[00:00:00] Speaker 01: versus smart modular. [00:00:41] Speaker 01: Mr. Fink, please proceed. [00:00:46] Speaker 01: Please proceed. [00:00:48] Speaker 05: I can't hear you. [00:00:49] Speaker 05: I'm sorry. [00:00:49] Speaker 01: Oh, no problem. [00:00:52] Speaker 05: Good morning. [00:00:55] Speaker 05: The issue here is the manning of the term accused products in the settlement term sheet. [00:01:05] Speaker 05: And this is in the appendix paragraph two. [00:01:09] Speaker 05: The district court, in order [00:01:11] Speaker 05: at Appendix page 24 states, and this is at Appendix page 28. [00:01:23] Speaker 05: There could be no question that the plain meaning of the term accused products in a patent case is the products that are accused of infringing the patent. [00:01:34] Speaker 05: It also makes sense when considering the meaning of an agreement [00:01:37] Speaker 05: that settles a case that the agreement would be setting the actual claims asserted in the complaint. [00:01:45] Speaker 05: What's wrong with that? [00:01:47] Speaker 05: Oh, it's beautiful. [00:01:48] Speaker 05: I love it. [00:01:49] Speaker 05: In fact, this court has pointed out that this is absolutely true. [00:01:55] Speaker 05: This is mentioned in the blue book at page four in the Tessera case, in Ray Billing, and loose in fact. [00:02:05] Speaker 05: In fact, what's interesting is... What did the district court do wrong, sir? [00:02:10] Speaker 05: Oh. [00:02:12] Speaker 05: He said that the memory products themselves infringe and any use of them infringe. [00:02:21] Speaker 05: And the district court, and this is at Appendix Page 6, points out the Second Amendment [00:02:33] Speaker 05: The second amended complaint has a single charge, a single direct charge of infringement. [00:02:42] Speaker 05: And infringement occurs when a memory device is put into the testing equipment, because it is the testing equipment that supplies the additional two components required for claim one. [00:02:57] Speaker 05: The memory products themselves cannot infringe. [00:03:01] Speaker 05: Yet, [00:03:02] Speaker 05: And so unfortunately, the district judge assumed that the accused products are the memory products, which can never be, because it's only when the infringement occurs when the memory product is put into a machine that supplies the other two components. [00:03:30] Speaker 05: This is in the blue book of page seven that describes the claim one, which is the broadest claim. [00:03:50] Speaker 05: The Fifth Circuit has said that, this is blue book three, that you have to look within, if an agreement [00:04:01] Speaker 05: is unambiguous, you have to look within the agreement, the four corners. [00:04:06] Speaker 05: And this district court said that the agreement was unambiguous. [00:04:19] Speaker 02: Was it wrong to look at the complaint? [00:04:22] Speaker 05: Well, that's exactly right. [00:04:27] Speaker 05: But the complaint does not say that the [00:04:29] Speaker 05: memory products infringe. [00:04:31] Speaker 05: It says the memory products when connected to a testing equipment infringe. [00:04:36] Speaker 05: Therefore, the memory products are not accused products. [00:04:41] Speaker 05: There are no accused products from SMART. [00:04:45] Speaker 05: And the judge would not, the district judge would not allow me to point out that in a response to discovery, this statement was, we were asked what the accused products are, and we said, [00:04:59] Speaker 05: There are no accused products, because we have not said that the memory products infringe. [00:05:07] Speaker 05: The judge said, no, the settlement term cheat is unambiguous, and I won't, though I would it. [00:05:16] Speaker 05: So we don't have it here. [00:05:22] Speaker 02: I thought the district court was also afraid that if the court adopted your interpretation, that would render the terms of the settlement meaningless. [00:05:37] Speaker 02: That's a canon of interpretation, right? [00:05:42] Speaker 02: Trying to give meaning to the terms of a green thing. [00:05:47] Speaker 05: Well, the law, as the district judge stated, and as you have stated, [00:05:52] Speaker 05: is clearly that the accused products are what the complaint says is being infringed. [00:06:01] Speaker 05: You can make it up as anything you want, but then you're not following the law. [00:06:07] Speaker 05: Then you're saying, oh, well, it's mentioned in the complaint. [00:06:14] Speaker 05: Therefore, anything mentioned in the complaint is an accused product. [00:06:18] Speaker 05: I'm sorry, but that does not follow the law, and it's not even logical. [00:06:24] Speaker 04: What are the accused products? [00:06:27] Speaker 05: There are none, Your Honor. [00:06:29] Speaker 04: You brought a complaint for infringement of no accused product. [00:06:33] Speaker 05: The infringement occurs. [00:06:36] Speaker 05: You have a memory product that is not fringing. [00:06:41] Speaker 05: It's a direct infringement. [00:06:43] Speaker 05: When you put it in the test equipment to test it, that combination of the two creates for the few seconds