2    ------------------------------x

   3    PGMEDIA, INC.,
        d/b/a NAME.SPACE,
                   v.                           97 Civ. 1946 (RPP)

   8                   Defendants.

   9    ------------------------------x

  10                                            July 20, 1998
                                                4:15 p.m.
                       HON. ROBERT P. PATTERSON, JR.,
                                                District Judge
  16         Attorneys for Plaintiff
  17    GARY COHEN

             Attorneys for Defendant Network Solutions, Inc.

             Attorneys for Defendant Network Solutions, Inc.

             United States Attorney for the
  23         Southern District of New York
             Assistant United States Attorneys


   1               THE COURT:  Please be seated.

   2               Just give me a second.

   3               (Pause)

   4               THE COURT:  Mr. Manishin, you are going to do the

   5    arguing?

   6               MR. MANISHIN:  Yes, your Honor, I will be arguing

   7    for the plaintiff.

   8               THE COURT:  Mr. Dallas, you are going to make the

   9    argument, too?

  10               MR. DALLAS:  For Network Solutions, your Honor,

  11    yes.

  12               THE COURT:  Mr. Haber, you are going to do the

  13    argument --

  14               MR. HABER:  For NSF, your Honor.

  15               THE COURT:  All right, and I am somewhat set.

  16               MR. MANISHIN:  Take your time, your Honor.

  17               (Pause)

  18               THE COURT:  All right.

  19               MR. MANISHIN:  Good afternoon.  Glenn Manishin

  20    for plaintiff, pgMedia.  I am accompanied today by my

  21    partner, Gary Cohen.  Mr. Leffell, from Paul, Weiss, could

  22    not be here today.

  23               Your Honor, we are here today on plaintiff's

  24    motion for partial summary judgment on Count Six of the

  25    Second Amended Complaint.


   1               As your Honor may recall, the present proceedings

   2    began with a filing by plaintiff in May for a motion for a

   3    preliminary injunction.  At the status conference before the

   4    Court on May 27, all the parties agreed and your Honor

   5    subsequently signed an order June 1 deeming that motion to

   6    be a motion for partial summary judgment on three

   7    potentially dispositive issues:

   8               First, whether NSF has the statutory or other

   9    authority to order defendant NSI to make no changes to the

  10    so-called Internet Root Zone Server, which I will describe

  11    in further detail in a moment;

  12               Second, whether that directive, if authorized,

  13    provides any antitrust immunity for NSI from the scope of

  14    Section 2 of the Sherman Act; and

  15               Third, if so, whether defendant NSF, as the

  16    government, by precluding the addition of new top-level

  17    domains to the Internet, engaged in a prior restraint of

  18    speech.  So there are two basic claims before you, antitrust

  19    and the First Amendment.

  20               The Court need not, however, reach the First

  21    Amendment claim if you find, as plaintiff alleges, that

  22    defendant NSF doesn't have the authority that it claims to

  23    control the Internet's Domain Name System, because that

  24    control, that statutory and contract control, is a predicate

  25    to defendant NSI's assertion that they are immune from the


   1    antitrust laws under what they term the Federal

   2    Instrumentality Doctrine.

   3               I will start, with the Court's indulgence, with a

   4    very brief overview of the case and then turn to the issues.

   5               This case is really not technically complex

   6    except for the extraordinary amount of acronyms that are

   7    necessary to describe the Internet.

   8               Pursuant to a contract between the government --

   9    National Science Foundation -- and defendant NSI -- Network

  10    Solutions -- NSI controls all registration of domain names

  11    in the top-level domain, ".com."  Those are the three

  12    letters to the right of the dot in an Internet address.

  13    Under that contract, NSI also has exclusive rights to

  14    register all domain names in .net and .org.  No one is

  15    permitted to compete with them.

  16               As a result of inheriting those functions when it

  17    took over from the government, NSI also controls what is

  18    known as the Internet's Root Server.  That is R-O-O-T, as in

  19    roots of a plant.  The Root Server is described in great

  20    detail in the affidavits of Paul Garrin, for the plaintiff,

  21    and Messrs. Strawn and Graves, respectively, for defendants.

  22    But, essentially, the root server, very simply, allows all

  23    Internet users to communicate.  It permits the resolvability

  24    of domain names.  It permits the matching of a domain name

  25    and an Internet protocol number, or address, assigned to a


   1    computer.  So, without access to this Root Zone Server,

   2    which is a computer operated in Virginia by defendant

   3    Network Solutions, any competitor who wants to offer

   4    different top level domains -- .web, .arts, .law, dot

   5    whatever -- can't get that business because its customers

   6    will not be able to be seen or communicated with by other

   7    people on the Internet.

   8               This case started in March 1997, when pgMedia,

   9    one of the first potential competitors in that market, the

  10    domain name registration for new top-level domains, or TLDs,

  11    of NSI to list its TLDs in the Root Server, when NSI said

  12    no, the lawsuit was filed, based upon the All Essential

  13    Facilities Doctrine.  It has been around in the antitrust

  14    laws since 1920.

  15               After the case was filed, Defendant NSF asserted

  16    itself saying that it controlled access to this root server,

  17    and it did it in a letter dated June 25, 1997, which appears

  18    as Exhibit 13 to my declaration in support of the

  19    preliminary injunction motion.  It is a letter that

  20    instructed NSF -- and I will quote the operative part, that

  21    "NSI take no action to create additional TLDs or to add any

  22    other new" --

  23               THE COURT:  What is the designation on that

  24    exhibit?

  25               MR. MANISHIN:  It is Manishin Exhibit 13.  So, it


   1    is the original exhibits filed with the preliminary

   2    injunction motion near the end of the action.

   3               "NSI take no action to create additional TLDs or

   4    to add any other new TLDs to the Internet root zone file."

   5    And there is additional verbiage there that basically

   6    suggests that NSF will have "in consultation with other U.S.

   7    government agencies" complete policy deliberations on the

   8    issues.

   9               That put this case essentially into limbo, and in

  10    hearings before your Court last summer, my predecessor,

  11    Mr. Donovan, as counsel for plaintiff, agreed to add

  12    defendant NSF as a defendant in order to litigate the legal

  13    validity of that directive.  Essentially, the question

  14    before you on antitrust is, is there statutory or

  15    contractual authority for NSF to assert that control over

  16    the addition of any new top-level domains on the Internet,

  17    and, if so, does that provide antitrust immunity to Network

  18    Solutions?

  19               I want to make very clear at the outset that

  20    pgMedia does not challenge the monopoly grant of .com and

  21    the other monopolies over registrations to Network

  22    Solutions.  This is not a case where we're coming into the

  23    court and saying that the Court should set aside the

  24    contract called the Cooperative Agreement and substitute us

  25    for Network Solutions.


   1               We are challenging, rather, defendant's use of

   2    its monopoly power to exclude plaintiff from competing for

   3    other TLDs, of which plaintiff has developed about 500

   4    ranging from, again, .law to .zone.  We think that would

   5    actually be a very positive development for the Internet.

   6               As the papers set out, NSF's asserted control of

   7    this essential facility, the Internet Root Zone Server, even

   8    if true factually -- and we don't believe it is at all

   9    proven by the summary judgment documents introduced by

  10    defendant -- does not grant NSI any measure of antitrust

  11    immunity.

  12               It is inconsistent with the binding precedent in

  13    this circuit by implied antitrust immunity defenses, which

  14    are very difficult to find in the absence of a pervasive

  15    regulatory scheme that is directly inconsistent with

  16    antitrust laws.  That does not exist in this case.  And it's

  17    also inconsistent with the limited lines of cases that the

  18    defendants have articulated to you.

  19               But I think the most serious part of this case,

  20    as I conclude the introductory remarks, is an effort

  21    particularly by the government to suggest to your Honor that

  22    plaintiff is attempting to derail the government's efforts

  23    to bring stability to the Internet.  And I refer

  24    specifically to the introduction to Defendant NSF's reply

  25    memorandum where they said that our civil action here was


   1    "An effort to derail the Policy Statement's carefully set up

   2    process."  I don't know if that is exactly right, but an

   3    effort to derail is an exact quote.

   4               THE COURT:  They say you are trying to derogate

   5    to yourselves, to pgMedia, its concepts as to how it ought

   6    to be run or how the Internet ought to be run instead of

   7    letting the government do it.

   8               MR. MANISHIN:  That is essentially correct, your

   9    Honor.  We believe that the normal laws attended to

  10    commercial activities on the Internet should apply to the

  11    Internet roots as much as they do anywhere else.  The

  12    government takes the position that they should have the

  13    ability, because they have set up a policy process,

  14    essentially to usurp this Court of its jurisdiction.  And

  15    that is not the case, and it can't be the case for two

  16    simple reasons:

  17               First, the government's actions in the Policy

  18    Statement, which exists as an exhibit to Mr. Dallas'

  19    affidavit, Exhibit 10 to the Dallas -- I'm sorry, it is

  20    Exhibit 10 in the NSI group of exhibits.  It just came out.

  21    That document makes very clear that it is not a legally

  22    binding document of any sort.  I think I will just read that

  23    to you, that it does not define or impose any substantive

  24    regulatory regime for the domaining system.  It is not a

  25    substantive rule.  It does not contain mandatory provisions


   1    and does not itself have the force and effect of law.

   2               So the government had a chance in the proceedings

   3    before the Commerce Department, which postdated this case,

   4    to take legal action and assert legal authority over the

   5    Internet, contrary to what's claimed by plaintiff in this

   6    case.  They chose not to do so, and the government yet,

   7    nonetheless, comes before this Court in a cross-motion

   8    asking the Court to stay the antitrust action on the grounds

   9    that we are attempting to end-run the policy process.

  10               I respectfully submit that the opposite is the

  11    case.  The antitrust action was filed first.  Only after

  12    this antitrust action did the government commence

  13    deliberation on what it should do on the Internet Root

  14    Server, and they concluded that they would set no binding

  15    rules, they would pass no laws, they would not promulgate

  16    any regulations.  They would only issue a general statement

  17    of policy that doesn't have the force and effect of law.

  18               I don't believe it is appropriate for this Court

  19    to give the government through the back door the legal

  20    authority that they refuse to assert directly, but I will

  21    back that up, as I move into substance, by showing you why

  22    in our view NSF doesn't have either the authority under the

  23    cooperative agreement or the authority under its statutes to

  24    assert this control over the Internet's root system.

  25               Those two questions, the scope of their authority


   1    and their immunity, are really the flip side of the same

   2    point; that is, if they have the authority, then almost by

   3    definition under defendant's view of the words, that

   4    authority means there is antitrust immunity.  Conversely, if

   5    they don't have the authority, then it doesn't matter

   6    whether they could grant antitrust immunity because they did

   7    it.

   8               If you look at the statutes governing NSF's role,

   9    which are cited in all of the papers, those are the National

  10    Science Foundation Act and the Federal Grant and Cooperative

  11    Agreement Act, you will find that those statutes don't

  12    provide any authorization for regulatory oversight or

  13    control of the Internet, of any parts of the Internet

  14    infrastructure, or of any private parties.  What they

  15    authorize is that defendant NSF can support and fund

  16    research activities involving computers and computer

  17    networks.

  18               When you go beyond the statutes to see whether in

  19    the Cooperative Agreement Contract between NSF and NSI there

  20    is any authority for NSF to issue the directives, you find

  21    that the Cooperative Agreement says very clearly that unless

  22    NSF reserves specifically powers for itself, that all powers

  23    to implement the program rest with the awardees, which is

  24    Network Solutions.  One can search in vain for any reference

  25    in the Cooperative Agreement to any control or not for the


   1    National Science Foundation over the Root Server System or

   2    the creation or addition of new top-level domains.

   3               In fact -- and this is set forth in the reply

   4    memorandum that we filed on Thursday, and it is verified by

   5    the affidavit of Mr. Strawn, for Defendant National Science

   6    Foundation, the Cooperative Agreement cross-references

   7    certain Internet standards known as RFCs, or Requests for

   8    Comment.  And those RFCs make clear that in deciding whether

   9    or not new top-level domains, or TLDs, should be added to

  10    the Internet, the Internet Registry, NSI was required to

  11    "consult" with IANA -- IANA, another acronym.  It stands for

  12    the Internet Assigned Numbers Authority.

