Case 3:18-cr-04683-GPC Document 223 Filed 12/07/20 PageID.2308 Page 1 of 9
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`Randy K. Jones - SBN 141711
`rkjones@mintz.com
`MINTZ, LEVIN, COHN, FERRIS,
`GLOVSKY AND POPEO, P.C.
`3580 Carmel Mountain Road, Suite 300
`San Diego, California 92130
`Telephone: (858) 314-1510
`
`Attorney for Mark Manoogian
`
`
`Whitney Z. Bernstein - SBN 304917
`wbernstein@bienertkatzman.com
`Thomas H. Bienert, Jr. - SBN 135311
`tbienert@bienertkatzman.com
`James Riddet – SBN 39826
`jriddet@bienertkatzman.com
`BIENERT | KATZMAN PC
`903 Calle Amanecer, Suite 350
`San Clemente, California 92673
`Telephone: (949) 369-3700
`
`Attorneys for Mohammed Abdul Qayyum
`
`
`Gary S. Lincenberg - SBN 123058
` glincenberg@birdmarella.com
`Naeun Rim - SBN 263558
` nrim@birdmarella.com
`BIRD, MARELLA, BOXER, WOLPERT,
`NESSIM, DROOKS, LINCENBERG &
`RHOW, P.C.
`1875 Century Park East, 23rd Floor
`Los Angeles, California 90067-2561
`Telephone: (310) 201-2100
`Facsimile: (310) 201-2110
`
`Attorneys for Petr Pacas
`
`David W. Wiechert - SBN 94607
`dwiechert@aol.com
`Jessica C. Munk - SBN 238832
`jessica@wmgattorneys.com
`William J. Migler - SBN 318518
`william@wmgattorneys.com
`WIECHERT, MUNK & GOLDSTEIN,
`PC
`27136 Paseo Espada, Suite B1123
`San Juan Capistrano, California 92675
`Telephone: (949) 361-2822
`
`Attorneys for Jacob Bychak
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF CALIFORNIA
`
` CASE NO. 3:18-cr-04683-GPC
`
`DEFENDANTS’ JOINT
`SUPPLEMENTAL REPLY BRIEF
`IN SUPPORT OF MOTION TO
`DISMISS
`
`Hrg. Date: December 17, 2020
`Hrg. Time: 2:30 p.m.
`
`Assigned to Hon. Gonzalo P. Curiel,
`Courtroom 2D
`
`UNITED STATES OF AMERICA,
`
`Plaintiff,
`
`vs.
`
`JACOB BYCHAK, MARK
`MANOOGIAN, MOHAMMED
`ABDUL QAYYUM, AND PETR
`PACAS,
`
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`Defendants.
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`The Government’s failure to respond to Defendants’ arguments or to address the
`Court’s questions speaks for itself. The law is clear—unless IP addresses were traditionally
`recognized as property during the timeframe alleged in the Indictment, the wire fraud counts
`must be dismissed. After a year of litigating this issue, and multiple rounds of briefing, the
`Government has not found a single case or treatise showing traditional recognition of IP
`addresses as property. The property-status of IP netblocks was instead described as a
`“largely unsettled threshold issue” by a court in 2015, a year after the alleged offense
`conduct. See Glob. NAPS, Inc. v. Verizon New England, Inc., No. CV 02-12489-RWZ, 2015 WL
`12781223, at *2-3 (D. Mass. Mar. 10, 2015). This defect is fatal to the wire fraud counts.
`The Government regurgitates old arguments and cites to inapposite cases about other
`intangible interests (taxes, domain names, software) to maintain that this Court should force
`four men to stand trial on wire fraud without first determining whether IP addresses are
`“property.” By urging this Court to kick the can down the road, the Government hopes to
`infect the trial with a host of irrelevant, unduly prejudicial allegations and evidence relating to
`wire fraud, thereby increasing the chances of securing convictions, no matter how
`unconstitutional or unfair. The law does not support the Government’s proposed approach
`—and constitutional principles of fair notice and due process forbid it.
`A.
