[00:00:00] Speaker 03:
For argument, it's 16-1-0-2-6, Aztec landmark versus CMO.

[00:01:39] Speaker 01:
Mr. Chen, whenever you're ready.

[00:01:55] Speaker 01:
Mr. Chen, I hope you're not going to need all that material, but I'm glad you brought it just in case.

[00:02:08] Speaker 06:
Proceed.

[00:02:10] Speaker 06:
Good morning, Your Honors.

[00:02:11] Speaker 06:
May it please the court, I am Kyle Chen from Cooley, representing the appellants.

[00:02:22] Speaker 06:
Your Honors, I would like to begin today's oral argument by discussing an important legal issue, which I believe is one of first impression for this court.

[00:02:38] Speaker 06:
So this issue is about damages.

[00:02:42] Speaker 06:
Specifically, the awarded royalty rate of 14.5% in this case must be vacated because it is based on unproven lost profits.

[00:02:59] Speaker 04:
It's not the lost profits.

[00:03:00] Speaker 04:
It's the plaintiff's profits.

[00:03:02] Speaker 04:
This was based on an estimated

[00:03:04] Speaker 04:
expected profits of the defendant.

[00:03:07] Speaker 04:
Completely different concepts, theories, facts.

[00:03:15] Speaker 06:
So if Your Honor would allow me to.

[00:03:19] Speaker 04:
Well, I will tell you, I want to talk almost exclusively about the remedy, the injunction question here.

[00:03:25] Speaker 04:
So I just don't want time to, in my view, might be wasted.

[00:03:32] Speaker 04:
on a topic that I'm not really seeing your argument on, namely the damages question.

[00:03:37] Speaker 04:
OK.

[00:03:39] Speaker 04:
So if you have something at least that you can sharply tell me, then you won't take so much time away from what I think is more contestable.

[00:03:46] Speaker 06:
Sure, sure.

[00:03:48] Speaker 06:
Just Toronto.

[00:03:49] Speaker 06:
So let me just very quickly go through it.

[00:03:52] Speaker 06:
The idea is that Ashtag's expert admitted that what she did was that she backed

[00:04:01] Speaker 06:
asset's profit margin into an effective royalty rate in order to get to the same amount of lost profit, and they called it a reasonable royalty.

[00:04:15] Speaker 06:
So they didn't prove buffer causation under Pentwood.

[00:04:21] Speaker 04:
If this approach... The pendulum is about but for causation in the sense of what the plaintiff would have gotten had there not been infringement.

[00:04:28] Speaker 04:
You get a royalty even if you as the plaintiff would not have gotten a penny had there not been infringement.

[00:04:35] Speaker 06:
That is absolutely correct, Your Honor.

[00:04:37] Speaker 04:
But the problem here is that... And in a hypothetical negotiation, if you're trying to assess the value of the thing that was taken, the value of what was taken, which is what we said royalty is about,

[00:04:49] Speaker 04:
the value necessarily from the infringer side of the table is what do I expect to get out of a deal if I enter into one, which is what are the incremental profits, expected profits over what else I might be able to do, and the actual profits have a very strong evidentiary bearing on the expected profits.

[00:05:07] Speaker 04:
We said this in AquaShield and Carnegie Mellon.

[00:05:09] Speaker 04:
We said it before.

[00:05:11] Speaker 04:
I just don't understand why there's some sort of problem here with

[00:05:19] Speaker 04:
What was that?

[00:05:20] Speaker 06:
Well, the issue is that if you have a profit in mind, and you use a profit margin to back into a royalty rate, such that you get to what they call the expected profit, but call it the reasonable royalty, then economically what you're actually getting is lost profits.

[00:05:43] Speaker 04:
lost profits is the patent owner's lost profits, not the defendant's expected profits from entering into a deal.

[00:05:49] Speaker 04:
Two different people, two different sides of the table.

[00:05:53] Speaker 06:
Yeah.

[00:05:53] Speaker 06:
Your Honor, that's absolutely correct.

[00:05:57] Speaker 06:
So what they did was that they are actually using the backing, the profit margin, into the effective royalty rate, which is actually a different number.

[00:06:08] Speaker 06:
Based on the defendant's sales price,

[00:06:13] Speaker 06:
and then get to the same growth amount that is effectively the same as the profit that they would have lost had they made the sales of CMI, the appellate.

[00:06:30] Speaker 06:
So if I may, I would like to bring your honor's attention to page A077110.

[00:06:54] Speaker 04:
I'm sorry, 7-7-1-10, the numbers don't go down.

[00:06:59] Speaker 06:
Yes, 8-0-7-7-1-0.

[00:07:02] Speaker 06:
I'm sorry, I apologize.

[00:07:14] Speaker 06:
So this is what happened.

[00:07:18] Speaker 06:
So on the left hand side, there's this confidential profit margin

[00:07:24] Speaker 06:
So their expert admitted that she started with that and backed that into a royalty rate of 16% that they were asking per unit.

[00:07:41] Speaker 06:
So then what happens is that in the end, the per unit royalty ended up almost exactly the same as the per unit profit

[00:07:53] Speaker 06:
that they would have lost had they could prove the buffer causation that all the CMI sales actually were made by Aztec.

[00:08:09] Speaker 06:
So this is the economic reality.

