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TUCoPS :: Cyber Law :: 0121-t~1.txt

Injunction hearing against 2600 Website and others regarding DeCSS




     1   UNITED STATES DISTRICT COURT
         SOUTHERN DISTRICT OF NEW YORK
     2   ------------------------------x
 
     3   UNIVERSAL CITY STUDIOS, INC.;
         PARAMOUNT PICTURES CORPORATION;
     4   METRO-GOLDWYN-MAYER STUDIOS, INC.;
         TRISTAR PICTURES, INC.; COLUMBIA
     5   PICTURES INDUSTRIES, INC.; TIME
         WARNER ENTERTAINMENT CO., L.P.;
     6   DISNEY ENTERPRISES, INC.; and
         TWENTIETH CENTURY FOX FILM
     7   CORPORATION,
 
     8                  Plaintiffs,
 
     9              v.                           00 CV 277 (LAK)
 
    10   SHAWN C. REIMERDES; ERIC CORLEY
         a/k/a "EMMANUEL GOLDSTEIN"; and
    11   ROMAN KAZAN,
 
    12                  Defendants.
 
    13   ------------------------------x
 
    14                                           January 20, 2000
                                                 2:45 p.m.
    15
         Before:
    16
                             HON. LEWIS A. KAPLAN,
    17
                                                 District Judge
    18
                                  APPEARANCES
    19
         PROSKAUER ROSE LLP
    20        Attorneys for Plaintiffs
         BY:  LEON P. GOLD
    21        JON BAUMGARTEN
              WILLIAM M. HART
    22        KENNETH RUBENSTEIN
 
    23   PETER L. KATZ
              Attorney for Defendants
    24       -and-
         HUBER & SAMUELSON, P.C.
    25   BY:  ALLONN E. LEVY (via speakerphone)
              ROBIN D. GROSS (via speakerphone)
 
 
                                                                  2
 
 
 
     1            (In chambers)
 
     2            THE COURT:  All right.  So one of the people on the
 
     3   phone is Robin Gross and the other gentleman is --
 
     4            MR. KATZ:  Allonn Levy.
 
     5       Judge, if I may, in the interim, these are two
 
     6   applications pro hac vice for Ms. Gross and Mr. Levy.
 
     7       Judge, I've lost them.  I'll get Ms. Gross and tell her
 
     8   we're ready to proceed.
 
     9            THE COURT:  Once more.  Ms. Gross?  Ms. Gross?
 
    10            MS. GROSS:  Hello?
 
    11            THE COURT:  Ms. Gross, are you there?
 
    12            MS. GROSS:  Yes, I'm here.
 
    13            THE COURT:  Mr. Levy, are you there?
 
    14            MR. LEVY:  Allonn Levy here.  Thank you.
 
    15            THE COURT:  Everyone is present.  Let me first
 
    16   indicate that this is being held in chambers rather than in
 
    17   the courtroom to accommodate Ms. Gross and Mr. Levy, who are
 
    18   in California and, for various reasons, were unable to get to
 
    19   New York for the hearing this afternoon.  And I have usable
 
    20   conference facilities here, but not in the courtroom.  The
 
    21   proceeding is nonetheless public.  There are various members
 
    22   of the public and I believe the press in attendance, and they
 
    23   are certainly welcome.
 
    24       Mr. Katz has given me pro hac vice applications on behalf
 
    25   of Ms. Gross and Mr. Levy.  I will hear Ms. Gross or Mr. Levy
 
 
 
                                                                  3
 
 
 
     1   this afternoon.  These applications are not in the right form
 
     2   and they're not accompanied by the necessary check that the
 
     3   clerk's office will insist on, so you should make those
 
     4   applications and pay the fees in due course.  But I'll hear
 
     5   you this afternoon.
 
     6            MR. LEVY:  Thank you, your Honor, and I apologize for
 
     7   the errors.
 
     8            THE COURT:  No problem.  All right.  It's the
 
     9   plaintiff's motion for a preliminary injunction.  I'll hear
 
    10   you, Mr. Gold, on behalf of the plaintiff.
 
    11            MR. KATZ:  Judge, if I may just have one housekeeping
 
    12   matter before we begin.  Your Honor had directed that reply
 
    13   documents be served via fax by 12:30 today.  It's my
 
    14   understanding that counsel in California had not received it
 
    15   when I had left my office.
 
    16       Counsel, have you since received the documents.
 
    17            MS. GROSS:  I have not received the documents.
 
    18            MR. LEVY:  I have not, your Honor.  However, I have
 
    19   not been back at my office.  I understand from Mr. Katz that
 
    20   there were some 94 pages faxed, so I don't imagine that I
 
    21   would have been able to review them in any case.  But, no, I
 
    22   did not have them.
 
    23            THE COURT:  Mr. Katz, did you receive them?
 
    24            MR. KATZ:  Judge, I received 71 of the 94 pages.  I
 
    25   had to leave my office to get down to court on time.  I
 
 
 
                                                                  4
 
 
 
     1   simply, even though they were faxed prior to, I believe the
 
     2   fax started coming through about 11:30, it took well over an
 
     3   hour for the transmission to complete and, as a result, Judge,
 
     4   because I was travelling in a car, I did not have an
 
     5   opportunity to review these documents, 94 pages.  I simply
 
     6   wasn't able to do so in the period of time in which they were
 
     7   sent.
 
     8            THE COURT:  Duly noted.
 
     9            MR. GOLD:  Yes.
 
    10            THE COURT:  Mr. Gold.
 
    11            MR. GOLD:  Thank you, your Honor.  This case, your
 
    12   Honor, is all about digital videodiscs, DVDs, which is the
 
    13   latest technology for watching copyrighted motion pictures at
 
    14   home.  Competing with and catching up on the videotape that so
 
    15   many of us are used to, the DVD gives us much clearer, sharper
 
    16   pictures than the videotapes.  However, the DVDs can be copied
 
    17   if unprotected.  And unlike videotapes, where if you run off
 
    18   one copy, you get a substantial decrease in the quality and
 
    19   two, much more so, and it gets worse and worse so you don't
 
    20   really have a copying problem, with a DVD, you can copy an
 
    21   endless number of them and they're just about as clear as the
 
    22   original DVD.
 
    23            THE COURT:  Is the content of a DVD simply a data
 
    24   file?
 
    25            MR. GOLD:  Yes, your Honor.
 
 
 
                                                                  5
 
 
 
     1            THE COURT:  Okay.
 
     2            MR. GOLD:  Now, before plaintiffs were willing to
 
     3   make DVDs available, they decided that they had to have an
 
     4   encryption technology so that the content and their copyright
 
     5   interest in the content could be protected, something that
 
     6   would scramble the picture and scramble the sound.  And that
 
     7   system was created, and it is called CSS, which stands for
 
     8   content scrambling system.  And you can't watch a movie unless
 
     9   you have an authorized DVD player, and the authorized DVD
 
    10   player has the computer key to the program.  So with a DVD and
 
    11   an authorized player, the authorized player will unscramble
 
    12   the picture and the sound and you can watch your movie.  But
 
    13   you can't copy it.  The CSS technology prevents that.
 
    14            THE COURT:  And the key is what?  Is it software?  Is
 
    15   it hardware?  Is it a combination?
 
    16            MR. GOLD:  The key is software.
 
    17            THE COURT:  Okay.
 
    18            MR. GOLD:  So what CSS is is a safety device which
 
    19   protects the copyrighted material.  Now, the motion picture
 
    20   studios, in creating DVDs and getting them out to the public
 
    21   and increasing the number, relies not only on the encryption
 
    22   system, not only on CSS because given the developments in the
 
    23   world over the last ten years and even over the last two or
 
    24   three years, it was known to them that there was a possibility
 
    25   that there would be decryption of CSS and there was a lot of
 
 
 
                                                                  6
 
 
 
     1   pressure by many copyright owners to get extra protection from
 
     2   Congress, and a statute called a Digital Millenium Copying Act
 
     3   was passed.  And what it created was a new right that a
 
     4   copyright owner would have if he had to protect the system, a
 
     5   technology which would protect his copyrighted material.  He
 
     6   got the right to that safety device and the right not to have
 
     7   it circumvented as a matter of federal law.  So this is like a
 
     8   guard or a moat surrounding the house, the protected material.
 
     9            THE COURT:  Filled with litigators instead of
 
    10   alligators.
 
    11            MR. GOLD:  And increasingly so.  Yes, your Honor,
 
    12   that's true.  And I appreciate the differential between those
 
    13   two.  And the act was passed to bring the U.S. in line with
 
    14   the world intellectual property organization which had created
 
    15   a treatise of which there are perhaps 12, 14 countries that
 
    16   have signed it, and this treatise provides legal protection
 
    17   and legal remedies against circumventing technology systems
 
    18   that protect copyrighted devices.
 
    19       So what the motion picture studios are relying on in terms
 
    20   of selling DVDs is their copyright in the motion picture, a
 
    21   licensing system that they have created to allow people to use
 
    22   the copyright, and the anticircumvention law, and what they
 
    23   believe is their right to court enforcement of the
 
    24   anticircumvention law in a rapid and effective way, through
 
    25   preliminary injunctions and then final injunctions.  That is
 
 
 
                                                                  7
 
 
 
     1   the safety net, they believe, surrounding their copyrighted
 
     2   material.
 
     3            Now, in late '98, I believe, a technological device,
 
     4   a computer device, was created called DCSS, DeCSS, and I guess
 
     5   it stands for decrypted CSS.
 
     6            THE COURT:  Was it '98 or '99?
 
     7            MR. GOLD:  '99, did I say 98?
 
     8            MR. HART:  Yes.
 
     9            MR. GOLD:  Now, what that device does, if you have
 
    10   it, is you have it in your computer, it will unscramble the
 
    11   system, unscramble the movie, unscramble the movie.
 
    12            THE COURT:  Is it a device or is it a program?
 
    13            MR. GOLD:  It's a computer program.  I think that's a
 
    14   technological device computer program, which protects, which
 
    15   does away with CSS.  And once it does away with it, it does
 
    16   away with it, you can watch it on your computer, you can watch
 
    17   the movie, copy it, download it, and run off lots of copies.
 
    18   Once CSS decrypts, it decrypts.
 
    19       Now, what we did, as soon as this started to be used was
 
    20   to send out letters telling everybody they had no right to use
 
    21   it, that they were violating the law and we would seek
 
    22   enforcement of the law, and that did an awful lot of good
 
    23   because an awful lot of websites that were posting DeCSS
 
    24   stopped doing it.
 
    25       Then there was a lawsuit that was started in California
 
 
 
                                                                  8
 
 
 
     1   under a trade secret law.  The motion picture companies are
 
     2   not parties and don't control in any way that litigation.
 
     3   There was a hearing in court, as I say, in state court, under
 
     4   the trade secret law, to try to enjoin the use of DeCSS.
 
     5   There was a hearing on preliminary injunction; it was not
 
     6   issued and a lengthy hearing was conducted on the preliminary
 
     7   injunction this Tuesday.  There has been no decision on the
 
     8   preliminary injunction.  However, it is not brought under the
 
     9   Digital Millenium Copying Act; it's brought under state
 
    10   copying, it's brought under state secrecy laws, trade secret
 
    11   laws, and we are not parties to that action.
 
    12            I think what I would like to do, your Honor, since a
 
    13   major defense in the reply papers has been that defendants
 
    14   aren't appropriate parties, I would like to get into who the
 
    15   defendants are and why they have been named and what are they
 
    16   doing.  And if I can refer you to the declaration of
 
    17   Mr. Boyden, Bruce Boyden, a lawyer in my office, an associate
 
    18   in my office, in support of the application for preliminary
 
    19   injunction, I will be able to show you just what's happening.
 
    20            THE COURT:  I've read your papers.  Each of the
 
    21   defendants is listed on some registration or other, the domain
 
    22   name registrations, I suppose, as at least the technical
 
    23   contact, if not other positions, with the registrant of each
 
    24   of three websites that have posted DeCSS.  Am I right?
 
    25            MR. GOLD:  Yes.  Each one of them is posting DeCSS
 
 
 
                                                                  9
 
 
 
     1   and one of them is also linking DeCSS.  Now, by that, I mean
 
     2   one of them is posting the names of other websites and, if you
 
     3   click on to the other website, you are delivered to a page of
 
     4   another website on which DeCSS appears, and then, if you
 
     5   double click DeCSS, you get it right into your computer, just
 
     6   as though it was originally done.
 
     7       So one of them is linking as well as posting, but all
 
     8   three of them are posting; except for at the present time
 
     9   we've been advised that one of the defendants, Mr. Kazan,
 
    10   called us and he said that, if we got a court injunction, he
 
    11   would take it down, just send him the injunction.  But when we
 
    12   checked in the next several days, he had taken DeCSS off of
 
    13   his website.
 
    14            THE COURT:  All right.
 
    15            MR. GOLD:  And as your Honor has seen, when you went
 
    16   to our papers, when you go to one of these websites, you just
 
    17   have a section which has DeCSS underlined and you simply put
 
    18   your mouse on that, double click it, and you have DeCSS.  You
 
    19   can then watch a DVD without an authorized player and copy it
 
    20   if you want.
 
    21       Now, under the statute, three conditions need to be
 
    22   satisfied:  Are defendants offering, providing, trafficking in
 
    23   this device, and is it designed to circumvent the
 
    24   technological measure that's controlling access to protected
 
    25   copyright work?  We think it's all very, very clear.
 
 
 
                                                                  10
 
 
 
     1   Circumvent means to descramble, and that's what DeCSS does.  A
 
     2   technological measure effectively controls the access here to
 
     3   do the protected work and CSS is such a measure and it's
 
     4   designed to control access to our copyrighted works.  Because
 
     5   CSS is an encryption technology, you've got to have a software
 
     6   key to open it, so CSS qualifies as an access control measure.
 
     7   And all of the statutory requirements are met, and defendants
 
     8   are clearly violating them.
 
     9       The statute does say something about primary purpose, and
 
    10   I'd like to get into that for just a moment.  Under
 
    11   1201(a)(2), the statute says that no person shall manufacture,
 
    12   offer, provide, or otherwise traffic in any technology, in any
 
    13   technological device that is primarily designed for the
 
    14   purpose of circumventing a technological measure.  That
 
    15   effectively controls the access to a work protected under the
 
    16   title.
 
    17       Now, if you look at the statute, if the technological
 
    18   measure did not control access to a copyrighted work, then the
 
    19   statute doesn't apply.  For instance, you could have some
 
    20   device that controls access to work that is in the public
 
    21   domain.  It's not protected by copyright and the statute
 
    22   wouldn't be applicable.  Here, the issue is whether the
 
    23   primary purpose of DeCSS is to get around the safety measure
 
    24   in order to get to a protected, copyrighted work, and the
 
    25   reason that it's so clear it was primarily designed to do that
 
 
 
                                                                  11
 
 
 
     1   is that it has absolutely no other function.  There's nothing
 
     2   that you can do with DeCSS except decrypt CSS.  That's all it
 
     3   does.
 
     4       So I think the question of the primary purpose is quickly
 
     5   and easily answered by that analysis.  Now, there are several
 
     6   exceptions that the defendants have talked about and,
 
     7   naturally, all of the major exemptions are the statute so
 
     8   they're thrown in here and they claim each one of them means
 
     9   that they haven't violated the statute.  One of them is a
 
    10   reverse engineering exception.  The legislative history that
 
    11   we've cited in our brief makes clear that the reverse
 
    12   engineering exception only applies to a technological device
 
    13   to a program that prevents access to a computer program and
 
    14   nothing else.
 
    15       Congress decided that would promote competition in the
 
    16   computer world, and they did not want to protect computer
 
    17   programs that were guarded in that way by a protective device.
 
