ACS v. Leadscope: Why Chemists Should be DisturbedSeptember 19th, 2012
The efficient operation of any democracy depends on the participation of an informed electorate. The Founding Fathers of our country believed so strongly in this point that they felt compelled to begin the Bill of Rights by protecting the freedom of the press. A few citizens in power must never be allowed to control the flow of information to the greater citizenry.
The American Chemical Society is a democratic organization: its members elect a Board of Directors that, in turn, operates the society on behalf of the membership. Unfortunately, members of the ACS are woefully uninformed regarding even the most simple matters of society governance. A big part of this problem is that the pool of journalists who cover the ACS is either incapable or unwilling to provide anything more than superficial coverage of matters relating to the administration of our professional society.
You can start by blaming me. I am one of the few journalists outside of the ACS to cover the society, but I write stories sporadically and do not have time to cover issues in as much depth as I’d like to. I am one person; blogging is not my primary occupation; I don’t get paid a dime for it; and I’ve got a ton of other things on my plate. I wish I could do more, but I can’t. Sorry.
For better or for worse, most of the reporting associated with the ACS is paid for by the organization itself. The journalists at Chemical & Engineering News are employees of the society, and C&EN is the “official organ” of the ACS. Part and parcel with this relationship is that the bylaws and policies of the ACS limit what the magazine can cover. That is why coverage of the ACS elections is so superficial. Wouldn’t you like to see more than those vapid statements written by each candidate and published as a wall of text in the magazine? Where is the reporting? Where is the analysis? Where is the monitoring of accountability for campaign promises? It’s nowhere to be found. The result is that members of the ACS are uninformed about important issues that should be central to each ACS election, and voter participation is consistently atrocious (~15%). That’s right, only 15% of eligible members bother voting!!
Unfortunately, the coverage of ACS elections is not the only thing that has suffered from neglect by chemical journalists. One of the reasons behind the birth of ChemBark was the media’s dreadful lack of coverage of the Sames-Sezen misconduct scandal. You will recall that I began reporting the story three months prior to the first set of retractions in JACS, and that C&EN did not issue its first story until two weeks after the retractions—only a few hours before the New York Times was set to publish a story. I was forced to conclude that the decision to avoid coverage of the scandal was intentional—not simply an oversight—because JACS and C&EN are managed by the same division of the society, and C&EN reporters read JACS (so someone at the magazine had to have seen the retractions when they were published).
The latest important story to suffer consistent neglect from the chemical media is the ACS v. Leadscope legal case. My guess is that the vast majority of you have no idea what this case is about, because it has received only perfunctory coverage from C&EN. Unlike the Sheri Sangji story, which has been the focus of several detailed articles (1 2 3 all), the Leadscope case has received little attention in comparison. C&EN‘s reporting has been limited to short news stories announcing milestone events in the case (1 2 3 4 5).
The latest milestone event occurred yesterday—the Supreme Court of the State of Ohio issued a decision on the latest appeal by the ACS—but C&EN did not post a single item on its site or in its Twitter feed. The slip opinion weighed in at a whopping 75 pages of densely written legalese. Chemists cannot be expected to wade through such a document; we need the services of an informed journalist to provide us with the bottom line, paying special attention to the decision’s impact on the operations of the ACS.
Enter the blogosphere! Rich Apodaca has written several good primers on the case, including a summary of the IP at the heart of the dispute and a rough sketch of the history of litigation. Another good place for a concise summary of the case can be found in a news story written by the Office of Public Information for the Ohio Supreme Court:
The case involved a lawsuit filed by ACS in the Franklin County Court of Common Pleas alleging that the former employees who helped start Leadscope had breached employee agreements and misappropriated ACS’s intellectual property by using proprietary information they obtained while employed at ACS to develop a new software product for Leadscope that would compete with products marketed by ACS.
Leadscope and its principals denied all of ACS’s claims, and filed counterclaims seeking damages from ACS for unfair competition, tortious interference with business relations and defamation. As the basis for its unfair competition counterclaim, Leadscope alleged that ACS knew that it had no valid legal basis for its intellectual property claims, and had filed its lawsuit for the purpose of impairing or eliminating Leadscope as a competitor by scaring away venture capital investors the new company needed to successfully launch its business.
Following an eight-week jury trial, the jury returned verdicts against ACS on all of its claims against Leadscope. The jury also returned verdicts in favor of Leadscope on its counterclaims against ACS for unfair competition and defamation. The jury awarded Leadscope and its principals compensatory and punitive damages totaling more than $26 million. ACS appealed. On review, the Tenth District Court of Appeals affirmed the trial court’s judgment and damage awards. ACS sought and was granted Supreme Court review of the case, asserting in its briefs and oral argument that the Tenth District made multiple incorrect rulings in affirming the trial court’s decision.
A summary of some of the (heavy) costs associated with the case, including the damages, the legal fees for Leadscope, and the interest ACS is/was being charged on the damages and legal fees, can be found in a recent ACS financial statement (pointed out by Apodaca and a Nature News blog post):
In 2002, ACS brought suit against three former employees and the company they founded in a case styled, American Chemical Society v. Leadscope, Inc., et al., Case No. 02-CVC-07-7653 (Franklin County, Ohio Court of Common Pleas). Leadscope, Inc., and the individual defendants counterclaimed, seeking damages in excess of $50 million. Trial in this matter commenced on February 4, 2008. The jury rendered its verdict on March 27, 2008, rejecting the Society’s claims of breach of employment agreements and misappropriation of trade secrets, and finding against the Society on three separate counts: defamation, tortious interference with business relations, and unfair competition. The jury’s award to Leadscope, Inc. and the three individual defendants/counterclaim plaintiffs (referred to collectively as “Leadscope”) totaled $26.5 million.
