[00:00:00] Speaker 02:
Okay.

[00:00:00] Speaker 02:
The first argued case this morning is number 15-1621, Kramer against Creative Compounds.

[00:00:07] Speaker 02:
Mr. Collins.

[00:00:10] Speaker 00:
Thank you, Your Honor.

[00:00:13] Speaker ?:
Good morning.

[00:00:14] Speaker 00:
Good morning.

[00:00:14] Speaker 00:
May it please the Court, I represent my clients Ron Kramer, Sally Abraham, and Thermalife International LLC.

[00:00:22] Speaker 00:
I want to point out to your honors that in the briefing, Thermalife International LLC was lumped together as one of the parties seeking fees here.

[00:00:32] Speaker 00:
It is not seeking fees.

[00:00:33] Speaker 00:
There's no argument that it prevailed on any claim before the district court.

[00:00:39] Speaker 00:
That was simply the result of

[00:00:42] Speaker 00:
using the wrong plural.

[00:00:45] Speaker 00:
It should just be Kramer and Abraham seeking fees.

[00:00:48] Speaker 04:
Is this only related to attorney's fees under 285 and whether this is an exceptional case?

[00:00:56] Speaker 04:
Because I know to receive costs you have to be the prevailing party also, but I didn't understand your brief.

[00:01:01] Speaker 04:
as appealing the prevailing party definition under the context of, what is it, 54D for costs?

[00:01:07] Speaker 00:
I believe 54D is mentioned in the brief.

[00:01:10] Speaker 00:
It's certainly not a central argument in the brief, but we are appealing also the denial of costs to Kramer and Sallie Graham.

[00:01:19] Speaker 04:
Where is that in your brief?

[00:01:21] Speaker 04:
I hear you say that in oral argument, but I'm not sure.

[00:01:23] Speaker 00:
I believe in the conclusion of the reply.

[00:01:27] Speaker 04:
Conclusion of the reply?

[00:01:28] Speaker 00:
I know the cost is mentioned.

[00:01:30] Speaker 00:
I looked at this issue last night.

[00:01:35] Speaker 00:
At the end of the day, there were not substantial costs here, Your Honors.

[00:01:40] Speaker 00:
The critical issue is the attorney's fees.

[00:01:42] Speaker 00:
There were relatively substantial attorney's fees incurred by my clients, despite the fact that they repeatedly offered walk-away settlements throughout the underlying litigation.

[00:01:54] Speaker 02:
But you need to persuade us why this

[00:01:56] Speaker 02:
District Court exceeded its discretion in balancing whatever as he balanced it.

[00:02:03] Speaker 00:
Your Honor, respectfully, I believe the standard here should be de novo.

[00:02:07] Speaker 00:
And that's based on the SSL Services case.

[00:02:10] Speaker 00:
That case was decided six months after the United States Supreme Court decided both Octane Fitness and Highmark.

[00:02:17] Speaker 03:
So it's just your position that with respect to the prevailing party finding that that's reviewed under the de novo standard review and everything else would be under an abuse of discretion?

[00:02:28] Speaker 00:
Absolutely.

[00:02:29] Speaker 00:
Exceptionality, Your Honor, should be reviewed for abuse of discretion.

[00:02:33] Speaker 00:
Whether or not the underlying conduct in the litigation is exceptional is, according to the United States Supreme Court, very clearly reviewed for abuse of discretion.

[00:02:43] Speaker 00:
The issue in this case is not whether or not the underlying conduct was exceptional.

[00:02:48] Speaker 00:
In fact, the district court never got to that issue.

[00:02:51] Speaker 00:
So we've asked this court to remand the proceedings with a reversal on the prevailing party issue.

[00:02:56] Speaker 04:
When you say the district court never got to it, and I realize the district court's decision, and I don't think it's disputed, is limited to whether or not you are the prevailing party.

[00:03:05] Speaker 04:
But it also says, as an aside, it may be a throwaway sentence, but it says it nonetheless, that it sees no litigation, misconduct, or abuse of any process at all in this case.

[00:03:16] Speaker 04:
Now, the decision is clearly limited to prevailing party, but in light of a statement like that,

[00:03:21] Speaker 04:
What's the point of this case?

[00:03:24] Speaker 04:
I mean, you're not likely, it doesn't seem to me, by having the district court say he sees nothing in the way of litigation misconduct or abuse of process or anything else in this case.

[00:03:34] Speaker 04:
It seems very unlikely that even if we were to fine for you on prevailing party, that anything is happening other than you're incurring more costs now.

[00:03:42] Speaker 00:
I understand that.

[00:03:43] Speaker 00:
If the district court had unequivocally said this is not an exceptional case and there were two bases for his ruling here, we wouldn't appeal this.

[00:03:51] Speaker 00:
Because the abuse of discretion standard on exceptionality and the factors that go into an exceptionality finding, that's going to be the district court's decision.

