"The Apple iPod iTunes Anti-Trust Litigation"

Filing 199

Transcript of Proceedings held on 12/16/08, before Judge Ware. Court Reporter/Transcriber Irene L. Rodriguez, Telephone number (408)947-8160. Per General Order No. 59 and Judicial Conference policy, this transcript may be viewed only at the Clerks Office public terminal or may be purchased through the Court Reporter/Transcriber until the deadline for the Release of Transcript Restriction.After that date it may be obtained through PACER. Any Notice of Intent to Request Redaction, if required, is due no later than 5 business days from date of this filing. Redaction Request due 2/2/2009. Redacted Transcript Deadline set for 2/12/2009. Release of Transcript Restriction set for 4/13/2009. (Rodriguez, Irene) (Filed on 1/15/2009)

" T h e Apple iPod iTunes Anti-Trust Litigation" D o c . 19 1 2 3 4 5 6 7 I N THE UNITED STATES DISTRICT COURT FOR T H E N O R T H E R N D I S T R I C T O F CALIFORNIA SAN JOSE DIVISION "T H E A P P L E IPOD ITUNES ANTI-T R U S T LITIGATION ." ___ ___ ___ ___ ___ ___ ___ __ ) ) ) ) ) ) C -05 -0037- JW D E C E M B E R 1 6, 2008 P A G E S 1 - 54 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 (APPEARANCES CONTINUED O N T H E NEXT PAGE .) 23 24 25 1 OFFICIAL COURT REPORTER : I R E N E RODRIGUEZ, C S R, CRR CERTIFICATE NUMBER 8074 FOR THE PLAINTIFFS: COUGHLIN, STOIA , GELLER, RUDMAN & ROBBINS BY: B O N N Y E . SWEENEY 655 W. BROADWAY SAN DIEGO , CALIFORNIA 92101 BRAUN LAW GROUP , P .C. BY: MICHAEL D. BRAUN 12304 SANTA MONICA BOULEVARD SUITE 109 LOS ANGELES, CALIFORNIA 90025 THE PROCEEDINGS WERE HELD BEFORE THE HONORABLE U N I T E D STATES DISTRICT JUDGE JAMES WARE A P P E A R A N C E S: U.S. COURT REPORTERS Dockets.Justia.co 1 2 3 FOR THE PLAINTIFFS: 4 5 6 7 FOR THE DEFENDANTS: 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 2 JONES DAY B Y: ROBERT A . MITTELSTAEDT CARLYN CLAUSE 555 CALIFORNIA STREET 2 6TH FLOOR SAN FRANCISCO , CALIFORNIA 94104 BONNETT , FAIRBOURN, FRIEDMAN & BALINT B Y: FRANCIS J. BALINT , J R. 2901 N. CENTRAL AVENUE SUITE 1000 PHOENIX , ARIZONA 85012 A P P E A R A N C E S: (CONT 'D) U.S. COURT REPORTERS 1 2 SAN JOSE , CALIFORNIA DECEMBER 16, 2008 PROCEEDINGS 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MOTION. M S. SWEENEY: THANK Y O U, YOUR H O N O R. THE HONOR . ( WHEREUPON , C O U R T C O N V E N E D A N D THE FOLLOWING PROCEEDINGS WERE HELD: ) T H E CLERK: CALLING CASE NUMBER 05 -00 37, THE APPLE IPOD ITUNES ANTITRUST LITIGATION. O N FOR PLAINTIFFS' MOTION FOR CLASS CERTIFICATION. TWENTY MINUTES EACH SIDE. COUNSEL , PLEASE COME FORWARD AND STATE YOUR APPEARANCES . M S. SWEENEY: GOOD MORNING. BONNY SWEENEY FOR T H E D I R E C T PURCHASER PLAINTIFFS. WITH ME IS PAULA ROACH ALSO OF MY OFFICE , FRANK B A L I N T, AND MICHAEL BRAUN. M R. MITTELSTAEDT : GOOD MORNING , YOUR BOB MITTELSTAEDT F O R APPLE AND WITH ME IS C A R L Y N C L A U S E FOR APPLE . T H E COURT: VERY WELL. M S. SWEENEY, YOUR DIRECT PURCHASER PLAINTIFFS R O S E N, TUCKER , A N D CHAROENSAK SEEK CLARIFICATION OF A CLASS OF ALL PEOPLE I N THE UNITED STATES WHO PURCHASED IPODS 3 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 DIRECTLY FROM APPLE BETWEEN A P R I L 2 003 A N D T H E PRESENT. I N THIS CASE, AS YOUR HONOR IS AWARE BECAUSE THE COURT H A S R U L E D ALREADY ON T W O MOTIONS TO DISMISS, PLAINTIFFS SEEK DAMAGES A N D INJUNCTIVE RELIEF F O R APPLE' S UNLAWFUL T Y I N G CONDUCT A N D I T S UNLAWFUL MONOPOLIZATION . PLAINTIFFS CLAIM THAT APPLE UNLAWFULLY TIED THE IPOD TO THE DIGITAL DOWNLOADS THAT ARE PURCHASED THROUGH THE ITUNES STORE BOTH VIDEO AND MUSIC . PLAINTIFFS ALSO CLAIM THAT APPLE UNLAWFULLY MONOPOLIZED OR ATTEMPTED TO MONOPOLIZE A L L T H R E E MARKETS ; THAT IS , T H E DIGITAL P O R T A B L E PLAYER MARKET, THE DIGITAL VIDEO DOWNLOAD MARKET, AND THE DIGITAL MUSIC DOWNLOAD MARKET. I N OUR PAPERS , YOUR HONOR , PLAINTIFFS S H O W E D THAT A L L O F T H E REQUIREMENTS OF RULE 23( A) A R E SATISFIED AND IN ADDITION THAT A C L A S S I S PROPERLY CERTIFIED U N D E R BOTH RULES 23 (B) (2) F O R INJUNCTIVE RELIEF A N D 2 3(B )(3 ) F O R DAMAGES. W E ALSO SUBMITTED A N EXPERT REPORT FROM PROFESSOR NOLL OF STANFORD UNIVERSITY. PROFESSOR NOLL IS AN ECONOMIST W H O H A S BEEN VERY A C T I V E I N T H E F I EL D F O R MORE THAN 40 YEARS . HE' S PUBLISHED 4 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MORE THAN 1 3 B O O K S, MORE THAN 30 0 A R T I C L E S, AND HE SUBMITTED A N OPINION IN WHICH HE CONCLUDED THAT USING T H E K I N D S O F T O O L S THAT T H E ECONOMISTS U S E, PLAINTIFFS SHOULD BE ABLE TO PROVE USING COMMON PROOF BOTH COMMON I M P A C T THAT EACH MEMBER OF T H E PROPOSED CLASS SUFFERED ANTITRUST DAMAGES , AND ALSO PROFESSOR NOLL PROPOUNDED THREE ALTERNATIVE DAMAGES METHODOLOGIES THAT C A N BE USED T O SHOW DAMAGES TO T H E C L A S S. A L L THREE OF THESE METHODOLOGIES HAVE BEEN ADOPTED B Y C O U R T S IN NUMEROUS OTHER ANTITRUST CASES , INCLUDING MOST RECENTLY JUDGE HAMILTON AND JUDGE WILKINS BOTH O F THE NORTHERN DISTRICT CERTIFIED T H E DR A M C L A S S A N D THE SRAM CLASS IN RELIANCE ON E X P E R T NOLL 'S EXPERT R E P O R T. NOTABLY APPLE DID NOT SUBMIT ANY EXPERT TESTIMONY T O CHALLENGE PROFESSOR NOLL' S CONCLUSIONS . THERE I S JUST ONE UNCHALLENGED EXPERT REPORT I N THIS CASE, YOUR HONOR, A N D I T I S PLAINTIFFS' EXPERT PROFESSOR NOLL. I N O U R OPENING B R I E F A N D IN OUR REPLY BRIEF , PLAINTIFFS DEMONSTRATED THAT EACH ELEMENT O F THEIR C L A I M S, THEIR ANTITRUST C L A I M S, CAN BE P R O V E N WITH COMMON PROOF . 5 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A S T O T H E TYING CLAIM, T H E ELEMENTS A R E FAIRLY STRAIGHTFORWARD. YOU HAVE T O PROVE THAT THEY' RE SEPARATE PRODUCTS. A P P L E H A S CONCEDED THAT THEY 'RE SEPARATE PRODUCTS SO THERE 'S NO QUESTION THAT THAT PROOF WILL BE COMMON . I N A D D I T I O N, PLAINTIFFS HAVE TO SHOW THAT APPLE HAS SOME MEASURE, NOT NECESSARILY MONOPOLY POWER , B U T SOME MEASURE IN T H E T Y I N G M A R K E T. IS T H E T Y I N G PRODUCT M A R K E T I S T H E MARKET F O R DIGITAL DOWNLOADS . A N D THAT, AS PROFESSOR NOLL OPINED IN H I S MANY COURTS HAVE HELD, THE QUESTION OF T H E APPROPRIATE DEFINITION OF THE M A R K E T A N D WHETHER T H E DEFENDANT HAS M A R K E T P O W E R, THOSE ISSUES A R E BOTH SUSCEPTIBLE OF ESTABLISHING THROUGH COMMON PROOF , NOT THROUGH INDIVIDUAL PROOF . PLAINTIFFS ALSO HAVE T O SHOW THAT APPLE' S CONDUCT HAD N O T INSUBSTANTIAL E F F E C T O N C O M M E R C E I N THE TIED PRODUCT MARKET . N O W, THIS IS A VERY DE MINIMUS TEST A N D WE E X P E C T THAT APPLE WILL CONCEDE THAT POINT . T H E ONLY A P P L E A R G U M E N T I N OPPOSITION TO PLAINTIFFS' MOTION I S C O E R C I O N. THIS IS THE ONLY THAT ARGUMENT THAT APPLE MAKES TO ARGUE THAT T HE CLASS 6 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 S H O U L D N O T BE CERTIFIED . A N D THE PROBLEM WITH A P P L E'S COERCION ARGUMENT , YOUR HONOR , I S THAT IT IS O N E THAT H A S ALREADY BEEN R E J E C T E D B Y THIS COURT TWICE IN DENYING APPLE' S T W O MOTIONS T O DISMISS . I T H A S ALSO BEEN REJECTED BY T H E N I N T H CIRCUIT. A P P L E A R G U E S THAT EVEN T H O U G H T H E TIE , THAT IS THE RESTRICTION ON I T U N E S THAT PREVENTS DIGITAL DOWNLOADS , BOTH VIDEO A N D M U S I C, FROM PLAYING DIRECTLY ON ANY PORTABLE P L A Y E R O T H E R THAN T H E IPOD , EVEN T H O U G H THAT RESTRICTION IS PRESENT IN EACH AND EVERY DOWNLOAD , A N D EACH A N D EVERY IPOD, THAT YOU HAVE TO TAKE INDIVIDUAL TESTIMONY T O DETERMINE WHETHER ANY INDIVIDUAL MEMBER O F THE CLASS WOULD HAVE PURCHASED T H E TIED PRODUCT BUT F O R T H E T I E. B U T THAT'S N O T WHAT T H E L A W REQUIRES. A S YOUR HONOR RECOGNIZED IN DENYING APPLE 'S TWO MOTIONS TO DISMISS, BOTH I N T H E SLATTERY CASE AND IN T H E T U C K E R CASE, IN THE NINTH CIRCUIT THE COURT IS N O T R E Q U I R E D T O O R T H E PLAINTIFF I S N O T REQUIRED TO DEMONSTRATE ACTUAL COERCION . R A T H E R, T H E PLAINTIFF IS REQUIRED TO 7 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 DEMONSTRATE