Features - Reed Elsevier Sues TheLaw.Net Complaining of Unfair CompetitionBy T.R. Halvorson, Published on July 2, 2001
T. R. Halvorson is Deputy County Attorney in Sidney, MT, President of Synoptic Text Information Services, Inc., webmaster of LexNotes, and author of Law of the Super Searchers: the Online Secrets of Top Legal Researchers.
Reed Elsevier1 is suing2 TheLaw.net Corporation. Unlike some past litigation by established, large legal publishers against new entrants into the market for online legal information, this suit is not about taking mass quantities of their caselaw, rather Reed is concerned about the way TheLaw.net competes.
Reed's complaint accuses TheLaw.net of trademark infringement,3 false advertising and unfair competition,4 trademark dilution,5 deceptive trade practices,6 and tortious interference with business relationships.7 Reed alleges that TheLaw.net has engaged in an aggressive and unlawful campaign to divert Reed's customers to itself by:
- making false or misleading statements about its own products and services;
- making false or misleading statements about Reed's products and services;
- making false or misleading statements about TheLaw.net's relationship with Reed's products and services;
- making false or misleading statements about an alleged anticompetitive affiliation between Reed and West;8
- misusing Reed's trademarks; and
- deep linking and framing Reed's various websites in ways that alter them.
- an injunction to stop TheLaw.net from continuing to do all of the things about which it complains;
- payment by TheLaw.net to Reed of all profits from its violations, with interest;
- payment of damages suffered by Reed, with interest;
- payment of punitive damages;
- payment of Reed's attorney fees; and
- payment of court costs.
After briefly describing TheLaw.net, this article discusses how the complaint arose, details of the complaint, the response of TheLaw.net to the time of writing, settlement negotiations, a preliminary injunction that has been entered, discovery proceedings that are under way, and the clashing views the parties have of the purpose of the litigation.
TheLaw.net in a Nutshell
TheLaw.net sells a software interface to: (A) VersusLaw's caselaw databases (including subscription); and (B) other legal resources on the web. The company worked with the Norwegian producer of the alternative web browser, Opera, to create a customized, standalone browser. It incorporates an extensive collection of categorized links to selected law-related websites. For further information, see Roger V. Skalbeck, The New Legal Browser That Could... TheLaw.net Examined and Explained, LLRX.com™, January 15, 2001.9
How the Complaint Arose
Reed's complaint says TheLaw.net "sent web advertisements and unsolicited, mass e-mails in interstate commerce to thousands of Plaintiffs' customers and prospective customers." I spoke with Michael Jacobs, General Counsel for the plaintiffs, Charles Faruki, attorney for the plaintiffs in the litigation, and Mark Feighery, who until recently was the Director of Corporate Communications at LEXIS Publishing. Jacobs said concern first arose when he and most of the members of his staff received some of those e-mails. They saw trademark problems immediately because of use of the term "Wexis." After looking at the TheLaw.net's website and product, they saw more trademark problems because of use of the Shepard's® mark.
Whitney says, and Reed acknowledges, that Reed initiated the litigation without any preliminary communication to TheLaw.net setting forth its concerns. Faruki and Jacobs said Reed viewed the conduct as egregious, calculated, and not accidental. They pointed out that they have sometimes pursued the same course in the past against defendants both large and small, including West Publishing Company when it continued to make reference to Shepard's® after West's license to use Shepard's® had expired.
Additional concerns arose about probable breach of license restrictions on the use of Reed's Martindale Hubbell database. That database is salted with records for fictitious names. Salting databases with various sorts of identifying data or traits is a common practice of database producers. They use salting as a means of proving that their data is the source of someone else's data. Some of the fictitious records contain functioning e-mail addresses. Jacobs says Reed learned that some of the functioning e-mail accounts listed for fictitious names in the Martindale Hubbell database received e-mail advertisements from TheLaw.net.
LAW-LIBers responded to my request to send me copies of the e-mail advertisements. I received many copies of nine different advertisements. A number of law librarians who sent me copies expressed annoyance at the e-mail campaign and frustration with having to explain to lawyers and firm managers why they did not believe many of the core claims and comparisons made in those advertisements.
The advertisements are bold and make statements directly comparing TheLaw.net's products and services with those of LEXIS® and The West Group. I spoke with Mark Whitney, President and CEO of TheLaw.Net Corporation. He said, "We’re real aggressive in marketing. We’re a marketing company before anything else. We’re a software company. We’re trying to sell software.”
