Realnetworks, Inc. et al v. DVD Copy Control Association, Inc. et al

Filing 104

MOTION for Hearing Motion to Preclude Claims Based on Non-CSS Technologies or Alternatively, to Continue the Preliminary Injunction Hearing, and for the Appointment of a Discovery Referee filed by Realnetworks Home Entertainment, Inc.(a Delaware corporation). Motion Hearing set for 3/9/2009 02:00 PM in Courtroom 15, 18th Floor, San Francisco. (Attachments: # 1 Proposed Order Granting RealNetworks' Motion to Preclude Claims Based on Non-CSS Technologies or Alternatively, to Continue the Preliminary Injunction Hearing and for the Appointment of a Discovery Referee)(Berta, Michael) (Filed on 1/26/2009)

Realnetworks, Inc. et al v. DVD Copy Control Association, Inc. et al

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JAMES A. DiBOISE, State Bar No. 83296 Email: [e-mail] LEO CUNNINGHAM, State Bar No. 121605 Email: [e-mail] COLLEEN BAL, State Bar No. 167637 Email: [e-mail] MICHAEL A. BERTA, State Bar No. 194650 Email: [e-mail] TRACY TOSH LANE, State Bar No. 184666 Email: [e-mail] WILSON SONSINI GOODRICH & ROSATI Professional Corporation One Market Street Spear Tower, Suite 3300 San Francisco, CA 94105 Attorneys for Plaintiffs and Counterclaim Defendants REALNETWORKS, INC. and REALNETWORKS HOME ENTERTAINMENT, INC. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA REALNETWORKS, INC., a Washington Corporation; and REALNETWORKS HOME ENTERTAINMENT, INC., a Delaware corporation, Plaintiffs, Case Nos. C08 04548 MHP; C08 04719 MHP NOTICE OF MOTION AND MOTION TO PRECLUDE CLAIMS BASED ON NON-CSS TECHNOLOGIES OR, ALTERNATIVELY, TO CONTINUE THE PRELIMINARY INJUNCTION HEARING, AND FOR THE APPOINTMENT OF A DISCOVERY REFEREE Before: Hon. Marilyn Hall Patel Dept: Courtroom 15 Date: March 9, 2009 Time: 2:00 p.m.

17 v. 18 19 20 21 22 23 24 Defendants. 25 26 27 28 AND RELATED CASES DVD COPY CONTROL ASSOCIATION, INC., a Delaware nonprofit corporation, DISNEY ENTERPRISES, INC., a Delaware corporation; PARAMOUNT PICTURES CORP., a Delaware corporation; SONY PICTURES ENTER., INC., a Delaware corporation; TWENTIETH CENTURY FOX FILM CORP., a Delaware corporation; NBC UNIVERSAL, INC., a Delaware corporation; WARNER BROS. ENTER. INC., a Delaware corporation; and VIACOM, Inc., a Delaware Corporation,

PUBLIC REDACTED VERSION
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NOTICE OF MOTION AND MOTION TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: Please take notice that on March 9, 2009 at 2:00 p.m., or as soon thereafter as this matter may be heard, before the Honorable Marilyn H. Patel, United States Courthouse, 450 Golden Gate Avenue, San Francisco, California, 94102, plaintiffs and counterclaim defendants RealNetworks and RealNetworks Home Entertainment, Inc. (collectively, "RealNetworks") will move, and hereby do move, for an order precluding the defendants from asserting claims based on ARccOS, RipGuard, or any other non-CSS technologies in support of their motions for a preliminary injunction. In the alternative, RealNetworks will move, and hereby does move, for an order continuing the preliminary injunction hearing currently scheduled for March 3 by six weeks, until April 14, and simultaneously directing the defendants to comply immediately with their discovery obligations. Finally, RealNetworks will move, and hereby does move, for designation of a Magistrate Judge (or special master) to resolve any subsequent discovery disputes that may arise prior to the preliminary injunction hearing. RealNetworks is also filing a motion to shorten time on this motion, which requests that this motion be heard on February 2, 2009 at 2:00 p.m., with opposition papers being due on January 29, 2009 and reply papers being due on January 30, 2009. This motion is based on the following Memorandum of Points and Authorities, the accompanying Declaration of Tracy Tosh Lane, and the materials on file in this action.

