1 IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
2 Civil Action No. 95-B-2143
3 RELIGIOUS TECHNOLOGY CENTER,
4 Plaintiff,
5 vs.
6 F.A.C.T.NET, INC., et al.,
7 Defendants.
8
9 REPORTER'S TRANSCRIPT
10 MOTION FOR PRELIMINARY INJUNCTION
11
12
13 Proceedings before the HONORABLE JOHN L. KANE, JR.,
14 Judge, United States District Court for the District of
15 Colorado, commencing at 10:00 p.m., on the 8th day of
16 September, 1995, in Courtroom C-401, United States Courthouse,
17 Denver, Colorado.
18
19
20
21
22
DEBORAH A. STAFFORD, Official Reporter
23 P.O. Box 3592
Denver, Colorado, 80294
24 (303) 571-0530
25 Proceedings Reported by Mechanical Stenography
Transcription Produced via Computer
2
1
APPEARANCES
2
For the Plaintiff: EARLE C. COOLEY, ESQ.
3 Cooley, Manion, Moore & Jones
21 Custom House Street
4 Boston, MA 02110
5 TODD P. BLAKELY, ESQ.
Sheridan Ross & McIntosh
6 1700 Lincoln Street, 3500
Denver, CO 80203
7
ERIC M. LIEBERMAN, ESQ.
8 Rabinowitz, Boudin, Standard
Krinsky & Lieberman, P.C.
9 740 Broadway at Astor Place
New York, New York 10003
10
HELENA K. KOBRIN, ESQ.
11 7629 Fulton Avenue
North Hollywood, CA 91605
12
For the Defendants: THOMAS B. KELLEY, ESQ.
13 NATALIE HANLON-LEH, ESQ.
Faegre & Benson
14 2500 Republic Plaza
370 17th Street
15 Denver, CO 80202
16 KEN LIEBMAN, ESQ.
DANIEL A. TYSVER, ESQ.
17 Faegre & Benson
90 South Seventh Street
18 Minneapolis, MN 55402
19 * * * * *
20 PROCEEDINGS
21 THE COURT: This is 95-B-2143, Religion Technology
22 Center against F.A.C.T.Net, Inc. and others, and the cause
23 comes on for hearing of the preliminary injunction. Before
24 the court came into session and for some days previous to
25 today, briefs have been filed, and in fact one this morning.
3
1 And it appears to me from an examination of the documents on
2 file that in all likelihood we are not going to finish today
3 with the hearing. And if that is the case -- well, Monday is
4 available, and we'll go over into Monday, if necessary. So I
5 do not want the attorneys thinking that somehow or other there
6 is a visage of the grim reaper with a stopwatch in his hand.
7 That does not mean I am inviting you to whetter on endlessly.
8 So we'll take what time the case needs, and we'll proceed, but
9 let's proceed expeditiously. Are you ready to proceed?
10 MR. COOLEY: Yes, Your Honor.
11 MR. BLAKELY: Yes, Your Honor.
12 THE COURT: Defendants ready?
13 MR. KELLEY: My office is in the process of
14 delivering my exhibit notebooks. They are not here yet. I
15 don't know what to say except that I am going crazy. I do
16 expect they will be here any minute. I have a couple of
17 preliminary matters I need -- we need to raise.
18 THE COURT: Be seated. Do you need your exhibit
19 notebooks before we hear any opening statement from the
20 plaintiff?
21 MR. KELLEY: No, not unless the Court does or
22 Mr. Case does.
23 THE COURT: What about your preliminary matters?
24 What are you talking about?
25 MR. KELLEY: We have a protective order I would like
4
1 to tender to the court and get that out of the way. I think
2 that's all I have.
3 THE COURT: Protective order regarding this hearing?
4 MR. KELLEY: Regards discovery and what happens at
5 this hearing with confidential matters, yes, sir.
6 MR. BLAKELY: It's a stipulated protective order,
7 Your Honor, because of the trade secrets that are involved in
8 the case.
9 THE COURT: Well, okay. I am willing to listen to
10 whatever you are talking about.
11 MR. KELLEY: We also have motions pro hac vice for
12 two other members of my firm from our Minneapolis office who
13 are not admitted in Colorado.
14 THE COURT: Okay. Well, I am going to grant the
15 motion for admission pro hac vice, but I do need to tell you
16 it says that Mr. Liebman graduated from Yale Law School, and
17 it's my understanding it's so hard to get there, that there
18 isn't one.
19 MR. LIEBMAN: I apologize for going there.
20 THE COURT: Don't they just give you a degree once
21 you get the admission standard?
22 MR. KELLEY: In redemption for or mitigation he is
23 steeped in midwestern values and only spent a brief period of
24 time out there.
25 THE COURT: Anybody from Minnesota is admitted.
5
1 What's next?
2 MR. KELLEY: Your Honor, we do have a stipulated
3 protective order, which I have signed, tender an original and
4 a copy to Mr. Case. The only thing I want to be on the record
5 is that at this stage that protective order does not permit me
6 to disclose confidential material to any insurer involved in
7 the defense of this case. We have agreed in principle that
8 order will be amended to so provide. We have to hammer out
9 the language simply. With that caveat, that order is tendered
10 as agreement of the parties. It deals with materials
11 exchanged during the course of the discovery that are claimed
12 to be confidential and trade secrets. I think it makes it
13 clear that however the court feels about confidentiality
14 matters, once they are offered as evidence is up to the court.
15 THE COURT: Well, that's all I am really concerned
16 about. The agreement you have for things that happen before
17 or after court are entirely up to counsel. What happens here
18 is another matter.
19 MR. KELLEY: I understand that and attempted to make
20 that very clear.
21 THE COURT: Okay.
22 MR. COOLEY: May it please the Court.
23 THE COURT: Yes.
24 MR. COOLEY: With respect to that last point, we'll
25 be presenting in the course of the evidence in support of the
6
1 application for preliminary injunction the materials that were
2 located on the computers and in the hard copies of the
3 defendants pursuant to the Order of Seizure. And we'll have
4 notebooks for the court comparing those infringing materials
5 with the actual materials. We would ask that those
6 notebooks -- that Mr. McShane will be the witness, that he
7 compare, he point out the portion of the notebook that makes
8 the comparison but that those matters not be made a matter of
9 public record because that of course would expose us to losing
10 the secrecy that we are here trying to protect. We, of
11 course, will have copies of those books for counsel and for
12 the court, but we would ask that under the protective order
13 that the counsel have all agreed to that the matters be
14 designated as confidential and that we not in the course of
15 litigating the matter lose the very rights we are trying to
16 protect.
17 THE COURT: To the extent we can, that's fine. I
18 respect trade secrets. I do not respect confidential court
19 hearings. That's the problem.
20 MR. COOLEY: I understand. Sometimes, however, the
21 courts have entered these kinds of procedures to protect
22 against a pyrrhic victory with the thing being disclosed on
23 the record.
24 THE COURT: We'll try to avoid that. I understand
25 what you are saying. All right. Did you get your exhibit
7
1 books?
2 MR. KELLEY: No, I have not seen the doors part and
3 exhibits come in. All I can do is apologize, Your Honor.
4 THE COURT: That's all right but can't we go ahead
5 now.
6 MR. KELLEY: I can go ahead if everyone else can.
7 THE COURT: All right, okay.
8 MR. COOLEY: Your Honor, I have one housekeeping
9 matter Your Honor mentioned that you received a brief from the
10 defendants this morning.
11 THE COURT: I think it was this morning. It could
12 have been late last night.
13 MR. COOLEY: It was served on us around late
14 yesterday afternoon, so I don't know when it was filed. We
15 didn't file anything since we were in discovery the last
16 couple of days and we have been in Virginia. I had been
17 informed that this court had a 72-hour rule, and I didn't want
18 to run a foul of it, so I obviously was too late to meet it
19 and I didn't expect that I would be -- I was going to ask the
20 court permission this morning to file something.
21 THE COURT: Sure you can.
22 MR. COOLEY: If the court is going to consider that
23 brief.
24 THE COURT: I am going to consider any briefs that
25 are filed, and you have permission to file them. The 72-hour
8
1 rule doesn't apply to extraordinary proceedings which by
2 definition an injunction is. We wouldn't -- that's the reason
3 we have preliminary injunctions is to suspend the normal rule.
4 If you want to file something, you go ahead, and if you want
5 me to wait to make up my mind until you get it, why, I will do
6 that.
7 MR. COOLEY: That will be fine. Thank you, Your
8 Honor. I had planned to make an opening statement if it meets
9 with the Court's approval.
10 THE COURT: Sure. I want to hear from you then. I
11 will hear from Mr. Cooley, and then we'll start with the
12 testimony.
13 OPENING STATEMENT
14 MR. COOLEY: This case is here because of
15 trademark -- of copyright infringement and trade secret
16 misappropriation. That's what the case is all about. The
17 Complaint in this case was filed. A temporary restraining
18 order was entered against the defendants as well as an
19 impoundment order and a seizure order. Seizure was executed
20 under the supervision of the United States Marshals, and we
21 have continuously through an independent computer expert been
22 conducting the searches for infringing material. Over here
23 are the boxes of the infringing material that have been taken
24 from the computers and the hard copies of the defendants.
25 There are two boxes of unpublished upper level materials on
9
1 their computers. There are two boxes of unpublished materials
2 in hard copy. Since the order extended to all writings of
3 L. Ron Hubbard, we located 12 boxes of published materials
4 that are copyrighted in hard copy and on the computer and six
5 boxes of published material and a copyright of some of the
6 unpublished upper level O.T. II material which were on CDs,
7 and copy of which F.A.C.T.Net distributed for $200 or $225 a
8 piece. This massive infringement search is not complete
9 because there are huge quantities of documents on tapes that
10 Mr. Wollersheim and apparently Mr. Penny have made that are
11 encrypted. And at his deposition the day before yesterday,
12 Mr. Wollersheim was asked to furnish us with the encryptions,
13 so we could examine those to determine the existence of
14 infringing materials there, and he refused to do so. My
15 colleague, Mr. Blakely, has a motion with respect to that
16 refusal, and we cannot complete the search until we have that
17 encryption. In any event, we have this massive quantity of
18 material that we believe more than supports a preliminary
19 injunction. What we are dealing with here is Mr. Wollersheim,
20 a former Scientologist who has been for 15 years obsessed with
21 the destruction of the Church of Scientology and the religion
22 of Scientology and has come upon the device of applying for
23 and obtaining from the Internal Revenue Service a 501(c)(3)
24 status for his corporation, F.A.C.T.Net, by parading himself,
25 parading that corporation, as an electronic lending library
10
1 and an archive preservation site. In fact, the evidence which
2 we'll introduce will show that under the false cover of that
3 so-called charitable educational enterprise, what in fact is
4 going on is that Mr. Wollersheim in conjunction with another
5 man that is going to testify here today, apparently a
6 Mr. Vaughn Young, are running a litigation support service for
7 lawyers who are engaged in litigation against the Church of
8 Scientology or who are planning litigation against the Church
9 of Scientology.
10 In Mr. Wollersheim's case this takes several forms.
11 In addition, to being a director of F.A.C.T.Net, he has his
12 own private business, a consulting business, in which among
13 other things he furnishes consulting services to lawyers in
14 connection with suits against the Church of Scientology. He
15 gets paid for that, but he uses the F.A.C.T.Net database in
16 furnishing that service. He then pays F.A.C.T.Net a portion
17 of his income, and we have uncovered some 20 to $30,000 of
18 that and from his testimony. And sometimes F.A.C.T.Net does
19 itself permit Mr. Wollersheim with his F.A.C.T.Net director
20 hat on or employee hat on to furnish these services which in
21 fact is going on right now in litigation with Time Magazine.
