Public Comments and Plaintiff's Response; United States of America v. The Thomson Corporation and West Publishing Company
Federal RegisterOct 11, 1996
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DEPARTMENT OF JUSTICE
Antitrust Division
Public Comments and Plaintiff's Response; United States of
America v. The Thomson Corporation and West Publishing Company
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that Public Comments and
Plaintiff's Response have been filed with the United States District
Court for the District of Columbia in United States v. The Thomson
Corporation and West Publishing Company, Civ. Action No. 96-1415.
On June 19, 1996, the United States filed a Compliant seeking to
enjoin a transaction in which The Thomson Corporation (``Thomson'')
agreed to acquire West Publishing Company (``West''). Thomson and West
are two of the country's largest publishers of law books and legal
research materials. Thomson and West publish numerous competing legal
publications, including the only two annotated United States Codes and
the only two enhanced U.S. Supreme Court reporters. The Complaint
alleged that the proposed acquisition would substantially lessen
competition in the market for legal publications in violation of
Section 7 of the Clayton Act, 15 U.S.C. 18, and Section 1 of the
Sherman Antitrust Act, 15 U.S.C. 1.
Public comment was invited within the statutory 60-day comment
period. Such comments, and the responses thereto, are hereby published
in the Federal Register and filed with the Court. Charts appended to
the Public Comments have not been reprinted here, however they may be
inspected with copies of the Complaint, Stipulation, proposed Final
Judgment, Competitive Impact Statement, Public Comments and Plaintiff's
Response in Room 3233 of the Antitrust Division, Department of Justice,
Tenth Street and Pennsylvania Avenue, N.W., Washington. D.C. 20530
(telephone: 202-633-2481) and at the office of the Clerk of the United
States District Court for the District of Columbia, Third Street and
Constitution Avenue, N.W., Washington, D.C. 20001.
Copies of any of these materials may be obtained upon request and
payment of a copying fee.
Constance K. Robinson,
Director of Operations, Antitrust Division.
In the United States District Court for the District of Columbia
United States of America, 1401 H Street, NW, Suite 4000,
Washington, DC 20530 (202) 307-5779, State of California, State of
Connecticut, State of Illinois, Commonwealth of Massachusetts, State
of New York, State of Washington, and State of Wisconsin Plaintiffs,
v. The Thomson Corporation, and West Publishing Company Defendants.
Civil No. 96-1415 (PLF)
PLAINTIFFS' RESPONSE TO PUBLIC COMMENTS
I. Background
II. Response to public comments
A. Divestiture of the Publications Enumerated in the Decree
Adequately Protects Competition
1. Divestiture of competing products, not companies and
supporting infrastructure
2. Availability of legal editors
3. Divestiture products independent of a cross-referencing
``system''
4. California
5. Brand names
B. The Option to Official Reporter Contract States Provision is
Appropriate and Adequate Relief for the Violation Alleged in the
Complaint
1. California
2. Washington
3. Wisconsin
4. Other states
C. Divestiture of Auto-Cite and Lexis/Reed Elsevier's Option to
extend Critical Thomson Content Licenses Adequately Protects
Competition in the Comprehensive Online Legal Research Services
Market
1. TCSL
2. Product differentiation
3. Auto-Cite divestiture
4. Overall competition in the comprehensive online legal
research services market
D. The Star Pagination License Eases a Significant Barrier to
Entry and is Procompetitive
1. Validity of West's star pagination copyright claim
2. Abandonment of star pagination copyright claim
3. Text copyright
4. Other antitrust violations
5. Citation to first page of an opinion
6. Level of license royalty fees
7. Large publishers
8. Other markets
9. The need for a text license in unrelated to this merger
transaction
10. Selection of cases
11. Description of product or service
12. License fee per format
13. Challenges of West's copyright
14. The confidentiality provision is intended to protect the
licensee and could encourage procompetitive discounting
15. Arbitration
16. The Internet
17. License fee for books
18. Other comments regarding the star pagination license
E. Plaintiffs Used Appropriate Merger Analysis in Examining this
Merger
F. Plaintiffs Should Not Require Divestiture of the Juris
Database
1. There is no conflict of interest within the Department on
this matter
2. Familiarity with legal publishing industry
G. Miscellaneous Comments--unrelated to merger or unsupported by
the investigation
III. The Legal Standard Governing the Court's Public Interest
Determination
IV. Conclusion
Pursuant to the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h) (``Tunney Act''), the United States
and the attorneys general of the states of California, Illinois,
Massachusetts, New York, Washington, and Wisconsin hereby respond to
the public comments received regarding the proposed Final Judgment in
this case.\1\
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\1\ The State of Connecticut does not join in this Response to
Comments. Therefore, subsequent references to ``the governments'' or
``the plaintiffs'' refer only to the plaintiffs who have signed the
response.
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I
Background
On June 19, 1996, the United States Department of Justice (``the
Department'') and the seven plaintiff state attorneys general's offices
filed the Complaint in this matter. The Complaint alleges that
defendants Thomson Corporation (``Thomson'') and West Publishing
Company (``West''), in violation of Section 7 of the Sherman Act, 15
U.S.C. 18, proposed a merger that was likely substantially to lessen
competition.
[[Page 53387]]
Simultaneously with the filing of the Complaint, the plaintiffs
filed the proposed Final Judgment and a Stipulation signed by all the
parties that allows for entry of the Final Judgment following
compliance with the Tunney Act. A Competitive Impact Statement
(``CIS'') was filed and published in the Federal Register on July 5,
1996. The CIS explains in detail the provisions of the proposed Final
Judgment, the nature and purposes of these proceedings, and the
practices giving rise to the alleged violation.
As the Complaint and CIS explain, the merger as originally proposed
was likely to reduce or eliminate competition between Thomson and West
in several specific markets in three categories: enhanced primary law,
secondary law, and comprehensive online legal research services.
Complaint Secs. 24 and 25. The proposed Final Judgment is intended to
prevent the expected lessening of competition caused by the merger in
those specific markets.
As a remedy to particular competitive concerns in enhanced primary
and secondary law product markets, the Department, seven states,
Thomson, and West agreed to certain product divestitures, the mandatory
licensing of the internal pagination from West's National Reporter
System (``star pagination''), and, in the case of official reporter
contract states, an option to those states to obtain a new official
publisher and to require divestiture of Thomson's official reporter
assets.
These divestitures of enhanced primary and secondary law products
are also intended to protect consumers by ensuring continued vigorous
competition between Lexis-Nexis and WESTLAW in the ``comprehensive
online legal research services'' market after the merger, but the
plaintiffs agreed also to the extension of certain licenses to Lexis-
Nexis, a division of Reed Elsevier, Inc., and the divestiture of Auto-
Cite to address this concern.
The 60-day period for public comments expired on September 3, 1996.
As of September 23, 1996, plaintiffs had received comments from 26
persons.\2\
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\2\ The comments received as of September 23, 1996, are
attached, preceded by a list of the 26 commenters. The United States
plans promptly to publish the comments and this response in the
Federal Register.
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The comments come from a variety of sources. The most extensive
comments are submitted by Lexis/Reed Elsevier; Alan Sugarman, President
of HyperLaw, Inc. (``HyperLaw''); and Matthew Bender & Company, Inc.
(``Matthew Bender''). Lexis/Reed Elsevier is the owner of the only
existing competitor to West in the comprehensive online legal research
services product market. Alan Sugarman and Matthew Bender are currently
engaged in copyright litigation with West in the District Court for the
Southern District of New York. Other comments are from private
attorneys, librarians, individuals, non-profit organizations,
government organizations, and one anonymous commenter.
II
Response to Public Comments
In the legal publishing industry, there are a number of contentious
legal, business, and public policy issues being debated. Many of these
issues involve the merging parties or the Department of Justice. This
fact has generated a large number of comments that do not relate to the
specific law violations charged in the Complaint or even to the merger
in any way.
The Court's responsibility under the Tunney Act is to determine
whether entry of the proposed Final Judgment is ``within the reaches of
the public interest.'' United States v. Western Elec. Co., 993 F.2d
1572, 1576 (D.C. Cir.), cert. denied, 114 S. Ct. 487 (1993) (emphasis
added, internal quotation and citation omitted). The Court may not look
beyond the Complaint ``to evaluate claims that the government did not
make and to inquire as to why they were not made.'' United States v.
Microsoft, 56 F.3d 1448, 1459 (D.C. Cir. 1995) (emphasis in original).
Thus, comments that relate to conduct plaintiffs did not pursue are
beyond the scope of Tunney Act review for the reasons set forth fully
in section III, below.
Many of the comments raise issues not relevant to this merger or in
this Tunney Act proceeding. Rather, they are statements about:
--Other public policy issues in the legal publishing industry;
--Issues in litigation in other non-merger cases;
--Conditions in the legal publishing industry--unrelated to the
merger--that make it less competitive than the commenter believes it
could be;
--Arguments that plaintiffs should have brought a different case; and
--Individual complaints about behavior of one of the merging parties,
unrelated to the merger.
In general, this Response mentions these comments and explains why
they are not the proper subject of this proceeding. Where appropriate,
the comments are placed in context.
Each of the comments that is relevant to this Tunney Act proceeding
is addressed below. In general, they fall in three categories:
--Some comments raised relevant issues that the decree has already
resolved. Plaintiffs explain the proper interpretation of the decree
and demonstrate why this is the case.
--In three instances, comments raise issues of ambiguity in the decree.
To resolve the matter, plaintiffs have agreed with defendants on new,
clarifying language for the decree.
--Other comments make criticisms that simply are not warranted. For
example, they are premature, or go to matters that will happen after
the Final Judgment is entered, or are otherwise unfounded.
Because a number of the commenters adopted or replicated the
comments of other commenters, plaintiffs have organized this Response
by subject to avoid redundancy. An appendix list the comments submitted
and cross-references to the places where they are discussed in this
Response. Many of the arguments made by Lexis/Reed Elsevier in its
Motion to Intervene and accompanying papers were essentially comments
on the decree, or they repeated or elaborated their previous comments;
accordingly, such Lexis/Reed Elsevier arguments are addressed in this
Response.
A. Divestiture of the Publications Enumerated in the Decree Adequately
Protects Competition
Several commenters expressed concern that the divested publications
will not be viable without divestiture of additional products and
rights.\3\ Viability of divestiture assets is an important concern in
virtually every merger case, and plaintiffs in this case carefully
reviewed these issues and took steps in the proposed Final Judgment to
ensure viability of the divested publications. We believe that when the
terms of the proposed Final Judgment are carefully examined, it will be
clear that these concerns have been adequately addressed.
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\3\ Professor Robert Oakley, American Association of Law
Libraries; Cyndi A. Trembley, Association of Law Libraries of
Upstate New York; Alois V. Gross, Esq.; Gary L. Reback, Esq., Lexis/
Reed Elsevier; Kendall F. Svengalis, Rhode Island State Law Library;
James P. Love, Consumer Project on Technology.
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1. Divestiture of Competing Products, not Companies, and Supporting
Infrastructure
Professor Robert Oakley of the Georgetown Law Center comments as
Washington Affairs Representative of the American Association of Law
Libraries (``AALL''). The AALL stated, at
[[Page 53388]]
the beginning of the governments' investigation, that it was neutral on
the Thomson/West merger, and in its comment it reiterates that it
remains neutral. At the same time, the AALL questions certain aspects
of the proposed Final Judgment.
AALL states that some of its members are concerned that individual
titles are required to be divested rather than subsidiary companies.\4\
They think this may mean some individual titles will not continue to be
viable entities in the market after divestiture. They are concerned
that the divestiture products share a ``supporting infrastructure''
with other, non-divested products, and that at least some of the
divestiture publications are an essential component of a ``larger
system of legal research.'' Divestiture of such non-divested products
would mean ordering defendants to divest products where there were no
product overlaps.
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\4\ Similar comments were submitted by E. Scott Wetzel, CD Law,
Inc.
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Plaintiffs agree that the future viability of divestiture products
is a legitimate concern and assert that this concern is fully addressed
in the decree. The government's investigation examined the supporting
infrastructure of the parties very carefully. Except in the case of the
California Reports and Deering's California Code,\5\ production costs
are not formally allocated between or among Thomson products to an
extent sufficient to question the viability of individual products, and
plaintiffs discovered relatively little evidence of joint production of
Thomson products. This means such products can be viable on a stand
alone basis, provided the acquirer has the necessary editorial staff
and production infrastructure. For this reason, plaintiffs have ensured
that acquirers of divestiture products will have access to these
resources. The proposed Final Judgment provides that acquirers receive
all production assets of the divestiture products, including
intellectual property, work in progress, plates, films, master tapes,
machine-readable codes for CD-ROM production, existing inventory,
pertinent correspondence and files, a copy of the current subscriber
list, all related subscriber information, advertising materials,
contracts with authors, software, and, at the acquirer's option,
computers and other physical assets. Proposed Final Judgment at para.
II.B. Also at the acquirer's option, Thomson must agree to provide
transition production of the product on behalf of the acquirer
(essentially as a contract publisher) for a reasonable period of time
and a reasonable price.\6\ In order to facilitate divestiture,
provisions in the Proposed Final Judgment specifically say prospective
purchasers can have access to personnel, physical facilities, and
financial documents. Id. at para. II.E. And, the proposed Final
Judgment states that Thomson/West shall not interfere with any
negotiations by acquirers to make offers of employment to Thomson/West
employees whose primary responsibility is the production, sale or
marketing of divestiture products. Id. at para. II.F. Thomson/West must
preserve the divestiture products until divestiture is made, must not
reassign employees to avoid their being hired by acquirers, except for
transfer bids initiated by employees which must be reported to
plaintiffs. Id. at para. VIII.A-C. Finally, all divestitures are
subject to the approval of the United States with the consultation of
the state plaintiffs, and divestitures of state-specific products are
subject to the approval of the United States and the appropriate state
plaintiff. Approval of the divestitures will only be made if, to the
sole satisfaction of the appropriate plaintiffs, the divestiture
product(s) can and will be operated by the acquirer as viable, ongoing
product lines. Thus, the decree has properly addressed the issue of
viability of divested assets and contains adequate provisions to
protect viability.
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\5\ As explained below, both these products are to be divested
pursuant to the proposed Final Judgment.
\6\ Proposed Final Judgment at para. II.C. The acquirer will
control all pricing, promotion, sales, and order fulfillment. Id.
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2. Availability of Legal Editors
Gary L. Reback at the law firm of Wilson Sonsini Goodrich & Rosati
submitted comments on behalf of Lexis/Reed Elsevier. Reed Elsevier, the
Anglo-Dutch corporation that owns Lexis-Nexis, had 1995 revenues of
$5.8 billion. Lexis-Nexis is the sole competitor to West's WESTLAW
service. The comments of Lexis/Reed Elsevier express concern that there
is an inadequate supply of qualified legal editors to maintain the
divestiture products. In its Motion to Intervene and accompanying
papers, Lexis/Reed Elsevier claims that Thomson/West has a ``monopoly
in editorial staff.'' Memorandum in Support of Motion to Intervene at
22.
Plaintiffs agree that a capable editorial staff is needed to
continue these divested products. But a qualified purchaser of the
divestiture products can hire editorial staff pursuant to the
divestiture terms or secure them elsewhere in the market.
On the basis of our investigation, plaintiffs believe that the
divestiture products will attract a strong, capable buyer, which has
the capability to ensure their viability. Plaintiffs understand, from
the reports submitted pursuant to the proposed Final Judgment, that
several significant publishing firms, including Lexis/Reed Elsevier
itself, indicated interest in purchasing the divestiture assets. These
potential buyers already possess editorial staffs and publishing
infrastructure. Other possible buyers include firms that could hire
staff and create infrastructure to accompany the divestiture product.
Furthermore, the decree provides, as noted above, that the acquirer
of the divestiture products will have access to relevant Thomson
employees for purposes of making offers of employment. Of course, such
employees are free to decide whether or not to accept such an offer of
employment. But they may be expected to carefully consider whether
future prospects are better at the acquiring firm, if the product on
which they have worked is being divested.
In addition, there is market evidence of the ability of prospective
acquirers to obtain qualified legal editors. A number of legal
publishers and some states employ trained editorial staffs who
editorially enhance their respective law products. For example, Michie,
which is also owned by Reed Elsevier, employs an editorial staff which
enhances over 20 state code products. Another commenter, CD Law (a
company which has been very successful with its own Washington state
product) prepares headnotes for the official Washington state reports.
