UNITED
STATES DISTRICT COURT
FOR THE
SOUTHERN DISTRICT OF NEW YORK
MATTHEW BENDER & COMPANY, INC., Plaintiff,
v.
WEST PUBLISHING COMPANY
and
WEST PUBLISHING CORPORATION, Defendants.
_____________________________________
HYPERLAW, INC., Intervenor-Plaintiff,
v.
WEST PUBLISHING COMPANY
and WEST PUBLISHING CORPORATION, Defendants.
94 Civ. 0589 (JSM)
2001 U.S. Dist. LEXIS 8936
July 2, 2001
Counsel:
For
plaintiffs: Paul Ruskin, Esq., and Carl J. Hartmann III, Esq., New York, NY
For
defendants: James Rittinger, Esq., Satterlee Stephens Burke & Burke, New
York, NY.
OPINION and ORDER
JOHN S. MARTIN, Jr., District Judge:
In an Opinion
and Order dated December 16, 1999, this Court awarded Plaintiff Hyperlaw
$813,724.25 in attorneys' fees. See Matthew Bender & Co. v. West Publ'g
Co., 1999 U.S. Dist. LEXIS 19387, No. 94 Civ. 589, 1999 WL 1211836 (S.D.N.Y.
Dec. 16, 1999). In a decision dated January 23, 2001, the Second Circuit, on
the basis of its analysis of this Court's opinion, found that this Court's
reasoning did not support that award. See Matthew Bender & Co. v. West
Publ'g Co., 240 F.3d 116 (2d Cir. 2001) ("Hyperlaw III"). n1[1]
The Circuit Court noted, however, that certain comments in this Court's opinion
suggested that there might be other grounds that could justify the award. The
Circuit Court, therefore, remanded the case for "clarification [*2] as to whether the District Court relied on
instances of bad faith conduct not specifically identified in its opinion."
Id. at 127.
Accordingly,
Hyperlaw has renewed its application for an award in the full amount of its
attorneys' fees, pointing to certain specific instances of bad faith conduct by
Defendant West. West disputes Hyperlaw's contention that the cited conduct
amounted to bad faith and argues that, in any event, Hyperlaw has failed to
comply with the Circuit Court's direction that it identify the precise costs
attributable to that bad faith conduct. See 240 F.3d at 126.
This Court's ability to resolve the fee issue in these remand
proceedings [*3] in a manner consistent
with the intent of the Circuit Court is complicated by the fact that to some
extent, the Second Circuit's holding that this Court's reasoning did not
justify an award of attorneys' fees appears to have resulted from a
misunderstanding of that reasoning, which no doubt resulted from a
less-than-clear articulation of that reasoning in my opinion. As a result, this
Court's opinion awarding fees and the Circuit Court's opinion vacating that award
resemble ships passing in the night, leaving this Court in serious doubt as to
the proper result on remand.
Because more than $ 800,000 is at issue, it is unlikely that this
Court's determination will be accepted as final by the parties, and therefore
it seems appropriate to more fully explain the reasons for the original award
and to accept the Circuit Court's invitation to identify "instances of bad
faith conduct not specifically identified in [my original] opinion." I
will then address the more limited question of whether the specific bad faith
acts cited by Hyperlaw justify an award of fees "solely on the basis of
[that] bad faith conduct."
At the outset, it seems appropriate to attempt to clarify those
portions [*4] of my prior opinion which
appear to have mislead the Circuit Court concerning the basis of my decision. The
essence of the rationale for the award of attorneys' fees to Hyperlaw is found
in the following sentence of my earlier opinion:
Hyperlaw's
action vindicated the public interest in wide dissemination of federal judicial
opinions.
The Circuit Court differed with this statement because
in its view, "judicial opinions are decidedly not creative works."
Hyperlaw III, 240 F.3d at 124 n.8. While devotees of Cardozo, Hand, Friendly,
Weinfeld and others might disagree with that statement, see generally The Law
as Literature (Ephraim London ed., 1960), that is not the question that I was
addressing.
