[00:00:00] Speaker ?: Okay. [00:00:51] Speaker 02: Okay, the next argued case is number 16-1476, Advanced Video Technologies Against HTC Corporation. [00:01:01] Speaker 02: Mr. Morris, you're ready. [00:01:13] Speaker 00: May it please the Court, Your Honor. [00:01:15] Speaker 00: I'm Robert Morris on behalf of AVT. [00:01:18] Speaker 00: The District Court's order [00:01:20] Speaker 00: Granting sanctions against AVT was an abuse of discretion that should be vacated for several reasons. [00:01:26] Speaker 00: First and foremost, the district court got the underlying issue wrong. [00:01:32] Speaker 00: AVT owns the patent. [00:01:36] Speaker 00: The district court applied the wrong law. [00:01:38] Speaker 03: Well, wait, you didn't appeal the underlying merits issue. [00:01:41] Speaker 00: We did not. [00:01:42] Speaker 00: We did not, Your Honor. [00:01:43] Speaker 03: OK, so we have to assume that it's right at this point, right? [00:01:46] Speaker 00: Well. [00:01:47] Speaker 03: There's a judgment. [00:01:48] Speaker 00: There's a judgment. [00:01:49] Speaker 00: And we're not appealing the judgment. [00:01:51] Speaker 00: We had a question of time. [00:01:53] Speaker 03: OK. [00:01:53] Speaker 03: But we can't look behind that judgment to determine whether or not 285 fees would be warranted, can we? [00:02:00] Speaker 00: Well, you can, Your Honor. [00:02:01] Speaker 00: So all I'm asking you to do is to look at the law that was applied and look at the facts that were applied, because that goes to the heart of the subjective and objective intent of all of the parties and all of their actions. [00:02:16] Speaker 00: OK. [00:02:16] Speaker 00: We're not asking you to reverse the lower court decision. [00:02:19] Speaker 00: We're just asking you to... The court's decision is based on how people acted, what they did, what they were doing at all times. [00:02:31] Speaker 00: And the lower court just got it all wrong. [00:02:34] Speaker 00: The lower court applied... The key document in the appeal is the purchase order agreement. [00:02:42] Speaker 00: The purchase order agreement was A352 to A354. [00:02:50] Speaker 00: The purchase offer agreement was a document. [00:02:51] Speaker 04: You never even argued this anywhere in your briefs. [00:02:54] Speaker 04: You stand up and the first argument to us is the lower court got it wrong. [00:02:58] Speaker 04: We always owned the patent. [00:03:00] Speaker 04: Tell me, show me where in your brief that argument is made. [00:03:04] Speaker 00: Sure. [00:03:04] Speaker 00: On page 21 of the opening brief, of our brief, further evidence regarding the strength of AVT's claim can be seen from the fact that another court could have easily determined that AVT did in fact own the 788 patent based on the record below. [00:03:19] Speaker 04: How is that an argument that the lower court got it wrong and we did? [00:03:23] Speaker 04: This seems to be, at best, an argument that our case and our arguments were not, in fact, frivolous. [00:03:29] Speaker 04: In fact, another court could have come out the other way. [00:03:32] Speaker 04: Not that this court came out the wrong way. [00:03:35] Speaker 04: Look, there's a million cases we see that could have come out one way or the other. [00:03:38] Speaker 04: A lot of cases could be close. [00:03:41] Speaker 04: So your argument here is, at best, that a different court could have decided this case differently. [00:03:46] Speaker 04: It's not that this court got it wrong. [00:03:48] Speaker 00: The next page we go on. [00:03:50] Speaker 00: We say ABT, Epigee nevertheless, acquired all of ABT's asset by virtue of the purchase offer agreement. [00:03:57] Speaker 00: That's just what I just said, Your Honor, with all due respect. [00:04:00] Speaker 04: Where is this word? [00:04:02] Speaker 00: That's on page 22, which clearly stated the terms agreed to by the parties for the proposed sale of ABC's shares to Epigee. [00:04:11] Speaker 00: I'm not taking this out of left field. [00:04:25] Speaker 00: The order for sanctions is based on the fact that AVT went off and they supposedly were bluffing. [00:04:36] Speaker 00: They supposedly knew of the defect in title the entire time. [00:04:42] Speaker 04: No, I don't think he said they knew of the defect in title. [00:04:44] Speaker 04: What he said is they had reason to know there might be a defect in title because the two gentlemen, names of which escape me at the moment. [00:04:52] Speaker 00: Mr. Gross and Mr. Cone. [00:04:55] Speaker 04: Yes, had had that in that earlier email exchange had acknowledged there might be a problem here, but then just decided to move on to other things and ignore what potential problem which could have been rectified by simply them finding out whether or not documents had been filed in this case as they were supposed to have been. [00:05:17] Speaker 04: They may have had a good faith belief that [00:05:21] Speaker 04: That should have happened in the regular course of things, but they at least demonstrated, and this court relied on the evidence that demonstrates that they had a question about whether there was actually ownership, a legitimate question, and didn't pursue it. [00:05:35] Speaker 00: But Your Honor, in your discussion just now, you talked about the documents that should have been filed. [00:05:41] Speaker 00: There didn't have to be any documents filed. [00:05:43] Speaker 00: If there was a short form merger, which is what the court went off on, [00:05:48] Speaker 00: on a tangent that basically followed a tangent set out