22 The database of F.A.C.T.Net is being employed to mount a
23 litigation campaign against the Church of Scientology.
24 Mr. Vaughn Young who is described by Wollersheim as a
25 voluntary worker for F.A.C.T.Net is engaged in the same
11
1 business. In fact, I know of no other business that he is
2 beyond working for lawyers engaged against the Church of
3 Scientology. I raise this because it impinges upon the claim
4 rather directly that Wollersheim -- that F.A.C.T.Net is a
5 quote "library" end of quote or a preservation archive which
6 is entitled to some lofty constitutional protection that
7 permits it to destroy the constitutional protections that
8 pertain to the Religious Technology Center and the religion of
9 Scientology which it protects.
10 There is no doubt whatsoever that there is a twofold
11 purpose that is going on here. The publication of the posting
12 of the upper level materials O.T. I through O.T. VII to the
13 Internet by Arnaldo Lerma, a resident of Arlington, Virginia,
14 and a director of F.A.C.T.Net without any comment, just
15 putting them on, according to Mr. Lerma, was done upon receipt
16 of those materials in the Fishman affidavit from
17 Mr. Wollersheim. Mr. Wollersheim denies that that happened.
18 So we have the unusual circumstance of one director of
19 F.A.C.T.Net saying one thing, and the other director of
20 F.A.C.T.Net saying another. We'll point those contradictory
21 pieces of testimony out to you in the deposition excerpts that
22 we have for Your Honor's consideration.
23 The purpose that is involved here is to destroy the
24 Church of Scientology in a twofold manner. One, by cutting
25 off at the entry level, the opportunity for the church to
12
1 proselytize and expand and like all proselytizing religions
2 the church considers the entire world a proselytizing area.
3 The upper level materials are a sacred part of the religion
4 that by religious doctrine are not made available to a
5 parishioner until he has gone through the gradient steps
6 necessary to bring him there and then and only then is he
7 entitled to see them. There is no more deeply held religious
8 belief, conviction in the church than that. The plan is to
9 take those upper level materials and expose them before their
10 time and before people are ready to so as to ridicule and
11 demean the Church of Scientology by preventing people or
12 discouraging people from entering and exposing them to
13 materials that they should not as a matter of religious
14 conviction have been exposed to until they had gone through
15 the other gradient steps. This has a double-barrel effect of
16 wiping out the church's First Amendment rights under the
17 banner of somebody else's First Amendment rights, wiping out
18 the church's intellectual property rights, which incidentally
19 have root in the constitution of the United States that
20 predates the Bill of Rights even. Copyright and protecting
21 original writings has been recognized in the constitution
22 before we even had the First Amendment. But in any event,
23 this has a double barrel impact.
24 It has an economic impact of huge dimensions because
25 the church depends upon -- the churches that use these
13
1 materials depend upon the influx of parishioners who provide
2 fixed donations for these materials. So it's a double
3 barreled economic impact of huge dimensions, combined with the
4 intention to wipe out the religion by strangling it
5 financially and destroying its rights under the First
6 Amendment to the free exercise of its religion. That's what's
7 going on here. This is not a case of any attempt on the part
8 of Religious Technology Center or the Church of Scientology to
9 interfere with anybody else's legitimate First Amendment
10 rights. Those rights they have. There are thousands and
11 thousands and thousands of postings on this religion,
12 Scientology, attack on the Church of Scientology and
13 Scientologists in the most scatological materials, in
14 particular, obscene and vial terms applied to my woman
15 colleague, Helena Kobrin, who has been working on this
16 litigation. No finger has been raised to seek judicial
17 intervention in this matter until we got into the area of
18 copyright infringement and trade secret infringement. When
19 that happened, Ms. Kobrin started giving notices of
20 infringement and warnings to cease and desist. Instead of
21 following that, Mr. Wollersheim and people like him
22 participated in an effort to execute this plan that had been
23 articulated on the Internet.
24 They can sue ten of us. They can sue 20 of us, but
25 they cannot sue 10,000 of us, so copy, copy, copy, copy.
14
1 That's the game plan. That's the game plan that
2 Mr. Wollersheim is about. He is not about it in any
3 educational context. That simply is not so. He is relying
4 upon an exception for a library archive under 17 U.S.C.
5 Section 108. This exception only applies to unpublished works
6 that are properly in the possession of an archive in the first
7 place. That is in this Carey case at 873 F.Supp. at 889. It
8 says Congress did not intend Subsection 108 to apply to
9 photocopying and distribution of unpublished work by libraries
10 or archives for their patrons. Once the copyright owner has
11 made the decision not to publish, this choice must be honored.
12 It goes on, if the archive could copy and distribute this
13 material, it could also copy and distribute any author's
14 creative work though unpublished.
15 MR. KELLEY: Your Honor, this is more of a closing
16 than an opening.
17 MR. COOLEY: I am trying to set the legal context in
18 which the evidence is going to be introduced, Your Honor.
19 THE COURT: It's all right. It's to the court. Go
20 ahead.
21 MR. COOLEY: So long as the materials came into the
22 archive's possession, says the archive could copy and
23 distribute this material and could also copy and distribute
24 any author's creative material, so long as the materials came
25 into the archive's possession. Solely, if the possession was
15
1 by illegitimate means, such a result would be totally at odds
2 with the intent of Congress with enacting the Federal
3 Copyright Act.
4 That's an important concept, legitimate means,
5 because there is a red herring that has been drawn across the
6 path here and will be placed in front of the court. And that
7 is that this material, O.T. I through VII that is involved
8 here was in a court file in the United States District Court
9 for the Central District of Los Angeles for a period of time.
10 That allegation lends nothing to the defendants' position.
11 The mere existence of a file in a court file does not destroy
12 copyright, and it does not destroy trade secrets. In that
13 case, the so-called Fishman case, the material was dumped into
14 the record after the case was dismissed in ostensible support
15 of a motion for fees and costs, and the Judge said what is
16 this? This has nothing to do with it and wouldn't consider it
17 in any way. We then attempted to get it sealed. It went to
18 the Ninth Circuit, went back to Judge Hupp for findings and
19 that was completed and was awaiting an order when the only
20 person ever to go to the clerk's office and obtain it out of
21 the file was a representative of The Washington Post, which
22 then proceeded to publish material from it.
23 Parenthetically, the defendants have in the papers
24 filed with you today or last night included our position --
25 our Motion for Reconsideration before Judge Bringama in the
16
1 Eastern District of Virginia on that Washington Post matter.
2 They mischaracterized our position, so we have made the full
3 submission to the court, so the court will see what our
4 position is there and what the issues are that are involved to
5 the extent that the court considers them relevant for its
6 consideration.
7 In any event, nobody ever obtained these documents
8 from the Church of Scientology or any church-related entity by
9 any means other than theft, and the record will show that in
10 the evidence that we introduce, extraordinary security
11 precautions were taken to protect the confidentiality of these
12 materials. The defendants will say that because they were in
13 that court file, they became fair game and could be copied,
14 distributed, and sent around the world. That simply is not
15 the law. The trade secret was not lost. We had somebody at
16 the courthouse checking that file out every single day that
17 the court was on. And that file did not get copied and that
18 file did not even get used by anyone else for all the time
19 that it was there. And as soon as Judge Hupp learned that it
20 had been copied by The Washington Post, he sealed it. The
21 Washington Post then published after it was sealed, and that
22 file is not in any way accessible. But whether it would be
23 accessible or whether it wouldn't, I emphasize, is not a
24 relevant consideration. That does not permit, for example, if
25 there had been litigation over Gone With the Wind, one would
17
1 hardly expect that one could go in and take a copy that was in
2 the court file, post it to the Internet and distribute it to
3 the eternal financial harm and ruin of the author or whoever
4 owns the copyright. That is a preposterous proposition, and
5 to suggest that a trade secret can be lost in that way when
6 you are dealing with a compilation of materials, a universe of
7 trade secrets by having it a little out here and a little out
8 there is also preposterous.
9 What it comes down to, if there is value to be
10 derived, and there is, for R.T.C. and for Scientology, if
11 there is value to be derived from the trade secret by virtue
12 of its secrecies in the universe of people who might gain from
13 it, the mere fact that a little is here and a little is there
14 or some people have it and some people don't, that universe of
15 one billion people is an irrelevant consideration. The value
16 is there. The owner has done all in its power to protect it.
17 It has taken reasonable steps which is what the Trade Secret
18 Act requires and the material has never passed into anybody's
19 hands by any legitimate means. It was stolen. There was an
20 actual theft in Denmark of these materials in 1983. One of
21 the thieves or participants in that ring was a director of
22 F.A.C.T.Net, recently resigned and replaced. One of the
23 others went to jail over there for the theft, prosecuted --
24 the prosecution pressed by Scientology and so the church and
25 R.T.C. has done all in their power.
18
1 F.A.C.T.Net has no contract. There is no express
2 contractual right to do this. Express criminal act,
3 prohibition against reproduction for any purpose, Section 108
4 shall not be construed as justifying a violation of the
5 contract. F.A.C.T.Net doesn't even have a contract and did
6 not obtain these lawfully. All three F.A.C.T.Net directors
7 had confidentiality agreements when they were permitted access
8 to these documents, Mr. Penny, Mr. Wollersheim, Mr. Lerma, and
9 they have violated those contracts and the trade secret
10 statute by acquiring and disclosing them. And those
11 confidentiality agreements will go into evidence before the
12 court in this hearing. We'll show that -- they rely on this
13 Pentagon Papers case. They ignore the fact that the Pentagon
14 Papers case expressly stated through Justices White, Stewart
15 and Marshall, concurring but emphasizing, that that injunction
16 could not issue against The New York Times because of the
17 absence of express and appropriate limited statutory
18 authority, such as that provided by the copyright statute and
19 so to cite the Pentagon Papers case is to deal with a totally
20 inappropriate and inapplicable situation. If copyright
21 existed there, they probably covered that that, enjoined the
22 arguments made Justices White and Stewart, drew specific
23 comparisons with copyright and unfair competition. Where
24 Congress had authorized prior restraint against the private
25 parties in certain instances -- that's a quote -- Justice
19
1 White further emphasized no one denies that a newspaper can
2 properly be enjoined from publishing the copyrighted works of
3 another and that injunctions may be obtained against unfair
4 methods of compensation.
5 Now, far from standing for the proposition advanced
6 by the defendants, the Pentagon Papers case supports the
7 position advanced here. For Mr. Wollersheim to try to even
8 disguise himself as The Washington Post is ludicrous because
9 his activities don't bear any resemblance to those of a news
10 person. Even in its application to The Washington Post, the
11 Pentagon Papers case was erroneously applied and Judge
12 Bringama will be hearing that issue next Friday. There are a
13 large number of distorted references to Scientology cases that
14 the defendants are going to rely upon the Wollersheim case,
15 case against the Church of Scientology of California, and they
16 distort what the text in issue here, how they were impacted by
17 that case.
18 In fact, they say that the text in issue were ordered
19 released to the public as part of the court file on November
20 4, 1995 -- 1985 rather. On 4 November 1985 the files have
21 been sequestered and the court vacated the sequestration and
22 were not ordered released. The only text in issue was O.T.
