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THE AMERICAN Chemical Society last week hit back at courtroom adversaries
who, in two separate lawsuits against the society, threaten to undermine
its charitable status and financial wellbeing. The outcome of the case has
implications for other American learned societies.

The bodies that filed the lawsuits claim that the ACS has created a
lucrative mono poly for itself selling abstracts drawn from the society’s
chemical journals. The critics accuse the society of achieving this monopoly
by exploiting its charitable status to avoid paying taxes on its profits.

The ACS last week attacked Dialog Information Services, one of its legal
opponents, citing ‘fraudulent accounting practices’, and filed a countersuit
against the company to claim $10 million (about Pounds sterling 6 million)
in royalties that are allegedly owed to the ACS. If the Dialog suit and
a separate suit initiated by the city of Columbus, Ohio, succeed, the ACS
stands to lose more than $150 million. Both lawsuits focus on the ACS’s
lucrative Chemical Abstracts Service (CAS), which provides about half of
the tax-exempt society’s $180 million budget every year. The CAS has published
the Chemical Abstracts, a compilation of virtually all the world’s chemical
knowledge, since 1907. In the 1970s, with some financial help from the US
government, the CAS rewrote the Chemical Abstracts on computer databases.
The CAS started its own online information service in 1980.

The CAS allows Dialog, based at Palo Alto in California, to access some
of the databases in return for royalties, but Dialog accuses the CAS of
keeping the best databases for its own online service. In a lawsuit filed
in June, Dialog claimed that the ACS’s tax-exempt status as a non-profit
scientific society gave it ‘a government-subsidised monopoly over the databases’.
The CAS, claim Dialog officials, ‘is seeking total control over the online
chemical information market both here and abroad’.

Dialog also claimed that the original government contracts required
that the databases be widely available at a reasonable cost. The US government
supplied more than $25 million to construct the database, says Robert Simons,
Dialog’s chief lawyer.

The CAS rebuts Dialog’s claims and contends that Dialog filed the suit
to draw attention away from the company’s ‘fraudulent accounting practices’.

ACS representatives state that Dialog’s claims are ‘patently false’.
They say that federal funds were used mostly to write computer software
for the database, and that the CAS no longer receives any government money.
Therefore the CAS is not obliged to share any of the information in the
chemical abstracts outside the society’s own online information service.

‘The CAS is competing fairly in the marketplace,’ said James Seals,
the vice president of marketing for the CAS. ‘Dialog’s agenda seems to be
one of limiting competition rather than encouraging it.’

Ironically, this claim to be competing in the marketplace may backfire
in the case brought by the city of Columbus, Ohio. City officials claim
that the CAS is just like any other business and should be taxed as such.

‘They’re not entitled to a tax exemption,’ says Jeffrey Rich, a lawyer
for the city schools of Columbus, the group that would benefit from taxes
on the CAS. ‘They would be entitled if they offered services to the public
with no recompense, but they are a major computer industry competing with
companies in the private sector that do the same thing.’ In 1980, Rich says,
the CAS received over $90 million in revenue, of which about $60 million
went to expenses. This left $31 million in ‘reserves’, which are profits
in a supposedly non-profit organisation, Rich contends.