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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:
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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>
