[00:00:15] Speaker 06:
Okay, our next case this morning is number 17 2597 Princeton digital image corporation versus office Depot

[00:00:50] Speaker ?:
Okay, Ms.

[00:01:05] Speaker 06:
Elliott.

[00:01:22] Speaker 02:
Good morning, and may it please the court.

[00:01:24] Speaker 02:
My name is Tara Elliott with Latham and Watkins on behalf of the intervener appellant, Adobe Inc.

[00:01:32] Speaker 02:
Undoubtedly, there are numerous issues raised in the briefs by the parties on this appeal.

[00:01:36] Speaker 02:
However, there are three key observations together with the law that we submit compel, reversal, and remand in this case.

[00:01:47] Speaker 02:
The first is the damages rule the district court cracked below.

[00:01:51] Speaker 06:
Could we talk about appealability and respect to that because I have some concerns about that under the Microsoft case and some of the circuit decisions following Microsoft, not all of which are referred to in the brief.

[00:02:07] Speaker 06:
It strikes me that there's a pretty good argument that this falls within the Microsoft rule.

[00:02:13] Speaker 06:
It's not a class action issue to be sure.

[00:02:16] Speaker 06:
But later circuit cases have extended Microsoft to situations bearing a fair resemblance to this, where there's a voluntary dismissal because the dismissing party thinks that it can't win based on the record that it's allowed to make.

[00:02:36] Speaker 06:
And so it seems to me that there may not be jurisdiction.

[00:02:41] Speaker 06:
over that aspect of the case.

[00:02:43] Speaker 06:
I'd like you to address that.

[00:02:44] Speaker 06:
I'd like you to address a second question, and that is suppose we were to decide that there is no appellate jurisdiction over the tortious interference claim.

[00:02:54] Speaker 06:
Does that have any significance about the argument with respect to the attorney's fees on the patent claim and with respect to the cross appeal?

[00:03:06] Speaker 06:
And it strikes me that Microsoft did not intend

[00:03:11] Speaker 06:
to say that other aspects of the case couldn't be brought up on appeal just because there was a voluntary dismissal that tainted the one claim.

[00:03:20] Speaker 06:
OK, that's a long way of saying it.

[00:03:23] Speaker 06:
You get the point.

[00:03:24] Speaker 02:
I do, Your Honor, and I appreciate the point.

[00:03:26] Speaker 02:
Microsoft B. Baker dealt with, particularly the class action context, which Your Honor has recognized and which we briefed.

[00:03:35] Speaker 02:
The issue there dealt with specifically the public policy around

[00:03:39] Speaker 02:
Rule 23 and the gamesmanship that the court saw and recognized and the way that that could be abused in that particular setting and under those circumstances.

[00:03:50] Speaker 02:
Critically, though, the issue there, which is distinguished from ours here, is that there was not finality.

[00:03:56] Speaker 02:
When a denial of a class certification is ruled upon by the district court, it doesn't end the action for that particular plaintiff.

[00:04:06] Speaker 02:
Here, there's no doubt that there's finality.

[00:04:08] Speaker 02:
The district court's legal rulings regarding the type of damages Adobe could recover rendered Adobe unable to establish an element of its breach of contract claim under New Jersey law.

[00:04:21] Speaker 00:
That terminated.

[00:04:22] Speaker 00:
Can I ask you about that?

[00:04:23] Speaker 00:
The district court said the opposite.

[00:04:26] Speaker 00:
The district court said you can actually establish damages.

[00:04:29] Speaker 00:
You may not think it's worthwhile, but the district court said you can establish damages.

[00:04:34] Speaker 00:
And the other thing I guess I want to ask you about

[00:04:37] Speaker 00:
You sought an injunction.

[00:04:38] Speaker 00:
You don't need to establish damages to seek an injunction.

[00:04:43] Speaker 00:
So how is it that... I guess those are the two points, right?

[00:04:48] Speaker 00:
We have a long line of cases and there are lots of other similar cases that say when a district court decides a particular issue against the plaintiff and the plaintiff says, we now concede a factual question, that means we do not have liability.

[00:05:07] Speaker 00:
claim construction, the accused products under that claim construction don't fit, or that there is some legal implication eliminating the liability.

[00:05:19] Speaker 00:
But we don't seem to have that, and the district court didn't think we had that.

[00:05:23] Speaker 00:
We seem to have a, you just don't think it's worth proceeding, and therefore you are confessing judgment because you don't think it's worthwhile.

[00:05:34] Speaker 02:
We would disagree, and I would submit to Your Honor two things.

[00:05:37] Speaker 02:
First, Princeton Digital raised first at the morning of trial how analogous this situation was to a claim construction decision that rendered an infringement or non-infringement decision untenable.

[00:05:50] Speaker 00:
Right, so they're wrong about that.

[00:05:51] Speaker 00:
We have a jurisdictional question.

[00:05:53] Speaker 00:
We're not bound by what you say or what they say.

[00:05:56] Speaker 00:
The judge said you can prove damages.

[00:05:59] Speaker 00:
The judge also said you seek an injunction.

[00:06:03] Speaker 02:
The judge said you can prove some measure of purely defensive damages.

[00:06:08] Speaker 00:
However, at most, that's all that liability requires.

[00:06:15] Speaker 00:
And if you're seeking an injunction, I'm not sure liability even requires that.

[00:06:19] Speaker 02:
Well, there's numerous cases, Your Honor, that stand for the proposition that the parties nor the district court need to pursue through trial on an issue where

[00:06:32] Speaker 02:
Parties have, at least one party in this case, both parties stipulated to judgment, and the court agreed in order to expedite review.

[00:06:42] Speaker 02:
And there are several cases that stand for it.

[00:06:44] Speaker 02:
There's a Sixth Circuit case, the Bogart v. Eli Lilly case, that approved a solicitation of the dismissal, which was designed to expedite review of an order that in effect dismissed the complaint.

[00:06:57] Speaker 02:
Same way in the Raceway Properties Case v. Imprise, that's another circuit case.

[00:07:01] Speaker 00:
In effect, it seems to me to have a couple of different possible meanings.

[00:07:04] Speaker 00:
One is the kind of meaning that we've given to it in the claim construction situation, where once there's a claim construction ruling, the plaintiff can actually admit a factual question that would then determine no liability.

[00:07:21] Speaker 00:
I don't see that that has happened here, and I'm not sure whether that has happened

[00:07:26] Speaker 00:
in most of the cases that you've relied on.

[00:07:29] Speaker 02:
There was, in fact, a factual admission here.

[00:07:35] Speaker 06:
Let's put aside the injunction for one.

[00:07:38] Speaker 06:
If there had been a determination here that there was no entitlement to damage or even nominal damages, that might fall within these cases.

[00:07:47] Speaker 06:
But the problem is that there is no such fact here, because the district court said,

[00:07:56] Speaker 06:
you could prove some amount of defensive damages.

[00:08:00] Speaker 06:
There's no ruling that you couldn't prove some amount of defensive damages.

[00:08:04] Speaker 06:
So it's a choice that you made to say, well, that's not worth the candle.

[00:08:09] Speaker 06:
Let's just get a judgment against us and appeal.

[00:08:14] Speaker 06:
And my reading of Microsoft in the later cases is that you can't do that.

[00:08:19] Speaker 02:
We would disagree, Your Honor.

[00:08:20] Speaker 02:
First, the court clearly cracked at the rule

[00:08:24] Speaker 02:
and did so under the threat of sanctions for noncompliance, and this is all in the transcript from the first day and last day of trial, that he could grant Princeton Digital's summary judgment motion, which said that we had no damages either.

[00:08:39] Speaker 03:
And that you hadn't proven your damages.

[00:08:41] Speaker 02:
I'm sorry?

[00:08:41] Speaker 03:
That you hadn't proven your damages, or that the theory you put forward was not limited to offensive damages, right?

[00:08:48] Speaker 02:
The position Adobe took and maintains is that

[00:08:52] Speaker 02:
the damages in pursuit of its breach of contract claim was inextricably intertwined and inseparable from its defense of its customers and its assertion of a licensed defense.

[00:09:03] Speaker 02:
That has been its position throughout the case.

[00:09:06] Speaker 02:
And Adobe submitted cases, particularly the safeguard case that has been cited numerous times in my other courts for the same proposition, that fees that are inextricably intertwined are defensive in nature.

[00:09:20] Speaker 02:
And that's the situation we had here.

[00:09:21] Speaker 02:
But every time the Adobe sought to comply with the district court's orders, and they were incremental and successive in nature in terms of saying what damages were permissible for recovery, the district court came back iteratively and said,

[00:09:38] Speaker 02:
That's not defensive either.

[00:09:39] Speaker 02:
That's not defensive either.

[00:09:41] Speaker 06:
But it is true that at the same time, the district court at the end of the day said, you may be able to prove some defensive damages.

[00:09:49] Speaker 06:
I'm not going to prohibit you from showing that at the trial, right?

[00:09:53] Speaker 02:
And the district court then said that only purely defensive, only purely defensive.

[00:09:58] Speaker 02:
Correct.

[00:09:59] Speaker 02:
And the record reflects there are no purely defensive damages to prove.

[00:10:05] Speaker 02:
So there's

[00:10:06] Speaker 02:
Obvious inconsistency on both the record and the facts that make the district court's judgment call, or at least opinion in that regard, not justifiable.

[00:10:19] Speaker 02:
And in this particular case, Princeton Digital agreed.

[00:10:22] Speaker 02:
This was a stipulation and agreed that there were no damages.

[00:10:27] Speaker 02:
And their agreement is in the record.

[00:10:29] Speaker 02:
It's at least on Appendix 3592.

[00:10:35] Speaker 02:
Princeton acknowledged that Adobe had no damages to prove.

[00:10:38] Speaker 02:
Moreover, in the 11th Circuit.

[00:10:41] Speaker 00:
What did you say, 3592?

[00:10:42] Speaker 02:
3592, Your Honor.

[00:10:44] Speaker 02:
In Southland Farms, Visibha.

[00:10:46] Speaker 00:
Which volume is that in?

[00:10:49] Speaker 00:
Three.

[00:10:52] Speaker ?:
23, Your Honor.

[00:10:57] Speaker 03:
In Southland Farms.

[00:10:59] Speaker 03:
What is the language that you're relying on?

[00:11:01] Speaker 03:
Page 3592.

[00:11:02] Speaker 06:
This is a brief submitted by the appellee here.

[00:11:29] Speaker 02:
Yes, so this is Princeton Digital's brief.

[00:11:32] Speaker 02:
It's one of its four summary judgment motions to the district court, where, in fact, it asks the court to grant summary judgment.

[00:11:44] Speaker 02:
And in its position, it says that Adobe has no damages.

[00:11:50] Speaker 06:
Well, so what?

[00:11:51] Speaker 06:
I mean, the district court didn't grant summary judgment motion.

[00:11:55] Speaker 02:
It's up for it.

[00:11:56] Speaker 02:
Itkins its decision at the end.

[00:11:59] Speaker 02:
On the last day of trial, when he articulated this further clarified rule that only purely defensive damages could be recovered, it says that he could grant the Prince and Digital summary judgment motion, which actually asked for that.

