"Back to DOJ Antitrust Review of Thomson/West Merger Page"
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
_______________________________________
UNITED STATES OF AMERICA, ET AL, Docket No. CA 96-1415 (PLF)
Plaintiffs, HYPERLAW'S
AMICUS CURIAE
vs. BRIEF (CORRECTED)
THE THOMSON CORPORATION, ET AL,
Defendants.
_______________________________________
A. THE POSTURE OF THE CASE BEFORE THIS COURT
Shortly after the Government filed its antitrust complaint in June 1996, defendants Thomson Corporation and West Publishing Company consummated their merger. The defendants have already proceeded to combine the operations of the companies. Some of defendants' facilities have been consolidated, and others have been closed. In addition, some products have already been terminated.1
The Government has proposed a settlement of the claims it asserted in the June 1996 antitrust complaint. If the consent decree is allowed, Defendants will avoid a trial, avoid disclosure of documents and avoid an examination of the facts.
Having already avoided any significant disclosure, Defendants now seek to rush the Court in its review of this matter—purportedly due to losses being suffered. However, because the merger has effectively already occurred, the defendants are prejudiced (by what they characterize as "delay" in this proceeding) only to the extent that they are inhibited in their ability to discontinue operations, discontinue some products and increase prices on other products. (The Government did not seek to stay the consummation of the merger, and the parties proceeded with the merger knowing that this review by the Court would be necessary.) Therefore, the posture of this case before the Court is like that in any other non-merger related consent decree submitted to the Court for consideration pursuant to the Tunney Act. The Court should not feel rushed by a situation Defendants knowingly created, and it should proceed with its statutorily mandated review—to:
1. Assure compliance with the letter of the Tunney Act2;
2. Determine whether the proposed consent decree provides adequate relief to address the points raised in the complaint; and
3. Determine whether the proposed consent decree is in the public interest.3
The Court has three primary options at this juncture; it may:
1. Refuse to approve the proposed consent decree, which would result in one of two outcomes:
a. the Government would have to litigate in an effort to protect the public from anticompetitive effects of the merger; or
b. the parties would have to propose modifications that would then meet with the approval of the Court.
2. Require substantive changes—or changes to provide a level of clarity presently absent from the proposed decree. (For example, the proposed license agreement either permits copying of text of court opinions from West case reporters, or it does not. The proposed license agreement should, at the very least, be clear about this issue).
3. Delay approving the consent decree until the Government meets its Tunney Act obligations. (As described in HyperLaw's October 10, 1996 letter to Mr. Conrath, the Tunney Act is a "sunshine law" and, in addition, serves to establish a level of accountability for the Government's actions. If the Government wishes to promote a license agreement which for many older opinions will provide licensees with the meaningless right to star-paginate blank pages, then it should step up and articulate this position; and then attempt to defend its position before this Court and before the public. In the future, the proponents of this position should not be able to excuse their conduct—accountability for the Government's decisions must be assigned.) The Court has already demonstrated, by shedding a little light on the "no-contest provision" of the license agreement, that there could be immediate 'evaporation' of this dubious provision. Similarly, shedding light on other provisions of the consent decree, by sheer embarrassment alone, may well cause the parties to offer up other previously non-negotiable provisions.
Finally, HyperLaw notes the irony of the fact that both the DOJ and the defendants take the position that the proposed license agreement (which is part of the proposed consent decree) should not be scrutinized by the Court—because, they maintain, it really does not relate to the complaint, and it was something that the Government could have never obtained in litigation...clearly Catch-22.
B. HYPERLAW'S REQUESTS TO THE COURT
First, HyperLaw has asked the Court to assure that the specific statutory requirements of the Tunney Act be met. HyperLaw's letter to DOJ dated October 10, 1996 (HyperLaw Exhibit J) sets forth the several ways in which the Act's requirements have not been met. This is not a matter of discretion for either the DOJ or this Court. Just one example of why the Court must insist that these requirements are met can be seen in the statutory requirement that documents central to the DOJ's consideration of this matter be disclosed.4 This mandates disclosure of specific, critical, industry-controlling documents reviewed by the DOJ. It is clear that the merger/consent decree/proposed license package will severely exacerbate an already highly controlled industry and assist the cartel which has control. The secret 1988 agreements between West and Lexis, the documents which reflect how and where those control agreements have been administered (and subsequent modifications) are a sine qua non to even the most basic understanding of the effects of the proposed consent decree.5
Second, the Court must find an answer to the question of why the license agreement is part of the relief presented to this Court for its review and approval. HyperLaw wonders whether the Government continues to even suggest that it strong-armed the defendants into the license agreement. It is clear that this was not the case. HyperLaw submits that the license agreement is part of the consent decree for the following reasons:
(1) While negotiating the consent decree, the Government was insisting upon divestitures of companies and products which were not acceptable to Thomson and West (This is the import of contemporaneous newspaper articles6, although only an examination of the Government and the defendants would permit this to be proven directly.) The voluminous comments from varied sources have criticized the inadequacies of the divestitures, as compared to the allegations of the complaint.7 The Government further refuses to share the most basic information regarding the divestitures, including the HHI of both divested and non-divested products, as well as the breakdown on sales of the vaunted 51 divested products. If the divested products are inadequate, then one must look elsewhere for balancing relief—presumably this was the intended purpose of the proposed license. Clearly there is linkage between the limited and ineffectual divestitures and the competitive relief that could be provided by an effective license agreement.
