eBay Inc. v. Digital Point Solutions, Inc. et al

Filing 52

Transcript of Proceedings held on 12-12-2008, before Judge Jeremy Fogel. Court Reporter/Transcriber Summer Clanton, Telephone number 408-288-6150. Per General Order No. 59 and Judicial Conference policy, this transcript may be viewed only at the Clerks Office public terminal or may be purchased through the Court Reporter/Transcriber until the deadline for the Release of Transcript Restriction.After that date it may be obtained through PACER. Any Notice of Intent to Request Redaction, if required, is due no later than 5 business days from date of this filing. Release of Transcript Restriction set for 3/16/2009. (Clanton, Summer) (Filed on 12/17/2008)

e B a y Inc. v. Digital Point Solutions, Inc. et al

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IN T H E U N I T E D S T A T E S DISTRICT COURT FOR T H E N O R T H E R N D I S T R I C T O F CALIFORNIA SAN JOSE DIVISION EBAY, INC ., ) ) ) ) ) ) ) ) ) ) CV -08 -4052- JF SAN JOSE , CALIFORNIA DECEMBER 12 , 2008 PAGES 1- 38

5 PLAINTIFF, 6 VS . 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 ALSO PRESENT: ADAM SAND FOR THE DEFENDANT : DIGITAL POINT SOLUTIONS, HOGAN A P P E A R A N C E S: FOR THE PLAINTIFF : EBAY DIGITAL POINT SOLUTIONS, INC . E T A L, DEFENDANT.

TRANSCRIPT O F PROCEEDINGS BEFORE THE HONORABLE JEREMY FOGEL UNITED STATES DISTRICT JUDGE

O' MELVENY & MYERS L L P BY : DAVID EBERHART SHARON BUNZEL T W O E M B A R C A D E R O C T R, 28 TH FL S A N FRANCISCO, CA 94111

COAST LAW GROUP , L L P BY : ROSS C A M P B E L L 1 6 9 S A X O N Y RD, S T E2 0 4 ENCINITAS, CA 92024

(APPEARANCES CONTINUED O N T H E NEXT PAGE ) 24 25 OFFICIAL COURT REPORTER : S U M M E R CLANTON, CSR , CERTIFICATE NUMBER 13185
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Dockets.Justia.co

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FOR THE DEFENDANT : BRIAN DUNNING, BRIANDUNNING.C O M, THUNDERWOOD

R U S, MILIBAND & S M I T H, APC BY : LEO PRESIADO 2211 MICHELSON DR , 7 TH FL I R V I N E, CA 92612

FOR THE DEFENDANT : TODD DUNNING, DUNNING ENTERPRISE

FREELAND COOPER & FOREMAN, LLP BY : STEWART FOREMAN 1 5 0 S P E A R S T., STE 1800 S A N FRANCISCO, CA 94105

FOR THE DEFENDANT : KESSLER' S FLYING CIRCUS

L A W O F F I C E OF PATRICK MCCLELLAN BY : PATRICK MCCLELLAN 2211 MICHELSON DR ., #7 0 0 I R V I N E, CA 92612

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SAN JOSE , CALIFORNIA

DECEMBER 12 , 2008

PROCEEDINGS (WHEREUPON, COURT CONVENED A N D T H E FOLLOWING PROCEEDINGS WERE HELD: ) T H E C O U R T: OKAY. W E HAVE ONE OTHER

MATTER F O R ARGUMENT, A N D THAT 'S EB A Y VERSUS DIGITAL POINT SOLUTION . OKAY. COULD I GET APPEARANCES, PLEASE . GOOD MORNING, YOUR H O N O R.

MR . E B E R H A R T:

DAVID EBERHART ON B E H A L F O F E BAY , A L O N G WITH MY PARTNER SHARON BUNZEL AND CLIENT REPRESENTATIVE ADAM SAND. T H E C O U R T: GOOD MORNING. GOOD MORNING, YOUR H O N O R.

MR . P R E S I A D O:

L E O P R E S I A D O O N B E H A L F OF DEFENDANTS B R I A N DUNNING , BRIANDUNNING.C O M, A N D T H U N D E R W O O D H O L D I N G S, INC . T H E C O U R T: MR . FOREMAN : OKAY. I 'M SORRY, GO AHEAD .

GOOD MORNING , YOUR HONOR .

STEWART FOREMAN O N B E H A L F OF DEFENDANTS TODD DUNNING A N D DUNNING E N T E RPRISE , I N C. MR . MCCLELLAN: GOOD MORNING, YOUR HONOR.

PATRICK MCCLELLAN ON B E H A L F O F KESSLER 'S FLYING CIRCUS. MR . C A M P B E L L: ROSS CAMPBELL -3

GOOD MORNING, YOUR H O N O R.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THANK Y O U.

T H E C O U R T:

JUST A MOMENT.

COUNSEL, IF Y O U C O U L D D O THAT OUTSIDE,

MR . C A M P B E L L:

GOOD MORNING, YOUR H O N O R.

ROSS CAMPBELL ON BEHALF OF DEFENDANTS SHAWN HOGAN A N D DIGITAL POINT SOLUTION S, INC . T H E C O U R T: GOOD MORNING, EVERYONE.

P L E A S E, YOU COULD HAVE A SEAT IF Y O U LIKE . I WILL BASICALLY TO CUT TO T H E C H A S E. D O N'T THINK THAT THERE' S A PROBLEM WITH THIS COMPLAINT. I THINK EB A Y C O U L D HAVE , PERHAPS , I

PROVIDED A LITTLE MORE SPECIFICITY WITH R E G A R D TO DAMAGES, B U T I D O N'T THINK IT 'S REQUIRED TO. I THINK THE ISSUE IS WHETHER THE STATUTE, T H E CFAA , COVERS A T H I R D-P A R T Y C O M P U T E R. CASE LAW THAT SUPPORTS EB A Y O N THAT . THERE 'S

I THINK

THERE 'S A FACTUAL ISSUE AS TO WHETHER THE A C C E S S W A S AUTHORIZED OR N O T. THE AOL CASE TALKS ABOUT

VIOLATIONS OF USER AGREEMENTS BEING UNAUTHORIZED ACCESS; THAT'S ALLEGED. THE - - WITH REGARD T O RICO , THE QUESTION OF WHEN THERE WAS A CORPORATE E N T I T Y I N T H E GRAND S C H E M E O F T H I N G S, THERE 'S A FACTUAL ISSUE AS TO THAT. I THINK T H E RICO CLAIM , A L T H O U G H I 'M NOT A

GREAT F A N O F RICO C L A I M S, AND I DON 'T THINK ANY
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TRIAL J U D G E S A R E, B U T I THINK IN THIS ONE , T H E ELEMENTS HAVE BEEN ADEQUATELY ASSERTED . A N D THEN WITH REGARD TO T H E CASE MANAGEMENT QUESTIONS , T H E FORUM SELECTION CAUSE IN T H E PENDING CASE IN SOUTHERN CALIFORNIA, EB A Y I S N O T A PARTY IN THOSE CASES . SO WHILE THERE MIGHT

BE SOME EFFICIENC Y I N T H E COORDINATION -- A N D I D O N'T BELIEVE VENUE IN SOUTHERN CALIFORNIA I S REQUIRED OR THAT THE COURT OUGHT TO STAY THIS CASE JUST BECAUSE T H E R E'S SOMETHING G O I N G O N T H E R E. SO THAT' S M Y VIEW . LET ME A S K T H E MOVING

PARTIES IF THERE' S A PARTICULAR THING THEY WANT TO HIGHLIGHT B E Y O N D WHAT'S IN T H E P A P E R S, A N D I WILL BE HAPPY TO TALK ABOUT YOU ABOUT IT IF Y O U HAVE . GO AHEAD . MR . P R E S I A D O: YOUR HONOR, IN

CONSIDERATION OF THE COURT 'S TIME, AND BY WE I MEAN M Y S E L F A N D MR. FOREMAN, HAVE SPLIT UP THE ARGUMENT MADE BY THE DUNNING DEFENDANTS A N D ONLY DUNNING DEFENDANTS, WE A R E N O T AFFILIATED WITH T H E H O G A N DEFENDANTS. SO I WOULD LIKE T O DISCUSS T H E V E N U E I N PARTICULAR WHICH I S E E AS A THRESHOLD ISSUE, T H E ISSUE OF T H E F O R U M SELECTION CLAUSE . OKAY WITH T H E COURT TO START.
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IF THAT'S

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T H E C O U R T:

Y O U C A N DO WHATEVER YOU LIKE.

