Capitol Records, LLC v. Redigi Inc.

Filing 107

TRANSCRIPT of Proceedings re: CONFERENCE held on 10/5/2012 before Judge Richard J. Sullivan. Court Reporter/Transcriber: Rose Prater, (212) 805-0300. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 11/16/2012. Redacted Transcript Deadline set for 11/29/2012. Release of Transcript Restriction set for 1/25/2013.(McGuirk, Kelly)

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1 CA5PCAPC 1 2 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------x 3 CAPITOL RECORDS, LLC, 4 Plaintiff, 5 v. 6 REDIGI, INC., 7 8 12 CV 00095 (RJS) Defendant. ------------------------------x New York, N.Y. October 5, 2012 10:22 a.m. 9 10 Before: 11 HON. RICHARD J. SULLIVAN, 12 District Judge 13 APPEARANCES 14 15 16 17 COWAN, LIEBOWITZ & LATMAN, PC Attorneys for Plaintiff RICHARD S. MANDEL JONATHAN Z. KING 18 DAVIS SHAPIRO LEWIT & HAYES, LLP Attorney for Defendant GARY ADELMAN 19 ALSO PRESENT: SARAH MATZ 20 21 22 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 2 CA5PCAPC 1 (In open court) 2 (Case called) 3 THE COURT: 4 MR. MANDEL: 5 Good morning. Richard Mandel, Cowan, Liebowitz and Latman for the plaintiff, Capitol Records. 6 THE COURT: 7 MR. MANDEL: 8 MR. KING: 9 Have a seat. Okay. Mr. Mandel, good morning. Good morning, your Honor. Jonathan King, also with Cowan, Liebowitz and Latman. 10 THE COURT: All right. 11 MR. ADELMAN: Mr. King, good morning to you. Gary Adelman, Davis, Shapiro, Lewit and 12 Hayes for the defendant, and with me is my non-admitted 13 associated. 14 help me at the table today and -- With your permission, your Honor, I'd like her to 15 THE COURT: And that is? 16 MR. ADELMAN: 17 THE COURT: Her name? Sarah Matz, M-a-t-z. Okay. Good morning, Miss Matz. 18 seat. 19 just like to see lawyers go at it. 20 money's worth. 21 is welcome here. 22 Have a I gather we have some interested parties or people who today are very interesting ones, I think. Welcome. So I think you'll get your It's a public courtroom. Everybody The issues that we're going to be discussing 23 I want to thank the parties for their briefs. 24 thought they were very well written and helpful to me. 25 a lot of stuff here. There are two motions. I There's They are really SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 3 CA5PCAPC 1 cross motions for summary judgment. 2 there are no issues that are disputed, no fact that would be 3 disputed that would require this to go to a trial or a fact 4 finder; so that each should win as a matter of law, since there 5 are undisputed facts. 6 we'll talk about that. 7 Each party believes that And, yet, you seem to dispute facts. So I guess I should be clear on a couple of things. 8 There are a lot of people who are very interested in what the 9 law should be and what would be a wise way to arrange ourselves 10 with respect to this kind of technology and having access to 11 music or other things like this digital recordings. 12 That's a fascinating issue in its own right, but 13 that's not really what we're here to decide today. 14 today to decide what the law is and what is the proper 15 application of that law. 16 ought to be different, but if the law is clear and the 17 application is obvious, then that's what we're going to do. 18 We're here And so certainly I think the law So I think there are honest disagreements as to what 19 the law says and how it ought to be applied, but I want to make 20 it very clear that just sort of broad policy arguments about 21 what -- in an ideal world what we ought to do is not really 22 relevant, at least not for this forum. 23 So each of you has a motion. Okay? I thought we'd start 24 with the plaintiffs, since it's their case. 25 start, and then we'll go to the defense. And so they'll And I'll allow each SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 4 CA5PCAPC 1 of you to respond to the other. 2 don't want to be here all day either. 3 the ball for your team -- 4 MR. MANDEL: 5 THE COURT: 6 MR. MANDEL: I'm in no terrible rush, but I So you're going to carry Yes. -- Mr. Mandel? Your Honor, Capitol believes that it is 7 entitled to partial summary judgment with respect to its 8 copyright infringement claims that turn on violation of the 9 right of reproduction and the right of distribution. I just 10 point out, at the outset, the motions are not perfect mirror 11 images in that we haven't moved on the performance and display 12 portion of the case; so I just want to make that clarification. 13 There's no dispute with respect to ownership. It's 14 not disputed on its motion. It's been admitted in the 56.1 15 statement that Capitol owns valid copyrights in the sound 16 recordings, both under federal law with respect to the 17 post-1972 recordings and state law with respect to the pre-'72 18 recordings. 19 turns on, is their an infringement of the exclusive rights 20 under 106 of the Copyright Act. And the issue, really, and I think what this case 21 I'll start, if I may, with the reproduction, which is 22 in 106.1 and grants the copyright owner the exclusive right to 23 reproduce the copyrighted work in copies or phono records and 24 in this case, of course, dealing with sound recordings, it's 25 phono records that are applicable. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 5 CA5PCAPC 1 THE COURT: 2 MR. MANDEL: It's such a quaint term. I know. I love it. It's interesting, and I think 3 the first time, throughout the PI we talked about copies 4 because there's a tendency to lump them together. 5 the same definitional effect, but phono records is the precise 6 term for purposes of the material object that embodies sounds, 7 which is what we're talking about here. They do have 8 And picking up on your Honor's statement, we believe 9 that the issues are clear under existing law, and we actually 10 think that much of what Redigi spends its time arguing on are 11 broad policy items. 12 way. 13 amended. 14 Congress and that were the subject of a report at Congress' 15 request by the copyright office to decide that issue. They think the law should be a certain They think the Copyright Act should, in effect, be 16 These are the same arguments that were put before But the reality is, that Congress had the opportunity 17 to amend the copyright law. 18 statute, actually, that was under consideration at the time of 19 the Digital Millennium Copyright Act that would have changed 20 the law with respect to first set. 21 and, instead, to send it out to the copyright office for its 22 report, which the copyright office issued. 23 24 25 THE COURT: stuff. Congress specifically had a So it chose not to do that Right, but they choose not to do a lot of That's another story. MR. MANDEL: But beyond not amending it, they SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 6 CA5PCAPC 1 actually, in the statute, said that they wanted further 2 certificate, enact a pretty significant statute in the Digital 3 Millennium Copyright Act. 4 digital age, and they did choose to act in certain respects, 5 but on the question of the first sale doctrine, they didn't 6 and, instead, said we'd like to see a report on this. 7 sent it to the copyright office. 8 9 It was designed to bring us into the And they I think the copyright office report is very significant because what the copyright office did, it looked at 10 the existing law, and there really wasn't much debate about 11 what the existing law was. 12 on whether a change should be made, and the copyright office 13 made arguments, from a policy perspective, as to why it didn't 14 think an amendment was a good idea. 15 in fact, enact an amendment in any of the ten years since then 16 or more than ten years. 17 The whole report was really focused And Congress chose not to, But in the report, it talks about, although it's a 18 report on the first sale doctrine and distribution, it explains 19 why you would need an amendment. 20 first sale doctrine does not apply if there's been a 21 reproduction. 22 actually reproduce the copyrighted work, and the work that's 23 being distributed or the phono record that's being distributed 24 is not the particular phono record with which you start. 25 And the reason is because the You can't claim a first sale defense if you So it's not just a report on distribution. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 It's a 7 CA5PCAPC 1 report that looks at the reproduction right, and it explains in 2 very clear terms why there is a reproduction, by necessity, in 3 a digital transmission. 4 THE COURT: Can I ask you a question, though, because 5 last time we were here for the preliminary injunction, maybe it 6 was the pre-motion conference, I forget which, but I asked you 7 if I could sell my iPod to somebody and you said I could. 8 9 MR. MANDEL: Yes, and you know, it's interesting you say that because I would actually have to say that I think that 10 answer probably was not a correct one. 11 the problem, you know, with the hypotheticals, to be frank, 12 it's tough, you know. 13 weeks about an actual dispute on a similar issue with Bruce 14 Willis and Apple are disputing whether Bruce Willis would have 15 the right to bequeath his collection of iTunes recordings, 16 which is apparently quite extensive, as part of his will and 17 apparently that's a subject for litigation. 18 reaction on that might not have been correct because the 19 problem with the iPod is, you know, that there's copy thereto. 20 21 22 THE COURT: I think that part of I was reading an article in the past few So my initial Right, that's where I was going. It seems to me it's been copied to get to the iPod. MR. MANDEL: Right. And, you know, fortunately, I 23 think the answer is none of it is, I think, very difficult in 24 the context of this case and the issues that are here. 25 know, we've been playing with hypotheticals a lot in the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 You 8 CA5PCAPC 1 context of this case because it is interesting to think about 2 all the ramifications and what would happen in this case and 3 what would happen in that one. 4 example highlights that you could probably have other very 5 interesting litigations about some of those issues as well. 6 And I guess the Bruce Willis But in terms of the issue that we're here to decide 7 today, I think it's pretty clear, and it's largely governed by 8 the statutory definitions in the Copyright Act itself, what a 9 phono record is, and what's involved in the process of upload 10 in order for a Redigi user to be able to sell their recording. 11 And if I can turn -- 12 THE COURT: There is a dispute on that, isn't there? 13 What is involved in the process of uploading, it's sort of 14 obviates a dispute between defendant's first set of papers and 15 their latter set of papers, but there is a dispute as to 16 whether it's copying or migrating, which all sounds like 17 semantics on some level. 