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Court Rejects Hotz's Motion for Protective Order & Lays Down the Rules; and March 10th Hearing Transcript, as text
Friday, March 18 2011 @ 10:00 PM EDT

Magistrate Judge Joseph Spero in SCEA v. Hotz has denied George Hotz's Motion for Protective Order:

03/18/2011 - 102 - ORDER, by Judge Joseph C. Spero, signed 3/18/11, denying 100 George Hotz's Motion for Protective Order (klh, COURT STAFF) (Filed on 3/18/2011) (Entered: 03/18/2011)

But the door isn't slammed altogether. He tells the lawyers how he expects them to handle disagreements about discovery -- it is their responsibility to follow the rules and meet *in person* when there are disagreements. If they then can't work it out, they can send a joint letter to him setting forth the issues needing to be resolved regarding discovery. At that point the Court will tell them what the next step is going to be.

Meanwhile, as he points out in the order, the discovery process was already ordered by the court on March 15.

I gather he's not happy with the way the lawyers are behaving, and he expects improvement. I think from reading the order that Hotz's lawyers can now meet in person with SCEA's lawyers, and then follow the rest of the instructions, so as to try to resolve the issues raised in the motion for a protective order. I think this judge is sick of the bickering and posturing and inability to come to a stipulated process, or he wants to act like he is to light a fire under these lawyers:

In the event that the parties continue to be unable to resolve the matters regarding the timing and scope of discovery, the Court will consider what future actions are necessary. These actions may include the following: (1) sanctions against a party failing to cooperate in the discovery process and meet and confer in good faith, as required by this Order, the Federal Rules of Civil Procedure, and the Local Rules of this Court; and/or (2) requiring each party to attend the in-person, meet-and-confer sessions described above. The Court is not entering either of these matters as an Order of the Court at this time, and fully expects counsel to meet their obligations under this Order and under the Local Rules.
When a judge talks like that, he means he "fully expects" the lawyers to straighten up and fly right. Or else.

Also, I promised to do a text version of the transcript [PDF] of the telephonic hearing held on March 10th, as text. I've done it now. I think it clarifies nicely some details we've been wondering about. First, despite the tone of the order, Judge Spero, is a mensch. He's seriously trying to be fair, not only to the parties but to the individuals and entities being subpoenaed.

He is not just rubber-stamping whatever Sony asks for, as if Hotz doesn't exist or has no rights, but he's letting SCEA have what they need. He keeps them inside the confines of jurisdictional discovery though, not letting them wander off into discovery regarding the merits. Not that they don't try.

What I really want you to notice is how important it is to have a lawyer when you step into a courtroom. As you watch Hotz's lead attorney, Stewart Kellar, raising issue after issue and in several instances changing the judge's mind as a result, ask yourself this: if you were the defendant, would you have thought of any of the matters he raises? All of them? It really makes a difference to have competent legal representation, which is no doubt why both Hotz and graf_chokolo in Germany established legal defense funds to try to equalize the playing field a bit.

Kellar isn't just winging it. I mean, lawyers are good at thinking on their feet, the litigators. But he will have walked in with a plan and a list of points he hopes to make, and that will have required all the team to have brainstormed prior to the hearing. Others on Hotz's team but not at the telephonic hearing are Yasha Heidari and Jack Praetzellis.

On SCEA's side, there were three lawyers on the phone at this hearing, James Gilliland, Mehrnaz Boroumand Smith, and Holly Gaudreau. Three lawyers for a phone call. That's why Hotz realized he needed a legal defense fund. Kilpatrick Townsend and Stockton represents SCEA, and they've assigned five lawyers to this case, Ryan T. Bricker, Timothy R. Cahn, Gaudreau, Gilliland, and Smith. SCEA also has Riley R. Russell, its General Counsel working on it. So it's still not exactly even, which is one thing you'll notice in the transcript -- that the judge raises the issue of paying for the expert, and in the end SCEA agrees to cap the amount it can ever cost Hotz, with SCEA paying all the rest.

