[00:00:08] Speaker 03:
Okay.

[00:00:09] Speaker 03:
The next argued case is number 15-1707, SmartFlash ILC against Samsung Electronics Company.

[00:00:17] Speaker 03:
Mr. Verhoeven.

[00:00:20] Speaker 01:
May I please record?

[00:00:23] Speaker 01:
Our case is similar to the case you just heard with the biggest difference being that Samsung and HT have not gone to trial.

[00:00:31] Speaker 01:
So, looking forward, Samsung and HTC have a huge burden in front of them

[00:00:37] Speaker 01:
They have to ship witnesses across the world to try the case.

[00:00:42] Speaker 01:
They have to organize witnesses.

[00:00:44] Speaker 01:
As we all know, a trial itself composes the largest expense of handling litigation at the district court level.

[00:00:54] Speaker 01:
Oftentimes, in fact, law firms give budgets all the way to pre-trial and have a whole separate budget for trial because it's so much more expensive, especially in a case of this magnitude.

[00:01:03] Speaker 02:
So, uh, when you're overlap cases, I mean, I know I'm, you know, Judge Gilschkep had four separate cases.

[00:01:11] Speaker 02:
He stayed two and didn't stay two.

[00:01:13] Speaker 02:
But with respect to the answer, aside from the fact that the trial is set for August, right?

[00:01:18] Speaker 02:
He said that you all had agreed that there were a lot of the questions that were decided in Apple that would apply.

[00:01:25] Speaker 01:
The court handled both cases together for many of the issues during the pretrial, but there had to be separate trials in this case under the AIA, Your Honor.

[00:01:36] Speaker 01:
So we were all set for the same dates.

[00:01:40] Speaker 01:
But what I was actually getting at, Your Honor, is the history relating to the filing of the CBM petitions.

[00:01:46] Speaker 01:
Samsung and HTC also moved to stay, along with Apple, and we represented that we would be bound by the results of Apple's petitions.

[00:01:58] Speaker 01:
And so we placed ourselves in that same position and told the court in May 14, 2015, before depositions,

[00:02:08] Speaker 01:
had started before expert... Those weren't 101.

[00:02:11] Speaker 01:
Those were not 101, but they were based on 102 and 103, Your Honor.

[00:02:17] Speaker 02:
I want to... One of the things I think... The motion before is only related to the 101.

[00:02:24] Speaker 01:
That's true, Your Honor, but as we all know, Alice wasn't decided until after those CBMs were filed, Your Honor.

[00:02:31] Speaker 01:
And I think it's telling that we, the Samsung HT defendants,

[00:02:36] Speaker 01:
We filed a motion for summary judgment of no willfulness.

[00:02:42] Speaker 01:
And in opposition, the plaintiff said that our 101 defense did not even pass the objectively reasonableness test.

[00:02:52] Speaker 01:
And the court agreed.

[00:02:55] Speaker 01:
And that was pre-allice.

[00:02:57] Speaker 01:
It said, pre-ALIS, you didn't even have an objectively reasonable basis to assert 101.

[00:03:03] Speaker 01:
And then the court's order denying the stay, we were taken to task for not including 101 in our CBNs pre-ALIS.

[00:03:11] Speaker 02:
I mean, that's all interesting background, but that's not what the issue is here.

[00:03:15] Speaker 02:
The issue is, as of these CBN reviews and these motions to stay,

[00:03:21] Speaker 02:
which are the only motions on appeal.

[00:03:25] Speaker 02:
What were the circumstances and whether a state is appropriate?

[00:03:28] Speaker 01:
Well, we filed those, we believe, reasonably diligent after the Alice decision, Your Honor.

[00:03:33] Speaker 01:
We did not file them on 101 before the Alice decision, and I agree with Mr. Perry that it wouldn't have been wise to do that while the Supreme Court was considering all of that.

[00:03:44] Speaker 01:
We were waiting to see what would happen.

[00:03:46] Speaker 01:
And once the decision came out, we had a lot of things going on.

[00:03:50] Speaker 01:
It takes a lot of work to prepare these CBMs.

[00:03:52] Speaker 01:
We were under deadlines from the district court.

[00:03:54] Speaker 01:
But we worked and got those on file in a few months, Your Honor.

[00:03:59] Speaker 01:
And I'll note that in the NFC case, Judge Bryson noted that seven months was not an unreasonable amount of time to take to prepare these things.

[00:04:07] Speaker 01:
So we tried to do that diligently.

[00:04:09] Speaker 02:
So let's go back to my original question.

[00:04:13] Speaker 02:
Yes, Your Honor.

[00:04:14] Speaker 02:
So there is a trial.

[00:04:16] Speaker 02:
I get that.

[00:04:17] Speaker 02:
August 3.

[00:04:19] Speaker 02:
So are you telling me that basically all the pre-trial rulings that apply to Apple apply to you all and that that's all done?

[00:04:27] Speaker 01:
No, we have a separate pre-trial, Your Honor.

[00:04:30] Speaker 01:
The pre-trial, they've separated the pre-trial stage.

[00:04:32] Speaker 01:
And so there are separate proceedings and those proceedings are largely done to be frank.

[00:04:40] Speaker 01:
We're still dealing with issues.

[00:04:43] Speaker 01:
the pre-trial issues you deal with as you're leading up to trial.

