984 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 25, 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 WILLIAM M. HART 18 MICHAEL MERVIS 19 FRANKFURT, GARBUS, KLEIN & SELZ Attorneys for Defendants 20 BY: MARTIN GARBUS ERNEST HERNSTADT 21 DAVID ATLAS JEFFREY ROLLINGS 22 23 24 25 985 1 (In open court) 2 THE COURT: Good morning. 3 MR. ATLAS: Before we begin with the testimony today, 4 would it be possible to move in the exhibits and the 5 deposition testimony, or would you rather do that before the 6 break or whatever? 7 THE COURT: Let's not keep the witness waiting. 8 MR. GARBUS: Your Honor, can I just approach the 9 bench a minute? I hope the last bench approach. 10 (At the sidebar) 11 MR. GARBUS: I just wanted to point out, because the 12 comments on Thursday and Friday that I briefed at the reply on 13 page 2, footnote 2, is whether one agrees or disagrees that 14 plaintiff's conduct and the relief sought in the complaint 15 also violates antitrust law and the first sale doctrine, as 16 well as 1201(b)(3)'s prohibition against encryption technology 17 that like CSS and home DVD players requires a particular 18 design. 19 Plaintiffs believe that the licensing regime and the 20 DVD-CCA constructed permits them to dictate to members of the 21 public who purchased their movies on DVDs (but not on VHS or 22 VCD) as then purchased and approved CSS-licensed DVD players 23 on which to view the movie. 24 And then there's a quote. It says: Indeed, Fritz 25 Attaway was the MPADC general counsel and many congressional 986 1 lobbyists testified that "In order to obtain authorized access 2 to a DVD, the consumer has to, in fact, make two purchases. 3 He or she has to buy a DVD disk and also has to purchase a DVD 4 display device." 5 I just wanted to point that out that whether or not 6 that's an issue in the case, we perceived it to be an issue, 7 whether one agrees with it or disagrees with it or not. 8 THE COURT: Well, the Court doesn't perceive it to be 9 an issue. You never pleaded it. 10 (In open court) 11 THE COURT: Mr. Cooper? 12 MR. COOPER: I have one issue with respect to the 13 exclusion of witnesses. My understanding is that we will hear 14 from the defense today, five expert witnesses. I would like 15 to be able to have Mr. Schumann sit in on their testimony in 16 order to aid us in preparing for potential rebuttal in the 17 event that any of them testified to matters to which he might 18 need to respond. If there's no objection, I'd like him to 19 attend that portion. 20 THE COURT: Is there any objection? 21 MR. GARBUS: No, your Honor. 22 MR. COOPER: Thank you, your Honor. 23 THE COURT: Your next witness, Mr. Garbus? 24 MR. HERNSTADT: Good morning, your Honor. 25 THE COURT: Mr. Hernstadt, I see where you spent the 987 1 weekend. 2 MR. HERNSTADT: I'm sorry? 3 THE COURT: I see where you spent the weekend. 4 MR. HERNSTADT: For some reason everybody has noticed 5 today. The defendants call Chris DiBona. 6 CHRIS DI BONA, 7 called as a witness by the defendant, 8 having been duly sworn, testified as follows: 9 THE CLERK: State your name for the record. 10 THE WITNESS: My name is Chris DiBona, D-I B-O-N-A. 11 THE COURT: You may proceed, Mr. Hernstadt. 12 MR. HERNSTADT: Thank you, your Honor. 13 DIRECT EXAMINATION 14 BY MR. HERNSTADT: 15 Q. Good morning, Mr. DiBona. 16 Mr. DiBona, where do you live? 17 A. Well, Palo Alto, California. 18 Q. Can you describe your educational background? 19 A. Yeah. Let's see now. I went to school over at George 20 Mason and studied computer science. 21 Q. When was that? 22 A. That probably was from about '91 until about '96. 23 Q. And what were the courses that you took in your computer 24 science program? 25 A. You know, your basic broad-range of courses ranging from 988 1 programming languages to database design, compiler design, 2 system architecture, systems engineering, that sort of thing. 3 Q. And could you describe your employment history, please? 4 THE COURT: Well, did you graduate? 5 THE WITNESS: No, I have one class left, sir. 6 THE COURT: I'm sorry? I couldn't understand your 7 answer. 8 THE WITNESS: I have one class left. 9 THE COURT: And this is for a bachelor's degree? 10 THE WITNESS: Yes. 11 THE COURT: Go ahead. 12 BY MR. HERNSTADT: 13 Q. Could you describe your employment history, please. 14 A. In chronological order or -- O.K. I worked for the United 15 States Department of State in their office of information 16 management doing prototype software and doing dispute security 17 work for them. I then went to work for a law firm in 18 Washington, where I administered an E-mail system. 19 I worked -- came up to the -- I worked for Tandem, 20 and I worked for Tandem and Smart Cards. I started 21 consulting. Then I discovered VA Linux systems. 22 Q. When did you first start using Linux? 23 A. I first discovered Linux in late '94 as part of my 24 computer science studies, at Sun Labs. So, it was easier for 25 me to install the Linux on the machine at home and do my 989 1 homework there. 2 Q. And have you been using it as your system of choice for -- 3 since 1994? 4 A. Pretty much. 5 Q. Are you being paid by the defendants or DFF to be here 6 today? 7 A. No, I'm not. 8 Q. What does VA Linux do? 9 A. VA Linux is a provider of systems software and 10 professional services around the Linux operating system. We 11 sell, you know, computers for the infrastructure market. We 12 sell scientific computing clusters and a limited range of 13 graphical work stations. 14 Q. Can you explain what those last two items are? 15 A. A scientific cluster is -- basically, it's a large 16 collection of computers that are designed to attack a 17 scientific problem, say weather or nuclear weapons 18 simulations. Those two are the common uses of those. Instead 19 of using one very, very large, very, very expensive system, 20 you take a number of much smaller, much less expensive 21 computers to attack the jobs, as far as -- 22 THE COURT: Mr. DiBona, it's very difficult for me to 23 understand. Obviously the reporter is having a tough time, 24 too. 25 THE WITNESS: Sorry, your Honor. 990 1 Q. Mr. DiBona, if you could perhaps talk a little more 2 slowly, it might make it easier for everybody to understand 3 you. 4 A. No problem. 5 Q. Thanks. 6 You were talking about scientific clusters. 7 A. For graphical work stations. So, one of our clusters, 8 already a graphical work station, is used by scientists and 9 engineers to simulate or visualize data sites so that people 10 can understand them, what kind of data they're working with. 11 Q. And does VA Linux provide the software and the hardware 12 for these systems? 13 A. Yes, we do. 14 Q. And what's the software on systems? 15 A. Usually it's just -- you know, we install Linux. We 16 configure it specifically for the hardware, so it performs 17 well. We do some third-party software that we add on top of 18 it sometimes. It depends on the need of customer. 19 Q. And does VA Linux provide anything other than for software 20 and hardware for its customers? 21 A. Under the circumstances, you have professional services, 22 integration services, deployment services. That's about it. 23 Q. Is VA Linux a publicly-traded company? 24 A. Yes, we are. We went public December of last year. 25 Q. And are there other publicly-traded companies that deal 991 1 with the Linux operating system? 2 MS. MILLER: Objection. Foundation. 3 THE COURT: Overruled. Go ahead. 4 A. There are a number of them. They're Caldera, Red Hat. 5 Also companies like Dell, Compac and IBM all start up with 6 Linux's efforts. 7 Q. And what is the nature of these efforts? 8 A. They saw the market growing, and so they're trying to 9 address it in their own ways. 10 Q. Is this both software and hardware? 11 A. Yes. 12 Q. Based upon your -- excuse me, what is your position at VA 13 Linux? 14 A. I'm a director in the marketing department. My job is 15 essentially development with the Linux community at large. 16 So, they sort of have a way of talking with us, and we have a 17 way of starting dialogue with them, if need be. 18 Q. And how do you accomplish that function? 19 A. A lot of different ways. We give away hardware to groups 20 who need it for their development. We provide hosting and 21 network bandwidth to projects that need it. I go to trade 22 shows and speak a lot, that sort of thing. 23 Q. Now, based upon your job at VA Linux, do you have 24 information about how many people are using the Linux 25 operating system now? 992 1 A. Yeah. Currently, depending on who you talk to, it's about 2 20 million people is the best guess right now. That's from 3 using numbers from IDC combined with sort of the work that 4 Red Hat and we've done on sort of measuring the Linux market. 5 Q. And what is IDC? 6 A. IDC is a company up in Farmingham, Massachusetts that 7 specializes in market research reports on the computer 8 industry. 9 Q. And what are the uses for Linux right now? 10 A. Right now, Linux is -- 11 MS. MILLER: Objection; relevance, foundation. 12 THE COURT: Sustained. 13 Q. Based upon your position at VA Linux, can you say how 14 successful Linux is as a program right now? 15 MS. MILLER: Objection. 16 THE COURT: Sustained. 17 MR. HERNSTADT: Your Honor, on relevance? 18 THE COURT: Well, I think relevance. I think 19 foundation. I think it's basically calling for hearsay. You 20 don't -- there is no definition of what "successful" means. 21 MR. HERNSTADT: O.K. 22 THE COURT: It's kind of like asking somebody who 23 buys for supermarkets whether Tide is successful to get the 24 stains out. I don't know. 25 MR. HERNSTADT: I understand, your Honor. 993 1 BY MR. HERNSTADT: 2 Q. Mr. DiBona, from the perspective of VA Linux and you, as 3 the director of marketing, what is the measure of success in 4 terms of the Linux operating system? How would you measure 5 it? 6 MS. MILLER: Same objection. 7 THE COURT: Overruled. 8 A. We measure it a number of different ways. We rely on 9 Netcraft to show us the growth of Linux in the Internet 10 serving market. That tells us how Linux is growing in terms 11 of percentage of web servers out there. 12 THE COURT: What is Netcraft? 13 THE WITNESS: Netcraft is an another market research 14 site. What they do is they, using a program, sort of pull 15 different machines on the Internet to see what they are 16 running, and they put together a report based on that, and 17 from this point they can tell if they're running Windows or 18 Linux or whatever. 19 And from information like this, we can tell how Linux 20 is doing in the marketplace, and it helps us in our 21 forecasting and predictions on our own sales because we know 22 that our percentage of sales of that market is connected to 23 the growth of Linux. So, that's how we figure out how to 24 attack the market. 25 BY MR. HERNSTADT: 994 1 Q. And what results do you see today with respect to how 2 Linux is growing in the market? 3 A. Well, specifically VA Linux has been growing depending on 4 which part you look at, between 30 and 60 percent each 5 quarter. That's pretty much above what Netcraft is showing as 6 a percentage of the Internet serving market. 7 THE COURT: I'm sorry. I don't understand the 8 answer. What is VA? 9 THE WITNESS: VA, that's the company I work for. 10 Sorry. 11 THE COURT: I see. So, basically, what you are 12 telling us is that this Netcraft service tells you that Linux 13 is growing 30 to 60 percent per quarter. 14 THE WITNESS: No, that's our own numbers. The 15 Netcraft shows that Linux is growing anywhere -- basically a 16 little percentage each month. 17 THE COURT: I'm sorry. A little percentage each 18 month? 19 THE WITNESS: Yeah, like a percent or two each month, 20 as a percentage of total Internet circuit. 21 THE COURT: What percentage? I'm not sure this was 22 the right witness or that this isn't hearsay. 23 Just out of curiosity, what percentage of the market 24 for operating systems in the United States does Linux account 25 for as far as if you know? 995 1 THE WITNESS: Internet serving market. I can tell 2 you a number that makes sense. 3 THE COURT: In the server market? 4 THE WITNESS: Yeah. Specifically, Linux is about 5 32 percent. 6 THE COURT: In the server market? 7 THE WITNESS: In the web server market. 8 THE COURT: In the web server market? 9 THE WITNESS: Yes. 10 THE COURT: And overall? 11 THE WITNESS: It's almost impossible to tell you. 12 THE COURT: All right. Go ahead. 13 BY MR. HERNSTADT: 14 Q. Does VA Linux have plans to expand into its desktop 15 market? 16 A. We have a few offerings in the desktop market, but it's 17 not a very large percentage of our sales right now. 18 Q. What kind of offerings do you have right now? 19 A. We have a very low-end desktop and sort of a medium-range 20 graphical work station. 21 Q. What is limiting, if anything, about VA Linux's ability to 22 get into the desktop market? 23 MS. MILLER: Objection. Leading, foundation, 24 relevance. 25 THE COURT: I don't see the relevance, counsel. 996 1 What's the relevance? 2 MR. HERNSTADT: The relevance is that Mr. DiBona can 3 testify about why there is a disparity between the server 4 market and the operating system market for the general public 5 and the desktop. 6 THE COURT: What does that matter to this case? 7 MR. HERNSTADT: It matters because one of the reasons 8 it's different is the lack of applications and applications, 9 such as, for example, a DVD player. Those applications are 10 necessary to make an operating system generally attractive and 11 generally viable. 