[00:00:03] Speaker 03:
We will hear argument next in number 15.

[00:00:33] Speaker 03:
2009 AquaShield against Interpool cover team as soon as council is settled.

[00:00:54] Speaker 03:
Mr. Coffey, please come up to the podium and begin.

[00:01:06] Speaker 05:
May it please the court.

[00:01:09] Speaker 05:
My name is Greg Coffey, and I represent the appellant pool and spa enclosures and alcoff.

[00:01:17] Speaker 05:
Your honors, this is the second time that this matter has reached this court.

[00:01:24] Speaker 05:
And so I believe that the issues here today are relatively narrow, and I would like to address a couple of those.

[00:01:34] Speaker 05:
And first, I'd like to address

[00:01:36] Speaker 05:
the issue that the trial court on remand determined that enhanced damages and attorney's fees were not warranted based upon the totality of the circumstances in this case.

[00:01:51] Speaker 05:
My adversary takes the position in this case, as do we, that a reversal of that determination

[00:02:04] Speaker 05:
would have to be an abuse of discretion standard, consistent with... I'm confused about something.

[00:02:10] Speaker 03:
I'm sorry?

[00:02:11] Speaker 03:
I'm confused about something.

[00:02:14] Speaker 03:
You represent the defendants here, right?

[00:02:16] Speaker 03:
You prevailed on that issue.

[00:02:18] Speaker 03:
Shouldn't you be arguing your appeal?

[00:02:21] Speaker 05:
I absolutely am prepared.

[00:02:23] Speaker 05:
I was planning to fit into that.

[00:02:25] Speaker 05:
I mean, you're first, so it seems like you should be arguing your appeal.

[00:02:28] Speaker 05:
So I can be happy to start with that, and our position

[00:02:32] Speaker 05:
Your Honor, is that the trial court erred in adopting gross revenue as the basis for the royalty in this case.

[00:02:43] Speaker 05:
As Your Honors know from the prior hearing, the argument before the court and the trial court, Judge Stewart in Utah, determined originally that net profit should be used.

[00:02:59] Speaker 05:
And on remand, the determination

[00:03:02] Speaker 05:
consistent with this court's instruction on remand, determined that $216,000 was an appropriate award based upon 8% of $2.7 million in gross revenue or gross sales.

[00:03:18] Speaker 05:
Really the same thing.

[00:03:20] Speaker 05:
Our position is that the burden with respect to royalty fell upon the

[00:03:27] Speaker 05:
plaintiff or appellee in this case, and that what the trial court was faced with in this case was really a dart board.

[00:03:35] Speaker 05:
They had no expert.

[00:03:38] Speaker 05:
They had no testimony or sales information from Aqua Shield.

[00:03:47] Speaker 00:
Isn't there some evidence though that there were some meetings between the parties in advance, the litigation and the base that was discussed?

[00:03:56] Speaker 00:
for what the reasonable royalty would relate to.

[00:03:59] Speaker 00:
Trial exhibit CC.

[00:04:01] Speaker 05:
Absolutely.

[00:04:02] Speaker 05:
And that's my point today, which is the discussion that took place, talked about a royalty in a meeting that took place between Jan Zitko of Alcoff and Robert Brooks of AquaShield of 2.5%.

[00:04:15] Speaker 00:
Yeah, but that was... I don't see your briefs as questioning the percentage rate that was determined by the district court.

[00:04:24] Speaker 00:
I see it as questioning what the base is.

[00:04:28] Speaker 00:
And the base that is supported by those actual negotiations is the sales of the devices themselves.

[00:04:36] Speaker 00:
Am I right?

[00:04:37] Speaker 05:
You're right, except that we urge that gross profit instead of net profit is the appropriate base here, and here's why.

[00:04:47] Speaker 02:
Right, but the record here is thin.

[00:04:49] Speaker 02:
The other sign has trial exhibit CC, which shows that the parties at one point was planning on using sales revenue as a base for a possible royalty.

[00:05:00] Speaker 02:
What evidence do you have on your side that would show that the hypothetical negotiators really would be using profit?

[00:05:08] Speaker 05:
As Judge Stoll just alluded to, the email that was made part of the evidence at trial before Judge Stewart, which talks about a discussion between the principals of the two companies, where they talked about 2.5%.

[00:05:21] Speaker 05:
The issue, Judge... 2.5% of what?

[00:05:24] Speaker 05:
2.5% of gross profit.

[00:05:27] Speaker 05:
Is that in the record?

[00:05:29] Speaker 05:
That is in the appendix attended to the appeal that we've made here.

