Capitol Records, LLC v. Redigi Inc.

Filing 26

TRANSCRIPT of Proceedings re: Argument held on 2/6/2012 before Judge Richard J. Sullivan. Court Reporter/Transcriber: Michael McDaniel, [phone]. 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 3/5/2012. Redacted Transcript Deadline set for 3/15/2012. Release of Transcript Restriction set for 5/14/2012.(McGuirk, Kelly)

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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CAPITOL RECORDS, LLC,

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Plaintiff,

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v.
REDIGI INC.,

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12 CV 95 (RJS)

Defendant.
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New York, N.Y.
February 6, 2012
3:30 p.m.

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Before:
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HON. RICHARD J. SULLIVAN,
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District Judge
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APPEARANCES
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COWAN, LIEBOWITZ & LATMAN
Attorneys for Plaintiff
BY: RICHARD MANDEL
JONATHAN KING
RAY BECKERMAN, PC
Attorneys for Defendant
BY: RAY BECKERMAN
M. TY ROGERS

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SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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(In open court, case called, appearances noted)

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THE COURT:

All right.

Mr. Rogers, good afternoon to

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you, and I should note that the docket sheet has you at

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Vandenberg & Feliu.

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MR. ROGERS:

That was my former firm.

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everything in the Southern District system.

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I changed

will look into that.

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THE COURT:

Check into it.

copy of it when they moved it over.

I'm surprised.

I

Maybe you didn't make a
That was a little

copyright joke.
Good afternoon.

And I gather we have some others in

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the gallery interested in the subject or more than just a

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passing interest in the subject.

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We're here on I guess two potential motions.

I have

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the motion of plaintiff's for a preliminary injunction.

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got the opening brief that was dated January 6 as well as --

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I'm sorry, the complaint is January 6, the answer is

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January 19, and I have the opening brief January 26, the

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reply -- excuse me, the response January 27, it's date of

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docketing, then the reply brief February 1st.

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premotion letters related to defendant's contemplated motion

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for a summary judgment, so I have a January 19 letter from

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Mr. Rogers and a January 24 and letter in response by

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Mr. Mandel.

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So that's what I have got.

So I

I also have

I have got something from

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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counsel from Google that I have already dealt with, but nothing

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else from the parties.

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MR. MANDEL:

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THE COURT:

Right?

That's correct, your Honor.
I find this to be a fascinating issue.

We

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raised a lot of technical and statutory issues that make this

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kind of a niche case, as far as I'm concerned.

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So I have read the papers, and I read them carefully,

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but I'm happy to hear further argument, particularly since

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defendants have not had a chance to respond to the reply

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papers, which I guess fine tune some of the arguments that were

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made in the opening brief.

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argument now.

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I'm curious to have a little oral

So it's plaintiff's motion, so we'll start with

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plaintiffs.

And I think there's no dispute as to what the

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standard is here.

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harm, because it seems to me that this is the kind of thing

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that money should take care of.

I think we ought to start with irreparable

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Mr. Mandel?

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MR. MANDEL:

Your Honor, we don't think that money

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really will adequately address the injury here, and I think

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there obviously was a long history for many years where

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irreparable harm was presumed in copyright cases.

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Now obviously in Salinger the Second Circuit said that

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is no longer the case, reading the Supreme Court's opinion in

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Ebay.

But at the same time, they were careful to point out as
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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a empirical matter it still well may be that most copyright

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plaintiffs will be able to establish irreparable harm.

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Roberts' current opinion in Ebay where he talks about we're not

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writing on a blank slate now, obviously years of history can be

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worth a lot of logic.

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here.

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reasons.

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Justice

And I think that really is the case

There is irreparable injury, and for a number of

First of all, with respect to monetary damages, I
think there's a real concern whether this defendant would be in

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a position to provide the kind of judgment that Capitol is

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entitled to.

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THE COURT:

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MR. MANDEL:

Why?

Because they're pretty new?

Not just that, in response to the

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preliminary injunction motion they essentially said that an

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injunction would put them out of business.

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me that they're really saying their business model, which they

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decided to go forward on knowing -- they had to know that there

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was significant risk when they went forward with that business

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model, and they're saying if they're wrong, they're out of

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business.

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THE COURT:

And so it seems to

That's not the same as saying you're

judgment proof, is it?
MR. MANDEL:

I think there's a question if there's

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added business.

The idea of a beta start up company that has

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just been in testing mode that goes into it knowing there's a
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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serious legal question and saying that they'll be out of

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business if they're not allowed to do this, I think there's

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real question to whether we get a statutory damage award for

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hundreds of recordings that could add up to million of dollars,

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there is no way they would be able to compensate us for that.

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THE COURT:

But that sounds like speculation more than

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anything.

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because an injunction in their own mind would potentially

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threaten the existence of a company whose entire reason for

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existence is this technology that they're touting, that this

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must mean they're judgment proof.

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You just are surmising because they're a start up,

MR. MANDEL:

I don't think it must mean, but I think

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it raises a serious question about it such that I think Capitol

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shouldn't be in a position to be forced to take that risk.

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Because when you really look at the respective hardships here,

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the defendant went forward with a business plan where, we

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submit -- and this obviously ties back to the likelihood of

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success -- we submit there is really no colorable offense or

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reason that they are able to do the things that they are doing

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here.

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And the reality of the situation is that they had to

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know that, and they took the risk.

And what Capitol is saying

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is our most valuable asset is our copyrights.

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have to put that at risk while they're in testing mode getting

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an opinion as to whether what they do is valid?

Why should we

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

Wouldn't the

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better thing to do here be to establish that you have some

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possibility of actually having a real defense here?

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THE COURT:

That's sort of setting the standard for a

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preliminary injunction on its head.

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preliminary injunction until they can establish they have a

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likelihood of success in defending.

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MR. MANDEL:

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THE COURT:

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MR. MANDEL:

It says we'll presume a

I'm speaking to the balance of hardships.
I'm asking about irreparable harm.
So beyond just the money damage question,

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I think there is also irreparable injury here in the sense that

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this is being touted and promoted to the public as legal in

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their Web site.

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The whole idea of using a digit marketplace is something that

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we submit is something that is not legally cognizable.

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being out there and creating this confusion in the public mind

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and opening up this Pandora's box inviting people to infringe

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in a similar manner, saying well, if I take steps to delete my

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copy after I do this, I can do this wonderful sale, there's a

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real risk that essentially the infringement is going to be very

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widespread and Capitol will lose control of its assets, its

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copyrights, its most valuable assets.

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They're saying this is a legal alternative.

THE COURT:

And

Dangerous legal theory is a basis for

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establishing irreparable harm?

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MR. MANDEL:

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support.

Untenable legal theory that has no

And that, we submit, ties back to whether we
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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established that we're right, but we think it's pretty clear

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it's not legally supportable.

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confusion in the public mind this is something that is legal,

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that people have the right to duplicate their files, and as

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long as after they submit it --

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THE COURT:

And to be able to create

But do you have authority for this

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proposition?

Public market confusion is people will think this

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is Pepsi, for crying out loud, and it's not Pepsi.

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think this is a legally defensible theory that they're

People will

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operating under, and I can't think that's a case of irreparable

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harm.

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MR. MANDEL:

We haven't had a lot of case law since

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Salinger.

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presumed there was irreparable harm once likelihood of success

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was established in a copyright case.

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of fleshing out of the legal standard.

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a copyright context, given the nature of the injury, the loss

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of control of your property rights.

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We have decades of experience where it was routinely

There hasn't been a lot
You have the history of

The fact that essentially the statutory scheme is

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being turned on its head, instead of having a right to exclude

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people from making reproductions and from using your

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copyrighted material, you are sort of turning it the other way

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and setting up almost a compulsory licensing scheme or some

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kind of statutory exception that's not there.

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that that is unfair and not what is intended in the copyright

So we do think

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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area, because this is intangible property that is very

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difficult to control, and it has a tremendous value that is not

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easy to quantify.

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THE COURT:

I'm sorry to interrupt you.

That's one of

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the benefits of having the robe is I'm able to do that.

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since I'm the fact finder, or at least the decision maker here,

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I apologize.

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time, not maliciously, but because I have a short attention

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span.

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And

So everybody, I will interrupt you from time to

So my question is even outside of the copyright area,

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irreparable harm has to be established for a preliminary

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injunction.

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dangerousness of a legal theory is advanced as a basis for

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establishing irreparable harm?

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MR. MANDEL:

Are you aware of any other authority in which the

I'm not, but I guess I wouldn't say it's

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the dangerousness of the legal theory, what I will say it's the

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unsupportable contention there's right to do something that

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there is clearly not a right to do.

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public about the applicable statutory scheme.

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misinformation about the contributions that are supposedly made

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to the record labels and to the music community and all of

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those things that we think do fall into place in terms of

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establishing irreparable harm combined with just the loss of

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control and the difficulty of quantifying the damage when your

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intangible property right that you have a right to generally

It's misinformation to the
There's

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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exclude others from using is basically being cast aside and

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you're told well, you will stand here and take it at face

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value, that at the end of this, money will be enough.

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THE COURT:

But you're saying that lost sales would

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not be the measure, there are certain people you would not sell

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to under any circumstances.

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MR. MANDEL:

No, I'm saying the danger here goes

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beyond the specific lost sales that may quantifiable.

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may be other infringements that are being encouraged by the

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activity.

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There

public.

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There is misinformation being communicated to the

THE COURT:

But the encouragement of other

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infringement, is that anywhere cited as a basis for

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establishing irreparable harm?

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MR. MANDEL:

I haven't seen it.

I haven't seen it either, but as I said,

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copyright plaintiffs have not had a long period of time where

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they have actually been required to prove much.

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presumed for decades in this circuit and elsewhere that

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irreparable harm is almost assumed.