18 MR. MANDEL: And I think that is my answer to it. I 19 think it is semantics. It's semantics because here's what's 20 not in dispute. 21 recording on their home computer and has to upload it to get to 22 the Redigi cloud in order for it to be sold. 23 dispute that there are two separate material objects there. 24 There is the computer hard drive, where that sound recording 25 sits at the beginning of the process, and then there's the When a user for Redigi starts with is a sound There's no SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 9 CA5PCAPC 1 Redigi server out in Arizona, where the sound recording ends up 2 before it can be distributed. 3 If you look at the statutory definitions under the 4 Copyright Act of what a phono record is, those are two 5 different phono records. 6 you look at what the right of reproduction is, as it's been 7 explained in the House and the Senate report, and really, as 8 very basic copyright law, Professor Nimrick describes it as 9 anytime you create a new phono record, that is a reproduction. 10 THE COURT: And they -- our position is that if I guess they're saying it's not a copy, 11 right? They're saying that it's transported from one place to 12 another, and it's sort of schuu -- like that. 13 MR. MANDEL: 14 THE COURT: 15 MR. MANDEL: I think -Let the record say I said "schuu." I'm not quite sure what they're saying in 16 terms of technologically. I don't think they're really saying 17 it flies through the wire. I mean, they're kind of a little 18 vague about that, but here's what they can't dispute and what 19 the facts say, and that is undisputed. 20 there are two different material objects here, that there is a 21 server in Arizona, the Redigi cloud, as it were; there's a 22 server on which the user first has that sound recording 23 embodied, and that there are two different phono records. 24 25 THE COURT: There's no dispute that But I think that there are -- I assume you're going to dispute that, right? SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 10 CA5PCAPC 1 MR. ADELMAN: 2 THE COURT: Yes, absolutely, your Honor. I kept thinking about this, but -- I'm not 3 a Trekkie, but I kept thinking it's the difference from Captain 4 Kirk going from the Enterprise to the planet through that 5 transporter thing, where he's not duplicated, to the cloning 6 where there's a good and a bad Captain Kirk where they're both 7 running around. 8 other was transported and it's only one Captain Kirk. 9 I think one is a copy and the other is -- the MR. MANDEL: Right. And, you know, that's part of the 10 problem we have at a basic level because it's not Star Trek 11 here, and I don't think they're really saying -- 12 THE COURT: 13 MR. MANDEL: Wouldn't it be cool if it were? I know. It would be exciting and maybe 14 it would require a whole other Copyright Act, but, you know, 15 that's not where we are. 16 they can't say that. 17 it's not just a dispute between their prior papers and their 18 current papers. 19 different contexts. 20 answer, where they admit that -- and state clearly that they 21 delete the existing file. 22 And they don't quite say that because And, you know, the dispute between -- It's a statement that appears in a number of It's a statement that appears in their Well, obviously, if you have to delete the original 23 file on the user's hard drive, then, obviously, there's a copy. 24 You know, that's what they said in their answer. 25 stands. It's there. It still They said it in a sworn declaration that SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 11 CA5PCAPC 1 Mr. Rudolph submitted to this Court, and they, frankly, said it 2 a number of times at the deposition. 3 Mr. Rudolph's testimony at Page 132 and 236, I believe it is of 4 his deposition, these are pretty clear questions. 5 very precise in the questions he put to them, and he said to 6 them the first time, we need to be precise. 7 the original file. 8 9 If you look at That's the lead in. Mr. King was I'm talking about The answer is yes. The second time, at Page 236, they're talking about specifically the declaration. Mr. King is going over the 10 language of the declaration and, again, it says, okay, that 11 file, we're talking about the file itself, the original file. 12 That's the lead in. 13 admission in their answer, in deposition testimony, in the 14 declaration. 15 The answer is yes. So you have that You also have an admission in the preliminary 16 injunction brief in absolutely crystal clear terms that we 17 submit it should be binding and should be a judicial admission. 18 And while they dispute that, they don't dispute that it's 19 appropriate legally for that to constitute an admission. 20 just say the statement is not sufficiently clear, that it's 21 ambiguous, and therefore, you shouldn't construe it as a 22 binding judicial admission. 23 They But if you look at that statement, it's absolutely 24 crystal clear. I mean, their explanations to try to argue 25 around that, frankly, just make no sense. They say, well, you SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 12 CA5PCAPC 1 know, it's a colloquial usage. 2 using it colloquially, but that's not the context. 3 legal brief talking about the Copyright Act, introducing an 4 argument as to why it's permissible and saying, okay, the only 5 copying that occurs is in this context. 6 excused by the fair use doctrine. 7 That's legal terminology. 8 9 10 THE COURT: THE COURT: 13 MR. MANDEL: 17 That's not colloquial usage. I'm sorry to interrupt you, resale, but storage, is that a violation of the Copyright Act? 12 16 That copying is but the process of just using the cloud for storage, not MR. MANDEL: 15 This is a That's -- All right. 11 14 People can say copies and be The simple act of storing? Yeah. It's certainly not something we challenge in this case. THE COURT: Okay. But why not? If copying is going on, why not? MR. MANDEL: Because in a case of pure storage, there 18 probably is a fair use defense. 19 about, we wouldn't have brought this lawsuit. 20 these storage situations is they're all different business 21 models that involve different things and do different things. 22 In this context, the business model is quite clearly 23 24 25 not about storage. THE COURT: If that's all we're talking The problem with It's about a marketplace, and it's about -I get that, but I just, I'm thinking poor Bruce Willis who spent so much time and money on his SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 13 CA5PCAPC 1 collection. I remember a friend of mine years and years ago 2 took all his records and converted them to reel-to-reel, great 3 period sound, all in one spot, I'm sure he regrets it now, but 4 spent a lot of time and money doing that. 5 reel-to-reels, would that be a violation? 6 MR. MANDEL: 7 THE COURT: If he sold his I'm sorry, if he sold his? He took all his records, and then he 8 trans -- he recorded it on reel-to-reel all the songs, I guess, 9 he liked, in the he order he liked them. 10 11 12 13 14 MR. MANDEL: And then he sold them? I think it would be a violation. THE COURT: Okay. But just having them in on the reel-to-reel would not be? MR. MANDEL: Right. And that's the distinction, and 15 they really walked away from that. 16 argument at the preliminary injunction stage. 17 asserted fair use with respect to the upload process. 18 haven't even done that here, I mean, because I think they 19 recognize how weak the fair use argument is under the four 20 factors, and so they've adopted the recharacterization 21 approach. 22 I mean, that was their They basically They They haven't even attempted to posit this case as 23 being about storage, and if you read Mr. Ossenmacher's 24 deposition testimony, he was quite clear that this business 25 model is not even viable as a storage option. The only way SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 14 CA5PCAPC 1 they make money is by taking commission on sales. 2 So this is not about storage. This is about a 3 marketplace in which Redigi profits by having sales of the 4 recordings made. 5 what we're seeking to enjoin. 6 according to the data we receive to bring it up to the cloud, 7 do sell it, or at least offer it for sale because that's what 8 they're doing here. 9 recordings, make some bucks at it or, you know, buy some other That's what it's in business to do. That's The fact is that most people, They're saying take your old, unwanted 10 music out of it, turn it into something profitable. 11 what they're pitching. 12 on. 13 lawsuit. 14 That's That's what they have built a business That's what we say is illegal. That's why we filed this So I think storage really was a red herring, and I 15 think that's why they moved away from it, frankly, because they 16 know that defense isn't going to work. 17 it done for them. 18 decided to walk away from their own statements, recharacterize 19 everything and adopted a new approach. 20 It's not going to get So what have they done? They've basically Now, the problem with that is, even apart from the 21 fact that we say you can't do that, that you're bound by your 22 judicial admissions, and we think that's a separate independent 23 ground for summary judgment, the definitional argument still, 24 from our perspective, also defeats their position. 25 can call it whatever you want, you know, you can pretend that SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 Because you 15 CA5PCAPC 1 we're in a new century and it's Star Trek now, but it doesn't 2 change the fact that there are two different phono records. 3 A phono record is a material object in which sounds 4 are fixed and from which they can be perceived, reproduced or 5 otherwise communicated. 6 is not a phono record. 7 The electronic file, in and of itself, In fact, the undisputed evidence shows that while this 8 process of upload is taking place, you can't access that 9 recording, you can't perceive it, you can't hear it. It's just 10 data that's being copied, we say. 11 or moved, migrated, but whatever you want to say, there's no 12 dispute that you -- it can't be a material object as a 13 definitional matter. 14 They would say transmitted I mean that's a legal dispute, I guess, but we think 15 that it's pretty clear that if you can't perceive it, you can't 16 access it, you can't hear it, that's not a material object. 17 And so you have created a new material object, and the process 18 of creating -- and I should really say a phono record to be 19 more precise. 20 21 THE COURT: So what is the phono record? The phono record is the server in Arizona? 22 MR. MANDEL: Yes. The phono record is the server in 23 Arizona, which now has digital sequence magnetically encoded on 24 it. 25 reproduce it, you can do all the things that you were able to So that from that server, you can play it, you can SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 16 CA5PCAPC 1 do when it was on the user's home drive -- home computer, which 2 is a separate phono record, a different material object. 