[00:00:01] Speaker 03: Our final case for today is 2016-1011 Netlist Inc. [00:00:09] Speaker 03: vs. Diablo Technologies. [00:00:15] Speaker 03: It's really a good lesson for the cook today. [00:00:40] Speaker 03: Mr. Panachowski, please proceed when you're ready. [00:00:49] Speaker 02: Good morning, Your Honors, and may it please the Court. [00:00:52] Speaker 02: Netlist seeks reversal of the judgment on its breach of contract claim based on a single legal question. [00:00:59] Speaker 02: Did the party's supply agreement prohibit Diablo's undisputed use of Netlist's isolation devices to make products for someone other than Netlist? [00:01:08] Speaker 04: Here's my biggest problem with your argument is that you're essentially making, as you say, a legal argument as to the construction of the contract, correct? [00:01:18] Speaker 04: Yes, Your Honor. [00:01:19] Speaker 04: And you had, at least initially, you had the district court on your side construing the contract much like you want it to be construed. [00:01:28] Speaker 02: Yes, Your Honor. [00:01:29] Speaker 04: So why didn't you either move for partial summary judgment with respect to the construction of the contract, or more importantly, [00:01:37] Speaker 04: asked the court to instruct the jury what the contract meant. [00:01:42] Speaker 02: Your Honor, Netlist did not move for partial summary judgment on that issue, in part because the trial was accelerated after the grant of the preliminary injunction [00:01:55] Speaker 02: And then your honor, there were various requests that were made to the district court to interpret the contract in a manner that would produce the result that Netlist believes is appropriate here. [00:02:09] Speaker 04: I give you that the trial court went back and forth with you about whether extrinsic evidence was necessary or whether the contract could be construed as unambiguous. [00:02:18] Speaker 04: The court was inclined to say it was unambiguous, but you never said to the judge, [00:02:24] Speaker 04: instruct the jury, put it in the jury instructions. [00:02:28] Speaker 04: And instead, you just tried the case wide open to the jury and allowed the jury to interpret the contract. [00:02:34] Speaker 04: So why haven't you waived any ability at this point to argue for a pure legal construction of the contract? [00:02:43] Speaker 02: Your Honor, Netlist has not waived the ability to ask for a pure legal construction of the [00:02:48] Speaker 02: because under this court's precedent in cases like Newell, N-E-W-E-L-L, when you have undisputed facts and you simply need to apply something that is a pure question of law to those undisputed facts, the court, not just the district court, but also the appellate court may decide that issue as a matter of law. [00:03:11] Speaker 02: Netlist is not challenging the district court's failure to instruct the jury. [00:03:17] Speaker 02: on a particular contract interpretation on appeal. [00:03:20] Speaker 02: Rather, what Netlist is challenging on appeal is the district court's denial of its motion for judgment as a matter of law. [00:03:28] Speaker 02: And on JMAW, it is appropriate, as this court has said, for a party to say, Your Honor, there is a legal principle here, and there are also a set of undisputed facts. [00:03:42] Speaker 02: When you apply this legal principle to the undisputed facts, [00:03:46] Speaker 02: The only proper result here would be, in this case, judgment for netless on the breach of contract claim. [00:03:52] Speaker 02: The fact that the jury reached a contrary decision does not prevent this court from ordering JMAW because under both this court's precedence and under California law, the question of the interpretation of a contract where it does not depend on the credibility of extrinsic evidence is always a question of law for the court to decide. [00:04:14] Speaker 02: Sometimes that question is decided on summary judgment. [00:04:17] Speaker 02: Sometimes that question is decided in the jury instructions. [00:04:20] Speaker 04: However, there is no law that requires... You can't wait until after trial to ask the court to construe the contract as a