M A R K E T L E V E L C O E R C I O N A N D THE NINTH CIRCUIT HELD I N T H E CASE O F M O O R E V E R S U S JAS O N MATTHEWS THAT COERCION MAY BE IMPLIED FROM A SHOWING THAT A N A P P R E C I A B L E N U M B E R OF BUYERS HAVE ACCEPTED BURDENSOME TERMS. OF B U Y E R S. S O PLAINTIFF HAS TO SHOW THAT A N APPRECIABLE N U M B E R O F B U Y E R S OF THE TIED PRODUCT WOULD N O T HAVE PURCHASED THAT PRODUCT BUT F O R T H E T I E. PLAINTIFF DOESN' T HAVE TO SHOW THAT EACH A N D E V E R Y M E M B E R OF THE CLASS WOULD HAVE MADE A N IDENTICAL DECISION. A S PROFESSOR NOLL O P I N E D IN HIS R E P O R T A N D TESTIFIED AT HIS DISPOSITION , WHAT MATTERS IS THAT THERE IS A SUFFICIENT N U M B E R THAT IT ENABLED APPLE TO INCREASE I T S M A R K E T POWER AND THEREBY INCREASE T H E P R I C E O F T H E TIED PRODUCT THAT IS THE IPOD. N O W, IN T H E M O O R E CASE , W H I C H I MENTIONED, AND THIS IS 550 F. 2D 120 7, AND THAT CASE INVOLVED AN ALLEGED TIE BETWEEN THE SALE OF CEMETERY LOTS AND MEMORIAL MARKERS. N O W, T H E F A C T S O F THAT CASE WERE THAT T H E DEFENDANT O W N E D E I GH T O F T H E S E CEMETERIES . ONLY 8 A N APPRECIABLE NUMBER U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FIVE OF THOSE CEMETERIES A C T U A L L Y R E Q U I R E D THAT A P E R S O N W H O WANTED TO PURCHASE A CEMETERY LOT ALSO PURCHASED A MARKER. THE NINTH CIRCUIT HELD THAT THAT WAS SUFFICIENT. A N D THE NINTH CIRCUIT SAID THAT RELYING UPON THE LEADING SUPREME COURT TYING CASES , THE COURT SAID THE NINTH CIRCUIT , OUR READING O F T H E SUPREME COURT 'S OPINIONS SUPPORTS THE VIEW THAT COERCION M A Y B E IMPLIED FROM A SHOWING THAT AN APPRECIABLE NUMBER O F BUYERS HAVE ACCEPTED BURDENSOME TERMS SUCH A S THE TYING PRODUCT MARKET. COERCION OCCURS WHEN THE BUYER MUST ACCEPT THE TIED ITEM AND FOREGO POSSIBLY DESIRABLE SUBSTITUTES . W E ALSO CITED A NUMBER OF OTHER CASES SUPPORTING THE POINT MADE BY THE NINTH CIRCUIT IN MOORE . FOR EXAMPLE, T H E B A F U S CASE , W H I C H W E CITE IN O U R P A P E R S, YOUR HONOR, CERTIFIED A CLASS ON T H E BASIS THAT THERE WAS AN APPRECIABLE N U M B E R O F B U Y E R S W H O WERE INFLUENCED BY T H E T I E RATHER THAN AN ABSOLUTE REQUIREMENT THAT EACH A N D EVERY MEMBER OF T H E P R O P O S E D C L A S S W A S BOUND BY THE T I E. APPLE ALSO MAKES THE ARGUMENT THAT THE TYING CLAIM C A N'T BE CERTIFIED BECAUSE OF WHAT IT R E F E R S T O A S T H E PACKAGE T H E O R Y OF DAMAGES. 9 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A P P L E R E L I E S ON AN ELEVENTH CIRCUIT CASE WHICH CITES T H E N I N T H CIRCUIT 'S SIEGLE CASE FOR T H E PROPOSITION THAT, WELL, IN SOME CASES A T I E ACTUALLY REDUCES -- HAS T H E E F F E C T IT MAY INCREASE T H E P R I C E O F T H E TIED PRODUCT , B U T IT HAS T H E E F F E C T O F R E D U C I N G T H E PRICE OF THE TYING PRODUCT. I N O T H E R W O R D S, APPLE SAYS HERE Y O U HAVE TO DETERMINE WHETHER T H E I T U N E S VIDEO AND DIGITAL DOWNLOADS W A S DECREASED AS A RESULT OF T H E T I E. WELL , THAT I S N'T REALLY A CORRECT STATEMENT O F T H E LAW IN T H E N I N T H CIRCUIT . T H E SIEGLE CASE INVOLVED THE CLASS . THE NINTH CIRCUIT DID N O T O V E R T U R N T H E CLASS DECISION N O R D I D THE NINTH CIRCUIT OVERTURN THE LIABILITY JUDGMENT IN FAVOR OF T H E PLAINTIFFS . RATHER , THE NINTH CIRCUIT SAID THAT Y O U HAVE TO TAKE THIS INTO ACCOUNT IN CALCULATING THE A M O U N T O F DAMAGES . S O I T I S MERELY A DAMAGES QUESTION AND A S BLACKIE AND MANY OTHER NINTH CIRCUIT A N D MANY O T H E R NORTHERN CALIFORNIA CASES HAVE HELD , EVEN IF THERE ARE DAMAGES ISSUES, THAT DOES NOT PRECLUDE CERTIFICATION OF A C L A S S. N O W, MOREOVER , T H E SIEGLE CASE WAS A L I T T L E UNUSUAL BECAUSE THERE THERE WAS NO PRICE F O R THE ALLEGED TYING PRODUCT. T H E SO- CALLED TYING 10 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PRODUCT WAS T H E U S E OF THE TRADEMARK NAME CHICKEN DELIGHT WHICH APPARENTLY H A D VALUE IN THE M A R K E T. HERE , O F C O U R S E, PLAINTIFFS AND MEMBERS OF T H E C L A S S PAID MONEY F O R T H E I R I T U N E S DIGITAL VIDEO AND MUSIC DOWNLOADS. W E ALSO HAVE A CLAIM FOR MONOPOLIZATION BOTH FOR ATTEMPTED MONOPOLIZATION A N D MONOPOLY MAINTENANCE OR CREATION . N O W, APPLE DOESN 'T REALLY ADDRESS THIS ARGUMENT AT A L L I N T H E I R P A P E R S. APPLE MERELY SAYS THAT IT' S B A S E D O N O U R TYING THEORY , A N D, THEREFORE, IT FAILS FOR T H E SAME REASONS. WELL , I N FACT , PLAINTIFFS HAVE ALLEGED A MONOPOLIZATION CLAIM THAT DON 'T RELY S O L E L Y ON THEIR TYING CLAIMS. THERE ARE SEVERAL DIFFERENT ASPECTS O F APPLE 'S CONDUCT THAT PLAINTIFFS CONTEND A R E AND WERE ANTICOMPETITIVE . A N D AS WE EXPLAINED IN O U R P A P E R S, A L L O F T H E E L E M E N T S O F T H E PLAINTIFFS' MONOPOLIZATION AND ATTEMPTED MONOPOLIZATION CLAIMS WILL B E PROVEN RELYING ON EVIDENCE THAT I S C O M M O N TO THE CLASS BECAUSE IT IS PRINCIPALLY, IF N O T E N T I R E L Y, EVIDENCE THAT IS IN THE HANDS OF APPLE . FIRST THE PLAINTIFF HAS T O SHOW THAT 11 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 APPLE H A S M A R K E T POWER IN THE PROPERLY DEFINED MARKET. MARKETS. A N D THEN T H E PLAINTIFFS HAVE TO SHOW THAT APPLE ACQUIRED OR MAINTAIN ED THAT M O N O P O L Y THROUGH WILLFUL OR ANTICOMPETITIVE CONDUCT. A N D THE ANTICOMPETITIVE CONDUCT THAT IS OUTLINED IN O U R P A P E R S AND IN T H E AMENDED COMPLAINT IS , O N E, T H E ENCRYPTION THAT WE COMPLAIN ABOUT, NAMELY, THAT APPLE ENCRYPTS THE DIGITAL DOWNLOADS WITH IT' S O W N PROPRIETARY DRM , THEREBY PREVENTING DIRECT PLAY BACK O N ANY PORTABLE PLAYER OTHER THAN THE IPOD . I N A D D I T I O N, APPLE HAS TAKEN STEPS THROUGHOUT THE CLASS P E R I O D T O P R E C L U D E E N T R Y B Y WOULD BE COMPETITORS . WHEN A COMPETITOR FIGURED AND AGAIN W E ALLEGE THREE MONOPOLY O U T H O W TO PLAY I T U N E S MUSIC ON ITS COMPETING PORTABLE PLAYER, APPLE PROMPTLY ISSUED A SOFTWARE FIX THAT PREVENTED THAT . APPLE COULD HAVE LICENSED ITS PROPRIETARY DR M ENCRYPTION TO O T H E R S. IT COULD HAVE PURCHASED A LICENSE T O O T H E R S FOR ANOTHER ENCRYPTION METHODOLOGY . ENCRYPTION. IT COULD HAVE USED A NON PROPRIETARY T H E R E A R E ALL SORTS OF WAYS IN WHICH APPLE 'S CONDUCT W A S DESIGNED TO -- INTENDED TO AND 12 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 H A D T H E EFFECT OF PRECLUDING ENTRY INTO T H E MARKET A N D M A I N T A I N I N G I T S OWN MONOPOLY IN A L L T H R E E MARKETS. T H E COURT: N O W, HAVE I PREVIOUSLY RULED IN A N Y W A Y THAT T H E I R U S E OF THEIR OWN DR M I S WILLFUL CONDUCT THAT WOULD SUPPORT A MONOPOLY CLAIM ? M S. SWEENEY: YOUR HONOR IN THE RULINGS ON T H E M O T I O N TO DISMISS RECOGNIZED T H E PLAINTIFFS ' ALLEGED NUMEROUS WAYS I N WHICH APPLE COULD HAVE AVOIDED THE T I E A N D AVOIDED - - A N D YOUR H O N O R D I D N O T SPECIFICALLY RULE THAT USING I T S O W N DRM W A S ANTICOMPETITIVE O R WILLFUL CONDUCT. S O THAT ISSUE REMAINS TO BE RESOLVED ON A MORE COMPLETE RECORD . T H E COURT: THAT 'S THE PART OF THE MONOPOLY A N D ATTEMPTED MONOPOLY CLAIM THAT I 'M NEEDING MORE HELP FROM THE PARTIES ON AND UNDERSTANDING, BUT I HAVE COME T O THE TENTATIVE CONCLUSION THAT I CAN PROCEED WITH CLASS CERTIFICATION AND LEAVE THIS FOR LATER . Y O U A G R E E WITH THAT? M S. SWEENEY: T H E COURT: Y E S, YOUR H O N O R. A L L RIGHT. I MIGHT GET A I SUPPOSE DIFFERENT VIEW FROM YOUR O P P O N E N T, BUT IT SEEMS TO 13 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ME THAT WHAT I AM BOTHERED BY BY THIS ARGUMENT THAT IT 'S WILLFUL CONDUCT IS BECAUSE IT SEEMS TO ME THAT WHAT I UNDERSTAND ABOUT D R M S O F T W A R E I S THAT IT 'S SOMETHING THAT IS DONE TO PROTECT T H E COPYRIGHT OWNER AND THAT ALL DOWNLOAD, SOFTWARE DOWNLOAD DISTRIBUTORS HAVE TO INCORPORATE SOMETHING O F THAT KIND IN THE SOFTWARE . A N D SO IT SEEMS TO ME THAT T H E QUESTION THAT I HAVE IN MY MIND IS WHETHER W I L L F U L N E S S MUST BE SOMETHING MORE THAN SIMPLY CHOOSING A PARTICULAR DRM OVER ANOTHER. A N D WHAT I REMEMBER EARLY ON IN T H E CASE IS WHAT YOU 'RE TELLING ME THAT SOMEHOW THERE W A S A MODIFICATION O