[00:05:35] Speaker 05:
That's correct.

[00:05:36] Speaker 05:
Great.

[00:05:37] Speaker 05:
And our position is that there are... Can you give a specific citation?

[00:05:41] Speaker 05:
I can get that to you, sure.

[00:05:44] Speaker 00:
Is it 506?

[00:05:45] Speaker 00:
I'm sorry?

[00:05:46] Speaker 00:
Is it A, 506?

[00:05:48] Speaker 05:
Yes.

[00:05:49] Speaker 05:
The numbers that we're talking about are

[00:06:01] Speaker 05:
the gross profit being $600,000, the gross revenue being $2.7 million.

[00:06:08] Speaker 05:
To respond to your question, Judge Chen, we believe that by Judge Stewart keeping the royalty rate at 8% and not changing that, where he had no expert testimony, where he had no

[00:06:27] Speaker 05:
evidence presented by the plaintiff at trial.

[00:06:30] Speaker 05:
I have two questions.

[00:06:31] Speaker 02:
He had a dart board.

[00:06:32] Speaker 02:
I have two questions.

[00:06:33] Speaker 02:
First question is where in A506 does it show that some contemplation of using profits as the base?

[00:06:43] Speaker 03:
It is not stated in there.

[00:06:45] Speaker 03:
Indeed something to the, it seems to me, to the contrary because this is talking about the license fee and it says, I don't know, under

[00:06:55] Speaker 03:
How much will the Udder license fee be selling prices in Europe?

[00:07:02] Speaker 03:
That sounds like sales, revenues, not like profit of any sort.

[00:07:10] Speaker 05:
And the reason we advance gross profit as

[00:07:14] Speaker 05:
as an appropriate measure.

[00:07:16] Speaker 05:
And I recognize fully that most courts use gross sales.

[00:07:23] Speaker 05:
I recognize that and I acknowledge it.

[00:07:25] Speaker 05:
But we think, based upon the fact that they were using and negotiating in real time, a lower royalty percentage.

[00:07:33] Speaker 05:
The fact that Judge Stewart kept 8% on remand and used 8%

[00:07:41] Speaker 05:
against.

[00:07:43] Speaker 05:
Have you argued the percent?

[00:07:46] Speaker 05:
Are you arguing that in this case on appeal?

[00:07:49] Speaker 05:
I'm not arguing a change in the percent.

[00:07:53] Speaker 05:
I'm saying that the unchanged, I want to be clear about this, I'm arguing that the fact that Judge Stewart on the remand did not change the percentage at 8% and the fact that at page 506 there's a reference to a much lower

[00:08:11] Speaker 05:
percentage that he aired when he used a higher number of gross sales.

[00:08:17] Speaker 05:
And that based upon the fact that we were dealing with a dart board at trial, no expert, no testimony on it, that it's more appropriate to use gross revenue.

[00:08:28] Speaker 02:
Just to be clear, my understanding is Judge Stewart said that no party disputed the 8% rate number.

[00:08:37] Speaker 02:
And so now it was all about just trying to figure out

[00:08:40] Speaker 02:
what to designate as the base and then one side had an exhibit to point to that showed you know there's some evidence in disha that the negotiators would use sales price and he said there was no evidence on the other side of the ledger that would suggest why that two parties would use profits why

[00:09:04] Speaker 02:
isn't or why is it clearly erroneous for the judge to use the one piece of evidence that pointed in one direction?

[00:09:12] Speaker 05:
The percentage is not before this court on appeal.

[00:09:18] Speaker 05:
So that's absolutely correct that 8% was adopted and it wasn't challenged.

[00:09:23] Speaker 05:
What we're saying is that the 8% along with the documentation that is in exhibit 66, which is at page 506,

[00:09:33] Speaker 05:
supports an approach that would come up with gross sales, excuse me, gross profit as a basis, a middle ground.

[00:09:46] Speaker 05:
You got $2.7 million against 8%.

[00:09:49] Speaker 05:
The case was remanded based upon 8% of the gross profit, the net profit.

[00:10:00] Speaker 05:
We think that gross profit at $600,000

[00:10:03] Speaker 05:
is the appropriate remedy.

[00:10:06] Speaker 05:
And we think that Judge Stewart had.

[00:10:09] Speaker 03:
But for purposes of the appeal, you have to go beyond saying what you think is appropriate.

[00:10:14] Speaker 03:
You have to be saying that the alternative that Judge Stewart adopted is actually legally incorrect under a clear error standard.

[00:10:25] Speaker 03:
I mean, in the world of damages, there's usually a range of what can be appropriate.

