[00:00:00] Speaker 03: Everyone, this argued case this afternoon is number 15-70-01, SmartFlash LLC against Apple Incorporated. [00:00:09] Speaker 03: Mr. Perry. [00:00:12] Speaker 05: Thank you, Judge Newman, and may it please the court. [00:00:15] Speaker 05: The new trial set by the district court for September 14th and all other proceedings in that court should be stayed because the TTAB has instituted CBM review of all claims asserted in this case and [00:00:30] Speaker 05: there would be no prejudice to the patentee smart flash from that stay. [00:00:35] Speaker 05: In ruling otherwise, the district court made three critical legal errors. [00:00:42] Speaker 05: First, the court treated section 101 differently than the other grounds of invalidity or unpatentability. [00:00:48] Speaker 05: We know that's wrong from this court's decision in the benefit fundings case, as well as this morning's decision in the Versada v. SAP case, [00:00:56] Speaker 05: which holds that PTAB can review section 101 determinations under the CBA. [00:01:01] Speaker 05: Second, the court resolutely looked backwards, not forwards. [00:01:05] Speaker 05: It looked at the water already under the bridge, the work already done, rather than the work remaining to be done, which now, since this appeal was filed, includes an entire new trial and damages, impaneling a new jury, having new experts, new dowers, new discovery, all of which would be avoided by a stay. [00:01:23] Speaker 05: And third, and I think most fundamentally, [00:01:26] Speaker 05: The court faulted Apple for employing the procedures authorized by Congress in the AIA. [00:01:33] Speaker 05: And we hear a variant of this from my friends at SmartFlash who claim that Apple is seeking a tactical advantage by using the CBM process. [00:01:42] Speaker 05: I would like to address first the factual errors. [00:01:44] Speaker 01: Can I address that last question first? [00:01:46] Speaker 01: Because what does the clear tactical advantage for the moving party in the AIA language mean? [00:01:55] Speaker 05: Well, Your Honor, two answers. [00:01:57] Speaker 05: First, it comes from that beneficial loan case, as the Court knows, where the Court said that it's part of the weighing of the equities, as in the traditional four-factor stay test, the balance of hardships, if you will. [00:02:08] Speaker 05: Does the prejudice of the moving party outweighed by the advantage gained by the not? [00:02:13] Speaker 01: I'm trying to understand what tactical advantage, if not the kind of tactical advantage that the District Court talked about here, [00:02:21] Speaker 01: could be contemplated. [00:02:23] Speaker 05: I think the only ones that I could think of, Your Honor, would either be an unfair advantage, one unauthorized by law, or somehow gaming the system. [00:02:30] Speaker 05: Apple did not game the system here. [00:02:32] Speaker 05: Apple did exactly what the system required. [00:02:34] Speaker 05: And I think there's a disconnect there between the arguments being made and some of the district court's order and the facts of this case. [00:02:40] Speaker 01: So just give me a hypothetical example of where the gaming the system could come up in this context. [00:02:49] Speaker 05: Your Honor, I think that if a challenger waited literally until after the trial to then institute a CBM for the first time on grounds that were available earlier in the case and did not act reasonably promptly, that could be the kind of advantage. [00:03:08] Speaker 05: That's not what happened here. [00:03:09] Speaker 05: What happened here is [00:03:11] Speaker 05: Right after the Alice decision, and the Court is familiar, of course, with the confusion after this Court's decision in Alice, once the Supreme Court decided Alice in June of 2014... I don't know why anyone would be confused after that. [00:03:23] Speaker 05: Me neither, Your Honor. [00:03:26] Speaker 05: The Supreme Court decided that case in the middle of June of 2014. [00:03:30] Speaker 05: Within three months, Samsung filed its 101 petitions, Apple then filed its 101 petitions, and we simultaneously moved on 101 grounds in the District Court. [00:03:38] Speaker 05: SmartFlash makes it sound like, why didn't we just do that at the beginning of the case? [00:03:43] Speaker 05: Judge O'Malley, footnote eight of the court's opinion in Intellectual Ventures, as the court may recall, says that Congress didn't intend for parties to file CBMs at the beginning of the case. [00:03:52] Speaker 05: It was only when they became right. [00:03:53] Speaker 05: And a CBM is a difficult thing. [00:03:55] Speaker 05: I brought the first Apple CBM petition with me, Your Honors. [00:03:58] Speaker 05: It's 3,300 pages long. [00:04:01] Speaker 05: It stands six and a quarter inches tall, printed double size. [00:04:05] Speaker 05: And if you don't do this amount of work, [00:04:07] Speaker 05: The PTAB rejects the petition at the outset because you haven't set forth the grounds for review. [00:04:12] Speaker 01: But that's not the 101 petition. [00:04:13] Speaker 05: That's the first 101 petition. [00:04:15] Speaker 05: It also has 102, 103 grounds in it, Your Honor. [00:04:17] Speaker 05: But that's the first petition that we're talking about in this case. [00:04:19] Speaker 03: These are substantial underpins. [00:04:22] Speaker 03: I'm sorry? [00:04:23] Speaker 03: Because of amendments? [00:04:24] Speaker 03: Proposed amendments? [00:04:25] Speaker 03: Is that why? [00:04:26] Speaker 05: The exhibits, Your Honor, include the prior art, references for the 102-103 claims, as well as expert reports. [00:04:33] Speaker 01: But for 101, it's a much more streamlined process. [00:04:36] Speaker 05: All of the grounds have to be set forth because of the statutory estoppel argument. [00:04:41] Speaker 05: Once the PTAP gets the final decision, the statutory estoppel provision kicks in. [00:04:46] Speaker 01: Let me ask about the 101. [00:04:47] Speaker 01: I mean, your first point, you saying that the court treated 101 as substantively different. [00:04:55] Speaker 01: I'm not sure I understand how you get that from the opinion. [00:04:59] Speaker 01: He clearly did fault you all for not raising 101 sooner, and I think there's a fair argument that can be made that Alex changed the landscape. [00:05:08] Speaker 01: But I didn't see him say that somehow there's some substantive difference with 101 as to whether a state issues. [00:05:15] Speaker 05: Your honor, he said, Judge Gilstrop said repeatedly, and my friends repeat this, that [00:05:20] Speaker 05: Whereas 102, 103 require an examination of the prior art and therefore involve the expertise of the PTAB. [00:05:26] Speaker 05: 101 is a pure question of law and therefore there's no advantage