Description of Self and Competitors
Reed's complaint says TheLaw.net sent web and e-mail advertisements "falsely representing material aspects of Defendant's and Plaintiffs' databases and services." Among the aspects are:
Coverage. Reed complains that TheLaw.net "misleadingly implies parity with the LEXIS® database’s years of coverage and tribunal coverage." It focuses on a comparison chart titled "Wexis v. TheLaw.net Corporation: A Case Study." Reed complains that the chart is misleading because "it fails to list the entire range of cases and tribunals covered by Plaintiffs under the LEXIS® mark and only lists the cases and tribunals covered by Defendant."
Database Size. Reed complains that TheLaw.net falsely claims it offers "the third largest searchable database of case law, behind Plaintiffs and West."
Timeliness. Reed complains that TheLaw.net falsely claims its "database of cases is also more current than either of the large, better known pay-per-view databases."
Cost. The complaint says, "Defendant claims that Plaintiffs are in the 'pay per view business' whereas Defendant is in the business of offering 'free access' to third party sites. In fact, unlike Defendant, Plaintiffs, through their web sites, offer free access to over 20,000 third party law-related web sites, categorized by Plaintiffs at absolutely no cost to the user." In addition, Reed says it offers "a flat rate service with unlimited access to Plaintiffs’ LEXIS® services."
Removal of Reed's Content. TheLaw.Net's browser is designed to access Reed's www.bender.com and www.shepards.com sites. The software does not simply access those sites, however. Reed says it removes content from Reed's genuine www.bender.com site. This results in as series of complaints by Reed. The complaint says TheLaw.net "falsely represents to consumers without notice that the site they view is genuine and complete." As a result, TheLaw.net "misrepresents the nature, characteristics, and qualities" of Reed's services. Reed says TheLaw.net enhances its product with content from Reed's sites, yet diminishes Reed's products by removing content from them. Some of the removed content is products and services from which Reed normally derives revenue. Reed complains of interference with its ability to obtain revenues.
Affiliation and Source Confusion
When the browser accesses Reed's sites, it adds a frame on the screen within which it displays Reed's diminished content. According to Reed, the frame "hyphenates Defendant’s name, TheLaw.net, and Plaintiffs’ SHEPARD’S®, and SHEPARD’S CITATIONS marks, and MATTHEW BENDER® mark and name and adds other elements." Reed complains that this:
falsely suggests to consumers that there is some nonexistent affiliation, connection, authorization, license, sponsorship, endorsement, or approval;
falsely designates the origin of TheLaw.net's products and services;
enables TheLaw.net to call attention to itself, its products, and its services; to trade on Reed's goodwill; to gain acceptance for its products on the reputation and goodwill of Reed and its marks;
unjustly enriches TheLaw.net at Reed's expense; and
dilutes the distinctive quality of Reed's marks and lessens their ability to function as source indicators
Can I Shepardize®?
TheLaw.net provides FAQs at its site. Prior to commencement of the lawsuit, one of them was titled, "Can I Shepardize® a citation, statute, rule or regulation?" It appeared as follows:
Reed complains that the answer beginning with, "This is very easy to do," suggests that TheLaw.net will explain how to access its SHEPARD's® service through its site. Instead, the rest of the answer explains how to perform citation searches in the full text databases. Reed calls that use of the SHEPARDIZE® mark a classic “bait and switch” and an intentional trademark infringement designed to divert users to Defendant’s legal citation services.
The FAQ was at www.thelaw.net/faqs/search4.htm. When I first looked at that URL, the content had been changed. The question now reads, "Can I check the precedential value of a citation, statute, rule or regulation?"
While law librarians and professional legal researchers are not likely to be fooled that citation searching is the same thing as using a citator, feedback from LAW-LIBers suggests that an appreciable number of lawyers and law firm managers who make purchasing decisions would have been taken in by the original "Can I Shepardize® ?" FAQ.
Can They Say, "Wexis Duopoly?"
TheLaw.net's advertising refers to Westlaw and Lexis as "Wexis," the "Wexis duopoly," or a "duopoly." Reed complains that this
- dilutes the distinctive quality of Reed's famous marks;
- lessens the ability of Reed's famous marks to function as indicators of source;
- falsely designates the origin of Reed's services;
- deceives purchasers as to an anti-competitive association between Reed and West;
- disparages Plaintiffs by implying an anti-competitive association or affiliation between Reed and West; and
- tarnishes Reed's LEXIS®, LEXIS-NEXIS®, and NEXIS® marks.
