[00:00:43] Speaker 04:
May it please the court.

[00:00:56] Speaker 04:
This case is an appeal from the board's incorrect and unreasonable construction of the term consignment, which construction enveloped all sales, including direct sales.

[00:01:09] Speaker 04:
Using that construction, the board then took two pieces of art

[00:01:13] Speaker 04:
that do not describe, let alone mention, consignment to find them anticipatory.

[00:01:18] Speaker 04:
And on top of that, used vague phrases such as the terms billing and administration of articles to find specific server system requirements to be met by those two pieces of art.

[00:01:32] Speaker 03:
In the gray brief at 17, you say that FFF doesn't cite any evidence supporting its inherency.

[00:01:42] Speaker 03:
You also note, however, that it relies on expert testimony that Gib, quote, would inherently include creation of orders, close quote.

[00:01:57] Speaker 03:
What other type of evidence could a party cite for inherency?

[00:02:02] Speaker 04:
For inherency, a party trying to state that a server system in administering a stock of articles is going to create orders for additional products would show

[00:02:13] Speaker 04:
that person of skill in the art, that there's inventions at that time, that when you're administering a stock of articles, you always create orders.

[00:02:21] Speaker 04:
It has to be an always thing, not a probability, not a possibility.

[00:02:25] Speaker 04:
And there, there's just a statement by an expert who says, it's inherent.

[00:02:30] Speaker 04:
It would necessarily do that.

[00:02:32] Speaker 04:
There's no further- It means always.

[00:02:34] Speaker 04:
Which means always.

[00:02:36] Speaker 04:
It should mean always.

[00:02:37] Speaker 04:
There's no showing here that it means always.

[00:02:39] Speaker 04:
In fact, if we look at the Gibb

[00:02:43] Speaker 04:
Reference that they're talking about.

[00:02:45] Speaker 04:
It's a minibar system.

[00:02:46] Speaker 04:
There's no showing that a minibar system always creates an order somehow tells the server or the Owner or the supplier of the goods.

[00:02:56] Speaker 04:
Hey, I need more coca-colas.

[00:02:58] Speaker 04:
I need more wine in this minibar There's no showing that it does that whatsoever and it was for that reason that we said that wasn't sufficient But all of this comes back to whether Gibb and Dearing teach consignment

[00:03:12] Speaker 04:
because they don't mention it.

[00:03:14] Speaker 04:
And the reason that the board was able to make things that are about direct sales turn into what it thought was consignment was because it started off with the construction of consignment that said all that matters is whether you take the thing out of the cabinet or the product packaging.

[00:03:31] Speaker 04:
First of all, Gibb and Dearing don't teach anything about removing something from product packaging.

[00:03:36] Speaker 04:
So the board and FFF's entire reliance on trying to fit Gibb and Dearing into that definition

[00:03:42] Speaker 04:
was based upon removal from the cabinet.

[00:03:45] Speaker 04:
Now, looking at the issue of removal from the cabinet, that issue is true for every type of sale, direct or consignment.

[00:03:52] Speaker 04:
If you walk into 7-Eleven and take something out of the freezer, you took it out of the cabinet, you pay upon checkout, you walk into 7-Eleven, you eat a Snickers bar while you're in the store, you removed it from the product packaging, you have now, according to the board, engaged in a consigned sale.

[00:04:10] Speaker 04:
their definition was no definition whatsoever.

[00:04:13] Speaker 04:
There's at least five reasons why the definition of consignment product units was incorrect.

[00:04:19] Speaker 04:
Number one, the board admits that it did not use an ordinary construction of the term, that it departed from using an ordinary construction because it thought somehow that it needed to be different based upon the 607 pattern.

[00:04:32] Speaker 04:
But in addition, it starts to use a different element

[00:04:38] Speaker 04:
the claim.

[00:04:39] Speaker 04:
The claim requires consignment product units and then it requires when the server system removes the unit is removed from the inventory.

[00:04:49] Speaker 04:
So it merged both those concepts.

[00:04:51] Speaker 04:
It merged removing from the inventory and removing from the cabinet or the product packaging into the term consignment.

[00:04:58] Speaker 04:
It read out a preferred embodiment.

[00:05:00] Speaker 04:
There's an embodiment where these cabinets that can be used in hospitals for surgery so would have expensive goods like a blood thinner

[00:05:07] Speaker 04:
that may cost $1,000.

[00:05:08] Speaker 04:
And the hospital takes out three of these blood thinners, takes it to the surgery room, uses two, returns one.

[00:05:15] Speaker 04:
If the construction of the term is removed from the cabinet or product packaging, if it was removed from the cabinet, all three of those would be charged.