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Supreme Court said is OK, fine, that has changed, and you can

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no longer rely on that presumption, but we're also not writing

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on a clean slate here.

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existed for 30 years, and it is because of recognizing the

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nature of the kind of injury that's at play when you deal with

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copyrighted intellectual property.

It's been

And I think what the

There's a reason why that presumption

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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THE COURT:

But here we're talking about lost sales

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for which they're getting 39 cents a song and you or your

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licensees would be getting a buck and a quarter.

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me pretty easy to quantify and pretty easy to establish damages

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on, and a money judgment should take care of the whole thing.

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MR. MANDEL:

That seems to

Potentially, assuming there is money to

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withstand a judgment, notwithstanding that they're a data

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company that would be out of business by virtue of a decision

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that their business model doesn't work.

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THE COURT:

But then it's your burden to establish

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that they don't have the wherewithal to withstand the judgment,

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not their obligation to prove they can, right?

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MR. MANDEL:

We think there's significant risk there,

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that you have to look at it in context.

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also a risk that the marketplace in general -- that there will

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be harm beyond that not just from their service but from other

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people who will infringe.

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I have said what I have to say.

And I think there is

I don't know that I

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can add anything to it.

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tradition in copyright cases of granting and presuming

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irreparable harm flows from a natural recognition of the nature

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of that right, and we think that continues to be at play even

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more when you're dealing with a defendant that has no real

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basis to do what it's doing under the law.

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THE COURT:

But we do believe that the strong

All right.

Let's take these one element

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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at a time.

So I'm happy to hear -- who is going to carry the

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ball for the defense, Mr. Rogers or Mr. Beckerman?

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MR. BECKERMAN:

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THE COURT:

I will.

Let's talk about irreparable harm.

If

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they win, as they seem confident they're going to, are you

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going to be -- is there any prospect of your client having any

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assets from which to pay a money judgment?

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MR. BECKERMAN:

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THE COURT:

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I haven't asked them that.

All right.

Why not?

You don't want to

know the answer or you don't think it's relevant?

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MR. BECKERMAN:

The question is whether the plaintiff

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will be made whole of an award by money judgment.

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asked them -- we put in our papers that they keep very careful

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records of every single transaction, so there won't be any

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problem in computing the amount of damages.

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THE COURT:

But that's not my question.

And I have

My question

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is, assuming you're right about quantifying the damages, if

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there's going to be any prospect of them recovering on the

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damages.

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me that might be pretty significant for establishing

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irreparable harm.

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Because if the answer is "not a chance," it seems to

Don't you think?

MR. BECKERMAN:

I have no idea.

The plaintiff has the

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burden of proving that and hasn't shown that.

If that were to

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be a basis for preliminary injunction, then why even come to

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court when you're a small company that doesn't have the kind of
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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money the plaintiff does?

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THE COURT:

It's not --

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MR. BECKERMAN:

What is interesting is everything that

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Mr. Mandel is saying is based on his statements that we

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obviously don't have a defensible legal model.

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were so clear we didn't have a defensible legal model, it's

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unclear to me why he hasn't been able to make out a case of

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copyright infringement.

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THE COURT:

But yet, if it

I'm not sure that I follow you.

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moving from the element I want to focus on.

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We keep

talking about that he hasn't made out a case?

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MR. BECKERMAN:

But what are you

He brings up in the discussion of

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irreparable harm that we have an indefensible legal model, but

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he hasn't been able to show any instance of copyright

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infringement.

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infringes anyone's copyrights.

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There isn't any part of our process that

And his papers are a moving target.

They say -- they

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keep attacking uploads without their permission and downloads

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without their permission, then saying they're not attacking the

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uploads and downloads, they're attacking the sale.

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THE COURT:

I don't think that's a fair

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characterization of his papers.

I think he's saying the

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uploading and downloading that you seem to concede in your

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papers require the kind of copying that the Copyright Act

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prohibits.
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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That's your point, right, Mr. Mandel?

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MR. MANDEL:

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THE COURT:

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Yes, your Honor.
So that's what he's saying.

Whether he is

right is another story, but that's what he's saying.
MR. BECKERMAN:

The uploading and downloading are --

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if they did not have all the verification technology, it will

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still be protected as a fair use.

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downloading is a quintessential fair use.

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after Google raised that concern, they claim they're not

Uploading to a cloud and
And they claimed --

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raising that issue, even though they repeatedly state in their

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motion papers that they repeatedly attacked the uploads and

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downloads.

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Now then on the site itself they falsely claim that

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there's a copy made, but there is no copy made.

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transaction which take place is done without copying, it's done

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with the exact file that's uploaded.

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simply pointed one, the sale transaction takes place, and the

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concomitant transaction, the actual file stays exactly where it

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is, it is not changed, and it is not copied, it's simply owned

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by someone else.

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THE COURT:

The sale

The record locator is

Well, what you said, page 9 of your

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opposition brief, the only copying which takes place in the

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ReDigi service occurs when a user uploads user files to the

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ReDigi cloud, thereby storing copies thereof in the user's

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personal Cloud locker, thereby placing copies of files on his
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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or her computer.

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MR. BECKERMAN:

It's a single file, unique file.

It's

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the same unique file, cannot be uploaded twice.

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not even permitted to be maintained on the user's computer on

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attached devices.

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single instance of a file, and after that single instance is in

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their cloud locker and has passed all the verification tests,

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at the client level and then at the sever level, then it's

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something which is accepted into the cloud locker.

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The software requires it.

THE COURT:

All right.

Plus, it is

So there's a

Again, I want to stay focused

for now on the irreparable harm.

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So you're not sure whether your client has the ability

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to pay a money judgment because you haven't asked.

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suggesting it's plaintiff's burden, and they haven't proven

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that your client can't.

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irreparable harm.

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MR. BECKERMAN:

Right?

But you're

That's your basic argument for

I have not asked any client whether,

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if the plaintiffs were to get a large money judgment, whether

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they will be able to pay it or not.

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in many cases where the defendant did not have money to pay a

21

judgment, but nevertheless assets or income or other items were

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found.

I have collected judgments

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THE COURT:

But you don't know one way or the other.

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With respect to the argument that there are other

25

harms that result that can't be compensated for by a money
SOUTHERN DISTRICT REPORTERS, P.C.
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judgment, your response to that?

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MR. BECKERMAN:

What are they?

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nothing.

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to suppress competition.

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papers about anything but money.

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Records are going to go to bed crying at night?

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Capitol Records will go out of business?

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This is just about money.

There's absolutely

THE COURT:

It's just about the desire

It's got -- there's nothing in their
The shareholders of Capitol
It's absurd.

It's ridiculous.

I don't think that's the suggestion.

I

don't think anybody suggested Capitol Records is going to go

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out of business.

I think the concern is whether or not they

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will be able to collect on a money judgment or whether there is

12

a violation of the Copyright Act that can't be otherwise

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compensated for.

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MR. BECKERMAN:

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violation of the Copyright Act.

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if they were true, would be copyright violations, but they're

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non-existent facts they made up.

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themselves could easily verify but they chose not to and put in

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no evidence by an investigator or anyone like that who would

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claim to have witnessed the contract infringement.

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they have two declarations of attorneys based on peeking at the

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Web site.

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THE COURT:

Which they have shown none, no

All right.

They have made up facts which,

Many of them were facts they

Instead,

You indicate and you have an

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affidavit to that effect, that your client keeps track of every

25

sale they make, and so it's very easy to ascertain the number
SOUTHERN DISTRICT REPORTERS, P.C.
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of sales.

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MR. BECKERMAN:

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THE COURT:

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That's correct, your Honor.

No question about that in your mind,

right?

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MR. BECKERMAN:

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THE COURT:

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MR. BECKERMAN:

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too.

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There is no question about that.

OK.
And they keep records of other things,

through.

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They keep records of every single unique file that passes

THE COURT:

Every unique file that passes through,

what does that mean?
MR. BECKERMAN:

Every file that passes through the

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marketplace.

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and selling count, there's also a record of the exact file,

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because their software is designed to ensure that that file

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never gets sold there again except by the authorized -- the

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true owner.

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So not only is there a record of the buying count

THE COURT:

Well, all right.

into a different element.
With respect to irreparable harm, I think you said
what you plan to say, right?

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MR. BECKERMAN:

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THE COURT:

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25

I think we're drifting

Yes, your Honor.

Is there anything that you want to say in

response?
MR. MANDEL:

Very quickly, your Honor.

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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First of all, with respect to precedent, Salinger

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itself talks about marketplace confusion, so there is some

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precedent.

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is a copyright case.

5

That language actually appears in Salinger, which

THE COURT:

But that's the confusion that somebody

6

will think JD Salinger wrote the darn thing when it is Norah

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Jones that recorded the album.

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MR. MANDEL:

9

There's a recognition there can be other

types of confusion that take place in a copyright context that

10

could bear on whether it's irreparable harm or not.

11

traditionally a copyright interest, the idea of who wrote the

12

work is really more in the nature of a trademark kind of

13

injury, but yet in the copyright context they find that's

14

potentially irreparable harm, irreparable injury.

15

somewhat new, because there frankly isn't a lot of law that

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employs Salinger and looked at what a copyright owner has to

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show, but it's not as if there is no idea for the support that

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that type of injury, that could be irreparable harm.

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THE COURT:

That's not

It may be

But the injury that you are talking about

20

is the same injury that flows from them defending this suit,

21

right?

22

this is legal.

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in their answer, that is going to perhaps embolden or mislead

24

someone to violate copyright law.

25

for irreparable harm, for defending the suit or bringing --

You're saying that's a dangerous thing to be saying
Whether they say it on their Web site or say it

That strikes me as nutty,

SOUTHERN DISTRICT REPORTERS, P.C.
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MR. MANDEL:

Obviously if your Honor didn't find it

2

likely to establish success on the merits, that wouldn't be the

3

case, but I think that we'll obviously talk about that.

