[00:00:02] Speaker 03:
The case for argument this morning is 15-1-8-7-0-M-I-L-L-C.

[00:00:10] Speaker 03:
Mr. Crane, whenever you're ready.

[00:00:13] Speaker 02:
Thank you.

[00:00:17] Speaker 02:
Good morning, and may it please the court.

[00:00:20] Speaker 02:
For any of the eight or more reasons that we've briefed, the district court's orders should be vacated.

[00:00:26] Speaker 02:
This morning, I'd like to use my time to focus on four key issues.

[00:00:30] Speaker 02:
Number one, the District Court misconstrued the term first green.

[00:00:34] Speaker 02:
A proper construction of that term means that there is no infringement of either of the alleged claims, the asserted claims.

[00:00:42] Speaker 02:
Two, as the claim 16, which is the only claim that the District Court found was likely infringed, the District Court erred in construing and in finding infringement of the degassing chamber limitation.

[00:00:57] Speaker 02:
Three, the claims are not entitled to a 2007 filing date.

[00:01:01] Speaker 02:
And if MI is correct about infringement, the claims are invalid because of the on-sale bar.

[00:01:08] Speaker 02:
And finally, the equitable considerations overwhelmingly point against the entry of an injunction.

[00:01:14] Speaker 02:
MI's limited allegations of irreparable harm are based on speculation, and the unrebutted evidence is that the injunction will put my client FP out of business without it staying in court.

[00:01:25] Speaker 04:
What is, as an aside, a quick aside, what is the current status of these proceedings?

[00:01:30] Speaker 04:
Is anything scheduled?

[00:01:31] Speaker 04:
Is things moving forward?

[00:01:32] Speaker 02:
Things are moving forward in the case.

[00:01:36] Speaker 02:
We've intervened.

[00:01:37] Speaker 02:
Our Canadian parent has intervened to assert claims.

[00:01:40] Speaker 02:
We've asserted counterclaims.

[00:01:42] Speaker 02:
There is a scheduling order in place.

[00:01:44] Speaker 02:
The injunction is state.

[00:01:49] Speaker 02:
So turning first to claim 16, again, the only claim that the district court found was likely infringed

[00:01:55] Speaker 02:
The court construed two elements of Claim 16, the terms first screen and the terms degassing chamber, and found that both are present in the vac screen, my client's product.

[00:02:05] Speaker 02:
I will talk about each of these in turn.

[00:02:08] Speaker 02:
The district court construed the term first screen to mean any screen in a series of shell shaker screens, including the last screen.

[00:02:16] Speaker 02:
Claim 16 requires that a vacuum be applied to the first screen of the shell shaker to enhance the flow of drilling fluid through that screen

[00:02:24] Speaker 02:
with respect to a second screen that specifically does not have a vacuum applied to it.

[00:02:31] Speaker 02:
MI's argument stands or falls on this notion that the terms first and second are always used generically in patents and convey generally and specifically as to their patent, the 288 patent, no sequential meaning.

[00:02:45] Speaker 01:
Where in the claim 16 does it have any kind of physical location description?

[00:02:51] Speaker 02:
The physical location, well, it describes the location as first in the claim itself.

[00:02:57] Speaker 02:
The first screen is identified in the claim itself and something occurs in the first screen with respect to the second screen.

[00:03:03] Speaker 02:
But you'll have to go back to the specification to find the specific definition of the first screen.

[00:03:08] Speaker 01:
So you want us to limit the claim to the specification?

[00:03:12] Speaker 02:
I want you to read the claim in light of the specification.

[00:03:17] Speaker 02:
which is the court indicated is often deterrent as to the definition of particular terms within the claim.

[00:03:23] Speaker 01:
If we agree with your room that first screen and second screen and the claim language is broader, is there anything in the specification that specifically narrows it or are they just examples?

[00:03:39] Speaker 02:
Well, if the court is asking does the specification say first screen is defined as, no it doesn't.

[00:03:47] Speaker 02:
You have to derive the definition from the entirety of the specification.

[00:03:51] Speaker 01:
You do start with the claim language, right?

[00:03:54] Speaker 01:
The claim language doesn't seem limited in any kind of physical aspect.

[00:03:58] Speaker 01:
Do you agree with that?

[00:04:00] Speaker 01:
We have to get to the specification to have any kind of physical limitation.

[00:04:06] Speaker 02:
I would respectfully disagree because I think, because Your Honor, we have submitted expert testimony.

[00:04:12] Speaker 02:
from an expert in the field who would tell you that a person of ordinary skill in the art of shell shakers would read the term first screen and always hear that term as the first screen in a series of shaker screens.

[00:04:25] Speaker 05:
Of course, as I think you're proposing counsel's point, the use of the term first screen is really not so much

[00:04:37] Speaker 05:
a question of what a person of skill in the particular mechanical art here would interpret it to mean.

[00:04:44] Speaker 05:
But more, it's a patent convention.

[00:04:46] Speaker 05:
That's their argument.

[00:04:47] Speaker 05:
So I'm not sure how useful the view of a person of skill in the art is when you're talking about terms that have patent convention uses.

[00:04:57] Speaker 02:
Well, Your Honor, of course the term has patent convention uses.

[00:05:00] Speaker 02:
But another case that approached the same issue is the Eplera case.

[00:05:04] Speaker 02:
And in the Eplera case,

[00:05:06] Speaker 02:
the definition of first and second vacuum chambers in a spectrometer was made relative to the position of those vacuum chambers in the flow of ions.

[00:05:19] Speaker 02:
In this case, there is a flow of slurry across several screens, progressively becoming less and less because of the effect of the screens.

[00:05:31] Speaker 02:
And what they have invented

[00:05:34] Speaker 02:
in their invention is the notion that under that first screen, as demonstrated in their various illustrations, they place a vacuum to improve, to enhance the flow under that particular screen.