F T H E DRM IN A WAY THAT WAS ANTICOMPETITIVE, NOT T H E P R E S E N C E O F A D R M. A N D SO I'M T R Y I N G T O MAKE SURE THAT A S I PROCEED I HIGHLIGHT THAT I NEED TO UNDERSTAND THAT ISSUE BETTER. THIS MAY N O T B E T H E TIME T O D O I T, B U T I T'S O N E O F T H O S E ISSUES THAT I 'M STRUGGLING WITH. M S. SWEENEY: HONOR . I APPRECIATE THAT , YOUR AND PLAINTIFFS' VIEW IS THAT O N THIS R E C O R D WE D O N'T WE HAVEN 'T YET H A D A N Y MERITS DISCOVERY. HAVE A COMPLETE RECORD. A N D WE BELIEVE, OF COURSE , THAT THE EVIDENCE WILL BEAR O U T OUR ALLEGATIONS IN 14 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 OUR COMPLAINT THAT THERE ARE SEVERAL DIFFERENT TYPES OF CONDUCT THAT A P P L E ENGAGED IN THAT CONSTITUTE WILLFUL A N D ANTI-COMPETITIVE CONDUCT . D I D YOUR H O N O R WANT ME TO -T H E COURT: M S. SWEENEY: T H E COURT: N O, GO AHEAD. OKAY. I W A S JUST PAUSING AT THAT POINT BECAUSE THAT I S A N AREA THAT I M A R K E D FOR MYSELF T O GET A BETTER UNDERSTANDING O F A T SOME APPROPRIATE POINT . M S. SWEENEY: THANK Y O U, YOUR H O N O R. AS I MENTIONED BEFORE, PLAINTIFFS' EXPERT PROFESSOR NOLL HAS DESCRIBED T H R E E P R O P O S E D METHODOLOGIES F O R CALCULATING DAMAGES. O N E IS THE B E F O R E A N D AFTER; T H E S E C O N D IS THE YARDS T I C K M E T H O D; A N D T H E THIRD IS O N E THAT LOOKS AT APPLE 'S PROFIT MARGINS, IT 'S MARKU P S. A L L THREE OF THESE METHODS HAVE BEEN R E L I E D UPON BY C O U R T S I N O T H E R ANTITRUST CASES, INCLUDING I N T H E DR A M CASE WHICH W A S A PRICE FIXING CASE; T H E SRAM CASE, ANOTHER PRICE FIXING CASE. THEY ALSO HAVE BEEN ADOPTED BY COURTS THAT HAVE CERTIFIED CLASSES WHERE PLAINTIFFS ALLEGE TYING CLAIMS. F O R EXAMPLE, THE S E C O N D CIRCUIT IN T H E 15 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 VISA CHECK MASTER MONEY LITIGATION CERTIFIED A CLASS OF MERCHANTS - - E X C U S E ME -- WHO CHALLENGED VISA AND M A S T E R CARD 'S TYING OF THE MERCHANT 'S ACCEPTANCE OF SIGNATURE DEBIT TO THEIR ACCEPTANCE OF C R E D I T C A R D S. I N THAT CASE THE PLAINTIFFS' E X P E R T PROFFERED A METHODOLOGY THAT USED T H E YARDSTICK METHOD. T H E E X P E R T COMPARED THE COST OF ACCEPTANCE OF SIGNATURE D E B I T, WHICH IS WHERE YOU HAVE TO SIGN TO U S E T H E CREDIT CARD AND P I N D E B I T A N D THE COURT HELD THAT W A S AN APPROPRIATE METHOD F O R D E T E R M I N I N G T H E OVERCHARGE C A U S E D B Y T H E TIE . T H E BAFUS CASE, WHICH WE CITE I N O U R P A P E R S, ALSO R E L I E S UPON A YARDS T I C K M E T H O D AND THAT ALSO I S A TYING CASE. A P P L E SAYS THAT THE APPROPRIATE METHODOLOGY F O R D E T E R M I N I N G DAMAGES IN A TYING CASE IS A METHODOLOGY CITED IN THE L E S S I G CASE . A NINTH CIRCUIT CASE . B U T AS WE POINT OUT IN O U R P A P E R S, T H E L E S S I G CASE H A S N O A N A L Y S I S A S T O WHAT KIND OF DAMAGES METHODOLOGY IS APPROPRIATE IN A T Y I N G CASE . I T MERELY, EXCUSE M E, AFTER TRIAL -T H E COURT: WATER . 16 Y O U CAN PAUSE A N D G E T SOME THAT'S U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 HONOR . M S. SWEENEY: OH , T H A N K Y O U, YOUR HONOR. I N T H E LESSIG CASE THE COURT HELD THAT T H E INTRODUCTION BY THE PLAINTIFF O F CERTAIN EVIDENCE REGARDING THE COST O F SUBSTITUTE PRODUCTS WHICH W A S T H E ONLY E V I D E N C E I N T H E RECORD AS TO DAMAGES WAS SUFFICIENT TO SUPPORT T H E JURY'S VERDICT. S O W E D O N' T T H I N K THAT T H E LESSIG CASE HAS ANY APPLICABILITY. A N D I S E E T H E LIGHT IS ON, YOUR HONOR, A N D I WANT TO RESERVE SOME TIME FOR REBUTTAL SO I' LL CLOSE MY REMARKS N O W. VERY MUCH. T H E COURT: A L L RIGHT. COUNSEL . THANK YOU M R. MITTELSTAEDT : GOOD MORNING , YOUR IT WOULD BE UNPRECEDENTED A N D CONTRARY TO PRECEDENT T O CERTIFY T H E CLASSES OR T H E C L A S S REQUESTED B Y THE PLAINTIFFS HERE . I F A N Y ONE H A D T H E TYING OR MONOPOLIZATION CLAIM THAT THEY ALLEGE, THE ONLY WAY TO PROVE IT WOULD BE BY INDIVIDUAL PROOF. AND THAT' S TRUE BOTH FOR T H E A L L IMPORTANT COERCION ELEMENTS A N D I T'S ALSO TRUE F O R FACT O F I N J U R Y OR IMPACT. I N A TYING CASE THE PLAINTIFF C O M E S INTO COURT AND PROVES THAT I N ORDER T O BUY A HIGHLY 17 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 DESIRABLE PRODUCT HE W A S ALSO F O R C E D T O B U Y A PRODUCT THAT H E DIDN 'T WANT, THE TIED AND T H E T Y I N G PRODUCT. S O I N T Y I N G C A S E S, THE PRODUCT THAT H E'S F O R C E D T O B U Y IS ONE THAT HE DOESN' T WANT BY DEFINITION. H E'S COERCED, HE 'S FORCED INTO BUYING T H E PRODUCT THAT HE DOESN' T WANT IN ORDER TO B U Y T H E PRODUCT THAT HE DOES WANT . HERE WHAT IS WRONG WITH THIS CASE RIGHT FROM THE O U T S E T I S THAT THEY' RE SAYING THAT THE PRODUCT THAT A L L OF THEIR CLASS MEMBERS, ALL CONSUMERS HAVE BEEN FORCED TO B U Y I S A N IPOD , O N E OF T H E MOST POPULAR PRODUCTS IN THE COUNTRY. S O T H E I R B U R D E N IS TO SHOW THAT SOMEBODY , THAT EVERYBODY THAT WHOEVER I S I N THEIR CLASS WAS F O R C E D T O B U Y AN IPOD R A T H E R THAN B U Y I N G AN IPOD F O R A L L OF THE REASONS THAT P E O P L E BUY IPODS , COMPLETELY UNRELATED TO T H E AVAILABILITY OF MUSIC FROM APPLE' S M U S I C S T O R E. I 'LL G E T INTO THIS IN MORE D E T A I L BUT WHEN THEY TALK ABOUT THE MOORE CASE , THE NINTH CIRCUIT CASE THAT SAYS THAT Y O U CAN INFER COERCION IF AN APPRECIABLE N U M B E R O F P E O P L E AGREE TO AN ONEROUS TERM, A BURDENSOME TERM. THAT HAS N O APPLICATION HERE, THAT EVIDENTIARY INFERENCE OR 18 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 IMPLICATION H A S N O BEARING HERE, NO APPLICATION BECAUSE BUYING AN IPOD IS NOT A BURDENSOME TERM , IT 'S NOT ONEROUS, IT 'S NOT SOMETHING THAT P E O P L E WOULD DO ONLY IF THEY'R E F O R C E D TO DO IT. S O THIS IDEA THAT THEY C A N JUST SORT OF WAVE THEIR HANDS AND S A Y EVERYBODY IS COERCED T O B U Y A N IPOD WITHOUT ANY PROOF , WITHOUT GOING P E R S O N BY P E R S O N A N D WITHOUT A S K I N G WHY D I D Y O U BUY YOUR IPOD? W A S IT BECAUSE Y O U WERE F O R C E D BECAUSE Y O U H A D B O U G H T MUSIC FROM A P P L E S T O R E, OR WAS IT F O R A N Y O T H E R N U M B E R OF REASONS? S O, FIRST OF ALL , WHAT IS WRONG WITH THE WHOLE CASE AND WHAT HAS , Y O U KNOW, STRONG BEARING ON WHETHER THEY C A N CERTIFY A CLASS IS THAT THE PRODUCT THAT THEY HAVE SELECTED FOR T H E TIED PRODUCT IS A VERY POPULAR PRODUCT. S E C O N D L Y, IT' S SEPARATELY AVAILABLE A N D CAN B E USED SEPARATELY. A N D THAT'S TRUE BOTH O F EVERYBODY KNOWS AND WE T H E M U S I C A N D OF THE IPOD. N O W HAVE IT IN T H E R E C O R D IN THE DEPOSITIONS OF T H E PLAINTIFFS AND THEIR E X P E R T, YOU C A N WALK INTO AN APPLE STORE A N D B U Y AN IPOD. ABOUT T H E M U S I C. N O B O D Y -- AND Y O U C A N BUY MUSIC ON T H E MUSIC STORE A N D N O B O D Y EVER SAYS WE 'RE ONLY GOING 19 NOBODY EVER ASKED YOU U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 TO SELL YOU MUSIC IF Y O U A G R E E T O B U Y AN IPOD. T H E OTHER WAY WE KNOW SOMETHING IS WRONG WITH THIS CASE IS EACH OF THE PLAINTIFFS, A L L FIVE OF THEM, TESTIFIED THAT THEY BOUGHT IPODS VOLUNTARILY WITHOUT COERCION. I N MOST CASES THEY HADN'T EVEN BOUGHT MUSIC FROM THE MUSIC STORE Y E T. S O W E KNOW THEY WEREN' T COERCED . HAVE ADMITTED THEY W E R E N'T COERCED. THEY T H E R E'S NEVER BEEN A T Y I N G CASE BY A CONSUMER WHERE THE CONSUMER COMES IN A N D SAYS THAT I WASN 'T COERCED B U T YET I WANT TO REPRESENT A CLASS AND S A Y THAT T H E C L A S S WAS COERCED . I N ADDITION, THEY HAVE NOT IDENTIFIED A S I N G L E P E R S O N WHO THEY SAY W A S COERCED ON T H E THEORY THAT THEY HAVE THEORIZED HERE AND THEY HAVEN 'T COME U P WITH A N Y M E T H O D OF IDENTIFYING ANYBODY WHO THEY SAY W A S COERCED . T H E COURT: L E T' S D I V I D E THE CONSIDERATION INTO WHETHER OR N O T T H E R E I S P R O O F O F INDIVIDUAL COERCION WITH WHETHER OR N O T T H E R E N E E D S BE PROOF OF INDIVIDUAL COERCION AND -- BECAUSE Y O U'R E RAISING BOTH. A N D I BELIEVE THAT MY PRIOR LOOK A T THIS LEAD ME TO BELIEVE THAT INDIVIDUAL COERCION IS 20 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 