[00:04:46] Speaker 01:
What issues remain?

[00:04:49] Speaker 01:
What pre-trial issues remain?

[00:04:50] Speaker 01:
Well, we have a big issue because of the ruling on damages in the Apple case.

[00:04:54] Speaker 01:
And so we don't know yet.

[00:04:56] Speaker 01:
We're digesting that.

[00:04:57] Speaker 01:
But the same damages model, very similar damages model, not substantially different, is involved in our case.

[00:05:02] Speaker 01:
And the same answer that you heard from Mr. Perry applies to us on that.

[00:05:06] Speaker 01:
There may need to be a whole new redo by the plaintiffs, both sort of in their court, on damages because the ruling by the district court just a few days ago on that.

[00:05:18] Speaker 01:
So it's hard to say how much more will be done on that.

[00:05:20] Speaker 00:
Apart from damage.

[00:05:21] Speaker 01:
Apart from that, just evidentiary rulings and then the burden and expense of setting up a whole trial site down in Texas and flying out witnesses from Asia, Your Honor, which would be highly burdensome for us.

[00:05:34] Speaker 02:
So we are pretty much down to the trial and the evidentiary ruling could occur at trial?

[00:05:40] Speaker 01:
Pretty much, Your Honor.

[00:05:42] Speaker 01:
But that is a huge expense, maybe a third of a total expense.

[00:05:45] Speaker 02:
I'm not discounting that trial is important, I just want to know what we're talking about.

[00:05:48] Speaker 01:
I think it's important to remember that here all of the asserted claims have been found invalid, preliminarily, by the PTAB.

[00:05:57] Speaker 01:
And the PTAB, as Mr. Perry said, since Alice, has been remarkably consistent, 100% of the time.

[00:06:04] Speaker 01:
And I think that's because the standard to initiate is very similar to the ultimate standard.

[00:06:10] Speaker 01:
It's not a substantial new question or whatnot.

[00:06:12] Speaker 01:
You have to be more likely than not.

[00:06:14] Speaker 01:
And you'll see that it's hard, if you look at, there's a lot of denials of institutions.

[00:06:19] Speaker 01:
So people are taking their best shot, taking a lot of time to prepare really good petitions, Your Honor.

[00:06:26] Speaker 01:
But once those petitions are granted, 100% of the time after Alice, those have been followed through and finaled.

[00:06:33] Speaker 01:
And if you look at Factors 1 and 4, there's just no question that in the Samsung HTC case, it will simplify the issues.

[00:06:42] Speaker 01:
It'll make the case go away entirely.

[00:06:45] Speaker 02:
We can't just ignore factor two.

[00:06:47] Speaker 02:
No, we can't.

[00:06:48] Speaker 02:
Congress didn't assume that just because CBM is granted, there would always be a stay, because it didn't say that.

[00:06:56] Speaker 02:
I mean, yes, it's clear that Congress contemplated that in most cases there would be a stay.

[00:07:02] Speaker 02:
But it didn't say there would always be a stay.

[00:07:04] Speaker 02:
And one of the factors we're supposed to look at is how far down the road have we gone?

[00:07:08] Speaker 02:
And like, is discovery completed?

[00:07:11] Speaker 02:
Is trial set?

[00:07:11] Speaker 02:
And in your case, both of those things are true.

[00:07:14] Speaker 01:
I think if you look at virtual agility in the Versada case, in both those cases... Are you citing the vacated Versada?

[00:07:20] Speaker 02:
Yes, I am, Your Honor.

[00:07:21] Speaker 02:
I don't think you can cite a vacated Versada.

[00:07:23] Speaker 01:
I was just going to reference the analysis that the court went through.

[00:07:26] Speaker 01:
I acknowledge it's not binding precedent, but the panel did think it was issuing a binding.

[00:07:32] Speaker 01:
My understanding is they were informed that there was a settlement, and that's why it was vacated afterwards.

[00:07:37] Speaker 01:
But just looking at virtual agility then, the court looked and there was an argument, when do you measure under prong two?

[00:07:45] Speaker 01:
And the court said you look to when the motion to stay was filed.

[00:07:49] Speaker 01:
Now here, unlike virtual agility, I'll admit your honor, that that ground, specific ground of 101 wasn't in the first round of CBNs.

[00:07:58] Speaker 01:
That's because Alex hadn't been decided yet.

[00:08:00] Speaker 01:
If Alex had been decided, there's no question that we would have included that in our CBNs.

[00:08:06] Speaker 01:
It's not like we chose to ignore Alice.

[00:08:08] Speaker 02:
OK, so we're talking about the spring, right?

[00:08:11] Speaker 02:
So I mean, you're getting back into the equities.

[00:08:14] Speaker 02:
I understand there were some equitable issues that the court had.

[00:08:17] Speaker 01:
I'm getting the second prong in whether there's a tactical advantage, Your Honor.

[00:08:21] Speaker 02:
That's the fourth prong.

[00:08:22] Speaker 02:
So let's talk about the second prong.

[00:08:24] Speaker 01:
OK, Your Honor.

[00:08:26] Speaker 01:
Well, Your Honor, Alice comes out.

[00:08:31] Speaker 01:
We didn't choose when it came out.

[00:08:33] Speaker 01:
We acted diligently after it came out to file these.

[00:08:37] Speaker 01:
And there's absolutely no question, Your Honor, that going forward, this would simplify the issues.