by the defendants, a short form merger would have required documents to be filed in the state of Delaware. [00:06:01] Speaker 00: With regard to this, and the court found that Epigee had acquired 100% shares of the stock. [00:06:09] Speaker 04: Why don't we just assume, for purposes of this argument, for the rest of the argument, [00:06:13] Speaker 04: that I will not go behind the district court and decide whether it decided Delaware corporate law properly, because even if you have a single errant sentence in your brief, you didn't meaningfully explain Delaware law to me in a way that I could, on appeal, make a determination of the accuracy of the district court's decision on this state law question. [00:06:33] Speaker 04: You didn't cite to me all the relevant Delaware statutes. [00:06:36] Speaker 04: You didn't go through the law and explain it to me. [00:06:38] Speaker 04: So from here on, assume I don't think you meaningfully raised that issue. [00:06:43] Speaker 04: From there, answer the question. [00:06:45] Speaker 00: With all due respect, Your Honor, what about the True Blue case that we cited that was Delaware Law? [00:06:49] Speaker 04: You don't get to ask questions. [00:06:51] Speaker 00: It's not the way this works. [00:06:51] Speaker 00: I'm not trying to ask questions, Your Honor, with all due respect. [00:06:54] Speaker 00: But you just told me to ignore Delaware Law because we didn't sign any, but we did. [00:07:00] Speaker 03: You argued that your position wasn't frivolous, which, frankly, the trial court didn't say it was frivolous. [00:07:06] Speaker 03: The trial court said you had a good faith belief that you owned it, but there was enough [00:07:12] Speaker 03: that should have raised questions and you should have looked behind it. [00:07:15] Speaker 03: So let's go forward. [00:07:18] Speaker 03: You have other arguments, so let's look at your other arguments. [00:07:20] Speaker 00: Sure, Your Honor. [00:07:29] Speaker 00: If we just go straight to 285, 285 and basically the Octane case sets out the totality of the circumstance test that you're supposed to do to the side of a case that's exceptional. [00:07:42] Speaker 00: In the Supreme Court's case, Halo, Halo made clear that the district court, while they can be provided with a wide latitude of discretion, is not boundless. [00:07:52] Speaker 00: They can't just go off on a whim. [00:07:54] Speaker 00: We contend that that's what happened here. [00:07:56] Speaker 00: Halo states that sanctions are appropriate when conduct has been, quote, willful, wanton, malicious, bad faith, deliberate, consciously wrongful, flagrant, or characteristic of a pirate. [00:08:10] Speaker 00: None of that's the case here. [00:08:12] Speaker 03: Well, again, your problem with this argument is that you're really asking us to rethink the discretionary aspect of the court's decision. [00:08:22] Speaker 03: Let's talk about prevailing party. [00:08:24] Speaker 00: Sure. [00:08:26] Speaker 03: OK. [00:08:27] Speaker 03: Now, let's assume that I agree with you, that dismissal for lack of standing does not make one a prevailing party. [00:08:39] Speaker 03: Did you preserve that issue below? [00:08:43] Speaker 00: We believe that we did, Your Honor. [00:08:47] Speaker 03: Okay, but the places that you cited us to were only places in which you had discussions that talked about the fact that, well, we can just restart this case so it's not a big deal. [00:09:01] Speaker 03: I don't see you actually saying to the lower court that there was a predicate that was a requirement prior to the award of 285 fees. [00:09:12] Speaker 03: Did you ever make that argument? [00:09:14] Speaker 00: I don't think we got more precise than what we said, Your Honor. [00:09:18] Speaker 00: The dismissal was without prejudice. [00:09:20] Speaker 00: The dismissal was related to jurisdiction. [00:09:24] Speaker 00: None of the substantive issues got involved in any way other than having a markman hearing. [00:09:29] Speaker 00: There was one hearing. [00:09:30] Speaker 00: There was one dispositive, or not dispositive motion, but there was one motion that dealt with the subject matter of the case. [00:09:38] Speaker 00: It was a motion that was filed by the defendants. [00:09:40] Speaker 00: to invalidate part of the patent for the patent and that was denied. [00:09:44] Speaker 04: Would it have mattered to your argument whether or not you can refile because you certainly stressed in like your blue brief at various pages that we can and in fact did refile this litigation and now we're proper owners. [00:09:57] Speaker 04: Would that have mattered and what I mean by that is suppose you came to court asserting ownership and you didn't in fact own it someone else did and suppose they were unwilling [00:10:07] Speaker 04: to assign it to you, such that you would now never be able to sue on this patent. [00:10:14] Speaker 04: Would that matter to your view of whether or not the prevailing party status had been met? [00:10:21] Speaker 04: I know that's not your facts. [00:10:22] Speaker 04: Don't worry. [00:10:23] Speaker 04: I understand that. [00:10:24] Speaker 04: But I want to know, would that matter? [00:10:25] Speaker 04: Because that would seem to very much change the circumstances as between the parties in a way that you're not true here. [00:10:31] Speaker 04: I get it. [00:10:32] Speaker 04: But I'm trying to understand the impact on the law if I decide [00:10:37] Speaker 04: that standing as a whole and a dismissal for lack of standing as a whole as opposed to