[00:00:04] Speaker 01: All right, the next case before the court is Rembrandt Technologies LLC versus Comcast of Florida, case number 171784. [00:00:14] Speaker 01: This is an appeal from a decision from the District of Delaware. [00:00:25] Speaker 01: Okay. [00:00:26] Speaker 01: Mr. Goldstein, you want five minutes? [00:00:29] Speaker 01: Yes, ma'am. [00:00:30] Speaker 01: Okay, good luck with that. [00:00:32] Speaker 02: I may have pleased the court. [00:00:33] Speaker 02: My name's Tom Goldstein, and I represent Rembrandt. [00:00:36] Speaker 02: The defendant's theory below and the principal theory here is that Rembrandt and its lawyers in paradigm engaged in some grand conspiracy to destroy documents and to mislead the court. [00:00:48] Speaker 02: And the district court multiple times rejected that conclusion and the idea that there was bad faith here. [00:00:54] Speaker 02: Instead, it awarded the defendants all of their attorney's fees, the largest Section 285 attorney's fee award ever. [00:01:00] Speaker 02: based on the combination of three discrete supposed areas of misconduct. [00:01:05] Speaker 02: And they did it in orders that could only terribly be described as very, very, very terse. [00:01:11] Speaker 02: It's a little hard to unpack. [00:01:13] Speaker 00: And our standard of review here is an abuse of discretion. [00:01:16] Speaker 02: That is correct. [00:01:17] Speaker 02: There's abuse of discretion, the court said, in cases like liquid, excuse me, large audience displays that the facts have to actually exist. [00:01:24] Speaker 02: And of course, a legal error is an abuse of discretion as a matter of law. [00:01:29] Speaker 02: So with respect to each of the three discrete areas that the district court found were relied on in combination, there are, in the orders on their face, clear factual errors, which is why the defendants instead don't really pursue the order as such but this grander theory. [00:01:46] Speaker 02: So with respect to the destruction of documents, the district court finds or says that there was no instruction in paradigm to preserve documents. [00:01:54] Speaker 02: And that's just not true. [00:01:55] Speaker 02: There were two different instructions and two different contracts that provided that. [00:02:00] Speaker 02: With respect to the revival of any of the patents in the case, the district court says that Rembrandt revived the patents. [00:02:07] Speaker 02: It's just not true. [00:02:08] Speaker 02: It just didn't happen. [00:02:09] Speaker 00: When you look at the timeline with respect to the spolation issue, it [00:02:14] Speaker 00: It seems to me that this record may have been corrected when you review the timeline, that at one point Rembrandt knew that documents were required and the prior documents or other documents, possibly related documents, or even maybe even germane documents, had been destroyed. [00:02:34] Speaker 02: OK, so just to rehearse and just to go through the timeline. [00:02:38] Speaker 02: So our original contract with Paradigm says you'll provide us all of the relevant documents. [00:02:43] Speaker 02: and you'll, including with respect to inequitable conduct or whatever else, it's in the contract. [00:02:47] Speaker 02: And then there's a letter that says you have to preserve these documents as well. [00:02:52] Speaker 02: Then Zoom comes in and purchases Paradigm. [00:02:54] Speaker 02: And when it purchases Paradigm, it's not interested in just the intellectual portfolio of Paradigm. [00:03:01] Speaker 02: It wants to actually just produce the products. [00:03:03] Speaker 02: And in other words, what the district court finds is a general document destruction. [00:03:08] Speaker 02: We find out [00:03:09] Speaker 02: after 90% of those documents have been destroyed. [00:03:12] Speaker 02: And remember, they relate only to one defense as to two of the patents. [00:03:15] Speaker 02: It's not like these are central documents to the other patents or even to the two patents in the case. [00:03:21] Speaker 00: As soon as we find out, we give them another instruction that says... The destruction of the documents had begun after September 15th, after you started the first wave of litigation. [00:03:31] Speaker 02: That's exactly right. [00:03:32] Speaker 02: And just to be clear, this is a warehouse. [00:03:34] Speaker 02: So Paranin is a big company. [00:03:36] Speaker 02: It has all kinds of intellectual property. [00:03:38] Speaker 01: I'm sorry. [00:03:39] Speaker 01: Even if the trial court never made a finding of bad faith, in fact declined to, and then later said, well, it's kind of consistent with bad faith. [00:03:50] Speaker 01: But even if it's not intentional spoliation, wouldn't it be fair for the court to consider the failure to put a real litigation hold as an improper conduct in the litigation? [00:04:04] Speaker 02: Well, a couple of things about that. [00:04:06] Speaker 02: The district court relied on a conclusion that there was spoliation. [00:04:09] Speaker 02: Not a discovery of sanction, but an actual spoliation. [00:04:12] Speaker 02: And the case law that we cite makes clear that a litigation, the Fairview Institute of Litigation is not itself spoliation. [00:04:18] Speaker 02: Now, the district court's discretion is broad. [00:04:20] Speaker 02: We are not trying to say that there are some things that are off limits. [00:04:23] Speaker 02: What I'm saying is that the district court made a legal conclusion about spoliation that is unsustainable for two reasons. [00:04:29] Speaker 02: One, well, multiple reasons. [00:04:30] Speaker 02: One is there is actually a hold. [00:04:32] Speaker 02: I mean, we do say preserve all these documents. [00:04:35] Speaker 02: We do have a contractual obligation for them to provide them to us. [00:04:39] Speaker 02: And it also requires that faith. [00:04:41] Speaker 02: It requires knowledge. [00:04:43] Speaker 02: And the theory of the other side here has to be that the lawyers from Fish and Richardson, from all of the lawyers in the case, engaged in this conspiracy to preserve the material, the list of what was in each box and to turn that over. [00:04:58] Speaker 02: but to allow this widespread destruction of documents that will result in them being disbarred. [00:05:02] Speaker 01: But how do you start litigation without putting a litigation hold on? [00:05:05] Speaker 01: That, I mean, putting aside whether it's foliation, it's kind of shocking. [00:05:09] Speaker 02: Well, Your Honor, there is actually a letter that goes, there's both a contractual obligation. [00:05:12] Speaker 01: There's a letter that says save stuff for me, these are the things I want. [00:05:15] Speaker 01: Save and provide. [00:05:17] Speaker 01: But it didn't say anything about [00:05:19] Speaker 01: sales that might implicate the on-sale bargain. [00:05:22] Speaker 02: It does, Your Honor. [00:05:22] Speaker 02: It relates to all defenses, and it relates to all of the patents that they're requiring. [00:05:26] Speaker 02: It's both in the contract and the letter. [00:05:29] Speaker 02: And then when zone acquires them, there's yet another contract. [00:05:32] Speaker 02: And again, I will stress that even if the court has a concern about the level of detail in the litigation hold, it is a very, very different kettle of fish to go from there to conclusion of spoliation, which is what the district court's conclusion was. [00:05:47] Speaker 02: and that it relates to all of the patents when it relates to only two, and only one defense has to do with the patents. [00:05:52] Speaker 02: Remember, when we enter into the Supreme Court with paradigm, they produce a ton of documents related to the patents. [00:05:58] Speaker 02: We produce those to the other side. [00:06:01] Speaker 01: This is... What about the John Melley visit? [00:06:03] Speaker 01: That's really one of the things that's very difficult for me to get past. [00:06:07] Speaker 02: Absolutely. [00:06:07] Speaker 02: And so the thing that is extremely misleading, the reason the district court didn't lie on this, which ought to be one telling thing, is that John Melley visits an office [00:06:16] Speaker 02: It is not the facility that we're talking about. [00:06:19] Speaker 02: John Milley visits an office of paradigm. [00:06:21] Speaker 02: Part of paradigm is, and this is just described in the relevant record section, this is an office of paradigm when this aspect of paradigm is being shut down. [00:06:30] Speaker 02: The documents involved in this case are not from that office in any way, shape, and form. [00:06:34] Speaker 02: This is a warehouse that is offsite, is completely and utterly unrelated to it. [00:06:40] Speaker 02: There's nothing in that the district court concluded would have caused Mellie to have some sort of alarm or believe that there was some other document destruction going on. [00:06:48] Speaker 02: They're just unrelated to each other. [00:06:51] Speaker 02: The evidence is undisputed that when the lawyers in the case find out about the document destruction, they immediately instruct Zun to stop and preserve all materials. [00:07:02] Speaker 02: That is wildly inconsistent with the views that they wanted the documents destroyed. [00:07:08] Speaker 02: There is no way in the world that attorneys who are involved in the case would do that in the first place, but would do it in a manner in which they instruct that it's stopped as soon as they find out that it's occurring, and also that there's no reason for them to have believed that the documents involved would be in any way more favorable to the other side than to them. [00:07:26] Speaker 02: Remember, the district court finds that this is a general document obstruction that has nothing to do with the patents in this case, or the defenses in the case, or anything like that. [00:07:35] Speaker 01: Let's go to another topic. [00:07:37] Speaker 01: Let's go to the inequitable conduct. [00:07:41] Speaker 01: Now I know there's this whole debate over what the burden of proof is, and I frankly don't think that, despite how things are described, that Judge Bryson is on one side and the District of Delaware is on another on this. [00:07:53] Speaker 01: I think Judge Bryson explains you have to find inequitable conduct by clearing convincing evidence, but then you still only [00:08:01] Speaker 01: that becomes an important factor in determining whether by the preponderance of the evidence it's exceptional. [00:08:06] Speaker 01: So I don't see this as a big divide in the case law. [00:08:09] Speaker 01: But having said that, what about the fact that the court said there was, in fact, inequitable conduct? [00:08:17] Speaker 02: I think that's a pretty good illustration of our point that it's just the district court saying it. [00:08:21] Speaker 02: So there are two issues related to the revival. [00:08:23] Speaker 02: One is what Paradigm did and then what we did. [00:08:26] Speaker 02: Now the clear error of fact on its face is the district court's statement or conclusion that we revived the patent. [00:08:31] Speaker 02: We just didn't. [00:08:32] Speaker 02: Paradigm revives the patent. [00:08:34] Speaker 02: Now what happens is that Paradigm does so in circumstances that network signature says is not inequitable conduct. [00:08:42] Speaker 