12 And to the extent that this case is about DeCSS and 13 DeCSS is a part of the reverse engineering project to bring 14 DVD players to the Linux operating system, Mr. DiBona can 15 testify that that's an essential ingredient in the viability 16 of Linux as an operating system. 17 THE COURT: What has that got to do with the issues 18 in this case? This isn't the Microsoft case. I could 19 understand this line of questioning in the Microsoft case. 20 MR. HERNSTADT: I understand, your Honor. I think 21 what it gives you is more as to the liquidity of reverse 22 engineering. 23 THE COURT: As to the -- 24 MR. HERNSTADT: To the presence of reverse 25 engineering. 997 1 THE COURT: To the presence of reverse engineering. 2 MR. HERNSTADT: That it is a normal and, in fact, 3 necessary part of building Linux applications, that the DVD 4 player application is a necessary part to make the Linux 5 operating system viable, and it was DeCSS was part with the 6 reverse engineering in order to give the DVD player a 7 presence. 8 I understand that when I was not here there were 9 discussions about antitrust and -- 10 THE COURT: That would be something of an 11 overstatement. 12 MR. HERNSTADT: O.K. I think that what this can 13 show, though, is that if Linux and if applications are not 14 made for Linux, then that will have an anti-competitive effect 15 on the Linux operating system and will deny -- make it much 16 more difficult for it to be viable, which will have an 17 anti-competitive effect. 18 THE COURT: What's that got to do with this case? 19 MR. HERNSTADT: We have an affirmative defense. 20 THE COURT: Your affirmative defense is that the DMCA 21 violates the antitrust laws. I expressed myself fully on that 22 last week. That's not a defense to anything. 23 MR. HERNSTADT: I think, also, your Honor, in terms 24 of statutory construction, perhaps it gives a certain amount 25 of guidance that, if the statute permits, an interpretation as 998 1 opposed to another interpretation, if one interpretation 2 permits a situation that has anti-competitive effects and is 3 bad for the public, because of that, that perhaps that's 4 not -- that might be one of the factors that would -- 5 THE COURT: You know, the patent laws have an 6 anti-competitive effect. If a drug company finds the cure for 7 cancer and patents it, it will be the only drug company that 8 can sell it. They will charge whatever they want, and it will 9 be highly anti-competitive, and it will be perfectly legal 10 because the Patent Code so permits. So, I just don't get the 11 argument. 12 MR. HERNSTADT: I understand, your Honor. This is 13 not a patent situation. The plaintiffs -- 14 MR. GARBUS: Your Honor, can I just briefly be heard 15 with regard to that? 16 THE COURT: I will hear you. 17 MR. GARBUS: I think the position that we take and 18 the answer says the DMCA as interpreted applied, it doesn't 19 say facially. And what it says is that if this Court or any 20 Court were to permit an anti-competitive situation, an 21 antitrust situation to create that, that would be -- that 22 would be an interpretation the DMCA made, which we believe 23 runs up against Sony, Sega, and the other issues. 24 I don't want to have the argument now. I think the 25 Court has expressed its feeling. I just did want to point out 999 1 that that is the position that we take to make it clear with 2 respect to this witness' testimony. And I know the Court 3 disagrees. 4 THE COURT: Ms. Miller? 5 MS. MILLER: As the Court has already stated, the 6 plaintiffs view this as completely irrelevant testimony. The 7 defendant has already admitted that he's not engaged 8 personally in reverse engineering activities. 9 And as far as whether or not there is a DVD player 10 available, and if it's a Linux operating system, you've 11 already heard testimony that other developers of DVD players 12 have sought and in certain instances obtained licensing from 13 the DVD-CCA and developed such players. Again, this adds 14 nothing to the record. 15 THE COURT: I take it, Ms. Miller, that you don't 16 have any quarrel with the basic proposition that the ability 17 of any operating system, be it Linux or anything else, to 18 succeed in the marketplace is related to the extent to which 19 applications that run under that operating system are 20 available; is that true? 21 MS. MILLER: Theoretically and absolutely not. We 22 have no quarrel with that. 23 THE COURT: And not only theoretically, I take it you 24 have no quarrel with the proposition that that's true for 25 Linux. 1000 1 MS. MILLER: I don't know that that's true for Linux. 2 I don't think we've heard through this witness whether or not 3 that, in fact, is true. 4 THE COURT: Well, I was trying to save some time, but 5 I guess we are not going to save some time. 6 Go ahead, counsel. 7 MR. HERNSTADT: Thank you, your Honor. 8 Actually, could we have the last question and answer 9 read back before we went into the objection, your Honor? 10 THE COURT: Yes. 11 (Record read) 12 MR. HERNSTADT: Thank you. 13 A. There is a certain lack of applications for the desktop 14 market. For instance, office productivity and certain 15 vertical market applications for things like doctors, dentist 16 offices, and that sort of thing. You have to have a certain 17 number of applications before you can sell the personal 18 desktop, everything from software for small offices to large 19 ones, so... 20 Q. Is the DVD player one of the applications that your 21 company thinks would be necessary to make the Linux operating 22 system viable for the personal market? 23 MS. MILLER: Objection, relevance. 24 THE COURT: I'm going to hear it. 25 A. Basically multimedia is still very important for the 1001 1 personal market. If we were to sell to an end user, we would 2 have to be able to compete, and for DVD, CD, audio, the whole 3 thing. And most of that is that for Linux DVD is not because 4 of the -- it is just the manufacturers never made a player, 5 and when the people tried to write one themselves, the 6 developers out there on the net and such, they were met with 7 resistance, and that's why I'm here. 8 Q. Is VA Linux doing anything to develop applications? 9 A. Well, we have a couple of efforts. My regular activities, 10 where I give away hardware and make sure that people who are 11 working on these kinds of problems are helped out however we 12 can, be it by hosting or by serving or administration of our 13 machines. 14 We also have a project called Source Forge, and it 15 hosts about 6,800 projects, and about 40,000 of them source 16 developer, the idea being that if we administer the machines 17 and take care of backups and provide for messages and 18 discussions and reports, that they can get to the business of 19 doing the software that they want to do without having to 20 worry about the minutia of system administration and such. 21 Q. You said it hosts about 6,800 projects. Are those 22 different projects for Linux applications? 23 A. Yes. 24 Q. And who owns the application if the project is successful 25 and completed? 1002 1 MS. MILLER: Objection, relevance, calls for 2 speculation. 3 THE COURT: Overruled. 4 They are owned by the project leaders and the 5 developers on the site. VA doesn't take an ownership of the 6 projects. They are just there to help. 7 Q. Mr. DiBona, do you know what DeCSS is? 8 A. Yes. 9 Q. Have you ever used DeCSS on a DVD? 10 A. For the purpose of my writing my declaration, I used DeCSS 11 to copy a VOB file off of a DVD. 12 Q. Have you ever made a DVD available on the Internet to 13 other people to upload? 14 A. Never. 15 Q. Have you ever downloaded a DVD from the Internet? 16 A. Never. 17 MR. HERNSTADT: Thank you very much. 18 THE COURT: Thank you, Mr. Hernstadt. 19 Ms. Miller? 20 MS. MILLER: No questions, your Honor. 21 THE COURT: All right. Thank you, Mr. DiBona. You 22 are excused. 23 THE WITNESS: Thank you, your Honor. 24 THE COURT: Next witness? 25 (Witness excused) 1003 1 MR. HERNSTADT: Your Honor, the defendants call on 2 Olevario Craig. 3 OLEVARIO LOPEZ CRAIG, 4 called as a witness by the defendant, 5 having been duly sworn, testified as follows: 6 THE CLERK: State your name, spelling it slowly. 7 THE WITNESS: Olevario Lopez Craig. O-L-E-V-A-R-I-O 8 L-O-P-E-Z C-R-AI-G. 9 THE COURT: Counsel, you may proceed. 10 MR. HERNSTADT: Thank you. 11 DIRECT EXAMINATION 12 BY MR. HERNSTADT: 13 Q. Mr. Craig, where do you live? 14 A. In Amherst, Massachusetts. 15 Q. Can you describe your educational background, please? 16 A. I assume you just want higher education. 17 I attended UMASS in the fall of 1998 and spent three 18 years as a computer science major, dropped out for reasons 19 both academic and non, and then came back to complete a degree 20 in communications, which is a B.A., and that was -- I finished 21 in May of 1995. 22 Q. How long have you been working with computers? 23 A. Depends on how one defines "working," but I've been using 24 computers since, oh, I would guess 1983. I've been employed 25 regarding computers since mid-high school, which would be 1004 1 1986. 2 Q. And could you describe your employment history? 3 A. With regard to computers? 4 Q. Sure. 5 A. Several summer jobs, working for a small software company 6 in Waltham, Massachusetts, which is now defunct by the name of 7 DataTree. At that point in time, I did things like create 8 their software distributions, make the floppy disks that 9 actually had the software on it, package it up, send it out. 10 I also set up a bulletin board system, which was at 11 that point the height of customer service technology, not 12 really related to work. But at the same time, the high school 13 that I attended had old deck hardware, Digital Equipment 14 Corporation hardware, including VAX 11780 and previously 15 PDP1170, both of which ran Unix Operations, U-N-I-X operating 16 systems. 17 Q. And how long have you been employed by the University of 18 Massachusetts? 19 A. Since shortly after graduation in 1995. 20 Q. What is your position there? 21 A. Well, my position has changed somewhat over the past five 22 years, but I was initially hired as entry-level software 23 support for people who were familiar with ISP, that would be 24 analogous to help desk support. You call up and you tell 25 somebody that something is not working and they help you 1005 1 figure it out. 2 I have since moved away from that and into second and 3 third tier operations, operating systems applications and 4 networking support. 5 Q. And have you done any consulting work? 6 A. From time to time, on the side, I do various bits and 7 pieces, mostly relating to people who want to set up 8 networking in their mall business or home office. I've had a 9 few clients. I couldn't really point to a number, probably 10 less than five over the last three years. 11 Q. And what operating system do you use in your work? 12 A. At work, we have a very heterogenous environment. We 13 maintain seven different players of Unix operations. One 14 includes Unix, in addition to Windows NT, '95, and Windows 15 2000, and several different versions of the McIntosh system. 16 Q. And what operating system do you use at home? 17 A. In my house, I have several computers. On my main 18 computer, the one that I use most often, I have both Linux and 19 Windows '98. 20 Q. And Mr. Craig, are you being paid to be here today? 21 A. I am not. Actually, spending my vacation time to be here. 22 Q. You said that you have a Windows program on your home 23 computer. What do you use that for? 24 A. Interestingly enough, as it pertains to this case, I use 25 Windows -- I have Windows on my home computer as a bootable 1006 1 operating system solely to be able to play DVDs. I don't 2 really play games anymore. There aren't many reasons, from my 3 point of view, to actually boot into Windows, rather than run 4 it under an application like VM Ware. Playing DVDs is really 5 the only reason why I have Windows as a bootable operating 6 system on my home computer. 7 Q. Can you explain what the difference is between booting 8 into Windows and using it in an application like VM Ware? 9 A. Certainly. It's typical when setting up a Linux system on 10 a system that already has Windows installed, to set it up on 11 what's called a dual boot, meaning that if you turn the 12 computer on, you have the choice of which operating system to 13 run. 14 And, thereafter, after that session, you are locked 15 into that operating system. In other words, to get to the 16 other operating system, you have to reboot the operating 17 system controlling the computer completely. 18 And if you want to run programs from another 19 operating system, you have to reboot. The only reason that I 20 boot into Windows is that I can run the software in running my 21 DVD player card. The software to do that under Linux -- which 22 tells me it's going to happen really soon -- is not yet really 23 ready for just sitting down and playing. 24 MR. COOPER: Move to strike the last portion; hearsay 25 grounds. 1007 1 MR. HERNSTADT: Your Honor, I can inquire what the 2 basis of the -- 3 THE COURT: All right. Go ahead and do that. 4 Q. Mr. Craig, when you were talking about the Linux DVD 5 player, what is the basis of your knowledge, if any, about the 6 Linux DVD player? 