412 1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK 2 ------------------------------x 3 UNIVERSAL CITY STUDIOS, INC., et al, 4 Plaintiffs, 5 v. 00 Civ. 277 (LAK) 6 SHAWN C. REIMERDES, et al, 7 Defendants. 8 ------------------------------x 9 July 19, 2000 10 9:00 a.m. 11 Before: 12 HON. LEWIS A. KAPLAN, 13 District Judge 14 APPEARANCES 15 PROSKAUER, ROSE, L.L.P. Attorneys for Plaintiffs 16 BY: LEON P. GOLD CHARLES S. SIMS 17 CARLA MILLER SCOTT COOPER 18 FRANKFURT, GARBUS, KLEIN & SELZ 19 Attorneys for Defendants BY: MARTIN GARBUS 20 ERNEST HERNSTADT DAVID ATLAS 21 22 23 24 25 413 1 THE COURT: Before we get started with the witness, 2 let me just make a suggestion to you. 3 We have been proceeding on the assumptions that 4 everybody knows and that the record reflects such fundamental 5 facts as what's a computer, what's an operating system, what's 6 the Internet or the worldwide web, and so on. 7 In the interest of having a complete record, it seems 8 to me we ought not to assume those things. So, I invite your 9 attention to what I think are entirely uncontroversial 10 findings on those points in U.S. v. Microsoft, basically 11 defining the terms which is reported at 84 Fed.Supp.2d page 9. 12 And the ones I thought particularly relevant were paragraphs 13 1, 2, 11, 12, 13, 14, and 16, which simply lay out the 14 background. 15 I would invite you to look at them at some point and 16 see whether you will stipulate to them. And if you can't 17 stipulate to them, address the question of why I shouldn't 18 take judicial notice of the facts in those paragraphs. 19 Obviously we are not trying the Microsoft case here. 20 Let's proceed. 21 MR. GARBUS: Your Honor, may we approach the bench? 22 THE COURT: Yes. 23 (At the sidebar) 24 MR. GARBUS: I have some suggested stipulations that 25 may save a great deal of time and we may be able to -- (1) 414 1 that there's no direct proof that any single copy of a movie 2 has ever been sent out on the Internet, that is DeCSS and 3 deencrypted -- 4 MR. GOLD: If I may? Your Honor, I would 5 respectfully request that whatever stipulations Mr. Garbus may 6 have in the case and whenever he has them, I would love to get 7 them in writing so I can look at them and it seems to me the 8 quickest way to do it, instead of grabbing a minute or two 9 before a particular witness is examined -- 10 MR. GARBUS: I'm trying to do this because of time. 11 MR. SIMS: Your Honor -- 12 THE COURT: Don't everybody talk at once. 13 I know you are, Mr. Garbus. And I appreciate that 14 you are trying to save time. I don't want to take trial time 15 unnecessarily with this. I can't anticipate the discussion 16 from yesterday's discussion and I think the solution on at 17 least the one you read now is readily obvious, in light of the 18 solution yesterday. 19 I suspect that when Mr. Gold gets a chance to think 20 about it, he will agree with the same caveats he agreed 21 yesterday, that is, he's going to ask me to infer and he is 22 going to want you to, at this point, I suppose that lots of 23 people are offering movies that purport to be decrypted and 24 that I should infer, even in the absence of specific knowledge 25 as to what utility was used to decrypt them, that at least 415 1 some of them were decrypted with DeCSS, and you will have your 2 arguments on. 3 Why don't you have that discussion between yourselves 4 first. 5 MR. SIMS: We provided you five pages of proposed 6 stipulations last week at the judge's request and we've never 7 gotten any response and I've written about it. 8 MR. GARBUS: I haven't seen them. 9 THE COURT: Work that out. 10 MR. GARBUS: The other thing I wanted to mention is 11 since your Court has been very sensitive about the whole issue 12 of press, I wanted to mention that over the of the two days, I 13 have not spoken to any representative of the press. I have no 14 objection to the fact that other people have spoken to members 15 of press. They have every right to do so. 16 I just wanted to point that out. We have not in over 17 the last two days not spoken to a soul. 18 THE COURT: We are just not going to get into that, 19 Mr. Garbus. You have made your assertion. Ms. Gross and the 20 Electronic Frontier Foundation, which is I gather financing 21 this case, and she's sitting at counsel table with you, 22 weren't covered by your remarks I noticed. 23 MR. GARBUS: They were. 24 THE COURT: Nor were any of a number of other people. 25 So, let's -- 416 1 MR. GARBUS: I was talking about myself. 2 THE COURT: Let's just avoid all these protestations. 3 MR GOLD: Your Honor, in the late afternoon 4 yesterday, you asked us several questions about turning over 5 of drafts of Mr. Schumann's declaration and we have run that 6 down at this point. Is it appropriate to do it now or would 7 you rather wait? 8 THE COURT: Did I ask you questions? I just asked 9 you to turn them over, if you had it. What's the problem? 10 MR GOLD: What happened is when we verified this with 11 the records, after the deposition, we got a letter from 12 defendant's firm asking very specifically for documents. They 13 did not ask for the drafts of any declarations; however, they 14 did ask for some specific materials and what Mr. Schumann did 15 is turn over his whole file at that point. 16 The file contained drafts that he had in his 17 possession of this declaration. Although they had not been 18 asked for, we took Mr. Schumann's file and turned it all over, 19 including declarations, to the defendants. 20 I know your Honor doesn't want me to bring up other 21 issues that we have about documents with the defendants, so I 22 will not. So, there were drafts and they were turned over. 23 THE COURT: All right. Let's go. 24 (In open court) 25 MARSHA KING, resumed. 417 1 called as a witness by the plaintiff 2 having been previously duly sworn, testified as follows: 3 MR. HERNSTADT: Your Honor, just to complete the 4 record on that, I believe to the extent they were turned over, 5 they were turned over within the last week after the second 6 day of Mr. Schumann's declaration. 7 THE COURT: Look, could we please get on with the 8 testimony. 9 MR. HERNSTADT: Thank you. 10 THE COURT: Ms. King, you are still under oath. 11 DIRECT EXAMINATION Continued 12 BY MR GOLD: 13 Q. Good morning, Ms. King. 14 A. Good morning. 15 Q. You had just finished yesterday testifying about the 16 nature of the importance the studios attributed to having an 17 encryption system before they came out with their DVDs and I'm 18 going to continue from there. 19 What has happened with DVD sales since the adoption 20 of CSS and the studio's decision to release their pictures in 21 DVD format? 22 A. Well, the sales of DVD players have been quite successful. 23 There are over, I believe it's about 5 million U.S. homes, the 24 projections show probably 10 million by the end of the year 25 2000. The sales of DVD software have been quite robust both 418 1 in the United States and where we are launched around the 2 world. 3 Q. Approximately how many DVD players have been sold? 4 A. I think it's -- I think it's about 5 million. 5 Q. Is there current harm to the plaintiffs represented by the 6 dissemination in the DeCSS hack? 7 MR. GARBUS: I object to the form. 8 THE COURT: What's the objection to the form? 9 MR. GARBUS: No foundation for it. Could we hear the 10 question again? 11 THE COURT: Read the question please, Amy. 12 (Record read) 13 MR. GARBUS: I object to the question. 14 THE COURT: Overruled. 15 The witness is the head of business affairs for the 16 studio. 17 A. First of all, we lost what to us was our first line of 18 defense in protecting our copyrights in the digital domain. 19 The CSS encryption system was to provide protection for our 20 works in DVD. As I said before, the reason that the studios, 21 including Warner Brothers, were willing to distribute their 22 product in the digital domain in this new format was because 23 they had this protection. 24 So, the first thing is we've lost our protection. 25 That in itself is of great harm to us. Secondly, the second 419 1 harm might be the loss of confidence in using. 2 MR. GARBUS: May I object, your Honor -- 3 A. Excuse me. 4 THE COURT: You can cross-examine, Mr. Garbus. You 5 can't object to the answer. 6 A. The second problem is certainly the loss of confidence 7 that the studios would have in continuing to distribute 8 product in this format. There's a tremendous amount of 9 investment that's gone into the development of DVD, the 10 investments of the studios, including in mastering a very 11 expensive product, the investment of the consumer electronics 12 industry, the investment of the computer industries and 13 equally the investment of what will be we think 12 million 14 consumers by the end of the year 20000 and purchasing a 15 product that is widely accepted around the world. 16 On top of that, we believe that we are beginning to 17 lose legitimate sales of our product and will continue to 18 increasingly lose legitimate sales of our product. 19 Q. Does Warner believe that the DeCSS -- 20 THE COURT: Let's talk about what the witness 21 believes, at least. I don't think she can speak for untold 22 thousands of individuals. 23 MR GOLD: Thank you, your Honor. 24 Q. Do you believe any other damage will flow to Warner from 25 the DeCSS hack unless dissemination of DeCSS is enjoined? 420 1 A. Well, if the dissemination of DeCSS is not enjoined and if 2 the legislation is not upheld, then we've lost our protection 3 for products in the digital domain, not only could it have a 4 tremendously adverse effect on the sale of DVD, but Warner 5 Brothers at least is now looking into digital distribution of 6 its movie in video-on-demand avenues. They can be private 7 video on demand through a pay-per-view network like direct TV 8 or it could be through the Internet. 9 But the only way I think that we would be willing to 10 go ahead is if we had some type of protection for our product. 11 Additionally, even if we had protection on video on demand, if 12 there still was a hack like this of DVD, it could cut the 13 window and cut off our future revenue from that new product 14 stream. So, our TV revenues as well as our video revenues 15 would be impacted greatly. 16 Q. Have you ever heard the term "film library"? 17 A. Yes. 18 Q. What is that? 19 A. Our film library like the libraries of the other studios 20 had a great value to us because in the reselling of our older 21 catalog titles, what we call our "crown jewels" of the studio. 22 We make income just to bring in new movies because 23 there's a very small percentage of new movies that actually 24 turn a profit over the short term. So, the resale of our 25 library and the value of existing products like "Casablanca" 421 1 or "Gone With The Wind" are very valuable to the studios. 2 A product like DVD gives the studios a chance to 3 resell its library to a new -- to a new consumer and since 4 video was the first consumer product in their hands provided 5 by the motion picture studios, we have seen a tremendous sale 6 of catalog product. The continued dissemination of our movies 7 not coming from the studios would impact those sales. 8 Q. Can you quantify the potential loss of revenue that Warner 9 would suffer unless the dissemination of the DeCSS hack is 10 enjoined? 11 THE COURT: Mr. Garbus? 12 MR. GARBUS: I object. 13 THE COURT: Pardon? 14 MR. GARBUS: I object to that. There's no 15 foundation. 16 THE COURT: Overruled. 17 A. I have not seen a quantification of projected harm. I do 18 know that our -- when I speak for Warner Home Video in which I 19 work, that we have done our five-year projections and our 20 five-year strategic plan. And one of the great risks focuses 21 on the growth of DVD which provides, not just income to 22 balance out a mature business like video, but incremental 23 income to show growth for our company. 24 One of the tremendous risk factors that we list and 25 that we emphasize every time we talk about the business is to 422 1 the risk of digital piracy and digital copyright sharing. 2 Q. Does DeCSS create any problem with the public's image of 3 motion pictures and motion picture distribution? 4 MR. GARBUS: I object to the form of the question. 5 THE COURT: What's the problem with the form? 6 MR. GARBUS: As to what the public is thinking? As 7 to what the public's image is? 8 THE COURT: I'm going to take it for what it's worth 9 as a perception of the studio. I don't know that it's worth 10 much. 11 Go ahead. 12 A. Well, I also can't speak, you know, for the entire public, 13 but I can speak for how the studios look at what's happening 14 in the marketplace today. 15 One of the great problems that we believe at the 16 studio is happening in the music industry is the perception 17 that copyrighted music is free and whether that's grounded in 18 prior law or whether that's grounded in just common practice, 19 we are not sure, but it's a perception that exists in the 20 marketplace that makes it very difficult for the music 21 industry to make its case. 22 In the movie industry, we are in a different -- we 23 are in a different situation and we know that our movies are 24 protected by copyright in that there is no right to make a 25 copy of a movie. There just isn't. And we want to protect 423 1 our movies now and into the future. 