[00:00:00] Speaker 02:
1813 Board of Trustees of University of Illinois versus Micron Technology, Mr. Schertzer.

[00:00:24] Speaker 04:
Your Honor, Adam Scharzer on behalf of Micron Technology again.

[00:00:27] Speaker 04:
May it please the court.

[00:00:29] Speaker 04:
For seven years, Micron has litigated this case.

[00:00:32] Speaker 04:
For the last nearly four years, it's litigated this case after every claim of all three patents of the university's patents at issue with respect to this set of litigation were invalidated by the PTAB and that judgment was affirmed by this court.

[00:00:48] Speaker 00:
Are you seeking work, seeking fees for work

[00:00:52] Speaker 00:
on the patent aspects of this case?

[00:00:55] Speaker 04:
Well, we have sought fees with respect to certainly the breach of contract.

[00:01:01] Speaker 04:
We think that is the activity that's most concerning here.

[00:01:05] Speaker 04:
Below, I think, well, certainly the federal rules require that when seeking fees, one list an estimate of fees.

[00:01:13] Speaker 04:
And we provided an estimate of fees broken down for the district court by the work that was done on the patent work before the patents were invalidated.

[00:01:22] Speaker 04:
the work that was done at the PTAB, and then the work that was done after this court's affirmance of the PTAB's decisions.

[00:01:30] Speaker 04:
So your attorney's fees claim was limited to the third category?

[00:01:35] Speaker 04:
And I think the Supreme Court president would bear that out, that our fees that we would see need to be related to the work that was done with respect to the unreasonable conduct that makes this case exceptional.

[00:01:49] Speaker 04:
And the unreasonable conduct arose when we went back to the district court nearly four years ago following the invalidity of these patents.

[00:01:56] Speaker 00:
So can I ask what I realize is a point that you and I did not latch on to below.

[00:02:06] Speaker 00:
But why is it not quite clear under our precedent, how everyone pronounces that?

[00:02:13] Speaker 00:
that 285 just absolutely does not authorize the award of fees for this contract claim, which is not piggybacked on the patent claim.

[00:02:26] Speaker 04:
Well, Your Honor, I would have to respectfully disagree that there's not a piggyback here.

[00:02:31] Speaker 00:
All right.

[00:02:32] Speaker 00:
Let me be more precise.

[00:02:33] Speaker 00:
Was it inter-spiro?

[00:02:34] Speaker 00:
Is that the first case?

[00:02:35] Speaker 04:
That's correct.

[00:02:36] Speaker 00:
So that said, and then was read by Gujralov to say, we have a state law claim whose content depends on finding patent infringement.

[00:02:46] Speaker 00:
That's false here.

[00:02:48] Speaker 00:
It's not true here.

[00:02:49] Speaker 00:
We have an independent contract claim not tied in that specific way to a claim of patent infringement.

[00:02:57] Speaker 00:
Why does Gujralov and the earlier case Machinist

[00:03:01] Speaker 00:
not absolutely bar use of 285 for fees for that work.

[00:03:07] Speaker 00:
And I realize you and I did not make this argument below.

[00:03:13] Speaker 00:
We're entitled sometimes to decide legal questions that were not preserved below.

[00:03:22] Speaker 00:
So two questions.

[00:03:23] Speaker 00:
Why is it wrong on the merits?

[00:03:25] Speaker 00:
And then we can talk about why this isn't the case in which we

[00:03:29] Speaker 00:
ought to overlook the waiver because the answer is so clear.

[00:03:32] Speaker 04:
Well, Your Honor, it's wrong on the merits because of the positions that the university has taken throughout this litigation, which is that it could not prove a breach of contract until it first proved patent infringement.

[00:03:44] Speaker 04:
This is patent infringement of invalid patents.

[00:03:47] Speaker 04:
So if you turn with me to your appendix, page 5787, and this is in the sealed record,

[00:03:55] Speaker 04:
But I will read this because I don't believe this is at all confidential.

[00:04:00] Speaker 04:
The university took the position.

[00:04:02] Speaker 04:
The fact is that Micron has known since at least August 2015, and that's after we went back down on the remand, or not on a remand, but we went back to the district court for the breach of contract claim after invalidity.

[00:04:14] Speaker 04:
The fact is that Micron has known since at least August 2015 that the university would rely on patent infringement to establish breach of contract

[00:04:24] Speaker 04:
So the university has been utterly clear throughout.

[00:04:27] Speaker 04:
Now, they've taken positions.

[00:04:28] Speaker 04:
They've bounced around with positions.

[00:04:29] Speaker 04:
They say, well, no, it's not patent infringement.

[00:04:32] Speaker 04:
It's just practicing the claims.

