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This article appears courtesy of The Connecticut Law Tribune. Copyright 1996. American Lawyer Media, L.P. All rights reserved. For reprints of recent articles, please contact Yvette Otero at 203-256-3600, or by email at (firstname.lastname@example.org). The Connecticut Law Tribune October 7, 1996 HEADLINE: It Ain't Over 'Til the District Judge Rules Even as one judge in Washington, D.C., ponders the merger of law publishers West and Thomson, a hot challenge to West is under way in Manhattan. BY: THOMAS SCHEFFEY, Senior Writer for The Connecticut Law Tribune (email@example.com) Antitrust lawyers for the federal and state governments urged U.S. District Judge Paul L. Friedman Sept. 30 to grant his blessing quickly to the merger of the two largest merchandisers of American law, West Publishing Co. and Thomson Corp. But the Washington, D.C.-based judge made it clear he won't be rushed, and that he's alert to the rights of parties who never got near the table where the deal was cut. Meanwhile, in a recently unsealed federal court challenge in Manhattan, a West adversary, HyperLaw Inc. of New York, is driving for a ruling that could cut to the heart of West's case law empire -- a declaration that West competitors would not be violating copyright law by copying judicial opinions directly from West Federal Reporter books. And in another bid to erode West's corner on the market, Virginia-based Tax Analysts Inc. on Oct. 2 renewed its failed bid to gain friend-of-the-court status in the merger case. Tax Analysts wants to argue that one barrier to competition is the difficulty, and sometimes impossibility, of obtaining past court decisions from the courts themselves. Right now, the money for the West-Thomson merger has changed hands, but its legal status isn't settled yet. Financially, the merger was transacted on June 20, a day after U.S. Department of Justice lawyers and seven state attorneys general, including Connecticut's Richard Blumenthal, filed an antitrust suit against West and Thomson threatening extensive prosecution. But along with the suit, the antitrust authorities also proposed a settlement, in the form of a consent decree, which they had negotiated with West and Thomson. Hours later, Toronto-based Thomson enriched approximately 200 West shareholders by a stupefying $3.4 billion. West is headquartered in Eagan, Minn.; Thomson has its U.S. headquarters in Stamford. In March, a federal merger probe by Justice's antitrust division ordered the two companies to sell off 51 overlapping publications, plus Thomson's electronic case-checking tool, Auto-Cite. Thirty-five of the divested volumes are "minor," according to Rhode Island State Law Librarian Kendall Svengalis, a Justice consultant. West and Thomson emphasize that the larger divested products are major works, including the U.S. Code Service, the Lawyers Edition of the U.S. Reports and U.S. Digest. Legally, the deal won't get a clean bill of health until Friedman determines it is "within the reaches of the public interest" under the terms of the Tunney Act, a Watergate-era antidote to the necessary secrecy and the potential political influence in the federal merger approval process. The act allows a period for public comment and requires federal court review and approval. Twenty-six letters of public comment were filed with Justice by Sept. 3, much of it blisteringly critical of the merger. The Justice Department neither posted them on its Internet site nor published them in the Federal Register before Friedman's review began. At the hearing, lawyers for the government and the parties urged Friedman to move right along. Justice's Merger Task Force chief, Craig W. Conrath, told the judge his group's review lasted five months and included 100 interviews with lawyers, law librarians and competing publishers. Speaking for the states, California Assistant Attorney General Kathleen Foote said all seven "join wholeheartedly with the antitrust division and ask the court to approve [the merger] today." Friedman didn't do that, taking the matter under review. Thomson antitrust counsel, Wayne Dale Collins, a partner in New York's Shearman & Sterling, told Friedman that the antitrust investigation's pace caused forced concessions: "Just the float on $3.4 billion is $630,000 a day . . . and that's what the West shareholders were losing by not closing the transaction." The government antitrust enforcers, continued Collins, "gave up very little," whereas West and Thomson "gave up quite a lot." Indeed, said Collins, the state and federal antitrust lawyers "did a good job in what whey were trying to do and left nothing on the table." Off the Table In his comments from the bench, Friedman made it clear he had read the public comments, and took keen interest in a key issue only partly on the table in the first place. That point is West's claim that it owns a copyright in the text of state and federal court judicial opinions based on editing changes, which include spelling corrections, parallel citations and court-approved corrections it adds to court opinions with the approval of the author-judge. West has battled against "copyists," contending that its text cannot be used as a basis for extracting the uncopyrighted opinions of the courts. Publishing competitors and consumer advocates say it's hard to get raw law from the courts. The original antitrust complaint filed by the states and Justice states that in nine markets where West and Thomson compete, other competitors are unlikely to enter the market because of problems getting the cases. Competitors' access is also impeded by West's claim that it has a copyrightable ownership of its page numbers. The complaint states that the page cite claim "chills potential entry into these markets." At Monday's hearing, Friedman referred to the comments made by three parties -- the New Mexico Compilation Commission; Geronimo Development, a CD-ROM publisher based in St. Cloud, Minn.; and the Los Angeles firm of Irell & Manella, lawyers for Matthew Bender & Co., a New