1
2 IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA
3 Alexandria Division
4 x- - - - - - - - - - - - - - - - - - - -x
:
5 RELIGIOUS TECHNOLOGY CENTER, :
:
6 Plaintiff, :
:
7 VS. : CIVIL ACTION
: NO. 95-1107-A
8 ARNALDO PAGLIARINI LERMA, et al., :
:
9 Defendants. :
:
10 X- - - - - - - - - - - - - - - - - - - -x
11 Friday, January 19, 1996
12 Alexandria, Virginia
13 Transcript of motion proceedings in the
14 above-captioned matter.
15 BEFORE:
16 The Honorable LEONIE M. BRINKEMA, Judge
United States District Court
17
APPEARANCES:
18
FOR THE PLAINTIFF:
19
J. FREDERICK SINCLAIR, ESQ.
20 910 King Street
Alexandria, Virginia 22314
21
22
23
24
25
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2
1 APPEARANCES: (Continued)
2 FOR THE PLAINTIFF:
3 WILLIAM M. HART, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER
4 Thirty-First Floor
399 Park Avenue
5 New York, New York 10022-4697
6
FOR THE DEFENDANT LERMA:
7
THOMAS B. KELLEY, ESQ.
8 FAEGRE & BENSON
2500 Republic Plaza, 370 Seventeenth Street
9 Denver, Colorado 80202-4004
10 MERRIL J. HIRSH, ESQ.
ROSS, DIXON & MASBACK, L.L.P.
11 601 Pennsylvania Avenue, N.W.
North Building
12 Washington, D. C. 20004-2688
13
14
15
16
17
18
19
20 C O N T E N T S
21
22 WITNESS: DIRECT CROSS REDIRECT RECROSS
23
24 (None)
25
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3
1 P-R-O-C-E-E-D-I-N-G-S
2 THE CLERK: Civil Action No. 95-1107-A, Religious
3 Technology Center vs. Arnaldo Pagliarini Lerma.
4 THE COURT: Good morning, Mr. Sinclair.
5 MR. SINCLAIR: Yes, Your Honor.
6 THE COURT: You are here for RTC?
7 MR. SINCLAIR: I am, Your Honor, along with
8 Mr. William Hart, if I may briefly introduce him, Your
9 Honor.
10 THE COURT: All right, Mr. Hart.
11 MR. HART: Good morning, Your Honor.
12 THE COURT: Good morning.
13 MR. SINCLAIR: Mr. Hart is with the Firm of Paul,
14 Hastings, Janofsky & Walker, Your Honor, of New York City.
15 He has assisted me and is my co-counsel with the issues with
16 respect to copyright infringement.
17 As Your Honor is well aware, I just got into this
18 case around the beginning of December. In all due respect,
19 I didn't think I could become totally conversant in that
20 area of the law in 45 days, so I have sought outside help.
21 If the Court would indulge me, I would ask that you allow
22 Mr. Hart to assist me during oral argument.
23 THE COURT: That's fine. All right.
24 MR. SINCLAIR: Thank you, Your Honor.
25 THE COURT: And for the defendants?
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1 MR. KELLEY: Your Honor, Tom Kelley, along with
2 Merril Hirsh. I am with the firm of Faegre & Benson, and
3 Merril Hirsh is with Ross, Dixon & Masback.
4 THE COURT: All right, good morning.
5 MR. KELLEY: For the Defendant Lerma. Thank you.
6 THE COURT: All right, I have before me the
7 plaintiff's motion for summary judgment for copyright
8 infringement. I have the defendants' motion for summary
9 judgment, or countermotion for summary judgment and/or to
10 dismiss, and then the defendants' motion for an order
11 pursuant to Rule 56(d).
12 This case, as we all know, has been extensively
13 briefed. I have looked at not all but most of the
14 exhibits. I have taken care to especially look at the
15 exhibits concerning the allegedly copyrighted materials and
16 the postings on the Internet; and I have looked at the mast
17 copyright registrations and those materials.
18 I think, very simply, this case, despite all of
19 the eloquence in the briefs, ultimately comes down to the
20 issue of fair use, because there really is no factual
21 dispute that I see of any significance between the parties
22 as to the fact that these materials were, in fact,
23 copyrighted. They have been registered with the Copyright
24 Office; that the plaintiff is, in fact, the owner of those
25 registered copyrights.
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1 Now, I have had a chance to actually see the
2 evidence, and I have actually seen the mast documents that
3 were filed with the Copyright Office. I have seen the
4 registration papers. I have seen what was posted on the
5 Internet, and I have been able to make that comparison. I
6 don't think there is any real factual dispute that the
7 numbers and the percentages that are in the RTC's brief
8 were, in fact, copied by Mr. Lerma in either -- in the
9 postings and in the downloading onto the computer.
10 So I don't think there is any real dispute about
11 that. I am looking at you, Mr. Kelley, because those facts,
12 of course, are all "agin" you, so to speak. But then the
13 issue comes back. The real thrust of this case has been for
14 some time now is whether or not what Mr. Lerma did with that
15 constitutes fair use.
16 Anyway, that's how I see this case. And then I
17 have looked carefully at the arguments about fair use and
18 the various factors that one goes through, so, Mr. Kelley,
19 do you want to briefly respond? As I say, we have already
20 looked at the briefs. I don't need to hear all of that
21 repeated, or Mr. Hirsh. I don't know which one of you is
22 going to take that. Go ahead.
23 MR. KELLEY: Thank you, Your Honor. In an attempt
24 to help Your Honor's effort to simplify this case, I agree
25 with everything Your Honor said about the copyright
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1 registrations, deposits, and so forth.
2 We have had problems with those things. We have
3 worked through them. The only issue I would like to take is
4 with respect to copyrightability. We think there is a
5 serious issue of copyrightability as to most of all of the
6 works at issue and quite possibly all of -- some of them,
7 particularly OT-2, and for that reason --
8 THE COURT: (Interposing) Go ahead and discuss
9 that slightly. I think your main argument is that they are
10 not copyrightable as individual -- they are not
11 copyrightable in that they don't stand on their own as a
12 particular unit of copyrightable material, right?
13 MR. KELLEY: That's right, although there are two
14 components that are important here: One, they don't stand
15 on their own. They make no sense on their own. That's been
16 admitted.
