[00:00:00] Speaker 00:
Two zero one five dash one four zero six National Oil Well Varko versus Amron Oil Field and Marine.

[00:00:08] Speaker 00:
Mr. Rowley, please proceed.

[00:00:13] Speaker 01:
Thank you, Your Honor.

[00:00:22] Speaker 01:
May it please the Court, I'm John Railey and this is Bobby Bowick and we're here on behalf of National Oil Well Varko.

[00:00:29] Speaker 01:
A standing decision based on contractual interpretation, your honor, is reviewed de novo by this court.

[00:00:35] Speaker 01:
The lower court's decision is entitled to no deference under the case law.

[00:00:40] Speaker 01:
In this case, the lower court... Mr. Alley?

[00:00:43] Speaker 04:
Yes, your honor.

[00:00:44] Speaker 04:
The corporate structure involved here with your client is somewhat complex.

[00:00:50] Speaker 04:
Can we just go through a little bit of it so I understand it?

[00:00:53] Speaker 04:
Yes, your honor.

[00:00:53] Speaker 04:
I'm happy to.

[00:00:55] Speaker 04:
Okay.

[00:00:55] Speaker 04:
There's a company called MD Tatco.

[00:00:58] Speaker 04:
Yes.

[00:00:59] Speaker 04:
Martin Decker-Totko?

[00:01:02] Speaker 04:
That was or is a division of VARCO-LP?

[00:01:06] Speaker 04:
Correct.

[00:01:07] Speaker 04:
There's still a division of VARCO-LP?

[00:01:10] Speaker 01:
It's a DBA.

[00:01:12] Speaker 01:
It's not an actual entity apart from VARCO-LP.

[00:01:18] Speaker 01:
It's just a DBA.

[00:01:20] Speaker 04:
So maybe we can consider VARCO-LP and MD-Totko as

[00:01:25] Speaker 04:
one-in-the-same you can consider in the talk to his work will be an embargo lp was a subsidiary of varco incorporate yes at one time and right one time because then varco incorporated and national oil well incorporated merged into something that became national oil well varco incorporated correct okay and then underneath what was once upon a time national oil well incorporated

[00:01:54] Speaker 04:
was a subsidiary called National Oil Well LP.

[00:01:58] Speaker 04:
Correct.

[00:01:59] Speaker 04:
Which changed its name to National Oil Well VARCO LP.

[00:02:04] Speaker 04:
Correct.

[00:02:04] Speaker 04:
And so National Oil Well VARCO LP, also known as NOV LP, is like a sister subsidiary of VARCO LP.

[00:02:16] Speaker 01:
It was at one time, and then pursuant to the Assets Contribution Agreement, which is

[00:02:22] Speaker 04:
uh... uh... at issue in this case barco lp transfer it's assets to national oil well part of it is still as is their separate legal entities that still exist one called barco lp correct and one called in a vlp yes your honor but barco lp has no assets currently pursuant to its tax returns it has no no no i was barco lp listed as a plaintiff in the canadian case great with the canadian court issued an opinion in twenty thirteen

[00:02:52] Speaker 04:
noting that VARCO LP is the owner of the patent there that is the sister patent for the 142 here.

[00:03:01] Speaker 01:
I don't claim to be an expert on Canadian law, Your Honor, but I can tell you my understanding.

[00:03:06] Speaker 01:
That case was filed in 2005 prior to the asset contribution agreement, so at that time VARCO LP was the owner.

[00:03:14] Speaker 01:
There were no new pleadings in the case.

[00:03:16] Speaker 01:
My understanding was everybody in the chain of title

[00:03:20] Speaker 01:
was added as a plaintiff because Canada is unclear about whether it recognizes transfer of interest in lawsuits.

[00:03:27] Speaker 01:
So they were all in there.

[00:03:28] Speaker 01:
But ownership was never an issue in that case because the Canadian counterpart had an exclusive license.

[00:03:35] Speaker 04:
There was a $50 million judgment there, right?

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

[00:03:38] Speaker 04:
And so somebody cut a check to VARCO LP?

[00:03:41] Speaker 04:
No, to National Oil Well.

[00:03:44] Speaker 01:
VARCO, Your Honor.

[00:03:45] Speaker 04:
How did they do that when National Oil Well VARCO was never listed as a plaintiff in that case?

[00:03:51] Speaker 01:
Because everybody in the world knows that National Oil Well VARCO owns the assets of VARCO LP except for our opponents in this case and the lower court.

[00:04:01] Speaker 04:
But the point is, that case... Then National Oil Well VARCO LP needed to be identified as a plaintiff in that Canadian litigation.

[00:04:11] Speaker 01:
Well, the case with the judgment was not executed, Your Honor.

[00:04:17] Speaker 01:
There was a settlement with National Oil Well Varco, and that was the $112 million payment.

[00:04:23] Speaker 01:
But the point, to answer Your Honor's question more directly, the Canadian company had an exclusive license to prosecute the Canadian counterpart to the 142, the 313 patent.

[00:04:34] Speaker 01:
And that's what was done in Canada, and they were the lead plaintiffs.

[00:04:37] Speaker 01:
So ownership was never really an issue in that case.

[00:04:41] Speaker 04:
What I'm saying is, doesn't it seem like if all of you guys, whoever you are, believe that National Oil Well VARCO LP was the owner of the patent as of January 2006, then there needed to be a paper filed in the Canadian court letting the Canadian court know that the patent had transferred over to National Oil Well VARCO LP instead of

[00:05:08] Speaker 04:
allowing the Canadian court to keep going and believing that Varco LP was the true owner of the file.

