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Subpoenas in SCEA v. Hotz Issue, Subject to Motions to Quash - Updated
Friday, March 11 2011 @ 11:04 AM EST

The telephone conference with the parties in Sony Computer Entertainment America v. Hotz and the magistrate judge, Hon. Joseph Spero, went off as scheduled, and the sparse minutes are now available. The subpoenas are issuing now.

The transcript won't be available until June 8, unfortunately. I wish the courts would consider a shorter time period of embargo. Here's the operative bit from the minutes:

Pursuant to the Order signed on 3/3/11, docket no. 90, it is ordered that the issuance of the subpoenas is without prejudice to the subpoenaed party to file a Motion to Quash. Any information provided pursuant to the subpoena shall be provided on an “Attorneys’ Eyes” only.

Court issued rulings on the record as to docket nos. 85 and 86. Plaintiff to prepare Order, with agreed to form by Defendant, no later than the close of business on 3/14/11.

No.85 was the joint letter to the judge about discovery, with some issues not resolved by the parties, and No. 86 was the joint letter regarding impoundment issues. So the judge has now decided those issues, and since Sony is doing the order, it won more than Hotz, I gather. We'll find out when Sony files the orders by the 14th of this month.

Here are the filings:

03/10/2011 - 92 - Minute Entry: Telephonic Discovery Hearing held on 3/10/2011 before Joseph C. Spero. (Court Reporter Lydia Zinn.) (klh, COURT STAFF) (Date Filed: 3/10/2011) (Entered: 03/10/2011)

03/10/2011 - 93 - Transcript of Proceedings held on 03/10/2011, before Judge Joseph C. Spero. Court Reporter/Transcriber Lydia Zinn, Telephone number (415) 531-6587. Per General Order No. 59 and Judicial Conference policy, this transcript may be viewed only at the Clerks Office public terminal or may be purchased through the Court Reporter/Transcriber until the deadline for the Release of Transcript Restriction.After that date it may be obtained through PACER. Any Notice of Intent to Request Redaction, if required, is due no later than 5 business days from date of this filing. Release of Transcript Restriction set for 6/8/2011. (Zinn, Lydia) (Filed on 3/10/2011) (Entered: 03/10/2011)

[ Update: The judge has issued an order on March 15, allowing SCEA to get information from PayPal on source of funds between January 1, 2009, to February 1, 2011. And here is the docket entry of the order, with related filings:

03/14/2011 - 94 - Letter from [Joint] Plaintiff SCEA and Defendant George Hotz re Proposed Order for March 10, 2011 Hearing. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit A)(Smith, Mehrnaz) (Filed on 3/14/2011) (Entered: 03/14/2011)

03/14/2011 - 95 - MOTION for leave to appear in Pro Hac Vice of Yasha Heidari ( Filing fee $ 275, receipt number 34611057493.) filed by George Hotz. (Attachments: # 1 receipt, # 2 proposed order)(ys, COURT STAFF) (Filed on 3/14/2011) (Entered: 03/15/2011)

03/15/2011 - 96 - ORDER RE MARCH 10, 2011 TELEPHONIC HEARING RE JONT LETTER ON IMPOUNDMENT ISSUES AND JOINT LETTER ON DISCOVERY. Signed by Judge Joseph C. Spero on 3/15/11. **Please note change on page 3, line 12**(klh, COURT STAFF) (Filed on 3/15/2011) (Entered: 03/15/2011)

So, another lawyer for Hotz, and the Paypal issue is resolved. Note that Exhibit 2 attached to #94 is a transcript of the telephonic hearing. It's fascinating, in that it was the judge that says, before the parties even speak a substantive word, that he requires Sony to add information to the subpoenas advising the parties being subpoenaed that they have the right to file a motion to quash:
I did sign the order authorizing the issuance of the subpoenas that you both agreed that should be issued. And we'll deal with the rest of the discovery disputes today. I did want to emphasize two things about the subpoenas that were issued; and also, to the extent I authorize a PayPal subpoena, what my intent is with respect to those.

And my intent, number one, is that the information that's produced pursuant to those subpoenas will be attorneys' eyes only, under the protective order; and second, that it will be without prejudice, obviously, to the subpoenaed parties or anyone else who's got standings, prejudice -- without prejudice to their right to file a motion to quash. And what I would order you to do is make sure, when you serve those subpoenas or any other subpoenas I authorize, that you make sure you advise the subpoenaed parties that they have the right to file a motion to quash.

On the discovery disputes, I thought we'd just go down them, one by one.