matter of law. [00:04:28] Speaker 02: Your Honor, there is no law that either party has cited that prohibits a party from asking the court to construe a contract as a matter of law after trial. [00:04:38] Speaker 02: Here, in addition to the construction that Netflix got in the preliminary injunction proceedings, there were repeated invitations to the district court to construe the contract as a matter of law. [00:04:52] Speaker 02: But for purposes of this appeal, it's not relevant whether such requests were made or the form in which such requests were made, because it is always proper where there's no extrinsic evidence at issue [00:05:05] Speaker 02: and therefore no fact relevant to contract interpretation that the jury could have decided to say to the court afterward, Your Honor, we have undisputed facts that emerge on the record at the jury trial. [00:05:19] Speaker 02: We have a contract here which the court must interpret as a matter of law. [00:05:23] Speaker 02: Here is the correct interpretation. [00:05:25] Speaker 02: And under that interpretation, the undisputed facts compel judgment in our favor. [00:05:33] Speaker 02: All right. [00:05:34] Speaker 02: Your Honor, the three contractual provisions which read together compel a finding of a breach as a matter of law here are found in the supply agreement between the parties. [00:05:45] Speaker 02: First, on Appendix Page A-4919, Section 2E2 contains a limited carve-out from Diablo's obligation not to make or sell any device constituting the Netlist chipset or Netlist technology for or to anyone other than Netlist. [00:06:02] Speaker 02: This carve-out, Your Honors, [00:06:04] Speaker 02: allows Diablo to use for third parties only one of the devices that make up the Netlist chipset. [00:06:11] Speaker 02: This device is the Diablo Standard Register. [00:06:14] Speaker 02: The second contract provision that's relevant here is on Appendix Page A4918. [00:06:19] Speaker 02: There, Section 1 defines the Diablo Standard Register to mean, quote, a DDR3 industry standard register [00:06:28] Speaker 02: derivative of the netless chipset with either or both of DXD LRD functionality physically disabled." [00:06:35] Speaker 02: End quote. [00:06:36] Speaker 02: Isolation devices are not included in the definition of the Diablo standard register. [00:06:42] Speaker 02: Rather, they are separate devices that are separately identified in the definition of the netless chipset. [00:06:49] Speaker 04: Isn't the whole point, though, of this agreement that it was, as your friend on the other side puts it, [00:06:57] Speaker 04: Diablo who actually put the chipset on silicon. [00:07:04] Speaker 04: In other words, the implementation of the chipset was something that Netlist did not do and wasn't capable of doing. [00:07:12] Speaker 02: Yes, your honor. [00:07:12] Speaker 02: Netlist is a fabulous semiconductor company and they were looking for Diablo to actually inscribe and manufacture Netlist designs in silicon. [00:07:23] Speaker 04: And so you're saying that whether enabled or not, that there was nothing about the chipset that they had authority to use? [00:07:34] Speaker 02: Your honor, that is not exactly what we're saying because there is one thing about the chipset in terms of a physical device that Diablo was allowed to use. [00:07:43] Speaker 02: And that was the Diablo standard register as defined in section one. [00:07:48] Speaker 02: Section 7, which is the third relevant contractual provision, also gives Diablo rights to the implementation of the Netlist chipset in silicon. [00:07:58] Speaker 02: Because Diablo, in the process of that, would be using and possibly creating techniques for actually creating this device. [00:08:07] Speaker 03: The exclusive provision prohibits them from selling or manufacturing the Netlist chipset and the Netlist technology. [00:08:17] Speaker 03: And that's defined. [00:08:19] Speaker 03: And the netless chip set, I think, if I understand it right, involves multiple components, an isolation device and the standard register. [00:08:28] Speaker 03: Is that right? [00:08:29] Speaker 02: That is correct, Your