[00:00:00] Speaker 01:
The next case for argument is 14-1205, Sukumar versus Nautilus.

[00:00:10] Speaker 01:
Take your time.

[00:00:10] Speaker 01:
Get ready.

[00:00:30] Speaker 04:
Go ahead.

[00:00:35] Speaker 04:
Thank you, Your Honor, and may it please the Court.

[00:00:37] Speaker 04:
The district court summary judgment ruling for Nautilus rests not only on a misreading of the amended false marking statute in state law, but also on credibility determinations that invaded the province of the jury and adverse evidentiary inferences drawn in the movement's favor.

[00:00:53] Speaker 04:
Nautilus admits to engaging in false marking repeatedly and knowingly.

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The machines here were falsely marked

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with 16 to 24 pens.

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In plaintiff's evidence, corroborated by not one but two former Nautilus employees, Frank Smith and Jeff Turner, showed that plaintiffs were deceived by this false marking, leading them to make some major outlays of cash.

[00:01:15] Speaker 01:
So is the central issue in this case whether or not you qualify as a competitive injury under the new statute?

[00:01:21] Speaker 04:
That's certainly part of the issue, yes, Your Honor.

[00:01:23] Speaker 01:
So you're saying that, and that boils down to whether or not

[00:01:28] Speaker 01:
competitive injury requires that you have been an active competitor at the time, right?

[00:01:33] Speaker 04:
In part, yes.

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Nautilus's position is that you must be a quote-unquote true competitor already on the market to establish a competitive injury under the statute.

[00:01:43] Speaker 01:
How would you define what

[00:01:45] Speaker 01:
parameters are with respect to competitive injury.

[00:01:48] Speaker 04:
We think the statute clearly protects both actual on the market competitors and potential competitors.

[00:01:54] Speaker 01:
Can you give me a little more in terms of potential competitors because one could construe that broadly as being anybody who ever thought about maybe doing something in this market.

[00:02:03] Speaker 00:
Sure.

[00:02:03] Speaker 01:
I know you don't mean that.

[00:02:05] Speaker 01:
I mean, the difficulty about these tests are that they create confusion and lack of predictability out there in the marketplace if we're not precise.

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So I want you to be as precise as you can in terms of what's required.

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And here's how you should be precise.

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You should require an intent to compete, and you should require an ability to compete.

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And here you have extensive objective indicia of both.

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If you look, for example, at what happened over the past several years, you have

[00:02:33] Speaker 04:
money spent seeking licenses on patents.

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You have money spent investigating the validity of Nautilus' patents.

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You have money spent designing prototypes to work around patents that were falsely marked.

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You have money spent to buy other product lines.

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Do you have a contract to sell any of the products?

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A contract to sell products that the plaintiffs intended to make.

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That you intended to sell?

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No, they haven't reached the point of manufacture, Your Honor.

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But we think to limit Section 292 to folks who are actually already competing would essentially grant immunity to the most effective false markers for keeping people completely out of the market.

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If you look at what the text of the statute says, it doesn't say a competitor has standing to assert an injury.

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It says a person has standing to assert a competitive injury.

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Now, why did Congress say it that way?

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They wanted to distinguish between people who were legitimately trying to get on the market and people who were consumers, who might have had an actual injury but not a competitive one.

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Why wouldn't Congress not have said, expressly said, potential competitors or those who think to compete?

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Your Honor, the very idea of a competitive injury, it's a concept that's common in the antitrust law.

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And it's a concept, the whole idea is that you're protecting the competitive process.

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And so you can have actions like the actions here, repeated, knowing false marking.

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16 to 24 falsely marked patents on these products.

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Did your record show patent by patent?

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I gather that some of these patents relate to the Nautilus machines and others don't.

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Did your record show the particular response

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to each of the patents on the label?

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Yes, the record is quite detailed, Your Honor.

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As I said, there were 16 to 24 patents on the marked machines.

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Eight of the patents on each of the machines didn't cover any Nautilus product whatsoever.

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The remainder did not cover the marked products.

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The Greg Webb deposition, that's a Nautilus employee who marked the machines.

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It's detailed concessions that this was done knowingly and repeatedly.

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And it shows that... So was the evidence of licensing negotiations and so on directed to those patents that did cover the machines?

[00:05:02] Speaker 04:
Your Honor, I don't know that the 2009 settlement offer details each in that settlement offer letter that lists all 24 of the patents.

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But there's no question that there would not have been an offer to pay for a license

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had there not been false marking by Nautilus.

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There's direct causation there, I would argue, even under the most stringent form of causation.