02: The district court's view took a relatively narrow view, and it's not an implausible view, of the word unintentional. [00:08:47] Speaker 02: You could read the form that the PTO has for patent revivals to mean purely accidental. [00:08:52] Speaker 02: That would be one reading of it. [00:08:54] Speaker 02: That argument was presented to the court in the network signatures case. [00:08:57] Speaker 02: And the court says, no, we are not going to conclude that when you discover belatedly commercial interest and you submit it, that that's inequitable conduct. [00:09:05] Speaker 01: Say we disagree on whether or not there was actually inequitable conduct [00:09:11] Speaker 01: by the parties involved at the time of the renewal. [00:09:15] Speaker 01: So at minimum, doesn't that mean that if Rembrandt had knowledge that that's in fact what occurred, why wouldn't there be at least an improper conduct in an attempt to enforce a patent that you knew to be unenforceable? [00:09:34] Speaker 02: So just to take your premise, let's assume that there was an equitable conduct. [00:09:38] Speaker 02: So then the question is, well, did Rembrandt know that there was inequitable conduct? [00:09:43] Speaker 02: The Section 285 inquiry after Octane is the question of how the party in the case actually litigated. [00:09:49] Speaker 02: There is no reason, there is no finding and no reason to believe that Rembrandt knew that there was inequitable conduct in the case. [00:09:56] Speaker 02: Now the other side's argument is, look, you are aware that there was a revival. [00:10:01] Speaker 02: The point is that revivals are perfectly legal. [00:10:04] Speaker 00: There's nothing intrinsic in the fact that- [00:10:09] Speaker 00: due diligence in the purchase of prints. [00:10:12] Speaker 00: That's right. [00:10:12] Speaker 02: These are lawyers who were paid by the hour, unquestionably did an extensive due diligence. [00:10:17] Speaker 00: Why didn't that raise a question as to why the patents had expired? [00:10:20] Speaker 02: Well, Your Honors, we knew that the patents hadn't expired as such. [00:10:25] Speaker 02: That is, they had been allowed to lapse and they hadn't been remade, which is perfectly legal. [00:10:29] Speaker 02: There's nothing, and network signatures is the best possible evidence of that. [00:10:33] Speaker 02: And that is, when you learn that a patent... And was there any evidence submitted as to [00:10:39] Speaker 01: what you inquired about as it relates to that lapse in renewal? [00:10:44] Speaker 02: Because it's a pretty long period of time. [00:10:48] Speaker 02: Within the two-year period that the PTO itself provides is perfectly appropriate for a renewal. [00:10:54] Speaker 02: It occurred. [00:10:55] Speaker 02: The other side, as I understand it, did not attempt to take discovery on what had happened. [00:10:59] Speaker 02: So there is no record evidence on what inquiries went back and forth. [00:11:03] Speaker 01: These guys weren't strangers to you, so you wouldn't have to depose them. [00:11:06] Speaker 02: No, no, I'm sorry. [00:11:07] Speaker 02: It's their emotion. [00:11:08] Speaker 01: I get that, but what they're saying is that of course you had to know because these guys were working with you. [00:11:14] Speaker 02: Your Honor, we know that there was a renewal. [00:11:17] Speaker 02: It's true on the face of the patent materials. [00:11:18] Speaker 02: My point is this. [00:11:19] Speaker 02: If you were going to draw an inference of, you know, it's an exceptional case under Section 285, there are perfectly valid reasons, including this reason, network signatures fines, for reviving a patent. [00:11:30] Speaker 02: It's not something that causes alarm bells to go off in any way. [00:11:34] Speaker 01: And you didn't have access to that email that addressed this? [00:11:38] Speaker 02: The email, Your Honor, what happens is that there's a set of communications that goes back inside of Paradigm. [00:11:46] Speaker 02: So there isn't any evidence that we were aware of it at the time, but the emails that go back and forth inside Paradigm, of course, only show their good faith, their belief that they had the 24-month period. [00:11:57] Speaker 02: Remember, the district court doesn't do any sort of fact-finding. [00:12:00] Speaker 02: that would cause the district court to conclude that paradigm's people were lying when they said they had a good faith belief that they could just renew within 24 months and revive the patent. [00:12:10] Speaker 02: Or there's no reason to believe it. [00:12:11] Speaker 02: The other side embraces the idea, embraces the idea that this was renewed on the basis of the interest from broadband well before we ever became involved. [00:12:20] Speaker 02: And network signature says that's perfectly appropriate. [00:12:23] Speaker 02: that what the courts are not going to do in assessing inequitable conduct is second guess the PTO's determination to allow the revival. [00:12:32] Speaker 02: The PTO itself is empowered to ask questions about this. [00:12:35] Speaker 02: I will give you one other good piece of evidence that this wasn't outrageous conduct, and that is the other side is aware, of course, of the revival as well, and doesn't even plead inequitable conduct on the basis of it. [00:12:47] Speaker 02: I mean, if it's not [00:12:50] Speaker 02: It doesn't even induce them to assert the defense of inequitable conduct. [00:12:54] Speaker 02: It is very, very hard to see how it is outrageous inequitable conduct that can be attributed to us that we give rise to a Section 285 issue. [00:13:01] Speaker 00: Can you address the