[00:04:34] Speaker 04:
And that's not infringement.

[00:04:35] Speaker 04:
And linear tech resolves that in my runs favor.

[00:04:38] Speaker 04:
But it is very clear that the university has always pursued its breach of contract claim as a second bite at the apple to try to prove patent infringement.

[00:04:48] Speaker 04:
And that's the problem with the university's case when we went back down.

[00:04:52] Speaker 04:
upon invalidation of the university's patents, they were not entitled to carry a case forward attempting to prove patent infringement.

[00:05:01] Speaker 00:
So the term patent infringement can have at least two different meanings.

[00:05:04] Speaker 00:
One is liability for practicing the patent.

[00:05:14] Speaker 00:
And the other is just practicing the patent.

[00:05:16] Speaker 00:
So once there's no valid patent,

[00:05:21] Speaker 00:
Right?

[00:05:21] Speaker 00:
There can't be any liability for anything you do under that patent.

[00:05:26] Speaker 00:
But why is there argument not simply we understood that the proprietary interest that the contract, we say, obliged us to honor is exactly what would be covered by

[00:05:48] Speaker 00:
practicing the steps laid out in the claims.

[00:05:51] Speaker 00:
Call that infringement.

[00:05:52] Speaker 00:
We don't care whether you call it infringement.

[00:05:54] Speaker 00:
It's the definition of the interest.

[00:05:56] Speaker 00:
Why would that be on the inter-spiro as opposed to the gizharov off side of the line about 285's coverage?

[00:06:06] Speaker 04:
Well, Your Honor, I think that the inter-spiro case resolve is because the inter-spiro case is very similar to the claim in which the university

[00:06:14] Speaker 04:
brought here, except in the Inner Spiro there was actually a commercial license agreement and it was the alleged breach of the commercial license agreement which predicated a breach of contract claim going through the district courts.

[00:06:28] Speaker 04:
And as part of trying to prove the breach, the plaintiff there with the license agreement and the IP had to prove patent infringement.

[00:06:38] Speaker 04:
But the patent infringement issues were resolved

[00:06:40] Speaker 04:
before, just like this case.

[00:06:42] Speaker 02:
Yeah, but even if that weren't true, isn't this a situation in which, in order to determine the amount of a license, you would have to consider patent issues?

[00:06:51] Speaker 02:
And it's inextricably intertwined in that sense anyway, isn't it?

[00:06:56] Speaker 04:
Well, I think that's right.

[00:06:58] Speaker 04:
The problem here, though, is the agreement itself, the word agreement that we were just looking at, doesn't include any measure of damages or define how to calculate damages.

[00:07:10] Speaker 04:
And that's the difference between a lot of these cases with respect to breach of contract claims is there is an actual license agreement that requires royalty payments.

[00:07:17] Speaker 02:
But in order for them to prevail, they'd have to show what a reasonable royalty, reasonable license fee would have been here.

[00:07:25] Speaker 02:
And in order to determine what a reasonable license fee would have been, you certainly would have to consider patent issues.

[00:07:32] Speaker 04:
Well, that's absolutely true.

[00:07:33] Speaker 04:
And that's what the university pursued down the low.

[00:07:36] Speaker 04:
The university pursued its patent infringement claim.

[00:07:39] Speaker 04:
It served on us patent infringement expert reports.

[00:07:43] Speaker 02:
I don't think you're understanding what I'm saying.

[00:07:45] Speaker 02:
I'm saying even if it's true that you could show a breach of the license agreement without getting into patent issues, in order to determine the amount of damages, you'd have to determine what a reasonable license fee

[00:08:04] Speaker 02:
was, and in order to determine what a reasonable license fee was at the time, you would have to get into patent issues.

[00:08:11] Speaker 02:
So at least to that extent, it's inextricably intertwined.

[00:08:15] Speaker 04:
That's absolutely true.

[00:08:16] Speaker 04:
And that is the standard that Innerspirit set forth, is this inexplicably intertwined standard.

[00:08:24] Speaker 04:
And that is the measure of damages that the university has pursued in an attempt to prove up alleged contract damages.

[00:08:31] Speaker 04:
They served an expert report.

[00:08:32] Speaker 04:
based under the entire market value rule theory.

[00:08:35] Speaker 04:
And that was an expert report that we had to file a Dow-Behr motion against down below.

[00:08:39] Speaker 04:
All of this despite the existence of a stipulated judgment as to non-infringement by all of Micron's products.

[00:08:46] Speaker 04:
So we were all a little dumbfounded when we went back down to the district court.

[00:08:51] Speaker 04:
We entered into a stipulated judgment of invalidity and non-infringement and then had to pursue all of our patent infringement defenses

[00:09:01] Speaker 04:
as well as defenses to a trade secret misappropriation claim.

