U.S. Bankruptcy Judge George Francis Bason Jr. is scheduled today to determine the amount of damages that should be assessed against the Justice Department for misappropriating a computer software program from Inslaw Inc., a Washington company that has been battling the department for three years.
Bason ruled last September that the Justice Department used "trickery, fraud and deceit" to steal a computer program developed by Inslaw and then attempted to drive the company out of business. Inslaw, which filed for bankruptcy protection in February 1985, is seeking $6.8 million in damages, plus legal fees.
The case took an unusual twist earlier this month when questions were raised as to whether Bason lost a chance to be reappointed to the bankruptcy court because of his rulings in the case. Bason is scheduled to leave office Feb. 8 and will be replaced by S. Martin Teel Jr., a Justice Department attorney who was involved in arguing the Inslaw case.
In a letter written this month to Patricia Wald, chief judge of the U.S. Circuit Court of Appeals for Washington, Bason said he had been told by local lawyers that his Inslaw rulings might have led to his failure to be reappointed to the bench. The Justice Department then attempted to have Bason removed from the Inslaw case because of his alleged bias, but that request was turned down last week by Chief U.S. District Judge Aubrey E. Robinson Jr.
Inslaw and the Justice Department spent three days late last month arguing before Bason over how much Justice owes Inslaw for the software. The Justice Department is seeking to pay no more than $3 million. "If you take something and don't return it, you have to pay for it," said Michael E. Friedlander, an attorney for Inslaw. "Any party that takes what otherwise it would be required to pay in license fees damages the other party. They have never returned what they have taken, including parts of the software they say they have never used and are useless to them."
Inslaw's figure of $6.8 million in damages is based on the price of similar software it markets and on the theory that Justice would own the software in perpetuity. Inslaw says Justice owes it $5.6 million if it plans to return the software. "Inslaw would be willing to accept either," Friedlander said.
But Dean Cooper, a Justice Department lawyer, argued before Bason that "the measure of damages is unreasonable." He said any calculation of damages should be based on how long the software was used, and that damages should be calculated on an annual fee basis rather than as if the department had bought a perpetual license. Cooper said Justice should be required to pay no more than $11,000 for each of 44 copies of software, or a total of $484,000.
In a pretrial brief, the Justice Department argued that paying Inslaw under the perpetual license theory would "perpetuate the alleged violation indefinitely and give Inslaw a windfall." In any case, the department also argued, the damages should not exceed $3 million, which Justice says is the fair market value of Inslaw software at the time it went into bankruptcy.
The complicated and controversial case began three years ago when Inslaw filed for bankruptcy protection, alleging Justice officials drove it to do so by unfairly stopping payment on a contract Inslaw had to develop a computer software program, called Promis, that was used to track cases in U.S. attorneys' offices. Inslaw also alleged that the department attempted to stop the company from selling the software to other customers by claiming the program belonged to the government.
Inslaw also alleged that it was the victim of a vendetta by Justice officials led by C. Madison Brewer III, who oversaw the Inslaw contract for the department's executive office for U.S. attorneys. Brewer was a former general counsel for Inslaw who had been fired by the company.
Inslaw also contended that shortly after the company filed for bankruptcy, Justice Department officials attempted to force it to convert from a Chapter 11 bankruptcy reorganization case to a Chapter 7 liquidation.
Brewer and other Justice officials denied the charges, and the department contended it had stopped doing business with Inslaw because the company had not lived up to its contract. But Bason found that Brewer was biased against Inslaw and had influenced other Justice officials against the company.