  13               THE COURT:  The what?

  14               MR. MANISHIN:  Internet Assigned Numbers

  15    Authority.

  16               I don't need to say too much about IANA except

  17    two points:  One, it is undisputed that IANA is not the

  18    government.  It is not a government agency, and it is not a

  19    government-owned corporation.

  20               Second, after this case was filed, Network

  21    Solutions took the position that it did not have the power

  22    to add new top-level domains to the Root Server but that

  23    IANA had the power.  In a letter which is part of the

  24    exhibits attached to my declaration from April 1997 -- it

  25    was quoted in all of our papers -- IANA said, we are aware


   1    of no authority which provides IANA with any power over

   2    Network Solutions.  So IANA declined to exercise any

   3    authority because it said it didn't have any.

   4               What Defendant NSF really says is that because

   5    IANA, the private entity based in California, refused to

   6    consult with NSI, they sort of had to jump into the lurch,

   7    take over the control of the issue because IANA refused to

   8    do what its job was.

   9               I don't see anything, and they haven't cited

  10    anything in the Cooperative Agreement that gives them the

  11    power to do that.  And going back to my first point, the

  12    Cooperative Agreement says unless there is a specific

  13    reservation for the government, all powers remain with the

  14    private party, Network Solutions.  Hence, the conclusion is

  15    that if there was any power to control NSI, it was private

  16    power from this IANA group out of California, and, in

  17    addition, that NSF's assertion of the ability to jump over

  18    IANA to take over finds no support in the text of the

  19    agreement.

  20               The second point:  Even if NSF has the power

  21    under the Cooperative Agreement, they haven't actually

  22    exercised that power.  Meaning -- I read you the language

  23    just before, your Honor, from the June 1997 Directive where

  24    it said NSI shall create No additional TLDs, and I will note

  25    for the record that the word "No" is capitalized in the


   1    original there -- NSI has in fact created more than a dozen

   2    new top-level domains since October of '97.

   3               THE COURT:  That was before the date of that

   4    letter, wasn't it?

   5               MR. MANISHIN:  No, it is undisputed that they

   6    have, in fact, created new top-level domains on the Internet

   7    since June of 1997.  That is not contested.

   8               What is contested is only whether that letter,

   9    which says no new TLDs, means what it says.  In affidavits

  10    filed by the defendants in opposition to summary judgment,

  11    the Strawn Declaration and the Graves Declaration, both

  12    defendants now take the position that "no new TLDs" only

  13    means no new generic TLDs or gTLDs.  It doesn't apply -- I

  14    apologize for the increasing number of acronyms.  It does

  15    not apply to ccTLDs, or country code TLDs.

  16               The basis --

  17               THE COURT:  You had better alert me as to the

  18    distinction being made there.

  19               MR. MANISHIN:  Sure.  I am not sure of how they

  20    derive that distinction from the language of the letter

  21    which I read to you before, which makes no distinction among

  22    TLDs, which is my point, but a generic top-level domain is a

  23    TLD that is not associated with a particular country.  So,

  24    for example, in the United Kingdom, many second-level domain

  25    names, many domain names end with the TLD.UK.  In Germany


   1    they end with the TLD.DE.  Every country in the world has

   2    one of these top-level country code domains.  There are also

   3    domains that are not necessarily associated with any one

   4    nation; those are .com, .net, .org and the new TLDs that

   5    the plaintiffs would like to add to that.

   6               THE COURT:  What is the significance -- maybe I

   7    don't pick it up correctly, but what is the significance of

   8    adding the six TLDs if they are country TLDs?

   9               MR. MANISHIN:  The significance is very simple.

  10    They are TLDs which they are told not to add them and they

  11    added them anyway.  So the Directive either does not mean

  12    what it says or it has not been followed.

  13               It also is important for another reason, Judge,

  14    and that is if you look at the history of this case, I

  15    explained to you before that the first response of

  16    defendants was that IANA was in control of whether they

  17    could add new TLDs to the root.  Then it turned out that

  18    IANA said no, and when they said no, the National Science

  19    Foundation was in control, and they issued a directive that

  20    said no new TLDs.

  21               Then they said that NSF is only in control with

  22    regard to some TLDs, because if you look at the Strawn

  23    Declaration and the Graves Declaration, it says that NSF

  24    controls generic TLDs, but IANA, the same group that

  25    disclaimed authority in the beginning, is in control of


   1    country code TLDs.  So it is a shell game, to be perfectly

   2    honest.  Every time we look under a shell and ask who is in

   3    control, it turns out to be somebody different.

   4               THE COURT:  But your company is only interested

   5    in generic TLDs, isn't that correct?

   6               MR. MANISHIN:  That is right.

   7               Again, the significance of the addition of

   8    country code TLDs is only that the directive purports to say

   9    no additional TLDs.  That directive was not in fact

  10    followed.  The defendants are now trying to say it doesn't

  11    mean what it says.

  12               Let me turn to the effect of this.

  13               Even if the Court concludes that there are

  14    statutory authority for NSF to control the root of the

  15    Internet and that that authority was exercised in the

  16    Cooperative Agreement, the two points that I just covered,

  17    that doesn't make a difference; it is completely irrelevant

  18    to the question of antitrust immunity.

  19               And that's there for a very simple reason.

  20    Antitrust immunity is very hard to find.  If it's expressed

  21    in the statute and Congress has decided it, a party, a

  22    transaction or an industry can be exempt from the antitrust

  23    laws.  But the Court has made clear, almost since the

  24    Sherman Act was passed, that implied repeals of the

  25    antitrust laws are disfavored and that implied immunity is


   1    very difficult to obtain.

   2               The defendant seizes upon what they say is the

   3    public purpose of NSI's actions, the public purpose of the

   4    Cooperative Agreement, and suggesting that for some reason

   5    the Court should be more liberal in deciding questions of

   6    antitrust immunity in this case.  But that public purpose,

   7    even if it exists, is also immaterial.  Because the Federal

   8    Grant Act, the statute under which NSF issued this contract,

   9    allows such contracts, such cooperative agreements, when

  10    they serve a public purpose.  Yet, the Grant Act, admittedly

  11    and concededly, contains no grant of antitrust-immunizing

  12    authority.  In other words, when an agency enters into a

  13    cooperative agreement, they have no power to immunize the

  14    other party from the antitrust laws.

  15               In this circuit, the Strobl case is a successor

  16    to Silver v. The New York Stock Exchange and Gordon v. The 

  17    New York Stock Exchange, two well-known Supreme Court cases. 

  18    Strobl says that implied antitrust immunity is only

  19    available if, first, there is a pervasive regulatory scheme

  20    and, second, there is a plain repugnancy, a direct

  21    inconsistency between antitrust laws, on the one hand, and

  22    the statute, on the other.

  23               That does not apply in this case.  The defendants

  24    concede that NSF does not regulate the Internet and does not

  25    regulate NSI.  So what are they left with?  They are left


   1    with what they call the Federal Instrumentality Doctrine.

   2               I have prepared an exhibit to help explain that.

   3    I also did an eight-and-a-half-by-eleven form, which all

   4    other counsel have seen.  With the Court's indulgence, I

   5    will bring it up to your law clerk right now.

   6               THE COURT:  Yes, you can hand it up.

   7               MR. MANISHIN:  The Federal Instrumentality

   8    Doctrine is a derivation, as this chart shows, of the

   9    antitrust immunity that the U.S. Government enjoys.  Because

  10    the U.S. Government is not a person under the antitrust

  11    laws, and because there is sovereign immunity to the U.S.

  12    Government, the government can't be sued for antitrust

  13    violations.

  14               If you take it down one level and ask about

  15    federal instrumentalities, for example, the Sea-Land case

  16    from the D.C. Circuit talked about wholly owned and operated

  17    entities, the courts have said that because the government

  18    is immune from an antitrust lawsuit, a federal

  19    instrumentality controlled by the federal government is

  20    equally immune.  That would be a government corporation, a

  21    government agency or the like.

  22               The federal instrumentality case on which

  23    defendants rely -- and there is approximately seven of them

  24    that we have been able to find, and all of them are cited in

  25    all of the papers -- relate to a contract between a federal


   1    instrumentality and an exclusive contractor, a private party

   2    which has been given some sort of monopoly franchise under a

   3    contract.

   4               For example, the IT&E case, which I have some

   5    language from over there, involved the Guam Telephone

   6    Authority, which was a corporation established by the

   7    Territory of Guam.  The federal instrumentality therefore

   8    contracted for monopoly telephone service for the island.

   9               Those cases hold very simply that if the federal

  10    instrumentality enters into an agreement to trade an

  11    exclusive franchise, that that contract does not equal an

  12    unlawful conspiracy.  That monopoly franchise, that contract

  13    cannot be attacked as a violation of the antitrust laws.

  14               Again, as I said at the beginning, we do not

  15    challenge the .com monopoly.  We don't challenge the

  16    existence of that monopoly.  We don't say it is illegal.  We

  17    don't say that the Cooperative Agreement, as the plaintiffs

  18    did in the case in Washington called Thomas that defendants

  19    rely on, we do not say that that contract is an unlawful

  20    antitrust conspiracy.  We challenge the use of that contract

  21    to exclude plaintiffs from competing in the market for other

  22    top-level domains.

  23               That is the extension the defendants want this

  24    Court to take from a contract between a federal

  25    instrumentality and a third party, to the third party's


   1    relationship -- the contractor's relationship with

   2    competitors.  And there are no cases which say that just

   3    because a private party operates under contract to the

   4    government it is free to do anything it wants, however

   5    exclusionary, granted competitive, in competition with a

   6    private party.

   7               So we think that the Federal Instrumentality

   8    Doctrine actually stands for a very unremarkable

   9    proposition, that if you contract with the government for an

  10    exclusive franchise, assuming that the government has the

  11    authority to enter into the contract, the contract is valid

  12    and no one can come up and say that that contract somehow is

  13    an illegal conspiracy to monopolize that market.

  14               But it doesn't say that if you, as the

  15    contractee, have a contract you can do whatever you want

  16    against any of your competitors and abuse your monopoly

  17    power.  From that perspective, it is very consistent with

  18    antitrust laws that existed for 15 years at the very least,

  19    50 years at the most, since Terminal Railroad and the AT&T

  20    case, meaning, if you will, a lawful monopoly, however it is

  21    acquired, the maintenance or use of your monopoly power to

  22    exclude rivals is illegal.

  23               So the offensive monopolization includes not only

  24    obtaining the monopoly but also using it to preserve it or

  25    extend it, which is what we challenge here.


   1               Another consequence of their extension of this

   2    Federal Instrumentality Doctrine would be perverse, and

   3    that's why we think it can't apply here.  That is that there

   4    is a corollary doctrine call the State Action Doctrine.

   5    Under State Action immunity, a state or its political

   6    subdivisions enjoys qualified antitrust immunity if they

   7    articulate a system other than market competition and

   8    actively supervise the conduct.

   9               Under this approach, the Federal Instrumentality

  10    immunity, parties all the way down the food chain here would

  11    receive absolute immunity for all of their activities in

  12    excess, in excess of the immunity granted to states,

  13    sovereign states and political subdivisions under the

  14    antitrust laws.

  15               That doesn't seem to make sense as a policy

  16    matter.

  17               It also doesn't make sense as a question of

  18    policy and a question of judicial approach to change in the

  19    law.  Very simple, Strobl is the law of this circuit.

  20    Defendants take the position that the Federal

  21    Instrumentality cases are an exception to Strobol;

  22    therefore, they don't have to show pervasive regulation or a

  23    plain repugnancy.  But Strobl makes it very clear that

  24    antitrust immunity should be hard to get.  Therefore, if an

  25    exception is to be made to Strobl based upon the existence


   1    of a federal contract, we think, in all respect, your Honor,

   2    it should come from the Second Circuit.

   3               I will make just a couple of more points about

   4    this and then I will move on to First Amendment.

   5               The cases about Federal Instrumentality Doctrine

   6    show that we are right in our interpretation that it should

   7    be limited.  First, I pointed to the IT&E language on the

   8    chart.  The IT&E language says that what was challenged

   9    there and held immunity was agreements with

  10    instrumentalities of the federal government.  That is, the

  11    Cooperative Agreement can be immunity, not the conduct.  In

  12    fact, in that case a monopolization count was maintained

  13    even after a Section 1 unlawful contract count was

  14    dismissed.

