[00:00:02] Speaker 02:
Well, from all, first case for arguments this morning is 151066, Commonwealth Client-Hypics versus Districtal Systems, Mr. Equest.

[00:00:15] Speaker 02:
Before we start the clock running, we just had a few preliminary comments about some of the markings in the briefs for both parties.

[00:00:23] Speaker 02:
So I'll turn to Richard.

[00:00:26] Speaker 01:
As you know, legal argument cannot be marked as confidential.

[00:00:31] Speaker 01:
And it appears that in the blue brief and the reply brief in particular, that there are such markings, for example, on page three of the blue brief.

[00:00:39] Speaker 01:
It talks about compounding that error.

[00:00:42] Speaker 01:
Cicero's rates were based on little more than the rule of thumb.

[00:00:45] Speaker 01:
This court rejected it in Unilock.

[00:00:47] Speaker 01:
And there are various other references to that.

[00:00:51] Speaker 01:
Page 34 of the brief and 37 and so on and so forth.

[00:00:55] Speaker 01:
That kind of marking is not proper and indeed is sanctionable.

[00:01:01] Speaker 03:
Judge Steig, the reason that those were marked was that the underlying information from CSIRO's consultant that engaged in that specific methodology was treated as confidential and in order to try to be faithful to

[00:01:16] Speaker 03:
maintaining the confidentiality of what their consultant had done, we felt that it was necessary to mark that as confidential within the briefing itself.

[00:01:26] Speaker 03:
Obviously, if the court disagreed... That's not proper.

[00:01:30] Speaker 01:
That's legal argument, citing cases, talking about the 25% rule of thumb.

[00:01:35] Speaker 01:
That's extending confidentiality far beyond

[00:01:38] Speaker 03:
It's just like, obviously, I apologize for any error and take responsibility for that.

[00:01:43] Speaker 03:
Again, our intent was to try to avoid disclosing precisely what the methodology was that had been used by the consultant.

[00:01:51] Speaker 03:
We're happy, of course, to file amended copies of the briefs if it would assist the court.

[00:01:57] Speaker 03:
And if the court wants to treat those portions as unredacted, assuming that there are no objections from my colleague at CIRA, whose material we were attempting to try to

[00:02:07] Speaker 03:
prevent from disclosing, we certainly don't have any objection to doing that.

[00:02:12] Speaker 02:
Do you have a comment, sir?

[00:02:13] Speaker 05:
Your Honor, the only information that CSIRO has requested be marked confidential is information belonging to third parties like counterparties and licenses to whom we owe either contractual duty of confidentiality or

[00:02:32] Speaker 05:
subject to the district court.

[00:02:34] Speaker 01:
You don't need to understand.

[00:02:36] Speaker 01:
You're not supposed to mark this sort of thing as confidential.

[00:02:39] Speaker 01:
And the bar needs to understand that the fact that things are marked confidential in the district court doesn't mean that when you're making legal arguments that don't refer, for example, to profit percentages or whatever, can't be marked confidential.

[00:02:58] Speaker 05:
For the teeth, for example, that your honor referenced,

[00:03:01] Speaker 05:
CYRO has no objection to that being unredacted.

[00:03:05] Speaker 05:
In fact, any of CYRO's information, other than third party information, we have no objection to that being fully disclosed in the public record.

[00:03:15] Speaker 05:
But we'd be happy to, I think, revisit and make additional comments.

[00:03:19] Speaker 02:
What if you confer and submit within five working days?

[00:03:23] Speaker 02:
Absolutely.

[00:03:24] Speaker 02:
Additional copy for the brief.

[00:03:26] Speaker 02:
Absolutely.

[00:03:27] Speaker 02:
This is simply because we, you know, there's a, we feel compelled to recognize that there's really a public notice function here and that the public really has a right to know the details.

[00:03:36] Speaker 02:
So we're very sensitive as a court.

[00:03:38] Speaker 03:
I appreciate that Chief Judge Prost.

[00:03:39] Speaker 03:
And Judge Stike, I appreciate the points that you've made and completely understand them.

[00:03:43] Speaker 03:
Again, we were just attempting to preserve the confidentiality of the arguments that had been made by Cyrus Consultant, but I take the court's point and we're happy to

[00:03:53] Speaker 03:
with them and to submit versions in which particularly the material that you've identified has been unredacted, and we'll confer about whether there are other materials that can be unredacted as well.

[00:04:04] Speaker 00:
Thank you.

[00:04:06] Speaker 02:
Okay.

[00:04:06] Speaker 02:
We'll get started now on the argument.

[00:04:08] Speaker 03:
Thank you.

[00:04:09] Speaker 03:
Thank you, Chief Judge Prost.

[00:04:10] Speaker 03:
May it please the Court again, John O'Quinn, on behalf of Cisco.

[00:04:13] Speaker 03:
The District Court committed a series of legal errors by awarding a royalty in which it first used multi-component end products rather than ships as the royalty base.

[00:04:22] Speaker 03:
Second, used the patentee's unaccepted offer rather than the real-world license between these parties as the starting point for the rate.

[00:04:30] Speaker 03:
And third, rejected the very adjustments to that rate that this court specifically required in Erickson to account for standardization.

[00:04:37] Speaker 03:
The damages award is thus inconsistent with this court's decisions in Vernetix and Erickson, which the district court did not have the benefit of at the time that it was writing its opinion.

[00:04:45] Speaker 03:
as well as laser dynamics and Unilock.

[00:04:48] Speaker 02:
Can I start here with the final point you made about standardization because it was kind of confusing to me about what was happening here.

[00:04:55] Speaker 02:
There's no RAND commitment with respect to the 69 patent, right?

[00:04:59] Speaker 03:
No, that's not quite right, Chief Judge Kroos.

[00:05:00] Speaker 03:
There's no dispute that there was a RAND commitment with respect to... On A, right?

[00:05:06] Speaker 03:
With respect to 802.11A.

[00:05:08] Speaker 03:
With respect to 802.11G, you can see at A9, Siro represented to the industry that

[00:05:15] Speaker 03:
The IEEE is aware of our patents and we've agreed with the IEEE we will grant licenses under our patents on a RAND basis and were specifically referred both to A and G, but there was no actual formal agreement with respect to G. And then with respect to 802.11n,

[00:05:33] Speaker 03:
you have clearly a product of lock-in.

[00:05:36] Speaker 02:
If you look at A. But if you fit to the G, for example, so there's no dispute that there was no RAND commitment.

[00:05:43] Speaker 03:
There's no dispute that there was no RAND commitment that was ultimately made.

[00:05:46] Speaker 03:
There was certainly a representation to the community, which explains part of why it was that.

[00:05:51] Speaker 02:
No, I understand that.

[00:05:52] Speaker 02:
So in the absence of a RAND commitment, I mean, Erickson and other cases have referred to what happens when there's a RAND commitment.