H O W DOES -- H O W I S E BAY BOUND BY THAT SINCE THEY ARE N O T A PARTY TO THAT PARTICULAR AGREEMENT? MR . P R E S I A D O: WELL, YOUR HONOR, I DON 'T

THINK IT C A N B E REASONABLY D I S P U TED THAT THE PARTIES ARE ONLY RELATED THROUGH THAT AGREEMENT . T H E ONLY R E A S O N THAT EB A Y WAS M A K I N G P A Y M E N T S T O OUR CLIENTS , AND THOSE PAYMENTS THEY NOW CHARACTERIZE A S T H E DAMAGES THEY SUSTAINED, THE ONLY REASON THEY WERE M A K I N G THOSE PAYMENTS WAS BECAUSE OF OUR CLIENTS' PARTICIPATION IN THE EB A Y AFFILIATED PROGRAM THROUGH THAT PSA , T H E PUBLISHED SERVICE AGREEMENT . SO -T H E C O U R T: SO Y O U A R E SAYING EB A Y

CONTRACTUALLY AGREED TO HAVE ANY DISPUTES OF THIS KIND RESOLVED IN THE CENTRAL DISTRICT OF CALIFORNIA; D I D E BAY ACTUALLY AGREE TO THAT? MR . P R E S I A D O: WELL, EB A Y DOESN' T HAVE TO

BE A SIGNATORY TO THAT AGREEMENT . T H E C O U R T: BENEFICIARY . MR . P R E S I A D O: B U T B E Y O N D THAT, IF YOU THEY ARE A THIRD- PARTY

LOOK AT THE CASE LAW PROVIDED , I T'S ACTUALLY T H E
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STANDARD THAT IS CLOSELY RELATED TO THAT AGREEMENT . THEY ARE A THIRD- PARTY BENEFICIARY, A N D EVEN THAT SAYS FOR THEM TO BE BOUND BY THAT F O R U M SELECTION C L A U S E, BUT T H E S T A N D A R D I S A C T U A L L Y L O W E R THAN THAT, IT 'S CLOSELY RELATED . A N D N O T ONLY THAT , I F Y O U LOOK A T T H E T&C SUPPLEMENT, THAT SUBSUMES -- AND THAT' S A N E BAY DOCUMENT , THAT 'S NOT CONTESTED - - THAT SUBSUMES T H E P S A. A N D I N FACT , T H E R E'S LANGUAGE IN THAT STATING

THAT SETTING U P AND ESTABLISHING THE AGENCY RELATIONSHIP BETWEEN EB A Y AND COMMISSION JUNCTION, IT S T A T E S THAT T H E AFFILIATED PROGRAM IS MONITORED BY EBAY THROUGH COMMISSION JUNCTION BASED ON T H E P S A. T H E C O U R T: A L L R I G H T.

SO IN OTHER WORDS , I F I C A N S A Y BACK T O Y O U WHAT I' M HEARING , T O T H E EXTENT THAT EB A Y I S CLAIMING THAT THEY HAVE A CLAIM UNDER THE CFAA BECAUSE THE TERMS A N D CONDITIONS OF T H E USER AGREEMENT PRECLUDED THE ACTIVITY THAT OCCURRED HERE. THOSE TERMS AND CONDITIONS SUBSUME THE

AGREEMENT THAT CONTAINS T H E F O RU M SELECTION CLAUSE . MR . P R E S I A D O: IT 'S EVEN BROADER THAN

THAT, YOUR HONOR, BECAUSE THE P S A H A S RELATED T O LANGUAGE BECAUSE, BASICALLY, ANY DISPUTE RELATED T O
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T H E P S A FALLS INTO THIS VENUE -T H E C O U R T: RIGHT . WELL THAT 'S

NECESSARILY A DISPUTE BETWEEN T H E PARTIES TO T H E P S A. SO EB A Y IS NOT A PARTY, B U T Y O U ARE S A Y I N G THEY A R E, NONETHELESS, BOUND BY IT BECAUSE THEY HAVE, IN EFFECT , INCORPORATED IT INTO T H E TERMS AND CONDITIONS . MR . P R E S I A D O: RIGHT .

A N D THEY A R E CLOSELY RELATED AND THEY ARE THIRD -PARTY BENEFICIARY . BUT ARGUMENT C A N ALSO BE

MADE THAT THEY A R E, IN FACT, PARTY TO THAT P S A BECAUSE OF THE A G E N C Y RELATIONSHIP WITH C JI, COMMISSION JUNCTION, A N D THAT 'S APPARENT FROM T H E PLEADINGS THEMSELVES . IF Y O U LOOK AT PARAGRAPH - - T H E EB A Y COMPLAINT A T PARAGRAPH 19, T O P O F PAGE 5, T H E LAST SENTENCE , " EB A Y A N D/ OR COMMISSION J U N C T I O N T R A C K S T H E I N F O R M A T I O N U S I N G I N F O R M A T I O N P L A C E D ON THE N E W USER' S BROWSER ." THAT' S T H E WHOLE CRUX O F T H E ARGUMENT. T H E T R A C K I N G I S DONE BY T H E PLACING OF COOKIES. ALSO, IF Y O U G O T O PARAGRAPH 12, THEY ALLEGE -- I' M SORRY , PARAGRAPH 20 OF THE FIRST AMENDED COMPLAINT . "E BAY USED THE SERVICES OF COMMISSION JUNCTION IN
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ADMINISTERING THE AFFILIATED MARKETING PROGRAM. " THEY GO ON TO ALLEGE , " CJ WAS RESPONSIBLE F O R, AMONG OTHER T H I N G S, REC R U I T I N G AFFILIATES TRACKING -- I' M S O R R Y - - " TRACKING AFFILIATE TRAFFIC, MONITORING COMPLIANCE WITH AFFILIATES, PREVENTING AND DETECTING FRAUDULENT ACTIVITY , A N D P A Y I N G AFFILIATES USING FUNDS PERMITTED B Y E BAY ." SO THESE ALLEGATIONS INFER THAT THERE WAS A DIRECT A G E N C Y RELATIONSHIP BETWEEN T H E TWO . N O W, THE STANDARD WITH RESPECT T O V E N U E IS THAT THE B U R D E N I S O N T H E PLAINTIFF TO ESTABLISH P R O P E R V E N U E; AND ALSO, T H E B U R D E N IS ON THE PLAINTIFF T O ESTABLISH OR TO DEFUSE T H E P R E S U M E D VALIDITY OF A FORUM SELECTION C L A U S E. T H E C O U R T: T H E A R G U M E N T HERE I S N'T THAT

T H E F O R U M SELECTION CLAUSE I S N'T VALID , THEY A R E S A Y I N G THEY A R E N O T A PART OF IT . THEY ARE ATTACKING I T S VALIDITY. MR . P R E S I A D O: NONETHELESS , I T I S THEIR I D O N' T T H I N K

B U R D E N T O ESTABLISH PROPER V E NUE . T H E C O U R T: IF THAT FORUM SELECTION

C L A U S E DIDN 'T EXIST THIS W O U L D N O T BE AN IMPROPER VENUE . SO IT' S A DEFENSE, IF Y O U WILL , T O T H E I R

ASSERTION O F V E NU E. A N D I AGREE THAT -- ASSUMING THEY WERE A
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PARTY TO THAT CLAUSE , THEN IT WOULD BE THEIR B U R D E N TO SHOW IT WASN'T VALID A N D I T SHOULDN 'T BE ENFORCED . BUT T H E F I G H T I S A B O U T WHETHER THEY ARE

A PARTY, N O T WHETHER IT 'S VALID. MR . P R E S I A D O: DEFENDANTS HAVE ASKED THE

COURT TO TAKE JUDICIAL NOTICE OF T H E COMMISSION JUNCTION COMPLAINT W H I C H A T T A C H E S T H E PSA . THAT -- AND I DON 'T WANT T O R E H A S H ALL MY ARGUMENTS, BUT THERE IS -- T H E V E N U E SELECTION C L A U S E DOES APPLY TO EB A Y, JUST TO SUMMARIZE , EITHER A S T H E DIRECT AGENT -T H E C O U R T: AT . I SEE WHAT YOU A R E GETTING AND IN

