T. R. Halvorson is a lawyer in sole practice in Sidney, MT, President of Pastel Programming Co., a division of Synoptic Text Information Services, Inc., and author of Law of the Super Searchers: the Online Secrets of Top Legal Researchers, How to Avoid Liability: The Information Professional's Guide to Negligence and Warranty Risks, and Legal Liability Problems in Cyberspace: Craters in the Information Highway.
Jurisline.com LLC copied the core text of court opinions from the Lexis Law On Disc™ CD-ROMs to create its web-based legal information service. On December 8, 1999, Jurisline.com sued Reed Elsevier, Inc.1 Three of its nineteen claims are antitrust claims.
The antitrust claims center on two primary allegations:
1. Lexis2 has or controls an “essential facility.” (Claim 18)
2. Lexis and West conspired or combined to create a shared monopoly. (Claims 16 and 17)
On February 18, 2000, Reed Elsevier served a notice of motion for summary judgment of dismissal of the three antitrust claims. The court heard oral argument on that motion on April 10, 2000.
Jurisline’s Antitrust Claims
Jurisline alleges that a potential competitor could not, as a practical matter, copy from the published sources of opinions and statutes to create its competitive databases. It alleges, in paragraph 207 of its Amended Complaint, that "Lexis and West control the essential facility of a competitive source of opinions that contain (or reflect) West's pagination, and of statutes" and that Lexis and West prevent competitive entry by refusing to license potential competitors.
Jurisline alleges that the 1988 settlement agreement between West and Lexis' predecessor and the master agreement between Lexis and its customers are anticompetitive: in preserving West's and Lexis' control of the essential facilities of court opinions and statutes; in raising prices to consumers; and in preventing competitive entry. Jurisline alleges that West and Lexis possess a shared monopoly and have engaged in "parallel conduct" that prevents potential competitors from gaining access to the essential facilities and unreasonably restrains trade.Requirement of Barriers Erected by the Defendant
Not every monopoly violates antitrust law.
There is no violation of Section 2 of the Sherman Act if a defendant’s monopoly grows or develops because of a superior product, business acumen, or historical accident.3 A corporation does not violate the Sherman Act, though it acquires a dominant position, if it does so by the ability, ingenuity, intelligence, and industry of those who direct its activities.4
For a Section 2 violation to exist, an enterprise must have exercised power to control a defined market and that power must result from barriers erected by its business methods. The barriers need not be predatory, immoral, or a violation of Section 1 of the Act to be covered by Section 2. If, however, the barriers exist because of superior skill, superior products, natural advantages, scientific research, low profit margins maintained permanently and without discrimination, legal licenses, and the like, there is no antitrust violation.5
The question looms: has Lexis erected barriers to Jurisline creating databases of court opinions and statutes that violate antitrust law?
Agreed Primacy of West’s Reporters
Jurisline would define the market being monopolized as the one for comprehensive computer-assisted legal research services. Comprehensiveness requires broad coverage of courts, deep back-files of older cases, and current cases. Jurisline alleges, and Lexis agrees, that West’s federal and state reporters are the primary sources of case opinions. How, then, Lexis asks, could Lexis be a monopolist? Lexis does not possess or control the primary sources of the allegedly monopolized material.
Denial that Lexis Has an Essential Facility
1. control of the essential facility by a monopolist;
2. a competitor’s inability practically or reasonably to duplicate the essential facility;
3. the denial of the use of the facility to a competitor; and
4. the feasibility of providing the facility.
Lexis argues that it is not a monopolist and its databases of court opinions and statutes are not an essential facility or bottleneck. Therefore Lexis could not engage in monopolistic practices that violate Section 2 of the Sherman Act, either alone or together with West.
Even if West and Lexis were considered together as a single unit, by either of two independent legal routes, anyone willing to put forth their own effort and expense can create their own databases of court opinions and statutes. They may use their own databases to compete with West, Lexis, BNA, CCH, Loislaw, FindLaw and a host of others. Lexis argues that the existence of those routes shows that its databases are not an essential facility or a bottleneck.
The first route is based on two Matthew Bender v. West Publishing cases.8 Under those cases, anyone is free to copy from West’s federal and state reporters (and other sources) the full court-authored text of case opinions and non-copyrightable enhancements including West’s pagination. This route provides competitive entry without legal impediment and without payment of license fees.
The second route is based on the Thomson/West antitrust consent decree. That decree requires West to grant non-exclusive licenses for its pagination to any party at no more than specified license fees.