[00:05:25] Speaker 04:
And a consignment system, according to the 607 invention, it wouldn't have charged for that third one if it was returned timely.

[00:05:32] Speaker 04:
In addition, there's a separate preferred embodiment that's discussed in the patent

[00:05:37] Speaker 04:
and that was at A505, where you remove the product from the cabinet, you keep it out for too long.

[00:05:44] Speaker 04:
You don't return it within the 24-hour time block or the 72-hour time block.

[00:05:48] Speaker 04:
The board's construction doesn't encompass that preferred embodiment.

[00:05:52] Speaker 04:
And so it's incorrect for those reasons as well.

[00:05:55] Speaker 04:
The important part of the phrase that the board relies upon in the 607 patent starts off with a product is not sold

[00:06:06] Speaker 04:
when shipped for placement in the cabinet.

[00:06:08] Speaker 03:
Are you going to address your standing argument?

[00:06:11] Speaker 04:
The standing argument, Your Honor, is quite simply that in a CBM, the CFR requires the petitioner to claim that it has been sued or charged for infringement.

[00:06:23] Speaker 03:
And you say in your blue brief that what FFF did not tell the board is that FFF moved to dismiss the Eastern Texas lawsuit

[00:06:35] Speaker 03:
and took the position that the district court lacked subject matter jurisdiction over the action because ABSG allegedly did not own the 607 patent.

[00:06:47] Speaker 03:
Yes, sir.

[00:06:48] Speaker 03:
Okay.

[00:06:48] Speaker 03:
So, did ABSG own the 607 patent?

[00:06:53] Speaker 04:
I believe it does.

[00:06:54] Speaker 04:
Yes, Your Honor.

[00:06:54] Speaker 03:
Okay.

[00:06:55] Speaker 03:
Then why do we care what FFF argued before the district court?

[00:07:00] Speaker 04:
Because if FFF has a burden of proof and if FFF

[00:07:04] Speaker 03:
Was FFF not sued for infringement?

[00:07:06] Speaker 03:
It was sued for infringement.

[00:07:09] Speaker 04:
But in order to be sued for infringement of the patent, it has to be sued by the patentee.

[00:07:14] Speaker 04:
That's a requirement of 35 USC 281 and 35 USC 100.

[00:07:19] Speaker 04:
If they're claiming that they were sued by a stranger, that does not give them the right to file a CBN petition.

[00:07:26] Speaker 03:
But you're saying that they're incorrect.

[00:07:31] Speaker 04:
They are incorrect, Your Honor.

[00:07:32] Speaker 03:
then you're saying they have standing.

[00:07:34] Speaker 04:
No.

[00:07:36] Speaker 04:
I would contend that they have standing.

[00:07:38] Speaker 04:
They don't contend they have standing.

[00:07:40] Speaker 03:
Well, and even today, if you contend they have standing, then you concede they have standing.

[00:07:46] Speaker 04:
No, because they're disputing it.

[00:07:48] Speaker 04:
Because even today, they have a motion dismissed that's still pending in the Eastern District of Texas case, and they still have a case pending in California in which they say ABSG is not the patent owner, ASD is the patent owner,

[00:08:00] Speaker 04:
And so even after the board's decision, they continue to dispute that ABSG is the patent owner.

[00:08:07] Speaker 04:
When they continue to do that, when they make representations in Article III courts and don't change those, then I don't think they can meet their own burden of showing standing.

[00:08:17] Speaker 04:
With respect to the term consignment and then its use of trying to find dearing and give to involve consignment, the most important part about dearing that's in the appendix 789 to 790

[00:08:31] Speaker 04:
is it goes through an analysis and describes how it is that the products are loaded into the cabinet.

[00:08:38] Speaker 04:
And the most important part of that is that when the product is loaded into the cabinet, there's a change in control or change in inventory message, number 100, that's described in figure three, that is generated and creates billing.

[00:08:52] Speaker 04:
This is the same message that FFF relied upon in its petition at A74 to claim

[00:08:59] Speaker 04:
that this taught consignment.

[00:09:02] Speaker 04:
But if this court reads that paragraph on pages A789 and 790 and sees that the change in inventory message is related to the addition of products, then Dearing cannot teach consignment.

[00:09:18] Speaker 00:
What about the board's later site where they relied on the teaching at JA791 through 92?

[00:09:25] Speaker 00:
which was the idea of when the customer removes one of our products 90 from the interior of the MW-36 and closes the door 37, then he goes on for a while and says invoicing can occur.

[00:09:37] Speaker 00:
So why isn't that satisfactory or sufficient evidence to support the board's finding?

