Oracle Corporation et al v. SAP AG et al

Filing 817

Declaration of Tharan Gregory Lanier in Support of 816 Defendants' Cross Motion for Partial Summary Judgment and Opposition to Plaintiffs' Motion for Partial Summary Judgment (FILED PURSUANT TO D.I. 810) filed by SAP AG, SAP America Inc, Tomorrownow Inc. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Exhibit 12, # 13 Exhibit 13, # 14 Exhibit 14, # 15 Exhibit 15, # 16 Exhibit 16, # 17 Exhibit 17, # 18 Exhibit 18, # 19 Exhibit 19, # 20 Exhibit 20, # 21 Exhibit 21, # 22 Exhibit 22, # 23 Exhibit 23, # 24 Exhibit 24, # 25 Exhibit 25, # 26 Exhibit 26, # 27 Exhibit 27, # 28 Exhibit 28, # 29 Exhibit 29, # 30 Exhibit 30, # 31 Exhibit 31, # 32 Exhibit 32, # 33 Exhibit 33, # 34 Exhibit 34, # 35 Exhibit 35, # 36 Exhibit 36, # 37 Exhibit 37, # 38 Exhibit 38, # 39 Exhibit 39, # 40 Exhibit 40, # 41 Exhibit 41, # 42 Exhibit 42, # 43 Exhibit 43, # 44 Exhibit 44, # 45 Exhibit 45, # 46 Exhibit 46, # 47 Exhibit 47, # 48 Exhibit 48, # 49 Exhibit 49, # 50 Exhibit 50, # 51 Exhibit 51, # 52 Exhibit 52, # 53 Exhibit 53)(Related document(s) 810 ) (Froyd, Jane) (Filed on 8/27/2010) Modified on 8/30/2010 (vlk, COURT STAFF).

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Oracle Corporation et al v. SAP AG et al Doc. 817 Att. 28 EXHIBIT 28 Dockets.Justia.com UNITED STATES D I S T R I C T COURT NORTHERN D I S T R I C T OF CALIFORNIA BEFORE THE HONORABLE PHYLLIS J . HAMILTON, JUDGE ORACLE USA, I N C . , e t a l . , Plaintiffs, v. SAP AG e t a l . , Defendants. NO. 0 7 - C V - 0 1 6 5 8 P J H San Francisco, California Wednesday, November 26, 2008 TRANSCRIPT OF PROCEEDINGS APPEARANCES: For Plaintiffs B i n g h a m M c C u t c h e n LLP Three Embarcadero Center S a n F r a n c i s c o , CA 9 4 1 1 1 - 4 0 6 7 GEOFFREY M. HOWARD A t t o r n e y a t Law JOHN POLITO A t t o r n e y a t Law ANTHONY FALZONE A t t o r n e y a t Law Jones Day Silicon Valley Office 1755 Embarcadero Road P a l o A l t o , CA 9 4 3 0 3 THARAN GREGORY LANIER A t t o r n e y a t Law BY: For Defendants BY: Reported By: CHRISTINE TRISKA, CSR, RPR Pro-Tern Reporter 2 1 Wednesday, November 26, 2008 2 3 9 : 2 0 A.M. PRO C E E DIN G S THE CLERK: Calling c i v i l Case 07 dash 1658, Oracle e t 4 5 a l . v e r s u s SAP AG, e t a l . 6 7 8 9 10 11 12 13 14 MR. HOWARD: THE COURT: MR. HOWARD: Good morning, your Honor. Good morning. Your appearance. I w a s w a i t i n g f o r my c o l l e a g u e . J e f f Howard on behalf of Oracle, your Honor. MR. LANIER: Good morning, your Honor. Gregory Lanier of Jones Day for the Defendants. THE COURT: Good morning. All right. This matter is o n f o r h e a r i n g o n t h e m o t i o n t o d i s m i s s f i l e d b y SAP. I do have some questions. I guess the way t h a t 15 w e ' l l do i t i s w e ' l l s t a r t f i r s t with the copyright 16 17 18 19 20 21 22 infringement allegations and then perhaps -- then the preemption argument. Those are the more d i f f i c u l t of the The breach of contract and So l e t ' s issues, I think, that are raised. the unjust enrichment are not terribly problematic. start first, then, with the copyright infringement allegations. I'm a l i t t l e unclear about the appropriate way to analyze this motion. 12(b) (1) and 12(b) (6). I t ' s purportedly brought under both The arguments a r e n ' t e n t i r e l y clear 23 24 25 t o me w h y i t s h o u l d b e v i e w e d a s - - I m e a n t h e r e s u l t c o u l d 3 1 very well be different depending upon the standard the Court 2 3 4 imposes. I t ' s n o t e n t i r e l y c l e a r t o me t h a t i t ' s a p p r o p r i a t e to look at the merits at this particular stage. But I think the more troubling aspect of the case i s i t ' s not -- 5 the Complaint i s n ' t very clear, and i t ' s not clear 6 7 t o me w h e t h e r o r n o t e i t h e r o f t h e t w o o r g a n i z a t i o n s , e n t i t i e s t h a t a r e a t i s s u e i n t h i s p o r t i o n o f t h e m o t i o n , t h a t ' s JDEE a n d 8 asc, w h e t h e r o r n o t t h e y w e r e e i t h e r o w n e r s - - a c t u a l o w n e r s o f 9 10 11 copyrights that are asserted or exclusive licensees of the copyrights. And even though you've kind of made d i f f e r e n t a r g u m e n t s , i t s e e m s t o me t h e o w n e r s h i p i s s u e c o m e s i n t o p l a y 12 with respect t o e i t h e r one of these e n t i t i e s . 13 14 15 16 17 S o w h e t h e r o r n o t we l o o k a t t h e e x t r a t e r r i t o r i a l a c t i v i t y o f JDEE o r t h e s t a n d a r d o r c a p a c i t y o f a s c , i t s e e m s t o me t h a t t h e C o m p l a i n t i s n ' t e n t i r e l y c l e a r . What's not clear is -- because there are multiple p l a i n t i f f s a n d m u l t i p l e d e f e n d a n t s i t ' s n o t c l e a r t o me w h i c h 18 p l a i n t i f f s are a s s e r t i n g which claims against which p a r t i c u l a r 19 Defendants. 20 21 22 23 24 Are a l l the p l a i n t i f f s asserting a l l the claims against a l l the defendants, and do they a l l have equivalent status? That's not clear at all. So t h a t ' s a d i f f i c u l t y I'm having with the copyright issue. MR. LANIER: Your Honor, then, i f I may, f i r s t 25 touching on the ownership question and then circling back, 4 ~ 1 b e c a u s e i t g e t s t o t h e q u e s t i o n o f w h e t h e r t h i s i s a 1 2 ( b ) (1) o r 2 12(b) (6) and whether i t even matters a t t h i s stage, i t ' s 3 4 i m p o r t a n t t o l o o k a t t h e t w o d i f f e r e n t p a r t i e s , JDEE a n d OSC, separately, because they were in a different position. That's 5 why we s p l i t o u r m o t i o n a s t o t h e m . 6 OSC i s n o t n o w a n d n e v e r h a s b e e n a n o w n e r o r 7 exclusive licensee of any of the copyrights at issue. 8 There's no dispute about that fact. 9 I t i s n o t now a n e x c l u s i v e l i c e n s e e . I t i s n o t now an owner. I t has never been an So the 10 owner and i t has never been an exclusive licensee. 11 only -- so from our perspective that ends i t . 17 U.S.C. 501(b) makes i t very c l e a r t h a t only the o w n e r o r e x c l u s i v e l i c e n s e e may b r i n g s u i t . Then t h e r e ' s a 12 13 14 r e l a t e d question o f , i f I'm the owner today may I reach back 15 and a s s e r t claims based on conduct t h a t occurred before I 16 became an owner? 17 18 That's a different issue. They are trying to conflate these issues for reasons I ' l l explain in a moment. But the core point as to 1 9 OSC i s t h a t i t i s n o w n o t a n d n e v e r h a s b e e n a n o w n e r , a n d 20 21 22 23 24 25 there's no dispute about that. In fact, the allegations in P l a i n t i f f s ' C o m p l a i n t a r e t h a t OSC i s a s u c c e s s o r - i n - i n t e r e s t to parties that have been owners. That's, then, where the issue comes about p o t e n t i a l l y reaching back. W h a t P l a i n t i f f s a l l e g e , a n d a s a m a t t e r o f f a c t we d o n ' t d i s a g r e e w i t h t h e m , i s t h a t OSC i s a s u c c e s s o r - i n - i n t e r e s t 5 4IJ 1 2 3 4 5 to some of the corporations t h a t were collapsed together to form the current Oracle Corporation. One b r i e f word o f background, your Honor. You m a y r e c a l l t h a t though t h i s i s Oracle versus SAP, t h e software t h a t ' s a t issue here was developed by other companies, for Oracle acquired 6 t h e m o s t p a r t P e o p l e S o f t a n d JD E d w a r d s . 7 t h o s e c o m p a n i e s i n e a r l y 2 0 0 5 a r o u n d t h e t i m e t h a t SAP 8 a c q u i r e d t h e TomorrowNow c o m p a n y . Over the years, 9 principally in 2005, Oracle then took steps to organize i t s 10 corporate ownership together. S o OSC i s a r e s u l t o f t h a t . That is normal in the course of 11 Nothing untoward about t h a t . 12 mergers and a c q u i s i t i o n s . 13 14 OSC i s t h e r e s u l t o f t r a n s f e r r i n g n o n - I P a s s e t s - - n o i n t e l l e c t u a l p r o p e r t y - - b u t a s s e t s t o f o r m w h a t ' s now c a l l e d A n d how i t b e c a m e O r a c l e C o r p o r a t i o n t o OSC I d o n ' t t h i n k 1 5 OSC. 16 matters for purposes of t h i s motion. 