[00:00:09] Speaker 04:
First case for argument this morning is 15-5146, Frankel versus United States.

[00:00:16] Speaker 04:
Mr. Dowd.

[00:00:33] Speaker 02:
Good morning, Your Honors, and may it please the Court.

[00:00:35] Speaker 02:
My name's Matthew Dowd, and I represent the Appellant

[00:00:38] Speaker 02:
David Frankel, who is sitting next to me at the council table today.

[00:00:41] Speaker 02:
As the court knows, there are two main issues in this case that deals with a robo-call challenge that was sponsored by the Federal Trade Commission.

[00:00:51] Speaker 02:
And the two issues are the breach of contract issue and the procurement issue.

[00:00:55] Speaker 02:
And I'd like to first turn to the breach of contract issue.

[00:00:59] Speaker 02:
And we think that this is an important case.

[00:01:01] Speaker 02:
It's a case of first impression for this court.

[00:01:03] Speaker 02:
It deals with the question of whether the

[00:01:08] Speaker 02:
The contest and the judge's decision in this particular contest are reviewable.

[00:01:13] Speaker 02:
The contest was conducted under the American.

[00:01:16] Speaker 04:
What's your relief?

[00:01:17] Speaker 04:
I mean, you had 797 applicants here.

[00:01:19] Speaker 02:
Yes.

[00:01:20] Speaker 04:
All but one didn't win.

[00:01:23] Speaker 04:
So each of them, I guess, in your view, would be eligible to bring a challenge such as yours to this court?

[00:01:31] Speaker 02:
Your Honor, no.

[00:01:31] Speaker 02:
Not everyone can do that.

[00:01:33] Speaker 02:
And that's what puts Mr. Frankel in a rather unique position, because what he did here

[00:01:38] Speaker 02:
is before filing a suit, he filed a FOIA request.

[00:01:42] Speaker 02:
And based on the information that was revealed during the FOIA request, there were clear indications that what the judges did violated the rules.

[00:01:54] Speaker 02:
They changed the judging criteria.

[00:01:55] Speaker 02:
But in addition, so you have that one requirement.

[00:01:58] Speaker 04:
It would apply to all applicants.

[00:02:00] Speaker 02:
Yes, that would apply to all applicants.

[00:02:02] Speaker 02:
But the way the judging criteria were ignored

[00:02:07] Speaker 02:
directly affects Mr. Frankl's submission.

[00:02:11] Speaker 03:
Don't the contest rules require a blocking solution?

[00:02:14] Speaker 03:
Do you agree with that?

[00:02:16] Speaker 02:
Yes, and the rules, Judge Dyke, provide a specific definition for blocking, yes.

[00:02:22] Speaker 03:
Okay, so if a contestant didn't provide a blocking solution, that contestant would not have standing to sue, right?

[00:02:30] Speaker 02:
I would agree with that, Your Honor, yes.

[00:02:34] Speaker 03:
Did Mr. Frankl supply a blocking solution?

[00:02:37] Speaker 02:
Yes, Your Honor.

[00:02:39] Speaker 03:
But it's not a technological blocking solution.

[00:02:41] Speaker 03:
His proposal was to identify the illegal callers and to prosecute them, right?

[00:02:48] Speaker 02:
No, Your Honor.

[00:02:49] Speaker 02:
With respect, it's more complicated than that.

[00:02:51] Speaker 02:
And that brings up two important... Well, wait.

[00:02:54] Speaker 03:
What's more complicated than that?

[00:02:55] Speaker 02:
Well, because, Your Honor, it's not just about prosecuting.

[00:02:58] Speaker 02:
It's about working with carriers to provide a technical solution on preventing

[00:03:04] Speaker 02:
calls from these robo-callers, from the source, as opposed to the quote-unquote winners that were selected.

[00:03:11] Speaker 03:
But he didn't propose a blocking solution at the source, right?

[00:03:16] Speaker 02:
No, he did, Your Honor.

[00:03:18] Speaker 02:
Yes, he did.

[00:03:18] Speaker 02:
Absolutely, he did.

[00:03:20] Speaker 03:
I've looked at his proposal.

[00:03:21] Speaker 03:
I didn't see that he proposed a blocking solution.

[00:03:24] Speaker 02:
Well, let me first address a premise of that, because it goes to an important point in the posture of this case, which is ruled on summary judgment.

[00:03:32] Speaker 03:
And the federal... Tell me where he proposed that blocking solution.

[00:03:39] Speaker 03:
I've read his proposal, and it talks about identifying the courts and prosecuting.

[00:03:45] Speaker 03:
And I don't see how that's a blocking solution.

[00:03:48] Speaker 02:
Well, his proposal is at 159 in the Joint Appendix.

[00:03:53] Speaker 02:
And if you look at A170, for example, the second paragraph,

[00:04:02] Speaker 02:
And I will preface all of this is that these are technical, complicated solutions.

[00:04:08] Speaker 02:
And that's why we had two of the three judges who were technical people.

[00:04:12] Speaker 03:
Our technical solution is a little different.

[00:04:14] Speaker 03:
It's really a tracking and enforcement tool.

[00:04:16] Speaker 03:
In other words, you prosecute the people.

[00:04:19] Speaker 02:
No, it's more complicated than that, Your Honor, with respect.

[00:04:22] Speaker 02:
And it's not just a prosecution tool.

[00:04:25] Speaker 02:
It's more an effective enforcement tool working with carriers by preventing the calls

[00:04:30] Speaker 02:
And not necessarily preventing, but blocking them at the source.

[00:04:34] Speaker 02:
And so the way these telecom systems work and the way the phone call systems work.

[00:04:40] Speaker 03:
It says the technology doesn't prevent rubble calls per se.

[00:04:43] Speaker 00:
Correct, Your Honor.

