Unites States of America v. Apple, Inc. et al

Filing 115

MEMORANDUM OF LAW in Support re: 114 MOTION to Intervene for Purposes of Appeal.. Document filed by Bob Kohn. (Brower, Steven)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
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UNITED STATES OF AMERICA
Plaintiff,
v.
APPLE, INC.,
HACHETTE BOOK GROUP, INC.,
HARPERCOLLINS PUBLISHERS, L.L.C.
VERLAGSGRUPPE GEORG VON
HOLTZBRINK PUBLISHERS, LLC
d/b/a MACMILLAN,
THE PENGUIN GROUP,
A DIVISION OF PEARSON PLC,
PENGUIN GROUP (USA), INC. and
SIMON & SCHUSTER, INC.,
Defendants.

Civil Action No.12-CV-2826 (DLC)

MEMORANDOM OF IN SUPPORT OF MOTION BY BOB KOHN
FOR LEAVE TO INTERVENE FOR THE SOLE PURPOSE OF APPEAL

i

Table of Contents
INTRODUCTION ........................................................................................................................................ 1
INTERESTS OF MOVANT ......................................................................................................................... 3
ARGUMENT ................................................................................................................................................ 5
I.

MOVANT SHOULD BE PERMITTED TO INTERVENE FOR THE SOLE PURPOSE OF
APPEAL .......................................................................................................................................... 5
A.

Movant Would Aid the Court in Making Its Public Interest Determination ............................. 6

B.

Movant Has Presented Serious Issues Regarding the Propriety of the Decree Entered by This
Court .......................................................................................................................................... 6

C.

Movant Is Well-Situated to Demonstrate That the Proposed Final Judgment is Contrary to the
Dictates of the Tunney Act ........................................................................................................ 6

II.

MOVANT FULLY MEETS THE PERMISSIVE INTERVENTION CRITERIA OF FEDERAL
RULE OF CIVIL PROCEDURE 24(b) ........................................................................................... 9
A.

The Present Motion is Timely Made ....................................................................................... 10

B.

Movant Has a Claim or Defense That Shares With The Main Action A Common Question of
Law or Fact.............................................................................................................................. 10

C.

Intervention will not Unduly Delay or Prejudice the Adjudication of the Rights of the
Original Parties ........................................................................................................................ 15

D.

This Motion States the Grounds for Intervention and Otherwise Satisfies the Requirements of
Rule 24(c) ................................................................................................................................ 16

CONCLUSION ........................................................................................................................................... 17

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Table of Authorities
CASES
Broadcast Music v. CBS, 441 U.S. 1 (1979)..................................................................................................................2
Flying J Inc. v. Van Hollen, 578 F.3d 569 (7th Cir. 2009) ...........................................................................................10
FTC. v. Indiana Fed’n of Dentists, 476 U.S. 447, 459 (1986),......................................................................................2
Massachusetts School of Law at Andover, Inc. v. United States, 118 F.3d 776 (D.C. Cir. 1997) ....................... passim
Massachusetts v. Microsoft Corp., 373 F.3d 1199 (D.C. Cir. 2004) ............................................................. 1, 5, 15, 16
McCarthy v. Kleindienst, 741 F.2d 1406 (D.C.Cir. 1984) ..........................................................................................16
SEC v. United States Realty & Improvement Co., 310 U. S. 434, 459 (1940) ............................................................14
United States v. American Tel. & Tel. Co., 552 F.Supp. 131 (D.D.C. 1982)............................................................. 1, 5
United States v. Keyspan Corp., 783 F. Supp.2d 633 (S.D.N.Y. 2011)................................................................. 3, 4, 6
United States v. LTV Corp., 746 F.2d 51 (D.C.Cir. 1984) ......................................................................................... 5, 6
United States v. Thomson Corp., 1997-1 Trade Cas. (CCH) ¶71,735, 1997 U.S. Dist. LEXIS 1893 at *15 (D.C.C.
February 27, 1997) ....................................................................................................................................................2
STATUTES
Tunney Act, 15 U.S.C. §16(b) .......................................................................................................................................9
Tunney Act, 15 U.S.C. §16(f)(3) ............................................................................................................................... 1, 9
RULES
ANTITRUST GUIDELINES FOR THE LICENSING OF INTELLECTUAL PROPERTY (DOJ/FTC 1995) ...................................11
Federal Rules of Civil Procedure Rule 23 .....................................................................................................................4
Federal Rules of Civil Procedure Rule 24 ........................................................................................................... passim
Federal Rules of Civil Procedure Rule 7 .....................................................................................................................16
ARTICLES & TREATISES
Al Kohn & Bob Kohn, KOHN ON MUSIC LICENSING (Wolters Kluwer, 4th Edition 2002) ............................................7
William M. Landes & Richard A. Posner, THE ECONOMIC STRUCTURE OF INTELLECTUAL PROPERTY (Harvard
University Press, 2003) ...........................................................................................................................................12
PUBLIC COMMENTS
Comments of Bob Kohn (ATC-0143, May 30, 2012), 12-02826 (DLC) .......................................................... 1, 2, 6, 7
COURT DOCUMENTS
Amicus Brief of Bob Kohn, 12-cv-2826, Docket No. 110 (September 4, 2012) ............................................................2
Complaint, 12-02826 (DLC) (Docket No. 1) (April 11, 2012).................................................................. 12, 13, 14, 15
Motion for Leave to Participate as Amicus Curiae, 12-cv-2826, Docket No. 97 (August 13, 2012) ............................7
Opinion & Order re: Final Judgment, 12-2826, (Docket No. 113) (September 6, 2012) .............................. 1, 4, 16, 18
Opinion & Order, 12-02826 (Docket No. 108) (August 28, 2012)............................................................................ 1, 7
Proposed Amicus Brief of Bob Kohn, 12-cv-2826, Docket No. 97 (August 13, 2012) ........................................ 2, 7, 13

