[00:00:00] Speaker 04:
Six cases on our docket today, this particular panel.

[00:00:04] Speaker 04:
Two of the cases have been submitted on the briefs, and we're working on those cases.

[00:00:10] Speaker 04:
We won't have oral argument.

[00:00:11] Speaker 04:
We do have oral argument on four cases here this morning.

[00:00:17] Speaker 04:
As you know, we normally sit in a panel of three.

[00:00:21] Speaker 04:
Earlier this week, we received news of the passing of a dear friend and colleague

[00:00:26] Speaker 04:
Chief Judge Pogue of the Court of International Trade, former Chief Judge.

[00:00:32] Speaker 04:
And Judge Wallach, who's a member of this panel, served for almost a decade with Judge Pogue.

[00:00:40] Speaker 04:
I understand that, well, it must have been for 16 years then, because I understand that they both began pretty much at the same time.

[00:00:48] Speaker 04:
And when two judges joined the bench almost at the same time, there's a

[00:00:56] Speaker 04:
They become friends and also Judge Wallach is attending the funeral services of Judge Pogue this morning.

[00:01:06] Speaker 04:
Now, given our custom and the way we do business, we come fully prepared for oral argument.

[00:01:13] Speaker 04:
And Judge Wallach was fully prepared to hear the case.

[00:01:17] Speaker 04:
He's going to listen to the transcripts because all our cases are recorded, our arguments.

[00:01:24] Speaker 04:
He's going to listen to the transcripts, and we're going to reunite in our deliberations.

[00:01:31] Speaker 04:
So that's just a brief explanation as to why there's two of us here.

[00:01:38] Speaker 04:
We have the first case is Medtronic versus Boston Scientific Corporation, 15-1996.

[00:01:46] Speaker 04:
And we have a number of parties involved in the case.

[00:01:52] Speaker 04:
And I want to make sure that I have

[00:01:54] Speaker 04:
the time for the arguments correctly.

[00:01:57] Speaker 04:
And I ask that you help me by speaking at the time when it's your turn, et cetera.

[00:02:02] Speaker 04:
So now, Mr. Neustadt, you've reserved five minutes for rebuttal.

[00:02:08] Speaker 04:
Is that correct?

[00:02:09] Speaker 01:
That's correct, Your Honor.

[00:02:11] Speaker 04:
OK.

[00:02:12] Speaker 04:
And Mr. Luke and Mr. Jakes, you've divided your time eight and seven.

[00:02:17] Speaker 04:
Is that correct?

[00:02:18] Speaker 02:
That's correct, Your Honor.

[00:02:20] Speaker 04:
And Mr. Jakes, you're going to go first when it's... I'm happy to, yes.

[00:02:24] Speaker 04:
Okay, well then let's start with Mr. Newstapp.

[00:02:27] Speaker 04:
Thank you, Your Honor.

[00:02:29] Speaker 04:
May it please the Court?

[00:02:36] Speaker 01:
This is a contract claim and the contract is a 1991, primary contract is a 1991 cross license between Lilly and Medtronic.

[00:02:46] Speaker 01:
They were big players in the heart stimulator field.

[00:02:50] Speaker 04:
Now, just as a preliminary matter, what would you say our standard of review is?

[00:02:54] Speaker 04:
We're reviewing a case coming out of Delaware.

[00:02:57] Speaker 04:
And so we apply the law of the Third Circuit in that situation.

[00:03:03] Speaker 04:
What do you see as our standard of review?

[00:03:06] Speaker 01:
Well, this contract had a governing clause, a governing law clause.

[00:03:11] Speaker 01:
And it specifically said you've got to go by Minnesota law.

[00:03:14] Speaker 01:
And Minnesota law says it's a question of law.

[00:03:18] Speaker 01:
And the district court held that and cited a Minnesota case court.

[00:03:22] Speaker 04:
Is this solely an issue of contract interpretation?

[00:03:26] Speaker 04:
The Third Circuit would perhaps say that this is an issue of construction as well.

[00:03:33] Speaker 01:
It's an issue of just the, I know they made the distinction between that, but they don't make that distinction in Minnesota law.

[00:03:43] Speaker 01:
And they have a very broad governing section.

[00:03:45] Speaker 01:
that says it covers everything, including the procedural rules.

[00:03:49] Speaker 04:
Fair enough.

[00:03:50] Speaker 04:
Now, just as another preliminary matter, we did deny the motion for additional time, but we will give the parties time to make your argument.

[00:03:58] Speaker 04:
So hopefully you can stay within the time limits.

[00:04:00] Speaker 04:
But if you stray, that's a little, that's OK.

[00:04:03] Speaker 01:
Thank you, Your Honor.

[00:04:04] Speaker 01:
I appreciate that.

[00:04:06] Speaker 01:
So we're looking at the 1991 cross license.

[00:04:10] Speaker 01:
That cross license has a

[00:04:12] Speaker 01:
governing, law governing provision, it's 9.05 and it says that it's Minnesota law that's applicable.

[00:04:22] Speaker 01:
Medtronic was a Minnesota corporation so they probably got that in that agreement for that purpose.

[00:04:28] Speaker 01:
That contract, the Minnesota law with respect to this case is as follows, and this is in the district court's opinion, contract interpretation is a question of law.

[00:04:41] Speaker 01:
The primary goal of contract interpretation is to determine and enforce the intent of the parties.

[00:04:49] Speaker 01:
Third, the intent of the parties is determined from the plain language of the contract.

[00:04:54] Speaker 01:
So that pretty much sets a very straightforward procedure.

