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Justiciability Opinion: Matthew Bender & HyperLaw v. West, 94 Civ. 0589, U.S.D.C. S.D.N.Y., May 1, 1996


UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
______________________________________
94 Civ. 0589 (JSM)
MATTHEW BENDER & COMPANY, INC.,
Plaintiffs,
and
HYPERLAW, INC.
Intervenor-Plaintiff,
v.
WEST PUBLISHING COMPANY,
Defendant.
______________________________________
95 Civ. 4496 (JSM)
MATTHEW BENDER & COMPANY, INC.,
Plaintiffs,
-V.-
WEST PUBLISHING COMPANY,
Defendant.
______________________________________

MEMORANDUM OPINION AND ORDER

JOHN S. MARTIN, Jr., District Judge:

This order and opinion addresses two related cases -- the "New York product action" (94 Civ. 0589), and the "Texas product action" (95 Civ. 4496). Plaintiffs in both cases publish legal materials in CD-ROM ("Compact Disc Read-Only-Memory") format, and both seek declaratory judgments with respect to West Publishing Company's ("West's") copyright in various features contained in West state and federal reporters.

Plaintiff Matthew Bender & Company ("Bender") filed the New York product action seeking a declaration that West does not possess a federal statutory copyright in the page numbers of

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certain of its reporters and that, therefore, Bender's use of those numbers in its New York product will not infringe any West copyright. HyperLaw, Inc. ("HyperLaw") intervened as a plaintiff in the New York product action, and seeks a declaration of noninfringement with respect to the use of various West features in its product. Bender is the only plaintiff in the Texas product action.

West now moves to dismiss the three complaints in these two actions under Federal Rule of Civil Procedure 12(b)(1) for failure to state an actual case or controversy as required by the Declaratory Judgment Act, 28 U.S.C. 2201, and Article III of the United States Constitution.

1. Justiciability Requirement for Declaratory Judgment Actions

Under the Declaratory Judgment Act, an action for declaratory relief is proper only where there is "a case of actual controversy" between interested parties. 28 U.S.C. 2201. The statutory requirement that a "definite and concrete" dispute exist between adverse parties, see Aetna Life Ins. Co. v. Hayworth, 300 U.S. 227, 240-41, 57 S.Ct. 461, 464 (1937), is driven by the constitutional limitation on the exercise of the federal judicial power to "cases or controversies." U.S. Const. art III, 2.

In the patent and copyright area, courts employ a "pragmatic two-part test" to determine whether a plaintiff seeking a declaratory judgment fulfills statutory and constitutional

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justiciability requirements. Under this test,

(t]here must be both (1) an explicit threat or other action by the (copyright holder], which creates a reasonable apprehension on the part of the declaratory plaintiff that it will face an infringement suit, and (2) present activity which could constitute infringement or concrete steps taken with the intent to conduct such activity.

BP. Chemicals Ltd. v. Union Carbide Corp., 4 F.3d 975v 978 (Fed. Cir. 1993); see also Wembley v. Superba Cravats., 315 F.2d 87, 90 (2d Cir. 1963). In making the determination of whether an actual controversy exists, "[t]here is no simple rule that addresses all shades of relationships between disputants." BP Chemicals, 4 F.3d at 978. Rather, this is a fact-specific inquiry that requires an examination of all of the circumstances. Maryland Casualty Co. v. Pacific Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512 (1941).

The burden is on the plaintiff to establish that jurisdiction over the action for a declaratory judgment existed when the complaint was filed, and has continued to exist since that time. Intern. Medical Prosthetics v. Gore Enterprise, 787 F.2d 572, 575 (Fed. Cir. 1986). The showing that the plaintiff

1 Although BP Chemicals, like much of the caselaw in this area, is a patent case, "[t]he same principles that control patent cases are applicable . . . if a declaratory judgment is sought about a copyright." Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, 1OA Federal practice and Procedure 2761 (1983); see also Sony Corp. v. Universal City Studios, 104 S.Ct. 774, 787 (1984) (noting the "historic kinship between patent law and copyright law" in using patent standards for vicarious liability in copyright case); Re-Alco v. National Center for Health Education, 812 F.Supp. 387, 395 (S.D.N.Y. 1993) (applying patent standards articulated in Wembley v. Superba Cravats, 315 F.2d 87 (2d Cir. 1961) to copyright case).