Lexis says the road is open to Jurisline via those routes and that Lexis has done nothing to stand in Jurisline’s road. The settlement agreement with West does not stand in Jurisline’s way. Thanks to the two Matthew Bender cases, no copyright claims stand in its way. Matthew Bender’s license agreement with its customers covering Lexis Law On Disc™ does not stop Jurisline from going either of the two routes open to it. The license agreement only stops Jurisline from riding free on Lexis’ efforts and expense. By suing under the antitrust laws, Jurisline is not really seeking access to database content, Lexis says. Access exists elsewhere. Lexis Law On Disc™ is not a bottleneck. It is not “the only one in town.”9 The obstacles to Jurisline are effort and expense, not bottlenecked essential facilities.
The brief, witness declarations, and exhibits filed by Reed Elsevier tell how Lexis constructs it databases of court opinions.10 They go on to detail the methods currently available to anyone, including Jurisline, to construct databases of court opinions and statutes. The presentation is thorough and comprises a roadmap any seriously interested party could follow, given enough effort and expense. Lexis most commonly obtains opinions in hardcopy from the courts and converts them into electronic form. Those arrangements are not exclusive, Lexis says, and Jurisline is free to negotiate similar arrangements. In many instances, Lexis gets court opinions from state and federal court web sites. The exhibits include a comprehensive listing of free federal case law on the web and another of free state case law on the web.
Lexis points to Loislaw and FindLaw as illustrations that parties can create such databases – at their own efforts and expense. Although not mentioned by Lexis, VersusLaw could be another illustration. Lexis says Jurisline can construct databases the same way Lexis has, but Lexis is not obligated by antitrust law to give away its effort and expense to Jurisline.
Denial of Conspiracy or Combination with West
A claim of conspiracy to monopolize requires both a conspiracy or combination and specific intent to monopolize. Omitted from Jurisline’s pleading is any allegation of intent to monopolize.
Lexis argues that the notion of “shared monopoly” is self-contradictory, and has not been approved by any court. Oligopolies do not become monopolies by adding the adjective “shared.” There must be a conspiracy or combination that forms a monopoly.
The only joint conduct of Lexis and West that Jurisline alleges is the 1988 settlement agreement between Mead Data Central and West Publishing. That agreement and subsequent modifications of it provide a license from West to Lexis. Lexis contends the agreement has promoted competition and not restrained it. It ensured that West would have a competitive rival. West and Lexis have competed vigorously in the market and in the courthouse for decades, proving, says Lexis, that they have acted independently.
Lexis produces the heretofore confidential settlement agreement and subsequent modifications among the exhibits supporting its motion. It invites the court and everyone to examine the arrangement with West to see whether it reveals any intent to monopolize or any unreasonable restraint of trade. It contends the agreement shows no intent to monopolize and contains to provision erecting barriers to Jurisline or anyone. The license from West to Lexis is non-exclusive.
Michael Harris, general counsel of Thomson Corp., West’s parent company, says West agreed to the release of the agreement by Lexis “to show that there is nothing untoward about it.”11 Thomas Scheffey, a writer for The Connecticut Law Tribune, after quoting Harris, says “But some legal observers disagree with that characterization, arguing that the pact … has unduly shut out competitors.”12 The next person Scheffey mentions or quotes is Paul Ruskin. Scheffey quotes Ruskin saying that, by the agreement, “Lexis paid $3 million a year to shut out serious competition.”13 Apparently, by “observer,” Scheffey means Ruskin. Ruskin is an attorney suing Lexis for two Virgin Island lawyers seeking “An Order requiring West and Lexis to disgorge excess profits for the last four years, in the amount of 2 billion dollars, plus applicable interest, trebled,” “Damages to Plaintiffs in pro rata amounts of the disgorgement as may be determined by the Court, trebled,” and “An Order requiring West and Lexis to sell such part or parts of their businesses as may be necessary to restore competition in the industry.”14 Not as any depreciation of Mr. Ruskin, is that the stance and stake you expect in what a reporter calls an “observer”?
The reporting of Ruskin’s allegation that the agreement shut out competition has a context. The story title is “West-Lexis Secret Pact Unshrouded.” The beginning of the article says The Connecticut Law Tribune obtained copies of the agreement. Next the article quotes West’s attorney and then Ruskin. A reader might infer that either Ruskin or the author of the article found something in the agreement supporting the claim that Lexis, via the agreement, shut out competitors. I, too, have a copy of the agreement and the subsequent modifications. I have had them since March 22, 2000. I previously wrote that “I am curious to know what is in that agreement.”15 I have read and re-read them looking for the “smoking gun,” the erection of some barrier to competitive entry. So far I have not found any provision that restrains Jurisline from competitive entry, nor any other party. If Ruskin or Scheffey had particular provisions in mind, they did not say which ones. If Jurisline and its attorneys find provisions they think erected barriers, perhaps they will identify the particular ones as the litigation continues.