[00:08:42] Speaker 01:
A trial will cost millions of dollars.

[00:08:44] Speaker 01:
Two trials, both apples and ours, they have to retry on damages.

[00:08:49] Speaker 01:
It's clear that it would be more efficient to proceed as Congress intended.

[00:08:54] Speaker 01:
But once these things are instituted, going with the patent office on a single issue at a fraction of the cost, you won't have to litigate all these other issues.

[00:09:03] Speaker 01:
The plaintiff here is an NPE.

[00:09:06] Speaker 01:
The district court found, and it really can't be disputed, this is about money.

[00:09:10] Speaker 01:
So if they wait a little bit longer to get their money, if they're going to prevail, there's no prejudice there.

[00:09:16] Speaker 01:
I don't think it's fair to take Apple, Samsung, or HT to task.

[00:09:20] Speaker 01:
for not anticipating that Alice would come out and predicting it and filing M101 earlier.

[00:09:28] Speaker 01:
We did it reasonably soon after it came out.

[00:09:32] Speaker 01:
And there's no evidence that there's any tactical advantage here that we were seeking.

[00:09:37] Speaker 01:
We were simply exercising our rights to file petitions.

[00:09:41] Speaker 01:
We asked to stay.

[00:09:42] Speaker 01:
The court said we couldn't stay.

[00:09:44] Speaker 01:
And so the result was parallel proceedings.

[00:09:46] Speaker 01:
We didn't choose parallel proceedings.

[00:09:48] Speaker 01:
We asked the court in May 14th after the petitions got filed to just do one... My problem is that you only want to talk about one factor.

[00:09:57] Speaker 02:
It's tactical advantage.

[00:09:59] Speaker 02:
And I understand that there's an equitable overlay, but there's three other factors.

[00:10:03] Speaker 02:
And so can we talk about those?

[00:10:05] Speaker 01:
Yes, Your Honor.

[00:10:07] Speaker 01:
So simplification of the issues.

[00:10:09] Speaker 01:
going forward.

[00:10:10] Speaker 01:
As the cases have said, when you have a 101 grant and all the claims, it's the ultimate simplification of the issues, Your Honor.

[00:10:18] Speaker 01:
So I would submit simplification of the issues.

[00:10:20] Speaker 01:
And factor one is completely met, and that it was air for the district court to find that it wasn't.

[00:10:26] Speaker 01:
The fourth factor as well, the harm or the prejudice going forward, the harm going forward, will this reduce the burden?

[00:10:35] Speaker 01:
Clearly, there's just no question it would reduce the burden.

[00:10:37] Speaker 01:
So those two are easy questions, Your Honor, and prejudice to the non-movement, non-petitioner.

[00:10:45] Speaker 01:
Here, the district court found no prejudice.

[00:10:47] Speaker 01:
The court found that we were seeking a tactical advantage, but the only thing the court pointed to is timing the filings of things, and we have explanations for that.

[00:10:56] Speaker 01:
Alice came out later, Your Honor.

[00:10:58] Speaker 01:
We weren't acting in a way to try to hijack the system in any way.

[00:11:01] Speaker 02:
I know you don't want to throw Mr. Perry and Ms.

[00:11:04] Speaker 02:
Klein under the bus, but is there enough of a distinction between Apple circumstances and Samsung circumstances to possibly justify a different result?

[00:11:16] Speaker 01:
In all honesty, Your Honor, before the ruling on the new trial and damages, I think that would say there was a distinction, enough of a distinction.

[00:11:23] Speaker 01:
But they are now facing a large trial, too.

[00:11:26] Speaker 01:
And it really tilts the balance when you look at factor one and factor in the burden going forward for them.

[00:11:36] Speaker 01:
But for us, there's no question.

[00:11:37] Speaker 01:
We have a full-on trial.

[00:11:39] Speaker 01:
And we have to take a...

[00:11:41] Speaker 01:
The verdict in this case is substantial, Your Honor.

[00:11:45] Speaker 01:
We're taking it very seriously.

[00:11:47] Speaker 02:
How much trial time does the court have?

[00:11:49] Speaker 01:
We usually get about 12 to 14 hours per side.

[00:11:52] Speaker 01:
It hasn't been decided yet.

[00:11:53] Speaker 01:
But the trials are six to seven days.

[00:11:55] Speaker 01:
We're going to ask for a little bit more time because we have foreign language defendants.

[00:11:58] Speaker 01:
We'll have to use translators and we have more accused products than in the Apple case, Your Honor.

[00:12:03] Speaker 01:
So those things haven't been resolved yet by the district court.

[00:12:09] Speaker 01:
So I'm eating into my rebuttal time.

[00:12:12] Speaker 01:
Unless there's any other questions, I'll suggest.

[00:12:13] Speaker 03:
We'll take your rebuttal time, Mr. Breaux.

[00:12:15] Speaker 03:
Thank you.

[00:12:21] Speaker 03:
Thank you.

[00:12:21] Speaker 03:
Mr. Caldwell?

[00:12:22] Speaker 00:
Your Honor, may I take a second to refill my water?

[00:12:28] Speaker 00:
Thank you.

[00:12:28] Speaker 00:
May it please the court?

[00:12:33] Speaker 00:
Samsung, in this case, did seek a tactical advantage despite what

[00:12:37] Speaker 00:
the court has just heard, and something I'd like to clarify.