2 MR. GOLD: I have no further questions, your Honor. 3 THE COURT: Ms. King, I've got one. 4 Is there any way to put this genie back in the 5 bottle, I mean, the DeCSS genie by a Court order addressed to 6 this defendant? 7 THE WITNESS: Well, I'm not a technical expert and I 8 know that that is very difficult, however, I believe that the 9 combination of the enforcement of the DMCA code, citizens 10 being law-abiding citizens and the measures that we have in 11 place in terms of our own antipiracy and anticopying efforts 12 sends a message that I think it's a combination of the 13 enforcement, further technological innovations that will put 14 on our product, the enforcement of the law and the public 15 perception -- the public understanding that you cannot just 16 violate the copyright law and take product that has -- is up 17 there because it's a violation of the law, it's being 18 trafficked on, because it's violated the law. 19 That's why I think -- that's why I think this is 20 exceptionally important and I know my colleagues believe that 21 as well. 22 THE COURT: Given the apparent dissemination of the 23 DeCSS code, wouldn't your interests, if they are valid, be 24 served to whatever extent a Court is able to serve them by 25 declaratory judgment in determining whether or not what 424 1 occurred here and what is threatened to continue occur with 2 DeCSS, assuming there's a continued threat, is illegal or not? 3 Do you follow me? 4 THE WITNESS: In other words, you're saying if it 5 just was declared illegal, as opposed to -- 6 THE COURT: As opposed to picking out one defendant 7 to enjoin. It's as if what you were trying to do here was to 8 stop 37,000 kayakers coming down the Hudson River and you're 9 asking for an injunction against one of them on the premise 10 that coming down the Hudson River in a kayak is illegal. 11 Even if you get that injunction, there are going to 12 be 36,999 kayakers coming down the river. Isn't what you are 13 really after here a determination of whether it's illegal to 14 kayak down the Hudson? 15 THE WITNESS: Yes, that is certainly what we are 16 after here. My response to that is that, at least as one of 17 the studios involved in this lawsuit, we had to start 18 somewhere. 19 THE COURT: Mr. Garbus? 20 CROSS-EXAMINATION 21 BY MR. GARBUS: 22 Q. Does anyone in the studio -- and I'm just repeating the 23 stipulations now we were going to offer this is morning -- 24 have any direct proof that any single copy of a movie that has 25 ever been sent out on the Internet was sent out after DeCSS 425 1 encryption, yes or no, direct proof? 2 A. I can't answer that question for all the studios. 3 Q. For yourself? 4 A. Not that I know of. 5 Q. Now, you say you meet with other studios' representatives 6 and heads, is that right? 7 A. From time to time. 8 Q. Has anyone at any studio ever told you -- have you ever 9 seen a document -- let me rephrase that question. 10 Have you ever seen a document from any studio or the 11 MPAA or any third party showing any direct proof that any one 12 single copy of a movie has ever been sent out on the Internet 13 that was DeCSS encrypted? 14 A. No. 15 Q. Have you ever seen any direct proof that anyone ever 16 downloaded source or object code from 2600.com? 17 A. Other than in this courtroom, I have not. 18 Q. Other than the plaintiff's witnesses, you mean? 19 A. Yes. 20 Q. Have you ever seen any direct proof that anyone ever made 21 a copy of a DVD as a result of having downloaded anything from 22 2600.com? 23 A. I don't recall ever seeing that. 24 Q. And in your conversations with the studio, has anyone ever 25 told you that they ever saw any direct proof that anyone ever 426 1 downloaded source or object code from 2600.com that was used 2 to make a copy of a movie? 3 A. That was not a topic of any conversation I had with the 4 studio people. 5 Q. Weren't you involved -- 6 A. So, the answer is no. 7 Q. Weren't you involved in copy protection? Wasn't that your 8 issue? 9 A. Yes, I was involved in the development of copy protection 10 technology in the initial licensing. 11 Q. Did you ever ask anybody at any studio whether or not 12 there was one single document that indicated that anyone ever 13 downloaded source or object code from 2600.com? 14 A. No. 15 Q. Did you ever ask anyone at any studio whether there was 16 any proof that anyone ever made a copy of a film as a result 17 of having downloaded object or source code from 2600.com? 18 A. No. 19 Q. Do you know of any direct proof or did anyone at the 20 studio ever tell you or did you ever see a document that said 21 that anyone did not buy a DVD because they saw a DeCSS 22 deencrypted movie? 23 A. No. 24 Q. Do you have any direct proof or has anyone at the studio 25 ever told you that any DVD, any one DVD in the United States 427 1 was ever not sold because someone saw a DeCSS encrypted movie 2 on the Internet? 3 MR GOLD: Your Honor, I would object to this whole 4 line as being irrelevant to the issues in this case. 5 Moreover, if Mr. Garbus is going to continue with his 6 questions about direct proof, maybe he ought to define what 7 that is. 8 THE COURT: The witness is a lawyer. 9 MR. GOLD: A long time ago. Sometimes -- 10 THE COURT: You want the standard charge on the 11 difference between direct and circumstantial proof, Counsel? 12 Are you having any problem with the concept of direct 13 proof, Ms. King? 14 THE WITNESS: No. 15 THE COURT: O.K. Overruled. 16 Q. Do you or anyone at the studio have any projection for the 17 year 2000 of the loss of any DVD sales as a result of films 18 deencrypted by DeCSS either sold on the street or transmitted 19 on the Internet? 20 A. I don't. I can't speak for anyone at the studio. 21 Q. Is there anyone at the studio who would have that 22 information, if such information exists? 23 A. I don't know of anyone that would have them. 24 Q. You mentioned on the direct examination a five-year plan? 25 A. Yes. 428 1 Q. Is there any word in that document that in any way relates 2 to any anticipated loss of sales as a result of anything 3 having to do with DeCSS specifically? 4 A. It is my recollection that in that documentation, under 5 "risks," we list digital copyright protection as one of the 6 major risks that we take as we go into the digital media. It 7 is set up as a risk. It is not quantified. 8 Q. Please answer my question. 9 Is there anything in that document that in any way 10 indicates that DeCSS particularly, specifically, creates any 11 risk for the next five years? 12 A. No, not -- 13 Q. Do you have a copy of that document? Pardon me. 14 A. Not specifically, no, it does not. 15 Q. Do you have a copy of that document here with you today? 16 A. No, I do not. 17 MR. GARBUS: Mr. Gold, may I see it? She testified 18 to it on direct. 19 MR. GOLD: Was this a document in our document 20 designation? 21 MR. GARBUS: Pardon me? 22 MR GOLD: Was this a document in our document 23 designation? 24 MR. GARBUS: This is a document that she testified 25 about on your question, a five-year plan, and I ask for that 429 1 document. 2 MR GOLD: Well -- 3 THE COURT: Do you have it here, Mr. Gold? That's 4 the first question. 5 MR GOLD: No. 6 THE COURT: No. Ask the next question. 7 MR. GARBUS: I ask that it be produced. 8 THE COURT: We will consider that later. 9 BY MR. GARBUS: 10 Q. Now, you were in court when you saw Mr. Shamos testify, is 11 that right? 12 A. Yes. 13 Q. And have you been part of the defense team in this case? 14 A. No. 15 Q. Did you file an original affidavit in this case back in 16 January? 17 A. Yes, I did. 18 Q. And were you deposed in this case? 19 A. Yes, I was. 20 Q. Has anyone at Warner's ever asked anybody to replicate or 21 duplicate or to make the same kind of test that Mr. Shamos 22 made with respect to the use of DeCSS, then DiVX'ing a movie, 23 and then sending it out over the Internet? 24 A. To the best of my knowledge, and I don't know everyone at 25 Warner Brother; no. 430 1 Q. Can you tell me why if DeCSS is such a threat, that no one 2 prior to the time that Mr. Shamos was asked to do this test, 3 anyone at Warner's or anyone at the other major studios or 4 anyone at the MPAA never made such a test? 5 MR GOLD: Your Honor, that -- 6 THE COURT: Sustained. 7 Q. Did you discuss Mr. Shamos' test with him at any time 8 prior to the time he made it? 9 A. No. 10 Q. Since you saw Mr. Shamos in court, have you requested 11 anyone at Warner Brothers to try and replicate the test? 12 A. Since I saw him the day before yesterday? 13 Q. Yes. 14 A. No. 15 Q. To your knowledge, since Mr. Shamos performed the test 16 about a month ago, has anyone ever asked anyone at Warner's to 17 replicate the test? 18 A. Not that I know of. 19 Q. To your knowledge, has anyone at any of the other major 20 studios for the last eight months since DeCSS was cracked made 21 any attempt to replicate the test that Mr. Shamos made? 22 A. I have no information about the other studios in this 23 area. 24 Q. Do you have any direct proof of anyone who did not go to 25 see a movie or watch an HBO film because they had previously 431 1 seen a deencrypted copy of a DVD, deencrypted through DeCSS? 2 A. I have no direct proof. 3 Q. Do you know what the budget is of the MPAA to investigate 4 piracy? 5 A. I can't remember off the top of my head, but I know I've 6 been told in the past. 7 Q. Do you know what the budget of Warner Brothers is to 8 investigate piracy? 9 A. We don't have a budget to investigate piracy. We 10 participate through the MPAA and provide them with 11 information. We have an intellectual property group that 12 helps facilitate the work with the MPAA. 13 Q. And can you tell me if the MPA has offices in New York, in 14 California, and in Washington, is that right? 15 A. I know there are offices in Washington and Los Angeles; 16 yes. 17 Q. And they also have offices throughout the world? 18 A. I know they have offices, not in every country in the 19 world, but I know they have offices in Europe and in other 20 place. 21 Q. In Asia? 22 A. They have an office in Singapore. 23 Q. And do you know at these offices they have investigators? 24 A. Yes, they do. 25 THE COURT: Mr. Garbus, this is not a helpful line. 432 1 MR. GARBUS: I think we could deal with it all on a 2 stipulation. That's the stipulation I was offering before. 3 THE COURT: You offered five propositions for before. 4 I think that you are now on about the 40th of the 5. 5 MR. GARBUS: No, no, I'm prepared to go through 6 the -- 7 THE COURT: Mr. Garbus, it is perfectly obvious that 8 the studios have antipiracy efforts. They have antipiracy 9 resources, just about every trademark holder in America does, 10 every copyright holder, everybody knows that. 11 Q. Were you here when you saw Mr. Schumann talk about the 12 logs that had been developed? 13 A. Yes, I was in the courtroom. 14 Q. And do you know what the LiViD logs are? 15 A. No. 16 Q. Do you know what the logs were that he was referring to? 17 A. From what I gathered in the courtroom, they were logs 18 relating to Linux development. 19 Q. The people have been involved in the cracking of the 20 DeCSS, among other things? 21 A. No. 22 Q. To your knowledge, has anyone at the MPAA or any of the 23 major studios made any attempt at all at any time to contact 24 any of the people who were involved in the DeCSS crack? 25 A. To the best of my knowledge, the studios, once they were 433 1 informed by the MPAA of the cracking of DeCSS spent an 2 incredible amount of time talking together about what action 3 they should take. We took it as a unified group through the 4 MPAA. 5 That was a conscious decision, and we left together 6 immediately after we heard about it. This wasn't just 7 something we put on the shelf. There were immediate meetings 8 and there were many of them. 9 Q. Let me ask you this: To your knowledge, did anyone ever 10 attempt to contact anyone who allegedly on the Internet is 11 trying to sell or distribute or share a film that allegedly 12 was deencrypted through DeCSS? 13 That you can answer that, I think, yes or no. 14 A. No, I -- no, I can't. 15 Q. Let me rephrase it. 16 Do you know the name -- 17 MR. GARBUS: Judge, I think this is unnecessary. 18 THE COURT: I do, too. 19 Q. Do you know the name of any one person who was sharing 20 films on the Internet who was sharing a film that has been 21 deencrypted through DeCSS? 22 A. No, I don't. 23 Q. Have you ever seen a document from the MPAA, your studio, 24 or any other studio that indicates that any attempt was made 25 to learn the names of the people who allegedly claim on the 434 1 Internet that they have used DeCSS to deencrypt movies? 2 MR GOLD: Your Honor, I object to the form of the 3 question. 4 THE COURT: To the form, Mr. Gold? What's wrong with 5 the form? 6 MR GOLD: I thought it was compound and I didn't 7 quite understand it myself. 8 THE COURT: Rephrase it, Mr. Garbus. 9 MR. GARBUS: Can I hear the question again? 10 THE COURT: Go ahead. 11 (Record read) 12 MR. GARBUS: I can break it is down into six 13 questions, if you want. 14 Q. Have you ever seen any document -- 15 THE COURT: I do you think the sarcasm is helpful, or 16 is that designed to provoke a reaction? 17 MR. GARBUS: No, no, no, no, just trying to save 18 time. 19 THE COURT: Go ahead. 