[00:04:44] Speaker 00:
You're confusing.

[00:04:45] Speaker 00:
I'm going to interrupt this discussion of the technology, because my understanding is that we haven't crossed the bridge of the right to challenge the decision of the judges, even if we were to assume

[00:04:58] Speaker 00:
that Mr. Frankel's suggestion was the same as one of those that received the award.

[00:05:04] Speaker 00:
Is that correct?

[00:05:05] Speaker 02:
I'm sorry.

[00:05:06] Speaker 00:
Could you repeat your question, Your Honor?

[00:05:09] Speaker 00:
The issue before us and that was decided is that in view of the contract terms, the contest terms, those who do not receive the award, these hundreds of people who provided suggestions who are not among the two selected as a tie

[00:05:26] Speaker 00:
that there is no, because of the terms of the contest, there is no opportunity to challenge the judge's decision.

[00:05:34] Speaker 00:
Don't we have to cross that bridge first?

[00:05:37] Speaker 02:
Yes, Judge Newman, that's correct, and that brings up a separate issue from your question, Judge Dyke.

[00:05:42] Speaker 02:
I'd like to address both.

[00:05:44] Speaker 00:
It's a separate issue, but if we don't cross that threshold, do we reach the other question as to the merits of the

[00:05:51] Speaker 02:
Proposal no your honor, but I think we made it clear and the case law has made it clear that we've cited and the government hasn't cited any contrary case laws that when you can establish or at least allege that the the judging criteria or the rules of the contest have not been followed then that gives a Party a right to challenge the the contest in court the Johnson versus BP oil case is a classic example what?

[00:06:18] Speaker 02:
Well, there are three primary rules.

[00:06:20] Speaker 02:
One, requiring a blocking, that the winners block the robo calls.

[00:06:25] Speaker 02:
The second was that the judging criteria required weighting the scores for a strong preference for solutions that worked on both types of phones, both wireless and landline phones.

[00:06:39] Speaker 02:
And it's clear that the judges, and this is clear from the deposition testimony, that the judges ignored that requirement.

[00:06:45] Speaker 02:
And the third is also the numerical scoring.

[00:06:47] Speaker 02:
And if you look at the way this process was developed, the scores were only applied after there was some selection and winnowing down of... Is there anything in the rules that required a numerical score for each of the entries?

[00:07:01] Speaker 02:
Your Honor, with respect, that's the only way this could be feasibly done.

[00:07:05] Speaker 02:
And Judge Bellowvin, in his deposition testimony, acknowledged that you had to score and it was required by

[00:07:12] Speaker 02:
It was required by the rules of the contest.

[00:07:15] Speaker 03:
Wait a second.

[00:07:17] Speaker 03:
These cases, and I've read all these cases, at most say that if there's an irregularity or a gross mistake, maybe you can sue despite the preclusion provision of the rules, right?

[00:07:29] Speaker 02:
Yes, Your Honor.

[00:07:30] Speaker 03:
So you have to show at least a clear violation of the rules, right, in order to sue.

[00:07:36] Speaker 02:
Yeah, I think that falls under the irregularity category.

[00:07:39] Speaker 03:
So you have to have a clear violation.

[00:07:42] Speaker 03:
Right?

[00:07:43] Speaker 02:
Yes, and that's what we show here.

[00:07:44] Speaker 03:
And so that's the problem when you say that the only feasible way that the rules could work is to have an individual scoring.

[00:07:52] Speaker 03:
It seems to me what you're doing is you're challenging the judgments that were made by the judges here rather than alleging a clear violation of the rules.

[00:08:03] Speaker 02:
With respect, Judge Dyke, I don't think we are.

[00:08:05] Speaker 02:
I mean, the scores set out three categories.

[00:08:08] Speaker 02:
They put numerical weights.

[00:08:09] Speaker 02:
The first category, does it work, is worth 50% of the score.

[00:08:13] Speaker 02:
In the end, the judge has applied numerical scores.

[00:08:16] Speaker 02:
And in fact, and I think this is the most egregious aspect of this whole process, is that Mr. Frankel's submission, when they start... Where is there a specific rule here that was violated by that?

[00:08:29] Speaker 02:
Well, Rule 9 sets forth a judging criteria, and it says the submissions will be judged according to the criteria.

[00:08:37] Speaker 02:
And the criteria

[00:08:38] Speaker 02:
by necessity, include numerical scores.

[00:08:41] Speaker 02:
And Judge Bellows acknowledged during his deposition that the scoring is required.

[00:08:47] Speaker 03:
And in fact... It's only required for solutions that the judges consider to be blocking solutions, and they didn't consider this one to be a blocking solution.

[00:08:56] Speaker 02:
With the utmost respect, Judge Dyke, I wholeheartedly disagree, because when they started the process, one of the judges actually scored Mr. Frankel's submission.

[00:09:07] Speaker 02:
They gave him one of the top scores.

[00:09:09] Speaker 02:
And in fact, it was a score that was equal to a score of one of the ultimate winners.

[00:09:14] Speaker 02:
Now, only when the judges implemented this new filtering requirement, after the judges noted that this process was untenable, that they had too many submissions, that some of the judges were only working on weekends, only after the implementation of that filtering requirement did Mr. Frankel's submission get knocked out.

[00:09:32] Speaker 04:
OK, what do the rules preclude then?

[00:09:33] Speaker 04:
from doing this sort of filtering requirement, from calling out some of those at the bottom and not scoring them and only scoring the top.

[00:09:40] Speaker 04:
Where in the rules does that kind of procedure prohibit?

[00:09:46] Speaker 02:
Your Honor, I think any time you have a way to score a contest and the judging criteria include numerical categories, 50%, 25%, 25%, that inherently and necessarily requires a numerical score.