This is all about jurisdictional discovery. George Hotz has filed a Motion to Dismiss for lack of jurisdiction, so Sony asked the presiding judge, the Hon. Susan Illston, for limited jurisdictional discovery, and she ordered it. They'd rather stay in California, not just for convenience, I guess, but likely also because California has some helpful laws regarding computer misuse. But if they get tossed out of California, they can just sue in New Jersey. So what's happening now is Sony is trying like crazy to find some way to pin this New Jersey resident to California before the oral argument on the motion to dismiss happens in April. So far, it has nothing that they've revealed to the public or the court, and hence the subpoenas. Judge Spero describes Sony like this:

And because you're doing a bunch of jurisdictional discovery, I mean, you're going all over the place and subpoenaing people, and, you know, from what I can tell, causing quite a hullabaloo in the blogosphere; but it's -- my question for you is: Well, what, in particular is on these devices that you think you need, in addition to all of this other stuff you're getting?
Discovery isn't supposed to be duplicative. If they have enough, they're supposed to be satisfied and not ask to turn over every possible rock along the road. Sony, of course, wants all it can get. But discovery is costly, so there is a balance a judge has to set, to keep it from overburdening folks who don't have Sony's income.

One of Sony's attorneys tells the judge that they want to look for evidence that Hotz has connected to Playstation Network, because if he did, there's a California forum provision in the TOS that he would have had to agree to (or could be presumed to have done so - I don't play games so I don't know if there is an "I agree" or not). Hotz's side tells the court that if Hotz had connected to the Network, and he's said he doesn't think he ever did, then it would be evidenced on his console, not on his computer hard drives. But Sony's lawyer then says that Sony told her that you can connect by computer.

Sony also wants to look to see if there are any Sony Developer Kits on Hotz's hard drives, because if there are, they would have informed him that SCEA is in California. That matters because normally you can't be sued in a place you've never had any significant dealings with. If, on the other hand, you sold T-shirts to people in California, it's not unreasonable for you to know you could be sued in California, no matter where you live. You are not forced to sell anything in California, after all. It's a choice. And if you make that choice, people there who buy your gear can sue you there, without have to traverse the entire country to find you where you reside.

Sony claims there's no other place to get that evidence but from his hard drives, so Judge Spero feels he must order it to happen, but he is agreeable to the Hotz lawyer's suggestion that the parties meet and devise the precise language on how the discovery should be done. As we know, what happened later is that the parties' lawyers did meet, but they really couldn't agree at all, and Hotz ended up filing a motion for a protective order, accusing Sony of bad faith and making false representations to the court in this very hearing.

Stay tuned for what happens next, but I think you will find it reassuring to read the transcript and see how Judge Spero conducts it. I'll show you just one example, and then I'll let you have at it. They are discussing the proposed Paypal subpoena, and Hotz's lawyer tries to get it narrowed:

MR. KELLAR: Only that the subpoena seeks financial information from those people who have no connection to California. If we're looking for addresses of the subpoenaed parties, those outside of California have no relevance to jurisdictional discovery.

THE COURT: Okay. Could I hear from the plaintiff on that subject?

MS. SMITH: This is Mehrnaz Boroumand Smith, on behalf of SCEA.

The only 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 geohot@g-mail.com 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.

Did you see how SCEA's side tried to get a broader subpoena by claiming it would be easier for PayPal to just provide everything? He isn't buying that at all, and he lets it be known that easy isn't the issue at all. The issue is fairness and limitations that match what this is supposed to be about, jurisdiction.

Here it is as text:

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

EXHIBIT 2

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

BEFORE THE HONORABLE JOSEPH C. SPERO, MAGISTRATE

SONY COMPUTER ENTERTAINMENT
AMERICA LLC, a Delaware limited
liability company,

Plaintiff,

vs.

GEORGE HOTZ; HECTOR MARTIN
CANTERO; SVEN PETER; and DOES 1
through 100,

Defendants.

__________________

NO. C 11-00167 SI (JCS)

San Francisco, California
Thursday
March 10, 2011
11: 00 a.m.