attorney's fees issue? [00:13:04] Speaker 02: That is to say, the attribution issue? [00:13:06] Speaker 02: Yes. [00:13:06] Speaker 02: Sure. [00:13:06] Speaker 02: So to give examples, the document instruction relates to two patents. [00:13:10] Speaker 02: The revival relates to two patents. [00:13:13] Speaker 02: None of this related at all to the 627 patent, but the district court just [00:13:17] Speaker 02: awarded them all of their attorney's fees without regard to any attribution, which this court has clearly declared. [00:13:23] Speaker 00: Isn't the underlying finding that was made by the court that the exceptionality of the case affected the entire MDL? [00:13:35] Speaker 00: It tainted the entire MDL. [00:13:37] Speaker 02: I don't think the district court says that, and if the district court says something like it, it doesn't explain it. [00:13:41] Speaker 02: The best example is the 627. [00:13:45] Speaker 02: activity. [00:13:46] Speaker 02: This conduct just didn't implicate the Adelphia bankruptcy in the 627 litigation. [00:13:49] Speaker 02: It just didn't. [00:13:51] Speaker 02: And yet the district court awarded all of those attorney's fees. [00:13:53] Speaker 02: There's nothing in the case that this, and it is also perfectly inconsistent with the district court's affirmative finding three times that we didn't litigate the case in bad faith. [00:14:03] Speaker 02: I don't understand how it is that you would say the case is pursued in good faith. [00:14:07] Speaker 02: And yet we're going to attribute all of the attorney's fees on the basis of the supposed combination of three acts. [00:14:13] Speaker 02: Again, just [00:14:14] Speaker 00: Do you challenge the amount of the attorney's fees on the basis that the judge did not make a thorough analysis whether the fees were reasonable or not? [00:14:23] Speaker 02: No, we have tried to minimize the kind of fact-bound appeals. [00:14:26] Speaker 02: Our point is attribution. [00:14:28] Speaker 02: And that is, you can't just categorically award all of the fees. [00:14:31] Speaker 01: You object to the fact that he made the decision on a MDL-wide basis. [00:14:36] Speaker 01: And I understand that MDLs aren't class actions. [00:14:39] Speaker 01: They only have to have one common question of lower fact. [00:14:43] Speaker 01: They are more, they maintain their disparate character as disparate cases, but the whole point is that certain things can be decided on across the board. [00:14:53] Speaker 01: So putting aside the 627, is there anything about at least applying the findings, whether they're right or wrong? [00:15:00] Speaker 01: to all the other cases in the MDL. [00:15:02] Speaker 02: There's nothing intrinsically wrong with applying it across the cases. [00:15:06] Speaker 02: So for example, if we did something that implicated all the cases, the district judge doesn't have to go one, two, three, four, five. [00:15:12] Speaker 02: Our point is that the district court didn't conclude and couldn't have concluded that the alleged instances of misconduct did infect the entire MDL or each of the constituent cases. [00:15:22] Speaker 02: So we give the example, and that is that two of the patents were revived. [00:15:26] Speaker 02: Two of the patents were the subject of the supposed foliation [00:15:29] Speaker 02: There was lots of patent litigation completely unrelated to those things that the defendants got their attorney's fees. [00:15:36] Speaker 02: So it's just a question of attribution. [00:15:37] Speaker 02: It's not intrinsic in the notion of it. [00:15:39] Speaker 00: How would the attribution be made through a load-start type calculation? [00:15:43] Speaker 02: Well, there are two different things that would happen. [00:15:45] Speaker 02: One is you would associate the supposed misconduct with work done by the defendant's lawyers. [00:15:51] Speaker 02: That's what we're concerned with. [00:15:53] Speaker 00: The only way to do that would be through a load-start calculation, right? [00:15:57] Speaker 00: at work attributed to particular functions or issues. [00:16:02] Speaker 02: That's correct, but it would still have to be tied to the misconduct. [00:16:04] Speaker 02: We don't object to the calculation, in this court, to the calculation of the amount of the fee. [00:16:10] Speaker 02: What we're saying is that if they said they spent a hundred hours... You don't object to how that amount was calculated. [00:16:15] Speaker 02: Right. [00:16:16] Speaker 02: What we object to is, just to give the simplest example, the judge, say, gave them a hundred hours worth of attorney's fees working on a particular issue. [00:16:23] Speaker 02: What we're saying is that you have to tie that in some way to the supposed misconduct. [00:16:28] Speaker 01: Okay, your time is up. [00:16:29] Speaker 01: We'll give you three minutes for rebuttal. [00:16:35] Speaker 01: Thank you. [00:16:36] Speaker 01: All right, Mr. O'Quinn. [00:16:41] Speaker 03: Thank you, Judge O'Malley. [00:16:42] Speaker 03: I may please the court. [00:16:43] Speaker 03: This case was found exceptional by a district court judge who's presided in more than 2,000 patent cases during which time he's apparently found a total of three to be exceptional. [00:16:52] Speaker 01: He did not abuse this discretion. [00:16:54] Speaker 01: Don't get me wrong. [00:16:54] Speaker 01: I love Judge Sleat. [00:16:55] Speaker 01: But I have never seen an opinion this short. [00:16:59] Speaker 03: Well, Judge O'Malley, let me refer you to this court's decision in integrated technologies versus Rudolph 629 federal appendix at 975, a report affirmed a finding of exceptionality that