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INTRODUCTION
Bob Kohn, on his own behalf and through his pro bono attorneys pursuant to 15 U.S.C.
§16(f)(3) and Rule 24 of the Federal Rules of Civil Procedure, respectfully submits this
memorandum in support of his motion for leave to intervene for the sole purpose of appeal.
Movant submitted to the Department of Justice extensive comments 1 objecting to the
proposed Final Judgment and later was granted leave to participate as amicus curiae in
proceedings before this Court. 2 With a Final Judgment now entered, 3 Movant moves for leave to
intervene solely for the purpose of seeking appellate review of such entry by the United States
Court of Appeal for the Second Circuit.
In this Tunney Act proceeding, the public comments were “both voluminous and
overwhelmingly negative.” U.S. v. Apple, Inc. et.al., Opinion & Order at 19 (September 6,
2012). “More than 90 percent of the 898 comments opposed entry of the proposed Final
Judgment.” Id. Many of the comments were “very thoughtful.” Id. When a Tunney Act
settlement is presented with serious and thoughtful opposition, federal courts have routinely
authorized post-judgment intervention for purpose of appeal by individuals or organizations who
submitted comments to the Justice Department during the Tunney Act proceedings. See,
Massachusetts v. Microsoft Corp., 373 F.3d 1199, 1234-36 (D.C. Cir. 2004); United States v.
American Tel. & Tel. Co., 552 F.Supp. 131 (D.D.C. 1982), aff’d mem. sub. nom. Maryland v.
United States, 460 U.S. 101 (1983).
Though the Court has disagreed with the substantive arguments advanced by Movant in
his comments and amicus curiae brief, Movant respectfully submits that the issues to be raised

1

Comments of Bob Kohn (ATC-0143, May 30, 2012).
Opinion & Order, No. 12-2826 (Docket No. 108) (August 28, 2012).
3
Opinion & Order re: Final Judgment, No. 12-2826, (Docket No. 113) (September 6, 2012). Actual entry of Final
Judgment was imminent at the time of this writing.
2

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on its appeal constitute serious and credible applications of U.S. Supreme Court and Second
Circuit precedent that must not be ignored if the public interest is to be secured. Where the issues
raised are important, “their presentation to the Court of Appeals should not be foreclosed by this
Court.” United States v. Thomson Corp., 1997-1 Trade Cas. (CCH) ¶71,735, 1997 U.S. Dist.
LEXIS 1893 at *15 (D.C.C. February 27, 1997).
Movant, like millions of consumers, has a vital interest in competitive markets for ebooks and the e-book readers and systems that support them. That vital interest necessarily
includes an interest, not in what the government contends are low prices, but rather in efficient
prices for e-books. The purported public interest in “low” prices was fabricated by the Justice
Department with a now discredited citation. See, Amicus Brief of Bob Kohn at 2 (Docket No.
110) and proposed Amicus Brief of Bob Kohn at 23 (Docket No. 97). As Movant has pointed out
to this Court, the government’s position on this point is contrary to the law of the Second Circuit
and most other federal jurisdictions that have considered the issue. 4 Should the proposed Final
Judgment result in what the government’s stated intention—lowering certain e-book prices to
below marginal cost—millions of consumers will be harmed.
Moreover, since none of the parties have raised, or even responded to, these issues, it is
unlikely that any party, should they seek to appeal the entry of judgment, will raise them for
consideration by the Court of Appeals. In fact, the non-setting defendants may have already
4