[00:08:13] Speaker 06:
And the mission by Aztec's expert is actually

[00:08:23] Speaker 06:
a 0-6-1-3-4.

[00:08:26] Speaker 06:
And I quote, this is her testimony.

[00:08:33] Speaker 06:
And in this matter, I derived an effective or a profit margin that Aztec received only on the sales from Corsair of a confidential percent.

[00:08:50] Speaker 06:
And so using that margin, I can

[00:08:53] Speaker 06:
back into all of the expected effective rates.

[00:09:01] Speaker 06:
So that's where the problem is, because if you do that, if this approach were allowed to stand, what happens is that no one will ever try to prove lost profits anymore, because it's additional burden.

[00:09:20] Speaker 06:
No one will try to prove backward causation for lost profits.

[00:09:24] Speaker 06:
Rather, they would just back the profit margin into an effective royalty rate.

[00:09:32] Speaker 04:
One might lose, looking at it from the plaintiff's point of view, a lot more profits than you could ever get as a royalty, because the defendant would never agree to that.

[00:09:44] Speaker 06:
Well, in this case, actually, that's our position, because the amount they're asking will result in a

[00:09:52] Speaker 06:
huge profit margin after the royalty is paid, and such a tiny one for us, and it would not be reasonable.

[00:10:02] Speaker 06:
And actually, on the next page, A07711, it shows the situation where before the 16% royalty, on the left-hand side and the right-hand side are the

[00:10:22] Speaker 06:
rose profit margins.

[00:10:24] Speaker 06:
After the 16% rate, they were asking, we got such a tiny amount, they got a huge amount.

[00:10:32] Speaker 06:
And exactly like Judge Toronto just mentioned, if you're doing that, basically you ended up with such a disparity in the returns that it would be very hard for the accused infringer.

[00:10:49] Speaker 06:
to agree to such a rate in the hypothetical negotiation.

[00:10:54] Speaker 04:
Can I ask you to switch to the injunction?

[00:10:57] Speaker 04:
Of course.

[00:10:58] Speaker 04:
OK.

[00:10:58] Speaker 04:
And I guess I have some specific questions.

[00:11:02] Speaker 04:
First, as a background, I gather CMI USA at this point is an independent company not owned or controlled by Cooler Master.

[00:11:14] Speaker 04:
Can I just call Cooler Master the Taiwanese company?

[00:11:16] Speaker 06:
Yes, sure.

[00:11:17] Speaker 06:
Cooler Master.

[00:11:18] Speaker 06:
That is correct, basically.

[00:11:19] Speaker 06:
Was that always true?

[00:11:22] Speaker 06:
Based on the information we have, CMIUSA is owned by an entity that's different from Cooler Master.

[00:11:31] Speaker 04:
I'm sorry.

[00:11:32] Speaker 04:
What I changed was the tense, the past versus the present.

[00:11:37] Speaker 04:
It's a little bit odd to me to expect that a company once called Cooler Master USA, now called CMI USA, never had any ownership or control relationship to Cooler Master.

[00:11:51] Speaker 04:
And I'm just asking if that's true.

[00:11:55] Speaker 06:
As far as I know, that is actually true.

[00:11:58] Speaker 06:
They still have business relationships in doing business in terms of

[00:12:06] Speaker 06:
the CMIUSA, once called Cooler Master.

[00:12:09] Speaker 04:
Can I ask you a bunch of these little specific questions?

[00:12:13] Speaker 04:
When precisely did the injunction in this case take effect on September 22, 2015, when the judge said he was going to issue it?

[00:12:21] Speaker 04:
Or was it not until October 19 when the amended judgment was entered?

[00:12:27] Speaker 06:
The injunction was in effect the day the... That's actually how we view it.

[00:12:34] Speaker 06:
the day when the order was issued, which was September 22nd.

[00:12:38] Speaker 04:
And you have two clients here, CMI and Cooler Master.

[00:12:43] Speaker 04:
Did you inform Cooler Master of that injunction right after September 22nd?

[00:12:50] Speaker 06:
So on that, I need to clarify a little bit.

[00:12:52] Speaker 06:
So before, Cooler Master was dismissed in September 2014.

[00:13:00] Speaker 06:
So Cooler Master did not have console.

[00:13:03] Speaker 06:
We did not represent Cooler Master.

[00:13:05] Speaker 06:
It's only after the injunction... Right, so let me just ask you.

[00:13:11] Speaker 04:
Did you, after September 22nd, pretty immediately inform Cooler Master that there was an injunction running against them?

[00:13:25] Speaker 04:
By October 30th, they actually moved to intervene and stay.

[00:13:28] Speaker 04:
So somewhere between there's somebody, maybe they read about it in the newspaper.

[00:13:31] Speaker 04:
I suspect not them.

[00:13:34] Speaker 06:
I think in our discussion with CMI, Cooler Master was informed of the injunction someplace.

[00:13:46] Speaker 06:
Just right now, I can't.

[00:13:49] Speaker 06:
to pinpoint the exact date.

[00:13:52] Speaker 04:
I'm asking these questions in part because it seems to me that one of the kinds of arguments that you do not make in your blue brief is an independent argument about lack of notice and an opportunity to contest the Rule 65 facts.

[00:14:08] Speaker 04:
You make an argument that

[00:14:10] Speaker 04:
The dismissal with prejudice simply means you can't be enjoined.