MEMORANDUM OF POINTS AND AUTHORITIES ISSUES TO BE DECIDED (LOCAL RULE 7-4(A)(3)) Should the defendants be prevented--in this preliminary injunction proceeding--from asserting claims premised on non-CSS technology such as ARccOS and RipGuard because RealNetworks has not been provided with timely and adequate discovery on these topics? If the Court allows the defendants to raise such claims, should the preliminary injunction hearing be continued for six weeks, until April 14, 2009? Should the defendants be directed to comply immediately with their discovery
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obligations and should a referee be appointed to manage the parties' discovery disputes? II. INTRODUCTION AND BACKGROUND In mid-December, just days before the parties were to complete expedited discovery, and as they were set to begin final preparations for a rapidly approaching preliminary injunction proceeding, the Studio Defendants sought to dramatically alter the focus of this case. (Lane Dec., ¶ 2) On December 18, the day before the parties were to exchange expert reports, the Studio Defendants asserted for the first time that they would seek to raise in the preliminary injunction proceeding new unpleaded claims that RealDVD and Facet circumvent purported "content protection" technologies known as "ARccOS" and "Ripguard." (Id., Ex. A)1 These new claims were a marked departure from the defendants' original claims, which were based on, and limited to, defendant DVD CCA's Content Scramble System technology ("CSS"). The new claims formed no part of the Complaint filed by the Studios and no part of the earlier TRO proceedings, or the temporary injunction that resulted and is still in effect. The new claims also put RealNetworks at an immediate and significant informational disadvantage, contrary to the spirit and purpose of the Federal discovery rules. At the time the claims were raised, RealNetworks knew next to nothing about these technologies ­ and the Studio Defendants had yet to produce a single document regarding either ARccOS and RipGuard.2 (Lane Dec., ¶ 3.) This was not for lack of information on the part of the Studio Defendants, which have deep experience with, and expertise in, both ARccOS and RipGuard. Indeed, one of the Studio Defendants (Sony, apparently through a corporate affiliate or subsidiary) purportedly invented the ARccOS technology, and RipGuard has been used by some or all of Studio Defendants since at least 2004. (Lane Dec., ¶ 13.) RealNetworks, by contrast, has no expertise with, or substantive knowledge of these technologies. RealNetworks does not know how they work, or even how RealDVD and Facet

All references to "Ex. __" are to the exhibits attached to the accompanying Declaration of Tracy Tosh Lane ("Lane Dec."). RealNetworks, by contrast, produced documents relating to its Facet product in November 2008, before it formally asked to include that product in these proceedings. (Lane Dec., ¶ 8.)
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are said to circumvent them. Real's informational disadvantage was starkly apparent during the defendants' depositions of RealNetworks' employees--depositions that were supposed to be limited to the CSS technology that formed the basis of the defendants' original claims. During these depositions the Studio Defendants' lawyers repeatedly asked, over strenuous objection and in an argumentative fashion, seemingly irrelevant questions about "ARccOS" and "RipGuard. The deponents testified similarly: · Phil Barrett, who leads the Facet project, testified that he had no idea what either ARccOS and RipGuard does because he has never seen even basic specifications for them. (Barrett Tr. 124:16-17; 125:13-21; 133:11-13; 173:5-8 ("I've never seen a specification of ARccOS. I don't know what ARccOS is."); 242:5-9, Ex. E.) · Jeffrey Chasen, who leads the RealDVD project, was repeatedly subjected to argumentative questions about ARccOS and RipGuard, and in each instance was forced to repeat that he had no idea what either technology did, how it worked, or how it was possible to tell if it existed on any particular DVD. (Chasen Tr. 156:12-19; 157:24158:3; 168:18-20 ("I don't know exactly what RipGuard is."); 195:4-5; 198:1-2 ("Again, I don't know what Sony ARccOS is . . . I've said this a few times."); 208:8-11, Ex. F.) · Jeffrey Buzzard, who wrote much of the code for RealDVD, testified that although he was aware of and had used the terms "ARccOS" and "RipGuard," he also had little or no idea how the technologies work. (Buzzard Tr. 72:5-13; 127:15-22; 249:14-21 (Q: "Do [RipGuard and ARccOS] write errors? A: I don't know if RipGuard does. Q: Okay. Does ARccOS, the Sony ARccOS system? A: I don't know what it does.", Ex. G.) · Jim Brennan, who wrote much of the code for Facet, testified that he considered "ARccOS" to be a generic term to describe DVD errors, and said that he too had no idea what it is or how it worked. (Brennan Dep. 154:16-155:2; 235:18-236:4; 275:6-276:13, Ex. H.) Within a few days of first learning about these new claims, on December 22, RealNetworks also learned that the Court would allow them.3 The Court provided that as a condition of this ruling, however, that the parties should produce any additional relevant documents by January 9, 2009 to allow each side to prepare adequately for the preliminary injunction hearing, which was continued (from late January) to March 3. (Dec. 22, 2008 Tr. at 80, Ex. B.) After this ruling, the parties conferred regarding--among other things--the
3