[00:12:42] Speaker 00:
You heard that Samsung moved for a stay back in May of 2014 based on Apple's non-section 101 CBN petition.

[00:12:52] Speaker 00:
Your Honor, what you didn't hear is that what Samsung actually moved for in that instance was that they would be bound by the outcome of Apple's CBNs only if

[00:13:04] Speaker 00:
the court granted their stay that was contingent upon the court granting Apple's stay.

[00:13:10] Speaker 00:
Samsung wanted no part of actually being found as collaboratively as stopped and signing on to Apple's CBMs if possible.

[00:13:16] Speaker 00:
Instead, they waited until the very end, right up against the deadline for when the patent office would have to give a go or no-go decision on Apple's first DVM before Samsung filed its own.

[00:13:28] Speaker 03:
What was wrong with that?

[00:13:30] Speaker 00:
Well, what happened was they were certainly aware of all the same prior art that Apple was.

[00:13:35] Speaker 00:
They had already done their invalidity contentions in the case.

[00:13:39] Speaker 00:
They had done them well before.

[00:13:41] Speaker 00:
They knew all their prior art.

[00:13:42] Speaker 00:
They could have filed timely.

[00:13:44] Speaker 00:
Instead, what Samsung actually chose to do

[00:13:46] Speaker 00:
was to make sure in the event Apple's initial 102 and 103 CBM petitions were denied that there'd be something still pending, some sort of CBM that's still pending that they could claim to use as a basis for a stay or whatever.

[00:14:03] Speaker 03:
You're saying they shouldn't have done that?

[00:14:05] Speaker 00:
Your Honor, I'm saying looking at the factors that we have when we're analyzing a stay, certainly they're not barred since there's not a time bar.

[00:14:13] Speaker 00:
What I'm saying is the factors absolutely contemplate that you try to invoke the process early as an alternative to litigation.

[00:14:24] Speaker 00:
You don't try to seek a tactical advantage waiting until the last

[00:14:27] Speaker 02:
I would think if you've got multiple defendants that there must be a dance among the defendants because you don't want to be the first one to jump on a TVM because then you're not stuck with the estoppel, but you could end up getting the benefit of the patent being wiped out.

[00:14:41] Speaker 00:
Well, and I would suggest that if instead of trying to invoke the system timely to avoid litigation expense,

[00:14:50] Speaker 00:
you're ensuring that you're driving down two expensive parallel highways at some point in this case.

[00:14:54] Speaker 00:
You're not actually availing yourself of the intended purpose of the CBMs to try and minimize expense.

[00:15:00] Speaker 00:
If what you do is try to do this tactical dance, you go first, we'll go second.

[00:15:06] Speaker 00:
And what we've seen from the Joint Defense Group here is that we're now, this dance has gotten us up to 48 CBMs.

[00:15:10] Speaker 03:
Well, then as your reasoning that the court should have stayed Samson, even if they didn't stay Apple.

[00:15:17] Speaker 00:
I'm sorry, Your Honor.

[00:15:18] Speaker 03:
On the reasoning, you're talking about the equities and the commitment and the investments.

[00:15:23] Speaker 03:
So on your reasoning, the court should have...

[00:15:25] Speaker 03:
agreed to a stay for Samsung, whether or not they did so for Apple.

[00:15:30] Speaker 00:
No, absolutely not.

[00:15:32] Speaker 00:
I think what happened actually is Samsung could have raised the 101 petition, but they certainly could have raised the 102s and 103s as well.

[00:15:40] Speaker 03:
You're saying that if they had raised it, then they would have been entitled to a stay?

[00:15:44] Speaker 00:
Well, what I'm saying is, similar to with Apple, both of these defendants, both Apple and Samsung, have told the court

[00:15:51] Speaker 00:
they knew of their 101 defense as of their answer and they should have moved it timely and then when analyzing the factors carefully as Judge Bielstraat did, he may have come to a different result.

[00:16:03] Speaker 00:
If it appeared that the stay or denial thereof would simplify the issues of question and streamline trial and factor two just came up in the argument there under the subject of some discussion.

[00:16:13] Speaker 00:
I think it's important not to lose sight of the fact that what factor two says, whether discovery is complete and whether a trial date has been set.

[00:16:22] Speaker 00:
Plainly, by the language of that factor, even when a court is weighing whether or not to grant a stay, you're envisioning that the trial is sometime in the future and you're looking at issues like, have we done our discovery?

[00:16:35] Speaker 00:
Have we incurred that expense already?

[00:16:37] Speaker 00:
But then also, has the trial even been set?

[00:16:40] Speaker 00:
And at this point, by the time that the parties moved for stay, we were months after what had been the trial date setting since the beginning of this case, which is January of 2015.

[00:16:50] Speaker 00:
And both cases proceeded towards that, even having combined pretrials and everything.

[00:16:56] Speaker 00:
And I believe that it's the defendants, both Samsung and Apple, who tactically chose to wait.

[00:17:03] Speaker 00:
In Samsung's case, they waited not only on the 101s, but they waited on

[00:17:07] Speaker 00:
invalidity based on anticipation and obviousness as well.

[00:17:11] Speaker 00:
They waited very, very late in the process to guarantee that running alongside their petitions for CBN, they were actually moving for summary judgment of invalidity based on anticipation and obviousness and tracking that in the district court.

