[00:00:29] Speaker 02:
Final case this morning is number 17-2462, Andrea versus Barnes and Noble Inc.

[00:00:54] Speaker 01:
Mr. Ederer.

[00:00:56] Speaker 01:
Yes, good morning, Your Honors.

[00:00:57] Speaker 01:
May it please the Court.

[00:00:59] Speaker 01:
May I say most respectfully, if ever there was a case in which a defendant in a patent litigation who did not prevail on every infringement claim should be found to be the prevailing party.

[00:01:09] Speaker 02:
Why are we here in a dispute over $45,000 when the attorney's fees for the client must far exceed that?

[00:01:19] Speaker 02:
I'm sorry.

[00:01:19] Speaker 02:
Why are we here over a dispute involving $45,000 when the attorney's fees for the appeal must be two or three times that?

[00:01:28] Speaker 01:
Yeah, well, the answer to that question, Your Honor, is that our client feels very strongly that the law was incorrectly applied and that it should be declared the prevailing party.

[00:01:37] Speaker 01:
It's more about the, it's not about the $45,000.

[00:01:42] Speaker 01:
We've already paid the judgment in this case, which was well more than that.

[00:01:46] Speaker 01:
It's about the principle of applying the law correctly.

[00:01:50] Speaker 04:
There's gotta be more than that here.

[00:01:52] Speaker 04:
I mean, $45,000, the appeal costs more than that.

[00:01:55] Speaker 04:
You know you're taking our time.

[00:01:57] Speaker 04:
and asking the court to spend all this time reading briefs and getting prepared and sitting here for oral argument.

[00:02:02] Speaker 04:
And you're splitting hairs.

[00:02:05] Speaker 04:
It's either $40,000 or maybe there's a $10,000 figure here.

[00:02:09] Speaker 04:
But it doesn't even make any sense that you all haven't been able to resolve this.

[00:02:14] Speaker 01:
Well, the main focus of the appeal, there is, of course, a portion of the appeal where we talk about some of the individual costs.

[00:02:21] Speaker 01:
That's correct.

[00:02:21] Speaker 01:
But the focus of the appeal is more on the question of who was the prevailing party and whether

[00:02:26] Speaker 01:
we should be required to pay costs at all.

[00:02:28] Speaker 01:
So I do understand your point.

[00:02:31] Speaker 01:
It is a relatively small amount.

[00:02:33] Speaker 01:
But for our client, it really is a matter of principle here.

[00:02:38] Speaker 01:
Because it really does feel that after all of the time that was spent in this case over a four-year period through two full trials, the end result was clear.

[00:02:46] Speaker 01:
In other words, it's a case about emotion rather than money.

[00:02:51] Speaker 01:
Well, you can put it that way.

[00:02:52] Speaker 01:
But I'd rather use the word principle than emotion, Your Honor.

[00:02:58] Speaker 01:
So I would also say that in addition to requesting that the law be applied so that this court would find that Barnes and Noble is, in fact, the prevailing party in this case, at worst, this is just the kind of mixed results case where neither party prevailed sufficiently and each party should have to bear its own costs.

[00:03:19] Speaker 04:
With respect to the secondary disputes as to the

[00:03:24] Speaker 04:
small matters.

[00:03:25] Speaker 04:
Why didn't you file a motion for correction of the judgment or reconsideration to address those areas where you think that the court might have inadvertently included a cost that shouldn't have been included?

[00:03:38] Speaker 04:
Because again, the focus of our point here is with respect to the issue of whether or not... Perhaps you could have at least cleaned up that if you really thought it was worthy of getting fixed before you came up here, right?

[00:03:50] Speaker 01:
I suppose that's true, Your Honor, but I think that

[00:03:52] Speaker 01:
In some of those instances as well, there was simply a misapplication of the law and not necessarily just a mistake or a correction.

[00:04:00] Speaker 01:
So if we were to have made a motion for reconsideration, we would have to show that the judge failed to apply the law correctly or he overlooked the law.