[00:05:14] Speaker 01:
Again, Your Honor, I wasn't Canadian counsel.

[00:05:17] Speaker 01:
But I know that that case was filed prior to the ACA.

[00:05:20] Speaker 01:
There were no new pleadings.

[00:05:21] Speaker 01:
So the time it was filed, Varco LP was the owner.

[00:05:24] Speaker 01:
But the case was prosecuted by Lee as lead counsel.

[00:05:27] Speaker 04:
But by 2013, that was well over seven years after the supposed transfer took place.

[00:05:34] Speaker 01:
They certainly could have filed an amended pleading, I guess, but I don't really know because I don't understand Canadian law, Your Honor, but you're correct.

[00:05:42] Speaker 04:
This is not about understanding the intricacies of Canadian law.

[00:05:45] Speaker 04:
This is about trying to get straight who is the proper plaintiff in a case and notifying the courts of that.

[00:05:53] Speaker 01:
They did not file an amended pleading, Your Honor.

[00:05:55] Speaker 04:
Now, why... The thing is... Then the Colorado case... Can I... No, I need to know this.

[00:06:02] Speaker 04:
I need to straighten this out.

[00:06:04] Speaker 04:
In the Colorado case, you told the Colorado District Court that VARCO LP had changed its name into becoming National Oil Well VARCO LP.

[00:06:18] Speaker 04:
But of course, that's not the case because we just settled the issue that they're really sister subsidiaries that are separate legal entities.

[00:06:25] Speaker 04:
And so now we have a situation where the Colorado District Court was, to put it charitably, misinformed as to

[00:06:34] Speaker 01:
who as to what really happened there with this complex corporate structure our local council is that fair to say our local council i have it right uh... tell me where i'm wrong yesterday i'd love to our local council game i've already had in my wrong they get in my wrong impart your honor okay tell me where my wrong because it was a shorthand version for what really happened rather than tell the whole tale our local council said name change there was a name change

[00:07:03] Speaker 01:
National Oil Well Inc.

[00:07:07] Speaker 01:
and VARCO, that became National Oil Well VARCO.

[00:07:11] Speaker 01:
National Oil Well LP changed its name to National Oil Well VARCO LP.

[00:07:16] Speaker 01:
VARCO LP assigned its assets to that newly named company.

[00:07:21] Speaker 01:
VARCO LP never changed its name into National Oil Well VARCO LP.

[00:07:26] Speaker 01:
Is that correct?

[00:07:27] Speaker 01:
No, it was an assets transfer.

[00:07:29] Speaker 01:
That is correct, Your Honor.

[00:07:29] Speaker 04:
There was never a name change.

[00:07:30] Speaker 04:
They remained separate legal entities.

[00:07:32] Speaker 01:
I believe the name change that my local was referring to was the name change from National Oil Well.

[00:07:37] Speaker 04:
No, the district court took and accepted the entry by the plaintiff that its name, Varco LP, had been changed to National Oil Well Varco LP.

[00:07:51] Speaker 01:
All I know is, Your Honor, what happened between the parties at the time in January 2000.

[00:07:57] Speaker 01:
and stakes confirmed by the contract and all of the extrinsic evidence at that moment in time by the parties.

[00:08:04] Speaker 01:
Respectfully, a statement by counsel years later in court, which may not be fully accurate, is not dispositive over the conduct and attitude and testimony of the parties in the contemporaneous documents at the time and the tax returns filed under risk of federal prosecution that say that before the ACA there's zero non-cash assets and after the ACA

[00:08:26] Speaker 01:
I mean, before the AC, there's hundreds of millions of dollars of non-cash assets, and after, there's zero.

[00:08:31] Speaker 01:
Who defended the re-examination of the 142 patents back in 2010?

[00:08:36] Speaker 04:
There were several.

[00:08:38] Speaker 04:
It was VARCO LP, right?

[00:08:41] Speaker 04:
Because Mr. Craven filed a declaration with the PTO notifying them of the prior transfer from Wildcat to VARCO LP, or to MD Taco.

[00:08:56] Speaker 04:
of the 142 patent.

[00:08:58] Speaker 04:
And so it was VARCO LP that this corporate structure identified as the right party to prosecute the reexamination of the 142 patent.

[00:09:10] Speaker 01:
In that case, we got caught between a rules conundrum.

[00:09:13] Speaker 01:
The Patent and Trademark Office rules require that an assignment

[00:09:16] Speaker 01:
that is filed has the patent number on it.

[00:09:19] Speaker 01:
The case law does not.

[00:09:21] Speaker 01:
The case law says you can assign all of your assets.

[00:09:24] Speaker 01:
The ACA could not be filed with the Patent and Trademark Office because it did not bear a number.

[00:09:29] Speaker 01:
So we were in a conundrum.

[00:09:31] Speaker 01:
This second re-examination was filed without providing us notice.

[00:09:35] Speaker 01:
Fortunately, Mr. Ballack agreed.

[00:09:36] Speaker 04:
Is there any evidence that there was a conversation going on among the various entities or lawyers saying, oh my goodness, we can't

[00:09:46] Speaker 04:
We can't record the ACA with the PTO.

[00:09:50] Speaker 04:
Because in fact, the PTO doesn't look behind these types of recordations.

[00:09:57] Speaker 04:
It's a total ministerial act.

[00:09:59] Speaker 04:
Right.

[00:09:59] Speaker 01:
It's not evidence.

[00:10:02] Speaker 04:
Whatever you submit as the asset transfer, and you file a declaration identifying yourself as the new owner, the PTO just accepts it and moves on.