17 They have to be taken as a whole to hang together,
18 but there is another issue here, and that is that most of,
19 for example, or virtually all of OT-2 is a series of
20 processes that involve one-word, two-word or mere phrase
21 stimulous-response commands, and the claim is that those
22 have to be delivered in exactly those words or they don't
23 work.
24 Those are processes that merge into the
25 expression. There is simply no other way to express them.
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1 Not only that, but that's exactly what the copyright owner
2 admits.
3 Now, all of these works are described as a series
4 of processes. The instructions, for example, in OT-3, the
5 rendition of history in OT-3 all are described as a series
6 of processes that have to be --
7 THE COURT: (Interposing) They may be, but the
8 discussion of history, the galactic cataclysm and all that,
9 I read those, and several of them are like little -- they
10 have a beginning, and they have an end. They may not make
11 sense all the way through, but one can read them even
12 without the training that apparently you do need to get the
13 full significance of them, and they made sense to me. I
14 mean, I could see a logical coherence and -- not in all of
15 them, I will grant you that, but several of them, enough of
16 them that I think you win on the copyrightability issue.
17 There are several of those. There is one, I think
18 -- I don't have the numbers in front of me -- there is one
19 that's an instruction, and it goes from the very beginning
20 to the very end. It's very coherent. There are varying
21 degrees of comprehensibility, I will grant you that, as to
22 these documents. But there are several that are -- in my
23 opinion, clearly they stand alone. They were copyrighted.
24 I am satisfied that they were copyrightable. Go ahead.
25 MR. KELLEY: And I assumed that Your Honor would
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1 reach that conclusion as to some of them.
2 THE COURT: Right.
3 MR. KELLEY: But I think in some of the works, and
4 I have in mind particularly OT-2, it is very arguable that
5 none of it is copyrightable.
6 THE COURT: Of course, that doesn't really save
7 you, does it, because the copyright claim is one count, and
8 I think to find liability on the copyright count, I don't
9 have to find that every one of the alleged documents has
10 been infringed, do I?
11 MR. KELLEY: No, but there has to be a finding on
12 each one separately.
13 THE COURT: I understand that.
14 MR. KELLEY: But that's true. That's not a
15 complete escape hatch but certainly an issue that we think
16 is present on the copyrightability point.
17 THE COURT: Let's move on to the fair use.
18 MR. KELLEY: Your Honor, I guess I don't want to
19 go through everything that's been done, and I feel like Mark
20 Twain already having to apologize for the length of the
21 brief. He said if he had more time, he would write a
22 shorter letter. I feel the same way. I would like to just
23 cover the high points. I just hope you won't let me sit
24 down without answering any questions.
25 THE COURT: As I said, we have had this case
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1 around a long time, and we have had these briefs, despite
2 the move, with us for some time. I have looked at them. We
3 have spent a lot of time on this. I don't need to hear any
4 of the briefs repeated in court. The opportunity this
5 morning is to highlight the -- because, as I said, to me
6 this is purely fair use. That is the ultimate point that I
7 have to resolve in this case.
8 And I have looked at the briefs carefully. I am
9 going to have to, when I give you my final opinion because
10 you need to know -- because it will have an impact down the
11 road -- document by document, whether I have found it to be
12 copyrightable or not, whether I find it's been infringed.
13 So obviously you are going to have to get a written opinion
14 in this case.
15 But I want to hear if you have anything else that
16 you want to add on the fair-use argument.
17 MR. KELLEY: Well, let me just touch on the four
18 factors briefly. I guess there are five categories really,
19 because we feel that there is another factor --
20 THE COURT: (Interposing) Downloading?
21 MR. KELLEY: -- category as well.
22 But let's talk about the factor one in the nature
23 of the use and focus first on the posting of the Fishman
24 affidavit and attachments.
25 Briefly, again, we have shown it's a nonprofit
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1 use, presumptively fair under Sony. We have shown that at
2 least in the sense contemplated by the Cox vs. Cone Case,
3 it's news reporting in that it reports what's happened in a
4 court file. Again, no one is claiming that involves
5 absolute immunity, but it's certainly an important factor.
6 We have shown in Mr. Lerma's most recent affidavit
7 that the context occurred in one of debate over many aspects
8 of these materials.
9 Most importantly, we have shown that this posting
10 was accompanied by commentary. It was accompanied by a
11 posting by Mr. Lerma in which he very briefly comments on a
12 statement written by Mr. Fishman about why he filed his
13 affidavit and attachments and what the significance was.
14 And most of that is between the two postings that
15 occurred on the first or that appeared on the Internet on
16 the first and second.
17 And while they are not part of the same postings,
18 that is, we submit, simply not the way the Internet works.
19 In fact, the Fishman affidavit appeared in 14 separate
20 postings by Mr. Lerma on the first and the second; and with
21 this medium, it only makes sense to look at all of those
22 postings together, just as you would, say, a series of
23 newspaper articles that are running back to back, day after
24 day.
25 Now, there are several characterizations in the
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1 response brief as to why Mr. Lerma posted that. We submit
2 none of those are fair or accurate, and we really hope,
3 Mr. Lerma hopes, that Your Honor will read his declaration
4 and the attachment to it, Exhibit 32, which, in effect, is
5 the commentary.
6 Now, the gist of what he says is he felt these
7 postings were appropriate and necessary to show how the
8 Advanced Technology involves mind control, how people are
9 called upon to accept an unusual version of history, how it
10 involves ritual, how it involves preoccupation with body
11 Thetans infestation and expurgation techniques to get rid of
12 all the things, all of which are tied to the story of Xenu.
13 THE COURT: Let me stop you for a second. What
14 would be left to a copyright if the Court bought this
15 argument that by simply putting the most minimal frame
16 around a copyrighted work, one is then licensed to publish
17 the entire work on a medium like the Internet?
18 I understand, with the Washington Post case, which
19 was the accompanying case, I found fair use there, because,
20 first of all, there were fewer quotes, but the quotes were
21 within real, meaty context. And they were immediate to the
22 quote.
23 Now, I know that the Cleek (phonetic) affidavit,
24 and you all are arguing the Internet is a different kind of
25 medium, and I possibly could accept that. However, there
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1 has got to be some kind of rule of reason that the
2 relationship of the commentary to the quote has got to be
3 more integrated.
