p2p news / p2pnet special: As the members of the Organized Music family, Sony BMG, Vivendi Universal, Warner Music and EMI, struggle fruitlessly to gain total control of how, and by whom, music is distributed online, it’s one embarrassment after another, lately.

Their claims that their bizarre sue ‘em all marketing campaign is resulting in both increased business for the corporate online music services, and significant reductions in the numbers of people using the p2p networks, have repeatedly been proved to be as empty as their assertions that they have customer interests at heart.

The Sony BMG Digital Restrictions Management (DRM) disaster, under which the cartel member was caught red-handed trying to plant secret DRM spyware on customers’ computers, was irrefutable evidence of the low esteem in which Sony, for one, holds the people who keep it fat and happy.

Now a lawyer representing OM’s ARIA (Australian Recording Industry Association) has succeeded in turning what the labels had hoped would be a seal of approval for the RIAA’s (Recording Industry of America) Audible Magic ‘filter’ for controlling the p2p companies into yet another major PR disaster.

An Australian court had given Sharman Networks, owner of the failing Kazaa p2p application, the users of which have appeared on so many RIAA subpoenas, a December 5 deadline to build a keyword filter system based on words supplied by the Big Four. Or else.

They would then conceivably have tried to use it to force the music industry’s only competitors, the indie p2p companies, into conforming to OM demands, whatever they may have been.

But then Michael Williams, a lawyer acting for Big Four Oz ‘trade’ group, the ARIA, blew it.

As a p2pnet source in Australia put it, “Yesterday the Kazaa case was back on for a post judgement hearing. Strange experience. The judge [Murray Wilcox] absolutely blasted the record company’s lawyer for walking out of an expert’s conclave which was intended to be a gathering designed to apply a filtering solution to the problem of infringement.”

But even if December 5 deadline hadn’t been cancelled, as frequent p2pnet poster and OM victim Rafael Venegas says, “I doubt very much that a filtering solution will be found by programmers unless all digital files have a required integrated ID and copyright status data (which they don’t have at present). Then if the integrated data is modified to fool the filter, the filter will be fooled.

“No wonder the lawyer did not show up to a ‘filtering solution’ conference.

“The music industry is in a bind. Any attempts to stop all file sharing would be illegal because many works are in the public domain or the owner allows sharing and copying. And no filtering system will work if the files do not have the required ID and copyright status data.

“There is no way out other than a radical change in the way music is licensed and authors are paid for their work when files are shared on the Internet or copied at home.”

Venegas also says, “Anyway, a filename based filter would only be an utter failure, as filenames will simply be changed before uploading and then again after downloading, or playback programs can be made to recognize and play back real mp3 files regardless of the extension name.”

Meanwhile, yesterday, we ran the Sharman press release centering on the latest Organized Music phk-up.

Here’s the pre-release draft of the Sharman statement and as our source says, “I don’t know why they went away from the original press release. For once it would’ve worked for them!” Under it is a fly-on-the-wall transcript of what happened during the behind-closed-doors conclave.

STATEMENT FROM SHARMAN NETWORKS

November 25, 2005

Record company lawyer shoots himself in the foot

The Australian Federal Court yesterday granted Kazaa a reprieve after hearing that the record companies’ lawyers had walked away from the court-ordered technical process. (1)

During the hearing Justice Wilcox indicated that he was “extremely angry” with Mr Michael Williams’ treatment of a Federal Court official overseeing the technical process.

Justice Wilcox indicated that Mr Williams had “shot himself in the foot” by aborting the court-ordered process.

A first technical meeting had been held with considerable success, with Kazaa seeing this as the first step towards establishing a business that would gain from the record companies the licenses it had always wanted.

Kazaa was granted an extension to deal with the technical issues until late February 2006, despite objections by the record companies.

The court also rejected, out of hand, an attempt by the record companies to obtain damages after their barrister indicated that he would be seeking $200 m.

A spokesperson for Sharman said the action of the record companies in rejecting the court ordered meeting reveals their true intention is not to foster legitimate business as envisaged by the court, but to shut down Kazaa and rid themselves improperly of a competitor.

As a result of yesterday’s rejection by the Court of the record companies’ submission, consumers will be able to enjoy the Kazaa experience at least until the appeal is held, in late February 2006.

For more information, please contact:

Julie Fenwick, ICON International Communications
+61 2 8235 7600 (work)
+61 423 174 424 (mobile)
julie.fenwick@iicpr.com

(1) The court in handing down its judgement on 5 September 2005 made a landmark ruling ensuring the survival of Kazaa by recognising that its legitimate business should be protected and afforded the opportunity of a time frame in which parties could agree to a protocol. This operating protocol was to be agreed between the parties. This would allow the respondents to adjust their operations so that they could continue.

Below is a confidential transcript of the cause of Organized Music’s discomfort. It’s long, but well worth the read. >>>>>>>>>>>>>>>>>>>>>>>>

FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY

WILCOX J
No NSD 1809 of 2005

UNIVERSAL MUSIC AUSTRALIA PTY LTD and OTHERS
and
SHARMAN LICENSE HOLDINGS LIMITED and OTHERS

No NSD 1665 of 2005

SHARMAN NETWORKS LTD and OTHERS
and
UNIVERSAL MUSIC AUSTRALIA PTY LTD and OTHERS

No NSD 1666 of 2005

ALTNET INC and ANOTHER
and
UNIVERSAL MUSIC AUSTRALIA PTY LTD and OTHERS

No NSD 1667 of 2005

KEVIN GLEN BERMEISTER
and
UNIVERSAL MUSIC AUSTRALIA PTY LTD and OTHERS

No NSD 110 of 2004

UNIVERSAL MUSIC AUSTRALIA PTY LTD
and
SHARMAN LICENSE HOLDINGS LTD

SYDNEY

10.32 AM, THURSDAY, 24 NOVEMBER 2005
MR A.J.L. BANNON SC appears with MR R. COBDEN SC
and MR HENNESSY for the applicants
MR J.M. IRELAND QC appears with MR S.C.G. BURLEY
and MR N.R. MURRAY for the 3rd and 4th respondents
MR B.D.E. LEEMING appears for the 6th and 9th respondents

Copyright in Transcript is owned by the Commonwealth of Australia. Apart from any use permitted under the Copyright Act 1968 you are not permitted to reproduce, adapt, re-transmit or distribute the Transcript material in any form or by any means without seeking prior written approval from the Federal Court of Australia.

MR A.J.L. BANNON SC: I appear for the applicants with my learned friends

MR R. COBDEN as senior counsel and MR HENNESSY.

HIS HONOUR: Thank you.

MR J.M. IRELAND QC: I appear with Mr S.C.G. BURLEY AND MR N.R. MURRAY on behalf of the third and fourth respondents.

MR J. LEEMING: I appear for the sixth and ninth respondents.

HIS HONOUR: Yes, Mr Leeming. Well, now I guess what is before the court today is an application. Is there a notice of motion on your side, Mr Ireland?

MR IRELAND: Yes, there is, your Honour. There is a notice of motion filed on 14 November by my clients and that seeks a further stay of the orders made on 5 September 2005 until the determination of appeals which have now been fixed, your Honour, by the Full Court commencing on 20 February 2006.

HIS HONOUR: These motions have been filed in the

MR IRELAND: Original proceedings, being I think

HIS HONOUR: I am not sure that they have. They seem to be in the appeal files. I don’t know why that has been done.

MR IRELAND: The one I have is entitled in NSD 110 of 2004 which I understood to be the trial proceedings.

HIS HONOUR: We will just go and get it. It think what we have got here is the files in the appeal.

MR IRELAND: I see. I can pass up a copy of the notice of motion filed by us on 14 November. Now that in our case is supported by an affidavit of Rowan Michael Higgins sworn on the same day in the same proceedings. Can I please pass that up together with the exhibits which have been served. There is a comparable application by my learned friend Mr Leeming.

HIS HONOUR: A hearing date has now been fixed.

MR IRELAND: Yes. Well, it has. As I mentioned it was confirmed, I think, yesterday or the day before that the appeals have been set down by the Full Court for hearing in the week commencing Monday, 20 February 2006. That is the appeals on the present respondents’ side and also the other appeals which the applicants have made for further and greater relief than your Honour was minded to order.

HIS HONOUR: Well, it’s all the appeals, isn’t it?

MR IRELAND: All of them. And your Honour that is well on track as I understand it as Mr Higgins’ affidavit makes clear. Your Honour, would it be convenient if I just in a minute or two just opened our position?

HIS HONOUR: Yes.

MR BANNON: I have some objections to that affidavit as to the exhibits.