[00:10:03] Speaker 02:
And that's exactly what they did.

[00:10:04] Speaker 02:
That's what the judges started doing.

[00:10:06] Speaker 03:
So you're not relying on a clear provision of the rules.

[00:10:08] Speaker 03:
You're relying on your interpretation of the rules.

[00:10:12] Speaker 03:
And the problem is you can't challenge the judge's interpretation of the rules.

[00:10:17] Speaker 03:
You can only make a challenge if there's a clear violation.

[00:10:21] Speaker 03:
And you're not able to show that there was a clear rule here that was violated.

[00:10:26] Speaker 02:
Your Honor, if you go back, I think, to the case law, Carlini, for example, talks about not

[00:10:32] Speaker 02:
the judges can't apply its own interpretation of the rules, meaning that it can't interpret the rules as contrary to the plain meaning of the contract.

[00:10:39] Speaker 02:
And this goes to the general interpretation of this contract.

[00:10:43] Speaker 02:
And the most reasonable, in fact, only reasonable interpretation of the contract is when you set forth judging criteria, and some of them are ignored, such as the categories and the numerical categories, that's a violation of the rules.

[00:10:56] Speaker 02:
Otherwise, we're left with a process.

[00:10:59] Speaker 02:
And this is what this process was.

[00:11:00] Speaker 02:
We're left with a process where

[00:11:02] Speaker 02:
They find out they have too many submissions.

[00:11:04] Speaker 02:
They have a staffer categorize the submissions.

[00:11:07] Speaker 02:
Within three days after the categorization by the staffer, they select two winners who just happen to have the same score.

[00:11:14] Speaker 02:
And only after that fact, they score them.

[00:11:17] Speaker 02:
That is not consistent with the way these rules are set up.

[00:11:20] Speaker 00:
So what is the judicial role, in your view?

[00:11:24] Speaker 00:
At what stage do we intrude into the process

[00:11:28] Speaker 00:
basic scoring, the initial culling of the 700 such submissions, or after the staffer had reduced them to 50, whatever the number was, we then looked to see if they were fairly scored, or how would that have to work on your position?

[00:11:51] Speaker 02:
Judge Newman, I think it's a very simple process that any agency can follow.

[00:11:57] Speaker 02:
how they've scored and how they've at least analyzed all the submissions in accordance with the judging criteria.

[00:12:03] Speaker 02:
That wasn't done.

[00:12:04] Speaker 00:
Do you want us to tell them to do it again or to write more detailed guidelines as to be applied?

[00:12:12] Speaker 00:
Or if one accepts the premise that things were done hastily, or I'm not sure what the premise is, but that there's some sort of flaw, what is the judicial role of the remedy?

[00:12:26] Speaker 02:
Well, I think at a minimum here, Your Honor, the government repeatedly says that Mr. Frankel's submission doesn't work.

[00:12:34] Speaker 02:
And that's contravened by the fact that he was scored and he received a top score.

[00:12:39] Speaker 02:
At a minimum, given this is summary judgment against Mr. Frankel, there's more factual development to figure out here.

[00:12:46] Speaker 02:
But in addition, we have to make sure that the agency complies with the rules.

[00:12:52] Speaker 02:
And here, there was no compliance.

[00:12:54] Speaker 02:
There was complete ignorance of the requirement that the submissions work for both types of phones.

[00:13:02] Speaker 02:
That's readily admitted in the deposition testimony.

[00:13:07] Speaker 02:
And to get to your answer specifically, there are several forms of relief here.

[00:13:11] Speaker 02:
We can remand it to the trial court for a full trial on the issue.

[00:13:15] Speaker 02:
That brings up the procurement issue, which I haven't addressed and would like to take a minute to address.

[00:13:19] Speaker 04:
if the court wants to entertain some... You can't client, even if everything, we agreed with everything you said about the improprieties and problems we had in the context.

[00:13:32] Speaker 04:
Nobody would be in a position to know your client may prove up where he was, but I don't think he's ever going to be able to prove, vis-a-vis the other candidates, that he's exceeded theirs.

[00:13:43] Speaker 04:
Whatever they did to him, they did to the others as well, right?

[00:13:45] Speaker 04:
Or whatever they failed to do with respect to his

[00:13:48] Speaker 04:
submission they field with respect to 786 other submissions, right?

[00:13:53] Speaker 02:
That's correct.

[00:13:54] Speaker 04:
But it only gets to the- So he can't prevail.

[00:13:55] Speaker 04:
He can't demonstrate that he was entitled to the $50,000 under any proceeding we've got in mind, right?

[00:14:02] Speaker 02:
Well, that gets to the procurement, which we believe is also properly classified as a procurement under procurement law.

[00:14:09] Speaker 02:
And we could sort of bid protest.

[00:14:12] Speaker 02:
And so you have the agency rerun the contest.

[00:14:14] Speaker 02:
And that's certainly an option.

[00:14:16] Speaker 02:
There is nothing to preclude this

[00:14:17] Speaker 02:
contest from being classified as a procurement because the FTC is clearly soliciting the services of individuals to provide them with submissions.

[00:14:27] Speaker 04:
You say there's nothing that would preclude them from calling them a procurement.

[00:14:31] Speaker 04:
That's a little different by saying that they were compelled to consider this as a procurement contract.

[00:14:37] Speaker 02:
Yeah, and maybe I should be a little more forceful on that.

[00:14:39] Speaker 02:
I think under the law, when you look at 6303, for example, this

[00:14:45] Speaker 02:
prize contest is properly classified as a procurement.

[00:14:49] Speaker 02:
In fact, when you look at the memorandum from the Office of the Executive President from March 2010, the OMB specifically says that these types of contests can be done under procurement authority of the agency.

[00:15:02] Speaker 04:
But isn't there a difference between whether they can be done and whether they must be done?

