[00:00:00] Speaker 03:
This morning is 14-1394 Aviva Sports versus Fingerhut Direct Marketing.

[00:00:06] Speaker 03:
Mr. Schmidt.

[00:00:22] Speaker 02:
Thank you, Your Honor.

[00:00:23] Speaker 02:
I may please the court, Tom Schmidt, on behalf of the retailer defendants Kmart, Menard, and Fingerhut.

[00:00:28] Speaker 02:
Aviva's case against the retailer defendants was exceptionally weak from the start and only weakened as the case progressed.

[00:00:35] Speaker 02:
Aviva adopted an unsupportable claim construction position that directly contradicted the position it had taken before the PTO.

[00:00:43] Speaker 02:
It asserted Lanham Act standing against the retailers without any reasonable basis to think it had standing and it persisted with its case

[00:00:50] Speaker 02:
long after the writing was on the wall, continuing to oppose summary judgment, after the district court's Markman ruling left it with no final... What's the standard of review here?

[00:00:58] Speaker 01:
The standard of review is abuse of discretion, Your Honor, as the Supreme Court... trial judge carefully went over all these points, every one that you mentioned, and found otherwise.

[00:01:07] Speaker 02:
That's true, Your Honor.

[00:01:08] Speaker 02:
We think that was a clear error of judgment.

[00:01:11] Speaker 02:
Abusive discretion is deferential, to be sure, but it doesn't mean a case is unreviewable.

[00:01:17] Speaker 02:
And in fact, since Highmark, this court has reversed district court's exceptional case determinations in a number of cases.

[00:01:22] Speaker 02:
In VX versus NVIDIA, for instance, the first case that came up after Highmark, this court reversed the district court's determination that a case was not objectively baseless.

[00:01:33] Speaker 02:
In a separate case, opalist technologies, this court reversed.

[00:01:37] Speaker 03:
Where's the legal error here?

[00:01:38] Speaker 03:
Are you alleging legal error?

[00:01:40] Speaker 02:
No.

[00:01:40] Speaker 02:
No, Your Honor.

[00:01:41] Speaker 02:
We're not alleging legal error.

[00:01:42] Speaker 02:
We think it was an abusive discretion, an error of judgment, just like this court found in Rayla.

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Why?

[00:01:46] Speaker 03:
Because somebody, do you know how many cases we have where parties, the opposing party has denied or opposed a state petition?

[00:01:56] Speaker 03:
Is opposing a state petition a basis for awarding attorneys?

[00:01:59] Speaker 02:
Your Honor, not alone.

[00:02:00] Speaker 02:
We think that the strongest bases are, first of all, what we think is the frivolous claim construction position that they adopted, and then not giving up the case when it would have been reasonable to do.

[00:02:10] Speaker 02:
Your Honor's opinion in Raylon, we think, is most directly on point.

[00:02:14] Speaker 02:
There, Your Honor said, of course, it's abuse of discretion.

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It is a deferential standard.

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But there is a threshold below which a claim construction position is so unreasonable that it renders a case exceptional.

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And this court reversed, even under an abuse of discretion review.

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Now, that court, that case, to be sure, was before our high mark.

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But that doesn't matter for two reasons.

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The first was that there were both Rule 11 sanctions at issue in that case and exceptional case determination at issue in that case.

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And the Rule 11 issue was reviewed under regional circuit law, and that was abuse of discretion.

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And this court still reversed the district court's determination that it wasn't frivolous.

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And second of all, there was a petition for cert to the Supreme Court in Raylon after Highmark had been granted, and the Supreme Court just denied the petition outright.

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So if there any argument that Highmark somehow weakened Raylon or undermines Raylon, we don't think that's

[00:03:03] Speaker 02:
persuasive the Supreme Court with a GVR.

[00:03:05] Speaker 03:
Let's take one of the points you mentioned, which is that after they got the claim construction, one of your points is they should have dropped it.

[00:03:12] Speaker 03:
And they pursued a DOE claim, and they lost on that DOE claim because there was an insufficient showing.

[00:03:20] Speaker 03:
I don't know if it comes up in any research you've done, but we see quite a number of cases in which somebody alleges DOE.

[00:03:28] Speaker 03:
They lose on summary judgment, and we just say simply,

[00:03:32] Speaker 03:
the testimony was conclusory, and they just haven't.

[00:03:35] Speaker 03:
It seems, I mean, if the standard the Supreme Court has set means this case stands out among others, even in my experience here at the appeals court reviewing this court, that is, alleging DOE without having a sufficient basis for doing so does not stand out as being the most unusual thing we see around.

[00:03:54] Speaker 02:
Your Honor, we appreciate that in the mine run of cases after Highmark, it's not going to be appropriate to reverse a district court's exceptional case determination.