UNNECESSARY IF I CAN IDENTIFY COERCION AT A MARKET LEVEL . N O W, Y O U M A Y TAKE I S S U E WITH THAT, B U T I T SEEMS TO ME THAT THAT I S WHAT Y O U, THAT I S WHAT Y O U A R E F A C E D WITH IN TERMS OF T H E C O U R T'S PRIOR R U L I N G A N D ESSENTIALLY WHAT Y O U'R E I N V I T I N G M E T O D O I S T O GO BACK TO THAT, REEXAMINE IT , A N D TURN I T A R O U N D A N D THEN GO TO INDIVIDUAL COERCION AS OPPOSED T O M Y NEEDING TO FIND INDIVIDUAL COERCION . M R. MITTELSTAEDT : HEAD ON. DISMISS. LET ME ADDRESS THAT T H E COURT -- AND THIS IS ON THE M O T I O N T O S O Y E A R S A G O BEFORE WE H A D D E P O S I T I O N S, BEFORE W E WERE COMING T O THE CLASS CERT STAGE WHERE T H E Q U E S T I O N I S H O W ARE T H E PLAINTIFFS GOING TO PROVE THEIR CASE AND C A N THEY PROVE IT ON A CLASS BASIS ? YOUR HONOR R E L I E D O N T H E MURPHY CASE FOR THIS CONCEPT O F MARKET LEVEL COERCION. WITH ALL RESPECT, MURPHY DOES NOT SUPPORT THAT PROVISION , THAT PROPOSAL. M U R P H Y SAYS I T S T A R T S OFF RELYING ON JEFFERSON PARISH, T H E SUPREME COURT CASE, THAT SAYS AN ESSENTIAL CHARACTERISTIC O F T Y I N G I S FORCING T H E BUYER , A N D I'M PARAPHRASING, FORCING T H E BUYER INTO T H E P U R C H A S E O F A TIED PRODUCT THAT HE DIDN' T WANT . 21 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CASE. A N D THEN T H E COURT SAYS, WE AGREE WITH T H E D I S T R I C T C O U R T THAT SUMMARY JUDGMENT FOR DEFENDANTS WAS APPROPRIATE . AS THAT C O U R T S T A T E D, T H E U NCONTRADICTED E V I D E N C E S H O W S THAT NO PLAINTIFF W A S F O R C E D TO ACCEPT A TIED PRODUCT . S O I N T H E MURPHY CASE THE COURT AFFIRMED SUMMARY JUDGMENT FOR T H E DEFENDANT. THE DEFENDANT W O N O N T H E GROUND THAT THE PLAINTIFF H A D NOT SHOWN THAT HE WAS F O R C E D T O A C C E P T THE TIED PRODUCT. T H E COURT DIDN'T S A Y, WELL, THAT D O E S N'T M A T T E R A S LONG AS HE C A N P R O V E M A R K E T LEVEL COERCION . IN THAT CASE T H E C O U R T SAYS , Y O U' RE OUT OF COURT , PLAINTIFF, BECAUSE YOU HAVEN 'T PROVED COERCION . T H E PLAINTIFFS, YOUR H O N O R, DO NOT T R Y AND SUPPORT THE PRIOR DECISION BASED O N THE MURPHY CASE. THEY RECOGNIZE A T LEAST IMPLICITLY THAT M U R P H Y D O E S N'T SUPPORT A CONCEPT OF M A R K E T L E V E L COERCION . WHAT THEY DO IS THAT THEY GO TO T H E M O O R E T H E R E I S A PRIOR DECISION IN T H E M O O R E CASE AT 47 3 F .2D 32 8 THAT TALKS ABOUT T H E E V I D E N C E O F COERCION IN THAT RECORD . I N M O O R E I T S E L F, MOORE S T A R T S O F F BY S A Y I N G T HAT COERCION IS REQUIRED . IT SAYS T Y I N G S 22 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 INVOLVE A S E L L E R' S REFUSAL TO SELL ONE PRODUCT UNLESS THE BUYER ALSO PURCHASES ANOTHER PRODUCT . AND THEN I T SAYS , REVIEWS THE EVIDENCE O F COERCION ON THAT RECORD , A N D THEN I T SAYS , "C O E R C I O N M A Y BE IMPLIED FROM A SHOWING THAT AN APPRECIABLE NUMBER O F BUYERS HAVE ACCEPTED BURDENSOME TERMS. " A N D THIS I S WHAT I WAS REFERRING T O BEFORE. IN ORDER TO G E T T H E BENEFIT O F A N INFERENCE THAT THERE 'S COERCION, THEY HAVE T O SHOW THAT AN APPRECIABLE NUMBER OF B U Y E R S A C C E P T E D BURDENSOME TERMS. B U T BUYING AN IPOD IS NOT A BURDENSOME TERM. O N E CANNOT INFER FROM THE MERE FACT THAT SOMEBODY BUYS AN IPOD THAT THEY WERE COERCED INTO DOING THAT AND THAT WAS TRUE WHETHER I T'S AN INDIVIDUAL OR WHETHER Y O U LOOK A T A L L INDIVIDUALS. T H E COURT: WELL , YOU STATE THAT BUYING AN IPOD IS NOT A BURDENSOME TERM B U T A M I TO S I M P L Y A C C E P T THAT AT THIS POINT? M R. MITTELSTAEDT : YOUR H O N O R, IF I C O U L D HAND UP A HANDOUT THAT WILL ADDRESS THAT ISSUE. THIS FIRST CHART SUMMARIZES THE EVIDENCE IN T H E R E C O R D AND SOME OF IT IS CONFIDENTIAL SO I' M N O T G O I N G T O S A Y IT OUT LOUD. BUT WHAT W E KNOW 23 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FROM THE DATA IS THAT A MAJORITY OF IPOD USERS E I T H E R RECEIVE THEIR IPOD AS A GIFT , S O THEY WEREN 'T COERCED, OR THE P E R S O N B U Y I N G IT WASN'T COERCED OR THEY N E V E R B O U G H T MUSIC FROM A P P L E'S MUSIC STORE SO THEY COULDN 'T HAVE BEEN COERCED BY THAT. A N D AT PAGE 6 OF O U R B R I E F W E S E T FORTH T H E DATA ON THAT, B U T I T'S A SIZEABLE PERCENTAGE O F IPOD PURCHASERS JUST NEVER GO TO T H E M U S I C S T O R E. SO THEY COULDN 'T HAVE BEEN COERCED UNDER THE PLAINTIFFS' T H E O R Y, OR THEY B O U G H T THE IPOD BEFORE B U Y I N G A N Y MUSIC FROM T H E MUSIC STORE, SO THEY COULDN'T HAVE BEEN COERCED , O R THEY HAVE VERY S M A L L ELEMENTS OF I T U N E S M U S I C O N T H E I R IPOD . S O U N D E R T H E I R LOCK -IN T H E O R Y I T D O E S N'T WORK BECAUSE T H E MAJORITY OF THE MUSIC ON AN IPOD COMES FROM SOURCES O T H E R THAN T H E M U S I C S T O R E, NOTABLY A PERSON' S C D COLLECTION . S O WHAT WE KNOW IS THAT A L O T O F P E O P L E B O U G H T I P O D S EVEN B E F O R E T H E MUSIC STORE WAS LAUNCHED . YOU KNOW, IT DIDN' T COME ON T H E S C E N E UNTIL 18 MONTHS A F T E R I P O D S H A D BEEN INTRODUCED A N D WERE SELLING. W E KNOW THAT FIVE O U T OF THE FIVE PLAINTIFFS ADMIT THEY W E R E N'T COERCED. THEY BOUGHT 24 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 IPODS IN THESE CIRCUMSTANCES. A N D AS I S A Y, THERE 'S NEVER BEEN A CONSUMER CLASS A C T I O N W H E R E I T W A S ADMITTED BY THE NAMED PLAINTIFFS THAT T H E R E WASN 'T ANY COERCION . S O THEY D O N'T G E T T H E BENEFIT O F A N INFERENCE THAT JUST BECAUSE Y O U BUY AN IPOD YOU WERE COERCED T O D O I T, BECAUSE A S I S A Y, A M A J O R I T Y OF IPOD USERS COULDN 'T POSSIBLY HAVE BEEN COERCED. A N D T H E PLAINTIFFS RECOGNIZE THAT. A N D SO WHAT THEY DO , A N D THIS I S O N T H E S E C O N D PAGE , T H E I R E X P E R T COMES UP WITH A LIST OF CHARACTERISTICS O F T H E PERSON THAT THEY S A Y IS COERCED. A N D HERE'S WHAT ACCORDING TO THEIR E X P E R T THEY HAVE T O FIND . FIRST OF ALL , T H E PERSON H A S T O BUY ENOUGH MUSIC FROM ITUNES THAT I T MATTERS ; THEN THEY HAVE T O WANT TO PLAY IT ON A PORTABLE PLAYER, A PORTABLE DIGITAL PLAYER; A N D THEN THEY WANT TO -- THEY HAVE TO P R E F E R A N IPOD COMPETITOR, R A T H E R THAN AN IPOD; A N D THEN THEY HAVE TO SHOW THAT THEY D O N'T KNOW HOW TO BURN AND R I P T H E MUSIC BECAUSE I T IS ADMITTED ON THIS RECORD THAT BY BURNING A N D THEN RIPPING THE MUSIC , Y O U CAN PLAY ITUNES MUSIC ON A COMPETING PLAYER. 25 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I N A N ADDENDUM T O O U R OPPOSITION B R I E F, YOUR HONOR, WE S E T F O R T H SOME S C R E E N S H O T S THAT SHOW HOW THAT PROCESS O F BURNING A N D RIPPING WORKS . A N D THE PLAINTIFFS HAVE A D M I T T E D THAT A CONSUMER C A N MAKE C O P I E S O F T H E RECORDINGS Y O U GET FROM ITUNES MUSIC STORE AND READ THEM BACK INTO A PERSONAL COMPUTER AS D R M FREE FILES . AT FOOTNOTE 8 OF OUR BRIEF . AND THEN NOLL , THEIR EXPERT, SAYS THAT T H E MECHANISM TO PLAY I T U N E S FILES ON COMPETING PLAYERS IS TO DO AN ACTUAL OR A VIRTUAL BURN OF T H E CD A N D THEN REPLAY I T. A N D THE PLAINTIFFS HAVE A D M I T T E D THAT IT 'S EASY T O D O THAT . AND AT PAGE 9 O F O U R BRIEF, THAT'S QUOTED WE S E T F O R T H T H E DEPOSITION TESTIMONY WHERE THEY ADMIT IT TAKES UNDER A MINUTE TO DO THAT. KNOW HOW TO DO IT . THEY D O I T FREQUENTLY . THEY AND T H E FIRST PLAINTIFF, MR. SLATTERY , A D M I T T E D THAT BY BURNING AND RIPPING, HE C A N PLAY COMPETING - - H E CAN PLAY ITUNES MUSIC O N COMPETING DEVICES. A N D I A S K E D H I M, A N D BURNING A N D RIPPING IS A PROCESS THAT Y O U HAVE DONE NUMEROUS TIMES? OH , Y E S, MANY. A N D SO ALL THEY HAVE T O D O I S P U T A B L A N K CD IN THEIR COMPUTER , H I T THE BURN DISK I CON IN 26 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I T U N E S A N D IT BURNS THE MUSIC , C O P I E S THE MUSIC TO A CD, A N D THEN THEY JUST DRAG IT BACK TO THEIR MUSIC LIBRARY AND THEY CAN P U T I T O N A N Y COMPETING PLAYER THAT THEY WANT T O. A N D AS I S A Y, APPENDIX 2 TO OUR OPPOSITION SETS FORTH THAT PROCESS. S O WHAT THE PLAINTIFFS SAY I S THAT THEY ACKNOWLEDGE THAT IF YOU BURN AND R