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must make to Satisfy this burden varies depending on the procedural posture of the case. Where the defendant challenges plaintiff's jurisdictional allegations with a Rule 12(b) motion, and where there has been discovery on the jurisdictional issue, the plaintiff must support its prima facie case for jurisdiction with "an averment of facts that, if credited by the trier, would suffice to establish jurisdiction over the defendant." Ball v. Metallurgie Hoboken-Overpelt. S.A., 902 F.2d 194, 197 (2d Cir.), cert. denied, 498 U.S. 854, 111 S.Ct. 150 (1990). Normally, when the defendant contests plaintiff's factual allegations, a hearing is required to resolve the jurisdictional dispute. Id. at 197 n.3; see also BP Chemicals, Ltd v.. Union Carbide Corp., 757 F.Supp. 303, 305 (S.D.N.Y. 1991), aff'd, 4 F.3d 975, 978 (Fed. Cir. 1993). At that hearing, the plaintiff bears the burden of proving jurisdiction by a preponderance of the evidence. Ball at 197.

Bender, HyperLaw and West have conducted extensive discovery on the jurisdictional issues in the New York product action. No evidentiary hearing is necessary on West's motion to dismiss Bender's complaint in the New York action. This is because, although West contests certain of Bender's jurisdictional allegations, the contested facts are not essential to Bender's case for jurisdiction. For the reasons set forth in more detail below, Bender has proven jurisdiction by a preponderance of the evidence based upon undisputed facts. An evidentiary hearing is necessary on West's motion to dismiss HyperLaw's complaint in the

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New York action, because facts essential to HyperLaw's jurisdictional allegations are in dispute.

Although there has not yet been discovery in the Texas product action, both Bender and West have submitted and rely on the extensive discovery materials from the New York product action in their arguments with respect to the "reasonable apprehension" prong. Again, because Bender has shown jurisdiction by a preponderance of the evidence based on undisputed facts, no hearing is necessary on this prong of the justiciability test. Finally, although discovery from the New York product action is not relevant on the "intent and ability" prong in the Texas product action, West has withdrawn its argument with respect to that prong of the case and therefore -for the reasons set forth in more detail below -- an evidentiary hearing at this time is unnecessary on this issue.

A. The "Reasonable Apprehension" Prong

This prong of the justiciability inquiry is satisfied by a showing of either direct threats or "[indirect threats or actions that place the declaratory plaintiff in reasonable apprehension of suit-" BP Chemicals, 4 F.3d at 979. In the absence of express threats, the "totality of circumstances" surrounding defendant's conduct will determine if the plaintiff had reasonable apprehension of suit. Arrowhead Indus, Water, Inc. v. Ecolochem. Inc., 846 F.2d 731, 737 (Fed. Cir. 1988).

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Courts should take "business realities" into account when making this "pragmatic judgment." Sherwood Medical industries, Inc. v. Deknatal, Inc., 512 F.2d 724, 728 (8th Cir. 1975).

The parties do not disagree about the legal standard for this prong of the justiciability inquiry. Rather, they differ over the reasonableness of the plaintiffs' alleged apprehension of suit.

B. The "Intent and Ability to Produce Prong

The parties disagree over the standard that the Court should apply in determining whether plaintiffs fulfill this prong of the two-part justiciability test. Defendant cites the 1963 case of Wembley v. Superba Cravats 315 F.2d 87 (2d Cir. 1963), where the second Circuit stated that a plaintiff must show that he is "either engaged in manufacturing, using or selling the invention, or that he has the immediate intention and ability to do so." Id. at 89 (emphasis added). Plaintiffs point to more recent cases from the Federal circuit, which hold that a plaintiff "must be engaged in an actual making, selling, or using activity subject to an infringement charge, or must have made meaningful preparation for such activity." Arrowhead Indus. water, 846 F.2d at 736 (emphasis added); see also Serco, Servs. Co., L.P. v. Kelley Co., 51 F.3d 1037, 1038 (Fed. Cir., 1995). Recent cases in this Court have also focused on whether the plaintiff "made meaningful preparation" for activity subject to an infringement charge, see, e.g., Bristol-Myers Squibb Co. v. Rhone-Poulenc

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Rorer. Inc., 1996 WL 71492 (S.D.N.Y. February 20, 1996); BP Chemicals Ltd. v. Union Carbide Corp., 757 F.Supp. 303, 304 (S.D.N.Y. 1991), aff'd, 4 F.3d 975 (Fed. Cir. 1993), or simply on whether the plaintiff "has prepared" to produce a potentially infringing product. See, e.g., Nintendo of America v. Magnavox Co., 659 F.Supp. 894, 895 (S.D.N.Y. 1987); Nynex Corp. v. Reuben Donnelley Corp-., 688 F.Supp. 128, 130 (S.D.N.Y. 1988).