17 18 B u t t h e c o r e p o i n t f o r OSC a n d w h y i t ' s a 1 2 ( b ) ( 6 ) m o t i o n i s t h a t i t i s n o t now a n d n e v e r h a s b e e n a n o w n e r o r So from our 19 exclusive licensee of any copyright i n t e r e s t s . 20 p e r s p e c t i v e i t s i m p l y d o e s n o t h a v e s t a n d i n g . 21 22 23 24 25 question. MR. LANIER: Plaintiffs argue that because i t is a successor-in-interest -- I'm sorry, your Honor. THE COURT: Standing i s more a j u r i s d i c t i o n a l Standing for -- copyright standing is 6 1 t y p i c a l l y t r e a t e d as an issue t o be resolved on 12 (b) (6), your A l l t h e c a s e s t h a t we p u t b e f o r e y o u r H o n o r t r e a t T h a t ' s why t h e r e ' s a 2 Honor. 3 4 copyright standing as a 12(b) (6) i s s u e . l i t t l e b i t d i f f e r e n t i s s u e w i t h JDEE, w h e r e i t ' s a q u e s t i o n o f 5 JDEE p u r p o r t s t o b e a n e x c l u s i v e l i c e n s e e , a n d i t ' s a q u e s t i o n 6 of where i t s rights exist. 7 8 9 10 11 12 13 14 That's typically treated as a jurisdiction question, whereas copyright standing is to be t r e a t e d under 12(b) (6) for resolution. THE COURT: MR. LANIER: More as an element of the claim. Exactly right, your Honor. I t ' s an And the p a r t i e s agree the i s s u e i s r i p e element of 17 U.S.C. 501(b), an owner o r e x c l u s i v e l i c e n s e e may bring suit only an owner or exclusive licensee. So what Oracle does in i t s opposition to the motion 1 5 o n OSC i s t o s a y , " W e l l , i t ' s a s u c c e s s o r - i n - i n t e r e s t , 16 17 18 19 therefore i t acquired the right to sue for past infringement when i t acquired a l l these other a s s e t s , and as a r e s u l t i t can sue. II The response to that, your Honor, i s in addition to 20 21 22 23 24 25 the cases t h a t are i n our papers - - i s 17 U.S.C. 501(b) -- only an owner o r e x c l u s i v e l i c e n s e e may i n i t i a t e s u i t . there in the statute. I t ' s very clear. It's right Oracle Systems C o r p o r a t i o n , OSC i s n o t a n o w n e r o r e x c l u s i v e l i c e n s e e . So the question of whether i t could reach back to f i l e suit based on pre-existing infringement is irrelevant, ..------------_..-_------------------- 7 ~ 1 because i t can't file suit for copyright infringement. 2 doesn't have standing. 3 4 5 It I t ' s important to note that Oracle International Corporation -THE COURT: But as the successor-in-interest didn't i t 6 acquire such standing? 7 MR. LANIER: I t did not, your Honor, for two reasons. 8 Before the creation -- or the transfer or the 9 c r e a t i o n o f t h e c u r r e n t aBC - - a n d i t h a d a d i f f e r e n t n a m e a t 10 the time all of the intellectual property rights of the 11 p r e - e x i s t i n g companies were t r a n s f e r r e d t o Oracle 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I n t e r n a t i o n a l Corporation, OIC. That's one of the named We a r e n o t c h a l l e n g i n g Plaintiffs on the copyright claim. i t s standing or the Court's subject matter jurisdiction on its claims. OIC r e m a i n s i n t h e c a s e . OIC t o o k t r a n s f e r o f a l l t h e I P i n t e r e s t s o f t h e c o m p a n i e s t h a t t h e n b e c a m e aBC. What's missing is an express assignment of the right to sue for past causes of action. assignment. your Honor. THE COURT: Why i s i t c r i t i c a l t h a t t h a t k i n d o f No o n e r e c e i v e d t h a t And h e r e ' s the - - two of the cases - - I'm sorry, express assignment have been made? MR. LANIER: Because the law of this circuit as applied in this district in the Co-opportunities case, relying o n t h e De S i l v a c a s e , m a k e s i t v e r y c l e a r t h a t t h e r e c a n n o t b e a 8 1 suit for infringement prior to the time one takes ownership or 2 becomes an exclusive licensee of an express, written assignment. 3 The reason for t h a t i s in the s t a t u t e , your Honor, 4 because the s t a t u t e U.S.C. 17 501 (b) not only says t h a t only 5 a n o w n e r o r e x c l u s i v e l i c e n s e e may f i l e a s u i t , i t s a y s may 6 f i l e s u i t for infringement t h a t occurred while i t was an S o t h e l a w i s - - a g a i n t h e C o - o p p o r t u n i t i e s a n d De 7 owner. 8 9 10 Silva cases are the key cases, and they are in our papers -requires an express assignment. Now, p a r t o f t h e c o n f u s i o n m a y b e t h a t s o m e t h i n g 1S 11 missing here. 12 13 14 15 16 There i s no express assignment of the right to sue for p a s t infringement t o Oracle I n t e r n a t i o n a l Corp., OIC. T h a t ' s t h e p a r t y t h a t we d o n ' t c h a l l e n g e i t s s t a n d i n g a t t h i s point. I t ' s in the case. I t owns the copyrights today. It didn't receive an assignment for the right to sue for past infringement. JDDE d i d n o t - - w e ' l l t u r n t o JDDE i n a S o we d o n ' t k n o w i f a n y o n e r e c e i v e d a n 17 moment. 18 OSC d i d n o t . assignment for the right to sue for past infringement, but 1 9 OSC d i d n o t . 20 P l a i n t i f f s ' opposition concedes that point and argues that i t got the assignment by virtue by operation 21 22 23 of law by virtue of acquiring the companies that had held that right. And again, your Honor, I would p o i n t t o the 24 25 C o - o p p o r t u n i t i e s a n d De S i l v a c a s e s t h a t e x p r e s s l y h o l d e v e n in the case of what they called a quote, "family", closed 9 ~ 1 quote of companies that the assignment must be expressed and 2 3 4 i t must be in writing. S o OSC d o e s n ' t h a v e s t a n d i n g . But your Honor, from our perspective a l l of that that argument i s i r r e l e v a n t , because 17 U.S.C. 501(b) says 5 o n l y a n o w n e r o r e x c l u s i v e l i c e n s e e may i n i t i a t e a s u i t , a n d 6 there i s no dispute or complaint -- the allegations of the OSC i s n o t a c u r r e n t o w n e r o r 7 Complaint are crystal clear: 8 exclusive licensee. 9 entities. 10 I t is a successor-in-interest to such S o t h a t ' s t h e i s s u e w i t h OSC. It's typically treated l I o n 12(b) (6). 12 13 14 15 Honor. 16 17 18 There's no dispute about that in this case, and I t ' s a matter of standing as an t h a t ' s how t h e c a s e i s t r e a t e d . element of the claim. T h e JDDE i s s u e - - I ' m p r e p a r e d t o t u r n t o t h a t , y o u r THE COURT: MR. LANIER: Sure. Thank you. JDEE i s s l i g h t l y d i f f e r e n t , a n d t h a t ' s b e c a u s e JDEE i s a p a r t y t o a c o n t r a c t , w h i c h we p u t I t ' s Exhibit One t o the Lanier 19 on the record before your Honor. 20 21 22 23 Declaration. JDEE i s a n e x c l u s i v e l i c e n s e e t o d a y , a t p r e s e n t . And t h a t ' s i n - - y o u ' l l s e e p a r a g r a p h 6 . 2 o f L a n i e r Exhibit One, and that1s the -- I ' v e forgotten the name. think i t ' s a research and cooperation agreement. Exhibit One, paragraph 6.2. I ~ 24 25 But Lanier 10 ~ 1 2 But i t ' s worth -- I ' l l draw your Honor's attention to one specific provision to that paragraph to point out, as 3 we p o i n t o u t i n o u r p a p e r s , t h a t JDEE h a s a r i g h t - - h a s a n 4 5 exclusive -- and then there are a variety of other words l i c e n s e i n t h e c o u n t r i e s s e t f o r t h i n E x h i b i t A. And 6 E x h i b i t A p r o v i d e s t h a t JDEE h a s i t s e x c l u s i v e r i g h t i n t h e 7 c o u n t r i e s t h a t a r e c o l l o q u i a l l y c a l l e d EMEA, E u r o p e , M i d d l e 8 East and Africa. 9 I t does not have any rights in the United States. Its rights are as set 10 There's no dispute about t h a t f a c t . 