23 III not O.T. I, II, IV, V, VI, VII. The church had
24 approximately 1,500 Scientologists lined up at the court to
25 get the files and no others got access to them. Almost
20
1 immediately, the state stayed its order to unseal the files to
2 obtain these documents and there was -- they were never in an
3 unsealed court file after that. There was no evidence that
4 the Los Angeles Times actually obtained copies from the brief
5 files. It could have happened because the Scientologists had
6 custody of them and more than likely obtained them from
7 Mr. Wollersheim's attorney.
8 The Religious Technology Center v. Wollersheim case,
9 the statement in that case, but not applicable here, the use
10 was found to be fair was copying of the documents by a lawyer
11 for use by two expert witnesses. And the sole use -- that was
12 permitted was that use. The court says that it's
13 uncontroverted that Lawyer Schlatter earmarked the documents
14 confidential and never offered them in evidence. Discussed
15 copy issues only and not trade secret issues and dismissed
16 state claims as pendant claims because the federal claims were
17 dismissed. The R.T.C. v. Wollersheim and Scott case -- they
18 talk -- is a case on remand alleged to economic advantages for
19 the first time and no misappropriation was found they say.
20 That's not true. We didn't amend the trade secrets claim.
21 Always alleged it in the same terms. We amended to add a
22 copyright claim because the Ninth Circuit had noted that we
23 hadn't made one, and we took that as an invitation to get on
24 board with one and we did. R.T.C. v. Scott did not say there
25 was no misappropriation. It referred to the new church, that
21
1 is the competing church's misappropriation but found that we
2 had not argued economic harm, so we didn't meet the standard
3 of economic advantage. When we went back, we did argue
4 economic harm which had already been placed in the record. We
5 are in this case arguing a vigorous combination of both
6 factors economic harm, and notwithstanding the defendants'
7 characterization of what we are doing, economic harm resulting
8 from the activities of Mr. Wollersheim, Mr. Young, and his
9 colleagues and the destruction of our First Amendment rights
10 in the whole process. That the court has to engage in by
11 the -- by the misapplication of alleged First Amendment rights
12 of Mr. Wollersheim being attempted to be invoked in a
13 circumstance in which they have no application.
14 The continuous -- in the case of BPI v. Beene, that's
15 cited to the court by the defense, we won that case. The
16 court found economic advantage. And I guess whether they cite
17 it or not, we cite it, the court found economic advantage and
18 ruled as a matter of law that the very materials here in issue
19 were trade secrets. So that case stands in the U.S. District
20 Court in California as persuasive authority for what we are
21 asking the court to do here.
22 They have made the statement -- and one of the things
23 that we have to keep in focus here is that the defense makes
24 bald statements about copies being made. And they have no
25 evidence of that, and we have evidence of the contrary. There
22
1 were no copies made from that file except by The Washington
2 Post. To say that the motions on file with the court six
3 months with a Motion to Reconsider Change of Venue that they
4 had filed -- what happened was this case, the Fishman case was
5 first in Florida then came back to California. There was a
6 pending motion. These things were not exposed in files. They
7 were under protective order. After the protective order
8 expired with the dismissal of the case, then this Graham Berry
9 who is the very lawyer with whom Mr. Wollersheim is getting
10 consulting services -- furnishing consulting services, using
11 the F.A.C.T.Net database, dumped them into the record, so we
12 have a sort of circular motion here. Wollersheim and his
13 friend get them dumped into the record gratuitously. They
14 know that they are in a chain of theft from beginning to end
15 and then try to rely on that -- the material being in that
16 file as an excuse to post them to the Internet. And in fact
17 the copy that was posted to the Internet did not come from the
18 court, went from Wollersheim to Lerma, who received it knowing
19 that he was to post it to the Internet. He sent it back to
20 Wollersheim and posted it and that is a fragrant violation of
21 both copyright and trade secret misappropriation.
22 Bearing upon the issue of Mr. Wollersheim's denial in
23 this regard, we have extracted the entire Fishman affidavit
24 from Mr. Wollersheim's computer with a covering he mailed to
25 Mr. Wollersheim on the 29th of July, sending the material back
23
1 to Mr. Wollersheim, the first two-fifths and the remainder the
2 next day and the posting occurred the day after that. So
3 we'll ask the court to compare that to Mr. Wollersheim's sworn
4 testimony.
5 I think that I don't want to have an opening that
6 goes so long that we lose track of the evidence, but I do want
7 to address trade secrets for a moment because I want to
8 emphasize to the court that trade secrets are as important as
9 copyright in this case. Mr. Wollersheim argues and will, I am
10 sure, advance the theory to the court that the secrets are in
11 the public domain. Once disclosed he will say a trade secret
12 loses its protection. He assumes that a mere disclosure
13 destroys protection, and this is simply not so. Absolute
14 secrecy is not required. Relative, partial, or qualified
15 secrecy is sufficient under the Restatement Third, Section 39,
16 Comment F. And that's confirmed in Jostens v. National
17 Computer Systems, 214 U.S.P.Q. 918, even distribution to
18 thousands of people does not destroy secrecy. Data General
19 Corporation v. Digial Computer Controls, Inc., 357 Atlantic
20 2d. 105, only reasonable efforts to maintain secrecies are
21 required. National Legal Research Group v. Latham, 1993 WL
22 169789 out of the Western District of Virginia. Du pont v.
23 Christopher, 431 F.2d 1012, out of the Fifth Circuit in 1970,
24 trade secret status protection is not lost because documents
25 are filed in court, and the key case on that is Gates Rubber
24
1 Company, 9 F.3rd 823 out of this circuit in 1993. The key
2 point is the mere fact that the materials may temporarily have
3 been available for copy such as in a court file or even on the
4 Internet does not mean that secrecy status is destroyed. And
5 our evidence will show that it's not critical that the secrecy
6 potentially could have been compromised. The burden is on the
7 defendant and they cannot show a compromise under any
8 circumstances that is sufficient to wipe out the trade secret.
9 The proper standard is whether there is sufficient
10 evidence to conclude that the secrecy status has in fact been
11 destroyed so as to render trade secret protection ephemeral,
12 and whether the holder of the secret took reasonable steps to
13 protect it. There is no way that the trade secret here is
14 ephemeral. It cuts across the very fundamental beliefs of the
15 Church of Scientology and has application to a universe of
16 people that in fact embraces the planet. There is no evidence
17 that secrecy has been breached and overwhelming evidence that
18 will come from Mr. McShane that the plaintiff undertook all
19 precautions. The argument against economic value Mr. McShane
20 will give the court evidence that shows that the R.T.C.
21 derived substantial economic value and that these materials
22 have been the subject of a number of attempts at piracy and
23 exploitation by others and is only because we have succeeded
24 in protecting secrets that there is presently no viable
25 competing entities using these materials. Our success cannot
25
1 be converted perversely into evidence of no economic value.
2 Again, the Vien case upholds that. There is no way that
3 Mr. Wollersheim can show that he got the materials through
4 lawful means. Mr. McShane will testify that nobody ever got
5 those materials outside of the church through anything but
6 unlawful means. Mr. Wollersheim knew of the secrecy status
7 for years, signed contracts to that effect. Calls them
8 invalid, and he won't honor them whereas his colleague
9 Mr. Penny recognizes that they are valid and that he has
10 honored them himself, and so we can compare the differing
11 views of the directors of the same corporation on that matter.
12 The concept of fair use does not apply at all to
13 trade secrets. Has no application in the trade secret area,
14 and the fair use that Mr. Wollersheim is claiming is wiped out
15 by the fact that he is really in a commercial business of
16 Scientology bashing with lawyers, as this case will show. He
17 is not in the business of educating anyone because an
18 educational exemption from the IRS requires a balance to life
19 and his approach is simply anti-Scientology from beginning to
20 end and only to educate people through his views of what
21 Scientology is, how it should be treated. That isn't what an
22 educational institution does, and this business of
23 archiving -- he is not under the statute entitled to do that
24 or claim a fair use for that or for anything else under the
25 statute. He simply has no fair use defense on copyright and
26
1 there is no fair use defense on trade secret.
2 I'm sorry I took so long, but that's the context in
3 which the evidence will go in and perhaps as --
4 THE COURT: Can you tell me who you are going to call
5 as witnesses, please?
6 MR. COOLEY: Yes, Your Honor. Mr. Warren McShane,
7 the president of Religious Technology Center. He will be the
8 first witness. The second witness will be the computer
9 expert, Ron Tencati -- I shouldn't have trouble with an
10 Italian name -- then we'll be putting on deposition testimony
11 that will be furnished to the court, notebooks, exhibits, and
12 affidavits, and that will be the totality of the case.
13 THE COURT: Thank you. Mr. Kelley.
14 OPENING STATEMENT
15 MR. KELLEY: That you, Your Honor. I am going to
16 hold off having the people barge in with my exhibits now.
17 They are here. If Your Honor please, I will wait until I am
18 finished with the opening statement.
19 Your Honor, first of all, I appreciate Mr. Cooley's
20 efforts to put things in focus, and I am going to try to do
21 the same thing, and I am going to begin by telling you what we
22 are not going to prove here today.
23 Your Honor, as you know, this is an expedited
24 proceeding, and we have proceeded as quickly as we can to get
25 ready. It has been impossible to get ready on all issues, and
27
1 I want to make it clear to the court that there are some
2 issues that we simply do not intend to present evidence on
3 today and reserve for later, develop through discovery,
4 presentation at the ultimate trial of this case. I am
5 thinking if I take this position, it's going to save some time
6 today and simply get out in the open what we are not requiring
7 the plaintiff to prove today. And if Your Honor will accept
8 that, we can deem these as facts that are admitted strictly
9 for purposes of this hearing but not for purposes of the
10 ultimate determination.
11 THE COURT: All right.
12 MR. KELLEY: We are not going to contest the
13 originality of the work by Mr. Hubbard. We are not going to
14 contest the ownership of the copyright to that work, nor the
15 chain of title of the plaintiff. Nor are we going to contest
16 the registrations or validity of the registrations, although,
17 given the lack of contest to the copyright, I think that's
18 probably moot. We have a number of defenses on which we are
19 not going to present evidence, including the misuse of
20 copyright, unclean hands and other defenses, which we also
21 would like to reserve. With that, I hope I have saved a
22 couple of hours.
23 THE COURT: Thank you.
24 MR. KELLEY: Further attempting to focus this case,
25 Your Honor, what the case is about is seven copyrighted works
28
1 which the plaintiff also claims at the same time are trade
2 secrets. They are known as O.T. I through O.T. VII. These
3 are the only works as to which any intellectual property
4 rights are in issue in this case. To basically simplify what
5 this case is all about is simply this. Which of those
6 materials do the defendants, my clients, have in their
7 possession. How did they get them and what have they done
8 with them. In issue also is the status of the secrecy of
9 these materials. And when Your Honor hears all of the
10 evidence in the case, Your Honor is going to find we believe
11 that is simply contention that cannot be taken seriously.
12 F.A.C.T.Net is a library and an archive. It collects
13 and gathers information concerning dangerous cults or related
14 to be dangerous cults. Granted, the primary purpose for the
15 use of that information is the victims of what it considers to
16 be dangerous cults and certainly the religion of Scientology
17 is high on their list, and that certainly is what most of
18 their material is about. They are a 501(c)(3) corporation. A
19 fact which incidentally wasn't disclosed in the moving papers,
20 seeking the right of seizure in this case. What's more
21 important is that they are a library and archive and also are
22 in the age of electronic communications a newspaper. They
23 publish over the Internet on a regular basis. They publish a
24 quarterly newspaper. At least, they did until their printing
25 press, so to speak, was seized. The court is going to hear a
29
1 lot about the new technology in this case. The Internet is an
2 extraordinary medium of communication that permits instant
3 communication of vast amounts of information electronically.
