Please visit my other project
where amazing people meet
ERLICH'S MEMORANDUM IN SUPPORT OF MOTION ... (1685 lines)
By ckaun@deimos.ads.com (Carl Kaun)21 Jul 1995 18:22:29 GMT
I am posting the following document in the case of Religious Technology vs. Netcom on behalf of an a.r.s reader who prefers to remain anonymous. This anonymous benefactor contributed his time and equipment in converting the original paper documents to electronic form, enabling their presentation here. We all owe him thanks for his civic contribution.
I invite Ron Newman, and others who may desire, to incorporate the document on their Web pages. A salute to Ron and others for the work they have put into maintaining an accessible record of the goings-on is also in order.
Mr. Neal Pendleton, a contributer to a.r.s, and a significant benefactor to the Dennis Erlich defense fund, has caused the transcript of the June 23 hearing to be sent to me. I am trying to arrange to have it converted to electronic form for posting here. Anyone who would like to help may contact me directly, by email (ckaun@ads.com).
I was away last week, and our newsfeed only holds about 3 days traffic. I trust I missed nothing significant (like a decision on the various motions in RTC vs. Netcom).
------------------------1 3. "Advanced Technology" is spiritual by nature. ...............................17DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO
[Scanned from original public record. ] [Typo's are the fault of OCR software, not original authors ]
[rubberstamp] ORIGINAL -
[rubberstamp] FILED May 12 1995 Richard W. Wieking Clerk, U.S. District Court, Northern District of California San Jose
[handwritten initials] JR [??]
[handwritten:] 114 [handwritten initials]
1 HAROLD J. McELHINNY CARLA B. OAKLEY 2 MATTHEW K. FAWCETT MORRISON & FOERSTER 3 345 California Street San Francisco, California 94104-2675 4 Telephone: (415) 677-7000 Facsimile: (415) 677-7522 5 6 Attorneys for Defendant and Counterclaimant DENNIS ERLICH 7
8 IN THE UNITED STATES DISTRICT COURT
9 FOR THE NORTHERN DISTRICT OF CALIFORNIA
10
11 RELIGIOUS TECHNOLOGY CENTER, a ) Civ. No. C-95-20091 RMW California non-profit ) 12 corporation; and BRIDGE ) PUBLICATIONS, INC., a ) ) 13 California non-profit ) corporation, ) DEFENDANT ERLICH'S 14 ) MEMORANDUM IN SUPPORT OF Plaintiffs, ) MOTION TO DISSOLVE OR 15 ) AMEND THE AMENDED TRO v. ) 16 ) NETCOM ON-LINE COMMUNICATION ) 17 SERVICES, INC., a Delaware ) Date: June 23, 1995 corporation; DENNIS ERLICH, ) Time: 9:00 a.m. 18 an individual; and TOM KLEMESRUD, ) The Hon. Ronald M. Whyte an irdividual. dba CLEARWOOD ) 19 DATA SERVICES ) ) 20 Defendants. ) ) 21 ) DENNIS ERLICH, ) 22 ) Counterclaimant, ) 23 ) v. ) 24 ) RELIGIOUS TECHNOLOGY CENTER, INC. ) 25 and BRIDGE PUBLICATIONS, INC., ) ) 26 Counterclaim ) Defendants. ) 27____________________________________)
28
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO
1 TABLE OF CONTENTS
2 Page 3 TABLE OF AUTHORITIES ...................................iii 4 INTRODUCTION 5 STATEMENT OF FACTS ................................... 2 6 ARGUMENT ............................................. 4 7 I. PLAINTIFFS CANNOT ESTABLISH THAT THEY 8 ARE LIKELY TO SUCCEED AND WILL SUFFER IRREPARABLE HARM, OR THAT THERE ARE 9 SERIOUS QUESTIONS AND THAT THE BALANCE OF HARDSHIPS TIPS SHARPLY IN THEIR 10 FAVOR ....................................... 4
11 II. PLAINTIFFS' TRADE SECRET CLAIMS FAIL DUE TO THE WIDE PUBLICATION AND THE 12 NATURE OF THE DOCUMENTS AT ISSUE ............ 5
13 A. The Exhibit B Documents Have Not Been Maintained As Confidential 14 Over the Years. .......................... 6
15 1. The security measures RTC describes have limited application 16 and do not cover crucial time periods. ................................. 6
17 2. The OT documents have been 18 publicized widely and are publicly available. ........................... 8 19 3. Unprotected copyright registration 20 waived any claim of secrecy for NOTS documents. .......................10 21 4. RTC's claims regarding the Class VIII 22 Assists lecture tape are riddled with defects. ..............................11 23 B. RTC Cannot Show The Requisite Independent 24 Economic Value in Its Alleged Trade Secrets. .................................12 25 1. A trade secret must have independent 26 commercial value to competitors. ......13
27 2. RTC cannot show that the Exhibit B documents have any independent 28 commercial value. .....................14
-------------
III. PLAINTIFFS' CLAIMS OF COPYRIGHT INFRINGEMENT 3 SUFFER MULTIPLE DEFECTS ......................19
4 IV. EVEN IF PLAINTIFFS ARE ENTITLED TO ASSERT COPYRIGHT CLAIMS, THERE IS NO INFRINGEMENT 5 BECAUSE MR. ERLICH'S "USE" CONSTITUTES "FAIR USE" ...................................20 6 A. The Character And Purpose Of Use 7 Weigh In Favor Of Finding Fair Use........22
8 B. The Nature Of The Works At Issue Weighs In Favor Of A Finding Of Fair Use. 24 9 C. The Volume Of Mr. Erlich's Postings Is 10 Consistent With A Finding Of Fair Use. .....................................25 11 D. Mr. Erlich's Use Cannot Possibly Displace 12 The Potential Market For Scientology Materials. ...............................28 13 V. PLAINTIFFS CANNOT ESTABLISH IRREPARABLE 14 HARM OR THAT THE BALANCE OF HARDSHIPS TIPS SHARPLY IN THEIR FAVOR. .................31 15 CONCLUSION ............................................32 16
17
18
1 9
20
21
22
23
24
25
26
27
ii 1 TABLE OF AUTHORITIES
2 Page(s)
3 Cases
4 ABBA Rubber Co. v. Seaquist, 235 Cal. App. 3d 1 (1991) .......................5, 13
Associated Gen. Contractors of 6 California Inc. v. Coalition for Economic Equity, 950 F.2d 1401 (9th Cir. 1991), 7 cert. denied, 503 U.S. 985 (1992) ...............5
8 Belmore v. CitY Paqes, Inc., 34 U.S.P.Q.2d 1295 (D. Minn. 1995) ..............27, 28
Big Country Foods, Inc. v. Bd. of Educ., 10 868 F.2d 1085 (9th Cir. 1989) ......................4
11 Bridqe Publications, Inc. v. Vien, 827 F. Supp. 629 (S.D. Cal. 1993) ...............14 n.12, 12 15 n.13
13 Campbell Soup Co. v. ConAqra, Inc., 977 F.2d 86 (3d Cir. 1992) ......................15 n.13
14
Campbell v. Acuff-Rose Music, Inc., 15 114 S. Ct. 1164 (1994) .............................Passim
16 Caribbean Marine Servs. Co. v. Baldriqe, 844 F.2d 668 (9th Cir. 1988) ....................4
Chicago Lock Co. v. Fanberg, 18 676 F.2d 400 (9th Cir. 1982) .......................6
19 Church of Scientoloqy Int'l v. Fishman,
1994 U.S. App. LEXIS 23848 20 (9th Cir. Aug. 30, 1994) ...........................8, 9
21 Clark v. Bunker, 453 F.2d 1006 (9th Cir. 1972) ...................17 n.15
22 Courtesy Temporary Serv., Inc. v. Camacho, 23 222 Cal. App. 3d 1278 (1990) .......................14
24 Dow Jones & Co. v. Bd. of Trade of
The City of Chicaqo, 25 546 F.Supp. 113 (S.D.N.Y. 1982) ....................27
26 Federal Open Market Committee of the Federal Reserve System v. Merrill, 27 443 U.S. 340 (1979) ................................17 n.15
28
iii Paqe
1 Fisher v. Dees, 794 F.2d 432 (9th Cir. 1986) ....................30 2 Harper & Row Publishers. Inc. v. 3 Nation Enters., 471 U.S. 539 (1985) .............................25 4 Hustler Maqazine, Inc. v. Moral Majority, Inc., 5 796 F.2d 1148 (9th Cir. 1986) ...................Passim
