INSLAW, Inc. v. United States (In Re INSLAW, Inc.)

FINDINGS OF FACT AND CONCLUSIONS OF LAW

(Counts I, II and III of the Complaint)

GEORGE F. BASON, Jr., Bankruptcy Judge.

TABLE OF CONTENTS Page

INTRODUCTION. 93

FINDINGS OF FACT. 93

I.THE NATURE OF INSLAW’S BUSINESS AND ITS DEVELOPMENT OF PROMIS. 93

A. Origins of INSLAW. 93

B. Formation of INSLAW as a “For-Profit” Corporation and the Development of its Proprietary Enhancements.-96

C. The Nature of the Proprietary Enhancements. 97

1. Data Base Adjustment. 98

2. Batch Update. 99

3. The 32-Bit Architecture VAX Version Of PROMIS. 99

4. Additional Discrete PROMIS Enhancements.100

II. INSLAW HAS CREATED USING PRIVATE FUNDS AN ENHANCED VERSION OF PROMIS THAT IS PROPRIETARY TO INSLAW... 101

A. INSLAW’s Accounting System Demonstrates that INSLAW’s Claimed Changes and Enhancements Were Created Using Private Funds... 101

B. INSLAW has Demonstrated that the Three Major Enhancements, the Data Base Adjustment Subsystem, the Batch Update Subsystem and the 32-Bit Architecture VAX Version of PROMIS, were Created Using Private Funds and are Proprietary to INSLÁW.104

C. INSLAW has Demonstrated the Creation of Numerous Individual Proprietary Changes and Enhancements to PROMIS Using Private Funds.106

III. C. MADISON BREWER’S RELATIONSHIP TO INSLAW AND THE ORIGINS OF HIS BIAS AND LACK OF IMPARTIALITY TOWARD INSLAW . 110

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TABLE OF CONTENTS _ Page

A.Brewer’s Firing By Hamilton. 110

IV. DOJ’S DECISION TO AUTOMATE U.S. ATTORNEY’S OFFICES WITH PROMIS AND TO HIRE BREWER AS PROMIS PROJECT MANAGER... 112

A. Nature of DOJ’s Case-Tracking Problem. 112

B. INSLAW’s Recommendation to Use Microcomputers Rather Than Word Processors in the Executive Office RFP. 113

C. DOJ’s Hiring of Brewer as PROMIS Project Manager. 114

D. Brewer’s Organization of DOJ’s PROMIS Project Team. 116

V. INSLAW GIVES DOJ NOTICE OF ITS OWNERSHIP OF AND PROPRIETARY RIGHTS TO ENHANCED PROMIS. 117

A. INSLAW Gives Notice of Its Proprietary Claims. 117

B. DOJ’s Confusion Over Data Rights. 118

C. Nature and Terms of the PROMIS Contract. 120

VI.BREWER’S STRATEGY FOR THE RUINATION OF INSLAW. 121

A. Brewer Informs His EOUSA/PROMIS Project Team About His Opinions of Hamilton. 121

B. INSLAW’s Initial Problems With DOJ . 122

1. INSLAW’s Decision To Market Enhanced PROMIS And Brewer's Response To These Plans. 122

2. Morris’ Recusal Of Brewer On The Proprietary Enhancements Issue. 125

3. Brewer’s Continued Involvement In DOJ’s Consideration Of The Proprietary Enhancement Issue. 126

4. Brewer’s Strategy For The Ruination Of INSLAW. 127

C. Brewer’s Renewal of the Proprietary Enhancements Issue and Termination of Advance Payments. 129

VII.BREWER’S USE OF MODIFICATION 12 “TO GET INSLAW’S GOODS”... 132

A. Negotiation of Modification 12. 132

B. Brewer, Rugh and Videnieks Stymie INSLAW’s Efforts to Substantiate Proprietary Enhancements. 136

VIII.DOJ’S COMMITMENT TO CONSIDER REPLACING WORD PROCESSING MACHINES WITH MICROCOMPUTERS; DOJ’S DECISION INSTEAD TO ATTEMPT TO TERMINATE THE WORD PROCESSING PORTION FOR DEFAULT AND ITS ULTIMATE DECISION TO TERMINATE “FOR CONVENIENCE”. 138

IX. THE EFFORTS OF ELLIOT RICHARDSON AND OTHERS TO OBTAIN AN INDEPENDENT AND IMPARTIAL PROCESS FOR CONSIDERATION OF INSLAW’S COMPLAINT. 140

A. Richardson Meets with Assistant Attorneys General for Administration Liotta and Wallace in an Attempt to Receive Unbiased Consideration of INSLAW’s Complaints. 140

B. At Jensen’s Suggestion, Richardson and Others Attempt to Resolve the DOJ Bias With Associate Deputy Attorney General Jay Stephens... 141

C. INSLAW’s “Last Ditch Effort” to Obtain from Jensen an Independent Consideration and Investigation of DOJ’s Bias Against INSLAW... 142

X. JENSEN’S BIASED ATTITUDE AGAINST INSLAW AND HIS INDIFFERENCE TO INSLAW’S REPEATED COMPLAINTS OF MISCONDUCT BY OTHER DOJ OFFICIALS. 143

A. Deputy Attorney General D. Lowell Jensen Had a Previously Developed Negative Attitude About PROMIS and INSLAW. 143

B. Jensen’s Close Involvement in the PROMIS Contract as Ranking DOJ Official on the PROMIS Oversight Committee and Immediate Organizational Superior of the Executive Office During the Period of Brewer’s Misconduct Against INSLAW. 144

C. During the Period of the Automatic Stay, Jensen was Repeatedly Made Aware of INSLAW’s Complaints About Brewer But Took No Corrective Action. 145

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TABLE OF CONTENTS Page

XI. DOJ’S FAILURE TO INVESTIGATE AND REMEDY INSLAW’S CLAIMS OF BIAS PRIOR TO THE BANKRUPTCY. 146

XII. DOJ’S UNLAWFUL AND IMPROPER CONDUCT CONTINUES UNABATED THROUGHOUT THE PERIOD OF BANKRUPTCY. 149-

XIII. DOJ’S BAD FAITH NEGOTIATIONS AND OTHER IMPROPER CONDUCT DURING THE PERIOD OF BANKRUPTCY. 151

A. DOJ’s Continued Improper Implementation and Use of PROMIS Software ... 151

B. The Effects of Bias On the 1985 Negotiations. 152 XIV. DOJ’S CONTINUED FAILURE TO INVESTIGATE CLAIMS OF BIAS

DURING THE PERIOD OF BANKRUPTCY. 153

CONCLUSIONS OF LAW. 158

JURISDICTION AND VENUE. 158

I. INSLAW’S PROPRIETARY ENHANCEMENTS ARE ENTITLED TO PROTECTION AS TRADE SECRETS. 158

II. DOJ UNLAWFULLY USED INSLAW’S PROPRIETARY TRADE SECRET ENHANCEMENTS IN VIOLATION OF THE AUTOMATIC STAY.159

III. DOJ’S FRAUD IN INDUCING INSLAW TO ENTER MODIFICATION 12, THE EFFECTS OF WHICH HAVE NOT BEEN CURED BY DOJ, CONSTITUTES A FURTHER VIOLATION OF THE AUTOMATIC STAY.168

IV. DOJ’s FAILURE TO CURE THE CONTINUING EFFECTS OF BIAS AGAINST INSLAW FURTHER VIOLATES THE AUTOMATIC STAY... 169

V. INSLAW IS ENTITLED TO PERMANENT INJUNCTIVE RELIEF... 170

VI. INSLAW IS FURTHER ENTITLED TO ITS COSTS AND ATTORNEYS’ FEES.172

INTRODUCTION

Those claims for relief as set forth in Counts I, II and III of the Complaint herein, as modified by this Court’s Order dated July 20, 1987, having come before this Court for trial during the period July 20 through August 5,1987; the parties hereto having submitted extensive evidence, legal briefs, argument and proposed findings of fact and conclusions of law; and this Court having very carefully taken into consideration all of these submissions and having also thoroughly weighed all of the evidence, and having determined that the relevant legal principles involving non-bankruptcy law are clear, simple, basically undisputed and not requiring the expertise of any specialized agency, makes the following findings of fact and conclusions of law.

These findings of fact are based upon a very careful analysis and weighing of all the evidence presented, and after consideration and review of the proposed findings, and replies thereto, submitted by each party. In making these findings, the Court heavily relies upon its very close observation of the witnesses who testified in this matter, and the credibility of those witnesses based upon the Court’s close observation of their demeanor, expressions and the inherent probability or improbability of their testimony in light of the documentary evidence and other known facts. The Court also finds that all the facts hereinafter found have been established by at least clear and convincing evidence. In some instances the evidence is overwhelming or even irrefutable. Further reference is made to the statements made from the bench in open court on September 28, 1987, which are incorporated herein.

FINDINGS OF FACT

I. THE NATURE OF INSLAW’S BUSINESS AND ITS DEVELOPMENT OF PROMIS

A. Origins of Inslaw

1. Plaintiff INSLAW, Inc. (“IN-SLAW”), a debtor-in-possession currently undergoing reorganization under Chapter 11 of the Bankruptcy Code, is a corporation organized and operated under the laws of the State of Delaware, with its principal

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place of business in the District of Columbia. It is in the business of designing, manufacturing, marketing and maintaining software systems for use on computers. (Answer 111)

1

2. In 1973, William Hamilton and Dean Merrill founded the Institute for Law and Social Research (“Institute”) as a not-for-profit corporation. (Hamilton, T. 85; Merrill, T. 747-748) Thereafter, the Institute focused on the development of computer software case management programs for the automation of law enforcement offices, including a primitive version of the computer software which eventually was made available to DOJ and is at issue in this proceeding. (Answer 1110) During the 1970s, the Institute obtained a number of cost-plus grants and cost-plus contracts largely from the Law Enforcement Assistance Administration (“LEAA”) of DOJ, for the development and implementation of such software automation programs.

2

(Hamilton, T. 86; Merrill, T. 752)

3. In the 1970s, the Institute developed a version of a software product, known as the Prosecutor’s Management Information System (“old PROMIS”), for automating certain law enforcement record keeping and case-monitoring activities (Answer II10). With the exception of the Superior Court Division of the U.S. Attorney’s Office for the District of Columbia, this software system was focused on assisting state and local prosecutors. (Hamilton, T. 113; Merrill, T. 752) Accordingly, the contract between the Executive Office of U.S. Attorneys (“EOUSA”) and Inslaw in March 1982, which is the subject of this litigation, was the first national effort to implement PROMIS in U.S. Attorney’s offices. (Hamilton, T. 113) However in 1979, the Institute conducted an EOUSA sponsored feasibility study to determine the best approach for improving the case management and information systems used by the United States Attorneys. The study identified a need for more information about the United States Attorneys’ activities. (DX 8, Appendix A, p. 3; Hamilton, T. 244) That feasibility study and a “pilot project” (see F.F. ¶ 8, below) had demonstrated the workability of the nationwide effort.

4. Originally, old PROMIS was a limited function software package that permitted rudimentary case tracking functions using computer hardware. (Merrill, T. 759; PX 9, 21) It was a “batch” software system,

i.e.,

limited in hardware applications and user accessibility, which was redesigned and reprogrammed in 1976 to become an “on-line real time” system, a change that permitted greatly expanded usage of minicomputers as well as instantaneous updating and retrieval of case files. (PX 21) PROMIS developed and was improved over the entire decade of the 1970s. The software relevant to this adversary proceeding are the Executive Office of U.S. Attorneys (“EOUSA”) pilot version (which was in the public domain in 1982; see F.F. 118 below) and the enhancements financed by INSLAW’s contract with DOJ’s Bureau of Justice Statistics (“BJS”); see F.F. 1111 below.

5. Old PROMIS, as it existed in or about 1982, was designed to provide the user with a basic system of storing, managing and retrieving certain standard types of information which would be applicable to every user. (PX 8; PX 21) However, and

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unlike most other information management software packages, Old PROMIS further permitted each individual user to tailor the software to store additional types of data to serve the user’s unique needs. (PX 21) Moreover, Old PROMIS permitted each user to design the look and the contents of the video display screens used to enter and retrieve data, and the look and contents of hard copy paper reports. (PX 21) Old PROMIS was therefore designed to offer great flexibility to a wide variety of users by permitting the software system to adapt to the recordkeeping needs of each user rather than vice versa. (PX 21)

6. Old PROMIS was created using the computer Common Business Oriented Language, or (“COBOL”), in a version written by the American National Standards Institute. (PX 21) The purpose of writing PROMIS in such a standard language was to permit the PROMIS software to be easily converted or “ported” to run on numerous brands of computers which are otherwise incompatible. (PX 21)

7. Because the Institute designed Old PROMIS to be inherently versatile, adaptable and portable, Old PROMIS met with great user acceptance and success in those jurisdictions and offices that had installed PROMIS. (Hamilton, T. 106) More particularly, LEAA designated PROMIS as an exemplary project and encouraged state and local governments to consider implementing PROMIS. (Hamilton, T. 106; Gizzarel-li, T. 468)

8. The EOUSA decided to test the concepts proposed in the feasibility study by implementing a “pilot project” beginning in October of 1979. (Hamilton, T. 86) In essence, this pilot program involved the extension of the state/local criminal version of old PROMIS to encompass civil litigation and legal process debt collection functions and the installation of the extended system on government-furnished minicomputers in two U.S. Attorneys offices: the District of New Jersey and the District of Southern California (San Diego). (PX 9) Due to the Government’s delay in procuring mini-computers, both of these sites initially “time-shared” the Institute’s computers using remote data entry terminals and printers. (PX 9) In the summer of 1981, after a year or more of time-sharing, PROMIS was installed on each District’s “Prime” brand of mini-computer. (PX 9)

9. An adjunct of the Institute’s pilot program was the development of PROMIS-like case control functions on Lanier word processing equipment in two smaller U.S. Attorneys offices in 1981 — the Southern District of West Virginia and the District of Vermont. (DX 8, Appendix A, pp. 3-4; Hamilton, T. 245; PX 9)

10. The pilot project was evaluated by an independent contractor and determined to be the most cost effective operational alternative. Thus, DOJ made the decision to install the system, as envisioned by the pilot project, on a nationwide basis in the remaining 89 offices. (PX 8 [Bates Stamp 022708]; DX 8, Appendix A, p. 5)

3

11. In 1979, LEAA awarded a three-year-cost-plus contract to the Institute for PROMIS upkeep and upgrade services. (PX 21) In 1981, when LEAA was liquidated, the three year PROMIS support contract was assigned to DOJ’s newly created Bureau of Justice Statistics (“BJS”) which lacked funds for the final year of the contract. (PX 21; Hamilton, T. 256-258) EOU-SA, through an interagency transfer of funds, allocated over $500,000 to this contract in order to finance the development of certain enhancements requested by EOU-SA. (PX 21) The enhancements funded by the EOUSA through the BJS contract were added to the public domain software for use in the 1982 implementation contract.

12. The BJS contract, in essence, contained a laundry, or “wish” list of enhancements DOJ wanted to be made to Old PROMIS. (Hamilton, T. 257-258; Deroy, T. 2460-2462) DOJ chose to determine the priority for the enhancements it desired and INSLAW agreed to go forward to see how much could be done on a cost-plus

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basis. (Hamilton, T. 258; Deroy, T. 2460-2462)

INSLAW claims that: (1) Because the Executive Office refused to transfer $125,-000 to the BJS contract needed to complete the third year of the contract, INSLAW agreed to complete the five enhancements as part of the 1982 Executive Office contract without additional compensation for development costs. (Hamilton, T. 114) (2) INSLAW completed five enhancements under the BJS contract but never received from DOJ full reimbursement of development costs for these enhancements. (Hamilton, T. 257-258) (3) Notwithstanding that DOJ failed to pay INSLAW’s actual full costs for development of the five BJS enhancements, INSLAW does not claim any of them among its privately-financed proprietary enhancements. (Hamilton, T. 114)

In response, DOJ contends as follows: (1) The implication that DOJ somehow refused to pay INSLAW money owed to it for development of the BJS enhancements is untrue. (2) As it was required to do so by contract, INSLAW notified DOJ of a potential cost overrun of $125,000 on the BJS contract. (3) DOJ, as government agencies are required to do in cost-type contracts, considered whether it wanted to endure the cost overrun or avoid it by taking some action such as reducing the statement of work. (4) When it refused to agree to approve the additional work, IN-SLAW

agreed

to perform the work as part of the 1982 implementation contract at no

additional

cost to the government (Hamilton, T. 259; Brewer, T. 1640). (5) That agreement recognized that INSLAW believed that implementation costs would be reduced and that no additional funding would be necessary. Modification 6 to the 1982 implementation contract specifies the enhancements to be made and states that the $110,000 required for those enhancements be taken from other contract tasks. (PX 17)

It is not necessary for this Court to resolve this $125,000 dispute between the parties at this time.