[00:05:45] Speaker 02:
So the fact that there is a patent convention, which I admit there's a patent convention, but that patent convention is not absolute.

[00:05:54] Speaker 02:
And there's no case saying that it is absolute.

[00:05:56] Speaker 02:
And in fact, there are cases where you derive the meaning of the specific terms.

[00:06:01] Speaker 02:
by their description in the specification, which is precisely the case here.

[00:06:05] Speaker 05:
Let me ask you if you can turn to the degassing.

[00:06:09] Speaker 02:
I can.

[00:06:10] Speaker 05:
As I looked at the record materials, it seemed to me that the following was reflected in the record.

[00:06:21] Speaker 05:
at least viewing the record most favorably to the findings made by the district judge.

[00:06:28] Speaker 05:
First, that the 959 patent is your patent.

[00:06:34] Speaker 05:
And second, that there is evidence that the back screen was a commercial embodiment of the 959 patent and that the 959 patent has a degassing

[00:06:46] Speaker 05:
function that's performed by the, I think it's numbers 51 and 52 in figures 2 and 2A to B. And that your, the materials, I guess it's a manual of some sort, describe the degassing

[00:07:07] Speaker 05:
function performed by the back screen.

[00:07:10] Speaker 05:
Why isn't that evidence sufficient to support the District Court's conclusion that degassing in some form of degassing chamber is performed by the back screen?

[00:07:23] Speaker 02:
For several reasons, hopefully I can keep them all in my head, Your Honor.

[00:07:26] Speaker 02:
One is that the degassing chamber is a very specific thing in the 288 patent.

[00:07:32] Speaker 02:
If you look at the patent prosecution history,

[00:07:35] Speaker 02:
MI went in with just a chamber, and the PTO limited them to a degassing chamber.

[00:07:40] Speaker 02:
And it's a very specific spot in which the degassing must occur.

[00:07:46] Speaker 02:
And if you look then at the 288 pattern, and you see how they diagram their schematics, how they diagram the drawings, you'll see that they identify the degassing chamber as a separate component from the flow line connecting that degassing chamber.

[00:08:01] Speaker 02:
Again, a very specific thing performing a very specific function.

[00:08:05] Speaker 02:
from the sump that is drawing the fluid and air underneath.

[00:08:10] Speaker 02:
If you juxtapose that against what the district court found here, the district court found that a flow line with air or liquid separation, water or air separation, performs the same function as that highly specific degassing chamber.

[00:08:29] Speaker 02:
So what the district court did was look at some elements of our

[00:08:35] Speaker 02:
device and say, there, there's fluid or air separation.

[00:08:40] Speaker 02:
Therefore, that part, the flow line, in combination with a tank, performs the same function as the degassing chamber, which is very specific and very limited in the 288 patent.

[00:08:53] Speaker 05:
Let's turn to the 959 patent.

[00:08:54] Speaker 05:
At column 8,

[00:08:57] Speaker 05:
Lines 59 through 62 are what it is.

[00:09:04] Speaker 05:
There's the reference to the figures that I mentioned, 2A and 2B.

[00:09:07] Speaker 05:
And it says, so a preferred environmental fluid separation system having a multi-stage fluid-solid separation.

[00:09:14] Speaker 05:
In this system, a primary accumulator, tank 51, which is the tank I was referring to, enables first-stage fluid-gas separation.

[00:09:23] Speaker 05:
Tank secondary accumulator 52 provides secondary fluid gas separation.

[00:09:29] Speaker 05:
And that tank looks an awful lot like the tank that shows up in your drawings of your figures of the

[00:09:43] Speaker 05:
of the back screen.

[00:09:45] Speaker 05:
Why isn't that enough?

[00:09:47] Speaker 05:
Given your experts or your representative's admission that the 959 is embodied in the back screen, why isn't that enough right there to show that there is a chamber that does the fluid with the gas extraction?

[00:10:03] Speaker 02:
Well, there are a number of claims within the 959 that don't talk about fluid or gas separation.

[00:10:09] Speaker 02:
But fundamentally, the problem here is that

[00:10:13] Speaker 02:
the court, the district court, construed two elements, the fluid or gas separation, and combined them into a very specific degassing chamber.

[00:10:24] Speaker 02:
The fact that the drawing itself looks similar can't allow us to avoid the court's findings.

[00:10:31] Speaker 05:
Well, it looks similar and is described as a fluid-gas separation.

[00:10:39] Speaker 05:
in the patent.

[00:10:40] Speaker 02:
It is described as a fluid or gas separation and I don't believe there's anything in the record and certainly nothing that the court relied upon to determine that fluid gas separation is the same fluid or air separation is the same thing as the specific degassing function that is described and trumpeted, candidly, in the 288th patent.

[00:11:00] Speaker 05:
You think fluid gas separation is not degassing?

[00:11:03] Speaker 02:
I don't know.

[00:11:04] Speaker 02:
I honestly don't know the answer in terms of what MI

[00:11:09] Speaker 02:
uh... determined that the captain or described in their pat as the captain return back to uh... the fee issue regarding first grade very quickly and point out again i've already discussed a player up and the uh...

[00:11:35] Speaker 02:
and the examples within the patent, within the specification that we briefed, that identify where it is that first screen is defined in the specification again and again.

[00:11:47] Speaker 02:
I'll end by pointing out that the 959 patent issued over the 2888 patents, two weeks after the 2888 patent issued, the 959 patent issued, in which we claimed

[00:12:02] Speaker 02:
the application of vacuum to up to one-third of the entire shaker bed, which would include the last screen where the vacuum is located.

[00:12:09] Speaker 02:
That's important because MI has never commercialized its product.

[00:12:15] Speaker 02:
Its first screen technology didn't work.