Another such example is the editorial staff at the Bureau of National
Affairs (``BNA''), which editorially enhances United States Law Week.
Similarly, the States of New York, Illinois, and Massachusetts write
their own headnotes for their official case reporters. Thomson uses
contract employees for some of its editing. The preceding is not
intended to be an exhaustive list, but is included only to provide
representative examples of the fact that qualified editorial staffs are
now widely employed, and there is no ``monopoly'' of legal editors, as
Lexis/Elsevier claims. A suitable publisher which uses the provisions
of the decree and other sources could assemble a capable editorial
staff.\7\
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\7\ The preceding discussion also addresses the argument of
Garth Saloner in his Declaration in Support of Lexis-Nexis'
Opposition to the Entry of the Proposed Final Judgment that
defendants will have a unique incentive to pay editors who work with
divestiture products more than the potential acquirer would in order
to interfere with an offer by the divestiture buyer. (Paras. 13-
16). Furthermore, the decree forbids the defendants to interfere
with the acquirer's attempt to hire personnel whose primary
responsibility encompasses a divested product.
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[[Page 53389]]
3. Divestiture Products Independent of a Cross-Referencing ``System''
Other comments suggested that the divestiture products are
integrated in a ``research system.'' Lexis/Reed Elsevier's Motion to
Intervene also raises this issue. See Declaration of Kendall F.
Svengalis in Support of Lexis-Nexis' Opposition to the Entry of the
Proposed Final Judgment Paras. 7-9.
Some of these comments relate to the viability of the divested
products, an appropriate Tunney Act comment. This was an issue the
plaintiffs considered carefully and concluded that divestiture of
independent products was sufficient. Other comments, however,
essentially suggest that the plaintiffs should have brought a different
case--one based on loss of competition between research systems. For
reasons stated in Section III, the latter sort of comment is not
appropriate in a Tunney Act proceeding.
The proposed Final Judgment is the culmination of an extensive
investigation by Plaintiffs. In the course of the investigation,
plaintiffs subpoenaed documents from defendants, deposed employees and
officers of defendants, and interviewed numerous law librarians, legal
publishers that compete against defendants, and other legal publishing
industry participants. Plaintiffs carefully examined whether
significant numbers of users of legal research tools consider Thomson's
``Total Client Service Library'' or ``TCSL'' \8\ to be a substitute for
West's ``Key Number'' system. See section II.C.1 below.
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\8\ The Total Client Service Library includes cross-references
that Thomson includes in many of its legal publications.
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In fact, most law schools do not teach that the TCSL and West Key
Number system are substitutes. This is true, for example at the
Georgetown University Law Center, at which Professor Oakley, who
commented on behalf of AALL, teaches.
Nor did our investigation reveal that competition between the
parties' individual products is based on competition between TCSL and
Key Numbers. Rather, the competition between individual products is
based primarily on substantive content in the publications. For
example, in new York, both firms have annotated statutes. They are
substitutes primarily because they both offer statutory text and
annotations to relevant case law. For case law reporters, both firms
offer case law publications that are substitutes primarily on the basis
of containing case law and editorial enhancements such as headnotes and
summaries. The parties' divestiture publications do compete in part
because they are enhanced with cross-references.
At the conclusion of the investigation of these issues the
Department carefully considered, under the prevailing legal standard,
the evidence supporting the theory that the merger harmed competition
between competing research systems, and determined that no further
action was warranted on the evidence before it.
After careful investigation, the governments decided that it would
not be necessary to divest all the publications to which divestiture
products are cross-referenced in order to keep the divestiture products
competitive. Lexis/Reed Elsevier complains that ``the Consent Decree
exacerbates the proposed acquisition's anticompetitive effects in its
failure to require Thomson to provide continued access to, and use of,
the portions of the Thomson system that the Department is not proposing
for divestiture.''
Divestiture products that contain cross-references to Thomson
products will still be able to include those cross-references. Thomson
has never objected to, and has in fact encouraged, cross-references (of
the kind contained in the TCSL) to their products by other publishers.
The governments' investigation revealed many instances of other
publishers cross-referencing to Thomson, West, and other firms'
publications. For example, Matthew Bender includes American Law Reports
(``ALR'') references in several of its publications. Thomson has
confirmed to the Department that it will continue this practice of open
citation to Total Client Service Library products.\9\ See attachment A.
Plaintiffs expect that the acquirer(s) of the divestiture products will
continue to be able to cross-reference Thomson publications, which will
help the divestiture products remain competitive.
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\9\ Professor Saloner maintains that ``new entrants'' are
unlikely to come into the markets for enhanced primary law products
even if postmerger prices increase, because the cost of developing
and introducing a cross-reference methodology for a small set of
products would be prohibitive. Declaration of Garth Saloner in
Support of Lexis-Nexis' Opposition to the Entry of the Proposed
Final Judgment Paras. 17 and 18. However, as explained above, a
``new entrant'' would be able to cite to the TCSL products and would
therefore not have to develop its own cross-reference methodology.
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Lexis/Reed Elsevier's comments express concern that Thomson will
charge monopoly prices for cross-referencing to ALR and other Thomson
publications that are part of the TCSL. This concern is unfounded as
Thomson has never claimed a proprietary interest in such cross-
references and has never charged a royalty for them. Lexis/Reed
Elsevier is also concerned that Thomson may ``save itself the cost of
maintaining ALR.'' The implication is that Thomson would stop
publishing this popular publication because ALR is a substitute for a
West product or products. This fear is not supported by substantial
evidence. See II.C.1.
Similarly, Lexis/Reed Elsevier comments that the acquirer of United
States Reports, Lawyers Edition will not have access to the annotations
at the back of each reporter. Plaintiffs disagree. The proposed Final
Judgment provides that defendants will divest to the acquirer the
annotations in existing volumes. Proposed Final Judgment at para. II.B.
The acquirer will be responsible for continuing to provide such
annotations in future volumes.
4. California
Mr. L. David Cole, an attorney in Beverly Hills, California, a
subscriber to Thomson's CD-ROM titles in California, is concerned that
the divestiture of Deering's California Code Annotated will separate it
from other titles such as California Reports, the Witkin Library, and
Miller & Starr, and that such separation will result in ``unintegrated
sets, thereby frustrating the reason for my choice of products * * *.''
He states, ``my * * * investment in Deering's and California Reports
will be rendered substantially less valuable when the related treaties
are no longer under common ownership and integrated.''
The precise issue identified by Mr. Cole's comment was considered
seriously during the investigation of potential competitive effects
caused by the Thomson/West merger--that is, whether any of the parties'
competing products involve such integration with other, non-competing
products that they could not after divestiture, compete in the
marketplace. Specifically, the issue of integration of Thomson's
California products was investigated and reviewed. It was determined by
the plaintiffs that Deering's Code and the California Reporter are
integrated sufficiently to indicate that they should both be
divested.\10\ On the other hand,
[[Page 53390]]
there was insufficient evidence that one or both of those two products
are sufficiently integrated, in the minds of consumers, with Witkin or
any other Thomson product, to warrant a challenge involving more
titles.
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\10\ The proposed Final Judgment requires immediate divestiture
of Deering's Code. The proposed Final Judgment also contemplates the
divestiture of California Reports; however, the concurrence of the
State Reporter of Decisions is an additional requirement before its
divestiture can occur.
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5. Brand Names
Mr. Alois V. Gross, an attorney in Minneapolis, Minnesota, comments
that trade names must be divested, including Lawyer's Cooperative,
Bancroft-Whitney, LawDesk, TCSL, and American Jurisprudence. He
believes these names carry valuable goodwill and brand recognition and
are essential to the divestiture products' viability. Where brand names
appeared important to the divestiture product, their divestiture has
been included. For example, Deering's Annotated California Code, Corbin
on Contracts, and United States Reports, Lawyers Edition, all will be
divested. The brand names Mr. Gross mentions cover a broad range of
products and are not those primarily associated with the specific
divestiture products.
B. The Option to Official Reporter Contracts States Provision is
Appropriate and Adequate Relief for the Violation Alleged in the
Complaint
Several commenters expressed concerns about the scope and terms of
the decree provision which requires Thomson to grant the Official
Reporter Contract States the option to terminate their Thomson
contracts for publishing official reporters.\11\
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\11\ L. David Cole, Esq.; Edward D. Jessen, California Advisory
Committee on Publication of Official Reports; Kathleen Jo Gibson,
New Mexico Compilation Commission; Karen Ehmer, Esq., Darby Printing
Company; E. Scott Wetzel, CD Law, Inc.; John H. Lederer, Esq.
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1. California
On August 7, 1996, Mr. Edward Jessen submitted comments as Official
Reporter of Decisions and Secretary of the Advisory Committee for
Publication of the Official Reports of the State of California. He
questioned whether the proposed Final Judgment adequately addressed the
fact that California Reports and Deering's California Codes share costs
and text and should be together to stay competitive. Lexis/Reed
Elsevier' Motion to Intervene and accompanying papers also expressed
this concern.
Deering's and its assets are required to be divested. California
Reports, and all its related assets, also must be divested if the
governing entity in California awards the official publisher contract
to another firm. Mr. Jessen is the head of that governing body. This
provision was inserted into the Final Judgment (Washington and
Wisconsin are treated similarly) for the sole purpose of allowing the
state governing bodies to concur in the need for divestiture of
official reported assets and to decide who should buy the official
reporter assets.
Plaintiffs believed this would be a superior approach to attempting
directly to require the abrogation and assignment of the contracts with
the state judicial branch entities.\12\ Therefore, the affected states
were effectively given the option to obtain full divestiture. Mr.
Jessen and his committee are given control over whether to require
divestiture of California's official reporter assets or continue with
Thomson. The committee can re-open bidding for the state contract, and
give significant weight to ownership of Deering's Code. This places
California in a similar position to its pre-merger position. This
action should satisfy Mr. Jessen's concerns completely.
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\12\ Darby believes that the official reporter assets of
official reporter contract states should also be immediately
divested. The part of proposed Final Judgment relating to the re-
opening of bidding of official state reporter contracts involves a
true option to the state governing bodies. These bodies are not
required to re-open bidding. The plaintiffs have no information on
the requirements that will be placed on bidders by the state
governing bodies. There is nothing in the proposed Final Judgment
insuring that Thomson will participate in bidding, or requiring
states to allow Thomson to participate. Even if Thomson were to
participate in a re-opened bidding process, there are no
restrictions in the proposed Final Judgment on the state governing
bodies' criteria or decision on what firm to pick as a new official
reporter or a state's decision to choose Thomson if the state
wishes.
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Mr. Jessen has now indicated he no longer has the concerns he
initially addressed. On September 17, 1996, Mr. Jessen sent a letter to
Thomas Greene, Senior Assistant Attorney General at the State of
California Department of Justice, in which he stated that, ``I now
fully support the proposed consent decree for the Thomson/West
transaction as sufficient to protect California's interests as far as
my office is concerned.'' (The entire correspondence is contained in
attachment B). This letter appended Mr. Jessen's September 16, 1996
letter to Brian Hall, President of the West Information Publishing
Group.
In his letter to Mr. Hall, Mr. Jessen stated,
I now understand that this issue was thoroughly investigated by
the California Attorney General's Office and by the United States
Department of Justice. I also understand that any sale of Deering's
and the other California products to be divested must be approved
under the consent decree by the California Attorney General's Office
and the United States Department of Justice, and that Thomson is not
free to select any purchaser of its choosing regardless of its
qualifications. I am confident that the California Attorney
General's Office and the United States Department of Justice will
exercise their powers of approval as provided in the proposed
consent decree to ensure that the purchaser of any divested product
will have the managerial, operational and financial capability to
compete effectively in the publication and sale of that product.
The plaintiffs agree that there is a nexus between California
Reports and Deering's California Code.
2. Washington
E. Scott Wetzel comments on behalf of CD Law, Inc. of Seattle,
Washington. CD Law publishes case law, administrative law, and other
Washington state legal materials on CD-ROM and the Internet. CD Law
comments that ``Thomson and West competed vigorously for the contract
to publish the official Washington state reports.'' Plaintiffs agree.
However, as CD Law concedes, Thomson and West were not the only
competitors for the contract--Darby, Michie, and CD Law also submitted
bids.
CD Law comments that ``there are virtually no publishers capable of
competing with West/Thomson'' and summarily dismisses companies such as
Darby and Michie. Darby currently holds the official reporter contracts
for Georgia and the Virginia Supreme Court, and recently was named the
successful bidder in Michigan, beating out Thomson among others. Darby
has in the past had the official reporter contract for Massachusetts
and Arkansas. Michie publishes numerous print and CD-ROM codes and case
reporters. Further, Michie is owned by Reed Elsevier, the second
largest legal publisher in the United States. In addition to these two
serious bidders, the governments' investigation revealed that there are
a number of other companies which have bid on and/or published official
reporters in other states and which possibly could bid in Washington.
CD Law is also concerned that defendants will not renew its
contract to write the headnotes for the official state reports. This
concern does not necessarily flow from the merger, as Thomson could
have decided not to renew the contract and instead to write its own
headnotes in the absence of the merger. In addition, CD Law is not
precluded from contracting with the successful bidder for a contract to
write headnotes in the event that the state of
[[Page 53391]]
Washington decides to exercise its option to terminate its contract
with Thomson and awards the contract to another bidder.
CD Law complains that it will not be able to compete with
defendants because its product will lack headnotes and case summaries;
however, even if Thomson does not contract with CD Law to perform these
editorial enhancements, CD Law has not explained why it cannot continue
to create the enhancements for its own CD-ROM products. The
governments' investigation revealed that CD Law has been a vigorous
competitor in Washington for a number of years, and CD Law has not
advanced any reasons why that should not continue to be the case.
3. Wisconsin
John H. Lederer, Esq., a retired attorney in Oregon, Wisconsin,
expresses concern that defendants will be the only bidders for the
Wisconsin official reporter contract. As noted above, the governments'
investigation revealed that a number of companies bid for various
official reporter contracts in a number of states. Any of these
companies potentially could bid for the Wisconsin contract.
4. Other States
Ms. Karen Ehmer comments on behalf of Darby Printing Company, a
printer of court opinions in a number of states. Darby asks that
Illinois, Massachusetts, and New York (where Thomson publishes other
official reporters) also be given the opportunity to re-open bidding
for official reporter contracts.
With respect to the official reporters for Illinois, Massachusetts,
and New York, competition for these was considered carefully by the
plaintiffs in the course of the investigation. This comment relates to
markets not included in the Complaint, and thus it is not an
appropriate Tunney Act comment. Plaintiffs note, however, that as Darby
knows (it was the official printer of Massachusetts opinions until 1995
when it lost the contract to Thomson), in these three states the states
themselves write the headnotes and summaries and make other editorial
judgments about content. Thomson acts as a printer, rather than an
editorial writer in these states. In these states, then, existing
editorial competition is only between the state and West. More
important, however, is that a court-ordered divestiture of assets is
not required for the state to choose a new printer that is capable and
adequate to replace Thomson. Printers do not also need to be law
publishers in order to compete. There are many printers that can do the
job, including Darby (e.g., in Massachusetts, or in Michigan where
Darby won the printing contract in 1995). Finally, plaintiffs note that
the state attorneys general's offices from Illinois, Massachusetts and
New York joined the Complaint and settlement.
Ms. Kathleen Jo Gibson comments on behalf of the New Mexico
Compilation Commission. The Commission wants the proposed Final
Judgment to include language giving New Mexico, and other states that
have official reporters, an option to re-open bidding similar to that
now in the proposed Final Judgment for California, Washington, and
Wisconsin. The Commission would also like a permanent, royalty-free
license to New Mexico court opinions reported by West.
The merger does not affect competition for the sale of official
reporters in New Mexico. Thus, it would be inappropriate to require the
relief requested by the New Mexico Compilation Commission. West has
been the official reporter of New Mexico opinions since 1933. Thomson
simply does not compete in New Mexico with an official reporter. In
fact, Thomson has not represented even potential competition with West;
according to the Commission, ``For a number of reasons, it is not
economical for small states such as New Mexico to contract with any
other publisher * * *'' New Mexico's dispute with West over the
copyrightability of West-reported New Mexico opinions likewise is not
related to any actual or potential competition likely to be lost as a
result of the Thomson/West merger.