In its Opinion & Order dated September 5, 2012, the Court appeared to base its reply solely upon Movant’s
comments filed during the 60-day comment period, with virtually no reference to his amicus brief (Docket No. 110),
and clearly no reference to his proposed amicus brief (Docket No. 97). The proposed 25-page amicus brief had
specifically anticipated the Court’s narrow interpretation of Broadcast Music v. CBS, 441 U.S. 1 (1979), using an
important reference in the U.S. Supreme Court’s decision in FTC. v. Indiana Fed’n of Dentists, 476 U.S. 447, 459
(1986) as an example. In that case, the high court extended the coverage of Broadcast Music beyond per se to the
rule of reason. DOJ sidestepped the relevance of Indiana Fed’n of Dentists with a non-sequitur, (see. Docket No.
111 at fn 3), and no reference is to be found to the Indiana Fed’n of Dentists case in the Court’s Opinion & Order.
Moreover, the Court did not take the opportunity to address in its Opinion & Order the fact that the literal horizontal
price-fixing in Broadcast Music was sustained by the need to countervail the monopsony in that case (other than
making a factual reference in footnote 14 of its Opinion & Order that amicus had raised the “monopsony” power
issue in this case).

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taken positions that would foreclose their credibly raising these issues on appeal. For example,
all three non-settling Defendants have suggested that the Defendants’ conduct has resulted in
lower e-book prices. The premise of the argument Movant has made, and will raise on appeal, is
that Defendants’ conduct, as alleged, resulted in higher prices for some e-books—a result which
is good for consumers. Even the Justice Department—while ignoring the substantive legal issues
raised by Movant—still characterized Movant’s comments as coming from a “unique
perspective.” Accordingly, without Movant’s intervention, “no party will be in a position to
present these issues to the Court of Appeals.” Thomson, supra (emphasis added).
For these reasons, this intervention is essential to “ensure that the Final Judgment is
properly tested in the appellate crucible” Id (emphasis added).
INTERESTS OF MOVANT
Being that the “remedy” contained in the decree is now purported to be in the public
interest, it is only appropriate that a member of the public be allowed to seek appellate review of
such remedy on the grounds that the decree is not in the public interest—especially under these
circumstances. In this context, it is extremely important to appreciate that an appeal of this case
will hinge upon not whether the Department of Justice has “vigorously and faithfully”
represented the interest of consumers. That is, the proposed appeal would not concern whether
the Final Judgment adequately or effectively addresses the anticompetitive harms alleged, but
will question the factual foundation upon which the government used to identify the alleged
“harms.” As demonstrated in Movant’s proposed amicus brief and amicus brief, the government
could not, as a matter of law, have reached a conclusion that Defendants’ conduct was harmful to

3

consumer welfare, and without that, under Keyspan, 5 the government’s conclusions could not
have been reasonable.
Accordingly, as well-intentioned as the DOJ may have embarked upon this action, it can
no more “vigorously and faithfully” further the interests of consumers than a doctor in the course
of committing malpractice can “vigorously and faithfully” further the interest of his or her
patient. Under the Tunney Act, the Justice Department is not the final arbiter as to whether it is
committing civic malpractice. The courts are. Given that the District Court has determined that
the proposed Final Judgment is in the public interest, then it should permit a non-party wellsituated to seek appellate review of the Court’s decision.
Movant’s arguments in this matter have been completely focused on the public interest,
taking the perspective of consumers of e-books and the public generally. Movant is directly
affected by the Final Judgment, having purchased e-books before and after the effect of the
agency model, not unlike millions of other consumers of e-books. Indeed, had this motion to
intervene been filed as a “class action” on behalf the class of consumers affected by the proposed
Final Judgment, all of the prerequisites set forth in Rule 23(a) and (b) may well have been
satisfied. 6
Movant is well-situated to intervene for the purpose of demonstrating to the Court of
Appeals that the Court’s public interest determination is contrary to the dictates of the Tunney
Act. Movant believes he is uniquely qualified to assist the Court in appreciating the nature of the

5

United States v. Keyspan Corp., 783 F. Supp.2d 633 (S.D.N.Y. 2011).
Under Rule 23(a), (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions
of law or fact common to th class; (3) the claims or defenses of the representatives parties are typical of the claims
or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
Further, suffice it to say that Movant also believes that all of the criteria for maintenance of the class under Rule
23(b)(1), (2), or (3) would be satisfied. Though Movant is not formally seeking to represent a class—sparing the
parties and the Court the time and expense of satisfying and adjudicating the remaining requirements of Rule 23—
Movant nevertheless hopes to be heard as furthering the interests of millions consumers of e-books and e-books
systems who would be victims of the Final Judgment.
6

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markets in which e-book transactions occur and the countervailing pro-competitive effects of
Defendants’ conduct—critical elements of the factual foundation of the government’s decisions
and essential to the Court’s determination, under the Keyspan standard of review, about whether
government’s conclusions regarding the proposed settlement are reasonable. Movant has
approached the issues in this proceeding specifically from the perspective of the public interest in
the promotion of competition and innovation—especially as it concerns, as it does in this case,
copyrighted works of authorship disseminated in digital form. As a consumer of digital goods,
author of a treatise on copyright, and founder and CEO of technology companies directly
involved in the digital distribution of music and e-books, Movant as a unique perspective to
provide in the appellate review of the Court’s entry of judgment.
ARGUMENT
I.