[00:09:05] Speaker 04:
There was an attempt to backdoor that in to the case, which we learned was baseless from the university's corporate witness.

[00:09:11] Speaker 02:
Why don't you spend a few minutes, unless there are other questions on this point, telling us why we should reverse the district court's discretionary determination not to award fees?

[00:09:24] Speaker 04:
Your Honor, here with respect to the district court's termination, we all know that the district court was required to apply the totality of the circumstances standard.

[00:09:34] Speaker 04:
Instead, what the district court applied was a Rule 12 standard and determined that in the district court's determination, the most egregious action was the motion to dismiss and that the university had survived

[00:09:52] Speaker 04:
a motion to dismiss and that therefore they could proceed in this case wasn't exceptional.

[00:09:56] Speaker 04:
But by failing to consider 11 different circumstances in the record below that we raised to the district court.

[00:10:04] Speaker 02:
What do you mean failure to identify in its opinion?

[00:10:06] Speaker 02:
It didn't say it didn't consider.

[00:10:09] Speaker 04:
Well, certainly the district court identified invalidity as something that it was at least aware of.

[00:10:16] Speaker 04:
But the district court never identified the stipulated judgment of non-infringement.

[00:10:21] Speaker 02:
and our arguments with respect to that and how that precluded the... The district court doesn't have to write an opinion addressing every circumstance, does it?

[00:10:31] Speaker 04:
Well, by focusing on the Rule 12 standard, the district court necessarily failed to consider the totality of the circumstances that were raised by Micron's briefing below.

[00:10:44] Speaker 04:
The Supreme Court and Octane Fitness also provided a separate independent basis for awarding fees

[00:10:51] Speaker 04:
in 285 cases, and that's on the basis of evidence of unreasonable conduct.

[00:10:56] Speaker 04:
In particular, unreasonable conduct that goes unrebutted below, and that's exactly what we had here as well.

[00:11:03] Speaker 04:
We raised a number of issues of the university's unreasonable conduct with respect to litigating this as a patent infringement case despite the existence of the stipulated judgment of non-infringement and the judgment of invalidity.

[00:11:17] Speaker 00:
But why isn't it at least a reasonable answer to say now you're just playing a language game about the term infringement?

[00:11:24] Speaker 04:
Because linear tech precludes that, your honor.

[00:11:26] Speaker 04:
Linear tech, in that opinion, linear tech said there's no substantial evidence that AATI actually practiced the claimed method, which is required to prove infringement.

[00:11:40] Speaker 04:
This actually practice argument that the university makes is an argument they now make for the first time on appeal.

[00:11:46] Speaker 04:
trying to draw some line in between actually practice and infringement, but linear text shuts that down.

[00:11:51] Speaker 00:
And so that's why the university... How did the case in the district court get to the point?

[00:11:57] Speaker 00:
I didn't think it did get to the point where there was any adjudication or even preliminary adjudication about whether if they were right about their view of the work agreement and what they would have to show is that

[00:12:15] Speaker 00:
the commercial use met the terms of the claim.

[00:12:20] Speaker 00:
We don't have any opinion that says anything, do we, about whether?

[00:12:25] Speaker 04:
The university did not have no other position other than we breached this agreement because there was an alleged infringement that occurred.

[00:12:38] Speaker 00:
That is, you were doing things that the claims read on.

[00:12:42] Speaker 00:
Let's just call it that.

[00:12:43] Speaker 00:
Forget the word infringement.

[00:12:45] Speaker 00:
I think, un-clarifying.

[00:12:49] Speaker 00:
We don't have any litigation, do we, about any adjudication about what you were doing during the two and a half years or something that's really at issue here for either the claims read on that activity or didn't?

[00:13:04] Speaker 04:
There was no adjudication per se.

[00:13:07] Speaker 04:
There were a number of pending summary judgment motions below.

[00:13:10] Speaker 04:
For instance, we filed a motion for summary judgment

[00:13:13] Speaker 04:
of non-infringement and non-commercialization, which was mooted by the summary judgment grant.

[00:13:21] Speaker 00:
But you won on the contract.

[00:13:23] Speaker 00:
We won on the contract.

[00:13:25] Speaker 00:
So everything else went away.

[00:13:27] Speaker 00:
Everything else was mooted.

[00:13:28] Speaker 00:
And you think that the district court, in deciding the fees question, had to then adjudicate the summary judgment motions that the contract ruling made moot?

[00:13:39] Speaker 04:
No, the district court didn't have to adjudicate the summary judgment motions.