No Answer Yet; Motion to Dismiss
I cannot report on what TheLaw.net admits or denies concerning the complaint because an answer has not yet been filed.
TheLaw.net has filed a motion to dismiss under Rule 12(b)(6), Fed.R.Civ.P. That kind of motion contends that the complaint fails to state a claim. It assumes, solely for the purposes of testing the complaint but not generally for all purposes in the litigation, that all the material facts alleged in the complaint are true, but don't add up to anything that a court can call foul on or remedy. Instead of saying "No" to a complaint, a Rule 12(b)(6) motion says, "Even if it is true, that does not mean we've done anything wrong."
Clashing Views of Litigation Motives
Whitney views the litigation as competitive intelligence by litigation. Reed has served TheLaw.net with several court papers making discovery requests including a request for production of documents, interrogatories, requests for admission, and a motion for expedited depositions. Taken together, the discovery requests examine virtually everything about TheLaw.net including in-depth details of its website, its software, its marketing, possible merger with or acquisition by other firms, any contemplated business with The West Group, material on the products and services of its competitors, its e-mail systems, its e-mail lists, and its financial condition. TheLaw.net has filed a motion for delay of discovery and so far has refused to provide any of the information Reed seeks.
Whitney told me:
“When the process server first tried to serve our legal counsel at his home, the next day he called them [Reed] and asked them what they wanted. They e-mailed a copy of the complaint to us. The next day – basically within 24 hours – we contacted them back and said we’d agree to basically everything they wanted. They said, ‘No, that’s not good enough. We need to conduct discovery.’ We were thinking of FedExing them a fishing pole.”
In a conference with the court, TheLaw.net said it would stipulate during the pendency of the lawsuit to refrain from doing the things about which Reed complains. The court ordered TheLaw.net to draft a form of preliminary injunction. Faruki says the form drafted by TheLaw.net "really gutted it. The defendant's written product did not match its words." Reed offered a different form. Faruki says the court heard arguments on the two forms and adopted the one proposed by Reed. On June 18, 2001, the court issued a Preliminary Injunction by Consent. Faruki says that's Reed's draft. Whitney says, "The background behind the injunction is that WE drafted it and pushed it along."
Faruki and Jacobs say Reed has no indication that TheLaw.net is willing to make the preliminary injunction permanent. They acknowledge that if the injunction were made permanent, Reed would no longer need some portions of the discovery, but would still need the portions that relate to damages. Reed does not know yet whether TheLaw.net drew away any of its existing customers and says, "That information is in the possession of TheLaw.net."
Jacobs and Faruki say that Reed is vigilant in protecting its intellectual property, and that the law requires vigilance to maintain one's rights in intellectual property. They also say:
Reed tries to compete fairly and by the rules by, for example, screening its own advertising. We expect our competitors, large and small, to do the same. We believe TheLaw.Net has not played by the rules. Unfortunately it appears necessary to go to court to get them to play by the rules. We hope this can be accomplished without drawn out litigation, but that's up to TheLaw.net.
Whitney says Reed's approach buries a small firm. He says, “The bottom line is that we don’t have the time, money, or inclination to litigate. We view this as a business problem. We don't want to let this be all about lawyers getting paid. We stipulated not because we think we did anything wrong, but so we can focus on business.”
1 The plaintiffs are Reed Elsevier Inc. through its LexisNexis and Shepard's divisions, Reed Elsevier Properties Inc., Matthew Bender & Company, Inc., and Matthew Bender Properties Inc. For the convenience of brevity, this article refers to them collectively as either Reed Elsevier or Reed. <back to text>
2 The suit is pending in the U.S. District Court for the Southern District of Ohio, Western Division (Dayton), Case No. C-3-01-116, filed March 16, 2001. <back to text>
3 Under Section 32(1) of the Lanham Act, 15 U.S.C. § 1114 (1), under Section 1329.65 of the Ohio Revised Code, and under Ohio common law. <back to text>
4 Under Section 43(a)(1) of the Lanham Act, 15 U.S.C. § 1125 (a)(1), and under Ohio common law. <back to text>
5 Under Section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c), and under Ohio common law. <back to text>
6 Under Section 4165.02 of the Ohio Revised Code. <back to text>
7 Under Ohio common law. <back to text>
8 The West Group is a division of The Thomson Corporation. <back to text>