  15               Second is the Otter Tail case cited in our

  16    papers.  That is one of the seminal cases on the Essential

  17    Facilities Doctrine.  In that case the Supreme Court was

  18    faced with almost identical facts:  A defendant with a

  19    monopoly refused to deal with competitors.  The defendant

  20    said we have a contract with the federal government that

  21    should immunize our conduct, and the Supreme Court

  22    unequivocally said government contracting officers have no

  23    power to create immunity from the Sherman Act whether they

  24    flow from Congress or not at all.  

  25               Once again, let me just come back very briefly to


   1    public purpose.  The defendants, in defending immunity, say,

   2    well, we're not providing services to the government, we're

   3    providing services for the government.  That is, since we're

   4    doing a public purpose, we're implementing a public program,

   5    we should sort of stand in the shoes of the government for

   6    antitrust purposes.

   7               This public purpose idea, again, doesn't find any

   8    roots in the statute, but it also doesn't make much sense.

   9    Because electricity and telephone service are definitely

  10    public purposes.  They are regulated by public service

  11    commissions.  And yet for each of those industries and those

  12    actors immunity rests upon the Strobl test.  Is there

  13    pervasive regulation?  And is there a plain inconsistency

  14    between antitrust and that regulatory scheme?  And I daresay

  15    it is more than that, because electricity and telephone

  16    service are necessary to get on the Internet in the first

  17    place.

  18               So to suggest that somehow there is a public

  19    purpose behind the Cooperative Agreement that is useful for

  20    providing antitrust immunity flies in the face of the fact

  21    that electric utilities and telephone companies, although

  22    they provide public services and are regulated by a public

  23    utility commission, merit less antitrust immunity than NSI

  24    would under its theory.  That doesn't make sense.

  25               Finally, under their theory, any time the


   1    government wanted to privatize any conduct, that is, when

   2    the government wanted to create a contract, have a private

   3    party do a function that it normally did, that private

   4    entity would be immune in all of its conduct, and that

   5    doesn't make any sense, as well.

   6               Let me just sum up by saying that NSI also

   7    challenges plaintiff's standing to raise the antitrust

   8    claims, arguing that because our injury was caused by the

   9    government, that we don't have standing under Brunswick.

  10               If you actually look at the arguments, they

  11    merely repeat the immunity arguments and others.  Also, it

  12    wasn't one of the three issues that your Honor said they

  13    could brief here.  So, if they do have a standing argument,

  14    it should come later.

  15               We don't think it is meritorious, however,

  16    because under their approach, the cases they rely on, Thomas

  17    and Beverly and IT&E, should never have been decided because

  18    all of those plaintiffs would have lacked standing.  The

  19    court should have dismissed on standing grounds and not

  20    reached the merits of the antitrust case.

  21               One final point.  The statutory authority

  22    argument of NSF boils down to one thing.  They say that we,

  23    the government, have been involved with the Internet for

  24    decades.  We funded it.  We helped build part of it.

  25    Therefore, it's our job.


   1               But they don't say, importantly, your Honor, that

   2    they assert any ownership claim to this Root Server, or that

   3    any government proprietary interest in the technology gives

   4    them the right to do what they are saying.

   5               In a very real sense, therefore, their position

   6    is we have some general language authorizing support for

   7    science in our statute, but since we have been doing the

   8    work on the Internet, if not us, who?  It must be us.  We

   9    have been doing it traditionally; therefore, we have the

  10    power.

  11               But tradition doesn't matter in the law.

  12    Tradition might be Fiddler on the Roof, but it does not

  13    belong in the antitrust laws.

  14               I will speak very briefly on the First Amendment.

  15    I think most of the issues there are the defendants'.

  16               The First Amendment claim is very

  17    straightforward.  Top-level domains are speech.  They can be

  18    and are used as communicative messages.  We have given many

  19    examples of those in our papers, from for.mayor to

  20    Microsoft.bytes to other uses of esoteric and parody ideas

  21    as well as core political values.

  22               This Court held in Planned Parenthood several

  23    years ago that there is First Amendment protection for

  24    domain names.  Very simply, the Court said that a trademark

  25    infringement action would not lie if the defendant's use of


   1    the mark was a communicative expression under the First

   2    Amendment.  So the First Amendment would trump the trademark

   3    laws.

   4               It's actually the same First Amendment right that

   5    NSI asserts as a defendant, that is, the right to publish

   6    domain names on the Internet.  And the Garrin Declaration

   7    and the Mueller Declaration attached to plaintiff's motion

   8    papers show that there are numerous communicative expression

   9    possibilities of domain names.  In fact, you might analogize

  10    them to the headline of a newspaper article; the domain name

  11    is the headline, the Web site itself is the content.

  12               We believe that a rule that says you cannot use

  13    these other TLDs is a core unlawful prior restraint of First

  14    Amendment protected speech.  That prior restraints are only

  15    justified in extraordinary circumstances, like wartime, that

  16    do not exist here.  That, at the very least, they have to

  17    meet the Reno test established by the Supreme Court in 1997

  18    for a compelling governmental interest, and that the

  19    government admits they have no compelling governmental

  20    interest, which is why they try and categorize their

  21    restriction as a time, place and manner restriction.  But it

  22    can't be because it says to the plaintiff, you must speak

  23    our words, .com, .net, .org; you can't speak .arts, .web,

  24    and you can only speak if your speech complies with the

  25    guidelines that we limit.


   1               And they are doing it since -- they are doing it

   2    before the plaintiff has been able to engage in speech.  It

   3    falls under the prior restraint test, and it must fall.

   4               Unless the Court has any questions, that is all I

   5    have.

   6               THE COURT:  No.  Thank you.

   7               Mr. Dallas or Mr. Sbarbaro, who is it?

   8               MR. DALLAS:  I will wait for Mr. Manishin to sit

   9    down so that you can see me.  I can see you.  Can you see

  10    me?

  11               Listening to Mr. Manishin speak, there is a

  12    certain -- and I don't mean this pejoratively -- but there

  13    is a certain Alice-in-Wonderland quality to our discussion

  14    here.  He is talking about a contract to which his client is

  15    not a party, and interpreting it as to how he thinks it

  16    ought to be interpreted.  A letter that wasn't sent to his

  17    client, interpreting it as to how he thinks it ought to be

  18    interpreted.  A statute that doesn't govern his

  19    relationship, telling you how it should be interpreted.

  20               But the real question here, Judge, really is:

  21    Who is in charge?  And I'm not talking about who is in

  22    charge of the Internet per se, but who is in charge of

  23    oversight over the relationship between the National Science

  24    Foundation and my client.  And it is not pgMedia.  It is the

  25    National Science Foundation.


   1               And your Honor doesn't have to spend a lot of

   2    time finding the source of that.  It is in black and white

   3    in the Cooperative Agreement.  Article 6B1 of the

   4    Cooperative Agreement says that "The National Science

   5    Foundation shall have the responsibility for oversight and

   6    monitoring Network Solutions' activities."

   7               Now, the last time I checked a dictionary

   8    definition of what "oversight" meant, the dictionary told me

   9    "oversight" means supervision.  And when I looked at what

  10    "supervision" said, supervision means not only oversight,

  11    but also direction, an overall authority.  A supervisor is

  12    entitled to direct the activities of those whom it

  13    supervises.

  14               This is not an earthshaking, novel proposition.

  15    It is a basic principle of contract law into how

  16    organizational things, organizational relationships are.

  17    You have somebody who has the primary responsibility

  18    operationally to do things; that's Network Solutions, being

  19    my client.  You then have the supervisory responsibility;

  20    that's the National Science Foundation.  The National

  21    Science Foundation is an agency of the federal government.

  22    No dispute about that.

  23               What Mr. Manishin's basic pitch to your Honor

  24    was, I think, was basically a plea, your Honor, to disregard

  25    the Federal Instrumentality Doctrine and to ignore the two


   1    cases that were decided within the last three and a half

   2    months which have applied that doctrine to the very same

   3    Cooperative Agreement that's before your Honor.  And those

   4    two cases are Thomas v. Network Solutions and the National 

   5    Science Foundation, a decision by Judge Hogan in the

   6    District of Columbia District Court, and Beverly v. Network 

   7    Solutions, a decision handed down last month by Judge Vaughn

   8    Walker in the Northern District of California.

   9               And I would point out to your Honor that in the

  10    Thomas case, the plaintiffs there asserted a Section 2

  11    monopolization claim that was a virtual carbon copy of the

  12    Essential Facilities claim being asserted by pgMedia here,

  13    and Judge Hogan dismissed that claim under the Federal

  14    Instrumentality Doctrine, as he did the Section 1 conspiracy

  15    claim.

  16               So, to suggest that the Federal Instrumentality

  17    Doctrine is limited to conspiracy claims is simply not the

  18    case.

  19               Now, let me talk a little bit about what the

  20    Federal Instrumentality doctrine is all about, because I

  21    think Mr. Manishin has somewhat confused that doctrine with

  22    the other immunity doctrines.

  23               The Federal Instrumentality Doctrine is really

  24    quite a different doctrine.  It is different because, as

  25    Mr. Manishin acknowledged, the United States government and


   1    its agencies are entirely outside the reach of the antitrust

   2    laws.  Nobody else in the world, your Honor, has that

   3    status.  I guess your Honor does, but that's because you are

   4    acting as part of the United States government.  But states,

   5    municipalities, foreign governments are all subject to the

   6    antitrust laws.  The federal government and its

   7    instrumentalities are not.

   8               So, when we talk about the Federal

   9    Instrumentality Doctrine, we really are not talking about an

  10    immunity doctrine as it applies to the federal

  11    instrumentalities, because when you talk about immunity, you

  12    are talking generally about people who would be subject to

  13    the antitrust laws but for the immunity.  That is not the

  14    case with the federal government and federal

  15    instrumentalities.  They are completely outside the reach of

  16    the antitrust laws under all circumstances.

  17               That's the critical difference between the

  18    Federal Instrumentality Doctrine and the State Action

  19    Doctrine and the Regulatory Immunity Doctrine that

  20    Mr. Manishin is talking about.  The starting point is the

  21    federal government and its instrumentalities are not subject

  22    to the antitrust laws, not because of immunity, but because

  23    of statutory interpretation.

  24               This was interpreted long ago by the Supreme

  25    Court, 57 years ago, in United States v. Cooper Corporation.


   1    All of that history is reviewed in the leading decision on

   2    the Federal Instrumentality Doctrine, a decision, Sea-Land 

   3    Services v. Alaska Railroad, authored by then Circuit Judge,

   4    Ruth Bader Ginsburg, back in 1981.  And that decision, the

   5    Sea-Land Services decision, Judge, has been followed by

   6    every court that I am aware of that has been called upon to

   7    consider the Federal Instrumentality Doctrine.

   8               Now, that doctrine applies not only to units of

   9    the federal government, it also applies to private entities

  10    that are acting on behalf of the government in carrying out

  11    governmental programs.

  12               That does not mean, Judge, that every contract

  13    between a private entity and the federal government is

  14    immune under the antitrust laws.  Not at all.  Routine

  15    commercial services contracts or procurement contracts where

  16    you are providing services to the government are not covered

  17    by this doctrine, and that is your Otter Tail decision.

  18    That is the situation in the Otter Tail case, where you have

  19    a contract between a private utility and an agency of the

  20    federal government, to wheel electricity.  It was a service

  21    contract for the government.

  22               The Instrumentality Doctrine -- the Federal

  23    Instrumentality Doctrine says that where the private party

  24    is assisting the government in carrying out the government's

  25    programs or policies, then it is entitled to the same


   1    immunity as the government.

   2               Now, that is not a shocking proposition.  That is

   3    essentially the same rule that applies under the State

   4    Action Doctrine.

   5               THE COURT:  How do you make that distinction?

   6               MR. DALLAS:  The distinction between state --

   7               THE COURT:  As to whether a company is working

   8    for the government or providing services to the government?

