RELIGIOUS TECHNOLOGY CENTER, a California non-profit corporation, Plaintiff,
v.
F.A.C.T.NET, INC., a Colorado corporation; Lawrence Wollersheim, an
individual; and Robert Penny, an individual, Defendants.
Civ. A. No. 95-B-2143.
United States District Court,
D. Colorado.
Sept. 15, 1995.
Religious organization brought copyright infringement action against nonprofit
corporation which maintained library of materials concerning organization and
allegedly posted unpublished, copyrighted documents to international computer
network. On organization's motion for preliminary injunction, the District
Court, Kane, Senior District Judge, held that: (1) organization failed to show
likelihood of success on merits of infringement claim due to likely finding of
"fair use"; (2) organization failed to show likelihood of success on merits of
trade secrets misappropriation claim because works were widely known outside of
organization; (3) denial of injunction would not irreparably harm
organization; (4) balance of hardships weighed in favor of corporation; and
(5) injunction was not in public interest.
Denied.
[1] INJUNCTION
Preliminary injunction is extraordinary remedy providing potential for
considerable harm yet its emergency nature does not afford to court usual
degree of careful consideration afforded by deliberative processes of trial;
issuance of such injunction, like power of contempt, is best used sparingly, if
at all.
[2] INJUNCTION
Purpose of preliminary injunction is to preserve "status quo ante," which
is last existing state of peaceable, noncontested conditions which preceded
pending controversy.
See publication Words and Phrases for other judicial constructions and
definitions.
[3] INJUNCTION
Considerations or findings which must be made before preliminary injunction can
issue, and which likewise assist in determining scope of injunction and
conditions which attach to it, include whether party seeking relief can
establish that it will suffer irreparable injury unless injunction issues, that
threatened injury to movant outweighs whatever damage proposed injunction may
cause opposing party, that injunction would not be adverse to public interest,
and substantial likelihood that movant will eventually prevail on merits.
[4] INJUNCTION
If movant has satisfied first three requirements for preliminary injunction,
namely irreparable injury, that injury to movant outweighs injury to opponent,
and that injunction would not be adverse to public interest, movant may
establish fourth factor, likelihood of success on merits, by showing questions
going to merits so serious, substantial, difficult and doubtful as to make
issues ripe for litigation and deserving of more deliberative investigation.
[5] COPYRIGHTS AND INTELLECTUAL PROPERTY
Less rigorous test for injunctive relief sometimes employed in copyright cases
is only applicable where plaintiff has made prima face showing of infringement.
[6] COPYRIGHTS AND INTELLECTUAL PROPERTY
To prevail in copyright infringement action, plaintiff must prove ownership of
valid copyright and that defendant copied protected components of copyrighted
material.
[7] COPYRIGHTS AND INTELLECTUAL PROPERTY
If certificate of registration in accordance with Copyright Act has been
obtained, there is presumption in favor of plaintiff, in infringement action,
that valid copyright exists; defendant then has burden of overcoming
presumption. 17 U.S.C.A. s 410(c).
[8] COPYRIGHTS AND INTELLECTUAL PROPERTY
Question of whether defendant unlawfully appropriated some protected portions
of copyrighted work at issue breaks down into separate inquiries of whether
defendant, as factual matter, copied portions of plaintiff's work and whether,
as mixed issue of fact and law, those elements of works that have been copied
are protected expression and of such importance to copied work that
appropriation is actionable.
[9] COPYRIGHTS AND INTELLECTUAL PROPERTY
Religious organization failed to show likelihood of success on merits of
copyright infringement claim against nonprofit corporation which maintained
library of materials concerning organization, in support of motion for
preliminary injunction, as corporation's placement of organization's
unpublished works in its private library, constituted "fair use"; no
evidence showed effect of copying on potential market for works, copying was
for nonprofit purpose of advancing understanding of issues concerning
organization which were subject of public controversy, and posting of some
works on computer network was likely made for purposes of criticism, comment,
or research, not commercial gain. 17 U.S.C.A. s 107.