7 A. Well, starting, I would guess, sometime in November or 8 December of last year, I was really looking to get Windows off 9 of my home computer. I had reached a level of frustration 10 with it, and as I said, I decided that I really didn't need it 11 for anything else. 12 So, I was looking for a Linux application to play 13 DVDs and went to the Web and searched and found the LiViD home 14 page, followed the links and saw that there was this ongoing 15 trial, but that there was something there that could be 16 downloaded from the CVS repository. So, I downloaded at that 17 point in time and built it -- wasn't really able to get it to 18 work satisfactorily. 19 At that point, it was particularly on my particular 20 hardware decoder card which wasn't supported, and it wasn't at 21 a level that I felt comfortable to try to replace my Windows 22 application operating system. 23 Q. Would you explain, Mr. Craig, what the CVS is? 24 MR. COOPER: Relevancy, your Honor. 25 THE COURT: Overruled. 1008 1 A. It has nothing to do with pharmacies. It stands for 2 Concurrent Version System. It's a method by which people can 3 work on a single code base and download the code, make 4 changes, fix bugs, upload the code, and merge it into a 5 coherent hole. 6 Q. Mr. Craig, in your position as the systems administrator 7 in the computer science department in Amherst, Massachusetts, 8 have you worked with the network for the computer science 9 department? 10 A. Extensively. I'm involved in design decisions. I don't 11 usually make purchasing decisions, but I help lay out the 12 groundwork for what needs need to be filled, where we should 13 go for upgrade capacity, what kind of room we need to leave 14 ourselves for future improvement. 15 Q. And are you also familiar with the University of 16 Massachusetts' network of a hole? 17 A. I am familiar to a lesser degree. It's not a network that 18 I administer personally, but I do know a great deal about how 19 it works by necessity because we are connected to it. I also 20 know a great deal about the hardware on which it runs. 21 Q. And what's the basis of your knowledge? 22 A. Having to work with it, having to connect to it, it's also 23 a point of interest for what we do in order to tell an 24 incoming student or a prospective student or prospective 25 faculty member what kind of facilities they're going to have. 1009 1 We regularly try to update our own description on 2 what the University of Massachusetts has for technology 3 resources and particularly after my deposition in this case, I 4 went and made it my business to research more about the UMASS 5 network in specific. 6 Q. Is research a part of your job? 7 A. Absolutely. 8 Q. And how do you research -- do you do research information 9 about systems or networks or the research that you do in your 10 job? 11 A. The web is by far the greatest tool that has ever been 12 invented for research. Second to that, there is the archive 13 of news groups at what's called Deja News, which allows one to 14 see roughly the last five to ten years' worth depending on the 15 hierarchy of on-line discussions regarding any subject, you 16 can imagine the subjects that I generally go looking for are 17 hardware and software integration, but the web is certainly a 18 primary source. 19 Q. Is that true for systems administrators generally or is 20 that true just for you? 21 A. I think that's absolutely true for systems administrators 22 in general. Without the Web, finding information necessary to 23 solve problems becomes much more difficult. 24 Q. Mr. Craig, could you describe the topology of the 25 University of Massachusetts network? 1010 1 A. The UMASS network itself or our section of it, the campus 2 backbone, which is the core of the network is what's called 3 star wired single mode fiber that is gigabyte Ethernet. It 4 has a transfer of theoretical maximum capacity of 1,000 5 megabits per second. 6 That is attached to five routers from which 7 subsections of networking depend at a speed of 100 megabits 8 per second. So, it uplinks to the routers of 100 megabits per 9 second. 10 From those five sections, you get various physical 11 areas of campus. The southwest residential area, as an 12 example, has its own switch which is connected to the -- 13 actually, it's a Cisco 5500 switch, which is connected to the 14 Whitmore switch, which is one of the five switches on one of 15 the five switches connected to the routers in the backbone. 16 Other areas of campus are likewise funneled into 17 those five routers. Typically, an area of campus right -- if 18 you think of it as a tree coming out from that router, you'll 19 get thinner and thinner branches, but most sections of campus 20 one of 100 megabit Ethernet right up to the point where one 21 dissolves, so the leaves, the nodes, where you generally get 22 between 10 and 100 megabits per second depending on that 23 particular section of campus and the architecture and what 24 it's required to do. 25 I should state that an exception to all of this is my 1011 1 network or what I like to think of as my network which is 2 attached outside the campus backbone directly to the router 3 that connects both to the cable and wireless Internet 4 connection, which is our commodity Internet connection. 5 Q. Do you know who has access to the Internet to connections? 6 A. I know that access from the dorms is extremely limited. 7 That router is rate limited and, in fact, we are -- I think we 8 are the only department on campus that can take as much 9 bandwidth as we need for that router. 10 MR. COOPER: Move to strike, your Honor. 11 The witness was asked whether he knew and then he 12 supplied an answer, which I believe is based on hearsay. 13 THE COURT: Is that right Mr. Craig? 14 THE WITNESS: I don't believe so. 15 THE COURT: Well, how did you know what you just told 16 us? 17 THE WITNESS: Because I've seen the router and I've 18 worked with the cables that are connected to it. 19 THE COURT: Motion denied. 20 Q. What is the speed -- or excuse me -- the bandwidth of the 21 Internet connection from the campus backbone to the Internet? 22 A. It's what's called a partial DS-3. We have 30 megabits 23 per second on the cable and wireless router. 24 Q. By way of example, could you explain the different 25 switches or connections that a file sent from a dorm room to 1012 1 the Internet would have to go through on the way? 2 MR. COOPER: Lacks foundation. 3 Q. Do you know from personal knowledge how the topology of 4 the Internet, so that you could describe that based on your 5 knowledge? 6 A. Yes. 7 Q. O.K., could you do so, please? 8 MR. COOPER: Lacks foundation. 9 THE COURT: Overruled. 10 A. I mentioned earlier the southwest dormitories which are 11 the single largest residential area on campus. A file going 12 from a dorm room in the southwest dormitories would go from 13 the student's computer to what's called a node room, a switch 14 Ethernet connection to a node room in the dorm, there are up 15 to three node rooms per dormitory. 16 The node rooms have switches in them that are 10 17 megabits to the students' rooms and then they are star wired 18 with 100 megabit uplink to a core switch, which would then go 19 to the aforementioned Cisco 5500 router switch off of the 20 southwest residential area, which is connected to the 21 Whitmore, which is connected to the Whitmore -- I can't 22 remember the numbers. 23 It's connected to a Cisco router at the Whitmore 24 point of presence on the backbone. So, it would then go from 25 100 megabit between the southwest switch and the Whitmore 1013 1 switch to the gigabit Ethernet on the backbone. Then it would 2 go to the LGRC router, which connects to the cable and 3 wireless router and out to the commodity Internet. 4 THE COURT: Is the bottom line of all this that if 5 somebody wanted to up or download a file from a dorm room, the 6 transfer rate limitation would be the 10-megabit-per-second 7 switch in the dorm and whatever proportion of that capacity 8 might be available at the moment to the particular user? 9 THE WITNESS: Actually, it's a little bit more 10 complicated than that. 11 THE COURT: Go ahead. 12 THE WITNESS: I mentioned the 100 megabit uplink to 13 the -- let's take the 100-megabit section between the node 14 room and the southwest router. That 100-megabit uplink is 15 taking all the traffic from -- if we have a large dorm, we 16 have three node rooms. It's taking all of the traffic from 17 all of the students in those rooms. I think the largest dorm 18 we have on campus is in the realm of 1,400 students. 19 I know that we have at least 1,400 students in a 20 single dorm because I was in such a dorm. So, that's 1,400 21 guided by a maximum of three node rooms. And if you have any 22 proportion of those 1,400 students using the Internet, what 23 you're going to see is not a fraction of the 24 10-megabit-per-second link to the student which is actually 25 switched. 1014 1 You're going to see a fraction of the 2 100-megabit-per-second uplink which is shared among those 3 1,400 students. 4 THE COURT: O.K. Thank you. 5 Mr. Hernstadt? 6 Q. Has University of Massachusetts upgraded its system in the 7 last two years? 8 A. Extensively. 9 Q. And at which points on the route have they made the 10 upgrades? 11 A. The dorm networking project is ongoing, so they are 12 pulling what in industry is called the last mile, but in the 13 legal area network, it's actually a much shorter distance into 14 new dormitory rooms probably as we speak. 15 We have I think 42 dormitories total that plan to be 16 wired, and I think of those, 35 are completed. They have also 17 upgraded the campus backbone which used to be fiber digital 18 internet, FDDI, F-D-D-I. They have upgraded that to single 19 mode fiber gigabit Ethernet. 20 They have -- because that that particular change 21 necessitates a change in technology, they had to upgrade all 22 the routers connected to the gigabit mesh. The previous 23 router would not accept any technology. And they have 24 upgraded the router that connects to -- they've upgraded the 25 routers that connect both to the commodity and the cable and 1015 1 wireless commodity Internet and the Internet 2 connection. 2 THE COURT: I take it, Mr. Craig, that it is not 3 actually unheard of for students to access the Internet at the 4 University of Massachusetts from computers that are not in 5 their dorm room; right? 6 THE WITNESS: That's correct. 7 THE COURT: It happens in the computer science 8 department from time to time? 9 THE WITNESS: Well, yes. We have an educational 10 laboratory that at the moment has 20 computers that we are 11 keeping and 20 computers that we are throwing out because 12 they're too old and we are planning to upgrade it with a bunch 13 of Linux PCs; however, and there are other facilities on 14 campus where students attach to a particular program, would be 15 able to use the computers directly connected to the Internet. 16 There are also places on campus and I actually ran 17 one when I was a student that are just labs for general use 18 and all you have to have is a student I.D. to be able to sit 19 down at a computer. These are, however, monitor situations. 20 As an example, I have -- I have myself in the past 21 terminated student access to the educational lab computers for 22 resource starvation and what we call misuse of the resources. 23 There was one person who was continually keeping enormous 24 files on a shared disk and preventing other students from 25 completing their classwork because the disk was full with -- 1016 1 actually what he was downloading was the Linux source industry 2 at that time. So, it wasn't the content of the -- the use 3 that we found objectionable, it was simply the fact that he 4 was using so much that other people couldn't use the research 5 and, therefore, it was against our policy. 6 THE COURT: O.K. Go ahead, Mr. Hernstadt. 7 BY MR. HERNSTADT: 8 Q. You testified before in response to the judge's questions 9 that the point -- it would not be the 10-megabit switched 10 network in the dorm room that would limit transfer rates, but 11 100-megabit uplink. Has -- is that correct? 12 A. That's actually oversimplifying, and I apologize since it 13 was obviously my fault for the oversimplification. It would 14 most likely be the fraction of the 100 megabit Ethernet that 15 would be the pinch point. At no point in time is a single 16 student going to get more than 10 megabits down or up. We 17 don't do differential upload and download rates. 18 However, more likely, if you have a significant 19 number of people in that 1,400-person dorm that I mentioned 20 using the Internet, it's not going to be their individual 21 10-megabit-per-section connections that's going to limit them. 22 Rather, it's going to be the fact that they have to divide one 23 megabit, that one single 100-megabit Ethernet connection 24 between all of them. 25 And as I said, in a case with 1,400 students, that's 1017 1 significantly less than a fraction of then a 2 10-megabit-per-second link. If you were to assume that 700 of 3 those 1,400 students were using the Internet at one time, you 4 could probably work out the math better than I can. 5 Without a calculator on me, I would guess you'd get 6 less than two megabits per second out of that entire hundred. 