maybe some nuance in this case. [00:10:44] Speaker 04: But your argument was dismissal for jurisdiction, dismissal for standing doesn't count. [00:10:50] Speaker 04: And so what I'm trying to understand is if it doesn't count and yet you could see factual scenarios like the one I just raised where it does seem to meet the legal test, right, which is changing the nature of the relationship as between the parties kind of thing. [00:11:03] Speaker 04: Here, it's not true. [00:11:04] Speaker 04: I know. [00:11:05] Speaker 04: But what do you think about that? [00:11:06] Speaker 00: Tell me how I should do that. [00:11:08] Speaker 00: Hypothetically, I see how you can get there. [00:11:10] Speaker 00: My only problem, even with the hypothetical, is how do any of those additional facts that you can't refile and who has the ownership of the patent, how do those ever get on the record? [00:11:18] Speaker 00: How do those ever come into play? [00:11:21] Speaker 00: Because you file the case, you went forward. [00:11:24] Speaker 00: Now you're going to try to file it again because the district court in that kind of situation would go and they would find, well, somebody else owned the patent. [00:11:33] Speaker 00: If you went now, now you're outside the scope, that case was dismissed. [00:11:37] Speaker 04: But you argued, but you argued this to us in the blue brief. [00:11:41] Speaker 04: You argued that one of the things that should help me understand why a dismissal for lack of standing doesn't change the relationship between the parties is the fact that you do now own and we're able to refile. [00:11:52] Speaker 04: You made that argument. [00:11:53] Speaker 04: You're the one who told me these facts are relevant to my decision-making here. [00:11:59] Speaker 00: Your honor, it is our view that we always don't depend. [00:12:03] Speaker 00: There was a contract. [00:12:04] Speaker 00: There was a contract on the sale of a company from ABC. [00:12:06] Speaker 04: That's not what you argued at Bluebrief page 15. [00:12:10] Speaker 04: I'm not saying, but what you said is there was no change in the standing because we were able to refile the suit with no defect in ownership. [00:12:19] Speaker 00: Right. [00:12:21] Speaker 00: I mean, it's very fact specific. [00:12:22] Speaker 00: Part of it is because the court found that everybody involved truly believed that they owned the patent. [00:12:30] Speaker 00: the court found, and all of the people were the same people. [00:12:35] Speaker 02: But that's exactly your problem, isn't it? [00:12:38] Speaker 02: That after the defect, whether it was real, whether it could have been overcome with additional arguments or whatever, after the defect came to the surface, it's easy enough to understand why this court would have appreciated that the easiest solution is, all right, we'll fix it, and we'll start again. [00:13:00] Speaker 02: equally easy to understand why the district court would have thought, in that case, why should they have been put through this defense in a case that you are now dropping for other reasons, perhaps to avoid having it go against you, or perhaps just because it's more straightforward, because it's quite conspicuous, is it not, that all of the attorney's fees that were requested [00:13:31] Speaker 02: were not awarded. [00:13:32] Speaker 02: They were cut almost in half. [00:13:35] Speaker 02: So that this court was trying to come up with something that's reasonably fair in the circumstances because it is an exceptional circumstance where when a defect in title is pointed out, you drop the case. [00:13:52] Speaker 02: You file again having cured the defect, although you now tell us it wasn't defective. [00:13:59] Speaker 02: So it is [00:14:00] Speaker 02: Difficult is it not to say that this district judge did something unfair or unjust? [00:14:09] Speaker 00: Well, even if I go down that path, Your Honor, the district court stated, and I believe that's on A-76, that this was the first time it had ever happened in any patent case she ever had that a plaintiff didn't own the patent. [00:14:23] Speaker 00: And by itself, that's enough to make the case exceptional. [00:14:27] Speaker 00: This court has dealt with countless cases. [00:14:29] Speaker 02: Well, maybe it is. [00:14:30] Speaker 02: You've dropped the case almost very soon after this flaw, this defect, after Discovery found the exchange of emails suggesting that this weakness might exist. [00:14:48] Speaker 00: We did, Your Honor. [00:14:49] Speaker 00: It was a question of timing. [00:14:51] Speaker 00: The patent was about to expire. [00:14:53] Speaker 00: The life of the patent, once the patent expires, the six years [00:14:57] Speaker 00: basically statutory period we can collect damages. [00:15:00] Speaker 00: The clock is just ticking and every day that goes by the value of the assets gone. [00:15:04] Speaker 02: Why does the fact that the patent was about to expire relate to whether or not this was an exceptional case? [00:15:14] Speaker 00: It really was just a question of whether or not we decided to appeal that decision in which case we basically would eat up another two years of life or [00:15:22] Speaker 00: We were able to go to Delaware where we followed the instructions of the judge because the judge gave us guidance that said, you go do this, that's fine with me. [00:15:31] Speaker 00: That'll fix the issue. [00:15:33] Speaker 00: And so we did what she told us to do because we were back in the saddle like six weeks later, not two years. [00:15:39] Speaker 