion of its star pagination copyright and diminishes
the likelihood the problem will be solved later by private
litigation.
---------------------------------------------------------------------------
\15\ There is some question about whether this provision is
enforceable. Compare, Lear v. Adkins, 395 U.S. 653 (1969) (a patent
case invalidating on public policy grounds the doctrine of
``licensee estoppel,'' i.e., the doctrine that a licensee may not
challenge the validity of the licensed patent), with Saturday
Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191, 1200 (7th
Cir. 1987)(allowing enforcement of a no contest clause in a
copyright license). Rumbleseat in turn has been criticized by the
leading copyright commentator. See, 3 Melville Nimmer & David Nimmer
Nimmer on Copyright Sec. 10.15[B]).
---------------------------------------------------------------------------
For the reasons stated in this letter, Matthew Bender urges the
Department not to approve the proposed Final Judgment without
modification to prohibit Thomson/West from enforcing any alleged
star pagination copyright. In the event that the Department does
give its approval, Matthew Bender urges the Court to recognize the
positive injury to third parties caused by the proposed final
judgment and to refuse to approve it absent the same modification.
Sincerely,
James Imbriaco,
Associate General Counsel, and General Counsel, Professional
Publishing, The Times Mirror Company, 780 Third Avenue, 40th Floor,
New York, New York 10017.
[[Page 53440]]
James Imbriaco,
Counsel for Matthew Bender & Company, Inc., a wholly-owned
subsidiary of The Times Mirror Company.
Irell & Manella LLP,
Morgan Chu, Alex Wiles, Elliot Brown.
Morgan Chu,
Counsel for Matthew Bender & Company, Inc.
Alexander Wiles,
Counsel for Matthew Bender & Company, Inc.
Elliot Brown,
Counsel for Matthew Bender & Company, Inc.
CD Law
August 29, 1996.
Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, United States
Department of Justice, Suite 4800, 1401 H. Street, N.W., Washington
D.C. 20530
Re: Thomson Acquisition of West: Public Comment re Proposed Final
Judgment
Dear Mr. Conrath: I have reviewed the Antitrust Division's July
5, 1996 filing in the Federal Register with respect to the above-
referenced matter (61 Fed. Reg. 35250). Please consider this letter
responsive to that request for public comment.
I founded CD Law, Inc., of Seattle, Washington, in 1989. We
publish case law, statutes, administrative law, and other Washington
State legal materials on CD-ROM and on the Internet. Our computer-
assisted legal research products are exclusively digital, not print.
We compete directly with West Publishing in the Washington legal
CD-ROM business. To a lesser extent, we compete with Michie
Publishing, the Reed-Elsevier subsidiary, which publishes a CD-ROM
for Washington. Additionally, we have a somewhat unusual short-term
contract with Lawyers Cooperative Publishing (``LCP'') to produce
headnotes that are used in their Official Washington Reports. Given
these facts, I have been in a unique position to observe the state
of the Washington legal publishing market. My comments are based on
six years of first-hand experience competing with the largest legal
publishers in the United States.
In a nutshell, I feel that the proposed final judgment not only
will do nothing to preserve competition in Washington State, but
that in fact it will reduce competition and do grave damage to the
market for legal materials in Washington. This is true even though
Washington was one of three states given the option to rebid their
official court reports. The acquisition eliminates competition for
enhanced case law reports in Washington, and will adversely impact
the market for competing electronic products. I strongly urge the
Department of Justice to withdraw its consent to the Proposed Final
Judgment and deny the Thomson Corporation permission to acquire West
Publishing. Failing that, the DOJ should at a minimum require
Thomson to divest Lawyers Cooperative Publishing as a precondition
of the purchase of West.
The following pages detail my objections to the Proposed Final
Judgment and the proposed pagination licensing agreement. While my
focus in this letter is primarily on Washington State, my objections
also extend to matters of a more national scope.
I. Thomson and West Competed Vigorously for the Contract to Publish the
Official Washington State Reports
As the Department of Justice's filing in the Federal Register on
July 5, 1996 recognizes, Washington State is one of at least nine
markets in which the HHI measure of market concentration
presumptively raises antitrust concerns. The post-merger HHI
increase in Washington (996) is substantially above the number (100)
that raises the presumption. As I indicated in a previous letter to
DOJ, the Washington State legal publishing market is pervaded with
anti-competitive practices that include predatory pricing, exclusive
contracts for certain legal materials, and tying agreements. The DOJ
consent decree does little or nothing to prevent or ameliorate these
practices. A brief review of recent developments in the Washington
State legal publishing business made these facts clear.
a.) Washington Case Law Was Published by the State From 1982-1995
A Washington state agency known as the Commission on Supreme
Court Reports published the printed Washington case law from 1982 to
June 30, 1995. The printed advance sheet annual subscription to the
Washington Reports were sold by the Commission at an ``an cost''
basis: $52.50 per year for the Supreme Court Reports and $52.50 per
year for the Court of Appeals Reports in advance sheet form. Bound
volumes cost $19.50 for ``current volumes'' (recently issued
volumes) and $22.50 for older volumes.
b.) The Official Washington Reports Were Privatized in 1995
In early 1995, in response to funding cuts by the 1994
Legislature, the Washington Supreme Court decided to privatize the
publication of the Washington case law. The Office of the
Administrator for the Courts in Olympia, WA issued RFP #95055, which
called for bids on a combined print and CD-ROM version of the
Official Washington Reports. Both West Publishing and Lawyers
Cooperative Publishing (``LCP''), a Thomson subsidiary, bid on the
job.
c.) ``Cost Comparison'' Analysis by Court Reveals West/Thomson
Competition
Lawyers Cooperative Publishing and West Publishing submitted the
two lowest bids for the print version of the Washington case law. I
enclose a sheet labelled ``Cost Comparison'' that breaks down each
vendor's response to the RFP. The Cost Comparison information was
compiled by the Office of the Administrator for the Courts. Their
telephone number in Olympia, Washington is (360) 705-5239.
d.) West Cut Prices by Over $40.00 per Volume in Attempt To Win
Washington Bid
At the time of the RFP, West published a competing set of
printed Washington case law volumes titled ``Washington Reporter.''
The cost for West's volumes was and is $57.62 per bound volume and
$97.38 for advance sheets. Compare that price with their bid of
$17.50 plus $2.75 shipping for bound volumes in response to the RFP.
e.) Competition led to substantially lower consumer prices in
Washington
The successful vendor on the RFP was Thomason subsidiary Lawyers
Cooperative Publishing (``LCP''), who began publishing the Official
Washington Reports effective July 1, 1995. As the Cost Comparison
shows, there was significant competition between LCP and West. As a
result of this competition, Washington lawyers and law firms are now
paying $9.00 per year less for advance sheets and $5.50 less for
bound volumes than they were when the Reports were published by the
State.
II. The Acquisition Eliminates ``Enhanced Case Law'' Print Competition
in Washington, and Thereby Significantly Undermines Competing
Electronic Publications
a.) The Official Publisher May Claim Copyright in the Washington
Headnotes
Under the terms of the contract to publish the Washington
Reports, the official publisher is allowed to claim copyright in the
headnotes produced for the State of Washington. The DOJ recognizes
that ``. . . a sophisticated editorial staff would be needed to
create the headnotes and summaries . . .'' (See Complaint, at para.
31.) From first-hand experience, I know that headnotes and case
summaries are both useful and expensive to produce.
b.) The printed Official Reports control the electronic market
My company entered into a short-term contract with Lawyers
Cooperative Publishing whereby we draft the official headnotes for
the Washington case law and fax them to the Reporter of Decisions in
Olympia, WA. The headnotes are then reviewed by the Washington
Supreme Court and Court of Appeals, finalized, and returned to us.
We then send the headnotes by e-mail to LCP. Under the terms of our
contract with LCP, LCP retains the copyright to the headnotes, while
we retain the right to use these headnotes in our electronic
products during the term of the contract. LCP paid us a flat sum for
the time period in question. The contract ends in mid-December,
1996. This will leave Thomson/West the only vendor of enhanced case
law for Washington.
The upshot is that a competing publisher (my company, CD Law) is
now authoring and using the official Washington headnotes in our
unofficial CD-ROM product, while the copyright to the headnotes is
held by LCP and used in their official print product. The presence
of the official Washington headnotes in our product is a definite
sales advantage for my company. We have been told by LCP executives
that their company is in a dilemma as to how to market a competing
CD-ROM product against us (as they are required to do by their
contract with the State of Washington) given this factual situation.
I believe that Thomson/West will seek to gain a competitive
advantage against us by not renewing our contract. We will be forced
to attempt to compete with Thomson/West with an unenhanced case law
product. As the
[[Page 53441]]
DOJ recognizes, ``[U]nenhanced case law publications . . . are not
substitutes for enhanced case law.'' Complaint, at para. 24. The
practical lesson is this: Whoever controls the right to publish the
Official Washington Reports also controls the headnotes. Whoever
controls the headnotes can, to a large degree, control the
marketplace in the CD-ROM Market.
c. There are virtually no publishers capable of competing with
West/Thomson
If the West/Thomson merger is approved, there will be no
competition for enhanced case law in Washington. Should the
Washington Supreme Court decide to exercise its option to rebid the
Washington Reports, there is only one other publisher that has the
expertise, printing presses, capital, trained staff, and know-how to
produce an enhanced case law product for Washington: Michie
Publishing Company.
However, Michie has met with very limited success in Washington
with is CD-ROM case law product. And according to Kendall Svengalis'
``Legal Information Buyer's Guide & Reference Manual,'' Michie
publishes enhanced print case law products in a tiny handful of
states, far fewer than the combined West/Thomson entity. From what I
can determine, I believe it is unlikely that Michie would bid on the
Washington Reports should they be rebid, or be the successful vendor
if they did bid. Similarly, the other company that bid on the
Washington RFP, Darby Publishing of Georgia, publishes enhanced case
law in only one state. Both Michie and Darby's bids were
significantly higher than West and LCP's.
My company, CD Law, is certainly not a potential competitor with
West/Thomson for the official printed Washington Reports. We simply
do not have the ability to produce a competitively priced print
product. While we were the lowest bidder on the CD-ROM side of the
Washington RFP, we were far and away the highest bidder on the print
side. It is not reasonable to assume that a company the size of mine
can compete effectively with a company like West/Thomson for printed
enhanced case law legal materials. Both West and Thomson enjoy
enormous economies of scale in producing numerous print publications
that cannot be duplicated by smaller publishers like CD Law. If the
acquisition is permitted to go through, there would be no effective
check on Thomson's ability to engage in below-cost pricing and
eventually to charge monopoly prices for its products.
d. Print concentration will destroy competing digital products
Given these facts, it is a foregone conclusion that West/Thomson
will control the market for enhanced case law materials in
Washington. The only remaining competitor will be my company, CD
Law, whose CD-ROM product will lack headnotes and case summaries,
and Michie, who has to my knowledge sold very few, if any, of its
CD-ROM product for Washington State. As the DOJ pointed out in para.
22 of its Complaint, ``Full-text searching of primary law on an
online legal research service or a CD-ROM is a partial substitute
for the enhanced primary law materials sold by each of the parties.
It is not a good substitute, for most users and most uses, because
full text searching does not provide users with the editorial
analysis of the West or Thomson enhanced primary law products.''
(Emphasis added.)
III. Predatory Practices Will Continue Unabated With This Final
Judgment
a. Exclusive Contracts
Since 1963, West Publishing has enjoyed an exclusive contract
with the Washington Committee on Pattern Jury Instructions, which is
charged with publishing our State's Jury Instructions. West used the
threat of litigation to force the Washington State Bar Association
(``WSBA'') to remove the Washington Pattern Jury Instructions from
the WSBA's ``LAW BBS,'' a Bulletin Board Service run by the WSBA
that contains miscellaneous Washington legal materials to the Bar
and to the public. When my company approached West Publishing for a
license to reproduce these materials, West offered the materials to
my company for $7,000 plus $3,500 in ``annual fees.'' I enclose a
letter from James Schatz, West's counsel, as Exhibit Two.
As Schatz's letter indicates, West would not agree to license
the notes, comments or other materials written by the Committee. It
is these analytical materials, none of which were written or
enhanced by West, that make the Pattern Jury Instructions useful.
Interestingly, West sales representatives have sent out mailings
indicating that they give away the Washington Pattern Jury
Instructions without charge to CD-ROM subscribers (see copy attached
as Exhibit Three).
West's proposed $10,500 license for the Washington Pattern Jury
Instruction contains about 800,000 bytes of data or about 400 pages,
which easily fits on to one floppy disk. If this is indicative of
the licensing agreements that we can expect from the new West/
Thomson consortium, I think that ``higher prices and reduced product
quality'' noted in the Competitive Impact Statement has been vastly
understated.
West Publishing also paid $25,000 to purchase an exclusive
contract to republish Washington Jury Verdicts. The sum was paid to
a Washington company called Jury Verdicts Northwest. These are just
two examples of exclusive contracts paid for by monopoly profits.
b. Predatory Pricing and Tying Practices
West charges $30 per month for updates to its Washington case
law CD-ROM. I believe that this is one of the lowest charges in the
United States by West and that this figure is below their cost of
production. West also waives monthly access charges to its online
service, Westlaw, for its Washington CD-ROM subscribers. Finally,
West has recently announced that effective April 1, 1996, it will
provide access to the latest Washington case law and statutes ``at
no extra charge.'' To quote the direct mail piece. ``[T]he new
online update service comes with no increase in your regular
subscription charge.'' See copy of mailing, attached as Exhibit
Four. Ordinarily, West charges on the order of $175 per hour to
access these same materials. This is yet another indication of
below-cost pricing.
The practice of tying print, CD-ROM, and online services
together at or below cost make it very difficult for smaller
publishers to compete in the market place. I have no reason to
believe that the tying practices, below cost and/or predatory
pricing now engaged in by West will be improved after the Thomson
takeover.
The Department of Justice and the Attorney General of the State
of Washington have done nothing in the Proposed Final Judgment to
address these concerns, all of which were documented in previous
filings with the Department of Justice.
c. Meaningless Divestiture Assets in Washington
Thomson was required to divest the ``Washington Trial Handbook''
as part of the consent decree. Evidently, this is a Bancroft Witney
publication. Before I started CD Law, I practiced law in Seattle for
six years. I never once heard of this publication or used it. In the
nearly seven years I've been in the legal publishing business I have
never seen this title on anyone's bookshelf. It is not in any sense
a meaningful divestiture item and will do nothing to preserve
competition in Washington State.
IV. Other Concerns
I have other concerns with the proposed consent decree that are
less provincial. The fact that DOJ required West to license its
pagination is fine, but the cost ($.09 per 1.000 characters in the
first year) is prohibitive for all but the biggest publishers. The
fact that the pagination license agreement prevents the licensee
from disputing copyright claims held by West/Thomson is odious. The
fact that arbitration is held in Minnesota if disputes arise under
the proposed license gives Thomson an unfair home advantage.
The root of my objection to the proposed licensing agreement is
that the fact remains that there is great uncertainty in the
validity of the West pagination copyright. I believe that putting
such an expensive premium on what the Department of Justice
evidently does not itself believe to be a valid copyright will
result in few, if any, pagination licenses being issued. It is
therefore a meaningless gesture.
In my opinion, the Department of Justice should have litigated
this proposed acquisition. The DOJ amicus brief filed in the Bender
v. West action in the Southern District of New York is indicative
that someone at DOJ wanted to litigate one or more of the issues
presented in this merger/acquisition. As indicated in the DOJ filing
in the Federal Register on July 5, 1996, the Antitrust Division is
free to withdraw its consent to the proposed Final Judgment, and I
urge it to do so now.