[00:04:01] Speaker 02:
But we don't think that change is the basic point, that there is a threshold below which it is unreasonable enough that reversal is warranted.

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And we think this is such a case.

[00:04:10] Speaker 02:
The doctrine of equivalence argument is a good example in that, first of all, the district court found it wasn't even developed enough to rule on.

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The district court said it was truly just conclusory.

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And there was hardly any argument even made in support of it.

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I think there was a single sentence

[00:04:24] Speaker 02:
in their opposition to summary judgment, which just said it was a jury issue without pointing to any evidence.

[00:04:29] Speaker 02:
And even on the merits, had they developed it more, it would have been weak as well, because it basically vitiated one of the key limitations of the patent, which was of claim 14 of the patent, which was the manner in which the side rails of the slide were formed.

[00:04:43] Speaker 02:
So we think, again, in the mine run of cases, it's not going to be appropriate to reverse.

[00:04:48] Speaker 02:
But there is a threshold below which it is unreasonable enough that it is appropriate.

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And we think this case is below the threshold.

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And so maybe I could just talk about claim 14 for a moment and the claim construction dispute.

[00:05:02] Speaker 02:
The key dispute, just to refresh your memory, was the meaning of the word baffle.

[00:05:08] Speaker 02:
And the question was whether the baffle had to be entirely inside the body of the slide or could be partially external.

[00:05:14] Speaker 03:
Right.

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And there's nothing in the claim language that answers that question.

[00:05:18] Speaker 02:
We think there is, Your Honor.

[00:05:19] Speaker 02:
Because what the claim language says is the baffle has to interconnect the base to the upper surface of the slide.

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And we don't think any portion of a baffle that extends beyond the top of the sliding surface

[00:05:32] Speaker 02:
can be a baffle if it's exclusive of upper surface.

[00:05:35] Speaker 02:
So I garbled that a little bit.

[00:05:36] Speaker 02:
The idea is it has to interconnect the base and the upper surface so it can't be part of the upper surface.

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And I would point, Your Honor, to the specifications.

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So the patent itself is at the end of the opening brief.

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It's also in the joint appendix.

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So the relevant diagram, Your Honor,

[00:06:02] Speaker 02:
is on page A724.

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And you'll see number 29 there is pointing to basically the inner surface of the side rail.

[00:06:24] Speaker 02:
Now, the specification itself, a couple pages later,

[00:06:30] Speaker 02:
labels 29, quote, the upper surface.

[00:06:36] Speaker 02:
In one of their briefs before the PTO, Aviva similarly labeled that the upper surface.

[00:06:41] Speaker 02:
And so we think if the claim language is that a baffle has to interconnect the base and the upper surface,

[00:06:46] Speaker 02:
it cannot include that part which the patent itself has labeled the upper surface.

[00:06:50] Speaker 01:
But Mr. Schmidt, almost every case that comes before us has a difference of opinion on clamp construction and some of the positions are just poor and unsubstantiated and wrong.

[00:07:03] Speaker 01:
And if we were to find that

[00:07:05] Speaker 01:
being wrong amounts to sanctionable conduct, you'd be involved in a very risky business.

[00:07:13] Speaker 02:
Absolutely.

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And we don't dispute that, Your Honor.

[00:07:15] Speaker 02:
At the same time, the Supreme Court did in octane considerably lower the standard for awarding attorney's fees in patent cases.

[00:07:26] Speaker 01:
had two cracks at the issue, one post-op thing, and still came out the same way.

[00:07:31] Speaker 02:
Absolutely.

[00:07:32] Speaker 02:
But we still think the basic point of Raylon, Chief Judge Pro's opinion in Raylon stands, which is that it's entirely true that almost every patent dispute is going to resolve into some dispute about claim construction.

[00:07:43] Speaker 02:
You can't award attorneys fees in all of them.

[00:07:45] Speaker 02:
But that doesn't mean there isn't some objective threshold of reasonableness below which a claim construction is frivolous enough that it warrants a reversal of the district courts.

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judgment there and we think this is such a case.

[00:07:58] Speaker 02:
There's the claim language interconnecting the base and the upper surface.

[00:08:01] Speaker 02:
The claim language also requires the baffles to perform a specific structural function which is maintaining the inflatable body in wedge shape and only the internal part of a baffle would perform that spacer function.

[00:08:13] Speaker 02:
We think the

[00:08:14] Speaker 02:
The diagrams and the specification are all quite clear and we think the prosecution history is quite clear that Aviva disclaimed this specifically during the re-examination of the patents.

[00:08:22] Speaker 02:
When you put all those things together, we think it really was quite a weak claim construction position and enough to render the case exceptional.