I'M GOING TO A S K THEM TO RESPOND. THANK Y O U. MR . FOREMAN ? MR . FOREMAN : WOULD YOU LIKE ME TO

ADDRESS THOSE OTHERS N O W? T H E C O U R T: WANT TO ADD ? MR . FOREMAN : COMMENT ON VENUE. EVEN ASIDE FROM THE AGREEMENT ARGUMENT , T H E ONLY THING THAT OCCURS IN THIS DISTRICT IS EB A Y' S HEADQUARTERS. CENTRAL JUNCTION. COMMISSION JUNCTION IS IN T H E JUST A N ADDITIONAL BRIEF NO , N O. ANYTHING ELSE YOU

E BAY PAYS COMMISSION J U N C T I O N I N
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THE CENTRAL DISTRICT WHICH THEN PAYS OUR CLIENTS WHICH ARE I N THE CENTRAL DISTRICT - T H E C O U R T: MR . FOREMAN : THAT' S A 1404 ARGUMENT. WHAT I PRIMARILY W A N T E D TO

ADDRESS, YOUR HONOR, IS T H E S U B S T A N T I V E P O I N T A B O U T THE CFAA AND SECTION 502 CLAIMS. A N D WITH A L L D U E RESPECT T O T H E COURT, YOUR INITIAL COMMENT REFERENCED THE USER AGREEMENT IN T H E A O L CASE. A N D I 'M NOT EXACTLY -- I'M JUST

INFERRING WHAT Y O U M I G H T MEAN BY THAT REFERENCE , B U T I THINK IT 'S IMPORTANT TO UNDERSTAND THAT THIS CASE IS NOT ABOUT T H E USER AGREEMENT. THE USER

AGREEMENT I S ONLY ALLEGED IN THIS F I R S T AMENDED COMPLAINT I N O R D E R T O C R E A T E THE ALLEGED VENUE HERE. T H E USER AGREEMENT, WHICH BY THE W A Y T H E PLAINTIFFS DON 'T ATTACH TO THEIR COMPLAINT B U T AGAIN WE ASKED F O R J U D I C I A L N O T I C E, WE PRINT ED OFF A COPY, THAT'S T H E AGREEMENT THAT E V E R Y O N E OF US IN THIS COURTROOM W H O HAPPENS TO BE REGISTERED AS EB A Y POTENTIAL B U Y E R S SIGN AS B U Y E R S. T H E C O U R T: THEY OFFERED THAT -- THEY ARE

N O T T R Y I N G TO ENFORCE T H E USER AGREEMENT AS A CONTRACT . Y O U A R G U E THAT THEY HAVEN' T M E T THE
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ELEMENT OF UNAUTHORIZED A C C E S S, AND THEY ARE S A Y I N G IT VIOLATES T H E USER AGREEMENT T O S T U F F COOKIES ; THAT' S T H E I R ARGUMENT. MR . FOREMAN : WELL, WITH A L L DUE RESPECT,

YOUR HONOR, T H E SUBSTANTIVE ALLEGATIONS I N T H E FIRST AMEND ED COMPLAINT , A T L E A S T A S I READ THEM, D O N'T TALK ABOUT US VIOLATING T H E USER AGREEMENT. THEY TALK A B O U T U S VIOLATING THE AFFILIATE MARKETING PROGRAM WHICH IS N O T PART OF T H E USER AGREEMENT. A N D T H E ALLEGATIONS ABOUT THE C O O K I E STUFFING PROGRAM HAVE T O D O WITH A PROGRAM THAT IS COMPLETELY SEPARATE FROM B E I N G A USER OF EB A Y I N THE SENSE O F GOING O N THEIR T O PURCHASE THINGS. IT 'S THE B E H I N D T H E -- WHAT W E WERE ENGAGED IN AS AFFILIATES T O T H E I R MARKETING PROGRAM THROUGH COMMISSION JUNCTION I S THE BEHIND THE S C E N E S A C T I V I T Y T O T R Y TO GET P E O P L E A S U S E R S O F EB A Y. SO WHAT I'M T R Y I N G T O P O I N T O U T, YOUR HONOR , I S THAT T H E C O O K I E STUFFING IS UNRELATED TO THE USER AGREEMENT. IF T H E A C C E S S ISSUE FOR T H E

CFAA IN 502 H A S T O B E L O O K E D AT IN THE CONTEXT OF THE ACTIVITY THAT THE PARTY WAS ALLEGEDLY ENGAGED IN , W H I C H I S T H E AFFILIATE MARKETING PROGRAM , A S
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THEY CLAIM IN THE FIRST AMENDED COMPLAINT . A N D U N D E R THAT PROGRAM, THEY ADMIT -- AND FIRST OF A L L, THEY A D M I T I N T H E I R F I R S T AMENDED COMPLAINT THAT OUR CLIENTS NEVER ACCESSED THEIR COMPUTERS A S AFFILIATES . THAT JUST DOESN 'T HAPPEN ;

SO THAT' S N O T EVEN A DISPUTE. T H E ONLY THING THEY SAY , A N D THEY R A I S E THIS NOT IN THEIR PLEADINGS B U T AS AN ARGUMENT IN THEIR OPPOSITION BRIEF, WHICH THAT IN AND OF I T S E L F REQUIRES AN AMENDMENT T O T H E COMPLAINT , B U T WHAT THEY SAY IS , O H, THE POTENTIAL USER , T H E INTERNET USER WAS AN UNWITTING A G E N T F O R OUR CLIENTS UNDER THE AFFILIATE MARKETING PROGRAM, NOT UNDER THE USER AGREEMENT. THE PROBLEM WITH THAT ARGUMENT, YOUR HONOR , I S THAT EVERY CASE THAT TALKS ABOUT A PRINCIPAL AGENCY RELATIONSHIP POTENTIALLY GIVING RISE TO A VIOLATION UNDER THE CFAA, IT 'S CLEAR THAT THERE IS A CLEAR AGENCY PRINCIPAL RELATIONSHIP AND THAT RELATIONSHIP W A S F O R M E D FOR T H E PURPOSE OF IMPROPER ACCESS. THAT' S N O T WHAT OCCURS HERE A N D THEY CERTAINLY D O N' T A L L E G E IT. HERE , Y O U' VE GOT , B Y

THEIR OWN WORDS I N THEIR ARGUMENT, UNWITTING USERS W H O HAVE A COOKIE THAT THEN V O L U N T A R I L Y G O T O E BAY .
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THEN THERE' S T H E ISSUE OF THE UNAUTHORIZED PART . WELL, I T H I N K I T'S VERY CLEAR

FROM THE ARGUMENT , A N D AGAIN IT' S N O T EVEN ALLEGED IN T H E COMPLAINT, B U T I N T H E ARGUMENT THE UNAUTHORIZED A S P E C T IS ONLY DETERMINED AFTER T H E FACT. A N D IT' S C L E A R U N D E R T H E CASES,

SHAMROCK FOODS A N D O T H E R S, THAT YOU C A N ONLY HAVE UNAUTHORIZED A C C E S S AT THE TIME OF THE A C C E S S. THE SHAMROCK CASE AND OTHERS CLEARLY SAY IF Y O U'V E G O T AUTHORIZED A C C E S S AND Y O U L A T E R U S E THAT ACCESS FOR IMPROPER PURPOSE , THAT MAY B E A VIOLATION O F SOME T H I N G S B U T NOT CFAA. T H E C O U R T: THAT' S W H E R E I THINK , A N D I

WILL CERTAINLY LOOK AND MAKE SURE I 'M NOT CONFUSING A P P L E S A N D ORANGES, BUT I THINK THAT'S WHERE T H E USER AGREEMENT IS RELEVANT BECAUSE IT' S N E V E R AUTHORIZED TO ACCESS T H E COMPUTERS FOR AN IMPROPER PURPOSE. I T'S N O T AUTHORIZED TO THEM TO USE THEM

FOR A COOKIE STUFFING SCHEME, FOR EXAMPLE . THAT' S WHAT I UNDERSTOOD THEM TO BE ARGUING WAS THAT IT IS UNAUTHORIZED AT T H E TIME THAT IT OCCURS BECAUSE USERS AREN'T ALLOWED TO DO THAT. MR . FOREMAN : T H E C O U R T: WELL - OR USERS AREN' T ALLOWED TO BE
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USING IT . MR . FOREMAN : T H E C O U R T: BUT WE 'RE N O T T H E USER. B U T Y O U ARE USING T H E U S E R S, AND THAT IS, IN I T S E L F,

