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Judge Spero Rules on Jurisdictional Discovery in SCEA v. Hotz
Tuesday, March 29 2011 @ 11:48 PM EDT

The telephonic hearing in SCEA v. Hotz was yesterday, the one about how to handle jurisdictional discovery, and here's what Magistrate Judge Joseph Spero decided to do. Keep in mind, though, that this is still not the main event. This was about how to handle George Hotz's impounded devices, which is related to Sony's expressed need to do discovery to oppose Hotz's motion to dismiss on jurisdictional grounds. So we're still in the buildup phase, where SCEA is fighting like the devil to find a way to pin Hotz to California's jurisidiction, which so far it has been unable to do. It's a split decision, you might say, with Hotz winning some and losing some and ditto for SCEA.

The filings:

03/29/2011 - 118 - Minute Entry: Telephonic Discovery Hearing held on 3/28/2011 before Joseph C. Spero re: Joint Letter Re: Jurisdictional Search of Mr. Hotz's Impounded Hard Drive [docket no. 98] (Court Reporter Kathy Sullivan.) (klhS, COURT STAFF) (Date Filed: 3/29/2011) (Entered: 03/29/2011)

03/29/2011 - 119 - Proposed Order re 118 Discovery Hearing, [PROPOSED] ORDER RE PROTOCOL FOR JURISDICTIONAL DISCOVERY ON IMPOUNDED DEVICES by Sony Computer Entertainment America LLC. (Smith, Mehrnaz) (Filed on 3/29/2011) (Entered: 03/29/2011)

03/29/2011 - 120 - Notice of Withdrawal of Motion to Quash (Wrubel, Kenney) (Filed on 3/29/2011) (Entered: 03/29/2011)

03/29/2011 - 121 - Transcript of Proceedings held on 3/28/11, before Judge Joseph C. Spero. Court Reporter/Transcriber Katherine Powell Sullivan, RPR, CRR, CSR, Telephone number 415-794-6659/Katherine_Sullivan@cand.uscourts.gov. 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 6/27/2011. (Sullivan, Katherine) (Filed on 3/29/2011) (Entered: 03/29/2011)

Update: And now, on April 4, a Stipulated and Proposed Order has been filed for the judge's signature:

04/04/2011 - 124 - STIPULATION re 122 Order STIPULATION AND PROPOSED ORDER RE: SUPPLEMENTAL BRIEFING SCHEDULE AND HEARING ON MOTION TO DISMISS by Sony Computer Entertainment America LLC. (Boroumand Smith, Mehrnaz) (Filed on 4/4/2011) (Entered: 04/04/2011)

- End Update.]

As you see, Softlayer has withdrawn its motion to quash.

The parties couldn't agree on a protocol, so what's the judge's decision? The hard drives will be copied in their encrypted state. Then Hotz is to provide passwords so TIG, the neutral third party, can make copies of them unencrypted while Hotz is there watching. Sony is to provide TIG copies of the Playstation3 Software Development Kit and a list of urls and cookies the parties agreed to have searched to see if any impounded device ever accessed or signed in to the Playstation Network. For some reason, the judge appears to agree with SCEA that this matters enough to keep this process going to try to find out once and for all what the truth about that is.

SCEA has to give the SDK to Hotz's lawyers also to review, after they sign an NDA, but at the offices of SCEA's lawyers. They can't make a copy. They can take notes, Attorneys' Eyes Only. I know. Ridiculous, but there it is. SCEA more or less won that one.

Then the lawyers for both sides meet and figure out together what search terms TIG should use to search with. TIG is then to verify the urls and cookies that SCEA has provided, to make sure the sites are in fact "located on the PSN Secure Area" (that sounds like a Hotz side suggestion), and after that TIG does that search as well as keyword searches, all to figure out if the PSN Secure Area was accessed by "the computer system".

If any SDK, or portion thereof, is found, there are further keyword searches, again agreed upon by the parties. And heaven help Hotz if any are found, I'd say.

Then TIG hands over the results to Hotz's lawyers, to weed out anything privileged, and after that it goes to SCEA with a privilege log, if any privileged material is found. Hotz can review it also, but otherwise it's attorneys' eyes only also.

Hotz has to go to California and be deposed on April 15th. SCEA won that point too.