4 Your own papers show that the Internet is a
5 fleeting medium. So I might have commentary today on the
6 Internet that's gone in two days. And somehow to allow two
7 days later somebody to come along and now wholesale put
8 copyrighted material on the Internet and say, "Well, it
9 relates back to that discussion we had two days ago," would
10 seem to me, if one were to take that logic to its ultimate
11 conclusion, you would effectively have copyright evaporate.
12 I have looked at the affidavit. I have looked at
13 the commentary or the -- it wasn't really commentary. I
14 think it was more discussion -- that's going on in the
15 environment around the posting, and it certainly is
16 stretching, I think, the standards used in fair-use analysis
17 to say that this is the kind of commentary. I mean, it's
18 certainly not scholarly research.
19 I think commentary is more than gossip, and it's
20 more than exchange. It has to be, I think, more meaty than
21 that. This is an interesting case, but I am very troubled
22 by this argument that you can say that this aspect of the
23 fair-use analysis has been satisfied, given the amount of
24 copying.
25 You know, again, if the copying were closer to
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1 what we saw in the Post article, if they were a few
2 sentences here and there given as examples of certain
3 things. But we all know what went on here was a lot more
4 copying.
5 Actually, it was indiscriminate in the sense that
6 it was the literal Fishman affidavit. There wasn't even, as
7 I understand it, any real editing that occurred, was there,
8 of the Fishman affidavit?
9 MR. KELLEY: No, Your Honor, although the Fishman
10 affidavit was edited considerably from the whole of each
11 work.
12 THE COURT: That's true.
13 MR. KELLEY: But, you know, Mr. Lerma attempted to
14 explain that in his declaration.
15 Let me try to deal with a number of things Your
16 Honor just raised.
17 First of all, I agree that if you have a formula
18 where you can wholesale post an entire work and simply add a
19 line in a later posting, you are giving a formula for
20 copyright infringement that is not going to work on the new
21 medium if we are going to protect intellectual-property
22 rights.
23 But here what we have is not that at all. We have
24 a posting of the Fishman affidavit, a second posting of the
25 Fishman affidavit, and sandwiched in between the two as far
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1 as the time when they appeared on the Internet what I would
2 call a meaty comment, not the kind that we see book
3 reviewers of the Washington Post use where you have quotes
4 and then comment on the quote and so forth. You have a
5 broader bit of copying, accompanied by separate commentary.
6 Now, I submit that that's exactly what has
7 happened in the Belmore Case (phonetic). It is what has
8 happened in the Nordstrom Case and a number of others we
9 cited. It creates more of a problem than the strictly few
10 lines, then comment, book-review type of copying, I admit.
11 But nonetheless, where you have what you have
12 here, no co-option of the market, where you have a work that
13 in some senses is always going to be unpublished because
14 it's, in effect, encrypted. It's in code. No one can
15 really understand what it means in terms of the plaintiff's
16 use of it without the instruction and the indoctrination
17 that goes with it.
18 The only thing that is expressed by publication of
19 the amount that was published is that there is the story of
20 Xenu, which one might question the credibility of. There is
21 a preoccupation with body Thetans and to some degree this
22 involves ritual. Other than that, it doesn't make any sense
23 to anyone so what is perhaps not like any other case on the
24 first factor, we submit, is more than made up by others.
25 In addition to that, I think -- I hate to harp,
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1 but I really wish Your Honor would read Mr. Lerma's
2 affidavit because he tries to explain all this. But, again,
3 the Fishman affidavit, with Mr. Fishman's statement of why
4 it's there and exactly what was filed in court, what
5 Mr. Fishman said was an argument in support of a very, very
6 important position. That is the document that the Court in
7 California as of the time of Mr. Lerma's posting had
8 determined should remain public. And that's one additional
9 reason why he sought not to be editing.
10 Again, this is not only with commentary, but it's
11 a use that is clearly transformative. It doesn't come close
12 to serving the same purpose that the plaintiff's sole use
13 for these documents serves.
14 The downloads, I think, is a more simple issue.
15 Plaintiffs argue that Mr. Lerma is not like the time shifter
16 at home in Sony, because he acts as a clearinghouse, and he
17 does republish things. The only Advanced Technology he
18 posted was the Fishman affidavit, but nonetheless, they
19 claim that because he is in that business, he is different.
20 If that's true, if that's true, then he is like,
21 he is in the position of the Washington Post, even though
22 you might argue that his medium is different, and he is more
23 like the lonely pamphleteer.
24 Your Honor's ruling that downloading that stuff,
25 whether it's for further review, scholarship consideration
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1 or even consideration for possible use on the Internet,
2 hopefully, fair use, in making that mere download, Mr. Lerma
3 is either in a position of the time shifter in Sony, which
4 everyone does on the Internet, particularly if they are
5 incurring on-line charges; or he is in the position of a
6 researcher or someone like the Washington Post, call it a
7 clearinghouse or a medium.
8 I have already talked something about the nature
9 of the copyrighted work. The plaintiff admits time after
10 time after time that it's a series of processes. To the
11 extent it involves narration of facts, it's certainly
12 factual, and has admitted with respect to OT-3 that it's
13 entirely instructional. All the cites are in our brief.
14 At the very least, that's a type of work entitled
15 to less -- well, subject to greater amount of fair use.
16 The primary argument made that it's an unpublished
17 work -- and, Your Honor, I submit it's unpublished only in
18 the most technical sense. It's widely disseminated.
19 Millions of dollars have been made off it, and we take you
20 through the language of Harper and Row dealing with
21 publication, and it's clear that they focus on the very
22 practical consideration of controlling the right to first
23 publication, essentially, an economic right.
24 They use words such as "undisseminated" rather
25 than words such as "published" in a technical sense under
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1 the copyright law.
2 More importantly, there are practical ways, as I
3 have just mentioned, that this work is always unpublished
4 until the recipient receives the indoctrination, instruction
5 and administration that's necessary to make head or tail of
6 it. All that comes across without that is the contention in
7 use that the defendant is attempting to make, which
8 demonstrates in his view the foibles of Scientology.
9 It doesn't serve any of the purposes for which the
10 plaintiff uses it. Those purposes are not served until it's
11 all explained, understood, makes sense.