[00:15:07] Speaker 02:
Absolutely there is, but when you look at the facts of this

[00:15:10] Speaker 02:
of this contest, we believe and strongly believe that it falls under the procurement.

[00:15:15] Speaker 02:
The government doesn't argue that it's a grant or it doesn't argue that it's a cooperative agreement.

[00:15:19] Speaker 02:
It's clearly not a cooperative agreement.

[00:15:21] Speaker 04:
No, I don't think there are any.

[00:15:23] Speaker 02:
Exactly.

[00:15:24] Speaker 02:
And if you look at the government's red brief at points in the procurement section, they're saying, well, this isn't even a contract.

[00:15:31] Speaker 02:
I don't think there's any dispute that there's a contract formed here.

[00:15:34] Speaker 02:
decades of case law support that when you have these prize competitions, a contract is formed.

[00:15:41] Speaker 02:
And so there's clearly a contract.

[00:15:43] Speaker 02:
And our point is that we've shown a breach of the rules.

[00:15:47] Speaker 02:
And once we've gotten to that point, we say, well, what's the remedy?

[00:15:50] Speaker 02:
And if it's a contract, it could fall under the procurement.

[00:15:53] Speaker 04:
I see that I'm into my- Yeah, well, we'll restore two minutes.

[00:15:57] Speaker 04:
Why don't we- Thank you, Your Honor.

[00:15:58] Speaker ?:
Thank you.

[00:16:14] Speaker 01:
Morning, Your Honor.

[00:16:15] Speaker 01:
May it please the Court?

[00:16:16] Speaker 01:
I'd like to start by addressing, in the order that questions were presented, some of the questions raised by the Court.

[00:16:21] Speaker 04:
Could you just start by talking about whether or not you agree with Mr. Dowd that there was a violation of the rules, and if not one?

[00:16:27] Speaker 01:
No, Your Honor, we disagree with that sentiment.

[00:16:29] Speaker 01:
And we believe that's an unfair characterization of what were the undisputed facts before the trial court.

[00:16:34] Speaker 01:
The chronology of events does not support the narrative that Mr. Dowd is trying to present.

[00:16:39] Speaker 01:
And the trial court found this undisputed because we can strictly look at the documents, the sworn deposition testimony, the post-contest debriefing about what that process was.

[00:16:48] Speaker 01:
And what that process shows is the judges reviewed all the submissions, all 266 of them.

[00:16:54] Speaker 01:
Each of the judges independently did that.

[00:16:57] Speaker 01:
They did express frustration at the start, but the lack of creativity in some of those solutions.

[00:17:01] Speaker 04:
Did they give numerical scores to each of the submissions?

[00:17:03] Speaker 01:
They did not.

[00:17:04] Speaker 01:
And no one required to?

[00:17:05] Speaker 01:
No, they weren't.

[00:17:05] Speaker 01:
If you look at the rules, and this is in the index, 43 through 48, there is nowhere that it says every solution had to be scored.

[00:17:13] Speaker 03:
Well, his basic complaint is that they imposed a filtering requirement on the submissions and didn't really consider the ones that didn't provide a filtering requirement, right?

[00:17:23] Speaker 03:
And he says that that's a violation of the rules.

[00:17:25] Speaker 03:
So address that.

[00:17:27] Speaker 01:
Yes, first of all, I'll answer that in two ways.

[00:17:29] Speaker 01:
Number one, the idea that there was a filtering requirement imposed is merely another way of saying, when the judges thought my solution wouldn't work and eliminated it, that was not in accordance with the rules.

[00:17:39] Speaker 01:
It's merely going back to the criteria.

[00:17:41] Speaker 03:
Wouldn't work because it wasn't a blocking solution?

[00:17:45] Speaker 01:
Well, so that argument is raised.

[00:17:46] Speaker 01:
That goes a little bit more to the merits, and I'd be happy to answer that question.

[00:17:49] Speaker 01:
Mr. Frankel's solution is what the judges call the trace back solution, meaning it traces the multiple hops between.

[00:17:56] Speaker 01:
And for that reason, it wouldn't work.

[00:17:58] Speaker 01:
Yeah, because it would require multi-jurisdictional enforcement, multi-carrier cooperation.

[00:18:03] Speaker 01:
It would require private phone companies to disclose all their private information and provide access to the government.

[00:18:09] Speaker 01:
The judge just didn't think that solution would work.

[00:18:11] Speaker 01:
They told Mr. Frankel that at his deposition.

[00:18:14] Speaker 01:
And Mr. Frankel, at the end of his deposition, said,

[00:18:16] Speaker 01:
I agree that judges weren't being unfair.

[00:18:18] Speaker 01:
They're not biased.

[00:18:19] Speaker 01:
They're not nefarious.

[00:18:20] Speaker 01:
They're not acting with malice.

[00:18:21] Speaker 01:
They didn't commit fraud.

[00:18:22] Speaker 01:
They didn't act in bad faith.

[00:18:24] Speaker 01:
It came down to a technical disagreement.

[00:18:26] Speaker 01:
And if the finality clause in the rules doesn't at least govern that, there's very little else it would guard against.

[00:18:32] Speaker 01:
Because when the contest rules say the determinations of the judges are final and binding, and you just say, I have a different interpretation of that rule.

[00:18:39] Speaker 01:
I'm going to bring a lawsuit, then you're rendering the finality clause a nullity.

[00:18:44] Speaker 01:
And that's important.

[00:18:45] Speaker 01:
Because the FTC, when it decided to profit from this contest, did it under the impression that they wanted to stimulate innovation in the private sector.

[00:18:53] Speaker 01:
They wanted to get people interested in the problem.

[00:18:55] Speaker 01:
They anticipated a lot of people would supply solutions.

[00:18:59] Speaker 01:
And there would be, unfortunately, many losers.