In International Harvester Co. v. Deere & Co., 623 F.2d 1207 (7th Cir. 1980), the Seventh Circuit offered yet another articulation of the test, finding that the infringement prong would be fulfilled where the plaintiff had "engaged in preparations for production such that 'but for a finding that the product infringes . . . the plaintiff would and could begin production immediately."' Id. at 1210-1211 (quoting Sweetheart Plastics, Inc. v. Illinois Tool Works, Inc,-, 439 F.2d 871, 875 (1st Cir. 1971)).

Although the wording of these tests differs somewhat, they share the basic purpose of ensuring that the plaintiff truly intends and is able to undertake a potentially infringing activity, while acknowledging that "it would be economically wasteful to require a plaintiff to embark on an actual program of manufacture, use or sale which may turn out to be illegal." Wembley, 315 F.2d at 90. Furthermore, "(w]hether a declaratory plaintiff's ability and definite intention to undertake a potentially infringing activity constitutes sufficient 'preparation' is a question of degree to be resolved on a case-

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by-case basis." Arrowhead Indus. Water, 846 F.2d at 736; see also Wembley, 315 F.2d at 90 ("ability or potential varies from product to product and industry to industry"); Re-Alco v. National Center for Health Education, 812 F.Supp. 387, 395 (S.D.N.Y. 1993) ("Intention and ability must be decided on a case by case basis"). in sum, where the plaintiff has not yet manufactured the product but instead is preparing to do so, the court must consider the particular facts and circumstances of the case to determine whether plaintiff has evinced an intent to actually produce the product and the ability to do so.

II. West's Three Motions to Dismiss

Because the justiciability inquiry is fact-specific, it is necessary to examine each of the three motions to dismiss -against Bender and HyperLaw in the New York case, and Bender in the Texas case -- separately. Both plaintiffs in both actions have alleged in their complaints that they have produced or intend to produce their respective products, and that they reasonably believed that West would initiate suit over those products should they include the various West features at issue in these actions. Plaintiffs and defendant have submitted affidavits and other materials relevant to this motion, and the Court will consider this evidence outside of the pleadings in resolving this jurisdictional dispute. See Kamen v. American Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986).

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A. Bender's Now York Product

Bender filed the New York product action in connection with its "Search Master New York Practice Library With Cases" CD-ROM (the "New York product"), which contains published and unpublished decisions of the Second Circuit Court of Appeals and the four United States district courts within the state of New York for the last five years. A forthcoming second version of the New York product will also contain published and unpublished decisions of the New York Court of Appeals, New York Appellate Division, New York Supreme Court, and other lower New York courts for the last five years. Future releases of the product' will include opinions from earlier years. The published opinions in the New York product contain the volume and pagination of the opinions as they appear in West's federal and New York reporters. 2

Alleging that West has threatened to initiate suit against it if it includes star pagination to West's reporters in its CD-ROM publications, Bender filed this declaratory judgment action. Bender seeks a declaration that West does not possess a federal statutory copyright in the page numbers of its federal and Now York reporters and that, therefore, Bender's star pagination to those reporters will not infringe any West copyright.

2 In the legal publishing industry, the practice of inserting the page number of one publication into the text of another publication for cross-reference purposes is known as "star paging." In this opinion, "star pagination" is used to refer to plaintiffs' inclusion in their respective publications of the pagination of opinions as they appear in West's reporters.

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In its motion to dismiss, West argues that Bender has not fulfilled either prong of the two-part justiciability test. Furthermore, West claims that Bender's request for a declaration with respect to West's federal reporters is moot because West has represented that it will never sue Bender over the first version of the New York product, which contained only federal court opinions.

1. Intent and Ability to Produce

By detailing its substantial and meaningful preparations, Bender has met its burden of showing that it had both the intention and ability to produce the Now York product.

In the affidavits submitted in opposition to West's motion to dismiss, Bender shows that it took the following actions in preparation for production of the New York product prior to filing a complaint in this action in February 1994:

In addition, Gary Goldstein, Bender's Vice President for Marketing, Sales, and Product Planning, represented in a declaration that at the time Bender filed the complaint, it anticipated an April 1, 1994 completion of the New York product.