Honor. [00:08:30] Speaker 03: OK. [00:08:30] Speaker 03: So if I say you're not allowed to sell TVs, are you allowed to sell chips that would be used in TVs? [00:08:39] Speaker 02: Your Honor, maybe yes and maybe no. [00:08:41] Speaker 02: It depends on how the contract is written. [00:08:43] Speaker 02: And here... Is this really my problem? [00:08:45] Speaker 03: I mean, because I think I'm going right to the heart of it, which is they can't sell netless chipsets. [00:08:50] Speaker 03: But does that really mean they can't sell a component which is part of but not a netless chipset? [00:08:57] Speaker 02: Your Honor, yes. [00:08:58] Speaker 02: In this case, it does mean that they cannot sell any component of the netless chipset. [00:09:03] Speaker 02: Why? [00:09:03] Speaker 02: Except for the Diablo Standard Register. [00:09:05] Speaker 02: And the reason, Your Honor, [00:09:07] Speaker 02: is when you read section 2e2 as a whole and in conjunction with section 7, what we have is an agreement that gave Diablo rights only in two things. [00:09:19] Speaker 02: And the remainder of those rights were reserved to netless. [00:09:21] Speaker 02: So we see that section 2e2 says specifically that, quote, Diablo shall not sell or manufacture any device constituting. [00:09:31] Speaker 03: Are you on 7 now, or you're back on 2? [00:09:34] Speaker 02: Your Honor, yes. [00:09:35] Speaker 02: We're on section 2E2 at page A, 4919. [00:09:39] Speaker 03: Yes. [00:09:40] Speaker 03: Any device constituting the NETLIS chipset. [00:09:44] Speaker 02: For NETLIS technology, to or for any party except NETLIS. [00:09:47] Speaker 02: So you have this phrase. [00:09:48] Speaker 04: But NETLIS technology requires use of, has DXD and LRD requirements, correct? [00:09:57] Speaker 02: Yes, and Your Honor, on this appeal, we are not contending that Diablo's use of the isolation devices constituted use of the Netlist technology. [00:10:07] Speaker 04: That was an issue for me. [00:10:08] Speaker 04: The Netlist chipset is defined by reference to Netlist technology. [00:10:13] Speaker 02: Your Honor, Netlist chipset as a whole does say, as you indicate, that the chipset solution is utilizing the Netlist technology. [00:10:24] Speaker 02: However, Section 2E2 [00:10:27] Speaker 02: doesn't simply say that Diablo cannot sell or manufacture the netless chipset. [00:10:33] Speaker 02: Rather, it says Diablo should not sell or manufacture any device constituting the netless chipset. [00:10:40] Speaker 02: So that raises the question of what does the word constitute mean here? [00:10:45] Speaker 02: And sometimes constitute does mean be the equivalent of. [00:10:49] Speaker 02: Sometimes, your honors, constitute means being one of the parts of, in the sense that a bicycle [00:10:55] Speaker 02: may consist of a frame, a pedal, a chain, and wheels. [00:11:00] Speaker 02: And those four devices are devices constituting the bicycle. [00:11:05] Speaker 02: But that question was presented to the jury, and the jury ruled against you. [00:11:09] Speaker 02: Your Honor, the questions of contract interpretation here are purely a question of law. [00:11:15] Speaker 02: And therefore, they're not questions that the jury itself may resolve. [00:11:19] Speaker 02: The court always has the ability, as the cases study in our brief show, [00:11:24] Speaker 02: to, after the verdict, give a proper legal interpretation to the contract and then apply it to undisputed facts. [00:11:33] Speaker 01: But you have to be in a situation where the contract couldn't be interpreted in any way that would allow a reasonable juror to rule in your favor. [00:11:47] Speaker 01: And that seems to me to be a high hill to climb. [00:11:51] Speaker 02: Your Honor, we haven't seen any case [00:11:54] Speaker 02: that subjects the question of contract interpretation to a jury's findings. [00:12:00] Speaker 02: The substantial evidence standard does not apply to legal questions of contract interpretation, whereas here, there was no extrinsic evidence. [00:12:09] Speaker 01: But where you left the legal question, you did not press the legal question before the district court. [00:12:18] Speaker 