[00:00:03] Speaker 00:
The first case for argument this morning is 141777 Pragmatis versus Nuez.

[00:00:10] Speaker 00:
Mr. Runley.

[00:00:12] Speaker 02:
Thank you, Your Honor, and may it please the Court.

[00:00:14] Speaker 02:
This appeal presents a straightforward question of law.

[00:00:17] Speaker 02:
When is a party a prevailing party entitled not to an award of fees, but to get in the door to seek fees?

[00:00:24] Speaker 02:
Existing Federal Circuit law unambiguously answers that question.

[00:00:27] Speaker 02:
A party who benefits from a dismissal with prejudice is a prevailing party.

[00:00:31] Speaker 02:
Dismissals without prejudice under Rule 41A1 are not judicially sanctioned changes of the relationship.

[00:00:37] Speaker 02:
But dismissals with prejudice under Rule 41A2 are.

[00:00:39] Speaker 00:
Well, there are a lot of cases on this, and certainly a lot of them support your position.

[00:00:45] Speaker 00:
But this case seems to be a little different.

[00:00:46] Speaker 00:
Firstly, it was resolved via a settlement in this circumstance.

[00:00:50] Speaker 02:
No, Your Honor, it was not.

[00:00:51] Speaker 02:
There is no settlement here.

[00:00:53] Speaker 02:
There is absolutely no agreement between the parties.

[00:00:55] Speaker 02:
This was a unilateral surrender on the part of the plaintiff.

[00:00:59] Speaker 00:
Clearly tied to, I mean, they could not have proceeded on this case given that the NUEG has a license in another case, right?

[00:01:10] Speaker 02:
I think that's right, Your Honor.

[00:01:11] Speaker 00:
So outside events dictated the resolution here.

[00:01:17] Speaker 02:
Well, Your Honor, I think they certainly changed the dynamics of the case here.

[00:01:22] Speaker 02:
It's worth noting that when they sued us, they sued us even though we were using Oracle, a licensed provider, and the settlement exempts both the live person and Moxie

[00:01:36] Speaker 02:
implementations which they did enter into a settlement with Liveperson and Moxie, but also exempt the Oracle implementation which they had brought a lawsuit on even though it was already licensed.

[00:01:48] Speaker 04:
But just focusing on the first two, I thought in looking at what was said in the district court that everybody pretty much agreed that the cause of this dismissal was the settlement in the other litigation.

[00:02:04] Speaker 04:
Do you dispute that?

[00:02:05] Speaker 02:
No, Your Honor, I think we don't dispute that.

[00:02:08] Speaker 02:
And I think the only point I want to make is

[00:02:10] Speaker 02:
The dismissal that happened is a broader dismissal than just the dismissal of claims with respect to Moxie and live persons.

[00:02:18] Speaker 02:
It includes the dismissal of claims against us with respect to our Oracle implementation, which we'd had since 2011, in which they had filed suit on, notwithstanding the fact that they'd already gotten a license from Oracle, and it dismissed every other claim of any kind, known or unknown,

[00:02:33] Speaker 04:
There weren't any other claims asserted.

[00:02:35] Speaker 02:
There were not, Your Honor.

[00:02:37] Speaker 04:
I don't know why you would read the dismissal as covering claims that weren't included within the complaint.

[00:02:45] Speaker 02:
Well, Your Honor, because the language of the dismissal, I think, is quite clear on this point.

[00:02:49] Speaker 04:
So if you look at A1093... How can a court order a dismissal with respect to claims that didn't exist?

[00:02:59] Speaker 02:
The honor, your honor, I think that what the court can and did do is it ordered a dismissal with respect to any claims that had accrued, any claims they could have brought.

[00:03:08] Speaker 02:
And it is Pragmatis that wanted that, and they wanted it because they wanted... Could have brought?

[00:03:13] Speaker 04:
I'm sorry?

[00:03:14] Speaker 04:
Could have brought?

[00:03:15] Speaker 04:
I don't understand how a court can dismiss claims that could have been brought, weren't brought.

[00:03:21] Speaker 02:
you know i think this is the language that is pretty common in as a general release in a contract or a settlement it is not your honor but the but the language that they chose here i think it is pretty unambiguous in that respect so it has two sentences to it the first is that all claims brought by pragmatists that relate to live chat products or services provided to new egg by moxie live person in oracle corporation are dismissed with prejudice that was the basis of the lawsuit

[00:03:47] Speaker 02:
Then it goes on to say, all of Pragmatis' claims against Newegg that accrued before the date of its motion are dismissed with prejudice.

[00:03:54] Speaker 02:
And I think the only way to read those two sentences in conjunction with each other is to say, we're getting rid of not only the claims we have been fighting over, we're buying peace across the board.

[00:04:04] Speaker 04:
I don't see how you can possibly read it that way.

[00:04:07] Speaker 04:
If it were a settlement agreement, maybe, but I don't see how the court can exercise authority over claims that weren't before it.

[00:04:14] Speaker 02:
I understand that limitation, Your Honor, and I guess what I would say is that I think that Pragmatis sought this language precisely because they wanted to eliminate any possibility of a threat of suit because they wanted to eliminate our counterclaims.