4

think once you look at it and make a determination it is likely

5

that we're going to succeed on the merits, I don't think it's

6

crazy at all that somebody should be able to encourage people

7

to infringe by engaging in a model that finds no statutory

8

support and that is unlikely to ever be successful in a

9

courtroom.

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THE COURT:

But I

It seems to me this is really an argument

11

that likelihood of success on the merits equals irreparable

12

harm, when has already been rejected.

13

MR. MANDEL:

But the other point on irreparable harm

14

in terms of monetary -- whether they could satisfy a judgment,

15

obviously it's difficult for us to satisfy that burden going in

16

without any discovery, without an opportunity to know how the

17

copy is capitalized.

18

didn't ask," so he's not in a position to make any

19

representations to the Court.

20

And now Mr. Beckerman is saying today "I

We would suggest that if that really needs to be

21

shown, that maybe we be given an opportunity for some expedited

22

discovery to find out exactly what the level of capitalization

23

here is and what the likelihood is that they really are going

24

to be able to satisfy a potential substantial judgment.

25

that is something -- that's something we couldn't obviously in
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

If

19
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1

our moving papers at this juncture possibly have met the burden

2

on, but there's enough suggestion just in the response

3

saying -- and I think their quote in The New York Times, "If we

4

can't do this, we're out of business," the idea that they will

5

leave money around to satisfy a big judgment I think is a lot

6

for us to take at face value.

7

maybe to have some expedited discovery on that point.

8
9

THE COURT:

So we would like an opportunity

But it seems to me that since this is the

service they provide, to be enjoined from providing this

10

service would almost by definition put them out of business,

11

wouldn't it?

12

and airplane engines as well so that business continues.

13

It's not like they make colas and record players

MR. MANDEL:

They have told us they do storage.

They

14

tried to make the whole defense be about storage.

So

15

presumably they could still do that.

16

motion only deals with Capitol's recordings, it's not going to

17

enjoin them from selling the other labels' recordings.

18

what the other labels decide to do or what deals they may or

19

may not be able to strike with the other labels is entirely

20

open.

21

distribute Capitol's recordings they're out of business.

22

They're out of the business of during the pendency of this

23

trial, until trial, of distributing Capitol's recordings.

24

it is more limited.

25

THE COURT:

But beyond that, this

And

But it's certainly not the case by not being able to

OK.

So

So irreparable harm, I think I have

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

20
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heard what I'm going to hear.

2

Let's now talk about likelihood of success on the

3

merits, which is what I think everybody really wants to talk

4

about.

5

MR. MANDEL:

In terms of likelihood of success, first

6

of all, as your Honor pointed to, we think the admission at

7

page 9 of their brief that basically copying take place to

8

upload to the cloud and download to the locker is really almost

9

dispositive here.

It's an admission there is an act of

10

reproduction.

11

facie right of the copyright owner under 106 to have exclusive

12

rights and not to have others reproduce it.

13

becomes:

14

reproduction to take place?

15

THE COURT:

16

That is in violation certainly of the prima

And the question

Is there some defense that would allow that

They have offered two, fair use of

essential step doctrine.

17

MR. MANDEL:

But when you actually look at the

18

argument on them, they're arguing defending a case that we

19

never brought.

20

supposed resale market for digital music, and that's what

21

sparked the complaint, and that's what we thought we made clear

22

in our papers.

23

in our reply papers we certainly made it clear beyond question

24

as to what the nature of the injury that we're talking about

25

here is.

This case was brought because there's an online

To the extent there was any confusion, I think

So the question is:

Is there a defense?

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

And when

21
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1

you look at fair use, their whole defense on fair use basically

2

presupposes that we're challenging just the mere act of

3

storage.

4

THE COURT:

That's my question to you.

So if someone

5

just decided to store digital recordings that they purchased

6

through iTunes, they wanted to store it in a cloud, that

7

requires copying, according to your papers.

8
9

MR. MANDEL:

Yes.

Right?

And that's not what we're

challenging here.

10

THE COURT:

But why not?

So what is the difference

11

between what is going on here that you are challenging and the

12

hypothetical I just supposed?

13

MR. MANDEL:

Because what is really going on, what

14

their entire Web site talks about, their Facebook page,

15

everything, is a resale market, the ability not to store it,

16

but to sell it.

17

resale.

18

It's stored in the cloud for the purpose of

THE COURT:

But well, it's stored in the cloud, and

19

the process of storage requires a copying.

20

you're saying -- I think you're conceding is not a violation of

21

the Copyright Act.

22

MR. MANDEL:

And that process

For purposes of this case, we're not

23

making that claim.

We're not challenging that.

24

saying is that you can't subdivide what they're doing.

25

they're really saying essentially user A starts out, and he can
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

What we're
And

22
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1

start the copy.

2

file, they can download it because they're taking it from the

3

cloud to their computer.

4

really happened is that file has been distributed, has been

5

transmitted from the first user to the second.

6

So his is fair use.

THE COURT:

User B, who bought the

But at the end of the day, what has

No question.

So I have my little iPod

7

player right here and I have all the great Bee Gees hits, and I

8

decided I'm moving out of the '70s and want to get progressive,

9

so I sell to my law clerk my iPod with all my favorite Bee Gees

10

songs.

11

MR. MANDEL:

That's fine, because you transferred the

12

material object in which the copies are affixed, and that would

13

be a first sale.

14

giving them -- your iPod happens to be preloaded with sound

15

recordings, and that's fine.

16

THE COURT:

And you're not making another copy, you're

But now I'm more technically advanced, so

17

I have it actually stored in a cloud that allows me to listen

18

to the same great numbers through just through different

19

technology, but you're saying I can't transfer any of those

20

wonderful songs to her.

21

MR. MANDEL:

That's correct, and that's the statutory

22

scheme.

23

based on the notion of the actual copy, you can't make a

24

reproduction.

25

And it's really because the first sale doctrine is

THE COURT:

And that's a statutory language question,

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

23
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1
2

or is it a licensing contractual question?
MR. MANDEL:

It's interpretation.

We cite to the

3

Copyright Office Report of 2001, which we think has some very

4

interesting discussion of this whole issue.

5

the origins, it set out a very clear distinction between

6

reproduction and distribution, and the idea was there's a

7

recognition that physical property, that you have a right

8

generally to dispose of that, but not to reproduce it and

9

dispose of a copy.

10

And if you look at

And so it's not just a technical distinction, it is a

11

distinction on which the entire doctrine turns.

12

what we're saying about the reproduction is you can't stand

13

there and pretend that the reproduction is just about space

14

shifting if the whole purpose that you're encouraging and the

15

whole business model that you developed is focused on idea of

16

selling that recording.

17

THE COURT:

And basically,

But what if I stored it in the cloud when

18

I still liked Bee Gee's and decided to sell it later when I

19

decided I don't and I want to recoup some of the investment,

20

you're saying that's violation?

21

MR. MANDEL:

And their technology talks about actually

22

checking something that makes it available for resale, so I

23

think users have the opportunity to actually use their

24

technology, decide when they're offering it for resale.

25

we're saying certainly the point that you do that, you can't
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

And

24
C26TCAPA
1

really say anymore it's just about storage because what you're

2

doing is you're distributing it.

3
4
5
6
7

THE COURT:

But it was about storage at the time I

copied it into the cloud, right?
MR. MANDEL:

It is a hypothetical.

Hypothetically it could have been about

that, but if you look at the business model -THE COURT:

This is -- indulge me on my hypothetical.

8

Are you saying the outcome is different in if I chose to store

9

these things, in fact did store them for my own use for a year,

10

and after a year I decided to move to a new decade and sell my

11

collection?

12

MR. MANDEL:

I think it is different, and the reason

13

it's different is maybe it will be the case that Congress will

14

decide that there's enough reliability in the technology that

15

they have developed and that others may develop that they're

16

willing to extend the first sale doctrine in a way that it can

17

apply in this digital environment and someone can have a

18

broader right to distribute it, but it's not there now.

19

THE COURT:

So that's my point.

My point is you're

20

saying the statutory language is where I ought to go and where

21

I ought to stop, because the statutory language would prohibit

22

what going is on here, even though if I had the CDs or the

23

iPod, I could go to the flea market and sell the darn thing.

24
25

MR. MANDEL:

That's right.

We say the statutory

language, but also the history of the first sale, it's the
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

25
C26TCAPA
1

clear interpretation of first sale that says that you can't

2

make a copy in the context of first sale.

3

together, which the copyright office was looking when they

4

opined on the question, all together saying to us maybe someday

5

maybe there should be a new digital right.

6

that now, and under existing law there is certainly not that

7

right.

8

THE COURT:

All those things

They haven't done

What about your response to the opposition

9

brief which talks about pointers, sometimes like in some ways

10

the language being utilized in the technology being described

11

to differ between the parties so they're almost talking past

12

each other, so talking about a pointer, we're not copying,

13

we're allowing somebody else to, in essence, have the click

14

rights to something that is in the cloud?

15

MR. MANDEL:

I think once again what they try do is

16

break this process down and then OK, pointer, so there's no

17

copying made, so it's just space shifting here, just space

18

shifting here.

19

from one user to another.

20

But as we said in our reply papers, it shifted

THE COURT:

But that happens in flea markets all the

21

time, and that's a time honored right.

But if we're

22

interpreting a statute that predates the technology, why would

23

we interpret it in such a way as to prevent the first purchaser

24

from ever being able to have rights in that or the ability to

25

resell it?

Why would we take that away if we have two choices,
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

26
C26TCAPA
1

you get to make a sale like a flea market owner or --

2

MR. MANDEL:

I think in the first instance we would

3

say that decision would be for Congress to make.

4

Copyright Office went on after, it said there is no digital

5

first sale, it then analyzed should the Copyright Act be

6

amended to provide.