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The district court referred to, is this the sole item that causes your injury?

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Why would you seek a license on a product that you know is not covered by any patent?

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Why would you seek to design around that product?

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Why would you spend money investigating the validity of those patents?

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There's no reason but for the false marking.

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So you have several categories of damages, and I encourage you to look at the categories category by category.

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They are classic reliance damages.

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Well, that's what I'm trying to understand.

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So you're saying that for the patents that were on the label, they clearly didn't relate to the machines that you wished to license, that there were specific expenditures and so on as to the validity of all of the patents on the label?

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Yes, Your Honor, and this unfolded over time, of course.

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When a potential competitor sees this many patents listed, and it's a matter of public record that Nautilus has aggressively enforced its intellectual property rights, it's not the kind of situation where you think, well, maybe one of these patents has expired, or maybe I can work around all 24 patents.

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A reasonable person would not look and see.

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Most of the key time cases before the statute was changed

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was because the patents had expired.

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When you look at the patent numbers on the label, you don't have to know very much about patents to see that some of them had expired.

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Was a distinction drawn in terms of those that had expired under which one wouldn't need a license under any circumstances?

[00:07:11] Speaker 04:
No, Your Honor.

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But I would note that this unfolded over time.

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And over time, more and more investigation was done.

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And there's no dispute really in the evidence that these expenditures were a direct response to the false marking.

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There's no other explanation for them.

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Now, to return to your question, Chief Judge.

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And to the correct marking.

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I'm sorry, Your Honor.

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The expenditures you've told us were in response to the patents on the label.

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The falsely marked patents.

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All of them were falsely marked, Your Honor.

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There were 16 to 24.

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related to the machines that were sold?

[00:07:53] Speaker 04:
None.

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There are 16 to 24 patents marked in these machines.

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Eight of them didn't relate to any Nautilus product.

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The rest didn't relate to the products at issue.

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So the plaintiffs understandably didn't try to start copying these products right away.

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They invested in other ways.

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They had out-of-pocket expenditures.

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And I would emphasize, we're seeking here reliance damages, not lost profits damages.

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But there can't be any serious question if you take the plaintiff's evidence at face value.

[00:08:32] Speaker 01:
Can I just go back to Judge Newman's point?

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Because I'm a little confused, too.

[00:08:35] Speaker 01:
I thought that reading the judge, and I'm talking about this February 10, 2012 order,

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The district court found eight of the 24 patents marked on certain pieces of equipment did not cover the machines and eight of the 16 marked on others were not covering the machine.

[00:08:55] Speaker 01:
So it wasn't all the markings were not found to be improper, right?

[00:08:59] Speaker 04:
That's not how I read that, Your Honor.

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This is eight of the patents don't cover any Nautilus product and the balance don't cover the machines at issue.

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You've got several categories of damages here, and they're directly related to the issue of encountering this false marking.

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You've got the license.

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You've got the validity expenses.

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You've got the design around expenses.

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Those were the very types of expenses that this court talked about in Forest Group under the prior version of the statute.

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Now, obviously, Joe Q. Public can no longer bring a claim under the statute.

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Neither can Joe Q. Consumer.

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But here you have a substantial evidence of a legitimate ability to compete.

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You have over a million dollars spent on over 200 machines.

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You have efforts to modify those machines.

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You do have contracts with equipment manufacturers to create private prototypes, the Kaiser Corporation, regeneration equipment.

[00:10:04] Speaker 04:
And you have, of course, much of this evidence is corroborated by Frank Smith and Jeff Turner.

[00:10:11] Speaker 02:
You kind of remind me, if I was to look at this like in a sports setting, and maybe this sport doesn't exist, but you're a competitor, tell me if I'm wrong, but it seems to me you're a competitor that's on the sidelines saying, I want to get in the game, I want to get in the game, I want to get in the game, but you never get in the game.

[00:10:31] Speaker 02:
I mean, regardless of how much you work out and train, spend on equipment and lotions and the whole bit, you never actually got into the game.

[00:10:39] Speaker 04:
Well, the question, Your Honor, is whether it's a reasonable inference from this evidence.

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They're moving for summary judgment.

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All reasonable inferences have to be drawn in our favor.

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Is it a reasonable inference that when you spend a million dollars on over 200 machines, when you spend 100... There's no doubt about that.

[00:10:57] Speaker 02:
I mean, that's not a question how much you spend or how much was prepared to get into the game.

[00:11:02] Speaker 02:
But you never competed.

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We did not actually sell products.

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So the injury you're trying to connect, it's got to be a competitive injury.

