Transcript from Summary Judgment hearing

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  1            UNITED STATES DISTRICT COURT

  2          NORTHERN DISTRICT OF CALIFORNIA

  3                 SAN JOSE DIVISION

  4  ONLINE POLICY GROUP,        )    C-03-04913-JF
     et al.,                     )
  5                           )
                 Plaintiff,     )
  6                           )    San Jose, CA
                       vs.       )    February 9, 2004
  7                              )
     DIEBOLD, INCORPORATED,      )
  8  et al.,                   )
                                 )
  9               Defendants.    )
     ____________________________)
10
                TRANSCRIPT OF PROCEEDINGS
11          BEFORE THE HONORABLE JEREMY FOGEL
               UNITED STATES DISTRICT JUDGE
12
     A P P E A R A N C E S:
13
     For the Plaintiffs:        Electronic Frontier
14                          Foundation
                             By:  CINDY COHN
15                          WENDY SELTZER
                             454 Shotwell Street
16                          San Francisco, CA
                             94110
17
                             Law Offices of Alan
18                          Korn
                             By:  ALAN KORN
19                          1840 Woolsey Street
                             Berkeley, CA   94703
20
                             Stanford Law School
21                          Cyberlaw Clinic
                             By: JENNIFER S.
22                          GRANICK
                             559 Nathan Abbott Way
23                          Stanford, CA  94305

24      (APPEARANCES CONTINUED ON THE NEXT PAGE)

25  Court Reporter:            PETER TORREANO, CSR
                                License Number C-7623
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 1  A P P E A R A N C E S:

  2  For the Defendants:        Jones Day
                             By:  ROBERT A.
  3                          MITTELSTAEDT,
                             ADAM R. SAND
  4                          555 California Street
                             26th Floor
  5                          San Francisco, CA
                             94104
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 1  San Jose, California            February 9, 2004

  2               P R O C E E D I N G S

  3           THE COURT:  Okay.  Online Policy Group

  4  versus Diebold.

  5           MS. COHN:  Good morning, Your Honor.

  6           Cindy Cohn from the Electronic Frontier

  7  Foundation for Plaintiffs.  With me is Wendy

  8  Seltzer of EFF.

  9           MS. GRANICK:  Good morning, Your Honor.

10           I'm Jennifer Granick for the Swarthmore

11  student Plaintiffs, Nelson Pavlosky and Luke

12  Smith, from the Center for Internet and Society

13  Foundation.

14           THE COURT:  Good morning.

15           MR. KORN:  Good morning, Your Honor.

16           Alan Korn for Online Policy Group.

17           MR. MITTELSTAEDT:  Good morning, Your

18  Honor.

19           Robert Mittelstaedt and Adam Sand for

20  the Defendants.

21           THE COURT:  Good morning.

22           Well, there's a lot here.  I guess the

23  question I have which may help me think about

24  these important issues is this:  Has Diebold

25  represented that it will not ever take any action

                                                                  3

 1  with respect to this particular archive against

  2  these Plaintiffs?

  3           MR. MITTELSTAEDT:  Yes.

  4           THE COURT:  And if additional e-mails

  5  that are part of the same subject matter, I guess

  6  is the best way to put it, if a similar problem

  7  should arise in the future, is Diebold in the

  8  position to take the same view with respect to

  9  the applicability of the DMCA?

10           MR. MITTELSTAEDT:  If somebody else

11  hacks into the computer system and obtains other

12  materials and publishes them in some way, I don't

13  think, Your Honor, that our representation to the

14  Court to date would cover that hypothetical

15  because I don't know what the other materials

16  would be.  I don't know how they would be used.

17           And I don't think Diebold has intended

18  and I don't think it would be prudent and I don't

19  think it's necessary in order to moot this case

20  for Diebold to say there's open license for

21  anybody to hack into its computer system and do

22  whatever it wants.

23           But, Your Honor, we have addressed the

24  materials at issue in this case.

25           THE COURT:  All right.  So basically

                                                                  4

 1  anything that's in this archive which is a

  2  definable body of material, you're willing to

  3  waive any claims based on copyright infringement

  4  or the Digital Millennium Copyright Act with

  5  respect to that archive?

  6           MR. MITTELSTAEDT:  Yes.

  7           THE COURT:  Then I guess my follow-up

  8  question to Plaintiff's counsel is why that

  9  wouldn't moot at least some of the claims that

10  are at issue here.

11           MS. COHN:  Well, Your Honor, I'm pleased

12  that Mr. Mittelstaedt said that he would waive

13  all claims since the letter that he sent to OPG

14  was pretty specific about commercial versus

15  non-commercial.  It appears that there's a change

16  now from what he's told the ISP and I'd like him

17  to actually write all the ISPs again then and be

18  clear about commercial versus non-commercial

19  since that was a question we had.

20           But I think it does change the nature of

21  the inquiry somewhat.  It certainly -- I think

22  there's no need for injunctive relief at this

23  point.  I do think, however, it doesn't change

24  the fundamental nature of the inquiry, which is

25  what are the consequences from what Diebold has

                                                                  5

 1  done before and should there be any consequences

  2  for what Diebold has done before, and I think

  3  that's actually the center of what we're here

  4  for.

  5           THE COURT:  You're talking about

  6  damages?