York-based law publisher. In an Aug. 8 comment letter, Kathleen Jo Gibson, clerk of the New Mexico Supreme Court, asked that states get licenses back from West and Thomson so states like her own, which has its decisions published by West, would regain copyright control of their own cases. The crown jewel of the proposed merger settlement, judging from last June's glowing press releases from federal and state antitrust agents, is a copyright provision that gives competitors a right to buy a license to publish West page numbers for a fee. By its terms, the page license excludes a text license. As West's copyright trial lawyer, Joseph M. Musilek, of the Minneapolis firm of Schatz, Paquin, Lockridge, Grindal & Holstein, said in an interview in July, "The license that's part of the consent decree is a star pagination license. It presumes that you have a compilation of the cases, and that you simply want to use West's pagination for those cases in your compilation that overlap with the printed cases in the [West] National Reporter book." Geronimo, which publishes Virginia law on CD-ROM, urges in its comments that the merger terms be changed to "[r]equire 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." Quizzing Conrath from the bench, Friedman's eyes widened as he asked in apparent surprise: "Does West argue copyrightability in the text of cases themselves?" Conrath told the judge he'd have to ask West. That issue was only glancingly addressed in the state and federal antitrust case, and Friedman's question never was answered at the two-and-a-half hour hearing. Friedman expressed particular distaste for a condition in the June page license agreement that requires a licensee to agree not to contest the copyrightability of the page numbers. The Justice Department, despite its inclusion of the page license fee offer in the consent decree, officially says West's page claim is a legal loser. In the past two months, Justice has submitted briefs opposing copyright to West page numbers in federal cases in New York and Minneapolis. Friedman pointed out that the only court that has upheld that claim is in West's home turf in Minnesota. "What is the possible public interest that requires all the middle-sized and smaller publishers to abandon" challenges to West's copyright claims? Friedman asked. The no-legal-challenge clause is, Friedman added, "a very dubious proposition." He rejected Justice's argument that parties to the merger could agree not to litigate, because the potential licensees were not the ones at the table when the page license deal was struck. Friedman said he found "persuasive" the argument of Matthew Bender's lawyer Morgan Chu, of Irell & Manella, opposing the no-sue provision. Chu wrote that West's controversial copyright claims are overdue for a court challenge, that they have dodged review through legal "games," and that the copyright claims should not be shielded by the decree. At the end of the hearing, Collins attempted to address the judge's concern by offering to withdraw the no-sue provision. West's page cite claims are one side of the competition barrier. Equally important, according to the five small CD-ROM publishers who supplied written comments to Justice, is West's position that anyone who copies judges' opinions from West books violates a copyright, because West's work is woven through the uncopyrightable opinions. West's frequently stated position is that competitors must get copies of cases from courts, and that a copyright is violated if judges' opinions -- normally in the public domain -- are transcribed from West volumes. But in suits against West filed in the last three decades, such competitors as online legal research giant Lexis-Nexis Inc., based in Dayton, Ohio, and Virginia-based Tax Analysts Inc., have claimed that the case-gathering process is costly, cumbersome and sometimes futile. Before Thomson acquired West, it had been the most powerful voice opposing West's claims to a copyright in basic court opinions and statutes. Furthermore, Thomson practiced what it preached, barring no one from publishing cross-references to Thomson products, which are published by Lawyers Cooperative, Clark Boardman Callaghan, Bancroft-Whitney, Warren, Gorham & Lamont and two dozen smaller houses. After Thomson bought West, the West view of copyright ownership of cases became the company line. Lexis Rising Friedman also allowed Lexis-Nexis to argue as an amicus curiae at last week's hearing. Lexis' lawyer, Gary L. Reback, of Palo Alto, Calif.'s Wilson, Sonsini, Goodrich & Rosati, used most of his time to press a narrow complaint against Thomson. Reback contended that West, Thomson and the Justice Department worked out a deal to sell Auto-Cite that violates Lexis' contract rights. Under a 1991 contract with Thomson, Lexis' contract to use Auto-Cite could not be assigned without its consent. Auto-Cite is an electronic service similar to Shepards' citation checking tools. Under those terms of the proposed final judgment, argued Reback, Thomson would retain a copy of the current Auto-Cite database -- a huge advantage in creating a new, competing product. Reback contended that Lexis' rights to Auto-Cite are obliterated by the terms of the consent decree, which amounts to an illegal, uncompensated government taking. It's as if Thomson and Justice agreed to put a highway through Lexis' land without paying it a penny, Reback contended in an acid, animated protest. The problems identified by Justice's antitrust complaint are not solved by the remedy of simply divesting Auto-Cite, he said. Currently Auto-Cite references the American Law Reporter (ALR) volumes retained by Thomson after the merger, but Thomson, owning both West and ALR, would have no contractual or competitive reason to nourish Auto-Cite with fresh ALR references, and Auto-Cite would be diminished, Reback argued, tearing out thick hunks of an ALR volume and plopping them on Thomson's table to make his point. (A Justice lawyer afterwards dismissively called Reback's advocacy "good theater.") Friedman assured Reback he