Coupons, Inc. v. Stottlemire

Filing 99

Memorandum of Points and Authorities in Opposition to Defendant Stottlemire's Motion for Sanctions Pursuant to Rule 11 of the Federal Rules of Civil Procedure re #96 filed by Coupons, Inc. (Attachments: #1 Exhibit A & B)(Cusack, Dennis) (Filed on 10/7/2008)Text modified on 10/8/2008 (bw, COURT STAFF).

Coupons, Inc. v. Stottlemire

Doc. 99

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Farella Braun & Martel LLP 235 Montgomery Street, 17th Floor San Francisco, CA 94104 [phone]

Neil A. Goteiner (State Bar No. 083524) Dennis M. Cusack (State Bar No. 124988) Carly O. Alameda (State Bar No. 244424) Farella Braun & Martel LLP 235 Montgomery Street, 17th Floor San Francisco, CA 94104 Telephone: [phone] Facsimile: [phone] E-mail: [e-mail], [e-mail], [e-mail] Attorneys for Plaintiff COUPONS, INC. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

COUPONS, INC., Plaint iff, vs. JOHN STOTTLEMIRE, and DOES 1-10, Defendants.

Case No. 5:07-CV-03457 HRL COUPONS' MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT STOTTLEMIRE'S MOTION FOR SANCTIONS PURSUANT TO RULE 11 OF THE FEDERAL RULES OF CIVIL PROCEDURE Date: November 4, 2008 Time: 10:00 a.m. Courtroom: 2, 5th Floor Judge: Honorable Howard R. Lloyd

I.

INTRODUCTION AND SUMMARY OF ARGUMENT The single sentence which Stottlemire protests in his frivolous motion is both true and

entirely consistent with Coupons' allegations regarding Stottlemire's circumvention software.1 Stottlemire's own motion contradictorily admits the truth of the challenged sentence. Stottlemire's second inappropriate sanctions motion underlines why discovery must begin without further waste of the parties' and the Court's time. His obvious understanding of
1

We will not repeat the factual and procedural background set forth fully in the parties' briefs on Stottlemire's accompanying motion to dismiss, and respectfully refer the Court to those pleadings.
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Coupons' software, reflected in his own admissions about how his circumvention software works, also demonstrates the bad faith of his motion: he fully understands the sentence in paragraph 15 of the Third Amended Complaint ("TAC") and that it is true. And he also understands that he must now proceed with the lawsuit since his Rule 12 attack on the complaint is at an end. This is Stottlemire's second baseless motion for sanctions. We ask that the Court admonish Mr. Stottlemire to seek permission from the Court or hire counsel, before filing another one. He should no longer have standing to hide behind his pro se status as he wastes Coupon's and this Court's resources. II. ARGUMENT A. Legal Standard

Rule 11 sanctions are imposed only in the "exceptional circumstance" where a claim "is patently unmeritorious or frivolous." Riverhead Savings Bank v. Nat'l Mortgage Equity Corp., 893 F.2d 1109, 1115 (9th Cir. 1990) (quoting Doering v. Union County Bd. of Chosen Freeholders, 857 F.2d 1531, 1537 (9th Cir. 1986). "The key question in assessing frivolousness is whether a complaint states an arguable claim -- not whether the pleader is correct in his perception of the law." Hudson v. Moore Bus. Forms Inc., 827 F.2d 450, 453 (9th Cir. 1987); see also Associated Bus. Tel. Sys. Corp. v. Cohn, No. C-93-1570-DLJ, 1994 WL 589487, *3 (N.D. Cal. Oct. 4, 1994) ("If, judged by an objective standard, a reasonable basis for the position exists in both law and in fact at the time the position is adopted, then sanctions should not be imposed.") (quoting Golden Eagle Distributing Corp. v. Burroughs Corp., 801 F.2d 1531, 1538 (9th Cir.1986)). When, as here, a complaint is the subject of a Rule 11 motion, the inquiry should focus on: "(1) whether the complaint is legally or factually baseless from an objective perspective, and (2) if the attorney has conducted a reasonable and competent inquiry before signing and filing it." Holgate v. Baldwin, 425 F.3d 671, 676 (9th Cir. 2005) (internal quotations and citation omitted). That the allegation is true, and that Stottlemire's own brief shows that he knows it is true, obviously precludes any basis for an award of sanctions.

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B.

TAC ¶ 15 Accurately Describes Coupons' Technology

We italicize the sentence in Paragraph 15 of the TAC that Stottlemire attacks: Plaint iff's security features are keyed to individual uniquely identified computers, rather than to individual people. By allowing or prohibiting access according to uniquely identified computers, Plaintiff effectively ensures the desired distribution for coupons, and protection against fraud. The features block an individual computer's access to a particular coupon offer altogether if that computer does not have the proper registry keys in place (has not previously been identified as a unique computer), or where that computer has been identified but has previously obtained the allowed number of particular coupons requested, or where the total number of coupons intended for distribution has already been printed. (Emphasis added.)