MOVANT SHOULD BE PERMITTED TO INTERVENE FOR THE SOLE
PURPOSE OF APPEAL
Tunney Act commentators who wish to appeal entry of a government antitrust settlement

must first seek intervenor status in the district court. United States v. LTV Corp., 746 F.2d 51
(D.C.Cir. 1984).
[T]hose who object to entry of a consent judgment must seek to intervene in the
proceedings (either before or after entry of the judgment) as a condition of taking an
appeal.
Id. at 53; see also, Massachusetts v. Microsoft Corp., 373 F. 3d 1199, 1234-36 (2004); United
States v. American Tel. & Tel. Co., 642 F.2d 1285, 1290 (D.C. Cir. 1980).
Movant should be permitted to intervene in this action solely for purposes of appeal,
because Movant (a) would aid the court in making its public interest determination, (b) has
presented serious issues regarding the propriety of the proposed Final Judgment, (c) is well-

5

situated to demonstrate that the Final Judgment is contrary to the dictates of the Tunney Act, and
(c) fully meets the permissive intervention criteria of Federal Rule of Civil Procedure 24(b).
A.

Movant Would Aid the Court in Making Its Public Interest Determination

To gain status as an intervenor, the would-be appellant must first establish that
participation by the intervenor would aid the court in making its public interest
determination under the APPA [i.e., the Tunney Act]
LTV, 746 F.2d at 53. This Court has already made such a finding with regard to Movant in
permitting his participation as amicus curiae. Opinion & Order at Docket No. 108. Movant had
set forth the reasons why he believes he would aid the Court in making its public interest
determination in his Motion for Leave to Participate as Amicus Curiae. See, Docket No. 97; see
also, discussion infra. Even if the Court had ruled that Movant would not aid the District Court,
Movant respectfully submits that it would aid the Court of Appeal in its review of the District
Court’s public interest determination.
B.

Movant Has Presented Serious Issues Regarding the Propriety of the Decree
Entered by This Court

In the Comments of Bob Kohn, and in his proposed amicus curiae brief and amicus brief,
Movant raised serious issues that called into question whether the proposed decree, which has
been entered by this Court unchanged, is in the public interest. Applying the standard of review
followed by this Court in Keyspan, Movant showed that the factual foundation of the
government’s decisions were such that its conclusions about the proposed remedy were
unreasonable.
C.

Movant Is Well-Situated to Demonstrate That the Proposed Final Judgment
is Contrary to the Dictates of the Tunney Act

One seeking to intervene for purposes of appellate review to “correct a district court’s
‘public interest’ determination when the record indicates the determination is contrary to the

6

dictates of the Tunney Act” should be any “non-party well-situated to demonstrate that this is
so.” Massachusetts School of Law at Andover, Inc. v. United States, 118 F.3d 776, 785 (D.C. Cir.
1997) (Judge Wald, concurring) (hereinafter, “MSL”).
During the course of Movant’s 30-year career–working for entertainment, computer
software, and internet companies–he has had responsibility and oversight for several high profile
antitrust matters involving the adoption by consumers of technology products and copyrighted
works, which operated in conjunction with each other, in a multi-sided market prone to
attempted monopolization by dominant systems providers. These matters directly concerned the
intersections between copyright and antitrust law as they relate to the public interest in
promoting innovation and competition. Movant has testified on these subjects before both the
FTC (1995) and joint hearings held by the DOJ and the FTC (2002). 7
Movant is co-author of KOHN ON MUSIC LICENSING (Wolters Kluwer, 4th Edition 2002) ,
cited by the U.S. Supreme Court 8, the Second Circuit 9, the Sixth Circuit 10, and the Southern
District of New York. 11 Movant has testified as an expert before the District Court in In Re
Application of AOL, RealNetworks and Yahoo! (related to United States v. ASCAP), 559
F.Supp.2d 332 (S.D.N.Y. 2008) (a rate hearing in which Movant provided testimony to the late
District Judge William C. Conner on how music is transmitted and marketed on the Internet). 12

