Religious Technology Center v. Netcom On-Line Com., C-95-20091 RMW.

• Decision Date: 22 September 1995
• Docket Number: No. C-95-20091 RMW.,C-95-20091 RMW.
• Citation: 923 F. Supp. 1231
• Court: U.S. District Court — Northern District of California
• Parties: RELIGIOUS TECHNOLOGY CENTER, a California non-profit corporation; and Bridge Publications, Inc., a California non-profit corporation, Plaintiffs, v. NETCOM ON-LINE COMMUNICATION SERVICES, INC., a Delaware corporation; Dennis Erlich, an individual; and Tom Klemesrud, an individual, dba Clearwood Data Services, Defendants.

923 F. Supp. 1231

RELIGIOUS TECHNOLOGY CENTER, a California non-profit corporation; and Bridge Publications, Inc., a California non-profit corporation, Plaintiffs, v. NETCOM ON-LINE COMMUNICATION SERVICES, INC., a Delaware corporation; Dennis Erlich, an individual; and Tom Klemesrud, an individual, dba Clearwood Data Services, Defendants.

No. C-95-20091 RMW.

United States District Court, N.D. California.

September 22, 1995.

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Helena K. Kobrin, North Hollywood, CA, Andrew H. Wilson, Wilson, Ryan & Campilongo, San Francisco, CA, Thomas M. Small, Janet A. Kobrin, Small, Larkin & Kidd?, Los Angeles, CA, Elliot J. Abelson, Los Angeles, CA, for Plaintiffs.

Randolf J. Rice, Pillsbury, Madison & Sutro, San Jose, CA, for Defendant Netcom On-Line Communication Services.

Harold J. McElhinny, Carla Oakley, Morrison & Foerster, San Francisco, CA, for Defendant Dennis Erlich.

Daniel Leipold, Hagenbaugh & Murphy, Orange, CA, for Defendant Tom Klemesrud.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' APPLICATION FOR A PRELIMINARY INJUNCTION AND DEFENDANT ERLICH'S MOTION TO DISSOLVE THE TRO; DENYING PLAINTIFFS' APPLICATION TO EXPAND THE TRO; DENYING PLAINTIFFS' MOTION FOR CONTEMPT; GRANTING ERLICH'S MOTION TO VACATE THE WRIT OF SEIZURE; AND DENYING PLAINTIFFS' REQUEST FOR SANCTIONS AGAINST ERLICH'S COUNSEL

WHYTE, District Judge.

This case involves the scope of intellectual property rights on the Internet.¹ Plaintiffs, two Scientology-affiliated organizations claiming copyright and trade secret protection for the writings of the Church's founder, L. Ron Hubbard, brought this suit against defendant Dennis Erlich ("Erlich"), a former Scientology minister turned vocal critic of the Church, who allegedly put plaintiffs' protected works onto the Internet.²

On June 23, 1995, this court heard the parties' arguments on eight motions, five of which relate to Erlich and are discussed herein: (1) plaintiffs' motion for a preliminary injunction against Erlich and Erlich's related motion to dissolve or amend the Amended TRO; (2) plaintiffs' application to expand the TRO; (3) plaintiffs' motion for contempt against Erlich; (4) Erlich's motion to vacate the writ of seizure; and (5) and plaintiffs' request for sanctions against Erlich's counsel.³ For the reasons set forth below, the court grants in part and denies in part plaintiffs' motion for a preliminary injunction against Erlich and Erlich's motion to dissolve the TRO, denies plaintiffs' application to expand the TRO, denies plaintiffs' motion for contempt against Erlich, grants Erlich's motion to vacate the writ of seizure, and denies plaintiffs' request for sanctions against Erlich's counsel.

I. BACKGROUND

Defendant Dennis Erlich was a member of the Church of Scientology ("the Church")⁴ from approximately 1968 until 1982. During his years with the Church, Erlich received training to enable him to provide ministerial counseling services, known as "auditing." While with the Church, Erlich had access to various Scientology writings, including those of the Church's founder, L. Ron Hubbard ("Hubbard"), which the Church alleges include published literary works as well as unpublished confidential materials (the "Advanced Technology works"). According to plaintiffs, Erlich had agreed to maintain the confidentiality of the Advanced Technology works.

Since leaving the Church, Erlich has been a vocal critic of Scientology and he now considers it part of his calling to foster critical debate about Scientology through humorous and critical writings. Erlich has expressed his views about the Church by contributing to the Internet "Usenet news-group"⁵ called "alt.religion.scientology" ("the newsgroup"), which is an on-line forum for the discussion of issues related to Scientology.⁶

Plaintiffs allege that in the six months prior to their filing suit, Erlich unlawfully posted to the newsgroup works from two separate categories of writings by Hubbard which are contained in Exhibits A and B of the FAC. Following Hubbard's death in 1986, ownership of Hubbard's copyrights passed to Author's Family Trust-B. In 1993, the copyrights were distributed to the Church of Spiritual Technology ("CST"), a California nonprofit religious corporation. Plaintiff Bridge Publications, Inc. ("BPI"), a nonprofit branch of the Church, claims to be the exclusive licensee of CST's copyrighted literary works listed in Exhibit A to the Complaint ("Exhibit A works"), which consist mainly of policy letters and bulletins from the Church.