[00:05:59] Speaker 02:
And Erickson explicitly talked about adjusting the Georgia Pacific factors.

[00:06:03] Speaker 02:
in that regard.

[00:06:04] Speaker 02:
But is it your view that even in the absence of a RAND commitment, because it's part of the standard, the district court has to apportion the value attributable to standardization?

[00:06:15] Speaker 02:
That's part one.

[00:06:16] Speaker 02:
And the question, part two, is how does he do that?

[00:06:18] Speaker 02:
I mean, Judge Davis here did refer to it in several portions of his opinion, seeming to try to at least account for the standardization.

[00:06:26] Speaker 03:
Well, with respect to the second point, I would submit that what the district court did is exactly the opposite of what Erickson required.

[00:06:32] Speaker 03:
He did take into account the fact that there had been standardization, and he gave CSIRO the benefit of that and said, I'm going to look to things that were later in time after the market had changed because of 802.11A and 802.11G.

[00:06:45] Speaker 01:
Of course he increased the royalty because of the lock-in rather than decreased it.

[00:06:50] Speaker 01:
Well, so what he did- Wait, wait.

[00:06:52] Speaker 03:
Isn't that accurate?

[00:06:53] Speaker 03:
He increased the royalty as a result of the lock-in as opposed to decreasing it.

[00:06:57] Speaker 03:
Or he found that factors 8, 9, and 10 all favored an upward adjustment.

[00:07:02] Speaker 03:
Whereas Erickson, to come back to your first question, Judge Prost, Erickson specifically says, and this is a 1231 of that opinion, that factors 8, 9, and 10 need to be adjusted, quote, for set patents generally and not just for rand encumbered patents.

[00:07:18] Speaker 03:
And the reason for that is because when you have lock-in, then factors like 8, 9, and 10

[00:07:23] Speaker 03:
no longer makes sense the way that they do outside of standardization because it means that the reason that a particular product has commercial success or the reason competing products don't have commercial success is either the first was part of the standard and the second is not part of the standard.

[00:07:38] Speaker 02:
And how is that distinction, do we use experts to determine what the differential is between the value because of standardization and not?

[00:07:48] Speaker 03:
Well, Erickson identifies a number of ways that a court could potentially take that into account in court, including looking to things that happened pre-standardization.

[00:07:56] Speaker 03:
And here, the district court didn't do that.

[00:07:58] Speaker 03:
In fact, he rejected reliance on the TLA and A22 of his opinion precisely because it was pre-standardization.

[00:08:08] Speaker 03:
He said it was too early in time before commercialization had occurred and the market had changed.

[00:08:13] Speaker 03:
And Erickson says you may even need to adjust the time of the hypothetical negotiation

[00:08:17] Speaker 03:
to take into account the effects of standardization.

[00:08:20] Speaker 03:
And here it was a virtue, not a vice, that the TLA predated standardization.

[00:08:26] Speaker 01:
What about other aspects of the TLA?

[00:08:28] Speaker 01:
I understand what you're saying about that.

[00:08:29] Speaker 01:
What about other aspects of the TLA?

[00:08:32] Speaker 01:
And in particular, the suggestion that the TLA rates reflected other kinds of compensations

[00:08:40] Speaker 01:
Going from radio, whatever the name of it is, to Commonwealth and in particular a license on further developments with respect to the chip.

[00:08:52] Speaker 03:
Sure, Judge Stike.

[00:08:53] Speaker 03:
Well, first, the district court certainly mentioned those factors in deciding that he didn't view the TLA as a comparable license and in determining that Cisco's damages model wasn't reliable.

[00:09:05] Speaker 03:
But he also said at page A23 of his opinion that, quote, the primary problem with Cisco's damages model was that it uses chips rather than end products as the base.

[00:09:16] Speaker 03:
And that, of course, is legal error.

[00:09:18] Speaker 03:
I understand.

[00:09:21] Speaker 01:
But what about the suggestion that the rates were distorted because there was other compensation going to Congress?

[00:09:29] Speaker 03:
So a few points on that.

[00:09:30] Speaker 03:
First, by the time that the TLA was, of course, amended, such that you no longer had Radiata as a party, but you actually had Cisco as a party, a number of amendments took place that would have changed the dynamic of the relationship between the parties.

[00:09:45] Speaker 01:
Did it change the relationship in this respect in terms of the royalty-free license for further development?

[00:09:51] Speaker 03:
Judge Dyke, I'm not sure that it changed that particularly.

[00:09:54] Speaker 03:
I know that there were changes to the definition of the term product.

[00:09:58] Speaker 03:
I know that there were changes to some of the treatment of IP.

[00:10:02] Speaker 03:
But the one thing that didn't change through these amendments that would have been contemporaneous with the hypothetical negotiation was the rates and the base.

[00:10:10] Speaker 01:
And the other thing that... Was there any expert testimony about why the TLA was particularly good evidence because you would not

[00:10:20] Speaker 01:
find in this royalty-free license any significant compensation going from Radiata to Commonwealth?

[00:10:27] Speaker 03:
Absolutely, just like there was both fact evidence and there was expert evidence that's related to the first part of your question.

[00:10:34] Speaker 03:
There was evidence from cyrozone witnesses that the TLA was a quote arms length transaction.

[00:10:39] Speaker 03:
That's an A-235 and then there's evidence.

[00:10:42] Speaker 01:
It could be an arms length transaction and still involve additional consideration not reflected in the license.

[00:10:48] Speaker 03:
Right, and there were other, there was other evidence including PWC's valuation of the 069 patent at A947, which our expert used along with another piece of data, the Macquarie settlement between

[00:11:04] Speaker 03:
Siro and Macquarie University on how to apportion out what was attributable to the 069 patent and what was not and that was discussed by our expert Mr. Mr. Bakewell and some of that's reflected at A1356 and 1378 among other places.

[00:11:21] Speaker 03:
So yes there was absolutely an attempt to take that into account.

[00:11:25] Speaker 02:
This is just for purpose.

[00:11:26] Speaker 02:
I'm just trying to refresh my recollection because there are a lot of numbers thrown around.

[00:11:29] Speaker 02:
Weren't the numbers for the TLA not majorly different than the numbers that were thrown around in the negotiations?

[00:11:37] Speaker 02:
Isn't the TLA problem the fact that the price of chips decreased dramatically during the damages period?

[00:11:45] Speaker 02:
So now you want those numbers to reflect that decrease and the other side does not, obviously.

[00:11:50] Speaker 03:
So Judge, the TLA, of course, is tied to a percent of CHIP prices.

[00:11:56] Speaker 03:
That's right.

[00:11:58] Speaker 02:
And so the numbers themselves at the earlier period of time were not that significantly different from the award here.