[00:04:10] Speaker 01:
If it was on an issue of whether there was a mistake in the calculation, I agree with Your Honor, we could have done that.

[00:04:16] Speaker 04:
Are you advocating for a rule that says every time there are mixed results, there is no prevailing party?

[00:04:21] Speaker 01:
No.

[00:04:22] Speaker 01:
What we're saying here is in a case where we believe the results were in our favor, that this is the type of case where if we are not going to be declared the prevailing party in the first instance, which we believe under Federal Circuit law we should be, that since we prevailed to a greater extent than the plaintiff did, this should be a mixed results case.

[00:04:46] Speaker 04:
Is your focus on the dollar figure being less than they asked for, or what is the focus?

[00:04:53] Speaker 01:
The focus of the appeal, the main focus of the appeal is to get a declaration that we were the prevailing party and therefore we do not have to pay any costs.

[00:05:03] Speaker 02:
But why does that depend on the number of patents or the amount that was recovered?

[00:05:08] Speaker 02:
I mean, as I understand it, there was only a single product here which was involved, which is the Nook, right?

[00:05:15] Speaker 01:
That's correct, although there were different Nook models that were the subject of the litigation.

[00:05:19] Speaker 02:
Did the infringement of the various models depend on which patent was infringed?

[00:05:25] Speaker 01:
Well, as a matter of fact, Your Honor, the one patent that we were found ultimately to have infringed was a patent that related to a feature called the shop feature.

[00:05:36] Speaker 01:
And the question was whether or not that shop feature was, which provided information about the books that a consumer may wish to purchase.

[00:05:44] Speaker 01:
The question was whether that shop feature provided that information without accessing a web browser.

[00:05:50] Speaker 02:
We, of course, took the position... Does that apply to all the Nook models?

[00:05:54] Speaker 02:
Sorry?

[00:05:54] Speaker 02:
Did that apply to all the Nook models?

[00:05:57] Speaker 01:
No, it applied to the Nook models that were being sold at the time, but by the time this case... No, no.

[00:06:03] Speaker 02:
What I'm trying to understand is the patent that was found in French.

[00:06:08] Speaker 02:
If you

[00:06:08] Speaker 02:
as to the other patents, one of which was found invalid, the other one was found not infringed, did those cover different products than the one where infringement was found?

[00:06:19] Speaker 01:
No, what I'm saying is that... No, it's the same product.

[00:06:22] Speaker 01:
It's the same product, but the patent that was found to have been infringed only applied to certain models, whereas the other patents applied more broadly to all Nook models that were available at the time.

[00:06:35] Speaker 01:
So for example, one of the patents, the patent that was found to be invalid

[00:06:38] Speaker 01:
was the lending patent.

[00:06:40] Speaker 01:
The Barnes and Noble nooks all had a feature called Lend Me whereby they, the user could lend the books that they had downloaded to their system to their friends who had a nook as well for a certain period of time.

[00:06:53] Speaker 01:
That applied to all Barnes and Noble models.

[00:06:56] Speaker 01:
But the patent that was found to have infringed only applied to certain models that didn't have a web browser.

[00:07:01] Speaker 01:
By now, by the time of the second trial in this case, all nook models had a web browser.

[00:07:06] Speaker 01:
So that, that patent was

[00:07:09] Speaker 01:
as far as we're concerned, the least important patent, and the third patent that we were found not to.

[00:07:13] Speaker 04:
But it's still a patent that you were found to infringe and to have caused damage, right?

[00:07:17] Speaker 01:
Correct.

[00:07:19] Speaker 01:
But I think you have to, the idea is to weigh the respective successes of the party to see which parties substantially prevailed.

[00:07:27] Speaker 01:
And I think if you do that here, we're not saying that the infringement was of no consequence.

[00:07:33] Speaker 01:
Of course it was of consequence.

