ACS Responds to Dialog Suit; Files Countersuit Alleging Breach of Contract and Fraud

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ACS Responds to Dialog Suit

Files Countersuit Alleging Breach of Contract and Fraud

The gloves have come off and the Marquess of Queensberry rules are in jeopardy in what promises to be a protracted bout of legal fisticuffs between two of the top heavyweights in the information industry--the American Chemical Society (ACS) and Dialog Information Services. On August 31st, the ACS filed its response to Dialog's suit (filed on June 7th) which alleges that ACS has violated anti-trust laws by withholding from Dialog certain portions of the chemical information it collects and creates (see Information Today, July/August 1990). At the same time, the ACS filed a counterclaim which alleges that Dialog has, on many occasions, breached its contracts with ACS' Chemical Abstracts Service division (CAS) and engaged in fraudulent accounting practices in order to avoid paying royalties due CAS.

While the original Dialog suit seeks $150 million in actual and punitive damages, the ACS suit seeks a meager $30 million--$10 million in estimated lost royalties and $20 million in punitive damages. [Should we just subtract the one from the other, have ACS pay Dialog the $120 million difference and forget the whole thing ever happened? Not likely.]

Definitions Are Important

One of the first things that the ACS response attempts to do is to redefine some of the terms used in the Dialog suit. In particular, ACS takes issue with the use of the name "Chemical Registry System Database" or "CRSD." The "definition applied by Dialog to the acronym CRSD is an artificial construct created by Dialog to serve its own purposes in the lawsuit," the ACS response reads.

Why is this important? The assumption is that ACS would like the court to view the services that CAS offers as a "collection" of many independent databases rather than as one single comprehensive database. If this view is accepted, then the act of witholding just five or six of these databases (in particular, the full abstracts and the connection table data) from Dialog, while granting use of all the others, will seem less like an attempt at creating a monopoly and more like plain-old fair (albeit hardball) competition.

Dialog, on the other hand, would like the court to view the information CAS creates as one integrated database. Take away any significant part of the database, the reasoning goes, and you take away the online service's ability to effectively compete in that arena.

The ACS also takes issue with the way Dialog, in its suit, describes the "market" for CAS information. Where Dialog seeks to limit the debate to the market for CAS information only (or failing that, at least just chemical information), CAS believes the definition should be broadened. "Dialog and ACS compete for the distribution of information within a broader scientific and technical information market that includes not only distribution via online computer searches, but also hard copy and other alternative forms...," the suit claims.

If ACS is successful in getting the court to view the market for CAS' services as the much broader market for scientific and technical information, a market filled with overlapping and competing online databases and many other sorts of information services, then Dialog's cries of monopoly will likely fall on deaf ears, especially in light of the fact that, as the suit points out, Dialog is itself the exclusive distributor of 60-some scientific and technical databases.

If Dialog, on the other hand, can keep the focus on CAS' own databases and on CAS' predominant position in the field of chemical information, then quite another outcome might be expected.

As many Information Today readers would surely testify, the natural tendency of professional online searchers is to go to the service with the most complete information available. In the case of the CAS database this means CAS Online (or STN International), and this obviously accounts, in large degree, for the gradual but significant migration from Dialog to CAS online. …