C. Divestiture of Auto-Cite and Lexis/Reed Elsevier's Option To Extend
Critical Thomson Content Licenses Adequately Protects Competition in
the Comprehensive Online Legal Research Services Market
The complaint alleged that the merger could harm consumers by
adversely affecting competition in the comprehensive online legal
research services market. Specifically, there was a risk that Thomson,
a supplier of content to Lexis-Nexis, could use this position to harm
Lexis-Nexis and benefit WESTLAW (which Thomson would now own) in a way
that would harm consumers.\13\ In reviewing the situation created by
this merger, thus, the question is whether the Lexis-Nexis service
could be so degraded by Thomson's postmerger actions that consumers
(not Lexis/Reed Elsevier) would be hurt.
---------------------------------------------------------------------------
\13\ This ``vertical foreclosure'' risk is likely to lead to
anticompetitive effects on consumers, however, only to the extent
that Lexis/Reed Elsevier cannot take market actions to maintain
content adequate to allow it to be a vigorous competitor. If the
downstream firm (here, Lexis/Reed Elsevier) in a possible vertical
foreclosure situation can readily obtain its inputs (here, content)
from other sources, or develop the inputs itself, then there is no
antitrust violation (even though the downstream firm might prefer
simply to continue its existing source of inputs).
---------------------------------------------------------------------------
In reviewing how competition in this market functions, plaintiffs
observed that Lexis/Nexis and WESTLAW compete not only by offering
virtually identical data bases of court decisions, but also by offering
various, different secondary legal materials and a wide variety of non-
legal materials; their products are differentiated. Competition in the
market to date has resulted in two services that are partly similar,
partly differentiated and constantly changing. The merger does not
affect the similar part of the services--the text of court decisions.
Thus plaintiffs considered the effect on the differentiated portion of
the services. Plaintiffs noted that Lexis/Reed Elsevier itself, of
course, is a large multinational publishing corporation. Plaintiffs are
also aware that shortly after the Thomson/West merger announcement,
Lexis/Reed Elsevier entered a new arrangement with Matthew Bender
(another significant legal publisher) in which Matthew Bender's content
will be included in the Lexis/Nexis service. Plaintiffs also noted that
this market is evolving extremely rapidly--indeed, it virtually did not
exist before the Lexis-Nexis service was created in the 1970s.
In this context, plaintiffs evaluated a possible case and potential
relief. Prior to the governments' review of this merger, Thomson and
Lexis negotiated extensions of the most important licenses for Thomson
content, both legal and non-legal.\14\ Virtually all of the licenses
were extended for five additional years and generally at the existing
price, i.e., prices that had been negotiated when Thomson did not own
WESTLAW and thus could have no anticompetitive incentives with regard
to Lexis/Nexis. With the extensions, the average length of the licenses
was about seven years.
---------------------------------------------------------------------------
\14\ These licenses included the following materials: (1) Legal
publications (including Auto-Cite, ALR U.S.C.S., and AmJur2d); (2)
non-legal databases (including ASAP, Predicasts, and Investext); and
tax materials from Research Institute of America.
---------------------------------------------------------------------------
The plaintiffs thus evaluated whether additional relief was
necessary to ensure vigorous competition in this market. Two additional
protections were determined to be necessary. First, for certain key
non-legal data bases,
[[Page 53392]]
Thomson was required to offer to extend Lexis/Reed Elsevier's licenses
for an additional five years. These data bases (ASAP, Predicasts and
Investext) had been identified by Lexis/Reed Elsevier as particularly
significant. Second, Auto-Cite was required to be divested, so that
Lexis/Reed Elsevier could obtain it from a source independent of
Thomson (or buy it itself). These two provisions, together with the
previously negotiated license extensions, and the normal market
incentives and capabilities of Lexis/Reed Elsevier (such as those that
led it to a new partnership with Matthew Bender), should be sufficient
to maintain vigorous competition that would protect consumers in the
comprehensive online legal research services market.
Lexis/Reed Elsevier comments that these actions are not enough.
These arguments are not new. Plaintiffs heard them from Lexis/Reed
Elsevier during the investigation and investigated them extensively and
intensively.
Specifically, Lexis/Reed Elsevier makes two complaints. First, they
seek divestiture of TCSL. Second, they criticize the divestiture of
Auto-Cite. These points are essentially reiterated in their Motion to
Intervene.
1. TCSL
Lexis/Reed Elsevier complains that plaintiffs should have obtained
an additional divestiture--the TCSL--in order to enable Lexis/Reed
Elsevier to use the components of the TCSL to compete with WESTLAW's
Key Numbers and headnotes. Plaintiffs disagree. Plaintiffs carefully
considered this argument and all the evidence relevant to it--and found
it wanting. The information filed by Lexis/Reed Elsevier with its
Motion to Intervene itself demonstrates why this argument is without
merit.
Lexis/Reed Elsevier asserts that there are four ``portions of the
TCSL'' that are ``the most important * * * enhancements'' and that
Lexis/Nexis must license ``(i)n order to compete with Westlaw'': ``the
annotations found in ALR and Lawyer's Edition, the AmJur encyclopedia,
and Auto-Cite.'' Emrick Declaration para.7. In fact, the enhancements
that are important to Lexis/Reed Elsevier will continue to be
available. First, Lawyer's Edition is, of course, a divestiture
product. The new buyer, if other than Lexis/Reed Elsevier, certainly
will have every incentive that Thomson had to earn revenue by licensing
Lawyer's Edition to Lexis/Nexis. Second, Auto-Cite, too, is a
divestiture product. If Lexis is not the buyer of this product, it will
have access to Auto-Cite, as explained more fully in the next section.
Third, the claim that AmJur is essential to Lexis/Nexis is undercut by
Lexis/Nexis' own behavior. AmJur was only added to the Lexis/Nexis
service in February 1996 after Lexis/Nexis fitfully negotiated for it
over a course of several years.
Fourth, ALR is touted by Lexis/Reed Elsevier as a substitute for
West's Key Number system in finding cases. Emrick Declaration para.8.
But a document attached to the Emrick Declaration directly undercuts
this claim. This Thomson document reports on research with focus groups
of lawyers and librarians, addressing the issue of whether ALR is a
substitute for West Key Numbers. The results were that ``ALR was not
well received as being a place to start research'' even among groups
``where familiarity with ALR was skewed in ALR's favor.'' Emrick
Declaration Exhibit B at 11, 12.\15\ In focus groups of Lexis/Nexis
sales people, ``No one understood the analogy of ALR as a competitive
alternative to headnotes.'' Id. at 9.\16\
---------------------------------------------------------------------------
\15\ Among other points, it was also noted that ``[b]oth
attorneys and librarians view ALR as one of many available secondary
sources, often cited in the same category as law reviews and
treatises.'' Id. at 11. ``ALRs were not highly regarded as
definitive legal research.'' Id. at 12. Lexis sales people said that
``Attorneys mostly use ALR as a last resort * * *.'' Id. at 10.
\16\ Because the evidence does not support the proposition that
ALR is a substitute for West Key Numbers, there is no basis for the
claim in the Saloner Declaration (para. 11) that the price of ALR
will rise. Saloner assumed such substitutability.
---------------------------------------------------------------------------
There is simply insufficient evidence that ALR must be divested to
preserve competition with the West key number system. Under the Tunney
Act the Department has the duty to review the evidence and determine
the litigative prospects. Lexis/Reed Elsevier asks the court to adopt
this prosecutorial function.
2. Product Differentiation
Similarly, Lexis/Reed Elsevier argues that divestiture of TCSL is
necessary to allow Lexis/Reed Elsevier to offer a product that is
differentiated from that offered by defendants. Plaintiffs disagree.
The governments' investigation revealed that the Lexis-Nexis and
Westlaw services are today quite different and that Lexis-Nexis
continues to add new, non-Thomson publications and databases to its
service. In addition, we note that Lexis/Reed Elsevier, on its own, was
able to negotiate and extend its licenses for these components into the
next decade. For example, Lexis/Reed Elsevier negotiated a license for
ALR through 2002 and a license for AmJur2d through 2006. This may
provide an additional cushion for further differentiation of Lexis-
Nexis and addition of additional secondary sources. Furthermore, Lexis/
Reed Elsevier's joint venture with Matthew Bender, a leading legal
publisher with numerous primary and secondary law products, will
bolster its ability to continue to offer a good quality, differentiated
product. Finally, the proposed Final Judgment requires Thomson to grant
Lexis/Reed Elsevier the option to extend its License Agreements for
three non-legal databases--Investext, ASAP, and Predicasts \17\--which
are offered on Nexis, for an additional five years. Thus Lexis/Reed
Elsevier may, at its option, extend these contracts until 2010.
Proposed Final Judgment at para. X. (As with the legal publications
above, Lexis/Reed Elsevier and Thomson have already negotiated extended
contracts for these databases into the next decade.) In the judgment of
plaintiffs, this is sufficient time for Lexis/Reed Elsevier to seek
other sources, differentiate its product in other ways, or create
competing databases.
---------------------------------------------------------------------------
\17\ Investext is a collection of approximately 200 brokerage
house reports regarding individual equities and industries. ASAP is
an indexed consolidation of approximately 450 specialized industry
publications. Predicasts includes the following three databases: (1)
PROMT, an indexed database of over 1,100 trade and business
publications; (2) MARS, an indexed database that includes
information relating to advertising and marketing of consumer
products and services; and (3) Newsletter, an indexed international
database including 650 different newsletters from 165 publishers.
---------------------------------------------------------------------------
3. Auto-Cite Divestiture
Lexis/Reed Elsevier also comments that the proposed Final Judgment
``impairs Lexis-Nexis' contract rights to Auto-Cite, thus affirmatively
damaging its ability to compete.'' The plaintiffs disagree. As
explained above, Thomson has never discouraged citations to its
publications and the acquirer of Auto-Cite will be able to continue to
cite to defendants' publications, including ALR. In addition, the
acquirer of Auto-Cite will be bound by the terms of the existing
license between Thomson and Lexis/Reed Elsevier. Further, the
acquirer--if it is a firm other than Lexis/Reed Elsevier--has every
incentive to continue to offer Lexis/Reed Elsevier a competitive
citator rather than risk losing that revenue stream.
Lexis/Reed Elsevier further comments that defendants should have
been required to divest ``all rights and interests'' in Auto-Cite and
complains that
Thomson is thus not divesting itself of Auto-Cite at all: it is
retaining the database itself, the staff trained in its use; the
[[Page 53393]]
(apparently exclusive) right to use important elements of the
system, i.e., the cross-references and integration with the ALRs and
other Thomson products; and other important incidents of ownership,
such as the ability to sublicense.\18\
---------------------------------------------------------------------------
\18\ James P. Love of the Consumer Project on Technology
submitted a similar comment.
The governments' investigation revealed that Lexis/Reed Elsevier
needed to be able to license Auto-Cite and provide it on its system in
order to effectively compete in the comprehensive online legal research
service market. The proposed Final Judgment addresses this concern and
ensures that the acquirer of Auto-Cite will be able to continue to
provide Auto-Cite to Lexis/Reed Elsevier.
The proposed Final Judgment provides that the divestiture of Auto-
Cite:
Shall include the sale of all Auto-Cite trademarks and service
markets, the assignment of the Auto-Cite License Agreement, and
delivery of a transferrable royalty-free perpetual license of the
Auto-Cite case database as of the time of the divestiture and all
software, trade secrets, and know-how used in producing and updating
the Auto-Cite case database.
para.II.B. Thus, Thomson must divest to the acquirer everything it
needs to be able to continue to offer Auto-Cite to Lexis/Reed Elsevier,
other than new cases, which the acquirer can get from a number of
sources, including Lexis/Reed Elsevier.
Furthermore, the plaintiffs will ensure that Auto-Cite will be
acquired by a qualified bidder. The proposed Final Judgment provides
that the United States after consultation with the state plaintiffs
must be satisfied that: (1) The acquirer can and will operate Auto-Cite
as a viable, ongoing product; (2) the purchase is for the purpose of
competing effectively in the sale of Auto-Cite; and (3) the acquirer
has the managerial, operational, and financial capability to compete
effectively in the sale of Auto-Cite.\19\
---------------------------------------------------------------------------
\19\ Before Thomson offered Auto-Cite as a commercial product on
the Lexis online service, it used it internally for editorial
purposes. (The same is true of West's Insta-Cite service). The
governments' investigation revealed that entirely foreclosing
Thomson editors from internally using Auto-Cite for essential,
editorial purposes would harm its retained products, which would
clearly harm competition. Thus Thomson retains a copy of Auto-Cite
and can use that copy (though not, for example, the Auto-Cite
trademark).
---------------------------------------------------------------------------
Professor Saloner's concern that (1) ``the acquirer will merely be
given a license to the product, without the personnel that currently
produce Auto-Cite,'' and that (2) ``Lexis-Nexis has lost effective
access to Auto-Cite because of the failure to include critical
components of the service (e.g., prospective access to ALR) in the
divestiture'' are addressed above and also in Sections II.A.2 and
II.A.3 Declaration of Saloner Paras. 19-23.
Lexis/Reed Elsevier also complains that Thomson has not provided it
with basic information about Auto-Cite, including cost information, so
that it could ``evaluate and make a meaningful bid.'' Plaintiffs
investigated this complaint and requested additional information from
Thomson about the bidding process. The governments' inquiry revealed
that the bidding process is at an early stage. At this point, only non-
binding expressions of interest, not actual bids, have been requested
by defendants. A number of interested companies, including Lexis/Reed
Elsevier, have expressed interest in bidding.
During the next stage of the bidding process, prospective bidders
will receive a presentation by Thomson personnel and access to a due
diligence room containing proprietary documents. Ironically, because of
its confidential license agreements with Thomson, Lexis has access to
key data that no other bidder can obtain and therefore has more
information than any other bidder. Thus, prospective bidders will have
adequate information before formulating their bids.\20\
---------------------------------------------------------------------------
\20\ Lexis/Reed Elsevier's real concern appears to be that
Thomson could use its copy of the Auto-Cite database to improve
WESTLAW, West's comprehensive online legal research service.
WESTLAW's counterpart to Lexis-Nexis' Auto-Cite is called Insta-
Cite. Insta-Cite only offers a portion of what Auto-Cite offers--it
does not offer negative, indirect history before 1972 nor does it
offer cross-references to ALR. If Thomson does ``upgrade'' Insta-
Cite, it would be a procompetitive result. The governments'
investigation did not reveal--and even Lexis/Reed Elsevier has not
argued--that Auto-Cite has to be ``better than'' Insta-Cite for the
Lexis-Nexis service to compete with WESTLAW. Continued access to
Auto-Cite is sufficient. Further, West could have, absent the
merger, to fill in the Insta-Cite database.
---------------------------------------------------------------------------
4. Overall Competition in the Comprehensive Online Legal Research
Service market
Matthew Lee, Executive Director of Inner City Press/Community on
the Move (``ICP'') also expressed concerns about competition in the
comprehensive online legal research services product market. ICP
comments that the comprehensive online legal research service product
market was already an ``over-concentrated and anticompetitive'' duopoly
and faults plaintiffs for taking no action to change this situation.
ICP's complaint is unrelated to the merger. ICP's complaint essentially
seeks a Sherman Act section 2 monopolization case in the comprehensive
online legal research services market. Whatever the merits of such an
action, it is far beyond the scope of this Tunney Act proceeding on a
Clayton Act section 7 matter.
O.R. Armstrong submitted comments on behalf of Geronimo Development
Corporation, St. Cloud, Minnesota. Geronimo Development publishes a CD-
ROM format, Virginia case law, statutes and administrative materials,
along with U.S. Fourth Circuit and Supreme Court case law. Geronimo
claims that because Lexis will be weakened by the merger, West's
enhanced lower federal court case law monopoly therefore will be
strengthened. Plaintiffs disagree. Our response to Lexis' comments
relating to the merger's effect on it are above in II.C. However, even
if Geronimo's claim about weakening Lexis were true, the merger cannot
accurately be described as strengthening West's position in any
enhanced federal case reporters, because there is insufficient evidence
to support a successful allegation that Lexis is an actual or potential
competitor in that market.
D. The Star Pagination License Eases a Significant Barrier to Entry and
is Procompetitive
A number of commenters raised concerns about the decree provision
which requires defendants to grant licenses to star paginate to West's
National Reporter System publications.\21\ This license provision was
included in the proposed final judgment because West's prior refusal to
grant such licenses was a barrier to entry into some markets affected
by the merger, particularly emerging electronic forms (particularly CD-
ROM) of enhanced primary law and secondary law.
---------------------------------------------------------------------------
\21\ Lynn Warmath, Hirschler, Fliescher, Weinberg, Cox & Allen;
Alan D. Sugarman, HyperLaw, Inc.; Professor Robert L. Oakley,
American Association of Law Libraries; Alois V. Gross, Esq.; Gary L.