[00:17:27] Speaker 00:
writing those briefs at essentially the time they were filing their petitions for CBN on 102, 103, and 101.

[00:17:35] Speaker 00:
And that made it essentially impossible to gain the efficiencies that were envisioned by the CBN provisions.

[00:17:44] Speaker 02:
How much time did the trial court allot for the damages retrial?

[00:17:49] Speaker 00:
He's not set a number of hours for the damages retrial yet.

[00:17:53] Speaker 00:
I know you asked about the length of trial.

[00:17:55] Speaker 00:
I don't know if you're curious about what it was in the actual trial that's already taken place on that, but he hasn't set a number of hours per side.

[00:18:03] Speaker 02:
What was it?

[00:18:03] Speaker 00:
Five days?

[00:18:04] Speaker 00:
Six days?

[00:18:04] Speaker 00:
It ended up being a Monday, Tuesday, Wednesday, Thursday, Monday, Tuesday.

[00:18:09] Speaker 00:
I think the evidence ran through five full business days, and then I want to say arguing the charge and instructions ended up being on the sixth day.

[00:18:21] Speaker 00:
So Mr. Verhoeven makes the point that all claims that are at issue have been found preliminarily invalid in the PTAB proceedings.

[00:18:33] Speaker 00:
They haven't been found preliminary invalid.

[00:18:35] Speaker 00:
They have decided to institute based on their standard.

[00:18:38] Speaker 00:
But the thing I think we're forgetting is this 101 question is a question of law.

[00:18:43] Speaker 00:
Judge Gilstrap and the Matt Strait working with Judge Gilstrap have both looked at it and determined that these claims are claiming patentable subject matter and Apple, I realize we're in the same time appeal, but just so the court's aware, Apple asked the court to revisit that post trial and

[00:19:03] Speaker 00:
and we got an order yesterday indicating that the court won't.

[00:19:06] Speaker 00:
We actually have in this case a final ruling from Judge Gilstrap that he found the various claims to be patent eligible subject matter.

[00:19:16] Speaker 00:
So looking only at the factor that the Patent Tribal Appeals Board has decided to institute

[00:19:22] Speaker 02:
But it is true that, like the Supreme Court cases, the odds are they're going to reverse.

[00:19:30] Speaker 02:
If the GCAP takes it, at least statistically so far, the odds are that they're going to find the patent to be in that.

[00:19:38] Speaker 00:
I think the statistics would show that they have done that, but I think if the natural result of that, if I'm understanding it correctly, would be basically to assume you have an automatic stay once they institute, because despite the difference in the standard of institution versus the standard of actually concluding that the claims are invalid, if what we were going to do is just say,

[00:20:01] Speaker 00:
a decision institute is tantamount to a final decision that these are invalid, well, then we'd look at the factors entirely differently.

[00:20:08] Speaker 00:
But that's not what the factors say.

[00:20:11] Speaker 00:
And it wouldn't be just to look and say, well, in the past on other claims and other patents, the patent office hasn't validated once they've instituted CBMs.

[00:20:22] Speaker 00:
Therefore, we should stay in this case.

[00:20:24] Speaker 00:
I don't think that would be appropriate at all.

[00:20:26] Speaker 00:
In this instance, it's not like in virtual agility,

[00:20:31] Speaker 00:
where this court suggested that the district court, it's not the district court's job to engage in some collateral attack of the decision to institute via the Patent Trial and Appeal Board and say, well, listen, I'm not going to stay you because I've looked back at why they instituted and I think they were wrong.

[00:20:52] Speaker 00:
And that's not at all what Judge Gilstrap did here.

[00:20:54] Speaker 00:
What he did is that the defendant's urging, they asked him to rule on section 101, the question of law, as it came up in the case when they filed a motion for summary judgment.

[00:21:06] Speaker 00:
And he did.

[00:21:06] Speaker 00:
He already had that ruling determining that these claims do cover patentable subject matter well before their request for a stay was ever on file.

[00:21:17] Speaker 00:
And the fact that he had gone through that exercise and had the one trial we've already talked about,

[00:21:22] Speaker 00:
was necessitated based on how late it was that the defendants waited to request Patent Trial and Appeal Board's review under 101.

[00:21:30] Speaker 00:
I would like to point out to the court, I think it's clear in the briefs, but Samson has, although they're here telling you today, it would have been unreasonable or irresponsible for us to have moved on 101 with the Patent Trial and Appeal Board until Alice.

[00:21:51] Speaker 00:
The Supreme Court affirmed Alice.

[00:21:53] Speaker 00:
And as the court recognized, I believe Judge O'Malley was observing, that these arguments related to patentable subject matter were being raised in virtually every case, especially anything that has anything to do with computers and some parts of it are implemented through code.

[00:22:07] Speaker 00:
They were being raised in all these cases.

[00:22:09] Speaker 00:
This wasn't a shock that there were continuing to be developments in this area of the law.

[00:22:14] Speaker 00:
And the defendants pledged it.

[00:22:15] Speaker 00:
Samsung and HTC, they pledged it in their answer.

[00:22:18] Speaker 00:
And in defense to Samsung, the allegations that Samsung's infringement was willful, they told the court, we've always had this one-on-one defense.

[00:22:26] Speaker 00:
We had that since the very, very beginning.