[00:10:11] Speaker 01:
That's it.

[00:10:12] Speaker 01:
That's all that's required.

[00:10:13] Speaker 01:
It's simply notice it's not evidence of ownership.

[00:10:15] Speaker 01:
Your honor is correct.

[00:10:17] Speaker 01:
But the rules require that it must identify the patent by the patent number.

[00:10:21] Speaker 01:
Therefore, the ACA itself could not be filed because it simply says call.

[00:10:25] Speaker 00:
Mr. Alley.

[00:10:26] Speaker 01:
Yes, ma'am.

[00:10:27] Speaker 00:
This all seems to be a discussion about parole evidence.

[00:10:33] Speaker 00:
But I don't understand the lower court as having found the contract to be ambiguous and thus to have a need to

[00:10:41] Speaker 00:
turn to all of these questions of who asserted it when and who was claiming ownership where, or who was the assignee before the PTO registered, et cetera, et cetera.

[00:10:51] Speaker 00:
I understood the lower court to base its decision on several alternative theories of why the plain language of the contract itself didn't actually transfer the patent at issue.

[00:11:04] Speaker 00:
So could you do me a favor and please focus on why

[00:11:11] Speaker 00:
The district court was wrong to conclude that this patent was not a physical asset that was transferred pursuant to the asset contribution agreement.

[00:11:21] Speaker 01:
Thank you, Your Honor.

[00:11:22] Speaker 01:
As Your Honor knows, the whole goal of contract law is to determine the intent of the parties.

[00:11:28] Speaker 01:
In this case, the lower court allowed a third party to rewrite the contract, deleting key phrases, and declare that the contract unambiguously

[00:11:38] Speaker 01:
reached a meaning that neither of the actual parties to the contract intended.

[00:11:42] Speaker 01:
And Your Honor, the Lockheed Martin versus West case, Federal Circuit 97, which we've cited, said that words are given their ordinary meaning unless the parties have their own meaning, which is understood by them.

[00:11:54] Speaker 01:
So with that understanding, let's look at the assets contribution agreement.

[00:11:57] Speaker 00:
So is it your understanding that the words physical assets under Delaware law, because we would be applying state contract law to the interpretation of this phrase,

[00:12:07] Speaker 00:
doesn't typically include patents, but that this contract on its face makes it clear that the party's intended otherwise?

[00:12:13] Speaker 01:
Yes, Your Honor, because here's why.

[00:12:15] Speaker 00:
You do conceive, though, that Delaware law doesn't normally consider patents to be physical assets.

[00:12:20] Speaker 01:
Yes, Your Honor.

[00:12:22] Speaker 01:
So here's why.

[00:12:24] Speaker 01:
The whereas clause of the contract says contractor desires to contribute all of its physical assets, including but not limited to those assets generally described in Exhibit A, the property, excluding any

[00:12:35] Speaker 01:
capital or common stock of subsidiaries or owned companies.

[00:12:40] Speaker 01:
Now a stock also, your honor, is not in the ordinary sense of the word a physical asset.

[00:12:46] Speaker 01:
So if the contract is interpreted the way our opponents in the court interpreted it, this sentence would make no sense at all.

[00:12:52] Speaker 01:
For example, you can say all cars except brown Buicks, and that makes sense because a Buick is a car, but you can't say all cars except brown horses.

[00:13:03] Speaker 01:
So if you interpret physical as the ordinary sense of the meaning, then there's no reason to put the rest of the sentence that says, excluding any capital or common stock.

[00:13:14] Speaker 01:
And so physical, according to the parties, was in no way a limitation of the transfer.

[00:13:23] Speaker 01:
And that's confirmed, of course, if the court finds ambiguity, that's confirmed by all of the contemporaneous

[00:13:29] Speaker 00:
Documentary evidence the secretary certificate signed later that day I'm not interested in talking with you about parole because I can't decide it what the parole evidence explains to someone is a question of fact it's not a question of law that is not something that I do in the first instance just talking about parole tell me why the plain language includes patents and in particular this patent and here is my concern even if you're correct

[00:13:56] Speaker 00:
that the party's intent as expressed in this overall document is that patents would be included among physical assets that were, in fact, contributed as part of this asset contribution agreement.

[00:14:08] Speaker 00:
And the only way I could get to that is, of course, by looking at Exhibit A. And Exhibit A actually has a line that says patents on it.

[00:14:15] Speaker 00:
So I don't think that your argument is a terrible one by any means, that since Exhibit A actually has a row that says the patents and lists

[00:14:26] Speaker 00:
asset value for each company that transfers patents for the respective patents, it's included.

[00:14:33] Speaker 00:
So I don't think that your argument is a terrible one that physical assets, and they mention as described in Exhibit A, and patents are described in Exhibit A, so maybe it is clear from this document that the intent of the parties was that patents be included as physical assets, maybe so.

[00:14:49] Speaker 00:
But then the problem is

[00:14:52] Speaker 00:
The subsidiary that owned this patent is VARCO LP.

[00:14:56] Speaker 00:
And when you look at the column for VARCO LP, it says that as part of this asset contribution agreement, it is contributing $0 worth of patents.

[00:15:04] Speaker 00:
And so this isn't a case where they left it blank, where it was undefined what they were contributing.

[00:15:09] Speaker 00:
It expressly says some people are contributing patents as part of this asset contribution agreement.

[00:15:15] Speaker 00:
But VARCO LP is not contributing patents.