7

no, it shouldn't be.

8

shouldn't be is a congressional question.

9

satisfy it right now, and right now I think that's a function

10

THE COURT:
me.

But ultimately whether it should or
We say it doesn't

I have the statute right here in front of

What provision are you referring to?

13

MR. MANDEL:

14

THE COURT:

15

MR. MANDEL:

16

They decided -- their determination was

of the statutory language and history.

11
12

I think the

Section 109.
What part of it?
109(a), I believe it is, talks about the

right to -- let me take the statute.

17

Notwithstanding the provisions of 106(3), the owner of

18

a particular copy or phonorecord lawfully made under this title

19

is entitled, without the authority of the copyright owner, to

20

sell or otherwise dispose of the possession of that copy or

21

phonorecord.

22

So the whole idea of first sale I think is borne out

23

in all the cases that interpreted it, as well as that it's the

24

particular material object, and the example that your Honor

25

gave is really a good example that illustrated that.
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

If you

27
C26TCAPA
1

have the iPod and you distribute the iPod the recordings are

2

on, then you have distributed that particular copy.

3

If you make a copy and then put it up somewhere else

4

in order to distribute it, it isn't that particular copy

5

anymore that you're distributing.

6

whole essence of the first sale doctrine is that it didn't

7

include the right to reproduction any more than if I had a book

8

or CD that I could photocopy, give the copy to my friend, and

9

then decide I don't want this book anymore, I'm going to throw

And that is basically the

10

the book in the garbage.

That wouldn't be covered by the first

11

sale doctrine, and neither is this.

12

different.

13

THE COURT:

14

copies are material objects.

15

MR. MANDEL:

It's logically no

But in terms on definition of copies, 101,

It turns on the definition of copies and

16

the notion of that particular copy, because what 109 is really

17

saying is that you have a right to dispose of the particular

18

copy if lawfully made.

19

And that's another issue.

We don't think it's

20

lawfully made because if the copy was made for the purpose of

21

distributing it, it's not lawfully made.

22

right to make a copy and distribute it to somebody else.

23

that's another problem under 109, and I think they try to

24

confuse this.

25

interesting in terms of if I store it today and a year from now

You don't have a
So

And I understand the hypotheticals are

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

28
C26TCAPA
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I sell it, but the real marketplace model as presented and

2

promoted as going to make them money is not by a kind of

3

differentiation, it's about:

4

It's happening essentially together.

5

some people that decide to store it there and not sell, that's

6

not what the business model is about.

7

distinguishes them from any other places where they could store

8

them.

9

should sell it because you could put it up there, you earn

10

credits to distribute it, you can sell it to somebody else.

11

And that's their business model, and it turns on reproduction,

12

which is not allowed under the cases and statute.

13

Hey, sell your digital music.
And that there may be

That's what

What distinguishes them is they're telling people you

And also it's not a lawfully made copy because it's

14

not lawfully made.

If it's for purposes of distribution, you

15

don't have a right to copy a copyrighted work to distribute it

16

to somebody else, even if you decided to throw away your work.

17

That's my example with the book.

18

can't give the photocopy to my friend even if I throw my book

19

in the garbage.

20

able to do that.

I could photocopy my book.

I

And functionally, it may seem like I should be

21

THE COURT:

22

MR. MANDEL:

23

THE COURT:

24

MR. MANDEL:

25

THE COURT:

You can give the book.
I could give the book.
And you could sell the book.
I could sell the book.
Basically you're saying the technology

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

29
C26TCAPA
1

created a real great windfall to publishers because they get to

2

shut down secondary markets that previously existed before

3

technology, right?

4

MR. MANDEL:

I don't think so, because I think if

5

you're going to get into the policy question, which I'm kind of

6

avoiding because what I'm saying is the statute speaks to this,

7

it's Congress's province to make those judgments.

8

want to look at the policy point of view, there is enormous

9

risk that the copyright owner is being subjected to here.

But if you

The

10

fact that it's the lead-in for my computer, what assurance do I

11

have that before I have done that I haven't downloaded it onto

12

some other device, that I don't reconnect that computer and I

13

listen to -- continue to listen to the music?

14

THE COURT:

But that aside, there's always been a

15

desire, frankly, to shoot down the swap meets and shut down the

16

secondary markets for CDs and records.

17

MR. MANDEL:

Because oftentimes that marketplace is

18

selling infringing copies and there's illegal bootleg copies.

19

Nobody is saying we want to shut down the right to an album,

20

legitimate CD that I purchased to resell, but not to make

21

copies and distribute en masse copies it.

22

that is a concern to the record company.

23
24
25

THE COURT:

That is something

So you're OK with people selling their old

records and selling their old CDs?
MR. MANDEL:

Absolutely.

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

30
C26TCAPA
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THE COURT:

So if somebody like defendants come up

2

with a way to really verify that the copy has been deleted, you

3

would be OK with telling Congress, sure, we think that

4

previously owned, preowned digital audio files should be able

5

to be sold?

6
7

MR. MANDEL:

I can't speak to what my client would say

in that legislative discussion.

8

THE COURT:

9

MR. MANDEL:

I would be willing to take a hunch.
But my point is they shouldn't have to

10

take that gamble because, first of all, if the technology is

11

proven to that extent, then Congress can enact that protection.

12

We have a real question, because even Mr. Ossenmacher agrees in

13

The Times article if people want to get around it, they will

14

get around it.

15

download it to a different device not synced to the computer,

16

and bingo, you have got around it.

That's obvious you can do that, you just

17

So it's cold comfort to say to my client, don't worry,

18

this is all going to work great and nothing is going to happen,

19

because we know that there's a long history here where people

20

want to infringe.

21

all these cases that have come up going to Supreme Court.

22

There's a lot of effort to sell infringing copies, and asking

23

my client against that backdrop and decades of litigation and

24

experience to take it at face value that people are going to do

25

the right thing, I don't think that's something that they have

We have seen a lot of case law, Napster and

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

31
C26TCAPA
1

to do, and certainly not something Congress said they have to

2

do.

3

made that judgment yet.

If Congress makes that judgment, fine, but they haven't

4

THE COURT:

But yours is a legal argument, and it's

5

not a licensing of contract argument, it's a statutory

6

interpretation argument.

7

MR. MANDEL:

8

THE COURT:

9
10

So it doesn't turn on whether or not the

conditions of buying the audio file were such that the seller
made the buyer promise they won't resell.

11
12

I believe that's correct.

MR. MANDEL:

I don't think that's really critical to

it, no.

13

And should I move on to the essential step doctrine?

14

THE COURT:

15

MR. MANDEL:

Yeah, let's do that, too.
So in terms of fair use, I want to say --

16

I won't go through it, but if you look at the four factors,

17

which they haven't briefed, all they cited is a case under the

18

digital recording act, not even a fair use case involving the

19

MP3 case, and they haven't gone through the four factors.

20

We think the cases that looked, like the MP3.com and

21

Napster decision, when they analyzed fair use in the context of

22

what is really going on is basically copying to be able to

23

distribute digital files, they have really given this defense

24

short thrift, and we don't think it works here by pretending

25

the service is something other than what it is and redefining
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

32
C26TCAPA
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it into component parts.

2

doctrine, it's a rule of reason.

3

approach for the Court to close its eyes to the reality of what

4

is taking place and do this kind of formalistic dissection

5

without really looking at the end result, so we think fair use

6

is not even colorable here.

7

And fair use is an equitable
It would be the wrong

In terms of the essential step, which is really the

8

other step that they assert in terms of reproduction, basically

9

in the first instance we don't even think this is a computer

10

program under the statutory definition, a set of instructions

11

to carry out a result.

12

cited is very clear that 117 of the Copyright Act is all about

13

internal use, and the statutory language there says for no

14

other purpose, it has to be essential to the use and for no

15

other purpose.

16

But even if it is, the case law that we

And the purpose here again is to make a distribution,

17

to be able to transmit to to somebody else.

18

quintessential example of what you can't do under 117.

19

117 is a limited exception that recognizes when you buy a piece

20

of software, in order to use it, you have to technically make a

21

copy.

22

made into my hard drive, if it didn't do that, I couldn't use

23

the program.

24
25

That's the
Because

When I put it in my computer, by definition a copy is

That really has no bearing on what is going on here,
where it's not essential to make the copy to use it, it's only
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

33
C26TCAPA
1

essential if you want to distribute it to somebody else, which

2

you have no legal right to do.

3

the cases that we cited clearly doesn't fall into protecting

4

this kind of use, and I don't believe they even cited a case to

5

the contrary.

6

So the essential step under all

So really the defenses I think are really weak on the

7

law.

When you really look at the case law, they have basically

8

nothing.

9

or essential step work here, and in the end, what we're left

10

with is that they are wishing that there were a right to do

11

something that they don't have a right to do under the law.

12

They're arguing a lot of policy but neither fair use

THE COURT:

All right.

But for essential step, I mean

13

you just conceded, I think, that making a copy is necessary to

14

be able to access and listen to the audio file you purchased,

15

right?

16

MR. MANDEL:

17

THE COURT:

Yes.
So if you have -- I have twins girls, if

18

one of them buys the Bee Gees and the other buys the Beatles

19

and says great, we'll share, we have got one computer, we'll

20

just share and each listen to the other's purchased files, is

21

that a violation then of the copyright law?

22

MR. MANDEL:

No, because it's the same computer and

23

they have each downloaded a particular file that they're

24

listening to.

25

computer.

You can play anything that you want on your

The language of 117 says it's essential to the use
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

34
C26TCAPA
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and for no other purpose, and the case law is very clear when

2

it talks about "for no other purpose" is for internal use, not

3

for an ability to make distributions.

4

THE COURT:

But if the enterprising one to says the

5

lazy one, "I will charge you five bucks and you can listen to

6

the Bee Gees," is she all the sudden going to show up in a

7

copyright case?