[00:04:58] Speaker 01:
You have to go by the intent of the parties, and the intent of the parties is governed by what is exactly in the contract.

[00:05:06] Speaker 01:
So that's a fairly straightforward analysis.

[00:05:09] Speaker 01:
I don't think there's any dispute that that's the law in Minnesota.

[00:05:13] Speaker 01:
Now we go to the 1991 cross license.

[00:05:18] Speaker 01:
Lilly and Medtronic were the big suppliers of heart stimulators, such as ICDs and the like.

[00:05:27] Speaker 03:
Mr. Neustadt, that agreement, the 91 agreement, contains, for lack of a better expression, loser pays provision in it on appendix space 306.

[00:05:42] Speaker 03:
loser pays provision still in effect?

[00:05:46] Speaker 01:
You mean today?

[00:05:47] Speaker 03:
Today.

[00:05:48] Speaker 01:
No, it's not.

[00:05:51] Speaker 01:
Well, it depends upon how you look at it.

[00:05:54] Speaker 01:
If the parties want to go back to the 1991 agreement and says we want to have a loser's pay provision again, the parties are entitled to do that.

[00:06:04] Speaker 03:
But my question is whether that provision was extinguished by any of the subsequent agreements.

[00:06:11] Speaker 01:
Yes.

[00:06:13] Speaker 03:
Which agreement?

[00:06:14] Speaker 03:
And what provision extinguished it?

[00:06:16] Speaker 03:
The 2006 LTA?

[00:06:23] Speaker 01:
Well, it was not only extinguished by that.

[00:06:25] Speaker 01:
In the 203 letter agreement, this is the August 28, 2003 agreement at A501, they said each party is going to bear its own fees.

[00:06:37] Speaker 01:
So that didn't apply to that.

[00:06:39] Speaker 01:
Then in the letter agreement in 2004, which had to do another declaratory judgment action, A601, they said there isn't going to be any fees in that.

[00:06:51] Speaker 01:
Then it got to the litigation tolling agreement in 2006, and in contrast to the earlier agreements, which were letter agreements on Medtronic Stationery, they decided to write a whole new agreement.

[00:07:04] Speaker 01:
in the 206 agreement.

[00:07:05] Speaker 01:
It's a standalone agreement by itself.

[00:07:07] Speaker 01:
It was a 12-page, very detailed agreement.

[00:07:11] Speaker 01:
Does it not reference back to the 1991 agreement?

[00:07:14] Speaker 01:
It does, but it references back to that only for Medtronic's protection.

[00:07:20] Speaker 01:
Medtronic keeps saying, I don't want to lose my license, and I haven't breached the license.

[00:07:25] Speaker 01:
And the parties would have disputes.

[00:07:27] Speaker 01:
So Medtronic in the 206 agreement said,

[00:07:33] Speaker 01:
That 1991 agreement is still in effect with respect to the fact that I have this right to get a determination without being evicted from my license.

[00:07:45] Speaker 03:
That includes the loser pays provision.

[00:07:47] Speaker 01:
Well, no, it didn't.

[00:07:48] Speaker 01:
Why not?

[00:07:49] Speaker 01:
Well, they have one provision, which was it said that

[00:07:58] Speaker 03:
But you say they have one provision.

[00:08:01] Speaker 03:
What are you talking about?

[00:08:02] Speaker 03:
You're talking about the 2006 agreement?

[00:08:05] Speaker 01:
2006, there's one provision in there for Medtronic to pay fees.

[00:08:09] Speaker 03:
It's not applicable for Arousal.

[00:08:11] Speaker 03:
But that's with respect to any dispute about the royalties.

[00:08:15] Speaker 01:
That's right.

[00:08:15] Speaker 03:
Yeah.

[00:08:16] Speaker 03:
Let's just put that aside for a minute.

[00:08:19] Speaker 03:
But in terms of the DJ litigation itself.

[00:08:23] Speaker 01:
They drafted a new agreement for the 2006.

[00:08:25] Speaker 01:
It did not include the loser pays provision.

[00:08:28] Speaker 01:
That agreement superseded the other agreement, even though, of course, Medtronic said, don't you forget, I still have a right to contest.

[00:08:37] Speaker 03:
Well, I hear you saying it's superseded.

[00:08:40] Speaker 03:
And maybe you're right.

[00:08:42] Speaker 03:
I'm looking for the language.

[00:08:44] Speaker 03:
I can't find it.

[00:08:45] Speaker 01:
Well, the other point on that is Medtronic's contention is that Murowski has to pay.

[00:08:53] Speaker 01:
And the 1991 agreement.

[00:08:56] Speaker 01:
did not include Murowski as a party.

[00:08:58] Speaker 03:
I'm aware of that.

[00:08:59] Speaker 03:
I'm just taking small steps here.

[00:09:01] Speaker 03:
And the first step is I'm trying to find out whether anything superseded that loser pay provision from the 91 agreement.

[00:09:11] Speaker 03:
And I don't see anything in the 2006 tolling agreement that supersedes that.

[00:09:17] Speaker 01:
Well, if they're going to put in that Medtronic's going to pay fees in the 2006 agreement, they also would have put in there, and by the way,

[00:09:24] Speaker 01:
we want the loser also to pay fees, because that was supposed to be a complete agreement unto itself.

[00:09:30] Speaker 03:
So that answers, I think... Well, that's not necessarily true, is it?

[00:09:34] Speaker 03:
Because in paragraph 15 of the 2006 agreement, it says except for a number of things, including the Medtronic agreement, that's the 91 agreement, this agreement constitutes the entire agreement, etc., etc.