was five sentences long. [00:17:12] Speaker 03: And I realize that Judge Sleat's style here was to put this into footnotes. [00:17:16] Speaker 03: If you take those footnotes out, put it into text, double spaces, it ends up being that these all add up to about a 20 page opinion. [00:17:22] Speaker 01: I'm sorry, Judge Plager hates footnotes, I'll have to tell him that. [00:17:29] Speaker 03: Make it a 40 page opinion rather than... And I think that here, the district court didn't abuse its discretion in finding that this is a case that in the words of Octane [00:17:38] Speaker 03: Now Rembrandt's arguments on appeal, and you've heard them here today, are to try to consistently raise the bar. [00:17:45] Speaker 03: It conflates the standard for exceptionality with the standard for finding conduct to be independently sanctionable. [00:17:52] Speaker 03: And to be clear, there are no findings by the district court that this case was brought in good faith. [00:17:57] Speaker 03: The district court found that there wasn't enough bad faith to warrant [00:18:01] Speaker 01: the award for example of prejudgment interest, or that there wasn't that kind of bad faith. [00:18:14] Speaker 01: Now I'm thinking about it, so I'm going to add another sentence that says this is consistent with bad faith or not inconsistent with bad faith. [00:18:20] Speaker 03: Judge O'Malley, I don't think you'll find it anywhere in his opinion where he affirmatively says that there, in any of the opinions, where he affirmatively says that this was a case that was brought and proceeded in good faith or that was not in bad faith. [00:18:32] Speaker 01: No, but he says it was not in bad faith, right? [00:18:34] Speaker 03: He doesn't actually say that, I think, Judge O'Malley. [00:18:36] Speaker 03: When you look at what he specifically says, at most what he says is that [00:18:42] Speaker 03: There was not the, quote, kind of bad faith to warrant an award of prejudgment interest. [00:18:51] Speaker 03: But I don't recall that in any of the opinions that we're talking about that he says that there was no bad faith. [00:18:58] Speaker 03: And indeed, he does, as you know, specifically find that the evidence supports a finding of bad faith with respect to the document destruction. [00:19:06] Speaker 00: The district court found exceptionality on three [00:19:09] Speaker 00: different or distinct grounds, right? [00:19:11] Speaker 03: I think that's right, Judge Raina. [00:19:12] Speaker 00: Okay. [00:19:13] Speaker 00: So suppose we were to reverse on one of those grounds. [00:19:17] Speaker 00: Does that upset the weighing that the district court undertook and should we send that back for the court to look at again? [00:19:25] Speaker 03: Not entirely, Judge Raina. [00:19:27] Speaker 03: The district court says, and this is at Appendix 30, quote, if it had only been a single issue, perhaps the court's view would be different. [00:19:36] Speaker 03: But so I think that if this court were to upset two of the grounds on which the district court relied, that might give rise to a basis to remand or reweigh. [00:19:46] Speaker 03: But I don't think that just upsetting a simple point. [00:19:48] Speaker 00: That doesn't change the totality of the circumstances, the general finding of the totality of circumstances? [00:19:54] Speaker 03: Well, Judge Raina, obviously the totality of circumstances test is one that's undertaken on a case by case basis. [00:20:01] Speaker 03: And the district court has discretion to weigh the entirety of the circumstances, [00:20:05] Speaker 03: And I think that what Judge Sleet has said here is if an adjustment won, well, maybe I would reach a different decision. [00:20:12] Speaker 03: And so I think that if the court were to find that only one of these were unreasonable conduct, they don't need to be independently sanctionable conduct as Octane holds. [00:20:20] Speaker 00: But if these were percentages, it would be 30%. [00:20:23] Speaker 00: Let's say we find that the district court got it wrong on 30% of its general finding. [00:20:30] Speaker 00: Shouldn't that go back for additional? [00:20:32] Speaker 03: uh... for additional work once it was that first of all i don't think this work out wrong with respect to any of these and i'm happy to walk through them in detail one-by-one [00:20:41] Speaker 03: And second, and that's not what the district court said. [00:20:43] Speaker 03: What the district court said was, if it was only one, maybe I reached a determination. [00:20:47] Speaker 03: But I looked at the totality of the circumstances. [00:20:49] Speaker 03: And I think given the explicit statement by the district court that if you were to disagree or disagree around the margins with respect to just one, that that wouldn't be reason to send it back. [00:20:59] Speaker 03: I think at the end of the day, if you can find that this was still a reasonable exercise of the district court's discretion, then it should have been. [00:21:06] Speaker 00: In that regard, and to the questioning that I'm having with you, [00:21:10] Speaker 00: Then I want you to address the spoliation issue. [00:21:14] Speaker 03: Absolutely. [00:21:15] Speaker 03: I think this is a case of rampant document destruction and Rembrandt knew about it. [00:21:21] Speaker 03: It knew about it by its own admission in its brief by no later than June of 2006. [00:21:28] Speaker 03: And what does it do in June of 2006? [00:21:31] Speaker 03: It files two more lawsuits then. [00:21:33] Speaker 03: It finally files five more lawsuits after that. [00:21:36] Speaker 01: So even if you assume... Well, they didn't say that they knew