[00:13:43] Speaker 04:
But it did have to consider the circumstances in which the university required us, the Micron, to litigate and the way in which the university carried forward its case, which was that it was going to prove a patent infringement of invalid patents.

[00:13:58] Speaker 00:
It was going to prove that you undertook activity covered by the claims.

[00:14:04] Speaker 04:
That's another way of putting it, but that's just part and parcel with proving infringement.

[00:14:07] Speaker 00:
What you are appealing to as outrageous is the notion

[00:14:13] Speaker 00:
that they were going to prove patent infringement after the patent's invalidated.

[00:14:17] Speaker 00:
That depends on the connection between validity and an ability to prove infringement.

[00:14:23] Speaker 00:
The outrage that you're trying to generate is not supported by simply describing it as they were trying to prove you engaged in activity that the claims read on, which is all that their claim depended on, their contract claim depended on.

[00:14:40] Speaker 04:
Apologies.

[00:14:41] Speaker 04:
Your Honor, I don't believe there was any way that the university could have proved that our products practiced their claims.

[00:14:48] Speaker 04:
Their claims are void at the issue.

[00:14:49] Speaker 04:
They don't exist after the invalidity.

[00:14:52] Speaker 04:
There's no IP there to protect.

[00:14:53] Speaker 04:
There's nothing to practice.

[00:14:55] Speaker 04:
It's a legal nullity as if it never existed.

[00:14:57] Speaker 04:
But our claim is not limited to just that as well.

[00:15:00] Speaker 04:
We also identified the circumstances of raising the trade secret misappropriation allegation, which the university corporate witness

[00:15:07] Speaker 04:
willingly admitted was a baseless allegation that was raised by the university, yet another allegation raised by the university that we had to litigate all the way through the close of fact discovery in the case.

[00:15:19] Speaker 02:
And with rec- So surely the district court could conclude that not a lot of money was spent on that and that they gave it up early in the case and that this wasn't significant to make it different from, to make it stand out from the usual run of cases, right?

[00:15:37] Speaker 02:
well we don't know what the district court doesn't have to write a hundred page opinion detailing its decision as to each sub-argument in the case, right?

[00:15:52] Speaker 04:
And that's not Micron's position, but Micron's position is the octane fitness standard, and the octane fitness standard is you don't just give lip service to the totality of the circumstance as the octane fitness standard is that one consider the totality of the circumstance.

[00:16:06] Speaker 02:
This happens all the time.

[00:16:07] Speaker 02:
You're conflating didn't consider with didn't discuss.

[00:16:13] Speaker 02:
It's not the same thing.

[00:16:16] Speaker 04:
Well, Your Honor, there's no indication that the district court did consider the fact or was even aware of the existence.

[00:16:22] Speaker 02:
In case after case, courts assume in summary judgment and other contexts that courts considered the arguments that were made.

[00:16:31] Speaker 02:
You'll find lots of cases that say you don't have to articulate

[00:16:36] Speaker 02:
the reasons that you've rejected particular arguments.

[00:16:41] Speaker 04:
Certain courts have certainly determined that in a number of cases.

[00:16:44] Speaker 04:
We do that.

[00:16:45] Speaker 04:
Right?

[00:16:46] Speaker 01:
We do.

[00:16:46] Speaker 01:
We address every argument.

[00:16:47] Speaker 02:
Yes, Your Honor.

[00:16:48] Speaker 01:
What was the basis for you trying to make the counsel personally liable for attorney's fees?

[00:16:56] Speaker 04:
Well, we moved on that below.

[00:16:59] Speaker 04:
I am aware of the Gust case that was decided by this court very recently.

[00:17:05] Speaker 04:
It's not something we appeal here, because the university has waived its arguments with respect to 285.

[00:17:11] Speaker 04:
The university never made the argument below that 285 does not apply to the entirety of the fees request here.

[00:17:19] Speaker 04:
And I'll see that I need a member of bottle time, so I'll attempt to reserve the balance.

[00:17:24] Speaker 02:
There is no balance, but we'll give you two minutes.

[00:17:27] Speaker 02:
Negative balance.

[00:17:29] Speaker 02:
Negative balance.

[00:17:31] Speaker 02:
It's supposed to be negative balance in the two minutes.

[00:17:37] Speaker 02:
Mr. Vannette.

[00:17:39] Speaker 03:
Good morning, Your Honors.

[00:17:40] Speaker 03:
May it please the Court.

[00:17:41] Speaker 03:
Jacob Vannette on behalf of the University of Illinois.

[00:17:44] Speaker 03:
I want to start with the applicability of Section 285.

[00:17:47] Speaker 03:
There can be no genuine dispute that this is a state law breach of contract claim.