01: And you allowed the jury to make these determinations [00:12:21] Speaker 01: So you can't now, after the fact, get away from the fact that these are all intertwined. [00:12:28] Speaker 01: You can't simply say, oh, this can be decided as a matter of law, unless you can really say that there is no way this contract can be interpreted in a manner that would allow a reasonable jury to decide in your favor. [00:12:43] Speaker 01: Your Honor, that is not the case here. [00:12:45] Speaker 02: For one thing, Netlist did. [00:12:48] Speaker 02: press the district court to interpret the contract before the trial. [00:12:52] Speaker 02: There was some dispute in the party's post trial motions below about whether Netlist has specifically proposed a concrete jury instruction containing that interpretation, but there were numerous examples where in other forms, [00:13:10] Speaker 02: Netlist had asked the district court to interpret the contract, and the district court made clear, I'm not going to do that. [00:13:16] Speaker 02: I'm not going to tell the jury how this contract is interpreted. [00:13:18] Speaker 02: But the district court did note in one of its comments that I guess that's why we have judgment as a matter of law or something to that effect. [00:13:27] Speaker 02: So the district court was even acknowledging to the parties. [00:13:29] Speaker 03: I'd like to ask you to go back to your constitute example. [00:13:31] Speaker 02: Yes, Your Honor. [00:13:32] Speaker 03: Give me a good example about a bicycle. [00:13:33] Speaker 03: What was it? [00:13:34] Speaker 03: Can you say it again? [00:13:34] Speaker 02: Pedal, frame, [00:13:38] Speaker 02: chain and wheels are all devices constituting a bicycle. [00:13:42] Speaker 03: OK. [00:13:42] Speaker 03: So those taken together constitute the bicycle. [00:13:45] Speaker 02: Yes, Your Honor. [00:13:46] Speaker 03: But could you say a pedal constitutes a bicycle? [00:13:49] Speaker 02: Your Honor. [00:13:50] Speaker 03: That's what you're asking me to do here. [00:13:52] Speaker 03: That's the problem with your analogy. [00:13:54] Speaker 03: Your analogy is only good for exactly what it's good for, which is the sum of the parts taken together constitute the whole. [00:14:00] Speaker 03: But you can't say an individual part constitutes the whole. [00:14:03] Speaker 03: And that's the problem. [00:14:04] Speaker 03: with the exact legal construction you're asking for for the word constitute. [00:14:08] Speaker 02: Your honor, I would not say that a pedal constitutes a bicycle. [00:14:12] Speaker 02: I agree with you about that. [00:14:14] Speaker 02: But I would say that a pedal is one of the devices constituting a bicycle. [00:14:20] Speaker 02: And the language we have here. [00:14:21] Speaker 04: But if the bicycle is defined as something that enables a user to ride down the street, then it has to have all of those pieces and parts [00:14:34] Speaker 04: in workable form, correct? [00:14:37] Speaker 04: Yes, Your Honor. [00:14:40] Speaker 04: And in the contract, netless chipset is defined as having the technology at fully enabled. [00:14:49] Speaker 04: So if they use something that has the technology disabled or not enabled, then it doesn't constitute netless chipset, even under your analogy, correct? [00:15:02] Speaker 02: Your honor, it is correct that what they would be doing wouldn't constitute the netless chipset in the sense of being equivalent to the netless chipset. [00:15:14] Speaker 04: But the part of the contract that is... If you take the wheels off the bike, you're not enabling someone to ride it down the street. [00:15:20] Speaker 02: That is correct, your honor. [00:15:21] Speaker 02: But there is one more portion of the contract that resolves for us this question of whether [00:15:28] Speaker 02: any device constituting the netless chipset must mean the whole thing or can mean a component, and that is the carve out here. [00:15:35] Speaker 02: Provided that Diablo will be allowed to make, have made, use, design, manufacture, distribute, and sell to any third party, the Diablo standard register. [00:15:44] Speaker 02: The