[00:09:43] Speaker 04:
Because for anticipation, we're going to read the reference as a whole and read it through and see if it teaches the invention in its entirety, in the order, and the elements in which it's arranged.

[00:09:54] Speaker 04:
if in the very first place the micro warehouse in Dearing is loaded and an invoice is created and the customer has been billed already and then Dearing is just acting like a vending machine and a receipt can be created or an invoice can be created.

[00:10:10] Speaker 04:
And note, Your Honor, that that sentence says invoicing can also occur using other, so something else, electronic and non-electronic mechanisms.

[00:10:19] Speaker 00:
Well, there's two responses to that.

[00:10:20] Speaker 00:
One might be that the prior is teaching different embodiments.

[00:10:23] Speaker 00:
And another one might be that your claims are pricing claims.

[00:10:27] Speaker 00:
And so if it actually teaches the limitation where when someone removes something from the cabinet and they receive an invoice, why wouldn't that satisfy the claim?

[00:10:38] Speaker 04:
Well, maybe you could argue that if you look at invoicing in a vacuum, that that might satisfy some component of the server system creating

[00:10:46] Speaker 04:
an invoice, first of all, there's no showing that the service system is creating that invoice.

[00:10:50] Speaker 04:
It just is how you can create invoices electronically or not electronically.

[00:10:54] Speaker 04:
What it doesn't teach, that sentence absolutely does not teach, is a consignment model.

[00:10:58] Speaker 04:
It doesn't teach that those products are there and have been shipped to that unit without payment and that they're being held there and that upon use or sale, then that occurs.

[00:11:10] Speaker 04:
And because it doesn't teach that, it doesn't teach consignment.

[00:11:13] Speaker 04:
And it's the board's construction of consignment just to mean when you remove something from the cabinet, that automatically means consignment.

[00:11:20] Speaker 04:
That's not true.

[00:11:21] Speaker 04:
That doesn't meet the dictionary definition of consignment.

[00:11:23] Speaker 04:
It doesn't meet the definition and the specification of consignment.

[00:11:27] Speaker 04:
And so the phrase just generally that invoicing can occur doesn't teach anything about the nature of the products that are stored inside that cabinet.

[00:11:36] Speaker 04:
And the same thing happens with Gibb.

[00:11:38] Speaker 04:
With Gibb, you have a mini bar, which there's no showing whatsoever in Gibb.

[00:11:43] Speaker 04:
of how those products get into that mini bar and how those products were built.

[00:11:48] Speaker 04:
There's no showing that Coca-Cola and the Robert Mondavi Company and that the Mars Company have cokes and wine and candy bars inside that mini bar and they're waiting for payment.

[00:12:00] Speaker 04:
And the reason that the board can then take, give, and claim that it teaches consignment is because they've used this generic idea of if you remove something from a cabinet, then it must be.

[00:12:11] Speaker 04:
Yim was worried about the fact that when somebody went into a minibar and touched something, it would create a data about there's been a sale.

[00:12:20] Speaker 04:
And it said, well, we want to teach away from that priority.

[00:12:22] Speaker 04:
We want to make this better.

[00:12:23] Speaker 04:
You can grab it, you can look at it, and you can return it.

[00:12:27] Speaker 04:
And that's all it's teaching, is how to make a better minibar so a person can look at it.

[00:12:31] Speaker 04:
That's like at the grocery store.

[00:12:32] Speaker 04:
You can walk up, you can look at the label, you can look at the product, you can put it down.

[00:12:36] Speaker 04:
That's not consigned.

[00:12:38] Speaker 01:
Can I ask you, where in your blue brief, I'm not talking about what you said before the board, but where in your blue brief to this court do you say that what the board should have done is adopt a construction of consignment that builds in this requirement of an agent for the seller?

[00:13:01] Speaker 04:
In the blue brief?

[00:13:02] Speaker 04:
Yes.

[00:13:03] Speaker 04:
No, Your Honor, we're not suggesting that it necessarily requires an agent.

[00:13:08] Speaker 04:
The agent definition was one example from Webster's.

[00:13:11] Speaker 01:
So it really doesn't matter if the Coca-Cola company or the Robert Mondavi company owns the goods in the mini fridge.

[00:13:19] Speaker 01:
It's OK if the Hilton Hotel does.

[00:13:22] Speaker 01:
And it's the Hilton Hotel that is selling it to you when you take it out and 30 minutes later,

[00:13:34] Speaker 04:
scanning device inside the fridge looks and sees how we're missing a bottle of coke or it does matter because the very nature of consignment is that a supplier is placing goods at a customer location allowing them to have use and access to those goods without paying for them once the Hyatt hotel has bought those goods and is putting them in the hotel room for a resale you're well within your time just so you know yes your honor

[00:14:01] Speaker 04:
Those resale and sale after sale, that's exactly what happens at the mall.