[00:14:14] Speaker 04:
I'm going to put that aside.

[00:14:15] Speaker 04:
You make an argument.

[00:14:17] Speaker 04:
You make an extraterritoriality argument.

[00:14:19] Speaker 04:
Put that aside.

[00:14:21] Speaker 04:
And you make what is, I think, the core of your argument that when you don't even make an argument, a separate argument, that naming Cooler Master is improper unless

[00:14:33] Speaker 04:
the substantive standards of acting in concert or being legally identified with a successor to are not met.

[00:14:40] Speaker 04:
And you make the argument that the injunction reaches independent conduct and you're not legally identified with CMI.

[00:14:49] Speaker 04:
And you don't make a separate argument.

[00:14:51] Speaker 04:
We did not have the opportunity to contest the facts about whether you're really a successor or not.

[00:15:00] Speaker 06:
Well, I guess

[00:15:03] Speaker 06:
The reason we didn't make that argument was one of credibility.

[00:15:08] Speaker 06:
The issue here is, obviously, CMI continues to have a business relationship with Cooler Master.

[00:15:17] Speaker 06:
Although we can probably argue, we could have argued, that Cooler Master did not have proper notice.

[00:15:25] Speaker 06:
Like say, for example, the injunction was never properly served on Cooler Master in Taiwan.

[00:15:33] Speaker 06:
Coolmaster, at least based on what I know, was informed of the injunction pretty soon.

[00:15:45] Speaker 06:
It's within that one month period, pretty soon after the injunction was issued.

[00:15:49] Speaker 06:
So they talked to us and hired us to represent them, to intervene and to file their notice of appeal.

[00:16:00] Speaker 06:
And because of that business relationship, I actually don't, standing here today, I actually don't know if throughout the process that, throughout the process whether

[00:16:22] Speaker 06:
they were in a position to argue lack of notice.

[00:16:26] Speaker 04:
But in any event, you have not made a separate argument.

[00:16:29] Speaker 04:
We haven't made a separate argument.

[00:16:30] Speaker 04:
Your argument is, again, putting aside extraterritoriality and putting aside the dismissal of prejudice argument that because the injunction here reaches conduct by cooler master, undertaken on a going forward basis, not

[00:16:45] Speaker 04:
In conjunction with the CMIU that's correct, but the injunction reaches too far as contempt would reach too far That's right.

[00:16:54] Speaker 04:
Is that exactly the same whether they're named or not?

[00:16:57] Speaker 06:
That's right.

[00:16:57] Speaker 06:
That's actually the key argument.

[00:16:59] Speaker 04:
So if we were to send it back for further inquiry into that, what would be the facts that would be relevant to that question?

[00:17:08] Speaker 04:
Or do you think that there are no more relevant facts, and as a matter of law, you simply cannot be covered, whether by contempt or naming, by an injunction reaching your now independent content?

[00:17:21] Speaker 06:
Your Honor, my time is up.

[00:17:22] Speaker 06:
May I?

[00:17:23] Speaker 06:
Please proceed.

[00:17:25] Speaker 06:
OK, thank you.

[00:17:27] Speaker 06:
Standing here right now, I don't think we will need any additional facts.

[00:17:33] Speaker 06:
The situation is that, as Your Honor has pointed out, the injunction reached Cooler Masters activities completely unrelated to CMI.

[00:17:47] Speaker 06:
And we believe under the law, if the liability is acting in concert,

[00:17:52] Speaker 06:
then obviously the scope of injunction should only reach the activities that can be considered to be acting in concert with the actual enjoying party as opposed to treating Cooler Master as if it were

[00:18:07] Speaker 06:
an independent party that went through trial and got enjoined.

[00:18:11] Speaker 04:
My reading of the case law on this is that while sometimes these two substantively different things are put under the same heading, in fact there are two separate substantively different things.

[00:18:25] Speaker 04:
One is when the person subject to the injunction, whether by contempt or name, is acting to help

[00:18:31] Speaker 04:
the continuing violation by the named defendant, a defendant who actually had the opportunity to contest the underlying liability.

[00:18:39] Speaker 04:
But the other is persons who are treated as legal successors.

[00:18:48] Speaker 04:
And a successor here may or may not mean something narrow.

[00:18:52] Speaker 04:
But for that, the successor can be subject to the injunctive obligations

[00:19:00] Speaker 04:
even if the original defendant disappears, is dissolved.

[00:19:04] Speaker 04:
And the question, I think, is, are you one of those?

[00:19:08] Speaker 04:
Half of you, the Cooler Master, half of you, are you one of those?

[00:19:11] Speaker 06:
Well, Cooler Master is not one of those.

[00:19:14] Speaker 06:
And specifically, as Your Honor just pointed out, there is this acting consular liability, and there is a separate, different liability

[00:19:24] Speaker 06:
which is legally identified, which I guess is what Your Honor is referring to.

[00:19:31] Speaker 06:
So given that Cooler Master and CMIUSA, based on the record, they are separate corporations, and Cooler Master was dismissed with prejudice and did not participate, the District Court actually never found

[00:19:49] Speaker 06:
legally identified form of liability.

[00:19:52] Speaker 02:
Is there an issue raised?

[00:19:54] Speaker 02:
Did the other side make that allegation, or was that just never on the table and never discussed?