[00:10:31] Speaker 03:
And he decided this.

[00:10:33] Speaker 03:
The question is not whether yours would have been just as good, but whether his is actually improper.

[00:10:40] Speaker 05:
I completely understand, and our position on that is, going back to my original comment, that Judge Stewart had a dark board, and that the burden falls upon the plaintiff, in this case, the appellee on that issue.

[00:10:54] Speaker 05:
And that if there's going to be a determination, that my client should not be penalized as a result of that.

[00:11:03] Speaker 05:
We believe that Judge Stewart erred in determining that gross sales would be the appropriate base to go against that.

[00:11:13] Speaker 00:
So just going back to another point you were making, I think you were saying that the percentage rate at page A506 is very different than 8%.

[00:11:23] Speaker 00:
And I guess some of their percentage rates are like 5.5%, which is less than 8%.

[00:11:28] Speaker 00:
But what about the fact that when you are in the exercise of a hypothetical negotiation, at that point, you're presuming that patent is valid and infringed.

[00:11:39] Speaker 00:
And it's under that construct that you're determining the appropriate royalty rate to be applied to the appropriate base in this case, since you're not challenging the rate.

[00:11:48] Speaker 00:
I mean, isn't that something that would be proper to be taken into account, the fact that this evidence at A506

[00:11:57] Speaker 00:
is before anybody has presumed that the patent is valid and infringed?

[00:12:03] Speaker 05:
I think your question, if I understand it, is that the rate might be a little less where there is not any determination or any resolution to that issue.

[00:12:15] Speaker 05:
And so 8% isn't that far off?

[00:12:18] Speaker 00:
I guess that's it.

[00:12:19] Speaker 00:
I mean, one thought would be under the hypothetical construct, you're not just looking at what the parties actually negotiated.

[00:12:27] Speaker 00:
But you've got a backdrop there of understanding, hey, now it is uncontested.

[00:12:33] Speaker 00:
That patent is valid and infringed.

[00:12:35] Speaker 05:
In most cases, that would be the case, Your Honor.

[00:12:39] Speaker 05:
In this case, as I say, Judge Stewart had nothing to work from.

[00:12:43] Speaker 05:
And so we believe that his determination

[00:12:47] Speaker 05:
He went through the Georgia-Pacific test with respect to the rate.

[00:12:51] Speaker 05:
That's not before the court, and that's not disputed.

[00:12:53] Speaker 05:
Came up with 8%.

[00:12:55] Speaker 05:
We think in Indisha, that kept the rate the same.

[00:12:59] Speaker 05:
It impacts on the base.

[00:13:04] Speaker 05:
And to your point, the negotiation at 5%, you could argue, yeah, that once the patent is determined to be valid, it may be higher.

[00:13:14] Speaker 05:
It may be lower because it's not.

[00:13:16] Speaker 05:
Our position is that what Judge Stewart did on the remand was arbitrary and capricious and in clear error on the basis that he should have used gross profit as a reasonable middle ground here.

[00:13:31] Speaker 03:
He had nothing else to work with.

[00:13:32] Speaker 03:
You've used half of the time that you meant to save for rebuttal.

[00:13:36] Speaker 03:
Yes.

[00:13:37] Speaker 03:
Why don't you let your friend talk.

[00:13:49] Speaker 03:
Mr. Zenger.

[00:13:52] Speaker 01:
I had reserved some time.

[00:13:54] Speaker 01:
Do I get rebuttal after Hammer?

[00:13:57] Speaker 03:
Since there's a cross appeal here, you have said you want to use 12 minutes and then three minutes.

[00:14:07] Speaker 01:
I want to begin with the premise that Judge Stewart found, I don't exactly know why he made that finding.

[00:14:13] Speaker 01:
One of his findings was, this was not a close case.

[00:14:17] Speaker 01:
Now, the reason he said it was not close, I still don't understand and I think is legal error in his findings.

[00:14:25] Speaker 01:
But he determined this was not a close case.

[00:14:28] Speaker 01:
And why was it not a close case?

[00:14:31] Speaker 01:
This is a case in which it was not only exceptional, but extraordinary and stands out from others.

[00:14:36] Speaker 01:
This is a case in which the defendants had approximately eight years to show some type of defense, and they never did.

[00:14:47] Speaker 01:
And I just want to rehearse the history of this case just a little bit.

[00:14:51] Speaker 01:
In 2001, Aukersfield entered the market.

[00:14:57] Speaker 01:
We have trial testimony, which we cite in the brief, that the defendants were following our actions.