6 Kewanee Oil Co. v. Bicron CorP., 416 U.S. 470 (1974) .............................11, 13, 7 15 n.12
8 Liberty Mutual Ins. Co. v. Arthur J. Gallaqher & Co., 9 1994 U.S. Dist. LEXIS 18412, (N.D. Cal. Dec. 19, 1994) .......................10
10 Los Anqeles Memorial Coliseum Comm'n v. 11 National Football Leaque, 634 F.2d 1197 (9th Cir. 1980) ...................4, 31
12 MAI Sys. Corp. v. Peak Computer, Inc., 13 991 F.2d 511 (9th Cir. 1993), cert. denied, 114 S.Ct. 671 (1994) ..............14 14 Marcus v. Rowley, 15 695 F.2d 1171 (9th Cir. 1983) ...................27 n.21
16 Maxtone-Graham v. Burtchaell, 803 F.2d 1253 (2d Cir. 1986), 17 cert. denied, 481 U.S. 1059 (1987) .................29
18 Murdock v. Pennsylvania, 319 U.S. 105 (1943) .............................15 n.12, 19 17
20 Narell v. Freeman, 872 F.2d 907 (9th Cir. 1989) ....................28 21 Near v. Minnesota, 22 283 U.S. 697 (1931) ................................5
23 New Era Publications Int'l v. Carol Pub. Listinq Group, 24 904 F.2d 152 (2d Cir.), cert. denied, 498 U.S. 921 (1990) ...............4 n.2, 25 22, 24, 25 26 Nixon v. Warner Communications, Inc., 27 435 U.S. 589 (1978) .............................8
28
iv Paqe
1 Norse v. Henry Holt & Co., 847 F. Supp. 142 (N.D. Cal. 1994) ...............21 n.18 2 Ordo Templi Orientis v. City of Berkeley, 3 1991 U.S. Dist. LEXIS 15018, (N.D. Cal. Oct. 15, 1991) .......................5 n.3
Purcell v. Summers, 5 145 F.2d 979 (4th Cir. 1944) ....................17 n.15
6 Reliqious Technoloqy Center v. Wollensheim, 796 F.2d 1076 (9th Cir. 1986), 7 cert. denied, 479 U.S. 1103 (1987) .................Passim
8 Reliqious Technoloqy Center, Church of Scientoloqy Int'l, Inc. v. Scott, 9 869 F.2d 1306 (9th Cir. 1989) ......................18 n.16
10 Rent-A-Center, Inc. v. Canyon Television & Appliance Rental, Inc., 11 944 F.2d 597 (9th Cir.) ............................31
12 Rotbart v. J. R. O'Dwyer Co., Inc., 34 U.S.P.Q.2d 1085 (S.D.N.Y. 1995) ..............Passim
Seqa Enterprises Ltd. v. Maphia, 14 857 F. Supp. 679 (C.D. Cal. 1994) ...............20 n.18, 29 n.23 15 Sinclair v. Aquarius Elecs., Inc., 16 42 Cal. App. 3d 216 (1974) ......................6, 13
17 Smith v. Dravo Corp., 203 F.2d 369 (7th Cir. 1953) ....................8, 17 18 n.15
19 Sony Cor~. of America v. Universal City Studios, Inc., 20 464 U.S. 417 (1984) ................................23, 27
21 Trianqle Publications, Inc. v. Kniqht-Ridder Newspapers, Inc., 22 626 F.2d 1171 (5th Cir. 1980) ......................26
23 United States Jaycees v. San Francisco Junior Chamber of Commerce, 24 354 F. Supp. 61 (N.D. Cal. 1972), aff'd. 513 F.2d 1226 (9th Cir. 1975) ............17 n.15 25 Weissman v. Freeman, 26 868 F.2d 1313 (2d Cir. 1989) ....................23
27 William Inqlis & Sons Bakinq Co. v. ITT Continental Bakinq Co., 28 526 F.2d 86 (9th Cir. 1975) ......................4
v Paqe~s)
1 Woinarowicz v. American Family Ass'n, 745 F. Supp. 130 (S.D.N.Y. 1990) ............ 22, 30 2
3 Statutes
4 Fed. R. App. Proc. 36-3 ............................ 9 n.7
5 17 U.S.C. 107 ........................................... 20, 21, 6 25, 28 408 ...........................................10 7 411 ...........................................19 705(a) ........................................10 8 705(b) ........................................10
9 Cal. Civ. Code 3426.1(d)(1) ..................................5, 13 1 0 Other Authorities
Howard B. Abrams, The Law of Copyright (1994) 12 15.04[C][4][v], 15-100 ........................30
13 Melvin F. Jager, Trade Secrets Law (1993) 6.03[1] .......................................6 14 Roger M. Milgrim, Milgrim on Trade Secrets (1994) 15 1.03 ..........................................13 1.05[1], [2] ..................................6 16 Restatement (First) of Torts 17 757 Comment b .................................14 n.ll 18 19 20 21 22 23 24 25 26 27 28
vi 1 INTRODUCTION 2 Dennis Erlich was devoted for many years to the Church 3 of Scientology of California. By 1982, he found he could no 4 longer accept or support Scientology's practices and policies. 5 Since then, Mr. Erlich has considered it part of his personal 6 ministry to participate in and foster critical debate regarding 7 Scientology. To this end, Mr. Erlich has used excerpts of 8 Scientology courses to illustrate Scientology policies and to 9 provide a context for debate and a basis for his criticism. In 10 the summer of 1994, Mr. Erlich joined the extensive debate 11 about Scientology on the Internet news group called 12 "alt.religion.scientology." Mr. Erlich has never claimed to be 13 the author of any Scientology works and has not profited from 14 his critique, satire or commentary. 15 On February 8, 1995, plaintiffs Religious Technology 16 Center ("RTC") and Bridge Publications, Inc. ("BPI") came to 17 this Court, ex parte, seeking an order prospectively 18 prohibiting Mr. Erlich from using Scientology works in any way. 19 Plaintiffs claimed that Mr. Erlich's Internet postings 20 (1) infringed various valid copyright interests owned by them, 21 and (2) constituted the misappropriation of certain allegedly 22 trade secret Scientology documents owned by RTC. Relying on 23 plaintiffs' representations, this Court issued a temporary 24 restraining order -- prospectively prohibiting Mr. Erlich's 25 criticism and commentary of Scientology and the exercise of his 26 personal ministry. TRO, dated February 10, 1995. The TRO was 27 later amended, clarifying that Mr. Erlich retained his "fair 28
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO
1 use" rights as to documents identified on Exhibit A to the 2 complaint and was only prohibited from using those documents 3 identified on Exhibit B. Amended Temporary Restraining Order, 4 dated February 23, 1995 ("Amended TRO'').l 5 In seeking emergency ex parte relief, plaintiffs 6 failed to advise the Court that most of the items identified as 7 alleged trade secrets either have been found by the Ninth 8 Circuit to have been widely publicized, or were publicly 9 deposited in the United States Copyright Office. Plaintiffs 10 also failed to advise the Court of the actual status and 11 ownership of various copyrights that are the basis of their 12 claims. 13 In light of the myriad defects and inconsistencies in 14 plaintiffs' copyright and trade secret claims, plaintiffs are 15 not likely to succeed on the merits of this action. All of the 16 other factors that underlie injunctive relief weigh in 17 Mr. Erlich's favor as well. He therefore requests an order 18 dissolving the Amended TRO. 19 STATEMENT OF FACTS 20 Mr. Erlich operates a computer out of his home. He 21 does not "compete" with RTC or BPI. When Mr. Erlich cites or 22 quotes any Church of Scientology ("CoS") or L. Ron Hubbard 23 ("LRH") works, he does not claim to be the author of those 24 works. On the contrary, even copies of alleged postings 25 plaintiffs rely upon show that Mr. Erlich frequently includes 26 27 /1/ Mr. Erlich was not represented by counsel in this action 28 until March 12, 1995.