[00:11:13] Speaker 04:
And that's why we say the statute doesn't refer, it doesn't say you have to show injury to a competitor or injury to an established competitor.

[00:11:21] Speaker 04:
It says a person has to show a competitor.

[00:11:23] Speaker 02:
It seems to me that you have an argument, and I'm not sure you've made it, but it seems to me that you have an argument that the reason why in this case, sitting on the sidelines when to get in is important.

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is because we're looking at a right to exclude under a pen, meaning you're prohibited from actually entering the field of competition just out of the belief that patents exist.

[00:11:49] Speaker 04:
Exactly, Your Honor.

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And I guess that was my unstated premise.

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But it's like any form of unlawful monopoly conduct.

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An unlawful monopolist can't say, when sued for imposing antitrust injury, for example, well, they never got on the market.

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They didn't actually have market share.

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They succeeded.

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They kept them off the market.

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These patent markings had exactly the effect that they were intended to have.

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They kept the plaintiffs from getting to market.

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And I would go there with you, except that I just don't see the evidence showing that you were going to actually fulfill the intent or the idea of entering the marketplace.

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You never stepped on the field at all.

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There's got to be more than wishful thinking.

[00:12:34] Speaker 04:
There is far more than wishful thinking here, Your Honor.

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People who engage in wishful thinking don't spend money investigating the validity of the patents and spending $130,000 when Plan A of copying the products fails, of trying to buy Med-X machines or to buy Med-X's patent portfolios.

[00:12:53] Speaker 04:
There's no risk of a cottage industry coming here, of people coming in to sue to recover the money they spent on working around the patents.

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to get the chance of recovering what they spent out of pocket.

[00:13:05] Speaker 04:
So you have a classic situation here of a potential competitor.

[00:13:11] Speaker 04:
There's no dispute about the money spent.

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You have a man with a Wharton MBA and several engineering degrees.

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You have evidence of contracts with actual equipment manufacturers.

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Those all go to the ability to compete.

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And to say that the statute only protects those who have actually competed

[00:13:32] Speaker 04:
would really got the statute because it would mean that those who make startups that make major investments to compete, but just don't quite get to that point, can't state a claim.

[00:13:44] Speaker 01:
Why don't we reserve the remainder of your time?

[00:13:46] Speaker 04:
Thank you, Your Honor.

[00:13:47] Speaker 03:
Good morning, Your Honors.

[00:13:55] Speaker 03:
May it please the court, my name is Patrick Kearns.

[00:13:57] Speaker 03:
I represent Nautilus Inc.

[00:14:00] Speaker 03:
I want to be clear about something right from the outset.

[00:14:03] Speaker 03:
I do not believe, and I disagree with my colleague, that the determination of whether a potential competitor can recover under this statute is dispositive at all.

[00:14:13] Speaker 03:
I think it's interwoven into the analysis.

[00:14:17] Speaker 03:
I think because this case began as a... Actually, I understand your point, that it's not dispositive.

[00:14:22] Speaker 01:
In other words, you're saying that even if we were to disagree with your assumption

[00:14:28] Speaker 01:
that you have to be an active competitor at the time, you would still prevail?

[00:14:32] Speaker 01:
Is that the point you're making?

[00:14:33] Speaker 03:
That is what I'm saying, Your Honor.

[00:14:35] Speaker 03:
The evidence in this case, and if you look at it... How would you draw the line?

[00:14:38] Speaker 01:
What would you say if you're willing to say that the statute might allow someone who hasn't, isn't at the time an active competitor?

[00:14:47] Speaker 01:
What would you say that would require the showing date?

[00:14:51] Speaker 03:
Well, Your Honor, I happen to believe that you should have to be an active competitor to recover.

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And that is our position.

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I think there's only one way to read this statute.

[00:14:59] Speaker 03:
And Judge Raina, as you pointed out, Congress could have said any person who suffers an injury as a result of false marking can recover.

[00:15:07] Speaker 03:
They did not.

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Congress used a specific term.

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They said competitive injury.

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And that means something.

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Plaintiffs would ask this court, as they ask the court below, to just disregard that.

[00:15:19] Speaker 03:
We're using the term potential competitor here.

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And I think that's interesting.

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The word potential competitor.

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is a phrase developed by the plaintiffs in the lower court.

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But really, I think what's more apt is hypothetical competitor.

[00:15:32] Speaker 02:
In most business settings, when you have an investor or someone looking to enter into the marketplace, and they have to show financial strength, a business plan, and they have to enter the marketplace, I can see how that would be, how one would become a competitor, go out and solicit an order

[00:15:54] Speaker 02:
But what about in a PAN case, where the PAN-T has a right to exclude?

