[00:00:01] Speaker 01: I have a motion to make, so I'm going to defer to Judge Clevenger to hear that. [00:00:10] Speaker 00: Your motion is? [00:00:12] Speaker 01: May it please the court. [00:00:14] Speaker 01: I move the admission of Caton Devereux Lewis, who is a member of the bar and in good standing with the highest court of New York. [00:00:24] Speaker 01: I have knowledge of her credentials and am satisfied she possesses the necessary qualifications. [00:00:31] Speaker 01: She came to me from the Court of International Trade on high recommendation from Judge Richard Eaton, and she exceeded that recommendation in its entirety. [00:00:45] Speaker 01: And I moved the admission of Shailen Dawson, who is a member of the bar and in good standing with the highest court of California. [00:00:54] Speaker 01: I have knowledge of her credentials and am satisfied she possesses the necessary qualifications. [00:01:01] Speaker 01: Ms. [00:01:02] Speaker 01: Dawson came to me on my own recommendation. [00:01:05] Speaker 01: She was an intern in my office of international trade and was the most persistent damn intern I ever saw in my life. [00:01:20] Speaker 00: The motion strikes me as one that has merit. [00:01:26] Speaker 00: I think it has exceptional merit because as the movement judge has familiarity with the qualifications of these two applicants, I do as well. [00:01:36] Speaker 00: For those of you in the audience who aren't familiar with how our court functions, the clerks in our court all interact actively every day with one another. [00:01:46] Speaker 00: And so I've had the pleasure, through my clerks, of meeting the applicants. [00:01:50] Speaker 00: And I can also attest to their qualifications that I am in favor of granting the motion. [00:01:55] Speaker 00: I assume that the presiding judge will recuse himself, since he seems to have a prejudice in this matter. [00:02:01] Speaker 00: And a bias. [00:02:02] Speaker 00: Judge Toronto, do you have a vote? [00:02:05] Speaker 00: I join you. [00:02:06] Speaker 00: The motion is granted. [00:02:07] Speaker 01: Would you please step to the clerk of the court to have it? [00:02:29] Speaker 01: First, we have four argued cases, or three argued cases today, not including the one we just did. [00:02:36] Speaker 01: The first is Illumina Villariosa. [00:02:40] Speaker 01: Are counsel ready to proceed? [00:02:41] Speaker 04: Yes, Your Honor. [00:02:42] Speaker 04: Yes, Your Honor. [00:02:43] Speaker 01: Mr. Reinus. [00:02:45] Speaker 04: Thank you, Your Honor. [00:02:46] Speaker 04: Edward Reinus on behalf of Illumina and may it please the Court. [00:02:50] Speaker 04: I'd like to start first by addressing the threshold issue of appellate jurisdiction and respond to the Court's June 1st letter concerning whether this is the appropriate circuit to hear this matter. [00:03:03] Speaker 04: The question is, of course, a good one. [00:03:05] Speaker 04: And the answer we believe is that microchip correctly decided the jurisdictional question in the instance of a denial of a motion to compel arbitration or require arbitration. [00:03:18] Speaker 04: And the reason, the primary reason from my perspective why that's true is that if you decouple section 16 of Title IX of the Arbitration Act of the appellate provisions therein, [00:03:29] Speaker 04: from chapter 83 of Title 28 and the appellate provisions therein, which is what essentially the industrial Costco decision did in Medtronic before it in the Third and Seventh Circuits. [00:03:45] Speaker 04: If you decouple those, you have a dual path for appellate jurisdiction in the case of denial [00:03:50] Speaker 04: of an arbitration provision. [00:03:52] Speaker 03: Can I ask you what is perhaps even a threshold question? [00:03:57] Speaker 03: It's not discussed in any of the three cases you mentioned, the eighth, third, or our own case. [00:04:06] Speaker 03: And that is whether this is a Section 16 listed motion at all. [00:04:11] Speaker 03: And there's a case from the D.C. [00:04:12] Speaker 03: Circuit, which I must say I didn't discover until this morning, called Bombardier, I don't know how to pronounce it exactly, from 2003, in which the D.C. [00:04:23] Speaker 03: Circuit said, [00:04:25] Speaker 03: What we have in front of us is a denial of a motion to dismiss under Rule 12. [00:04:29] Speaker 03: That's not a motion to compel arbitration. [00:04:32] Speaker 03: It wasn't made as such. [00:04:34] Speaker 03: It's not a motion to stay arbitration under, I don't know, Section 4 or something. [00:04:38] Speaker 03: And we're going to be persnickety about the form of the motion and say that a motion to dismiss is not one of the ones listed under Section 16. [00:04:49] Speaker 03: and we think that when you're making exceptions to the normal final decision rule for appellate jurisdiction, we ought to be persnickety. [00:04:56] Speaker 03: It then did also go on to say, and in this particular case, we wouldn't re-characterize the motion as one of the Section 16 listed ones, even if we thought we could. [00:05:06] Speaker 03: But why isn't there a threshold problem here that this simply is not one of the Section 16 listed ones? [00:05:13] Speaker 04: Again, a fair inquiry. [00:05:14] Speaker 04: Obviously, we're dealing with a number of issues here where [00:05:18] Speaker 04: friend and I have agreed, so we didn't have it joined up. [00:05:22] Speaker 04: So there wasn't the kind of development, as you know, that would maybe assist you more than the way it came up. [00:05:28] Speaker 04: I think that's because we were like-minded about it and read the law the same way. [00:05:31] Speaker 04: The case law, I think, is one-sided. [00:05:34] Speaker 04: There is the DC Circuit decision. [00:05:37] Speaker 04: There are some other decisions that are persnickety, as you describe it, and are form over