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 2
1 an express attribution to LRH or a copyright notice that 2 specifies ownership by LRH. See, e.g., Exhibits 2A, 3A, 4A, 3 8A, 12A, 13A, 14A to McShane 2/24 Decl. 4 While no longer recognized as a minister by CoS, 5 Mr. Erlich still considers himself a minister, but now with a 6 calling to scrutinize Scientology and stir public discussion 7 through humorous and/or critical writings. For this purpose, 8 Mr. Erlich has used selections of certain CoS documents or 9 excerpts thereof -- items carefully chosen out of hundreds of 10 pages and a variety of dif ferent works . Compare Exhibits A 11 and B of the Complaint (listing 19 allegedly copied works) to 12 Exhibits A-C of McShane 2/24 Decl. (listing more than 200 total 13 works allegedly seized from Mr. Erlich's home). 14 According to the First Amended Complaint, BPI is the 15 exclusive licensee of various nonconfidential CoS or LRH works 16 that Mr. Erlich allegedly infringed. Am. Compl. ~ 17. The 17 license agreement upon which BPI relies, however, does not 18 expressly identify any of the titles identified on Exhibit A. 19 Compare Exhibit A to Exhibit E of the Am. Compl. Further, 20 although the original copyright terms for certain items listed 21 on Exhibit A have expired and renewal terms have vested in the 22 author's statutory heirs (see Appendix Re Copyright Issues, 23 filed herewith), BPI has offered no agreement transferring any 24 rights from LRH's wife and children to BPI. 25 Likewise, according to the First Amended Complaint, 26 RTC is the exclusive licensee of purported confidential or 27 trade secret works that Mr. Erlich allegedly infringed and 28
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 3
1 misappropriated. Am. Compl. ~ 15, 16. The agreements upon 2 which RTC relies, however, do not expressly identify all of the 3 particular titles for works identified on Exhibit B. Compare 4 Exhibit B to Exhibits C and D of Am. Compl.; see, infra, n.Il.2 5 ARGUMENT 6 I. PLAINTIFFS CANNOT ESTABLISH THAT THEY ARE LIKELY TO SUCCEED AND WILL SUFFER 7 IRREPARABLE HARM, OR THAT THERE ARE SERIOUS QUESTIONS AND THAT THE BALANCE OF 8 HARDSHIPS TIPS SHARPLY IN THEIR FAVOR
9 The Ninth Circuit defines the standard for obtaining a 10 preliminary injunction as follows: 11 To obtain a preliminary injunction, the moving party must demonstrate either a combination of 12 probable success on the merits and the possibility of irreparable injury or that serious questions are 13 raised and the balance of hardships tips sharply in his favor. William Inqlis & Sons Bakinq Co. v. ITT 14 Continental Bakinq Co., 526 F.2d 86, 88 (9th Cir. 1975) (emphasis in original). "These formulations 15 are not different tests but represent two points on a sliding scale in which the degree of irreparable 16 harm increases as the probability of success on the merits decreases." Biq Country Foods, Inc. v. Bd. 17 of Educ., 868 F.2d 1085, 1088 (9th Cir. 1989). Under either formulation of the test, the party 18 seeking the injunction must demonstrate that it will be exposed to some significant risk of 19 irreparable injury. Caribbean Marine Servs. Co. v. Baldriqe, 844 F.2d 668 (9th Cir. 1988). A 20 plaintiff must do more than merely allege imminent harm sufficient to establish standing, he or she 21 must demonstrate immediate threatened injury as a prerequisite to preliminary injunctive relief. Los 22 Anqeles Memorial Coliseum Comm'n v. National Football Leaque, 634 F.2d 1197, 1201 (9th Cir. 23 1980). 24 25 /2/ In addition, it is difficult to reconcile plaintiffs' ownership allegations with the fact that other cases have been 26 filed alleging copyright and trade secret claims arising out of Scientology documents, but the claims have been raised by 27 different entities. See, e.q., New Era Publications v. Carol Publishinq, 904 F.2d 152 (2d Cir.), cert. denied, 498 U.S. 921 28 (1990).
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 4
1 Associated Gen. Contractors of Cal., Inc. v. Coalition for 2 Economic Equity, 950 F.2d 1401, 1410 (9th Cir. 1991), cert. 3 denied, 503 U.S. 985 (1992). As discussed below, plaintiffs 4 cannot establish the likelihood of success on the merits, or 5 irreparable harm. Further, because the TRO prospectively 6 muzzles critical speech and Mr. Erlich's free practice of his 7 personal ministry with respect to documents that cannot qualify 8 as trade secrets, the balance of hardships cannot tip sharply 9 in plaintiffs' favor. See Near v. Minnesota, 283 U.S. 697, 10 715-17 (1931) (holding unconstitutional law allowing injunction 11 against publication of malicious or scandalous materials). 12 II. PLAINTIFFS' TRADE SECRET CLAIMS FAIL DUE TO THE WIDE PUBLICATION AND THE NATURE OF 13 THE DOCUMENTS AT ISSUE 14 In order to show a likelihood of success on the merits 15 of its trade secrets claim, RTC must show that the documents 16 identified in Exhibit B are confidential and that RTC derives 17 independent economic value from the information not being known 18 to RTC's competitors. Cal. Civ. Code 3426.1(d); ABBA Rubber 19 Co. v. Seaquist, 235 Cal. App. 3d 1, 19 (1991). Since RTC is 20 not likely to succeed in proving either of these factors, the 21 Court should dissolve the Amended TRo.3 22____________________________________________ 23 /3/ The Ninth Circuit has questioned whether RTC could allege the competitive market advantage required without raising 24 "grave doubts about its claim as a religion and a not-for- profit corporation." Reliqious Technoloqy Ctr. v. 25 Wollersheim, 796 F.2d 1076, 1091 (9th Cir. 1986), cert. denied, 479 U.S. 1103 (1987). See Ordo Templi Orientis v. 26 City of Berkeley, 1991 U.S. Dist. LEXIS 15018, *9 (N.D. Cal. Oct. 15, 1991) (Judge Armstrong) (refusing to issue a 27 preliminary injunction to religious organization that alleged that its scripture and membership list constituted trade 28 secrets).
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 5
1 A. The Exhibit B Documents Have Not Been Maintained As Confidential Over the Years. 3 Even if the Exhibit B documents otherwise could 4 qualify as trade secrets, they have lost their trade secret 5 status due to prior disclosures without adequate safeguards. 6 Roger M. Milgrim, Milqrim on Trade Secrets 1.05[1], [2] 7 (1994); Melvin F. Jager, Trade Secrets Law 6.03[1] (1993). A 8 trade secret loses its character where the owner divulges it or 9 where it is discovered through proper means. Chicaqo Lock 10 Co. v. Fanberq, 676 F.2d 400, 404 (9th Cir. 1982) (reverse 11 engineering of locks vitiates trade secret); Sinclair v. 12 Aquarius Elecs., Inc., 42 Cal. App. 3d 216, 226 (1974) (by 13 definition a trade secret is something which has not been 14 placed in the public domain). 15 The security measures RTC 16 describes have limited application and do not cover 17 crucial time periods. 18 In its ex parte papers, RTC goes to great lengths to 19 describe the security system it purportedly uses to protect the 20 "Advanced Technology" documents.4 See. e.q., McShane 2/8 Decl. 21 ~ 14-18 and Exh. E. RTC failed to advise the Court, however, 22 that the security measures described in Mr. McShane's 23 declaration and demonstrated by photographs in Exhibit E 24 25 4 RTC describes various Scientology upper level courses as "Advanced Technology" and claims all "Advanced Technology" 26 works constitute trade secrets. RTC further claims that each of the documents identified on Exhibit B to the complaint is 27 part of the "Advanced Technology." OT 1 is one "course;" OT 2 is another "course;" NOTS is another "course," composed of a 28 number of "Issues," six of which are identified on Exhibit B.
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 6
1 thereto are, in fact, only in place in three of the ten 2 locations where RTC's "Advanced Technologyll documents are 3 available to Scientology members and staff. McShane Depo. 4 at 77:21-89:6, 125:4-126:12 (Exh. A to Declaration of Carla B. 5 Oakley in Support of Motion to Dissolve or Amend the Amended 6 TRO, filed herewith ("Oakley Decl.")). Moreover, many of the 7 security devices described were only put in place in the last 8 few years. Id. Indeed, RTC did not even have security alarms 9 or security cameras until 1986 or 1988. Id. at 85:12-86:17, 10 88:7-13. 11 Also, there is a glaring gap in evidence regarding the 12 time between the issuance by LRH of many of the Exhibit B works 13 and the commencement of Mr. McShane ' s tenure at RTC in 1983 . 14 Likewise, there is little evidence regarding security measures 15 between 1968, when Mr. Erlich joined Scientology, and 1982, 16 when he left . 5 17 Strong evidence suggests that until CoS turned to the 18 legal strategy of using trade secret law to make debate 19 impossible, protections for "Advanced Technology" documents 20 were far less than RTC implies. Members freely took such 21 materials to their homes to study, unescorted and unsupervised, 22 many of which have filtered out to the general public. See. 23 24 25 Had RTC ' s present security system been in place when 25 Mr. Erlich was there, RTC would be able to produce Confidentiality Agreements, a Certificate of Eligibility and 26 photo ID card, as well as security records and computer logs. Instead, RTC produced only part of a checksheet that 27 generically refers to confidentiality (but not trade secrets) and a Declaration of Religious Commitment that nowhere 28 explicitly mentions conf identiality obligations .