The first is a PayPal subpoena. This is -- it seems to me the relevancy of the PayPal information is limited to whether or not the source of funds that are paid into the PayPal account associated with the "geohot" g-mail address the location from which those funds are paid may be of some relevance, but the documents, beyond that narrow scope, I don't see particularly interesting, because we want to find out whether or not it's being paid by California residents.

And so my thought was I would authorize a subpoena to the PayPal account only to the extent that you could obtain documents sufficient to identify the source of funds, including location of the source of those funds deposited into a PayPal account -- any PayPal account associated with the from January of 2009 to the present; but otherwise, narrow it to that, but no further....

MS. SMITH [SCEA]: One concern I have with the proposal that you're making is that PayPal may have difficulty providing us information limited to -- in other words, it may be easier for PayPal to give us all of the information, rather than the information limited to the California residents.

THE COURT: Yeah. Well, easier is one issue. Easier doesn't necessarily cut it. There are lots of things that are easier, and it may or may not be easier. It may or may not be impossible. It depends on -- it's a matter of degree. So I don't know about easier; whether that would justify getting information; but you agree that the question that is relevant is -- is to identify whether or not, and how much, and how many California residents paid into that account?

MS. SMITH: Yes, your Honor. We agree with that.

THE COURT: Okay. All right. Well, then, I'll limit it, as requested. I will limit it to documents sufficient to identify any source of funds in California that went into that PayPal account -- any PayPal account associated with for the period January 1, '09, to February 1, '11. And ask the plaintiff to redraft their subpoena accordingly. So that's the PayPal account.

So it was the judge who thought about the recipients of the subpoenas, not the parties. That's what judges are for, of course, but it's nice to see. It's also relevant to a later argument between the parties. Hotz insists the subpoenas have to be redone, while SCEA argues they don't, but this indicates to me that they do. The cutoff date for PayPal ended up being February 1, because Hotz set up a legal defense fund in February, whereas Sony had asked for it to be all the way to the present. As you see, the judge is genuinely trying to be fair to both parties, not just Sony. - End update.]

Meanwhile, Sony has prevailed against LG in the Netherlands, getting the court to lift the seizure order, according to

It was revealed today that the court order had been lifted, with LG being fined USD$180,000 in legal fees and an additional $275,000 for every day that they fail to pay up. While this only concerns the prejudgement order and not the actual Blu-Ray Disc patents case, it is still good news for Sony, who can now continue shipping and distributing PS3s across Europe.

Sony's lawyer said that they are willing negotiate with LG to settle the patent dispute, as well as all other cases with the company, including a clash with subsidiary, Zenith, over digital TV patents; as well as claims Sony made against LG, alleging that some LG smartphones infringe on Sony patents - "but not with a knife at the throat," supposedly referring to the prejudgement seizure order. The first hearing for the Blu-Ray Disc case is currently scheduled for November 18 this year.

The Daily Mail confirms:
As it now stands, LG could be facing a large claim for damages.

A Sony spokesman said today: 'At a court hearing in the Hague yesterday, Sony's arguments were accepted and the seizure order was lifted. We understand that there will now be no problem re-starting imports of the PlayStation 3 to Europe.'

The scary part of this story is that according to the Guardian's account, the police not only were authorized by the now-lifted order to seize PS3s in warehouses and stores but they had authority to enter private homes to grab purchased products:
Dutch police have seized several thousand PlayStation 3s at Sony's biggest European warehouse in the latest stage of its acrimonious patent battle with LG.

LG has won a court order enabling it to seize all new PS3 across the Netherlands – including those already in Dutch homes – in a dispute that centres on Sony's allegedly infringing use of Blu-ray technology belonging to LG.

Time to buy only with cash, I guess. Patent law has gone nuclear. These laws really don't believe that when you pay for something, it belongs to you after the sale. I know. They see patent infringement like robbing a liquor store. They might want to read this scholarly paper [PDF] on how patents lead to stagnation. The abstract:
A country's most talented people typically organize production by others, so they can spread their ability advantage over a larger scale. When they start firms, they innovate and foster growth, but when they become rent seekers, they only redistribute wealth and reduce growth. Occupational choice depends on returns to ability and to scale in each sector, on market size, and on compensation contracts. In most countries, rent seeking rewards talent more than entrepreneurship does, leading to stagnation. Our evidence shows that countries with a higher proportion of engineering college majors grows faster; whereas countries with a higher proportion of law concentrators grows more slowly.
Do you not see that in the current patent wars?

And the other news in this picture is that the plaintiffs in the class action regarding OtherOS being removed from PS3 have filed their amended complaint. We're working on a text version for you.