V. Conclusion
If I were to suggest one single action that would allay most if
not all of my concerns, it would be to require the complete
divestiture of Lawyers Cooperative Publishing from the proposed
West/Thomson conglomerate. That would have the practical effect of
requiring the two biggest state law publishers in the United States
to continue
[[Page 53442]]
to do what they have done in the past: compete vigorously, to the
great advantage of the American legal community and citizens.
Sincerely,
Scott Wetzel
Enclosures
This chart could not be reprinted in the Federal Register,
however, they may be inspected in Suite 215, U.S. Department of
Justice, Legal Procedures Unit, 325 7th St., N.W., Washington, D.C.
at (202) 514-2481 and at the Office of the Clerk of the United
States District Court for the District of Columbia.
Schatz Paquin
Lockridge Grindal & Holstein P.L.L.P.
May 10, 1996
VIA FACSIMILE #206/624-8458
Mr. Scott Wetzel,
CD Law, Inc., Suite 1610, 1900 Second Avenue, Seattle, WA 98104
Dear Scott: West has now had a chance to consider your request
and is willing to grant CD Law a license to include the civil and
criminal jury instructions contained in its Washington Pattern Jury
Instructions publications on CD Law's Washington CD-ROM product.
This would not include the notes, comments or any other contents of
such publications. West would be willing to provide the jury
instructions to CD Law in electronic form (800,000 plus characters),
and to provide complete new electronic forms (i.e., all jury
instructions whether or not changed) every time a pocket part
(containing new or revised jury instructions) or a new edition of
either publication is published. West would be willing to grant this
license for an initial fee of $7,000 and annual fees of $3,500 over
a reasonable term, all subject to reasonable mutually-agreed
contract terms.
If you are interested in pursuing this matter, please get back
to me with any other specific contract details you desire such as
length of agreement, any timing details, etc. I look forward to
hearing from you.
Very truly yours,
Schatz Paquin
Lockridge Grindal & Holstein P.L.L.P.
James E. Schatz.
This page could not be reprinted in the Federal Register,
however, they may be inspected in Suite 215, U.S. Department of
Justice, Legal Procedures Unit, 325 7th St., N.W., Washington, D.C.
at (202) 514-2481 and at the Office of the Clerk of the United
States District Court for the District of Columbia.
This page could not be reprinted in the Federal Register,
however, they may be inspected in Suite 215, U.S. Department of
Justice, Legal Procedures Unit, 325 7th St., N.W., Washington, DC at
(202) 514-2481 and at the Office of the Clerk of the United States
District Court for the District of Columbia.
Broad and Cassel
Attorneys at Law
August 27, 1996
Mr. Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, United States
Department of Justice, 1401 H Street, N.W., Suite 4000, Washington,
DC 20530
Re: Proposed Consent Decree Between United States of America v. The
Thompson Corporation and West Publishing Company Publication dated
July 5, 1996, Our File No. 17666.0001
Dear Mr. Conrath: This firm represents Oasis Publishing Company,
Inc. Oasis is a Nebraska corporation, whose business is the
publication of court decisions and statutes on CD-ROM. Pursuant to
Section V, Oasis notifies you of its opposition to the proposed
Consent Decree for two (2) primary reasons. First, Oasis objects to
the decree in that such decree would add legitimacy to West's
assertion, contrary both to age-old precedent and to recent trends,
that its copyrights extend to the pagination of its reports. Oasis
submits to you, as it is currently arguing in the United States
Eighth Circuit Court of Appeal, that West does not have such a
copyright. Unfortunately, the proposed license agreement that is
part of the settlement would inappropriately require a licensee to
recognize West's claim of copyright to the pagination, as a
condition of such license.
Second, the proposed licensing fee caps set forth in the Consent
Decree are prohibitive to competitors like Oasis, whose market niche
would primarily be the users of low-cost, unenhanced, primary law
materials. For example, in Florida during 1995, West published
Volumes 647 through 668 of Florida Cases. The approximate total
number of pages for that year was 7,787, with each page containing
roughly 3,710 characters. Assuming a similar number of pages and
characters for each year since the beginning of Florida Cases, 1949,
the annual license fee for this information could be as high as
$2,566,247.00 (at $.09 per 1,000 characters) or $3,706,846.20 (at
$.13 per 1,000 characters)--a ridiculously and prohibitively
excessive amount. These estimates show, at a minimum, that entry
into the market at a level which would permit competition with West/
Thomson would be a monumental hurdle that few, if any, could
overcome, based on the proposed maximum licensing fees set forth in
the proposed consent decree.
On the basis set forth herein, Oasis urges withdrawal of the
Consent Decree, and submits that such decree would create an
improper guise of legitimacy for West's continued monopolistic
conduct and an illusory solution to the significant barrier to
market entry that currently exists as a result of West's claims.
Oasis respectfully suggests that any settlement should require
Thomson/West to stop asserting any claim of copyright to the
pagination of its reporters, as a condition to the Merger.
Sincerely,
Jose I. Rojas, P.A.,
For the Firm, Attorneys for Oasis Publishing Company.
Broad and Cassel
Attorneys at Law
August 30, 1996.
Mr. Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, United States
Department of Justice, 1401 H Street, N.W., Suite 4000, Washington,
D.C. 20530.
Re: Oasis Publishing Company v. West Publishing Company, Our File
No. 17666.0001
Dear Mr. Conrath: This letter is sent in follow-up to our letter
dated August 27, 1996 for the purpose of clarifying the calculations
set forth therein.
The Consent decree requires that the license fee be paid each
year. Therefore, based again on 1995, wherein a total of 7,787 pages
were published in Florida Cases, and which contained pages including
an average of 3,710 characters per page, the license fee (for data
needed from 1949 through 1995) would total approximately $119,603.22
(at $.09 per 1000 characters) or $172,760 per year (at $.13 per 1000
characters), each year. Moreover, this fee paid to West would
increase every year as more and more volumes are added. As stated in
our August 27, 1996 letter, this amount is prohibitive to a company
like Oasis, and would not only discourage competition, but
effectively prohibit it.
If you have any questions, or need additional information,
please call.
Very truly yours,
Jose I. Rojas, P.A.,
For the Firm.
American Association of Legal Publishers
September 3, 1996.
Mr. Craig Conrath, Esq.,
Chief, Merger Task Force, Antitrust Division, U.S. Department of
Justice, Suite 4800, 1401 H Street, NW, Washington, DC 20530
Re: Pending Settlement of West/Thomson Merger
Dear Mr. Conrath: The American Association of Legal Publishers
(AALP) submits these comments in response to the July 5, 1996
announcement in the Federal Register for comments on the proposed
settlement of the merger of West and Thomson Publishing Companies.
We are limiting our comments to two barriers to competition of great
concern to AALP members: (1) the unavailability of an archive of
judicial decisions as discussed in paragraph 30 of the Department's
complaint in this matter, and (2) the proposed license agreement to
make West's internal pagination in an opinion available to other
legal publishers.
AALP is a trade association of small legal publishers and
creators of computer software used in electronic legal research
materials. Our members produce products in print, CD and online. A
copy of our Statement of Principles is attached.
Many of our members have submitted statements directly to your
office. One member, International Compu Research, Inc. is submitting
its statement herewith. It is Exhibit 1 hereto.
Access to an Archive of Judicial Opinions
To produce a meaningful and useful primary or secondary legal
research product, a publisher must have access to an archive
[[Page 53443]]
of judicial decisions. Although there is no agreement as to how
extensive the archive should be, most publishers seek as much depth
as possible and consider 35 years to be a minimum. For state and
federal supreme courts, a complete archive of all judicial opinions
issued is considered desirable while a less complete archive of
lower court opinions may be acceptable. However, as long as there is
one publisher offering a complete archive of all opinions issued by
a particular court, competitors offering less are at a severe
disadvantage and must sell their product for a lower price.
It is widely believed that anyone can easily obtain judicial
opinions. For example, Judge Gladys Kessler of the Federal District
Court for the District of Columbia in her January 16, 1996
memorandum opinion in the case of Tax Analysts v. U.S. Department of
Justice, 913 F. Supp 599 (D.D.C. 1996).
``And as Defendants properly point out, the public may still
obtain public-domain material--i.e., non-West formatted material--
from the government directly for nominal copying costs (e.g. through
the clerk's office in a courthouse).'' 913 F. Supp 605.
In this quote, the ``Defendants'' to which Judge Kessler is
referring are the Civil Division of the U.S. Department of Justice
and defendant-intervenor West Publishing Company.
In paragraph 30 of its complaint in this matter, the Antitrust
Division of the Department of Justice states that ``Past and/or
current opinions simply are not available from many courts, and in
many others, obtaining access is costly and time-consuming.'' Since
reading this paragraph, AALP has spent considerable time, energy and
funds trying to obtain a copy of an original decision issued by
judges in a specific case in the following federal district courts:
Southern District of New York
District of New Jersey
District of Delaware
Eastern District of Pennsylvania
Middle District of Pennsylvania, Erie Division
Western District of Pennsylvania
District of Maryland
District of Columbia
Eastern District of Virginia, Richmond Division
Eastern District of Virginia, Newport News Division
Eastern District of South Carolina, Florence Division
Northern District of Illinois, Eastern Division
Southern District of Iowa, Central Division
There are three ways to obtain materials from closed cases. They
are to purchase them from a commercial search service, have them
sent to the federal district court in which the case was venued and
go to the federal records center in which the file is stored. AALP
tested all three methods.
Opinions from three closed files were ordered from Prentice-
Hall's document location service on August 12, 1996. One of the
opinions from a federal district court in Illinois was received in
about 18 days at a cost of $65.50 for a 6 page opinion. The other
two decisions requested from the federal district courts in South
Carolina and Iowa were not received by September 3rd and AALP was
advised it would take an additional one to three weeks to obtain
these cases. See Affidavit A attached.
Five files were requested from the Federal District Court of
Maryland in Baltimore. Only one file was ever available. AALP was
not told until almost three weeks after the request was made that
the other four files were in the archives in Philadelphia. See
Affidavit B attached.
A total of 10 cases were reviewed at Federal Records Centers
(FRC). Three cases reviewed at the FRC in New Jersey were from the
Federal District Court of New Jersey and the desired opinions were
available. However, the FRC in New Jersey also stores closed files
from federal courts in New York and they constitute a significant
portion of reported cases. This FRC only permits a visitor to review
3 closed files per day, so any effort to obtain many cases will take
a very long time, perhaps years, or have to involve many persons
working simultaneously. See Affidavit C attached. Seven closed files
from federal district courts in Virginia, Delaware and Pennsylvania
were reviewed at the FRC in Philadelphia and two of the files did
not contain the desired opinion. In one case, none of the materials
concerned the case except for a cover sheet. See Affidavit D
attached.
Two cases had to be obtained from federal archives in New York
and Philadelphia and those efforts were successful, see Affidavits B
and E. The minimum charge is $6 per order and beyond that the cost
is .25 per page copied.
Major impediments exist in obtaining the closed file numbers,
called accession numbers, needed to access a case located in a
federal records center. District Courts in Washington, DC,
Pittsburgh and New York City only supply this information by mail or
to visitors. In several cases the information from F. Supp was
incorrect, so the court could not provide AALP with an accession
number. See Affidavits F, G and H. The Eastern Division of the
Federal Districe Court of Philadelphia took almost 3 weeks to
provide an accession number and even then was not sure it was
correct. See Affidavit I. It also can take several phone calls
before the correct person is reached, is available and finds the
required numbers.
Further, when first investigating how to obtain access to closed
files, AALP received a wide variety of information, much of which
was false or confusing. Affidavits L through T report on these
efforts concerning nine other district courts not discussed nor
listed above.
Proposed License Agreement
AALP is strongly opposed to the proposed licensing agreement for
several reasons. First and foremost the license agreement only
covers access to West's internal page numbers. However, given the
difficulties described above in obtain judicial opinions and the
failure of the Department to remedy this situation, page numbers are
a secondary concern. A page number is meaningless if one does not
have the text to put on the page.
If by some miracle a publisher obtained the text, one must then
confront a licensing agreement which, as proposed, could serve as a
textbook example of a contract of adhesion. The agreement in its
entirety favors West and emasculates the licensee. Among the most
onerous portions are the following:
Article 1 The purpose of the license--to lower barriers to
competition--is totally undermined by only licensing original
compilations and West's right to determine what is an original
compilation. This would eliminate any possibility of a licensee's
product competing with an existing West product, such as Oasis
Publishing Company's attempt to create a Florida product of judicial
decisions. Competition occurs between an existing product and a new
version of it, but this agreement gives West the authority not to
license a competing product.
The list of reporters subject to the license should include all
West state reporters where it claims a proprietary right or does
not. For each state reporter listed in the license agreement, West
should state whether or not it claims a proprietary right.
A licensee should be required to disclose to West only the most
general ideas about the proposed use of the licensed materials. As
written, Section 1.03 requires the licensee to provide the largest
legal publisher in the world with advance notice of a new product,
just the type of information a company wants to keep secret. Given
that West always wants to keep secret everything it does or signs,
it can certainly understand another publisher's reluctance to tell
West its new product plans. Instead, the agreement should provide
that the license is for the use of the licensed materials in
professional quality materials to be used by the legal profession
and others doing research. Products lacking an appropriate
professional approach will be subject to revocation of the license
with an arbitration in the home state of the licensee or in
Washington, DC if revocation is contested.
Section 2.03 License Fees--The fee is too high for a small
publisher to afford. It is clear to AALP that this fee was developed
without an understanding of the economics of legal publishing. Mr.
Conrath called me in late June to discuss the proposed settlement
and said ``the fee is less than Lexis pays West''. That may be true,
but Lexis is a rich giant compared to 99 percent of all other legal
publishers. If the proposed fees are not reduced by at least 75
percent, AALP members have told me that no publisher will be able to
afford them.
Further, the fee should be paid by a publisher only once and not
each year for each product, so if a publisher issues print and CD
products with a case, he pays two license fees per year. There
should be no license agreement for a publisher using fewer than
5,000 opinions. Royalty payments should be payable upon publication
for all licensees.
Section 3.01 Copyrights. This section requires competing
publishers to renounce their First Amendment right to express their
opinions about the Licensor's alleged copyright during the term of
the license. AALP cannot believe the U.S. Department of Justice
would consent to or recommend such an onerous provision,
particularly one which limits a person's constitutionally-protected
[[Page 53444]]
rights under any circumstances, much less in connection with a
license agreement for page numbers to judicial opinions, even
opinions which discuss and uphold the First Amendment. In the grand
scheme of life in a democracy, access to West's internal page
numbers are trivial compared to the First Amendment, so the quid pro
quo proposed is all the more surreal.
Article 4 AALP opposes all efforts to make the agreement
confidential. Since the basic terms are going to be approved by the
federal court reviewing this matter, the agreement is already public
except for the individual details concerning each licensee. Under no
circumstances should a licensee who consents to a secret agreement
receive a better deal than one who does not.
Section 6.07 Arbitration. This agreement is being issued under
the supervision of the U.S. Department of Justice and is being
reviewed and approved by the Federal Court for the District of
Columbia, both entities located in Washington, D.C. Thus, all
arbitration concerning this agreement should occur in Washington,
D.C. under the auspices of the American Arbitration Association and
should consist of a three person panel, one each selected by the
Licensee and Licensor and one selected by the antitrust division of
the Department. Under no circumstances should arbitration occur in
Minnesota, West's home state and where it exerts a major influence
over the business and legal community and the employment
opportunities and financial security of thousands of families. If
Washington, DC is not acceptable, arbitration should occur in the
home state of the licensee.