7 You'd get less than -- probably less than 500 mg. 8 MR. COOPER: Your Honor, move to strike the last 9 portion of that as speculation, without foundation. 10 THE COURT: It's arithmetic; overruled. 11 Q. And Mr. Craig, based on your knowledge of the University 12 of Mass. network and the upgrades that are being done to it, 13 what would they have to upgrade for to relieve that pinch 14 point? 15 A. They would have to put in -- the problem with relieving 16 that pinch point is that's the best logical place to put the 17 pinch point. We only have 30 megabits per second out to the 18 Internet total, so there has to be a pinch point someplace and 19 it's better not to have it on the incoming router. 20 Particularly since there is a predilection in the 21 administration level to provide better service to, for 22 instance, the computer science department than to the 23 dormitories as a whole because there are researchers in the 24 computer science department who are doing research and 25 collaboration with international figures and they really need 1018 1 that bandwidth. 2 So, it's difficult to answer your question. They'd 3 have to spend a lot of money on a bunch of different places. 4 The network as it is I think is optimized pretty much as well 5 as it can be without spending an enormous amount of money. 6 Q. Are you personally knowledgeable about the Internet access 7 available to consumers in their homes in the area of the 8 University of Massachusetts? 9 MR. COOPER: Foundation, your Honor? 10 Q. And if you are, could you tell us what the basis of that 11 personal knowledge Is? 12 A. Earlier this spring, I gave a talk to the assembled 13 faculty grad students and staff regarding their options as to 14 home access. As you might imagine, it's a very hot topic 15 among computer science professionals, the ability to be 16 connected at all times, and we did, myself and a coworker, did 17 a survey of what was available in the area, what was planned 18 to be available in the area for the next -- for the 19 foreseeable future, in other words, as much information as the 20 local providers were willing to give us, "providers" meaning 21 cable modem providers, DSL providers, the telecommunications 22 companies that are in the area currently. 23 In particular, I focused on cable modems, but we did 24 a great deal of research into DSL available as well, because 25 there are some areas where DSL is available. There are some 1019 1 areas where cable modems are available and there are some 2 areas where both are available and at that point, we had a lot 3 of professors asking us, which should I choose? Which would 4 be better in the long run? 5 Q. And what is the name typically given that to type of 6 network? 7 MR. COOPER: Your Honor -- 8 THE COURT: To what kind of network? 9 MR. HERNSTADT: The network of Internet access 10 providers to a locality or a region and in this case, the 11 region around Amherst. 12 MR. COOPER: This is a topic we've never heard from 13 this witness before, never heard about this study, never had 14 it provided to us. I have no reason to believe he has 15 expertise in this area of general network and consumer speed 16 access in the general area around his university. He's 17 certainly not employed in the area and has no apparent 18 expertise. 19 THE COURT: Well, look, I am going to hear what he 20 has to say. But, Mr. Hernstadt, if the point of all this is 21 to suggest that consumers will not have in the foreseeable 22 future adequate bandwidth to upload and download movie files 23 from the Internet, you are sure not going to do it by 24 addressing Amherst, Massachusetts, it's atypical of which as 25 measured against urban markets is perfectly obvious to 1020 1 anybody. 2 MR. HERNSTADT: Actually, the point is slightly 3 different than that. 4 THE COURT: All right. Go ahead. 5 MR. HERNSTADT: O.K. 6 Q. Let me be more specific. The network at the University of 7 Massachusetts is known as a local area network, is that 8 correct? 9 A. That's correct. 10 Q. What is the name given to the network of a region such as 11 around the University of Massachusetts? 12 A. Generally, you wouldn't collectively call that a network. 13 You would call it wide-area networking. It is an 14 implementation thereof, but one doesn't think of local area 15 networking as what you can put in a small defined physical 16 area because there are limits to the lengths of cables in the 17 technologies involved. 18 Specifically, for 100-megabit Ethernet, I believe 19 you're limited to 200-meters total between devices, so between 20 the computer and a switch or a repeater. And you can't really 21 achieve more than five kilometers even using fiber, which is 22 able to span greater distances. 23 You can't really go more than five kilometers between 24 one end point on the network and another end point on the 25 network. So, the technologies for local area networks are 1021 1 very different from the technologies used for wide-area 2 networks. When you start trying to connect -- 3 THE COURT: What exactly is wide-area networking as 4 you are using the term? 5 THE WITNESS: Any networking technology used to 6 connect physical places that are not contiguous, that are not 7 close to each other. 8 THE COURT: So, under that definition, ordinary 9 telephone lines are all part of a wide-area network, is that 10 right? Because you can transmit data over them and they are 11 in the physically contiguous locations? 12 THE WITNESS: That would be -- yes, that would be 13 correct. 14 THE COURT: O.K. 15 Q. And did you have -- have you studied wide-area networking 16 in the your course of studies at the University of 17 Massachusetts? 18 A. Not in my course of studies, but as part of research for a 19 consulting client who was wondering about what kind of network 20 connection they should get in to a small business. The 21 difference between a cable modem and the next step up which 22 would be a T1 using frame relay. 23 The T1 using frame relay was, at that point in time, 24 $1,600 a month and a cable modem, which is soon to be 25 available at that time, this was I think a year and a half ago 1022 1 was projected to be $50 a month. 2 THE COURT: Look, Mr. Hernstadt, if you want to 3 elicit from him what he found out when he went around and 4 asked people what kind of connections they could get in 5 Amherst, Massachusetts ask him. If you want to qualify him on 6 this subject -- 7 MR. HERNSTADT: Actually, two or three more questions 8 on this subject. 9 THE COURT: All right. 10 Q. As a result of your research, did you learn the costs of 11 how much it would cost to upgrade wide-area networking? 12 MR. COOPER: Objection, your Honor; foundation. 13 THE COURT: I don't understand what that question 14 means. I mean, by his definition, one possible answer to that 15 is what it would cost to replace all the telephone wires in 16 that part of the country. What does it mean? 17 MR. HERNSTADT: O.K. I can use -- take a few more 18 questions and be a little bit more specific. 19 Q. In conducting your research into the Amherst region, as 20 you described before, did you learn the types of equipment 21 that were used in the Amherst region to provide Internet 22 connections to the consumers there? 23 A. Yes. 24 Q. And -- I'm sorry, well -- 25 A. You can basically divide them into two categories, those 1023 1 that are delivered by telephone and those that are delivered 2 by other wires into the house, well, a cable into the house. 3 Everyone needs some way to get the information into 4 and out of the house in order to provide service. The focus 5 in the industry has been on wires that already exist in the 6 house, which basically means cable, telephone, and power, I 7 suppose. 8 The power technology really doesn't seem to have gone 9 anywhere. The cable and telephone solutions have reached a 10 point where any improvements in their service is limited by 11 the physical characteristics of the wires into the house. So, 12 in order to upgrade any of the -- the rates that you can now 13 get with a cable modem over the DSL connection, the person 14 providing the service would have to pull new wires, which 15 seems to be something that everybody is trying to avoid. 16 Q. And in the course of your research -- 17 MR. COOPER: Move to strike that last comment as 18 plainly without foundation. 19 THE COURT: Yes, I'm striking it. I simply do not 20 accept this gentleman as an expert on this subject. So, 21 whatever opinion testimony he's giving, it's useless. 22 MR. HERNSTADT: I'm not asking for his opinion 23 testimony. I'm asking for what his research revealed to him 24 and specifically in terms, the next question I'm going to ask 25 is what did he learn -- did he learn in his research about the 1024 1 cost of upgrading the types of networks that he just described 2 in comparison with the cost of upgrading a local -- 3 THE COURT: As I told you, if you want him to tell 4 you what Southern New England Tel. or whatever it is out there 5 told him what it costs to put in a T1 line, I'll let you ask 6 him that, but your questions are less focused. 7 MR. HERNSTADT: I'll move on. May I approach the 8 witness? 9 THE COURT: Yes. 10 Q. Mr. Craig, I've handed you Defendant's Exhibit BDT. Could 11 you look at it and identify it, please. 12 A. Yes, this is a declaration that I wrote regarding some of 13 the claims made in the Shamos declaration, I believe the 14 second Shamos declaration. 15 Q. Shamos or the -- 16 A. I'm sorry; Schumann. My apologies. 17 Q. And this is your declaration, is that correct? 18 A. This is my declaration, that's correct. 19 Q. And does this set forth experiments that you personally 20 undertook? 21 A. Yes, it does. 22 Q. And is everything in this declaration a description of 23 acts that you personally undertook? 24 MR. COOPER: Objection, your Honor. 25 Is the intent to submit this as the witness' 1025 1 testimony by having him affirm the truth of it? 2 THE COURT: I don't know. 3 MR. HERNSTADT: This is a declaration that sets forth 4 experiments that Mr. Craig conducted regarding transfer rates 5 available on the University of Massachusetts. Rather than 6 walk him through it, I would offer this into evidence and I'm 7 trying to establish that this is a factual statement of acts 8 that he undertook himself. 9 THE COURT: So, I guess the short answer is, yes, Mr. 10 Cooper. 11 MR. COOPER: I object to the form. It's also without 12 foundation. 13 THE COURT: What's wrong with the form? 14 MR. COOPER: To begin with, your Honor, I believe 15 that it is obviously compound and I think that if a proper 16 foundation were attempted to be laid, we would find that the 17 conclusions are based on a variety of assumptions for which 18 there is no factual basis. 19 THE COURT: Well, you can cross-examine. 20 Now, what is the other objection? You said you have 21 two objections. One was form and I asked you about form, and 22 you told me. What was the other one? 23 MR. COOPER: Foundation. 24 THE COURT: Overruled. 25 I'm going to receive this. The points counsel makes, 1026 1 they can cross-examine. 2 MR. HERNSTADT: Thank you, your Honor. 3 (Defendant's Exhibit BDT received in evidence) 4 Q. Mr. Craig, do you know what DeCSS is? 5 A. Yes, I do. 6 Q. Have you ever used DeCSS on a DVD? 7 A. No. 8 Q. Do you know what DiVX is? 9 A. Yes, I do. 10 Q. Have you ever used DiVX on a DVD? 11 A. No, I have not. 12 Q. Have you ever made a movie available on the Internet for 13 uploading? 14 A. No, I have not. 15 Q. Have you ever downloaded a movie from the Internet? 16 A. No, I have not. 17 MR. HERNSTADT: Thank you very much, Mr. Craig. 18 THE COURT: All right. Thank you, Mr. Hernstadt. 19 Mr. Cooper? 20 CROSS-EXAMINATION 21 BY MR. COOPER: 22 Q. Good morning, Mr. Craig. 23 A. Good morning. 24 Q. You have no job responsibility for the portion of the 25 University of Massachusetts network that involves the 1027 1 dormitories; correct? 2 A. That's correct. 3 Q. Your job responsibilities are limited to that portion of 4 the computer system which is contained within the computer 5 science department; correct? 6 A. More or less, correct. I would add that I also support 7 professors and students who are connecting from other places. 8 So, to that extent, I would say that I support more than just 9 the network contained within our department. 10 Q. And your direct responsibility by definition of your job 11 description is limited to the computer science, computer 12 system; correct? 13 A. That's correct. 14 Q. Now, again, your declaration, Exhibit BBT, could you 15 please turn to paragraph 4 on page 2. You refer in that 16 paragraph to certain tests you conducted; correct? 17 A. That's correct. 18 Q. Now, those tests did not actually involve any downloads 19 from the Internet; correct? 20 A. No, that's not correct. The first -- 21 Q. Let me understand. You used certain T1 and 10-megabit and 22 100-megabit lines in your experiment; correct? 23 A. That's correct. 24 Q. And you adjusted the speed at which some of those lines 25 operated in order to simulate certain speeds that you expected 1028 1 to receive in connection with downloads; correct? 2 MR. HERNSTADT: Objection to the form of the 3 question. 4 THE COURT: Overruled. 5 A. I adjusted one of the tests to simulate a 10-megabit 6 connection. That test is listed as subparagraph B of that 7 paragraph. 