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 7
1 e.q., Declaration of Matthew D. Berger, attached to Request for 2 Judicial Notice ("Berger Decl."), filed herewith, Exh 10, 3 p. 29; Exh. 22, p. 157. No amount of after-the-fact protection 4 can retrieve trade secret status. Smith v. Dravo Corp., 5 203 F.2d 369, 373 (7th Cir. 1953) ("That which has become 6 public property cannot be recalled to privacy."). ~ 7 Additional facts support the conclusion that RTC is 8 not likely to succeed in establishing the documents on 9 Exhibit B are confidential. For example, Mr. McShane testified 10 that there currently are thousands of people who have 11 authorized access to the Advanced Technology works. McShane 12 Depo. at 50:25-51:19 (Exh. A to Oakley Decl.). These documents 13 are available at ten different locations around the world, as 14 well as at CSI where copies are made. Id. at 79:12-25, 88:22- 15 89:20. 16 2. The OT documents have been publicized widely and are 17 Publicly available.
18 The OT 1 and OT 2 documents, which are listed on 19 Exhibit B to the complaint and claimed to be trade secrets, 20 have been available in open court records for more than a year 21 in the case of Church of Scientoloqy Int'1 v. Fishman, now 22 pending in the Central District of California.6 Case 23 No. 91-6426 HLH (Tx). As part of court records, these 24 documents cannot constitute trade secrets. See Nixon v. Warner 25 26 OT stands for Operating Thetan, and OT-I through OT-VIII 27 are eight Operating Thetan courses. NOTS stands for New Era Dianetics Operating Thetan Series. The NOTS course is a 28 replacement for the OT-V course.
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 8
1 CommunlcationS, Inc., 435 U.S. 589, 597 (1978) (court records 2 are public documents). 3 In Fishman, defendant Steven Fishman in mid-1993 4 attached the OT-I through OT-VIII courses in their entirety to 5 a declaration. This declaration was not filed under seal and 6 the Church of Scientology, Int'l ("CSI") has been unsuccessful 7 in its attempts to require the sealing of the documents. Most 8 recently, the Ninth Circuit considered the district court's 9 denial of CSI's request to seal the documents and, in remanding 10 for further evaluation of whether the OT documents qualified as 11 trade secrets, the Ninth Circuit said the district court may 12 "wish to take into consideration some of the observations we 13 have made while reviewing the record." Church of Scientology 14 Int'l v. Fishman, 1994 U.S. App. LEXIS 23848, *8 (9th Cir. 15 Aug. 30, 1994) (attached as Tab 1 to Appendix of Authorities). 16 The Ninth Circuit went on to say: 17 Our review of [the record] indicates that materials for upper levels OT-I, OT-II 18 and OT-III have been widely publicized. 19 Id. at *9 (emphasis added).7 20 For the Court's benefit, Mr. Erlich submits some of 21 the evidence that the Ninth Circuit considered in Fishman. See 22 Berger Decl., filed herewith. The picture that emerges from 23 24 Although Fishman is an unpublished opinion, this Court may 25 rely upon it pursuant to Ninth Circuit Rule of Appellate Procedure 36-3, because the ruling is "relevant under the 26 doctrines of law of the case, res judicata, or collateral estoppel." Fed. R. App. Proc. 36-3. Indeed, in seeking an ex 27 parte temporary restraining order to silence one of its critics, RTC should have brought Fishman to the Court's 28 attention.
DEFENDANT ERLICH'S MEMORANDUM IN.SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 9
1 this one declaration is that the contents of most OT levels 2 have been publicly available for a long time. See Berger 3 Decl., Exh. 7, p.15; Exh. 10, p.185. OT I and OT II documents 4 have been purchased without restriction or control. Id. 5 at Exh. 1, ~ 5. For a period of time, members would take 6 "Advance Technology" materials home, without supervislon, 7 contrary to RTC's claims. Id. at Exh. 10, pp.29-31; Exh. 22, 8 pp.157-60. Indeed, Exhibits 5 and 6 to Mr. Berger's 9 declaration list "unauthorized" people who possess OT and NOTS 10 level materials. Also, the contents of the materials have been 11 reported widely. Id. at Exh. 9; Exh. 12, pp.203-05, Exh. 16. 12 3. Unprotected copyright registration waived any claim of secrecy for 13 NOTS documents. 14 When registering an unpublished copyrighted work, the 15 applicant is required to deposit one copy of the work with the 16 Copyright Office. 17 U.S.C. 408. The Register of Copyrights 17 retains all items deposited with the Copyright Office and they 18 are "open to public inspection." 17 U.S.C. 705(a) and (b). 19 Although RTC had available to it procedures for special relief 20 from the open deposit requirements to shield its trade secrets, 21 RTC did not avail itself of these protections for the NOTS 22 documents.8 Works available to the public do not qualify for 23 trade secret protection. See qenerally Liberty Mutual Ins. 24 Co. v. Arthur J. Gallaqher & Co., 1994 U.S. Dist. LEXIS 18412, 25 *13 (N.D. Cal. Dec. 19, 1994) (information that is "readily 26_______________________________________ 27 /8/ Special relief status is indicated on a registration statement with a stamp so stating and an asterisk by the date 28 of deposit.
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 10
1 obtainable through public sources" cannot constitute a trade 2 secret). 3 While the registration statements for OT I and OT II 4 indicate special relief was sought, there is no such indication 5 on the registration certificate RTC cites for the NOTS 6 documents. Req. No. TXu257-326 (Exh. H to Am. Compl., Bates 7 No. 139-147). The necessary presumption is that an entire 8 unredacted or unmasked copy of the NOTS series was filed, 9 waiving any trade secret claim. Kewanee Oil Co. v. Bicron 10 Corp., 416 U.S. 470, 484 (1974) ("matter once in the public 11 domain must remain in the public domain").
12 4. RTC's claims regarding the Class VIII Assists lecture tape are riddled with 13 defects.
14 With respect to the final document on Exhibit B, the 15 Class VIII Assists tape, RTC cannot establish that it is likely 16 to succeed on its claim because of serious inconsistencies in 17 the license agreements and the lack of evidence supporting its 18 claim of confidentiality.9 19 Neither the 1982 nor the 1987 agreement provided by 20 RTC expressly refers to the Class VIII Assists lecture tape or 21 to any other lectures. See Am. Compl. Exhs. C, D. Rather, 22 this tape, which was not registered until September 1994, first 23 appears in a January 17, 1995, addendum. Am. Comp., Ex. D. 24 The January 17, 1995, addendum was executed only after 25 Mr. Erlich's alleged posting of the materials, perhaps in 26_____________________________ 27 /9/ The Class VIII Assists tape is allegedly the transcription of a lecture given by LRH in October 1968. McShane Depo. at 28 59:15-19, 60:12-15 (Exh. A to Oakley Decl.).
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 11
1 anticipation of this very litigation. Under the circumstances, 2 that addendum must be regarded with great suspicion.10 3 Finally, there is no evidence that the Class VIII 4 Assists lecture was given under circumstances to protect its 5 alleged confidentiality or has, in fact, been maintained as 6 confidential since the lecture was first given in 1968. 7 McShane Depo at 59:15-64:9 (Exh. A to Oakley Decl.). 8 Mr. McShane did not attend the lecture, has no personal 9 knowledge of security measures in place when the lecture was 10 first presented and could not say whether the lecture room was 11 locked, how many people were in the audience or whether tape 12 recording by the audience was expressly prohibited. Id. 13 B. RTC Cannot Show The Requisite Independent Economic Value in Its 14 Alleged Trade Secrets.
15 To constitute a trade secret, RTC also must prove that 16 the documents identified in Exhibit B have independent economic 17 18 10 The agreements relied upon by RTC also contain numerous 19 inconsistencies. For example, the license agreement that is Exhibit C to the complaint is not dated properly on page 1 to 20 establish the effective date; the exact year is missing. Also, while the agreement purportedly was signed by LRH on 21 "May 16, 198_," which is "the date first above written" (Am. Compl. Bates page 29), LRH's signature purportedly was 22 notarized on May 10, 1982 -- six days earlier. In addition, the purported "Addendum" to the "May 16, 198_" agreement in 23 Exhibit C is "effective January 19, 1982," and purports to modify an agreement dated "January 1, 1982" (Am. Compl. Bates 24 page 33) but does not specify the date on which it was signed. The agreement that is Exhibit D to the complaint purportedly 25 was signed by Norman Starkey, on behalf of LRH's estate, on September 17, 1987, but the signature was notarized on 26 September 20, 1987 (Bates page 39). Further, although it is alleged in paragraph 18 of the complaint that "CST assumed and 27 affirmed the Trusts's September 17, 1987, license to RTC," it is alleged in paragraph 17 that assets were not distributed to 28 the Trust until 1989.