20 Q. Have you ever seen a document from the MPAA that gives you 21 the name of any person on the Internet who allegedly is 22 seeking to share a deencrypted movie? 23 A. No. 24 Q. Have you ever seen any document which shows any attempt 25 made by the MPAA to learn the name of any person who allegedly 435 1 shares a movie allegedly deencrypted through DeCSS? 2 A. No. 3 Q. Have you ever seen a document from any studio, including 4 yours, indicating any attempt to learn the name or the 5 identification of any person who was allegedly sharing on the 6 Internet DeCSS deencrypted movies? 7 A. When you say the identification, I do know that the MPAA 8 looked for sites where they were posting the DeCSS code. So, 9 I did see documents that referred to that, but not names. 10 Q. Now, with respect to those sites, do you know if anyone at 11 the MPA or the studios or Warner Brothers ever made an attempt 12 to contact any of those sites? 13 A. Yes. 14 Q. And what attempt was made to contact those sites other 15 than 2600.com? 16 A. I know they sent out cease and desist letters and I don't 17 know to the extent they sent out letters. They had some take 18 downs and that's about all I know. I wasn't intimately 19 involved, but I know they did that. 20 Q. Other than cease and desist letters, did they make any 21 contact with by IPS server to determine the name of any 22 individual who allegedly used DeCSS to deencrypt a movie? 23 A. Oh, I don't know. 24 Q. Do you know that IPS servers will give you that 25 information, if requested? 436 1 A. I'm not familiar with that. 2 Q. Do you know that the technology now permits -- excuse 3 me -- do you know that IPS servers have logs about who visits 4 their sites? 5 MR GOLD: Your Honor, I object to the question. 6 Could Mr. Garbus describe what an "IPS" is? 7 MR. GARBUS: Internet Service Provider. I'm sorry. 8 I said "IPS." 9 THE COURT: Look, Mr. Garbus, I had this point about 10 four months ago and whatever merit it has, it has. It's not 11 getting any better or worse. If you want to pursue it, I'm 12 going to give you five more minutes. 13 BY MR. GARBUS: 14 Q. Now, in your direct examination, you talked about the 15 licensing structure. Do you recall that? 16 A. Yes. 17 Q. See if you can help me and let me just state it and you 18 tell me if it's accurate, if that's an appropriate way to do. 19 The DVD CCA has licenses with the movie studios 20 concerning CSS? 21 A. Not necessarily. 22 Q. Then why don't you describe the licensing system. 23 A. Well, you need to have a license with DVD CCA to put the 24 encryption on your disks, but that license could either be 25 taken out by the motion picture studio or it could be taken 437 1 out by their replicator who makes the disks. 2 Q. O.K. We are getting at it the same way, and it also is 3 taken out by the hardware manufacturer? 4 A. Yes, it is. 5 Q. So that the license from DVD CCA goes to the movie studio, 6 it goes to the replicator, and it goes to the hardware 7 manufacturer, is that right? 8 A. Yes, and if there's going to be a software implementation, 9 I would assume it goes to that party as well. 10 Q. So that the only people who allegedly can play DVDs or use 11 CSS are those people who have the licenses from DVD CCA, is 12 that right? 13 A. That's correct. 14 Q. Now, if you buy -- do you have any information -- does 15 Warner Brothers have any information on the number of sales of 16 DVDs to Linux users? 17 A. No. We don't follow that information. 18 Q. Do you know whether, in fact, the number of sales of DVDs 19 have increased because they are now available for Linux users 20 when they were not available before the DeCSS crack? 21 MR. GOLD: Your Honor, I object to the question 22 because it assumes facts that aren't in evidence. 23 THE COURT: Sustained as to form. 24 Q. Are there any licensed Linux users? 25 A. I have been told that there are at least two licensed 438 1 Linux implementations. 2 Q. Do you know if there are any people using or watching DVDs 3 on Linuxes that do not have licenses? 4 A. I do not know that. 5 Q. Has there been any investigation -- I don't know if this 6 is the same round or a different round -- 7 Has there been any investigation made by the MPA, 8 your studio, any of the nine major studios over whether or not 9 the extent to which Linux users who do not have licenses are 10 using DVDs? 11 A. Linux users don't have to have licenses. Linux users just 12 have to use an authorized implementation. So, I don't have 13 that information. 14 Q. Let me ask the question another way. Linux users, of 15 course, can have a Windows system, so they can have a Windows 16 system so they can watch a licensed DVD, isn't that correct? 17 A. That is correct. 18 Q. And if a Linux user does not have a Windows system, 19 then -- withdrawn. 20 Do you know how many sales of DVDs have been made to 21 Linux users who do not have Windows operating systems? 22 A. We do not track the different types of computer operating 23 systems that use our product. 24 Q. To make a DVD player, how many different licenses do you 25 need? 439 1 A. I don't know. 2 Q. Is it more than five licenses? 3 A. I don't know. I thought it was just one, but I'm not 4 familiar enough with how they're licensing now. 5 Q. Do you know what the cost of those licenses are? 6 A. The cost of the license, which is royalty free, is 7 $10,000, from my recollection. 8 Q. That's for the first year? 9 A. Yes. I don't know. I remember $10,000. 10 Q. You were talking about the increased sales of DVDs, is 11 that right, and how it's mushroomed in the market? 12 A. Yes. 13 Q. And given someone who's in this area, one would expect 14 that the mushrooming would continue? It's a highly-profitable 15 business, is that right? 16 A. Yes. 17 Q. And it's replacing videos? 18 A. Yeah. I mean, it's a very complex -- excuse the word 19 "matrix" to figure out how the business is growing. I mean, 20 we have VHS. We have VCD in Asia. We have DVD. So, we are 21 always analyzing what the growth is. Is DVD taking anything 22 away from our current business? Is it incremental? It's part 23 of our business plan. 24 Q. And are there any projections within Warner Brothers in 25 your business plan indicating the decrease in videos as a 440 1 result of the DVD sales? 2 THE COURT: Asked and answered. 3 Q. What are those projections? 4 THE COURT: She said there were none. 5 Q. Does your five-year plan for Warner Brothers have no 6 projections with respect to the loss of video sales as a 7 result of the increase in the DVD market? 8 A. Let me see if I understand. 9 THE COURT: I'm sorry. The question you asked a 10 minute ago, I misheard. You can go back to that, if you want, 11 video versus DVD, Mr. Garbus. 12 A. Yes. Our projections show the, as I said before, our 13 sales of DVD are incremental to our video sales currently. 14 But in our projections for the future, it shows that video 15 would decline as DVD increases. 16 Q. Isn't it fair to say that the expectation is within a 17 relatively short period of time, if the audio and video market 18 would become very small as the DVD market becomes very large? 19 A. No, that's not accurate. 20 Q. Isn't it fair to say that as time goes on, a movie will 21 not be released on both audio and video? 22 A. We have no projections that show that; none. 23 Q. Now, do you have any projection -- 24 THE COURT: Just a second. I mean, obviously people 25 are not paying any attention to the words that are being used. 441 1 Are movies being released on "audio and video"? 2 THE WITNESS: No. 3 THE COURT: O.K. Mr. Garbus, you meant to say, "DVD 4 and video." 5 That's what you expected, Ms. King, so you answered 6 the question that he didn't ask. 7 Let's pay a little attention, folks. 8 BY MR. GARBUS: 9 Q. With respect to DVD and video? 10 A. Yes. 11 Q. Are there projections? 12 A. Certainly. 13 Q. And these projections show that the DVD market is 14 increasing and as that increases, the sale of the video market 15 will decrease, is that right? 16 A. Yes, to a certain extent; yes. 17 Q. And are there projections of when movies will be released 18 on DVD, but will no longer be released on videos? 19 A. No. 20 Q. Have you seen any projections made by anyone other than 21 Warner's about when video becomes fundamentally far less 22 significant and has fewer films released on it? 23 A. I've seen no projections that show that we are not going 24 to release our movies in the video cassette format which is in 25 99 percent of American television homes. 442 1 Q. And in what percentage of American television homes right 2 now are DVDs? 3 A. This is an estimate. We are looking at I think 10 percent 4 by the end of the year in the United States. 5 Q. And by the end of next year? 6 A. I don't remember. 7 Q. And by the end of the third year? 8 A. I don't remember. 9 Q. Now, do you recall that at the deposition we had been 10 talking about the release of DVD audio? Do you remember that? 11 A. Yes. 12 Q. And you know that DVD audio is in the stores today? 13 A. I don't believe DVD audio in the sense that I think of DVD 14 audio is in the stores today. 15 Q. Well, you say in the sense that you think DVD audio, is 16 there something out there called DVD audio? 17 A. There's a bit of confusion about what DVD audio is. 18 Q. Let me ask you a question: Is there something out in the 19 stores now that you called first DVD audio players by 20 Panasonic and by Phillips? 21 A. There may be. I don't know. 22 Q. And DVD audio players are supposed to play DVD audio, is 23 that right? 24 A. Yes. 25 Q. And is it your testimony that there are DVD audio players 443 1 out for sale today, but that there is no product for the DVD 2 audio players? 3 THE COURT: The witness just said she didn't know if 4 there were DVD audio players in the store today. So, your 5 question starts off on an erroneous premise that maybe you 6 understand the facts right and the witness is not informed. 7 But let's at least listen to the answers. 8 (Continued on next page) 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 444 1 BY MR. GARBUS: 2 Q. So when you say there is something out there, is there 3 something out there called DVD audio which is used with the 4 DVD audio players? 5 A. I don't know. I have been told that there is some music 6 in the marketplace that is in what is the video audio 7 component of DVD. 8 In other words, DVD video plays 5.1 surround audio 9 which is even different from a normal CD. You can put out 10 music in 5.1 surround which is the video standard for sound. 11 I'm trying to make this clear. But that isn't DVD audio. DVD 12 audio is another standard, and I don't believe that any music 13 is in the marketplace that meets that standard yet. Although 14 I could be wrong. That's just what I have been told. 15 THE COURT: That meets which standard? 16 THE WITNESS: That meets the new DVD audio standard. 17 The sound on the DVD video has a certain specification. DVD 18 audio goes beyond that specification, so it's an even added 19 feature. 20 THE COURT: When you are talking about DVD audio, you 21 are not talking about 5.1 surround, you are talking about a 22 different standard, is that correct? 23 THE WITNESS: That's correct, that's what I would be 24 talking about, yes. 25 THE COURT: Let's go. 445 1 MR. GARBUS: May I mark this as an exhibit? It 2 hasn't been marked as an exhibit before. I can describe it or 3 not. These are things that I purchased last night at Tower. 4 THE COURT: Mr. Gold? 5 MR. GOLD: We object, your Honor. 6 THE COURT: Where are you going with this, Mr. 7 Garbus? 8 MR. GARBUS: There is testimony in the record and 9 there are affidavits in the record that DVD audio was not 10 released because DeCSS somehow affected it and that DVD audio 11 was going to be delayed for another year, and in fact they are 12 out for sale now. 13 THE COURT: Mr. Gold? 14 MR. GOLD: It may well be, your Honor, that the DVD 15 audio market, that the product that we are going to get into 16 now was not on the market but this other DVD product that 17 Ms. King described is, from her prior answers. 18 THE COURT: Well, I mean that's kind of an 19 observation about what might be going on, Mr. Gold, but is 20 there an objection, and, if so, what is it? 21 MR. GOLD: Your Honor, we got a list of documents and 22 I thought the way the games were played -- if they want to go 23 out and buy some videos, they could have given them to 24 Mr. Hernstadt last night when he was in our office and he 25 could have given them to us, or we could have gotten some 446 1 notice. 2 The rules provide for appropriate notice, and all of 3 your Honor's orders provided for appropriate notice. 4 THE COURT: I am going to sustain the objection. 5 MR. GOLD: Also, I don't think there is a foundation 6 on that to that question. 7 THE COURT: Well, all we have had is a proposal to 8 mark the disks. You don't need a foundation to mark a disk, 9 but I don't see the relevance of this, Mr. Garbus. 10 MR. GARBUS: Let me see if I can explore a little 11 further. 12 Q. Do you know what water marking is? 13 A. Yes, I do. 14 Q. And was that one of the potential encryption systems that 15 were considered for DVDs? 16 MR. GOLD: Your Honor, is this not way beyond the 17 subject of direct testimony? Is this not irrelevant? I 18 object on those grounds. 