[00:04:30] Speaker 02:
And so what Pragmatis was buying here by adding that broader language was we're offering a promise that we're not going to sue you at all on other patent claims with respect to other products or other implementations that already existed.

[00:04:44] Speaker 02:
And by doing that, they managed to invoke superset.

[00:04:48] Speaker 02:
They managed to basically cause the district court to dismiss our counterclaims for invalidity and non-infringement.

[00:04:53] Speaker 02:
That's it.

[00:04:54] Speaker 02:
Go ahead.

[00:04:54] Speaker 02:
No, please, Your Honor.

[00:04:55] Speaker 01:
Suppose this were a settlement.

[00:04:57] Speaker 01:
I mean, I suppose that if it were an unopposed motion to dismiss, they could have conditions, pretty much unlimited conditions with respect to any potential or actual disputes between parties.

[00:05:10] Speaker 01:
And that is, in fact, exactly what it is here.

[00:05:12] Speaker 01:
It is an unopposed motion to dismiss.

[00:05:14] Speaker 01:
But it's not a joint motion, let's put it that way.

[00:05:16] Speaker 01:
That's correct.

[00:05:17] Speaker 01:
If it's a joint motion to dismiss with costs and fees to be borne by each party, as is normally the case, then presumably that could be an enforceable judicial order that would bind to the parties even though the scope of the relief would be much broader than the particular dispute before the court, right?

[00:05:37] Speaker 02:
A settlement agreement, I think, certainly could, if it were entered into, yes.

[00:05:41] Speaker 02:
But in this case, it is an unopposed motion to dismiss that is broader than just the dispute between the parties.

[00:05:46] Speaker 01:
Let me ask you, on the question of settlements, suppose that what you had in this case, there was a claim, let's say, for a million dollars, and there's a settlement for $990,000, and then a voluntary dismissal without the usual each party will bear its own costs.

[00:06:04] Speaker 01:
Is the defendant the prevailing party in that situation?

[00:06:08] Speaker 01:
So the dismissal itself is not enough.

[00:06:13] Speaker 01:
A voluntary dismissal with prejudice is not enough to make the defendant a prevailing party.

[00:06:19] Speaker 02:
This was a settlement out of court.

[00:06:25] Speaker 01:
But a dismissal motion, all the court sees is a voluntary motion to dismiss with prejudice all the claims without any recitation of the amount of the settlement or without any conditions imposed on the party with respect to phishing costs.

[00:06:41] Speaker 02:
So we start by saying, it's hard to imagine that anyone would ever enter into such a deal.

[00:06:46] Speaker 01:
All right, my question is going to be in the settle for $500,000.

[00:06:50] Speaker 01:
I understand.

[00:06:52] Speaker 02:
No, I don't mean the amount of money, Your Honor.

[00:06:56] Speaker 02:
What I intend to suggest is that it is universally the case that if the parties actually settle, they both submit it under Rule 41A1 not to, and they themselves resolve the question of whether or not these are on there.

[00:07:11] Speaker 01:
In your experience, in the district court cases that I've been sitting on, I've already seen two.

[00:07:15] Speaker 01:
in which there were voluntary dismissal orders entered where the party did not actually resolve the question of fees and costs, and that was left to me.

[00:07:25] Speaker 02:
So, and I think, Your Honor, if the dismissal is pursuant to a settlement in which the parties have agreed to a payment that resolves the claims,

[00:07:33] Speaker 02:
then I think it's fair to say that you're not necessarily a prevailing party simply because that settlement led to a dismissal.

[00:07:40] Speaker 01:
Even if the settlement is for $10,000?

[00:07:43] Speaker 02:
I think that's right, Your Honor, because there's an agreement between the parties to resolve the controverted claims.

[00:07:52] Speaker 02:
There is no such agreement here.

[00:07:56] Speaker 02:
plaintiff unilaterally dropped its claims against us.

[00:07:59] Speaker 02:
It is true, as Judge Post suggested, that it did so because it had gotten paid by the upstream supplier.

[00:08:06] Speaker 00:
Let me just say, I just want to get clarification for your response for Judge Bryson.

[00:08:09] Speaker 00:
So you're saying that if there's a settlement between the parties, even though one party moves to dismiss with prejudice,

[00:08:15] Speaker 00:
then even if they paid them a dollar out of a claim for $20 million, you're agreeing that then the defendant would not be at the prevailing party.

[00:08:25] Speaker 02:
Your Honor, let me reiterate that I think this is a case that frankly never arises outside of the context of public interest litigation.

[00:08:33] Speaker 02:
But because when the parties settle... Take it from me.

[00:08:37] Speaker 02:
I will do that, Your Honor, and I find that quite interesting.

[00:08:42] Speaker 02:
I do think it is the case that if the parties agreed to a set of terms to resolve the dispute, you have a different situation than if one party unilaterally walks away.

[00:08:54] Speaker 02:
And the situation we have here is... But you're conceding that.

[00:08:56] Speaker 00:
If your answer to me is yes, you would answer Judge Bryson's...