[00:09:53] Speaker 03:
It seems to me that it's quite clear from that language that the Medtronic agreement remains in place, except to the extent that it may be inconsistent with something in the 2006 agreement.

[00:10:06] Speaker 03:
Is that a fair statement?

[00:10:07] Speaker 01:
Yet it is inconsistent with the 2006 agreement.

[00:10:10] Speaker 03:
That's where I'm asking you to take me.

[00:10:13] Speaker 03:
Where is it inconsistent?

[00:10:14] Speaker 01:
Because they wrote an entire agreement, and that agreement was supposed to cover everything, and they put in one

[00:10:23] Speaker 01:
loser pays provision that only pertained to Medtronic.

[00:10:27] Speaker 01:
And if they were following along with what they had done and they wanted loser pays from the 1991 agreement, they would have put it in there.

[00:10:36] Speaker 01:
But in any event, it doesn't make any sense because even if you say that what's in 1991 gets incorporated into 206, there never was anything in 1991 where Murowski agreed to pay fees.

[00:10:52] Speaker 01:
Medtronic?

[00:10:54] Speaker 03:
Well, that may be true.

[00:10:55] Speaker 03:
That's a separate issue.

[00:10:56] Speaker 03:
But it seems to me, you have in the 2006 agreement, well, let me back up a bit.

[00:11:03] Speaker 03:
In the original 91 agreement, in the two paragraphs at the bottom of page, appendix 306, it basically lays out the scenario where if

[00:11:21] Speaker 03:
If new devices are considered to be infringing, then Morawski provides notice.

[00:11:27] Speaker 03:
Once the notice is given, then a DJ action can be filed.

[00:11:32] Speaker 03:
And even where a challenge is made, the license remains in place, and loser pays.

[00:11:40] Speaker 03:
So that's sort of basic, you might say, generic overview of a potential DJ scenario.

[00:11:49] Speaker 03:
And then you had in the 2006 agreement in paragraphs 8 and 9, and then continuing in 10, but at least 8 and 9, it sort of reiterates the same idea about giving notice, filing a DJ action.

[00:12:10] Speaker 03:
If a DHA action is filed, here's what will happen.

[00:12:13] Speaker 03:
Here's what you can assert, what you can't assert.

[00:12:16] Speaker 03:
It's a more specific,

[00:12:19] Speaker 03:
set of circumstances that are prescribed consistent with the generic statements in the earlier 91 agreement.

[00:12:28] Speaker 03:
But what is noteworthy is that despite spelling out in great detail in paragraph 9, what will go on in that D.J.

[00:12:36] Speaker 03:
action is nothing about lose of pace.

[00:12:40] Speaker 03:
So the question in my mind is why is that missing and what is the impact of that?

[00:12:45] Speaker 03:
And for me,

[00:12:47] Speaker 03:
It seems to me that that means that the loser pays provision and the 91 agreement remains in place.

[00:12:56] Speaker 03:
Tell me why I'm wrong.

[00:12:58] Speaker 01:
Well, I think you're wrong about it because since it was a complete agreement and since they're having the other provision about fees being paid, obviously they would have put in this provision from the 1991 agreement if they specifically wanted it in there.

[00:13:12] Speaker 04:
Why would they have to put it in if they're incorporating it?

[00:13:16] Speaker 01:
Well, I don't think they incorporated that.

[00:13:19] Speaker 01:
I think what they were incorporating was Medtronic still keeps its license.

[00:13:22] Speaker 01:
But it seems to me that the major thing with respect to the whole thing is, why aren't you thinking about the fact that Morowski never agreed to pay fees?

[00:13:33] Speaker 04:
If Lilly and Medtronic, two multinational- In the tolling agreement, doesn't Morowski step into the shoes of Lilly?

[00:13:40] Speaker 04:
No, not at all.

[00:13:42] Speaker 01:
Morowski has no control over Lilly.

[00:13:46] Speaker 01:
gave the license to Medtronic.

[00:13:49] Speaker 01:
Medtronic did not get it from Morowski.

[00:13:51] Speaker 01:
Lilly is the major player.

[00:13:53] Speaker 04:
In the 1991 agreement, Morowski is in the background.

[00:13:57] Speaker 04:
In the tolling agreement, Morowski is a named party with specific obligations and specific interests.

[00:14:05] Speaker 01:
I'll tell you why.

[00:14:07] Speaker 01:
The only reason why Morowski is a named party in each of these other agreements

[00:14:14] Speaker 01:
is because Medtronic is filing these DJ actions.

[00:14:18] Speaker 01:
And when Medtronic files these DJ actions, it names Murowski as a party.

[00:14:24] Speaker 01:
Their view is, well, we're just going to join everyone.

[00:14:27] Speaker 01:
So therefore, when you have an agreement which relates to a litigation in which Murowski is named as a defendant, obviously Murowski is going to sign that.

[00:14:39] Speaker 01:
But there is no undertaking by Murowski

[00:14:43] Speaker 01:
in any of these agreements to pay Lilly's fees.

[00:14:47] Speaker 01:
And there would be no reason whatsoever that Moravsky would ever agree that if Lilly and Medtronic want to have an agreement for paying fees, I should step in and pay Lilly's fees.

[00:15:04] Speaker 04:
Well, Moravsky or what, MFV,

[00:15:10] Speaker 04:
stepped in, it seems to me it stepped in the shoes of Lilly to a certain extent.

[00:15:15] Speaker 04:
It now adopted whole new notice provisions and became and adopted obligations that are specified in paragraphs seven and eight of the tolling agreement.