substance. [00:05:44] Speaker 04: There are numerous cases. [00:05:45] Speaker 04: I think the FITTECH case out of the First Circuit is grouped a bunch of the case law on that. [00:05:51] Speaker 04: The Roto-McClarity case out of the Fourth Circuit, which is a 2012 case. [00:05:55] Speaker 04: The Conrad case out of the Tenth Circuit. [00:05:58] Speaker 04: There's a body of law that says we look at [00:06:02] Speaker 04: the substance, not the form, in this arbitration area and specifically on this kind of subject. [00:06:08] Speaker 04: And a motion to dismiss is effectively a commitment to arbitrate. [00:06:14] Speaker 04: I think the real question is, from my perspective, is in the motion to dismiss, are you committing to arbitration? [00:06:19] Speaker 04: In other words, if you just move to dismiss, you say these guys are the opposition's on the wrong path. [00:06:24] Speaker 04: That's one thing. [00:06:25] Speaker 04: But if you say the opposition's on the wrong path because these are arbitrable and must be arbitrated, [00:06:31] Speaker 03: Is there any particular reason that your motion was made as a motion to dismiss as opposed to a motion to compel arbitration or a motion to stay adjudication of the counterclaim pending resolution of arbitration? [00:06:46] Speaker 04: I think the best I can say is that since it's their claims that we don't think have merit, we didn't necessarily want to say that it may have been that they were only inserted [00:06:58] Speaker 04: as being worthwhile by our opposition for purposes of litigation defense. [00:07:03] Speaker 04: In other words, for purposes of having that story that they want to tell at the jury trial, which is why it's irreparable injury and why we're here. [00:07:09] Speaker 04: That goes to the second question. [00:07:12] Speaker 04: So it was more, this isn't right. [00:07:14] Speaker 04: If they want to pursue this claim, it has to be in arbitration. [00:07:16] Speaker 04: If they know how to do that, rather than us saying, let's go arbitrate. [00:07:21] Speaker 04: We just don't think it has any merit at all. [00:07:23] Speaker 04: And I'm not sure they'd pursue it if it was a pure arbitration. [00:07:26] Speaker 04: So that's why I motioned this to be more appropriate. [00:07:28] Speaker 04: But in terms of the persnickety form over substance issue, in the document, we say if they want to pursue these claims, they must pursue them in the arbitration vehicle, not in court. [00:07:39] Speaker 04: It doesn't belong in court. [00:07:40] Speaker 04: It's foreclosed by the requirement of arbitration. [00:07:44] Speaker 04: I think that's why this list of cases, and it runs longer than that. [00:07:47] Speaker 04: We can supplement as appropriate and helpful to the court. [00:07:51] Speaker 04: So on that initial threshold question, that's my answer. [00:07:54] Speaker 04: If you're ready for me to move to the second threshold question, I'm happy to do that. [00:07:59] Speaker 04: Okay, thank you. [00:08:00] Speaker 04: So the point that I made, which was a subtle one, we only had a few days on this, again, because the parties agreed, but maybe we should have vetted it more originally, that hindsight, is if you have a dual system where an appellant can go either to a regional circuit or [00:08:22] Speaker 04: to the Federal Circuit by whether they invoke Title IX's appeal provision or they go directly to Title 28, Chapter 83, and go to 1291A2, or actually A1. [00:08:38] Speaker 04: And they go right to A1, and they say, we meet the standard under A1, under really, it's a Carson. [00:08:43] Speaker 04: I mean, you could look at it as a Gulfstream issue, but it's really the Supreme Court's Carson. [00:08:47] Speaker 04: Is it important enough? [00:08:48] Speaker 04: Is it irreparable harm? [00:08:49] Speaker 04: The traditional factors that apply as a general proposition, it's not a patent-specific or an arbitration-specific issue. [00:08:56] Speaker 04: It's just a general issue. [00:08:58] Speaker 04: If you can go that way and get to the Federal Circuit, or go under [00:09:06] Speaker 04: section 16 of Title IX, and then under at least the rationale of the Costco court, and then you get to a regional circuit, the form shopping risk is too high, and it makes no sense to have these parallel paths to the very, very, very same appeal. [00:09:21] Speaker 04: And, you know, so there are numerous cases. [00:09:24] Speaker 04: This court itself, in Rome, Cologne, found that the Carson test was met. [00:09:31] Speaker 04: So you don't even need to invoke [00:09:34] Speaker 04: Title IX, Section 16, because of this court's long-plunged decision, which is, and again, because this has not been briefed, you know, it's a little bit harder to expect you to have kind of working knowledge, but that's 769 of 2nd, 1569. [00:09:52] Speaker 04: And the Ninth Circuit, which is the relevant circuit in terms of if there was an alternative forum, the Ninth Circuit in the Alice scum case, [00:10:03] Speaker 04: found the same thing. [00:10:04] Speaker 04: It found the Carson test was met. [00:10:07] Speaker 04: And there are more recent cases, which I find very interesting to this question. [00:10:13] Speaker 04: There are more recent cases, including one in the 8th Circuit and 4th and others, mostly in the context of labor. [00:10:22] Speaker 04: In the labor field, apparently, you can't go into the FFA. [00:10:25] Speaker 04: You have different arbitration provisions. [00:10:27] Speaker 04: So if you want to appeal a denial [00:10:32] Speaker 04: demand for arbitration in those contexts, you don't have the benefit of section 16 of Title IX. [00:10:40] Speaker 04: So you go straight to 1292A1 if you're in that. [00:10:44] Speaker 04: So it's still a percolating issue in the circuits. [00:10:47] Speaker 04: So it's acknowledged that you have a right in a