(2) Clearly the merger directly enhances the market effect of West's claims to rights in the citation and text of court opinions and statutes. The merger of West's market power in these areas with the enormous market power of Thomson in secondary source material without question has a major impact on competition.8 The Government misreads the comments of Matthew Bender, HyperLaw, Geronimo Development Company, the State of New Mexico, and others by stating dismissively:
We disagree with TA's oft-repeated conclusion that West's control over access to some judicial opinions and statutes is a "consequence" of the merger of Thomson and West. Mem. at 5. Simply, whatever role West has relating to access to judicial opinions is a pre-condition to the merger and not caused by it.
See Plaintiffs' Opposition to Tax Analysts' Motion For Reconsideration Of Its Denial of Amicus Curiae Status, October 15, 1996, at 4. Matthew Bender correctly notes that the consequence of the merger is to extend the West-Lexis' copyright pool to the other major publisher, Thomson, to the exclusion of smaller publishers. The appended 1994 advertisement shows just the types of integrated products that Lawyers Cooperative Publishing offered, which will now tie into this pool.9 Anyone competing with the products shown in that advertisement (and the unfortunate purchasers of the divested products) now must face the West copyright factor. The Government is not correct in its assertion that those objecting to the insufficiency of the consent decree seek to remedy preexisting anticompetitive effects.
The Court must also require the Government to respond specifically to criticism of the consent decree and license agreement made in the Comment Letters—and to the filings in this proceeding. For example, HyperLaw, in its September 30, 1996 motion to this court, pointed out the impropriety of the Government's relying upon documents not filed in this Court and not made available to the public in construing the license agreement. HyperLaw referred specifically to this statement:
11. On page 44 of its responses to comments, the government states:
(1) 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. (2) 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. (3) Indeed, Matthew Bender has introduced such a product and we are informed defendants have not challenged it as a "selection" infringement. (4) Defendants would object to a print reporter which simply replicated a West print reporter ... (numeration of sentences added).
How has the Government responded to HyperLaw's clear objection? No response.
It is possible that in the future (in a closed, private arbitration in Minnesota) a competitor might try to introduce the entire record of this proceeding in an attempt to persuade the arbitrator that these vague assertions of the Government are somehow binding on West-Thomson. This will not be necessary if the license agreement itself can be read clearly. If anything, the Court, in its order relating to the consent decree, should provide the needed specificity.
Similarly, the agreement does not state what it does not cover (e.g., the text of the opinions). Once again, one could introduce the entire proceedings herein to a committee of Congress considering something akin to a database protection bill—to counter the expected Thomson-West argument that there was a compulsory license in effect. The easier solution is for the Court to mandate clarity now.
Moreover, the Government has provided no documentation whatsoever to demonstrate the reasonableness of the license rate—and, indeed, its position seems to be that anything is better than nothing. First, this is nonsense, but more important is the fact that this will allow Thomson-West to state that the rate has been "approved by the Government" as 'standardized royalty rates which the Antitrust Division approved as commercially reasonable' ) as described by HyperLaw at page 5 of its September 3, 1996 comments to the Government. See HyperLaw Exhibit N-4. Again the DOJ evaded the question. (The Government could have stated that: "The Government has not approved the rates as commercially reasonable, nor did it conduct a study as to the competitive impact of the rates on a variety of products in a variety of media." Instead, the Government's response was that it is not responsible for what Thomson-West does right under its nose—or for what vagueness allow Thomson-West to assert in the future.)
C. CONSEQUENCES OF THE COURT NOT PRESSING THE PARTIES
The Government was aware of the fact that the next largest legal publisher, Lexis, had entered into the secret 1988 cross-licensing agreements with West—agreements which created the copyright equivalent of a clandestine "patent pool"—giving Lexis access to the West citations and text to both case law and statutes, and (it appears) vice versa.10 It does not appear that the government understood the significance of this fact—and it may be too embarrassed to now step forward and comment on the state of the emperor's attire. The merger has the undeniable result of significantly expanding this copyright cartel to include the other large legal publisher, Thomson. The result is that, in the post-merger period, West, Thomson, and Lexis will be able to use the intellectual property pool to the exclusion of all other legal publishers. The cost of this to the public is staggering. It makes effective on-line legal research for poor and middle class litigants a joke—not to mention the effect of this cartel on new technologies such as CD-ROM and Internet.11 Well into the 21st Century the entire country will pay an override—nothing less that a monopoly tax to the very few who own the text of and citation to the case law prior to 1991.