    18   But as the legislative history is very clear, reverse
 
    19   engineering does not at all in any way protect or provide an
 
    20   exemption for someone who is getting around a safety device
 
    21   for the purpose of getting at a copyrighted act, at a
 
    22   copyrighted piece of work, a picture or a book or anything
 
    23   like that.  The only thing that would be exempted would be the
 
    24   computer program.  Now, aside from that, there's nothing in
 
    25   any of the papers before you that would indicate that these
 
 
 
                                                                  12
 
 
 
     1   particular defendants have those kind of skills.
 
     2            All of the evidence would indicate that they're using
 
     3   DeCSS and telling other people to use DeCSS to watch movies
 
     4   that they otherwise would have to watch on licensed players.
 
     5   And they can also download movies, they can trade them with
 
     6   their friends.  There's nothing in the record to suggest that
 
     7   these people are involved in or could possibly be involved in
 
     8   reverse engineering.  But even if there were, they can't use
 
     9   that exemption here because the exemption only applies to a
 
    10   safety device around a computer program and not around any
 
    11   other kind of copyrighted work.
 
    12            Next, they talk about an exemption because they are
 
    13   doing research and the research has something to do with
 
    14   coming up with an alternate player, a Linux system, a Linux
 
    15   player.  Again, one would have to note that there is nothing
 
    16   that indicates that these particular defendants that are
 
    17   before you and charged with violating the statute would be
 
    18   able to do that research.
 
    19            THE COURT:  Is there not a more basic answer to that
 
    20   argument?
 
    21            MR. GOLD:  Yes, there is.  And that is that you have
 
    22   to go to the copyright owner and ask his permission and
 
    23   negotiate with him before this exemption applies, and they
 
    24   haven't done it and they don't claim to have done it.
 
    25            THE COURT:  But even more basically, you're suing
 
 
 
                                                                  13
 
 
 
     1   under 1201(a)(2), right?
 
     2            MR. GOLD:  Yes.
 
     3            THE COURT:  And doesn't the encryption research
 
     4   exemption apply only to 1201(a)(1) claims?
 
     5            MR. BAUMGARTEN:  No, your Honor.  I think there is
 
     6   provision for a limited application, 1201(a)(2), in
 
     7   fairness --
 
     8            MR. HART:  It relates to the dissemination of the
 
     9   fruits of the encryption research and provides strict limits
 
    10   on qualified collaborators.  They have to be people trained or
 
    11   skilled in the art of cryptology, and the legislative history
 
    12   makes it quite clear, your Honor, that when the encryption
 
    13   device or the tools or the fruits of the encryption/decryption
 
    14   research are disseminated indiscriminately outside of the fold
 
    15   of what you would consider to be qualified researchers that
 
    16   the exemption clearly doesn't apply.
 
    17       There's not only scholarly commentary on the subject; we
 
    18   are dealing with some of the statute, but also substantial
 
    19   legislative history to say there has to be a line between
 
    20   using encryption research as a pretext, if you will, and that
 
    21   which really goes to the pejorative of hacking.
 
    22            MR. BAUMGARTEN:  It's clause 4 of paragraph G, your
 
    23   Honor.
 
    24            THE COURT:  Clause 4.  Okay.  Thank you.
 
    25            MR. GOLD:  Finally, the defendants claim that the
 
 
 
                                                                  14
 
 
 
     1   statute applied in the way that we're asking the Court to
 
     2   apply it violates their rights to free speech under the First
 
     3   Amendment.
 
     4            Your Honor, this DeCSS, I would submit, is not an
 
     5   expression of anything.  It doesn't communicate any ideas.
 
     6   What it is, and I think the closest analogy, is it's a
 
     7   burglary tool.  It's like a lock pick.  And it has nothing to
 
     8   do with free speech.
 
     9       We would also point out that there is an awful lot of
 
    10   speech on the websites of defendants and many other websites
 
    11   where DeCSS is offered where long soliloquies are given about
 
    12   the inappropriateness of the copyright laws, the
 
    13   inappropriateness of the Digital Millenium Copyright Act, the
 
    14   anticircumvention act.  We're not seeking any injunction
 
    15   against any of those expressions or statements of opinion and
 
    16   expression of rights.  We're only trying to take out of these
 
    17   websites the thing that says DeCSS that you put your mouse on
 
    18   and click it twice and you have circumvented the protective
 
    19   device on our copyrighted films.  That's all we seek from you,
 
    20   both in the case of posting and also in the case of the
 
    21   linking that I described to your Honor before.
 
    22            Touching on irreparable injury, I think, again, it
 
    23   kind of speaks for itself here.  The plaintiffs have a huge
 
    24   investment in these copyrighted movies, a huge investment of
 
    25   putting out DVDs.  The public has a huge investment now in DVD
 
 
 
                                                                  15
 
 
 
     1   players, and all of this with continued dissemination of DeCSS
 
     2   unabated by the courts will be lost, including a lot of the
 
     3   value of our copyrighted films.
 
     4       On the other side, what is the injury if a preliminary
 
     5   injunction is ordered?  For the time it takes to try this
 
     6   case, they -- the defendants -- will not be able to post DeCSS
 
     7   and people won't be able to avoid the safety device on our
 
     8   copyrighted movies.  If we lose the trial, they'll be able to
 
     9   in four to eight weeks or whenever the trial is held.  It
 
    10   seems to me that irreparable injury concepts and concepts of
 
    11   equity compel the issuance of a preliminary injunction here,
 
    12   even if the Court felt that there was a material issue as to
 
    13   any merits of the case, as to any point that the defendants
 
    14   have raised because the equities tip so strongly in favor of
 
    15   plaintiff that preliminary injunction be issued until the time
 
    16   of trial.
 
    17            With that, your Honor, I'll conclude.
 
    18            THE COURT:  All right.  Thank you.  Who wants to be
 
    19   heard for the defendants?
 
    20            MR. KATZ:  Your Honor, we had discussed among the
 
    21   defense counsel, with your permission, we would like to handle
 
    22   several issues separately.  Would that be acceptable to your
 
    23   Honor?
 
    24            THE COURT:  Sure.
 
    25            MR. KATZ:  With regard to the facts, Ms. Gross, do
 
 
 
                                                                  16
 
 
 
     1   you want to take that?
 
     2            MS. GROSS:  I think Mr. Levy would like to.
 
     3            MR. KATZ:  I apologize.
 
     4            MR. LEVY:  Thank you, your Honor.
 
     5       I will discuss briefly the facts in this case because the
 
     6   vast majority of them will have to be fleshed out at the trial
 
     7   stage and that is essentially the difficulty that the Court
 
     8   will be facing with this preliminary injunction, and that is
 
     9   they that it did not have all of the information before it.
 
    10   It cannot have all of the information before it.
 
    11       As for the basic premise, yes, we know what DVDs are and
 
    12   we have at least some grasp of what DeCSS purports to do and
 
    13   what it says.  And I say what it says and what it does because
 
    14   those are two separate things.  Part of the issues that we'll
 
    15   be facing here are the overlap between something it says and
 
    16   something it does.  The DeCSS code is just that.  It's a code,
 
    17   it has been posted in various different ways.  Sometimes there
 
    18   have been discussions intermixed between the code.  There have
 
    19   been notes by different programmers, and the code itself is in
 
    20   and of itself an expression of academic importance; that is to
 
    21   say, the cryptology that those who enmesh themselves and have
 
    22   dedicated themselves to the science of ciphering and
 
    23   deciphering and the study of codes are dependent on the
 
    24   continuing research in this field.  And so I would take issue
 
    25   with the concept that this DeCSS code is a lock pick.  It is
 
 
 
                                                                  17
 
 
 
     1   certainly not a lock pick the instant that it is written, and
 
     2   there are cases that suggest that as soon as something is
 
     3   written there is already a presumption that it is speech.
 
     4   That's certainly the case where the writing is expressive to
 
     5   another and we know that although machine code is difficult to
 
     6   read it can be read by individuals; it's frequently read by
 
     7   individuals.  The same is true for the source code.  Certainly
 
     8   I don't understand source code very well, but others do, and
 
     9   source code can't even be understood by machines.
 
    10       Now, the other part is that in between that source code,
 
    11   there are various notes and notations of how programmers
 
    12   arrived at different ideas.  All of those are expressive.  And
 
    13   finally, the plaintiffs, I think, focus only on the
 
    14   distribution of the speech and have failed to discuss the
 
    15   receiving of the speech, and, in this case, that is a very
 
    16   important counterpart to the dissemination.  Certainly one is
 
    17   entitled to disseminate, but others -- that is, the public --
 
    18   are also entitled to receive.
 
    19            Now, the facts themselves in this case are likely
 
    20   fairly complex and fairly convoluted.  I say "likely" because
 
    21   the defendants had all of one and a half days to present those
 
    22   facts to the Court, and I understand that that issue has been
 
    23   discussed, but I would like to simply flag it briefly.
 
    24            THE COURT:  With all due respect, counsel, that
 
    25   statement is simply false.  So let's just proceed.
 
 
 
                                                                  18
 
 
 
     1            MR. LEVY:  Very well.
 
     2       I think the importance of that statement is that it will
 
     3   require that the Court look very carefully at what is
 
     4   presented to it; that is the extent of the point of my
 
     5   statement.
 
     6       In addition, we would offer to the Court that there are
 
     7   many useful affidavits on file in the California case of which
 
     8   the Court may take judicial notice and review, and we would be
 
     9   happy to put those items before the Court at the end of this
 
    10   hearing.
 
    11            THE COURT:  Counsel, the order to show cause was
 
    12   signed almost a week ago.  Your clients were served almost a
 
    13   week ago.  The order required that any papers you cared to
 
    14   submit be submitted earlier this week.  The record is now
 
    15   closed, and it says what it says.  Now let's proceed from
 
    16   there.
 
    17            MR. LEVY:  I understand.  The record that the Court
 
    18   does have before it shows a request by the plaintiffs to
 
    19   curtail a number of individuals, one of whom is a journalist,
 
    20   from expressing what they have discovered.  It is not
 
    21   something that they've created; it's simply something that
 
    22   they have discovered and are attempting to publish to others.
 
    23   I, of course, am referring to the defendant and the website
 
    24   2600.  That is essentially a news organization and that's
 
    25   their purpose, to offer these things into the public.  And
 
 
 
                                                                  19
 
 
 
     1   Peter Katz will be discussing that issue at greater length;
 
     2   that is, the standing issue and the arguments regarding
 
     3   whether or not these individuals are even properly before this
 
     4   Court.
 
     5            Additionally, there are a number of legal issues
 
     6   regarding the Digital Millenium Copyright Act and that, of
 
     7   course, goes to the likelihood of success in this case; that
 
     8   is, whether or not at trial the plaintiffs would be able to
 
     9   show what it is that they have of theirs.  And Robin Gross
 
    10   will be fleshing those points out, discussing both the
 
    11   applicability of the Digital Millenium Copyright Act to this
 
    12   particular set of facts and also the appropriateness and the
 
    13   constitutionality of that act in general.
 
    14            THE COURT:  Look, I do appreciate the preview, Mr.
 
    15   Levy, but I wish we would get into the discussion instead of
 
    16   the discussion about the discussion.
 
    17            MR. LEVY:  Very well.  Then I will pass the virtual
 
    18   pulpit over to Ms. Gross to discuss the Digital Millenium
 
    19   Copyright issues.
 
    20            MS. GROSS:  I think first Peter was going to talk
 
    21   about the proper defendants and the improper defendants.
 
    22            MR. LEVY:  Sorry.  That's right.
 
    23            MR. KATZ:  Your Honor, I'll run through that quickly
 
    24   for the Court.  As I noted, the Court is in receipt of the
 
    25   opposition papers that we had submitted.  Judge, we have three
 
 
 
                                                                  20
 
 
 
     1   defendants here.  One is a news organization that, as Mr. Levy
 
     2   had pointed out, 2600.com also is involved in a -- it's a
 
     3   distribution of a quarterly document.  My understanding is
 
     4   that they have over 50,000 subscribers and receive
 
     5   approximately 10,000 unique visitors on a daily basis who view
 
     6   information that's posted on the site.
 
     7            The defendant who should be named here is 2600.com.
 
     8   2600 Enterprises, Inc. is a corporation.  If your Honor, and
 
     9   it's not entirely clear from the documents here, but if
 
    10   someone were to go to its website, on the left-hand side, on
 
    11   the bottom left-hand side of the site, they would see it says
 
    12   2600 Magazine.  On the right, they would see the corporate
 
    13   information.  And when one goes to what's known as a DNS
 
    14   registry, which has been annexed to the documents in the order
 
    15   to show cause as referred to "who is" through Network
 
    16   Solutions, there is a registry.  The registry indicates that
 
    17   2600.com is 2600 Enterprises.  And the individual who's named
 
    18   as Emmanuel Goldstein is listed merely as a technical contact.
 
    19   Mr. Goldstein is the defendant in this case.
 
    20       It's the position under Rule 17 of the Federal Rules of
 
    21   Civil Procedure that Mr. Goldstein is improperly named and it
 
    22   should be, rather, the corporation.
 
    23            THE COURT:  Go ahead.  I'm just getting a book.
 
    24            MR. KATZ:  Thank you, your Honor.  With regard to
 
    25   Shawn Reimerdes, once again, your Honor, we have information
 
 
 
                                                                  21
 
 
 
     1   on his website which has been annexed to the order to show
 
     2   cause indicating a Leach Software, Inc.
 
     3            THE COURT:  Before you go on to Mr. Reimerdes, are
 
     4   you telling me that the gentleman you were just discussing,
 
     5   who you said is listed as a technical contact, is not involved
 
     6   in any way in offering to the public or providing DeCSS?
 
     7            MS. GROSS:  Actually, it's a journalist who was
 
     8   reporting on it on the website.
 
     9            MR. KATZ:  But in terms of providing that document,
 
    10   no, he does not provide the DeCSS.  He reports on it.  But if
 
    11   you're referring, Judge, to Mr. Goldstein as involved with
 
    12   2600.com, yes, he is involved.  It's my understanding that he
 
    13   is an editor and/or reporter of 2600 Enterprises, Inc.
 
    14            THE COURT:  You'll get your chance later, Mr. Hart.
 
    15            MR. HART:  Thank you.
 
    16            MR. KATZ:  I had mentioned Mr. Reimerdes to your
 
    17   Honor and his involvement of Leach Software referring to
 
    18   defendant Roman Kazan.  Two parts to him, Judge, one is that
 
    19   he is listed through "who is" as the technical contact for
 
    20   www.Krackdown.com.  We understand they had the link to DeCSS.
 
    21   Mr. Kazan is what's known as an ISP.  He's a host.  His
 
    22   company -- actually, that's how we get involved in the proper
 
    23   party -- his company, which is Escape.com, hosts sites.  My
 
    24   understanding is that Escape.com hosts approximately a
 
    25   thousand sites and the purpose, his business, is to provide
 
 
 
                                                                  22
 
 
 
     1   hosting.  He does not have actual control over these
 
     2   individual websites and Krackdown.com is the site.  However,
 
     3   Escape.com is the actual host and the distinction is very
 
     4   important, your Honor.  When we deal with Mr. Kazan and his
 
     5   corporation, which is very clear on his DNS registry, at the
 
     6   very top is registrant Kazan Corporation, administrative
 
     7   contact Roman Kazan.  We say that he would fall also as an
 
     8   improper party, as it should be Kazan Corporation.
 
     9            THE COURT:  I don't get this improper party concept
 
    10   at all.
 