[00:15:18] Speaker 00:
So how is that not plain language that indicates that no patents owned by VARCO LP were contributed as part of this activity?

[00:15:25] Speaker 01:
Patent has no value unless it is currently collecting revenues.

[00:15:29] Speaker 01:
And there were probably hundreds or even thousands of patents that issued.

[00:15:32] Speaker 00:
Where do you get that idea from?

[00:15:34] Speaker 00:
I have never, ever, ever heard someone suggest what you just said.

[00:15:37] Speaker 01:
That is a direct monetary value.

[00:15:39] Speaker 00:
Patent has no value unless it's collecting revenue.

[00:15:44] Speaker 01:
Let me rephrase, Your Honor.

[00:15:45] Speaker 01:
It's difficult to assess a mathematical value without speculating.

[00:15:49] Speaker 01:
We think this patent may be worth this much.

[00:15:51] Speaker 01:
And rather than go through hundreds or even thousands of patents and try to speculate on a value, since this was an agreed exchange between two subsidiaries of one company and everybody knew what was going on, they decided not to wade into that and try to assess a value for all of these patents.

[00:16:07] Speaker 01:
So they just thought it was OK to save all and then list patents.

[00:16:11] Speaker 01:
And that's what they did.

[00:16:12] Speaker 01:
And they knew what they were doing.

[00:16:15] Speaker 01:
And that's what they did.

[00:16:18] Speaker 04:
Do you understand why, though, that a zero entry looks very specific and suggests that VARCO LP is not including MD TOTCO's patents in the transfer?

[00:16:36] Speaker 04:
Just looking at the table.

[00:16:37] Speaker 01:
Just looking at it, I can see how it could be misinterpreted, Your Honor.

[00:16:40] Speaker 01:
But they had hired an auditor to assess the value of the assets.

[00:16:44] Speaker 01:
that prepared Exhibit A, and it was attached, and it was the understanding, and I see that I'm almost out of time.

[00:16:53] Speaker 01:
I'd like to address the present tense, past tense thing very briefly, if I could, so I could make sure that I get that covered.

[00:16:59] Speaker 01:
Well, I'll make sure I answer your honor's question first.

[00:17:02] Speaker 00:
You go ahead.

[00:17:03] Speaker 00:
I think that at this point, you have actually used all of your time, all of your rebuttal time, and you're beyond your time.

[00:17:09] Speaker 00:
So we're not going to hear anything more from you right now.

[00:17:10] Speaker 01:
Oh, I thought the clock was winding down from 11.

[00:17:12] Speaker 00:
11?

[00:17:14] Speaker 00:
Yes, I was 11 and 4.

[00:17:15] Speaker 00:
No, it was winding down from 15.

[00:17:16] Speaker 00:
15, that's correct.

[00:17:19] Speaker 00:
So I think that you need to be seated.

[00:17:21] Speaker 00:
My apologies, Your Honor.

[00:17:23] Speaker 00:
I misread the clause.

[00:17:25] Speaker 01:
Everything else I hope is briefed adequately.

[00:17:27] Speaker 01:
Thank you, Your Honor.

[00:17:32] Speaker 00:
Mr. Lowry.

[00:17:33] Speaker 02:
Thank you, Your Honor.

[00:17:37] Speaker 02:
Matt Lowry from Foley & Lardner.

[00:17:39] Speaker 02:
for the affiliate Kim Dada, partner of Foley & Larner.

[00:17:42] Speaker 00:
Mr. Lowry, what law applies to this clause in the asset contribution agreement?

[00:17:49] Speaker 00:
Delaware law or Federal Circuit law?

[00:17:52] Speaker 02:
Both, Your Honor.

[00:17:53] Speaker 02:
The first... Yes, Your Honor.

[00:17:54] Speaker 00:
The first issue is... That's a really interesting idea.

[00:17:57] Speaker 00:
Okay, I've never seen that before, so please continue.

[00:18:00] Speaker 02:
Yes, Your Honor.

[00:18:00] Speaker 02:
So the first question is, was there an assignment when the contract says concurrently shall convey rather than hereby does convey?

[00:18:09] Speaker 02:
Is that a present assignment or a promise to assign?

[00:18:12] Speaker 02:
If it's a present assignment, they're standing.

[00:18:14] Speaker 02:
If it's a promise to assign, there's not.

[00:18:16] Speaker 00:
That's an issue of federal.

[00:18:16] Speaker 00:
You mean the word agrees to transfer?

[00:18:20] Speaker 02:
It says agrees to transfer, and there's others that say concurrently shall convey.

[00:18:24] Speaker 00:
You better get your appendix out and show me exactly which one you're talking about.

[00:18:31] Speaker 00:
I'd like to know precisely which sentence in the asset contribution agreement you are saying is governed by federal circuit law.

[00:18:40] Speaker 02:
Section 1.2.

[00:18:41] Speaker 00:
Okay, I'm there.

[00:18:43] Speaker 00:
Conveyance of property, yes.

[00:18:45] Speaker 02:
Concurrently with the execution of this agreement, contributor shall convey.

[00:18:49] Speaker 00:
Uh-huh, shall convey.

[00:18:50] Speaker 00:
And why is that governed by Federal Circuit law?

[00:18:53] Speaker 00:
Because if that's a promise to separately convey... If I promise to separately convey to you my house, is that governed by Federal Circuit law?

[00:19:03] Speaker 02:
No, but if it's a patent, it is.

[00:19:04] Speaker 00:
Where does this clause say that it's

[00:19:07] Speaker 00:
limited to or pertaining to patent rights?