Subpoenas in SCEA v. Hotz Issue, Subject to Motions to Quash - Updated | 272 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections here
Authored by: red floyd on Friday, March 11 2011 @ 11:33 AM EST
So PJ can find them.

Hints as to the location in the message body, and a brief description in the
title (e.g. rong => wrong) would be useful.

I am not merely a "consumer" or a "taxpayer". I am a *CITIZEN* of the United
States of America.

[ Reply to This | # ]

Off Topic here
Authored by: red floyd on Friday, March 11 2011 @ 11:36 AM EST
On topic posters will have to become a creditor in Judge Gross' court.

I am not merely a "consumer" or a "taxpayer". I am a *CITIZEN* of the United
States of America.

[ Reply to This | # ]

Newspicks discussion here
Authored by: red floyd on Friday, March 11 2011 @ 11:38 AM EST
Please put the title of the newspick in the title of your post, assuming you're
starting a new subthread.

I am not merely a "consumer" or a "taxpayer". I am a *CITIZEN* of the United
States of America.

[ Reply to This | # ]

COMES goes here
Authored by: red floyd on Friday, March 11 2011 @ 11:39 AM EST
Please follow the usual procedures.

I am not merely a "consumer" or a "taxpayer". I am a *CITIZEN* of the United
States of America.

[ Reply to This | # ]

Patent stupidity
Authored by: wvhillbilly on Friday, March 11 2011 @ 02:04 PM EST
Patents. It's all about greed any more.

I wonder how much good money spent on litigation trying to strangle competitors
could have accomplished had it been spent on innovating and cooperating instead.
Look at open source software, for example. Vastly superior to proprietary, and
at a fraction of the expense, and especially when you include all the money
spent on litigation by proprietary companies trying to destroy each other and
competition in general.

Wasn't it Bill Gates himself who said if we had had patents 20 years ago like we
have today, the software industry would be at a standstill? What's any different
about today? Why are people now trying to kill each other with patents, when all
it does is lead to stagnation?

Like I said, it's all about greed. Pure and simple.

"It is written." always trumps, "Um, ah, well, I thought..."

[ Reply to This | # ]

  • Patent stupidity - Authored by: Anonymous on Friday, March 11 2011 @ 05:10 PM EST
  • re: billg - Authored by: Anonymous on Saturday, March 12 2011 @ 01:08 AM EST
Can I be summonsed to California if someone there looks at my website
Authored by: Anonymous on Friday, March 11 2011 @ 02:28 PM EST
I'm still concerned about the jurisdiction part of this

SCEA said that Hotz can be summonsed to California if people
in California visited his website because that counts as
doing business there. The judge thinks that's a compelling
enough reason that his host needs to be subpoenaed to find

That's huge. If it's that simple then anyone running a
website can be summonsed almost anywhere.

Has this happened before? Is there actual law or cases
behind it or is it just this judge playing by ear?

[ Reply to This | # ]

BlueHost subpoena
Authored by: pem on Friday, March 11 2011 @ 02:53 PM EST
Mention was made in an earlier article about how BlueHost just rolled over on

To the extent that Sony is just looking to tie IP addresses to geographic
location, the privacy implications may not be that bad.

To the extent that Sony wants to go after people who visited the websites,
another level of subpoenas (to the anonymous users' ISPs) will be required in
order to actually unmask the identities.

So either make sure you have a good ISP, or do all your surfing through an
anonymizing proxy...

[ Reply to This | # ]

Scholarly article doesn't really talk about how patents lead to stagnation
Authored by: Bystander on Friday, March 11 2011 @ 06:03 PM EST

The scholarly paper cited, "The Allocation of Talent: Implications for Growth", written by Kevin Murphy, Andrei Shleifer, and Robert Vishny, actually talks about how exceptionally talented people choose between pursuing opportunities involving entrepreneurship, working for others, or rent- seeking. Access to the published paper requires a subscription, but a pre- print version is available online.

Pre-pr int draft of cited paper

The authors do not say that patents lead to stagnation. On page 3, they say this:

Finally, the compensation contract--how much of the rents on their talent the superstars can capture--determines the sector's attractiveness to talent. For example, if returns to innovation are not protected by patents and cannot be captured by an entrepreneur, entrepreneurship becomes less attractive. When individual output is difficult to measure or is not sufficiently rewarded when measured, talented people are underpaid. Teamwork without attribution is unattractive to superstars, as is horizontal equity. The more of the rents on her talent a superstar can keep, the more likely she is to join a sector.