Reback, Esq., Lexis/Reed Elsevier; O.R. Armstrong, Geronimo
Development; Morgan Chu, Esq., Matthew Bender & Company; E. Scott
Wetzel, CD Law; Jose is. Rojas, Esq., Oasis Publishing Company,
Inc.; Eleanor J. Lewis, American Association of Legal Publishers;
Professor J.C. Smith, Artificial Intelligence Research Project; John
H. Lederer, Esq.; Kendall F. Svengalis, Rhode Island State Library;
James P. Love, Consumer Project on Technology; Norman S. Wolfe,
International Compu Research, Inc.
---------------------------------------------------------------------------
West's claim of copyright infringement by ``star pagination'' is
controversial. It has been the subject of litigation. In current
litigation the United States has stated its position that use of star
pagination does not constitute copyright infringement.\22\ If
[[Page 53394]]
that position prevails, then licenses pursuant to the decree will be
unnecessary. If that position does not prevail, then the license
provisions will reduce existing entry barriers and thus make these
markets more competitive.
---------------------------------------------------------------------------
\22\ The United States recently filed briefs to this effect in
Matthew Bender & Co., Inc. v. West Publishing Co., 94 Civ. 0589
(JSM) (S.D.N.Y.) and Oasis Publishing Co. v. West Publishing Co.,
No. 96-2887 (8th Cir.).
---------------------------------------------------------------------------
Because the issue of West's alleged pagination copyright has been
so controversial, this provision of the decree attracted a substantial
number of comments. Most of them are comments about this general public
policy issue and do not relate to harm caused by the merger and to the
violation alleged in the complaint. Each is discussed below.
1. Validity of West's Star Pagination Copyright Claim
Many of the commenters questioned the propriety of including the
Star Pagination License provision in the proposed Final Judgment.\23\
Specifically, these commenters believe that the license provision
somehow endorses West's claim that star pagination infringes its
copyright. This argument ignores the plain language of the decree.
---------------------------------------------------------------------------
\23\ Alan D. Sugarman, HyperLaw, Inc.; Alois V. Gross, Esq.;
Morgan Chu, Esq., Matthew Bender & Company; Jose is. Rojas, Esq.,
Oasis Publishing Company, Inc.; Eleanor J. Lewis, American
Association for Legal Publishers; Professor J.C. Smith, Artificial
Intelligence Research Project; Kendall F. Svengalis, Rhode Island
State Library; James P. Love, Consumer Project on Technology.
---------------------------------------------------------------------------
Language in the Stipulation, proposed Final Judgment, and
Competitive Impact Statement clearly states that the license provisions
created in settling this case shall not have any bearing, in any forum,
on any West intellectual property claim. This provision was added
specifically in anticipation that some persons might incorrectly infer
that the proposed star pagination license endorses West's star
pagination claim. If defendants ever attempt to use the Final Judgment,
or any pleading in this case, to support any intellectual property
claim in any other forum, any opposing party can simply cite the
relevant disclaimer language to rebut Thomson/West.
In addition, the proposed final judgment has been revised with the
addition of the following language to the disclaimer:
Defendants have agreed that they will not use the model license
contained in this Final Judgment, or the fact that any such license
was included in the Final Judgment, in any litigation or
negotiations with third parties to support the validity of their
position on star pagination.
2. Abandonment of Star Pagination Copyright Claim
Several of the commenters who made the foregoing point also argued
that plaintiffs should have insisted on total abandonment of the claim
that star pagination infringes West's copyright. For example, Morgan
Chu at the law firm of Irell & Manella submitted comments on behalf of
Matthew Bender. Matthew Bender cites two cases for the proposition that
this decree should require abandonment of star pagination claims;
however, these cases presented entirely different factual situations.
United States v. Borland International, Inc., 1992-1 Trade Cas. (CCH)
para. 69,774 (N.D. Cal. 1992), involved a merger of firms that
controlled competing database programs and related intellectual
property. Had Borland not been barred from pursuing Ashton-Tate's
copyright infringement claims against ``clones,'' the resulting
increase in concentration from the acquisition would have been
anticompetitive. Thus, the abandonment of infringement claims directly
addressed competitive harm posed by the transaction. In this case, the
deal does not combine two competing sets of intellectual property
rights; no one is seeking the right to star-paginate to Thomson
products. Therefore, Borland does not apply.
The relief in Hoechst AG, 60 Fed. Red. 49609 (F.T.C. 1995), was
even more narrowly drawn. Hoechst's acquisition of Marion Merrell Dow,
Inc. (``MMD''), put it in control of Cardizem CD, the dominant product
in the market for once-a-day Dilitiazem, which is used to treat, among
other things, high blood pressure and angina. Before the acquisition,
Hoechst and another firm had been developing a drug to compete with
Cardizem CD, and MMD had sued them for patent infringement. In ensuring
that the third company would be able to continue to develop the
competitive drug as effectively as it would have absent the merger, the
decree required dismissal of the infringement suit. Since Hoechst had
left the new drug in the other firm's hands and the infringement suit
was dismissed, there was no need for the sweeping relief obtained in
Borland.
Matthew Bender further comments that defendants should have been
forced to abandon West's star pagination claims because they will give
Thomson and West an unfair advantage in creating new products which
integrate Thomson's secondary law with West's primary law. Matthew
Bender argues that other publishers will not be able to compete with
these new, integrated products because of the star pagination claim.
However, Matthew Bender does not explain how the star pagination
license leaves it worse off. If it prevails in its litigation with
West, of course, Matthew Bender will not need a license at all to star
paginate. If however, it loses, the license ensures that Matthew Bender
will be able to obtain a star pagination license at a reasonable rate.
The creation of new, integrated products is a procompetitive
development, which the antitrust laws encourage. To the extent this
acquisition makes that creation possible, the proposed Final Judgment
should not prevent it.
3. Text Copyright
Mr. Sugarman claims the proposed Final Judgment unfairly benefits
Thomson/West in HyperLaw's private suit with defendants, for
infringement of a West (claimed) copyright in the text of cases
reported in West reporters. He apparently believes the proposed star
pagination license will be falsely characterized by West to sway and
mislead courts and the United States Congress, to persuade them to
adopt West's view of its copyright claim in the text of West-reported
cases. Plaintiffs disagree. The proposed Final Judgment does not
support or even address West's claim to a text copyright. The decree's
disclaimer language applies equally to any West text copyright claim.
4. Other Antitrust Violations
Mr. Sugarman states that, ``the Antitrust Division has punched a
free antitrust waiver ticket to West-Thomson. It will be able to throw
its weight around in the legal market without any concern as to
enforcement from the Antitrust Division.'' There is no support for this
statement. Thomson/West remains subject to full antitrust investigation
and enforcement on any conduct other than this specific merger.
Mr. Sugarman states, ``there is nothing in Hart-Scott-Rodino [the
premerger notification filing statute, codified at 15 U.S.C. 18a] that
prohibits the United States from initiating antitrust enforcement
action when it develops evidence of violation of the antitrust laws in
the course of a Hart-Scott-Rodino investigation.'' Plaintiffs agree. If
an antitrust violation unrelated to this merger were to be uncovered
during the course of the investigation, or in any other investigation,
the appropriate remedies would necessarily be sought in other fora, for
example, by challenging the conduct in a civil complaint, a grand jury
proceeding and/or indictment in a potentially criminal matter, by
amicus brief in a private suit, or by competition advocacy in
legislative or regulatory forums.
[[Page 53395]]
Mr. Sugarman worries that the Department, West and others
mischaracterize the star pagination license as ``resolv[ing] any
possible antitrust concern regarding the availability of star-
pagination licenses.'' We agree that such a statement, by itself, would
be a mischaracterization of the intended effect of the proposed
license. The plaintiffs believe only that the proposed license, along
with the other relief obtained in this settlement, resolves any
possible antitrust concerns arising from this merger. The plaintiffs
have no control over the mischaracterization of any part of the
proposed Final Judgment by any other person. However, the terms and
circumstances of the star pagination license are sufficiently clear to
make successful mischaracterizations of the kind that concerns Mr.
Sugarman highly unlikely.
5. Citation to First Page of an Opinion
Matthew Bender comments that it believes that West claims to have
``a copyright interest in the initial parallel citations (i.e., the
cite to the first page of a case) in the National Reporter System that
may be infringed when a competitor uses such citations.'' The
governments' investigation revealed that West claims it has a copyright
interest in such ``initial parallel citations,'' but concedes that
third party use of such citations is a fair use and as such is a
defense to infringement and that such citations are ``effectively in
the public domain.'' Further, West has never enforced such a copyright
interest, and defendants have stated that they have no intention of
enforcing such a copyright interest in the future. See Attachment A.
6. Level of License Royalty Fees
There were many comments on the level of the pagination license
fees. After carefully reviewing these comments and after obtaining more
information about license fees, the parties negotiated a revision to
the schedule of pagination license fees contained in the proposed Final
Judgment. With this revision, the fees per thousand characters would be
as follows:
1st year of a license
.............................................4 cents
2d year of a license
..............................................4 cents
3d year of a license
..............................................6 cents
4th year of a license
.............................................6 cents
5th year of a license
.............................................8 cents
6th year of a license
.............................................8 cents
7th year of a license
.............................................9 cents
Subsequent years
..................................................9 cents
This new schedule, compared to that in the initial proposal,
reflects the comments on the need for lower fees to more effectively
encourage new entrants. The new schedule has overall lower fees for
such entrants. Furthermore, the new schedule both begins at a lower
rate and allows a longer period in which a new entrant benefits from
low rates.
7. Large Publishers
A number of commenters express concerns that the star pagination
graduated royalty rate (license fee) structure will benefit only large
publishers.\24\ The revised fee structure is likely to result in entry
by some legal publishers, which should result in competition being
preserved and perhaps enhanced by new competition. The ``graduated''
structure is specifically aimed at encouraging entry of publishers who
are new or small, by providing a lower license price in the early
years. This should assist start-up firms with less capital in the early
years. Then, after the entrant has had a few years to establish its new
publication the rate levels off.
---------------------------------------------------------------------------
\24\ Lyn Warmath, Hirschler, Fliescher, Weinberg, Cox & Allen;
Alan D. Sugarman, HyperLaw, Inc.; Professor Robert L. Oakley,
American Association of Law Libraries; Gary L. Reback, Esq., Lexis/
Reed Elsevier; Morgan Chu, Esq., Matthew Bender; Jose is. Rojas,
Esq., Oasis Publishing Company; Eleanor J. Lewis, American
Association of Legal Publishers; John H. Lederer, Esq.; Kendall F.
Svengalis, Rhode Island State Law Library; James P. Love, Consumer
Project on Technology; Norman S. Wolfe, International Compu
Research, Inc.
---------------------------------------------------------------------------
It also should be remembered that the license fee is a function of
the number of cases for which star pagination is licensed. Thus, the
size of the total fee payment should be compared to the number of cases
and expected sales, not the size of the publisher. Finally, the license
provides that the fee is not to exceed the stated rates; therefore, the
license specifically allows for negotiation and payment of a lower fee.
8. Other Markets
Ms. Lyn Warmath, Library Director at Hirschler, Fliescher,
Weinberg, Cox & Allen in Richmond, Virginia expresses concern about the
level of the fee anticipated for the star pagination license. Ms.
Warmath calculates the license fees for various publications, for
example, she calculated the license to duplicate West's Federal
Supplement to be $632,000 in the first year. This product, however, is
not affected by the merger, so the relevance of this point is dubious.
Essentially, the plaintiffs' approach to this case is to encourage
competition in the enhanced primary and secondary law product markets
alleged in the Complaint where a star pagination license might be
useful. Simply, competition for federal reported case law (other than
the enhanced Supreme Court reporters for which divestiture is required)
is not affected by the merger of Thomson and West, because Thomson does
not publish products that compete with West's Federal Supplement or
Federal Reporter series. The proposed Final Judgment therefore
addresses the relief deemed necessary to preserve competition.
The Department has said publicly that it hopes the mandatory star
pagination license encourages entrants in other markets. These
generally pro-competitive results, if they occur, would be ancillary to
the remedy sought in the proposed Final Judgment.
9. The Need for a Text License Is Unrelated to This Merger Transaction
Mr. Sugarman insists that the proposed star pagination license
should also include a mandatory test license and a waiver of any
Thomson/West copyright claims on intermediate copying as long as any
published case does not include West head notes and summaries.
Similarly, Eleanor J. Lewis of the American Association of Legal
Publishers (``AALP''), comments on the unavailability of an archive of
federal judicial decisions. Norman Wolfe of International Compu
Research, Inc. (``ICRI'') comments that ``[t]here is no provision in
either the settlement document or the licensing agreement for obtaining
the full text of judicial opinions.'' Plaintiffs disagree with the
proposition that a text license should have been included in the
decree.
The relevant question is not what license would be the best
possible license to address all possible issues involving the legal
publishing industry in a vacuum. The proposed license is an attempt, in
connection with the other relief, to remedy the effect of this
particular merger. The straightforward purpose of the star-pagination
license is to open access to the de facto star pagination standard in
the markets alleged in the Complaint. A text license or intermediate
copying waiver is not necessary to address any competitive harms
flowing from this merger. In fact, in the enhanced primary case law
markets alleged in the Complaint for which the proposed star pagination
license is intended to encourage entry, court opinions are available to
potential entrants from the courts, so a text license and an
intermediate copying waiver are not necessary.
Mr. Sugarman insists that the Final Judgment include relief on the
issue of West's claimed text copyright merely because the text of
judicial opinions is difficult to obtain. HyperLaw alleges
[[Page 53396]]
that West has made it difficult to obtain opinions in some
jurisdictions and that this places firms like HyperLaw at a competitive
disadvantage. Plaintiffs agree that judicial opinions may be difficult
to obtain in some jurisdictions, and that this is an entry barrier to
some enhanced primary law markets. Complaint para.30. However, there is
no evidence that the merger of Thomson and West, or the proposed Final
Judgment, will affect in any way HyperLaw's ability to obtain the text
of judicial opinions. Mr. Sugarman states, ``Thomson was not only a
potential competitor in the creation of archives of opinions, but was
well on the way to doing so.'' Plaintiffs are unaware of any basis for
this assertion. The most likely broad-scope source of opinions
competing with West, in those instances where the difficulty in
obtaining opinions may be a barrier to competition, is Lexis/Reed
Elsevier. Moreover, in the enhanced primary law markets alleged in the
Compliant, the text of opinions is not difficult to obtain.
10. Selection of Cases
Mr. Sugarman complains that Section 1.03 of the proposed star
pagination license defines ``Licensee Case Reports'' as reports of
decisions ``selected for reporting by Licensees,'' and it therefore
will allow Thomson/West to refuse to license if it determines that the
potential licensee did not select the decisions, but instead copied the
selection of West, a state, or some other party. Ms. Lewis of the AALP
expresses concern that ``only licensing original compilations and
West's right to determine what is an original compilation'' will
undermine the purpose of the license. Matthew Bender comments, ``West
apparently can still challenge a licensee's use of star pagination if
West contends that the licensee has not made its own selection,
coordination, and arrangement of cases.'' Plaintiffs disagree.
The plaintiffs interpret the proposed license to mean that a
license must be issued for star pagination any set of cases selected by
the licensee, even if West or any other person had previously selected
a similar set of cases. Defendants have stated to plaintiffs that they
would not consider a CD-ROM product which included exactly the same
cases included in a West print reporter to be an infringement. Indeed,
Matthew Bender has introduced such a product and we are informed
defendants have not challenged it as a ``selection infringement.
Defendants would object to a print product which simply replicated a
West print reporter; however, there is no reason to expect entry into
print products and, in any event, CD-ROM products compete with print
products and thus provide competitive constraint.
11. Description of Product or Service
A number of commenters think the proposed star pagination license
should not unnecessarily require licensees to disclose competitive
product information to defendants in order to obtain a star pagination
license.\25\ For example, Eleanor Lewis of AALP comments, ``A licensee
should be required to disclose to West only the most general ideas
about the proposed use of the licensed materials.''
---------------------------------------------------------------------------
\25\ Alan D. Sugarman, HyperLaw; Morgan Chu, Esq., Matthew
Bender; Eleanor J. Lewis, AALP; Norman Wolfe, ICRI.