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And that means that even if you go out and solicit an order, you may be at the point of infringement.

[00:16:06] Speaker 02:
You may be at the point of suffering some sort of legal injury, much less a commitment.

[00:16:13] Speaker 02:
Isn't this a different situation, the PAN content, when we're looking at a right to exclude and a potential investor?

[00:16:25] Speaker 03:
I don't think that that's what's presented here.

[00:16:27] Speaker 03:
I think it's important to look at what the actual undisputed facts of this case were, because that's why I say that this potential competitor analysis, although important and intertwined, isn't necessarily dispositive.

[00:16:39] Speaker 03:
What the district court found here was that plaintiffs could not show any injury, no damage of any kind, competitive or otherwise.

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And that's significant here, because we have to look at what is actually at issue.

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The plaintiff has admitted he's conceded in deposition.

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He manufactures nothing.

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He makes nothing.

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He sells nothing.

[00:17:00] Speaker 03:
He claims that he has these machines that he wanted to modify.

[00:17:03] Speaker 03:
He conceded that he did, in fact, modify several machines, but he's never sold one.

[00:17:08] Speaker 03:
He doesn't have a distribution facility.

[00:17:11] Speaker 01:
Well, what is the question we're asking?

[00:17:14] Speaker 01:
I mean, you're asking us to say he wasn't an active competitor at the time.

[00:17:18] Speaker 01:
What if we think that that's too stringent and we think there ought to be some level of potential competitors that would be foreclosed by the marking and therefore ought to be covered and ought to be rewarded under this?

[00:17:32] Speaker 01:
If that's the circumstance, do you think this case still falls?

[00:17:36] Speaker 03:
Falls in our favor.

[00:17:37] Speaker 01:
Yes, Your Honor.

[00:17:38] Speaker 01:
Yes.

[00:17:38] Speaker 01:
Okay.

[00:17:38] Speaker 01:
And tell me why that, I mean, even assuming the

[00:17:41] Speaker 01:
Sure, if the test is what you would like it to be, which is you have to be an active competitor.

[00:17:46] Speaker 01:
I don't think there's any dispute that they were an active competitor at the time.

[00:17:50] Speaker 01:
But what about something beyond that?

[00:17:52] Speaker 03:
Yes, you're correct.

[00:17:52] Speaker 03:
They can see that they were not a competitor at the time.

[00:17:55] Speaker 03:
I think beyond that, let's say, for example, this court finds that there are circumstances where a potential competitor can suffer a competitive injury.

[00:18:04] Speaker 03:
That still isn't a dispositive inquiry here.

[00:18:07] Speaker 03:
The inquiry here is that Mr. Sukumar has not shown any damage

[00:18:11] Speaker 03:
as a result of these patent labels.

[00:18:13] Speaker 03:
What he has done, what the plaintiffs have done, have thrown a lot of stuff, a lot of evidence at the trial court.

[00:18:21] Speaker 03:
They said attorney's fees, attorney's fees to attempt to license, and I want to address that, storage fees, things of this nature which they are claiming.

[00:18:29] Speaker 03:
These have nothing to do with competition.

[00:18:31] Speaker 03:
They have nothing to do with the patent labels.

[00:18:34] Speaker 03:
But he claims that they are somehow this competitive law.

[00:18:37] Speaker 02:
The licensing fees issues- So he's claiming that

[00:18:39] Speaker 02:
that they incurred all of these costs in order to design around and to enter into the market when it turned out that you really didn't have a right to exclude or begin with because of your false markings.

[00:18:50] Speaker 02:
And they would not have undergone all these costs but for your false markings.

[00:18:55] Speaker 03:
And I think that's inaccurate, Your Honor.

[00:18:57] Speaker 03:
Your hypothetical where someone was sitting on the sideline waiting to get in the game, I think it's close, but I think in truth, the plaintiffs aren't even on the sideline.

[00:19:05] Speaker 03:
They're watching from TV.

[00:19:06] Speaker 03:
And you don't have to take my word for it.

[00:19:08] Speaker 03:
You can take the plaintiffs.

[00:19:10] Speaker 03:
The plaintiffs conceded that they had no intent to enter into this market until after the lawsuit began.

[00:19:17] Speaker 02:
Where is that in the record?

[00:19:19] Speaker 03:
Your Honor, it's actually, the court cites to it several times throughout the district court's opinion.

[00:19:25] Speaker 03:
And in the plaintiff's deposition, which it cited both, it cited to in the district court's opinion, and it's also in the exhibits to Nautilus's motion for summary judgment.