[00:12:16] Speaker 06:
But he didn't?

[00:12:18] Speaker 02:
Yeah, but his decision in terms of articulating a rule of law, it's not supported by the case law.

[00:12:24] Speaker 02:
There is no New Jersey case that stands for the proposition that only purely defensive fees are recoverable and that fees that are inextricably intertwined, both affirmative and defensive fees, are not recoverable.

[00:12:37] Speaker 02:
There is no case that stands for that proposition.

[00:12:39] Speaker 02:
The facts remain, and this is what Adobe admitted, that there are no purely defensive fees.

[00:12:45] Speaker 02:
There are no fees that are distinguishable such that they were in pursuit of

[00:12:53] Speaker 02:
a defense, a licensed defense, while at the same time not affirmative in terms of a breach of contract.

[00:13:00] Speaker 02:
They were inseparable in terms of Adobe's role as an intervener.

[00:13:04] Speaker 02:
They're two sides of the same coin.

[00:13:07] Speaker 06:
Unless my colleagues have other questions.

[00:13:09] Speaker 06:
Do you have another question on the jurisdictional issue?

[00:13:11] Speaker 00:
Yeah, I was interested actually in your second question.

[00:13:14] Speaker 00:
Suppose we concluded that there's not a final judgment here in Kohler in part.

[00:13:21] Speaker 00:
What happens?

[00:13:22] Speaker 02:
Two responses to that, Your Honor.

[00:13:24] Speaker 02:
I want to at least point out the 11th Circuit case in Southland Farms.

[00:13:28] Speaker 02:
There, after the court ruled that a disclaimer of liability for consequential damages applied, the plaintiff stated that the time and expense of trial could not be justified by the claim of compensatory damages alone.

[00:13:41] Speaker 02:
And the district court, on that representation, entered a final judgment with the consent of all parties, just like here.

[00:13:48] Speaker 02:
and dismiss the action.

[00:13:49] Speaker 02:
And the 11th Circuit found jurisdiction in that circumstance.

[00:13:53] Speaker 02:
As to the specific question that you're asking.

[00:13:55] Speaker 00:
I assume that's pre-Baker?

[00:13:57] Speaker 02:
It's a 1990 case.

[00:13:59] Speaker 00:
Well, pre-Baker, yeah.

[00:14:01] Speaker 02:
And it's a 11th Circuit case.

[00:14:03] Speaker 02:
And there's a number of other cases, 6th Circuit cases, a number of cases post-Baker that also acknowledge that when the parties stipulate to expedite review of a decision, a legal decision here, such as the case we have here,

[00:14:18] Speaker 02:
to expedite review that that is uphill.

[00:14:21] Speaker 02:
There is finality in this case.

[00:14:23] Speaker 06:
But none of those cases involves a situation like this where you've elected to enter a voluntary dismissal because you don't like the chances of establishing an element of the case rather than the court ruling against you on that element.

[00:14:42] Speaker 02:
We would respectfully submit that's not the circumstance in which we dismissed.

[00:14:46] Speaker 02:
We dismissed because the facts were that there were no purely defensive damages.

[00:14:52] Speaker 02:
That was an admitted fact.

[00:14:54] Speaker 02:
And under Jane, where the court sent back a case, this court sent back a case for clarity about the decision the district court made, that could likewise be appropriate here.

[00:15:09] Speaker 02:
Let's move on to the other.

[00:15:11] Speaker 06:
Can I ask one question?

[00:15:12] Speaker 03:
I just want to ask you about the claim to the injunction.

[00:15:15] Speaker 03:
Could we go back to that for a minute?

[00:15:17] Speaker 03:
Has your client given up the claim for an injunction?

[00:15:20] Speaker 02:
I'm not sure what you mean by giving up the claim for an injunction.

[00:15:22] Speaker 03:
Do you still have an injunction claim?

[00:15:24] Speaker 03:
I mean, setting damages aside, is there still a claim for an injunction?

[00:15:28] Speaker 02:
There is a claim for declaratory judgment that the licensed offenses precluded these cases from being filed.

[00:15:37] Speaker 02:
There was also a pending claim for a breach of contract and acknowledging that the licensed defense would prevail.

[00:15:44] Speaker 00:
I'm not sure exactly what you're pointing to in terms of... There's a footnote, I think in one of Judge Stark's opinions, I think having something to do with restitution in which he expressly says, you seek an injunction and that's a reason why he's not going to do something else.

[00:16:03] Speaker 00:
Do you seek injunction or have you permanently waived any right to an injunction?

[00:16:09] Speaker 00:
The answer to which may well affect

[00:16:11] Speaker 00:
whether the ruling on damages actually undermines liability.

[00:16:16] Speaker 02:
I guess the part of your zone confused with the question is because the restitution claim was dismissed.

[00:16:20] Speaker 02:
That's not, and so that's not been briefed by either party here because restitution.

[00:16:24] Speaker 00:
Am I not remembering correctly that, that Judge Stark said you seek an injunction on your breach of contract claim to prevent Princeton from filing more lawsuits in breach of the, of the covenant not to

[00:16:41] Speaker 02:
I'm not questioning your request, Your Honor.

[00:16:43] Speaker 02:
I just don't know where you're citing that, because you're tying that with restitution, and that claim is dismissed.

[00:16:49] Speaker 03:
What about on page 3207, where you're seeking an injunction?

[00:16:56] Speaker 02:
I'll just point while I'm going there that the cases, with the exception of two pending in the District of Delaware, the cases about which you're seeking fees and seeking a recovery of damages

[00:17:10] Speaker 02:
We're dismissed.

[00:17:14] Speaker 02:
So I'm at 3207.

[00:17:17] Speaker 02:
That looks to be a complaint.

[00:17:21] Speaker 02:
Right.

[00:17:22] Speaker 02:
So I'm not sure, Your Honor.

[00:17:24] Speaker 03:
Is this your complaint?

[00:17:27] Speaker 03:
This may have the order in joining Princeton from suing or maintaining suit against other Adobe customers and end users based on their use of Adobe licensed products.

[00:17:36] Speaker 03:
Are you still seeking that?

[00:17:39] Speaker 02:
Well, the cases in which Adobe has intervened has been dismissed.

[00:17:42] Speaker 02:
So we are not a party to any case right now that would give us standing to proceed.

[00:17:49] Speaker 06:
No, but Your Honor, this sounds as though you're asking for injunction against the filing of future suits.

[00:17:55] Speaker 02:
Your Honor, the cases in which Adobe presently has standing and that it has intervened in... Are you saying that you're seeking an injunction or not?

[00:18:04] Speaker 03:
If you're not, just say, no, I'm not.

[00:18:07] Speaker 02:
So I guess, Your Honor, the fact that the patent is expired, there can be no new suits filed.

[00:18:14] Speaker 02:
The suits that have been dismissed are closed.

[00:18:19] Speaker 06:
So what you're saying is that any request for injunction is moot?

[00:18:22] Speaker 02:
It's moot.

[00:18:24] Speaker 06:
OK.

[00:18:24] Speaker 06:
Let's turn to the other question.

[00:18:27] Speaker 06:
OK.

[00:18:28] Speaker 06:
And that is, if we were to conclude hypothetically that the tortious interference claim can't be brought up on appeal,

[00:18:37] Speaker 06:
because of the Microsoft line of cases.

[00:18:40] Speaker 06:
What is the impact of that on your appeal with respect to attorney's fees and with respect to the cross-appeal?

[00:18:50] Speaker 02:
The appeal for fees and the appeal with respect to the waiver of privilege was joined under the court's merger doctrine and their final.

[00:19:01] Speaker 02:
And our view is that the issue on the breach of contract for a breach of a covenant not to sue

[00:19:07] Speaker 02:
also is final with respect to the court's views below in terms of what we could have proved.

[00:19:14] Speaker 02:
There's nothing left for the court to do that satisfies this court's final judgment rule and that satisfies finality here.

[00:19:21] Speaker 02:
So our submission is that all three issues are ripe for this court's review and appeal.

[00:19:27] Speaker 02:
But most certainly, the fee issues have been merged with the others and independently offer jurisdiction for this court to review.

[00:19:37] Speaker 02:
decisions that we've cited in our brief, this court can review all three.

[00:19:44] Speaker 06:
And with respect to... Well, the question is whether we can review the two if we don't have jurisdiction over the other one.

[00:19:50] Speaker 06:
I don't know of any cases that have addressed that issue.

[00:19:54] Speaker 02:
Well, certainly there's nothing left for the court to do.

[00:19:56] Speaker 02:
That's what we look at when we analyze under the final judgment rule.

[00:20:01] Speaker 02:
So those decisions have been decided

[00:20:03] Speaker 02:
And there's nothing left for the district court to do.

[00:20:05] Speaker 02:
So they are ripe and they are final.

[00:20:08] Speaker 02:
I think this falls squarely within this court's jurisdiction.

[00:20:12] Speaker 02:
And the final judgment that this court, the district court, signed off on and submitted was that all, and that's on 107 and 108 of the appendix, all of the decisions that were interlocutory in nature were ready and subject to review by this court.

[00:20:29] Speaker 02:
And that's our submission.

[00:20:31] Speaker 06:
Okay, let's talk about the attorney's fees issue.

[00:20:34] Speaker 02:
Yes.

[00:20:35] Speaker 06:
As I read the record, Judge Stark viewed this as a two-step process.

[00:20:41] Speaker 06:
Step one, he's going to determine whether it's an exceptional case, and step two, he's going to decide in the exercise of his discretion not to award attorney's fees.

[00:20:51] Speaker 06:
I don't think you've accurately described the second decision as based on efficiency alone, but let's put that aside for a moment.

[00:21:01] Speaker 06:
We have cases before octane which say that it is a two-step process.

[00:21:10] Speaker 06:
And my first question is after octane, is it really a two-step process?

[00:21:15] Speaker 06:
That is a determination of exceptional case and then the exercise of discretion to award attorney's fees.

[00:21:22] Speaker 06:
Or should it really be viewed as a one-step process involving the totality of the circumstances and just a decision

[00:21:29] Speaker 06:
as to the exceptional case determination, which automatically leads to an award of attorney's fees.

[00:21:38] Speaker 06:
And I don't see that we've addressed that question yet after octane.

[00:21:45] Speaker 06:
And there is a difference between the pre-octane cases and the situation we're addressing now, because our pre-octane cases didn't apply a totality of the circumstances standard.

[00:21:58] Speaker 06:
to the exceptional case findings so that it made sense to have a two-step procedure.

[00:22:04] Speaker 06:
But I'm not sure now that it makes sense to view this as a two-step procedure since both the first step and the second step are applying the same standard.

[00:22:14] Speaker 06:
That's kind of long-winded.

[00:22:16] Speaker 06:
Do you understand what I'm saying?

[00:22:17] Speaker 02:
I think I do, Your Honor.

[00:22:19] Speaker 02:
And I would submit that the octane case itself and the case's post-octane don't really make clear whether the process is one or two steps.

[00:22:29] Speaker 02:
But I would also submit to you that the outcome would be the same under either circumstance here.