[00:15:28] Speaker 04:
And then the remainder of, and very specific changes to the 1991 agreement, and then the remainder of the 1991 agreement is adopted.

[00:15:38] Speaker 04:
It seems to me that the loser pay provision under 1991 just slide right into the tolling agreement.

[00:15:46] Speaker 01:
Well, you then reach a very silly conclusion, which is that Murowski, even though they never agreed to pay fees, all of a sudden is paying fees on the basis of what?

[00:15:58] Speaker 01:
Because it was a losing party, whereas the 1991 agreement defined that loser pays provision

[00:16:07] Speaker 01:
with respect to Medtronic and Lilly.

[00:16:09] Speaker 01:
It said nothing at all about Murawski.

[00:16:12] Speaker 01:
So how do you take Murawski, who's not a multinational corporation, and all of a sudden say, well, you sign this agreement where Medtronic named it as a party in the declaratory judgment action, and now we want you to pay it.

[00:16:26] Speaker 01:
Murawski never would have agreed to any of that.

[00:16:29] Speaker 04:
You're well into your rebuttal time.

[00:16:31] Speaker 04:
I'm going to restore your entire rebuttal time, Mr. Nixon.

[00:16:35] Speaker 04:
Thank you.

[00:16:42] Speaker 02:
Good morning.

[00:16:43] Speaker 02:
May it please the court.

[00:16:45] Speaker 02:
This was a fight between Medtronic and Moravsky.

[00:16:48] Speaker 02:
We were on the sidelines.

[00:16:50] Speaker 02:
Even though Guidant was the exclusive licensee through these various contractual arrangements, including the amendments to the 1901 agreement, Guidant had no stake in the outcome in this case.

[00:17:02] Speaker 03:
Can you answer the question I asked Mr. Neustadt?

[00:17:06] Speaker 03:
That is, is the loser pay provision in the 91 agreement still in place?

[00:17:11] Speaker 03:
Or was it superseded?

[00:17:14] Speaker 02:
Your Honor, in the district court, we argued that it was superseded.

[00:17:17] Speaker 02:
We have not carried that argument through on appeal.

[00:17:20] Speaker 02:
So I'm not here to argue.

[00:17:22] Speaker 03:
So your position is still that it's been superseded?

[00:17:27] Speaker 02:
Your Honor, our position is it doesn't apply to us.

[00:17:30] Speaker 03:
Well, I recognize that.

[00:17:32] Speaker 02:
And we did argue that it was superseded.

[00:17:35] Speaker 02:
We accept the district court's finding that it was not superseded.

[00:17:39] Speaker 02:
So for purposes of today,

[00:17:41] Speaker 02:
we are assuming that it's still in place.

[00:17:44] Speaker 02:
So I'm not arguing that it was superseded anymore.

[00:17:50] Speaker 02:
But the guidance position here is that it was not able to recover any royalties.

[00:17:55] Speaker 02:
It was not able to get an injunction.

[00:17:58] Speaker 02:
It did not make a claim or a counterclaim for infringement.

[00:18:03] Speaker 02:
Only Murawski did that.

[00:18:05] Speaker 02:
And so the district court was correct when it determined that since guidance did not insert infringement,

[00:18:11] Speaker 02:
It wasn't the losing party to the judgment, which was a judgment of non-infringement.

[00:18:17] Speaker 03:
But Guiden was part of the litigation.

[00:18:20] Speaker 02:
It was part of the litigation.

[00:18:21] Speaker 02:
It was a named party, but only by name.

[00:18:25] Speaker 03:
We had no stake in the outcome.

[00:18:26] Speaker 03:
Isn't that enough?

[00:18:27] Speaker 03:
I mean, you're a named party.

[00:18:29] Speaker 03:
That matters.

[00:18:31] Speaker 02:
It may matter to the effect that as the exclusive licensee, we were a necessary party.

[00:18:36] Speaker 02:
We had an interest in the validity of the patent.

[00:18:38] Speaker 02:
We could have asserted infringement.

[00:18:40] Speaker 02:
No, Your Honor, I don't believe we should have.

[00:18:42] Speaker 02:
That we gave up those rights in the subsequent agreements.

[00:18:46] Speaker 02:
That we no longer could do that.

[00:18:47] Speaker 03:
You would have been bound by whatever judgments were entered?

[00:18:51] Speaker 02:
That we don't contest those judgments.

[00:18:54] Speaker 02:
But there was no jurisdiction to enter a judgment of non-infringement against us because we never made a claim for infringement.

[00:19:03] Speaker 02:
That's what the judge found.

[00:19:04] Speaker 02:
We did not assert infringement.

[00:19:05] Speaker 02:
We did not make a claim for infringement.

[00:19:08] Speaker 02:
it's perhaps if the validity had been decided that judgment could have affected us because as the exclusive licensee the patent could have been extinguished but as to infringement we were not in a position to make a claim royalties went entirely to Marowski if they were to be paid we could not make an injunction there was no controversy but you challenged the validity of the patents we did not know we were the exclusive licensee and did not challenge validity

[00:19:38] Speaker 02:
I misspoke.

[00:19:41] Speaker 02:
So this 2006, the litigation tolling agreement, it did give Murowski the right to assert infringement, and it did that.

[00:19:54] Speaker 02:
And that was the basis of the declaratory judgment action.

[00:19:57] Speaker 02:
So the 1991 loser pays provision.

[00:20:00] Speaker 02:
As I've said, we're no longer contesting or arguing that it was superseded.

[00:20:06] Speaker 02:
But it doesn't apply to us.

[00:20:08] Speaker 02:
The 2006 agreement gave Murowski the right to assert infringement.