[00:04:04] Speaker 00:
I respectfully don't believe that this district court has come to that conclusion.

[00:04:09] Speaker 00:
I do know that there's a throwaway line, what I would call a throwaway line.

[00:04:13] Speaker 00:
It's certainly not a holding.

[00:04:14] Speaker 00:
It's certainly not something that's backed up by analysis.

[00:04:16] Speaker 00:
that the conduct may not be exceptional as he sees it on the papers.

[00:04:22] Speaker 00:
But when you look at the record, certainly what went on here isn't typical patent litigation, isn't typically how this case should have played out.

[00:04:30] Speaker 00:
And we do view the underlying conduct as exceptional.

[00:04:33] Speaker 00:
And we'd like the opportunity to go back to the district court and argue that issue.

[00:04:37] Speaker 04:
Well, you already had that opportunity, right?

[00:04:39] Speaker 04:
You had the opportunity because when you made your motion,

[00:04:43] Speaker 04:
You had to present all of that evidence in the context of the motion itself.

[00:04:46] Speaker 00:
That issue was briefed in front of the court.

[00:04:49] Speaker 00:
That's absolutely correct.

[00:04:50] Speaker 00:
I don't believe that there is a finding on that issue.

[00:04:54] Speaker 04:
So you understand when he says the court, because he says the court finds only for the purposes of determining a failing party, that there has been no litigation, misconduct, or abusive advocacy.

[00:05:04] Speaker 00:
I don't think that that statement means that there was no abusive conduct.

[00:05:09] Speaker 00:
I think.

[00:05:10] Speaker 04:
What?

[00:05:11] Speaker 04:
There has been no litigation misconduct or abusive advocacy.

[00:05:14] Speaker 00:
Only for the purposes of determining prevailing party, he makes that conclusion.

[00:05:20] Speaker 04:
I don't even understand how that's relevant to determining prevailing party, first off.

[00:05:23] Speaker 00:
Well, then I don't understand the sentence either.

[00:05:25] Speaker 00:
Then why does it say only for purposes of determining prevailing party?

[00:05:30] Speaker 00:
I think what he's trying to say is, look, the underlying misconduct isn't relevant for determining prevailing party.

[00:05:37] Speaker 00:
I think the sentence, I think we can agree the sentence isn't perfectly worded.

[00:05:41] Speaker 00:
If the court explicitly said, I would not find exceptionality on these facts, we wouldn't be in front of you.

[00:05:48] Speaker 00:
That would be a waste of money.

[00:05:51] Speaker 00:
So what we have here is we have the only disputed issue before the district court being decided in my client's favor.

[00:05:59] Speaker 00:
You've got to realize that below, creative compounds conceded direct infringement.

[00:06:05] Speaker 00:
From the beginning, this case was an infringement through advertising.

[00:06:11] Speaker 00:
And in interrogatories, Creative responded, yes, we have advertised this for sale.

[00:06:17] Speaker 00:
And in their summary judgment briefings, they conceded that they infringed claim 11 of the patent.

[00:06:24] Speaker 00:
by advertising it for sale.

[00:06:26] Speaker 03:
So your position is that you're the prevailing party because they challenged the validity of your patent and lost.

[00:06:32] Speaker 03:
Can we talk about the rest judicata issue in particular?

[00:06:35] Speaker 03:
Absolutely.

[00:06:36] Speaker 03:
And what is it that rest judicata applies to?

[00:06:40] Speaker 03:
Is it just the defense that they raised and lost on, or does it go beyond that?

[00:06:44] Speaker 00:
Well, it's more than a defense that they raised here.

[00:06:47] Speaker 00:
They actually raised an affirmative claim to invalidate the patented issue.

[00:06:51] Speaker 00:
And I think that's important.

[00:06:52] Speaker 00:
If this was an affirmative defense,

[00:06:54] Speaker 00:
The res judicata argument certainly would not be as strong.

[00:06:57] Speaker 00:
But they raised an argument that the patent was invalid.

[00:07:00] Speaker 00:
They raised a claim.

[00:07:01] Speaker 04:
Because you're saying the suit is at basic, a DJ action.

[00:07:04] Speaker 04:
They brought a DJ action.

[00:07:05] Speaker 04:
You didn't sue them.

[00:07:06] Speaker 04:
They sued you.

[00:07:07] Speaker 04:
That's absolutely correct.

[00:07:08] Speaker 04:
They brought action challenging the patent.

[00:07:11] Speaker 00:
That's absolutely correct.

[00:07:12] Speaker 04:
And that, you think, is a significant distinction.

[00:07:14] Speaker 00:
I think it's critical.

[00:07:16] Speaker 00:
Because very early on in this case, that's what this case was about.

[00:07:19] Speaker 00:
They sued us first for a DJ action, right?

[00:07:22] Speaker 00:
My client called them directly.

[00:07:24] Speaker 00:
They ran to court in, I believe, St.