[00:07:35] Speaker 01:
What we're saying is that of the three patents, that was the least important from the standpoint of the commercialization of these products.

[00:07:43] Speaker 01:
And the other patents, if we were found to have infringed, we would have had to change a very significant feature.

[00:07:49] Speaker 01:
And the third patent that we were not found to have infringed was a patent that talked about how books were sent from the cloud down to the user's nooks.

[00:08:00] Speaker 03:
That would have required a... I thought that our case law and prevailing party said that the party has to receive at least some relief on the merits and that the relief must materially alter the relationship between the parties by modifying one party's behavior in a way that directly benefits the opposing party.

[00:08:17] Speaker 03:
For one patent, even if you don't think it's the most important patent, how is that standard not met?

[00:08:23] Speaker 01:
I'm not here to suggest that that statement is not met.

[00:08:25] Speaker 01:
What I'm here to say is that Barnes and Noble II, by virtue of the fact that

[00:08:31] Speaker 01:
the patent was invalidated, also is eligible under that same test, which is what I call the Shum test.

[00:08:39] Speaker 01:
Right in the Shum case, it says that the invalidation of a patent also constitutes a material alteration.

[00:08:45] Speaker 04:
But when it comes to costs, the Court has the authority to say, well, there is one prevailing party, but I'm still going to choose not to award costs.

[00:08:59] Speaker 04:
But in this particular case, I mean, the courts don't say there are two prevailing parties and we divide cause.

[00:09:06] Speaker 01:
Correct.

[00:09:06] Speaker 01:
And I'm not that's not what I'm here to suggest.

[00:09:09] Speaker 01:
What I'm here to suggest is that when there are two parties that are both eligible to be the prevailing party, then the court must follow the and do the way the respective successes, which is the case of SSL,

[00:09:22] Speaker 04:
Just because some courts have chosen not to award costs in somewhat similar circumstances doesn't mean this court had to make that choice.

[00:09:32] Speaker 01:
No, but I think there's two issues here that are being conflated a little bit.

[00:09:38] Speaker 01:
The first issue is who is the prevailing party when both parties are eligible to be the prevailing party.

[00:09:45] Speaker 01:
And in that case, you have to follow the SSL test and weigh the respective successes of the parties.

[00:09:51] Speaker 01:
And we respectfully submit that if you weigh the respective successes of the parties, Barnes and Noble by far succeeded to a greater extent than Adrea did.

[00:10:00] Speaker 04:
But who is better equipped to decide what the ultimate respective successes of the parties are than the trial judge who sat through years of these proceedings?

[00:10:11] Speaker 01:
Well, I don't think that's the correct analysis here.

[00:10:15] Speaker 01:
First of all, I don't think the judge did do a proper analysis under the law.

[00:10:21] Speaker 01:
And by the way, on the second issue, the question of whether he exercised his discretion in this mixed judgments case to deny costs notwithstanding the fact that Adrea may have been the technical prevailing party, the judge didn't even address that issue in our motion, our post-trial motion for review.

[00:10:39] Speaker 01:
That issue he didn't even address.

[00:10:41] Speaker 01:
And as far as his determination with respect to who was the prevailing party from the standpoint of who prevailed more greatly, if you will,

[00:10:50] Speaker 04:
He made a mistake, because one of the things he said was that... Well, it's not a straight-up who prevailed more greatly, is it?

[00:10:58] Speaker 01:
It's a weighing of the respective successes to determine who was the substantial prevailing party.

[00:11:04] Speaker 01:
That is the test of this circuit.

[00:11:05] Speaker 01:
And we're entitled to a de novo review of that issue.

[00:11:11] Speaker 01:
And if you apply that test, we contend very strongly if you look at all the results here, including not only the number of patents

[00:11:19] Speaker 01:
parties prevail, but also how the damage award worked out, starting from a $12 million demand down to $1.33 million at the first trial when two patents were found to have been infringed, down to 266,000 on the second trial for damages.