8 Q. Where did you get the files that you actually downloaded? 9 A. I created them. 10 Q. And where were those files taken from when you downloaded 11 them? 12 A. I should make a distinction here in test A, I did not do 13 the downloading. I offered for downloading and a 14 co-conspirator, if you will, a fellow by the name of Sean 15 Standish downloaded over the Internet from me. 16 Q. And in the second test, paragraph 4B, there was no 17 download from the Internet at all; correct? 18 A. That was downloaded from a computer on our network to 19 another computer on our network. 20 Q. So, it doesn't reflect any Internet download speeds? 21 A. It reflects download speeds within a local area network 22 which was what I was trying to address with that test. 23 Q. But it doesn't reflect any actual experience on the 24 Internet; does it? 25 A. For B, it does not; that's correct. 1029 1 Q. And the same is true for C; is it not? 2 A. That is correct. 3 Q. And the same is true for D; is it not? 4 A. That is correct. 5 Q. And all of those speeds as to which you testified in B, C 6 and D of paragraph 4 of your declaration are created by, 7 assuming certain decreases in the maximum potential download 8 speed from the systems you were using; correct? 9 A. I'm sorry. I don't think I understand your question. 10 Q. Well, do I understand correctly that there were certain 11 assumptions built into your laboratory process as reflected in 12 B, C and D? 13 A. I -- perhaps you can identify assumptions that you think I 14 made. I'm not certain what you're asking. 15 Q. Well, actually your declaration doesn't explain how it is 16 that you generated the particular speeds that you did generate 17 and since they weren't on the Internet, I'm asking you what 18 assumptions went into the process that resulted in the speeds 19 that you did generate? 20 A. How do you refer to generating speeds? Are you talking 21 about the speeds of the cables and switches which I put in 22 between? 23 Q. Yes. 24 A. Those are described in Exhibit 1. 25 Q. And you constructed those for purposes of this laboratory 1030 1 experiment, is that correct? 2 A. No, I used what was available on our local area network. 3 The only exception is 4B where in order to simulate a slower 4 lab, I downgraded a switch -- downgraded a port on a switch. 5 Q. And for each of these experiments, have you downloaded a 6 650 megabyte file rather than the 1.5 gigabyte file, the 7 actual download times would have been substantially less; 8 correct? 9 A. Probably. 10 Q. Do you know what those download times would have been for 11 a 650 megabyte file at even the speeds that you created in 12 this laboratory environment? 13 A. I don't know off the top of my head, but if you want, I 14 can take out a calculator. Would you like me to do that? 15 Q. Let's see if it makes sense for me to suggest some times 16 for you and you can tell me if it sounds about right. 17 THE COURT: Well, is the relationship linear, 18 Mr. Craig? 19 THE WITNESS: The reason I chose a file size that 20 charge was to eliminate any possibility of there being a 21 relationship between the file size and an increasing or 22 decreasing rate of return. So, yes, the relationship should 23 be linear. 24 Q. It's a constant relationship? 25 A. More or less. It's -- it would be expressed in a function 1031 1 with a constant, if you will. 2 Q. Does the percentage difference that you would receive 3 downloading a 650 megabyte file, as opposed to a 1.5 gigabyte 4 file equal 43.3 percent? 5 A. Wouldn't equal it. It would probably be 43. -- I'm 6 assuming without doing the math in my head that that's the 7 percentage of 650 megabytes to 1.5 gigabytes. 8 Q. So, the answer is yes? That sounds right? 9 A. If we stipulate that that's the mathematics of it, then it 10 would be that percentage, plus a certain constant for 11 overhead, probably something like 5 percent, between 2 and 12 5 percent. 13 Q. That's a constant for overhead? 14 A. Yes. 15 Q. And how do you arrive at a constant for overhead? 16 A. There is a certain amount of data that has to be sent with 17 each packet and even though you can put a lot of data into a 18 single packet, you have to increase it by a constant for the 19 length of the packet. 20 Q. So that an amount of the overhead would actually be higher 21 for a 1.5 gigabyte file than it would be for a 650 gigabyte 22 file? 23 A. No, the amount of the overhead would be higher for the 650 24 megabyte as a percentage of the total transfer. 25 Q. Total time would still be reduced by the reduced number of 1032 1 packets; correct? 2 A. Well, I think I understand what you're saying and the 3 answer is probably yes, but packets are not a unit of time. 4 So, I agree with you, but that's not quite how you phrased the 5 question. 6 Q. You mentioned in paragraph 4D that your experiment in the 7 laboratory using 100-megabit-per-second networking using your 8 view, the "absolute best case possible scenario"; correct? 9 A. That's correct. 10 Q. You're aware, are you not, that the new Abilene network 11 that has been developed for major universities is running at 12 2.4 gigabits-per-second speeds? 13 A. That speed is not what you can attain in between 14 individual computers, however. 15 Q. No, but it is the new state of the art used at 16 universities rather than 100-megabit-per-second network; 17 correct? 18 A. I don't think it's used at any university other than 19 Abilene and its partners, so. 20 Q. Do you have any idea who those partners are now? 21 A. I do not. 22 Q. Does 37 sound about right to you? 23 A. I do not have an idea. 24 MR. COOPER: No further questions, your Honor. 25 THE COURT: Let me follow up on one thing. 1033 1 In the supplement to your declaration, you list in 2 the source computer several of the components, including SCSI 3 busts? 4 THE WITNESS: That's correct. 5 THE COURT: And what I take to be the hard disks, 6 both the system and the data disks have 40-megabyte-per-second 7 transfer rates. Are there faster components for those 8 functions? Are there faster SCSI busts and hard drives? 9 THE WITNESS: There are. 10 THE COURT: How much faster? 11 THE WITNESS: The fastest SCSI bust I've actually 12 seen was on a very expensive computer and we are not talking 13 actually about technology that's limited by the speed of the 14 disks, but rather by the speed of the controller that uses 15 several disks to increase speed and that was 80 megabytes per 16 second. 17 THE COURT: And these components that are rated at 18 40-megabytes components that limit the speed of the transfers 19 in your tests? 20 THE WITNESS: 40 megabytes per second is still much 21 faster than 100 megabits per second. So, I would say no. 22 THE COURT: All right. Mr. Hernstadt, anything else? 23 MR. HERNSTADT: A couple of questions, your Honor. 24 REDIRECT EXAMINATION 25 BY MR. HERNSTADT: 1034 1 Q. Mr. Craig, Mr. Cooper asked you about the speeds that you 2 created. Did you create any transfer speeds in the experiment 3 contained or described in your declaration? 4 A. I used what was available to me in a typical large local 5 area network installation with a lot of high-speed networking. 6 I did not specifically create any connection speeds with the 7 exception of, I think it was 4B, where in order to simulate a 8 slower network, I set a port on a switch to negotiate at 10 9 megabits per second, rather than 100. 10 MR. HERNSTADT: Thank you very much, Mr. Craig. 11 I have nothing further, your Honor. 12 THE COURT: Mr. Cooper? 13 MR. COOPER: Nothing further, your Honor. 14 THE COURT: Thank you, Mr. Craig. 15 (Witness excused) 16 THE COURT: Next witness, please? 17 (Continued on next page) 18 19 20 21 22 23 24 25 1035 1 MICHAEL EINHORN, 2 called as a witness by the Defendant, 3 having been duly sworn, testified as follows: 4 DIRECT EXAMINATION 5 BY MR. GARBUS: 6 Q. Mr. Einhorn, describe your educational background. 7 A. I received a BA in economics summa cum laude from 8 Dartmouth in 1974 and a Ph.D. from Yale University in 1981 in 9 economics. 10 Q. Did you also receive a masters from Yale? 11 A. In 1976. 12 Q. And can you tell me something about your work background. 13 A. Since receiving my Ph.D., I worked at Bell Laboratories as 14 a member of their technical staff. I've been Assistant 15 Professor at Rutgers University. I worked for six and a half 16 years in the Antitrust Division of the U.S. Department of 17 Justice, and two years, two and a half years at Broadcast 18 Music, Incorporated. 19 I'm now a research fellow at Columbia University, and 20 I'll be joining the faculty as a visiting professor of William 21 Patterson University, which is a school in New Jersey that has 22 a music management department, the only one of three in the 23 U.S., and I am negotiating as an adjunct at Columbia this year 24 as well. 25 Q. Have you ever testified in a court before? 1036 1 A. No, just in small claims court. 2 Q. Are you being compensated for your work? 3 A. I'm working pro bono. 4 THE COURT: We're not going to go into that. 5 Q. You're not an expert in small claims. Okay. You work for 6 pro bono. Can you tell me something about your publications. 7 A. I published, I think, about -- I didn't count them up -- 8 maybe 40 to 50 publications. My areas of specialty generally 9 can be called applied microeconomics. Microeconomics can deal 10 with a number of issues, including public utility regulation, 11 antitrust, general market conditions, and intellectual 12 property. I have either published in or spoken in or 13 submitted papers in all of those areas. 14 Q. Can you tell me what materials you have read prior to your 15 testimony here today concerning the issues in this case? 16 A. Most importantly, I've read a number of declarations. 17 I've read Franklin Fisher's deposition. I read Franklin 18 Fisher's declaration. I've done a thorough literal search of 19 all the articles bearing on the topics of copying and piracy. 20 I visited the website of Charles River Associates. I 21 went to the Department of Justice and looked through their 22 antitrust guidelines on intellectual property, and I read a 23 number of Law Review articles that I felt were related to 24 copyright. 25 Q. Have you done any independent empirical studies on your 1037 1 own with respect to DVDs or the loss of sales, any particular 2 studies since we've actually come into this case? 3 A. I've done no empirical studies. 4 Q. You mentioned Charles River Associates. Can you give me 5 some of the names of people whose articles you have read? 6 A. In particular, in the course of my involvement in 7 intellectual property, there were three people in the course 8 of my career whom I became aware of at Charles River 9 Associates and who are personal associates of mine, 10 professional associates of mine who work in the area of 11 intellectual property. 12 Those three people are Stanley Besen, John Woodbury 13 and Steve Salop. S-a-l-o-p. Besen, B-e-s-e-n. Besen, in 14 particular, is described by Charles River Associates as a 15 nationally renowned expert on intellecutal property on their 16 website. 17 Q. And you know that Mr. Fisher is with Charles River 18 Associates? 19 A. He is the chairman. 20 Q. Have you read articles by any of those three? 21 A. In particular, Mr. Besen. I've also read one by 22 Mr. Solomon a while ago, but Mr. Besen -- when I said I did a 23 literal search on the topic of copying in piracy, I didn't 24 survey all the articles that could have been written by the 25 Charles River people on this topic. I stayed specifically 1038 1 within the area of copying and piracy and found two that 2 Mr. Besen had his name on. I'm sorry. Conceivably three. 3 Q. Let me just ask you, I'm going to read to you a sentence 4 from the Fisher affidavit and I ask you to comment on it and 5 give us your opinion on it. 6 It's paragraph 8. It says: "The availability of 7 unauthorized copies of feature length films on the Internet 8 would have a considerable, negative financial and market 9 impact on the major motion picture companies." May I have 10 your opinion on that? 11 A. If that availability were made free of charge, with equal 12 quality and equal amount of time necessary, there could be 13 truth to that, but the comment, as it relates to this case, is 14 entirely hypothetical because he's ignoring issues that are 15 very much related to the kind of unauthorized reproduction 16 that we're talking about here. 17 Q. And what are these other issues? 18 A. Well, in particular, I measure three. Number one is 19 quality. He doesn't own up to the possibility that the kind 20 of DiVX downloads that we're talking about will be far 21 inferior to the DVD movies that one can get with high 22 definition. That's number one. 23 Number two is he ignores the time that's required to 24 make these DVDs pirated moves. There are two issues in time 25 that I see. First of all, as Mr. Shamos has pointed out to 1039 1 us, one has to go about in the current market now preparing a 2 DiVX to trade with somebody else. That takes a certain amount 3 of investment in one's time to put that trading material 4 together. 