denial of a petition for arbitration to go under 1292A1 and just seek it directly. [00:10:57] Speaker 04: And it just seems to me having this dual system makes no sense. [00:11:00] Speaker 04: This court, I think, wisely and microchip, coupled the two and said, what you have to do is when you look at Title IX, you have to understand that what it's saying is for purposes of 1292A1, [00:11:11] Speaker 04: an arbitration denial qualifies. [00:11:14] Speaker 03: Can I interrupt for a second? [00:11:17] Speaker 03: Sure. [00:11:17] Speaker 03: We asked you to talk about jurisdiction and a lot of time has now run, but on the merits. [00:11:24] Speaker 03: Why was Judge Ilston wrong in the very, very simple logic that their counterclaim would establish a license which would defeat infringement? [00:11:36] Speaker 03: Boy, is that related. [00:11:37] Speaker 04: Well, I think for two reasons. [00:11:39] Speaker 04: There's two counterclaims. [00:11:41] Speaker 04: I don't want to move too fast. [00:11:42] Speaker 04: There's two counterclaims. [00:11:43] Speaker 04: There's a second and a third one. [00:11:45] Speaker 03: Right. [00:11:45] Speaker 03: But you did not make any distinction in your opening brief among the counterclaims or, as you did in your reply brief, between arbitrating the counterclaim and arbitrating the damages that might flow from it. [00:11:59] Speaker 03: So it seems to me this is a single one ball of wax kind of thing. [00:12:04] Speaker 04: The reason I use the counterclaim three is because it really illustrates the point that [00:12:11] Speaker 04: What their claim is, is a claim for damages, for breach of contract, for denying that we gave them a license, but we don't believe we gave them, but, right, that's the claim. [00:12:21] Speaker 04: It's a money damage claim. [00:12:22] Speaker 04: That's been our story from day one. [00:12:24] Speaker 04: It's never changed. [00:12:25] Speaker 04: And I think why she's wrong, other than maybe so semantically superficial to say she construed the lady too broadly, but getting more to the gist of it, which is what you're asking, is that it's undisputed that [00:12:40] Speaker 04: The contract claims, both second and third, but I wanted to identify the third because it's a little easier for understanding, are independent of the infringement claim. [00:12:51] Speaker 04: That's why it's wrong. [00:12:53] Speaker 04: Because their allegation of breach is that we asserted that there is infringement, and we deny that they had the license. [00:13:00] Speaker 04: They're just saying, you told us we had a license. [00:13:03] Speaker 04: and you had to give it to us and you're denying it and we're entitled to that. [00:13:07] Speaker 04: That's independent of infringement. [00:13:09] Speaker 03: But is it not a premise of their contract [00:13:16] Speaker 03: claim that you breached by asserting the infringement claim that they in fact had this license. [00:13:27] Speaker 03: By denying that they had a license. [00:13:30] Speaker 03: But in order to establish the obviously more difficult proposition that you're filing of the lawsuit, [00:13:37] Speaker 03: was a breach, they do have to establish that their activity came within the license. [00:13:43] Speaker 03: And if they establish that, that will in fact defeat your infringement claim, will it not? [00:13:49] Speaker 04: It would, but it's broader than that. [00:13:51] Speaker 04: They would argue that even if they're not infringing, they think they have a license to this patent. [00:14:00] Speaker 04: It's independent of the infringement. [00:14:01] Speaker 04: It's not an element of their claim that they have to prove infringement. [00:14:04] Speaker 00: In the context of this case, what's the purpose of their wanting to establish that they have a license? [00:14:10] Speaker 04: To get damages for supposedly interference with their IPO. [00:14:14] Speaker 00: It's not about the infringement. [00:14:15] Speaker 00: Don't you have a complaint of patent law infringement against them? [00:14:19] Speaker 00: They have the complaint of... You've said, you have infringed my patent. [00:14:24] Speaker 00: And they said, gee, we'd like to prove that we win that lawsuit. [00:14:29] Speaker 00: How come they win that unit? [00:14:30] Speaker 04: No, they're saying, but they're not saying that. [00:14:32] Speaker 04: That's just a pure license defense. [00:14:34] Speaker 04: What they're saying is we're entitled to the diminution in value of our company because you interfered with our IPO by asserting that we don't have a license to this patent when we did. [00:14:43] Speaker 00: Actually, they don't mind if you win an infringement verdict against them? [00:14:46] Speaker 00: No, they, of course, mind. [00:14:47] Speaker 00: They'd be delighted to have that happen to them. [00:14:50] Speaker 00: But that, to me... It's immaterial? [00:14:52] Speaker 04: It's, it's not necessary to their claim. [00:14:58] Speaker 03: I don't know what else to say. [00:14:59] Speaker 03: It's not necessary. [00:15:01] Speaker 03: Are you suggesting that they could win one of their counterclaims? [00:15:07] Speaker 03: Yes. [00:15:09] Speaker 03: Or even, I guess, all of their counterclaims is more important. [00:15:11] Speaker 03: They could win all of their counterclaims without establishing that they had a license to the activity issue? [00:15:20] Speaker 04: No, without an infringement finding. [00:15:23] Speaker 04: They're just saying they have a license to this patent. [00:15:27] Speaker 03: They say there is a license to the activity that they're conducting. [00:15:33] Speaker 03: That's an issue, right? [00:15:35] Speaker 03: And that would defeat your infringement case. [00:15:38] Speaker 04: They're saying they have a license to patents. [00:15:40] Speaker 04: They're saying they have a broad license to