03: One of the things that's odd about the lower court decision is the court's repeated reference to the ownership status of the patent holder, and there are some [00:15:52] Speaker 03: statements that said there has to be some deterrence against trolls, as she described them. [00:15:59] Speaker 03: But you don't actually raise on appeal whether that is an appropriate consideration for the lower court to take into account. [00:16:06] Speaker 00: I mean, don't hold me to the exact word count, but I think something like 20% of the text is basically a political argument about trolls. [00:16:18] Speaker 03: Right, but you didn't raise that point on appeal. [00:16:23] Speaker 03: You didn't complain about that. [00:16:25] Speaker 03: You didn't say that that was an improper consideration for purposes of the court's exercise of its discretion. [00:16:31] Speaker 00: No, we did not on this appeal. [00:16:33] Speaker 00: We did that in our other appeal, Your Honor. [00:16:36] Speaker 00: Because we refiled the cases. [00:16:38] Speaker 00: She dismissed the cases for a lack of credential standing then. [00:16:41] Speaker 00: We raised that issue as part of that appeal. [00:16:44] Speaker 00: Here, like I said, with regard to 285, if I could continue, Your Honor, for a couple seconds, [00:16:53] Speaker 00: She found the case exceptional because by itself there was no standing. [00:16:57] Speaker 00: There were countless cases that this very court has dealt with where people were found to not have standing and no sanctions were awarded. [00:17:07] Speaker 00: The cases weren't exceptional. [00:17:09] Speaker 00: For example, there was a district court case that we cite to the Orbit case. [00:17:15] Speaker 00: And in that case, that district court found, expressly found, that lacking standing alone does not make a case exceptional. [00:17:23] Speaker 02: Let's hear from the other side. [00:17:25] Speaker 02: We're running over a bit. [00:17:27] Speaker 02: We'll save us some rebuttal time. [00:17:29] Speaker 02: Thank you, Your Honor. [00:17:35] Speaker 01: Miss Keith. [00:17:35] Speaker 01: Thank you. [00:17:36] Speaker 01: Good morning, Your Honors. [00:17:37] Speaker 01: May it please the Court. [00:17:39] Speaker 01: In terms of the very last question that was being discussed as to whether or not the court below [00:17:45] Speaker 01: had abused its discretion in coming to its finding. [00:17:48] Speaker 01: The court below in no means said that the only reason that it found that this was an extraordinary case was simply because that court had not had cases involving standing. [00:17:57] Speaker 04: She said, I've never seen a case like that. [00:18:00] Speaker 04: That alone, and this is a direct quote, that alone makes this case exceptional. [00:18:04] Speaker 01: She did, Your Honor. [00:18:05] Speaker 01: But in the very next paragraph, she said, additionally, surveying the totality of the circumstances, I find that at least two of the factors in the court suggested [00:18:14] Speaker 01: district courts consider warrant imposition of fees and costs here, objective unreasonableness, and the need in particular circumstances to advance considerations of compensation and deterrence, citing to October 15th. [00:18:26] Speaker 03: That second aspect is where her whole thing was all about amenity rate against trolls. [00:18:32] Speaker 03: And the reality is, whatever policy attitude you have toward trolls, who owns the patent [00:18:40] Speaker 03: it might be relevant for purposes of determining whether an injunction is appropriate, but to say that because someone is a troll in that judge's view that therefore there is more of a need for sanctions seems kind of out of bounds, doesn't it? [00:18:58] Speaker 01: That's not actually how I read her Honor's opinion. [00:19:00] Speaker 01: While she explained that this was a non-practicing entity, [00:19:03] Speaker 01: whose sole purpose was to file lawsuits and therefore should have had a heightened understanding of making sure that it had standing. [00:19:11] Speaker 01: The way that I read her honor's deterrence was not specifically aimed at non-practicing entities or patent assertion entities, but instead saying no one should come to my court unless they have made certain that their record is clear that they own their patent. [00:19:25] Speaker 03: I don't think she was saying... She wrote like an article about how bad trolls are and how they're, you know, [00:19:32] Speaker 03: sucking the life out of society. [00:19:34] Speaker 03: I mean, this was not just a passing reference to the fact that they weren't a practicing entity. [00:19:40] Speaker 01: No, I understand that, Your Honor, but what I'm saying is that in page 879 of the record, when she specifically comes to the deterrence finding, she specifically holds that AVT was aware of the possible defects in title from the very beginning and goes on to say that the fact that they took no steps to confirm it was something that she was trying to deter, that she was trying to make sure [00:20:00] Speaker 01: that if anyone, whether troll or not, realizes that there are potential defects in title, they should do something to make sure that they've cured those defects before they come into court. [00:20:11] Speaker 03: How is that consistent with her finding that there was no bad faith and that actually they naively believed that they had it, but they believed that they had the title? [00:20:19] Speaker 01: What she first indicated was that there's no proof of bad faith, but what she said instead was