The Court also ruled on RealNetworks motion to amend its complaint to include its Facet product and to add the Facet product to the preliminary injunction proceedings.
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document production deadline and discussed a short extension by which to complete production. (Lane Dec., ¶ 4.) Thereafter, RealNetworks immediately collected, reviewed, and produced in timely fashion (as it has done for each prior production) over 11,000 additional pages of documents relating to its Facet product.4 (Lane Dec., ¶ 7.) In total, to date, RealNetworks has completed the production of (1) documents regarding the development of Facet and RealDVD; (2) the source code for RealDVD and current and historical versions of the Facet source code; (3) multiple witnesses for depositions on the development and operation of both Facet and RealDVD, including the managers who lead the projects, and the principal engineers who wrote and designed the projects; and (4) executable copies of the RealDVD software and a prototype of the Facet product (for inspection). (Id., ¶ 8.) By contrast, in the wake of the December 22 ruling, RealNetworks has been deprived of even the most basic information about ARccOS and RipGuard. (Lane Dec., ¶¶ 6 and 9.) RealNetworks requires and has requested, among other things, (i) the technical specifications for each version and implementation of the technologies known as ARccOS, RipGuard DVD, and any other technologies that the defendants claim RealDVD or Facet circumvents; (ii) documents sufficient to show all DVD titles that have used any implementation or version of ARccOS and/or RipGuard, including documents showing why the Studios implemented ARccOS or RipGuard on some DVD titles but not others; and (iii) internal correspondence discussing either ARccOS or RipGuard, including their merits and shortcomings as alleged "content protection" mechanisms. (Lane Dec., ¶ 5.) Initially, the Studio Defendants refused to produce any of this documentation for a variety of reasons, including relevance objections, and also claimed that the ARccOS and RipGuard technologies were a "black box" to them, even though Sony had purportedly invented

Real had previously produced thousands of pages of Facet-related documents, including producing the Facet source code and technical documents, in early November when RealNetworks filed its motion to amend regarding Facet. (Lane Dec., ¶ 7.)
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ARccOS.5 (Lane Dec., ¶¶ 13-14.) After the January 9 deadline had come and gone, the Studio Defendants reconsidered and agreed to produce some documents, but only after RealNetworks insisted that a Magistrate Judge was necessary to resolve discovery disputes. (Lane Dec., ¶ 6.) At the same time, however, the Studios asserted as a justification for further delay that the documents were subject to third-party confidentiality, and informed RealNetworks that they had yet to seek the necessary permissions to produce the documents. (Id.) It was not until late in the evening on January 22 that the defendants made their first production of documents purportedly containing information relevant to ARccOS and RipGuard. (Lane Dec., ¶ 9; Jan. 22, 2009 Letter, Ex. C.) Although this initial production comprised over 28,000 pages of material (which RealNetworks is currently struggling to review), the Studio Defendants have admitted that the production is not yet complete, and also that they do not know when it might be. (Id., ¶¶ 9-10.)6 Nor have the Studio Defendants stated whether their production will actually contain the specific technical specifications for ARccOS and RipGuard that RealNetworks requires in order to defend itself. (Id.) In addition to the delay in document production, the Studio Defendants have prejudiced RealNetworks' ability to prepare for the preliminary injunction hearing in two additional respects. First, as of Friday, January 23, the defendants had not offered any dates for the three Rule 30(b)(6) depositions that RealNetworks had requested from the Studios, a topic that was expressly discussed and ruled upon at the December 22 hearing. (Lane Dec., ¶ 15.) It was not until after RealNetworks approached the Court for assistance on this issue on January 23 by