[00:14:05] Speaker 04:
You walk into the Gap store, they've bought it from the wholesaler, now the retailer is reselling it.

[00:14:10] Speaker 04:
And that's a sale after sale after sale.

[00:14:12] Speaker 04:
That's the very problem with the definition of consignment used by the board.

[00:14:16] Speaker 04:
If I may, I'd like to reserve the rest of my time for a moment.

[00:14:18] Speaker 04:
May.

[00:14:24] Speaker 02:
Good morning, Your Honors.

[00:14:25] Speaker 02:
May it please the court

[00:14:27] Speaker 02:
The board properly found here that claims one and two of the 607 patent were both anticipated.

[00:14:33] Speaker 02:
Those are two separate and independent references given during either one renders the 607 unpatentable.

[00:14:42] Speaker 02:
The idea here is tracking products in a cabinet via RFID tags and triggering invoice or billing from a server system based on products from the cabinet being taken out.

[00:14:56] Speaker 01:
That idea doesn't really account for the ordinary meaning of the word consignment.

[00:15:00] Speaker 02:
Your Honor, and the board found that the ordinary meaning of consignment did not work here.

[00:15:06] Speaker 02:
And that's really what part of this argument that we're having with ABSG is.

[00:15:12] Speaker 02:
They want to apply the so-called ordinary meaning of consignment, sort of like a pawnbroker or something of that nature.

[00:15:19] Speaker 01:
Or at least they did before the board.

[00:15:21] Speaker 01:
I'm not so sure they do here.

[00:15:22] Speaker 02:
Well, it's ever shifting, Your Honor.

[00:15:24] Speaker 02:
They've had, by my account, three or four

[00:15:26] Speaker 02:
Different arguments about what consignment means, but we know it doesn't mean traditional consignment idea where you take a Product put it in the hands of an agent who holds it sells it to a third party and then gives the money back to the original person That's not what we have here.

[00:15:43] Speaker 01:
That's not what the board found the board found that I'd like you to say we know that it's not that now Tell me why we know that besides the fact that the board said it the board might be wrong defend the board

[00:15:54] Speaker 02:
We know that because the patent owner here in the 607 patent described a consignment in a particular way.

[00:16:02] Speaker 02:
They defined consignment as something where the billing occurs, not where the products put into a cabinet, but when the product is taken out of the cabinet.

[00:16:11] Speaker 01:
That's the key.

[00:16:12] Speaker 01:
What are you referring to?

[00:16:13] Speaker 02:
Your Honor, that is in the 607 patent.

[00:16:18] Speaker 02:
The record side is appendix 497 to 506.

[00:16:23] Speaker 02:
And I believe the patent site itself is in column six.

[00:16:28] Speaker 02:
Price considered sold when removed from the calendar.

[00:16:31] Speaker 02:
What line, what line, what line?

[00:16:33] Speaker 02:
Your honor, column six, I believe lines 29 to 32.

[00:16:40] Speaker 02:
Okay.

[00:16:44] Speaker 02:
But that's where the board decided the rubber met the road on consignment.

[00:16:49] Speaker 02:
They said, look, you don't really have an agent here.

[00:16:52] Speaker 02:
You have a cabinet, you have an inanimate object in the 607 path.

[00:16:56] Speaker 02:
So it wouldn't be, it doesn't make much sense to describe that inanimate object as an agent.

[00:17:03] Speaker 02:
So the court relied on this language from the 607 as well as the overall context to conclude that the key for consignment definition in this case is billing when the product is removed.

[00:17:19] Speaker 02:
and not billing when the product is put in the cabinet to begin with.

[00:17:23] Speaker 02:
And they also drew on, the patent draws on this and the board draws on this, the difference between a direct sale and a consignment sale.

[00:17:32] Speaker 02:
The patent talks about that over and over again.

[00:17:35] Speaker 02:
It talks about direct sales, talks about consignment sales.

[00:17:38] Speaker 02:
And then the patent also has, in column seven, lines 15 to 18, also talks about the concept of delayed billing.

[00:17:46] Speaker 02:
So you might have a situation where

[00:17:48] Speaker 02:
The product is removed from the cabinet, but it's not billed right away.

[00:17:54] Speaker 02:
But in any event, the court did not find that that was the traditional common sense meaning of consignment.

[00:18:01] Speaker 01:
Right.

