[00:00:14] Speaker 03:
Good morning.

[00:00:15] Speaker 00:
Good morning.

[00:00:16] Speaker 00:
May it please the court, Chris Cravey for Appellant ALE USA, Inc.

[00:00:22] Speaker 04:
The infringement judgment in this case... I'd like to start with your construction of the adapted limitation.

[00:00:27] Speaker 04:
Yes, Your Honor.

[00:00:29] Speaker 04:
Okay.

[00:00:30] Speaker 04:
In the blue grade at 22, you say the term adapted was purposely added to the 012 patent claims to impart an additional limitation on the other patents in suit.

[00:00:41] Speaker 04:
And you cite me to the patent

[00:00:43] Speaker 04:
J.A.

[00:00:45] Speaker 04:
186, A.

[00:00:45] Speaker 04:
7, column 18, line 62, and so on.

[00:00:53] Speaker 04:
All you're citing to me is the claim.

[00:00:57] Speaker 04:
How does that citation demonstrate the purpose of adding the adapted limitation?

[00:01:04] Speaker 04:
And is there any prosecution history that supports you?

[00:01:08] Speaker 00:
Well, perhaps the site could have been better.

[00:01:10] Speaker 00:
There is evidence in the specification to support our argument, Your Honor.

[00:01:14] Speaker 00:
Well, okay.

[00:01:16] Speaker 00:
When you say perhaps it could have been better, you better tell me something that's better.

[00:01:19] Speaker 04:
Yes.

[00:01:20] Speaker 00:
Well, the word adapted was added to the claims of the 012 patent to impart a new meaning.

[00:01:26] Speaker 00:
It's the only patent in which adapted is in the claim.

[00:01:30] Speaker 00:
It's also cited in the title of the patent, System and Method for Adapting a Piece of Terminal Equipment.

[00:01:37] Speaker 00:
And we understand from the specification what the patent team meant when he said adapted, because what the specification tells us is that there was existing network equipment that existed in the ARC prior to the 012 patent.

[00:01:50] Speaker 00:
There were PCs.

[00:01:51] Speaker 00:
There were computers.

[00:01:52] Speaker 00:
There were printers.

[00:01:54] Speaker 00:
And what the patent tells us is these pieces of equipment.

[00:01:56] Speaker 04:
I understand the logic of your argument.

[00:01:58] Speaker 04:
What I want to know is you said there was intention, other than facial,

[00:02:05] Speaker 04:
comparison, do you have any evidence?

[00:02:08] Speaker 04:
Do you have any prosecution history evidence, for example?

[00:02:13] Speaker 00:
I do not have evidence of it being added by way of amendment in the prosecution history.

[00:02:18] Speaker 00:
I have evidence in the fact that it was added.

[00:02:20] Speaker 00:
It's a word.

[00:02:21] Speaker 00:
It's a limitation in this claim.

[00:02:23] Speaker 00:
The word adapted exists in the preamble.

[00:02:27] Speaker 00:
Intentionally, we can understand because the patentee wouldn't have put it in there by accident.

[00:02:33] Speaker 00:
And so that's what we meant with our argument and that it's added by intention and that it appears in this patent and doesn't appear in the other patents.

[00:02:42] Speaker 00:
The district court.

[00:02:43] Speaker 04:
In the yellow brief, you say it was routine to modify a computer motherboard with memory in RAM slots or add a new CPU to a motherboard socket.

[00:02:54] Speaker 04:
You don't cite anything.

[00:02:56] Speaker 04:
What's your authority for that statement?

[00:02:59] Speaker 04:
Other than as a hobbyist, I might know that.

[00:03:04] Speaker 00:
of just the state-of-the-art, Your Honor, at the time of the patent filing.

[00:03:12] Speaker 00:
Certainly, even if the Court was inclined to disagree, and that the evidence did not support a finding that it was routine to modify motherboards at the time of the invention, the Court has said... Was there judicial notice in that?

[00:03:30] Speaker 00:
Well, Your Honor, even if the Court's not inclined to

[00:03:33] Speaker 00:
support that argument, the Court has repeatedly said that claims need not encompass all disclosed embodiments.

[00:03:40] Speaker 00:
In fact, in the TIP Systems case we cited, this Court said that the precedent is replete where this is the case, where claims do not, in fact, encompass all disclosed embodiments.

[00:03:51] Speaker 00:
So if the Court was inclined to be of the opinion that appellant's construction would exclude that disclosure in the patent specification,

[00:04:00] Speaker 00:
Our construction is still correct as a matter of law because it's supported by an overwhelming portion of the intrinsic record, the specification, and the claims themselves.

[00:04:10] Speaker 04:
I'm just asking you about the parts of your brief that give me pause.

[00:04:14] Speaker 00:
That's all.

[00:04:15] Speaker 00:
I understand, Your Honor, and I do not have a site for you in the intrinsic record to say that... Let's talk about the construction of the two limitations.

[00:04:25] Speaker 04:
That can be an important word.

[00:04:29] Speaker 04:
In the blue brief at 38,

[00:04:31] Speaker 04:
You say Posita would understand that the general term, Ethernet terminal equipment, does not expressly or inherently disclose structure sufficient to perform the three functions required.