11 12 13 14 15 16 17 18 forth in paragraph 6.2. I t ' s also, i f your Honor i s going to study t h i s a l i t t l e after, worth looking at paragraphs 6.1.1 and 6.1.2 of t h a t same agreement, Lanier Exhibit One. And those specifically provide that the reason for this structure 6.1.1 makes i t very clear that the reason for the structure is in order to assure enforcement of intellectual property rights. So the p a r t i e s to t h i s agreement had t h i s issue in 19 mind. 20 21 22 23 24 25 the fight. S o n o w h e r e ' s w h a t ' s n o t d i s p u t e d , a n d t h e n we g e t t o W h a t ' s n o t d i s p u t e d i s t h a t JDEE i s a p a r t y t o t h i s agreement, and i t has the exclusive license set forth in 6.2, and that exclusive license gives i t limited rights but exclusive r i g h t s i n EMEA, o u t s i d e t h e U n i t e d S t a t e s . Now, w h y i t i s a q u e s t i o n o f j u r i s d i c t i o n a s 11 ~ 1 o p p o s e d t o s t a n d i n g , y o u r H o n o r , i s b e c a u s e JDEE h a s a n 2 exclusive license. So i t meets -- on the surface of i t i t 3 meets the f i r s t - - the f i r s t element i s 17 U.S.C. Section 501 4 5 (b). I t i s an owner or exclusive licensee today. T h e p o i n t , t h o u g h , i s t h a t JDEE d o e s n o t h a v e a n y And i t ' s i m p o r t a n t t o make a 6 rights in the United States. 7 distinction here. This -- our argument i s not that i f you hold Let's say just 8 the U.S. rights -- and l e t ' s take a scenario. 9 h y p o t h e t i c a l l y f o r a r g u m e n t JDEE h e l d U . S . r i g h t s , a n d I 10 11 12 13 14 15 16 import - - I copy some of i t s software and I export i t to France. Our argument i s not that that action i s beyond the jurisdiction of this Court. the damage claim. There are other challenges to That is not our argument, because in that They have a right t h a t ' s They can come before I want this s c e n a r i o JDEE h a s U . S . r i g h t s . recognized under the U.S. copyright. your Honor and say, "I've got a complaint. 1 7 r e l i e f , " a n d t h e n we c a n a r g u e o v e r t h e d a m a g e s a n d 18 19 20 21 22 23 24 25 States. everything else, whether i t ' s copyrightable and a l l that stuff. This is different. JDEE h a s n o r i g h t s i n t h e U n i t e d Therefore, as the Allarcom and L.A. News cases - - i t ' s useful to c o n t r a s t , compare those two cases - - make c l e a r i t has i t s rights cannot be infringed in the United States. If i t s rights cannot be infringed in the United States no active infringement can be completed in the United States, i t s claims .-------_ _. 12 ~ 1 2 are beyond the reach of this Court. I t ' s an issue of e x t r a t e r r i t o r i a l i t y , which as the Silver and Sybersounds cases 3 make i t c l e a r , t h e r e ' s 80 years of j u r i s p r u d e n c e , the Copyright 4 Act does not apply e x t r a t e r r i t o r i a l l y . 5 And i t ' s worth f o r a moment touching on the Allarcom 6 and L.A. News cases t h a t are - - again, t h a t are i n our papers, 7 your Honor. Both of those -- they give you the opposite sides They get to the same p r i n c i p l e . 8 of the same story. 9 In L.A. News the p l a i n t i f f t h e r e had r i g h t s 10 worldwide r i g h t s , therefore they had r i g h t s within the United 11 States. And somebody took some videotapes - - copyrighted "We've got a That I s Your 12 videotapes and exported them, and they said, 13 14 copyright complaint." extraterritorial. The defendants said, "No. You s e n t i t o u t o f t h e c o u n t r y . 15 damages happened there." 16 17 And t h e r e t h e c o u r t s a i d , "Well, no, because they had rights in the United States." The question was not the locus of the conduct. That's the issue -- U.S. It 18 was the locus of the r i g h t s . 19 20 21 22 23 rights. Allarcom -- THE COURT: copyrights. MR. LANIER: THE COURT: MR. LANIER: The copyrights, though, are U.S. Correct. There's no dispute about that. Absolutely right. ~ 24 25 13 ~ 1 THE COURT: A n d t h e a g r e e m e n t p e r m i t s JDEE t o 2 distribute outside of the United States. 3 MR. LANIER: The agreement -- t h e r e ' s two points -There's two points to follow up on on 4 you're absolutely right. 5 that vein. 6 T h e a g r e e m e n t d o e s n ' t j u s t s a y , " I g i v e y o u , JDEE, II 7 U. S . c o p y r i g h t s . I t says, " I give you the rights to a l l i t could be patent rights, So i t gets 8 this intellectual property" 9 trademark r i g h t s , know-how, e t cetera, e t c e t e r a . 10 11 12 13 14 a variety of intellectual property rights. A n d JDEE i s conferred one and only one right, which i s the right to d i s t r i b u t e a n d t o m a k e s o m e c h a n g e s t o d i s t r i b u t e i n EMEA, outside the United States. So yes, your Honor, t h e r e ' s no question t h a t for 1 5 p u r p o s e s o f t h i s c a s e we a r e t a l k i n g a b o u t m a t t e r s t h a t t h e y 16 17 18 19 20 21 22 23 claim to be covered by the U.S. copyrights. fights about that later for this motion. at issue. But the question i s not, where did the conduct o c c u r , w h i c h i s w h y a l l o f t h e p a g e s a n d p a g e s a b o u t who s h o t J o h n a n d who d i d w h a t w h e r e i s i r r e l e v a n t t o t h i s m o t i o n . I t ' s not where the conduct occurred. motion where the harm occurred. I t ' s not even for this There will be U.S. copyrights are I t ' s where the rights exist. I t may n o t c o m e ~ 24 25 A n d JDEE h a s n o r i g h t s i n t h e U n i t e d S t a t e s . before this Court on a copyright claim. 14 1 And a f i n a l n o t e , y o u r H o n o r , I m e n t i o n e d t h a t t h e issue about, is this 12(b)(1)? jurisdictional or is i t not? From our perspective two things are important: first is that the issue doesn't matter. issue is ripe. They concede the The only impact The Is i t 12(b)(6)? Is it 2 3 4 5 6 7 I t ' s ready for resolution. i t might have on the Court's ruling i s whether you consider 8 a l l of that other evidence, which i s irrelevant on the merits 9 anyway. 10 11 12 13 14 15 16 But the other point is that i t is verbally treated as a question of subject matter jurisdiction. The Arbaugh case dealt with T i t l e VII issues, where the number of employees of the companies -- I'm sure your Honor i s familiar - - the number of employees of the company i s an aspect of the claim. And i n t h a t c a s e t h e Supreme C o u r t a n d J u s t i c e 17 Ginsburg held t h a t t h a t issue was not a question of 18 jurisdiction. I t was a question - - o r i t was not a question I t was a question of the element of the 19 of j u r i s d i c t i o n . 20 21 22 23 24 25 different. claim. And c r i t i c a l l y t h e p r o c e d u r a l p o s t u r e was v e r y In Arbaugh, t h i s issue was coming up a f t e r a jury v e r d i c t where a 12(b) (6) motion would have been t o o l a t e anyway. So i t r e a l l y mattered what the outcome was there. Here, though, a l l the cases treat t e r r i t o r i a l i t y as 15 ~ 1 a question of jurisdiction, rights or rights under the 2 Copyright Act, and even cases subsequent to Arbaugh, cases 3 4 decided the same year but subsequent to Arbaugh in t h i s d i s t r i c t , the Williams case, for example, t r e a t the question So i t 5 of territoriality as a question of jurisdiction. 6 7 a r i s e s under 12 (b) (1) . Regardless, your Honor, from our perspective again, i t d o e s n ' t m a t t e r whether i t ' s 12 (b) (1) o r 12 (b) ( 6 ) . ripe and appropriate for resolution on this motion. It is We 8 9 10 brought one motion t h a t asserted theories up - - two d i f f e r e n t 11 12 13 14 15 16 17 18 theories under 12, but separated i t out as to the two different parts. THE COURT: All right. So you're e s s e n t i a l l y relying o n 1 2 ( b ) ( 6 ) f o r OSC a n d 1 2 ( b ) ( 1 ) f o r J D E E ? MR. LANIER: THE COURT: MR. HOWARD: That's correct, your Honor. All right. Your response? Good morning, your Honor. L e t me s t a r t w i t h t h e q u e s t i o n t h a t y o u s t a r t e d 19 with, which i s why the t h r e e P l a i n t i f f s , and then I ' l l 20 21 22 23 24 25 respond t o Mr. Lanier. it. A p l a i n t i f f has standing i f i t i s the owner or the exclusive licensee. plaintiff. OIC i s t h e owner, and s o i t i s a p r o p e r I t h i n k Mr. Lanier a c t u a l l y covered It exclusively licensed certain of its copyrights t o J D E E , a n d s o a s t h e e x c l u s i v e l i c e n s e e , JDEE i s a l s o a 16 ~ 1 proper copyright plaintiff. And t h e r e ' s b e e n n o c h a l l e n g e t o 2 JDEE's standing before the Court. 