to be gained by a PTAB proceeding versus a district court proceeding. [00:05:32] Speaker 01: Well, but wasn't that harshly, his point was that I've already looked at this as a matter of law. [00:05:38] Speaker 01: There's nothing, there's nothing that, he didn't say that they don't have any right to look at it or they couldn't reach a different conclusion. [00:05:45] Speaker 01: He simply said, I've already done this whole amount. [00:05:47] Speaker 05: Your honor, he did, but he did it in the context of saying that prior art might make the difference, and we think that under the statutory scheme and certainly under the Versado decision today, it doesn't make a difference what ground of patentability is asserted. [00:05:58] Speaker 05: Congress set up this system of parallel adjudications in order that all authorized grounds of unpatentability can be referred to the PTAP. [00:06:07] Speaker 05: Once a proceeding is instituted, [00:06:09] Speaker 05: you will always have parallel litigation, if you will. [00:06:13] Speaker 05: And you can't even file a CBM petition until after the district court litigation starts. [00:06:17] Speaker 05: So it has to go in parallel. [00:06:19] Speaker 05: Then the question becomes, which should go first? [00:06:22] Speaker 05: Because if they both keep going at the same time, the courts, this court specifically, ultimately will end up in the unenviable position that I know several of you are familiar with from Frasinius and other cases, where there's [00:06:37] Speaker 05: potential conflict. [00:06:38] Speaker 05: That conflict can be avoided entirely if one process or the other goes forward while the other one waits. [00:06:45] Speaker 05: Congress told us which process it's going to be by two specific provisions in the AIA. [00:06:50] Speaker 05: First, the estoppel provision. [00:06:52] Speaker 05: It works one way. [00:06:53] Speaker 05: It's PTAP to court. [00:06:55] Speaker 05: It's not court to PTAP. [00:06:56] Speaker 05: That meant Congress thought the PTAP would get to the decision first and specify the estoppel effect of the PTAP decision. [00:07:02] Speaker 05: And second, the stay provision. [00:07:04] Speaker 05: It authorized, and in some cases required, a stay of the district court proceedings. [00:07:08] Speaker 05: There is no authority for a stay of the PTAB proceedings. [00:07:10] Speaker 05: On the contrary, the PTAB proceedings are subject to a strict 12 month after institution statutory period that cannot be altered by either the parties or the PTAB, and Congress therefore expected that that would be expeditious. [00:07:23] Speaker 05: And in every judicial district of the United States, with the exception, to my knowledge, of the Eastern District of Texas, the District of Delaware, and the Eastern District of Virginia, the PTAP proceeding is going to finish before the district court litigation does. [00:07:34] Speaker 05: That's just generally the case. [00:07:35] Speaker 05: That's not true in every single case, but generally the way these patent cases play out. [00:07:39] Speaker 05: We are in a jurisdiction that moves faster, as perfectly entitled to do, of course. [00:07:43] Speaker 05: But Congress wrote a rule here for all judicial districts. [00:07:46] Speaker 05: This is not limited to any particular place. [00:07:48] Speaker 05: And they clearly thought that the PTAP proceeding would proceed first, the final decision, [00:07:53] Speaker 05: Whatever then remained of the case could be resolved in the litigation. [00:07:57] Speaker 01: I understand that some of this is just because these issues are all so interesting. [00:08:04] Speaker 01: B&B hardware, Supreme Court's decision in B&B hardware, there was a discussion about estoppel going the other way. [00:08:10] Speaker 01: Indeed, Your Honor. [00:08:12] Speaker 01: And is it just because the AIA writes in estoppel going one way, at a time when it was unclear whether agencies could estoppel courts, that wouldn't stop an estoppel running from the court to the agency, would it? [00:08:28] Speaker 05: Well, you need a final judgment, for one thing, in the court. [00:08:31] Speaker 05: In this case, we don't have one. [00:08:32] Speaker 05: And I agree with SmartFlash. [00:08:33] Speaker 05: There is no estoppel question presented in this appeal. [00:08:36] Speaker 05: I think the interplay between B&B hardware and the general restatement principles that the court articulated there and the statutory estoppel provision in section 18 will be down the road a question that this court is going to have to grapple with in the right case. [00:08:50] Speaker 05: It's another hard question, though, that is avoided. [00:08:52] Speaker 05: If the PTAB goes first and ends, we know the answer to the estoppel question because Congress provided it to us. [00:08:57] Speaker 05: Again, because they contemplated that the PTAP proceeding in all but the most, quote, rare and extraordinary circumstances, as Senator Schumer said, would go forward first in the PTAP and then in the district court. [00:09:08] Speaker 05: We'd also submit that those rare and extraordinary circumstances don't include this case. [00:09:12] Speaker 05: I think what Congress had in mind there was [00:09:15] Speaker 05: the kind of case, a competitor versus competitor case, where the patent holder has a product on the market and would actually suffer real, quantifiable, demonstrable, factually findable injury. [00:09:28] Speaker 05: We don't have that here. [00:09:29] Speaker 05: We have, in fact, a district court determination that this patent holder would suffer no injury from this case. [00:09:33] Speaker 05: This case is all about money. [00:09:35] Speaker 05: It's a non-practicing entity. [00:09:36] Speaker 05: Any delay is fully compensable through an award of damages. [00:09:40] Speaker 05: The district court, which has been overseeing this litigation, [00:09:42] Speaker 05: ruled to that effect, my friends haven't challenged it. [00:09:45] Speaker 05: So that doesn't fit within that rare set of cases that might require an exception, particularly where all claims have been instituted. [00:09:54] Speaker 05: I apologize, Judge O'Malley. [00:09:55] Speaker 01: Let's go to your other two points. [00:09:59] Speaker 01: You said that the first thing, one of the things you said was that there's so much left to do, partially because the court has now ordered a new trial on damages. [00:10:11] Speaker 01: But at what point in time are we supposed to be assessing? [00:10:16] Speaker 01: I mean, we've got virtual agility that sort of said at the time the motion's filed, but said, OK, but maybe it could be at the time that it's granted, that the CBM is granted. [00:10:30] Speaker 01: But it never said it should be at the