[00:19:38] Speaker 03:
I actually took some excerpts from the deposition and put them in my brief, Your Honor.

[00:19:43] Speaker 03:
I'll paraphrase slightly because, but Mr. Sukumar was asked, he said, who do you compete with?

[00:19:49] Speaker 03:
He said, Nautilus is a company that makes and sells exercise equipment.

[00:19:52] Speaker 03:
You don't make anything.

[00:19:53] Speaker 03:
You don't sell anything.

[00:19:54] Speaker 03:
Who do you compete with?

[00:19:55] Speaker 03:
Mr. Sukumar said, well, I have an intent to compete now.

[00:20:01] Speaker 03:
Later on in the record, he confirms that once the court granted partial summary judgment, in order that we didn't dispute, by the way,

[00:20:07] Speaker 02:
You said there was no evidence of any intent to compete, and I'm not sure that's accurate.

[00:20:15] Speaker 02:
I think it may be arguable, but I don't think it's accurate to say that the record shows no evidence.

[00:20:22] Speaker 03:
I think that here's where the two portions of evidence are.

[00:20:28] Speaker 03:
There's Mr. Sukumar's statements that he wanted to compete.

[00:20:31] Speaker 03:
Now keep in mind, compete means something different to us, apparently, than it has to the plaintiffs.

[00:20:37] Speaker 03:
We're talking about competing in the fitness machine industry, creating and selling fitness machines.

[00:20:44] Speaker 03:
Mr. Sukumar, from the beginning in SCSRI, have always claimed, for the decade that these lawsuits have been going on, that they intend to open spa centers, senior citizen spa centers that provide holistic and physical rehabilitation.

[00:20:58] Speaker 03:
The licensing issue, which I think is particularly notable, it's just notable, and so I'll raise it.

[00:21:04] Speaker 03:
It's just one of several issues.

[00:21:05] Speaker 03:
You can find the letter in the record at A380 and A381.

[00:21:12] Speaker 03:
Now, this settlement letter is Mr. Sukumar's sole support for his contention that he tried to license Nautilus products.

[00:21:22] Speaker 03:
It was a letter in 2009 from his attorneys at the time at Jones Day.

[00:21:26] Speaker 03:
It was written to myself.

[00:21:27] Speaker 03:
And right in the caption, it tells you that it was an attempt at a global settlement of three separate pending lawsuits Mr. Sukumar had.

[00:21:35] Speaker 03:
none of them about false marking, none of them about patents, none of them about the stickers on the machines.

[00:21:42] Speaker 03:
And it says, right to you, it says, Mr. Sukumar, among the many things that he would like as part of this settlement, a license under Nautilus patents and applications to make and have made for use exclusively in Sukumar-owned rehabilitation centers.

[00:22:00] Speaker 03:
Not to sell these machines, not to engage in competition with Nautilus,

[00:22:05] Speaker 03:
to buy the machines, to be a customer, and to modify them, and to use them in his centers.

[00:22:13] Speaker 03:
Moreover, even if you consider that a true attempt to license the patent, which, by the way, I suggest that it's not.

[00:22:21] Speaker 03:
It was part of a settlement offer that contained a monetary component that they hadn't said yet, so it was a partial offer.

[00:22:27] Speaker 03:
Well, why the offer and why the monetary component?

[00:22:29] Speaker 03:
It says any settlement should include some monetary component designed to compensate our clients for their losses

[00:22:35] Speaker 03:
relating to the defendant's failure to perform on the contracts at issue.

[00:22:40] Speaker 03:
That is another glaring thing here that the plaintiffs don't want to talk about, and they didn't mention in their brief, and it should be mentioned.

[00:22:48] Speaker 03:
Mr. Sukumar has routinely changed the reason why he's damaged from lawsuit to lawsuit to lawsuit.

[00:22:57] Speaker 03:
The district court recognized this.

[00:23:00] Speaker 03:
One of the most glaring examples are these storage fees damages.

[00:23:05] Speaker 03:
SDSRA and Mr. Sukumar are claiming that they incurred hundreds of thousands of dollars in storage fees as a result of the false market.

[00:23:13] Speaker 03:
This is what they told the court here.

[00:23:16] Speaker 03:
Yet in another pending case in the Southern District of California, after this case was already filed, Mr. Sukumar filed a brief with that court and said those same storage fees were the result of a breach of warranty involving the paint on the machine.

[00:23:33] Speaker 03:
The same storage fees were in a state court trial.

[00:23:35] Speaker 03:
They were at issue in a state court trial against Nautilus and one of its distributors for breach of contract and interference with contract.