this was a risk that was taken. [00:20:26] Speaker 01: that when they understood that there was some potential problem, that when Mr. Gross said, I don't have the documents, I'm not sure whether or not we can perfect that chain of title, that should have clued them in to checking out whether or not they could perfect their title. [00:20:40] Speaker 01: And so they're not necessarily inconsistent. [00:20:43] Speaker 04: What does she mean when she uses the acronym P-A-E? [00:20:46] Speaker 04: Patent Assertion Entity. [00:20:48] Speaker 04: That's a non-practicing entity. [00:20:49] Speaker 01: Correct. [00:20:50] Speaker 01: Okay. [00:20:51] Speaker 04: So when you said you interpreted her deterrent rationale as being [00:20:57] Speaker 04: Broadly, utilitarianly, extending to everyone, don't come into my court, you said, without ownership. [00:21:05] Speaker 04: But let's actually read the sentence. [00:21:06] Speaker 04: Absolutely, Your Honor. [00:21:08] Speaker 04: This sanction will serve as a deterrent to other PAEs who might prefer to ignore doubts about their title, warning them to make sure they own the patent before initiating suit. [00:21:18] Speaker 04: Does that, that's the quote from her opinion. [00:21:21] Speaker 04: Doesn't that sound like she might be directing this sentence? [00:21:24] Speaker 01: I think that's one portion of what she's directing at, but if you continue to read the opinion down through the rest, when she's distinguishing from the Tri-Ream case, she focuses on the notion not that they are PEAEs, but instead [00:21:38] Speaker 01: that AVT here was aware of the possible defects. [00:21:42] Speaker 04: Is that in the place where she's talking about why her deterrent rationale? [00:21:46] Speaker 01: Yes, on page A79, underneath the notion that she's talked about deterrence up above in the finally considerations. [00:21:53] Speaker 04: Finally, that paragraph's all about deterrence. [00:21:55] Speaker 04: I don't see anything in the next two paragraphs about deterrence. [00:21:57] Speaker 04: Where are you pointing me to? [00:21:59] Speaker 01: What I'm pointing to is the paragraph, just two paragraphs below. [00:22:02] Speaker 01: So she has one paragraph. [00:22:03] Speaker 04: Is the word deterrent anywhere in that paragraph? [00:22:05] Speaker 01: No, it's not. [00:22:06] Speaker 04: Is there anything at all about deterrence in that paragraph or any sentence at all that would suggest to you that she is continuing to discuss deterrence? [00:22:14] Speaker 01: The way that I understood the order, Your Honor, was when you're reading completely through. [00:22:17] Speaker 04: Is there a header that said deterrence and this falls under it? [00:22:21] Speaker 01: No, Your Honor, but it comes right after she describes the consideration of deterrent. [00:22:25] Speaker 01: She said there were two reasons. [00:22:25] Speaker 01: No, no, it doesn't come right after. [00:22:26] Speaker 01: It comes actually two full paragraphs after. [00:22:29] Speaker 01: Correct. [00:22:29] Speaker 01: And it comes above the heading for ABT's counsel. [00:22:32] Speaker 01: So when she says, I'm now switching topics onto another topic. [00:22:35] Speaker 01: And so my reading of the order was that that was also a portion of what she was hoping to deter. [00:22:40] Speaker 01: I understand, Your Honor's question. [00:22:42] Speaker 04: And in terms of, was this... Because I think when you said, no, no, she's applying this to everyone. [00:22:47] Speaker 04: Don't come into my court. [00:22:48] Speaker 04: I think... [00:22:49] Speaker 04: Let's just say that's a bit of an overreach on your part, which diminishes your credibility a little bit. [00:22:54] Speaker 01: And I apologize for that, Your Honor. [00:22:55] Speaker 01: I did not intend to do that in any way. [00:22:56] Speaker 01: But I do believe that, in fact, the notion of deterrence does go to all entities to perfect the title. [00:23:02] Speaker 03: You may think that, but she didn't evidence it. [00:23:04] Speaker 03: She thought that. [00:23:05] Speaker 03: Thank you, Your Honor. [00:23:06] Speaker 03: Let's get to the legal requirements. [00:23:07] Speaker 03: You agree, do you not, that prevailing party status is an underlying requirement of an award of 285 fees? [00:23:16] Speaker 03: Yes, Your Honor. [00:23:17] Speaker 03: OK. [00:23:17] Speaker 03: Yes, Your Honor. [00:23:18] Speaker 03: Putting aside the waiver question, your red brief seems to collapse the distinction between, which I believe there to be a distinction, between there has to be some determination on the merits and there has to be an alteration of the relationship between the parties. [00:23:34] Speaker 03: I read those as two separate requirements, as have multiple courts, not just ours, but courts considering 54D and 1988, both provisions we've said we look to to help determine prevailing party status. [00:23:47] Speaker 03: Yes. [00:23:48] Speaker 03: I get what you're saying is that you believe there was some difference in the relationship between the parties, but you have a single case that says that dismissal based on lack of standing is a merits-based determination? [00:24:02] Speaker 01: I do not, Your Honor. [00:24:03] Speaker 01: I do, however, have the U.S. [00:24:05] Speaker 01: Supreme Court case that we sent in via letter to the court, which is the CRST versus the EEOC case. [00:24:13] Speaker 01: And in the CRST versus EEOC case, the Supreme Court took up the meaning of prevailing party. [00:24:19] Speaker 01: Now, that case was an