   9               MR. DALLAS:  Well, I think the way you can look

  10    at it, Judge, in our case -- and there are going to be gray

  11    areas -- is whether the primary purpose of the agreement is

  12    to benefit the government in supplying a service, or is it

  13    benefiting the government by carrying out the government's

  14    statutory mission to help others.  I mean, it is one thing

  15    to be supplying electricity or telephone service to the

  16    government for its own use -- that is a procurement

  17    contract.  Cooperative agreements, I think the greatest aid

  18    here, your Honor, is what Congress has said.  How do they

  19    distinguish between contracts that are for the benefit of

  20    the government and contracts that are not, that are to be

  21    used for public purpose?

  22               And the Federal Grant and Cooperative Agreement

  23    Act contains three sections.  One section deals with

  24    contracts to provide services to the government.  Another

  25    section talks about grant agreements.  The third section


   1    talks about cooperative agreements.

   2               And what did Congress say cooperative agreements

   3    were?  Congress told federal agencies that they were to use

   4    cooperative agreements when they expected to be -- and I am

   5    quoting this -- "substantially involved with the recipient,"

   6    the other contract party, "in carrying out a public purpose

   7    of stimulation or support as authorized under the Agency's

   8    statutes."  That's how Congress in its wisdom has

   9    distinguished between "Cooperative Agreement," which are to

  10    benefit others, and "contracts," where the primary

  11    beneficiary is the government itself.

  12               So Congress itself has had no difficulty in

  13    distinguishing between agreements that are basically

  14    procurement contracts -- they fit in one category -- and

  15    cooperative agreements, which are intended to carry out a

  16    public purpose, which are entirely different.

  17               The Cooperative Agreement Act, I think, is the

  18    best example of a statutory scheme that basically embodies

  19    the Federal Instrumentality Doctrine.

  20               Mr. Manishin said, well, the Federal Cooperative

  21    Agreement Act contain no express grant of immunity.  That's

  22    true.  You won't find it there.

  23               But, your Honor, it wasn't needed.  It's not

  24    needed.  In no case that has applied the Federal

  25    Instrumentality Doctrine has any court suggested that


   1    Congress has to specifically state that an agreement between

   2    a private party and the government to carry out a

   3    governmental program must be given specific express immunity

   4    by Congress.  That isn't the basis for immunity under the

   5    Federal Instrumentality Doctrine.  It starts with the fact

   6    that the antitrust laws, to begin with, don't apply to the

   7    federal government, and that the doctrine is extended to

   8    private entities in those limited circumstances where the

   9    private entity has a relationship with the federal agency to

  10    carry out that agency's mandate.  So that basically the

  11    agency is looking to the private entity to fulfill one of

  12    its obligations, which, if the agency itself did it

  13    directly, it would be immune.  Therefore, as a matter of

  14    policy, the courts have said in those circumstances it makes

  15    sense, and it is proper, to give the same level of immunity

  16    to the private entity.

  17               That's what the courts have done in the State

  18    Action Doctrine.  The Supreme Court in the Southern Motor 

  19    Freight Conference decision said, look, it makes no sense to

  20    say that the states can adopt a policy that is entitled to

  21    antitrust immunity under the State Action Doctrine but if a

  22    private party acts in furtherance of that policy it can be

  23    subject to antitrust liability, because that would frustrate

  24    the ability of the government to carry out its programs if

  25    they could not use private parties to help them without


   1    subjecting the private party to antitrust liability.  That

   2    just is not a sensible policy approach, and that's what the

   3    Supreme Court has said, and that's how that doctrine has

   4    been applied similarly in the Federal Instrumentality

   5    situation.

   6               So that is the basis here for it.  I think, your

   7    Honor, there is no dispute that the services being provided

   8    by Network Solutions under the Cooperative Agreement are

   9    services that are in furtherance of the statutory mission of

  10    the National Science Foundation.

  11               Congress told the National Science Foundation you

  12    are directed to support and foster Internet access by

  13    research and educational communities as well as others, and

  14    part and parcel of that is to provide, through the services

  15    of Network Solutions, some of the backbone functions that

  16    are necessary for the operation of it.  And one of those is

  17    the Internet Root Server.

  18               Now, let me tell you what that Root Server is,

  19    Judge.  It is not a very impressive thing.  It is a

  20    computer.  We operate the Primary Root Server.  There are

  21    twelve others -- I guess eleven others that we don't operate

  22    at all that are in many cases operated by the federal

  23    government or by private contractors operating for the

  24    federal government.

  25               The Root Server itself is nothing special.  What


   1    it has is the Root Zone File.  I didn't hear Mr. Manishin

   2    talk about that at all.  But the Root Zone File is the

   3    computer program that contains the identifying information

   4    needed to identify all of the top-level domains on the

   5    Internet.  And we maintain the master copy, and the other

   6    Root Server administrators can download periodic updates

   7    whenever they want.  That is our function.

   8               But all of these are -- we don't have a monopoly

   9    over the Root Server System or the Root Zone File.  All we

  10    do is provide the top point in the process so that everybody

  11    else can operate in the same way.

  12               THE COURT:  Where is that in your papers?

  13               MR. DALLAS:  It is in our statement of facts, I

  14    think, your Honor.  I mean, do you want me to --

  15               THE COURT:  It is the --

  16               MR. DALLAS:  It is in the declarations of --

  17    Mr. Graves describes that in his declaration, and

  18    Mr. Holtzman goes through that.  I believe Mr. Strawn

  19    adverts to it in his declaration, but the details are all

  20    there.

  21               Now, Mr. Manishin says that he is not attacking

  22    the Cooperative Agreement; that he acknowledges that under

  23    the Federal Instrumentality Doctrine, the Agreement is

  24    lawful, it can't be challenged.  But he says that doesn't

  25    immunize conduct.


   1               Your Honor, the antitrust laws are directed to

   2    conduct.

   3               Agreements by themselves, if no one acts on them,

   4    violate no principle of antitrust law.  The Agreement and

   5    our performance of that Agreement are inseparable.  And to

   6    say that it is lawful to enter into a contract but you are

   7    subject to antitrust liability if you perform in accordance

   8    with that contract renders the Instrumentality Doctrine, the

   9    Federal Instrumentality Doctrine, a nullity.

  10               In each of the cases that Mr. Manishin talked

  11    about that dealt with exclusive franchises, it was the

  12    conduct of operating the exclusive franchise that was being

  13    challenged, and in Thomas it was our administration of the

  14    root zone system -- of the Root Zone File -- it is late in

  15    the day, Judge, I am getting confused with the terms -- but

  16    the Root Zone File that was supposedly the essential

  17    facility, and that was dismissed on the pleadings under the

  18    Federal Instrumentality Doctrine.

  19               So, the conduct and agreement cannot be

  20    separated.  I am unaware of any case which has said that the

  21    instrumentality doctrine applies only to agreements but not

  22    to performance of those agreements.  I would be shocked if

  23    it said that, because that would then render the Doctrine an

  24    extremely impotent doctrine.

  25               Now, let me turn briefly to the NSF directives,


   1    because that is an entirely separate basis for granting

   2    summary judgment to Network Solutions.

   3               The Instrumentality Doctrine applies to our

   4    functions under the Cooperative Agreement.  In the two cases

   5    I've cited earlier, the NSF directives were not at all the

   6    basis for granting or granting us dismissal of antitrust

   7    claims based on the Cooperative Agreement and our activity

   8    under the Cooperative Agreement.

   9               The NSF directives are a separate basis, and what

  10    we say is that pgMedia point to those directives as the

  11    reason why they have not been able to add hundreds and

  12    hundreds of TLDs to the Root Zone File.  Our response is the

  13    following:

  14               First, those directives by the National Science

  15    Foundation cannot be attacked on antitrust grounds.  Why?

  16    Because the NSF is outside the reach of the antitrust laws,

  17    so they don't constitute an antitrust claim or an antitrust

  18    violation.

  19               Second, those directives cannot be attacked for

  20    lack of authority.  Going back to the point I made at the

  21    beginning, Judge, NSF had the authority to issue those

  22    directives to Network Solutions.  They didn't issue them to

  23    the world at large.  They issued them to their contract

  24    counterpart, and they were entitled to do that because they

  25    had oversight responsibility under the Agreement, and that's


   1    what their directives were, the exercise of oversight

   2    responsibility, directing their subordinate as to what they

   3    wanted the subordinate to do.

   4               Thirdly, those directives cannot be challenged as

   5    being unreasonable.  Why?  Because those directives were

   6    issued to maintain the status quo.  They were issued just

   7    days before President Clinton, in a Rose Garden

   8    presentation, directed the Secretary of Commerce, with other

   9    agencies and widespread public input, to study the future of

  10    the Domain Name System and, among other things, specifically

  11    to study the issue of global TLDs.

  12               That was one of the things they were to study.

  13    So this was to maintain the status quo to allow that study

  14    to go forward without it being preempted or mooted or upset

  15    or prejudiced.

  16               Now, your Honor was quizzical about what are

  17    global or generic TLDs and what are these country code TLDs

  18    and how do country code TLDs fit into this case.

  19               They don't.  As I think your Honor now

  20    understands, country code TLDs are used to identify

  21    countries.  Those are administered, with the acquiescence or

  22    approval of the NSF, by the IANA.  Now, the IANA is a

  23    private entity but it is a government contractor.  It does

  24    everything it does under a contract with an agency of the

  25    Department of Defense.  And one of the things they do is


   1    decide when to have new country codes added to the Internet.

   2               As a practical matter, virtually all of the

   3    country codes have already been added, and they were added

   4    well before the Directive given by the NSF to Network

   5    Solutions.  There were about ten that have been added since

   6    then, but that's a far different kettle of fish than adding

   7    hundreds or thousands of global TLDs or generic TLDs, and

   8    that has been a very, very contentious issue in the Internet

   9    community.

  10               What the NSF did was to simply say to us, don't

  11    do anything about TLDs until we give you further guidance,

  12    and we understood that to mean global TLDs.  NSF says that's

  13    what they meant.

  14               So, I don't know, Mr. Manishin or his client may

  15    not have understood it that way, but the parties who

  16    counted --

  17               THE COURT:  He said there were six more -- six

  18    have been added since that letter.

  19               MR. DALLAS:  Ten country codes, your Honor, done

  20    by IANA.  Nothing to do with any decisions by my client.

  21    IANA, the IANA makes those --

  22               THE COURT:  I understand, but Mr. Manishin's

  23    argument, as I understand it, is that the letter doesn't

  24    seem to be accurate or observed by IANA, at least.

  25               MR. DALLAS:  No, the letter was not directed to


   1    IANA, Judge.

   2               THE COURT:  No, I know it wasn't.

   3               MR. DALLAS:  It was directed to us, and it told

   4    us to add no TLDs.  It has been -- I mean, to make no

   5    decisions to add TLDs.

   6               We have not made any decisions to add any TLDs.

   7    The only party that's made decisions to add TLDs is the

   8    IANA, which has always done it for country codes and only

   9    country codes.

  10               And that is a separate issue.  I mean, that's not

  11    really part of this case.  Mr. Manishin's client doesn't

  12    want to be a country code registrar.  They are concerned

  13    about global TLDs.

  14               THE COURT:  That's the way I understood it.

  15               MR. DALLAS:  Yes.  And there is no dispute from

  16    anybody in this part of the courtroom --

  17               THE COURT:  I was merely clarifying my mind as to

  18    whether or not the country code issue was in the picture.

  19               MR. DALLAS:  No, and it is not.

  20               What has happened is that after a year of study,

  21    massive public discussion, getting endless comment, the

  22    government has adopted their final Policy Statement.  It is

  23    a policy statement, it is not a mandate; deliberately so

  24    because what the government has said is we want the Internet

  25    community -- not us, the U.S. Government, not Mr. Manishin


   1    and his client, or any one single group or entity -- to

   2    decide on how the Internet should be operated.  What we want

   3    is to privatize it.  We want a new, nonprofit, private

   4    corporation form that would be representative of the

   5    interests of the Internet community as a whole worldwide to

   6    make these very difficult decisions about what global TLDs

   7    should be added, when, how, etc.

   8               I submit that it is plainly reasonable for the

   9    status quo to be maintained while the government allows this

  10    process to go through, and it is going on right now.

  11    Because otherwise, if new TLDs, global TLDs are added, you

  12    are going to preempt one of the major functions of this new

  13    corporation, and, instead, your Honor is going to find

  14    yourself in the rather unenviable position -- I heard the

  15    term "Internet czar," well, your Honor, you would become an

  16    Internet czar and you would be having to decide issues about

  17    what new TLDs should be added, who should add them, how

  18    many, under what circumstances, technical requirements, and

  19    I said --

  20               THE COURT:  Don't worry about that.  I am

  21    sensible enough not to do that.  That doesn't mean other

  22    things.