HIS HONOUR: What is the objection, Mr Bannon?

MR BANNON: The exhibit RMH2 is an exhibit of a report by a Registrar of this court and annexed to that report are certain attachments which constitute a series of assertions by our good friends Mr Morle and Mr Rose as to what can or can’t be done in relation to filtering. They as part of the report of the Registrar and I understand the report has been provided to your Honour and the report exists for your Honour to look at but the attachments are not evidence. We object to them as evidence of the truth of any of their contents.

HIS HONOUR: Well, they are evidence for the position that the respondents were taking in the discussion before the Registrar.

MR BANNON: Yes.

HIS HONOUR: Which is all I am concerned with.

MR BANNON: Yes, as long as I am protected that it is not evidence for example when they say in effect we can’t comply with order 5, that that is not evidence of the truth of that fact.

HIS HONOUR: Well, Mr Bannon, I don’t know how many times I have to say that the as a basis to discussion for the Registrar was not to include the statement we can’t comply with order 5. Really the question in my mind about what happened before the Registrar is what was the position being taken by the parties and who is at fault, if anybody is, for the fact that they didn’t turn out to be truthful.

MR BANNON: Yes.

HIS HONOUR: And I think I need to know as best I can what happened before the Registrar. I have read the Registrar’s report. If I just left it with the Registrar’s report then that would be bad news for you because she obviously took a strong view about the way she was treated last Monday, and let me say I take a strong view about it too. I thought it was discourteous in the extreme for your clients to notify that they wouldn’t attend by an email sent at 8 minutes to 6 on the Friday night for an appointment that had been arranged for a long time which was due to start at 9 am on Monday. It is just not acceptable for solicitors to behave in that way to a Registrar of the court.

When I heard about it I was extremely angry about it, I can tell you that. I will try and not let that determine my attitude to what has to be decided today, but I have to struggle not to. If Mr Williams wanted to call off the attendance you should have done so in good time and notified everybody in good time. Not has a situation where a 9 o’clock on Monday morning everyone was looking around and saying, well what is happening. I think it also was quite inappropriate for nobody on your side to turn up. But we will come back to that later.

There are larger issues, I appreciate that and I will try and not allow that to determine my decision but I just want to express as forcibly as I can, when I make directions for attendance before the Registrar I expect practitioners to treat the Registrar with the normal courtesies we would expect from each other. All right. Well, having said that I am going to allow the material to come in for the purpose of today’s discussion.

MR BANNON: Yes, and I think I am sufficiently protected that it is not evidence of the truth of what is said in those attachments.

HIS HONOUR: Yes, Mr Ireland.

MR IRELAND: Your Honour, the second to fourth respondents apply today by notice of motion which I have identified filed on 14 November for a further a stay until the determination of the appeals which have been lodged. Your Honour has heard that all the appeals have now been fixed for hearing on the date mentioned, 20 February. When your Honour delivered judgment on 5 September in this matter you upheld in part the claims made by the music companies against a number of the respondents in these proceedings. Most significantly, order 4 restrained in general terms my clients, the second, third and fourth respondents, from authorising uses of the Kazaa system, first of all from making copies of any sound recordings and secondly from authorising Kazaa users to communicate any such recordings to the public.

Now, your Honour, it was fundamental to the court’s finding that the continued distribution of the Kazaa system by the second respondent in an unchanged form would lead to further acts of authorisation of copyright infringements. It was also fundamental to the court’s reasoning that continued use of the peer-to-peer facilities provided by the Kazaa system by existing users of the technology would be likely to give rise to further incidences of infringement. Your Honour made order 5 on 5 September which was not mandatory in its terms, it illuminated the intention of the court with respect to compliance with the absolute terms of the injunction contained in order 4 and it was provided that the continued operation of the Kazaa system and the provision of software programs to new users would not be regarded by the court as a contravention of the general restraint upon authorisation of infringement if certain changes were made.

The modifications contemplated by order 5 which would relieve the relevant respondents from a charge of contempt of order 4 entailed the creation of what was described as a protocol, and that protocol was either to be agreed between the parties or approved by the court, and its object was to ensure changes to the Kazaa system distributed to new users to contain filter technology of a type described by the order. As a true alternative to this, the court directed that a mechanism which was effective to limit search results by reference to an identified list of recordings would be regarded as satisfying the absolute terms of order 5.

Your Honour, we see that the court recognised that the technology which would satisfy compliance with the absolute terms of order 4 was not immediately available to the relevant respondents.

HIS HONOUR: I don’t know about not immediately available. I certainly recognise that there would need to be some modification of the existing Kazaa software, but I envisage that that could be done quite quickly, Mr Ireland.

MR IRELAND: Yes, your Honour. And for that and perhaps other reasons, the court stayed the operation of the critical order 4 for a period of initially two months until 5 November and provided for further extension of that two-month period upon application to a judge.

The applicants then made an application to the court to dissolve the stay, and that matter was dealt with by your Honour in a videoconference on 10 October 2005. It was on that occasion that the court granted to all the parties leave to appeal against the orders, and at the same time the court extended the stay, as I say, for a further month subject to further orders.

That stay will now expire on 5 December 2005. By this application, the second to fourth respondents seek an extension of the stay at least until February 2006, when the Full Court will be seized of the appeals, and preferably until the determination of those appeals.

When the matter was before the court on 10 October, the court made some significant further orders. It directed that a conclave be held under the auspices of the Registrar at which the parties’ technical representatives would have the opportunity to have a direct dialogue about the technical implications of the filtering systems which the court had contemplated.

In the conclave proceedings before the Registrar, the respondents had co-operated conscientiously to reach agreement with the applicants as to the technical matters which would allow the introduction of effective filters.

The Registrar has reported to the court on the progress of those proceedings. Her initial report was made on 14 November 2005, in which the Registrar set out in some detail the results of the discussions between the parties’ experts.

Initially at that conclave meeting, the lawyers had agreed to withdraw, with the exception that Mr Bates, who is an employee of Gilbert and Tobin, had a dual role, and he was put forward as one of the technical representatives of the applicants for the purposes of the discussions. The Registrar concluded in her first report:

— All technical representatives have been working under strict time constraints and considerable logistical pressures to undertake the tasks that were identified in the conclave. In my view, all have been diligent, genuine and co-operative in their attempts. This is demonstrated by the progress of work achieved so far and as outlined in their respective reports.

When the court directed the conclave before the Registrar, it contemplated that those proceedings might need to be adjourned from time to time in order to carry out testing and evaluation. In the present case, the Registrar decided that it would be beneficial and constructive to hold a further conclave between the technical representatives of the parties, and this was scheduled to take place last Monday, 21 November.

As your Honour has remarked, late on the preceding working day, Mr Williams, the solicitor the applicants, communicated with the Registrar by email, stating that in his clients’ view there would be no useful purpose served in a further meeting of the technical representatives of the parties at a resumed conclave. It is fair to say that both the Registrar and my clients, who also received this communication at the same time, were taken aback by this stance, and notwithstanding the time fixed last Monday for the resumption of the conclave, no representative of the applicants attended and no explanation was given to the Registrar on the day as to the reasons for the applicants’ withdrawal from that aspect of the proceedings.

Yesterday, your Honour, the Registrar furnished a supplementary report, and she concluded that:

— Whilst the applicants had displayed co-operation in attending the first conclave and their technical representatives demonstrated good faith in contributing to the development of the protocol, it was unfortunate that this co-operation did not extend to their attendance at the resumed conclave.

The Registrar has made clear in her second report that there had been a genuine and continued attempt on the part of the technical representatives for the respondents to create a protocol in accordance with order 5 made by the court on 5 September.

When the court directed the conclave procedures before the Registrar, it clearly contemplated that there would be a further stay of proceedings pending the determination of the appeal. So much appears from the transcript of 10 October. At that time

HIS HONOUR: Well, that was subject to what happened at the conclave.

MR IRELAND: Yes. At that time, therefore, the date for hearing of the appeals was uncertain, and the interval of any further stay was not known. It seemed to be the intent of the court that if a stay was to be granted upon the terms now sought by the respondents, the time prior to the hearing of the appeal should not be wasted in formulating mechanisms which could be then much more quickly implemented in the event that the appellants were unsuccessful in their challenge to your Honour’s judgement.

The particular terms of order 5 required consultation between the parties and ultimately an agreement between the parties as to the form of filtering protocol to be explored. The conclave proceedings before the Registrar provided the occasion for that to be done at a time before the hearing of the appeals so that technical explorations could be carried out between the parties of what was feasible and what was not. This dialogue was to be encouraged, and by virtue of the structure of the orders which the court made on 5 September, it was indispensable that the applicants should participate along with the respondents in the necessary technical dialogue.