[00:12:06] Speaker 02:
The difference is that if you then apply the percentages to the declining chip price, it gets you a far lower number, right?

[00:12:15] Speaker 03:
Well, that's certainly true.

[00:12:17] Speaker 03:
I do think that there's a problem here fundamentally when you have a district court that uses

[00:12:21] Speaker 03:
the end product as the base, as opposed to at least starting with the smallest available unit, precisely because he's looking to that.

[00:12:31] Speaker 01:
And this is a case where... But the trouble is, if you have license negotiation or licenses that are based on the end product, I mean, it doesn't seem to me that it is reasonable to say that those should be entirely ignored.

[00:12:45] Speaker 01:
It may be that there should be a preference

[00:12:48] Speaker 01:
for a license with respect to the smallest saleable unit.

[00:12:50] Speaker 01:
But if you have licenses, license negotiations, with respect to the end product, surely we shouldn't throw those out the window entirely.

[00:12:58] Speaker 03:
So Judge Dyke, we're not arguing in the context of this case that this report was required to ignore those altogether, although the CSIRO rate card has a number of fundamental flaws in it.

[00:13:08] Speaker 03:
And it was improper for the district court to rely on that.

[00:13:12] Speaker 03:
But with respect to the Lang suggestion,

[00:13:16] Speaker 03:
You have a situation where that is years after the hypothetical negotiation.

[00:13:19] Speaker 03:
It's after CSIRO has begun its enforcement campaign, pre-eBay, in which CSIRO is seeking injunctive relief.

[00:13:26] Speaker 03:
And it raises real serious concerns for district court to potentially use that as a starting point, precisely because it will chill negotiations.

[00:13:33] Speaker 03:
You have the same policy concerns that you have embedded with using litigation-driven licenses, except this isn't even a license.

[00:13:42] Speaker 03:
It's not even offered.

[00:13:43] Speaker 03:
The most the district court could say it was was an inchoate suggestion.

[00:13:46] Speaker 03:
And that's certainly going to have, I think, real ramifications in terms of chilling negotiations.

[00:13:51] Speaker 01:
Some of the things that you have with respect to 408.

[00:13:55] Speaker 01:
is made in the course of negotiations isn't just as pertinent as a license.

[00:14:00] Speaker 01:
There may be reasons for disregarding it because it's litigation-driven and so on and so forth because it reflects the holdup value.

[00:14:07] Speaker 01:
I mean, there are arguments, but it doesn't seem to me that the mere fact that it's a negotiation rather than a license renders it irrelevant.

[00:14:15] Speaker 03:
I don't think that this Court has ever sanctioned the notion of using negotiations as a starting point.

[00:14:21] Speaker 03:
And in fact, in Hanson versus Alpine Ski,

[00:14:23] Speaker 03:
from 1983, this court rejected the notion of using offers as a starting point precisely because they weren't a, quote, established rate.

[00:14:31] Speaker 03:
I think those concerns are presented here.

[00:14:34] Speaker 03:
And with respect to one of the questions that Chief Judge Crost asked a few minutes ago, I think it's important to also understand that the parties at the time of the hypothetical negotiation absolutely knew that chip prices were anticipated to decline.

[00:14:46] Speaker 03:
That was in the Schellar letter itself, A1261, that chip prices would eventually become a commodity.

[00:14:53] Speaker 03:
Cyrus Expert conceded at A514 that chip prices would have been expected to decline.

[00:14:57] Speaker 04:
The primary problem... But isn't that precisely why the district court looked at the chip and decided it wasn't a proper reflection of a good base value because it wasn't going to reflect the value of the patent?

[00:15:12] Speaker 04:
Because the chip prices

[00:15:13] Speaker 04:
don't reflect the full value.

[00:15:15] Speaker 04:
I mean, you can disagree about where they start.

[00:15:17] Speaker 04:
There's lots of evidence going both ways here, but the district court made some pretty specific findings on this and considered your arguments and rejected them and found that not only was the chip not the proper base, it found that it tried to separate out the standardization from the patent value when it looked and said,

[00:15:38] Speaker 04:
not only, even though this is incorporated in the standard, what's driving the success of this is the technology, not just the standardization.

[00:15:47] Speaker 04:
I mean, there are quotes in the district court's opinion.

[00:15:50] Speaker 04:
I understand it's a very complicated thing here, but at the end of the day, you know, the district court seems to be in the best position to look at all this and make a judgment.

[00:16:00] Speaker 04:
Judge, she has a number of points that you made.

[00:16:01] Speaker 03:
First of all, while you can

[00:16:03] Speaker 03:
try to characterize them as fact points.

[00:16:05] Speaker 03:
They're really not.

[00:16:05] Speaker 03:
They ultimately come down to legal issues.

[00:16:07] Speaker 03:
I mean, there's no basis for the district court effectively using the entire market value.

[00:16:13] Speaker 03:
If you're going to use the entire market value, you've got to have the factual findings that the entire market value rule requires.

[00:16:19] Speaker 03:
They didn't argue, Syra didn't argue that the entire market value rule applied.

[00:16:22] Speaker 03:
And the district court didn't purport to find it applied.

[00:16:24] Speaker 03:
But nonetheless, he identifies the base as, quote, the revenue pool implicated by the infringement and says, I'm going to use the revenue pool for end products.

[00:16:33] Speaker 03:
And then the rate is going to be, quote, the percentage of that pool adequate to compensate the plaintiff for infringement.

[00:16:38] Speaker 03:
That's an A4 of his opinion.

[00:16:40] Speaker 03:
That is fundamentally inconsistent with this court's decisions in Laser Dynamics and Vernetics.

[00:16:45] Speaker 03:
Now, to be sure, the district court didn't have the benefit of Vernetics at the time of his opinion.

[00:16:49] Speaker 03:
But Vernetics tells you that applying the Supreme Court's decision in Gerritsen, you have to apportion in all cases.

[00:16:55] Speaker 03:
unless the entire market value rule is satisfied.

[00:16:58] Speaker 02:
And there's no factual finding.

[00:17:00] Speaker 02:
You're conflating two things.

[00:17:01] Speaker 02:
There's the entire market value rule versus the smallest available unit.

[00:17:06] Speaker 02:
And then there's this other notion of apportionment.

[00:17:09] Speaker 02:
And maybe Erickson is the best case that illuminated that.

[00:17:13] Speaker 02:
I mean, they sort of differentiate it.

[00:17:15] Speaker 02:
What are we going to use as the royalty base?

[00:17:17] Speaker 02:
The key here is to do an appropriate apportionment.

[00:17:21] Speaker 02:
And certainly in the absence of a jury, as we have here with this event trial, all the concerns that drove a lot of what the rejection of the entire market value rule in most circumstances was the fear that juries would be unduly influenced by these large numbers.

[00:17:37] Speaker 02:
And that obviously doesn't apply here as well.

