321 Studios v. Metro Goldwyn Mayer Studios, Inc.

• Decision Date: 19 February 2004
• Docket Number: No. C 02-1955-SI.,C 02-1955-SI.
• Citation: 307 F.Supp.2d 1085
• Court: U.S. District Court — Northern District of California
• Parties: 321 STUDIOS, Plaintiff, v. METRO GOLDWYN MAYER STUDIOS, INC., et al., Defendants. And Related Counterclaims.

307 F.Supp.2d 1085

321 STUDIOS, Plaintiff, v. METRO GOLDWYN MAYER STUDIOS, INC., et al., Defendants. And Related Counterclaims.

No. C 02-1955-SI.

United States District Court, N.D. California.

February 19, 2004.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Daralyn J. Durie, Lloyd A. Farnham, Michael H. Page, Ashok Ramani, Clement S. Roberts, Keker & Van Nest LLP, San Francisco, CA, for Plaintiff/Counter-claimant.

Douglas R. Young, Stephanie Powers Skaff, James W. Morando, Nan E. Joesten, Farella Braun & Martel LLP, San Francisco, CA, Russell Jay Frackman, Patricia H. Benson, Marc E. Mayer, Mitchell Silberberg & Knupp LLP, Los Angeles, CA, Steven B. Fabrizio, Eric J. German, Mitchell Silberberg & Knupp LLP, Washington, DC, for Defendants/Counter-Defendant.

Deirdre Mulligan, pro se, Berkeley, CA, for Amicus.

Cindy Ann Cohn, pro se, San Francisco, CA, for Amicus.

Jocelyn Burton, U.S. Attorney's Office, San Francisco, CA, John H. Zacharia, United States Department of Justice, Washington, DC, for Intervenor.

ORDER GRANTING DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT AND RESOLVING RELATED MOTIONS

ILLSTON, District Judge.

Presently before the Court are defendant/counterclaimants' motion for partial summary judgment, and various accompanying motions. Having carefully considered the arguments of counsel and the papers submitted, the Court hereby GRANTS defendant/counterclaimants motion for partial summary judgment; GRANTS plaintiff Victor Mattison's motion to dismiss defendants' counterclaims; DENIES plaintiff's motion for denial or continuance of motion for summary judgment pursuant to Rule 56(f); GRANTS Electronic Frontier Foundation's and Copyright Law Professors' motion for leave to file amici briefs in opposition to defendants' motion for summary judgment; DENIES plaintiff's motion for leave to amend answer to counterclaim; GRANTS Larry Davis' motion to intervene as plaintiff; and GRANTS defendants' motion for judicial notice, for the reasons set forth below.

BACKGROUND

A digital versatile disc ("DVD") is a five inch wide plastic disk that stores digital information. Moore Decl., ¶ 2 n. 1; Schumann Decl., ¶ 7. DVDs currently make up 39% of the sales of video and film works. Schwerin Decl. ¶ 3. Many films are sold only in the DVD format. Moore Decl. ¶ 25; Schwerin Decl., ¶ 4. This format allows bonus features, such as alternate endings, deleted scenes, video games, alternate viewing configurations, commentary from directors and actors, and other menu-driven options, that are not available on VHS tapes or any other format. Moore Decl. ¶¶ 26-30; Schwerin Decl., ¶ 7; Touretsky Decl., ¶ 9; Schumann Decl., ¶ 18.

Many DVDs store the digital data in a format called the "Contents Scramble System" or "CSS." The Copyright Control Authority administers the CSS encoding scheme and the licensing of the electronic "keys" used by DVD players to playback DVDs. Moore Decl. ¶¶ 10-11; Schumann Decl., ¶¶ 12-14. The 31 CSS keys and the algorithm that can be used to decode a DVD are broadly available on the Internet. Touretsky Decl., ¶¶ 7, 11, 14, 22, 24; Schumann Decl., ¶ 22.

Plaintiff 321 Studios, LLC is a company that markets and sells software and instructions for copying DVDs. First Amended Complaint ¶¶ 1, 23, 26, 28, 29; Moore Decl., ¶¶ 2-4. 321 sells two products: DVD Copy Plus, which began selling in August 2001, and DVD-X COPY, which began selling in November 2002. Moore Decl. ¶¶ 2, 5. DVD Copy Plus consists of an electronic guide explaining how to create backup copies of DVDs, two pieces of free, publicly available software, and one CD burning application, PowerCDR, licensed from a German company. Moore Decl. ¶ 2. DVD Copy Plus copies video content from original DVDs regardless of whether they are encoded with CSS. Moore Decl. ¶ 3. The software does not create an identical copy of the DVD; rather it allows the user to copy a portion of the video contents on the DVD onto a recordable CD. Moore Decl. ¶ 3. DVD-X COPY requires the user to have a DVD drive that is capable of reading and writing data to blank DVD media. Moore Decl. ¶ 5. DVD-X COPY reads the data on the original DVD, decodes it, and then uses the data to create a backup copy of the DVD. Moore Decl. ¶ 6. This data is read by the DVD drive, decrypted by the DVD-X COPY software, and then stored on the computer (either in RAM or on the hard drive) until the backup copy of the DVD is created. Id. Once the backup copy is created, the stored data from the original DVD is automatically deleted. Id. If the DVD is encoded with CSS, DVD-X COPY uses a CSS "player key" to access the data; DVD-X COPY also contains publicly known computer code that performs the algorithms to decode the DVD data. Moore Decl. ¶ 8. DVD-X COPY does not affect the encryption on the original DVD. Moore Decl. ¶ 9.