19 MR. GARBUS: I will make an offer of proof, basically 20 that the movie studios knew back in -- 21 THE COURT: Before you make any offer of proof, maybe 22 you could respond to the objection. 23 MR. GARBUS: I think it's relevant because I think it 24 shows -- and I am prepared to do this at the sidebar, or if 25 you want, I will do it from here. 447 1 THE COURT: Would you go ahead, please, Mr. Garbus. 2 MR. GARBUS: That at the time that the encryption 3 system was placed on the DVDs, they knew that the encryption 4 system would be broken in a very, very short period of time, 5 and they got into the study of water marking, and different 6 groups then competed for the kind of encryption system that 7 was available. 8 I think the proof will show, and it relates to the 9 clause you read yesterday of the law, that they knew that it 10 was not an effective device, and that since they have known 11 about the cracking they have developed in fact other 12 encryption codes that are superior to CSS which they can place 13 immediately on DVDs. It may cause some difficulty in how you 14 put it into the machine, but in fact a security system is now 15 available and can be used now to stop any potential loss of 16 future sales. 17 MR. GOLD: Your Honor -- 18 MR. GARBUS: And you then get into a very important 19 economic issue, namely because you are concerned about and you 20 indicated I think that the concern is not today's damage or 21 may be today's damage to circumstantial proof, but certainly 22 damage tomorrow. 23 And what I would like to show, if we had an 24 opportunity to do it, is that the movie studios know about it, 25 knew about it two years ago, and have the total ability to 448 1 stop that damage, unlike the audio business. 2 THE COURT: Whatever the movie studios may have known 3 about two years ago is first of all not within the scope of 4 the direct and second of all not relevant. 5 It is not relevant because although you seem to have 6 the view, and you are entitled to advocate it, that when the 7 statute speaks of effective control of access to copyrighted 8 works it should be construed to mean good or hard to crack 9 control, that is not the way the term is defined in the 10 statute. 11 Indeed, if it were so defined in the statute, it 12 would be meaningless, the entire statute, because the 13 definition of something that effectively would control access 14 would mean something uncrackable if it exists, and the only 15 occasion for envoking the statute is where something has been 16 cracked. So, by definition any time something had been 17 cracked, the control wouldn't have been effective. 18 Now, I just don't read the statute that way, and you 19 are welcome to take that up on appeal should the occasion 20 arise, if indeed the plaintiffs win this lawsuit. 21 Now, that having been said, that takes care of the 22 past. As to threatened harm, I think that the witness has 23 raised the question of threatened future harm on direct, and I 24 think certainly in terms of a claim for an injunction you are 25 entitled to some latitude to explore her claim on that. 449 1 That's the ruling. 2 BY MR. GARBUS: 3 Q. Isn't it a fact that since CSS was cracked, the studios 4 have been developing other encryption systems? 5 A. The studio? The studio -- I'm not sure I know what you 6 mean by other encryption systems. 7 Q. You know what water marking is? 8 A. Yes, but water marking is not the same as an encryption 9 system, so that's why I say that. They have been working on 10 water marking, they have been working on a system for digital 11 transmission for a long time in both of those systems. Since 12 CSS was cracked, you know, they have looked, they certainly 13 have asked Matsushita Toshiba what they can do about it, if 14 anything, and I have not heard that we have an instant or an 15 immediate fix. 16 Q. Have you heard of CSS 2? 17 A. Yes. 18 Q. What is CSS 2? 19 A. CSS 2 is a similar encryption system to CSS that was meant 20 to protect DVD audio. 21 Q. And do you know what CPPM is? 22 A. Yes, I believe that CPPM, to the best of my knowledge, is 23 the encryption system that audio adopted after they 24 disregarded CSS 2 upon being cracked in October. 25 Q. And when you say CPPM was adopted, that was after they 450 1 learned that CSS 2 would not protect audio, is that right? 2 A. Let me rephrase what you said. CSS 2 was a system similar 3 to CSS. When we found out about DeCSS, the music industry 4 decided they did not want to use CSS 2 because it was 5 vulnerable. Therefore, they looked for another type of system 6 to protect DVD audio, and I believe the one that they picked 7 was CPPM, which is different than CSS 2. 8 Q. You have now talked about the way that the audio 9 industry -- pardon me -- the audio industry has changed 10 encryption systems or security systems. Tell me what attempt 11 the movie industry has made since October to develop security 12 systems or encryption systems. And I gather the word 13 encryption system is not appropriate for water marking but the 14 word security system is. Is that correct? 15 A. Yes. 16 MR. GOLD: Your Honor, I object to the form of that. 17 THE COURT: Overruled. I think it's clear. Go 18 ahead. 19 A. The studios have spent a tremendous amount of time, I know 20 because I have been tangentially involved, in coming up with a 21 system that is now called 5C, which is for digital 22 transmission. It works on IEEE 1394 digital connections, and 23 it protects the transmission from one digital device to 24 another. That's extremely important because in the CSS 25 license we demanded that all digital ports be turned off so 451 1 that product could not be transmitted. We are looking for a 2 strong protocol now for that, and it has taken up a tremendous 3 amount of time and resources at every single studio in that 4 discussion. 5 Simultaneously with that, the studios have been 6 working on a very difficult situation involving the choice of 7 water marking. And water marking does not provide an 8 encryption system. What it does is if encryption is broken or 9 if for some reason circumvented, if you have a water mark then 10 the copy would not play in an authorized player. So it's 11 another system of security as well. 12 In addition to that, we would have loved to have 13 chosen an immediate substitute system for DVD. However, there 14 are going to be, you know, I'm making a guess here, 12 million 15 DVDs in the market by December. If you put another encryption 16 system on and you started encrypting your movies, then all of 17 those players would be obsoleted and it's very difficult to 18 trade in the installed base of CE players and those are just 19 stand alone players. There is probably 20 million or more DVD 20 ROM drives that would also be obsoleted if we were to put a 21 noncompatible encryption system on. So the first thing we did 22 was go to Matsushita Toshiba and say is there any way we can 23 get a fix on this that would help us going into the future. 24 The studios certainly have not sat on their thumbs but have 25 put in a tremendous amount of time and resources to see what 452 1 they could do to fix the situation. 2 Q. Can you tell us, do you have any document with you here 3 today indicating when the studios project -- the judge asked 4 before the question putting the genie out of the bottle. 5 DeCSS has been posted regularly since October, at least since 6 October of 1999, is that right, to your knowledge? 7 A. I imagine. 8 Q. It has been posted regularly in November, December, 9 January, February, March, April, May, June. 10 THE COURT: We all know what the intervening months 11 are, Mr. Garbus. Another question, please. 12 Q. And is it fair to say that anyone who wants DeCSS or any 13 number of people in the United States who wanted DeCSS in the 14 last months already has had an opportunity to see it? 15 MR. GOLD: I object on the grounds that that calls 16 for speculation. 17 THE COURT: Look, I guess it does, but the 18 fundamental point is obvious. 19 A. Okay, it's available. 20 THE COURT: That's all right. I am sustaining the 21 objection. There is no need to take time on it. Somebody who 22 wants it and knows anything about the Internet knows how to 23 get it. It's that obvious. 24 Q. And they have known how to get it since at least October. 25 MR. GOLD: Your Honor, objection. 453 1 THE COURT: Yes. Well, no, no. I will allow that, 2 but the witness needs to answer from her personal knowledge. 3 Q. From your personal knowledge, based on your involvement in 4 the industry, since October, anyone in the United States with 5 a computer can get a copy of DeCSS, is that true? 6 THE COURT: I suppose they need an Internet 7 connection, don't they? 8 A. I was going to say, if they are knowledgeable about where 9 to go and have the right connections. 10 Q. You say "if they are knowledgeable." If you go to 11 Disney's search engine and you punch in DeCSS, does it tell 12 you where to go? 13 A. You have to be knowledgeable in knowing what DeCSS is. I 14 mean not everyone knows that. 15 Q. I see. Can you go to let's say Infoseek and punch in CSS 16 and then gets references to DeCSS? 17 A. I don't know. 18 Q. Can you go to Infoseek or to any search engine and punch 19 in DVD and then get CSS or DeCSS? 20 A. I don't know. 21 Q. Do you know enough about the Internet to know that the 22 search engines, there are variable ways of getting to DeCSS 23 without punching in DeCSS? Is that right? 24 MR. GOLD: Your Honor, I object to the question. 25 THE COURT: Sustained. 454 1 Q. Do you go on the Internet? 2 A. Rarely. 3 Q. Have you ever used any of the search engines to see where 4 DeCSS is? 5 A. No. 6 Q. Have you ever gone to 2600.com? 7 A. No. 8 Q. Now, Warner permits buyers of its DVDs to play them in a 9 DVD player no matter where they purchase the DVD player, is 10 that correct? 11 A. Yes. 12 Q. Can Warner decide on its own to allow a company to play 13 its DVDs without that company having a license from the 14 DVD-CCA? 15 A. No, not if we have encrypted the movie. 16 Q. If you encrypted the movie and I created a player that 17 could deencrypt that movie, could Warner sell that DVD to me? 18 A. I think that would violate the license with DVD-CCA. 19 MR. GARBUS: Can I have a moment, your Honor? 20 THE COURT: Yes. 21 Q. Now, do any of your business plans -- and I think you have 22 mentioned this -- in Warner Brothers take into account DeCSS? 23 The five year plan, that you have mentioned. Does any other 24 specifically take into account DeCSS? 25 MR. GOLD: Your Honor, I believe this has been 455 1 covered in prior cross. 2 THE COURT: Sustained. 3 Q. Have you ever seen any press releases from the MPAA saying 4 that -- let me show you Exhibit 2M. 5 THE COURT: M as in Michael? 6 MR. GARBUS: Yes. May I approach the bench? 7 THE COURT: Yes. 8 Q. Did you ever see that press release? 9 MR. GOLD: Your Honor, we are trying to come up with 10 a copy of this. 11 THE COURT: Mr. Garbus, maybe you can give counsel a 12 copy. 13 MR. GOLD: We have ZM. 14 THE COURT: Z as in zebra, Defendants' ZM. Do you 15 have it now, Mr. Gold? 16 MR. GOLD: Yes, ZM. 17 Q. Have you ever seen that press release before? 18 MR. GOLD: Your Honor, I believe -- this is a 19 document as to which you have held it is work product. 20 THE COURT: What? 21 MR. GOLD: We have made the assertion that this is 22 work product, this document. 23 THE COURT: This is one of the things that was 24 produced under the no waiver? 25 MR. GOLD: Yes, your Honor. 456 1 MR. HERNSTADT: No, your Honor, that one wasn't. 2 There may have been others. 3 THE COURT: It has a Bates number on it. You fellows 4 ought to be able to figure this out. 5 MR. HERNSTADT: All the no waiver documents were 6 stamped. 7 MR. SIMS: This was officially produced without a 8 stamp, and we sent them a letter, it was privileged as they 9 know because they have seen the other documents. It was never 10 released as a press release and it was drafted largely by 11 lawyers. 12 THE COURT: Look, Mr. Garbus, I think you are 13 entitled to find out at a minimum whether it was ever 14 released, because if it was there is no question of privilege. 15 So, see if you can deal with that. 16 MR. GARBUS: Mr. Gold, was it ever released? 17 MR. GOLD: We were advised it was not released. 18 THE COURT: Mr. Gold is not the witness. 19 Q. Ms. King, do you know if it was ever released? 20 A. I don't think it was released. 21 Q. Have you ever seen any statements made by Mr. Valenti 22 saying that the so-called CSS hack is useless? 23 A. Well, I may have seen this draft. 24 THE COURT: That's not the question. Forget the 25 document. 457 1 THE WITNESS: Okay. 2 Q. Have you ever seen or have you ever heard Mr. Valenti say 3 that the CSS hack is useless? 4 A. I don't remember that exact quote coming from Mr. Valenti. 5 Q. Well, in substance do you remember any quotes coming from 6 the MPAA or any other movie studio saying fundamentally that 7 the CSS hack is useless because the cost of making an illegal 8 copy is too high? Just yes or no. 9 A. Yes. 10 Q. Do you recall statements by Mr. Valenti that deencrypted 11 movies on the Internet are useless because they are not of 12 such a greater quality? 