[00:17:39] Speaker 03:
So respectfully, Chief Judge Prost, I think that Erickson makes clear that there are two rationales for the rule.

[00:17:46] Speaker 03:
One is substantive and one is evidentiary, but not that the entire market value rule isn't implicated if you don't have a jury presence.

[00:17:55] Speaker 03:
And in fact, that wouldn't make sense at all.

[00:17:57] Speaker 02:
But Erickson talks about apportionment being the key.

[00:18:01] Speaker 02:
It sort of drifts away from entire market value, which is

[00:18:04] Speaker 02:
has a value because of the evidentiary concerns.

[00:18:07] Speaker 02:
But it says, but at the end of the day, the be all and end all is apportionment.

[00:18:11] Speaker 03:
But apportionment, of course, is just the flip side of the entire market value rule.

[00:18:15] Speaker 01:
No, it's not.

[00:18:16] Speaker 01:
That's not true.

[00:18:19] Speaker 01:
The central apportionment concern here

[00:18:23] Speaker 01:
It seems to me is the failure of the district court to apportion for the fact that this became the standard, for the holdup value of this, which is entirely separate, a separate issue from the entire market value rule.

[00:18:35] Speaker 01:
You focus so much on the smallest saleable unit, and there are arguments why you should focus on the smallest saleable unit.

[00:18:41] Speaker 01:
But the real problem here is the failure to take account of the fact that this became the standard.

[00:18:47] Speaker 01:
And a lot of the value of the patent is the fact that it was adopted.

[00:18:52] Speaker 03:
I certainly agree that the standardization issue here is a real problem.

[00:18:57] Speaker 03:
Respectfully, Judge Hughes, the district court didn't take into account standardization in the way that Erickson says that it's supposed to.

[00:19:03] Speaker 03:
He did exactly the opposite of what Erickson requires.

[00:19:06] Speaker 03:
He gave them the benefit of standardization.

[00:19:09] Speaker 03:
Ultimately, the premise of laser dynamics and vernetics and the whole point of apportionment is to get down to the component

[00:19:16] Speaker 03:
that the market has put a value on is the component that actually practices what's inventive about the patent because presumably that is going to be the best way of being able to determine what the value of the invention is in a multi-component product.

[00:19:30] Speaker 01:
Why does that mean that we should ignore negotiations and license between the parties that don't focus on the smallest saleable unit and instead focus on the end product?

[00:19:39] Speaker 01:
It seems to me you're arguing that we must ignore

[00:19:44] Speaker 01:
The parties focus on the end product.

[00:19:47] Speaker 01:
I don't follow that.

[00:19:48] Speaker 03:
Judge Stipe, first, I'm not arguing that the court has to ignore that.

[00:19:51] Speaker 03:
Erickson contemplated that the court, for example, could consider licenses that were based on end products, but you had to engage in apportionment.

[00:19:58] Speaker 03:
But part of the problem here, the fundamental problem with the district court's approach was to reject

[00:20:04] Speaker 03:
Cisco's entire damages model, and the primary reason for that, that's an A23, the primary reason for that was because it used chip prices rather than end prices.

[00:20:14] Speaker 04:
And so the district court's fund owner here... Under Harris, and that's a perfectly proper rejection if he gives good reasons for it, which he did.

[00:20:21] Speaker 04:
He said those chip prices don't properly reflect the value of the patent.

[00:20:26] Speaker 04:
It seems like that's okay, and we can go with that.

[00:20:30] Speaker 04:
The problem here seems to be that his

[00:20:32] Speaker 04:
his separating out the standardization value is a little suspect.

[00:20:37] Speaker 04:
And so I don't understand why you keep going back to the first point, because what you should be arguing is he didn't apportion properly.

[00:20:45] Speaker 04:
I don't see any reversible error in him deciding not to start with an artificially low chip rate.

[00:20:51] Speaker 04:
I mean, that's exactly what Erickson was intended to allow and not have an inflexible entire market value or smallest saleable unit rule.

[00:21:00] Speaker 04:
So why is there a problem here?

[00:21:02] Speaker 03:
the apportionment.

[00:21:04] Speaker 03:
So Judge Hughes, I absolutely agree that apportionment here is the fundamental problem.

[00:21:08] Speaker 03:
And it's a fundamental problem for all of the reasons that you just articulated.

[00:21:12] Speaker 03:
It's the fundamental problem here because it failed to account for the effects of standardization.

[00:21:17] Speaker 03:
Respectfully, I think it also is a problem here because it does take in-product value and use that as the starting point.

[00:21:25] Speaker 03:
But you agree that that's not, as a matter of law, improper as long as proper apportionment is done from that base.

[00:21:32] Speaker 03:
So Vernetix itself specifically says that determining the smallest available unit is, quote, simply a step toward meeting the requirement of apportionment.

[00:21:42] Speaker 03:
And so I agree with you.

[00:21:43] Speaker 01:
Yes, you could, as a logical matter, start- It doesn't have an apportionment problem at all.

[00:21:47] Speaker 01:
You can have somebody focus on the smallest available unit and still not apportion.

[00:21:51] Speaker 01:
to take into account the value attributable to standardization.

[00:21:54] Speaker 01:
They're separate issues.

[00:21:56] Speaker 01:
I completely agree.

[00:21:57] Speaker 03:
And I'm not trying to conflict them.

[00:21:59] Speaker 03:
There are multiple problems here with the district court's reasoning, any one of which requires remand.

[00:22:07] Speaker 03:
The failure to apportion to take into account standardization by itself requires a remand here

[00:22:13] Speaker 03:
and reconsideration of the damages award.

[00:22:16] Speaker 03:
I'm just saying that there are additional reasons as well.

[00:22:19] Speaker 02:
I think you're well over your rebuttal time.

[00:22:22] Speaker 02:
We'll restore three minutes of rebuttal, and we'll add five minutes to the other side to try to keep it even.

[00:22:28] Speaker 02:
Thank you, Chief Justice.

[00:22:28] Speaker 02:
Thank you.

[00:22:32] Speaker 05:
Good morning, and may it please the court.

[00:22:35] Speaker 05:
We have obviously some fundamental disagreements.

[00:22:39] Speaker 02:
Can you start where your friend left off, which was talking about the impact of standardization on the numbers used here and why you think, presumably, that the district court got it right and properly accounted for standardization?

[00:22:53] Speaker 05:
Absolutely, Your Honor.

[00:22:56] Speaker 05:
First of all, to answer Your Honor's first question, there is no rain commitment.

[00:23:01] Speaker 05:
district court found as a matter of fact that there was no rank commitment on G, which are the overwhelming majority of the product.

[00:23:06] Speaker 02:
No.

[00:23:07] Speaker 02:
OK.

[00:23:07] Speaker 02:
Let me start.

[00:23:08] Speaker 02:
So the first question I asked your friend was, in the absence of a rank commitment, let's take that as a given.