See publication Words and Phrases for other judicial constructions and
definitions.
[10] COPYRIGHTS AND INTELLECTUAL PROPERTY
"Fair use" of copyrighted work is factual determination; each fact must be
assessed in light of total circumstances of case and then conclusion can be
made as to whether doctrine applies. 17 U.S.C.A. s 107.
[11] COPYRIGHTS AND INTELLECTUAL PROPERTY
Even if copyrighted work is introduced in its entirety, copying may
nevertheless constitute "fair use," for purpose of copyright infringement
claim. 17 U.S.C.A. s 107.
[12] INJUNCTION
Under Colorado law, religious organization failed to show likelihood of success
on merits of trade secrets misappropriation claim against nonprofit corporation
which allegedly acquired, disclosed and used portions of organization's
unpublished works without authorization, in support of motion for preliminary
injunction, as works were widely known outside of organization through multiple
sources. West's C.R.S.A. s 7-74-102(4).
[13] TORTS
Under Colorado law, what constitutes trade secret is question of fact for trial
court, based on number of factors including extent to which information is
known outside business, extent to which it is known to those inside business,
precautions taken by holder of secret to guard secrecy of information, savings
effected and value to holder in having information as against competitors,
amount of effort or money expended in obtaining and developing information, and
amount of time and expense it would take for others to acquire and duplicate
information. West's C.R.S.A. s 7-74-102(4).
[13] TORTS
Under Colorado law, what constitutes trade secret is question of fact for trial
court, based on number of factors including extent to which information is
known outside business, extent to which it is known to those inside business,
precautions taken by holder of secret to guard secrecy of information, savings
effected and value to holder in having information as against competitors,
amount of effort or money expended in obtaining and developing information, and
amount of time and expense it would take for others to acquire and duplicate
information. West's C.R.S.A. s 7-74-102(4).
[14] COPYRIGHTS AND INTELLECTUAL PROPERTY
Religious organization would not suffer irreparable harm due to court's failure
to grant preliminary injunction in action alleging copyright infringement and
trade secret misappropriation based on nonprofit corporation's alleged use and
disclosure of organization's unpublished works, absent showing that
organization would lose competitive advantage or that corporation used works
for commercial purpose or showing that denial would deprive organization's
followers of freedom to exercise their religious beliefs.
[14] INJUNCTION
Religious organization would not suffer irreparable harm due to court's failure
to grant preliminary injunction in action alleging copyright infringement and
trade secret misappropriation based on nonprofit corporation's alleged use and
disclosure of organization's unpublished works, absent showing that
organization would lose competitive advantage or that corporation used works
for commercial purpose or showing that denial would deprive organization's
followers of freedom to exercise their religious beliefs.
[15] COPYRIGHTS AND INTELLECTUAL PROPERTY
Balance of hardships weighed in favor of nonprofit corporation which allegedly
used and disclosed religious organization's unpublished works, for purpose of
determining whether organization was entitled to preliminary injunction in
copyright infringement action, as relief would effectively "pull the
plug" on corporation's electronic library of works relating to
organization, infringing on rights of criticism and research, and could be
"death knell" of corporation.
[16] COPYRIGHTS AND INTELLECTUAL PROPERTY
Public interest did not favor preliminary injunction in religious
organization's copyright infringement action against nonprofit corporation
which allegedly used and disclosed organization's unpublished works, as public
interest lay with free exchange of dialogue on matters of public concern.
*1521 Todd P. Blakely, Denver, CO, Helena K. Kobrin, North Hollywood, CA,
Earle Cooley, Boston, MA, for Plaintiff.
Thomas B. Kelley, Natalie Hanlon-Leh, Denver, CO, for Defendant.
MEMORANDUM OPINION AND ORDER
KANE, Senior District Judge.
