[00:00:35] Speaker 04:
We will hear argument next in number 161456, prison technologies against sprint spectrum.

[00:00:44] Speaker 04:
Mr. Phillips, whenever you're ready.

[00:00:47] Speaker 04:
Can you answer the following for me?

[00:00:50] Speaker 04:
And I maybe should know.

[00:00:51] Speaker 04:
There was once a 288 patent in this case.

[00:00:55] Speaker 04:
I'm concerned about whether we have a final judgment in front of us.

[00:01:00] Speaker 04:
didn't see an order disposing of the claims about the 288.

[00:01:04] Speaker 04:
If you don't happen to know, I welcome a submission.

[00:01:09] Speaker 00:
I appreciate that.

[00:01:12] Speaker 00:
Otherwise, this is all for naught.

[00:01:14] Speaker 00:
I recognize that.

[00:01:17] Speaker 04:
For a while, anyway.

[00:01:18] Speaker 00:
Thank you, Your Honor.

[00:01:21] Speaker 00:
May it please the Court.

[00:01:22] Speaker 00:
I want to go a little bit out of the sequence of the briefing and analyze what, at least in my mind, is unquestionably

[00:01:30] Speaker 00:
the single and fatal flaw in the district court's approach in this litigation, and that's the treatment of the AT&T settlement.

[00:01:39] Speaker 00:
I have to be a little bit careful because a lot of the AT&T settlement is under wraps on confidentiality, but it does seem to me absolutely clear that the use of the settlement both in terms of

[00:01:51] Speaker 00:
trying to measure damages and ultimately in determining liability was way beyond the bounds of what's permissible.

[00:01:57] Speaker 00:
And as a consequence, not only should the damages be retrived, the liability as well.

[00:02:01] Speaker 00:
And I want to start by taking what may be viewed as a somewhat more provocative position, but I think it's important for the panel to take it into account in evaluating the whole question.

[00:02:11] Speaker 00:
Because I know this Court has said in laser dynamics there's a strong presumption against the use of settlements as a basis for measuring damages.

[00:02:19] Speaker 00:
I would go back further to where the US Supreme Court was in the Ruud case in 1889.

[00:02:24] Speaker 00:
And the language of that opinion is strikingly powerful.

[00:02:30] Speaker 00:
And I'll just take the time to read it.

[00:02:33] Speaker 00:
It is clear that a payment of any sum in settlement of a claim for an alleged infringement cannot be taken as a standard to measure the value of the improvements patented.

[00:02:45] Speaker 00:
and determining the damages sustained by the owners of the patent and other cases of infringement."

[00:02:50] Speaker 00:
I don't see.

[00:02:51] Speaker 00:
That's not a presumption.

[00:02:52] Speaker 00:
That's a flat, categorical statement from the US Supreme Court.

[00:02:56] Speaker 00:
And I know of no decision in the intervening years that remotely casts doubt on the continuing vitality of that position.

[00:03:04] Speaker 00:
And if that's true, then the entire exercise of putting the AT&T settlement before this jury was completely illegitimate.

[00:03:13] Speaker 00:
And it's by itself.

[00:03:15] Speaker 00:
I would argue, a basis for setting aside the verdict in this case and demanding a new trial.

[00:03:19] Speaker 00:
Can you clarify this for me?

[00:03:20] Speaker 04:
Am I right that at least you didn't object to the other litigation settlements coming in?

[00:03:29] Speaker 00:
We did not.

[00:03:30] Speaker 00:
At the outset of that, that's true.

[00:03:33] Speaker 00:
Those were substantially smaller settlements, and so we were willing.

[00:03:37] Speaker 01:
And they were all in settlement of litigation as well.

[00:03:41] Speaker 01:
Right.

[00:03:41] Speaker 00:
They were all in settlement of litigation.

[00:03:43] Speaker 00:
And candidly, the other side objected to them and could have legitimately said none of that should be legitimate.

[00:03:48] Speaker 04:
Oh, I see.

[00:03:48] Speaker 04:
So it's not just that you didn't object them.

[00:03:49] Speaker 04:
You actually offered them.

[00:03:52] Speaker 00:
We suggested that they're, yes, we did.

[00:03:53] Speaker 00:
And they objected.

[00:03:54] Speaker 00:
And they're not in the case.

[00:03:57] Speaker 00:
I mean, we know about them.

[00:03:58] Speaker 00:
But they were not part of the evidence in this particular case.

[00:04:01] Speaker 00:
The only evidence in this case of a prior settlement is the AT&T settlement.

[00:04:05] Speaker 00:
And what I'm suggesting to you is that that was just wrong.