B. Formation of INSLAW as a “For-Profit” Corporation and the Development of its Proprietary Enhancements

13. In 1980, the Institute received notice that funding for Old PROMIS through LEAA would be extinguished beginning in May 1981. (Hamilton, T. 86; Merrill, T. 759) In order to maintain the existing PROMIS user installations, as well as to expand the use of Old PROMIS, the Institute determined to become a for-profit corporation that could market its expertise and software to current and potential PROMIS users. (Hamilton, T. 86; Merrill, T. 759) In particular, this market plan focused upon local district attorney’s offices which previously had received free service from the Institute at the expense of LEAA. (Hamilton, T. 86)

14. In connection with this market plan, INSLAW retained Roderick Hills, Esquire for advice on how to proceed with implementing the plan. (Hamilton, T. 86) As part of this assignment, Hills and Hamilton apprised Charles B. Renfrew, Deputy Attorney General of DOJ, of INSLAW’s plans to invest private funds for enhancements to PROMIS for creation of proprietary, fee-generating products which would be sold to anyone having an interest in such products. (Hamilton, T. 87-88, 264-265; Merrill, T. 763-775) In addition, Hills informed Ren-frew that INSLAW intended to make enhancements to the Old PROMIS software and to assert a proprietary interest in the enhancements financed through private funds. (Hamilton, T. 100; Merrill, T. 763-764) During this discussion, Hills asked Renfrew if DOJ would have any problem with INSLAW’s plans. (Hamilton, T. 88, 264-265) Renfrew responded that DOJ had no plans to continue to finance the upkeep and upgrade of PROMIS and DOJ welcomed, and had no problems whatsoever with, INSLAW's plans in this regard. (Hamilton, T. 88)

15. In January 1981, INSLAW was organized and purchased the assets of the Institute. (Answer ¶ 10; Hamilton, T. 84) Since its inception in 1981, William A. Hamilton has been the President and Chairman

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of the Board of INSLAW. (Hamilton, T. 83)

16. In an effort to obtain the private funding necessary for the survival of IN-SLAW and PROMIS, in May 1981, IN-SLAW began selling its software upkeep and upgrade services to its existing user base pursuant to annual flat fee contracts. (Hamilton, T. 99; Merrill, T. 816) These funds were combined with investments of the company’s equity capital and contract monies from private companies in an effort to develop enhancements to Old PROMIS. (Hamilton, T. 100-101, 104)

17. INSLAW had two motives in going forward with privately financed enhancements of PROMIS. (Hamilton, T. 109) First, the founders of INSLAW had invested a number of years in the development of PROMIS and did not want to see that effort wasted. (Hamilton, T. 109) Second, INSLAW wanted to make a profit from its efforts to enhance the PROMIS software. (Hamilton, T. 109)

18. INSLAW also entered into a number of contracts with individual private clients to create new and important functional enhancements to PROMIS. (Hamilton, T. 102-104) These enhancements were then made available to other PROMIS users on a license basis; input and experience developed from this effort was used by INSLAW to further modify and improve the Old PROMIS system over and above the system created under the LEAA funding. (Merrill, T. 759-761)

19. As INSLAW’s expert testified from his twenty-five years of experience in the software industry, it is common within the software industry for a private corporation (i) to take public domain software created using public funds, (ii) then to enhance the public domain software using private funds and (iii) finally to market the resulting product as a proprietarily enhanced version of the software. (DeLutis, T. 1299-1300; PX 233)

20. INSLAW also marketed enhanced PROMIS successfully to additional federal government offices outside of the Department of Justice, non-federal government offices, and private non-government clients. (Hamilton, T. 98-99) These additional users permitted INSLAW to further enhance PROMIS through greater revenues, additional user input and private funding for particular changes. (Hamilton, T. 98-99; Merrill, T. 759, 761)

21. Significantly, INSLAW also began to change the structure of PROMIS by extending the basic concept to other uses. (Hamilton, T. 98-99) INSLAW thus created and began to market new PROMIS-based packages such as JAILTRAC for correctional institutions, DOCKETRAC for courts, MODULAW for insurance companies and private law firms, and CJIS for county-wide justice administration. (Hol-ton, T. 1125; Merrill, T. 816-817) While each of these other applications contains some specific coding that relates to the particular user needs, PROMIS and these derivative application packages share much of the same COBOL software code. (Hol-ton, T. 1125) Thus, generic enhancements to any of the packages benefit all of these applications. (Merrill, T. 816-817, 819)

22. Through its experience with PROM-IS users, INSLAW further modified PROMIS pursuant to the suggestions of the in-house staff of INSLAW. (Merrill, T. 761) A number of enhancements were funded through INSLAW’s profits and research and development costs, which became part of the Enhanced PROMIS — “PROMIS ’82” —that INSLAW began to market aggressively to new users beginning in the Fall of 1982. (Hamilton, T. 104-105; Merrill, T. 759)

C. The Nature of the Proprietary Enhancements

23. In essence, INSLAW made two types of enhancements to PROMIS: first, changes “sewn inside” the existing old PROMIS code which permit more efficient, user-friendly and less defect-prone operation of the software; and second, changes “hooked-on” to the PROMIS code which add new functionality. (Hamilton, T. 102)

24. Enhanced PROMIS consists of a number of subsystems,

ie.,

packages that are themselves comprised of a number of

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programs or modules. (Holton, T. 1122-1124; PX 225b) Two of these subsystems, the Data Base Adjustment subsystem and the Batch Update subsystem, have been demonstrated by INSLAW to have been developed using private funds, are proprietary to INSLAW and were not deliverable under the EOUSA contract. (Hamilton, T. 125, 2571-2575;

See

F.F. M 69 & 73 below) The Data Base Adjustment and Batch Update subsystems are “hook-on” systems that are independent of the remainder of PROMIS. (Holton, T. 1123-24) Although they perform additional useful and desirable functions within PROMIS, they are not themselves required to make PROMIS function, and they could have been removed from PROMIS without preventing the operation of the remaining PROMIS software system. (Holton, T. 1123-1124)

1. Data Base Adjustment

25. The Data Base Adjustment subsystem consists of nine programs. (Holton, T. 1126; Hamilton, T. 2589) Data Base Adjustment is used to modify the structure of a PROMIS data base that has already been in use, without causing any loss of data that would ordinarily preclude structural modifications to existing databases. (Hol-ton, T. 1126-27) For example, if the information in a phone book is considered as a record in a data base, the existing structure of that record would include the name, address and telephone number for each listing. (Holton, T. 1126) If one then wished to expand the structure of that record by including zip codes, the Data Base Adjustment subsystem would be useful in altering the structure of the existing phone book data base to permit entry of zip codes for both new and old listings. (Holton, T. 1126-27)

26. Restructuring of a database permits the user to accommodate needs for additional information, work flow pattern changes, changes in office organizational structure, and a greater user sophistication in use of office automation. (Hamilton, T. 2577-2578) It is INSLAW’s experience that PROMIS users typically will request retai-loring perhaps as often as every 12-18 months, which will require the use of the Data Base Adjustment subsystem. (Hol-ton, T. 1120-21; Hamilton, T. 2576-2578) DOJ may be — or may not be — atypical: Mr. Rugh testified that the United States Attorneys have never needed to restructure their PROMIS data bases. (Rugh, T. 2627-28) However, this Court has found Mr. Rugh’s testimony to be unbelievable. See F.F. ¶ 398 below. It is entirely possible that individual U.S. Attorneys’ offices have wanted to restructure their PROMIS data bases and have been prevented from doing so by EOUSA. (See F.F. 1140 below)

27. Although specific-need programs for specific restructuring of particular data bases could be created, the advantage of the PROMIS Data Base Adjustment subsystem is that it is a generic, reuseable package that requires little coding work by the programmer for each new adjustment. (Holton, T. 1126-27) Without Data Base Adjustment, users who desired to improve the structure of their data base would be required for each specific need to engage in weeks, perhaps months, of hard coding, testing and debugging of a program that would alter only one specific existing data base to one specific new data base structure. (Holton, T. 1127)

28. Although there were two programs that comprised an earlier version of the Data Base Adjustment package, they were not the same as any of the programs that comprise the nine Data Base Adjustment subsystem programs that were provided to the Department of Justice. (Holton, T. 1172-75, 2533, 2563) Unlike the Data Base Adjustment subsystem provided to DOJ by INSLAW in 1985, the two early programs did not generate code and did no comparison of the old and new database designs. (Holton, T. 1173-74) The nine-program Data Base Adjustment subsystem performs numerous additional functions not present in the early version of Data Base Adjustment. (Holton, T. 1173-74)

29. The two earlier programs are not in or among the nine-program Data Base Adjustment subsystem that INSLAW has claimed as proprietary in this litigation. (Holton, T. 1174-75; Hamilton, T. 125)

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30. The nine programs in the Data Base Adjustment subsystem are in the possession and control of the government. (Gagliardi, T. 2069; Hamilton, T. 2607-2609, 2589; Holton, T. 2510; DX 212 [Holton] at pp. 210-212; see, however, Holton, T. 2530)

31. Data Base Adjustment is an extremely useful tool for PROMIS users, and is a very valuable enhancement to PROM-IS. (DeLutis, T. 1281-1282; Holton, T. 1124, 1127; Hamilton, T. 2576-2578) Even Defendant’s expert conceded that Data Base Adjustment is an enhancement to PROMIS, and believed that any commercially viable software program should have the capability of adjusting the data base. (Gagliardi, T. 2073-2074) Data Base Adjustment was not required to be delivered under the EOUSA (1982) Contract. (Hamilton, T. 125, 2607-2608; Holton, T. 1123)

2. Batch Update

32. The Batch Update subsystem permits a user to add computerized information to an existing database structure in batches

(i.e.,

without requiring the tedious input of information one record at a time through keyboards at video terminals), in a cost-effective manner, and without incurring the concomitant increased risk of introducing human data entry errors into the database. (Holton, T. 1128-1129; DeLutis, T. 1280-1281; Hamilton, T. 2572-2574)

33. Batch Update is a very significant feature of PROMIS that, according to defendant’s expert, must be present in order even to begin to enter the marketplace. (Gagliardi, T. 2044-2045) Batch Update is a useful tool for PROMIS users and is a valuable enhancement to PROMIS. (DeLu-tis, T. 1280-81) Batch Update was not required to be delivered under the EOUSA (1982) Contract. (Hamilton, T. 2571-2575; Holton, T. 1123)

3. The 32-Bit Architecture VAX Version of PROMIS

34. INSLAW also created between June and September of 1981, using private funds, a third major enhancement to PROMIS, which was the redesign and porting of the PROMIS software to run on the 32-bit architecture VAX minicomputer manufactured by Digital Equipment Corporation. (Holton, T. 1132) A software “port” is the process of converting an existing software package to enable it to run on different brands and models of computers. (Holton, T. 1132) The earlier versions of PROMIS ran on other Digital Equipment Corporation computers, known as PDP 11/70, as well as on computers sold by IBM, Wang, Honeywell and Burroughs. (Holton, T. 1133; DeLutis, T. 1273-1274)

35. In 1981, INSLAW noted that Digital Equipment Corporation was replacing its 16-bit architecture PDP line of computers with the newer, state-of-the-art VAX line. (Holton, T. 1132) Because the VAX computers offered significant technological advantages over the PDP line, including 32-bit architecture as opposed to 16-bit architecture, increased work-in-storage space and faster input/output for processing of information — differences as significant as the difference between a propeller-driven airplane and a jet — INSLAW made a strategic decision to stay abreast of the technology by porting the entire PROMIS system from the 16-bit PDP to the 32-bit VAX “environment.” (Holton, T. 1131-33; DeLutis, T. 1274-1280)

36. The development of a version of PROMIS to run on VAX minicomputers was a very valuable enhancement to PROMIS in terms both of INSLAW’s need to stay abreast of the market and of IN-SLAW’s customers’ need and desire for faster, more capacious products. (DeLutis, T. 1274-1280)

37. The VAX version of PROMIS subsequently was used by INSLAW to provide time-sharing facilities to ten United States Attorneys’ Offices, pending selection and installation by the government of on-site computer equipment. (Holton, T. 1254)

38. Whereas the “base” or “master” version of PROMIS until 1980 ran on 16-bit architecture PDP 11/70 computers, the 32-bit VAX version in about 1981 became the base or master version of PROMIS that was then used to do further development and maintenance work to PROMIS. (Hol-ton, T. 1133-34)

39. Although the 1982 contract did not prescribe the manner in which the contractor was to create the Prime version of PROMIS to be delivered to the govern

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ment, and indeed DOJ had not yet chosen the Prime computer hardware until long after the contract had been entered into, INSLAW in fact used the VAX version of PROMIS to create the version of PROMIS that ran on the Prime computers selected by the government. (Holton, T. 1250-51; Hamilton, T. 173) INSLAW used the VAX version rather than the earlier Prime version developed by INSLAW during the Executive Office “pilot project” contract, because the differences between the new COBOL compiler on the Prime computers selected by the government and on the VAX were less significant than the differences between the COBOL compilers in the new and old models of the government-furnished Prime minicomputers. (Holton, T. 1250)

40. Both the major enhancements as well as the individual changes and enhancements to PROMIS are licensed by IN-SLAW to its current users. (Merrill, T. 760-761; Hamilton, T. 173) INSLAW has had requests from individual United States Attorney’s Offices to obtain the latest additional PROMIS enhancements, including a request from the United States Attorney’s Office for the Southern District of New York which wishes to obtain from IN-SLAW its most up-to-date enhancements to PROMIS created by INSLAW since the end of the Executive Office contract in March 1985. (Merrill, T. 761-762)

4. Additional Discrete PROMIS Enhancements

41. A number of the enhancements to PROMIS improved the Old PROMIS systems by making the software more efficient and user-friendly, and adding new functionality. (Hamilton, T. 102-103) Certain enhancements, for example, provided information to the user to assist in operation of PROMIS or diagnosis of errors encountered in entering or retrieving data. (Holton, T. 1175, 1215-1219; DeLutis, T. 1285) Other enhancements provided the user with the ability to perform tasks more quickly, either by structuring the on-screen processes to perform additional functions or by streamlining the amount of code so as to allow the program to run faster. (Hamilton, T. 102-103; Holton, T. 1215-1216, 1219; DeLutis, T. 1285)

42. All of these enhancements became part of the enhanced PROMIS software that INSLAW sought to market to new users and to provide through maintenance updates to existing PROMIS users that had entered into maintenance contracts with INSLAW. (Holton, T. 1126-1134; Hamilton, T. 108-109)

43. These enhancements identified by INSLAW were created from private, non-federal funds expended by INSLAW for software enhancements from May of 1981 through March of 1985. (Ling, T. 1065-1066, 1073-1074, 1080; Gibson, T. 2245-2246, 2251-2252) The total spent by IN-SLAW during this period for software enhancements of all kinds was more than $8.3 million. This figure has been verified by an audit performed by DOJ’s staff auditors. (Gibson, T. 2245-2246, 2251-2252) Although INSLAW’s accounting system does not permit the identification with specificity of the cost of each particular enhancement, INSLAW had during that same time period approximately $13 million in funds from private sources that were available and could have been used to perform these and other software enhancements. (Ling, T. 1071, 1074)

44. INSLAW took a number of steps to maintain the confidentiality of the software that was created after INSLAW came into being. (Hamilton, T. 105) First, INSLAW required all of its employees to sign confidentiality and non-disclosure agreements. (Hamilton, T. 105) Second, the enhancements to PROMIS were created under maintenance contracts and private contracts that expressly provided that all proprietary rights to all of the enhancements were held exclusively as the property of INSLAW. (Merrill, T. 762-763; Hamilton, T. 104; PX 236-236a)

4

Users were further subject to restrictions precluding disclosure or dissemination of these enhancements in the absence of a license from INSLAW. (Merrill, T. 762-763; Hamilton, T. 105; PX 236-236a) Finally, INSLAW copyrighted its software and documentation. (Hamilton, T. 105)

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45. The PROMIS enhancements were determined by INSLAW to be privately financed and proprietary to INSLAW by analyzing the documentation of each enhancement that is contained in the source code of the programs themselves, the forms used by INSLAW to report and record software changes, and the timesh-eets of the employees who performed the programming work on each enhancement. (Holton, T. 1175-1177) The method used by INSLAW to track software enhancements and to account for employee time is wholly reasonable within the standards used throughout the industry, and is, in many respects, exceptionally good.

5

(De-Lutis, T. 1287-1288, 1297-1298) On the basis of the foregoing and the record as a whole, this Court finds that the enhancements that INSLAW developed either with private funds, or with a combination of private funds and under government contracts specifically permitting INSLAW to retain private rights, were not in the public domain but were INSLAW’s private property.

II. INSLAW HAS CREATED USING PRIVATE FUNDS AN ENHANCED VERSION OF PROMIS THAT IS PROPRIETARY TO INSLAW

A. INSLAW’s Accounting System Demonstrates that INSLAW’s Claimed Changes and Enhancements were Created Using Private Funds

46. INSLAW’s accounting system tracks costs relating to software development according to unique four-character charge codes. (Ling, T. 1054; Gibson, T. 2231) The first two characters of this charge code identify the project for which the work is being performed and to which the time is being charged; the second two characters identify a particular task within that overall project. (Gibson, T. 2231)

47. These charge codes are reflected in INSLAW’s accounting system in time sheets used by INSLAW employees, expense reports and journal entries, which are then summarized in monthly project control reports for each charge code, as well as in INSLAW’s general ledger. (Ling, T. 1054-1058; Gibson, T. 2231)

48. INSLAW has used continuously since its inception as a private corporation the same form of time sheet for its software programmers. (Ling, T. 1055-56; PX 227) Using this time sheet, INSLAW’s software programmers track on a bi-weekly basis the number of hours spent working on a particular project and task by entering the appropriate four-character charge code. (Ling, T. 1057; PX 227; Holton, T. 1139)

49. INSLAW programmers are informed at the beginning of a project of the appropriate four character charge code to be used on time sheets to charge work for that project. (Holton, T. 1139; DX 211 [Ling] at p. 70) At the end of the two-week pay period, the employee totals and checks the time sheet, signs it, and submits it for review to the director of that employee’s division. (Ling, T. 1057-58; Holton, T.

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1139) The employee’s time is reviewed and approved by the division director, who must sign and date the time sheet. (Ling, T. 1057-58; Holton, T. 1139) Time charged to particular projects must also be approved by the project manager, who must initial the time sheet next to the charge code. (Ling, T. 1058) The time sheet is then submitted to the accounting department for review, payroll processing and entry into INSLAW’s general ledger system. (Ling, T. 1058)

50. Any INSLAW employee who attempted intentionally to mischarge time to incorrect accounts would be severely reprimanded and could very easily be terminated. (Holton, T. 1140-41) Although DOJ witness James Mennino testified to the contrary, this Court has found his testimony to be absolutely incredible, totally unsubstantiated and obviously biased, as discussed in F.F. ¶ 398 below. It appears that Mennino was attempting to excuse his own excessive time spent on a project, on which he was in charge of one aspect, by complaining about the time spent by other persons responsible for other aspects of that project, even though he had no knowledge concerning either what those other persons were doing or how long it should reasonably take them to do it.

51. INSLAW’s time sheets are of the type commonly used in the software industry for recording time spent by computer programmers on software development. (DeLutis, T. 1288-1291; Gagliardi, T. 2088)

52. For major enhancements that are assigned individual charge codes, INSLAW can track its labor costs relating directly to those particular enhancements. (Ling, T. 1080-81) For smaller enhancements that are not assigned separate charge codes, INSLAW’s accounting system does not permit tracking the cost of each such enhancement. (Ling, T. 1080-81; DX 211 [Ling] at pp. 84-85)

53. Each programmer also was assigned an individual computer “account,”

i.e.,

a work space within the computer. (Holton 52-54) To “sign on” to the computer account, the programmer would use a code that would enable INSLAW to charge the programmer’s computer time to a particular client, or to INSLAW itself. (DX 212 [Holton] at pp. 52-55; DX 211 [Ling] at p. 64)

54. However, tracking of and/or accounting by individual smaller enhancements is not done generally within the industry, and none of the witnesses called by either INSLAW or the government was aware of any software development company that maintained accounting records with that degree of detail. (DeLutis, T. 1291-1292, 1306; Gagliardi, T. 2090-2092; DX 211 [Ling] at pp. 87-89; Ling, T. 1081) The testimony by DOJ witnesses Gagliardi and Rugh, that even so INSLAW should have maintained such records (Gagliardi, T. 2083-85; Rugh, T. 1515-17), was obviously a product of their intense bias against IN-SLAW, which caused them to testify in whatever way they thought might defeat INSLAW’s claims, without regard to the truth.