12 THE COURT: Thank you, Mr. Kelley.
13 Let me hear Mr. Hart. Do you want to respond
14 briefly on -- I would like to hear you first on the
15 downloading issue.
16 MR. HART: Okay, Your Honor. The fair-use
17 doctrine is a body of law in copyright which has a lot of
18 history, and there is a lot of texture and lot of weight to
19 it.
20 Saying, as Mr. Kelley does, that the Sony Beta Max
21 Case which condoned, quote, "a hundred-percent taking" can
22 now be used to excuse what's gone on here is a little off
23 the mark in terms of the greater body of fair-use law for
24 two simple reasons, Your Honor.
25 Leaving aside the peculiar facts of Sony and the
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1 fact that later cases have said really should be limited to
2 its facts because what was going on there was a subject of
3 what should have been a legislative exemption, not fair use,
4 that it distorted principles to reach a society beneficial
5 goal.
6 What was at issue in that case, Your Honor?
7 People had VCRs at home. They were watching free TV. We
8 are not talking cable. The Sony Case was careful to
9 distinguish that. We weren't talking any kind of private
10 transmissions. There was implied consent. Mr. Rogers from
11 Mr. Roger's Neighborhood on TV, in fact, gave a bit of
12 testimony in that case to say, "Hey, when I put my program
13 on the air, I expected people to watch it."
14 That was the real issue there. It wasn't
15 distributing copies. It wasn't making copies and making
16 them available to others for their intrinsic purpose. It
17 was simply to, quote, "time shift."
18 Now, what is time shifting? It's, "I am not here
19 at 3:00 to watch All My Children or whatever the soap opera
20 is because I work. I would like to watch that at midnight.
21 Erase the tape."
22 Now, the two critical features of Sony, the
23 implied consent and putting it on free TV in the first
24 instance and the use of it within the confines of the home
25 make it so off the mark as a precedent to say that someone
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1 in Mr. Lerma's position can take something that was never
2 put out, at least under authority on the Internet by this
3 plaintiff, and use it not just for his personal edification
4 but for what he admits is a clearinghouse function.
5 He said he devotes a lot of time and resources,
6 and the primary goal is to get it out to the public for its
7 intrinsic content. That rings a lot of bells with me, Your
8 Honor, because in the body of fair use, intrinsic use of the
9 work -- and this goes right to the commentary notion --
10 intrinsic use of the work is really never fair use.
11 What is intrinsic use? What is commentary?
12 Commentary is not a talisman. We don't say, "Well, I made a
13 commentary. Therefore, it's excused." Commentaries can be
14 enjoined if they contain infringing matter.
15 The Nation Case which Mr. Kelley has referred to
16 involved news. Mr. Victor Nevasky (phonetic), the Nation
17 Magazine, wrote a serious article on the Nixon pardon, but
18 he took too much. If you look at all the serious biography
19 cases on down the line, 2nd Circuit, Supreme Court and in
20 other circuits, you will see that that is the law. There is
21 no excuse for taking too much.
22 THE COURT: Okay, but on the downloading, would
23 you agree that if somebody simply downloaded and never did
24 anything else with the material, that it was not for further
25 dissemination but you were going to sit and read the stuff
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1 in your living room, how do you think that operates?
2 Because I may be wrong, but I thought the evidence in this
3 record is we don't have any evidence of what Mr. Lerma did
4 after he downloaded it.
5 MR. HART: Well, I think we do, Your Honor.
6 Perhaps I should touch on that. I want to answer your
7 question directly, though. Let me answer the question, and
8 then we will talk about some evidence here, okay?
9 The public sometimes has this misconception that
10 there is personal home-use exemptions. I went back to the
11 legislative history to Barbara Ringer talking when she was
12 the register of copyrights in the '60s about how it would
13 work from an enforceability standpoint. At that time, the
14 issues were photocopying. VCRs weren't out yet. Some of
15 the technologies such as Internet weren't there, but there
16 has always been a new technology coming along and an effort
17 to adapt the law.
18 Readers' comments in the legislative history say,
19 you know -- and this is consistent with the law, although it
20 may seem rather technical and we will talk about damage in a
21 second -- the notion -- if I went into a library, Your
22 Honor, and copied longhand Gone With The Wind, I am
23 infringing the copyright. I am violating the author's right
24 of reproduction. I don't have to distribute a copy to
25 infringe.
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1 Now, the fact is, there may not be any harm in
2 that instance. The fact is that from an enforceability
3 standpoint, I think one of the things that influenced the
4 Sony court, at least with respect to free TV, was the notion
5 of enforcing the rights in the home. But you run into a
6 situation with Internet where the very argument that
7 Mr. Lerma is raising or his counsel is raising about, you
8 know, commentary, that is, nobody is really passive, forces
9 you also to conclude that the instance of an isolated, "Let
10 me take it down and read it" may not be the cases that we
11 are presented with.
12 The pure answer is it's technically an
13 infringement, but in this case, we don't have to decide that
14 issue because we have an awful lot of evidence not only of
15 what Mr. Lerma did, in fact, but also what by his own words
16 he was doing with these copies in the first instance.
17 I think there are a couple of points to be made
18 there that go above the briefs, if you will, so if you will
19 indulge me for a moment.
20 There are a couple of postings that Mr. Lerma made
21 that are actually in his papers in response to this motion,
22 which -- and they are reprinted on page 29 of our reply
23 brief -- in which Mr. Lerma says, and I quote, "An ideal
24 scene for ability technologies: Public are encouraged to
25 use a workable technology. The complete works of all
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1 clearing practitioners are made available to all who desire
2 and encouraged to apply that." That's Defendants' Exhibit 8
3 to the fifth Lerma declaration.
4 Again, "For clarification of intent," says
5 Mr. Lerma, "I seek the establishment of a free and open
6 field of clearing practitioners free from interference from
7 what passes for top management of CFS or RTC."
8 In other words, this isn't about a passive
9 recipient who happens to press the button on the Internet
10 and scan for personal information or edification.
11 Over and above the clearinghouse function, and
12 Mr. Lerma's self-proclaimed role as a critic -- leave that
13 one aside for the moment -- what he is also saying is, "I
14 believe this stuff is usable, and there are people out there
15 that want to use it."