[00:23:13] Speaker 02:
Is it still not the case that the district court has to consider taking into account and put the value attributable, account for the value attributable standardization?

[00:23:24] Speaker 05:
Yes.

[00:23:25] Speaker 05:
And the court was clear about that in Erickson.

[00:23:27] Speaker 05:
But here the district court did exactly what was required.

[00:23:31] Speaker 05:
How did he do that?

[00:23:33] Speaker 05:
I think that's where we're having trouble.

[00:23:35] Speaker 05:
Well, number one, the district court found that this patent covers the core of the standards.

[00:23:43] Speaker 05:
So we're not talking about a minor feature where we're worried about CSIRO being in the right place at the right time.

[00:23:48] Speaker 01:
Well, how's that an answer?

[00:23:49] Speaker 01:
I don't understand how that's an answer to the problem.

[00:23:52] Speaker 05:
Well, because it's the core, Your Honor, he found that the 069 patent played a significant role in the commercial success of 802.11 products.

[00:24:02] Speaker 02:
So he found that the... Yeah, but what is that?

[00:24:04] Speaker 02:
We're talking about standardization here and whatever impact is attributable to the standardization.

[00:24:10] Speaker 02:
So how does that account for it?

[00:24:13] Speaker 05:
Well, he found that this patent was responsible for the success of 802.11 products

[00:24:19] Speaker 05:
Generally speaking and when he apportioned out the patented versus unpatented features.

[00:24:24] Speaker 05:
He also talked about the benefits that were that this patent Provided to those end products where they strip out the standardization value I read the opinion three times.

[00:24:37] Speaker 01:
I don't find it.

[00:24:38] Speaker 01:
It seems to me did the opposite It seems to me he increased the royalty rate because of the standardization rather than to strip it out of the calculation

[00:24:49] Speaker 05:
Your Honor, he did walk through George Pacific 8, 9, 10, and 13, and he did talk about the value that this technology added to it, and I think we should be mindful of... But what about the standardization?

[00:25:00] Speaker 02:
I mean, look at page 826, his opinion, and where he talks about Georgia Pacific factors to determine adjustments.

[00:25:07] Speaker 02:
There's a sentence towards the end of the page.

[00:25:10] Speaker 02:
Although other courts have made specific adjustments to the Georgia Pacific factors to take a RAND commitment into account, specific adjustments to the overall framework are not necessary here.

[00:25:20] Speaker 05:
Well, that's correct.

[00:25:21] Speaker 05:
And I think he's talking there about the RAND context, and in Erickson, this court

[00:25:26] Speaker 05:
rejected the idea that the Georgia Pacific factors need to be modified in all circumstances or in a prescribed way.

[00:25:31] Speaker 05:
We're talking here about standardization and not about RAND.

[00:25:35] Speaker 01:
One of the... How about where did he take into account the need to strip out the value attributable to the standardization?

[00:25:44] Speaker 01:
Now, to be sure, to be fair to the district judge here, he didn't have the benefit of Erickson when he wrote this opinion.

[00:25:51] Speaker 01:
But in the light of Erickson, how can this be sustained when he failed to strip that out?

[00:25:59] Speaker 05:
Well, he didn't have the benefit of Erickson, so I think that we need to do a little bit of the work and go into what he said to find where he said what value this patent added to the standard versus what value the standard added to the

[00:26:15] Speaker 04:
to the patent itself.

[00:26:17] Speaker 04:
And he didn't say very much.

[00:26:19] Speaker 04:
This is your problem.

[00:26:20] Speaker 04:
I mean, I'm looking at his opinion and looking at Effectors 9 and 10, which is, I think, where you account for it.

[00:26:25] Speaker 04:
In no way, that's in a paragraph starting at the bottom of a 28, 27 of the opinion, going to the top of a 29, 28 of the opinion.

[00:26:35] Speaker 04:
That paragraph doesn't even start to suggest that there should be an apportionment for the standardization

[00:26:43] Speaker 04:
versus the improvements of the technology.

[00:26:45] Speaker 04:
It talks about the improvements of the technology, but it nowhere says that we have to consider an adjustment for standardization.

[00:26:55] Speaker 04:
In fact, again, he does the exact opposite and says these favor an upward adjustment.

[00:27:00] Speaker 04:
Isn't that precisely wrong?

[00:27:02] Speaker 04:
Because it should favor a lower adjustment.

[00:27:05] Speaker 04:
or at least he has to explain why a lower adjustment is not proper when he's talking about standardization.

[00:27:12] Speaker 05:
Your Honor is absolutely correct.

[00:27:13] Speaker 05:
He didn't do it in a mechanical way, and Erikson doesn't require that there's a particular format.

[00:27:16] Speaker 04:
Mechanical way?

[00:27:17] Speaker 05:
How did he do it in a non-mechanical way?

[00:27:19] Speaker 04:
Can you point to any place in his opinion where he says he considered downward adjustment for standardization?

[00:27:25] Speaker 05:
If you look at footnote 12,

[00:27:29] Speaker 05:
He doesn't say that he is doing that.

[00:27:32] Speaker 05:
That's on A-22 or A-21.

[00:27:34] Speaker 02:
Yeah, that really doesn't do it.

[00:27:35] Speaker 02:
I mean, I have that 1 mark, too, because we scoured the opinion looking for any accounting.

[00:27:40] Speaker 02:
And all he says here is this is not an indication that the value of the patent increased solely because it was included in the standard, rather as a whole.

[00:27:49] Speaker 02:
That doesn't do it for you, right?

[00:27:50] Speaker 02:
What is that?

[00:27:51] Speaker 05:
Well, it shows that he was aware of it.

[00:27:53] Speaker 04:
These issues were certainly present.

[00:27:54] Speaker 04:
But he didn't look at, of course, he just said, well, part of it may have been due to standardization.

[00:27:59] Speaker 04:
part of it may have been due to technology.

[00:28:02] Speaker 04:
He didn't explain why the number he arrived at considered whether to depart upward or downward.

[00:28:08] Speaker 05:
I think there are some unique facts here that help.

[00:28:13] Speaker 05:
First of all, let me answer your earlier question about whether

[00:28:17] Speaker 05:
considering the value of standardization versus the value that the patent as the standardization would require that the adjustment for factors 9 and 10 be upward or at least neutral.

[00:28:28] Speaker 05:
There are circumstances where we know that

[00:28:30] Speaker 05:
as Judge Rader referenced in his concurrence in Apple, that standardization may simply reflect the value that's inherent in the technology.

[00:28:36] Speaker 05:
And the fact that it's incorporated into the standard doesn't mean that that value is destroyed.

[00:28:41] Speaker 05:
We don't necessarily lower it just because it's been increased.

[00:28:43] Speaker 05:
But he didn't make that finding, Karen.