---------------------------------------------------------------------------
Plaintiffs agree. There is no requirement in the proposed license
that detailed information be disclosed. Section 1.03 merely requires
licensees to provide a short, general description of the licensee's
product or service to defendants, i.e., a title. This limited
disclosure is necessary so that it is clear what product is covered by
the license. Ultimately, the licensee must disclose what cases are
included in their product so that the license fee can be calculated.
This simple information is not the type that should or could be
considered sensitive competitive information, as the cases selected by
the licensee for publication will subsequently be public information.
12. License fee per Format
A number of comments maintain that the provision in the proposed
star pagination license that requires the payment of a separate license
fee for each format--books, CD-ROM, on-line or the Internet--erects too
high a barrier to potential entrants.\26\ However, the governments'
investigation indicated that many, perhaps most, prospective entrants
would only consider one medium--CD-ROM. One of the main objectives of
the licensing provision was to facilitate entry specifically into the
new technology/new product of CD-ROMs incorporating analytical material
and hypertext links to relevant primary law. Because enhanced primary
case law on CD-ROM competes with enhanced primary law in print, CD-ROM
entry should be sufficient (with the other relief in the decree) to
deter anticompetitive behavior by Thomson/West in either print or CD-
ROM.\27\
---------------------------------------------------------------------------
\26\ Alan D. Sugarman, HyperLaw; Morgan Chu, Esq., Matthew
Bender; Eleanor J. Lewis, AALP; James P. Love, Consumer Project on
Technology.
\27\ As reflected in the Complaint, Thomson and West do not
compete in the provision of enhanced primary case law in the online
medium. Although the plaintiffs are fully aware that several firms
desire to enter the provision of case law online and on the
Internet, entry into these mediums is not a remedy intended to be
addressed by the proposed star pagination license.
---------------------------------------------------------------------------
Addtionally, the governments' investigation revealed that for those
existing publishers who publish in more than one format, for example
CD-ROM and on-line, the latter medium is used primarily to provide
updates (new cases) and therefore does not duplicate the cases on the
CD-ROM and would not require multiple payment of the license fee.
13. Challenges to West's Copyright
Mr. Sugarman and Matthew Bender, who are currently engaged in
copyright litigation with West, contend that the prohibition in the
proposed star pagination license that bars licensees from challenging
the validity of West star pagination copyright claims ignores Lear v.
Adkins, 395 U.S. 653 (1969), and assures that no West copyright claim
will be challenged. Ms. Lewis states that the license ``requires
competing publishers to renounce their First Amendment right to express
their opinions about the Licensor's alleged copyright during the term
of the license.'' Mr. Wolfe of ICRI also comments regarding ``this
obvious abandonment of our First Amendment rights.'' Plaintiffs
disagree.
First, the prohibition in Exhibit B is limited to challenges only
to the star pagination claim, not to any other West copyright claim,
and is limited in time--only during the duration of the license.
Second, it is questionable as to whether the progeny or policy of Lear,
a patent case, applies to copyright licenses. See, e.g., Saturday
Evening Post Co. v. Rumbleseat Press, Inc., 816 F. 2d 1191 (7th Cir.
1987); Nimmer on Copyright Sec. 10.15[B] at 10-134-137 (questioning
Rumbleseat). In addition, this prohibition is much more narrowly
tailored than the broad no-challenge clauses courts have struck down in
patent-license contexts.
Third, this provision will not prevent challenges to the validity
of West's star pagination infringement claims; publishers may still
choose the option they have today--publish without a license and
litigate the star pagination copyright claim's validity. The proposed
Final Judgment simply provides prospective publishers with an entry
option they would not otherwise have.
Fourth, a licensee may exercise his First Amendment rights and
speak out publicly and lobby for changes relating to this issue.
[[Page 53397]]
14. The Confidentiality Provision Is Intended to Protect the Licensee
and Could Encourage Procompetitive Discounting
Mr. Sugarman, Ms. Lewis, and Mr. Wolfe comment that the
confidentiality provision in the proposed star pagination license will
permit Thomson/West to engage in preferential licensing and to continue
to engage in abusive licensing practices in secret. Plaintiffs
disagree. The confidentiality provision in the star pagination license
is intended to protect the product development and marketing plans of
the licensee, not any secrets of Thomson/West. Thomson/West's minimum
license terms are already public in Exhibit B. The company is required
to grant a license--in at least this favorable a form--to anyone who
wants one. Failure to fulfill this requirement and any licensing
obligation would be a violation of the Final Judgment and grounds for
contempt.
Concerns about secret, preferential licensing and abusive licensing
practices may in fact be concerns that Thomson/West might enter some
licenses that are more favorable to the licensee than Exhibit B. But
entering into licenses with more favorable terms will generally be
desirable and pro-competitive. Moreover, a ``most-favored-nation''
clause (one that states Thomson/West will not grant to any licensee a
more favorable license) would discourage pro-competitive discounting
that Thomson/West may undertake on its own in response to market
forces.
15. Arbitration
Mr. Sugarman states that provisions in the proposed star pagination
license requiring arbitration in West's home state will lead to bias in
favor of West on any arbitrated matter. Ms. Lewis agrees and comments
that arbitration should occur in Washington, D.C. or the home state of
the licensee. Mr. Wolfe comments, ``[i]t is not appropriate for the
jurisdiction for any dispute to be any place other than Washington,
DC.''
Plaintiffs disagree. Such provisions are standard in licenses which
are negotiated at arms length in the context of private business
transactions, and are usually included only for the convenience of
traveling. There is no reason to call into question the honesty,
integrity, or ability of any impartially appointed arbitrator based
solely on his or her location or citizenship in the State of Minnesota.
In addition, the decision of the panel of arbitrators is appealable to
the appropriate state or federal court.
16. The Internet
James P. Love of CPT comments that the ``license agreement is
written in such a way that the subscribers must agree to the terms of
the license, and Thomson must approve the license, making it extremely
unlikely that the citations will ever be available for browsing on the
Internet.'' We interpret Mr. Love's concern to be that the license
provisions to which a licensee's subscribers must agree may be used to
restrict some form of Internet publication of licensed material on the
Internet.
The possibility that Mr. Love suggests appears unrelated to the
acquisition. Provisions of this kind are conventional in intellectual
property licenses. Nothing would have prevented West, prior to the
acquisition, from insisting on such provisions in licenses. The
acquisition should not aggravate Mr. Love's concern, and therefore,
there is no need for the remedy to alleviate it. In short, this comment
addresses a public policy concern not related to the merger.
17. License Fee for Books
Mr. Sugarman claims that the proposed star pagination license is
ambiguous as to the license fee charged for books. Plaintiffs intended
that the fee would be paid by the licensee in the year the book is
printed. In other words, books first printed, then stored, and sold in
later years would not require additional fee payments for the later
years. In order to avoid any confusion, the language of the proposed
License Agreement will be modified. Defendants have agreed to the
following modification, which plaintiffs will include when we later
move the Court to enter the decree:
2.01. Star Pagination License. During the term of this
Agreement, subject to the terms and conditions hereof, including,
without limitation, the timely payment by Licensee to Licensor of
the licensee fees provided for in Section 2.03 hereof, Licensor
hereby grants to Licensee, and Licensee hereby accepts from
Licensor, a non-exclusive, non-transferable (except as specifically
provided in Section 6.05 hereof), limited License (i) * * * (iii) to
license and/or distribute such [Licensee Product(s)/Services(s)] to
Licensee Subscribers subject to Licensee Subscriber Limitations; * *
*
2.03 License Fees. In consideration of the license granted under
Section 2.01 hereof, Licensee shall pay Licensor the license fees
provided for in this Section 2.03; provided, however, that the
licensee fee for [print Licensee Product(s)] needed only be paid for
the year in which the [print Licensee Product(s)] are printed.
18. Other Comments Regarding the Star Pagination License
Mr. Sugarman believes that third party information providers should
be able to sell or license case law data which includes licensed star
pagination and text as long as the purchasers or licensees have entered
into or are subject to a pagination license agreement with Thomson/
West.\28\
---------------------------------------------------------------------------
\28\ Mr. Wolfe of ICRI offered a similar comment on behalf of
ICRI, which describes itself as ``a wholesale customer of legal
publishers with the rights to resell, as part of our product and for
the use of our product, case law data.''
---------------------------------------------------------------------------
Plaintiffs agree. Section 2.02 of the license addresses this point
specifically: ``nothing in this Agreement shall prohibit Licensee from
selling, leasing, licensing or otherwise transferring Licensee Case
Reports that contain Licensed NRS Pagination to third party information
providers, but such transfers shall not include or grant any right to
reproduce, publish, broadcast, distribute, loan, rent, lease, sell or
otherwise transfer, make available or use the Licensed NRS Pagination
contained in such Licensee Case Reports.'' Any third party information
provider that obtained a star pagination license could, of course, use
the transferred star pagination under its own license with Thomson/
West. There is nothing in the proposed license to the contrary.
Nevertheless, to clarify that the license fee need only be paid by the
publisher, and not also by the third party information provider,
plaintiffs proposed and defendants reviewed and agreed to the following
language:
2.01. Star Pagination License * * *. (iv) to have a third party
obtain, on behalf of Licensee, NRS Pagination from West Case Reports
contained in NRS Reporter publications and include such NRS
Pagination (which shall become Licensed NRS Pagination when so
included) in corresponding Licensee Case Reports contained in
[Licensee Product(s)/Service(s)].
Mr. Sugarman comments that Thomson/West should be required to agree
not to assert future database protection legislation and anti-RAM
copying claims against licensees, for use of star pagination. This
issue is specifically addressed in the proposed license in Exhibit B.
The proposed license ensures that Thomson/West will not contend that a
licensee's use of star pagination infringes any intellectual property
right. Section 2.01 also provides that ``Licensor [Thomson] shall not
challenge, under any present or future legislation, any use by the
Licensee of Licensed NRS Pagination if Licensee's use of same conforms
to the terms of this Agreement.'' (emphasis added).
[[Page 53398]]
Mr. Sugarman comments that the proposed Final Judgment should
require West-Thomson to negotiate star pagination licenses in good
faith. Plaintiffs disagree because the proposed Final Judgment requires
Thomson/West to grant the license contained in Exhibit B to the
Judgment to anyone who wants one; therefore, good faith is not
relevant. Any refusal to license would be punishable as contempt.
Mr. Sugarman states that the proposed star pagination license is
not an ``open license,'' ``* * * when it will be negotiated in private
and arbitrated in private pursuant to confidentiality provisions agreed
to by the Antitrust Division.'' Plaintiffs disagree. The proposed
license is in fact ``open'' within the common meaning of that word. The
terms are public and mandatory, and are attached the proposed Final
Judgment as Exhibit B. While it is true that negotiations with
potential licensees seeking more favorable terms than the proposed
license may be non-public, licenses arranged for under more favorable
terms will not cause an anticompetitive effect and in fact should be
pro-competitive.
Mr. Sugarman feels that the requirement in the proposed star
pagination license that licensees prominently display West internal
pagination should be deleted. In fact, Section 2.05 of the license
merely requires licensees to present NRS Pagination ``no less
prominently than any other unofficial pagination or pinpoint
locators.'' (emphasis added). Plaintiffs cannot determine what possible
anticompetitive effects, if any, could arise from this provision. Mr.
Sugarman does not state any.
Mr. Sugarman is concerned that the proposed star pagination license
does not include a mandatory license agreement for statutes. Star
pagination to West's statutes has not become an issue. We are aware of
no jurisdiction where it is conventional to cite to statutes by West
pages. A license agreement on the text of statutes themselves is not
called for in the context of the competitive issues raised in this
merger investigation. Statute text is available in every jurisdiction,
for every potential entrant, and in every product market involving
statutes affected by the merger.
E. Plaintiffs Used Appropriate Merger Analysis in Examining this Merger
Ms. Trembley comments that ``[i]n the past, Thomson practices have
made acquired products both more labor intensive and costly to
maintain.'' She is concerned that Thomson-owned products in the past
have had their price raised at a higher rate than West products.
Similarly, Mr. Marc Ames, an attorney in New York City, comments that
he has been involved in a lengthy billing dispute with Lawyers
Cooperative Publishing, a part of Thomson. He brings this to our
attention to ``point out and underscore a shift in attitude when
business becomes too large as the result of mergers and acquisitions.''
Past price increases by Thomson are beyond the scope of this merger
challenge. To the extent they indicate that price rises have resulted
when Thomson takes over specific competing products, evidence of past
price increases is useful as evidence that similar product pairings
should be prohibited.
Plaintiffs believe such pairings have been identified and
prohibited in this case by the required divestitures. Plaintiffs note
that it does not necessarily follow that a large firm always will
engage in harmful pricing or service practices to its customers.
Competition leads to lower prices and increased service, quality and
innovation. However, there is no way to prove a likely decrease in
competition due to a merger without first carefully examining the
factual details in specific product markets.
Mr. David C. Harrison, an attorney in Philadelphia, Pennsylvania,
asks how the Justice Department can approve the merger of ``the second
largest legal publisher with the largest legal publisher, giving the
new company a virtual monopoly.'' Even if it was true, a merger of the
second largest and largest legal publisher would not necessarily lead
to an irreplaceable reduction in competition in legal publishing.\29\
As stated above, increases in industry concentration is an important
indicator of possible anticompetitive effects of any merger, however,
courts require more before a merger challenge will be successful.
Generally, courts require provable relevant product markets and a lack
of likely substitutes or entry. The plaintiffs believe every plausible,
legally recognizable, anticompetitive effect of the Thomson/West merger
has been addressed in the Complaint and proposed Final Judgment.\30\
---------------------------------------------------------------------------
\29\ According to SIMBA/Cowles Professional Publishing
Information Report (1996) and Lexis' own figures, measured by sales
Thomson has been the number three legal publisher, behind Reed
Elsevier, owner of Lexis. Thomson owns many non-legal assets
unrelated to this merger. West is the largest legal publisher.
\30\ Lexis states that consumers are already feeling the loss of
competition because Thomson has stopped publication of the Illinois
Administrative Code, and that Thomson may be on the verge of
canceling its New Jersey Administrative Code. Mem. at 6. However,
Thomson's codes in Illinois and New Jersey do not compete in any
market alleged in the Complaint, nor do they compete with any West
product, as they are unenhanced. Moreover, the regulatory materials
contained in these products are freely available from the states and
entry into the publication of unenhanced state administrative codes
is unlikely to be difficult.
---------------------------------------------------------------------------
F. Plaintiffs Should not Require Divestiture of the JURIS Database
1. There is no Conflict of Interest Within the Department on This
Matter
Tax Analysts (``TA'') comments that the United States Justice
Department (``the Department'') should be forced to disclose the
contents of its former JURIS database in order to remove an alleged
barrier to entry described in paragraph 30 of the Complaint--that in
many jurisdictions case law is difficult to obtain. TA also believes
that because the Department's Civil Division, joined by West, is
defending a Freedom of Information Act (``FOIA'') (5 U.S.C. 552 et
seq.) request by TA for the JURIS database in another action, the
Department has an irreconcilable conflict of interest that causes the
Department to act against the public interest. TA filed a motion to
intervene in this Tunney Act proceeding on July 25, 1996, which was
denied by an order of Judge Richey of this Court.
TA is a non-profit vendor of publications relating to legal tax
issues, that logically wishes to obtain historic reports of legal
opinions and statutes cheaply, or for free, in order to offer these to
its customers. It applied for but was denied a FOIA request to obtain
the JURIS database.\31\ TA filed a FOIA action against the Department
in the District of Columbia in January, 1994, seeking an order
requiring disclosure of the database. West intervened. It sought to
protect its interest as the original provider of the case reports to
the Department; West continues to sell similar reports to its other
customers. The Department has been defended at all times in that matter
by attorneys of the Federal Programs Branch of the Civil Division. In
January 1996, Judge Kessler granted the partial motion of the
Department to dismiss the suit as it related to the status of the West-
supplied case reports as an ``agency record'' under FOIA. The order was
[[Page 53399]]
certified as final on April 1, 1996. Tax Analysts v. Department of
Justice and West Publishing Company, 913 F. Supp. 599 (D.D.C. 1996).
---------------------------------------------------------------------------
\31\ JURIS was established and used by the Department for
internal use by its many components for legal research. It licensed
case reports and statutes from West and made them available along
with other legal information and documents online across the
Department and other United States Government agencies. In an effort
to reduce costs, JURIS was discontinued in 1993, and replaced at the
Department with contracts for direct provision of case reports and
statutes from Lexis/Reed Elsevier and West.