[00:04:45] Speaker 04:
You don't cite any support for what Posita would believe.

[00:04:50] Speaker 04:
What's your support for that?

[00:04:56] Speaker 00:
Your Honor, it would be what the patentee tells us in the specification that

[00:05:00] Speaker 00:
There was existing Ethernet equipment that existed in the ART, and this is in column five of the O-1-2 patent lines 14 through 17, where it talks about existing pieces of equipment that could do conventional Ethernet communications.

[00:05:16] Speaker 00:
What the specification tells us is that this equipment that existed in the ART at the time was incapable of performing these functions.

[00:05:25] Speaker 00:
The entire, virtually entire specification is devoted to the notion of adding new structural components to these existing pieces of equipment to perform the functions in which the patentee believed distinguish over the prior art.

[00:05:38] Speaker 00:
Figures one, figures two, figures three illustrate adding this new piece of structure, the remote module, that will perform these functions.

[00:05:48] Speaker 00:
Nowhere in the specification does the patentee say that these existing pieces of equipment could do

[00:05:54] Speaker 00:
these functions believe to distinguish over the prior art.

[00:05:57] Speaker 00:
In fact, the specification says exactly the opposite.

[00:06:04] Speaker 00:
If I could direct the Court's attention to column one, lines 66 through 67, the patentee teaches therefore a method for permanently identifying an asset.

[00:06:17] Speaker 03:
You're talking about the O-1-2 patent.

[00:06:19] Speaker 00:
Yes, Your Honor.

[00:06:21] Speaker 00:
Both parties agreed there's a common specification and we cite to the 012 patent in our briefing for the intrinsic support.

[00:06:30] Speaker 00:
So if we look at column one of the 012 patent line 66, 3067, the patentee says, therefore a method for permanently identifying an asset by attaching an external or internal device to the asset and communicating with that device using existing network wireless

[00:06:51] Speaker 00:
wiring or cabling as desirable.

[00:06:53] Speaker 00:
So what that passage is saying is that we're going to add something new to this existing ethernet terminal equipment.

[00:07:01] Speaker 00:
And that theme is carried, Your Honor, into column four, lines 53 through 56, where the patentee says, in general, the central module monitors remote module circuitry

[00:07:20] Speaker 00:
that may be permanently attached to remotely located electronic workstations such as personal computers.

[00:07:27] Speaker 00:
So what this is teaching us is that the structural configuration of existing ethernet terminal equipment that existed in the ART at the time the patents were filed was incapable of performing these claimed functions.

[00:07:42] Speaker 04:
You say in the blue brief that the district court improperly expanded the scope of physically

[00:07:50] Speaker 04:
by rewriting the claim to encompass a system that is merely configured to be construed.

[00:07:57] Speaker 04:
The district court said no further construction of the term physically connect is necessary.

[00:08:02] Speaker 04:
Show me where the district court specifically reconstrued the limitation to require only that it be configured to be connected.

[00:08:44] Speaker 00:
Your Honor, it goes on in Appendix 39 through 40.

[00:08:48] Speaker 00:
I'm looking at 40 right now, yeah.

[00:09:02] Speaker 00:
Starting on Appendix 39, the Court improperly relies on the doctrine of claim differentiation to say that the

[00:09:12] Speaker 00:
The scope of claim one of the 760 patent does not require an actual physical connection between the two constituent components, the central and the terminal pieces of equipment.

[00:09:24] Speaker 00:
Basically, the court is resolving the party's dispute.

[00:09:26] Speaker 00:
This dispute before this court was what the scope of claim one is.

[00:09:30] Speaker 00:
Does claim one require a physical connection between these two components?

[00:09:36] Speaker 00:
It was our position that the words as written

[00:09:39] Speaker 00:
physically connect, data signaling pairs of connectors that physically connect from a central device to a terminal device, in and of themselves require that physical connection.

[00:09:52] Speaker 00:
The, the, the patentee, the appellee, relied on claim differentiation to broaden that claim.

[00:09:59] Speaker 00:
The claim doesn't say operable to physically connect, capable of configure, of, of physically connecting.

[00:10:06] Speaker 00:
It says physically connect.

[00:10:08] Speaker 00:
And so it's our contention, Your Honor, that the plain and ordinary meaning of the claim as drafted requires a physical connection.

[00:10:17] Speaker 04:
What evidence supports your statement in the blue brief that the system would be inoperable if the first and second pairs are not physically connected?

[00:10:27] Speaker 00:
What would be the language of the claim itself, Your Honor, that the functional requirements in the claim, drawing different magnitudes of DC current,

[00:10:39] Speaker 00:
would not be capable of being performed if the physical connection didn't actually exist.

[00:10:48] Speaker 00:
This is a system claim, Your Honor.

[00:10:50] Speaker 00:
It talks about two components being in the system, and the claim expressly recites that these two components are, in fact, physically connected to each other.

[00:11:00] Speaker 02:
What was the proof?

[00:11:02] Speaker 02:
I guess you all, infringement was not actually tried, right?

[00:11:06] Speaker 00:
That's correct, Your Honor.

[00:11:07] Speaker 02:
So before trial, what was the, as applied to the accused product's dispute about why they met this claim element if it doesn't require an actual physical connection?

[00:11:26] Speaker 02:
Full stop.