Plaintiff Religious Technology Center ("RTC"), a nonprofit religious corporation, "was formed by Scientologists, with the approval of Hubbard, to act as the protector of the religion of Scientology and to own, protect, and control the utilization of the Advanced Technology⁷ in the United States." FAC, Ex. C, at 2. RTC claims to be the exclusive licensee of the copyrights and the owner of the other rights in the unpublished Advanced Technology works listed in Exhibit B to the Complaint (the "Advanced Technology" works or the "Exhibit B works").

BPI and RTC allege that Erlich infringed the copyrights in the Exhibit A and B works. RTC also alleges that Erlich misappropriated its trade secrets in the Exhibit B works, the confidentiality of which it alleges has been the subject of elaborate security measures. RTC further claims that those works are extremely valuable to the Church. Erlich admits to having posted excerpts from some of the works, but argues that the quotations were used to provide context for debate and as a basis for his criticism. Erlich further argues that he has neither claimed authorship of any of the works nor personally profited from his critique, satire, and commentary. Erlich contends that all of the Exhibit B documents he posted had been previously posted anonymously over the Internet, except for item 1, which he claims he received anonymously through the mail.

From August to December 1994, plaintiffs exchanged a series of letters with Erlich, warning him to stop posting their protected writings onto the newsgroup. Plaintiffs also demanded that defendants Netcom and Klemesrud take actions to prevent Erlich's continued postings of protected materials. Erlich indicated that he would not stop, claiming he had a right to continue with his criticism and satire. On February 8, 1995, plaintiffs filed this action against Erlich, Klemesrud, and Netcom for copyright infringement and, against Erlich alone, for misappropriation of trade secrets, seeking actual, statutory, and punitive damages, injunctive relief, impoundment of the infringing materials and equipment, and attorneys' fees and costs.

On February 10, 1995, the court granted plaintiffs' ex parte application for a temporary restraining order ("TRO") prohibiting Erlich from making unauthorized use of works identified in the exhibits to the complaint and an order directing the clerk to issue a writ of seizure under 17 U.S.C. ? 503(a). On February 13, 1995, in execution of the writ of seizure, local police officers entered Erlich's home to conduct the seizure. The officers were accompanied by several RTC representatives, who aided in the search and seizure of documents related to Erlich's alleged copyright infringement and misappropriation of trade secrets. Erlich alleges that RTC officials in fact directed the seizure, which took approximately seven hours. Erlich alleges that plaintiffs seized books, working papers, and personal papers. After locating Erlich's computers, plaintiffs allegedly seized computer disks and copied portions of Erlich's hard disk drive onto floppy disks and then erased the originals from the hard drive. Although plaintiffs returned to Erlich's counsel some of the articles seized, Erlich contends that plaintiffs have not returned all of the seized articles, including ones that are unrelated to the litigation.

On February 23, 1995, the court issued an "Amended TRO," which sought to clarify what types of use were prohibited and to emphasize that Erlich could make "fair use" of the Exhibit A works.

II. PRELIMINARY INJUNCTION/DISSOLUTION OF TEMPORARY RESTRAINING ORDER⁸

A. Legal Standards

A party seeking a preliminary injunction may establish its entitlement to equitable relief by showing either (1) a combination of probable success on the merits and the possibility of irreparable injury, or (2) serious questions as to these matters and that the balance of hardships tips sharply in its favor. First Brands Corp. v. Fred Meyer, Inc., 809 F.2d 1378, 1381 (9th Cir.1987). These two tests are not separate, but represent a continuum of equitable discretion whereby the greater the relative hardship to the moving party, the less probability of success need be shown. Regents of University of California v. American Broadcasting Cos., 747 F.2d 511, 515 (9th Cir.1984). The primary purpose of a preliminary injunction is to preserve the status quo pending a trial on the merits. Los Angeles Memorial Coliseum Commission v. National Football League, 634 F.2d 1197, 1200 (9th Cir.1980).

B. Likelihood of Success on Copyright Infringement Claims

To establish copyright infringement, plaintiffs must demonstrate (1) they own a valid copyright and (2) Erlich violated any of their exclusive rights, including, inter alia, the rights to reproduce or prepare derivative works from the original, or to distribute or display copies publicly. 17 U.S.C. ?? 106(1)-(3) & (5), 501(a); Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 361-63, 111 S.Ct. 1282, 1296, 113 L.Ed.2d 358 (1991). Erlich, for the most part, admits to having "copied" the Exhibit A and B works, but contends that plaintiffs are not able to establish ownership of a valid copyright interest in those works. Erlich also argues that his activities do not constitute infringement because his use was a ...