[00:17:52] Speaker 03:
In the court below, Micron actually agreed with this position because it tried to remand this case to state court.

[00:17:58] Speaker 03:
Then the district court agreed when it retained the case on its docket by exercising supplemental jurisdiction under Section 1367.

[00:18:06] Speaker 03:
Now my colleague spent a great deal of time talking about how the patent issues are intertwined with the state law breach of contract issues based on the way the university actually litigated the claim.

[00:18:16] Speaker 03:
But that's not the standard.

[00:18:18] Speaker 03:
The Supreme Court in Christensen v. Colt Industries stated very clearly that if on the face of a well pleaded complaint, there are reasons completely unrelated to the provisions and purposes of the patent laws, why the plaintiff may or may not be entitled to the relief it seeks, then the claim does not arise under those laws.

[00:18:36] Speaker 03:
And that is exactly the case here.

[00:18:38] Speaker 00:
I took the heart of Mr. Sorcher's argument about this, that to be something like when you told the district court what you think the breach was, you yourself made as the only assertion of what the breach was, the assertion that they were practicing the claims.

[00:19:03] Speaker 03:
I'm not sure that we necessarily made that exact assertion in the complaint.

[00:19:07] Speaker 03:
I think it's the way the complaint reads itself.

[00:19:10] Speaker 00:
I wasn't limiting myself to the complaint.

[00:19:12] Speaker 00:
They referred to your experts and your damages.

[00:19:18] Speaker 00:
They did not limit us to the complaint.

[00:19:20] Speaker 00:
What aspect of your effort to show breach was separate from an effort to show that they were engaged in activities that the claims read on?

[00:19:32] Speaker 03:
Well, Your Honor, other than the assertion briefly of trade secret misappropriation, I don't think that the way the case was actually litigated was divorced from the underlying patent issues.

[00:19:43] Speaker 03:
It is true that our theory, as we actually litigated it, was contingent on showing that they practiced the asserted claims.

[00:19:51] Speaker 03:
But I think that what the Supreme Court is saying in Christensen is that that is irrelevant to the determination of whether the claim actually arises under the patent laws.

[00:20:00] Speaker 03:
By attaching the work agreement to the complaint, the work agreement itself became part of the pleadings.

[00:20:06] Speaker 03:
And there are ways in which the university could have shown that Micron breached the work agreement without resorting to the patent laws.

[00:20:12] Speaker 03:
For example, if you look at section 2A, which has been a big part of both down below and here, the way the parties have discussed the proper interpretation of the agreement, if Micron had, for example, taken the wafers that the university annealed for them and instead of performing experiments on them, just threw them into a product and started selling it,

[00:20:29] Speaker 03:
That would be a clear violation of the contract.

[00:20:32] Speaker 03:
But the university wouldn't have to resort to patent laws to show that Micron had breached the agreement.

[00:20:37] Speaker 03:
And to Judge Dyck's point about the reasonable royalty calculation and that being intertwined, I think that the university wouldn't have had to resort to the entire market value rule or any sort of patent theory of damages to show how it had been damaged by Micron's breach of Section 2A.

[00:20:54] Speaker 03:
And so I think that's the key here.

[00:20:56] Speaker 03:
regardless of how the case was actually litigated.

[00:20:58] Speaker 00:
Did you allege a breach of 2A?

[00:21:02] Speaker 03:
In the complaint, Your Honor, I believe we simply alleged a violation of the work agreement generally.

[00:21:08] Speaker 03:
We didn't limit the allegations of breach to a particular section.

[00:21:13] Speaker 03:
And it's the way the complaint reads that is determinative of how

[00:21:18] Speaker 03:
or whether the claim arises under the patent laws.

[00:21:22] Speaker 00:
Right.

[00:21:22] Speaker 00:
But why should the arising under standard be the same as the standard for determining what piece of the litigation is covered by 285?

[00:21:35] Speaker 03:
Because, Your Honor, the way this court characterized the applicability of Section 285 in Inner Spiro is that it only applies to patent claims.

[00:21:44] Speaker 03:
And so I think that to determine whether it's actually a patent claim, it has to arise under the patent laws.

[00:21:49] Speaker 03:
And so that's why it goes into this question of whether the breach of contract claim actually arises under the patent laws.

[00:21:56] Speaker 03:
And that's why I think it's important to also consider the fact, A, that Micron agreed with our position when it tried to remand the case to state court, and B, that the district court also agreed by retaining the case by exercising supplemental jurisdiction, instead of saying, well, no, this breach of contract claim also arises under the patent laws, and so it's a Section 1338 claim, and I'll keep it for that reason.

[00:22:17] Speaker 03:
But in the event that this court disagrees with that position and that Section 285 does apply, there's still no basis to reverse the district court's discretion that this is an unexceptional case.