[00:12:17] Speaker 02:
Our last screen technology does work, and they know that because they marketed and evaluated our product for over two years and recognized the value of adding vacuum to the last screen as opposed to the first screen.

[00:12:32] Speaker 02:
Again, I think I've covered the gassing chamber.

[00:12:36] Speaker 02:
Again, I would point out that the district court does take two elements and combine them to say they perform the same function, even though MI has only pled literal infringement.

[00:12:47] Speaker 02:
I'm going to pass over validity and go to the equitable considerations for the remainder of my time.

[00:12:54] Speaker 02:
The district court's findings of irreparable harm are based on speculation.

[00:12:57] Speaker 02:
There's no evidence of MI's lost sales.

[00:13:00] Speaker 02:
MI entered the market.

[00:13:02] Speaker 02:
with the back, the screen pulse, its product just a few weeks before the injunction hearing.

[00:13:08] Speaker 02:
MI presented no evidence of sales, much less lost sales, and it presented no evidence, essentially because it couldn't, of lost market share.

[00:13:15] Speaker 02:
None of this harm can be presumed.

[00:13:17] Speaker 04:
But we're looking forward when we're talking about irreparable harm, right?

[00:13:22] Speaker 02:
You are looking, yes, your honor, you are looking forward as to what is the likely harm to come, but in every instance where there's been a finding of irreparable harm,

[00:13:31] Speaker 02:
every case that they cite, including Bosch, the Bellwether case, there is evidence of irreparable harm presented in terms of actual losses, actual market share loss.

[00:13:41] Speaker 02:
And on this record, there is none.

[00:13:43] Speaker 01:
Well, how could they have any if they just entered the market?

[00:13:47] Speaker 01:
They couldn't, Your Honor.

[00:13:48] Speaker 02:
We don't know what impact there could be.

[00:13:51] Speaker 01:
We don't know what the market share impact is.

[00:13:52] Speaker 01:
The only way then is if they've just gotten a patent, just entered the market, they're never entitled to an injunction because they can't show harm.

[00:14:00] Speaker 02:
I think it would be difficult to be entitled to an injunction, your honor, when you cannot show harm yet.

[00:14:04] Speaker 01:
Isn't that precisely the point where you actually might need an injunction, where you haven't established a market share, and you're a new company asserting a new patent right, and you don't, and it will destroy your market share if you are forced to compete?

[00:14:18] Speaker 02:
I think with respect, that presumes the success of your product in the marketplace.

[00:14:22] Speaker 02:
That presumes you're going to establish a role in the market to have an impact on.

[00:14:28] Speaker 02:
The fact that you've invented a product that you believe will displace another product, even an infringing product, that's not tested.

[00:14:36] Speaker 02:
That's not presumed.

[00:14:36] Speaker 02:
That can't be presumed.

[00:14:37] Speaker 02:
There's no case allowing that to be presumed, John.

[00:14:44] Speaker 04:
You want to save your interior rebuttal time.

[00:14:46] Speaker 02:
I am in for rebuttal time.

[00:14:47] Speaker 02:
I want to make one quick point, and then I'll end for now.

[00:14:51] Speaker 02:
Again, every case-based site, including Bosch, had evidence of market impact.

[00:14:58] Speaker 02:
and the undisputed evidence is that we have provided evidence for ability to pay, and that this injunction would put our company out of business, which is precisely the thing that the court commented on when it commented on the reliance upon windsurfing in a similar case, where the court indicated that at this stage, not a permanent injunction phase, but at a preliminary injunction phase, we should be very wary of putting the company out of business.

[00:15:27] Speaker 04:
Thank you, Your Honor.

[00:15:34] Speaker 00:
May it please the Court.

[00:15:36] Speaker 00:
Let me address a couple of things that my opposing counsel has raised, particularly on the first screen.

[00:15:42] Speaker 00:
Where I think we ended up, after your correct question, Judge, is that there is nothing in the claim language that says this is the location of the first screen or the second screen.

[00:15:51] Speaker 00:
It is used as a common patent convention.

[00:15:54] Speaker 00:
We ended up in reliance on Expert and Appalara.

[00:15:56] Speaker 00:
And I think Aflera, even though it's only a district court case, and I'm finding here, is instructive because in Aflera, what Judge McKelvey found was based on just the specification and the claim language, you wouldn't have a location limitation.

[00:16:10] Speaker 00:
But in the file history, there was a specific argument where the patentee said, because to get around this prior art, we have to have things in this location.

[00:16:19] Speaker 00:
First has to come before second.

[00:16:21] Speaker 00:
That's the only reason that they found it.

[00:16:23] Speaker 00:
In this case, there's been no evidence.

[00:16:25] Speaker 00:
There's no argument.

[00:16:26] Speaker 00:
that anything in the specification limits first to the inlet side.

[00:16:31] Speaker 00:
And the other most important thing is what they're calling a definition is just a description of an example.

[00:16:36] Speaker 00:
And in the example, it uses the terms first and last two screens, which are not the claim terms they're saying are defined.

[00:16:44] Speaker 00:
In the claims, it says a first screen and a second screen.

[00:16:47] Speaker 00:
These are not technical terms.

[00:16:49] Speaker 00:
These are terms of patent convention.

[00:16:51] Speaker 00:
Should be given their ordinary meaning.

[00:16:53] Speaker 00:
The district court got it exactly right on the claim construction.

[00:16:56] Speaker 00:
So they first screened and the second screen just distinguishes two screens regardless of location where the first has a pressure differential and the second does not.

[00:17:07] Speaker 00:
The issue on the degassing chamber, there is no limitation to a specific degassing chamber.

[00:17:15] Speaker 00:
In fact, what the patent says about the degassing chamber in the 288 patent at column 11, which the judge down below relied on,

[00:17:22] Speaker 00:
at lines eight to nine it says degassing the drilling fluid may be performed by any method known in the art.