[00:11:26] Speaker 00:
What was the party's position with respect to infringement?

[00:11:30] Speaker 00:
I'm sorry, Your Honor.

[00:11:31] Speaker 02:
I'm trying to get a, what I do not currently have in my head, a concrete idea why this dispute matters.

[00:11:38] Speaker 00:
Oh, this dispute matters, Your Honor, because ALE doesn't sell complete systems.

[00:11:45] Speaker 00:
And nor did Appellee argue in its expert reports that we did.

[00:11:50] Speaker 00:
While we might sell the constituent components, a terminal device, or a central piece,

[00:11:56] Speaker 00:
nowhere do we sell the two pieces physically connected together.

[00:12:02] Speaker 00:
And Appellee's infringement read at the district court was based solely on the time of sale when these products are sitting on the shelf available for purchase.

[00:12:12] Speaker 00:
And when these products are sitting in the store, there is in fact no physical connection between what they allege is a central component and what they allege is a

[00:12:22] Speaker 00:
terminal component.

[00:12:23] Speaker 02:
And there was no claim of contributory or induced infringement.

[00:12:27] Speaker 02:
Is that right?

[00:12:32] Speaker 00:
Well, I think they did have claims, in fact, of inducement and contributory infringement.

[00:12:38] Speaker 00:
But that was part of the stipulation.

[00:12:42] Speaker 02:
But if the thing you just said is the only reason it makes a difference, that is, you can't use these things without

[00:12:49] Speaker 02:
the other piece, they don't sell the other piece, everybody who buys their piece is going to buy the other piece and connect it.

[00:12:56] Speaker 02:
What is the difference in terms of ultimate infringement under any subsection of 271 you care to name?

[00:13:03] Speaker 00:
Well, the only direct, they had no, well, for contributory or an indirect infringement, as the Court is aware, you have to show some act of direct infringement.

[00:13:11] Speaker 00:
And they had no evidence, Your Honor, of direct infringement of any system of ALE actually being physically connected.

[00:13:19] Speaker 00:
And so they would have been incapable or they would not have been able to show the indirect... Your position is without the physical connection, these things would not be operable?

[00:13:30] Speaker 00:
Is that right?

[00:13:30] Speaker 00:
For direct infringement, that's correct.

[00:13:32] Speaker 02:
And is it agreed that there were some large number of working units out in the world?

[00:13:40] Speaker 00:
No, Your Honor, it was not agreed.

[00:13:41] Speaker 00:
And we contested that position.

[00:13:42] Speaker 00:
And they had no evidence to show that, in fact, there was a working system

[00:13:47] Speaker 00:
made, offered for sale, or sold by ALE.

[00:13:49] Speaker 02:
So they're proof on the indirect... No, no, I didn't say about a working system sold by ALE.

[00:13:55] Speaker 02:
I meant, I said, out there in the world, what was damages based on?

[00:14:01] Speaker 00:
Their damages were based on the number of PoE-capable ports.

[00:14:04] Speaker 02:
But to answer your question... Units were being sold.

[00:14:09] Speaker 02:
And in your view, a buyer, unless he physically connects them, should just throw it in the trash.

[00:14:17] Speaker 02:
No, our position is- People were probably interested in doing the combination.

[00:14:25] Speaker 02:
If they kept buying them.

[00:14:26] Speaker 02:
I mean, in your view, that it's inoperable if not.

[00:14:29] Speaker 00:
Well, that's certainly conceivable, Your Honor, but it's their burden of proof to show, as you just pointed out, that somewhere out in the world there was, in fact, a system that was put together with these components.

[00:14:40] Speaker 00:
They had no evidence that anywhere in the world these systems existed, that ALE, that they had

[00:14:48] Speaker 00:
I understand your point, but it's still their burden of proof to show that in fact that was the case, which they did not do.

[00:14:57] Speaker 03:
Good morning, Your Honors.

[00:15:08] Speaker 01:
I'd like to pick up where you left off, Judge Toronto.

[00:15:10] Speaker 01:
The dispute on physical connection would not have made a difference.

[00:15:14] Speaker 01:
Carmar had two infringement theories, one based on sale of the component parts as direct infringement under St.

[00:15:20] Speaker 01:
Clair Intellectual Property, where sale of the parts would constitute direct infringement and contributory infringement.

[00:15:25] Speaker 01:
Had we gone to trial, we would have presented evidence for both of those theories.

[00:15:29] Speaker 01:
The fact Ailey insists on maintaining this operational state type of non-infringement defense, even though that argument has been rejected repeatedly by the district court in Markman and again on summary judgment.

[00:15:43] Speaker 01:
But the court was correct in rejecting this physical connection argument that ALE makes based on the language of the claim and claim differentiation under claim 71, the dependent claim that says they're actually connected.

[00:15:55] Speaker 04:
In the yellow brief of five, ALE identifies a portion of a quotation that you omitted in the red brief at 15 and 16, which indicates that harmless error may occur where the evidence in support of a verdict was so overwhelming that the same verdict

[00:16:12] Speaker 04:
wouldn't necessarily be reached absent the error you had intentionally omit that portion of the quotation.

[00:16:21] Speaker 01:
No, Your Honor.

[00:16:21] Speaker 01:
I believe that was for a different proposition.