4 Permits that to happen worldwide. No medium that I have ever
5 worked with before comes anywhere near close to what can
6 happen over this medium. Perhaps more importantly, this
7 medium comes closer than anything I have ever seen to a true
8 speaker's corner or public forum. It's a medium where
9 communication is from many to many as opposed to one to many
10 and in which concentration of ownership of newspapers and
11 broadcast media has led us to where one medium basically
12 broadcasts or distributes to the world. Here anyone can
13 communicate their message to the world instantaneously. One
14 other aspect of this medium is that these communications can
15 be made unanimously and without accountability. And that's
16 one of the problems the legal system is facing in dealing with
17 this medium, but my client is not anonymous. My client is
18 accountable. My client is here. And for that reason, we are
19 going to ask the court to treat my client the way it would
20 anybody who serves the function of a library and a newspaper
21 at the same time.
22 And counsel has suggested that this is a very biased
23 newspaper and very biased library in its orientation. Putting
24 aside 501(c)(3), which has nothing to do with this case, under
25 the First Amendment, Your Honor, I have never heard any
30
1 distinction between a biased newspaper and unbiased newspaper
2 except in the forum of public opinion.
3 Never have I suggested that a court insist and impose
4 any distinction between those two. We think that is a
5 nonissue in this case, and we want the court just to consider
6 what the court is dealing with is the impoundment of both a
7 printing press and a newspaper in one fell swoop. With this
8 new medium, the court has more power than the court had in the
9 Near v. Minnesota case in terms of what it might do in
10 silencing someone in the new world -- world of public forum.
11 The Church of Scientology is an organization that has
12 made a number of claims concerning the emotional and healing
13 properties of its religion. It's an organization that is
14 reaching deeper and deeper into society. And essentially it
15 has religious tenets that were the word of the founder L. Ron
16 Hubbard who claimed and in his belief he learned from research
17 and his memory how mankind came to be the way he is as a
18 result of events that occurred in intergalactical
19 confederation some 75 million years ago. What I am talking
20 about now is no secret. It has been in hundreds of newspaper
21 articles. Many of which will be offered here. The level of
22 intergalactical confederation dealing with an over population
23 problem took --
24 MR. COOLEY: I object and ask -- this is -- this is a
25 direct accounting of one of the O.T. levels. To be done in
31
1 this fashion is to defeat our very effort to try to protect
2 it. I understood that we had an understanding that there
3 would be efforts to maintain confidentiality. The court can
4 certainly see what it is that that level says for the purpose
5 of comparing it with what was done, but to have counsel
6 speaking it out loud in the courtroom, I object to it. I ask
7 if counsel wants to show the court the written material, that
8 counsel do so and make whatever arguments he wishes to make
9 from that. I object with everyone else present to try to
10 violate our rights by having them destroyed in this fashion.
11 MR. KELLEY: Your Honor, I am describing something
12 that has been published all over the world, in The Washington
13 Post, Los Angeles Times, over the Internet time after time
14 after time.
15 MR. COOLEY: That's one of the very issues we are
16 here to contest.
17 THE COURT: The objection is overruled. If there is
18 anything specifically secret, that's fine, but he's free to
19 talk about what's already a matter of public knowledge.
20 MR. COOLEY: We haven't gotten to the point in the
21 hearing where the court's in a position to make a ruling as to
22 what or is not in the public domain.
23 THE COURT: I have to rely upon counsel who says it's
24 in the public domain.
25 MR. COOLEY: I say it isn't, and I object.
32
1 THE COURT: I understand. Mr. Kelley, do you have
2 something that says it's in the public domain.
3 MR. KELLEY: Yes, sir, Your Honor. I am just talking
4 about the basic story which appeared in the Washington Post
5 August 19, has appeared in the Los Angeles Times in 1986 and
6 that series of stories has appeared in countless stories that
7 will be offered into evidence and has appeared time after time
8 in the last year over the Internet.
9 THE COURT: The objection is overruled. Go ahead.
10 MR. KELLEY: The current state of mankind occurred as
11 a result of the leader of the galactic confederation, someone
12 by the name of Xemu, chaining a number of -- or somehow
13 binding a number of persons from that galactic confederation
14 to volcanoes on the planet earth, bombs those volcanoes with
15 H-bombs and the souls of those persons', those souls known as
16 Thetans which inhabit human beings now and account for all of
17 their psychological and some physical ills, and the religion
18 is the process of expurgating those things. The plaintiff
19 attempts to keep this secret because they say that it's
20 inappropriate to expose people to this until they have had
21 adequate spiritual conditioning to receive it and to accept it
22 and to practice it. My clients and a number of other people
23 out there, a number of credible people and a number of people
24 that Your Honor is going to read about take the position that
25 this is a system of psychological coercion, i.e.,
33
1 brainwashing.
2 We are not here to ask this court to decide who is
3 right in the course of this, but we are going to show the
4 court that this is a matter of intense public debate right
5 now, and I think given what adherents to this religion are
6 asked to believe, the argument that there is some brainwashing
7 going on is not implausible. Given that situation and the
8 fact that my client is aware and has documented hundreds of
9 cases of casualties from this brainwashing process, emotional
10 injuries, suicides, what have you. It has set up an
11 information system for the aid of victims, victims' families
12 and for which it has a public archive and library and private
13 archive and library. And Mr. Wollersheim will testify to how
14 this is set up and the efforts that are made to maintain that
15 distinction.
16 The evidence is going to be that materials such as
17 the ones here where they feel they can anticipate a claim of
18 copyright are kept in the private section of the library which
19 means they are not accessible by people that have electronic
20 access to the library. They are not downloadable. And since
21 Mr. Wollersheim came into possession of what's known as the
22 O.T. materials, they have been kept in the private portion of
23 the library, and Mr. Wollersheim has had those materials since
24 the mid 1980s.
25 Now, a little bit needs to be said about how
34
1 Mr. Wollersheim got those materials. What we are talking
2 about here primarily is the affidavit of Stephen Fishman,
3 filed in the spinoff suit, which the Church of Scientology
4 filed against him for being a source in a 1981 article
5 concerning Scientology in Time magazine. In that affidavit he
6 asked the court for certain relief and took the position that
7 he had been brainwashed and in support of that attached as
8 exhibits portions of the O.T. documents we are talking about
9 here. My client, since that time, has had a copy of that
10 document. He has a copy of it with a court filing stamp on
11 it. In addition, my client had his own case against the
12 Church of Scientology in which he recovered millions of
13 dollars for intentional infliction of emotional distress.
14 That judgment is final. Appeals have been exhausted. The
15 judgment is unpaid.
16 In the course of that litigation, he obtained copies
17 of some of the same materials and some additional ones. And
18 that case was tried in 1986. The evidence is going to be that
19 over this ten-year period he has had those materials and has
20 not disseminated them in any public way.
21 One other thing the court needs to know is that these
22 materials, the attachments to the Fishman affidavit and the
23 other materials I am talking about are a very small portion of
24 the entire O.T. works. Mr. McShane has testified that the
25 entire O.T. I through VII works in issue in this case amount
35
1 to something in the neighborhood of I believe it's 800 to
2 1,000 pages. I don't have the exact number here. They will
3 be in evidence. Nonetheless, the only thing that is claimed
4 in our possession that's infringing of the O.T. I through VII
5 is somewhere between 60 and 70 pages. And that's going to be
6 something very important in this case, and I want to be on the
7 record right now that we have asked for production of the
8 entire works, so that we might submit to the court the entire
9 works and the court might see what kind of use has been made
10 of those works. They have not been provided to us. And from
11 my cursory look at the exhibit book this morning, it doesn't
12 look like they are being offered to the court. I want to
13 object to that very strenuously if I am right about that. The
14 evidence is going to be that from the beginning there were
15 security problems with these materials. They were outside the
16 church system through many sources long before the theft in
17 Copenhagen in 1983. They were the subject of newspaper
18 articles, they were in the possession of newspaper
19 organizations. After the theft of 1983, documents were filed
20 in court proceedings. It's through that process that my
21 client obtained copies of those documents and obtained copies
22 of them lawfully.
23 After that time, these documents have been not only
24 the continuing subject of newspaper publicity. We now know
25 that The Washington Post has them and has published articles
36
1 concerning them. We also know that they have been posted on a
2 regular basis on the Internet throughout 1995, and we will
3 have evidence of that. Significantly, Your Honor, the
4 document was on file in the Central District of California for
5 nearly two years. It was not sealed. It was there to be
6 copied, and The Washington Post did copy it.
7 Our position on the matter of trade secrets is that
8 this is not in any sense a secret and given the importance of
9 this information and in the course of the public debate in
10 which the Church of Scientology declares that all of their
11 teachings are taken out of context, it's not something that's
12 appropriate for injunction, as a matter of trade secrets. As
13 a matter of copyright, Your Honor, our position is very simply
14 that what document is on file in a Federal Court and not under
15 seal, a media organization of any kind under the First
16 Amendment and under the common law right of access to the
17 judicial branch of government which is recognized throughout
18 the country, a media organization has the right under the
19 doctrine of fair use to make a copy of that document for
20 whatever use it might want to make and in reporting or storing
21 information. I would say that's particularly so under the
22 doctrine of fair use when there is no other available source
23 for the copy. You can't go out and buy it at a bookstore.
24 When a media organization takes that copy, it has the right to
25 make the same use of it under the doctrine of fair use that
37
1 one might make with a book bought at a bookstore.
2 It's our contention that the use made of these
3 materials by my client as a library and archive copying it
4 within the organization is fair use.
5 The evidence is going to be that the only public
6 posting of the Fishman document was the one by Mr. Lerma that
7 occurred August 1 or 2 1995. Our evidence is going to be
8 that it was contrary to Mr. Wollersheim's policies. It
9 happened as a miscommunication. But in any event, our
10 position will be that it was fair use.
11 It's going to be difficult for the court to analyze
12 the issue of fair use as to whether the few pages copied and
13 transmitted on August 1 or 2, without having the entire works
14 in front of the court, and we are going to object unless that
15 happens, or if my understanding of the state of the record is
16 incorrect, it's straightened out. But in any event, we
17 contend it's fair use. If the court should disagree with
18 that, my clients are prepared to abide by whatever decree the
19 court enters, defining what fair use means with respect to a
20 document such as that. Surely, my clients no less than the
21 Washington Post are permitted to comment concerning what's in
22 that document and make fair use of copying it with
23 appropriately limited excerpts, and that's the relief we'll be
24 asking for Your Honor, that Your Honor discharge the writ,
25 order my clients' printing press and library returned to them,
38
1 and at the very least permit them to make whatever Your Honor
2 feels fair use permits of the materials in their possession.
3 Thank you.
4 THE COURT: Who are you going to call as witnesses,
5 please?
6 MR. KELLEY: We are calling Professor Richard Cleek,
7 Professor of Geography and Computer Science at the University
8 of Wisconsin in Westbend. He will be called to discuss the
9 nature of the Internet and postings of O.T. materials he has
10 seen on the Internet.
11 We'll be calling Mr. Robert Vaughn Young to testify
12 simply concerning some of the past media publicity concerning
13 disclosure of the O.T. materials.
14 And we'll be calling Mr. Wollersheim to testify to
15 essentially what I have -- what I have outlined in this
16 opening statement. Mr. Penny is also here. Mr. Penny is in
17 ill health, suffering from multiple sclerosis. I am going to
18 try to avoid calling him as a witness, but it's possible he
19 may have to be called as well.
20 THE COURT: Thank you very much. Call your first
21 witness, please.
22 MR. COOLEY: Warren McShane, please.
23 THE COURT: I think everyone should know when the
24 oath is being administered, I do not allow any other conduct
25 to be taking place. The witness is entitled to that respect.
