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The American Chemical Society’s Lawsuit Problem

Since we’ve been talking about the ACS around here recently, I wanted to highlight a decision in a long-running court case the society has been involved in, American Chemical Society v. Leadscope. Rich Apodaca has a summary here of the earlier phases of the suit, which is now in its tenth year in the courts. Basically, three employees of Chemical Abstracts left to form their own chemical information company, and ended up with a patent on a particular variety of software that would display structure-activity and structure-property relationships. The ACS felt that this was too similar to the (discontinued) Pathfinder software they’d developed, and sued.
The ACS lost in a jury trial – in fact, they did more than just lose. The jury found that the society had competed unfairly, filing suit maliciously and defaming Leadscope in the process, and they awarded the latter company $26.5 million in damages. The ACS then lost in the Court of Appeals (and the damages were increased). So they took things all the way to the Ohio Supreme Court, and now they’ve lost there, too. The defamation ruling (and award) was reversed, and will be vacated by the lower court, but the finding of unfair competition stands. It looks like the society still owes $26.5 million. As this post by an IP lawyer shows, they were going all out:

As for the issue of ACS’s subjective intent, the Supreme Court found ample support for the jury’s finding that ACS had the intent to injure Leadscope and its founders. It noted that ACS’s president had closely monitored Leadscope and had even sent out an email to then-Ohio-Governor Robert Taft to abort a visit by the governor to Leadscope’s offices. ACS’s former information technology director also provided damaging testimony documenting ACS’s president’s hostility towards Leadscope. In addition, ACS took actions or made statements that interfered with Leadscope’s ability to get funding (for example, by dissuading an venture capitalist interested in investing in Leadscope by telling him that there were legal issues with Leadscope’s technology) and took actions in the litigation to disrupt Leadscope’s ability to get insurance coverage for the dispute.

As detailed here at ChemBark, it’s not like there’s been a lot of coverage about this (I’ve never written about it myself). These are things that every member of the ACS should at least be aware of, but it’s not like the ACS is going to do that job, for obvious reasons. One of the main venues for such stories would be. . .Chemical and Engineering News, so that’s not going to happen. And it’s not a story that resonates much with a general newspaper/magazine readership, so what does that leave us with? Well, mentions like that Nature News article to get the word out, and the blogs to go into the details.
That ChemBark post has a whole series of questions that would be very much worth answering. How the the ACS get into this fix in the first place? Was the original suit ill-advised? How much will that $26.5 million affect the society’s finances – is that a big deal, or not? How much further money went down the drain in legal fees along the way? Are there any lessons to be learned from all this, or could the same thing start happening again next month?
And beyond those immediate questions, there are the bigger ones that the ACS (and other scientific societies) should be asking. Can a single entity be (A) a publisher of a large stable of high-profile scientific journals, and (B) the curator and disseminator of the (very profitable) primary database of all the reported chemical matter in the world, and (C) the voice of its own membership, who are simultaneously paying money for access to A and B, and (D) the lobbying organization for chemistry in general, as well as (E) a scientific society dedicated to the spread of knowledge? I’m not sure that all these are possible, at the same time, for the same organization. But sites like ChemBark, and this one, and the rest of the chemical blogworld) are the only places that seem to be available to talk about these things.

33 comments on “The American Chemical Society’s Lawsuit Problem”

  1. exGlaxoid says:

    Thanks for posting this, I had almost forgotten the entire debacle.
    I have been wondering for years how the ACS could charge so much for some services like ACS archives and Scifinder access, yet still have to charge members so much for membership on top of that, without providing some sort of free access to the data to members.
    Like many others, I am starting to really wonder the purpose of the ACS and question my membership, which was funded by work for many years, but it no longer paid for by them. While I may be odd in liking to read CEN to keep up with all things chemical, it is becoming the only benefit I get for my dues.

  2. watcher says:

    ACS has lost its way. The orgnization should be supporting growth and promotion of chemically related endeavors, not fighting them. They need to be better in providing information to members at more reasonable cost, particularly as more & more do not have the same level of easy access through academic libraries or large companies which pay the inposed fees. They need to remember the organization in non-profit, and cut the compensation of those with lofty sounding titles in ACS. What do these people actually do to deserve such money anyway? They need to be less enamored by academic self-aggrandizing & get more in touch with those working in today’s real world.

  3. drug_hunter says:

    Within a decade it will be possible to get ~80% of the information that CAS now offers either for free or from much lower-cost providers. So, as the funds dry up, the ACS as we know it will gradually morph into a very different organization.