[00:16:23] Speaker 01:
Under this Court's precedent in Comcast IP and Smith Klein Beecham, the main issue is that they failed to show any error, any prejudice in their opening brief.

[00:16:31] Speaker 01:
And without giving this Court any context to Judge Taranto's point about why this would matter, this physical connection dispute, it leaves this Court to simply take their word for it.

[00:16:40] Speaker 01:
that if they were to receive their construction of physically connected, they wouldn't have stipulated to infringement.

[00:16:46] Speaker 01:
They'd have a new trial for infringement.

[00:16:49] Speaker 01:
I have to say, it's a dangerous precedent to set because it would allow any defendant to stipulate to infringement, get a free trial on invalidity, damages, fraud, breach of contract, everything else, and then come up to this court to identify just one error of claim construction and have a new trial on infringement.

[00:17:07] Speaker 01:
Certainly, that would be unfair to the patent holder.

[00:17:09] Speaker 01:
and a waste of judicial resources.

[00:17:11] Speaker 01:
But most importantly, under this court's precedent, they needed to identify the prejudice in their opening brief, and they failed to do that.

[00:17:18] Speaker 01:
And to your point on adapted, there was no prosecution history on the word adapted, as you pointed out.

[00:17:26] Speaker 01:
It's not repeated in the body of the claim.

[00:17:29] Speaker 01:
It is not a word that needs to import additional limitations beyond the entire body of the claim.

[00:17:35] Speaker 01:
And the court was correct in rejecting ALE's attempted

[00:17:39] Speaker 01:
additional limitation, which would turn it into a product by process claim requiring a retrofitting limitation, where then infringement would depend on the order in which these products were manufactured.

[00:17:51] Speaker 04:
Did you agree that the preamble of claim 31 of the 012 patent is limiting?

[00:17:55] Speaker 01:
Yes, Your Honor, we did.

[00:17:57] Speaker 01:
And that's because in the body of the claim, it repeats.

[00:17:59] Speaker 01:
It's an ethernet terminal device.

[00:18:01] Speaker 01:
The body of the claim doesn't repeat the word adapting.

[00:18:04] Speaker 01:
What ALE is proposing is that each word the preamble would need to have additional limitation

[00:18:09] Speaker 01:
above and beyond the entirety of the claim.

[00:18:12] Speaker 01:
Now, their main argument is that the word adapted, with or without, provides no more meaning, no more patentable distinction, or no limitation.

[00:18:21] Speaker 01:
That's incorrect.

[00:18:23] Speaker 01:
If you have two preambles, in this case of claim 31, an adapted piece of equipment, well, as the court found, to meet the preamble, you must have the piece of Ethernet equipment and meet all the other limitations in the claim.

[00:18:36] Speaker 01:
Without the adapted part,

[00:18:38] Speaker 01:
Any prior art piece of Ethernet equipment would meet the preamble.

[00:18:41] Speaker 01:
It is limiting in the context of the preamble of claim 31.

[00:18:45] Speaker 01:
It just doesn't import additional limitations beyond the entirety of the claim.

[00:18:49] Speaker 01:
And it certainly would be improper to read a retrofitting limitation or a temporal limitation.

[00:18:55] Speaker 01:
And again, to the prejudice, Your Honor, even ALE's own expert admitted that a device manufactured with this invention would still meet the term adapted under their incorrect claim construction.

[00:19:08] Speaker 01:
And if I might turn briefly to the two phrases, Your Honor, ALE and its experts all admitted, and the court noted, that these structural limitations were known and understood by a person of ordinary skill in the art.

[00:19:21] Speaker 01:
That alone is enough to meet the test under Williamson, under Sky versus MindGeek, and media rights tech to defeat a claim that they invoke 112.6 means plus function.

[00:19:34] Speaker 04:
I'm more concerned with the damages models.

[00:19:36] Speaker 01:
Thank you, Your Honor.

[00:19:38] Speaker 01:
I know this wasn't addressed.

[00:19:41] Speaker 01:
If you have specific questions, I would address it.

[00:19:42] Speaker 01:
Otherwise, I could just say briefly.

[00:19:44] Speaker 04:
How can we accept that the 250 royalty was reasonable when both Mr. Mills and the District Court previously acknowledged that it failed, that that rate failed to apportion damages?

[00:19:57] Speaker 01:
He did not, the District Court, Your Honor, did not say that the rate didn't account for apportionment.

[00:20:02] Speaker 01:
The District Court first rejected Mr. Mills' methodology

[00:20:06] Speaker 01:
because he stated he didn't have to account for any potential increase in value due to standardization, due to Dr. Matt Assetti, the technical expert's statement and opinion that there was an absence of non-infringing alternatives.

[00:20:17] Speaker 01:
The district court rejected that and said, go back and do it again, make sure you are accounting for standardization, and don't rely on the absence of non-infringing alternatives.

[00:20:26] Speaker 04:
Where in the record did Kreimer demonstrate that patent-related features of the patents in suit are the basis for customer demand?

[00:20:36] Speaker 01:
We did not, Your Honor, and nor did we use the entire market value rule.

[00:20:40] Speaker 01:
The apportionment began with the royalty base in this case.