[00:18:01] Speaker 01:
So I'm not having a lot of difficulty reading this passage in column six as distinguishing two kinds of ways you might put stuff in cabinets, one of which is consignment and one of which isn't.

[00:18:17] Speaker 01:
Why would you read a claim that uses the word consignment not to be consignment in the traditional sense?

[00:18:22] Speaker 02:
Your Honor, I think you certainly look at all the specification in full context of the patent.

[00:18:27] Speaker 02:
In this case, we think the inventor acted as his own lexicographer in a sense and defined consignment in a particular way.

[00:18:37] Speaker 02:
Now, he might have done it differently, but the reality is if you look at the context of what this is, which is a cabinet which has stocked items that are billed when they're removed,

[00:18:47] Speaker 02:
That is the kind of consignment that this 607 patent's talking about.

[00:18:52] Speaker 02:
And we think the board was correct in finding it.

[00:18:53] Speaker 01:
That's an extremely peculiar use of the word consignment, which involves party A, party B, party C, A gives something to B. To sell it to C, that's the first sale.

[00:19:08] Speaker 01:
But B has not itself engaged in a sale.

[00:19:11] Speaker 02:
That is correct, Your Honor.

[00:19:12] Speaker 02:
I think that's why

[00:19:13] Speaker 02:
ABSG before the board had a series of shifting explanations for what consignment should mean.

[00:19:20] Speaker 02:
First, they tried the Webster's definition, which the notion of an agent holding it for sale to a third party.

[00:19:27] Speaker 02:
The board rejected that because there's no agent in the 607 patent.

[00:19:31] Speaker 01:
They then argued, but wait a minute, the purchaser... Whoever is operating the cabinet is the agent.

[00:19:38] Speaker 01:
Cabinets don't mysteriously appear and operate themselves.

[00:19:41] Speaker 01:
Somebody's operating the cabinet.

[00:19:42] Speaker 01:
Well, certainly checking it.

[00:19:45] Speaker 02:
The cabinet is put in the room in this case by the hotel owner.

[00:19:49] Speaker 02:
The cabinet is put in the room.

[00:19:50] Speaker 02:
You have staff coming in and stocking and restocking.

[00:19:52] Speaker 01:
There's no doubt about that.

[00:19:54] Speaker 01:
Is there any reason to think that Coca-Cola and Mondavi companies own the little bottles that are in the cabinet in the hotel?

[00:20:01] Speaker 02:
I don't believe so, your honor.

[00:20:03] Speaker 01:
I mean, who would call that consigned?

[00:20:06] Speaker 02:
The 607 inventor described consignment in that way, Your Honor, and the board so found.

[00:20:11] Speaker 02:
It's not the order of any.

[00:20:12] Speaker 01:
Do you have anything but this passage in column six?

[00:20:15] Speaker 02:
Well, Your Honor, I think that passage, as well as the general distinction between direct sale that the patent makes, where you're billed upon inserting the products in the cabinet, versus what it calls a consignment sale, it focuses on when the billing occurs.

[00:20:33] Speaker 02:
That's the notion of consignment.

[00:20:36] Speaker 00:
The problem I hear from your colleague on the other side is that there's two sales, one when the cabinet is stocked, and then another sale when the hotel room user takes the item out.

[00:20:52] Speaker 00:
And he's saying when you have the sale to the hotel initially, that takes it outside of the realm of consignment.

[00:20:59] Speaker 02:
Your Honor, the sale to the hotel

[00:21:02] Speaker 02:
at first instance is not what this patent's talking about.

[00:21:05] Speaker 02:
This patent's talking about what happens between the interaction between the customer, in this case the hotel guest and the cabin.

[00:21:12] Speaker 00:
I understand that.

[00:21:13] Speaker 00:
But what I'm trying to say is how do you respond to the argument that when there is a first sale to the hotel, it is no longer a consignment, even if there is a sale later to the end user?

[00:21:27] Speaker 02:
The first sale from

[00:21:28] Speaker 02:
Coca-Cola to the Hyatt.

[00:21:30] Speaker 02:
I think that probably is a direct sale, but that doesn't mean that the sale to the eventual hotel room guest is not a Consignment product unit under the 607 patent and that's what the board concluded You may have different aspects of the sale.

[00:21:45] Speaker 02:
We're not saying and that's why Frankly the notion of consignment sale if you just use the ordinary definition of

[00:21:53] Speaker 02:
it doesn't work here.

[00:21:54] Speaker 02:
And that's why the board looked to the inventor and looked to the patent to decide, okay, what did this inventor mean by the term product consignment units?