39
1 So we'll just wait a minute until these exhibits come in and
2 then we'll proceed with the taking of the oath. Since there
3 are a number of spectators, I might point out to you that you
4 are free to come and go as you wish except as the oath is
5 being taken, I don't want people moving around at that time.
6 MR. KELLEY: It's my fault, Your Honor. I told them
7 to come in.
8 THE COURT: Mr. Case said he hadn't notified people
9 before. It may be an idiosyncrasy, but it's one that I am
10 comfortable with.
11 MR. KELLEY: I am familiar with it, too, and I
12 apologize.
13 (Warren L. McShane was sworn.)
14 THE COURTROOM DEPUTY: State your name for the
15 record. Please spell your last name.
16 THE WITNESS: Warren L. McShane, M-C-S-H-A-N-E.
17 DIRECT EXAMINATION
18 BY MR. COOLEY:
19 Q What position do you hold with Religious Technology
20 Center, sir?
21 A I am the president of the corporation.
22 Q How long have you held that position since?
23 A Since January 1994.
24 Q How long have you been with Religious Technology Center
25 and in what capacities?
40
1 A I first became employed with R.T.C. in August 1983.
2 I have held various positions within R.T.C. mainly
3 dealing with the protection of intellectual property rights.
4 Q Have you worked continuously in the area of having primary
5 responsibility for the enforcement of the R.T.C.'s
6 intellectual property rights?
7 A Yes.
8 Q Would you tell us, sir, what steps are taken to maintain
9 the confidentiality of the O.T. levels?
10 A Okay. From the very beginning of time when they became
11 available to the church from Mr. Hubbard, he has always
12 stressed their confidentiality. When the materials were sent
13 to trusted aids of his back in 1966, they were instructed to
14 copy them.
15 MR. KELLEY: I don't think there is any foundation
16 for this.
17 THE COURT: Overruled.
18 THE WITNESS: They were instructed to maintain their
19 confidentiality. In fact, they weren't even allowed to look
20 at them when they copied them, and they were to be held in a
21 safe, so that there would be an additional copy to the one
22 that Mr. Hubbard had at the time in case anything happened,
23 natural disaster, whatever happened, he had copies. From that
24 point when they were allowed to be viewed by the parishioners
25 who had obtained the correct spiritual level, parishioners
41
1 were made to sign confidentiality agreements and the materials
2 were always kept under lock and key, usually in separate
3 rooms, separate filing cabinets and only allowed to be viewed
4 when the qualified person is in the room usually with a
5 supervisor to oversee the person's study of those materials.
6 If the materials went anywhere within the church, they were
7 always couriered within locked briefcases always accounted
8 for. They were logged in and out of their secured filing
9 cabinet, so they would always be maintained and always be kept
10 track of. Over the years, the technology has increased and
11 improved, and we have hopefully kept up with technology and
12 increased our security to what it is today. I can go into the
13 details what it is today. If you would like me to.
14 MR. COOLEY: Could the exhibits be given to
15 Mr. McShane? Does the court have its book of exhibits.
16 THE COURT: Mr. Case will get them to me now.
17 THE COURTROOM DEPUTY: He will.
18 THE COURT: I have it now.
19 MR. COOLEY: Your Honor, the first 27 exhibits relate
20 to the area which Mr. Kelly has said is not going to be in
21 dispute, at least at this hearing, namely, the copyrights, the
22 title to the copyrights, be the copyright registrations, those
23 are all in the exhibit book as Exhibits 1 through 27.
24 THE COURT: Thank you.
25 BY MR. COOLEY:
42
1 Q I am asking the witness now to focus on the photographs
2 which have been marked as Exhibits 29 through 58, and tell us
3 generally what those depict, what they reflect with respect to
4 security procedures?
5 A Certainly. Like I stated, the technology has increased
6 over the years, especially in the advent of computerization.
7 In modern times when a parishioner requests access to the
8 materials, as his next step in the spiritual bridge, he has to
9 apply for permission to obtain access. That is not contingent
10 on any donation fee he would pay. The eligibility for him to
11 have access comes to R.T.C. R.T.C. approves everyone who goes
12 onto the O.T. levels. We ensure that the person is ethically
13 of the standard that we require, that they have no
14 qualifications which would not allow them access.
15 Q Disqualifications?
16 A Disqualifications, sorry. Once we have approved that
17 person, then he is allowed to have access to the materials at
18 the text level that is next on his sequence.
19 Q Do these photographs all show security procedures that are
20 in place?
21 A Yes, they do. The first one which is Exhibit 29 I believe
22 shows the eligibility for O.T. levels. That's something that
23 the person who would receive -- once he has had clearance from
24 R.T.C., then the photographs depict the sequence that he would
25 go through and the various stages to ensure their security.
43
1 The important break through that we have affixed to these
2 materials is computerization. All of the documents themselves
3 are in binders which you can see. I will point to one.
4 Exhibit 48, for instance, this shows one of the O.T. levels.
5 This happens to be O.T. VI, and you will notice they are in
6 binders. These binders are sealed and cannot be opened. The
7 rings within them cannot be opened, and the packs themselves
8 are wired into the computer system. When the course
9 administrator removes these packs from their secure cabinets,
10 they are unplugged. As soon as they are unplugged, the door
11 to that course room is locked magnetically, so no one can
12 leave the room with the materials. The course administrator
13 has a specific amount of time, usually about 20 seconds, to
14 plug in the pack at the table where the parishioner would be
15 studying his materials. Once that's plugged in, the alarm
16 system is turned off. That is the same procedure that's done
17 for all of the O.T. levels.
18 Q Have the O.T. levels been kept under lock and key from the
19 beginning in locked cabinets?
20 A Yes, they have.
21 Q Have they been logged out consistently from the beginning?
22 A Yes, each pack has been given a number has since the very
23 beginning, and when a parishioner -- when a course
24 administrator assigns it back for a parishioner for study in
25 the course room, then that particular number is logged out to
44
1 him.
2 Q In an effort to place the advanced technology, which are
3 these upper levels that you have referred to, in perspective
4 can you tell us the origin of the Scientology scriptures?
5 A The origin -- the beginning started in 1950 when
6 Mr. Hubbard wrote the first book -- Dianetics The Modern
7 Science of Mental Health. That technology addressed man and
8 his relationship to the body of the physical universe. From
9 that -- and as he continued his research he discovered that
10 mental image pictures that a person records at the time of
11 traumatic experiences were recorded in the mind and
12 specifically in a mind that he called a reactive mind which is
13 a portion of the mind that is not under the person's control.
14 It's a stimulus response mechanism that controls the
15 individual in times where certain traumatic experiences might
16 be -- I want I don't want to use any Scientology terms. I am
17 trying to keep this as simple as possible. Certain instances
18 in present time may rekindle some of the past experiences or
19 certain things that are in that traumatic experience. Maybe
20 it's the same time of day or same sound that would rekindle
21 that thought and then have that negative reaction on the
22 person at the present time. These negative impulses and
23 pictures or stories in the reactive mind Mr. Hubbard
24 discovered this and discovered a way of alleviating that. In
25 this process of doing that he discovered that looking at these
45
1 pictures, he asked the question who was actually looking at
2 them. What entity was looking at these pictures. If you say,
3 okay, get a picture of a cat in your mind, and everybody sees
4 a cat. Who is looking at that cat? That was the question
5 that he asked of himself. He discovered and actually kind a
6 phrase or an identity for that person at that time was called
7 just the I. The person himself not his body or the mind but
8 the actual spiritual being himself. From that point that has
9 led into more of the spiritual realm. He then coined a word
10 for that person I, he called it Thetan, T-H-E-T-A-N, which is
11 taken from the Greek letter Theta.
12 Q Is the word Thetan the T in O.T.?
13 A Yes.
14 Q What is the O?
15 A Operate. I can get to that in a minute. Once he
16 discovered this Thetan as this spiritual being, he then
17 continued his research and discovered that there have been
18 certain instances in the past far back in history that have
19 debilitized the Thetan and all Thetans. Have led to what the
20 present condition is of most Thetans, that they are not aware
21 of who they are. They are not aware of their inherent
22 abnormalities, and that many of us are stuck in the physical
23 universe and do not have a clue of what occurred or how to
24 deal with these inabilities.
25 Through his research and discoveries over the years
46
1 he found the way out. He found what had happened many, many
2 years ago, traumatic and devastating circumstances to all
3 Thetans and discovered and developed a way out, so to speak, a
4 particular series of processes and things that a person can do
5 in Scientology that can rekindle the person's native abilities
6 and his natural spiritual awareness of himself and others. He
7 also found at that time period that that unknowingness or the
8 blocks that occurred were done intentionally and that those
9 blocks were designed to stop anyone from discovering what had
10 occurred way back then.
11 That is the reason why these materials are kept very
12 confidential because in the wrong hands, since he discovered
13 how to reverse that, negative instances that occurred and put
14 a person back into his native spiritual sense, that if in the
15 wrong hands that that technology could be used to further
16 degradate the individual and stop him from regaining his
17 natural abilities and natural spiritual awareness of himself
18 and others.
19 From that point on, materials have always been kept
20 confidential, and it's inherent within the materials
21 themselves that they have to be kept that way. And that's why
22 we protect them so vigorously.
23 Q And the confidentiality of these upper level materials
24 doesn't apply to all Scientology scripture, does it?
25 A Not at all.
47
1 Q Are there a vast body of Scientology religious technology
2 that is available to the public in libraries and published
3 books and the like?
4 A The majority of Mr. Hubbard's works are publicly
5 available. The confidential levels are a portion of the
6 materials that he discovered but are a small portion in
7 comparison to what he has discovered and written out and
8 published in books since the early fifties. These are
9 publicly available, sold in church book stories, sold in
10 regular book stores. They are available in libraries.
11 But the key thing to confidentiality is to understand
12 that a person who is not spiritually at that stage to be able
13 to confront what has occurred way back in time, the materials
14 can be harmful to the person or could be harmful to the person
15 spiritually. Mr. Hubbard discovered a gradient of bringing a
16 person up and building, so he can confront those instances
17 that occurred and achieve the spiritual benefit. That's why
18 it's very, very important, and we stress strongly that the
19 person has to do Scientology in the exact sequence Mr. Hubbard
20 discovered and created.
21 Q Is that an article of religious conviction and faith by
22 the Church of Scientology and all Scientologists?
23 A Absolutely.
24 Q Now, at the time that these advanced technologies --
25 religious technology materials were made available to people
48
1 who had reached the proper level so as to have them, were new
2 organizations, church organizations formed to deliver their
3 level?
4 A Yes, they were. In 1966 Mr. Hubbard made his major break
5 through when he discovered a lot of these instances that
6 occurred in the past. And that level was called O.T. III. He
7 had to develop a way of obviously being able to present that
8 to parishioners who had obtained that state. And in order to
9 maintain their confidentiality, he actually started an
10 organization or an organization was formed of the most trusted
11 staff in the church. And this organization was called the Sea
12 Organization. This organization consisted of, like I said,
13 the most dedicated staff in the history of the church. They
14 are mainly responsible for keeping the materials protected and
15 secured. They are also the ones who are only the ones who are
16 authorized to deliver this material to parishioners. Special
17 advanced churches were created to deliver this material to
18 parishioners. There are six of them actually in the world.
19 They are specifically licensed by R.T.C. to have this
20 material. They are all staffed by Sea Org members in order to
21 keep the materials secure and to ensure their standard
22 delivery to parishioners.
23 Q Just identify the six advanced organizations for the court
24 that deliver these levels?
25 A The largest advanced church that we have is located
49
1 Clearwater, Florida, called the Flag Service Organization.
2 There is an advanced organization in East Grinstead in Sussex,
3 England. There is an advanced organization in Copenhagen,
4 Denmark. There is an advanced organization in Sydney,
5 Australia, and an advanced organization in Los Angeles,
6 California.
7 Q The reference to the Sea Organization, had Mr. Hubbard in
8 fact done research on advanced technology aboard a ship?
