RELIGIOUS TECHNOLOGY CENTER, a California non-profit corporation, and Bridge
Publications, Inc., a California non-profit corporation, Plaintiffs,
v.
F.A.C.T.NET, INC., a Colorado corporation; Lawrence Wollersheim, an
individual; and Robert Penny, an individual, Defendant.
Civ. A. No. 95-K-2143.
United States District Court,
D. Colorado.
Oct. 3, 1995.
In copyright infringement action, alleged infringers filed motion seeking
compliance with prior order requiring return of previously seized items. The
District Court, Kane, Senior District Judge, held that: (1) order requiring
nonprofit corporation to return seized materials did not violate corporation's
First Amendment right to free exercise of religion, and (2) previously seized
infringing materials related to Church of Scientology, including any computer
equipment or media of any nature, were required to be placed in custody of
court so they could be examined by special master for determination of whether
they were being returned in their original condition.
Ordered accordingly.
[1] COPYRIGHTS AND INTELLECTUAL PROPERTY
Order requiring nonprofit corporation to return previously seized materials in
copyright infringement action did not violate corporation's First Amendment
right to free exercise of religion by requiring corporation or members of
Church of Scientology to violate church tenets forbidding members from
furnishing any copies of church materials to anyone who had not fulfilled
required spiritual or ethical prerequisites; original seizure order required
allegedly infringing materials to be turned over to corporation's counsel, and
order requiring return of seized material imposed obligation on counsel, not
corporation. U.S.C.A. Const.Amend. 1.
[2] COPYRIGHTS AND INTELLECTUAL PROPERTY
Previously seized infringing materials relating to Church of Scientology,
including any computer equipment or media of any nature, were required to be
placed in custody of court so they could be examined by special master for
determination of whether they were being returned in their original condition.
*1528 Todd P. Blakely, Robert R. Brunelli, Sheridan Ross & McIntosh,
Denver, CO, Jeffrey A. Chase, Ann B. Frick, Jacobs Chase Frick Kleinkopf &
Kelley, Denver, CO, Earl C. Cooley, Cooley, Manion, Moore & Jones, P.C.,
Boston, MA, Helena K. Kobrin, North Hollywood, CA, for Plaintiffs.
Thomas B. Kelley, Natalie Hanlon-Leh, Faegre & Benson, Denver, CO, for
Defendant.
MEMORANDUM OPINION AND ORDER ON VARIOUS MOTIONS
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). On October 2, 1995,
RTC and an additional party, Bridge Publications, Inc., filed an amended
complaint, but this event has no effect on the pending motions.
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 under 28 U.S.C. s 1367 is asserted over the trade
secrets misappropriation claim, which RTC alleges arises out of the same
transaction and occurrences.
*1529 I. Background.
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
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.
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.
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 my right to clarify my oral order with a written
opinion. I denied RTC's request for a stay pending its appeal of the order.
On September 13, 1995, RTC filed an emergency motion with the United States
Court of Appeals for the Tenth Circuit for a stay pending appeal of the order
denying preliminary injunction and ordering return of seized materials. On
that day, the Tenth Circuit temporarily stayed the September 12, 1995 order and
directed Defendants to respond to the emergency motion by noon on Friday
September 15, 1995.
On September 15, 1995, I clarified my oral order with a written
memorandum opinion and order. I memorialized my oral orders denying RTC's
motion for preliminary injunction; requiring RTC to return and restore to
Defendants immediately and at RTC's expense all seized materials in the
condition they were when taken and to the precise places from which they were
taken; ordering Defendants to maintain the status quo as to their possession
of all copyrighted materials at issue in this case and restricting them to
making only fair use thereof; and prohibiting Defendants 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. (Mem.Op. & Order at
18.)
On September 15 and September 18, 1995, RTC filed supplemental memoranda in
support of its motion for stay of the order pending appeal. On September 18,
1995, the Tenth Circuit granted RTC's motion to place Exhibit 8 of Defendants'
appendix under seal but dissolved the temporary stay entered on September 13,
1995 and denied RTC's motion for stay pending appeal.
RTC filed an application for a stay of my order before the United States
Supreme Court, Justice Breyer, Circuit Justice for the Tenth Circuit Court of
Appeals. On September 20, 1995, Justice Breyer denied the request for a stay.
On September 21, 1995, RTC renewed its application to the Supreme Court and
requested it be addressed to Justice Souter. (To my knowledge no action on
this application has occurred.)
On September 22, 1995, RTC's counsel agreed the seized materials would be
returned on September 25, 1995 at 2:00 p.m. Defendants demanded that all
copies made of seized materials be returned as well. At that scheduled date
and time, RTC's counsel, two RTC representatives and two of its computer
experts appeared at the offices of Defendants' counsel.
*1530 RTC maintains it tendered to Defendants' counsel the remaining [FN1]
computerized equipment and items in its possession with the exception of:
FN1. On September 1 and September 5, 1995, RTC tendered certain disks,
files, hard copy documents and computer equipment to defendants' counsel.
a. One floppy disk which contained Advanced Technology ("AT") materials. RTC
asserts the disk has been copied and a disk with the AT document removed has
been given to Defendants.
b. Two computer tapes which contained AT materials. RTC asserts exact
duplicate tapes have been given to Defendants with only the AT materials
deleted.
c. One computer CD on which AT materials were found. RTC asserts the CD has
not been copied as a duplicate CD cannot be made.
d. The original hard drives of two computers which contained AT materials.