`The Court Must Look to Whether the Law Has Traditionally
`Recognized IP Addresses As Property, Not At Their Characteristics
`While the question of whether IP addresses are “property” is a novel one, the approach
`the Court must take to consider the question is not. The Supreme Court and appellate courts
`have developed a firmly-established roadmap on how to resolve the “property” question
`when it comes to intangible interests alleged in federal criminal fraud cases. Not one of these
`cases suggests that the question comes down to a factual/evidentiary issue, as the
`Government insists here. Instead, the pertinent question has always been whether the law
`has long recognized, or traditionally treated, the intangible interest as property. See, e.g.,
`Pasquantino v. United States, 544 U.S. 349, 356 (2005) (“right to be paid money has long been
`thought to be a species of property”); Cleveland v. United States, 531 U.S. 12, 24 (2000) (among
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`other things, construing license as property would “stray from traditional concepts of
`property”) (emphasis added); Carpenter v. United States, 484 U.S. 19, 26 (1987) (“[c]onfidential
`business information has long been recognized as property”) (emphasis added); United States
`v. Bruchhausen, 977 F.2d 464, 468 (9th Cir. 1992) (while confidential business information
`“has long been recognized as property,” there is “no comparable understanding that a
`manufacturer has a property interest in the destination of its products”) (emphasis added);
`United States v. Hedaithy, 392 F.3d 580, 590 (3d Cir. 2004) (“the object of the alleged scheme
`or artifice to defraud must be a traditionally recognized property right”) (emphasis added);
`United States v. Henry, 29 F.3d 112, 115 (3d Cir. 1994) (“to determine whether a particular
`interest is property for purposes of the fraud statutes, we look to whether the law
`traditionally has recognized and enforced it as a property right”); United States v. Baldinger, 838
`F.2d 176, 179 (6th Cir. 1988) (Supreme Court “clearly intended to exclude from the reach of
`the mail fraud statute claims which did not involve a direct intention to deprive another of a
`recognized and traditional property right”) (emphasis added).
`In the face of the overwhelming case law applying the traditional-recognition rule, the
`Government pivots and attempts to reframe the question as one that involves a factual
`dispute that must be resolved at trial. Unsurprisingly, the Government does not even
`mention Bruchhausen, which soundly refutes this argument and is directly on point. In
`Bruchhausen, the Ninth Circuit made clear that construing “property” within the meaning of
`wire fraud is a question of law that impacts the sufficiency of an indictment. See 977 F.2d at 468 (“we
`hold that the second indictment was insufficient as a matter of law”). The court also
`concluded that the right of a manufacturer to control the destination of its products could
`not be “property” under wire fraud because, unlike confidential business information, it had
`not “long been recognized as property.” Id. at 468 (quoting Carpenter). The court did not
`remand the case and order the district court to make factual determinations about the
`characteristics of the intangible interest—it applied the traditional-recognition rule and the
`rule of lenity. That is the same approach the Court must apply here.
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`B.
`
`The Government Cites No Cases Treating IP Addresses As
`Traditionally-Recognized Property During the Relevant Timeframe
`The Government cites no new cases dealing with IP netblocks prior to 2014. Without
`basis, it claims that Kremen v. Cohen, No. C 98-20718, 2006 WL 8443063 (N.D.Cal. Dec. 20,
`2006) “recognized the traditional property rights embodied in IP addresses, namely use,
`registration, and transferability.” Opp. at 10. The district court’s order in Kremen did nothing
`of the sort. In Kremen, as part of a judgment, the court had ordered that certain IP netblocks
`be transferred from the defendant and registered in the name of plaintiff Gary Kremen. Id.
`at *1. ARIN filed a motion for clarification, arguing that Kremen had to sign ARIN’s
`Registration Services Agreement—which clearly states that IP addresses are not property—
`before any IP addresses could be registered in his name, even if the IP addresses he was to
`receive had not previously been subject to an RSA. Id. at *2 (“ARIN is willing to transfer the
`IP Resources within its control to Kremen once Kremen signs a Registration Services
`Agreement”). Kremen argued that IP addresses were “monies and properties” that should
`undergo “no substantive change or transformation,” and that he should receive the
`netblocks “with the same rights and restrictions (no more and no less)” as the defendant. Id.
`at *2. The district court rejected Kremen’s argument and granted ARIN’s motion for clarification,
`requiring Kremen to enter into an RSA before any IP address could be registered to him. Id.
`at *3. Thus, the district court in Kremen refused the plaintiff’s request to treat IP netblocks as
`it would traditional “monies and properties.” This can hardly be characterized as a
`recognition of the “traditional property rights embodied in IP addresses.” At most, the
`district court’s decision in Kremen confirmed the ambiguity around the property question.