9 A That's how the Sea Organization got its name. He was
10 aboard a ship. Mr. Hubbard was a decorated naval officer
11 during the war. He loved the sea and chose to do his research
12 and his upper research levels at sea, where he could be
13 totally undisturbed. He chose a select few staff members to
14 go with him that he trusted, and that's how the Sea
15 Organization was formed.
16 Q Are the advanced organizations that you have identified
17 staffed solely by Sea Organization members.
18 A Yes, absolutely.
19 Q About how many Sea Org members are there?
20 A Overall, internationally about 5,000.
21 Q Now, the first advanced organization and every one since
22 then, has it applied the confidentiality provisions that you
23 have described?
24 A Absolutely. It was upon instruction from Mr. Hubbard. In
25 fact, it was a requirement that these materials be maintained
50
1 secure. They would not be authorized to have them unless they
2 were authorized to and they required the parishioners to sign
3 for instance the confidentiality agreements.
4 Q When you say the parishioners had to sign confidentiality
5 agreements, would you look at Exhibits 59, 60, 61 and 62.
6 A Okay.
7 Q Will you tell me what those are please. Tell the court
8 what they are.
9 A They are the confidentiality agreements that I was
10 referring to. They have taken different forms, but
11 essentially the essence of the agreement is the same; that is,
12 to maintain confidentiality of materials.
13 Q Whose agreements are these?
14 A These specific ones are all the ones that Mr. Wollersheim
15 signed when he was in the church.
16 Q And was Mr. Wollersheim -- had Mr. Wollersheim been at
17 O.T. III completion?
18 A I believe he actually got up to O.T. V.
19 Q With respect to Exhibits 63, 64, would you tell me what
20 those are?
21 A These are the confidentiality agreements -- called a
22 security pledge. Security pledge that Bob Penny has signed.
23 Q Mr. Penny is one of the other directors of F.A.C.T.Net,
24 correct?
25 A That's correct.
51
1 Q Okay. Now, going on with his passing on, we don't have to
2 get into it in any detail, is it fair to say that R.T.C. today
3 is the party or corporation in the church charged with the
4 protection of the upper level materials?
5 A Yes, they are.
6 Q And is it R.T.C. who licenses the use of those materials
7 to other churches?
8 A That's correct.
9 Q And does it in fact license those materials to the mother
10 church, Church of Scientology International?
11 A That's one of the organizations.
12 Q And other organizations as well. These -- were these
13 works, these upper level materials, which I take it covers the
14 range of power through O.T -- what O.T. level? Should I wait
15 for Mister --
16 THE COURT: No, it's all right. You can wait if you
17 wish, but that's okay.
18 BY MR. COOLEY:
19 Q Give me the range of upper level materials.
20 A The ranges from level which is called power which is the
21 first confidential level and goes all of the way to the level
22 called O.T. VIII. That's the level that have been released
23 for delivery to the public. There are levels that are above
24 that.
25 Q Incidentally, the so-called O.T. VIII that is contained in
52
1 the Fishman affidavit, is that a legitimate O.T. VIII?
2 A No, it's not. It's a complete forgery.
3 Q It bears a date of 1980. Was O.T. VIII even out in those
4 early days?
5 A No, O.T. VIII came out in 1986.
6 Q So the R.T.C. is claiming no copyright or intellectual
7 property interest in that forgery whatsoever, is it?
8 A That's correct.
9 Q Now, could you tell us what the activities of R.T.C. has
10 been over the years to protect the upper level materials and
11 particularly to protect their confidentiality or any
12 infringement of them as well as any attempted violations
13 thereof? What activities has R.T.C. engaged in?
14 A Well, from the very beginning RTC was formed in 1928.
15 Just as a little background, Mr. Hubbard when he was doing his
16 estate planning, obviously he knew he wasn't going to be
17 around forever, he was very concerned about maintaining the
18 integrity and confidentiality of the materials. And an
19 organization was formed which was the Religious Technology
20 Center with the sole purpose of the protection of the religion
21 itself. He assigned to R.T.C. all of the trademarks that are
22 contained within the religion and the advanced technology
23 itself. From that point on, R.T.C.'s job has been to maintain
24 the integrity and the confidentiality of the materials. We
25 have taken great steps over the years to ensure that the
53
1 security of the materials are increased as the technology
2 increases. We do various inspections of the advanced churches
3 to ensure that they are standardly delivering the materials to
4 the parishioners and maintaining the security requirements.
5 They have logs that show people who are on a
6 particular level that the materials are logged in and out to
7 them. R.T.C. is also responsible, as I testified a while
8 ago, responsible for ensuring that all people are eligible to
9 come on to the O.T. levels, and there is a section within my
10 office that their responsibility is to check the
11 qualifications of these people. We maintain a log, which we
12 have produced here that has the peoples' names that are listed
13 and shows what we do and what we checked to ensure that they
14 do and why. Once we do, then we give the okay to be advanced
15 to allow them onto other levels.
16 Q Is that in one of these exhibits?
17 A I am not sure.
18 Q I don't see it. I don't see it here.
19 A It was produced.
20 Q Produced in the document production?
21 A That's correct.
22 Q Now, has the Religious Technology Center run into
23 situations in which it has had to deal with theft of documents
24 in an attempt to set up a competing church with those
25 documents?
54
1 A Yes, we have.
2 Q Would you tell the court about that?
3 A Well, the person -- in April or May of 1983, in England,
4 where some apostates, ex-members, had arranged to steal some
5 of the lower O.T. levels, I believe it was O.T. I, II, and
6 III. Then they planned out the theft of O.T. V materials,
7 which we call the NOTS materials. It's another name for O.T.
8 V. It's important to know that these individuals who
9 attempted to set up splinter organizations or competitive
10 groups needed to have the material in order to attract
11 anybody. This was why they believe the money was -- with the
12 materials themselves, they could attract people away from the
13 church or attract new people. Without these materials, it was
14 impossible to operate. They have tried over time to create
15 the materials themselves either out of memory or whatever.
16 MR. KELLEY: Your Honor, I object on the grounds of
17 foundation.
18 THE COURT: Overruled.
19 THE WITNESS: Thank you, Your Honor. They attempted
20 this throughout this period of time unsuccessfully, so they
21 figured they had to have originals -- the copies of
22 Mr. Hubbard's works in order to make the money they intended.
23 This is where the thefts -- these two instances that I
24 described came to fruition. The theft in Copenhagen, Denmark,
25 is the most important one, I think, because there the O.T. V
55
1 materials were stolen. These individuals -- there were three
2 of them -- in coordination with Mr. Atack, who was director at
3 that time of the F.A.C.T.Net worked out and planned the theft.
4 They dressed themselves up in uniforms that are worn by the
5 Sea Organization, specifically, by my organization, R.T.C.
6 They went in impersonating as being members of R.T.C. in order
7 to quote "inspect their materials," which is something that we
8 do. The staff at that particular organization in Copenhagen
9 fell for the pretense, allowed them to view the materials in a
10 secure room. They preceded then to put them in a briefcase
11 and walk out to the car that was sitting outside in front of
12 the church with its motor running. The whole bit, just like
13 the movies. The gentleman who was driving the car, Mr. Robin
14 Scott, subsequently came back to Copenhagen, where he was
15 arrested at the airport by the Copenhagen police. He was
16 imprisoned, convicted of theft and eventually deported from
17 the country. We didn't get the other two thieves as they
18 never reentered the country. If they do, the same fate will
19 be waiting for them. These materials were then taken back to
20 England and over to Mr. Atak's home, copied and distributed.
21 MR. KELLEY: Your Honor, I object. The witness has
22 no way of knowing this other than hearsay.
23 THE COURT: I am admitting this as a recitation of
24 history by the president of the organization. It's not
25 admitted for the truth of the facts asserted. Objection is
56
1 overruled.
2 BY MR. COOLEY:
3 Q Did you indicate that Jon Atak was a director of
4 F.A.C.T.Net at the time of the theft?
5 A I don't know that. He was a director at some point in
6 time.
7 Q He later became?
8 A I don't think F.A.C.T.Net existed back then.
9 Q I wanted to make sure that you weren't misstating --
10 A I do state -- Your Honor, I participated in the recovery
11 of those materials and the prosecution of Mr. Scott. I
12 attended all the depositions that occurred there. We obtained
13 injunctions in both England and Scotland. Impoundment orders
14 were issued by the courts. All of the materials were
15 recovered. The defendants in the UK case were supposed to
16 turn everything in, all copies, to our solicitors in England.
17 We subsequently found out that they did not. They violated
18 the law there and copies were sent out to the states and a few
19 other places. Wherever these materials have cropped up, we
20 have sued. The first one was in 1985 when they showed up in
21 California to a gentleman by the name of David Mayo. He set
22 up a competing organization in Santa Barbara, specifically, to
23 offer the upper level materials and substantially made a lot
24 of money from that. As we proved in that court case, he made
25 over $2 million from doing this. An injunction was issued at
57
1 the time in 1985. All of his materials were impounded. They
2 are in the court to this date. Both sides or both cases were
3 dismissed and are both up on appeal at this point. Other
4 people, other members of his organization attempted to set up
5 other splinter organizations and in each one of those cases
6 have been shut down.
7 Q Are you aware of a concept known as the "free zone?"
8 A Yes.
9 Q What does that mean?
10 A A "free zone" is a loose term that describes mainly
11 ex-members of the church, who want to be out in the field, so
12 to speak, and deliver these materials or deliver Scientology
13 without any authorization from the church.
14 Q They want to use the material but not within the church?
15 A That's correct.
16 Q In addition to the efforts that you have described, have
17 you -- was one of those a case involving Enid Vien?
18 A Yes. Enid Vien was an ex-member of the church who had
19 possessed a copy of one of these materials that were stolen in
20 Copenhagen. She was sued in San Diego. An impoundment order
21 was issued. All of her materials were impounded by the court.
22 We subsequently then filed a series of Summary Judgment
23 Motions which were granted by the court and a preliminary
24 injunction was issued and damages of some $52,000 was awarded
25 for both copyright infringement, trade secret infringement,
58
1 which are almost the identical issues that are at issue here.
2 Q That are involved here including O.T. III that Mr. Kelly
3 recited to the court?
4 A Yes, sir, they are.
5 Q And that was held to be a trade secret, was it?
6 A Yes, it was.
7 Q As a matter of law?
8 A Yes, the same type of evidence, newspaper articles, et
9 cetera, were attempted to dissuade the judge in that case that
10 that material was not trade secrets and were public domain and
11 she issued her order.
12 MR. KELLEY: Your Honor, I object to his reciting
13 court records.
14 THE COURT: Sustained.
15 BY MR. COOLEY:
16 Q The AAC, that is the Advanced Ability Center of David Mayo
17 that was attempting to use these materials, closed its doors
18 at point, did it not?
19 A Yes, it did.
20 Q When was that?
21 A Sometime in 1986, I believe.
22 Q How many months -- that was after the entry of the
23 preliminary injunction denying them the right to use these
24 materials?
25 A It was shortly thereafter.
59
1 Q And have the illicitly obtained materials, including
2 copies, were they to have been returned to the church pursuant
3 to orders by both the criminal court in Denmark and the United
4 States Federal Court in Los Angeles?
5 A Yes, they were.
6 Q And did the thieves as well as Mr. Mayo claim not to have
7 kept copies?