[00:22:05] Speaker 02:
And we believe that that is amply supported by the record.

[00:22:11] Speaker 00:
Do you have anything besides the

[00:22:13] Speaker 02:
Discussion in column six that you're relying on for that Yes, your honor as well as the distinction that the patent makes throughout between this notion of direct sales and Consignment sales, that's what the board looked to The prior art here we believe is a clear match it appears to me that for example at column 7 line 15 when it refers to

[00:22:40] Speaker 03:
implementation where the product is in the cabinet on consignment, the patent is talking about it simply being in the cabinet and available for someone to take it and use it or not use it.

[00:22:54] Speaker 02:
Correct, Your Honor.

[00:22:56] Speaker 02:
Which makes it different from the example my colleague gives at a 7-Eleven.

[00:23:01] Speaker 02:
You've got products that are put in the cabinet for a potential customer, a specific potential customer.

[00:23:09] Speaker 02:
in that hotel room, in that pharmacy, whatever it may be.

[00:23:12] Speaker 02:
It's not just a big store at Macy's where anybody can go in and pull off something off the shelf.

[00:23:17] Speaker 02:
Give and Deering both anticipate the two claims of the 607 patent.

[00:23:22] Speaker 02:
The prior, here's a clear match.

[00:23:23] Speaker 02:
Give is indeed an invention directed to a hotel mini bar.

[00:23:28] Speaker 02:
It's an appendix 893.

[00:23:29] Speaker 02:
Its items are stored in the cabinet for use by hotel guests.

[00:23:33] Speaker 02:
The guest is billed upon removal of items.

[00:23:36] Speaker 02:
This aligns very neatly with the 607 patent.

[00:23:40] Speaker 02:
The record site there is 32.

[00:23:44] Speaker 02:
In the appendix 870, the language is, one or more articles have been taken away from one of the shelves.

[00:23:51] Speaker 02:
The guest is charged.

[00:23:53] Speaker 02:
So the board found that Gibb discloses this element, and that finding is entitled to deferential review.

[00:24:03] Speaker 02:
Gibb also has an administering system.

[00:24:06] Speaker 02:
for billing a dispensed article.

[00:24:08] Speaker 02:
That also aligns with the claim that the server system creates an invoice.

[00:24:13] Speaker 02:
And this notion that my colleague raised in argument about creating an order, somehow that's not in give or daring.

[00:24:20] Speaker 02:
I want to respond to that directly.

[00:24:22] Speaker 02:
First, it's our position that's waived.

[00:24:25] Speaker 02:
That's not an element that they challenged as give or daring missing in the board below.

[00:24:31] Speaker 02:
They had three opportunities.

[00:24:32] Speaker 02:
They actually mentioned three arguments

[00:24:35] Speaker 02:
that Gibb did not mention, and one of them was not this ordering concept.

[00:24:39] Speaker 02:
And then two, what you have then is you have unrebutted the expert's testimony at A-770, paragraph 31, Dr. Bello, that talks about the notion that an order is created in Gibb.

[00:24:53] Speaker 02:
But in any event, we think that argument's waived because it was not properly raised below.

[00:24:58] Speaker 02:
With respect to dearing, that's another cabinet.

[00:25:02] Speaker 02:
that invoices not when you put the products in the cabinet, but when you take them out.

[00:25:06] Speaker 02:
As Dearing notes, and this is at the appendix 791 to 792, once the customer removes one or more products from the cabinet, the client controller scans the products in the cabinet, called a micro warehouse in Dearing, and sends an inventory message identifying the missing products and the system performs invoicing for the removed product.

[00:25:29] Speaker 02:
That is a fact.

[00:25:31] Speaker 02:
found by the board.

[00:25:32] Speaker 02:
That is to say, what Deering discloses is a fact found by the board at appendix 26 and 27.

[00:25:40] Speaker 02:
ABSG actually admits that Deering invoices upon removal.

[00:25:45] Speaker 02:
That's at appendix 186.

[00:25:47] Speaker 02:
That's what they said in their initial filings before the board, that Deering has that element.

[00:25:51] Speaker 02:
They try to point to some alleged contradiction within Deering with his so-called integrity algorithm.

[00:25:57] Speaker 02:
That's at appendix 790.

[00:25:59] Speaker 02:
That does not demonstrate or change the notion that daring builds upon removal and not upon insertion.

[00:26:07] Speaker 02:
Would you talk about the standing argument?

[00:26:10] Speaker 02:
Your Honor, the standing argument in our judgment is what the board called specious, and we think it is specious.

[00:26:18] Speaker 02:
On the record before this court, ABSG is the claimed owner of the 607 patent.

