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Sony v. Hotz: The Parties Agree and Disagree on Jurisdictional Discovery Issues
Tuesday, February 22 2011 @ 06:11 PM EST

The parties in SCEA v. Hotz have conferred and now have sent a 17-page joint letter to the Magistrate Judge Joseph C. Spero, informing him that certain disputes about jurisdictional discovery have been resolved but others need his intervention.

I'll show you the letter, as text, and provide some details, but the bottom line is that Sony, technically Sony Computer Entertainment America or SCEA, is pursuing discovery more in the manner that large corporations do. They want as much as they can get, like wanting George Hotz to fly to California for a deposition, and they are even willing to pay Hotz's travel expenses. But Hotz is an individual, not a corporation, and he doesn't have endless money from international commerce, so he'd like SCEA to send interrogatories and other written methods of doing discovery. They aren't offering, he points out, to pay for a court recorder at the deposition.

And I'd have to say Hotz would like it if Sony didn't treat him like he is inclined to be dishonest. His lawyers say he has been above-board and forthcoming to date. But on Sony's side, they feel they'd like definite confirmation about the facts of Hotz's dealings with California, so Sony still wants things like the right to subpoena PayPal.

This is all about whether or not SCEA can sue Hotz in California or if it must start again in New Jersey, where Hotz resides. Hotz has a Motion to Dismiss filed, and unless SCEA can come up with a way to pin Hotz to California, it can't sue him there.

Here is the docket:

02/18/2011 - 85 - Letter from James G. Gilliland and Stewart Kellar [Joint] Re: Discovery Issues. (Gaudreau, Holly) (Filed on 2/18/2011) (Entered: 02/18/2011)

02/22/2011 - MOTION to Expedite MOTION FOR EXPEDITED DISCOVERY vacated off of Judge Illston's calendar - motion referred to Spero (tfS, COURT STAFF) (Filed on 2/22/2011) (Entered: 02/22/2011)

Here's what they did agree about:
Pursuant to the Court's order, on February 14, 2011, counsel for the parties met and conferred in person for approximately three hours in an attempt to resolve any disputes on what jurisdictional discovery SCEA should be permitted to take in advance of its Opposition to the Motion to Dismiss. The parties made significant progress during this meeting. SCEA agreed to narrow many of its Requests for Production, Interrogatories, its Inspection Demand, and third party subpoenas. SCEA also agreed to hold off propounding certain discovery altogether until a later date. Attached as Exhibit A is a list of the agreed upon jurisdictional discovery. The parties agreed to a deadline of March 7, 2011 for Mr. Hotz's responses to SCEA's discovery. The parties also the agreed to reschedule the Motion to Dismiss hearing for April 8, 2011, with SCEA's opposition and Mr. Hotz's reply being due on March 18, 2011 and March 25, 2011, respectively. The parties have filed a stipulation with the Court to this effect.
So SCEA is trying to be reasonable where it feels it can. But there are some remaining issues. They still don't agree about SCEA sending a subpoena to Paypal to get all of Hotz's records, as Hotz feels the subpoena is too broad; they don't agree that George Hotz should have to fly to California for a deposition regarding jurisdictional discovery; and they don't agree that the third-party neutral now holding on to Hotz's impounded computers should be allowed to search for "relevant" materials having to do with jurisdiction. They were impounded for another purpose, Hotz argues, and once they are returned to him on February 28, he can just provide answers to written discovery interrogatories and other requests.

If you were SCEA, you'd want it all, too. There is nothing inappropriate in asking. But if you are Hotz, you hope not to be bankrupted by a corporate-style litigation. And to be frank, a defendant always tries not to show its complete underwear drawer, so to speak, preferring to make the plaintiff ask for specific items and hoping that he won't know what to ask for. That's true for innocent defendants as well as those who know they did something they should not have done, by the way.

The discovery dance is just that, a dance. So each side is doing what it's supposed to do here, but there is the added detail that it's not an even field. SCEA has oodles of money it can spend on discovery. It can crush Hotz just by making it impossible for him to function in real life any more. It has apparently begun to show some consideration to Hotz, in recognition of the imbalance. But Hotz would like some more. Meanwhile, the clock is ticking, in that the motion to dismiss is filed. So the court will have to weigh the competing interests, and try to find the right line, so that SCEA gets what it needs to demonstrate whether or not it can tie Hotz to California, while also protecting Hotz from overbearing requests that punish him before he has even been found guilty of anything. Courts do consider such factors. If two corporate interests are in litigation, courts can be very strict about insisting on discovery to the Nth degree; but with individuals they will consider what is reasonable. For example, if the judge thinks a deposition is required, he could order SCEA to fly to New Jersey instead or to pay for everything.