[00:22:32] Speaker 03:
First, with respect to the university's breach of contract claim and the viability of that claim.

[00:22:38] Speaker 03:
The university's breach of contract claim was predicated on the simple theory that Micron promised to take a license to the university's intellectual property before commercializing

[00:22:48] Speaker 03:
the deuterium annealing process that it embodied.

[00:22:51] Speaker 03:
When the university encountered evidence that Micron had used deuterium in its commercial products, it reasonably believed that Micron might have breached the contract.

[00:23:02] Speaker 03:
The work agreement obligation to take a license, as the university read the agreement, was not contingent on patent validity.

[00:23:10] Speaker 03:
So this court's Shell oil decision allowed that breach of contract case to continue even after the university's claims were invalidated in IPR.

[00:23:18] Speaker 00:
Here the provision, the 2C that you rely on for the contractual obligation, it includes language about intellectual property, right?

[00:23:32] Speaker 03:
Yes, Your Honor.

[00:23:33] Speaker 00:
So doesn't that require, that is, this is not a contract provision that says, if you perform the process described in claims 1 through 17 of the 624 patent or something, then you must pay us.

[00:23:48] Speaker 00:
This is one that says you have to, in your view, that there is an obligation to take a license, which is the subject of the first case, is about an obligation to take a license for intellectual property.

[00:24:02] Speaker 00:
Once the patent was held invalid, isn't that a null set?

[00:24:10] Speaker 03:
At the time that the work agreement was entered into, there was valid intellectual property.

[00:24:14] Speaker 03:
And the university wasn't entitled to a presumption that that intellectual property was valid.

[00:24:18] Speaker 03:
And that's a statutory right that the university has.

[00:24:21] Speaker 00:
Right.

[00:24:21] Speaker 00:
But if the obligation is limited to an obligation to take a license for using intellectual property, then are we now back into that German-named case trying to figure out whether before the coal or something?

[00:24:39] Speaker 00:
whether the contract, in your view, imposed that obligation up until the time it was either held invalid or notice was given that there was an assertion of invalidity.

[00:24:57] Speaker 03:
Yes, Your Honor, that's exactly right.

[00:24:59] Speaker 03:
That does depend on the applicability of shell oil.

[00:25:01] Speaker 00:
Oh, shell is the other name, right.

[00:25:04] Speaker 03:
It's much easier to pronounce, Your Honor.

[00:25:08] Speaker 03:
That Shell oil case is precisely what the district court relied on in allowing the breach of contract claim to continue.

[00:25:14] Speaker 03:
And it said that the work agreement in this case was analogous to a license-bearing royalty, or a royalty-bearing license, excuse me.

[00:25:21] Speaker 03:
And for that reason, the university could continue to assert its breach of contract claim even in the face of invalid patents.

[00:25:29] Speaker 03:
And so, and that was the university.

[00:25:31] Speaker 02:
What was the difference between coal in this case, in the sense that in coal there wasn't any dispute

[00:25:36] Speaker 02:
about the obligation to pay the royalty apart from the defense of patent invalidity, which is not the situation here.

[00:25:46] Speaker 03:
That's correct, Your Honor.

[00:25:49] Speaker 03:
But in the event that the university, for example, if the university ends up winning, hypothetically speaking, one in the court below on its interpretation, then the Shell Oil case becomes applicable because of that analogy.

[00:26:03] Speaker 03:
And in the motion to dismiss stage, the district court faced that question, decided that the university's reading was the most reasonable reading.

[00:26:11] Speaker 03:
And so you reach that second question of whether the Shell oil case applied, and concluded that it did.

[00:26:17] Speaker 03:
And this case would not have continued.

[00:26:20] Speaker 03:
Micron would not have been forced to litigate a breach of contract case if the district court had disagreed with the university.

[00:26:28] Speaker 03:
And it never would have incurred the fees that it did to defend it.

[00:26:31] Speaker 03:
So the university's conduct wasn't unreasonable to continue litigating a case that the district court said, yes, your theory is correct, at least at this stage, and allowing the case to continue.

[00:26:41] Speaker 00:
And the theory both on the interpretation of 2C and on the applicability or inapplicability and on the question of what Shell Oil had to say about this.

[00:26:52] Speaker 03:
That's correct, Your Honor.

[00:26:53] Speaker 00:
Those two points were already, you already had an expression of a pro-university opinion from the district court.

[00:27:01] Speaker 03:
That's correct, Your Honor.

[00:27:02] Speaker 03:
And we actually had that on multiple different occasions from the district court, because Micron filed a motion for reconsideration of its denial of the motion to dismiss.