  23               MR. DALLAS:  I am sensible about the relief that

  24    is being sought here, your Honor, and that I think, as your

  25    Honor wisely acknowledges, is not the position you want to


   1    find yourself in nor should any court.

   2               The government has set in process an orderly

   3    procedure to privatize the arrangement.  And what this

   4    means -- what do the directives mean to Network Solutions?

   5    Very simply, your Honor, it means that we should be

   6    entitled -- are entitled to comply with those directives

   7    without being subjected to potential antitrust liability.

   8    It is as simple as that.

   9               So, to bring this to a close, we have two grounds

  10    for summary judgment:  One, the Instrumentality Doctrine

  11    that immunizes our activities under the Agreement, and, two,

  12    the NSF's directives, which we are entitled to comply with

  13    without running afoul of the antitrust laws.

  14               Thank you, Judge.

  15               THE COURT:  Thank you.

  16               MR. DALLAS:  Unless you have questions.

  17               THE COURT:  Mr. Haber will do the First Amendment

  18    issue?

  19               MR. DALLAS:  I think I will leave it to eminent

  20    counsel to handle that, Judge.

  21               THE COURT:  All right.

  22               MR. HABER:  Good afternoon, your Honor.  Before I

  23    start off the argument, I wanted to address one point that

  24    your Honor raised regarding the root server system and the

  25    relationship between that and the Root Zone File.  In the


   1    government's declaration of George Strawn, it is at

   2    paragraphs 20 through 26 that that information is contained,

   3    if your Honor wants to take a look at it.

   4               With respect to the stay issue, I think it is

   5    important to lay out a little bit of the chronology and the

   6    history here regarding the government's efforts to privatize

   7    the Domain Name System.

   8               In March of 1997, as set forth in the Strawn

   9    Declaration, the government began thinking about what was

  10    going to happen to the management of the Domain Name System

  11    come the end of the Cooperative Agreement, which was

  12    scheduled to end either in March of the following year,

  13    March of '98, or September of '98, depending on whether the

  14    six-month extension was invoked, which it has been; so

  15    September 30th of 1998 marks the end of the Cooperative

  16    Agreement.

  17               So in March of '97, the government started

  18    thinking about the issue.  This is before pgMedia even sued

  19    NSI.  It is six months before pgMedia sued NSF.  So there is

  20    absolutely nothing to the inference raised by Mr. Manishin

  21    that somehow the government's position regarding the

  22    management of the DNS, of the Domain Name System, has been

  23    in response to this lawsuit.

  24               THE COURT:  But the letter is dated 1997, isn't

  25    it?


   1               MR. HABER:  The first letter sent by NSF is late

   2    June of 1997, at which point the process -- and the letter,

   3    in fact, references the ongoing discussions within the

   4    government amongst various executive agencies as to what was

   5    going to happen to the management of the Domain Name System

   6    at the end of the Cooperative Agreement.

   7               So it is quite clear that even before pgMedia was

   8    known at all to the government, the government was thinking

   9    about how to manage, or was thinking about how the Domain

  10    Name System would be managed after the Cooperative

  11    Agreement.

  12               THE COURT:  Well, this suit was begun before June

  13    1997.

  14               MR. HABER:  It was begun before June 1997, it was

  15    not --

  16               THE COURT:  So what is the evidence of the

  17    government seeking the status quo earlier than June 1997?

  18               MR. HABER:  Your Honor, I wasn't intimating that

  19    the government didn't seek the status quo.  The government

  20    began the process of looking into the Domain Name System

  21    issue in March of 1997.  The government wasn't added to the

  22    lawsuit until September of 1997, long after, and itself

  23    issued its directive not to add any generic TLDs to the

  24    system.

  25               I just want to skip forward in the process to


   1    February of 1998, which is when the government issued

   2    something that's colloquially known as the Green Paper that

   3    was the government's first or extended take on how it

   4    viewed, as one possibility, how it viewed the management of

   5    the Domain Name System going forward at the end of the

   6    Cooperative Agreement, and it laid out certain proposals

   7    that the government had and it asked for comment from the

   8    Internet community.

   9               THE COURT:  What is the document you are

  10    referring to?

  11               MR. HABER:  Your Honor, it is called the Green

  12    Paper.  It is in the Federal Register, and in our paper it

  13    is Exhibit D to my declaration.  It may, in fact, be

  14    exhibits to other declarations, as well.  It is Exhibit D to

  15    the Haber Declaration.

  16               Importantly, for this case, in the Green Paper,

  17    the government said the following with respect to the

  18    addition of new generic top-level domain names.  It said

  19    that optimally it would like to leave that issue for the

  20    private, not-for-profit, internationally representative

  21    entity that the government proposed or the government hoped

  22    would be in place in time to take over management of the

  23    Domain Name System at the end of September of this year.

  24               But the Green Paper also proposed that in the

  25    interim, i.e., between February of this year and the end of


   1    September of this year, that five new generic top-level

   2    domain names be added.

   3               The response on that point was overwhelmingly

   4    against the government's proposal, and that's evidenced in a

   5    June 1998 document called the White Paper that I believe

   6    Mr. Dallas has adverted to.  That document is at Exhibit B

   7    to my declaration, and that's the final statement of the

   8    government's policy with regard to privatization of the

   9    Domain Name System.

  10               And in the White Paper -- and I will just briefly

  11    read the section -- the White Paper said that "The comments

  12    received evidenced very strong support for limiting

  13    government involvement during the transition period on the

  14    matter of adding new gTLDs."  Specifically, most

  15    commentators, both U.S. and non-U.S., suggested it would be

  16    more appropriate for the new locally representative

  17    corporation to decide these issues once it is up and

  18    running.

  19               That's exactly what the government set forth in

  20    the White Paper.  The government retreated from its proposal

  21    in the Green Paper to add new gTLDs on its own and heeded

  22    the call of the Internet community to not act on this issue

  23    and to leave it up to the new not-for-profit corporation.

  24               In this record, there is an interesting comment I

  25    think made by Mr. Manishin who said that pgMedia wishes to


   1    add 500 new generic TLDs to the system, and I think his

   2    words were, in substance, that we think -- we, pgMedia,

   3    think that this would be a good idea.

   4               It is instructive in this regard to look at

   5    Exhibit G to my declaration which set forth various -- the

   6    responses received to the initial proposal, responses

   7    received from international entities.  And if your Honor

   8    looks at the response received from the European community,

   9    from Japan and from Australia that are set forth in that

  10    exhibit, your Honor will note that all of those

  11    international entities and sovereigns stated that they did

  12    not wish to see new generic TLDs added to the system until

  13    an international consensus and a new not-for-profit agency

  14    were in place to make that decision.  Again, the government

  15    heeded that call.

  16               That is the basis upon which the government

  17    states that the relief that plaintiff seeks in this case,

  18    the immediate addition of 500 generic TLDs, will preclude

  19    the international community from being heard on that issue.

  20               I would note in this regard, it is highly ironic

  21    that, given that situation, given that the international

  22    community has asked that no new TLDs be added, it is ironic

  23    that plaintiff is relying on international law as a support

  24    for its position in this case, although Mr. Manishin didn't

  25    refer to it in his presentation, so I won't repeat the


   1    international law argument in mine.

   2               Turning, your Honor, to the statutory authority

   3    issue.

   4               This is not a case, as plaintiff would have it,

   5    of raising the question of whether the government has the

   6    authority to regulate generally the Internet or even raising

   7    the question of whether the government has general

   8    regulatory authority over the Domain Name System.  It raises

   9    a very discrete issue, and the issue is:  Did the NSF have

  10    the authority to issue a directive under the Cooperative

  11    Agreement to the awardee of that Cooperative Agreement,

  12    Network Solutions?

  13               PgMedia has conceded in its papers, and here

  14    today in argument, that it is not asking the Court to set

  15    aside the Cooperative Agreement, so it concedes that the

  16    Cooperative Agreement is appropriate and that the NSF had

  17    statutory authority to enter into it.

  18               Rather, what pgMedia seems to argue is that while

  19    the NSF has the authority to foster and support access to

  20    networks by entering into the Cooperative Agreement and

  21    funding NSI, it somehow lacks the authority to impose any

  22    conditions on NSI's conduct, to have any requirements as to

  23    what NSI can and can't do; it somehow lacks the authority to

  24    make sure that NSI is conducting itself in accord with the

  25    Cooperative Agreement.  That's all that's going on here.


   1               There was a request made by NSI to add new gTLDs.

   2    It was a request that was referring basically from plaintiff

   3    to the NSF, and the government said, no, you may not add

   4    those gTLDs pursuant to the Cooperative Agreement and the

   5    documents referenced therein.

   6               So this case isn't about authority to regulate

   7    the Internet.  It is about a Cooperative Agreement and what

   8    authority the government has under it.

   9               And, as pgMedia has conceded, the government had

  10    full statutory --

  11               THE COURT:  What provision of the agreement are

  12    you relying on?

  13               MR. HABER:  Your Honor, let me turn to that.

  14               The Cooperative Agreement, as a whole, makes

  15    clear -- there are two relevant documents, your Honor.

  16    There is the Cooperative Agreement, which is Exhibit F to

  17    the Strawn Declaration, and there is also something called

  18    the Grant of General Conditions, which is Exhibit A to the

  19    Haber Declaration.  I apologize for not putting them in the

  20    same declaration.

  21               The Cooperative Agreement contains language

  22    regarding the reservation of responsibilities, and you've

  23    heard the plaintiff refer to this today.  It is Article 6A.

  24               What you haven't seen in plaintiff's papers

  25    anywhere is a complete quote of that provision.  The


   1    provision states that, according to plaintiff, that NSF has

   2    to specifically reserve responsibilities under the

   3    Cooperative Agreement --

   4               THE COURT:  Is that page 4 you are on?

   5               MR. HABER:  Page 4, yes, your Honor, Article 6A.

   6               The plaintiff's argument is that a general

   7    condition cannot be a specific reservation.  But the

   8    language of the Article, which has never been fully quoted

   9    by the plaintiff, belies that contention, because it

  10    specifics says, "To the extent that NSF does not reserve

  11    specific responsibility for accomplishing the purposes of

  12    this Agreement," -- and this is the part that is highlighted

  13    by plaintiff -- "by either special condition or general

  14    condition of this Agreement, all such responsibilities

  15    remain with the awardee."

  16               So it is clear that a general condition can be a

  17    specific reservation of rights.

  18               And then, your Honor, you turn to the General

  19    Grant of Conditions.

  20               THE COURT:  I don't quite follow your argument.

  21               MR. HABER:  I am sorry.  Plaintiff has contended

  22    that under Article 6A, NSF has to specifically reserve

  23    responsibility, and if it doesn't specifically reserve it,

  24    the responsibility rests with NSI.

  25               THE COURT:  Right.


   1               MR. HABER:  And the government agrees.

   2               PgMedia then states that --

   3               THE COURT:  What?

   4               MR. HABER:  Excuse me.

   5               THE COURT:  I have followed you so far.  There is

   6    no disagreement.

   7               MR. HABER:  OK.  The disagreement is pgMedia

   8    contends that a General Grant Condition, because it is a

   9    general condition, cannot act as a specific reservation of

  10    rights.

  11               And that argument is belied by the language of

  12    Article 6A, which specifically says that NSF can reserve

  13    specific responsibility by either a special condition or a

  14    general condition, and those general conditions are in fact

  15    the grant in general conditions.  Those are referred to --

  16               THE COURT:  Which ones are you relying on?  That

  17    is what I am trying to get to.

  18               MR. HABER:  OK, your Honor.  I am sorry.  The

  19    General Grant Condition, it is Article 8 of the General

  20    Grant Conditions, and those again are set forth in --

  21               THE COURT:  Article what?

  22               MR. HABER:  Article 8, your Honor.

  23               And Article 8 states that "The grantee is

  24    required to obtain prior written approval from the NSF

  25    Grants Officer whenever there are significant changes in the


   1    project or its direction."