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 12
1 value Cal Civ. Code 3426.1(d)(1). Trade secret law is 2 inherently and necessarily related to commerce. See qenerallv 3 Kewanee Oil, 416 U.S. at 481 ("The maintenance of standards of 4 commercial ethics and the encouragement of invention are the 5 broadly stated policies behind trade secret law. . . ."). Not 6 even every commercial secret qualifies as a trade secret. 7 "[O]nly secrets affording a demonstrable competitive advantage 8 may be properly considered trade secrets." Milqrim on Trade 9 Secrets, supra, at 1.03. This requires significantly more 10 than Mr. McShane's simple statement that "Advanced Technology" 11 documents have important economic value and that RTC, like 12 other organizations, must pay bills. McShane 2/24 Decl. ~ 7. 13 1. A trade secret must have independent commercial value to 14 competitors. 15 To determine whether information has the independent 16 economic value required to constitute a "trade secret," it is 17 necessary to focus on value not only to the holder, but to a 18 market that could exploit the information for money. Cal. Civ. 19 Code 3426.1(d)(1). "[A] trade secret in the broad sense 20 consists of any unpatented idea which may be used for 21 industrial and commercial Purposes." Sinclair, 42 Cal. App. 3d 22 at 222 (1974) (citations omitted) (emph. added). Further, "a 23 showing of value, by itself, is not sufficient to satisfy the 24 statutory definition . . . the statute also requires that the 25 information have value to other businesses which are unaware of 26 the information and which could put that information, if known, 27 to beneficial use." ABBA Rubber Co., 235 Cal. App. 3d at 19. 28
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 13
1 Like the California courts, the Ninth Circuit 2 recognizes that the proper focus of trade secret law is the 3 commercial value of the secret to the owner's competitors. ~To 4 establish a violation under the UTSA, it must be shown that a 5 defendant has been uniustly enriched by the improper 6 appropriation, use or disclosure of a 'trade secret.'~ MAI 7 Sys. corP. v. Peak Computer, Inc., 991 F.2d 511, 520 (9th Cir. 8 1993), cert. dismissed, 114 S. Ct. 671 (1994) (emph. added). 9 2. RTC cannot show that the Exhibit B documents have any 10 independent commercial value.
11 In order to succeed on their trade secret claims, RTC 12 must demonstrate that the documents in Exhibit B have 13 independent economic value, generated by virtue of the owner's 14 efforts, such that they may be exploited for profit in the 15 marketplace not just by its owner, but by competitors as well. 16 See qenerally CourtesY Temporary Serv.. Inc. v. Camacho, 222 17 Cal. App. 3d 1278 (1990). The Exhibit B documents do not fit 18 these criteria.12 19_____________________________________________ 20 /11/ Comment b to the Restatement (First) of Torts 757, relied upon by RTC in its brief (Pl. 2/24 MPA at 14 n.3), 21 lists various factors to be considered in determining whether information is a trade secret. Contrary to RTC's implication, 22 information cannot be a trade secret just because it is important to the owner, who limits its availability. The 23 Restatement factors refer to the commercial nature of the information, its relationship to business, competition, and 24 research and development costs. 25 12 The district court in Bridqe Publications, Inc. v. Vien, 827 F. Supp. 629 (S.D. Cal. 1993), found that "Advanced 26 Technology" had economic value to plaintiffs and that the defendant in that case, unlike Mr. Erlich, intended to 27 establish a competing religion teaching the same materials. Id. at 633-34. The opinion does not indicate what evidence or 28 authorities were presented to the court. The court only cited FOOTNOTE 12 CONTINUED ON NEXT PAGE
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 14
1 RTC has not established any commercial value -- and 2 has refused to provide evidence of such value -- of any of the 3 Exhibit B documents. Rather, Mr. McShane's counsel instructed 4 him not to answer any questions that would require him to 5 reveal the revenue RTC receives in licensing fees, despite 6 repeated offers by counsel to treat the information as 7 confidential. McShane Depo. at 44:23-48:14, 110:5-8, 180:17- 8 182:6 (Exh. A to Oakley Decl.). Due to RTC's refusal to allow 9 discovery on the issue of revenue received and its failure to 10 put any evidence in the record to support its claim of economic 11 value, Mr. Erlich moves to strike all allegations by RTC of 12 economic value.13 13 14 FOOTNOTE 12 CONTINUED FROM PREVIOUS PAGE one case, Murdock v. Pennsylvania, 319 U.S. 105, 111 (1943). 15 Respectfully, Murdock did not involve trade secrets, but an unconstitutional attempt to levy taxes on Jehovah's Witnesses. 16 In ruling that the tax was unconstitutional, the Supreme Court focused on the non-commercial nature of defendants' 17 activities. The Murdock opinion, in fact, highlights precisely why the Ninth Circuit believed trade secret 18 protection could be inconsistent with being a non-profit religious entity: 19 [W]hen a religious sect uses "ordinary 20 commercial methods of sales of articles to raise propaganda funds," it is proper 21 for the state to charge "reasonable fees for the privilege of canvassing." 22 Situations will arise where it will be difficult to determine whether a 23 particular activity is religious or purely commercial. The distinction at 24 times is vital.
25 Id. at 110 (citation omitted). Trade secret law protects commercial activity. Kewanee, supra, 416 U.S. at 481, 485. 26 13 RTC does not claim that Mr. Erlich is purporting to offer 27 competing Scientology services. This factor alone makes Wollersheim, 796 F.2d 1076, and Vien, 827 F. Supp. 629, 28 inapposite; see also Campbell Soup Co. v. ConAqra, Inc., 977 FOOTNOTE 13 CONTINUED ON NEXT PAGE
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 15
1 Further, Mr. McShane concedes that RTC has no current 2 competitors for the Exhibit B materials or for the so-called 3 ~Advanced Technology" materials as a whole.14 Id. at 92:21- 4 96:9. He also said that RTC does not have "customers," but 5 promotes these documents to those members who have reached a 6 proper level of spiritual training and have satisfied RTC's 7 ethical requirements. Id. at 96:10-97:3, 101:6-13. Finally, 8 Mr. McShane does not, in any declaration, directly state that 9 "Advanced Technology" is sold for profit or that "Advanced 10 Technology" sales fund RTC's operating expenses. In fact, 11 despite filing numerous declarations, RTC never explains 12 precisely how it derives economic benefit from the "Advanced 13 Technology," let alone how "Advanced Technology" has economic 14 value to others. 15 16 17 18
FOOTNOTE 13 CONTINUED FROM PREVIOUS PAGE 19 F.2d 86, 92 (3d Cir. 1992) (even though defendant possessed plaintiff's trade secret, it did not intend to market the 20 product and therefore preliminary injunction is inappropriate). Furthermore, it appears that Mr. McShane 21 overestimates the significance of Judge Pfaelzer's orders in the other RTC cases. The order of confidentiality (McShane 22 2/8 Decl., Exh. F) is merely a confidentiality order. The preliminary injunction (McShane 2/24 Decl., Exh. H) rested on 23 the court's belief that it "was a stolen documents case." The court specifically did not decide whether the documents were 24 trade secrets. 25 14 See also interview with RTC President David Miscavige, Berger Decl., Exh. 27, p. 38 (Koppel: "You call it a 26 donation." Miscavige: "Oh, absolutely, because there's people there who are donating to the Church, period."); 27 statement of Los Angeles Church of Scientology President Shirley Young, Berger Decl. Exh. 29, p. 3 ("We are a church. 28 We do not have business.").
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 16
1 3. "Advanced Technology" is spiritual by nature. 2 Characterizing "Advanced Technology" as a process, 3 method, or program has no bearing on what it is: religious 4 text. The materials concern "applied religious philosophy and 5 spiritual healing technology." Am. Comp. ~ 9. To argue that these religious texts are commercially protectable flouts a 7 fundamental distinction between religious and commercial 8 activity. See Murdock, supra, 319 U.S. at 110.15 RTC's 9 awkward attempt to graft "economic value" onto the Exhibit B 10 documents is the result of calculated effort to find any way to 11 12 13 14 15 None of RTC's authorities are persuasive. Neither Clark v. Bunker, 453 F.2d 1006 (9th Cir. 1972) nor Smith v. 15 Dravo Corp., 203 F.2d 369 (7th Cir. 1953) considered whether religious texts could be trade secrets. Clark determined 16 whether a plan to create, promote, finance and sell funeral service contracts was a trade secret. 453 F.2d at 1008. 17 Dravo Corp. considered trade secrets in the context of freight container design and construction. 203 F.2d at 371. Also, 18 Federal OPen Market Committee of the Federal Reserve SYstem v. Merrill, 443 U.S. 340 (1979), in no way holds that non-profit 19 organizations may possess trade secrets. The case determined whether FOMC's (responsible for all open market operations of 20 the Federal Reserve System) practice of withholding certain monetary directives from the public violated the Freedom of 21 Information Act. Id. at 342-43. In one part of the opinion, upon which RTC seems to rely, the Supreme Court stated that 22 there may be appropriate cases where the government could seek a protective order to preclude civil discovery of confidential 23 commercial information. Id. at 356-57. Finally, the Ninth Circuit has already discredited RTC's reliance on Purcell v. 24 Summers, 145 F.2d 979 (4th Cir. 1944) and United States Jaycees v. San Francisco Junior Chamber of Commerce, 354 F. 25 Supp. 61 (N.D. Cal. 1972), aff'd, 513 F.2d 1226 (9th Cir. 1975). "Purcell does not involve trade secrets. Rather, it 26 is an example of 'the common law of trademark infringement and unfair competition . . . organizations [may protect] against 27 the continued use of their name by local chapters which disaffiliate."' Wollersheim, supra, 796 F.2d at 1091 n.17 28 (quoting United States JaYcees, suPra).