3 And that's what we think controls this case, as a 4 matter of statutory definitions, and why they can call it 5 whatever they want, they can say whatever they want, but it is 6 reproduction. 7 it's always been understood in its most fundamental 8 application, the right to create a new phono record. 9 some defense to be able to do that. 10 It's a violation of the reproduction right, as You need Now, they talk about, well, then if you move it on 11 your hard drive, that would be a problem under my 12 interpretation because that's a new phono record. 13 if it is, there are lots of things that may be technically a 14 violation of the reproduction right, which would have a valid 15 defense. 16 your files on your hard drive. 17 would be crazy to bring a case like that. 18 a fair use right to do that, but it doesn't change the fact 19 that there may be a reproduction. 20 Well, even Nobody is challenging the ability to move it among Nobody would be -- anybody Obviously, you have Certainly there is in the context where we're talking 21 about two different servers. We're talking about two different 22 computers. 23 has, and we're talking about a material object that exists 24 somewhere out in Arizona. 25 reproduction of the copyrighted work in a new phono record in We're talking about a material object that the user And that, by definition, is the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 17 CA5PCAPC 1 violation of the reproduction right in the absence of some 2 defense; so.... 3 THE COURT: No, but I see why you want to back off the 4 statement you made the last time about selling the iPod because 5 it seems to me that if the copy is made to your iPod or to your 6 computer, you download it, and then you allow someone else 7 access to your computer, do you sell the computer or the iPod 8 or you sell them the right to come onto your computer iPod and 9 listen? 10 Mr. Adelman is saying goes on in Arizona. 11 12 That would basically seem to be the same thing that MR. MANDEL: thing. 13 Right? Well, I don't know if it's the same I guess if you sold your iPod, you're saying -THE COURT: Well, I guess what it would really be is I 14 got my iPod at home, and I allow my law clerk to go to my home 15 and listen to it. 16 getting the recording, the phono record in Arizona and allowing 17 it to be accessed by someone other than the person who bought 18 it. 19 He's saying that Redigi is about making -- MR. MANDEL: Nobody is saying that you can't in your 20 home, you know, play something that's on your iPod and have 21 somebody -- you could have somebody over and you could be 22 playing recordings and give them access, in a sense, to the 23 iPod. 24 25 I mean, that would -THE COURT: Right, but what if you charged them for it? SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 18 CA5PCAPC 1 MR. MANDEL: 2 THE COURT: Right. I have twins. They each have an iPod, and 3 I can certainly imagine charging the other two to listen to 4 their songs. 5 MR. MANDEL: Well, I think that's the point. At some 6 point, when you move into the commercial realm, the facts do 7 change under, you know, what you might have a right to do, you 8 don't have a right to do. 9 fun hypotheticals. 10 That's why you can play with kind of But in this context, it's not that you're just giving 11 access. 12 that recording. 13 copy, and that is a violation of the reproduction right that 14 has no defense. 15 effect, in their papers, in their answer, in their deposition 16 testimony. 17 I mean, you are basically selling and distributing And in order to do that, you'd have to make a And, really, that has been admitted, in I can address the technological issues, as well. 18 They're not part of our motion. 19 to reach them in order to grant us summary judgment. 20 put them into issue in this case. 21 response to their motion. 22 discuss those at that time, but it depends on how your Honor 23 wants to -- 24 25 THE COURT: I don't think it's necessary We didn't We have raised them in It might be more appropriate to I'll give you a chance to respond to Mr. Adelman, but I just want to make sure that I've heard you SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 19 CA5PCAPC 1 with respect to Redigi 2.0. 2 MR. MANDEL: Okay. With respect to Redigi 2.0. I 3 think with respect to Redigi 2.0, our basic position is that is 4 not this case. 5 filed. 6 challenged in the complaint that we filed. 7 that's raised in their answer. 8 brought a declaratory judgment on. Redigi 2.0 did not exist when this lawsuit was It wasn't something that we thought about, knew about, 9 THE COURT: 10 MR. MANDEL: 11 THE COURT: 12 MR. MANDEL: 13 THE COURT: 14 It's not something It's not something that they So you're not seeking to -No. -- enjoin that? No. And you're not seeking damages off of that? 15 MR. MANDEL: No, not in this case. Frankly, we don't 16 even know, at this point, whether Capitol Recording has ever 17 been the subject of a sale through Redigi 2.0. 18 that was unveiled nine days before the close of discovery that 19 we learned about -- when I say unveiled, it was implemented 20 nine days before the close of discovery that we learned about, 21 for the first time -- a day before the close of discovery. 22 It's something We haven't had an adequate opportunity to consider all 23 the facts that are necessary to address that. And we, frankly, 24 think it would be an advisory opinion to get into at this 25 point. It's not the case we brought about, and it's not the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 20 CA5PCAPC 1 subject of our motion, certainly. 2 most fundamentally. 3 THE COURT: 4 MR. MANDEL: So that's my position on it, All right. Let me briefly talk about the 5 distribution right. Some of it is encompassed within the 6 discussion of the reproduction right for the reasons that I 7 said. 8 first sale defense? 9 isn't because the first sale doctrine, as enacted now, the You know, the basic issue on distribution is, is there a And our response on that is, no, there 10 existing law, is very clear that you have the owner of a 11 lawfully made phono record, of a particular lawfully made phono 12 record, has the right to dispose of possession of that phono 13 record. 14 The reason that Congress was considering at the time 15 of the Digital Millennium Copyright Act implementing a first 16 sale doctrine that would work in the digital context was 17 because it recognized that the existing law wouldn't allow 18 that. 19 office to prepare a report, which the copyright office did. 20 The copyright office recommended not amending. 21 not amended. They decided not to do it. Sent it out to the copyright Congress has 22 And the bottom line is that there is no existing 23 defense that would allow you, in the context of a digital 24 transmission, to claim a first sale defense because you are not 25 distributing the phono record, the same particular phono record SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 21 CA5PCAPC 1 with which you began. 2 And, you know, again, they talk about their 3 technology. One of the things that I think is interesting is 4 that Mr. Rudolph admitted at the deposition, they haven't 5 invented a new way of upload; this is, in fact, he says, a very 6 old way of doing it. 7 that the -- what the copyright office was actually considering 8 was some of the same kind of basic technology. 9 something new that Redigi invented by their own admission. And that's important because, at the time There's not 10 If you look, I think it's at Page 82 of the copyright 11 office report, they actually talk about, quote, unquote, "move 12 technology"; so that was kind of one of the proposals. 13 talk about move or forward and delete. 14 terminology, both of them, at Page 82, move or forward and 15 delete. 16 considered. 17 18 19 They Now, they use that So, you know, this is the same thing that was being It's -- and it's borne out by all the evidence. THE COURT: How can I include that now? You didn't call an expert, right? MR. MANDEL: Well, we do have an expert in response, 20 who explains it. I think if you look at what's undisputed, 21 even between their experts, you can tell that, but again, it's 22 really simpler than that. 23 basically defines the argument on distribution because if you 24 accept, which we think is right under the statute, that in 25 order to effect that upload, you have created a new phono I think the argument on reproduction SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 22 CA5PCAPC 1 record. 2 definition, when you create a new material object. 3 You have, in effect, you've reproduced it, by THE COURT: What you're saying is a phono record is 4 that is my hard drive laptop, and then the new phono record is 5 a new server in Phoenix. 6 MR. MANDEL: Correct. And because of that, you have 7 not met the requirements of Section 109 of the Copyright Act 8 because you have not disposed of the particular phono record 9 with which you began. 10 And the copyright office is instructive because it's 11 basically explaining why it is that -- it doesn't spend a lot 12 of time on it because, frankly, it was pretty much a given that 13 digital transmissions are not covered by the first sale 14 doctrine. 15 be. 16 that point that you can see why it is the case, and it really 17 is just, again, a question of statutory language. 18 It was analyzing the question of whether it should But the discussion is useful in terms of that -- making It's not the same phono record that's being 19 distributed in a digital context because it does have to be 20 embodied or fixed in a new fixation on a new phono record in 21 order for it to be perceived or reproduced. 22 perceived or reproduced during the upload process, only when it 23 hits the hard drive of -- not the hard drive, the server in the 24 Redigi cloud, and that's a new phono record. 25 phono record with which you started, and for that reason, the It can't be It's not the same SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 23 CA5PCAPC 1 first sale doctrine does not apply. 2 think reproduction is at the heart of this because if we're 3 correct about reproduction, we're also correct about 4 distribution for the same reason. 5 THE COURT: 6 MR. MANDEL: 7 8 9 And that's basically why I All right. Unless your Honor has any other questions, I think that is the gist of our motion. THE COURT: No, I'll let you respond to Mr. Adelman when he's wrapped up. Okay. Thank you, Mr. Mandel. 10 Give me one second, Mr. Adelman. 11 MR. ADELMAN: 12 13 Your Honor, with your indulgence, I was just going to ask if I could go to the men's room for a second. THE COURT: Okay. 14 back in five minutes. 