In reliance on the claim that the Studios did not know anything about the technologies that underlie their new claims, RealNetworks also sought technical information directly from a company called Macrovision, which allegedly created RipGuard, and also from the Sony affiliate that currently markets ARccOS technology. In the course of these efforts, RealNetworks learned that the Studios' claims that the technologies were a "black box," and that they had no knowledge of them, was inaccurate. (Lane Dec., ¶ 14.) On the morning of January 26, as RealNetworks was preparing to file this motion, counsel for the Studio Defendants indicated that an additional, yet still incomplete, production had been delivered by messenger. (Lane Dec., ¶ 17.) Counsel also stated that additional production(s) would be made later in the week. (Id.) RealNetworks has not, of course, had time to review these new materials, which were only produced after RealNetworks signaled its intention to file this motion.
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filing a letter brief that the Studio Defendants offered, late in the day, to make 30(b)(6) deponents available, albeit under strict conditions. (Id., ¶ 15, Ex. I.)7 That offer, unfortunately, was and still is unacceptable. Among other things, the Studio Defendants have refused to provide witnesses on several topics, have designated multiple witnesses to cover the same topics, and have split topics in such a way as to seek to force Real to forego much of the testimony it has sought by way of 30(b)(6) depositions. (Id.) Second, it appears that although the Studio Defendants have begun to produce documents relating to ARccOS and RipGuard ­ only a few days before the parties had contemplated exchanging expert reports ­ they have attempted to prevent RealNetworks from any meaningful understanding of their contents. All documents produced to date have been marked "Highly Confidential" or "Attorneys' Eyes Only" under the provisional protective order, which prevents RealNetworks from showing the documents to their employees--even to the employees who designed and built the RealDVD and Facet products that are at issue here. (Lane Dec., ¶ 10.) The Studio Defendants have also asserted (on January 22, the same night they began late production of documents) that Real's previously approved technical experts should not be allowed to look at any ARccOS or RipGuard documents at all. (Lane Dec., ¶ 11, Ex. D.) The net result of these maneuvers, if allowed, would be that none of RealNetworks' technical employees or experts can look at the recently produced ARccOS and RipGuard documents. These tactics have RealNetworks stymied. It is simply not possible to understand the Studio Defendants' claims under these circumstances, which of course means that it is impossible to fairly defend against them. Due to the significant prejudice that has been caused to RealNetworks, the defendants should be precluded from raising either ARccOS or RipGuard at the PI hearing. In the alternative, the hearing should be continued until April 14 and the defendants should be ordered

On January 23 RealNetworks filed a letter brief with the Court pursuant to its instruction during the TRO hearing to raise disputes in that fashion. (Lane Dec., ¶ 16, Ex. J.) That letter brief requested identical relief as does this motion--it was simply converted into this motion over the weekend to comply with the Court's instruction to that effect. (Id.)
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to immediately comply with their discovery obligations. In either case, a magistrate should be appointed to monitor these discovery proceedings. III. ARGUMENT A. The Defendants Should Be Precluded from Asserting ARccOS and RipGuard Claims at the Preliminary Injunction Hearing