[00:09:00] Speaker 00:
hypothetical, even if they settle for a dollar out of 20 million dollars, there's still no prevailing party in that circumstance.

[00:09:08] Speaker 00:
Then that leads us to saying, well, the district court, if there's something going on on the outside of this case that results, whether it's a settlement, whether it's what happened here in terms of the licenses to the third party,

[00:09:21] Speaker 00:
that the district court goes beyond that and looks and evaluates the conduct outside that is how the party's well-being is satisfied outside of what's going on in this case, right?

[00:09:34] Speaker 02:
Your Honor, I think if the parties are involved in a settlement, even if that settlement doesn't show up in the record, it is relevant.

[00:09:41] Speaker 02:
If the parties are not involved in the settlement, and New Egg had nothing to do with the settlement here, it's not relevant to the question of whether we are a prevailing party.

[00:09:48] Speaker 02:
It may well be relevant on the merits of whether or not we should win fees, and I think the district court is entitled to consider that fact, but this court's case law is pretty clear that we lost nothing, that even if you thought that the reason we lost nothing is that Pragmatis, having decided voluntarily to sue both manufacturers, to seek money from both manufacturers and retailers, even though they knew they weren't entitled to collect at both levels, then dropped the suit against us.

[00:10:17] Speaker 02:
We've gotten a substantial benefit by having that suit dismissed and paying no money.

[00:10:22] Speaker 04:
What about rights in terms of our presence?

[00:10:25] Speaker 04:
I'm sorry?

[00:10:27] Speaker 04:
Isn't rights pretty close to this where as a result of a unilateral action by the government outside of the context of the litigation?

[00:10:35] Speaker 04:
The case was essentially mooted and the district court wasn't dismissal with prejudice, but the district court did order the government to do what it said it was going to do.

[00:10:46] Speaker 04:
So there was a judicial order, but it was not the result of what happened in the litigation and we held that the

[00:10:53] Speaker 04:
private party was not a prevailing party as a result of that.

[00:10:58] Speaker 04:
Why is that very similar?

[00:10:59] Speaker 02:
Well, I think the distinction is extremely useful here, right?

[00:11:02] Speaker 02:
Because in that case, as in the settlement case, one of the parties has made a voluntary decision to change their behavior outside the course of litigation.

[00:11:13] Speaker 02:
That's a very different situation than we have here, right?

[00:11:16] Speaker 04:
Why is it different?

[00:11:17] Speaker 04:
I mean, if you assume

[00:11:19] Speaker 04:
that something outside of the course of litigation, in other words, the settlement in the other case, caused this to happen.

[00:11:25] Speaker 04:
Why isn't that similar to rights where an event outside of the context of litigation led to the mooting of the case?

[00:11:33] Speaker 02:
Well, Your Honor, I think the difference is twofold.

[00:11:36] Speaker 02:
One is that the party in this case, New Egg, has no participation.

[00:11:43] Speaker 02:
They're not involved in that.

[00:11:44] Speaker 02:
But second, I think it's worth remembering that

[00:11:49] Speaker 02:
order here that dismisses with prejudice gives us things that a licensed defense wouldn't have.

[00:11:54] Speaker 02:
I think it first gives us the benefit of actually not having a suit filed against us, and there is a substantial difference in practice between having a defense you think will succeed and having a case actually dismissed.

[00:12:08] Speaker 02:
And second, it dismisses all the other possible things that they could have brought.

[00:12:12] Speaker 02:
Other patents

[00:12:12] Speaker 02:
other suits against other implementations.

[00:12:16] Speaker 02:
The U.S.

[00:12:17] Speaker 02:
Supreme Court has said that you are a prevailing party if you win even nominal damages.

[00:12:21] Speaker 02:
Even one dollar is sufficient to establish that you are a prevailing party.

[00:12:25] Speaker 02:
It may of course affect whether you're entitled to win your fees on remand.

[00:12:29] Speaker 02:
In this case, I think what we got as a result of this motion to dismiss is worth well more than a dollar.

[00:12:34] Speaker 02:
And all we ask is that the court open the door, as this court's law suggests we should do, to give us the ability to try to prove our entitlement to fees.

[00:12:45] Speaker 02:
If in fact the evidence of the settlements with third parties is evidence of their good faith, they are entitled to bring that evidence to the district court.

[00:12:53] Speaker 02:
But we're entitled to bring evidence of their nuisance value litigation strategy, of their deliberate effort to target people at both levels

[00:13:02] Speaker 02:
as evidence to support a B's claim.

[00:13:05] Speaker 02:
With court's permission, I'll reserve the remainder of my time.

[00:13:19] Speaker 03:
Thank you.

[00:13:19] Speaker 03:
Morning.

[00:13:20] Speaker 03:
May it please the court.

[00:13:21] Speaker 03:
What New Egg is really advocating here for is that any time there's a dismissal, it automatically conveys prevailing party status, and that runs counter to Buchanan,

[00:13:31] Speaker 03:
acres and shum.

[00:13:33] Speaker 03:
Now, a lot of the discussion that happened right now were what I'll call unanimous.

[00:13:36] Speaker 00:
Well, the party's legal relationship changed as a result of a dismissal with prejudice, right?