[00:04:07] Speaker 04:
I'm sorry.

[00:04:08] Speaker 04:
I'm confused.

[00:04:08] Speaker 04:
I thought those other agreements were

[00:04:12] Speaker 04:
part of this case.

[00:04:13] Speaker 00:
My understanding, and then I'm mistaken, I thought for some reason they had actually been stricken, but regardless, at the end of the day, there's no question that the party's positions have shifted on this, because at one point all of the settlements were relatively small, and then one obviously is outside the normal range, and that not surprisingly causes the parties to rethink their position.

[00:04:38] Speaker 00:
But at the end of the day, from my perspective,

[00:04:41] Speaker 00:
what the court has to do at this stage is say what what's the law and the law from the u.s.

[00:04:46] Speaker 00:
supreme court in rude which as far as i can tell has never been and and we did object to the use of this.

[00:04:50] Speaker 00:
And rude was what kind of case?

[00:04:52] Speaker 00:
It's a patent case and it's not this is not just dicta by the supreme court which hopefully you wouldn't cast aside anyway but but i mean this is a case in which the court said there is no evidence of damages and there's no legitimate evidence of damages in the case set aside a verdict on the basis that

[00:05:11] Speaker 00:
That use of that settlement was invalid, completely.

[00:05:16] Speaker 00:
So that's the holding of the court.

[00:05:17] Speaker 01:
Mr. Phillips, let me ask you this.

[00:05:20] Speaker 01:
I can certainly understand, conceptually, that if a party is under the compulsion of litigation, that financial terms of resolution might be viewed as skewed by the fact that there's

[00:05:37] Speaker 01:
the compulsion of litigation there, the threat and all of that.

[00:05:43] Speaker 01:
But at the same time, it's fairly well recognized that by the time you get to the end of the preparation of a lawsuit and you're either about ready to go to trial or the trial is about finished, if parties compromise, it's not unusual where the parties will come in and basically sort of split the difference.

[00:06:06] Speaker 01:
You ask for $100 million, I think I should get away without paying anything.

[00:06:11] Speaker 01:
Let's settle it for $50 million.

[00:06:15] Speaker 01:
Why is that not relevant to the issue of damages where the parties may be similarly situated, same or similar patents?

[00:06:28] Speaker 00:
uh... same or similar operations it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's it's

[00:06:56] Speaker 00:
if you think that there ought to be a specific and special rule for dealing with patent litigation.

[00:07:00] Speaker 00:
But in the absence of that, I don't see any basis for the court to say, well, as a matter of policy, it would be better to, or at least we can imagine circumstances in which that evidence might be valuable.

[00:07:10] Speaker 00:
I think in this particular case, as I say, I think the rule's categorical.

[00:07:14] Speaker 00:
I don't think there's any basis for allowing that evidence in in this case.

[00:07:18] Speaker 00:
But even if you went beyond that and you go to the laser dynamic criteria where the court said,

[00:07:24] Speaker 00:
generally there's a strong presumption against using it, but on occasion you can't if certain circumstances don't attend.

[00:07:31] Speaker 00:
And in this situation where you're talking about a vastly larger number of patents than were as part of that settlement than are at issue here, where you're talking about a settlement that is multiples beyond any other settlement that's been applied in this case, where it's executed two and a half years,

[00:07:50] Speaker 01:
There's some indication that a lot of those patents were really not that germane.

[00:07:57] Speaker 00:
Right, but one of them clearly was.

[00:07:59] Speaker 00:
And it was significantly lower.

[00:08:01] Speaker 00:
And it does seem to me, again, to me this is why I think the Supreme Court's rule makes the most sense.

[00:08:06] Speaker 00:
Just get out of the business of doing this and force plaintiffs to come up with a better theory rather than using litigation to pound this.

[00:08:13] Speaker 01:
RescueNet was wrongly decided.

[00:08:14] Speaker 01:
I'm sorry?

[00:08:15] Speaker 01:
RescueNet was wrongly decided.

[00:08:18] Speaker 00:
Yes, I think at the end of the day.

[00:08:20] Speaker 00:
And AstraZeneca.

[00:08:21] Speaker 00:
Well, AstraZeneca was mostly.

[00:08:22] Speaker 00:
I mean, yes.

[00:08:24] Speaker 00:
I mean, those are kind of addictive because the court was vacating and remanding and saying the lower court ought to take into account how to evaluate this, and it ought to be very careful.

[00:08:34] Speaker 00:
And so in that sense, I'm not sure.

[00:08:36] Speaker 00:
And clearly, nobody had made the Root argument quite as aggressively.

