Thursday, January 24, 2008

Dialog's Dialogue with Willful Infringement (The Settlement Is Dead, Part 3)

In his comment yesterday, Francis Hamit offers a hint at just how many digits might have been missing from the damages model that drove the now-doomed global copyright class action settlement. See

Now let’s move on to another factor: willful infringement. The law specifies special damages for willfulness.

In her declaration to the court in support of the lawyers’ application for fees, class counsel A.J. De Bartolomeo attempted to explain why the case against the tiny UnCover fax delivery service (on which, as she noted, both she and I had worked) yielded a $7.25 million recovery, while the consolidated class actions here, against every other major similar infringer combined, yielded a grand total of $18 million. In the earlier case, according to De Bartolomeo, “plaintiffs obtained considerable evidence suggesting defendants’ copyright infringements were willful. In the present action, by contrast, Plaintiffs have obtained no evidence of willful infringement. On the contrary, all indications are that before the Tasini case, publishers did not believe their electronic use of freelancers’ works constituted copyright infringement.”

No other statement in the record of In re Literary Works better illustrates the collusion of the parties in this horrible sellout of a settlement, which thankfully was stopped just before it could be consummated.

For the next actions, your humble blogger is going to try to make sure plaintiffs “obtain” such evidence. One way to obtain it would be to engage in meaningful, adversarial discovery to review internal industry documents. De Bartolomeo and co-counsel did no such discovery. They didn't even get the defendants to file a formal response to their complaint.

Another way to "obtain" willfulness evidence is to look at public statements and coverage of the electronic rights issue in the industry trade press. I’ll be rolling out examples of these in the coming weeks.

Yet another way is to follow the timeline of new infringing products that were started both before and after the Supreme Court’s Tasini ruling and other pertinent developments.

Again, there are a zillion examples, and I’ll get to as many as I can, as efficiently as I can. Let’s start with DialogSelect Open Access.

Dialog is one of the first-generation database brands. Like Gale Group, it is now owned by Canada’s Thomson Corporation. For most of the period covered by the UnCover lawsuit, UnCover was part of the Dialog family. Thus, when the parties settled for $7.25 million, the payments were divided into $6.5 million from Knight-Ridder Information, Inc. (which owned Dialog) and $750,000 from Knight-Ridder Information’s short-lived successor, a British company called Dialog Corporation plc. The settlement was completed early in 2000. It was spurred by two victories by the plaintiffs in the UnCover case: October 1998 summary judgment on interpretation of Section 201(c) of the Copyright Act – the precise issue that would be affirmed once and for all by the Supreme Court in Tasini – and January 1999 class certification.

On October 4, 1999, Dialog announced the start-up of a new product, DialogSelect Open Access. “Yes, hard as it is to believe, Dialog has finally opened its doors to the unwashed masses,” reported Information Today NewsBreaks. “You can now buy Dialog content by the document, with a credit card.” See DialogSelect Open Access still exists (though subsequent to my court declaration in 2005, my Washington Monthly article, the subject of my blog item a couple of days ago, got removed from it without explanation).

Let’s review this slowly. In October 1999, Dialog was putting the finishing touches on a multimillion-dollar settlement driven by negative findings in a lawsuit against one of its products. At the exact same moment, Dialog was launching a new product with the exact same infringing model.

No evidence of willfulness, indeed.


Anonymous Anonymous said...

Hey, Irv,

I have a question for you regarding the settlement: Let's say that the category C folks are thrown out...what happens to all of the A and B folks? I have about 500 claims files and only about 70 of those are category C works. What will happen to my A and B works? I would really appreciate it if you could address this on your blog. Thanks!

11:20 AM  
Blogger Irv Muchnick said...

Dear Anonymous,

SCENARIO 1: The Category C works are thrown out and the settlement as a whole is not thrown out on the merits. In this case, the settlement goes back to district court. At that point a settlement will be renegotiated for the A and B works only, or not. My guess: not. The defendants have said they want "complete peace," and a settlement covering fewer than 1% of the infringements won't give them that. The defendants could enter into good-faith negotiations for a royalty system blessed by accompanying legislation by Congress -- the model suggested by the Supreme Court. Otherwise, A's and B's can undertake new actions (individual, mass, and class), and so can C's that become registered. How individuals choose to prosecute or settle their claims is not my concern; however, I and other objectors would remain vigilant against ineptly prosecuted actions that result in terms binding an entire class to the license-by-default and other unacceptable terms of the current doomed settlement.

SCENARIO 2: The settlement as a whole collapses from the weight of all its flaws -- whether or not the current jurisdiction ruling gets reversed. In that case, go to the last three sentences of Scenario 1, beginning "The defendants could enter into good-faith negotiations ..."


12:06 PM  

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