[00:15:04] Speaker 01:
They were looking at our website, they were looking at our product materials, and they were looking at us at trade shows.

[00:15:10] Speaker 01:
So here, AquaShield is in the market from 2001 to 2005 with its unique patented device.

[00:15:19] Speaker 01:
Enter defendants into the market, 2005.

[00:15:22] Speaker 01:
What do they come with?

[00:15:23] Speaker 01:
They don't come with some other device that doesn't infringe.

[00:15:26] Speaker 01:
They come with a nearly dead-on knockoff four years after we come into the market.

[00:15:33] Speaker 01:
Copying can be shown not by some smoking gun, but by the circumstances.

[00:15:40] Speaker 01:
In this case, we have the admission of the parties.

[00:15:43] Speaker 01:
They were watching us.

[00:15:44] Speaker 01:
And so what do we have?

[00:15:45] Speaker 01:
We have them copying us coming into the market.

[00:15:48] Speaker 01:
Then what happens?

[00:15:50] Speaker 01:
Does watching equal copying?

[00:15:52] Speaker 01:
No, watching does not equal copying, but they had access to our product information about our device and they knew that we were asserting a patent because we had it marked.

[00:16:06] Speaker 01:
from the get-go.

[00:16:08] Speaker 01:
There's no issue that we didn't have it marked from the get-go.

[00:16:11] Speaker 01:
They knew or should have known.

[00:16:12] Speaker 01:
But worse, in 2005, we send a cease and desist letter.

[00:16:16] Speaker 01:
And what happens?

[00:16:17] Speaker 01:
We get totally snubbed.

[00:16:19] Speaker 01:
Nothing.

[00:16:21] Speaker 01:
Instead, they choose to litigate.

[00:16:23] Speaker 01:
And from 2005 until the briefs in this case, they argue this denial of the preliminary injunction before the United States District Court in New York.

[00:16:36] Speaker 01:
This court, in its previous decision, in which Judge Chen and Judge Tronte, you both participated, determined that that was a legally insufficient basis to have any good faith belief of non-infringement or invalidity, because it didn't go to those issues.

[00:16:54] Speaker 01:
It went to an issue of personal jurisdiction and a lack of some factual information, and that was it.

[00:17:00] Speaker 01:
So what do we have in 2005?

[00:17:02] Speaker 01:
We have a cease and desist.

[00:17:03] Speaker 01:
Now they are for sure on notice of our allegations and they do nothing.

[00:17:08] Speaker 01:
They present no evidence of non-infringement and no evidence of invalidity to the United States District Court and District of New York.

[00:17:16] Speaker 01:
That case languishes three years.

[00:17:19] Speaker 01:
in Hague Convention Service and in a motion to dismiss and transfer to Utah.

[00:17:24] Speaker 01:
It comes to Utah.

[00:17:25] Speaker 01:
And what happens?

[00:17:27] Speaker 01:
We file a motion for summary judgment on infringement.

[00:17:30] Speaker 01:
Here we are now in 2011.

[00:17:32] Speaker 01:
Sorry.

[00:17:38] Speaker 04:
Now is their chance to put on their non-infringement case.

[00:17:41] Speaker 04:
This was transferred to Utah in 2008 or 9?

[00:17:44] Speaker 04:
2009.

[00:17:45] Speaker 04:
2009.

[00:17:46] Speaker 03:
And the motion for summary judgment was 2011?

[00:17:50] Speaker 01:
I think that's right.

[00:17:52] Speaker 01:
Why did it change?

[00:17:53] Speaker 01:
I don't have the date.

[00:17:54] Speaker 01:
It's in the cases.

[00:17:55] Speaker 01:
It's even in the court's previous decision.

[00:17:57] Speaker 01:
But the point is, we bring a motion for summary judgment on non-infringement.

[00:18:01] Speaker 01:
And what do they put forth with non-infringement defense with respect to claims 1 through 14 and 16?

[00:18:08] Speaker 01:
a big fat zero.

[00:18:11] Speaker 01:
Absolutely nothing.

[00:18:15] Speaker 01:
The court grants summary judgment because they put on no defense.

[00:18:21] Speaker 01:
They bring a motion for summary judgment on invalidity, and we cross-move.

[00:18:26] Speaker 01:
What evidence do they put on a single piece of prior art, anticipating each and every element of a single claim?

[00:18:35] Speaker 01:
What do they present?

[00:18:36] Speaker 01:
Nothing.

[00:18:37] Speaker 01:
Zero.

[00:18:39] Speaker 01:
This is now in 2012, or 2011, 2012.