[00:08:40] Speaker 03:
Would you say that Rule 408 tracks the holding of Root?

[00:08:48] Speaker 03:
The 408 represents an articulation of beholding?

[00:08:53] Speaker 00:
I don't know that it articulates it quite as dramatically, but it seems to me quite clear it's not intended in any way to cast doubt on the appropriateness of RUDE, particularly as it applies in a patent context.

[00:09:07] Speaker 00:
So it would seem to me that you would want a lot more evidence from the advisory committee on 408 to suggest that it meant to

[00:09:17] Speaker 00:
modify the rule in Root than you've got, which is nothing.

[00:09:20] Speaker 00:
And so from my perspective, from where this court's sitting today, that ought to be its assessment of this.

[00:09:27] Speaker 00:
And I don't want to be clear, because not only did this go to the issue of the measure of damages, because the correspondence between the ultimate verdict and that settlement is stunning.

[00:09:39] Speaker 00:
And so it's pretty clear to me that it did affect the case.

[00:09:42] Speaker 03:
Laser dynamics discussed Root, right?

[00:09:44] Speaker 03:
It quoted it.

[00:09:46] Speaker 00:
And that's all it did.

[00:09:47] Speaker 00:
And then it went back to RescueNet and it said that the rule is, and that's the end of the inquiry.

[00:09:56] Speaker 04:
Can I just ask, in the district court, my recollection, correct me if I'm wrong, is that you did or did not make an argument to the district court that wholly apart from 403 balancing,

[00:10:14] Speaker 04:
Agreements in settlement of litigation are simply inadmissible.

[00:10:19] Speaker 04:
I mean, we quoted Rood.

[00:10:21] Speaker 04:
But it's a little hard for me to see how you could have made that since you were promoting the admission of a whole bunch of such settlements.

[00:10:27] Speaker 00:
Yeah.

[00:10:27] Speaker 00:
I mean, we made the argument under 403.

[00:10:30] Speaker 00:
I would say that it's fairly subsumable within 403 at this point for this court to... I mean, I don't think there's any question.

[00:10:36] Speaker 00:
We objected to this particular settlement going in on 403 grounds.

[00:10:41] Speaker 00:
We did, in fact, cite Rood.

[00:10:43] Speaker 00:
as part of that.

[00:10:45] Speaker 00:
We did not specifically advert the 408.

[00:10:48] Speaker 00:
We certainly talked about the laser dynamics standards.

[00:10:50] Speaker 00:
It just seems to me at this stage, it may be not as clean as you might want it to be, but there's no question that the issue of the admissibility of this particular settlement is squarely posed for this court.

[00:11:04] Speaker 00:
And the answer, I would say, on the root is absolutely not.

[00:11:07] Speaker 00:
And then I would say, if you don't want to go that far at a minimum, say, on the laser dynamics, it's clearly not.

[00:11:14] Speaker 00:
And then, that's why you have to go beyond.

[00:11:16] Speaker 00:
Not only did the plaintiff run with this in pushing as aggressively as possible on the issue of damages, but went on to deal with liability.

[00:11:25] Speaker 00:
And because a lot of this is confidential, I'd ask you to look at the pages 26 and 31 to 32 of our reply brief, where we go through in each of the instances in which the plaintiff's counsel, either through witnesses or through argument, consistently said,

[00:11:41] Speaker 00:
that these are the same activities that were AT&T.

[00:11:44] Speaker 00:
This is not a question of damages.

[00:11:45] Speaker 00:
This is going to the conduct of my client vis-a-vis AT&T and saying that that settlement not only speaks to the question of how much you should punish us as a consequence of this, but that you ought to find that the behavior of Sprint under these circumstances corresponds to that for AT&T.

[00:12:04] Speaker 00:
And as a consequence, what I would ask the court to do is to set aside the entirety of the judgment and allow a new trial.

[00:12:12] Speaker 00:
under those circumstances.

[00:12:14] Speaker 00:
If the court goes down that path, I would hope that the court then would also recognize the problem that's embedded in the O2 micro issue in this particular case.

[00:12:24] Speaker 00:
Because there is little doubt in my mind, at least, that while the district judge admirably construed the claims appropriately at one point in time, he allowed that construction to completely fall apart

[00:12:40] Speaker 00:
when the time came for the expert opinion to come in.

[00:12:43] Speaker 00:
And again, this is laid out carefully in the district court's own opinion, where he's talking about the controlling organization and then the insert of the word single controlling organization.

[00:12:56] Speaker 00:
And the expert minor says it has to be a single controlling organization.