15 restroom, they can do that. That's fine. Why don't we come If anyone else needs to use the 16 (Recess taken) 17 THE COURT: 18 MR. ADELMAN: 19 THE COURT: 20 MR. ADELMAN: Five minutes. All right. Is it Adelman or Adelman? Adelman. Okay. Mr. Adelman. Thank you, your Honor. This case is 21 really not about a definitional issue. 22 evidentiary issue, which is what most cases should be about. 23 It's about plaintiff having the burden of proof, demonstrating 24 that there's a violation of one of his exclusive rights. 25 It's about an The purpose of the Copyright Act, essentially, is to SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 24 CA5PCAPC 1 accept somebody's creation, to serve the ultimate goal of 2 promoting broad public availability of literature, music and 3 other arts. 4 reflects the balance between the two competing claims. 5 noted in 20th Century Music Corp. v Aiken, the Copyright Act 6 does not give the copyright control over all uses of his 7 copyrighted work. 8 are made exclusive to the holder of the copyright. 9 Copyright laws' limited scope of protection As Instead, it enumerates several rights that The two rights that Mr. Mandel discussed today were 10 the reproductive right and the distribution right. 11 as the reproduction right is concerned, plaintiff has the 12 burden of proof of demonstrating that there was an actual 13 reproduction, and within the papers itself there is no evidence 14 that Redigi ever reproduced any of Capitol's files. 15 16 THE COURT: What are the phono records? MR. ADELMAN: 18 THE COURT: 20 21 22 I mean, that's the language of the statute, right? 17 19 Now, as far Right. I mean, we all feel sheepish saying it because we know what it means, those vinyl things. MR. ADELMAN: I actually like it. I'm old school. I still have vinyl. THE COURT: The phono record is the material object in 23 which sounds are affixed by any method, now known or later 24 developed -- how's that for broad -- and from which the sounds 25 can be perceived, reproduced or otherwise communicated, either SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 25 CA5PCAPC 1 directly or with the aid of a machine or a device. 2 So what are the material objects here? Mr. Mandel is 3 saying that the material object that is my laptop, and there's 4 a separate material object that is, you're calling it a cloud, 5 which makes it sound like it's etherial. 6 MR. ADELMAN: 7 THE COURT: 8 MR. ADELMAN: 9 THE COURT: 10 It's a hard drive. It's a hard drive? Yes, absolutely. It's in Arizona. Isn't that a separate phono record? 11 MR. ADELMAN: 12 THE COURT: 13 MR. ADELMAN: No, it's the same phono record. How can it be the same phono record? In our papers, we cited CM Paula, and CM 14 Paula goes through the process and CM Paula stands for the 15 fact -- 16 THE COURT: There are a lot of people here; so tell 17 them what that case is about. 18 MR. ADELMAN: 19 THE COURT: 20 MR. ADELMAN: 21 THE COURT: 22 MR. ADELMAN: It's not about records. No, it's not about records. It's about greeting cards -Yes. -- or plaques or something. Exactly. What happened was that 23 defendant in that action purchased 100 greetings cards with a 24 copyrighted design on it, and they used the chemical process to 25 lift the ink, the copyrighted picture, off of the greeting SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 26 CA5PCAPC 1 cards and placed them on tiles. 2 copyrighted material from the greeting cards to the tiles, and 3 then they sold those tiles. 4 the owner of the copyright to that design brought an action 5 against them for reproduction and distribution. 6 the Court found that it was not a reproduction. 7 8 9 THE COURT: Right. They transferred the Then they sold those tiles, and And, in fact, And what lofty court found this and what year? MR. ADELMAN: 10 THE COURT: 11 MR. ADELMAN: 12 THE COURT: 13 MR. ADELMAN: 14 THE COURT: 15 MR. ADELMAN: 16 THE COURT: It was -- I believe it was 19 -- 1973. '75? 1973, the Northern -1973. The Northern District of Texas. That's true. Not the Supreme Court, not the Second 17 Circuit, not one of my colleagues here, but some guy in Texas. 18 I don't mean to disparage him. 19 but it's certainly not controlling precedent. 20 MR. ADELMAN: He might have had great wisdom, No, it's not, but it stands for the 21 logic with which we stand here today, which is Redigi has 22 developed technology which does ostensibly the same thing. 23 what CM Paul, the judge in CM Paul was saying is is that -- he 24 wasn't talking about phono records, but what he is saying is 25 you're not changing the phono record. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 And 27 CA5PCAPC 1 What he said, in order to get a hundred tiles, you 2 must have purchased a hundred greeting cards and, therefore, 3 the plaintiff in this case has extinguished his right. 4 gotten the benefit of that right and, thus, the distribution 5 right has now been extinguished. 6 was entitled to sell that copyrighted material on the tiles. 7 THE COURT: He's And, therefore, the defendant But the deference difference is that the 8 process there, by necessity, only allowed you to do one of 9 these at a time, right? 10 MR. ADELMAN: 11 THE COURT: It's the same thing with Redigi. Oh, no. 12 of these at one shot. 13 MR. ADELMAN: 14 THE COURT: You could easily do a gozillion You've just chosen not to. No. You've designed it so that it doesn't do 15 more than one, but if you wanted to do a million, you could do 16 a million like that. 17 MR. ADELMAN: Right. Well, that's what file-sharing 18 services do and that is specifically what Redigi wanted to 19 prevent. 20 copyright law. 21 the rights of the copyright owner and facilitate a sale of the 22 109, the first sale voucher. 23 make sure that their process worked perfectly, in that it 24 migrates the file from one hard drive -- 25 They wanted to make sure that they followed the They designed a system specifically to protect THE COURT: They went to great lengths to What does it mean, it migrates the file? SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 28 CA5PCAPC 1 MR. ADELMAN: It's like a train, as we said in our 2 paper, your Honor. 3 ones and zeros, and it pulls it in a matter of seconds to the 4 cloud hard drive. 5 6 THE COURT: It grabs the file on the hard drive, the It pulls it one little one and then a zero right behind it? 7 MR. ADELMAN: Yes. Actually, it goes in reverse, to a 8 certain degree, but again, that's exactly what it does. 9 the technology, like you had said earlier about Star Trek. 10 THE COURT: 11 MR. ADELMAN: 12 THE COURT: That's Right. I mean 40 years ago -- I'm going to regret that one. 13 every blog in America is going to go with that. 14 I know like the show. 15 MR. ADELMAN: It has some truth in. I didn't even I mean, one of 16 the examples I was thinking of was Willy Wonka. 17 they put Tommy on the stage. 18 particles go across the top and, boom, there he was, 19 miniaturized, but still him in that TV. 20 believe? 21 Remember when They beamed him, and you saw the What's so hard to No, but seriously, as far as data is concerned, why is 22 it so hard to believe that that occurs? Because it does. I 23 mean, they filed a patent on it. 24 farfetched for human beings, but for physical objects, in this 25 computer world, when 20 years ago, would you believe that data Now, I agree, it's a little SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 29 CA5PCAPC 1 could sync or migrate through the air from your computer to a 2 handheld device? 3 take a handheld device and walk around and type to your friends 4 or make phone calls? 5 improves. 6 I mean, did you even believe that you could No. Technology changes. We have very smart people. THE COURT: Okay. Technology This has happened. Well, look, the difference between 7 migrating and copying could be significant. 8 you talking about migrating and using other analogies to 9 describe the process, and we're all groping for analogies, it 10 11 Earlier I heard seems. MR. ADELMAN: It's true. But, actually, I mean, I 12 object to the use of the word copying because in the case law 13 it's reproduction, and that, I believe, is different than 14 copying, but nevertheless -- 15 THE COURT: 16 is the phono record, right? But, again, it's the material object that 17 MR. ADELMAN: 18 THE COURT: Yes. So you've got a material object that is my 19 laptop, and material object that is the server, and it's not 20 the code. 21 someplace else, I don't think is really the issue, right? 22 the material object is the phono record. 23 The fact that my code got sucked out of this and put MR. ADELMAN: It's Well, the thing is, I think London-Sire 24 also addressed this, is that -- well, they addressed one other 25 point, which was that the material object does not have to SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 30 CA5PCAPC 1 exist throughout the entire process to distribute a phono 2 record, but -- 3 4 THE COURT: Well, I understand that. I'm not sure why that's either here or there, at least for this case. 5 MR. ADELMAN: Well, they're also -- I mean, part of 6 their reproduction right is that it's not perceivable, and they 7 clearly say that it doesn't have to be during the transaction 8 process, that transitory three seconds. 9 But as far as the material object is concerned, 10 there's no question, I think if you follow the logic of CM 11 Paula and what they were trying to say, that it's perfectly 12 permissible. 13 what's important? 14 It is that same unique file, and isn't that What's important in copyright law is that iTune -- 15 Capitol, through iTunes, sold a unique file. 16 say they're selling music tracks. 17 consumer, I have purchased that file. 18 rights associated to that file. 19 They certainly They sold a file. Me, as a I am entitled to the That is property for me, okay? Now, under 109, once I purchased that file, the 20 distribution rights of Capitol, they're extinguished. And, 21 now, I have the right to sell, dispose or destroy. 22 choice. 23 You only have the right to destroy it. 24 right to sell, and that's -- that's the antithesis of what 109 25 is about. It's my But what Capitol is saying, you don't have that right. You don't have the 109 -SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 31 CA5PCAPC 1 THE COURT: Can I -- It seems to me Redigi 2.0 is 2 basically saying we've got this code. 3 access rights to that code, but before it gets downloaded on 4 your hard drive, it's going to get sent someplace else so that 5 the only phono record, under 2.0, is going to be sitting on a 6 server in Phoenix. 7 MR. ADELMAN: 8 THE COURT: 9 10 case. That's correct. And so Mr. Mandel said, that's not his He's not pushing that case now, but that's where you have moved to. 11 You've purchased the Isn't that where we ought to be focused? MR. ADELMAN: Well, I think that's part of it, 12 absolutely. 