8 A That's what he says.
9 Q But have copies cropped up from time to time?
10 A They have, yes.
11 Q As has the church done everything in its power to track
12 down those copies and to litigate the possession of them
13 wherever it could?
14 A Yes, once we became aware that anybody had possession, my
15 normal reaction would be to contact them usually via our
16 attorneys and ask for their return and a stipulation that they
17 would not be exposed. And if not, then we would take whatever
18 relevant legal action would be called for.
19 THE COURT: We'll take a recess until 1:30.
20 (Recess at 12:00 to 1:25 p.m.)
21 THE COURT: Mr. McShane can come back to the stand.
22 BY MR. COOLEY:
23 Q Mr. McShane, to your knowledge, has any upper level
24 material or advanced technology ever left the possession of
25 the church by any legitimate means whatsoever?
60
1 A No, it has not.
2 Q And has there in fact ever been any of the advanced
3 technology made available to any parishioner of the church for
4 use under any circumstances and allowed them to keep it?
5 A No, not at all.
6 Q And if anybody ever took a copy, would it have been in
7 violation of their confidentiality agreement?
8 A Yes.
9 Q Now, while you have testified to some theft and
10 misappropriation on your prior testimony, have each of these,
11 to the extent that they occurred, occurred in breach of
12 confidentiality agreements?
13 A Yes, they have.
14 Q And in violation of the procedures under which the
15 materials are held and made available to parishioners?
16 A Yes.
17 Q And has R.T.C. done everything that it possibly can to
18 track those down and enforce its rights?
19 A Yes, we have.
20 Q Has it succeeded wherever it has found these materials in
21 either obtaining a new agreement or in having an injunction
22 entered or having a case pending on the matter?
23 A Yes, in every instance that we are aware of where these
24 materials have been stolen or distributed in some form after
25 the theft, we have taken the necessary steps. Normally, we
61
1 would contact the person, request that they return the
2 materials to us and agree to keep the materials confidential.
3 If the person refuses, then we end up usually in litigation.
4 Q Now, were any of the -- Strike that.
5 You testified to the competing church set up by David
6 Mayo; do you recall that testimony?
7 A Yes.
8 Q That went out of operation in April of 1986?
9 A Yes, late April of 1986.
10 Q And that happened as a result of a court injunction
11 entered against the use of those materials?
12 A Yes, sir.
13 Q Now, in the Fishman case; do you recall the Fishman case?
14 A Yes, I am familiar with it.
15 Q Were measures taken to protect the confidentiality of the
16 materials in that case?
17 A Yes, several measures.
18 Q What was done? Will you tell the court?
19 A When the material I believe that was attached to the
20 Fishman affidavit first came into the case, the plaintiff in
21 that action, which was the mother church, Church of
22 Scientology International who was the only plaintiff in that
23 action, moved the court for a confidentiality order, I believe
24 concurrently when that occurred, the case was transferred from
25 Los Angeles to Florida. And then in that interim time period
62
1 nothing was ruled on. The documents were not available, the
2 whole court file was in transit. And at some point -- it was
3 in late July -- the judge in Florida transferred the case back
4 to Los Angeles. And once the court finally got it and the
5 record was there, we moved again to seal the record. I
6 believe there was a ruling from the Magistrate to maintain the
7 confidentiality of anything that was produced, and it stayed
8 that way until the case was finally resolved when we dismissed
9 the action. And then when the court file became then
10 available, then we moved -- CSI moved to seal the records.
11 That was denied by the District Court Judge. Although he did
12 not rely upon those records at all throughout that whole
13 proceeding. That went up to the Ninth Circuit and the Ninth
14 Circuit remanded it back down, basically instructing the judge
15 to make a determination on whether they were secret or not
16 secret, and it has been pending ever since.
17 Q Was that fully briefed and submitted by November of 1994?
18 A Yes, in fact the R.T.C. moved to intervene which was
19 accepted by the District Court Judge.
20 Q Does the court still have that under submission?
21 A Yes.
22 Q It does?
23 A It does.
24 Q Has the court now sealed that file?
25 A Yes.
63
1 Q Are confidential religious scriptures unique to
2 Scientology in any way?
3 MR. KELLEY: Irrelevant, Your Honor.
4 THE COURT: Sustained.
5 MR. COOLEY: I was trying to get into a question of
6 comparative religion, and it's a very common thing, Your
7 Honor, historically.
8 THE COURT: I know that.
9 MR. COOLEY: That's enough for me.
10 THE COURT: Okay.
11 BY MR. COOLEY:
12 Q Is Scientology what you would call a missionary religion?
13 A Yes, I would call it that.
14 Q Does it ultimately seek to reach communicants throughout
15 the universe?
16 A Yes, Scientology is nondenominational, and it's our intent
17 hopefully at some point in time that all people on earth and
18 elsewhere would partake in Scientology service.
19 Q And as a matter of religious belief and scriptural dogma
20 in the church, is it harmful for these to be viewed out of
21 sequence?
22 A Absolutely, yes.
23 Q Does that harm in the religion of Scientology accrue not
24 only to Scientologists but to others?
25 A Yes. If I can explain briefly? To a non-Scientologist
64
1 who was unfamiliar with the technology itself, the harmful
2 effect or the spiritual harmful effect may not be evident
3 until a point where he has progressed up the levels. The
4 closer to the O.T. levels one becomes, the more spiritual harm
5 would ensue from prior exposure, if he was not ready for it.
6 Q Is it a central belief and practice in Scientology that
7 the spiritual destiny and salvation of every man, woman, and
8 child in the universe depends upon the precise application of
9 the Scientology religion?
10 A Absolutely.
11 Q Now, were there policies written by Mr. Hubbard regarding
12 the security of these materials?
13 A Yes, there have been many policies.
14 Q And is there specifically a policy entitled no
15 unauthorized copies of upper level materials are to be made?
16 A There is a policy referenced the first of that, yes.
17 Q Is that a 1981 reference?
18 A I believe there is one issue.
19 Q Do you happen to have that available to you?
20 A If it's in here.
21 MR. COOLEY: May I approach the witness, Your Honor?
22 THE COURT: Yes.
23 BY MR. COOLEY:
24 Q Have you policy reference in front of you now, sir?
25 A Yes, I do.
65
1 Q Could you tell the court what it provides and who wrote
2 it?
3 MR. KELLEY: Your Honor, is this an exhibit? If so,
4 it ought to be offered before he reads from it? If not, it
5 shouldn't be gone into at all.
6 THE COURT: I don't know what it is yet. Let him
7 identify it first.
8 THE WITNESS: This is the policy extract from a
9 policy that was written by Mr. Hubbard in 1981 which covers
10 emphasizes strongly the fact that no copies, no notes, no
11 nothing are to be made of the materials.
12 THE COURT: Then it should be marked as an exhibit.
13 MR. COOLEY: I can't recall whether we did it, but I
14 will. I don't have it on my list of exhibits, so I will pass,
15 Your Honor, and furnish it on a supplemental submission to
16 counsel and to the court.
17 THE COURT: All right.
18 MR. COOLEY: I have to retrieve my document.
19 THE COURT: Okay.
20 BY MR. COOLEY:
21 Q In any event, was the policy of confidentiality created by
22 the author of the materials, namely, L. Ron Hubbard?
23 A Yes, Mr. Hubbard authored all the policies.
24 Q Is it pursuant to that teaching that they are kept
25 confidential?
66
1 A Yes.
2 Q Now, is any student allowed to keep notes of it when he is
3 doing the process?
4 A No. When a student is on the level as in a course room
5 setting, he is supervised by the course supervisor, a minister
6 who is trained to deliver that level and no notes or any type
7 of notes or anything or tape recordings are made.
8 Q No cribbing?
9 A No.
10 Q Any study aids allowed?
11 A None at all.
12 Q Any flash cards or films or anything like that allowed?
13 A Nothing of that nature whatsoever.
14 Q When is anyone, any Scientologist, ever accepted on to the
15 O.T. levels without having met all the requirements and
16 signing a covenant of confidentiality promising never to
17 disclose the contents of the materials?
18 A None at all.
19 Q Is this a procedure agreed upon by all Scientologists
20 before they are given access to the material?
21 A If a parishioner when he makes his way up the spiritual
22 level wants to partake in the next level which is a
23 confidential level, then he is explained the requirements to
24 be allowed onto that level. He reads the confidential issues
25 that cover the level and if he agrees to abide by that in
67
1 keeping the materials confidential, then he is permitted.
2 Q Suppose he says he won't agree to that?
3 A Then he is not allowed onto that level.
4 Q Have you yourself taken the upper level advanced
5 technology courses?
6 A Yes, I have done up to O.T. VII back in 1976.
7 Q And have you yourself signed those confidentiality
8 agreements?
9 A Yes.
10 Q Do you know what level Mr. Penny reached?
11 A I believe it was O.T. III.
12 Q And Mr. Wollersheim went to O.T. V?
13 A I believe so.
14 Q Is that old O.T. V or new O.T. V?
15 A It's new O.T. V. There was a change in 1978 where
16 Mr. Hubbard made some additional discoveries and the upper
17 part of the O.T. levels from V, VI and VII were changed and
18 that's what we call new O.T. V, new O.T. VI and new O.T. VII.
19 Q Now, is there anything in the confidentiality that relates
20 to the -- to the matters of eternal spiritual significance
21 being achieved in a unique step by step way?
22 MR. KELLEY: I don't see the relevance and the
23 document speaks for itself.
24 THE COURT: Overruled.
25 THE WITNESS: The O.T. levels are done in an exact
68
1 sequence and one is built upon the other. And that's why it's
2 imperative that a parishioner do them in the exact order that
3 Mr. Hubbard laid out and the documents themselves mandate
4 confidentiality and mandate the order in which they are made
5 out.
6 Q Is there any concern for the altering of the materials by
7 shorthand expressions or by paraphrasing or things of that
8 nature if they are in hands other than the church and is that
9 a reason for keeping them confidential?
10 A Absolutely.
11 MR. KELLEY: No foundation, Your Honor.
12 THE COURT: Overruled.
13 THE WITNESS: There cannot be any alteration at all
14 of Mr. Hubbard's work. The way he had laid it, there is an
15 exact sequence of steps. It's very detailed, and there can't
16 be any alteration to it.
17 Q Some of these newspaper articles alluded to buy Mr. Kelley
18 in his opening statement this morning have seen some
19 alterations and paraphrasing?
20 A There have. In all the newspapers articles I have seen
21 since 1982 and before have all contained to some degree some
22 alteration. I don't believe that I can remember sitting here
23 exact quotes from any of the materials.
24 Q Did Mr. Kelley's statement itself constitute some serious
25 paraphrasing of the material?
69
1 A Absolutely.
2 Q Is that considered spiritually harmful by the Church of
3 Scientology?
4 A Yes, alteration or pre-exposure to materials we believe is
5 harmful.
6 Q I want to turn, Mr. McShane, to the question of economic
7 harm resulting to the Religious Technology Center by the
8 publication of these materials, failure to keep these
9 materials confidential; is there such economic harm?
10 A Absolutely, yes.
11 Q Would you tell us what it consists of?
12 A Scientology has a system of donations that are fixed per
13 each level and the donation rates for the O.T. levels are
14 known about ahead of time, and parishioners agree to make that
15 particular donation for that level. It's one of our strongest
16 tenets of the religion -- is that there be fair exchange in no
17 matter what you do in life. For allowing someone to go onto
18 these services, there has to be exchange and that is an agreed
19 upon exchange that all parishioners agree to be able to do the
20 level. R.T.C. licenses the six churches -- advanced churches
21 to deliver those materials. As part of this license agreement
22 R.T.C. receives a 6 percent licensing fee that is paid from
23 the advanced organizations from the donations that are
24 received from those levels. That 6 percent is used to fund
25 our organization, our expenses, our promotion, and also we
70
1 make donations to an archival organization to maintain an
2 archive of Mr. Hubbard's works for life. If there is any
3 hindrance of anyone coming into the church that will
4 eventually arrive at those upper level materials, there is
5 economic harm.
