Hearing Transcript

in MGM et al. v. Grokster et al. (Mar. 4, 2002)

[cover pages elided]



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3 (COURT IN SESSION at 1:30 p.m.)

4 THE CLERK: Item number 11, CV 01-8541-SVW, Metro
5 Goldwyn Mayer studios, et al versus Grokster, Ltd, et al.

6 I would like to remind you, due to the number of
7 attorneys, please identify yourself when addressing the
8 Court.

9 THE COURT: I assume everyone has made their
10 appearance with the clerk; is that correct?

11 (COUNSEL RESPOND: Yes, your Honor.)

12 THE COURT: Okay. You may all be seated.

13 Let me just tell you that I don't think a lot is
14 going to happen today. That's not a good way to start an
15 argument, I guess.

16 I think the motion for partial summary judgment is
17 premature. And the other matters are mostly procedural and
18 mechanical. I mean, everyone agrees that the issues seem to
19 be the same with the three cases. There appears to be no
20 opposition to consolidate the cases for discovery and
21 pretrial motions and probably the trial if it gets to that.

22 Let me tell you why -- and I'll hear from you. I
23 don't want to prevent you from giving me some understanding
24 of where you think case is going because this is also a
25 status conference as well as a hearing on the motions.


1 The defendant, which is the defendant that made the
2 motion, Music City?

3 MR. BRIDGES: Yes, your Honor, Streamcast Networks
4 and Music City Networks.

5 THE COURT: The reason I think the motion is not
6 appropriate to be heard, at this time, is that you have
7 essentially reformulated the plaintiff's position in the
8 case in a way that seems conducive to your motion.

9 In other words, I don't think the plaintiff is saying
10 that the -- maybe they are, and I'll invite some comment --
11 that the mere selling of this software contributes to
12 copyright infringement. I think what they're saying is that
13 the involvement of the defendants is much more extensive
14 then the -- well, first of all, you don't sell it, you give
15 it away, as far as I know.

16 Incidentally, in preparation for this hearing, I hope
17 it doesn't disqualify me, I have never done this device and,
18 you know, my law clerks are much younger than I am, so I
19 wanted to see how this works so I tried it. It works. I
20 got some nice music.

21 Since I'm a music lover, I hope this doesn't
22 disqualify me because now I see there's all sorts of avenues
23 of opportunity out there.

24 But in any event, getting serious because I realize
25 this is a very serious matter. A lot is at stake. I think


1 the plaintiffs are saying that it isn't just the
2 availability of this software, it's many other things;
3 operational and otherwise, that the defendants do which
4 makes them contributorily liable.

5 And then, of course, there's also the question of
6 -- and that needs discovery -- and then there's also the
7 question of whether the software has non-infringement uses
8 as in the Sony case.

9 And I did look at the other cases that were brought
10 to my attention, the RCA case in the Southern District of

11 New York in 1984 and the general audio-video cassettes case.
12 And it's just my view that there wouldn't be a whole lot
13 served by ruling on the partial summary judgment, at this
14 point. So before I definitively decide not to do that, why
15 don't I give each side a few moments to give me their best
16 position on the issues.

17 MR. BRIDGES: Thank you, your Honor.

18 I'm Andrew bridges, representing defendants
19 Streamcast Networks and Music City Networks.

20 I respect and understand the views of the Court that
21 you've just expressed. Our view is that plaintiffs very
22 much want, as part of a broad attack on everything connected
23 with the defendants, plaintiffs do want to stop distribution
24 of the software. And they -- whether they challenge other
25 aspects of defendants' conduct or not, it's clear that they


1 want that.

2 Now, I acknowledge that the Leiber plaintiffs said in
3 their opening papers that it's not about enjoining
4 distribution of the software.

5 THE COURT: The Leibers, are they the songwriters?

6 MR. BRIDGES: That's correct, your Honor.

7 And the plaintiffs have characterized this motion as
8 a strawman. It is vital, your Honor, that we understand, as
9 this case goes forward, what is and is not left on the table
10 to be decided. And we believe that there's going to be a
11 lot of discovery, a lot of focusing on various alleged
12 activities by the defendants.