8
9

MR. MANDEL:

I think there's a lot of hypothetical

examples, but what is going on, the marketplace reality is

10

about setting up a mechanism by which people can sell to anyone

11

out there in the world.

12

about your sister or anything like that.

13

don't think that anybody is transmitting it to another computer

14

anyway, if they're using the same computer.

15

And I don't think we're concerned
And in that case, I

So the real question is when you set up a business

16

model that is based on distribution and reproduction, how does

17

that fall within 117?

18

think it's a computer program, but if it is under the case law,

19

it is clear under the statutory language that it is not

20

protected by the essential step doctrine.

21
22

And we don't

I don't know if you want me to move on to other than
reproduction.

We have kind of talked about distribution.

23

THE COURT:

24

MR. MANDEL:

25

And it clearly doesn't.

Covers the arts, that sort of thing?
I meant distribution I think we have

already touched upon, so we have talked about reproduction and
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

35
C26TCAPA
1
2

distribution.
The only point I want to make on distribution that we

3

didn't cover, we talked about the defense of first sale, but

4

didn't talk about the question of whether it's actually a

5

distribution.

6

because you're not distributing copies.

7

look at the precedents, basically they made clear courts have

8

not hesitated to say when you transmit electronic files that is

9

a distribution.

They seem to say well, it's not a distribution
And we think if you

In fact, the Supreme Court in Tasini said the

10

sale of copyrighted articles through LexisNexis is a

11

distribution.

12

And as practical matter, if you look at the

13

consequences of that, it would be devastating, it would be open

14

season on copyrighted works if you essentially were saying put

15

it up on the internet, transmit to anyone you want, you're not

16

distributing.

17

saying that's not right, there is a violation of distribution

18

right under the precedents.

19

That can't be right, and courts had no trouble

What they try and say is well, if there's a violation

20

of distribution rights, there must be a first sale defense.

21

But that's not the case, because the point is the first sale

22

talks about that particular copy, and that material object is

23

not what is being sold, there's a reproduction there.

24
25

THE COURT:

That's your point about material versus a

non-material copy.
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2

MR. MANDEL:

Correct.

And I don't know if you want me

to briefly address performance and display as well.

3

THE COURT:

4

MR. MANDEL:

I think I get it from the papers.
I don't think that I need to say much

5

more.

I think I said in my reply papers, again, the cases talk

6

very clearly about streaming clips to people who are interested

7

purchasers.

8

they do.

9

stream.

That's what their tutorial says on the Web site

That is not the same as going to my locker and
That would not be a public performance, and we didn't

10

challenge that.

So again, we're talking at cross purposes.

11

We're not addressing the same thing.

12

THE COURT:

13

MR. MANDEL:

So a link you have no trouble with.
I think what I'm saying is that the

14

individual person in their locker who may own a file we are not

15

challenging their right to play it, but what we're saying is

16

when you stream to interested purchasers anything in these

17

clips for the purpose of enticing them to make a purchase

18

that's not legally authorized in the first place, that is a

19

violation.

20

That is a public performance.

THE COURT:

All right.

But again, let's get back to

21

my analogue world of my Bee Gees recordings CD.

22

flea market and allowed people to listen to my recording, CD,

23

before purchasing, is that a violation?

24
25

MR. MANDEL:

If I went a

Is that a performance?

Is that a public performance?

be if you're playing it in a public setting.
SOUTHERN DISTRICT REPORTERS, P.C.
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THE COURT:

I have a CD player right there with a set

2

of headphones to listen to see if it's damaged or not damaged

3

or see if the --

4

MR. MANDEL:

5

this case, I think.

6

THE COURT:

It's certainly not what is going on in

But why not?

It seems to me that to

7

perform a work means to recite, render, play, dance or act it,

8

directly or by means of any device or process.

9

MR. MANDEL:

It may be that that's a public

10

performance, and maybe we could get into an argument whether

11

that's a fair use purpose of legitimate sale.

12

here it's not.

13

THE COURT:

14

MR. MANDEL:

15

reasons we already discussed.

16

THE COURT:

The truth is,

17
18

Here it would be furtherance of a sale.
Not an authorized sale for all the

So it comes back to, I think, your

interpretation of the Copyright Act and -MR. MANDEL:

It's connected to that.

And I think they

19

rely on a license that says that you can't use their clips for

20

purposes of encouraging infringement, which is exactly what we

21

say is going on here because they're doing it to interest

22

people and make purchases that are not legally permitted.

23

The last point to round out liability, just to briefly

24

mention the DMCA, I think they make a half-hearted defense

25

here, but they don't even really say that they fall under the
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requirements of the statute, they just say our notice was

2

defective.

3

give a notice, so it's kind of -- I don't understand their

4

argument.

Of course, there's no requirement that you even

5

There are three things they're required to show that.

6

They haven't attempted to show that they can satisfy all three

7

of those things to claim a DMCA immunity.

8

directly, they can't establish that they don't have a right and

9

ability to control, and that they don't profit from the

And clearly and most

10

infringing activity because they take a piece of every sale.

11

That's a direct financial benefit.

12

right and ability to control, because that's the whole purpose

13

of their verification engine is to decide prescreen whether it

14

will be offered or not.

15

And they said they have a

The problem with their verification is it's based on

16

an erroneous legal principal that seems to assume they're

17

entitled to make a distribution they're not entitled to make,

18

but they clearly have the ability to control it, by their own

19

admission, and clearly financially benefit.

20

that reason they haven't even argued that they fall within the

21

DMCA immunity in their papers, and they don't under the clear

22

language of the statute.

23
24
25

And perhaps for

So that's all I have to say on likelihood of success
on merits.
THE COURT:

OK.

Mr. Beckerman.

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MR. BECKERMAN:

Your Honor, could I start off by

2

addressing a hypothetical?

3

the hypothetical that you asked Mr. Mandel --

4
5

THE COURT:
she just likes them.

6

Because I want to make sure that

I don't know why she likes the Bee Gees,
Why do you like them so much?

MR. BECKERMAN:

The hypothetical that your Honor

7

addressed to Mr. Mandel about in the flea market letting people

8

listen to it.

9

in the cloud locker except the user, and it would have to --

10
11

That can't go on.

THE COURT:

No one can listen to what's

But you indicated it's a link to some

other authorized site.

12

MR. BECKERMAN:

There are links to the download site

13

with the 30 second clips like they have on iTunes where you

14

sample it.

15

THE COURT:

16

MR. BECKERMAN:

17

Ridio is a licensee of plaintiff.

18

there, we just have the links to audio under our license with

19

Ridio.

20

by Ridio pursuant to the license agreement pursuant to their

21

agreement with plaintiff.

22

But who authorized it?
Well, this is licensed by Ridio, and
And we don't stream anything

Similarly, the artwork is just links that are provided

So I just want to make that clear that that's the only

23

public streaming that goes on, and it's pursuant to license.

24

And it's not on the site at all.

25

THE COURT:

It's not on the site.

It's not in the

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cloud, you mean?

2
3

MR. BECKERMAN:

It's not on the ReDigi cloud at all,

it's just linked.

4

THE COURT:

I understand that from the papers, which

5

is why I think that's kind of beside the point.

6

understand that, Mr. Mandel, or was that your understanding as

7

well?

8
9

MR. MANDEL:

Did you not

That's my understanding of what they have

said.

10

THE COURT:

You're not sure it's true.

11

MR. BECKERMAN:

It wasn't clear to me why Mr. Mandel

12

keeps talking about fair use and essential step, because we

13

only recognized those in connection with the upload and

14

downloading of the storage locker, which he doesn't challenge.

15

He's only challenging the -- we never said the fair use

16

doctrine or the essential step defense has any bearing on the

17

used digital marketplace.

18

completely lawful for completely other reasons.

19

involve any kind of copying.

20

THE COURT:

The used digital marketplace is
It doesn't

Well, let me stop you there.

What you're

21

saying is there's copying done to get the audio file in the

22

cloud, but there's no copying after that.

23
24
25

MR. BECKERMAN:

No copying on the site at all.

The

upload and the download -THE COURT:

I'm not sure that's a distinction that

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necessarily matters, no copying on the site, but if you're

2

enabling or assisting someone else in copying someplace else,

3

then you could be held liable for the infringement, right?

4

least conceivably.

5

MR. BECKERMAN:

At

I will just concede the uploading and

6

downloading is copying, but arguably it's not even a copy under

7

Cartoon Network, but I won't -- I'm not making that point.

8
9

THE COURT:

But just so I'm clear, because in using

Bee Gee's analogies, my technology may be as dated as my

10

musical tastes, but you're conceding copying is necessary to

11

upload into the cloud and copying is also necessary for the

12

purchaser to listen, right?

13
14

MR. BECKERMAN:

For the purchaser, the purchaser after

he purchased it?

15

THE COURT:

Yeah.

16

necessary after that or not?

17

MR. BECKERMAN:

18

THE COURT:

19

MR. BECKERMAN:

Is there a copying that is

There will be a copy in RAM, no doubt.

OK.
But the actual sale transaction

20

involves no copying.

And Mr. Mandel has falsely stated --

21

well, the papers falsely allege in a number of places that

22

there are copies floating around on the site, which is

23

completely false.

24

copying whatsoever, it's just a change in the record locator.

25

And there are various grounds, neither of which is fair use or

And the sale is effective without any

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essential step, for a finding that to be lawful.

2

could find it on alternative grounds, either that under the

3

distribution section, 106, the MP3 files are not material

4

objects, as plaintiffs themselves concede in their papers, or

5

your Honor could say well, even if they were material objects,

6

well, the definition is exactly the same for the first sale

7

exception.