I P A N D KNOW H O W TO DO IT , THEN Y O U'R E N O T UNDER THEIR THEORY COERCED. Y O U' RE NOT L O C K E D I N. YOU CAN PLAY ITUNES MUSIC O N A COMPETING PLAYER. S O THE OTHER ELEMENT FOR THEIR COERCED CONSUMERS I S THAT THIS PREFERENCE FOR A COMPETING P L A Y E R H A S TO BE NOT S T R O N G E N O U G H TO JUSTIFY THIS SMALL A M O U N T O F TIME A N D E F F O R T IT TAKES TO DO THE BURNING AND RIPPING BECAUSE I F Y O U REALLY WANT A COMPETING P L A Y E R, THEN YOU 'RE GOING TO TAKE, Y O U KNOW, T H E M I N U T E OR LESS I T T A K E S T O D O THIS EASY STEP OF BURNING A N D RIPPING. A N D ONLY I F THEY MEET ALL OF THOSE REQUIREMENTS C O U L D THEY S A Y THAT THEY' RE FORCED TO BUY A N IPOD . WELL , WHAT IS T H E S IGNIFICANCE OF ALL OF THAT? F I R S T O F A L L, T H E PLAINTIFFS THEMSELVES 27 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 D O N'T MEET THOSE CRITERIA. ANYBODY WHO DOES. THEY HAVEN 'T FOUND THEY HAVEN 'T PROPOSED ANY CLASS WIDE METHOD OF IDENTIFYING ANYBODY WHO FITS INTO THAT CATEGORY. THEY CERTAINLY H A V E N'T NARROWED T H E C L A S S TO THESE TYPES OF P E O P L E A N D THE R E A S O N THEY HAVEN 'T DONE A N Y OF THAT I S THAT THEY RECOGNIZE T H E ONLY WAY TO DETERMINE I F ANYBODY FITS INTO THIS S E T OF CRITERIA IS TO GO INDIVIDUAL BY INDIVIDUAL. S O THEY COME BACK A N D SAY , WELL , M O O R E SAYS THAT W E CAN JUST INFER THAT PEOPLE ARE COERCED. WELL , NOT UNDER THEIR THEORY . YOU C A N'T INFER , JUST BECAUSE SOMEBODY HAS AN IPOD, THAT THEY MEET THESE CRITERIA. T H E ONLY W A Y TO DO THIS I S T O A N D THAT 'S WHY , YOUR GO INDIVIDUAL BY INDIVIDUAL. HONOR , WHEN Y O U LOOK AT T H E T Y I N G C A S E S, IN ANTITRUST C A S E S, YOU KNOW, PRICE F I X I N G C A S E S, C O U R T S O F T E N CERTIFY CLASSES BUT THAT' S N O T TRUE I N TYING CASES . THE PARTIES CITED ABOUT 2 0 TYING CASES WHERE A CLASS WAS REQUESTED I N T H E VARIOUS B R I E F S. I N 1 1 O F T H O S E, THE C O U R T S D E N I E D CLASSES. A N D IN THE NINTH CIRCUIT IN THE DISTRICT A N D THE C O U R T S, THE PERCENTAGE IS ABOUT THE SAME. KRELL CASE IN THE NINTH CIRCUIT IS A GOOD EXAMPLE. 28 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 IN THAT CASE T H E COURT CERTIFIED SOME CLAIMS A N D REFUSED TO CERTIFY O T H E R C L A I M S. A N D THE DIFFERENTIATING F A C T O R IN THESE T W O L I N E S O F C A S E S A N D IN KRELL ITSELF IS THAT IF THERE IS A UNIFORM C O N T R A C T U A L R E Q U I R E M E N T THAT SAYS THAT I 'M NOT GOING TO SELL YOU PRODUCT A U N L E S S Y O U BUY PRODUCT B, AND I' M N O T GOING TO SELL T H E PRODUCT SEPARATELY, THEN THE C O U R T S FIND THAT THERE 'S A UNIFORM CLASS WIDE METHOD OF PROOF . T H E COURT: N O W, I AGREE WITH A L O T O F WHAT YOU 'RE TELLING ME, B U T T H E R E I S SOME PARTS OF WHAT I UNDERSTAND ABOUT THIS CIRCUMSTANCE THAT Y O U'R E N O T ADDRESSING A N D IT HELPS YOUR A R G U M E N T I F Y O U W O U L D P A Y ATTENTION TO THAT. AND THAT I S THAT ANTITRUST LAW EVOLVED A S THE SOCIETY HAS EVOLVED AND INDUSTRIES AND TECHNOLOGIES AFFECTED B Y I T BRING DIFFERENT PROBLEMS TO BEAR. HERE WE LIVE IN A W O R L D T O D A Y THAT IS VERY DIFFERENT THAN WHAT EXISTED THEN T H E DECISIONS THAT ARE BEING CITED T O M E AND ACROSS VARIOUS MARKETS THE PARAMETERS THAT THE COURTS S H O U L D U S E TO JUDGE COERCION CAN C H A N G E. W E EXIST I N A WORLD TODAY WHERE I NOTICE THAT ONE B U L L E T P O I N T Y O U HAVE N O T PUT ON YOUR SLIDE IS THAT THERE ARE AN APPRECIABLE N U M B E R O F 29 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CONSUMERS WHO UNDERSTAND THE RELATIONSHIP BETWEEN THE DIGITAL MUSIC MARKET AND DIGITAL MUSIC PLAYERS A N D C H O O S E TO PURCHASE PRODUCTS BASED UPON THAT LEVEL OF UNDERSTANDING. A N D DO I UNDERSTAND Y O U T O DENY THAT THERE A R E A GROUP OF PURCHASERS WHO APPRECIATE THAT APPLE H A S A LARGE M A R K E T I N DIGITAL MUSIC IN I T S I T U N E S S T O R E A N D WHO WOULD WISH TO PURCHASE THAT MUSIC UNENCUMBERED B Y A REQUIREMENT THAT THEY DOWNLOAD IT TO A DISK B E F O R E THEY C O U L D THEN DOWNLOAD IT TO A PLAYER A N D W H O WOULD WISH T O SIMPLY DOWNLOAD I T DIRECTLY T O A PLAYER BUT FIND THAT THEY C A N' T D O THAT ? W E A R E A SOCIETY OF CONVENIENCE . IF GIVEN THE CHOICE BETWEEN A GAS STATION WHERE YOU COULD B U Y YOUR G A S WITHOUT H A V I N G T O G O I N S I D E BY S I M P L Y SLIDING A CAR D WITH A HIGHER PRICE THAN ONE THAT HAS A CHEAPER P R I C E I F Y O U GO INSIDE TO SOMEONE AND TALK TO THEM A N D DEAL WITH THEM, CONSUMERS ARE ONES WHO MIGHT TAKE THE FASTER COURSE O U T O F H A B I T. A N D SO THE MERCHANTS O F T H E WORLD KNOWING THAT PROCLIVITY C A N TAKE ADVANTAGE OF IT AND O N E O F T H E WAYS AS I UNDERSTAND A P P L E H A S TAKEN ADVANTAGE OF THAT IS TO SAY THAT IF WE MAKE A P L A Y E R W H I C H 30 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 C A N ONLY DIRECTLY DOWNLOAD FROM THE INTERNET MUSIC C A L L E D T H E IPOD A N D NO OTHER PLAYER C A N D O THAT , A N D W E S E T UP OUR MUSIC IN A WAY THAT IT CAN ONLY DOWNLOAD DIRECTLY TO AN IPOD, CONSUMERS WILL PURCHASE THAT PRODUCT BECAUSE OF THEIR PROCLIVITY F O R THAT FAST AND CONVENIENT WAY OF DOING IT . D O Y O U DIS AGREE WITH A N Y T H I N G THAT I HAVE JUST SAID? M R. MITTELSTAEDT : YES A N D N O. THE QUESTION IS THAT IT' S N O T APPLE TAKING ADVANTAGE O F SOMETHING THAT IT 'S CREATING ITSELF . GO DIRECTLY TO YOUR -T H E COURT: IT . I DIDN' T S A Y APPLE CREATED THIS D O E S N'T TOOK ADVANTAGE OF IT AS A PROCLIVITY IN HUMAN NATURE. M R. MITTELSTAEDT : LET ME ADDRESS THAT A N D I T'S CLEAR A N D EVERYBODY AGREES THAT THE R E A S O N THAT MUSIC STORES U S E D R M, ANTI- PIRATE SOFTWARE IS BECAUSE THE R E C O R D L A B E L S REQUIRE I T. T H E COURT: AND I ACKNOWLEDGE THAT WHEN I WAS SPEAKING WITH YOUR OPPONENT. M R. MITTELSTAEDT : AND IT 'S ALSO TRUE A N D THIS IS A N E W FACT THAT PLAINTIFFS' E X P E R T H A S ACKNOWLEDGED THAT THERE 'S NOTHING W R O N G WITH APPLE USING ITS OWN PROPRIETARY SOFTWARE. H E SAID IT 31 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 WOULD BE S T U P I D T O P R O H I B I T THAT , S T U P I D IS HIS WORD, BECAUSE IT WAS T H W A R T INNOVATION . SO HE' S O N BOARD WITH APPLE USING ITS O W N S O F T W A R E R A T H E R THAN MICROSOFT'S , F O R EXAMPLE. T H E COURT: AND I HOPE I HAVE NOT SAID I THINK APPLE HAS ANYTHING CONTRARY TO THAT. DISTINGUISHED ITSELF AS A COMPANY B Y THAT VERY FREEDOM. M R. MITTELSTAEDT : SO TO GET TO YOUR HONOR 'S QUESTION, L E T'S ASSUME THAT THERE A R E P E O P L E O U T THERE WHO B O U G H T I P O D S BECAUSE THEY WORK WELL WITH THE ITUNES MUSIC STORE AND WORK BETTER A N D D O N' T TAKE THAT EXTRA MINUTE THAN A COMPETING PLAYER. T H E COURT: Y O U CALLED IT A MINUTE . I'L L L E T Y O U GO FOR N O W, BUT I' M A F R A I D I D O N' T A G R E E WITH YOU THAT IT' S A M I N U T E. M R. MITTELSTAEDT : T H E USER 'S TIME. LONGER. MINUTE. T H E COURT: WELL , Y O U SEE -- B U T THAT 'S WELL, IT' S A M I N U T E O F YOU KNOW , THE COMPUTER TAKES I CAN SHOW YOUR H O N O R H O W TO DO IT IN A N O T T H E ISSUE BUT GO AHEAD . M R. MITTELSTAEDT : THE ISSUE , I THINK , YOUR HONOR, IS WHETHER THIS I S SOMETHING THAT C A N 32 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BE P R O V E D O N A CLASS WIDE BASIS OR WHETHER I T REQUIRES INDIVIDUAL PROOF. T H E COURT: THAT I THINK IS THE ISSUE . A N D S O T H E QUESTION THAT Y O U' RE ASKING ME TO RECONSIDER IS WHETHER O R N O T THE M A R K E T L E V E L COERCION IS PERMISSIBLE IN THIS CASE, AND I' M WILLING TO THINK ABOUT THAT MORE BECAUSE I D O T H I N K THAT THAT I S A N IMPORTANT ISSUE TO ANSWER . B U T IF I A N S W E R THAT I T I S P E R M I S S I B L E, DO Y O U HAVE AN ARGUMENT THAT THERE IS NO MARKET LEVEL COERCION ? M R. MITTELSTAEDT : THE ARGUMENT AT THAT POINT IS H O W A R E THEY G O I N G T O P R O V E M A R K E T LEVEL COERCION ? THEY NEED TO COME UP WITH A M E T H O D T O PROVE THIS ON A C L A S S WIDE BASIS A N D THEY HAVEN 'T SUGGESTED A N Y. I T'S , Y O U KNOW, WHETHER I T'S INDIVIDUAL -T H E COURT: I THINK BY DEFINITION, M A R K E T LEVEL COERCION IS