3 OSC - - a n d I ' m g o i n g t o s t a r t w i t h OSC b e c a u s e M r . L a n i e r d i d - - OSC h a s s t a n d i n g a s t h e s u c c e s s o r - i n - i n t e r e s t to owners of accrued, preexisting claims for copyright infringement. In their papers and here today there is looseness 4 5 6 7 with which Section 501 i s being described. 8 9 W h a t 5 0 1 s a y s i s t h a t , "An o w n e r o r e x c l u s i v e l i c e n s e e may" - - a n d now I ' m q u o t i n g - - " i n s t i t u t e a n a c t i o n f o r infringement of that particular right committed while he or she is the owner of i t . " So OSC's predecessors-in-interest - - t h e r e ' s three companies were owners of a right under a copyright between 10 11 12 13 14 15 16 2002 and 2005. We h a v e a l l e g e d t h a t t h o s e r i g h t s h e l d b y t h o s e entities were infringed during that time period, in other 17 words, in the language of 501 while they were the owners of 18 it. THE COURT: B u t c l e a r l y n o t w h i l e OSC w a s a n o w n e r , 19 20 21 22 23 because they succeeded in interest after the copyright alleged infringement occurred. MR. HOWARD: Exactly right. So t h e r e ' s no dispute t h a t there was a claim for copyright infringement t h a t was held by the predecessors-in-interest right up u n t i l 2005; right? Then what happens in 2005 i s t h a t those ~ 24 25 -- - - - - - - - - - - - - - - - - _ . _ - _ . __ .. _ - - _ . _ - - - - - - - - _ . . . _- - --- - . _ - - - - - _ . . . _ - - - - - - - _ .. _ - - - - 17 4It 1 predecessors-in-interest transfer their ownership in the 2 copyrights t o OIC, but they do not t r a n s f e r t h e i r ownership of 3 4 5 6 agreement? 7 argument. the claims that had arisen and which had given them standing in the pre-2005 time period. THE COURT: Would they s t i l l have standing under t h a t I mean, e i t h e r -- I don't quite understand your Either they retain the express right to sue, in which 8 case they would no longer be owners as of the date t h i s s u i t was 9 f i l e d , o r t h e y t r a n s f e r r e d i t a n d OSC w o u l d b e t h e o w n e r . 10 11 12 13 I d o n ' t s e e how a l l t h r e e c o u l d p o s s i b l y b e i n t h e same position. MR. HOWARD: Well, in fact -- well, no. The cases d i s t i n g u i s h - - and Mr. Nimmer d i s t i n g u i s h e s i n h i s t r e a t i s e 14 between the ownership of the r i g h t and the a b i l i t y t o bring a 15 16 17 18 19 20 21 22 23 claim for infringement of the r i g h t while the e n t i t y owned i t . And s o , f o r e x a m p l e , t h e S i l v e r s c a s e , N i n t h Circuit case, distinguishes between the conveyance of a copyright and the conveyance of a right to recover for infringement of that copyright. T h a t c a s e a p p r o v i n g l y c i t e s t h e ABKCO c a s e , a n d t h e language of that case is "that the assignor," which in this c a s e a r e t h e p r e d e c e s s o r s - i n - i n t e r e s t t o OSC: -- "the assignor retains the right to bring actions accruing during its ownership of the right even i f the actions 4It 24 25 18 1 are brought subsequent to assignment. That's a quote. So - THE COURT: II 2 3 4 S o i f t h e a s s i g n o r r e t a i n s t h e r i g h t s , how 5 d o e s t h a t q u a l i f y OSC a s a s u c c e s s o r - i n - i n t e r e s t i n h a v i n g t h e 6 same r i g h t s ? 7 standing. 8 MR. HOWARD: S o l e t me t h e n , p l e a s e , g e t t o t h a t and I don't I d o n ' t u n d e r s t a n d how b o t h c a n b e i n t h e s a m e 9 point, because I wanted to f i r s t establish that 10 think there's any dispute about i t -- that the 11 p r e d e c e s s o r - i n - i n t e r e s t retained the r i g h t t o sue even a f t e r 12 13 14 15 16 17 18 19 20 21 22 23 24 25 they t r a n s f e r r e d the copyrights to OIC. S o w e ' r e now i n M a r c h 2 0 0 5 . Ole holds the copyrights, and the predecessors-in-interest have retained the right to sue. The only question then to your Honor's question i s -- the only question is what happened to that r i g h t to sue when the p r e d e c e s s o r s - i n - i n t e r e s t merge into ose and cease to exist? air? T h a t ' s what Mr. Lanier i s suggesting; t h a t t h e r e i s a claim for infringement, that there i s an infringer, and that there is an action that can be brought, and that simply by the result of merger that claim just evaporates into thin a i r and suddenly nobody has i t . THE COURT: Do y o u d i s a g r e e t h a t i t h a s t o b e Does the claim j u s t evaporate into thin 19 ~ 1 expressly transferred or retained? MR. HOWARD: Yes and no. L e t me e x p l a i n t h a t . 2 3 4 5 I agree t h a t i t has to be expressly t r a n s f e r r e d when the transferor continues to exist. Co-opportunities case to your Honor. Mr. Lanier c i t e d the In the Co-opportunities 6 case the ownership was transferred but not the r i g h t to sue. 7 Judge Patel then allowed the assignor subsequently three years 8 l a t e r t o make a second assignment s o l e l y of the r i g h t to sue, 9 and then the assignee was held to have the a b i l i t y to bring t h a t 10 p r e e x i s t i n g claim. 11 The crucial difference there and the crucial d i f f e r e n c e i n t h e De S i l v a c a s e t h a t was a l s o c i t e d t o y o u r Honor i s t h a t somebody was there t o make t h a t second assignment. Here there i s no prior entity. They have -- the 12 13 14 15 16 17 18 19 20 21 agreements that have been provided to your Court say they have ceased to exist. So everything t h a t i s about them, everything t h a t t h e y h a v e h a s b e e n m e r g e d i n t o OSC. And i t would d e f e a t j u s t i c e f o r s u r e - - and i t certainly i s n ' t part of merger law -- that the claims that ABKCO a n d C o - o p p o r t u n i t i e s a n d S i l v e r s a n d N i m m e r a n d 22 23 24 25 everybody say, the claims that s t i l l existed because they had accrued a t the time t h a t those e n t i t i e s owned the copyrights, i t would defeat justice to say that they just disappeared. Of course they d o n ' t . T h e y c o n t i n u e w i t h t h e p e r s o n who 20 1 succeeds to those entities. 2 3 So i t ' s not a case THE COURT: And w h a t d o - - w h i c h o f t h e c a s e s 4 5 specifically says that? MR. HOWARD: Your Honor, no case has been cited to you 6 by either side where the transferring entity has ceased to 7 exist. 8 But that is the dispositive factual difference. If i t is true that the assignor retains the right And t h e 9 to sue, then there's -- then that right is there. 1 0 d i s t i n c t i o n b e t w e e n C o - o p p o r t u n i t i e s a n d De S i l v a , w h e r e 11 12 13 14 15 16 somebody i s there, a corporation or a sole proprietor i s t h e r e who c a n s i g n t h e c a p t i o n a n d b r i n g t h e c l a i m i n t o y o u for resolution, the difference between those cases and this o n e i s t h a t n o w n o b o d y h a s t h a t i f i t ' s n o t OSC. And o f c o u r s e i t h a s t o b e OSC b e c a u s e t h e y ' v e a c q u i r e d e v e r y t h i n g . THE COURT: Such result could have been avoided 17 obviously by having express conveyance a t the time of the 18 merger; correct? 19 20 21 22 23 24 25 MR. HOWARD: I s u p p o s e t h a t i f we w a n t e d t o p u t o u r s e l v e s b a c k i n t o t h e C o - o p p o r t u n i t i e s t i m e p e r i o d we c o u l d have done that, but i t ' s different. that because a merger is everything. There i s no reason to do There'S no question as There i s no there i s when the t r a n s f e r o r continues to e x i s t . question that something has been retained. retained. Nothing has been In a merger nothing gets l e f t by the wayside because 21 1 everything that is held by that entity passes through to the 2 successor- in- interest. 3 The same c a n ' t be said for the cases where t h a t Then the 4 entity or sole proprietor continues to exist. 5 question has to be asked: Did they actually transfer the 6 right to sue in addition to the copyright? 7 THE COURT: All right. L e t ' s move on. 8 9 10 Did you want to respond? MR. LANIER: 1 7 u . S . C. 5 0 1 ( b ) s a y s : All of that s t i l l doesn't matter because "The legal or beneficial owner of an 11 exclusive r i g h t under a copyright f" and i t goes from there. 