point in time that we're on appeal. [00:10:36] Speaker 05: I would answer that in four steps, if I may, Your Honor. [00:10:39] Speaker 05: First, I would take the language from... Are you prepared for this question? [00:10:42] Speaker 02: I would take the language from... That one I am. [00:10:46] Speaker 05: I would take the language from the Versada opinion, which says the correct test is to look prospectively and not retrospectively. [00:10:52] Speaker 05: I would add that second to the language from virtual agility that says the date we look at that prospective question is the date the motion is filed. [00:10:59] Speaker 05: So standing on the date the motion is filed, what is going to happen forward in the litigation? [00:11:05] Speaker 05: Third, I would take the language from virtual agility, including footnote six that says, the court can take judicial notice of things that happen after the motion is filed if they bear on the stay question. [00:11:15] Speaker 05: And fourth. [00:11:16] Speaker 01: But I thought that footnote was only talking about judicial notice of things from the P tab. [00:11:21] Speaker 01: I don't read it as broadly as you seem to. [00:11:23] Speaker 05: Your Honor, I would suggest the footnote four of intellectual ventures authored by you [00:11:28] Speaker 05: suggests that judicial notice is judicial notice, and if it is an event that is judicially noticeable, it may play into the stay analysis, which feeds into my fourth point. [00:11:38] Speaker 05: That must be one of the meanings of the Section 18 provision that says this court may review de novo, because when it gets here, this court has to have some power to take into account those things. [00:11:51] Speaker 05: None of this should surprise. [00:11:52] Speaker 05: These are going to move quickly. [00:11:55] Speaker 05: The PCAP, once instituted, moves very quickly. [00:11:58] Speaker 05: District courts move quickly. [00:11:59] Speaker 05: And events will happen. [00:12:01] Speaker 05: And if it were the case that it were frozen in time, Judge O'Malley, you would have the odd situation where it's clear that a stay is required today, but you go back in time and it might have been a closer question. [00:12:12] Speaker 05: There's no sense in a remand or something. [00:12:15] Speaker 05: I think what Congress said by putting in the de novo review provision is, it's now here. [00:12:18] Speaker 05: Just decide. [00:12:19] Speaker 05: We've got a new trial in damages. [00:12:20] Speaker 05: We're going to have new expert reports. [00:12:22] Speaker 05: We're going to have a lot more work. [00:12:23] Speaker 05: And we're going to have a lot of work in this court. [00:12:25] Speaker 05: And I think it's clear that this court's work ought to play into the calculus. [00:12:30] Speaker 05: We would submit that. [00:12:30] Speaker 05: That looking forward to the future, this court will ultimately have to decide the Section 101 question. [00:12:36] Speaker 05: Clearly, that's right. [00:12:38] Speaker 05: Would it be more efficient to decide it in a single issue appeal coming up out of the PTAB after that agency adjudicator has rendered a reasoned decision, as in this morning's Prasada case, [00:12:48] Speaker 05: Or would it be more efficient to wait, have a retrial, another jury, and all of those proceedings, and then have that issue come up with all of the other issues of non-infringement? [00:12:58] Speaker 03: Let me interrupt. [00:12:59] Speaker 03: If you weren't talking about efficiency, but if we were trying to figure out and to decide the optimum structure for the future, [00:13:09] Speaker 03: whether or not you're able to benefit from it now. [00:13:12] Speaker 03: What would you propose? [00:13:14] Speaker 05: Your Honor, I would propose that we follow the statute. [00:13:16] Speaker 05: The PTAB is put in first place. [00:13:18] Speaker 05: As Judge Bryson wrote when he was sitting as a district judge in the NFC Tech case, Congress intended the PTAB to make authorized determinations, quote, in the first instance. [00:13:27] Speaker 05: They go first, that comes to this court, and then anything that's left in the litigation gets resolved in the district court. [00:13:32] Speaker 05: That is what Congress put in place for, by the way, this narrow slice of patents. [00:13:37] Speaker 05: This isn't an across-the-board rule. [00:13:39] Speaker 05: This is for covered business method patents. [00:13:41] Speaker 05: The court also held today that that's a reviewable determination. [00:13:44] Speaker 05: The PTAB has already ruled that these are covered patents. [00:13:47] Speaker 05: And if you compare these patents to Alice, they look pretty darn close. [00:13:50] Speaker 05: So this is not an across the board rule. [00:13:54] Speaker 05: So, Your Honor, structurally, that's a policy question that Congress answered. [00:13:58] Speaker 05: And yesterday's decision in the Coasio case, the judges were of two minds on the claim destruction issue, but all agreed that this was a new development, a parallel system of agency adjudication deliberately set up by Congress for certain authorized issues and certain authorized patents. [00:14:16] Speaker 05: It should go first. [00:14:17] Speaker 05: And if we take that as the [00:14:19] Speaker 05: Defining principle, as I think the statute says. [00:14:22] Speaker 05: and depart from it only in the rare and extraordinary case where the patent holder, after institution, would suffer harm. [00:14:30] Speaker 05: That does take care of my client in this case, but it would also take care of my clients where I am representing the patent holder, and it would be a fair and neutral rule that applies to everyone. [00:14:37] Speaker 02: And that's the rule we propose. [00:14:39] Speaker 04: One quick question you talked about. [00:14:43] Speaker 04: Don't look back. [00:14:45] Speaker 04: Look at what is facing the court at the present time. [00:14:49] Speaker 04: But doesn't the fact that the district court, as in this case, had extensive experience with these patents, dealt with this case over an extended period of time, is fully familiar with all of the issues. [00:15:04] Speaker 04: I mean, doesn't that have an effect on the efficiency of the district court in going forward, in continuing, shall we say, sort of the momentum in getting this case resolved, as opposed to [00:15:18] Speaker 04: at this point in time, despite all of the work that has been done, sort of putting everything on hold and then picking it up, you know, months later and having to start afresh? [00:15:29] Speaker 05: Not really, Your Honor. [00:15:31] Speaker 05: Certainly not in this case for this reason. [00:15:33] Speaker 05: The only substantial issue that the asserted claims that the PTAP