On August 21, 1995 Religious Technology Center ("RTC"), a California
non-profit corporation, filed a verified complaint against Lawrence
Wollersheim, Robert Penny and F.A.C.T.NET, Inc. ("FACTNET") for injunctive
relief and damages for copyright infringement (17 U.S.C. s 501) and trade
secrets misappropriation (Colo.Rev.Stat. s 7-74-102 to -110 (1986)).
Jurisdiction is based on 28 U.S.C. ss 1331 and 1338(a) and (b) in that
this is an action for copyright infringement under 17 U.S.C. s 501.
Supplemental jurisdiction exists under 28 U.S.C. s 1367 over the trade
secrets misappropriation claim, which RTC alleges arises out of the same
transaction and occurrences.
Before me is RTC's motion for preliminary injunction.
I. Background.
RTC is one of the formal entities constituting the Church of Scientology (the
"Church") founded by L. Ron Hubbard. FACTNET is a non-profit educational and
charitable corporation registered and with its principal place of business in
Colorado. Wollersheim and Penny are former Scientologists. [FN1] Wollersheim
serves as President of the Board and Executive Director of FACTNET and Penny is
a member of the FACTNET Board.
FN1. The Church of Scientology and Wollersheim have opposed each other in
litigation in various cases. In Wollersheim v. Church of Scientology,
(Cal.Ct.App.1992), an action in which Wollersheim alleged intentional and
negligent infliction of emotional injury, the court affirmed its prior
judgment in his favor as to the cause of action for intentional infliction
with the exception of the $30 million damage award which it reduced to
$500,000 for compensatory damage and $2 million for punitive damages. A
final judgment which the evidence discloses remains unpaid.
Defendants, operating on minimal financial resources, maintain a library and
archive information concerning, inter alia, an ongoing public controversy
regarding the Church's status as a religious tax exempt organization and
charges that its practices involve harmful psychological coercion which has
resulted in mental and physical harm to a significant number of its adherents.
Much of the information maintained by Defendants is made available publicly on
FACTNET's Bulletin Board Service on the international computer network known as
the Internet. [FN2] Other data is stored in a private portion of the FACTNET
library which includes information concerning and provided by former
Scientologists and their families.
FN2. A bulletin board service ("BBS") usually requires users to dial in
through telephone lines to access specialized information or services.
RTC alleges Defendants have placed on the Internet unauthorized copies of
unpublished religious works called OT materials, often referred to as "Advanced
Technology." They list the materials in issue ("the Works") in Exhibit "A" to
the complaint.
RTC maintains it has the exclusive license to the Works. It asserts the
materials consist of unpublished works of L. Ron Hubbard, the founder of the
Church of Scientology. The Church only permits access to each of the works to
members who have attained the proper level of spiritual enlightenment and made
the requisite financial contributions. Such access is through a highly
controlled system known as "auditing" involving *1522 supervision by a
senior member of the Church. RTC claims the Works are available at only seven
sites around the world and are never removed from these locations.
Defendants maintain any of the Works in its possession were obtained lawfully
and are maintained in the non-public section of Defendants' library.
Wollersheim has provided consulting services to lawyers representing clients in
litigation involving the Church but denied making copies of the Works for this
purpose. Defendants assert they have not posted any of the Works to the
Internet for public availability and that it is their policy not to do so.
According to Wollersheim, the only deviation from this policy was
between August 1 and August 3, 1995, when, due to miscommunication, Arnold P.
Lerma, a FACTNET director posted some of the Works to the Internet. The
portions of the Works published by Lerma had been part of an unsealed public
court record in the Central District of California in Church of Scientology
International v. Fishman, No. CV 91-6426 HLH (Tx) C.D.Cal. [FN3] These
materials were attached to an affidavit filed by Fishman in that case.
Wollersheim testified he received a copy of the affidavit from Fishman's
counsel in the course of the consulting services Wollersheim provided in that
case.