[00:18:42] Speaker 01:
So now we have them in the market from 2005 to 2012 with no

[00:18:49] Speaker 01:
non-infringement or indolidity basis that they want to present to anyone, including the court.

[00:18:57] Speaker 03:
Can you walk through?

[00:19:00] Speaker 03:
Your argument here is all about, I guess, really one paragraph in Judge Stewart's opinion in which he walked through the read against portent factors.

[00:19:12] Speaker 03:
And I think your argument, more or less by definition, is that he abused his discretion

[00:19:19] Speaker 03:
by making a series of clearly erroneous findings or otherwise misguided.

[00:19:25] Speaker 03:
So can you take these one at a time?

[00:19:27] Speaker 01:
I would be happy to do that.

[00:19:28] Speaker 01:
First one.

[00:19:29] Speaker 03:
Because he did find that they willfully infringe.

[00:19:32] Speaker 03:
He did find that they willfully infringe.

[00:19:33] Speaker 03:
But nevertheless said, that's not the end of the inquiry.

[00:19:36] Speaker 03:
I'm now supposed to consider whether enhanced damage.

[00:19:39] Speaker 03:
You don't argue for a different result between enhanced damages and fees.

[00:19:46] Speaker 03:
As far as I could tell in your brief,

[00:19:47] Speaker 03:
Same basis, same argument.

[00:19:49] Speaker 03:
They stand in fault or fall together.

[00:19:51] Speaker 01:
Yes.

[00:19:51] Speaker 03:
OK.

[00:19:52] Speaker 03:
So the first thing he said is.

[00:19:53] Speaker 01:
Let's go to that.

[00:19:54] Speaker 01:
Let's go to that analysis.

[00:19:56] Speaker 03:
In particular, that they were making presented testimony that they, the other side, was making similar products prior to issuance of the patent.

[00:20:04] Speaker 01:
OK.

[00:20:05] Speaker 01:
Perfect.

[00:20:06] Speaker 01:
That's erroneous.

[00:20:08] Speaker 01:
Because when it came to their summary judgment motion on invalidity, they had an opportunity to put that evidence in.

[00:20:17] Speaker 01:
And not only didn't they, they couldn't, because the very things they put in, the court rejected.

[00:20:23] Speaker 01:
They put in some vague screenshots.

[00:20:26] Speaker 01:
They put in some schematics that had nothing to do with it.

[00:20:29] Speaker 01:
And so when they had the opportunity to show that they had invalidating sales or prior sales that would exculpate them, they couldn't do it.

[00:20:41] Speaker 01:
And so why is this finding erroneous?

[00:20:43] Speaker 01:
This finding is erroneous because the judge previously found that they hadn't put forth any evidence of it.

[00:20:50] Speaker 01:
What is this statement based on?

[00:20:54] Speaker 01:
It's based upon a uncorroborated statement made by a layperson at the trial that we were making them.

[00:21:02] Speaker 01:
But there was no evidence of it.

[00:21:03] Speaker 01:
They didn't bring a single shred of evidence to show that they had made the product like it or ever sold it in Europe or in the United States.

[00:21:12] Speaker 01:
There is no evidence of it.

[00:21:14] Speaker 01:
Zero.

[00:21:15] Speaker 03:
There was no citation to the record.

[00:21:16] Speaker 03:
If they had made the product and sold it six months before you applied for the patent, that wouldn't have been invalidating it, would it?

[00:21:29] Speaker 01:
I think at that point in time, 102B was a year.

[00:21:34] Speaker 01:
Right.

[00:21:34] Speaker 01:
Had to have been a year before.

[00:21:36] Speaker 03:
So they might have done that, and still that wouldn't have been copying your patent, but not be invalidating.

[00:21:48] Speaker 01:
Worse.

[00:21:49] Speaker 01:
There was no evidence.

[00:21:50] Speaker 03:
The record is so thin on this.

[00:21:52] Speaker 01:
It's a little hard to... On this point it isn't, because the judge found in his summary judgment ruling there is no evidence of an invalidating sale in the United States.

[00:22:01] Speaker 01:
Zero.

[00:22:02] Speaker 01:
None.

[00:22:04] Speaker 01:
So how can he conclude that they were making devices and therefore they thought they were okay?

[00:22:09] Speaker 01:
He couldn't.

[00:22:10] Speaker 03:
He's making conflicting... There's testimony which you think is not terribly

[00:22:17] Speaker 03:
well-grounded that there is testimony, right?

[00:22:21] Speaker 01:
Yes.

[00:22:21] Speaker 01:
And when we asked them to corroborate it, they were unable to.