  7           MS. COHN:  Yes.

  8           THE COURT:  All right.

  9           MS. COHN:  And costs and attorneys fees,

10  of course, because --

11           THE COURT:  Sure.  I'm trying to break

12  this down.

13           MS. COHN:  Sure.

14           THE COURT:  And I'm not sure there is --

15  if I understood Mr. Mittelstaedt correctly, I'm

16  not sure there is a live controversy that

17  requires injunctive or declaratory relief at this

18  point, and that's what I wanted to pin down.  I

19  think we can move on and talk about damages, but

20  that's the -- that was certainly the first

21  question I had going into the hearing.

22           MS. COHN:  I think that the question of

23  injunctive relief has been put to bed especially

24  today with the last little bit cleared up.

25           I think the question of declaratory

                                                                  6

 1  relief is one that still could be live if Your

  2  Honor wanted it to be.  I think for copyright

  3  misuse it might not be because the remedy there

  4  is not using the copyright since they haven't

  5  done that.

  6           But I do think that declaratory relief

  7  standards are pretty high for an entity that is

  8  essentially ceasing voluntarily its own behavior,

  9  and the rules are pretty clear in the Ninth

10  Circuit that there has to be no lingering damage

11  from what you've done before and no possibility

12  that you will do it again.

13           And I think that Diebold's kind of --

14  kind of, you know, on the one hand, saying we

15  won't sue anybody and, on the other hand, saying

16  we're completely right about what we did the

17  first time has caused a lot of confusion out

18  there.

19           THE COURT:  Well, sure.  But, you know,

20  I actually had this exact issue in the Yahoo!

21  case about whether we had a case or controversy,

22  and there has to be an actual possibility of

23  future consequences, at least that's what my

24  review of the law in that case caused me to

25  conclude.

                                                                  7

 1           Here they are saying they are not going

  2  to sue anybody, they are not going to invoke the

  3  provisions of the DMCA with regard to this

  4  archive and I didn't hear any limitations put on

  5  that.  The Court has to exercise some discretion

  6  in using its declaratory relief powers.

  7           And then I suppose the other point that

  8  seems germane to this is you're talking about

  9  what hopefully is a very unusual situation where

10  the ten-day period -- unless you're seeking a

11  declaration that the whole DMCA is

12  unconstitutional.

13           MS. COHN:  No, Your Honor.

14           THE COURT:  But the application here is

15  that you have this ten-day period where ISPs have

16  to take down the material.  You know, the First

17  Amendment is about as important as it gets and

18  even being deprived of your First Amendment

19  rights for ten days is a real injury, but is this

20  a situation where given Diebold's position it

21  makes sense for the Court to wade into these

22  waters?

23           MS. COHN:  I think it does, Your Honor.

24           First of all, the counternotice

25  provisions of the DMCA are completely optional.

                                                                  8

 1  You know, an ISP doesn't have to put back.  There

  2  is no requirement in the law in the way that they

  3  are -- you know, they want the safe harbor they

  4  have to take down.  They don't get anything extra

  5  by putting back.  So it's a completely optional

  6  thing for the case.

  7           Now, in this case Swarthmore did

  8  indicate that they would put back.  Now, we never

  9  had to worry about that since Diebold withdrew

10  about whether they were going to, you know, hold

11  good to that promise.  So I think it's not just

12  10 or 14 days because it's 10 court days.  I

13  think it's not just a two-week period that you're

14  dealing with here.

15           And I think it's important because ISPs

16  don't have any incentive under this law to

17  protect speech rights for the 14 days or for an

18  extended period afterwards.  Their incentives, in

19  fact, in the statute go all the other way.

20           So I think it's important for the Court

21  to look at what's happened here and issue

22  declaratory relief that will signal I think to

23  ISPs nationwide that there is protection for them

24  if they choose to, you know, evaluate a claim of

25  copyright infringement and say, you know, we

                                                                  9

 1  don't think it holds water here.

  2           So I think there's some space for

  3  declaratory relief.  I think it's a discretionary

  4  call on your part, Your Honor.  I don't think

  5  anything mandates that you do it, and I think a

  6  careful decision on damages that actually

  7  evaluates all the issues raised here could answer

  8  many of the same questions that declaratory

  9  relief could.

10           THE COURT:  Okay.  Well, that's helpful

11  to have that view because this -- the other thing

12  I would say about the declaratory relief part of

13  it is this seems like a pretty fact-intensive

14  situation.  You have this massive archive.  You

15  have something which again is a fundamental

16  right, voting rights, that's at the bottom of

17  it.

18           Maybe some of the material is

19  proprietary.  Maybe some of the material -- well,

20  we know some of the material is fair use.  I

21  don't think anybody is really arguing that, but

22  nobody has actually gone through the archive and

23  gone through it document by document.  Perhaps

24  counsel have, but I'm certainly not aware that

25  that inquiry has occurred and I'm not sure that

                                                                  10

 1  the candle is worth the burning.  And so you've

  2  perhaps giving me a way of dealing with it.

  3           MS. COHN:  But I do think, Your Honor,

  4  that you don't have to read every single document

  5  in this archive because I think that the fourth

  6  fair use factor -- for the fair use inquiry and

  7  then let's set aside for a second the ISP inquiry

  8  because I think that's completely separate and

  9  not dependent on whether this Court finds there's

10  fair use or not.