RTC asserts an identical hard drive has been secured for Wollersheim's hard
drive, and an equivalent for Penny's. It maintains the entirety of the
original two hard drives has been copied into the duplicate hard drives which
have been installed in their computers and returned to them with only the AT
materials deleted.
On September 25, 1995, RTC filed Plaintiff's Motion for an Order Concerning
Full Compliance with the Court's Order of September 15, 1995, Directing Return
of Seized Materials and for an Order on New Issue Regarding Relief from
Violation of First Amendment Ecclesiastical Rights. On September 26, 1995, RTC
filed a Motion for Leave to Deposit Disputed Computer Media with Court under
Seal. On that day, Defendants' filed Defendants' Application for Issuance of
an Order to Show Cause re: Contempt as to Plaintiff's Willful Refusal to
Comply with this Court's September 15, 1995 Order, and for Seizure of
Defendants' Computer Hard Drives.
On September 27, 1995, I ordered RTC to appear on October 2, 1995 at
9:00 a.m. to show cause why it has not complied with my order of September 15,
1995 and why it should not be adjudged in contempt for failure to comply with
the order. On October 2, 1995, RTC filed Plaintiff's Opposition to Defendants'
Application for an Order to Show Cause re: Contempt. That day an evidentiary
hearing took place on the contempt issue and I heard oral argument on the
pending motions.
II. Discussion.
RTC requests me to order that it has complied with the order of September 15,
1995 (incorporating my oral ruling of September 12, 1995) and to modify the
order concerning those items which it has not returned. RTC also requests
leave to deposit with the court under seal the "computer media" it has retained
in its possession contrary to the order. Defendants on the other hand request
me to find RTC in contempt for its willful refusal to comply with the order and
to order the seizure of Defendants' computer hard drives.
[1] RTC requests me to adjudge it in compliance with my order and to modify
the order based on First Amendment issues which it submits were not raised or
addressed at the preliminary injunction hearing.
RTC argues it is unable to comply with my order insofar as it requires RTC to
return and restore to Defendants copies of AT materials which were seized
because to do so would cause RTC's president to violate a fundamental religious
belief of the Church of Scientology. RTC asserts a central tenet of the
Scientology religion forbids all Scientologists from furnishing any copies of
the AT materials to anyone who has not fulfilled the required spiritual and
ethical prerequisites and any apostates of the religion. RTC maintains
requiring compliance with the September 15, 1995 order would interfere with the
Scientologists' right to exercise their religion freely as guaranteed by the
First Amendment of the United States Constitution. [FN2]
FN2. The First Amendment pertinently provides: "Congress shall make no
law respecting an establishment of religion, or prohibiting the free
exercise thereof...." U.S. Const. amend I.
*1531 My order of September 15 (incorporating my oral ruling of September
12, 1995) stated pertinently: "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." (Mem Op. & Order September 15, 1995.)
My order was inaccurate because it was phrased as an order to RTC to return
the seized materials. This court has never authorized the possession by RTC of
the materials.
Judge Babcock's August 21, 1995 order of seizure stated in pertinent part:
IT IS ORDERED THAT:
1. The Clerk of the Court issue a Writ directed to the United States Marshal
or other on-duty or off-duty federal, state municipal law enforcement officer
(hereinafter referred to collectively as a [sic] "law enforcement officers")
assisted by counsel and representatives of the plaintiff, forthwith to seize
and deliver to the custody of counsel for the plaintiff the articles identified
in Paragraph 2 below infringing the copyrights in the literary works of L. Ron
Hubbard or containing trade secret materials belonging to RTC.
....
3. The Writ so issued shall further direct that the law enforcement
officer(s) shall hold the articles so seized in a safe place and forthwith
deliver all such articles so seized in a safe place and forthwith deliver such
articles to the custody of counsel for plaintiff.
(Order to Clerk to Issue Writ for Seizure of Articles Infringing Statutory
Copyright and Containing Misappropriated Trade Secrets and Order for
Impoundment at 1-3) (emphasis added).
My order of return, although legalistically addressed to RTC, was intended to
be directed to those persons to whom Judge Babcock had ordered the law
enforcement officers to deliver the seized articles. Judge Babcock's order
required the law enforcement officers to deliver the articles to counsel for
RTC, rather than RTC itself. Compliance with my order of return created no
obligation on the part of RTC to return materials. Rather, it required counsel
for RTC, whom this court had authorized to take possession of the seized
articles from the law enforcement officers, to do so. Accordingly, my order
cannot be perceived as requiring RTC or any member of the Church of Scientology
to violate any religious belief nor constitute a threat to a central tenet of
the religion. For this reason, my order did not involve any First Amendment
issue concerning the free exercise of religion nor can RTC be held in contempt
for violating that order.