[00:22:24] Speaker 01:
And when they had the opportunity to corroborate it, they produced nothing.

[00:22:29] Speaker 01:
So on that point, we believe that was an erroneous finding.

[00:22:33] Speaker 03:
So and then the next thing Judge Stewart says is there's evidence they sought the advice of counsel.

[00:22:38] Speaker 03:
We don't know what

[00:22:39] Speaker 03:
and were informed that they could continue to sell their products.

[00:22:43] Speaker 01:
Well, everybody can be informed that they can continue to sell.

[00:22:46] Speaker 01:
The question is, is there a risk or is there a liability?

[00:22:49] Speaker 01:
But in this case, let's bite it off in pieces.

[00:22:55] Speaker 03:
I'm sorry, did you seek in discovery this opinion since they were relying on it?

[00:23:00] Speaker 01:
We asked them if there was one, and they did not produce anything to us in discovery or at the trial court.

[00:23:08] Speaker 01:
The court found in its earlier findings there was no written opinion.

[00:23:13] Speaker 01:
That was a finding of fact, number 20, in the court's first findings.

[00:23:18] Speaker 01:
No written opinion.

[00:23:19] Speaker 01:
So what are we left with?

[00:23:20] Speaker 01:
We're left with an oral.

[00:23:21] Speaker 01:
So let's take those.

[00:23:22] Speaker 03:
And did you have the identity of who gave this oral opinion?

[00:23:26] Speaker 01:
No.

[00:23:30] Speaker 01:
And we don't even know if it was counsel who was competent in these matters.

[00:23:34] Speaker 01:
But I can't really go there because I don't know who it was.

[00:23:37] Speaker 01:
So what do we have?

[00:23:38] Speaker 01:
If it's oral, there can only be a couple of things that happen.

[00:23:42] Speaker 01:
First, that oral opinion could have said, well, based upon the denial of the preliminary injunction in New York, you can go ahead.

[00:23:49] Speaker 01:
But this court has already determined that that was an insufficient legal basis.

[00:23:54] Speaker 01:
OK?

[00:23:55] Speaker 01:
So we cross that one off.

[00:23:57] Speaker 01:
So that one's no good.

[00:23:58] Speaker 01:
So if the oral opinion was that they infringed

[00:24:03] Speaker 01:
then they were reckless, and they went forward knowing they infringed.

[00:24:06] Speaker 01:
If that oral opinion was they didn't infringe, they never told anybody what that basis was.

[00:24:14] Speaker 01:
They had opportunities in the summary judgment proceeding, and they never showed what it was.

[00:24:20] Speaker 01:
And what did the court say?

[00:24:21] Speaker 01:
That their basis was objectively unreasonable.

[00:24:26] Speaker 01:
And that there was no way a litigant could rely upon their non-infringement case.

[00:24:30] Speaker 01:
So if the oral opinion was non-infringement, we still don't know what it was, because they never presented it to us.

[00:24:36] Speaker 01:
And apparently, they didn't follow it.

[00:24:39] Speaker 01:
OK, so if their oral opinion was the case patent was invalid, again, they never presented it to us or to the court.

[00:24:49] Speaker 01:
So that doesn't make sense.

[00:24:51] Speaker 01:
And if the oral opinion was that it was valid and they went forward, then they were dubiously reckless.

[00:25:01] Speaker 01:
But there's no evidence in the record as to what that oral opinion was.

[00:25:07] Speaker 03:
Can I just ask you one thing I'm not remembering if I ever knew.

[00:25:14] Speaker 03:
What opportunities, for example, on remand, did you all have the opportunity to present new evidence?

[00:25:23] Speaker 03:
No.

[00:25:25] Speaker 03:
Did the judge say, we're not going to do that, I'm just going to rule?

[00:25:28] Speaker 03:
Did you have an oral argument in front of the judge?

[00:25:30] Speaker 03:
Sure.

[00:25:32] Speaker 03:
Was there new legal filings after our remand?

[00:25:35] Speaker 01:
There was.

[00:25:36] Speaker 01:
He allowed a paper filing.

[00:25:41] Speaker 03:
But said, did he forbid the submission of new evidence?

[00:25:46] Speaker 01:
He didn't offer any, and he didn't accept any.

[00:25:50] Speaker 03:
and you didn't ask.

[00:25:52] Speaker 03:
When you said you didn't accept any, I mean, did you ask and he said no?

[00:25:55] Speaker 01:
I don't recall either party asking to supplement with additional information.

[00:26:00] Speaker 01:
But the point here is, if he says they relied on counsel, what was it and what effect did it have on the party?