The proposed license agreement may have been well-intentioned, but it is a completely insufficient attempt to provide to other legal publishers access to this copyright pool. It is insufficient in the industry, insufficient under the Tunney Act, and is even insufficient to address the specific problems addressed in the government's own complaint. Once again, the insufficiencies of the proposed license agreement would be demonstrated were the Government to make available to the Court the 1988 settlement agreements between West and Lexis—as well as the documents explaining where those agreements have been and how they have been modified.12 In its October 10, 1996 letter to Mr. Conrath at the DOJ, HyperLaw described the many references to these 1988 agreements made in connection to the proposed consent decree—and provided an analysis of the probable contents of these agreements.13 For the reasons set forth in the unsealing motion papers that HyperLaw sought to file in the United States District Court, District of Minnesota, it is in the public interest that the Court require these 1988 agreements to be made public. (HyperLaw did not file this motion because, incredibly, West advised HyperLaw that the agreements are not in the possession of the Minnesota court that apparently still supervises the operation of the major industry players under these agreements.14 Further, the docket sheets in these matters do not reflect that the agreements were ever actually filed with the Court.15)
D. CONCLUSION
The Government and the defendants join together to argue that the Microsoft decision substantially curtails the Court's discretion. The Government goes well beyond the Microsoft decision by engaging in narrow interpretations of the complaint that the Government drafted. In other words, the Government is proposing a new principle: where the relief does not address the allegations in the complaint, just reinterpret the complaint.16
This is a true win-win situation for Thomson-West. The complaint, however, has res judicata/collateral estoppel effect on the Government, and the standard is not how the Government construes the complaint, but rather what future antitrust enforcement activity will be forestalled by the complaint before the Court.17
The time is now, and the place is this Court. If these agreements and the industry control cannot be examined by Your Honor, the public will pay the monopoly tax long into the future—and an already highly anti-competitive industry will become virtually closed. This may indeed be the last opportunity to, at least, examine the facts—given the enormous political power amassed by this merger.
DATED: October 17, 1996
RESPECTFULLY SUBMITTED,
/S/
______________________________________
Lorence L. Kessler (D.C. Bar # 203521)
Counsel for HyperLaw, Inc.
Suite 400
1825 I Street, N.W.
Washington, D.C. 20006
202-857-8067
OF COUNSEL:
Carl J. Hartmann, III
New York, NY
Paul J. Ruskin
Douglaston, NY
PREVIOUS EXHIBITS FILED BY HYPERLAW
Exhibit 1 Opinion dated August 5, 1996, Matthew Bender & Company and HyperLaw v. West.
Exhibit 2 Excerpt from Docket Sheet, West Publishing Company v. Mead Data Central, Inc., 4-85-931, United States District Court, District of Minnesota.
Exhibit 3 Article, How West Was Won, American Lawyer, September, 1996.
HyperLaw Exhibit A HyperLaw Motion For Summary Judgment, Matthew Bender & Company Inc. and HyperLaw v. West Publishing Company.
HyperLaw Exhibit B- Letters, from HyperLaw to Attorney General Reno and Lawrence Fullerton dated September 26, 1996 re amicus brief.
EXHIBITS FILED AS A BINDER WITH THIS BRIEF
HyperLaw Exhibit C Affidavit of Kendall F. Svengallis dated October 7, 1996.
HyperLaw Exhibit D Advertisement, "Only a select few can discuss the specifics of a case with each other", Lawyers Cooperative Publishing Advertisement, Law Technology Product News, September 1994.
HyperLaw Exhibit E Complaint, Mead Data Central, Inc. v. West Publishing Company, 76-Civ. 3618 W.C.C., United States District Court, Southern District of New York, August 16, 1976 (Antitrust including FLITE and JURIS and spurious copyright claims to text of court opinions.)
HyperLaw Exhibit F Complaint, Mead Data Central, Inc. v. West Publishing Company, C-3-87-426, United States District Court, Southern District of Ohio, August 18, 1987. (Antitrust including control of statutes and opinions, FLITE and JURIS, Fifth and Eleventh Circuits, spurious copyright claims to text of court opinions.)
HyperLaw Exhibit G Docket Sheet, West Publishing Company v. Mead Data Central, Inc., 4-85-931, United States District Court, District of Minnesota.