  4. RB Woodweird says:

    It’s time for chemists to organize an alternative organization, a chemists’ guild, which will actually represent the interests of chemists and not necessarily the chemical industry.

  5. Alex Besogonov says:

    A useful heuristic: any company suing someone over a pure software patent is sleazy. That never fails.

  6. MoMo says:

    Another sign of the ACS monopoly and one that Congress should investigate.
    I am with you RB Woodweird. Time to change this dinosaur of a society with one that is’nt so ominous.

  7. Anonymous says:

    Two simple things are required to stop management greed at the ACS:
    Take away their tax free status as a nonprofit organization which based on executive comp, they clearly are not, and
    Forbid any and all copywriting of any materials produced with taxpayer-supported government funding.
    This sham chemists’ organization, oops, I mean monoply publisher, will go away, and we chemists can have our Society back as the greedy exec’s head for greener playgrounds.

  8. Sili says:

    One of the main venues for such stories would be. . .Chemical and Engineering News, so that’s not going to happen. And it’s not a story that resonates much with a general newspaper/magazine readership, so what does that leave us with?

    http://www.rsc.org/chemistryworld/News/2010/June/24061001.asp

  9. paperclip says:

    How many nonprofits undertake aggressive lawsuits like this? Seriously, I don’t know.

  10. John Wayne says:

    It so happens that my ACS membership is up for renewal at the moment. I’m going to use how they respond to this situation to determine if I want to be a part of the organization going forward.

  11. MoMo says:

    Paperclip- Only those non-profits that want to maintain a monopoly.

  12. Midas says:

    This is very interesting, and it brings up a number of possibly ethically deviant if not criminal charges.
    ACS is supposed to be a non-profit, but it’s behaving like a private for-profit enterprise.
    Question 1 : What is the ACS yearly gross revenue?
    Question 2 : How much of ACS’s revenue is diverted into grotesquely inflated salaries, such as the one for Madeleine Jacobs (808K!!).
    QUESTION 3: Since ACS’s for-profit model squeezes its own profession, I wonder why this organization is not just labeled one big scam? Why does Jacobs need a Chauffeur?
    From Wikipeida-
    “In 2004, when the current executive director of the ACS, Madeleine Jacobs, assumed her position, it included the use of two Cadillac cars and a chauffeur that her predecessor, John Crum, had acquired.[11] Jacobs later auctioned off the cars and let go of the chauffeur.
    In 2007, Madeline Jacobs was reported to receive a salary of over $800,000 per year.[12] The salaries of the ACS executives (executive director, treasurer, and secretary) are decided by the Standing Committee on Executive Compensation which is composed of the “president, the immediate past president, the chair of the society committee on budget and finance, and two members of the society with demonstrated expertise in senior and executive staff compensation.”[13]”

  13. Anonymous says:

    Yep, Madeleine Jacobs makes 800K a year and tells us to do chemistry for the “honor” of it without regard for financial considerations. Her view pretty much represents the attitude of the entire ACS top brass whose salaries are comparable.
    The whole organization is rotten to the core and needs to be dismantled and rebuilt.

  14. found a new society? says:

    The conclusion from the ACS’s behavior is that Chemists in the USA do not have a professional organization that represents their interests.
    How about founding an “International Society of Chemists – US-American Subsection”? It is completely non-profit and only non-paid volunteers can have positions of responsibility. Thus, no membership fees are needed. People in the same geographic area can meet regularly to discuss science and help each other with networking.

  15. found a new society? says:

    The conclusion from the ACS’s behavior is that Chemists in the USA do not have a professional organization that represents their interests.
    How about founding an “International Society of Chemists – US-American Subsection”? It is completely non-profit and only non-paid volunteers can have positions of responsibility. Thus, no membership fees are needed. People in the same geographic area can meet regularly to discuss science and help each other with networking.

  16. p says:

    I’m fairly financially naive, but if $26.5 million doesn’t hurt them, badly, then they don’t seem like much of a non-profit to me.

  17. paperclip says:

    @15 – I would gladly pay fees for such a society if fees helped give it the financial clout to speak up for chemists.

  18. Chemjobber says:

    It would seem wise to me to use the existing power structure within ACS (i.e. ACS elections, national meetings, etc) to generate as much publicity before splitting.