Diablo standard register is merely a component of the netless chipset. [00:15:50] Speaker 02: There is no reason why the parties would have provided for this specific carve out if Diablo was already [00:15:58] Speaker 02: allowed to use any component of the Netlist chipset, so long as it wasn't using the whole thing. [00:16:04] Speaker 02: And that, your honor, shows why this contract means that Diablo was not allowed to use the isolation devices, which were one of the devices constituting the Netlist chipset for anyone other than Netlist. [00:16:16] Speaker 03: Thank you, your honor. [00:16:18] Speaker 03: Well, we'll restore a little bit of rebuttal time for you. [00:16:21] Speaker 03: We've used all your time. [00:16:22] Speaker 03: Mr. Marino? [00:16:26] Speaker 00: Good afternoon, and may it please the court. [00:16:29] Speaker 00: We urge this court to affirm for three reasons. [00:16:33] Speaker 00: The first one is Netflix failed to satisfy the element of harm, which is independent from the element of which. [00:16:39] Speaker 03: Can we just start where we left off with Mr. Panachowski, and in particular with section 2E2, please? [00:16:48] Speaker 03: And can you tell me why he isn't right about 2E2? [00:16:52] Speaker 03: What is your argument about 2E2? [00:16:56] Speaker 03: In particular, right where he left off when he said, [00:16:59] Speaker 03: Look, the word constituting might be confusing. [00:17:02] Speaker 03: But if the word constituting didn't allow for the consideration of the individual devices that make up the netless chipset, then there wouldn't be that providing language afterwards. [00:17:13] Speaker 03: That language would be completely superfluous if we didn't construe constituting the way he wants us to. [00:17:20] Speaker 03: So can you address that argument in particular, please? [00:17:23] Speaker 00: Sure. [00:17:23] Speaker 00: I will start with that, Your Honor. [00:17:25] Speaker 00: So first of all, I think the Diablo standard register is a right that was granted to Diablo to do. [00:17:32] Speaker 00: What needed to be proved, what Netlis needs to prove, is that Diablo did something, the contract prohibited Diablo from doing. [00:17:39] Speaker 00: So whether Diablo also had another right is irrelevant. [00:17:43] Speaker 00: Now, I think the argument is treating the carve out as in the claim construction sense. [00:17:51] Speaker 00: But the Diablo sender register is a completely separate device. [00:17:54] Speaker 00: It's one that actually can use, is licensed to use part of the technology, can use one of DXD or LRD rank multiplication or load reduction, but not both. [00:18:07] Speaker 00: So it's a completely separate animal from the rest of the contract. [00:18:12] Speaker 00: I think the better reading of Section 2E2 and Netlist chips, that is exactly what the court had advocated before, propounded before, which is it requires both the register with the DXC LRD technology physically enabled, as well as the escalation devices, actually utilizing the Netlist technology, which is also defined in the contract as the load reduction rank multiplication technology. [00:18:39] Speaker 04: What is derivative of NETLIS chipset mean in the definition of Diablo standard register? [00:18:45] Speaker 00: That is related. [00:18:46] Speaker 00: It's using the same silicon in this particular case. [00:18:49] Speaker 00: So what we're dealing with is two semiconductor devices that have standard circuitry that is specified by the JEDEC standard. [00:18:57] Speaker 00: That's the functionality of a standard register and the functionality of an isolation device upon which NETLIS adds additional functionality, this load reduction and rank multiplication, to be added. [00:19:10] Speaker 00: And so the definition of netlist chipset is very clear. [00:19:12] Speaker 00: It says, if you turn on the standard functionality plus all of the netlist additional functionality for load reduction and run multiplication, you have a netlist chipset. [00:19:22] Speaker 00: And that would be on both devices. [00:19:24] Speaker 00: But if you physically disable that additional functionality, and