---------------------------------------------------------------------------
TA was denied the database it sought because Judge Kessler held
that the Department did not control the West-supplied case reports,
which were provided under a contract with West. The contract restricts
the Department's right to use, dispose of, or transfer the database;
and it therefore does not qualify as an ``agency record'' for purposes
of disclosure under FOIA. Tax Analysts, at 604. At no time has the
Department asserted any proprietary or copyright interest in the
database, nor has it made any assertion on behalf of West's copyright
claim. The Department's defense in the FOIA matter is not related to
any conduct of Thomson or West relating to the merger. TA has appealed
Judge Kessler's ruling.
The Antitrust Division's unrelated investigation of the proposed
merger of Thomson and West began on March 12, 1996, pursuant to the
Clayton Antitrust Act, 15 U.S.C. 12 et seq. At all times, the
Department's investigation, challenge and settlement negotiations of
the Thomson/West matter have been conducted by attorneys of the Merger
Task Force of the Antitrust Division or their direct supervisors within
the Antitrust Division, and in direct coordination with several state
attorneys general's offices. At no time during the investigation or
subsequent challenge has the Department or any plaintiff made any
assertion relating to the JURIS database.
In the Tax Analysts defense, the Department seeks to protect
against unwarranted disclosures under FOIA and to protect against
violating its contract with a private entity. The Thomson/West merger
challenge and settlement, on the other hand, involves the public
interest reflected in the federal antitrust statutes for the
preservation of competition in markets affected by mergers. There is
simply no conflict or inconsistency between the public interests sought
to be protected by the two cases.
TA argues that the Department has an irreconcilable conflict of
interest resulting from its litigating relationship with West in the
Tax Analysts case. At all times the Department has conducted an
independent FOIA defense in the Tax Analysts case. West intervened on
its own initiative and has made its own pleadings and assertions. To
the extent West's views in that matter coincide with the Department's,
joint pleadings were appropriate for judicial economy.
West is not the Department's client in either this or the Tax
Analysts matter. TA avers that the Department has adopted the interests
of West in the Tax Analysts case, and substituted them for the public
interest. The Department has a clearly articulated and valuable role in
protecting the public interest against unwarranted FOIA disclosure and
breach of government contracts with private persons. Department
attorneys are strictly prohibited from representing other persons in
matters involving the United States. 18 U.S.C. 203. Moreover, West's
interest in the Tax Analysts case is commercial, while the Department
has no commercial interest whatsoever in the JURIS database.
There have been no Department attorneys involved at any time in
both matters. The first time any attorney from the Antitrust Division's
Merger Task Force (handing the Thomson/West matter) had any contact or
even knew the identity of any attorney from the Civil Division handling
the Tax Analysts matter was after Tax Analysts filed a motion to
intervene in this matter.
TA does not seek to protect rights that would be impaired by the
entry of the proposed Final Judgment. TA seeks relief directed at the
conduct of the Department and which would place requirements on it
alone. Essentially, TA seeks to prohibit a merger between two parties
unless and until another party not involved in the proposed merger
takes some affirmative action to increase competition (they believe) in
the legal publishing industry. The paragraphs in the Complaint towards
which TA points as examples of the harm not remedied by the proposed
settlement are pre-existing industry facts that will not be changed by
the merger. (See e.g., paragraph 30 of the Complaint, which states,
``[p]ast and/or current opinions simply are not available from many
courts, and in many others, obtaining access is costly and time-
consuming.''). In short, this is a public policy issue unrelated to the
merger.
2. Familiarity With Legal Publishing Industry
Another allegation made by TA is that the Department is unfamiliar
with the workings of the legal publishing industry, particularly with
the role of online legal publishing. The Department regularly
investigates, challenges, and reaches settlement with participants in
many industries in which it is not a participant. In order to develop
expertise in an industry for purposes of merger enforcement, the
Department uses past experience, examines documents, conducts
interviews and depositions, employs industry experts, and reviews
publicly available materials. These activities were all done in the
investigation of the Thomson/West merger.
In addition, during this merger investigation, an unprecedented
level of cooperation was established between the Department and several
states, and the expertise of seven state attorneys general's offices
was combined. The state attorneys general have joined in the Complaint
and proposed Final Judgment after participating in fact-gathering and
legal analysis. Two of the states, New York and California, devoted
full-time employees to the investigation throughout its duration. All
of the state governments provided valuable assistance due to their
intimate knowledge of state-related publications.
TA states the Department has mischaracterized existing competition
between Lexis and WESTLAW in the ``comprehensive online legal research
services'' market and argues that other small legal publishers exist.
However, the existence of small, online legal publisher has no impact
on the anticompetitive effects alleged to result from the Thomson/West
merger in the comprehensive online legal research services market in
which there are only two participants at this time.
G. Miscellaneous Comments--Unrelated to Merger or Unsupported by the
Investigation
A number of comments were received when raised concerns which are
either unrelated to the merger or asserted conclusions which were not
supported by the governments' investigation.
Ms. Cyndi A. Trembley, President of the Association of Law
Libraries of Upstate New York, comments, ``Thomson will have control of
a significant portion of the secondary sources that aid in interpreting
the law.'' Kendall F. Svengalis of the Rhode Island State Law Library
comments that defendants will control a large percentage of legal
publications, and that they therefore should have been required to
divest Lawyers Cooperative Publishing (``LCP'').
It is true that Thomson has owned and now owns, as a result of its
merger with West, a significant number of secondary law titles.
However, that fact alone is not grounds on which to base a merger
challenge under the antitrust laws. Elements of a legally recognizable
merger challenge include proving that the merging firms actually
compete with each other in one or more product markets and that the
effects of that competition will be lost and not replaced after the
merger. The burden is also on the enforcing agency or agencies
[[Page 53400]]
to show that there are insufficient substitutes for the products of the
merging firms, and that entry into the product market is difficult.
Thus, plaintiffs focused on competing legal publications. A torts
handbook does not compete with a contracts treatise, for example. In
the proposed Final Judgment, the plaintiffs require divestiture of one
of the parties' products in as many product markets as could plausibly
be alleged, or that the plaintiffs believed were likely to be
allegeable, in a litigated merger challenge.
Mr. Svengalis complains that some of the titles that defendants
must divest are relatively small and that only three states must be
given the option to rebid their respective official reporter contracts.
The fact that some parts of the divestiture list are small does not
mean that the entire settlement is inadequate.
Mr. Gross states that the bids (for divestiture products) should
not be limited to the entire list of divestiture products. The proposed
Final Judgment permits Thomson/West to package, initially, the
divestiture products in any manner it desires. The only requirements on
bidding for divestiture products are contained in the proposed Final
Judgment and relate to the need that the divestiture products are sold
to some person who will keep them viable and competitive. There is no
reason to believe (in fact it may be to the contrary) that the
divestiture products will be more viable and competitive in the hands
of two or more acquirers. In any event, the divestitures remain subject
to approval by the appropriate plaintiffs, who must agree that the
products will be kept viable.
There is no reason to believe that ``having more legal publishers
in the market will result in competitive pricing and higher quality of
law products for the consumer,'' as suggested by Mr. Gross. The relief
in this merger challenge addresses the expected loss of competition due
to Thomson and West no longer competing with each other. If all the
Thomson products go to one able firm, as long as there is no reduction
in competition resulting from the divestiture, then any competition
lost by the Thomson/West merger will be replaced and preserved.
Mr. Gross comments that Thomson should have to pay a license fee
for ALR cites on Auto-Cite, after Auto-Cite is divested. Plaintiffs
disagree. It is true that Auto-Cite includes ALR cites. However, there
is no requirement that the acquirer of Auto-Cite continue to include
ALR references. If the acquirer wants to, however, it is free to
continue them. Thomson may receive some incidental benefit to continued
ALR references at the option of the acquirer, but if Thomson cares
about the cites remaining on Auto-Cite, Thomson can negotiate on its
own a contract/license to place them there. The investigation of this
merger did not reveal sufficient evidence that the competitive value of
Auto-Cite derives from ALR references. Rather, Auto-Cite's value comes
from an accurate, up-to-the-date display of case citations, and an
accurate display of whether or not a case opinion is still good law by
showing the case's direct history.
Mr. Gross claims that the competition between West's Corpus Juris
Secundum (``CJS'') and Thomson's American Jurisprudence 2d
(``AmJur2d'') will be eliminated by the merger and therefore one of
them should be divested.\32\ Plaintiffs disagree. This comment does not
relate to any claim made in the Complaint and thus is not relevant. In
fact, while they are both referred to as ``encyclopedias,'' there was
insufficient evidence that CJS is a strong competitor for AmJur2d in
the minds or actual use of consumers.
---------------------------------------------------------------------------
\32\ A similar comment was submitted by Bartlett F. Cole, Esq.
---------------------------------------------------------------------------
Geronimo comments that the Complaint fails to address West's
monopoly in reporting enhanced lower federal (U.S.) court opinions.
Geronimo suggests four remedies designed to open up the market for
enhanced lower federal case law. This comment also relates to a market
not included in the Complaint and thus is not relevant. West reports
decisions of lower federal courts in its Federal Supplement and Federal
Reporter series. The Complaint does not include a count involving
enhanced lower federal case law because Thomson is not even a
participant in that market. There also is insufficient evidence to
allege that Thomson is an actual potential or perceived potential
competitor to West's alleged monopoly in enhanced lower federal case
law. That Thomson is a large company with financial resources and
editorial expertise does not make it a potential competitor.
Lexis/Reed Elsevier comments that plaintiffs in their press release
incorrectly calculated the sales of the divestiture products, in which
Lexis/Reed Elsevier claims is only $48 million. Plaintiffs disagree.
The $72 million figure was based upon information obtained from Thomson
about the sales of the divestiture products, including Auto-Cite, and
products related to the Official Reporter Contracts. Lexis/Reed-
Elseiver's reference to the lower figure apparently does not include
the retail revenues of Auto-Cite or the sales of Official Reporters and
related products.
Scott Wetzel of CD Law comments that ``the Washington States legal
publishing market is pervaded with anti-competitive practices that
include predatory pricing, exclusive contracts for certain legal
materials, and tying agreements. The Department consent decree does
little or nothing to prevent or ameliorate these practices.'' These
comments go beyond the allegations in the Complaint. Hence, they are
not relevant to the Tunney Act proceeding.
Matthew Lee for ICP complains that West does not offer ``any
program or provision for granting access to Westlaw and other West
resources to non-profits, particularly grassroots civil rights and
consumers' groups at reduced or waived fees.'' Whether defendants offer
such programs falls outside of the process of merger review and
analysis.
ICP also questions ``DOJ's long standing inter-relation with West,
particularly the selection of West as the DOJ's legal-materials
supplier after, largely due to West's anticompetitive behavior, the DOJ
abandoned its `Juris' project.'' Since discontinuing Juris, DOJ
attorneys have used both Lexis-Nexis and Westlaw. Further, if merely
using a product or service were grounds for concern, government
attorneys would be unable to investigate and analyze many of the
mergers that come before them.
ICP further maintains that ``DOJ should attempt to better inform
the affected public, especially the `retail' and low and moderate
income segment thereof, of pending DOJ merger reviews, such that the
DOJ can receive, and consider, comments from those who stand to be most
affected.'' First, the plaintiffs, during the investigation, sought to
receive very wide input from affected users, and in fact received
information from an unusually wide number of sources. Second, as
required by the APPA, plaintiffs have filed the requisite documents
with this Court and published them in the Federal Register and the
Washington Post. Furthermore, it would be impossible for plaintiffs to
identify all members of ``the affected public'' and then notify each of
these individual and entities of the proposed Final Judgment. In this
case, plaintiffs also personally notified many of the individuals and
companies who had been involved in the investigation of the proposed
Final Judgment.
Some commenters were concerned that politics played a role in
governments' investigation and
[[Page 53401]]
settlement of this matter.\3\ There is no political context to this
merger challenge or the proposed Final Judgment, and any comments
making such accusations are wrong. Recommendations of the settlement
reached were made by the Department's career professional staff. We
note that the Department of Justice is joined by seven state attorneys
general's offices in this matter, all of which are dedicated to
impartial law enforcement regardless of politics.
---------------------------------------------------------------------------
\33\ David C. Harrison, Esq.; John H. Lederer, Esq.
---------------------------------------------------------------------------
An anonymous commenter alleges that West is in collusion with the
United States Congress in the production of United States Code
Annotated (``U.S.C.A.''). The commenter says whatever company possesses
this privileged, insider relationship, whether it be West or Thomson,
enjoys an enormous and unwarranted market advantage. Plaintiffs
received no other information to support this anonymous allegation.
However, any condition of advantage enjoyed by West through its
relationships with the Congress or any judicial entity is not affected
by the merger of Thomson and West. Thomson may replace West in the
position of advantage, but existing competition between Thomson and
West is not changed. In any event, Thomson's annotated United States
Code product, United States Code Service, is a divestiture product
under the proposed Final Judgment.
III
The Legal Standard Governing the Court's Public Interest Determination
Once the United States moves for entry of the proposed Final
Judgment, the Tunney Act directs the Court to determine whether entry
of the proposed Final Judgment ``is in the public interest.'' 15 U.S.C.
16(e). In making that determination, ``the court's function is not to
determine whether the resulting array of rights and liabilities is one
that will best serve society, but only to confirm that the resulting
settlement is within the reaches of the public interest.'' United
States v. Western Elec. Co., 993 F.2d 1572, 1576 (D.C. Cir.), cert.
denied, 114 S. Ct. 487 (1993) (emphasis added, internal quotation and
citation omitted).\34\ The Court should evaluate the relief set forth
in the proposed Final Judgment and should enter the Judgment if it
falls within the government's ``rather broad discretion to settle with
the defendant within the reaches of the public interest.'' Microsoft,
56 F.3d at 1461. Accord, Associated Milk Producers, 534 F.2d at 117-18.
---------------------------------------------------------------------------
\34\ The Western Electric decision concerned a consensual
modification of an existing antitrust decree. The Court of Appeals
assumed that the Tunney Act was applicable.
---------------------------------------------------------------------------
The Court is not ``to make de novo determination of facts and
issues.'' Western Elec., 993 F.2d at 1577. Rather, ``[t]he balancing of
competing social and political interests affected by a proposed
antitrust decree must be left, in the first instance, to the discretion
of the Attorney General.'' Id. (internal quotation and citation omitted
throughout). In particular, the Court must defer to the Department's
assessment of likely competitive consequences, which it may reject
``only if it has exceptional confidence that adverse antitrust
consequences will result--perhaps akin to the confidence that would
justify a court in overturning the predictive judgments of an
administrative agency.'' Id.\35\
---------------------------------------------------------------------------
\35\ The Tunney Act does not give a court authority to impose
different terms on the parties. See, e.g., United States v. American
Tel. & Tel. Co., 552 F. Supp. 131, 153 n.95 (D. D.C. 1982), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983) (Mem.);
accord H.R. Rep. No. 1463, 93d Cong., 2d Sess. 8 (1974). A court, of
course, can condition entry of a decree on the parties' agreement to
a different bargain, see, e.g., AT&T, 552 F. Supp. at 225, but if
the parties do not agree to such terms, the court's only choices are
to enter the decree the parties proposed or to leave the parties to
litigate.
---------------------------------------------------------------------------
The Court may not reject a decree simply ``because a third party
claims it could be better treated.'' Microsoft, 56 F.3d at 1461 n.9.
The Tunney Act does not empower the Court to reject the remedies in the
proposed Final Judgment based on the belief that ``other remedies were
preferable.'' Id. at 1460. As Judge Greene has observed:
If courts acting under the Tunney Act disapproved proposed
consent decrees merely because they did not contain the exact relief
which the court would have imposed after a finding of liability,
defendants would have no incentive to consent to judgment and this
element of compromise would be destroyed. The consent decree would
thus as a practical matter be eliminated as an antitrust enforcement
tool, despite Congress' directive that it be preserved.
United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.
D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001
(1983) (Mem.).
Moreover, the entry of a governmental antitrust decree forecloses
no private party from seeking and obtaining appropriate antitrust
remedies. Thus, Defendants will remain liable for any illegal acts, and
any private party may challenge such conduct if and when appropriate.
If any of the commenting parties has a basis for suing Defendants, they
may do so. The legal precedent discussed above holds that the scope of
a Tunney Act proceeding is limited to whether entry of this particular
proposed Final Judgment, agreed to by the parties as settlement of this
case, is in the public interest.