13 get stronger and stronger. 14 plan from the beginning, which was cloud storage is where it's 15 at. 16 And as their technology develops, it's going to But certainly, this was part of the It's what everybody is moving to. Everybody wants stuff in their cloud. They want to 17 access it everywhere. 18 whole section of their agreement which focuses on cloud 19 service, and it allows all of those things that we've been 20 discussing to happen, move the files to the cloud service. 21 THE COURT: In fact, iTunes and Capitol, they have a I know that. I get all that. If we're 22 looking at the language of section 106 and 101, which is where 23 the definition of phono records is, I mean, it seems to me that 24 what we're dealing with there is a very antiquated provision, 25 which limits the focus to material objects in which sounds are SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 32 CA5PCAPC 1 fixed, which requires a process of taking code, putting it on a 2 server someplace, and that is the phono record. 3 MR. ADELMAN: Correct, your Honor. And in 2.0, that's 4 what Redigi does. The user, instead of it coming directly onto 5 the user's hard drive, it's just directed to the user's Redigi 6 cloud. So that's the first time that it's fixed and -- 7 THE COURT: Right. I think you've got a great 8 argument under 2.0. 9 under the original, classic version of Redigi. I think you've got a much tougher argument Because it 10 seems to me what you're talking about is the process. 11 migration is not really any different than my playing my record 12 here, putting the phone next to it and having somebody record 13 it at the other end of the phone. 14 MR. ADELMAN: 15 THE COURT: 16 MR. ADELMAN: 17 THE COURT: The No, it's. Let me finish. Sorry, your Honor. The phono record is here, and there's a 18 new reproduction of the phono record at the other end of my 19 phone. 20 21 22 23 24 25 MR. ADELMAN: It's not. It's the same data that was on the hard drive. THE COURT: It's the same data that's basically coming off of my record player. MR. ADELMAN: your phone? You know, what's not on the recording on The metadata that's encircled in that. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 That's one 33 CA5PCAPC 1 thing. 2 3 THE COURT: But the statute doesn't say anything about metadata. 4 MR. ADELMAN: 5 THE COURT: 6 MR. ADELMAN: 7 THE COURT: 8 No, what I'm saying is -- It just says sounds. Yes, I understand, your Honor. It could be a crappy recording, and it's still a copyright. 9 MR. ADELMAN: 10 technologically is not a copy. 11 unique file that you purchased from iTunes and moving it from 12 the computer's hard drive to the cloud's hard drive. 13 THE COURT: That's a copy. What Redigi is doing It is actually taking the I get that, but I'm not sure it isn't 14 still a new phono record, a reproduction phono record because 15 the way the statute is set up is it focuses on the material 16 objects in which the sounds are fixed. 17 You are focused on the unmaterial, the code that is in 18 the ether, and I don't think that's what the Copyright Act is 19 about. 20 obsolete. Now, again I think Redigi 2.0 may have made all of this 21 MR. ADELMAN: The copyright, well, reproduction is not 22 defined in the Copyright Act. 23 reproduction, in essence, is two files existing at the same 24 time, and that never happens with Redigi. 25 file existing at one time; so therefore, it's the same material The case law indicates that There's only one SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 34 CA5PCAPC 1 object. 2 It's just in a different place. THE COURT: But it's sort of like if I combined my 3 photocopier and my shredder so that I made a photocopy and the 4 original, instead of coming out of the bin where I can pick it 5 up, goes straight to the shredder. 6 same time, but it seems to me the other one is still a copy. 7 MR. ADELMAN: The two don't exist at the They actually do exist at some point 8 together, in your scenario. 9 THE COURT: No, they don't. No, they don't. It takes 10 a minute for that image to get transported from the original to 11 the copy, and if in the interim, while that is taking place, 12 the transfer to the second page is taking place, the original 13 is getting shredded, then they don't both exist at the same 14 time. 15 MR. ADELMAN: But in Redigi's technology, there's no 16 copy. 17 There's no copy; so there's nothing to be shredded. 18 nothing to be deleted. 19 is not a forward and delete situation. 20 They're pulling the exact file from the hard drive. THE COURT: There's There's no shredding or delete. This I guess I'm not buying necessarily the 21 argument that, as long as the two don't exist at the same time, 22 then the second one is not a copy. 23 argument -- 24 MR. ADELMAN: 25 THE COURT: I think you could use that Right. -- to justify the photocopy I just talked SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 35 CA5PCAPC 1 about not being a copy; so I don't think that's what the 2 language of the statute is. 3 MR. ADELMAN: Yes, but the -- Well, I don't think the 4 language -- I think the language of -- As the case law has come 5 down, that's basically what's been intimated, that a copy is 6 like the file sharing. 7 and then you down load millions of copies to all types of 8 people. 9 You have a copy on your file sharing, That's reproduction. There's no question about that. But Redigi is not copying or reproducing at all. It's 10 how their technology works. 11 declarations trying to explain exactly how it works, that there 12 is no copying involved whatsoever. 13 the actual file that is being transported like in your Star 14 Trek example or migrating. 15 THE COURT: 16 MR. ADELMAN: 17 THE COURT: 18 MR. ADELMAN: We spent a lot of time with There's no deleting. It is Or your Willy Wonka. Or my Willy Wonka. Nicely done. That's migrated. That's how the 19 technology works. 20 rebuttable evidence in this case that says it doesn't work that 21 way. 22 the case, is that there's no two copies ever at the same time. 23 That's reproduction. 24 25 That's what the evidence says. There's no And that's what -- that's actually, I think, the heart of There's no reproduction. reproduction right. Capitol only has a They don't have a copying right. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 Copying 36 CA5PCAPC 1 is not in the statute. Reproduction is what's been defined as 2 the right, and there is no reproduction of the file in the 3 Redigi system ever. 4 THE COURT: Now, we haven't talked about it in the 5 papers, spent a lot of time on this, is that certainly 6 previously your client, through different counsel, has made 7 statements that copying does take place. 8 which takes place in the Redigi service occurs when a user 9 uploads music files to the Redigi cloud. 10 The only copying Thereby storing copies thereof in the user's personal cloud locker. 11 Now, I know you've worked hard to make that an 12 ambiguous statement, but, boy, that seems pretty emphatic. 13 Maybe that's why he is no longer counsel of record. 14 see how you get past that. 15 MR. ADELMAN: 16 past that. 17 I don't Well, there are a number of ways to get copying. 18 First of all, in the answer we've clearly denied THE COURT: Well, you can deny copying, but then when 19 you say that, it sure looks like you just admitted certain 20 facts that are going to be fatal. 21 MR. ADELMAN: 22 though. 23 It's not what's actually happening, That's the first thing. taken out of context. 24 THE COURT: 25 MR. ADELMAN: The second thing is, it's What is it taken out of context? The only copying that takes place when a SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 37 CA5PCAPC 1 user uploads music to a Redigi cloud. It is like we explained 2 in our files, it was not explained in the PI hearing papers. 3 We have explained -- 4 THE COURT: 5 user's personal cloud locker. 6 what's in the cloud locker is a copy. 7 And it says it's a copy that results from the Redigi service 8 and the user uploading music, right? 9 Thereby storing copies thereof in the MR. ADELMAN: No. This sentence says that what That's what it says. I mean, it's -- The way that cloud 10 locker storage works is that people put copies up into the 11 cloud. 12 It's within PI papers. 13 were not copying. 14 Redigi is not copying. It's not a judicial admission. In the answer they clearly said they It's very difficult, especially in a preliminary 15 injunction situation, technology is often very hard to 16 describe. 17 you're putting together papers in a very quick scenario. 18 the ability to spend weeks with the plaintiffs discussing their 19 technology, understanding their technology, understanding what 20 they were doing, and understanding what it did. 21 our motion papers look the way they do. 22 It's often very hard when you just met your lawyer, I had That is why It's unfortunate that we have to explain this away 23 because we shouldn't have to because no copying occurs on the 24 system. 25 archival copy that was -- that, in the event that there was no The only copy that they were talking about here was an SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 38 CA5PCAPC 1 other copies on the system, they would place an archival copy 2 on the system in the -- 3 4 THE COURT: this statement says. 5 6 Look, that's not -- That is just not what I think that's said. MR. ADELMAN: It's the essence of what it means, your Honor. 7 THE COURT: No. Look, you may have changed your 8 theory. You may have come to a deeper understanding of the 9 technology, but there's no way that statement is referring to 10 an archival copy. 11 That's just -- I mean, that is -- you can't defend it as that. You can't do it. 12 MR. ADELMAN: 13 a colloquial use of the word. 14 happening with the system. 15 THE COURT: Well, your Honor, they don't copy. It's It just doesn't reflect what was Well, I mean, you're moving for summary 16 judgment too. 17 the statements that were made that I just recited, there is a 18 disputed fact between your former lawyer and your current 19 expert as to what exactly goes on with this process. 20 It would seem to me, at the very least, based on Should I make a credibility finding as to whether your 21 expert is making sense, or whether the more accurate statement 22 is the one that was previously made on your client's behalf? 23 MR. ADELMAN: I don't think that you would have to do 24 that. I think that, based on that there's no other evidence 25 other than declarations from the people who have put together SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 39 CA5PCAPC 1 the technology stating, under oath that this is the way it 2 works, that your Honor can rely on it. 3 There's no opposing -- There's nothing from Capitol 4 saying it doesn't work that way. 5 technology. They had the opportunity to look at the 6 technology. The only evidence in the record is that no copying 7 takes place. 