_________________

TRANSCRIPT OF PROCEEDINGS

APPEARANCES:

For Plaintiff:
Kilpatrick Townsend & Stockton LLP
[address, phone, fax]
BY: MEHRNAZ BOROUMAND SMITH
JAMES G. GILLILAND, JR.
HOLLY GAUDREAU

For Defendant
George Hotz: Stewart Kellar, E-ttorney at Law
[address, phone]
BY: STEWART REYNOLDS KELLAR

(Appearances continued on next page)

2

APPEARANCES (CONT'D)

For Defendant
George Hotz: MBV Law LLP
[address, phone, fax]
BY: JACK CONRAD-CHARLES PRAETZELLIS

3

THE CLERK: We are calling Case Number C. 11-00167, Sony Computer Entertainment versus George Hotz. And, counsel, please state your appearances.

MR. GILLILAND: Good morning, your Honor. For the plaintiff, this is Jim Gilliland, together with Mehrnaz Boroumand Smith, and Holly Gaudreau, for Plaintiff, Sony Computer Entertainment.

MR. KELLAR: And good morning, your Honor. For Defendant, George Hotz, this is Stewart Kellar, along with Jack Praetzellis.

THE COURT: Okay. Well, thank you very much.

So the text of our meeting today is the two letters. One is dated the 18th, having to do with discovery disputes; and one is the 28th of February, having to do with impoundment.

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

4

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 geohot@gmail.com from January of 2009 to the present; but otherwise, narrow it to that, but no further. That would be my tentative ruling.

Anyone want to comment on that?

MR. KELLAR: Your Honor, this is Stewart Kellar, for

5

George Hotz.

With regard to the PayPal subpoena, first, the subpoena does not limit discovery to locations within California, which would be the only relevant portion to find jurisdiction at this stage.

And, second, the legal -- George has subsequently set up a legal-defense fund, at which he received donations through PayPal after January 11th, after our February 10th meeting in your office. And so those donations would be implicated in the subpoena, and the privacy interests of those involved would be implicated, and has no bearing on jurisdiction.

THE COURT: When was that set up? When did you start receiving money?

MR. KELLAR: The exact date? THE COURT: Approximately.

MR. KELLAR: Subsequent to our meeting February 10 or so. I believe it might have been that following week. Let me find out.

THE COURT: That doesn't matter.

What I would do -- the easy way around, to satisfy your concern on that, I'll just say January 1, '09, to 2/1/11. We'll cabin it. We'll put bookends on the dates. January 1, '09, through February 1, 2011. And that will do yours.

Okay. Anything else you wanted to say, Mr. Kellar, on that subject?

6

MR. KELLAR: Only that the subpoena seeks financial information from those people who have no connection to California. If we're looking for addresses of the subpoenaed parties, those outside of California have no relevance to jurisdictional discovery.

THE COURT: Okay. Could I hear from the plaintiff on that subject?

MS. SMITH: This is Mehrnaz Boroumand Smith, on behalf of SCEA.

The only 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

6

identify any source of funds in California that went into that PayPal account -- any PayPal account associated with geohot@g-mail.com 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.

Twitter -- is Twitter -- there's no issue with Twitter anymore? MS. SMITH: So the only outstanding issue with Twitter, your Honor, is that Twitter requires a consent from Mr. Hotz to release his Tweets. And we need to get that consent from Mr. Hotz. Our understanding is that he will provide it. And we're working on the paperwork that Twitter needs; but we just wanted to confirm that that consent is going to be provided to us.

THE COURT: Mr. Kellar.

MR. KELLAR: Your Honor, with regard to the consent, we agree at our meet-and-confer in person that we would not oppose that subpoena being sent, but as far as doing affirmative acts to enable the subpoena, we didn't agree to that.

THE COURT: Okay. Well, then, Mr. Hotz is ordered to sign a consent to obtain his Twitter posts from January 1, 2009, to the present; his Tweets. I think it's -- he's already not objected to the subpoena. I'll order him to provide that consent.