For all of the reasons listed above, AALP requests the
Department of Justice to change the terms of the proposed settlement
to truly lower barriers to competition in the legal publishing
industry.
Sincerely,
Eleanor J. Lewis.
Attachments
American Association of Legal Publishers
Statement of Principles
1. Our legal system depends on prompt, unrestricted publication
and dissemination of the law.
2. The members of the American Association of Legal Publishers
have joined together to support the common interests of legal
publishers to promote and encourage publication and dissemination of
the primary sources of the law upon which our legal system depends,
as well as publication and dissemination of information and guidance
about the law.
3. Publication and dissemination of the law should not favor one
medium (such as print) over another (such as electronic).
4. The judicial opinions, statutes, regulations, and
administrative rulings of the United States, and each of its states
and subdivisions, are the property of the public. Notices relating
to such documents, and all amendments to such documents, are also
the property of the public.
5. All judicial opinions, statutes, regulations, and
administrative rulings, and all notices and amendments relating
thereto, should be made easily available to all, on an equal basis,
by the originating court, legislature, or agency, with only such
charges as are necessary to defray the actual costs of
dissemination.
Steps To Carry Out the Principles
1. Judicial opinions, statutes, regulations, and administrative
rulings should be identified by means of a vendor-neutral, public-
domain citation system.
2. The official version of a judicial opinion, statute,
regulation, or administrative ruling should be the version first
released to the public by enrolling clerks and similar judicial and
administrative officers, either in print or electronically. Changes
should thereafter be made only by means of written orders filed with
the same office as the original judicial opinion, statute,
regulation, or ruling.
3. Courts and other agencies should number the paragraphs in the
opinions, rulings, and similar legal documents that they issue, in
accordance with an agreed set of rules, so as to facilitate pinpoint
references to those opinions, rulings, and similar documents.
This letter could not be reprinted in the Federal Register,
however, they may be inspected in Suite 215, U.S. Department of
Justice, Legal Procedures Unit, 325 7th St., N.W., Washington, D.C.
at (202) 514-2481 and at the Office of the Clerk of the United
States District Court for the District of Columbia.
State of Maryland
County of Montgomery
I, Eleanor J. Lewis, upon my oath state
1. I am the Executive Secretary of the American Association of
Legal Publishers.
2. On Monday, August 12, 1996, I called Prentice Hall Legal and
Financial Services in Washington, DC, 292/408-3120, and spoke with
Mr. Freddie Collins. I ordered a copy of the judge's original
opinion from three closed federal district court cases which I had
selected from various volumes of Federal Supplement. The three
opinions I wanted were:
1. Opinion of December 19, 1961 in the case of Rakowsky v.
U.S.A., case number 59 C 984 in the US District Court of Illinois,
Northern District, Eastern Division.
2. Opinion of November 5, 1962 in the case of Layton James v.
Atlantic Coast Line Railroad Company, Civ. A. No. 7854 in the US
District Court of South Carolina, Eastern District, Florence
Division.
3. Opinion of February 2, 1962 in the case of John Moeller et
als, V. ICC, USA, et als, Civ. No. 4-1166 in the US District Court
of Iowa, Southern District, Central Division.
3. On August 12th I received the attached 3 pages confirming my
order and estimating I would receive the requested materials by
August 14th.
4. On August 27, 1996 I recieved the requested Illinois decision
and a bill for $65.50 (copy attached) for these materials.
5. During the last two weeks of August I called Mr. Collins
periodically to determine the status of my order. I spoke to Mr.
Collins or Ms. Gloria Barry and was told that in South Carolina,
``the correspondence traveled to Florence to get the decision but it
wasn't there so she was going to Columbia, SC to obtain it.'' I was
told on August 29th by Mr. Collins that the correspondent had
determined the South Carolina case was in the archives in Atlanta
and it would take another 7-10 days to obtain it.
I was told by Ms. Barry the Iowa opinion was unavailable as of
August 30th; it would take another 3-4 weeks to obtain it.
6. I understand if any statements made by me are knowingly
false, I am subject to punishment.
Eleanor J. Lewis,
Sworn to and subscribed before me this 3rd day of September
1996.
State of Maryland,
County of Montgomery.
Karen Klitsch,
Expires 7/1/97.
CSC Networks, Prentice Hall Legal and Financial Services
Status Report
Date: August 12, 1996.
To: Ms. Eleanor Lewis, American Association of Legal Publishers.
From: Freddie Collins/plb.
Fax No.: 301-652-2970.
Order #: 050280.
Client Ref: Not Provided.
Pages: 1.
Re: Interstate Commerce Commission USA, et al.
The following is a schedule of an estimated turn around for
copy(s) ordered on the above named subject(s). Should you have any
questions regarding these requests, please feel free to contact us.
IA U.S. District Court, August 14, 1996.
This fax is also to verify the spelling of the debtor(s) and the
jurisdiction(s).
CSC Networks, Prentice Hall Legal and Financial Services
Status Report
Date: August 12, 1996.
To: Ms. Eleanor Lewis, American Association of Legal Publishers.
From: Freddie Collins/plb.
Fax No.: 301-652-2970.
Order #: 050280.
Client Ref: Not Provided.
Pages: 1.
Re: USA.
The following is a schedule of an estimated turn around for
copy(s) ordered on the above named subject(s). Should you have any
questions regarding these requests, please feel free to contact us.
IA U.S. District Court, August 14, 1996.
This fax is also to verify the spelling of the debtor(s) and the
jurisdiction(s).
CSC Networks
Status Report
Date: August 12, 1996.
To: Ms. Eleanor Lewis, American Association Of Legal Publishers.
From: Freddie Collins/plb.
Fax No: 301-652-2970.
Order #: 050280.
Client Ref.: Not provided.
[[Page 53445]]
Pages: 1.
Re: Atlantic Coast Line Railroad
The following is a schedule of an estimated turn around for
copy(s) ordered on the above named subject(s). Should you have any
questions regarding these requests, please feel free to contact us.
SC U.S. District Court, August 14, 1996.
This fax is also to verify the spelling of the debtor(s) and the
jurisdiction(s).
CSC Networks
------------------------------------------------------------------------
Description Amount
------------------------------------------------------------------------
Client Reference: Not Provided
Our Order Number: 050280 015
Order Date: 08/12/96
ILUCOO UCC WORK IN ILLINOIS, U.S. DISTRICT COURT............. $1.00
ILUDSC COUNTY FEE DISBURSEMENT............................... 8.00
ILUC83 IN-HOUSE UCC COPIES--PER PAGE......................... 1.50
ILU36S CORRESPONDENT FEE--COPY REQUEST....................... 20.00
ILUC69 SERVICE FEE-COPY REQUEST.............................. 20.00
IL601 OVERNIGHT DELIVERY..................................... 16.00
------------------------------------------------------------------------
Thank you for using CSC Networks. Freddie Collins.
State of Maryland
County of Montgomery
I, Eleanor J. Lewis, upon my oath state:
1. I am the Executive Director of the American Association of
Legal Publishers.
2. On August 9, 1996, I sent the attached letter and a check for
$125 to the Federal District Court for the District of Maryland,
requesting access to 5 closed cases which I had selected from
various volumes of Federal Supplement.
3. On August 19th, I received a phone message from Laverne
Haynes of the Court saying the ``case you want, number 77-1217, is
at the Court for your review.''
4. On August 20, I called 410/962-2600 and asked to speak to Ms.
Haynes; after several transfers I ended up in the Bankruptcy Court.
The man there told me there is something wrong with the phone system
and people on hold for the District Court frequently end up in the
Bankruptcy Court. He told me to hang up and call again which I did.
This time I reached Ms. Haynes' voice mail and I left a message
explaining I requested 5 cases and wanted to review all of them
during the same visit.
5. Ms. Haynes called me back on August 20th and left a message
that she did not know when she called me that I had requested 5
cases, but now she had my letter in front of her. She said the
``other cases are very old and will take some time to get; they may
not let them out of the archives because of their age; we will call
you when we know more about this.'' I never again heard from Ms.
Haynes or any one else concerning this matter.
6. On August 29, 1996 I went to the Clerk's Office of the
Federal District Court in Baltimore to review the files I had
requested. Only one case was there; the 1977 case of Warren Slater
6366 v. Ralph William. I reviewed the case and found the opinion in
the file which I copied at a cost of .50 per page. I also paid $25
for having the file sent to the Court.
7. I asked the woman helping me, Ms. Evaleen Gibbons, when I
could see the other 4 cases I had requested. She said they were very
old cases and were in the archives; they will not come to the Court.
She said the employee in the clerk's office dealing with the
archives rotates weekly, but as far as she knew, the old cases will
never be sent to the Court. She called and let me speak to the
Archives about these cases and they told me I must provide them with
the case name and file number and they will tell me the cost of the
materials I want. I can then send them a check for minimum of $6.00
and receive the materials by mail.
I understand if any statements made by me are knowingly false, I
am subject to punishment.
Eleanor J. Lewis,
Sworn to and Subscribed before me this 3rd day of September,
1996.
State of Maryland,
County of Montgomery.
Karen Klitsch,
Expires 7/1/97.
Eleanor J. Lewis, Esq.
August 9, 1996.
Clerk,
U.S. District Court, 101 West Lombard Street, Baltimore, MD 21201
Re: Obtaining Access To Old Cases
Dear Sir or Madam: Enclosed is a check for $125 to cover the
cost of your obtaining from the Federal Records Center 5 closed case
files which I will then review in your offices. The files I want to
review are:
1. Englehardt v. United States of America et al., Civ. A. No.
3276, decided on January 18, 1947 in the Federal District Court of
Maryland.
2. David Nathaniel Harris v. Warden Maryland Penitentiary, Civ.
A. No. 13030, decided on January 17, 1962 by Judge Chesnut in the
Federal District Court of Maryland, Civil Division.
3. Royal Indemnity Company v. Aetna Insurance Company, Civ. A.
No. 13970, decided on July 15, 1964 by Judge Winter in the Federal
District Court of Maryland.
4. Mercantile-Safe Deposit and Trust Co. v. United States of
America, Civ. No. 15254, decided on June 1, 1966 by Judge Thomsen in
the Federal District of Maryland.
5. Warren Slater 6366 v. Ralph William, Civ. No. T-77-1217,
decided on November 3, 1977 by Senior Judge Thomsen in the Federal
District Court of Maryland.
I am eager to review these files as soon as possible so your
prompt cooperation in this matter is appreciated.
Sincerely,
Eleanor J. Lewis
State of Maryland
County of Montgomery
I, Eleanor J. Lewis, upon my oath state:
1. I am the Executive Secretary of the American Association of
Legal Publishers.
2. On Wednesday, August 14, 1996, I called the Newark Office of
the Federal District Court for New Jersey to request access to 3
closed case files. I was told to call the Court's Trenton Office at
609/989-2065.
3. I called Trenton and made my request to the woman who
answered the phone. I request 3 cases in which opinions were
rendered in 1965, 1979, and 1986. She said ``these are old cases and
not on the computer.'' I asked her what were the earliest cases on
the computer and she said ``1991.'' She took all identifying
information, case name and docket number, about the cases and me and
said she would call me back. When I had not heard from her in over 3
hours, I again called Trenton.
4. I spoke with Mark and told him I wanted accession numbers for
3 closed cases. He said just a minute and then started to find the
information for the 1979 and 1986 cases on the computer. For the
1965 case, he left the phone to get a book and then returned and
gave me the information. He said he was uncertain the information
for the 1965 case was correct. He also warned me not to go to the
Federal Records Center until they call and confirm they have the
cases I want to review.
5. I called the Federal Records Center (FRC) in Bayonne, NJ at
about 3:45 PM on August 14 to make an appointment to review the New
Jersey cases. In an earlier call I had been told I could only review
3 files per visit. I provided them with the information Mark had
given me for the cases.
6. On August 15th I received a call from Mrs. DePalma of the FRC
informing me the FRC does not have the 1965 case. It has been sent
to the Federal Archives office in New York City and I should call
them, 202/337-1300.
7. On August 16th I called the Federal Archives in New York City
and requested the judge's opinion in the 1965 case. I was told I
either must go to their office in New York City or send them a
letter with all the relevant information and a check for $6.00,
their minimum charge per order. They charge for copying at the rate
of .25 per page. I explained to the man that I might come in on
Monday, August 19th, so he took the identifying information from me
by phone and told me to call on Monday to confirm they have what I
requested. If they do, I could come get it or obtain it by mail.
8. On August 16th I called Mark at the Trenton Office of the New
Jersey Federal District Court and requested the identifying
information for another closed NJ case so I will review 3 cases when
I go to the FRC. He provided me with the information. I then called
the FRC to request the case; they said it would be available to me
on August 19th.
9. On August 19th, I drove to the FRC in Bayonne, NJ. It is a
few miles from Exit 14A of the New Jersey Turnpike. I was shown to a
table where the 3 cases I wanted were waiting for me. I went through
each file and found the decision I wanted in each case and had
copies made for .50 per page. The staff does the copying, one
request at a time and then prepares a bill for each visitor. During
the two hours I was there reviewing files, I observed there was
always one employee, Mrs. DePalma, helping visitors who are
[[Page 53446]]
looking at files. This employee is also answering the phone, taking
phone orders for records, copying files, preparing bills and
obtaining payments. Very occasionally, a second staffer, Maureen,
was helping Mrs. DePalma.
10. When I paid Maureen for my copies, I asked her again how
many cases per visit I could review. She replied ``you are limited
to 3 cases per day because we are so busy.'' I asked if I could see
more cases per visit and she said ``No.''
11. On August 20th, I called the Federal Archives in New York
City to obtain the decision of the 1965 case which was not at the
FRC in Bayonne. I told the person who answered about my call on
August 16th and that the decision would be at the desk waiting for
me. The man, Greg Plunges, put me on hold and then returned to say
it was not at the desk. He took the case information and said he
would look for it and call me back. He called me back within an hour
and told me he had the decision dated June 8, 1965. He instructed me
how to send him the $6 check he must receive before he sends me the
opinion. I mailed him the required letter and check on August 20th.
I received a copy of the decision by mail on August 30th.
I understand if any statements made by me are knowingly false I
am subject to punishment.
Eleanor J. Lewis.
Sworn to and Subscribed before me this 3rd day of September,
1996.
State of Maryland
County of Montgomery
I, Eleanor J. Lewis upon my oath state:
1. I am the Executive Director of the American Association of
Legal Publishers.
2. On Wednesday, August 14, 1996, I called the Federal Records
Center (FRC) in Philadelphia to make an appointment to see some
closed files. I had selected these cases from various volumes of
Federal Supplement and then called each federal district court in
which they were filed to obtain the closed accession numbers. I was
transferred to the phone of James Kent and I left a message on his
voice mail. When I did not receive a return call within a few hours,
I called twice more during the day and left a message asking how to
make an appointment.
3. Late on August 14th, Mr. Kent left me a message explaining
what I must do to obtain cases from the FRC and telling me to fax my
response to the FRC. However, he did not provide me with the fax
number.
4. I called Mr. Kent the evening of August 14th and left a
message asking him to give me the fax number to which I should fax
my response. He called me back on August 15th and provided the fax
number. I faxed the list of cases I want to review to the FRC on
August 15, 1996; a copy is attached. The cases I requested came from
district courts in Delaware, Pennsylvania and Virginia.
5. I never received a response to my fax, so on August 20th, I
called Mr. Kent. He said he had never received my fax and put me on
hold. He then returned and said my fax had been received and the
files were waiting for me at the FRC in Philadelphia. He said I
should have been called and told they were available and would be
available through August 30th. He gave me directions to get to the
facility.
6. On August 29th I traveled to the FRC in Philadelphia. The
building exterior does not have a street number or name, so I was
not sure I was in the right place.