   2               THE COURT:  Where are you?

   3               MR. HABER:  That is at page 2 of Haber

   4    Declaration Exhibit A.  That is Article 8 of the general

   5    grant --

   6               THE COURT:  The other agreement?

   7               MR. MANISHIN:  The other declaration, your Honor.

   8               MR. HABER:  That is why I apologize as attaching

   9    it to two declarations, your Honor.

  10               THE COURT:  Now, where are you, page what?

  11               MR. HABER:  Exhibit A, page 2.  It is the

  12    paragraph numbered 8.

  13               THE COURT:  Page 3?

  14               MR. HABER:  Page 2, your Honor.

  15               THE COURT:  Page 2?

  16               MR. HABER:  Yes, Article 8.  It is entitled

  17    "Significant Project Changes."

  18               THE COURT:  All right.

  19               MR. HABER:  And it is that provision that gave

  20    rise to the Directive here, and I will have to backtrack a

  21    little bit --

  22               THE COURT:  What is your position, that the

  23    adding of a TLD is a significant project change?

  24               MR. HABER:  Your Honor, it is not the

  25    government's position that the adding of a TLD is a


   1    significant project change.  What is a significant project

   2    change is the adding of a TLD through a process other than

   3    that that was contemplated by the Cooperative Agreement and

   4    the documents referenced therein.

   5               That's where I have to turn now.  It gets a

   6    little messy, I understand.  But it is not just that new

   7    TLDs were to be added --

   8               THE COURT:  It is not important that you

   9    understand, it is important that I understand.

  10               MR. HABER:  It is messy, your Honor, and let me

  11    see if I can cut to the heart of it.

  12               The Cooperative Agreement, as pgMedia concedes,

  13    incorporated by reference certain documents that are called

  14    Requests for Comment or RFCs.  These are documents that are

  15    issued by various entities, by two entities having some sort

  16    of general oversight in the Internet community with respect

  17    to the Domain Name System.  It is a consensual mode of

  18    governance.  So what happens is these requests for comments

  19    are put out for comment, essentially, on the Internet.

  20               But there is only one Request for Comment that is

  21    relevant here and --

  22               THE COURT:  Let's just go back to page 2.

  23               MR. HABER:  Sure.

  24               THE COURT:  Because page 2 of Exhibit A talks

  25    about a significant change and then it talks about a


   1    transfer of a project effort and then it talks about a

   2    change in objectives or scope, and the third item in that

   3    section doesn't seem to me to be relevant, but maybe it is.

   4    What are you relying on under B, "Significant Project

   5    Changes," just so I've --

   6               MR. HABER:  Your Honor, I think it would be --

   7    although I don't necessarily think that A, B and C represent

   8    the sum total of things that could be significant changes,

   9    but we think this falls within B.  This falls within a

  10    proposed change --

  11               THE COURT:  That's what I thought.

  12               MR. HABER:   -- in the phenomenon --

  13               THE COURT:  Yes.

  14               MR. HABER:  And the way it does is as follows:

  15    The Requests for Comment that's incorporated into the

  16    Cooperative Agreement is Requests for Comment 1591.  It is

  17    at Exhibit H to the Strawn Declaration.  And that request

  18    for comment --

  19               THE COURT:  Just let me get back to Strawn, then.

  20               MR. HABER:  Yes.

  21               THE COURT:  All right.

  22               MR. HABER:  The Cooperative Agreement required

  23    that NSI provide services pursuant to the Requests for

  24    Comments, including this one.

  25               THE COURT:  Where is that?


   1               MR. HABER:  This gets even a little more messy in

   2    terms of referring to documents.  At least you are still in

   3    the Haber Declaration.  Exhibit F is the Cooperative

   4    Agreement.

   5               THE COURT:  I have gone to Strawn.

   6               MR. HABER:  I'm sorry, you are right.

   7               MR. DALLAS:  You are in the right room, Judge.

   8               MR. HABER:  It is page 3.  It is Article 3C, and

   9    it says --

  10               THE COURT:  Of what?

  11               MR. HABER:  I'm sorry, it is the Cooperative

  12    Agreement.  It is Exhibit F to the Strawn Declaration.

  13               The Cooperative Agreement --

  14               THE COURT:  I've got that.  Now what page?

  15               MR. HABER:  Page 3, your Honor, at the very top.

  16               THE COURT:  "Estimated Requirements and Review?"

  17               MR. HABER:  No.  I'm sorry, your Honor.

  18               MR. MANISHIN:  Page 6 of the exhibit is page 3 of

  19    the contract.

  20               MR. HABER:  Excuse me.  Page 3 of the contract --

  21    page 3 of the Cooperative Agreement, and it is Article 3C,

  22    although Article 3 starts at the bottom of the prior page.

  23    Article 3 is called "Statement of Work," and Article 3C is

  24    at the very top of page 3.

  25               THE COURT:  Page 3?


   1               MR. HABER:  "The awardee shall provide

   2    registration services in accordance with the provisions of

   3    RFC 1174."

   4               Exhibit G is RFC 1174.  Exhibit H is RFC 1591,

   5    which is the successor to RFC 1174, and there is no dispute

   6    about that.  It was set forth in the Strawn Declaration, and

   7    I have not seen any argument from plaintiff to the contrary.

   8               This now I think gets us back to Exhibit H.

   9               THE COURT:  You've got to hold a second.

  10               MR. HABER:  Sure, your Honor.

  11               (Pause)

  12               THE COURT:  You are saying I've got to find that

  13    NSI had to provide registration services in accordance with

  14    the provisions of RFC 1174?

  15               MR. HABER:  Correct, your Honor.  And as set

  16    forth in the Strawn Declaration, RFC 1591 is the successor

  17    to RFC 1174, and, again, in the reply brief from pgMedia, I

  18    saw no statement to the contrary, certainly no argument to

  19    the contrary.

  20               So under the Cooperative Agreement, therefore,

  21    the --

  22               THE COURT:  I have to get Exhibit G out now.

  23               MR. HABER:  Actually, your Honor, Exhibit G is

  24    the first RFC.  It is there --

  25               THE COURT:  That only applies to IANA?


   1               MR. HABER:  No, your Honor, RFC 1174 was the RFC

   2    that was referenced in the Cooperative Agreement.  RFC 1591,

   3    which spoke to the same issue but at greater length, that's

   4    Exhibit H, your Honor; that is the successor to Exhibit G.

   5               THE COURT:  It has known of its existence since

   6    March of '94?

   7               MR. HABER:  Yes, your Honor.  In fact, you will

   8    note that it is issued -- on top of page 1 on Exhibit H, you

   9    will note that it was issued by J. Postel, who is Jon

  10    Postel, who is essentially IANA.  He is the director, I

  11    believe, in title, but I believe that John Postel is the

  12    IANA.

  13               THE COURT:  Are you saying he is a/k/a?

  14               MR. HABER:  Essentially, your Honor.

  15               MR. DALLAS:  A/k/a The Big Kahuna.

  16               MR. MANISHIN:  There is a czar.

  17               MR. HABER:  Page 3 of Exhibit H, page 3 of RFC

  18    1591, this is where the process is set forth as to how new

  19    top-level domain names are to be added to the system.

  20               Again, I will just read from the document.  It

  21    says, "The IANA is responsible for the overall coordination

  22    and management of the Domain Name System, and especially the

  23    delegation of portions of the name space called top-level

  24    domains."

  25               And I will skip down to the next paragraph.


   1               "A central Internet Registry" -- and, again, it

   2    is conceded by all parties that NSI serves as the Internet

   3    Registry here.

   4               "A central Internet Registry has been selected

   5    and designated to handle the bulk of the day-to-day

   6    administration of the DNS.  Applications for new top-level

   7    domains (for example, country code domains) are handled by

   8    the IR" -- again, which is Network Solutions -- "with

   9    consultation with the IANA."

  10               And that's the crucial statement, your Honor.

  11               Because what happened in this case was when NSI

  12    forwarded to the IANA pgMedia's request to add 500 new

  13    generic top-level domains, the response was not anything

  14    that could be called "consultation with the IANA."  The

  15    response was on an April 4, 1997 letter from counsel for

  16    IANA, which essentially disclaimed any responsibility for

  17    opining on this issue.

  18               The plaintiff argues that "consultation with the

  19    IANA" does not mean participation by the IANA.  That is

  20    simply an absurd way of looking at the RFC and the

  21    requirement of consultation.

  22               "Consultation" in the dictionary is defined as a

  23    deliberation among two or more parties as to a particular

  24    matter.  There was no deliberation here.  There was a

  25    request made to the IANA.  The IANA refused to opine as to


   1    whether or not any new generic top-level domain names should

   2    be added.

   3               In NSF's reasonable view, that was not

   4    "consultation with the IANA."  And that, your Honor, is

   5    where the significant project change arises.  Had the IANA

   6    opined and said, yes, you may add new TLDs, or, no, you may

   7    not add new TLDs, that would have been the end of the

   8    matter.  There would have been no role for NSF under those

   9    circumstances, because the process that was set up in the

  10    Cooperative Agreement through the Requests for Comment would

  11    have been followed.

  12               But it's because IANA declined to say anything on

  13    the subject --

  14               THE COURT:  You mean Postel?

  15               MR. HABER:  Mr. Postel, yes, your Honor.

  16               THE COURT:  He is one man with all of this power?

  17               MR. HABER:  Well, he is, as Mr. Dallas

  18    referenced, a government contractor, and he has been an

  19    integral player in the management of the Domain Name System

  20    since the late 1960s, early 1970s.

  21               THE COURT:  Well, you can't ascribe it to

  22    campaign contributions, then.

  23               MR. HABER:  Your Honor, with respect to the

  24    addition of country code TLDs, I only want to add one point,

  25    which is pgMedia makes the claim that it was only when they


   1    filed their May 1998 brief this year that NSF started taking

   2    the position that the Directive meant only no generic

   3    top-level domain names.  That's just inconsistent with the

   4    Directive in this case.

   5               It was clear to NSF from shortly after --

   6               THE COURT:  What part of the record is it

   7    inconsistent with?

   8               MR. HABER:  Your Honor, it is inconsistent with

   9    the chronology, which is, as I think plaintiff will concede,

  10    new country code names were being added starting in

  11    September or October of 1997, that they had been added over

  12    a period of time since then.  So NSF was aware that there

  13    were new country code names being added long before pgMedia

  14    filed its brief in this case, and --

  15               THE COURT:  I don't get your point.

  16               MR. HABER:  The significance, your Honor, is that

  17    it isn't the case that NSF articulated a distinction between

  18    generic top-level domains and country code top-level domains

  19    only in response to plaintiff's brief, which is what the

  20    plaintiff has stated.  In fact, the addition of country code

  21    TLDs was long known to the NSF, and the reason why that

  22    wasn't a problem under the Directive was that IANA was

  23    participating in that process.  As NSI has demonstrated,

  24    IANA gave the authority to add those country code top-level

  25    domains, and so there wasn't an issue about process.


   1               Had IANA not been authorizing it, presumably they

   2    wouldn't have been added, and that might have been an issue.

   3    But that is simply not the case.

   4               IANA has participated in the country code

   5    process, as evidenced in the April '97 letter.  They did not

   6    participate in the generic TLD process.

   7               THE COURT:  Isn't IANA a private entity?

   8               MR. HABER:  It is a private entity, your Honor,

   9    that receives substantial government funding to do the

  10    particular functions that it does regarding the Domain Name

  11    System.  It is associated with the University of Southern

  12    California, so it is certainly not a government entity, but

  13    it is a government contractor with respect to these issues.

  14               THE COURT:  So you really have got two government

  15    contractors, then?

  16               MR. HABER:  Yes, your Honor.

  17               THE COURT:  Is it a necessary party here?

  18               MR. HABER:  We don't believe so, your Honor.

  19    They were named, I would note, as a -- I think they were

  20    named as a nonparty co-conspirator in the First Amended

  21    Complaint, which I would note was filed shortly before IANA

  22    decided that it wasn't going to participate in the Generic

  23    top-level domain name discussion.  So there is --

  24               THE COURT:  Wait a minute.  Which did they do,

  25    and what are you relying on on the record, that they were


   1    able to participate, or that they instructed NSI not to add

   2    any more domain names?

   3               MR. HABER:  Your Honor, it is that they did not

   4    participate, they did not consult.  Had they instructed NSI

   5    not to add --

   6               THE COURT:  Your point is that until a certain

   7    point they were supposed to be consulted before any names

   8    were added, as I understand your reading of the regulation?