[00:08:31] Speaker 02:
After the district court's market ruling, Aviva continued to oppose summary judgment, as we discussed, without a viable infringement theory.

[00:08:38] Speaker 02:
In fact, its own expert conceded that Manley's slides had the exact same structure as the diagram the district court had used to show what the claims do not cover.

[00:08:49] Speaker 02:
So there was really nothing there.

[00:08:51] Speaker 02:
And then beyond that, the VIVA continued with claims 18 and 19 right up until the eve of trial, even though it had very little evidence of damages, and in fact conceded in its motion to dismiss that damages were de minimis.

[00:09:08] Speaker 02:
And it persisted, nonetheless, right up until the eve of trial and moved to dismiss only two weeks before, after a lot of expensive preparation had happened.

[00:09:16] Speaker 02:
The case was actually dismissed one week before trial, but after motions and limine had been filed.

[00:09:20] Speaker 02:
And we think that's a factor that weighs in favor of the case being exceptional.

[00:09:25] Speaker 02:
Again, one of your opinions, Chief Judge Prost, in a case called Monolithic, pointed to exactly that.

[00:09:32] Speaker 02:
The site is 726 F.

[00:09:33] Speaker 02:
3rd, 1359.

[00:09:36] Speaker 02:
Pointed to exactly that fact, a patentee moving to dismiss after the defendants had completed their filings for final pretrial conference.

[00:09:43] Speaker 02:
wasting the parties and the court's resources, we think.

[00:09:46] Speaker 03:
I will parent my colleague, Judge Lurie, who always points out that none of us have our own opinions.

[00:09:53] Speaker 03:
They become opinions of the court.

[00:09:55] Speaker 02:
Sorry, Your Honor.

[00:09:57] Speaker 02:
Even better.

[00:09:57] Speaker 02:
Opinion of the court.

[00:10:00] Speaker 03:
I just, I mean, you're right.

[00:10:02] Speaker 03:
Octane presumably did change the standard for attorney's fees, but the significance

[00:10:08] Speaker 03:
of equal significance for us is high mark and that we have to defer to district court judges on a very deferential standard, on totality of the circumstances, on a comment which is, this stands out among others, which seems to suggest, are we talking about that particular judge's docket and what he's seen over the past 10 years?

[00:10:30] Speaker 03:
So it's a very high road to try to overturn a district judge on any other than clear error of law.

[00:10:38] Speaker 02:
Absolutely.

[00:10:39] Speaker 02:
We appreciate that, Your Honor.

[00:10:40] Speaker 02:
But it hasn't stopped the court from reversing in a number of instances.

[00:10:44] Speaker 02:
since Highmark, and we think that this is another instance where that would be warranted.

[00:10:48] Speaker 02:
I only have a minute before my opening runs out to address the Lanham Act side of the case.

[00:10:56] Speaker 02:
The only thing I want to say there is just that there were a number of standards percolating in the courts of appeals for Lanham Act standing at the time this case was filed.

[00:11:03] Speaker 02:
And we think the fact that Aviva's claim to standing fails so clearly under all three, and even under the Supreme Court standard in Lexmark, which subsequently

[00:11:11] Speaker 02:
superseded those standards.

[00:11:13] Speaker 03:
This was another instance where at first the district court denied your first motion so a district court who denies your first motion granted your second

[00:11:21] Speaker 03:
It's hard pressed for that district court to then come back and say that it was subjectively baseless or frivolous, right?

[00:11:27] Speaker 02:
Your Honor, the district court denied our motion to dismiss, and there were allegations in the complaint sufficient to support standing.

[00:11:33] Speaker 02:
The problem was there was never any evidence to support those allegations.

[00:11:36] Speaker 02:
So there may have been an allegation in the complaint that there was competition between Aviva and the retailers, but that allegation was never worn out by the evidence.

[00:11:43] Speaker 02:
We don't think the fact that the 12b6 motion was denied really affects

[00:11:47] Speaker 02:
The fact that the claim to standing, once push came to shove, its summary judgment really had no basis.

[00:11:53] Speaker 03:
Thank you.

[00:11:54] Speaker 03:
Why don't we hear from the other side?

[00:12:06] Speaker 00:
Good morning, your honor.

[00:12:08] Speaker 00:
May it please the court, Tom Vitt for Aviva.

[00:12:11] Speaker 00:
I want to start where the court did with the standard of review.

[00:12:14] Speaker 00:
And earlier this week on Monday, this court, in an opinion in which Chief Judge Proce was on the panel, reminded us that there are two species, really, of abuse of discretion.

[00:12:27] Speaker 00:
One, where there's a clear error of law, or an error of law.

[00:12:31] Speaker 00:
That's been conceded.

[00:12:32] Speaker 00:
It didn't happen here.