This Court has the inherent authority to enforce its discovery and case management 6 orders, and to impose sanctions when those orders are not complied with, up to and including 7 striking all or portions of a case or pleading. United States v. W.R. Grace, 526 F.3d 499, 5158 516 (9th Cir. 2008) (en banc) ("[T]he district court here is well within its authority to manage its 9 docket in enforcing a valid pretrial discovery order."); Anheuser-Busch, Inc. v. Natural Beverage 10 Distrib., 69 F.3d 337, 348 (9th Cir. 1995) (recognizing inherent power to dismiss counterclaim 11 for concealing discovery documents). Rule 37 of the Federal Rules of Civil Procedure likewise 12 authorizes "a wide range of sanctions" for a party's failure to comply with discovery rules or 13 court orders enforcing them, Wyle v. R.J. Reynolds Indus., Inc., 709 F.2d 585, 589 (9th Cir. 14 1983), including penalizing a party "for dilatory conduct during discovery proceedings." Bollow 15 v. Fed. Reserve Bank of San Francisco, 650 F.2d 1093, 1102 (9th Cir.1981) (citing Fed. R. Civ. 16 P. 37(a)(4)). Rules 16 and 41(b) afford similar relief in other contexts. See Fed. R. Civ. P. 16, 17 41(b). 18 Here, RealNetworks is requesting far less than dismissal of the defendants' claims. 19 Rather, RealNetworks is merely seeking to level the playing field at the impending preliminary 20 injunction proceeding. That field cannot and will not be level if the defendants are allowed to 21 argue, as they apparently intend to, that ARccOS and RipGuard constitute effective 22 "technological measures" pursuant to 17 U.S.C. §§ 1201(a), (b), while at the same time 23 RealNetworks and its experts have been blocked from timely receiving and analyzing even the 24 most basic information about these measures. 25 Indeed, to even begin to understand the defendants' new allegation would require that 26 RealNetworks know far more than it currently does--which is next to nothing--about ARccOS 27 and RipGuard. RealNetworks must be allowed to obtain and analyze documents reflecting not 28 only what ARccOS and RipGuard actually are and how they work--it also must be permitted
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access to documents that bear upon the defendants' claim that ARccOS and RipGuard are "effective" content protection schemes under § 1201. Among other things, this will require that RealNetworks obtain access to, as it has requested, (i) detailed and comprehensive technical specifications for both technologies; (ii) internal correspondence discussing the merits and drawbacks of the technologies; and (iii) information sufficient to determine how widely, and by whom, these technologies are employed. RealNetworks cannot take depositions, cannot prepare its experts, and certainly cannot draft its opposition papers or prepare for the preliminary injunction hearing until the defendants' production of this material is both complete and adequate. To date, it is neither. As noted above, RealNetworks received a first and incomplete production of ARccOS and RipGuard materials-- comprising approximately 28,000 pages of material--on the evening of January 22. (Lane Dec., ¶ 9.) RealNetworks has had just three days to consider this material, and an unknown quantity is yet to come. The defendants, by contrast, are in possession of RealNetworks' completed production of thousands of documents and source code relating to the Facet and RealDVD products. And they and their experts have had this material for weeks, and in some cases months. The playing field is, in short, anything but level. It is no answer that the Studio Defendants have begun production, or have encountered purported obstacles to production. "Late tender is," as the Ninth Circuit has noted, "no excuse" for the prejudice caused by inadequate or dilatory discovery. In re Phenylpropanolamine (PPA) Prods. Liab. Litig., 460 F.3d 1217, 1227 (9th Cir. 2006); Fair Housing of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002) ("Last-minute tender of documents does not cure the prejudice to opponents. . . ."); Nat'l Hockey League v. Metro. Hockey Club, Inc., 427 U.S. 639, 643, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976) (per curiam) ("[b]elated compliance with discovery orders does not preclude the imposition of sanctions."); F.T.C. v. Foster, No. CIV07-00352 JB/ACT, 2007 WL 1827099, at *4-5 (D.N.M. Jun. 11, 2007) (applying Fed. R. Civ. P. 37 and precluding defendant from introducing at the preliminary-injunction hearing, without separate approval, documents or expert testimony based on documents that defendant failed to timely produce as required by preliminary-injunction discovery).
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The Studio Defendants late and inadequate production should result in preclusion at the preliminary injunction proceeding. B. If the Defendants' Are Allowed to Assert Claims Premised on ARccOS and RipGuard, the Hearing Should be Continued until April 14, 2009