many of our patents. [00:15:44] Speaker 03: Which would defeat your assertion of those patents against them for the infringement issue. [00:15:49] Speaker 04: But that isn't the primary thing. [00:15:50] Speaker 04: The primary thing is they want [00:15:51] Speaker 04: damages because we've denied that we're giving them a license to patent. [00:15:55] Speaker 04: They do not say. [00:15:57] Speaker 03: Whether primary or not, I guess it still sounds to me as though there's no dispute that for them to, and I'm not even sure it's necessary for it to be essential, but it sounds like there's actually no dispute that for them to prevail on at least one of their counterclaims [00:16:15] Speaker 03: They will have to establish, and they're trying to establish, that they have a license to the patents you're asserting against them. [00:16:23] Speaker 03: That's true. [00:16:23] Speaker 03: And if that's true, your infringement case goes away. [00:16:27] Speaker 03: That's true, too. [00:16:29] Speaker 03: Doesn't that seem just as related as could be? [00:16:33] Speaker 03: No. [00:16:34] Speaker 03: Maybe not as related as it could be, but related enough. [00:16:37] Speaker 04: Do you mind? [00:16:38] Speaker 04: I would like to say at least the minute you're here. [00:16:40] Speaker 04: You'll get a couple of minutes. [00:16:41] Speaker 04: Okay, thank you. [00:16:42] Speaker 04: Go ahead. [00:16:43] Speaker 04: Related this could be would be if infringement was an element if we dropped our infringement claim. [00:16:48] Speaker 03: Forget about my related this could be. [00:16:49] Speaker 03: Related enough. [00:16:51] Speaker 03: They're prevailing on their counterclaim. [00:16:54] Speaker 04: I would like to discuss related enough because I think that's the nub of it, right? [00:16:59] Speaker 04: If you adopt the kind of mindset that some relationships enough, it doesn't have to be a tight relationship of the kind that we're talking about. [00:17:06] Speaker 04: Any relationships enough. [00:17:08] Speaker 04: There's three pages of indemnity in this agreement about what happens in the instance of a patent infringement claim. [00:17:14] Speaker 03: That's too extreme. [00:17:16] Speaker 03: The specific relation that seems to me not disputed is if they win one of their counterclaims, your infringement case is thereby defeated. [00:17:30] Speaker 04: Presumably a number of other infringement cases we could bring. [00:17:34] Speaker 04: And to you, that's the type of relationship where the exception, I mean, again, just as a reset, I know you understand these intellectually, but just as a reset, this exception is to be construed narrowly in light of a broad arbitration provision, in light of a broad policy of arbitration. [00:17:51] Speaker 04: And it says, don't decide issues of infringement or validity. [00:17:55] Speaker 04: and issues related to that. [00:17:57] Speaker 04: To me, related to that is remedies that might come out of infringement. [00:18:02] Speaker 04: They don't want it to be so tight. [00:18:03] Speaker 04: But to say that anything related, and let me just make the point about indemnity, because I don't think it's so out there that it's not instructive. [00:18:10] Speaker 04: I think it's very helpful. [00:18:12] Speaker 04: A core part of this agreement, as you can imagine, is who defends the infringement suit that follows if this high-dense technology is found to infringe that [00:18:23] Speaker 04: we're interacting with them on. [00:18:24] Speaker 04: It's a system of DNA sequencing. [00:18:27] Speaker 04: Who defends that? [00:18:28] Speaker 04: Three pages, literally, of stuff on that. [00:18:32] Speaker 04: It says the title of it is indemnity in case of infringement. [00:18:36] Speaker 04: Well, if they have a dispute about indemnity, that's related to infringement. [00:18:42] Speaker 04: Could someone stand up here and say it has no relationship at all to infringement? [00:18:45] Speaker 04: Of course it's related to infringement. [00:18:47] Speaker 04: But is that really the kind of things that people that said our breach contract claims in general in this agreement in a strong arbitration provision are going to be disputed? [00:18:55] Speaker 04: They're saying we got more patents than you gave us in this license than you're saying you gave us. [00:19:01] Speaker 04: To me, that's not an infringement claim. [00:19:03] Speaker 04: That's not about infringement. [00:19:04] Speaker 04: Yes, you're right if they got all the different rights that are implicit in their claim. [00:19:10] Speaker 04: then they would extinguish our infringement claim. [00:19:12] Speaker 04: That is true. [00:19:13] Speaker 04: I'm saying that is reading related far too broadly for all the reasons that I just identified, including that it sweeps indemnity and some other things. [00:19:22] Speaker 04: The only other thing I wanted to mention before I sit back down, Pico, is [00:19:28] Speaker 04: On the jurisdictional question, I just did want to note that this court has applied microchip over the years. [00:19:35] Speaker 04: I just didn't know if that had come up. [00:19:37] Speaker 04: And in the Qualcomm case, which is 466 F3 1366, it was specifically applied that there was Chief Judge Pro's opinion applying it to this context. [00:19:48] Speaker 04: And I don't think it's time to change course right now. [00:19:51] Speaker 04: Thank you very much. [00:19:59] Speaker 01: Mr. Gingler, I'll give you a couple extra minutes if you need them. [00:20:02] Speaker 01: Thank you very much. [00:20:04] Speaker 02: I'd like to first address the question that the court has raised about jurisdiction. [00:20:10] Speaker 02: And there is a problem. [00:20:12] Speaker 02: And the problem is that we do not have an appealable order, something which the parties failed to address. [00:20:18] Speaker 02: But I