    11            MS. GROSS:  Perhaps I could explain it.
 
    12            THE COURT:  Perhaps I could finish the point,
 
    13   Ms. Gross.
 
    14       Rule 17 says that every action shall be prosecuted in the
 
    15   name of the real party in interest.  Now, the people who are
 
    16   prosecuting this case are not your clients.  They are
 
    17   defendants and they either are or they're not liable.  And so
 
    18   far I don't have before me an affidavit from any of them
 
    19   saying that we have nothing to do with providing or making
 
    20   available DeCSS.
 
    21            MR. KATZ:  Your Honor, if I could be heard with
 
    22   regard to Mr. Kazan in that he falls under the immunity
 
    23   provided by DMCA which is Title 2, which is entitled the
 
    24   Online Copyright Infringement Liability Limitation Act.
 
    25            THE COURT:  What's the citation?
 
 
 
                                                                  23
 
 
 
     1            MR. HART:  512.
 
     2            THE COURT:  Of the Copyright Act?
 
     3            MR. KATZ:  Yes, your Honor.
 
     4            MS. GROSS:  17 U.S.C. 101, and then the specific --
 
     5   that's the Online Copyright Infringement Liability Limitation
 
     6   Act.
 
     7            MR. HART:  512.
 
     8            MS. GROSS:  Give me one second.
 
     9            THE COURT:  I think I have it in front of me.
 
    10            MS. GROSS:  Section 512(c) limits liability for
 
    11   information residing on systems or networks at the direction
 
    12   of users and limits the liability, for injunctive or other
 
    13   equitable relief, for information of copyright by reason of
 
    14   the storage at the direction of a user, which is exactly
 
    15   what's going on in this case.
 
    16            MR. KATZ:  Judge, the limitations have about four
 
    17   parts to them under 512(c), the transitory communications
 
    18   caches, storage of information, direction of users and
 
    19   information location tools.  The limitation pursuant to
 
    20   512(c) --
 
    21            THE COURT:  Just a minute.  Before we get carried
 
    22   away in the minutia of 512(c).  What 512(c) provides, if I'm
 
    23   reading it correctly, is a limitation on liability for
 
    24   infringement of copyright.  Am I correct?
 
    25            MR. KATZ:  Yes, your Honor.
 
 
 
                                                                  24
 
 
 
     1            THE COURT:  Your clients are not being sued for
 
     2   infringement of copyright.  They're being sued for violation
 
     3   of Section 1201.  Right?
 
     4            MS. GROSS:  But 1201 is designed to protect
 
     5   copyrighted work.
 
     6            THE COURT:  Maybe so, but it's not infringement of
 
     7   copyright.  Isn't that true, counsel?
 
     8            MS. GROSS:  I'm sorry.
 
     9            THE COURT:  An infringement of copyright, by
 
    10   definition, is the violation of the copyright proprietors'
 
    11   exclusive rights as conferred in the Copyright Act.  That is
 
    12   not what your clients are charged with, as I understand it.
 
    13   So I don't see what the applicability of 512(c) to this is at
 
    14   all.  Now, if I'm mistaken, that's the reason I raised the
 
    15   point; I'd like to hear about it.
 
    16            MS. GROSS:  This is a case of first impression.
 
    17            THE COURT:  That doesn't make it any better.
 
    18            MS. GROSS:  But I think that it's a jump to say you
 
    19   can't violate one, or you have to say you have to violate one
 
    20   without the other.
 
    21            THE COURT:  Come again, please.
 
    22            MS. GROSS:  I'm sorry.  It seems to me that there's
 
    23   no direct infringement.  If you were not infringing a
 
    24   copyrighted work then there's nothing that shows how anyone is
 
    25   providing a tool to others that are doing that.
 
 
 
                                                                  25
 
 
 
     1            THE COURT:  The charge against your clients is
 
     2   providing a device which is a means for circumventing an
 
     3   access limiting factor.  The infringement would be done by
 
     4   someone else, although it might be done by your client, it
 
     5   need not be.  Nor is the infringement essential to the
 
     6   violation of 1201.  Is there some error in that, counsel?
 
     7            MS. GROSS:  I think you need to have -- I'm sorry.
 
     8            MR. LEVY:  Essentially, your Honor, our reading of
 
     9   the DMCA, certainly in order to make it a constitutional
 
    10   reading, is that it does not outlaw any type of decryption.
 
    11   It only outlaws decryption that affects copyrighters' rights,
 
    12   and to that extent the two are read together; that is, it is
 
    13   not the case that as soon as you engage in the science of
 
    14   cryptology you have violated the DMCA, though certainly those
 
    15   raise other constitutional issues.  That's essentially what we
 
    16   are saying.  Is that clear?
 
    17            THE COURT:  What you've said is clear.  It's just
 
    18   very different from what Congress said.
 
    19            MR. LEVY:  I think we're working on finding the
 
    20   citation, if the Court will bear with us.  It's a rather
 
    21   lengthy statute.  Perhaps we'll continue looking through that
 
    22   and we can move on.
 
    23            THE COURT:  Okay.
 
    24            MR. KATZ:  Your Honor, at this time, I'll turn this
 
    25   over to Ms. Gross to handle the DMCA issues.
 
 
 
                                                                  26
 
 
 
     1            MS. GROSS:  Okay.  First I'd like to talk a little
 
     2   bit about the standard for issuing a preliminary injunction,
 
     3   and you have to, as the plaintiffs have pointed out, show a
 
     4   threat of irreparable injury and likelihood of success on the
 
     5   merits or series of questions and balances that equities tip
 
     6   in their favor.  So with that as our starting point, let's
 
     7   talk about injury.
 
     8       I think it's important to note, and I'd like to draw the
 
     9   Court's attention to the fact, that in all of these hundreds
 
    10   of papers that we've been deluged with the last couple of days
 
    11   there's not a single sentence that talks about current or
 
    12   actual harm.  Everything in the documents that have been
 
    13   submitted to us only talks about speculative harm, possible
 
    14   harm, potential for harm.  I'd like to just draw the Court's
 
    15   attention to a couple in particular.  If you look at the
 
    16   Atwater declaration, let's see, paragraph 12, the harm alleged
 
    17   is that the plaintiff would have to abandon DVD in favor of
 
    18   another format, and I don't think that asking businesses to
 
    19   consider alternative methods is a proper type of harm for a
 
    20   court in order to issue an injunction.
 
    21       Additionally, in that same declaration, the next
 
    22   paragraph, they talk about plaintiffs' potential loss and then
 
    23   the sentence ends it by saying it could well be higher and so,
 
    24   again, it's all speculative, potential, possible, future,
 
    25   maybe harm.  If you look at paragraph 16, it says there is
 
 
 
                                                                  27
 
 
 
     1   even --
 
     2            THE COURT:  Ms. Gross, let me save you a little time.
 
     3   If all of the harm already had occurred, you would be arguing
 
     4   that I shouldn't issue an injunction because there's no need
 
     5   for it.  Injunctions are issued to protect against threatened
 
     6   harm which, by definition, is future harm.
 
     7            MS. GROSS:  But what I'm saying is this is
 
     8   speculation because it's all based on if this other thing were
 
     9   to happen, then there would be harm.  So they're skipping a
 
    10   step in between.  There's an assumption that this other thing
 
    11   will happen that will then cause there to be harm.
 
    12            THE COURT:  What do you think people are going to do
 
    13   with DeCSS, put it on floppy disks and use it to fertilize the
 
    14   garden?
 
    15            MS. GROSS:  No, actually, because it wouldn't fit on
 
    16   a floppy disk, which is another reason --
 
    17            THE COURT:  I stand corrected.  Their hard drives.
 
    18            MS. GROSS:  You could put about one on your hard
 
    19   drive in which case it makes a player and your computer
 
    20   becomes your player, and that is actually what is the case
 
    21   here.  In fact, this computer program is --
 
    22            THE COURT:  Ms. Gross, is there the slightest doubt
 
    23   that DeCSS can be used to permit one who has it to make
 
    24   unauthorized copies of copyrighted movies?
 
    25            MS. GROSS:  Well, DeCSS, by itself -- all DCSS is is
 
 
 
                                                                  28
 
 
 
     1   a part, a piece of a player that's under construction.  It's
 
     2   computer code taken from a project where they were trying to
 
     3   build a DVD player, and this is the part of the program that
 
     4   handles the descrambling and the playing and so it itself does
 
     5   not circumvent a right because all it does is play.
 
     6            THE COURT:  Okay.  Could you answer my question.
 
     7            MS. GROSS:  I'm sorry.  Could you tell me your
 
     8   question?
 
     9            THE COURT:  Is there the slightest doubt that it
 
    10   would permit somebody to copy CSS scrambled material?
 
    11            MS. GROSS:  I believe you could copy it onto your
 
    12   hard drive, but, again, it's sort of like putting your tape in
 
    13   your VCR player and, yes, your television set, your screen,
 
    14   now has made a copy, analogously.  Same like a computer when
 
    15   you put your DVD in, but, again, it's a copy that you are
 
    16   making only temporarily to be played on your player.
 
    17            THE COURT:  And once you have that on your hard
 
    18   drive, can't you churn out as many of them as you want?
 
    19            MS. GROSS:  Perhaps your hard drive or your computer
 
    20   will do that, but this particular program is separate from
 
    21   what your computer will do or not do, you know.  That, again,
 
    22   is speculation.  It's saying that using this program in
 
    23   conjunction with something else, and even if that is not the
 
    24   case --
 
    25            THE COURT:  Now, look, Ms. Gross, please.  I really
 
 
 
                                                                  29
 
 
 
     1   think that it's a mistake to assume that you're talking to a
 
     2   moron.  On one of your clients' websites, it says, and I
 
     3   quote, "Yes, you can trade DVD movie files over the Internet."
 
     4   Now, is that true or not?
 
     5            MS. GROSS:  Actually, I don't -- I'm not aware of
 
     6   anyone who is doing this and particularly because it's
 
     7   impossible for practical purposes.  It would take over 300
 
     8   hours.
 
     9            THE COURT:  So why do you think your client said
 
    10   that?
 
    11            MS. GROSS:  Well, it could be, it could be a source
 
    12   video, something that someone else has authorized.  It doesn't
 
    13   have to be an unauthorized movie that he's talking about.
 
    14   There's no assumption that it's illegal copying or illegal
 
    15   trading.
 
    16            THE COURT:  And why do you suppose right after that
 
    17   he put on his website:  "Notice the DVD Copy Control
 
    18   Association," which I understand to be the movie industry
 
    19   here -- is that right -- "are cock suckers"?
 
    20            MS. GROSS:  I think that while that kind of language
 
    21   is certainly inappropriate, nonetheless, it is of itself not
 
    22   speech that can be enjoined, and I think if my client were
 
    23   present to answer that question, he would say it's because of
 
    24   all the cease and desist letters going out over the Internet
 
    25   and shutting websites down based on fear of litigation, and a
 
 
 
                                                                  30
 
 
 
     1   lot of people are very upset because they feel their civil
 
     2   liberties are being trampled on, and that's the reason for the
 
     3   statement.  And I'm not going to defend the statement.
 
     4            THE COURT:  Ms. Gross, if it were the case, as you
 
     5   seem to be trying to imply, without saying, that DeCSS does
 
     6   not permit unauthorized copying of copyrighted movies recorded
 
     7   on DVDs, I would imagine you would have said that to the
 
     8   plaintiffs and they would have taken you up on the offer to
 
     9   demonstrate it and they wouldn't have bothered hiring a
 
    10   high-priced law firm to come in here and sue you all.  I don't
 
    11   think it's for exercise.  That doesn't mean they're right, but
 
    12   nobody has said under oath before me that the assertion that
 
    13   you can copy DVDs using this software is false.
 
    14            MS. GROSS:  I think that it's important to look at
 
    15   the actual wording of the statute in question here, and we're
 
    16   talking about Section 1201(b) and they say no person shall
 
    17   manufacture, etc., offer to the public, etc., for the purpose
 
    18   of circumventing protection that effectively protects a right
 
    19   of a copyright owner.  So I think it's important to note that
 
    20   what we're talking about here is a circumvention that protects
 
    21   a right of a copyright --
 
    22            THE COURT:  I'm sorry.  Tell me exactly where you're
 
    23   reading from.
 
    24            MS. GROSS:  Section 1201, which is the circumvention
 
    25   copyright protection system.
 
 
 
                                                                  31
 
 
 
     1            THE COURT:  1201 what?
 
     2            MS. GROSS:  1201(b), additional violations.
 
     3            THE COURT:  All right.
 
     4            MS. GROSS:  Then (b)(1)(A) we're talking about
 
     5   here --
 
     6            THE COURT:  Now what about --
 
     7            MS. GROSS:  What we're talking about --
 
     8            THE COURT:  Ms. Gross, don't get carried away.  What
 
     9   about (a)(2), which is the statute you're being sued under?  I
 
    10   mean, I'm sure the Internal Revenue Code isn't a big problem
 
    11   for you on this either.
 
    12            MS. GROSS:  Because --
 
    13            THE COURT:  It says that you can't offer to the
 
    14   public any technology, product, service, etc., that's
 
    15   primarily designed or produced for the purpose of
 
    16   circumventing a technological measure that effectively
 
    17   controls access to a protected work.  Now, is there any doubt
 
    18   that CSS protects access to a copyrighted work?  Is there any
 
    19   at all?
 
    20            MS. GROSS:  Agreed.
 
    21            THE COURT:  Is there any doubt at all that DeCSS is a
 
    22   device that circumvents CSS?
 
    23            MS. GROSS:  It does descramble it.
 
    24            THE COURT:  Okay.
 
    25            MS. GROSS:  But that --
 
 
 
                                                                  32
 
 
 
     1            THE COURT:  With that established, let's proceed.
 
     2            MS. GROSS:  But it's not primarily designed to do
 
     3   that.  It's not designed to be a player.  This is software
 
     4   that was taken from a project that was being built for a new
 
     5   DVD player.  So it's just a component of a player.  And so,
 
     6   therefore, it was not primarily designed to circumvent.  It
 
     7   was designed to act as a player and the player is not the
 
     8   right of a copyright owner.  Copying is not prohibiting from
 
     9   playing.
 
    10            THE COURT:  Is it not an exclusive right of the
 
    11   copyright owner to make copies of the copyrighted work?
 
    12            MS. GROSS:  It is.  It is, except for the fair use
 
    13   exception, and it's very clear in copyright law that
 
    14   copyright -- that owners of legitimate copies have a right to
 
    15   make fair use, and that's not something that's in dispute
 
    16   here.  And so when you put this DVD in your computer, you're
 
    17   making a fair use.  You are playing the copy that you have.
 
    18   You have to be able to put it on your computer in order to see
 
    19   it on the screen.  So, yes, a copy technically has to be made,
 
    20   but only for the purposes of playing.  It's not something that
 
    21   can practically be used to make lots of copies.  It's not
 
    22   possible.
 
    23            THE COURT:  And fair use is a defense to
 
    24   infringement, right?
 
    25            MS. GROSS:  That's right.
 
 
 
                                                                  33
 
 
 
     1            THE COURT:  It's not a defense under 1201, is it?
 
     2            MS. GROSS:  But we're talking about -- we are talking
 
     3   about something that is primarily designed or produced for the
 
     4   purpose of circumventing a right, and so it is not a right to
 
     5   prevent fair use.  Copyright owners do not have the right --
 
     6            THE COURT:  You're quoting the wrong statute again,
 
     7   Ms. Gross.
 
     8            MS. GROSS:  I don't believe so.  This is the statute
 
     9   in question here.
 
    10            THE COURT:  Let me rephrase that.  You're quoting the
 
    11   section of the statute they didn't sue you on.  You're not
 
    12   quoting the section they did sue you on.
 