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This date was ultimately delayed due to settlement discussions between Bender and West, and because of unexpected technical problems.

In its First Supplemental Complaint, filed in June 1995, Bender asserted that it "has completed production of . . . the 'New York product,"' and that this product included the volume number and pagination of opinions as they appear in West's federal reporters. Therefore, even though the Court finds that Bender has shown an intention to produce the New York product prior to filing the original complaint, the First Supplemental Complaint certainly cured any jurisdictional defects that West believes to have existed when the complaint in this action was filed. See Basic Books, Inc. v. Kinko's Graphics Corp., 758 F.Supp. 1522, 1541 (S.D.N.Y. 1991). Furthermore, even though Bender had not completed the New York product prior to filing the original complaint, "subsequent events can reinforce the correctness of the (justiciability] conclusion." BP Chemicals, 4 P.3d at 980. This is because later events -- here, completion of the allegedly infringing product -- are relevant to plaintiff's intent at the time it filed suit. See Heerema Marine Contractors v. Santa Fe Intern., 582 F.Supp. 445, 451 n.6 (C.D. Ca. 1984).

Bender has fulfilled its burden of showing by a preponderance of the evidence that it had the intention and ability to produce the New York product at the time it filed the complaint, and Bender has now in fact completed that product.

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2. Reasonable Apprehension of Suit

The issue here is whether -- given the product, the industry and other relevant facts and circumstances -- West's conduct created a reasonable apprehension of an infringement suit in Bender. This test is an objective one. See Indium Corp. of America v. Semi-Alloys, Inc., 781 F.2d 879, 883 (Fed. Cir. 1985), cart.. denied, 479 U.S. 820, 107 S.Ct. 84 (1986).

In support of their claims that they had a reasonable apprehension of being sued by West when they filed these actions, both plaintiffs in the New York and Texas product actions point to West's litigation against other publishers in connection with star pagination and other West features. Plaintiffs cite West Publishing Co. v. Mead Data Central, Inc., 799 F.2d 1219 (8th Cir. 1986), cert. denied, 479 U.S. 1070 (1987), in which West was granted a preliminary injunction based on its infringement claim against Mead Data Central for its use of star pagination to West reporters. Plaintiffs also point to six cases filed between 1988 and 1993 in which West claimed a copyright violation in connection with the use of star pagination as well as other West reporter features, and to deposition testimony by various West employees in which they state that they do not know of any companies that have used West's star pagination that West has not sued.

Although it is true, as West argues, that a party's "record in past suits does not by itself show that it has charged infringement in this suit," Premo Pharm. Labs v. Pfizer

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Pharm., Inc., 465 F.Supp. 1281, 1283-84 (S.D.N.Y. 1979), the party's "willingness and capacity to enforce its (copyright] rights is pertinent to the inquiry for an actual controversy.,, West Interactive Corn. v. First Data Resources" 972 F.2d 1295, 1298 (Fed. Cir. 1992). Furthermore, "in determining whether a charge [of infringement] could be reasonably inferred the court must look at the entire course of action and all of the defendant's relevant conduct." Sherwood Medical Industries, 512 F.2d at 728. For example, in Super Products Cor. v. D P Way Corp-., 546 F.2d. 748 (7th Cir. 1976), the Seventh Circuit found a reasonable apprehension on the part of the plaintiff in the absence of a direct accusation of infringement "because of the similarity of (plaintiff's) own product to the defendant's patented product and because of the defendant's expressed determination to defend its rights." Id. at 754. Here, West's history of litigation against other legal publishers and its claims of a copyright in star pagination to its reporters, although not dispositive, is certainly relevant to the plaintiffs' apprehension of suit.

Bender also claims that West explicitly threatened to sue it for its use of star pagination on two occasions. The first alleged threat occurred at a lunch meeting at the annual Association of American Law Libraries meeting in Boston in July 1993. Present at that meeting were Gary Goldstein, a Bender vice president responsible for CD-ROM publications, Alex Sann, Bender's president, Gerald Peterson, West's manager for CD-ROM

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publishing, and James Schatz, outside legal counsel for West. Paterson testified in his deposition that this meeting was the first time that counsel for West had participated in a meeting between Paterson and Bender, and that Schatz "may have" expressed West's claims to general proprietary rights in various West features during that meeting. Also during the meeting, West proposed licensing and other arrangements with Bender that would allow Bender to avoid a "dispute" or a "public dispute" with West. When Sann responded that such a dispute could turn into the "mother of all lawsuits," Schatz stated that his firm "always wins all of its lawsuits." 3