5 But more important right now, if a DVD has, 6 hypothetically, 6 gigabytes on it, which I'm led to believe is 7 the reasonable size of a DVD right now, and one has a 56 8 kilobit modem, which is what maybe 90 to 95 percent of the 9 population has right now, it will take you over 200 hours to 10 download a DVD onto your hard drive. Finally, a hard drive 11 only has -- my hard drive only has 28 gegabits, and a DVD has 12 up to 6 or 8. That's taking up an awful lot of hard drive. 13 Or another issue related to this that Mr. Fisher 14 doesn't talk about are the costs. If you decide to put it 15 onto a blank DVD, right now the cost of a blank DVD exceed 16 those -- the necessary tape requirements and the cost of that 17 blank tape exceed the costs of buying the tape flat out. It's 18 cheaper for me just to buy the tape with the movie on it. 19 furthermore, the minimum -- from the testimony I've 20 read about and heard about, the minimum cost of a burner, 21 which is necessary to burn the movie into a blank DVD, is 22 $500. That's Mr. Shamos saying that. Someone else testified 23 at $5,000. 24 So there are three major issues. There's a bad 25 quality. There's the amount of time that it takes, and 1040 1 there's the cost of the equipment. 2 THE COURT: Did you ever look at a movie that was 3 decrypted with DeCSS? 4 THE WITNESS: I have not. 5 THE COURT: You're the expert on quality? Go ahead, 6 Mr. Garbus. 7 MR. GARBUS: He didn't say that at all. He said 8 quality is a factor. He didn't say he was an expert on 9 quality, and he wasn't produced as an expert on quality. 10 THE COURT: Do you have any more questions, Mr. 11 Garbus? 12 BY MR. GARBUS: 13 Q. What does Mr. Besen say, if you recall, of the overall 14 effect of copying on sales? 15 MR. SIMS: Objection. 16 THE COURT: Sustained. 17 Q. Are there any other factors to take into account? Did you 18 read the affidavit of Mr. Kurlantzick? 19 MR. SIMS: Objection. Which question is he asking 20 for an answer to? 21 THE COURT: Sustained as to form. 22 Q. Did you read the affidavit of Mr. Kurlantzick? 23 A. I read the affidavit of Mr. Kurlantzick. 24 Q. And do you have an opinion with respect to it? 25 MR. SIMS: Objection. 1041 1 THE COURT: Sustained. 2 Q. Let me show you the affidavit of Mr. Kurlantzick, and I 3 address your attention to paragraphs 3 and 4 of the affidavit. 4 THE COURT: What exhibit is this? 5 MR. SIMS: It's not an exhibit, your Honor, that I'm 6 aware of. Mr. Kurlantzick was offered by them in pretrial 7 proceedings for deposition. We took his deposition, and we've 8 heard no more. 9 MR. GARBUS: Your Honor, that's not so. We heard 10 Mr. Fisher being cross-examined on Mr. Kurlantzick's 11 affidavit. 12 THE COURT: Mr. Garbus, if you have a question, 13 please put it. 14 BY MR. GARBUS: 15 Q. I show you paragraphs 3 and 4 of Mr. Kurlantzick's 16 affidavit, and I ask you whether or not you agree or disagree 17 with the opinions expressed therein? 18 THE COURT: Objection sustained. If you want to ask 19 him for his opinion, ask him for his opinion, but not about 20 somebody else's article or somebody else's affidavit in this 21 way. There is a hearsay rule, Mr. Garbus. If you wanted to 22 call Mr. Kurlantzick, you should have called Mr. Kurlantzick. 23 MR. GARBUS: Your Honor, we had a discussion during 24 Mr. Fisher's examination, and they wanted to ask questions off 25 the Kurlantzick affidavit, and they asked questions off the 1042 1 Kurlantzick affidavit. There was dialogue there about that, 2 and he was permitted to do it. 3 THE COURT: Mr. Garbus, I'm not stopping you from 4 asking this witness questions about opinions he may have 5 formed concerning issues relevant in the case. 6 BY MR. GARBUS: 7 Q. Do you have an opinion on the question of positing 8 one-to-one ratios between acts of copying and displaced sales? 9 A. Yes, I do. 10 Q. What is that opinion? 11 A. I think it is theoretically unjustified by economic theory 12 to suggest that there is a one-to-one relationship between a 13 sale of a good at hypothetically zero price and a displacement 14 of a "legitimate" good at a higher price. 15 Q. And can you tell me how this, in your opinion, applies to 16 the whole question of DVDs? 17 MR. SIMS: Objection. 18 THE COURT: Overruled. 19 A. There are two things that one must consider in the DVD 20 issue. First of all, one must identify the costs associated 21 with using the DVD. That's issue number one. 22 And number two, if, indeed, DVDs are determined to 23 have lower prices than legitimate movies or original movies, 24 then one must also recognize that many of the sales of DVDs 25 that take place at hypothetically -- hypothetically zero 1043 1 dollars or one dollar would not have ensued at a higher price 2 of $25. 3 That's what the one-to-one -- that's why the 4 one-to-one rule is not a theoretically justified rule because 5 there is no direct correspondence. 6 Q. Can you tell me what the impact of the rental DVD is on 7 this? 8 A. Yeah; I certainly shall. What happens now in the United 9 States is most of the home video market, of course, is video 10 cassettes. I'd say in the U.S. last year consumers spent 11 about $41 billion on movies, on watching movies on television, 12 the box office and from video cassettes and DVDs. 13 Of that $41 billion, about $18 billion was spent on 14 video cassettes and a small $1 billion was spent on DVDs. In 15 that video cassette market, over half, 60 percent, was spent 16 on rentals. What happens, as we know, is rentals are the main 17 factor in the video cassette market. 18 What I'm surprised at -- what we need to do is 19 establish if there's going to be piracy or illegitimate 20 copying, we have to consider that the pirate or the copier is 21 going to consider all the costs of alternative ways of getting 22 his or her hands on the movie. This includes not only buying 23 a DVD at $25. 24 It will include -- as we have the build-out of the 25 DVD players that right now are not yet built-out, it will 1044 1 include in the infrastructure, also, the rental industry. 2 Right now, the average video cassette in the U.S. 3 last year rented for $2.78. So if I want, I can go into 4 Blockbuster, my Blockbuster, on Monday, Tuesday and Wednesday 5 and get two movies or the price of one. So you may be talking 6 here about $1.39. Furthermore, the price of video cassettes, 7 the real price of video cassettes has fallen -- real price, 8 adjusted for CPI -- has fallen 25 percent -- this is for 9 rentals -- for rentals has fallen 25 percent since 1986. 10 MR. SIMS: Objection. Move to strike. Lack of 11 foundation. 12 THE COURT: Overruled. 13 Q. Go ahead. 14 THE COURT: Mr. Garbus, your previous point on 15 reviewing my notes was well taken. I did allow the other side 16 to ask a question on Kurlantzick's affidavit because you said 17 you would call substantially equivalent testimony. If you 18 want to do so, you may do so. 19 THE WITNESS: Can I answer? 20 THE COURT: I thought you were finished. 21 THE WITNESS: I'd like to go a little more if I may. 22 I'm almost done. 23 BY MR. GARBUS: 24 Q. Go ahead, sir. 25 A. So what we have to do here is consider when people talk of 1045 1 piracy and when this is going to take place, hypothetically 2 five years out into the future when everyone has got the broad 3 band equivalent of what they don't have now at their modem, 4 five years from the future, anyone who wants to pirate is 5 going to have the opportunity to go in and making my 6 projections, I'd say buy that -- they can go in and rent a 7 DVD. If they can get a video cassette now at $2.78, okay, and 8 that rate is falling over real time due to -- because it 9 doesn't keep up with inflation, it's conceivable they can get 10 this thing for about two bucks. 11 So if you want to talk about piracy, let's just bear 12 in mind there's another kind of technology out there that 13 hasn't even been mentioned by Mr. Fisher or anybody whose 14 declaration that I have read, and that is, is this piracy 15 going to be cost effective to people who can go to video 16 stores and pop these movies for five days for two bucks. 17 Q. Let me ask you this. I want you to assume -- and this is 18 very obvious -- that there are Linux operating systems that 19 also could use DVDs. Does that widen the market for DVDs? 20 A. Yes, it does. 21 Q. And what are the possible consequences of that? 22 A. The very important thing to recognize about the video 23 cassette market, the home rental market over the past 12 years 24 is that it has been driven by the growth, the saturation, the 25 penetration of the video cassette recorder at home. And I've 1046 1 got some numbers here that will substantiate that. 2 Q. Tell us what they are. 3 A. Okay. Remember I said that the rental price has fallen in 4 real terms 25 percent since 1986. That's the rental price. 5 The sale price of a video cassette has fallen since 6 1986 by 60 percent. Despite the fact the real rental price 7 has fallen and the real sale price -- by "real" I mean 8 consumer price index adjusted. Despite the fact that both of 9 those sales prices have fallen, total spending in the video 10 cassette market has gone up by over 200 percent. 11 Why? Because the VCR has built out. We've gone up 12 from 30 million homes to 85.9 million homes. What is 13 happening here is the American consumer buys the VCR, and the 14 reason why they keep buying the VCR is because there's a 15 build-out of cheaper movies for them to get their hands on and 16 more movies to get their hands on. 17 And by enabling people to get their hands on movies 18 that are falling in price and more and more movies, the VC 19 market has grown out because of the growth -- I'm sorry, the 20 video cassette market has grown out because of the increased 21 penetration of the VCR. 22 Q. And what is the benefit to the consumers if you have, 23 let's say, Linux players out there playing DVDs that people 24 purchase? 25 MR. SIMS: Objection; irrelevant. 1047 1 THE COURT: Sustained. 2 Q. Do you have any opinion on what the effect would be on the 3 price of DVDs if Linux players were out there? 4 MR. SIMS: Objection, your Honor. Irrelevant. 5 THE COURT: Sustained. 6 Q. Now, have you looked at the Microsoft decision in the 7 Microsoft case? 8 A. I have looked at it. 9 Q. And do you have any opinion between the question of the 10 strength of an operating system and the availability of 11 applications and its consumer period? Go ahead. 12 MR. SIMS: Objection. 13 THE COURT: Sustained. 14 Q. Do you have any experience or any knowledge of the 15 relationship between anything you had at the Department of 16 Justice, between the strength of an operating system and the 17 availability of application? 18 MR. SIMS: Objection. 19 THE COURT: Sustained. 20 Q. Now, can you tell me any other benefits that you can see 21 from consumers having an open-source system such as Linux? 22 MR. SIMS: Objection. 23 THE COURT: Sustained. 24 MR. GARBUS: I think I may be through, your Honor. 25 Thank you very much. 1048 1 THE COURT: Thank you, Mr. Garbus. Mr. Sims. 2 MR. SIMS: Your Honor, can we take a mid-morning 3 break now. 4 THE COURT: All right. 15 minutes. 5 THE DEPUTY CLERK: All rise. 6 (Recess) 7 (In open court) 8 THE COURT: Okay, Mr. Sims, cross-examination. 9 MR. SIMS: Thank you, Judge. 10 CROSS-EXAMINATION 11 BY MR. SIMS: 12 Q. Professor Einhorn, BMI recently severed your employment, 13 correct? 14 A. Correct. 15 Q. Except for working on a single matter involving a radio 16 company merger, you have no experience in the entertainment 17 issues, correct? 18 A. I think when I worked at BMI, I worked for two and a half 19 years in the entertainment industry. 20 Q. Anything related to video, home video market at BMI? 21 A. At BMI, no. 22 THE COURT: I'm sorry. Was it BMI that fired you or 23 was it EMI? 24 THE WITNESS: BMI. 25 THE COURT: BMI. I know the difference. 1049 1 BY MR. SIMS: 2 Q. And your present employment as an economist is limited to 3 a one-year terminal position at the Patterson State University 4 in New Jersey as an adjunct visiting professor? 5 A. I'm also doing some private consulting work at the same 6 time now. 7 Q. You've never taught any course relating to copyright? 8 A. Relating to copyright? 9 Q. Yes. 10 A. Specifically copyright, no, I have not. 11 Q. Or any course involving markets where the marginal cost of 12 an additional copy is essentially zero? 13 A. I've taught courses in applied microeconomics, and I've 14 taught them for seven years. In particular -- wait, if I may 15 finish. In the course of teaching applied microeconomics, 16 I've taught the theory of public goods. In the theory of 17 public goods, many of the issues that are discussed in the 18 theory of public good is the fact that the marginal cost of 19 using a public good can be zero. 20 I have not taught a course specifically on copyright, 21 but the issue of marginal cost being equal to zero comes up in 22 a standard applied microeconomics course, which I have taught 23 for seven years. 24 Q. Is it your view, Mr. Einhorn, that motion pictures created 25 by the plaintiffs are public goods? 1050 1 A. No; they are not. 2 Q. Okay. Thank you. Now, you made no study of consumer 3 behavior in connection with this matter, correct? 4 A. I have yesterday reviewed some data on consumer behavior 5 in the video cassette market. I do not have, at this point, 6 enough information in my hands to study consumer behavior in 7 the DVD market. 