[00:22:35] Speaker 02:
The court determined, and it's not disputed here on appeal, that the conduct here was exceptional.

[00:22:40] Speaker 02:
It is undisputed that Princeton digital distance.

[00:22:43] Speaker 00:
I'm sorry.

[00:22:44] Speaker 00:
case was exceptional.

[00:22:46] Speaker 00:
And that included a number of reasons, some of which had to do with their conduct and some of which had to do with your conduct.

[00:22:53] Speaker 02:
I think when you look at the district court's opinion and the totality of its opinion, it is critical of Princeton Digital's conduct and delineates at great length the conduct which it found unacceptable or less than desirable.

[00:23:09] Speaker 02:
As for Adobe's conduct, Your Honor, the district court

[00:23:13] Speaker 02:
opine that Adobe litigated aggressively.

[00:23:18] Speaker 06:
Well, wait, wait.

[00:23:19] Speaker 06:
In your view, is this a two-step process or a one-step process?

[00:23:22] Speaker 02:
I think having found the case to be exceptional, the conduct here warranted fees to Adobe.

[00:23:31] Speaker 06:
No, but that's not answering my question.

[00:23:33] Speaker 06:
Is it a one-step or a two-step process?

[00:23:36] Speaker 02:
I think under Octane that the first step is to determine whether or not the case is exceptional.

[00:23:43] Speaker 02:
And so that would be a two-step process.

[00:23:45] Speaker 06:
Okay, so if it's a two-step process, we know the first step, exceptional case determination, it's totality of the circumstances.

[00:23:53] Speaker 06:
What then is the standard at the second step?

[00:23:59] Speaker 06:
What standard governs whether to award fees once you've determined that the case is exceptional?

[00:24:05] Speaker 02:
Well, if we look at this court's decision in Opolis, this court looked at a district court's determination that a case was exceptional, and then looked at the court's denial of fees after for that finding.

[00:24:15] Speaker 02:
And in Opolis, this court found that the court did not provide a justification as to why the case did not warranted fees to the party who moved for fees.

[00:24:26] Speaker 02:
And I think Opolis is instructive here.

[00:24:29] Speaker 02:
Opolis did not conflate the analysis into one stat, nor did it

[00:24:35] Speaker 02:
disturbed the finding of exceptional conduct.

[00:24:37] Speaker 02:
It said exceptional conduct was determined here, and it was the same case here, and there was no rationale for denying fees in that case, and this court reversed and remanded it.

[00:24:48] Speaker 03:
But here, isn't there a rationale provided?

[00:24:51] Speaker 02:
We would respectfully disagree on it.

[00:24:53] Speaker 03:
You disagree with the rationale.

[00:24:54] Speaker 02:
Well, the rationale was that Adobe was aggressive, and that's a very subjective opinion.

[00:25:00] Speaker 06:
That's not accurate.

[00:25:02] Speaker 06:
that it's only one part of what the district court said.

[00:25:05] Speaker 06:
And you keep saying that that was the entire basis for his decision, and that's not correct.

[00:25:10] Speaker 02:
Well, the court, in saying that we were aggressive, cited the things about which we were aggressive.

[00:25:14] Speaker 06:
No, but you're not addressing my point.

[00:25:15] Speaker 06:
Aggressiveness was only one part of his decision not to award pleas.

[00:25:20] Speaker 06:
He went on and relied on a number of other factors as well.

[00:25:24] Speaker 02:
It's all on Appendix 41, Your Honor.

[00:25:27] Speaker 02:
The whole rationale about the court's discretion as to whether to award pleas

[00:25:31] Speaker 02:
is on page 36 and 36-7 of his opinion.

[00:25:35] Speaker 02:
And as he analyzes Optane Fitness, that is on page 37 of the lower court's opinion on Appendix 41.

[00:25:42] Speaker 06:
Look, he says at the top of the page on 41, he says you've litigated this aggressively, and that has some relationship to compensation and deterrence.

[00:25:51] Speaker 06:
But then, you know, at the bottom of the, in the middle and the bottom of the page, he gives other reasons.

[00:25:57] Speaker 06:
It's not his only reason.

[00:25:58] Speaker 02:
Well, he explains what he means by aggressive.

[00:26:00] Speaker 02:
But he explains that we're aggressive by intervening.

[00:26:03] Speaker 02:
He explains that we are aggressive by asking for sanctions.

[00:26:07] Speaker 06:
He says there is no singular category of conduct that rises to a level that would warrant deterrence by way of an award of attorney's fees.

[00:26:14] Speaker 06:
That's going beyond aggressiveness.

[00:26:16] Speaker 02:
That's to Princeton Digital's conduct, Your Honor.

[00:26:18] Speaker 02:
That's to Adobe's conduct.

[00:26:20] Speaker 02:
It is in the first full paragraph on Appendix 41.

[00:26:23] Speaker 02:
And he's saying that we were aggressive, including

[00:26:27] Speaker 02:
by intervening, the only step that Adobe could take to honor its contracts it had with its customers who were asking for indemnification.

[00:26:35] Speaker 03:
But we might not even get to this issue, right, if we rely on Judge Stark's finding that you were not the prevailing party, right?

[00:26:44] Speaker 02:
Well, Judge Stark did not find that we weren't the prevailing party.

[00:26:47] Speaker 02:
In fact, he assumed for purposes of the decision that we were the prevailing party.

[00:26:51] Speaker 02:
And in fact, we are the prevailing party as it relates to these underlying cases.

[00:26:55] Speaker 02:
because they were all dismissed with prejudice.

[00:26:59] Speaker 03:
Didn't he assume?

[00:27:00] Speaker 03:
He said, I'm going to find that you're not the prevailing party.

[00:27:03] Speaker 03:
That's on page 25 and 26.

[00:27:05] Speaker 03:
And then he says, but I'm going to go ahead and presume for a minute that you are the prevailing party and address this exceptionality.

[00:27:12] Speaker 03:
Right?

[00:27:12] Speaker 03:
That's how I'm reading it.

[00:27:14] Speaker 03:
Tell me how I'm wrong.

[00:27:15] Speaker 02:
I didn't read the initial part as you did, Your Honor.

[00:27:18] Speaker 02:
I read where he says he's assuming for purposes of this decision that Adobe is the prevailing party.

[00:27:25] Speaker 02:
So I'm not sure where Your Honor is citing that he said we weren't the prevailing party.

[00:27:29] Speaker 02:
But under the law, the prevailing party looks at two things.

[00:27:32] Speaker 02:
Was there some relief on the merits?

[00:27:34] Speaker 02:
And did that relief change the relationship, a material change in the legal relationship that affected and modified the behavior of one party vis-a-vis the others?

[00:27:46] Speaker 02:
There's no doubt whatsoever that Princeton Digital was not the prevailing party here.

[00:27:50] Speaker 02:
They filed infringement suits.

[00:27:52] Speaker 06:
Wait, wait, wait.

[00:27:52] Speaker 06:
This wouldn't be for us.

[00:27:54] Speaker 06:
If we were to agree with you that he abused his discretion in not awarding fees based on the grounds that he gave, we would still have to send this back for a prevailing party determination, right?

[00:28:09] Speaker 02:
You could, Your Honor, but the decision as to whether a party is prevailing is an issue of law.

[00:28:15] Speaker 02:
This court could decide that issue de novo, and there is no doubt here

[00:28:20] Speaker 02:
that Princeton Digital is not the prevailing party and Adobe is the prevailing party on the infringement suits in which Adobe intervened and that those parties were dismissed.

[00:28:31] Speaker 02:
They were dismissed with prejudice, without any consideration, and that is the relief that Adobe sought.

[00:28:38] Speaker 02:
That is precisely the relief that Adobe sought.

[00:28:40] Speaker 02:
Dismissal of these cases.

[00:28:41] Speaker 00:
Can I just check something?

[00:28:42] Speaker 00:
Yes.

[00:28:42] Speaker 00:
All nine of these were without consideration.

[00:28:44] Speaker 00:
I thought there was some record that maybe at least in one, maybe more than one,

[00:28:49] Speaker 00:
some of the sued defendants did pay something, maybe not these nine?

[00:28:53] Speaker 02:
I understand your question, Your Honor, not these nine.

[00:28:56] Speaker 02:
These nine were all dismissed after receiving declarations that these defendants were using Adobe products, which is exactly the same thing that Princeton Digital was told by both the defendants and Adobe, that they were all licensed when these cases were filed, yet they maintained suit for years, even after their own expert told them in December of 2014

[00:29:19] Speaker 02:
that the conduct they accused was covered by the Adobe license.

[00:29:24] Speaker 02:
The expert opined and sent them an email in December of 2014 saying, these are Adobe products.

[00:29:30] Speaker 02:
These must be dismissed.

[00:29:32] Speaker 02:
And even after getting that information in violation of rule 11.

[00:29:36] Speaker 06:
In terms of reviewing Judge Stark's opinion with respect to his decision not to award fees, we have to look at what he said.

[00:29:48] Speaker 06:
And what he said on page 41 is not just that Adobe was aggressive.

[00:29:57] Speaker 06:
He also made quite a number of comments about PDIC's conduct as not warranting fees.

[00:30:07] Speaker 06:
And so we have a decision which, contrary to your argument, does not rest entirely on Adobe's aggressivity, but the results relies on a number of factors.

[00:30:18] Speaker 06:
What factor has he left out, in your view, in making that decision?

[00:30:25] Speaker 02:
Your Honor, we submit that the conduct that the court has tagged to Adobe that was labeled aggressive, but the specific conduct was intervening, moving for sanctions, filing motions, which was the responsibility.

[00:30:40] Speaker 06:
You're saying he made an improper finding that you'd acted aggressively?

[00:30:44] Speaker 02:
It was an abuse of discretion.

[00:30:46] Speaker 02:
It was an improper error in the assessment of the evidence.

[00:30:49] Speaker 06:
Let's put that aside.

[00:30:50] Speaker 02:
OK.

[00:30:51] Speaker 06:
So he goes into these other factors.

[00:30:54] Speaker 06:
He doesn't rest just on aggressive conduct.

[00:30:57] Speaker 06:
What has he left out?

[00:30:59] Speaker 06:
What has he not considered that he should have considered?

[00:31:02] Speaker 02:
He actually considers quite thoroughly, in our view, the conduct that

[00:31:12] Speaker 02:
prolonged the case that multiplied the proceedings that caused Adobe to have to move and react.

[00:31:21] Speaker 02:
He does that repeatedly, starting from pages 26.

[00:31:27] Speaker 06:
Basically at 41, he's saying, their conduct isn't so bad that I'm going to award attorney's fees, right?

[00:31:33] Speaker 02:
Correct.

[00:31:33] Speaker 02:
That's what he says.

[00:31:34] Speaker 06:
OK, so what's wrong with that?

[00:31:35] Speaker 02:
We're saying that it is an error

[00:31:38] Speaker 02:
in the assessment of the evidence.

[00:31:40] Speaker 02:
It is against the weight of the evidence.

[00:31:42] Speaker 02:
It is internally contradictory.

[00:31:44] Speaker 02:
It is just like this case's decision in Obelisk.

