[00:00:01] Speaker 00: The next case of argument is 17-2589, Rayco versus Spinmaster. [00:00:43] Speaker 00: I will almost certainly butcher your name, so why don't you tell us who you are. [00:00:47] Speaker 05: Certainly, may it please the court. [00:00:48] Speaker 05: Tim Grochowsinski, on behalf of the appellant RICO LLC. [00:00:54] Speaker 05: May I have your seat? [00:00:56] Speaker 05: Yes, please. [00:00:57] Speaker 05: Your Honor, there are two issues in this appeal. [00:00:59] Speaker 05: The first issue deals with RICO's breach of contract claim, and the second issue deals with the patent infringement claim focused on Spin Master's auto-hovering toy products. [00:01:09] Speaker 05: So focusing on the first issue that I made last week. [00:01:12] Speaker 00: Can I just ask you a sort of logistical question? [00:01:15] Speaker 00: I understand strategically you don't know what we're thinking or what we're going to do. [00:01:19] Speaker 00: So particularly in Gray, you spent much more time on the infringement questions and only ended with the signal claim construction, right? [00:01:28] Speaker 05: Yes, ma'am. [00:01:30] Speaker 00: Am I correct that if we were hypothetically to agree with you on the claim construction of A, [00:01:39] Speaker 00: that we don't have to go any further on the infringement claims. [00:01:42] Speaker 00: We would just send it back for an adjudication of any arguments with regard to infringement. [00:01:48] Speaker 00: I agree with that, yeah. [00:01:49] Speaker 00: Okay, just thank you. [00:01:50] Speaker 02: All right, so before you get into, yeah, I'm going to eat up some of your time. [00:01:53] Speaker 02: Before you get into, you know, your main arguments for purposes of our audience, tell them what kind of very, very high tech, and I do not mean that disparaging, invention is an issue in this case. [00:02:05] Speaker 02: Because they've heard, you know, if you sat through the others, [00:02:08] Speaker 05: we were deep in the weeds on pharma stuff so hopefully this is more exciting subject matter for the audience you didn't bring any of those samples i did not your honor um so i may request them my client my client is uh raco lsc they're here in chicago on washington street and they invent toys they've been doing for 35 years in c Chicago they design and develop toys and their business model is [00:02:31] Speaker 05: When they design and develop toys in their workshop, they then license those to big toy companies, Spin Master being one of them, Mattel, Hasbro. [00:02:40] Speaker 05: You go to Target, you see toys they've invented. [00:02:42] Speaker 05: In this particular case, I started by breaking down the two separate issues, contract and patent. [00:02:49] Speaker 05: Both of them involve toys. [00:02:50] Speaker 05: The contract involves the flying toy helicopters that you can buy at Target, remote controlled. [00:02:56] Speaker 02: Oh, it's better than that. [00:02:57] Speaker 02: Like the one, it's like a little guy that looks like the Pillsbury Doughboy. [00:03:01] Speaker 02: And he's got a propeller hat on, and he lifts up by his head. [00:03:04] Speaker 05: So then the patent, the patent infringement side of it is what's called, I'm broadly calling the auto hover toys. [00:03:12] Speaker 05: The preferred embodiment in the patent is, as you described, it looks like the old big boy. [00:03:16] Speaker 00: So the two issues are completely separate in terms of the impact? [00:03:19] Speaker 05: They are, yeah. [00:03:21] Speaker 05: They're separate legal issues, separate claims, and the auto hover products [00:03:27] Speaker 05: kind of as the name suggests, they rely upon infrared signals to then detect where a surface is. [00:03:33] Speaker 02: So since I've made you do the technology, let's just go to the one signal versus multiple signal arguments, because we're already talking about how basically radiofrequency signals are what cause the thing to raise or lower based on receipt of signals to do so, right? [00:03:49] Speaker 02: Yes. [00:03:49] Speaker 02: Because you want it to hover. [00:03:50] Speaker 02: That's correct. [00:03:51] Speaker 02: So, okay, so why don't you, if you don't mind jumping into that argument first, and then we'll back our way into that. [00:03:57] Speaker 05: So there was two separate infringement arguments that were posited by my client. [00:04:00] Speaker 05: One of them deals with what I'll call the multiple signals theory, and the other one deals with a single signal theory. [00:04:08] Speaker 05: And so, focusing on first the infringement. [00:04:10] Speaker 05: And in order to prevail, you need to prevail on both of those arguments, right? [00:04:15] Speaker 05: I do not, Your Honor. [00:04:16] Speaker 05: Why not? [00:04:17] Speaker 05: And so the argument one does relate to the claim construction issue. [00:04:22] Speaker 05: So to the extent this court, as we argue, thinks that the claim construction of a single, I'm sorry, a signal was wrong, then we approved infringement under theory one, the multiple signals theory. [00:04:36] Speaker 04: Well, that's what the district court, I thought, said you didn't do. [00:04:40] Speaker 04: That even under a multiple signal theory, there was no infringement. [00:04:44] Speaker 04: because you didn't satisfy the control system limitations. [00:04:48] Speaker 04: The district court did say that, Your Honor. [00:04:50] Speaker 04: Well, so why don't you have to win on both issues? [00:04:53] Speaker 04: They're two separate theories, is my point, Your Honor. [00:04:55] Speaker 04: My point is that I don't understand what you mean. [00:04:58] Speaker 04: They're two separate theories as to why they're [00:05:01] Speaker 04: is