[00:13:01] Speaker 00:
We said there's nothing in the construction of the claims that permits for that.

[00:13:08] Speaker 00:
We asked the district court to take that issue up.

[00:13:12] Speaker 04:
I was a little confused about the following.

[00:13:14] Speaker 04:
I'm not so much talking about the red brief here, but what the arguments were below.

[00:13:23] Speaker 04:
Was the theory of the other side that for particular wireless calls,

[00:13:34] Speaker 04:
There was no single controller over the path that a individual call took or only that there was no single controller over the multiplicity of several dozen different back home.

[00:13:51] Speaker 00:
I'll let my friend answer that, but I understood the argument to be the latter, not the former.

[00:13:56] Speaker 00:
Only the latter.

[00:13:56] Speaker 00:
Yes.

[00:13:57] Speaker 00:
That was my understanding of it, which is why

[00:14:00] Speaker 00:
I would say that that also has a problem with dealing with the path through as opposed to the path to.

[00:14:05] Speaker 00:
Because I think with respect to the path to, that's clearly the Ethernet, that's clearly a private line, and that's not what this patent's about.

[00:14:14] Speaker 00:
And as a consequence of that, it seems to me that on remand, if I'm right, that the court ought to set aside, because of the damages mistake, that on remand the court also ought to at least ask the district court to construe

[00:14:26] Speaker 00:
this particular provision and to do so in a way that will allow this case to be properly tried on remand.

[00:14:34] Speaker 00:
If there are no further questions, I'd like to reserve the balance of my time, Your Honor.

[00:14:37] Speaker 00:
Thank you.

[00:14:38] Speaker 04:
Thank you.

[00:14:43] Speaker 04:
Mr. Andre?

[00:14:46] Speaker 04:
May it please the Court?

[00:14:47] Speaker 04:
Can you start where I was, where I just, with my last question, can you clarify?

[00:14:55] Speaker 04:
The idea of single controller was an idea that was being applied to the path a particular call takes or only the collection of 40 some back call paths you use.

[00:15:11] Speaker 02:
It would be for the most part both, your honor.

[00:15:14] Speaker 02:
It wasn't just... I'm sorry, for the most part both?

[00:15:17] Speaker 02:
Well, I mean, it would be one of the situations, it didn't come up at trial to be quite frank.

[00:15:21] Speaker 02:
They didn't raise it.

[00:15:23] Speaker 02:
If you were to look at a call, a single call takes to go from any location to the home network, a single call would go over multiple different owners networks.

[00:15:36] Speaker 04:
So let me just, I want to just try to be clear, put completely to one side, that very small proportion of femtocells, picocells and stuff, and just talk about, just focus on the ones where there's several dozen

[00:15:52] Speaker 04:
backhaul networks.

[00:15:54] Speaker 04:
Now speak about only those.

[00:15:57] Speaker 02:
And I was, Your Honor.

[00:15:58] Speaker 02:
The femto and pico cells are not even really in dispute.

[00:16:01] Speaker 02:
They're more on a stipulate to infringement on those million access points because they stipulate.

[00:16:07] Speaker 04:
OK, so was it your position that there needed to be but there wasn't a single controller on an individual call that transited only

[00:16:21] Speaker 04:
backhaul networks.

[00:16:23] Speaker 02:
The AAV backhaul networks?

[00:16:24] Speaker 02:
That's correct, John.

[00:16:26] Speaker 02:
So our position is there's no controlling organization that controls the network that a single call would transmit from cell tower to the sprint home network.

[00:16:42] Speaker 02:
So there would be multiple entities.

[00:16:45] Speaker 01:
There'd be multiple backhaul networks?

[00:16:47] Speaker 01:
Not a single one.

[00:16:48] Speaker 02:
There'd be a single backhaul network, but that backhaul network is made up of multiple AAVs, multiple vendors that control each of their own portion of the network.

[00:16:57] Speaker 02:
So you might get, if I make a call from San Francisco, California, and it's not really, it's not really a call, it's more data usage.

[00:17:05] Speaker 02:
If I'm going to try to stream music from California, and it's going to go to Sprint's headquarter in Philadelphia, for example, it's going to transmit that one streaming request.

[00:17:14] Speaker 02:
It's going to transmit over a single backhaul network.

[00:17:17] Speaker 02:
that is controlled by multiple companies because each portion of that backhaul network is controlled by that company.

[00:17:24] Speaker 04:
So there's no... Do you happen to have a JA site to that proposition that an individual data transmission going over the sprint backhaul network is fairly often, always, whatever, going to transit pieces controlled by distinct AAVs?