`Neither do the characteristics of “use, registration, and transferability” convert IP
`addresses into property. Copyrights can also be used, registered, and transferred for value,
`but the Supreme Court has nonetheless held that they are not “property” when it comes to
`federal criminal fraud. See Dowling v. United States, 473 U.S. 207, 216-17 (unauthorized sale of
`copyrighted music did not constitute theft of “property” for purposes of 18 U.S.C. § 2314).
`The Government’s own witness John Curran, the CEO of ARIN, confirms this very point. Even as the
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`Government tries to have it both ways by submitting another declaration from Mr. Curran,
`this extrinsic evidence only undercuts its argument. Mr. Curran states, “ARIN’s corollary
`assertion that ARIN registrants do not have ‘ownership’ of the underlying IP number
`resources is not in any way inconsistent with the registrants’ exclusive rights to utilize the
`resources and transfer their rights in the registry to another qualifying party for monetary
`compensation.” (Dkt. 222-2 ¶ 4.) In other words, even though a registrant may have an
`exclusive right to use, transfer, and register their IP address, that does not mean they own it.
`There is nothing new here to support the Government’s position. Mr. Curran does not
`retract his previous sworn statement: “When a registry allocates a[n IP] number to an entity,
`it is giving that entity the ability to use that number; no property right is conferred to the
`recipient.” (Dkt. 107-1 ¶14 (emphasis in original).)
`C.
`The “Characteristics” of IP Addresses Are Closer to Telephone
`Numbers and Copyrights than Domain Names
`The Court has heard these arguments before. In brief, because the Government
`cannot find supportive case law involving IP addresses, it argues the Court should treat IP
`addresses like domain names, which the Ninth Circuit has held are “property” for purposes
`of conversion. See Kremen v. Cohen, 337 F.3d 1024 (9th Cir. 2003).1 Defendants maintain that
`the correct inquiry is the one this Court has identified: whether IP addresses themselves have
`been traditionally treated as property. But even if it were appropriate for the Court to look to
`cases dealing with interests that are merely similar to IP addresses, the correct line of cases to
`apply are those involving phone numbers and copyrights, not domain names.
`Phone numbers, which are similar to IP addresses in that they are a series of numbers
`that enable devices to communicate over a network, have long been held not to be property
`
`1 Defendants previously addressed the Kremen factors at Dkt. 169-1 at 24. A key fact
`distinguishing the Ninth Circuit’s decision in Kremen is that the domain name registry,
`Network Solutions, had conceded that “the right to use a domain name is a form of
`intangible personal property.” 337 F.3d at 1029-30. In contrast, the IP address registry,
`ARIN, made no such concession and fought the plaintiff’s claim that IP addresses were
`“monies and properties.” See Kremen, 2006 WL 8443063 (N.D.Cal. Dec. 20, 2006).
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`in the context of civil conversion. See, e.g., Rotstein v. Cable & Wireless, Inc., No. G027549,
`2002 WL 691458, at *6 (Cal. Ct. App. Apr. 24, 2002) (telephone number not property for
`purpose of conversion); Teleco, Inc. v. Sw. Bell Tel. Co., 392 F. Supp. 692, 697 (W.D. Okla.
`1974), aff’d, 511 F.2d 949 (10th Cir. 1975) (“The right to telephone service is not . . . personal
`property which is capable of being converted”); see also In re StarNet, Inc., 355 F.3d 634, 637
`(7th Cir. 2004) (“No one has a property interest in a phone number”). Importantly, in Jahn v.
`1-800-FLOWERS.com, Inc., 284 F.3d 807, 811 (7th Cir. 2002), the Seventh Circuit held that
`the subscriber of a telephone number could sell the right to use the number, even if it was
`“not the subscriber’s property.” The court explained that even though phone numbers were
`not property, that “did not mean that subscribers were forbidden to transact about whatever
`interest they enjoyed in the use of the numbers currently assigned.” Id.