[00:20:01] Speaker 06:
It's a little bit unclear, because when they cited case law, some of the case law did mention both form of liability.

[00:20:09] Speaker 06:
But based on my understanding of their briefs, their conclusion is still only that Cooler Master was

[00:20:18] Speaker 06:
acting in concert with CMI USA, not that Cooler Master was legally identified with CMI USA.

[00:20:28] Speaker 06:
So the latter part was not in their conclusion, and the latter part of being legally identified was never found by the district court.

[00:20:42] Speaker 06:
So as a result.

[00:20:44] Speaker 03:
We've exceeded your rebuttal time and gone over that too.

[00:20:47] Speaker 03:
So why don't we hear from the other side.

[00:20:54] Speaker 05:
Good morning, your honor.

[00:21:04] Speaker 05:
May it please the court.

[00:21:07] Speaker 05:
Jump right into the injunction, unless you have any questions about the other issues.

[00:21:10] Speaker 03:
Yeah, could you tell us whether or not, I mean, if we're on to this question about whatever we call a legal successor or successor, I didn't see that that was an argument that you pressed in order to get this.

[00:21:21] Speaker 05:
As far as formal corporate succession, we didn't pursue that because there was no evidence of that.

[00:21:28] Speaker 05:
What we have is Cooler Master purporting to be a separate entity.

[00:21:33] Speaker 05:
But what we have in the record,

[00:21:35] Speaker 05:
is acting in concert, that Cooler Master and CMI are acting in concert together.

[00:21:40] Speaker 03:
I get that.

[00:21:41] Speaker 03:
I get that you have that they're acting in concert.

[00:21:42] Speaker 03:
My question with respect to the injunction that was imposed, however, is it seems to me, so you can tell me why I'm wrong if I'm wrong, that you could get Cooler Master acting in conjunction with CMI under paragraph one of the injunction.

[00:21:57] Speaker 03:
Paragraph two of the injunction seems to me quite different.

[00:22:01] Speaker 03:
It seems to go to Cooler Master activities with persons completely outside, not related to in any way, shape, or form, CMI.

[00:22:11] Speaker 05:
This is the notice requirement.

[00:22:13] Speaker 03:
Well, I'm just asking you, is that, am I reading it correctly, that any conduct, future conduct in connection between, in concert between CMI and Cooler Master

[00:22:24] Speaker 03:
contempt would be covered under paragraph one of the injunction.

[00:22:27] Speaker 03:
Am I right?

[00:22:28] Speaker 05:
It would in my automatic action of 65D.

[00:22:32] Speaker 05:
OK.

[00:22:33] Speaker 03:
So that's under paragraph one.

[00:22:35] Speaker 03:
But we are contesting, or he is contesting, paragraph two.

[00:22:39] Speaker 03:
And it seems to me paragraph two is something other than one.

[00:22:43] Speaker 03:
And so it goes only, or at least, to conduct the cooler might engage in involving parties and entities completely separate and distinct from CMI.

[00:22:54] Speaker 03:
Am I reading correctly the two portions of this?

[00:22:57] Speaker 05:
You are reading correctly that there are two different paragraphs, one naming CMI, that it can't

[00:23:02] Speaker 05:
commit infringement in the United States, the other one saying... With or without Kuhler?

[00:23:06] Speaker 03:
With Kuhler.

[00:23:07] Speaker 03:
I mean, wouldn't Kuhler be in contempt if CMI and Kuhler proceeded to conduct their infringement activities?

[00:23:14] Speaker 03:
Wouldn't both parties be in contempt under one?

[00:23:16] Speaker 05:
Under that paragraph, under one, yes, if CMI were to continue its infringing activities.

[00:23:21] Speaker 03:
Okay.

[00:23:21] Speaker 03:
So what does two cover then?

[00:23:23] Speaker 03:
It covers... Well, so what two covers...

[00:23:25] Speaker 03:
does not cover, covers activities that are completely independent of anything CMI is doing.

[00:23:32] Speaker 05:
It doesn't and here's why.

[00:23:33] Speaker 05:
It doesn't, it requires anything that violates paragraph two which is Cooler Master can't infringe in the United States.

[00:23:42] Speaker 05:
The only way that can happen is with CMI's cooperation because remember Cooler Master and CMI have a pre-verdict agreement

[00:23:51] Speaker 05:
that any activity in the United States belongs to CMI.

[00:23:55] Speaker 04:
Can you clarify this?

[00:23:56] Speaker 04:
At least when I checked all the passages that you cited, nothing in there said that that agreement wasn't terminable at will by Guler Master.

[00:24:08] Speaker 05:
It was an oral agreement.

[00:24:09] Speaker 05:
They certainly didn't put any of that information in the record.

[00:24:12] Speaker 04:
What we had in the record... But we do not, in fact, have an evidentiary basis for saying only if CMI USA agrees can Cooler Master start using different avenues into the United States.

[00:24:26] Speaker 05:
Well, if it does, it needs CMI's permission to do that.

[00:24:30] Speaker 05:
Not if it's terminable at that well.

[00:24:32] Speaker 05:
But there's no evidence that it's terminable at that well.

[00:24:33] Speaker 04:
All we have in the record... I'm sorry, there's no evidence either way.