want to address it right now. [00:20:20] Speaker 02: The problem is that the motion that was brought was a motion to dismiss. [00:20:28] Speaker 02: The motion was not filed under the Federal Arbitration Act. [00:20:32] Speaker 02: In fact, if you look at the motion that was filed, it doesn't even mention the Federal Arbitration Act. [00:20:37] Speaker 03: Nominally, it clearly was not one of the Section 16 listed motions. [00:20:44] Speaker 03: I don't mean to be disparaging in saying nominally. [00:20:48] Speaker 03: In what concrete real world sense was this any different from a motion to say, [00:20:57] Speaker 03: This has to go to arbitration if the other side wants to pursue it. [00:21:02] Speaker 02: The difference is the following. [00:21:04] Speaker 02: I agree that the substance matters, right? [00:21:08] Speaker 02: In other words, it's not the magic of saying, Section 9, Title IX, Section 16. [00:21:15] Speaker 02: The magic is, what's the remedy you're asking for? [00:21:19] Speaker 02: Are you making a motion to compel arbitration, or are you invoking a forum selection clause and saying, [00:21:25] Speaker 02: You are precluded from being in this court. [00:21:28] Speaker 02: You can't be here. [00:21:29] Speaker 02: You want to be someplace else? [00:21:31] Speaker 02: Go be someplace else. [00:21:32] Speaker 02: But the remedy that I want is dismissal. [00:21:35] Speaker 02: This question has been addressed, as far as I can tell, since looking at this, starting on June 1st, by five circuits. [00:21:45] Speaker 02: Five circuits have directly addressed this question. [00:21:49] Speaker 02: Four of them have come out finding that this order would not be appealable. [00:21:56] Speaker 02: one has come out the other way. [00:21:59] Speaker 02: The four, and that is it, silly outline. [00:22:03] Speaker 01: So, not us, right? [00:22:05] Speaker 02: So the four circuits, just to put this on the table, so the tenth circuit would find this to be not appealable in the Conrad versus phone directories case. [00:22:16] Speaker 02: The DC circuit, as you mentioned, in the Bombardier case, would find this to be not appealable. [00:22:23] Speaker 02: The second circuit, [00:22:24] Speaker 02: in the Wabtec versus Pavely case would find this to be not appealable. [00:22:31] Speaker 02: And even the First Circuit case, which counsel mentioned, the Fittek case, the court would find it not appealable. [00:22:40] Speaker 02: Now in that case, the parties did bring a motion to dismiss. [00:22:45] Speaker 02: But what was different about that case is that the defendant, Bali, sought arbitration. [00:22:52] Speaker 02: they actually commenced an arbitration proceeding. [00:22:56] Speaker 02: And so the court there said, I'm reading from the court's decision, if Bali had wanted a dismissal, but no decision by the arbitrator, then we would refuse to entertain an appeal by Bali to provide a reference that Bali had not sought and did not want. [00:23:14] Speaker 02: But in this case, Bali is clearly invoking the accountant dispute resolution remedy [00:23:21] Speaker 02: even if a stay rather than a dismissal ensues. [00:23:25] Speaker 02: Since no one has been prejudicially misled by Valley's request for the over-favorable remedy of dismissal, its request for dismissal in favor of the accountant remedy, which they had sought, can be treated as accompanying the lesser alternative remedy of stay in reference. [00:23:43] Speaker 02: The key is, what are you asking for? [00:23:47] Speaker 02: They never made a motion to compel arbitration. [00:23:51] Speaker 00: What's the one case that's the outlier? [00:23:53] Speaker 02: The other case, the one case which does not come out this way is from the Fourth Circuit. [00:23:59] Speaker 02: It's called Choice Hotels International versus BSR. [00:24:04] Speaker 02: Its reasoning is dealt with very quickly. [00:24:08] Speaker 02: It's a single paragraph. [00:24:10] Speaker 00: Before or after these other four cases? [00:24:12] Speaker 02: That decision is from 2009. [00:24:16] Speaker 02: And the other decisions, the 10th Circuit case, which, by the way, has the most detailed reasoning. [00:24:23] Speaker 00: The 4th Circuit case distinguishes the other authority? [00:24:25] Speaker 02: It does not. [00:24:26] Speaker 02: It doesn't even talk about them. [00:24:28] Speaker 00: So if we agree with the 4th Circuit case, you'd have a certain worthy issue. [00:24:32] Speaker 00: You might get a trip to the Supreme Court. [00:24:34] Speaker 02: You know, I'm always looking for a trip to the Supreme Court. [00:24:37] Speaker 02: But you know, I'm not sure this is the one where I want to do it. [00:24:40] Speaker 00: Maybe your only chance. [00:24:45] Speaker 02: What I can tell you is that this issue has been addressed by five courts. [00:24:50] Speaker 02: Four actually have gone through and actually parsed the statute, parsed the case law, and have said, if you in substance are seeking to enforce an arbitration remedy, whether or not you actually mention the FAA, but that's what you're doing, then you have an appealable order. [00:25:11] Speaker 03: So why, again, in substance, is that not what they were trying to do? [00:25:19] Speaker 03: I mean, obviously, they would like the claim simply to go away. [00:25:23] Speaker 03: But if it's not going to go away, their whole motion to dismiss was there is one and only one place you can bring it in arbitration. [00:25:31] Speaker 02: That's correct. [00:25:32] Speaker 02: Because they did not ask for the remedy [00:25:37] Speaker 03: of compelling arbitration. [00:25:39] Speaker 03: But that seems not substance before. [00:25:41] Speaker 02: That's exactly the substance which the courts have looked at in the four circuits which have come out this way. [00:25:46] Speaker 02: What they have said is, what remedy are you