13 But we do believe, and the Napster case in the Ninth
14 Circuit points this out, we do believe it's important to
15 distinguish between the product, itself, which has a
16 capability of substantial long infringing uses.

17 That product, itself, and its distribution can be put
18 on one side as the Napster case did, as the Ninth Circuit
19 did in the Napster case; put the architecture of the system
20 and the Napster software on one side and focused on the
21 other alleged activities.

22 This, your Honor, has the potential of being a very,
23 very big case. There are a lot of plaintiffs. There are a
24 lot of lawyers. There are a lot of copyrighted works at
25 issue and there are a lot of users of the software. We're


1 trying to narrow it so that the case as a whole becomes more
2 manageable by insuring that among the many things at issue,
3 the capability of the software for non-- for substantial
4 non-infringing uses is established and that the distribution
5 of the software is protected against liability for
6 contributory copyright infringement. We think that would
7 make the difference to the case management.

8 We believe that the case law -- the Sony case made it
9 clear. We think the Napster case especially made it clear,
10 the way the Ninth Circuit did distinguished between product
11 and conduct. We do believe that we can carve that issue out
12 from the case, be done with it, and then focus on the other
13 things that the plaintiffs allege.

14 If the plaintiffs truly say it's not about
15 distribution of the software but it's about all these
16 activities that defendants are alleged to engage in; it's
17 about all these services; those are still at issue and would
18 be appropriate for discovery and other pretrial matters and
19 eventually a trial.

20 But we just think that the one thing we can be
21 certain of now to try to streamline the case is this part.

22 THE COURT: All right. Thank you.

23 I'll invite the plaintiffs to respond.

24 MR. KENDALL: Your Honor, may it please the Court.

25 I'm David Kendall, for plaintiffs MGM, Colombia


1 Pictures, Universal, Fox, Paramount and Disney.

2 I think the Court reads our papers correctly. Our
3 complaint focuses not on the kind of software but what it is
4 defendants do with that software. This is about
5 contributory copyright infringement.

6 We've not requested injunctive relief against any
7 particular kind of software distribution. What we say is,
8 with this software and with what defendants do with it, they
9 infringe our copyrighted material.

10 Now, I don't think there's any -- I think it depends
11 on the kind of software you have, and we haven't had any
12 discovery on that. There may be some kinds of software like
13 viruses and software which unlocks protections that may be
14 illegal. We don't know what can be done with this software.

15 We are not opposed to P-to-P technology. If the
16 content on there is proper, then we think that technology --
17 we have no problem with that.

18 But here, we've made allegations that plaintiffs
19 [sic] are essentially running a kind of cybernetic Alice's
20 Restaurant and the menu is our protected content.

21 Now, the plaintiffs [sic] do a lot besides distribute
22 software, I think the Court has observed. And all this
23 conduct -- they have knowledge. They have conduct. And the
24 result of that is infringement of our copyright.

25 So I think, as we've said in our papers, the summary


1 judgment motion is premature. I think we need discovery.
2 But I think even after discovery, there's not going to be a
3 simple ruling possible, probably, on just the software,
4 itself.

5 This is a case about conduct. As the Ninth Circuit
6 said, it's about what the defendant does with its software.
7 And here, it provides a service that infringes our
8 copyright. So we think it would be appropriate to allow
9 discovery and to set an early trial date.

10 THE COURT: All right.

11 I agree with the plaintiff's position insofar as this
12 issue is concerned.

13 Let me now turn to case management concerns and how
14 we are going to bring this case to some resolution sooner
15 rather than later. In other words, when you mention that it
16 has the potential for being a big case, sometimes big cases
17 have narrow issues. I mean, they're big because there's a
18 lot at stake, but they are confinable.

19 In terms of discovery, how do you -- you're the
20 plaintiff, how do you intend to proceed, and what sort of
21 time line do you envision, and would some sort of
22 bifurcation; liability versus damages -- or are you only
23 seeking injunctive relief?

24 MR. KENDALL: We're seeking both injunctive relief
25 and damages, your Honor. I think that while in some


1 respects there are large numbers connected with this case,
2 the actual triable legal issues will be reasonably well
3 confined.