[00:17:29] Speaker 00:
So what happened down below was FTUSA tried to come in with an expert declaration and say no degassing is limited to a specific type of degasser.

[00:17:39] Speaker 00:
The district court properly rejected that and then found just as the court has said from their own admissions in their saying that the patent covers their commercial embodiment

[00:17:50] Speaker 00:
in their marketing material from their own expert's prior report.

[00:17:54] Speaker 00:
They said that the degassing chamber was part of the vacuum screen system.

[00:17:59] Speaker 00:
So there is nothing that would say there isn't a degassing chamber on the preliminary record the court had.

[00:18:05] Speaker 00:
There were multiple admissions, multiple things that said we do have the degassing chamber.

[00:18:10] Speaker 00:
This issue of performing the function is just a side because the district court

[00:18:15] Speaker 00:
responding to language that Council for FPUSA raised in their motion for reconsideration.

[00:18:22] Speaker 00:
In their motion for reconsideration, they asked him to reconsider and said there's no showing that this performs the same function that's in the patent.

[00:18:30] Speaker 00:
And in the district court's order on reconsideration, he used those words.

[00:18:34] Speaker 00:
They've now latched onto that to try and say, oh, he did the wrong analysis.

[00:18:38] Speaker 05:
Do you, is it your view, as it seemed to be the district courts, that the degassing is performed by the vacuum line?

[00:18:45] Speaker 05:
Or do you take the view that the degassing is performed principally in the chamber that you identify at 377 in one of your exhibits as being number 50?

[00:18:59] Speaker 00:
Yes.

[00:18:59] Speaker 00:
I think if you look at the language of the claim limitation, it says a degassing chamber in fluid communication with the pressure differential.

[00:19:07] Speaker 00:
I think the fluid communication is the line and the chamber is the tank.

[00:19:12] Speaker 00:
So I think the district court found all those were literally met.

[00:19:16] Speaker 05:
Well, but the district court seemed to have focused on the line as being the degasser or the degassing chamber.

[00:19:22] Speaker 05:
At least that's the way I read the district court's opinion.

[00:19:25] Speaker 05:
When I looked at the argument that you were making, it seemed that you were making the argument that the tank 50 is the degassing chamber.

[00:19:32] Speaker 00:
That is the argument we made.

[00:19:33] Speaker 05:
And I think the district court... Do you detect that the district court is focusing instead on the line as opposed to the chamber?

[00:19:40] Speaker 05:
Or what do you make of that?

[00:19:42] Speaker 05:
of that language from the district court's opinion.

[00:19:44] Speaker 00:
I think the district court recognized that was the fluid communication that was required.

[00:19:49] Speaker 00:
So it's a system claim.

[00:19:50] Speaker 00:
It requires the chamber.

[00:19:51] Speaker 00:
It requires the fluid communication.

[00:19:53] Speaker 00:
And I think the district court was reacting to language in the defendant's reconsideration brief, which said there's no evidence that the line in the chamber performed the same function.

[00:20:03] Speaker 00:
And I think while the district court language was maybe less than perfectly clear,

[00:20:08] Speaker 00:
between the two orders, he was very clear that it's the tank, the line for fluid communication, and then responding to their position, he said these perform the functions required in the patent.

[00:20:23] Speaker 00:
The 959 issue that they raised, by the way, was not raised below.

[00:20:26] Speaker 00:
This idea that there's a specific location in the claims was not raised below for the degasser.

[00:20:35] Speaker 00:
So as to claim 16,

[00:20:38] Speaker 00:
I think the district court was very clear, got it right on first and second screen.

[00:20:42] Speaker 00:
It's clear from the claim and the spec, there's no need to go outside of those what first and second mean.

[00:20:48] Speaker 00:
And the degassing chamber is admitted.

[00:20:50] Speaker 00:
So I think infringement, the likelihood of success on claim 16 is very well established.

[00:20:55] Speaker 00:
As to claim one, first and second was their primary argument.

[00:21:00] Speaker 00:
It falls the same way.

[00:21:01] Speaker 00:
They argued that they were not practicing the method and they were not controlling the airflow.

[00:21:05] Speaker 00:
Those were the total of the arguments for non-infringement down below.

[00:21:09] Speaker 04:
But the district court never found infringement.

[00:21:11] Speaker 00:
The district court got slightly sidetracked.

[00:21:14] Speaker 04:
The district court... Could you just answer my question before you explain it?

[00:21:18] Speaker 00:
Yes.

[00:21:18] Speaker 04:
The district court never found infringement in Claim 1, right?

[00:21:22] Speaker 00:
Chief Judge, I would say that inherently in the reconsideration order and saying that they are enjoined from infringing Claim 1,

[00:21:30] Speaker 00:
he did find that claim one was met.

[00:21:32] Speaker 00:
He addressed in his first order the two non-infringement arguments that they made, which were first screen and controlling airflow.

[00:21:41] Speaker 00:
And what he didn't do, he latched onto their expert report, which had one element that said flowing slurry over the screen with the pressure differential.

[00:21:52] Speaker 00:
And he said, I don't need to decide that now.

[00:21:55] Speaker 00:
And then they came back and they moved for reconsideration.

[00:21:58] Speaker 00:
And in doing reconsideration, I believe he inherently found that no reasonable person could find they weren't flowing slurry over the last screen, and that's why he did it.

[00:22:08] Speaker 00:
But I will agree that that's not expressly written in the order.

[00:22:14] Speaker 00:
I think this court could find, based on the multiple admissions that they've made, even in their most recent briefs, but in their opening brief, they repeatedly say there's slurry flowing over the last screen.

[00:22:27] Speaker 00:
So to any extent, that's the missing piece that the district court didn't specifically say.

[00:22:33] Speaker 00:
I think this court could say there's no reasonable way to see it otherwise.