as a factual matter, that was something that was submitted to the jury with expert testimony on both sides. [00:19:35] Speaker 00: And those circuits are completely physically disabled. [00:19:38] Speaker 00: They cannot physically work. [00:19:40] Speaker 00: Then you have a sender register on which there is no prohibition from the outlaw to use in this contract. [00:19:47] Speaker 00: The only prohibition is you shall not use the Netlist chipset, which has all these special functionality Netlist requested, physically enabled, and is being utilized by both the register as well as the isolation devices. [00:20:02] Speaker 04: What's your view about whether or not we could simply just disregard the fact that the jury [00:20:07] Speaker 04: entered a verdict here. [00:20:09] Speaker 04: And we can just say, as a matter of law, the contract should have been construed a different way, and there should have been essentially summary judgment. [00:20:18] Speaker 00: It shouldn't have been, Your Honor. [00:20:19] Speaker 00: And the reason is very simple. [00:20:22] Speaker 00: Under California law and Ninth Circuit precedent, the determination of whether the conduct of the party accused of breach violated the terms of the contract is a fact question of fact, not a question of law. [00:20:34] Speaker 00: And the only fact that Natural Resources relies on in its appeal is the use of the ID chip. [00:20:42] Speaker 00: There was a very lively factual dispute that had to be tried to a jury on whether the prototypes that included the register and the ID chip and the ID chips physically disabled from performing DXC-LRD [00:21:01] Speaker 00: constituted the NETLIS technology or the NETLIS chipset. [00:21:05] Speaker 00: That was a factual determination for the jury to make. [00:21:08] Speaker 00: The only undisputed fact NETLIS relies on is the use of the ID chip, regardless of whether it constituted the NETLIS chipset or the NETLIS technology. [00:21:17] Speaker 00: So that would not have been sufficient. [00:21:19] Speaker 00: That factual dispute had to be tried to a jury. [00:21:22] Speaker 00: We had experts testifying on that issue. [00:21:23] Speaker 00: We had engineers from both companies testifying to that issue. [00:21:27] Speaker 00: And ultimately, even if you go back and look at the preliminary injunction order, in the preliminary injunction order, the district court looked at that specific factual issue in assessing the likelihood of success on the merits. [00:21:41] Speaker 00: She said, and that's in the order, that after looking at the contract, there was evidence presented by netlist experts [00:21:52] Speaker 00: saying that even though the register on the prototypes had been physically disabled, the expert believed that the functionality of load reduction and rank multiplication was still being performed by the device as a whole. [00:22:07] Speaker 00: There was a factual determination that the district court made in the preliminary injunction order and found that this was likely to succeed. [00:22:14] Speaker 00: Well, the court turned out to be wrong. [00:22:17] Speaker 00: The jury considered the same factual dispute with a much fuller record. [00:22:22] Speaker 00: and found in favor of Diablo. [00:22:25] Speaker 00: And the district court on Jamal concurred with the jury, found that, in fact, Diablo had presented substantial evidence on the factual issues presented to the jury. [00:22:35] Speaker 00: And therefore, there was substantial evidence to sustain the jury's verdict. [00:22:39] Speaker 00: So I think a trial was necessary in this case to resolve factual issues. [00:22:47] Speaker 00: Netflix is not even challenging those factual determinations by the jury. [00:22:50] Speaker 00: So that is an independent basis to uphold the denial of Jamal by the district court. [00:22:58] Speaker 00: Now, if I may address briefly the issue of harm. [00:23:02] Speaker 00: Harm is a separate requirement under California law from conduct that is prohibited by the contract. [00:23:10] Speaker 00: It is a separate issue from damages. [00:23:13] Speaker 00: Damages might be the remedy once you've proven