no infringement here. [00:05:03] Speaker 04: In order to have a case on infringement, don't you have to overcome both theories? [00:05:09] Speaker 05: No, Your Honor. [00:05:10] Speaker 05: Here's my point. [00:05:11] Speaker 05: I can prove infringement. [00:05:13] Speaker 05: Let's assume for one second that the district court's construction was incorrect and it should be one or more signals. [00:05:20] Speaker 05: Assuming that's true, our infringement theory using that construction is that if the thing is hovering low to the ground, [00:05:29] Speaker 05: All signals, so all one or more, are received, and based upon that, it will then increase its speed to gain altitude. [00:05:38] Speaker 04: I'm not understanding this, because I thought the district court said, even with multiple signals, that this accused product doesn't satisfy the system limitation. [00:05:49] Speaker 05: I disagree with that. [00:05:51] Speaker 00: You think they didn't say that? [00:05:52] Speaker 05: I disagree with that. [00:05:54] Speaker 00: Would you disagree with that? [00:05:55] Speaker 00: But the question is not whether you disagree. [00:05:57] Speaker 05: It's whether or not the district court... My point is I disagree that the district court said that. [00:06:01] Speaker 05: I think the district court made two findings. [00:06:03] Speaker 05: I think that it incorrectly found that there's no infringement because it uses multiple signals. [00:06:09] Speaker 04: And that is tied to the police construction. [00:06:10] Speaker 04: I understand that. [00:06:11] Speaker 04: And I understand that. [00:06:12] Speaker 04: And clearly the district court did say that. [00:06:14] Speaker 04: And there's a question about that. [00:06:15] Speaker 04: But put that aside. [00:06:17] Speaker 04: Didn't the district court also say that even if multiple signals were in there, [00:06:22] Speaker 04: that it didn't satisfy the control system limitation. [00:06:25] Speaker 05: I think that it did say that, and I think that there was... Well, that's why you have to win on that one, too. [00:06:29] Speaker 04: You have to win on both. [00:06:31] Speaker 02: Where did the district court say that? [00:06:32] Speaker 02: Can you please point us to it? [00:06:34] Speaker 05: Yes, ma'am. [00:06:36] Speaker 05: To be perfectly frank, I think that the district court's opinion is difficult to follow in this regard. [00:06:43] Speaker 05: But my understanding was that the district court summarily, without any citation to have it said in its opinion... Where? [00:06:50] Speaker 05: I apologize, Your Honor. [00:06:52] Speaker 05: Do you have the page for that? [00:06:56] Speaker 05: I don't have the page, Your Honor. [00:06:57] Speaker 05: I will get it for you. [00:06:58] Speaker 05: I apologize. [00:06:59] Speaker 02: But here's the- I don't know. [00:07:01] Speaker 02: I think if I were you, I'd be a little cautious about sort of agreeing that the district court made findings against your client when you can't even find them in the opinion yet so that we can look at them, especially if you're going to tell me their cursory conclusion is confusing and inconclusive or something. [00:07:14] Speaker 05: Well, here's the reason why I say it, though, and I respond to the question quickly, Your Honor. [00:07:18] Speaker 05: It's because of this. [00:07:19] Speaker 05: The district court's construction was not just that it's limited to a single signal. [00:07:23] Speaker 05: The district court then went one step further and specifically said that any product that includes more than one signal, no matter what those signals are related to, cannot infringe this claim. [00:07:33] Speaker 05: It was an exclusionary claim construction. [00:07:35] Speaker 04: Well, yes. [00:07:37] Speaker 04: I think the district court did say that, but it also said that under a multiple signal construction that the accused product don't satisfy the system, control system. [00:07:48] Speaker 04: I apologize. [00:07:48] Speaker 05: I misunderstood your question, Mr. Jack. [00:07:51] Speaker 05: I disagree with that point. [00:07:53] Speaker 05: I don't think, though, that the district court said that. [00:07:56] Speaker 05: Here, if you look at it, it's at page 39. [00:07:59] Speaker 05: It's Appendix 61, APPI 61. [00:08:02] Speaker 05: And there is a paragraph where it talks to you [00:08:06] Speaker 05: Moreover, even if Rayco were correct, that signaling claim one could be construed to refer to one or more signals. [00:08:13] Speaker 05: The clear language of the claims, the abstract and the specifications show that, to the extent multiple signals could be employed in the specified control system, it would be the collective receipt or non-receipt of the signals. [00:08:28] Speaker 05: Going on then, he says that Rayco's expert, Dr. Spanko, admitted that the accused products do not explicitly show non-receipt of a signal. [00:08:36] Speaker 05: And then the court goes on and says, yet this is what Spin Master's products all do. [00:08:41] Speaker 05: First off, that is not what that testimony says whatsoever. [00:08:46] Speaker 02: I don't even understand this paragraph. [00:08:48] Speaker 05: Well, that was my point, Your Honor, about how I just ordered, to be frank. [00:08:53] Speaker 05: My point, though, is this. [00:08:54] Speaker 05: Under the multiple signals argument, it is undisputed. [00:08:57] Speaker 05: Their own documentation shows [00:09:00] Speaker 05: If it's all signals are received, it does one thing, which is gain. [00:09:03] Speaker 04: I understand that argument. [00:09:04] Speaker 04: I just don't understand why we're having difficulty getting to the argument. [00:09:08] Speaker 04: Because my reading of