[00:22:37] Speaker 00:
They've admitted it, that it's slurry.

[00:22:39] Speaker 00:
Slurry is defined in the patent.

[00:22:40] Speaker 00:
The district court adopted that as a mixture of drilling fluid and cuttings.

[00:22:44] Speaker 00:
And that's the whole purpose of both devices, is to pull more drilling fluid off the cuttings.

[00:22:49] Speaker 00:
So I think this court could say, to any extent, the district court needed to expressly state that that could be done

[00:22:56] Speaker 00:
you know, on remand or this court could find that no reasonable person could find otherwise based on their own admissions.

[00:23:06] Speaker 00:
As to the irreparable harm, if I can go there, the defendants admitted repeatedly until their last brief that they've submitted in this court that this is a two-player market.

[00:23:16] Speaker 00:
And what they've said now is, well, there's no evidence, and you're quite right, Judge, this is a going forward looking case, and they said there's no evidence that there's lost

[00:23:25] Speaker 00:
market share or lost sales?

[00:23:26] Speaker 00:
Well, in an admitted two-player market, which they've repeatedly said, there is no other thing that could happen, but there will be lost sales.

[00:23:36] Speaker 00:
And along with that, the lost opportunity to sell other goods and services, which there is evidence in the record of, and I put in a declaration saying, when we're on the rig and we have the opportunity to sell this device,

[00:23:48] Speaker 00:
We also have the opportunity to sell other things such as more drilling fluids, shakers, replacement screens, many other things.

[00:23:54] Speaker 00:
All of those will be lost if they're allowed to continue in this market.

[00:23:58] Speaker 00:
The loss of exclusivity.

[00:24:00] Speaker 00:
I mean, that's a common patent thing is we have the right to say that we're not going to license others to use our technology.

[00:24:07] Speaker 00:
We have the right to market as we're the exclusive supplier.

[00:24:10] Speaker 00:
In fact, one of the things that's not accurate in the way council portrays this is they say, well, we've been out there in the market.

[00:24:16] Speaker 00:
And now MI is changing the status quo.

[00:24:18] Speaker 00:
The actual status quo was MI was selling a product called the Maximizer and renting some of their screens.

[00:24:25] Speaker 00:
So MI was the only brand name known.

[00:24:28] Speaker 00:
And only when MI found out they were going to start selling on their own and this patent came out, that changed the status quo.

[00:24:35] Speaker 00:
And so the status quo is being maintained by the preliminary injunction.

[00:24:41] Speaker 00:
There's also the, in addition to the loss of exclusivity, the lost sales,

[00:24:46] Speaker 00:
the lost things that go along with the sales, the ability to brand our things ourselves, there is the danger of their inability to pay.

[00:24:54] Speaker 00:
Despite councils saying, you know, that that's not a factor in irreparable harm, it is a factor because they've repeatedly said now they only have 45 days of operating cash.

[00:25:04] Speaker 00:
And so if they're, you know, in fact what they've said is the only way we could pay a judgment is if we're allowed to go forward and keep selling the infringing product

[00:25:14] Speaker 00:
So that at the end of the case, we could pay for that infringement.

[00:25:17] Speaker 00:
And that's certainly not what's intended and why you can't get a preliminary injunction.

[00:25:22] Speaker 05:
As to the evidence, you rely on the Dun and Bradstreet evidence as your evidence of the financial weakness of the defendant.

[00:25:35] Speaker 05:
That seemed a little on the thin side to me.

[00:25:40] Speaker 05:
You have nothing else, I take it, other than their assertion that they're at risk if they're enjoined from continuing financial

[00:25:49] Speaker 00:
Yes, Your Honor, and I agree with you that that is our evidence, those two things, in large part because the defendant is in control of what they put in.

[00:25:58] Speaker 00:
And we argued down below that we think this is a company that has risk.

[00:26:02] Speaker 00:
We think because they have a Canadian parent and they don't have cash, that's an issue on irreparable harm.

[00:26:08] Speaker 00:
They came in only with a declaration that said we would be put out of business.

[00:26:13] Speaker 00:
It kind of blurred sales between Canada and the US.

[00:26:16] Speaker 05:
It's really... But they did have a revenue figure, I think, for US, if I recall correctly, as well as projected revenue figures.

[00:26:25] Speaker 05:
I sought revenue.

[00:26:27] Speaker 05:
I didn't see profits.

[00:26:29] Speaker 00:
Right.

[00:26:30] Speaker 05:
Correct.

[00:26:31] Speaker 05:
Was there any discovery in this case?

[00:26:32] Speaker 05:
I assume not.

[00:26:33] Speaker 05:
There was not.

[00:26:34] Speaker 05:
And this is proceeded entirely on the papers.

[00:26:36] Speaker 00:
Yes.

[00:26:37] Speaker 00:
This was a preliminary record.

[00:26:38] Speaker 00:
And in fact, the court offered, at the end of the hearing on this issue, we had asked to present live witnesses

[00:26:46] Speaker 00:
The court said it didn't have time, but it can give us another day.

[00:26:50] Speaker 00:
We could come back, present any additional evidence.

[00:26:52] Speaker 00:
Both counsel agreed that the record was complete, and the court did not need to do that.

[00:26:57] Speaker 00:
But I think really it shouldn't be held against us that defendant hasn't come forward with any financial records, profit statements, loss statements, anything to verify what they're saying.

[00:27:09] Speaker 00:
All we could get was the public record, which is the Dun & Bradstreet that says they're at risk.

[00:27:14] Speaker 00:
without further discovery.

[00:27:16] Speaker 00:
Now, this is a preliminary proceeding.

[00:27:18] Speaker 00:
I don't think there's any clear error in the way the court looked at this and found that there were irreparable harms on the record that it had on a preliminary basis.