RealNetworks is at present subject to a temporary restraining order which, RealNetworks 5 expects, will be dissolved after the preliminary injunction hearing. If the Court declines to 6 preclude the defendants from premising their preliminary injunction motion on ARccOS and 7 RipGuard, RealNetworks is nevertheless willing to have the TRO further extended so that the 8 hearing can be continued until April 14. Rohan ex rel. Gates v. Woodford, 334 F.3d 803, 817 9 (9th Cir. 2003) (district courts have inherent authority to stay or adjourn proceedings before 10 them) (citing Landis v. N. Am. Co., 299 U.S. 248, 254, 57 (1936)); Rivers v. Walt Disney 11 Co., 980 F.Supp. 1358, 1360 (C.D. Cal. 1997). This puts RealNetworks in the extraordinary 12 position of seeking a continuance of a hearing that it believes will result in relief from a pending 13 injunction, because the cost of not obtaining this short continuance, and of being forced to 14 proceed on March 3 while almost totally in the dark about the heart of the defendants' case, is 15 potentially irreparable. 16 Again, it is simply no answer that the Studio Defendants have begun to comply with their 17 obligations. Even if the Studio Defendants were to produce all relevant documents immediately, 18 RealNetworks cannot conduct fact or expert depositions until it has had adequate time to review 19 and carefully analyze the complete set of ARccOS and RipGuard materials. Similarly, 20 RealNetworks cannot hope to prepare its expert reports without providing its experts with access 21 to these materials, and to the related testimony of fact witnesses. To complicate matters further, 22 the defendants now contend that RealNetworks' long-approved technical expert should not be 23 permitted access to any ARccOS or RipGuard related documents. (Lane Dec., ¶ 11.) Under 24 these circumstances, RealNetworks is simply unable to prepare for and execute two rounds of 25 substantive briefing, followed closely by a preliminary injunction hearing, as the case schedule 26 currently stands. 27 RealNetworks therefore proposes the following modified schedule, and requests that it be 28
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entered as an Order of the Court: ACTION Production of all additional documents Identify additional witnesses to testify (live or by declaration) at hearing Depositions of fact witnesses Exchange expert reports Expert depositions Opening briefs Responsive briefs Exchange names of trial witnesses and depo designations Exchange counter designations; exchange demonstratives Hearing DATE Feb. 2, 2009 Feb. 9, 2009 Completed by February 18, 2009 Feb. 20 and Feb 27 (rebuttal), 2009 (5 pm) March 2 ­ March 10 , 2009 March 17, 2009 (5 pm) March 31, 2009 (5 pm) April 1, 2009 April 8, 2009 Begins April 14, 2009

C.

A Magistrate Judge Should be Appointed to Provide Expedited Review of Any Discovery Disputes before the Preliminary Injunction Hearing

The course of discovery in this action has been more difficult, and has resulted in more 17 disputes, than either party expected. To remedy this, and given that the present dispute is 18 anything but an isolated incident, RealNetworks formally requests that a discovery magistrate be 19 appointed to monitor these proceedings. Rule 16 authorizes a court to manage cases so that 20 wasteful pretrial activities are discouraged, the quality of the trial is improved, and settlement is 21 facilitated. It recognizes "the need for adopting special procedures for managing potentially 22 difficult or protracted actions that may involve complex issues, multiple parties, difficult legal 23 questions, or unusual proof problems." Fed. R. Civ. P. 16(c)(2)(L). Although there is clearly 24 such a need here, the Studio Defendants have refused to agree to this request. That refusal 25 suggests that the disparity in information regarding the technologies to be litigated--a disparity 26 arising from the Studios' unfair discovery tactics--benefits the Studios to the detriment of 27 RealNetworks. 28
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CONCLUSION For the foregoing reasons, this motion should be granted.

Dated: January 26, 2009

WILSON SONSINI GOODRICH & ROSATI Professional Corporation

By:

/s/ Michael A. Berta

Attorneys for Plaintiffs REALNETWORKS, INC. AND REALNETWORKS HOME ENTERTAINMENT, INC.

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