The second alleged threat came during a phone conversation between Goldstein and Peterson in December 1993. Goldstein summarized that conversation in a memorandum dated December 20, 1993, which he wrote based on his handwritten notes that he later destroyed. In the memo, Goldstein states that after he rejected the various West proposals discussed at the Boston meeting, Peterson asserted that West would sue to protect its copyright in star pagination if Bender built databases containing judicial opinions on its own. Peterson, in his affidavit and deposition, offers a different version of events. He states that, as best he

3 West argues that Schatz made this last comment as an offhand remark with the simple intention of changing the topic of conversation. Bender argues that it believed the comment was a direct threat of litigation. However, the parties' subjective characterization of the facts does not control. The "reasonable apprehension" test is objective, and the issue is whether a reasonable person in Bender's position would have viewed Schatz's comment, given the other relevant facts and circumstances, as threatening.

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can remember, star pagination never came up in the phone conversation and that litigation by West came up only when Goldstein raised the issue. 4

Although the parties disagree about the exact content of the Boston conversation and about the basic exchange of the Goldstein/Peterson phone conversation, under either party's version of events, Bender would have been objectively reasonable in its belief that West might file suit should Bender use features that West considered proprietary. The facts supporting Bender's reasonable apprehension of suit include the presence of West's counsel at the Boston lunch, his assertion of West's general proprietary rights in various West features, his comment that his firm wins all of its lawsuits, and West's offer to negotiate a license so as to avoid a dispute with Bender. These facts, in the context of West's litigation against other legal publishers with respect to star pagination and other West features, is sufficient evidence in support of Bender's jurisdictional allegations.

4 in its motion to dismiss, West argues that because the above conversations did not focus on the New York product (and because West did not even have knowledge of the New York product when the conversations took place), these exchanges cannot support Bender's alleged fear of being sued. West thus asserts that "without knowing of the specific nature of the product Bender intended to publish, West could not have threatened any suit." Mem. in Support of Mot. to Dismiss. at 28. However, West need not have threatened litigation with respect to a specific product in order for Bender to have a reasonable apprehension of suit. As stated above, Bender need not even allege explicit threats of litigation.

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3. Mootness

As noted above, Bender's First Supplemental Complaint alleged completion of the New York product. Shortly after Bender filed the First Supplemental Complaint, and after West had the opportunity to review the first version of Bender's New York product, West represented for the first time that it had no intention of suing Bender over the current New York product "or any future version of that product produced in the same manner." West's Reply Memo. in Supp. of Def's Mot. to Dismiss Pl.'s Compl. at 2. West then argued that its offer to stipulate to the above mooted Bender's request for a declaratory judgement. However, in a Memorandum Opinion and order dated November 22, 1995, this Court granted Bender permission to file a Second Supplemental complaint, in which Bender alleges that it "is currently completing production of the second release of the New York product." Second Suppl. Complt. Par. 16. The second version, as described above, will contain cases from all levels of New York state courts for the last five years in addition to the federal cases included in the first version. The published state cases, like the federal cases in the first version, will include star pagination to West's New York reporters.

West has not represented that it will not sue Bender over the second version of the New York product. Instead, West now argues that the portion of Bender's Second Supplemental Complaint requesting a declaratory judgment with respect to West's alleged copyright in star pagination to its federal reporters is moot,

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while Bender's similar request with respect to West's state reporters fails to state a case or controversy and should therefore be dismissed for lack of subject matter jurisdiction.

In support of the latter argument, West claims that Bender cannot have a reasonable apprehension of suit over the second version of the New York product because the threats that Bender alleges predate West's knowledge of the second product by more than eighteen months. As noted above, the "reasonable apprehension" inquiry is fact-specific, and the Court must examine the defendant's conduct as a whole to determine whether the plaintiff's apprehension is a reasonable response. West need not have made explicit threats to sue Bender over the second version of the New York product for Bender to have such apprehension. Bender's apprehension arises in connection with its star pagination to West reporters, and is not specific to federal or state reporters. Instead, Bender's general belief that West might sue it for using star pagination in its CD-ROM products is reasonable with respect to both the first and second versions of the New York product.