[00:23:43] Speaker 03:
These damages did not result from false marking labels.

[00:23:47] Speaker 03:
These damages have been, by Sukumar's own testimony, by his own sworn statements, the cause of everything else until we got to the false marking.

[00:23:57] Speaker 02:
How should we treat the evidence in the record that Nautilus has some sort of history of

[00:24:03] Speaker 02:
of falsely marking its products?

[00:24:06] Speaker 03:
Well, Your Honor, I think it has very limited value in this case.

[00:24:09] Speaker 03:
And I'll tell you why.

[00:24:11] Speaker 03:
First of all, on this appeal, the plaintiffs didn't, there was a motion for partial summary judgment that they brought seeking various elements.

[00:24:19] Speaker 03:
And Nautilus didn't dispute the fact that certain numbers on these labels were not accurate.

[00:24:26] Speaker 03:
Now, I disagree with counsel that they didn't apply at all.

[00:24:29] Speaker 03:
They were all Nautilus's patents.

[00:24:31] Speaker 03:
What Noleth had done was created what we called a unilabel.

[00:24:35] Speaker 03:
It was one sticker that listed a number of patents.

[00:24:38] Speaker 03:
And this label was, for whatever reason, put on several different machines.

[00:24:42] Speaker 03:
So not necessarily every patent number on every sticker applied to that given machine.

[00:24:48] Speaker 03:
And we acknowledge that.

[00:24:49] Speaker 03:
But that really, beyond that, beyond acknowledging that those labels are, in that sense, incorrect.

[00:24:54] Speaker 03:
And if you set aside for the moment the expired patents that were on some of those things,

[00:25:00] Speaker 03:
The net issue hasn't been litigated in this case at all.

[00:25:04] Speaker 03:
I think it has zero impact on the outcome of this case and really zero impact on the analysis.

[00:25:08] Speaker 03:
I think the focus here needs to be what, if anything, has Mr. Sukumar shown below to identify that these patent labels actually caused him some kind of injury.

[00:25:20] Speaker 03:
And it's important to look not only at the storage fees issue and not only at these licensing issues, but it's important to look at the evidence that was actually produced by their side.

[00:25:29] Speaker 03:
Their argument in their brief and their argument here today before this court sort of presumes that they've suffered these damages.

[00:25:36] Speaker 02:
Just in the restrictive nature of the right to exclude, shouldn't there be some sort of burden on, let's say, nautilus in this case once it's shown that there's false marking in order to show that the injury should not be attributed to you?

[00:25:54] Speaker 03:
I don't believe so, Your Honor.

[00:25:55] Speaker 03:
I mean, this is a statutory cause of action where they have to prove at a minimum

[00:25:59] Speaker 02:
What I see here is that Nautilus had on a prior occasion engaged in false marking of its products.

[00:26:07] Speaker 02:
Now we come to this situation, and again, you're arguing don't hold us liable because some of the, they were all Nautilus pens, some may have been expired, some may have applied to the machines, but the fact is that this label was on particular machines that it didn't apply to.

[00:26:28] Speaker 02:
And those machines were not patented under those markings.

[00:26:32] Speaker 02:
And it seems to me that given the restrictive nature of the right to exclude, that if under the statute we allow businesses to utilize patent markings time and time again and not face any type of repercussion, then what's the use of the statute?

[00:26:54] Speaker 03:
I don't think it's allowing businesses to not face any repercussion.

[00:26:59] Speaker 03:
I think that just like any other statute or just like any other cause of action, the plaintiffs need to simply prove their case.

[00:27:05] Speaker 03:
They need to prove that false marking has actually occurred.

[00:27:08] Speaker 03:
Now, they have not done so in this case.

[00:27:10] Speaker 03:
Let's be clear.

[00:27:11] Speaker 03:
Nautilus did concede that some of these labels did not apply to the machines.

[00:27:16] Speaker 03:
But we never got to the next step, which is, as this court has recognized, a very important step, the intent to deceive.

[00:27:23] Speaker 03:
We've never gotten that far in litigation.

[00:27:25] Speaker 03:
So Nautilus hasn't conceded that it's violated the law by any means.

[00:27:28] Speaker 03:
I think the plaintiffs need to only prove their case, Your Honor, and Congress has provided a remedy for exactly that type of conduct.

[00:27:35] Speaker 01:
But we don't- Your view that proving the case includes not just showing that there was a false marking, but as the statute says, that they filed that they have suffered competitive injury as a result of that marking, that that's their burden and not yours to show the injury?

[00:27:51] Speaker 03:
I believe so, Your Honor.