8 Q. You would agree with me, sir, that your ability as an 9 economist doesn't help you at all in assessing the likelihood 10 that DeCSS on defendants' website may lead to copying of 11 plaintiffs' motion pictures from DVDs? 12 A. I am an economist, and I do not purport to understand the 13 workings -- the technical workings of DeCSS. I can only point 14 out the factors that should be considered to make an economic 15 decision. 16 Q. So the answer to my question is yes? 17 A. Yes. 18 Q. Now, are you aware of Steven King's recent decision to put 19 a Gnutella on the Internet on -- strike that. Are you aware 20 of Steven King and Simon and Shuster's experiment earlier this 21 year in delivering a Steven King Gnutella over the Internet? 22 MR. GARBUS: Objection. 23 THE COURT: Where is this going, Mr. Sims? 24 MR. SIMS: I'm asking him since he opined on what he 25 sees as a reason to or not to copy, whether he is aware of 1051 1 Mr. King's objection on television that he was amazed that 2 lots of hackers spent 48 hours trying to hack into a system in 3 which his novel was available for $2.50. 4 THE COURT: Sustained. 5 MR. GARBUS: Sorry Mr. Sims wasn't under oath for 6 that. 7 THE COURT: We can do without those comments. 8 MR. GARBUS: I'm sorry. I apologize. 9 BY MR. SIMS: 10 Q. Mr. Einhorn, you testified, I think, that you saw no 11 one-to-one relationship between copying and sales 12 displacement, correct? 13 A. That's correct. 14 Q. You would agree though, wouldn't you, that the motion 15 pictures studio's development of a market on the net for 16 digital delivery of their own motion pictures may be thwarted 17 by the presence of unauthorized reduced-costs product? 18 A. I'm sorry. Can you repeat the question again, please. 19 Q. Yes. You would agree, wouldn't you, that the motion 20 picture studio's development of a market on the Internet for 21 digital delivery of their own motion pictures will be thwarted 22 by the presence of unauthorized reduced-costs product? 23 MR. GARBUS: I object to the question. "Will be 24 thwarted" is speculative. 25 THE COURT: In that form, yes. Sustained. 1052 1 Q. You would agree, wouldn't you, sir, that the motion 2 picture studio's development of a market on the net for 3 digital delivery of their motion pictures may be thwarted by 4 the presence of unauthorized reduced-costs product? 5 MR. GARBUS: I object to it. 6 THE COURT: Sustained as to form. Why don't you try 7 may be affected adversely. 8 Q. Would you agree, sir, that the motion pictures studio's 9 development of a market on The internet for digital 10 delivery -- 11 MR. GARBUS: I think I would object to it unless it 12 was the same market. 13 THE COURT: I don't understand your objection, sir. 14 MR. GARBUS: As I understand the question we're not 15 talking about DVDs. We're talking about delivery of movies on 16 the Internet. It's a different market. 17 THE COURT: Overruled. 18 BY MR. SIMS: 19 Q. Do you understand the question, Mr. Einhorn? 20 A. No, I'm sorry, because -- please repeat it. 21 Q. I'll do it again. You would agree, wouldn't you, that the 22 motion picture studio's development of a market on the net for 23 digital delivery of their motion pictures may be adversely 24 impacted by the presence of unauthorized reduced-costs 25 product? 1053 1 A. There's a very important word -- there's a very important 2 word you used there, "reduced costs." It's essential that we 3 understand that when I answer your question here, I'm talking 4 here about a hypothetical market where costs are, indeed, 5 reduced. 6 Now, I would agree that if there were a reduced -- 7 reduced-cost technology that is able to offer movie content at 8 reduced costs, I would agree that could adversely affect the 9 studios. However, the measurement of costs is a very serious 10 matter in economics. In fact, that's our bread and butter. 11 Economics is a science of benefits and costs accurately 12 measuring each and determining an optimum position that trades 13 them off. All costs must be considered if we're applying your 14 paragon to any one market. 15 Q. Let me turn to page 84 of your deposition taken last week. 16 A. I'm going to need to see it because I don't have it in 17 front of me. 18 Q. I'll read the following question and answer: 19 "Q. As a matter of economic theory, do you agree with the 20 statement made in paragraph 9 of the Fisher declaration that 21 any expectation that the film companies have to develop a 22 legitimate market on the Internet for the delivery of their 23 films will be significantly thwarted by the presence of 24 unauthorized product available at little or no charge to the 25 consumer?" 1054 1 An objection from Mr. Hernstadt to form and 2 foundation. 3 "A. I'd rather say could instead of will. I think there is 4 certainly a possibility that is true." 5 Was that testimony truthful, sir? 6 A. You have reflected what I said on the issue. 7 Q. Now, from the viewpoint of economic theory as you 8 understand it, am I correct that the availability over the 9 Internet of unauthorized decrypted copies of a blockbuster 10 like Matrix would likely adversely impact the revenues for 11 that film? 12 A. This is a question that was asked at the deposition, and 13 it's very essential and important for me to understand what 14 "over the Internet" means, okay. When we talk about "over the 15 Internet," let me -- when I hear the words "over the 16 Internet," how I imagine what that phrase could mean is a 17 realtime streaming application that is scheduled. So that at 18 9 o'clock in the evening on Sunday evening, I could go, read 19 my video guide or whatever I read for my movies, and 20 understand that at 9 o'clock, I will get a streamed, realtime 21 movie that will show me the Matrix. 22 And in that instance, I would agree that if someone 23 can stream that movie at me, that can conceivably displace 24 other sales of that movie. But while we talk about over the 25 Internet, once again, like everything else, we need some 1055 1 specificity. Realtime streaming is not the same thing as 2 downloading, and down loading in an hour is not the same thing 3 as downloading at 300 hours. 4 So what I'm asking for me is some specificity. In 5 the abstract, I agree. In the abstract, I would agree that 6 movies over the Internet -- and what I'm thinking about here 7 is realtime streaming -- present that danger. I shouldn't say 8 danger because I think the movie studios will be doing it 9 themselves, but would present that issue of -- of an 10 application that could lead people to say, look, we don't have 11 to bother to go to the theatre because at 9 o'clock, it's on 12 tonight, and it's on in the same full quality that we have 13 right now. 14 Q. And do you believe, sir, that the impact, adverse impact 15 on blockbusters like Matrix would be seen in the box office, 16 as well as in the home video market? Correct? 17 A. Once again, we're talk about hypothetical. I would agree 18 that movies over the Internet, in certain formats, could 19 affect blockbuster sales in the movie theatre or at the -- in 20 any number of different windows. Movies over the Internet 21 being taken to mean, as I said, a realtime streaming 22 technology. 23 Q. Now, finally, your testimony on direct, as I understand 24 it, is that as a matter of economics, you don't see why there 25 would be a market for DVD piracy when it's pretty cheap to 1056 1 rent a DVD? Is that essentially what you were testifying to? 2 A. I didn't say that. 3 THE COURT: The witness can answer. 4 A. I didn't say that. What I said is this, I said to do an 5 economic analysis -- and this point has been sustained in 6 economic research for the past 15 years. It's been said by a 7 number of researchers, and it's been said by Stan Besen in 8 print, okay. I read through this literature, and I saw what 9 other economists say. 10 What economists say is you've got to do lots of 11 research. You have to understand the facts. You've got to 12 understand the nature of technology. You've got to understand 13 quality. You've got to understand time, okay. Now, in the 14 course of these things, in understanding them, certain 15 outcomes can go one way or the other, but you've -- 16 I'm sorry. Can you -- I missed the second half of 17 your question. 18 MR. SIMS: Can you reread the question, please. 19 (Record read) 20 A. Thank you so much. I'm not making any predictions about 21 piracy or not. What I'm calling for here is some kind of 22 evidence to go beyond a step. I can't even talk about that 23 stuff because I haven't seen anything that would meet the 24 criterion that my profession has established as necessary 25 criterion to analyze piracy and copyright issues. 1057 1 Q. Now, you came out earlier with many statistics. What's 2 the cost, as you understand it, of renting a VHS from a store 3 like Blockbuster? 4 A. My understanding right now is that 95 percent -- by VHS, 5 you mean -- 6 Q. VHS, a video cassette from Blockbuster. How much does it 7 cost to rent? 8 A. The average is $2.78. 9 Q. And are you aware of the size of the market for video 10 cassette piracy in the United States? 11 A. No, I'm not. 12 Q. Do you believe, sir, that individuals want to possess 13 copies of films in various formats and not merely see them 14 streaming? 15 MR. GARBUS: I object to this. 16 THE COURT: Pardon me. 17 MR. GARBUS: I object. 18 THE COURT: Sustained. 19 MR. SIMS: No more questions, your Honor. 20 REDIRECT EXAMINATION 21 BY MR. GARBUS: 22 Q. I'll just ask two questions, and that is whether or not 23 you have an opinion on whether the availability of movies on 24 videotape has an adverse impact on revenues? 25 A. On videotape? 1058 1 Q. Whether VCRs have an adverse impact on revenues. 2 MR. SIMS: Objection. 3 Q. Do you know one way or the other? 4 THE COURT: Let's find out if he has an opinion 5 first. 6 A. Okay, I don't know of any research one way or the other. 7 Because these things come later, the question is to what 8 degree are there people who will move from going to the movie 9 theatre and instead say, look, I'm not going to go to the 10 theatre, I'm going to wait 26 weeks or 39 weeks, and I'm going 11 to wait for them at Blockbuster. Personally I do that, okay, 12 but that's just one person. 13 Q. Do you know whether the movie companies presently make 14 more monies on VCR or DVDs than off theatre revenues? 15 A. Yes, they do. I'll repeat. Let me give you numbers. 16 These are not necessarily for American studios. In 1999, the 17 American consumer spent $41 billion on movies. Those being 18 combined over cable, home video, and the box office. Of that 19 $41 billion, I'd say $19 billion is spent in the home market. 20 About $7 billion, $8 billion -- I'm going to miss 21 some numbers here because I'm not rounding off correctly, but 22 $8 billion is spent at the box office, and the remaining 13 or 23 $14 billion is spent on cable, and cable, of course, subsumes 24 a number of different applications. The biggest single market 25 now in the U.S. for movies is the home video market. Of 1059 1 course, there are some home videos -- and most of that is 2 right now video cassette, and most of the video cassette 3 market is the rental market. 4 This is why it's essential. If you're going to talk 5 about whether piracy really has an economic meaning is to talk 6 about the other technologies that a consumer can have to 7 pirate. And that particular technology is, hey, for two 8 bucks, you can go to Blockbuster, and for 3 bucks or 4 bucks, 9 Cosmo will deliver it to you within an hour. If you want to 10 pirate, take 250 hours to download a DVD, it's your life. 11 Q. Can you tell me the difference between piracy relating 12 to -- you read about the Napster case -- piracy with respect 13 to audio and piracy with respect to DVDs? 14 MR. SIMS: Objection; beyond the scope of cross. 15 THE COURT: Sustained. 16 MR. GARBUS: I have no further questions. 17 THE COURT: What's the source of the revenue dollars 18 you just gave us, sir? 19 THE WITNESS: I'm sorry. That was from a book by -- 20 it's an annual report published by an investment banking firm 21 named Verona Suller, Incorporated. Every year they put out an 22 annual report of -- 23 THE COURT: This is not something that's within your 24 area of expertise. You're just relating what you read 25 somewhere. 1060 1 THE WITNESS: No. As a matter of fact, I worked on 2 the annual report this year. 3 THE COURT: And what did you do that produced these 4 numbers? 5 THE WITNESS: I'm sorry. The numbers that I'm 6 reporting here were taken from other trade publications by 7 research analysts those trade publications include -- 8 THE COURT: Okay. I understand. Thank you. 9 MR. GARBUS: Thank you for your testimony. 10 (Witness excused) 11 THE COURT: Your next witness, please. 12 MR. GARBUS: I think we'll be finished by lunch with 13 our witnesses. 14 THE COURT: Mr. Sims, I hope you're ready to go after 15 lunch. 16 MR. ATLAS: Defendants call Dr. David Touretzky. 17 MR. GARBUS: If I could say something. I didn't know 18 there was going to be any rebuttal case. 19 THE COURT: Well, on Friday we discussed this, and 20 they indicated that they might do so. That's all I know. 21 MR. SIMS: Actually, I spoke to Ed Hernstadt last 22 night, probably at 11 o'clock, and we said we weren't certain 23 we might have a witness, and if so, we would present him for 24 deposition. We haven't yet decided. We wanted to see this 25 morning's witnesses before we decided. 1061 1 THE COURT: Okay. Let's proceed. 