the district court opinion is that he said, even under a multiple signals instruction, you still lose because you don't satisfy the system controls, control system limitation. [00:09:21] Speaker 04: He may have been wrong about that, or she may have been wrong about that. [00:09:24] Speaker 04: But there's the ruling, and you have to deal with it. [00:09:27] Speaker 05: I agree with you, Your Honor. [00:09:29] Speaker 05: And my point is, and that's why I went in response to Judge Moore's question, I believe that this is the rationale for what you're saying, Your Honor. [00:09:38] Speaker 05: And my point and my argument is that this rationale is severely flawed. [00:09:43] Speaker 05: Because the finding that under multiple signals that there is no infringement, that the control system limitation is not met, is faulty. [00:09:53] Speaker 02: Well, and completely unsubstantiated. [00:09:56] Speaker 02: Why? [00:09:56] Speaker 02: The claim says what the claim says. [00:09:59] Speaker 02: If multiple signals are included in one signal, why would a multi-signal product not infringe the control? [00:10:06] Speaker 02: I don't understand. [00:10:08] Speaker 02: There's no explanation whatsoever. [00:10:11] Speaker 02: some sort of poorly worded fact-finding or conclusion, I don't know. [00:10:14] Speaker 02: I don't understand. [00:10:15] Speaker 05: Your Honor, I agree with you in our argument with respect to the infringement side is that the evidence, there was an evidentiary record. [00:10:22] Speaker 04: And what the district court did is it selected specific as there was substantial evidence for a supported jury verdict that the multiple signals caused the thing to go up and down. [00:10:32] Speaker 04: in the way that the claims require, right? [00:10:34] Speaker 05: Yes. [00:10:34] Speaker 05: And I was trying to answer your question. [00:10:37] Speaker 05: I'm not trying to be evasive. [00:10:38] Speaker 05: What I was trying to do was explain to you why we believe the evidence supports the view that there is infringement and that the control system limitation is met. [00:10:48] Speaker 00: OK. [00:10:49] Speaker 00: Well, let's go. [00:10:49] Speaker 00: Can I just ask one little technical question? [00:10:52] Speaker 00: Do claims one through three rise and fall together? [00:10:54] Speaker 00: Yes, Your Honor. [00:10:56] Speaker 02: Can you please now go to the one signal issue? [00:10:58] Speaker 02: And one of the problems I have with what the district court did [00:11:01] Speaker 02: is on page A60 of the appendix, which is page 38 of the one signal. [00:11:07] Speaker 02: I mean, first off, we have a general rule. [00:11:09] Speaker 02: When something says A signal, our general rule as a matter of claim construction is that it includes one or more, right? [00:11:14] Speaker 03: Yes, ma'am. [00:11:15] Speaker 02: And it seems to me that the district court found on page A60 that Dr. Spanko basically testified that this product would not work or there would be some sort of technical impediment [00:11:26] Speaker 02: to the receipt of multiple signals using a $3 or $5 toy to go up and down. [00:11:33] Speaker 02: Simple radio frequency signals, multiple signals. [00:11:36] Speaker 02: I mean, this is not rocket science. [00:11:38] Speaker 02: I feel like my 14-year-old could figure out how to make one of these things work, take it apart, and put it back together again. [00:11:44] Speaker 02: And I don't mean that to be insulting to your client. [00:11:47] Speaker 02: I just mean that this is not all that hard. [00:11:50] Speaker 02: But the district court concluded that even Rayco's expert, Dr. Spenco, [00:11:54] Speaker 02: said, no, no, with one or more signals, this would be confusing. [00:11:57] Speaker 02: The implication the district court derived from that is that it wouldn't work with one or more signals. [00:12:02] Speaker 02: Do you think that's what Dr. Spanko was testifying to on page 1912 of the appendix? [00:12:07] Speaker 05: I do not, Your Honor. [00:12:08] Speaker 05: And I would direct the court to page 25 of our opening brief, the blue brief. [00:12:12] Speaker 02: See, the opening brief, you don't want to, you want to take us to the evidence. [00:12:15] Speaker 02: That is the evidence. [00:12:16] Speaker 02: I'm sorry. [00:12:17] Speaker 02: Your blue brief [00:12:18] Speaker 05: I'm sorry, there's a giant block quote. [00:12:19] Speaker 05: It's APPX 1902. [00:12:20] Speaker 05: Yep. [00:12:21] Speaker 05: OK. [00:12:22] Speaker 05: That's right. [00:12:23] Speaker 05: And so I just so you're aware, this is not attorney argument. [00:12:26] Speaker 05: This is the actual testimony from Dr. Spanko. [00:12:29] Speaker 05: The focal point of the district court was on the first, I guess it would be five lines. [00:12:33] Speaker 05: And the problem is the district court didn't stop reading, I guess, OK? [00:12:38] Speaker 05: Because the first question makes absolutely no sense. [00:12:42] Speaker 05: The question is, question OK, and could you have, if you had multiple signals, [00:12:47] Speaker 05: Could some of those signals cause the vehicle to go up, and some of those vehicles cause the vehicle to go down? [00:12:52] Speaker 02: Right. [00:12:52] Speaker 02: That was not a good statement. [00:12:53] Speaker 02: Vehicles cause the vehicle. [00:12:54] Speaker 02: No, I get it. [00:12:55] Speaker 02: And the expert said, that's confusing. [00:12:57] Speaker 05: And admittedly so. [00:12:58] Speaker 05: Dr. Spanko should have said that. [00:13:00] Speaker 02: And then the very next question actually asked it the right way. [00:13:03] Speaker 02: Correct. [00:13:04] Speaker 02: And he then responded, I suppose so, depending on how