[00:13:41] Speaker 03:
No, it did not.

[00:13:42] Speaker 03:
What precipitated the change in the party's legal relationships were those two licenses.

[00:13:47] Speaker 03:
That's the only thing that changed the party's relationship.

[00:13:49] Speaker 00:
Yeah, but the party's relationship did change.

[00:13:52] Speaker 03:
I don't see how it could have, Your Honor.

[00:13:54] Speaker 00:
I'm sorry.

[00:13:55] Speaker 00:
They dismissed it with prejudice, right?

[00:13:58] Speaker 03:
Correct, because there were no other infringement reads other than those two that had become exhausted.

[00:14:04] Speaker 03:
And so dismissal with prejudice was appropriate because there were no other claims or infringement theories in the case at that time.

[00:14:12] Speaker 04:
What about the suggestion that there was an oracle claim that wasn't resolved by the third party settlement, so there was relief with respect to the oracle claim?

[00:14:21] Speaker 03:
We didn't assert an infringement read against Oracle at all, because that was the license that happened before the litigation happened.

[00:14:27] Speaker 03:
We asserted against Moxie and LivePerson, use of Moxie and LivePerson.

[00:14:35] Speaker 03:
That's correct, Your Honor.

[00:14:38] Speaker 03:
And that's what I feel is a misrepresentation.

[00:14:41] Speaker 00:
And the first part of this is we were never accusing... The initial claim, the alleged infringement, was it based on oracles?

[00:14:51] Speaker 03:
It was based on the two that became licensed, which was live person and moxie.

[00:14:59] Speaker 03:
They make the assertion that there may have been oracle screenshots in the infringement content, but you can't tell one way or the other from looking at that whether it's oracle or not.

[00:15:09] Speaker 03:
It doesn't say oracle, and I don't believe that it's true.

[00:15:11] Speaker 03:
I believe that it's Moxie and my person that are.

[00:15:14] Speaker 01:
What about if there's at least room for debate about that, I think?

[00:15:18] Speaker 03:
Well, that wasn't litigated at the district court level.

[00:15:20] Speaker 01:
No, no.

[00:15:22] Speaker 01:
You said, I think, in response to the Chief Judge's question, that you didn't think that there was a change in the legal position of the parties vis-a-vis one another.

[00:15:29] Speaker 01:
But isn't that a grant of a dismissal with prejudice, which carries with it residue to kind of consequences that didn't exist prior to the actual entry of the order?

[00:15:42] Speaker 01:
Isn't that exactly the kind of thing that, for example, Buchanan was talking about and talking about changes in the legal positions of the parties respective to one another?

[00:15:52] Speaker 03:
The legal positions of the parties changed before the order ever came out.

[00:15:55] Speaker 01:
It was those who settled the agreement.

[00:15:57] Speaker 01:
The potential, the strength of a legal argument.

[00:16:01] Speaker 01:
That new act could have made, in your case, certainly was enhanced.

[00:16:07] Speaker 01:
But the thing that had the effect, it seems to me, of changing the legal posture of the case, the legal position of the parties vis-a-vis one another, was the entry of a dismissal with prejudice.

[00:16:19] Speaker 01:
That has rescued iconic effects.

[00:16:21] Speaker 01:
That is a judge saying, I agree that the license had that effect.

[00:16:26] Speaker 01:
Until the judge says that, your legal position

[00:16:29] Speaker 01:
has not been changed in that material way.

[00:16:32] Speaker 01:
Would you agree with me in that respect?

[00:16:36] Speaker 01:
Put another way, that the dismissal with prejudice had legal effect.

[00:16:41] Speaker 03:
Well, there were two aspects to the dismissal.

[00:16:43] Speaker 01:
There was the dismissal without prejudice, which... I know, but the part we're talking about is the dismissal with prejudice.

[00:16:48] Speaker 01:
That's what really matters here.

[00:16:49] Speaker 01:
Right, but once there was an answer... Legal consequences, correct?

[00:16:55] Speaker 03:
The legal consequences of the case was no longer pending.

[00:16:57] Speaker 01:
And you couldn't bring...

[00:17:00] Speaker 01:
that case anywhere else?

[00:17:02] Speaker 03:
On the patent infringement claims, correct.

[00:17:05] Speaker 01:
And that was something the day before the entry of the dismissal was not true.

[00:17:09] Speaker 01:
You could have brought the claim.

[00:17:11] Speaker 01:
It wouldn't have been open to New Egg to argue rest judicata.

[00:17:14] Speaker 01:
They could have argued the merits, but they wouldn't have had rest judicata.

[00:17:18] Speaker 01:
as an argument.

[00:17:19] Speaker 01:
Correct.

[00:17:20] Speaker 03:
They don't have res judicata as to any infringement that occurs after the date.

[00:17:24] Speaker 01:
I understand.

[00:17:25] Speaker 01:
I'm talking about the dismissals with prejudice, the portions of the order that dismiss with prejudice.

[00:17:31] Speaker 01:
All I'm getting, I'm trying to see if you're going to answer the question by saying yes, they have a res judicata defense they didn't have the day before the dismissal order was entered.