8
9

The Court

So in this particular case I don't even need to decide
the material objects in question, because in this particular

10

case I have a very clear application of the first sale

11

doctrine, because this particular copy has changed ownership

12

without any reproductions being made.

13

within the first sale doctrine.

14

THE COURT:

So it clearly fits

Well, I mean I think what you're arguing

15

is it's sort of a tandem application of essential step and fair

16

use, right?

17
18

MR. BECKERMAN:

No, they have nothing to do with the

sale.

19

THE COURT:

Well, the copying is necessary to get into

20

the cloud all together, right, and so what Mr. Mandel is saying

21

as long as it's for one's own personal use, that's OK, but if

22

it's going really for the purpose of a distribution, that's not

23

OK.

24
25

MR. BECKERMAN:

Well, purposes are going to be

individual to every person.

Like with the Bee Gees, you decide

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you wanted to move into the modern age, you put them there, you

2

were thinking you don't want these cluttering up your computer

3

any more, you played a few just for the heck of it to see if it

4

works and say, you know, you maybe I acted too hasty, and you

5

store them there for a year and then you decided to take them

6

back.

7

actually happens.

8

he's asking you to avoid -- to pay no attention to that

9

technology, disregard that.

10

THE COURT:

Mr. Mandel is trying to ask you to disregard what
The actual physical event that is occurring,

I think there may be a dispute to what the

11

technology is, which I think is foreshadowing what we're going

12

to be talking about with your contemplated motion for summary

13

judgment, because maybe there's some factual disputes that have

14

to be resolved first.

15

MR. BECKERMAN:

There has to be some evidence on this

16

side and some evidence on that side.

17

evidence on this side and some lawyer speculating as to what he

18

thinks may be going on.

19
20
21

THE COURT:

There can't be some

We haven't had any discovery, so there's

no evidence on any side at this point.
MR. BECKERMAN:

He should not have brought a lawsuit

22

without evidence of a copyright infringement.

If there were a

23

copyright infringement, it would have been a small matter for

24

an investigator to open up an account -- and this is what they

25

do all the time, in fact they probably did.

I think it is

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interesting they made a preliminary injunction motion and there

2

was no investigation.

3

they didn't like the information he brought back to them.

4

could you bring a lawsuit without an investigator?

But maybe there was a investigator and
How

5

If the investigator could show that some law was being

6

violated, that a copy was being made, contrary to what we said,

7

if he could show there is public performance or if he could

8

show there was unlawful copies littering the place -- the

9

likely claim is it is completely fabricated by the attorneys --

10

where is that evidence?

11

bringing a lawsuit instead of terrorizing people in the first

12

place.

13

THE COURT:

There has to be some threshold for

I think we're getting ahead of ourselves

14

here.

15

to be premature because we have had no discovery at all, and at

16

this stage of a case, nobody is expected to be basically

17

attaching affidavits and asking the Court to resolve disputed

18

issues of fact.

19
20
21

I was suggesting that the summary judgment motion seems

MR. BECKERMAN:

I have a very strict policy, if Court

tells me a motion is premature, I don't make it.
THE COURT:

But right now we're talking about the

22

preliminary injunction motion, and it seems to me what

23

Mr. Mandel is saying is that there is a copying, and it's

24

copying for the purpose of a sale.

25

is a copying, but it's a necessary first step for the purchaser

And you're suggesting there

SOUTHERN DISTRICT REPORTERS, P.C.
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to listen, but the sale itself doesn't involve any copying.

2

That's really what -- I think each of is characterizing what

3

goes on here slightly differently.

4

with legal theories, not surprisingly, perhaps.

5

It also happens to coincide

But what Mr. Mandel said a moment ago is if you had a

6

book and you made copies in the book for your own use, that

7

would be one thing, but if you sold the photocopies of the book

8

to somebody else, that would be an infringement.

9

with that?

10
11

MR. BECKERMAN:

THE COURT:

13

MR. BECKERMAN:

14

THE COURT:

Right.

So I think it's --

I wasn't sure if it's OK to make --

I said it's a matter of which analogy one

chooses for this different and unique technology.

16
17

If you sold copies of the book, that

would be an infringement.

12

15

Do you agree

MR. BECKERMAN:

We're not selling a copy of the file,

we're selling the actual file.

18

THE COURT:

I think what you're suggesting is you're

19

selling access to a file, right, that's in a cloud, and the

20

process of putting it in the cloud is an essential step for the

21

user.

22

cloud, which might entail a copy, is a necessary step for the

23

purchaser to listen, but they're essential.

24

what you're arguing?

25

The first user and the process of accessing it in the

MR. BECKERMAN:

Is that really

We don't access a separate thing, we

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sell title.

2

business model with iTunes is because iTunes sells the title to

3

the MP3.

4

One of the reasons that we started out this

THE COURT:

But if I had a whole bunch of books in my

5

library and I decided who needs this, I could hang stuff on my

6

walls if I didn't have these book cases, so I'm going digitize

7

every book in my library and I could put it in the cloud, are

8

you suggesting that I could never sell those books, the digital

9

versions of those books to someone else?

10

MR. BECKERMAN:

11

THE COURT:

12

MR. BECKERMAN:

No?

No.
Why not?

What's the difference?

Well, in this case, we have gone --

13

we're doing something which is lawful and which they don't

14

challenge, which is enable people to store it.

15

Secondly, we have --

16

THE COURT:

But can I interrupt you?

Are you

17

suggesting that the first step of digitizing my books and

18

storing in a cloud would in of itself be a violation of

19

Copyright Act, for my own use?

20

MR. BECKERMAN:

I'm not aware of a precedent for it,

21

but I would imagine it would probably be a fair use just like

22

the fair use of an MP3 file.

23

THE COURT:

24
25

But you're suggesting selling it from the

cloud would be an infringement, right?
MR. BECKERMAN:

Well, you still have the book in your

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book case.

2

THE COURT:

I have got rid of all the books.

3

MR. BECKERMAN:

4

THE COURT:

5

MR. BECKERMAN:

6

THE COURT:

Well, a ReDigi user --

I had a bonfire.
Well, you had it.

I had digitized all my books, put them in

7

my cloud, and then burned all my books and put up paneling so I

8

didn't need the book cases.

9

disputing that I could go look at my digital books without

Are you saying -- you're not

10

violating the Copyright Act, right?

11

that?

You're saying I can do

You think about that.

12

Mr. Mandel, can I do that?

13

MR. MANDEL:

14

THE COURT:

No.
You're saying I can't do that.

But I

15

could make photocopies and leave them -- I could make a copy of

16

the chapters or things that I want to use for my term paper.

17

MR. MANDEL:

I don't think there's a case that

18

actually addressed it.

I think you would have to look

19

factually at each situation.

20

if you were making the copies for your own personal use.

Arguably it would be a fair use

21

THE COURT:

22

Do you know what real estate costs in Manhattan?

23
24
25

Yeah, my own personal use.
I

don't want books all over the place.
MR. MANDEL:

I think the problem here -- I don't think

we actually do have a factual dispute.

Their papers

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acknowledge that a copy is made.

2

understand is there is no copying in the resale, but you

3

couldn't have a resale without the copy.

4

There would be no marketplace.

5

resale but for the copy, because you wouldn't be able to take

6

the pointer and point it from A to B.

7

a very formalistic and not appropriate way to look at it,

8

particularly where you've gone out and marketed your whole

9

service as being based on a marketplace, that's how you make

10
11

What I really don't

That's the point.

There would be no possible

So it seems to me to be

your money, you take a cut of sales.
Now for legal purposes, we're saying it's just

12

storage, I'm just storing it, and there's no copying.

13

there's no copying, you wouldn't be able to have a marketplace.

14

Of course there's copying.

15

these defenses you can look at in that kind of isolated way

16

where you don't actually look at what is happening.

17

Well, if

We don't think fair use or any of

On these facts before the Court, based on what

18

defendant has done and how the marketplace is set up, how it's

19

trying to make money, clearly the copying is being done for an

20

improper purpose.

21

in some other clothing because maybe that would be a fair use,

22

but that's not what we have here.

23

And they're trying to kind of put themselves

THE COURT:

I'm curious about the consistent

24

application of law in different hypotheticals.

25

instructive for me.

It's certainly

So I know you don't want to indulge me in

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these, but it seems to me if a pure storage cloud marketed

2

itself for that purpose to a user who has got scads of digital

3

recordings, then that user were to try and they bequeath their

4

access to their files to somebody else, could they do that?

5
6
7

MR. MANDEL:

I don't know.

I would have to think

about that.
THE COURT:

Well, we're on Mr. Beckerman's time now

8

anyway, so I wanted to give him a chance to think about my

9

hypothetical.

10

MR. BECKERMAN:

I'm not a hundred percent sure that

11

digitization of a book is -- I don't know that it's not a

12

violation of reproduction right.

13

speed on that issue.

14

THE COURT:

15

MR. BECKERMAN:

I really am just not up to

OK.
I don't know.

The difference between

16

a book and these iTunes files is that each iTunes file has very

17

specific unique identifier.

18

copies are bought of the same song, every single unique file

19

has an a different identifier; it has a different purchase

20

date, it has a different purchaser, and it has the UITS, in the

21

later versions of it, which is a unique encrypted code, which

22

is going to be different for every single one.

23

only -- there can only be one of that unique file.

24
25

So even if a million different

So there is

There can be multiple instances of it with unlawful
copying or even with lawful copying, but we have gone the extra
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mile by having software which searches your computer and any

2

attached devices and any devices which come later at any future

3

time, all which have are designed to prevent you from having

4

any additional copies of that file.

5

tremendous service to the recording industry because it's

6

telling people that have related copies that's not the same.

7

They might think it's the same, but it's not the same because

8

they can't resell it.

9

market value.

I think it's doing a

Whereas, this can be resold, it has a

10

THE COURT:

11

Did you want to respond to any other points of

12

I think I understand that point.