Following the jury verdict, Leadscope filed motions seeking prejudgment interest, attorneys’ fees, and expenses. Subsequently, Leadscope withdrew the motion for prejudgment interest. Through the attorneys’ fees motion, Leadscope sought an additional $11 million. On February 6, 2009, the Trial Court awarded Leadscope fees and expenses of $7.9 million. Post-judgment interest on the $26.5 million judgment accrues at the rate of 8%. Postjudgment interest on the $7.9 million award of fees and expenses accrues at the rate of 5%. Both rates are “simple interest” and cumulatively, total approximately $ 9.0 million as of December 31, 2011.
The Society filed an appeal on November 20, 2008 to the Ohio Court of Appeals, Tenth District (the “Appeals Court”). On June 15, 2010, the Appeals Court issued its opinion affirming the trial court’s judgment, i.e., the Court did not grant any of the relief ACS had sought in its appeal. See American Chemical Society v. Leadscope, Inc., Slip Op., 2010 WL 2396544 (Ohio. App, June 15, 2010). ACS filed a Notice of Appeal and Memorandum in Support of Jurisdiction with the Ohio Supreme Court on July 30, 2010. On October 27, 2010, the Ohio Supreme Court, exercising its discretion as to whether to hear the appeal, granted the Society’s request to hear the case. See American Chemical Society v. Leadscope, Inc., 126 Ohio St. 3d 1615, 935 N.E. 2d 854 (2010) (Table). Accordingly, the full seven-member Ohio Supreme Court is reviewing all of the issues raised by ACS. All of the briefing has been completed and the Court conducted oral arguments on September 7, 2011. It is not known when the Court will render its decision.
In yesterday’s decision, the Ohio Supreme Court overturned the verdict against the ACS for defamation, but upheld the ruling against the ACS for unfair competition against Leadscope. The bottom line is that the ACS is still on the hook for $26.5 million in civil damages.
That’s MILLIONS, folks, and it doesn’t include the legal fees, either.
So, here is your American Chemical Society at work: some underappreciated employees from the Chemical Abstracts division go off and start a successful company, someone at the ACS haphazardly launches an overreaching lawsuit to vigorously defend the society’s intellectual property, the company countersues and wins a multi-million-dollar judgment, ACS loses two appeals in a row and half of the latest appeal and is now on the hook for $26.5M. Great =/
Of course, we know where this money comes from: the fees our schools and companies pay ACS Publications in exorbitant subscription rates to access the journal articles that we write, fund, and referee for free. Don’t get me wrong…I’m not one of those open-access crusaders that C&EN hates—I believe the ACS should make a profit off of its journals—but the situation has gotten ridiculous.
A Tweet yesterday by Apodaca puts the money issue in perspective. (See also: “Why ACS Must Come Clean on Journal Publication Costs”)
$26.5 million + interest as settlement to Leadscope would be ~6% of ACS sales of e-services, 200% of dues in 2011: bit.ly/Pwoew1
— Rich Apodaca (@rapodaca) September 18, 2012
For the record, the Chairman of the Board of Directors of the ACS issued a statement on the matter, including a note that:
Today’s ruling will not impact ACS member dues; ACS products, programs or services; ACS staffing levels; or the ability of ACS to achieve its mission.
The statement is posted on the ACS Web site, where few people will bother to notice it. Such placement is consistent with what we’ve already seen: due to a lack of quality journalism regarding the Leadscope trial, ACS members are not informed sufficiently to appreciate the implications of this case, which would seem to have important financial repercussions for the society.
Beyond a detailed, multi-page story on the events that transpired to precipitate this case, I would like to see the following questions answered:
1. What is the total cost of this case to the society? Beyond the civil damages awarded to Leadscope, how much has the ACS paid in legal fees?
2. What are the costs associated with continued litigation of this case? What information went into the decision of making continued appeals versus simply paying the Leadscope people after each verdict?
3. Does the board of directors consider $26M (+ legal fees) to be a significant sum of money? Where does this money come from? How can this much money not “impact ACS member dues; ACS products, programs or services; ACS staffing levels; or the ability of ACS to achieve its mission”?
4. Has the person responsible for pursuing the malicious litigation been disciplined by the ACS? Who made this decision and what is his/her annual compensation from the society?
5. Has the ACS changed any internal policies regarding the public dissemination of potentially defamatory statements? What is preventing the ACS and its employees from making similar costly errors in the future?
6. Does the Board of Directors believe it is appropriate for a non-profit, scientific organization to protect its intellectual property this aggressively/haphazardly? Isn’t part of our society’s charted mission the “promotion of research in…industry”, increasing the “diffusion of chemical knowledge”, and “aiding the development of our country’s industries”?
While I love C&EN dearly, in matters like Leadscope and ACS elections, the magazine appears hamstrung. If any of you want to don a reporter’s hat and tackle some of these items, I will promote the hell out of you and your blog. If you want to post your efforts as original reporting here, we can do that too. But somebody has got to get to the bottom of these important issues, because sadly, we can’t count on C&EN to do it for us.