Finally, the Tunney Act does not contemplate judicial reevaluation
of the wisdom of the government's determination of which violations to
allege in the Complaint. The government's decision not to bring a
particular case on the facts and law before it at a particular time,
like any other decision not to prosecute, ``involves a complicated
balancing of a number of factors which are peculiarly within [the
government's] expertise.'' Heckler v. Chaney, 470 U.S. 821, 831 (1985).
Thus, the Court may not look beyond the Complaint ``to evaluate claims
that the government did not make and to inquire as to why they were not
made.'' Microsoft, 56 F.3d at 1459 (emphasis in original); See also,
United States v. Associated Milk Producers, Inc., 534 F.2d 113, 117-18
(8th Cir. 1976), cert. denied, 429 U.S. 940 (1976).
Similarly, the government has wide discretion within the reaches of
the public interest to resolve potential litigation. E.g., United
States v. Western Elec. Co., 993 F.2d 1572 (D.C. Cir.), cert. denied,
114 S. Ct. 487 (1993); United States v. American Tel. & Tel. Co., 552
F. Supp. 131, 151 (D. D.C. 1982), aff'd sub nom. Maryland v. United
States, 460 U.S. 1001 (1983) (Mem.). The Supreme Court has recognized
that a government antitrust consent decree is a contract between the
parties to settle their disputes and differences, United States v. ITT
Continental Baking Co., 420 U.S. 223, 235-38, (1975), United States v.
Armour & Co., 402 U.S. 673, 681-82 (1971), and ``normally embodies a
compromise; in exchange for the saving of cost and elimination of risk,
the parties each give up something they might have won had they
proceeded with the litigation.'' Armour, 402 U.S. at 681. This Judgment
has the virtue of bringing the public certain benefits and protection
without the uncertainty and expense of protracted litigation. Armour,
402 U.S. at 681; Microsoft, 56 F.3d at 1459.
IV
Conclusion
After careful consideration of these comments, the plaintiffs
conclude that entry of the proposed Final Judgment will provide an
effective and appropriate remedy for the antitrust violation alleged in
the Complaint and is in the public interest. The Plaintiffs
[[Page 53402]]
have moved the Court to enter the proposed Final Judgment after the
public comments and this Response have been published in the Federal
Register, as 15 U.S.C. 16(d) requires.
Dated: September 23, 1996.
Respectfully submitted,
James K. Foster,
Minaksi Bhatt (DC Bar #434448),
Attorneys, U.S. Department of Justice, Antitrust Division, 1401 H
Street, N.W., Suite 4000, Washington, D.C. 20530, Tel: 202/514-8362.
For Plaintiff State of California:
----------------------------------------------------------------------
Kathleen E. Foote,
Deputy Attorney General, 50 Fremont Street, Suite 300, San
Francisco, CA 94105, (415) 356-6320.
For Plaintiff State of Illinois:
----------------------------------------------------------------------
Christine H. Rosso
For Plaintiff Commonwealth of Massachusetts:
----------------------------------------------------------------------
George K. Weber
For Plaintiff State of New York:
----------------------------------------------------------------------
Stephen P. Houck
For Plaintiff State of Washington:
----------------------------------------------------------------------
Tina E. Kondo
For Plaintiff State of Wisconsin:
----------------------------------------------------------------------
Kevin J. O'Connor
Appendix--Index of Public Comments and Response
------------------------------------------------------------------------
Comment Response
------------------------------------------------------------------------
Lyn Warmath, Library Director, II.D.6., II.D.7, II.D.8.
Hirschler, Fleischer, Weinberg,
Cox & Allen, Pp. 1-3 (pagination
license).
L. David Cole, Esq., Pp. 1-2 II.B.1.
(unintegrated products).
Alan D. Sugarman:
June 26 letter:
P. 1 (good faith negotiation) II.D.18.
P. 2 (text license).......... II.D.3., II.D.9.
Pp. 2-3 (level of license II.D.6., II.D.7.
fees).
P. 3 (copyright challenges).. II.D.13.
Pp. 3-4 (confidentiality of II.D.14.
license).
P. 4 (arbitration)........... II.D.15
P. 4 (selection of cases).... II.D.10.
Pp. 4-5 (text license)....... II.D.3., II.D.9.
P. 5 (license fee per format) II.D.12.
P. 5 (West pagination II.D.18.
display).
P. 5 (description of product) II.D.11.
P. 5 (book license fees)..... II.D.17.
P. 6 (third party providers). II.D.18.
June 28 letter:
Pp. 1-2 (selection of cases). II.D.10.
P. 2 (license for statutes).. II.D.18.
September 3 letter:
P. 2 (other antitrust II.D.4.
violations).
P. 2 (products divested)..... II.A.1.
P. 3 (good faith negotiation) II.D.18.
P. 4 (open licenses)......... II.D.18.
Pp. 5, 9 (confidentiality of II.D.14., II.D.18.
license).
P. 5 (level of license fees). II.D.6.
P. 5-8 (text license)........ II.D.9.
P. 8 (selection of cases).... II.D.10.
P. 8 (copyright challenges).. II.D.13.
Pp. 8-9 (license fee per II.D.12.
format).
P. 9 (third party providers). II.D.18.
P. 9 (arbitration)........... II.D.15.
Edward D. Jessen, Reporter of II.B.1.
Decisions, Supreme Court of
California, Pp. 2-3
(divestitures of products).
Professor Robert L. Oakley,
American Association of Law
Libraries:
P. 2 (divestiture of II.A.1.
products).
P.2 (editorial staffs)....... II.A.2.
P. 3 (``systems'')........... II.A.3.
Pp. 3-4 (level of license II.D.6., II.D.8.
fees).
Pp. 4-5 (copyright II.D.13.
challenges).
P. 5 (online competition).... II.C.4.
Cyndi A. Trembley, President, II.A.1., II.E., II.G.
Association of Law Libraries of
Upstate New York, P. 1 (merger
and pricing).
Kathleen Jo Gibson, New Mexico
Compilation Commission:
P. 1 (state reporters)....... II.B.4.
Pp. 1, 2 (text copyright).... II.D.3., II.D.9.
P. 2 (star pagination II.D.2.
copyright).
Karen Ehmer, Esq., Darby Printing
Company:
P. 1 (state reporters)....... II.B.4.
Pp. 1-2 (state reporters).... II.B.1.-3.
David C. Harrison, Esq.
P. 1 (merger)................ II.E.
P. 1 (political II.G.
considerations).
Alois V. Gross, Esq.:
August 12 letter:
Pp. 1-4 (brand names)........ II.A.5.
Pp. 4-5 (star pagination II.D.1., II.D.2.
copyright).
Pp. 5-6 (state reporters).... II.B.1.-3.
[[Page 53403]]
Pp. 6-7 (packaging II.G.
divestitures).
P. 7 (legal encyclopedias)... II.G.
August 20 letter:
Pp. 1-5 (brand names)........ II.A.5.
Pp. 2-3 (``systems'')........ II.A.3.
P. 4 (encyclopedias)......... II.G.
P. 5 (Auto-Cite)............. II.C.2., II.G.
Thomas F. Field, Publisher Tax
Analysts:
August 29 letter:
Pp. 1-8 (access to case law/ II.F.
Juris).
P. 8 (online competition).... II.C.
September 3 letter:
Pp. 1-2 (barriers to entry).. II.D.
Gary L. Reback, Esq., Wilson,
Sonsini, Goodrich & Rosati (for
Lexis-Nexis Division of Reed-
Elsevier):
Pp. 1-2, 7 (divestiture of II.A.1.
products).
Pp. 2-6 (``systems'')........ II.A.3.
Pp. 2, 8-9 (Auto-Cite)....... II.C.2.
Pp. 5-6 (editorial staffs)... II.A.2.
Pp. 7-8 (``systems'')........ II.C.1.
Pp. 10-11 (level of license II.D.6., II.D.8.
fees).
P. 12 (value of divestitures) II.G.
Anonymous, Pp. 2-3 (U.S.C.A.).... II.G.
Marc L. Ames, Esq., Pp. 1-3 II.E.
(merger).
O.R. Armstrong, President,
Geronimo Development
Corporation:
Pp. 2, 4-5 (pagination II.D.1., II.D.2.
copyright).
P. 2 (online competition).... II.C.1.-3.
Pp. 2-3 (monopoly in federal II.G.
case law).
Pp. 3-4 (text copyright)..... II.D.3.
P. 5 (Tax Analysts).......... II.F.
Morgan Chu, Irell & Manella LLP,
(for Matthew Bender & Company,
Inc.):
P. 9, 11 (initial parallel II.D.5.
citations).
P. 12 (star pagination II.D.1., II.D.2.
copyright).
P. 13 (integration of II.D.2.
products).
P. 13 (level of license fees) II.D.6., II.D.8.
P. 13 (license fee per II.D.12.
format).
P. 14 (selection of cases)... II.D.10.
P. 14 (description of II.D.11.
product).
Pp. 14-15 (copyright II.D.13.
challenges).
E. Scott Wetzel, CD Law:
Pp. 3-4 (Washington case law) II.B.2.
Pp. 4-5 (other antitrust II.G.
violations).
P. 6 (level of license fees). II.D.6., II.D.8.
P. 6 (copyright challenges).. II.D.13.
P. 6 (arbitration)........... II.D.15.
P. 6 (divestiture of II.A.1.
products).
Jose I. Rojas, Esq., Broad and
Cassel (for Oasis Publishing
Company):
August 27 letter:
P. 1 (star pagination II.D.1.
copyright).
P. 1 (copyright challenges).. II.D.13.
P. 2 (level of license fees). II.D.6., II.D.8.
August 30 letter:
P. 1 (level of license fees). II.D.6., II.D.8.
Eleanor J. Lewis, American
Association of Legal Publishers:
Pp. 1-4 (text license)....... II.D.3., II.D.9.
P. 4 (selection of cases).... II.D.10.
P. 4 (description of product) II.D.11.
Pp. 4-5 (level of license II.D.6., II.D.8.
fees).
P. 5 (license fee per format) II.D.12.
P. 5 (copyright challenges).. II.D.13
P. 5 (confidentiality of II.D.14.
license).
P. 5 (arbitration)........... II.D.15.
Professor J.C. Smith, Director, II.D.1., II.D.6.
Artificial Intelligence Research
Project, P. 2-3 (license
agreement).
John H. Lederer, Esq.:
P. 1 (``systems'')........... II.A.3.
P. 2 (level of license fees). II.D.6., II.D.8.
P. 2 (copyright challenges).. II.D.13.
P. 2 (state reporters)....... II.B.3.
Pp. 2-3 (political II.G.
considerations).
Professor Kendall Svengalis,
Rhode Island State Law Library:
Pp. 1-2, 5 (divestiture of II.A.1.
products).
Pp. 2, 5 (``systems'')....... II.A.3.
Pp. 3-4 (secondary law)...... II.G.
[[Page 53404]]
P. 4 (state reporters)....... II.B.1.-3.
P. 5 (level of license fees). II.D.6., II.D.8.
Matthew Lee, Executive Director,
Inner City Press/Community on
the Move:
Pp. 2-6 (online competition). II.C.2.
P. 8 (non-profit II.G.
organizations).
James Love, Director, Consumer
Project on Technology:
P. 1 (divestiture of II.A.1, II.A.3.
products).
P. 2 (``systems'')........... II.A.3.
P. 2 (editorial staffs)...... II.A.2.
P. 2 (license fee per format) II.D.12.
P. 2 (level of license fees). II.D.6., II.D.8.
P. 3 (Internet).............. II.D.16.
P. 3 (validity of copyright). II.D.1.
Norman Wolfe, International Compu
Research, Inc.:
P. 2 (level of license fees). II.D.6., II.D.8.
P. 2 (third party providers). II.D.18.
P. 2 (text license).......... II.D.9.
P. 2 (copyright challenges).. II.D.13.
P. 2 (description of product) II.D.11.
P. 3 (confidentiality II.D.14.
license).
P. 3 (arbitration)........... II.D.15.
Bartlett F. Cole, P. 1 II.G.
(encyclopedias).
Lexis-Nexis Opposition to the II.A.2.
Entry of the Proposed Final
Judgment, P. 22 (editorial
staffs).
Mary Brandt-Jensen Declaration:
Paras. 4, 7 (``systems'')... II.A.3.
para. 6 (text copyright)..... II.D.3.
para. 6 (level of license II.D.8.
fees).
para. 9 (online competition). II.C.1.-2.
Nicholas R. Emrick Declaration:
Paras. 7-12 (``systems'')... II.C.1.-2.
para. 13 (editorial staffs).. II.A.2.
Michael A. Jacobs Declaration:
Paras. 3-5, 9-12 (Auto-Cite II.C.3.
divestiture).
para. 13 (value of II.G.
divestiture).
Garth Saloner Declaration:
para. 7 (divestiture of II.A.1.
products).
Paras. 10-11 (ALR).......... II.C.1.
para. 12 (ALR)............... II.A.3
Paras. 13-16 (editorial II.A.2.
staffs).
Paras. 17-18 (``systems'').. II.A.3.
Paras. 19-23 (Auto-Cite).... II.C.2.
Kendall F. Svengalis Declaration:
Paras. 7-9 (``systems'').... II.A.3.
para. 11 (Auto-Cite)......... II.C.2.
para. 12 (divestiture of II.A.1.
products).
------------------------------------------------------------------------
The Thomson Corporation
September 18, 1996.
Via Facsimile 202 307 5802
Ms. Minaksi Bhatt,
U.S. Department of Justice, City Center Building, 1401 H Street,
NW., Washington, DC 20530.
Dear Ms. Bhatt:
I'm writing in response to your letter to Dale Collins and me of
September 13 asking for clarification of Thomson's position
regarding the use by competitors of first page citations to West
case reports.
As we discussed last Thursday, Thomson's position and belief is
that the use of first page citations by competitors or others is a
fair use under 17 U.S.C. Sec. 107--i.e., an otherwise infringing use
that, when analyzed under the four fair use factors set forth in
Sec. 107, is deemed ``fair.'' This is the same position consistently
taken by West. See West Publishing Company v. Mead Data Central,
Inc., 616 F.Supp. 1571, 1580-81 (D.Minn. 1985), affirmed, 799 F.2d
1219, 1228 n.3 (8th Cir. 1986), cert. denied, 479 U.S. 1070 (1987);
Oasis Publishing Company v. West Publishing Company, 924 F.Supp.
918, 926 (D.Minn. 1996).
The reason Thomson and West believe that the use of first page
citations is ``fair'' (while star paging is not) is that, as found
by the Court in Oasis, ``[a]lthough with either the parallel cites
or an internal cite form each case a user could sort West's cases
and determine West's arrangement, the former does not utterly
supplant the need for West's product while the latter does.'' 924
F.Supp. at 926. As a result of their belief regarding fair use,
neither Thomson nor West objects to the use of first page citation
by others, including competitors. Therefore, Thomson does not plan
to seek to prevent, by legal action, citation to the first page of
West case reports.
Additionally, I wish to confirm that Thomson has not in the
past, nor will it in the future, take any action to prohibit third
parties from cross-referencing any of its publications (including,
for example, ALR, Am Jur, or any of its treatises). Additionally,
our proposed divestiture agreement will, likewise, recognize the
right of the buyer to cross-reference Thomson publications.
I trust this responds to your questions. If not, please feel
free to call me.
Sincerely,
Michael S. Harris
MSH/kpf
cc: L Fullerton, Esq., C. Robinson, Esq., C. Conrath, Esq., J.
Foster, Esq., B. Hall, D. Collins, Esq., J. Schatz, Esq.
State of California, Department of Justice
September 12, 1996.
Edward W. Jessen,
Reporter of Decisions, Supreme Court of California, 303 Second
Street, South Tower, Eighth Floor, San Francisco, CA 94107.
[[Page 53405]]
Re: Thomson/West Merger, Proposed Settlement
Dear Mr. Jessen: Your letter of September 5, 1996 to Tom Greene
of this office expresses concern that the proposed judgment in
settlement of the Thomson/West merger might leave the Court without
effective competitors for the job of publishing the California
Official Reports. In particular, you noted that the integration of
the Official Reports with other editorially enhanced titles,
especially Deering's California Codes, renders a more competitive
product from the standpoint of both consumer appeal and the
efficiencies of joint editing. You are concerned that these assets
might be lost as a result of awards to separate publishers in the
divestiture process.