[00:19:12] Speaker 02:
The clause itself does not, but whether a promise is a promise to convey in the future or a present... In all cases?

[00:19:19] Speaker 00:
It's governed by federal circuit law?

[00:19:21] Speaker 02:
That's my understanding of the precedent.

[00:19:23] Speaker 04:
So let me get something straight.

[00:19:24] Speaker 04:
So in the table there is an entry for assets called furniture and fixtures.

[00:19:29] Speaker 04:
Yes, Your Honor.

[00:19:30] Speaker 04:
Okay, so now this particular provision in the ACA covers that

[00:19:37] Speaker 04:
type of asset, furniture and fixtures, with several million dollars.

[00:19:43] Speaker 04:
So are you saying that Federal Circuit law covers whether this is an actual assignment versus just a mere promise to assign?

[00:19:52] Speaker 02:
I don't understand there to be a difference between Federal Circuit law and Delaware law on this issue, but it would be my understanding, Your Honor, that Federal Circuit law applies to whether it's a current transfer.

[00:20:00] Speaker 04:
But I guess the point is, if we were in Delaware state court right now,

[00:20:07] Speaker 04:
The Delaware State Court would almost certainly interpret this provision in the ACA under Delaware State law when it came to whether or not $50 million of furniture and fixtures were transferred from VARCO LP to National Oil Well LP.

[00:20:26] Speaker 04:
Correct your answer.

[00:20:26] Speaker 04:
So now we're in a conundrum because you're telling us that the exact same provision, maybe for one class of assets, will be

[00:20:35] Speaker 04:
interpreted under one law.

[00:20:38] Speaker 04:
But for every other asset that's listed in the table, this exact same generic provision is going to be interpreted by some completely other jurisdiction of law.

[00:20:50] Speaker 02:
Again, I don't think it makes a difference for this appeal, but I believe that's correct.

[00:20:53] Speaker 00:
And here's why.

[00:20:53] Speaker 00:
When you say you don't think it makes a difference for this appeal, I see no briefing of Delaware law on this point anywhere in this case.

[00:20:59] Speaker 00:
So I'm just supposed to accept your view of Delaware law that you're proposing to me from the podium?

[00:21:04] Speaker 02:
The only precedent that's been offered is Federal Circuit precedents on this issue.

[00:21:09] Speaker 02:
And the reason, Your Honor, is because Section 261 is a federal patent statute that requires that the assignment of patents be in writing.

[00:21:17] Speaker 02:
And as I understand this court's holdings, it has said that that makes it an issue of federal law.

[00:21:22] Speaker 02:
And so if you want to treat this.

[00:21:24] Speaker 00:
Where does it say that?

[00:21:25] Speaker 00:
Where does our federal circuit law say that a general clause that never mentions the word patents and that undisputedly assigns all assets of a company is governed by federal circuit law?

[00:21:37] Speaker 02:
The only precedent that I can think of is all the precedent I'm aware of is set in the brief.

[00:21:41] Speaker 02:
And it all concerns agreements that are generally governed under state law.

[00:21:47] Speaker 02:
but it treats an assignment as federal law because the statute says assignments have to be in writing.

[00:21:53] Speaker 02:
And what qualifies as a writing sufficient to transfer a patent under section 261 is reasonably, it doesn't matter what the other thing is.

[00:22:03] Speaker 02:
If it's sufficient for Delaware, that's great.

[00:22:04] Speaker 02:
But it's not sufficient for section 261 of the federal patent statute.

[00:22:08] Speaker 02:
And that's why I believe it to be an issue of federal law.

[00:22:10] Speaker 04:
Do you know if any of those prior federal circuit cases were

[00:22:15] Speaker 04:
interpreting a generic provision like this when it's talking about a whole genius of assets well beyond just patents?

[00:22:26] Speaker 04:
Or were they all just specifically a transfer of a patent?

[00:22:30] Speaker 02:
Yeah, I don't believe that this was an issue addressed in the briefing, Your Honor, so I didn't review the cases for that particular issue.

[00:22:35] Speaker 02:
Off the top of my head, I can't think of one.

[00:22:37] Speaker 02:
However, I can say that almost like the employment agreements, having done a bunch of them,

[00:22:42] Speaker 02:
there almost always shall this agrees to assign all rights, and that would include patent rights, trade secret rights, all kinds of rights, many of which are state law, which until recently would be all trade secret ones.

[00:22:54] Speaker 02:
And all of those say even in that employment agreement, whether it's patent rights, trade secret rights, and other rights, the patent right issue is determined as a matter of federal law.

[00:23:03] Speaker 00:
That's because it's determined as a matter of Federal Circuit law because it is a clause that deals in particular with patents and spells itself out as such.

[00:23:12] Speaker 00:
It says patents in Stanford-La Roche.

[00:23:14] Speaker 00:
In every one of the employment cases, it said patents.

[00:23:17] Speaker 00:
I was on the case in Stanford-La Roche.

[00:23:20] Speaker 00:
And what we explained in that opinion, this is not personal knowledge, this is what's explained in the opinion, is that we were looking at future rights to be developed.

[00:23:28] Speaker 00:
It wasn't naming particular patents.

[00:23:31] Speaker 00:
It was talking about if you, employee, invent something in the future, then you will have to agree to assign it to us in the future if rights are secured on it.

[00:23:42] Speaker 00:
So it made total and complete sense that that was a forward-looking, future-based assignment.

[00:23:48] Speaker 00:
I guess I'm having trouble understanding why this clause would be governed by that very specific law that deals with

[00:23:56] Speaker 00:
and employment contract, and later arising rights.