has instituted review on is the Section 101 issue. [00:15:40] Speaker 05: It is a question of law. [00:15:42] Speaker 05: If it is decided, if they confirm their initial determination, these patents are ineligible. [00:15:46] Speaker 05: all of those other issues fall out of the case. [00:15:49] Speaker 05: So the most likely scenario is the district court never has to return to all that work. [00:15:53] Speaker 05: The case is simply over. [00:15:54] Speaker 05: Now, it is possible... What if the Patent Office doesn't? [00:15:57] Speaker 04: And if the Patent Office doesn't... Then there's no assurance that it will happen. [00:16:00] Speaker 05: I understand. [00:16:00] Speaker 05: Well, they have confirmed, Your Honor, their initial determinations in 101 cases, 100% of the cases and 97% of the claims. [00:16:07] Speaker 05: So there's a pretty good assurance. [00:16:10] Speaker 05: Yes, Your Honor, it's 50-101 institutions, 32 final decisions, 100% confirmation as to [00:16:16] Speaker 05: patents and 97% as to claims. [00:16:18] Speaker 05: So there's a pretty good assurance in this case where they've already found more likely than not ineligible that it will be confirmed. [00:16:24] Speaker 05: This court, of course, will have to review that. [00:16:25] Speaker 05: I understand that. [00:16:27] Speaker 05: But on the other scenario, and I'm eating into my own time here, the court will be able to pick it up. [00:16:33] Speaker 05: What's left is a damages retrial, according to the most recent order, with new experts, new discovery, and so forth. [00:16:39] Speaker 05: Everybody's going to have to do something new to start so that in the unlikely event that this patent is ever held to be [00:16:45] Speaker 05: sustainable and actionable then we can pick it up in the future and again I need to return to the point the court has already found that most importantly [00:16:54] Speaker 05: Doing so would engender and envisage no harm on the patent holder smart collection. [00:17:00] Speaker 01: Judge, you may now answer your question. [00:17:01] Speaker 01: Judge Newman's graciously allowing me to answer one more question. [00:17:05] Speaker 01: If we're talking about what is most efficient in getting to the end game as quickly as possible, given our jurisprudence, which you know I don't really agree with, but you could actually, you have a right to appeal as a right from the liability determination even without a damages trial having occurred. [00:17:23] Speaker 01: So you could ask the trial court to enter a judgment and take an immediate appeal right now of all of those issues, including the 101 issue, right? [00:17:32] Speaker 05: Your Honor, we've actually taken a position in the district court that liability and damages is inextricably intertwined in this case and that it can't be separated out that way. [00:17:39] Speaker 05: The court reserved that issue pending SmartFlash's new damages approach to see whether or not it would have to decide that. [00:17:46] Speaker 05: We don't have a final decision on that question and we don't think that kind of an appeal would be right in this particular case. [00:17:51] Speaker 05: I don't think that's a [00:17:53] Speaker 05: a generalizable principle. [00:17:54] Speaker 05: Some cases might well fall into that category. [00:17:57] Speaker 05: Certainly as to efficiency, though, of getting everything wrapped up in the broad run of cases from every district in every circumstance, letting the PTAT go first under its statutory timeline is generally going to result in the fastest thing and avoid one of the other problems that I know members of this court don't agree with, which is the conflict between the PTO and the courts. [00:18:17] Speaker 03: Okay, thank you. [00:18:17] Speaker 03: We'll save you regrettable time, Mr. Karr. [00:18:24] Speaker 03: Mr. Caldwell. [00:18:28] Speaker 00: Excuse me. [00:18:29] Speaker 00: May it please the court. [00:18:31] Speaker 00: I'd like to start with an observation that Judge Newman made in virtual agility. [00:18:37] Speaker 00: That the American Vents Act permits that it does not require the district court to stay in earlier filed litigation during later requested post-grant PTO proceedings. [00:18:46] Speaker 00: Such a stay is not obligatory, but is confined to the district court's discretion. [00:18:52] Speaker 00: And I think what we have here is we have very thoughtful and thorough analysis by the district court, who has a lot of experience with this case and has put a lot of effort into this case, and carefully analyzed the statutory factors as to four different parties and put out a careful ruling that follows the statute. [00:19:12] Speaker 00: denying a stay as to Apple and then the Samsung defendants, but granting a stay as to Google and Amazon who were postured very differently. [00:19:20] Speaker 00: They were well before Markman, before even the start of Discovery in the case of Amazon. [00:19:26] Speaker 00: And I think what we've seen, Your Honors, is that Judge Gilstrap carefully followed the statute and appropriately denied the stay as to after. [00:19:34] Speaker 01: What about the forward versus backwards looking thing? [00:19:38] Speaker 01: I mean, it's clear that Judge Gilstrap was frustrated by how much work he'd already put into the case. [00:19:44] Speaker 01: But there is still much left to be done, especially now with the new trial, right? [00:19:49] Speaker 00: Well, I would say that there's comparatively less to be done, because so much has been done. [00:19:54] Speaker 00: As to whether the court can appropriately look both forward and backward, I think there are a couple different aspects of that. [00:20:01] Speaker 00: One is what the court has already done certainly informs and elevates his level of knowledge of the case and familiarity with the case. [00:20:08] Speaker 00: And handling the remainder, the short amount left in this case now, [00:20:14] Speaker 00: prevents the need to completely reboot and reload all of these issues in the court's mind at a time later if, as we believe is correct, this court ultimately determines that these patents are patent-eligible subject matter. [00:20:27] Speaker 01: It's not just a new trial on damages, but you've got to go back and press the restart button on your expert, right? [00:20:35] Speaker 00: I think that's to be determined. [00:20:37] Speaker 00: We got the ruling from Judge Gilstrap just a couple of days ago. [00:20:40] Speaker 00: And at this point, I think, honestly, it's just a matter of us still figuring out exactly where that puts us and looking at what we have to do to go and present the new trial. [00:20:49] Speaker 00: He set the new trial for the middle of September. [00:20:52] Speaker 00: Clearly, Judge Gilstrap