11           But for the purposes of the fair use

12  argument the most important factor is their, you

13  know, effect on the market for the work and it's

14  important to remember, of course, copyright is

15  designed to protect people who sell their works.

16           I don't think Diebold has even -- you

17  know, I think it strains credulity for Diebold to

18  argue that there is -- certainly there was no

19  current market for the work because they weren't

20  marketing it and that they had any future

21  intention to enter the market for the sale of

22  their internal technical e-mail mailing lists

23  even if we would posit some hypothetical future

24  market for such things.

25           THE COURT:  How would you state the

                                                                  11

 1  rule?  I guess that's part of what I'm saying.

  2  Whether the Court does it by way of declaratory

  3  judgment or whether the Court awards damages,

  4  what is the thing that future defendants cannot

  5  do?

  6           MS. COHN:  I think that future

  7  defendants cannot send DMCA cease-and-desist

  8  notices if they don't have a likelihood of

  9  success on the merits on their underlying

10  copyright claim.  I think the preliminary

11  injunction standards, since that's what they

12  would have to prove, if they were to come to this

13  court and ask for a temporary restraining order

14  to prevent publication, that's the standard you

15  would hold them to under the federal rules.

16           I think another standard that's actually

17  interesting and might be appropriate is the

18  California SLAPP standard where they have to

19  prove a probability of success on the merits.

20  Either of those -- I like the preliminary

21  injunction standard because it's native to

22  federal law and it does have requirements --

23           THE COURT:  So you're saying if you're

24  going to chill free speech, even though Congress

25  says you can chill free speech for 14 days, you

                                                                  12

 1  have to at least have enough evidence of

  2  copyright violation to meet the preliminary

  3  injunction standard.

  4           MS. COHN:  I think that's right, Your

  5  Honor.  I think otherwise you really are -- I

  6  think the statute runs into constitutional

  7  problems if you don't because if you don't have a

  8  likelihood of success on the merits of a

  9  copyright claim then you clearly are in trouble

10  with the First Amendment.

11           I mean, all the copyright -- you know,

12  this is all speech; right?  It's not speech if

13  you've won your copyright claim, but until you've

14  won your copyright claim it's still protected

15  speech.  And in this particular instance, of

16  course, it's criticism.  It's, you know, the

17  heartland of free speech.  So I think that the

18  standard --

19           THE COURT:  I'm sorry.  Congress can't

20  say, you know, we think copyright is very

21  important, maybe not as important as free speech

22  but it's by definition a limitation on free

23  speech and it's -- and I think, as pointed out in

24  Diebold's papers, it's discussed in the same part

25  of the Constitution.  It's a contemporaneous

                                                                  13

 1  concept that the Framers had in mind.

  2           So it's important and Congress is saying

  3  in the DMCA, well, you know, we're going to

  4  provide at least for a short period of time a

  5  little more chilling of free speech than we might

  6  the rest of the time.  You're saying Congress

  7  can't do that?

  8           MS. COHN:  Congress can't do that for

  9  bad copyright claims.  Congress can only do that

10  for good copyright claims.

11           THE COURT:  So there has to be a

12  threshold test.

13           MS. COHN:  There has to be a threshold

14  test and I think the preliminary injunction test

15  is the test we apply to all other attempts to

16  restrain speech in all other contexts including

17  copyright before the DMCA.

18           THE COURT:  So this is actually segueing

19  into what I was really interested in asking

20  Plaintiffs.  The money is not the issue here.

21  What you're looking for, whether it's couched as

22  declaratory relief or damages, is a statement

23  that this threshold is a bare minimum regardless

24  of what Congress has done under the DMCA.

25           MS. COHN:  I think that's -- well, I

                                                                  14

 1  think Congress has indicated, you know.  I mean,

  2  that's what 512(f) is for.  It's to try to ensure

  3  that people don't take this powerful new tool of

  4  the DMCA notices and use it willy-nilly for all

  5  sorts of other claims.  And that's what's

  6  happened here.  I mean, at best they have a trade

  7  secret claim here.  I don't think that they would

  8  have survived that.

  9           So I think that the reason you have the

10  countervailing part of the statute 512(f) is to

11  make sure that this power isn't misused and I

12  think it does fall to you to figure out, okay,

13  well, they said knowing misrepresentation, but I

14  think for court's purposes you have to figure out

15  what that means.

16           And I think the preliminary injunction

17  standard makes sense for a lot of reasons.

18  Again, I think the SLAPP statute might work as

19  well.

20           Now, I mean, I would be lying if I

21  didn't say that the monetary damages award didn't

22  matter to Online Policy Group.  They are a tiny

23  organization and it would help them.

24           THE COURT:  The fees and costs would

25  help.

                                                                  15

 1           MS. COHN:  The fees and costs would

  2  help.  But, you know, that actually I think is,

  3  if I was forced to choose between them, less

  4  important than the judicial decision because, of

  5  course, if we get a judicial decision, and I

  6  really do want to talk about the ISP here, that

  7  will actually give OPG the kind of protection I

  8  think hopefully that it will need so that it

  9  doesn't need lawyers next time.