[00:20:13] Speaker 02:
It exercised that right.

[00:20:14] Speaker 02:
If you look at the 1991 agreement, at the time, only Lilly had the ability to notify Medtronic of infringement.

[00:20:23] Speaker 04:
What's your position?

[00:20:24] Speaker 04:
If it was not superseded, then was it incorporated in the tolling agreement?

[00:20:29] Speaker 02:
Well, the 1991 agreement is mentioned.

[00:20:32] Speaker 02:
And in paragraph 15, it says, except for that,

[00:20:38] Speaker 02:
1991 agreement that it constitutes the entire agreement, but the earlier agreement shall be considered as amended as necessary.

[00:20:47] Speaker 02:
So we argued previously that the 2006 agreement superseded that, but that can certainly be read as carrying through, at least in principle, to the 1991, to the 2006 agreement.

[00:20:59] Speaker 02:
But it still does not apply to us.

[00:21:02] Speaker 02:
In that 1991 agreement, Lilly had the ability to notify Medtronic of infringement

[00:21:07] Speaker 02:
and then Medtronic had the right to challenge Lilly's assertion of infringement.

[00:21:12] Speaker 02:
Well, Guidant stepped into the shoes of Lilly, but Guidant never made an assertion of infringement.

[00:21:20] Speaker 02:
It continues, in any such action that is a DJ action challenging Lilly's assertion of infringement, then the losing party has to pay attorney's fees.

[00:21:28] Speaker 02:
But having never made that assertion, we can't be the losing party.

[00:21:32] Speaker 02:
And to answer your question, Judge Raina, before, Moravsky did step into the shoes because

[00:21:38] Speaker 02:
They were given the right to assert infringement.

[00:21:40] Speaker 02:
They were given the right to recover the royalties directly, not through guidance or Lilly as a sub-licensee.

[00:21:49] Speaker 02:
They were paid $10 million as a result of that agreement, paid directly.

[00:21:53] Speaker 02:
So they greatly changed the relationships of the parties.

[00:21:57] Speaker 04:
Under the agreement, if damages were to be found against Murowski,

[00:22:05] Speaker 04:
in any type of illegal action, then wouldn't Guyden also be responsible for those damages, not attorney's fees, damages?

[00:22:16] Speaker 02:
Not if we did not make a claim for infringement.

[00:22:18] Speaker 02:
I don't see how we could.

[00:22:20] Speaker 02:
And we were not in a position to do that because we had given up those rights.

[00:22:25] Speaker 02:
With respect to Medtronic only, and that's what this case is, that's why I say it's not our fight.

[00:22:30] Speaker 02:
Guyden may have had other rights.

[00:22:32] Speaker 02:
If I could just briefly address the timeliness issue.

[00:22:35] Speaker 02:
I think this is a very straightforward application of the rule.

[00:22:39] Speaker 02:
The rule says that you have to file your request for attorney's fees by motion within 14 days unless, and there's one exception, the substantive law requires those fees to be proved at trial as an element of damages.

[00:22:53] Speaker 02:
That's not this case.

[00:22:54] Speaker 02:
That's the exception.

[00:22:56] Speaker 02:
Do you prove attorney's fees as an element of damages at trial?

[00:23:00] Speaker 02:
No.

[00:23:01] Speaker 02:
If not, you have to file within 14 days.

[00:23:03] Speaker 03:
But what about the advisory committee notes that make reference to contracts?

[00:23:09] Speaker 02:
It does.

[00:23:10] Speaker 02:
It doesn't say all contracts are excused from that.

[00:23:14] Speaker 02:
If you read the Ray Hallett case, the Supreme Court case, it says rule 54D applies regardless of the statutory, contractual, or equitable basis for attorney's fees.

[00:23:26] Speaker 02:
That time in 54D still applies.

[00:23:28] Speaker 02:
So simply saying it's a contract doesn't answer the question.

[00:23:32] Speaker 02:
If you look at the advisory committee note, it says, Rule 54D does not apply to fees recoverable as an element of damages as when sought under the terms of a contract.

[00:23:44] Speaker 02:
It doesn't excuse all contract issues.

[00:23:46] Speaker 02:
It says when it's sought as damages.

[00:23:49] Speaker 02:
That wasn't done here.

[00:23:51] Speaker 02:
And the unless of Rule 54 does not apply, there's no dispute that the... I think that this issue goes to my initial question.

[00:23:59] Speaker 04:
Right.

[00:24:00] Speaker 04:
And that it's what's our standard of review.

[00:24:03] Speaker 04:
I think that if we're looking at just a contract interpretation, then I think you have a good case.

[00:24:09] Speaker 04:
But if we're also looking at interpretation and construction, then perhaps this is damages arising out of a contract.

[00:24:17] Speaker 02:
Your Honor, I understood the Third Circuit law to apply here and they do make a distinction between interpretation and construction, at least as far as the standard of review goes.

[00:24:28] Speaker 02:
because that's what this court would apply.

[00:24:30] Speaker 02:
The standard contract interpretation, I agree it's Minnesota law, but it's to the standard of review on appeal, it would be the Third Circuit's law, and they do draw a distinction between interpretation and construction.

[00:24:43] Speaker 02:
Moravsky has said all along, this is a question of the intent of the parties.

[00:24:47] Speaker 02:
That's interpretation, and that's reviewed under the clearly erroneous

[00:24:51] Speaker 02:
As to the application of Rule 54D, I believe that is a question of law and one that this Court can just answer in applying the rule.

[00:25:00] Speaker 02:
Thank you.