[00:24:37] Speaker 05:
There is the Cooler Master witness at the site where he talks about the relationship they have with Cooler Master and how the parties are very careful that when a product is coming into the United States, that's going to be CMI's sale.

[00:24:53] Speaker 04:
RR is present tense.

[00:24:56] Speaker 05:
Well, in present tense, if they're going to change the agreement, they're going to change the agreement with CMI.

[00:25:02] Speaker 05:
in the record that says that Cooler Master can do this unilaterally.

[00:25:06] Speaker 04:
Or the other way.

[00:25:06] Speaker 04:
But you've just made an argument that we can conclude that in order for Cooler Master to reroute its products into the United States through some distributor other than CMI USA, CMI USA has to agree.

[00:25:23] Speaker 04:
I don't see the basis for that in the record.

[00:25:25] Speaker 05:
And there's also the problem that Cooler Master and CMI

[00:25:29] Speaker 05:
were worked together to develop the products.

[00:25:32] Speaker 05:
They worked together to market the products in the United States.

[00:25:34] Speaker 05:
They worked together to price the products in the United States.

[00:25:36] Speaker 05:
So there's that basis of the district courts acting in concert as well.

[00:25:41] Speaker 03:
Can I go back, though?

[00:25:42] Speaker 03:
I mean, I guess maybe you're not understanding my question, I think, because you're not answering it.

[00:25:48] Speaker 03:
If they act in concert going forward, that activity by either Cooler Master or CMI, it seems to me, would be covered under paragraph one of the injunction.

[00:25:59] Speaker 03:
Am I wrong about that?

[00:26:01] Speaker 05:
I don't think you are.

[00:26:02] Speaker 03:
Okay, so I'm right.

[00:26:03] Speaker 03:
So all of that is covered by one.

[00:26:05] Speaker 03:
So what is covered by two?

[00:26:07] Speaker 03:
Is it not activities by Cooler Master that are absolutely separate, unconnected and discreet and unrelated to anything CMI might be doing?

[00:26:17] Speaker 05:
No, the way we always looked at that was Cooler Master, the reason that's legitimate is because Cooler Master was acting in concert with CMI.

[00:26:24] Speaker 03:
But you already told me that any future activities in which they are acting in concert, Cooler Master gets contempt under paragraph one.

[00:26:33] Speaker 03:
It would be covered.

[00:26:34] Speaker 03:
Wait, let me ask.

[00:26:37] Speaker 03:
What conduct does paragraph two get to that paragraph one does not cover?

[00:26:42] Speaker 05:
It doesn't cover any additional conduct.

[00:26:44] Speaker 05:
Let me explain why we put that in.

[00:26:46] Speaker 03:
It doesn't?

[00:26:46] Speaker 03:
OK, so we've established paragraph two doesn't cover any additional conduct.

[00:26:50] Speaker 05:
Paragraph two makes explicit what 65D already

[00:26:55] Speaker 05:
made implicit, which is persons acting in concert with CMI.

[00:27:01] Speaker 05:
It doesn't, but that was the basis for us asking for paragraph two, was to make explicit so that Cooler Master couldn't later

[00:27:15] Speaker 05:
complain that it didn't have notice.

[00:27:17] Speaker 05:
The reason for paragraph two was to provide notice to Cooler Master.

[00:27:20] Speaker 04:
The language here is getting in the way of the substance, including the language of Rule 65.

[00:27:27] Speaker 04:
Rule 65 uses in-concept language to refer to two different things.

[00:27:32] Speaker 04:
One, to bring it home to this case, would be Cooler Master doing stuff to assist CMI in itself, violating the injunction.

[00:27:44] Speaker 04:
The other is, if Cooler Master is legally identified with a successor to, with respect to this line of business, CMI, Cooler Master engaging in conduct that is importing, selling, et cetera, these products.

[00:28:03] Speaker 04:
Even if CMI decides to go into a wholly different line of work and isn't involved at all, is the latter covered by paragraph three?

[00:28:14] Speaker 05:
Cooler Master goes into business and CMI is not connected at all?

[00:28:20] Speaker 05:
Correct.

[00:28:21] Speaker 05:
Yeah, paragraph two would require that the two be acting in concert.

[00:28:24] Speaker 04:
Now, it doesn't require, it's not that... Let's get the paragraph numbers right, because paragraph three of the injunction, that's the one that starts Cooler Master Co.

[00:28:34] Speaker 04:
Limited.

[00:28:35] Speaker 05:
I'm sorry, yes.

[00:28:35] Speaker 04:
Does it cover activities, for example, Cooler Master,

[00:28:40] Speaker 04:
importing into the United States directly to some customer, completely bypassing CMI USA, the products listed in the injunction.

[00:28:52] Speaker 05:
Well, it still would because those infringing products were created by the two together.

[00:28:57] Speaker 05:
So that's another part of the acting in concert finding of the district board.

[00:29:00] Speaker 04:
So your view is that in concert does not actually require CMI to be doing anything more than it once did.

[00:29:08] Speaker 05:
Then it wants, for that aspect, correct.

[00:29:11] Speaker 05:
Right.

[00:29:12] Speaker 05:
Right.

[00:29:12] Speaker 05:
Because CMI and Cooler Master jointly developed the products.

[00:29:16] Speaker 05:
They came up with a marketing strategy on the products in the United States.