would scrutinize Lexis' contract claims seriously. All parties agreed that in doing so, Friedman could view in camera the secret 1988 agreement in which Lexis agreed to pay West a license fee to use West page numbers in its online delivery of cases, and licensed West's arrangement of statutes. Carl R. Hartmann, a lawyer for New York-based CD-ROM publisher HyperLaw Inc., which was also granted amicus curiae status in the case, says in an interview that the market concentration in electronic legal research between Lexis-Nexis and West-Thomson is even more acute than that enjoyed by Hertz and Avis in the rental car market when that industry was overhauled by federal regulation to allow new competitors. (In its rebuttal Sept. 24 of public comment criticism, West and Thomson quoted the eminent California law librarian, Robert C. Berring, of the University of California's Boalt Hall School of Law, as stating, "[W]e live in the most fecund period of legal publishing in history, new products are bursting out all over. . . . '') But Hartmann says, "Between Westlaw and Lexis, there is 100 percent ownership of the online legal research industry." He attributes this result to West's effective yet, in his view, improper claim of a copyright ownership in judicial opinions. Some copyright scholars dismiss such a claim as patently non-existent. L. Ray Patterson, a copyright law professor at the University of Georgia, said in an amicus curiae brief filed last month on behalf of the American Association of Legal Publishers in the case of Oasis v. West, pending before the U.S. Court of Appeals for the 8th Circuit in Minnesota, that no one can claim ownership of the text of judicial opinions as a matter of constitutional law. West and Thomson's view echoes that of the trial court in that case, which held that the first page of a case is subject to "fair use" exception to copyright. The internal pagination is not, however, because a user could sort West's cases in an electronic file and "utterly supplant the need for West's product" once the internal page breaks are identified, wrote Judge Paul A. Magnuson. Text Showdown Now, even as Friedman ponders the public policy implications of the merger, a hot challenge to West's text claim is under way in Manhattan. HyperLaw, an amicus in Friedman's court, is also a plaintiff in the New York federal District Court case against West, Matthew Bender Inc. and HyperLaw Inc. v. West Publishing Co. On Sept. 23, it filed a motion for partial summary judgment on a question that may prove pivotal within legal publishing. HyperLaw asks U.S. District Judge John Martin to rule that it can copy federal judicial opinions directly from West books. A much-criticized U.S. Court of Appeals for the 8th Circuit case in 1986, West Publishing Co. v Mead Data Central, upheld West copyright claims in its case collections, but since then the U.S. Supreme Court has ruled, in the landmark Feist v. Rural Telephone in 1991, that only creativity is rewarded by copyright, and that "sweat of the brow" collecting of fact is not. "This is the first post-Feist challenge of West's text copyright claim to make to a judge," says HyperLaw lawyer Hartmann. West has not yet filed a response to the motion, and its copyright litigator, Musilek, did not respond to a call for comment by press time. A contest over West's claim of copyright of opinions has battled forward for over four years, out of public view. Filings in that case have previously been under seal or marked "Attorneys' Eyes Only," according to clerks familiar with filings in the case. Musilek, in a Sept. 26 letter to Hartmann, re-designated the HyperLaw motion nonconfidential. HyperLaw's 55-page memorandum of law in support of its motion argues that West's work on court opinions simply lacks the level of creativity that the law requires to qualify for a copyright. West "uses the weapon of indistinct claims to unidentified, minuscule variations to original court text to appropriate and monopolize public domain work," the memo states. West did not respond to a call for comment, and it has not yet filed a response to the summary judgment motion. However, West has historically maintained it holds a compilation copyright based on originality in its selection, arrangement, editing and other enhancements. Thomson Is Happy After the Washington, D.C., hearing, Thomson General Counsel Michael S. Harris was optimistic. "We were very pleased with the arguments," he says. "We feel the judge had read all the papers and understood the issues, and he understands that the consent decree is fully in the public interest. We're confident that he will approve it." Thomson officials have consistently downplayed the importance of West's copyright battles as a feature of this complex transaction. Says HyperLaw president Alan D. Sugarman in an interview, "I do not believe Thomson fully understands the complexity and how important the West intellectual property claims are to the West business." But Harris says Thomson fully understood the disputed nature of West's copyright claims at the time of purchase, and that the ongoing challenges were adequately disclosed before the purchase. "Let's make this very clear," says Harris. "There are a lot of things that make West a very valuable property, not the least of which are its employees, its terrific name in the legal community, and its reputation for delivering fast and accurate legal opinions." Harris regards as of little consequence the Sept. 25 news that the U.S. Office of Management and Budget placed, without explanation, 7,000 U.S. Supreme Court decisions, spanning the years between 1937 and 1975, on the Internet, where they can be accessed at no cost. (Its address is www.fedworld.gov/supcourt/index.htm.) (See "Free Access to High Court Opinions," page 4.) "Many courts put their cases on the Internet and that's yet another avenue of potential competition for West," Harris says, adding that nevertheless, "we believe that we add so much value to the products we deliver that we're a very valuable source" to the legal consumer.