[00:31:47] Speaker 06:
So it's not that he applied a wrong standard.

[00:31:50] Speaker 06:
It's that the findings that he made aren't supported by the record.

[00:31:54] Speaker 02:
Correct, Your Honor.

[00:31:56] Speaker 02:
And same with Rule 11.

[00:31:57] Speaker 02:
He actually finds the facts that support a Rule 11 violation, which the rule requires shall be sanctioned.

[00:32:06] Speaker 02:
It's not even discretionary.

[00:32:08] Speaker 02:
when a party does not, an attorney does not make an independent investigation.

[00:32:15] Speaker 02:
On this record, he fully acknowledges, even as Prince and Digital's counsel again on the record, I have nothing more than Mr. Morris' declaration.

[00:32:25] Speaker 02:
And the answer, that is correct.

[00:32:26] Speaker 02:
And though he held and so found that there was no independent investigation, he still excused that conduct in violation of Rule 11.

[00:32:34] Speaker 02:
He disregarded.

[00:32:36] Speaker 02:
the improper purpose for which these cases were filed and which was demonstrated by the explosive letters that were sent seeking nuisance value settlements, which this court, again, has acknowledged as indicia of an improper purpose.

[00:32:53] Speaker 02:
So under both Rule 11 and separately under Section 285, Adobe submits that there was an abuse of discretion by not granting fees.

[00:33:03] Speaker 02:
Your honor, I know I'm out of time, but I would love to have some time for rebuttal if your honor would fit.

[00:33:09] Speaker 06:
Okay, we'll give you two minutes for rebuttal.

[00:33:12] Speaker 06:
Thank you.

[00:33:23] Speaker 06:
Mr. Pezuniak, is that how you pronounce it?

[00:33:25] Speaker 06:
Yes, correct.

[00:33:27] Speaker 07:
Thank you.

[00:33:28] Speaker 07:
If it may, please record George Pezuniak for

[00:33:32] Speaker 07:
at the Lee Cross Appellant Vincent Digital Corporation, addressing the jurisdictional issues first.

[00:33:44] Speaker 07:
This is a case just like the Third Circuit case in Kamesi and in Microsoft v. Baker.

[00:33:52] Speaker 07:
There was an interlocutory

[00:33:56] Speaker 07:
in limine decision, limiting the nature of the damages that Adobe could present at trial.

[00:34:05] Speaker 00:
You use the word in limine, which in trying to understand the messy body of case law did come up a number of times.

[00:34:13] Speaker 00:
I did not take this to be in limine.

[00:34:15] Speaker 00:
That is, the district court said, I hereby exclude all the evidence of damages that falls into a particular category, namely

[00:34:26] Speaker 00:
damages in the form of costs of defending against Princeton's claims against the actual defendants, not the intervener, that also overlap with what has been called affirmative costs.

[00:34:42] Speaker 00:
And that evidence is not going to come in.

[00:34:45] Speaker 00:
I am not reserving that for later change during the trial proceeding.

[00:34:51] Speaker 00:
This did not strike me as in limine.

[00:34:54] Speaker 07:
Well, perhaps I view in limine as simply a name for limiting the amount, limiting the evidence that's allowed to be presented.

[00:35:04] Speaker 00:
The cases that I read, at least I understood them to use in limine in a particular sense, namely, this could change at trial.

[00:35:13] Speaker 00:
And I didn't see any evidence that this ruling could change at trial.

[00:35:18] Speaker 00:
Indeed, it's a little hard to do suddenly when you say

[00:35:22] Speaker 00:
Mr. Becker or Dr. Becker can't come here.

[00:35:24] Speaker 00:
It's a lot easier if you say he can come and I may restrict.

[00:35:28] Speaker 07:
Well, it's still a decision that could be changed at any time during the trial because it was not a final decision.

[00:35:38] Speaker 06:
There's also... Let's assume we reject that.

[00:35:41] Speaker 06:
Let's assume we reject that.

[00:35:43] Speaker 06:
Let's assume that Judge Stark meant these to be final rulings about what evidence could be brought in.

[00:35:50] Speaker 07:
It's still a limitation as to what damages could be presented.

[00:35:57] Speaker 07:
But not a complete bar.

[00:35:59] Speaker 07:
Not a complete bar.

[00:36:00] Speaker 03:
Why isn't it a complete bar?

[00:36:01] Speaker 03:
I mean, if Adobe is in the best position to know what evidence it could present and whether it could actually show these kinds of damages, why are you basing your statement that it wasn't limiting

[00:36:16] Speaker 03:
Adobe to zero, what is your basis for that?

[00:36:20] Speaker 07:
There's two different answers.

[00:36:22] Speaker 07:
One is that if in fact Adobe was defending the customers, then there should be some record of that, some financial ability to demonstrate that, yes, we spent this money.

[00:36:37] Speaker 03:
What if they didn't do that though?

[00:36:38] Speaker 03:
What if they didn't keep those kinds of records?

[00:36:40] Speaker 03:
I mean, they're in the best position to know whether they did or didn't, right?

[00:36:44] Speaker 07:
Well, if Adobe did not keep adequate records to present a damaged case, that's their problem, not the problem of the court or PDIC.

[00:36:56] Speaker 03:
Well, but it doesn't mean that it's not a final decision.

[00:36:58] Speaker 03:
I mean, the question is whether there's jurisdiction for an appeal right now.

[00:37:03] Speaker 07:
And the answer is there's a second answer.

[00:37:05] Speaker 07:
And that is, as we pointed out in our red brief at page 26,

[00:37:11] Speaker 07:
established the New Jersey law is that if you prove a breach of contract, the law infers damages, and you're entitled to at least nominal damages.

[00:37:23] Speaker 07:
Therefore, under the Baker case, under the Kamesi case, there was a case that Adobe was bound to present.

[00:37:34] Speaker 07:
And that is to go into the court, present the best case it could on liability,

[00:37:41] Speaker 07:
If they proved liability, they would have been entitled to at least nominal damages.

[00:37:47] Speaker 07:
That's the law.

[00:37:49] Speaker 07:
And in fact, as the court pointed out, they could probably have presented other things.

[00:37:56] Speaker 07:
The main point is, what happens now?

[00:38:00] Speaker 07:
Suppose that Adobe consented or actually requested a final judgment.

[00:38:09] Speaker 07:
That final judgment is now the law of, is rest judicata.

[00:38:18] Speaker 07:
You have claimed preclusion.

[00:38:21] Speaker 06:
What is your position about whether the non-appealability of the tortious interference claim extends to the claim for attorney's fees under 285 and rule 11?

[00:38:37] Speaker 06:
et cetera, and to your cross appeal.

[00:38:39] Speaker 06:
Do you agree that even if there is no appellate jurisdiction over the tortious interference claim, that we still have jurisdiction over the other claims?

[00:38:49] Speaker 07:
Over the Section 285 in Rule 11?

[00:38:53] Speaker 07:
Yeah.

[00:38:54] Speaker 07:
I believe that an appeal lies from a final judgment.

[00:39:01] Speaker 07:
And that final judgment subsumes all the other interlock into it.

[00:39:05] Speaker 07:
Yeah, but what's the answer to my question?

[00:39:07] Speaker 07:
Well, I was getting to that.

[00:39:09] Speaker 07:
Because the final judgment subsumes all the interlocutory decisions, once the court dismisses an appeal, then the entire appeal fails.

[00:39:23] Speaker 00:
I guess I was expecting you to talk about either 1292 or 54B, right?

[00:39:31] Speaker 00:
So there's a claim in the case called patent infringement.

[00:39:37] Speaker 00:
fees under 285 about the patent infringement case.

[00:39:43] Speaker 00:
And then there's a counterclaim of breach of contract, which is, I think, the only counterclaim left in the case.

[00:39:49] Speaker 00:
Their breach of contract counterclaim, have I got that right?

[00:39:54] Speaker 07:
No, Your Honor.

[00:39:56] Speaker 07:
There was a PBIC filed a claim for patent infringement against these various defendants.

[00:40:04] Speaker 07:
Adobe intervened.

[00:40:06] Speaker 07:
and filed a complaint for breach of contract and also... And patent misuse, but patent misuse is gone, so what's left is the counterclaim of breach of contract.

[00:40:17] Speaker 07:
But it's not a counterclaim, it's a claim by Adobe.

[00:40:21] Speaker 00:
Okay, so there are two claims.

[00:40:23] Speaker 00:
Rule 54 addresses the question of two claims.

[00:40:26] Speaker 00:
If we thought that there was no final judgment on the breach of contract claim, then

[00:40:33] Speaker 00:
Don't you have to go through a 54B process in order to get the patent judgment up here?

[00:40:41] Speaker 07:
Adobe did not appeal from the patent any patent issues.

[00:40:46] Speaker 07:
The only appeal... 285.

[00:40:49] Speaker 00:
It appeals from the denial of attorney's fees.

[00:40:54] Speaker 07:
Yes, but it appealed from that as part of the appeal from the final judgment.

[00:41:01] Speaker 06:
So you're suggesting we don't have any

[00:41:03] Speaker 06:
Jurisdiction over the 285 appeal?

[00:41:06] Speaker 07:
I believe that, Your Honor, it does not have a jurisdiction.

[00:41:09] Speaker 06:
But aren't there plenty of cases saying that attorney's fees determinations are separate from the merits and can be separately appealed?

[00:41:17] Speaker 07:
That is correct.

[00:41:19] Speaker 07:
And perhaps that is the answer, as Your Honor has previously pointed out.

[00:41:25] Speaker 07:
There is no jurisdiction, no cases deciding that jurisdictional issue.

[00:41:31] Speaker 07:
There is, in this case, those decisions were made already before the final judgment.

[00:41:40] Speaker 07:
The appeal from the final judgment specifically cited all of these interlocutory decisions.

[00:41:48] Speaker 07:
And therefore, even though it would have been possible for Adobe to go and ask for attorney's fees after this, in fact,

[00:41:58] Speaker 07:
They had done that before the case terminated.

[00:42:02] Speaker 07:
So that decision was subsumed in the final judgment.

[00:42:06] Speaker 07:
And that final judgment is now on appeal.

[00:42:09] Speaker 07:
And if that appeal is dismissed, there shouldn't be anything else that the court should rule on.

[00:42:17] Speaker 06:
Including your cross appeal?

[00:42:19] Speaker 07:
No.

[00:42:20] Speaker 07:
Our cross appeal is different because the

[00:42:25] Speaker 07:
basis for the commessing and the Microsoft ruling was that the appellant should not be able to rig the system to have... Well, if there's no final judgment, why is the cross appeal proper?

[00:42:42] Speaker 07:
Oh, there is a final judgment, except the court does not have jurisdiction to hear that final judgment because

[00:42:52] Speaker 07:
there is insufficient finality.

[00:42:57] Speaker 07:
The cases here where you have... I don't see how you can distinguish your cross-appeal from the attorney's fee, the 285 issue.

[00:43:06] Speaker 07:
Well, the PDIC is entitled to have this court consider the assessment... Or maybe you have to go through a 54B certification to get it up here.

[00:43:18] Speaker 07:
If we have to go through a 54B certification, then I guess we have to do that.