FN3. On August 11, 1995, RTC sued Lerma in the United States District
Court for the Eastern District of Virginia for copyright infringement and
trade secret misappropriation in Religious Technology Center v. Lerma,
897 F.Supp. 260 (E.D.Va.1995). On August 11, 1995, RTC obtained a
restraining order and order of seizure and impoundment against Lerma. On
August 22, 1995, RTC amended its complaint in that case, adding the
Washington Post and two of its reporters as defendants. On August 30,
1995, that court denied RTC's motion seeking to enjoin the Post defendants
from copying, disclosing, using, displaying, or reproducing Advanced
Technology materials which it had obtained from the same public court file.
On August 15, 1995, Defendants posted a message to a newsgroup on the Internet
claiming Lerma had acted on their behalf and with their endorsement and that
they stood behind his actions.
II. Procedural History.
On August 21, 1995, Judge Babcock, ruling on ex parte motions, granted a
temporary restraining order against Defendants. His order restrained
Defendants from the unauthorized copying, use or reproduction of the Works
identified in Exhibit "A" to the complaint or any other part of the works that
are part of the Advanced Technology, in particular the copying into "any
computer data base, information service, storage facility, archives, or other
computerized network or facility." The order further restrained the
destruction or concealing by Defendants of such Works in their possession. It
also required RTC to file a bond in the amount of $10,000 with the court
forthwith. Judge Babcock set a hearing for a preliminary injunction before me
on August 25, 1995 due to his being unavailable on that date.
Judge Babcock ordered Defendants to deliver the infringing articles within
their possession and control into the custody of RTC's counsel. In this
regard, he issued a writ of seizure and ordered a portion of the court file
sealed until execution of the writ of seizure. Judge Babcock also granted
RTC's motion for expedited discovery, ordering the depositions of all three
Defendants to take place on August 23, 1995.
On August 22, 1995, extensive materials, including computer equipment,
computer software and voluminous documents were seized from Defendants'
premises pursuant to the writ. They were placed in the custody of RTC's
counsel who proceeded to search for allegedly infringing materials.
On August 23, 1995, Defendants filed motions for a protective order, for
temporary stay of expedited discovery and to require immediate delivery of
confidential, proprietary, and privileged documents belonging to Defendants to
their counsel of record, Thomas B. Kelley. RTC filed an opposition to the
motion for a stay.
On August 24, 1995 I ordered an extension of the time for taking the
depositions of Defendants and an extension of the restraining order until
September 8, 1995 when the preliminary injunction hearing commenced. On August
25, 1995 I ordered Defendant's counsel or his representative be allowed to be
present while Plaintiff's counsel searched *1523 the impounded evidence. I
further ordered any items to which Defendants might claim privilege to be
segregated from the materials impounded and handed over to the court.
The preliminary injunction hearing took place before me on September 8,
11, and 12, 1995. At the termination thereof, I issued an oral ruling. I
denied RTC's request for a preliminary injunction and ordered RTC to return and
restore to the Defendants all seized materials. I ordered Defendants to
maintain the status quo as to the possession of all copyrighted materials at
issue in the case and restricted each of Defendants to making only fair use of
the materials. I reserved the right to clarify my oral order by way of a
written opinion. This is that opinion.
III. Preliminary Injunction.
I have authority to issue a preliminary injunction under Federal Rule of
Civil Procedure 65. In addition, the Copyright Act specifically authorizes me
to grant a preliminary injunction "on such terms as [I] may deem reasonable to
prevent or restrain infringement of a copyright." 17 U.S.C. s 502. The
Colorado Uniform Trade Secrets Act similarly grants me the power to grant
injunctive relief "to prevent or restrain actual or threatened misappropriation
of a trade secret."
[1] A preliminary injunction is an extraordinary remedy providing the
potential for considerable harm yet its emergency nature does not afford the
court the usual degree of careful consideration afforded by the deliberative
processes of a trial. As a consequence, the issuance of such an injunction,
like the power of contempt, is one which is at best used sparingly, if at all.