Accepting that judicial opinions are not themselves creative works
under the Copyright Act, and that the Act was not passed for the purpose of
encouraging judges to write opinions, they do form the basic material out of
which innumerable copyrighted articles, books, treatises and, in rarer
instances, novels, plays, and movies are created. Even more importantly, the
general availability of judicial opinions is essential to the proper
functioning of our [*5] judicial system
and to the dissemination of information about the development of the law to the
public.
As such, judicial opinions are a highly sought-after commodity in the
legal, literary, and news markets. Hyperlaw's action in this case served the
public good because West was maintaining a monopoly over the market for several
thousand judicial opinions based on a tenuous copyright claim. West was not the
author of an original work seeking only to prevent another from making fair use
of a portion of a work it had authored. West was attempting to use the fact
that it had made inconsequential modifications to judicial opinions to maintain
a monopoly in the publication of those opinions. Thus, rather than invoking the
Copyright Act as a shield to protect legitimate creative work, West used it as
a sword to perpetuate a monopoly over important government works.
As the Supreme Court noted in Fogerty v. Fantasy, Inc.:
The
policies served by the Copyright Act are more complex, more measured, than
simply maximizing the number of meritorious suits for copyright infringement.
. . .
For
example, in Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95 S.
Ct. 2040, 2043, 45 L. Ed. 2d 84 (1975), [*6]
we discussed the policies underlying the 1909 Copyright Act as follows:
"The
limited scope of the copyright holder's statutory monopoly . . . reflects a balance
of competing claims upon the public interest: Creative work is to be encouraged
and rewarded, but private motivation must ultimately serve the cause of
promoting broad public availability of literature, music, and the other arts.
The
immediate effect of our copyright law is to secure a fair return for an
'author's' creative labor. But the ultimate aim is, by this incentive, to
stimulate artistic creativity for the general public good."
510 U.S. 517,
526, 114 S. Ct. 1023, 1029, 127 L. Ed. 2d 455 (1994).
While this Court was clearly in error in stating that West's conduct
"violated" Section 403 of the Copyright Act, it is correct to say
that Hyperlaw's action fostered the public access to government documents that
Congress was attempting to promote in adopting Section 403. It is also correct
that Congress would consider the notice used by West to be misleading. See
Notes of Committee on the Judiciary, H.R. Rep. No. 94-1476, at 145-46 (1976),
reprinted in 1976 U.S.C.C.A.N. 5659 (" [*7] To make the notice meaningful rather than
misleading, section 403 . . . requires that, when the copies or phonorecords
consist 'preponderantly of one or more works of the United States Government,'
the copyright notice (if any) identify those parts of the work in which copyright
is claimed." (emphasis added)).
In any event, this Court did not award Hyperlaw its attorneys' fees in
order to punish West for a violation of Section 403; it awarded the fees
because West engaged in bad faith conduct in an attempt to maintain a monopoly
in the lucrative market for judicial opinions when it knew that there was
little likelihood that it would prevail if the issue was presented to a court.
This Court is persuaded that West did not act in good faith both before
and during the course of this litigation. The Circuit Court noted in its
opinion that "unfortunately . . . the District Court did not make a clear
finding on [the issue of good faith]." Hyperlaw III, 240 F.3d at 122. The
Circuit Court went on to state, however, that "West's arguments at trial
were objectively reasonable," noting that there was prior authority
supporting West's position and that its arguments [*8] were accepted by Judge Sweet in his dissents
from the affirmance of this Court's rulings against West. Id.
In assessing whether West acted in good faith both before and during
this litigation, it should be noted that the Circuit Court's focus on this
issue was much narrower than that which lead me to conclude that West did not
act in good faith. The Circuit Court focused on the narrow issue of whether
West believed its arguments "were objectively reasonable." This Court
recognizes that West had non-frivolous arguments that it could urge in support
of its copyright claims.
However, if one asks "Did West have a good faith belief that it
would prevail on its copyright claims?", the answer is "No."
This Court's substantial experience with West's tactics in this litigation,
including false statements, belated concessions, delaying tactics, and strained
attempts to avoid a judicial resolution of the copyright claims, leads to the
firm conclusion that West knew that if the cases was finally adjudicated, its
monopoly over judicial opinions would be terminated. West, therefore, decided
to do everything in its power to avoid such an adjudication, or, at a minimum,
delay the adjudication [*9] as long as
possible and thereby extend its monopoly.