7. I was shown to a room where the 7 cases I had requested were
in a pile. I examined each file, looking for the judge's opinion of
the date specified in the Federal Supplement case I had selected. I
found the opinions for case numbers 1, 3, 4, 5 and 7 in my memo.
For case number 2 in my memo, Wolkind v. Selph, filed in 1979 in
the Federal District Court of Virginia, Eastern District, Richmond
office I was given a file that contained 12 pages concerning the
case, but did not include an opinion. Also in the file was a 26 page
opinion from the Eastern District of Pennsylvania concerning a case
related to the case of Brown v. Cameron-Brown, Civil Action #78-
0838-R, venued in the Richmond Office of the Federal District Court
of Virginia.
For case number 6 in my memo, Stewart Aviation Co. v. Piper
Aircraft, filed in 1973 in the Federal District Court of
Pennsylvania, Middle District, Scranton Office, the file I was given
had the right name, but only contained a cover sheet concerning the
case I wanted. All the other documents in the file were from a 1968
case between the same parties which was filed in the Federal
District Court of West Virginia, Northern District. A copy of one of
these documents is attached.
8. I then explained to David Weber, the FRC employee on duty,
that I would probably need to look at thousands of old files and
could they accommodate such a request. He said it would be easiest
if I could group my requests in the order in which the cases were
closed by each court, since they are closed in batches and each
batch is filed together. By grouping them in such a manner, I would
reduce the time needed to find the files. I explained that might not
occur, since I am requesting cases from different courts in
different states. He said they would try to accommodate my needs and
I should start by requesting 50 cases at a time and provide them
with as much advance notice as possible.
I understand if any statements made by me are knowingly false, I
am subject to punishment.
Eleanor J. Lewis.
Sworn to and Subscribed before me this 3rd day of September
1996.
American Association of Legal Publishers
August 15, 1996.
To: James Kent, Federal Records Center, Philadelphia
From: Eleanor J. Lewis
Re: Obtaining Access To Closed Federal Court Files
I want to come to the Federal Records Center in Philadelphia and
review and copy portions of the closed case files listed below.
Please contact me by phone or fax to confirm you have these files
available for my review, so I review them within the next 10 days.
Thank you for your cooperation in this matter.
1. Case File Number 76-2961
Case Name: William Heigler v. William Gatter et al.
FRC Accession Number: 021-830091
Location Number: D-11-025-5-1
Box Number 144
2. Case File Number 79-0311-R
Case Name: Henry L. Wolkind v. Willard P. Selph
Accession Number: 021-81-0037
Location Number: E 3808576
Box Number 13
3. Case File Number 88-692
Case Name: Young v. West Coast
Accession Number: 021-94-0049
Location Number: E 4004546
Box Number 45
4. Case File Number 4720
Case Name: Grossman v. Cable Funding Corp
Accession Number: 021-84-0006
Location Number: 87301311
Box: 2 through 5 of total of 48
5. Case File Number 76-37-NN
Case Name: Peggie Ann King v. Gemini Food Services
Accession Number: 021-81-0011, subgroup NNV
New Location: E-30-065-2-1
Series Description--CIV CS FLS (closed 1980)
Box Number 3
6. Case File Number 73-717
Case Name: Stewart Aviation Co. v. Piper Aircraft
Accession Number: 021-77-0001
Location Number: C-26-027-2-1
Boxes: 112 and 113 of 117 boxes
7. Case File Number 80-86
Case Name: Metropolitan Life Insurance Co. v. Debra P. McCall et
als
Accession Number: 021-87-0097
Location Number: A0905353
Box: 7 of 17
This page could not be reprinted in the Federal Register, however,
they may be inspected in Suite 215, U.S. Department of Justice, Legal
Procedures Unit, 325 7th St., N.W., Washington, D.C. at (202) 514-2481
and at the Office of the Clerk of the United States District Court for
the District of Columbia.
This page could not be reprinted in the Federal Register, however,
they may be inspected in Suite 215, U.S. Department of Justice, Legal
Procedures Unit, 325 7th St., N.W., Washington, D.C. at (202) 514-2481
and at the Office of the Clerk of the United States District Court for
the District of Columbia.
State of Maryland, County of Montgomery
I, Eleanor J. Lewis, upon my oath state:
1. I am the Executive Director of the American Association of
Legal Publishers.
2. On Wednesday, August 14, 1996, I called the Pittsburgh Office
of the Federal District Court of Pennsylvania, Western Division and
spoke with Mr. Keith Anderson. I told him I wanted to obtain the
closed case numbers for a case, so I could review the cases in the
Federal Records Center in Philadelphia. He said that information
could
[[Page 53447]]
not be given over the phone and he does not have a fax machine. I
could only receive that information from him by mail.
3. I then provided him with the information for a case with a
decision rendered on October 4, 1968. He immediately responded
``that decision is over 25 years old. The case is in the Federal
Archives in Philadelphia, call 215/597-3000.'' I thanked him and
hung up.
4. I promptly called the Federal Archives in Philadelphia and
was connected to Dr. Plowman. I told him what case I wanted. He
asked what I wanted and I said I want a copy of the judge's
decision. He responded, ``opinions are not necessarily included in
the case file. They are not required to be in the closed file.'' He
took my name and number and said he would see what he could find.
5. Dr. Plowman called me back within an hour and reported he had
found the case and had the decision. If I would send a check for $6
he would send me a xerox of the decision. I sent him the required
check and letter on August 14th. I received a copy of the decision
by mail on August 21st.
I understand if any statements made by me are knowingly false, I
am subject to punishment.
Eleanor J. Lewis.
State of Maryland, County of Montgomery
I, Eleanor J. Lewis, upon my oath state:
1. I am the Executive Director of the American Association of
Legal Publishers.
2. On Wednesday, August 14, 1996, I called the Federal District
Court of New York, Southern District, in New York City and asked for
the closed case numbers for some closed files, so I could go look at
the files in the Federal Records Center. I was connected to a man
who told me I must come to Room 370 at 500 Pearl Street in New York
City to obtain the information or send a letter and they will
respond in writing. When I said I needed to get the information
quickly and I am in Maryland, I was told I must speak to the
supervisor, Rosemarie Fugnetti. I was connected to her phone but was
unable to leave a message because her voice mailbox was full.
2. I then called the clerk's office again and explained I could
not leave a message for Ms. Fugnetti. They told me she was at lunch
and I should call back in an hour.
3. I called an hour later and spoke with Ms. Fugnetti on August
14, 1996. She repeated that the court only provides closed file
numbers to people coming to the court house or inquiring in writing.
They do not accept faxes and they do not respond by fax because they
do not have a fax machine in her office. She said I could send her a
FED EX letter and she would respond by FED EX if I pay for the
response or they would mail the response by regular mail the day
they receive it.
4. On August 14th, I sent Ms. Fugnetti a Fed Ex letter
requesting the closed file numbers for 4 opinions. She responded on
August 15th, providing me with the information I requested.
5. I was unable to review these files from the Federal Records
Center in New Jersey on August 19th because they only permit a
visitor to look at 3 files per day and I had already requested 3
files from the New Jersey Federal District Court.
I understand if any statements made by me are knowingly false, I
am subject to punishment.
Eleanor J. Lewis.
State of Maryland, County of Montgomery
I, Eleanor J. Lewis, upon my oath state:
1. I am the Executive Director of the American Association of
Legal Publishers.
2. On August 15, 1996, I called the Federal District Court for
the District of Columbia to obtain the closed file numbers for
several closed cases from which I wanted to obtain a copy of the
judge's original decision. I had selected these cases from various
volumes of Federal Supplement. A telephone tape recording provides
information about extension choices, but none of them concerned
closed files, so I didn't talk to anyone.
3. On August 22nd, I traveled to the Court clerk's office and
requested closed file numbers for 3 cases from Bryant. He asked me
to wait and returned with the information I needed in about 10
minutes.
4. I explained to Bryant that when I called the court I could
not find an extension that dealt with such requests. He said I
should call 202/273-0520. I asked if I could obtain closed case
numbers over the phone. He said, ``No, you must come in to get them
or write.'' He told me the closed files for this court are stored in
Suitland, MD.
I understand if any statements made by me are knowingly false, I
am subject to punishment.
Eleanor J. Lewis.
State of Maryland, County of Montgomery
I, Eleanor J. Lewis upon my oath state:
1. I am the Executive Director of the American Association of
Legal Publishers.
2. On Wednesday, August 14, 1996, I called the Wilmington Office
of the Federal District Court of Delaware and requested the closed
file numbers for 3 cases with opinions rendered in 1968, 1973 and
1991 from Ms. White. She took the information the case name and
docket number from me and said she would call me back with the
closed case numbers.
3. Ms. White called back about 2 hours later.
A. She provided me with the closed case numbers needed to obtain
access to the 1991 case. I reviewed this case on August 29th at the
Federal Records Center (FRC) in Philadelphia and found the opinion I
wanted.
B. For the 1973 case, James Gerity, Jr. v. Cable Funding Corp.,
Civil Action #4720, decision rendered on November 6, 1973, according
to 372 F. Supp. 64, she had a problem. The Court records showed that
docket number corresponded to the case of Grossman v. Cable Funding
Corp, decision rendered on June 30, 1978. She said her docket sheet
showed there were many decisions made after November 6, 1973 and
that ``this is a research project'' I took the information she had.
On August 29th I reviewed this file at the Philadelphia FRC and
found the opinion I wanted.
C. For the 1968 decision of McMilin v. USA, case #1906, decision
rendered on September 26, 1968 by Judge Steele and amended on
September 30, 1968, Ms. White said she had a problem. According to
her records this is the case of Albright v. USA; it concerns a suite
to refund taxes; the complaint was filed on July 1, 1957 and a
stipulation and order was entered on May 15, 1958 by Judge Caleb
Layton. She said the file was sent to the archives on December 1,
1987. She said this case was so old that its records were not
automated and she had to go to another location to obtain this
information. She could not provide me with any information
concerning my originally requested case--McMilin v. USA--so I was
unable to acquire a copy of the decision from any source.
I understand if any statements made by me are knowingly false I
am subject to punishment.
Eleanor J. Lewis.
State of Maryland, County of Montgomery
I, Eleanor J. Lewis, upon my oath depose and state:
1. I am the Executive Director of the American Association of
Legal Publishers.
2. On Wednesday, August 14, 1996, I called the Richmond Office
of the Federal District Court of Virginia, Eastern District to
obtain the closed case numbers for 3 cases.
3. I provided the woman with the information I had obtained on
each case from the West's Federal Supplement, including the case
name, case number, date of decision and name of the judge.
4. The woman put me on hold and then provided me with the
following information:
A. For the case with a decision rendered in 1979, she went to
the archive book and found the closed case information and gave it
to me.
B. For the case of Frank A. Principe et al. v. McDonald's Corp
et al., 463 F. Supp. 1149 (1979), Civ. Action #78-0606-R, decision
rendered on January 16, 1979 by Judge Warriner, the Court records
show that this is the case of Kennedy v. Stacy, a prisoner claim.
She said she would investigate this matter and get back to me.
On August 15th and 16th I received a call from the court, from
either Mrs. Grant or Mrs. Hatton, telling me they were looking for
the information. On August 20th I called and spoke with Mrs. Grant;
she said she would investigate if the information were found and
call me. She called me back on August 20th and said the case I
wanted, Principe v. McDonald's is Civil Action #78-601, not 606. She
then provided me with the closed case numbers I need to obtain the
case at the Federal Records Center in Philadelphia and the exact box
in which I would find the opinion dated January 16, 1979.
C. For the case of Wolkind v. Selph, Case No. 79-0311-R, I was
provided with the accession numbers. I sent them to the FRC on
August 15th and went to the FRC on August 29th to review the file.
The Wolkind v. Selph decision of July 10, 1979 amended on August 15,
1979 was not in the file but there was an opinion from a case from
the Eastern District of Pennsylvania in the file. It appeared to be
related to another case from the Richmond court, the case of Brown
v. Cameron-Brown, Civil Action #78-0838.
[[Page 53448]]
I understand if any statement made by me are knowingly false I
am subject to punishment.
Eleanor J. Lewis.
State of Maryland, County of Montgomery
I. Eleanor J. Lewis, upon my oath state:
1. I am the Executive Director of the American Association of
Legal Publishers.
2. On Wednesday, August 14, 1996, I called the Philadelphia
Office of the Federal District Court of Pennsylvania, Eastern
District and requested the closed case numbers for several cases. I
was transferred to the file room and told I must come in person to
obtain that information. I explained I was far away and could not do
that. I was told to call back and talk to the supervisor, Mr.
Clewlie, who was not in the office at this time.
3. I called back about 90 minutes later and spoke with Mr.
Clewlie who agreed to send me the information by fax. He said it was
easier than calling. I provided him with the following case
information.
USA v. William Henry Burdick, Criminal No. 22487, decision
rendered on May 31, 1968 by Judge Weiner. I obtained this
information from 284 F. Supp 685.
4. Mr. Clewlie called me back within two hours on August 14th
and told me he was going to have to ``look up this information and
it will take some time.''
5. On August 27th I called Mr. Clewlie about this matter because
I had not heard from him. I was told he was out for the week; I
should call back on September 3rd.
6. I called Mr. Clewlie on September 3rd, but no one answered
his phone, so I called the court clerk and asked to leave a message
for him. Since he does not have voice mail or a secretary, they took
the message. About 2 hours later, Bill Jones called and asked what I
wanted. I told him I needed the closed case number for a file. He
took the information and called me about 30 minutes later with the
closed case numbers. He said, the closed case numbers he gave me are
very old and may not be correct, ``but this is all we have''.
I understand if any statements made by me are knowingly false, I
am subject to punishment.
Eleanor J. Lewis.
State of Maryland, County of Montgomery
I. Eleanor J. Lewis, upon my oath state:
1. I am the Executive Director of the American Association of
Legal Publishers.
2. On Wednesday, August 14, 1996, I called the Newport News
Office of the Federal District Court of Virginia, Eastern District,
and spoke with Mrs. Graham. I requested the closed case numbers for
one case with a decision rendered in 1976. I had selected the case
from a volume of F. Supp. Ms. Graham took the information, put me on
hold and then returned in a few minutes with the identifying
information, including information contained in a February 1996
letter providing the new location of the file in the Federal Records
Center (FRC) in Philadelphia.
3. I requested the case from the FRC on August 15th.
4. I went to the FRC on August 29th and reviewed the file,
finding the opinion I wanted.
I understand if any statements made by me are knowingly false, I
am subject to punishment.
Eleanor J. Lewis.
State of Maryland, County of Montgomery
I. Eleanor J. Lewis, upon my oath state:
1. I am the Executive Director of the American Association of
Legal Publishers.
2. On Wednesday, August 14, 1996, I called the Erie office of
the Federal District Court of Pennsylvania, Western District and
spoke with a woman.
3. I provided her with the case name and docket number for a
case in which the judge rendered a decision on March 6, 1981, in the
Erie court. I found this case in a volume of F. Supp. She put me on
hold for a few minutes and then returned with the closed numbers I
need to obtain the case at the Federal Records Center (FRC) in
Philadelphia.
4. On August 15th I requested the case from the FRC.
5. On August 29th I went to the FRC and reviewed the file,
finding the opinion I wanted.
I understand if any statements made by me are knowingly false I
am subject to punishment.
Eleanor J. Lewis.
State of Virginia, County of Arlington
I, Allyson E. Manson, upon my oath state;
(1) I am a law student at the University of Virginia. In July
and August of 1996 I am working part-time as a legal intern for the
American Association of Legal Publishers.