8

Okay. Third is Mr. Hotz' deposition. Mr. Hotz is ordered to appear for a deposition relating solely to the question of personal jurisdiction.

The plaintiff shall pay reasonable expenses of Mr. Hotz to be deposed in California. Parties shall work out a date.

MR. KELLAR: Your Honor, this is Stewart Kellar, for George Hotz. With regard to a deposition, if George is ordered to appear in California, he will be present in the forum, and therefore, subject to being served with process while in the forum.

THE COURT: Well, can we --

MS. SMITH: We agree, your Honor, not to serve him --

THE COURT: All right.

MS. SMITH: -- when he appears for his deposition.

THE COURT: Well, so am I -- it is stipulated between the parties that appearance here in -- that he cannot be served with process by the parties to this action when he appears at his deposition in California? Is that correct?

MS. SMITH: That's correct, your Honor.

THE COURT: Okay.

MR. KELLAR: Your Honor, this is Stewart Kellar again. Can it also be stipulated that none of the interested

9

parties in this action that have been listed by Sony Computer Entertainment America will serve Mr. Hotz' process, either?

THE COURT: Well, by "interested parties," what do you mean?

MR. KELLAR: They were listed in -- along with the initial complaint of -- I'm pulling it up right now, your Honor.

THE COURT: You're talking about the statement of interested parties filed for conflict purposes, or refusal purposes?

MR. KELLAR: Correct.

THE COURT: Is there any objection to that addition?

MS. SMITH: No, your Honor. Good. Then that's the stipulation.

THE COURT: Neither the plaintiff nor any interested parties listed by plaintiff shall serve Mr. Hotz with process when he comes to California.

I mean, I've got to tell you I don't think it makes any difference, because they can serve him with process wherever he is. Personal jurisdiction doesn't depend on where he serves the process.

So -- but fine. Everyone's agreed to that. That's great.

The next two issues -- the impound demand and the impound -- and the -- in terms of inspection for discovery

10

purposes, and the impound sort of work together. And here are my preliminary thoughts about that.

Number one is I'd like to know from the plaintiffs: If we go along with your proposal with respect to what is impoundment, leaving aside the -- any searching the devices for discovery, which may or may not be permitted, but just the impoundment procedure you have envisioned, and which -- with the procedures identified by the expert in the second declaration, the second certification, and making a couple of extra copies, what's that cost?

MS. SMITH: Well, I think it was about 1,500, your Honor, per image. And that -- we would be required to do four images, under our proposal; plus the amount of time that it would take the experts to do the analysis that they need to do. And they did not give us an estimate, I don't think, on the amount of time it would take them to do their analysis.

THE COURT: Okay. Well, you know, it's always a balance. And so -- and right now, you're splitting the costs of this, right?

But the defendant has, you know, raised certain objections, which mayor may not be well taken; but I think I have to balance in that the price that would be required for each of the steps that you want. So, you know, if the whole thing costs $6,000, then I don't care very much. You can split that. And that is $3,000 each. And that's not very much, in

11

the scheme of things; but the time is what is expensive with this expert.

MS. SMITH: Well, your Honor, this is Mehrnaz again. We can put a cap on the amount that's divided between the two parties, and then anything additional, SCEA would pay for, if that helps.

THE COURT: Okay. What would you propose?

MS. SMITH: We could say 3,500 would be the cap, and then anything above that would be -- SCEA would pay for that. THE COURT: So what you mean by that is the maximum share that the defendant would have to pay is $3,500?

MS. SMITH: That's correct, your Honor.

THE COURT: Okay. Do you have any comments on that, Mr. Keller, leaving aside the question, for the moment, of whether it's appropriate for other reasons or inappropriate for other reasons to do the kinds of imagery and forensic analysis?

MR. KELLAR: This is Stewart Kellar again. Putting aside the other issues at this point with regard to splitting the costs, it raises a few issues with regard to neutrality of the neutral. If they're getting paid by one party to perform certain tasks, we're concerned that the neutral may be inclined to perform tasks that are outside the scope of the impoundment order, because plaintiff is happy to pay for those extra tasks, which would then harm the neutrality of the neutral.