The authors go on to say, starting on page 4:

In different countries and time periods, talented people chose occupations in which it was the most attractive to be a superstar. When markets in a country are large and when people can easily organize firms and keep their profits, many talented people become entrepreneurs. Examples of such countries might be Great Britain during the Industrial Revolution, the United States in the late nineteenth and early twentieth century, and some East Asian countries today.
Which activities the most talented people choose can have significant effects on the allocation of resources. When they become entrepreneurs, they improve the technology in the line of business they pursue, and as a result, productivity and income grow. In contrast, when they become rent seekers, most of their private returns come from redistribution of wealth from others and not from wealth creation. As a result, talented people do not improve technological opportunities, and the economy stagnates. Landes [1969] believes that the differential allocation of talent is one of the reasons why England had the Industrial Revolution in the eighteenth century but France did not. In more recent times, the allocation of talent to the rent-seeking sectors might be the reason for stagnation in much of Africa and Latin America, for slow growth in the United States, and for success of newly industrializing countries where these sectors are small.

The important point being made by the authors is that extremely talented people will gravitate towards fields where they can be rewarded for their talents. Growth occurs when the rewards for entrepreneurship are greater than the rewards for other activities, particularly non-productive rent seeking.

Moreover, a country with large wealth but slow growth is especially attractive for rent seeking. The reason is that new goods often have more than unitary income elasticity of demand, and therefore future growth is essential for the profitability of innovation. Slow growth then reduces the attractiveness of innovation and entrepreneurship. This logic suggests that the productivity growth slowdown can be self-sustaining: as talent leaves entrepreneurship and growth slows, the returns to entrepreneurship fall further relative to those to rent seeking. We thus expect rent seeking to prosper in countries with substantial wealth and slow growth, such as the United States and Argentina today.

If talented people cannot feel that they can be properly rewarded for their talents by being innovative in technological fields, they may well be motivated to take up other fields such as lawyering. What the authors are saying is that this transition can be a self-feeding process, as fewer entrepreneurs leads to lower growth, which leads to even further disincentives for entrepreneurs.

Patents can have both positive and negative effects on providing extremely talented entrepreneurs with incentives to innovate. The authors seem to feel that innovation largely comes from the activities of a relatively small number of exceptionally talented individuals. This perhaps explains why our present patent system doesn't seem to work well. With too many patents being issued, and the majority being issued to large corporations for relatively minor variations on existing technology, the truly exceptional innovators have less opportunity to stand out. Patents would work more like they are intended if they were limited to real significant advances, and they more readily acknowledged and rewarded the accomplishments of the real innovators.


[ Reply to This | # ]

Court didn't actually authorize seizure
Authored by: Tolerance on Friday, March 11 2011 @ 06:45 PM EST
PJ's comment about the patent seizure law were partly based on a Guardian
article which has since been amended:

"This article was amended on 3 March to clarify the role of the civil court
of justice in the Hague in this injunction.

The court only serves to grant the LG's lawyer's application to have power of
attorney for the company on this matter.

Once this is granted, the attorney can then order EU customs officials to
blockade imports of this product."

So it's not the EU Civil Court ordering customs to impound the PS3s. It's LG
itself, through its attorney.

Grumpy old man

[ Reply to This | # ]

Sony games chief considered charming
Authored by: DCFusor on Friday, March 11 2011 @ 10:01 PM EST
Which kind of tells you something about how their corporate culture must be. Would not all this action have originated with this guy? Bloomberg link

Why guess, when you can know? Measure it!

[ Reply to This | # ]

Subpoenas in SCEA v. Hotz Issue, Subject to Motions to Quash
Authored by: Anonymous on Saturday, March 12 2011 @ 07:43 PM EST
A famous general once said the best way to win a war is not to play by the
oppositions game plan. I don't know the reference but the logic makes sense.

[ Reply to This | # ]

PS3 no longer hackable?
Authored by: drwh on Monday, March 14 2011 @ 09:07 AM EDT
A blog hosted by the The New Scientist is reporting that version 3.6 of the PS3's firmware fixes the "damage" caused by Hotz's work, and speculates on the implications of the fix to the lawsuit... However the article reports that there is doubt that the hole has been permanently filled

[ Reply to This | # ]

Buying with Cash - Subpoenas in SCEA v. Hotz Issue, Subject to Motions to Quash
Authored by: Anonymous on Monday, March 14 2011 @ 12:57 PM EDT
"Time to buy only with cash, I guess."

That will only work for you as long as you don't connect to the internet. If
you have a PS3, do you think it can't be found if it is on line?

[ Reply to This | # ]

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