8 9 They didn't look at the That is the evidence before you, your Honor. THE COURT: respond to that. 10 to hit on? 11 I mean -- All right. All right. There are other points you want talk about 2.0. 12 What about 2.0. And Mr. Mandel can MR. ADELMAN: Mr. Mandel says we're not here to We are here to talk about Redigi and 13 Capitol's claim that they violate the reproduction right. 14 Capitol -- and the distribution right. 15 If On top of that, what Capitol is trying to claim, which 16 I think is ridiculous, that the first sale doctrine does not 17 apply to digital goods. 18 19 THE COURT: 2.0 didn't come out until -- is a Johnny-come-lately in terms of this case, right? 20 MR. ADELMAN: 21 THE COURT: 22 No. I'm sorry. When was this disclosed in this discovery, that 2.0 was coming out? 23 MR. ADELMAN: 24 THE COURT: 25 Certainly 2.0 is in play here. That 2.0 was already out. When was 2.0 disclosed as part of discovery? SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 40 CA5PCAPC 1 2 3 MR. ADELMAN: Probably, you know, within two or three weeks before the end of discovery. THE COURT: All right. I mean, it's not supposed to 4 work that way, but the case has radically changed because since 5 the filing of the papers, you are have changed your technology 6 in a significant way. 7 that they're locked into the discovery deadline that prevents 8 them from assessing this technology when a your argument is now 9 different than what it was at the time you -- 10 MR. ADELMAN: I don't think it's appropriate to say It's not the argument that's different. 11 It's the technology -- the technology has improved to the point 12 where it fits in, even with what the plaintiffs are saying. 13 THE COURT: But it's certainly different. I mean, it 14 has an impact on Mr. Mandel's arguments. 15 difference as far as you're concerned, but Mr. Mandel's 16 arguments are premised not on 2.0, but on classic. 17 18 19 MR. ADELMAN: I agree. It may not make a But what I'm saying is even under Mr. Mandel's arguments, 2.0 is perfectly proper. THE COURT: Well, Mr. Mandel is saying 2.0 is not his 20 complaint, and it's not been tee'd up in this action. 21 saying it is tee'd up in this action. 22 well, if it is tee'd up in this action, don't I have to allow 23 additional discovery? 24 MR. ADELMAN: 25 You're And I'm asking you, Well, what -- I'm -- No because the -- We gave them the opportunity to look at the technology. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 The 41 CA5PCAPC 1 technology for 2.0 was already in place. 2 released yet. 3 THE COURT: 4 MR. ADELMAN: 5 It just wasn't Well, you said in two weeks -I'm sorry. Wait. Your Honor, I apologize. 6 THE COURT: No. 7 MR. ADELMAN: 8 THE COURT: 9 MR. ADELMAN: I came onto this case on April 24th. Okay. And one of the first things that I 10 discussed with plaintiff's counsel was the technology and 11 looking at it. 12 discovery. 13 all part and parcel to the same system. 14 effects, okay -- was readily available for them to look at at 15 that time. 16 That was two months before the end of Redigi 2.0 -- we're calling it 2.0, but it's just It just has different Because of marketing efforts, it wasn't released until 17 the end of May. 18 my clients until the middle -- until the middle, late end of 19 May. 20 only on this case for less than a minute, you know. 21 it together. 22 And, in fact, when they wrote you somewhere around June 20th, 23 they already knew about Redigi 2.0 but did not make the 24 request. 25 And they chose not to take the depositions of I understand the discovery schedule was short, and I was And we put But nevertheless, they had their opportunities. THE COURT: But it's their complaint, right? SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 42 CA5PCAPC 1 MR. ADELMAN: 2 THE COURT: I agree it's their complaint. So if they want this to be about Redigi 3 classic, I mean, why do you get to say no, no, no, I've decided 4 this is about something else? 5 MR. ADELMAN: Well, it's not necessarily about 6 something else. It's still the same law, and we're arguing the 7 same arguments. What we're just saying is, hey, you know, even 8 if what you say is correct, Redigi 2.0 complies with that. 9 THE COURT: Well, I'm not -- 10 MR. ADELMAN: 11 THE COURT: So I hear what -- I'm sorry. I'm not sure they're disagreeing. 12 sure Mr. Mandel wants to engage on that right now. 13 I'm not right, Mr. Mandel? 14 MR. MANDEL: No. Is that Actually, we do disagree, and we did 15 brief, after our other arguments, as to why we think Redigi 2.0 16 also is a violation on the limited information we had. 17 THE COURT: 18 it's not this case. 19 MR. MANDEL: But I asked you a minute ago, and you said We don't think it's this case, but 20 obviously, they made a motion, and I don't know what your Honor 21 is going to say is a part of this case or not. 22 to consider it and think we're not entitled to discovery, we do 23 have an argument as to why we think it's a violation. 24 basic position is, no, it's not part of this case. 25 if it is going to be part of this case, we have to have an If you're going SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 But our Certainly, 43 CA5PCAPC 1 opportunity for further discovery. 2 THE COURT: Okay. 3 MR. ADELMAN: 4 THE COURT: 5 MR. ADELMAN: Mr. Adelman? Yes, your Honor. Any other points you wanted to make? Since you asked us not to make policy 6 arguments, if you wouldn't remind if I just reviewed my notes 7 for a second. 8 THE COURT: Sure. 9 MR. ADELMAN: Take your time. If I could just address the DMCA report 10 for a second. Our response to that is that the DMCA report is 11 not binding. It's only entitled to get more deference based on 12 the power to persuade, and the Second Circuit has already 13 declined to follow this report's interpretation concerning 14 duration or requirements in cartoon networks. 15 The one part that I want to address about the report 16 is that Mr. Mandel said that they talked about moving, and the 17 technology was already available. I didn't see anywhere in the 18 report that it discussed moving. What it discussed was forward 19 and delete. And, actually, it did say that -- 20 THE COURT: What did say? 21 MR. ADELMAN: That the report did say that the -- that 22 their findings were premised on the fact that technology was 23 not available in 2001 to be able to effectuate Section 109, and 24 the report itself conceded that if the right technology was 25 available, it may be conceivable. So I think that that rebuts SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 44 CA5PCAPC 1 Mr. Mandel's arguments on that point. 2 Unless your Honor has any other questions.... 3 THE COURT: 4 No, I don't think I do. I'll give Mr. Mandel an opportunity to respond, if he wants. 5 MR. ADELMAN: 6 THE COURT: 7 MR. MANDEL: Thank you, your Honor. Okay. Thank you, Mr. Adelman. Your Honor, you know, Mr. Adelman talks 8 about they filed a patent, but I think it's important to point 9 out the patent they filed is not on this so-called Star Trek 10 technology that we're hearing about today. 11 look at the language of the patent, which was put in our 12 papers, what it actually says is for a digital media object, 13 which is a music file, to be offered for sale. 14 copied to a remote server, and served on the disk. 15 In fact, if you It is first That's the way they described their technology in the 16 patent they applied for, which Mr. Adelman just said is the 17 patent that they have. 18 process that, apparently, now they've decided is what truly the 19 technology is. 20 don't think it's necessary to delve into the technology. 21 There's nothing about some migration And while, for all the reasons I've said, I I do think that even if you look at it at the 22 technological level, based on the evidence before your Honor, 23 that it is clear that they delete the file. 24 our expert said in response, they said this in paragraph 14 of 25 his declaration and it's not disputed in the reply Because what are SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 45 CA5PCAPC 1 declarations, that basically they use a function called set and 2 defile. 3 environment. 4 At least that's what they use in the Windows And what that does is effectively truncates the 5 original file that's on the user's hard drive in pieces; so as 6 each piece is read into memory, they truncate that original 7 file so it gets smaller and smaller until, by the end, it's of 8 zero length and it no longer has the recording there. 9 Now, our expert said, and don't dispute this, that the 10 only reason that's there -- that has nothing to do with getting 11 the file to the cloud. 12 reason only, to make sure that that file that existed on the 13 hard drive can no longer be accessed and that the original file 14 is no longer on the user's hard drive. That's there for one reason and one 15 So if that didn't exist, if they weren't using that 16 truncate function to set and defile, you could do everything 17 they do. 18 nobody would be disputing that there's a copy because that 19 would just be a basic upload, like any other upload, that ends 20 up with two copies. 21 cloud. 22 Take it in reverse order, read it in pieces, and One here, the original, and one in the Now, obviously, they didn't want that to happen; so 23 they had to figure out a way to make sure. It wasn't good 24 enough to just read it in reverse order and send it up that 25 way, because you'd still be left with two, and that would SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 46 CA5PCAPC 1 defeat their argument on reproduction. 2 additional function, set and defile. 3 THE COURT: 4 MR. MANDEL: So they have this You think that's just a shredder? Exactly. That's what it is. It serves 5 no purpose in terms of making sure that it's duplicated. 6 there only to be shredded. 7 in the record, but there's the evidence of their own 8 admissions, and not just in the brief. 9 It's in the answer, upon the upload of an eligible file to the Now, they say there's no evidence There's the statement 10 cloud, such file is deleted. 11 That's their language. 12 it, and now they say, well, "such file" means the archival copy 13 that we were making temporarily. 14 Such file and all other copies. That's how they affirmatively described That's preposterous. I mean, that's not what it says. 15 It says such file in reference to the eligible file is deleted. 16 And they said it again in their deposition on two occasions 17 when they confirmed that that statement was accurate, and 18 that's a statement that they made in a sworn declaration. 19 there is evidence that comes right from them that unequivocally 20 establishes that there is a deletion, and that we're only 21 talking about characterization. 