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And the second, where there's been a clearly erroneous assessment of the evidence, and the decision is based on that.

[00:12:39] Speaker 00:
It's really material to the decision.

[00:12:41] Speaker 00:
There's no argument here that that happened.

[00:12:43] Speaker 03:
What about your postmarkman allegation with regard to DOE?

[00:12:48] Speaker 03:
Doesn't that come under the rubric of baseless

[00:12:51] Speaker 00:
No, Your Honor, and I really want to correct what is a misleading presentation in the reply brief and earlier today about how that came up.

[00:13:00] Speaker 00:
You have to understand that the retailer defendants did not move for summary judgment based on this baffles limitation entirely inside.

[00:13:08] Speaker 00:
They did not raise this issue at all in their summary judgment papers.

[00:13:13] Speaker 00:
Walmart raised it in their claim construction briefing.

[00:13:16] Speaker 00:
So when we responded to summary judgment, we argued against the seven or eight arguments that the retailers made, and we won every single one of those arguments.

[00:13:25] Speaker 00:
Once the court's claim construction came out in July,

[00:13:29] Speaker 00:
Now Walmart has prevailed on a claim construction position, adding this limitation entirely inside the inflatable body.

[00:13:38] Speaker 00:
And at that point, our side conceded literal infringement in response to Walmart, who had raised it in their briefing.

[00:13:45] Speaker 00:
This was so objectively baseless, they didn't even notice it, which is what happened.

[00:13:50] Speaker 00:
And we made a showing under the doctrine of equivalence, but it wasn't perfunctory or baseless.

[00:13:54] Speaker 00:
It was a five-page affidavit by an expert explaining how the drawings in the patent, the way the court had construed them, really matched the Walmart product.

[00:14:05] Speaker 00:
It was selling manly products, the same products that they're selling.

[00:14:08] Speaker 00:
So there's no difference.

[00:14:09] Speaker 00:
And there was a four-page argument in the brief.

[00:14:12] Speaker 00:
Now, the judge didn't like it, but there was nothing wrong with raising it.

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And we also have to keep in mind the timing here.

[00:14:18] Speaker 00:
This all happened within a couple of months.

[00:14:20] Speaker 00:
So we asserted Doctor of Equivalence against the party that raised this issue.

[00:14:25] Speaker 00:
We lost the issue.

[00:14:25] Speaker 00:
And then Claim 14 is over by November 7 in their case, December 3 in Walmart's case, within a couple of months of the claim construction order.

[00:14:33] Speaker 00:
So really a standard way to proceed.

[00:14:37] Speaker 00:
We do think the Doctor of Equivalence argument had some merit, but we didn't win.

[00:14:41] Speaker 00:
But it's not fair for them to say, well, that's a baseless claim, because they didn't even raise it.

[00:14:46] Speaker 03:
Can I point?

[00:14:48] Speaker 03:
Your friend didn't get around to talking about the taxable costs.

[00:14:51] Speaker 03:
Yes.

[00:14:52] Speaker 03:
But it's a little disturbing, isn't it?

[00:14:54] Speaker 03:
I mean, the rule, FRAP says costs should be awarded.

[00:14:59] Speaker 03:
Bottom line in this case, you didn't have to pay any costs.

[00:15:03] Speaker 03:
Doesn't that seem to be contrary to the statutory directive?

[00:15:07] Speaker 00:
No, Your Honor.

[00:15:08] Speaker 00:
Here's why.

[00:15:10] Speaker 00:
Absolutely, the retailers, as the prevailing parties, were entitled to costs.

[00:15:15] Speaker 00:
But they have to make a showing that they incurred costs and paid costs.

[00:15:20] Speaker 00:
That's true for anybody, right?

[00:15:22] Speaker 00:
They did not make that showing.

[00:15:24] Speaker 00:
They put in a bill of cost that shows every cost that was there was incurred by Manley, who's the losing party.

[00:15:33] Speaker 00:
This is all in the appendix.

[00:15:34] Speaker 00:
I've got the site.

[00:15:36] Speaker 00:
Let me get to that page of my outline.

[00:15:40] Speaker 00:
Appendix A, 1344 to 1372.

[00:15:44] Speaker 00:
So the cost bill that was put in was for manly's costs.

[00:15:48] Speaker 00:
And again, this is an abuse of discretion standard.

[00:15:52] Speaker 00:
The clerk looked at it and said, there's no showing here that the retailer defendants incurred costs and paid costs.

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These are manly's costs.

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You have to apportion them.

[00:16:03] Speaker 00:
And the district judge affirmed that.

[00:16:05] Speaker 00:
And this court should affirm, again, the issue is,

[00:16:10] Speaker 00:
Manly can't get costs.