[00:11:36] Speaker 01:
I think you can say that if you combine both the damage award and the results on the patents, we were the substantial prevailing party.

[00:11:43] Speaker 01:
But one other thing I'd like to say here is that one of the things that the district

[00:11:49] Speaker 01:
relied on was the fact that we had substantially modified our devices after having been found to have infringed the patent in question.

[00:12:05] Speaker 01:
And in making that reference, in his opinion, he was referring to Barnes and Noble's response to Adrea's request for supplemental damages.

[00:12:15] Speaker 01:
As I mentioned before, we had come out with a whole new range of nooks by the time the second trial took place in 2016.

[00:12:22] Speaker 01:
And Adrea made a motion for supplemental damages, saying all of your new products have the same feature as your old products, and therefore they should be folded in to the damage award.

[00:12:34] Speaker 03:
And we came back- You had said that the district court didn't use its discretion in analyzing the cost issues.

[00:12:42] Speaker 03:
And I know this is different, but what about where the court said it has discretion to deny costs, where the award would be inequitable, and then it says, for these particular costs, some deposition testimony, I'm not going to award the costs because these depositions related to issues on which Adrea did not win, I think, or something to that effect.

[00:13:03] Speaker 03:
And why isn't that appropriate in this circumstance to address the kind of concerns you have?

[00:13:09] Speaker 03:
Were you talking about possibly there being a situation where the party didn't prevail on all issues, and the court has discretion?

[00:13:18] Speaker 01:
Well, I think what you just said was a situation where the judge was looking at an individual cost that was at issue.

[00:13:25] Speaker 01:
And what we're saying is,

[00:13:28] Speaker 01:
that what he failed to address is the question of whether in a mixed results case like this one, it would have been inequitable for either party to have to pay costs.

[00:13:38] Speaker 01:
He did not address that issue whatsoever.

[00:13:40] Speaker 01:
He ignored it.

[00:13:41] Speaker 01:
And so that's our second point.

[00:13:43] Speaker 01:
Our first point is we're arguing that under this court's de novo review, we should be declared the prevailing party.

[00:13:49] Speaker 01:
The second issue is that the court abused its discretion by failing to address the mixed results question whatsoever.

[00:13:57] Speaker 01:
in the total context, not in regard to each individual cost that was at issue.

[00:14:03] Speaker 02:
Okay.

[00:14:03] Speaker 02:
You want to save your rebuttal time here?

[00:14:05] Speaker 01:
Yes.

[00:14:10] Speaker 02:
Mr. Brown?

[00:14:15] Speaker 00:
Thank you, Your Honor.

[00:14:15] Speaker 02:
May I please, the Quarry... There's a $10,000 error here, right?

[00:14:21] Speaker 00:
There's probably a $10,000 error here.

[00:14:24] Speaker 00:
I agree with that.

[00:14:26] Speaker 02:
If we were to affirm here, would you agree that you would stipulate to correct the judgment to take out the $10,000?

[00:14:35] Speaker 00:
Yes, Your Honor.

[00:14:44] Speaker 04:
Is there something else we're missing?

[00:14:46] Speaker 04:
Why are we here?

[00:14:50] Speaker 00:
We're here because

[00:14:54] Speaker 00:
Barnes and Noble's view of this case as being one that they want to... I shouldn't say what they want.

[00:15:04] Speaker 00:
They have, throughout this litigation, made it clear that they don't want to settle anything.

[00:15:09] Speaker 00:
They don't want to agree to anything.

[00:15:11] Speaker 00:
I mean, my impression has been that they wanted to make the litigation as painful and expensive as they could.

[00:15:24] Speaker 00:
Nothing more.

[00:15:26] Speaker 04:
Okay.

[00:15:27] Speaker 04:
That was probably an unfair question.

[00:15:28] Speaker 00:
Go ahead.

[00:15:31] Speaker 00:
Okay.

