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et al., )
5 )
Plaintiff, )
6 ) San Jose, CA
vs. ) February 9, 2004
7 )
8 et al., )
9 Defendants. )
A P P E A R A N C E S:
For the Plaintiffs: Electronic Frontier
14 Foundation
454 Shotwell Street
16 San Francisco, CA
Law Offices of Alan
18 Korn
19 1840 Woolsey Street
Berkeley, CA 94703
Stanford Law School
21 Cyberlaw Clinic
559 Nathan Abbott Way
23 Stanford, CA 94305


25 Court Reporter: PETER TORREANO, CSR

License Number C-7623

1 A P P E A R A N C E S:

2 For the Defendants: Jones Day

4 555 California Street
26th Floor
5 San Francisco, CA

















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

1 with respect to this particular archive against

2 these Plaintiffs?


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

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?


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

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

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.

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.

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

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


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

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


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


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


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.


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


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.


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


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


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


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


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


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?"

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,


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


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


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.


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.


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


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


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


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


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


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


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


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.


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


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


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


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---



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.






23 _______________________
24 License Number C-7623