12 13 S o t h e p e r s o n t h a t may c o m e b e f o r e y o u r H o n o r a n d seek redress under the copyright laws must be a legal or There i s no question that a t the present 14 b e n e f i c i a l owner. 15 16 17 18 19 20 21 22 23 24 25 and say f t i m e OSC i s n e i t h e r a l e g a l o r b e n e f i c i a l o w n e r o f a n exclusive right. licensee. All of the cases that permit someone to reach back "I have the right to sue for past infringement f " I t ' s not the owner. I t ' s not the exclusive involves someone who's an owner or exclusive licensee. r e a s o n t h e l a w p e r m i t s t h a t i s b e c a u s e I m i g h t own t h e The copyrights -- I might exclusively license them to your Honor. E i t h e r o f u s c o u l d s u e my c o l l e a g u e o v e r t h e r e . q u e s t i o n i s who g e t s t o s u e f o r t h e o l d s t u f f ? Then the That's where - - t h a t ' s where you might have - - t h a t ' s why you need 22 ~ 1 2 3 4 to do these assignments. But in this circumstance the dispositive fact t h a t ' s a d m i t t e d i n t h e C o m p l a i n t i t s e l f i s t h a t OSC i s n o t the legal or beneficial owner a t the present time. I t does 5 not have standing, period. 6 MR. HOWARD: Y o u r H o n o r , may I j u s t s a y o n e o t h e r 7 thing? 8 I f t h a t - - t h a t statement ignores Nimmer, which Nimmer says: 9 c i t e s ABKCO. 10 11 12 13 14 15 16 17 "Absent retroactive grant to the infringer only the grantor, not the grantee, has standing to sue for pre-grant infringement." So i t j u s t i s n ' t the case t h a t you have to currently at the time you bring your s u i t be the owner of the copyright. clear. N i m m e r i s c l e a r , ABKCO i s c l e a r , a n d S i l v e r s i s You c a n b r i n g a c l a i m i f y o u w e r e t h e o w n e r , i n t h e 18 words of 501, " a t the time i t accrued." 19 20 21 22 23 24 25 H e r e w h e n t h e m e r g e r i n t o OSC h a p p e n e d n o b o d y k n e w about these claims. THE COURT: MR. HOWARD: Okay. All right. We n e e d t o m o v e o n . S o I ' l l a d d r e s s t h e JDEE i s s u e n e x t . JDEE h a s a U . S . r i g h t . Your Honoris exactly right. I t is a U.S. copyright that has been exclusively licensed to i t , and that i s a U.S. right. I t ' s not a European right; i t ' s a 23 1 U.S. right. 2 The question, then, i s not what the geographic scope 3 of t h a t r i g h t i s - - and i t ' s much broader than what Mr. Lanier 4 said. He s a i d t h e r e ' s o n l y o n e a n d o n l y o n e r i g h t , w h i c h i s That's not so. The right i s t o modify, develop, 5 distribution. 6 reproduce, make, have made, s e l l -- a l l of the r i g h t s that go 7 w i t h t h e U. S . c o p y r i g h t . 8 The law i s very clear. I t is not the geographic It 9 scope of that right. 10 11 I t is the location of the conduct. is the location where the regulated conduct occurs. Mr. Lanier has overruled the Ninth C i r c u i t ' s affirmance of your Honor in the Blazevska case, where you held t h a t i t l s the l o c a t i o n of the conduct t h a t matters when you're looking at the extraterritorial bar to a statute. H e r e we h a v e a l l e g e d t h e c o n d u c t t h a t v i o l a t e s t h e That 12 13 14 15 16 U.S. r i g h t and the scope of the license I j u s t read. 17 18 conduct was copying in the United States, in Texas, of U.S. r i g h t s t h a t were e x c l u s i v e l y licensed t o JDEE, and then the 19 exploitation of t h a t infringing act into JDEEls t e r r i t o r y . 20 21 And i f t h e r e w a s a n y d o u b t a b o u t i t u n d e r Blazevska, under Massey on which your Honor also relied in 22 23 24 25 t h a t d e c i s i o n , a s we p o i n t e d o u t i n o u r o p p o s i t i o n , a n d w h i c h got no response i n the reply and no response now, the Congress has j u s t amended the Copyright Act, and i t has made c l e a r in Section 602 t h a t the exportation of infringement i s ,--------------------------------------------------------------------------- - - - - 24 4It 1 actionable in the United States. 2 have alleged here. 3 4 A n d t h a t i s a l l t h a t we There was copying t h a t infringed JDEE's r i g h t s -their U.S. rights. I t w a s e x p o r t e d i n t o E u r o p e , w h e r e JDEE That conduct that 5 has the exclusive license to distribute. 6 we h a v e a l l e g e d i s i n f r i n g i n g o c c u r r e d i n t h e U n i t e d S t a t e s , 7 and i t is actionable, and I don't think there can be any 8 question about that. 9 I f y o u r H o n o r w o u l d l i k e me t o a d d r e s s t h e 1 2 ( b ) ( 1 ) 10 versus 12(b) (6) issue I'm c e r t a i n l y happy t o do t h a t as well. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I t was brought under 12(b) (1). I t ' s not brought under 12(b) (6). I t is not properly brought under 12(b) (1), which I think is sufficient at this point to deny the motion. The Arbaugh case sets forth -- the U.S. Supreme Court sets forth a bright line rule. the Supreme Court. That's the language of And t h e b r i g h t l i n e r u l e i s t h a t u n l e s s Congress i n a federal s t a t u t e has s p e c i f i c a l l y made extraterritoriality a jurisdictional issue, then i t ' s not. I t is a criteria, an element of the claim that's properly treated under 12(b) (6). 12 (b) (1) . The Litecubes case, which i s a federal c i r c u i t case, applies Arbaugh to the Copyright Act and properly so, because the Copyright Act, as did the Title VII in Arbaugh does not have that statement of Congressional intent. So the motion i s not proper under 25 1 Mr. Lanier r e f e r s t o the Williams case, which was 2 Judge Breyer's affirmance of Magistrate James's report, and 3 in that case I j u s t wanted to point out to your Honor t h e r e ' s 4 no mention a t a l l of Arbaugh, and in fact the reference by 5 Judge Breyer to Judge James occurred prior to the Arbaugh 6 decision. J u d g e J a m e s i s s u e d h e r OSC p r i o r t o t h e A r b a u g h 7 decision, and I think i t ' s fairly clear from the decision 8 9 that neither the parties nor the court were considering Arbaugh at the time of that decision. 10 THE COURT: All right. All right. We n e e d t o m o v e a l o n g t o t h e 11 preemption argument. 12 13 14 I'm a l i t t l e unclear about what's in dispute. m e a n , i t s e e m s t o me t h a t t h e - - I m e a n , t h e D e f e n d a n t s ' argument i s that the state claims for the most part are I 15 preempted by the Copyright Act. 16 There i s a statement, however, in each of the 17 various d i f f e r e n t arguments t h a t to the extent t h a t each 18 claim r e l i e s upon the Copyright Acts, that they are 19 preempted, but to the extent that there are other 20 21 22 23 24 25 allegations, and the other allegations are kind of these misrepresentation, fraud, deceit claims, that there isn't. S o i t s e e m s t o me y o u a l l a r e i n a g r e e m e n t . I am n o t s u r e t h a t I c a n a r t i c u l a t e , b e c a u s e I ' m not sure you a l l have articulated exactly what the something extra is with respect to each of the claims. 26 1 MR. LANIER: Thank you, your Honor. 2 I t h i n k we a r e i n a g r e e m e n t - - a n d i t ' s i m p o r t a n t t o s t a r t t h e r e a n d t h e n t o p o i n t o u t w h y - - i f we a r e i n a g r e e m e n t w h y d o we e v e n n e e d t o h a v e t h i s m o t i o n ? thought probably crossed your Honor's mind. We a r e i n a g r e e m e n t - - p a r t i e s a g r e e t h a t t o t h e That 3 4 5 6 7 extent the various state law claims are based on conduct of 8 acts of alleged copyright infringement they are preempted by 9 10 11 the copyright laws. THE COURT: MR. LANIER: Right. Now, a s a l l o f t h e d e c i s i o n s b e f o r e y o u r 12 13 14 15 16 17 18 19 20 21 22 23 Honor have pointed out -- well, one other point we're in agreement on - - i n f a c t , they are so much i n agreement on i t t h a t i n the Third Amended Complaint P l a i n t i f f s t e l l you t h a t they actually carved those allegations out of those various different claims. 