West also claims that the second version of the New York product is not "sufficiently close to commercial production" to fulfill the "intent and ability to produce" prong of the justiciability test. However, the test requires that plaintiff be "either engaged in manufacturing, using or selling the invention." Wembley, 315 F.2d at 90 (emphasis added). Commercial distribution is not required. Bender has manufactured

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the first version of the New York product, and alleged in the Second Supplemental Complaint that it was "currently completing production" of the second version. Under the caselaw, this is sufficient. Therefore, the Court finds that there is an actual controversy with respect to the Second Supplemental Complaint.

Finally, the court denies West's request to declare the federal reporter portion of the case moot. West's statement that it will not sue Bender over publication of the first version of the New York product was specific to that version of the product and does not serve to moot this case, or any portion thereof, as it now stands.

An actual controversy exists with respect to Bender's New York product, and West's motion to dismiss is therefore denied. 5

B. Bender's-Texas Product

In the Texas product action, Bender -- the sole plaintiff -- seeks a declaration with respect to its CD-ROM entitled "Search Master Texas Practice Library" (the "Texas product"). The Texas product is a compendium of Bender publications related to practice in the Texas courts, which Bender is preparing to enhance by adding published decisions of the Texas courts for the past 40 years so that users can move from a citation in a Bender

5 As noted above in section I, an evidentiary hearing at which Bender would have to prove jurisdiction by a preponderance of the evidence is unnecessary. This is because Bender has met that burden on the extensive materials now before the Court, by showing both intent and ability to produce, and reasonable apprehension of suit even on the facts as alleged by West.

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treatise to the actual judicial opinion. The opinions in the Texas product will contain star pagination to the Texas court opinions in West's South Western Reporter.

Many of the opinions that Bender collected for the planned enhancement of the Texas product were purchased in database form from Curtis Hill Publishing. West has contended that the Curtis Hill database includes certain textual additions copied from West's South Western Reporter, including parallel citations, case titles, docket number, judge and attorney names, and rehearing information (the "West textual additions").

In its complaint, Bender alleges that West has threatened to sue it if it includes star pagination to West reporters in Bender products, and that West has also threatened suit over use of the West textual additions contained in the Curtis Hill database. Bender thus seeks a declaration that its use of these features in the enhanced Texas product does not infringe any West copyright.

1. Intent and Ability to Produce

At the time that it filed the complaint in the Texas product action in June 1995, Bender had published the Texas product for four years, and was preparing to publish the enhanced version with the West features. In its complaint, Bender alleged that it had collected all of the relevant judicial opinions, converted most of them to electronic form, and planned to add the volume number and pagination of the Texas court opinions as they appear

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in West's South Western Reporter. Bender purchased many of the opinions designated for use in the enhanced Texas product from Curtis Hill Publishing, and these opinions contained the West textual additions described above.

In opposition to West's motion to dismiss, Bender also offers the following evidence through submission of declarations and other documentary evidence:

Although some these actions were taken after Bender filed its original complaint in June 1995, they are all relevant in showing that Bender did indeed intend and was able to produce the Texas product when it filed this lawsuit. Bender also claims that it spent more than $1 million preparing for production of the enhanced Texas product before it filed the First Amended Complaint in this action. see Halajian Decl. at . 11.

In its reply brief in support of its motion to dismiss, West withdraws its argument that Bender's "First Amended Complaint is facially defective for failing to allege that publication of the Texas product is imminent or immediate" and claims that further discovery will be necessary to determine whether Bender has met justiciability requirements. See West Reply at 2 n.l. However, in opposition to West's motion to dismiss, Bender has supported

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the allegations in its complaint with "an averment of facts that, if credited by the trier, would suffice to establish jurisdiction over the defendant." Ball v. Metallurgie Hoboken-Overpelt, 902 F.2d at 197. Therefore, the motion to dismiss is denied.'

2. Reasonable Apprehension of suit

In its complaint, Bender alleges that West threatened to sue it over both star pagination and the West textual additions contained in the Curtis Hill database. In opposition to West's motion to dismiss this action, Bender points to evidence submitted in opposition to the motion to dismiss its New York product action and argues that this evidence provides factual support for its reasonable apprehension of suit in this action as

6 In its motion to dismiss, West sought sanctions against Bender pursuant to Rule 11 of the Federal Rules of Civil Procedure for falsely alleging that this case met justiciability requirements and for allegedly filing this action in order to gain leverage in ongoing business negotiations between Bender and west. In a separate opposition brief to the Rule 11 motion, Bender pointed out that the motion must fail because west had failed to fulfill the Rule's procedural requirements. Bender then went on to address the merits of the Rule 11 motion. In reply, West withdrew its Rule 11 motion, acknowledging that it had failed to comply with procedural requirements. Bender has now requested that the Court award it full fees and costs incurred in defending against the Rule 1l motion.
However, the bulk of Bender's opposition to West's Rule 11 motion addressed the merits of West's argument. Only a few pages were devoted to the procedural issue that led to West withdrawing its motion. Furthermore, as West points out, Bender filed its opposition papers without informing West about the procedural inadequacies, which would have given West the opportunity to withdraw its motion before Bender incurred significant costs. Therefore, Bender's request for fees and costs is denied.