[00:15:31] Speaker 00:
A couple of points that were raised in questions on Mr. Ederer's presentation.

[00:15:39] Speaker 00:
The products that were accused of infringing these, the patent that was found valid and infringed, are the same products that were accused of infringing the other patents.

[00:15:51] Speaker 00:
They're not two separate set of

[00:15:53] Speaker 00:
sets of products.

[00:15:55] Speaker 00:
All of the products that were involved were accused and found to infringe the patent that survived.

[00:16:09] Speaker 00:
Mr. Ederer said that he does not contest the judge's conclusion that we met the test that was used by the Supreme Court in the Ferrari-Vehavi decision

[00:16:22] Speaker 00:
He agreed, he seemed to agree that we met that test.

[00:16:26] Speaker 00:
That should be the end of the discussion of whether we are properly found a prevailing party.

[00:16:32] Speaker 00:
This court has consistently followed the Farrar test on prevailing party.

[00:16:40] Speaker 00:
It adapted that test to patent infringement cases and the Menildra-Milling case.

[00:16:49] Speaker 00:
In Menildra Milling, it faced a situation where a plaintiff had not obtained a money judgment for patent infringement and pointed out that the district court was faced with the question of whether a plaintiff could still be a prevailing party without having obtained a money judgment.

[00:17:08] Speaker 00:
It determined that it could, given the complete success on the patent issues in that case.

[00:17:18] Speaker 00:
Next case that this court decided on this issue was the Shum case.

[00:17:23] Speaker 00:
In that case, both parties had filed bills of costs.

[00:17:28] Speaker 00:
That is unlike this case, although Mr. Etter here is claiming that they were entitled to be considered as a prevailing party.

[00:17:37] Speaker 00:
They did not even file a bill of cost, claiming to be a prevailing party in the district court.

[00:17:42] Speaker 00:
Only Adraeli filed a bill of costs.

[00:17:46] Speaker 00:
But in Shahn, both parties had filed a bill of cost.

[00:17:50] Speaker 00:
The plaintiff had, in that case, sued a former business partner, claiming that he should have been named as a co-inventor and that he should have received a share of the takings on the technology that his partner had been taken to Intel.

[00:18:11] Speaker 00:
Both parties filed bills of cost.

[00:18:16] Speaker 00:
The plaintiff obtained only a declaration of co-inventorship on certain patents.

[00:18:24] Speaker 00:
The court held that that was not sufficient for prevailing party status, and that the court concluded that that did not provide to the plaintiff any rights that he didn't have under contractual arrangements that pre-existed the case.

[00:18:45] Speaker 00:
And so he did not meet the test that was announced in Farrar and that had been followed in this court.

[00:18:52] Speaker 00:
In the SSL Services versus Citrix case, there wasn't actually a weighing of the relative successes of the parties.

[00:19:05] Speaker 00:
The court looked at a case where there had been two patents asserted.

[00:19:09] Speaker 00:
One was found valid and infringe, and one was found invalid.

[00:19:16] Speaker 00:
and the court looked at the results and noted that the plaintiff had not prevailed in all claims, but said that it was dispositive that the plaintiff had obtained a money judgment that met the test that had been set out in Farrar and followed by this court consistently.

[00:19:38] Speaker 00:
So Adrea disagreed with the

[00:19:43] Speaker 00:
basic contention that Barnes and Noble had made that there is a weighing to be done by the district court in determining who is the prevailing party, especially in a case where the plaintiff is a patent infringement plaintiff who has obtained a money judgment for patent infringement.

[00:20:09] Speaker 00:
The district court did explain its exercise of discretion

[00:20:14] Speaker 00:
It went through the history of the case.

[00:20:16] Speaker 00:
It fairly carefully looked at each item of costs about which concerns had been expressed.

[00:20:24] Speaker 00:
And it explained why it was allowing some costs to Adre and not allowing other costs.