22 So And in terms of the copyright office report, if I can 23 just read from Page 81, what it says, they're talking about the 24 proposals. 25 THE COURT: Page 81 of? SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 47 CA5PCAPC 1 MR. MANDEL: Of the DMCA report that the copyright 2 office did, and they're talking about the similarities between 3 a physical transfer and the technological process that's going 4 to happen online. 5 enhance the similarity by requiring the use of technological 6 measures, in some cases referred to as 'move' or 'forward and 7 delete' technology that will disable access to or delete 8 entirely the source file upon transfer of a copy of that file." 9 And they say, "Some of these proposals would So it is the same thing they were talking about, and 10 Redigi has said, we didn't invent something new. 11 we came up with a new way to do uploads. 12 a very old way, and, in fact, they admitted that they delete 13 the file. 14 It's not like In fact, we're using Now, Mr. Adelman says, why is it so hard to believe? 15 I mean, one of the reasons it's hard to believe is that if you 16 really had this new technology and you were coming into court 17 to defend a preliminary injunction, where you claim your whole 18 business is at stake, I think that might be front and center. 19 It might be one of the first things he said. 20 our technology doesn't make a copy. 21 anything close to that. 22 Oh, by the way, But they didn't say In fact, they admitted, clearly and unequivocally, in 23 the brief that they made a copy. They admitted in the 24 declaration and in the answer, that they delete, and they 25 acknowledge that it at the deposition. So the evidentiary SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 48 CA5PCAPC 1 record is absolutely clear on this point, and there is a 2 violation of the reproduction right. 3 And, in essence, all we have is what they're trying to 4 say, what they're straining to say, well, but there's not two 5 copies at the same time; so therefore, it shouldn't be a 6 reproduction. 7 the reasons that your Honor said. 8 photocopy machine and page by page copied it and shredded the 9 page that I copied, there's no dispute that you wouldn't have 10 But that's not what it means. I mean, I -- for I mean, if I stood at my two at the same time, but what you'd end up with is a copy. 11 The fact of the matter is, the Copyright Act does not 12 permit you to reproduce the work and sell the reproduction. 13 Even if you destroyed the original. 14 original is irrelevant. 15 the reproduction right, and with it, the first sale defense, as 16 well. 17 Whatever you do with the Now, I think that really disposes of And I just want to such briefly on the first sale 18 defense. Mr. Adelman talks about London-Sire, and the fact 19 that a material object doesn't need to exist throughout the 20 process, but London-Sire is a distribution case. 21 is not analyzing a first sale defense to decide whether the 22 particular phono record, which they used to begin, is what's 23 been sold. 24 violation of the distribution right, and they reached the 25 sensible conclusion, the same conclusion the Supreme Court London-Sire They were just analyzing whether there's a SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 49 CA5PCAPC 1 reached in Tasini, that, yes, that's a violation of the 2 distribution right. 3 You are distributing with a phono record. If you end up one here and you end up with one at the 4 other end of the process, that's a violation of the 5 distribution right. 6 to look at for first sale. 7 be the particular phono record, and if you look at London-Sire, 8 even they were very careful in a passage that really didn't 9 matter for purposes of the issue they were deciding, but is But that's not the question that you have For first sale purposes, it has to 10 critical in the context of this case. They said, or more 11 precisely, when they were describing what the phono record is, 12 it's the electronic file or more precisely the segment of the 13 hard drive on which the electronic file can be found. 14 And that really is the point, that it's not the 15 electronic file, the data floating in the air that's the 16 material object. 17 the distribution right is violated, but there is no first sale 18 defense. 19 because you're interpreting different statutory language that 20 applies in each case. 21 of those provisions is not the same. 22 23 There's no inconsistency between those two positions Phono record is the same, but the rest The last point I want to just briefly talk about is Redigi 2.0. 24 25 It is the hard drive, and for those reasons, THE COURT: I thought you didn't want to talk about that. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 50 CA5PCAPC 1 MR. MANDEL: Well, I want to talk about where it fits, 2 and since your Honor has asked about it and is interested; so I 3 want to explain our position on that clearly. 4 First of all, Redigi 2.0, according to the deposition 5 testimony, was implemented on June 11th, 2012. We didn't take 6 the depositions in late May. 7 witnesses June 20th, I believe the 20th and the 19th, right at 8 the close of the discovery period, literally the day the 9 discovery period was closing. We took the deposition of their 10 And that's when we found out about it, in a 11 deposition, when -- it wasn't something that anybody was even 12 focusing on or new existed. 13 that, oh, we do it this way now. 14 we didn't have an adequate opportunity to fully flush this out 15 and figure out what's involved. 16 first of all, we say it would be an advisory opinion, it's not 17 an issue here. 18 considered, there has to be a full opportunity for discovery. 19 It came up in answer to a question So, you know, it's clear that And that is the reason why, And, secondly, certainly if it's going to be Now, the discussions with counsel, and I think this is 20 an important point, part of the problems we had, to be honest, 21 is we were shooting at a moving target. 22 discussions with their prior counsel in which he frankly said, 23 look, we don't think we need to look at your technology if the 24 position you're taking is that it's a copy, and that's conceded 25 as you said in your preliminary injunction papers. You know Mr. King had SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 And he 51 CA5PCAPC 1 said, yeah, that's our position, and that's not in dispute. 2 We also submitted two case management plans to your 3 Honor, including one after Mr. Adelman was substituted in, that 4 specifically said the parties believe that the issues can be 5 resolved on summary judgment following fact discovery, and 6 that's why we're asking that you put off expert disclosures, 7 put off expert discovery until after the summary judgment 8 dates. 9 Now, we still believe that, based on the arguments we 10 made, but the fact of the matter is, they changed completely 11 the position that they were asserting. 12 for believing that was we thought we were all in agreement 13 that, of course, a copy is made and a deletion has occurred, as 14 they had said repeatedly. 15 we implemented a new technology that was not the subject of 16 your complaint, that was not disclosed in any documents we 17 produced, that was revealed for the first time in a deposition 18 the day before discovery closed or perhaps the day discovery 19 closed, and now it's tee'd up for decision I think is just not 20 fair, and it violates basically Rule 56D and the reason you 21 have that there. 22 discovery, you should be given that. 23 A part of our reason So to now try and say, by the way, That if you need an opportunity for further So our position is it's not part of this case. If it 24 is part of this case, we should have some discovery on it. 25 finally, if your Honor disagrees with us on those two points, SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 But 52 CA5PCAPC 1 and says, yes, it is part of this case, we don't agree that 2 it's not a violation. 3 opposition brief. 4 And we've explained that in our And the reason for that is it's not the case that this 5 is just limited to the Redigi cloud. I think the deposition 6 testimony that Mr. Ossenmacher offered when he first told us 7 about this technology, was that the file appears in two places 8 virtually simultaneously, in the Redigi cloud and also on the 9 user's hard drive; so that there are two copies. So it's not 10 the case that there's one copy that's delivered just to the 11 Redigi cloud, and more fundamentally, it's not the case that 12 Redigi has any right to intervene in the relationship here and 13 deliver it in a different manner. 14 Certainly that's part of the Capitol/Apple 15 transaction. 16 by virtue of this, that the downloads can appear in a non-Apple 17 environment. 18 issues there that would really need to be thought about, 19 developed and further looked at. 20 I mean, Capitol and Apple are not agreeing that, That's not what the agreement says; so there are By no means do I want to say today that we concede 21 that Redigi 2.0 is okay. We don't concede that point, but we 22 just don't think this is the appropriate vehicle, this motion, 23 to actually resolve that question. 24 brought us to court, and what is at the heart of this case, is 25 that they were setting up a used marketplace that would cover And the question that SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 53 CA5PCAPC 1 all kinds of existing music that's already been purchased from 2 iTunes that's on users' hard drives that they would now be able 3 to resell. 4 What's going to happen in the future with respect to 5 if somebody who buys something in June has decided, you know, 6 they want to resell that, that's for another day, but that's 7 not what caused this lawsuit to be filed. 8 we're seeking relief against. 9 that's what we think is really at the heart of this case. And that's what That's why we're here, and 10 THE COURT: 11 Mr. Adelman, anything you want to say in response? 12 13 All right. Thank you. Any last words? MR. ADELMAN: Yes, some short comments. All right. 14 So one point that I want to just address was that Mr. Mandel 15 said earlier that he said that files moving within the same 16 hard drive must be okay, but I think one of the things with 17 Redigi 2.0 is we have to know what uses fall within this 18 statute and what uses fall without. 19 files on my own hard drive and that doesn't violate the 20 production, but to move my file to a cloud does violate 21 reproduction? 22 Why is it okay to move It doesn't seem to make sense to me. THE COURT: But wait, isn't that the same difference? 