55. Although the government auditor, Alan Gibson, testified that he did not believe that INSLAW’s records were sufficient to audit each of the changes and enhancements identified by INSLAW as privately funded (Gibson, T. 2114), Gibson admitted that he has no knowledge of records kept in the ordinary course of business by software developers, and has never performed any analysis of funding sources for software enhancements. (Gibson, T. 2229-2230) However good a government auditor Mr. Gibson may be, this is a specialized field in which Mr. Gibson has no expertise or competency.

56. Moreover, an accounting system that tracked software development costs by individual software changes would be unduly burdensome and expensive to set up and maintain, and would require computer memory capacity far exceeding the capabilities of even INSLAW’s computers. (DX 211 [Ling] at pp. 62-63, 87-88)

57. Because INSLAW’s records are within the standards for recordkeeping within the industry, including time records and documentation concerning software maintenance, and indeed are exceptionally good, the Court considers INSLAW’s

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records more than sufficient for the purposes of establishing the existence of and funding for the enhancements and changes claimed as proprietary by INSLAW.

58. INSLAW has demonstrated that between May 1981 and March 1985, the period from which INSLAW began developing enhancements using private funding through the end of the 1982 EOUSA contract, INSLAW expended $8,328,883, of private, non-federal funds for software development for private clients or in-house software development, exclusive of software development costs for the federal government. (PX 230; Ling, T. 1072-75; Hamilton, T. 400; Merrill, T. 815-816) The $8,328,893 reflected in Plaintiffs Exhibit 230 includes but is not limited to solely the cost to INSLAW of creating those enhancements that were delivered to DOJ pursuant to Modification 12 to the contract and that INSLAW claims as proprietary. (Ling, T. 1062) The precise cost to INSLAW of creating solely those specific enhancements has not been established but is irrelevant (even if that cost were as low as the $400,-000 to $1.4 million range testified to by DOJ witness Gagliardi — which, given Ga-gliardi’s bias, this Court does not believe). (Gagliardi, T. 2071) The only relevant fact in this regard is that each of the enhancements was developed solely with private funds, and it has been so proven.

59. INSLAW has further demonstrated that during the same time period, it had $12,998,076 available from private funding sources to support its in-house software development and software development for private clients, exclusive of funds paid to INSLAW pursuant to federal government contracts. (PX 231; Ling, T. 1065-72, 1074-75)

60. Among the sources of those private funds is a category of fees paid by subscribers to INSLAW’s maintenance program. (PX 231; Ling, T. 1066) Pursuant to separate maintenance agreements and for a fee, these subscribers receive error corrections and maintenance enhancements from INSLAW on a periodic basis. (Ling, T. 1067)

61. Two of INSLAW’s maintenance customers were federal government clients, DOJ’s Land and Natural Resources Division and the Occupational Safety and Health Review Commission (“OSHARC”), which contributed funds to a maintenance pool used to support general maintenance for all of INSLAW’s maintenance customers. (Ling, T. 1067; PX 236) Although the government has at times contended that these contributions to an overall maintenance pool entitle the government to unlimited rights in all changes and enhancements funded through the general maintenance account, the Court rejects this contention for two reasons.

62. First, and more importantly, these two federal agencies received all maintenance enhancements pursuant to express contractual agreements with INSLAW that contain the following clause:

Proprietary Information

The documentation, bug fixes, enhancements and the ideas and expressions contained therein, and any copyrights thereof are acknowledged by Customer to be confidential proprietary information (hereinafter called Program Product) belonging solely to INSLAW. Customer will not for the duration of this agreement nor at any time thereafter, without the prior written permission of INSLAW: (a) permit or cause any person (i) to copy or duplicate any physical form of the Program Product from or to any media except for archival or security purposes; or (ii) to create or to re-create, or to attempt to create or recreate the source programs, object programs or any other aspect of the Program Product in whole or in part; or (iii) to gain any access to confidential information learned pursuant to this agreement; or (b) permit or cause such information to be placed into the public domain, whether pursuant to law or otherwise.

(PX 236a; Ling, T. 1068-69) Thus, the government did not obtain through these maintenance agreements any rights to copy, disclose or disseminate these changes and enhancements. Rather, the govern

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ment thereby acknowledged that all maintenance changes and enhancements were proprietary to INSLAW.

63. Second, the revenues that these two agencies contributed pursuant to the maintenance contracts amounted to less than one-half of one percent of all private funds available to INSLAW for its proprietary enhancements, which the Court finds in any event to be

de minimis,

so as not to afford the government any ownership rights in the enhancements and changes created using maintenance funds. (Ling, T. 1077)

64. Because the analysis performed by the government auditor, Alan Gibson, assumed that these maintenance accounts commingled private and government funds, without any information or understanding concerning the contracts entered into between the government clients and IN-SLAW, Mr. Gibson’s analysis of the funding sources for INSLAW’s proprietary enhancements is not entitled to great weight. (Gibson, T. 2237-2239) In fact, Mr. Gibson admitted that he had no knowledge of the substance of any of the enhancements, or of the meaning of entries on the report forms used by INSLAW to track its maintenance changes or enhancements, or of any other documents that might reflect the dates on which work was performed by INSLAW programmers.

6

(Gibson, T. 2239-2244)

65. Despite its claims that INSLAW’s project code 22 was funded in part by corporate overhead which allegedly was derived in part from overhead charged to DOJ under the PROMIS Contract, DOJ has no knowledge, and has failed to demonstrate, that any government overhead or computer center funds in fact supported any software claimed by INSLAW to be developed at private expense. (Gibson, T. 2246-2249) INSLAW had sufficient private funds to support all of INSLAW’s private software development, and, in any event, the amortized portion of any capitalized software was less than the difference between INSLAW’s actual overhead costs and the maximum amount that could have been contributed by the government to the overhead pool. (Ling, T. 1097-1099, 1105-1107) Moreover, because government audits have questioned the allowability of any overhead payments reflecting costs for IN-SLAW’s independent research and development, the government has not in fact paid any allocable share of such overhead costs. (Ling, T. 1107; Gibson, T. 2227)

66. An auditor for the government has reviewed INSLAW’s financial records in order to reconcile INSLAW’s records with the analysis reflected in PX 230 and PX 231 and concluded that the method reflected in that analysis is reasonable, and that the figures reflected therein are correct, with the exception of minor differences that are either insignificant or in INSLAW’s favor. (Gibson, T. 2245-2246, 2251-2252; Ling, T. 1075-76) The analysis reflected in PX 230 and PX 231 was performed in accordance with generally accepted accounting principles. (Ling, T. 1061)

B.

INSLAW has Demonstrated that the Three Major Enhancements, the Data Base Adjustment Subsystem, the Batch Update Subsystem and the 32-Bit Architecture VAX Version of PROMIS, were Created using Private Funds and are Proprietary to IN SLAW

67. INSLAW has created, using private funds, two subsystems of PROMIS, known as Batch Update and Data Base Adjustment, which were included neither in the pilot version of PROMIS nor among the BJS enhancements. (Holton, T. 1123)

68. Neither of these subsystems was required to be delivered to the government pursuant to the Statement of Work in the 1982 Executive Office contract. (Hamilton, T. 125, 2571-2578)

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69. Data Base Adjustment was created by INSLAW in late 1983 as a private research and development project, and was not requested, required or funded pursuant to a contract with any particular client. (Holton, T. 1127) (See F.F. ¶1¶ 28 and 29 above as to two programs that comprised an earlier version of the Data Base Adjustment package.)

70. Development of Data Base Adjustment was assigned by INSLAW a separate charge code, 2214, which indicates that it was part of INSLAW’s independent research and development project, Project 22. (Holton, T. 1128) In October 1983, at the beginning of the new fiscal year, IN-SLAW’s accounting department assigned the Data Base Adjustment development project a different charge code, 9060, which again reflected independent research and development projects under Project 90. (DX 212 [Holton] at pp. 217-218) Charge codes 2214 and 9060 were used exclusively by INSLAW programmers when billing time to Data Base Adjustment development. (DX 212 [Holton] at pp. 492-493; Holton, T. 1128)

71. While paragraph 3.2.4.1 of the Statement of Work required INSLAW to retailor a number of the individual versions of PROMIS provided to the larger United States Attorneys’ Offices, and although IN-SLAW used its Data Base Adjustment enhancements for that purpose, the contract itself does not state that INSLAW is to develop software for that purpose. (Hamilton, T. 2575-2578, 2609-2610; PX 17) In the absence of Modification 12, and if DOJ requested software for data base adjustments, INSLAW could have and no doubt would have provided hard-coded, specific-need programs to perform the specified data base retailoring services, rather than and in preference to giving up its proprietary rights to its Data Base Adjustment enhancements. (Hamilton, T. 2575-2578, 2607-2610) (See F.F. ¶ 27 above.)

72. INSLAW provided the Data Base Adjustment Subsystem to DOJ pursuant to contract Modification 12. (Hamilton, T. 2578-2579)

73. The Batch Update Subsystem was created by INSLAW in November 1981 through early 1982 as a task under a contract with a private, non-federal government client. (Holton, T. 1129-31; PX 322) INSLAW’s accounting department assigned the development of Batch Update an individual charge code, 0405, which reflected that it was a task under the overall Project 04 for a private client. (Holton, T. 1131)

74. Although paragraph 3.2.2.7 of the Statement of Work refers to the transfer of information from the existing Docket and Reporting System database to a PROMIS database, and while INSLAW used the Batch Update subsystem for that purpose, the record demonstrates that the development of the Batch Update subsystem occurred prior to the execution of the 1982 Executive Office contract and that the development occurred using private funds. (Hamilton, T. 2571-2575; Holton, T. 1129-31)

75. The pre-existing Batch Update subsystem also was capable of transferring many kinds of computerized information into an existing PROMIS database, and had capabilities well beyond the input of information from the Docket and Reporting System into PROMIS. (Hamilton, T. 2574-2575)

76. Hamilton testified that in the absence of Modification 12, INSLAW would have provided the government with limited purpose software that would only have enabled the government to transfer information from a particular Docket and Reporting System database to a particular PROM-IS database. (Hamilton, T. 2575, 2605-2607) In contrast, the Batch Update subsystem was capable of transferring information from numerous different kinds of data bases into the various PROMIS formats, without “hard-coding, testing and debugging” the entire program each time. (Hamilton, T. 2571-2575)

77. Batch Update was delivered to the government by INSLAW pursuant to Modification 12, and has been used by the government. (Hamilton, T. 2575)

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78. INSLAW delivered to the government twenty-two separate versions of PROMIS that contained all of the individual PROMIS enhancements and changes, as well as the entire Batch Update subsystem, and one program of the Data Base Adjustment subsystem. (Hamilton, T. 2588-2589) INSLAW delivered to the DOJ a separate tape containing all nine programs in the Data Base Adjustment subsystem, and delivered in each individual version of the PROMIS software for the United States Attorneys’ Offices one of the nine Data Base Adjustment programs. (Hamilton, T. 2579, 2589; Gagliardi, T. 2067, 2069)

79. INSLAW was not required to develop a 32-bit architecture VAX version of PROMIS pursuant to any contract or for any private client. (Holton, T. 1132-33) The VAX version was not required to be delivered to the government under the Statement of Work in the 1982 Executive Office contract unless the government chose to implement VAX computers in its individual offices. (Hamilton, T. 2580-2581) Because the DOJ chose to use Prime minicomputers rather than VAX computers, INSLAW was not otherwise required to deliver the VAX version of enhanced PROMIS under the 1982 Executive Office contract. (Hamilton, T. 2580-81)

80. The funding for the VAX version was channelled through INSLAW’s computer center, and supported with private research and development funds. (Holton, T. 1250-51)

81. The reason that INSLAW turned over to the DOJ the VAX version of PROMIS was because of the request of the Contracting Officer in December 1982, and pursuant to Modification 12. (Hamilton, T. 2581; PX 46; PX 78) In the absence of Modification 12, INSLAW would not have provided the VAX version of PROMIS to the DOJ. (Hamilton, T. 2581)

82. It was common knowledge among INSLAW’s senior personnel and was discussed at senior staff meetings that the Batch Update subsystem, Data Base Adjustment subsystem and VAX development were being created by INSLAW, and that they were being developed at private, non-federal government expense. (Holton, T. 1142-43, 1193)

C.

INSLAW has Demonstrated the Creation of Numerous Individual Proprietary Changes and Enhancements to PROMIS using Private Funds

83.INSLAW has also demonstrated that numerous discrete proprietary changes and enhancements to PROMIS were created with private funds. They were provided to the government pursuant to Modification 12. Precisely how many such changes and enhancements there were depends on the method of counting that is used.

As Hamilton testified at trial:

[A] given change that is sewn into the software can be looked at from several different perspectives.

And you can have a single change ... that can affect multiple modules, and each time its in a different module it has — there is labor, separate labor involved to insert it, and then, within a single module, it can affect a number of different locations in the code.

And each one of those locations in the code requires independent labor to insert. So you can count them in three different ways. Each way represents a legitimate perspective, and a big part of Mr. Viden-ieks' quarrel, as far as the so-called errors, was not understanding the difference in the three different perspectives of counting.

(Hamilton, T. 368-369) Thus Videnieks’ initial debate with INSLAW over whether the number of enhancements was 800 or 247 or whatever was based upon his fundamental lack of understanding of the nature of the enhancements themselves.

INSLAW noted in a June 11, 1987 discovery-response memorandum that a large number of the individual enhancements encompassed changes to more than one program module, and numerous changes within the same program module:

Often one change or enhancement to a particular software module will require additional changes both within that soft

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ware module and to other software modules. For example, Change Number 0270 was made to module PR4400 in one place, involving eight lines of code, but required changes as well to PN9974 in two places, involving changes to one line each; PN9972 in one place to one line; and to PN9971 in one place and six lines. Change Number 0283 originally molified module WN997a in one place, involving ten lines of code, but also involving ten lines of code, but also affected modules PN9971 and PN9961 in two places each, and for six lines for each change. Change Number 0055 involved one change to the program documentation and changes to module PR4300 in twenty-four locations for a total of ninety-four lines of code.

(DX 212e, Exh. 18 at 19) This description lists only a few of the many changes that affect numerous modules in a number of individual locations.

(See also,

change numbers 0211, 0221, 0251, 0271 of PX 224) For that reason, as Hamilton explained at trial, each change or enhancement could actually be considered as several enhancements. As INSLAW concluded in its June 11, 1987 memorandum to DOJ, “purely numerical analyses of the software enhancements are not particularly instructive and are potentially misleading.” (DX 212e, Exh. 18 at 19)

With respect to the alleged “reductions” asserted by DOJ, this Court finds that IN-SLAW reduced the number of enhancements claimed as proprietary because IN-SLAW ascertained that certain enhancements,

even though they were privately funded,

were provided to the government under earlier contracts such as the Pilot project. (Holton, T. 1219-1220) For example, during the deposition of Ms. Holton, DOJ provided INSLAW with excerpts from the pilot version of PROMIS that, to Ms. Holton’s mind, cast doubt on whether certain of the privately-funded enhancements previously had been included in the pilot version. Following a detailed comparison of the enhancements list and the pilot project software, INSLAW then withdrew its claims. Among the privately funded enhancements that were discovered to have been included in the pilot project software was one of the major enhancements,

i.e.,

the Historical Purge package. Thus, even though INSLAW created those enhancements with private funds, INSLAW recognized that it could not in fairness assert proprietary rights to those enhancements against the Government and accordingly withdrew those claims from this proceeding. INSLAW similarly withdrew its claims with respect to those five discrete enhancements that at trial appeared to Ms. Holton to be included in the July 18, 1981 LEAA/BJS version of PROMIS.

This process of comparing the enhancements proofs with the previously-provided PROMIS software could have been performed easily by INSLAW with DOJ’s assistance in the summer of 1983, when IN-SLAW attempted to negotiate this issue with DOJ and submitted to DOJ its memo-randa proving specific enhancements. All of the documents used by INSLAW in this proceeding to identify the funding of its enhancements existed at the time the negotiations should have occurred. As Mr. Rugh conceded at trial, the proofs offered by INSLAW would have satisfied him that the enhancements were indeed privately funded. (Rugh, T. 1517-1520) DOJ was required to negotiate

then,

in 1983, as Vi-denieks specifically had proposed under Modification 12

(see

PPFF 228-236), but instead it wrongfully and cynically failed either to negotiate in good faith or even to reveal to INSLAW any purported concerns of Messrs. Rugh and Videnieks at that time with INSLAW’s proposed method of proof

(see

PPFF 246-250).

It is obvious and this Court finds that, contrary to DOJ’s unwarranted implications, any reduction in the number of enhancements identified by INSLAW was not caused by the purported inadequacy of any assumptions employed by Ms. Holton in her analysis. The reductions, rather, were caused by INSLAW’s desire to present this Court with the most conservative measure of INSLAW’s enhancements, by giving DOJ the benefit of the doubt whenever there was any real question, without the “window dressing” of counting each en

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hancement as several changes, or by breaking out the literally thousands of individual components of each of the three major enhancements.

In any event, the ultimate question to be answered under the automatic stay provisions is not whether 247 or 151 or 105 enhancements were misappropriated by DOJ. The fact that DOJ unlawfully has exercised control over even one of IN-SLAW’s proprietary enhancements constitutes a violation of the automatic stay and entitles INSLAW to judgment in its favor on the merits.