Although, your Honour, the order of 5 September included the mechanism, as it were, that the court would approve the matter ultimately if there was disagreement between the parties. Your Honour, we saw it as a matter of some regret that Mr Williams decided, for reasons associated with this litigation, that his clients’ technical representatives would not be permitted to resume contact with the technical representatives of the respondents in the continued conclave set to occur last Monday, and we suggest that it really does no credit to Mr Williams or the applicants in taking his advice that such an approach was justified.

The applicants are now the party who should be visited with the court’s displeasure in the context of the present application. The respondents have really done all they possibly can to progress towards a technical environment where filtering procedures of the type contemplated can be developed and adopted.

HIS HONOUR: Mr Ireland, can I just raise the point that I think is raised against you in the outline of submissions that I’ve seen from Mr Bannon and his colleague? What they are saying is yes, the respondents turned up at these discussions. Yes, there were discussions. However, they seemed to be on the basis that any modification to filter system would accommodate, at the most, about 3000 titles, and that was woefully inadequate and was not what was contemplated by order 5 of the orders made back in September, which really contemplated that all titles to which the applicants had copyright on supply to your clients would be then subject to the filter; and that in the context where it was known that you were dealing with some hundreds of thousands of titles, to come along and say “Well, perhaps we can get 3000 up” was really tokenism. That’s not Mr Bannon’s words, but that’s basically what he says.

MR IRELAND: That was really - I missed your Honour’s remark.

HIS HONOUR: Tokenism. That’s not Mr Bannon’s words, but that, I think, is the substance of what he was saying, and he was saying that was not what was envisaged. So although you came along wearing your smiles and a co-operative visage, and the Registrar was impressed about that, you really weren’t grappling with the implications of what was required. That seems to me the substance of what is put against you.

Now, what I think is unfortunate is that if that was the position of the applicants which would be an entirely understandable position, the course they took, the sensible course would have been to have pointed out to your people, whether through lawyers or technical people, well, look what you’re doing sounds good, but it’s not grappling with the problem. Now, at the next technical conclave, we want to have a discussion about how you can embrace the whole of our title. Instead of which, Mr Williams chose to take his bat and go home and that’s the problem.

MR IRELAND: Yes, the short answer to the problem if I can deal with it is this, your Honour. When the lawyers withdrew and the technical people were left on the applicant’s side to have a dialogue with the respondent’s technical representatives and quickly reached the view at a consensus that 900,000 titles by the sort of adaptation to the filtering system that was on the table could not be done.

HIS HONOUR: But that’s the problem, you see, the sort of filtering system

MR IRELAND: But I’m saying, your Honour, the technical representatives on the other side accepted that proposition.

HIS HONOUR: Yes, but that’s because of what you put on the table and this is the refrain that your opponents say, and rightly say, that it was not the purpose of the conclave to revisit the findings of fact in the trial. Now, they’ll be revisited there before the Full Court and with whatever result, that’s not a matter that I’ll lie awake worrying about, frankly. The Full Court will look at that.

MR IRELAND: I can tell your Honour we do lie awake worrying about that.

HIS HONOUR: Well, you’re paid well for that, Mr Ireland. What is argued in Full Court is not my concern, but inevitably one has to reach some conclusion of fact as a trial judge and sometimes you get it right and sometimes arguably you get it wrong, but you reach conclusions of fact. I didn’t intend, and I think I made this abundantly clear, that the conclave should redebate those matters which were strenuously debated at the time.

The conclave was designed to start with the premise that it was feasible to provide filtering for the whole of the applicant’s title list by one of two ways and your people had the option of deciding which was the preferable way to go and you know the ways I’m talking about, modification of Kazaa or gold file flood filtering and it wasn’t an answer to come along to that and say, well, we could do either of those, but we can only cover 2000 or 3000 titles.

MR IRELAND: Your Honour, can I respond to that? Your Honour has put it twice. When looked at closely, your Honour’s finding in the principal

judgment was not that there had been available some mechanism which could be implemented, but Sharman could have gone about the development of some system in the past which would have headed off the sort of problems that your Honour saw ultimately on the issue of authorisation. Your Honour did not hold that there were any currently, as your Honour said at the outset today, that there was any currently existing mechanism which had been explored to be adapted to the task and my client’s ultimate obligation, if your Honour’s order stands, is to obey order 4.

Order 5 is in the nature of a guidance and a concession that says whatever we do, if it obeys order 4, whether it’s within order 5 or in some other realm, will be compliance with that injunction, so long as order 4 is ultimately satisfied. What your Honour had done helpfully, if I may say so with great respect, is to say, look, leaving the order in absolute terms is sphinx like, what I’m prepared to do in order 5 is to indicate some areas in which there could be agreement. But order 5 has, with respect, the deficiency in that it depends upon a protocol and an agreement or ultimately a sanction by the court of something technical, something your Honour did not have evidence about. The applicants did not call it and that’s one of our complaints in the appeal, but there had to be, on the ground, in realistic terms, a dialogue between the technical people in order to see how it could be played out to be effective.

So what was quickly agreed in the first protocol, once the lawyers were out of the way, was that it ought to be done in two stages, one was to implement quickly what all the experts discerned was a realistic application of

MR BANNON: That’s not true. That’s just incorrect.

HIS HONOUR: Please don’t interrupt, Mr Bannon.

MR IRELAND: Implement quickly what was then available. This was something accepted by the other side. The touchstone of that is that following the conclusion of the first conclave, Mr Williams and his client provided the crucial 3000 titles. We didn’t do that and it wasn’t something that was available to us until after the conclusion of the first conclave. That was the signal that they accepted that that was the first stage. At the other end of the spectrum, it was something which did create difficulties because we said that ultimately the way to really fix this problem was to change the architecture of the Kazaa system.

Whereas before there was no central point during which the communications between the peers was vetted, something which had just come onto the market within weeks and was available for this kind of purpose, a system called Audible Magic, would run everything through a black box and test it and decline to allow the transmission of peer-to-peer communications for any number of titles, but that was a major change to the architecture of the system which our people were ready to do to comply with order 4.

Because we were wedded by your Honour’s requirements for the protocol to do the best we could with this key word filtering, it was in that context that everybody agreed that as a first and more immediate stage and quicker stage that, at least, should be undertaken and that was something welcomed by the technical representatives. It was obviously very unwelcome when Mr Williams found out what had happened.

HIS HONOUR: Why do you say - I mean Audible Magic is a term that wasn’t even breathed at the trial. I’ve never heard of it and it seems to have come up since the trial.

MR IRELAND: Well, I wasn’t there, so I can’t say one way or the other.

HIS HONOUR: No, I can assure you, it wasn’t. If it was, it would have found its way into the judgment. Just reading what the Registrar said about it, it sounds like the solution to all the problems.

MR IRELAND: That’s right, your Honour.

HIS HONOUR: In which case, if it was the preferable solution, I certainly wouldn’t wish the two methods that were referred to in paragraph 5 to be treated as excluding it.

MR IRELAND: But they couldn’t, your Honour, with respect, because order 4 says stop authorising infringements and if we comply with order 4, whether paragraph 5 is paid regard to or not, we’re in obedience of the order.

HIS HONOUR: But if you used Audible Magic, as I understand it, you wouldn’t be infringing.

MR IRELAND: That’s what I’m saying, your Honour and that was what our people were advocating forcefully as the real solution. The other side, at first, thought that was a good idea and it was left on the basis that there would be responses given after the end of the first conclave on those two twin parameters, one, an initial 3000 titles, I think, would be provided and that would be the limit of, according to what was debated between the experts, that would be the practical limit of what could be done with the present architecture, that’s my word, architecture, and then the Audible Magic involves getting some proprietary software which would provide a fingerprint for all of these tunes or songs and, as I say, you put a black box really between the two peers notionally.

So if somebody wants to transmit something and copy something that’s on the list of that technology, you just simply can’t do it.

HIS HONOUR: What was the timeframe for Audible Magic being

MR IRELAND: March. We had to buy it, develop it proprietarily and adopt the system. So that was the genuine debate that was taking place. Whatever can be said about this case today, the Registrar accepted all that. The Registrar could not have reported in any more glowing terms about all of the parties representatives in the first round until Mr Williams put his oar in and stopped the second round, the thing went off the rails at a practical level.

For our learned friends to say as they have said in their preposterous submission this morning that we have derailed this process of compliance with the injunction is an absolute fantasy. That is our position, your Honour, in a nutshell.