7

See,Testimony of Robert H. Kohn, Hearings of the Federal Trade Commission on the Changing Nature of
Competition (panel on "Networks, Standards, Foreclosure, Strategic Conduct")
http://www.ftc.gov/opp/global/bobkohn.shtm (Washington, D.C., November 29, 1995). Cited in, Antitrust for High
Tech Companies (Prepared Remarks of Susan DeSanti, Director of Policy Planning, Federal Trade Commission)
http://www.ftc.gov/speeches/other/desanti1.shtm (San Francisco, February 2, 1996). See, Testimony of Robert H.
Kohn, DOJ/FTC Joint Hearings on "Competition and Intellectual Property Law and Policy in the Knowledge-Based
Economy" http://www.ftc.gov/opa/2002/02/ipsecond.shtm (Berkeley, California, February 27, 2002).
8
Eldred v. Ashcroft, 57 U.S. 186 (2003).
9
Woods v. Bourne, 60 F.3d 978 (2d Cir. 1995); Boosey & Hawkes v. Buena Vista Home Video, 145 F.3d 481 (2d
Cir. 1988).
10
Bridgeport Music v. Dimension Films, 410 F.3d 792 at fn 18 (6th Cir. 2005).
11
Fred Ahlert Music Corp. v. Warner/Chappell Music, 958 F.Supp. 170 (S.D.N.Y. 1997).
12
A more complete resume and disclosure of the amicus curiae’s background, qualifications and affiliations is
contained in the Comments of Bob Kohn (ATC-0143, May 30, 2012).

7

As stated in Movant’s Comments, during the time Movant served as general counsel of
Borland International, Inc., he was responsible for overseeing the six-year litigation of Lotus
Dev. Corp. v. Borland Int’l, Inc., 516 U.S. 233 (1996), where a divided Supreme Court let stand
the 1st Circuit decision that the menu-command structure of Lotus 1-2-3 was an uncopyrightable
“method of operation.” Lotus Dev. Corp. v. Borland Int'l, Inc., 49 F.3d 807 (1st Cir. 1995).The
court adopted the "network externalities" theory raised by Borland and amicus curiae brief on
appeal. The theory suggests that a single product may emerge as the de facto standard in a
market, giving the proprietor of the standard a monopoly over which it may illegally exercise
market power.
Movant also oversaw and settled on behalf of Borland an antitrust action brought by the
DOJ to stop Borland's acquisition of Ashton-Tate in 1991. This was an acquisition which the
DOJ alleged would provide Borland overwhelming market share in database management
software. In exchange for allowing the acquisition to proceed, the DOJ accepted Borland's offer
to not enforce any copyright rights in the dBASE programming language for five years. The DOJ
accepted Borland's theory that, without the ability to enforce any rights it may have had in the
dominant database programming standard at the time, Borland would not be able to use the
effects of network externalities to tip the database management market entirely in its favor.
Also during that time, Movant was called in by both the DOJ and FTC on several
occasions in connection with the government's antitrust investigation of Microsoft Corp. Movant
met with four of the Commissioners of the FTC and then with the Assistant Attorney General for
Antitrust of that time, Joel Klein. Beginning in the early 1990's, Borland claimed that Microsoft
was leveraging their monopoly in PC operating systems to gain an illegal competitive advantage
in the market for applications software, such as word processors, spreadsheets, and database

8

management software. See, Microsoft, 56 F.3d at 1453.
In December, 1997, Movant co-founded eMusic (NASDAQ: EMUS), the first digital
music download service to sell digital music “MP3” files for 99 cents per track, a business not
unlike Amazon’s Kindle or Barnes & Noble Nook platforms for e-book downloads.
Movant is licensed to practice law in California and is a member in good standing of the
State Bar of California. He has taught law at Monterey College of Law, Monterey, California.
Movant believes he is as well-situated as any consumer, and uniquely-situated among any
of the parties or other participants in this action, to demonstrate that the proposed Final Judgment
is not in the public interest and that entry of the Final Judgment would be contrary to the dictates
of the Tunney Act.
II.

MOVANT FULLY MEETS THE PERMISSIVE INTERVENTION CRITERIA OF
FEDERAL RULE OF CIVIL PROCEDURE 24(b)
Under Rule 24(b), permissive intervention is authorized by a District Court
(i) “[o]n a timely motion,”
(ii) when an applicant is “anyone” who “has a claim or defense that shares with
the main action a common question of law or fact,” and
(iii) where intervention will not “unduly delay or prejudice the adjudication of the
rights of the original parties.”
In addition, under Rule 24(c), “A motion to intervene must state the grounds for

intervention and be accompanied by a pleading that sets out the claim or defense for which
intervention is sought.”
All of these criteria are satisfied by Movant.

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A.