[00:26:25] Speaker 02:
Certainly, it asserts ownership.

[00:26:27] Speaker 02:
My colleague asserted it without

[00:26:29] Speaker 02:
qualification or equivocation.

[00:26:31] Speaker 02:
We've challenged that assertion below, but there's been no ruling on the merits.

[00:26:36] Speaker 02:
So as things stand today in this court, on this record, ABSG is the owner of the 607 patent.

[00:26:43] Speaker 02:
So as such, at the time of the filing of the CBM, FFF had been sued for and charged with infringement of the 607 patent.

[00:26:54] Speaker 02:
And to suggest otherwise is simply to try to turn

[00:26:58] Speaker 02:
the standing argument on its head.

[00:27:00] Speaker 02:
And indeed, the arguments that are made by ABSG in their briefing, this notion that there somehow could be a sham lawsuit, somehow somebody could come up and claim to own a patent and not really own it, that's not in this record at all.

[00:27:16] Speaker 02:
That's not something, if in fact there's sham lawsuits, the courts have a very, very excellent procedures for dealing with that.

[00:27:23] Speaker 02:
And that's certainly not the situation, that's not the circumstance we have here.

[00:27:27] Speaker 02:
I want to address one other point that came up, and that is this notion that the board's definition of consignment product units does not cover the 607 embodiments.

[00:27:44] Speaker 02:
It's important to note that the board's definition includes this notion that the products are considered sold when the products are removed from the cabinet.

[00:27:56] Speaker 02:
the product packaging.

[00:27:59] Speaker 02:
So you have this concept of delay.

[00:28:01] Speaker 03:
I recall that they used the word misconstrued about that argument.

[00:28:05] Speaker 02:
Well, Your Honor, what ABSG argued below was that somehow that the board's definition read out these preferred embodiments and no such thing.

[00:28:16] Speaker 02:
The definition includes this notion of

[00:28:20] Speaker 02:
You take it out, or you remove it from the packaging.

[00:28:23] Speaker 02:
Now, it's true.

[00:28:23] Speaker 02:
That's really just a proxy for a lot of things that can happen.

[00:28:26] Speaker 02:
You can look at it.

[00:28:28] Speaker 02:
You can put it back in.

[00:28:29] Speaker 02:
But if you can study it, decide you don't want it, put it back in.

[00:28:33] Speaker 02:
So this notion of removal from the packaging is this idea, OK, you've now decided to buy it.

[00:28:38] Speaker 02:
You own it.

[00:28:38] Speaker 02:
So it's not just removal from the cabinet.

[00:28:40] Speaker 02:
And both Gibb and Deering talk about that as well.

[00:28:42] Speaker 03:
It seems to me that what it's talking about is looking at the medical situation as it evolves.

[00:28:49] Speaker 03:
and deciding whether to use the product or not.

[00:28:52] Speaker 03:
And if not, putting it back in and that removing from the packaging is indicative of we're using it.

[00:28:59] Speaker 02:
Yeah, that is a proxy, your honor.

[00:29:00] Speaker 02:
I think the, if you take something out of the packaging, whether it's a set of cookies or whether it's some kind of medical product, if you take it from the package, you've used it, you've bought it and you're going to be billed for it.

[00:29:12] Speaker 02:
Your honors, I'm almost out of time.

[00:29:15] Speaker 02:
If the court has any additional questions, I will be pleased to take them.

[00:29:19] Speaker 02:
If not, I'll yield my five seconds to the court.

[00:29:22] Speaker 02:
Thank you, counsel.

[00:29:33] Speaker 04:
Your Honor, I'll make three points on rebuttal.

[00:29:34] Speaker 04:
The first one is that we have always advocated the plain and ordinary meaning of the term consignment.

[00:29:39] Speaker 04:
We've shown different pieces of evidence.

[00:29:42] Speaker 04:
The Webster's Dictionary, the Apex Dictionary, Dr. Engel's testimony,

[00:29:48] Speaker 04:
as well as the specification itself.

[00:29:50] Speaker 04:
There is no counter evidence from FFF to any of those pieces of evidence that would say that you shouldn't.

[00:29:57] Speaker 01:
Look, the entirety of the board's claim construction rests on its view that column 6 and column 7 of this patent make perfectly clear that the word consignment is not being used in the usual sense.

[00:30:08] Speaker 01:
So talk about column 6 and column 7.

[00:30:10] Speaker 01:
Why don't they do that?

[00:30:11] Speaker 04:
Well, column 6, as FFF's counsel said, does not have

[00:30:16] Speaker 04:
a clear disavowal of the term consignment, and nor is it an expressed definition of the term consignment.

