A short post by Colette Vogele, at Stanford's Center for Internet and Society, Schloss hearing, suggests that the judge in the case will likely allow the case to proceed, denying the defendant's motion to dismiss. She attended the hearing and had this to say:
From the hearing, I felt Judge Ware was fairly predisposed to rule in Professor Schloss's favor and allow the case to proceed beyond pleadings. I was really impressed with how prepared he was and how he clearly understood the background and factual questions that were being raised by the defendant's motion to dismiss the complaint. Although he didn't rule on the motion at the time of the hearing, he did give a strong indication that he'd be issuing a scheduling order (so, I gather he's not dismissing the case!).
If you are not familiar with this case, The Center, whose attorneys are representing Schloss, also has more information on it. It is a very high-stakes fair use case, so we should all be watching it carefully.