12rffffr5

THE COURT: Well, we can fix that, right? We'll just order that they -- that the neutral can only do things that are authorized by the Court. Right? That will fix that problem. All right. So--

MR. KELLAR: This is Stewart Kellar again. I agree with that.

THE COURT: Yeah. Okay. All right. So let's start talking about impoundment. And the first order will be that the neutral -- what's the name of the neutral, again?

MS. SMITH: "The Intelligence Group," or "TIG."

THE COURT: TIG shall only take steps with respect to the items in their possession; items that have been impounded that are authorized by Court order; that the first $7,000 of TIG costs will be split equally between plaintiff and defendant, and any amount over $7,000 would be paid for by the plaintiff.

You see, I put off the hard question.

What do we do?

And so I guess, you know, my -- I guess the question for you, Mr. Keller, is: I didn't really see how I could do anything other than order the expert to do those things that it thought were forensically necessary to examine, and comply with the Court orders with respect to the files at issue.

You know, it has a protocol. The expert has a protocol. And that is -- it's probably the first exhibit to

13

the letter, is the relevant protocol. Is that the -- that's the one that has the -- isn't it the first certification, or second? I'm trying to --

MR. KELLAR: Yes, your Honor. This is Stewart Kellar again. With regard to the impoundment order, the original impoundment order and the temporary restraining order had ordered that the hard drive be impounded, irrespective of whether or not any circumvention devices are removed from the drives.

We saw that, initially, as overbroad. However, when we came to an agreement during the temporary restraining order hearing on February 10th, regarding the scope of the impoundment order, neither party had any idea the method in which that extraction would take place.

And now, after speaking with the neutral, we realize that, in fact, the methods are more burdensome and invasive than just having the drives impounded with a third-party neutral.

THE COURT: No. I appreciate that; but the third-party neutral says that in order to accomplish the isolation of these particular files, it needs to do various things. And the certification by Mr. Grenier, which is dated February 27th, 2011, states various things he thinks he needs

14

to do. It's got, in paragraph five, the recommended procedures, and goes on to elaborate a little bit in the next paragraph. And that involves various technical procedures, including making a working copy, or whatever you would call it. And you don't want him to do that?

MR. KELLAR: No, your Honor, because, see, the procedures of making a backup copy then goes outside of the the order of the Court or the -- the notion of an impoundment order, which is to get the devices at issue out of the hands of the plaintiff, and out of the hands of the general public. In fact, Judge Illston made such a comment during the hearing on February 10th, stating that the drives were to the circumvention devices were to be taken from Mr. Hotz, so he did not have access to them, which is the sole reason for the impoundment order.

Then when the impoundment order came out, the language stated an overbroad term or a broad term; that the things that are to be isolated, segregated, and removed are information on those devices related to defendant's circumvention, rather than circumvention devices, themselves. Therefore, it has opened up a very problematic method of finding these drives -- these circumvention devices -- and information related thereto, which is a squishy term.

THE COURT: Well, I understand that, but here's my problem. That's the order of the Court. You've lost that

15

argument. Judge Illston has issued that order. As far as I'm concerned, that is the order of the court.

Now we have to figure out what to do with it. I'm not in a position to say, "Oh, well, Judge Illston got it wrong. let's not do that."

My task is to resolve disputes with regard to how her order will be implemented, right? That's my task.

MR. KELLAR: Correct, your Honor.

THE COURT: Not whether. And she's ordered that.

I've got someone saying, "This is how you do it." And your response is, "We don't want them to do what she asked." I don't think I can go along with that. I mean, I appreciate your concern.

You know, it should give you some comfort that nothing's going to leave the hands of the neutral, without Court order. I mean, she -- they're -- TIG, through the order that I just stated, will only be allowed to take any steps that are authorized by the Court -- by this court, with respect to these devices. And I can tell you that would include releasing anything to anyone that they have in their possession. So your client can take some comfort in that, but I've got to come up with a forensically sound way of doing what the Court has ordered. And the only forensically sound way

16

that I've got in front of me is the one the neutral's proposed.