16 In fact -- one more moment of your time on this
17 point, Your Honor, and then we can move on.
18 I know there was a lot of heat about the Post and
19 Mr. Leibey and Mr. Lerma, but in December of '94 -- excuse
20 me -- the December '94 article that Mr. Leibey wrote, he
21 quotes Mr. Lerma as saying, first -- and I quote. This is
22 from Exhibit 97, defense: "Among people that are on the
23 Internet and posting in this news group are a current
24 Scientology practitioner, that is, people with training,
25 bored dropouts and ex-staffers like Arnaldo Lerma who favors
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1 establishing a spin-off religion that retains the
2 problem-solving tech."
3 So this isn't about mere passive home receipt.
4 It's about someone who is actively involved in getting it
5 out there because the technology is usable.
6 THE COURT: All right.
7 Do you want to address the copyrightability
8 issue?
9 MR. HART: Very briefly, Your Honor. It's a red
10 herring. Section 102-B of the act -- no dispute about this
11 -- says copyright protects expression. It doesn't protect
12 ideas, discoveries, processes, methods, et cetera. No
13 dispute about that.
14 But there are an awful lot of works out there,
15 Your Honor, that describe, refer to discoveries, processes,
16 and ideas. In fact, I think it's almost impossible to think
17 of a work in any form that does not at the same time convey
18 an idea which is uncopyrightable. That doesn't condemn the
19 work as uncopyrightable, and that's the perversity of this
20 argument. In fact, in this District, in the MIA Case --
21 let's talk about a prime example of process -- computer
22 program.
23 It's a series of machine instructions. On one
24 level, it's all process, but there is also an awful lot of
25 creativity that goes into writing one of those things.
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24
1 You know what, Your Honor? This court -- not you,
2 but another member of this Bench, said that's a creative
3 work.
4 Here we are talking about something that, you
5 know, it's not even intelligible unless you know how to read
6 binary code -- a series of machine instructions.
7 This argument that because the word contains
8 ideas, discoveries and processes is rendered uncopyrightable
9 is so fallacious, Your Honor. Talk about rendering
10 copyright completely useless, it would eat up every
11 copyrightable work.
12 THE COURT: All right. Do you want to address --
13 I am jumping ahead. I didn't give Mr. Kelley a chance, and
14 I will give him a chance, to address his motion but, of
15 course, Lerma has filed a cross-motion for summary judgment
16 in which they raise the issues of -- many of which I have
17 heard before -- I don't want to have reargued today, but the
18 two ones are fraud on the court and misuse of copyright.
19 Do you want to address either of those two
20 arguments?
21 MR. HART: I would love to, although I think
22 Mr. Sinclair here is chomping at the bit, so I am going to
23 sit down for a few minutes. Thank you.
24 THE COURT: Mr. Sinclair?
25 MR. SINCLAIR: Your Honor, two things with the
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1 fraud on the court, I believe it's still -- that
2 cross-motion for summary judgment amounts to a thinly
3 disguised motion for reconsideration. They urged upon you
4 at the time of the September 15th hearing that you look into
5 the fraud-upon-the-court issue as well as the exclusionary
6 rule. And you took it under advisement at that time and
7 said you were going to issue an opinion.
8 Subsequent thereto, RTC filed a motion for
9 reconsideration, the type of motions you have been frowning
10 upon, but it was to settle declaration, and then there was a
11 response by Mr. Lerma's counsel. All that was before you.
12 Now, Your Honor, I can go back into discussions as
13 to what took place in front of you on August 11th when --
14 THE COURT: (Interposing) I don't need to hear
15 that.
16 MR. SINCLAIR: But there was nothing that
17 Mr. Cooley said to you, Your Honor, that I would say amounts
18 at all to a fraud on the court. By analogy, I might refer
19 you to the Warner Case, Warner vs. Di Wu (phonetic). If you
20 want to see some heavy-handed action by a lawyer, this New
21 York attorney there, what he did -- I mean, Mr. Cooley is an
22 angel, a choir boy compared to that attorney.
23 THE COURT: And he is also from Boston.
24 MR. SINCLAIR: That's true. That's right, Your
25 Honor, but when Mr. Cooley, Your Honor, made representations
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26
1 perhaps in the colloquy between you -- I know you have
2 expressed a concern about getting into private areas, but he
3 did say to you, we are going to have an independent expert,
4 and as we tell you, no independent expert comes free. So,
5 of course, they were retained. And then there was -- he
6 said to you there would be Scientologists present.
7 What got the defense going was the amount,
8 apparently, of items that were reviewed. Your Honor,
9 something that is telling that I thought I would bring to
10 the attention of the Court, under Mr. Hirsh's sixth
11 declaration, which was filed in support of his motion, and
12 in one of his footnotes of the opinion, I think, on page 27
13 or whatever, he quotes to a Professor Nutt, who goes into --
14 and they go by analogy to this pending case in Colorado and
15 talk about some heavy-handed dealings with that computer
16 disk.
17 But I did find it instructional as to what their
18 own Fact Net -- who is related to this Lerma issue -- their
19 own expert thought would be an appropriate search for A T
20 materials. I would direct your attention to page 13 of that
21 exhibit. I believe it's Exhibit W, to the Hirsh
22 declaration. Anyway, it is the Professor Nutt declaration.
23 He was talking about binary files do not contain
24 user-defined information, so they would not include any --
25 THE COURT: Mr. Sinclair, slow down.
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1 MR. SINCLAIR: I'm sorry, Your Honor. Binary
2 files do not contain user-defined information, so they would
3 not include any A T materials. Hence, there is no
4 justification based on copyright infringement for not
5 including any binary file on the replacement disk nor for
6 removing it from the original disk.
7 Here is what's important. "A T materials could
8 appear in data files in many different formats, including
9 mail messages" -- that's the E-Mail issue they raise -- "and
10 bulletin-board postings, parens, ASCII, A-S-C-I-I files,
11 scanned images," which you allowed them to review,
12 "encrypted ASCII files, parens, unreadable as ASCII
13 characters, word-processing files, et cetera."