IS WHAT THEY A R E SAYING . UNAUTHORIZED ACCESS. MR . FOREMAN :

WELL, YOUR H O N O R, IF I M A Y

JUST BACK U P S O THAT WE A R E, AT LEAST I A M SATISFIED O N B E H A L F OF MY CLIENT THAT WE KIND O F UNDERSTAND WHAT THEY 'VE ALLEGED IN TERMS OF FACTUAL SEQUENCE . WE HAVE A P E R S O N OUT IN T H E I N T E R N E T, THE USER, W H O H A S ON THEIR SCREEN AT SOME POINT THROUGH SOME OTHER PLACE THEY'V E BEEN ON T H E I N T E R N E T, WINDS UP WITH AN ADD F O R E BAY THAT' S BEEN P U T T H E R E BY O U R CLIENTS . A N D I N THAT PROCESS OF VIEWING THAT AD , THAT USER W I N D S U P WITH A KESSLER C O O K I E ON THEIR COMPUTER . NOBODY SAYS THERE' S ANYTHING W R O N G WITH

THAT; THAT HAPPENS T O A L L OF US ALL T H E TIME . THEN THAT USER GOES TO EB A Y, MAYBE IT' S JOE THE AUTO MECHANIC I N BALTIMORE, AND H E WANTS T O BUY NEW SHOCK ABSORBERS CHEAPER THAN HIS LOCAL DISTRIBUTOR . HE' S N E V E R USED EB A Y BEFORE ; H E'S N O T H E S U R F S E BAY ,

YET EVEN SIGNED THE USER AGREEMENT.

B U T I N T H E PROCESS H E H A S PICKED UP AN EB A Y COOKIE
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FROM EB A Y. L E T'S S A Y H E F I N D S H I S SHOCK ABSORBERS THAT ARE CHEAPER AND H A S T O B U Y THEM. HE THEN HAS

TO REGISTER A N D H E S I G N S A USER AGREEMENT AT THAT TIME. H E S I G N S I T; WE DON 'T. H E S I G N S I T; HE BUYS

SOMETHING. THROUGH THE WONDERS OF THE INTERNET , COMMISSION JUNCTION DOWN I N THE CENTRAL DISTRICT, GETS A NOTICE SAYING THERE 'S A M A T C H; THAT'S A KESSLER' S C O O K I E AND AN EB A Y COOKIE ; W E HAVE A NEW USER REGISTERED O N E BAY THAT' S B O U G H T SOMETHING , KESSLER IS OWED COMMISSION . THAT'S H O W THIS WORKS .

SO T H E USER AGREEMENT THAT THEY' VE ALLEGED TO TRY TO C R E A T E T H E, Y O U KNOW , JURISDICTION HERE , I S T H E USER AGREEMENT OF OUR INDIVIDUAL CLIENTS WHICH HAS NOTHING T O D O WITH THE TRANSACTION THAT I JUST DESCRIBED WITH O U R J O E, T H E AUTO SHOP. SO THAT' S W H Y IT HAS NOTHING TO DO WITH CF AA. A N D WHAT I JUST DESCRIBED , A N D I D O N' T T H I N K

ANYBODY SERIOUSLY DISPUTES THESE FACTS , THE USER AGREEMENT THAT J O E S I G N S C A N' T CREATE LIABILITY F O R US UNDER T H E CFAA . WHAT THEY A L L E G E IS THAT J O E, WHEN HE ORIGINALLY SAW O U R A D, HE DIDN'T CLICK ON SOMETHING
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TO G E T H I S COOKIE .

THAT'S THEIR PROBLEM.

THAT 'S

WHAT THEY'R E FUNDAMENTALLY COMPLAINING ABOUT , THAT HE G O T A C O O K I E SOMEHOW . THEY SAY HE W A S S U P P O S E D T O C L I C K O N SOMETHING. A N D THEY S A Y SOME PEOPLE D I D, WHICH

PRESUMABLY IS OKAY, AND SOME PEOPLE DIDN' T, WHICH THEY COMPLAIN ABOUT. B U T THEY D O N' T EVEN ALLEGE

H O W T O D I S T I N G U I S H WHETHER J O E CLICKED OR DIDN' T CLICK WHEN HE GOT H I S C O O K I E. WHAT THEY S A Y IS IF HE' S A N UNCLICKED P E R S O N, HE' S THEN AN INVOLUNTARY AGENT OF O U R CLIENTS AND THAT AFTER HE BUY S SOMETHING AND AFTER THEY PAY A COMMISSION T O COMMISSION JUNCTION THAT EVENTUALLY COMES TO US, HE RETRO ACTIVELY BEC O M E S UNAUTHORIZED T O HAVE ACCESSED EB A Y' S C O M P U T E R. T H E C O U R T: WELL, B U T H E'S CARRYING --

A N D THIS IS GOING TO BE A BAD ANALOGY, B U T H E'S CARRYING T H E B U G OR VIRUS AT THE TIME HE REGISTERS ; T H E C O O K I E IS ALREADY T H E R E. MR . FOREMAN : T H E C O U R T: MR . FOREMAN : M A Y INTERRUPT YOU . RISK -T H E C O U R T: COUNSEL, NOTHING IS GOING TO
17

AGREED . SO -I'M SORRY , YOUR HONOR , I F I

AND I KNOW I DO THAT AT GREAT

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

HAPPEN T O Y O U, I ASSURE Y O U. MR . FOREMAN : THAT'S A KEY POINT . THAT'S

EXACTLY RIGHT; HE GETS A C O O K I E. GETS A COOKIE.

W E A L L AGREE HE

T H E KEY POINT IS THEY SAY SOME OF

THEM GET A COOKIE WITHOUT CLICKING ON SOMETHING . N O W, WHERE IN THEIR FIRST AMENDED COMPLAINT D O THEY S A Y THAT THAT' S A REQUIREMENT OF ANYTHING ? AND THAT' S T H E HEART OF THE PROBLEM ALSO WHERE DID OUR CLIENTS EVER

WITH THEIR RICO C L A I M.

A L L E G E T O HAVE PROMISED OR REPRESENTED THAT ONLY CLICKED USERS WOULD GO TO EB A Y T O EARN US A COMMISSION? I T'S NOWHERE.

A N D THAT 'S WHY THIS COMPLAINT FAILS UNDER T H E C O M P U T E R F R A U D A N D ABUSE ACT , I N SECTION 5 0 2, A N D RICO , A N D ULTIMATELY O N W H Y YOU D O N'T HAVE JURISDICTION, YOUR H O N O R. T H E C O U R T: THANK Y O U VERY MUCH. MR . FOREMAN : PATIENCE , YOUR HONOR . T H E C O U R T: ANYTHING ELSE, COUNSEL, THANK YOU F O R YOUR THERE 'S MISSING L I N K S. OKAY

B E F O R E I HEAR FROM E BAY ? MR . C A M P B E L L: THANK Y O U, YOUR H O N O R.

WITH RESPECT T O M R. HOGAN AND DIGITAL POINT SOLUTIONS, INC ., AS A P R E L I M I N A R Y M A T T E R IT
18

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WOULD HAVE BEEN R E F E R R E D A S T H E KFC DEFENDANTS WHO BOTH MAKE EXCELLENT POINTS WITH RESPECT T O VENUE A N D S U B S T A N T I V E DEFECTS IN FEDERAL CAUSES OF ACTION. WE 'RE LOOKING AT A MORE FUNDAMENTAL FLAW WITH RESPECT T O M Y C L I E N T; THAT IS, I DID HEAR THE COURT ADDRESS, IN I T S TENTATIVE, O N E I S S U E WITH RESPECT TO THERE' S A QUESTION OF FACT AS TO THE EXISTENCE O F DIGITAL POINT SOLUTIONS, INC . WHAT

THAT COMES DOWN T O I S R E A L L Y THE SCOPE OF O U R REQUEST FOR JUDICIAL N O T I C E A N D THE E F F E C T O F T H E LEGAL DATE DIGITAL P O I N T S O L U T I O NS, I N C. WAS INCORPORATED. AND I F YOU STOP AND THINK ABOUT THAT FOR A MOMENT , T H E PLAINTIFF IS LOOKING TO RECOVER F O R A THREE -YEAR PERIOD OF FRAUD B E F O R E THAT LEGAL INCORPORATION DATE. THAT' S A REMARKABLE COMPONENT AND CRITICAL T O THAT ,

OF THEIR ATTEMPT TO RECOVER.