'Cause i f you look at the incorporation paragraph at the beginning of every state law cause of action where i t s a y s , "We r e l y o n t h e s e p a r a g r a p h s , " t h e y c h o p o u t t h e allegation, the specific paragraphs that assert the cause of action for copyright infringement. So they a r e so much i n agreement with us that they say they did i t . T h e p r o b l e m , a n d w h y we h a d t o b r i n g t h e m o t i o n , i s that i s n ' t actually what happened, because each and everyone of the s t a t e law claims i s based on paragraphs that allege 24 25 27 ~ 1 acts of copyright infringement, even i f they are not 2 expressly based on the claim of copyright infringement. 3 4 L e t me j u s t g i v e y o u r H o n o r a c o u p l e o f e x a m p l e s . Paragraph 19, which is incorporated into everyone of the 5 state law claims, alleges illegal downloading and illegal 6 copying. Paragraph 101, which is incorporated into everyone 7 of the state law claims, further describes illegal 8 downloading. Paragraph 114, which i s incorporated in one of Paragraph 118 of the Third 9 them says "thousands of copies." 10 Amended Complaint, which i s a l s o incorporated i n t o those 11 12 13 14 state law claims -- i t ' s the basis of those claims -- talks about impermissible copying and the creation of derivative works. So each and everyone of the s t a t e law claims i s 15 based on a c t s of alleged copyright infringement and i s 16 preempted. 17 18 19 20 21 22 23 Now, w h y t h i s i s s u e i s a l w a y s t r i c k y a n d t r o u b l e s o m e i s because you can't just rely on broad labels -- preempted, therefore the whole claim goes. You h a v e t o , u n f o r t u n a t e l y , look at the specific conduct alleged. Every case that has been put in front of your Honor d i v e s down i n t o , w h a t f a c t s do t h e y a l l e g e ? you copied? Okay. That's preempted. 1S Do t h e y a l l e g e t h a t Do y o u a l l e g e t h a t t h e y ~ 24 25 did something that not protected by the copyright laws? That I s not preempted. 28 1 A n d i n o u r r e p l y b r i e f we t r y t o d o s o m e o f t h a t 2 work f o r y o u r Honor by - - your Honor may r e c a l l i n o u r r e p l y 3 brief we've actually taken the allegations that they relied 4 on in t h e i r various state law claims and aone 5 s t r i k e - t h r o u g h s , a n d we t h i n k t h i s s t u f f i s c o v e r e d b y t h e So I won't repeat a l l t h a t here. It's in 6 copyright laws. 7 our reply brief, your Honor. 8 T h e i m p o r t a n t p o i n t 1S t h i s : the issue. Labels don't decide They 9 10 11 12 13 They agreed with us on a l l of these points. agreed that you need to go claim by claim, conduct by conduct and decide, i s this preempted or not? Because as your Honor knows, a s t a t e law claim could attack a broad swath of activity. Fundamentally t h i s case i s about two things: It's 14 15 about whether TomorrowNow was p r o p e r l y on those P l a i n t i f f s ' computers, and there'S a variety of claims in the case not at i s s u e h e r e - - C o m p u t e r F r a u d a n d A b u s e A c t , C a l i f o r n i a CDAC, trespass to chattels -- that aren't at issue here. The other thing that t h i s case i s about i s copyright infringement. shouldn't have been done? Those claims are covered by the Copyright Act and they are prohibited. We've t r i e d in our reply b r i e f to say, Their biggest argument in What was done with the software t h a t 16 17 18 19 20 21 22 23 24 25 "This stuff is prohibited." response is to say, "well, use. " We d o n ' t s a y -- we s a y n o t 29 ~ 1 only that you copied and created derivative works and 2 distributed, which are a l l rights unequivocally covered by 3 4 5 the Copyright Act, but you also "used" the software. different. That's That's not preempted by the copyright laws. That's wrong for two reasons, your Honor, and the In Altera 6 Altera case, which is in the papers, i s key here. 7 8 the Ninth Circuit considered the preemption argument involving software, and the Ninth Circuit actually found no But i t ' s important t o look a t why i t did. lS 9 preemption. 10 11 12 13 14 15 16 17 18 In Altera what the Ninth Circuit did said you have to make t h i s d i s t i n c t i o n - - d i s t i n g u i s h between copying the software. That's an act of copyright infringement. If I make a copy and I give i t your Honor, t h a t ' s an a c t of copyright infringement i f I don't have permission to do i t . But i f I take the software and I run the software to r u n my b u s i n e s s - - I t a k e s o m e P e o p l e S o f t f i n a n c i a l s a n d I r u n my b u s i n e s s b a s e d o n t h a t a n d I d o n ' t p a y f o r i t , t h a t ' s n o t c o v e r e d b y t h e c o p y r i g h t l a w s - - my c o p y i n g , my d i s t r i b u t i o n , my 19 derivative works are. 20 21 22 23 So in Altera what the Ninth Circuit distinguished between was copying or other copyright-related a c t i v i t i e s with the software and use of i t s output. claims are not preempted. Those types of They are legitimately different. ~ 24 25 B u t e v e r y t h i n g - - a n d a g a i n we t o u c h e d u p o n t h i s i n our reply papers, your Honor -- everything that P l a i n t i f f s 30 1 say i s extra and different i s one of two things: It's either 2 a c c e s s t o c o m p u t e r s - - a n d we d o n o t c l a i m t h a t t h o s e c l a i m s 3 are preempted by the copyright laws. 4 never has been - - or i t ' s a use. 5 therefore i t ' s different." 6 That's not our motion, And t h e y s a y , " I t ' s u s e , But you have to look behind the label of "use" just like the Ninth Circuit did in Al tera and And i f u s e i s c o p y i n g , i f i t ' s 7 say, what does use mean? 8 creating a derivative work, i f i t ' s distributing, or the 9 other rights protected by the copyright laws then t h a t ' s 10 preempted. 11 12 13 So i t ' s unfortunately a preemption issue t h a t t h i s many s t a t e law claims c r e a t e s an i n c r e d i b l e amount o f work for the Court. We've t r i e d t o do some of t h a t i n our reply 14 paragraphs with a strike-through. 15 16 17 18 19 The core point i s that i t ' s a f a c t - s p e c i f i c analysis, not a label-specific analysis. And i n view of the Court's time - - and I know you have another matter - - I can stop here, and I could of course go on. THE COURT: MR. HOWARD: All right. Thank you, your Honor. I certainly agree We'll stop here. 20 21 22 23 24 25 t h a t i t ' s a f a c t - s p e c i f i c a n a l y s i s , a n d t h a t ' s why t h i s s i m p l y i s n ' t p r o p e r i n a 1 2 (b) (6) m o t i o n . Y o u r H o n o r m a d e s o m e r e m a r k s w h e n we f i r s t a p p e a r e d before you about the length of our Complaint. B u t l e t me s a y that even the length of our Complaint can't begin to capture 31 1 what happened over several years where software i s being used 2 every s i n g l e day by many d i f f e r e n t people. 3 4 5 occurred. Our allegations are summaries of conduct that And i n some of those - - i n some of those - - and they are -- and that conduct occurs pursuant to hundreds of 6 d i f f e r e n t customer l i c e n s e agreements, some of them with 7 v a r y i n g t e r m s t h a t a f f e c t how t h a t s o f t w a r e c a n b e u s e d . 