    13            MS. GROSS:  But, see, they don't have a right to stop
 
    14   the fair use here, so this isn't something that --
 
    15            THE COURT:  Under (a)(2) they don't need to.  That
 
    16   argument might have some merit if it were a (b)(1) suit or a
 
    17   (b)(2) suit, but it isn't.
 
    18            MS. GROSS:  Okay.
 
    19            THE COURT:  Okay.  So what else?
 
    20            MS. GROSS:  You have to read the two together because
 
    21   (b)(A)(2) says as used in this section.  So (a)(2) is simply
 
    22   the defining criteria for (a)(1).
 
    23            THE COURT:  No.  Actually, you're reading (a)(3) now.
 
    24            MS. GROSS:  (a)(3)?
 
    25            THE COURT:  That's the one that starts with "as used
 
 
 
                                                                  34
 
 
 
     1   in this subsection."
 
     2            MS. GROSS:  That's (a)(2).
 
     3            THE COURT:  No, that's (a)(3).
 
     4            MS. GROSS:  Right?
 
     5            THE COURT:  (a)(3).  Look, if you have other points
 
     6   about the statute, you better get to them.
 
     7            MS. GROSS:  I'm sorry.
 
     8            MR. LEVY:  I apologize, your Honor.  Some of the
 
     9   difficulty here is because we are all using different copies
 
    10   of the statute.  There might be some confusion.  We're trying
 
    11   to review what the courts have said and ensure that we're all
 
    12   on the same page, and Ms. Gross is madly flipping through our
 
    13   version of the DMCA to make sure that we understand where the
 
    14   Court is coming from and also what we're saying.
 
    15            THE COURT:  I'm coming from the United States Code.
 
    16            MS. GROSS:  Okay.  Well, I think it's important -- I
 
    17   think it's important to note some of the clauses that are
 
    18   specifically mentioned in this same code section.
 
    19            THE COURT:  I'm ready to listen to you.
 
    20            MS. GROSS:  It specifically says, if you read
 
    21   1201(c), it basically says nothing in this section shall
 
    22   affect the right of, including fair use, under this title.  So
 
    23   this section is saying it doesn't affect fair use and these
 
    24   people are making fair use.
 
    25            THE COURT:  Ms. Gross what you did was to read about
 
 
 
                                                                  35
 
 
 
     1   half the words of that paragraph.
 
     2            MS. GROSS:  I can read the whole one, but I picked
 
     3   out the ones --
 
     4            THE COURT:  That helped you.  What you did is left
 
     5   out the ones that hurt you.  It says, "Nothing in this section
 
     6   shall affect rights, remedies, limitations or defenses to
 
     7   copyright infringement" -- those are the words you left out --
 
     8   "including fair use."  In other words, were you being sued for
 
     9   copyright infringement, nothing here would take away your fair
 
    10   use defense.  But you are not being sued for copyright
 
    11   infringement.
 
    12            MS. GROSS:  If there's no copyright to violate, how
 
    13   is a device being enjoined to protect that right?
 
    14            THE COURT:  Ms. Gross, if you have another point to
 
    15   make, you better get to it.
 
    16            MS. GROSS:  I think at this point I will turn it over
 
    17   to -- Allonn will talk about the First Amendment issues.
 
    18            MR. LEVY:  Your Honor, I'd like to discuss one final
 
    19   point on the likelihood of success, which touches upon the
 
    20   First Amendment issue, which is essentially, if we read this
 
    21   statute with the type of breadth that I think that we're
 
    22   talking about here, that essentially what we're saying is that
 
    23   any type of computer code that decrypts something is illegal,
 
    24   that would be an unprecedented disruption of our First
 
    25   Amendment rights to, in this case, participate in or in any
 
 
 
                                                                  36
 
 
 
     1   way discuss a totally legitimate area of educational work.
 
     2   And that is encryption.
 
     3       Cryptology has been around for generations.  It's
 
     4   incredibly important.  There are thousands and thousands of
 
     5   individuals in this country who dedicate their entire lives to
 
     6   learning, understanding, and bettering this very important
 
     7   field.  I think that if we read the DMCA as saying that --
 
     8   that is, that it does not matter what it is that you're
 
     9   decrypting, that it's simply the act of decrypting itself as
 
    10   put in computer code -- that is an impermissible and
 
    11   thoroughly unconstitutional reading of that statute, which, of
 
    12   course, for our purposes -- the only reason that's important
 
    13   for our purposes, it would mean that the plaintiffs cannot
 
    14   succeed on the merits of their case, and I'll just flag that
 
    15   point very quickly.
 
    16       Now, the other First Amendment issues come into play for
 
    17   this particular hearing.  This particular hearing requests
 
    18   preliminary relief, and the relief that it requests is a
 
    19   removal from, among other things, a press site of what is
 
    20   essentially offending speech.  Now, plaintiffs' counsel points
 
    21   out that there are many words on that site that are rude and
 
    22   are inappropriate.  Of course, we have the Cohen case, which
 
    23   is the illustrious or famous draft case, and I'm sure the
 
    24   Court is aware of that point.  We all have well ingrained in
 
    25   our history that it is permissible to be rude.
 
 
 
                                                                  37
 
 
 
     1            THE COURT:  Look, Mr. Levy --
 
     2            MR. LEVY:  That is admittedly a side point because
 
     3   they're not trying to enjoin --
 
     4            THE COURT:  It's a nonpoint.  They're not talking
 
     5   about that.
 
     6            MR. LEVY:  True.  Admitted, to the extent that that's
 
     7   not the relief that they request.  I merely bring it up
 
     8   because we ought not get lost in the fact that because these
 
     9   folks may be are a bit irreverent we should jump to the
 
    10   conclusion that they are bad or they are doing something
 
    11   improper.  That's the only purpose for my comment on that.
 
    12            The matter that they are attempting to suppress,
 
    13   however, is the DeCSS speech in its various forms, and, as
 
    14   we've discussed, that is information that is readable by
 
    15   individuals.  Indeed, both from the standpoint of those
 
    16   involved in cryptology and also now because of the various
 
    17   lawsuits involved, to the wide public, this matter has become
 
    18   a public issue.  It is a matter of public concern and the
 
    19   individuals that are trying to suppress this are actually
 
    20   trying to suppress ideas.
 
    21       Now, the point here is that in order to have a free
 
    22   discourse and a free discussion, you must be able to reference
 
    23   things.  Drawing on my limited experience, I can only address
 
    24   some of the facts that are in the California case.  Here the
 
    25   San Pedro Mercury News is our sort of local news.  It's very
 
 
 
                                                                  38
 
 
 
     1   well respected and it has also links to these sites because
 
     2   it's a matter that should and is being discussed in public
 
     3   forums.  Now, to step in and stop that speech, I would submit
 
     4   to the Court --
 
     5            THE COURT:  No one is asking to stop any speech about
 
     6   this issue.  What is being requested is an injunction
 
     7   preventing the dissemination of the DeCSS program.
 
     8            MR. LEVY:  Your Honor, respectfully, I would submit
 
     9   to you that the link itself is speech.  Now, if you remove the
 
    10   link, are we really to stop telling people where to go to get
 
    11   information?  I would submit that that's improper.  The code
 
    12   itself is also speech.  I cannot cite the Court directly to
 
    13   the appellate Bernstein decision which is on review, but
 
    14   certainly the arguments are the same.  And, additionally, we
 
    15   have guidance from Bernstein one, which is noted in our
 
    16   papers, that has very carefully reviewed this issue and found
 
    17   that the code itself is in fact speech.  Indeed, in our
 
    18   case --
 
    19            THE COURT:  But, Mr. Levy, let's suppose that's true.
 
    20   That does not mean you win, does it?
 
    21            MR. LEVY:  It does not.
 
    22            THE COURT:  So let's get on to the more important
 
    23   issues.
 
    24            MR. LEVY:  But it does give a strong presumption that
 
    25   we win.
 
 
 
                                                                  39
 
 
 
     1            THE COURT:  Let's just explore that.  Suppose you
 
     2   opened a hamburger stand and you put in front of it two golden
 
     3   arches to express something about your hamburgers and you put
 
     4   up a big sign that said Levy's McDonald's to express the idea
 
     5   that your hamburgers were as good as theirs and you were sued
 
     6   by McDonald's for trademark infringement.  Now, do you think
 
     7   that if you went into court and said, Well, I'm just speaking
 
     8   out here and conveying an idea that that would get you even
 
     9   remotely partway down the first baseline?
 
    10            MR. LEVY:  I think it would get me partway down and I
 
    11   think I would be stopped partway down.  I think that what the
 
    12   Court would do is it would hold a full hearing on that issue.
 
    13   I think that there would be evidence adduced on both sides and
 
    14   if, indeed, those arches were found to be a property right and
 
    15   that property right was stolen, then the Court would say,
 
    16   Well, perhaps you have speech here, but you don't have
 
    17   protected speech here.  And so the prior restraint doctrine
 
    18   does not apply.
 
    19       But that's not what we have here.  We don't have stolen
 
    20   speech.  We have speech that was independently created, we
 
    21   believe, we suspect.  And we have commentary on that speech.
 
    22   And I should point out that when I say "commentary," I also
 
    23   mean within some of the source code, and there have been
 
    24   postings all over so I cannot tell the Court which one is
 
    25   which.  But there are discussions within the source code
 
 
 
                                                                  40
 
 
 
     1   reminding the Court that source code is intended for
 
     2   programmers only, it does not run on a machine, that discusses
 
     3   the code.
 
     4            THE COURT:  But these would be nonexecutable program
 
     5   notes, right?
 
     6            MR. LEVY:  That's correct.  Now, I suspect that
 
     7   because --
 
     8            THE COURT:  And when the program was compiled, the
 
     9   programmer's notes would not be compiled into object code,
 
    10   right?
 
    11            MR. LEVY:  That's correct.  That is correct.
 
    12            THE COURT:  Is anybody trying to restrain the posting
 
    13   alone of programmer's notes without the source code, the
 
    14   executable instructions?
 
    15       Mr. Gold?
 
    16            MR. GOLD:  No.
 
    17            THE COURT:  No.  Let's move on.
 
    18            MR. LEVY:  The notes are intermingled within the
 
    19   source code and they are commentary within that source code,
 
    20   so if you suppress the source code, you have suppressed --
 
    21            THE COURT:  But nobody's trying to stop you from
 
    22   disconnecting the programmer's notes from the compilable
 
    23   executable instructions and doing whatever you want with the
 
    24   programmer's notes.
 
    25            MR. LEVY:  True, but you lose access to the
 
 
 
                                                                  41
 
 
 
     1   programmer's notes as soon as you lose access to the source
 
     2   code.  But if you suppress the source code, you have also
 
     3   suppressed additional speech.
 
     4            THE COURT:  Counsel, that's simply a bald assertion
 
     5   and we all know it not to be true.  I would take judicial
 
     6   notice that it's not true.
 
     7            MR. LEVY:  I'm sorry?
 
     8            THE COURT:  I said we all know that isn't true and I
 
     9   would take judicial notice, if I needed to, that it isn't
 
    10   true.
 
    11            MR. LEVY:  Judicial notice of the fact that --
 
    12            THE COURT:  That the programmer's notes are available
 
    13   to whoever has the source code and even if you were enjoined
 
    14   from disseminating the source code itself, as distinct from
 
    15   the programmer's notes, they're not going to vanish.
 
    16            MR. LEVY:  I'm sorry, your Honor.  I actually have a
 
    17   technology expert with me.  Would the Court like to or would
 
    18   they agree to hear a very brief statement on this point from
 
    19   that expert?
 
    20            THE COURT:  No.
 
    21            MR. LEVY:  I'm sorry?
 
    22            THE COURT:  No.  Let's go on.
 
    23            MR. LEVY:  As an example, and by way only of
 
    24   argument, Frank Andrew Stephenson, who is one of the
 
    25   individuals who created the LVD project, which is the player
 
 
 
                                                                  42
 
 
 
     1   that eventually made this playable on Linux, was able to
 
     2   create his innovations by reading the source code and the
 
     3   expressions within that source code.  And I use that to show
 
     4   the Court that, first, the two aren't inseparable -- that is,
 
     5   the source, the bits of code and the programmer's notes --
 
     6   and, second, to show its utility; that is, that there is a
 
     7   very real need and a use for the posting of this code.
 
     8            Now, going back briefly to your Honor's analogy of
 
     9   the golden arches, we do not have a situation here where there
 
    10   is, if you will, stolen speech that has gained a property
 
    11   value to it.  What we have is allegedly offending speech that
 
    12   may run counter to a state -- I'm sorry, a federal provision.
 
    13            THE COURT:  Let's start off with the fact that your
 
    14   premise about property rights and trademarks is really highly
 
    15   inaccurate and the basis of trademark protection lies not in
 
    16   some theoretical property right and the senior user, but
 
    17   rather in the fact that the junior user's use of the mark in
 
    18   circumstances where it is likely to lead to confusion in the
 
    19   marketplace ought to be enjoined in the public interest.
 
    20       Now, you're welcome to go on from there, but the premise
 
    21   of your analysis is wrong.
 
    22            MR. LEVY:  I think that that's an excellent point.  I
 
    23   used the term "stolen property" because it's easier for my
 
    24   feeble brain.  But, yes, the point and what the courts
 
    25   generally hinge on is that ability to make a mistake.  That
 
 
 
                                                                  43
 
 
 
     1   is, you'd ride into the burger stand, you see the golden
 
     2   arches, you think, Oh, McDonald's, and you walk in.
 
     3       There's no such danger of mistake here.  It's a completely
 
     4   different type of speech, and I would submit that we are not
 
     5   permitted to carve out a new exception for speech that simply
 
     6   would seem to run counter to a federal provision.  In fact, I
 
     7   would cite the Court to the DMCA, and I shall work a bit
 
     8   harder to try to get the letters correct here.  We are on
 
     9   Section 1201.  I believe this is (c)(3).  And again -- I'm
 
    10   sorry.  It's (c)(4).  And this, again, is in regard to the
 
    11   entire act, not a certain portion of it.  It says, "Nothing in
 
    12   this section shall enlarge or diminish any rights of free
 
    13   speech or the press," which is involved here, "for activities
 
    14   using consumer electronics, telecommunications or computing
 
    15   products."  And that is the portion in its entirety.
 
    16       So it's very important that we not use this particular
 
    17   statute to create a new exception to the prior restraint
 
    18   doctrine.  And I submit to the Court that the evidence that's
 
    19   been put before it -- that is, as the Court noted, exclusively
 
    20   that of the plaintiff -- does not come close to raising to the
 
    21   level of national security and the like that we have in the
 
    22   Pentagon papers and the Progressive case and other similar
 
    23   cases.  Certainly using the Progressive case, if we cannot
 
    24   even do a preliminary injunction to enjoin seriously dangerous
 
    25   speech such as the H-bomb instructions, because it is speech
 
 
 
                                                                  44
 
 
 
     1   after all, as well as potentially classified military
 
     2   information, we certainly ought not issue a prior restraint on
 
     3   the manner in which DVDs work.  The interest to the public is
 
     4   simply not that important.
 
     5       Now, if we are incorrect, if our analysis of the DMCA is
 
     6   wrong, then that can be proven at a trial, but certainly not
 
     7   before that.  And I would submit to the Court that this line
 
     8   is a rather dangerous one of going down, and attempting to
 
     9   reach this decision prior to the trial in that it will
 
    10   seriously chill not just the speech rights of those who are in
 
    11   this suit but it will do the same for other individuals who
 
    12   post information on their websites because, again, assuming
 
    13   that there is some type of original sin here, assuming that
 
    14   there is a problem with the DMCA, these individuals didn't
 
    15   cause it; they merely found something and they put it on their
 
    16   websites.  I think that when deciding how we would like our
 
    17   Internet policed we ought to be very careful to ensure that we
 
    18   retain our traditional rights to express ourselves freely and
 
    19   to provide others with information.
 