10           THE COURT:  Okay.  Well, why don't you

11  get into that and then I'll give Mr. Mittelstaedt

12  a chance to respond to what you've been saying.

13           MS. COHN:  I think regardless of what

14  you think about fair use the question of who is

15  an appropriate recipient of a cease-and-desist

16  notice is a tremendously important one in terms

17  of again trying to keep this statute down to the

18  really important and crucial uses that Congress

19  intended it to and stop it from --

20           THE COURT:  You're talking about the

21  tertiary and quaternary posters.

22           MS. COHN:  That's right, Your Honor.

23           There is no case law that says that the

24  ISP of someone who links has any potential

25  copyright liability and there is certainly no

                                                                  16

 1  case law that says that the ISP of an ISP of

  2  someone who links, which is hard even to say, has

  3  copyright -- has any copyright liability.

  4           I think the DMCA notices were intended

  5  to give ISPs who might have uncertainty, real

  6  uncertainty about copyright liability a safe

  7  harbor, not to be a free form tool that can be

  8  asserted against just anybody with any remote

  9  relationship to the publication.

10           And I think it's important for ISPs, all

11  ISPs, that there be some limits on who can be the

12  subject of these notices.  And I think it's --

13  it's complete -- you know, it's inappropriate.

14  It was inappropriate and wrong at the facial

15  level for notices to go to OPG and I think beyond

16  the pale for notices to go upstream from OPG.

17           But these notices have effect.  ISPs are

18  nervous when they get a cease-and-desist notice.

19  Most of them don't have sophisticated copyright

20  lawyers on call who can say, oh, well, you should

21  just ignore that one because you're not

22  appropriate.  They take risk averse stances, and

23  I think again it's important in this particular

24  instance for the Court to be clear about whether

25  512 has any limits.

                                                                  17

 1           THE COURT:  But if there's no actual

  2  case or controversy with regard to the ISPs in

  3  terms of declaratory relief and there's no future

  4  threat, the only way the Court can really get at

  5  this is some type of nominal damage award.

  6           MS. COHN:  Well, I think for OPG there's

  7  actual damages, not just nominal damages and

  8  there's costs and attorneys fees right in the

  9  statute.

10           THE COURT:  But for Hurricane, for the

11  other similarly situated folks.

12           MS. COHN:  Yes, I think that's right.

13           Hurricane isn't a party here today, but

14  since the harm to OPG happened really not because

15  of the letter that went to OPG, OPG, you know,

16  luckily had us and we said -- you know, we wrote

17  the response.  The harm to OPG happened when the

18  letter went upstream.

19           So OPG gets protected by the analysis of

20  its own letter, but I think actually in some ways

21  gets more protection by the analysis of whether

22  the letter to Hurricane Electric was

23  appropriate.

24           For the Swarthmore students, you know, I

25  think it's -- you know, we could have come up

                                                                  18

 1  with some theory of damages for the loss of their

  2  First Amendment right for two weeks, but, again,

  3  I don't think that's as important to the

  4  students.  And I think trying to tease out the

  5  percentage of their $30,000 a year tuition bill

  6  that goes to the free web hosting would have been

  7  extremely difficult.

  8           And since it wasn't again I think, you

  9  know, worth the candle we've only asked for

10  nominal damages.  But I think it will give not

11  only the students like the Swarthmore students

12  but ISPs like Swarthmore College, which, as you

13  saw in the letters to Mr. Carissimi had serious

14  concerns about the merits of this, a little more

15  confidence that they don't have to respond by

16  taking down speech every time they get a

17  cease-and-desist notice from anybody about

18  anything.

19           THE COURT:  Okay.

20           MS. COHN:  And I think that's -- you

21  know, we run the Chilling Effects Project along

22  with the Stanford clinic and the Boalt clinic and

23  the Harvard clinics and stuff where we're tracing

24  512 notices and we're finding that they are being

25  used for a wide range of things.  And I think

                                                                  19

 1  Diebold's use to try to silence speech on a

  2  critical matter of public importance is an

  3  important and in some ways maybe one of the worst

  4  ones we've seen, but it's by far not the only

  5  one.

  6           THE COURT:  Okay.  Thank you very much.

  7           Mr. Mittelstaedt, you have a lot to

  8  respond to.  So please proceed.

  9           MR. MITTELSTAEDT:  Thank you, Your

10  Honor.

11           First of all, Ms. Cohn is correct that I

12  did not mean to change what Diebold has

13  represented to the Court that the agreement not

14  to sue and the withdrawal of the DMCA

15  notifications relates to the non-commercial use

16  of the Plaintiffs --

17           THE cOURT:  So if somebody is trying to

18  sell parts of the archive that arguably have some

19  commercial value, that's not covered.

20           MR. MITTELSTAEDT:  Yes, that's correct.

21  And it shouldn't be because one of their

22  arguments about fair use is that they are making

23  non-commercial use and they shouldn't be able to

24  springboard that into some different --

25           THE COURT:  None of the parties in this

                                                                  20

 1  case are accused of having made commercial use.