[00:17:47] Speaker 02:
I'll try to pull it.

[00:17:49] Speaker 02:
It wasn't raised at the time at the trial in the court below.

[00:17:52] Speaker 02:
It wasn't raised on appeal either, that single call versus multiple calls.

[00:17:57] Speaker 02:
The networks themselves are made up of multiple AAVs.

[00:18:02] Speaker 02:
And there is a hypothetical situation, just to be candid, that if you were close enough to Sprint's home network, it may not maybe transmit just a single AAV provider.

[00:18:14] Speaker 02:
That's the reason I said for the most part.

[00:18:17] Speaker 02:
it'd be multiple AAVs.

[00:18:19] Speaker 02:
So that's the reason I kind of qualified my answer earlier, Your Honor, because I didn't want to mislead the court.

[00:18:25] Speaker 03:
And wasn't the judge, I guess, in resolving the motion to exclude minor on the idea of a single controlling organization, the judge seemed to be talking in terms of an aggregate network, how the internet represents a network of networks, and it's an aggregate.

[00:18:46] Speaker 03:
And so it was asking the question, well, that the jury would have to answer the question of whether Sprint controlled the aggregate network or had sufficient control of the aggregate backhaul network to the extent that Sprint could be said to be a controlling organization over the entire backhaul network made up of a bunch of smaller AAV

[00:19:14] Speaker 03:
segmented networks.

[00:19:16] Speaker 02:
That's correct, Your Honor.

[00:19:17] Speaker 02:
The judge resolved the O2 micro issue by saying that the expert Mr. Miner's opinion was not in opposite of his order, the Martin order.

[00:19:27] Speaker 02:
And he said what the question of fact is, is does print exercise sufficient control over the network where it would be no controlling organization?

[00:19:37] Speaker 02:
Now that term itself, the way he construed it, it's singular.

[00:19:39] Speaker 02:
It's not no controlling organizations.

[00:19:41] Speaker 02:
It's no controlling organizations singular.

[00:19:44] Speaker 02:
And when Mr. Minor was pressed in his deposition, they go, do you mean no single controlling organization?

[00:19:51] Speaker 02:
He says, well, that's how I'm reading the order.

[00:19:53] Speaker 02:
That's how I'm interpreting it.

[00:19:54] Speaker 02:
It's in grammar.

[00:19:55] Speaker 02:
It's English.

[00:19:56] Speaker 02:
No controlling organization is no controlling organization.

[00:20:00] Speaker 02:
And so when he was pressed, he said no single.

[00:20:02] Speaker 02:
They brought up to the judge.

[00:20:03] Speaker 02:
The judge resolved the issue, and that's on the APX 93 and 94, where he was very clear that

[00:20:11] Speaker 02:
Mr. Meyer's interpretation of the Martin order was not inconsistent with his understanding, and that the question of fact was going to be whether or not Sprint exercised such control.

[00:20:23] Speaker 02:
And that was a question of fact.

[00:20:25] Speaker 04:
Can we switch now to the 18T agreement issue?

[00:20:30] Speaker 04:
Can you start by talking about the rude Supreme Court case, both its merits and whether it was properly raised, and anything else, because I don't think you cited in your brief.

[00:20:41] Speaker 02:
Well, it wasn't raised in the opening brief.

[00:20:44] Speaker 02:
It was raised in reply and leave.

[00:20:46] Speaker 02:
No, I thought it was raised.

[00:20:48] Speaker 02:
It's an upper brief.

[00:20:50] Speaker 02:
The root case, I think, the subsequent Federal Circuit cases, from Laser Dynamics to Rescue Net, they dealt with this as well.

[00:20:59] Speaker 02:
As Judge Lemme was saying earlier, the fact that sub-agreements come in is good law.

[00:21:07] Speaker 02:
In fact, if they... Lemme just... I mean, I think, Mr.

[00:21:11] Speaker 04:
Phillips was clear about saying he doesn't think any of that is good law because the post-rude federal circuit cases are inconsistent with rude.

[00:21:24] Speaker 04:
So I'm actually quite interested in your explanation why they're not inconsistent with rude.

[00:21:31] Speaker 02:
I don't think rude is quite the bright line test that my friend is saying it is.

[00:21:36] Speaker 02:
I think the rude case is more in line with

[00:21:41] Speaker 02:
trying to not allow unduly prejudicial information in under 403, that is a bright line test that no settlement grievance can ever come in.

[00:21:52] Speaker 02:
And so in patent cases in particular, if the settlements are used specifically for damages, which they were in this case, then we get around 403.