84. INSLAW’s privately-funded, proprietary maintenance changes and enhancements were not required to be delivered to the government under the Statement of Work in the Executive Office contract, paragraph 3.2.4.3, because they were not responsive to requests made or errors reported to INSLAW by the Executive Office. (Hamilton, T. 2567-2571; PX 17) These changes and enhancements are being used by the Department of Justice. (Hamilton, T. 2571)

85. These changes are identified by IN-SLAW within the source code of PROMIS according to standards established by IN-SLAW, using a system of change markers as “bookends” before and after the actual changes to the PROMIS code. (Holton, T. 1177-1180; PX 229 [designated “Confidential”]) The history of all changes to the programs are also listed within a history section at the beginning of each program or program module. (Holton, T. 1176-1179; PX Confidential 229) INSLAW’s documentation standards are more extensive than those generally employed by software developers in the industry. (DeLutis, T. 1287-1288)

86. Because of INSLAW's standard documentation for tracking changes and enhancements made by INSLAW to PROMIS, INSLAW is able to remove any changes or enhancements and provide an earlier version of PROMIS to a user without the changes or enhancements. (Hol-ton, T. 1180-81)

87. Each of these individual changes or enhancements originated either with a request from a user or an “in-house” suggestion from an INSLAW programmer. (Hol-ton, T. 1181, 1184) These requests and suggestions are recorded by INSLAW on report forms, which are retained by IN-SLAW in a master book. (Holton, T. 1181-1185; PX 226a) The top portion of the form records the reason for the requested change, the origin of the change and the date the change was requested. (PX 226a; Holton, T. 1183-85)

88. When the change is completed, the INSLAW programmer also completes the lower portion of the report form, noting the programmer who performed the change, the date the work was completed, the programs that were changed as a result of the work and any other pertinent comments concerning the changes made to the programs. (Holton, T. 1183-87, 1259; PX 226a)

89. These report forms are maintained by INSLAW for the use of its software division, and are not used by INSLAW in financial accounting. (Holton, T. 1259-1260)

90. By matching the changes noted in the source code with the report forms, and then examining the time sheets of the programmers during the period when the programmer worked on the changes, INSLAW has demonstrated that changes and enhancements to PROMIS were created by INSLAW and funded through non-federal government, private sources. (Holton, T. 1186-1187; PX 354) The assumptions utilized by INSLAW in making such demonstration were reasonable. (DeLutis, T. 1293-1298) These changes and enhancements that INSLAW claims as proprietary are identified on PX 224.

91. Many of the individual enhancements summarized on PX 224 add to PROMIS new functionality, or efficiency, or increase the “user-friendliness” of PROMIS,

ie.,

make PROMIS easier to use. (Holton, T. 1215-1219; DeLutis, T. 1284-1285; PX 228) Many more of these changes and enhancements added to user confidence in PROMIS insofar as certain latent defects were discovered and corrected and PROMIS therefore became more

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reliable. (DeLutis, T. 1284) No software the size of PROMIS is completely and totally “error-free”, and this fact is well known and recognized among computer software companies and their customers, as demonstrated by the special, restricted definition given by DOJ to the term “error-free” in the contract which DOJ drafted and which is at issue here. (DeLutis, T. 1284; Hamilton, T. 2568; Deroy, T. 2496-2497)

92. INSLAW defined a “bug” or “software error” as a problem with the source code that stops the program from executing or generates incorrect results, and an “enhancement” as a change that expanded the capabilities of the program. (Holton, T. 1258-1259)

93. Although DOJ’s expert defined “enhancement” differently from INSLAW, and although he only concentrated on eight of the more than one hundred discrete changes and enhancements claimed as proprietary by INSLAW, even DOJ’s expert conceded that there was no question that among the discrete changes shown on Plaintiff’s exhibit 224, INSLAW had created enhancements to PROMIS. (Gagliar-di, T. 2037-2038, 2065-66, 2096; DX 207a at 18) Dr. Gagliardi also conceded that he did not spend time forming opinions as to the functional significance of any of IN-SLAW’s enhancements and changes to PROMIS. (Gagliardi, T. 2044, 2065, 2096-2097)

94. Given the standards within the software industry for bookkeeping, accounting and documentation relating to software maintenance, and given the practices common within INSLAW and the industry at large relating to software development, IN-SLAW’s method of proof that the individual changes and enhancements identified on PX 224 were privately funded is reasonable. (DeLutis, T. 1298)

95. Defendants’ expert, Dr. Gagliardi, posited that productivity rates for IN-SLAW’s programmers could be accurately determined by dividing the raw number of lines of code in particular changes and enhancements by the number of hours shown on programmer time sheets. (Gagliardi, T. 2020-2023; DX 207a) Although Defendants’ expert testified that the “productivity” rates for the Batch Update and Data Base Adjustment subsystems appeared to him to call into question INSLAW’s time accounting records, that testimony was based merely upon a purely numerical analysis of these subsystems, and not on any knowledge of the substance of the programs themselves. (Gagliardi, T. 2053, 2077, 2090; DX 207a) (See also F.F. ¶ 398 concerning this witness’s bias, which caused him to testify in whatever way he thought might defeat INSLAW’s claims, without regard to the truth.)

96. The results of Dr. Gagliardi’s statistical analysis are undercut by the substance of those subsystems and the circumstances underlying the creation of those subsystems; approximately 25% of each of those subsystems consisted of unexecuted program documentation, which can be written much more quickly than lines of code. (Holton, T. 2507-2509, 2511) A .great number of the lines of code in each of those subsystems was generated by other IN-SLAW software rather than coded manually by the programmers. (Holton, T. 2509, 2511) In addition, Dr. Gagliardi’s count of the number of lines of code may well include “copy members” that already existed in the PROMIS programs and would not have been rewritten by the programmers who coded these subsystems. (Holton, T. 2526) These factors and others, including the experience, capabilities and work habits of the programmers who worked on these two subsystems, affect Dr. Gagliardi’s conclusions by as much as fifty percent and perhaps more. (Holton, T. 2506-2515)

97. Even excluding the substantial number of lines of code changed or added to PROMIS as a result of the development of the 32-bit VAX version of PROMIS, Defendants’ expert conceded that IN-SLAW’s proprietary enhancements constitute at least eleven percent of the total code of PROMIS. (Gagliardi, T. 2070-2071) However, an analysis of value based solely upon the number of lines of code can be misleading because, as Defendants’ expert noted, it is desirable for a programmer to devise a program that consists of as few

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lines as possible so as to take up less memory space and execute more quickly. (Gagliardi, T. 2098-2100)

III. C. MADISON BREWER’S RELATIONSHIP TO INSLAW AND THE ORIGINS OF HIS BIAS AND LACK OF IMPARTIALITY TOWARD IN-SLAW

A.

Brewer’s Firing by Hamilton

98. C. Madison Brewer, III (“Brewer”) was employed by the Institute as its general counsel from November 1974 to April 1976. (Answer ¶ 7; Brewer, T. 1571; Hamilton, T. 90; Merrill, T. 812) At the time of his employment, Brewer understood that Hamilton and the Institute were synonymous. (PX 324 [Brewer] at p. 49; Brewer, T. 1655)

99. Hamilton interviewed Brewer prior to hiring him. (Hamilton, T. 91) At the time, Hamilton was looking for a former prosecutor to act as general counsel whose primary responsibility would be to serve as an intermediary between the Institute and its marketplace of public prosecutors. (Hamilton, T. 91; Merrill, T. 755) In this liaison capacity, the general counsel would translate between what public prosecutors wanted and what the Institute had to offer. (Gizzarelli, T. 469; Brewer, T. 1575; Hamilton, T. 91; Merrill, T. 755) The general counsel would also be a key player in the “inner circle” of managers who were utilized by Hamilton for running the Institute. (Hamilton, T. 84, 92; Merrill, T. 751) Hamilton fully informed Brewer about these duties and responsibilities and hence Brewer must have understood the nature of the position. (Hamilton, T. 91; Gizzarelli, T. 469) Prior to accepting the position at the Institute, Brewer was also informed by the out-going general counsel that Hamilton was a fast-paced person who was an entrepreneurial type who wanted to get things done. (Gizzarelli, T. 470)

100. From the outset, Brewer was himself unhappy because of his misconception of what the job as general counsel entailed. (PX 324 [Brewer] at pp. 41, 49-50; Brewer, T. 1576) Within weeks of his joining the Institute, Brewer himself came to realize that his concept of what a general counsel was to be was radically different from Hamilton’s, in that Hamilton chose to make decisions without consulting Brewer. (PX 324 [Brewer] at p. 43; Brewer, T. 1576)

101. Brewer reported to Hamilton, who observed his performance as general counsel of the Institute. (Hamilton, T. 92) On at least three specific occasions, Brewer failed to perform important tasks assigned to him. (PX 324 [Brewer] at pp. 39-45; Hamilton, T. 93-94; Merrill, T. 756) Brewer was informed on a number of occasions in 1975, beginning at least as early as April, that his work was unsatisfactory and that he would have to make efforts to improve or consider leaving his employment. (Hamilton, T. 93-95; Merrill, T. 757, 812-813) Brewer’s contrary testimony is unbelievable for a variety of reasons, including his own testimony referred to in F.F. MI 103 and 106-110 below. See also F.F. MI 104 and 398.

102. Brewer himself understood that he was not performing one of his critical duties, which was to generate income for the firm. (PX 324 [Brewer] at p. 65) In addition, Brewer believed that he was a substantial “drag on the overhead,” because of his failure to generate business. (PX 324 [Brewer] at pp. 64-65)- He also understood that there were projects assigned to him which either were not completed or not done in a timely manner, and he was aware of Mr. Hamilton’s disappointment as a result thereof. (PX 324 [Brewer] at pp. 39-45; Hamilton, T. 93, 97; Merrill, T. 756)

103. When Brewer’s performance did not improve, Hamilton informed Brewer that he was not fitting in at the Institute, that he was like a “duck out of water”. (Hamilton, T, 94-95; PX 324 [Brewer] at pp. 51-55; Brewer, T. 1584; Merrill, T. 756-757) Hamilton cited to Brewer the ways in which it was not working out and asked him to leave. (Hamilton, T. 94-95) Because of Hamilton’s concern that firing Brewer would have a negative impact on the Institute’s relationship with the local D.C. United States Attorney’s Office (because the Institute originally had sup

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ported that office as a principal source of revenue and because the Institute had hired Brewer from this office), Hamilton told Henry F. Greene, then Chief of the Superior Court Operations of the United States Attorney’s Office for the District of Columbia, that Brewer was not fitting in at the Institute, and sought his advice and the advice of others about how to fire Brewer painlessly. (Gizzarelli, T. 473; Hamilton, T. 95)

104.Because of his belief that Brewer’s performance was not likely to improve, Hamilton told Brewer specifically to look elsewhere for work and to give Hamilton a date certain to leave. (PX 324 [Brewer] at pp. 51-55; Brewer, T. 1583; Hamilton, T. 96, 249, 252) In early April 1976, Hamilton again asked Brewer when he would be leaving the Institute for other work because of the length of time it was taking Brewer to leave. (Hamilton, T. 96; PX 324 [Brewer] at p. 67; Gizzarelli, T. 473) In April 1976, Brewer was terminated by Hamilton because of his failure to perform his job duties and responsibilities. (Hamilton, T. 97; Gizzarelli, T. 470-471; Merrill, T. 756-757)

7

Brewer finally left the Institute at the end of April 1976 and returned to his earlier position as an assistant U.S. Attorney for the District of Columbia. (PX 324 [Brewer] at pp. 66-67; Brewer, T. 1581; Hamilton, T. 97; Merrill, T. 812)

8

On the basis of all of the evidence, Brewer unquestionably knew that he was being fired for cause; he had no reason to believe that he was leaving voluntarily.

9

This Court rejects DOJ’s argument in favor of Brewer’s contrary contention. Hamilton was simply being humane, as well as a good manager and a protector of IN-SLAW’s own best interest, by not publicizing the fact that Brewer was being forced out, rather than leaving voluntarily. [Editor’s Note: The Court has omitted portions of this paragraph from publication.]

105. Brewer understood that when he gave notice of what he characterized as his “decision to leave”, he was “no longer part of Hamilton’s ‘select circle,’ and was no longer included in meetings of any import”. (PX 324 [Brewer] at p. 61; Brewer, T. 1584) He also stated that he had become a “nonperson” and “outside of the inner-circle,” and that this situation, which he characterized as putting him in an awkward position, lasted from the middle of 1975 to April, 1976, when he finally left. (PX 324 [Brewer] at pp. 60-65; Brewer, T. 1584)

106. During Brewer’s employment at the Institute, he developed very negative opinions about Hamilton. (PX 324 [Brewer] at pp. 61, 70-79; Brewer, T. 1587-1588) Brewer believed that Hamilton had a “messianic personality” and a very distorted view of reality. (PX 324 [Brewer] at pp. 61, 70; Brewer, T. 1649) Brewer perceived that Hamilton had a persecution complex and that Hamilton thought “there was a conspiracy to get him.” (PX 324 [Brewer] at p. 70) According to Brewer, Hamilton allegedly had a “love/hate fixation about the law or lawyers” and was very hostile to lawyers and particularly prosecutors.

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(Brewer, T. 1592, 1653-1654; PX 324 [Brewer] at p. 71) Brewer also believed that Hamilton did not view facts objectively and that Hamilton considered all persons who disagreed with him as his “enemy.” (PX 324 [Brewer] at pp. 70-72; Brewer, T. 1589, 1592)

107. On the basis of Brewer's observations, he concluded that Hamilton was “a very troubled individual”. (PX 324 [Brewer] at p. 72; Brewer, T. 1651) In particular, Brewer considered that Hamilton was an “M.O.”, which in prosecutor’s vernacular is an individual sent away for mental observation because of bizarre behavior or a questionable capacity to comprehend court proceedings. (PX 324 [Brewer] at p. 74; Brewer, T. 1590; Gizzarelli, T. 474-475) Brewer freely characterized Hamilton as “crazy Bill” and described Hamilton’s conduct as “Bill’s being crazy”. (PX 324 [Brewer] at p. 78; Brewer, T. 1652)

108. Brewer also believed the Institute’s empirical research to be of questionable value, non-utilitarian and “kind of a joke”. (PX 324 [Brewer] at pp. 75-77; Brewer, T. 1660)

10

More importantly, Brewer thought that Hamilton had a very unrealistic view of PROMIS software and its role in the world. (PX 324 [Brewer] at p. 73)

109. These were opinions that Brewer developed during the period of time that he was the Institute’s general counsel. (PX 324 [Brewer] at pp. 78-79; Brewer, T. 1653) Subsequent to leaving the Institute, Brewer repeated some of these negative comments to others. (PX 324 [Brewer] at pp. 79-80; Brewer, T. 1659-1660; Gizzarel-li, T. 475) More particularly, Brewer continued to refer to Hamilton as an “M.O.” after Brewer rejoined the U.S. Attorney’s office. (Gizzarelli, T. 475)

11

110. On the basis of the foregoing and the evidence taken as a whole, this Court is convinced beyond any doubt that, prior to assuming his position as the PROMIS Project Director at EOUSA, and during the course of discharging his responsibilities in that position, Mr. Brewer was consumed by hatred for and an intense desire for revenge against Mr. Hamilton and INSLAW, and acted throughout this matter in a thoroughly biased and unfairly prejudicial manner toward INSLAW.

IV. DOJ’S DECISION TO AUTOMATE U.S. ATTORNEY’S OFFICES WITH PROMIS AND TO HIRE BREWER AS PROMIS PROJECT MANAGER

A.

Nature of DOJ’s Case-Tracking Problem

111. Beginning in the early 1970’s, both the Office of Management and Budget (“OMB”) and the Congress were criticizing DOJ for its lack of management information concerning its litigation activities. (PX 9; PX 341 [Tyson] at p. 27) In response to this criticism, DOJ attempted to develop a more responsive case management system known as the Automated Caseload and Collection System (“ACCSYS”). (PX 9) In a 1978 internal audit study, DOJ found ACCSYS to be seriously deficient in applications, inflexible in use and expensive to operate with estimated annual operating

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costs of $500,000 per office. (PX 9) The system was finally abandoned in 1979. (PX 9)

112. During this same time period, LEAA was funding the PROMIS Project in the District of Columbia U.S. Attorney’s Office. (PX 8; PX 9) The Old PROMIS System was also being utilized by numerous other state and local jurisdictions. (PX 9) Old PROMIS received enthusiastic endorsements from its various users because of its flexibility of use and breadth of hardware applications. (PX 9)

113. After careful study, DOJ’s Justice Management Division (“JMD”) and the Executive Office for United States Attorneys (“EOUSA”) concluded in 1981 that the then-current docketing and reporting system should be replaced by Old PROMIS, as modified by INSLAW under the pilot project contract, in the 20 largest U.S. Attorney’s Offices, and by word-processing software mimicking the functions of Old PROMIS, for the remaining 74 U.S. Attorney’s Offices. (PX 2; PX 10) On August 27,1981, Deputy Attorney General Edward C. Schmults approved a joint JMD/EOUSA proposal to implement Old PROMIS on local mini-computers in the 20 largest U.S. Attorney’s Offices and on word processing equipment in the remaining 74 U.S. Attorney’s Offices. (PX 4; PX 10; Hamilton, T. 109-111)

114. The PROMIS Project was understood by senior officials at DOJ to be the most important long-term improvement that could be made for U.S. Attorneys’ Offices in particular, and law enforcement in general. (PX 1, PX 341 [Tyson] at p. 33) In light of the importance of the project, Schmults directed that the originally proposed procurement schedule be moved up so that work on the project could begin at the earliest possible date. (PX 6)

115. Despite this recognition of the importance of the PROMIS Project by Senior DOJ officials, it was not universally supported by staff personnel at DOJ, particularly in JMD. (PX 341 [Tyson] at p. 53; Brewer, T. 1636; PX 3)

116. As part of DOJ’s overall planning on the PROMIS Project, a senior level PROMIS Oversight Committee was organized in the spring of 1981. (PX 341 [Tyson] at pp. 17-18; PX 8) As Assistant Attorney General for the Criminal Division, D. Lowell Jensen attended PROMIS Oversight Committee meetings; as Associate Attorney General and Deputy Attorney General, Jensen was ranking member of that Committee. (PX 328 [Jensen] 83-84) The PROMIS Oversight Committee decided important strategic questions, but Brewer, the Project Manager, had responsibility for and direction of day-to-day activities. (PX 341 [Tyson] at p. 99; Tyson, T. 1541; PX 10)

117. A three year implementation contract for the PROMIS Project was planned with a Request for Proposal (“RFP”) scheduled for issuance in October 1981 to be responded to within six weeks. (PX 5) The award of the contract was planned for March 31, 1982. (PX 5)

B.