[00:23:59] Speaker 00:
And in particular, in each of those cases, I don't know if the clauses at issue pertain to other rights.

[00:24:05] Speaker 00:
You may be right.

[00:24:06] Speaker 00:
But the only one we claim to be speaking to was patents.

[00:24:10] Speaker 00:
And it was expressly called out, patents in the contract, unlike this one that doesn't have a patent.

[00:24:14] Speaker 02:
Well, to begin with, I think that's an excellent point.

[00:24:17] Speaker 02:
This doesn't call out explicitly for a transfer of patents.

[00:24:21] Speaker 02:
So to therefore conclude it's a transfer of patents under state law,

[00:24:24] Speaker 02:
would kind of beg the question that it's not calling for a transfer of patents in the first place.

[00:24:28] Speaker 00:
No, it's calling for a transfer of all physical assets.

[00:24:33] Speaker 02:
Right.

[00:24:33] Speaker 02:
And that would be the, which we would say does not include patents.

[00:24:36] Speaker 02:
I'd like to address that.

[00:24:37] Speaker 02:
But in addition, the Abraxis case dealt with issued patents.

[00:24:41] Speaker 02:
So it's not a future developed patent.

[00:24:43] Speaker 00:
And that clause was limited to patents.

[00:24:45] Speaker 00:
You can look at the clause itself and it says agrees to transfer patent rights.

[00:24:51] Speaker 00:
So it makes sense that federal circuit law would apply.

[00:24:53] Speaker 00:
me, you don't want Federal Circuit law applying the general contract provisions?

[00:24:57] Speaker 00:
That would be a disaster.

[00:24:59] Speaker 00:
You'd end up with all this forum shopping between Fed.

[00:25:02] Speaker 00:
Well, if I'm going to claim that a patent is in here somewhere, therefore Federal Circuit law applies and not state contract law.

[00:25:08] Speaker 00:
We have no business attempting to usurp the role of the state courts in assessing and governing general contract provisions like the transfer of all physical assets.

[00:25:18] Speaker 00:
We're going to say

[00:25:19] Speaker 00:
The transfer of all physical assets is governed by federal circuit law, and we're going to interpret that according to federal circuit law.

[00:25:24] Speaker 02:
Again, Your Honor, this was not an argument, I believe, submitted to the district court, but yes, the federal, it would be formed.

[00:25:30] Speaker 00:
You want the federal circuit law to govern

[00:25:33] Speaker 00:
a clause that says the transfer of all physical assets.

[00:25:37] Speaker 02:
No, only the portion as it pertains to patent and whether that satisfies section 261 of the Patent Act.

[00:25:42] Speaker 03:
So let me ask you this hypothetical, because we have some problems with the way this is phrased.

[00:25:47] Speaker 03:
But instead of saying they agree to transfer all physical assets, this says they agree to transfer all physical and intangible assets, clearly including patent rights.

[00:25:58] Speaker 03:
Your view is Federal Circuit law applies to that clause.

[00:26:02] Speaker 03:
to the extended transfers patent rights, but state law applies to the extended transfers, everything else?

[00:26:09] Speaker 02:
Yes.

[00:26:09] Speaker 02:
It is a federal issue whether section 261 has been satisfied that it be in writing.

[00:26:13] Speaker 03:
And in fact, to the forum shopping question- Isn't the point of contract interpretation to get to what the parties mean?

[00:26:19] Speaker 03:
How could they possibly mean two different things if they're using the same clause?

[00:26:26] Speaker 02:
The question again is, has it satisfied the Federal Patent Act?

[00:26:30] Speaker 02:
And in state law, it does control it.

[00:26:32] Speaker 03:
So your view is that the Patent Act requires some kind of separate statement about the transfer of patents?

[00:26:41] Speaker 02:
Patent Act requires a present assignment.

[00:26:44] Speaker 02:
That's my understanding of the law.

[00:26:46] Speaker 02:
I'd like to address, if I could, the notion of whether a patent could be a physical assignment.

[00:26:50] Speaker 03:
That's not answering the question.

[00:26:52] Speaker 02:
I'm sorry.

[00:26:52] Speaker 03:
I mean, it can be a present assignment without having

[00:26:56] Speaker 03:
being complying with our precedent, it can be a present assignment of physical rights without complying with our patent-specific case law, right?

[00:27:07] Speaker 03:
Yes.

[00:27:08] Speaker 03:
And so if they use one clause to transfer all assets, and that was meant to be a present assignment, you're saying for purposes of non-patent law or non-patent assets, it could be a present assignment.

[00:27:21] Speaker 03:
But for purposes of patent rights,

[00:27:24] Speaker 03:
isn't even though the party is intended by it from its plain language to transfer everything.

[00:27:30] Speaker 02:
Well, first of all, the objective intent under all of the cases that have addressed it that have been cited to this court is that shall convey is not intend to transfer.

[00:27:38] Speaker 02:
The objective intent.

[00:27:39] Speaker 03:
That's our law though.

[00:27:40] Speaker 03:
Let's assume the state law is different.

[00:27:43] Speaker 02:
That's an assumption that's not been asserted.

[00:27:45] Speaker 03:
Well, I'm asking you hypotheticals.

[00:27:46] Speaker 03:
Because it seems to me you're presenting an almost absurd position that we have to interpret the same sentence two different ways depending on whether it applies to physical assets or patent assets.

[00:28:02] Speaker 03:
And I can't imagine that any parties engaging in an asset transfer would intend that.