HIS HONOUR: Mr Leeming?

MR LEEMING: Can I indicate my client’s position which is, as you might expect, similar but there are a couple of differences that I need to emphasise to your Honour. Like Mr Ireland we have a motion as well that’s filed in the original proceedings before your Honour.

HIS HONOUR: Yes, I picked that out. I think they’re practically the same. Both cases seek an extension until determination of the appeal.

MR LEEMING: Thank you, your Honour.

HIS HONOUR: I grant the extension, Mr Leeming and Mr Ireland, I might say extended until perhaps the end of the first day’s hearing so as to in fact require you to raise that issue before the Full Court. I think the Full Court ought to have total carriage over the matter. They may decide to attempt a determination of the appeal and they will do that.

What I could do is say, extend until determination of the appeal or earlier order of a judge or the Full Court. That enables somebody to raise it before the Full Court or it can be raised with a judge in the meantime although I imagine no single judge is going to want to put his or her foot in the water.

MR LEEMING: I think we would be completely content with that. There are really three things to say; first, by way of emphasis that the issues before your Honour this morning may in fact be narrower than they appear, particularly from my learned friend Mr Bannon’s written submissions. I say that because this hearing was presaged by what occurred before your Honour on 10 October and might I take your Honour to the transcript of that occasion which is RMH1.

HIS HONOUR: Have I got that?

MR LEEMING: I think it’s been exhibits to Mr Higgins’ affidavit.

MR IRELAND: I handed that up, your Honour.

MR LEEMING: RMH1 is the transcript where if I may say so, helpfully, your Honour identified the issues that would arise today if there weren’t agreement.

HIS HONOUR: Yes, I have it now.

MR LEEMING: If your Honour goes to page 4 of that transcript at lines 6 to 10 your Honour indicated, presciently, that it might be better if the lawyers weren’t there and that the experts sat down and talked about how to organise a filter system with a neutral person acting as a chair. Ultimately that occurred although the applicant’s response to that was initially to turn up with Silk and solicitor at that conference. Ultimately, at the first successful conference the technical experts did sit down.

Also on page 4 at line 28 your Honour said, and your Honour said it a number of times, that the findings of fact made by your Honour were to stand. I should make it absolutely clear we embrace that and we always have. We reject the suggestion that’s put by my learned friends that we, in some way, are seeking in these original jurisdiction proceedings, to undermine the findings of fact that your Honour made.

Your Honour, however, went on to say, and this relates directly to what Mr Ireland and your Honour were debating immediately before I rose, at line 30:

— As I say, if the respondents can come up with a better way and that’s acceptable for the applicant that’s another matter. There may be some new technological answer can be found.

That, in my submission, is exactly what occurred. Audible Magic which a long time ago, I don’t know if your Honour remembers, it’s actually found in Mr Speck’s affidavit on the Anton Piller order; it’s a technology that the applicants are very familiar with. It is a better way but that’s

HIS HONOUR: I can assure you I have forgotten but it wasn’t run at the trial was it?

MR LEEMING: No, it wasn’t, and it was acceptable to the applicants, at least so far as appeared at the end of the technical experts conclave, round 1. So your Honour contemplated that and it occurred. We are concerned that it’s put against us that in some way we are seeking to subvert what your Honour put on the last occasion. We are not.

On page 5 at line 43 Mr Bannon sought to resist any extension of the stay. In fact his application on that day was for the stay to cease three days later. That was rejected by your Honour for reasons your Honour gave. He’s now having another go at doing the same thing. On page 7, and this is the second point which is a matter of particular concern to my client, at lines 5 to 10 your honour indicated what is obvious, if I may say so from the form of order 5, that there’s a choice in it. Your Honour said the respondents firstly have to make up their minds which of the two options in 5 they wish to go for and then set down a means in which that goal will be achieved.

My clients have formed the view, as have all of the technical experts, that of the two mechanisms your Honour proposed Goldfile flood filtering is by far and obviously the least effective means. We embrace order 5(1) rather than order 5(2).

Very serious statements are made by the applicant’s solicitor to the Registrar of this court in its submissions today about the good faith of our clients and the motives behind Mr McKemmish’s reports and my clients had a choice; they could either say to your Honour, we’re not doing order 5(2), order 5(1) is the best, and be exposed undoubtedly to a criticism or we’re not acting in good faith to put in place a protocol pursuant to one of the mechanisms your Honour has indicated.

We have chosen to do something different. We have certainly chosen the outcome because 5(1) is much better than 5(2) but rather than simply saying in a blanket fashion, we’re not doing it, and expose ourselves to those criticisms we wanted to put before the court in a reasoned, articulated basis in an evidentiary way and that’s why Mr McKemmish’s affidavit is a report that I’m relying upon today exactly the difficulties that confronted us on the order 5(2) route which is why we’re going order 5(1). In my submission, that is something contemplated by the order and contemplated by your Honour on the last occasion.

HIS HONOUR: I don’t think the court is concerned with your reasons for preferring 5(1) to 5(2). As I say the respondent has a choice. As Mr Ireland has pointed out and it’s obviously what was intended this was, if you like, a concession to say, well, rather than force you to the consequence of order 4 there are two methods that seem, on the evidence, to be feasible and if you do either of those then that’s okay.

When I talk about protocol I must say I didn’t intend that the applicants technical people would get involved in telling the respondents how to rewrite their software. What I mean was there would be some agreement about how information would be supplied; presumably it would be supplied digitally and presumably at certain time intervals, how quickly thereafter it would be put into your system, the Kazaa system, whichever one it is going to be, and then what modifications to Kazaa so that the applicants could feel, not that they would have a say in the design of it, but they would be told what result would occur and they would then be able to say, yes, we can see why that will happen. That’s what I had in mind.

MR LEEMING: That’s what we understood by your Honour’s orders.

HIS HONOUR: Sadly, Mr Leeming, the numbers then start to - there wasn’t a discussion on the basis, yes, we’ll take all the titles, it was, well, you know, we can do 3000 or so. Mr Ireland says, well, that was a first instalment. I don’t know that it comes with any great clarity out of the documents supplied does it?

MR LEEMING: It may be necessary to descend to that level of detail because it does but it may be that it’s not because of the way the issues that arise today emerge from what happened on the last occasion which was why I was taking your Honour to your Honour’s framing of those issues. I am just about to come to how your Honour framed “the” issue that is arising today.

On page 8 and then again page 10 your Honour framed the issue that would arise today in the event of what has occurred, a breakdown of the mechanism that your Honour proposed. After some criticism at lines 25 to 26 of the tone of correspondence that’s come from Messrs Gilbert & Tobin which has continued and we will put our response to that in evidence your Honour indicates at lines 32 to 40 that, first of all, by today and by 5 December, probably this wouldn’t have been completely implemented because it’s a large task but if you were satisfied by that time on any further application - I will put it another way; unless I was satisfied on an application for a further extension beyond 5 December that the respondents were bona fide and constructively contributing to discussions about the protocol your Honour indicated that you would not be minded to extend the stay.

Your Honour continued lines 44 to 48 to do that, that is to not grant a stay, two months short of the hearing of an appeal, it is closer than that now, which I am prepared to accept is a genuine appeal and if at that time the parties are co-operating and working out a protocol to put in place if they lose it would be a very unusual step for any judge to take.

So your Honour clearly put on that page the onus on us to bona fide and constructively contribute to the discussions and that’s the issue that your Honour indicated but, of course, fairly, your Honour contemplated the possibility of unilateral cessation of negotiations on the other side.

On page 10 after indicating what is quite plain and what seems not to have been appreciated by Mr Williams’ email of last Friday evening that the report of the Registrar was intended to go to the parties and to inform your Honour today your Honour said at line 29 on page 10:

—If it’s the respondents who are at fault they’ll get no sympathy from me. If, on the other hand, it appears that they - the respondents - have done all they can and that there’s no agreement perhaps because of your default -

that is your Honour speaking to Mr Bannon there -

— well, I would extend the stay until the Full Court dealt with it.

That’s the way in which there can be some discipline on constructive talking about 5. It’s for the parties to discuss.

I take your Honour to that to say this: at the moment your Honour has an evidentiary deficiency, if I may say so. Your Honour has the benefit of the independent assessment of the Registrar. Your Honour also has the benefit of the evidence that’s been adduced by the respondents as to what they’ve done, what they’re presented and how cogent it is.

Against that your Honour doesn’t have what was contemplated by your Honour’s directions and that is reports by my learned friend Mr Bannon’s technical people saying, well, this is wrong, or maybe, this is right. I completely agree that this is the sensible way forward but that process was cut short and not by our doing.