[2] Moreover, the very purpose of an injunction is to preserve the status
quo ante. That is a rather elegant piece of Latin which means the last
existing state of peaceable, noncontested conditions which preceded the pending
controversy. I will not dwell on this, but it is helpful to observe that our
legal forefathers were not fools; the complete phrase is status quo ante
bellum which literally means "the state of things before the war began."
[3][4] Given this purpose and the caution the law prescribes there are four
basic considerations or findings which must be made before an injunction can
issue. These same four factors likewise assist in determining the scope of the
injunction and the conditions which attach to it.
A party seeking injunctive relief must establish:
(1) it will suffer irreparable injury unless the injunction issues;
(2) the threatened injury to the movant outweighs whatever damage the
proposed injunction may cause the opposing party;
(3) the injunction would not be adverse to the public interest; and
(4) substantial likelihood that the movant will eventually prevail on the
merits.
Walmer v. United States Dep't of Defense, 52 F.3d 851, 854 (10th
Cir.1995). The Tenth Circuit has adopted a modified interpretation of the
fourth "likelihood of success" element. Id. "If the movant has satisfied
the first three requirements for a preliminary injunction, the movant may
establish likelihood of success by showing questions going to the merits so
serious, substantial, difficult and doubtful, as to make the issues ripe for
litigation and deserving of more deliberative investigation." Id. This
modified test applies, however, only where the first three requirements are
satisfied.
[5] Similarly, the less rigorous test for injunctive relief sometimes
employed in copyright cases is only applicable where the plaintiff has made a
prima facie showing of infringement. See, e.g., Financial Control Assoc's
v. Equity Builders, Inc., 799 F.Supp. 1103, 1113 (D.Kan.1992); 3 Melville B.
Nimmer & David Nimmer, Nimmer on Copyright s 14.06[A] (1995).
The circumstances of this case warrant consideration and balancing of all four
factors.
A. Substantial Likelihood of Success on the Merits.
1. Copyright Infringement Claim.
RTC contends it will succeed on the merits of its claims for copyright
infringement because *1524 it owns a valid copyright and the copyrighted
work was copied by Defendants without its authorization.
[6][7] To prevail in a copyright infringement action, a plaintiff must
prove (1) ownership of a valid copyright and (2) defendant copied, "protected
components of the copyrighted material." Gates Rubber Co. v. Bando Chemical
Indus., Ltd., 9 F.3d 823, 831 (10th Cir.1993). If a certificate of
registration in accordance with 17 U.S.C. s 410(c) has been obtained, there
is a presumption in favor of the plaintiff that a valid copyright exists.
Id. at 832. The defendant then has the burden of overcoming this
presumption. Id.
RTC claims it has certificates of registration for the Works, is their
exclusive licensee and is entitled to protect them as if it were the original
holder of the copyrights. At the outset of the preliminary injunction hearing,
Defendants' counsel stipulated only for the purposes of this proceeding that
the Works were originated by L. Ron Hubbard and that RTC has a valid title to
the copyright in the Works.
[8] Once a plaintiff shows it holds a valid copyright, it must then prove
the defendant unlawfully appropriated some protected portions of the
copyrighted work at issue. Id. This question breaks down into two separate
inquiries:
1) [W]hether the defendant, as a factual matter, copied portions of the
plaintiff's [writings]; and 2) whether, as a mixed issue of fact and law,
those elements of the [writings] that have been copied are protected expression
and of such importance to the copied work that the appropriation is actionable.
Id. In Gates Rubber the court noted that the inquiry does not end with
a finding that the defendant copied the plaintiff's materials. "Liability for
copyright infringement will only attach where protected elements of a
copyrighted work are copied." Id. at 833. The Copyright Act provides:
In no case does copyright protection for an original work of authorship
extend to any idea, procedure, process, system, method of operation, concept,
principle, or discovery, regardless of the form in which it is described,
explained, illustrated, or embodied in such work.