the three [00:23:18] Speaker 00: elements of a breach of contract claim. [00:23:20] Speaker 00: Existence of a contract conducted violates the terms of the contract and harm. [00:23:27] Speaker 00: The jury found against Netlis on the issue of harm. [00:23:30] Speaker 00: Netlis did not appeal that portion, so they're not entitled to J-MAL, even if this court were to agree with them on the second requirement. [00:23:39] Speaker 00: The third requirement of harm has not been satisfied [00:23:41] Speaker 00: It was substantial evidence presented at trial to sustain the jury's verdict on harm. [00:23:45] Speaker 04: I'm confused by that argument. [00:23:47] Speaker 04: Are you saying that the mere fact that a contract is breached isn't enough under California law? [00:23:55] Speaker 00: Correct. [00:23:55] Speaker 00: Well, again, there are three requirements under California law. [00:23:59] Speaker 00: Existence of a contract, the fact that the party accused of breach either didn't satisfy an affirmative obligation or violated a negative covenant, and the [00:24:11] Speaker 00: the plaintiff was harmed by that conduct. [00:24:15] Speaker 00: The third element here was not proven. [00:24:17] Speaker 00: It was submitted to the jury. [00:24:18] Speaker 00: There were competing arguments, factual disputes, as to whether, even if there had been a violation of the exclusivity provision, naturalists had actually been harmed by that conduct. [00:24:31] Speaker 00: Both fact and expert witness testified on that issue. [00:24:34] Speaker 00: So it wasn't an issue that went away with the issue of breach. [00:24:39] Speaker 00: It was something that the jury had to pass on. [00:24:41] Speaker 00: And in fact, if you look at the verdict form, there were special interrogatories, four, five, and six, that each addressed the three separate elements of the breach of contract causal action. [00:24:54] Speaker 00: And they all had to be answered by the jury, and the jury did answer all three. [00:24:59] Speaker 00: By comparison, special interrogatories one, two, and three on a separate breach of contract claim that is not on appeal [00:25:06] Speaker 00: contain an instruction that say, if you find for the defendant on the first question, you can skip to question four. [00:25:13] Speaker 00: That was not done in the verdict form for the breach of the supply agreement, because there was an actual factual dispute between the parties that the jury had to resolve. [00:25:25] Speaker 00: And of course, if there are three requirements to satisfy a code of action, [00:25:31] Speaker 00: It's black clatter law that all three have to be satisfied by the plaintiff in order to prevail. [00:25:38] Speaker 00: In the reply brief, Natalie talks about damages and the possibility of remand to assess the amount of damages. [00:25:45] Speaker 00: That's not the issue here. [00:25:46] Speaker 00: It was an actual legal requirement that the jury had to factually determine [00:25:53] Speaker 00: that Natlis had been harmed by Diablo's conduct. [00:25:56] Speaker 00: And on that point, the jury sided with Diablo, and Natlis has offered nothing on appeal. [00:26:02] Speaker 03: Question six of the jury verdict was expressed and asked them to find whether there was harm or not. [00:26:07] Speaker 00: Exactly. [00:26:09] Speaker 00: So that's the issue of harm. [00:26:10] Speaker 00: Now, let me briefly address the issue of why this is a license and not an affirmative covenant. [00:26:17] Speaker 00: So Section 2E2, the so-called exclusivity provision, [00:26:22] Speaker 00: is part of Section 2E, which is the license provision. [00:26:26] Speaker 00: And in fact, if we look at that portion of the contract, it becomes very clear because in 2E itself, it says that Netlis grants a license to Diablo subject to Section 2E2. [00:26:40] Speaker 00: Section 2E2 is just a conditional limitation on the license that Netlis granted to Diablo to use Netlis' perceived intellectual property rights. [00:26:52] Speaker 00: What is the result of exceeding the scope of a license? [00:26:57] Speaker 00: Well, you don't have a license. [00:26:58] Speaker 00: You