asking for? [00:25:49] Speaker 02: Are you asking for an order of compelling arbitration? [00:25:54] Speaker 02: Or are you asking for a stay in favor of arbitration? [00:25:58] Speaker 00: In that case, don't those cases undermine our microchip case? [00:26:02] Speaker 02: No, I don't think so, because microchip deals with the situation of when somebody actually brings a motion to compel arbitration and that motion is denied, then the question is, well, does the Federal Circuit have jurisdiction? [00:26:18] Speaker 02: And this is a place where I agree with counsel for Illumina. [00:26:24] Speaker 02: If in fact they had brought such a motion, then there would be jurisdiction [00:26:30] Speaker 02: in this circuit. [00:26:30] Speaker 03: So there are two separate questions. [00:26:32] Speaker 03: One is, is there an appealable order? [00:26:34] Speaker 03: And the second is, if there's an appealable order, which circuit does it go to? [00:26:38] Speaker 03: And you both agree that if there's an appealable order, it should come here. [00:26:41] Speaker 03: But you disagree about whether there's an appealable order. [00:26:43] Speaker 02: That is exactly correct. [00:26:45] Speaker 02: And there is no appealable order under the four cases which I have cited. [00:26:49] Speaker 02: And I would direct the court to take a look at the reasoning of all five of the cases, because five circuits have thought about this question. [00:26:57] Speaker 02: and looking at the substance. [00:26:59] Speaker 02: What are you asking for? [00:27:02] Speaker 02: All right. [00:27:03] Speaker 02: On the merits of the issue, the counterclaims that we brought turn on literally one thing. [00:27:15] Speaker 02: Whether we have a license to the patent assorted against us. [00:27:19] Speaker 01: That's it. [00:27:20] Speaker 01: That's the breach. [00:27:21] Speaker 01: How is a breach of the covenant of good faith and fair dealing [00:27:25] Speaker 01: particularly related to intellectual property? [00:27:28] Speaker 02: Well, it is in this case because if you have a license defense, okay, because you usually have an agreement. [00:27:38] Speaker 02: I have a license. [00:27:40] Speaker 02: And so if somebody sues you in violation of your license, you're going to have a breach of contract claim. [00:27:47] Speaker 02: And that's exactly what's happened here. [00:27:50] Speaker 02: We have a license to the patent they've asserted against us. [00:27:54] Speaker 02: It is a direct, it is a defense, it is a direct defense. [00:27:58] Speaker 02: And no matter how you read related as broad or as narrow. [00:28:02] Speaker 00: You can establish whether or not you have a license without ever mentioning the word Title 35. [00:28:09] Speaker 02: In this case? [00:28:10] Speaker 00: I mean the fact that on the sole issue of whether or not you do or not have a license, whether there's any relationship at all that had or was non-existent. [00:28:21] Speaker 02: But, you know, under Title 35, right? [00:28:27] Speaker 00: Well, here, I think this does deal with Title 35, because Section 271. [00:28:39] Speaker 02: Title 35 says, a defendant can only be liable for infringement if the allegedly infringing acts are carried out, quote, without authority. [00:28:51] Speaker 02: So in fact, the licensing concept is built into the Patent Act itself. [00:28:58] Speaker 01: So the bridge of the covenant that faith and fear are dealing is related to IP. [00:29:04] Speaker 01: I'll accept that. [00:29:06] Speaker 01: But if that's true, then isn't the arbitration clause means, since it governs the use of IP, [00:29:14] Speaker 02: I don't think the arbitration clause is meaningless. [00:29:17] Speaker 02: In fact, the arbitration clause is quite meaningful. [00:29:20] Speaker 02: And the question is, what is it there and what purposes does it serve? [00:29:25] Speaker 02: So the arbitration clause has two parts to it, right? [00:29:28] Speaker 02: So it has a part which broadly provides that any dispute, claim, or controversy arising out of or relating to the breach, termination, enforcement, [00:29:40] Speaker 02: interpretation or validity of this agreement shall be determined by arbitration. [00:29:46] Speaker 02: Then it has an exception stated quite clearly. [00:29:49] Speaker 02: It says this section 31C, arbitration provision, shall not apply to and no arbitration shall resolve [00:29:59] Speaker 02: Disputes relating to issues of scope, infringement, validity, and or enforceability of the Alaska property rights. [00:30:10] Speaker 02: So how is Aluna's interpretation of relating to unreasonable? [00:30:15] Speaker 02: It's unreasonable because it's supported by absolutely no authority from any place. [00:30:21] Speaker 02: In other words, there are lots of cases from California, there are federal court cases, [00:30:27] Speaker 02: which look at the term relating to, and all of them interpret them in a relatively broad way. [00:30:35] Speaker 02: What Illumina does is it basically takes the words out of the agreement, and they say this is only about issues of infringement or validity or enforceability. [00:30:49] Speaker 02: They take the words relating to right out. [00:30:52] Speaker 02: They don't give them meaning, they just want to remove them. [00:30:57] Speaker 00: a dispute relating directly to. [00:31:05] Speaker 02: But Judge Ilston, you know, Judge Ilston actually didn't even have to engage in the debate about broadly or narrowly because she found that a licensed defense to an infringement claim relates directly [00:31:20] Speaker 02: to infringement. [00:31:21] Speaker 02: How could it relate less directly? [00:31:23] Speaker 02: It's as close of a tie you can get. [00:31:25] Speaker 02: It is a full and complete 100% defense to an infringement case to have a license to a patent. [00:31:32] Speaker 03: And that's not