[00:29:19] Speaker 05:
They came together with pricing strategy sales.

[00:29:24] Speaker 03:
I don't understand why, if we're talking about just aiming at infringing products that have previously

[00:29:32] Speaker 03:
been created by those two parties acting in concert, why would that not be covered under paragraph two?

[00:29:40] Speaker 05:
And Your Honor, the reason we insisted on the other paragraphs was notice for Cooler Master, because this litigation has been... The question you asked earlier, has Cooler Master ever owned a CMI?

[00:29:54] Speaker 05:
We never got a straight answer to that question either.

[00:29:56] Speaker 03:
Well, let me ask you, could the same have been accomplished then?

[00:29:59] Speaker 03:
Look at paragraph two, if it says, and those persons

[00:30:02] Speaker 03:
including Cooler Master if they are active in the active concert of participation with them.

[00:30:08] Speaker 03:
Is that all you wanted to do was get Cooler Master's name and paragraph 2?

[00:30:12] Speaker 05:
For that paragraph, yes.

[00:30:14] Speaker 03:
But don't you understand the concern that paragraph 3, I think fairly read, so tell me if I'm wrong, paragraph 3 goes way beyond activities that Cooler Master may be

[00:30:27] Speaker 03:
engaged in that are related to CMI.

[00:30:30] Speaker 03:
I think that's a fair reading of paragraph three, is it not?

[00:30:34] Speaker 05:
I don't think it is when you look at the context of the parties, ACETEC, and the district court had never envisioned that completely independent conduct by Cooler Master would be covered by the injunction.

[00:30:48] Speaker 03:
So how would you need to rewrite paragraph two?

[00:30:50] Speaker 03:
It seems to me paragraph two

[00:30:53] Speaker 03:
seems to cover everyone.

[00:30:54] Speaker 03:
And you're saying, well, the only thing that paragraph two doesn't do is call out explicitly Cooler Master?

[00:31:01] Speaker 03:
Correct.

[00:31:01] Speaker 05:
Correct.

[00:31:02] Speaker 03:
So if you said, and those persons in active concert or participation with them who receive notice of the order, including Cooler Master, hereby immediately, so that would be OK?

[00:31:13] Speaker 05:
That would have been another way to do it.

[00:31:15] Speaker 03:
So why would we need to call out Cooler Master?

[00:31:19] Speaker 03:
I mean, this would cover paragraph two, as I understand it.

[00:31:22] Speaker 03:
would cover other persons as well, right?

[00:31:24] Speaker 03:
Anybody acting in those persons in active concert with them who receive notice of the order.

[00:31:29] Speaker 03:
Well, there's no dispute that they receive notice of the order, right?

[00:31:32] Speaker 03:
Correct, correct.

[00:31:33] Speaker 03:
So what I'm not understanding, my Kulin master would have to be called out.

[00:31:39] Speaker 05:
Well, let me explain what happened after the verdict.

[00:31:42] Speaker 05:
Asetek was faced with not only a spike

[00:31:45] Speaker 05:
in infringing sales after the verdict from CMI, but the nature of the sales coming into the United States changed as well in two ways that are in the record, but there are more as it turns out.

[00:31:57] Speaker 05:
But in the record, we have two parts.

[00:32:00] Speaker 05:
We have Cooler Master on its website, on Cooler Master's website, starts selling CMI products, makes CMI products available

[00:32:14] Speaker 05:
on Cooler Master websites and represents that they're Cooler Master products and these are websites that are in the U.S.

[00:32:21] Speaker 05:
They're not foreign websites.

[00:32:22] Speaker 05:
They're U.S.

[00:32:22] Speaker 05:
websites targeted at U.S.

[00:32:24] Speaker 05:
customers.

[00:32:24] Speaker 05:
More concerning to Asetek was all of a sudden AMD starts releasing an infringing product.

[00:32:32] Speaker 05:
AMD is partnering with Cooler Master to release an infringing product.

[00:32:36] Speaker 05:
Well, AMD is an American company importing products into the United States.

[00:32:41] Speaker 05:
That's CMI's customer, according to the arrangement that Cooler Master and CMI had before the verdict.

[00:32:46] Speaker 05:
We contacted counsel, prior counsel, who was also counsel for both CMI and Cooler Master, and said, how can you be doing this?

[00:32:54] Speaker 05:
How can AMD be doing this when CMI is under threat of an injunction?

[00:33:00] Speaker 05:
The injunction hadn't been entered yet, but we wanted answers for how AMD could be doing this.

[00:33:04] Speaker 05:
And CMI disclaimed any responsibility and said, notwithstanding our exclusive arrangement with Cooler Master,

[00:33:10] Speaker 05:
AMD's getting the products from somewhere else.

[00:33:13] Speaker 05:
And that's what triggered our concern that Cooler Master was going to keep playing games.

[00:33:17] Speaker 03:
I understand.

[00:33:18] Speaker 03:
And I understand my concerns might have arisen with respect to trying to get the right guys here.

[00:33:24] Speaker 03:
The greater concern I have, however, is that paragraph three seems to stand on its own and doesn't implicate CMI.

[00:33:35] Speaker 03:
doesn't require CMI to be in any way, shape, or form related to anything going on in paragraph three.

[00:33:42] Speaker 03:
And I think I hear you saying, well, that would be a problem, but that's not what we intended to cover in paragraph three.