13 A. No. 14 Q. Do you recall any statements by Mr. Valenti, lengthy 15 talking about the difficulty of making copies through DeCSS or 16 the CSS hack? 17 A. No. 18 Q. Now, you say you saw the draft of this document? 19 A. It looks familiar. 20 Q. When did you see the draft? 21 A. To the best of my recollection probably a meeting at the 22 MPAA. 23 MR. GOLD: Your Honor, we just asserted our work 24 product privilege as to this document. 25 THE COURT: Right now he is asking whether she saw it 458 1 or drafted it. I'm not sure which. 2 MR. GOLD: The question is did she see it. 3 THE COURT: Yes. 4 Q. Did you see it? 5 A. I think so. 6 Q. And how do you know that it was not released? 7 A. I believe we decided not to do a press release. That's 8 the best of my recollection. 9 Q. Why was that? 10 MR. GOLD: Your Honor, that's part of the privilege. 11 THE COURT: Where was this decision made and by whom? 12 THE WITNESS: It was made by all lawyers at the MPAA, 13 at a meeting to discuss how to handle this threat, what type 14 of litigation should we take. It was all in the context of 15 deciding how to respond to DeCSS in an overall context. 16 THE COURT: Look, it seems to me that to the extent 17 lawyers were sitting around discussing legal matters, that's 18 one thing. To the extent lawyers are sitting around being 19 public relations consultants, that's another thing. So, I 20 don't see, I don't think, Mr. Gold, any valid objection to the 21 witness testifying. 22 MR. GOLD: We respectfully suggest that if it was 23 released then the lawyers were sitting around engaging in 24 public relations, if a decision was made not to release it, I 25 believe the lawyers were sitting around engaging in the 459 1 practice of law. 2 THE COURT: I see. Your theory is that in substance 3 the nonrelease embodies the legal advice they gave their 4 client. What about that, Mr. Garbus? 5 MR. GARBUS: I disagree. 6 THE COURT: I know you disagree, but is there a 7 reason you disagree? 8 MR. GARBUS: I think functioning in the area of 9 public relations and deciding what to release and what not to 10 release, you are sitting -- well, first of all we get into who 11 else was in the room. Put that aside. 12 I don't think that's a lawyer's function and that the 13 whole question of press releases and public releases do not 14 come within the attorney/client privilege. 15 In this case, where you have a great deal of public 16 information being released by the MPAA, either with or without 17 its lawyers, then what is out there is certainly waived, and I 18 think that that waiver also applies to what's in there. 19 THE COURT: Suppose you were advising a criminal 20 defendant who had been indicted in a case as to whether or not 21 to issue a press release giving the defendant's version of the 22 facts and coming to the conclusion that the government was all 23 wet in indicting him. Do you think that's legal advice? 24 MR. GARBUS: I think a criminal situation like that 25 is totally different. 460 1 THE COURT: Could you just answer the question I put 2 to you? 3 MR. GARBUS: I can't. I just think it's so 4 different. I think here you have a series of -- I think we 5 can agree in this case that there had been a series of press 6 releases. 7 Let me move on to the next exhibit. 8 THE COURT: All right. 9 Q. Let me show you Exhibit RK. 10 MR. GARBUS: May I approach the bench? 11 THE COURT: Yes. 12 Q. Is that your name at the top of that document? 13 MR. GOLD: Your Honor, may we just wait until we 14 can -- are we dealing with RV? 15 THE COURT: No, K as in knight. 16 MR. GOLD: Thank you, your Honor. 17 THE COURT: Go ahead, Mr. Garbus, please. 18 Q. Have you ever seen that document which is the first page? 19 It says to Marsha King. 20 A. Well, I believe so. 21 Q. And is Dean Marks at the MPAA? 22 A. No, he isn't. 23 Q. Where is he? 24 A. Dean Marks is with Time Warner. 25 Q. John Schulman? 461 1 A. Warner Brothers. 2 Q. Ed Weiss? 3 A. Time Warner. 4 Q. Jeremy Williams? 5 A. Warner Brothers. 6 Q. Bernard Sorkin? 7 A. Time Warner. 8 Q. Now look at the next page. Do you see a quote in the 9 fourth paragraph from James Cardwell? 10 A. Yes, I do. 11 Q. Who is James Cardwell? 12 A. James Cardwell is the executive vice president of North 13 American, Australia, New Zealand for Warner Home Video. 14 Q. Looking at that document, does this refresh your 15 recollection that Mr. Cardwell told CNN -- 16 THE COURT: Now, just a minute, Mr. Garbus. She 17 hasn't said that her recollection needed refreshing, first of 18 all, so there is no foundation for the question. 19 Secondly, you know perfectly well that this is 20 hearsay. If it was offered against you, you would have 21 objected to it strenuously. If you want to ask a question in 22 an unsensational fashion, I think you know how. 23 Q. Do you know if Mr. Cardwell ever made a statement on 24 behalf of Warner with respect to his expectation that the CSS 25 code would be broken? 462 1 A. I was shown this article. I was not there. 2 Q. Did you ever have a conversation with Mr. Cardwell -- 3 wasn't it the position of Warner Brothers they had expected 4 the source code to be broken, that you weren't surprised it 5 was broken and you believed there was no economic incentive to 6 hacking the product? Wasn't that the Warner Brothers 7 position? 8 MR. GOLD: I object to the form of that question. 9 THE COURT: Sustained as to form. 10 Q. Did anybody to your knowledge at Warner Brothers ever say 11 we expected the source code to be broken? 12 A. I don't remember anyone actually saying that, but it could 13 have been said. 14 Q. And what did they say, if not exactly that, what your 15 expectation was -- 16 (Record read) 17 Q. -- with respect to the breaking of the code? 18 A. It's difficult. We didn't have a joint expectation with 19 respect to the code. We always knew that with any code there 20 was a possibility it could be hacked. 21 Q. And to your knowledge, did anyone at Warner -- by the way, 22 after you saw this document, did you at any time speak to 23 anyone at Warner Brothers to determine whether or not Cardwell 24 had said that? 25 A. Yes, I did. 463 1 Q. Who did you speak to? 2 A. Mr. Cardwell. 3 Q. What did he say? 4 A. He said he didn't remember those exact words but he could 5 have said it. 6 Q. And when did you speak to Mr. Cardwell? 7 A. The day that I saw this article or saw something similar 8 to this article. 9 Q. And if he didn't remember the exact words, did he tell you 10 what he did say? 11 MR. GOLD: Your Honor, I object on hearsay grounds. 12 THE COURT: Mr. Cardwell? Overruled. 13 A. No. 14 Q. Isn't it true -- by the way, this article is back in 15 January 13 of the year 2000. Did you ever ask him when they 16 expected the source code to be broken? 17 A. No, I didn't. 18 Q. Did you ever ask anybody at Warner Brothers when they 19 expected the source code to be broken? 20 A. I -- 21 MR. GOLD: Your Honor, I don't understand so far as 22 it relates to source code. 23 THE COURT: I think that point is well taken, but, 24 you know, the witness can answer if she can. 25 A. I don't know the answer to that. We didn't have a Warner 464 1 expectation. 2 THE COURT: Does the concept of breaking a source 3 code have any meaning to you, Ms. King? 4 THE WITNESS: No. The way I'm thinking of it, I 5 guess is breaking the encryption. 6 THE COURT: Proceed. 7 Q. Did he ever tell you that we expected CSS to be broken? 8 MR. GOLD: Your Honor, hasn't that been asked and 9 answered twice and ruled on, my objection? 10 THE COURT: I think so. Sustained. It's cumulative. 11 Q. And did you ask him about the sentence, we were surprised 12 it wasn't broken earlier, what he meant by that? 13 A. No, that's not what I asked him. 14 Q. What did you ask? 15 A. I asked him if he had said this. 16 Q. And he said he had said it substantially, is that right? 17 A. He said he couldn't remember but it could have been said. 18 Q. Now, when you asked him that, who else asked him? Who was 19 in the room when that question was asked of him? 20 A. Warren Lieberfarb. 21 Q. And who is he? 22 A. He is the president of Warner Home Video. 23 Q. And did Mr. Lieberfarb say anything at that meeting? 24 A. No. 25 Q. Tell me how that meeting came about. 465 1 A. It came about because I had been at an MPAA meeting and 2 they had shown me this very same piece of information and 3 asked me if I could find out about it. When I got back to the 4 office, they were in a meeting together, and so I went in 5 there and showed it to Jim, asked them if I could interrupt, 6 and I did. 7 Q. And after Mr. Cardwell said whatever he said, what then 8 happened? 9 A. Excuse me? 10 Q. Tell me what happened in the room. 11 A. Well, I asked him if he had said that, and, you know, he 12 said he didn't exactly remember but he could have, and I said 13 okay, and then I left basically. 14 Q. And did Mr. Lieberfarb say anything? 15 A. I don't remember him saying anything. 16 Q. Did you show him this article when you asked him if he 17 said that? 18 A. Yes, I did. 19 Q. And do you know where that article comes from? 20 A. No. I think I showed him this or something similar to 21 this, but it was a similar quote. 22 MR. GARBUS: I offer the document into evidence. 23 It's an exception to the hearsay rule. It come in as an 24 exception because it explains a course of conduct that is 25 ultimately taken, namely litigation here. January 13 is the 466 1 date of the lawsuit here and of course there is the litigation 2 before in December. And I think that all of these documents 3 come in, and we have several others, as an exception to the 4 hearsay rule because it shows exactly what Warner Brothers was 5 doing to deal with this particular problem. I offer it in 6 evidence. 7 MR. GOLD: Your Honor, this document, as is apparent 8 from the cross-examination of the witness, is offered for the 9 truth of the material contained therein, and I believe it's 10 clearly hearsay. 11 MR. GARBUS: I also believe that even the way the 12 witness testifies to it, assuming it's of any significance, 13 that it's an admission of a party. 14 MR. GOLD: Not this, your Honor. 15 THE COURT: Well, there is a double hearsay problem 16 with that, Mr. Garbus, and the double hearsay problem is that 17 if you had somebody testifying on personal knowledge to what 18 Mr. Cardwell said, that would be an admission. But what you 19 have is a newspaper reporter saying that Mr. Cardwell told him 20 something, and that's the link, that is the double hearsay 21 problem. 22 Nonetheless, it seems to me that so much of RK as 23 consists on the cover sheet, and the sentence on the second 24 page purporting to quote Mr. Cardwell, the whole purported 25 quote from Mr. Cardwell comes in for what it's worth in light 467 1 of Mr. Cardwell's direct admission to the witness that he 2 could have said it and whatever else she said he said. I 3 think it is close enough that there is a foundation on which I 4 could find that it was an adoption by the witness of the 5 statement, and so it comes in on that basis and to that 6 extent. 7 THE COURT: I meant to say an adoption by 8 Mr. Cardwell, not an adoption by the witness. 9 MR. GARBUS: Your Honor, can we take our morning 10 break now? 11 THE COURT: All right. 15 minutes. 12 (Defendants' Exhibit RK received in evidence) 13 (Recess) 14 MR. ATLAS: Before we go on the lunch break if we. 15 could just figure out the scheduling for the next couple of 16 days. We are just trying to tell our witnesses with some 17 precision when they are going to be called. It would take 18 maybe five minutes. I think we are hoping to look for 19 something like a Friday to begin our case. If that's okay 20 with the Court and if that's okay with the other side, we can 21 get our witnesses lined up. 22 THE COURT: We will talk about it later. Mr. Gold, remind me, is there a claim for declaratory 23 relief in this case? Do you want to go back and check? All right. 24 Mr. Garbus, you may proceed. (Continued on next page) 25 468 1 CROSS-EXAMINATION Continued 2 BY MR. GARBUS: 3 Q. Ms. King, I'm going to try and pick up where Mr. Gold 4 began examination and I'll try and do it quickly so we can 5 finish before lunch. 6 When did you start at Warner Home Video? 7 A. Beginning of March 1990. 8 Q. And when did you start begin working on DVD? 9 A. We didn't call it DVD, but I did some work on that during 10 the year 1990. 11 Q. What did you then call it? 12 A. We called it movie on a disk. 13 Q. And at some point does that get called DVD or whatever 14 that predecessor was? 15 A. Then it was called Taz and then it was called DVD. 16 Q. And about when was it called DVD? 17 A. '96, it had been called SD as well. 18 Q. And at the very beginning of these conversations, was 19 there a concern about a security system for whatever was 20 called that was going to be released the movie on a disk? 21 A. Well, when it was just an idea, there wasn't a security 22 system. 23 Q. When did it go beyond being just an idea? 24 A. Well, when it was coming into being reality and the studio 25 started meeting, we talked about a security system. I believe 469 1 that was around 1995. 2 Q. So that the first time -- 3 MR. GOLD: Your Honor, if I may, this line of 4 questioning that goes back in time, back before 1996 when this 5 was released and on into the early '90s hasn't got any 6 relevance to this case whatsoever. 