[00:07:25] Speaker 00:
Louis and filed a DJ action.

[00:07:28] Speaker 00:
We called them and said, hey, you don't have jurisdiction in St.

[00:07:30] Speaker 00:
Louis.

[00:07:31] Speaker 00:
They agreed to transfer that action to Arizona.

[00:07:34] Speaker 00:
And in the interim, we had filed our infringement lawsuit.

[00:07:38] Speaker 00:
And that infringement lawsuit, as most infringement lawsuits do, had a claim for correct infringement, a claim for inducement of infringement, and a claim for contributory infringement, all three.

[00:07:48] Speaker 00:
Very early on in the case, it was admitted that there was no sale.

[00:07:53] Speaker 00:
We took discovery on that issue, didn't discover a sale.

[00:07:56] Speaker 00:
So instead, we had a direct infringement claim under claim 11 of the patent for advertising for sale a product that was patented.

[00:08:06] Speaker 00:
That was the only claim that went forward on.

[00:08:08] Speaker 00:
We quickly disclaimed the ability to go after damages here.

[00:08:12] Speaker 00:
This became a permanent injunction case.

[00:08:13] Speaker 00:
That's all we were seeking.

[00:08:15] Speaker 00:
And the only reason that summary judgment wasn't entered, well,

[00:08:21] Speaker 03:
So I'm re-judging.

[00:08:22] Speaker 03:
I'm going to direct you back to my question.

[00:08:24] Speaker 03:
OK.

[00:08:24] Speaker 03:
OK, so I called it a defense, but it's an affirmative.

[00:08:28] Speaker 03:
Right.

[00:08:29] Speaker 03:
OK.

[00:08:29] Speaker 03:
So but still, what's the scope of the rescue to CADA?

[00:08:32] Speaker 00:
The scope of the rescue to CADA is what they argued as far as invalidity.

[00:08:36] Speaker 00:
And what they argued was public use of the patented product more than a year prior to the patent application.

[00:08:43] Speaker 04:
Well, didn't they also argue co-inventorship?

[00:08:45] Speaker 00:
They did.

[00:08:46] Speaker 04:
That would be a co-inventorship issue as well.

[00:08:50] Speaker 04:
I just don't want you to limit yourself beyond what I think the record actually is.

[00:08:54] Speaker 00:
You're absolutely right.

[00:08:55] Speaker 00:
The record is, they switched arguments on us multiple times.

[00:08:59] Speaker 00:
I believe both of those issues are properly briefed in the summary judgment.

[00:09:02] Speaker 04:
But I think that Judge Stoll's question is really important because as I was researching this, I was trying to ascertain and I didn't get a clearer picture from your brief on this.

[00:09:12] Speaker 04:
I was trying to ascertain what the scope of claim preclusion would be in a circumstance like this.

[00:09:18] Speaker 04:
And is it limited to just the particular invalidity defenses you raised, or as we held in Pactive versus Dow, the defense of claim preclusion will generally be available when the asserted claim was or could have been raised in a prior action between the parties, which has been adjudicated on the merits.

[00:09:36] Speaker 04:
So is your argument that claim preclusion applies only to the defenses

[00:09:40] Speaker 04:
in particular that they raised, or is your argument that under standard law of race due to god or claim preclusion, it would apply to everything they could have raised and had an opportunity to in the litigation?

[00:09:49] Speaker 00:
We dropped a footnote regarding this issue, Your Honor.

[00:09:52] Speaker 00:
The answer is there's claim preclusion here.

[00:09:55] Speaker 00:
And that's the first answer.

[00:09:56] Speaker 00:
The second answer is we believe that claim preclusion is broad, of course.

[00:10:01] Speaker 00:
And we're going to seek as much claim preclusion as we can.

[00:10:03] Speaker 00:
And let's be clear here.

[00:10:05] Speaker 00:
How broad?

[00:10:07] Speaker 00:
It's broad enough so they can't argue that this patent is invalid.

[00:10:10] Speaker 00:
in a separate suit, if they sell the product at issue.

[00:10:15] Speaker 00:
This was an advertising for sale.

[00:10:16] Speaker 04:
So you're recognizing Hulco.

[00:10:17] Speaker 04:
We have a decision called Hulco, which says if you sue them on one product and they raise an invalidity defense, then they're precluded from raising it again with regard to that product.

[00:10:27] Speaker 04:
But if you sue them on a totally different product, a whole new suit, all over again, start over, do over, claim preclusion doesn't apply in that circumstance.

[00:10:36] Speaker 04:
Is that what you're recognizing in your statement?

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

[00:10:39] Speaker 00:
And I think that's really critical here.

[00:10:41] Speaker 00:
Because they got out of our direct infringement claims.

[00:10:44] Speaker 00:
They escaped liability.

[00:10:45] Speaker 00:
They escaped a permanent injunction here as a result of the court's ruling on rightness.