[00:33:49] Speaker 05:
Correct.

[00:33:52] Speaker 05:
You don't want to elevate form over substance.

[00:33:54] Speaker 05:
We didn't want Cooler Master to start trying to elevate form over substance by saying, our name's not in the injunction.

[00:34:00] Speaker 05:
It doesn't cover us.

[00:34:02] Speaker 05:
And so we wanted to make explicit what 65D makes explicit.

[00:34:04] Speaker 03:
Well, why would it not cover them?

[00:34:06] Speaker 03:
I mean, we have injunctions all the time.

[00:34:08] Speaker 03:
And it says CMI, name CMI, and those persons in active concert or participation with them who receive notice of the order.

[00:34:17] Speaker 03:
I mean, why would that not cover Cooler Master?

[00:34:21] Speaker 05:
I don't want to sound glib.

[00:34:23] Speaker 05:
But the arguments they've been raising in this case

[00:34:29] Speaker 05:
That would not surprise me if they raised that argument as well.

[00:34:32] Speaker 03:
Well, believe me, we see a lot coming through here.

[00:34:34] Speaker 03:
I understand.

[00:34:37] Speaker 03:
I don't want to make that sound like it wasn't a technical.

[00:34:40] Speaker 03:
But you understand that that can't influence our view of the legal propriety of a particular part of an injunction.

[00:34:48] Speaker 05:
I understand.

[00:34:49] Speaker 04:
Can I get back to, I guess, and maybe I'm just confused about this, but if I am, then I'm still confused.

[00:34:57] Speaker 04:
They will say.

[00:34:58] Speaker 04:
if we just have paragraph two, that when they ship directly to AMD and CMI is not involved, that's not in concert.

[00:35:09] Speaker 04:
If you want to get us under that for contempt, you have to establish the alternative of legally identifying us for our new CMI independent activities with CMI.

[00:35:25] Speaker 04:
So they... How does that get nailed down in advance if it's proper to do so?

[00:35:31] Speaker 04:
Well, in advance of... In advance of your bringing a contempt motion and litigating under the heading of in concert with.

[00:35:39] Speaker 05:
Right.

[00:35:39] Speaker 05:
Well, the only evidence right now on the record is... Or do we have to wait?

[00:35:43] Speaker 05:
I don't think we have to wait.

[00:35:44] Speaker 05:
I think the reason was to get this prospectively resolved so that it's very clear.

[00:35:50] Speaker 05:
Cooler Master had a chance to come in and put in whatever evidence it wanted to,

[00:35:54] Speaker 05:
about the relationship with CMI.

[00:35:55] Speaker 05:
We were very upfront saying that Cooler Master couldn't possibly come into the United States without CMI's agreement.

[00:36:02] Speaker 05:
No attorney ever raised the argument you just raised, Judge Toronto, which is that we were able to sever the agreement.

[00:36:08] Speaker 04:
They could do it without CMI's agreement.

[00:36:10] Speaker 05:
Right.

[00:36:10] Speaker 05:
There's not even argument in the record that that's possible to be done.

[00:36:14] Speaker 05:
So what we have in the record is an existing.

[00:36:18] Speaker 05:
Not yet.

[00:36:19] Speaker 05:
Not yet.

[00:36:19] Speaker 05:
Council just said they have nothing left to put in the record.

[00:36:21] Speaker 05:
They already had an opportunity to put whatever they wanted in the record.

[00:36:24] Speaker 03:
So your answer is that would be covered under paragraph 2, the scenario you've laid out.

[00:36:28] Speaker 03:
Correct.

[00:36:29] Speaker 03:
ADI, or I forget the names of the parties, but if they're acting clearly in concert or as an agent for or in conjunction with CMI, then they're clearly covered, and Cooler Master continues to perform, do what you allege they have been doing.

[00:36:42] Speaker 03:
That's covered under paragraph 2.

[00:36:44] Speaker 05:
Correct, right.

[00:36:44] Speaker 05:
We have no intention of

[00:36:46] Speaker 05:
of expanding Rule 65D beyond what this court has already said it can cover, which is active concert with the named defendant.

[00:36:54] Speaker 05:
Any activity in the United States has got to be in concert with CMI, because there's the only evidence of the record is... And you acknowledge that paragraph three does not require that?

[00:37:05] Speaker 05:
No.

[00:37:05] Speaker 05:
Well, paragraph three is proper because it would only cover

[00:37:11] Speaker 05:
activities of Cooler Master and CMI together.

[00:37:14] Speaker 05:
So it was never intended.

[00:37:15] Speaker 03:
It doesn't limit it to CMI activities.

[00:37:18] Speaker 03:
It limits it to... Correct.

[00:37:20] Speaker 05:
Well, the injunction, but when you look at the judge's order explaining why paragraph three is there, it's because CMI and Cooler Master were acting in concert together in designing the products, selling the products, and the exclusive arrangement that they had were CMI and Cooler Master.

[00:37:35] Speaker 03:
I know we're going in circles, but that's the case.

[00:37:38] Speaker 03:
I don't understand why that stuff isn't already covered by paragraph 3.

[00:37:41] Speaker 05:
Our position is that it is covered that paragraph 3, naming Cooler Master, explicitly was to eliminate wiggle room when it comes time to move for contempt.