So your Honour has that deficiency and in an attempt to cure that what one has, surprisingly if I may say so having regard to the lack of evidence about it, are statements in the submissions that were sent to your Honour’s chambers this morning saying that there’s been a distortion of what actually occurred at the conference.

That’s a distortion that doesn’t appear in the Registrar’s report and, most importantly, it’s not supported by any evidence from the other side. Maybe there is a distortion, maybe there is, but it is for the applicants, if they wish to make out a case that things aren’t as they seem, to adduce some evidence of it. They haven’t done that.

That’s why I say there may be an easy way through. Your Honour indicated the matters that would inform your Honour’s exercise of discretion today and, in my submission, it’s quite plain that it cannot be said that we have not acted in a bona fide way but that instead, on the other hand, the applicants have defaulted. They failed to comply with your Honour’s orders and they have done so in a manner which your Honour has already commented upon.

There’s one last thing to take your Honour to if I may. At the very end of the last occasion on page 21 of the transcript I came back to the matter that I commenced with where at line 39 I confirmed by clarification by reference to the passage I’ve already taken your Honour to that it might be possible for the parties to reach agreement on some other more effective means of achieving the goals indicated and we said that we didn’t see those directions precluding attempts along those lines and your Honour agreed, “no not at all because this is an area where there’s technological change and if all the parties are agreed that it’s satisfactory” and so on. So that the complaint that’s put against us in some way that our technical experts are first of all not complying with what was contemplated and secondly the more serious complaint that they’re motivated by some sort of improper purpose should in my submission be rejected out of hand.

If your Honour were to consider the issues as framed by your Honour at the last occasion, which is how we’ve approached it, it won’t be necessary to get down into the minutiae of the evidence. Mr Bannon no doubt has a view about that and your Honour will hear from him. It might be appropriate at this stage, having said those words really by way of opening, I indicate we have two reports of Mr McKemmish and an affidavit of my instructing solicitor Mr Pozniak dealing with the correspondence between the parties and the history of the matter which, if it’s necessary, I’ll seek to rely upon.

HIS HONOUR: Yes, all right. Mr Bannon?

MR BANNON: Firstly I draw attention to your Honour the fact that in the affidavit of Mr Higgins it’s noted that the reports in paragraph 7:

— These technical reports which now are annexed to the Registrar’s

report surfaced on 7 November and then they were revised about 10 November 2005.

So you have the conclave and they effectively put in writing what they are saying and they’re effectively those reports. Now the first response to those reports is from Mr Gooch, our expert, one of our experts and he says, and I’ll tender this, I’m not sure if it’s in somebody’s affidavit. He says in the first numbered paragraph:

— You’ve overstated the outcome.

HIS HONOUR: Why don’t you just pause for a moment? I’ll just read it, Mr Bannon.

MR BANNON: So that’s the first step and what Mr Gooch was saying echoed what I said on the last occasion that this will be an attempt by them to derail the process and go and look at a new type of process. On page 22 of the transcript on the last occasion I said “that the purpose of the conference, while they may agree something else, is to implement order 5″. I said, “we fear they were going to try and derail it to go some other process”. They said by their counsel on that occasion, “No, no, don’t be worried about that, your Honour, we’re going to do this process, implement order 5″. So we respond that. Now Mr Rose sends an email back in response of 10 November 2005, the relevant paragraph of which he says:

— Key word filtering will not work.

It’s the third last paragraph of that email.

MR LEEMING: Can I have a copy please?

MR BANNON: I’ve only got one copy for his Honour and one that Mr Ireland has and if I had another copy you’d be the first person I’d give it to.

MR IRELAND: Your Honour, this is a little bit unsatisfactory. They were supposed to put their material on. They came to court today to try and exclude our side of the story. They haven’t even got an affidavit or copies available of what they’re tendering which is a little bit difficult for us at the Bar table.

HIS HONOUR: I know, and I think, Mr Bannon, you are going to have to give everybody time to digest these documents, including myself, I am just going to re-read them. Yes, I have read that material, Mr Bannon.

MR BANNON: The next piece of correspondence says the first piece of correspondence is between Mr Williams and the Registrar. It is not annexed to the report. It commences in order, reading from the bottom, it says Williams to the Registrar, 11 November:

— The applicants and Mr Williams apologise for the non-attendance on

Monday. In retrospect, it was inexcusable and should not have occurred.

The difficulty arose because of the timing of the email on the Friday to which we expected a response - which I will come to in a moment - but correspondence has been issued from the applicants’ solicitors from time to time and no offence to the Court or the Registrar was intended and we are deeply sorry that that has been occasioned.

But in the course of these proceedings, and since the judgment, the applicants have been absolutely driven to a level of frustration which at the end of the day has to be excused, because after that conclave those reports came through, the only way of reading those reports, and I can take your Honour to them, is to say we are not going to make any attempt to implement order 5, we are going to go down the audible magic process and to the extent that we will do order 5 it would be, to adopt your Honour’s expression, tokenism, it is better than any expression we have used.

Now, in that sense of frustration Mr Williams - because we are not participants, the lawyers weren’t participants in the process - gets to see these reports, we are told that they are going to be exhibited to the Courts. That’s the response, whether it was the right response or not, we envisaged an application to your Honour to raise it with your Honour, the email which was sent to explain our difficulties was sent too late on the Friday and we apologise. I have to say I am partly to blame because I was involved in other proceedings and I was consulted about it and I couldn’t turn my mind sufficiently as to the appropriate approach, at least not turning up to explain our position to the Registrar in retrospect was inappropriate and we deeply apologise, but to say that these people had demonstrated by those reports in the attempt to comply with your Honour’s orders, we don’t resile from a single word of those submissions and in fact they are tame compared to what could be said.

To put in wrongly written reports, to say we can’t do this, we can’t do that, it will take for ever in any event and at best we are going to lose 3000 words and sometimes it’s three dozen characters which amounts to 300 words is then laughing at the applicants forensically. Quite frankly, I don’t know what happened at that first conclave and the Registrar wasn’t the officer of the court who made the orders that your Honour made, but your Honour knew the intent of those orders and we knew the intent of those orders and the respondent knew the intent of that order 5. But somehow or other, in the absence of lawyers, Mr Morle and Mr Rose managed to persuade the Registrar that proceeding down a track and perhaps our technical experts, proceeding down a track of looking at 0.3 per cent bore any relation to what your Honour had in mind.

That we were angry and frustrated that they had been permitted to do that to the Registrar of this court is understandable and if we haven’t reacted in the timely way which we should have we apologise, but as a matter of substance, we are in the position, on behalf of the applicants, quite frankly as I’m aware, as we’ve said in our submissions, they have taken the opportunity of this stay to respond to the increased requests for the unamended software which have been generated, one may infer, by the fact that there’s imminent closure.

HIS HONOUR: Well, Mr Bannon, I’ve read the exchanges of emails between Mr Rose and Dr Gooch about what happened in the conclave and there is some difference between them, I think. I think I have to be guided by what the Registrar said and it may be useful for us just to look together at the Registrar’s reports. The first report which she calls a progress report, reports on conferences held on 25 October and apparently it’s a very lengthy conference. I know that there was a preliminary conference at 10 o’clock and they got down to business at 11, concluding at 7 pm. Presumably there was some break at some stage, but obviously a lot of time was spent by people and the Registrar lists the people who appeared, representing the various parties.

There was a statement of the technical representative where the shared goal was to work on the technical aspects of filtering solutions to prevent infringing. So that’s a very wide statement appropriately. Now, there appeared to be an acknowledgment of the parameters of the existing systems on behalf of the Universal representatives and so on.

MR BANNON: Can I just pause there? That’s an irrelevant consideration.

HIS HONOUR: Well, I’m just telling you the Registrar’s impression of what was happening.

MR BANNON: I appreciate that, your Honour, but somehow or other the Registrar was led to think that that was a relevant consideration and it’s not.

HIS HONOUR: Well, it says:

— Considerable expertise and fellowship was brought by all who attended the conclave. A genuine constructive effort to working together towards the removal of the infringing files in the Kazaa system.

Then she sets out the aims. She sets out a summary of the conclave. Now, we weren’t talking numbers here. She wasn’t talking numbers. It was a discussion of how the orders could be organised and the development protocols for consideration which is exactly what I intended she should think about or the conclave should discuss.

— Identification of the nature and extent of relevant technical information specification to be provided in exchange. If possible, expectations of technical work could realistically be achieved clarified.

MR BANNON: Again, that’s irrelevant.