[00:19:02] Speaker 01:
And so you had to have provisions that, hey, look, you guys are all smart people.

[00:19:06] Speaker 01:
You guys might disagree with what these very accomplished academics and people in the industry think.

[00:19:11] Speaker 01:
But their decisions are final.

[00:19:13] Speaker 01:
And you agree to that.

[00:19:14] Speaker 01:
Mr. Frankel admitted he read the rules.

[00:19:16] Speaker 03:
But wouldn't you agree that under the cases that if there was a clear violation of the rules that that suit would not be concluded?

[00:19:24] Speaker 01:
I would agree.

[00:19:24] Speaker 01:
I would phrase that a little bit differently by just repeating the standard.

[00:19:27] Speaker 01:
Fraud, bad faith, gross mistake, or regularity.

[00:19:31] Speaker 03:
And to understand- Irregularity in bad faith or a gross mistake would encompass a clear violation of the rule.

[00:19:39] Speaker 01:
It would.

[00:19:39] Speaker 01:
And I'll provide a few examples.

[00:19:41] Speaker 01:
Now, Kilberg is instructive.

[00:19:43] Speaker 01:
Mr. Frankel ignores it in his brief.

[00:19:45] Speaker 01:
But what Kilberg stated was, by mutual assent to the parties, you decide that a certain individual will be the decision maker.

[00:19:52] Speaker 01:
And those determinations are final.

[00:19:54] Speaker 01:
That determination is binding unless you can show gross mistake necessarily implying bad faith or a lack of honesty.

[00:20:01] Speaker 01:
Mr. Frankel admitted he had no bad faith.

[00:20:04] Speaker 01:
It really goes to the core of what judging is about.

[00:20:07] Speaker 01:
The rule said the judges will be impartial.

[00:20:09] Speaker 01:
We know here they were.

[00:20:11] Speaker 01:
The rules state that the judges will apply the criteria.

[00:20:13] Speaker 01:
We know here they were.

[00:20:14] Speaker 01:
Ultimately, what Mr. Frankel disagrees with is, well, I would have weighted things a little differently.

[00:20:19] Speaker 03:
Well, basically, he's saying my solution is workable.

[00:20:22] Speaker 03:
They made a mistake in concluding that it wasn't workable.

[00:20:26] Speaker 01:
That's what it comes down to.

[00:20:27] Speaker 01:
And that's not a clear violation.

[00:20:28] Speaker 01:
That's not a clear violation of the rules.

[00:20:29] Speaker 01:
Because anybody can disagree.

[00:20:31] Speaker 01:
A number of people can disagree.

[00:20:32] Speaker 01:
We have 800 contestants in this competition.

[00:20:35] Speaker 01:
And Mr. Frankel is probably not the only one that disagrees with what the judges did.

[00:20:39] Speaker 01:
This honorable panel may disagree.

[00:20:41] Speaker 01:
But at the end of the day, we have to enforce what was agreed upon in the rules.

[00:20:45] Speaker 01:
Because this is what the FTC conditioned the contest on.

[00:20:49] Speaker 01:
Not only that, but there was a release clause that said, one condition of applying for a solution in this contest is that,

[00:20:57] Speaker 01:
any liability arising from your participation in the contest, you're waiving it.

[00:21:00] Speaker 01:
That is one condition.

[00:21:02] Speaker 01:
We know there are going to be a lot of interested people.

[00:21:04] Speaker 01:
We can't afford to have these competitions if every time we hold one, we get hundreds of lawsuits and we have to defend all of them.

[00:21:11] Speaker 04:
Speaking of which, this is outside of the record, but is this a practice that is commonly used by agencies, by different agencies?

[00:21:18] Speaker 01:
The contest, Your Honor?

[00:21:19] Speaker 01:
Yeah, I believe since 2010, since it was passed in statute by President Barack Obama, yes, it is something that agencies are really looking to do because

[00:21:28] Speaker 01:
This is just a matter of common sense.

[00:21:31] Speaker 01:
Sometimes the private sector does things better than the government can.

[00:21:34] Speaker 01:
And you want to tap into that knowledge.

[00:21:36] Speaker 01:
And one way to get people interested in solving public problems is to give a little prize, give a little reward.

[00:21:43] Speaker 01:
It's a very cost effective way for the government to do something that would benefit the public.

[00:21:48] Speaker 01:
The FTC's overall agency mission is to protect consumers.

[00:21:51] Speaker 01:
They saw this as one way to do that.

[00:21:53] Speaker 01:
It wouldn't be very cost effective if 700 people could sue.

[00:21:56] Speaker 01:
No.

[00:21:57] Speaker 01:
Exactly, Your Honor, and I think that's why these clauses have to be enforced, and that's why the FTC envisioned putting these in as a condition for contestants' participation in the contract.

[00:22:07] Speaker 01:
Even assuming, we can ignore that these solutions or that the contest rules just did not contain these provisions, even that Mr. Frankel cannot articulate a breach.

[00:22:18] Speaker 01:
I mean, what he's boiling this down to is, well, my solution wouldn't score, and

[00:22:22] Speaker 01:
My understanding of the rules was that every solution would be scored.

[00:22:25] Speaker 01:
We asked Mr. Frankel this in deposition.

[00:22:27] Speaker 01:
Where in the rules does it say that?

[00:22:29] Speaker 01:
And he couldn't point to anywhere in the rules where it said every solution would be scored.

[00:22:33] Speaker 01:
And the fact of the matter is it's because the rules didn't say that.

[00:22:36] Speaker 01:
He had to cobble together three sections to get the suggestion in his mind that somewhere along the lines, he believed every solution would be scored.

[00:22:44] Speaker 01:
What the judges understood, and I believe this is an unfair characterization of Mr. Belevin's testimony,

[00:22:49] Speaker 01:
was that eventually some of the solutions would be scored.