In the same article, Ruskin is also quoted as saying Lexis got “an astronomical benefit for the pittance of a royalty they had to pay West.”16 Perhaps Lexis would not be the only party willing to pay a pittance for an astronomical benefit. Why doesn’t Jurisline just offer to pay an equal pittance?
Aside from joint conduct, Jurisline alleges certain “parallel conduct” by West and Lexis. Lexis argues that “parallel conduct” is insufficient to constitute collusive conduct under existing law. “Parallel conduct” does not make a case of conspiracy or combination.
Selection of Defendant
Ironically, the party that opened the route for everyone, including Jurisline, through litigation against West is Matthew Bender, the owner of Lexis Law On Disc™ used by Jurisline.
Ironically, while Jurisline and others who have not entered into license agreements with West are free, because of the Matthew Bender cases, to copy from West’s reporters without paying license fees, Lexis is bound to pay license fees to West under the settlement agreement. Reed Elsevier and its predecessors have paid West about $35 million.
Ironically, Jurisline taps into the theory of Mead Data Central’s essential facility suit against West Publishing in 1987,17 but instead of following that theory by suing West, it sues Lexis. If there ever was an essential facility, it started with West. In a suit against West, one would have to prove West has an essential facility. In a suit against Lexis, one would have to prove West has an essential facility and tie Lexis into it. Following either strategy, proof of West’s essential facility has to be made. Why choose the strategy the requires proof of something more? That strategy is more work and entails higher risk of failure.
Why didn’t Jurisline bring its essential facilities claim against West rather than Lexis? Perhaps technical considerations overrode legal strategy. In preliminary examinations of West’s Premise CD-ROMs and the Lexis CD-ROMs, it looks easier to extract data from the Lexis product. Having taken the data from the Lexis CD-ROMs, the suit had to be filed against Lexis.
Dismissal before Discovery
In the antitrust case against Microsoft, communications disclosed by the discovery phase of the litigation played an important role in establishing an antitrust violation. The pending motion for summary judgment is made before discovery. If granted and upheld on appeal, the case will never be affected by what otherwise might have been disclosed through discovery. If the motion is denied, that will not necessarily mean the court has concluded Lexis is a monopolist engaged in antitrust violations. It might mean only that the court sees reason to give Jurisline an opportunity to conduct discovery. The meaning will depend on the particular reasons given in the order.
- Acquisitions and restructuring of legal entities involved in this litigation can make references to them confusing. LEXIS Publishing is the entity within the LEXIS-NEXIS Group that combines LEXIS-NEXIS, Martindale-Hubbell, Matthew Bender, Michie, and Shepard's. LEXIS-NEXIS Group is a division of Reed Elsevier plc. Matthew Bender, Inc. is the current owner of the Lexis Law On Disc™. Jurisline might have named the wrong party as defendant. Recently Matthew Bender, Inc. was added as a party to Jurisline’s federal lawsuit. <back to text>
- See note 1. Jurisline has not sued Lexis, but in this article I will often speak of Lexis rather than Reed Elsevier, Inc. <back to text>
- United States v. Grinnell Corp., 384 U.S. 563, 86 S.Ct 1698, 16 L.Ed.2d. 778 (1966). <back to text>
- Kansas City Star Co. v. United States, 240 F.2d 643 (8th Cir 1957), cert. den. 354 U.S. 923, 77 S.Ct. 1381, 1 L.Ed.2d 1438. <back to text>
- United States v. United Shoe Machinery Corp., 110 F.Supp. 295 (D.Mass.1953), aff’d 347 U.S. 521, 74 S.Ct. 699, 98 L.Ed. 910. <back to text>
- The doctrine had its origin in United States v. Terminal R.R. Ass'n, 224 U.S. 383 (1912); Associated Press v. United States, 326 U.S. 1 (1945). <back to text>
- MCI Communications v. A T&T, 708 F.2d 1108, 1131-33 (7th Cir. 1983); Twin Laboratories., Inc. v. Weider Health & Fitness, 900 F.2d 566, 568-69 (2d Cir. 1990). <back to text>
- Matthew Bender & Co. v. West Publishing Co., 158 F.3d 674 (2d Cir. 1998), cert. denied, 119 S. Ct. 2039 (1999); Matthew Bender & Co. v. West Publishing Co., 158 F.3d 693 (2d Cir. 1998), cert. denied, 119 S. Ct. 2039 (1999). <back to text>
- Twin Laboratories, Inc. v. Weider Health & Fitness, 900 F.2d 566, 569 (2d Cir. 1990). <back to text>
- The following excerpt from the brief is a summary of the information presented in the witness declarations and exhibits:Once a newly-issued judicial opinion is in electronic form on one of Lexis' databases, Lexis then, among other things, determines whether the judicial opinion has been published in one of West's reporters. (Emrick Dec. ¶ 29.) For those cases that are published in West's reporters, Lexis' employees --- pursuant to the pagination license between Lexis and West --- refer to the case decision as published in the applicable West reporter, identify the page breaks in the judicial opinions as published in the West reporter, and insert the applicable page numbers in the text of the electronically-stored judicial opinions. (Id.)
