An Interview with the Attorney who Took on Legg Mason

When a federal jury awarded newsletter publisher Lowry’s Reports more than $19 million in a copyright infringement suit against brokerage firm Legg Mason in 2003, the decision sent shock waves across corporate America. They later settled confidentially for a reported amount of about $12 million. Two years later, the plaintiff’s attorney in that case, Tom Kirby, is still busy litigating companies for infringement involving the unauthorized use and distribution of newsletter content. Copyright Clearance Center recently checked in with Kirby to learn why these types of cases are so prevalent and what companies should know to avoid infringement.

Excerpts:

Q: What is the lasting significance of the Lowry versus Legg Mason case?

Kirby: We have received reports of corporations inspired by the Legg Mason case that are undertaking the kind of proactive compliance review I’ve talked about, and that’s wonderful. The other real impact the case has had is that when infringement is detected, people are much quicker to realize that it is a significant problem and that they have to work with the publisher to resolve it, or there can be serious consequences. There’s no getting around the fact that Legg Mason was a particularly favorable result for the publisher. Everybody recognized that. Still, companies have said, “Gee, the downside is pretty big here.” That’s why we have achieved multi-million dollar and very high hundreds of thousands of dollar settlements.

Q: You filed several higher profile copyright infringement lawsuits this year against investment companies on behalf of newsletter publisher Grant’s Financial Publishing for unauthorized use and distribution of Grant’s Interest Rate Observer. What can you tell us about those cases?

Kirby: There are three pending lawsuits right now, all in the Southern District of New York. Those are situations in which Grant’s received information that infringement was occurring. The defendants were contacted and asked to investigate and explain, and there was neither an innocent explanation nor a satisfactory resolution, so Grant’s did what it said it would do, which was to bring suit. If you won’t sue, there is no incentive to settle. By the way, we expect to finalize confidential settlements of those cases very shortly.

Q: How widespread is the problem of newsletter copyright infringement?

Kirby: We have a significant number of newsletter publisher clients that come to us when they get information about infringement. The great majority of these cases get worked out before we file suit. We file suit when people are not being realistic about their potential exposure. Our clients don’t like to make infringement claims, but this is their livelihood and, if folks ignore repeated warnings, what choice do publishers have?

We have had settlements in the millions of dollars. One of our clients recently announced a settlement of $800,000. The exposure can be very substantial when a significant business doesn’t monitor what its employees are doing, and they just develop a pattern of systematic copying. It can be very expensive.

Q: Why does the problem seem so acute with newsletters?

Kirby: I believe that, for whatever reason, newsletter subscribers take the copyright interests of newsletter publishers less seriously than they do the copyrights of other publications. People who would never think of buying one copy of a book, running off six copies and passing them along to their staff, will take one subscription to a newsletter and make copies for all the members of their staff. They know it’s wrong, but somehow it doesn’t seem to them as wrong.

Q: How do you find out that infringement is occurring within an organization?

Kirby: It happens in a lot of different ways. In the Legg Mason case, for example, a broker who had moved on from Legg Mason and who had enjoyed the publication courtesy of the infringing internal distribution there called up and wanted to subscribe. Many of our publishers have their people trained for good business purposes to say “how did you hear about us?” The fellow said “Well when I was at Legg Mason they sent around copies to everybody.” The publisher’s representative was alert and informed the head of the company.

Sometimes you’ll get somebody’s assistant, say a secretary, who will call up the publisher and say, “Mrs. Smith asked me to send around copies of your October 2^nd newsletter to her team but I can’t find a copy. Can you send me another?” If whoever gets that call at the publisher’s end is alert, that may trigger an investigation. There also are software protocols that to some extent can report on some kinds of copying, and that leads to information too.

Q: So inadvertent reports of infringement may be more common than reports from whistleblowers.

Kirby: That’s right. That is one important justification for statutory damages that are many, many times the actual loss of subscriptions. It’s because there’s only one chance in a thousand that somebody’s going to get caught. They need to know that if they do, it’s going to cost more than a thousand times what it would cost to do subscribe honestly.

Q: Is that the justification that was applied to the large size of the Lowry-Legg Mason case award?

Kirby: I think so. There were a number of factors in the Legg Mason case that contributed to the size of the award, but certainly one of the points that I emphasized to the jury was how difficult it was to detect this kind of activity. We pointed out that at Legg Mason, this kind of comprehensive copying apparently had been going on for more than a decade. This was really extensive copying. And it came to light only in this screwy, accidental way. I suggested to the jury that in deciding how much per issue to award, they should take into account how much of this activity is going on that is never detected and consider the need to have a consequence serious enough that people will try to avoid this activity even knowing they’re not very likely to get caught.

Q: Does the size of a defendant’s organization affect the size of the financial judgment in an infringement case?

Kirby: Yes, for several reasons. Two of the purposes of statutory damages are to deter and punish. Those are two related but different purposes. Both of those purposes require the consequences to be felt by the organization, and it’s just common sense that a large corporation has to pay more than “Ma and Pa Grocery” to punish them and to deter them. Also, I think juries expect large companies to be leaders in ethical behavior and to make a special effort to obey the law and respect the rights of smaller businesses and individuals.

Q: What advice would you offer to businesses to limit their liability?

Kirby: First, somebody in the organization has to take the issue seriously and has to elevate it. The second thing the organization needs to do is take an inventory of what is going on. I can tell you that what an inventory reveals is often shocking. Good people fall into bad habits. They know better, but somehow they just do. You need to find out what’s going on with respect to copying and distribution. Thirdly, you have to develop and effectively communicate policies to prevent infringement. Lastly and critically, you have to have a periodic review of compliance. Just sending around an e-mail may correct behavior for three weeks, but it sort of washes over people’s heads. We have assisted a couple of companies in doing an internal risk audit and compliance procedure. It’s something a general counsel who wants to focus on it can probably do himself. But it does have to be taken seriously, because one of the big problems is that employees aren’t taking this problem seriously and they’re not going to correct their behavior unless they understand that it really, really matters.

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