[00:00:01] Speaker 03:
Before we begin our regular proceedings, I'd like to turn to Judge Laurie and make the motion.

[00:00:08] Speaker 05:
Thank you, Chief.

[00:00:10] Speaker 05:
I move the admission of Benjamin Aaron Sedmon, who is a member of the Bar and is in good standing with the highest court of Georgia.

[00:00:21] Speaker 05:
I have knowledge of his credentials and am satisfied that he possesses the necessary qualifications

[00:00:29] Speaker 05:
I would like to go beyond the formal requirements of the motion and say that Ben has been with me for almost two years.

[00:00:41] Speaker 05:
He has done fine work.

[00:00:44] Speaker 05:
He's been diligent, thorough, insightful, and enjoyable to work with.

[00:00:52] Speaker 05:
And we've had lots of enjoyable conversations beyond the law in cases, including the relative merits of Washington and Atlanta sports teams.

[00:01:07] Speaker 05:
I have no doubt that he will have a successful career and Ralph will be with me for a couple of more months happily.

[00:01:16] Speaker 05:
I will, when he's left, I will look back fondly on his courtship and I wish him well and move his admission to our bar.

[00:01:29] Speaker 06:
I'm happy to join Judge Laurie's motion and to welcome you to the bar of the court.

[00:01:44] Speaker 01:
As am I. Please.

[00:01:55] Speaker 03:
Our first case this morning is 151056, Orenstein versus Centrek system.

[00:02:03] Speaker 03:
Mr. Fink, whenever you're ready.

[00:02:11] Speaker 04:
Good morning.

[00:02:16] Speaker 04:
I'd like to address some questions that have never been asked

[00:02:21] Speaker 04:
And I'm going to pose the questions and hopefully provide an answer.

[00:02:27] Speaker 04:
In the red brief at page two, there is a list of things that are reported from the Orenstein deposition.

[00:02:40] Speaker 04:
And briefly, Mr. Orenstein testified he knew nothing about Citrix Accused Products and in fact could not even name a single product.

[00:02:52] Speaker 04:
He had no basis to believe that the Citrix accused products infringed the patents in suit.

[00:02:57] Speaker 04:
As alleged in his complaint, he had conducted no investigation to determine whether Citrix accused products infringed the patents in suit.

[00:03:06] Speaker 04:
He had never discussed Citrix and its accused products with his counsel, Lincoln Johnson, before the filing.

[00:03:13] Speaker 04:
He had never requested or received any opinion from his counsel, Lincoln Johnson.

[00:03:18] Speaker 04:
regarding whether Citrix's accused products infringed the patent and suit, and he had authorized the filing of this suit without knowing whether Citrix infringed the patent and suit.

[00:03:31] Speaker 04:
Clearly, I did speak to Mr. Orenstedt,

[00:03:36] Speaker 04:
The court followed this and was disturbed that I had not told Mr. Ornstein, wait a minute, I did talk to you, but you might want to know what was in my head.

[00:03:55] Speaker 04:
This is not an excuse, but what was in my head?

[00:03:58] Speaker 04:
And I'll tell you what was in my head.

[00:04:01] Speaker 04:
He knew nothing because I never told him anything.

[00:04:04] Speaker 04:
That's why he didn't know what the accused's products were, why he didn't know about the investigation, why he had no knowledge of what was going on.

[00:04:14] Speaker 06:
When was the first time that Citrix learned that a pre-filing investigation had been conducted in this case?

[00:04:24] Speaker 04:
Probably at the deposition.

[00:04:31] Speaker 06:
My understanding is that they did not learn that a pre-filing investigation had been done until your declaration was filed in response to the motion for summary judgment.

[00:04:45] Speaker 04:
Yes, that's correct.

[00:04:51] Speaker 06:
But prior to that time, Ms.

[00:04:54] Speaker 06:
Citrix had to engage in a number of activities

[00:05:00] Speaker 06:
simply in an effort to learn whether any pre-filing investigation had been done.

[00:05:06] Speaker 06:
They first sought that information from Mr. Orenstein, then getting no answer from him, they sought your deposition, Mr. Johnson's deposition, then there was the motion for protective order, et cetera, et cetera.

[00:05:25] Speaker 06:
So quite a bit of activity took place.

[00:05:29] Speaker 06:
before they were able to get an answer, a simple answer, that yes, a pre-filing investigation had been done.