Finally, the magistrate will recommend to the presiding judge that the schedule be shifted so each side has time to file supplemental briefing, no doubt all about whatever is found in the discovery process. SCEA has to file by April 20th, in this revised schedule, if the presiding judge adopts it, which she is likely to do, and then Hotz gets to reply by April 22nd, followed by a hearing on May 6 or whatever date is convenient for Judge Illston.

I know one thing. SCEA had better find something, or Hotz is likely to fly away, either back to New Jersey or free as a bird altogether. Alternatively, if any proof is found that Hotz did indeed access the Playstation Network, I'd guess this order means he will have to endure litigation in California. Plus his name will be more or less mud in this court, which never helps your cause. The reason I say this is because I don't think the judge would set up such an elaborate protocol all about that one issue unless he thought it would be sufficient to tie Hotz to that state. My guess is SCEA really pulled out all the stops at the hearing to get this discovery. If they thought they had enough already, the digging would stop. Also, keep in mind that the general rule in litigation is that plaintiffs tend to get discovery requests approved. If you recall, SCO succeeded in getting IBM ordered to turn over every version of AIX from the founding of the world. Not that it did SCO any good. But the magistrate judge did order it.

Here's the text of the minutes:

ORDERED AFTER HEARING:

Plaintiff shall submit the modified version of the Hotz proposed order to Judge Spero by 10 AM on 3/29/11.

Lead trial counsel shall meet-and-confer in person on agreed upon search terms. Mr. Hotz shall on or before 4/1/11 respond to TIG. TIG should provide results of searches and processes to Mr. Hotz’s counsel on or before 4/5/11.

Mr. Hotz’s counsel will produce non-privileged material from the search and a privilege log to Plaintiff’s counsel by 4/11/11. Mr. Hotz shall be deposed on 4/15/11. Parties shall propose the following briefing scheduled to Judge Illston on the Motion to Dismiss:

Pla’s supplemental brief shall be filed by 4/20/11.

Dft’s supplemental reply brief shall be filed by 4/22/11.

Hearing on Motion to Dismiss to be heard on 5/6/11 or as is convenient to Judge Illston’s calendar.

Here's the proposed order, as text, with all the details:

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

KILPATRICK TOWNSEND & STOCKTON LLP
JAMES G. GILLILAND, JR. (State Bar No. 107988)
TIMOTHY R. CAHN (State Bar No. 162136)
MEHRNAZ BOROUMAND SMITH (State Bar No. 197271)
HOLLY GAUDREAU (State Bar No. 209114)
RYAN BRICKER (State Bar No. 269100)
[address, phone, fax, emails]

Attorneys for Plaintiff
SONY COMPUTER ENTERTAINMENT AMERICA LLC

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

SONY COMPUTER ENTERTAINMENT AMERICA LLC,

Plaintiff,

v.

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

Defendants.

_________________

Case No. 11-cv-00167 SI

[PROPOSED] ORDER RE
PROTOCOL FOR JURISDICTIONAL
DISCOVERY ON IMPOUNDED DEVICES

_________________

On March 10, 2011, the Court ordered plaintiff Sony Computer Entertainment America LLC (“SCEA”), Defendant George Hotz (“Hotz”), and the third party neutral, The Intelligence Group (“TIG”), to meet and confer on a protocol for the search of the impounded devices to determine whether: (1) they contain all or portions of the development tools for the PlayStation® 3 System (“PS3 System”) and (2) the impounded devices have been used to

access or connect to the PlayStation Network (“PSN”). On March 16, 2011, the parties submitted competing protocols together with a Joint Letter Related to Jurisdictional Search of Mr. Hotz’s Impounded Hard Drives (Docket No. 98) to the Court. On March 28, 2011, the Court held a Telephonic Discovery Conference regarding the Joint Letter. Having reviewed the papers and heard arguments from the parties, the Court orders as follows:

(1) TIG will forensically image the impounded devices in their encrypted state.

(2) Mr. Hotz shall make himself available to TIG on or before April 1, 2011 to provide TIG access to his computer and passwords for the purpose of creating un-encrypted images of the devices. Mr. Hotz shall make himself available to TIG until the process is completed.

(3) Counsel for SCEA shall provide to TIG copies of the following items which will be copied into evidence files:

(a) A copy of the PS3 System Software Development Kit (“SDK”)

(b) A list of URLs and cookies and other information agreed upon by the parties which might appear on a user’s computer if they accessed the “secure” area of the PSN which requires a valid user name and password (“PSN Secure Area”)

(4) SCEA shall make the SDK available for review by Mr. Hotz’s outside counsel for record in this action under the following conditions:
(a) Mr. Hotz’s outside counsel of record (“Qualified Persons”) may review the SDK at SCEA counsel’s office at Kilpatrick Townsend and Stockton LLP in San Francisco on a “stand alone” secure computer system (i.e. the computer system will not be linked to any network, including a local area network (“LAN”), an intranet or the Internet). Qualified Persons shall sign a Non-Disclosure Agreement before reviewing the SDK.