The easiest way to demonstrate Stottlemire's bad faith is to review how Coupons' technology works: An advertiser decides to make available over the Internet a limited number of downloadable and printable coupons for a particular product. This is called a "coupon offer." TAC ¶ 13. A graphic description of the coupon (but not a copy of the coupon itself) appears on a website. A consumer can click on a "Print Now" link in order to download and print the coupon. TAC ¶ 11. (Copies of a webscreen from Coupons.com showing the coupon description for a Quilted Northern coupon, and the actual coupon, are attached hereto as Exhibits A and B respectively, for the Court's convenience.) Once the consumer clicks on the print link, several things happen. Coupons' system checks to see if the individual computer already has a unique identifier assigned to it. If it does not, Coupons' system delivers to the consumer's computer a unique identifier, which resides in one or more files in the individual computer. TAC ¶ 16. If it does, the system proceeds to the next step. Prior to clicking the print link, an individual computer has no view or print access to any coupon. This is true even if the computer has already been assigned a unique identifier (because it previously sought to download a coupon from Coupons' system).

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Once Coupons' system has determined that the individual computer has a unique identifier (either because it already had one or Coupons' system just gave it one), this identifier interacts with Coupons' system to allow, or block, access to and printing of the desired coupon. The system verifies whether or not the computer has already printed coupons up to the device limit for that particular coupon offer. Each time the computer seeks to have a coupon printed, Coupons' system goes through this verification process. Id.

If the device limit for that coupon and that computer has not been reached, the system sends the coupon file to the printer attached to the computer for printing. If the device limit (or the campaign limit) has been reached, the system does not allow the coupon file to be sent and printed. TAC ¶ 20.

Thus, without a unique identifier assigned to it and residing in the computer's files, a computer cannot obtain access to a coupon. All the consumer can do is look at a description of the coupon on a webpage. Stottlemire's circumvention software works by deleting the files in the computer that

contain the unique identifier. By removing the files with the unique identifier, Stottlemire's software fools Coupons' system into believing that the computer has never before obtained access to the system. This causes Coupons' system to assign a new identifier to the computer and effectively refreshes the computer's ability to access and print coupons beyond what would otherwise be the device limits. Stottlemire of course cannot pretend that he does not know what "access" means in the context of Coupons' technology. He not only has used the system, he studied it to create his circumvention software. The Complaint in the challenged sentence correctly states that without the registry keys that contain a unique identifier, all any consumer with a computer can do is view a description of the coupon. There is no access to the coupon itself, either in display or digital form. It cannot be printed, which is the only relevance of "access" in the context of Coupons' technology. There is thus no inconsistency between the statement in TAC ¶ 15, and the other allegations in the TAC.
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Stottlemire understands this. This is all set out in Stottlemire's Motion for Sanctions, at pp. 4-5, where he describes not only Coupons' technology, but also how his own circumvention software works to delete the registry files deposited by Coupons' system. What is worse, Stottlemire in his brief (at 5:18-25) actually explains why TAC ¶ 15 is true. Stottlemire states: Under Plaintiff's claim it would be impossible for consumers who had never printed a coupon from Plaintiff's website to gain access to Plaintiff's coupons and print the coupons. Fundamentally, these consumers would not have the "proper registry keys in place" as there has never been an opportunity for Plaintiff to identify them as a unique computer and create the proper registry keys. The answer to this question can be found elsewhere in Plaintiff's TAC: "When a consumer first request [sic] a coupon from a website, Plaintiff delivers to the consumer's computer a security feature in the form of a unique identifier (TAC ¶ 16). This, without doubt, is exactly how Plaintiff's security feature works. Stottlemire thus admits that he knows that there is no access absent Coupons' system depositing a unique identifier into the registry keys in a consumer's computer. This is how Coupons' system enforces device limits on coupon prints. Stottlemire's software removes the registry keys so as to refresh the process of seeking access, obtaining a unique identifier, and resetting the device limits on coupon prints. Stottlemire's admission thus belies his contention that the following two statements in the complaint are "exact opposite to one another": (1) that Coupons' system blocks all access if the proper registry keys are not in place; and (2) that Stottlemire gained access by erasing the proper registry keys. He knows that a computer needs to have registry keys to gain any access, but those same registry keys interact with Coupons' system to set limits on the number of prints. By removing the registry keys, Stottlemire's program removes the device limit on a particular coupon offer. That is the dispositive point that exposes his motion as frivolous. III. CONCLUSION Stottlemire's sanctions motion confirms both desperation to avoid confronting what he did and the consequences for it, as well as a willingness to make this case more expensive. The Court should deny his motion and allow this case to move forward based on the ­ now virtually undisputed ­ facts. The Court should also admonish Stottlemire to seek counsel or the Court's
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approval before he files any more Rule 11 motions for sanctions. Because Coupons believes the case will run more smoothly if Stottlemire has additional legal counsel, Plaintiff would like to offer to pay up to $1000 directly to the attorney of his choice for a consultation fee.

Dated: October 7, 2008

FARELLA BRAUN & MARTEL LLP

By:

/s/ Dennis M. Cusack

Attorneys for Plaintiff COUPONS, INC.

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