[00:27:53] Speaker 03:
But I also think to a sense that we haven't got that either.

[00:27:56] Speaker 03:
In other words, this court doesn't have to find that in order to affirm this ruling.

[00:28:01] Speaker 02:
You're not arguing that intent to deceive is a necessary finding under 292, right?

[00:28:09] Speaker 03:
That's not an issue here, Your Honor.

[00:28:11] Speaker 02:
But you said it was.

[00:28:12] Speaker 02:
You said that was the next step.

[00:28:21] Speaker 02:
It's okay, Your Honor.

[00:28:23] Speaker 03:
I just want to craft it in the sense that we are in a procedural position here where we basically, in effect, said show us all your evidence that you've been damaged at all.

[00:28:39] Speaker 03:
The competitive injury or the potential competitor or hypothetical competitor, however you want to say that, really what it is, it's a causation requirement.

[00:28:48] Speaker 03:
The federal statute has it.

[00:28:50] Speaker 03:
All the state law claims have it.

[00:28:51] Speaker 03:
They all require some sort of proof, at least at some point in time, by the plaintiff bringing the cause of action, that it was in fact these labels that damaged it.

[00:29:01] Speaker 03:
Because what if we don't have that?

[00:29:03] Speaker 03:
What if we don't require that burden of the people bringing the claim?

[00:29:08] Speaker 03:
Then we're just back to a key TAM statute.

[00:29:10] Speaker 03:
Then we've rendered the changes to the AIA meaningless.

[00:29:14] Speaker 02:
But I think the issue here is whether a potential competitor

[00:29:19] Speaker 02:
qualifies under the statute.

[00:29:21] Speaker 02:
And then, for example, if we were to find that the answer to that is yes, then we would send it back down to consider the damages and the applicability of any damages.

[00:29:33] Speaker 03:
I don't believe so, Your Honor, because if you look at the district court's opinion, the district court acknowledged that it did not decide that a potential competitor could never sue or never recover under the statute.

[00:29:45] Speaker 03:
And it didn't have to.

[00:29:46] Speaker 03:
In fact, the court said, quote,

[00:29:47] Speaker 03:
it may be perhaps an interesting legal issue.

[00:29:51] Speaker 03:
And it is.

[00:29:52] Speaker 03:
And I think in some sense, it gives a lot of context to this case.

[00:29:56] Speaker 03:
But regardless of whether they are able to get their foot in the section 292 door, they still have no damages that they can prove resulted from the patent labels.

[00:30:07] Speaker 01:
And you think even under the summary judgment, Seandrick, with all imprecises going their way, there's still absolutely not enough evidence.

[00:30:14] Speaker 03:
I absolutely, yes, I absolutely think so, Your Honor.

[00:30:16] Speaker 03:
I think it's, I think it's a difficult case in the sense that there's a lot.

[00:30:21] Speaker 03:
I mean, you know, there was a classic story, a judge once said to me that, you know, you get a summary judgment motion so high and you know that there's got to be a disputed fact in there somewhere.

[00:30:30] Speaker 03:
I think that this is that sort of case where you're claiming attorney's fees.

[00:30:33] Speaker 03:
You're claiming storage costs.

[00:30:36] Speaker 03:
You're claiming, I couldn't enter into that market.

[00:30:39] Speaker 03:
But then you just got to look at Mr. Sukumar's sworn testimony.

[00:30:41] Speaker 02:
Isn't that a factual issue to determine whether those are related to the false markings?

[00:30:47] Speaker 03:
Not when the plaintiff has conceded that they're not.

[00:30:51] Speaker 03:
Not when the plaintiff says, for example, I didn't have any intent to compete with their, to compete with Nautilus until after the lawsuit.

[00:30:59] Speaker 03:
You know, another thing the plaintiff conceded, that he bought 50 more Nautilus machines after the lawsuit started.

[00:31:06] Speaker 03:
I mean, that was significant.

[00:31:07] Speaker 03:
My colleague here said, Mr. Sukumar has bought 200 machines, but, you know, 100 of those were in 1998 and 50 of them were during this lawsuit.

[00:31:14] Speaker 03:
I mean, these are all these things to consider, but at the end, I think the district court got this absolutely right.

[00:31:20] Speaker 03:
Thank you very much, Your Honors.

[00:31:21] Speaker 03:
I understand my time here.

[00:31:25] Speaker 01:
A few quick points, Your Honor.

[00:31:27] Speaker 01:
Just to keep the time even.

[00:31:29] Speaker 04:
Thank you.

[00:31:29] Speaker 04:
How much do I have, Your Honor?