[00:30:22] Speaker 01:
So the board said there's a passage, what, 27 to 33 in column six, and then kind of roughly the top half of column seven, that make clear that the only distinction between direct sale and consignment, the board said, has to do with when charging takes place, not whether there is some intermediary party between the owner and the taker-outer.

[00:30:48] Speaker 04:
But the problem with that is there's a separate limitation in the claim that relates to the service system creating an order when the item is removed from inventory.

[00:30:55] Speaker 04:
So to merge those two together reads out the term consignment.

[00:30:58] Speaker 04:
These are supposed to be consignment product units.

[00:31:00] Speaker 04:
These are supposed to be product units that are placed in a cabinet for which a supplier has not received payment.

[00:31:06] Speaker 04:
And that's the hospital example that's discussed in here.

[00:31:08] Speaker 04:
And the way that they read that term.

[00:31:10] Speaker 01:
What, in your view, is the difference between the

[00:31:14] Speaker 01:
Implementation where there is a direct sale, that's line one of column seven.

[00:31:18] Speaker 01:
And implementation where the product is in the cabinet on consignment, that's line 23 of column seven.

[00:31:24] Speaker 04:
Your Honor, if you look at column seven, it says that the billing invoice is created when the product units are shipped or when they are detected within the cabinet.

[00:31:31] Speaker 04:
So it's upon the addition.

[00:31:33] Speaker 04:
On the consignment model, it's not upon addition.

[00:31:37] Speaker 04:
It says specifically not sold when shipped for placement, but instead

[00:31:44] Speaker 04:
held there and when used either from product packaging or removed from too long that at that point that there's a invoicing or billing that occurs.

[00:31:54] Speaker 01:
I guess what I'm hearing you say just now is exactly what the board said because what you just said the difference was and has nothing to do with it whether there's a third party between the originator and the taker outer.

[00:32:09] Speaker 04:
It's not the third party it's that the board's construction

[00:32:13] Speaker 04:
does not include that first step.

[00:32:16] Speaker 04:
They're talking about a direct sale.

[00:32:17] Speaker 04:
They don't include the concept that it was not sold when placed into the cabinet.

[00:32:23] Speaker 00:
It's your view that there's two direct sales, one to whoever is at the facilities where the cabinet is, and the second is to whoever is the user of the particular item in the cabinet.

[00:32:37] Speaker 04:
The way the board's construing it, it's no different than 7-Eleven, a grocery store, any other retail embodiment.

[00:32:43] Speaker 04:
It's considered sold when removed from the cabinet or the product packaging.

[00:32:46] Speaker 04:
That's what happens to us in everyday life.

[00:32:48] Speaker 00:
A consignment requires... Am I correct, though, in my understanding of what your position is?

[00:32:53] Speaker 00:
That it's... I didn't ask my question.

[00:32:54] Speaker 00:
The way that... Sorry.

[00:32:55] Speaker 00:
I wasn't in the form of question, but is it... Am I correct in understanding that what your position is is that in a situation where there's an invoice, when the inventory is put in the cabinet, that's one direct sale?

[00:33:07] Speaker 04:
That's exactly right.

[00:33:08] Speaker 00:
And then later, when someone takes it out and they're charged, that's a second direct sale.

[00:33:13] Speaker 04:
That's exactly right.

[00:33:14] Speaker 04:
That's what the board's construction allows to occur.

[00:33:16] Speaker 04:
And that's why Deering at 790 and Gibb are both talking about that situation and not the consignment product unit situation.

[00:33:26] Speaker 04:
And for those reasons, Deering and Gibb do not anticipate when consignment is properly construed to involve the idea that products are placed somewhere, agent or no agent, your honor, without

[00:33:40] Speaker 04:
that first step of billing or invoicing them.

[00:33:44] Speaker 04:
They're allowed to use it.

[00:33:45] Speaker 04:
They're allowed to have it.

[00:33:46] Speaker 04:
They can take it from the hospital.

[00:33:47] Speaker 03:
I thought that was your argument.

[00:33:49] Speaker 03:
You're well over it.

[00:33:50] Speaker 04:
Just like the hospital room could take the product, put it in the surgery room, put it back, it never gets charged.

[00:33:57] Speaker 04:
That's the very concept of consignment taught of these pharmaceutical products that are discussed in the 607 patent.

[00:34:03] Speaker 04:
Gary and Gibb don't teach that.

[00:34:04] Speaker 04:
We request that the court reverse.

[00:34:08] Speaker 03:
Thank you, Your Counsel.

[00:34:09] Speaker 03:
Matter stands to no good.