[00:20:33] Speaker 00:
The court issued a nine-page decision and fairly carefully looked at each concern that the parties had raised.

[00:20:42] Speaker 00:
The court has indicated there is what looks like might be a mistake in terms of the award relating to the transcript costs.

[00:20:54] Speaker 00:
I would only point out that the court's comment that it was awarding fees in connection with the 2014 trial was in response to a comment from the clerk.

[00:21:12] Speaker 00:
And the district court was responding to a comment about not allowing the costs for the 2014.

[00:21:21] Speaker 04:
But the $10,000 relates to the disquettes in the real time.

[00:21:29] Speaker 00:
So it's a little confusing as to what the $10,000 is.

[00:21:33] Speaker 00:
But it's the disquettes in the real time and the challenge.

[00:21:39] Speaker 04:
Right, the stuff you didn't ask.

[00:21:41] Speaker 00:
Well, the stuff that we did not ask for in the request to review the clerk's initial taxation of costs, we had asked for it initially.

[00:21:53] Speaker 02:
But you weren't arguing before the district court that you were entitled to that.

[00:21:58] Speaker 00:
I beg your pardon?

[00:21:58] Speaker 02:
You were not arguing to the district court as opposed to the clerk that you were entitled to that.

[00:22:06] Speaker 00:
We did not make that argument in the motion to the district court.

[00:22:11] Speaker 02:
But you've agreed to correct that?

[00:22:13] Speaker 00:
Absolutely, Your Honor.

[00:22:16] Speaker 02:
OK.

[00:22:16] Speaker 02:
Anything further?

[00:22:18] Speaker 00:
I have nothing further to add.

[00:22:20] Speaker 02:
OK.

[00:22:20] Speaker 02:
Thank you.

[00:22:24] Speaker 02:
Mr. Editor.

[00:22:26] Speaker 01:
Just very briefly, Your Honor.

[00:22:28] Speaker 01:
First of all, I take issue with Mr. Brown's statement that Barnes & Noble is trying to make this as painful as possible.

[00:22:34] Speaker 01:
We were the parties.

[00:22:35] Speaker 01:
We were the parties who were sued for $12.4 million for three counts of patent infringement.

[00:22:39] Speaker 04:
You don't need to respond to that.

[00:22:40] Speaker 04:
That was not a fair question for me to ask.

[00:22:43] Speaker 01:
Secondly, and I think this is more germane to what we're here today to talk about, Mr. Brown misdescribed the holding in SSL services versus Citrix systems.

[00:22:53] Speaker 01:
First of all, that case specifically says that the plaintiff was declared the prevailing party, but only, quote, in view of the party's respective successes, meaning that this court did do a weighing

[00:23:05] Speaker 01:
of the relative successes of the parties to determine who should be declared the prevailing party, even though both parties were eligible to be declared the prevailing party.

[00:23:15] Speaker 01:
And he also misstated the outcome of that case, because he said that there was a finding of invalidity.

[00:23:22] Speaker 01:
That's not correct.

[00:23:23] Speaker 01:
What happened in that case was that plaintiff prevailed on one of the patents and was awarded $15 million in damages, including an enhancement for willfulness.

[00:23:32] Speaker 01:
The defendant prevailed on the other patent by proving only non-infringement, but defendant's invalidity claim was rejected.

[00:23:38] Speaker 01:
That's quite a significant difference from our situation, where the ultimate damage award was reduced from millions of dollars to $260,000, and there was a finding of invalidity.

[00:23:50] Speaker 01:
So I think if you do the weighing that SSL and other cases say should be done and which should be done de novo, Barnes & Noble should be found to be the prevailing party.

[00:24:02] Speaker 01:
Thank you, Your Honor.

[00:24:03] Speaker 02:
Okay, thank you, Mr. Chair.

[00:24:04] Speaker 02:
I thank both counsels for the cases submitted.

[00:24:06] Speaker 02:
That concludes our session for today.