[00:26:06] Speaker 01:
It appears to be undisclosed, and you cannot hide behind some undisclosed defense for a basis of non-infringement or invalidity.

[00:26:17] Speaker 01:
It just smacks against every rule of due process.

[00:26:20] Speaker 02:
The judge's willfulness finding, was it limited to willfulness beginning after he had ruled on summary judgment of validity and infringement?

[00:26:31] Speaker 01:
No, he said it began at least then.

[00:26:34] Speaker 01:
But he recognized that because it was a legally insufficient basis to rely upon the denial of the preliminary injunction in the New York case, that they had never presented at any time

[00:26:46] Speaker 02:
But I guess I'm trying to figure out what the judge meant by that.

[00:26:50] Speaker 02:
I think one reading would be that in his view, the willfulness began as soon as he issued his summary judgment orders confirming the validity and confirming infringement.

[00:27:05] Speaker 02:
And so the window of infringement is actually during this later stage of the litigation.

[00:27:12] Speaker 02:
Is that a fair reading of his opinion?

[00:27:16] Speaker 01:
That's not how I read it, Judge Chen.

[00:27:18] Speaker 01:
I read it him saying it began at least then because he did the analysis that showed they never offered a non-infringement or infidelity opinion before then.

[00:27:29] Speaker 01:
They were on notice with a cease and desist letter.

[00:27:31] Speaker 01:
The court went through this.

[00:27:32] Speaker 01:
They were on notice and they did nothing to come forth with that defense even up to the time of the summary judgment.

[00:27:42] Speaker 01:
So I don't read it as being there was only willful infringement after his decision.

[00:27:48] Speaker 04:
And so I'd like to go on to a couple of these other points.

[00:27:52] Speaker 03:
Just so you know, you have about a minute left.

[00:27:55] Speaker 03:
Right.

[00:27:56] Speaker 03:
If you want to stand up a second time after

[00:27:59] Speaker 03:
Mr. Coffey stands up.

[00:28:01] Speaker 03:
You better save the time now.

[00:28:02] Speaker 03:
You don't have to, but it's up to you.

[00:28:04] Speaker 01:
Okay, of my total time?

[00:28:05] Speaker 01:
That's right.

[00:28:05] Speaker 01:
Thank you.

[00:28:06] Speaker 01:
I'll take it.

[00:28:14] Speaker 05:
I'll be very brief.

[00:28:16] Speaker 05:
Your Honours, Mr. Zenger is making a pre-octane argument.

[00:28:22] Speaker 05:
He agrees in his brief that the

[00:28:27] Speaker 05:
evaluation before this court should be abuse of discretion.

[00:28:31] Speaker 05:
But then he goes through in his brief at page 29 and he cites to Judge Stewart's decision and he cherry picks each of the individual factual determinations that Judge Stewart looked at in denying enhanced damages.

[00:28:49] Speaker 03:
Right, but he's perfectly entitled to do that.

[00:28:51] Speaker 03:
It's an abuse of discretion among other things if you rely

[00:28:56] Speaker 03:
too much, I'm using the shorthand, on clearly erroneous findings.

[00:29:00] Speaker 03:
So he's entitled to walk through that paragraph with the seven or eight Read Against Portent findings and say, this one's clearly a clear error, this one's a clear error, and I lost five to three on the finding, so I can show that four of the five were wrong, and so you've got to do it again.

[00:29:16] Speaker 03:
The question is, does he have the goods to back up the argument that a bunch of those adverse findings were clearly erroneous?

[00:29:25] Speaker 05:
I agree with you.

[00:29:25] Speaker 05:
And our position is that he doesn't have the goods.

[00:29:28] Speaker 05:
And that reliance in octane and the cases decided consistent with that.

[00:29:35] Speaker 05:
Keep in mind, and I know your honors are familiar with that line of cases, where our Supreme Court determined that they eliminated clear and convincing evidence on appeal.

[00:29:47] Speaker 05:
And they imposed on the trial judge

[00:29:52] Speaker 05:
the determination of whether enhanced damages were appropriate based upon a totality of the circumstances.

[00:29:57] Speaker 05:
So my position with respect to abuse of discretion, and I agree with you completely, Your Honor, that he can go through and analyze that.

[00:30:05] Speaker 05:
That's his prerogative.

[00:30:07] Speaker 05:
But the issue is that my suggestion to the court is that

[00:30:11] Speaker 05:
It's not a de novo review.

[00:30:14] Speaker 05:
We understand that.

[00:30:15] Speaker 05:
We understand that.