you program it. [00:13:06] Speaker 02: It's just a matter of programming. [00:13:07] Speaker 02: That's right. [00:13:08] Speaker 02: This is really not that complicated. [00:13:10] Speaker 02: One signal versus two signals telling it whether to go up and down. [00:13:13] Speaker 05: Your Honor, I agree with you. [00:13:14] Speaker 05: I think the issue is, [00:13:15] Speaker 05: And this is the theme. [00:13:16] Speaker 02: But the district court seemed to rely pretty heavily on a belief that there would be some technical impediment, some technical confusion, to achieving operation under multiple signals. [00:13:26] Speaker 02: Is that your understanding of what one place in which the district court erred in reaching its claim construction? [00:13:32] Speaker 04: One of many. [00:13:34] Speaker 00: Why don't we move on to the contract question? [00:13:36] Speaker 04: On A1495, we had this settlement agreement. [00:13:42] Speaker 04: The question was, the settlement agreement [00:13:44] Speaker 04: covers the Havoc Healy, okay? [00:13:47] Speaker 04: And your argument is, oh, well, the Havoc Healy was not part of the final decision by the royalty organization, and therefore, it's not covered by the settlement. [00:14:02] Speaker 04: But the problem is that this all relates to things that relate to the audit. [00:14:09] Speaker 04: And since the Havoc Healy [00:14:12] Speaker 04: Royalty dispute was originally part of the audit and originally was part of the draft audit report and was only removed after that. [00:14:22] Speaker 04: Why is it that the Havoc Healy dispute does not relate to the audit? [00:14:29] Speaker 05: Two reasons, Your Honor. [00:14:30] Speaker 05: First of all is that the term audit was specifically defined as the report. [00:14:34] Speaker 05: And the report, before you jump in, I know it was just related to. [00:14:38] Speaker 04: It doesn't say covered by, it says relate to. [00:14:43] Speaker 05: It says related to the audit. [00:14:45] Speaker 05: The audit is defined as the report. [00:14:46] Speaker 05: The report never included the Havakili. [00:14:49] Speaker 04: And Spinmaster, why isn't something that was originally in the report and then removed be something that was relating to the audit? [00:14:57] Speaker 05: Because Spinmaster took the position that it didn't relate to it. [00:15:02] Speaker 05: Just like they took the position throughout this case that it's not covered by the helicopter agreement that was the subject matter of the audit. [00:15:10] Speaker 05: My point being is that when it suits them, [00:15:12] Speaker 05: It's included, but when it doesn't suit them, it's not included. [00:15:16] Speaker 04: You can't have it both ways. [00:15:18] Speaker 04: I don't understand that they're saying that this language doesn't cover the Havoc Healy dispute. [00:15:23] Speaker 04: I think their position is that it does, and that it is something that relates to the audit, correct? [00:15:28] Speaker 05: Not at the time of the audit, though, Your Honor. [00:15:30] Speaker 05: My point is that the Havoc Healy was excluded from the audit, OK, because of the position taken by Spinmaster that they didn't owe royalties on. [00:15:41] Speaker 05: That it wasn't even part of the agreement. [00:15:42] Speaker 05: the original print? [00:15:44] Speaker 05: That's correct. [00:15:44] Speaker 05: When the agreement was the agreement that was identified in the audit. [00:15:48] Speaker 05: And setting that aside as a secondary point, Your Honor, there are two specific limitations on that release language. [00:15:54] Speaker 05: One of them is what we've been discussing, which is it's tied to the audit. [00:15:58] Speaker 05: That is my client's position. [00:15:59] Speaker 05: A separate issue, though, and a separate limitation is one of time. [00:16:03] Speaker 05: It specifically is the release language is specifically limited [00:16:07] Speaker 05: to Q1 of 06 to Q2 of 2010, which makes perfect sense. [00:16:13] Speaker 05: This is a royalty audit. [00:16:16] Speaker 05: You are resolving a royalty dispute about toys that have been sold. [00:16:21] Speaker 05: My point is that it was completely erroneous for the district court to find that we released claims related to toys that were never even sold. [00:16:31] Speaker 05: There's absolutely no justification for that finding whatsoever. [00:16:35] Speaker 05: Toys that were never sold. [00:16:37] Speaker 05: What? [00:16:37] Speaker 05: When? [00:16:38] Speaker 05: I'm saying after Q2 2010 the district court took the position that we just released everything and there's absolutely no legal basis for that finding. [00:16:47] Speaker 05: Q2 2010 is the cutoff so that that's all and Q3 2010, Q4 2010 all the way up I believe it's still being sold today. [00:16:56] Speaker 04: So you're saying to the extent that it was sold after 2010 it wasn't resolved? [00:17:02] Speaker 04: It's not released absolutely. [00:17:04] Speaker 04: Okay so but [00:17:05] Speaker 04: In other words, that it might have been released for periods before that, but not after that. [00:17:10] Speaker 05: I'm saying, even if you buy the position that you were arguing for, I'm not arguing for positions. [00:17:15] Speaker 05: I'm sorry. [00:17:17] Speaker 05: If you take the position that it was included within the scope of the audit, and so therefore, it still is temporally limited. [00:17:27] Speaker 04: So part of the claim would be barred, but part wouldn't be. [00:17:30] Speaker 04: Absolutely. [00:17:31] Speaker 04: OK. [00:17:32] Speaker 00: We're way over. [00:17:35] Speaker 00: Will we store some of your butter? [00:17:36] Speaker 00: Let's hear from the other side. [00:17:37] Speaker 00: No, not your