INSLAW’S Recommendation to Use Micro-Computers Rather than Word Processors in the Executive Office RFP

118. Prior to DOJ’s issuance of the PROMIS Project RFP, several vendors approached DOJ with- recommendations against the use of word processing equipment to perform the complex case-tracking functions of Old PROMIS. (PX 341 [Tyson] at pp. 46-47, 52-53)

119. In May 1981, Hamilton and Gizza-relli, on behalf of INSLAW, met with William P; Tyson, Director of EOUSA, and his deputy, Lawrence McWhorter, in an effort to persuade them that use of word processing equipment to perform PROMIS-like case control functions was ill-advised, particularly in light of the computation-intensive requirements of legal process debt collection and the availability of inexpensive full function micro-computers that could perform both data processing

(i.e.,

case control and management information functions) and word processing functions. (Hamilton, T. 116; Gizzarelli, T. 496; Tyson, T. 1543-1545; PX 341 [Tyson] at pp. 43-44, 52-53) Moreover, INSLAW recommended that, if DOJ were not interested in

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substituting micro-computers for word processors, then DOJ should split the planned procurement into two separate procurements, one for computer-based PROMIS in the 20 largest offices and one for word-processing based case tracking for the 74 smaller U.S. Attorney’s Offices. (Hamilton, T. 116-117)

120. Tyson responded to INSLAW's concern by indicating that he had no reason to doubt its validity but that, due to the difficulty of getting approval of the proposal, he was not willing to change it. (Hamilton, T. 117) Tyson did say, however, that he would regard the entire contract as a success if computer-based PROMIS were implemented in the 20 largest U.S. Attorney’s Offices regardless of whether implementation of word processing PROMIS was successful. (Hamilton, T. 117)

12

Hamilton’s response to Tyson was that, under these circumstances, INSLAW would bid on the RFP and would do its best to make the entire project a success. (Hamilton, T. 118; PX 341 [Tyson] at p. 46)

121. OMB, in response to an INSLAW inquiry after the meeting with Tyson and McWhorter, wrote to the Deputy Attorney General enclosing and endorsing an IN-SLAW analysis of the reasons for using full function computers rather than word processors for the PROMIS-like case control work in the 74 smaller U.S. Attorney’s Offices. (Hamilton, T. 118-119; PX 7)

122. Despite these recommendations, DOJ issued the PROMIS Project RFP on November 2, 1981. (Answer IT 12) The RFP sought bids for implementation of Old PROMIS on mini-computers and for PROMIS-like case control software that would work on word processing equipment. (Answer II12; Hamilton, T. 124) This proposal sought

only

the pilot project version of PROMIS plus the BJS enhancements. (Hamilton, T. 124; Merrill, T. 764-766, 840-841)

C.

DOJ’s Hiring of Brewer as PROMIS Project Manager

123. As part of the original approval of the PROMIS Project, Deputy Attorney General Schmults also approved the appointment of a PROMIS Project Manager. (PX 10) On January 6, 1982, Schmults approved an EOUSA request for the allocation of a Senior Executive Service Position for the PROMIS Project Manager. (PX 10)

124. In essence, the PROMIS Project Manager was assigned total responsibility for the implementation and development of the PROMIS Project for EOUSA. (PX 10) The Project Manager’s responsibilities were three-fold: first, responsibility for coordination with the contract to implement the system within three (3) years in offices of differing sizes; second, responsibility for coordinating the utilization of PROMIS by the U.S. Attorney’s Offices, JMD and DOJ; and third, responsibility for coordinating EOUSA activity associated with the implementation of PROMIS. (PX 10) In addition, the Project Manager was responsible for organizing a staff to administer the PROMIS Project. (PX 10)

125. In August 1981, Laurence McWhorter, Deputy Director of EOUSA, approached Brewer to become the PROMIS Project Manager. When this opportunity presented itself, Brewer, believing that he had been wrongfully discharged by Hamilton and INSLAW and having developed an intense and abiding hatred for Hamilton and INSLAW as a result thereof, applied for the PROMIS Project Manager’s position with the purpose of using that position to vent his spleen against INSLAW. The evidence showed conclusively, and beyond any question in the mind of this Court, that Brewer was consumed by hatred for and an intense desire for revenge against IN-SLAW and Hamilton. (PX 324 [Brewer] at p. 90; PX 341 [Tyson] at pp. 69-70; Tyson, T. 1539-1540) Brewer was interviewed for the position by McWhorter and Tyson of EOUSA and Rooney of JMD. (PX 341

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[Tyson] at pp. 67-69, Tyson, T. 1639-1540; PX 330 [McWhorter] at pp. 21-23; Brewer, T. 1657)

126. During these interviews, Brewer did not disclose the opinions he held regarding Hamilton, because in his view they were “irrelevant.” (PX 324 [Brewer] at p. 92; Brewer, T. 1647, 1657) In addition, Brewer did not disclose the reason for his termination from the Institute or the fact that he had been asked to leave. (PX 341 [Tyson] at pp. 70-71; Tyson, T. 1549; Brewer, T. 1658) Brewer also believed that his reasons for leaving the Institute were “irrelevant.” (Brewer, T. 1658)

127. As of the time of these interviews, Brewer, Tyson, McWhorter and Rooney were all aware that INSLAW was the likely successful bidder for the work of performing the PROMIS Project. (PX 341 [Tyson] at p. 70; Tyson, T. 1539-1540; PX 330 [McWhorter] at p. 12; PX 324 [Brewer] at pp. 96-97) If Brewer had disclosed the actual circumstances of his termination, at least Rooney and Tyson would have made further inquiry into his employment at the Institute, and Rooney’s strong inclination would have been not to hire Brewer. (PX 341 [Tyson] at pp. 71-72; Tyson, T. 1553-1554)

128. Despite this knowledge of IN-SLAW’s role as a bidder on the Contract and DOJ’s understanding that Brewer had previously been employed by INSLAW, this Court does not believe that any inquiry was made by DOJ to determine INSLAW’s view of Brewer as an employee, or as to the circumstances of his termination from employment.

13

(PX 341 [Tyson] at p. 85; Tyson, T. 1551-1552, 1554; Hamilton, T. 296-297; PX 209 [Confidential])

Indeed, McWhorter and Tyson believed that Brewer’s prior employment with IN-SLAW was a “plus” factor for DOJ, and failed to recognize that such prior employment would generally lead the former employee either to favor or to disfavor the former employer, thus preventing that person from being impartial in the discharge of his duties.

129. Despite the fact that Brewer had no prior experience with computers, computer technology, computer programming, accounting, auditing or contract administration, he was hired as the PROMIS Project Manager and began in that position in January 1982. (PX 324 [Brewer] at pp. 9-10, 92-93; Brewer, T. 1643-1644) He was in full charge of administering the PROMIS Project. (Answer 117) In essence, Brewer was given day-to-day direct responsibility for the PROMIS Project. (PX 341 [Tyson] at p. 99; Tyson, T. 1540-1541) More particularly, in exercising this responsibility he effectively was left alone to implement the PROMIS system. (PX 341 [Tyson] at p. 105; Tyson, T. 1541)

130. As part of his responsibilities as Project Manager on the PROMIS Contract, Brewer was the liaison between EOUSA and other components of DOJ and served as the spokesman for EOUSA on the Project. (Brewer, T. 1604) Brewer also dealt directly with INSLAW in connection with the contract. (Brewer, T. 1654; Tyson, T. 1540)

131. Brewer and Rugh regularly informed Tyson of their views on INSLAW’s assertion of proprietary rights in Enhanced

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PROMIS, their contingency plans for assuming control over the contract if discontinuation of advance payments caused IN-SLAW’s insolvency, their awareness of delays in hardware procurement, and their concern that INSLAW might be entitled to additional time-sharing cost payments because of greater than anticipated use of PROMIS by the U.S. Attorney’s Offices. (PX 237, 238, 239, 240, 241, 242, 243, 244, 245, 246, 248, 249) Brewer also briefed the PROMIS Oversight Committee as well as the staff of the Assistant Attorney General for the Criminal Division (who at the time was D. Lowell Jensen) in regard to the PROMIS Contract. (Brewer, T. 1604, 1661-1662) The Executive Office, including Brewer and his superiors, reported directly to Jensen when Jensen was Associate Attorney General and then began reporting directly to the Deputy Attorney General when Jensen was promoted to that position. (Brewer, T. 1661-1662; Tyson, T. 1534-1535)

D.

Brewer’s Organization of DOJ’S PROMIS Project Team

132. Brewer began organizing his staff for the PROMIS Project shortly after his appointment to the position. (PX 324 [Brewer] at pp. 101,108-109) At the inception of the Project, Peter Videnieks had been appointed as Contracting Officer. (PX 324 [Brewer] at p. 104; Brewer, T. 1606; PX 39; PX 342 [Videnieks] at pp. 17-20; Videnieks, T. 1805-1807) Although at all times during the contract Videnieks was an employee of DOJ’s JMD, EOUSA requested that he be assigned “full time” to the PROMIS Project, reimbursed JMD in full for his services and provided Videnieks with an office and file space. (PX 39; PX 238; PX 324 [Brewer] at p. 102; Brewer, T. 1606)

133. This “extraordinary action” was taken by Brewer to insure Videnieks’ undivided service on the PROMIS Project. (PX 39) In September 1982, Tyson, at Brewer’s request, sought and received Rooney’s permission to have Videnieks assigned essentially full-time to the PROMIS Project because of Brewer’s belief that Videnieks was needed full time to “vigorously monitor the INSLAW contract”. (PX 39)

14

Vi-denieks was described by one witness as a puppet who responded to Brewer’s direction. (Gizzarelli, T. 527) Videnieks’ testimony, especially at deposition, but also in Court, reveals a man keenly aware of his own limitations and the superior rank and knowledge possessed by Brewer and Rugh. Videnieks was a lower level employee who was dependent on the expertise of others, specifically Brewer and Rugh, in all areas about which he had to make decisions as the contracting officer, including accounting, computer software and computer hardware. In addition, Videnieks was dependent upon the good will and approbation of Brewer and Rugh for his professional livelihood and advancement.

INSLAW believed, with good reason, that Videnieks was not acting like a Government contracting officer in that he was not independent from the disputes or divorced from the operational aspects of the contract. (Gizzarelli, T. 527) Although a Government contracting officer is of course a representative of the Government and not a completely detached and neutral arbiter, nevertheless he has a responsibility — which it is obvious Videnieks did not fulfill in this case — to act in a statesmah-like manner, somewhat “above the fray,” at least to the same extent as would a corporate president, as William Hamilton has conducted himself. (Sherzer, T. 992) Indeed, the opinion of our Court of Appeals in

Conax Florida Corp. v. United States,

824 F.2d 1124, 1128 (1987) suggested that a contracting officer can be regarded as separate from either “party,” when that Court stated,

“the parties

litigated this threshold question

before the Navy’s contracting officer,”

and when the Court then held, “we may set aside the contracting officer’s finding only if we determine it is arbitrary and capricious.” (Emphasis added.)

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134. Brewer interviewed and hired Michael Snyder as the Contracting Officer’s Technical Representative (“COTR”) in June of 1982. (PX 337 [Snyder] at p. 45) As COTR, Snyder was required to provide technical advice and assistance to the Contracting Officer in connection with the PROMIS Project. (PX 337 [Snyder] at pp. 29-30)

135. Snyder was hired as COTR despite the fact that he had very limited education, training or experience in computers, computer hardware and software, computer technology and installations. (PX 337 [Snyder] at pp. 5-9, 13) Although Snyder had some prior experience involving automated litigation systems, this was largely limited to legal research services, such as LEXIS or JURIS, and to document retrieval systems. (PX 337 [Snyder] at pp. 7-8, 17-19) In his position as COTR, Snyder discussed the PROMIS Project with Brewer on a daily basis, and his office was two doors away from Brewer’s office. (PX 337 [Snyder] at pp. 28-29)

[Editor’s Note: The Court has omitted paragraph No. 136 from publication.]

137. Both Rugh and Videnieks were infected by Brewer’s poisonous attitude towards Hamilton and INSLAW, and they aided and assisted Brewer in his wrongful efforts to injure INSLAW. Rugh also was improperly motivated by his desire to build a small empire within EOUSA if DOJ were to take over the job of software development and maintenance with respect to PROMIS software.

V. INSLAW GIVES DOJ NOTICE OF ITS OWNERSHIP OF AND PROPRIETARY RIGHTS TO ENHANCED PROMIS

A.

INSLAW Gives Notice of Its Proprietary Claims

138. By the time that DOJ issued the RFP, INSLAW had made substantial enhancements to Old PROMIS. (Hamilton, T. 105; Merrill, T. 763) These enhancements, which eventually included major new functional subsystems and substantial changes to the existing code, at a cost which IN-SLAW estimated to be $8.3 million, rendered Enhanced PROMIS far superior to Old PROMIS in terms of speed, flexibility, ease of use, breadth of function, and ability to be modified for particular needs. (Hamilton, T. 400; Merrill, T. 760-762; Holtoi. T. 1216-1219)

Both before and after the PROMIS contract was signed, INSLAW specifically advised EOUSA in writing that it had available for sale, at an additional cost, certain proprietary enhancements to PROMIS.

139.In its Technical Proposal responding to DOJ’s PROMIS Project request for proposals (“RFP”), INSLAW informed DOJ that it had made enhancements to Old PROMIS which were proprietary, and as to which it had made a significant developmental and commercial commitment. (Answer II13; PX 12; Hamilton, T. 124-125; Gizzarelli, T. 482-483) In this regard, IN-SLAW specifically made a claim of proprietary rights in such enhancements. (Hamilton, T. 124) In response to INSLAW’s proposal, Videnieks requested a clarification of INSLAW’s claim of proprietary rights to PROMIS software. (PX 13; Hamilton, T. 126; Merrill, T. 766-767) In an amendment to its Technical Proposal dated January 13, 1982, INSLAW responded to Videnieks’ inquiry and specifically informed DOJ that "... all of INSLAW’s software is proprietary to it thus far.” (PX 14; Hamilton, T. 127) Videnieks did not respond further to INSLAW’s amendment of its Technical Proposal. (Gizzarelli, T. 490; Merrill, T. 767-769) INSLAW also indicated that such programs were copyrighted and that since May 1981 it had been developing privately financed enhancements to PROMIS which were the exclusive property of INSLAW, and that DOJ had no license to use these privately-financed enhancements. (PX 14)

This Court rejects DOJ’s contention that INSLAW offered to give up, without fee, all its proprietary rights in PROMIS when it offered to make “available to the United States Attorneys’ Offices” new enhancements and modifications to PROMIS that INSLAW planned to develop “[d]uring the life of this project — but not as part of this

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project.” (PX 12) DOJ’s interpretation ignores the crucial language “not as part of this project,” whereby INSLAW clearly indicated that the enhancements were

not

being offered for no consideration or without a claim of proprietary rights.

In addition, DOJ’s interpretation would lead to an absurd result. It would require this Court to believe, contrary to all the evidence, that INSLAW was willing to give up, without fee, its corporate lifeblood— was offering, in effect, to commit corporate suicide. (See F.F. ¶ 142 below.)

140. To illustrate this point, INSLAW, in its Technical Proposal, singled out the two-program version of the data base adjustment subsystem as an enhancement which had been developed by INSLAW using private funds. (Hamilton, T. 125; PX 14)

15

The data base adjustment subsystem was not required to be delivered under the contract nor had it been required to be delivered under any prior DOJ contracts (Hamilton, T. 125, 2575-2578; Merrill, T. 768). By this January 22 amendment, IN-SLAW illustrated the concept that IN-SLAW had all the proprietary rights in Enhanced PROMIS (Gizzarelli, T. 493).

141. Subsequent to receipt of IN-SLAW’s response to Videnieks, and prior to the execution of the contract, no one from DOJ made any further inquiry of IN-SLAW, or raised any questions, concerning INSLAW’s right to assert its proprietary rights in Enhanced PROMIS. (Hamilton, T. 128; Merrill, T. 767-769; Gizzarelli, T. 490) Brewer was not given and had not considered INSLAW’s January 13,1982 letter, or any of the pre-contract correspondence between INSLAW and Videnieks; therefore, Brewer’s subsequent positions regarding INSLAW’s proprietary rights were taken without consideration of this letter. (PX 324 [Brewer] at pp. 204-205)

B.

DOJ’S Confusion over Data Rights

142. After INSLAW’s submission of its Technical Proposal, Gizzarelli, Kelley, Merrill and Hannon from INSLAW had several negotiating sessions with DOJ personnel including Peter Videnieks, Jack Rugh, Patricia Goodrich and Brewer (who did not attend all of the sessions). (Gizzarelli, T. 484-485) At the first negotiating session in which the contractual data rights clause was discussed, Videnieks stated that DOJ was entitled to receive unlimited rights to the PROMIS software to be delivered under the contract. (Gizzarelli, T. 488-489, 582-583) In response, Kelley conveyed Gizzarelli’s view to DOJ that INSLAW could not live with that restrictive data rights clause. (Gizzarelli, T. 486) The basis for this statement was that INSLAW existed solely on the basis of its PROMIS software and that such a broad data rights clause would destroy any business potential for INSLAW because “it would have in effect delivered to the DOJ all of the assets of INSLAW, Inc.” (Gizzarelli, T. 486-487, 583-584) This Court accepts Gizzarelli’s testimony concerning what was said at the negotiating sessions and rejects Kelley’s contrary testimony for the reasons relating to credibility that are stated in F.F. II398.

143. At the next negotiating session, the attendees discussed the data rights clause again. (Gizzarelli, T. 487) IN-SLAW proposed changes to the contractual data rights provisions, and eventually negotiated terms that were acceptable to DOJ and that, INSLAW understood, preserved INSLAW’s rights in the software. (Gizza-relli, T. 488)

16

Under this alternative pro

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posal it was INSLAW’s intention, of which DOJ was aware, that DOJ did not gain unlimited rights to any of INSLAW’s proprietary enhancements to the software. (Gizzarelli, T. 488)

Both Hamilton and Brewer were acutely aware of the fact that permitting DOJ unlimited rights to INSLAW’s proprietary enhancements was tantamount to corporate suicide, and neither understood that the contract was intended to give DOJ unlimited rights to these proprietary enhancements. This is the reason that Brewer later was determined to get these enhancements and why Hamilton was equally determined not to let Brewer get INSLAW’s Enhanced PROMIS.