[00:22:53] Speaker 00:
So at what stage, if any, would the government acknowledge that there ought to be a basis for a failed contestant to come into court and expose the entire situation?

[00:23:06] Speaker 01:
Yeah, I'll address this one at a time.

[00:23:08] Speaker 01:
First, I'll address the finality clause.

[00:23:10] Speaker 01:
Now, that's fraud, bad faith, gross mistake, or regularity.

[00:23:12] Speaker 01:
What that comes down to, according to Kilberg, if you give Kilberg, which is the root precedent regarding all contest cases, including Gilmore Fergili, all those cases rely on Kilberg as the source.

[00:23:22] Speaker 00:
So that's fraud, a charge of fraud?

[00:23:25] Speaker 01:
Not only a charge of fraud, it basically has to offend basic judging principles.

[00:23:29] Speaker 01:
The contestant was robbed of being judged.

[00:23:32] Speaker 01:
And there are certain examples that Mr. Frankel provides in his brief.

[00:23:35] Speaker 01:
For example, flipping coins, throwing darts on the wall.

[00:23:39] Speaker 01:
Those would be clear violations.

[00:23:40] Speaker 01:
If that was uncovered in this case, a persuasive case could be made that that finality clause could be ignored.

[00:23:47] Speaker 01:
In this case, what Mr. Frankel is quibbling with is, you didn't score my solution.

[00:23:51] Speaker 01:
Well, the rules didn't say that.

[00:23:52] Speaker 01:
Well, you didn't take this subfactor regarding cross-platform workability across landlines and mobile phones and make that outcome determinative.

[00:24:01] Speaker 01:
Well, I'm sorry, that was vested to the discretion of the judges.

[00:24:04] Speaker 01:
Everyone understood this going in.

[00:24:06] Speaker 01:
You can't nitpick with the rules when all evidence shows that the judges, when they were carrying out the rules and carrying out their function, acted in good faith, tried the best they could.

[00:24:17] Speaker 01:
And Mr. Frankel acknowledged at his deposition, these people are reasonable people with reasonable integrity generally.

[00:24:24] Speaker 04:
Yeah, but this procedure was kind of a mess.

[00:24:26] Speaker 04:
And it's nobody's fault.

[00:24:27] Speaker 04:
But they got far more applicants than they expected, right?

[00:24:31] Speaker 04:
And there wasn't enough resources dedicated to the judging thing.

[00:24:34] Speaker 04:
So people were all out of sorts and not knowing and running around deciding how to fix it and how to get it done right.

[00:24:41] Speaker 01:
I'll say it this way.

[00:24:42] Speaker 01:
The competition was a rousing success.

[00:24:44] Speaker 01:
They got 800 people interested in the problem.

[00:24:45] Speaker 04:
Well, your success may be chaos on the other end of that.

[00:24:49] Speaker 04:
I mean, there were problems with that.

[00:24:52] Speaker 04:
Your position is just that none of that rises.

[00:24:54] Speaker 01:
None of that matters because the rules contemplated the uncertainty and said, look,

[00:25:01] Speaker 01:
There's no strict criteria.

[00:25:02] Speaker 01:
If you look at the rules, the contest criteria on page 46 of the appendix, almost everything is a value determination.

[00:25:09] Speaker 01:
How well does it work in this way?

[00:25:10] Speaker 01:
Will it do this?

[00:25:11] Speaker 01:
These are all factors you consider.

[00:25:13] Speaker 01:
But ultimately, all that decision making is vested in the determination of the judges.

[00:25:17] Speaker 01:
When the judges were deciding to winnow it down to the filtering category, they were discussing all the solutions.

[00:25:23] Speaker 01:
They saw fatal flaws in all of them across broad categories.

[00:25:27] Speaker 01:
They specifically told Mr. Frankel, look, tracebacks just won't work.

[00:25:31] Speaker 01:
There's a lot of problems associated with that, including multi-carrier cooperation, access to private data, multi-jurisdictional enforcement.

[00:25:38] Speaker 01:
A lot of these calls come from third world countries where they have no interest in enforcing American laws against their indigenous people.

[00:25:46] Speaker 01:
It just doesn't work that way.

[00:25:47] Speaker 01:
This was the determination that judges made.

[00:25:50] Speaker 01:
And at the end of the day, we might argue, well, you could have documented it better.

[00:25:54] Speaker 01:
You could have had more documentation.

[00:25:55] Speaker 01:
You could have scored everything, even though the rules didn't expressly require it.

[00:25:59] Speaker 01:
You could have done that.

[00:26:00] Speaker 01:
But at the end of the day, the critical question is, when the judges did what they did, was anything in direct contravention of the rule such that it would rise to the level that would offend the judging process, critically offend the judging process?

[00:26:14] Speaker 01:
The examples that Mr. Frankel raises are not even close to this case.

[00:26:18] Speaker 01:
He talked about a dog show where you award the prize to a poodle in a German shepherd category.

[00:26:23] Speaker 01:
This case is not even close to that.

[00:26:25] Speaker 01:
Judge Dyke, you said a clear violation of the rules.

[00:26:28] Speaker 01:
I would agree with that, except I would say it has to offend basic principles of judging such that your solution was not judged.

[00:26:34] Speaker 04:
Can we move on to procurement?

[00:26:36] Speaker 01:
Absolutely.

[00:26:37] Speaker 04:
And why is this not an exchange of property for money?

[00:26:40] Speaker 04:
You've got this thing the other guy got.

[00:26:42] Speaker 04:
You paid him $50,000 for it.

[00:26:44] Speaker 04:
And why isn't that, therefore, fallen into the category here?

[00:26:48] Speaker 01:
I believe Lucas is instructive, if we're going to analyze it under that specter.