THEIR ALLEGATION IS THAT Y O U JUST HAVE TO A C C E P T THAT WE' VE CLAIMED T H E CORPORATION EXISTED A T A L L RELEVANT TIMES A N D D I D SOME W R O N G D O I N G. B U T A T A MINIMUM, I THINK TO ACCESS THAT REMARKABLE AMOUNT OF RECOVERY F O R THAT THREE -YEAR P E R I O D, THEY W O U L D HAVE TO A L L E G E SOME FACTUAL BASIS F O R A THEORY O F P R E- INCORPORATION LIABILITY.
19

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T H E C O U R T:

THERE IS SOME TIME I N T H E

RELEVANT PERIOD THAT 'S AFTER INCORPORATION, CORRECT? MR . C A M P B E L L: THERE IS A BRIEF SIX -WEEK

P E R I O D A T T H E END OF T H E T H R E E A N D A HALF YEARS . T H E C O U R T: A N D O N A 12 (B) (6) M O T I O N, THE

COURT DOESN 'T PARSE WITH THAT CLOSELY. MR . C A M P B E L L: WELL, THERE 'S STILL NO

NEXUS BETWEEN DIGITAL S O L U T I O NS, I N C. AND T H E ALLEGED FRAUDULENT ACTIVITY. THEY HAVE ALLEGED INVOLVEMENT WITH MR . H O G A N A S T O USER AGREEMENTS AND SO FORTH . ALLEGED THAT T H E CORPORATION HAS -- THIS IS IN THEIR B R I E F S - - T H E CORPORATION HAS AFFIRMATIVELY HELD ITSELF OUT A S A SEPARATE ENTITY. THOSE A R E MATTERS THAT ARE N O T W I T H I N DEFENDANT'S EXCLUSIVE CONTROL , T H O S E A R E BASED ON REPRESENTATIONS THAT HAVE BEEN MADE , ALLEGEDLY, TO THE PLAINTIFF. T H E C O U R T: AGAIN , THIS IS A 12( B)( 6) THEY

M O T I O N, AND AT A MINIMUM T H E CORPORATION HELD I T S E L F O U T AS A S E P A R A T E E N T I T Y, WHETHER THAT'S TRUE OR NOT IS ANOTHER DAY . AND EVEN ACCEPTING THAT THE INCORPORATION IS TO BE ACCORDED FULL FAITH AND C R E D I T, YOU STILL
20

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HAVE SIX WEEKS OF ALLEGED FRAUDULENT A C T I V I T Y A F T E R THAT INCORPORATION OCCURS. S O THAT AT LEAST S T A T E S

T H E C L A I M, MAYBE NOT AS VAGUE AS A CLAIM AS YOU WANT, B U T I T STATES A C L A I M. MR . C A M P B E L L: I THINK THE CONCERN IS THE

N O T I O N THEY ALLEGED THE CORPORATION HELD ITSELF O U T AS A SEPARATE ENTITY , THAT 'S NOT IN T H E COMPLAINT, IT 'S IN THE BRIEFING . AND SO T H E FACT AS TO H O W I T

HELD ITSELF O U T NEED TO BE IN T H E COMPLAINT SO WE C A N HAVE AN ADEQUATE OPPORTUNITY TO RESPOND. T H E C O U R T: SO Y O U A R E ECHOING WHAT YOUR

C O LLEAGUES HAVE SAID , A S T O T H E SUBSTANCE OF THESE CLAIMS THERE NEEDS T O B E MORE PARTICULARITY. MR . C A M P B E L L: AND SPECIFICALLY WITH

RESPECT TO RICO, THE ENTERPRISE COMPONENT , T H E R E I S A DISTINCTIVE PRINCIPAL WHERE THE RICO DEFENDANT C A N N O T B E IDENTICAL TO THE RICO -T H E C O U R T: UNDERSTOOD. A N D I W O N'T GO BACK OVER

MR . C A M P B E L L:

T H E B R I E F S, B U T THAT SEPARATENESS I S CREATED BY T H E AFFIRMATIVE ACT O F INCORPORATOR. THAT IS WHAT

C O NFERS THE SEPARATE BENEFITS , P R O T E C T I O N S R I G H T S TO S U E, RIGHTS TO BE SUED, THAT ALLOWS F O R T H E ENTERPRISE TO BE -T H E C O U R T: WELL, THAT' S N O T THE ONLY
21

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KIND OF ENTERPRISE THAT RICO RECOGNIZES.

A

CORPORATION IS O N E ENTERPRISE , I T'S N O T T H E ONLY KIND. MR . C A M P B E L L: B U T T H E CORPORATION IS THE

ONLY KIND THEY 'VE ALLEGED HERE O T H E R THAN T H E ASSOCIATION , I N FACT WHICH I THINK WE BRIEFED VERY WELL, C A N N O T B E PREDICATED ON JUST THE DEFENDANT A N D D O E' S 1 THROUGH 10. Y O U CANNOT TACK ON

FABRICATED DEFENDANTS I N THAT WAY T O CIRCUMVENT . T H E C O U R T: Y O U NEED A LITTLE MORE. I T'S

N O T JUST A LITTLE MORE, Y O U NEED SPECIFICITY AS TO T H E N A T U R E AND STRUCTURE O F T H E ENTERPRISE. MR . C A M P B E L L: SUBMIT THAT . T H E C O U R T: THANK Y O U. G O A H E A D, CORRECT. A N D WE WOULD

A LOT F O R E BAY TO RESPOND TO. COUNSEL. MR . E B E R H A R T: Y E S, YOUR H O N O R.

FIRST , L E T ME ADDRESS WHAT I THINK ARE SOME MISTAKEN UNDERSTANDINGS ABOUT WHAT WE' VE ALLEGED REGARDING THE COOKIE STUFFING SCHEME. T H E S C H E M E INVOLVES, AS T H E C O U R T H A S APTLY P U T I T, UNWITTING USERS W H O A R E USED B Y T H E DEFENDANTS IN THIS S C H E M E. IT AS A PARKED C A R. S O Y O U COULD THINK OF

THE DEFENDANTS ARE RUNNING
22

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INTO THE P A R K E D C A R AND THAT CAR IS HITTING EB A Y. THAT PARKED C A R, THAT USER , I S N' T D O I N G ANYTHING . WHAT I S HAPPENING IS THAT T H E DEFENDANTS

A R E CAUSING THESE THIRD -PARTY USERS ' COMPUTERS TO A C C E S S E BAY 'S SITE. AND I T I S A T THAT MOMENT THAT IT IS THAT FORCING OF

THE UNLAWFUL ACCESS OCCURS .

A CLICK OR THE SIMULATION OR FALSIFICATION O F A CLICK THAT CAUSES THE WRONGFUL ACCESS. A N D WHAT WE 'VE ALLEGED IS THAT T H E USER AGREEMENTS THAT G O V E R N THE ACTIONS OF THESE DEFENDANTS ARE T H E ONLY BASIS ON WHICH THEY HAD T H E RIGHT TO A C C E S S E BAY 'S SITE. AND B Y DOING WHAT

THEY DID , THEY VIOLATED THOSE USER AGREEMENTS. N O W, THAT VIOLATION TAKES PLACE BEFORE A N Y PART OF THIS AFFILIATE MARKETING PROGRAM COMES INTO PLACE. NOTHING HAPPENS UNDER THAT AGREEMENT

BETWEEN THE DEFENDANTS AND COMMISSION JUNCTION. THE CFAA VIOLATION I S COMPLETE A T THE MOMENT THAT THEY MAKE T H E I R UNAUTHORIZED ACCESS A N D I M P A I R THE DATA WHICH BELONGS T O E BAY BY DOING T H E C O O K I E STUFFING . N O W, THEY'V E A R G U E D THAT T H E TERMS AND CONDITIONS THAT THEY 'VE ATTACHED TO THEIR BRIEFING A R E SORT OF SUBSUMED USER AGREEMENTS, THE EB A Y USER AGREEMENT W E'V E ALLEGED GOVERNS THE ACTIONS OF
23