[00:17:43] Speaker 01:
That's true.

[00:17:43] Speaker 01:
And that seems to be a change in their legal position.

[00:17:48] Speaker 03:
It is true that you could not bring those claims again.

[00:17:51] Speaker 03:
If you brought them again, there would be race judicata affected to those.

[00:17:54] Speaker 03:
But you will never be able to settle cases in co-pending actions, and you'll have to take them to trial.

[00:18:01] Speaker 03:
Because there was no avenue for pragmatists to do anything after a license occurs, other than to withdraw claims.

[00:18:09] Speaker 03:
And this is an unopposed motion to dismiss.

[00:18:10] Speaker 03:
It was the only avenue pragmatists had once claims become exhausted through substantial licenses beforehand.

[00:18:18] Speaker 01:
Well, suppose you had a case in which you had a strong position and you had a witness, a dynamite witness, and three days before trial the witness dies.

[00:18:32] Speaker 01:
And then you say, well, there's no chance of our winning this case, and we dismiss with prejudice.

[00:18:39] Speaker 01:
Is the defendant not the prevailing party in that situation?

[00:18:43] Speaker 01:
Or are they in your view?

[00:18:44] Speaker 03:
The defendant would be the prevailing party in that situation.

[00:18:46] Speaker 01:
And if there's a change in law, for example, you're arguing that you have a strong doctrine of equivalence case.

[00:18:56] Speaker 01:
And three days before trial, the Supreme Court says no more doctrine of equivalence.

[00:19:01] Speaker 01:
And you move to dismiss.

[00:19:03] Speaker 01:
Is that a case in which the defendant's prevailed in your view?

[00:19:07] Speaker 03:
And that's a closer call.

[00:19:10] Speaker 03:
But since the law, it eviscerates the basis of your claim, and it doesn't moot your claim, it eviscerates the basis for your claim, then I would say they were the prevailing party.

[00:19:21] Speaker 03:
But here, it's different.

[00:19:22] Speaker 03:
The claims become mooted.

[00:19:23] Speaker 03:
It doesn't.

[00:19:24] Speaker 04:
Suppose that the change in the law was the result of legislation in an acre.

[00:19:31] Speaker 03:
Well, acres, that's a little bit, I think, different because there you're changing the law.

[00:19:38] Speaker 03:
Here you were saying that that law, doctrine of equivalence, never existed, if I understand the hypothetical correctly.

[00:19:43] Speaker 03:
But in acres, it was clear that there was no change because of that intervening outside act, just as there was here.

[00:19:53] Speaker 04:
Are you saying that if the law gets changed as a result of legislation that that's an extraneous thing and the dismissal with prejudice which is required by the consequences of the legislation that prevents prevailing party status?

[00:20:09] Speaker 03:
No, in that situation there would be no prevailing party.

[00:20:13] Speaker 03:
And to be clear on acres, you have to have a judgment that's tantamount

[00:20:19] Speaker 03:
to a judgment in favor on the merits of the original claim.

[00:20:23] Speaker 01:
The problem in A Christian, I gather, is that it was just a remand.

[00:20:27] Speaker 01:
It was a remand for continuing litigation as opposed to a judgment.

[00:20:35] Speaker 01:
in favor of, in that case, the claimant.

[00:20:40] Speaker 01:
Right.

[00:20:41] Speaker 03:
When it's saying of the original claim, though, the claim changed here because of the exhaustion.

[00:20:46] Speaker 04:
So when they refer to claims outside of... It's the former employee line of cases where it's an administrative agency case brought in the district court and there was a remand.

[00:20:57] Speaker 04:
That is relief on the merits, if it's the result of the merits of the case.

[00:21:02] Speaker 04:
Pardon me, Your Honor.

[00:21:04] Speaker 04:
Under the former employee's line of cases, a remand is relief where it's an administrative agency proceeding that's brought to district court because it is the end of the district court proceeding if there is no retention of jurisdiction.

[00:21:19] Speaker 04:
So the fact that it's a remand rather than a final judgment isn't a distinction of that line of cases because the remand is final action by the district court in that context.

[00:21:30] Speaker 03:
Yeah, but again, you need something that tantamounts to a judgment on the merits.

[00:21:34] Speaker 03:
And what Newegg thought was non-infringement, invalidity, and there was no judgment in either of those with respect to the claims.

[00:21:44] Speaker 00:
And their only way... Wait, you're talking about the counterclaims.

[00:21:50] Speaker 03:
The counterclaims, yes, which were dismissed without prejudice.

[00:21:53] Speaker 00:
Yeah, they're dismissed without prejudice.

[00:21:55] Speaker 03:
But also the defenses.

[00:21:58] Speaker 03:
there was the front of the front of the non-infringement and validity that were were withdrawn as part of this as well i don't understand your point but the point is that they they didn't already because they didn't prevail on their defenses they didn't prevail on any defense on any claim or defense on a counterclaim or defense i mean the same thing happened neither party won on infringement neither party won on invalidity no one prevailed on any claim or defense as part of this

[00:22:28] Speaker 00:
Well, we're looking at the standard as to whether there was a change in the legal relationship between the parties with respect to this litigation, and indeed there was, because there was a dismissal with prejudice of certain of the claims.

