09/03/96 HyperLaw, Inc.®

HyperLaw First Comment Letter to DOJ Re Thomson/West, June 26, 1996

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HyperLaw, Inc.
P.O. Box 1176
New York, NY 10023
Fax 212-496-4138

June 26, 1996
Assistant Attorney General Anne Bingaman Antitrust Division United Stated Department of Justice 10th & Constitution Ave., N.W. Washington, D.C. 20530 Dear Assistant Attorney General Bingaman:

The Department of Justice, with seven state attorney generals, recently filed a Complaint against The Thomson Corporation and West Publishing Company and simultaneously filed a consent settlement order in the form of a Stipulation and Order.

The settlement included a mandatory licensing agreement as Exhibit B. The License Agreement provides minimal benefits, if any, and is not in the public interest. We have provided detailed comments concerning the License Agreement in the attached letter to the Merger Task Force.

In particular, we believe it to be entirely inappropriate to require licensees of West pagination to not contest the West copyright claims in court or to otherwise contest the claims, perhaps even in Congress. Section 3.01 simply is poor public policy.

The following comments demonstrate why it is critical to craft a compulsory licensing agreement that minimizes the ability of the merged company to abuse copyright claims so as to eliminate or diminish competition.

We do not agree with your statement in the Department of Justice's press release that the settlement is "a victory for all of us." No doubt, the Antitrust Division has extracted meaningful concessions from West and Thomson and won victory as to certain issues, but the merger is far less than a victory for the public and establishes conditions that will assure continued abuses by the merged company.

That is because the resulting company will have a substantial anti-competitive impact in legal publishing, will substantially reduce future competition, and will have a negative impact on innovation. The basic problem is that pre-merger, the West power in the legal information market presented substantial antitrust problems. Even with the divestitures of certain products, the post-merger entity will have even greater power in the legal markets. The net result is that the conditions are now set for the creation of two mega-companies that will control American legal publishing: Thomson-West and Reed Elsevier/Lexis.

To place the merger and the divestitures into perspective, the total revenues of West and Thomson combined exceeds $8 billion. The value of West and the Thomson legal companies exceed $6 billion. The divestiture of assets having a value of $75 million and $250 million revenues shows how little the combined company is affected by the divestitures and the dominance that the resulting company will have. There are large numbers of product lines with substantial competition which are left completely untouched by the divestiture. Moreover, West was a viable potential competitor with Thomson in all of Thomson's so-called secondary law type products -- with the merger, that competition will never exist, and the consumer will pay and suffer. Indeed, we cannot understand how the merger of these companies was approved.

During the 60 day period that following filing of the Stipulation and Order, we hope that your division will carefully consider the comments filed by the public, most of whom were not privy to the negotiations that have been taking place over the past few months, and will take the action to provide remedies that will have a long term meaningful impact on legal publishing and the use of legal opinions in all contexts.


Alan D. Sugarman HyperLaw, Inc.
P.O. Box 1176
New York, NY 10023
Fax 212-496-4138

June 25, 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 purpose 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 collections 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 meaningfulness 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)/Services(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.

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 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 absolutely 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 legislative 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 analyze this provision and will provide additional recommendations before the expiration of the 60-day period.


Alan D. Sugarman President HyperLaw, Inc.