The Present Motion is Timely Made

Under the Tunney Act, Movant could have moved to intervene at any point after the
filing of this action on April 11 2012. See, 15 U.S.C. §16(f)(3)). Instead, Movant chose to first
take advantage of the 60-day comment period under 15 U.S.C. §16(b) to give the DOJ an
opportunity to reconsider its action, withdraw from or modify the settlement, and/or dismiss the
case. The DOJ has refused to do so. On September 6, 2012, the Court ordered that the proposed
Final Judgment be entered. This motion was filed the next day. A motion not filed until the
district court has entered final judgment is not untimely where all the Movant wants to do is take
an appeal. Flying J Inc. v. Van Hollen, 578 F.3d 569, 572 (7th Cir. 2009) (opinion by Circuit
Judge Posner).
B.

Movant Has a Claim or Defense That Shares With The Main Action A
Common Question of Law or Fact

Permissive intervention is available to “anyone” who “has a claim or defense that shares
with the main action a common question of law or fact.” Rule 24(b)(1).
First, Movant certainly qualifies as “anyone.” An intervenor need not be a trade
association, established issue-oriented activist group, or organization of any kind. Nor need an
intervenor be a competitor of one or more of the parties or a business whose has a pecuniary or
contractual interest directly affected by the decree. On the contrary, one who is seeking to
intervene for purposes of appellate review to correct a district court’s ‘public interest’
determination under the Tunney Act” may be any “non-party” well-situated to demonstrate that
the district court’s public interest determination is “contrary to the dictates of the Tunney Act.”
MSL, 118 F.3d at 785 (Judge Wald, concurring).
Second, Movant has a “defense that shares with the main action a common question of
law or fact.” This requirement is satisfied because Movant wants to present the same defenses
10

that the Defendants presented or are available to the Defendants to present. See, Flying J Inc. v.
Van Hollen, 578 F.3d 569, 573 (7th Cir. 2009). In fact, Movant and other consumers each have
quite a number of defenses in common with the Defendants in the main action.
For example, in the very first allegation of the Complaint and in the very last, the
government mischaracterizes the goods at issue in this case (see Complaint at ¶ 1 and ¶ 99),
therefore making it impossible for a court to find a rational relation to the methodology that the
courts prescribe to define a market for antitrust purposes. The description of the goods at issue
reads more like an advertisement for e-books than a reflection of sound antitrust policy. The
antitrust policy of the United States, as embodied in the DOJ’s own IP Guidelines, 13 direct that
the characteristics that distinguish the intellectual property at issue from other forms of property
must be taken into account in evaluating the specific market circumstances in which e-book
transactions occur. For a discussion of such characteristics, see proposed Amicus Brief of Bob
Kohn, 12-CV-02826 (DLC), Docket No. 97 at pp. 5-11.
Movant and other consumers also deny the allegations made in Paragraph 8 of the
Complaint that price and non-price competition among e-book publishers and among e-book
retailrs was unlawfully eliminated to the detriment of U.S. consumers.
Contrary to Paragraph 9 of the Complaint, Movant and other consumers believe the effect
of the lawsuit, should it succeed, would be harmful to consumer welfare, because it seeks to
undo the pro-competitive effects that Defendants’ actions, as alleged, had on the markets
relevant to the purchase and consumption of e-books.
Contrary to Paragraph 10, Movant and other consumers believe that, as a result of
Defendants’ alleged conduct, it more likely than not that consumers will pay tens of millions of

13

The antitrust policy of the United States with respect to copyrighted works is set forth in the ANTITRUST
GUIDELINES FOR THE LICENSING OF INTELLECTUAL PROPERTY (DOJ/FTC 1995) (the “IP Guidelines”).

11

dollars less (not more) for e-books, that they will pay less for e-book reader devices, that they
will benefit from increased innovation in those devices and in the systems platforms that support
the devices and the consumption of e-books.
Contrary to the government’s allegations in Paragraph 25 of the Complaint, Movant and
other consumers deny that e-books are “books published in electronic formats.” An e-book is a
string of bits of data, commonly referred to as a set of “1’s and 0’s,” and is comprised of one or
more kinds of “works of authorship,” as that term is used in copyright parlance. Works of
authorship may include literary works, musical works, dramatic works, pictorial works, graphic
works, and other kinds of works. Unlike books, which may be read by merely holding and
opening them, e-books must be read with the aid of a machine or device. Unlike a book, an ebook has no value whatsoever to consumers without the aid of a machine or device.
In addition, Movant and other consumers deny knowledge or information sufficient to
form a belief as to the truth or falsity of the allegation that e-book publishers avoid some of the
expenses incurred in producing and distributing print books, including most manufacturing
expenses, warehousing expenses, distribution expenses, and costs of dealing with unsold stock.
The cost of producing a book has two components: (1) the cost of creating the work, which
consists primarily of the author’s time and effort plus the cost to the publisher of soliciting and
editing the manuscript and setting it up for publication and (2) the cost of producing, distributing
and accounting for the actual copies. The former is generally a fixed cost while the latter
generally a variable cost. William M. Landes & Richard A. Posner, THE ECONOMIC STRUCTURE
OF INTELLECTUAL PROPERTY

(Harvard University Press, 2003).