A question may exist as to whether the misuse of a valid copyright in
order to maintain a monopoly is a defense to a copyright infringement action.
See generally Basic Books, Inc. v. Kinko's Graphics Corp., 758 F. Supp. 1522,
1537-38 (S.D.N.Y. 1991). However, permitting a party to utilize a meritless
claim of copyright infringement to monopolize the market for judicial opinions
would "seriously impair the policy of the copyright law that seeks to
preserve free public access to ideas." Torah Soft Ltd. v. Drosnin, 136 F.
Supp. 2d 276, 291 (S.D.N.Y. 2001).
In assessing West's claim that it believed in good faith that its
claims were meritorious, it is important to note that the primary case out of
the Eighth Circuit supporting its copyright claims, see West Publ'g Co. v. Mead
Data Cent., Inc., 799 F.2d 1219 (8th Cir. 1986), was decided before the Supreme
Court's decision in Feist Publications, Inc. v. Rural Telephone Service Co.,
499 U.S. 340, 111 S. Ct. 1282, 113 L. Ed. 2d 358 (1991). As the Second Circuit
found in Hyperlaw II, the reasoning of Mead Data [*10] was undermined by Feist. See Hyperlaw II, 158
F.3d at 707-08. In addition, that decision involved only the question of
whether the use of star pagination violated West's compilation copyright. n2[2]
Thus, at least from the time that the Supreme Court decided Feist in
1991, West knew that there was substantial reason to question the continuing
validity of the cases upholding its copyright claim for star pagination and
that the Supreme Court's holding that there was no copyright protection for
"sweat of the brow" activity created serious doubt as to its claims
to a copyright in its alleged "enhancements" to judicial opinions.
Knowing that its copyright claims were marginal at best, West engaged
in a concerted course of action in an attempt to prevent a judicial
determination [*11] of its claim. West
did not merely refuse to detail for potential competitors the
"enhancements" it allegedly made to judicial opinions, it threatened
them with litigation if they went forward with their competing products. This
tactic was used on Matthew Bender, Hyperlaw, and at least two other potential
competitors. That these threats were not made in good faith is evidenced by the
fact that when those competitors proceeded to develop their products undeterred
by West's threats, West did not bring the threatened lawsuits but instead did
everything it could to prevent an adjudication of the copyright issues,
including falsely denying that threats had been made.
Before turning to specific examples of such conduct, it is important to
note the economics of the market that West was attempting to monopolize. As
noted above, this is not a case in which an author was attempting to protect
its copyright in a single original work or a single compilation, where the cost
of producing the allegedly infringing work would not be considered a deterrent
to a potential competitor. Here, West was claiming copyright protection in
thousands of judicial opinions that were to be incorporated into CD-Rom
[*12] collections. The cost of producing
these collections was very substantial. Thus, when West threatened its
potential competitors with litigation if they chose to go forward with their
competing products, it knew that the mere threat of litigation would place the
competitors in such a difficult position that they may well have chosen not to
develop their products at all. If the competitors could not obtain an early
judicial resolution of the copyright claims, they ran the risk of spending
hundreds of thousands of dollars to produce a product that a court might find
to infringe West's copyright. Even after West learned that Hyperlaw and Matthew
Bender would not be inhibited by its threats, West knew that the longer it
delayed a judicial resolution of its copyright claims, the longer it could
maintain its monopoly. Moreover, by making this litigation as expensive as
possible for its adversaries, West sought to deter other competitors who were
more risk-averse than Hyperlaw from entering the market. Thus, the tactics that
West employed against Hyperlaw and Matthew Bender must be viewed against this
larger canvas.
When Hyperlaw indicated its intention to copy the opinions contained in
the [*13] West reports, West made clear
to Hyperlaw that if it went forward with its product, it would be sued by West.