Historically, Thomson and West have bid competitively for the
right to publish the Official Reports. Safeguarding the ability of
the Court to rebid the Official Reports contract in a comparable
climate of competition following the merger was a primary aim of
this office in reaching the proposed settlement. Recognizing the
volume and complexity of the materials and the Court's special need
for accuracy and speed in publication, we required measures to
facilitate the transfer of Bancroft-Whitney's editorial expertise,
in addition to other provisions designed to promote the competitive
strength of any prospective new publisher.
From a practical financial standpoint, this office believes the
successor publishers of Deering's Codes and the other divested
California titles will likely be, and should be, strong, active
bidders for the right to publish the Official Reports, in the event
the court elects to rebid that contract. We expect to apply this
perspective in reviewing the competitive suitability of the
Acquirer(s) of the California titles under paragraph IV.C. of the
proposed judgment. In light of your concerns and consistent with our
own past practice, we will examine in some detail what concrete
plans, if any, the Acquirer has for taking on the Official Reports
publication.
We believe that this approach should produce a bidding climate
comparable to that enjoyed by the Court in past years. Moreover, it
should do so without disturbing the proposed settlement or
jeopardizing the prospective competitive benefits that it contains.
Sincerely,
Daniel E. Lungren,
Attorney General.
Kathleen E. Foote,
Deputy Attorney General.
cc: Craig W. Conrath (U.S. Dept. of Justice), Wayne D. Collins
(Shearman & Sterling)
Supreme Court of California, Office of the Reporter of Decisions
September 13, 1996.
Kathleen E. Foote,
Deputy Attorney General, Department of Justice, 50 Fremont St.,
Suite 300, San Francisco, CA 94105-2239
Dear Ms. Foote: Recently expressed concerns on the proposed
settlement for the Thomson/West merger have been substantially
mitigated by your September 12 letter, and by a verbal understanding
reached this week in a conversation with Wayne D. Collins and a
subsequent conference call with Brian Hall and two other Thomson
executives responsible for the California Official Reports. On that
basis, please consider the suggestions in my September 5 letter to
your office as moot.
This assumes, of course, that the verbal understanding reached
with Thomson will be reduced to writing over the next few business
days, consistent with the discussions.
The verbal understanding with Thomson provides that: (i) The
license for use of summaries and headnotes will be expressly
prospective in application, both as to material in existence on the
finality date for the consent decree and material yet-to-be-written
under the present publication contract; (ii) a license similar to
the one stated for summaries and headnotes will be provided for use
of the digest classification scheme for the California Official
Reports, notwithstanding possible divestiture of the digest; and,
(iii) a waiver of Thomson's right to withhold consent should
California exercise the option for a second one-year extension of
the present contract, and an express statement that exercising that
option waives no rights under the consent decree. (The above is
intended to be descriptive and is not necessarily reflective of the
precise language that will be employed.)
In combination with your September 12 letter, this understanding
satisfactorily addresses concerns relating to the California
Official Reports set forth in the advisory committee's August 7
public comment letter to Craig Conrath, and in my September 5 letter
to your office. On behalf of the Official Reports advisory
committee, thank you for your assistance.
Cordially,
Edward Jessen,
Reporter of Decisions.
cc: Justice Marvin Baxter, chair of advisory committee, Wayne D.
Collins, Shearman & Sterling, Brian Hall, Jim Fegen, Tom Trenkner,
members of the advisory committee.
Supreme Court of California, Office of the Reporter of Decisions
September 16, 1996.
Brian Hall,
President, West Information Publishing Group, 610 Opperman Drive,
P.O. Box 64526, St. Paul, MN 55164-0526.
Dear Brian: Thank you very much for your attention to my
concerns about the proposed consent decree relating to the Thomson/
West legal publishing transaction. Since Thomson is presently the
publisher of the Official Reports, it is my duty as the Reporter of
Decisions to ensure that the interests of the Supreme Court and the
people of California are protected by any agreement settling the
investigation.
My greatest concern was whether California's ability to select a
``substitute publisher'' would effectively be dictated by Thomson's
selection of a buyer for Deering's Codes. In particular, I was
concerned that the production synergies between Deering's and the
Official Reports are so great that the only substitute publisher
that could support the Official Reports was the publisher of
Deering's.
I now understand that this issue was thoroughly investigated by
the California Attorney General's Office and by the United States
Department of Justice. I also understand that any sale of Deering's
and the other California products to be divested must be approved
under the consent decree by the California Attorney General's Office
and the United States Department of Justice, and that Thomson is not
free to select any purchaser of its choosing regardless of its
qualifications. I am confident that the California Attorney
General's Office and the United States Department of Justice will
exercise their powers of approval as provided in the proposed
consent decree to ensure that the purchaser of any divested product
will have the managerial, operational and financial capability to
complete effectively in the publication and sale of that product.
Moreover, I was very glad to learn that the proposed decree
requires Thomson to reveal to any new purchaser of the divested
products information about the personnel whose primary
responsibilities are the editorial production of these products. I
also understand that the proposed decree prohibits Thomson from
interfering with any negotiations between the new purchaser and
Thomson employees whose primary responsibility is the production,
sale or marketing of the divested products. These requirements
should help ensure that a new buyer will be able to continue with
the products without any loss of continuity.
Finally, I was not aware that any buyer of Deering's or
substitute publisher of the Official Reports would be free to
provide the cross-references to ALR, AM Jur, Cal Jur and the other
Thomson publications that make up the other half of Thomson's
research system of cross-references. You have told me, however, that
Thomson has never asserted a copyright interest in these cross-
references and does not intend to do so in the future, so that a new
publisher of Deering's or the Official Reports would be free to
include these cross-references as they saw fit. I understand that
you have similar representations to the California Attorney
General's Office and the United States Department of Justice.
In light of this, my level of comfort with the transaction has
greatly increased. As we discussed, however, I have several more
concerns that I do not believe are addressed by the proposed decree
and that need to be resolved before I can fully support the proposed
settlement. First, I am concerned that there will be a ``gap'' in
the Thomson license to the State and the State's potential
introduction of any substitute publisher. Second, although Thomson
is required by the proposed decree to divest the California digest
in the event California finds a substitute publisher, I am concerned
that this does not give the State an adequate interest in the
Digest's classification scheme. Third, I am concerned that Thomson
may not consent to continue, at California option, as the publisher
of the Official Reports for a second one-year extension of the
existing
[[Page 53406]]
contract to begin November 1, 1997, as contemplated by our contract
extension agreement of April of this year.
Therefore, to fully satisfy my concerns, I ask that Thomson,
subject to whatever approvals are required from the California's
Attorney General's Office and the United States Department of
Justice, agree to the following:
Condition 1. Extend the license to California provided by
Section XI(C) of the proposed consent decree to include the use of
any intellectual property rights which Thomson holds pertaining to
the headnotes, case notes, and/or case summaries in the Official
Reports created through the end of the existing contract, including
any extensions pursuant to the April, 1996, agreement.
Condition 2. Include in the license to California provided by
Section XI(C) the use of the classification scheme of Thomson's
California Digest.
Condition 3. Agree to consent to the additional one-year
extension from November 1, 1997, to October 31, 1998, of the
existing publication contract of the California Official Reports as
provided in the publication contract extension agreement of April,
1996, if California elects to exercise its option to extend under
the extension agreement, and acknowledge that during any such
extension California retains all rights under Section XI of the
proposed consent decree to terminate the publication contract
without cause upon ninety days notice to Thomson.
If you agree to these three conditions, I will withdraw my
letter to Assistant Attorney Greene by sending him a copy of this
letter and your response, and fully support the proposed consent
decree as sufficient to protect California's interests as far as my
office is concerned.
Cordially,
Edward Jessen,
Reporter of Decisions.
WEST
September 16, 1996.
Edward W. Jessen,
Reporter, Supreme Court of California, Office of the Reporter of
Decisions, 303 Second Street, South Tower, Eighth Floor, San
Francisco, CA 94107.
Dear Ed: Thank you very much for your letter of September 16,
1996. As you know, we take your concerns very seriously. Your
satisfaction as a Reporter of Decisions with our performance on the
Official Reports and with the adequacy of the proposed consent
decree to protect the interests of your office is very important to
us. I am glad that we have had the opportunity to discuss your
concerns and resolve them to your satisfaction.
To that end, I am happy to agree on behalf of Thomson to the
three conditions set forth in your letter. In particular, subject to
whatever approvals are required from the California Attorney
General's Office and the United States Department of Justice,
Thomson (operating through the West Information Publishing Group)
agrees to do the following:
1. Extend the license to California provided by Section XI(C) of
the proposed consent decree to include the use of any intellectual
property rights which Thomson holds pertaining to the headnotes,
case notes and/or case summaries in the Official Reports created
through the end of the existing contract, including any extensions
pursuant to the April, 1996, agreement.
2. Include in the license to California provided by Section
XI(C) the use of the classification scheme of Thomson's California
Digest.
3. Agree in consent to the additional one-year extension from
November 1, 1997, to October 31, 1998, of the existing publication
contract of the California Official Reports as provided in the
publication contract extension agreement of April, 1996, if
California elects to exercise its option to extend under the
extension agreement, and acknowledge that during any such extension
California retains all rights under Section XI of the proposed
consent decree to terminate the publication contract without cause
upon ninety days notice to Thomson.
With these commitments in hand, I am delighted that you will now
be able to inform Assistant Attorney General Greene of your support
for the proposed consent decree.
We very much look forward to working with you in the future.
Respectfully,
Brian H. Hall.
Supreme Court of California
September 17, 1996.
Thomas Greene,
Senior Assistant Attorney General, Department of Justice, P.O. Box
944255, Sacramento, CA 94244-2550.
Dear Mr. Greene: Please regard my September 5 letter to you as
withdrawn. I now fully support the proposed consent decree for the
Thomson/West transaction as sufficient to protect California's
interests as far as my office is concerned.
This change in view results from discussions initiated by Brian
Hall, President of the West Information Publishing Group, to address
the concerns expressed in the September 5 letter, and also the
August 7 public comment letter to Craig Conrath, United States
Department of Justice. These discussions culminated in the attached
exchange of correspondence, which set forth provisions that will
significantly improve the commercial viability of the Official
Reports in the coming years.
Also contributing to my change in view is Kathleen Foote's
September 12 letter, which sets forth the perspective the Attorney
General will likely apply in reviewing the competitive suitability
of the acquirer of California divestiture titles.
In sum, my concerns have been satisfactorily addressed by the
discussions and correspondence that followed the September 6 letter.
Cordially,
Edward Jessen,
Reporter of Decisions.
cc: Brian Hall, Kathleen Foote
Certificate of Service
On September 23, 1996, I caused a copy of Plaintiffs' Response
to Public Comments to be served by first-class mail upon all parties
to this action, and a courtesy copy to be mailed to each commenter.
----------------------------------------------------------------------
Minaksi Bhatt
Public Comments
1. Lyn Warmath, Library Director, Hirschler, Fliescher, Weinberg,
Cox & Allen, P.O. Box 500, Richmond, VA 23218-0500
2. L. David Cole, Esq., 433 North Camden Drive, Beverly Hills, CA
90210
3. Alan D. Sugarman, President, HyperLaw, Inc, P.O. Box 1176,
Ansonia Station, New York, NY 10023-1176
4. Edward D. Jessen, Reporter of Decisions and Secretary to
California Advisory Committee on Publication of Official Reports,
Office of the Reporter of Decisions, 303 Second Street, South Tower,
San Francisco, CA 94107
5. Professor Robert L. Oakley (For American Association of Law
Libraries), Georgetown University Law Center, Edward Bennett
Williams Law Library, 111 G Street, NW, Washington, DC 20001
6. Cyndi A. Trembley, President, Association of Law Libraries of
Upstate New York, 557 Cutler Road, Homer, NY 13077
7. Kathleen Jo Gibson, Secretary and Clerk, New Mexico Compilation
Commission, P.O. Box 15549, Santa Fe, NM 87506
8. Karen Ehmer, Esq., Darby Printing Company, 6215 Purdue Drive,
Atlanta, GA 30336
9. David C. Harrison, Esq., 2100 Arch Street, Fifth Floor,
Philadelphia, PA 19103-1399
10. Alois V. Gross, Esq., 2219 Pillsbury Avenue, Minneapolis, MN
55404-3266
11. Thomas F. Field, Publisher, Tax Analysts, 6830 North Fairfax
Drive, Arlington, VA 22213
12. Gary L. Reback, Esq. (For Lexis-Nexis Division of Reed-
Elsevier), Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road,
Palo Alto, CA 94304-1050
13. Anonymous
14. Marc L. Ames, Esq., 225 Broadway, New York, NY 10007
15. O.R. Armstrong, President, Geronimo Development Corporation, 606
25th Avenue South, Suite 206, St. Cloud, MN 56301
16. Morgan Chu, Esq., (For Matthew-Bender & Company, Inc.), Irell &
Manella, 1800 Avenue of the Stars, Suite 900, Los Angeles, CA 90067-
4276
17. E. Scott Wetzel, CD Law, Inc., 1000 Second Avenue, Suite 1610,
Seattle, WA 98104
18. Jose I. Rojas, Esq. (For Oasis Publishing Company), Broad and
Cassel, 201 South Biscayne Boulevard, Miami, FL 33131
19. Eleanor J. Lewis, American Association of Legal Publishers, 282
North Washington Street, Falls Church, VA 22046
20. Professor J.C. Smith, Faculty of Law Artificial Intelligence
Research Project, The University of British Columbia, 1822 East
Mall, Annex 1, Vancouver, BC, Canada V6T 1Z1
[[Page 53407]]
21. John H. Lederer, Esq., 5678 Vineyard Road, Oregon, Wisconsin
53575
22. Kendall F. Svengalis, State Law Librarian, Rhode Island State
Law Library, 250 Benefit Street, Providence, RI 02903
23. Matthew Lee, Executive Director, Inner City Press/Community on
the Move, 1919 Washington Avenue, Bronx, NY 10457
24. James P. Love, Consumer Project on Technology, P.O. Box 19367,
Washington, DC 20036
25. Norman S. Wolfe, Vice President/General Manager, International
Compu Research, Inc., 1401 Dove Street, Suite 580, Newport Beach, CA
92660
26. Bartlett F. Cole, Esq., 1201 S.W. 12th Ave. Rm. 305, Portland,
OR 97205-1705
Hirschler, Fleischer, Weinberg, Cox & Allen
August 2, 1996.
By telecopier and first class mail
Mr. Craig Conrath,
Chief--Merger Task Force, Antitrust Division, United States
Department of Justice, 1401 H Street, Suite 4000, Washington, DC
20530.
Re: United States of America v. The Thomson Corporation and West
Publishing Company, No. 96 1415
Dear Mr. Conrath: I am writing to express my opposition to the
settlement in the acquisition of West Publishing Company by the
Thomson Corporation. I was initially pleased by the general terms of
the settlement until I read details of licensing fees for internal
pagination to West's National Reporter System. I was further alarmed
when a colleague did some arithmetic based on the fee schedule
described in the settlement agreement.\1\
---------------------------------------------------------------------------
\1\ Calculations are based on 1,000 characters of text equalling
38 characters across each of two columns and 50 lines on a page in a
random volume of Federal Supplement that contains 1583 pages. That
totals approximately 6,015,400 characters in the sample volume,
although some amount should be subtracted for West's proprietary
headnotes.
---------------------------------------------------------------------------
Using a random volume of the Federal Supplement reporter,
licensing the star pagination from a single volume of this one
reporter appears to be a bit less than $541. Multiplied by the 918
bound volumes in the set as of mid-July, star pagination for this
single set of reporters would start off in the general vicinity of
$496,000 annually. This does not even take into consideration the
addition of approximately 36 new volumes per year as well as the
increases built into the settlement agreement for the second and
third years. The settlement agreement provides $0.02 per year annual
increases per 1,000 characters and at first glance we seem to be
discussing mere pennies. The reality, however, is that we are
discussing astronomical amounts of money. Licensing this one title
for the second year will add approximately $632,000 to a small
business's production costs while licensing this one title for the
third year will add a further $774,000 to production costs. These
increases are nearly 22% and 37% over the first year's estimated
costs.
The first year's license fees alone are a staggering amount for
a small business to contemplate and few businesses can sustain
production increases like those described above. These licensing
fees will have a direct and critical impact on prices of potential
competing products.
I believe these facts merit repeating: So far, I have described
costs for one title. The license agreement, however, covers 19
titles:
------------------------------------------------------------------------
Number
Titles of
volumes
------------------------------------------------------------------------
Supreme Court Reporter......................................... 112
Federal Reporter 2d............................................ 999
Federal Reporter 3d................................
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