[00:22:03] Speaker 02:
And in the case below, Sprint actually

[00:22:10] Speaker 02:
fought and won to get all those settlement agreements in, as your arm pointed out.

[00:22:14] Speaker 02:
They got in the rim settlements and several other settlement agreements.

[00:22:18] Speaker 02:
So it's conceivable that that might be viewed as a waiver of any rude argument.

[00:22:23] Speaker 02:
Absolutely.

[00:22:24] Speaker 02:
That's an absolute waiver, as is our 408 argument, which they never raised at all.

[00:22:30] Speaker 04:
Suppose I didn't put aside waiver.

[00:22:35] Speaker 04:
Do you remember enough about the rude case to explain why there's wiggle room there in a way that Mr. Phillips suggests that there is not?

[00:22:44] Speaker 02:
I do not have that.

[00:22:46] Speaker 02:
I would not be able to distinguish it at that level.

[00:22:48] Speaker 02:
I know it was cited in the laser dynamics case and the subsequent cases and they distinguish over the rude case, allowing some agreements in for very specific purposes.

[00:23:02] Speaker 02:
And in fact,

[00:23:03] Speaker 02:
The law that we deal with in district court is if you don't address settlement agreements, there's a good chance it's going to be remanded back.

[00:23:12] Speaker 02:
If your expert witness does not look at settlement agreements in the context, that's the basis for reversal itself.

[00:23:19] Speaker 02:
So in one sense, we have controlling law that tells us if we don't consider settlement agreements, that's reversible.

[00:23:28] Speaker 02:
And now there's a new suggestion on the table that if you do

[00:23:31] Speaker 02:
settlement agreements, that's reversible as well.

[00:23:33] Speaker 02:
That kind of ties a patent owner's hands considerably.

[00:23:38] Speaker 02:
Do you have any more questions about the settlement agreement that I can answer?

[00:23:42] Speaker 02:
I do want to address a couple more things.

[00:23:45] Speaker 02:
You can talk about whatever you want to talk about at this point.

[00:23:49] Speaker 04:
Questions may arise.

[00:23:50] Speaker 02:
That's fine.

[00:23:51] Speaker 02:
I do want to talk a little bit about the fact that much of what is being discussed in the opening brief has been waived

[00:24:00] Speaker 02:
they not raise this in the Rule 50 motions.

[00:24:03] Speaker 02:
I think that is a fatal flaw to much of this appeal.

[00:24:07] Speaker 02:
And by not raising it under Eighth Circuit standards in the Rule 50 motion, then those arguments are waived in totality.

[00:24:14] Speaker 04:
But assume for certain purposes that they are not entitled here to a judgment of no infringement, but at most a new trial.

[00:24:26] Speaker 04:
So put it just as

[00:24:28] Speaker 04:
Assume that for now.

[00:24:32] Speaker 04:
What do you say about their O2 micro argument?

[00:24:36] Speaker 02:
Well, and the O2 micro is a very limited understanding.

[00:24:41] Speaker 02:
I know, Your Honor, I just mentioned that they have very few of the pico and femto cells.

[00:24:46] Speaker 02:
In reality, they have much more.

[00:24:49] Speaker 04:
No, no, no.

[00:24:50] Speaker 04:
I think what I meant was that a very, very small proportion of your total

[00:24:55] Speaker 04:
of their total accused calls go over those cells?

[00:24:59] Speaker 02:
The traffic, they put an evidence at the court below that the amount of traffic that goes over the femto and pico cells is very small.

[00:25:05] Speaker 02:
It was not contested because it wasn't relevant.

[00:25:09] Speaker 02:
The evidence that went in below was that over 96% of the access points that travel from, you know, rather than data transmission, go from access point to the home network.

[00:25:22] Speaker 02:
96% of those access points are the femto and pico cells.

[00:25:27] Speaker 02:
And they admit they use the internet.

[00:25:29] Speaker 02:
So infringement is already agreed to.

[00:25:34] Speaker 02:
There's no dispute about infringement.

[00:25:36] Speaker 04:
But that infringement doesn't quite match the portion of infringement on which your expert base damages.

[00:25:44] Speaker 04:
Is that right?

[00:25:45] Speaker 02:
No, and that's not quite correct because the expert actually talked about those femto and pico cells.

[00:25:51] Speaker 02:
He said, I didn't give it a number on damages for those because it would have been astronomical.

[00:25:56] Speaker 02:
The cost to replace the lines for all those internet lines, to make a private network, would have been a magnitude larger than it would have been just for the 40,000 cell towers.