  2           MR. MITTELSTAEDT:  That's correct.

  3           THE COURT:  So there's no present

  4  controversy nor has there ever been a controversy

  5  about any of the parties in this case or their

  6  ISPs for that matter being commercial users.

  7           MR. MITTELSTAEDT:  That's correct.

  8           THE COURT:  Okay.

  9           MR. MITTELSTAEDT:  Let me just treat

10  briefly the declaratory relief issue and then

11  I'll move on to the other issues.

12           It's clear that the Plaintiffs have

13  understood the unequivocal unambiguous nature of

14  Diebold's representations.  On their web site the

15  students say Diebold has withdrawn all of its

16  DMCA notices and has promised not to send out any

17  more.  This means you can mirror the memos

18  freely.  Nobody will do anything to you.  You can

19  now use these vital documents in public

20  discussion without fear.

21           The Plaintiffs cite the Hunter

22  Engineering case in the Supreme Court for the

23  proposition that withdrawing a threat isn't

24  enough and then they cite the two sentences down

25  where the court says dismissal of the suit would

                                                                  21

 1  leave the plaintiff with the threat of litigation

  2  hanging over its head.

  3           What they left out was the intervening

  4  part where the court said:  "We do think it

  5  relevant in light of the circumstances that

  6  Hunter has not indicated that it will not sue the

  7  plaintiff for infringement."

  8           That's the difference between that case

  9  and our case.  It's the same difference between

10  Your Honor's Yahoo! case and this case.

11           THE COURT:  That was the dispositive

12  point in Yahoo! at least to me that plaintiffs

13  never agreed to dismiss their case in France.

14           MR. MITTELSTAEDT:  On the fair use

15  issue.  Let me see if I can get the structure of

16  this straight.  I think those points that we just

17  talked about moot the declaratory relief action

18  for much the same reason that Your Honor has

19  already found that the injunctive relief claim

20  was mooted.

21           One of the arguments the Plaintiffs make

22  in their papers is that, even though they are

23  clear that they can do -- they can make

24  non-commercial use of these memos, others may not

25  be and so it's important for Your Honor to weigh

                                                                  22

 1  in.  And they cite, the only example they cite is

  2  Johns Hopkins.

  3           But Johns Hopkins I think, that episode

  4  really goes the other way because attached to the

  5  declaration of a student from Johns Hopkins

  6  University are some e-mails with the general

  7  counsel's office.

  8                   And if I can just refer to Exhibit A to

  9           the Laroia declaration, this is a memo from the

10           general counsel's office where they

11           say:  "As a non-profit educational

12           institution which produces copyrighted

13           works and which prior to publication

14           holds and maintains substantial

15           confidential and valuable information we

16           are aggrieved when someone takes our

17           work without permission," et cetera.

18                    And then they go on to say:

19           "Diebold has apparently given up trying

20           to contain these materials, but does

21           that not make the copyright violation

22           any less or just reduce the

23           consequences?  Should the university aid

24           and abet and participate in this

25           electronic disobedience?"

                                                                  23

 1           And then they go on, the Attorney

  2  General -- excuse me, the general counsel's

  3  office goes on to refer to the work of Professor

  4  Rubin, professor at the Johns Hopkins University

  5  that analyzed some of the materials in a very

  6  critical piece.

  7                   And they say this:  "Please

  8           understand I view this act far different

  9           from the work of Professor Rubin.  If a

10           faculty member chooses to do a scholarly

11           analysis, no matter how detrimental, we

12           would and do stand by the right to

13           publish.  But this is far different.

14           It's publishing raw documents belonging

15           to Diebold.  It's the difference between

16           publishing a thoughtful though scathing

17           article about the poems of Shelley and

18           simply publishing a copy of the poems

19           themselves."

20           And then they go on to say the first is

21  journalism and the second is copyright

22  infringement.

23           THE COURT:  Let's say that I'm inclined

24  to agree that perhaps there's not a live

25  controversy here.  Ms. Seltzer -- or Ms. Cohn,

                                                                  24

 1  rather, said all right, you can still address

  2  this in the damages analysis and I think she's

  3  absolutely right.  If the Court decides the

  4  damages are appropriate and writes an opinion

  5  that explains why, it seems to me that it's the

  6  same difference in a way.

  7           So why don't you go there.

  8           MR. MITTELSTAEDT:  Okay.  And let me

  9  address two points there.

10           First of all, as a technical matter the

11  elements of the three other causes of action are

12  not satisfied and I want to go over that just

13  briefly, but the broader question I think is the

14  one that was addressed by Ms. Cohn when Your

15  Honor engaged in a discussion of what the

16  limitations on 512 should be.

17           And to me, Your Honor, that's a very

18  interesting discussion if we were legislators,

19  but we're not and 512(f) speaks to this issue.

20  And it doesn't say a company can be held liable

21  for sending out a notification if it turns out to

22  be wrong because the court finds preliminary

23  injunction wouldn't have been granted.

24           THE COURT:  Well, she's arguing really a

25  constitutional issue, I think, that to the extent

                                                                  25

 1  Congress has the power to chill First Amendment

  2  rights to the Digital Millennium Copyright Act

  3  there has to be a threshold.

  4           MR. MITTELSTAEDT:  Okay.  And it's a

  5  complex issue because what Congress was faced

  6  with was a new era and the problem with the

  7  Internet -- I mean, there are all these

  8  advantages to the Internet.  The problem with the

  9  Internet was described very well by Judge Newman

10  on the Second Circuit in a case that was a

11  follow-on to the DVD case that both cases cited.