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THESE DEFENDANTS. THAT' S S I M P L Y NOT TRUE. THOSE ARE TERMS

A N D CONDITIONS THAT ARE RELATED TO THE AFFILIATE MARKETING PROGRAM THAT THEY HAVE WITH COMMISSION JUNCTION . THOSE ARE N O T T E R M S A N D CONDITIONS THAT AND

PURPORT TO MODIFYING EB A Y' S USER AGREEMENT. STRIKINGLY, THERE IS NOTHING IN EITHER THAT

AGREEMENT THEY 'VE ATTACHED WITH COMMISSION J U N C T I O N OR IN T H E SUPPLEMENTAL TERMS AND CONDITIONS THAT GIVES THEM ANY RIGHT TO A C C E S S E BAY 'S SITE. WHY I S THAT ? WELL THAT 'S BECAUSE, AS

COUNSEL PUT IT , THEY 'RE SUPPOSED TO BE IN T H E BACKGROUND. EB A Y' S SITE . THEY A R E N O T SUPPOSED TO BE ACCESSING THEY A R E SUPPOSED TO BE PLACING A D S

THAT USER'S AFFIRMATIVELY CLICK ON AND T H E U S E R S G O TO EB A Y. T H E DEFENDANTS AREN' T SUPPOSED T O B E ACCESSING E BAY 'S SITE A S PART OF T H E AFFILIATE MARKETING PROGRAM , A N D IT DOESN' T GIVE THEM ANY RIGHT TO A C C E S S EBAY 'S SITE. SO IT IS PRECISELY

THE USER AGREEMENT THAT ARE A T ISSUE WHEN THEY IMPROPERLY ACCESS EB A Y' S WEBSITE . THEY' VE ALSO A R G U E D IT' S E BAY 'S BURDEN TO PROVE THAT THE FORUM SELECTION C L A U S E DOES N O T APPLY . THAT'S S I M P L Y N O T THE L A W. THEY ARE
24

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ATTEMPTING TO IMPOSE A FORUM SELECTION C L A U S E FROM A CONTRACT TO WHICH EB A Y I S N O T THE PARTY A N D THEY -T H E C O U R T: A N D I THINK IT IS . L E T'S ASSUME THAT 'S RIGHT, WHY IS EB A Y NOT -- EBAY IS NOT

A PARTY TO THAT AGREEMENT, B U T W H Y IS EB A Y N O T BOUND BY IT BECAUSE OF THE CLOSE RELATIONSHIP A N D THIRD -PARTY BENEFICIARY ? MR . E B E R H A R T: BECAUSE THERE IS A - - T H E

INITIAL VIOLATION UNDER THE USER AGREEMENT WHICH H A S I T S OWN FORUM SELECTION C L A U S E WHICH PROVIDES T H E F O R U M I S T O B E HERE IN T H E N O R T H E R N D I S T R I C T O F CALIFORNIA -T H E C O U R T: C A R CRASHES INTO EB A Y. MR . E B E R H A R T: RIGHT . OCCURS. NO . UNDER CFAA - - THAT 'S T H E HARM IS WHEN THE P A R K E D

SO THE HARM OCCURS WHEN THE C O O K I E S T U F F I N G T H E CFAA CLAIM IS COMPLETE AT THAT MOMENT

BECAUSE EB A Y'S DATA HAS BEEN IMPAIRED AS OF THAT TIME. SO O U R A R G U M E N T I S THAT T H E USER AGREEMENT, WHICH GOVERN S THAT ACCESS WHICH I S ESSENTIAL T O O U R CLAIM, IS T H E F I R S T V I O L A T E D CONTRACT , I F Y O U WILL, EVEN ASSUMING THIS THIRD -PARTY CONTRACT BINDS EB A Y. A N D SO THAT F I R S T
25

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VIOLATED CONTRACT , THE FORUM SELECTION CLAUSE OUGHT TO G O V E R N I N THIS CASE. T H E C O U R T: SO Y O U N E V E R G E T TO THE

QUESTION OF WHETHER A DISPUTE AS TO T H E O T H E R AGREEMENT I S T H E ONE THAT WOULD IMPROPERLY V E N U E I N SOUTHERN CALIFORNIA EVEN I F E BAY WERE NOT A SIGNATORY; YOU NEVER G E T T H E R E. MR . E B E R H A R T: T H E C O U R T: CORRECT.

DO Y O U WANT TO ADDRESS ON THE

RICO ISSUE, T H E I S S U E A B O U T WHETHER THERE OUGHT TO BE MORE SPECIFICITY ABOUT THE ENTERPRISE GIVEN THE DATA INCORPORATION? MR . E B E R H A R T: SURE, YOUR HONOR.

THERE 'S AN ADDITIONAL S T R I K I N G FACT ABOUT T H E RICO C L A I M S W H I C H - - NEITHER IN T H E OPENING B R I E F S N O R IN T H E REPLIES DO A N Y O F T H E DEFENDANTS CHALLENGE T H E C O M M O N LAW FRAUD CLAIM . THEY MAKE A LOT O F ARGUMENTS ABOUT FAILURE TO PLEAD OUR RICO CLAIMS WITH SPECIFICITY, B U T I T'S T H E E X A C T SAME BEHAVIOR WE 'VE COMPLAINED OF IN O U R C O M M O N LAW FRAUD CAUSE OF A C T I O N. A N D B Y CONCEDING THAT THAT 'S PROPERLY PLEAD , I THINK THEY HAVE CONCEDED THAT THE PREDICATE ACTS UNDER RICO ARE P R O P E R. T H E C O U R T: I DON 'T THINK THEY A R E
26

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ARGUING THAT, AT LEAST THAT'S WHAT I H E A R D. MR . E B E R H A R T: N O W, WITH RESPECT TO T H E

D P S A L L E G A T I O N S, THEIR ARGUMENT IS THAT W E'V E ONLY PLED AN ASSOCIATION IN FACT B Y COMBINING MR. HOGAN WITH THE D O E'S . THAT' S N O T THE CASE. W E'V E PLED O U R

ASSOCIATION IN FACT, INCLUDING M R. HOGAN AND T H E D O E'S A N D D PS, I N C. N O W, THE FACT THAT THEY CLAIM

DP S, INC . D I D NOT EXIST B E F O R E M A Y OF 2007, I T H I N K WE 'VE ADEQUATELY ADDRESSED THAT, A N D I THINK T H E CASES SUPPORT THE N O T I O N, CANNOT BE JUDICIALLY NOTICED. T H E FACT OF T H E F I L I N G DOES N O T PROVE THAT DPS , I N C. D I D N O T EXIST BEFORE M A Y O F 2007 . SO REQUIRING E BAY TO -- I' M N O T SURE H O W WITHOUT DISCOVERY - - FIND O U T WHAT OTHER ENTITIES MR . H O G A N POSSESSED P R I O R T O M A Y 2007, EVEN ASSUMING T H E R E WASN' T SOME D P S, INC . B E F O R E MAY 2007, IS S I M P L Y NOT A MOTION T O DISMISS ISSUE . IT 'S A SUMMARY JUDGEMENT I S S U E A F T E R DISCOVERY BECAUSE IT M A Y WELL BE MR . H O G A N H A D ANOTHER DIGITAL P O I N T SOLUTIONS, I N C. THAT H E DISSOLVED. T H E C O U R T: OUT THE POSSIBILITY. Y O U A R E SAYING Y O U C A N' T RULE A N D THE MERE FACT THAT Y O U
27

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HAVE THE CORPORATE F I L I N G DOES N O T RULE O U T ANY OTHER POSSIBILITIES. MR . E B E R H A R T: YOUR HONOR. T H E C O U R T: OKAY. T H A N K Y O U. THAT' S CORRECT ,

I THINK I'V E G O T ENOUGH TO CHEW ON FOR A WHILE . I WILL G E T A R U L I N G O U T AS SOON A S

POSSIBLE . Y E S? MR . P R E S I A D O: LAST POINT. T H E C O U R T: BRIEFLY. Y E S, I WILL MAKE IT BRIEF. IF I COULD BE HEARD ON ONE

MR . P R E S I A D O:

I DON 'T THINK THEY D E N I E D THAT REGARDLESS OF T H E T I M I N G O N T H E COOKIE STUFFING S C H E M E THAT IT ONLY MATTERS IF WE ALLEGEDLY C O O K I E STUFFED BECAUSE OF T H E P A Y M E N T S THEY MADE TO US, A N D THAT DIRECTLY RELATES TO THE P S A. IF THEY DIDN'T MAKE ANY PAYMENTS TO US , H A D N O O B L I G A T I O N S T O U S A N D THERE WAS THIS COOKIE STUFFING THING GOING ON , I T W O U L D N' T M A T T E R. T H E C O U R T: DAMAGES. THERE W O U L D N'T BE A N Y

I T WOULD STILL B E IMPROPER. MR . P R E S I A D O: WELL, I DON 'T KNOW. WE

ARGUE THAT IT WOULDN 'T.
28

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T H E C O U R T:

SO IT 'S OKAY T O S T U F F COOKIES

AS LONG AS YOU D O N'T G E T PAID F O R I T? MR . P R E S I A D O: VENUE HERE, YOUR HONOR. T H E C O U R T: I KNOW Y O U ARE . MY QUESTION NO , I 'M TALKING A B O U T

IS N O T M E A N T T O B E A SILLY O N E. IF Y O U'R E MESSING WITH PEOPLE 'S DATA, EVEN IF IT' S N O T IN ORDER TO DERIVE BENEFIT FROM ANOTHER CONTRACT, I S N'T THAT IN AND OF I T S E L F A WRONGFUL A C T? MR . P R E S I A D O: WELL, THEY CONCEDE THEY

C O O K I E S T U F F U S E R S THAT GO ON THEIR SITE FOR T H E FIRST TIME WITHOUT SIGNING A USER AGREEMENT. T H E C O U R T: SO T H E D A M A G E ELEMENT FLOWING

FROM THE C O O K I E S T U F F I N G W O U L D N' T E X I S T B U T FOR T H E P S A. MR . P R E S I A D O: T H E C O U R T: RIGHT .

A N D THAT GETS YOU BACK TO THE

FORUM SELECTION CLAUSE. MR . P R E S I A D O: RIGHT .

A N D YOUR HONOR , I WOULD REQUEST -- AND I THINK WE 'VE MADE ENOUGH OF AN ARGUMENT WITH RESPECT TO PS A A N D THE V E NUE ISSUE A N D F O R U M SELECTION C L A U S E; THAT A T T H E VERY L E A S T, THERE SHOULD BE A CONTINUANCE OR AN ADVANCE OF THE CASE FOR T H E
29

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LIMITED DISCOVERY OF T H E A G E N C Y RELATIONSHIP , T H E I R CONNECTION TO THE P S A, ET CETERA , T O B E ABLE TO COME BACK WITH FACTS ESTABLISHING, TO THE E X T E N T T H E C O U R T I S N' T SATISFIED HERE, ESTABLISHING T H E AGENCY A N D THEIR OBLIGATIONS -T H E C O U R T: ISSUE . I DON 'T THINK THAT'S MY

I ACTUALLY THINK I F THIS CASE WERE ABOUT

T H E P S A, THAT YOUR V E N U E ARGUMENT W O U L D B E PRETTY STRONG. B U T A T L E A S T T H E WAY I' VE BEEN LOOKING AT

IT UP UNTIL N O W, IT SEEMS TO ME WHAT I T'S ABOUT IS THE COOKIE STUFFING. Y O U A R E SAYING THEY CAN 'T MAKE A N ESSENTIAL ELEMENT OF T H E C FAA CLAIM WITHOUT INVOKING R I G H T S U N D E R T H E PSA , S O I T GETS Y O U BACK TO THAT STARTING POINT. MR . P R E S I A D O: RIGHT , YOUR HONOR .

A N D THAT 'S WHY THEY DON 'T BRING BREACH OF CONTRACT CLAIM , W H I C H W O U L D B E T H E SAME DAMAGES -T H E C O U R T: I UNDERSTAND.

I' M G O I N G T O GIVE IT THOUGHT, A N D I WILL A S K COUNSEL TO SPEND 30 SECONDS RESPONDING T O THAT . *M R. FOREMAN: JUST BRIEFLY, YOUR H O N O R.

QUICKLY, ON THIS FAILURE T O T H E STATE THE FRAUD CLAIM , W E'R E CHALLENGING THIS COURT 'S JURISDICTION. WE DIDN' T CONCEDE ANYTHING ABOUT
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FRAUD , S O THAT 'S WHY WE DIDN' T ADDRESS T H E C O M M O N L A W F R A U D C L A I M. ON THIS USER AGREEMENT, COUNSEL FOR PLAINTIFF MADE A VERY C R I T I C A L ADMISSION ON BEHALF OF H I S C L I E N T THAT I JUST THINK WE NEED T O P A Y ATTENTION T O. HE SAID IN HIS ARGUMENT THAT THE

M O M E N T T H E UNLAWFUL ACT O C C U R S, AT THE CONNECTION BETWEEN THE AD THAT OUR C L I E N T P R O D U C E D A N D THE USER IN THE INTERNET LOOKING AT IT AND GETTING A COOKIE. SO THERE 'S TWO IMPORTANT T H I N G S THERE, YOUR HONOR. THAT 'S WHEN T H E ALLEGED COOKIE AND

STUFFING O C C U R S, NOT WHEN THEY G O T O E BAY . IT 'S VERY IMPORTANT -T H E C O U R T: ON T H E A D, RIGHT? MR . FOREMAN : CLICKING .

THEY GET TO EB A Y BY CLICKING

OR THEY A L L E G E BY NOT

CERTAINLY , I F THEY CLICK ON T H E A D I T

TAKES THEM TO EB A Y, THEN THEY ALREADY HAVE O U R C O O K I E A N D HE EB A Y G I V E S THEM A COOKIE . A N D THAT 'S WHERE, AGAIN , THIS ANALOGY OF THE BUMP CARS REALLY BREAKS DOWN . USER IS THE O N E THAT GOES TO EB A Y. T H E C O U R T: MR . FOREMAN : B U T H E O R S H E IS CARRYING -CARRYING COOKIES, THERE' S
31

THE INTERNET

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NOTHING ILLEGAL O R IMPROPER. THE TIME .

WE A L L G E T THEM A L L

THERE ARE CASES THAT HAVE ORIGINALLY

CHALLENGED COOKIES A S BEING UNLAWFUL UNDER THE CFAA, A N D A L L OF THOSE CASES FOUND COOKIES D O N O HARM, THEY ARE PERFECTLY OKAY IN T H E I N T E R N E T T H E S E DAYS. T H E C O U R T: MR . FOREMAN : T H E C O U R T: P S A. MR . FOREMAN : THAT'S W H Y B Y PUTTING A U N L E S S THEY A R E TIED TO -IF SOMETHING ELSE HAPPENS. WHICH IS WHERE Y O U G E T TO THE

COOKIE O N A N INTERNET USER COMPUTER WHEN THEY SEE YOUR ADD IS N O T A PROBLEM. T H E C O U R T: WHAT MAKES IT WRONG IS

BECAUSE YOUR CLIENTS ARE ALLEGEDLY GETTING PAID FOR SOMETHING THEY 'RE N O T S U P P O S E D T O. MR . FOREMAN : AND THAT' S W H Y THIS CASE IS

JUST ABOUT A B R E A C H OF CONTRACT UNDER THE AFFILIATED MARKETING . TO T H E E X T E N T THEY WANT TO GO BACK TO THIS USER AGREEMENT, THEIR FIRST AMENDED COMPLAINT PAGE 9, PARAGRAPH 3, 5 L I N E S 4 A N D 5 ALLEGES THE USER AGREEMENTS A C C E P T E D B Y EACH OF T H E DEFENDANTS SHAWN HOGAN , B R I A N DUNNING A N D TODD DUNNING ARE ESSENTIALLY SIMILAR.
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SO YOUR HONOR, A L L T H E S E O T H E R CORPORATE DEFENDANTS SHOULD BE DISMISSED. IF THIS WHOLE CASE

IS BASED ON T H E USER AGREEMENTS, AS THEY' RE ARGUING N O W, NONE O F T H E OTHER PARTIES SIGNED THEM. T H E C O U R T: WHAT I H E A R D H I M SAY W A S THAT

HE W A S TALKING ABOUT T H E USER AGREEMENTS OF THE P E O P L E W H O REGISTER ON EB A Y, THE INNOCENT THIRD PARTIES WHO CARRY T H E COOKIES ; I THINK THAT' S WHAT I HEARD; B U T I UNDERSTAND. MR . FOREMAN : YOUR HONOR. MR . C A M P B E L L: THANK Y O U, YOUR H O N O R. COUNSEL FOR OKAY. THANK Y O U,

JUST A COUPLE CORRECTIONS.