[00:20:44] Speaker 01:
The royalty base, as this Court has made clear in Siro and in Erickson, apportionment can be performed in both the base and the rate.

[00:20:52] Speaker 01:
In this case, Mr. Mills did both, starting with the royalty base of power over ethernet ports.

[00:20:58] Speaker 01:
Each of those ports includes the patented inventions.

[00:21:01] Speaker 04:
Did Mr. Mills rely on license agreements?

[00:21:04] Speaker 04:
stemming from litigation and so on.

[00:21:06] Speaker 01:
He did, Your Honor.

[00:21:07] Speaker 01:
And I believe that has been acceptable at his court in Erickson and Rescue Net and other cases.

[00:21:13] Speaker 01:
And notably, and most importantly, all the evidence, the CryMars licenses, Network One licenses, the Power over Ethernet premium, were admitted into evidence without objection.

[00:21:25] Speaker 01:
Ailey never once subjected in its two Dauberts, and anytime during trial, to any of the evidence coming in.

[00:21:32] Speaker 01:
What they complain about now is the weight

[00:21:34] Speaker 01:
And that went to the jury, where two experts looked at the evidence, critiqued it, analyzed it, made arguments, and the jury made a determination.

[00:21:43] Speaker 04:
Tell me how litigation settlement licenses are comparable.

[00:21:49] Speaker 01:
Well, Your Honor, every license negotiated for a patent has some specter of litigation.

[00:21:56] Speaker 01:
A patent owner has no other enforcement mechanism other than to file suit.

[00:22:01] Speaker 01:
So the hypothetical negotiation assumes.

[00:22:03] Speaker 01:
I hope that's not the case.

[00:22:04] Speaker 01:
Unfortunately, you're out of the, if we are talking about, if two companies are talking about taking a license and we approach you, if you refuse, the next step has to be some form of litigation or abandoning your rights.

[00:22:18] Speaker 04:
That's true.

[00:22:21] Speaker 04:
If every company refuses.

[00:22:22] Speaker 01:
If they refuse.

[00:22:24] Speaker 01:
Now, there were not, not all of the license in this case were negotiated during litigation.

[00:22:29] Speaker 01:
There were a few that weren't.

[00:22:31] Speaker 01:
But at the same time,

[00:22:33] Speaker 01:
Just the specter of litigation isn't enough to make the license agreements themselves inadmissible.

[00:22:38] Speaker 01:
And I believe that proposition was West again in Erickson.

[00:22:41] Speaker 01:
And as a matter of fact, in this case, you have licenses from Primar directly on point, about 30 licenses in total.

[00:22:49] Speaker 01:
About a dozen were running royalty licenses.

[00:22:51] Speaker 01:
Some were a per port rate and dollar figures per port.

[00:22:55] Speaker 01:
And then a royalty percentage of net revenue.

[00:22:59] Speaker 01:
And Mr. Mills relied on both.

[00:23:01] Speaker 01:
The same was true for Network One's comparable licenses.

[00:23:04] Speaker 01:
Dollar figures per port, percentage of net revenue.

[00:23:08] Speaker 04:
Why didn't Mr. Mills set the royalty rate at the rate paid to Network One?

[00:23:14] Speaker 01:
It was up to his methodology to form an opinion.

[00:23:18] Speaker 01:
In his opinion, what he did is he actually used CRIMAR's lowest rate from all of its running royalty licenses of $2.50.

[00:23:26] Speaker 01:
Had Mr. Mills, and he testified this at trial, used a percentage base

[00:23:30] Speaker 01:
the royalty rate would have been much higher.

[00:23:33] Speaker 01:
Crimer's royalty rates and Network One's royalty rates on a percentage of net revenue were much higher and would have resulted in a per port royalty rate much higher.

[00:23:42] Speaker 01:
He capped it at 250, thinking that that was reasonable based on all the Georgia-Pacific factors, accounting for the value of these patents with respect to the products and accounting for any potential artificial value due to standardization.

[00:23:55] Speaker 01:
But again, Your Honor,

[00:23:57] Speaker 01:
The question is, did the court abuse its discretion in allowing him to testify about this opinion?

[00:24:03] Speaker 01:
When he had objective evidence that was admitted without objection, it was tied to the facts of this case.

[00:24:11] Speaker 01:
This is certainly not a case where he arrived in an opinion disconnected from all evidence or giving mere lip service to the Georgia Pacific factors.

[00:24:20] Speaker 04:
Are you going to talk about your cross-pill now?

[00:24:22] Speaker 01:
Yes, Your Honor.

[00:24:23] Speaker 04:
Your cross-pill seeks attorney space.

[00:24:25] Speaker 04:
If we reverse any

[00:24:27] Speaker 04:
portion of the district court's judgment, your cross deals are removed.

[00:24:33] Speaker 01:
I don't believe that's correct, Your Honor.

[00:24:35] Speaker 01:
I believe if you reverse, we would still be the prevailing party on most, if not all, of ALE's counterclaims and offenses, particularly things like the antitrust counterclaim.

[00:24:45] Speaker 01:
ALE chose to put itself in the plaintiff's shoes, bring a meritless claim, fail to even present expert opinion on it, maintain it through summary judgment, telling the court

[00:24:55] Speaker 01:
during the letter briefs for summary judgment that it could present its antitrust claim to the jury without any expert testimony against a party that it alleged was a non-practicing entity, was incapable of proving market power.