fault. [00:17:38] Speaker 00: We asked you a lot of questions. [00:17:58] Speaker 00: Good morning. [00:17:59] Speaker 01: Good morning. [00:18:00] Speaker 01: Please support Megan Redman for appellee. [00:18:03] Speaker 01: Just to kind of respond to some questions you all raised during your examination, we do believe that they have to win on both theories. [00:18:12] Speaker 01: First, we think this whole case can be decided under the multiple signal theory, because this district court did find that there's no predefined speeds. [00:18:22] Speaker 01: And that's something that's largely ignored. [00:18:24] Speaker 01: We hear a lot about these toys going up and these toys going down. [00:18:28] Speaker 01: But this is a control system for controlling speed. [00:18:31] Speaker 01: There's a predefined speed that makes it go up and a predefined speed that makes it go down. [00:18:37] Speaker 01: The thing that was missing from all the evidence was the speed factor. [00:18:41] Speaker 01: So we had evidence about the toys going up and down, and the court's absolutely correct. [00:18:46] Speaker 01: Our toys go up and down. [00:18:49] Speaker 01: Where does the court make that finding? [00:18:51] Speaker 01: The court makes that finding on page 45 of its order, which is appendix 67. [00:18:57] Speaker 01: Kind of in the middle of the page, it talks about Mr. Wong's testimony, that they do not set predefined speeds [00:19:06] Speaker 01: Based upon, I'm on appendix page 45, 67. [00:19:11] Speaker 01: I'm sorry, it's page 45 for your honor. [00:19:14] Speaker 02: Appendix page 67. [00:19:18] Speaker 02: Okay. [00:19:19] Speaker 02: Now, what would you like me to see where this particular, even with multiple speeds, this does not meet the control system limitation because [00:19:26] Speaker 02: It does not control speed. [00:19:28] Speaker 02: So where is that fact finding? [00:19:29] Speaker 02: Sure. [00:19:29] Speaker 01: There's on page 45, which is appendix 67. [00:19:33] Speaker 01: It starts with spin master's engineer, T.W. [00:19:36] Speaker 01: Wong, testified that the accused products do not set predefined speeds based upon the receipt or non-receipt of signals. [00:19:46] Speaker 01: Rather, Mr. Wong testified that the receipt and non-receipt of numerous signals indicate particular altitudes and that speed is then set [00:19:56] Speaker 01: as a function of a given altitude. [00:19:58] Speaker 01: Okay, so where's the fact-finding? [00:19:59] Speaker 01: That's a discussion of testimony. [00:20:01] Speaker 01: Right. [00:20:02] Speaker 04: I mean, they relied on... There wouldn't be a fact-finding at the summary judgment. [00:20:06] Speaker 02: Okay, well where's the conclusion that there are no facts for contrary? [00:20:10] Speaker 01: Sure. [00:20:10] Speaker 01: And I think if you continue on, his conclusion is... [00:20:13] Speaker 01: And it goes through and continues, and it says, these are the reasons, and it goes on to Dr. Spanko's testimony. [00:20:20] Speaker 01: Because again, Dr. Spanko confirmed this. [00:20:23] Speaker 01: Dr. Spanko, when asked about these flow charts, and I said, Dr. Spanko, what speed, what signal would not receive multiple signal theories? [00:20:33] Speaker 02: I'm wondering where the district court held that summary judgment was warranted because of the speed issue, and I don't see it anywhere in this pages. [00:20:40] Speaker 02: So where is a statement by the district court [00:20:42] Speaker 02: that he is granting summary judgment in light of the infringing products not having the speed limitation of claim one. [00:20:51] Speaker 01: I think, Your Honor, this is the best place I have to point to. [00:20:55] Speaker 02: But all this is is him laying out, this is what this person testified to, this is what this person testified to, this is what this person testified to. [00:21:00] Speaker 02: There is absolutely not a single sentence here that begins with therefore, or I conclude, or summary judgment is appropriate because. [00:21:08] Speaker 00: Or no reasonable jury could find under these circumstances. [00:21:11] Speaker 00: Yes. [00:21:12] Speaker 00: In fact, some of the argument makes it sound like there is an issue of material fact in this regard. [00:21:17] Speaker 01: Yeah, and I agree there's no sentence that says that in this order, but I disagree that the court hasn't done the analysis and he put all the theories together because these were all argued together and the whole basis for our summary judgment motion [00:21:33] Speaker 01: was under the multiple signal theory was this idea of a predefined speed. [00:21:39] Speaker 01: Basically, that was our argument. [00:21:41] Speaker 01: And that's what he is deciding here under the multiple signal. [00:21:44] Speaker 01: So the thing that's kind of also getting lost in this paragraph is Dr. Spanko testified based on these flow charts. [00:21:51] Speaker 04: So what you concede is that your product goes up and down depending on signals, the non-received particular signals. [00:22:01] Speaker 01: based on non-recy- yes. [00:22:03] Speaker 01: There's some pulse width modulations or power motor adjustments that are made to the motor, but these are like little tweaks throughout. [00:22:09] Speaker 04: Okay, so what you're saying is that it's not based on predetermined speed? [00:22:14] Speaker 01: Correct. [00:22:16] Speaker 01: It's a speed control system that's claimed and ours are hyped. [00:22:19] Speaker 01: And Dr. Spanko admitted with respect to these flow charts [00:22:22] Speaker 01: that when the signals are not received, he could not point to a signal or multiple signals when not received that caused the vehicle to set a speed that caused the vehicle