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06/26/96 HyperLaw, Inc.®
HyperLaw Comments on Citation License Agreement in United States v. The Thomson Corporation and West Publishing Company June 26, 1996
The Complaint and Stipulation and Order filed June 19,1 996, which includes the proposed License Agreement, may be found at the Department of Justice site. "United States v. Thomson Documents"
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Assistant Attorney General Anne Bingaman
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
President, HyperLaw, Inc.
Craig W. Conrath
Chief, Merger Task Force
U.S. Department of Justice
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.
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 ..."
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
4. Provisions requiring arbitration in West's home state, and, presumably in privacy.
See Section 6.07
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]."
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.
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.
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.
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]"
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.
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:
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