HIS HONOUR: It’s the first meeting, Mr Bannon and it was an attempt to - we’ll come to it.

MR BANNON: I’m sorry, your Honour, yes, it depends on the underlying assumption, I’m sorry.

HIS HONOUR: Let’s just look at what they’re saying:

— (c) specific agreed task to facilitate the use of existing filters.

So that was looking at the existing system and then looking at the software enhancement to see what that says:

— Setting agreed time …(reads)… provision of exchanged incoming ports.

And so on. Longer term strategy, there was a discussion about audio fingerprint technology and Audible Magic and she refers to that and I need not read that out.

— Assessment, all technical representatives have been working to strict time constraints and considerable logistical pressures to undertak the tasks identified in the conclave and in my view all have been diligent, genuine and co-operative in their attempt.

And that includes, I note, Mr Morle and Mr Rose who you make some comments about in your submissions.

— This is demonstrated by the progress of work sheets by our clients in respect of - although it’s fair to say that more work needs to be done, not being sufficient …(reads)… fully tested and implemented. Good progress has been made in resolving some outstanding issues, particularly concerning keyword filtering. In my view a fair facilitative conclave dedicates -

and so on. Then she ends up by specific issues largely in regard to gold file but filtering and they require clarification and so on.

— In the end it might be beneficial and constructive to hold a further conclave.

So she fixes the week commencing 21 November. So that’s to be the second conclave. What she’s saying at this stage is, well, it was good start. We had a long talk. A number of things were talked about. Nobody was putting numbers or limits against it. Everybody seemed to have a common purpose and everybody agreed they should meet again on 21 November. Now, subsequently, in come documents from your opponents.

MR BANNON: Which are annexed to the report and which informed

HIS HONOUR: I understand that. I’m not stupid, I have read them and I’ve got them in front of me. They’re not going to go before the Full Court, Mr Bannon, this is without prejudice to the appeal. I think I said that right at the beginning too and I’m not going to be sitting on the Full Court you’ll be disappointed to know. Just let’s stay calm for a moment. So in this comes and then it pointed me into integration to KMD and on page 1, as you will hasten to point out, there was a reference to 3000 words and you say:

— After the technical meeting Sharman Network checked the development with Fast Track and determined this is a reasonable figure to plan around.

Now, I can understand why even if your technical experts didn’t immediately take the point, those who were guiding the case from your point of view might say, well, hang on, 3000 words is not enough. I can understand that reaction and it is fair to say without going through the document which is lengthy, it really is talking about what we would do to put 3000 words on. And then a very similar document from Altnet, attachment two, and that is also limited I think in this case. Yes, this is again 3000 words, is it, it may be two. But anyway plainly an insufficient number and I would imagine anybody on your side reading it will say well look that is all fine but we are not talking 3000 words we are talking about the lot. And it therefore would have been an appropriate response for your people to have said, and they may have said it for all I know, hang on thank you for that, can we get back to talking about the lot and if not before 21 November to talk then.

Well, that, as we know, didn’t happen. There was this exchange of emails between Mr Rose and Dr Gooch. That seems to be mainly that Mr Gooch was concerned that he might have been verballed, to use the legal expression, about Audio Magic. I am not saying it is the answer and it is probably fair to say that the Registrar got the impression that it might be the answer and I must say when I read her report I thought that looks hopeful. But Dr Gooch has got his reservations which he is entitled to have and he expressed them to Mr Rose and Mr Rose said well in effect that is not what you said in the conclave and you get that sort of issue between them.

Well, then what happens is that instead of taking the course I would have thought was the sensible course which would be saying to the other side, now look thanks for all this, but you really have to concentrate on the real problem which is that Audible Magic whatever its long term suitability is not available immediately. You have a problem immediately that if you are going to avoid the guillotine or order 4 you have got to come up with one of the alternatives in order 5. What you have said about 3000 words doesn’t meet that. What are you going to do about it? And we want you to put that on the table on 21 November and if you don’t come up with something suitable then we are going to be submitting on the Thursday afterwards to the judge that you are not really bona fide. I would have thought was the response.

What does Mr Williams do instead of laying the groundwork for that and coming along and taking that line last Monday, we get this email in effect saying I am not going to talk to you any more. I just can’t resist the thought that, yes, there is room for criticising the respondents, but Mr Williams shot himself in the foot.

MR BANNON: Your Honour, I have said what I have said about the procedure adopted

HIS HONOUR: I am not talking about the lack of courtesy. I do have a view about that and thank you for your apology but it would be quite wrong for me to dispose of this matter on the basis of a lack of courtesy. When I ask myself and Mr Lemming has reminded me of what I actually said at the video conference and I in effect put the wood on your opponents to demonstrate to the satisfaction of the Registrar that they were genuine if they were going to get an extension. Well, they have persuaded her. She sat there for hours while they talked. She had the advantage that I can never reproduce, so she ended up saying well I think these people are for real. Now you might well say, yes but she was limiting the goal too much and that is possibly a fair criticism.

MR BANNON: That’s right.

HIS HONOUR: The proper response was then elevate the proposed goal and it has been said time and again that you were entitled to have the larger goal. Instead of which the conversation instead of being put on a proper basis, it is aborted by your side and then you come along here today and say don’t extend the stay. It is a bit hard.

MR BANNON: Your Honour, if I could just engage that. The trouble is the lawyers weren’t allowed in the enclave. So we had a Registrar that somehow or other has been persuaded

MR IRELAND: What about Mr Bates, he was allowed.

HIS HONOUR: Mr Ireland, I asked Mr Bannon not to interrupt you.

MR IRELAND: Mr Bates was a lawyer.

HIS HONOUR: Mr Bates had two hats on, yes. I appreciate your point. Your technical people were reporting back. What I am saying, what could have happened, I understand when you got these reports from both Sharman and Altnet that those reading it on your side who perhaps had taken the broader view than the technical people will without any disrespect to them, would have said, hang on they are talking about something that is inadequate. This isn’t sufficiently covering the problem. And it would have been entirely in order for Mr Williams, if he was the chosen person, to write to people on the other side and say, look we have read your reports but hang on the discussion was supposed to be about the total thing. That is what we want to discuss on 21 November and if you have got proposals about that as time is short let us have that in advance. That was the appropriate response.

MR BANNON: We tried to have it relisted before your Honour on the Monday and Tuesday because it had to leave the technical environment, your Honour. It had to leave the technical environment because the technical people were talking about a system which was confined by the existing technology because they were being told by Morel and Rose, this is all we can do. And our people were saying well if that is all you can do, if you are talking about a universe which comprises as an underlying proposition which is contrary to what your Honour had found then you will have a technical debate at a level which is completely irrelevant to the orders.

The Registrar couldn’t control that process because she was controlling a technical process. It had to have a legal cane brought to the process which only your Honour can bring. And a legal cane is they responded to an order by saying this is all we either can, or are going to do, and they have to satisfy - I appreciate what your Honour is putting, but we in response to your Honour’s order after spending all that time from 25 October until 10 November all they could come up to which was allegedly a bona fide response to the order which they knew what the order was to say all we can do and all we are going to do is 2 per cent, 0.3 per cent.

It doesn’t lie in our mouth to say well, we are at fault. In other words, for failing to point out your bona fides. You have shot yourselves in the foot by being so disrespectful of the intent of the orders that you spent all that time, notwithstanding what your Honour said on the last occasion, you spent all that time and all that energy to say this is all we can do and this is all we’re going to do which was a complete fly in the face of the order.

Now, in those circumstances, leaving aside the failing to show the Registrar sufficient respect, we had on its face our absolute cast iron demonstration of what we always believed about these people that they had no intention of attempting to satisfy in any reasonable timeframe the order and for your

Honour to say in the light of these people, the way they write it in such detail and quite frankly, knowing who they are from what we know from the hearing, to say, we had to go back and point out to them, we had to point out to these people, you’ve only done 0.3 per cent of the titles which you said in your correspondence, we could handle. To say that we have somehow or other shot ourselves in the foot, quite frankly, your Honour, puts the foot of a wrong gun.

HIS HONOUR: Well, everybody seems to be amputated now, Mr Bannon.

MR BANNON: But at the end of the day, what we have before your Honour is this. Since the last occasion there has been absolutely no positive go forward on heir part and if for them to say - Mr Ireland and Mr Leeming to jump up and say, well, if only you’d pointed out to us, if only you had said to us, 0.3 per cent wasn’t enough, then the world would have changed.

Flowers would have sprouted out of the ground and the sun would have shone and yes, we would have been here, if only you’d done that. That is the substance of their point.