The Construction by Lexis of Its Database of Court Opinions
At various times since it launched its initial version of the Lexis Service in the early 1970s, Lexis has relied (and continues to rely) on four sources to obtain newly-issued judicial opinions. (Emrick Decl. ¶¶ 26-27.) First, Lexis obtains judicial opinions in electronic form by downloading them from publicly available Internet web sites maintained by various state and federal courts. (Id. ¶ 26a.) Second, Lexis obtains opinions in electronic form directly through arrangements with some state and federal courts. (Id. ¶ 26b) Third, Lexis obtains opinions in paper (i.e., hard copy) from various state and federal courts and converts them into electronic form. (Id. ¶ 26c.) This method of obtaining judicial opinions, which is the most common method used by Lexis, requires Lexis to convert the text into electronic form. (Id. ¶¶ 26c, 28.) This electronic conversion is accomplished by manually typing, or "keying," the text of the opinions on a word processing system; scanning (i.e., copying the text to electronic form by using an optical character recognition device); or a combination of keying and scanning. (Id. ¶¶ 28.) Finally, more infrequently, Lexis obtains opinions by purchasing hard copies of various reporters and converting the opinions into electronic form. (Id. ¶ 26d.)
Lexis has compiled a number of judicial opinions that are not published in West's reporters. (Emrick Dec. ¶ 32.) Virtually all of these so-called "unpublished" decisions post-date the early 1970s for the obvious reason that Lexis did not start compiling material until that time. (Id.) Almost all of the unpublished case decisions in the Lexis database were (and continue to be) obtained by Lexis from the issuing courts, in one of the four methods described above, contemporaneous with Lexis' acquisition of judicial opinions that are published in West's reporters. (Id.) The only "unpublished" cases contained in the Lexis database that are not obtained by one of these four methods are those that are sent to Lexis by third parties, such as attorneys, and those that are obtained later when Lexis discovers that an unpublished decision is cited in one of the case decisions contained on the Lexis database. (Id.) The total collection of "unpublished" judicial opinions in the Lexis database is not exhaustive, as Lexis does not obtain all, or even a majority, of the unpublished decisions issued by the courts. (Id. ¶ 33.)
Lexis' database also includes judicial opinions that pre-date its efforts to compile prospective material (i.e., pre-1970s material). (Emrick Dec. ¶ 30.) Lexis compiled its body of pre-1970s judicial opinions principally by purchasing older case reporters --- including official state reporters, West reporters and a variety of other reporters --- and converting the text of the opinions contained in those reporters into electronic form by keying. (Id.) <back to text>
- Thomas Scheffey, “West-Lexis Secret pact Unshrouded,” The Connecticut Law Tribune, April 4, 2000. <back to text>
- Id. <back to text>
- Paul Ruskin quoted by Thomas Scheffey, “West-Lexis Secret Pact Unshrouded,” The Connecticut Law Tribune, April 4, 2000. <back to text>
- Civil Complaint for Federal Antitrust Violations and Violation of the Copyright Act, Bentz v. Reed Elsevier, Inc., U.S. District Court, Southern District of New York, Civil No. 00-CIV-1149, February 15, 2000, prayers for relief A, B, and C. <back to text>
- T. R. Halvorson, “Jurisline.com and Matthew Bender: Halos and Horns All 'Round,” LLRX.com™, February 7, 2000. <back to text>
- Thomas Scheffey, “West-Lexis Secret Pact Unshrouded,” The Connecticut Law Tribune, April 4, 2000. <back to text>
- Mead Data Central, Inc. v. West Publishing Company, 679 F. Supp. 1455 (S.D.Ohio 1987), 10 Fed. R. Serv. 3d (Callaghan) 1179, 5 U.S.P.Q.2D (BNA) 1796, Copy. L. Rep. (CCH) ¶ 26,277, 1988-2 Trade Cas. (CCH) ¶ 68,146. <back to text>