that the testing is occurring, [00:06:52] Speaker 05: That's when the direct infringement occurs. [00:06:55] Speaker 05: And that's all that's described in the second amended complaint. [00:06:58] Speaker 03: So you think a fair reading of the complaint was that you were not accusing Smart Modular of infringement under 271A, B, or C for making, using, and selling the DDR memory products? [00:07:15] Speaker 05: No, Your Honor. [00:07:17] Speaker 05: It's infringement under 271A because [00:07:21] Speaker 05: That moment when they're testing it, there is infringement. [00:07:25] Speaker 05: The memory product itself can't infringe. [00:07:28] Speaker 05: The claim has two other components. [00:07:32] Speaker 05: Besides the memory, it has the control device electrically isolating. [00:07:36] Speaker 03: This goes to your view that the complaint was strictly a 271A direct infringement complaint, right? [00:07:44] Speaker 03: Yes. [00:07:45] Speaker 03: And that it's wrong to understand the complaint is [00:07:49] Speaker 03: potentially encompassing 271B and 271C theories. [00:07:54] Speaker 03: Is that right? [00:07:54] Speaker 05: Exactly. [00:07:55] Speaker 05: And this is pointed out by the Court in the amended memorandum, which starts at Appendix Page 1, and at Appendix Page 6, the Court says that the Second Amendment Appointment contains one count charge of direct patent infringement, [00:08:20] Speaker 05: and goes on to say that when it's tested, and this is described in the second amended paragraph 13. [00:08:27] Speaker 01: But the same second amended complaint, which I'm looking at now on page five, at the end of that count one, which is titled direct patent infringement, the prayer for relief is an injunction prohibiting not just testing, but selling any of the modules at DDR2, DDR3, DDR4. [00:08:48] Speaker 01: If those modules standing alone don't amount to direct infringement, how could you have sought an injunction prohibiting their sale unless you were implicitly arguing that they amounted to induced infringement or contributory infringement because they had no non-infringing uses? [00:09:08] Speaker 01: How could you have prayed for an injunction on the sale of those products if you're now standing in front of me and saying those products standing alone don't cause any harm to anybody? [00:09:19] Speaker 05: Excuse me, Your Honor, I did not say they caused no harm. [00:09:24] Speaker 05: I did not imply that in any way. [00:09:27] Speaker 05: I said the second amended complaint and the district court agreed has a single direct claim of infringement and it only occurs at the time that's being tested. [00:09:42] Speaker 01: The district court and this court has said that- But if that's true, how could you have asked for an injunction on the sale of the modules? [00:09:50] Speaker 01: Do you see the inconsistency in your own complaint? [00:09:53] Speaker 01: Your complaint alleges there are no other possible non-infringing uses for these modules. [00:09:59] Speaker 01: That rings a lot like a 271B or C argument. [00:10:05] Speaker 01: And then the prayer for relief you have goes beyond what you would be entitled to under a direct infringement claim. [00:10:10] Speaker 01: unless you were claiming the modules themselves directly infringed. [00:10:15] Speaker 05: I did not claim that. [00:10:16] Speaker 05: It could not possibly occur. [00:10:18] Speaker 05: The claim, one of the broadest claims, would not allow that. [00:10:24] Speaker 05: Look, when you make the prayer, you want costs, you want damages, you ask for a lot of things. [00:10:31] Speaker 05: You don't get them, but you can ask for them. [00:10:33] Speaker 04: Mr. Fink, Mr. Goodman is your client? [00:10:37] Speaker 05: Yes, Your Honor. [00:10:38] Speaker 04: I have before me a copy of the settlement term sheet. [00:10:43] Speaker 04: His signature is on it. [00:10:45] Speaker 05: Yes, Your Honor. [00:10:47] Speaker 04: Paragraph 2 says Goodman shall stipulate that all accused products do not infringe his U.S. [00:10:55] Speaker 04: patent 315. [00:10:58] Speaker 04: What did he think he was talking about? [00:11:02] Speaker 05: Well, if you had a set of numbers, odd numbers, that were equal [00:11:08] Speaker 05: to two odd numbers that were added together, you would have nothing in it. [00:11:13] Speaker 05: And that's exactly what was happening. [00:11:15] Speaker 05: It was a set that has nothing in it. [00:11:18] Speaker 04: What did Mr. Goodman think he was stipulating when he stipulated that all accused products do not infringe? [00:11:24] Speaker 04: What was he talking about? [00:11:26] Speaker 05: He was thinking that he wasn't causing any damage to himself because it's a meaningless statement drafted by three brilliant attorneys. [00:11:35] Speaker 05: on the other side. [00:11:36] Speaker 04: You're saying he knew this was false. [00:11:38] Speaker 05: That is correct. [00:11:43] Speaker 04: Well, that raises a whole other set of questions, doesn't it? [00:11:50] Speaker 01: Okay. [00:11:50] Speaker 01: Mr. Fink, you want to save the rest of your time for