(b) No recordable media or recordable devices, other than those physically installed in a computer or cell phone, shall be permitted into the area containing the stand alone computer system, including without limitation sound recorders, peripheral equipment, cameras, CDs, DVDs, or drives of any kind. No computers, recordable media, or recordable devices may be connected to any such stand-alone secure computer system or otherwise

2

used to copy or record the SDK from such stand-alone secure computer system. No means capable of connecting computers, recordable media, or recordable devices to the stand-alone secure computer system shall be permitted into the area and no computers may be used to duplicate or re-write any portions of the SDK.

(c) The stand alone secure computer system shall be password protected.

(d) Counsel for SCEA shall provide the password and the SDK to Qualified Persons, who will then be allowed to insert the SDK in the stand alone secure computer system.

(e) Qualified Persons may not alter, dismantle, disassemble or modify the stand alone secure computer system or the SDK in any way, or attempt to circumvent any security feature of the stand alone secure computer system or the SDK in any way.

(f) No copies shall be made of the SDK, whether physical, electronic, or otherwise. Qualified Persons may take notes of his thoughts and impressions during any review of the SDK. Any notes concerning the SDK shall not be used to circumvent the restrictions herein against making copies of the SDK. Persons viewing the notes shall do so in a manner consistent with restrictions on material designated as HIGHLY CONFIDENTIAL – OUTSIDE ATTORNEY’S EYES ONLY INFORMATION.

(5) Counsel for the parties shall review and agree to search terms that TIG shall use to conduct searches in an effort to prove or disprove access to the PSN Secure Area. These agreed upon terms will be provided to TIG no later than April 1, 2011. Lead counsel for the parties shall meet and confer in person to determine these search terms.

(6) Counsel for the parties shall review and agree to search terms that TIG shall use to conduct searches on any SDK material found on the devices. These agreed upon terms will be provided to TIG no later than April 1, 2011. Lead counsel for the parties shall meet and confer in person to determine these search terms.

(7) TIG shall review the URLs and cookies provided by counsel for SCEA and verify that the sites are located on the PSN Secure Area.

(8) Once the forensic images of the un-encrypted drives have been pre-processed, TIG shall conduct the following procedures:

3

(a) TIG shall search the devices for URLs and cookies, and other information agreed upon by the parties in an attempt to prove or disprove that the computer system had accessed the PSN Secure Area.

(b) TIG shall conduct keyword searches as agreed to by both parties in an effort to prove or disprove that the computer system had accessed the PSN Secure Area.

(c) TIG shall search the devices and determine if all or any portion of the SDK provided to TIG by SCEA exists on the devices.

(d) TIG shall search all or any portion of the SDK that is found on the devices with additional search terms agreed to by the parties.

(9) TIG shall provide the results of the searches to counsel for Mr. Hotz on or before April 5, 2011. Counsel for Mr. Hotz shall review this data and provide counsel for SCEA with a privilege log, on or before April 11, 2011, containing sufficient information so that counsel for SCEA may be able to determine if the information is privileged. Other than material as to which a privilege has been asserted, the results of these searches and processes shall be produced to counsel for SCEA on or before April 11, 2011. This production shall be designated as HIGHLY CONFIDENTIAL – ATTORNEYS’ EYES ONLY, and treated as such by both parties, except that Mr. Hotz shall be permitted to review this production for purposes of his defense in this lawsuit.

(10) Mr. Hotz shall appear for his deposition in California on April 15, 2011.

(11) This Court shall recommend to the Honorable Susan Illston the following revised schedule for supplemental briefing and for the hearing date for Mr. Hotz’s Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue:

Supplemental briefing filed by SCEA: April 20, 2011

Reply filed by Mr. Hotz: April 22, 2011

Hearing on Motion to Dismiss: May 6, 2011 or as soon thereafter as is
convenient for Hon. Susan Illston.

4

IT IS SO ORDERED.

DATED:_______________

____________________
HON. JOSEPH C. SPERO
UNITED STATES MAGISTRATE JUDGE

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