Contrary to the allegations in Paragraph 26 of the Complaint, while Movant and other
consumers admit that we sometimes purchase e-books through Web sites of e-book retailers and

12

sometimes purchase e-books through applications loaded onto our reading devices, this is not
always the case. Sometimes consumers are unable to purchase e-books though applications
loaded onto our reading devices due to restrictions imposed by the seller of the devices. For
example, one cannot purchase an e-book sold by Apple directly from a Kindle device. Likewise,
one cannot purchase an e-book sold by Amazon within the Kindle application loaded on an
Apple iPad; to do so, the consumer must open a browser on the iPad and purchase the e-book
from Amazon, whereupon it can be downloaded in the Kindle application on the iPad. These
differences, which the complaint glosses over with its imprecision, have important impacts upon
competition in the markets concerning e-book consumption.
Contrary to Paragraph 63 through 66 of the Complaint, Movant and other consumers
deny that the purpose or effect of the alleged provisions of the agency model raised and
stabilized e-book prices to the detriment of consumers. Whatever the purpose of the agency
model was, its effect was to eliminate below marginal cost pricing of e-books, which is a result
that is unmistakably good for consumers.
And finally, for example, contrary to Paragraph 99 of the Complaint, consumers deny
that the relevant product market for purposes of this action is “trade e-books.” As addressed at
length in the Comments of Bob Kohn and Movant’s proposed amicus brief and amicus brief, this
cannot be the market or markets that must be considered in an antitrust action brought as a result
of Defendants’ alleged actions.
In addition to the denials and defenses consumers have in common with the main action,
consumers would pose many of the same separate and additional defenses, including (1) the
relief sought is not in the public interest, (2) the Complaint fails to state a claim upon which
relief can be granted, (3) Defendants’ alleged actions did not result in harm to competition, and

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(3) the pro-competitive justifications for Defendants’ alleged actions outweighed any alleged
harm to competition, among others.
Each and every consumer of e-books and e-book systems has been affected by
Defendants’ alleged conduct in a positive way. Even if some consumers, under the agency
model, have paid a higher price for some e-books than they would have paid under the retail
model, every consumer of e-books has benefited from (a) paying more efficient prices (e.g.,
prices no longer set below marginal cost) for e-books and (b) increased competition among ebook systems providers, resulting in increased innovation in e-book systems, new entrants to the
e-books systems market, and lower long-term prices for e-books themselves—all of which
directly resulted from Defendants’ actions.
By the same token, every consumer of e-books and e-book systems in the United States
will become a victim of the harmful effects of the Final Judgment beginning the day it is
enforced. While permissive intervention does not require “that the intervenor shall have a direct
personal or pecuniary interest in the subject of the litigation” (See, SEC v. United States Realty
& Improvement Co., 310 U. S. 434, 459 (1940)), Movant, like millions of other consumers, has a
direct pecuniary interest in whether the proposed Final Judgment takes effect.
Accordingly, each consumer of e-books, including Movant, has a “claim or defense that
[he or she] shares with the main action.” These claims or defenses concerning questions of law
or fact in common with the main action are specifically set forth in the accompanying draft
pleading submitted pursuant to Rule 24 (c).

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C.

Intervention will not Unduly Delay or Prejudice the Adjudication of the
Rights of the Original Parties