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well. 7 This evidence includes the July 1993 Boston meeting and the December 1993 telephone conference. As noted above, and contrary to West's arguments, the discussions at these meetings need not have centered around a particular product to be relevant to the "totality of the circumstances" inquiry that this Court must undertake in determining justiciability. In any case, the Boston meeting did specifically address the Curtis Hill database. Bender President Sann testified in his deposition that Schatz, West's outside counsel, told Bender at the meeting that West believed the Curtis Hill database contained some West proprietary elements which West had protected in the past and which West would protect in the future.

In support of its justiciability arguments, Bender has also offered additional evidence in connection with the Curtis Hill database. Paterson, West's manager for CD-ROM publishing,. testified in his deposition that he contacted Goldstein of Bender around March 1993 after becoming aware that Bender had acquired the Curtis Hill database. Peterson informed Goldstein that West believed that the Curtis Hill database had been scanned from West reporters. After that conversation, Peterson faxed Bender a copy of a letter that West had earlier sent to Curtis Hill, in which West noted that the Curtis Hill database contained certain West features not contained in the original judicial opinions and

7 West also relies on discovery from the New York product action, arguing that the "extensive discovery" in that case demonstrates that Bender cannot fulfill the "reasonable apprehension" requirement in this action.

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suggested that Curtis Hill discuss this situation with its intellectual property counsel. This exchange between Peterson and Goldstein took place before the Boston meeting, at which time the Curtis Hill database was again discussed.

West argues that any apprehension that Bender might have had over being sued for use of the Curtis Hill database is negated by the fact that West has not sued Curtis Hill in the two years between sending the above letter and the date on which Bender filed the Texas product action. The fact that West made a decision not to sue Curtis Hill, while relevant to the totality inquiry, is not dispositive. In addition, West has argued throughout its various motion papers that it has made clear to Bender its policy of deciding whether or not to sue on a case-by-case basis after having had the opportunity to examine a finished product. Since Bender did not actually have a product on the market prior to filing this suit, it could not predict what action West would take with respect to its use of the Curtis Hill database.

Bender has proved by a preponderance of the evidence that it had a reasonable apprehension of being sued over both star pagination and use of the Curtis Hill database prior to filing its complaint in this action. 8 Accordingly, West's motion to

8 An evidentiary hearing on this issue is unnecessary, as the Court has reached this determination after examining extensive documents from discovery in the New York action, which both parties agree are relevant to the "reasonable apprehension prong in this action. Furthermore, this finding is based on the facts as alleged by West or on undisputed facts.

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dismiss the Texas product action is denied.

C. The HyperLaw Product

HyperLaw, the intervenor-plaintiff in the Now York product action, has published two CD-ROM products. HyperLaw first published Supreme Court on Disc, which contained recent opinions of the United States Supreme Court, in February 1992. HyperLaw released an updated version of Supreme Court on Disc in February 1993. Neither version included any reference to any West publications. In July 1993, HyperLaw began publishing Federal Appeals on Disc, which contained recent opinions of the United States Courts of Appeals with no reference to West publications. Beginning with the September or December 1993 update of Federal Appeals on Disc., HyperLaw included a separate table which provided a cross-reference to the initial page and volume citation for West's Federal Reporter. The most recent version of Federal Appeals on Disc was released in October 1994, and offers both Supreme Court and Court of Appeals decisions as well as the United States Code.' This version includes the cross-reference table and -- for some of the opinions -- reference to the first page citation of West's Federal Reporter at the beginning of the opinion as it appears in the HyperLaw product. The HyperLaw product includes no other reference to West publications.

9 Because Federal Appeals on Disc now contains both Supreme Court and court of Appeals opinions, HyperLaw has not updated its Supreme Court on-disc product. This opinion will therefore refer to Federal Appeals on Disc as "the HyperLaw product."