144. There is some uncertainty as to whether INSLAW and DOJ had a meeting of the minds on the PROMIS contract; DOJ’s deletion of the “Rights in Data” clause from the PROMIS Contract evidences that uncertainty, yet also demonstrates DOJ’s awareness of the critical need for INSLAW to maintain its proprietary rights in its enhancements to PROM-IS. (PX 15; PX 16; PX 17) Hamilton understood that DOJ had received the right to use the PROMIS computer software only in the 20 largest offices specified in the contract. (Hamilton, T. 363-364) Giz-zarelli’s and Merrill’s understanding was similar to Hamilton’s understanding. (Giz-zarelli, T. 488; Merrill, T. 764, 769-770) Kelley testified that DOJ informed him that it only wanted to use the PROMIS computer software for the U.S. Attorney’s Offices. (Kelley, T. 1385)

17

Rugh testified that he understood DOJ had the right to use the PROMIS software anywhere in DOJ and to distribute it to the rest of the federal government, to state and local government and even to private parties. (Rugh, T. 1434, 1463-1466) However, this Court does not believe that testimony, because Rugh acknowledged that he equally understood that INSLAW was actively attempting to market PROMIS software to private firms and state and local prosecutors. (Rugh, T. 1463) Nor does the Court believe the similar testimony of Brewer and Videnieks. Brewer testified that he understood that DOJ had absolute rights to give the PROMIS software away to anyone it chose, including private parties. (Brewer, T. 1609, 1683-1684) Notwithstanding this purported belief, Brewer testified that he had a “gentlemen’s understanding” with Kelley that DOJ would not give PROMIS away to private companies. (Brewer, T. 1686-1687) Videnieks testified that he understood that DOJ had the absolute right to give the software away to anyone, including private parties. (Videnieks, T. 1821-1823) Moreover, Videnieks believed that gentlemen’s agreements or unwritten side agreements were not only unenforceable, but also would subject the government employee making such commitment to sanctions. (Videnieks, T. 1873-1878)

Neither Brewer nor Rugh nor Videnieks could fail to understand that, if INSLAW gave to DOJ the right to

give away

to

anyone

all of INSLAW’s PROMIS software, INSLAW would be unable to

market

that software: Who would

buy

from IN-SLAW what could be gotten

free

from DOJ? Thus, Brewer, Rugh and Videnieks were bound to know that INSLAW did not intend what they now claim the contract meant.

145. In its original Technical Proposal, INSLAW also informed DOJ that completion of the scope of work contemplated in the RFP would cost approximately $14 to $15 million. (Hamilton, T. 129) INSLAW was subsequently informed that DOJ had only approximately $10 million dollars to spend but that DOJ would make certain undertakings in order to get INSLAW to perform the contract at the $10 million dollar level. (Hamilton, T. 129-130; PX 19) The negotiation memorandum prepared at the time of the negotiations shows that INSLAW’s proposed costs were reduced as

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a result of lengthy and detailed negotiations. (PX 19)

146. First DOJ stated that it would be willing to make certain timely contributions of manpower in the form of PROMIS system managers during the implementation phase to reduce the cost of the overall effort to the budgeted amount. (Hamilton, T. 129-130; PX 19)

18

147. Next DOJ assured INSLAW that it would adhere to the schedule for procuring the government furnished equipment,

i.e.,

computers and word processors, essential to timely contract performance. (Hamilton, T. 193)

19

Third, DOJ assured IN-SLAW that it would timely make available, which it frequently failed to do, the U.S. Attorney’s Office personnel necessary to enable INSLAW to ascertain individual office procedures and requirements. (Hamilton, T. 194;

see

PX 225a, Holton, T. 1118-1119) Finally, DOJ represented to IN-SLAW that there would be limits on the variances in requirements among the various offices. (Hamilton, T. 195) This was the only commitment DOJ was able to fulfill. (Hamilton, T. 195) On the basis of these representations and negotiations, IN-SLAW agreed to a three year cost-plus incentive fee contract with a target price not to exceed $9,612 million. (Hamilton, T. 130; PX 18; PX 19; PX 20)

148. Contract No. JVUSA-82-C-0074 (“PROMIS Contract”) to implement and install Enhanced PROMIS was awarded to INSLAW on March 16, 1982. (Answer If 14) The contract was on a cost-plus basis which was very similar to the Institute’s prior contracts with LEAA except for the addition of an incentive fee, and except that the 1982 implementation contract was by far the largest government contract with which INSLAW had ever been involved. (Hamilton, T. 130)

149. INSLAW did not participate in the drafting of the statement of work contained in the contract which described the nature and type of services to be performed under the competitive procurement contract. (Rugh, T. 1512; Hamilton, T. 2599) In any event, the major issue here is not over rights to what was delivered under the contract, but over rights to what was delivered

beyond

the contract.

C.

Nature and Terms of the PROMIS Contract

150. The contract between INSLAW and DOJ involved two separate, severable and clearly distinguishable tasks:

1. To create, generate and implement software to be used on computers at twenty designated larger U.S. Attorney’s Offices (with an option, admittedly never exercised, to expand this

use,

to up to thirty offices).

2. To create, generate and implement

a different kind of

software to be used on specified word processing equipment at some seventy-four smaller U.S. Attorney’s Offices. (PX 17)

Thus, Paragraph 1.2 of the contract provides in part:

1.2 The Contractor shall implement PROMIS software and procedures as modified for the U.S. Attorney’s environment on Government furnished mini-computers located in the larger U.S. Attorneys’ Offices. Case tracking systems that have been developed to operate on Government furnished word processing equipment shall be installed in the smaller U.S. Attorneys’ Offices....

151. The parties clearly understood that these were separate tasks, and required the development and creation by INSLAW of two different and distinguishable kinds of software, each to be implemented only within the designated types of offices specified in the contract for that particular kind

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of software. (PX 324 [Brewer] at pp. 215-217; Snider 54-56; Gizzarelli, T. 479, 488, 494-495; PX 341 [Tyson] at p. 41; Hamilton, T. 110-111, 115, 132-134; Merrill, T. 770-771)

152. The software generated for the twenty larger computer-site offices, as specified in the contract, was to be used

only

at those offices and the word processing type of software to be developed and created by INSLAW was to be used

only

at the seventy-four smaller offices. (Hamilton, T. 132-134; Merrill, T. 764; Gizzarel-li, T. 488, 497-499; PX 324 [Brewer] at pp. 215-216) At no time during any meeting, either before or after the contract was signed, did anyone from DOJ inform IN-SLAW that DOJ believed that the computer based software could be used beyond these 20 offices. (Merrill, T. 770; Hamilton, T. 134) The contract did provide, however, that DOJ could extend the implementation of computer-based PROMIS to an additional 10 offices at an added price which the contract specified (and the parties understood) would be negotiated between the parties. (Hamilton, T. 124; PX 17; Merrill, T. 769-770; Gizzarelli, T. 496-499; PX 324 [Brewer] at pp. 215-216)

153. In effect, it was as if there were two contracts calling for two types of software to be delivered to two types of offices, a fact clearly understood by DOJ. (Hamilton, T. 110-111, 132-134; Merrill, T. 764; Gizzarelli, T. 488, 494, 497-499)

When DOJ unilaterally terminated the word processing part of the contract for the convenience of the Government, the 74 word processing offices dropped out, and all that remained was the 20 offices that were to receive the computer-based version of PROMIS (plus the never-exercised option to extend the latter version to ten additional offices at additional cost).

154. The computer-based version of PROMIS called for under the March 1982 contract was the Pilot Project PROMIS plus the five enhancements developed under a contract with DOJ’s Bureau of Justice Statistics. (Hamilton, T. 114; Merrill, T. 764-765; Gizzarelli, T. 483-484, 598; Rugh, T. 1428-1429)

155. None of INSLAW’s privately financed enhancements was to be delivered to DOJ under the PROMIS contract of March 1982, or under any other federal contract. (Hamilton, T. 115; Gizzarelli, T. 595) More particularly, the PROMIS contract gave DOJ no right to use these proprietary enhancements. There was no confusion expressed by any representative of DOJ at meetings in 1982 and 1983 as to what was to be delivered under the PROM-IS Contract. (Merrill, T. 765, 2603-2604)

20

156. The word processing software for case-tracking called for by the contract required taking the word processing software previously developed by INSLAW for use on EOUSA’s Lanier word processing machines and altering it to run on different government-furnished word processing machines chosen by DOJ for the 74 smaller U.S. Attorney’s Offices. (Hamilton, T. 133-134)

VI. BREWER’S STRATEGY FOR THE RUINATION OF INSLAW

A.

Brewer Informs his EOTJ-SA/PBOMIS Project Team About his Opinions of Hamilton

157. Subsequent to joining EOUSA, Brewer’s opinions about Hamilton became even more negative. (Gizzarelli, T. 477, 500-501, 522; PX 324 [Brewer] at pp. 86-87) During the course of the PROMIS Project, Brewer conveyed these opinions about Hamilton to his subordinates and superiors at EOUSA. (PX 324 [Brewer] at pp. 82-87, Brewer, T. 1659-1660) Clearly, Brewer was biased against Hamilton for having been dismissed by Hamilton from the Institute. (Gizzarelli, T. 501)

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158. In particular, Brewer informed others at EOUSA that Hamilton was “crazy,” that he had a “very, very distorted view of the world,” that he was not “realistic” and that he was “mentally defective.” (PX 324 [Brewer] at pp. 82-84; Brewer, T. 1659) By these types of comments from the head of the project team, Brewer in essence “poisoned the well at DOJ” against INSLAW. (Gizzarelli, T. 522)

159. In a prophetic memorandum to his INSLAW superior dated July 1, 1982, just months after the start of the 3-year PROMIS contract, Gizzarelli noted that Brewer had made no secret of his dislike for Hamilton and that in his present position he was able to demonstrate his dislike. (PX 34) Although Hamilton had theretofore kept his distance from the project, Gizzarelli forecast that Brewer:

will escalate the level of controversy until he draws Bill into the project, at which time he will be able to ‘lord it over him’ and show who’s boss.

I don’t think Brick will ever be at peace with his feelings about Bill and, therefore, with us.” (PX 34)

160. Brewer’s attitude in this regard was openly manifested by his negative comments about Hamilton and INSLAW as well as EOUSA’s imposition of increasingly more burdensome administrative tasks (e.g., greatly increased financial and contract reporting requirements and advance permission for contract travel), which previously had not been required in IN-SLAW’s contracts with DOJ. (Gizzarelli, T. 522-526) These burdens were added by DOJ without explanation. (Gizzarelli, T. 524-525) In addition, Brewer personally assigned an EOUSA employee who was totally inexperienced in computerization or case management to accompany, and ultimately to harass, INSLAW employees making site visits to U.S. Attorney’s Offices. (Gizzarelli, T. 525)

161. Immediately after assuming his position as PROMIS Project Manager, Brewer also conducted an inquiry about other contracts INSLAW had with DOJ with the intent of trying to scuttle as many of these contracts as possible, intending that the result of this activity would be to cut off INSLAW’s funding and cash flow, and thereby drive INSLAW out of business.

B.

INSLAW’s Initial Problems mth, DOJ

1. INSLAW’s Decision to Market Enhanced PROMIS and Brewer’s Response to These Plans

162. In April 1982, INSLAW formally notified DOJ of its intent to market Enhanced PROMIS as a fee-generating product to public and private sector customers. (Hamilton, T. 134-136; Merrill, T. 775) In this connection, Roderick M. Hills, an attorney for INSLAW, wrote to Associate Deputy Attorney General Stanley E. Morris, enclosing a memorandum written by Hamilton (with his counsel’s assistance) describing the origin and financing of Old PROM-IS, INSLAW’s efforts to substantially improve the program utilizing private funds, and the need to market such privately-financed enhancements. (PX 21) Hamilton’s memorandum also recited the written recommendations of DOJ task forces under both the Carter and Reagan Administrations that some way should be found to perpetuate the PROMIS software for the benefit of state and local justice when federal financial support ended. (PX 21)

163. Hill’s letter solicited any questions or objections that DOJ had to INSLAW’s plans. (PX 21) In essence, this inquiry was intended to provide advance notice to DOJ as to INSLAW’s plans and to obtain a “sign-off” letter from DOJ to respond to concerns raised by IBM which at that time was considering a joint marketing agreement with INSLAW. (Rogers, T. 422-424; Hamilton, T. 277) The purpose of the “sign-off” letter, from INSLAW's perspective, was to give INSLAW assurance that DOJ understood what INSLAW was proposing to do, that it agreed with INSLAW’s legal position, and that it would take no affirmative action to disrupt or impede IN-SLAW’s marketing efforts. (Rogers, T. 444-445)

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164. INSLAW’s notice to DOJ was received by Brewer on or about April 13, 1982. (PX 22; Brewer, T. 1668)

166.This plan obviously infuriated Brewer. (Gizzarelli, T. 500-501; Brewer, T. 1666; Sherzer, T. 967-969) According to Videnieks’ contemporaneous handwritten notes, on the very next day, April 14, 1982, a PROMIS Project Team meeting was held, at which Hamilton’s “scurrilous” memorandum (PX 23; PX 26; Brewer, T. 1668) was a major subject of discussion. The notes reveal that, in particular, Brewer actively considered terminating for the Government’s convenience the month-old PROMIS Contract in retaliation for INSLAW’s letter to Morris. (Brewer, T. 1673; PX 23) At that time Videnieks advised against it. In his testimony at trial, Brewer’s deputy, Rugh, acknowledged that such a termination at that time would have been “ludicrous.” (Rugh, T. 1471; Brewer, T. 1673; PX 23) No resolution was reached at that time. (Brewer, T. 1673; PX 23) This Court finds and concludes that the sole reason that such termination was not carried through at that time was that it was ludicrous and absurd, as all of the government witnesses testified. In addition, Brewer discussed reprisals against IN-SLAW on its several other contracts with DOJ, one of which was the BJS contract for specific PROMIS enhancement development work which was not part of the PROMIS enhancements claimed as proprietary by INSLAW. (Hamilton, T. 114; PX 24)

All of the DOJ witnesses who attended the April 14,1982 meeting professed a total lack of memory about it. They testified they had no recollection of any such meeting. This Court disbelieves that testimony. None of them could offer any credible explanation, or indeed

any

explanation, of the meaning of Videnieks’ handwritten notes other than what this Court finds to be their meaning in this Finding of Fact No. 165. These notes constitute a “smoking gun” that clearly evidences Brewer’s intense bias against INSLAW, his single-minded intent to drive INSLAW out of business, and Rugh’s and Videnieks’ complicity.

166. Another contract discussed at the April 14, 1982 meeting was awarded to INSLAW in 1981 by DOJ to perform a needs analysis and system design for PROMIS in the U.S. Attorneys office in the District of Columbia. (PX 324 [Brewer] at p. 122; Brewer, T. 1634,1673; Hamilton, T. 141; PX 232) The authorized second phase of this contract would have been a PROM-IS implementation effort by INSLAW at an estimated contract price of $600,000. (PX 324 [Brewer] at pp. 123-124; Hamilton, T. 141-142) It was noted during the April 14th meeting that DOJ was undecided about whether to proceed with the contract’s second phase and that Brewer and Rugh would meet with the District of Columbia’s U.S. Attorney’s Office staff to decide what would be done on the contract. (PX 23) It was further noted that cancellation of the authorized second phase would adversely affect INSLAW’s ability to keep its overhead rate in line with EOUSA expectations. (PX 23)

167. Stating that he wanted to discuss the BJS contract with INSLAW, Brewer demanded a meeting, with INSLAW for April 19, 1982. (PX 24; Brewer, T. 1638)

168. At the outset of the meeting on April 19, 1982, Brewer informed James Kelley, INSLAW’s General Counsel, and Joyce Deroy that his concern on the BJS contract arose from the “scurrilous” memorandum written by Hamilton which was attached to INSLAW’s April 2, 1982 notice to Morris of its plans to market Enhanced PROMIS. (PX 25; PX 26; PX 324 [Brewer] at p. 137; Brewer, T. 1671)

169. As of this meeting, Brewer understood from Hamilton’s memorandum that INSLAW was asserting its right to market Enhanced PROMIS as well as its ownership rights in Enhanced PROMIS. (PX 25; PX 324 [Brewer] at p. 141)

170. During the April 19,1982 meeting, Brewer again referred to the Hamilton memo and launched into a very emotional, even belligerent, tirade. (PX 26; Brewer, T. 1639; Kelley, T. 1397)

171. During this part of the discussion of the Hamilton memo, Brewer made a number of specific statements regarding

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the memo. (PX 324 [Brewer] at p. 143) He stated that the Hamilton memo was unnecessary because in Brewer’s view DOJ had already acknowledged INSLAW’s right to sell Enhanced PROMIS. (PX 324 [Brewer] at pp. 144-145) Nevertheless, and despite the obvious inconsistency, it was Brewer’s further understanding, he said, that while INSLAW had the right to sell Enhanced PROMIS, DOJ had unlimited rights to such software, including the right “to give it away” to those very public and private sector entities to which INSLAW would be attempting to market PROMIS. (PX 324 [Brewer] at pp. 146-147; Brewer, T. 1683-1684) DOJ has the audacity to contend that “[it] is in no way inconsistent” for INSLAW to have “the right to sell ... PROMIS” at the same time that DOJ has “unlimited rights” to give PROMIS away to INSLAW's intended customers. (DRPPFF 167)

172. Brewer also questioned INSLAW’s ability to perform the PROMIS Contract and indicated that a number of people at DOJ were upset with INSLAW and that the Hamilton memo had caused all kinds of problems. (PX 26; PX 324 [Brewer] at pp. 172, 174-175) Brewer further questioned the quality and timeliness of INSLAW’s work, citing the Illinois Criminal Justice Coordinating Council, the Michigan Prosecuting Attorneys’ Association and others as sources of this information. (PX 26; PX 324 [Brewer] at pp. 175-176)

173. Finally, Brewer strongly challenged INSLAW’s right to claim ownership of, and complete domain over, Enhanced PROMIS. (PX 26; PX 324 [Brewer] at p. 177)

174. Another matter of discussion by Brewer at the April 19,1982 meeting was a supplemental request for payment from INSLAW in the amount of $125,000 in regard to the BJS contract (PX 324 [Brewer] at pp. 141-142; Brewer, T. 1638, 1679; Hamilton, T. 144, 200). Brewer contacted the superior of the contracting officer on the BJS contract and asked that a “preliminary notice” of default be issued on the contract

21

as well as a reprimand to IN-SLAW for failing to comply with the “Limitation of Cost Clause.” (PX 27) Subsequent to the meeting and at Brewer’s insistence, INSLAW agreed to absorb this $125,000 expense into the PROMIS Contract without increasing the total cost of the PROMIS Contract and without any additional payment under the BJS Contract. (PX 324 [Brewer] at pp. 276-278; Brewer, T. 1640; Hamilton, T. 145)

22

175. Subsequent to the April 19, 1982 meeting, Brewer met with officials of the District of Columbia U.S. Attorney’s Office to recommend that they not go forward with Phase II of the contract. (PX 232; PX 237; PX 324 [Brewer] at p. 123; Brewer, T. 1674) INSLAW was not formally notified of this decision until August 25, 1982, although it had successfully completed Phase I of the D.C. U.S. Attorney’s Contract on May 31, 1982. (Hamilton, T. 142; PX 37; PX 38; PX 48) This formal notice was given just 13 days after IN-SLAW received a letter from Deputy Attorney General Stanley Morris dated August 11, 1982, which noted that INSLAW could assert proprietary rights to any privately financed PROMIS enhancements. (Hamilton, T. 138-140, 277; Merrill, T. 775-776; PX 36)

176. Brewer played a very important role in the decision not to go forward with Phase II of the D.C. U.S. Attorney’s Office contract. (PX 232; PX237; PX 324 [Brewer] at p. 124) Brewer identified the purported basis for this decision, in part, as his understanding that INSLAW was not able to perform because of the demands being made upon INSLAW under the PROMIS Contract, (PX 324 [Brewer] at pp. 124-125; Brewer, T. 1635), notwithstanding that the

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contract had been in effect only a few months.