HIS HONOUR: I don’t want to dampen your imagery, your oratory, Mr Bannon, but there were ways of going about it and one way of going about it would have been for Mr Williams to have sent a letter to the Registrar saying we have received these documents as I think he knew that she had received and we are concerned that they are talking about 3000 names.

We have written to representatives of no doubt the lawyers for the respondents pointing out that the purpose of the conclave is to discuss the totality of our names and we asked you at the resumed hearing to insist that there be attention to that subject. It would have been perfectly possible for a light and reasonable letter to be sent, copies to the solicitors acting on the other side and copies could have said we’re going to invite the judge to take your response to this letter into account on 24 November.

I would have thought if there had been an attempt of behaving in a normal reasonable way that’s what you would do or even if you want to be cynical about it, if you want to set up your opponents so they can be seen not to be dinky-di, that’s the way you would do it.

MR BANNON: We weren’t clever enough, your Honour.

HIS HONOUR: Well, you certainly weren’t clever just to call off the conference.

MR BANNON: At the end of the day, what you have before your Honour is the only demonstrated intent on their part is to do 0.3 per cent of word filtering and assertions that they can’t do any more. It would only be if one could infer that if we had said, you realise it’s 0.3 per cent that there’s any basis for thinking that they would have in a bona fide way come back and said all right, we will.

When one reads the detailed reports annexed, one couldn’t draw that conclusion. In fact, it would have been an affirmation of that conclusion. One sees Mr Rose has stated, it can’t be done and I have to take you through these reports, your Honour, to point out the vigour with which the proposition about limitations to 2003 does this put. It is put with as much vigour as what I have been delivering today.

HIS HONOUR: I understand that.

MR BANNON: So that it is hard to put outside what your Honour has observed about either both disrespectful and miscalculated conduct but if one can do that and just look at what is before the court, that is what is before the court. You have an order on one side. On one side of the equation is the order which we all know what it was intended to do. You’ve had a passage of time where they’ve attempted to put their best foot forward after we argued they shouldn’t have any stay. This is their best foot forward and this is the best they can do and we rely on the assertions in that document, albeit we don’t for a moment accept the truth of it.

Your Honour, there may be an update on correspondence about that. There is one email to which we responded and said we did not agree it was limited to a certain number of key words. It’s a long email but that’s the nub of it, Richard Gooch on 8 November, copy to the Registrar. He is more polite than me.

HIS HONOUR: I don’t think I’ve seen this one.

MR BANNON: No, because I haven’t handed it up.

MR IRELAND: Your Honour, we haven’t seen any of this. May I say this is very unsatisfactory. They have come here and played their first card which is exclude everything

MR BANNON: Here it is.

MR IRELAND: Can I say this; we find it very difficult to deal on the run with things being handed up and not copied to us, they’re not admitted formally in evidence, there may be other material that we want to add to it. It really isn’t a very satisfactory way to go about trying to pick up the pieces of an argument from the shattered shape of the old one.

HIS HONOUR: This is right, Mr Bannon. I am quite surprised because, you know, usual courtesy amongst the Bar would be that you provide documents to your opponents not necessarily in a very formal way but just a bundle of copy documents. There is one thing that is outstanding about the Intellectual Property Bar in Sydney, in my opinion, is that the Bar gets on very well and their courtesies are incurred. I am just surprised it hasn’t happened.

MR BANNON: Your Honour, can I just say this? This is simply responding to the suggestion that we didn’t point out that 3000 wasn’t enough. I am really responding to my friend’s suggestion that it was all agreed that we go down this limited route which Mr Leeming said from the bar table.

What I rely on is their assertions in their report which they’re recorded in their evidence which we say demonstrably shows no intention to deal with your Honour’s orders so all I am doing is handing up to respond when your Honour says to me, well, why didn’t you point out that 3000 wasn’t enough, I’ve just been told we did point it out so I am just handing it across as I get it.

MR IRELAND: But we got some documents

MR BANNON: My courtesy to Mr Ireland and Mr Leeming and Mr Burley and Mr Murray is renowned in fact. Some say I overdo it.

HIS HONOUR: I am just trying to pick out - I see.

MR BANNON: It’s from Richard Gooch:

— It’s not the case that any kind of limit was accepted overall and the number of key words across the different aspects of the - - -

HIS HONOUR: This was 8 November? That’s right isn’t it? What happened

after that, between then and the 21st?

MR BANNON: There was a correspondence between us and the Registrar

HIS HONOUR: Yes.

MR BANNON: by Mr Williams and the Registrar.

HIS HONOUR: What, as to when the resumption

MR BANNON: No, no, as to - sorry, there was the correspondence between Gooch and the Registrar and Mr Rose to the effect, well, Audible Magic was never agreed with Audible Magic. We say it’s only key word filter. Then we had Mr Rose coming back saying, we’re never going to do key word filter, and then Mr Williams says to the Registrar

HIS HONOUR: Where does Mr Rose say that?

MR BANNON: The third last paragraph on that email of 10 November from Mr Rose. The other chronologies that your Honour has at hand because I haven’t pointed out, after the report of the Registrar the respondents annexed a report to an affidavit and filed it on 14 November which annexed without prejudice correspondence which we thought was a bit odd. I wasn’t going to talk about what is appropriate conduct or not appropriate conduct but there you go. Then they filed another report from Mr McKemmish who also said we can’t do key word filter other than tokenism.

HIS HONOUR: I haven’t been taken to that, I haven’t even read it.

MR BANNON: That’s the context in which the 18 November one was written, getting this body of material building up which really explains how it got back up on Friday and too late on Friday, regrettably. That is an important point I think, the fact that the affidavit in support of the stay was filed by Mr Higgins on 14 November putting forward those reports in a sense of this is a cut off, this is our demonstration of our good faith. So this is the evidence they were relying upon and that is another reason why the conduct of saying, well, go back and give them another go wasn’t appropriate in those circumstances because we were gearing up for a hearing before your Honour and so they are putting forward by way of evidence now as their best foot forward those ridiculous tokenism filters in defiance of your Honour’s orders. They were putting that forward.

They weren’t saying this is only an opening negotiating gambit which we’re really just waiting on a comeback from you whether you’ve worked out that it’s only 0.3 per cent and once you do we’ll give you our true position. This is Mr Higgins who is going into evidence about it.

As an opening bid we might have treated it as such. We accepted it as being serious but once that context is seen it was entirely appropriate for us to say, well, this is what they say is their best foot forward. That’s what we’re here for and that comes back to our position.

Leaving aside this debate about correspondence because that’s a furphy, that’s another irrelevancy, the real issue is they put their evidence on 14 November and these are the reports. That’s their best foot forward. We look at them. They bear no relation to the orders which your Honour put forward referred to in order 5 and that’s the substance of the matter. If the truth was an opening bid, and I’m not really sure that Mr Ireland would be game to say this, but if he was to rather forensically and daringly say there was an opening bit and all we had to do was come back well the Registrar could hardly have contemplated that she was dealing with a party who was going to deal with it on a negotiating basis in the way in which one might negotiate a common law settlement.

HIS HONOUR: All right, thank you, Mr Bannon. Mr Ireland, can I go back to you and perhaps Mr Leeming as well? I wasn’t previously aware of all of these email exchanges but what seems to be happened here is that Mr Gooch on 8 November was saying the sort of things that I’ve suggested to Mr Bannon should have been said on his side and you may wish a bit more time to

MR IRELAND: I haven’t seen that email, your Honour. We haven’t been given a copy. I’ve now been given a copy.

HIS HONOUR: He’s responding quite quickly to the document, Mr Gooch is, and then on the second page of this document after dealing with the response to the document which is on a more limited basis he says:

— Your emails also comments about key words and key phrases and the number of characters comprising them. I must say at the conclave it is absolutely not a good … and informed that Kazaa will block this filter. It was going to be a certain number of key words. There was some discussion about the current implementation of user filter. I recall that you had postulated a bug of some kind for the reason that presently … that some key words can be handled in that filter. So there is no reason that this cannot be changed. More importantly this user filter is only one portion of the … filter that already exists. The meeting had as a specific goal documenting the notes of the Registrar and the inclusion of far greater uses of key words for the block despite the family filter or attempts to filter.

In other words a far greater risk to key words to ban the family filter or offensive filter which was accepted had a limited capacity.

— At the conclave we discussed several options by which both of these systems could be expanded for the inclusion of copyright key words in addition to the 3000 or so offensive words already in these lists. You have corroborated in your own protocol documents with the words the technical meeting discussed it was in the region of 3000 words. It is not the case in the kind of limit that was accepted overall on the number of key words across different aspects because they are blocked as a filter.