MR. KELLAR: Yes, your Honor. This is Stewart Kellar again. With regard to what the neutral has proposed, the neutral has also noted in paragraph 8, page 4, of Mr. Grenier's write-up, that the intelligence is only tasked with finding specific data and copying that data, and then deleting it from the original hard drive, and returning that drive to Mr. Hotz; but Sony is seeking to create additional forensic images of those drives for later, which is not a part of the impoundment order.

THE COURT: Well, okay. Let's take --

MS. SMITH: This is Mehrnaz Boroumand Smith again.

THE COURT: No, no. I'm not ready to hear from you.

MS. SMITH: Sorry, your Honor. THE COURT: I'm not ready to hear from you. So I want to address the discovery question later, second.

I want to do impoundment first.

As far as impoundment is concerned, my inclination is to order that the TIG do what it says it needs to do in its certification order that I previously cited with respect to its functions.

And I haven't seen any objection that -- that proposes a forensically sound way of doing what the Court has

17

ordered as an alternative. Having no alternative, that would be the order of the court.

Then I'd go on, and I would be happy to talk about the question of whether or not there will be an extra copy; whether or not they're going to be allowed to have discovery of that extra copy, et cetera.

And my inclination on that is: Not just now; but we'd talk about that.

So does anyone else want to be heard on the impoundment; not on the discovery question? Anything further?

MR. KELLAR: Your Honor, this is Stewart Kellar again. With regard to impoundment, both parties have had difficulty figuring out how to best articulate the finding of information related to those devices. Even with the neutral, it's been a difficult -- difficult to find out a protocol of information related to the devices. So I'd like to try to reach some sort of agreement on how we can determine what "information related to" means.

THE COURT: Well, let's do this a step at a time. Number one, I'm going to order that TIG perform the tasks identified in its certification of -- they're different dates, right? February 27th, 2011.

Now, in terms of you know, they have the Judge's

18

order. They can -- they can come up with their own proposal, but I have no problem with you all trying to meet and confer and decide what is -- how one understands what exactly is information related to the circumvention devices. I don't have any problem with that.

My guess is that the best person that's in the best position to actually figure out what is a forensically sound way of dealing with that question is the neutral; but I have no problem with you also trying to reach an agreement. And if you reach an agreement, and all submit it to me as an order, I'll sign it. So why don't I order you to meet and confer on that question?

MR. KELLAR: Will do.

THE COURT: Okay?

Now, on the question of discovery, you know, you're going to get -- you're going to have a lot of discovery on -- we're talking about jurisdictional discovery. I -- I'm not convinced that you aren't going to have sufficient jurisdictional discovery without having to delve into these particular devices, so I'm -- you're -- you're -- you need to convince me. And I'm not convinced by your letter, that that there's something particular on there that you need to search for or have someone else search for like a neutral.

And because you're doing a bunch of jurisdictional discovery, I mean, you're going all over the place and

19

subpoenaing people, and, you know, from what I can tell, causing quite a hullabaloo in the blogosphere; but it's -- my question for you is: Well, what, in particular is on these devices that you think you need, in addition to all of this other stuff you're getting?

And the other question is: Why now? So, for example, you could proceed with your jurisdictional discovery. If it turns out that, from this this jurisdictional discovery, there is -- you learn things that suggest, yes, we've got to get particular things off this drive or drives, and then come back to me.

MS. SMITH: So, your Honor, the reason for why we're seeking information off of these particular drives are twofold.

First, there's some information that may only be stored or contained on these devices. For instance, if Mr. Hotz used this device to connect to the PlayStation network, the only place that we're going to know that from is by doing an assessment or an inspection of the device. We're not going to be able to get that from a third party or --

THE COURT: What's that got to do with jurisdiction?