Plaintiff 321 Studios filed a complaint for declaratory relief on April 22, 2002, seeking, in Claim One, a declaratory judgment from this Court that "its activities in distributing DVD Copy Plus and DVD-X COPY do not violate the provisions of the [Digital Millennium Copyright Act "DMCA"] or, in the alternative, that these provisions are invalid in light of other copyright law provisions, these provisions are invalid because Congress exceeded its enumerated powers under Article 1, Section 8, of the United States Constitution, these provisions are "unconstitutionally vague, and/or these provisions violate the First Amendment of the Constitution." FAC ¶ 44. Claim Two seeks a declaratory judgment from this Court that its distribution of DVD Copy Plus and DVD-X COPY do not violate the Copyright Act "on the grounds that DVD Copy Plus and DVD-X COPY have substantial non-infringing uses, that the use of DVD Copy Plus and DVD-X COPY constitute fair use, and/or that the provisions of the Copyright Act, if interpreted to bar the distribution of DVD Copy Plus and DVD-X COPY, violate the First Amendment of the Constitution." FAC ¶ 49.

Most defendants ("the Studios") are members of the Motion Picture Association of America ("MPAA"). They are owners of copyrights in motion pictures, and produce and/or distribute DVDs that contain the copyrighted material. The United States was granted intervenor-defendant status on August 12, 2002 and limits its involvement to plaintiff's claims regarding the validity of the DMCA.

Now before the Court are defendant/counterclaimants' motion for partial summary judgment, plaintiff Victor Mattison's motion to dismiss defendants' counterclaims, plaintiff's motion for denial or continuance of motion for summary judgment pursuant to Rule 56(f), Electronic Frontier Foundation's and Copyright Law Professors' motion for leave to file amici briefs in opposition to defendants' motion for summary judgment, plaintiff's motion for leave to amend answer to counterclaim, Larry Davis' motion to intervene as plaintiff, and defendants' request for judicial notice.

LEGAL STANDARD

A. Summary judgment

The Federal Rules of Civil Procedure provide for summary adjudication when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

In a motion for summary judgment, "[if] the moving party for summary judgment meets its initial burden of identifying for the court those portions of the materials on file that it believes demonstrate the absence of any genuine issues of material fact", the burden of production then shifts so that "the non-moving party must set forth, by affidavit or as otherwise provided in Rule 56, `specific facts showing that there is a genuine issue for trial.'" See T.W. Elec. Service, Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).

In judging evidence at the summary judgment stage, the Court does not make credibility determinations or weigh conflicting evidence, and draws all inferences in the light most favorable to the nonmoving party. See T.W. Electric, 809 F.2d at 630-31 (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)); Ting v. United States, 927 F.2d 1504, 1509 (9th Cir.1991). The evidence presented by the parties must be admissible. Fed.R.Civ.P. 56(e). Conclusory, speculative testimony in affidavits and moving papers is insufficient to raise genuine issues of fact and defeat summary judgment. See Falls Riverway Realty, Inc. v. City of Niagara Falls, 754 F.2d 49 (2d Cir.1985); Thornhill Publ'g Co., Inc. v GTE Corp., 594 F.2d 730, 738 (9th Cir.1979). Hearsay statements found in affidavits are inadmissible. See, e.g., Fong v. American Airlines, Inc., 626 F.2d 759, 762-63 (9th Cir.1980).

B. Motion to dismiss

Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it fails to state a claim upon which relief can be granted. The question presented by a motion to dismiss is not whether the plaintiff will prevail in the action, but whether the plaintiff is entitled to offer evidence in support of the claim. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183, 104 S.Ct. 3012, 82 L.Ed.2d 139 (1984).

In answering this question, the court must assume that the plaintiff's allegations are true and must draw all reasonable inferences in the plaintiff's favor. See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir.1987). Even if the face of the pleadings suggests that the chance of recovery is remote, the Court must allow the plaintiff to develop the case at this stage of the proceedings. See United States v. City of Redwood City, 640 F.2d 963, 966 (9th Cir.1981).

If the court dismisses the complaint, it must then decide whether to...