  19. LR says:

    The issue of ACS’s non-profit status and its excessive salaries to Madeleine Jacobs and company are a legitimate concern. There is a way to complain to the IRS about this, detailed in this link:
    http://www.irs.gov/pub/irs-tege/divulge_all_suspected_tax_exempt_status_abuses_to_the_irs.pdf
    Apparently, private individuals can make the complaint, though from there it is up to the IRS to decide to pursue the matter.
    What if the IRS heard not just from one ACS member, but from 25, or 50, or more? That would certainly get their attention, perhaps enough for IRS to take a look at ACS’s finances.

  20. ScientistSailor says:

    I let my membership expire when I finished grad school 10+ years ago. Until this post, I forgot there even was an ACS…

  21. Brad says:

    Sounds just like the IEEE. Does anyone have a professional society that isn’t run with the laser-focused profit hunger of Elsevier?

  22. Electrochemist says:

    I agree completely with the criticisms of the ACS, above. I let my membership lapse several years ago.
    However, it seems that there is a lack of understanding here about what constitutes a not-for-profit organization (NPO). An NPO is simply an organization that keeps its surplus revenue (after paying the bills) to fund internal programs, rather than distributing them to shareholders.
    The NFL (US National Football League) is a not-for-profit organization under US Code Title 26 (501c6).
    As an NPO, the ACS can bilk its membership forever and buy Madeleine Jacobs gold-plated toilets without ever running afoul of the IRS. Hence, complaining to the IRS will do no good.
    If, like me, you find the ACS disgraceful, then drop your membership.

  23. londonlad says:

    With a falling number of working chemists, aren’t ACS/RSC/GDCh all looking at ways of keeping income up, their staff employed and so on. The ACS/CAS management do seem do do things on a larger scale though.
    I think the beginning of the end is when they start to play in publishing, taking advertising revenue etc., unfortunately.

  24. Raghavan says:

    It is appalling that ACS would engage in this idotic litigation without having a firm understanding of the legal postion with respect to trade secret and patent laws.
    What is more appalling is the incompetent legal advice that ACS received. As a member of ACS for over 30 years, I would like to know which incompetent law firm represented ACS.
    Finally, ACS Board and the President should not be engaing on personal vendetta or ‘ego trip’ and waste millions of dollars of membership fees.
    Finally, ACS members should have the right to vote on matters that involve large sums of money. This way, there is some oversight on ACS’s activities.

  25. James says:

    What was Milkshake’s comment the other day? “A publishing consortium disguised as a non-profit for tax purposes”. That nails it.

  26. MoMo says:

    I know a couple of Senators, including Kerry of Massachusetts and Cochran in MS. Kerry might be aloof as its his nature but Cochran likes science and would hopefully be appalled by this. Let me drop them a line and see about mounting an investigation on this Monopoly.
    In the meantime I am dropping my membership as it expires- any other Patriots out there?

  27. Lyle Langley says:

    @12, Midas:
    You ask…”Why does Jacobs need a Chauffeur?”
    Apparently she doesn’t (form your own post)…”Jacobs later auctioned off the cars and let go of the chauffeur.”

  28. Myma says:

    Derek, you forgot
    F) the ACS is professors giving other professors big-sounding awards.

  29. Another Derek says:

    The last straw for me with ACS was their attempt to squash Google Scholar with a trademark and unfair competition lawsuit based on their SciFinder Scholar and logo trademark, in December 2004 (http://pubs.acs.org/cen/news/8250/8250acs.html). The litigation quietly folded in 2006 (http://news.cnet.com/2100-1025_3-6096240.html). I’ve never regretted leaving.

  30. cdsouthan says:

    drug_hunter is right about the 80% of SF content being out there but wrong about having to wait a decade, its already here

  31. sepisp says:

    I keep getting mail from ACS urging me to join. Fortunately I’ve been able to ignore ACS, and this gives even more reason not to join. Their hostility towards open access, up to the point of paying hundreds of thousands to lobbyists, shows that it’s no longer a professional society of any sort, but a for-profit corporation. Their “membership” is like the “memberships” in various pyramid-scheme “clubs” advertised in junk mail. Fine, arrange conferences and charge for it, but don’t pretend to be a nonprofit.

  32. Scientist says:

    I am deeply saddened by the leaders of ACS and academics in general. Many of them are poor excuses for human beings let alone honorable people. When the primary goal of a academic is to work a graduate student as many hours has possible with the exclusion of that student from perusing the usual pursuits of life … marriage and balanced life………the profession has gone wrong. ACS is excluding individuals and small companies from literature access because they can not afford that access. Every other professional organization is promoting education, not restricting it to the ones with the deepest pockets. The large chemical companies are not suppose to be running the professional organization.

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