23 Just if I record my album to my cassette, and then put it in my 24 walkman, which I had 20 years ago, but are you suggesting that 25 is a violation or is not a violation? SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 54 CA5PCAPC 1 MR. ADELMAN: No. What I'm saying is that the 2 computer itself moves the file around, through certain actions, 3 to make things more efficient, et cetera. 4 earlier that that would be ridiculous, that wouldn't be a 5 violation, but the file is clearly moving. 6 around the hard drive. 7 And Mr. Mandel said It's clearly moving So what I'm saying is, there's no difference between 8 the file moving around a hard drive and the file moving to a 9 cloud drive. 10 It's the same file is what I'm saying. I just want to clarify that the patent that Mr. Mandel 11 was just referring to is not the patent that I was talking 12 about. 13 was talking about is a business model patent that Redigi filed 14 early on. 15 patent, which specifically discusses the migration process. There's a second patent. The patent that I'm talking about is a process 16 THE COURT: 17 MR. ADELMAN: 18 19 The patent that Mr. Mandel And when was that filed? That was filed within the last month or two. THE COURT: Okay. But why wouldn't you be also held 20 accountable to what you say in your patents, you know, as a 21 business model? 22 MR. ADELMAN: I think we do, but there's a difference 23 between a process patent and a technology patent. A 24 business -- a process patent and a business model patent. 25 There's differences. And taking what Mr. Mandel just said out SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 55 CA5PCAPC 1 of context is not necessarily the whole of what the patent 2 stands for. 3 There's no question that on our computers we do 4 delete. Though, I don't like the word delete because nobody 5 really deletes. 6 computer, it goes into the trash. 7 When you move it from the trash, it's still not really deleted 8 because anyone whose hard drive has crashed and has gone to the 9 genius bar knows that sometimes they can recover it. I mean, when you delete something off your 10 THE COURT: 11 MR. ADELMAN: It's not really deleted. Right. In this case, it's not deleted because 12 it's not there anymore. This end truncates the argument that 13 their supposed expert, which -- who's only in security and not 14 really in computer science, said it's just not the way it 15 works. 16 papers, the way it's described in the declarations, and the way 17 I've described it today, is that the file actually moves, 18 leaves no data. 19 is the name of the file. The way it works is the way it's described in our The only thing that's left when the file moves 20 THE COURT: Okay. 21 MR. ADELMAN: A couple other points. You mentioned 22 the London-Sire point. That was actual reproduction. It's a 23 file sharing case. 24 two different places because there was a reproduction. 25 case, it is the particular phono record that Redigi is selling. That's what -- that two different files at SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 In this 56 CA5PCAPC 1 It is the particular phono record that they're migrating from 2 the hard drive to the cloud. 3 THE COURT: 4 They're migrating the phono record? 5 6 Wait, wait, wait. MR. ADELMAN: They're migrating the unique file. The unique file that they purchased from iTunes is my -- 7 THE COURT: The phono record is not the file. The 8 phono record is the material thing that allows a listener to 9 hear sounds, right? 10 MR. ADELMAN: 11 THE COURT: Right. And so it's when you have that piece of 12 code, the file, on a particular material thing, which is, in 13 this case, a hard drive; it's no longer in the turntable -- 14 MR. ADELMAN: 15 THE COURT: 16 MR. ADELMAN: 17 in the cloud, though. 18 THE COURT: Right. -- that's the phono record, right? That -- Yes. It's the same phono record It is. Well, how is it the same phono record? 19 Phono record is a material thing. 20 what's in the cloud is the same as the thing that's on my desk? 21 22 23 24 25 MR. ADELMAN: So how can you say that Because you can perceive it and listen to it. THE COURT: But that's -- It's material. something doesn't make it material, right? MR. ADELMAN: No. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 Listening to 57 CA5PCAPC 1 2 THE COURT: the time. A material -- I listen to the radio all The radio is material; the songs aren't. 3 MR. ADELMAN: 4 THE COURT: 5 MR. ADELMAN: 6 The ability to hear it, though. The ability to hear it makes it material? Without the material object, there could be no ability to hear it. 7 THE COURT: But that is the point. That is what the 8 phono record is. 9 fixed, and so the argument of the plaintiffs is that the phono 10 It is a material object in which sounds are record is the file on a hard drive. 11 MR. ADELMAN: 12 THE COURT: The hard drive -- And that you, therefore -- that to have 13 the same thing, the same original in Phoenix is a non sequitur, 14 right, if the hard drive is still on my lap? 15 MR. ADELMAN: 16 THE COURT: It's just the same as in CM Paula. But that's a 1973 case involving greeting 17 cards and somebody taking stencils and putting them on top of 18 greeting cards. 19 MR. ADELMAN: 20 THE COURT: 21 22 23 24 25 The logic still applies. But that logic is -- I'm not bound by that logic. MR. ADELMAN: No, you're not. I'm trying to persuade you to that. THE COURT: All right. So then you're really relying on the Northern District of Texas. That is your case. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 58 CA5PCAPC 1 2 MR. ADELMAN: That's a small point. We're saying there's no reproduction; so you're right. 3 THE COURT: Okay. But it seems to me you keep going 4 back to the suggestion, which is appealing to the casual 5 observer, that what you own is the sounds, but you don't. 6 you buy these things, what you own is the piece of code that's 7 on your hard drive or your iPod. 8 MR. ADELMAN: 9 THE COURT: 10 When Yes. That's the phono record. MR. ADELMAN: You own that particular copy. Okay? 11 Having -- It would flip the law on its head if the law said 12 that in order to sell that phono record, I had to sell my hard 13 drive. 14 purchased a music track from iTunes. 15 me. 16 my hard drive, it's mine. 17 says -- 18 If I wanted -- I own that track. For $1.29, I ITunes delivered it to Whether it's in my cloud, they delivered it to me, or on THE COURT: 19 arguments. 20 arguments there. 21 I now own it. It's a sale. It Now, I think you're moving into policy Now, I think you're arguing and there's some great for Congress, right? They're not for me, though. 22 MR. ADELMAN: 23 THE COURT: No. They're really They're actually for you. We the people make the laws. You're 24 asking me to basically take over the drafting, and I guarantee 25 I can do it better than Congress will, but I don't have that SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 59 CA5PCAPC 1 authority. 2 MR. ADELMAN: 3 was created from Bobbs-Merrill. 4 Before Bobbs-Merrill there were some cases about first sale, 5 but it really didn't exist in the way it does today. 6 Bobbs-Merrill, in essence, codified first sale, and Congress 7 took Bobbs-Merrill and said, yes, this is what we want to do 8 now. 9 do so because I think -- 10 11 12 I think you do. But I mean, Section 109 Bobbs-Merrill was court's law. So, yes, I think you have the absolute right and power to THE COURT: That's another conversation about courts and their authority. MR. ADELMAN: I know, your Honor, but if I could just 13 say I think what Redigi is doing is perfectly proper under the 14 copyright law and, therefore, the arguments we're making are, 15 while may be policy, are founded in at least some law and, you 16 know, the arguments against the policy are nowhere. 17 evidence of it. 18 19 20 THE COURT: There's no Well, I think the argument is against the policy having been made. MR. ADELMAN: I don't think Mr. Mandel -- I have not. I don't mean the policy. I 21 mean, the definitional issue about -- I mean, we argued it; so 22 I'm not going to reiterate it. 23 So the last two things. One is that Mr. Mandel didn't 24 point out the page and section, but Mr. Ossenmacher in his 25 deposition never said that there are two copies. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 He never 60 CA5PCAPC 1 said. He described the technology exactly the way I've been 2 describing it today, the way we described it in our papers. 3 It's completely consistent. 4 And the last thing, his comment about iTunes. 5 does not tell you you cannot -- where to put the file. 6 know, by default they put a file in a certain place; so that 7 the files get delivered all into the same folder. 8 could put that folder anywhere, and there's nothing in the 9 terms -- A, there's nothing in the terms of service that says 10 11 ITunes You But you you can't put that folder into the cloud. In fact, Apple actually encourages you to put it into 12 their cloud or put it into, you know, any other space. 13 Nevertheless, Apple isn't here. 14 Redigi putting the files into the cloud, and I don't think 15 that's an issue here. 16 THE COURT: Apple isn't objecting to Thank you very much, your Honor. Okay. All right. Let me thank all the 17 lawyers, those who argued and those who participated in 18 briefing and preparing for the arguments. 19 exceptionally well done. 20 I don't always get briefs of this caliber on a subject that's 21 very interesting in which, you know, obviously, the lawyers 22 have to educate the Court. 23 job of that each of you so thanks. 24 25 It really was very I thought the briefs were terrific. So that's, I think you did a good I'm going to reserve. I have a lot to think about. know this is an important issue for both of your clients and SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 I 61 CA5PCAPC 1 beyond that. There's a large public and other interests that 2 are very focused on this. 3 want to just temper everyone's expectation to acknowledge that 4 we're in a court of law here. 5 blank slate, and so ultimately, what this is about is 6 interpreting and applying an existing statute. 7 up on that will make some people happy and some people unhappy, 8 but it's -- you know, don't confuse what I'm doing with what 9 the folks in Congress will be doing, where they will be It's not lost on me, but again, I We're not making policy on a And where I end 10 balancing different policy arguments and reaching conclusions 11 based on the strength of those arguments. 12 something that eventually is going to have to happen and 13 probably is already happening. 14 Great. Thanks a lot. And so that's Let me thank the court 15 reporter, who has worked feverishly the whole time and we 16 really benefit greatly from her skills and talents. 17 the technology is truly not that advanced. 18 that much in 50 or 60 years. 19 (Adjourned) Okay. Although, It hasn't changed Thanks. Have a good day. 20 21 22 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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