is not anticipating that we are backing this case up many, many months and starting from scratch. [00:21:00] Speaker 00: Well, I do think, obviously, some work is left to be done. [00:21:03] Speaker 00: dare argue otherwise. [00:21:04] Speaker 00: I don't think that it's the case that we are backing up significantly and starting all over again. [00:21:10] Speaker 01: Do you agree that in this particular case you are in a unique situation where the damages and the liability determinations are inextricably intertwined along the lines that [00:21:25] Speaker 01: the Supreme Court said in gasoline product or is this a situation where under our 1292C jurisprudence you could immediately appeal, Apple could immediately appeal the liability determination? [00:21:36] Speaker 00: I think it's the latter, particularly once judgment as a matter of law on invalidity and infringement are denied in this case. [00:21:43] Speaker 00: Judge Gilchap has diligently been putting out orders. [00:21:45] Speaker 00: Those are two that haven't been. [00:21:47] Speaker 01: But you have to enter final judgments. [00:21:49] Speaker 01: I mean, the judge would have to decide if that's the way to go. [00:21:52] Speaker 00: Correct. [00:21:53] Speaker 00: But I do think that this case is appropriately postured for that if Apple chose to avail itself of taking up those liability issues right now. [00:22:03] Speaker 00: I do not believe that this is a case where damages and invalidity are inextricably intertwined. [00:22:08] Speaker 00: That notion was raised, to my knowledge, for the first time in oral argument last week in front of Judge Gilstrap when there was a whiff of a notion that we might go back and revisit some damages. [00:22:18] Speaker 00: And Apple said, well, let's just make sure we get to redo everything we can on liability too. [00:22:24] Speaker 00: And that's the first I've heard of it, but I don't see any reason that it would. [00:22:26] Speaker 00: I don't know how far down this path you'd like to go, but for example, Apple had no non-infringing alternatives and stipulated to that. [00:22:34] Speaker 00: And once there's a finding that certain functionality already infringes, and there's a finding of no non-infringing alternatives that Apple had, this case is wildly different than many cases in which you might have to go and [00:22:46] Speaker 00: slice up a lot of small, fine boundaries on damages in order to retry damages. [00:22:52] Speaker 00: I don't believe they are inextricably intertwined. [00:22:54] Speaker 00: And to go back to your earlier point on looking backwards, there are two different cases where Judge Bryson, sitting in the Eastern District of Texas by designation, but also this Court of Virtual Agility has recognized that for factors two and three, it is appropriate to look at [00:23:11] Speaker 00: where we are in the case, not only in terms of what is left prospectively, but also what has been done so far, and to look at the dilatory motive. [00:23:23] Speaker 00: And I think, Your Honor, my friend representing Apple has brought to the Court's attention the congressional intent, and that has been addressed extensively in the briefing, plainly from congressional intent. [00:23:38] Speaker 00: The Covered Business Method review system was designed to be used as an alternative to litigation. [00:23:45] Speaker 01: Well, let me ask you that. [00:23:46] Speaker 01: I mean, yes. [00:23:47] Speaker 01: I mean, obviously, several of us argued in the pros and cons of dissent that the entire ITR system was designed to be an alternative to litigation. [00:24:00] Speaker 01: But the CBMR, there's one piece of it that makes me wonder about whether that's true. [00:24:05] Speaker 01: And that's the distinction between IPRs where you have to institute them within a year of litigation being instituted and CBMRs that are purposely left completely open-ended. [00:24:17] Speaker 01: So Congress obviously did contemplate that you might have a case that's pending four years before you ever get to this point. [00:24:24] Speaker 01: So doesn't that indicate possibly a different legislative intent with respect to the two types of proceedings? [00:24:29] Speaker 00: I don't think so, Your Honor, because although that there's not a hard and fast deadline, a hard and fast deadline perhaps wouldn't make a lot of sense. [00:24:37] Speaker 00: I mean, I realize that in some instances arbitrary deadlines are picked, and one could say that the one-year deadline in the case of IPRs is an arbitrary deadline that Congress picked. [00:24:46] Speaker 00: But what Congress did do in terms of the CBMs is we have congressional intent, and then we have a four-factor statutory test that tells us what to look at. [00:24:54] Speaker 00: And it reminds me of the point that Apple made in these proceedings. [00:24:59] Speaker 00: I'm not exactly sure how to characterize it, but essentially the notion was that because we are in one of the districts that's working really hard to get through things quickly, we should be able to do things that are really, really late in the case as a result, almost as though the district court's opinion should be less credible because he has worked very, very hard to get this case to trial. [00:25:21] Speaker 00: That's not like we filed the case and went to trial eight months later. [00:25:24] Speaker 00: It still was almost two years before we went to trial in the Apple case, but he did work very, very hard. [00:25:29] Speaker 00: And I think what Congress has told us is we're trying to have an efficient, cost efficient, time efficient alternative to litigation. [00:25:39] Speaker 00: But when you wait until the litigation is 90% of the way to trial, you negate that. [00:25:45] Speaker 00: And I think it probably bears repeating from the brief that plainly Congress never intended there to be a matter where getting close to the eve of trial, [00:25:58] Speaker 00: You file so many CBMs, you get to the point where on six patents there are approximately 48 CBMs. [00:26:06] Speaker 00: The system is, quite frankly, being abused and is definitively broken if in a situation like this, where a party claims from the day it answers, we have a 101 defense, and just waits [00:26:23] Speaker 00: and strings out CBNs, filing them serially, just until something hits, right up to the eve of trial. [00:26:32] Speaker 00: If that's going to justify a stay and say, never mind what your motives were, never mind the effort that the district court has put in, we're going to go ahead and stay it. [00:26:44] Speaker 00: the system is actually encouraging precisely the opposite of what it's meant to encourage because then what it encourages is litigation abuse from those who are the alleged infringers when