17 U.S.C. s 102(b). The 1976 House Report noted copyright protection does
not preclude others from using the ideas or information revealed by the
author's work, rather it refers only to the expression of the work adopted by
the author. H.R.Rep. No. 1476, 94th Cong., 2d Sess. 57 (1976), reprinted in
17 U.S.C.A. s 102 app. at 17 (1976)).
[9] RTC asserts Defendants themselves and through others directly
copied the copyrighted Works. It maintains Defendants duplicated portions of
the Advanced Technology materials onto a newsgroup [FN4] on the Internet and
onto a Web site, [FN5] making them accessible to Internet subscribers. These
subscribers could then download the works onto their own computers and have
personal copies.
FN4. A "newsgroup" is an electronic discussion group, serving as a
bulletin board for users to post universally accessible messages, and to
read and reply to those from others.
FN5. World Wide Web is a network of computers on the Internet that
maintains documents users can read and transfer with a number of programs.
RTC additionally claims Defendants provided Arnaldo Lerma with copies of the
materials at issue. Lerma ultimately posted these copies onto the Internet.
RTC claims the act of providing Lerma with the copies constitutes contributory
copyright infringement.
The evidence showed, however, that, apart from the Lerma posting, the only
copying of the Works by Defendants was scanning them onto their computer and
placing them in the private section of their library without making them
available to the public over the Internet or otherwise. Copying of this sort
by Defendants falls within the well established limitation on the exclusive
right of copyright ownership recognized in the Copyright Act, 17 U.S.C. s
107.
Under this limitation, "the fair use of a copyrighted work ... for purposes
such as criticism, comment, news reporting, teaching ... scholarship, or
research, is not an infringement *1525 of copyright." 17 U.S.C.A. s
107. The Copyright Act lists four factors for consideration in determining
whether a particular use made of a work is fair use:
(1) the purpose and character of the use, including whether such use is of
commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the
copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or value of the
copyrighted work.
Id.
[10] "Fair use" is a factual determination. Harper & Row, Publishers,
Inc. v. Nation Enterprises, 471 U.S. 539, 549, 105 S.Ct. 2218, 2224-25, 85
L.Ed.2d 588 (1985). Each fact must be assessed in light of the total
circumstances of the case and then a conclusion can be made as to whether the
doctrine applies.
In Harper & Row, a magazine editor obtained a copy of a copyrighted
manuscript which he knew he was not authorized to publish. In an attempt to
get a "scoop" on the magazine that had the rights to publish the piece, he
published excerpts from it. The Court found for the copyright holders,
determining on a factor by factor basis that there was no valid fair use on the
part of the defendant. The Court held the questioned publication's effect on
the market is the "single most important element of fair use." Id. at 566,
105 S.Ct. at 2233.
Even if, as RTC maintains, the Works have not been published, the concerns of
the Court in Harper & Row do not apply here. Defendants' use of the
materials was not with the intention of depriving the planned publication of
its full impact. Further, no evidence was presented as to the effect of the
Defendants' copying of the Works upon the potential market for them. [FN6]
FN6. This case is distinguishable from Bridge Publications, Inc. v.
Vien, 827 F.Supp. 629 (S.D.Cal.1993), appeal reinstated and transferred,
53 F.3d 344 (Fed.Cir. (Cal.) 1994). The Vien court held there was a
copyright infringement and fair use did not apply. In that case, as here,
an affiliate of the Church sued to enjoin the use of copyrighted works.
There, however, the defendants were charging for classes that used the
documents as part of their study. Id. at 632. The court found
defendants used the materials for the same purposes as the holders of the
copyright. Id. at 635. The court also found that there was a wholesale
copying of the work and that this weighed heavily against fair use. Id.
at 636. Finally, the Vien court found that because the defendant's use
of the materials was substantially similar to that of the Church, there was
an economic harm as demand for sale or distribution from the Church would
diminish. Id.