[00:43:25] Speaker 07:
But I think that the way the Microsoft and the Baker decision came out, and this is apparent if one reads the concurrent opinion in that case by Justice Thomas, the court put an overlay over section 291.

[00:43:45] Speaker 07:
that basically said even though there is a final judgment, it's not an appealable final judgment because we're not going to accept finality that's basically a rigged finality to afford... But there's no rigged finality as to the 285 claim, right?

[00:44:07] Speaker 06:
As I said... Or with respect to your cross-appeal, there's no rigged finality as to either one of those, is there?

[00:44:13] Speaker 07:
There is no...

[00:44:15] Speaker 07:
As to our cross-appeal, there is no rigged finality.

[00:44:18] Speaker 07:
As to Section 285 and Rule 11, yes, Your Honor, I agree.

[00:44:23] Speaker 07:
There's nothing rigged about it.

[00:44:27] Speaker 07:
If those decisions were decided, my only comment is that if, in fact, those decisions were rendered before the final judgment and subsumed in the final judgment, an appellant's appeal

[00:44:45] Speaker 07:
from that final judgment is dismissed, then everything is dismissed.

[00:44:49] Speaker 00:
Can I just ask you, have you thought about how the new Supreme Court decision in Baker relates to the old Supreme Court decision in Procter and Gamble, which was a rigged finality, more or less openly and expressly, where the government says, we're not going to provide grand jury testimony, and please judge right in your order

[00:45:15] Speaker 00:
that if we don't supply it, your anti-trust case, your whole anti-trust case is dismissed.

[00:45:21] Speaker 00:
And the Supreme Court said that's a perfectly fine way to bring a case up, at least when the alternative is going into contempt.

[00:45:33] Speaker 00:
And Baker, whatever else it is, is ultimately about Rule 23.

[00:45:39] Speaker 00:
But it has language that is, let's call it

[00:45:43] Speaker 00:
skeptical about various forms of voluntary action to produce finality that might not otherwise exist.

[00:45:54] Speaker 07:
Your Honor, if I may respectfully disagree with your underlying supposition that the Microsoft v. Baker is a Rule 23 case, that is where it originated.

[00:46:07] Speaker 07:
However, both Knessy and

[00:46:11] Speaker 07:
Microsoft Weebaker, although they were class certification rule 23 cases, if you read the decisions, the decisions do not rest on the fact that these were class certifications.

[00:46:25] Speaker 07:
They rest on the fact that these were interlocutory decisions that just as in this case, a plaintiff loses the class certification, it now becomes

[00:46:39] Speaker 07:
financially unbeneficial to continue the case because there's not enough money involved.

[00:46:48] Speaker 07:
So they say, fine, because we can't make any money on this, we're not going to go through liability.

[00:46:54] Speaker 07:
We're just going to ask the court to dismiss the cases.

[00:47:00] Speaker 07:
And that's exactly here.

[00:47:01] Speaker 07:
Both Tomesi and Microsoft Baker, they do deal with

[00:47:07] Speaker 07:
the interlocutory nature.

[00:47:09] Speaker 07:
Rule 23, F, for example, rule 23 in general, they were simply analyzed by these interlocutory decisions, and they were.

[00:47:21] Speaker 07:
The subsequent decisions of the second, fourth, and sixth circuit cases have taken the Baker case beyond class certifications into other areas,

[00:47:36] Speaker 07:
And if you look at, for example, the Keene case and the Fourth Circuit, they very clearly say, Microsoft v. Baker is an interlocutory decision.

[00:47:46] Speaker 07:
To answer the honor's question more directly, it's kind of hard to speculate as to what exactly the court would do.

[00:47:56] Speaker 07:
But the court basically followed this prior Cooper's Livran decision, which is that we want

[00:48:05] Speaker 07:
the entire case, including liability, damages, any counterclaims, all the issues to come up at once for very good, solid public policy, judicial policy reasons.

[00:48:18] Speaker 00:
What do you make of Procter & Gamble, then?

[00:48:22] Speaker 07:
Your Honor, frankly, I have to apologize, but I can't address the Procter & Gamble case.

[00:48:28] Speaker 07:
I can't address the Cooper's Lieberman case and the others.

[00:48:32] Speaker 07:
But there are situations.

[00:48:35] Speaker 07:
where a court decision, for example, we talked about claim construction.

[00:48:45] Speaker 07:
The district court renders a claim construction that makes it impossible for a patentee to actually present the case.

[00:48:55] Speaker 03:
How is that different from Microsoft v. Baker?

[00:48:58] Speaker 03:
I mean, I guess imagine a scenario where it might be

[00:49:02] Speaker 03:
a judgment call on whether they could prove their case or not.

[00:49:10] Speaker 07:
There may be some grayish area, but you've been involved in these things.

[00:49:15] Speaker 03:
And in fact, I don't know that anybody's raised Microsoft even in these things.

[00:49:20] Speaker 07:
Yeah.

[00:49:21] Speaker 07:
But at least in the district of Delaware, if you want to have a final judgment based on client construction that's appealable,

[00:49:30] Speaker 07:
You actually have to present an order to the court that details why that claim construction ruling is essentially a summary judgment of non-infringement.

[00:49:44] Speaker 07:
And that's part of the order.

[00:49:47] Speaker 07:
That's part of the order that's taken up.

[00:49:49] Speaker 03:
So it's not enough to say, I can't prove my infringement case under that claim construction.

[00:49:54] Speaker 07:
Yeah.

[00:49:54] Speaker 07:
It's never that simple.

[00:49:57] Speaker 07:
Every order that I have been involved in, and I think is generally true, all of those borders actually detail why the claim construction is essentially a summary judgment of non-infringement.

[00:50:11] Speaker 07:
And if you have summary judgment of non-infringement, then no, you cannot appeal.

[00:50:19] Speaker 07:
I'm sorry, you can't proceed with the case.

[00:50:22] Speaker 07:
There's nothing to present to the jury in this case.

[00:50:27] Speaker 07:
Adobe had the full opportunity to present its case on liability.

[00:50:35] Speaker 07:
If there was no liability, because there was no breach of contract,

[00:50:41] Speaker 07:
there, of course, we wouldn't have to worry about all of these damage issues.

[00:50:45] Speaker 07:
On the other hand, if the court, if it was the jury, determined that there was a breach, they would have been entitled to at least nominal damages, even if they couldn't prove anything.

[00:50:59] Speaker 07:
It is only then that you have final decision, a final determination that can be appealed.

[00:51:07] Speaker 07:
Anything other than that

[00:51:10] Speaker 07:
All we're talking about is amount of damages.

[00:51:13] Speaker 06:
Okay, I think we're going over the same ground that we went over before, unless my colleagues have questions.

[00:51:18] Speaker 07:
Let's move on to the merits of the... Your Honor, but to address your issue, specifically, if Your Honor decides that 285 and Rule 11 still should be decided, we still have the issue of whether or not Adobe for 285

[00:51:36] Speaker 07:
is the prevailing party.

[00:51:38] Speaker 06:
I understand.

[00:51:38] Speaker 06:
But let's talk about his decision where he assumed that Adobe was the prevailing party and then said, this is an exceptional case.

[00:51:48] Speaker 06:
And then he said, but I'm still not going to award attorney's fees.

[00:51:54] Speaker 06:
And how is it that that's possible?

[00:51:58] Speaker 06:
What additional findings does a district court have to make

[00:52:02] Speaker 06:
in determining whether to award fees once the court has determined that it's an exceptional case?

[00:52:08] Speaker 07:
I believe that the way the court looked at it, the exceptional case had a different meaning than I believe perhaps your honor places the meaning of exceptional case.

[00:52:24] Speaker 07:
The court specifically determined

[00:52:28] Speaker 07:
whether PBIC acted in bad faith and determined that we did not.

[00:52:33] Speaker 06:
Wait, wait.

[00:52:35] Speaker 06:
He made an exceptional case determination.

[00:52:38] Speaker 07:
But again, it's perhaps that this report was an error in finding exceptional case, if the exceptional case has the connotation that Your Honor does.

[00:52:50] Speaker 06:
Let's put that aside.

[00:52:51] Speaker 06:
Let's assume he made an exceptional case determination.

[00:52:54] Speaker 06:
When a court makes an exceptional case determination

[00:52:57] Speaker 06:
Under 285, what are the standards for determining whether attorney's fees should be averted thereafter?

[00:53:06] Speaker 07:
Your Honor, I ask if this is a singular question or a two-part question.

[00:53:12] Speaker 07:
The district court looked upon this as a two-part question, and the determination of exceptional case simply meant this case is different from the rest.

[00:53:25] Speaker 07:
to award attorney's fees under the Octane case, there has to be something.

[00:53:30] Speaker 00:
Do I remember Octane said something like that?

[00:53:33] Speaker 00:
Exceptional just means very far outside the mine run.

[00:53:38] Speaker 00:
And I think my recollection is Chief Judge Stark said, this is outside the mine run for a mix of reasons, some of which have to do with your conduct and some of which have to do with the complexity and the intervention.

[00:53:52] Speaker 00:
that aren't particularly focused on blameworthiness.

[00:53:55] Speaker 07:
That's correct.

[00:53:56] Speaker 07:
And that's the whole point, is that the court viewed exceptional case, the whole matter as a two-step process.

[00:54:04] Speaker 07:
Once, first, as stated in octane, you decide, is this a little bit different?

[00:54:11] Speaker 07:
Well, a little bit different doesn't mean you're entitled to attorney's fees.

[00:54:15] Speaker 06:
Well, I don't read him as saying, is this a little bit different than other cases.

[00:54:21] Speaker 06:
I read him as saying,

[00:54:22] Speaker 06:
there was sufficient culpability on behalf of your client to make this an exceptional case within the octane standard.

[00:54:30] Speaker 07:
I'm sorry, Your Honor.

[00:54:32] Speaker 07:
Again, I have to respectfully.

[00:54:34] Speaker 06:
Well, then show me what your basis is for saying that he wasn't applying the octane standard here.

[00:54:41] Speaker 07:
He was.

[00:54:42] Speaker 07:
And when the court, and we detailed this, I think, in our brief,

[00:54:49] Speaker 06:
Because we... Show me where he says this, that this is just, you know, this is an unusually interesting case or something.

[00:55:01] Speaker 06:
I read it as saying that there was culpability sufficient to make an exceptional case.

[00:55:07] Speaker 06:
Am I wrong about that?

[00:55:10] Speaker 03:
He even cites octane fitness in the midst of the discussion.

[00:55:14] Speaker 03:
He even cites octane fitness

[00:55:17] Speaker 03:
in the midst of this discussion on pages A40 and 41.

[00:55:21] Speaker 07:
I'm sorry, Your Honor.

[00:55:32] Speaker 07:
I am a little bit of a, because I'm trying to find exactly where the court addressed

[00:55:45] Speaker 03:
It's pages A39, A40, and A41.

[00:55:49] Speaker 07:
And at bottom of page APX 39, he says, under the totality of circumstances analysis, the court finds that these cases do stand out from the rest in comparison to the full panoply of patent cases, which

[00:56:13] Speaker 07:
with which the undersigned has been involved.