arguably it's said to curb litigation abuse from people who were sending out too many letters and abusing really terrible patents that shouldn't have been granted or things of that nature. [00:27:07] Speaker 00: What we've done is authorize a new methodology by which accused infringers can [00:27:14] Speaker 00: basically abuse pattern hunters. [00:27:17] Speaker 01: Well, in looking at the standards that Congress set forth, I mean, you can see that as you see, there is no undue prejudice to you from waiting. [00:27:31] Speaker 00: We do not concede that, Your Honor. [00:27:33] Speaker 00: The judge, Judge Gilstrap, found that there was no undue prejudice. [00:27:37] Speaker 00: He nevertheless found that that factor [00:27:39] Speaker 00: still favors of stay because of the tactical advantage part. [00:27:43] Speaker 00: I'm not trying to steer you away from your question, but I do not concede that there is no undue prejudice. [00:27:49] Speaker 02: What's the undue prejudice? [00:27:50] Speaker 00: Well, the undue prejudice is, there are several different aspects of undue prejudice. [00:27:53] Speaker 00: What Apple is seeking to do, Smart Punch is in a business of licensing. [00:27:58] Speaker 00: And Mr. Raxi, inventor, spent a lot of time trying to commercialize his inventions. [00:28:02] Speaker 00: And that didn't pan out. [00:28:03] Speaker 00: And I'm not going to play the sympathy to the court. [00:28:05] Speaker 00: But he made those efforts. [00:28:07] Speaker 00: And now, because of where the market stands, his opportunities are if he tries to license his patents. [00:28:13] Speaker 00: What Apple suggests is, we've taken this time, about two years, to proceed in this litigation. [00:28:18] Speaker 00: Let's put it on hold. [00:28:20] Speaker 00: We'll just say timeout, nothing on the litigation. [00:28:22] Speaker 00: We won't actually take the fastest route to getting Federal Circuit review of the 101 issue. [00:28:27] Speaker 00: We'll take the slower route. [00:28:30] Speaker 00: And then, by the time the patents could come up to the Federal Circuit following the Patent Trial and Appeal Board Review, and then come back, go back to the District Court, reinstate a case, and run that through to conclusion, we're talking essentially at the expiration of Mr. Rax's patents and basically no way to license. [00:28:48] Speaker 01: I've had a lot of cases to think about this week. [00:28:53] Speaker 01: I thought that the facts were that you all bought his past portfolio. [00:28:57] Speaker 00: What ended up happening, Mr. Rackstall owns basically half of it. [00:29:01] Speaker 00: It's slightly diluted by some folks that have invested, but it's not the case that we fold [00:29:09] Speaker 00: bought his patent portfolio. [00:29:12] Speaker 00: I'm happy to explain it as much as you want because I don't want to be misleading. [00:29:18] Speaker 00: I don't want to be misleading. [00:29:21] Speaker 00: He definitely found a friend who said, I will help you do this and I will help you continue your prosecution. [00:29:27] Speaker 00: I will help you get out of personal debt. [00:29:29] Speaker 00: That definitely happened and I don't mean to mislead you by my answer, but he's very much [00:29:35] Speaker 00: resisted at the time when, before the patents issue, resisted the people who tried to, around the time of his first patent issue, get them for a couple hundred thousand because he was desperate. [00:29:45] Speaker 00: I mean, he's done everything he could to stay attached to them because he firmly believed in it. [00:29:51] Speaker 03: Okay. [00:29:51] Speaker 03: Based on your experience with this case, what kind of structure would you redesign? [00:29:57] Speaker 03: We've seen now, we've seen enough appeals coming to us after the American Vince Act [00:30:04] Speaker 03: to illustrate all sorts of variations of the relationships as to what comes first and after and at which stage and so on. [00:30:13] Speaker 03: As far as this circumstance is concerned, I gather that your view is that what this should be some specific time period during which one can have resort to one forum or the other and make a commitment [00:30:33] Speaker 03: Or if in fact we're to have concurrent proceedings, it's very hard to draw bright lines as to how much concurrency. [00:30:42] Speaker 03: Or would you leave everything to the courts, to the patent office? [00:30:47] Speaker 03: There seem to be flaws that are forcefully brought to our attention with each new appeal. [00:30:56] Speaker 00: I think the answer to your question is, unfortunately, because of the law that we're operating under, there can't be a bright line rule. [00:31:04] Speaker 00: And I actually think that's terribly important in this case, because what you're hearing from Apple is that Congress has expressed an intent that the PTAB gets to rule on issues like this in the first instance. [00:31:18] Speaker 00: And that's not in the statute that we are advocating. [00:31:20] Speaker 03: Instead... No, but it's full of that. [00:31:22] Speaker 03: Legislative history is full of that. [00:31:24] Speaker 03: And in which case? [00:31:26] Speaker 03: the appropriate step then would be for the trial course to wait until the Patent Office procedures are over without trying to draw lines as to when they should be begun. [00:31:41] Speaker 03: But one sees inequities, you pointed some out in this case if we go that way. [00:31:49] Speaker 00: To be quite candid, the test is going to make it where it's not amenable to a bright line rule. [00:31:54] Speaker 00: I don't think that you can even say, for example, I don't think you can say if it's brought before or after a Martman hearing. [00:32:01] Speaker 00: And I think it comes down to, the reason I say that is it comes down to different district judges. [00:32:06] Speaker 00: based on they've figured out what works for them and they manage their dockets in a particular way. [00:32:11] Speaker 00: So there are some district judges who wait and address markman just before trial in connection with summary judgment. [00:32:17] Speaker 00: I'm only taking that as an example because I don't think because of the way district judges [00:32:22] Speaker 00: manage their dockets and they have wide latitude in how they manage their dockets, I don't think it's amenable to a bright line rule. [00:32:28] Speaker 00: And that's why I believe your dissent and virtual agility is very insightful on this point, because I think you have district judges who have seen the conduct of the parties, have looked at what the parties have said in their pleadings and what their conduct has been throughout the litigation, and they can say, in this case, [00:32:47] Speaker 00: you've told me that this defense was available