[00:22:28] Speaker 02:
But in fairness, you know the Supreme Court is about to rule.

[00:22:31] Speaker 02:
There's only so much time left in which the Supreme Court had to rule during that term.

[00:22:36] Speaker 02:
And so why not wait to see what the law of the land is really going to be?

[00:22:40] Speaker 00:
Well, to get to the point where you know that the Supreme Court's about to rule, you've already waited until this case has been proceeding for over a year.

[00:22:53] Speaker 00:
So I agree with you that at some point they could say, well, it's bound to be imminent any day they will get this ruling.

[00:23:02] Speaker 00:
CBM petitions were always an option to Sam Son and the other parties in these cases, given the timing of the filing of this case.

[00:23:11] Speaker 00:
And they could have raised it at any time, particularly since they, more than a year or approximately a year before the Alice opinion came out, they were already contending they had a 101 defense to these claims.

[00:23:20] Speaker 00:
They could have raised it at any time.

[00:23:22] Speaker 00:
And I've heard the argument that it would have been irresponsible to file the CBM before.

[00:23:28] Speaker 00:
But I'm having trouble understanding what that is supposed to mean.

[00:23:32] Speaker 00:
I say that because statutory estoppel and covered business method reviews only attach based on proceedings that are instituted, on the issues on which they're instituted.

[00:23:46] Speaker 00:
So if it is Samsung's contention, they always had these 101 defenses, but they wanted to wait around for a year or so to see if they got more clarity from the Supreme Court, and not doing so would be irresponsible.

[00:24:01] Speaker 00:
How?

[00:24:03] Speaker 00:
There wouldn't have been statutory estoppel, and if they already believed in it, they should have filed earlier.

[00:24:09] Speaker 00:
And one thing that we know,

[00:24:11] Speaker 00:
These parties are not reluctant in the slightest to file serial CBMs against these patents.

[00:24:22] Speaker 00:
Mr. Verhoeven observed to the district court in a hearing that that's one of the great things about the CBM.

[00:24:26] Speaker 00:
If they kick you out, you can just rejigger your application and file it again.

[00:24:32] Speaker 00:
And so to base now that, well, we were justified in... Well, from a defendant's standpoint, that's true, right?

[00:24:39] Speaker 00:
Well, these defendants certainly believe that's true.

[00:24:43] Speaker 00:
And what's happening as a result is any potential efficiencies that could be gained by using CBM proceedings as an alternative to litigation are being absolutely... There are a lot of problems with how these proceedings work.

[00:24:59] Speaker 02:
But we have to just look at what Congress gave us, not whether it's going the way Congress anticipated.

[00:25:08] Speaker 00:
I think that's right, however, I also hear the other side arguing, well, we've got to look at congressional intent.

[00:25:17] Speaker 00:
And although the factors absolutely do not say a stay is automatic and you should automatically enter a stay, although the factors don't say that, you should, because what they really meant was CBMs should be used to make the decision in the first instance.

[00:25:34] Speaker 03:
What they really meant was to move these decisions

[00:25:37] Speaker 03:
from the courts to the patent office.

[00:25:39] Speaker 03:
And that's what we're being asked to do.

[00:25:43] Speaker 00:
Well, I think what Congress intended, my understanding of what Congress intended is not that district courts can never decide these issues.

[00:25:51] Speaker 00:
I think if that were the case, the statutory factors would say so.

[00:25:55] Speaker 03:
Well, they'd have a constitutional problem, so they went as far as they could.

[00:25:59] Speaker 00:
I agree with you.

[00:26:00] Speaker 00:
That would be a constitutional problem.

[00:26:02] Speaker 00:
But even so, I'm not sure that they went as far as they could because these factors

[00:26:07] Speaker 00:
give criteria by which the district court and this court can look at the issues on the stay.

[00:26:14] Speaker 00:
And I agree with some of the implications of some questions from Judge O'Malley.

[00:26:19] Speaker 00:
We can't just stop and focus on one factor.

[00:26:23] Speaker 00:
There are several of them.

[00:26:24] Speaker 00:
And that's why the district court's opinion, which is very thorough and carefully weighed each of these factors, found none of them supported

[00:26:31] Speaker 00:
a stay for these parties.

[00:26:32] Speaker 03:
But doesn't this give them at least a stronger, equitable position than Apple, for example, because they haven't had the trial?

[00:26:41] Speaker 00:
I think if you were to put the equities for Apple and the equities for Samsung on the scales of justice, and you envision that a feather is going to make it tilt one way or the other, I do believe the implication of what you're saying is absolutely right.

[00:26:56] Speaker 00:
It's got to be stronger in Apple because more has been done.

[00:27:01] Speaker 00:
That said, I don't think that either one of them in these circumstances results in you granting a stay, that being the appropriate outcome, excuse me, granting a stay being the appropriate outcome.

[00:27:14] Speaker 00:
I don't think that's appropriate.

[00:27:16] Speaker 00:
I think actually by reference, if we're going to compare the factual situations of different cases, let's look at the broader picture of Apple, Samsung, and Google, and Amazon.

[00:27:28] Speaker 00:
Google and Amazon, even though they hadn't even filed CBMs.

[00:27:34] Speaker 00:
But what the district court did, trying to diligently follow the law, actually told them, guys, if you're going to contend that you need to stay because of the overlapping issues and the fact that there are CBMs that are instituted, you guys need to move now.