[00:05:38] Speaker 06:
And isn't that the problem that resulted in this sanction?

[00:05:43] Speaker 04:
Well, if I may, the final judgment, which is in the docket, was on May 20, 2003.

[00:05:59] Speaker 04:
Metering following that, Citrix filed a whole bunch of motions.

[00:06:06] Speaker 04:
And after the notice of appeal was filed, that's at docket 180, Citrix filed a motion for sanctions.

[00:06:17] Speaker 04:
This is after the case was over.

[00:06:20] Speaker 04:
So it did not move the case or cause any problems because the case was over.

[00:06:28] Speaker 03:
What didn't cause any problems?

[00:06:30] Speaker 03:
I mean, the fact that they filed it once, but you say the case was over.

[00:06:34] Speaker 04:
There was no vacation.

[00:06:35] Speaker 04:
The case was over.

[00:06:37] Speaker 04:
The case was over on May 20, 2003.

[00:06:40] Speaker 04:
They didn't file it.

[00:06:43] Speaker 06:
But Mr. Pink, they filed that motion after the case was over.

[00:06:48] Speaker 06:
But they filed a motion claiming that the proceedings were unduly multiplied.

[00:06:55] Speaker 06:
specifically the proceedings that I just referred to prior to the declarations filed in response to the motion for summary judgment.

[00:07:04] Speaker 04:
But all of the activities that's in the red book that they argued and that they wanted a bill for occurred after the case was over.

[00:07:15] Speaker 04:
They complained, for example, that they wanted to depose Johnson and May

[00:07:22] Speaker 04:
And we filed for protective order.

[00:07:26] Speaker 04:
But that all happened, that's been beforehand, right?

[00:07:29] Speaker 04:
That happened afterwards.

[00:07:30] Speaker 04:
The case was closed and the notice of appeal had been filed.

[00:07:36] Speaker 06:
And then they, so they are... No, no, no, wait a second.

[00:07:39] Speaker 06:
The motion for protective order was filed earlier, before the motion for summary judgment, right?

[00:07:48] Speaker 04:
They wanted, excuse me your honor, but they wanted to depose

[00:07:53] Speaker 04:
We resisted that.

[00:07:59] Speaker 04:
We fought for protective order.

[00:08:02] Speaker 06:
That did not occur after the case was decided.

[00:08:05] Speaker 06:
That occurred early in the case.

[00:08:07] Speaker 04:
The actual deposition occurred

[00:08:11] Speaker 04:
on April 21, 2004.

[00:08:14] Speaker 04:
The case was over in May 2003.

[00:08:19] Speaker 04:
The notice of appeal had been filed already.

[00:08:24] Speaker 04:
So this activity and the interesting result was

[00:08:31] Speaker 04:
They were hunting for information to prove that Orenstein knew all about the case and didn't know about it and didn't testify.

[00:08:40] Speaker 04:
Orenstein knew nothing.

[00:08:42] Speaker 04:
And so I want to mention to you, why did Orenstein know nothing?

[00:08:48] Speaker 04:
And the answer is very simple.

[00:08:50] Speaker 04:
I work on a contingency basis.

[00:08:53] Speaker 04:
And yes, I'm an attorney, but I have to be a little bit of a psychologist and I have to understand my client and what I can talk to them about.

[00:09:01] Speaker 03:
I appreciate what you're saying.

[00:09:03] Speaker 03:
Is this part of the record already?

[00:09:04] Speaker 03:
Or is this, I mean, was this in your deposition?

[00:09:07] Speaker 03:
I mean, is what you're conveying to us?

[00:09:09] Speaker 04:
No, it's not in the record, and I thought I'd tell you something that might interest you.

[00:09:16] Speaker 04:
That's not my defense, but it's well established that Orenstein knew nothing.

[00:09:25] Speaker 04:
He didn't know anything about anything.

[00:09:28] Speaker 04:
And I thought it might interest you to know why is it he knew nothing about the case.

[00:09:35] Speaker 05:
As implied by Judge Crost's question, we're reviewing the case for an abuse of discretion based on the record, not hearing new equitable evidence.

[00:09:48] Speaker 04:
Right.

[00:09:48] Speaker 04:
I just thought it might be interesting to mention.