to you a long time ago. [00:32:51] Speaker 00: You could have requested it a long time ago. [00:32:53] Speaker 00: And I think that's why district courts, looking at the factors, we're going to have to give some deference to them, although I know the statute permits de novo review to ensure consistent application of established precedent. [00:33:05] Speaker 00: I realize that, but the district judges have a lot of insight and will make determinations that should be entitled to some discretion. [00:33:13] Speaker 00: In this case, for example, [00:33:15] Speaker 00: When Apple and Samsung finally raised 101 petitions at the PCAB, they didn't even notify the district court until after the Apple trial had taken place, just as an example. [00:33:33] Speaker 00: Let's have a free look at the cards. [00:33:37] Speaker 00: Let's see the cards that are face down. [00:33:39] Speaker 00: We'll go ahead and move for summary judgment on 101. [00:33:42] Speaker 00: We'll move for summary judgment on multiple non-infringement grounds. [00:33:45] Speaker 00: We'll move for summary judgment on invalidity based on anticipation, based on obviousness. [00:33:50] Speaker 00: We'll try to dial up your expert, which they were successful in doing, and then over the holidays we redid a new damages model. [00:33:59] Speaker 00: They tried again, and that dial-up was denied. [00:34:02] Speaker 00: All of this took place, and then a trial took place. [00:34:05] Speaker 00: Then it was a couple of months after the trial that once some claims were instituted, they came to the district court and said, by the way, here are these 101 petitions we filed many months ago. [00:34:19] Speaker 00: We're getting some traction on them now. [00:34:20] Speaker 01: We'd like to stay the case. [00:34:23] Speaker 01: I know what the response is going to be. [00:34:24] Speaker 01: If you look at intellectual ventures, we said that's the relevant point in time. [00:34:28] Speaker 01: Until it's granted, it's probably pretty rare that a district court is going to enter a stay. [00:34:34] Speaker 01: So what was their obligation until they knew they actually were going to get a grant? [00:34:40] Speaker 00: I don't know that I'm saying they had an obligation. [00:34:43] Speaker 00: What I'm saying is if you also look at virtual agility, for example, that also tells you [00:34:48] Speaker 00: A district court can either deny without prejudice to refiling or can reserve a decision, I think is actually the way it's phrased, until there is an institution decision. [00:34:59] Speaker 00: But my point is simply that there was actually no effort to reduce any of the litigation cost, time, money. [00:35:09] Speaker 00: in this case based on these 101 petitions. [00:35:11] Speaker 01: So is that what you think tactical advantage means in the third prong? [00:35:15] Speaker 00: Well, I think the tactical advantage that's in this case certainly at least includes that. [00:35:21] Speaker 00: I wouldn't say that that's what it means of meets and bounds of tactical advantage. [00:35:25] Speaker 00: But I think your question earlier, I'm glad you asked again because I wanted to respond to that. [00:35:31] Speaker 00: In this case, you do see a tactical advantage because not just because Apple didn't notify the court, hey, we've got these on file, [00:35:39] Speaker 00: Apple essentially designed the timing of its filings so it could take every shot possible, including the jury trial shot. [00:35:52] Speaker 03: Well, aren't they entitled to think through their best tactical approach? [00:35:57] Speaker 03: We see extraordinarily creative lawyering in these cases. [00:36:04] Speaker 03: Why shouldn't they have an opportunity to think of their advantage? [00:36:08] Speaker 03: I don't want to take you too far down. [00:36:10] Speaker 03: this path of philosophy. [00:36:12] Speaker 03: Do you have another opportunity in arguing with Samson? [00:36:17] Speaker 03: Anything else you need to tell us in the moment? [00:36:19] Speaker 00: Would you let me answer the question that you've given? [00:36:21] Speaker 03: If there's an answer. [00:36:23] Speaker 00: Well, I think there is an answer. [00:36:26] Speaker 00: And I think there are very talented and creative lawyers. [00:36:30] Speaker 00: And hopefully that sentiment goes for both sides. [00:36:33] Speaker 00: And everybody's working very hard for their clients. [00:36:36] Speaker 00: But as part of being a talented and capable lawyer who pled in the first instance that you had a Section 101 defense, they also could not just cite congressional intent where it's helpful, but actually try to advance congressional intent by having moved far earlier. [00:36:53] Speaker 00: I think that's where the tactical advantage comes out. [00:36:55] Speaker 00: And the district court properly found that Apple sought a tactical advantage by delaying. [00:37:02] Speaker 03: Okay. [00:37:04] Speaker 03: Okay. [00:37:04] Speaker 03: Thank you, Mr. Caldwell. [00:37:05] Speaker 01: Mr. Perry, before you begin, I want to confirm something. [00:37:10] Speaker 01: You said that our law says we have to look forward and not backward, and you cited Versada. [00:37:20] Speaker 01: We weren't talking about this morning's Versada. [00:37:21] Speaker 05: Your Honor, the previous Versada case, which was vacated as moot that Judge Lynn said on the panel, that's correct. [00:37:26] Speaker 05: That was the [00:37:27] Speaker 05: Several Versadas out there. [00:37:29] Speaker 01: Right, but that's not the law because it's never mandated that it's been vacated. [00:37:33] Speaker 05: Virtual Agility says the same thing, Your Honor, and it's not quite such a concise term, and of course Versada cited Virtual Agility for that, which was the reason we pick the motion date and look forward from there is that's the relevant, what happens next is the relevant period. [00:37:46] Speaker 01: Well, if that's the case, then what is the point of the second factor that Congress listed? [00:37:52] Speaker 01: whether or not the deposition or discovery has been completed and a trial has been scheduled. [00:37:57] Speaker 01: Doesn't that indicate that Congress did contemplate looking backwards? [00:38:02] Speaker 05: No, I think Congress contemplated looking forward. [00:38:04] Speaker 05: When certain things have passed, there is less to be done in the future. [00:38:07] Speaker 05: And at some point you get to the end of the case and then it's over. [00:38:11] Speaker 05: But where everyone is in the case, the question presented by this day application is to look forward from there and see what remains to be done. [00:38:18] Speaker 05: Here we have at least [00:38:20] Speaker 05: a retrial on damages, an appeal, and a cross-appeal. [00:38:24] Speaker 