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 1 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 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 2 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