[00:25:09] Speaker 01:
And it did that through pretrial.

[00:25:11] Speaker 01:
And if Ailey's conduct was on behalf of a patent owner under this court's precedent in cases like a Justicam, I don't think there'd be much hesitation in finding it was an exceptional case.

[00:25:21] Speaker 01:
Ailey also did what a Justicam did.

[00:25:23] Speaker 01:
and continuing to pursue an objectively baseless non-infringement argument post-Markman and worse than a justicam through summary judgment, telling the district court that they had affirmatively disproved infringement because while the products are in the box, there's no power flowing, you can't meet the path coupled across claim element.

[00:25:43] Speaker 01:
And they repeat that today in their briefing and in their argument.

[00:25:47] Speaker 01:
Still, when they sell the products, they cannot possibly infringe.

[00:25:52] Speaker 01:
if one of those alone would be enough to find a patent owner liable for an exceptional case.

[00:25:58] Speaker 01:
In this case, they did so much more.

[00:26:00] Speaker 01:
They maintained fraud implied license and breach of contract claims knowing they were legally and factually impossible.

[00:26:06] Speaker 01:
They're appealing the jury instructions on fraud when they are incapable of proving the elements.

[00:26:12] Speaker 01:
Even if they were given their jury instructions, the jury instructions were improper because they would have created a nonexistent cause of action for fraud in a vacuum where the fraud

[00:26:21] Speaker 01:
was against anybody in the ether.

[00:26:24] Speaker 01:
In this case, you have a company that didn't exist until already.

[00:26:28] Speaker 02:
What was the fraud instruction that the other side proposed?

[00:26:34] Speaker 02:
I know what the one is that was given.

[00:26:36] Speaker 01:
What was it that the other side proposed?

[00:26:39] Speaker 01:
I believe that is in our reply brief on page 19, and where we show their proposal in red line.

[00:26:47] Speaker 02:
This is the gray brief.

[00:26:50] Speaker 01:
Gray brief?

[00:26:52] Speaker 01:
The final reply brief.

[00:26:54] Speaker 01:
I apologize.

[00:26:54] Speaker 01:
I don't know the colors.

[00:26:57] Speaker 01:
But on page 19, which we provided in red line, if the court were to adopt their improper instruction, it would be that CRIMAR was liable for fraud by making a misrepresentation of material fact in the abstract.

[00:27:11] Speaker 02:
So it did not propose a instruction

[00:27:17] Speaker 02:
that was different from what was given, but used language more expressly from the Exxon decision, which is not as strong as eliminating all of the references to whoever might ultimately get the misleading impression from the omission.

[00:27:43] Speaker 02:
It is a narrowed

[00:27:47] Speaker 02:
In fact, very much narrow.

[00:27:48] Speaker 02:
Very much narrow.

[00:27:49] Speaker 02:
But it's not, strictly speaking, in Exxon, though it was in 79, 79, whatever that.

[00:27:56] Speaker 01:
Yes, Your Honor.

[00:27:58] Speaker 02:
The middle level court that the Fifth Circuit then picked up in its non-precedential decision, which Exxon didn't repudiate.

[00:28:06] Speaker 02:
But they didn't propose something between their view, which I think Exxon actually expressly repudiates.

[00:28:14] Speaker 02:
Correct, Your Honor.

[00:28:15] Speaker 02:
And the one that was given.

[00:28:16] Speaker 01:
That's correct, Your Honor.

[00:28:17] Speaker 01:
They maintained this fraud in the abstract position that, had Crymar done something wrong in the year 2000, any company created later could claim fraud, breach of contract, implied license for these alleged acts or omissions.

[00:28:32] Speaker 01:
And most importantly, that was based on a fabricated duty, which the district court found as a matter of law, Crymar owed no duty.

[00:28:39] Speaker 01:
And Ailey is not appealing that.

[00:28:41] Speaker 02:
But the jury was not bound by the district court's determination of that question on the equitable question of equitable estoppel, was it?

[00:28:49] Speaker 01:
No, Your Honor, but it was the same.

[00:28:50] Speaker 02:
But the jury found that there was no such duty.

[00:28:53] Speaker 02:
It doesn't quite make it fabricated.

[00:28:55] Speaker 01:
Well, the jury rejected their position wholesale, but it was the same fact and legal.

[00:29:00] Speaker 02:
Well, I'm sorry.

[00:29:00] Speaker 02:
What does wholesale mean?

[00:29:01] Speaker 01:
It means it rejected their fraud, breach of contract implied while they

[00:29:07] Speaker 01:
The judge removed the implied license, but it rejected the fraud and breach of contract.

[00:29:11] Speaker 01:
But the entire argument, the basis, was that Kramer had a duty to do something.

[00:29:16] Speaker 01:
And the jury rejected that.

[00:29:17] Speaker 01:
If you don't mind, I will reserve my last minute for rebuttal.

[00:29:33] Speaker 03:
Thank you.

[00:29:33] Speaker 00:
Thank you, Your Honor.