12           And at 273 F.3d 455 Judge Newman says,

13  you know, in the old days maybe you had narrow

14  limits on contributory infringement, but in the

15  digital world, he says, it's a very different

16  problem.  He used the example of obscene

17  materials, but it applies here.

18           And his point was they can be

19  distributed around the world immediately.  And so

20  Congress was faced with that and said, well, what

21  are we going to do, and it came up with the

22  procedure that is familiar to all of us now.

23           And then it realized it needed to put

24  some limits on that consistent with the First

25  Amendment, and the limit it put on that was in

                                                                  26

 1  512(f) and it says a company is liable if it

  2  makes a knowing material misrepresentation.

  3           I think that makes a lot of sense and it

  4  applies more easily where the copyright owner

  5  claims ownership and materials it doesn't really

  6  have or it claims materials were published and

  7  they weren't.  But when it comes to a matter of

  8  law Congress says you can only hold a company

  9  responsible if it knowingly materially

10  misrepresents the infringement.

11           And in this case, Your Honor, there is

12  no evidence that Diebold didn't believe its legal

13  position and, in effect, what the Plaintiffs I

14  think are arguing is that the argument that I've

15  made in three briefs now and in two oral

16  arguments is frivolous and would be the basis for

17  Rule 11 sanctions.

18           And I think that is what knowing

19  misrepresentation means.  I don't see any reason

20  for Your Honor to reach out and to say Congress

21  said one thing, but the Constitution requires

22  something else when the cases are replete with

23  holdings that in the copyright area the courts

24  pay heavy deference to Congress and that the Fair

25  Use Doctrine is the First Amendment protection.

                                                                  27

 1           So I think under the statute at least

  2  the question is whether there was any knowing

  3  misrepresentation of infringement here and unless

  4  the law is so clear that the Plaintiffs could

  5  argue in good faith or the Court could find that

  6  our position is frivolous I don't think that

  7  512(f) standard is met.

  8           And it seems to me that in the fair use

  9  area we know a couple of things from the cases.

10  One of the guideposts is that wholesale

11  publication of copyrighted materials weighs

12  against a finding of fair use.

13           THE COURT:  That's the Scientology line

14  of cases among others.

15           MR. MITTELSTAEDT:  Yes.  And that's what

16  we have here, wholesale copying.

17           The second thing we know is that

18  previously unpublished materials are entitled to

19  more protection, and we have that here.  There is

20  no requirement that a copyright owner intends

21  sometime in the future to publish the materials

22  and the courts use the example of memoirs.

23  Somebody may write their memoirs and they have

24  the right under the copyright law to decide when

25  and if to publish.

                                                                  28

 1           The third thing we know is that there is

  2  no public interest exception.  Somebody can't go

  3  in and take somebody else's copyrighted material

  4  and say I'm going to broadcast it to the world

  5  because the public is interested in it.  That's

  6  the Harper & Row decision in the Supreme Court.

  7           So those three things point strongly

  8  against defining a fair use, and there are other

  9  factors that admittedly go the other direction.

10  My point here, though, is the Court doesn't have

11  to decide the final contours of fair use.  It's

12  enough to say that Diebold's position was not

13  frivolous as a matter of law and, therefore,

14  there's no knowing misrepresentation.

15           THE COURT:  And, therefore, no damages?

16           MR. MITTELSTAEDT:  And, therefore, no

17  damages.

18           To get damages the Plaintiffs have to

19  show some cause of action and they've come up

20  with their best causes of action and the first

21  one they plead, Your Honor, is intentional

22  interference with contract.

23           They have several problems there and, as

24  to the students, they have not presented any

25  contract and so we don't know if there's any

                                                                  29

 1  breach.  And as a technical matter again the

  2  notice that Diebold sent to Swarthmore did not

  3  refer to these students' web site.  It referred

  4  to a different web site.  So they don't have the

  5  causation there.

  6           On OPG, again, there was no breach of

  7  contract.  Hurricane Electric represented to this

  8  Court in a declaration that they were not going

  9  to take any adverse action against OPG during the

10  pendency of the case.  So there was no breach.

11           The California cases do say in some

12  circumstances if the plaintiff's performance of

13  the contract was made more costly or burdensome,

14  that can state a cause of action for this tort.

15  But here OPG has not shown that its performance

16  of its contract was made more costly or more

17  burdensome.

18           There was an acceptable use provision in

19  the contract between OPG and its upstream ISP

20  that permitted Hurricane Electric to suspend

21  service in order to comply with the DMCA

22  notification.  They didn't do that, but my point

23  is had they done that it wouldn't have been

24  breach of contract.

25           And on the same technical line, Your

                                                                  30

 1  Honor, one of the elements of this cause of

  2  action is an intent to cause the breach and there

  3  is no evidence that Diebold intended for any

  4  breach of contract knowing that there's an

  5  acceptable use provision in the contract.

  6           THE COURT:  What about the argument that

  7  the DMCA was never intended and could not be read

  8  as intended to reach the downstream ISPs and thus

  9  Diebold's alleged threats to them was a problem?

10           MR. MITTELSTAEDT:  Yes.  First of all,

11  the letter sent to the ISPs did not say we are

12  going to sue you.  It said we request your

13  assistance in removing this infringing material.