CLASS WIDE. M R. MITTELSTAEDT : PROVE COERCION ? I F I 'M RIGHT THAT T H E ELEMENTS OF THEIR COERCED CONSUMER ARE AS S E T F O R T H HERE ON CHART N U M B E R 2 , A N D LET 'S ADD TO IT WHAT I T H I N K I S 33 WELL, BUT H O W D O THEY U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 IMPLICIT A N D WHAT W A S SUGGESTED BY YOUR H O N O R THAT Y O U HAVE TO KNOW THAT I F Y O U BURN A N D RIP , THEN Y O U C A N PLAY T H E M U S I C O N A COMPETING PLAYER, L E T'S A D D THAT. THAT 'S ANOTHER INDIVIDUAL ISSUE . A N D IN ORDER TO PROVE THAT I W A S COERCED OR IN ORDER TO PROVE THAT, Y O U KNOW , T H E MARKET W A S COERCED. A N D AGAIN, T H E M A R K E T IS JUST A BUNCH OF INDIVIDUALS . A N D THERE' S - - Y O U KNOW, IF YOU C A N'T PROVE THAT I WAS COERCED WITHOUT ASKING M E AND EXPLORING M Y CIRCUMSTANCES , Y O U CAN 'T GET AWAY FROM THAT. T H E PLAINTIFFS C A N' T G E T AROUND THAT BY JUST S A Y I N G, WELL, WE' RE NOT GOING TO LOOK AT INDIVIDUALS . WE' RE GOING TO LOOK A T EVERYBODY AS A GROUP BECAUSE WHEN Y O U LOOK A T EVERYBODY AS A GROUP , Y O U STILL HAVE T O FIND O U T, YOU KNOW, W H Y D I D Y O U BUY YOUR IPOD? IPOD? I MEAN, SOME PEOPLE B U Y A N IPOD BECAUSE IT WORKS WELL WITH T H E MUSIC STORE AND THEY' RE DELIGHTED AND THEY WOULD NEVER BUY A COMPETING P L A Y E R EVEN IF IT W A S A S EASY TO U S E WITH T H E M U S I C STORE AS T H E IPOD BECAUSE THE IPOD IS A R E A L L Y GREAT DEVICE. SAME REASON O N C H A R T NUMBER 1. PEOPLE 34 WERE YOU HAPPY TO B U Y YOUR U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 B U Y A N IPOD WITHOUT REGARD TO T H E M U S I C S T O R E. S O YOU NEED T O ASK INDIVIDUAL B Y INDIVIDUAL AND THAT' S W H Y, Y O U KNOW , I 'M NOT S A Y I N G TYING LAWS SHOULDN'T KEEP UP WITH T H E TIMES BUT AN ESSENTIAL ELEMENT OF TYING L A W A N D CLASS CERTIFICATION IS CAN Y O U P R O V E I T O N A CLASS WIDE BASIS A N D THEY D O N'T HAVE A M E T H O D FOR DOING THAT, ESPECIALLY IF YOU NEED INDIVIDUAL C O E R C I O N, BUT EVEN IF YOU CALL IT MARKET COERCION , I T'S STILL A GROUP OF INDIVIDUALS . YOUR HONOR , L E T ME JUST H I T TWO OTHER POINTS QUICKLY . IT' S N O T RIGHT THAT C O E R C I O N I S AS O U R ONLY ARGUMENT AS AN INDIVIDUAL ISSUE. COUNSEL RECOGNIZES THIS N E T OVERCHARGE IS ALSO A R E A S O N THAT THEY DON 'T RECOGNIZE THAT THEY ADDRESSED I T. B U T W E S A Y THE NEED TO PROVE PROOF OF I N J U R Y O R T H E FACT O F D A M A G E IN THE NINTH CIRCUIT THAT N E E D S T O B E P R O V E D IN A T Y I N G CASE ON A PACKAGE B A S I S. LAW O N THAT . A N D THE BASIC IDEA, AS S E T F O R T H B Y T H E FREELAND CASE, T H E A T & T CASE I N T H E SOUTHE RN DISTRICT OF N E W YORK , I F A T I E C A U S E S A B U Y E R T O P A Y MORE THAN THE M A R K E T P R I C E F O R THE TIED PRODUCT, THE BUYER I S MOST LIKELY PAYING LESS THAN 35 AND CHART NUMBER 7 SUMMARIZES THE U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE PRICE THAT THE SELLER COULD OTHERWISE CHARGE F O R T H E TYING PRICE. I N O T H E R W O R D S, THE PRICE ON T H E F I R S T PRODUCT IS LOWER AND THAT' S B A S I C E C O N O M I C T H E O R Y F O R T H E REASONS S E T FORTH IN THE FREELAND CASE. FREE LAND DENIES CLASS CERTIFICATION BECAUSE THE PLAINTIFF W A S UNABLE TO IDENTIFY A M E T H O D T O D E M O N S T R A T E THAT THAT HAD N O T H A P P E N E D. A N D THE R E A S O N THAT 'S IMPORTANT IS A CONSUMER IS N O T DAMAGES , I S N O T INJURED I F, IN FACT, THERE 'S BEEN A LOWERING OF T H E P R I C E O N T H E MUSIC WHICH IS O F F S E T I N A N Y INCREASE IN THE PRICE OF T H E IPOD . THAT'S T H E L A W OF THE NINTH CIRCUIT IN T H E S I E G L E CASE A N D THE ELEVENTH CIRCUIT CASE W E CITE THERE IN THE B O T T O M B U L L E T SHOWS THAT. AND IT INTERPRETS AND APPLIES THE NINTH CIRCUIT SIEGLE RULE. T H E COURT: MORE ABOUT THAT. WELL , I WANT TO LEARN A L O T IN OTHER WORDS , I F T H E TIED - - I F A TIE C A U S E S A BUYER TO P A Y MORE THAN THE M A R K E T PRICE F O R T H E TIED PRODUCT , T H E BUYER IS MOST LIKELY PAYING LESS THAN THE PRICE THE SELLER COULD PROFITABLY CHARGE . S O THAT IS -- IS THAT MORE O R LESS THAN M A R K E T F O R THE TYING PRODUCT? 36 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 M R. MITTELSTAEDT : T H E COURT: LESS, LESS. LESS THAN MARKET ? YES . AND T H E IDEA IS M R. MITTELSTAEDT : THAT ON DAY O N E Y O U' RE SELLING T H E FIRST PRODUCT. T H E COURT: THERE 'S NO DAMAGE ? B U T HOW DOES THAT F O L L O W WHAT I F Y O U REDUCE IT BY A N I C K E L A N D SOMETHING ELSE IS SOLD A T A PREMIUM, H O W DOES THAT MEAN THAT THERE IS NO DAMAGE ? M R. MITTELSTAEDT : YEAH, IT DEPENDS O N T H E SIZE OF T H E OVERCHARGE A N D T H E SIZE O F T H E -T H E SIZE OF T H E OVERCHARGE A N D T H E SIZE O F T H E UNDER CHARGE IF Y O U WILL . T H E COURT: R I G H T. AND T H E R E L A T I V E M R. MITTELSTAEDT : N U M B E R O F U N I T S THAT Y O U B U Y OF EACH. T H E COURT: Y E S. AND SO IN T H E VISA M R. MITTELSTAEDT : CASE THE PLAINTIFFS' E X P E R T CAME IN A N D SAID THAT THERE 'S NO UNDERC H A R G E ON THE FIRST PRODUCT. AND SO T H E C O U R T SAID , OKAY , W E D O N' T HAVE A PROBLEM WITH A NET OVERCHARGE. A N D HERE WHEN I ASKED PROFESSOR NOLL, WHAT ABOUT THE PRICE OF MUSIC , W A S THAT LOWERED ? A N D H E SAID HE HASN' T STUDIED IT , H E D O E S N'T PROPOSE TO STUDY IT AND HE 'S NOT GOING TO OFFER AN 37 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 OPINION ON THAT. S O T H E BURDEN ON T H E PLAINTIFFS IN T H E NINTH CIRCUIT AND T H E E L E V E N T H CIRCUIT IS TO SHOW THAT THERE WAS A NET OVERCHARGE TAKING INTO ACCOUNT, IN O U R CASE , T H E AMOUNT OF MUSIC THAT AN INDIVIDUAL CONSUMER BOUGHT , T H E AMOUNT OF T H E UNDER CHARGE ON THAT, A N D C O M P A R E D WITH T H E N U M B E R OF IPODS THAT THE P E R S O N B O U G H T AND T H E OVERCHARGE ON THAT. T H E COURT: WHY SHOULD I DEAL WITH THIS AT T H E C L A S S CERTIFICATION ? M R. MITTELSTAEDT : WELL, FOR T H E VERY REASON, YOUR H O N O R, THAT T H E PLAINTIFFS D O N' T DEAL WITH IT. T H E REASON THEY DON 'T DEAL WITH IT IS THAT THE ONLY WAY TO ESTABLISH THIS FACT OF INJURY IN A REGIME WHERE T H E N E T OVERCHARGE MUST BE SHOWN ON A PACKAGE B A S I S I S T O G O C O N S U M E R B Y C O N S U M E R. I T R A I S E S INDIVIDUAL QUESTIONS, WHICH IS WHAT THE FREELAND CASE HELD A N D THAT'S W H Y FREE LAND DENIED CERT . THE PLAINTIFFS RECOGNIZE THAT BECAUSE T H E R E L A T I V E A M O U N T OF PURCHASES MATTERS IN THIS NET OVERCHARGE APPROACH , YOU HAVE T O G O INDIVIDUAL BY INDIVIDUAL TO SEE WHETHER THEY B O U G H T ENOUGH MUSIC TO MAKE UP FOR T H E OVERCHARGE ON T H E IPOD . 38 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THAT' S A N INDIVIDUAL QUESTION . T H E R E'S NO CLASS WIDE WAY TO DO IT OR AT LEAST THEY HAVEN' T PROPOSED A N Y. A N D THAT'S W H Y A S I SAY PROFESSOR NOLL JUST SAYS I 'M NOT GOING TO WORRY ABOUT THAT. T H E SECOND ARGUMENT ON FACT OF DAMAGES LEADS TO T H E SAME CONCLUSION. THE PLAINTIFFS AGREE THAT AT LEAST ONE W A Y O F PROVING TYING DAMAGES IS TO LOOK AT THE DIFFERENCE OF PRICE BETWEEN T H E IPOD Y O U WERE F O R C E D T O B U Y AND T H E COMPETING PLAYER Y O U WANTED T O B U Y. THAT 'S WHAT T H E LESSIG CASE DOES, AND THAT' S WHAT T H E GRAY CASE ALSO C I T E D DOES A N D THAT' S A RELATIVELY STRAIGHTFORWARD METHOD O F PROVING DAMAGES. THEY D O N'T DO THAT. A N D THE R E A S O N THEY D O N'T DO THAT IS THAT, TOO , R A I S E S INDIVIDUAL QUESTIONS. A S S E T FORTH IN OUR PREVIOUS ORDER TO PROVE THAT, Y O U HAVE TO GO INDIVIDUAL BY INDIVIDUAL S A Y I N G WHAT P L A Y E R D I D YOU WANT TO USE A N D D I D YOU WANT TO BUY AN IPOD AND WHAT WAS T H E DIFFERENCE IN PRICE AND THAT RAISES A N INDIVIDUAL QUESTION AND S O THEY DON 'T DO THAT. THAT 'S ANOTHER R E A S O N WHY T H E C L A S S - 39 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 W H Y THIS M O T I O N S H O U L D NOT BE GRANTED. I T SHOULD BE D E N I E D BECAUSE THEY HAVE I N ESSENCE FORFEITED, GIVEN UP , N O T PURSUED THAT RELATIVE STRAIGHTFORWARD M E T H O D O F PROVING DAMAGES FOR AN INDIVIDUAL. A N D IF THERE' S ANYBODY O U T T H