177. Based on prior discussions with DOJ officials, INSLAW had been led to believe that it would be awarded Phase II of the contract and had planned upon $600,-000 of revenue for estimating its overhead rate for all of its DOJ contracts and grants. (Hamilton, T. 143-144; Merrill, T. 774) After the decision not to go forward with Phase II had been made, Brewer was informed by INSLAW’s comptroller, Murray Hannon, that denial of the $600,000 contract resulted in a precipitous increase in INSLAW’s overhead within a few months of the decision, as Brewer had been forewarned would happen. (PX 324 [Brewer] at p. 125)

2. Morris’ Recusal of Brewer on the Proprietary Enhancements Issue

178. DOJ did not respond to INSLAW’s April 2, 1982 inquiry until May 24, 1982. (PX 28) Although signed by Morris, the response letter had been drafted by Richard DeHaan with the assistance of Brewer and others. (PX 348 [DeHaan] at pp. 12-13) The response raised a number of the same complaints stated by Brewer during the April 19,1982 meeting. (PX 28) First, it questioned the cost impact upon the PROMIS Contract from the marketing of Enhanced PROMIS. (PX 28) Second, the response took issue with INSLAW’s claims of ownership rights in Enhanced PROMIS. (PX 28) The response concluded by directing INSLAW to Brewer for the submission of questions or proposals regarding these issues concerning the PROMIS Contract. (PX 28)

179. In an effort to assuage Morris’ concerns, INSLAW’s attorney, James Rogers, wrote to Morris on May 26, 1982 to explain the constituent elements of Enhanced PROMIS and to assure Morris that the program did not include any DOJ financed enhancements. (PX29) These representations by Rogers were formulated in response to concerns expressed by DOJ. (Rogers, T. 431) Rogers thus understood that his representations were adequate to resolve Morris’ concerns. (Rogers, T. 432) In a letter dated June 1, 1982, Morris responded that the Department would respond to INSLAW’s request after careful review and analysis of the underlying legal and policy issues. (PX 31) INSLAW subsequently provided information to DOJ to assist DOJ’s legal analysis of the enhancements issue. (PX 33)

180. During this time period, Rogers and Kelley met with Brewer concerning INSLAW’s inquiry. (Rogers, T. 426-427) The purpose of the meeting was to give Brewer a briefing on INSLAW’s plans and its need for a “sign-off” for IBM. (Rogers, T. 427) Brewer’s response to this presentation was negative. (Rogers, T. 428) In fact, Brewer informed Rogers that he would not recommend that DOJ acquiesce in INSLAW’s April 2, 1982 request for clarification. (PX 324 [Brewer] at pp. 169-171)

181. These statements by Brewer were fully consistent with views he shared with others on the PROMIS Project Team. (PX 324 [Brewer] at pp. 163-164) Brewer and Videnieks both shared the concern that Hamilton’s April 1st memo was a “frontal assault” on the PROMIS Contract and an effort to achieve a novation of that contract. (PX 324 [Brewer] at pp. 150-151) These and other such views were communicated to others at DOJ. (PX 324 [Brewer] at p. 151)

182. As a result of Brewer’s vehement outbursts at the April 19th meeting and his subsequent statements of his negative opinions of INSLAW personnel, its attorneys and its plans for marketing Enhanced PROMIS, INSLAW complained to Morris and informed him that Brewer had previously “been asked to leave” by INSLAW’s predecessor and had lost his impartiality. (Hamilton, T. 138; Rogers, T. 437) IN-SLAW requested that Brewer be removed from further participation in DOJ’s consideration of INSLAW’s inquiry. (Hamilton, T. 138)

183. Based on a statement made by Morris in a meeting or during a telephone conversation, Rogers understood that Morris was aware that Brewer had been fired by INSLAW, and had been recused on this issue. (Rogers, T. 437)

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184. On or about May 27, 1982, Morris directed McWhorter, Tyson’s deputy, that Brewer should be excluded from the proprietary enhancements issue. (PX 30; PX 324 [Brewer] at pp. 166-169) Brewer expressed recognition of Morris’ action to Gizzarelli by stating that he had been taken out of the loop on enhancements. (Gizza-relli, T. 548) In this regard, Brewer believed that Hamilton was responsible for Morris’ action and told Gizzarelli that Hamilton had “shot himself in the foot.” (Giz-zarelli, T. 548)

185. Despite this express direction from the Associate Deputy Attorney General at DOJ, Brewer continued to involve himself in consideration of INSLAW’s April 2nd inquiry on proprietary enhancements. (PX 330 [McWhorter] at pp. 46-51; PX 324 [Brewer] at pp. 456-458, 464; PX 348 [De-Haan] at pp. 22-24)

186. Tyson’s deputy, McWhorter, who had been directed by Morris to “... take the point outside the Department on this subject” and to replace Brewer in this regard, did nothing to inhibit Brewer’s involvement in the proprietary enhancements issue. (PX 330 [McWhorter] at pp. 48-51) Subsequent to this failure to act by McWhorter, Brewer purchased a $4,000 “half-interest” in a condominium in Virginia owned by McWhorter which originally had been purchased for $43,000. (PX 324 [Brewer] at p. 105; McWhorter, T. 1344-1345,1352) Brewer purchased this half-interest from McWhorter because McWhorter was getting married and “needed cash”. (PX 324 [Brewer] at p. 105; McWhorter, T. 1395) Brewer also acted as groomsman at McWhorter’s wedding. (PX 324 [Brewer] at p. 106; McWhorter, T. 1345, 1352)

3. Brewer’s Continued Involvement in DOJ’s Consideration of the Proprietary Enhancement Issue

187. The only effect that Morris’ “removal” of Brewer had was to suggest to persons outside of DOJ that Brewer was no longer involved in the proprietary enhancements issue. (PX 330 [McWhorter] at pp. 46-51) As far as EOUSA was concerned, Brewer could and did remain very active in DOJ’s consideration of this issue. (PX 330 [McWhorter] at pp. 46-51)

188. Subsequent to his purported “removal” by Morris, Brewer repeatedly stated his opinion that INSLAW had no ownership or other rights in Enhanced PROMIS except for those specifically permitted under his view of the PROMIS Contract. (PX 324 [Brewer] at pp. 145-148, 157-161)

189. Despite Brewer’s efforts to influence DOJ’s response to the INSLAW inquiry, a response was sent to INSLAW by letter dated August 11, 1982 from Morris to INSLAW’s attorney, James Rogers. (PX 36) This letter acknowledged that IN-SLAW had the right to assert whatever proprietary rights it had in Enhanced PROMIS to the extent the enhancements contained in the program had been privately financed. (PX 36; Rogers, T. 435) This letter further was consistent with the legal opinions on the enhancements issue rendered by INSLAW’s attorneys. (PX 35)

190. Rogers understood that the Morris August 11 letter meant that if the representations stated in his letter of May 26, 1982 (which had been requested by Morris) were true, then DOJ did not have any rights that would inhibit or preclude IN-SLAW from asserting its rights, nor would DOJ challenge the assertion of such rights by INSLAW. (Rogers, T. 435, 437-438) Rogers viewed the Morris August 11 letter as providing the “sign-off” that INSLAW was seeking. (Rogers, T. 434) More particularly, Rogers drew the inference from the Morris letter that DOJ claimed no proprietary rights in the PROMIS 82 software. (Rogers, T. 435)

191. In this regard, Rogers understood that Morris did not attempt to limit the boundaries of INSLAW’s proprietary rights and by implication did limit the extent of DOJ’s rights based on the legal principle that every right has a correlative duty. (Rogers, T. 448)

192. Upon receipt of the Morris letter, INSLAW submitted it to IBM in connection with INSLAW’s effort to negotiate a co-marketing contract with IBM. (Hamilton, T. 139) In this regard, IBM had requested evidence of DOJ’s consent to INSLAW’s

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marketing plans for Enhanced PROMIS and accepted the Morris letter as evidence of the requested approval. (Hamilton, T. 139-140; Rogers, T. 436) Because of the DOJ’s and LEAA’s explicit descriptions of old PROMIS as being in the public domain, neither INSLAW nor IBM had any significant concern in 1982 that the government would suddenly attempt to enforce any restrictive language in INSLAW’s previous government contracts with respect to IN-SLAW's ability to market and enhance PROMIS, and that was not a factor underlying IBM’s request for a letter from DOJ. (Hamilton, T. 267-269;

see also

PX 35) Thereafter, IBM entered into the co-marketing agreement with INSLAW. (Hamilton, T. 140)

193. Upon seeing the Morris letter of August 11, 1982, Brewer told people at DOJ that Morris’ decision was incorrect. (PX 324 [Brewer] at pp. 153-154) Brewer believed that the Morris letter failed to resolve the questions raised in INSLAW’s April 2nd inquiry. (PX 324 [Brewer] at p. 160) Despite the Morris letter, Brewer’s view continued to be that DOJ had an absolute right to any enhancement of PROMIS delivered under the PROMIS contract. (PX 324 [Brewer] at pp. 160-161) McWhorter went so far as to call the Morris letter a “rip-off” of the government. (PX 324 [Brewer] at p. 154)

4. Brewer’s Strategy for the Ruination of INSLAW

194. On September 10,1982, Brewer requested Tyson to seek Rooney’s approval for assigning Videnieks essentially full-time as contracting officer on the INSLAW contract. (PX 89) Brewer’s basis for this request was "... that the only way to maintain our schedule within budget is to vigorously monitor INSLAW’s efforts”. Brewer’s request was granted. (PX 324 [Brewer] at pp. 102-105; Brewer, T. 1606-1607)

195. After Videnieks’ assignment as essentially full-time PROMIS Contracting Officer, he began playing an even more significant role than previously in the administration of the contract.

23

(PX 324 [Brewer] at pp. 111-114; Brewer, T. 1607) His first act in that regard was a letter to INSLAW, dated November 10, 1982, which alleged that INSLAW was in default of the advance payments clause of the PROMIS Contract. (PX 42; PX 43) The controversy over the advance payments clause was another effort to starve INSLAW of working capital and was further evidence of Brewer’s continuing hostility and bias against INSLAW, and his total lack of impartiality.

196. The advance payments clause did not permit INSLAW to receive payments in advance of the completion of specified work (PX 324 [Brewer] at p. 189; Hamilton, T. 145-147; Sherzer, T. 955); rather, it was intended simply to assist under-capitalized companies, such as INSLAW, by providing

immediate

payment for work performed. (PX 324 [Brewer] at p. 189; Hamilton, T. 145-147; Sherzer, T. 955) This is as opposed to the usual format of DOJ payments whereby a contractor is paid 60 to 90 days

after

specified work is completed. (PX 324 [Brewer] at pp. 189-190; Hamilton, T. 145-146)

197. As of this time, DOJ, and particularly Brewer, were well aware of IN-SLAW’s financial position and were equally well aware of the potential for harm to INSLAW from delayed payments on the PROMIS Contract. (PX 324 [Brewer] at pp. 188-190, 248; PX 342 [Videnieks] at pp. 184, 186-188)

198. Brewer’s stated reason for considering terminating INSLAW’s advance payment account was that a loan INSLAW had with the Bank of Bethesda, pursuant to which a lien was placed on payments received by INSLAW from the account (not the account itself), was contrary to the contract and placed the government in financial risk. (PX 324 [Brewer] at p. 228)

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INSLAW was in technical violation of the advance payment clause of the contract, but the Government clearly was not placed in any financial risk as a result of this technical violation.

199. Indeed, notwithstanding this expressed concern, DOJ auditors concluded that the Bank of Bethesda loan and lien, in reality, presented no financial risk to the government. (PX 345 [Whitely] at pp. 36-38, 40-44; Whitely, T. 1673-1764; Hamilton, T. 166-167)

200. Brewer and Videnieks were also purportedly concerned about a substantial deterioration in the financial condition of INSLAW. (PX 324 [Brewer] at pp. 230-233; Brewer, T. 1630; PX 342 [Videnieks] at p. 208; Hamilton, T. 162-165) In addition, they stated that they were concerned about the possibility that fraudulent accounting had been practiced by INSLAW. (PX 324 [Brewer] at pp. 230-233; Brewer, T. 1630; PX 342 [Videnieks] at p. 208; Hamilton, T. 162-165)

24

201. Despite these expressed concerns neither Brewer nor Videnieks could identify any evidence which led them to believe that INSLAW’s financial condition had substantially deteriorated since the award of the PROMIS contract in March 1982, nor any evidence of any fraud.

25

(PX 324 [Brewer] at pp. 232-233; 241-245; Brewer, T. 1630; Videnieks, 207-208)

202. Brewer and Videnieks were mistaken in their assumption that INSLAW’s financial condition had deteriorated during the latter half of 1982; INSLAW was much stronger in December 1982 that at the time the PROMIS contract began. (Hamilton, T. 162) In fact, during that period, IN-SLAW was able to increase a previously existing line of credit of $700,000 with First American Bank to a $1.2 million line of credit from the Bank of Bethesda. (Hamilton, T. 159; Merrill, T. 799) In addition, between August and December 1982, IN-SLAW entered into the co-marketing agreement with IBM. (Hamilton, T. 160; Merrill, T. 799) Perhaps most important is the fact that INSLAW had obtained the PROMIS contract, and prospects were strong for successful completion of the contract. (Hamilton, T. 160-161; Sherzer, T. 958-959)

203. Notwithstanding the evidence to the contrary, Brewer informed Tyson, Director of EOUSA, about these same unsupported concerns. (PX 49; Hamilton, T. 156-157) In a December 9, 1982 memo, Brewer raised the following issues:

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a. the prospect of INSLAW’s bankruptcy;

b. the possible need for in-house EOU-SA personnel to take over the PROMIS Project;

c. substantial questions of fraud being raised by INSLAW’s accounting practices;

d. the need for close auditing review of INSLAW’s costs, particularly overhead and computer center costs; and

e. the prospect of terminating the PROMIS Contract. (PX 49; Hamilton, T. 156-156)

204. The December 9 memo also expressly detailed EOUSA’s commencement of planning for carrying on the EOUSA Project in-house, using EOUSA employees

"...

in the event of trouble” and stated that DOJ had “demanded, as is our right, from INSLAW copies of

all

software documentation.(PX 49) This planning was not disclosed at any time by DOJ to INSLAW. (Hamilton, T. 165) Had this planning been disclosed to INSLAW, IN-SLAW would not have turned its software over to DOJ pursuant to Modification 12. (Hamilton, T. 165-166)

205. The December 9, 1982 Brewer memo was based on several fundamental misconceptions. First, INSLAW had not incurred $975,000 of additional bank debt, but $275,000, and the additional borrowing was necessary to defray partially $344,000 that DOJ then owed INSLAW for its time sharing services. (Hamilton, T. 157-158) Second, Brewer misconstrued the Advance Payments provision of the contract as a mechanism for “payment-in-advance” when it was merely a contractual procedure for DOJ’s

timely

payment of INSLAW’s vouchers for work

already completed.

(Hamilton, T. 158) Third, Brewer erroneously concluded that INSLAW had “reprogrammed” $100,000 in DOJ's contributions to the INSLAW employee profit-sharing plan because INSLAW had not yet deposited the annual contribution, when, in fact, the deposit was not yet due and owing. (Hamilton, T. 158-159) Fourth, Brewer incorrectly concluded that the nature of IN-SLAW’s indebtedness had become “desperate” by December 1982, when, in fact, IN-SLAW believed it had just obtained DOJ’s “sign-off” to its rights to license its privately-financed enhancements, had established its first sales and marketing unit and had consummated a national co-marketing arrangement with IBM for the public sector. (Hamilton, T. 159-161) Fifth, Brewer confused a version of PROMIS developed under the Pilot contract using a COBOL compiler that the hardware manufacturer (PRIME) had subsequently discontinued, with a version developed by INSLAW's European subsidiary based on current compiler technology; as a consequence of his lack of understanding, Brewer had suggested possible fraudulent accounting practices at INSLAW. (Hamilton, T. 162-165) INSLAW’s independent public accountants had, in fact, reviewed and approved the accounting transactions. (Hamilton, T. 165)

206. These issues formed the basis for Brewer’s effort to ruin INSLAW and to bring about DOJ’s wrongful use of IN-SLAW’s Enhanced PROMIS software. (PX 49)

C.