to go down. [00:22:34] Speaker 04: It's the set of speed is the key part of that. [00:22:37] Speaker 01: Right. [00:22:37] Speaker 01: He couldn't find it. [00:22:38] Speaker 01: And so what he said, and he said, well, he called my question a good one. [00:22:43] Speaker 01: He said, your question is a good one. [00:22:45] Speaker 01: But what I will tell you is I played with the toys. [00:22:48] Speaker 01: I played with the toys, and the toys go up, and the toys go down. [00:22:52] Speaker 01: When you rub their case away, that's the problem. [00:22:55] Speaker 01: Because there's nothing about the predefined speed. [00:22:58] Speaker 01: Everything is about up and down. [00:22:59] Speaker 01: They point to documents in the record that say up and down. [00:23:02] Speaker 01: I agree we go up and down, but I disagree there's any evidence in the record. [00:23:06] Speaker 04: You agree that it goes up and down based on the proportion of signals? [00:23:11] Speaker 01: Yes. [00:23:12] Speaker 01: But not based on setting a predefined speed, which causes the vehicle to go up or causes the vehicle to go down. [00:23:20] Speaker 01: And I believe their expert agrees with Spin Master that those flow charts that they're pointing to you and they're complaining about don't actually show that. [00:23:29] Speaker 01: Those flow charts don't support their position. [00:23:31] Speaker 01: They come to you with up and down, and I believe the claim requires more than up and down here today. [00:23:38] Speaker 01: And moving to the breach of contract claim, I believe that this Settlement Green is very clear. [00:23:46] Speaker 02: So, Havit Halley's... Well, I don't want you to move to a breach of contract claim because I don't see any fact-finding at all that supports you on the speed issue or conclusion by the District Court if the summary judgment is warranted in light of your arguments regarding speed. [00:23:58] Speaker 02: So, why don't you address the one-signal issue? [00:24:01] Speaker 01: Yeah, sure, but the single signal issue, the claim is that we believe to be a binary claim. [00:24:06] Speaker 01: So you either receive a signal or you don't receive a signal, for example. [00:24:10] Speaker 01: So if you receive... Why? [00:24:11] Speaker 02: It says transmitting a signal, receiving a signal or said signal. [00:24:17] Speaker 02: We have a general rule that when you say a signal, it means one or more signals. [00:24:23] Speaker 02: How has this specification [00:24:26] Speaker 02: made it clear that that general rule is inapplicable in this case. [00:24:29] Speaker 01: Sure. [00:24:29] Speaker 01: And I agree. [00:24:30] Speaker 01: That is a general rule. [00:24:31] Speaker 01: But here, we see this. [00:24:33] Speaker 01: How does this claim function? [00:24:34] Speaker 01: And I believe this is some testimony from their own expert that the district court keyed off of. [00:24:40] Speaker 01: And their own expert said, with respect to multiple signals, how would it work? [00:24:45] Speaker 01: He's like, I don't know how it would work. [00:24:48] Speaker 01: And he called my question confusing. [00:24:50] Speaker 01: And so then I asked him in the context of the infringement allegations. [00:24:53] Speaker 01: So with respect to Sin Master's product, he agreed with me. [00:24:57] Speaker 01: Receipt or non-receipt, for example. [00:24:58] Speaker 02: Well, I'm glad to hear that you admit that he called your question confusing. [00:25:02] Speaker 02: Don't you agree that Dr. Spanko's testimony was understood by the district court that the word confusing was [00:25:09] Speaker 02: understood differently and inaccurately by the district court, in his opinion. [00:25:14] Speaker 01: I don't believe so. [00:25:15] Speaker 01: I think if you read Dr. Spanko's testimony overall, I think it was clear and the context was clear. [00:25:21] Speaker 01: But you just said he called my question confusing. [00:25:23] Speaker 01: That's what I thought he was saying. [00:25:24] Speaker 01: I apologize. [00:25:25] Speaker 01: Council just came up to you and talked. [00:25:27] Speaker 01: I apologize if that was unclear. [00:25:28] Speaker 02: So you don't think that in that testimony that Dr. Spanko was calling your question confusing, you think he was saying it would be confusing to have two signals [00:25:38] Speaker 01: I do, and I think that if you read it throughout the whole... Show me. [00:25:41] Speaker 02: Show me where and why you think that, because I don't think that's even within the bounds of reasonable. [00:25:51] Speaker 02: Your question were that some vehicles can cause other vehicles to go up and down. [00:25:56] Speaker 02: And he says, I don't know. [00:25:57] Speaker 02: That's confusing. [00:26:02] Speaker 01: No, I agree. [00:26:02] Speaker 02: I do agree. [00:26:03] Speaker 02: That was a bad question. [00:26:06] Speaker 02: But that's the only place where this expert said, that's confusing, correct? [00:26:10] Speaker 02: And that's the place that the district court cited, and he attributed the that's confusing language to be, it would be technically confusing to have two signals cause vehicles to go up and down. [00:26:20] Speaker 02: That's part of how the district court reached its conclusion that only one signal could possibly be warranted [00:26:27] Speaker 02: by this claim, because even their expert admitted with two signals, it would be confusing as to how it works. [00:26:32] Speaker 01: I believe that district court got that conclusion from all his testimony. [00:26:36] Speaker 01: I agree that that testimony was cited in the order. [00:26:39] Speaker 01: I think that Dr. Spanko's testimony overall, where he talks about he can't identify