`Courts have also held that copyrights are not “property” in the federal criminal fraud
`context, even though they are considered to be a “bundle of exclusive rights.” See Dowling,
`473 U.S. at 216-17; United States v. LaMacchia, 871 F. Supp. 535, 543 (D. Mass. 1994)
`(copyright confers a limited property interest to the copyright holder but is not “property”
`for the purposes of the wire fraud statute). The same reasoning applies to IP addresses.2
`Notably, in response to LaMacchia, Congress modified the criminal copyright statute
`to encompass infringement for a noncommercial purpose—but it did not modify the wire fraud
`statute to broaden the definition of “property.” See H.R. Rep. 105–339, at 5 (1997), 1997 WL
`664424. Congress thus confirmed its intent to regulate copyright infringement through the
`copyright statute, not through the expansion of federal fraud. Likewise, Congress has never
`expressed an intent to insert itself into the regulation of IP addresses—and certainly not
`through the expansion of wire fraud.3 “If Congress desires to go further, it must speak more
`clearly than it has.” McNally v. United States, 483 U.S. at 360. Until then, there is no indication
`that IP addresses can be the object of wire fraud. The wire fraud counts must be dismissed.
`
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`2 See Dkts. 151 at 7-10 and 169-1 at 17-18 for full briefing on these issues.
`
`3 See Dkt. 169-1 at 15-18 for full briefing on this issue.
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`Respectfully submitted,
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`DATED: December 7, 2020
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`DATED: December 7, 2020
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`DATED: December 7, 2020
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`DATED: December 7, 2020
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`Gary S. Lincenberg
`Naeun Rim
`Bird, Marella, Boxer, Wolpert, Nessim,
`Drooks, Lincenberg & Rhow, P.C.
`
`By:
`
`s/ Naeun Rim
`Naeun Rim
`
`Attorneys for Petr Pacas
`
`David W. Wiechert
`Jessica C. Munk
`William J. Migler
`Wiechert, Munk & Goldstein, PC
`
`By:
`
`s/ Jessica C. Munk
`Jessica C. Munk
`
`Attorneys for Jacob Bychak
`
`Whitney Z. Bernstein
`Thomas H. Bienert, Jr.
`James Riddet
`BIENERT | KATZMAN PC
`
`By:
`
`s/ Whitney Z. Bernstein
`Whitney Z. Bernstein
`
`Attorneys for Mohammed Abdul Qayyum
`
`Randy K. Jones
`Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
`By:
`
`s/ Randy K. Jones
`Randy K. Jones
`
`Attorney for Mark Manoogian
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`3686803
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`Case 3:18-cr-04683-GPC Document 223 Filed 12/07/20 PageID.2315 Page 8 of 9
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`CERTIFICATE OF AUTHORIZATION
`TO SIGN ELECTRONIC SIGNATURE
`
`Pursuant to Section 2(f)(4) of the Electronic Case Filing Administrative Policies and
`
`Procedures of the United States District Court for the Southern District of California, I
`certify that the content of this document is acceptable to counsel for the Defendants and
`that I have obtained authorization from Randy K. Jones, Jessica C. Munk, and Whitney Z.
`Bernstein to affix their electronic signatures to this document.
`
`
`
`Respectfully submitted,
`
`
`Gary S. Lincenberg
`DATED: December 7, 2020
`Naeun Rim
`Bird, Marella, Boxer, Wolpert, Nessim,
`Drooks, Lincenberg & Rhow, P.C.
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`3686803
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`By:
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`s/ Naeun Rim
`Naeun Rim
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`Attorneys for Petr Pacas
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`Case 3:18-cr-04683-GPC Document 223 Filed 12/07/20 PageID.2316 Page 9 of 9
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`CERTIFICATE OF SERVICE
`Counsel for Defendants certify that the foregoing pleading has been electronically
`served on the following parties by virtue of their registration with the CM/ECF system:
`Sabrina L. Feve
`Assistant U.S. Attorney
`sabrina.feve@usdoj.gov
`
`Melanie K. Pierson
`Assistance U.S. Attorney
`melanie.pierson@usdoj.gov
`
`Ashley E. Goff
`Assistant U.S. Attorney
`Ashley.Goff@usdoj.gov
`
`Respectfully submitted,
`
`Gary S. Lincenberg
`Naeun Rim
`Bird, Marella, Boxer, Wolpert, Nessim,
`Drooks, Lincenberg & Rhow, P.C.
`
`By:
`
`s/ Naeun Rim
`Naeun Rim
`Attorneys for Petr Pacas
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`DATED: December 7, 2020
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