[00:16:11] Speaker 00:
They were the losing party.

[00:16:13] Speaker 00:
We had already been awarded those costs.

[00:16:15] Speaker 00:
We, Aviva, by the judge.

[00:16:17] Speaker 03:
No, but they're asking for proportion of the cost.

[00:16:19] Speaker 03:
So they're asking for, why should they?

[00:16:20] Speaker 03:
OK, and the fallback position is give them a pro rata share of the costs.

[00:16:24] Speaker 00:
Well, that would be fine if they had incurred or paid any costs and made a showing to the district court of that.

[00:16:29] Speaker 00:
They did not do that.

[00:16:30] Speaker 00:
The authority that they cite is situations where an insurance company, an outside party,

[00:16:37] Speaker 00:
pays for the defendant's costs.

[00:16:38] Speaker 00:
And of course, in that situation, the defendant still gets to recover those costs.

[00:16:43] Speaker 00:
Here, the losing party, Manley, paid for those costs.

[00:16:47] Speaker 00:
And they've made no showing that they incurred costs.

[00:16:50] Speaker 00:
So that's the threshold.

[00:16:51] Speaker 00:
Before you get costs, yes, as a matter of law, as a prevailing party, are they entitled to costs?

[00:16:59] Speaker 00:
Yes, they are.

[00:17:00] Speaker 00:
Did they make a showing that they incurred costs and paid costs?

[00:17:03] Speaker 00:
No, they did not.

[00:17:05] Speaker 00:
They put in bills that Manley paid.

[00:17:06] Speaker 00:
They're addressed to Manley.

[00:17:09] Speaker 00:
And the bill of cost guide is very clear in the District of Minnesota.

[00:17:13] Speaker 00:
It says, if you've got multiple parties on one side, winners and losers, you have to make some showing.

[00:17:20] Speaker 00:
And it also is clear.

[00:17:21] Speaker 00:
It says right in the bill of cost guide, and this makes sense, we can't award costs more than once.

[00:17:26] Speaker 00:
We only award one set of costs.

[00:17:28] Speaker 00:
Well, the judge awarded $700,000 to my client, Aviva,

[00:17:33] Speaker 00:
because we won the default judgment against Manley and were awarded attorney's fees and costs for Manley's conduct in the case.

[00:17:41] Speaker 00:
So that's the cost issue, Your Honor.

[00:17:43] Speaker 00:
There hasn't been any showing there's no authority anywhere that a defendant who's a winning party can recover costs paid by a losing party.

[00:17:55] Speaker 00:
If I could turn back to the standard review, I didn't want to lose the point I thought was persuasive.

[00:18:00] Speaker 00:
So what we have here is,

[00:18:02] Speaker 00:
There's no showing of legal error, and it's conceded.

[00:18:06] Speaker 00:
There's no attempt to show clearly erroneous fact finding.

[00:18:10] Speaker 00:
So what we have is an attack on the district court's judgment, pure and simple, asking this court to substitute its judgment for the district court's judgment.

[00:18:19] Speaker 00:
I think your honors are familiar that that's not appropriate under Highmark.

[00:18:23] Speaker 00:
But to take it a step further, the court's judgment has to be so wrong.

[00:18:28] Speaker 00:
It can't just be right or wrong.

[00:18:29] Speaker 00:
It has to be so wrong that it's an abuse of her discretion.

[00:18:32] Speaker 00:
If we look at claim 14, which was really the focus of the argument, this was the standard claim construction argument that we see in most patent cases.

[00:18:42] Speaker 00:
The patentee, my client Aviva, argued that the word baffle should be given its ordinary meaning as a check between the upper surface and the lower surface to keep the product in its wedge shape.

[00:18:56] Speaker 00:
We argue that based on Phillips, the court's precedent,

[00:18:59] Speaker 00:
and dictionary definitions.

[00:19:01] Speaker 00:
Walmart, not these retailers, they didn't think of this.

[00:19:04] Speaker 00:
Walmart said, judge, what you should do is you should add a limitation.

[00:19:09] Speaker 00:
Do something unusual.

[00:19:11] Speaker 00:
Add a limitation that says that baffle's got to be entirely inside the inflatable body.

[00:19:17] Speaker 00:
Now, the argument is made in this court that our position was objectively baseless because the claim language required that.

[00:19:26] Speaker 00:
to be that baffle to be entirely inside the inflatable body.

[00:19:30] Speaker 00:
And it just doesn't follow.

[00:19:33] Speaker 00:
The judge reasoned.

[00:19:35] Speaker 00:
And the question is, do we have an argument?

[00:19:38] Speaker 00:
It's not a question of whether we're right or wrong.

[00:19:40] Speaker 00:
But the judge reasoned that this side baffle D could not be a baffle because it was partly external.