8 9 10 11 So what - - r e a l l y what the Defendants are asking you to do i s t o give an advisory opinion, or to grant summary judgment based on facts that differ according to the day, according to the person, according to the year, according to the software, and according to the license agreement. And I j u s t 12 13 14 15 16 d o n ' t t h i n k t h a t i s t h e t h i n g t h a t t h e Court should be doing now on a 12(b) (6) motion. And the reason t h a t ' s c r i t i c a l i s t h a t t h e r e a r e i n s t a n c e s , a s we h a v e a l l e g e d , w h e r e s o f t w a r e w a s c o p i e d o r Those are the 17 d i s t r i b u t e d or derivative works were made. 18 things that Section 106 reserves exclusively to the Copyright 19 Act. 20 21 22 23 24 25 But the law i s clear that where there are contractual restrictions that r e s t r i c t the use of that software, or where there has been a misrepresentation that is used in the course of unfair competition or used in the course of interference, then that is not preempted by the Copyright Act. And so i n each of t h e s e i n s t a n c e s with each of 32 ~ 1 2 these allegations both are true. A n d we w i l l p r o v e t h a t b o t h are true depending on the day, depending on the year, 3 depending on the release of the software, depending on the 4 5 6 license agreement at issue. A n d we h a v e - - s p e c i f i c a l l y w i t h r e s p e c t t o t h e i n t e r f e r e n c e c l a i m we h a v e p o i n t e d y o u t o m a n y c a s e s w h e r e 7 there is a copyright allegation, and there is use of that 8 same copied software in ways t h a t are not contemplated as a 9 specific restriction under 106, and where those claims are 10 11 12 13 14 allowed to proceed. They are routinely allowed to proceed. A n d s o l e t me c o n c l u d e b y p o s i t i n g s o r t o f t w o different scenarios. In Scenario One, there i s a copy which i s made, and i t s a v i o l a t i o n of 106, and t h a t copy i s then used i n ways t h a t v i o l a t e the applicable license agreements, which i s 15 what the National Car Rental case said was improper, what the 16 ProCD c a s e s a i d w a s i m p r o p e r , w h a t M e r i d i a n , Summit -- a l l of 17 18 these cases say: You c a n ' t d o i t i f i t ' s a r i g h t t h a t ' s separate and apart from a private contractual right, separate 19 and apart from the r i g h t s under 106. 20 21 22 23 24 25 But there i s a whole other category -- there's a s e c o n d c a t e g o r y o f c l a i m s w h e r e t h a t c o p y t h a t I u s e d a s my predicate, that copy is not a violation of 106. So simply the w o r d ICOp y " d o e s n I t m e a n a n y t h i n g , b e c a u s e i t m a y b e a l i c e n s e d copy. And we've even s a i d i n our Complaint t h a t t h e r e 33 ~ 1 w e r e i n s t a n c e s w h e r e t h e a c c e s s t o C u s t o m e r C o n n e c t i o n may 2 have been properly within the scope of the customers' 3 4 agreement, o r the copy may, depending on the l i c e n s e agreement - - may have been properly o f f e r e d - - not a 106 5 violation, but then j u s t as in the National Car Rental case, 6 7 8 9 10 11 12 13 j u s t as 1n the Summit case, you take that copy and you use it. And t h a t u s e i s a n i n t e r f e r e n c e , a n d i t g i v e s r i s e t o inducement of breach as in Altera, and breach as in National Car Rental and Summit and Meridian and a l l of those other cases. So depending on the factual scenario those a l l should be allowed to proceed. THE COURT: contract. The d i f f i c u l t y that I have with t h i s , i t seems to All right. L e t ' s move onto the breach of 14 15 1 6 me t h a t t h i s i s t h e e s s e n c e o f t h e l a w s u i t a b o u t w h e t h e r o r 17 18 19 20 21 22 23 not the clickwrap agreements are binding agreements between your client and Oracle or whether they only apply to customers. T h a t s e e m s t o me t o b e t h e h e a r t o f t h e I'm very r e l u c t a n t on a 12(b) (6) agreement, and i t I s motion to grant the relief that you're seeking. MR. LANIER: May I , y o u r H o n o r ? This 1S - - t h i s We a g r e e w i t h y o u c o m p l e t e l y . 24 25 1ssue, this breach of contract gets to the crux of the case, and i t points out the central tension that affects every 34 ~ 1 2 3 4 aspect of their pleading and conduct of the discovery of this case, because Plaintiffs are, to be cliche, trying to have their cake and eat i t too. They a r e t r y i n g t o say, "You can g e t on our systems That's really what 5 but you c a n ' t get on our systems." 6 they're saying there. And I w o u l d d r a w y o u r H o n o r ' s 7 a t t e n t i o n again with l i m i t e d time t o look a t page 21 of t h e i r 8 o p p o s i t i o n b r i e f , l i n e s 23 t o 24, and t h a t ' s r e a l l y 9 10 11 instructive of the problem. And t h a t ' s w h e r e t h e y s a y : The Defendants accepted the agreement by clicking an "I agree" but then promptly violated i t by accessing the website. I t can't be both. I f you can click "I agree," i f 12 13 14 y o u ' r e a n i n t e n d e d o f f e r e e who c a n a c c e p t t h i s c o n t r a c t a n d get on the website, then you can't properly violate i t by 15 getting on the website. 16 17 A n d t o a d d r e s s y o u r H o n o r ' s c o n c e r n , we u n d e r s t a n d that. A n d I h a t e t o s a y t h i s o n b e h a l f o f my c l i e n t s , b u t If our clients didn't belong to the I t ' s pled in this case. There's a There's a 18 there's a remedy. 19 website t h e r e ' s a remedy. 20 21 22 23 24 25 CFAA c l a i m . T h e r e ' s a CDAC c l a i m . trespass-to-chattels claim. Congress and the state of California have gone to a l o t of trouble to figure out, what are the remedies that are available i f people get on their computers without the right to be there? are in this case. And those claims Now, we h a v e o t h e r i s s u e s w i t h t h e m . 35 ~ 1 We'll talk about damages -- not leaving them without those 2 remedies, though. 3 4 But the key point is, they chose a person to assert a claim for breach of contract. I t ' s fundamentally at 5 tension with their entire case, and those contracts, i f your 6 Honor reads them and I draw the Court's attention they 7 are a l l attached to the Lanier Declaration -- each and every 8 one specifically contemplates an ongoing relationship with 9 Oracle -- each and everyone of them. 10 11 them. A n d we p u t l a n g u a g e i n o u r p a p e r s - - I c o u l d r e r e a d I won't do i t . They are in front of the Court -but 12 everyone of those contracts says, "You, the customer" 13 14 i t ' s not just those words. THE COURT: Let's not rely on labels. But i s i t really just a matter of clicking 15 and g e t t i n g on? 16 17 I s n ' t i t the use to which the software is put t h a t ' s at issue and not just the accessing of i t ? MR. LANIER: Exactly. A n d t h a t ' s why we h a v e t o g e t 18 back to the use, your Honor. 19 20 The use. I t ' s a copy. What's the use? Is i t downloading it? Is i t taking that copy and giving i t to someone That's a copy -- that's a 2 1 who d o e s n ' t h a v e a r i g h t t o i t ? 22 23 copyright infringement. Is i t tweaking that software, modifying i t i n some way so then I can give i t t o someone else? That's creating a derivative work. I t ' s a copy. ~ 24 25 So the non-preempted things t h a t could be the 36 4It 1 2 3 subject of the breach of contract claim all relate to access to computers - - a l l of them. And a g a i n , t h e r e a r e c l a i m s s p e c i f i c a l l y i n t h e 4 case for that, but fundamentally i t ' s important to 5 r e m e m b e r - - t h e s e a r e n o t c o n t r a c t s we c a m e u p w i t h . These 6 a r e n ' t c o n t r a c t s t h a t r e s u l t e d f r o m TomorrowNow a n d O r a c l e 7 s i t t i n g d o w n a n d c o m i n g u p w i t h s o m e a g r e e m e n t , a n d w e ' r e now 8 saying, "Ah-ha, there's a technicality. 9 We c a n ' t g e t o n . " TomorrowNow g o t t o t h o s e c o m p u t e r s i n t h e c o u r s e o f Everyone of those 10 providing service t o i t s customers. 11 12 13 14 15 16 17 and them. offeree. a g r e e m e n t s - - e v e r y o n e o f t h e m s a y s , "We h a v e a n o t h e r agreement with you. Your use i s in furtherance of our Don't do continuing relationship subject to that agreement. things that violate that agreement." T h e r e i s n o f u r t h e r a g r e e m e n t b e t w e e n TomorrowNow S o t h e p o i n t i s , TomorrowNow i s n o t t h e i n t e n d e d I f somebody reached those agreements i t was the But that 1 8 p e o p l e who g a v e T o m o r r o w N o w p e r m i s s i o n t o g o t h e r e . 