4 The Napster case has blazed the way. We believe this
5 system, despite some architectural differences, is just like
6 Napster; operates that same way; the user experience is the
7 same. We don't think that there are going to be serious
8 questions about proof of copyrights.

9 There are works that -- it's our burden to establish,
10 we'll establish ownership. We think the real question is
11 going to be the defendants' knowledge what they have done
12 with their system.

13 And we think that -- we believe three months of
14 discovery would be adequate. We've requested a trial date
15 of September 30th.

16 THE COURT: Sounds reasonable. Sounds like someone
17 clued me up on the computer. Maybe Napster has one of those
18 Judge's deals and found out about all my inclinations.

19 MR. BRIDGES: Your Honor, if the Napster case plays
20 the way Mr. Kendall said, then the issues are much broader
21 than what Mr. Kendall acknowledged. Because as a matter of
22 fact, in the Napster case, Judge Patel has specifically
23 questioned whether the plaintiffs owned the copyrights that
24 are alleged. And there is, I understand, a special master
25 charged with the duty of determining copyright ownership.


1 These also a significant issue in the Napster case
2 where the recording industry plaintiffs are involved, also,
3 on copyright misuse. The Napster case, your Honor, has been
4 pending 22 months and has not yet gone to trial.

5 We believe that -- in order -- the shape of the case
6 depends on what the case is as plaintiffs are indeed
7 bringing.

8 THE COURT: They just told you what they believe the
9 shape of the case is.

10 MR. BRIDGES: What we don't yet know, your Honor, is
11 how many infringements they intend to prove.

12 Because in order to prove liability for contributory
13 copyright infringement, they must prove the underlying
14 direct infringement.

15 And there are relatively few copyrights that have
16 been alleged in the complaint or revealed by plaintiffs in
17 their initial disclosures; yet, they seem to hold out the
18 prospect that there are hundreds of thousands of copyrights
19 or millions of copyrights for which they will seek remedies,
20 for which they will seek statutory damages of $150,000 per
21 work infringed.

22 They hold out the prospect that there are hundreds of
23 thousands of works for each of which they want to recover
24 $150,000. So that will be a non-trivial exercise,
25 your Honor.


1 THE COURT: That relates more to damages, doesn't it?

2 MR. BRIDGES: It relates both to liability and to
3 damages because they have to show an underlying infringement
4 to establish liability for contributory infringement of
5 that work.

6 THE COURT: Well, then, in light of what you just
7 said, and assuming there to be a genuine issue along the
8 lines you outlined, would it be helpful then to set a trial
9 just on the issue that plaintiff suggested; that is, whether
10 the use of the software contributes to copyright
11 infringement, and save for, perhaps, a subsequent trial, the
12 question of whether the plaintiff can prove copyright
13 ownership and infringement.

14 Don't you think there will be at least some works
15 that will be protected, if not all that plaintiffs have
16 argued? Or are you thinking that there will be nothing to
17 protect?

18 MR. BRIDGES: Well, your Honor, I think that what
19 plaintiffs are sort of asking for and, perhaps, what the
20 Court is suggesting there, is not that the case be
21 bifurcated between liability and damages, but that the case
22 be bifurcated between whether the defendants may be
23 generally liable for contributory copyright infringement,
24 and then one proves whether they're specifically liable for
25 specific infringements.


1 THE COURT: Let me hear from the plaintiff on
2 that point.

3 MR. KENDALL: Your Honor, what we had in mind was a
4 trial on a small number of -- excuse me -- of works, say,
5 five, per plaintiff. That would try the issue both for
6 damages and injunctive relief.

7 At the second phrase, you would have a trial on any
8 other works for damages.

9 What is most important to us is injunctive relief.
10 And I think if that were available at the end of the first
11 trial, that would allow for bifurcation of damages for the
12 rest.

13 Because the one thing we know about this software is
14 it works the same way for every work. You don't need to
15 prove dozens and dozens and dozens of works. It works the
16 same way.

17 And I think if we had a speedy trial, you could, at
18 the end of the first phase have damages only for the works
19 that were at issue in that trial phase, but you get
20 injunctive relief based on those works and on other works,
21 as well, on the system. And then you can have -- you may
22 well be able to use a special master or you could do the
23 second phase in a number of ways. But that's what we would
24 have in mind.