[00:19:51] Speaker 00:
And the judge said, well, that doesn't

[00:19:54] Speaker 00:
attach the base to the upper surface, the upper surface E. Well, that just doesn't logically follow.

[00:20:00] Speaker 00:
That's not correct.

[00:20:02] Speaker 00:
The baffle D is attached to upper surface E at the side.

[00:20:07] Speaker 00:
It's supporting the wedge shape by being attached to the side.

[00:20:10] Speaker 00:
The other problem with counsel's argument is he ignores claim 14.

[00:20:15] Speaker 00:
Claim 14 says,

[00:20:17] Speaker 00:
that you raise the side baffle and the side wall to form a side rail.

[00:20:22] Speaker 00:
And the language, let me get to the right, the exact language.

[00:20:32] Speaker 00:
So you raise the side baffle, you raise the side wall to make the side rail such that the upper surface comprises a pair of side rails.

[00:20:41] Speaker 00:
So now this is the upper surface too.

[00:20:46] Speaker 00:
Our argument, which seems to me to be a reasonable, ordinary argument, is that baffle D, the whole segment, the side baffle, connects this upper surface E and this upper surface A

[00:20:59] Speaker 00:
And it's doing what it's supposed to do in the claim.

[00:21:00] Speaker 00:
And the claim language actually supports us and not them.

[00:21:04] Speaker 00:
The other main argument that's made is that the file history somehow makes our claim impossible, our argument objectively baseless.

[00:21:11] Speaker 00:
And that's just not true.

[00:21:13] Speaker 00:
All the file history exchange said was a side baffle can't be a side wall.

[00:21:19] Speaker 00:
It distinguished this side wall can't be a baffle.

[00:21:23] Speaker 00:
That's clear in the file history.

[00:21:25] Speaker 00:
But this can be a baffle.

[00:21:27] Speaker 00:
You could have a baffle here.

[00:21:29] Speaker 00:
There's just not the required showing made.

[00:21:33] Speaker 00:
And then the other argument that was made in the briefing, not really addressed here, is we're fighting about what the drawings mean.

[00:21:38] Speaker 00:
And I would just remind the court that your honors and your colleagues have many times cautioned us to be careful about the drawings.

[00:21:46] Speaker 00:
They're not meant to be exact, precise depictions of space or dimension.

[00:21:51] Speaker 00:
But we think, and we tried to explain in the papers, the drawings actually supported us.

[00:21:55] Speaker 00:
They think they support them.

[00:21:56] Speaker 00:
I think that's a fair ground for argument.

[00:22:00] Speaker 00:
But the one thing that is clear in the law is that drawing a single embodiment is not enough to read in a new limitation into the claim.

[00:22:10] Speaker 00:
So that's really Claim 14.

[00:22:13] Speaker 00:
I wanted to address the commentary about claims 18 and 19.

[00:22:16] Speaker 00:
If I could, it was very brief in this morning's presentation, but it's prominent in the briefing.

[00:22:22] Speaker 00:
The important thing to know about that is that that argument was not raised to the district court.

[00:22:27] Speaker 00:
The argument that's made to your honors today in the briefing is that claims 18 and 19 were so clearly invalid that Aviva's position was objectively baseless.

[00:22:40] Speaker 00:
To support that argument,

[00:22:43] Speaker 00:
Council puts into the brief two pictures of two slides and makes an obviousness argument that you combine those two pictures together and you've got an obviousness problem that should have been so clear to us that we never should have brought the case in the first place.

[00:22:57] Speaker 00:
That argument was not made to the district court.

[00:23:01] Speaker 00:
It was not made on summary judgment.

[00:23:03] Speaker 00:
It was not made in the fee petition.

[00:23:05] Speaker 00:
It has never been presented to the district court.

[00:23:08] Speaker 00:
And in the reply brief, the assertion is made that, well,

[00:23:13] Speaker 00:
We didn't have to really say all this in the fee petition because the judge knew all this already.

[00:23:22] Speaker 00:
That's a false statement.

[00:23:23] Speaker 00:
You need to understand that's not true.

[00:23:25] Speaker 00:
The judge had never been presented with that evidence, had never looked at those drawings.

[00:23:30] Speaker 00:
It's not anywhere in the record in front of the judge.

[00:23:33] Speaker 00:
So that's claims 18 and 19.

[00:23:35] Speaker 00:
That really should end that.

[00:23:37] Speaker 00:
The other argument that's made is, well, we didn't have sufficient evidence of damages to go forward.

[00:23:43] Speaker 00:
There was a motion for summary judgment on that, and we won.

[00:23:46] Speaker 00:
So we were ready to go to trial.

[00:23:49] Speaker 00:
That can't be an exceptional case.