[00:10:49] Speaker 00:
But if they turn around tomorrow and start selling the product that they advertised, we will sue them for infringement.

[00:10:57] Speaker 00:
And in that case, they will be precluded from challenging the patented issue.

[00:11:01] Speaker 04:
I have a dumb question about the facts.

[00:11:04] Speaker 04:
When they brought the DJ suit, what did they allege was the basis of jurisdiction?

[00:11:08] Speaker 04:
Did they expressly identify their advertisements or particular sales or particular products?

[00:11:14] Speaker 04:
There has to be, if it's not reasonable apprehension, there has to be some case or controversy as between the parties.

[00:11:20] Speaker 04:
So what was it that they identified as the basis for giving them the ability to go forward and challenge validity?

[00:11:26] Speaker 00:
For subject matter jurisdiction, they identified a phone call that was made

[00:11:29] Speaker 00:
by Ron Kramer, the president of Thermalife International, directly to someone at Creative Compound indicating, hey, I received this solicitation email which attached the flyer to it.

[00:11:42] Speaker 00:
And I have a patent over that product.

[00:11:46] Speaker 00:
You cannot go ahead and sell it.

[00:11:47] Speaker 00:
The very next day after that phone call, they ran to court.

[00:11:50] Speaker 00:
And so they argued subject matter jurisdiction based on the threat of an infringement lawsuit.

[00:11:57] Speaker 00:
It was transferred.

[00:11:59] Speaker 00:
by consent they agreed to transfer it as a result of lack of personal jurisdiction over Mr. Kramer because they were under the idea at that point that Thermalife International somehow could be tied in to jurisdiction on personal jurisdiction and eventually they agreed with us that they couldn't.

[00:12:18] Speaker 00:
If there's no more questions, I'll reserve the remainder of my time for rebuttal.

[00:12:22] Speaker 02:
Okay, let's hear from the other side.

[00:12:23] Speaker 02:
We'll save you rebuttal time.

[00:12:29] Speaker 02:
Mr. Nolte.

[00:12:31] Speaker 01:
Thank you.

[00:12:35] Speaker 01:
May it please the court, Kratus admits that this case was litigated to a draw and that neither party was a prevailing party.

[00:12:41] Speaker 01:
However, Thermal Life believes that their prevailing party, even though they failed to get a judgment on their direct infringement claim, their contributory infringement claim, and they

[00:12:50] Speaker 01:
summary judge it was rendered against them on their inducement of infringement claim.

[00:12:55] Speaker 04:
On direct and contributory the court decided that the case was not right on the

[00:13:07] Speaker 01:
on the inducement claim.

[00:13:08] Speaker 04:
So it dismissed without prejudice.

[00:13:10] Speaker 04:
That's right.

[00:13:10] Speaker 04:
So they're allowed to re-assert those claims.

[00:13:12] Speaker 04:
That's right.

[00:13:13] Speaker 04:
So no status quo has been changed with regard to those claims between the parties.

[00:13:17] Speaker 01:
But with reduced to the inducement of infringement claim, there is a summary judgment that was rendered against them based upon the fact that there was no direct infringement.

[00:13:26] Speaker 01:
Now, the court probably could have done the same thing on direct and contributory, but for some reason did not do that, but decided to render summary judgment on inducement of infringement.

[00:13:35] Speaker 01:
That was not appealed.

[00:13:37] Speaker 01:
So that remains, and it's unchangeable now.

[00:13:41] Speaker 01:
And that's a case that actually puts us in a different position, because the inducement claim they cannot bring, even though they only asserted claim 11, they can't assert any of the other claims against us now for inducement on that product.

[00:13:54] Speaker 03:
For that one act of alleged infringement.

[00:13:56] Speaker 01:
Right.

[00:13:57] Speaker 01:
Or I believe that if the exact same act was done again, that would still apply, because if it was

[00:14:04] Speaker 01:
If we sold a different product, then perhaps they could claim inducement of infringement on that product.

[00:14:09] Speaker 01:
But if we tried to sell this exact same product again, well, that issue's been decided.

[00:14:15] Speaker 01:
So if I could, Your Honor, I would like to actually get to the standard of review, if you want to hear about that.

[00:14:20] Speaker 01:
I believe the standard of view in this case should be abuse of discretion.

[00:14:24] Speaker 01:
Now, Thermal Life is right that after Maniljo Milling, the standard of review was de novo set by this court.

[00:14:31] Speaker 01:
But after that, in the Highmark case, the Supreme Court decided that all aspects of a district court, section 285 of the determination.

[00:14:38] Speaker 03:
Did the Supreme Court actually consider this issue in the Highmark case?

[00:14:42] Speaker 01:
They didn't consider prevailing party, no.

[00:14:44] Speaker 01:
But the statement that all aspects should be dealt with on an abusive discretion level, I believe were.

[00:14:50] Speaker 03:
But that issue wasn't before them, was it, the issue of prevailing party?