2 DAVID TOURETZKY, 3 called as a witness by the Defendant, 4 having been duly sworn, testified as follows: 5 THE COURT: Proceed, Mr. Atlas. 6 DIRECT EXAMINATION 7 BY MR. ATLAS: 8 Q. Good morning, Doctor. Can you tell us by whom you are 9 presently employed? 10 A. Carnegie Mellon University in Pittsburgh, Pennsylvania. 11 Q. And what do you do at Carnegie Mellon? 12 A. I do research and teaching computer science. 13 Q. Do you teach in any specialized area within the field of 14 computer science? 15 A. Artificial intelligence and computational neuroscience. 16 Q. Can you just describe briefly those areas in a little bit 17 greater detail? 18 A. Artificial intelligence is concerned with getting 19 computers to do things that normally require human-like 20 intelligence or animal-like sense. Computational neuroscience 21 is the use of computers to understand how brains work. 22 Q. And how long have you taught computer science at Carnegie 23 Mellon? 24 A. I've been on the faculty since 1984. 25 Q. Can you tell us what degrees you have and from which 1062 1 schools you obtained them? 2 A. I have a bachelors degree in computer science from Rutgers 3 University, and I have a masters and Ph.D. degree in computer 4 science from Carnegie Mellon. 5 Q. Do you serve on any boards? 6 A. I serve on several editorial boards: The Editorial Board 7 of Cognitive Science. It's a journal. The Editorial Board of 8 Neuro-Computation. I'm also on the board of directors of 9 NIPS. NIPS stands for neural information processing systems. 10 It's a foundation that manages an annual conference for 11 researchers in the field of neuro-networks. 12 Q. Have you published any books? 13 A. Yes. I've published three books. 14 Q. Have you published any articles? 15 A. Approximately two dozen journal articles and about 60 16 conference papers. 17 MR. ATLAS: May I approach, your Honor? 18 THE COURT: Yes. 19 Q. I'd like to show the witness what we've marked as 20 Defendants' Exhibit CCM, and if you could tell us what that 21 is. 22 A. This is a copy of my curriculum vitae as of, 23 approximately, April of this year. 24 Q. Are there any changes to your CV that are not reflected on 25 the April version? 1063 1 A. There are a few changes, a few articles that were listed 2 and perhaps now have page numbers. And I've added two items 3 to the CV that are relevant to this case. I now cite my 4 Gallery of CSS Descramblers as a publication and also a page 5 on the CSS descrambling algorithms. That's now included in my 6 vitae as a publication. 7 MR. ATLAS: If I may approach again. I'd like to 8 move Dr. Touretzky's CV into evidence. 9 THE COURT: Any objection, Mr. Mervis? 10 MR. MERVIS: Plaintiffs have no objection, your 11 Honor. 12 MR. ATLAS: If I may approach again, your Honor. 13 THE COURT: Go ahead. 14 BY MR. ATLAS: 15 Q. Dr. Touretzky, did you prepare a declaration in this case? 16 A. Yes, I did. 17 Q. I'd like to show the witness what we've marked as 18 Defendants' Exhibit BBC and ask the witness if that's the 19 declaration that you prepared and signed in this case? 20 A. Yes, it is. 21 MR. ATLAS: I'd like to move Dr. Touretzky's 22 declaration into evidence as well, your Honor. 23 MR. MERVIS: Your Honor, I suppose to the extent that 24 this won't help illustrate his testimony, I have an objection, 25 which is -- and it may be premature -- which is that the 1064 1 testimony is going to be cumulative from what you heard from 2 Dr. Felton. 3 Notwithstanding that, your Honor, I do have an 4 objection in specific to paragraph 7 of this declaration. The 5 grounds for that objection are as follows: Relevance, 6 hearsay, best evidence, and that, in fact, it does not involve 7 any expertise whatsoever. 8 THE COURT: What do you say, Mr. Atlas? 9 MR. ATLAS: I think Dr. Touretzky will be testifying 10 as an expert. I think he can opine on the matters he has in 11 paragraph 7, but I have no objection if the Court takes it for 12 everything other than paragraph 7. I think it will help for 13 the Court. 14 THE COURT: Dr. Touretzky, I take it that you're 15 telling us that the statements made in this document are true. 16 THE WITNESS: Yes. 17 THE COURT: Correct? 18 THE WITNESS: Correct. 19 THE COURT: All right. I will receive paragraphs 1 20 through 6 simply as a way of shortcutting his direct testimony 21 in open court. I do note that to the extent he expresses 22 opinions on legal subjects, I'm not going to consider those 23 opinions as evidence. Obviously some of these things are 24 matters for me to decide. 25 The one that caught my eye particularly is the 1065 1 assertion at the beginning of paragraph 3 that "source code is 2 expressive speech meriting the full protection of the First 3 Amendment." That is ultimately for me to decide. 4 This witness is not here as a law professor, but, 5 obviously, he may have things that are relevant to my 6 determination of that question to say. 7 MR. ATLAS: That's what I would like to focus this 8 witness' testimony on today, especially his gallery of CSS 9 descramblers which he's testified about. 10 BY MR. ATLAS: 11 Q. Dr. Touretzky, do you have a website? 12 A. Yes, I do. 13 Q. Is the Gallery of CSS Descramblers that you testified a 14 moment ago posted on this website? 15 A. Yes. I have an extensive website about DeCSS, and one 16 portion of that website is the Gallery of CSS Descramblers. 17 THE COURT: I should note, Mr. Atlas, that 18 Defendants' Exhibit BBC does include internal references to 19 attached exhibits, which are not attached, one of which is a 20 printout of the gallery. 21 MR. ATLAS: I've broken them down separately, and I'm 22 going to take them as individual exhibits. 23 THE COURT: All right. 24 MR. ATLAS: If I could approach the witness. 25 THE COURT: All right. 1066 1 MR. ATLAS: It's Exhibit CCN. 2 THE COURT: CC. 3 MR. ATLAS: N. 4 THE COURT: N. 5 MR. ATLAS: Just so we're clear, I'd like to show the 6 witness -- the witness provided me this morning with a copy 7 that has various colors on it. He said it would be easier as 8 he goes through and describes what the gallery is if he can 9 refer to this one. The copies I have are black and white. Is 10 there an objection to my showing him the colored version? 11 MR. MERVIS: No. 12 BY MR. ATLAS: 13 Q. Dr. Touretzky, can you tell us what Defendants' Exhibit 14 CCN is? 15 A. This is a printout of the main page of my Gallery of CSS 16 Descramblers. 17 Q. Now, what is the Gallery of CSS Descramblers? 18 A. The gallery is a presentation of the CSS decryption of 19 algorithms in various forms in an attempt to show that these 20 forms are equivalent and that it's not possible to 21 discriminate between them. 22 Q. Why did you create the gallery? 23 A. Well, in reading reports of this case, it seemed to me 24 that the public discussion of some of these issues having to 25 do with legal status of computer code as speech could benefit 1067 1 from pointing out some of the things I try to point out in the 2 gallery. And since no one else seemed to be discussing it, I 3 thought I would create this website. 4 Q. If we could referring to Defendants' Exhibit CCN, which is 5 your gallery. If you could take us through, I guess, 6 beginning with the reference here to the anonymous C source 7 code, and just explain what it is you were trying to do. 8 A. Sure. So, the two points that the gallery tries to make 9 are, first of all, that source code has expressive content, 10 and, secondly, that you can't distinguish between different 11 forms of description of an algorithm, whether they're in 12 computer language like C or English or some other notation. 13 So the first two items in the gallery -- the first 14 item is the anonymous C source code, which is the source code 15 that was posted to the LiViD mailing list in October of 1999. 16 This is one of the items that is covered, I believe, by the 17 injunction issued by this Court. 18 The second item is another version of the same 19 algorithm. This.item is called CSS descramble.c, and this 20 comes from the CSS-auth software package that was authored by 21 Derek Fawcus. And the point of providing these two versions 22 is to show that it is possible to have different 23 implementation of an algorithm, and by looking at these 24 different implementations, one can gain knowledge that one 25 couldn't get from looking at other decryptions of the 1068 1 algorithms. 2 So, for example, if you compare CSS descramble.com 3 against the anonymous C source code, one of the things you see 4 is that Mr. Fawcus used fewer tables in his implementation, 5 and he unrolls one of the loops. 6 So, what he's telling us is, hey, there's more than 7 one way to implement this algorithm. You don't need to use so 8 many tables. You can use fewer tables. You don't have to do 9 this operation in a loop. Maybe it's more efficient to unroll 10 the loop and have the individual operations stated as separate 11 lines of code, and that's a message that Mr. Fawcus is 12 expressing in his chosen implementation of the algorithm. 13 You can't get that message, except by looking at the 14 source code and reading the source code. So that's the only 15 thing that can be expressed in the source code. 16 Q. By the way, if you could turn the page to page 2 of the 17 gallery. And can you explain to us what the first item on 18 page 2 is? 19 A. Yes. I should say that the next section of the gallery, 20 the items on page 2, they all have to do with the issue of 21 different forms the code can take and the fact that this Court 22 has enjoined some forms and not others, and I was puzzled by 23 that. It struck me as unusual that the Court would decide 24 that it was okay to ban, say, the C source code, but the Court 25 declined to ban discussion of the algorithm. 1069 1 Q. Why? 2 A. Because in my mind, these things are all equivalent, and 3 so I was wondering what your Honor was thinking when he 4 decided that this would be an effective remedy and why the 5 MPA's lawyers thought they won something when they got this 6 injunction because to my mind this didn't -- I couldn't make 7 sense of it. 8 So in an attempt to explore what the reasoning of the 9 Court and the plaintiffs' lawyers might have been, I decided 10 to investigate different forms that the code could take and 11 look at the implications of that. 12 So I began with the first two exhibits, which we've 13 already discussed, which are the actual C source code, but the 14 LiViD version and the CSS-auth version, which I believe have 15 been enjoined. 16 Now, it seemed to me that it could be that The 17 Court's reasoning was that these are files that could be fed 18 to a C compiler, whereas an English description, which the 19 Court declined to enjoin, could not be fed to a C compiler. 20 So if that was the Court's reasoning, what I've shown in this 21 exhibit on the top of page 2 is a screen dump of the CSS 22 descrambling code. So this is the CSS code written as a 23 binary image file. So in this form, the code cannot be feed 24 to a C compiler, and, perhaps, therefore, it would fall into 25 the category of protective speech. 1070 1 But if that was the case, the problem here is that 2 any human could look at this image and just type the 3 characters that they see into a text editor, and then they 4 would have the C source code again. Furthermore, there are 5 today, there are OCR programs. OCR stands for optical 6 character recognition, which can take a binary image file like 7 this and turn it automatically into text form. 8 So it's not clear to me then if these binary images, 9 if these pictures of the source code -- that's what they are, 10 pictures -- if the pictures themselves are really illegal 11 circumvention devices under the DMCA, but since they can't be 12 feed to a C compiler directly, maybe they're protected speech. 13 Q. Did you reach any conclusion in terms of your examination 14 of this particular description of the code? 15 A. Well, my conclusion is that if these images are protected 16 speech, then really the Court has provided the plaintiffs no 17 protection at all because it was trivial to turn these back 18 into text files. So, since the plaintiffs seem to think that 19 they won something with this injunction, it must be that these 20 images are not protected speech. They must be circumvention 21 devices. 22 Q. Why is that? 23 A. Well, because they're trivially convertible into 24 circumvention devices by looking at the picture and typing the 25 words. 1071 1 Q. Moving down to the second item. 2 THE COURT: So, is the net of your view that if the 3 preliminary injunction decision was in substance correct, as a 4 matter of law, the problem is that the injunction is far too 5 narrow? Is that one way of putting your conclusion? 6 THE WITNESS: Yes; I think that's correct. 7 THE COURT: Okay. I thought that's where you were 8 going. 9 BY MR. ATLAS: 10 Q. The second item on page 2. 11 A. The second item is a file called new-language.txt, and I 12 believe that you have a printout of that that you can 13 introduce as a separate exhibit. 14 Q. Actually before I get to that, I'd like to explore 15 something the judge had just asked you if you don't mind. 16 Why, in your view, would it be too narrow, the injunction, as 17 it currently stands? 18 A. Well, I think what the Court was trying to do in the 19 injunction is prevent people from obtainin