EB A Y INDICATED THAT NO ONE H A D CHALLENGED T H E C O M M O N L A W FRAUD CLAIM FOR LACK OF SPECIFICITY OR PARTICULARITY. THAT AS WELL. T H E C O U R T: OKAY. A N D S E C O N D L Y, THE POSITION WELL , W E C A N' T KNOW T H E - THAT 'S NOT TRUE; WE D I D CHALLENGE

MR . C A M P B E L L: THAT THEY'R E T A K I N G IS:

WHAT THE EXISTENCE O F T H E ENTITY IS PRIOR TO T H E DATE OF INCORPORATION WITHOUT DISCOVERY. BUT

AGAIN , T H E I R B R I E F S REPRESENT THAT THE CORPORATION HELD ITSELF OUT A S A SEPARATE ENTITY. SO THOSE A R E

THE EXACT KIND S O F REPRESENTATIONS, FACTUAL
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INFORMATION , THAT NEEDS TO BE IN AN AMEND ED PLEADING . BRIEF LY, ALSO, WITH RESPECT T O RICO , N O INSPECTOR I N THE FIRST AMENDED COMPLAINT DOES I T A L L E G E THAT T H E C O R P O R A T I O N I S PART OF T H E H O G A N GROUP . THAT I S N O T TRUE. THAT IS CLEARLY A B S E N T

FROM THE FIRST AMENDED COMPLAINT . A N D A S A N EXTENSION OF THAT, AT A MINIMUM, T H E RICO CLAIM AS TO DIGITAL POINT SOLUTIONS, INC . W O U L D HAVE TO BE DISMISSED BECAUSE IT 'S NOT ALLEG ED AS A RICO DEFENDANT. IT C O U L D N'T

BE BECAUSE THEY'R E EXPRESSLY ALLEGING IT' S T H E RICO ENTERPRISE. SO THAT WAS ADDRESSED I N O U R RELY, NOTING THEY HADN'T R A I S E D THAT ISSUE OR RESPONDED T O THAT ISSUE IN THEIR OPPOSITION. T H E C O U R T: OKAY. QUICKLY, YOUR HONOR.

MR . E B E R H A R T:

FIRST OF A L L, PARAGRAPH 43 OF T H E F I R S T AMENDED COMPLAINT ALLEGES THAT D P S, I N C. WAS PART OF T H E A S S O C I A T I O N I N FACT . DP S, INC . H A S ONLY C H A L L E N GED C O M M O N L A W FRAUD CLAIM ON T H E B A S I S THAT THEY DID N O T E X I S T BEFORE M A Y 2007. THEY HAVE NOT OTHERWISE

CHALLENGED THAT C O M M O N LAW FRAUD CLAIM IN A N Y O T H E R
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W A Y. T H E C O U R T: OKAY. WITH RESPECT T O T H E CFA A

MR . E B E R H A R T:

CLAIM , T H E DAMAGE ABSOLUTELY EXISTS WHETHER OR NOT M O N I E S WERE PAID TO THE DEFENDANTS. T H E CFA A

RECOGNIZES, AS T H E C O U R T I BELIEVE HAS POINTED OUT , THAT IMPAIRMENT O F DATA IS D A M A G E U N D E R T H E CFAA. AT T H E M O M E N T OF THE C O O K I E S T U F F I N G EB A Y' S DATA W A S I M P A I R E D BECAUSE EBAY WAS N O W SEEING DATA THAT SAID, GHEE, THESE USERS WERE REFERRED BY THESE DEFENDANTS, B U T THAT WASN' T TRUE , THAT WAS FALSE . AND EB A Y HAD TO LATER TAKE STEPS

TO RESPOND TO THIS PROBLEM WHICH IS LOSS UNDER THE CFAA. SO EVEN IF YOU DIDN' T HAVE PAYMENTS TO THESE DEFENDANTS -T H E C O U R T: I THOUGHT THAT 'S WHAT YOUR

ARGUMENT W A S, BUT I JUST W A N T E D TO MAKE SURE . MR . E B E R H A R T: A N D I JUST WANTED TO

CORRECT ONE FINAL FACTU A L THING. THE USERS D O NOT RECEIVE COOKIES FROM THESE DEFENDANTS. THE COOKIES CAN ONLY COME FROM

EB A Y, SO THAT IS WHY THEY HAD TO FORCE T H E U S E R S O N TO EB A Y' S SITE TO G E T T H E COOKIE . AND THAT IS PLED

IN PARAGRAPHS 24 THROUGH 2 7 I N O U R FIRST AMENDE D
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COMPLAINT, YOUR H O N O R. T H E C O U R T: STOP. Y O U KNOW WHAT, THIS HAS TO I D O N' T

Y O U' VE BEEN G O I N G F O R HALF A N HOUR .

THINK ANYBODY IS GOING TO SAY ANYTHING N E W. MR . P R E S I A D O: T H E C O U R T: D O N'T WANT TO HEAR I T. MR . P R E S I A D O: OKAY. ONE SENTENCE.

IT B E T T E R B E N E W OR ELSE I

T H E FACT IS THEY DO ALLEGE MONETARY DAMAGE. TO T H E E X T E N T THEY D O, THEN I T TIES INTO

T H E P SA -T H E C O U R T: B U T JURISDICTIONAL ELEMENT IS I MEAN,

THAT THERE BE HARM, THAT T H E R E B E D A M A G E.

THERE A R E DIFFERENT KINDS OF DAMAGE , A N D I THOUGHT EB A Y' S A R G U M E N T W A S THAT T H E R E W A S DAMAGE IN ADDITION TO T H E LOSS OF REVENUE. MR . P R E S I A D O: RIGHT . BUT TO T H E E X T E N T

THERE IS D A M A G E, THEY S A Y, IN LOSS OF REVENUE, THEN THAT' S PART OF THEIR CLAIM , THAT TIES IN THE P S A. IF THEY' RE GOING TO SAY THEY ARE N O T SEEKING A N Y DAMAGES, MONETARY DAMAGES -T H E C O U R T: I NEED T O THINK ABOUT THAT

PIECE BECAUSE THERE IS A 1404 ARGUMENT THAT ISN 'T B E F O R E M E THAT I THINK POSSIBLY COULD BE MADE. I' M N O T INVITING MORE MOTIONS , B U T
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THERE 'S AN ARGUMENT THAT T H E R E M I G H T B E SOME JUDICIAL ECONOMY IN HAVING A L L O F THIS IN O N E PLACE ; B U T THAT'S ACTUALLY N O T WHAT I' M B E I N G A S K E D TO DEAL WITH T O D A Y. A L L R I G H T.

MATTER SUBMITTED. THANK Y O U VERY MUCH. (WHEREUPON, T H E PROCEEDINGS I N THIS MATTER WERE CONCLUDED.)

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STATE OF CALIFORNIA

) ) S S:

COUNTY O F SANTA CLARA )

I, T H E UNDERSIGNED O F F I C I A L C O U R T REPORTER OF T H E U N I T E D STATES DISTRICT COURT F O R THE NORTHERN DISTRICT O F CALIFORNIA , 280 SOUTH FIRST S T R E E T, SAN JOSE, CALIFORNIA, DO H E R E B Y CERTIFY: THAT THE FOREGOING TRANSCRIPT , CERTIFICATE INCLUSIVE, CONSTITUTES A TRUE , FULL AND CORRECT TRANSCRIPT O F M Y SHORTHAND NOTES TAKEN AS SUCH OFFICIAL COURT REPORTER OF THE PROCEEDINGS HEREINBEFORE E N T I T L E D A N D REDUCED B Y C O M P U T E R-A I D E D TRANSCRIPTION TO THE BEST OF MY ABILITY.

{_ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ } SUMMER A . CLANTON OFFICIAL REPORTER , C S R NO. 13185

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