[00:22:42] Speaker 03:
Which flowed from the licenses, and the licenses are what actually changed the legal relationship of the parties.

[00:22:50] Speaker 03:
When those licenses were entered into, and those cases dismissed, Pragmatis could no longer maintain

[00:22:56] Speaker 03:
this infringement action because that infringing activity had become licensed.

[00:23:01] Speaker 03:
So that is what changed the relationships of the parties.

[00:23:04] Speaker 03:
The dismissal merely confirmed that, reconfirmed that that was the effect of those licenses.

[00:23:12] Speaker 00:
Well, the licenses, what happened with respect to the licenses had no immediate and direct effect on the litigation.

[00:23:19] Speaker 00:
It was the parties' agreement movement to dismiss with prejudice that affected the litigation relationship between the parties, right?

[00:23:29] Speaker 03:
But there was no other avenue to go.

[00:23:32] Speaker 00:
Well, okay.

[00:23:33] Speaker 00:
I mean, yeah, okay.

[00:23:35] Speaker 00:
But the answer to my question is yes.

[00:23:38] Speaker 00:
The dismissal with prejudice affected the legal relationship between the parties with respect to this litigation.

[00:23:43] Speaker 03:
Well, in acres, they were clear that it had to be tantamount to a judgment.

[00:23:46] Speaker 03:
Is that yes?

[00:23:47] Speaker 03:
No, because in acres, it said the judicial action could take the form of a consent decree.

[00:23:52] Speaker 03:
This was nothing like a consent decree, a judgment on the merits, or an award of fees.

[00:23:57] Speaker 03:
And as the district court said, I've made no rulings.

[00:24:00] Speaker 03:
The only finding that the district court made, the only ruling that the district court made, was that there were settlement agreements that led to exhaustion, and those settlement agreements were substantial.

[00:24:11] Speaker 03:
Non-token settlement licenses.

[00:24:14] Speaker 03:
And that's what changed the relationship of the parties

[00:24:17] Speaker 03:
And that's why that court, the district court, never made a ruling, never had an order that was tantamount to a judgment in favor of Newegg.

[00:24:30] Speaker 01:
Have the settlement amounts been token according to the district judge?

[00:24:33] Speaker 01:
Do you think the case should come out differently?

[00:24:35] Speaker 03:
It's a closer case.

[00:24:37] Speaker 03:
It's certainly a closer case.

[00:24:38] Speaker 03:
How can that come out?

[00:24:39] Speaker 01:
Well, you'd probably have to look to the- You're not allowed to say this is a close case.

[00:24:44] Speaker 03:
Right, right.

[00:24:44] Speaker 03:
Well, in this one, the evidence

[00:24:47] Speaker 03:
First, the evidence was that they weren't anywhere close.

[00:24:49] Speaker 03:
And to use Your Honor's hypothetical of 1 million versus 999,000, the only evidence, there's no evidence that it wasn't for the full amount of the exposure or half the amount of the exposure.

[00:25:01] Speaker 03:
But settlement is something that the court system always wants to promote.

[00:25:05] Speaker 03:
So when it's non-nominal, non-illusory for $0.50 or $1, I mean, the dividing line,

[00:25:14] Speaker 03:
is difficult to discern.

[00:25:15] Speaker 00:
But as Mr. Lumley I think suggested in response to Judge Bryson's questions, this wasn't a case where there was a settlement between the parties, right?

[00:25:23] Speaker 03:
Correct.

[00:25:24] Speaker 03:
Correct, because it was with the two suppliers of the infringing instrumentality.

[00:25:29] Speaker 01:
Suppose you have the following situations.

[00:25:31] Speaker 01:
Well, you have a tort case in a jurisdiction where there's a cap on the amount of recovery, let's say of $250,000 for a certain kind of injury, and there are two joint tort pieces that are being charged.

[00:25:45] Speaker 01:
There's a settlement with the first joint tortfeasor for $250,000.

[00:25:49] Speaker 01:
I mean, the case is clear against that tortfeasor.

[00:25:54] Speaker 01:
So the plaintiff goes after them, get $250,000.

[00:25:56] Speaker 01:
And then he just says, well, that's the cap.

[00:25:58] Speaker 01:
I'm not going to be able to get any more, and therefore dismisses against the second tortfeasor, against whom the case was, let's say, arguably much weaker.

[00:26:06] Speaker 01:
Does that second tortfeasor prevail in that situation?

[00:26:09] Speaker 01:
There's just a voluntary dismissal with prejudice.

[00:26:12] Speaker 03:
I would say no, because the- It didn't prevail.

[00:26:14] Speaker 03:
It did not prevail because the other settlement brought them to the cap, so they couldn't... the second joint toy freezer...

[00:26:23] Speaker 03:
the plaintiff could not be awarded any more money on it.

[00:26:26] Speaker 03:
It didn't absolve the second joint feature of liability.

[00:26:29] Speaker 01:
Well, it certainly did absolve them of liability because they got a judgment of dismissal with prejudice.