[00:56:18] Speaker 00:
I guess what I was remembering was the full paragraph on page 40.

[00:56:24] Speaker 00:
That's what I took to be for the following mix of things, not due to the lack of merit of PDIC's case, nor due to bad faith litigation, but due to a combination.

[00:56:34] Speaker 00:
And then he enumerates some things about the weakness of your case and some things that are

[00:56:41] Speaker 00:
That's correct.

[00:56:42] Speaker 00:
The complexity.

[00:56:44] Speaker 06:
And then he says the overall balance leads him to conclude that it's an exceptional case.

[00:56:49] Speaker 06:
I mean, isn't he clearly applying the Octane standard?

[00:56:54] Speaker 07:
Well, he is, but he's determining that this case stands out from the rest is uncommon and rare.

[00:57:02] Speaker 07:
That's why it's exceptional.

[00:57:04] Speaker 06:
But under Octane, just because something is rare doesn't make it exceptional.

[00:57:08] Speaker 06:
There has to be some sort of culpability.

[00:57:11] Speaker 06:
Well, not the way the court looked at it.

[00:57:14] Speaker 06:
Well, I don't read it the way you do.

[00:57:18] Speaker 06:
But let's assume that he applied the octane standard and he found sufficient culpability on the part of your client to find the case exceptional.

[00:57:26] Speaker 06:
What's he supposed to do then?

[00:57:27] Speaker 06:
He seems to say on page 41, well, you know, it's an exceptional case, but it's not that bad, and therefore I'm not going to reward attorney's fees.

[00:57:37] Speaker 06:
Is that a fair reading of what he says on page 41?

[00:57:41] Speaker 07:
I think he said far more than that.

[00:57:44] Speaker 07:
The court did not analyze all the facts in PDIC's favor because he, in fact, found he looked at the worst arguments that could be made against PDIC and determined that we did not act in bad faith.

[00:58:03] Speaker 07:
We acted in good faith, in fact.

[00:58:05] Speaker 06:
Yeah, yeah.

[00:58:05] Speaker 06:
He said it's not so bad.

[00:58:06] Speaker 06:
You didn't act in bad faith.

[00:58:07] Speaker 06:
That's right.

[00:58:08] Speaker 06:
You had a reasonable claim.

[00:58:10] Speaker 06:
You know, isn't he just saying, yes, it's an exceptional case under octane, but it's not so bad that I think I ought to award attorney's fees.

[00:58:17] Speaker 06:
And the question is, is that permissible?

[00:58:20] Speaker 06:
I would have thought you would say yes.

[00:58:23] Speaker 07:
But you seem to be fighting it.

[00:58:25] Speaker 07:
It has to be permissible.

[00:58:27] Speaker 07:
It has to be permissible because again, the way octane defines exceptional does not carry with it any

[00:58:39] Speaker 07:
any implication that someone was acting in bad faith or that attorney's fees should be allowed.

[00:58:47] Speaker 07:
There's no way, I don't think, or at least it's a potential reading of octane that it is independent of bad faith, which is why perhaps

[00:59:04] Speaker 07:
Yes, you can combine them, or you can do them separate.

[00:59:07] Speaker 07:
But before attorney's fees are allowed, there has to be a finding of bad faith.

[00:59:13] Speaker 07:
There's no jurisdiction.

[00:59:15] Speaker 05:
There has to be a finding of bad faith?

[00:59:18] Speaker 07:
Pardon?

[00:59:18] Speaker 05:
There has to be a finding of bad faith?

[00:59:22] Speaker 07:
Basically, yes.

[00:59:23] Speaker 07:
Because I'm not aware of it.

[00:59:25] Speaker 05:
What case says that?

[00:59:27] Speaker 07:
I'm not aware of Octane changing the general rule.

[00:59:32] Speaker 07:
It changed a lot.

[00:59:34] Speaker 07:
Well, but it did not change the fact that attorney's fees under 285 by this court have only been allowed in cases where there has been some indication of bad faith.

[00:59:49] Speaker 07:
I'm not aware of this court ever affirming of attorney's fees under section 285 where there is no bad faith.

[01:00:00] Speaker 00:
Change topic.

[01:00:02] Speaker 00:
Can we turn to the breach of contract claim?

[01:00:05] Speaker 00:
And here's what I want to begin to ask you.

[01:00:11] Speaker 00:
The breach of contract claim is you promised not to sue Adobe's customers when the accused infringement, and I'm going to summarize here, involved Adobe products.

[01:00:28] Speaker 00:
I realize that's a short end.

[01:00:29] Speaker 00:
You did not promise not to sue Adobe customers.

[01:00:32] Speaker 00:
That would be false to say that you did.

[01:00:36] Speaker 00:
You did, however, promise not to sue them for infringement based, I forget the language, in whole or in part on the use of Adobe products.

[01:00:46] Speaker 00:
Whether your suit against the nine defendants here did that,

[01:00:56] Speaker 00:
would be a question in two ways.

[01:01:00] Speaker 00:
One, it's a defense to your charge of infringement, if it were true.

[01:01:05] Speaker 00:
And it also is a breach, about as perfect an overlap as to that issue as possible.

[01:01:14] Speaker 00:
Now, what law says that in their breach of contract claim,

[01:01:25] Speaker 00:
The work that they did for that issue, namely, trying to show that you sued in violation of the covenant, you sued for infringing activity that used Adobe products, that that's part of their recoverable breach damages.

[01:01:48] Speaker 07:
The contract says we're not going to sue any

[01:01:54] Speaker 07:
body for using Adobe products.

[01:01:58] Speaker 07:
We never sued anyone for using an Adobe product.

[01:02:02] Speaker 07:
We sued people for encoding images on their websites that followed an infringing method.

[01:02:12] Speaker 07:
When the first issue of Adobe came up, PDIC said absolutely unequivocally

[01:02:22] Speaker 07:
Nothing associated with Adobe is being charged with infringement.

[01:02:28] Speaker 07:
Adobe sent a letter to all of its customers, a letter that we helped, PDIC helped write, that said unequivocally, PDIC is not making any claim against any Adobe products.

[01:02:46] Speaker 07:
Adobe products methods are all free and clear.

[01:02:51] Speaker 07:
The customers who were sued, at least initially, went to Adobe and asked for indemnification.

[01:02:59] Speaker 07:
Adobe said, we're not going to indemnify you because a PDIC has already stated publicly, and it's in the record, that they're not suing any Adobe products, so we're not responsible.

[01:03:13] Speaker 00:
The district court concluded, as I understand it, that New Jersey would basically follow the Artvale standard so that

[01:03:21] Speaker 00:
Adobe could properly collect as breach damages costs of work it did in showing that your infringement suit against the defendants was meritless because it violated the promise not to sue.

[01:03:43] Speaker 00:
And you don't dispute that, that they could recover that if

[01:03:49] Speaker 00:
under the Art Vale standard, they could show that, which includes a certain aspect of either obviousness or bad faith in the bringing of the suit.

[01:03:59] Speaker 00:
And I think you do disagree with this, but Judge Stark did say that there was a triable issue of fact of bad faith under the Art Vale standard as adopted by New Jersey.

[01:04:12] Speaker 00:
And you said, no, there wasn't, that it was plainly not bad faith.

[01:04:17] Speaker 00:
And then the district court said, but if, and I'm trying to get at this, inextricably intertwined business, which seemed ultimately to be the heart of the limitation, what is it that you think Adobe was seeking to collect as breach damages

[01:04:47] Speaker 07:
What Adobe asked for in damages is every dollar that they had spent pursuing their claim for breach of contract against us.

[01:05:00] Speaker 07:
So essentially, they are asking for monetary damages against PBIC.

[01:05:09] Speaker 07:
They're expending attorney's fees to pursue a monetary claim against PBIC.

[01:05:16] Speaker 07:
And then they're saying that, well, our pursuit of money damages against you, you have to pay us because that is actually defensive fees.

[01:05:31] Speaker 07:
They're inexorably intertwined.

[01:05:34] Speaker 00:
Well, why is that wrong?

[01:05:38] Speaker 00:
all of their breach, it's on this assumption and maybe you're going to contest the assumption, if all of their breach work was aimed at showing that you were suing Adobe customers for activity that although you may not have known it at the time or maybe you just were reckless in not figuring it out, in fact used Adobe products, which is also a defense to the infringement

[01:06:08] Speaker 07:
Well, because they were pursuing those attorney's fees long after we dismissed the cases against the plaintiff's defendants.

[01:06:18] Speaker 00:
Well, as to these nine, yes, that's true.

[01:06:21] Speaker 00:
And if I remember right, somewhere near the end of July 2015, the last of these nine was dismissed.

[01:06:27] Speaker 00:
And then there was one case somewhere that didn't get dismissed, not one of these nine, another one, until December of 2016.

[01:06:37] Speaker 00:
And as far as I know,

[01:06:39] Speaker 00:
what Judge Stark was focused on was fees pre-January 1st of 2017.

[01:06:46] Speaker 07:
And the answer is that under New Jersey's American rule, the breach of contract attorney's fees are not recoverable.

[01:06:59] Speaker 07:
So in effect, Adobe was saying, we're going to circumvent the American rule

[01:07:06] Speaker 00:
Right, so you have two rules, right?

[01:07:10] Speaker 00:
One says if you commit a breach by suing somebody, the natural, and you do that, let's assume, in bad faith, contrary to your promise not to sue that person,

[01:07:23] Speaker 00:
all of which the judge thought were triable issues, then quite naturally you get, Adobe, the claimant on this claim, gets the costs of defending against that infringement.

[01:07:45] Speaker 00:
At least the costs of defending against that infringement on the ground that it came within your promise not to sue.

[01:07:54] Speaker 00:
The American rule at best says, we don't entitle you to any fees for some other work.

[01:08:01] Speaker 00:
How does an entitlement get defeated by a rule of non entitlement to something else?

[01:08:08] Speaker 07:
Because it, like in any other damage case, when you have lost profits, for example, there could be law, you know, profits lost from a sale of product.

[01:08:21] Speaker 07:
And the question is, well,

[01:08:22] Speaker 07:
how much of that product is actually infringing and what is not and what is the appropriate measure of damages.

[01:08:31] Speaker 07:
In every one of these cases, yes, there is some line drawing that has to be made.

[01:08:36] Speaker 00:
In this case- Here's my problem.

[01:08:38] Speaker 00:
I understood, Chief Judge Stark, to be ruling in the last set of rulings that on the common issue of whether your suits were

[01:08:51] Speaker 00:
within the Covenant not to sue or not within the Covenant not to sue, that you don't get, I'm sorry, that Adobe does not get its costs of defeating the infringement suit on that defense just because it is also seeking breach damages for that very same work.

[01:09:11] Speaker 07:
No, that's not how I think Judge start.

[01:09:17] Speaker 06:
I find this whole discussion

[01:09:19] Speaker 06:
very abstract because we don't have in the briefs any real discussion of what the fees are that are involved here.

[01:09:28] Speaker 06:
I mean, I guess it must be that some of those fees relate to defending the customers, but nobody has articulated what the record evidence shows about what the fees are that are in dispute here.