[00:27:27] Speaker 00:
But I do think it's important that second issue that you raised, Judge Bryson, is they have been, what they're saying is, we've been in business since 2012.

[00:27:36] Speaker 00:
It's now late 2015, and we only have 45 days of operating cash, or we're going to go out of business.

[00:27:43] Speaker 00:
I think that can be considered as record evidence that there's real danger that they're not going to be able to pay a judgment.

[00:27:50] Speaker 05:
I'm not really conversant with the system that Dun & Bradstreet uses to report these, and so it struck me just looking at the particular item that you relied on, that there is perhaps some seeming tension

[00:28:06] Speaker 05:
which the other side has pointed to, between the financial stress class rating that they've done in Bradstreet being four, which is next to the highest risk, and their risk of severe financial stress as being 0.84%.

[00:28:22] Speaker 05:
And in particular, I was a little confused of risk of severe financial stress for businesses with this class.

[00:28:30] Speaker 05:
I mean, can you interpret that for me in a way that makes sense to the lay reader?

[00:28:34] Speaker 00:
Sure, what Dun & Bradstreet does, as I understand it, is they try and look at similar businesses.

[00:28:40] Speaker 00:
So if you're selling a service in the oil field in this particular, they'll try and find comparable.

[00:28:48] Speaker 05:
I was really asking you to direct your attention to it.

[00:28:52] Speaker 05:
The risk of severe, this is at A431, risk of severe financial stress for businesses with this class is rated at 0.84%, presumably very low.

[00:29:05] Speaker 05:
Is that a reference to the general class of businesses as opposed to this business?

[00:29:12] Speaker 05:
Or is that a reference to this business within the general class, if my question is clear?

[00:29:18] Speaker 00:
I do.

[00:29:18] Speaker 00:
I think it's a reference to this business within the general class.

[00:29:21] Speaker 05:
So notwithstanding that they say there's a four out of five financial stress for this business, nonetheless the risk of severe financial stress such as insolvency and bankruptcy is one percent or less.

[00:29:39] Speaker 00:
I think that's what it's saying, although I think what it's saying is for small businesses of this size,

[00:29:46] Speaker 00:
it's typically not at the highest risk, right, in terms of bankruptcy.

[00:29:51] Speaker 00:
But it's not addressing all the factors because it's not a public company, right?

[00:29:56] Speaker 00:
So Dun & Bradstreet can only get the information that's given to it.

[00:30:01] Speaker 05:
OK, so you think your interpretation of the risk of severe financial stress number is a number specific to this company, not to the class of companies within which this company falls.

[00:30:15] Speaker 05:
what I understood you were saying.

[00:30:16] Speaker 00:
So let me be clear now as I'm looking at it again.

[00:30:19] Speaker 00:
It's the financial stress class and then the risk of financial stress for businesses with this class talks about 84 per 10,000.

[00:30:27] Speaker 00:
So I do think that's the general class that it's talking about.

[00:30:30] Speaker 00:
It's not talking about.

[00:30:31] Speaker 00:
Big difference if you're talking about the classes.

[00:30:33] Speaker 00:
Right, I agree.

[00:30:34] Speaker 00:
Now that I look at it, when it says 84 per 10,000, I think it's talking about the class overall, not this business.

[00:30:44] Speaker 04:
Any final comment?

[00:30:45] Speaker 00:
No, Your Honor, I think I would say that in terms of cases where a preliminary injunction is warranted, this is about one of the strongest I've seen.

[00:30:53] Speaker 00:
There's a very high likelihood of success.

[00:30:56] Speaker 00:
There's been essentially no invalidity challenge raised.

[00:30:59] Speaker 00:
The only prior art they assert is to say that their own device anticipates if we don't get the support for the claims.

[00:31:07] Speaker 00:
And in the record, on the spec,

[00:31:09] Speaker 00:
in the various other items we've pointed to, there's plenty of support for the limitations.

[00:31:14] Speaker 00:
So I think there's essentially no invalidity challenge, a very strong infringement case, and then on the equitable factors, I think they lean our way or at best are even on that one issue because of the claimed risk, even though they didn't provide any financial data.

[00:31:30] Speaker 00:
So overall, I think the district court got it exactly right on the merits.

[00:31:34] Speaker 00:
I'm going to ask that this court affirm.

[00:31:35] Speaker 05:
If I could just ask one further question now.

[00:31:39] Speaker 05:
in the nature of the specific challenges to the injunctive order.

[00:31:45] Speaker 05:
There are several procedural challenges, one of which is the reliance on claims of 1 and 16 as opposed to simply

[00:31:54] Speaker 05:
16 for the injunction.

[00:31:56] Speaker 05:
Another is the failure to include the specific injunctive terms within the single document as Fifth Circuit law seems to require.

[00:32:07] Speaker 05:
And third, of the principal objections, I guess,

[00:32:13] Speaker 05:
Third, let's see, was the, oh yes, the simply enjoining against infringement as opposed to enjoining the back screen or colorable imitations of the back screen, which is the normal way that injunctions are framed as opposed to disapproved injunctions that say don't infringe.

[00:32:35] Speaker 05:
You don't want to put somebody at risk of contempt on an instruction that big.

[00:32:42] Speaker 05:
Can you comment on whether the injunction needs to be reformulated for any one of those three reasons?

[00:32:49] Speaker 00:
I don't think it needs to be, but I think the Mangy's case which we've pointed to is instructive in saying that this court can affirm on the merits and say the district court got it right and just remand with instructions if it needs to to say this should all be in one order with these items addressed.

[00:33:08] Speaker 00:
You know, this issue of

[00:33:11] Speaker 00:
in a single order I think could be easily handled on remand with direction from this court.

[00:33:15] Speaker 00:
On claim one, as I've said, both of the arguments that they raised below were addressed by the district court.