The evidence showed the Works are esoteric in nature and are delivered
to certain followers by advanced Scientologists known as "auditors" as part of
an elaborate system of instruction. The only financial harm RTC would suffer
would be if followers were to forsake the Church's didactic methodology in
favor of self instruction through the Works copied by Defendants. There was no
suggestion, let alone evidence, of this potential for financial loss to the
Church. [FN7]
FN7. An argument that RTC may be harmed financially by Defendants'
intended criticism of the Works through copying would not prevail. In a
similar case, the Second Circuit ruled that economic harm from criticism is
not actionable under copyright laws. New Era Publications Int'l v.
Carol Publishing Group, 904 F.2d 152, 160 (2nd Cir.), cert. denied, 498
U.S. 921, 111 S.Ct. 297, 112 L.Ed.2d 251 (1990).
The alleged copying by the Defendants was not of a commercial nature. Rather,
it was made for non-profit purposes to advance understanding of issues
concerning the Church which are the subject of ongoing public controversy.
[11] RTC has not introduced the Works in their entirety into evidence to
enable comparison of the amount and substantiality of the portion of the Works
copied with each copyrighted work as a whole. Notably, however, even if a work
is introduced in its entirety, the copying may nevertheless constitute fair
use. See, e.g., Sony Corp. v. Universal City Studios, 464 U.S. 417, 104
S.Ct. 774, 78 L.Ed.2d 574, reh'g denied, 465 U.S. 1112, 104 S.Ct. 1619, 80
L.Ed.2d 148 (1984); Rotbart v. O'Dwyer Co., 34 U.S.P.Q.2d 1085
(S.D.N.Y.1995).
*1526 Defendants maintain and the evidence does not refute that the Lerma
postings to the Internet were made in the context of ongoing dialogue in the
particular newsgroup to which they were posted. They form part of the topical
debate concerning whether the Works are of substance or are perpetuated as part
of systemic mind control.
No evidence was introduced showing a likelihood that a follower of the Church
would consider the postings by Lerma as a market substitute for the Works. Nor
did the evidence show that the postings were of a commercial nature or had any
effect on the potential market for the works. As such, the postings may well
be considered as having been made for the purposes of criticism, comment or
research falling within the fair use doctrine.
At this preliminary stage of proceedings, I find RTC has not shown a
substantial likelihood of success on the merits of its copyright claim.
2. Misappropriation of Trade Secrets Claim.
[12] RTC claims Defendants have misappropriated its trade secrets by
acquiring, disclosing and using portions of the Works without authorization.
Such claim is governed by the Colorado Uniform Trade Secrets Act and is not
preempted by federal copyright statutes. See Gates Rubber, 9 F.3d at 846-
47.
Colorado defines trade secrets as:
[T]he whole or any portion or phase of any scientific or technical
information, design, process, procedure, formula, improvement, confidential
business or financial information, listing of names, addresses, or telephone
numbers, or other information relating to any business or profession, which is
secret and of value. To be a "trade secret" the owner thereof must have taken
measures to prevent the secret from becoming available to persons other than
those selected by the owner to have access thereto for limited purposes.
Colo.Rev.Stat. s 7-74-102(4) (1986).
[13] What constitutes a trade secret is a question of fact for the trial
court. Gates Rubber, 9 F.3d at 848. Colorado courts apply a number of
factors in determining whether a trade secret exists. They include:
1) the extent to which the information is known outside the business;
2) the extent to which it is known to those inside the business, i.e., by the
employees;
3) the precautions taken by the holder of the trade secret to guard the
secrecy of the information;
4) the savings effected and the value to the holder in having the information
as against competitors;
5) the amount of effort or money expended in obtaining and developing the
information; and
6) the amount of time and expense it would take for others to acquire and
duplicate the information.
Colorado Supply Co., Inc. v. Stewart, 797 P.2d 1303, 1306 (Colo.App.1990),
cert. denied, Oct. 7, 1991.
Despite RTC and the Church's elaborate and ardent measures to maintain the
secrecy of the Works, they have come into the public domain by numerous means.