[01:09:41] Speaker 06:
I would think that some of the fees must be for defending the customers and some of the fees must relate to proving the amount

[01:09:49] Speaker 06:
of damages that Adobe is seeking to recover here.

[01:09:54] Speaker 06:
So there must be at least two separate categories of damages, but nobody tells us what it is that we're arguing about.

[01:10:02] Speaker 06:
I find the briefing to be unsatisfactory in that respect.

[01:10:06] Speaker 07:
Oh, the reason for that, Your Honor, is Adobe has never distinguished them.

[01:10:12] Speaker 07:
Adobe has never identified, first of all, they had never really presented their attorney's fees claims.

[01:10:19] Speaker 07:
Rather, they presented totally redacted invoices with some hours and some time, but no specification of what was done.

[01:10:31] Speaker 07:
They have, and that was one of the issues that they had never done that.

[01:10:35] Speaker 00:
So put aside records and focus just on work that you can on the record show Adobe did before 2017.

[01:10:45] Speaker 00:
Okay.

[01:10:45] Speaker 00:
Let's cut it off there.

[01:10:49] Speaker 00:
What even category of work do you think that Adobe did before 2017?

[01:10:58] Speaker 00:
would be not work to defend against your infringement charge?

[01:11:06] Speaker 07:
The pursuit of the breach of contract damage claims, for example, the seeking of damages against PBIC unequivocally is an affirmation that what the court had

[01:11:25] Speaker 00:
What reason do we have to think that before 2017, Adobe's law firms spent any time on the question of quantifying or pursuing the damages for the breach?

[01:11:50] Speaker 07:
The depositions they took of PBIC, which focused

[01:11:55] Speaker 07:
on damages, the fact that they had a damage expert who submitted a damage expert report.

[01:12:03] Speaker 07:
When?

[01:12:03] Speaker 07:
Pardon?

[01:12:04] Speaker 00:
When?

[01:12:05] Speaker 07:
In the course of the... Before 2017?

[01:12:08] Speaker 06:
Oh... I'm not sure... Where do we find a description of the damages that Judge Stark thought were unrecoverable?

[01:12:25] Speaker 06:
What did Adobe present in terms of here are fees that were entitled to recover under the breach of contract?

[01:12:38] Speaker 06:
Where do they describe the fees?

[01:12:42] Speaker 07:
The only record we have is the code, and I believe it is in the appendix, but Adobe presented a

[01:12:53] Speaker 07:
all of its invoices for its lead counsel and Delaware counsel.

[01:12:59] Speaker 07:
And essentially, initially, they said, OK, all of these fees, every single dollar that they had spent in the case.

[01:13:08] Speaker 06:
But where's the description of what they did?

[01:13:10] Speaker 06:
Is there something in this appendix that provides a description of what they did?

[01:13:15] Speaker 07:
No, because Adobe refused to provide it.

[01:13:19] Speaker 07:
Adobe never provided a single description

[01:13:22] Speaker 07:
of anything they had done.

[01:13:25] Speaker 07:
That was part of the issue.

[01:13:27] Speaker 07:
And why the court was faced with a situation where all we have essentially is... Can you identify on the record where they did this?

[01:13:39] Speaker 03:
Is there some particular place that you want to identify for us to help us understand your position?

[01:13:44] Speaker 07:
I know we...

[01:13:54] Speaker 03:
Like, for example, there's appendix page 4265.

[01:13:57] Speaker 03:
I don't know.

[01:13:59] Speaker 07:
I think that that's a... I believe, Your Honor... An expert report.

[01:14:08] Speaker 07:
Yeah.

[01:14:08] Speaker 07:
If one takes a look... If one looks at a 5744,

[01:14:23] Speaker 07:
This is what, it's not the best one, but I... Okay, actually, Your Honor,

[01:14:53] Speaker 07:
The best place to look is, I'm sorry, right now I can't find it, but essentially 5744.

[01:15:07] Speaker 06:
But there are task descriptions here on 5745.

[01:15:12] Speaker 07:
Yeah, and this is, and it has things like,

[01:15:20] Speaker 07:
entry of default and some general very high level type descriptions, but not exactly what they did.

[01:15:30] Speaker 07:
And this was the reason the court said, yes, you can.

[01:15:33] Speaker 07:
Adobe, if you wanted to, you could separate those claims that are defensive and those claims that are affirmative.

[01:15:44] Speaker 07:
There's nothing.

[01:15:45] Speaker 06:
What did they submit to the court in terms of the claims?

[01:15:50] Speaker 06:
that he disallowed.

[01:15:51] Speaker 06:
I had a hard time understanding that from the brief.

[01:15:57] Speaker 06:
What's the evidence that they submitted that he said you can't present?

[01:16:02] Speaker 07:
They submitted something similar to 5744, and I thought it was in the record.

[01:16:14] Speaker 07:
That's what I was looking for at this moment.

[01:16:16] Speaker 07:
They can't identify it.

[01:16:18] Speaker 07:
But they had submitted something along the lines of 5744, which did not separate defensive fees from affirmative fees.

[01:16:35] Speaker 07:
And so the court said, look, you can present defensive fees any way you wish, but do not

[01:16:46] Speaker 07:
Tell me, which is what Adobe's argument was, was that everything they did affirmatively, that is seeking monetary damages, was in fact defensive in nature.

[01:16:59] Speaker 07:
All the court said is that the New Jersey American rule forbids you from claiming attorney's fees in pursuit of your breach of contract claim.

[01:17:14] Speaker 07:
So that is excluded.

[01:17:17] Speaker 07:
Do not tell me that your breach of contract claims are in fact defensive in nature because there's no evidence of that.

[01:17:27] Speaker 07:
That's not the case.

[01:17:29] Speaker 07:
It's an end around the American rule.

[01:17:33] Speaker 00:
I have found a lot confusing, but it seems to me that those two things are not opposite.

[01:17:39] Speaker 00:
The breach of contract claim on the merits is at its core identical to the defense of the underlying infringement suit.

[01:17:55] Speaker 00:
It is also true that fees spent seeking the fees for the breach

[01:18:02] Speaker 00:
would not be recoverable.

[01:18:04] Speaker 01:
Correct.

[01:18:04] Speaker 00:
Right.

[01:18:05] Speaker 00:
And to the extent Adobe said, everything that we can do by way of leverage against Princeton, everything, including threatening you for fees and whatnot, that also would not be recoverable.

[01:18:21] Speaker 00:
I'm having a very hard time.

[01:18:23] Speaker 00:
And I understand.

[01:18:23] Speaker 00:
So you said earlier that

[01:18:27] Speaker 00:
They were doing work on the quantification of breach damages and they were before 2017.

[01:18:34] Speaker 00:
And if they were doing that, it certainly feels like that's on the non-compensable side of the line.

[01:18:41] Speaker 00:
Show me what evidence there is, including an expert report from Becker, before 2017.

[01:18:49] Speaker 00:
And maybe the answer is it was in 2016 and we need to distinguish between December 2016 and July 2015.

[01:18:57] Speaker 00:
But as Judge Dyke said, there's a lot of abstractions here.

[01:19:06] Speaker 07:
Well, but the abstractions were caused because Adobe had refused to... Forget about my abstraction.

[01:19:13] Speaker 00:
Tell me something in the record that shows they did one hour of work quantifying damages.

[01:19:21] Speaker 00:
Before 2017.

[01:19:23] Speaker 07:
I cannot do that because we don't have the record to be able to show that because we don't have enough information about what Adobe did.

[01:19:31] Speaker 07:
Because the information that was provided is insufficient to show that.

[01:19:41] Speaker 05:
Do we have any more?

[01:19:44] Speaker 00:
One other question.

[01:19:47] Speaker 00:
Suppose I thought that the standard that I take Judge Stark to have articulated, which is that

[01:19:55] Speaker 00:
Fees that were incurred in defending against your infringement suit are nevertheless not recoverable as breach if they were also fees incurred in pursuing breach, that they are, even where they are inextricably intertwined, and I think Judge Stark said you can't, Adobe can't get those.

[01:20:16] Speaker 00:
Suppose I thought that were wrong, that was wrong.

[01:20:19] Speaker 00:
Is there an independent basis for Judge Stark's ruling that is a basis independent of that legal assertion about what happens to dual character fees?

[01:20:40] Speaker 00:
Around page 80, 82, he seems to say, I told you you had to separate.

[01:20:46] Speaker 00:
You didn't separate.

[01:20:48] Speaker 00:
I will exclude.

[01:20:49] Speaker 00:
And in addition, you, Adobe, are asserting a legal view about inextricably intertwined fees that I think is wrong.

[01:20:57] Speaker 00:
Are those independent grounds or are they?

[01:21:02] Speaker 07:
They are two independent grounds because initially Adobe

[01:21:07] Speaker 07:
claimed every single dollar they had spent in the litigation, including, I mean, literally every single dollar.

[01:21:15] Speaker 07:
The court then said, no, you can't get every single dollar because there are defensive fees, which as Your Honor pointed out, you can recover.

[01:21:26] Speaker 07:
And then New Jersey's American rule forbids those fees that were incurred in pursuit of Europe.

[01:21:37] Speaker 07:
breach contract claims.

[01:21:38] Speaker 07:
So separate them.

[01:21:41] Speaker 07:
Their initial expert report didn't separate them.

[01:21:43] Speaker 07:
So the court said, get your expert to separate them.

[01:21:48] Speaker 07:
They went back and presented a second expert report that basically said every dollar through December 2016 was defensive in nature.

[01:22:00] Speaker 06:
Are those expert reports in the appendix here?

[01:22:03] Speaker 06:
Pardon?

[01:22:03] Speaker 06:
Are the expert reports in the appendix?

[01:22:08] Speaker 07:
At least some of them are.

[01:22:09] Speaker 07:
I believe what we cited, I cited to them.

[01:22:12] Speaker 07:
So I believe they are.

[01:22:13] Speaker 07:
But off the top of my head, I can't tell.

[01:22:17] Speaker 06:
I think we're way over time here.

[01:22:21] Speaker 07:
OK.

[01:22:21] Speaker 07:
Thank you.

[01:22:22] Speaker 07:
I'm sorry, Your Honor, because I did want to address our cross talk.

[01:22:26] Speaker 06:
I think we don't.

[01:22:27] Speaker 06:
We'll take that on the briefs.

[01:22:30] Speaker 06:
OK, Ms.

[01:22:31] Speaker 06:
Elliott, we'll give you five minutes.

[01:22:33] Speaker 02:
Thank you, Your Honor.

[01:22:36] Speaker 02:
would not be in this case but for Princeton Digital's filing of cases that it was precluded from filing based on their covenant not to sue.

[01:22:45] Speaker 02:
Adobe's counsel worked diligently to try to get Princeton Digital to dismiss those cases before intervening.

[01:22:51] Speaker 06:
Yeah, but the problem is there's nothing in the briefs about what the fees are that you view Judge Stargis disallow.

[01:22:59] Speaker 06:
And I don't think you made a very good record before him on this either.

[01:23:04] Speaker 02:
Well, respectfully, Your Honor, this is a pretty voluminous record.