14 So Nutt himself encompasses a rather broad review
15 in order to get at A T materials. In fact, his version
16 would be far more invasive than that conducted by RTC in
17 that the encrypted materials would have required -- I'm
18 sorry, Your Honor, by the way, Nutt is Exhibit L to the
19 Hirsh declaration.
20 THE COURT: Thank you.
21 MR. SINCLAIR: His version you would have had to
22 come up with some type of special code to get into that
23 special secret area that he would have put these A T
24 materials. Nothing was done in this case like that. No one
25 tried to break into secret codes, yet Professor Nutt says in
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1 passing that's how you should do it if you are going to go
2 after A T materials.
3 So what I am saying, Your Honor, is you may have
4 been unhappy with the scope of the review, although it falls
5 well within what Professor Nutt says, but, Your Honor, it
6 was done in good faith.
7 Although they take misrepresentations, et cetera,
8 when you hear the three thread words, most of those words
9 did lead to some of these materials, and they downloaded
10 them for further review. And they found thereafter that
11 perhaps they didn't have any meaning. All these disks were
12 turned over pursuant to your instructions, August 26th,
13 given to them.
14 They make an issue about the militia. We address
15 that in our brief, Your Honor, but there are two Internet
16 postings in July concerning Mr. Lerma and his feelings about
17 the militia, and there is some reference to Mr. Leibey. I'm
18 not certain of his role in it, but the point is anything
19 that may have been mentioned by an RTC publication or any
20 other publication about militia did not come from turning
21 over materials that RTC had taken from Mr. Lerma's
22 computer. It came from that very public forum, the
23 Internet, which Mr. Lerma utilizes on a daily basis.
24 So, Your Honor, concerning the scope of the
25 search, and we have given you Fourth-Amendment law in our
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1 brief, there is no way this would rise to the level of a
2 fraud upon the court.
3 Your Honor, with respect to misuse, I think they
4 are trying to break new ground. They cite two cases, Laser
5 Com (phonetic), which is a 4th Circuit case and one of the
6 few circuits to really adopt it. And you are aware there
7 that there was a licensing arrangement, and they had a
8 99-year requirement that you could not improve upon it or
9 come up with new ideas or break new ground. That was, in
10 essence, the basis for the Laser Com decision going that
11 way.
12 The other one, the Quad Case, was a person who
13 comes up and tries to enforce a copyright which they
14 themselves had plagiarized or taken from another party. So
15 then they get into this abusive-litigation practice.
16 Your Honor, I don't want to retry cases that are
17 outside the Church of Scientology. The Church of
18 Scientology has been involved in hundreds and hundreds of
19 cases. They cite to a few examples. One thing I found a
20 bit -- I don't want to say offensive, but they were citing
21 slip opinions out of Superior Court of California. I don't
22 know what these cases held, Your Honor.
23 The IRS apparently reviewed them in great detail
24 in 1993 to make a determination as to whether this so-called
25 rogue litigant was worthy of a 501(c)(3) exemption and,
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1 indeed, gave the church the exemption it sought.
2 RTC itself, Your Honor, has been involved in
3 approximately 13 cases -- I think Helena Kobrin addresses
4 that in an exhibit -- nine of which has been resolved mostly
5 in the favor of the church. Four are pending. This is one
6 of them. The others, that you are well aware of, are out on
7 the West Coast and in Denver.
8 Your Honor, with respect to RTC vs. Scott which
9 they make much ado about some language of the special
10 master, there were apparently four summary-judgment matters
11 filed with respect to cross-claims raised by Scott granted
12 in favor of RTC.
13 It is true that the $2.9 million award still
14 remains. I believe that part of their case was dismissed
15 for some discovery infractions by their attorneys, and RTC
16 is now presently before the 9th Circuit. Mr. Lieberman
17 tells me that there may be a decision any time soon. I
18 don't know how that will ultimately be resolved.
19 Mr. Lieberman is somewhat optimistic that it will be
20 resolved in RTC's favor.
21 But nevertheless, it seems to me to be putting up
22 a red herring for you, and it's trying to basically paint a
23 somewhat inflammatory picture of someone who is here before
24 you trying to enforce an infringement.
25 Throughout your transcripts, and I reviewed them
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1 when I was trying to get on board, I am aware that
2 Mr. Cooley at times would take umbrage at their pleadings,
3 and he would start defending the church; and you would say
4 to him, you know, "You are treating this as a criticism of
5 Scientology. Let's get focused on what this case is about."
6 I believe that the memorandum prepared by
7 Mr. Hart's firm when we moved for summary judgment and
8 provided you with Exhibit G put this case in proper focus.
9 In all due respect to the Hirsh -- not Mr. Hirsh,
10 he is the declarant, but to the brief filed by Ross Dixon, I
11 believe it's a thinly disguised motion to reconsider. It's
12 a visceral, emotional appeal to you. It really is just
13 something to say, hey, how do we get past a case where we
14 have got wholesale infringement.
15 They raise fair use in Mr. Kelley's brief. I
16 thought -- addressed that, you know, for what he could. But
17 the other one, Your Honor, is an emotional appeal, and I
18 think you should disregard those arguments. Those do not
19 apply here. Misuse did not apply here for copyright. They
20 own the copyright. They don't deny the ownership of that
21 copyright. You have seen Exhibit G. There is wholesale
22 copying. There is certainly a probable cause and reasonable
23 good reason for them to be here.
24 One final thing, Your Honor: Let's look at
25 Mr. Lerma for what he has said he is. Seventeen years he
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1 was outside of the church and no one bothered. He has
2 admitted -- and if you look at pages 8, 9 and 10 of our
3 brief in response to the cross-motion, in depositions, also
4 at the Wallersheim deposition, "We knew we would get your
5 attention if we put it up on the big screen. We knew you
6 were going to come for us. We had our insurance policy. We
7 only had 11 months' premiums before it would run out. We
8 knew RTC would act, but before RTC acted, they brought these
9 two church members by and said, 'Hey, could you cease and
10 desist?'"
11 He declined. The suit came. He was prepared for
12 the raid. This very man who stands before you with his
13 counsel saying, "I have been denuded," actually went in and
14 attempted to, as he used the word, "defragmentize" his
15 computer, to delete things, send out some of the materials
16 to Leibey hoping that he could get it out of his own
17 computer.
18 And this is stuff we cite to you to show you that
19 this man who stands before you is not some lonely
20 pamphleteer or Hyde Park corner speaker who is suddenly
21 pounced upon by a big-time plaintiff. He was out there. He
22 was goading them. He wanted this type of litigation.