HyperLaw Exhibit H Docket Sheet, West Publishing Company v. Mead Corporation, Mead Data Central, Inc., Civ. 4-88-142, United States District Court, District of Minnesota.
HyperLaw Exhibit I Complaint, West Publishing Company v. Mead Corporation, Mead Data Central, Inc., Civ. 4-88-142, United States District Court, District of Minnesota, February 22, 1988. (Antitrust relating to Lexis exclusive access to regulatory material and copyright infringement for copying from West reporters.)
HyperLaw Exhibit J Letter, dated October 10, 1996, from Carl J. Hartmann, counsel for HyperLaw, to Craig Conrath, Esq. re disclosure of documents.
HyperLaw Exhibit K Letter, dated March 13, 1995, from Carl J. Hartmann to Joseph Musilek, counsel for West, confirming, inter alia, that a copy of the 1988 settlement agreements were not in the possession of the Minnesota United States District Court supervising the settlement.
HyperLaw Exhibit L Draft Motion to Intervene in Minnesota United States District Court, re unsealing by HyperLaw describing facts surrounding the 1988 settlement agreements.
HyperLaw Exhibit M Letter Dated October 3, 1996 from Joel I. Klein, Deputy Assistant Attorney General to Alan D. Sugarman declining to file an amicus brief in Matthew Bender and HyperLaw v. West in support of HyperLaw's motion for a determination that West copyrights are not infringed when a competing publisher keys-in and publishes the text of court opinions from a West case reporter, but does not key-in the West headnotes and syllabi.
HyperLaw Exhibit N HyperLaw Comment Letters Filed Under the Tunney Act with United States Department of Justice, N-1 June 26, 1996 to Assistant Attorney General Anne Bingaman (not in comment letters filed by DOJ), N-2 June 26, 1996 to Craig Conrath, N-3 June 28, 1996 to Craig Conrath, N-4 September 3, 1996 to Craig Conrath.
HyperLaw Exhibit M Tax Analysts' Memorandum in Support of Motion For Reconsideration of Leave to Participate As Amicus Curiae
I hereby certify that on October 15, 1996 I caused copies of HyperLaw Exhibits to its Amicus Curiae Brief to be served by Federal Express for delivery on October 16, 1996, and have confirmed that delivery upon the following.
Craig W. Conrath, Esq.
U.S. Department of Justice
Antitrust Division
Merger Task Force
1401 H Street N.W.
Washington, D.C. 20005
Wayne D. Collins, Esq.
Attorney for The Thomson Corporation
Shearman & Sterling
Citicorp Center
New York, New York 10022
Gary L. Reback, Esq.
Wilson Sonsini
650 Page Mill Road
Palo Alto, CA 94304
I hereby certify that prior to 4:00 PM on October 16, 1996 I caused copies of HyperLaw's Amicus Curiae Brief to be sent by Facsimile upon the following, and have re-served the corrected version of the brief on all parties by facsimile on October 17, 1996.
Craig W. Conrath, Esq.
U.S. Department of Justice
Antitrust Division Merger Task Force
1401 H Street N.W.
Washington, D.C. 20005
Facsimile: (202) 307-5802
James E. Schatz, Esq.
Schatz Paquin Lockridge
Grindal & Holstein P.L.L.P.
Suite 2200
100 Washington Avenue
So.Minneapolis, MN 55401
Facsimile: (612) 339-0981
Attorney General of New York
Steven D. Houck, Esq.
Chief Antitrust Bureau
120 Broadway, Suite 2601
New York, NY 10271
Attorney General of Illinois
Christine H. Rosso
Chief, Antitrust Bureau
100 Randolph St.
12th Floor
Chicago, IL 60601
Facsimile: (312) 814 2549
Attorney General of Connecticut
Aaron S. Bayer
Deputy Attorney General
110 Sherman Street
Hartford, Connecticut 06105
Facsimile: (860) 566-1704
George K. Weber
Assistant Attorney General
Chief, Consumer Protection
and Antitrust Division
One Ashburton Place
Boston, MA 02109
Facsimile: (617) 727-5765
Kevin J. O'Connor
Attorney General of Wisconsin
Assistant Attorney General
123 West Washington Ave.
Madison, Wisconsin 53717
Facsimile: (608) 267-2223
Wayne D. Collins, Esq.
Shearman & Sterling
Citicorp Center
New York, New York 10022
Facsimile: (212) 848-7170
Gary E. Reback, Esq.
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Facsimile: (415) 493-6811
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/S/
___________________________________
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_______________________________
[1] See Exhibit 15 to Lexis-Nexis' Memorandum in Support of Motion to Intervene, dated September 11, 1996.