[00:14:53] Speaker 03:
When they said all aspects, you're picking one sentence out of their opinion, and you're applying it to an issue that wasn't even before them, right?

[00:15:01] Speaker 01:
No, but I believe that is correct.

[00:15:03] Speaker 01:
But when you say all aspects, I believe they're referring to, if it's not binding upon this court, then it's at least something this court should consider, because all aspects are all aspects.

[00:15:14] Speaker 01:
I think we can take the Supreme Court at their words that they mean all aspects.

[00:15:18] Speaker 04:
The Supreme Court dictum is a little more influential than other courts' dictum, is what you're suggesting.

[00:15:23] Speaker 04:
I'm not saying that's an unfair suggestion, by the way.

[00:15:25] Speaker 01:
I would say yes, yeah.

[00:15:26] Speaker 01:
But even other courts, if the Federal Circuit had

[00:15:30] Speaker 01:
rendered a dictum in some case, and I was in a district court, I would definitely cite that to the district court judge.

[00:15:36] Speaker 01:
And giving deference to the issue of a prevailing party isn't really such a strange concept.

[00:15:41] Speaker 01:
At least in Menilja Milling, the Fifth and Seventh Circuits, the Federal Circuit noted, apply the abuse of discretion standard to prevailing party determination.

[00:15:55] Speaker 01:
Additionally, the Supreme Court said in Farrar versus Hobby,

[00:15:58] Speaker 01:
that a district court retains the discretion to deny cost, even though a party is a prevailing party.

[00:16:05] Speaker 01:
So maybe the determination of a prevailing party is the no vote, but the Supreme Court has said the district court still has the ability to say no cost.

[00:16:11] Speaker 04:
Well, yeah, but that's the discretionary component, right?

[00:16:15] Speaker 04:
I just feel like most of the circuit courts have addressed this question of prevailing party and how it is to be reviewed, because it does appear in every cost statute and in many other areas outside of patent law.

[00:16:28] Speaker 04:
And I feel like the result has almost consistently universally been that the question of whether someone is or is not a prevailing party is a legal question subject to de novo review.

[00:16:39] Speaker 04:
Certainly, there is then a discretionary component of despite the fact that you are a prevailing party, are you entitled to cost or are you entitled to fees?

[00:16:47] Speaker 04:
But the underlying determination of whether someone is a prevailing party seems to be under almost every case I could find to be treated as a legal question subject to de novo review.

[00:16:57] Speaker 01:
In many circuits it is, and in Menil Malinga that is definitely something that the court held.

[00:17:02] Speaker 03:
I was just going to want to note in support of that, in preparation for the argument today, one of my law clerks did some research.

[00:17:09] Speaker 03:
And the Fifth Circuit has a case that came out in 2008.

[00:17:12] Speaker 03:
It's Dearmore versus City of Garland.

[00:17:15] Speaker 03:
And it says it's a legal question, at least in Fifth Circuit.

[00:17:19] Speaker 03:
I mean, I don't know if you looked at some of those other circuits in preparation for today.

[00:17:23] Speaker 03:
But for what it's worth, the Dearmore case

[00:17:26] Speaker 03:
We looked at all of the other circuits, and she's right, the overwhelming majority of them are using a de novo standard of review for this issue.

[00:17:36] Speaker 01:
Well, going back to the Supreme Court in the Highmark case, I would submit to this court that Highmark might have changed the

[00:17:43] Speaker 04:
I guess that's why I was bringing up all of these circuit court cases, which, I mean, the word prevailing party appears in MSPB, in employee dispute cases, in antitrust litigation.

[00:17:56] Speaker 04:
Those words are

[00:17:59] Speaker 04:
are so pervasive in so many different areas of the law, and in all the cases I could find, they're always treated, the determinations treated as legal, it would seem a little difficult for me to assume that when the Supreme Court is not actually even defining those words or working with that in Highmark, it nonetheless meant to change the standard that ought to be applied in every area of the law when an assessment of prevailing party is made.

[00:18:26] Speaker 01:
Well, perhaps going back one step, at least for the assessment of prevailing party with respect to 285, I think the abuse of discretion is the appropriate standard.

[00:18:35] Speaker 02:
Are you drawing a distinction between who prevails on a specific issue, which does seem to call upon how the law applies, and the balance when one side succeeds on one aspect and another side succeeds in another aspect, that that

[00:18:55] Speaker 02:
that there is a distinction in terms of balancing, determining who is the overall prevailing party on the entirety of the circumstances?

[00:19:03] Speaker 01:
That's right.

[00:19:04] Speaker 01:
And I think because it rests on so many factual issues of how the case was litigated and things that happened below.

[00:19:10] Speaker 01:
Just as this court said below, that there was no litigation misconduct and that for purposes of prevailing party, that was taken into account.

