US v. Inslaw, Inc.
| Decision Date | 22 November 1989 |
| Docket Number | Civ. A. No. 88-0528-WBB and 88-0696-WBB to 88-0698-WBB,Bankruptcy No. 85-0070,Adv. No. 86-0069. |
| Parties | UNITED STATES of America and the United States Department of Justice, Appellants, v. INSLAW, INC., Appellee. In re INSLAW, INC., Debtor. INSLAW, INC., Plaintiff, v. UNITED STATES of America, and the United States Department of Justice, Defendants. |
| Court | U.S. District Court — District of Columbia |
J. Christopher Kohn, Sandra P. Spooner, Dean S. Cooper, Allen L. Lear, Dept. of Justice, Commercial Litigation Branch, Civ. Div., Washington, D.C., for U.S.
Charles R. Work, McDermott, Will & Emery, Michael E. Friedlander, Counts & Kanne, Chartered, Washington, D.C., for Inslaw, Inc.
This matter, before the court pursuant to 28 U.S.C. § 158(a), amounts to a consolidated appeal of the final judgments entered by the United States Bankruptcy Court against the United States of America and the Department of Justice ("DOJ") in favor of INSLAW, Inc.
The relationship between the parties dates far prior to INSLAW, Inc. becoming a bankrupt, and certain uncontroverted aspects of that relationship are set forth as briefly as possible as necessary background for understanding how the case develops to its present posture.
In 1973, William Hamilton and Dean Merill formed the Institute for Law and Social Research, a non-profit corporation organized to develop computer software designed to automate the record-keeping and case monitoring activities of law enforcement offices. Under contract to the Law Enforcement Assistance Administration (LEAA), INSLAW developed the Prosecutor's Management Information System ("PROMIS"). The parties do not dispute that this software which the bankruptcy court refers to as "old PROMIS" was developed with public grant money and was in the public domain.
In 1980, the Institute learned that LEAA funding which was the Institute's primary and almost sole source of income would dry up. The Institute then took steps to form a for-profit corporation, INSLAW, Inc., which would continue to market and enhance PROMIS as well as develop new proprietary computer software products. When the Institute on Law and Social Policy transformed itself into INSLAW, the Justice Department had several outstanding contracts with Inslaw. The first contract had been entered into in 1979 by the LEAA. This contract called for a three-year effort to maintain and upgrade PROMIS. However, by 1981, the LEAA ceased to exist and the Justice Department transferred the contract to its Bureau of Justice Statistics (BJS). But, BJS lacked the funding necessary to carry out the third and final year of the contract. Consequently, the Executive Office of the United States Attorneys (EOUSA) allocated approximately $500,000 to pay for the last year of the contract. In return for this funding, INSLAW agreed to make five specific enhancements to PROMIS. These enhancements later became known as the "BJS enhancements".
The Institute also entered into a second contract with the Justice Department in 1979. In this contract, the EOUSA paid for a pilot/feasibility study to determine whether PROMIS could be successfully installed in two large U.S. Attorneys' Offices in California and New Jersey. In addition, the contract directed the Institute to develop a word processing version of PROMIS which would then be introduced into two smaller offices in Vermont and West Virginia.
In late 1981, DOJ decided to go forward and implement the software used in the pilot project in the U.S. Attorneys' Offices, and on November 2, 1981 issued a Request for Proposals ("RFP") seeking bids on a contract to "develop and implement" a litigation management system in 89 U.S. Attorneys' Offices in the continental U.S. and U.S. Territories. More specifically, the contract sought proposals for (1) implementing the computerized "pilot version" of PROMIS as supplemented by the BJS enhancements in 20 "large" U.S. Attorneys' Offices; (2) creating and implementing a non-computerized version of that software for word processors in the remaining U.S. Attorneys' Offices; and (3) providing necessary training, maintenance and support for three years.