(2) On August 9, 1996, at approximately 3:50 p.m., I called
(903) 592-1212, the Clerk's office for the U.S. District Court for
the Eastern District of Texas. I spoke with Mike Lantz.
(3) I asked Mr. Lantz how I could obtain opinions rendered in
1968 and 1978 in his district. He responded that his office retains
original files for six months to one year. After one year, files are
sent to the Federal Records Center for twenty years. Then the
original file is destroyed. Mr. Lantz indicated that a case from
1968 may be difficult to obtain.
(4) Mr. Lantz said that the charge would be $15 per case without
a case number. The Clerk's office looks at the docket sheet to see
when that opinion was sent to the Records Center. Next the Clerk's
office codes your request onto a sheet which is sent to the Records
Center.
(5) Mr. Lantz indicated that it would take a while to research
and find these cases. He offered to fax me information on search
procedures.
I understand that if I made any knowingly false statements that
I am subject to punishment.
Allyson E. Manson.
State of Virginia, County of Arlington
I, Allyson E. Manson, upon my oath state;
(1) I am a law student at the University of Virginia. In July
and August of 1996 I am working part-time as a legal intern for the
American Association of Legal Publishers.
(2) On August 9 at approximately 4:30 p.m. I called the Clerk's
office for the U.S. District Court for the Western District of Texas
at (210) 472-6550. I spoke with Wayne Garcia.
(3) I asked Mr. Garcia how I could obtain opinions rendered in
1968 and 1978 in his district. He responded that any search for the
case numbers of documents older than five years would incur as $15
fee. He then explained that there would be a $25 retrieval fee
incurred when the document was obtained from the Federal Records
Center. Mr. Garcia made it clear that each case required a separate
request and incurred a separate fee.
I understand that if I made any knowingly false statements that
I am subject to punishment.
Allyson E. Manson.
State of Virginia, County of Arlington
I, Allyson E. Manson, upon my oath state;
(1) I am a law student at the University of Virginia. In July
and August of 1996 I am working part-time as a legal intern for the
American Association of Legal Publishers.
(2) On August 8, 1996 at approximately 2:45 p.m. I called (318)
676-4273, the Clerk's office of the U.S. District Court for the
Western District of Louisiana. I spoke with Nancy Lundy.
(3) I asked Ms. Lundy what the procedures would be for obtaining
a copy of Louisiana District Court decisions from 1968 and 1978. She
responded that I would need a case number or the name of the case.
She added that cases from 1978 would probably be on microfilm at the
Clerk's office. All cases after 1977 have been put on microfilm
there.
(4) Any cases rendered prior to 1977 would have to be retrieved
from the Federal Records Center in Fort Worth, Texas.
(5) Ms. Lundy explained that I would need to send a written
letter to the Clerk's office to request documents. The Clerk's
office then retrieves documents from the Federal Record Center. A
$25 retrieval fee would be charged for each case, and it would cost
fifty cents a page to copy the documents.
(6) Ms. Lundy explained that if I called and requested an
opinion, it would take a week to ten day before the Clerk's office
received the document. I could expect the document within two weeks.
I understand that if I made any knowingly false statements that
I am subject to punishment.
Allyson E. Manson.
State of Virginia, County of Arlington
I, Allyson E. Manson, upon my oath state;
(1) I am a law student at the University of Virginia. In July
and August of 1996 I am working part-time as a legal intern for the
American Association of Legal Publishers.
(2) On Thursday, August 8, 1996 at approximately 4:00 p.m. I
called (503) 326-5412, the Clerk's office for the U.S. District
Court of Oregon. I spoke with Kathy Wright.
(3) I asked Ms. Wright how I would go about getting a copy of
two judicial opinions rendered in her District, one in 1968 and one
in 1978. She responded that it would be difficult to locate the case
without a case number. To locate a case number one must go through a
list of them on microfilm to
[[Page 53449]]
ensure that the number matches a particular case. Case files more
than two years old are moved to the Federal Archive in Seattle,
Washington. Ms. Wright explained that I would need to fill out a
form at the courthouse to request the record.
(4) Ms. Wright stated that she believed that judicial decisions
are destroyed after twenty years.
(5) To retrieve a file, the clerk's office charges $25. Copying
is an additional fifty cents a page or fifteen cents a page if the
customer copies it herself.
(6) I then called the number Ms. Wright had given me for the
Federal Archive, which actually turned out to be the number for the
Federal Records Center. I spoke with a Mr. Rick Hall. Mr. Hall said
that if I requested documents from the Records Center, they could be
retrieved within one hour. However, there would be a retrieval fee
of $35.
(7) I then asked Mr. Hall how long Federal District Court
decisions were kept at the Records Center or the Archive. He
responded that there is a national publication entitled Schedule for
the Disposition of U.S. District Court Documents. I asked him if I
could get a copy of pages from the book concerning the disposition
of Federal District Court opinions. He talked for a while about the
distinction between criminal and civil opinions and opinions of
historical and non-historical value. He then explained that it is
not his job to send out copies of those documents, and he explained
that all District Court clerk's offices should have this volume, and
I could obtain copies from them.
I understand that if I made any knowingly false statements that
I am subject to punishment.
Allyson E. Manson.
State of Virginia, County of Arlington
I, Allyson E. Manson, upon my oath state;
(1) I am a law student at the University of Virginia. In July
and August of 1996, I am working part-time as a legal intern for the
American Association of Legal Publishers.
(2) On Thursday, August 8, 1996 at about 2:10 p.m. I called
(303) 844-3433, the Clerk's Office of the U.S. District Court of
Colorado. I spoke with Cathy Hasjord.
(3) I told Ms. Hasjord I wanted to get a copy of two judicial
opinions, one rendered in 1978 and the other rendered in 1968 in
Colorado's district court. She responded that if they are still in
existence they are not in the Clerks' Office. Ms. Hasjord stated
there are two ways to get a copy of these opinions:
A. She indicated that the Clerk's Office could get it for
$25.00. She indicated that I could look on the docket sheet and
determine what portions I wanted. Each page would cost fifty cents
to copy. I asked if this could be done by mail. She said that it
could with several mailings. She indicated it would be better to
review the case by showing up at the office.
B. Ms. Hasjord indicated that I could also call the Federal
Records Center directly.
I understand that if I made any knowingly false statements, I am
subject to punishment.
Allyson E. Manson.
State of Virginia, County of Arlington
I, Allyson E. Manson, upon my oath state:
(1) I am a law student at the University of Virginia. In July
and August of 1996, I am working as a legal intern for the American
Association of Legal Publishers.
(2) On Thursday, August 8, 1996 at approximately 2:20 p.m., I
called (208) 334-1361, the Clerk's office of the U.S. District Court
of Idaho. I spoke with the Clerk's assistant.
(3) I told her I wanted to get a copy of original judicial
decisions rendered in 1968 and 1978 in Idaho's Federal District
Court. She responded that I would need to come to the office and go
through the card index to determine the location of those files.
(4) She told me that it would cost $25 to review the file.
Copying would cost an additional twenty-five cents a page.
(5) I asked her if we could do this by mail. She told me that I
could send a letter to the clerk's office with my request. Upon
receipt of my request, the clerk's office would need 7 to 10 days to
retrieve the document.
I understand that if I made any knowingly false statements that
I am subject to punishment.
Allyson E. Manson.
State of Virginia, County of Arlington
I, Allyson E. Manson, upon my oath state;
(1) I am a law student at the University of Virginia. In July
and August of 1996 I am working part-time as a legal intern for the
American Association of Legal Publishers.
(2) On Thursday, August 8, 1996 at about 1:00 p.m. I called
(602) 514-7100, the Clerk's Office of the U.S. District Court of
Arizona. I spoke with Cathy Gerchar.
(3) I told her I wanted to get a copy of two judicial opinions,
one rendered in 1978 and the other rendered in 1968 in Arizona's
district court. She asked me for the case number. I told her that I
did not have a case number; I was trying to find out the procedures
my supervisor would follow to locate an original file and
specifically a judicial decision from the Arizona district court.
She explained that the clerk's office only keeps decisions for three
years. Earlier decisions:
A. Decisions between three and 1969 are kept at the records
center. To get something from the Records Center, one would have to
come to clerk's office to fill out a copy request. The Clerk's
office would then get the file from the Federal Records Center, and
I could obtain a copy from them.
B. Ms. Gerchar indicated that if the decision was rendered prior
to 1969, the decision had probably been moved from the Records
Center to the Federal Archive.
(4) I asked how much it would cost to retrieve this file. Ms.
Gerchar explained that there is a $25 file fee, which covers
expenses related to file retrieval.
(5) I asked Ms. Gerchar how long it would take to get a judicial
opinion from the clerk's office if it was rendered in 1978. She
responded that it would take between two and seven working days,
depending on whether it was located in the Records Center or the
Federal Archive.
(6) I requested the number of the Record Centers and the Federal
Archive. Ms. Gerchar gave me both numbers: (714) 360-2631 for the
Records Center, and (714) 360-2641 for the National Archive.
(7) I called the number Ms. Gerchar had given me for the
National Archive at approximately 1:15 p.m. and found that it had
been disconnected.
(8) Next, I called the Federal Records Center at approximately
1:15 p.m. on August 8, 1996 and spoke with Mr. Mike Kretch. I asked
him how I could retrieve records directly from his office. Mr.
Kretch suggested that I call in to request a file. He also said that
to retrieve the file, I had to provide him with the:
Accession number, box number, location number, file number.
Mr. Kretch indicated that I needed to make a trip to look at the
file and decide what portions I needed copied. The Center is located
in Laguna Niguel, California. It costs fifty cents a page to copy
the document.
I understand that if I made any knowingly false statements that
I am subject to punishment.
Allyson E. Manson.
State of Virginia, County of Arlington
I, Allyson E. Manson, upon my oath state;
(1) I am a law student at the University of Virginia. In July
and August of 1996 I am working part-time as a legal intern for the
American Association of Legal Publishers.
(2) On Thursday, August 8, 1996 at approximately 3:30 p.m. I
called the Clerk's office of the U.S. District Court for the Eastern
District of California at (916) 498-5415. I spoke with Ms. Dung
Duong.
(3) I asked Ms. Duong how I would go about obtaining opinions
rendered in 1968 and 1978 in her district. She responded that I
needed a case number, and that I would be required to pay a $25
retrieval fee.
(4) Ms. Duong added that I could either pay a fifty cent per
page copying fee or pay an independent contractor to copy the
material.
(5) Ms. Duong said that it would take ten mailing days for the
documents to reach me.
(6) I called the independent contractor for a price comparison
and I talked to a Kendall Allbright. He said that it would cost
thirty-two cents a page to copy any documents I requested.
I understand that if I made any knowingly false statements that
I am subject to punishment.
Allyson E. Manson.
State of Virginia, County of Arlington
I, Allyson E. Manson, upon my oath state;
(1) I am a law student at the University of Virginia. In July
and August of 1996 I am working part-time as a legal intern for the
American Association of Legal Publishers.
(2) On Thursday, August 8 at approximately 5:00 p.m. I called
(415) 522-2000, the Clerk's office for the U.S. District Court for
the Northern District of California. I spoke with Christee
Scqueilia.
(3) I asked Ms. Scqueilia how I could obtain opinions rendered
in 1968 and 1978 in her district. She responded that I would need to
provide her with a case number and the judge's initials.
(4) She also said that it would cost $25 to retrieve an opinion.
Opinions cannot be copied at the courthouse, but may be copied
through an independent contractor. Ms. Scqueilia said that there was
no way I could
[[Page 53450]]
get an opinion mailed to me from the courthouse.
(5) Mr. Scqueilia added that early opinions could be obtained
through the Federal Archives in San Bruno, California.
(6) It would take three to four days for the clerk's office to
get a document retrieved from San Bruno.
Allyson E. Manson.
This letter could not be reprinted in the Federal Register,
however, they may be inspected in Suite 215, U.S. Department of
Justice, Legal Procedures Unit, 325 7th St., N.W., Washington, D.C. at
(202) 514-2481 and at the Office of the Clerk of the United States
District Court for the District of Columbia.
Atty. Craig W. Conrath, Chief, Merger Task Force,
U.S.D.O.J., Antitrust Division, 1401 H. Street, Suite 4000 N.W.,
Washington, D.C.
Dear Mr. Conrath: I am a retired lawyer. I write this letter in
regard to the proposed Thomson-West merger solely on my own behalf
as a consumer and citizen.
I do not think the merger agreement should be approved. The
Department's conditions are insufficient to protect competition.
My objections are these:
1. Failure To Create Viable Competition
Legal publishing has a synergy when a publisher produces law for
multiple jurisdictions. Publishers attempt to address the market by
creating ``systems'' that are consistent and easy to use for
consumers, and allow the same methods to be used to find law from a
variety of sources. In addition there are substantial economies of
scale in the editing and production processes.
The consent decree envisions selling some of the products of
Lawyer's Cooperative, but not the ``system'', and not the key
products, AmJur and ALR that allow the creation of a system. The
result is a series of isolated products that will not compete
effectively with West's system and are of questionable viability in
the marketplace.
2. Ineffective Remedies for Citations
The proposed license agreements has a price for use of West's
citations that would foreclose its use by any small or new
competitors. The only competitor who could afford the flat pricing
would be a large one. But the merger eliminates the only large
competitor who does not already license West's system. In effect,
nothing is accomplished.
Though the prohibition against challenging the validity of
West's dubious copyright claims are frequently found in licensing
agreements, it traduces the purpose of the merger conditions and is
inconsistent with the Department's stated position on copyright of
citations.
3. Ineffective Remedies for Markets that Become Monopolies
Wisconsin currently has two competitive official reporters of
Wisconsin case law, West and Lawyer's Cooperative. After the merger
it will have one--there will be no competition. The consent decree's
remedy is to allow the Wisconsin Supreme Court to renegotiate its
contract. Since West will be the only serious publisher available in
the market why would renegotiating the contract do anything? A cynic
might comment that it would give West an earlier opportunity to
exercise its monopoly power.
Indeed, the situation in Wisconsin is somewhat more acute.
Lawyer's Cooperative has taken the position that its cites are
public domain as is the text of the decisions. West takes a contrary
opinion. So with the loss of Lawyer's Cooperative, we lose access to
public domain law in Wisconsin for small peripheral publishers.
Finally, I must point out that West is a well known
``politically connected'' company. Its CEO was a key early supporter
of Pres. Clinton's first campaign in Minnesota and recently
Treasurer for Sen. Feinstein's reelection campaign. West has made
many contributions to political campaigns.
The Department certainly should not treat differently a
politically connected company--West has an absolute right to
participate in politics. However, in such a case it is important
that the Department explain fully and adequately its reasoning so
that the Department's decisions can be understood to be free of
political taint. This the Department has not done in this case. It
fails to reveal or address the degree of concentration left after
its proposed conditions. It fails to reveal its reasoning or motives
for the conditions, It fails to reveal the course of negotiations.
On the face of it, this is a merger between major competitors in
a highly concentrated industry. In appearance it is not a merger
that should be approved. Failure to adequately address why the
Department is approving it, and why the conditions adequately
protect competition leaves the Department open to criticism.
Yours Sincerely,
John Lederer.
August 30, 1996.
Mr. Craig Conrath, Chief, Merger Task Force
U.S. Department of Justice, Antitrust Division, Merger Task Force,
1401 H Street NW, Suite 4000, Washington, DC 20530.
Dear Mr. Conrath: I write in response to the proposed Final
Judgment And Competitive Impact Statement issued by the Justice
Department in the case of United States of America vs. The Thomson
Corporation and West Publishing Company.