[00:19:19] Speaker 01:
So I think those factual determinations and view of how the case was litigated does

[00:19:24] Speaker 01:
play in on who is a prevailing party and what standard of review should be used.

[00:19:30] Speaker 01:
In any event, discretion definitely permeates the prevailing party and cost issue.

[00:19:36] Speaker 01:
Turning to the merits of the case, Thermal Life's cases that they cite for the proposition that they are a prevailing party are factually differentiable.

[00:19:46] Speaker 01:
In Manilja Milling,

[00:19:52] Speaker 01:
The defendant in that case actually won on invalidity and had the patent held invalid, but lost on issues like Sherman Act, Lanham Act, and common law issues.

[00:20:02] Speaker 01:
And basically, the court held that they were a prevailing party, even though they lost on multiple issues, because they gained some victory on the issues on which they sought relief.

[00:20:11] Speaker 01:
That's not the case here.

[00:20:13] Speaker 01:
Every issue upon which they sought relief, they did not win.

[00:20:16] Speaker 01:
The only thing they got is the very narrow issue of whether the prior use by creative

[00:20:22] Speaker 01:
on DIAC, the patented article.

[00:20:30] Speaker 03:
What's your view on the breadth of the claim preclusion?

[00:20:34] Speaker 03:
What would you be precluded from raising in another litigation?

[00:20:40] Speaker 01:
I believe we'd be precluded from bringing up that same issue on that same product.

[00:20:45] Speaker 01:
So there may be other insolidity arguments.

[00:20:48] Speaker 03:
So you think that you could argue invalidity based on the same grounds that you already raised?

[00:20:54] Speaker 01:
No, not on the same grounds.

[00:20:57] Speaker 01:
I believe we could raise invalidity if a different product was accused.

[00:21:01] Speaker 01:
I believe we could raise invalidity not on those grounds, but we could raise invalidity on other grounds, that same product being used, and we could raise invalidity

[00:21:10] Speaker 01:
on different arguments that may arise that we didn't argue in the lower court.

[00:21:16] Speaker 04:
How could you, when you say we didn't argue, this is critical to me because I don't know the answer and I'm trying to figure it out.

[00:21:22] Speaker 04:
We have cases that say claim preclusion, and this is a quote from Paktiv, our case here, the defense of claim preclusion will generally be available where the asserted claim was or could have been raised in the prior action between the parties which has been adjudicated on the merits.

[00:21:40] Speaker 04:
So the could have been raised part

[00:21:42] Speaker 04:
seems to suggest that in our circuit, and I think that language actually is cited in other circuits as well, suggests that what you're precluded from wouldn't just be this one little prior R-related validity concern, but maybe you'd be prevented from also saying, like, obviousness on that.

[00:22:01] Speaker 04:
Maybe you'd also be prevented from other validity concerns where those references were within your possession and you chose not to assert them.

[00:22:10] Speaker 04:
Do you understand what I'm saying?

[00:22:11] Speaker 04:
I understand what you're saying.

[00:22:12] Speaker 04:
was or could have been raised seems to be the language.

[00:22:15] Speaker 04:
So I'm not sure that your statement about what claim preclusion would apply to you is consistent with our precedent.

[00:22:22] Speaker 04:
Are there other cases you want to point me to that I'm not familiar with?

[00:22:25] Speaker 01:
I think the cases of Epic Metals and Foster versus Halko and Halko versus Foster all talk about the fact that if a new product is accused of infringement, then invalidity issues can be brought up again by the defendant.

[00:22:41] Speaker 01:
I'm not sure how that applies to then the could have been raised, because those cases don't deal with could have been raised.

[00:22:46] Speaker 04:
You're absolutely right.

[00:22:48] Speaker 04:
In a whole new product, which is sort of like a do-over.

[00:22:50] Speaker 04:
But suppose they want to sue you in the future on this product.

[00:22:56] Speaker 04:
Do you have the right to bring any validity defense you want?

[00:23:00] Speaker 04:
Or is it did raise or could have raised with regard to this product?

[00:23:06] Speaker 01:
I believe that we would only be precluded on the

[00:23:10] Speaker 01:
bases of invalidity that were put forth in the lower court.

[00:23:13] Speaker 04:
So you think that could have been raised language is just not applicable for some reason?

[00:23:20] Speaker 01:
I'm not familiar with that case and it wasn't in any of the parties briefings so I can't speak to that exact case.

[00:23:27] Speaker 01:
I can tell you that I have found no other case in the cases that were cited that put in a could have been raised limitation on invalidity defenses that can be raised.

[00:23:36] Speaker 02:
But isn't there a difference in light of the

[00:23:40] Speaker 02:
powerful public policy of finality.

[00:23:43] Speaker 02:
That shouldn't a distinction be drawn between in terms of the could have been raised that it should have been pleaded.

[00:23:50] Speaker 02:
It may not have been decided by the district judge.

[00:23:54] Speaker 02:
And so perhaps it remains available to be raised again in a subsequent suit.