[00:09:51] Speaker 04:
But the fact is that the case was over.

[00:09:57] Speaker 04:
They filed for sanctions and then there was a lot of activity.

[00:10:02] Speaker 04:
They filed motions.

[00:10:04] Speaker 04:
They wanted to depose us.

[00:10:09] Speaker 04:
We resisted that.

[00:10:10] Speaker 04:
They deposed us.

[00:10:12] Speaker 04:
They didn't come up with anything.

[00:10:19] Speaker 04:
Earlier when the case was still active,

[00:10:23] Speaker 04:
We filed our argument and we gave an infringement chart and we cited to the manuals that they had.

[00:10:42] Speaker 04:
Obviously we knew about it.

[00:10:46] Speaker 04:
The fact that the case was over and they were anxious to find out what exactly we knew and how we knew it, when we knew, didn't cause the case.

[00:10:57] Speaker 04:
It wasn't vexation.

[00:10:59] Speaker 04:
They were just curious.

[00:11:00] Speaker 04:
They were hunting for information to establish that Orenstein knew all about the case and he wouldn't tell him.

[00:11:08] Speaker 04:
And he lied all about it.

[00:11:11] Speaker 04:
And he didn't.

[00:11:11] Speaker 04:
He knew nothing about it.

[00:11:14] Speaker 04:
He did say he didn't talk to me, and I was wrong not to correct that.

[00:11:20] Speaker 04:
He did talk to me.

[00:11:21] Speaker 04:
We talked about sports.

[00:11:23] Speaker 04:
We talked about politics.

[00:11:25] Speaker 04:
I did not talk about the case and what we were doing.

[00:11:28] Speaker 05:
That's why you were sanctioned.

[00:11:30] Speaker 05:
I'd say, yep.

[00:11:31] Speaker 05:
Why you were sanctioned?

[00:11:34] Speaker 04:
Actually, that's one of the reasons I was sanctioned, but when the case came to this the first time, this court said,

[00:11:43] Speaker 04:
of the three reasons given by the court for sanction.

[00:11:47] Speaker 04:
They said, well, you said, first of all, Citrix misled the court because it appeared that Ornstein testified that the controller was what they said was, but they left out part of the transcript.

[00:12:07] Speaker 04:
So they were wrong there.

[00:12:09] Speaker 04:
The second reason, this court said,

[00:12:11] Speaker 04:
Second, the court found that Sinclair Johnson had minimal contact with Ornstein during the pre-filing investigation.

[00:12:21] Speaker 04:
Lastly, the court was disturbed by the fact that neither Sinclair Johnson corrected the apparent inconsistencies between Ornstein's deposition and his testimony hearing regarding Ornstein's conversation with counsel.

[00:12:37] Speaker 04:
The court went on to say,

[00:12:41] Speaker 04:
This was the first time we ran.

[00:12:48] Speaker 04:
Furthermore, we do not see why Fink and Johnson should be sanctioned for their minimal contact with Ornstein during the pre-filing investigation.

[00:12:57] Speaker 04:
Both Fink and Johnson have scientific backgrounds that suggest that they are at least competent in conducting an investigation of this sort, and the district court never truly challenged their ability.

[00:13:10] Speaker 04:
In addition, there is some advantage in attorneys making their own independent evaluation of a patent infringement issue free from any inherent bias of the offenders.

[00:13:23] Speaker 04:
In any event, we find no authority that requires attorneys to consult with patentees during the pre-filing investigation, although it would seem to be prudent, highly desirable, and a usual practice.

[00:13:37] Speaker 04:
Indeed, much of the district courts

[00:13:40] Speaker 04:
dim view of Finke-Johnson's conduct may be attributable to the court's erroneous interpretation of Oranstein's own view of the correct claim construction of his patent.

[00:13:59] Speaker 03:
So is it your view that our earlier opinion somehow precluded the finding of sanctions in this book on remand?

[00:14:07] Speaker 04:
In terms of sanctions, as I understand, sanctions are to discover certain bad conduct.

[00:14:23] Speaker 04:
Citrix has represented in their initial filing that they spent $330,000

[00:14:34] Speaker 04:
plus $30,000 in expenses to find out that Ornstein do nothing.

[00:14:44] Speaker 04:
The present district judge

[00:14:49] Speaker 04:
refused for a while the $30,000 because it wasn't properly, they weren't convinced it was properly documented and the $30,000 was simply reduced to about $200,000.