The RFP included a lengthy Statement of Work containing 60 paragraphs, one of which (3.2.4.2) stated:
All systems enhancements, modifications, and development performed pursuant to this contract shall be incorporated within the systems which have already been installed in the U.S. Attorneys\' Offices, including systems installed pursuant to other contracts in the District of Columbia, the District of New Jersey, the District of Vermont, the Southern District of California, and the Southern District of West Virginia.
INSLAW responded to the RFP on December 2, 1981, and in reference to the "enhancements" mentioned in the above paragraph it stated:
During the life of this project — but not as a part of this project — INSLAW plans new enhancements and modifications to the basic PROMIS software and to the original version of PROMIS for U.S. Attorneys.
The parties negotiated for over two months, and finally entered into a contract on March 16, 1982. Prior to the execution of the contract, and for a time thereafter, there were extensive discussions about what INSLAW claimed were privately funded enhancements which were featured in PROMIS. In other words, INSLAW claimed that at the time of entering into the contract their version of PROMIS was considerably more advanced than it was at the time of the pilot project, and that it claimed proprietary rights to those features which were developed with other than government funding.
In late May of 1982 James Rogers, an attorney representing Inslaw during a part of the negotiations, wrote to Stanley Morris, an Associate Deputy Attorney General, as follows:
On August 11, 1982, Morris responded:
We agree that the original PROMIS, as defined in your letter of May 26, 1982, is in the public domain. We also agree that the "printed inquiry" enhancement is in the public domain. To the extent that any other enhancements to the system were privately funded by INSLAW and not specified to be delivered to the Department of Justice under any contract or other arrangement, INSLAW may assert whatever proprietary rights it may have.
Thus, it appeared that the parties had reached an understanding. But as a matter of fact, this was not so, and the relationship between them during implementation of this contract was characterized by what appears to have been unusual controversy. There was unending contention about payment under this contract and the rights of the respective parties.
At the time that this contract was entered into, DOJ's Project Manager overseeing it was C. Madison Brewer. From November 1974 to April 1976 Brewer had been employed by INSLAW's predecessor as its general counsel. The nature and circumstances of his separation from that employment are somewhat in dispute, but it is clear that Brewer was not happy in his job when he left it after being urged to do so by Hamilton.
INSLAW attributed its troubles to an acute bias on the part of Brewer, who according to it was intent on running the company out of business. INSLAW lodged many complaints of bias and made several requests of DOJ to investigate these complaints and give some relief from what it perceived to be grossly unfair treatment. DOJ made no meaningful response to these complaints, and INSLAW's fortunes did not change.
On November 19, 1982, DOJ's technical representative formally requested a copy of the PROMIS software that was then in use by the U.S. Attorneys' Offices. According to the Justice Department the request was motivated by concern over the financial viability of INSLAW. It is without dispute that because the government had not obtained the minicomputer hardware for each office, INSLAW arranged for the largest U.S. Attorneys' Offices to use PROMIS on a time-sharing basis. In other words, because INSLAW could not install its software in the individual offices due to the government's failure to procure computer equipment, the U.S. Attorneys' Offices were nonetheless allowed to connect-up through telephone lines to INSLAW's computer center and use the enhanced version of PROMIS that INSLAW had been providing to its other non-Justice Department customers. INSLAW took the position that the Justice Department had no right to the enhanced software that the U.S. Attorneys' Offices had been using since this software had been provided to the Justice Department as a courtesy. DOJ countered that the contract obligated INSLAW to use public domain software for its implementation and that if proprietary enhancements had been added, it was up to INSLAW to prove it.
In an effort to respond to the Justice Department's alleged concern over its financial viability, INSLAW first offered to provide the Justice Department with enhanced PROMIS if the government would agree to limit its distribution to the 94 U.S. Attorneys' Offices and the EOUSA. The government, however, insisted that under its contract, INSLAW must provide software without restriction on distribution. INSLAW then offered to put copies of the disputed software in escrow,...
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