EEOC case under Title VII. [00:24:22] Speaker 01: It was not a patent case. [00:24:23] Speaker 01: However, what the court said there was that Congress has included, this is on page, sorry, it's the very beginning, in page 1646 of the Supreme Court edition, the court said Congress has included the term prevailing party in various fee-shifting statutes. [00:24:40] Speaker 01: And it has been the court's approach to interpret the term in a consistent manner. [00:24:44] Speaker 01: The court went on to indicate that for a defendant, prevailing party status could occur when a case was dismissed. [00:24:53] Speaker 01: And in that case, in that EEOC case, it essentially was also a standing issue because there had to be [00:24:58] Speaker 01: various steps that had to be taken before the lawsuit could be filed. [00:25:02] Speaker 01: And what the court found there was that the EEOC had not accomplished all of those steps. [00:25:07] Speaker 01: And I would say that's directly akin to the notion of perfecting title to a patent. [00:25:12] Speaker 01: And here, title had never been perfected, and therefore the dismissal was merit-based for the party as it was in the CRST case. [00:25:22] Speaker 01: And we also look, especially in the CRST case, at page 1651 [00:25:28] Speaker 01: The court indicates that a plaintiff seeks material alteration in the legal relationship between the parties, but a defendant seeks to prevent the alteration to the extent that's in plaintiff's favor. [00:25:39] Speaker 01: And the court goes on to say that the distinction between merits and no merits doesn't have the same meaning for defendants, that it is, in fact, the change of circumstance, the change of relationship between the parties that matters. [00:25:55] Speaker 01: The Supreme Court goes on to say that, in fact, [00:25:58] Speaker 01: policy of making sure. [00:26:00] Speaker 03: What's the date of the CSRT case? [00:26:01] Speaker 03: Because at least I never got anything, any letter. [00:26:04] Speaker 03: I didn't either. [00:26:06] Speaker 03: Did we get it? [00:26:07] Speaker 01: So it was sent. [00:26:12] Speaker 01: We mailed it to the Circuit and Executive Clerk of the Court on July 28. [00:26:19] Speaker 01: And the case itself, we mailed it July 28. [00:26:23] Speaker 01: I actually have a [00:26:26] Speaker 01: I have a copy of it here with the case citation and the file endorse date at the top. [00:26:32] Speaker 01: And we mailed it to the court. [00:26:34] Speaker 01: And the date of the case itself was May 19. [00:26:37] Speaker 01: And it was actually printed and electronically available only after we filed our briefs. [00:26:43] Speaker 01: And so that's why we sent it in on July 28. [00:26:47] Speaker 01: And it's CRS. [00:26:47] Speaker 03: And you did not submit it electronically? [00:26:49] Speaker 03: No. [00:26:50] Speaker 01: We did. [00:26:50] Speaker 01: I have it. [00:26:51] Speaker 01: We did submit it electronically, Your Honor. [00:26:53] Speaker 01: Yes. [00:26:53] Speaker 01: And in fact, like I said, I have the endorsed electronic stamp, the ECF stamp at the top, indicating the pages that we sent for case 16-1476. [00:27:04] Speaker 01: It's document number 63, page 1, filed, and then all the dates indicating that we did mail them. [00:27:10] Speaker 02: It was circulated after the panel was selected. [00:27:14] Speaker 02: OK. [00:27:15] Speaker 04: I must have missed it somehow. [00:27:17] Speaker 01: And so we actually believe that that case [00:27:20] Speaker 01: controls here, and it's very, very on point because the Supreme Court is basically saying that it would thwart the policy of having these very types of statutes if we were to look solely to whether or not you had to go all the way through a merits-based distinction. [00:27:39] Speaker 04: In fact... Well, assuming they didn't waive this argument about prevailing party status, why would the question of standing in this case, with the facts in this case, [00:27:51] Speaker 04: to really change the relationship between the parties? [00:27:55] Speaker 01: For a number of reasons, Your Honor, but the most important of which, we can look to the sweepstakes case that we actually cite. [00:28:00] Speaker 01: In the sweepstakes case, the court there, while not finding that the case was exceptional, did find that the prevailing party status had taken root after a standing issue because the amount of damages available to the parties changed. [00:28:14] Speaker 01: And so the relationship between the parties did in fact change. [00:28:17] Speaker 01: At one point, they were able to [00:28:19] Speaker 01: claimed back six years, but having to refile changed the amount of time in which the damages would take place. [00:28:25] Speaker 01: In this case, it was almost three and a half years of damages that was taken off the table. [00:28:30] Speaker 01: And in fact, there were a number of products whose end of life happened in that three and a half year period. [00:28:35] Speaker 01: And so they were no longer eligible to even be brought into the case. [00:28:39] Speaker 01: So I think that's the principal reason. [00:28:41] Speaker 01: If you don't look to the CRST Supreme Court case, which says that the prevailing party is just [00:28:48] Speaker 01: in the defendant's case, someone who has put off a case, a case that the court in that sense deemed frivolous because it wasn't fileable. [00:28:56] Speaker 03: Well, but that's not what happened here. [00:28:58] Speaker 03: This was fileable. [00:28:59] Speaker 01: They did