RTC's assertion that the only way in which the materials have escaped its
control was through two thefts in Denmark and England was not supported by the
evidence. A former senior Scientology official testified to ongoing
difficulties the Church incurred in keeping the Works secret, including members
losing materials in their possession. The evidence also showed portions of the
Works have been made available on the Internet through persons other than
Lerma, with the potential for downloading by countless users.
The Works posted by Lerma were publicly available as part of an unsealed
public court record in the Central District of California in Church of
Scientology International v. Fishman, No. CV 91-6426 HLH (Tx), C.D.Cal.
Wollersheim testified copies of the Works in his possession were sent to him by
an attorney representing defendants in that case for whom he had provided
consulting services.
In August 1995, reporters of the Washington Post obtained copies of the Works
from the unsealed Fishman file. The newspaper's publication of portions of the
materials *1527 prompted RTC to request injunctive relief in Religious
Technology Center v. Lerma, 897 F.Supp. 260 (E.D.Va.1995). On August 30, 1995,
that court found the materials had escaped into the public domain and onto the
Internet and that Lerma was not their only source on the Internet. Id., 897
F.Supp. at 266-67 (E.D.Va.1995). The court concluded RTC could not establish
for the purpose of the preliminary injunction motion that the documents were
"not generally known" as required by the Virginia statute.
In the course of the hearing before me, RTC changed its position with regard
to what materials constitute the purported trade secrets. At the outset, RTC
maintained the entire Works were trade secrets. After evidence was heard
indicating that the Works were in the public domain, RTC claimed that only
portions of the Works, rather than the whole were secret. RTC's ambivalence
and admission as to the non-secret nature of certain portions of the Works
casts some doubt on the secret status of Works as a whole.
The evidence showed the Works are widely known outside of the Church
through multiple sources. As such, they are not secret within the meaning of
the Colorado statute and RTC has not shown a substantial likelihood of success
on the merits of its trade secrets claim.
B. Irreparable Harm.
[14] I do not find RTC will suffer irreparable harm if the broad injunction
sought is not granted. There has been no showing that RTC has lost nor will
lose competitive advantage through Defendants' fair use of the Works, nor that
such use has been for commercial purpose.
RTC claims use of the materials impedes its right to exercise its religious
belief that the materials must be kept secret. I am not persuaded that a
denial of the injunction sought will deprive followers of the Church of their
freedom to exercise their religious beliefs. RTC effectively requests that I
advance its religion at the expense of Defendants' lawful rights to use the
materials for the purposes of criticism and research. The United States
Constitution, common law and the Copyright Act preclude me from doing so.
C. Balancing of Hardships.
[15] The evidence does not reflect that the threatened injury to RTC
outweighs the damage the broad injunction sought may cause the Defendants.
Such relief would effectively pull the plug on Defendants' electronic library,
infringe not only on their rights of criticism and research but be the death
knell of FACTNET. Any threatened injury to RTC is outweighed by this
potentially devastating hardship to Defendants.
D. Public Interest.
[16] Public interest lies with the free exchange of dialogue on matters of
public concern. The injunction sought would silence the Defendants as
participants in an ongoing debate involving matters of significant public
controversy. Relief of this kind does not serve the public interest.
IV. Conclusion.
Having weighed all the relevant factors, I conclude RTC has not shown a
substantial likelihood of success on the merits and the balance of harms weighs
in favor of Defendants. Accordingly, IT IS ORDERED THAT Plaintiff's motion for
preliminary injunction is DENIED;
IT IS FURTHER ORDERED THAT Plaintiff is to return and restore to Defendants
immediately and at Plaintiff's expense all seized materials in the condition
they were when taken and to the precise places from which they were taken;
IT IS FURTHER ORDERED THAT Defendants are to maintain the status quo as to
their possession of all copyrighted materials at issue in this case and are
restricted to making only fair use thereof. Defendants are prohibited from
making any additional copies of the materials or transferring them in any
manner or publicizing them other than in the context of fair use.