multiple signals, right? [00:26:46] Speaker 01: So he focuses on signal C, for example, or the vector on wave. [00:26:49] Speaker 01: And he agrees. [00:26:50] Speaker 01: Dr. Spanko agrees. [00:26:52] Speaker 01: C alone does not get you there. [00:26:54] Speaker 01: You have to know what all the other signals are to know if it's going to go up or down. [00:26:58] Speaker 01: And so that's where I think the district court picked that up. [00:27:02] Speaker 00: Okay. [00:27:02] Speaker 00: Can we move back to the contract claim because the clock is running? [00:27:05] Speaker 04: Yes. [00:27:06] Speaker 04: The opposing counsel says that even if you're right about the interpretation of the agreement and that the Havoc Healy is related to the audit, that still that [00:27:19] Speaker 04: there were many sales of the Havoc Healy after the audit period and those claims can't be barred by the settlement agreement. [00:27:27] Speaker 04: So what's the answer to that? [00:27:28] Speaker 01: I disagree with that. [00:27:30] Speaker 01: Which part of it? [00:27:31] Speaker 01: I disagree that there were sales of the Havoc Healy after the release. [00:27:36] Speaker 04: Does the record tell us what the answer to that is? [00:27:39] Speaker 01: I believe it does, Your Honor. [00:27:42] Speaker 01: Where? [00:28:13] Speaker 01: I believe it would, I don't have that citation as I'm sitting here today, but I believe when the parties went through the audit and the original draft of the audit, which is attached in the record, I believe in there reflected the sales. [00:28:29] Speaker 04: Well, it did reflect the sales, right, in the original draft of the audit, the sales of the Havoc Healy, but I'm not understanding that it said anything about sales stopping at [00:28:38] Speaker 01: I don't believe that was an issue before the district court. [00:28:41] Speaker 01: That's why I'm trying to think through the record of what was raised, and I don't believe that issue was raised. [00:28:45] Speaker 04: Do you agree that if there were sales of the Havoc Healy after the audit report, that that wouldn't be barred by the settlement agreement? [00:28:51] Speaker 01: I agree, yes. [00:28:52] Speaker 01: The settlement agreement was released to claims that arose, existed, or could have been asserted prior to the effective date of the agreement. [00:28:59] Speaker 01: So yes. [00:29:01] Speaker 01: That's exactly what the release says. [00:29:06] Speaker 01: This settlement agreement release was a release of an audit. [00:29:09] Speaker 01: This is not a skew settlement agreement. [00:29:12] Speaker 01: The parties got together. [00:29:13] Speaker 01: They said, we want to have a discussion about specifically Rico instigated and said, we want to talk about these licenses and see if you have paid royalties for all the products under the licenses. [00:29:22] Speaker 01: That's what the audit is. [00:29:24] Speaker 01: And that's reflected in paragraph A of appendix 1495, which is the settlement agreement and release. [00:29:33] Speaker 01: It says there that the RCO, that's the Royalty Compliance Organization, conducted an audit of Spinmaster's royalty accounting records [00:29:43] Speaker 01: related to the licenses listed below as referenced by the product SKUs identified in RICO's January 2009 report. [00:29:52] Speaker 01: It's not just talking about SKUs. [00:29:55] Speaker 01: It's talking about an audit of licenses. [00:29:58] Speaker 01: Those licenses are specifically listed and included in the scope of this agreement in provision one. [00:30:04] Speaker 01: And then turning to that release provision, [00:30:07] Speaker 01: we see that that is a release related to the audit and additional selling periods and any claims for royalties there under. [00:30:15] Speaker 01: You will also see another clause after there under, other than the spin master obligations under this agreement. [00:30:24] Speaker 01: Of course, those spin master obligations under the agreement was the payment of royalties. [00:30:30] Speaker 01: So this release has nothing to do with the payment of the royalties or the SKUs, as he's referencing. [00:30:35] Speaker 01: This has to do with any claims that could have been brought under that audit. [00:30:41] Speaker 01: And so for those reasons, we believe that the contract claim has no merit, and the district court was right. [00:30:47] Speaker 01: And I don't think there's any disagreement on the facts. [00:30:50] Speaker 01: I think everyone agrees. [00:30:51] Speaker 01: They know about the Havoc Kelly. [00:30:52] Speaker 01: If they wanted to not have the Havoc Kelly subject to that release, they needed to insert that language. [00:30:59] Speaker 01: And they didn't do that. [00:31:02] Speaker 01: Thank you. [00:31:02] Speaker 01: Thank you. [00:31:14] Speaker 04: Your Honor, with respect to the predefined speed... The opposing counsel has agreed that the control system of the accused toy does cause the helicopter, whatever it is, to move up or down and to different altitudes. [00:31:33] Speaker 04: Okay, so they say the sole argument they're making against assuming a multiple signal construction, the sole argument they're making [00:31:43] Speaker 04: against infringement rests on the speed limitation, okay? [00:31:49] Speaker 04: So where is it that we find in the record evidence from you that the speed limitation is satisfied? [00:32:00] Speaker 05: There are several places. [00:32:01] Speaker 05: Let me start with EPPX 2611. [00:32:04] Speaker 05: This is the hovering program flow charge. [00:32:09] Speaker 02: Are you going to direct us to an appendix page? [00:32:11] Speaker 05: I'm sorry, APPX 2611. [00:32:23] Speaker 05: At the risk of getting a