[00:25:11] Speaker 00:
Good morning.

[00:25:12] Speaker 00:
May it please the Court?

[00:25:13] Speaker 00:
I'd like to start by addressing the question that was raised regarding the loser pays provision and whether it survives the amendments that were made to the contract.

[00:25:25] Speaker 00:
I will then talk a little bit about the architecture of the litigation tolling agreement and I'll address our position on the Rule 54 issue.

[00:25:36] Speaker 00:
Starting with the loser pays, four times

[00:25:40] Speaker 00:
the Morowski Family Ventures entered into amendments to the 1991 license agreement that they signed either through one of their representatives or one of the individuals in the Morowski Family Ventures.

[00:25:55] Speaker 00:
And in two of those amendments, that would be the August 2003 and the February 2004 amendments, they modified the loser pays provision.

[00:26:08] Speaker 00:
So this provision was

[00:26:10] Speaker 00:
well-in-mind to Morowski family ventures and to guidance at the time that those agreements were made.

[00:26:16] Speaker 00:
Now, those involved other litigations.

[00:26:19] Speaker 00:
One was a recapture defense that Medtronic had asserted in Delaware, and the other was a different patent that was the subject of some litigation in Indiana.

[00:26:29] Speaker 04:
So the point you're making is that the Morowski family was aware of the loser pays and its interplay within the different agreements, but that they didn't necessarily

[00:26:40] Speaker 00:
uh... terminated at that time correct and they knew how to address it in the context of specific litigation when the parties agreed to do that those other members don't apply this disagreement this litigation decorate uh... only tangentially that's correct okay uh... so when you get to the litigation tolling agreement and let me just give a little context for this and talk about what's one of the broad benefits that marowski family ventures received as a result of that agreement

[00:27:10] Speaker 00:
During this time period in the early 2000s and continuing, it was a period of rapid development in this implantable pacemaking device art.

[00:27:21] Speaker 00:
And so what the litigation tolling agreement did was it gave Murowski an opportunity to see what products Medtronic was introducing into the marketplace.

[00:27:33] Speaker 00:
Medtronic, when they introduced a product, would send

[00:27:36] Speaker 00:
Murowski Family Ventures representatives, the product manuals, information from which they could assess whether they thought there was infringement.

[00:27:46] Speaker 00:
And at the end of the tolling agreement, then there would be this process of Murowski letting Medtronic know what, if any, claims they thought were infringed of the two patents, and Medtronic could then bring its challenge.

[00:28:00] Speaker 00:
And so to the direct question on whether or not the loser pays was abrogated in that agreement, I'd simply point out that, as Your Honor said, the specific language that was added about attorney's fees pertained to royalties and if Medtronic didn't pay under the contract.

[00:28:26] Speaker 00:
If we went back to the original 1991 agreement,

[00:28:30] Speaker 00:
And looked at, if that's at A206, you can see that what is identified there are loser pays fees with respect to claims of infringement, validity, and unenforceability.

[00:28:47] Speaker 00:
So there is a distinction between the two and nowhere in the LTA did anyone remove that provision.

[00:28:54] Speaker 00:
And as the court has observed in paragraph 15 of the tolling agreement,

[00:29:00] Speaker 00:
Anything that wasn't changed in the 1991 license was incorporated into the tolling agreement.

[00:29:09] Speaker 00:
And that's in fact where all of the rights for the license originate.

[00:29:16] Speaker 04:
Where the tolling agreement, and I just want some clarification on where the tolling agreement, do you see that the parties adopted the 1991 agreement unless otherwise amended?

[00:29:30] Speaker 00:
I would go to the language in paragraph 15, Your Honor, to the first clause and then to the last sentence.

[00:29:40] Speaker 00:
This is at A708, except for the August 28, 2003 settlement agreement, the Medtronic agreement and the amended original agreement.

[00:29:50] Speaker 00:
And then if we look back to A703 paragraph 1.14, it specifically defines the Medtronic agreement

[00:30:01] Speaker 00:
as the 1991 license with Lilly.

[00:30:04] Speaker 00:
So that's a reference.

[00:30:06] Speaker 00:
And then at the end, it says the Medtronic agreement shall be considered to be amended as necessary to conform with this agreement.

[00:30:13] Speaker 03:
But it doesn't say the 91 agreement is hereby incorporated by reference.

[00:30:20] Speaker 03:
It does not say that.

[00:30:21] Speaker 03:
But I think it says, in fact, the contrary.

[00:30:23] Speaker 03:
It says except for that agreement,

[00:30:28] Speaker 03:
This agreement constitutes the entire agreement and understanding.

[00:30:32] Speaker 03:
So it seems to me that's express language leaving the 91 agreement in place.

[00:30:39] Speaker 00:
I believe that is language that leaves the 91 agreement in place and modifies it to the extent necessary to conform.

[00:30:47] Speaker 03:
Yes.

[00:30:48] Speaker 03:
But that's different than incorporating by reference because now I'm thinking in terms of, you know,

[00:30:55] Speaker 03:
Morosky's position with respect to the loser pay provision.

[00:30:59] Speaker 03:
Because if the 91 agreement simply remains in place, except to the extent inconsistent with the 2006 agreement, that still doesn't answer the question of how Morosky becomes liable for those fees.

[00:31:15] Speaker 00:
Well, the court has been approaching this question

[00:31:20] Speaker 00:
as one of standing in the shoes.

[00:31:22] Speaker 00:
And the district court, and I think that is a correct analysis and I think that the provision applies under that analysis.