7 THE COURT: Well, look, you know why Mr. Garbus wants 8 to go into it and Mr. Garbus knows why he wants to go into it 9 and it hasn't got much to do with the issues in the case and I 10 know why he wants to go into it. He's trying to do some 11 discovery for another purpose. 12 MR GOLD: Yes, your Honor. 13 MR. GARBUS: No, I'm not. I'll skip it. That's not 14 the point. 15 THE COURT: Pardon me? 16 MR. GARBUS: That's absolutely not the point and I'll 17 skip it. I'll start with 1996. That has nothing to do -- I 18 see what's implied and it has nothing to do with that at all. 19 I don't know when it started. I don't know when they thought 20 of security systems. 21 THE COURT: Mr. Garbus, relax. There was something 22 else I was going to say on that subject, but in light of your 23 representation that that's not what it's all about and you 24 will skip it, I will accept the representation that we will go 25 on. 470 1 Q. Now -- 2 THE COURT: If you want to press it, then we will 3 deal with it. 4 Q. Now, when you started working on what we call DVD, let's 5 say 1995, and don't tell me anything about before 1995, was 6 that when the name DVD first came in or was it '96? 7 A. I can't exactly remember when the name DVD came in. The 8 two competing optical disk formats were converged I believe in 9 September of '95. 10 DVD as a name, since there was a convergence of two 11 standards, one called SD and one called MMCD came in after 12 that. So, it was either late '95 or early '96. 13 Q. And when for the first time after January 1, 1995 did they 14 start discussing encryption systems or security systems? 15 A. I can't -- I can't remember the initial date and I've been 16 given nothing to refresh my memory. I could find it, I'm 17 sure, in my files. 18 But around that time in '95, the motion picture 19 companies started discussing legislation. Originally it was a 20 legislative proposal between consumer electronics and the 21 motion picture industry to protect their product in the 22 digital domain. 23 Q. And tell me just a little about those conversations? 24 A. Those conversations were -- originally we looked at the 25 Audio Home Recording Rights Act where they had a big stream 471 1 which had to be recognized. We were looking at legislation 2 similar to that, however, you wouldn't be able to make a copy 3 as you are under the Recording Home Rights Act. 4 The issue was: Do we need the computer industry in 5 the room? We certainly at Warner said we did. Other studios 6 said we did, Disney included. When we finally came up with 7 some proposed legislation and brought the IT industry into the 8 room, we stopped the legislation and sat down and started from 9 scratch on a new security idea that that would be acceptable 10 by the computer industry along with a new type of legislation 11 to protect us. 12 Q. And the people -- 13 THE COURT: Excuse me a minute, Mr. Garbus. 14 Are you able to say from your own knowledge whether 15 Warner was working on encryption prior to January of 1995? 16 THE WITNESS: No, we weren't. 17 THE COURT: Proceed. 18 Q. Now, with respect to, instead of encryption, how about the 19 word -- since the judge asked the question -- how about 20 security system? Was there any concern prior to '95 expressed 21 about security for the videos -- pardon me -- for the movies 22 that were -- could be released? 23 A. I don't remember that being a topic that I participated 24 in. 25 Q. You say you don't remember being a topic that you 472 1 participated? 2 A. We were trying to come up -- we had a certain window of 3 opportunity, we felt, in the video industry, at least at 4 Warner Brothers, and we were part -- we were a large part of 5 the development of DVD. 6 We wanted to get this hard copy consumer product into 7 the market before high definition television and before video 8 on demand was widely available. We wanted to get consumer 9 acceptance and we knew we had a limited window of opportunity. 10 So, before you can think about security, you have to think 11 about having a product and we were immersed in developing the 12 product. 13 Q. Now, one of the issues with the AHRA, do you know what 14 that stands for? 15 A. The Audio Home Recording Rights Act. 16 Q. Yes, and that's 1992? 17 A. I don't know the date. 18 Q. One of the issues there was the question of security for 19 audio recordings, is that right? 20 A. That's how I understand it. 21 Q. So, everybody understood after 1992 that you had to have 22 some kind of security system for any product that was released 23 into the market? 24 A. That's right. 25 MR. GOLD: I object to the form of the question, your 473 1 Honor. 2 THE COURT: Yes, look, this is now enough, Mr. 3 Garbus. I have an affirmative obligation that I recognize. 4 As far as I'm concerned, I have discharged it. You can now 5 proceed and handle this case. 6 MR. GARBUS: Thank you. 7 Q. Now -- 8 MR. GARBUS: Can we just approach the bench for a 9 moment, your Honor? 10 THE COURT: I'm sorry? 11 MR. GARBUS: Can we approach the bench for a moment? 12 THE COURT: Yes. 13 (At the sidebar) 14 MR. GARBUS: I'm not going to pursue this line of 15 inquiry any further. It seems perfectly obvious to me that 16 even before the Audio Home Recording Act of 1992 that anyone 17 who was thinking of releasing any product into the consumer 18 market was extraordinarily concerned about security. 19 What this witness has just answered is, and I don't 20 remember her question and answer, that you were not going to 21 have a product released, she just gave a "yes" to my last 22 question. I'm not going to state it here and I'm not going to 23 go any further with it, but it's inconceivable to me -- I 24 won't say what's inconceivable to me. 25 MR GOLD: Your Honor, the witness has testified that 474 1 Warner had made the decision that they were not going to 2 release DVDs unless there was an encryption system that they 3 felt good about. She also testified that at the meeting, she 4 went to in the industry, she heard and knew that the other 5 studios felt the same way. 6 THE COURT: Look, I don't have to hear all of that. 7 This is exceptionally simple. The only reason I raise the 8 question is because quite apart from what the parties have 9 raised, I have an independent obligation under Section 10 455(b)(2) of the Code to disqualify myself if it appears that 11 someone with whom I practiced law at the time I did so was 12 engaged by a party "concerning the matter." 13 It is a subject in the context of this case on which 14 I have no knowledge of my own. I am entirely at the mercy of 15 what the parties put before me. I don't know that I had. An 16 obligation extending so far as to ask the question that I did, 17 but I now have before me the witness' deposition testimony. I 18 have what she said here. 19 I have the affidavits that were put before me on the 20 motion. And the issue is, as far as I'm concerned, closed 21 absent new evidence. I do not view this trial as a discovery 22 proceeding for the purpose of conducting an expedition in 23 search of that new evidence. Obviously, if there is such 24 evidence and it requires my disqualification, I will readily 25 do so, but I haven't seen it and what we are here to try now 475 1 is this case. 2 MR. GARBUS: So, can I understand something? So, 3 then I should not continue the line of questioning leading 4 from the AHRA of '92 up to '95 and '96? 5 THE COURT: I can't make abstract rulings like that. 6 I believe that I said in my opinion, Mr. Garbus, that one 7 reasonably might infer, although I don't have the text in 8 front of me, that somebody probably thought about security at 9 some earlier point, but somebody thinking about security and 10 my partner, former partner, having been engaged with respect 11 to security, if indeed that would be enough, which I express 12 no view on right now, in the period prior to August 22, 1994 13 is a whole other matter. 14 MR. GARBUS: Thank you. 15 (In open court) 16 BY MR. GARBUS: 17 Q. Any question that I ask you now, I want to direct, whether 18 I state it or not, to only after January 1, 1995; is that 19 clear? 20 A. Yes. 21 Q. Now, at the time these various groups were meeting, was it 22 all of the movie studio -- the representatives of all of the 23 movie studios? 24 A. All of the MPAA members participated in the discussions on 25 copy protection. 476 1 Q. And who else, if anyone? 2 A. We met separately and we met with the Consumer Electronics 3 Manufacturing Association in the United States. 4 Q. And who was that? Those are the people who make -- 5 A. Those are the major consumer electronics companies, Sony, 6 Phillips, Toshiba, Matsushita Electronics, Incorporated, I 7 believe, the major players. 8 Q. Let me just see if I can, and correct me if I'm wrong: 9 One group of people, the people who make the movies, the other 10 group of people are the people, if the movies have been 11 released, make the hardware to play the consumer products, is 12 that right? 13 A. That's correct. They were consumer electronics companies. 14 Q. And then what happened as to these discussions? Was there 15 ever a discussion of licensing of this product? 16 A. No, this was prior to CSS. There was discussion of 17 legislation. That's what it basically was all about. And 18 like I said, when we came out with a draft legislative 19 proposal, the computer industry rejected it and we started 20 leading with the computer industry. 21 Q. And tell me just in short substance about those 22 conversations. 23 A. Well, in short, the computer industry said, unlike in the 24 Audio Home Recording Rights Act, they did not want their 25 general purpose computers to be subject to legislation and 477 1 regulation. However -- 2 Q. Why not? 3 A. Because that would mean they have to change the structure 4 of all their computers. 5 Q. Why? 6 A. Because we were saying, computers -- we were saying that 7 everyone had to put in a certain bit, anything that could 8 record and they didn't want to be subject to that legislation. 9 And Microsoft, for example, said it was religious 10 with them not to be subject to that type of legislation, but 11 all the computer companies felt strongly. 12 So, we sat and met with them and listened to their 13 proposal about a way that could be a good situation for 14 everyone involved. It was unprecedented that three major 15 industries got together to talk about a way to be able to 16 distribute to the consumer the highest quality of product, 17 even in the computer environment, but yet to be protected. 18 So, we sat down with the -- 19 Q. Excuse me. So, the three major industries are the 20 recording industry, the motion picture industry, and the 21 computer companies? 22 A. Well, when you say, "recording industry," the consumer 23 electronic industry. It's not the music industry. 24 So, we sat down. We had groups of engineers working 25 and we had policy people talking about legislation and we 478 1 had -- we set up a group called the Copy Protection Technical 2 Working Group, which was open to the public. And the meetings 3 were announced, and what the computer industry said was, if 4 you were to encrypt your product, if you were to scramble it, 5 then we in the computer industry could decide whether or not 6 we wanted our computers to have that feature on it. 7 If we didn't, we'd just go ahead and make our 8 computers, however, we want, and if we do want that feature on 9 it, then since it's encrypted, we go and get a license and 10 then we are subject to the rules within the license. 11 And in addition, we talked about the third prong. It 12 was a three-pronged regime that we came up with in all these 13 groups. One was technology, whether it be encryption or water 14 marking or digital transmission, but technology, the use of 15 new technology that we in the motion picture industry had to 16 embrace new technology as a way to protect our films and to 17 use our films. I mean, if you want to have digital films, we 18 are using digital technology. 19 Secondly, that with that technology comes 20 responsibility and licensing. So, if you want to show our 21 movies, you need to make a deal with us that if you have the 22 keys to unlock our house and look at our crown jewels, that 23 when you leave, you're going to lock it up, O.K., so it can't 24 be sent everywhere. That was the second piece. 25 Then the third piece was, well, if you have the keys 479 1 to unlock our house, and you don't lock it up or you break the 2 window and get inside, then we need legislation to protect 3 someone who is stealing the keys and using it illegally. So, 4 it was a three-pronged regime that we came up in those 5 multi-industry negotiations. They took a long time. 6 Q. This is 1995, 1996? 7 A. This is 9996, at least. 8 Q. 1996, at least? 9 THE COURT: "1996, at least" meaning when? 10 THE WITNESS: Meaning it wasn't prior to 1996. 11 THE COURT: Thank you. 12 Q. And go on. Continue. 13 THE COURT: What's the question? 14 THE WITNESS: Yeah. 15 MR. GARBUS: Pardon me? 16 THE COURT: What's the question? 17 Q. After you started to recognize the need for legislation, 18 what did the movie industry do? What did the consumer 19 electronics industry do? 20 A. Well, our first focus was -- although legislation was 21 always part of the three-pronged approach, our first focus was 22 on the technology. 