lot of paper involved, the claim language, I think a lot of this problem stems from [00:32:29] Speaker 05: not paying attention to the court. [00:32:31] Speaker 02: To be clear, this document says highly confidential outside attorney's eyes only. [00:32:36] Speaker 02: So I mean, it's your client. [00:32:39] Speaker 02: So you decide. [00:32:40] Speaker 02: It's not my document, I'm sorry. [00:32:41] Speaker 02: Oh, it's their document? [00:32:42] Speaker 02: Yes. [00:32:42] Speaker 02: So you need to be careful how you proceed with it. [00:32:45] Speaker 02: You know, I have to say, there's sort of a ridiculous amount of stuff marked confidential in this case and in this appendix. [00:32:51] Speaker 02: And I would caution both. [00:32:53] Speaker 05: I will not discuss the actual issues that I believe are confidential. [00:32:57] Speaker 05: I think I can answer this question without doing so. [00:33:01] Speaker 05: The claim language talks about predefined speeds and then it says what those are. [00:33:06] Speaker 05: It specifically defines the first speed and second speed as a speed that causes a vehicle to gain altitude and to lose altitude. [00:33:17] Speaker 05: Okay, this is not speed must be a hundred miles an hour. [00:33:20] Speaker 05: This is a more generic where it's defined by the claim as to what we are talking about. [00:33:25] Speaker 05: their own documentation being spin master specific, and they said it. [00:33:29] Speaker 05: You heard it in this courtroom today. [00:33:31] Speaker 05: If all signals are received, we will gain altitude. [00:33:35] Speaker 05: If no signals are received, we will lose altitude. [00:33:39] Speaker 02: No signals are less than all signals. [00:33:41] Speaker 05: Well, that's infringement. [00:33:42] Speaker 02: So not no signals. [00:33:43] Speaker 05: And so their own documents show it, and we all went through the district court's opinion, and I'm going to refer the court to page 45 of that. [00:33:51] Speaker 05: It's APPS 27. [00:33:54] Speaker 05: This was the portion of the opinion that Spin Master's counsel directed this court to on the speedy limitations, Your Honor, as to why the district court made factual findings on this point. [00:34:05] Speaker 05: Notably, all that you heard was the first two sentences of this paragraph. [00:34:10] Speaker 05: If you go on, the district court in its own opinion agrees that their expert, I'm sorry, their engineer, T.W. [00:34:19] Speaker 05: Wong, testified [00:34:21] Speaker 05: That, what I just described, that based upon the receipt or non-receiptive signals, it will either gain altitude or lose altitude, but it's even better. [00:34:30] Speaker 05: He says it will do it based on predefined increments. [00:34:34] Speaker 04: These products are predefined increments, but not speed. [00:34:38] Speaker 04: It sounds to me... Those are speed, Your Honor. [00:34:40] Speaker 04: But I think the point is here, that the more you guys talk about it, the more it seems to me that there's a claim construction issue here. [00:34:49] Speaker 04: as to what the claim means when it says sets the speed. [00:34:52] Speaker 04: In other words, you both seem to agree about how the accused toys operate, but you disagree about what the speed limitation is. [00:35:01] Speaker 04: I don't know what the answer to that is, but it does seem to me there's an unresolved claim issue. [00:35:06] Speaker 05: Your Honor, what I would just respectfully submit to the court is this. [00:35:10] Speaker 05: I think that there's an unresolved issue because no one seems to want to read the claim. [00:35:14] Speaker 02: The claim expressly says at the end of claim one, the very last sentence or the last [00:35:19] Speaker 02: element of claim one is the first speed being predefined as a speed that causes the vehicle to gain altitude. [00:35:24] Speaker 02: The second speed being predefined as a speed, that's the only place predefined even appears in this claim, is in the description of how the only thing you mean by that is causing it to go up and down, right? [00:35:36] Speaker 02: Am I missing something? [00:35:37] Speaker 05: You are not, Your Honor. [00:35:39] Speaker 05: All right. [00:35:40] Speaker 05: And just briefly, there was a point made on the contract issue as to whether or not it was raised at the district court about the temporal limitation I described. [00:35:49] Speaker 05: In the district court's opinion, and this is at page 27 of that, which is APPX 49, this is the district court's verbiage from the order, Raco argues the release would not apply to any sales of covered products that occurred post- Where is that again? [00:36:06] Speaker 05: I apologize. [00:36:07] Speaker 02: Say it. [00:36:07] Speaker 05: APPX 49, and it is the middle paragraph last sentence. [00:36:13] Speaker 05: This is the district court acknowledging that we argued [00:36:16] Speaker 05: that the release would not apply to any sales of covered products that occurred post Q2 2010, i.e. [00:36:25] Speaker 05: after the additional selling period. [00:36:28] Speaker 05: We made the argument there. [00:36:29] Speaker 05: We made it in the briefs. [00:36:30] Speaker 05: So what does the district court say about that? [00:36:32] Speaker 05: Nothing. [00:36:33] Speaker 05: That's the problem, is that the district court just says, hey, this argument was made. [00:36:37] Speaker 05: Oh, we don't care, though. [00:36:38] Speaker 04: We're just doing it on a conventional basis. [00:36:41] Speaker 05: So unless there are further questions. [00:36:42] Speaker 00: No, we've got to end this Sunday. [00:36:44] Speaker 00: Thank you. [00:36:44] Speaker 00: We thank both sides. [00:36:45] Speaker 03: The case is submitted.