However, when Hyperlaw commenced this action, West moved to dismiss on the
ground that the case was not justiciable because Hyperlaw could not establish a
reasonable fear of suit by West. While the Circuit Court considered the fact
that this Court held a hearing on the justiciability claim as evidence that it
was asserted by West in good faith, n3[3]
the court failed to note that at the conclusion of the hearing the Court
rejected West's factual assertions concerning the threats and did not credit
the testimony of its principal witness. n4[4] [*14]
Similar evidence of West's bad faith is found in its almost identical
conduct in relation to Matthew Bender. When representatives of West met with
representatives of Matthew Bender to discuss a product that Matthew Bender
planned to offer to the public, West threatened them with litigation. But once
again, when Matthew Bender commenced a declaratory judgment action, West denied
that it had threatened suit and moved to dismiss on the ground that Matthew
Bender had no legitimate fear of being sued by West. While the Court did not
have to hold a hearing on this issue because the Uncontested facts established
that Matthew Bender had a legitimate apprehension of suit, there were factual
disputes that were not resolved in which West's version of the events at issue
was dramatically different from those of the Bender witnesses, whose testimony
concerning West's threats was similar to that of Mr. Sugarman of Hyperlaw.
In addition to threatening suit and then denying those threats, West
attempted to avoid judicial resolution of its copyright claims by first
threatening suit and then, when a declaratory judgment action was filed, making
a belated concession that it would not sue with respect [*15] to the particular product at issue. West
would then move to dismiss on the ground that its concession rendered the
action moot. See Matthew Bender & Co. v. West Publ'g Co., 1996 U.S. Dist.
LEXIS 5871, No. 94 Civ. 0589, 1996 WL 223917 (S.D.N.Y. May 2, 1996).
West also tried to avoid judicial resolution of its copyright claims by
making last-minute concessions that a use of a particular feature constituted
fair use, and then moving to dismiss the claim as moot. In Hyperlaw I, the
Circuit Court noted that "immediately prior to trial," West made this
type of "last-minute concession" with respect to Hyperlaw's use of star
pagination in order to argue that its action should be dismissed on
justiciability grounds. Hyperlaw I, 158
F.3d at 678. Although the ability to make these types of motions is a
"right provided by the Federal Rules," Hyperlaw III, 240 F.3d at 126,
they formed part of a wider bad faith effort to perpetuate West's tenuous hold
on its exclusive right to publish judicial opinions.
Further evidence that West was attempting to maintain a monopoly by
asserting copyright claims that it was afraid to have the courts resolve is
found in the fact that, [*16] in order to avoid a judicial resolution of
its copyright claims with respect to star pagination, it was willing to concede
that it would not sue Matthew Bender with respect to its New York product.
Because that product would include star pagination for hundreds of cases, it is
difficult to understand why West would make such a concession if it had a good
faith belief that its copyright claim would prevail.
In sum, the totality of West's conduct indicates that it knowingly
attempted to maintain a monopoly in the vastly lucrative market for judicial
opinions when it knew that it was likely that the courts wold reject its
copyright claims. It did this by falsely threatening potential competitors with
lawsuits that it knew it would not bring and by falsely denying that such
threats had been made, in addition to the procedural tactics it employed to
delay a final judicial ruling.
In Fogerty, the Supreme Court stated:
Because
copyright law ultimately serves the purpose of enriching the general public
through access to creative works, it is peculiarly important that the
boundaries of copyright law be demarcated as clearly as possible.
510 U.S. at 527, 114 S. Ct. at 1030. [*17] Here, Hyperlaw's lawsuit resulted in just
such a demarcation of the boundaries of West's copyright claim and thereby
broke West's monopoly grip on thousands of judicial opinions.
When David vanquished Goliath, the Israelites rewarded him by making
him their King. While Hyperlaw's vanquishing of West's monopoly over judicial
opinions may be far less impressive, all it asks for its efforts is that it be
reimbursed for the substantial legal fees West forced it to incur in order to
vindicate the public's right of access to judicial opinions. It prevailed
against an adversary that did all that it could to make this litigation as
expensive as possible, no doubt hoping that a small company such as Hyperlaw
would not stay the course. In these circumstances, the court continues to be of
the view that Hyperlaw is entitled to an award of the entirety of its
attorneys' fees.