19 doesn't mean t h e y ' r e without a remedy i f the access was 20 21 22 23 24 25 improper. They've pled their argument. THE COURT: MR. HOWARD: That's a l l I have. I think t h a t ' s a pretty good argument. Your Honor, t h e i r breach of contract claim relates to one agreement. THE COURT: Well, I ' d like to you respond to counsel's argument that what Oracle i s attempting to do i s to have i t both 37 ~ 1 ways. 2 Either you have permission, because you're a party to the contractual agreement, in which case using the software wouldn't 3 be a breach of contract although i t might be something else, or 4 you are not a party to the agreement, in which case you have 5 6 something other than a breach of contract. MR. HOWARD: Sure. lId be happy to address that. And 7 again i t gets back to the idea that there is a wide variety of 8 9 10 11 12 13 14 15 factual scenarios that are at issue here. We s a y i n t h e C o m p l a i n t t h a t l n s o m e i n s t a n c e s u n d e r some l i c e n s e agreements t h a t customers have with Oracle Defendants could go onto Customer Connection, the website, and download things. When t h e y d o t h a t t h e y a g r e e t o u s e t h o s e d o w n l o a d s in a p a r t i c u l a r way. And i n f a c t t h e y a g r e e n o t t o c r o s s - u s e them for other customers other than the one whose credentials 16 were used to download these p a r t i c u l a r items. 17 18 So simply accessing in t h a t s i t u a t i o n simply creates a c o n t r a c t which then can be breached down t h e road, and which was 19 breached down the road by the cross-use of those materials i n 20 21 22 23 24 25 support, for example, of other customers. L e t me g i v e y o u a v e r y c o n c r e t e e x a m p l e . THE COURT: J u s t so I understand, i n some instances the accessing is not a breach of any kind of contractual agreement, and, in fact, i s a permissible act on the part of the Defendant. 38 1 2 3 MR. HOWARD: right, your Honor. THE COURT: We s a y t h a t i n t h e C o m p l a i n t . That's But under some other instances they are 4 not permi t ted to do so? 5 MR. HOWARD: Exactly right, your Honor. And s o t h e 6 access to the website -- and please keep in mind, your Honor, 7 that the materials available to download from the website are 8 only one component of the software t h a t ' s a t issue in the case. 9 They are the support materials -- the patches and the bug fixes 10 11 12 and the documentation for the ongoing support of the underlying software. They also copied the underlying software not by 13 going onto the website but by acquiring i t from t h e i r c l i e n t s 14 15 16 17 18 and putting i t up on t h e i r systems. So we're talking about j u s t t h e s e d o w n l o a d s now a n d t h e c o n t r a c t t h a t g o v e r n s t h e access to and use of those downloads. So they have a c l i e n t . Let's say i t ' s Merck. Merck is issued a password credential to get onto the website by Merck gives that password credential to defendants. So Merck 19 Oracle. 20 21 22 23 24 25 Merck h a s a l i c e n s e t o S o f t w a r e A b u t n o t S o f t w a r e B. i s entitled to -- and they give the password depending on the l i c e n s e agreement t o defendants - - defendants may be e n t i t l e d t o go onto the website with that credential, take t h e i r patches for Software A but not Software Bi r i g h t ? So when they go on and they download both for 39 ~ 1 S o f t w a r e A a n d f o r S o f t w a r e B, b o t h a r e t r u e . They are there 2 properly -- under this hypothetical and for purposes of this 3 4 5 a r g u m e n t p r o p e r l y t o d o w n l o a d f o r A. They are not there -- they do not have permission, they do not have access, and they have breached immediately the access agreement to 6 download f o r Software B. 7 8 9 files. They did t h i s repeatedly to the tune of 8 million Some o f t h o s e f i l e s w e r e d o w n l o a d e d u s i n g c r e d e n t i a l s Millions of them were for which the customer was licensed. 10 downloaded using c r e d e n t i a l s for which the customer was not 11 12 13 14 15 16 17 18 19 20 patches. licensed. Now, we h a v e S o f t w a r e A p a t c h e s a n d S o f t w a r e B They are a l l put on the local computer a t the defendant's place of business, and they have one thing in common: Both are subject to the contractual use restrictions t h a t were agreed to when they were downloaded, which i s they w i l l not be - - among o t h e r things, they w i l l not be used to support other customers. Both were used to support other customers. So regardless of whether there was permission to download the 2 1 p a t c h e s f o r S o f t w a r e A, t h e b r e a c h n o w , t h e n , o c c u r s 22 23 subsequently when those are used to go support a customer t h a t ' s not Merck. And so a t t h a t p o i n t t h e agreement t h a t "I ~ 24 25 w i l l only use t h i s for the customer whose c r e d e n t i a l s I was using" is breached. 40 1 Now - - s o t h e r e ' s d i f f e r e n t w a y s t h i s b r e a c h o c c u r s . 2 And i n t h e S o f t w a r e B c a s e , w h e r e t h e d o w n l o a d i s o f - - i n t h e 3 f i r s t instance, in breach of the terms of use materials for 4 which that customer i s not licensed California law, code says 5 t h a t i f i n bad f a i t h you know t h a t you d o n ' t have t h a t 6 permission you are directly liable. 7 principal. 8 You a r e l i a b l e a s a And t h a t ' s e x a c t l y what he have a l l e g e d . THE COURT: Okay. All right. And l a s t l y , the u n j u s t 9 enrichment. 10 MR. LANIER: Y o u r H o n o r , may I h a v e o n e s e n t e n c e o n 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that breach of contract? Look behind the word "use," because a l l of the things t h a t Mr. Howard a l l e g e s are - - these are the other things that were then later the breach of contract are copying: cross-use i s copying, providing i t to someone else and using i t for someone else -- i t ' s a copy. software. I t ' s copying. The only non-preempted claims t h a t could be subject to breach of contract are access claims for which there's a remedy, but nothing else, your Honor. MR. HOWARD: That just i s n ' t true, your Honor. We've This is alleged research, training -THE COURT: All right. I don't want to hear anYmore. Unjust enrichment. I'm not so sure there's any real dispute. You b o t h a g r e e t h a t u n j u s t 41 1 2 3 4 enrichment is not necessarily a separate cause of action. I t ' s really a theory of recovery. Clearly, the -- Oracle's entitled to plead both contract and unjust enrichment, which i s synonYmous with I don't believe 5 restitution as an alternative theory. 6 there's any dispute that Oracle could not prevail or at least Either there'S 7 could not recover under both theories. 8 contract and tort, or there is unjust enrichment restitution, 9 but there's not both. 10 11 Is there any dispute to that? MR. LANIER: There'S no dispute as to anything your But I would draw your That's the core 12 Honor j u s t s a i d . We a g r e e w i t h a l l t h a t . 13 Honor's a t t e n t i o n l a t e r t o paragraph 220. 14 paragraph on the unjust enrichment claim. 15 So what paragraph 220 e s t a b l i s h e s i s t h a t Oracle They've not pled That's what 16 has not pled in the a l t e r n a t i v e . 17 18 19 20 21 22 23 24 25 alternatively. They've pled cumulatively. they've done here. They have pled that based on breach of the agreements, based on interference, based on a trespass, b a s e d o n c o m p u t e r f r a u d , b a s e d o n o u r l e g a l c l a i m s we g e t this additional remedy. And they most c l e a r l y here do not plead in the alternative, as an alternative to a claim for breach of contract, as an alternative to a tort claim. THE COURT: MR. HOWARD: That can be cured relatively easily. Yeah, your Honor, I'm not even sure 42 1 this i s a standard form of pleading. You're not -- there is 2 a -- they have said that the contract i s unenforceable t and so 3 4 5 in that instance the unjust enrichment claim stands in i t s stead. To your Honor's q u e s t i o n t I t h i n k t h e r e i s an The 6 agreement that nobody's entitled to double recovery. 7 question is whether the theory 8 THE COURT: Recovery under both a straight theory of 9 breach of contract and unjust enrichment. 10 11 12 13 14 MR. HOWARD: THE COURT: MR. HOWARD: For the same a c t

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