And here is the letter, as text:

************************

February 18, 2011

VIA HAND DELIVERY AND EMAIL
AT JCSpo@cand.uscourts.gov

Magistrate Judge Joseph C. Spero
United States District Court
Northern District of California
[address]

Re: Sony Computer Entertainment America LLC v. Hotz, et al.,
Case No. C-L 1-00167 SI (N.D. Cal)

Dear Judge Spero:

Pursuant to the Court's February 14, 2011 Order (Docket No. 80), plaintiff Sony Computer Entertainment America LLC ("SCEA") and Defendant George Hotz respectfully submit this joint letter regarding the remaining outstanding disputes relating to jurisdictional discovery.

Á. Case Background

On January 11, 2011, SCEA filed a complaint against Mr. Hotz and others for alleged violation of the Digital Millennium Copyright Act ("DMCA") (17 U.S.C. 1201), the Computer Fraud and Abuse Act ("CFAA") (18 U.S.C. 1030), the Copyright Act (17 U.S.C. 501), California's Computer Crime Law (Penal Code 502), and other state laws with respect to SCEA's PlayStation3 computer entertainment system ("PS3 System") (Docket No. 1). SCEA also moved for a Temporary Restraining Order against Mr. Hotz based on its claims under the DMCA and CFAA. (Docket No.2). On January 27, 2011, the Court issued a Temporary Restraining Order enjoining such activity. (Docket No. 50). The parties also submitted limited briefing on the question of whether the Court has personal jurisdiction over Mr. Hotz. [Docket Nos. 32, 46, 47] On February 2, 2011, Mr. Hotz filed a Motion to Dismiss for Lack of Personal Jurisdiction ("Motion to Dismiss"). [Docket No. 51]. SCEA subsequently moved to take expedited, targeted discovery prior to the deadline for its Opposition to the Motion to Dismiss. [Docket No. 62]. Among the discovery sought by SCEA for jurisdictional purposes are Requests


Magistrate Judge Joseph C. Spero
February 18, 2011
Page 2

for Production, Interrogatories, an Inspection Demand to inspect Mr. Hotz's PS3 System and computers, a Notice of Deposition, as well as third party subpoenas to ascertain Mr. Hotz's forum related contacts with California.

B. Meet and Confer On Discovery

Pursuant to the Court's order, on February 14, 2011, counsel for the parties met and conferred in person for approximately three hours in an attempt to resolve any disputes on what jurisdictional discovery SCEA should be permitted to take in advance of its Opposition to the Motion to Dismiss. The parties made significant progress during this meeting. SCEA agreed to narrow many of its Requests for Production, Interrogatories, its Inspection Demand, and third party subpoenas. SCEA also agreed to hold off propounding certain discovery altogether until a later date. Attached as Exhibit A is a list of the agreed upon jurisdictional discovery. The parties agreed to a deadline of March 7, 2011 for Mr. Hotz's responses to SCEA's discovery. The parties also the agreed to reschedule the Motion to Dismiss hearing for April 8, 2011, with SCEA's opposition and Mr. Hotz's reply being due on March 18, 2011 and March 25, 2011, respectively. The parties have filed a stipulation with the Court to this effect.

C. Areas of Dispute

The parties were unable to reach agreement on the following issues:

1. Service of PayPal Subpoena

a) SCEA's Position

SCEA seeks to serve a subpoena on PayPal, Inc. regarding Mr. Hotz's PayPal account. See Exhibit B. In particular, SCEA seeks "Documents sufficient to show all credit and debit transactions, occurring on or after January 1, 2009, related to any PayPal, Inc. account corresponding to or associated with the email address." SCEA also seeks "Documents sufficient to identify the source of all funds deposited into any PayPal, Inc. account corresponding to or associated with the email address." PayPal, Inc. is a company based in the Northern District of California. Mr. Hotz's use of PayPal is relevant to establishing his forum related activities. SCEA is entitled to determine what financial benefits Mr. Hotz has received from individuals residing in California in relation to his circumvention of the technological protection measures in the PS3 System. The subpoena is not overbroad as it restricts the time frame from January 1, 2009 to the present, approximately one year prior to the time that Mr. Hotz initially hacked the PS3 System. SCEA has also propounded a Request for Production for Mr. Hotz's PayPal information pertaining to the PS3 Systems, but it is not clear whether Mr. Hotz currently has all of this information in his possession. Certainly, too, SCEA is entitled to verify the veracity of any information produced by Mr. Hotz by subpoenaing PayPal, a third party who possesses complete records. Such discovery poses no burden on Mr. Hotz.


Magistrate Judge Joseph C. Spero
February 18, 2011
Page 3

b) Mr. Hotz's Position

SCEA stated that it would seek to subpoena from PayPal "all credit and debit transactions, occurring on or after January 1, 2009, related to. . . geohot@gmai1.com." Mr. Hotz believes this subpoena is overbroad as it is not narrowly tailored to the issue of jurisdictional discovery. Because SCEA Request for Production of Documents No. 9 already asks for PayPal transactions related to PS3 systems, the PayPal Subpoena for "all credit and debit transactions" is cumulative, duplicative and unnecessary. Such discovery burdens Mr. Hotz's privacy interest in his financial records. A Request for Production of Documents or an Interrogatory regarding Paypal transactions to Mr. Hotz from individuals or businesses in California would be an appropriate alternative to an overreaching subpoena of Mr. Hotz's complete Paypal transaction records. SCEA has not put forth any evidence or other information that would lead to a conclusion that Mr. Hotz will not be completely forthcoming in his responses to written discovery.

2. Consent to Twitter

a) SCEA's Position During the meet and confer, counsel for Mr. Hotz agreed to obtain written consent to facilitate Twitter's production of copies of any Tweets posted by Mr. Hotz from January 1, 2009 to the present. Because of Twitter's policy, this consent must be in writing.

b) Mr. Hotz's Position

Counsel for Mr. Hotz does not recall agreeing to affirmatively facilitate Twitter's production of copies of any Tweets posted by Mr. Hotz, nor has counsel for Mr. Hotz objected to SCEA's desire to subpoena records of Mr. Hotz's Twitter posts. SCEA may subpoena those records without objection from Mr. Hotz.

3. Deposition of Mr. Hotz

a) SCEA's Position

SCEA is entitled to take Mr. Hotz's deposition for jurisdictional discovery. Mr. Hotz has already submitted two declarations on the topic of personal jurisdiction. His declarations are carefully worded in certain respects, particularly with regard to Mr. Hotz's use of the PlayStation Network ("PSN"). The use of the PSN is relevant because the PSN User Agreement contains a forum selection clause subjecting the user to jurisdiction in California. SCEA is entitled to cross-exam Mr. Hotz on his declarations and uncover Mr. Hotz's contacts with California.


Magistrate Judge Joseph C. Spero
February 18, 2011
Page 4

SCEA agreed to review Mr. Hotz's discovery responses and then decide whether it wishes to proceed with the deposition of Mr. Hotz for purposes of jurisdictional discovery.

Should SCEA decide to take Mr. Hotz's deposition, SCEA has agreed to cover any travel expenses for a deposition in California.

b) Mr. Hotz's Position

Counsel for Mr. Hotz has already demonstrated Mr. Hotz's willingness to be fully forthcoming in all written discovery and SCEA has not demonstrated otherwise. Mr. Hotz will be responding to Document Requests, Interrogatories, and will be submitting his Sony Playstation computer for inspection, which counsel for SCEA stated at the meet and confer session will enable their forensic investigators to determine whether Mr. Hotz has accessed the PSN or agreed to the PSN Terms of Service. Deposing Mr. Hotz would therefore be cumulative, duplicative, burdensome and expensive.

SCEA's counsel stated at our meeting that SCEA would pay for Mr. Hotz's travel expenses to be deposed in San Francisco but wil not pay for court reporter fees, including copies of the deposition transcript. The cost of a court reporter and the deposition transcript alone, regardless of travel costs, is burdensome and prohibitively expensive to Mr. Hotz, as SCEA has been made aware by Mr. Hotz's counse1. Written discovery in the form of Production, Interrogatories, and the above-referenced Inspection Demand is less burdensome and less expensive for all parties involved.