23 The consumer electronics and computer industries 24 wanted to bring this product to market. They thought it was a 25 good product. We thought it was -- we at Warner Brothers 480 1 thought it was a great product. So, the first phase we went 2 through it with was how are we going to protect the product 3 and, therefore, we were looking at technologies to encrypt. 4 Q. And when you say -- and then what happened? 5 A. And then we adopted CSS. 6 Q. Were any consumers rights groups involved in any of these 7 tri-industry discussions? 8 A. I know that the Home Recording Rights Coalition 9 representatives were at all of these meetings. So, I mean 10 there were consumer advocate groups at the meetings; yes. 11 Q. And then what happened? In other words, the technology 12 moves apace, the attempts for legislation move apace, is that 13 right? 14 A. We finalize the technology in mid-to-late '96 and I think 15 simultaneously with finalizing the technology, we were working 16 on the licensing agreements and I don't remember the exact 17 timing. I just know when Warner released its product at that 18 point and we did not release until we had the ability to 19 encrypt it. 20 MR. GARBUS: Now, excuse me. Can I hear the last 21 answer, please? 22 THE WITNESS: We did not release our product until we 23 had the ability to encrypt it. 24 Q. And when was that? 25 A. In the United States, it was March of 1997. 481 1 Q. Now, prior to that time, had a licensing scheme been 2 worked out? 3 A. I can't give you exact specifics, but there were intense 4 negotiations on the licensing scheme. 5 Q. And did you play a part in that? 6 A. I attended quite a bit of those discussions, many of those 7 discussions. 8 Q. And are you familiar with licenses that are now used? 9 A. I was at one time. I hadn't seen them in two to three 10 years, I would guess. 11 Q. Let me show you Defendant's -- 12 MR. GARBUS: May I approach the bench? 13 THE COURT: You may. 14 Q. Defendant's Exhibit AJB. Now, this is one of the 15 documents that I'm not quite clear about. Before I ask 16 questions about it -- 17 THE COURT: Is it the part in Japanese we are going 18 to focus on? Maybe Judge Shinoda can help us. 19 MR. GARBUS: It's the part that says "highly 20 confidential." 21 THE COURT: Mr. Gold, what are we doing here? What's 22 the problem? I see it's not Mr. Gold's documents, it's a 23 non-party document. 24 MR. GARBUS: Yes, it's a document of DVD-CCA. 25 THE COURT: Right. 482 1 MR. GARBUS: But their interests are sufficiently 2 similar. 3 MR GOLD: Well, this is a -- I see, as your Honor 4 does, that it's the DVD-CCA has hacked this highly 5 confidential attorney's eyes only and although we had -- we 6 attended the deposition in this case, Mr. Hoy, who is with the 7 DVD-CCA, I'm afraid I don't know why the DVD-CCA has marked it 8 "confidential; attorney's eyes only." 9 THE COURT: Without discussing the terms of the 10 document, which is a license agreement, Mr. Garbus, can you 11 give me a clue without breaching the confidentiality on the 12 public record where you are going with this? 13 MR. GARBUS: Just to show that the license exists, 14 the terms of it. It relates to the antitrust argument. 15 THE COURT: I don't know that you have made any 16 antitrust arguments, sir. 17 MR. GARBUS: We have in our answer. 18 THE COURT: And it is what? That the DVD, the DMCA 19 violates the antitrust laws? 20 MR. GARBUS: No, that wasn't the argument. 21 THE COURT: What is the argument? 22 MR. GARBUS: The argument is that structure of this 23 licensing agreement, namely, that the only people that can 24 play like DVDs are people who are also signatories to the 25 DVD-CCA license agreement. That thereby excludes people like 483 1 Linux and that that is anticompetitive and that's the same 2 argument that was made successfully in the Sega case and in 3 the Connectix case and whether or not the DMCA overrules that 4 or not is an issue that this Court is going to decide. 5 MR. GOLD: Your Honor, we have -- 6 MR. GARBUS: That was indicated affirmatively in the 7 answer. 8 MR GOLD: Every person can get a license from the DVD 9 if they pay money and require it and if they sign the license 10 agreement. I know there are two Linux groups that have. 11 THE COURT: We heard all that. Let's talk about 12 this, what we are doing with this document. 13 MR. GARBUS: I'm prepared just to offer the document 14 into evidence without getting into any further -- other than 15 if I can just address your attention to page A-1 and I'm 16 prepared to do that at the bench. 17 MR. GOLD: Your Honor, one has to lay a foundation 18 for the document. 19 THE COURT: Mr. Gold, are you really telling me you 20 don't know if this is a real document at this point? 21 MR GOLD: I don't know if the witness can tell me if 22 it's real document. 23 THE COURT: I don't know that either, but you are 24 trying the case. Presumably you know whether this is for real 25 or not. 484 1 MR. GARBUS: It comes out of the file of the DVD-CCA. 2 They have three. 3 THE COURT: I understand that, but we don't have a 4 DVD-CCA witness here. 5 MR GOLD: I don't know as I stand here if this is a 6 license that the motion picture companies have. 7 THE COURT: I would be tremendously surprised if the 8 two of you, perhaps even involving a conference call with the 9 lawyer for the DVD-CCA can't by the end of the day stipulate 10 to as to whether this is authentic or not. 11 Now, assuming it is authentic and it is what it 12 purports to be, is there any objection to its being received 13 in evidence, Mr. Gold? 14 MR GOLD: I think it's irrelevant to the case, your 15 Honor. 16 THE COURT: Beyond that? 17 MR. GOLD: No, your Honor. 18 THE COURT: O.K. I'm going to assume for present 19 purposes that it is authentic. I'm going to receive it 20 subject to a motion to strike, if somebody can demonstrate to 21 me that there's a real issue as to authenticity and the 22 exhibit, just to be clear, is subject to the confidentiality 23 order in this case. It is going to be under seal. 24 Now, that's so long as there's no application to open 25 it. And if there's an application to open it, obviously the 485 1 DVD-CCA whose interests are those that are involved has to be 2 given notice of the application. 3 MR. GARBUS: I would just ask, as I mentioned before, 4 page A-1. I would just ask the question and I don't care 5 whether the question is answered by this witness in open court 6 or Mr. Gold, and I can stipulate to the answer, but I'll just 7 ask the question which I don't think creates an issue, namely, 8 how many separate licenses are issued by the CSS in order to 9 allow -- in other words, to which part as we talked about 10 before, movie studios, replicators and hardware manufacturers, 11 how many different kinds of licenses are issued to control the 12 entire process. 13 If you know that, fine. Don't look at the document. 14 Do you know that? 15 A. I just looked at the document, but I certainly didn't know 16 before I looked, I didn't remember. 17 MR. GARBUS: Perhaps Mr. Gold and I can discuss that. 18 THE COURT: I hope so. 19 Q. Now, before you mentioned the Home Recording Rights 20 Coalition, that's funded by the consumer electronics industry? 21 A. I believe so. I don't really know. 22 Q. Now, picking up on your narrative, if I can remember where 23 it was, when does the DVD-CCA come into existence, if you 24 know? 25 A. I wasn't participating in these meetings any longer when 486 1 they came into existence, so I believe it's been in existence 2 around a year. 3 Q. And let me, just getting away from the contracts, see if I 4 can understand something. If I go into Tower and buy a Warner 5 Brother DVD, give me the name of a film that Warner Brothers 6 makes so we can make it more specific. 7 THE COURT: It would have to have Tom Hanks and Meg 8 Ryan. 9 A. "Matrix." "You've Got Mail"; it's our movie. 10 MR. GARBUS: We'll use the judge's movie. 11 Q. "Sleepless In Seattle"? 12 A. Not our movie. 13 Q. Sorry. "You've Got Mail." If I go in, am I authorized by 14 Warner Brothers from whom I buy it to look at that DVD? 15 A. Sure. 16 Q. Am I authorized by Warner Brothers to -- with respect to 17 that DVD to somehow break it down so that I can look at it in 18 my video box? 19 THE COURT: What's a video box? What do you mean by 20 that? 21 MR. GARBUS: Video player. 22 MR GOLD: Your Honor, I object to the question. 23 THE COURT: Sustained. 24 Q. Am I authorized by Warner Brothers to make a copy of that 25 DVD? 487 1 A. No. 2 Q. Am I authorized by Warner Brothers to take that DVD to an 3 unauthorized player, one that does not have a contract with 4 the DVD-CCA? 5 MR GOLD: Your Honor, I cannot understand the 6 relevance of this line. He may be planning other lawsuits, 7 but I don't understand the relevance to this one. 8 THE COURT: Look, Mr. Garbus, it seems to me that 9 what this is beginning to sound like is the start of a debate 10 between you and the witness about what the Copyright Act 11 permits the buyer of a copyrighted work to do with it. 12 If that's what it is, that's a debate that you and 13 Mr. Gold will have and I will decide. It's a legal question. 14 And it's not a matter for testimony. If it's something else, 15 I don't perceive what it might be. 16 MR. GARBUS: It's not a debate. I just want to find 17 out the facts as Warner Brothers understands it. 18 THE COURT: So, you want Warner Brothers' 19 understanding of what the Copyright Act provides? 20 MR. GARBUS: No. I want to know, she stands there on 21 behalf of Warner Brothers. And I want to know if I can 22 whether as she -- in my contract, if you will, when I buy this 23 from Tower, can I play this on any player, anywhere, anywhere 24 in the world? That's what I want to know. 25 THE COURT: The objection is sustained. 488 1 The law is what it is. And arguing with the witness 2 about it, even in an entirely amicable way is not an 3 appropriate part of this trial. 4 MR. GARBUS: Well, it seems to me, and I'm not going 5 to press it, and I say this amicably that it's a way of 6 getting at least the facts in with respect to -- unless we can 7 stipulate. 8 THE COURT: But the facts are perfectly obvious. 9 There is no contract between Warner and the ultimate consumer. 10 Warner sells the disks to whomever they sell them to. Tower 11 buys them from somebody. 12 Tower then sells the disk to you or to whomever else 13 and whatever rights you acquire beyond the naked ownership of 14 the project, the hunk of plastic that constitutes the disk is 15 a function of the Copyright Act and the DMCA and whatever 16 other legislation is appropriate. 17 MR. GARBUS: Excuse me. 18 THE COURT: It's not a factual matter. 19 (Pause) 20 BY MR. GARBUS: 21 Q. What is the public position that Warner has taken with 22 respect to whether or not one can make copies of DVDs for 23 personal use? 24 MR GOLD: Your Honor, I think that's been asked and 25 answered already. 489 1 THE COURT: I don't remember it. Overruled. 2 A. You can't make a copy. 3 Q. Now, if I buy a DVD in New York, can I play it -- a Warner 4 DVD in New York, can I play it in France? 5 MR GOLD: Your Honor, I object to the question. 6 THE COURT: Why is it relevant, Mr. Garbus? 7 MR. GARBUS: The answer is "I can't." 8 THE COURT: The answer is you can't explain why? 9 MR. GARBUS: No, the answer is "I cannot." In other 10 words, I can buy a Warner disk on a licensed player for a 11 licensed player. If that licensed player is in Europe rather 12 than in the United States, I can't play the disk, and that's 13 the fact I was trying to get at. 14 So, Warner Brothers is selling me a disk because of 15 the licensing agreements that I can only use in certain areas. 16 THE COURT: Well, look, Mr. Gold -- 17 MR GOLD: Again, your Honor, it's irrelevant to this 18 case. 19 THE COURT: I have heard no explanation to the 20 relevance and I also think, though I know what you are driving 21 at, Mr. Garbus, that you haven't even stated it accurately. 22 Certainly as I understand the facts, if you have a 23 DVD player that you purchased here in the United States and a 24 DVD that you purchased here in the United States and you took 25 both to France and plugged the transformer into the wall to 490 1 convert the current so that your DVD player didn't explode 2 when you plugged it in, you could play it. 3 MR. GARBUS: That's correct. 4 THE COURT: I still haven't heard an explanation of 5 why this is relevant. 6 MR. GARBUS: It seems to me, again, it goes to the 7 antitrust issue. But I'll move on. 8 THE COURT: Go ahead. 9 Q. I think that the DMCA has a section on authorization and 10 what authorization means and the question then is when Warner 11 "authorizes" the buyer of its DVDs, the question is what are 12 the limitations in that authorization? 13 You may say that's just a question of law. I think 14 we can all agree fundamentally as to the facts and let me just 15 state what I understand the facts to be. The facts as I 16 understand it -- let me ask you a question. This a better way 17 to do it: 18 Q. Ms. King, the DVD-CCA consortium requires every maker of a 19 DVD player that wants to play a DVD to sign a license, is that 20 right? 21 A. That's correct. 