about the destruction of documents, but they said that they knew that there wasn't a formal litigation hold, right? [00:21:44] Speaker 03: I think that they acknowledged that they knew about the destruction of documents, not at the time that they acknowledged [00:21:51] Speaker 03: I believe that they knew about the destruction of documents as of June of 2006, and certainly the evidence shows that they should have known about the destruction of documents earlier than that if they in fact didn't. [00:22:04] Speaker 03: For example, you have the fact that Rembrandt's own lawyers, according to the pleadings that they filed, [00:22:11] Speaker 03: lawyers are visiting the warehouse that Mr. Goldstein was talking about in January of 2006. [00:22:16] Speaker 03: And so they certainly should have been aware of the document description. [00:22:20] Speaker 01: Was all of this about the state of the documents disclosed to you during the discovery in the Merritt's case or not until [00:22:28] Speaker 01: discovery relating to the fees. [00:22:30] Speaker 03: So there wasn't a separate discovery vis-a-vis the fees, Judge O'Malley. [00:22:34] Speaker 03: What happened here in terms of the timeline? [00:22:35] Speaker 03: And the timeline belies the story that Rembrandt had tried to tell on appeal, that they got an adverse claim construction and then decided, you know what, let's just walk away from this. [00:22:44] Speaker 03: They got an adverse claim construction in November of 2008. [00:22:47] Speaker 03: A covenant not to sue doesn't arrive until July of 2009 after the district court has granted us leave to seek sanctions for document destruction [00:22:58] Speaker 03: based on what we had discovered during fact discovery. [00:23:02] Speaker 03: And it's not until I believe it is either the spring or summer of 2008 that the warehouse that Mr. Goldstein was referencing, the existence of the warehouse was even disclosed to us. [00:23:15] Speaker 03: And so a lot of the discovery that took place [00:23:18] Speaker 03: in which we discovered what had been destroyed took place in that 2008-2009 time period. [00:23:24] Speaker 03: It was all part and parcel of the discovery that was going on in the case. [00:23:28] Speaker 03: They were still opposing our motion for summary judgment on the grounds that we didn't have documents [00:23:33] Speaker 03: even as late as June of 2009, at the same time that we were discovering and learning and filing a motion with the district court related to the document destruction. [00:23:43] Speaker 01: And to be clear... But was there any effort during the course of the merits discovery to hide the fact that some of these were destroyed at the time of these purchases? [00:23:53] Speaker 03: Well, I'll put it this way. [00:23:55] Speaker 03: As I understand it, they knew the document destruction had occurred by their litigation partner. [00:24:01] Speaker 03: And that litigation partner is not a word that we use. [00:24:03] Speaker 03: That's the word of Rembrandt's general counsel to describe the relationship with Paradigm. [00:24:08] Speaker 03: They know about that as of at least June of 2006. [00:24:11] Speaker 00: Was that Mr. Bremer? [00:24:14] Speaker 03: No, the general counselor is Mr. Mealy. [00:24:17] Speaker 03: Mr. Gremer was with Paradigm and then was one of the ones who entered into the relationship with Rembrandt that involved the contingency payment and in fact was compensated for his time as a fact witness. [00:24:29] Speaker 03: And you can see that at appendix 2796. [00:24:32] Speaker 03: But to come back to the question you were asking, Judge O'Malley, at no time in 2006, when they're apparently aware of the destruction that has occurred, did they disclose to us that it has occurred [00:24:46] Speaker 03: And indeed, in that time period and in the years that follow, their own lawyers, Rembrandt's own lawyers, are the ones handling discovery requests and subpoenas that are being issued to Zone and to Paradigm. [00:25:01] Speaker 03: And you can see that in appendix 3709 and appendix 3742, just to take the two examples from the year 2006. [00:25:09] Speaker 03: So this idea... But Zone wasn't a litigation partner. [00:25:11] Speaker 01: I mean, Zone just didn't want anything to do with it. [00:25:13] Speaker 03: Well, Judge O'Malley, that's their characterization of things on appeal. [00:25:16] Speaker 03: If you go back and look at the declarations that were filed in the 2008 time period talking about the relationship between Paradigm and, excuse me, the relationship between Paradigm and Rembrandt, and you can see this in Appendix 3608, they don't draw any pre- and post-Zone distinction. [00:25:38] Speaker 03: And Paradigm continued to exist. [00:25:40] Speaker 03: It just became a wholly owned subsidiary of Zone. [00:25:43] Speaker 03: And the fact is, on the issue of document destruction, if you look at appendix 1971 to 74, you look at appendix 2397, you have two separate lawyers from Rembrandt who say that no one at Rembrandt asked Zone or Paradigm to preserve customer agreements, shipping records, product literature, and product marketing relating to embodiments. [00:26:05] Speaker 03: And Mr. Mealy, the general counsel of Rembrandt, says that he didn't recall that a written document retention notice was sent to Paradigm or Zone and didn't know if anyone else had sent it. [00:26:16] Speaker 03: And what did they rely on? [00:26:18] Speaker 01: Was there an on-sale defense that had been asserted in this case? [00:26:20] Speaker 03: So Judge O'Malley, there were on-sale defenses that were ultimately asserted in this case with respect to two of the