[00:29:38] Speaker 00:
Just to pick back up on that fraud discussion that was just taking place, ALE did, in fact, object to the inclusion of the use of ALE in the fraud by omission and fraud by misrepresentation instruction.

[00:29:50] Speaker 00:
And the reason why we did, Your Honor, is that both parties agreed that Texas state law applied here.

[00:29:56] Speaker 00:
And under the Exxon v. Emerald case that we cited, the Texas Supreme Court held that the misrepresentation or omission did not need to be made to the defrauded party.

[00:30:08] Speaker 00:
In that case, Exxon had submitted well-plugging reports to the Texas Railroad Commission, and those reports were relied on by a subsequent operator in the field.

[00:30:20] Speaker 02:
Tell me if I'm wrong about this.

[00:30:22] Speaker 02:
So the Exxon decision said, I think in terms, it is not enough all by itself that a fraud in that case has been

[00:30:32] Speaker 02:
committed on the Railroad Commission, and then anybody who happened to rely on what was told the Railroad Commission was omitted.

[00:30:44] Speaker 02:
Actually, in that case, it was not an omission.

[00:30:45] Speaker 02:
But what was told to the Railroad Commission doesn't get a fraud action.

[00:30:51] Speaker 02:
In fact, the misrepresentation has to either be intended to go to the later would-be plaintiff,

[00:31:01] Speaker 02:
or the would-be plaintiff has to be not just within some foreseeable range of expectations, but especially likely to be one of those people.

[00:31:14] Speaker 02:
And all of that was addressed by the Exxon decision in ruling on the reliance element, and the Exxon decision didn't repudiate the 79-79 airport garage standard, which is practically verbatim what the

[00:31:29] Speaker 02:
district court used here and the Fifth Circuit in a non-precedential decision in 2014 adopted, non-precedential, adopted the 79-79 airport garage statement.

[00:31:43] Speaker 02:
Do I understand, is that the lay of the legal land here?

[00:31:46] Speaker 00:
I think that is the lay of the legal land.

[00:31:49] Speaker 02:
But Exxon would not have been, even Exxon would not have been satisfied by your proposed instruction which would have allowed

[00:31:56] Speaker 02:
to translate it into Exxon terms, a mere fraud on the Railroad Commission.

[00:32:03] Speaker 00:
Well, we're not arguing for our instruction based on just a mere fraud.

[00:32:09] Speaker 00:
I think the facts of this case do meet.

[00:32:11] Speaker 02:
I should say a fraud only on the Railroad Commission.

[00:32:14] Speaker 00:
That's right.

[00:32:15] Speaker 00:
The facts of this case meet that especially likely standard that was articulated in Exxon.

[00:32:21] Speaker 00:
Because your predecessor participated in the negotiations.

[00:32:26] Speaker 00:
That's correct, Your Honor.

[00:32:28] Speaker 00:
If I could, and amongst other reasons, and we laid this out in the blue brief from pages 70 through 76, in that there's a long history of CRIMAR being involved with the standard setting organization, being aware and understanding what these letters of assurance mean, why they're submitted, who will be relying on them.

[00:32:47] Speaker 00:
It's not just the fact that they made a misrepresentation or omission to the IEEE.

[00:32:51] Speaker 00:
It's the fact that CRIMAR, through its CEO, knew, in fact,

[00:32:55] Speaker 00:
that those participants, including ALE's predecessors, would, in fact, rely on that letter of assurance.

[00:33:02] Speaker 00:
Just to quickly turn to the damages, Mr. Cohen, in the briefing, has tried to turn this into a question on whether or not this is a question of admissibility of these litigation settlement agreements.

[00:33:17] Speaker 00:
That's not the dispute.

[00:33:19] Speaker 00:
The question is whether or not their damages expert satisfied the legal requirements for apportionment

[00:33:26] Speaker 00:
articulated under Syro and Erickson.

[00:33:28] Speaker 00:
He clearly did not.

[00:33:30] Speaker 00:
He was asked at trial whether or not he attributed any quantitative value to the standard.

[00:33:38] Speaker 02:
Can I just clarify something?

[00:33:40] Speaker 02:
There were two different things going on, both of which might be called apportionment.

[00:33:48] Speaker 02:
One of them is apportioning within the product between the patented features and the non-patented features.

[00:33:54] Speaker 02:
And when you move to exclude his testimony, Judge Love said, you're wrong about that.

[00:33:58] Speaker 02:
He's done that.

[00:33:59] Speaker 02:
The second one is giving some value to the standardization.

[00:34:03] Speaker 02:
And in his initial submission, he said, I don't even have to try to do that because of the non-existence of non-infringing alternatives.

[00:34:12] Speaker 02:
And Judge said, Judge Love said, no, no, the federal circuit says you have to try to do it.

[00:34:17] Speaker 02:
But you can actually rely on this expert, Dr. Mattassetti's views about non-infringing alternatives.

[00:34:28] Speaker 02:
That's obviously relevant.

[00:34:30] Speaker 02:
And then he went back and he said, now I'm going to value the standardization.

[00:34:35] Speaker 02:
And I think ultimately that value is so small that it doesn't change my bottom line.

[00:34:41] Speaker 02:
What's wrong with that?

[00:34:44] Speaker 00:
Well, I think in the first instance, it shows that he really didn't value the standard, because in his first report, he says, I don't have to value the standard, and it's $2.50 a court.