refile. [00:29:01] Speaker 01: But in the CRSAT versus the EOC case, the holding was you hadn't met your condition precedent. [00:29:08] Speaker 01: Here, in order to refile, they actually had to go back to Delaware [00:29:12] Speaker 01: appoint a receiver, have the receiver transfer additional assets, which change the legal relationship between the parties there as well. [00:29:19] Speaker 01: And then they refiled, only after that. [00:29:22] Speaker 01: So they were not even the same party holding the same materials that they held in the first case. [00:29:26] Speaker 01: So the legal relationship between the parties definitively changed. [00:29:30] Speaker 01: Now, secondarily to that, we actually file a secondary motion to dismiss because even though they've gone back and gotten some of the assets from the AVC entity, [00:29:41] Speaker 01: the assets that they had weren't sufficient to support state. [00:29:45] Speaker 04: Now, none of the arguments that you're making right now about the change in the amount of damages, for example, amounting to a change in the relations between the parties were made before the district court that I saw. [00:29:59] Speaker 04: But is your argument that, well, of course they weren't, because they waived the whole question of prevailing party, and we had no reason to introduce it. [00:30:06] Speaker 04: Because I would have a hard time if I had to decide this case. [00:30:10] Speaker 04: utilizing those facts that you just gave me, because certainly there's no evidence in this record as to how much the damages were or were not changed. [00:30:17] Speaker 01: That's correct, Your Honor. [00:30:18] Speaker 01: In fact, those issues were not raised because the patent owner did not raise those issues below. [00:30:24] Speaker 01: And so they weren't briefed with the district court below. [00:30:27] Speaker 01: Instead, for the first time on appeal, we were told, oh, you're not a prevailing party. [00:30:32] Speaker 01: And so we did the research to find as close a case law as we could. [00:30:35] Speaker 01: sweepstakes was the closest case law that we could find and in that case, like I said, even though it was not a finding of an exceptional case, the court did find that there had been a change in the relationship of the parties by virtue of the fact that damages had been lost because of the new timing that had come forward. [00:30:51] Speaker 03: I just have a problem with the notion that you can waive the actual legal predicate for a determination. [00:30:58] Speaker 03: I mean everybody knows that prevailing party status is the legal predicate to an award of [00:31:05] Speaker 03: attorney's fees or costs or in any number of statutes. [00:31:11] Speaker 03: And the fact that the trial court just never even made that decision, do you have to raise it? [00:31:18] Speaker 03: Because why wouldn't you think the trial court would make the finding? [00:31:23] Speaker 01: But Your Honor, I think we did believe that the trial court did make the finding by virtue of the fact that the trial court did say that we were allowed fees under its discretion. [00:31:32] Speaker 03: But you never said. [00:31:34] Speaker 03: because you're a prevailing party. [00:31:36] Speaker 03: She didn't say that. [00:31:37] Speaker 01: Those words were not in her order. [00:31:38] Speaker 03: Why shouldn't we vacate and remand and say, determine whether or not there's prevailing party status here, and you can consider any new case law that has come out of the Supreme Court, and in assessing exceptionality, assuming there's prevailing party status, that you should not take into consideration the nature of the patent ownership. [00:31:59] Speaker 01: I honestly believe, Your Honor, that in fact the prevailing party status [00:32:02] Speaker 01: is and has been met by virtue of the fact that we won the case below, and there was a change in the relationship of the parties as established by all of the arguments that we've put forward here, and they're directly supported by Supreme Court precedent that Your Honors can take note of at CRSAT versus EEOC. [00:32:21] Speaker 01: So I believe that all of the tests had been met. [00:32:24] Speaker 01: So to the same extent that patent owner can now argue for the first time about the prevailing party issue, [00:32:32] Speaker 01: We can defend ourselves on the prevailing party issue the same way, and Your Honor can take note of that. [00:32:36] Speaker 01: And I believe that the status of the relationship did in fact change, and we directly fall under the CRCT case. [00:32:42] Speaker 04: And although she didn't expressly address whether you were or were not a prevailing party, whether dismissal for lack of standing counts as a merits-based dismissal, she may not have addressed any of that. [00:32:52] Speaker 04: But you moved for fees and asserted in the briefing you were a prevailing party and they responded and didn't contest it. [00:32:58] Speaker 04: Isn't that right? [00:32:59] Speaker 01: That's correct, Your Honor. [00:33:00] Speaker 01: And Her Honor found the fees. [00:33:01] Speaker 04: You expressly asserted it. [00:33:02] Speaker 04: We are a prevailing party. [00:33:03] Speaker 04: That is absolutely correct, Your Honor. [00:33:04] Speaker 04: Those words appear in your briefs. [00:33:05] Speaker 04: That's correct, Your Honor. [00:33:07] Speaker 03: Thank you for pointing that out. [00:33:08] Speaker 03: But at the time that was filed and at the time the court made that determination, the current state of the law was that prevailing party