[00:28:45] Speaker 05:
But he did find that the IEEE, on repeated occasion,

[00:28:50] Speaker 05:
adopted this.

[00:28:50] Speaker 04:
Now remember that at the time... But they didn't say they adopted it because it was a superior technology, nor did he make that finding.

[00:28:58] Speaker 05:
He did not, but if you look at the record, that evidence is in there.

[00:29:03] Speaker 05:
Well, we're not supposed to make findings.

[00:29:06] Speaker 01:
He's supposed to make findings.

[00:29:07] Speaker 05:
Well, Your Honor, the standard review here says that if the record as a whole... Now, not if the judge didn't address the issue.

[00:29:15] Speaker 01:
We don't sustain a decision which is based on the absence of a finding because the judge could have made the finding based on the record.

[00:29:26] Speaker 05:
Your Honor, I respectfully disagree.

[00:29:29] Speaker 05:
I believe that the standard requires that if the record as a whole supports his conclusions, I mean, he's not required to cite every fact in the record.

[00:29:37] Speaker 04:
But he has to make a conclusion.

[00:29:38] Speaker 04:
Again, where in this opinion did he make a conclusion that the value here is attributable to the technology and not to the standardization?

[00:29:49] Speaker 04:
Where to find that it's attributable in part to both and try to apportion it?

[00:29:54] Speaker 05:
He didn't reach that conclusion, but I think that the preliminary facts that get him there are certainly present throughout his opinion.

[00:30:06] Speaker 01:
Could I move you on to the TLA?

[00:30:12] Speaker 01:
where it seems to me he may have made an additional error because he rejected the TLA primarily, not exclusively, but primarily because of the 1998 date.

[00:30:22] Speaker 01:
He ignored the fact that the TLA was amended in 2001 and 2003 much closer to the

[00:30:34] Speaker 01:
What was the basis for ignoring the fact that the same rates continued after those amendments in 2001 and 2003?

[00:30:46] Speaker 01:
Because SIR was contractually bound to honor those rates.

[00:30:50] Speaker 05:
Well, but it had the ability to set aside the agreement.

[00:30:54] Speaker 05:
It did not have the ability to set aside the agreement.

[00:30:56] Speaker 05:
The evidence in the record is clear.

[00:30:58] Speaker 05:
Syro did not have the ability to renegotiate the price terms of that agreement.

[00:31:03] Speaker 01:
But it says that if there was a transfer of all of the assets, which there was, to Cisco, it could terminate the agreement, no?

[00:31:10] Speaker 05:
It could terminate the agreement only if

[00:31:14] Speaker 05:
Only if Cisco was unable to fill the other development provisions of the TLA.

[00:31:19] Speaker 05:
Where does it say that?

[00:31:20] Speaker 05:
It says it's right in the TLA.

[00:31:29] Speaker 05:
Give me just a moment, I'll find that for you, Your Honor.

[00:31:35] Speaker 01:
Well, I don't want to hold you up, but I don't find it there.

[00:31:39] Speaker 01:
Let's assume hypothetically that I'm correct, that they did have the ability, that Commonwealth had the ability to terminate the agreement.

[00:31:47] Speaker 01:
Under those circumstances, doesn't the fact that the royalty rate continues have some significance?

[00:31:53] Speaker 01:
Isn't it incorrect under those circumstances to dismiss the agreement because of the 1998 date?

[00:31:57] Speaker 01:
Under that hypothetical?

[00:32:01] Speaker 05:
Under that hypothetical, yes.

[00:32:03] Speaker 05:
But there are four reasons that he rejected use of the TLA.

[00:32:07] Speaker 05:
the timing is only one of them.

[00:32:09] Speaker 05:
So there are still three other legs on which that decision to reject the TLA can stand.

[00:32:14] Speaker 05:
And remember that he's sitting as a finder.

[00:32:15] Speaker 05:
What are the other reasons?

[00:32:16] Speaker 05:
Number one, the close relationship between the parties.

[00:32:19] Speaker 05:
The fact that an inventor was one of the founders of the party.

[00:32:22] Speaker 05:
But by the time the amendments took place, there wasn't a close relationship.

[00:32:25] Speaker 05:
It was Cisco.

[00:32:27] Speaker 05:
Well, number two, the development proceedings.

[00:32:30] Speaker 05:
I think that that is actually the development requirements.

[00:32:32] Speaker 05:
I think that is actually the most important requirement

[00:32:35] Speaker 05:
CSIRO didn't enter into this agreement with the hopes that this was going to be the end-all, be-all of every revenue stream that it would ever get.

[00:32:45] Speaker 05:
It entered into this agreement in order to establish the commercial viability of its product.

[00:32:50] Speaker 05:
And that's a very important thing.

[00:32:50] Speaker 05:
This is how research institutions and universities around the world every day get their technology that they've developed in the laboratory.

[00:32:59] Speaker 01:
What you're suggesting is that there was compensation apart from the royalty payments going

[00:33:04] Speaker 01:
from Rodius to Commonwealth, correct?

[00:33:09] Speaker 05:
Yes, absolutely.

[00:33:09] Speaker 05:
And the testimony from Cyrus' witnesses were that that was actually more important to them.

[00:33:14] Speaker 05:
In fact, they had an incentive to keep the royalty low because they wanted to encourage Radiata and then Cisco to develop this commercial technology.

[00:33:24] Speaker 05:
They had a requirement that they had to get a certain number of products into the field.

[00:33:28] Speaker 05:
What they hoped was that if Radiata and then Cisco could establish the commercial viability of this technology,

[00:33:35] Speaker 05:
by developing the products from the laboratory into the commercial space.

[00:33:39] Speaker 05:
And that did not happen by 2001 and 2003?

[00:33:43] Speaker 05:
By 2001, 2003, it was still in the process of happening.

[00:33:50] Speaker 05:
What's the fourth reason?

[00:33:52] Speaker 05:
The fourth reason is the fact that it was based on chip prices.

[00:34:01] Speaker 05:
And the district court found that chip prices, because of widespread infringement,

[00:34:06] Speaker 01:
did not reflect... What's the evidence of widespread infringement?

[00:34:10] Speaker 01:
That's contested.

[00:34:11] Speaker 01:
Cisco says that 70% of the chips were licensed.

[00:34:16] Speaker 05:
70% of the chips were licensed by the time that we got to trial.

[00:34:19] Speaker 05:
70% of the chips were not licensed at the time.

[00:34:22] Speaker 01:
Well, what's the evidence that the vast majority of chips were not licensed at the time of the hypothetical denunciation?

[00:34:29] Speaker 05:
Every single one of CSIRO's licenses was put into evidence, and the earliest one was 2008, except for the TLA.

[00:34:36] Speaker 05:
other than the TLA, which was a handful of chips, which were not used in the kind of consumer products that were the majority of the accused products here.