[00:34:54] Speaker 00:
And then when he was specifically instructed by the court, no, I want you to value the standard, he comes back in a second report and says, oh, it just turns out, by the way, that what I'm doing.

[00:35:02] Speaker 02:
And then when you moved, you moved and said, that's bad.

[00:35:05] Speaker 02:
And the judge said, no, no, actually, he's fine now, except for one sentence.

[00:35:08] Speaker 02:
And I strike the one sentence.

[00:35:10] Speaker 00:
I think the issue I would take with that, Your Honor, I think the issue I would take with that is it's not based on a reliable economic analysis.

[00:35:19] Speaker 00:
In CSIRO, this Court criticized qualitative statements based on a patent's value or importance without it being rooted in a quantitative market analysis.

[00:35:30] Speaker 00:
And that's exactly what's taking place here.

[00:35:33] Speaker 00:
Dr. Mr. Mills has provided no quantitative analysis as to the value of the patented features versus unpatented features.

[00:35:41] Speaker 00:
And he's provided no quantitative analysis as to the value of the standardization.

[00:35:44] Speaker 00:
That, by definition, is unreliable.

[00:35:47] Speaker 00:
He was allowed to testify at trial just into the qualitative importance.

[00:35:51] Speaker 00:
I relied on Dr. Mattesetti.

[00:35:53] Speaker 00:
And I think this invention is really important.

[00:35:56] Speaker 00:
So I'm going to give it all this value.

[00:35:58] Speaker 00:
And I think, based on Dr. Mattesetti,

[00:36:00] Speaker 00:
This invention drove demand for the standard.

[00:36:03] Speaker 02:
How do you think he should have proceeded to do something quantitative?

[00:36:08] Speaker 00:
Well, there's a lot of different things he could have done.

[00:36:10] Speaker 00:
He could have done market surveys.

[00:36:14] Speaker 00:
He could have valued the cost of the technology to implement the power of the net standard like our expert did.

[00:36:22] Speaker 00:
He could have done our expert, Mr. Bakewell,

[00:36:26] Speaker 00:
went back and looked at non-infringing alternatives that were available to the IEEE before the implementation of the standard, and he analyzed those costs because they weren't tainted by patent holdup and valuation of standardization.

[00:36:40] Speaker 00:
It was a very clean way to look at what it would have cost to do the accused features in the POE standard prior to standardization.

[00:36:49] Speaker 00:
He could have done something like that, but he didn't.

[00:37:00] Speaker 03:
Even though your friend didn't specifically address the exceptional case, I think the discussion of fraud initially did come up in connection with the exceptional case.

[00:37:09] Speaker 03:
So to that extent, you can respond.

[00:37:11] Speaker 01:
Oh, thank you, Your Honor.

[00:37:12] Speaker 01:
I intended to keep my rebuttal strictly to the exceptional case.

[00:37:16] Speaker 01:
In this case, ALE chose to litigate vexatiously to maintain an entire barrage of weak to meritless claims, counterclaims, defenses, up until and even during trial.

[00:37:29] Speaker 01:
acted unreasonably throughout, for a case that was worth less than a million dollars at trial.

[00:37:34] Speaker 01:
In fact, the jury only awarded 324,000.

[00:37:36] Speaker 01:
The fact is, when a litigant maintains weak to meritless claims and defenses when they are belied by the facts, only to put undue pressure on a litigant, that is, by definition under Octane Fitness, an exceptional case.

[00:37:52] Speaker 01:
Unfortunately, the district court abused its discretion when it ignored

[00:37:57] Speaker 01:
Ailey's antitrust counterclaim for which it never intended to try and test the merits.

[00:38:02] Speaker 01:
It ignored the fact that like a justicam, Ailey defied the court's claim construction order and maintained its operational state argument.

[00:38:09] Speaker 01:
It ignored the fact that it maintained all of these weak to meritless claims and defenses right up until pre-trial, dropped all of its invalidity during trial.

[00:38:18] Speaker 01:
The fact is it stands here today still incapable of meeting the elements of fraud.

[00:38:24] Speaker 01:
It never showed the jury a contract.

[00:38:26] Speaker 01:
the inventorship on derivation.

[00:38:30] Speaker 01:
These are the issues that it decided to try to the jury, as opposed to its myriad of other claims and defenses.

[00:38:37] Speaker 01:
These are the ones it decided to try and test the merits.

[00:38:40] Speaker 01:
Fraud, breach of contract, implied license, derivation.

[00:38:44] Speaker 01:
The so-called main inventor, Mr. Benke, admitted at his first deposition the concepts for the inventions came from cry mark, certainly came from CMS.

[00:38:54] Speaker 01:
At his next deposition, Mr. Bankey said, he does not consider himself the sole inventor, and yet ALE persisted and maintained that he was in fact the true inventor.

[00:39:04] Speaker 01:
And at the end of the day, had they won on that claim, the patents could have been corrected.

[00:39:07] Speaker 01:
The whole purpose and litigation strategy has simply been to force CRIMAR to accept pennies on the dollar, which is the definition of an exceptional case.

[00:39:16] Speaker 01:
I hope this Court reverses.

[00:39:18] Speaker 03:
Thank you.