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 17
1 retrieve and prospectively protect information that already has 2 been publicly broadcast. 3 Originally, RTC sought trade secret protection for 4 ~Advanced Technology" based solely on allegations that the 5 materials had important spiritual value. However, in 6 Wollersheim, supra, 796 F.2d 1076, the Ninth Circuit rejected 7 RTC's claim that religious materials could constitute a 8 protectable trade secret even if they did not confer a 9 competitive commercial advantage. Id. at 1091. ("The value of 10 the confidential materials is thus spiritual not commercial, 11 and the materials cannot be said to have the 'independent 12 economic value' necessary to qualify as a protectable trade 13 secret."). The court accordingly dissolved an injunction 14 issued by the district court. 15 In response to Wollersheim, RTC has simply changed its 16 approach, now arguing that "Advanced Technology" actually has 17 economic value.15 That argument, however, defies common sense 18 and is a desperate attempt to fit a square peg in a round hole. 19 To grant trade secret protection to spiritual text requires 20 21___________________________ 22 /16/ In Reliqious Technoloqy Center, Church of Scientoloqy Int'l, Inc. v. Scott, 869 F.2d 1306 (9th Cir. 1989), the Ninth 23 Circuit considered whether the district court properly had denied RTC's trade secrets-based injunction. Id. at 1308. 24 The district court refused to issue an injunction, holding that Wollersheim precluded any trade secret claim without 25 regard to RTC's allegations or evidence. Id. at 1309. The Ninth Circuit reversed, holding that Wollersheim did not 26 determine whether religious materials could constitute trade secrets, only that a trade secrets claim is not available 27 where economic value is not asserted. Id. at 1309-10. The Wollersheim court was not confronted with the question of 28 whether such materials could ever constitute trade secrets.
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 18
1 ignoring the very purpose of trade secret law and confounding 2 legislative intent. 3 * * * * * * 4 For all of these reasons, the Court should dissolve 5 the Amended TRO because RTC cannot establish a likelihood of 6 success on the merits of its trade secret claims. ^~ 7 III. PLAINTIFFS' CLAIMS OF COPYRIGHT 8 INFRINGEMENT SUFFER MULTIPLE DEFECTS 9 To prove a claim of copyright infringement, plaintiffs 10 must establish that they own an existing, valid and registered 11 copyright interest. 17 U.S.C. 411. Plaintiffs, however, 12 likely will not be able to establish this threshold requirement 13 with respect to most -- if not all -- documents they allege 14 were infringed. As to the remaining documents, if any, the 15 registrations raise serious questions regarding plaintiffs~ 16 claims. 17 First, at least one of the works has entered the 18 public domain due to the expiration of the original copyright 19 term and the failure to file for the necessary renewal 20 registration. Second, the copyright interest in other works 21 has, since the expiration of the original copyright term, 22 vested in Mr. Hubbard's statutory successors, who have not 23 transferred their rights to plaintiffs. Third, for many of the 24 allegedly infringed works, plaintiffs do not have the necessary 25 registrations of the underlying original works, but rather rely 26 on registrations of a later compilation. Finally, in addition 27 to these defects, the registration certificates contain many 28
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 19
1 inconsistencies that call them into question and -- in most 2 instances -- were filed so long after initial publication or 3 creation that plaintiffs are not entitled to claim a 4 presumption of validity.17 5 For all of these reasons, as fully set forth in the 6 accompanying Appendix Re Copyright Issues, plaintiffs cannot 7 establish a likelihood of success on the merits sufficient to 8 justify an injunction prospectively restraining Mr. Erlich's 9 critical free speech and freedom of religion. 10
IV. EVEN IF PLAINTIFFS ARE ENTITLED TO ASSERT 11 COPYRIGHT CLAIMS, THERE IS NO INFRINGEMENT BECAUSE MR. ERLICH'S "USE" 12 CONSTITUTES "FAIR USE" 13 Plaintiffs are not likely to succeed on the merits of 14 their claims of copyright infringement because, to the extent 15 that Mr. Erlich used LRH or CoS works in his satire or 16 criticism of Scientology, his use qualifies as "fair use" under 17 Section 107, <a href="erlich-copyright-case-document-107.0.html#107">of the Copyright Act and does not constitute </a>18 infringement. 17 U.S.C. 107.18 19 20 17 Due to the highly technical nature of these various defects and the number of documents listed on Exhibits A and B 21 to the Complaint, we have separately addressed these issues in the Appendix Re Copyright Issues filed herewith. Included in 22 the Appendix is a chart summarizing the various defects, as well as an explanation of each. 23 18 Plaintiffs argue that Mr. Erlich's use cannot be "fair 24 use" because he was not authorized to possess the works used. Pl. 2/24 MPA at 3-4. This argument is not, however, supported 25 legally or factually, particularly as to the admittedly published Exhibit A works. The cases plaintiffs cite are 26 inapposite because they involve use of an unauthorized copy, not unauthorized use or possession of a lawful copy. For 27 example, in Seqa Enterprises Ltd. v. Maphia, 857 F. Supp. 679, 687 (N.D. Cal. 1994), the court said that the defendant's use 28 of an unauthorized copy made so that multiple copies can be FOOTNOTE 18 CONTINUED ON NEXT PAGE
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 20
1 Section 107, <a href="erlich-copyright-case-document-107.0.html#107">specifies four factors for the court to </a>2 consider in determining whether use qualifies as fair use: 3 (1) the purpose and character of the use, including whether such use is of a commercial 4 nature or is for nonprofit educational purposes; 5 (2) the nature of the copyrighted work; 6 (3) the amount and substantiality of the portion used in relation to the copyrighted work as a 7 whole; and 8 (4) the effect of the use upon the potential market for or value of the copyrighted work. 9 10 17 U.S.C. 107.19 These four factors are not exclusive and 11 courts are free to adopt the doctrine to particular situations 12 on a case-by-case basis. Campbell v. Acuff-Rose Music, Inc., 13 114 S. Ct. 1164, 1170 (1994); Hustler Maqazine, Inc. v. Moral 14 Malority, Inc., 796 F.2d 1148, 1151 n.4 (9th Cir. 1986). In 15 this case, the relevant factors and the circumstances of 16 Mr. Erlich's use amply support a finding of "fair use," making 17 18 19 20 FOOTNOTE 18 CONTINUED FROM PREVIOUS PAGE made by others over a bulletin board service to avoid the 21 expense of buying the computer game will "militate[] against . . . fair use." In Norse v. Henry Holt & Co., 847 22 F. Supp. 142, 147 (N.D. Cal. 1994), the second case cited by plaintiffs, the court said that, while bad faith may preclude 23 the fair use defense, bad faith was not established in that case as the defendant copied from unpublished letters found in 24 a university's library that was open to the public. In all events, good faith is not a prerequisite to fair use. See 25 Campbell, 114 S. Ct. at 1174 n.18. 26 19 Whether use qualifies as "fair use" is a mixed question of law and fact that a court may determine as a matter of law if 27 there are no genuine issues of material fact. Hustler Maqazine, Inc. v. Moral MaloritY, Inc., 796 F.2d 1148, 1150-51 28 (9th Cir. 1986).