Under Rule 24(b)(2), the court “shall consider whether the intervention will unduly delay
or prejudice the adjudication of the rights of the original parties.” In MSL, the court held that, in
connection with an intervention for purposes of appeal of a Tunney Act case,
If the attempted intervenor shows adequate grounds for upsetting the consent judgment,
then delay will be entailed (a remand for further proceedings, possibly including trial),
but it would be hard to say that this delay is undue. MSL at 782.
Moreover, Judge Wald homed in on this issue in his concurring opinion, which is set
forth below in full (with emphasis added):
I concur in the judgment and in most of the reasoning of the panel opinion. I do
want to stress, however, that in my view, the application of Federal Rule of Civil
Procedure 24(b)(2) in this case responds to the unusual nature of proceedings under the
Tunney Act, Pub.L. No. 93-528, 88 Stat. 1706 (1974) (codified as amended at 15 U.S.C.
§ 16(b)-(h) (1994)), as well as to the fact that the would-be intervenor here appeals from
the denial of a post-judgment intervention motion, and that the applicability of a similar
analysis outside of this context should not be assumed. This court long ago observed that
the language of Rule 24 required “other than literal application in atypical cases.”
Textile Workers Union v. Allendale Co., 226 F.2d 765, 767 (D.C.Cir.1955) (en banc). I
believe that this is such an atypical case, and that we have therefore properly allowed for
a somewhat “non-literal” application of Rule 24(b)(2). Thus, I would not expect our
opinion to stand for the proposition that the process of appellate review, or of remand for
the correction of errors made by the district court, may generally be treated as factors that
“delay or prejudice the adjudication of the rights of the original parties” under Rule
24(b)(2). Cf. majority opinion at 782. We treat them as such here so that this court may
reserve the discretion to review and correct a district court's “public interest”
determination when the record indicates that the determination is contrary to the dictates
of the Tunney Act and a non-party well-situated to demonstrate that this is so seeks to
subject that determination to appellate review.
MSL at 785 (Judge Wald, concurring).
More recently, in Massachusetts v. Microsoft Corp., 373 F.3d 1199 (D.C. Cir. 2004), the
Court of Appeals held that allowing the intervenors to appeal from the Tunney Act proceeding
would not “unduly delay or prejudice the adjudication of the rights of the original parties.” Id. at
1235-36. Intervenors in that case each submitted extensive public comments to the Justice
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Department and filed an amicus brief with the district court. “Because the district court already
confronted [the intervenors’] arguments in rendering its decision, there is no reason to fear ‘issue
proliferation,’ ‘confusion,’ ‘extra cost,’ or ‘an increased risk of error’.” Massachusetts v.
Microsoft at 1236 (quoting MSL, 118 F.3d at 782).
Accordingly, this motion to intervene for purposes of appeal would not unduly delay or
prejudice the adjudication of the rights of the original parties to this case.
D.

This Motion States the Grounds for Intervention and Otherwise Satisfies the
Requirements of Rule 24(c)

Under Rule 24(c), “A motion to intervene must state the grounds for intervention and be
accompanied by a pleading that sets out the claim or defense for which intervention is sought.” It
is submitted that the grounds for Movant’s motion to intervene are fully set forth in this
Memorandum. Movant is well-situated to aid the courts in making its public interest
determination and has presented serious issues regarding the propriety of the proposed Final
Judgment. Moreover, as more fully set forth in this Memorandum, Movant has a direct and
immediate interest in the outcome of this case and that, absent Movant’s participation, appellate
review of the Court’s entry of judgment and “public interest” determination with reference to the
issues raised by Movant may be foreclosed.
While Rule 24(c) also requires that a “motion to intervene must…be accompanied by a
pleading that sets out the claim or defense for which intervention is sought,” (emphasis added), 14
the courts “have not be[en] hypertechnical, actually, in making sure that …potential intervenors
do file a pleading.” Massachusetts v. Microsoft, 373 F.3d 1199, 1250 at fn 19. Accordingly,
“procedural defects in connection with intervention motions should be excused by a court.”

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Rule 7 lists the “only” pleadings allowed in Federal Court: (a) a complaint, (b) an answer to a complaint (or to a
counterclaim, a cross claim, or a third-party complaint), (c) a third-party complaint, and (d) if the court orders one, a
reply to an answer.

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McCarthy v. Kleindienst, 741 F.2d 1406, 1416 (D.C.Cir. 1984). Under these “atypical”
circumstances, Rule 24 requires “other than literal application.” MSL, 118 F.3d at 785.
Nevertheless, Movant is prepared to file an Answer to the Complaint setting forth
potential defenses for which intervention is sought, should the Court so require. Because this
motion to intervene is solely for the purpose of appeal, Movant respectfully requests that the
Court not to require a “literal application” of Rule 24 in considering this motion and therefore
not require the filing of a pleading in connection herewith.
CONCLUSION
For all these reasons, the Court should grant this motion and permit Movant to intervene
in this case for the sole purpose of appealing the Court’s Order and entry of Final Judgment.
Dated: September 7, 2012

Respectfully submitted,

_______________________
BOB KOHN
California Bar No. 100793
140 E. 28th St.
New York, NY 10016
Tel. [phone]; Fax. [phone]
eMail: [e-mail]
/s/ Steven Brower
By: _______________________
STEVEN BROWER [PRO HAC]
California Bar No. 93568
BUCHALTER NEMER
18400 Von Karman Ave., Suite 800
Irvine, California 92612-0514
Tel: [phone]
Fax: [phone]
Email: [e-mail]
Pro Bono Counsel to Bob Kohn
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