14  At that point it is not inducing a breach of

15  contract.  It is simply requesting assistance.

16           By the same token there is no

17  requirement in the DMCA that a notification can

18  be sent only to a party that would be liable.  So

19  let's say they are right on that point.  There's

20  still no prohibition against sending a request

21  for voluntary assistance to the ISP, and an ISP

22  is permitted to ignore the notice and to decide

23  they don't want to.

24           And, you know, these ISPs are

25  businesses, they do have lawyers for other

                                                                  31

 1  purposes, and there's nothing preventing them

  2  from asking for legal advice on whether we should

  3  comply with this and what happens if we don't.

  4           The Plaintiffs acknowledge, Your Honor,

  5  that this is an unsettled area of the law and

  6  they ask Your Honor to reach out and to clarify

  7  it.  The cases in this area suggest that there

  8  is contributory -- there can be contributory

  9  infringement by ISPs in this kind of situation.

10           But my real point, Your Honor, is to

11  decide the boundaries of that, to decide the

12  boundaries of contributory infringement for an

13  ISP should await a live controversy where the

14  parties have fully briefed it, are fully arguing

15  it, and it really matters.

16           In this case I think all Your Honor

17  needs to find is under 512(f) that there's no

18  knowing misrepresentation and under the

19  intentional interference that there's been no

20  breach of contract, there's been no inducing a

21  breach of contract.

22           THE COURT:  All right.  And the last

23  question for you:  Is there not an argument that

24  OPG at least is entitled to attorneys fees and

25  costs as a result of the -- having at least

                                                                  32

 1  achieved the vindication of their right to

  2  publish the fair use materials?

  3           MR. MITTELSTAEDT:  I don't think so,

  4  Your Honor, because they would only be entitled

  5  to that if a statute or one of these causes of

  6  action were satisfied and, as I think we have

  7  established, they haven't met the elements of

  8  these causes of action.

  9           And, you know, in a way this harkens

10  back, my last point, to the first comment I made

11  to Your Honor when we argued the temporary

12  restraining order quoting Justice Holmes from a

13  long time ago saying that great cases -- and this

14  is a great case.  There's a lot of great issues

15  here -- make bad law because there's a tendency

16  to decide more than needs to be decided.

17           THE COURT:  Thank you.

18           Ms. Cohn, do you want to reply?

19           MS. COHN:  Yes, Your Honor.  I'd like to

20  address just briefly a couple of the points that

21  Mr. Mittelstaedt made.

22           Mr. Mittelstaedt tries now to

23  recharacterize the letters as simply asking for

24  some kind of voluntary assistance.  If I may, I

25  think the best way to evaluate that is to

                                                                  33

 1  actually read the letter.  The final paragraph of

  2  all the letters is essentially the same.

  3                   "Our clients reserve their

  4           position insofar as costs and damages

  5           caused by the unauthorized provision of

  6           information-locating tools with respect

  7           to online locations engaging in

  8           infringing activity with respect to the

  9           Diebold property.  Our clients also

10           reserve their right to seek injunctive

11           relief to prevent further unauthorized

12           provision of information-locating tools

13           with respect to online locations engaged

14           in infringing activity with respect to

15           the Diebold property pending your

16           response to this letter.  We suggest you

17           contact your legal advisors to obtain

18           legal advice as to your position.  We

19           await your response within 24 hours."

20           Now, with all apologies to the gods of

21  grammar, I didn't write this.  This is a legal

22  threat and the question again under the

23  declaratory relief cases I think is the right

24  place to look.  The question is not whether they

25  use magic words, you know, "we hereby thus

                                                                  34

 1  threaten you."  It's whether there was a

  2  reasonable apprehension of legal liability in the

  3  recipient.  There was here and the letter is

  4  clear in that intent.

  5           So I think the attempt to try to

  6  rehabilitate the letters falls flat.  They were

  7  directly threatening legal action and that's what

  8  the ISPs who received them thought and that's why

  9  they responded.

10           I think it's important again, Your

11  Honor, and I suspect that you know this, the

12  Reimerdes case wasn't about copyright

13  infringement.  It was about section 1201.  I was

14  counsel on that case and I'd be happy to go on at

15  great length about the differences between the

16  anti-circumvention provisions and plain old

17  contributory copyright infringement, but that

18  case is just not relevant here.

19           I think that it's clear that OPG has

20  been damaged.  It had a reduced -- it was

21  burdened by this.  It had a reduced benefit of

22  its bargain with Hurricane Electric.  It was told

23  in no uncertain terms could it host the materials

24  and it was told essentially that Hurricane

25  Electric would forego cutting them off entirely

                                                                  35

 1  because we were running to court.  We came in on

  2  an emergency basis here.

  3           It simply can't be the law that OPG had

  4  to wait until a thousand of its web sites were

  5  unplugged and 77,000 of its users lost their

  6  authority before it could come and seek relief

  7  from this court.  At the time it was a very real

  8  threat and I think there was a clear reduced

  9  benefit of the bargain and clear damages here,

10  certainly costs and attorneys fees even if the

11  damages are difficult, but I think they are clear

12  and quite easy to prove here.