[00:23:51] Speaker 00:
Then the final argument about claims 18 and 19 is we didn't quit fast enough.

[00:23:56] Speaker 00:
basically.

[00:23:56] Speaker 00:
Well, we had a decision from the court that said, you're entitled to go to trial on claims 18 and 19.

[00:24:03] Speaker 00:
We had an interim decision from the patent office that was not favorable, but we still had the right to appeal.

[00:24:07] Speaker 00:
So we had a choice to make.

[00:24:09] Speaker 00:
And after the summary judgment ruling on claim 14, we immediately did two things.

[00:24:15] Speaker 00:
Aviva immediately reached out to Walmart, and over the course of a very short time, a few weeks, settled with Walmart.

[00:24:21] Speaker 00:
And they're not here today.

[00:24:22] Speaker 00:
We attempted the same process with these retailers who were represented by the same counsel that represented Manley, the party that's been sanctioned to the tune of a default judgment of over $8 million for litigation misconduct.

[00:24:36] Speaker 00:
And our counsel, Aviva's counsel, tried to approach the retailers knowing that there is no way that they could ever settle the case with Manley.

[00:24:46] Speaker 00:
It had to go direct to the retailers.

[00:24:48] Speaker 00:
And that was rebuffed.

[00:24:49] Speaker 00:
It didn't work.

[00:24:50] Speaker 00:
And so eventually, after this happened all within a few weeks, Aviva dropped the case.

[00:24:57] Speaker 00:
Now, there's kind of a fundamental inconsistency that runs throughout the entire papers.

[00:25:02] Speaker 00:
This is supposed to be some terrible thing that we put these retailers through for a month or two as they're getting ready for trial, instead of dropping it sort of immediately after claim 14 was dismissed, because claims 18 and 19 weren't worth as much.

[00:25:18] Speaker 00:
Well, if that's the case, then why didn't they ever put in any evidence that they hadn't made those sales?

[00:25:25] Speaker 00:
It would have been easy to do.

[00:25:27] Speaker 00:
And why, what party would really be spending money to get ready for trial if they had no infringement liability because they hadn't made any sales?

[00:25:36] Speaker 00:
It doesn't make any sense.

[00:25:38] Speaker 00:
It's just a way to drag this case out and make it harder for my client who's been at it for years with these folks.

[00:25:47] Speaker 00:
OK, final point.

[00:25:50] Speaker 00:
The Lanham Act.

[00:25:51] Speaker 00:
Again, we're in an abusive discretion world.

[00:25:55] Speaker 00:
The Lanham Act was dismissed on an argument, again, that Walmart brought for lack of what was then called credential standing is now called statutory standing.

[00:26:04] Speaker 00:
It's gotten easier to bring the case under the Lexmark case.

[00:26:09] Speaker 00:
And our position below was Aviva sells water slides, Manley sells water slides.

[00:26:17] Speaker 00:
The retailers are falsely advertising Manley's water slides in their stores because the false advertising is the pictures and the depictions of the products.

[00:26:26] Speaker 00:
The retailers are falsely advertising Manley's water slides on their websites, again, depicting their water slides side by side with our water slides.

[00:26:37] Speaker 00:
The retailer's actions have way more power than Manley's actions, obviously, because Kmart, Menards, and Fingerhut have a lot more exposure than Manley does on those websites.

[00:26:51] Speaker 00:
That harmed our client, because every sale they make is a sale we don't get.

[00:26:56] Speaker 00:
So whatever test you apply, we had a reasonable argument.

[00:27:00] Speaker 00:
We were a competitor.

[00:27:01] Speaker 00:
We didn't sell very much because we were being destroyed by their false advertising, as the district court so found.

[00:27:08] Speaker 00:
The last argument that they make in the reply brief as well, you didn't really have any damages.

[00:27:13] Speaker 00:
Lexmark cases made it very clear that is not a proper analysis under statutory standing.

[00:27:21] Speaker 00:
It's whether you're within that zone of interest and have proximate cause of harm.

[00:27:24] Speaker 00:
But in any event, we sure did have damages.

[00:27:26] Speaker 03:
Thank you.

[00:27:27] Speaker 00:
Thank you.

[00:27:46] Speaker 02:
Thank you, Your Honor.

[00:27:48] Speaker 02:
I'll begin just very briefly on the cost issue.

[00:27:50] Speaker 02:
The basic argument against costs is that we don't have authority for the fact that costs that were paid by a third party are somehow reimbursable.

[00:28:00] Speaker 02:
We think Moore's federal practice, which we cite in our brief, is right on point.

[00:28:04] Speaker 02:
It says the presumption.

[00:28:05] Speaker 02:
that should be awarded to the prevailing party, quote, applies even if the costs were actually paid by some third party and not by the prevailing litigant.