   9               MR. HABER:  It is actually --

  10               THE COURT:  Is it Regulation 1591?

  11               MR. HABER:  1591.

  12               Actually, your Honor, it is our position that

  13    they were supposed to be consulted and they were supposed to

  14    consult with NSI throughout.  There is no date by which they

  15    no longer had an obligation to consult.  They were --

  16               THE COURT:  I didn't say that.  You said they

  17    weren't going to --

  18               MR. HABER:  In April of '97.

  19               THE COURT:  And then after they said that they

  20    weren't going to do anything, the Foundation itself --

  21               MR. HABER:  Issued a Directive.

  22               THE COURT:  -- issued a Directive in June?

  23               MR. HABER:  Yes, your Honor.  Because IANA's lack

  24    of participation in the process was a significant project

  25    change.  And that's why the addition of generic top-level


   1    domains without the IANA's consultation had to be approved

   2    by the NSI.

   3               THE COURT:  I see.  Now I've got it.

   4               MR. HABER:  Your Honor, let me turn to the First

   5    Amendment.

   6               Your Honor, I will not put up the Cooperative

   7    Agreement for any awards for draftsmanship, but it

   8    incorporates by reference the documents we've indicated, and

   9    we think ultimately it is clear that this was a significant

  10    project change.

  11               Your Honor, turning to the First Amendment

  12    argument, I note that the plaintiff hasn't argued the

  13    standing point.  I just want to make one quick statement

  14    there with regard to the Metromedia case, since we haven't

  15    had an opportunity to respond to it.  It is at 453 U.S. at

  16    504 -- the Metromedia case involved a substantial amount of

  17    noncommercial advertising -- by the Supreme Court.

  18               It is our position that the overbreadth analysis

  19    doesn't apply here because of the overwhelmingly commercial

  20    nature of the Internet, and so the plaintiff lacks standing

  21    to raise the speech interests of others.

  22               THE COURT:  Let me understand that again.  I'm

  23    sorry.  I was still writing notes when you were speaking.

  24               MR. HABER:  Your Honor, the government argued in

  25    its brief that pgMedia was seeking to raise the speech


   1    rights of others, namely, of its putative customers,

   2    individuals who have registered names with it.  In a

   3    response, the plaintiff cited the Metromedia case --

   4    actually, let me back up.

   5               The government also argued that because of the

   6    overwhelmingly commercial nature of the Internet, the

   7    Overbreadth Doctrine didn't apply because the Overbreadth

   8    Doctrine, in long-settled Supreme Court case law, does not

   9    apply where the speech at issue is commercial.  So, I just

  10    wanted to point out the distinction between the Metromedia

  11    case, where there was a substantial amount of noncommercial

  12    speech at issue.

  13               Turning to the merits, pgMedia makes two separate

  14    arguments that they tend to conflate or at least they did so

  15    at argument today.  The first argument is an argument they

  16    raised in their original brief, which is the prior restraint

  17    argument.

  18               In response to that, NSF demonstrated two very

  19    salient facts.  First, that the words used by pgMedia in its

  20    proposed top-level domains, for example, "beyond.hope," is a

  21    name that they have proposed or is one of the TLDs that they

  22    would like to add.  Those words can all be used in a domain

  23    name under the present system.  It is simply a matter of

  24    using those words and then adding one of any number of

  25    different top-level domain names, .com, .org, .net, .west.


   1    There are a number of different domain names that can be

   2    added, so it is not as if the words -- it is not as if any

   3    restraint on the words themselves being used on whatever

   4    communicative value might be had in the domain name because

   5    the same words appear in the domain name.

   6               The government also demonstrated that, given the

   7    speed of computer searches, there is really no distinction

   8    between how quickly a search could be done under the present

   9    system and how quickly a search could be done under

  10    plaintiff's proposed system, and, in fact, the present

  11    system is in many ways more efficient in terms of allowing

  12    people to search out the relevant information contained in a

  13    particular Web site.

  14               In the reply brief, pgMedia does not refute these

  15    statements.  Instead, they raise an entirely new argument;

  16    that you will search in vain their initial brief and the

  17    Mueller Declaration for the argument that was contained in

  18    the reply brief, namely, a forced or compelled speech

  19    argument.  So the government is responding to that today for

  20    the first time.

  21               In the reply brief, at pages 27 and 29, pgMedia

  22    argues that they were supposed to add content to their

  23    domain name under the present system.  Now, they don't

  24    identify exactly what the substantive content is that they

  25    were forced to add; presumably, it was the addition of


   1    either .net, .com, or .org.

   2               Nowhere does plaintiff describe, much less prove,

   3    what content an Internet user would attach to those generic

   4    top-level domain names.  In fact, there is no content

   5    attached to those terms.

   6               In terms of compelled speech cases, your Honor,

   7    they run a continuum.  On one end is a case like, for

   8    instance, Woolley v. Maynard, which is not cited by

   9    plaintiff but which is the fairly well-known New Hampshire

  10    license plate case where the state motto "Live free or die"

  11    was required to be -- was on each license plate, and

  12    plaintiff challenged the authority of the state to require

  13    that he have that very content-laden phrase on his license

  14    plate.

  15               Another similar type case is the Tornillo case,

  16    which is cited by plaintiff, which is a requirement that

  17    when a newspaper publishes an editorial criticizing a

  18    candidate, the candidate get equal time to present again his

  19    very content-laden opposing views.  That is at one end of

  20    the compelled-speech spectrum.

  21               At the other end, we could hypothesize that

  22    rather than .com, .org and .net, it was .A, .B and .C, or

  23    .in, .under and .over.  Presumably, even plaintiff wouldn't

  24    be arguing that that's compelled speech because there is

  25    really no content to that speech.  Nothing is being learned


   1    about the nature of the individual who has registered the

   2    domain name simply by virtue of the fact that they have a .A

   3    or .B after the name.  So you have to have some content to

   4    the speech in order for there to be a compelled speech.

   5               The following fact unfortunately is not in the

   6    record, because the argument was raised for the first time

   7    in reply, but we can certainly supply it to the Court.  It

   8    is my understanding that for some time now, certainly long

   9    before the lawsuit was commenced, there were no restrictions

  10    on the types of entities that can register under .org, .net

  11    or .com.  So, for example, as stated in the Bucci case that

  12    is cited by the government in the Facts section of its

  13    brief, individuals can register under .com, not-for-profit

  14    organizations can register under .com.  My understanding is

  15    networks can register under .com; they can register under

  16    .org.  The bottom line is there is simply no information

  17    that is imparted about the entity registered under one of

  18    those three generic top-level domain names.  If I see a name

  19    and it has .com at the end of it, I have no way of knowing

  20    whether that is an individual, it is a not-for-profit, if it

  21    is a profit, if it is a network; it could be anything.  And

  22    because of that, there is absolutely no way that there is

  23    compelled speech.

  24               Because for there to be compelled speech, there

  25    has to be content, there has to be a viewpoint or a


   1    content-based imposition on an individual to say something

   2    that's revealing, and the bottom line is there is simply

   3    nothing revealing about .com, it is generic.  And plaintiff

   4    was free to register under .com.  They could have registered

   5    under .org.  There is simply no compulsion here and no

   6    content that's being foisted upon the plaintiff.

   7               In any event, your Honor, even assuming that

   8    there is some content to .net or .org, it is extremely

   9    limited.  It is nowhere near "Live free or die."  As even

  10    the Supreme Court recognized in the "Live free or die" case,

  11    the state can have interests that outweigh the speech right.

  12    Here, given their extremely limited, if any, content to

  13    something like .net or .org or .com, the government's

  14    interests, which had been laid out in the government's

  15    brief, we think are more than sufficient to overcome

  16    whatever First Amendment challenge might be brought on the

  17    basis of compelled speech.

  18               So, unless the Court has any further questions,

  19    thank you, your Honor.

  20               MR. MANISHIN:  We have kept you here for two

  21    hours, so I would appreciate five minutes more.

  22               There was a lot of discussion from both

  23    Mr. Dallas and Mr. Haber about how many TLDs should be added

  24    and the effect that it will have on the Internet, etc.  We

  25    are not arguing relief today; we are only arguing the


   1    question of whether there is antitrust immunity or whether

   2    there is a First Amendment violation.  What should happen,

   3    it is not an issue before the Court.  That's why we

   4    bifurcated briefing.

   5               First, liability questions, antitrust immunity,

   6    First Amendment.  Then if we win, we go on.  If we lose, the

   7    case is over.  That's why we did that.  So I'm not going to

   8    respond to questions of the impact that 500 TLDs will have.

   9               I will respond directly to Mr. Haber --

  10               THE COURT:  500 what?

  11               MR. MANISHIN:  I won't respond to the

  12    implications that 500 new top-level domains will destabilize

  13    the Internet or slow it down.

  14               If there is some reason why your Honor is less

  15    capable of --

  16               THE COURT:  I am not -- go ahead.

  17               MR. MANISHIN:  The other thing I think we found

  18    out is that the Internet is run by people, and it is a

  19    question I think in this case of whether this Court,

  20    applying the antitrust laws, is any less capable of deciding

  21    how the Internet should be run than John Postel.

  22               But what our position is on that, your Honor, is

  23    very simple.  As I said before, the law in this Circuit is

  24    clear:  Unless and until Congress speaks, the only kind of

  25    immunity that's available under the Strobl test is implied


   1    immunity for pervasive regulation.  If this Court wants to

   2    adopt the Federal Instrumentality Doctrine, which has never

   3    been applied by the Southern District, never been

   4    implemented by the Second Circuit, and is directly

   5    inconsistent with Strobl, we think that decision should be

   6    accorded an appeals decision, because you would be creating

   7    new law that's inconsistent with the controlling precedent

   8    on how difficult it should be to get antitrust immunity.

   9               Now, let me point, if I could, to one important

  10    thing that Mr. Dallas said.  He said that the Federal

  11    Instrumentality Doctrine means -- and I believe I got this

  12    quote correctly -- that private entities acting on behalf of

  13    the government and carrying out a public program are immune

  14    from liability because they are "assisting the government."

  15               None of the cases that he cites to you make that

  16    distinction.  None of them discuss private entities carrying

  17    out a government program.

  18               I would point to the Court a case cited by both

  19    parties, Champaign-Urbana News Agency, which is 632 F.2d

  20    680.  That is a Seventh Circuit --

  21               THE COURT:  632?

  22               MR. MANISHIN:  632 F.2d 680, a Seventh Circuit

  23    decision from 1980.

  24               A simple case.  Essentially, an army base

  25    contracts with a publisher to be the exclusive provider of


   1    books and magazines.  That is a simple procurement contract.

   2               Your Honor asked how do you distinguish between

   3    procurement and the theory that Mr. Dallas had.  The

   4    Champaign-Urbana case, which Mr. Dallas relies on for his

   5    distinguishing the Federal Instrumentality Doctrine from the

   6    implied immunity lines of cases, is a plain old procurement

   7    case.  His idea that somehow government agencies can

   8    implement a public purpose and that the contractor stands in

   9    the shoes of the government is made up; it finds no support

  10    in the precedent.

  11               The question of timing is answered by two things.

  12    First, the timing -- being Mr. Haber's point that the

  13    government had started thinking about how to address domain

  14    name issues before this case was filed.  First, if you look

  15    to Haber Exhibit C, Mr. Haber's Exhibit C is the Green

  16    Paper.  That is when the government formally asked for

  17    comment.  And we quote this in all of our papers, Judge.

  18               THE COURT:  Exhibit C?

  19               MR. MANISHIN:  Exhibit C to the Haber

  20    Declaration.

  21               THE COURT:  I've got Strawn.

  22               MR. MANISHIN:  That should be the thin one, if I

  23    remember right.  Exhibit C to the Haber Declaration --

  24               MR. HABER:  Are you talking about the Green Paper

  25    or --


   1               THE COURT:  I don't think you are right on C.

   2               MR. HABER:  C is not the Green Paper.

   3               THE COURT:  C is the Federal Registry.

   4               MR. MANISHIN:  C.

   5               MR. HABER:  That is not the Green Paper.

   6               MR. MANISHIN:  I'm sorry, Exhibit C is the first

   7    time that the government acted to look at the DNS.  That is

   8    correct, it is not the Green Paper.  The date at the very

   9    top is July 2, 1997.  That is when they first asked for

  10    comment.  It is the first formal action taken by the

  11    government, which postdated this lawsuit, postdated the

  12    directive.  We were first, they followed; those are the

  13    facts.