I think that’s the end of the relevant bit. Now then Mr Rose responds to that by talking about:

— A phase one strategy to target the top 3000 key words. This would be followed by a longer term strategy to prevent infringement of cataloguing and at the very least the 900,000 tracks which you have provided so far. Our testing has made it clear that some success can be had in key word filtering when using a small number of key words to target a fraction of your existing catalogue of tracks but key word filtering is imply not suitable at all for huge of catalogues of tracks. We thought this was clear to all of us at the conclave.

Then in the third last paragraph he says much the same thing:

— There’s simply no way that you could keep proposing key word filtering.

Now that does seem to be going behind the findings of fact at the trial because the key work filtering that I was talking about and it was in the order and which emerged because of the evidence was never 3000 and it was never intended to be just an add-on to the family filter or whatever else the other one was. It was intended to be a filter requiring modification of Kazaa which I thought could be done relatively quickly and what I was concerned about was that there be a protocol for how this was to operate in terms of the parties cooperating and providing the information and so on. Mr Gooch seems to have correctly taken the point on the 8th hang on, what’s this 3000 words? Yes, sure, we talk about 3000 but that’s not what we really - we’re not limited to that. We want the total thing and Mr Rose in effect tells him well he can forget that.

MR IRELAND: But what your Honour has not yet been given is perhaps the most crucial document in the case if we’re going to start looking at new documents on the run and I want to tender it when your Honour gets to an appropriate moment and that’s the minutes that the Registrar prepared of what actually happened at the meeting. That will betray three things. It will be betray that Mr Gooch, Richard, I think that is, was going to go off and get the list because everybody agreed that that was the way to go, the 3000.

HIS HONOUR: I haven’t seen the minutes.

MR IRELAND: No, you haven’t seen anything in an orderly way because they resisted putting all this stuff in.

HIS HONOUR: If you want me to see it you tender it now.

MR IRELAND: I want to tender it now. This is the Registrar’s minutes

which I have furnished to my learned friend in pursuance of continuing courtesy of the Intellectual Property Bar. These were our notes at the time. You will see, your Honour, that Richard was to prioritise the list of artists to be provided to Sharman and Altnet; two lists, one block unique word phrases. This was all gone over in the conclave, this was not news to Mr Gooch, he gave an undertaking to do all these things to the Registrar. Mr Bates obviously didn’t have his cell phone on to Mr Williams at the time.

Long term, on the next page, the issue of the use of audio fingerprint technology in the Audible Magic system was discussed at length, that’s at the top of the next page. All experts appeared to agree with the theoretic on practical terms, audio fingerprint technology was a more durable and effective solution to the problem. All these things went well on the table and this distracting attempt to go behind what the Registrar’s conclusions are were firmly based on what happened at the initial meeting. All of this was ordained on the day, everyone was going to go away and do their work, Mr Gooch was going to find his best songs that he wanted protected and give a list, which he duly did, and Audible Magic was seen by everybody in theoretical and practical terms the more durable and effective solution.

HIS HONOUR: The two things that were set out there for further action, did either of those things happen?

MR IRELAND: Is your Honour looking at the second page?

HIS HONOUR: Yes.

MR IRELAND: Number 2, your Honour, was annexed to the report, that the Registrar made, that was Mr Morle’s document that got on with the Audible Magic discussion. Your Honour, it’s not as if this has all just been done in a minute, we were there for hours at that meeting and our people have spent days trying to develop what we understood legitimately on the basis of the document I have just handed up was the way for people to go forward. What happened was, the problem got into the hands of Mr Williams, Mr Bates apparently having overlooked the strategy, and so for goodness sake we can’t go down this route, the judge would be satisfied that these people have been bona fide.

HIS HONOUR: Well, what do you say about Mr Rose’s response to it?

MR IRELAND: Mr Rose’s response was consistent with what the Registrar was recording. I know that it’s sacred ground, in light of what your Honour said on 10 October, but your Honour did say two things, one is if something more effective can be found, that should be pursued and your Honour, we selfishly want to get something that works, we don’t want to be in contempt henever the stay evaporates, if it ever does, we want to be able to comply. To be forced into a situation where an assumption has been made by the large capacity of the filtering technique which we have been involved with legitimately on our case to the extent of its capacity, then somebody to say, well, you know, in large measure this can’t be adapted to filter all of the copyright material.

We would be in a dreadful situation to find that that was the technical outcome. We would either have to stop the whole system which is something we obviously do not want to do or move towards something which will be effective.

Glancing at this for the first time, your Honour had not taken in, I think the whole thing, because it wasn’t at all developed at the trial. This Audible Magic thing is something that Mr Speck has known about for years and it has finally come onto the market, it’s something they have actually sanctioned in America when they have done the deal with other people in this industry. That’s a way of solving the problem. This is all just tactics that’s going on at the behest of Mr Williams.

HIS HONOUR: Well, there’s too much demonisation going on. Mr Leeming, do you want to say anything about this?

MR LEEMING: Can I say three things in an attempt to cut through, first shortly in answer to your Honour’s question about Mr Rose’s email. The fourth paragraph which you weren’t taken to is consistent, as Mr Ireland says, with the Registrar’s record of what occurred. He says that it’s Dr Gooch’s decision to back-pedal a lot of position that was agreed at the meeting, consistent with your Honour’s directions.

The second thing is that there does seem to be an unspoken and unwarranted assumption that the premise should be that the respondents are not respecting your Honour’s directions. There’s an obvious commercial reason why all of our clients on this side of the bar table ought be and are and your Honour ought infer are seeking to comply.

HIS HONOUR: It’s not unspoken, Mr Leeming, it has been spoken to forcefully.

MR LEEMING: Quite so and it’s a serious inference, as I have said on a number of occasions, that Mr Bell invites you to draw. It is not the obvious inference at all. Why wouldn’t one expect, especially publicly listed entities like my clients not to be attempting to do what this Court holds to be lawful? Why wouldn’t this Court infer what the Registrar inferred and what the contemporaneous documents say happened, that we were participating in an attempt to put in place something that would lead to a lack of authorisation?

Your Honour, the last thing is this. There is, as I have hinted before, a difficulty at the level of evidence in resolving the issue before your Honour, who said what and who agreed what and who is back-pedalling and who isn’t, at the conference, but at the end of the day what your Honour has is an application for a stay pending appeal. We know that the appeal is in a very short period of time, we know that it is on track, that it has been listed, we know that security for costs has been ordered and will be provided and if there is any deficiency about that no doubt an application will be made, I don’t know whether it has been provided as yet. You also know that it is an important and genuine appeal, it has been diligently prosecuted on all sides. Your Honour also knows that these are applicants who seek now adjunctive relief having not sought it at any time during the trial. In other words, they are protected.

Even if we ignore all of the factual morass that we have been spending time with this morning, if I can just push that to one side and ask myself, is a partially unsuccessful respondent in our client’s position entitled for as short stay, given the history of the matter, including in that the conduct of the applicants - - -

HIS HONOUR: You are not partially unsuccessful, you are unsuccessful. Those respondents who were not fortunate enough to be dismissed from the suit - - -

MR LEEMING: But there’s a large number of cross appeals that are going to take up, regrettably, some time of the appeal. But your Honour is right. On the level of substance the authorisation point.

HIS HONOUR: The cross appeal basically is to bring back the people who were dismissed.

MR LEEMING: And there is a conspiracy claim that is now sought and other means have been added on as well. But I am not disputing the substance of what your Honour says, of course, but that appeal is happening in a very short period of time. In other words, applying ordinary discretionary principles in that short period of time given the delay. These are applicants who sought a wide range of interlocutory relief in the court but never the interlocutory injunction. Of course they are entitled to put their hands up for a post judgment injunction, they’ve had their trial but we simply seek as stay pending appeal.

HIS HONOUR: What the current position of your clients and Mr Rose, although he’s not a party but obviously the moving technical person for your client, Mr Levy, about compliance with a requirement for key word filtering, covering the whole of the applicant’s list of parties. If his position is saying, I can’t do it, full stop, that does seem to me to be in the face of the order that was made on the findings of fact.

MR LEEMING: His position on a fair reading of the Registrar’s report and the agenda of the meeting and the documents that are filed in support of this affidavit are, first of all, and I am really speaking on behalf of Sharman here, in that key word filtering Altnet technology can’t do that but let’s do something as a start and quickly and it’s agreed to take a number out of the air, 3000, let’s do that and what we don’t know because we haven’t had the response from the applicant’s technical experts that was directed by the Registrar, nor do we have any technical response pursuant to your Honour’s orders in case t