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In its complaint, HyperLaw states that it "desires" to add further West information into its product, including the text of opinions not provided to HyperLaw by the courts, corrections and amendments that appear only in West reporters, and names of counsel ("West factual information"), and star pagination to West's Federal Reporter and Supreme Court Reporter. HyperLaw also alleges in its complaint that, in response to HyperLaw's request that West clarify its copyright assertions with respect to various West features, West warned HyperLaw that there would be legal consequences if HyperLaw used such features in its product. HyperLaw intervened in this action to seek a declaration that West's factual information, first page citation, and internal reporter pagination are not subject to copyright protection and that, therefore, HyperLaw's use of these West features will not infringe any West copyright.

1. Intent and Ability to Produce

As noted above, to meet justiciability requirements HyperLaw must show that it has taken "Present activity which could constitute infringement or concrete steps taken with the intent to conduct such activity." BP Chemicals, 4 F.3d at 978. Here, the product at issue is a version of the HyperLaw product, Federal Appeals on Disc, which would include West factual information as well as first page citation and star pagination to West reporters. HyperLaw concedes that it has not yet produced a product with all of these features. The question is thus

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whether, through concrete steps in meaningful preparation for production, HyperLaw has evinced an intent and ability to produce a product with the West features at issue. As the court noted in Arrowhead _Indus- Water, "(w]hether a declaratory plaintiff's ability and definite intention to undertake a potentially infringing activity constitutes sufficient 'preparation, is a question of degree to be resolved on a case-by-case basis.', 846 F.2d at 736.

HyperLaw president Alan D. Sugarman testified at various points in his deposition, and HyperLaw represents in its briefs, that HyperLaw will not actually add the West features at issue in this action unless and until this Court grants it declaratory relief. Noting that justiciability standards in declaratory actions do not require actual manufacture of the allegedly infringing product, HyperLaw argues that it has taken every preparatory step possible short of actual infringement. This is because, HyperLaw claims, the methodology that HyperLaw already uses for its product allows it to add text to existing opinions without preparation, and to complete such additions rapidly. In other words, HyperLaw argues that it can use existing methods to add quickly any West information that this Court finds to be unprotected by copyright, and that there are no further steps that HyperLaw could take to prepare for such additions.

West contests these factual allegations, arguing that insertion of the various West features involves substantially more preparation and time than HyperLaw claims. Given this

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factual dispute, and given the unique nature of CD-ROM production, an evidentiary hearing is necessary for the Court to determine whether HyperLaw has shown the requisite intent and ability to incorporate the various West features in its product's At this hearing, HyperLaw will bear the burden of proving jurisdiction by a preponderance of the evidence. Ball v. Metallurgie Hoboken-overpelt, 902 F.2d at 197.

2. Reasonable Apprehension of Suit

In addition to West's conduct with respect to other publishers -- which as explained above is relevant but not dispositive on this prong of the justiciability test -- HyperLaw describes a series of contacts between HyperLaw and West in support of its claim that it reasonably feared suit by West. HyperLaw claims that West threatened litigation during the exchanges, which HyperLaw initiated to request clarification from West over West's alleged claims of copyright in various West features. West characterizes these same exchanges as repeated attempts by HyperLaw to manufacture a threat of suit to enable it to file this declaratory judgment action.

Unlike the allegations of reasonable apprehension in connection with the Bender product, the court cannot determine

10 HyperLaw's argument for intent and ability, which is based on methodology, differs substantially from Bender's argument, which was based on evidence that Bender had, among other things, studied the feasibility of the planned product, hired a company to produce a test version, and thereafter produced the product at issue.

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whether HyperLaw reasonably apprehended suit by West over its product from the current record. Therefore, an evidentiary hearing is necessary to resolve the factual disputes with respect to this prong of the justiciability inquiry.

Conclusion

Defendant's motions to dismiss plaintiff Bender's complaints in the New York and Texas product actions are denied. The Court will hold an evidentiary hearing on West's motion to dismiss intervenor-plaintiff HyperLaw's complaint in the New York product action.


So ORDERED.


Dated: New York, New York
May 1, 1996

JOHN S. MARTIN, JR., U.S.D.J.


copies to:

For Plaintiff Bender:
Morgan Chu
Irell & Manella
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067-4276

For Plaintiff HyperLaw:
Paul J. Ruskin
72-08 243rd Street
Douglaston, New York 11363

For Defendant:
Jeffrey Kessler
Katherine Daniels
Wail, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153

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