  14               And they concluded, as I said in my opening, with

  15    a statement that Mr. Haber called the White Paper but which

  16    is really a general statement of policy, and that's because

  17    everyone thought the government --

  18               THE COURT:  You are referring to which exhibit

  19    now?

  20               MR. MANISHIN:  I am referring to NSI Exhibit --

  21               MR. HABER:  It is Exhibit B in my declaration,

  22    your Honor, if you are already in my declaration.

  23               MR. MANISHIN:  The 10th.  OK.

  24               THE COURT:  The June 10, 1996?

  25               MR. MANISHIN:  June 10, 1998.


   1               THE COURT:  June 10, 1998.

   2               MR. MANISHIN:  "Management of Internet Names and

   3    Addresses."

   4               Now I direct the Court's attention to page 3 of

   5    that exhibit, which is Federal Register 31743, the

   6    right-hand column, underneath Section 1, the last full

   7    paragraph on that page entitled "Response," the third

   8    sentence of that paragraph reads:  "In addition, this policy

   9    is not intended to displace other legal regimes,

  10    (international law" --

  11               THE COURT:  I've lost you.

  12               MR. MANISHIN:  OK.  It is 31743, the right-hand

  13    column.

  14               THE COURT:  I've gone there.

  15               MR. MANISHIN:  The last paragraph on the page,

  16    under "Response," and it is the third sentence of that

  17    paragraph, about the seventh line down.

  18               THE COURT:  "In addition?"

  19               MR. MANISHIN:  "In addition, this policy" --

  20    meaning this Policy Statement -- "is not intended to

  21    displace ... competition law."

  22               The government has said that their Policy

  23    Statement is not intended to displace antitrust laws, and as

  24    you and your clerk read this in full letter, you will find

  25    that the Policy Statement says very clearly that the


   1    antitrust laws apply to the new corporation to be formed to

   2    have a salutary effect and that the government deliberately

   3    chose that antitrust laws should still apply.

   4               Our position is that the government decided that

   5    antitrust laws should apply in the future, and there is no

   6    Congressional authorization to exempt them in the past, that

   7    they applied to past conduct predating this Policy Statement

   8    just like they will apply in the future.

   9               Finally, Mr. Haber had a long and I think

  10    convoluted explanation of why IANA's response was or wasn't

  11    consultation under the Cooperative Agreement.  That is an

  12    issue that I think can be summarized best by looking not at

  13    what NSF said in this case but what NSF said in the Thomas

  14    case in Washington.  A case, by the way, your Honor,

  15    notwithstanding Mr. Dallas' insinuations, that we provided

  16    to the Court with our initial motion papers, explained and

  17    distinguished in our initial memorandum.  So we are not

  18    hiding that case from your Honor.  We think it is clearly

  19    distinguishable, and to the extent it is not, it was wrongly

  20    decided, what the law is, in this Circuit.

  21               In any event, at page 7 of our initial Memorandum

  22    of Law we quote a declaration that NSF submitted in the

  23    Washington case, and it says very simply that NSI must

  24    "follow the policy guidance of a non-governmental body,"

  25    quote continuing, "in consultation with the Internet


   1    Assigned Numbers Authority ('IANA'), another

   2    non-governmental entity."

   3               Those are the exact phraseologies of RFC 1591

   4    that Mr. Haber laboriously walked you through.

   5               Consultation.  "Consultation" implies a request

   6    for an opinion.  This is what Network Solutions asked, and I

   7    will refer you to Exhibit 10 of the Manishin Declaration.

   8               THE COURT:  Wait a minute.

   9               MR. MANISHIN:  I will wait for you to get there.

  10               (Pause)

  11               THE COURT:  Which Manishin?

  12               MR. MANISHIN:  There was only one from me.  It

  13    was in the original papers filed in May.

  14               THE COURT:  May 15?

  15               MR. MANISHIN:  Exactly.

  16               THE COURT:  That's right.

  17               MR. MANISHIN:  My declaration is -- if you just

  18    go to the Exhibit 10 tab, there is only one Exhibit 10 in

  19    that whole stack, and it should be a March 27, 1997, letter

  20    on the stationery of Mr. Dallas' law firm to Mr. Jon Postel,

  21    who, we have learned today and as we said in our brief, is

  22    the IANA.

  23               If you look at the very last sentence on that

  24    page, you can see what NSI asked.

  25               THE COURT:  What page is it do you want me to


   1    look at?

   2               MR. MANISHIN:  It is a two-page letter, so look

   3    at the last paragraph on page 1, the last sentence on page

   4    1.

   5               "NSI maintains the information on that

   6    root-server under the authority" --

   7               THE COURT:  I see where you are now.

   8               MR. MANISHIN:  The last sentence.

   9               THE COURT:  Yes.

  10               MR. MANISHIN:  "NSI maintains the information on

  11    that root-server under the authority and at the direction of

  12    the IANA and NSI can only make changes to the Configuration

  13    File" -- which is another name for the Root Server file --

  14    "at the direction of the IANA."

  15               What this letter shows, Judge, is that NSI asked

  16    IANA to say IANA has authority to direct NSI what to do with

  17    the Root Zone Server File, and since they didn't ask for

  18    consultation, what your opinion is, IANA internationally

  19    responded by saying, I'm sorry, we don't have any binding

  20    legal authority or any contract to give you directions.

  21               So I think the bit about consultation, frankly --

  22               THE COURT:  Where is their response?

  23               MR. MANISHIN:  The response should be, if I am

  24    right, the very next exhibit, which should be Manishin 11.

  25    Yes, exactly right.


   1               Manishin 11 says, "The statement made in your

   2    letter concerning the relationship between the IANA and NSI

   3    is not correct.  We are aware of no contract or other

   4    agreement that gives IANA authority over your client's

   5    operations.  The IANA has no authority to establish a

   6    generic top-level domain without an Internet community

   7    consensus arrived at through committee review and ample

   8    opportunity for public input."  Indeed, "the restriction in

   9    expansion of gTLDs" --

  10               THE COURT:  I think it is "Instead."

  11               MR. MANISHIN:  "Instead" -- thank you, Judge.

  12               "Instead, the restriction in expansion of gTLDs

  13    has thus far been due to consensus which your client has

  14    chosen to accept in refusing requests from potential

  15    registrars of new gTLDs."

  16               That is not the clearest statement of everything,

  17    but it is very clear that IANA is saying you asked us to

  18    tell you that we had authority to authorize new gTLDs, we

  19    don't, and in the past you have profited from this Internet

  20    consensus by refusing requests from competitors.

  21               They continued to do that and it wasn't --

  22               THE COURT:  Where did they say that?

  23               MR. MANISHIN:  "Which your client has chosen to

  24    accept in refusing requests from potential registrars of new

  25    gTLDs."


   1               Finally, this is a strange case.  It is strange

   2    in one way:  Despite the fact that --

   3               THE COURT:  I have other people after you.  I've

   4    still got people in the back of the room who are very

   5    patient.

   6               MR. MANISHIN:  I appreciate that.  This is my

   7    last point.

   8               It is strange in that, since I took over as

   9    counsel for the plaintiff in this case, I have been

  10    receiving an ungodly amount of what they call spam,

  11    unsolicited Internet e-mail, from everybody, everyone in the

  12    world and every subject under the sun.  I happened to get an

  13    e-mail this morning from someone who said I read your brief

  14    and I read Mr. Strawn's declaration for NSF, but he is

  15    wrong, and I have a letter in which NSF says they don't

  16    control the root servers.  So I asked him to fax it to me.

  17    I have it here.

  18               THE COURT:  Have you given it to counsel?

  19               MR. DALLAS:  No.

  20               MR. HABER:  No, your Honor.

  21               MR. MANISHIN:  It just came up.  I just got it

  22    today.

  23               THE COURT:  You have to give a copy to them.

  24               MR. HABER:  It presumably didn't come up before

  25    my argument, Mr. Manishin, unless you have a fax machine at


   1    counsel table.

   2               MR. DALLAS:  Undated.

   3               MR. MANISHIN:  I will hand a copy to the Court.

   4               THE COURT:  OK.  We'll get it.

   5               MR. MANISHIN:  I am obviously not attesting to

   6    the authenticity of this, but I will say that this was given

   7    to me by Mr. Jim Fleming and this letter --

   8               THE COURT:  This is a letter from Mr. Strawn, I

   9    see.

  10               MR. MANISHIN:  It is a letter from Mr. Strawn,

  11    the declarant, to Mr. Fleming.

  12               THE COURT:  No date?

  13               MR. MANISHIN:  Correct, no date.  It doesn't

  14    matter, the date, though, your Honor, because as you read

  15    the letter, it talks about NSF's history, NSF's relationship

  16    to the Internet Council and the Internet, and it says in the

  17    next-to-last-paragraph, "NSF does not control root name

  18    servers."

  19               Now, Mr. Dallas and Mr. Haber both told you about

  20    how many root servers there are in the world and the fact

  21    that there is thirteen and etc., etc.  There is one fact in

  22    this case which is not disputed by anyone, and it is a fact

  23    that NSI put in its comments to the Department of Commerce.

  24    That fact is listed at paragraph 17 of our Rule 56.1

  25    statement; that is, that there can be only one Root


   1    Server -- in this case it is called the Root A Server -- for

   2    the Internet to achieve universal resolvability and

   3    interconnectivity.  That Root A Server is the server that

   4    NSF is asserting that they control.  When I alleged that NSI

   5    controlled the Root Server, NSF says, no, we do, they don't.

   6    And here they are saying exactly the opposite.

   7               The conclusion, with whether or not this

   8    particular piece of correspondence is genuine -- and I have

   9    no reason to believe it is not.  Obviously, I haven't had

  10    the opportunity to take Mr. Strawn's deposition, so I don't

  11    know that.  But the conclusion is very simple:  That the

  12    government and the defendant, NSI, have been trying to shift

  13    responsibility from one party to another, from NSI to IANA

  14    to NSF to the Commerce Department and now to a new

  15    corporation that may or may not be formed under this Policy

  16    Statement.  None of those shifts can change the basic fact,

  17    which is that Congress grants antitrust immunity and that

  18    there is no antitrust immunity in this case.

  19               Since there is no antitrust immunity, the Court

  20    can and should reach the merits, and because what the

  21    government is doing is only a general policy, it doesn't

  22    have the force of law, and it isn't going to change anything

  23    at the very least until 2000, there is no reason for the

  24    Court to stay its hand.

  25               I thank you, your Honor.  Unless you have any


   1    further questions?

   2               THE COURT:  As long as you can assure me that I

   3    don't have to run the Internet.

   4               MR. MANISHIN:  I assure you, no matter what you

   5    decide in this case, you don't have to run the Internet,

   6    whether you decide one TLD, no TLDs or 500 TLDs.  In fact, I

   7    would say the relief we requested did not ask the Court to

   8    decide the appropriate number of TLDs.

   9               MR. HABER:  Your Honor, if I may?  I don't want

  10    to take up the Court's time to reply to a letter that I had

  11    just seen now, and I would like to talk to my client about

  12    it.  What I would like to do is to reserve the right,

  13    whatever time the Court would like it, I would like to

  14    reserve the right to at least put in a two-page letter to

  15    respond to it, if I think that is necessary, by the end of

  16    the week, given that, again, this is the first time we have

  17    seen this document.  I would like to at least maintain that

  18    option, your Honor, if possible.

  19               THE COURT:  There has got to be an end to

  20    everything.

  21               MR. HABER:  I don't have any great desire to add

  22    to your burden.

  23               THE COURT:  I don't think that that is necessary

  24    here to hear that.

  25               MR. HABER:  Thank you, your Honor.


   1               THE COURT:  I think I've got to study these

   2    documents a little more and get a copy of the transcript and

   3    see where I come out.

   4               MR. MANISHIN:  Thank you, your Honor.

   5               MR. COHEN:  Thank you, your Honor.  I appreciate

   6    the time, sir.

   7               MR. DALLAS:  Thank you, your Honor.

   8                              -  -  -