6 Q When you say 6 percent, is that 6 percent of the donations
7 received by the church that holds the license to use the
8 materials?
9 A It's 6 percent of the donation once the service has
10 actually been delivered to that parishioner. It's not upon
11 the payment of the donation but the upon the completion of a
12 level.
13 Q And so that whatever the donation is for that level, 6
14 percent of that would go to Religious Technology Center?
15 A That's correct.
16 Q Is that a substantial factor in the support and survival
17 of Religious Technology Center to provide the services that it
18 provides?
19 A Very substantial, yes.
20 Q Could you give us an idea of what percentage of the total
21 income of Religious Technology Center that represents?
22 A I would say probably 94, 95 percent.
23 Q And is that basically how Religious Technology Center
24 staffs itself, pays its bills, and survives to protect the
25 religious technology of the Scientology religion?
71
1 A Yes, it is.
2 Q Now, in all of your experience since 1983 and in all of
3 the things that we have been talking about, including postings
4 to the Internet and the -- and the Vien case and cases where
5 you track down copies and the theft in Denmark and the whole
6 thing, have you ever encountered a situation in which it may
7 be said that those materials are generally available?
8 A No, not at all.
9 Q When it's considered in the universe of people to whom
10 they may be administered and delivered or on a lesser basis
11 are they generally available anywhere?
12 A No, they are not.
13 Q Have you seen any evidence to the contrary?
14 A No, not even on the Internet.
15 Q Do you have any clue as to how many people on the Internet
16 have these?
17 A I have no clue. There is a handful of people on the
18 Internet that communicate their views on the church, critical
19 views or whatever. Many allege that they have this or they
20 have that. There have been some quotations, alterations of
21 snippets of materials, and in all circumstances, I have
22 instructed our counsel if anything does come on the Internet,
23 that they are immediately contacted. We have gotten great
24 cooperation from the service providers on the Internet, that
25 if any violation is found, they take the material off and
72
1 delete it. They send warnings to people who put it on,
2 telling them not to violate the copyrights any more or else
3 they will be suspended. We have cooperated with many, many
4 service providers, in fact, working with service providers to
5 actually form rules and regulations internationally, so that
6 copyright and intellectual property are protected.
7 Q In your view as president of the R.T.C. charged with the
8 primary responsibility of dealing with these matters, do these
9 materials still have significant value to R.T.C. by virtually
10 not being generally available?
11 A Absolutely, yes.
12 Q Completely aside from that, these materials are materials
13 that the various advanced organizations that you have
14 identified earlier intend to continue to deliver on a
15 confidential basis pursuant to the advanced security
16 precautions you have described in those photographs, correct?
17 A Yes, they have to.
18 Q Provided that of course that those materials are continued
19 to be protected?
20 A Yes.
21 Q Now, in terms of the administration of those materials,
22 let's say by the Flag Service Organization which is an
23 advanced organization, correct?
24 A That is right.
25 Q If you get the 6 percent of their income from it, do you
73
1 have an idea of what it represents to them in terms of
2 essential income to survival?
3 A Well, the income from the upper level materials is the
4 majority of their income overall.
5 Q Does this apply across the board in the Scientology
6 religion to all Scientology organizations, include Religious
7 Technology Center?
8 A That's true, yes.
9 Q Now, the harm that might be -- the harm that accrues to
10 the church is that limited in any way to the -- somebody
11 administering these levels to himself or to his friend or
12 using them in that fashion? Is that what the harm is limited
13 to or is it broader?
14 A That's part of the harm but it's broader than that.
15 Q By broader than that, does it cut across the board, strike
16 the whole income fabric of the Religious Technology Center?
17 A Yes, certainly.
18 Q Scientology in the terms of the great sweep of time is a
19 relatively new religion having been in existence how long?
20 A I think the first church was formed in 1953 or 1954.
21 Q So we are talking something on the order of 41 or 42
22 years?
23 A We celebrated our 40th anniversary recently.
24 Q It hasn't been around for hundreds of years, and does it
25 rely solely upon the donations of its parishioners to survive?
74
1 A That's our sole income, yes.
2 Q Is that part of the funding system whereby fixed donations
3 are set for religious services to ensure the survival of the
4 religion?
5 A Yes, that's the system of donations we use.
6 Q Now, Scientology parishioners need assistance from church
7 staff for application of the confidential religious materials,
8 don't they?
9 A Yes, all levels have assistance.
10 Q But does that mean that there is no market for
11 unauthorized access?
12 A No, there is a market, put it that way, yes.
13 Q That market is a bootleg market, is it not?
14 A Yes.
15 Q Is the concern what existing Scientologists will do with
16 the materials if they fall into their hands or what outsiders
17 will do with them?
18 A It's plainly outsiders. Existing Scientologists would not
19 expose the materials. They have agreed to that tenet of the
20 religion and they abide by that. They are very strongly
21 supportive of that.
22 Q Now, did you personally deal with the copyrights in these
23 works and the registration applications filed with the
24 copyright office for the advanced technology?
25 A Yes.
75
1 Q Are each of the O.T. levels covered by a single copyright?
2 A Well, it depends on the level. There are some levels that
3 are a series -- registered as a series.
4 Q Each series is listed in the copyright?
5 A The contents of the series is listed in the registration
6 certificate, yes.
7 Q So I understand, give me an example of an O.T. level of
8 which that is true?
9 A O.T. II, for example, has the main body of the materials
10 and it has 21 steps that are attached to it. And each of
11 those steps are listed out in the certificate itself along
12 with the main body of the work.
13 Q So each one of them is separately covered under the main
14 registration number; is that right?
15 A Yes.
16 Q How many of the O.T. I through VII are copyrighted as a
17 series?
18 A There are three levels O.T. I, II, and O.T. V.
19 Q How many series in I, do you recall, in O.T. I?
20 A O.T. I consists of several issues. There isn't a series.
21 Q By Scientology an issue is something that's issued, not a
22 debatable issue, but something that's issued?
23 A Issued, yes, but not published.
24 Q I am trying to get the term use in the proper context.
25 Sometimes we in the law talk about issues as things we fight
From bobpenny@delphi.comSun Oct 1 22:15:27 1995
Date: Sun, 01 Oct 1995 02:41:39 GMT
From: Bob Penny <bobpenny@delphi.com>
To: alerma@dgs.dgsys.com
Subject: part 3
76
1 over.
2 A Okay.
3 Q In Scientology an issue is something that is a written
4 Scientology matter?
5 A Yes, either handwritten by Mr. Hubbard or typed.
6 Q And in connection with the -- with the copyrights, did you
7 personally supervise the manner in which they were
8 copyrighted?
9 A Yes, I did.
10 Q Did the copyright office permits you to retain the trade
11 secret aspect of the copyright of the material by copyrighting
12 it in a masked fashion?
13 A Yes.
14 Q Is that the same technique that was developed by the
15 copyright of office for software?
16 A Yes, that's where I got the idea from.
17 Q Tell us from that masking consists of and how it's
18 accomplished?
19 A When I started on this project, I contacted the copyright
20 office to see what method would be allowed to be able to
21 register trade secret material. The gentleman at the
22 copyright office informed me that they deal with software a
23 lot and that they permit a mask to be placed over the work and
24 the mask is a piece of paper that would have slots cut in it,
25 and then the work itself would be copied on a copy machine
77
1 with the mask over it, so the result would be a sheet of
2 paper, the trade secret work itself, with the slots which
3 would hide text. You would see text from in between the slots
4 which would be for the copyright office to identify there was
5 actually something there. And we allowed at least the
6 identification for the title to be apparent so the copyright
7 office could identify it somehow and all of the levels are
8 done that way and identified -- accepted by the copyright
9 office.
10 Q Accepted by the copyright office and continue to maintain
11 secrecy?
12 A They were all registered as unpublished works, yes.
13 Q Is that so on all upper level materials that have been
14 copyrighted?
15 A Yes.
16 Q Are you familiar with the so-called Fishman affidavit that
17 is at the heart of this litigation?
18 A Yes, I am.
19 Q Could you tell us how many pages, excluding the phony O.T.
20 VIII material, dealing with O.T. I through VII, how many pages
21 of copyrighted and trade secret material are included in that
22 affidavit?
23 A I believe between 60 and 70. I believe it's 63 or 69. I
24 am not totally sure.
25 Q Have you -- have you had the opportunity to review the
78
1 Fishman affidavit -- Strike that.
2 Was the Fishman affidavit with that material attached
3 retrieved from Mr. Wollersheim's F.A.C.T.Net system?
4 A Yes, it was.
5 Q And in how many separate places did it appear?
6 A In Mr. Wollersheim's hard drive it was in one file. I
7 think it was C drive in two different locations in its
8 entirety. We also found a hard copy in the materials that we
9 seized and then bits of it, meaning that various exhibits that
10 were attached to it, various O.T. levels were found in other
11 areas of the hard drive.
12 Q How many -- do you remember how many copies of it you
13 found in there?
14 A I don't remember. I did a chart that listed out
15 everywhere any of the O.T. materials were found.
16 Q Is that chart -- what's the exhibit number? Is that chart
17 an exhibit?
18 A I'm not sure, sir.
19 Q Exhibit 28?
20 A I am not sure, sir.
21 Q Do you have the exhibits there, Mr. McShane, Exhibit 28?
22 A Yes, I do.
23 Q And would you describe what this chart shows?
24 A I put this chart together to show the various confidential
25 materials that were found in either Mr. Wollersheim's
79
1 apartment or in Mr. Penny's residence which would include
2 either a soft copy or a hard copy.
3 Q What copy -- does this cover copyrighted works in addition
4 to O.T. I through VII?
5 A We found -- well, O.T. I through VII is copyrighted.
6 Q In addition, but in addition to them were there
7 copyrighted works that were in Mr. Wollersheim's possession?
8 A Yes, a lot.
9 Q Now, if we read across these columns, the first item, for
10 example, is power and it says, Wollersheim apartment, Box 1,
11 is that a box of hard copies?
12 A Yes, it was.
13 Q And so was it in the computer file?
14 A Correct.
15 Q N/A in the next column indicates that?
16 A That's true, yes.
17 Q And the amount of the work that was copied was 100
18 percent, Hubbard communication bulletin?
19 A All of these issues, they are policy letters or bulletins.
20 Q So an HCOPL is a Hubbard policy letter and Hubbard
21 communication office bulletin and the date -- also indicates
22 the date on which it was issued, correct?
23 A That's correct.
24 Q So you found -- and power, you indicated that the upper
25 level material starts with power?
80
1 A Correct. That's the first confidential element, yes.
2 Q I note that the first three items are copies of that
3 copyrighted work, correct?
4 A In Mr. Wollersheim's apartment, yes.
5 Q So were all three of them found in his Box No. 1?
6 A Well, the box No. 1 is the designation that I gave to the
7 box when it was seized. It was found in various different
8 places.
9 Q But it was a hard copy?
10 A Yes.
11 Q Not a computer copy?
12 A That's correct.
13 Q In each instance it was 100 percent of the work and the
14 copyright registration number for that work is in the extreme
15 right-hand column?
16 A Yes, there were photocopies. Yes.
17 Q This chart goes on for quite a few pages, and as a
18 concession to the shortness of life, I am not going to go
19 through every item, but could you tell us whether there were
20 O.T. levels that are on this