23 Apparently, you were going to be his forum, and he brought
24 about this lawsuit.
25 But, Your Honor, I believe that misuse and the
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1 fraud upon the court are simply a screen that you should cut
2 through and look to what the issue is before you. Is there
3 fair use and if it isn't, Your Honor, then you should award
4 judgment in favor of RTC.
5 THE COURT: Mr. Kelley, did you want to respond?
6 MR. KELLEY: Your Honor, to respond to the last
7 point first, there isn't any showing in this record of what
8 counsel just said. It's been a theory that the plaintiffs
9 have attempted to prove from the beginning, that this suit
10 was deliberately provoked to take advantage of insurance
11 coverage. There is no evidence of that. The quote from
12 Mr. Wallersheim relates to something that is totally
13 unrelated to that. Mr. Lerma has testified utterly to the
14 contrary throughout.
15 The fact is that the incredible motion after
16 motion after motion, abuse of process in this case has
17 depleted Mr. Lerma's insurance. I am the one that ought to
18 know, and it's true. But it certainly wasn't the reason
19 that this suit was brought.
20 He deleted materials from his computer, because
21 Ms. Taylor and the others representing Scientologists asked
22 him to during their visit, and he said he would, and he
23 attempted to. That's undisputed.
24 This defragmentation is clearly a red herring.
25 Mr. Settle testified that that's a routine maintenance
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1 procedure.
2 Your Honor, I know of Your Honor's concern of this
3 case veering off the subject of copyright infringement, and
4 I hear counsel when he accuses me of attempting a diversion
5 here appealing to emotions, but, Your Honor, this case has
6 been a diversion, primarily from the beginning. That's what
7 it's been all about.
8 All of the preoccupation with intelligence
9 searches of files that have nothing to do with this case,
10 lack of concern over security, the prospecting and very
11 abusive depositions, particularly that of Mr. Jacobson, the
12 multi-million dollar history of this case, motion after
13 motion after motion is what it has been all about.
14 Now, the plaintiffs are saying, let's go back to
15 the real subject matter, copyright abuse. Find for us,
16 forget everything we did to these defendants, to Fact Net,
17 in basically doing a fishing search, which I will describe
18 one more time briefly.
19 Your Honor, sure, we were concerned about the fact
20 that notwithstanding that they had done a word search -- and
21 by the way, a word search was all that Mr. Nutt, Professor
22 Nutt, the Court's expert, was talking about in his report, a
23 word search -- a word search was done that turned up
24 everything that was found to be infringing.
25 They elected to go and review many, many other
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1 files based on title only, in most cases, knowing only that
2 the title reflected it was E-Mail. They claim they had to
3 do that because they found the Fishman affidavit in E-Mail.
4 Yet, they have no trouble finding everything that was
5 infringing in E-Mail or otherwise with the word search.
6 If you are concerned about stashing in a strange
7 file, going by file title is absolutely the worst way to do
8 it. They went and did this and looked through files by
9 name, without anything that makes sense as far as reason to
10 believe that there was infringing materials in those files.
11 That happened. The part of it that is really the
12 rub is that going through those files, reading them and
13 scanning them, they elected to save and download and keep
14 files that absolutely had nothing to do with this case and
15 clearly involved intelligence related to idealogical enemies
16 of the church.
17 Our examples are cited at pages nine and ten of
18 the brief in support of this motion. All of the examples
19 are at tab D of Mr. Hirsh's first declaration. But no one
20 at any time has ever made an attempt to stand up and tell
21 this Court why a file containing information as to Fact Net,
22 information as to intelligence against the Scientologists,
23 information as to organizations of people that were
24 idealogically opposed to the Scientologists, obviously
25 containing no infringing material, were downloaded and
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1 kept.
2 If counsel in response steps up and gives an
3 explanation of that, that will be the first time.
4 Now, what is new? What is new in terms of what we
5 are presenting to this Court is that there has been a cover
6 up, pure and simple, and --
7 THE COURT: Mr. Kelley, I don't want to cut you
8 off, but I guess I am going to. I have read the brief, and
9 I must tell you that I do agree with Mr. Sinclair's
10 observation that the tenor of the brief writing flipped on
11 this last round of briefs, because most of the real rhetoric
12 and venom for a long time was on the RTC's side, which is
13 what got the Court so concerned about how the case was
14 developing.
15 And in fact, the position of the defendants had
16 pretty consistently been a far more rational, factual
17 response. But ironically, the brief, the cross-motion -- I
18 am not criticizing you. I am just criticizing more just the
19 tenor of the writings -- is much more to a more emotional,
20 venomous kind of matter.
21 The reality of it is that I had hoped, and, in
22 fact, I think we had, pared this case down. It has gotten
23 narrower and narrower. Counsel have been excellent the last
24 couple of sessions in terms of the oral argument, and the
25 writings have become less vitriolic.
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1 But we are down now to a copyright case. I
2 understand that there are situations where even if there has
3 been an infringement, the plaintiff doesn't win because of
4 misuse of the copyright or other extremely inequitable
5 conduct. I understand that is the essence of what you are
6 arguing here.
7 I am not going to revisit this whole issue of the
8 search. I think I have extracted, and I have other ways of
9 doing it down the road, whatever I need to in terms of
10 policing that.
11 When I finally write the opinion in this case, I
12 am probably going to put some advisory comments out for any
13 judge who cares to read it about how to handle seizure
14 warrants in the future, because, quite frankly, I learned
15 from this one, and if I ever have another seizure warrant
16 that comes through, I am going to have to be far more
17 restrictive about it than I was in this case, because I do
18 feel uncomfortable with the breadth of the search.
19 Obviously, it involved the technology with which
20 many judges are not as familiar as perhaps we should be.
21 Had I been more familiar with the exact nature of how this
22 kind of search goes on, I would have looked more carefully
23 at the warrant the way I would have if I were issuing it
24 under a regular Fourth-Amendment kind of search warrant for
25 a residence or something.
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1 So to some degree, I am willing to say on the
2 record that perhaps the Court was responsible too for this
3 search going beyond where it probably should have been,
4 because when I issued the warrant, it did not have what in
5 hindsight now I think should have been in there, as more
6 specific, clear directions to the plaintiff as to what would
7 or would not be permitted.