MS. SMITH: So if he -- if he accessed the PlayStation network, he would have had to have had clicked through the PSN agreement, which has a jurisdictional provision in it.

20

THE COURT: Well, so, isn't -- won't there be other evidence of -- of how this person accessed your server, if at all?

MS. SMITH: There may be, but the most direct evidence would be from his computer.

MR. KELLAR: Your Honor, this is Stewart Kellar.

MS. SMITH: Also, can I put in one other item, which is: A lot of times people put in fake names to access the PlayStation Network. So this -- being able to show that this computer in one way, shape, or form accessed the -- the network would show that Mr. Hotz did. And we wouldn't have to go through the issues that come up with a fake names that people put in.

THE COURT: So, but that -- that -- so what you're seeking, actually, is just any record in this computer of the computer being attached to a particular IP address?

MS. SMITH: Sure. That's right. We're just trying to establish that that computer somehow hooked up to the PSN; the PlayStation Network.

Additionally, we're looking for information, such as any of the Sony Developer Kit tools that might be contained on that computer. That information would only be distributed by Sony Computer Entertainment America, and would establish contacts between SCEA and Mr. Hotz.

THE COURT: Or between Mr. Hotz and somebody who had

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them, and gave them to him?

MS. SMITH: That's correct; but at the end of the day, he would have something belonging to SCEA that he should have licensed.

THE COURT: Well, but you already say he's got something belonging to you. This is not on the merits, right? This is about general and specific jurisdiction.

MS. SMITH: Right. And one of his contentions is that he's not aware of Sony Computer Entertainment America being in California. And we believe that the SDK -- the developer's kit -- would contain information showing him that SCEA is in California.

THE COURT: Okay. Mr. Kellar, both of those things seem relevant.

MR. KELLAR: Your Honor, this is Stewart Kellar again. With regard to inspecting the computers to find things that might be relevant to jurisdiction, that isn't enough. And, in fact, Mr. Hotz has already responded to interrogatories stating affirmatively and outright that he has never accessed the PlayStation Network.

THE COURT: Well, but I understand; but that's not enough. That's not the question. You know -- the question is not whether he says so. The question is whether it's true. And just because someone --

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MR. KELLAR: With regard to accessing the PlayStation Network, the PlayStation Network is, in fact, accessed through PlayStation 3 system -- the console; the game console -- and not external hard drives, which again shows that there is -- would be a reason to access the impounded hard drives, for purposes of finding out if they connected to the PlayStation Network.

THE COURT: Well, that's a technical matter I don't know about. And counsel can respond to that, but my -- but what about the second: Evidence to show that he knew that Sony Computers Entertainment America was in California?

MR. KELLAR: Ah. Your Honor, with regard to that, evidence to show that there are documents that say that Sony Computer Entertainment America is located in California does not evidence Mr. Hotz' knowledge that Sony is located in California.

THE COURT: Well, that's an argument looking for a little bit of a logical leap. I mean, I've got to tell you, it is. I'm sorry. It would be admissible in evidence to show if he, in fact, had a document on his computer showing that -- where the company was, he would be able to -- strong inference that since it's on his computer, he must have put it on there at some time. And the -- and it a reasonable inference that he looks at documents that go on his computer. And so a jury would be permitted to reach that conclusion, or a judge. It

23

may be right and it may be wrong. He may never have read them. He may have downloaded a huge amount at the same time, et cetera, et cetera. He can refute that, but it's certainly one inference that's not unreasonable. So that doesn't -- that doesn't persuade me at all.

As to the first issue, for the plaintiff's side, what about this point that you don't connect; that you can't connect -- I guess, is Mr. Kellar's point of view -- that you can't connect a normal computer hard drive to the PlayStation network?

MS. SMITH: My understanding, your Honor, is that you can do that.

THE COURT: Excellent. And where do you get that understanding?

MS. SMITH: I was told by Sony.

THE COURT: Oh.

MS. SMITH: I can go back and confirm, as well.

THE COURT: Well, Sony ought to know.