because you have to, as part of establishing the license, make any particular kind of patent-specific determination, but rather because [00:31:48] Speaker 03: The consequence of your determining the license would be to terminate their patent claims, right? [00:31:54] Speaker 03: That is correct. [00:31:55] Speaker 03: Can I ask you about the thing that I just said you don't have to do? [00:31:59] Speaker 03: Yes. [00:32:00] Speaker 03: I took it from a couple of sentences in Illumina's brief. [00:32:06] Speaker 03: and I don't understand this well enough, so it's going to be a somewhat open-ended question, that determining the scope of the license, which is written in terms of, I don't know, the primary intellectual rights and secondary or something like that, actually will itself require inquiry into whether the products that you are purchasing from them come within the 794 patent. [00:32:35] Speaker 03: And if that's true, then putting aside infringement, why doesn't your affirmative counterclaim actually relate to an issue of scope? [00:32:48] Speaker 02: It in fact directly does. [00:32:50] Speaker 02: And thank you for giving me the opportunity to address that. [00:32:54] Speaker 02: The contract grants licenses, but it does so by describing the categories in a general way. [00:33:03] Speaker 02: poor IP rights that you have, and then there's other category called secondary IP rights, which in the contract, Illumina said at the time that we signed the contract, we're not aware of any secondary IP rights that Illumina has that you need to operate under this agreement, which is effectively a license to the secondary IP rights which exist at the time. [00:33:31] Speaker 02: Here's the thing. [00:33:33] Speaker 02: How do you figure out what's in core IP rights and secondary IP rights? [00:33:40] Speaker 02: Because it just describes the patents in sort of a general categorical way as opposed to listing them. [00:33:47] Speaker 02: The only way you can do that is to look at the scope of the patent. [00:33:53] Speaker 02: You have to look at what the 794 patent claims and then say, okay, does that fall into core IP rights? [00:34:02] Speaker 02: or has it fallen to secondary IP rights in a way that is not covered by the implied license we got? [00:34:11] Speaker 02: In our view, we went either way because we clearly have an express license to core IP rights and we clearly have an implied license [00:34:21] Speaker 02: to secondary IP rights because they said when we signed the agreement and it's in the agreement, we're aware of no secondary IP rights that you need from Illumina and the 794 patent issued before we signed that agreement. [00:34:36] Speaker 03: Can I ask you something that may or may not be directly relevant to this scope of the provision? [00:34:44] Speaker 03: Where does the notion come from and do you have authority for the proposition that if you have or can establish that you have a license covering the activity that they're suing you for engaging in? [00:35:01] Speaker 03: that not only do you have a defense, but that their act of suing you is a breach of the contract. [00:35:09] Speaker 03: Those are two, they're related obviously, but they're also distinct. [00:35:14] Speaker 03: And I guess I'm not familiar, at least personally, with the idea that a suit to which there's a license defense, that the act of suing is itself actionable. [00:35:27] Speaker 02: Your honor, no one actually has challenged [00:35:30] Speaker 02: our cause of action on that ground. [00:35:32] Speaker 00: That's premature. [00:35:33] Speaker 02: That's correct. [00:35:35] Speaker 02: So I'm actually aware of no authority which would preclude a suit for breach of a license agreement because the essence of a license agreement is essentially freedom to operate. [00:35:46] Speaker 01: So what about the mirror image? [00:35:49] Speaker 01: Are you aware of authority that station can? [00:35:52] Speaker 01: I am aware other than the restatement maybe. [00:35:55] Speaker 02: Your honor, I must confess this has not been an issue which I have researched. [00:36:00] Speaker 02: for purposes of this appeal. [00:36:02] Speaker 02: We felt confident at the time that we brought our counterclaim that when we have a contract which says that we have a license and they sued and they breached that license agreement causing real damage to us, that's a claim that we have and they've never brought a motion to dismiss on that ground and I'm confident [00:36:22] Speaker 02: that excellent counsel, if they thought they had such an argument, would have made a motion to dismiss on that ground, and that was never made. [00:36:30] Speaker 02: They did make a motion to dismiss on the grounds that we hadn't done a good enough job of articulating our damages, and we filed an amended complaint, which Judge Ilson found to be satisfactory. [00:36:44] Speaker 02: I want to finish by pointing out one final thought, which is why is the exclusion [00:36:51] Speaker 02: even in this contract. [00:36:53] Speaker 02: What's it doing there? [00:36:55] Speaker 02: In other words, this is a contract where we're buying goods from Illumina, and the goods basically are, they're sequencing machines, and then the chemical reagents you need to work with the machines, because you've got to buy the reagents from Illumina. [00:37:10] Speaker 02: It's an exclusive relationship, okay? [00:37:13] Speaker 02: So it's a buy-sale agreement. [00:37:15] Speaker 02: So why is there a carve-out for [00:37:19] Speaker 02: disputes relating to issues of infringement, scope, validity. [00:37:27] Speaker 02: It's because the agreement also contains licenses. [00:37:32] Speaker 02: The agreement contains licenses. [00:37:35] Speaker 02: And so the current dispute actually is the most likely way that this exception would come up. [00:37:43] Speaker 02: because the