    20            THE COURT:  Would you say the same thing if they
 
    21   posted the text of a copyrighted book?
 
    22            MR. LEVY:  Likely not.  And, again, though I might
 
    23   say it at the preliminary stage, and certainly there are
 
    24   several very interesting and illustrative Law Review articles
 
    25   that discuss exactly this problem, and that is that courts may
 
 
 
                                                                  45
 
 
 
     1   have accidentally run afoul of prior restraint issues in some
 
     2   copyright cases because they did not wait until a full and
 
     3   final hearing is done, they did not satisfy themselves that
 
     4   indeed this does fall within the copyright exception, and
 
     5   instead they rushed forward in a rush to judgment.  And I
 
     6   really hate using that term, following the OJ Simpson case,
 
     7   but I feel that I have to in prior restraint cases, that they
 
     8   have rushed to judgment and they have accidentally restrained
 
     9   speech where they perhaps ought not have.  And as one of many
 
    10   illustrations, I would cite the Court to an interestingly
 
    11   article, 48 Duke Law Journal 147, which is freedom of speech
 
    12   and injunctions in intellectual property cases.
 
    13       Now, this argument is exclusively aimed at the preliminary
 
    14   injunction hearing.  As for this argument only, defendants
 
    15   could be 100 percent wrong on everything else, but as for the
 
    16   restraining of this speech prior to it reaching the intended
 
    17   audience, courts must exercise the highest diligence possible.
 
    18   In fact, some reasoners, of course, do not particularly agree
 
    19   but are nonetheless helpful, have reasoned that the only
 
    20   reason for the First Amendment is the prior restraint
 
    21   doctrine.  It is that important.  It essentially allows
 
    22   courts, and certainly I would not suggest that that would be
 
    23   the case for your Honor, but it allows courts to be make
 
    24   mistakes.  It says, Well, we are going to make a judgment
 
    25   about speech here.  That's that we allow it to reach its
 
 
 
                                                                  46
 
 
 
     1   intended audience first, we take our time, we look at the
 
     2   information carefully, if it is wrong, then the plaintiffs
 
     3   have their remedy, which is --
 
     4            THE COURT:  Let's suppose, counsel, that your client
 
     5   had broken into the vault at Coca-Cola and stolen the formula
 
     6   that they've protected for the last hundred years and somehow
 
     7   Coca-Cola discovered that they were going to publish it in the
 
     8   Atlanta Constitution, tomorrow.  Would you make the same
 
     9   argument about no preliminary injunction, we have to have a
 
    10   full trial?
 
    11            MR. LEVY:  I likely would, because there, the danger
 
    12   that the court is simply wrong is much too great.  If the
 
    13   information is stolen -- I'm assuming that we're assigning a
 
    14   property right.  That is, if, as the case I believe is, for
 
    15   Coca-Cola, there is simply, it's simply a trademark case, then
 
    16   my answer -- I'm sorry, a trade secret issue, then my answer
 
    17   would be a resounding no.  They have an absolute right to
 
    18   publish that.  Not only should there be a prior restraint, the
 
    19   case would likely go in favor of the Atlanta press.  But
 
    20   assuming that the information itself was somehow wrongful,
 
    21   that it was unprotected for some reason, then, yes, a prior
 
    22   restraint would likely still be inappropriate because you must
 
    23   prove that the speech is wrongful before it can be restrained.
 
    24   It has to be done with the utmost care, and a preliminary
 
    25   injunction is not the way in which that ought to be done.
 
 
 
                                                                  47
 
 
 
     1       Does that answer the Court's question?
 
     2            THE COURT:  It does.
 
     3            MR. LEVY:  Okay.  Now, the other part of the free
 
     4   speech issue is that of those who are receiving speech.
 
     5   Again, as we've discussed previously, there is a wide body of
 
     6   academic interest in this case completely separate from the
 
     7   plaintiffs' economic desires.  There are very high-level
 
     8   individuals who deal exclusively in cryptography who are
 
     9   fascinated by this particular topic.  And in order to allow
 
    10   their field to advance, they must have the ability to exchange
 
    11   information amongst themselves, otherwise you arrive at a
 
    12   situation where you simply do not have the means in which to
 
    13   produce either good encryption or good decryption, both of
 
    14   which, I submit to the Court, are very vital to this country.
 
    15            Now, the importance of that fact -- that is, whether
 
    16   or not they are able to get this information, certainly as has
 
    17   been cited in papers -- there is case law supporting that
 
    18   there is a First Amendment right to receive speech in addition
 
    19   to the First Amendment right to publish speech.  So here we
 
    20   have an issue where both interests are at stake.  And, again,
 
    21   in the interest of prudence, I would suggest that the Court
 
    22   must not issue the preliminary injunction, instead must weigh
 
    23   and look at this information carefully, thoroughly, with
 
    24   affidavits before it, and weigh the information before
 
    25   restraining any free speech rights.
 
 
 
                                                                  48
 
 
 
     1            I would also point out to the Court, and this is
 
     2   beginning to move away from the free speech argument and
 
     3   simply into general preliminary injunctions, and that is the
 
     4   issue of harm.  Now, when looking at the relevant harm that
 
     5   might be caused by a preliminary injunction, I would submit to
 
     6   the Court that not only does this harm not tip in favor of the
 
     7   plaintiffs, quite to the contrary, it tips substantially in
 
     8   favor of the defendants.  And I submit that to the Court on
 
     9   the following:
 
    10       The plaintiffs themselves have, as has been briefly
 
    11   discussed previously, offered conjecture as to why there would
 
    12   be harm.  They have offered no testimony that DVD sales have
 
    13   dropped.  They have offered no testimony that piracy has
 
    14   increased.  They have offered no testimony showing that that
 
    15   is actually what is going on here -- that is, that this is a
 
    16   piracy tool -- when, in fact, all of information suggests the
 
    17   contrary.  It is a Linux tool that was made by individuals who
 
    18   have no interest in piracy.  Their exclusive interest is in
 
    19   being able to play DVDs on their boxes.
 
    20       Now, in addition to the lack of harm on their part -- and
 
    21   I'm sorry, I should step back for just a moment because I
 
    22   recall that the Court previously addressed the idea of harm,
 
    23   and so I will point out to the Court that this is not a
 
    24   situation where this code was put out on the web yesterday.
 
    25   This is a code that has been out on the web since October, at
 
 
 
                                                                  49
 
 
 
     1   least.  That is, that's information that we have.
 
     2       Now, the information does not deal with -- I'm sorry.  Let
 
     3   me step back.  The code has been out since October and between
 
     4   October and now, if there was this immediate irreparable harm,
 
     5   certainly it would have already shown itself.  Certainly over
 
     6   in excess of four months, something would have happened if we
 
     7   have this immediate irreparable harm, this danger looming over
 
     8   our heads.  There is no information that there is something
 
     9   that they've made this more dangerous today.  No.  The
 
    10   preliminary injunction seeks to restrain just these three
 
    11   people from continuing to disseminate the information.  The
 
    12   plaintiff has failed to show why there is a difference today
 
    13   from four months ago.
 
    14            THE COURT:  First of all, it was three months,
 
    15   counsel, and, second of all, the argument that I take from
 
    16   their papers --
 
    17            MR. LEVY:  I apologize, your Honor.  I missed the
 
    18   first part of your statement.
 
    19            THE COURT:  First of all, it's three months, not even
 
    20   quite three months, since October 25.  At least on my
 
    21   calendar, it is.  And, secondly, I take from the plaintiffs'
 
    22   papers the following:  It's their submission, as I understand
 
    23   it, that initially the dissemination on the web was fairly
 
    24   limited, that they protested to ISPs, and that in many, if not
 
    25   most, cases, the ISPs immediately pulled the material.  The
 
 
 
                                                                  50
 
 
 
     1   lawsuit was then brought in California.  That provoked an
 
     2   enormous backlash in the hacker community, led to enormous
 
     3   numbers of postings and frenzied efforts to mirror and
 
     4   otherwise disseminate the program in what would appear to be
 
     5   an attempt by your clients and others to get this so widely
 
     6   disseminated that the genie never could be put back into the
 
     7   bottle and that, basically, that last part has happened in the
 
     8   last three to four weeks.
 
     9       Now, that's essentially what I drew from the papers.  If
 
    10   there's something wrong with that argument, I'm willing to
 
    11   listen to it.  But for you to tell me they haven't addressed
 
    12   the point or have offered nothing is the kind of hyperbole
 
    13   that doesn't advance your case.
 
    14            MR. LEVY:  I thank your Honor for correcting me on
 
    15   that point.
 
    16       I would point out a number of issues.  Now, first, the
 
    17   concept of a limited exposure on the web, I would submit to
 
    18   the Court, is unsupportable.  The web by its nature is a forum
 
    19   that reaches millions, and I would draw the Court's attention
 
    20   to the extensive discussion in ACLU v. Reno cited in
 
    21   defendants' papers.  So I would reject the notion that a piece
 
    22   of text that is posted, if you will, in the village square and
 
    23   is electronically replicated in every other village square has
 
    24   somehow been disseminated in a limited manner.
 
    25       As for the factual issue that it is three months instead
 
 
 
                                                                  51
 
 
 
     1   of four months, I'm informed by counsel that the Court is
 
     2   correct.  October 6 apparently is the first posting that we're
 
     3   currently aware of.  There may have been ones before, but we
 
     4   do not have that evidence before us.  And I think the Court
 
     5   also flagging another related issue that although it may have
 
     6   been addressed since, as I have informed the Court, I have not
 
     7   been able to carefully review all papers, I would offer this
 
     8   as an affirmative argument, and that is the futility of
 
     9   enjoining three individuals from posting this information on
 
    10   their websites.  Certainly the Court need not undertake a
 
    11   futile task, and, by the plaintiffs' own papers, this
 
    12   information is posted in tens of thousands, possibly hundreds
 
    13   of thousands, of other sites, not just throughout this country
 
    14   but throughout the world.  There are serious questions of the
 
    15   reach of this Court; that is, whether or not the preliminary
 
    16   injunction could be enforced.  And I'm sure counsel will
 
    17   suggest ways in which one could go into another court and
 
    18   request leave that the sister court in another country comply
 
    19   with your Honor's ruling, but I would suggest to the Court
 
    20   that when one thinks of other countries such as Iran and
 
    21   Syria, I'm not convinced that that would actually work and
 
    22   certainly I know of no precedent where it has worked.
 
    23            And the futility argument is particularly important
 
    24   when one links it to the free speech issues for individuals.
 
    25   It goes to the question of harm to the public and harm to
 
 
 
                                                                  52
 
 
 
     1   these defendants, and I shall focus on the harm to the public
 
     2   because to me it is so glaring.  I've discussed briefly the
 
     3   importance of this information to other researchers, to other
 
     4   cryptographers, and I have discussed it in sort of the
 
     5   microcosm of scholarly academia, but I have perhaps not
 
     6   addressed it on the public debate side.
 
     7            THE COURT:  Counsel, we're going to have to wrap this
 
     8   up sometime.
 
     9            MR. LEVY:  Very well.
 
    10            THE COURT:  And I'm going to give your side another
 
    11   six or seven minutes.
 
    12            MR. LEVY:  Very well.  I will, in that case, do
 
    13   things a bit more speedily.  I think that the preliminary
 
    14   injunction that has been requested is, although it may appear
 
    15   to be limited when one looks at the order and when one looks
 
    16   at the individuals that have sued, the types of rights that it
 
    17   attempts to curtail are of such importance that this Court
 
    18   ought not grant the relief that is requested, that it ought
 
    19   not curtail the discourse that is currently taking place, and
 
    20   that instead, it allow this matter to proceed to trial where
 
    21   the information is more fully briefed, where the individuals
 
    22   who are far more technically knowledgeable than, I would
 
    23   submit, I am are able to educate the Court and the attorneys
 
    24   as to what the information actually does.  We anticipate that
 
    25   that would show that the DeCSS system was always intended to
 
 
 
                                                                  53
 
 
 
     1   be a player, that neither of these individuals or others were
 
     2   sort of seagoing pirates; they were simply individuals who
 
     3   wanted to play DVDs that they purchased on their Linux boxes.
 
     4   They could not do that without DeCSS; they can do it with
 
     5   DeCSS.
 
     6       As for the concept that it may be distributed over the
 
     7   web, a DVD holds 5.2 gigabytes of information.  The ability to
 
     8   distribute that type of information over the web is
 
     9   nonexistent, that is, in a usable manner.  Certainly if one
 
    10   wants to take the 300 hours, it's possible, though wouldn't
 
    11   one not then just go down to the store and spend $20.
 
    12            The other point I would draw the Court's attention to
 
    13   is the existence of compact disk technology, meaning musical
 
    14   technology is also digital technology.  Currently, it is very
 
    15   simple to duplicate compact disk technology.  However, there
 
    16   is not massive widespread harm right now.  The companies are
 
    17   continuing to function properly, and while certainly piracy is
 
    18   a problem in its large-scale capacities, often in other
 
    19   countries, there are criminal laws that deal with that.  And
 
    20   to put forward that this speech that is being posted is what
 
    21   will cause a landslide or barrage of additional piracy issues
 
    22   is, I submit to the Court, simply inaccurate, or, as the Court
 
    23   put it, hyperbole.
 
    24       And with that, your Honor, I would turn it over to Mr.
 
    25   Katz if he has any additional points to make.
 
 
 
                                                                  54
 
 
 
     1            MR. KATZ:  No, your Honor.
 
     2            THE COURT:  Okay.  Thank you.
 
     3            Mr. Gold, delay and futility is what you should
 
     4   address.
 
     5            MR. GOLD:  Your Honor, until several weeks ago, we
 
     6   did not believe that we needed to come to court in order to
 
     7   protect our rights.  One of the problems with doing that in
 
     8   the hacker community is that if you challenge them a little,
 
     9   you really turn them on, and that was a major consideration
 
    10   for us.  And things seemed to be going to the point where
 
    11   these DeCSS postings were substantially diminishing.  But
 
    12   after California, we have no option, and we formed the belief
 
    13   within a week after the publicity of that decision on the TRO
 
    14   that we better come or we're going to lose our interest in
 
    15   this encryption device, and we're turning to the last
 
    16   protection that we relied on to safeguard the value of our
 
    17   copyrighted material, and that is the Court's enforcement of
 
    18   the existing statute.
 
    19       People are violating it.  They're madly going about trying
 
    20   to get people to mirror it so that the number of suits that
 
    21   we'll have to bring to bring this under control will increase,
 
    22   in the hope that it will turn us off and destroy this system.
 
    23   But it won't turn us off and we're going to pursue it in every
 
    24   place that it comes up because of our enormous investment in
 
    25   it and the investment of our public in those players.  We
 
 
 
                                                                  55
 
 
 
     1   didn't think we had to do this and we didn't want to do it,
 
     2   but we've got to do it now after what happened in California.
 
     3   We believe that if the Court enforces this, it will
 
     4   substantially stop in the United States.  People, most people,
 
     5   don't like to violate the law, if they see the courts are
 
     6   taking it seriously and are going to enforce it.  These are
 
     7   sophisticated people who are doing this.  And we honestly
 
     8   believe that we still, this week, have a viable protective
 
     9   device, and we don't think we're going to have it very much
 
    10   longer if the courts won't enforce the law.
 
    11            THE COURT:  All right.  Thank you.
 
    12            MR. LEVY:  Your Honor, if we can address two points
 
    13   very briefly.
 