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 21
1 it unlikely that plaintiffs will succeed on the merits of their 2 claims.20 3 A. The Character And Purpose Of Use 4 Weiah In Favor Of Findinq Fair Use. 5 The first factor requires consideration of the 6 character of the use and a weighing of the commercial~or non- 7 profit purpose of the use. Campbell, 114 S. Ct. at 1171; 8 Hustler, 796 F.2d at 1152. Use for purposes of criticism 9 weighs heavily in favor of fair use. See Rotbart v. J.R. 10 O'Dwyer Co., 34 U.S.P.Q.2d 1085, 1087 (S.D.N.Y. 1995). 11 Moreover, where issues of public concern are implicated, as 12 here, "the breadth [of fair use] expands and accords greater 13 protection to what might otherwise constitute an infringement." 14 Woinarowicz v. American Family Ass'n, 745 F. Supp. 130, 147 15 (S.D.N.Y. 1990) (pamphlet copying fragments of artworks to 16 protest federal grant of funds to artists was a fair use 17 because it addressed "an issue of public concern" ) . 18 Since Mr . Erlich ' s use of Scientology works as part of 19 his personal ministry was not for profit, but rather was purely 20 to evoke discussion regarding various Scientology philosophies 21 and to criticize Scientology, this factor weighs in favor of 22 fair use. See New Era Publications Int'l v. Carol Publishlnq 23 Listinq Group, 904 F.2d 152, 156-57 (2d Cir.), cert. denied, 24 25 20 There is no evidence that Mr. Erlich ever used Item 9 on Exhibit A since neither a copy of his allegedly infringing 26 copy, nor the original LRH work is attached to the 2/24 McShane declaration. There also is no evidence that 27 Mr. Erlich ever used Item 9 on Exhibit B. Indeed, RTC's index of the alleged postings of "Advanced Technology" documents 28 does not even list this document. Oakley Decl., Exh. B.
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 22
498 U.S. 921 (1990) (use of Scientology works in critical 2 biography of LRH constitutes fair use and first factor weighs 3 in favor of biographer)i see also Son~ Corp. of Am. v. 4 Universal Studios, Inc., 464 U.S. 417 (1984) (non-profit or 5 non-commercial use weighs heavily in favor of finding that use 6 is fair) . ~ 7 In support of their claim that this factor defeats a 8 fair use finding (Pl. 2/24 MPA at 9), plaintiffs claim simply 9 that Mr. Erlich's use is for profit because he "seeks status 10 and recognition" by using the works. Even accepting their 11 characterization (which we do not concede is true), such 12 "status and recognition" does not amount to profit for purposes 13 of a fair use analysis. 14 Weissman v. Freeman, 868 F.2d 1313 (2d Cir. 1989), the 15 case plaintiffs cite, supports this conclusion. Weissman 16 involved use by a professor of work authored by another 17 professor in order to obtain recognition among his peers in the 18 profession and to claim authorship credit, "without paying the 19 usual price that accompanies scientific research and writing, 20 that is to say, by the sweat of his brow." Id. at 1324. In 21 holding that the benefit the defendant derived from copying his 22 former student's work weighed against fair use, the Weissman 23 court noted that profit in academia is measured less by money 24 and more by recognition that may lead to tenure or other 25 professional advancement. Id. Here, in contrast, there is no 26 allegation that Mr. Erlich's use was to enhance his 27 professional credentials. More significantly, unlike the 28
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 23
1 Weissman defendant, Mr. Erlich did not claim authorship credit 2 for any CoS or LRH works. On the contrary, Mr. Erlich 3 frequently included the copyright notice specifying LRH as the 4 copyright holder or included an express attribution to LRH. 5 See, e.q., McShane 2/24 Decl., Exhs. 2A, 3A, 4A, 8A, 12A, 13A, 6 14A. ~ 7 For these reasons, the first factor amply weighs in 8 favor of a finding of fair use and against a finding that 9 plaintiffs are likely to succeed on the merits. 10 B. The Nature Of The Works At Issue Weighs In Favor Of A Finding Of Fair 11 Use. 12 The second fair use factor requires an assessment of 13 the nature of the works at issue, including whether the works 14 are factual or fictional in nature and whether they were 15 previously published. Campbell, 114 S. Ct. at 1175; New Era 16 Publications, 904 F.2d at 157-58. As held by the Second 17 Circuit in New Era Publications, LRH's works are -- generally 18 speaking -- more informational and factual than creative and 19 fictional, and therefore factor two weighs in favor of a 20 finding of fair use. 904 F.2d at 157-58. Plaintiffs 21 themselves have described LRH's works as techniques and 22 processes for spiritual development, not as creative works of 23 fiction. McShane 2/8 Decl. ~ 10; Am. Compl. ~ 9; Pl. 2/24 MPA 24 at 17. 25 Further, all of the items on Exhibit A to the 26 complaint are admittedly published works, which also weighs in 27 favor of finding fair use as to those documents. New Era 28
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 24
1 Publications, 904 F.2d at 157. To the extent RTC can establish 2 that any of the items on Exhibit B to the complaint are 3 "unpublished," in the copyright sense of the word, the 4 Copyright Act expressly provides that fair use is available as 5 to such works as well. "The fact that a work is unpublished 6 shall not itself bar a finding of fair use . . . ." 17 U.S.C. 7 107. 8 Considering the circumstances in their entirety, the 9 second factor weighs in favor of a finding of fair use, further 10 supporting the conclusion that plaintiffs are not likely to 11 succeed on the merits. 12 C. The Volume Of Mr. Erlich's Postings Is Consistent With A Finding Of Fair 13 Use. 14 "Factor three addresses the amount and substantiality 15 of the portion used in relation to the copyrighted work, not to 16 the allegedly infringing work." New Era Publications, 904 F.2d 17 at 158; Harper & Row Publishers, Inc. v. Nation Enters., 471 18 U.S. 539, 564 (1985). Factor three also requires consideration 19 of whether the amount and nature of copying is reasonable under 20 the circumstances. CamPbell/ 114 S. Ct. at 1175. Whether 21 copying is reasonable depends upon whether the purpose is for 22 criticism or parody, or to serve as a market substitute for the 23 work. Rotbart, 34 U.S.P.Q.2d at 1088, quotinq Campbell, 24 114 S. Ct. at 1176. Because Mr. Erlich did not post more than 25 reasonably necessary to stimulate debate, this factor weighs in 26 favor of a finding of fair use. 27 28
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 25
1 In this regard, plaintiffs contend that Mr. Erlich has 2 copied all or substantial portions of those works identified in 3 Exhibits A and B. Pl. 2/24 MPA at 7:22-8:6. The allegedly 4 infringed works, however, are analogous to smaller sections out 5 of a significantly larger work. See Triangle Publications. 6 Inc. v. Kniqht-Ridder Newspapers, Inc., 626 F.2d 117^1, 1177 7 (5th Cir. 1980) (cover of TV Guide not an entire work); cf. 8 Hustler, 796 F.2d at 1154-55 (advertisement in a parody in 9 magazine is an entire work). For example, Item 7 on Exhibit A 10 is included (at pages 166-69) in a 371-page book of well over 11 100 different policy letters. See Oakley Decl., Exh. C (Table 12 of Contents to Organization Executive Course, Basic Staff 13 Volume O). Likewise, the six NOTS items identified on 14 Exhibit B are, in fact, part of the NOTS level course, which 15 has not been produced, but appears to have several dozen 16 components according to Registration No. TXu 257-326. 17 The extent of Mr. Erlich's copying must be viewed in 18 the context of the Internet discussion for which the copies 19 were posted. Specifically, since Internet discussion 20 participants randomly "join" or "leave" the discussion at any 21 time, it is necessary -- and, in fact, quite common -- for 22 contributors to place comments in context to be sure that the 23 comments will make sense to the reader, who may very well miss 24 prior or subsequent postings. Further, given the nature of the 25 works posted, thorough postings are necessary to help the 26 reader understand the work that is being criticized, or that is 27 28
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 26
1 offered to stimulate debate or to respond to another user's 2 comments. 3 Even if it were assumed, arguendo, that any of 4 Mr . Erlich ' s postings constituted use of all or a substantial 5 percentage of a work at issue, the Supreme Court and the Ninth 6 Circuit have expressly held that the copying of an erltlre work 7 does not preclude f air use . 2 1 Sony Corp . of Am ., 4 64 U . S . at 8 540 (video-taping of an entire television broadcast for 9 personal use constitutes fair use); Hustler, 796 F. 2d at 1158 10 (copying of entire advertisement parody); see also Dow Jones & 11 Co. v. Bd. of Trade of the City of Chicaqo, 546 F.Supp. 113, 12 120-21 (S.D.N.Y. 1982) (publication of an entire Dow Jones 500 13 index); Rotbart, 34 U.S.P.Q.2d at 1086 (creation of transcript 14 of entire oral presentation for distribution to requesters and 15 to confirm accuracy of recount of the presentation); Belmore v. 16 City Paqes, Inc., 34 U.S.P.Q.2d 1295, 1299 (D. Minn. 1995) 17 (publication in a newspaper of an entire story from a 18 newsletter for purposes of social and political commentary). 19 For example, in Belmore, the court found that a 20 critic's copying of a short story in its entirety did not 21 prohibit a finding of fair use. The court said it was of no 22 consequence that the criticism consisted solely of a limited 23 introduction and concluding commentary. 34 U.S.P.Q.2d at 1299. 24 Instead, the court must consider not merely the "quantum of 25________________ 26 21 Plaintiffs ignore this controlling precedent and, instead, cite the much earlier case of Marcus v. Rowley, 695 F.2d 1171 27 (9th Cir. 1983), for the proposition that wholesale copying always precludes application of the fair use doctrine. See 28 Pl. 2/24 MPA at 5:15-22.