[00:28:13] Speaker 02:
We don't see why there ought to be a different rule, because the insurer happens to be a co-defendant rather than some other third party.

[00:28:20] Speaker 02:
So we don't think that's a persuasive basis to deny cause.

[00:28:24] Speaker 02:
I want to just briefly address the file history.

[00:28:29] Speaker 02:
I think perhaps the easiest way to understand the inconsistency between the file history and the position Aviva took at plane construction now in its brief is just to look at the picture on page 31 of their brief.

[00:28:43] Speaker 02:
They label the, if you're honest, time you can look at it,

[00:28:51] Speaker 02:
they label that side rail there, the vertical plane of the side rail, page A821, which is their brief to the PTO, they label that exact same thing, the upper surface.

[00:29:01] Speaker 02:
And that's sort of the key in consistency, because later on in their brief to the PTO, they say we have never called any part of the exterior wall a baffle.

[00:29:10] Speaker 02:
We've always called it either an upper surface,

[00:29:12] Speaker 02:
Et cetera, et cetera, et cetera.

[00:29:13] Speaker 02:
So that seems to me a pretty clear concession, that upper surface and baffle are two totally separate things.

[00:29:19] Speaker 02:
And that's the core of the inconsistency here.

[00:29:25] Speaker 02:
I'd like to also just briefly address the Lanham Act.

[00:29:28] Speaker 02:
We didn't have much chance to discuss it before.

[00:29:34] Speaker 02:
We think a very helpful case and a helpful way to sort of wrap your head around why there was so clearly no standing in this case is something that was discussed at length at the summary judgment phase in the district court, an Eighth Circuit case called Yellow Book.

[00:29:48] Speaker 02:
The allegation there was the Association of American Orthodontists brought suit against the Yellow Book saying, hey, somebody's advertising themselves as an orthodontist in the Yellow Book, but they don't have the proper prudential to be an orthodontist.

[00:30:00] Speaker 02:
And the Eighth Circuit said, no, there's no prudential standing here.

[00:30:03] Speaker 02:
You cannot sue the Yellow Book.

[00:30:05] Speaker 02:
The Yellow Book is just the medium of the false advertisement.

[00:30:07] Speaker 02:
It's not the perpetrator of the false advertisement.

[00:30:09] Speaker 02:
And that's the exact situation we have here.

[00:30:11] Speaker 02:
The retailers were not the perpetrator of the false advertisements.

[00:30:14] Speaker 02:
They just sold products that allegedly had false advertisements attached to them.

[00:30:19] Speaker 02:
So the retailers were just the medium.

[00:30:20] Speaker 02:
They were not the perpetrator.

[00:30:21] Speaker 02:
And we're aware of no authority saying that you can sue a retailer in that circumstance.

[00:30:25] Speaker 02:
It might be different if they could point to some evidence saying the retailers are somehow complicit in making these false advertisements or did it knowingly.

[00:30:33] Speaker 02:
But we're not aware of any evidence in the record of that.

[00:30:36] Speaker 02:
In fact, in their brief, Aviva's brief here in this court on page four, they say Kmart was aware of the falsity and continued to sell after the complaint was filed in this case.

[00:30:47] Speaker 02:
They cite to docket 196.

[00:30:50] Speaker 02:
If you actually look at what's cited there, it's an exhibit about Walmart.

[00:30:54] Speaker 02:
It's Walmart's answers to interrogatory.

[00:30:55] Speaker 02:
So as far as we know, there's no evidence in the record at all of the retailers doing anything to put themselves into complicity with Manley Toys.

[00:31:02] Speaker 02:
So we think there is clearly

[00:31:03] Speaker 02:
No basis for standing.

[00:31:05] Speaker 02:
The last thing I just want to say is Highmark, of course, is a deferential standard of use of discretion, but we think Highmark's

[00:31:13] Speaker 02:
is a two-way street.

[00:31:14] Speaker 02:
On the one hand, it says this court ought to be deferential.

[00:31:17] Speaker 02:
But on the other hand, it behooves district courts to provide some explanation and some reasoning to support their conclusions.

[00:31:25] Speaker 02:
And we think the district court simply never explained why the claim construction position here was not frivolous, never explained why it was reasonable to persist as long as Aviva did, and never explained why Aviva could have had a reasonable basis to think it had standing.

[00:31:40] Speaker 02:
We think because the district courts

[00:31:42] Speaker 02:
reasoning is so spare.

[00:31:44] Speaker 02:
We think that the rationale of Highmark, the deference that Highmark calls for, is weakened in this case.

[00:31:51] Speaker 03:
Thank you.

[00:31:52] Speaker 03:
We thank both counsel and the case is submitted.