Counsel for SCEA states that SCEA would only seek Mr. Hotz's deposition upon review of Mr. Hotz's discovery responses. The review SCEA contemplates does not regard thoroughness of responses, but whether those responses provide information bolstering SCEA's jurisdiction claim. If the responses do not provide the "smoking gun," although Mr. Hotz has been fully forthcoming with written discovery, SCEA will seek to conduct a burdensome and expensive deposition, forcing Mr. Hotz to travel to the other side of the country. Because the taking of Mr. Hotz's deposition would be cumulative, duplicative, burdensome and expensive, and because SCEA has not demonstrated how a deposition would provide information that other forms of written discovery or inspection would not, SCEA should not be permitted to take Mr. Hotz's deposition for jurisdictional discovery.

4. Inspection Demand

a) SCEA's Position

Defendant Hotz agreed to allow Inspection Demand No. 1 (All PS3 System consoles in YOUR possession, custody or control) to go forward for purposes of jurisdictional discovery. SCEA agreed to temporarily hold off moving forward with Inspection Demand Nos. 2-4 relating


Magistrate Judge Joseph C. Spero
February 18, 2011
Page 5

to Mr. Hotz's computers. However, SCEA believes that the impounded devices are highly likely to contain evidence relevant to the jurisdictional dispute between the parties.

To date, the parties have selected a third party neutral to impound Mr. Hotz's devices. The impoundment took place today and the devices are currently stored at the neutral's facility in New Jersey. The parties and the third party neutral will work together to develop a protocol for the isolation, segregation and removal of information on the devices related to the circumvention of the technological protection measures in the PS3 System. Per the Court's order, the protocol will be agreed upon by Monday, February 28,2011 and executed at that time.

Because there is a high likelihood that other relevant information relating to jurisdictional issues is contained on the impounded devices, SCEA has proposed that the third party neutral segregate and capture any material related to jurisdiction as part of the impoundment protoco1. SCEA believes that it would be most efficient to have all of this material segregated and captured at once as par of the impoundment protocol so that the discovery is turned over in time for SCEA to oppose the Motion to Dismiss. For example, the impounded devices may contain emails related to jurisdiction and any PS3 System materials including any PS3 instruction or warranty manuals or other materials such as software, distributed by SCEA that would show contacts with SCEA in California. SCEA should then be allowed to review any jurisdictional material therein prior to its deadline for responding to the Motion to Dismiss. The details of the protocol wil need to be worked in the coming week for the appropriate search and capture of this materia1.

b) Mr. Hotz's Position

SCEA's request to allow the third party neutral to inspect Mr. Hotz' impounded drives for purposes of segregating and capturing "relevant material" is unacceptable. Inspection of Mr. Hotz's drives for "relevant material" is overbroad, and SCEA has already agreed not to demand jurisdiction discovery. The third party neutral is not in a position to determine what is or is not relevant to the current jurisdictional discovery inspection of Mr. Hotz's drives for purposes of matters and inspection of Mr. Hotz's drives is not the purpose of the Impoundment Order.

Further, this Court has stated that parties are to split the costs of impoundment. Costs of impoundment are already highly burdensome, with costs starting at $28S/h (up to $400/hr) for the neutral's services. The costs associated with the third party neutral performing further there are searches unrelated to the impoundment order would only increase that burden. If there are materials relevant to SCEA's written jurisdictional discovery requests found only on the impounded drives, and unavailable from any other source, Mr. Hotz will make such a statement in his discovery responses and those documents will then be accessed and produced by Mr. Hotz after the drives have been "promptly returned" to Mr. Hotz, per the Impoundment Order.

The search protocol for the impoundment process is scheduled to occur on February 28,


discovery responses that require access to the impounded drves, if any. SCEA's Opposition to Mr. Hotz's Motion to Dismiss is due March 18,2011 leaving SCEA's five attorneys of more than two weeks to draft a brief. Further, the combining of was rejected at our initial meeting. SCEA's request for a search of "relevant material" amounts to a third party inspection of Mr. Hotz's drives and should not be permitted for jurisdiction discovery.

Thank you very much for your time and consideration.


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