[00:31:29] Speaker 03:
So what provision of agreement... The loser pays provision... ...specifies that Murawski stands in the shoes of Lilly or Gaiman?

[00:31:39] Speaker 00:
I think by participating in amending that agreement four times as a party, they have undertaken to stand in the shoes.

[00:31:49] Speaker 00:
I think the district court's grounds, which was they were stopped from denying the benefits of that license by taking advantage of the, or stopped from denying the obligations of the 1991 agreement while taking advantage of the benefits, is a ground that leaves in place that loser pays provision in the sense that

[00:32:17] Speaker 00:
If they want the $10 million that they get under the LTA, the right to assert the license and the royalty rate from the 1991 agreement against the developing Medtronic products, they have to take the obligations of that license as well.

[00:32:34] Speaker 00:
And that was a specific holding that the trial court made.

[00:32:38] Speaker 04:
I'm surprised your answer to Judge Lynn's question isn't that

[00:32:44] Speaker 04:
Murowski is actually named now in the tolling agreement and that it's named in the place of Lilly, where once Lilly resided, now we have the MSV.

[00:32:56] Speaker 04:
Is that correct?

[00:32:57] Speaker 00:
Well, they've made themselves a... I would say it's just slightly different than that, Your Honor, because

[00:33:03] Speaker 00:
in effect, guidance stands in the shoes of Lilly.

[00:33:07] Speaker 00:
But Morowski made itself a party to the agreement.

[00:33:11] Speaker 00:
You had observed early on that they were in the background in the 91 agreement.

[00:33:16] Speaker 00:
They then stepped forward to take full advantage of the license agreement in 2003, 2004, and 2006 by signing on to it.

[00:33:27] Speaker 03:
Even if they obtained some benefits under the 91 agreement,

[00:33:34] Speaker 03:
What obligations did they undertake from the 91 agreement?

[00:33:38] Speaker 03:
I'm still having trouble as to why Murawski is standing in the place of Lilly Guidant.

[00:33:48] Speaker 00:
Well, I would go to paragraph 9 of the tolling agreement at appendix 706 that lays out the procedure that is going to be followed

[00:34:00] Speaker 00:
when ultimately there is a declaratory judgment action.

[00:34:04] Speaker 00:
It's very specific.

[00:34:06] Speaker 00:
And it alters those things that the parties wanted to alter from the 91 agreement.

[00:34:11] Speaker 00:
It does not alter the loser pays.

[00:34:16] Speaker 03:
Well, I agree that paragraph 9 contains both benefits and obligations.

[00:34:21] Speaker 03:
And certainly, Moravsky undertook those obligations.

[00:34:24] Speaker 03:
The question is, to what extent are the obligated

[00:34:29] Speaker 03:
under the separate provision in the loser pay provision in the original 91 agreement.

[00:34:35] Speaker 00:
They're obligated because the parties did not change that provision when they entered into the LTA.

[00:34:41] Speaker 00:
But Moroski didn't agree to that provision.

[00:34:46] Speaker 00:
Well, they did agree to it by signing on to the tolling agreement and saying that they were going to amend the 91 license consistent with that.

[00:34:57] Speaker 00:
And that's why

[00:34:58] Speaker 00:
The two letter agreements that I referenced are relevant here because in both of those situations, they specifically changed the loser pays requirement.

[00:35:09] Speaker 00:
They clearly understood it applied.

[00:35:11] Speaker 03:
Well, but those agreements related to different circumstances, different patents, they could have just simply said, we're going to extinguish any fee obligation.

[00:35:22] Speaker 03:
Maybe there is potential fee obligation under section 285 or some such other thing.

[00:35:28] Speaker 03:
I don't know that you can read that much into those two agreements.

[00:35:35] Speaker 00:
Well, I think, Your Honor, that it's very clear that what the parties did here was to modify that provision when they thought that was the right way to reach whatever deal they had under consideration at the time.

[00:35:48] Speaker 00:
And when they entered into this litigation tolling agreement, this was going to govern

[00:35:54] Speaker 00:
what took place between the date of the tolling agreement and the expiration of the patents.

[00:36:01] Speaker 00:
And they chose not to modify that provision.

[00:36:05] Speaker 00:
And by the express terms of paragraph 9, or excuse me, of 15, in our opinion, it continues to stand, because it was not modified, and it was only modified as set forth in the LTA.

[00:36:17] Speaker 00:
OK.

[00:36:17] Speaker 00:
Thank you, Mr. Lutz.

[00:36:22] Speaker 04:
Mr. Anderson.

[00:36:24] Speaker 04:
You had like less than a minute left on your butter bar.

[00:36:27] Speaker 04:
I'm going to restore you back to five minutes.

[00:36:28] Speaker 01:
Thank you, Your Honor.

[00:36:29] Speaker 01:
I appreciate that.

[00:36:31] Speaker 01:
Mr. Jakes briefly mentioned that only Murowski filed a counterclaim for infringement.

[00:36:35] Speaker 01:
That was a permissible counterclaim, having nothing to do with what we're discussing here today.

[00:36:40] Speaker 01:
Medtronic makes a big deal out of it, so does Boston Scientific, about Murowski asserting infringement.

[00:36:49] Speaker 01:
Well, and they said that only later could Murowski assert infringement.

[00:36:52] Speaker 01:
But they're not reading the agreement.

[00:36:54] Speaker 01:
And Judge Lynn, when you read it to me before, in my opening argument, you said that Murowski has the right to assert infringement.

[00:37:02] Speaker 01:
In the 1991 agreement, it says, if Lilly or Murowski believes there is infringement, then Lilly shall assert infringement.