    14            THE COURT:  Very briefly.
 
    15            MR. LEVY:  Okay.  I'll have Ms. Gross do the first
 
    16   point.
 
    17            MS. GROSS:  I just wanted to refer back to the DMCA
 
    18   and the code section that we're talking about.  1201(a)(2) and
 
    19   I apologize for referring to the incorrect section before, but
 
    20   I've got the correct one in front of me now, but I think it's
 
    21   important to note that (A), big letter (A), capital letter
 
    22   (A), of that particular code section says it needs to be
 
    23   "primarily designed or produced for the purpose of
 
    24   circumventing a technological measure."  And I would submit to
 
    25   the Court that if we had an opportunity to develop the facts
 
 
 
                                                                  56
 
 
 
     1   and to present the Court with an adequate record to make its
 
     2   determination, that the primary purpose of this software is to
 
     3   play DVDs and not to copy --
 
     4            THE COURT:  Let's assume you're right about that.
 
     5            MS. GROSS:  Okay.
 
     6            THE COURT:  How does it get you home under (2)(A)?
 
     7            MS. GROSS:  Because it's not covered under (2)(A)
 
     8   then.
 
     9            THE COURT:  You said it, but I don't see why that
 
    10   follows at all.
 
    11            MS. GROSS:  Because it's not primarily designed for
 
    12   the purpose of circumventing the technological measure that
 
    13   controls --
 
    14            THE COURT:  Of course it is.  The whole point here is
 
    15   that CSS is designed to protect against even the playing of a
 
    16   copyrighted DVD except with a player using a licensed CSS key.
 
    17   And if you go ahead and put out DeCSS for the purpose of
 
    18   playing it without using a player with the licensed
 
    19   technology, you have done it primarily for the purpose of
 
    20   circumventing the measure.  Isn't that true?
 
    21            MS. GROSS:  I think that you've exactly hit on the
 
    22   point here, but I think that I want to disagree with you in
 
    23   this broad interpretation of the statute.  I don't believe
 
    24   Congress intended to give copyright holders the right to
 
    25   decide which players would be acceptable for playing their
 
 
 
                                                                  57
 
 
 
     1   works.  In fact, I don't think Congress has the power to give
 
     2   copyright holders that degree of control on what machines
 
     3   their work can be played.
 
     4            MR. LEVY:  In essence, your Honor, that broader
 
     5   reading, which I understand how the Court was reading it,
 
     6   would mean that licensed players run afoul of the DMCA, and
 
     7   certainly that's not Congress' intent.  That is to say, if it
 
     8   really is the case that any decryption is unlawful under DMCA,
 
     9   then licensed decryption is also impermissible and that, of
 
    10   course, one would hope, is not Congress' intent.
 
    11            MR. HART:  Your Honor, may we --
 
    12            MR. LEVY:  Ms. Gross, do you have any other --
 
    13            THE COURT:  But the problem, of course, is that the
 
    14   phrase "circumvent a technological measure" is defined to mean
 
    15   any decryption without the authority of the copyright owner.
 
    16   So the statute seems to say on its face precisely what you say
 
    17   Congress can't have meant.
 
    18            MS. GROSS:  Congress has limitations in what it can
 
    19   do under the law, and I don't think that Congress intended to
 
    20   give copyright holders the power to say your work can play on
 
    21   this device, that device, but not these other devices.  I
 
    22   think that really needs far more research and far more filling
 
    23   out the record on that.
 
    24       Hello?  Hello?
 
    25            THE COURT:  There's something wrong with your
 
 
 
                                                                  58
 
 
 
     1   connection, counsel.
 
     2            MS. GROSS:  Hello?
 
     3            THE COURT:  All right.  I think I need to give Carol
 
     4   a break here.  She's been working very hard.  We'll recess for
 
     5   ten minutes.  You, Mr. Katz, can try to reach your folks in
 
     6   California and get them plugged back in, and we'll reconvene
 
     7   at 25 to five and I'm going to give you a decision.
 
     8            (Recess)
 
     9            THE COURT:  Are you back, Ms. Gross?
 
    10            MS. GROSS:  Okay.
 
    11            THE COURT:  Mr. Levy?
 
    12            MR. LEVY:  Yes, this is Allonn Levy.
 
    13            THE COURT:  Fine.  I am prepared to give you a
 
    14   decision now.  Although given the nature of the case, I intend
 
    15   to file a written opinion in due course, I am persuaded that
 
    16   it is important that I rule immediately in all the
 
    17   circumstances, so I am going to make a summary statement of my
 
    18   reasoning, but I expect to elaborate on it as promptly as I
 
    19   can.
 
    20       I should begin by clarifying the record that is before me
 
    21   and the manner in which we came to this point.  The plaintiffs
 
    22   filed this action, if memory serves, on January 14.  Is that
 
    23   right?  And I signed an order to show cause on that date
 
    24   bringing on this motion for a preliminary injunction,
 
    25   initially for 11:00 this morning.  The order required prompt
 
 
 
                                                                  59
 
 
 
     1   service, which was made, and it required the filing of any
 
     2   affidavits or other answering papers on behalf of the
 
     3   defendants earlier this week.
 
     4       On Wednesday, if memory serves, I received an answering
 
     5   memorandum from the defendants but no affidavits.  I also
 
     6   received a request for an adjournment, which was opposed by
 
     7   the plaintiffs.  I held a conference call on the record on
 
     8   Wednesday with respect to the application for an adjournment.
 
     9   The defendants' position was that they were not prepared to
 
    10   consent to any interim relief in exchange for the adjournment
 
    11   they requested.  The plaintiffs' position was that they were
 
    12   not prepared to grant the adjournment in view of what they
 
    13   conceived to be the threatened harm to their clients, absent
 
    14   interim relief, and so I denied the adjournment except to the
 
    15   extent that I moved the hearing until 2:30 this afternoon to
 
    16   accommodate the defendants' counsel.
 
    17       On Wednesday, the defendants indicated to me also that
 
    18   they were in the process of preparing one or more affidavits
 
    19   and stated that they intended to file them before the hearing.
 
    20   They did not do so.  In consequence, the record before the
 
    21   Court consists of plaintiffs' moving papers, the defendants'
 
    22   answering memorandum, but no evidentiary submission by the
 
    23   defendants whatsoever, and reply papers submitted today by the
 
    24   plaintiffs.
 
    25            During the course of the proceedings, both in the
 
 
 
                                                                  60
 
 
 
     1   defendants' memorandum of law and in the course of assertions
 
     2   of counsel this afternoon, a great many factual contentions
 
     3   and assertions have been advanced.  They include such
 
     4   assertions as the contention that Mr. Kazan is an Internet
 
     5   service provider and that Krackdown is a website run by a
 
     6   press organization, but there are a great many others.  None
 
     7   of those assertions is supported by any evidence whatsoever.
 
     8   The evidence before me is that submitted by the plaintiffs,
 
     9   and it is on the basis of the evidence before me that I am
 
    10   obliged to rule.
 
    11            Coming to the matter before me, the technology, at
 
    12   least at the level that it need be understood for this
 
    13   purpose, is pretty simple.  The plaintiffs record copyrighted
 
    14   motion pictures on DVDs, which is an acronym for, I think,
 
    15   digital versatile disks.  DVDs with these movies are data
 
    16   files that may be transformed into audio and video by
 
    17   appropriate computer equipment.  In order to prevent
 
    18   unauthorized copying, the plaintiffs employ something called
 
    19   Contents Scramble System, or CSS, which is an encryption-based
 
    20   computer and authentication system that requires the use of
 
    21   appropriately configured hardware, such as a DVD player or a
 
    22   computer DVD drive, to decrypt, unscramble, and play back
 
    23   motion pictures on DVDs without enabling the user to make a
 
    24   digital copy of the DVD movie.
 
    25            In late October of 1999, computer hackers apparently
 
 
 
                                                                  61
 
 
 
     1   cracked the DVD encryption system used by the plaintiffs and
 
     2   began offering on the Internet a software utility called DeCSS
 
     3   that enables users to break the CSS copyright protection
 
     4   system and thereby not only play, but copy and distribute,
 
     5   digital copies of copyrighted DVD movies.
 
     6            The plaintiffs initially responded by remonstrating
 
     7   Internet service providers on which sites engaged in this
 
     8   activity were located.  In some substantial number of cases,
 
     9   the offending materials were removed.  As 1999 drew to a
 
    10   close, someone, not the plaintiffs, brought a trade secret
 
    11   action relating to this technology in a state court in
 
    12   California and moved for a temporary restraining order and a
 
    13   preliminary injunction.  The state court judge denied the TRO,
 
    14   I gather without explanation.  The preliminary injunction
 
    15   motion, I am informed, was heard this week and has not been
 
    16   decided.
 
    17            The commencement of the action in California, and
 
    18   particularly the denial of the TRO, led to a substantial
 
    19   increase in attempts to disseminate DeCSS on the Internet.
 
    20   From some of the evidence submitted by the plaintiffs, it
 
    21   appears clear that there are those in the hacker community and
 
    22   in the Internet community, more broadly, who took the
 
    23   litigation in California as a throwing down of the gauntlet.
 
    24   There appears, although it is not necessary to my decision, to
 
    25   have been an obvious effort in at least some quarters to
 
 
 
                                                                  62
 
 
 
     1   disseminate DeCSS as broadly and as quickly as possible to
 
     2   make it difficult or impossible to put the genie back in the
 
     3   bottle through legal means.
 
     4       If there is such an effort, and there appears to be, the
 
     5   defendants appear to be part of it.  According to plaintiffs'
 
     6   evidence, it appears that Mr. Reimerdes is the author and
 
     7   proprietor of a website that is disseminating DeCSS.
 
     8   Mr. Kazan is listed as the technical director for a second
 
     9   website which is so engaged, although plaintiffs inform me
 
    10   that he seems to have taken DeCSS down off the website since
 
    11   the commencement of this action.
 
    12       I note in that connection that that does not moot the
 
    13   claim against him.  The W.T. Grant case in the Supreme Court
 
    14   makes clear that the voluntary cessation of such conduct does
 
    15   not moot an application for an injunction.
 
    16       The defendant Corley, under the pseudonym Emmanuel
 
    17   Goldstein, is listed as the administrative, billing, and
 
    18   technical contact of the third such site.
 
    19       The defendants argue that they are not the real parties in
 
    20   interest, but the argument is both misguided and beside the
 
    21   point.  It is misguided because Rule 17 requires that actions
 
    22   be prosecuted in the name of the real party in interest.  It
 
    23   does not speak to defendants.  It is beside the point because
 
    24   the issue here is not whether these three individuals are or
 
    25   are not real parties in interest in the sense they use the
 
 
 
                                                                  63
 
 
 
     1   term or whether they are the proprietors or the moving forces
 
     2   behind the websites in question.  Rather, it is whether the
 
     3   plaintiffs are likely to show that they are engaged in
 
     4   violating the Act.  If they are, they may be subject to
 
     5   injunction.  If they are not, they, of course, would not be.
 
     6       They all had the opportunity to submit affidavits
 
     7   indicating they had nothing to do with these activities or
 
     8   explaining the nature of their conduct and why it is not
 
     9   covered.  They elected not to do that.  I draw the inference
 
    10   from the materials submitted by the plaintiffs and from
 
    11   defendants' silence that they are engaged in the offending
 
    12   activities.  That, of course, is a matter that they are free
 
    13   to contest at trial.  But for present purposes, that is my
 
    14   finding.
 
    15            The objectives of the websites with which they are
 
    16   connected are reasonably clear.  The site with which Mr.
 
    17   Reimerdes is connected invites users to share their DVDs with
 
    18   the world by copying them and, as I mentioned during the
 
    19   course of argument, it contains a notice reading, and I quote:
 
    20   "The DVD Copy Control Association are cocksuckers."
 
    21            The site with which Mr. Kazan is connected makes it
 
    22   fairly clear from materials plaintiffs have submitted that it
 
    23   is engaged in something approaching a vendetta against the
 
    24   plaintiffs in this case.  It inveighs against the plaintiffs'
 
    25   efforts to prevent unauthorized copying of their material and
 
 
 
                                                                  64
 
 
 
     1   makes clear its belief that it has a right to decrypt the
 
     2   plaintiffs' products and disseminate.
 
     3            The standard that governs the availability of
 
     4   preliminary injunctions in this circuit is very well
 
     5   established.  The movant has to demonstrate a threat of
 
     6   irreparable injury and either a likelihood of success on the
 
     7   merits or the existence of serious questions that are fair
 
     8   ground for litigation and a balance of hardships tipping
 
     9   decidedly in its favor.
 
    10       In this case, it is clear to me that there is a threat of
 
    11   irreparable injury.  To begin with, it is very well
 
    12   established in intellectual property cases that threatened
 
    13   infringement of copyright, trademark, or patent rights or
 
    14   violation of trade secret rights is presumptively irreparable
 
    15   injury.  I made the point forcefully with defendants' counsel
 
    16   that defendants are not here charged with copyright
 
    17   infringement.  That is true.  As a technical matter,
 
    18   therefore, the presumption to the point that it has developed
 
    19   up to now does not apply.  Nonetheless, it is plain that the
 
    20   dissemination of software that would circumvent the copyright
 
    21   protection on the plaintiffs' copyrighted works does involve a
 
    22   substantial and immediate threat of irreparable injury, and
 
    23   that requirement is satisfied.
 
    24            I have taken into account the line of cases in this
 
    25   circuit that has indicated that in some circumstances undue
 
 
 
                                                                  65
 
 
 
     1   delay in seeking a preliminary injunction may either defeat a
 
     2   presumption of irreparable injury or, at a minimum, undermine
 
     3   the plaintiffs' claim to irreparable injury.  The cases make
 
     4   clear, however, that undue delay exists where the delay in
 
     5   fact is unexplained and unjustified.  It does not exist where
 
     6   a party is unaware at the outset of the scope of the threat.
 
     7   It does not exist where the party pursues in a reasonable
 
     8   fashion and with reasonable dispatch other means of attempting
 
     9   to remedy the problem without coming to court.  There are
 
    10   other circumstances that are relevant.
 
    11       I find that there was no undue delay in this case.  The
 
    12   plaintiffs acted reasonably in seeking to deal with this
 
    13   problem by first approaching the ISPs.  They met with some
 
    14   success.  They were not aware then that the problem would be
 
    15   as widespread as it has become.  I accept that the problem has
 
    16   become much more widespread since late December and that their
 
    17   getting into court by January 14 was plenty fast enough.
 
    18            That brings us to an evaluation of the plaintiffs'
 
    19   likelihood of success on the merits.  The plaintiffs are
 
    20   proceeding under Section 1201(a)(2) of the Copyright Act.  In
 
    21   relevant part, it prohibits any person from offering to the
 
    22   public or providing any technology, product, service, device,
 
    23   or component "that is primarily designed or produced for the
 
    24   purpose of circumventing a technological measure that
 
    25   effectively controls access to a work protected under" the
 
 
 
                                                                  66
 
 
 
     1   Act, or that "has only limited commercially significant
 
     2   purpose or use other than to circumvent a technological
 
     3   measure that effectively controls access to a work protected
 
     4   under" the Act.
 
     5            "To circumvent a technological measure" is defined in
 
     6   the statute to mean descrambling a scrambled work, decrypting
 
     7   an encrypted work, "or otherwise to avoid, bypass, remove,
 
     8   deactivate, or impair a technological measure, without the
 
     9   authority of the copyright owner."
 
    10       "A technological measure effectively controls access to a
 
    11   work," according to the definition in the Act, "if the
 
    12   measure, in the ordinary course of its operation, requires the
 
    13   application of information, or a process or a treatment, with
 
    14   the authority of the copyright owner, to gain access to the
 
    15   work."
 