[00:27:10] Speaker 03:
And it challenged, it specifically challenged the applicability of that Shell oil case.

[00:27:14] Speaker 03:
And the district court again said, no, this is an analogous situation.

[00:27:19] Speaker 03:
The Shell oil case applies.

[00:27:20] Speaker 03:
And the district court

[00:27:22] Speaker 03:
felt that it was necessary for it to beat a dead horse.

[00:27:24] Speaker 03:
And that's a direct quote from its order on the motion for reconsideration.

[00:27:28] Speaker 03:
And then reiterated an entire paragraph of its order on the motion to dismiss on why the Shell LL case is applicable and why the university's breach of contract name remained viable.

[00:27:40] Speaker 03:
And so when it was faced with those exact same questions on a motion for attorney's fees,

[00:27:46] Speaker 03:
it had already decided that the university's claim was viable.

[00:27:49] Speaker 03:
And it wasn't brought to bad faith.

[00:27:51] Speaker 03:
It wasn't an unreasonable, exceptionally meritorious claim.

[00:27:54] Speaker 03:
And so it had no obligation to re-explain that ruling.

[00:27:58] Speaker 03:
And so it didn't feel that it was necessary, and it didn't do that.

[00:28:03] Speaker 03:
And so for that reason, Your Honors, the district court didn't abuse its discretion in saying that the university's breach of contract claim was exceptionally meritorious.

[00:28:12] Speaker 03:
Turning to the way the case was litigated,

[00:28:15] Speaker 03:
and the reasons for the university bringing the case to begin with, the district court made an explicit finding that the evidence Micron presented to these points simply did not support its allegations.

[00:28:29] Speaker 03:
And that finding was not clearly erroneous.

[00:28:32] Speaker 03:
Starting with the university's pre-suit investigation, the university conclusively determined that Micron had used deuterium in its commercial products.

[00:28:43] Speaker 03:
And based on the previous dealings between the parties, it suspected that this could mean that Micron had commercialized the university's intellectual property.

[00:28:53] Speaker 03:
But even then, the university did not rush to court to test his claims.

[00:28:57] Speaker 03:
It approached Micron and attempted to resolve the dispute amicably outside of court.

[00:29:03] Speaker 03:
During those discussions, it tested his theories, and Micron responded.

[00:29:08] Speaker 03:
And even after those discussions fell through, the university didn't feel that Micron's responses

[00:29:13] Speaker 03:
were sufficient to make it question the viability of its claims.

[00:29:19] Speaker 03:
But even then, it still didn't rush to court.

[00:29:22] Speaker 03:
Even after the discussions fell through, it tried to restart the discussions through alternative channels using alumni within Micron to try and get the discussion going.

[00:29:30] Speaker 03:
And Leslie Miller Nicholson explicitly says that the university did not want to sue Micron, either for patent infringement or for breach of contract.

[00:29:40] Speaker 03:
But Micron refused to deal with the university

[00:29:43] Speaker 03:
without the university suing them.

[00:29:45] Speaker 03:
And this also goes to the university's motivations for filing suit.

[00:29:50] Speaker 03:
Simply put, the university wanted to defend the integrity of its intellectual property and its work agreement process.

[00:29:57] Speaker 03:
And Micron admits that's the case in its briefing.

[00:30:00] Speaker 03:
And the motivation to implement a statutory patent right or to enforce an agreement between two parties is not an improper motivation to bring a lawsuit.

[00:30:11] Speaker 03:
In providing its settlement discussions or its settlement calculations, the university provided detailed breakdowns of what it thought would be a reasonable recovery at trial, what it thought would be a reasonable royalty if Micron had ended up taking a license, and provided a discounted lump sum value to Micron.

[00:30:32] Speaker 03:
This is the antithesis of an extortionately high settlement demand.

[00:30:38] Speaker 03:
And that's even assuming that an extortionately high settlement demand, whatever that

[00:30:41] Speaker 03:
whatever basis Micron has for making that characterization is even a basis to find a case exceptional because this court has said that nuisance value settlements, which SFA Systems defines as 10% of the cost to defend, that merits an exceptionality determination.

[00:30:58] Speaker 03:
But this is the opposite of that.

[00:30:59] Speaker 03:
Micron is saying this is too high.

[00:31:02] Speaker 03:
But even in that regard, Micron is wrong because the university provided its math, explained why it made those settlement offers,

[00:31:10] Speaker 03:
And Micron actually hasn't challenged the accuracy of that math or challenged the royalty rate that the university used in making those calculations.

[00:31:22] Speaker 00:
You said a couple of times in your brief something to the effect that the Bayh-Dole Act requires or encourages, I forget how strong your word was, the university to go out and

[00:31:38] Speaker 00:
press such patent rights as it has.