Well, here's my feeling on this. Both of those issues seem to me to be relevant to jurisdiction. I don't think that these things are immune from discovery, just because they're in -- in the possession of a neutral.

I do think that there's a risk that conducting discovery things on -- discovery searches on them will cause an injury to evidence in the case, or to the drives that belong to

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the defendant. And I want to avoid all of those things. So what I will authorize for now is one thing. I'll authorize an order, a second.

The authority is that the TIG shall make an additional copy of both the encrypted and unencrypted versions of the drive, and keep them in their possession.

And I'll order the parties to meet and confer and come up with a proposed order authorizing TIG to search, consistent with its forensic procedures, for documents showing, one, whether the drive was connected to PSN; and, second, for any -- what are the name? The developer -- what?

MS. SMITH: SDK -- the Sony Developers Kits.

THE COURT: Sony Developers Kits?

MS. SMITH: Sorry. Software Development Kits.

THE COURT: Software Development Kits, for PlayStation, right?

MS. SMITH: Correct.

THE COURT: So you meet and confer on that, and come up with a proposed order, because I'm going to authorize discovery of those things from the devices -- copies of the devices; but I don't want to do it -- but I want you all to come up with the exact language on how that's going to be done, but I just want you to know that that discovery will be authorized.

So I think that covers all of the issues, unless I

25

missed some. Have I missed any?

MS. SMITH: So there's one other issue, your Honor, with regard to the impoundment, and making sure that the encrypted computers or devices are decrypted. That's going to require that Mr. Hotz provide his decryption keys, or type them in for TIG. And I wanted to make sure that that was included, because he was refusing to do that, if any images were to be made.

THE COURT: Okay. And I guess -- I guess Mr. Keller, as consistent with my other rulings, I'd have to order that, right?

MR. KELLAR: This is Stewart Kellar. With regard to that, Mr. Hotz has not stated outright that he will -- he will never enter the passwords. And if, consistent with your rulings, you are saying the drives have to be made accessible, then you're correct.

THE COURT: Okay. Well, so, ask him to do it voluntarily. If he won't, I'll enter an order to that effect.

Now, so here's what I want to do. I've issued a bunch of orders on the record here. I'd like a proposed form of order reflecting all of those orders to be prepared by counsel for plaintiff, and agreed to as to form by counsel for defendant. And I guess we need to do that with some rapidity.

MS. SMITH: Your Honor, we'll do that.

THE COURT: Yes.

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MR. GILLILAND: We'll get a copy of the a transcript, so that everyone's clear about what we have to say.

THE COURT: Okay. So that is going to be a rushed transcript. That will make my court reporter really happy. She's shaking her head. You're missing all of the important -- see? You miss all of the nuances when you're on the phone.

MR. GILLILAND: Yeah.

THE COURT: All right. Well, so what I'd like you to do is agree on a form of order, and submit it to me no later than the close of business, Monday. So that will mean you'll have to get to it and get going. Start drafting it even before you get the transcript.

When you get the transcript, you can check it. Okay? MR. GILLILAND: Thank you very much, your Honor.

THE COURT: Thank you.

THE CLERK: Counsel, if you'll stay.

THE COURT: Everybody stay on the phone.

THE CLERK: Stay on the phone. I'll give you Lydia's phone number. Otherwise, court stands in recess.

THE COURT: Yeah. Stay on the phone.

(At 11:44 a.m. the proceedings were adjourned)

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CERTIFICATE OF REPORTER

I, LYDIA ZINN, Official Reporter for the United States Court, Northern District of California, hereby certify that the foregoing proceedings in C. 11-0167 SI (JCS), Sony Computer Entertainment America LLC v. George Hotz, et al., were reported by me, a certified shorthand reporter, and were thereafter transcribed under my direction into typewriting; that the foregoing is a full, complete and true record of said proceedings as bound by me at the time of filing.

The validity of the reporter's certification of said transcript may be void upon disassembly and/or removal from the court file.

_____________________
/s/ Lydia Zinn, CSR 9223, RPR

Thursday, March 10, 2011


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