[00:31:31] Speaker 01:
We'll give you three minutes.

[00:31:32] Speaker 04:
Thank you.

[00:31:33] Speaker 04:
A few quick points.

[00:31:33] Speaker 04:
Let me begin with intent to compete.

[00:31:35] Speaker 04:
It is absolutely incorrect.

[00:31:37] Speaker 04:
The plaintiff here said he didn't intend to manufacture before this lawsuit.

[00:31:41] Speaker 04:
If you look at pages A323, A324 of the Joint Appendix, Mr. Sukumar was asked at his deposition the question, when did your intent change to making machines for resale?

[00:31:53] Speaker 04:
Response.

[00:31:54] Speaker 04:
Basically, I reject the premise of your question.

[00:31:56] Speaker 04:
Quote, making machines for resale was also part of that prior intent.

[00:32:01] Speaker 04:
Previous page, page 323.

[00:32:03] Speaker 04:
It was, quote, also my intent to use the knowledge gained in modifying the machine to make machines of my own, distinctive machines suiting my particular market segment.

[00:32:12] Speaker 04:
You don't have to rely on just this, though.

[00:32:14] Speaker 04:
You can look at the testimony of Frank Smith, page A4081 to 482.

[00:32:18] Speaker 04:
Jeff Turner.

[00:32:19] Speaker 01:
Well, I thought the point in this regard wasn't that he never said it, but that he said something contradictory in other circumstances.

[00:32:27] Speaker 04:
No, there is no contradiction, Your Honor.

[00:32:29] Speaker 04:
The declaration says it was always his intent.

[00:32:31] Speaker 04:
The district court said,

[00:32:32] Speaker 04:
Oh, but in his deposition, he conceded it wasn't always his intent.

[00:32:36] Speaker 04:
As explained on page 39 of our brief and the quote that I just read you, he never said it wasn't always his intent.

[00:32:42] Speaker 04:
He said, it's been part of my intent from the beginning.

[00:32:44] Speaker 04:
Now, if there were a conflict, you have the corroborating testimony of Frank Smith, which you find at 481 to 482.

[00:32:51] Speaker 04:
You have the corroborating testimony of Jeff Turner at 496 and under federal rule of evidence 801 D2.

[00:32:57] Speaker 04:
Those statements could be used to rehabilitate his testimony.

[00:33:01] Speaker 04:
It's not necessary because there is no conflict.

[00:33:03] Speaker 04:
Of course, finally, you have the fact that actions speak louder than words, and he did all these things to move toward the market.

[00:33:09] Speaker 04:
That speaks to his intent as well.

[00:33:12] Speaker 04:
As to the 2009 license that Mr. Kearns referred to, there's nothing inconsistent with the desire for a license limited to rehabilitation centers, which was part of Mr. Sukumar's business plan, and the settlement offer and the intent to have a broader

[00:33:31] Speaker 04:
desire to manufacture it.

[00:33:32] Speaker 04:
If you look at the record again, page A369, Mr. Sukumar says we didn't seek a general license in those settlement negotiations because we didn't believe it was realistic.

[00:33:44] Speaker 04:
On the issue of causation, I encourage you to look at these category by category.

[00:33:49] Speaker 04:
Mr. Kearns has spoken about storage costs and about representations in prior cases.

[00:33:53] Speaker 04:
There's been no allegation of double recovery, no suggestion of getting two bites at the apple.

[00:33:58] Speaker 04:
We have disclaimed any storage costs

[00:34:00] Speaker 04:
damages that are not directly related to purchases of machines caused by the false marking.

[00:34:07] Speaker 04:
But then there are these other categories of damages, the money spent on seeking licenses, the money spent on design arounds.

[00:34:15] Speaker 04:
If you look at the force group case, it asks the question, did the false marking, quote, cause unnecessary investment in design around or cost incurred to analyze the validity or enforceability of a patent?

[00:34:27] Speaker 04:
It's page 1303 of the opinion.

[00:34:29] Speaker 04:
That's exactly what you have here.

[00:34:31] Speaker 04:
The fact that some of these fees are costs and damages are attorney's fees, well, that's how one looks at the validity of a patent.

[00:34:38] Speaker 04:
You hire an attorney to investigate it.

[00:34:40] Speaker 04:
These are classic reliance damages.

[00:34:42] Speaker 04:
There's no question that they trace to the false marking at issue in this case.

[00:34:46] Speaker 04:
And there's no question that if you draw reasonable inferences in favor of plaintiff's evidence, that this case should proceed to trial.

[00:34:54] Speaker 01:
Thank you.

[00:34:55] Speaker 04:
Thank you.