status needed a merits determination and that standing was not a merits determination, right? [00:33:22] Speaker 01: I was not able to find any cases that said that simply standing was a merits determination. [00:33:27] Speaker 01: I also did not find any that said that it was not. [00:33:30] Speaker 01: I could probably give you 20 or 30 right now. [00:33:33] Speaker 01: Your Honor, I'm sorry. [00:33:34] Speaker 01: I meant to say on the circumstances of this case. [00:33:37] Speaker 01: Absolutely there are cases where standing is some form of procedural defect that itself may not. [00:33:43] Speaker 01: That's all I meant to say. [00:33:44] Speaker 01: And I was not trying to overextend. [00:33:47] Speaker 01: But the CRSAT case absolutely is directly on point. [00:33:51] Speaker 01: goes to the heart of whether or not a prevailing party as a defendant has to be to the mayor's determinations. [00:33:57] Speaker 01: And it said that it did not. [00:33:59] Speaker 02: Anything else for Ms. [00:34:00] Speaker 02: Keefe? [00:34:01] Speaker 02: Any more questions? [00:34:02] Speaker 02: Thank you, Ms. [00:34:03] Speaker 02: Keefe. [00:34:03] Speaker 01: Thank you, Your Honors, very much. [00:34:05] Speaker 02: Mr. Morris, you have, let's say, three minutes. [00:34:09] Speaker 00: Thank you, Your Honors. [00:34:12] Speaker 00: With regard to CRST, the Supreme Court did not indicate that you still don't need some kind of preclusive judgment. [00:34:19] Speaker 00: In fact, the Supreme Court even brought it up and chose not to address it in the decision itself, because the parties never put that argument within the writ of certiorari. [00:34:30] Speaker 00: With regard to whether waiver is effective or not, I just want to direct the court to the automated merchant systems case, 782 F. [00:34:40] Speaker 00: 3rd, 1376. [00:34:42] Speaker 00: In that case, this court dealt with [00:34:48] Speaker 00: the fact that it could still deal with things even if it was waiver. [00:34:51] Speaker 00: So even if you find that there was waiver, you can still take our side in the prevailing parties case. [00:34:57] Speaker 00: In our brief on page four, we cite to that case and say, nevertheless, even where an argument has been deemed waived, appellate courts frequently exercise their discretion to entertain such arguments when they're based purely on a legal issue and do not require any additional fact-finding. [00:35:17] Speaker 00: With regard to this CRSP case also, I hope that your honors have a copy of this letter that was filed as document 40 or 64, it looks like, on August 19 of 2016. [00:35:32] Speaker 00: This was our response to that case. [00:35:35] Speaker 00: And we do note that, as Ms. [00:35:38] Speaker 00: Keefe acknowledged, it was an EEOC case. [00:35:43] Speaker 00: It wasn't a patent case. [00:35:45] Speaker 00: And in civil rights actions, courts frequently apply a heightened standard in deciding whether or not to apply attorney's fees that we don't believe applies to the present facts. [00:35:58] Speaker 00: With regard to going back to the district's court's opinion in 285, a couple of issues that I never really got to that were raised by Ms. [00:36:06] Speaker 00: Keefe on her discussion. [00:36:10] Speaker 00: We talked earlier about the by itself [00:36:13] Speaker 00: decision by the court, the fact that there was no standing. [00:36:16] Speaker 00: And Ms. [00:36:17] Speaker 00: Keefe brought up a couple of places where we talked about objective reasonableness or unreasonableness, as the court found. [00:36:24] Speaker 00: It's the objective unreasonableness that I was going to in the beginning when I was trying to lay out the reasons why the real decision was AVTO and the patent. [00:36:33] Speaker 00: But in fact, within the body of the order itself, there are repeated examples of contradictions by the court. [00:36:42] Speaker 00: where she made a finding of objective unreasonableness that just don't make sense. [00:36:48] Speaker 00: For example, the judge said, quote, that Chiang, Homer Chiang, was not knowledgeable about corporate matters because he was just an engineer. [00:36:57] Speaker 00: If you read the opinion at A77, it makes no sense at all. [00:37:01] Speaker 00: The man was CEO and chairman of the company. [00:37:04] Speaker 00: He's got to know about corporate matters. [00:37:05] Speaker 00: That's who he is. [00:37:07] Speaker 00: He's not an engineer. [00:37:08] Speaker 00: I don't know why she characterized him as an engineer, but that was part of [00:37:12] Speaker 00: why we were objectively unreasonable. [00:37:15] Speaker 03: The court also said she found that A-79... Well, but if he was a lot more than an engineer, then that might have led her to conclude that he acted in bad faith, right? [00:37:27] Speaker 03: In other words, she's saying you can't rely on him because he was an engineer, but if he had enough knowledge to know better, that could have made it worse for you, right? [00:37:36] Speaker 00: I don't know many presidents or many CEOs or chairmen of the company and any startup company in Silicon Valley that get down to the weeds of trying to file patent assignments or documents like that. [00:37:49] Speaker 00: I mean, that's what the issue was about. [00:37:51] Speaker 02: Okay. [00:37:51] Speaker 02: I think we have the issues. [00:37:54] Speaker 00: We will figure it out. [00:37:56] Speaker 00: Thank you very much. [00:37:56] Speaker 02: Thank you. [00:37:57] Speaker 02: Thank you both. [00:37:58] Speaker 02: The case is taken under submission.