[00:27:50] Speaker 00:
That order came out in the Amazon and Google case and got in all of this evidence.

[00:27:54] Speaker 00:
and decided that based on the four factors that we have in the AIA, that Amazon and Google should be stayed.

[00:28:00] Speaker 00:
But when carefully weighing those four factors, Judge Gilstrap concluded that in the case of Samsung, and I think even slightly more so in the case of Apple, these factors do not weigh in favor of a stay.

[00:28:14] Speaker 02:
Putting aside the CBM, wouldn't it make some sense, given that there's supposedly such an overlap between the issues in Apple and the issues in Samsung,

[00:28:24] Speaker 02:
stay at a Samsung trial pending an appeal in Apple?

[00:28:28] Speaker 00:
Well, I think that that outcome makes more sense than staying pending the CBMs where we take a decision that has merely been instituted and essentially start that challenge all over again.

[00:28:41] Speaker 00:
I do think it makes more sense than that.

[00:28:43] Speaker 02:
But that was never suggested to the judge?

[00:28:45] Speaker 00:
Well, I believe actually, I could be wrong about this.

[00:28:49] Speaker 00:
I don't mean to misquote something.

[00:28:50] Speaker 00:
I believe one thing that we presented to the judge in our papers were we don't believe any state should be granted.

[00:28:56] Speaker 00:
However, if they say we're granted in any of the non-Apple cases, it would certainly make more sense

[00:29:05] Speaker 00:
to get the application packaged up and sent to this court because the 101 issue is a question of law that can be reviewed coming out of the district court.

[00:29:16] Speaker 00:
It can be reviewed here.

[00:29:17] Speaker 00:
We did, I believe, suggest that that actually would make more sense than putting all of the very advanced district court proceedings on hold in order to essentially start the process over again through the patent trial and appeal board.

[00:29:32] Speaker 03:
Okay, any more questions?

[00:29:34] Speaker 03:
Any more questions?

[00:29:36] Speaker 03:
Thank you, Mr. Caldwell.

[00:29:38] Speaker 03:
And you have your rebuttal time.

[00:29:44] Speaker 01:
Well, I can say, Your Honor, that we're willing to have a stay pending the Apple appeal.

[00:29:51] Speaker 01:
Just for the record, I do believe we argued, we mentioned that to the district court.

[00:29:55] Speaker 01:
It wasn't a formal basis for a motion to stay, but as part of our reasons for doing so, we also mentioned

[00:30:01] Speaker 01:
the Apple appeal and the fact that you raised, Your Honor.

[00:30:07] Speaker 02:
Quickly... This is outside the record, so if you don't feel comfortable answering it, you don't have to, but are the infringement defenses substantially different between Apple and Samsung?

[00:30:19] Speaker 01:
Well, there's different acute technologies, yes.

[00:30:22] Speaker 01:
In our case, unlike the Apple case, there's three separate different accused technologies.

[00:30:28] Speaker 01:
So it's a lot more work we're going to have to do.

[00:30:30] Speaker 01:
I believe they only had one accused technology.

[00:30:33] Speaker 01:
So we have three different independent systems that we're going to have to defend.

[00:30:37] Speaker 03:
But aren't the patents the same?

[00:30:39] Speaker 03:
Make sure I understand.

[00:30:40] Speaker 03:
They're the same patents, isn't that right?

[00:30:43] Speaker 01:
They're the same patents, I believe, yes.

[00:30:45] Speaker 01:
But they might be different.

[00:30:46] Speaker 01:
In fact, they are different asserted claims.

[00:30:48] Speaker 01:
And I'm not sure exactly why.

[00:30:52] Speaker 01:
The plaintiff smart flash dropped from our case all of the claims at issue in the Apple case, but asserted other claims from all the same patents.

[00:31:02] Speaker 01:
So we have different claims from the Apple case intentionally by their election after they got diverted.

[00:31:08] Speaker 01:
But the patents are the same.

[00:31:11] Speaker 01:
And the claims are basically the same.

[00:31:13] Speaker 01:
They just pick different claims within the same patents, Your Honor.

[00:31:16] Speaker 01:
But the technologies are different.

[00:31:20] Speaker 01:
There's three different technologies.

[00:31:22] Speaker 01:
There's one for HTC.

[00:31:23] Speaker 01:
There's one for SmartFlash.

[00:31:24] Speaker 03:
I want to be sure I understand.

[00:31:26] Speaker 03:
I thought the claims they dropped were the ones that had been invalidated by the PTAB.

[00:31:35] Speaker 01:
After the SmartFlash verdict, SmartFlash indicated that they were dropping the claims they went to trial on against Apple in the SmartFlash case.

[00:31:46] Speaker 01:
And were instead relying on other claims against us

[00:31:49] Speaker 01:
from the same patents, but not the claims that tried in the Apple case.

[00:31:56] Speaker 01:
I can speculate as to why they did that.

[00:31:58] Speaker 01:
Your Honors can speculate as to why they did that, but that's what happened.

[00:32:02] Speaker 02:
That's okay, Your Honor.

[00:32:05] Speaker 01:
Council tried to suggest that we're somehow nefarious in our timing of filing these, and I've already argued this a little bit, but

[00:32:14] Speaker 01:
There was no, okay, Apple, you do something and then we'll take turns doing something else.