While I particularly regret that these remand proceedings may have been
made necessary by my failure to articulate more carefully the basis for the
award in my earlier opinion, I hope that this further exposition of the reasons
for the award will persuade the Circuit Court that Hyperlaw should prevail. As
was noted at the [*18] outset, however,
it is not certain that the Circuit Court will agree. To avoid another remand
should the Circuit Court again find that I have abused my discretion by
awarding Hyperlaw all of its attorneys fees, I will now turn to the narrower
question of whether Hyperlaw should be awarded some portion of its attorneys'
fees resulting from specific instances of bad faith conduct by West.
While the Second Circuit indicated that attorneys' fees might be
awarded on the basis of particular bad faith conduct by West, it emphasized
that:
The court
should not lose sight of the fact that it is awarding fees solely on the basis
of West's bad faith conduct when it turns to the question of the precise amount
of fees to which Hyperlaw is entitled. Any fees it awards should be related to
costs or expenses incurred as a direct result of bad faith conduct by West.
Hyperlaw III, 240 F.3d at 126.
Although Hyperlaw points to certain specific actions of West that it
claims were taken in bad faith, it completely fails to demonstrate any
"costs or expenses incurred as a direct result of" that conduct.
While some of the conduct that Hyperlaw cites, such as the false denial
[*19] of threats by West, may have
resulted in costs that could be identified at this late date in the litigation,
Hyperlaw has not attempted to identify them. Thus, even though the Court agrees
that the actions in question were committed in bad faith, it cannot calculate
the costs incurred by Hyperlaw as a result of that conduct.
To the extent that Hyperlaw cites examples of West's refusal to supply
appropriate discovery responses, it is obvious that, at this late stage in a
case that has been pending for over seven years, it would be very difficult to
identify with any degree of certainty the specific costs incurred as a result
of a bad faith answer to an interrogatory or other discovery abuse. If Hyperlaw
thought that these discovery abuses warranted an award of attorneys' fees, it
should have brought a motion for costs under Rule 37 at that time, rather than
requesting those costs as part of a request for counsel fees pursuant to 17
U.S.C. § 505.
Thus, it appears that this is an all or nothing affair. Either Hyperlaw
is entitled to recover the entirety of its attorneys' fees, or it has failed to
establish a link between specific bad faith conduct and the fees [*20] incurred that might justify a more limited
award. Because the Court is of the opinion that Hyperlaw is entitled to recover
all of its attorneys' fees, and believes that it is more probable than not that
this determination is not inconsistent with the opinion of the Second Circuit ordering
the remand, judgment will be entered for Hyperlaw against West in the amount of
$ 813,724.25 with interest from the date of the original award. n5[5]
SO ORDERED.
Dated: New York, New York
July 2, 2001
JOHN S. MARTIN, JR., U.S.D.J.
[1] n1 In keeping with the
Second Circuit's practice in this litigation, see Matthew Bender & Co. v.
West Publ'g Co., 158 F.3d 674 (2d Cir. 1998) ("Hyperlaw I"); Matthew
Bender & Co. v. West Publ'g Co., 158 F.3d 693 (2d Cir. 1998) ("Hyperlaw
II"), the remand decision will be referred to as "Hyperlaw III."
[2] n2 The one relevant
district court case decided after Feist was not decided until after this action
was commenced. See Oasis Publ'g Co. v. West Publ'g Co., 924 F. Supp. 918,
922-25 (D. Minn. 1996).
[3] n3 West may have had a good
faith belief that it had a non-frivolous argument that Hyperlaw's product was
not advanced far enough to render the issues justiciable.
[4] n4 Due to this Court's
reluctance to brand someone as a perjurer on the basis of the preponderance-of-the-evidence
standard that applies in civil litigation, the court did not make the specific
finding that West's officer knowingly testified falsely. However, the Court's
opinion took note of his inconsistent statements and the Court accepted the
testimony of Hyperlaw's witness, Mr. Sugarman, and rejected that of West's
executive.
[5] n5 Hyperlaw also asks the
Court to reconsider the rate at which its attorneys' fees should be calculated.
However, that issue is not within the scope of the remand.