[00:30:16] Speaker 00:
And also, Octane relates to attorney fees, not enhanced damages and for willfulness.

[00:30:21] Speaker 05:
Well, I would cite to Highmark, Octane, and Halo as a basis for the trilogy of cases which combined talk about enhanced damages and attorney fees.

[00:30:31] Speaker 02:
Well, let me ask you this.

[00:30:32] Speaker 02:
Why didn't the district court clearly err in giving credit to

[00:30:40] Speaker 02:
opinion of counsel in this particular situation when there was no written opinion and there was nothing in the record.

[00:30:48] Speaker 02:
So how could he say that this was somehow an authentic

[00:30:53] Speaker 02:
legitimate opinion of counsel that protected you.

[00:30:56] Speaker 05:
Because there was testimony of Mr. Stonkas at trial and Mr. Zitko.

[00:30:59] Speaker 02:
And to give you another example... Was it a non-infringement opinion or was it an invalidity opinion?

[00:31:04] Speaker 05:
I'm sorry?

[00:31:05] Speaker 02:
Was it a non-infringement opinion or was it an invalidity opinion?

[00:31:09] Speaker 05:
I think it was both.

[00:31:10] Speaker 02:
And our position is... How could it be a non-infringement opinion when your side didn't present any evidence or argument for non-infringement in the summary judgment proceeding?

[00:31:21] Speaker 05:
The attorney who represented

[00:31:23] Speaker 05:
in New York when the case was dismissed in New York was the attorney who was a patent attorney who provided the opinion.

[00:31:35] Speaker 05:
Okay, it was not in writing, but it was provided to them at that time.

[00:31:40] Speaker 05:
We have concerns also with the elements that Judge Stewart went through, Your Honor.

[00:31:46] Speaker 05:
For instance, what needs to be, I think, brought out is that the case in the Eastern District of New York was dismissed on jurisdictional grounds in 2006.

[00:31:55] Speaker 05:
Aqua Shield didn't file their complaint in Utah until three years later, 2009.

[00:32:02] Speaker 05:
How can my client, and that's our understanding.

[00:32:05] Speaker 05:
Was the case transferred or did they?

[00:32:06] Speaker 05:
It was transferred, but then they filed a complaint, and that's what activated the case and got it started.

[00:32:11] Speaker 05:
So our position is, is they sat on their rates for three years.

[00:32:14] Speaker 05:
The complaint without dispute was filed in Utah in 2009.

[00:32:19] Speaker 05:
The dismissal in the Eastern District of New York was in 2006.

[00:32:23] Speaker 05:
And so that case didn't even get started until that time, Your Honor.

[00:32:29] Speaker 05:
You have exceeded your time, and I thank you for your argument.

[00:32:34] Speaker 03:
I thank the court for its patience.

[00:32:36] Speaker 03:
Thank you.

[00:32:36] Speaker 03:
Mr. Zenger, I think you have about a minute.

[00:32:38] Speaker 01:
I would just add with respect to your question, Judge Chen, about this infringement opinion.

[00:32:44] Speaker 01:
We cited in our briefs the testimony of Mr. Stonkas, who was just now mentioned.

[00:32:51] Speaker 01:
And I asked him, what was the basis of that opinion?

[00:32:54] Speaker 01:
He couldn't tell me.

[00:32:57] Speaker 01:
And then I said,

[00:32:59] Speaker 01:
Well, give me some idea.

[00:33:00] Speaker 01:
Was it non-infringement?

[00:33:02] Speaker 01:
Was it invalidity?

[00:33:02] Speaker 01:
He said, no, it was mostly court rulings.

[00:33:07] Speaker 01:
And there was only one court ruling, and that was the denial of the PI in New York.

[00:33:12] Speaker 01:
It is our view, Your Honors, that Judge Stewart abused his discretion because there is clearly evidence of copying when he says there was none.

[00:33:23] Speaker 01:
There was evidence of harm.

[00:33:25] Speaker 01:
There was evidence of concealment.

[00:33:27] Speaker 01:
And his factors, as we set forth in our briefs, are either clearly erroneous or an error in judgment.

[00:33:34] Speaker 01:
And with respect to the request for damages, the Fromson case clearly says the judge can base damages on gross sales.

[00:33:43] Speaker 01:
They admitted in their brief, that's the one the judge chose, and it's proper.

[00:33:46] Speaker 01:
Thank you.

[00:33:47] Speaker 03:
Thank you, Mr. Zenger.

[00:33:48] Speaker 03:
Thank you to all counsel, and the case is submitted.