[00:32:18] Speaker 01:
We joined Apple's CBMs.

[00:32:21] Speaker 01:
And it doesn't make sense to inundate the Patent Office if you have five defendants with similar invalidity defenses or ineligibility defenses to all file.

[00:32:35] Speaker 01:
It makes sense to have one file and then you can join, tell the court you'll be bound by it if it stays.

[00:32:40] Speaker 01:
And that's what we did, Your Honor.

[00:32:44] Speaker 01:
We didn't sort of tag team the plaintiff here by any means.

[00:32:49] Speaker 01:
We joined in there 102 and 103 reasons.

[00:32:53] Speaker 01:
We didn't have what we thought was a weaning 101 that we wanted to spend the money and go into before Atlas.

[00:33:01] Speaker 01:
Plus, we were waiting to see what was going to happen.

[00:33:03] Speaker 01:
in the Alice case.

[00:33:05] Speaker 01:
And so when Alice changed the law, in our view, then we proceeded with due diligence to get these giant submissions together that relied on 101.

[00:33:15] Speaker 01:
And one of the things, Judge O'Malley, that I neglected to ask when we were debating whether you should measure, where you should measure the status of the case, the stage of the case, is that, in fact, our state is based for one of the asserted patents on CBMs filed in the very first Apple CBM.

[00:33:33] Speaker 01:
So it does relate back as to one of the asserted patents here.

[00:33:37] Speaker 01:
That's not 101.

[00:33:38] Speaker 01:
That's based on other grounds.

[00:33:41] Speaker 01:
But that's still a lot, and that's still going forward in the CBM.

[00:33:48] Speaker 01:
on that, Your Honor.

[00:33:49] Speaker 02:
So, and my point is... At the same time that the 101 for instance?

[00:33:53] Speaker 01:
No, it was on a separate track.

[00:33:54] Speaker 01:
Was it at the same time?

[00:33:57] Speaker 01:
It was earlier on a separate track, but it's still proceeding.

[00:33:59] Speaker 01:
It was denied on their other grounds.

[00:34:01] Speaker 01:
It wasn't instituted.

[00:34:03] Speaker 02:
But you didn't renew your motion at the time of the institution.

[00:34:06] Speaker 01:
No, well, because we wanted to wait and... The judge indicated... I'm not asking why.

[00:34:12] Speaker 01:
Well, the judge indicated to us when he denied our preliminary stay

[00:34:15] Speaker 01:
It was very clear from his order that he wasn't going to grant anything unless there's an institution.

[00:34:20] Speaker 01:
And so we waited until we felt that we had good evidence that this is going to institute in a way that would kill the whole case at the PCO or likely be a good thing.

[00:34:30] Speaker 01:
And once that happened, we moved within days to stay.

[00:34:34] Speaker 01:
Once we got the institution on.

[00:34:37] Speaker 01:
Yes, Your Honor.

[00:34:38] Speaker 01:
But not on the other one because that's one of five patents.

[00:34:41] Speaker 01:
And so, you know, we knew what would happen if we'd moved to stay then.

[00:34:44] Speaker 01:
So we waited until we had a good argument.

[00:34:47] Speaker 01:
And we didn't delay.

[00:34:51] Speaker 01:
Alice came out.

[00:34:52] Speaker 01:
And we acted reasonably diligently.

[00:34:53] Speaker 01:
We have lots of moving parts when we have these cases going along in peril.

[00:34:57] Speaker 01:
We had deadlines from the district court we had to deal with.

[00:35:00] Speaker 01:
So it did take us a few months to get those on file.

[00:35:04] Speaker 01:
And we serially filed them.

[00:35:05] Speaker 01:
We didn't wait and file them all.

[00:35:06] Speaker 01:
We filed the first one as soon as we finished it.

[00:35:08] Speaker 01:
We filed the next one as soon as we finished it.

[00:35:10] Speaker 01:
And then as soon as they instituted, they instituted on, I think, four.

[00:35:13] Speaker 01:
And within a couple of weeks, I think, we filed, or even a couple of days, we filed our motion to stay.

[00:35:20] Speaker 01:
So this is not a situation where we sought a tactical advantage.

[00:35:24] Speaker 01:
And to answer the question, we're not taking the position that stays automatic here.

[00:35:29] Speaker 01:
We agree with Apple's counsel.

[00:35:32] Speaker 01:
In rare circumstances, it shouldn't happen.

[00:35:35] Speaker 01:
In those circumstances, for example, if you have irreparable injury because it's competitor on competitor and a delay will cause a big problem.

[00:35:41] Speaker 01:
If you have a situation, Judge O'Malley, like only one of the five patents was instituted on.

[00:35:47] Speaker 01:
Well then, that's a different situation than us.

[00:35:49] Speaker 01:
Here, all assertive claims have been instituted.

[00:35:53] Speaker 01:
And we know the track record.

[00:35:55] Speaker 01:
And it's just no question that Congress intended in this situation, the PDO to handle this and not the district courts.

[00:36:04] Speaker 01:
And we suggest then that Your Honor should reverse the district court and stand the case.

[00:36:10] Speaker 03:
Thank you, Mr. Verhoeven and Mr. Caldwell.

[00:36:12] Speaker 03:
The case is taken under submission.

[00:36:14] Speaker 03:
That concludes the arguments for this afternoon.