[01:23:07] Speaker 02:
There is evidence in the record of what was submitted, and it starts with... But you don't discuss it in your briefs, really.

[01:23:14] Speaker 06:
My recollection is the briefs really are very imprecise in general about what happened here.

[01:23:21] Speaker 02:
My apologies, Your Honor.

[01:23:24] Speaker 02:
The rule here that set off this appeal is the assumption that these were separable.

[01:23:33] Speaker 02:
And I can hear in your honor's questions, both your honor, Judge Tronto, and Judge Stark, perhaps a different diversion of you, or maybe just asking whether or not they truly are separable.

[01:23:44] Speaker 02:
And this goes to the heart of our position.

[01:23:46] Speaker 06:
Well, I didn't ask you right now whether they're separable.

[01:23:50] Speaker 06:
What I'm commenting on is your failure in your brief to tell us what it is that Judge Stark disallowed.

[01:24:00] Speaker 06:
and to relate that to the appropriate interpretation of the New Jersey rule.

[01:24:06] Speaker 02:
I do believe we did that, Your Honor, on pages 42 through 55 of our briefs.

[01:24:11] Speaker 02:
But in particular, we cite to Becker's expert report.

[01:24:14] Speaker 02:
We also cite to the appendix 4504 and 4505.

[01:24:18] Speaker 02:
And I want to draw the Court's attention specifically to 4505, which is the heart of the discussion we were just having with my colleague here.

[01:24:28] Speaker 02:
in the substance.

[01:24:29] Speaker 06:
Where in the brief is there this description of what it is that was disallowed and why that was and why that particular ruling encompassed fees that were populated in the New Jersey rule?

[01:24:44] Speaker 06:
I mean, I see a lot of discussion of the New Jersey rule and the law and all that, but I don't see a discussion of the facts.

[01:24:51] Speaker 06:
Am I wrong?

[01:24:53] Speaker 02:
Respectfully, yes, because the court disallowed

[01:24:56] Speaker 02:
No, no.

[01:24:57] Speaker 06:
Where do you tell us in the brief?

[01:25:09] Speaker 02:
To look, Your Honor, on page 15, we discuss the cases that are counter to the court's underlying decision about whether or not the fees were inextricably intertwined.

[01:25:23] Speaker 02:
And then we discuss on pages 54, starting on the bottom of page 54, and then extending to page 55, the top page 55.

[01:25:38] Speaker 02:
We quantified, and our expert, Dr. Becker, quantified fees that were accrued while Adobe's customers were still in suit.

[01:25:51] Speaker 02:
And that's what Becker's report covers.

[01:25:53] Speaker 03:
Where is this?

[01:25:53] Speaker 03:
I apologize.

[01:25:55] Speaker 03:
Are you at the bottom of page 54 going on to 55 and saying this is where you quantify?

[01:26:00] Speaker 02:
We're citing to the discussion of in the record where defensive fees were excluded because the court determined that those fees that are inextricably intertwined are not recoverable.

[01:26:18] Speaker 03:
But which site are you referring to?

[01:26:21] Speaker 03:
on page 54 or 55.

[01:26:23] Speaker 02:
So I'm signing to the record discussions.

[01:26:26] Speaker 02:
And the record discussions are in the appendix.

[01:26:28] Speaker 02:
So for example, you turn to.

[01:26:32] Speaker 06:
Yeah, but the point is that this brief doesn't tell us what are the fees that you claimed, what they were specifically for, and what was disallowed.

[01:26:43] Speaker 06:
It's all general in terms of here's what New Jersey law is.

[01:26:47] Speaker 06:
And they're inextricably intertwined.

[01:26:49] Speaker 06:
And it doesn't give us the facts

[01:26:51] Speaker 06:
to back up the argument.

[01:26:53] Speaker 02:
Your Honor, the facts are that Adobe... No, it's not a question of what the facts are.

[01:26:58] Speaker 06:
It's the question, they're not in the brief.

[01:27:04] Speaker 06:
I found it very difficult to understand what was going on here.

[01:27:10] Speaker 02:
It is a complex record for sure, Your Honor, but the actual fact section of our brief, the blue brief, cites

[01:27:22] Speaker 02:
to a number of portions of the appendix, including specifically to the expert report of Dr. Becker.

[01:27:31] Speaker 00:
Is it the August 7th one or some earlier one?

[01:27:34] Speaker 02:
There is a March 10, 2017 opening expert report of Dr. Becker.

[01:27:40] Speaker 02:
That's the appendix 3632.

[01:27:43] Speaker 02:
There's also a successive report of Dr. Becker.

[01:27:46] Speaker 02:
And then in the record, appendix 4505

[01:27:50] Speaker 02:
is a discussion that is following yet another iterative ruling of the court.

[01:27:56] Speaker 02:
So the issue is whether or not you can segregate the fees.

[01:28:02] Speaker 00:
Can I try to be the one kind of concrete thing I guess I'm focusing on at the moment?

[01:28:10] Speaker 00:
Was there work done before 2017 on the question of quantifying your damages?

[01:28:22] Speaker 02:
Yes.

[01:28:23] Speaker 00:
Did you seek fees for that work?

[01:28:28] Speaker 02:
We sought fees, but for fees.

[01:28:32] Speaker 00:
I think my question has a yes or no answer.

[01:28:37] Speaker 00:
I'm not sure.

[01:28:38] Speaker 02:
Maybe I didn't hear it right.

[01:28:40] Speaker 02:
May I ask your honor?

[01:28:41] Speaker 00:
You said in response to my previous question, there was work done before 2017 on quantifying

[01:28:51] Speaker 00:
the damages you sought in breach, for the breach.

[01:28:57] Speaker 00:
And that you sought compensation for the work done in quantifying those damages.

[01:29:10] Speaker 00:
I don't think that those are recoverable.

[01:29:13] Speaker 00:
If they were part of your request, then there is something to separate.

[01:29:18] Speaker 02:
And we would disagree under the New Jersey opinion in Dorothy.

[01:29:23] Speaker 00:
Let's focus on the premise.

[01:29:24] Speaker 00:
Did you seek compensation for work done on quantifying the breach damages where the work was done before 2017?

[01:29:37] Speaker 02:
The answer is not a yes or no, and I would like to explain why.

[01:29:43] Speaker 02:
Because the defense of our customers

[01:29:47] Speaker 02:
were inseparable from our affirmative claim.

[01:29:51] Speaker 00:
So there was no point in time.

[01:29:54] Speaker 00:
Suppose I disagreed with that.

[01:29:56] Speaker 00:
Suppose I thought that at a minimum, the work done on quantifying your breach damages are on the side of the line of prohibited by the American rule, that that would be fees for

[01:30:13] Speaker 00:
the work done in the breach case, not for simply defeating the other side, which would be a walk away, you get nothing.

[01:30:26] Speaker 00:
And then that's one concrete example where I think that that's not on the inextricably

[01:30:35] Speaker 00:
intertwined side of the line, unlike all the work you did in trying to show that Princeton was suing in violation of the agreement.

[01:30:47] Speaker 02:
So the work done did not have a stoppage point such that there was a tender of fees that were segregated.

[01:30:57] Speaker 02:
And that's because Adobe's only role in this case was trying to get the dismissal

[01:31:04] Speaker 02:
of its customers from these cases.

[01:31:08] Speaker 02:
So from the moment Adobe picked up the phone to answer indemnity requests, responded to letters of indemnity, from that moment on, it was both a defense of its customers, via the licensed defense, which was the same legal instrument that was its breach of covenant ought to sue.

[01:31:28] Speaker 02:
Every action taken by Adobe and its counsel was in furtherance of getting its customers

[01:31:34] Speaker 02:
Dismissed.

[01:31:35] Speaker 00:
Not the action of recovering your fees for that work.

[01:31:41] Speaker 02:
They were inextricably intertwined.

[01:31:44] Speaker 02:
It's the same force.

[01:31:45] Speaker 02:
It's the same instrument.

[01:31:47] Speaker 02:
Had Prince and Digital dismissed Adobe's customers when it said it would in July 2014?

[01:31:55] Speaker 00:
It's always the case, is it not, under your but for principle, that attorney's fees for the work

[01:32:04] Speaker 00:
would not have been incurred if the underlying wrong hadn't been committed.

[01:32:12] Speaker 00:
That doesn't place them on the side of the line of recoverable breach fees under the art fail rule.

[01:32:21] Speaker 02:
Under River Edge, a New Jersey case, and under Dorothy, a New Jersey case, under safeguard

[01:32:28] Speaker 02:
a case that has been followed by a number of courts.

[01:32:31] Speaker 00:
Do any of them involve treating as breach recoverable fees, or costs, I guess, including fees, the fees for quantifying that measure of damages?

[01:32:49] Speaker 02:
Yes.

[01:32:50] Speaker 02:
That is the Dorfee case.

[01:32:52] Speaker 02:
And I want to just, I hate to reach the court, but this is important.

[01:32:55] Speaker 02:
And it's at the heart of this case, as Your Honor pointed out earlier,

[01:32:58] Speaker 02:
this inextricably intertwined is at the heart of this case.

[01:33:03] Speaker 02:
In door fee, and that's at site 453A2B 1341 and 1343, the court says... Under which court?

[01:33:12] Speaker 02:
This is the New Jersey Superior Court.

[01:33:17] Speaker ?:
Got it.

[01:33:17] Speaker 02:
The court says the test of recoverability of counsel fees is not whether they were generated in the same case

[01:33:26] Speaker 02:
but rather whether they were incurred in bringing or defending an action against a third person.

[01:33:32] Speaker 02:
It cites the restatement of torts and then goes on to say, in light of our rules and case law, which encourage the disposition of all related issues in a single litigation, it would surely be inappropriate to permit the recovery of counsel fees to turn on the existence of a separate and discrete

[01:33:51] Speaker 02:
Right.

[01:33:52] Speaker 02:
I don't think that doesn't get to my question.

[01:33:54] Speaker 02:
Your Honor, respectfully, if I may go into it, it does.

[01:33:57] Speaker 02:
Because Dorothy also stands for the proposition that recovery of fees for breach is appropriate where such fees represent the actual damages.

[01:34:05] Speaker 02:
And we look at Dorothy in connection with Safeguard Scientific, which is a Third Circuit case, again, affirming the principle that the pursuit of counterclaims was inextricably intertwined with the defense of the third party claim that was necessary

[01:34:19] Speaker 02:
as a defense of the litigation as a strategic matter.

[01:34:23] Speaker 02:
Every action Adobe took in this case with the court, everyone starting with intervention, which the court approved and said that Adobe had a right to be in, created a reaction in which Princeton didn't dismiss the case.

[01:34:36] Speaker 06:
They didn't dismiss all of them.

[01:34:38] Speaker 06:
OK, I think we're out of time.

[01:34:39] Speaker 02:
We have way, way over here.

[01:34:41] Speaker 02:
May I just conclude with the point that the Rule 11 ruling below is in square violation of this court's precedent in the Svalding case.

[01:34:49] Speaker 06:
Okay, we'll take that.

[01:34:53] Speaker 06:
Thank you both.