Mr. Mandel?

13

MR. MANDEL:

14

THE COURT:

15

respond to points you made.

16

If I could briefly.
I'm asking Mr. Beckerman if he wants to

MR. BECKERMAN:

He's talking about us making

17

half-hearted defenses.

The thing is, we had 20 pages and we

18

had about six and a half days to put it all together.

19

write a brief on this.

20

sophisticated lawyers, that this was an obvious DMCA case.

But

21

we chose to emphasize the things that say this isn't legal.

If

22

they had given a proper DMCA notice --

I could

It seems to me, to all us of us,

23

So Mr. Mandel, shoot me, I'm sorry, but --

24

THE COURT:

25

could tell you.

Don't do that, that would be illegal, I

As a former criminal lawyer, I know.

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MR. BECKERMAN:

As far as essential step and fair use,

2

Mr. Mandel says we are using fair use as a defense on

3

distribution, which we didn't, as opposed to spending more time

4

in our brief on these subjects.

5

lawyer stood up before the United States Supreme Court and says

6

space shifting is OK.

7

should I analyze all the factors?

8
9

THE COURT:

Why should we?

Their own

Why should I make a big deal?

Why

Because I think the issue -- well,

Mr. Mandel can respond to his own --

10

MR. BECKERMAN:

I am speaking to an incredibly hot

11

bench, so I don't feel I need to go repeat everything in my

12

papers.

13

THE COURT:

14

inviting, like a nice bath.

15
16
17
18

Hot I think is sort of -- warm, warm and

MR. BECKERMAN:

If your Honor has any questions, I

have nothing further.
THE COURT:

I may have some other questions after

hearing from Mr. Mandel.

19

Did you want to respond?

20

MR. MANDEL:

Briefly.

First of all, I want to clarify

21

in terms of there being a violation, we did put in evidence in

22

the declaration.

23

we found on the ReDigi site offered for sale.

We did ourselves

24

download and verify they were our recordings.

I didn't think

25

what was what the dispute was about.

We attached an exhibit of the recordings that

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They set up their marketplace to be able to sell

2

lawfully purchased copies.

I don't understand them to be

3

disputing that Capitol's recordings have been made available

4

and have been offered for sale.

5

As we said in our papers, we gave a hundred -- more than a

6

hundred examples of our recording that we own copyrights for

7

that were up there in the cloud that are available for sale.

8

And in fact our people -- Capitol downloaded them and verified

9

they were the song.

And in fact they have been.

They didn't come back -- and they say they

10

have all these recordings, they didn't say that wasn't Capitol

11

recordings, we never had Capitol's recordings up there.

12

don't think there's a serious -- they say there's no proof of a

13

violation, but that's a very clear.

14

issue.

I

The issue is a legal

15

And I understand the hypotheticals are very

16

interesting, and we have been doing it ourselves all week, and

17

they're hard, and they're informative, and I do appreciate why

18

the Court is doing it and pushing us.

19

day, I do want to return to what really is at issue here,

20

because that's ultimately what we're deciding.

21

return to the same thing, you can't set up a business model

22

that is effectively going to make money from distribution of

23

digital files which could not take place without a

24

reproduction -- by their own admission, there's a necessary

25

step in order to do that -- and then turn around and defend it

But at the end of the

And I just

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by some well, you know that's just space shifting, even though

2

we assume that most of what takes place on the site is sales.

3

That's what they're in business to do, that's what they're

4

doing to make money.

5

may be an isolated case of someone who decides to store up

6

there and doesn't do anything, but that's not what they're in

7

business for.

8
9

That's what they advertised.

Yes, there

That's not what most people are going to do.

In fact, what should be enjoined is the sale, and it
seems like they have the mechanism because their own system

10

says you have to click a button to offer it for sale.

11

far as Capitol is concerned, with respect to its recordings,

12

that button should not be available.

13

to go up in the cloud and click a button and say I'm selling

14

stuff that they don't have a right to sell that they reproduce.

15

Well, as

People should not be able

So from our perspective, while the hypotheticals are

16

interesting, while the technology may be new, the principles

17

are pretty clear, and we think it's a pretty clear violation in

18

terms of summary judgment.

19

many factually disputed issues.

20

likelihood of success on the merits.

21

judgment is going to be inappropriate for the defendant.

22

THE COURT:

I don't think there's going to be
Obviously, we think there's a
By definition, summary

I guess the other factors which I think

23

you touched on, Mr. Mandel, with respect to a preliminary

24

injunction or balancing of the equities and public interest, so

25

I think you've hit each of those.

If you wanted to elaborate

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2

in any way, I will give you a minute.
MR. MANDEL:

I will say briefly I think with balance

3

of hardships we cited a couple of cases, particularly in our

4

reply brief, that I think are worth taking a look at.

5

them quotes a Southern District case where they're talking

6

about balance of hardships.

7

hardship when you're engaging in an activity that you shouldn't

8

have been doing in the first place and roll out in testing mode

9

a service that basically is based on something that cannot be

One of

We're not going to worry about the

10

justified under existing law.

11

that is something that you should have to bear the risk on.

12

You can't turn around and say it can be a real hardship.

13

You have taken your risk and

In terms of public interest, we say the public

14

interest in upholding the statutory scheme that has clearly

15

defined principles for what is and isn't appropriate is

16

obviously served by an injunction.

17

THE COURT:

18

MR. BECKERMAN:

19

THE COURT:

20
21

Mr. Beckerman, do you want to respond?
Well --

Those two, the balance of equities and the

public interest.
MR. BECKERMAN:

It's obvious that this is not about

22

public interest on Mr. Mandel's part, it's about the private

23

interest of the corporation.

24

public is better off with competition, with new companies

25

developing, new technologies, and relying on old principals of

And it's very obvious that the

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law and working hard to avoid copyright infringement and to

2

prevent copyright infringement to make sure their site can't be

3

used for infringement.

4

THE COURT:

Or that whose site can't be?

5

MR. BECKERMAN:

6

copyright infringement.

7

application.

8

are meant to create a one-to-one relationship of the unique

9

file, so that it makes copyright infringement impossible.

ReDigi's site cannot be used for
Their software on the client

There is software on the server.

All of these

If

10

you are using the ReDigi system, there's no way it can be used

11

to infringe copyright.

12

THE COURT:

If you copied a file onto some other

13

device, you're saying that ReDigi's software, its server is

14

able to determine that so that the seller can't have saved the

15

original someplace else?

16

MR. BECKERMAN:

ReDigi does not have super powers to

17

monitor the entire universe, it has the power to make sure that

18

its software and its site cannot possibly be used for copyright

19

infringement.

20

infringement not using the ReDigi system, ReDigi can't stop

21

them.

22

on it, the ReDigi system will find it -- not that song, that

23

unique file, if there's a copy of that unique file on there.

If someone wants to commit a copyright

But if they ever plug in the device that has that song

24

THE COURT:

In the cloud.

25

MR. BECKERMAN:

No, on the client's application, too.

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THE COURT:

Well, if I have two computers and I have

2

downloaded a bunch of audio files from iTunes on the computer,

3

then I burn copies to a CD or to another computer, and then I

4

try sell -- upload into the cloud and then sell what was on the

5

computer A, are you telling me that your software is going to

6

be able to tell you that hey, wait a minute, that guy burned a

7

copy?

8

MR. BECKERMAN:

9

THE COURT:

10

Absolutely.

Absolutely on the sever level?

MR. BECKERMAN:

The software searches the entire

11

sever, and if there's any unique file that has ever gone

12

through their marketplace and is in the hands of someone who is

13

not the actual purchaser, they will pick it up and they will

14

force that account to cancel.

15

THE COURT:

16

MR. MANDEL:

Is that your understanding, Mr. Mandel?
No.

Because I think in the hypothetical

17

we're assuming you don't load to a device -- that you never

18

connect back to the computer.

19

it may seem all perfectly fine because it's not showing up that

20

you have made a copy and it's been deleted from the computer

21

that you reconnected to ReDigi, but it's sitting on another

22

computer has never been connected to ReDigi.

23

THE COURT:

24

MR. MANDEL:

25

MR. BECKERMAN:

As far as ReDigi is concerned,

That's what I don't know.
I don't know how it could.
I said we cannot police everything, we

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can only police the ReDigi system.

2

that file could ever be sold on the ReDigi marketplace because

3

they have a record of every single unique file that went

4

through that sale process.

5

THE COURT:

And there's no way that

But I don't -- maybe the principal concern

6

is not somebody selling multiple times the same audio file, the

7

concern is somebody selling all their audio files but keeping

8

the same audio files so they have retained and sold at the same

9

time.

10

MR. BECKERMAN:

If they never plugged in the other

11

computer, and if they did it with software that wasn't ReDigi

12

software and never plugged into the ReDigi software, then yes,

13

how would they ever know about it?

14
15

THE COURT:

But that's their principal concern, it

will be Napster with an in-between step, right?

16

MR. MANDEL:

Yes.

17

MR. BECKERMAN:

It's the same with CDs, it's the same

18

with audio cassettes, people can infringe copyright, but ReDigi

19

has nothing to do with it.

20

ReDigi software and plug in a storage device that has the song

21

that's gone through -- a file that's gone through there before,

22

it will pick that up on the client level, and then there's a

23

server-wide search and rejects it.

24

and it will not accept it into the cloud.

25

THE COURT:

ReDigi prevents it.

If you use

It calls it a violation,

Along those lines then, Mr. Mandel, if you

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own any CDs and I download them, I copy them all, in turn

2

convert them to digital files that I put in a cloud or don't

3

put in a cloud, I put them somewhere else and sell my CDs, is

4

that a copyright infringement?

5

MR. MANDEL:

No, technically you could do that.