[00:15:07] Speaker 03:
You're well into your rebuttal, do you want to?

[00:15:09] Speaker 03:
You're well into your rebuttal time sir, so do you want to save that?

[00:15:12] Speaker 03:
Okay, I want to save the rest of that.

[00:15:14] Speaker 04:
Thank you very much, I appreciate it.

[00:15:24] Speaker 03:
Mr. Russo?

[00:15:25] Speaker 02:
Good morning, Your Honors.

[00:15:26] Speaker 02:
May it please the Court.

[00:15:27] Speaker 02:
My name is Tim Russo from Goodwin Proctor.

[00:15:30] Speaker 02:
I'm here on behalf of dependent appellee, Citrix Systems.

[00:15:34] Speaker 02:
I would like to address three issues this morning.

[00:15:36] Speaker 02:
All three are factual issues.

[00:15:39] Speaker 02:
Factual issues are the only issues that have been raised by the appellees on appeal.

[00:15:43] Speaker 02:
Under the abuse of discretion standard, factual issues are reviewed for clear error.

[00:15:49] Speaker 02:
The first is the district court's factual findings.

[00:15:52] Speaker 03:
Can I just ask you, what would have happened, I mean your view is that what should have happened is that Ornstein should have said yes rather than no in the initial, in the deposition we're talking about, right?

[00:16:01] Speaker 03:
That's correct, it was more than one answer, but yes.

[00:16:04] Speaker 03:
What would have happened then if he had said yes?

[00:16:08] Speaker 03:
in terms of additional discovery or whatever.

[00:16:11] Speaker 03:
What would have been done differently than was actually done?

[00:16:15] Speaker 02:
Certainly.

[00:16:15] Speaker 02:
Well, Citrix would have at least then knew that a pre-founding investigation had been done and a Rule 11 motion would not have been necessitated.

[00:16:26] Speaker 02:
Certain other motions in limine, for example, were conducted as a result of the false testimony.

[00:16:34] Speaker 02:
This all relates to the proceedings that were multiplied.

[00:16:37] Speaker 06:
You certainly would have then attempted to depose Mr. Fink and Mr. Johnson just as you did, correct?

[00:16:47] Speaker 06:
That's likely correct.

[00:16:48] Speaker 06:
Yes, we would have attempted to learn the basis of the suit.

[00:16:53] Speaker 06:
Probably run up against the same motion for protective order, et cetera, et cetera.

[00:17:01] Speaker 02:
Perhaps.

[00:17:02] Speaker 02:
The district court did find as a factual matter that

[00:17:06] Speaker 02:
Because Mr. Orenstein had said that no pre-founding investigation had been done, or at least that he knew of none, that these were all proceedings that were caused by that, perhaps if Mr. Orenstein had testified to his knowledge, he would have been able to testify further regarding the pre-founding investigations that he was aware of.

[00:17:25] Speaker 02:
It would have gone certainly beyond the simple no or yes answer if he had testified truthfully.

[00:17:39] Speaker 02:
So the district court found as a factual matter that counsel below acted unreasonably and vexatiously, finding that their failure to correct their client's false testimony was tantamount to bad faith.

[00:17:53] Speaker 02:
The district court also found correctly as a factual matter that that conduct multiplied the proceedings, as we just discussed, and also that the magistrate judge's finding of the amount of sanctions that were awarded

[00:18:06] Speaker 02:
The magistrate judge carefully tailored that amount to the proceedings that were found to have been multiplied.

[00:18:13] Speaker 03:
Yeah, but it was kind of a rough justice, right?

[00:18:16] Speaker 03:
I mean, just kind of cutting it down by a certain percentage just because we'll feel that that was the right number, right?

[00:18:23] Speaker 02:
The magistrate judge reduced the amount of sanctions, the amount of attorney's fees sought by Citrix by one-third after a careful review of the billing records that Citrix submitted.

[00:18:36] Speaker 02:
11th Circuit precedent that explicitly permits that type of review.

[00:18:48] Speaker 02:
With respect to the unreasonable and vexatious conduct, the District Court correctly found that the conduct was tantamount to bad faith, which is the standard in the 11th Circuit.

[00:19:01] Speaker 02:
And in determining that, this is an objective, not a subjective review.