13           I think Mr. Mittelstaedt's

14  representation that there's unsettled law here or

15  that we admit that in terms of OPG is just flat

16  wrong.  At best there may be -- there is one

17  random case that held that a linker could be

18  liable in the Utah Lighthouse case which isn't

19  binding on this Court.

20           There has never been a case nor I think

21  ought there ever be where the ISP of a linker or

22  the upstream ISP of a linker was liable.  There

23  was absolutely no legal basis.  There's nothing

24  unsettled about that law.  It was clearly

25  improper.

                                                                  36

 1           In terms of the fair use, I think that

  2  it is clear under the case law that copyright law

  3  is intended to protect people who intend to

  4  monetize their work, and Diebold doesn't pass the

  5  giggle test here.  This information is way too

  6  embarrassing for Diebold to even posit that it

  7  would publish it.

  8           As I said I think the last time I was

  9  here, we looked on Amazon for the market for the

10  internal technical e-mail books by big major

11  companies and we didn't find any.  There's no

12  market that exists in this kind of work nor would

13  Diebold participate in it.

14           It's important to remember what's in

15  this archive.  It's incredibly embarrassing to

16  Diebold.  There's indications of intent to try to

17  overcharge officials, that they wanted more

18  security measures.  There's admission that the

19  machines were not as secure as they were being

20  marketed as.

21           There's admissions that the machines had

22  uncertified code which has developed into this

23  archive that led in part to this California

24  Secretary of State's decision to suspend

25  certification of the latest Diebold machine

                                                                  37

 1  because of the revelations in this archive of all

  2  the uncertified code that was used.

  3           This isn't the kind of thing that

  4  Diebold is going to market and sell.  It's highly

  5  embarrassing to them.  That I think is the

  6  important question for fair use purposes.

  7           You can quote the whole thing of

  8  something that isn't covered by copyright law

  9  here that wasn't intended to be sold.  Here this

10  wasn't intended to be sold.  Diebold had tools at

11  its disposal that said it was concerned about

12  confidential information, that it was concerned

13  about "hacking," a word it uses over and over

14  again.

15           Nobody here is a hacker.  None of these

16  people had anything to do with the retrieval of

17  this information out of Diebold.  There are

18  hacking laws, there are quite good ones, and I'm

19  sure this Court is well familiar with them, to go

20  after the person who broke into Diebold if they

21  wanted to.  They haven't availed themselves of

22  that remedy here against anybody as far as we can

23  tell.

24           There is trade secret law.  And if

25  Congress had wanted to write the Digital

                                                                  38

 1  Millennium Trade Secret Act and provide for

  2  emergency relief for those who get trade secrets

  3  out on a federal level, it could have done that.

  4  It didn't.  We have a trade secret regime in this

  5  country.  It's state by state.  California has a

  6  very hardy trade secret law.

  7           Again, they could have availed

  8  themselves to that law and met the standards of a

  9  preliminary injunction and received an injunction

10  here, but they didn't.  They went the short way,

11  the DMCA way, and it's an improper use of the

12  statute.

13           THE COURT:  Thanks very much.

14           I need to stop in about one minute.

15  Mr. Mittelstaedt, if you want to address the last

16  couple of points Ms. Cohn made, please.

17           MR. MITTELSTAEDT:  Three points

18  quickly.

19           First of all, if the letter to the ISP

20  is considered a legal threat, it's protected by

21  the First Amendment unless it's a sham and that

22  brings us back full circle.

23           Second, on the fair use issue the law is

24  just not as described.  Take the example of

25  someone writing memoirs that are very

                                                                  39

 1  embarrassing and deciding not to publish them.

  2           And the third point on OPG.  The

  3  question isn't whether they have been damaged.

  4  The question is whether they satisfy the elements

  5  of the California cause of action they've

  6  alleged.  And there has not been a breach of a

  7  contract by OPG and their performance has not

  8  been made more costly or more burdensome.

  9           So as attractive as the case may be in

10  other ways, they haven't met the elements of the

11  California claims.

12           Thank you.

13           THE COURT:  Well, Counsel, you've done a

14  great job of pointing out how complicated this

15  case is and it's going to take me some time to

16  write a careful decision and I just ask you to

17  bear with me.  I'll try to get something back to

18  you in a month or two.

19           MR. MITTELSTAEDT:  Thank you, Your

20  Honor.

21           THE COURT:  Thanks very much.

22           The matter is submitted.  We'll take a

23  five-minute recess.

24           (Whereupon, the proceedings concluded.)

25                      ---oOo---

                                                                  40

  1              CERTIFICATE OF REPORTER

  2

  3

  4

  5              I, Peter Torreano, Official Court

  6  Reporter of the United States District Court for

  7  the Northern District of California, 280 South

  8  First Street, San Jose, California, do hereby

  9  certify:

10              That the foregoing transcript is a

11  full, true and correct transcript of the

12  proceeding had in Online Policy Group, et al., v.

13  Diebold Incorporated, Case Number C-03-04913-JF,

14  dated February 9, 2004; that I reported the same

15  in stenotype to the best of my ability, and

16  thereafter had the same transcribed by

17  computer-aided transcription as herein appears.

18

19

20

21

22

23                          _______________________
                               PETER TORREANO, CSR
24                            License Number C-7623

25

</pre>

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