I expressly disapprove at the conduct of both counsel for Plaintiffs and
Defendants in not complying with my September 15, 1995 order. That order
required counsel for RTC to return and restore to Defendants immediately and at
RTC's expense all seized materials in the condition they were when taken and to
the precise places from which they were taken. Contrary to that order, and
without requesting a modification thereof, Defendants' counsel suggested and
Plaintiff's counsel agreed that the surrender be made at the offices of counsel
for Defendants. (Mot. Leave Deposit Computer Media under Seal at 4) (Defs.'
App. Issuance Order Show Cause, Ex. I.) Such conduct amounts to a disregard of
court authority.
At the evidentiary hearing on the issue of contempt, Wollersheim testified he
has been unable to operate his computer with the replacement hard drive which
RTC installed in place of his own. He also stated not all items seized were
returned to him in the condition in which they were seized. This testimony was
contradicted by that of RTC's witnesses including its computer experts who
maintain the equipment is fully operational.
Defendants' computer expert, Professor Gary Nutt of the University of Colorado
Department of Computer Sciences, testified he would be able to copy the
entirety of the two original hard drives in issue which have not been returned
into two duplicate hard drives with the AT materials deleted in a manner that
would result in the computers containing the duplicate hard drives being fully
operational.
*1532 RTC's counsel proposed at the hearing that the original hard drives
be placed under the supervision of this court under seal and that Professor
Nutt be requested, at RTC's expense, to create two operable new hard drives
deleting the AT materials at issue, which hard drives could then be provided to
Wollersheim and Penny for their use pending the outcome of this litigation.
The matters raised concerning compliance with my September 15, 1995
involve complicated issues which demand an exceptional knowledge of computer
expertise for their resolution. I am concerned that this litigation should
proceed in an orderly manner in accordance with prevailing law as well as the
orders of the Tenth Circuit and of this court.
The Tenth Circuit, in its order of September 18, 1995, granted the motion to
place exhibit 8 of Defendants' appendix in the documents submitted to that
court under seal. As I understand, that exhibit is the same as Defendants'
Exhibit CC submitted to this court in the course of the preliminary injunction
proceedings. It appears that the sealed materials contain, in part some of the
AT materials at issue. Those materials are placed under seal in accordance
with the order of the Tenth Circuit.
In light of the Tenth Circuit's September 18, 1995 order, any order mandating
the return of the remainder of the AT materials at issue could have resulted in
an unintentional disclosure of the information placed under seal. Further, the
evidence presented at the October 2 hearing clearly demonstrates that First
Amendment issues are hovering over pre-trial proceedings. While not now at
issue, the concerns for protecting the constitutionally guarded right to the
free exercise of religion must receive devoted attention. Allowing counsel for
any party under these circumstances to have possession or control over the
items seized and the information contained therein would be imprudent.
Pursuant to Federal Rule of Civil Procedure 53, I appoint Professor Gary
Nutt of the University of Colorado as special master in this civil action with
all and full powers contemplated by the rule. The reasonable fees of Professor
Nutt and any expenses he incurs of whatever kind, including the rental or
purchase of any necessary materials or the retention of any other experts or
assistants, shall be paid by RTC. This reference is made based upon the
exigencies of this case because the issues are complicated and exceptional
conditions require it.
[2] I order that all seized materials, including any computer equipment or
media of any nature, and any copies which have been made thereof, which are
currently in the possession of either counsel for RTC or counsel for Defendants
be immediately placed in the custody of this court. They shall remain in the
custody of this court until further order.
Those items which were seized but are currently in the custody of Defendants
themselves, rather than their counsel, need not be placed in the custody of the
court but may be retained by Defendants subject to the provisions of my
September 15, 1995 order. That order required Defendants to maintain the
status quo as to their possession of all copyrighted materials at issue in this
case and restricted them to making only fair use thereof. It prohibited
Defendants 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.
Any party may submit requests for materials, in addition to those
ordered by the Tenth Circuit to be placed under seal to this court. Any party
may, through counsel, make specific application for access to the materials
placed in the court's custody pursuant to this order. The conditions to which
such access will be subject will be specified by court order as need arises.
In his capacity as special master, Professor Nutt shall examine all materials
placed in the custody of this court, as well as any other materials or
equipment he deems necessary, and prepare a report concerning the condition in
which materials were seized and the condition in which they were returned. He
shall, inter alia, examine the two original hard drives which were not returned
to Defendants and take all measures necessary to determine if they have been
modified in any *1533 manner. If he is able to create two operable
replacement hard drives deleting the AT materials at issue, Professor Nutt
shall do so. The operational replacement hard drives shall then be provided to
Wollersheim and Penny for their use pending the outcome of this litigation.
Additionally, Professor Nutt is directed to restore the complete operations of
Defendants to the full degree of function that existed immediately before the
several items were seized using the replacement hard drives and not using or
permitting access to AT materials at issue. If Professor Nutt is not able to
achieve this restoration in an efficient and timely manner, he shall so report
to the court and further hearings will be scheduled on a priority basis.
I defer any order on issues of contempt or sanctions until I have considered
the report of the special master.