[00:33:22] Speaker 00:
This one issue on the slurry over the at last screen with the pressure differential generator is one that they've admitted repeatedly.

[00:33:30] Speaker 05:
Well, if we disagree with you on claim one, and we say that claim 16 is the only one on which the district court made a finding,

[00:33:38] Speaker 05:
uh... which is uh... likely to have success you presumably would have no issue with our confining the injunction to claim sixteen.

[00:33:50] Speaker 00:
I think this court could affirm the injunction on sixteen and then address any issues on the formalities of the order on remand.

[00:33:58] Speaker 05:
And in terms of the last issue the uh... injunction against infringing as opposed to the injunction against the

[00:34:07] Speaker 00:
Well, the injunction does say the back screen.

[00:34:11] Speaker 05:
I thought that it was broader than that.

[00:34:21] Speaker 05:
Well, it says that in part, but then it goes on.

[00:34:23] Speaker 05:
It says, enjoins defendant from promoting, selling, or renting any back screen.

[00:34:27] Speaker 05:
And then, of course, the killer language is, or in the other system, which infringes one at 16.

[00:34:33] Speaker 05:
So in effect, the District Court is just enjoining infringement.

[00:34:37] Speaker 00:
In effect, I think the district court could have used or any colorable version of the back screen, and that would have been an artful language.

[00:34:45] Speaker 00:
And I think this court can certainly direct the court to do that.

[00:34:48] Speaker 00:
I think it's kind of a straw man issue, because they've repeatedly said, we only have one product.

[00:34:53] Speaker 00:
It's had the same embodiment since 2010.

[00:34:56] Speaker 00:
It's never changed.

[00:34:57] Speaker 00:
It's current.

[00:34:58] Speaker 00:
So when the court says, you're enjoined from selling on the back screen, I think it's very clear they know exactly what the order is.

[00:35:05] Speaker 00:
But I agree, it could be something that could be cleaned up below and just say, or any colorable version.

[00:35:10] Speaker 05:
Well, but it could matter if, for example, they tried to design a round which was more than a colorable imitation of the back screen.

[00:35:18] Speaker 05:
But nonetheless, if you contended it was still infringing, they could be not only on the hook for infringement, but they could be on the hook for contempt if the district court found that it infringed under this order, but not under a

[00:35:31] Speaker 05:
back screen or colorable imitation.

[00:35:34] Speaker 00:
I think we'd be in the same position, Judge Bryson, because we'd be arguing about whether the supposed non-colorable difference that they, you know, allege doesn't infringe, whether it infringes or not, and we'd be arguing about as if non-colorable and still infringes.

[00:35:48] Speaker 05:
The difference for the defendant would be

[00:35:50] Speaker 05:
that the consequence of that argument in the context of an order that talked about infringing would be that they would be subject to contempt, as opposed to you are making a new argument of infringement in the context of an order that says don't sell the vaccine or a colorable imitation, in which case you would simply have a new infringement case.

[00:36:14] Speaker 05:
That makes a big difference to the defendants.

[00:36:16] Speaker 00:
We would have a new infringement case if we agreed

[00:36:19] Speaker 00:
that it was not colorably different, right, that it was somehow further afield, then it would be a new infringement case, otherwise it would be a contempt.

[00:36:27] Speaker 05:
If you thought it was a colorable imitation, and you went to the district court and the district court said, no it isn't, but I still think it infringes, then you would have no contempt, whereas you would have with the broad injunction, and you would have arguably an infringement action.

[00:36:42] Speaker 00:
I see your point, and that's why I conceded earlier the language could have been more precise, and I think this court can direct the district court to just

[00:36:49] Speaker 00:
uphold the injunction and correct that language.

[00:36:53] Speaker 00:
Thank you.

[00:36:54] Speaker 03:
Thank you, Your Honor.

[00:37:05] Speaker 02:
First, I want to make sure that we're clear on what the court found regarding claim one.

[00:37:12] Speaker 02:
He specifically said, I need not decide whether the back screen performs the second step.

[00:37:17] Speaker 02:
because he found an infringement of claim 16.

[00:37:19] Speaker 02:
And then he cited to Abbott saying, in order to show a likelihood of success in the merits, a plaintiff need only show that he proved that one claim is infringed.

[00:37:30] Speaker 02:
Second, the actual language that the court used regarding the degassing chamber, Your Honors, is that it performs that the degassing chamber in the 288 patent, quote, quote, performs the same function

[00:37:44] Speaker 02:
as the vacuum line with a fluid or air separator which is connected to a collection tank.

[00:37:49] Speaker 02:
So he specifically identifies almost in total the fluid line as being the degassing chamber and conflates those two items into becoming the very specific degassing chamber.

[00:38:07] Speaker 02:
Next I want to talk about the

[00:38:11] Speaker 02:
the availability of money damages even in a two-player market.

[00:38:16] Speaker 02:
And essentially what MI has argued is because of the two-player... If I could bring you back to the degassing.

[00:38:21] Speaker 02:
Yes, sir.

[00:38:21] Speaker 05:
Sorry to spend so much time on this, but it doesn't seem to be an important issue.

[00:38:25] Speaker 05:
Oh, please.

[00:38:28] Speaker 05:
I'm not sure whether you deny or not that the vac screen contains a degassing chamber.

[00:38:34] Speaker 05:
I mean, some kind of degassing, not used chamber, some kind of degassing functionality.

[00:38:42] Speaker 05:
Is that right?

[00:38:44] Speaker 02:
The vac screen, I think it is safe to say that any item that is moving fluid from one place to another incorporates the notion of degassing at some level.

[00:38:54] Speaker 02:
Is it the very specific degassing function identified in the 288 patent?

[00:38:58] Speaker 02:
I don't know, Your Honor.

[00:38:59] Speaker 02:
I would suggest not.

[00:39:00] Speaker 02:
And it does not occur in the very specific chamber that the 288 requires.