[00:26:06] Speaker 02:
So he wanted the lower number.

[00:26:09] Speaker 02:
Facts went in to allow the jury to consider those femtoma pico cells.

[00:26:14] Speaker 02:
And we didn't get a number from the expert.

[00:26:17] Speaker 02:
Our expert had a much higher number.

[00:26:19] Speaker 02:
The jury came down with a lower number.

[00:26:21] Speaker 02:
And the facts that went in that the jury could consider for damages could have been based on the femto and pico cells.

[00:26:28] Speaker 02:
There was industry reports put in about how it would cost to replace those lines.

[00:26:33] Speaker 02:
And there was testimony that was not disputed by any of the experts for Sprint that the cost savings that Sprint recognized by using the internet on those femto and pico cells were astronomical.

[00:26:49] Speaker 02:
He said, at least a magnitude of 10X larger than what was realized by using the AAVs instead of having the private network.

[00:26:57] Speaker 02:
So there were facts for the jury to base damages on in the court below.

[00:27:05] Speaker 02:
Those are undisputed facts.

[00:27:06] Speaker 02:
So I don't know where the jury came up with the $30 million number.

[00:27:11] Speaker 02:
Our expert had a higher number.

[00:27:13] Speaker 02:
They didn't have an expert.

[00:27:14] Speaker 02:
They didn't give an alternative damages theory.

[00:27:16] Speaker 02:
The jury heard facts.

[00:27:18] Speaker 02:
And based on the Motorola case, that alone is enough for them to come up with a damages number.

[00:27:23] Speaker 04:
Do I remember right that the basic theory, conceptual theory of your experts' damages was it's very important to have a pretty high degree of security on these networks.

[00:27:39] Speaker 04:
There are ways of getting some okay security, and we talk about them in the specification.

[00:27:46] Speaker 04:
In a competitive business like the wireless business, the fact is, unless they were licensing, they would have had to build their own network.

[00:27:54] Speaker 04:
And then he used, I think in theory, I mean, what he said in theory was a very conservative cost estimate of what they would have had to build.

[00:28:05] Speaker 04:
And it's based on that cost savings that the damages, that his damages theory asks for a particular number.

[00:28:13] Speaker 02:
That's right.

[00:28:13] Speaker 02:
It was something he took a very conservative approach.

[00:28:16] Speaker 02:
He looked at the call savings in a very conservative manner, then took a small percentage of that call savings.

[00:28:21] Speaker 02:
So he apportioned on multiple grounds and came up with a very small number of what he thought would be shared.

[00:28:27] Speaker 02:
He said that Sprint should keep 96% of their call savings.

[00:28:31] Speaker 04:
And just for purposes of your cross appeal, doesn't the nature of that theory make it at least reasonable for the district court to have concluded

[00:28:41] Speaker 04:
that the jury award was a one-time cost savings and not an amount that would increase with further usage for the next two years of the patent?

[00:28:55] Speaker 02:
Yeah, it would be reasonable.

[00:28:57] Speaker 02:
I agree, Your Honor.

[00:28:58] Speaker 02:
It would have been except for one thing, that jury question.

[00:29:02] Speaker 02:
The jury question came back, and I was actually trying to try the case at the district court.

[00:29:07] Speaker 02:
And when you get a question from the jury like that, you're obviously very happy about the question.

[00:29:11] Speaker 02:
because now we're talking damages.

[00:29:14] Speaker 02:
But we tried to say, we let the jury consider the two years going out and make a one-time payment because they wanted to know if it was going to be a license going forward.

[00:29:22] Speaker 02:
And Sprint was the vehicle and they said, no way.

[00:29:24] Speaker 02:
This is only for past.

[00:29:26] Speaker 02:
So they answer it back to the jury, no.

[00:29:29] Speaker 02:
And in that fact that happened, the jury question makes it less reasonable for the judge to say it was a fully-paid license for the entire time.

[00:29:41] Speaker 02:
And I think that is very telling that if the jury didn't have that question, I don't think we'd be sitting here at the cross of the bill today.

[00:29:47] Speaker 02:
But because of that jury question, that was very telling, and they only awarded past damages.

[00:29:52] Speaker 02:
All the facts that went in were from past damages.

[00:29:55] Speaker 04:
You mentioned a few sentences ago, Sprint argued, made certain arguments to arrive at the judge's answer to the jury question.

[00:30:05] Speaker 04:
Is that discussion that you just referred to in the record?

[00:30:08] Speaker 02:
It was on the record.

[00:30:09] Speaker 02:
It was a phone call that the judge had with the jury question, and basically they won out and the answer was no.