    16       There is, in my view, not the slightest question that
 
    17   plaintiffs have an exceptionally high likelihood of prevailing
 
    18   on the merits of the claim of violation of this Act by these
 
    19   defendants unless one of the statutory exceptions, which I
 
    20   will come to in a moment, is satisfied, or there is a
 
    21   constitutional impediment to that conclusion.  CSS effectively
 
    22   controls access to the copyrighted works because, as the
 
    23   defendants conceded at page 3 of their memorandum, one cannot,
 
    24   in the ordinary course, gain access to the copyrighted works
 
    25   on DVDs without applying information or a process inherent in
 
 
 
                                                                  67
 
 
 
     1   the player key that permits the play back of the DVD.  Indeed,
 
     2   it appears also that one cannot copy the copyrighted works
 
     3   protected by CSS even with a player key.
 
     4            It is undisputed that DeCSS decrypts encrypted works
 
     5   and otherwise avoids or bypasses CSS without the authority of
 
     6   the copyright owners.  It is also clear to me that plaintiffs
 
     7   are likely to establish that DeCSS is primarily designed or
 
     8   produced for the purpose of circumventing CSS and, thus, falls
 
     9   within Section 1201(a)(2)(A), and also that it has only
 
    10   limited commercially significant purpose or use other than to
 
    11   circumvent CSS and, thus, falls within 1201(a)(2)(B).
 
    12            The defendants made the argument here this afternoon
 
    13   that DeCSS was not primarily designed to circumvent CSS
 
    14   because it was meant only to enable people in lawful
 
    15   possession of copyrighted disks to play them for their own use
 
    16   on Linux machines.  A Linux machine is a computer that is
 
    17   operating under the Linux operating system rather than under
 
    18   Windows, the much more widely disseminated operating system.
 
    19   On the relative positions of the two, anyone interested might
 
    20   read the decision in the Microsoft case.  But the simple fact
 
    21   of it is that the argument fails for two reasons.
 
    22       First of all, defendants have submitted no evidence
 
    23   whatsoever that the primary purpose of DeCSS was to enable
 
    24   people in lawful possession of copyrighted DVDs to play them
 
    25   on Linux machines and not to copy them.  Secondly, even if
 
 
 
                                                                  68
 
 
 
     1   there were proof to that effect, there is no doubt that DeCSS
 
     2   was primarily designed or produced for the purpose prohibited
 
     3   in 1201(a)(2)(A) because the definition of "circumvent a
 
     4   technological measure" in 1201(a)(3) makes clear that
 
     5   decrypting or descrambling a copyrighted work without the
 
     6   authority of the copyright owner is the very definition of
 
     7   circumventing a technological measure.  Therefore, even if the
 
     8   primary purpose here were to enable lawful possessors of
 
     9   copyrighted DVDs simply to play those DVDs on Linux machines,
 
    10   the primary purpose would have been within the statute.  I
 
    11   need not ultimately decide the case on that ground because
 
    12   there are ample alternative bases that I already have
 
    13   outlined.
 
    14            In summary, on that point, absent a statutory
 
    15   exception or a constitutional impediment, there is here a
 
    16   crystal clear violation of the statute.
 
    17            The defendants have argued almost every conceivable
 
    18   exception found either in 1201 or in other parts of the
 
    19   Copyright Act, and they are all arguments that I find
 
    20   unpersuasive.  We start with Section 512(c) of the Copyright
 
    21   Act which provides limited protection from liability for
 
    22   copyright infringement by certain service providers for
 
    23   information resident on a system or network owned or
 
    24   controlled by them.  I think that argument is made under
 
    25   512(c) only with respect to Mr. Kazan.  But it does not matter
 
 
 
                                                                  69
 
 
 
     1   because the grounds that require its rejection in his case
 
     2   require its rejection in the case of all of them.
 
     3            First of all, there is no proof before the Court that
 
     4   any of the defendants is a service provider within the meaning
 
     5   of 512(c).  Second, even if they were all service providers,
 
     6   what 512(c) does is to provide liability protection from
 
     7   copyright infringement.  These defendants are sued under
 
     8   1201(a)(2) and are sought to be held liable not for copyright
 
     9   infringement but for a separate statutory violation.  Section
 
    10   512(c), whether or not they are service providers, is simply
 
    11   of no applicability to this case.
 
    12            The next argument turns on the reverse engineering
 
    13   exception, Section 1201(f)(2), or, more broadly, 1201(f).
 
    14   1201(f)(2) provides that, notwithstanding Section 1201(a)(2),
 
    15   a person who has lawfully obtained the right to use a copy of
 
    16   a computer program may develop technological means to
 
    17   circumvent a technological measure, or the protection afforded
 
    18   by that measure, to identify and analyze the elements of the
 
    19   program, that is to say, the program which the individual in
 
    20   question has obtained the right to use, necessary to achieve
 
    21   interoperability with an independently created computer
 
    22   program, or for the purpose of enabling interoperability if
 
    23   those means are necessary to achieve interoperability but only
 
    24   to the extent that doing so does not infringe copyright.
 
    25   1201(a)(3) permits limited rights to make such information
 
 
 
                                                                  70
 
 
 
     1   available.
 
     2       The defendants argue that they fall within this exception
 
     3   because DeCSS is necessary to achieve inoperability between
 
     4   computers running on the Linux system rather than Windows and
 
     5   DVDs.  I reject the argument.  First, there isn't any evidence
 
     6   in the record to support the assertion.  Second, DeCSS
 
     7   concededly runs under Windows, even assuming it runs under
 
     8   Linux.  And, third, as the plaintiffs have pointed out, the
 
     9   legislative history makes abundantly clear that Section
 
    10   1201(f) permits reverse engineering only of computer programs.
 
    11   It does not authorize the circumvention of technological
 
    12   protection that controls access to other works such as movies.
 
    13            The next exemption or exception on which the
 
    14   defendants rely is Section 1201(g), which relates to
 
    15   encryption research.  There is no showing that the defendants
 
    16   are engaged in that research, but I need not rely on that
 
    17   point.  In order to avail oneself of the exemption under
 
    18   1201(g), the defendant must demonstrate that he made a good
 
    19   faith effort to obtain authorization before circumventing the
 
    20   technological means.  There is no such showing here.
 
    21            The next argument is that this was authorized or
 
    22   exempt security testing under Section 1201(j).  That exemption
 
    23   is limited to the good faith testing of computers, computer
 
    24   systems, or computer networks, with the authorization of the
 
    25   owner of the equipment or the network.  In this case, DeCSS
 
 
 
                                                                  71
 
 
 
     1   has nothing to do with testing computers, computer systems, or
 
     2   networks, and what is going on here certainly was not done
 
     3   with the authorization of the owners.
 
     4            We next have the argument that the defendants are
 
     5   engaged in a fair use under Section 107 of the Copyright Act.
 
     6   Section 107 of the Copyright Act affords a limited defense to
 
     7   liability for copyright infringement.  For the same reasons
 
     8   that I pointed out earlier -- these defendants are not being
 
     9   sued for copyright infringement -- the fair use defense has no
 
    10   application in the facts of this case.  Thus, no colorable
 
    11   defense under the Copyright Act has been advanced.
 
    12            The defendants next argue that the First Amendment
 
    13   protects their activities.  They argue that their
 
    14   dissemination of DeCSS is protected by the First Amendment and
 
    15   that, moreover, injunctive relief here would run afoul of the
 
    16   prior restraint doctrine.
 
    17            I have some question in my mind whether DeCSS, the
 
    18   only portion of which that is offensive to the plaintiffs
 
    19   consists of executable instructions as distinguished from
 
    20   nonexecutable programmer comments, is protected speech under
 
    21   the First Amendment.  But for the purposes of this decision, I
 
    22   assume that it is.  To say that it is, however, is only the
 
    23   beginning of the analysis.
 
    24            Professor Nimmer, in his famous treatise on
 
    25   copyright, points out that if one took the most extreme
 
 
 
                                                                  72
 
 
 
     1   absolutist First Amendment and statutory construction approach
 
     2   to the provisions of the Constitution relevant here, the law
 
     3   of copyright is unconstitutional in its entirety.  The
 
     4   reasoning would be that all expressions are speech.
 
     5       The First Amendment says Congress shall make no law
 
     6   abridging freedom of speech or of the press.  The First
 
     7   Amendment was adopted after Article I of the Constitution.
 
     8   Under normal precepts of statutory construction, a later
 
     9   amendment modifies an earlier text.  All copyright law
 
    10   impinges on freedom of expression because any time one
 
    11   plagiarizes a book or a play or a movie or a copyrighted
 
    12   newspaper article, one is, after all, speaking and expressing
 
    13   oneself and, therefore, it would follow that the law of
 
    14   copyright is unconstitutional and that no copyright protection
 
    15   would exist for anyone in anything.
 
    16       I hasten to add that Professor Nimmer does not take the
 
    17   view that the law of copyright on which he and his son have
 
    18   both spent their lives is unconstitutional.  I am not sure
 
    19   that the Supreme Court has ever directly addressed that
 
    20   precise argument, but the question was raised indirectly in
 
    21   the Gerald Ford memoirs case, Harper & Row v. Nation
 
    22   Enterprises, 471 U.S. 539, where the alleged infringer was
 
    23   charged with copyright infringement for printing the juiciest
 
    24   part of President Ford's copyrighted memoirs, allegedly in
 
    25   violation of the publisher's copyright.  The defense was,
 
 
 
                                                                  73
 
 
 
     1   among other things, fair use, and the argument was made that
 
     2   the fair use defense in that case had to be given a very
 
     3   expansive reading to take account of the First Amendment
 
     4   interest in President Ford's memoirs, particularly, as I
 
     5   recall, his account of how President Nixon came to be pardoned
 
     6   for Watergate.
 
     7       The Supreme Court made clear that conventional fair use
 
     8   analysis would be applied and that it would not expand the
 
     9   boundaries of the traditional fair use defense in light of the
 
    10   First Amendment argument advanced by the defendant.  In the
 
    11   course of doing so, it made it perfectly clear that copyright
 
    12   and the First Amendment coexist.
 
    13       That is not to say there is never any tension.  And it is
 
    14   not to say that there is any crystal clear reconciliation of
 
    15   whatever tension there is.  There are a number of possible
 
    16   approaches.
 
    17       One that strikes me as quite relevant here, particularly
 
    18   in light of the Betamax case, which I will come to in a
 
    19   minute, is this:  The copyright clause of the Constitution,
 
    20   Article I, Section 8, empowers Congress to secure, for limited
 
    21   times, to authors the exclusive right to their writings.  It,
 
    22   thus, empowers Congress to adopt the Copyright Act and to
 
    23   confer upon the owners of copyrights the exclusive right to
 
    24   exploit those works for a limited period.  Article I concludes
 
    25   by empowering Congress to make all laws which shall be
 
 
 
                                                                  74
 
 
 
     1   necessary and proper for carrying into execution the foregoing
 
     2   powers.  In order to give authors the exclusive right to
 
     3   exploit their copyrighted writings -- and I should make clear
 
     4   that the word "writings" in this context is a generic term
 
     5   that embraces all copyrighted works -- Congress necessarily
 
     6   was given the power to prevent others from publishing those
 
     7   writings as long as the copyright subsisted, even though doing
 
     8   so necessarily prevents some people from saying some things
 
     9   some of the time; namely, things that are copyrighted by
 
    10   others.
 
    11            In consequence, the First Amendment cannot be read as
 
    12   abrogating the copyright clause and the necessary and proper
 
    13   clause.  Congress quite plainly has the power to limit speech
 
    14   where doing so is appropriate to ensure that copyright owners
 
    15   enjoy the exclusive right to exploit their works.  Chief
 
    16   Justice Marshall, almost 200 years ago, said with respect to
 
    17   the necessary and proper clause "let the end be legitimate,
 
    18   let it be within the scope of the Constitution, and all means
 
    19   which are appropriate, which are plainly adapted to that end,
 
    20   which are not prohibited but consistent with the letter and
 
    21   spirit of the Constitution, are constitutional."  McCulloch v.
 
    22   Maryland, 4 Wheaton 316, 420, decided in 1819.  That is the
 
    23   law today.
 
    24            The Betamax case makes especially clear that in areas
 
    25   of rapid technological change, such as the one we are dealing
 
 
 
                                                                  75
 
 
 
     1   with, the judiciary is to give deference to Congress' judgment
 
     2   about the manner in which copyright is to be protected in a
 
     3   changing technological climate.  In that case, Sony Corp. v.
 
     4   Universal City Studios, 464 U.S. 417 decided in 1984, a case
 
     5   that had to do with videotape recorders, the Supreme Court
 
     6   said this, and I do elide some material in this quote for
 
     7   brevity:
 
     8       From its beginning, the law of copyright has developed in
 
     9   response to significant changes in technology.  Indeed, it was
 
    10   the invention of a new form of copying equipment -- the
 
    11   printing press -- that gave rise to the original need for
 
    12   copyright protection.  Repeatedly, as new developments have
 
    13   occurred in this country, it has been the Congress that has
 
    14   fashioned the new rules that new technology made necessary.
 
    15   The judiciary's reluctance to expand the protections afforded
 
    16   by the copyright without explicit legislative guidance is a
 
    17   recurring theme.  Sound policy, as well as history, supports
 
    18   our consistent deference to Congress when major technological
 
    19   innovations alter the market for copyrighted materials.
 
    20   Congress has the constitutional authority and the
 
    21   institutional ability to accommodate fully the varied
 
    22   permutations of competing interests that are inevitably
 
    23   implicated by such new technology.
 
    24       That appears at pages 430 and 431 of 464 of the U.S.
 
    25   Reporter.  Now, in that case, the court relied on this
 
 
 
                                                                  76
 
 
 
     1   traditional deference to Congress to conclude that, in the
 
     2   absence of legislation, it should not extend copyright
 
     3   protection.  But the very same reasoning counsels in this case
 
     4   that in the face of express guidance from Congress,
 
     5   unmistakably clear guidance from Congress, I ought to be
 
     6   exceptionally reluctant to cut back on it.  That is not to say
 
     7   that the courts are obliged to blind themselves to
 
     8   constitutional violations.  Quite the contrary.  But this is a
 
     9   circumstance in which there is an obvious need for
 
    10   accommodation between interests in free speech and interests
 
    11   in protection of copyright.
 
    12       As Congress has chosen a means which is directly related
 
    13   to the protection of important copyright interests, I see no
 
    14   infirmity viewing this from the perspective of the
 
    15   Constitution as a whole, that is, the First Amendment, the
 
    16   copyright laws, and the necessary and proper clause.  That is
 
    17   one possible approach to the First Amendment question in this
 
    18   case.
 
    19       Another is a balancing approach in which there would be a
 
    20   balancing between the limitation on expression inherent in
 
    21   protecting a copyright and the values served by protecting the
 
    22   copyright.  In this case, I have no doubt about where that
 
    23   balance falls either, assuming that were the appropriate test.
 
    24   The plaintiffs here have enormous investments in copyrighted
 
    25   material, the commercial significance of which is a matter of
 
 
 
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     1   broad and obvious public knowledge.  The creation of media
 
     2   content is one of the large industries in this country and one
 
     3   of our major exports today.  The protection of intellectual
 
     4   property rights in materials owned by Americans is an
 
     5   important feature of our foreign policy and our trade policy.
 