[00:31:42] Speaker 03:
I believe the word I used was obligates.

[00:31:45] Speaker 00:
So where does that come from in the Beidol Act?

[00:31:49] Speaker 00:
I mean there's a general obligation to commercialize which might go no further than to say try to get it out into the marketplace but that doesn't quite cover and go out and make sure people pay for it.

[00:32:06] Speaker 03:
I believe that's true, Your Honor, but I think that the way the university approaches it is that if it has a reasonable suspicion of patent infringement, and it's not being paid for that, the use of its technology, it still has an obligation to press those claims.

[00:32:22] Speaker 03:
Any patent owner is going to want to press its rights in terms of- Right, but what in by dole?

[00:32:28] Speaker 00:
I mean, I can imagine, but I haven't read all of it, so I'm, I guess, hoping for quick guidance.

[00:32:33] Speaker 00:
I can imagine something that says,

[00:32:36] Speaker 00:
We're going to give the university certain kinds of special rights and protections.

[00:32:41] Speaker 00:
And in exchange, we want them to go out and collect money from commercial users so they can feed that back into university research.

[00:32:48] Speaker 00:
And maybe then the National Science Foundation will be able to reduce its budget and not have to carry all the burden of university research.

[00:32:55] Speaker 00:
I can construct a little theory, but is there something actually in the Bayh-Dole Act that obligates

[00:33:02] Speaker 00:
those covered by the Bayh-Dole Act to go out and try to enforce their patent rights?

[00:33:08] Speaker 03:
So, Your Honor, I don't have a quote from Bayh-Dole or a direct answer to your question right off the top of my head.

[00:33:14] Speaker 03:
I can file a brief, two-page brief, within two days if you would like.

[00:33:18] Speaker 03:
My time is up, so I will signal up something.

[00:33:22] Speaker 02:
No, don't bother to do that.

[00:33:24] Speaker 02:
Okay, thank you.

[00:33:26] Speaker 02:
Thank you, Mr. For that.

[00:33:30] Speaker 02:
Mr. Schertzer, you have two minutes.

[00:33:33] Speaker 04:
Your Honor, just briefly, counsel at the university suggested that they could prove a breach by pointing to section 2A of the work agreement.

[00:33:41] Speaker 04:
But in the briefing below and the other appeal we just argued, the 1511 appeal, it's the blue brief at page 17.

[00:33:48] Speaker 04:
The district court embraces this and admits, indeed, as the district court notes, the university has willingly admitted that there has been no breach of paragraph 2A.

[00:33:56] Speaker 04:
With respect to Cole, Cole is not applicable at all to this case.

[00:34:00] Speaker 04:
The Cole case

[00:34:01] Speaker 04:
assumed that infringement could be shown.

[00:34:03] Speaker 04:
The university could never show infringement on the basis of the stipulated judgment of non-infringement.

[00:34:09] Speaker 04:
And importantly, Cole also, the Sheltwell case, also had a license agreement in play, a license agreement for the payment of royalties for the commercial use of a product.

[00:34:20] Speaker 04:
And that license does not exist in this record.

[00:34:22] Speaker 04:
And Cole is inapplicable to this case.

[00:34:24] Speaker 01:
Council, I asked you before, what was the basis?

[00:34:27] Speaker 01:
I meant the legal basis for

[00:34:30] Speaker 01:
making opposing counsel personally liable for attorney's fees.

[00:34:34] Speaker 04:
Well, it was the Beck-Jace's conduct that occurred down below with respect to the filing of a number of motions.

[00:34:43] Speaker 04:
So to review those briefly, for your honor, the university's counsel filed a motion for injunctive relief.

[00:34:51] Speaker 01:
So in your brief you gave us the legal cases that support that position?

[00:34:56] Speaker 04:
We gave you the underlying basis for why the vexatious conduct occurred below and the vexatious conduct.

[00:35:02] Speaker 01:
No, I know that.

[00:35:02] Speaker 01:
What's the legal basis for making opposing counsel personally liable?

[00:35:07] Speaker 04:
Well, I think it would be 1928, USC 1927 itself, and acting in a vexatious manner to increase the cost of litigation.

[00:35:17] Speaker 04:
OK.

[00:35:19] Speaker 02:
OK.

[00:35:20] Speaker 02:
Thank both counsel.

[00:35:22] Speaker 02:
The case is submitted.

[00:35:22] Speaker 02:
That concludes our session for this morning.

[00:35:25] Speaker 02:
All rise.

[00:35:26] Speaker 02:
The honorable course is adjourned until tomorrow morning.

[00:35:31] Speaker 02:
It's at o'clock a.m.