[00:19:07] Speaker 02:
This conduct did relate directly to proceedings that were relevant to the case.

[00:19:11] Speaker 02:
This was all part of Citrix's efforts to understand the basis for why the suit was filed against them.

[00:19:18] Speaker 02:
This was back in 2002, 2003, before local patent rules were common, before routine exchange of infringement condemns were common.

[00:19:26] Speaker 02:
So at this point in the case, Citrix

[00:19:28] Speaker 02:
had no idea why its products were being accused, what the theory of infringement was.

[00:19:34] Speaker 02:
And Ornstein had identified only himself as person having relevant knowledge regarding that, so Citrix naturally, at his deposition, sought that information from him.

[00:19:47] Speaker 02:
We were rebuffed with a false answer.

[00:19:51] Speaker 02:
And as a result, we were forced to spend time and money and effort on additional proceedings to discover the basis for the suit.

[00:20:02] Speaker 02:
On additional proceedings, once it was revealed that the testimony was false, into the false testimony itself regarding a Rule 11 motion which was premised on the fact that the testimony was in fact true, which later turned out to be false.

[00:20:17] Speaker 02:
And on the

[00:20:19] Speaker 02:
and continuing today into the sanctions proceedings that we're currently dealing with.

[00:20:23] Speaker 02:
The District Court correctly found as a factual matter that all of this had a nexus to the false testimony.

[00:20:33] Speaker 02:
In connection with the amount of sanctions assessed, the 11th Circuit has said, even where the billing records submitted are not perfect or are inadequate, the District Court must still award a reasonable fee.

[00:20:50] Speaker 02:
The magistrate judge spent considerable effort in reviewing the records submitted by Cetrix.

[00:20:58] Speaker 02:
and determined that they should be reduced by one-third.

[00:21:01] Speaker 02:
And that was based on the fact that Citrix had sought fees for four certain categories of activities that they had conducted.

[00:21:08] Speaker 02:
And the magistrate found that only two of those were actually within the multiplied proceedings, as well as part of a third of the category.

[00:21:17] Speaker 02:
Certain motions to eliminate were also relevant.

[00:21:19] Speaker 03:
Is this the last thing pending in this case?

[00:21:21] Speaker 03:
This is.

[00:21:22] Speaker 02:
OK.

[00:21:22] Speaker 02:
This is.

[00:21:28] Speaker 02:
Council did not object to any specific line items, so the district court had no basis to reduce particular line items because council failed to identify any specific line items that were not relevant to the sanctioned conduct.

[00:21:45] Speaker 02:
Unless the court has any other questions, I'm prepared to see.

[00:21:50] Speaker 02:
Thank you.

[00:21:50] Speaker 03:
We have a couple minutes left, Mr. Hancock.

[00:22:01] Speaker 04:
To a great extent, the initial district court was disturbed by what appeared to be an agreement by Ornstein that Citric's definition for the controller was correct.

[00:22:19] Speaker 04:
In fact, it turned out that, as I mentioned earlier, that this was a dominant factor

[00:22:31] Speaker 04:
in the district court's initial decision for rule of evidence and sanctions, because it appeared that the case was brought with no reasonable basis.

[00:22:44] Speaker 04:
However, this court commented the previous decision.

[00:22:51] Speaker 04:
However, Ornstein's position on the claim construction of control was far from frivolous or unreasonable, and thus

[00:23:00] Speaker 04:
did not vexatiously multiply the proceedings, which the district court had thought.

[00:23:10] Speaker 04:
My colleague here said, I don't know if he meant to say it, but he said that, or he said there was no pre-filing investigation.

[00:23:21] Speaker 04:
He didn't say that.

[00:23:23] Speaker 04:
He never said that.

[00:23:25] Speaker 04:
He said he didn't do it.

[00:23:29] Speaker 04:
because you didn't know what was going on.

[00:23:35] Speaker 04:
I think that to ask for $200,000 for a failed attempt to discover that Ornstein lied outrageously at his deposition is unreasonable, and I hope that you see it that way.

[00:23:54] Speaker 03:
Thank you.

[00:23:56] Speaker 03:
We thank both counsel and the case was submitted and that concludes our proceedings for this morning.

[00:24:02] Speaker 00:
All rise.

[00:24:05] Speaker 00:
The honorable court is adjourned from day to day.