The proposed Final Judgment is deficient on numerous counts and
fails to provide any meaningful relief to consumers of legal
information in the United States. In support of this contention, I
wish to raise the following points:
(1) Divestiture of the fifty-one titles which comprise the major
portion of this tentative agreement will have no appreciable or
measurable impact upon the competitiveness of the legal publishing
industry as a whole. At least thirty-five of the fifty-one titles
are of little significance in the broader marketplace. Many of these
titles are small, state specific titles with only local appeal. In
fact, the presence of these thirty-five titles in the list leads one
to suspect that they are Thomson-West cast-offs, jettisoned to make
the list and its impact appear larger than it really is. Titles such
as Kentucky Probate PSL and Louisiana Successions, for example, are
insignificant even in their local markets, let alone when viewed
from a national perspective. The cumulative impact of Thomson-West
divesting thirty-five such titles will do virtually nothing to
enhance the competitiveness of the market for legal information in
the United States.
(2) The proposed Final Judgment also requires the divestiture of
several major primary law or finding aids for those states in which
Thomson-West would control all such existing titles. While one would
expect any agreement to prevent these obvious examples of total
market domination, it should be observed that the major impact of
these divestitures will be limited to these particular states and
those major law libraries with national collections of such primary
law or finding aids. In addition, price inflation in both the
initial and supplementation costs for these titles have been far
less egregious than the price inflation which has characterized
secondary materials. Viewed from the perspective of the average
consumer of legal information, these titles will have little impact
on the market as whole. For the New York attorney, for example, the
proposed final judgment will impact only the market for enhanced
statutory law and one minor title, New York Wills and Trusts. Once
these titles have been acquired, the attorney will face a market
largely dominated by Thomson-West (or what has now been named the
West Legal Publishing Group).
(3) The agreement also forces the divestiture of several major
primary law products, the most significant of which are the United
States Code Service, U.S. Reports, L. Ed., and the U.S. Digest, L.
Ed. Collectively, these titles have previously comprised major
components of Lawyers Cooperative's Total Client-Service Library
System, the only significant alternative to West's Key Number System
of legal research. Divestiture of these titles will preserve
virtually intact Thomson-West's future control of both systems of
legal research. The Total-Client Service Library system will simply
substitute the United States Code Annotated, West's Supreme Court
Reporter and West's Supreme Court Digest in place of the three
former Lawyer's Cooperative products.
Moreover, divorced from the system of which they were an
integral part, the three Lawyers Cooperative titles will fade in
importance, both as tools of legal research and in market position.
The legal publishers who may consider buying these titles must be
cognizant of the risks involved in purchasing titles whose
subscriber lists will inevitably shrink when they become independent
publications. While one could anticipate a potential publisher
incorporating citations to these titles in its secondary law
publications, this will still not result in the creation of a third
legal research system to challenge the domination of Thomson-West.
The only way to break this total domination of legal research
systems would be to force Thomson-West to divest itself of Lawyers
Cooperative Publishing Company in total.
(4) The proposed final judgment makes no serious attempt to
address the impending
[[Page 53451]]
domination of the market in secondary law materials by Thomson-West.
As a result of its steady stream of acquisitions over the past 17
years, the Thomson Corporation will control slightly more than 50%
of the leading secondary law titles published in the United States.
This statement is based on an analysis of the titles used for twenty
years by Bettie Scott in her Price Index for Legal Publications,
published, until recently, in the Law Library Journal, and an
analysis of the 533 treatises included in my own Legal Information
Buyer's Guide and Reference Manual 1996 (I should add,
parenthetically, that the titles selected for inclusion in my book
were made on their individual merits between March and July of 1995,
prior to the announcement by West that it was putting itself up for
sale). The percentage of secondary law titles to be controlled by
Thomson-West will constitute approximately 51% of the titles in
Scott's list and approximately 53% of the titles included in my
list.
Only seven national secondary titles of any significance are
included among those titles to be divested by Thomson-West, and only
two of these are larger sets which command a significant market
presence (Corbin on Contracts and Appleman, Insurance Law). These
seven titles represent only 1.3% of the 533 treatises titles
reviewed in my book, hardly enough to cause even a ripple in the
overall control which Thomson-West will exercise over the secondary
law marketplace.
A recent examination of the budget of our own Rhode Island State
Law Library revealed that 47% of our current expenditures are
earmarked for Thomson-West publications. However, because standing
orders to approximately 75% of the secondary law materials published
by Thomson have been suspended due to steeply rising supplementation
costs (and now updated sporadically), this figure could easily
exceed 65% of our budget were all titles on standing order.
The proposed Final Judgment leaves only six publishers of
secondary law materials to challenge Thomson-West's hegemony:
Anderson Publishing, Aspen Law & Business, Matthew Bender, Little
Brown, Michie, and Wiley Law Publications; however, the revenues of
Matthew Bender, the leading publisher in this group, probably exceed
those of the remaining five publishers. Matthew Bender has increased
prices so significantly in the past eight years that many attorneys
in small law offices have sought alternative publications, most of
which are published by Thomson or West. In other words, given that
fact that most attorneys will seek to avoid the extraordinarily high
costs associated with Matthew Bender treatises, Thomson-West's
control of the market will be even greater than the 51-53% included
in the above cited publications.
According to the Justice Department's Competitive Impact
Statement, Section B. 2.:
Thomson and West compete vigorously on the basis of price for
both enhanced primary law products and secondary law products.
Thomson and West look almost exclusively to each other in making
pricing decisions and promoting both their enhanced primary and
secondary law products in the relevant markets, and consumers have
benefited from this competition. Thomson and West also compete
directly on the basis of quality. The quality of Thomson's and
West's enhanced primary and secondary law products has improved as a
result of such competition. Unless restrained, the proposed
acquisition would allow the combined entity unilaterally to raise
prices without the threat of a new entry into these markets by a
third party (emphasis mine).
These statements notwithstanding, this proposed Final Judgment
does little to restrain a merger which will almost certainly result
in a unilateral raising of prices, particularly for secondary law
materials. There are, quite simply, too few major national titles on
the divestiture list to have any appreciable impact on this
eventuality. I predict that, within 3-5 years, we will witness a
significant increase in the supplementation cost of West's secondary
law publications as they are increased to the level of the competing
Thomson titles. When the effects of these price increases are felt
throughout the law library community, we will witness even greater
shrinkage of collections as library budgets are more completely
consumed by supplementation costs of a smaller number of titles.
West, which was the one major safe haven for those law libraries and
other customers anxious to avoid the more aggressive pricing of
Matthew Bender and the Thomson Companies will then have nowhere to
turn. The past history of Thomson prices increases provides ample
evidence to substantiate this belief (see Appendices to the American
Association of Law Libraries letter from Patrick Kehoe previously
submitted to your Division).
(5) The proposed Final Judgment also permits, but does not
require, states to reopen bidding of the three state contracts to
publish official state reporters. While this requirement is a
necessary one, it is my view that such rebidding for the reports of
only three states will have only marginal effect upon the market.
Pricing of official reports has not been a significant problem for
consumers of legal information in the past and it is unlikely that
it will be in the future, particularly in light of the fact that
these reports constitute only a small percentage of the average
lawyer's expenditures for legal information. Consumers should be
more concerned about future price increases for enhanced primary law
or secondary law materials.
(6) Finally, the proposed Final Judgment also requires Thomson
to license the use of star pagination in the National Reporter
System to other legal publishers. In the absence of the ultimate
resolution of the claim which West asserts over star pagination,
this proposed Final Judgment cannot be said to provide any
meaningful relief to consumers of legal information. The licensing
fees are simply too high to permit any but the most well-financed
publishers to use West star pagination.
Robert Oakley, Director of the Georgetown University Law
Library, conducted preliminary calculations of the cost of licensing
star pagination from the West Publishing Company. Based on the cost
of $.09 per 1000 characters, he calculated that it would cost a
potential licensee approximately $541.00 annually for each volume of
the Federal Supplement, or approximately $495,000.00 annually for
the entire Federal Supplement. New entrants who might arise to
challenge Thomson-West by developing value-added secondary materials
to either print or CD-ROM will simply find the entry costs too
onerous. And existing publishers, such as Matthew Bender, will be
forced to pay the high licensing fees to use star pagination in its
own secondary materials or run the risk of litigation for copyright
infringement. In the current environment, Thomson-West is not only
well positioned in the print field, but is in a superior position to
develop enhanced CD-ROM products which combine expert analysis with
the relevant primary law cases and statutes. This agreement provides
no relief in this regard.
In light of the above, I believe that the court can do no less
than find that this proposed Final Judgment is not ``within the
reaches of the public interest.'' In my view the Justice Department
has failed to provide consumers with any meaningful relief in this
proposed merger and leaves them little better off than if it had
taken no action at all. Many of the titles on the divestiture list
are obvious Thomson-West cast-offs and of little significance.
Furthermore, Thomson-West have it within their power to negate the
loss of the only three major national titles on the list (U.S.C.,
L.Ed. and U.S. Digest, L.Ed.) by incorporating its competing titles
(U.S.C.A., S. Ct. Reporter, and U.S. Supreme Digest) into the Total
Client-Service Library System. In my view, the divestiture of
Lawyers Cooperative, in total, is the minimum acceptable solution
``within the reaches of the public interest.'' This would at least
ensure that the only two major legal research systems remain in
separate hands.
Thomson-West have agreed to this proposed Final Judgment because
it leaves the fruits of their merger virtually intact and grants
them dominant control of the marketplace. Consent decrees which do
not protect the public interest, cannot, by definition, be effective
tools of antitrust enforcement. I urge the court to reject this
proposed Final Judgment.
Sincerely,
Kendall F. Svengalis,
State Law Librarian.
Inner City Press--Community on the Move
August 30, 1996.
U.S. Department of Justice,
Antitrust Division, Attn: Mr. Craig W. Conrath, Chief, Merger Task
Force, 1401 H Street, N.W., Suite 4000, Washington, D.C. 20150
Re: Comments Opposing the Currently Proposed Final Judgment in
United States v. The Thomson Corporation and West Publishing Company
Dear Mr. Craig W. Conrath and others: On behalf of Inner City
Press/Community on the Move and its affiliates and members,
including myself (collectively ``ICP''), I am submitting these
comments in opposition to the currently Proposed Final Judgment in
United States of America v. The Thomson
[[Page 53452]]
Corporation and West Publishing Company. The Proposed Final Judgment
was published in the Federal Register of July 5, 1996 (61 FR 35250),
along with a statement, pursuant to 15 U.S.C. Sec. 16(b)-(h), that
public comments received within sixty days will be considered, both
by the Department of Justice (``DOJ'') and by the District Court
Judge, before any final determination. These comments are timely.
There are serious questions of antitrust law here at stake,
questions that go beyond the stunningly elevated Herfindahl-
Hirschman Indices (``HHIs'') for numerous product markets, and the
requirements that Thomson-West license their page citation system to
competitors. The more fundamental issue, given that the
anticompetitive effects (and effects that would fly in the face of
the purpose(s) of the antitrust laws, see infra) that would clearly
result from this merger, is why the Department appears to have
accepted as a given that it must allow this combination, and has
only, in ICP's view, played around the edges in securing relatively
minimal divestiture and other purportedly mitigating actions, as a
condition for settlement. The Proposed Final Judgment states, at XV,
that its ``[e]ntry * * * is in the public interest.'' ICP dispute
this, for the reasons set forth below.
Section 7 of the Clayton Act, 15 U.S.C. Sec. 18, prohibits
mergers where ``the effect may be to substantially lessen
competition.'' The market for legal and legal-economic information
and research resources is already hyper-concentrated and
anticompetitive. ICP is submitting these comments from its
perspective/position as a small scale not-for-profit ``consumer'' of
legal and legal-economic information and research resources, a
grassroots community and civil rights group with far from unlimited
resources, which needs access to legal and legal-economic
information in order to pursue its public interest mission of
combatting redlining and other discriminatory practices by banks and
other financial institutions. Of most concern to ICP is what the
Proposed Final Judgment refers to as the ``comprehensive online
legal research services'' (hereinafter, the ``COLRS'') product
market.\1\ West already monopolizes this product market, as well as
a number of other product markets. There is simply no doubt that a
combination of Thomson, which is a producer/compiler of much of the
content of the (only two) ``comprehensive online legal research
service'' providers, would substantially (further) lessen
competition in this product market. Absent meaningful and sufficient
mitigation, the proposed combination runs afoul of Section 7, and
cannot be allowed.
---------------------------------------------------------------------------
\1\ The Department's definition/delineation of the COLRS product
market appears arbitrary. It is called the ``comprehensive online
legal research services'' product market, and yet the primary
mitigation proposed involves a option for Lexis-Nexis to extend its
licenses for three ``non-legal'' data bases: Investext, ASAP and
Predicasts. As further explained infra, WESTLAW and Lexis-Nexis have
a duopoly for the provision of a number of not specifically
``legal'' resources, which are necessary for consumers/public
interest groups to advocate. Requiring only that Thomson extend
licenses on three data bases, and only to one competitor does not
mitigate the foreseeable harm, even as described in the Department's
own presentation. The current Proposed Final Judgment should be
rejected.
---------------------------------------------------------------------------
The Competitive Impact Statement (the ``Statement'') appears to
acknowledge that there are only two competitors in this product
market: West and Lexis-Nexis. The Statement, 61 FR at 35262, recites
some, but not all, of the harm that would result from this
combination. What is most lacking in the Department's discussion
(and perhaps analysis) is a recognition of how over-concentrated and
anticompetitive this product market already is.\2\ The Statement
implies that if the Department and Thomson-West merely seek to
``maintain the level of competition that existed between WESTLAW and
Lexis-Nexis before the acquisition.'' the minimally modified
proposal can legitimately be said to be ``in the public interest.''
---------------------------------------------------------------------------
\2\ Interestingly, the Statement does not set forth the HHI for
this comprehensive online legal research services product market.
Exhibit C of the Statement provides HHIs for nine primary law
product markets, all of which exceed, often by a power of five or
more, the DOJ's own definition of an over-concentrated market. The
HHI for the COLRS product market is even higher; ICP questions is
that is not among the reasons for the omission of this HHI from the
Statement. The HHI for the COLRS product market, as the DOJ defines
it, must be entered into the record before the Court.
---------------------------------------------------------------------------
As a general matter, mitigation efforts such as these are, at
best, only partially successful. Where even the goal of the
mitigation effort is only to ``maintain the level of competition
that existed * * * before the acquisition'' (see supra), and that
level of competition was already insufficient, and the market
already over-concentrated--the mitigation effort would not
vindicate, or be consistent with, the pubic interest.
All that the Department proposes, to purportedly ``maintain the
level of competition that existed * * * before the acquisition,'' is
that Thomson ``divest itself of Auto-Cite and extend the terms of
existing licences of [the] Investext. ASAP and Predicasts databases
to Lexis-Nexis.'' 61 FR at 35263. This proposed mitigation is
entirely insufficient. For example, it formalizes (or ensures)
oligopoly in the COLRS product market. Whereas the Department has
implied that the Consent Decree would give competitors alternative
means of entry into the market, the proposed requirement that
Thomson license only three databases, and only to Lexis-Nexis, would
ensure anticompetitive duopoly deep into the 21st century.
Additionally, the number of databases required to be licensed is
absurdly low. Furthermore, the duration \3\ of the option to extend
is too short; nowhere is it explained why the Department apparently
believes that there will be more than the current two competitors in
the COLRS product market in five years time (in fact, the proposed
Final Judgment makes continuing duopoly more likely).
---------------------------------------------------------------------------
\3\ See 15 U.S.C. Sec. 16(e)(1).