[00:34:48] Speaker 05:
Except for that tiny, tiny sliver, the entire market was unlicensed until 2008.

[00:34:53] Speaker 02:
Let me bring up some more global issues.

[00:34:56] Speaker 02:
You know, we've had a lot of amicus briefing in connection with this appeal, which is somewhat unusual.

[00:35:01] Speaker 02:
And it goes to kind of the generic issue of entire market value versus small assailable unit.

[00:35:08] Speaker 02:
And certainly, if you look at our case law in totality over the last decade, the movement has been away from the entire market value in the absence of, as your friend said, of evidence of a driver of demand for the end product, and certainly towards the small assailable unit.

[00:35:25] Speaker 02:
Why, on that basis, shouldn't we be at least suspicious

[00:35:29] Speaker 02:
of the district court's failure to adhere to any of those principles?

[00:35:34] Speaker 05:
Because the district court did something very different.

[00:35:38] Speaker 05:
Very recently, this court said in Summit Six that there's no one way to calculate a reasonable royalty.

[00:35:45] Speaker 05:
And the district court is, or finder of fact, is entitled to rely on licensing evidence, entitled to rely on the analytical method, among a handful of other things.

[00:35:56] Speaker 05:
This district court was presented with at least four options.

[00:36:00] Speaker 05:
of how it might start.

[00:36:02] Speaker 02:
But certainly the cases over the past decades began with a suspicion, a gross suspicion of use of the, and overuse of the entire market value rule and the need to move away from that in the absence of a finding that's a substantial driver of demand towards the smallest saleable unit.

[00:36:20] Speaker 02:
And that seems consistent with the overall theme of the cases, which is we need to do an appropriate apportionment analysis

[00:36:26] Speaker 02:
and the smallest saleable unit is consistent with that.

[00:36:31] Speaker 05:
Right?

[00:36:31] Speaker 05:
Yes, Your Honor.

[00:36:32] Speaker 05:
And that's why we at trial were very careful to avoid the entire market value.

[00:36:35] Speaker 05:
If you look through the district court's opinion, not once does he mention the price of an end product.

[00:36:41] Speaker 05:
And so that wasn't his starting point.

[00:36:43] Speaker 05:
His starting point was the- But that's where he ended up.

[00:36:48] Speaker 01:
He ended up with a number which is related to the cost of the end product.

[00:36:55] Speaker 05:
No, he ended up with a number that was consistent, regardless of the price of the end product, whether it was one of Cisco's $1,000 routers or whether it was one of its $75 consumer routers.

[00:37:07] Speaker 05:
The royalty for the Wi-Fi functionality, which is what Erickson says, you have to look at the incremental value that the patented invention adds to the end product.

[00:37:15] Speaker 05:
That functionality is the same in a high-end router and a low-end router.

[00:37:18] Speaker 05:
And he ended up with a royalty that had no relation.

[00:37:23] Speaker 05:
It didn't go up or down.

[00:37:24] Speaker 05:
at all with the price of the end product.

[00:37:26] Speaker 05:
He started with what he found was Cisco's own, the best reflection of what Cisco itself ascribed as the incremental value of this patent to its product.

[00:37:40] Speaker 02:
You're talking about the license negotiation.

[00:37:43] Speaker 02:
Correct.

[00:37:43] Speaker 02:
Well, your friend says, and maybe some of the meekies say, that there are policy concerns with taking

[00:37:49] Speaker 02:
offers that were made and never accepted, and discussions of the settlement that never resulted in actual licenses, that there were policy concerns for not placing heavy reliance on that, because that would kill the negotiation process.

[00:38:02] Speaker 02:
I mean, why isn't that a fear?

[00:38:04] Speaker 05:
Sure.

[00:38:05] Speaker 05:
The federal rules of evidence, 408, provide a mechanism.

[00:38:08] Speaker 05:
And certainly in the Eastern District of Texas, there are local rules that provide a mechanism for parties to shield those discussions from the evidentiary record.

[00:38:17] Speaker 05:
Cisco elected not to assert 408.

[00:38:19] Speaker 01:
Yeah, but that doesn't have anything to do with this.

[00:38:23] Speaker 01:
I mean, the problem with those negotiations is that they were negotiations where there was a holdup value that was being paid as part of the negotiation because it had been adopted as part of the standard.

[00:38:40] Speaker 01:
That is the fundamental argument as to why those negotiations are not all that helpful.

[00:38:46] Speaker 05:
There is no evidence that there was holdup.

[00:38:50] Speaker 05:
In fact, there were other options that were out there.

[00:38:54] Speaker 05:
There were other versions of Wi-Fi.

[00:38:56] Speaker 05:
80211B was one of the two non-infringing alternatives, TBCC.

[00:39:01] Speaker 05:
You mean when the standard, after the standard was adopted, you could use something else?

[00:39:06] Speaker 05:
Correct, Your Honor.

[00:39:09] Speaker 05:
In 1999, the IEEE adopted 80211A, which is infringing, and 80211B, which is non-infringing.

[00:39:15] Speaker 05:
the market really took off in 2004 with the adoption of 802.11g.

[00:39:19] Speaker 05:
And I think that this may help us with the standardization problem.

[00:39:24] Speaker 05:
At the time when the IEEE adopted 802.11g, which is really when the market exploded, it had an option.

[00:39:32] Speaker 05:
It could have gone with the non-infringing B-type technology, or it could have gone with the infringing A-type technology.

[00:39:38] Speaker 05:
And it elected, and the evidence shows that it was because the

[00:39:42] Speaker 05:
because the technology was superior, because it was faster, in particular, to go with the 802.11g technology.

[00:39:51] Speaker 05:
Now Cisco itself said that it was the speed of 802.11g that drove the premium and the customer demand.

[00:40:02] Speaker 05:
But Cisco's own admission of what is attributable to what part of the standard

[00:40:10] Speaker 05:
drove customer demand.

[00:40:12] Speaker 05:
And if you do the math, Cisco said that it allowed it to do a 20% to 25% premium.

[00:40:17] Speaker 05:
That's about a $30 difference at the time of the hypothetical negotiation.

[00:40:22] Speaker 02:
So Cisco itself... Is this patent expired?

[00:40:24] Speaker 02:
No?

[00:40:25] Speaker 02:
Is this patent expired?

[00:40:25] Speaker 02:
Yes, Your Honor, it has expired.

[00:40:27] Speaker 02:
And is there any other litigation pending beyond this dispute?

[00:40:30] Speaker 02:
No, there is not.

[00:40:35] Speaker 05:
But I do want to say that at the time of the hypothetical negotiation, in 2002 and 2003, the IEEE had the option of going with non-infringing technology.

[00:40:48] Speaker 05:
It was already in the standard when Cisco elected at the district court level to assert two non-infringing alternatives.