[00:37:53] Speaker 05:
That's why it's there.

[00:37:55] Speaker 03:
but we'll go room only in connection with activities that clearly implicate and involve active participation by both CMI and POOL.

[00:38:04] Speaker 05:
Correct.

[00:38:05] Speaker 05:
Right.

[00:38:05] Speaker 05:
Right.

[00:38:06] Speaker 03:
Thank you.

[00:38:07] Speaker 05:
Thank you, Your Honor.

[00:38:20] Speaker 06:
So, Your Honors,

[00:38:23] Speaker 06:
We disagree with the allegations, but I believe your honors have nailed the exact issue that we're appealing for.

[00:38:33] Speaker 06:
The situation here is that we actually don't dispute that to the extent Hula Master

[00:38:45] Speaker 06:
is found to be acting in concert with CMI.

[00:38:47] Speaker 04:
So suppose paragraph three goes away.

[00:38:50] Speaker 04:
Suppose maybe even there is an express reference, including Cooler Master, inserted into paragraph two.

[00:38:57] Speaker 04:
And AMD calls you up and says, this is just between us.

[00:39:02] Speaker 04:
Don't tell the guys down in, is it Chino?

[00:39:03] Speaker 04:
Is that where CMI is, in Chino?

[00:39:06] Speaker 06:
Yes, yes, that's correct.

[00:39:09] Speaker 04:
Somewhere.

[00:39:11] Speaker 04:
Send us some of these goods.

[00:39:14] Speaker 04:
Are you in contempt or not?

[00:39:19] Speaker 04:
They say you are because the only way you can do that is within it's with CMI six Implicit acquiescence or maybe because you create you to created these products together that CMI has nothing to do with those shipments to AMD Are you going to dispute your in contempt or not?

[00:39:43] Speaker 06:
Your Honor, to the extent that such activities with AMD to have sales into the United States.

[00:39:54] Speaker 06:
So to the extent that such activities, sales activities to AMD into the United States and in view of the exclusive, well I shouldn't say that because

[00:40:13] Speaker 06:
actually the exclusive agreement between Coulomass and CMI.

[00:40:21] Speaker 06:
They're really about the retail market.

[00:40:25] Speaker 06:
But regardless, the point is that to the extent.

[00:40:29] Speaker 04:
So already we now have a dispute about whether there's going to be contempt.

[00:40:34] Speaker 04:
How are we going to resolve that, we being the judicial system?

[00:40:38] Speaker 06:
Well, depending on the facts.

[00:40:41] Speaker 06:
If the judge determines that regardless of the exclusive agreement between Cooler Master and CMI being predominantly in the retail market, the sales to AMD, given that it's to the United States, if the judges believe that means it's acting in concert with CMI because US is supposed to be CMI's territory, then we do concede in that sense

[00:41:12] Speaker 06:
the contact will apply to us, which we are not doing.

[00:41:16] Speaker 04:
Are you going to contest that that activity is in concert with CMI?

[00:41:31] Speaker 04:
Sorry about the red light, but please answer the question.

[00:41:37] Speaker 06:
I believe Cooler Master will look at the actual circumstances to make that determination.

[00:41:43] Speaker 06:
Right now, I understand the hypothetical.

[00:41:49] Speaker 06:
I believe if the court decides, given CMI is in the US and the sales are going to the US, which, by the way, Cooler Master does not do and has no intention of doing.

[00:42:09] Speaker 06:
But if that's the situation, and if the court decides that somehow it's actually aiding and abetting CMI because the US is supposedly CMI's territory, then yes.

[00:42:23] Speaker 00:
To be sure I understand, I don't recall your questioning that direct sales to a different customer in the United States were permitted under the injunction.

[00:42:37] Speaker 06:
We're not arguing that.

[00:42:40] Speaker 06:
We're not arguing direct sales to another US customer are permitted.

[00:42:45] Speaker 00:
To a US customer?

[00:42:47] Speaker 06:
To a US customer.

[00:42:48] Speaker 06:
We're not disputing that.

[00:42:51] Speaker 06:
We actually do believe, even though, as Judge Rondro just pointed out, there may be some factual dispute on that issue when the circumstances actually arise.

[00:43:07] Speaker 06:
The reality is that we are not doing that.

[00:43:11] Speaker 06:
We are not selling directly to the U.S.

[00:43:14] Speaker 06:
Everything, based on my understanding, Cooler Master is selling the accused products only to countries outside of the United States.

[00:43:26] Speaker 00:
But you're not contesting the notice provision directly.

[00:43:30] Speaker 00:
Are you that you can't circumvent this understood injunction

[00:43:36] Speaker 00:
by just putting a few other parties in the loop?

[00:43:39] Speaker 06:
Your Honor is absolutely right.

[00:43:41] Speaker 06:
We do not try.

[00:43:43] Speaker 06:
We do not intend to do that.

[00:43:48] Speaker 06:
And we will not argue that in order to circumvent the injunction with respect to sales to the US.

[00:43:57] Speaker 06:
We definitely will not.

[00:43:59] Speaker 01:
Thank you.

[00:44:00] Speaker 01:
Thank you.

[00:44:01] Speaker 01:
Thank you, Your Honor.

[00:44:02] Speaker 01:
Thank you.

[00:44:03] Speaker 01:
The party is the case is submitted.