[00:30:16] Speaker 01:
Your adversary makes much of the fact that the question mentioned four patents and not two.

[00:30:22] Speaker 01:
What's your comment on that?

[00:30:24] Speaker 02:
I think the jury just made a mistake.

[00:30:27] Speaker 02:
It was clear there's only two patents.

[00:30:29] Speaker 02:
They had a jury forum.

[00:30:30] Speaker 02:
They filled out for the two patents.

[00:30:32] Speaker 02:
I think it was just a slip.

[00:30:37] Speaker 02:
Thank you, Your Honor.

[00:30:38] Speaker 02:
Thank you.

[00:30:43] Speaker 00:
I'll try to be very brief, Your Honor.

[00:30:46] Speaker 00:
Thank you.

[00:30:48] Speaker 00:
First of all, it seems to me you put your finger on it in terms of what is the footprint of the patent and the damages theory in this particular case.

[00:30:57] Speaker 00:
You cannot construct or try to reconstruct a jury verdict in this case at damages at that level.

[00:31:05] Speaker 00:
based on expert opinion that goes exclusively to the notion of creating a backhaul and using a methodology of trying to figure out what that costs, which is completely made up, and try to apply that back to those FIMCO and PECO cells.

[00:31:19] Speaker 04:
I mean, it's not completely made up.

[00:31:21] Speaker 04:
And this is a case in which fundamentally they put on a damages case, and you didn't.

[00:31:27] Speaker 04:
If you're not going to use licenses, then I think an economically

[00:31:35] Speaker 04:
Or an approach to this that is supported by lots of economists is figure out what the non-infringing alternative would have been.

[00:31:42] Speaker 04:
If the non-infringing alternative here would have been construct a whole network.

[00:31:47] Speaker 04:
That's kind of what he went about doing.

[00:31:49] Speaker 04:
And then he said, here's the cost.

[00:31:51] Speaker 04:
And basically, we want 3% of the cost savings, not 90-something.

[00:31:56] Speaker 00:
And what I was talking about was the second half of that, which is, how do you go about figuring out the cost?

[00:32:00] Speaker 00:
He didn't go about figuring out the cost of actually constructing a backhaul ethernet system.

[00:32:04] Speaker 00:
He went about renting a backhaul and threw that all together.

[00:32:08] Speaker 04:
But as I understand it, his theory was,

[00:32:11] Speaker 04:
This is a very conservative estimate of the cost because they wouldn't be paying this year in and year out if it were cheaper for them to build.

[00:32:17] Speaker 04:
So the cost must be bigger, it must be larger than what they're paying, otherwise they would have built it.

[00:32:22] Speaker 00:
Right, all I'm saying is that whatever number he came up for with the cost is to my mind at least purely speculative because it's based off of an analysis of the lease arrangements which has nothing to do with the cost and takes into account a wide range of other

[00:32:37] Speaker 00:
considerations.

[00:32:38] Speaker 00:
And I don't think that ultimately, to me, the real problem in this case is going to still be the use of the AT&T settlement.

[00:32:46] Speaker 00:
And I didn't hear anything that he said that remotely suggests that.

[00:32:49] Speaker 00:
And to be sure, would this be cleaner if we had not ourselves put forward settlements consistent with what we thought laser dynamics permitted?

[00:32:57] Speaker 00:
To be sure.

[00:32:58] Speaker 00:
On the other hand, when the settlement that was beyond question

[00:33:03] Speaker 00:
prejudicial came into the case.

[00:33:06] Speaker 00:
At that point, we quite rightly objected to it.

[00:33:09] Speaker 00:
I've forgotten about it.

[00:33:10] Speaker 00:
In our post-trial motions, we also argued 408 specifically as well.

[00:33:14] Speaker 00:
But the bottom line is that we preserved that issue, objected to it strenuously, and candidly, it never should have gone into the case.

[00:33:24] Speaker 00:
I hope, obviously, that you don't get to the cross appeal for obvious reasons.

[00:33:28] Speaker 00:
But when the question came back from the jury, our only answer was the answer to that question is no.

[00:33:33] Speaker 00:
And the reason we said no was because we thought the jury misconstrued the four patents involved in the AT&T litigation versus the patents here, and that the jury had in mind.

[00:33:43] Speaker 04:
But in any event, the reasons are not on the record.

[00:33:45] Speaker 04:
Exactly, Your Honor.

[00:33:46] Speaker 00:
Thank you.

[00:33:47] Speaker 00:
If there are no further questions, I urge the court to reverse.

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

[00:33:50] Speaker 00:
The case is submitted.