E R E I N T H E WORLD , A N D AGAIN, THEY HAVEN' T IDENTIFIED ANYBODY THAT MEETS ALL OF THESE CRITERIA . THAT PERSON WOULD WANT TO COME I N A N D HAVE A RELATIVELY SIMPLE CASE AND S A Y, HERE'S MY MEASURE OF DAMAGES. IT 'S T H E DIFFERENCE BETWEEN THE REAL, T H E S A N S A, THE WHATEVER I WANTED TO B U Y A N D THE IPOD. D O N'T DO THAT. A N D FINALLY, LET ME ADDRESS THEIR SECTION 2 CLAIM. I N T H E FREELAND CASE FOOTNOTE 1 6 T H E AND THEY COURT SAYS THAT W H E R E Y O U HAVE T Y I N G PRACTICES AND THEY' RE MOST REGULARLY CHALLENGED A S T Y I N G C L A I M S WHEN THE CONDUCT AT ISSUE IS REALLY ALLEGED TO BE A TYING CLAIM , I T'S FROM THE TYING CASE LAW THAT GUIDANCE MUST BE SOUGHT IN AN ATTEMPT TO EVALUATE THE INJURY CLAIMED B Y THE PLAINTIFFS. AND THEN THEY SAY THE PRINCIPLES GLEANED FROM THOSE CASES ARE EQUALLY APPLICABLE T O T H E N O N-T Y I N G C L A I M S WHEN T H E BASIC ALLEGATION GOES TO TYING . A N D THAT'S WHAT IS GOING ON HERE. THEY 40 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 C A N'T -- TO T H E E X T E N T THAT THEY HAVE PROBLEMS WITH INDIVIDUAL PROOF FOR THEIR TYING CLAIM , THEY C A N'T G E T R I D OF THAT S I M P L Y BY SAYING , OKAY , W E'R E N O T GOING TO CALL IT TYING OR COERCIVE. CALL IT EXCLUSIONARY . BECAUSE WHEN THEY'R E - - I N O R D E R T O HAVE A SECTION 2 CLAIM FOR EXCLUSIONARY CONDUCT O N THE FACTS THAT THEY'R E G O I N G O N HERE OR ON T H E T H E O R Y, THEY HAVE T O SHOW THAT CONSUMERS WERE COERCED INTO DOING SOMETHING THAT THEY OTHERWISE W O U L D N'T DO A N D THEREBY EXCLUDED COMPETITION OR EXCLUDED COMPETITORS . S O HOWEVER THEY PHRASE THEIR CLAIM , I T A L L GETS BACK TO WHETHER T H E R E W A S ANY COERCIVE E F F E C T O N CONSUMERS AND WHETHER THEY WANT TO CALL IT COERCIVE TYING OR EXCLUSIONARY. THE CASE THAT REALLY LAYS OUT I THINK THE IMPORTANCE OF THIS C O E R C I V E E F F E C T IS THE COLBURN CASE. MOORE . I N THAT CASE JUDGE CONTI DENIED A CLASS S A Y I N G THAT T H E C O E R C I V E E F F E C T, IF A N Y, OF THE ALLEGED TYING AGREEMENT COULD NOT B E MEASURED O N A CLASS WIDE BASIS. I T H A D TO GO INDIVIDUAL B Y I T W A S JUDGE CONTI' S CASE . IT CAME A F T E R W E'R E G O I N G T O INDIVIDUAL AND THIS IS AFTER MOORE AND HE SAID ON 41 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 T H E F A C T S O F THAT CASE, Y O U NEED TO GO INDIVIDUAL BY INDIVIDUAL AND SO WE 'RE N O T G O I N G T O CERTIFY A CLASS . THAT CASE IN MY VIEW W O U L D N O T HAVE COME O U T A N Y DIFFERENTLY IF THE PLAINTIFF W O U L D HAVE SAID, OKAY, L E T'S N O T CALL IT COERCION . CALL IT EXCLUSIONARY . I T W O U L D REQUIRE T H E SAME KIND OF ANALYSIS OF WHETHER ANY CONSUMER H A D BEEN COERCED INTO BUYING AN IPOD THAT THEY DIDN' T WANT TO B U Y. FINALLY , YOUR HONOR , THE PLAINTIFFS O N THIS BURNING AND RIPPING ISSUE I N THEIR REPLY BRIEF RAISE T H E Q U E S T I O N A B O U T WHETHER IT 'S LAWFUL TO BURN AND R I P. A N D THEY SAID , Y O U KNOW, IF IT' S N O T L A W F U L, THEN A L L OF THIS GOES AWAY AND THIS IS ONE INDIVIDUAL ISSUE THAT WOULD B E WITHDRAWN. A T PAGE 6 OF THIS HANDOUT I SUMMARIZE T H E L A W O N THAT A N D, YOU KNOW, O U R VIEW IS THAT IT' S LEGAL TO BURN AND R I P A N D THAT THAT 'S NOT A REASON T H E - - THAT 'S NOT A WAY F O R T H E PLAINTIFFS T O A V O I D T H E I M P A C T OF THE AVAILABILITY O F BURNING A N D RIPPING. A N D JUST T O EMPHASIZE ONE POINT , YOUR HONOR , A S W E S E T FORTH IN THE BRIEF , T H E PLAINTIFFS 42 LET 'S JUST U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 AND THEIR EXPERTS ADMIT THAT BURNING AND RIPPING I S A VIABLE OPTION. O N E CAN QUARREL ABOUT HOW LONG IT TAKES TO DO THAT, H O W EASY IT IS TO DO THAT, B U T THAT ONLY HIGHLIGHTS THAT IT 'S AN INDIVIDUAL I S S U E. T H E PLAINTIFFS H A V E N'T COME UP WITH A N Y CLASS WIDE METHOD OF S A Y I N G N O B O D Y OUT THERE KNOWS H O W T O BURN A N D R I P. IT . Y O U KNOW, NOBODY EVER DOES IT' S N O T AN OPTION . AND THEY COULDN' T D O THAT GIVEN THE ADMISSIONS OF THEIR OWN CLIENTS. A N D SO LET ME E N D WITH THIS THOUGHT A N D IT 'S REALLY T H E W A Y I B E G A N THAT THIS REALLY IS AT B O T T O M I THINK A CON TRIVED ANTITRUST C L A I M BECAUSE IT 'S BASED ON APPLE USING ANTI-P I R A C Y SOFTWARE BECAUSE THE R E C O R D L A B E L S REQUIRE I T. A N D IT' S EQUALLY CONTRIVED O R EVEN MORE CONTRIVED T O T R Y TO TURN THIS INTO A C L A S S A C T I O N AND A CLASS ACTION NOT JUST FOR CONSUMERS BUT ALSO FOR RESELLERS. I 'LL RELY ON WHAT W E S A Y IN THE P A P E R S A B O U T W H Y THE CLASS SHOULDN' T B E CERTIFIED FOR THE RESELLERS LIKE WALMART AND TARGET AND BEST B U Y. THEY' RE OBV IOUSLY A DIFFERENT CATEGORY OF PURCHASER. THESE PLAINTIFFS , YOUR HONOR MAY RECALL, 43 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 WHEN THEY F I R S T M O V E D F O R CLASS CERTIFICATION, IT W A S M R S. -- W H O W A S IT? W A S A T THAT TIME. I F O R G E T W H O THE PLAINTIFF A N YH O W, THEY MAYBE SLATTERY. MOVED FOR CLASS CERTIFICATION . IT WAS TAKEN O F F CALENDAR WHEN THE N E W COMPLAINT WAS FILED A N D THEN T H E COMPLAINT WAS CONSOLIDATED. B U T THE FIRST TIME AROUND WHEN THEY M O V E D F O R C L A S S, THEY DIDN 'T MENTION, THEY DIDN 'T INCLUDE T H E RESELLERS AND I THINK THAT'S BECAUSE THEY'R E OBVIOUSLY I N A DIFFERENT CATEGORY. THEY HAVE NOT A G A I N, ASKED F O R A N Y DISCOVERY ON T H E RESELLERS. THEY' RE IN A DIFFERENT CATEGORY. THEY 'RE B U Y I N G HUGE VOLUMES A N D THEIR PURCHASING DECISIONS ARE DIFFERENT. A N D THESE PLAINTIFFS, YOU KNOW, A R E N O T TYPICAL OF RESELLERS THAT BUY MILLIONS A N D M I L L I O N S OF IPODS . O U R PAPER ALSO ADDRESSES THE REQUEST FOR AN INJUNCTIVE RELIEF CLASS THAT CLEARLY I S INAPPROPRIATE BECAUSE T H E THRUST OF THIS CASE I S F O R DAMAGES A N D S O L E T ME END AS I STARTED. WHAT IS UNUSUAL ABOUT THIS CASE A N D WHAT WOULD MAKE IT UNPRECEDENTED T O CERTIFY A CLASS IS T H E IPOD IS A VERY POPULAR PRODUCT. ONE CANNOT INFER THAT THE ONLY REASON ANYBODY WOULD BUY IT IS 44 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BECAUSE THEY WERE COERCED TO DO SO. S O THIS EVIDENTIARY INFERENCE FROM MOORE SIMPLY D O E S N'T WORK. T H E R E'S NEVER BEEN A C L A S S ACTION CERTIFIED WHERE THE ALLEGED TYING AND TIED PRODUCTS WERE SEPARATELY AVAILABLE, NOT ONLY SEPARATELY AVAILABLE B U T COULD BE USED SEPARATELY A N D HERE EVERYBODY A G R E E S THAT I T U N E S MUSIC CAN BE P L A Y E D O N A COMPUTER. I T C A N BE PLAYED ON AN IPOD, A N D I T C A N B E P L A Y E D WITH A N E X T R A STEP ON A N Y COMPETING PLAYER. T H E R E'S NEVER BEEN A C L A S S CERTIFIED IN THAT CIRCUMSTANCE BECAUSE IT OBVIOUSLY , I S A Y OBVIOUSLY, TO ME IT RAISES INDIVIDUAL ISSUES ABOUT WHY SOMEBODY BOUGHT THEIR IPOD AND WHETHER THEY CAN MEET THE CRITERIA THAT THE PLAINTIFFS HAVE S E T FORTH . T H E R E'S NEVER BEEN A C L A S S A C T I O N IN A CONSUMER CASE WHERE ALL OF T H E PLAINTIFFS ADMIT THAT THEY B O U G H T THE ALLEGED UNWANTED PRODUCT VOLUNTARILY . THEY A D M I T THAT THEY WEREN' T COERCED . A N D, YOUR HONOR, WHEN THE COURT GOES BACK TO LOOK AT THE MOORE CASE, ANOTHER DIFFERENCE T O KEEP IN MIND I N M O O R E I S M O O R E W A S A CASE BROUGHT BY A COMPETITOR. A N D S O T H E R E T H E COURT WAS A S K I N G 45 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 T H E Q U E S T I O N, HOW MUCH COERCION OF CONSUMERS DOES A COMPETITOR NEED T O SHOW IN ORDER TO PROVE A CLAIM FOR LOST PROFITS BECAUSE THEY WERE EXCLUDED FROM THE MARKET? THAT 'S A MUCH DIFFERENT CIRCUMSTANCE BECAUSE THERE THE ISSUE IS H O W MUCH OF T H E M A R K E T H A S T O B E FORECLOSED TO A COMPETITOR B Y THIS TYING IN ORDER F O R T H E COMPETITOR T O HAVE A CLAIM FOR LOST PROFITS. A N D SO IT' S O N E THING IN A CASE LIKE THAT TO S A Y, YOU KNOW, OF C O U R S E A QUESTIONER DOESN' T HAVE TO SHOW THAT HE W A S COERCED AT A L L. BUYING THE PRODUCT. HE 'S NOT AND S O WHATEVER THE COURT SAYS IN THAT CONTRACT DOESN' T A P P L Y A T L E A S T D I R E C T L Y I N T H E CASE WHERE A CONSUMER COMES IN AND T H E C O N S U M E R IS S A Y I N G I WANT TO RECOVER DAMAGES B U T I WASN' T