[00:39:05] Speaker 02:
The 288 patent is labeled as a degassing invention.

[00:39:10] Speaker 02:
And many of its embodiments talk about the function of pulling the gas out of the shell shakers to avoid the noxious gases being exposed to workers and the dangers of that.

[00:39:21] Speaker 02:
So it identifies that as a very special function.

[00:39:28] Speaker 02:
Regarding the two-player market, I think an instructive case for the court to consider is Lamb versus Johns Manville, which is cited on MI's table of authorities.

[00:39:37] Speaker 02:
And this court noted in that case where Lamb, the plaintiff, fled, market erosion, lost sales, this court said the profits lost by the patent owner in a two-supplier market is a proper ground for rewarding damages.

[00:39:51] Speaker 02:
So the presumption or the suggestion that there's some sort of presumption that in a two-player market,

[00:39:56] Speaker 02:
Damages lost sales are presumed to be irreparable.

[00:40:00] Speaker 02:
It's not true.

[00:40:00] Speaker 02:
Money damages have been awarded in similar cases over and over again.

[00:40:06] Speaker 02:
Last, I want to focus on the notion of MI's lost sales and where we are in the process.

[00:40:15] Speaker 02:
MI says, and it's brief, that it introduced the screen pulse to the market in 2014.

[00:40:22] Speaker 02:
As of the time of the hearing,

[00:40:25] Speaker 02:
MI produced literally no evidence of lost sales or lost market share, despite its saying that it ended the market with the product in 2014.

[00:40:32] Speaker 02:
The sequence matters because they evaluated our product in 2010, they began marketing our product as their own in 2012, and when we turned down their offer of $27 million for our technology in late 2014, they took this first screen patent and sued us for infringement with our last screen product.

[00:40:55] Speaker 02:
And during that time, when they were marketing our product as their product, as the maximizer, painting it with VMI Swaco colors and exposing it to the marketplace, they didn't gather data of their lost tag-along sales or what those tag-along sales might be.

[00:41:11] Speaker 02:
Because when they submitted their affidavits, Your Honors, all they said was there may be lost tag-along sales without identifying what those sales would be and what the particular items would be sold.

[00:41:22] Speaker 02:
So the suggestion that on the record they've demonstrated irreparable harm, severe, immediate irreparable harm is simply not true.

[00:41:31] Speaker 02:
There is no evidence on the record of irreparable harm that they face.

[00:41:35] Speaker 05:
Thank you, Your Honor.

[00:41:37] Speaker 05:
Let me ask you one final question.

[00:41:41] Speaker 05:
Now, on the question of ability to pay, the evidence

[00:41:46] Speaker 05:
I guess it's a little thin on both sides of that.

[00:41:50] Speaker 05:
They have it done in Bradstreet.

[00:41:51] Speaker 05:
You have a declaration from Mr. Russell that has a reference to revenues of FPUSA and the worldwide NUS revenues.

[00:42:03] Speaker 05:
But I didn't see anything that reflects profits.

[00:42:07] Speaker 05:
I mean, you can have a lot of revenue and still be in big financial trouble.

[00:42:12] Speaker 05:
But $6.4 million with the revenue and yet having only 45 days of cash reserves seems to me not to necessarily suggest that you're in the pink.

[00:42:23] Speaker 02:
Well, two points, Ron.

[00:42:25] Speaker 02:
One is there was other evidence submitted during the bond proceeding which occurred subsequently subsequent to the initial hearing, but when the court requested information on the bond, we provided further financial information.

[00:42:40] Speaker 05:
anywhere in the materials before us?

[00:42:42] Speaker 02:
It is in the materials before you.

[00:42:44] Speaker 02:
I'll get you a precise site.

[00:42:48] Speaker 05:
If I didn't see it, it's a reference from the briefs.

[00:42:53] Speaker 05:
It's support for the idea that you have that it's going for... I believe it's referenced in a footnote of our brief, Your Honor.

[00:43:00] Speaker 02:
Let me get my counsel to help me out there.

[00:43:02] Speaker 02:
Well, that's all right.

[00:43:03] Speaker 02:
I'll look at it.

[00:43:04] Speaker 02:
But, as it stands, we don't know today what damages we'll have to be answerable for.

[00:43:10] Speaker 02:
We don't know what that quantum is.

[00:43:13] Speaker 02:
There is some quantum out there that assuredly we can't afford to pay.

[00:43:16] Speaker 02:
But right now, there's no record before this quarter, for that matter, before the district court as to what MI's damages are.

[00:43:23] Speaker 02:
So you're measuring our ability to pay against an unknown number, an un-evidenced number.

[00:43:31] Speaker 02:
We have said, and we do believe, we have 45 days of cash if tomorrow we're not allowed to sell our product.

[00:43:39] Speaker 02:
But that product is a success, and we can anticipate some sales growth, although we are a relatively limited player in the market.

[00:43:49] Speaker 02:
Next to MI, as they point out, they point out that we have only four screens in the marketplace, which suggests, of course, the de minimis impact that we could be having on the market.

[00:43:58] Speaker 02:
So if you look, for example, at their briefing on the amount of bond, they suggest $250,000 because they anticipate that is our lost profit on our sales during the course of litigation.

[00:44:09] Speaker 02:
given the relatively small size of us in the marketplace, and the fact that they produce no evidence of actual lost sales, it's very difficult to match up our ability to pay with this imaginary number.

[00:44:21] Speaker 05:
I think your colleague may have identified something for you.

[00:44:26] Speaker 02:
Yes.

[00:44:26] Speaker 02:
So on A1089, our financial expert admittedly, in connection with the bond briefing in paragraph 13,

[00:44:39] Speaker 05:
has uh... the evidence uh... at the end of that again we don't have anything that shows actual property i don't think we've committed evidence of actual property