---------------------------------------------------------------------------
Accepting, rejecting, or modifying this Proposal Final Judgment
involves basic choices about the goal(s) of antitrust law. The
Department's focus here, in the COLRS product market, appears to be
on the rights of WESTLAW's (one) competitor, rather than on the
interests of consumers of COLRS products. The interest of the public
(said alternately, the public interest) must take precedence.
Although protection and fostering of competition is a goal of
antitrust law, this goal is a means to the wider objective of
promoting (and protecting) the interests of the consuming public.
See, e.g., United States v. Western Electric Co., 578 F. Supp. 668
(D.D.C. 1983).
This Proposed Final Judgment reflects a trend in which the
Department \4\ appears to begin with the presumption that any
merger, no matter how presumptively anticompetitive, can or must be
approved, as long as a few concessions are obtained and can be
announced. Many of the original goals of the Sherman and Clayton
Acts, and of the 1950 Cellar-Kefauver Amendments, goals which are
still vital and needed, appear to have been forgotten. Perhaps a
combined Thomson-West would be more efficient \5\--but what showing
(or requirement) is there that these efficiencies will be passed
along to consumers? This is unlikely, given that, for example, in
the COLRS product market, WESTLAW has only one competitor, and the
Proposal Final Judgment would only more deeply imbed this
anticompetitive duopoly. Madisonian concerns about the dangers of
concentration of power are also particularly relevant here, given
that the concentration would be not in some strictly consumer
product, but in access to information, the lifeblood and
prerequisite be to participatory democracy.\6\
---------------------------------------------------------------------------
\4\ And other agencies with antitrust jurisdiction, including,
for example, the Federal Reserve Board as to bank holding company
mergers, See infra.
\5\ Emphasis on ``[p]erhaps''--see generally, Robert Lande,
Wealth Transfers as the Original and Primary Concern of Antitrust:
The Efficiency Interpretation Challenged, 34 Hastings L.J. 65
(1982).
\6\ ICP stands ready to brief these wider issues, in connection
with the Section 16(f) proceedings it is urging the court to begin.
Given the unique ``products'' this proposed merger and consent
decree involve--the law, and information necessary for effective
public participation--full consideration of the Proposed Final
Judgment should involve more than mere technocratic (e.g. HHI)
battle of the numbers. See infra.
---------------------------------------------------------------------------
As noted above, ICP is a non-profit consumers' and civil rights
advocacy organization, which needs access to legal research
services, including online, to perform its mission. Our society has
become increasingly technological and fast-paced. Citizens groups
such as ICP, which, under various statutory schemes, provide a
counter-balance to the economic and political powers that
increasingly dominate the policy making process, cannot meaningfully
perform their functions without rapid access to legal precedent,
scholarly and news articles, etc. Where the market for these is
allowed to become ever more concentrated, driving prices to levels
entirely unaffordable to any but the largest corporate litigants/
lobbyists, the adverse effects extends beyond even those that flow
from anticompetitive pricing in other consumer markets. Allowing a
monopoly in toothpaste, or in pharmacies, may be one thing: such
concentration may diminish both allocative efficiency and
[[Page 53453]]
consumer welfare. But the effect is limited in the first case, to a
single personal hygiene product, and in the second, to a set of
these. Where access to the law, and to the background sources which
alone allow citizens groups to advance their (and the public's)
interest, becomes monopolized and anticompetitive, the adverse
effects reach even those who do not use these COLRS services, or are
not even aware of them.
The Statement, at 7, argues that the Court must almost
automatically accept this proposed Final Judgment, as long as it is
``within the range of acceptability or is within the reaches of
public interest.'' 61 FR at 35264, citing United States v. American
Tel. and Tel. Co., 552 F. Supp. 131, 150 (D.D.C. 1982), affd sub
nom. Maryland v. United States, 460 U.S. 1001 (1983), If that is the
standard of review that the Court here adopts,\7\ ICP formalizes its
contention that this Proposed Final Judgment is beyond the range of
acceptability, and is not within the reaches of the public interest.
Not only would this Proposed Final Judgment allow and legitimize the
current overconcentration and anticompetitive behavior in the COLRS
product market--it would make such concentration worse, and thereby
injure the public interest. This product market unique impinges on
and directly affects the ``public interest,'' even the way(s) in
which the ``public interest'' is determined.
---------------------------------------------------------------------------
\7\ In terms of the proper standard of review, ICP refers the
court to, e.g., Esco Corp. v. United States, 340 F.2d 1000, 1965 CCH
Trade Cases para. 71365 (9th Cir. 1965), providing that proposed
consent degrees must be scrutinized carefully and approved, both as
to form and content, by the court before entry.
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The Antitrust Procedures and Penalties Act (the ``APPA'') 15
U.S.C. Sec. 16(b)-(h), provides a convenient example of the way in
which Congress defers or assigns many policy debates within our
society to proceedings, subject to public notice and comment, in
which consumers can assert their interests, and confront the
arguments of large corporations which seek to maximize returns by
(virtually) any means necessary. To illustrate the harms created by
the current overconcentration in the COLRS product market, which
overconcentration this Proposal Final Judgment would not only not
address, but would make worse, consider the following:
As the Department's Statement notes, APPA authorizes the use of
procedures beyond a mere review of the Statement and (written)
Response to Comments to make the required ``public interest''
determination. See 61 FR at 35264, and 15 U.S.C. Sec. 16(f). Imagine
a citizens/consumers' group such as ICP seeking to participate in
such proceedings, without access to COLRS (that is, without access
to WESTLAW or Lexis-Nexis). Both Thomson-West, and the Department,
have instantaneous access to online legal research; a single
database search using key words will produce (most) all relevant
precedents, and other supporting information. One might assume that
the staff or members of the consumers group, priced out of the
monopolized COLRS market, could simply visit a law library and
conduct their research in books, by hand, using Shepards volumes,
indices of law reviews, perhaps searching hard copy newspapers on
microfilm. On personal knowledge, such a process is exceedingly time
consuming, and is not realistic in connection with proceedings under
the federal Community Reinvestment Act, Bank Merger Act, Clean Air
Act (or APPA). The citizens/consumers group, priced out of the
anticompetitive COLRS market, would not realistically be able to
effectively present its view of the ``public interest;'' in all
likelihood, the corporation's (and, surprisingly, the Department's)
competing view of the public interest would prevail, and become a
new precedent for applicants for further anticompetitive mergers.
This ``incremental corp-ocracy'' prediction might seem too extreme--
if it were not precisely what is happening in our society.
ICP urges the court, in order to make its determination under
Section 16(e), to use the procedure(s) specified in Section 16(f),
particularly those in Section 16(f)(3). ICP and its members,
including its executive director, are ``interested persons or
agencies;'' their participation would serve the public interest. ICP
is aware that Judge Richey on July 31, 1996 denied a motion by Tax
Analysts to participate in the proceedings, even as an amicus
curiae. West's counsel stated that ``Tax Analysts is disingenuous to
say they're intervening to protect the public interest. They're
intervening because they lost the lawsuit, and now they're trying to
get what they lost in the lawsuit through another means.'' \8\ ICP
wishes to emphasize that it is not a competitor with West or Lexis-
Nexis, that it is in fact not even a for-profit entity. ICP has had
experience in the COLRS product market, in the use of these products
in order to advocate in public proceedings, and has had experience
with the Department's antitrust reviews of proposed mergers beyond
this one (see infra this letter). Summary disposition on this
Proposed Final Judgment, considering only the Complaint, the
Statement, comments thereon, Response to Comments and the (perhaps
revised) Proposed Final Judgment--would be inappropriate, given the
issues raised by this proposed transaction,\9\ and the Proposed
Final Judgment.
---------------------------------------------------------------------------
\8\ Connecticut Law Tribune, August 5, 1996.
\9\ See, e.g., editorial in the New Jersey Law Journal of August
5, 1996, at 26: ``The antitrust implications of such an arrangement
are so obvious that one might have wondered what courageous attorney
gave the first opinion that the DOJ would permit the transaction.''
---------------------------------------------------------------------------
* * * * *
ICP wrote to the Department, attention Assistant Attorney
General Bingaman, on June 3, 1996, setting forth its opposition to
the proposed Thomson-West acquisition, and stating, inter alia, that
[I]n seeking * * * to advocate for the public interest, and for
the interest of the predominantly low income and minority residents
of the South Bronx and Harlem, ICP has become aware of the harmful
effects of West's and Thomson's current oligopoly control of the
market for legal and legal-economic information.
Thomson at present owns, inter alia, the American Banker, the
Regulatory Compliance Newsletter, Lawyers' Cooperative Publishing,
Sheshunoff Information Services, etc.; West, of course, is the
``proprietary'' publisher of most relevant case law, and owns the
Westlaw data base, containing not only case law, but an extensive
business and legal news date base, including the Dow Jones and
Associated Press wire services. It is virtually impossible to
effectively advocate without access to these resources; however, due
to the hyper-concentration of this market, the price for such
products is inordinately high. This proposed acquisition would
further concentrate this already anticompetitive market. The adverse
effect would not only be to further raise prices--the acquisition,
without mitigation or divestiture, would effectively exclude such
consumers as ICP from the market, and thus would serve to protect,
preserve and exacerbate other injustices and anticompetitive
behavior in the society.
ICP is a public interest advocate not only in the field of fair
lending and civil rights, but also in the antitrust field. For
example, ICP extensively documented the prospective anticompetitive
effects of the ongoing Chase-Chemical merger, for consumers in the
New York area, particularly in Bronx County. Such advocacy,
including antitrust advocacy, by those most injured by the many
mergers proposed these days--that is to say, small small business
associations, community and consumers' groups--is virtually
impossible without access to the legal and legal-economic
information which West and Thomson control. Any further
concentration in this market, any further raising of prices, would
silence more voices in society, and thus set off a chain of adverse
consequences.
For your information, I recently contacted West Publishing, [on
behalf of ICP and of the New York State Reinvestment Alliance, to
which ICP belongs], in order to inquire whether West has any program
or provision for granting access to Westlaw and other West resources
to non-profits, particularly grassroots civil rights and consumers'
groups, at reduced or waived fees. I was told that West does not
have any such program or provision; nor does West intend to
implement such a program or provision. I attempted to explain why
such a program would be both productive and in a sense incumbent
upon West, both because of its central position in the legal field,
and in view of its proposed acquisition and merger with one of its
few competitors, Thomson. I was told that the idea would be ``passed
along,'' but not to expect any changes, in the near future if at
all, because West does not change anything without much study. This
deliberativeness does not, however, appear to extend to pricing
decisions.
With all due respect, I must also say that ICP is troubled by
the DOJ's long standing inter-relation with West, particularly the
selection of West as the DOJ'S legal-materials supplier after,
largely due to West's anticompetitive behavior, the DOJ abandoned
its ``Juris'' project.\10\ See generally, Thomas
[[Page 53454]]
Scheffey, ``Too Close for Comfort? States Study West-Thomson Merger,
'' Texas Lawyer, April 1, 1996.
---------------------------------------------------------------------------
\10\ August 30 note: ICP is aware that on August 5, 1996, the
Department sought to intervene in the case of Matthew Bender & Co.
Inc and HyperLaw Inc. v. West Publishing Co., in the U.S. District
Court for the Southern District, apparently to argue against West's
claim that its page citation system is protected by copyright law.
See Connecticut Law Tribune, August 12, 1996. This is laudable, but
does not resolve the issues in the COLRS product market discussed in
this comment.
---------------------------------------------------------------------------
ICP regrets submitting these comments (presumably) late in the
DOJ's review of the the Thomson-West proposal. I telephoned a DOJ
Antitrust staffer I have come to know in the course of ICP's bank
merger advocacy work; after several days, this staffer informed me
that the Thomson-West proposal was being review not by his unit, but
by the ``Merger Task Force.'' Soon thereafter, I attempted to call,
and did in fact leave a message for, the Merger Task Force lawyer to
whom the staffer had referred me. I did not receive any response for
more than a week. I left a second message, in response to which the
lawyer informed me that he was not at liberty to tell me the status
of the Department's review, but that we could submit our comments by
mail to 1401 H Street (which we are hereby doing). While I
understand that the DOJ's review is not as formalized as, for
example, the reviews conducted by the Federal Reserve System in
connection with bank or bank holding company proposed mergers,
nevertheless I believe the DOJ should attempt to better inform the
affected public, especially the ``retail'' and low and moderate
income segment thereof, of pending DOJ merger reviews, such that the
DOJ can receive, and consider, comments from those who stand to be
most affected--not only to pay a higher price, but to be effectively
priced OUT of the market.
Thomson's West proposal is particularly troubling, because of
the ripple-effect a price raise / further concentration in the
relevant product markets can have. It is one thing for the ``lower''
end of the consumer market for baby wipes, diapers, toothpaste, etc.
to be affected by paying higher prices--and it is an entirely
different thing for whole segments of our society to be further
excluded from legal and legal-economic information, with which alone
these segments of society can attempt to participate in public
processes and advocate for their interests. This is a particularly
important product market, because it involves the raw material which
citizens need in order to participate in a Constitutional democracy.
For the Court's information, the Department did call ICP on the
day the Proposed Final Judgment was released, and faxed ICP a copy
of its six page June 19, 1996 press release. The difficulty of many
of those affected by proposal that the DOJ must review in providing
information to the DOJ does not appear to spring from any lack of
civility on the part of DOJ staff--it is the result of the DOJ
current implementation of APPA and other provisions, or perhaps of
the drafting of these provisions themselves. With all due respect,
however, ICP has noted, in connection with its advocacy efforts
during bank merger applications proceedings, that corporate
applicants are invariably represented by counsel who appear to have
a high degree of familiarity with regulatory staff (including, for
example, addressing their letters to DOJ staff on a first name
basis, which leaves the public, with less ``access,'' with the sense
that approval, perhaps with relatively minor mitigation, is a
foregone conclusion). ICP has not been privy to Thomson's
communications with the DOJ; \11\ these observations are drawn from
other DOJ antitrust reviews, including the recent review (which
resulted in a finding of no likely anticompetitive effect) of the
Chase Manhattan-Chemical merger. However, as I hope this comment has
made clear, concentration on the legal research services product
market threatens to have not only anticompetitive, but also anti-
participatory and frankly undemocratic ramification, much more so
than other consumer products industry mergers the Courts may review.
---------------------------------------------------------------------------
\11\ Nor has ICP seen the defendants' filings required by 15
U.S.C. Sec. 16(g).
---------------------------------------------------------------------------
The Proposed Final Judgment is inadequate; despite the
mitigation proposed, the combination of Thomson and West is not in
the public interest. ICP urges the Court to use the procedures
authorized in 15 U.S.C. Sec. 16(f), and to conduct at least a
hearing, and perhaps a full trial, on the Complaint filed by the
Department on June 19, 1996, and the foreseeable effects of this
proposed merger more generally.
If there are any questions about this comment, or any need for
follow up (including further participation in this proceeding),
please do not hesitate to contact the undersigned, by telephone at
(718) 716-3540, by fax at (718) 716-3161, or by mail at 1919
Washington Avenue, Bronx, New York 10457.
Thank you for your attention.
Matthew Lee,
Executive Director.
September 3, 1996.
Craig S. Conrath, Esq.,
Chief, Merger Task Force, U.S. Department of Justice, Antitrust
Division, 1401 H Street, Suite 4000, N.W., Washington, DC 20530
Via fax 202-307-5802
Re: United States v. The Thomson Corporation and West Publishing
Company Case No. 1:96CV01415 (U.S. District Court for the District
of Columbia)
Dear Mr. Conrath: This letter presents the comments of the
Consumer Project on Technology (CPT) on the Proposed Final Judgment
in the above referenced case. CPT is a project of the Center for
Study of Responsive Law. CPT was created by Ralph Nader in 1995. We
maintain a page of the World Wide Web which describes our
activities, at: http://www.essential.org/cpt.