[00:24:01] Speaker 02:
But if it's not mentioned at all, although it could have been, then aren't we

[00:24:07] Speaker 02:
going in a direction that I think the cases take us strongly against.

[00:24:11] Speaker 02:
You can't say, well, I'm going to raise this issue in this case, but never mind.

[00:24:16] Speaker 02:
If you sue me again, especially if there's a difference in the deep pockets of the parties and all the rest of it, then I'm going to raise another issue and put you through another several years of litigation.

[00:24:28] Speaker 02:
I think that the could have been raised is a very important aspect to be considered.

[00:24:34] Speaker 02:
Now, whether in fact

[00:24:36] Speaker 02:
In your pleadings, they were sufficiently general so that they covered that could have been raised, or in responding to the issues that were presented by Mr. Kramer.

[00:24:49] Speaker 02:
But there are distinctions here that I think we shouldn't blur.

[00:24:54] Speaker 01:
Well, I think another thing to point out, too, Your Honor, is that this was decided on summary judgment.

[00:25:04] Speaker 01:
shortened, foreshortened, and not every basis for invalidity could have been discovered by that point in time.

[00:25:11] Speaker 01:
So if another basis of invalidity would be discovered by the defendant, I think there's a strong public policy and also making sure that invalid patents don't continue.

[00:25:21] Speaker 02:
You could raise an issue subject, of course, to fleshing it out with discovery.

[00:25:26] Speaker 02:
But that too, I think the fact that it was decided on summary judgment on one issue is certainly significant.

[00:25:33] Speaker 02:
But as to

[00:25:34] Speaker 02:
What else might, could have been raised, even though not resolved, is, I think, an aspect in the overall, again, totality of the circumstances.

[00:25:47] Speaker 02:
Don't you?

[00:25:48] Speaker 01:
Yes, I agree with that, too.

[00:25:51] Speaker 04:
So maybe let me try to see if I understand your argument.

[00:25:55] Speaker 04:
Maybe your argument is, even if this court was inclined to continue the line of cases which, say, could have been raised, arguments are off the table, your argument, because your concern was, well, what if we newly discover prior art?

[00:26:09] Speaker 04:
could have been raised maybe doesn't apply in that situation.

[00:26:13] Speaker 04:
I mean, that's the Judge Newman totality of the circumstances, right?

[00:26:15] Speaker 04:
If you didn't even know about it and, you know, your reasonable efforts didn't discover it, then it couldn't have been raised earlier.

[00:26:22] Speaker 04:
Maybe it shouldn't be barred.

[00:26:24] Speaker 01:
I can see where it could have been raised.

[00:26:25] Speaker 01:
The argument could be, well, if you'd have done a prior art search at this point in time, you could have found this or, you know, there's... What about prior art listed on the face of the patent itself?

[00:26:35] Speaker 01:
Or prior art, right, not listed on the face of the patent itself.

[00:26:39] Speaker 01:
But if it was in your possession, I can see it could have been raised.

[00:26:43] Speaker 01:
But if it wasn't in your possession, could it have been in your possession?

[00:26:46] Speaker 01:
Because you could have done a search.

[00:26:47] Speaker 01:
After all, you were charged with patent infringement.

[00:26:50] Speaker 01:
Perhaps you should have done a search.

[00:26:52] Speaker 01:
I know in the administrative basis, in the patent trademark office, you can be held.

[00:26:58] Speaker 01:
You should have found this as far as second bites at the apple.

[00:27:03] Speaker 02:
But you were the complainant.

[00:27:05] Speaker 02:
You filed the declaratory action.

[00:27:07] Speaker 02:
Isn't an additional burden in that case at least to raise to plead the issues on which you rely?

[00:27:15] Speaker 01:
I disagree, Your Honor.

[00:27:17] Speaker 01:
And there's case law that says that the dispute doesn't change and the burdens don't change just because a declaratory judgment

[00:27:26] Speaker 01:
action is filed.

[00:27:27] Speaker 01:
There's no flipping of who has the burden.

[00:27:29] Speaker 02:
Not the burden of proof, but just the burden of coming forward to place issues in dispute.

[00:27:36] Speaker 01:
I think that's a dangerous situation, because you're drawing a distinction then.

[00:27:40] Speaker 01:
You're changing the burdens on the defendant, whether he asserts his right to bring a declaratory judgment action or not.

[00:27:46] Speaker 02:
So you're saying no other could have been raised.

[00:27:49] Speaker 02:
I'm pardoning you.

[00:27:50] Speaker 02:
You say then that it's meaningless, that the fact that statute and precedent say it could have been raised.

[00:27:56] Speaker 02:
Does it apply to a declaratory action?

[00:27:59] Speaker 01:
No, I don't think it should apply to a declaratory action different than an action just where you use it as an affirmative defense.

[00:28:07] Speaker 02:
OK.

[00:28:08] Speaker 02:
Any more questions?

