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It Ain't Over 'Til the District Judge Rules, Connecticut Law Tribune, 10/7/96

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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
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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

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

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

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

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

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

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

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

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

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.