8 As I said, I think the judges down the road
9 perhaps could benefit from our experience in that respect.
10 I am, therefore, not going to hear anything more on that.
11 On the misuse of copyright, we looked very
12 carefully at, I think, just about every case you cited, and
13 I don't see any of those cases to involve the kind of
14 factual situation we have here.
15 Those cases involve an actual misuse of the
16 copyright. Here is a person who was bringing the suit
17 doesn't really have the copyright or they themselves had
18 committed a copyright violation in order to be in their
19 position.
20 What you have here at best might be a misuse of
21 the seizure warrant. As I said, I think in part the Court
22 did not give the plaintiff enough specific ground rules that
23 I cannot find that there is any basis to grant that. So I
24 really don't want to go over a whole lot of that.
25 If you have any cases on misuse of copyright,
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1 other than the ones you have cited to us -- because I didn't
2 think any of those were directly on point -- I would be glad
3 to hear you discuss those this morning. Was there anything
4 else that came up in your research or in looking at the
5 response from RTC?
6 MR. KELLEY: No, Your Honor. We felt the closest
7 one in point was the Quad Case.
8 THE COURT: Which I still don't think is this
9 case.
10 MR. KELLEY: I have been in this Court long enough
11 to know not to blather on after the Court makes a statement
12 like that.
13 THE COURT: All right. Let me tell you what I am
14 going to do. I am denying the motion, the defendants'
15 cross-motion for summary judgment. I will expound upon that
16 in a written opinion, because I think the case does require
17 a written opinion.
18 I am also going to let the plaintiff know at this
19 point, I am finding that there have been copyright
20 violations. I need to go through again with the exhibits
21 and give you a specific finding on that, and it's going to
22 take a little time because I want to spend some time on this
23 opinion.
24 But there will be no need for a trial of this
25 case, so I think you all had probably assumed that,
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1 especially because neither side in any of their briefs at
2 any point made the argument that this was not a case ripe
3 for resolution on summary judgment. There really is no
4 need. I don't think there are any significant factual
5 issues in dispute. I am comfortable based on the extremely
6 voluminous briefs and materials before me that summary
7 judgment is the appropriate way to resolve this.
8 After I issue my opinion, then we will have to
9 address -- well, actually, I understand RTC's position is
10 that you are only seeking statutory damages in this case,
11 correct?
12 MR. HART: Yes, Your Honor.
13 THE COURT: All right. I am not going to address
14 the damages issue. I will give you, once I have issued my
15 opinion, an opportunity to come back either with briefs or
16 something on that.
17 When I say damages, I am including -- is there
18 going to be a request for attorneys' fees in this case?
19 MR. HART: Yes, Your Honor.
20 THE COURT: To save you all a lot of time, and to
21 save me some time, counsel may want to discuss this, because
22 let me tell you how I envision this opinion coming down.
23 It's going to be a narrow opinion. I am not sure you are
24 going to win on every exhibit, all right, in terms of a
25 copyright infringement. You are going to win on enough that
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1 you have made your Count 1.
2 In terms of attorneys' fees, because I threw out
3 the trade-secret count, you can't include that in your
4 request for attorneys' fees.
5 Furthermore, because of the history of this
6 litigation, with the number of attorneys and a lot of stuff
7 that didn't have to happen, I am not going to award
8 wholesale attorneys' fees in this case. What I am
9 suggesting is in order to save further attorneys' fees, is
10 you all might want to sit down and see without waiving any
11 appellate rights if you can agree to a reasonable number in
12 that respect. All right.
13 But that's how I am going to rule in this case,
14 and as I said, the specific nature of the ruling and the
15 specific opinions will be expressed to you in a written
16 opinion, all right.
17 Thank you. We will recess court until 2:00.
18 MR. SINCLAIR: Your Honor, may I add one thing
19 just to give you a little history of the case? We have also
20 resolved the fee issue with the Washington Post. That has
21 been settled with respect to the -- your opinion awarded
22 fees under the Copyright Act to the Post. I just wanted to
23 tell the Court that has now been resolved.
24 THE COURT: Well, there is precedence to this kind
25 of resolution, so you may be able to work it out in this
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1 case as well.
2 MR. KELLEY: Your Honor, on the attorney-fees
3 issue, we would only ask you to consider that as of this
4 point, plaintiff has given up on nearly half of the works in
5 issue.
6 THE COURT: That's what I am saying. I am giving
7 some cautionary instructions to everybody. You know, no
8 judge likes attorney-fee petitions. We hate them. If you
9 all can resolve it, you will have a happier judge, but you
10 you will also save your clients and yourselves a lot of
11 time. I am just telling RTC, you haven't hit a home run in
12 terms of tons of money coming to you. I don't really sense
13 that that's really what RTC has filed this lawsuit about
14 anyway.
15 Mr. Lerma is still an individual. I don't intend
16 to crush him with attorneys' fees in this case, all right.
17 MR. HART: Thank you, Your Honor.
18 MR. KELLEY: Thank you, Your Honor.
19 THE COURT: Recess court until 2:00.
20 (Whereupon, at 11:40 o'clock a.m., the
21 above-captioned matter was concluded, and court stood in
22 recess until 2:00 o'clock p.m.)
23
24
25
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1 CERTIFICATE OF OFFICIAL REPORTER
2 COMMONWEALTH OF VIRGINIA )
) ss.
3 CITY OF ALEXANDRIA )
4 I, EDWARD DONOVAN McCOY, Registered Professional
5 Reporter and Official Court Reporter for the United States
6 District Court for the Eastern District of Virginia,
7 appointed pursuant to the provisions of Title 28, United
8 States Code, Section 753, do hereby certify that I was
9 authorized to report, and did so report in Stenotype, the
10 foregoing proceedings;
11 THEREAFTER, my Stenotype notes were reduced to
12 typewriting under my supervision; and I further certify that
13 the pages herein numbered contain a true and correct
14 transcription of my Stenotype notes taken herein.
15 DONE and signed, this day of
16 , 19 , in the City of Alexandria,
17 Commonwealth of Virginia.
18
19
20
21
EDWARD DONOVAN McCOY, RPR
22 Official Court Reporter
23
24 * * *
25