[00:26:36] Speaker 01:
So there is no more liability in the picture for that second tort feature.

[00:26:41] Speaker 01:
It's not going to happen.

[00:26:42] Speaker 01:
Even if there's a reversal in the first case.

[00:26:45] Speaker 03:
It didn't change, well there couldn't be a reverse in the first case because it was a settlement, correct?

[00:26:49] Speaker 01:
It challenged the settlement on the ground that there was some kind of fraud in the inducement or whatever.

[00:26:55] Speaker 03:
Okay.

[00:26:55] Speaker 03:
But in that situation what changed the relationship of the claim, or of the parties and of the claim, what changed the nature of the claim against the second joint tort user,

[00:27:05] Speaker 03:
with the other settlement agreement.

[00:27:07] Speaker 01:
Well, that's true.

[00:27:08] Speaker 01:
But why should the second defendant bear the burden of the costs in a situation in which they have been completely exonerated?

[00:27:19] Speaker 03:
Well, they haven't been exonerated.

[00:27:21] Speaker 03:
The claim just can no longer continue due to an outside change.

[00:27:26] Speaker 01:
Which would be the case if there had been a Supreme Court decision saying that they can't be liable for whatever reason.

[00:27:35] Speaker 03:
Right, but it kind of depends on the circumstance.

[00:27:38] Speaker 03:
Your claim no longer went away.

[00:27:40] Speaker 03:
The underlying claim was not eviscerated.

[00:27:43] Speaker 03:
I mean, a change in the law could eviscerate the claim, but in the instance here, Pragmatis' claim against Newegg, whether there was infringement and what the damages were, didn't change.

[00:27:58] Speaker 03:
And that legal relationship with the parties didn't change.

[00:28:00] Speaker 03:
It was just a settlement agreement

[00:28:02] Speaker 03:
that no longer allowed for that to go forward.

[00:28:16] Speaker 03:
What changed the relationship of the parties?

[00:28:18] Speaker 03:
And this is something that changed the relationship of the parties before.

[00:28:21] Speaker 03:
What was the actual event that changed the relationship of the parties?

[00:28:25] Speaker 03:
And it was those settlement agreements.

[00:28:26] Speaker 03:
It wasn't the dismissal.

[00:28:28] Speaker 03:
The dismissal was a stamp confirming what the effect of the settlement agreements were.

[00:28:34] Speaker 03:
Confirming what actually changed the relationship of the parties, which was the settlement agreements.

[00:28:42] Speaker 03:
And since there's 20 seconds left, unless there's

[00:28:45] Speaker 03:
We'll pass the time unless the court has any more questions.

[00:28:53] Speaker 02:
Your Honor, I'd like to make three quick points.

[00:28:55] Speaker 02:
First, they did sue the Oracle implementation, and this is clear in the record.

[00:29:00] Speaker 02:
They filed their complaint, that's A1002, against both past and present implementations.

[00:29:06] Speaker 02:
The evidence is undisputed in the record that we used Oracle since 2011, before they filed the lawsuit.

[00:29:12] Speaker 02:
That's A1160-61.

[00:29:14] Speaker 02:
And indeed, they knew that because when they signed the dismissal with prejudice, they included the dismissal with prejudice not only as to Moxie and live person, they also included it as to Oracle.

[00:29:24] Speaker 02:
That's A1093.

[00:29:26] Speaker 02:
Now what that means is that just as with Moxie and live person, there was a change in the relationship, except that the change in the relationship happened before they ever brought the suit.

[00:29:34] Speaker 02:
We had an exhaustion defense all along as to the Oracle implementation, but there's a difference between having a defense and still being forced to defend a lawsuit and winning that defense by having the plaintiff go away.

[00:29:47] Speaker 04:
How is it that I know that the Oracle software is involved in this case?

[00:29:53] Speaker 02:
Because, Your Honor, at A1160 and 61, the one and only piece of discovery they ever sought in this case, the verified interrogatory response indicates that we started as of 2011 using the Oracle implementation.

[00:30:06] Speaker 02:
That's more than a... What about in the complaint?

[00:30:10] Speaker 02:
The complaint at A1002 alleges that we have in the past infringed and that we continue to the present day to infringe.

[00:30:17] Speaker 02:
That's as of 2012, more than a year after we adopted Oracle.

[00:30:22] Speaker 02:
It's possible that they didn't know.

[00:30:24] Speaker 04:
So they didn't mention Oracle in the complaint?

[00:30:26] Speaker 02:
It's not specifically mentioned, no.

[00:30:28] Speaker 02:
They allege against our implementation, which was an Oracle implementation.

[00:30:32] Speaker 04:
So what they're saying is that the complaint didn't cover Oracle, and you say it did.

[00:30:36] Speaker 02:
Your Honor, the complaint alleged that we were currently infringing.

[00:30:41] Speaker 04:
Isn't that a fair statement?

[00:30:43] Speaker 02:
I think it's a fair statement that they didn't know because they didn't bother to check whether the implementation that we had was one they had already licensed.