05: And so it's wherever we are, and it's just simply a recognition that there will be less to be done. [00:38:29] Speaker 05: Mr. Caldwell accused Apple four times, or three times maybe, of abusing the system by waiting too long to file this petition, but you never once heard him say the word Alice. [00:38:38] Speaker 05: These are Alice patents, Your Honor. [00:38:40] Speaker 05: These are computer-implemented business methods. [00:38:42] Speaker 05: The law was in confusion before the Supreme Court decided Alice. [00:38:46] Speaker 05: I apologize for saying that in this forum, but we were all here for Alice, and that's the case. [00:38:50] Speaker 01: But everybody was making arguments about 101. [00:38:53] Speaker 05: We preserved the 101 argument, Your Honor. [00:38:56] Speaker 05: It is in our answer, as you said. [00:38:57] Speaker 05: And as soon as the Supreme Court clarified what the standard was, we moved simultaneously for summary judgment in the district court and instituted the proceedings in the PTAT. [00:39:05] Speaker 05: There is no statutory deadline. [00:39:06] Speaker 05: The PTAP has ruled that it was timely. [00:39:08] Speaker 05: It's instituted the proceedings. [00:39:09] Speaker 01: So it's not an abuse of the system to preserve the arguments and present them at the appropriate time. [00:39:21] Speaker 01: analysis that had gone up to the Supreme Court, the Supreme Court took it. [00:39:24] Speaker 01: I mean, to wait necessarily for the Supreme Court, I think that's pushing it a little bit. [00:39:30] Speaker 05: Well, Your Honor, to be clear, the CBM petition has to set forth the grounds for patentability, and it is the document that then goes forward to the final decision. [00:39:38] Speaker 05: And if you haven't set forth the proper grounds, the estoppel rule kicks into that final decision. [00:39:43] Speaker 05: When it was being seriously debated simultaneously, contemporaneously in the Supreme Court, whether these kinds of patents were subject to 101 at all and what the standard would be, I actually think it would have been irresponsible to submit the CBN petition while the Supreme Court was considering that petition, giving the statutory estoppel rule. [00:40:00] Speaker 05: So I actually don't agree with the court's hypothetical. [00:40:03] Speaker 05: Certainly, it was not unreasonable for Apple to wait for the Supreme Court to clarify that question and then promptly file in both forums as Congress authorized. [00:40:10] Speaker 05: As to the gasoline products question that Judge O'Malley asked about, it's on page six of the new trial order that we submitted yesterday. [00:40:17] Speaker 05: Apple argues gasoline products, blah, blah, blah. [00:40:18] Speaker 05: Quote, given that the court expects SmartFlash to present at the new trial a damages model that moots this issue, the gasoline products issue, as raised by Apple, the court declines to address Apple's argument this time. [00:40:30] Speaker 05: And it couldn't be any clearer to me that we both need a new damages model and it's still in play whether or not the inextricably intertwined is there. [00:40:38] Speaker 05: Third, Your Honor, you asked me what the clear tactic advantage was. [00:40:41] Speaker 05: I mentioned the Broadcast Innovation case, but I didn't have the quote in mind. [00:40:44] Speaker 05: It's at page 10 of the Westlaw version of that opinion under the heading, will they stay unduly prejudiced in a nonmovie party or present a clear tactic advantage? [00:40:54] Speaker 05: And the court there said, that's what the case that Congress drew the four factors from. [00:40:59] Speaker 05: The court there said, quote, this factor is best summarized by one question. [00:41:04] Speaker 05: Do the plaintiffs have an adequate remedy at law? [00:41:07] Speaker 05: period, question mark. [00:41:09] Speaker 05: These plaintiffs do. [00:41:11] Speaker 05: Now, Mr. Caldwell got up and said they are arguing that. [00:41:13] Speaker 05: They do have a footnote where they say there would be some licensing thing. [00:41:17] Speaker 05: You will note there is no citation to the record. [00:41:18] Speaker 05: We had a five-day trial in this case. [00:41:20] Speaker 05: Mr. Racks testified. [00:41:21] Speaker 05: There is no evidence of any harm, no licensing, no nothing. [00:41:25] Speaker 05: We make all of these arguments if the court is interested in our injunction papers in the district court because it goes to that factor of the injunction. [00:41:30] Speaker 05: We have pointed out that there is absolutely no evidence of any harm whatsoever, much less irreparable harm. [00:41:35] Speaker 05: This is a case about money. [00:41:37] Speaker 05: they can be compensated. [00:41:39] Speaker 05: Fourth and finally, Judge Newman, you asked my friend what to do. [00:41:44] Speaker 05: And I think his answer was in a variant of leave it up to the district courts, have a case by case determination. [00:41:50] Speaker 05: With respect, that would result in what Senator Kyle called the dog's breakfast that existed before the AIA. [00:41:58] Speaker 05: Whatever else Congress did, it was clear that it wanted more uniformity as to this precise question, when stays should be issued. [00:42:07] Speaker 05: It gave this court de novo power, automatic appeals, full review. [00:42:12] Speaker 05: And when the court is exercising that, it ought to have standards for the benefit of this court, the district court, the litigants who have to take these cases. [00:42:22] Speaker 05: This court, Judge Newman, has had a lot of cases on the stay issue. [00:42:25] Speaker 05: It's only had one case, however, on the merits of a CBM, this morning's Versada case. [00:42:29] Speaker 05: And those are coming, though. [00:42:31] Speaker 05: As I said, there's 32 final decisions. [00:42:32] Speaker 05: They're going to get here. [00:42:33] Speaker 05: These issues need to be sorted out. [00:42:35] Speaker 05: A default rule, and I would submit it as this. [00:42:38] Speaker 05: When CBM review has been instituted on all claims in the case, the judicial court has very little discretion. [00:42:45] Speaker 05: That discretion is limited to prejudice to the opposing party. [00:42:48] Speaker 05: And in the absence of prejudice, a stay is required. [00:42:51] Speaker 05: That is a neutral rule that can be applied across the board in every case. [00:42:55] Speaker 05: And in this case, it means the stay should have been entered here [00:42:59] Speaker 05: The stay of all proceedings, including entry of judgment, should be entered, respectfully submit, by this Court. [00:43:06] Speaker 03: Thank you. [00:43:07] Speaker 03: Thank you, Mr. Perry and Mr. Caldwell. [00:43:09] Speaker 03: That concludes the argument for Apple.