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 27
1 material copied,ll but rather should determine whether the 2 amount copied is ~reasonable in relation to the purpose of the 3 copying.'" Id. (citation omitted).22 4 Accordingly, the third fair use factor supports a 5 finding that plaintiffs will be unlikely to succeed on the 6 merits of their infringement claims. 7 D. Mr. Erlich's Use Cannot Possibly Displace The Potential Market For 8 Scientoloqy Materials.
9 The fourth fair use factor requires the Court to 10 consider "'the effect of the use upon the potential market for 11 or value of the copyrighted work."' Hustler, 796 F.2d at 1155, 12 quotinq 17 U.S.C. 107(4). Given the purpose of Mr. Erlich's 13 use, as well as the nature and quantity of excerpts published, 14 plaintiffs will never be able to prove the type of market harm 15 that this factor is intended to address. Campbell, 114 S. Ct. 16 at 1177-79. 17 To determine whether the potential market for the 18 copied works is likely to be harmed, plaintiffs must establish 19 that Mr. Erlich's copies constitute an "acceptable substitute" 20 for the original works. Narell v. Freeman, 872 F.2d 907, 914 21 (9th Cir. 1989). Contrary to plaintiffs' claims (Pl. 2/24 MPA 22 at 11:8-12:26), it is not enough to argue that there are 23 potentially millions of Internet users who may gain access to 24 25 22 Plaintiffs' claim that Mr. Erlich posted CoS documents 26 without commentary is not, in fact, supported by the record since the purported postings filed by plaintiffs include 27 criticism and/or an invitation for discussion. In all events, plaintiffs' purported copies of postings raise serious 28 evidentiary and authentication questions.
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 28
1 the copied works because this factor does not turn on how many 2 people may read the copy, but rather looks to whether consumers 3 would decline to purchase the original work because they 4 obtained the copy as a substitute. See Maxtone-Graham v. 5 Burtchaell, 803 F.2d 1253, 1264 (2d Cir. 1986), cert. denied, 6 481 U.S. 1059 (1987) (incorporation of excerpts of pro-choice 7 book in anti-abortion book did not harm the market for pro- 8 choice book in light of "fundamentally different functions~ and 9 "opposing viewpoints").23 10 In this case, since Mr. Erlich copied or parodied -- 11 at most -- excerpts of works, or individual policy letters or 12 bulletins out of a whole series of letters or bulletins, it is 13 axiomatic that his use cannot be a substitute for the 14 systematic, carefully-monitored teaching of CoS that appears to 15 be required by Scientology. Wollersheim, 796 F.2d at 1078 16 (describing CoS claim that people may be spiritually harmed by 17 reading Advanced Technology before they have have received 18 prior levels of CoS training); see also Hustler, 796 F.2d at 19 1156 (readers of Hustler are not likely to substitute Jerry 20 Falwell's copies for the original magazine's parody); Rotbart, 21 22 ____________________ 23 The case upon which plaintiffs rely, Seqa Enterprises 23 Ltd. v. Maphia, 857 F. Supp. 679 (N.D. Cal. 1994), is easily distinguished. Seqa involved the posting and downloading of 24 entire Sega games from a bulletin board service so that users could avoid having to buy the game from Sega, which the court 25 found to be a purely commercial use and a direct replacement of the original. In contrast, Mr. Erlich's use is not of a 26 commercial nature and there is no allegation or proof that anyone interested in studying Scientology would be able to 27 learn its policies and practices solely from Mr. Erlich's random posting of limited selections from voluminous CoS 28 materials.
DEFENDANT ERLICHIS MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 29
1 34 U.S.P.Q.2d at 1088 (~lextremely doubtful'~ that anyone who 2 would pay to attend plaintiff's seminar would accept a critical 3 report of the seminar "'as market substitutes for the 4 original'"). As in Hustler and Rotbart, the readers of 5 Mr. Erlich's postings are not likely to be the members of 6 Scientology looking for the complete, methodical tralning and 7 guidance of CoS. 8 Further, potential economic harm to the original work 9 caused by criticism of the original work, as described by 10 Mr. McShane (Depo. at 108:20-109:11, Exh. A to Oakley Decl.), 11 is not relevant to the fourth factor and should be disregarded. 12 Howard B. Abrams, The Law of Copyright, 15.04[C][4][v], 15- 13 100 (1994). For example, the Ninth Circuit has held: 14 [T]he economic effect of a parody with which we are concerned is not its potential to destroy or 15 diminish the market for the original -- any bad review can have that effect -- but rather whether 16 it fulfills the demand for the original. Biting criticism suppresses demand; copyright infringement 17 usurps it. 18 Fisher v. Dees, 794 F.2d 432, 438 (9th Cir. 1986) (emphasis in 19 original); see also Wolnarowicz, 745 F. Supp. at 145; Rotbart, 20 34 U.S.P.Q.2d at 1089. 21 * * * * * * 22 To summarize, the four section 107 factors weigh 23 heavily in favor of a finding of fair use. Fair use is further 24 supported by the unique circumstances of Mr. Erlich's use of 25 CoS works -- namely, in the exercise of his constitutionally- 26 protected right to criticize Scientology, as well as in the 27 exercise of his freedom of religion and the practice his 28
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 30
1 personal ministry. Given these facts, plaintiffs are not 2 likely to succeed on their claims of infringement.24 3 V. PLAINTIFFS CANNOT ESTABLISH IRREPARA~3LE HARM OR THAT THE BALANCE OF HARDSHIPS 4 TIPS SHARPLY IN THEIR FAVOR 5 Plaintiffs are not entitled to continued injunctive 6 relief because they cannot establish the requisite le~vel of 7 potential harm absent such injunctive relief. Los Anqeles 8 Memorial Coliseum Comm'n v. National Football Leaque, 634 F.2d 9 1197, 1201 (9th Cir. 1980); Rent-A-Center, Inc. v. Canyon 10 Television & Appliance Rental, Inc., 944 F.2d 597, 603 11 (9th Cir. 1991). To the contrary, the only possible harm they 12 have identified or can identify does not give rise to 13 preliminary injunctive relief. When asked to identify how RTC 14 will be irreparably harmed absent an injunction prohibiting any 15 use of the Exhibit B documents, Mr. McShane identified 16 potential lost donations if people are dissuaded from signing 17 up for the courses, or potential spiritual harm to unprepared 18 readers. McShane Depo. at 111:7-113:4, 116:2-7, 203:17-204:12 19 (Exh. A. to Oakley Decl.). Mr. McShane conceded that he could 20 identify no member who quit Scientology as a result of 21___________________________ 22 24 To the extent plaintiffs suggest that mere possession of "unauthorized copies" of copyright-protected works is somehow 23 an unlawful infringement (Pl. 2/24 MPA at 4), the law is to the contrary. The Copyright Act merely reserves to the 24 copyright claimant the exclusive right to do one of the five acts specified in 106, including creation of derivative 25 works, copying or distribution of protected works. It is not, however, an infringement simply to possess unauthorized copies 26 of works. In all events, the complaint states no claim as to mere possession, but rather alleges in the First, Second and 27 Third Causes of Action only infringement and/or misappropriation of works specifically identified on 28 Exhibits A and B.
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 31
1 Mr. Erlich's postings. Id. at 97:13-98:2. In all events, lost 2 donations are monetary damages that do not constitute 3 irreparable harm. 4 There is not a credible showing of true irreparable 5 harm. Plaintiffs are not entitled to continued injunctive 6 relief to thwart Mr. Erlich's criticism and participa~ion in 7 the heated debate about Scientology. 8 CONCLUSION 9 There is no basis for continuing to enjoin 10 Mr. Erlich's use of various LRH or CoS materials prior to 11 resolution of this case on the merits. Both plaintiffs' 12 copyright and trade secret claims suffer many defects, making 13 it highly unlikely that they will succeed on the merits. 14 Moreover, plaintiffs cannot establish irreparable harm. 15 Accordingly, Mr. Erlich hereby requests that the Court dissolve 16 the Amended TRO or, in the alternative, that the Court further 17 modify the Amended TRO to narrow its reach. 18 Dated: May 12, 1995 19 HAROLD J. McELHINNY CARLA B. OAKLEY 20 MATTHEW K. FAWCETT MORRISON & FOERSTER 21 22 By 23 Carla B. Oa ~ y 24 Attorneys for Defendant and Counter-Claimant 25 DENNIS ERLICH 26 27 28
DEFENDANT ERLICH'S MEMORANDUM IN SUPPORT OF MOTION TO DISSOLVE OR AMEND THE AMENDED TRO 32