25 THE COURT: Now, does this case have involve a jury


1 trial, a jury demand?

2 MR. KENDALL: The jury defendants have asked for a
3 jury. I think it would be our position that we would try
4 these issues to the Court if the Court were amenable to
5 doing that.

6 THE COURT: Now, what's the defendants view? Do you
7 want a jury trial?

8 MR. PAGE: Your Honor, Michael Page, on behalf
9 of Grokster.

10 THE COURT: Yes.

11 MR. PAGE: Absolutely, yes, there is a jury demand
12 in place.

13 The problem with plaintiff's proposal is that they're
14 proposing that they try a small number of works but then be
15 entitled to an injunction as to thousands of works they
16 haven't tried, including thousands of works they don't own.

17 They want to come in with a tiny baby and ask you to
18 throw out all the bath water with it. We do not feel that
19 an injunction based on a small number of works can issue as
20 to works for which the Court has never heard any evidence.
21 That is the problem.

22 That is, I think, why my co-defendants tried to
23 address this issue on a summary judgment basis on issues
24 rather than judgments and injunctions as to works that
25 haven't even been tried.


1 Speaking for myself, for Grokster, although the
2 plaintiffs keep telling the Court this is about all this
3 other conduct and not the software that's distributed, there
4 is zero evidence placed before this Court that Grokster has
5 done anything other than simply distribute the software.

6 THE COURT: We're at the very early stages of the
7 case, how can you make a statement like that when the
8 plaintiffs haven't even had discovery?

9 MR. PAGE: I understand that.

10 THE COURT: Why should they have be the position of
11 having to put forth anything, at this point. You've jumped
12 the gun, or Music City has, on a summary judgment motion. I
13 don't mean it to be critical, but it is awfully quick. And
14 I don't think the plaintiff has to, at this point, put forth
15 any hard evidence. That's the nature of the process.

16 All right. I don't want to get into this too much at
17 this point in time.

18 Thank you for your observations.

19 MR. PAGE: Thank you.

20 THE COURT: I, at this point, will adopt the
21 plaintiff's suggestion as to the timeline. And I will
22 September a trial date of September 3. Is that a Tuesday?

23 THE CLERK: We'll have to move it over to October 1.

24 THE COURT: October 1 because that's not a Tuesday.

25 It will be a jury trial. The reason it has to be a


1 jury trial, if my memory serves me, is, isn't there an old
2 case in the Supreme Court which says that if you have a
3 damage claim running parallel with an injunctive action, if
4 there are issues that have to be decided by a jury, that
5 means that the Court has to abide by the jury verdict as to
6 those facts when it decides upon injunctive relief.

7 I think the case is -- you might look at this case.
8 This may be helpful. It's one of the few cases I know.
9 Don't think I know all the cases. But I know this one.
10 Beacon Theaters. It's sometime [around] World War II.

11 It comes up from time-to-time. It's a good thing to
12 get to know about. And you might look at the Beacon Theaters
13 case and see how the teachings of that case plays out in
14 terms of court versus jury trial on some issues.

15 In any event, please understand that I do my best to
16 keep the schedules I set. Of course, I have to be flexible
17 because one can't predict all the twists and turns of a
18 lawsuit, but don't count on there being re-settings for
19 reason that aren't persuasive.

20 All right. Thank you very much.

21 MR. BRIDGES: Your Honor, one last point, if I may.

22 THE COURT: Yes.

23 MR. BRIDGES: We would ask the Court to certify this
24 decision on the partial summary judgment motion for an
25 interlocutory appeal.


1 THE COURT: Well, has there been any briefing on
2 that point? I mean, have you made a motion along
3 those lines?

4 MR. BRIDGES: No, your Honor.

5 THE COURT: Well, I'm not going to do that
6 off-the-cuff. So if you feel strongly about it, make a
7 motion, allow your opponents to make a opposition to it, and I'll
8 make a ruling.

9 MR. BRIDGES: Thank you, your Honor.

10 MR. KENDALL: Thank you, your Honor.


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