22 MR GOLD: Your Honor, again, this is part of the very 23 same irrelevant line of questioning. 24 THE COURT: Overruled, for the moment. 25 Q. And the CSS licensing technologist includes, does it not, 491 1 restrictions on what features a DVD player can offer to the 2 public? 3 A. To the best of my recollection, that's right. 4 Q. Is there anything so that without that CSS licensing 5 technology, you couldn't have a DVD player that plays a DVD 6 that can do things that the license would not otherwise 7 restrict it to? 8 MR. GOLD: Objection as to form, your Honor. 9 THE COURT: I don't understand the question, Mr. 10 Garbus. Sustained as to form. 11 Q. So that if you had a DVD player that could play a DVD, it 12 is the license that restricts what that DVD player can do, is 13 that right? 14 MR GOLD: Your Honor, again, I object as to form and 15 irrelevance. 16 THE COURT: Sustained as to form, at least. 17 Q. Let me put it this way: If you previously said, and you 18 correct me if I'm wrong, that the CSS license and technology 19 includes restrictions on what features a DVD player can offer 20 to the public, is that right? 21 A. Well, that's putting it a bit more broadly. It has 22 certain -- 23 MR. GARBUS: We are getting into areas now that 24 concern me because of the confidential nature of the document 25 and I'm not sure -- 492 1 THE COURT: Look, the document speaks for itself. 2 Whatever it says, it says. 3 Q. So that -- 4 MR. GOLD: Your Honor, I believe that Mr. Garbus 5 needs to wait for the witness to finish speaking before he 6 makes a speech about why he's asking the question. 7 THE COURT: Look, Mr. Gold that's not helpful. Thank 8 you. Next question? 9 Q. So, with Time Warner music, you can make personal copies 10 of the music, but with respect to Time Warner movies, you 11 cannot make personal copies, is that right? 12 A. Time Warner -- 13 MR GOLD: If I may, I object to that question because 14 I believe it calls for a legal conclusion. 15 THE COURT: Objection sustained. 16 It's also argumentative. There are two different 17 statutes, two different technologies. 18 Q. Do you know -- is Warner Brothers as a result of the DeCSS 19 making any plans to stop releasing DVDs? 20 A. Not that I know of. 21 Q. And with respect to the various security systems and 22 encryption systems, do you have any idea when they can be put 23 into place? 24 A. It's my understanding currently that with respect to 25 digital transmission protocols that we are very close. With 493 1 respect to water marking, that although there has been some 2 delay due to a conflict between two different proposals, that 3 they're working on blending the proposals so we can have a 4 water marking solution, and I'm not familiar with the status 5 of any upgrade for CSS. I know there were discussions, but I 6 don't know the results. 7 Q. Now, you say with respect to digital transmission, they're 8 very close. Can you tell me what that means? 9 A. In the CSS license, if you took a CSS license, you weren't 10 allowed to transmit the materials out of a digital port until 11 there was proper copy protection. There is a group called 5C; 12 "5C" stands for five companies, the leader of which -- the 13 leaders of which are IBM and Hitachi -- not IBM, excuse me -- 14 Intel and Hitachi. I've got this confused -- let me go back. 15 In 5C, Intel, Matsushita, Toshiba, Sony and one other 16 company, I don't remember, have come up with a protocol and 17 they have been negotiating with the motion picture industry on 18 how this would work for some time and I believe they're 19 getting very close. 20 THE COURT: Close to what? 21 THE WITNESS: To finalizing an agreement so that the 22 digital ports can be opened up with a certain encryption 23 protection so that materials can be transmitted from one 24 digital media to another. 25 Q. And when you say, "very close," we talked about this month 494 1 or next month? 2 A. Well, it's always hard to predict these things. I know 3 there was a meeting last week and they've been working on this 4 for an extremely long time, probably a year. 5 THE COURT: This meeting is not at Camp David; is it? 6 THE WITNESS: It's equally as contentious, I think. 7 I know that it's a drawn-out process. My estimate would be 8 within the next couple of months, it will be finalized. 9 We have real time frames to do this in, because if 10 this protocol is going to have significant meaning to this 11 industry, we need to have it in things in set top boxes and I 12 don't pretend to be an expert in this area, but I know the 13 studios and the MPAA have been working with the FCC and with 14 the cable industry to try to make an overall protocol where 15 our content is protected. 16 So, I know there are real time frames that are set by 17 the Federal Government in this regard as well. 18 Q. So, the only thing -- the technology is there, is that 19 right? 20 A. The technology, I believe, is there; yes. 21 Q. And the technology has been there for how long? 22 A. I don't know. 23 Q. A year? 24 A. They're constantly working on the technology and I 25 wouldn't want to speculate. I don't know. 495 1 Q. For the reason that it hasn't yet become operative is 2 because the business negotiations surrounding that technology 3 have not yet concluded, is that right? 4 A. That's right. It's a very complicated negotiation. 5 Q. And what would be the effect of that digital technology 6 with respect to the security for DVDs? 7 A. Well, it would protect our product when it's transmitted 8 from one digital domain to another. 9 Q. And had there been an agreement between the parties on the 10 economics, this could have been done a year ago, is that 11 right? 12 MR. GOLD: I object to the question. 13 A. Excuse me. It has nothing -- 14 MR. GOLD: I object to the question, your Honor; 15 calling for speculation. 16 THE COURT: Sustained. 17 Q. Do you have -- have you ever seen any documents concerning 18 this digital technology and when it first became operative? 19 A. I don't remember seeing those documents. I came into 20 these negotiations, again -- I left the multi-industry 21 negotiations. They were turned over to Dean Marks a couple of 22 years ago, who works for Time Warner. 23 I started participating again in an effort to speed 24 up the process around October or November of last year. So, I 25 have been there on an as-needed basis since then. 496 1 Q. So, as I understand it, and if I'm wrong, correct me 2 because I'm less technical than you are, that this particular 3 technology would stop the transmission, let's say, of a movie, 4 a DVD movie over the Internet, is that right? 5 A. I don't want to characterize the technology. I just don't 6 know and I don't -- I don't want to speculate. 7 Q. Let me ask you a question: Hasn't there been a technology 8 that has been available for a year that stops the transmission 9 of DeCSS deconstructed movies over the Internet? 10 A. I have no knowledge. 11 MR GOLD: Your Honor, I object to the question. 12 THE COURT: The witness doesn't know. 13 Q. Who would know at Warner Brothers? 14 MR GOLD: On top of that, your Honor, this is getting 15 to the robustness and effective issue again and I think 16 that -- 17 THE COURT: It goes to the threat of irreparable 18 injury, too. 19 MR GOLD: What's that, sir? 20 THE COURT: It's going to the threat of irreparable 21 injury, too. 22 MR. GARBUS: I'd like to go to the bench on this, if 23 I may, so I'm not saying it before the public. 24 THE COURT: No. Go ahead. 25 MR. GARBUS: Pardon me? 497 1 THE COURT: Say what you have to say. 2 MR. GARBUS: It also shows that a year ago, they knew 3 of the problem. They could have stopped it, and that they 4 couldn't work out their business arrangements with respect to 5 it. 6 THE COURT: That may be your contention, but it 7 certainly doesn't show that. 8 MR. GARBUS: That's what we are going to try and 9 prove and that's what we tried to prove through discovery 10 which we never finished. 11 THE COURT: I'm not rising to that fish on the 12 surface either. 13 Q. Now, Ms. King, tell me who at Warner Brothers knows about 14 this digital technology? 15 MR GOLD: Which digital technology? 16 Q. How about a Mr. Cookson, do you know that name? 17 A. Yes, I do. 18 Q. Has Mr. Cookson ever been deposed in this case, to your 19 knowledge? 20 A. I don't believe he has. 21 Q. Who is Mr. Cookson? 22 A. He's an executive vice-president and chief technology 23 officer for Warner Brothers. 24 Q. And where is he located? 25 A. In Burbank, California. 498 1 Q. And is he the person at Warner Brothers who would be most 2 familiar with this digital transmission technology? 3 A. Yes. 4 Q. How long -- and what is his background? 5 A. He's an engineer. 6 Q. How long has he been working on it? 7 MR GOLD: Your Honor, if I may object to this line of 8 questioning about depositions and what they've been able to 9 take. 10 They never asked for the deposition of this 11 gentleman, although they knew his name and title for a long 12 time, they never asked. 13 THE COURT: O.K. 14 Q. Are there any documents, to your knowledge, at Warner 15 Brothers that deal with the digital transmission technology? 16 MR GOLD: I object to the form of the question, your 17 Honor. 18 THE COURT: Look, Mr. Garbus, what's the difference? 19 One of the points you have spent a good deal of time trying to 20 make is that CSS was only as good as whatever period of time 21 it would take somebody to crack it. Presumably that is true 22 of this technology, just like the Japanese naval codes in the 23 war, with all due respect to my colleague, just like our own 24 codes that other people are reading. Life is that. Nothing 25 is perfect. 499 1 MR. GARBUS: I can only deal with this case and in 2 this case, I believe the evidence is clear that they could 3 have stopped if they had wanted without changing -- I won't 4 argue it because it's obvious -- and that goes to the question 5 of harm and it goes to the other legal questions. 6 THE COURT: Look, if I understand you correctly, the 7 net of your position is that people are free, notwithstanding 8 an act of Congress, to circumvent technological measures 9 because there's always another technological measure that 10 could be used with which the particular mode of circumvention 11 doesn't work ad infinitum. 12 MR. GARBUS: That's not my argument. 13 THE COURT: Well, I think it is. 14 MR. GARBUS: It's too intellectual for me. I'm only 15 dealing with this particular case. 16 THE COURT: Well, sir, it is this case. It goes to 17 the question of the relevance in this lawsuit of whether there 18 were other protective means available to them. It is, as I 19 see the statute, no defense to a charge of circumventing a 20 means of protection, No. 1, that there may be another means of 21 protection available. 22 MR. GARBUS: I think, and I don't know that this is 23 the time for that debate, and I think I'd rather not get into 24 it, but I think there is an appropriate response which we 25 should make at an appropriate time, but I think for now, 500 1 unless you preclude me, I would like to prove that a year ago 2 they were -- the industry was perfectly capable of stopping 3 any damage from this particular type of circumvention. 4 And I'm not now dealing with whether or not the 5 ultimate issue about whether this is an appropriate 6 circumvention or inappropriate, because I think that you get 7 into all of the balancing issues that are involved in the 8 First Amendment and other issues. 9 I don't think, and I think the Court disagrees with 10 me, that you can take this and totally -- and I'm not 11 suggesting the Court has done that -- not look at the other 12 values. In Sony v. Betamax and Sega v. Accolade, and the 13 Connectix case, everybody recognizes that there is some degree 14 of infringement. And in Sony v. Betamax, the movies industry 15 said, there would be a great deal of infringement. And they 16 were fundamentally correct, nonetheless the Court came to the 17 conclusion that it did. 18 Now, one can interpret -- 19 THE COURT: Under a totally different statute. 20 MR. GARBUS: Yes. So, one can suggest that the DMCA, 21 and that is a legitimate argument which I disagree with, has 22 rendered Betamax, Sega, Connectix not applicable to these 23 technologies, that is an argument and that is an argument I 24 think that we are prepared to deal with. 25 But I think that what I would like to be able to do 501 1 is to get into the whole question of proof about -- and we 2 were not permitted, and I won't go back into discovery, but we 3 have not done that. We have not shown that the only reason 4 that there is any possibility of any future economic harm, 5 assuming DeCSS does everything that they say it does, they 6 chose not to put into place technology that existed a year 7 ago. 8 You may find that irrelevant. I think I'm entitled 9 to get into it, getting -- 10 THE COURT: You have gotten into it and I think what 11 you have established through this witness is that she doesn't 12 know. 13 MR. GARBUS: Well, then we get into the other issues 14 about -- and I don't want to put that on the table now, but it 15 is an issue for me, where are the witnesses who know and how 16 do we get that proof? 17 That is an issue, I think, for another time and that 18 goes back to some of the other issues we have bee