patents. [00:26:27] Speaker 03: But the suggestion that this document destruction issue was limited just to those two patents and had no ramifications with respect to the rest of the case just simply doesn't hold water. [00:26:38] Speaker 03: Rembrandt said in interrogatory responses, you can see this in appendix 2552, that it didn't have any technical documents for products relating to the 903, 444, 631, and 761 patents. [00:26:51] Speaker 03: Now that's somewhat implausible given that [00:26:55] Speaker 03: paradigm, of course, was in the business of developing products, and it's spitting off patents as it's developing products. [00:27:01] Speaker 03: And the idea that there are no documents available with respect to four or five of these patents strongly suggests that the reason they're not is because they don't exist. [00:27:11] Speaker 03: And obviously the burden should be on them, not us. [00:27:14] Speaker 01: Well, how do we know whether or not each piece of misconduct applies across the board without any kind of findings as to apportionment? [00:27:25] Speaker 03: So a couple of points on that Judge O'Malley. [00:27:28] Speaker 03: So first, I think you can look at, and certainly the district court had before it, what were the categories of documents that we know from the control sheets. [00:27:37] Speaker 03: We have a number of these control sheets, and some of them are in the appendix that tell you what was the type of things in the boxes. [00:27:44] Speaker 03: And no, we can't go back and trace them to specific patents. [00:27:47] Speaker 03: And I don't know that the district court would have been able to go back and trace them to specific patents because the boxes themselves obviously don't exist. [00:27:55] Speaker 03: But what we do know is that they are things that relate to licensing, to offers for sale, to royalty agreements, to the issues of standardization. [00:28:06] Speaker 03: And of course, you have to remember, taking a step back, this was a lawsuit brought against the entire cable industry. [00:28:12] Speaker 03: seeking to enjoin the entire cable industry from offering high-speed internet service. [00:28:18] Speaker 03: And they were arguing that it was because they had these patents that read on a standard. [00:28:22] Speaker 03: Obviously, there were various estoppel issues and so forth that would present themselves vis-a-vis the standard. [00:28:26] Speaker 03: And we know that there are boxes that would have related to that, as well as to patent prosecution. [00:28:31] Speaker 03: And you can see that appendix 2559 to, excuse me, 2557 to 60. [00:28:38] Speaker 03: And with the question of the 627 patent, [00:28:41] Speaker 03: Now, just to be clear, that only involves about 5% of the fees that were issued. [00:28:44] Speaker 03: If you think that the 627 should be carved out, that's not a reason to send this whole thing back. [00:28:48] Speaker 03: But there's no reason to carve it out because there are no question that there are documents that were destroyed during the relevant prior art time period that relates to the 627. [00:29:01] Speaker 01: But you would be asking us to make a finding of fact on that regard, right? [00:29:04] Speaker 03: I don't think so, Judge O'Malley. [00:29:09] Speaker 03: What I'm just pointing out is that what is the evidence that the district court had before it? [00:29:15] Speaker 03: And the district court, among the things that the district court had before it is the fact that records that were destroyed as of March of 2006 are from the critical prior time period for the 627 patent. [00:29:28] Speaker 03: And that's addressed in Appendix 3619. [00:29:32] Speaker 03: I'm not sure this is in the record, but I can tell you that Mr. Hoesmeyer, who was one of the people who was part of the improper payments, he was specifically disclosed in initial disclosures for the 627 patent on January 14, 2008. [00:29:49] Speaker 03: So the idea that the conduct here doesn't relate to the entirety of the issues, I think, is incorrect, and in any event, [00:29:59] Speaker 03: This court has made clear that Section 285 doesn't bar the trial court from awarding fees for an entire case. [00:30:08] Speaker 03: And in model of power versus O2 micro, this court specifically rejects the argument that fees must be, quote, traceable solely to the exceptional behavior. [00:30:20] Speaker 00: So Therese has discussed this for an entire case. [00:30:22] Speaker 00: Aren't these consolidated cases we're looking at here? [00:30:25] Speaker 03: So Judge Raina, these are cases that were consolidated for pre-trial purposes. [00:30:30] Speaker 03: But at the end of the day, number one, that's an issue that has been entirely waived. [00:30:34] Speaker 03: It was not raised by them until after the district court found the case to be exceptional. [00:30:40] Speaker 03: And it's not like there was some change in the law in which they could say, ah, well, because these are an MDL, you should now approach this differently. [00:30:47] Speaker 01: Right. [00:30:47] Speaker 01: And Mr. Goldstein just said he's OK with that, that it can be on an MDL-wide basis as long as you apportion the [00:30:54] Speaker 01: award to the activities related to the improper conduct. [00:30:59] Speaker 03: And I think Judge O'Malley, that gets back to this court's decision in monolithic power versus O2 micro. [00:31:05] Speaker 03: And in monolithic power, this court affirmed an award of attorney's fees that wasn't just for that district court proceeding, but in fact was for a related, encompassed a related [00:31:14] Speaker 03: ITC proceeding because the conduct permeated the