When the Proposed Final Judgment (PFJ) was first made public,
CPT made comments to several news organizations expressing
satisfaction with the proposed divestitures, while expressing
reservations about the economic terms of the compulsory license
agreement. After having the opportunity to more closely examine the
PFJ, we reiterate our concerns about the onerous economic terms of
the compulsory license, and we express our additional concerns about
the proposed divestitures. It is our opinion that the PFJ does not
adequately protect the public interest, and that the proposed merger
should not be permitted.
Proposed Divestitures
CPT was pleased see that the divestiture would include the U.S.
Code Service (USC), the U.S. Reports, Lawyers Edition (L.Ed.), and
Auto-Cite, three important Thomson valued-added services which
compete with products currently offered by West Publishing. However,
legal publishers and law librarians have expressed persuasive
concerns about omissions in the list of divested products, and
raised questions about the viability of USC and L.Ed., if Thomson
does not also divest its American Law Reports (ALRs) and American
Jurisprudence 2d (Am Jur).
At the heart of the problems over the enhanced legal products
that will be divested are the issues of economies of scope in
publishing and the inter-related nature of the various value-added
products. The USC, L.Ed., and Auto-Cite products rely upon access to
research and analysis from ALRs in a fundamental way, and to exclude
the ALRs from the products to be divested will greatly diminish the
value of the products which are divested.
The economies of scope issue is also important. Other legal
publishers do not believe that USC and L.ED. are economically
viable, if they are spun off without the ALRs and Am Jur products,
because of the lower cost of producing the products jointly, as
compared to the stand alone cost of producing enhanced case
analysis. These publishers believe the PFJ will create a set of
``product fragments'' which cannot succeed economically on their
own.
CPT did not fully appreciate the importance of the ALRs and Am
Jur publications at the time the PFJ was announced, and we would
like the record to reflect our views after having the opportunity to
more closely examine the agreement.
A third area of concern is the implementation of the
divestitures. Reed-Elsevier, the owner of Lexis-Nexis, has held
discussions with Thomson to determine what assets will actually be
sold. While we do not have access to the confidential documents that
have been shown to Reed-Elsevier, we do know that Reed-Elsevier
believes that Thomson intends to retain the Auto-Cite trained staff
and database, along with the exclusive rights to integrate Auto-Cite
with the ALRs and other Thomson products. It is one thing to divest
a trademark plus copies of the database and software, and yet
another to divest a product as a going concern. If Thomson
effectively guts the product and sells the service in name only, the
purpose of the divestiture will be undermined. Potential bidders on
these products have apparently raised these issues with DOJ.
The Compulsory License
In a June 19, 1996 press release, the DOJ emphasized the fact
the PFJ would require Thomson to ``openly license'' West's page
numbering system under a system of
[[Page 53455]]
``capped'' fees. In fact, the proposed compulsory licensing system
seems to permit very little new entry into the market for primary
source case law with the use of the West citation. Basically,
publishers who seek licenses must agree to purchase the right to use
the citation for each and every case that is cited, in each and
every product that is published, in each and every year the product
is sold. A publisher who licenses the citation to a single case for
use in CD-ROM and online products would have to pay twice for the
citation, and renew the payment year after year, with fees
increasing each year. The costs for those licenses are very high.
According to publishers, typical federal circuit court opinions
run from 20 to 40 thousand characters, and U.S. Supreme Court cases
often exceed 150 thousand characters. The PFJ requires publishers to
pay 9 cents per thousand characters in the first year, increasing to
13 cents after two years, with annual increases for inflation. Thus,
for a 30 thousand character opinion, Thomson will receive $3.90, for
each product where the opinion is published, in every year the
product is sold. This is a very high price to pay simply to publish
the law of the land.
These ``capped fees'' are also likely to be the minimum fees.
This particular fee structure sets very high hurdles for entry into
the market. The fee structure is strongly biased in favor of the
largest competitors to Thomson, and strongly prejudiced against
small businesses. Of course, the most important competitor to a
foreign owned Thomson/West is foreign owned Lexis-Nexis. Lexis-Nexis
will surely license the citations. But the proposed compulsory
licensing system makes it nearly impossible for many of the
innovative American small technology firms who are seeking entry
into this market to obtain the citations and become effective
competitors. This is a kind of reverse industrial policy that will
hurt consumers and American small businesses.
These fees must be paid by anyone, including not-for-profit
institutions. The license agreement is written in such a way that
the subscribers must agree to the terms of the license, and Thomson
must approve the license, making it extremely unlikely that the
citations will ever be available for browsing on the Internet.
We are concerned that the compulsory license agreement will have
the perverse effect of adding credibility to West's assertions of
copyright to the text and citations of federal court opinions,
without providing the public with any real improvements in access to
legal information.
For these reasons, we urge DOJ and the court to reject the PFJ,
and we urge the DOJ to bring and antitrust case against West
Publishing which addresses the serious anticompetitive problems in
the market for legal information.
Sincerely,
James P. Love,
Director, Consumer Project on Technology.
This letter could not be reprinted in the Federal Register,
however, they may be inspected in Suite 215, U.S. Department of
Justice, Legal Procedures Unit, 325 7th St., N.W., Washington, D.C.
at (202) 514-2481 and at the Office of the Clerk of the United
States District Court for the District of Columbia.
Bartlett F. Cole
September 3, 1996.
Ms. Janet Reno,
Attorney General of the United States of America, 10th and
Constitution Avenue N.W., Washington, D.C.
Re: Attention to Monopoly in Legal Publishing
Dear Ms. Reno: The undersigned has been in private practice of
Civil law since 1940 (except for overseas duty in the Navy in WW
II). Law books have been a substantial part of my overhead.
Currently I maintain in my office a complete set of CJS and Wests
Oregon Digest Second. When I need additional information I go to the
Multnomah County law library here in Portland Oregon. Ms. Jacque
Jurkins, the Librarian there has written in the Oregon State Bar
Bulletin that Thomson will control 100% of law encyclopedias and
100% of State Digests. She also writes that this will lead to
increased prices. I enclose a copy of her article.
Please give serious consideration to blocking this monopoly.
I would say that the President of Thomson has tipped his hand in
his letter of June 28, 1996. He says: ``Nothing will change in the
near term''.
Over the years West has spent millions of dollars on art shows,
and artists, and in sending annual calendars to its customers. Since
my Federal income tax, my State income tax, and my Portland Oregon
business tax all go to support art, artists, and art shows I don't
think we need to have to pay more for our law books so West can
support whom it feels like.
A few years back Multnomah County opened a brand new building
with jail space and additional court rooms. West saw fit to send
many of its original paintings to decorate the first and second
floor with paintings which it had acquired. One of these paintings
bore the title ``A Mugging''. The painting was in fact a murder
going on by one individual with a sharp knife in which another
individual was shown cut and bleeding. In my humble opinion a very
poor subject for a building of Justice.
West does not have a very good reputation for accuracy. A few
years back they came out with a paperback index to CJS. This was
supposed to be put out on an annual basis so they could have
reference to the pocket parts. I found a subject completely omitted
and wrote to them about it. I also wrote to them about the extremely
poor printing on the pages because ink from one side ran through the
paper to the other side. They admitted the mistake in writing but
brushed me off.
Please let me know if you are willing to block this monopoly or
not, At this time we have a First Lady in the White House who has
been a practicing lawyer also. If you are not going to do anything,
I need to write to her.
The Bible is the inspired word of God. I enclose for your
personal use a pamphlet entitled ``King of Kings'' which has helped
me understand the Bible.
Sincerely,
Bartlett F. Cole,
Attorney at Law.
Bartlett F. Cole
September 3, 1996.
West Publishing Corporation,
Attn: Mr. Brian H. Hall, President, PO Box 64779, St. Paul MN 55164
Re: West Annual Calendar
Dear Mr. Hall: I have your form letter dated June 28, 1996
promising no change in the near term. Jacque Jurkins, librarian
where I go when my office library is insufficient, predicts that you
are likely to increase prices. I enclose a copy of her editorial
published in a recent issue of the Oregon State Bar Bulletin.
If you think it is presumptive of me, a sole practitioner way
out here in Portland Oregon, to write to you about your annual
calendar please recall what scripture says:
Rebuke a wise man, and he will love thee * * *
Teach a just man, and he will increase in learning.
Proverbs 9:8,9
Eliminate Nonessentials
Mr. Hall, one of the ways you could keep costs down is to
eliminate your support of art, artists, art shows, and forever
cancel your annual West calendar. I have written to your Mr. Orell
G. Piper and frankly told him that I have never seen--in my over
fifty years of law practice--a West art calendar hanging in any
lawyers office. Frankly, Mr. Hall, I am required to support art,
artists, and art shows by my income tax to the Federal, State and
local governments. I really don't need to support every time I pay
for one of your books.
The Bible is the inspired word of God. I enclose for your
personal use a pamphlet entitled ``King of Kings'' which has helped
me understand the Bible.
Sincerely,
Bartlett F. Cole,
Attorney at Law.
Where Have All the Publishers Gone?
By Jacque Jurkins
On February 26, 1996, we saw the end of a legendary, 124-year
old U.S. publishing institution, with the news release, ``West
Publishing to Join Thomson in $3.425 Billion Transaction.'' This
sale, marked the latest and perhaps the greatest acquisition of an
American legal publisher by Thomson Professional Publishing, a
Canadian-British corporation. It is something akin to Ford and
General Motors merging.
The Thomson Corporation consists of three major business units:
travel companies in the UK; 140 newspapers in the United States and
Canada; and an international publishing group. The latter in turn is
split into six divisions, most notably the Thomson Professional
Publishing Group, to whom the assorted American law book companies
report.
Since 1979 Thomson has acquired at least 10 American legal
publishers in addition to West, including: Callaghan & Company
[[Page 53456]]
(1979); Clark Boardman (1980); Warren, Gorham & Lamont (1980);
Lawyers Cooperative (1989); Bancroft-Whitney (1989); Research
Institute of America (1989); Maxwell Macmillian, formerly Prentice-
Hall, (1991); Counterpoint Publishing (1994); Information Access
(1994); Barclays (1995); and Shepard's/McGraw-Hill, treatises only
(1995).
These acquisitions and the subsequent reorganization of
traditional product lines have created no end of confusion for law
book consumers as they struggle to keep up with the new lineup of
publishers and products. Publications once received from Lawyers
Cooperative Publishing (Lawyers Coop) may now come from Clark
Boardman Callaghan (CBC) or any one of the publishers owned by
Thomson; publications received from Shepard's have been transferred
to Lawyers Coop or CBC.
If the sale is approved by the Department of Justice--and at
this point in time no one believes it will not be approved--Thomson
will control: 100 percent of the national legal encyclopedias (CJS
and Am.Jur.2d); 100 percent of the annotated federal codes (USCA and
USCS); 100 percent of the commercial U.S. Supreme reporters (Supreme
Court Reporter and Lawyers Edition); 100 percent of the U.S. Supreme
Court digests; 80 percent of the national legal forms sets (West
Legal Forms, Am.Jur.Forms and Nichols Cyclopedia of Legal Forms); 76
percent of the state legal encyclopedias; 50 percent of the major
American legal treatises and student case books; the entire National
Reporter System; 100 percent of West state, regional, Decennial and
topical case digests; 25 annotated state codes; and WESTLAW LawDesk
and numerous CD-ROM products.
Prior to the sale, there was significant overlap in the
publications of West and the Thomson Group, giving the customers a
choice of titles from which to choose. The merger of the two
companies will almost certainly reduce competition through the
elimination of overlapping publications. Will the consumer have a
choice of either CJS or Am.Jur.2d., USCA or USCS, Supreme Court
Reporter or Law Edition? Doubtful.
The reduced competition is likely to lead to increased prices.
Based upon the history of prior Thomson acquisitions, consumers of
legal publications should be prepared for significant price
adjustments to former West publications. The cost of the annual
supplementation to Am.Jur.2d rose from $584 in 1987 to nearly $1,500
in 1994 following Thomson's acquisition of Lawyer's Coop in 1989.
Shortly after Thomson created the new entity, Clark Boardman
Callaghan in 1992, the supplementation frequency doubled for Couch
on Insurance and Costs rose from $133 in 1992 to $695 in 1995. West
charged $256 for the 1995 annual pocket parts to West's Legal Forms,
while CBC charged $842 for the 1995 supplementation to Nichols
Cyclopedia of Legal Forms, comparable form set. One can only
speculate as to what the annual supplementation to West's Legal
Forms is likely to cost in the future, particularly since it is well
recognized in the publishing industry that Thomson paid as much as
three times the going rate for its acquisitions and will need to
recoup its investment.
The reduced competition also has resulted in less local customer
services and fewer local sales representatives. (Perhaps some
customers will not find this a loss.) No longer can one deal with a
sales rep. No longer can one lean on the sales rep to straighten out
a confused billing or take back an unwanted publication. Instead,
there are the telemarket callers.
Lawyers, judges and law students cannot perform legal research
or study law without reference to one or more of these publishers'
research sources either on line or in hard copy format. Yet very few
lawyers are aware of the Thomson acquisitions and even fewer have
any understanding of the ramifications and profound effect they will
have on everyone in the legal community.
West Publishing Corporation
July 18, 1996.
Mr. Bartlett F. Cole,
1201 S.W. 12th Avenue, Rm. 305, Portland, Oregon 97205-1705
Dear Mr. Cole: Mr. Hall wanted me to thank you for your
greeting, and also asked me to respond to your letter of July 1
regarding the 1995 West Calendar.
Over the last twenty years West has encouraged the participation
of American artists by supporting one of the nations major
invitational art shows. Through ``WEST ART & THE LAW'' West has
received much recognition, and was even presented the National
Business in the Arts Award. The artwork which you enclosed was
highlighted and selected by a panel of nationally recognized
individuals from the arts community.
We recognize in art, as well as other subjects, taste,
judgments, perceptions vary with each individual. We did receive
several letters, such as yours, expressing displeasure with that
particular picture. Our intentions were not to offend any group of
individuals by this particular selection, but to support art. The
artwork for our 1997 West Calendar is called ``City Hall''. It's
more related to the legal profession, and I hope you won't mind if
we send you one as it becomes available.
I also wanted to thank you for the literature you enclosed. I
personally believe the Bible is the inspired word of God, but I had
never seen or read it in the comic book format. It was interesting.
Thank you again for interest.
Sincerely,
Orell G. Pieper,
Marketing Department.
West Publishing
June 28, 1996.
Dear Customer: I'm very pleased to announce that The Thomson
Corporation has acquired West Publishing. As a result of this
acquisition, we have combined two Thomson companies, Thomson Legal
Publishing, and West Publishing to form a new company, West
Information Publishing Group. This merger has successfully passed
review by the Department of Justice.
The new company is now unquestionably the preeminent provider in
legal publishing and will offer great benefits to the industry. We
now have the potential to provide more integrated products and
services--products that will be easier to use, more timely, and will
incorporate cutting-edge technologies. In addition, our licensing of
Star Pagination to third parties will provide greater public access
to primary case law by broadening the number of vendors who utilize
the product.
In terms of the sales support, customer service, product
enhancements, billings, and other services you expect from West
Publishing Company, nothing will change in the near term. All
operational details will remain the same for the remainder of 1996.
If you have any questions, please don't hesitate to call your
customer service representative.
You are a valued customer, and your satisfaction is at the top
of our priority list. I look forward to our enhanced ability to
serve you in the future.
Respectfully,
Brian H. Hall,
President, West Information Publishing Group.
[FR Doc. 96-25030 Filed 10-10-96; 8:45 am]
BILLING CODE 4410-01-M