[00:28:10] Speaker 02:
Good.

[00:28:10] Speaker 02:
OK.

[00:28:11] Speaker 02:
Thank you, Mr. Nolte.

[00:28:20] Speaker 00:
Mr. Collins.

[00:28:21] Speaker 00:
Thank you.

[00:28:22] Speaker 00:
I have four points I want to get to here real quick.

[00:28:25] Speaker 00:
First, there was a discussion as to whether or not the standard of review for a prevailing party determination should change based on whether or not the judgment below is mixed, whether or not one side got some relief and the other side got some relief too, and therefore now we're doing some sort of a weighing test.

[00:28:42] Speaker 00:
I'd refer the court to Shum, which is a federal circuit case.

[00:28:45] Speaker 00:
In that case, the court did a weighing analysis where the plaintiff prevailed

[00:28:50] Speaker 00:
for a substantial judgment on a patent infringement claim.

[00:28:54] Speaker 00:
And the defendant received some relief.

[00:28:57] Speaker 00:
There, the court applied a de novo standard of review, even in that situation.

[00:29:03] Speaker 00:
Second, there was an argument made that, for some reason, issue preclusion or collateral estoppel can't apply here, because this case didn't go all the way to trial, that this was a summary judgment ruling.

[00:29:16] Speaker 00:
And therefore, a creative compound shouldn't be stopped for any reason.

[00:29:20] Speaker 00:
This was not a quick strike summary judgment motion.

[00:29:23] Speaker 00:
This was a summary judgment motion that was filed after close of discovery, where all the issues should have been before the court.

[00:29:31] Speaker 00:
And to the extent that creative compounds wanted to take discovery, or the extent that creative compounds had other arguments as to why the patent would be invalid, it should have already raised them.

[00:29:42] Speaker 00:
So therefore, in my view, this is the classic example of creative compounds having an opportunity to raise any argument

[00:29:48] Speaker 00:
that it wanted to as to patent validity.

[00:29:53] Speaker 00:
Last, there was a question as to whether or not we're appealing the court's denial of costs under 54B.

[00:30:02] Speaker 00:
I agree with the court that that issue is not clear in the brief.

[00:30:06] Speaker 04:
It is mentioned.

[00:30:07] Speaker 04:
Stop saying that.

[00:30:08] Speaker 04:
I found that you say it in your statement of issue on page two of your blue brief.

[00:30:11] Speaker 04:
So don't take away what I found that you actually said.

[00:30:14] Speaker 00:
Thank you, Your Honor.

[00:30:16] Speaker 00:
It is in the statement of issue.

[00:30:17] Speaker 00:
It's also in the conclusion on the reply.

[00:30:20] Speaker 00:
My last point, and then I'll take more questions.

[00:30:23] Speaker 00:
There was a question as to whether or not the district court has already determined that this case isn't exceptional.

[00:30:28] Speaker 00:
I went through the court's order setting here on the decision on prevailing party.

[00:30:35] Speaker 00:
And this is the quote.

[00:30:37] Speaker 00:
As stated, whether plaintiffs of the prevailing party.

[00:30:41] Speaker 03:
Where are you reading from?

[00:30:42] Speaker 00:
I'm sorry.

[00:30:42] Speaker 00:
What page?

[00:30:43] Speaker 00:
This is the last page of the court's order.

[00:30:47] Speaker 00:
The court's order on the prevailing party standard.

[00:30:53] Speaker 00:
It's just above the conclusion.

[00:30:55] Speaker 00:
So he has a conclusion.

[00:30:56] Speaker 03:
So it's stage A5.

[00:30:57] Speaker 00:
I believe that's correct.

[00:30:59] Speaker 00:
As stated above, whether plaintiffs are the prevailing party is a threshold issue.

[00:31:03] Speaker 00:
And then the court cites Mildredra mining.

[00:31:08] Speaker 00:
And then the court continues.

[00:31:09] Speaker 00:
Therefore, because plaintiffs are not the prevailing party,

[00:31:12] Speaker 00:
court, and it should be the court, does not need to address whether plaintiff's claims attorney's fees are reasonable, whether this is an exceptional case, and whether plaintiffs are entitled to anything else.

[00:31:23] Speaker 00:
I cut it off there.

[00:31:26] Speaker 00:
I think we'd like the opportunity to go back before the court and find out what his conclusion is as to exceptionality.

[00:31:33] Speaker 00:
We believe that the conduct below was exceptional, absolutely.

[00:31:37] Speaker 00:
And we believe, on the record, we were the prevailing party.

[00:31:41] Speaker 00:
And we'd like this court to reach that conclusion on both and overturn what the lower court did.

[00:31:48] Speaker 02:
OK, any more questions?

[00:31:50] Speaker 02:
OK, thank you.

[00:31:51] Speaker 02:
Thank you both.

[00:31:52] Speaker 02:
The case is taken under submission.