licenses are described by category, but not by listing out particular patents. [00:37:50] Speaker 02: So the parties anticipated there could be a dispute about whether or not an infringement suit can or cannot be brought. [00:37:59] Speaker 02: That's what this provision is doing in an agreement that's a by-sale agreement. [00:38:05] Speaker 02: That's why it's there. [00:38:06] Speaker 01: Thank you, Lawrence. [00:38:10] Speaker 01: Thank you. [00:38:11] Speaker 01: Mr. Reich, you've got a couple minutes. [00:38:12] Speaker 04: Thank you, Your Honor. [00:38:13] Speaker 04: I appreciate that. [00:38:14] Speaker 04: Starting with the interchange between Judge Clevenger and my friend, I think that really distills this to a simple essence, which is this is a contract dispute about what rights they thought they got. [00:38:31] Speaker 04: It really is. [00:38:32] Speaker 04: There's nothing about Title 35 about infringement or validity that needs to be decided whatsoever. [00:38:40] Speaker 04: talented, but that's the only gist that you can get out of that interaction. [00:38:44] Speaker 03: Can I just ask you about, I mean this sentence which appears, this is on page four of your proof, and there's a version of it at page six of your reply brief. [00:38:53] Speaker 03: The goods that Illumina supplies to AREA OSA under the supply agreement do not include the type of proprietary custom DNA assay optimization kits and techniques. [00:39:04] Speaker 03: that are the subject matter of the 794 patent. [00:39:08] Speaker 03: And then in the reply brief you say at most their counterclaim will require analyzing the subject matter of the 794 patent in relation to the goods it purchases pursuant to the supply agreement. [00:39:20] Speaker 03: Why putting aside infringement [00:39:23] Speaker 03: the infringement word in the exception in the arbitration clause, why does that not itself establish that the scope of the patent is actually part of their contract claim? [00:39:38] Speaker 04: Let me start with, again, a [00:39:42] Speaker 04: argument is being raised that wasn't made by the other side. [00:39:45] Speaker 04: The other side never relied on scope. [00:39:47] Speaker 04: It was an infringement with the argument. [00:39:49] Speaker 04: We documented that in our appeal briefs. [00:39:51] Speaker 04: That's all that Judge Ilston found, so the order that you're reviewing only relies on infringement. [00:39:55] Speaker 04: So this is, again, a theory that wasn't pre-litigated with another kind of oral argument day conversion for Ariosa. [00:40:04] Speaker 04: And the answer is, [00:40:06] Speaker 04: This is essentially a contract dispute about the nature of the goods they sold and what licenses they get interpreting things. [00:40:13] Speaker 04: Exactly how they're going to argue it at the end of the day, I don't know. [00:40:17] Speaker 04: Fact is that the accused product doesn't involve reagents that we sell them. [00:40:24] Speaker 04: So it's actually a simple issue, which is no, you don't get license rights for something that you homebrew yourself and don't make. [00:40:29] Speaker 04: That's the ultimate dispute if you want to get that to brass tacks. [00:40:34] Speaker 04: I would just say that [00:40:35] Speaker 04: If you pull the lens back, and based on the interchange here, your question is, is this a contract dispute about what rights they got? [00:40:45] Speaker 04: Or is this an issue of infringement or validity? [00:40:49] Speaker 04: This is not about issues of infringement or validity. [00:40:52] Speaker 04: This is about a contract and what rights they got, and the broad provision of the arbitration says that this is [00:41:02] Speaker 04: to be arbitrated and given all that we need to do is have a reasonable debate, which I think we've had here today, and then we win under very well settled Supreme Court principles, this is arbitrable. [00:41:13] Speaker 01: Wrap it up, Mr. Ryan. [00:41:15] Speaker 04: Okay. [00:41:15] Speaker 04: I guess the final point I wanted to make is on, which I think will be helpful because the record's not developed on a lot of these points, [00:41:22] Speaker 04: I think in terms of what the law and the different circuits are on this form over substance question, I actually think although it sounded like there was disagreement, there's generally agreement, which is you don't look at the form, you look at the substance. [00:41:33] Speaker 04: I think that's what Mr. Gindler said time and again. [00:41:35] Speaker 04: And when he says all these decisions support him, it's because he thinks that we didn't effectively ask for arbitration. [00:41:43] Speaker 04: And I would just cite our motion, which is not in the appendix. [00:41:47] Speaker 04: You know, said things like, the issues presented in Illumina's motion are simple. [00:41:52] Speaker 04: Because the contract that Illumina allegedly breached includes an arbitration provision, Arios' breach of contract counterclaims must be arbitrated. [00:42:02] Speaker 04: So we were very emphatic. [00:42:04] Speaker 04: Are there any other questions? [00:42:06] Speaker 01: No, I'm just going to make a comment. [00:42:08] Speaker 04: Well, thank you so much for the amount of time, and I apologize if it seemed like we got deeper in, but a lot of this hadn't been briefed. [00:42:15] Speaker 02: I would point out the motion actually is in the appendix. [00:42:20] Speaker 02: It's just there. [00:42:21] Speaker 01: Thank you, Council, for a well-arguing matter. [00:42:27] Speaker 01: We're going to, we agreed in advance, ask for letter briefing. [00:42:34] Speaker 01: on jurisdiction. [00:42:37] Speaker 01: We blindsided you with the case which is probably having lived in Quebec when it was a local company, Bombardier. [00:42:47] Speaker 01: And so we'll issue an order to that effect to give you exactly what we want.