[00:28:08] Speaker 02:
The same would be true in the employment agreement where it incites all intellectual property rights, taxes, and trade secrets.

[00:28:14] Speaker 03:
Those cases all deal with intellectual property rights only.

[00:28:17] Speaker 02:
But most of those rights are state law rights.

[00:28:20] Speaker 02:
Trade secrets is a state law right.

[00:28:23] Speaker 00:
But those are all dealing with, also in the employment context, quite clearly with inventions, secrets, copyrights, whatever, not yet acquired.

[00:28:34] Speaker 00:
In every one of those examples in the employment context, it is

[00:28:38] Speaker 00:
future developed assets.

[00:28:41] Speaker 00:
Here, there's no doubt we're talking about some pre-existing physical assets.

[00:28:46] Speaker 00:
So just out of curiosity, your assertion, though it isn't briefed, is that Delaware law would be identical to federal circuit law and say this is a future conveyance?

[00:28:57] Speaker 02:
All I can say is I'm not aware of the difference.

[00:28:59] Speaker 00:
So does that mean nothing was transferred?

[00:29:02] Speaker 00:
Because this says shall convey.

[00:29:04] Speaker 00:
Your argument is no patents were transferred.

[00:29:08] Speaker 00:
Your argument would also have to be no other assets were transferred.

[00:29:11] Speaker 02:
The record is silent because there may be other documents that affect transfers.

[00:29:15] Speaker 02:
There could be UCC records.

[00:29:16] Speaker 02:
There could be other things that affect a transfer of, for example, the furniture.

[00:29:19] Speaker 02:
We don't know.

[00:29:20] Speaker 02:
The record's silent on that because nobody made an argument that they were being treated differently below.

[00:29:25] Speaker 02:
So the record's silent.

[00:29:26] Speaker 02:
If I may, I would like to address the physical, whether physical could include patents.

[00:29:30] Speaker 02:
And to be clear, as the district court found, that exhibit A includes goodwill,

[00:29:35] Speaker 02:
It includes liabilities.

[00:29:37] Speaker 02:
And so the notion that the fact that it appears in there somehow in Exhibit A makes it... Well, but liabilities aren't assets.

[00:29:43] Speaker 00:
So it says all physical assets described in Exhibit A, so liabilities naturally don't fall under that plain meaning.

[00:29:50] Speaker 02:
And the same would be true of intangible things as well.

[00:29:53] Speaker 02:
They're not physical.

[00:29:53] Speaker 00:
And again, there's no explanation for NOV as to why... They're not physical, but if it says all physical assets, including but not limited to those assets generally described in Exhibit A,

[00:30:03] Speaker 00:
those assets generally described in Exhibit A. Patents are an asset that is described in Exhibit A, correct?

[00:30:10] Speaker 00:
Is it an asset?

[00:30:12] Speaker 02:
It is an intangible asset that's listed in Exhibit A along with goodwill and along with the liabilities of everything else.

[00:30:19] Speaker 00:
So it is, in fact, an asset listed in Exhibit A. And it says, desires to contribute all of its physical assets, including but not limited to those assets described in Exhibit A. Patents would be an asset.

[00:30:30] Speaker 00:
So if I were to conclude that this meant

[00:30:33] Speaker 00:
to transfer patents as well, even though it used the word physical assets, and one would never normally think of a patent as a physical asset.

[00:30:41] Speaker 00:
But if I read the plain meaning of this as defining everything, all of the assets in Exhibit A as physical assets, whether I agree with it or not is irrelevant.

[00:30:51] Speaker 00:
But if I read it that way, then what happens to this case?

[00:30:55] Speaker 02:
If Your Honor were to read it that way, the patent still isn't included because there's a $1.00 value in the appropriate column.

[00:31:01] Speaker 02:
There's no dispute as to that.

[00:31:02] Speaker 02:
There was an argument that, well, if it's not, you know, we didn't value things.

[00:31:06] Speaker 02:
Well, there are actually non-zero entries for other divisions in the patent row.

[00:31:12] Speaker 02:
So they were plainly valuing the value of patents in that patents row.

[00:31:16] Speaker 02:
It's just there was a dollar zero in the column for VARCA.

[00:31:20] Speaker 00:
But his argument, whether it's true or not, I have no idea.

[00:31:24] Speaker 00:
is that for the non-zero columns it's because those were patents that were actually revenue generating at the time of the assessment that was done and that that's how we came up with those numbers and that we didn't, we put zero in any column where there weren't revenue generating.

[00:31:40] Speaker 02:
Yeah and the district court expressly addressed that and said that that cannot be the case because first of all that's not the way the balance sheets are generally

[00:31:49] Speaker 02:
set up as evidence by the balance sheet where furniture is at $44 million, but it's not generating revenue.

[00:31:55] Speaker 02:
The district court also noted that there is a separate portion of that sheet that's dedicated to revenue indicating that this is not intended to be a revenue situation.

[00:32:04] Speaker 02:
And third, like all of these issues, there's no explanation from NOV as to why, not from NOV, there's been a couple of references by its attorneys and statements, but there is nothing from NOV saying

[00:32:15] Speaker 02:
This is why we set physical assets rather than all assets.

[00:32:18] Speaker 02:
I mean, what does physical mean if it's including everything?

[00:32:22] Speaker 02:
There's no explanation as to why the dollar is zero.

[00:32:25] Speaker 02:
If your honor looks at the record, there's nothing from NOB that says, well, we did it because it's license generating revenue.

[00:32:30] Speaker 02:
That's an attorney argument, but it's not anything that's actually based in the record itself.