[00:26:52] Speaker 01:
Now, Lucas was a prize competition for the best design for the Korean War Memorial.

[00:26:57] Speaker 01:
Ultimately, there was one contestant who won that.

[00:27:00] Speaker 01:
And that contestant had a lot of design changes to his solution.

[00:27:04] Speaker 01:
and tried to get injunctive relief against the government because they were about to install or construct a design that he didn't originally propose.

[00:27:12] Speaker 01:
What the court said is, hey, look, this is not a procurement contract.

[00:27:16] Speaker 01:
The contest contract ended when they awarded you the prize money.

[00:27:20] Speaker 01:
If the government wanted to procure your idea after that, they would have bought it from you and then chose to enter into a procurement contract.

[00:27:29] Speaker 04:
Is that what distinguishes it from a Cuba contract because it ends at a specific date?

[00:27:35] Speaker 04:
Is that the distinguishing factor?

[00:27:36] Speaker 01:
No, and I think the argument that Mr. Frankel raises is, well, you're acquiring, he calls it a license for solutions.

[00:27:43] Speaker 01:
But what the rules made clear is all intellectual property rights remain with the owner, the inventor.

[00:27:49] Speaker 01:
When you submit your idea, the government is not claiming ownership of it.

[00:27:53] Speaker 01:
All intellectual property rights remain with the solution proponent.

[00:27:57] Speaker 00:
Didn't the contract terms give the government the right to use the subject matter?

[00:28:03] Speaker 01:
There was, yes.

[00:28:04] Speaker 01:
Yes, Judge Newman, there was license language, but it's important to know the context of the license language because that license was merely used to evaluate the submission in case the solution had to be tested.

[00:28:13] Speaker 01:
The judges had to judge.

[00:28:15] Speaker 01:
So if it was a Harvard... It was broader than that in the sense that eventually they had to publish the winners.

[00:28:21] Speaker 01:
So they asked for a license in that regard.

[00:28:24] Speaker 01:
Let us test your solution.

[00:28:25] Speaker 01:
And then ultimately, if you win, let us publish it.

[00:28:27] Speaker 01:
There were also honorable mention prizes or not.

[00:28:29] Speaker 03:
So when the government contracts with somebody to acquire a license, that's not a procurement?

[00:28:36] Speaker 01:
No, not in this respect.

[00:28:37] Speaker 01:
And I would submit that there might be variations where the government acquires license, where you can call it under 6303 an acquisition of a property or service.

[00:28:46] Speaker 01:
But ultimately, it has to come down to what's the principal purpose.

[00:28:50] Speaker 01:
is the principal purpose of a contest to acquire a property or service.

[00:28:56] Speaker 01:
We know that's not the case here because it's baked into the statute.

[00:28:59] Speaker 04:
What is the principal purpose?

[00:29:01] Speaker 01:
To stimulate innovation in the private sector.

[00:29:03] Speaker 04:
And the government gets no benefit out of it?

[00:29:05] Speaker 04:
I mean, this guy comes up with a terrific solution to the problem that the FTC has been working on for years and he just walks away with it and they give him $50,000?

[00:29:14] Speaker 01:
I'm not sure if the FTC has been working on it for years.

[00:29:16] Speaker 01:
I mean, one reason why this competition was

[00:29:20] Speaker 01:
promulgated was because they wanted to get private sector ideas.

[00:29:23] Speaker 04:
Now, the FTC wanted to get it for themselves so that they could use it or avoid it.

[00:29:27] Speaker 01:
No, no, no.

[00:29:29] Speaker 01:
The FTC, the aim of the FTC was not to get the best idea and then ultimately purchase it or gain ownership rights from the inventor.

[00:29:38] Speaker 01:
It was literally this idea that if you get the private sector interested in solving public problems, it just benefits the public in general.

[00:29:45] Speaker 03:
So if the primary purpose were to require licensing, wouldn't you?

[00:29:50] Speaker 01:
That would fulfill the first prong of the statute.

[00:29:53] Speaker 01:
The next prong is it would have to provide a direct benefit to the United States.

[00:29:57] Speaker 01:
Now here, this is in the language of the statute, or I'm sorry, the language of the contest, but it was to advance the agency's overall mission.

[00:30:03] Speaker 01:
Heimis decided this.

[00:30:05] Speaker 01:
Advance of the agency's overall mission is an indirect benefit.

[00:30:08] Speaker 01:
It's not a direct benefit.

[00:30:10] Speaker 04:
And the indirect benefit is to stimulate ideas in the private sector and have them then develop it all separately.

[00:30:17] Speaker 04:
apart from anything the FTC does.

[00:30:19] Speaker 01:
When you can pull together the private sector knowledge to address public problems, it's a very powerful tool to combat a very serious public problem.

[00:30:28] Speaker 01:
The FTC doesn't govern how that's done, but if you can get people interested in it on their own volition, spending their own time.

[00:30:34] Speaker 01:
Now, the FTC could have entered into a procurement contract with a contractor and say, invent a hardware solution that does X, Y, and Z, and maybe even do performance-based specifications or something like that.

[00:30:45] Speaker 01:
By and large, that would be far less effective than what the contest did, which is you get 800 people just thinking about a problem.

[00:30:53] Speaker 04:
You pool that vast knowledge from... Are there any studies done in terms of the impact or the effect?

[00:30:58] Speaker 01:
I believe Mr. Frankel cites a White House report.

[00:31:01] Speaker 01:
I believe they reference certain studies in there.

[00:31:03] Speaker 01:
I haven't personally read those studies.

[00:31:05] Speaker 01:
I have read the White House report, and it cites data suggesting that this is a very innovative way to get people interested in an idea.