[00:40:58] Speaker 05:
Both of those were standardized.

[00:41:00] Speaker 05:
In fact, one of them was baked into the 802.

[00:41:03] Speaker 01:
One of them wasn't.

[00:41:04] Speaker 01:
How does your evidence, both the rate card and the line discussions, took place after the G standard was adopted?

[00:41:12] Speaker 05:
That's correct, Your Honor.

[00:41:14] Speaker 05:
But the district court found, as a matter of fact, and it is entitled to deference on that, that those discussions were the best reflection of what Cisco would have done just a year or two before at the time of the hypothetical negotiation.

[00:41:30] Speaker 05:
This court might reach a different conclusion, confronted with the same evidence.

[00:41:35] Speaker 05:
But that's a factual finding that is entitled to deference.

[00:41:41] Speaker 05:
It is not a legal error.

[00:41:45] Speaker 05:
Thank you.

[00:41:47] Speaker 02:
Could you have something else?

[00:41:56] Speaker 05:
Your Honor, if I may just take one more minute, you have three more seconds.

[00:42:00] Speaker 05:
in the record at A1274.

[00:42:03] Speaker 05:
Section 16.3 of the TLA says that CSIRO may change the, it's incorporated by reference, but it says it may terminate the agreement if there's a change in beneficial ownership, direct or indirect, which would adversely affect the licensee's ability to comply with the obligation under this agreement.

[00:42:27] Speaker 05:
That's section 16.3A.

[00:42:30] Speaker 05:
Absent that, change of control or ownership does not allow CSIRO to terminate the agreement.

[00:42:37] Speaker 05:
Thank you.

[00:42:44] Speaker 03:
Thank you, Your Honor.

[00:42:44] Speaker 03:
And responding to that, Judge Dyke, CSIRO, of course, had the ability to agree or not agree to a whole series of amendments that were made in 2001.

[00:42:53] Speaker 03:
Everything was up for grabs, and yet the rate ended up staying the same.

[00:42:56] Speaker 03:
Chief Judge Prost, you asked if there were other cases pending.

[00:42:59] Speaker 03:
My understanding is that CSIRO still has a case pending against MediaTek involving this same patent in the Eastern District of Texas.

[00:43:06] Speaker 03:
With respect to some of the responses that my colleague has made, particularly about the issue of standardization, this absolutely is a case of lock-in.

[00:43:17] Speaker 03:
At the time of the 802.11g standard, you had a representation that was being made to the industry that they would make a RAND commitment.

[00:43:24] Speaker 03:
Now, they ultimately didn't follow through on that.

[00:43:26] Speaker 03:
But that helps to explain what happened with respect to 802.11g.

[00:43:31] Speaker 03:
And with respect to 802.11n at A2914, it was said, quote, it was decided early on in the process that backward compatibility with legacy 802.11g was mandatory.

[00:43:42] Speaker 03:
And as a result, OFDM became the modulation of choice.

[00:43:46] Speaker 03:
So this is a classic case of lock-in as exactly why standardization has to be taken into account.

[00:43:52] Speaker 04:
Can I ask you about that?

[00:43:53] Speaker 04:
So let's assume

[00:43:55] Speaker 04:
We disagree with you about smallest sellable unit, and we think the base he started with is okay, but we see problems with how we apportion for standardization.

[00:44:05] Speaker 04:
What can you do based on this record to correct that error, or is it going to have to be reopened and have new expert reports and new data put in?

[00:44:13] Speaker 03:
But Judge Hughes, I think that under any scenario, there would have to be some kind of a remand.

[00:44:18] Speaker 04:
Would the court be- Well, that's what I'm asking.

[00:44:21] Speaker 04:
What is the judge- I mean, it's not going back to Judge Davis, but what's the judge going to do on remand with the evidence he or she has, as opposed to is there a need for additional evidence?

[00:44:34] Speaker 04:
You know, respectfully, Judge Hughes- We talked about the two pieces of evidence, right?

[00:44:37] Speaker 04:
There's the TLA stuff, and then there's their rate card.

[00:44:41] Speaker 04:
neither of those seem to be particularly satisfactory evidence.

[00:44:45] Speaker 03:
Well, Judge Hughes, depending on what this Court says, I think the District Court would presumably have to revisit its consideration of the TLA.

[00:44:53] Speaker 03:
I mean, some of the issues that the District Court used in not considering the TLA were the fact that, again, that it used CHIPs versus end product.

[00:45:04] Speaker 03:
Well, he didn't consider the amendments.

[00:45:05] Speaker 03:
He didn't consider the amendments at all.

[00:45:07] Speaker 01:
That's right, Judge Dyke.

[00:45:08] Speaker 01:
And with respect to the

[00:45:10] Speaker 01:
provision that opposing counsel just read.

[00:45:13] Speaker 01:
That's just one of the bases for terminating the agreement.

[00:45:17] Speaker 01:
In fact, an alternative basis is it disposes of all or part of its assets, which is what happened with the transfer to Syscom.

[00:45:24] Speaker 03:
That's right, Judge Syke.

[00:45:25] Speaker 03:
And with respect to some of the other district court findings that related to this, the whole issue of widespread infringement, the only thing the district court cites

[00:45:32] Speaker 03:
And you'll find it in the record at A395.

[00:45:35] Speaker 03:
There's no evidence whatsoever, no evidence whatsoever that there was widespread infringement at the time of the hypothetical negotiation.

[00:45:42] Speaker 03:
And in fact, there wasn't widespread infringement at the time.

[00:45:44] Speaker 01:
What about the argument that the licenses weren't entered into until later, 2008 or whatever the date was?

[00:45:51] Speaker 03:
Well, Judge Dike, it's certainly true that some of the licenses were entered later in time.

[00:45:54] Speaker 03:
The one license that certainly existed at the time of the hypothetical negotiation and was indeed amended contemporaneously

[00:46:01] Speaker 03:
with the hypothetical negotiation was, of course, the TLA itself.

[00:46:06] Speaker 03:
And setting all of that aside, the district court committed real error in relying on the CSIRA rate card because that did depend on the 25% rule of thumb that this court specifically rejected in Unilock.

[00:46:18] Speaker 03:
The district court didn't grapple with that at all.

[00:46:20] Speaker 03:
And if this court's going to give guidance for remand,

[00:46:22] Speaker 03:
It would be helpful to have guidance that that's impermissible, that you can't get in through the back door, which you can't bring in the front door.

[00:46:28] Speaker 03:
The district court rejected Syro's expert for many of the reasons, for many of the same things that Syro's consultant did in crafting the rate card in the first instance.

[00:46:38] Speaker 03:
If the court has other questions, I see that I'm over my time, but thank you very much.

[00:46:41] Speaker 02:
Thank you.

[00:46:41] Speaker 02:
We thank all counsel in the case that's submitted.