[00:32:35] Speaker 00:
Can I ask a practical question?

[00:32:37] Speaker 00:
If you prevail in this instance, the patent expired, I think, three years ago.

[00:32:41] Speaker 00:
Is that right?

[00:32:42] Speaker 02:
I believe that's approximately correct.

[00:32:44] Speaker 00:
If you prevail, that means VARCO LP still owns the patent, correct?

[00:32:49] Speaker 02:
No, Your Honor.

[00:32:50] Speaker 00:
No?

[00:32:51] Speaker 02:
Not necessarily.

[00:32:51] Speaker 02:
That's an issue that hasn't been adjudicated.

[00:32:53] Speaker 02:
What Judge Sparks found was that, in part, it can't be cured because that $0 means either it wasn't transferred, and they deliberately put a $0, or maybe VARCO LP didn't own it in the first place.

[00:33:04] Speaker 02:
And that's not clear that VARCO.

[00:33:06] Speaker 00:
Well, assuming that VARCO LP owned it in the first place, but the 0 means it wasn't transferred.

[00:33:13] Speaker 00:
then VARCO still owns it, correct?

[00:33:17] Speaker 02:
If VARCO owned it and didn't transfer it, VARCO would still own it.

[00:33:20] Speaker 02:
Yes, sure.

[00:33:21] Speaker 00:
And the patent expired three years ago, but patent statute allows for damages to go back six years.

[00:33:27] Speaker 00:
So VARCO LP could bring a suit against you, your company, or Omron, for at least three years worth of damages.

[00:33:38] Speaker 02:
Is that right?

[00:33:41] Speaker 02:
potentially, but they haven't done it.

[00:33:43] Speaker 02:
And so we haven't brought our defenses, and we haven't looked at it.

[00:33:47] Speaker 00:
OK.

[00:33:47] Speaker 00:
Thank you.

[00:33:48] Speaker 00:
Anything further?

[00:33:50] Speaker 00:
No?

[00:33:50] Speaker 00:
Thank you very much.

[00:33:51] Speaker 01:
Thank you, Your Honor.

[00:33:52] Speaker 00:
We'll give you two minutes of rebuttal, Mr. Riley.

[00:33:54] Speaker 01:
Thank you, Your Honor.

[00:33:56] Speaker 01:
I very much would like to get to one issue quickly, because counsel has focused on the desires to and agrees to language and says that's a future tense.

[00:34:08] Speaker 01:
he's ignoring that the uh... article one point two says concurrently with the execution of this agreement uh... contributors shall convey a signed transfer of property partnership for our position is that at the moment of execution that's when the transfer occurred it's present tense and if the court and i think it's a logical conclusion as an alternative concludes that the contract is ambiguous uh... because of the word physical because of

[00:34:38] Speaker 03:
the zero because of the agrees to it versus the concurrently with the execution of the agreement then the contemporaneous and i know you're on it is always until it's about the fact even if we agree with you that physical you specially defined by saying including all assets listed in and and attachment a with ambiguous about putting a zero value for any assets in a column nothing your honor uh... it's our position that

[00:35:06] Speaker 01:
In context, the ACA unambiguously transfers assets.

[00:35:11] Speaker 01:
I'm just saying if the court determines in its wisdom that the contract is ambiguous, then the contemporaneous.

[00:35:17] Speaker 01:
I don't think you understood my question.

[00:35:18] Speaker 01:
I'm sorry.

[00:35:19] Speaker 01:
Maybe I apologize.

[00:35:20] Speaker 03:
I don't see what's ambiguous about the fact that if there's a zero there, there were no assets transferred for that column.

[00:35:28] Speaker 03:
I understand you made this argument about revenue generation.

[00:35:33] Speaker 03:
Is there anything in that document that suggests that that's the definition of it, rather than there were no patents for this column?

[00:35:43] Speaker 01:
There's no answer to that question in the document yourself, Your Honor.

[00:35:47] Speaker 03:
Well, then why isn't the zero unambiguous?

[00:35:52] Speaker 01:
I don't know how you assess the value of a patent that is not currently generating revenue.

[00:35:57] Speaker 01:
I don't know how to do that.

[00:35:59] Speaker 01:
And rather than wade into that with hundreds or thousands of patents, they decided to use the word all and in their mind that they were transferring all of the property.

[00:36:09] Speaker 03:
And so that's why I say... But the document doesn't say that.

[00:36:13] Speaker 03:
That's just you telling us that today.

[00:36:15] Speaker 01:
The document says all of its physical assets.

[00:36:18] Speaker 01:
No, no, no.

[00:36:19] Speaker 03:
I'm not talking about all physical assets.

[00:36:21] Speaker 03:
I'm talking about the distinction between the revenue generating patents and patents that aren't generated.

[00:36:26] Speaker 01:
Respectfully, Your Honor is making an assumption that the zero means that there were no patents.

[00:36:31] Speaker 01:
That is an assumption of the court, which is belied by the contemporaneous evidence.

[00:36:36] Speaker 01:
Your Honor, not only from the document itself, but from the contemporaneous

[00:36:41] Speaker 01:
a record for orange is that the light by the assumption of the document itself where is it the light by the document itself because it says all of its physical assets including but not limited to those assets generally described exhibit a so exhibit a your honor is simply an example of the type of assets that are transferred it's it's never meant to be an all-inclusive less than theirs and you don't talk about extrinsic but there's testimony from both parties

[00:37:10] Speaker 00:
Okay, I thank both counsel for their arguments.

[00:37:13] Speaker 00:
The case is taken under submission.