Brewer’s Renewal of the Proprietary Enhancements Issue and Termination of Advance Payments

207. At the same time that Brewer was seeking termination of the advance payment account, DOJ demanded in a letter dated November 19, 1982 that INSLAW produce to DOJ “... all computer programs and supporting documentation developed for or relating to this contract.” (PX 44) This demand was repeated verbatim in a letter dated December 6,1982 from Videnieks to INSLAW. (PX 46; Videnieks, T. 1810-1811, 1833-1834)

208. INSLAW understood these requests to require production of the source code and the object code for all of the software developed for the U.S. Attorney’s offices, including both the computer version and the word processing version. (Hamilton, T. 152, 2583-2588; Merrill, T. 782, 784-785) These requests required IN-SLAW to produce software codes for the enhancements otherwise not deliverable un

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der the contract. (Hamilton, T. 152, 2583-2588; Merrill, T. 782, 784-785) With these source and object codes, as well as the other material sought by DOJ, DOJ was in a position to sell the software, to give it away or to commission other private companies to take it, and to further develop it without normal costs associated with this process. (Hamilton, T. 152-153)

209. Until DOJ selected and procured from other sources the minicomputer hardware that would be used to run the contracted-for minicomputer PROMIS software, INSLAW agreed to provide the largest U.S. Attorney’s Offices with temporary access to PROMIS in a time-sharing arrangement. (PX 17 Article XXYI, Statement of Work at 11113.1.1, 3.2.2.4, 3.2.5) Those U.S. Attorney’s Offices would be tied into INSLAW’s computers on an interim basis, to obtain the benefits of PROMIS automation until DOJ was ready to actually implement the contracted-for version of PROMIS on site. INSLAW used its proprietary VAX version of PROMIS for this temporary accommodation to DOJ, in which other proprietary enhancements also had been included. There was no contractual requirement that INSLAW provide DOJ with this time-sharing software, and therefore INSLAW had, quite properly, not anticipated that DOJ would demand the underlying software which contained these proprietary enhancements.

210. When DOJ demanded that IN-SLAW turn over its time-sharing PROMIS software, DOJ still had not selected either the minicomputer or word processing hardware that would ultimately be used to run minicomputer PROMIS at the 20 larger offices and the word processor-based case tracking software at the 74 smaller offices. Thus, DOJ was not at that time prepared to implement the version of PROMIS called for under the terms of the contract and, indeed, INSLAW could not prepare the contracted-for version of PROMIS for DOJ until DOJ had decided which minicomputer hardware to procure. Therefore, when DOJ used the pretense of threatened termination of advance payments as leverage to obtain the enhanced time-sharing software, it knowingly set out to obtain a version of PROMIS to which it was not entitled under the contract, and which DOJ understood contained proprietary enhancements belonging to INSLAW.

211. INSLAW made clear to DOJ and DOJ clearly understood that DOJ was demanding and receiving these proprietary enhancements only as a temporary accommodation until the contracted-for software was ready. However, INSLAW further informed DOJ and DOJ plainly understood that DOJ could choose to purchase rights to use the enhancements from INSLAW in the actual software to be delivered to DOJ. Thus, DOJ’s situation here is analogous to that of a car buyer who has put in a purchase order for a stripped-down version of a car, for which the buyer will provide its own engine at a later date for installation by the car dealer. The dealer in the interim provides the buyer with another car, a top-of-the-line model, which the buyer agrees to test drive until the buyer’s engine arrives for the stripped-down model, with the understanding that the buyer can then instead choose to purchase the top-of-the-line model. What DOJ has done in this case is to drive off with the top of the line-model, while refusing either to accept the lesser version or agree to pay for the better model.

212. DOJ’s demands for PROMIS software tapes were initiated by Brewer, who engaged in regular conversations with his staff concerning INSLAW’s alleged deteriorating financial condition and the alleged risk of financial loss by the government. (PX 324 [Brewer] at pp. 232-233, 292-293; PX 342 [Videnieks] at pp. 189-190) Brewer was instrumental in renewing the dispute with INSLAW concerning proprietary enhancements to PROMIS. (PX 52)

213. In a letter dated January 6, 1983, Brewer renewed the requests for copies of all PROMIS software and computer source codes. (PX 52)

214. At the same time that Brewer and Videnieks were demanding INSLAW’s proprietary software, .they were also moving ahead to suspend INSLAW’s advance payments account, since they believed this

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threat would coerce INSLAW into “giving up the goods.” (PX 50) As part of this effort, Videnieks in late 1982 or early 1983 prepared a briefing paper on “Discontinuation of Advance Payments”. (PX 50; Vi-denieks, T. 1866-1867; PX 324 [Brewer] at pp. 244-245) The paper outlined four alternative “DOJ Alternatives,” constituting scenarios of damage to INSLAW that might result from the contemplated discontinuation of the Advance Payments. (PX 50)

215. One possible ramification of discontinuation was recognized as being a slowdown of INSLAW’s PROMIS contract effort. (PX 50) The solution set forth to this situation in PX 50 was a termination for default of the PROMIS contract with completion of the Project by in-house EOU-SA personnel. The paper discussed the prospect of INSLAW’s bankruptcy from discontinuation of Advance Payments and concluded that termination for default and in-house implementation could again be utilized. (PX 50) Even if the discontinuation had no impact on INSLAW’s contract effort, the EOUSA paper recommended that DOJ file liens against INSLAW’s property. (PX 50)

216. At a meeting on January 19 or 21, 1983 with DOJ’s procurement staff, IN-SLAW complained about harassment by Contracting Officer Videnieks and by other PROMIS Project personnel. (PX 54)

217. On January 26, 1983, Videnieks gave INSLAW notice that the government intended to suspend the advance payment account based upon alleged breaches of certain PROMIS contract clauses. (PX 53)

218. At a meeting on February 4, 1983, INSLAW personnel including Hamilton, Merrill, Jim Dimm and Murray Hannon, as well as INSLAW’s government contracts counsel, Harvey Sherzer, and its outside auditor, John Hozik, met with various DOJ officials, at their request, to discuss the advance payment issue. (Hamilton, T. 148; Merrill, T. 777-779) At the outset of the meeting, DOJ auditor Robert Whitely willingly acknowledged the lack of financial risk to the Government relating to IN-SLAW’s advance payments account. (Hamilton, T. 167, 197-198; Merrill, T. 781; Sherzer, T. 954-956; Whitely, T. 1763-1764)

219. When discussion at the February 4, meeting turned to the proprietary enhancements issue, Brewer acknowledged that all the PROMIS contract called for was the pilot version plus the five BJS enhancements. (Hamilton, T. 154, 197)

220. Indeed, Hamilton offered to provide DOJ with the privately financed enhancements to PROMIS at no cost in order to resolve the proprietary rights dispute with DOJ. (Hamilton, T. 345-346; Merrill, T. 790; PX 67) In response to this proposal, William Snider said that INSLAW did not have to give its privately financed enhancements away at no cost in order to protect its proprietary rights. (Hamilton, T. 346; Merrill, T. 790-791) Snider added that this was not the way the Government did business. (Hamilton, T. 155-346; Merrill, T. 790) Significantly, Snider advised INSLAW that if DOJ wanted INSLAW’s privately financed enhancements, DOJ would pay for them. (Hamilton, T. 155, 346; PX 336 [Snider] at p. 92) Brewer and Videnieks became quite angry with IN-SLAW and raised their voices in objection to INSLAW’s positions as to proprietary enhancements. (Hamilton, T. 196; Merrill, T. 778) Videnieks also engaged in a very hostile discussion with INSLAW personnel concerning performance of the PROMIS contract. (PX 336 [Snider] at pp. 40, 46-50)

221. In response to a DOJ request for INSLAW’s software, INSLAW stated that it would not release its proprietary product to DOJ unless the data rights issue was finally resolved by DOJ agreeing to give protection to INSLAW as to any proprietary product that was turned over. (Hamilton, T. 153; PX 56; PX 67) In this regard, INSLAW explained that Morris had already recognized, and had given a “sign-off” on, INSLAW’s rights to its privately-financed enhancements, and these enhancements made PROMIS a better product for the U.S. Attorneys. (Hamilton, T. 153-154)

222. Brewer responded to these comments with a remark about “[h]ow many

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times does the Department of Justice have to buy this software?” (Hamilton, T. 154)

223. Because of concerns raised at the February 4th meeting and the animus exhibited by certain government officials, IN-SLAW’s attorney, Harvey Sherzer, wrote to DOJ on February 10, 1983. (PX 58; PX 59) In this letter, Sherzer observed that there was general agreement that IN-SLAW’s performance under the PROMIS contract had been excellent and that any breach, however meaningless, had been inadvertent. (PX 58; PX 59) Sherzer did suggest, however, that DOJ might wish to consider a change of DOJ personnel on the PROMIS contract because of the “unfounded accusations] and hostility evidenced by [DOJ personnel] at the February 4 meeting.” (PX 58; PX 59) In this regard, Sherzer strongly complained of the negative impacts of “an atmosphere of bias or retribution” at DOJ and questioned the propriety of seeking termination of advance payments and warned against “... anyone’s personal effort to seek retribution against INSLAW ...” (PX 58; PX 59)

224. Sherzer also stated that IN-SLAW’s financial condition was not deteriorating, that in fact venture capitalists and investment bankers were interested in investing funds in INSLAW. (PX58; PX59) On this basis, Sherzer reasoned that the Government had less risk from the Advance Payments than it had had at the outset of the PROMIS Contract. (PX 58; PX 59)

225. Mr. Sherzer identified Brewer as the individual who exhibited such bias or “animus.” (Sherzer, T. 965) Sherzer based this conclusion on derogatory comments made by Brewer against INSLAW and its president which went far beyond the boundaries of any particular contract dispute. (Sherzer, T. 965) Sherzer thought that Brewer was deeply resentful of INSLAW and Hamilton. (Sherzer, T. 967, 994)

226. DOJ’s response to Sherzer’s letter did not take issue with the merits of any of his contentions, but did inform INSLAW that it viewed the issues of advance payments and proprietary enhancements as interrelated. (PX 60) Moreover, it also informed INSLAW that if it did not expeditiously produce additional information with respect to INSLAW’s proprietary enhancement claims, that Videnieks’ decision on discontinuation of advance payments

"...

will be made without the benefit of additional input.” (PX 60)

227. Brewer’s deputy, Rugh, went so far as to perform a “programmatic risk analysis” related to an INSLAW bankruptcy. (PX 65) The March 7, 1983 study stated that the mini-computer phase of the PROMIS Contract was “essentially on schedule” but that the word processing phase was behind schedule due to DOJ delays in the award of the hardware contract and limitations in the design of the pilot version of PROMIS. (PX 40; PX 65) In order to limit programmatic risk, Rugh recommended to Brewer and Videnieks that INSLAW’s time-sharing and word processing software be placed in escrow. (PX 65)

228. Despite Brewer and Rugh’s preoccupation with the issue of INSLAW’s “imminent” bankruptcy in the Spring of 1983, three financial institutions, including the Wall Street investment bank of L.F. Rothschild, Unterberg and Towbin, invested approximately $750,000 in INSLAW common stock in May 1983 after having valued IN-SLAW at $9 million for investment purposes. (Hamilton, T. 201-202)

VII. BREWER’S USE OF MODIFICATION 12 “TO GET INSLAW’S GOODS”

A.

Negotiation of Modification 12

229. The DOJ persisted in its attempts to interrelate resolution of the advance payments issue and INSLAW’s assertion of proprietary rights in Enhanced PROMIS. (PX 62; PX 66) When it became clear to INSLAW in March 1983 that DOJ would not resolve the advance payment issue without first obtaining the PROMIS software, INSLAW proposed in a March 11, 1983 letter to DOJ that the parties enter into an escrow agreement pursuant to which DOJ would receive the software if,

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and only if, INSLAW went into bankruptcy. (PX 68; Hamilton, T. 167-168; Brewer, T. 1693-1694; Merrill, T. 791) Brewer’s and Videnieks’ professed concern about IN-SLAW’s financial viability was merely a smoke screen; such concerns would have been fully met by placing the PROMIS software in escrow with a third party. The only reason such an arrangement was not acceptable to DOJ was because it wanted to “get” INSLAW’s “goods.” This is further evident from the exchange of correspondence from Mr. Rugh whereby the Department having gotten the goods, pretended to find fault with INSLAW’s methodology for proving private funding while refusing to divulge to INSLAW either any realistic purported defects in that methodology or any alternative methodology which would be acceptable to DOJ. DOJ thus took the tack designed to be the most harmful to INSLAW without any conceivable concomitant benefit to the Government other than the desire to get away with taking something without right.

230.Although certain DOJ personnel recommended INSLAW’s third-party escrow proposal, it was rejected by Brewer and Videnieks, because they could not thereby immediately obtain the software. (PX 73) Videnieks and Brewer discussed this issue on or about March 28, 1983 and decided to propose a letter response to Sherzer indicating DOJ’s intent “to back off [Advanced Payments] discontinuation and promising non-dissemination [of PROMIS software] in return for delivery of information demanded on 12/6” [PX 73] Videnieks prepared a draft of this letter which Brewer then rewrote [PX 73]. This letter was submitted to William Snider, Administrative Counsel for Procurement, who previously had indicated his preference for a bilateral agreement between the parties embodied in a contract modification. (PX 73)

231. A March 28 memo further recounts that Videnieks was in full agreement with Brewer about the letter, indicating quite significantly “... why do you need signature if you got the goods?” (PX 73; Videnieks, T. 1837-1838)

232. Snider quickly responded to the Brewer/Videnieks proposal on March 29, “sharply disagreeing on this approach.” (Videnieks, T. 1838) At this point, Brewer “forbade” Videnieks from entering into a “Mod” of the contract. (PX 73)

26

Brewer did not want a bilateral agreement if he could “get the goods” without it. (Brewer, T. 1704-1705)

233. On April 5, 1983 Videnieks and Brewer had a telephone conversation in which Brewer told Videnieks that he would “protect” him from “backing down” to Sherzer and Hamilton. (PX 73) After this conversation, Videnieks checked with Snider and “MH” who confirmed that a contract modification protecting INSLAW’s proprietary enhancements was a precondition to INSLAW’s delivery of the software. (PX 73; Brewer, T. 1208) Brewer understood that INSLAW wanted such protection, and that INSLAW would remove any enhancements that DOJ did not want. (Brewer, T. 1708-1709)

234. DOJ’s March 18, 1983 response to INSLAW’s March 11 proposal dismissed the proposal of an escrow agreement, but did offer in consideration of “getting the goods” to agree not to disseminate or disclose the PROMIS software beyond EOU-SA and the U.S. Attorney’s offices enumerated in the PROMIS contract pending resolution and negotiation of the proprietary enhancements issue — “until the data rights of the parties to the contract are resolved.” (PX 70; PX 71; Merrill, T. 792; Brewer, T. 1689-1690; Hamilton, T. 168) This proposal by Videnieks was basically the methodology proposed and discussed at the February 4, 1983 meeting. (Merrill, T. 792)

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235. The March 18 letter also stated that once the “data rights” issue was resolved, DOJ would review INSLAW’s proprietary enhancements to decide which (if any) enhancements DOJ desired to include in the Executive Office contract PROMIS software. (PX 70; PX 71)

236. Videnieks specifically stated in his March 18 letter that after the proprietary enhancements issue was resolved, DOJ:

... will review the effect of any enhancements which are determined to be proprietary, and then either direct INSLAW to delete those enhancements from the versions of PROMIS to be delivered under the contract or negotiate with IN-SLAW regarding the inclusion of those enhancements in that software. The Government would then either destroy or return the “enhanced” versions of PROMIS in exchange for the Government PROMIS software including only those enhancements that should be included in the software. If this course of action is acceptable to INSLAW there would be no need for an escrow agreement. (PX 70; PX 71; Videnieks, T. 1813-1815)

237. The enhancements which DOJ did not want would be removed from the software delivered to the DOJ. (PX 70; PX 71; Brewer, T. 1690-1691, 1709; Hamilton, T. 330-331)

238. INSLAW understood from Viden-ieks’ letter that it was necessary to resolve the issue of “proprietary enhancements” as soon as possible because INSLAW was scheduled to deliver software to the 20 largest U.S. Attorney’s offices beginning in the Summer of 1983. (PX 73; Hamilton, T. 169) INSLAW also understood from Viden-ieks’ letter that it was to identify the enhancements that had been privately financed, with evidence of the source of private funding, and an indication as to why the enhancements were not required to be furnished under the terms of the contract. (Hamilton, T. 170; PX 70; PX 71)

239. Most importantly, INSLAW understood from Videnieks’ letter that DOJ would negotiate with INSLAW to purchase any privately financed enhancements that it desired to keep in the software deliverable under the contract. (Hamilton, T. 171; Merrill, T. 792-793; Gizzarelli, T. 534; Sherzer, T. 977-979; PX 341 [Tyson] at pp. 205-207, 212-214; PX 336 [Snider] at pp. 91-96; PX 70; PX 71)

240. As of the time of Videnieks’ letter, INSLAW was fully prepared to delete any or all enhancements that DOJ indicated it did not desire pursuant to the process laid out in Videnieks’ letter. (Hamilton, T. 172-173; Merrill, T. 793)

241. INSLAW accepted Videnieks’ proposal in a letter dated March 23, 1983 from its attorney, Sherzer, to William Snider, DOJ’s Administrative Counsel. (PX 72; Sherzer, T. 979) Sherzer accepted Snider’s proposal that the agreement take the form of a modification to the PROMIS Contract and also stated his understanding that advance payments need not be stopped, since DOJ’s alleged risk would be eliminated as a result of DOJ’s receipt of INSLAW’s PROMIS software. (PX 72)

242. On April 11, 1983, Modification 12 to the PROMIS Contract was executed between INSLAW and DOJ pursuant to which INSLAW delivered the requested information to DOJ upon consideration of DOJ’s promise to limit dissemination and use of INSLAW’s proprietary software and data. (Answer ¶ 17; PX 78; PX 83) The language of Modification 12 as to the specified information to be produced was basically the same wording as used in the Vi-denieks March 18, 1983 letter. (Merrill, T. 786; Videnieks, T. 1843-1844; PX 70; PX 71; PX 78) The March 18 Videnieks letter to INSLAW was actually drafted by Snider, who believed that Modification 12 must be read and understood in the context of the March 18,1983 letter. (PX 336 [Snider] at pp. 91-96; Videnieks, T. 1842) Modification 12 required INSLAW to produce all computer programs and documentation for time-sharing, computer sites and for word processing. (Merrill, T. 786; Sherzer, T. 980; Hamilton, T. 152, 2583-2588) DOJ never told INSLAW that it was not required to produce all of this under Modification 12 or that INSLAW was producing too much. (Merrill, T. 787)

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243. The provisions of Modification 12 must be read consistently with the existing contract, the terms of which (Modification 12 unequivocally states) were not otherwise changed. (Gizzarelli, T. 535; Sherzer, T. 1030) Thus, DOJ’s agreement not to disseminate or use the software beyond the 94 offices has to be read in the context of the two contract tasks. This means that the computer-based software would not be disseminated beyond the 20 designated larger offices for which this software was being created and developed, and the word processing software would not be disseminated beyond the 74 offices for which that type of software was being created and developed. (Merrill, T. 787-788; Hamilton, T. 177-178; Gizzarelli, T. 535) Modification 12 sought to effect delivery to DOJ of all computer programs develo

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