You

6

may be committing an infringement by making the copy possibly

7

because --

8

THE COURT:

9

MR. MANDEL:

10

THE COURT:

11

MR. MANDEL:

That's what I'm asking.
You're asking if a copy is -Is making the copy an infringement?
I think if you're making it for purposes

12

of being able to keep something that you are actually trying to

13

sell but keeping, I think it will be a violation.

14

that the problem in the digital area is particular because of

15

the ease with which these files can be reproduced because the

16

whole history of that.

17

that in this area the problem is particularly acute, and I

18

think that the risk we're taking in the kind of hypotheticals

19

is too great to bear that risk, and certainly where the law has

20

not at this point set up any defense that allows it.

21

Congress is comfortable that the technology is so good or the

22

right to do this is so important, it can recognize it, but it's

23

not there at this point, and we think there are real questions

24

about the technology, because there are ways around it so

25

easily.

But I think

We're dealing with the decades of cases

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THE COURT:

OK.

2

MR. BECKERMAN:

You wanted to say something?
Just what he says is absolutely

3

correct, which why they should be embracing the defendant

4

instead of suing them.

5

of the action.

6

that says well, ReDigi software, they say they do this and they

7

say they do that, but that can't be possible because we have

8

been trying for ten years to do that, so it's a ludicrous

9

statement on their part.

They want to make sure they get a piece

There's a moving declaration for Mr. McMullan

But the thing is ReDigi is doing

10

something that they should have been doing and actually helps

11

their industry.

12

harm is just that.

13

So all this nonsense about the irreparable

THE COURT:

I'm not sure I have to get into whether or

14

not something helps the industry or not, but it is interesting.

15

I'm going to -- why don't we take a break for a minute

16

five minutes or so.

I'm going to think about what you said and

17

decide whether I want to rule now or whether I want to reserve.

18

So let's take five, you can use the restroom, get a drink of

19

water, and the court reporter may take a drink of water because

20

the poor man has been working every minute.

21

(Recess taken)

22

THE COURT:

So thanks.

23
24
25

I think I'm prepared to rule.

We have had

almost a couple of hours of argument.
I want to thank the parties for their papers and also
for the argument.

It was very helpful.

Obviously a lot of

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time and preparation went into it, and it's always appreciated

2

by me.

3

focused on the issues, so I thank those who spoke and those who

4

were involved in the preparation, and that might be more than

5

the lawyers at the tables.

I rely on lawyers who educate me and help me get

6

I think there's no doubt what the standard is here.

7

The standard, which I think each of you has quoted to me, is

8

the eBay v. MercExchange case from the Supreme Court.

9

that case the Second Circuit sort of revised its own standard

After

10

but said there's really no difference between that standard and

11

the Supreme Court standard, and I think that's true.

12

The key issues really are irreparable harm and

13

likelihood of success on the merits, or short of that,

14

whether -- this was the point made in plaintiff's papers --

15

even if there's not likelihood of success on the merits, that

16

there is a close or a serious question on a balance of

17

hardships that tips in favor of the moving party.

18

other issues that we talked about include the balance of

19

equities and the public interest.

20

And then the

In this case, I think the lack of irreparable harm is

21

one that really is the issue that causes me to deny the motion.

22

It seems to me that money damages should be able to take care

23

of all of this.

24

what the standard is, and the fact is that this is an

25

extraordinary remedy, and so a Court will have to consider

The Second Circuit in Salinger made very clear

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whether or not monetary damages are inadequate to compensate

2

for the injury alleged.

3

In assessing that, the Court has to look to whether

4

market confusion exists or whether there's a prospect of

5

difficulty in proving the loss of sales due to infringement.

6

think with respect to market confusion, I really don't think

7

that the market confusion being argued by plaintiffs here is

8

what is at the heart of demonstrating irreparable harm.

9

fact that defendants have espoused a legal theory or defense

I

The

10

both in their papers to the Court and on their Web site and in

11

public pronouncements doesn't really equate to the kind of

12

market confusion that the Second Circuit was talking about in

13

Salinger.

14

With respect to the difficult prospect of plaintiff

15

proving loss of sales due to infringement, I think the

16

defendant clearly argues that it keeps careful records, and

17

that if it were found to be infringing on plaintiff's

18

copyrights, there would be a record from which to calculate

19

damages.

20

that's the case.

21

irreparable harm that would merit the extraordinary relief

22

sought here.

23

I have seen nothing to refute that, and I'm persuaded
So I think there has not been a showing of

I think likelihood of success on the merits is

24

something that plaintiffs have demonstrated.

I should bear in

25

mind or at least repeat what the lawyers already know, which is
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that that doesn't mean that I'm finding that the plaintiffs

2

would win in this case, it's just that they have demonstrated

3

that there are arguments that on their face look to be

4

compelling or potentially persuasive arguments.

5

certainly done a good job of articulating those based on the

6

statute, which I think covers that element.

They have

7

The balance of equities I think is kind of a push.

8

think each side has interests that would be affected by the

9

ruling on a preliminary injunction, and each interest is a

10

significant one.

11

the Court were to begin a preliminary injunction, that would

12

have a devastating impact on the company.

13

the plaintiffs have an interest that its copyrights are

14

protected and enforced.

15

I

in the preliminary injunction that's being sought.

16

By virtue of the size of the defendant, if

By the same token,

So I think each has a strong interest

And as to the public interest, I think obviously the

17

public has an interest in seeing copyright law enforced.

On

18

the other hand, that copyright law includes recognitions of

19

things like legitimate secondary markets and the ability of

20

owners to resell their items.

21

So I think we've had a preview of what the arguments

22

are on those fronts, and I think ultimately that's where this

23

case will be resolved.

24

going to grant the preliminary injunction.

25

hasn't been irreparable harm established.

I'm not resolving it today.

I'm not

As I said, there

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But I do think with limited discovery we should be

2

able to get this teed up for summary judgment or a trial

3

perhaps even on stipulated facts if the parties can get there,

4

then we should try to resolve this as quickly as possible.

5

There's no reason why the courts have to be slow and have to be

6

cumbersome or costly, for that matter.

7

parties really are in agreement about most of the facts that

8

are pertinent to this case, I think stipulating to those facts,

9

identifying where there may be some disputes factually, that

If it is the case that

10

should then be the focus of discovery and will be an efficient

11

use of time.

12

So what I will do -- well, let me move to the second

13

contemplated motion, the motion for summary judgment.

14

that's premature at this point because it's not clear to me

15

that there are wholly undisputed facts.

16

I think

Now the parties seem to push back on me a little for

17

that one to suggest there are maybe fewer disputed facts than I

18

imagine.

19

for now, I think it would be premature to make that motion.

20

But I say that without prejudice to either side coming back to

21

me soon with premotion letters saying now we're ready to go,

22

and explaining what the disputes left are.

If that's the case, let's get it teed up quickly, but

23

MR. BECKERMAN:

24

THE COURT:

25

For the record, we withdraw.

The letter?

There's no offense taken.

You don't have to do that.

I don't mean to suggest that.

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That's just the way I see it.

2

So what I was going to propose is that I give the

3

parties maybe a week or ten days to confer and get back to me

4

with a discovery schedule that should track in general terms my

5

contemplated case management plan.

6

a look.

7

one-size-fits-all approach, it's the generally accepted version

8

that I use.

9

unique and that should require a tailoring of the case

It's on the Web site, take

And that's not designed to be set in stone, it's not a

If there are things about this case that are

10

management plan, I'm open to that.

11

to be practical and responsive and ultimately concerned about

12

the efficient resolution of disputes.

13

I mean I think courts have

So take a look at it, and then if there are things

14

that you agree should be tweaked, let me know that, and if you

15

think there are things about which you disagree, where one of

16

you thinks that a tweaking will be in order and another thinks

17

that tweaking would be counter productive, set that out in a

18

letter that explains your positions.

19

But do you think ten days is enough time?

20

MR. MANDEL:

21

MR. BECKERMAN:

Yes.
Your Honor, Ty and I have three days

22

of arbitration during the next five or six days, so I would

23

appreciate if we could possibly have a little longer time in

24

which to do that.

25

THE COURT:

I don't think it will take too long.

SOUTHERN DISTRICT REPORTERS, P.C.
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take a look at my template.

It's basically saying when you're

2

going to do interrogatories and document requests, when you're

3

going to do depositions, when you're going to wrap up fact

4

discovery, and whether you'll have experts and when you'll

5

finish that up.

6

onerous.

7

the parties.

8

completely engaged in something else that might make it hard

9

for you, does two weeks make a difference?

So take a look at it.

I don't think it's too

It will require a little bit of communication between
By design it requires that.

10

MR. MANDEL:

11

THE COURT:

So if you're

That's fine, your Honor.
Two weeks from today is the 20th, that's a

12

Court holiday.

But what I'm asking you to do is send me, via

13

email to my chamber's email address, the case management plan,

14

proposed case management plan, and any correspondence that

15

requires me to resolve any disputes.

16

you send me through email I will get in real-time.

17

fine, so we don't need to worry about the Court holiday.

So I'll be here, and what
So that's

18

Is there anything else we should cover today?

19

MR. MANDEL:

20

THE COURT:

21

MR. BECKERMAN:

22

THE COURT:

I don't think so, your Honor.
Mr. Beckerman?
No, thank you, your Honor.

Let me again thank you.

I found it very

23

interesting and very well argued, so maybe that's why I kept

24

you all as long as I did.

25

their trade.

I like to see good lawyers plying

I will issue a very short order that just
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memorializes the result here, but mostly just rely on what I

2

said on the record.

3
4

If you need a copy of the transcript, you can take
that up with the court reporter now or later through Web site.

5

MR. MANDEL:

6

MR. BECKERMAN:

7

THE COURT:

8

Thank you, your Honor.
Thank you, your Honor.

Thanks very much, have a good day.
o0o

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SOUTHERN DISTRICT REPORTERS, P.C.
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