[00:31:12] Speaker 01:
And they've generally seen, and this is one thing that was cited,

[00:31:15] Speaker 01:
They've generally seen that people outside the industry actually provide the best ideas because they provide a fresh set of eyes into a very common problem.

[00:31:22] Speaker 01:
If there are no further questions, I yield the rest of the time.

[00:31:25] Speaker 01:
Thank you, Your Honor.

[00:31:32] Speaker 02:
Thank you, Your Honor.

[00:31:33] Speaker 02:
On the procurement point, I'd like to address Lucas.

[00:31:36] Speaker 02:
Lucas provides really no analysis of the issue.

[00:31:39] Speaker 02:
And I will also note that in Lucas itself, in that case,

[00:31:42] Speaker 02:
The government actually argued that that contest was a procurement.

[00:31:46] Speaker 02:
So it's really, it's not that far outside of the box to say that this prize competition is a procurement just like the one in Lucas.

[00:31:54] Speaker 02:
Second is that we've heard repeatedly.

[00:31:56] Speaker 03:
When you reach that question, do we disagree with you that there was a clear violation of the rules?

[00:32:03] Speaker 02:
You don't, is the question that you don't have to or you don't at all?

[00:32:07] Speaker 02:
You don't necessarily have to.

[00:32:08] Speaker 02:
I think it's still an important question.

[00:32:10] Speaker 02:
Because you have a contract.

[00:32:12] Speaker 02:
There's no dispute that there's a contract.

[00:32:13] Speaker 02:
And there might just be a breach of a contract.

[00:32:15] Speaker 02:
But it might be a contract that doesn't fall under the procurement statute.

[00:32:18] Speaker 02:
But our position is that it does.

[00:32:20] Speaker 02:
So you can reach both issues.

[00:32:23] Speaker 02:
But I would like to emphasize, and I think this is a really important point in case of the facts in this case, is that there's been just repeated statements that Mr. Frankel's solution doesn't work.

[00:32:34] Speaker 02:
And that the judges told him that it wouldn't work.

[00:32:37] Speaker 02:
All of this is after the fact.

[00:32:40] Speaker 02:
The only evidence in the record about Mr. Frankl's submission is that it was scored as one of the top submissions.

[00:32:49] Speaker 02:
It tied one of the eventual winners.

[00:32:52] Speaker 02:
That's the only evidence with respect to the viability of Mr. Frankl's submission, whether it would work and whether it was scored.

[00:33:00] Speaker 00:
But that's why I asked what you want this court to do.

[00:33:03] Speaker 00:
Do we look at the top submissions and say, no, in our view,

[00:33:07] Speaker 00:
These are the ones that should have prevailed?

[00:33:10] Speaker 02:
I think that's the easiest way to do it, Your Honor, because their position is Mr. Frankl's doesn't work.

[00:33:16] Speaker 02:
Our position is, if we just compare ours to the two top winners, ours must necessarily work when you apply the rules correctly, when you apply the requirement that it has to work, or the preference, the strong preference that it works on both types of phones, that it actually blocks phones from ringing.

[00:33:31] Speaker 03:
So you want us to be the contest judges and decide the question of workability?

[00:33:35] Speaker 02:
No, Your Honor, with respect, I think the easier and the better way is to remand this to the trial court, get a full record.

[00:33:42] Speaker 02:
Remember, this is on summary judgment.

[00:33:44] Speaker 02:
This is just a small snippet of the record that was filed in the summary judgment motion by Mr. Frankel per se.

[00:33:50] Speaker 02:
And we think there's a lot more evidence that supports our case.

[00:33:53] Speaker 02:
All of these questions about the viability and the usability of Mr. Frankel's submission all go to the facts that need to be developed.

[00:34:00] Speaker 02:
We've gotten past the point where I think that there are rule violations or at least criteria

[00:34:05] Speaker 02:
And I think when you look at rule 9, and when you read rule 9 in the contest, it says specifically that the submissions will be judged.

[00:34:14] Speaker 02:
And the following rule, rule 10, describes how they will be judged.

[00:34:19] Speaker 02:
And it has numerical requirements.

[00:34:21] Speaker 02:
And I've never seen an instance where there's some- Do they have to be judged even if they're not workable?

[00:34:30] Speaker 03:
If there's evidence of- Do they have to be judged if they're determined not to be workable?

[00:34:34] Speaker 02:
No.

[00:34:35] Speaker 02:
If there's evidence in the record that a particular submission was deemed unworkable, I would agree with you.

[00:34:41] Speaker 02:
But there is no evidence in this case.

[00:34:44] Speaker 02:
And the only evidence is the single score for Mr. Frankl's submission where it tied one of the eventual winners.

[00:34:53] Speaker 02:
So this isn't the case where actually his submission was deemed unworkable.

[00:34:57] Speaker 02:
If you look at the deposition transcript carefully, every single one of those sites

[00:35:02] Speaker 02:
that I believe are on the red brief of page 30.

[00:35:05] Speaker 02:
Every single site is a generality about a category of solutions that they think won't work, these so-called trace back solutions.

[00:35:14] Speaker 02:
But they give no specifics.

[00:35:16] Speaker 02:
And this is all contravened by the only point of evidence that says that Mr. Frankl's submission was the top scorer before they implemented this filtering requirement.

[00:35:28] Speaker 02:
And our ultimate point, and I agree with my colleague, that these are important mechanisms to get ideas and innovation.

[00:35:35] Speaker 02:
The problem that we have, and I think the problem that everyone will have, is that if there is no transparency, if agencies are allowed to change the rules on the fly, and that there's no way to review these cases, it will undermine the confidence in these systems.

[00:35:49] Speaker 02:
And that's not the way these prize competitions are supposed to work.

[00:35:53] Speaker 04:
Thank you.

[00:35:54] Speaker 04:
Thank you, Your Honor.