don't have a license defense. [00:27:00] Speaker 00: But this was also a trade secrets case, where Netlis did assert trade secret misappropriation. [00:27:07] Speaker 00: And the jury found that none of the asserted trade secrets were, in fact, trade secrets. [00:27:12] Speaker 00: Diablo won. [00:27:13] Speaker 00: And Netlis is not appealing that. [00:27:15] Speaker 00: So whether Diablo also had a license or not is moving. [00:27:20] Speaker 00: This is not an affirmative covenant that Diablo had an obligation to perform under. [00:27:25] Speaker 00: This was a condition for Diablo to obtain the license from Natlis. [00:27:29] Speaker 00: So even if the courts were to agree with Natlis for some reason on their argument with respect to Section 2E2, that would simply mean that Diablo didn't have a license. [00:27:41] Speaker 00: Diablo prevailed on the underlying claim already, which is not an appeal. [00:27:44] Speaker 00: This issue is moot. [00:27:49] Speaker 00: Unless the court has any other questions. [00:27:53] Speaker 03: Well, I think Mr. Marino, we have your argument. [00:27:56] Speaker 03: Thank you very much. [00:27:57] Speaker 03: Mr. Panikowski. [00:28:01] Speaker 02: Thank you, Your Honor. [00:28:02] Speaker 02: I would like to make four points quickly on rebuttal. [00:28:04] Speaker 03: OK, that's not happening. [00:28:05] Speaker 03: You actually used all of your time before. [00:28:07] Speaker 03: I'll give you two minutes. [00:28:09] Speaker 03: If you can make four points in two minutes, go. [00:28:11] Speaker 02: Yes, thank you, Your Honor. [00:28:12] Speaker 02: First, Diablo has not argued, nor has it supplied a case that says that this court is unable [00:28:19] Speaker 02: to decide the question that NETLAS has presented as a legal issue under an overview of the district court's JMAW ruling. [00:28:26] Speaker 02: Second, Diablo has not provided any explanation for why the provided that carve out clause is in section 2E2 unless the principal clause would otherwise prohibit Diablo from using the various devices that constitute the NETLAS chipset even when they're not part of the NETLAS chipset as a whole. [00:28:49] Speaker 02: Third, in response to counsel's argument about harm, there are cases that Netlist has cited in its reply brief that show that even where there's not an express stop sign, a district court should disregard certain jury answers to special verdict interrogatories as superfluous. [00:29:10] Speaker 02: Examples of that are the Gerlanis case from the Third Circuit, as well as the McCollum case from the Fourth Circuit. [00:29:17] Speaker 02: And in this situation, Your Honor, the question five of the verdict form said, did Diablo breach the development and supply agreement? [00:29:25] Speaker 02: The jury answered no. [00:29:27] Speaker 02: Question six said, was NetList harmed by, quote, that conduct? [00:29:32] Speaker 02: And the jury answered no and then actually went on to run through and express stop sign to put in a zero dollar answer to the damages question in question seven when it shouldn't have. [00:29:43] Speaker 02: Your Honor, once the jury found no breach, [00:29:46] Speaker 02: It could not have found that Netlis was harmed by, quote, that conduct, because the breach is the only thing that that conduct could refer to. [00:29:53] Speaker 02: And the Fifth Service decision in Carr explains why it isn't in a situation like this. [00:29:58] Speaker 02: You would need a remand for determination of harm. [00:30:01] Speaker 02: And fourth and final, Your Honor, the supply agreement is not just a license. [00:30:06] Speaker 02: It's a supply agreement with affirmative obligations. [00:30:08] Speaker 02: The OBLU breached them here, and Netlis asked the court to reverse. [00:30:12] Speaker 02: Thank you, Your Honors. [00:30:13] Speaker 03: It's very impressive. [00:30:15] Speaker 03: You got through all four points. [00:30:16] Speaker 03: OK, we'll take this case under submission, and I thank both counsel for a helpful argument. [00:30:24] Speaker 04: All rise. [00:30:26] Speaker 04: The honorable court is adjourned, so tomorrow morning, 10 o'clock AM.