[00:30:52] Speaker 02:
And that's because their business model was directed at filing suit against retailers over 70 without regard to what they used, and then trying to seek money from fees at two levels.

[00:31:05] Speaker 02:
Now, one final point, and that is on the acres point, this court's case law is extremely clear.

[00:31:10] Speaker 02:
Power MOSFET expressly holds the dismissal of a claim with prejudice is a judgment on the merits under the law of the Federal Circuit.

[00:31:17] Speaker 02:
Highway Equipment holds that, quote, as a matter of patent law, the dismissal with prejudice granted pursuant to the district court's discretion under Rule 41A2 has the necessary judicial imprimatur to constitute a judicially sanctioned change in the legal relationship of the party.

[00:31:33] Speaker 01:
Sure, but here's what gives me some pause actually about that highway equipment case.

[00:31:38] Speaker 01:
There's one sentence, which I'm sure you're very conversant with, in highway equipment in which the court seems to step back from that general principle and says something to the effect, I don't remember the words exactly, something to the effect that the reason that the

[00:31:57] Speaker 01:
The prevailing party finding is not because of the dismissal alone, but because of the covenant not to sue.

[00:32:05] Speaker 01:
You know the sentence.

[00:32:06] Speaker 01:
I do, your honor.

[00:32:07] Speaker 01:
And I think- What do you make of that sentence?

[00:32:09] Speaker 01:
Because it seems inconsistent with your general proposition, the broad proposition, that if you have a dismissal with prejudice, you are a prevailing party, no ifs, ands, ands, and buts.

[00:32:21] Speaker 01:
Although you've qualified that by saying, well, if there's a settlement that underlay that, then you aren't a prevailing party.

[00:32:26] Speaker 02:
And I think, Your Honor, I would say two things.

[00:32:28] Speaker 02:
The first is that both Power Mospit and Exigent versus Atrana do not involve such a covenant not to sue.

[00:32:34] Speaker 02:
In Power Mospit, the plaintiff simply dismissed with prejudice because it decided they didn't have an infringement claim.

[00:32:40] Speaker 02:
It is true that that line exists.

[00:32:41] Speaker 02:
But I think you don't need to worry about it in this case because the general release that they provided is, for all intents and purposes, a covenant not to sue.

[00:32:49] Speaker 02:
They are not entitled to sue us on any claim that arose as of 2014.

[00:32:55] Speaker 01:
But that would be true even if all you had was a naked dismissal.

[00:32:59] Speaker 01:
You would still have rescued the kata as to all claims brought or that could have been brought.

[00:33:03] Speaker 01:
Therefore, I'm questioning, and I think I understand your argument with respect to oracle, but I'm not sure that your dismissal order is any broader than you could have adequately, than you could have properly claimed it to be based on Rescue the Cuddle alone.

[00:33:17] Speaker 01:
Is there a sense in which that order is broader than what you would have obtained from a pure we-dismissed opponent?

[00:33:25] Speaker 02:
I think it is, Your Honor, because I think Grace Giudicato would not have included completely unrelated claims and the dismissal with prejudice.

[00:33:32] Speaker 01:
And you view that sentence in the order and saying all claims arising previously as being all claims, even tort claims?

[00:33:41] Speaker 01:
I do, Your Honor, for the simple reason that I'm... You're laying down the president of Frank Mattis in your new egg car.

[00:33:46] Speaker 01:
that they could bring that claim?

[00:33:48] Speaker 02:
Absolutely, Your Honor.

[00:33:49] Speaker 02:
And there's no other way to read that sentence in the context of the prior sentence, which does cover the lawsuit.

[00:33:55] Speaker 02:
And I do think it's worth noting that this case was litigated below under the understanding this was a covenant not to sue.

[00:34:01] Speaker 02:
They never challenged that until this appeal.

[00:34:04] Speaker 02:
And SuperSAC, which is what they wanted, the ability to get rid of our counterclaims, requires a covenant not to sue.

[00:34:10] Speaker 02:
So everybody thought that this general release was operating as a covenant not to sue.

[00:34:14] Speaker 02:
and therefore that it's within the scope of highway equipment.

[00:34:16] Speaker 04:
If you look at the highway equipment, I mean you place so much reliance on it.

[00:34:20] Speaker 04:
If you look at 1034, when it's distinguishing rights, it says the present situation is different from the situation in rights in which voluntary action was taken outside the proceedings.

[00:34:31] Speaker 02:
was not designed to be judicially enforceable and resulted in a dismissal without prejudice.

[00:34:36] Speaker 04:
And that is not this case, Your Honor.

[00:34:38] Speaker 04:
Thank you for reading retro, but it does seem to be that the action taken outside the proceedings is a significant factor.

[00:34:46] Speaker 02:
Well, but Your Honor, if you go on to the very next sentence, what the court says is that in contrast to rights, the voluntary filing of the covenant in this case was designed to be judicially enforceable and was the basis for the court's order dismissing the claims with prejudice.

[00:34:58] Speaker 02:
That is precisely the set of facts we have here.

[00:35:01] Speaker 02:
and it's what distinguishes Rice.

[00:35:04] Speaker 00:
Thank you, Your Honor.