     6   You only have to read the newspapers to know that.
 
     7            On the other side here, we have the interest in
 
     8   expression.  I do not for a moment demean that interest; it is
 
     9   an important one.  But we always have to ask ourselves what we
 
    10   are really talking about.  The facts say a lot.  Putting aside
 
    11   programmer comments, nonexecutable programmer comments, which
 
    12   are not the focus of this application, we are dealing with a
 
    13   set or sets of computer instructions.  They are, I am prepared
 
    14   to assume, expressive to some degree.  They are much closer to
 
    15   an electronic or a mechanical device for performing an
 
    16   operation on a subject to produce a result.  They are a set of
 
    17   instructions which cause a computer to render intelligible a
 
    18   data file on a DVD.  If I were to balance the interest in
 
    19   protection of copyrights against the extent to which free
 
    20   dissemination of that set of machine-executable instructions
 
    21   serves the goals traditionally served by protection of
 
    22   speech -- an informed society, the ability to engage in
 
    23   self-government, the ability to realize social and
 
    24   intellectual goals -- the balance in my judgment falls on the
 
    25   side of copyright protection, even though I recognize that
 
 
 
                                                                  78
 
 
 
     1   there is perhaps some interest served on the defendants' side
 
     2   of the ledger.
 
     3            I do not think I need, for present purposes, to come
 
     4   to a definitive theoretical view on this point.  Under any of
 
     5   the approaches that have been brought to my attention, or that
 
     6   I have found on my own, I find the legislation under which
 
     7   plaintiffs seek relief, both on its face and as applied here,
 
     8   constitutional or at least highly likely ultimately to be held
 
     9   constitutional.
 
    10            The final point that plaintiffs make is the argument
 
    11   that an injunction here would be an unlawful prior restraint.
 
    12   It is an argument that is invoked almost as a talisman on the
 
    13   assumption that any and all prior restraints are
 
    14   unconstitutional, short of an immediate and grave threat to
 
    15   national security or something approaching that.  I suppose,
 
    16   for popular and even first-year law school purposes, that is
 
    17   not a bad statement.  But it is not really entirely accurate.
 
    18       I took a look during our break at Tribe on Constitutional
 
    19   Law, certainly somebody who has had a few more First Amendment
 
    20   cases than I have, and he makes the point that if you look at
 
    21   what the Supreme Court and the federal courts have done rather
 
    22   than some of the rhetoric, the reality is sometimes hard to
 
    23   square with the rhetoric.  He says, and I quote from the
 
    24   second edition of his book, at page 1046, "but prior
 
    25   restraints have been approved in the seemingly less momentous
 
 
 
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     1   areas of film censorship, commercial advertising, and permit
 
     2   requirements to use public places for expressive activities.
 
     3   The relative importance of the government's interests,
 
     4   therefore, cannot explain the cases."  He then goes on to try
 
     5   to come to a doctrinally satisfying reconciliation, which I
 
     6   will not bore you with.
 
     7       He does point out, however, that in the Progressive
 
     8   magazine case, United States v. Progressive, Inc., 467 F.Supp.
 
     9   990, where a magazine attempted to publish an article on how
 
    10   to make a hydrogen bomb, the district court did issue a
 
    11   preliminary injunction.  It remained in effect for seven
 
    12   months, and the Supreme Court denied a motion to expedite the
 
    13   appeal.  It illustrates the point about the difference between
 
    14   the rhetoric and the reality.
 
    15       Bearing in mind the very weighty interests on the
 
    16   plaintiffs' side of the equation here and the, to me, quite
 
    17   limited, although probably not nonexistent, expressive
 
    18   interests in the machine-executable code, and the lack of time
 
    19   sensitivity of the latter, I conclude that a preliminary
 
    20   injunction in this case is consistent with the prior restraint
 
    21   doctrine and, therefore, the motion is granted.  A preliminary
 
    22   injunction will issue.
 
    23       I do bear in mind the defendants' interest in speed here
 
    24   and in avoiding a prolonged duration for the preliminary
 
    25   injunction, and so, within the limits of my schedule, which is
 
 
 
                                                                  80
 
 
 
     1   pretty clear at the moment, you can have a trial pretty near
 
     2   whenever you want.
 
     3       So when do you want your trial?  I think I'm free to start
 
     4   Tuesday.
 
     5            MR. LEVY:  Your Honor, I'm having the problem with
 
     6   being in California.  I cannot even speak with the clients to
 
     7   find out what their schedule is like.  Certainly I'm not
 
     8   available for trial on Tuesday.  I'm not sure as to the other
 
     9   attorneys.
 
    10            THE COURT:  Then let's leave it this way.  I will act
 
    11   promptly on any application by the plaintiffs to set this case
 
    12   for a trial just as fast as I can reach it.  And all you have
 
    13   to do is communicate with my chambers and you'll be on the
 
    14   fastest express train you ever saw because I take this
 
    15   seriously.  And you will get as prompt a trial as I can give
 
    16   you, and I think that's very prompt.
 
    17            MR. LEVY:  Thank you, your Honor.
 
    18            MR. KATZ:  Your Honor, you mentioned the application
 
    19   of the plaintiff.  Are you referring --
 
    20            THE COURT:  I misspoke.  Application of the
 
    21   defendants.
 
    22            MR. KATZ:  Thank you, your Honor.
 
    23            THE COURT:  I misspoke.  I always assume when I see
 
    24   the Proskauer firm that it's here on behalf of some employer
 
    25   being sued for some labor violation.  So they're always here
 
 
 
                                                                  81
 
 
 
     1   for defendants.
 
     2       I have taken the order to show cause and translated it
 
     3   into a preliminary injunction.  I have copies that you folks
 
     4   can take a look at.  And if there are any problems about the
 
     5   form of it, I'll hear them now.  I realize you folks are in
 
     6   California and have a problem with that, but, Mr. Katz will
 
     7   hold up your end.
 
     8            MR. KATZ:  Your Honor, I've completed my reading of
 
     9   the document.
 
    10            THE COURT:  Okay.  Do we have any issues about the
 
    11   form?
 
    12            MR. GOLD:  Your Honor, we got a little smarter in the
 
    13   extra time between the end of last week and the end of this
 
    14   and were hoping that we could get an injunction against
 
    15   linking to DeCSS or posting or linking to any other
 
    16   circumvention device.  Again, the posting is you stay on this
 
    17   one website and you take down DeCSS.  The link is that you
 
    18   click your mouse twice, you get to another website, which has
 
    19   DeCSS on the page you're transferred to, and you get it.  So
 
    20   the only difference is instead of clicking twice, you have to
 
    21   click twice, wait a second, and click twice again.  And that's
 
    22   the linking to another circumvention device.  One of the
 
    23   defendants is engaged in both.
 
    24            MR. KATZ:  Your Honor, if I may be heard on that, the
 
    25   danger in doing so is linking to sites -- let me restate that,
 
 
 
                                                                  82
 
 
 
     1   not knowing what's on the other end of a website.  If you have
 
     2   a link that goes to a website and you're not necessarily
 
     3   posting that site and you double click, you are at the mercy
 
     4   of whatever may be on the other side of that.
 
     5            THE COURT:  Suppose it were "knowingly linking."
 
     6            MR. BAUMGARTEN:  Your Honor, our application does not
 
     7   refer to linking to the site.  It refers to linking to
 
     8   circumvention devices.  We're aware of the concern.
 
     9            THE COURT:  What about that?
 
    10            MR. KATZ:  Your Honor, my concern is, one, for all
 
    11   sites, but I'm concerned primarily about the media aspects of
 
    12   this in that there may be reporting of the DeCSS, which
 
    13   certainly would be permitted under your ruling, but --
 
    14            THE COURT:  Don't let my silence reflect
 
    15   acquiescence.  I'm not quite sure what you mean, but I'll hear
 
    16   you out.
 
    17            MR. KATZ:  Thank you.  In that there may be a
 
    18   reference to a particular site that may or may not have the
 
    19   DeCSS on it.  If there is a direct link coming from the site,
 
    20   I think that needs to be distinguished from the actual posting
 
    21   of DeCSS.
 
    22            MR. LEVY:  Additionally, your Honor, I think that the
 
    23   linking issue involves a completely separate issue, a whole
 
    24   slew of other problems, and there's been no notice to the
 
    25   defendants that this was what was going to be discussed.  It's
 
 
 
                                                                  83
 
 
 
     1   completely separate.  Simply drawing a quick suggestion, it
 
     2   would mean, as discussed in argument, that one cannot link to
 
     3   the San Pedro Mercury News because it does have a link to
 
     4   DeCSS.
 
     5            MS. GROSS:  Additionally, I think it's important to
 
     6   note that, once you link to something, you have no control
 
     7   over what that person puts in that file.
 
     8            THE COURT:  That's already been covered, Ms. Gross.
 
     9       Mr. Baumgarten.
 
    10            MR. BAUMGARTEN:  Your Honor, I simply want to point
 
    11   out that the language in the statute and the language in the
 
    12   order you prepared covers "providing," and Mr. Gold pointed
 
    13   out it's just four clicks instead of two and you're still
 
    14   getting the material.  This is not the copyright issue of
 
    15   whether linking is a performance or a display.  This is the
 
    16   language of this statute.
 
    17            THE COURT:  If I understand what you're saying, at
 
    18   least one of the defendants has on his site a place where you
 
    19   double click on an icon or a hypertext link and that does not
 
    20   of itself download the DeCSS to your computer; what it does is
 
    21   it puts you onto another site.
 
    22            MR. BAUMGARTEN:  For that material.
 
    23            THE COURT:  Where you then have to double click
 
    24   again.
 
    25            MR. BAUMGARTEN:  Yes, your Honor.
 
 
 
                                                                  84
 
 
 
     1            MR. GOLD:  Yes, it's a page with --
 
     2            MR. BAUMGARTEN:  But on that page, you don't have the
 
     3   page for the other site and scroll through.  Our order is
 
     4   limited to going directly to the offensive material.  To us,
 
     5   it makes little difference whether you're providing it with
 
     6   the first set of clicks or the second.  You're still providing
 
     7   it and the language of the statute is "providing."
 
     8            MR. LEVY:  Your Honor, providing a whole host of
 
     9   other information on the site.
 
    10            THE COURT:  Mr. Levy, just hold on a minute.  Is this
 
    11   hypothetical link page one on which, in your contemplation,
 
    12   the user simply double clicks anywhere on the page and
 
    13   automatically does it download, or is it a link page on which
 
    14   there's a bunch of stuff and if you click on the right
 
    15   hypertext link on that page you get the download because
 
    16   they're offering the download to everybody?
 
    17            MR. BAUMGARTEN:  Your Honor, for the purposes of the
 
    18   preliminary injunction, I think we'd be satisfied to make it
 
    19   clear that you're clicking on the icon or whatever is there or
 
    20   the word "DeCSS," as long as what you're downloading to the
 
    21   second click is DeCSS.  Anything else on the page is not
 
    22   within our contemplation.  We view it essentially the same as
 
    23   posting the DeCSS.  We don't mean to expand it.  If there was
 
    24   a newspaper article on the link to site the order would not
 
    25   enjoin linking to the newspaper article.
 
 
 
                                                                  85
 
 
 
     1            THE COURT:  I think that that issue is sufficiently
 
     2   different from what I've heard that I'm not prepared to rule
 
     3   on it now.  I will deal with this in the form, if you wish to
 
     4   press it, of an application to modify and we'll give the
 
     5   defendants an opportunity to respond to it and we'll deal with
 
     6   it in a more measured way.
 
     7            MR. BAUMGARTEN:  Thank you, your Honor.
 
     8            MR. KATZ:  Your Honor, with respect to that, however,
 
     9   by looking at the preliminary injunction order, 2(b), as your
 
    10   Honor points out, we deal with the issue of posting, but I'm
 
    11   concerned about the language "or in any other way
 
    12   manufacturing importing, or offering to the public," and it's
 
    13   the "importing," Judge, I'm concerned about in the language of
 
    14   what a link is.
 
    15            THE COURT:  That's the statutory language.
 
    16            MR. KATZ:  I understand that, your Honor.  But it
 
    17   just runs counter to what counsel has just said in terms of
 
    18   what they're willing to accept, posting versus linking.
 
    19            THE COURT:  Look, I don't see the problem about
 
    20   importing.  And I do not now offer any view as to what the
 
    21   phrase "offering to the public" means, or what the word
 
    22   "providing" means.  I'm not going to give an advisory opinion
 
    23   on that.  This is the statutory language.  Your people at the
 
    24   moment obviously are offering to the public and providing.  If
 
    25   some close case gets presented later on, I'll deal with it.
 
 
 
                                                                  86
 
 
 
     1            MR. BAUMGARTEN:  Thank you.
 
     2            THE COURT:  Anything else about the form of the
 
     3   order?
 
     4            MR. GOLD:  No, your Honor.
 
     5            MR. KATZ:  No, your Honor.
 
     6            THE COURT:  All right.  The order is signed at 5:40
 
     7   p.m.  My law clerks will give each side one copy of it and we
 
     8   will docket the order.  I reserve the right just to edit for
 
     9   syntax this transcript.  It probably won't be available to you
 
    10   until Monday, at best, before trial.
 
    11            MR. KATZ:  Your Honor, if I may just point out for
 
    12   clarification, affidavits or declarations of the defendants
 
    13   had been submitted to your Honor.
 
    14            THE COURT:  Where?
 
    15            MR. KATZ:  In the form of, if I'm not mistaken, in
 
    16   the reply brief.  They had been sent over to counsel, and
 
    17   those are contained --
 
    18            THE COURT:  The reply brief was filed by the
 
    19   plaintiffs.
 
    20            MR. KATZ:  By the plaintiff.  I apologize, your
 
    21   Honor.
 
    22            THE COURT:  Yes.  You didn't submit any.
 
    23            MR. KATZ:  I had been unable to obtain them and bring
 
    24   them down to court in time, and I sent them over to counsel
 
    25   and I believe that they are included -- I believe that they
 
 
 
                                                                  87
 
 
 
     1   are included.
 
     2            THE COURT:  They're included where?
 
     3            MR. KATZ:  I believe I saw them in the facsimile that
 
     4   was sent over, the three affidavits.
 
     5            THE COURT:  Who are the affiants?
 
     6            MR. KATZ:  Roman Kazan --
 
     7            MR. KAZAN:  I have a copy of it.
 
     8            MR. KATZ:  -- Eric Corley and Shawn Reimerdes.
 
     9            THE COURT:  They were never sent to me, as far as I
 
    10   know.  They were not filed with the Court, were they?
 
    11            MR. KATZ:  No, your Honor.  We only received them
 
    12   this morning.
 
    13            THE COURT:  The deadline was a day or two ago anyway.
 
    14            MR. KATZ:  I understand that.
 
    15            MR. HART:  Your Honor, I called Mr. Katz to ask him
 
    16   about it, and by the time he tracked down the fax that was
 
    17   supposed to have gotten to our office, we had already replied
 
    18   blindly and without the sworn testimony.  I did indeed get a
 
    19   fax from him after that and brought it on my way to court.
 
    20   But Mr. Gold has not even had a chance to see it.
 
    21            MR. KATZ:  And, your Honor, that was based on the
 
    22   transmission I had received from the individual defendants.
 
    23            THE COURT:  Look, obviously it's unfortunate that
 
    24   that happened.  But, counsel, you all knew what the rules
 
    25   were.  And there's nothing unusual about a preliminary
 
 
 
                                                                  88
 
 
 
     1   injunction being heard this way.  It happens every day of the
 
     2   week.  And it's been going on the entire 30 years I've been in
 
     3   this business in New York and it's probably going to go on a
 
     4   lot longer after I'm gone.  I mean an affidavit is good only
 
     5   if you put it before the Court.
 
     6            MR. KATZ:  Understood, your Honor.
 
     7            THE COURT:  Anything else?
 
     8            MR. GOLD:  No, your Honor.
 
     9            THE COURT:  I thank counsel.  This was illuminating
 
    10   to say the least.
 
    11                                o0o
 
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