rebuttal? [00:11:53] Speaker 05: Yes. [00:12:04] Speaker 00: Contract enforcement is a two-step process. [00:12:07] Speaker 00: The court interprets any contract terms in dispute as a matter of law, and then applies those terms. [00:12:15] Speaker 00: Here, the district court was analyzing the party's settlement term sheet, which is a contract. [00:12:22] Speaker 00: It interpreted the accused products as the products that were accused of infringement and infringement under the full scope of Section 271. [00:12:33] Speaker 00: including subparts A, B, and C. The contract analysis is roughly analogous to patent law, where the court interprets a claim term as a matter of law, and then the fact finder applies the interpreted claim term. [00:12:50] Speaker 00: Here the district court found that the terms are unambiguous, excluded parole evidence, and found that the unambiguous reasonable interpretation [00:13:04] Speaker 00: was the full extent of 271, and rejected the plaintiff appellant's interpretation as rendering the contract term meaningless, which is contrary to Texas contract law. [00:13:17] Speaker 00: The judge also noted that the appellant's admission in the district court that the term would be meaningless was extrinsic evidence, which he would not consider. [00:13:29] Speaker 00: He didn't need to. [00:13:29] Speaker 00: He got there as a matter of law in his own conclusion. [00:13:35] Speaker 00: The appellate court reviews the conclusions of law de novo without deference. [00:13:42] Speaker 00: But the second step, applying the interpreted contract terms, is a question of fact. [00:13:49] Speaker 00: The district court took the contract, took the complaint, three complaints. [00:13:55] Speaker 00: And although it analyzed in its orders just the complaints, it had before it 29 instances from the briefs and the pleadings. [00:14:05] Speaker 00: where the defendant argued the plaintiff identified the DDR2, 3, and 4 memory products as the accused products and determined as a question of fact that those were the accused products. [00:14:19] Speaker 00: That is a finding of fact, which this court will only reverse for an abuse of discretion. [00:14:27] Speaker 00: Now, the district court analyzed the admissions of the plaintiff that were in the court record. [00:14:34] Speaker 00: It rejected, after its analysis, the plaintiff's arguments and reviewed the defendant's arguments. [00:14:42] Speaker 00: That is not an abuse of discretion. [00:14:45] Speaker 00: Interesting, the real issue here, although the plaintiff appellant argues it in the briefing, of an implacability in appropriate use of the extrinsic evidence, is incorrect. [00:14:59] Speaker 00: What the appellant is actually disputing is that the court made a finding of fact [00:15:05] Speaker 00: appropriate finding a fact that the appellant disagrees with. [00:15:09] Speaker 00: Because the appellant does not argue from the settlement term sheet. [00:15:14] Speaker 00: The appellant argues from the complaint, saying that the conclusion from the complaint should have been contrary to the district court's finding. [00:15:23] Speaker 00: That is a finding of fact which this court cannot reverse but for abuse of discretion. [00:15:29] Speaker 00: There was no abuse of discretion here as the district court's analysis was complete and reasonable. [00:15:36] Speaker 00: And with that, I'll concede my time. [00:15:38] Speaker 01: Okay. [00:15:39] Speaker 01: Thank you, Mr. Heafy. [00:15:40] Speaker 01: Mr. Fink, you have some rebuttal time. [00:15:42] Speaker 05: Your Honor, I'd like to point out that at the appendix, page 6, the district court said that in order to interpret, quote, [00:16:06] Speaker 05: of the settlement term sheet. [00:16:09] Speaker 05: He wanted to incorporate the products discussed in the second amendment complaint. [00:16:16] Speaker 05: That was his finding. [00:16:18] Speaker 05: I would also like to point out that my distinguished colleague in the red book at page seven said that contract terms are given their plain [00:16:31] Speaker 05: ordinary and generally accepted meaning unless the instrument shows that parties use them in a technical or different sense. [00:16:38] Speaker 05: This is citing the case of energy mid-screen servicing. [00:16:46] Speaker 05: The district court and this court agrees that accused products are what the patent says are infringing. [00:16:57] Speaker 05: It can't be the memory product. [00:16:59] Speaker 05: It is not possible. [00:17:01] Speaker 05: Then we would be here talking about patent abuse. [00:17:06] Speaker 05: I'd also like to mention that there are other documents that are not before this Court, like a license agreement, so that the life and future of SMART doesn't depend upon this, because the settlement term sheet requires a license agreement, and that's been executed. [00:17:28] Speaker 05: Any questions, please? [00:17:31] Speaker 01: No, no questions. [00:17:32] Speaker 01: Okay, thank you, Mr. Pink. [00:17:34] Speaker 01: I thank both counsel for their argument. [00:17:36] Speaker 01: The case is taken under submission.