[00:37:13] Speaker 01:
So there was no change at all.

[00:37:15] Speaker 01:
Then they changed it in later agreements, saying Murowski or Lilly.

[00:37:19] Speaker 01:
So there wasn't any change here.

[00:37:22] Speaker 01:
What happened is with the subsequent agreements, they're based on discussing the DJ action.

[00:37:29] Speaker 01:
Murowski is a party to the DJ action.

[00:37:32] Speaker 01:
And Murowski says, this stuff doesn't concern me, and I don't have any objection to it.

[00:37:37] Speaker 01:
So even if you say that the provision in the 1991 agreement carried through in the 2006 agreement, it's still a provision only against Lilly or Medtronic.

[00:37:49] Speaker 01:
And I haven't seen any disagreement.

[00:37:50] Speaker 01:
with the thought that it's the intent of the parties that controls.

[00:37:54] Speaker 01:
And throughout this whole thing, Moravsky knows what it agreed to, and it knows that it wasn't a party to the 1991 agreement.

[00:38:01] Speaker 01:
It knows it never agreed to pay fees, and it never would agree to pay fees.

[00:38:06] Speaker 04:
The district court, I think very in detail, listed all the different amendments to the 1991 agreement, the new obligations and interests that were established under the tolling agreement, and concluded

[00:38:21] Speaker 04:
And I think it did so in the background that these are sophisticated parties.

[00:38:26] Speaker 04:
And they have sophisticated lawyers.

[00:38:30] Speaker 04:
And the one thing that was not amended in the tolling agreement was the loser pay provision and found that that's the way it applies.

[00:38:38] Speaker 04:
What's wrong with that reasoning?

[00:38:41] Speaker 01:
Well, first of all, each time they had a new declaratory judgment action,

[00:38:46] Speaker 01:
They had to find a different agreement that pertains to it.

[00:38:50] Speaker 01:
And so they said, well, we'll pick up this.

[00:38:53] Speaker 01:
But again, as I say, that 1991 obligation to pay for attorney's fees was never pertinent to Murowski.

[00:39:02] Speaker 01:
And the fact that Murowski signed these letters with these other actions that are taken to settle actions in which Medtronic named Murowski as a party still

[00:39:16] Speaker 01:
Even if they go into there, the agreement only applies to Medtronic or Lilly, because the second agreement that Murowski signs can't make something out of nothing.

[00:39:28] Speaker 01:
It's that 1991 agreement, the obligation of Lilly and Medtronic to pay fees, and Murowski has never agreed to it, and then they have these other agreements.

[00:39:38] Speaker 01:
Murowski has to sign them because Medtronic named him as a defendant, but none of them change the

[00:39:44] Speaker 01:
uh, uh, that attorney fee provision, which never applied to Morowski.

[00:39:49] Speaker 01:
And Morowski would say, Hey, what am I doing?

[00:39:51] Speaker 01:
I got these two giants who are, who are litigating.

[00:39:53] Speaker 01:
And then if they lose, I should pay attorney's fees.

[00:39:56] Speaker 01:
And it's the intent of the parties that controls.

[00:39:59] Speaker 01:
And I think you can see that Morowski never had any intent to pay attorney's fees.

[00:40:06] Speaker 01:
And that, that just goes through this whole thing and the district court's decision.

[00:40:11] Speaker 01:
just ignores that.

[00:40:12] Speaker 01:
She reaches a decision which is completely contrary to the intent of the parties, which was that any fees would be between Lilly and Medtronic.

[00:40:21] Speaker 01:
That was never changed, and it doesn't matter how many agreements there are, if Murowski never undertakes an obligation to do that, then certainly this would be a tremendous obligation for Murowski to do.

[00:40:33] Speaker 01:
It's just a third party license for here.

[00:40:36] Speaker 01:
Why would it ever agree to pay fees?

[00:40:40] Speaker 01:
It's a huge liability for it.

[00:40:43] Speaker 01:
And so if the intent of the parties controls, and if the intent of the parties is judged by what is in the agreement, and that's the 1991 agreement, that's the only thing that says anything about these fees, then you have to conclude from that that, yes, Murawski never agreed to that.

[00:41:01] Speaker 01:
How can the district court enter a judgment against that?

[00:41:05] Speaker 01:
One further small point.

[00:41:06] Speaker 01:
The transition is, you've got Lilly with an exclusive license.

[00:41:13] Speaker 01:
Lilly then transfers it to Guidant.

[00:41:16] Speaker 01:
So now you see Guidant rather than Lilly.

[00:41:19] Speaker 01:
You never see Murawski changing what he was doing.

[00:41:23] Speaker 01:
You never see Murawski say, I'm going to assume these liabilities and these liabilities.

[00:41:29] Speaker 01:
These other agreements are things that Lilly and Medtronic agree to.

[00:41:33] Speaker 01:
And they say, Murawski, you're a party too.

[00:41:36] Speaker 01:
So you have to agree to it also.

[00:41:38] Speaker 01:
And so we'd go ahead and sign it.

[00:41:40] Speaker 01:
But never did we ever comprehend in our wildest imagination that now we have to pay Lilly's fees rather than Lilly.

[00:41:49] Speaker 01:
So there never was any change there.

[00:41:52] Speaker 04:
OK.

[00:41:54] Speaker 04:
That's the conclusion of your time.

[00:41:56] Speaker 01:
Thank you, Your Honor.

[00:41:57] Speaker 04:
Thank you.

[00:41:58] Speaker 04:
Thank you, Your Honor.

[00:42:02] Speaker 04:
Our next case is international customs products versus United States.