COERCED. A T PAGE 14 OF O U R B R I E F W E Q U O T E FROM PROFESSOR A R E D A, YOU KNOW, T H E LEADING E X P E R T O N ANTITRUST L A W AND FROM HIS TREATISE A N D WHAT HE SAYS I T H I N K I S R E L E V A N T T O A L L OF THIS. HE SAYS THAT IF YOU WOULD HAVE PURCHASED T H E TIED PRODUCT A N YW A Y, SO YOU WOULD HAVE BOUGHT AN IPOD REGARDLESS OF T H E RELATIONSHIP TO THE MUSIC STORE , Y O U LACK STANDING TO O B T A I N DAMAGES BECAUSE YOU HAVEN 'T BEEN DAMAGED BY TYING. Y O U HAVEN' T BEEN COERCED TO DO 46 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ANYTHING . YOU JUST BOUGHT T H E PRODUCT , Y O U WOULD HAVE BOUGHT IT A N YW A Y. A N D THEN H E SAYS , T H E RESULT IS THAT TYING ARRANGEMENT PURCHASER CONSUMER CLASS ACTIONS , SEEKING DAMAGES C A N N O T BE CERTIFIED IF T H E C L A S S MIGHT INCLUDE SOME PURCHASERS WHO WOULD HAVE PURCHASED T H E TIED PRODUCT IN A N Y E V E N T BECAUSE THAT PERSON HASN' T BEEN DAMAGED, HASN' T SUFFERED ANTITRUST INJURY. H E W O U L D HAVE BOUGHT I T A N YW A Y. HERE , A S I HAVE SAID, THE PLAINTIFFS HAVE N O T T R I E D T O N A R R O W THEIR CLASS TO THE P E O P L E W H O MEET THESE CHARACTERISTICS . T H E COURT: I APPRECIATE YOUR ARGUMENT, A N D I DO NEED TO HAVE Y O U BRING IT TO A C L O S E MAINLY BECAUSE THERE ARE A COUPLE O F ISSUES THAT I NEED TO DEAL WITH B E F O R E I C A N MOVE INTO THESE MORE ESOTERIC THEORIES THAT YOU HAVE HIGHLIGHTED FOR ME WELL ENOUGH . AND SO THANK Y O U VERY MUCH. OKAY. THANK Y O U, YOUR M R. MITTELSTAEDT : HONOR . T H E COURT: COUNSEL , YOU RESERVED SOME O F YOUR TIME FOR REBUTTAL. I APOLOGIZE T O T H O S E W H O ARE HERE FOR O U R 10 :00 O' CLOCK HEARING, BUT I NEED T O GIVE COUNSEL TIME FOR REBUTTAL A N D W E'L L B E DONE IN ABOUT T E N 47 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MINUTES. M S. SWEENEY: WILL BE BRIEF. THANK Y O U, YOUR H O N O R, I M R. MITTELSTAEDT 'S ARGUMENT FOCUSSED PRIMARILY O N THE MERITS ISSUES I N THIS CASE AND I JUST W A N T E D TO REMIND T H E C O U R T THAT N O T ONLY IS THAT A P P R O P R I A T E I N C L A S S CERTIFICATION B U T IN THIS CASE DISCOVERY HAS BEEN BIFURCATED. HAVE HAD NO M E R I T S DISCOVERY. S O THE QUESTION WHETHER BURNING AND RIPPING IS A V I A B L E OPTION , O F C O U R S E WE DON 'T AGREE THAT IT IS A V I A B L E OPTION . THAT'S A MERITS WE ISSUE THAT WILL B E ADDRESS ED AFTER FULL DISCOVERY. T H E QUESTION ABOUT WHETHER T H E R E C A N BE INTERPLAYABILITY WITHOUT VIOLATING DRM , THAT IS ANOTHER MERITS QUESTION AND W E HIGHLIGHTED I N OUR OPENING BRIEF THE STATEMENT O F SOME OF T H E L A B E L S THAT THEY W O U L D LIKE TO S E E INTEROPERABILITY . S O OBVIOUSLY THE L A B E L S HAVE A DIFFERENT POINT OF VIEW THAN A P P L E. THAT IS APPLE' S VIEW IS , WELL, WE HAVE TO DO IT THIS W A Y BECAUSE OTHERWISE WE WOULD BE VIOLATING COPYRIGHT LAWS. S O THAT 'S ANOTHER MERITS ISSUE THAT I S RESERVED UNTIL AFTER PLAINTIFFS HAVE H A D AN OPPORTUNITY TO CONDUCT DISCOVERY . I WOULD ALSO LIKE T O CORRECT SOME OF THE 48 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 M I SSTATEMENTS THAT M R. MITTELSTAEDT MADE. H E MADE THERE C L A I M S A B O U T FIVE PLAINTIFFS IN THIS A C T I O N. ARE THREE PLAINTIFFS , THREE NAMED PLAINTIFFS . PLAINTIFF SLATTERY DISMISSED H I S C L A I M. PLAINTIFF S O M E R S IS A PLAINTIFF IN THE INDIRECT PURCHASER ACTION, NOT THIS ACTION. M R. MITTELSTAEDT SAID REPEATEDLY THAT EACH OF THOSE PLAINTIFFS A D M I T T E D THAT HE OR S H E WAS NOT COERCED INTO BUYING A N IPOD . IN FACT, THE DEPOSITION TESTIMONY READS A LITTLE DIFFERENTLY THAN THAT. PLAINTIFF TUCKER , WHO PURCHASED TWO IPODS , S H E PURCHASED AN IPOD AFTER HER FIRST O N E BROKE , W A S ASKED BY MR. MITTELSTAEDT, WHY D I D Y O U BUY THAT ? AND S H E SAID BECAUSE MY FIRST ONE BROKE . H E THEN ASKED , A N D HOW D I D Y O U CHOOSE AN IPOD RATHER THAN SAY AN IR I V E R? AND SHE ANSWERED, BECAUSE ALL OF MY MUSIC W A S ALREADY IN I T U N E S A N D THAT WOULD HAVE BEEN T H E ONLY W A Y T O KEEP MY MUSIC . AND I MENTION THIS JUST T O SHOW THAT THERE A R E DISCREPANCIES IN T H E R E C O R D AND THERE A R E SIMILAR TESTIMONY BY T H E O T H E R PLAINTIFFS B U T NONETHELESS , A S YOUR HONOR HAS RECOGNIZED , THE QUESTION IS N O T WHETHER WE C A N SHOW ON A CLASS MEMBER B Y CLASS MEMBER BASIS WHETHER THERE WAS 49 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 COERCION BUT WHETHER THERE WAS COERCION A T THE MARKET L E V E L. A N D THE M U R P H Y CASE IS STILL GOOD LAW . IT 'S TRUE THAT IN THAT CASE T H E PLAINTIFF D I D N O T PREVAIL BUT T H E C O U R T S T A T E D THE APPROPRIATE STANDARD , W H I C H W A S ALSO S T A T E D IN THE MOORE CASE WHICH WE T A L K E D A B O U T EARLIER . PROFESSOR NOLL'S COMMENTS ALSO HAVE BEEN A LITTLE B I T DISTORTED IN ARGUMENT. PROFESSOR NOLL H A S I N H I S 60 PAGE REPORT, WHICH APPLE DOESN 'T ADDRESS AT ANY TIME IN ITS BRIEF OR IN ARGUMENT , I N H I S R E P O R T HE DEVOTED A N U M B E R O F P A G E S T O EXPLAINING HOW AN ECONOMIST W O U L D G O A B O U T DETERMINING WHETHER THERE WAS AN E F F E C T O N T H E MARKET, THAT I S, WHETHER T H E R E W A S MARKET LEVEL COERCION A N D I BELIEVE THAT T H E RELEVANT PAGES ARE 39 THROUGH 49. DECLARATION . PROFESSOR NOLL EXPLAINED IN HIS DEPOSITION THAT Y O U DON 'T HAVE T O SHOW THAT EACH CLASS MEMBER WAS COERCED. AND THOSE BULLET POINTS THAT 'S IN EXHIBIT 1 TO MY THAT MR. MITTELSTAEDT SENT UP TO T H E C O U R T, THAT WAS A N EXAMPLE THAT PROFESSOR NOLL GAVE O F HOW SOME P E O P L E, SOME MEMBERS OF T H E C L A S S WERE COERCED. A N D THE QUESTION IS WHETHER ANY OF THOSE 50 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CLASS MEMBERS WERE COERCED THAT IT HAD AN E F F E C T O N M A R K E T P O W E R POSSESSED BY APPLE? I F I T APPRECIABLY ENHANCED APPLE 'S MARKET POWER , THEN APPLE W A S ABLE TO INCREASE T H E P R I C E O F I P O D S A N D THEREBY I N C R E A S E T H E P R I C E CHARGED TO EACH AND EVERY M E M B E R O F T H E CLASS . A N D THIS I S W H E R E W E G O BACK TO WHAT WE SAID IN OUR EARLIER OPENING P A P E R S AND THAT IS THAT APPLE HAS A N UNREMITTING POLICY. TECHNOLOGICAL RESTRICTION. I N E V E R Y I T U N E S DOWNLOAD AND IN EVERY IPOD THEREFORE IF E N O U G H C L A S S MEMBERS WERE COERCED TO E F F E C T I T A T T H E MARKET LEVEL , THEN EVERY CLASS M E M B E R PAID AN OVERCHARGE. A P P L E C I T E S A BUNCH OF TYING CASES A N D LOOKING, Y O U JUST HAVE TO READ T H E FACTS OF THOSE CASES WHERE THE COURTS DENY THE CERTIFICATION T O S E E THAT THEY' RE NOT APPLICABLE HERE. A N D THE COLBURN CASE, WHICH MR . MITTELSTAEDT MENTIONED A FEW TIMES , T H E PLAINTIFF INTRODUCED EVIDENCE OF O N E C O N T R A C T, HIS CONTRACT AND N O OTHER EVIDENCE THAT THERE WERE SIMILARLY S I T U A T E D PLAINTIFFS IN T H E C L A S S. T H E R E W A S NO EVIDENCE THAT T H E R E WERE OTHER SIMILAR CONTRACTS . 51 I T H A S THE U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 S O THOSE CASES ARE INAPPOSITE FOR A NUMBER O F REASONS . A N D I WANT TO TAKE ISSUE WITH MR . MITTELSTAEDT' S STATEMENT THAT T H E PLAINTIFFS AGREED THAT THE LESS SIGNIFICANT DAMAGES METHODOLOGY IS APPROPRIATE IN T H E T Y I N G CASE . I N FACT , A S PROFESSOR NOLL TESTIFIED AT H I S DEPOSITION , I T'S JUST -- IT' S N O T THE CORRECT WAY T O G O ABOUT PROVING DAMAGES BECAUSE YOU HAVE T O LOOK AT THE "B U T FOR WORLD ." Y O U HAVE TO CONCEDE FROM AN ECONOMIST POINT OF VIEW WHAT T H E MARKET WOULD LOOK LIKE I N THE ABSENCE O F THE ANTICOMPETITIVE MARKET. A N D SO IF WE WERE JUST , O F C O U R S E, TO S I T DOWN TODAY AND LOOK AT A COMPETING PRODUCT, THAT'S N O T T H E REAL B U T FOR WORLD BECAUSE, IN FACT, T H E PRICE OF THAT COMPETING PRODUCT IS AFFECTED BY THE T I E, BY THE MONOPOLISTIC CONDUCT BY APPLE . S O I T'S N O T A REALISTIC PICTURE A N D PROFESSOR NOLL TESTIFIED W H Y THAT W A S NOT AN APPROPRIATE METHODOLOGY . WITH RESPECT TO RESELLERS , W E EXPLAINED IN O U R B R I E F, WE CITED NUMEROUS CASES FOR T H E PROPOSITION THAT IT' S PERFECTLY APPROPRIATE TO INCLUDE RESELLERS IN T H E PLAINTIFF CLASS. 52 U.S. COURT REPORTERS 1 2 3 4 5 6 7 8 9