entire case. [00:31:24] Speaker 03: And we specifically argued, just to be clear. [00:31:27] Speaker 01: Was that all ordered under 285? [00:31:30] Speaker 03: I believe that it was, Judge O'Malley. [00:31:32] Speaker 03: And we specifically argued to the district court, in briefing in the district court, that this case was analogous to monolithic power versus O2 micro, and that that is why that we should be entitled to a full award of fees and costs for every stage of the litigation, rather than a limited subset because of Rembrandt's rampant misconduct. [00:31:51] Speaker 03: And the district court obviously agreed. [00:31:53] Speaker 03: That was the argument before it. [00:31:54] Speaker 03: It obviously agreed with it. [00:31:56] Speaker 03: But the district court didn't give us everything that we asked for, to be clear. [00:32:00] Speaker 03: Well, in fairness, Judge O'Malley, he really doesn't. [00:32:02] Speaker 03: Number one, he rejects the request for expert fees. [00:32:05] Speaker 03: Number two, he specifically goes through and parses and says, with respect to paralegal time, you can't have time that would be for clerical work. [00:32:13] Speaker 00: It seems odd that Judge Slee would make that type of accounting at that detail, but you had not answered the more, the bigger question and have an accounting as to the different cases. [00:32:28] Speaker 00: I mean, some of the cases were [00:32:29] Speaker 00: were dismissed. [00:32:30] Speaker 00: And so is it that error? [00:32:34] Speaker 03: So first of all, I don't think that there's any error for partly the reasons that Rembrandt's counsel has conceded. [00:32:40] Speaker 03: You certainly could proceed on an MDL-wide basis because there are issues that are common. [00:32:47] Speaker 03: And here, there are clearly issues that are common across the MDL. [00:32:51] Speaker 03: And second, the reason that the district court didn't go on an MDL-by-MDL basis [00:32:57] Speaker 03: is because that wasn't the argument that they made. [00:33:00] Speaker 03: The argument that they made was, first of all, they didn't oppose it being considered... They can't make the argument until they know what the court's going to do. [00:33:09] Speaker 03: Well, Judge Raina, I think that once the request for attorney's fees is in, and it is before him as an entire MDL, that was the moment for them to speak up and to say, Judge, you can't consider this on an MDL-wide basis. [00:33:22] Speaker 03: And they didn't do it until they had the remorse of the fact that the district court had ruled against them and found that the entire matter was exceptional. [00:33:30] Speaker 01: Let me ask you one question before you sit down, because you're already over. [00:33:33] Speaker 01: I gave you a little bit more, because I'm giving Mr. Goldstein some rebuttal back. [00:33:37] Speaker 01: On the issue of inequitable conduct, even if I accept the fact that there was inequitable conduct by players at an earlier point in time, what is your evidence that Rembrandt was aware of the inequitable conduct? [00:33:51] Speaker 03: Sure. [00:33:51] Speaker 03: Two points on that, Judge Malin. [00:33:52] Speaker 03: First, as alluded to in a question that Judge Raina asked, and a point that Mr. Goldstein has made today, there was extensive due diligence by Rembrandt. [00:34:04] Speaker 03: And indeed, if you look in the record at appendix [00:34:06] Speaker 03: 578 and 579, Mr. Bremer specifically stated that the files that related to this whole revival exercise were in the files of common interest and so should have been available. [00:34:19] Speaker 03: But second, and more specifically, if you look at appendix 320, this is an email from Mr. Bremer to Mr. Mealy. [00:34:30] Speaker 03: It's in August of 2006, so yes, it is after the cases have initially been filed. [00:34:34] Speaker 03: but it is an email that includes the list of patents. [00:34:38] Speaker 03: And it has in it, identifies specifically, five patents that say abandoned. [00:34:44] Speaker 03: And if you look at appendix 329, it says in all caps, with respect to another patent, plan to abandon soon. [00:34:54] Speaker 03: Now, when you have this document, it's not part of some large random discovery. [00:34:59] Speaker 03: It is a specific email in response to a specific request from Mr. Mealy to Mr. Grimmer. [00:35:04] Speaker 03: And it is identifying patents, including one of the patents in suit as having been abandoned. [00:35:09] Speaker 03: And we know it was then the subject of discussion within Rembrandt because Mr. Mealy testified in Appendix 2456 that, quote, people within Rembrandt discussed the 858 payment history, end quote. [00:35:23] Speaker 03: then they are surely on notice. [00:35:25] Speaker 03: And it would have been a very easy matter for him to have drilled down on this, assuming he didn't, in the context of discussing it with Mr. Bremer and Mr. Hoesmeyer, who at that point are on Rembrandt's payroll. [00:35:37] Speaker 01: OK. [00:35:37] Speaker 03: Thank you. [00:35:38] Speaker 03: Thank you, Judge O'Malley. [00:35:39] Speaker 01: To keep things even, I'll give you four minutes, Mr. Goldstein. [00:35:46] Speaker 01: I'm a mom, after all. [00:35:47] Speaker 02: Pure fairness. [00:35:50] Speaker 02: Your Honor, so just to start this publication, here's the big picture or the detail that I think is being missed in this. [00:35:56] Speaker 02: And that is, the other side wants to leave the impression that there was a body of documents that was being held by Paradigm that was highly relevant to this litigation. [00:36:04] Speaker 02: That is not what is going on here. [00:36:06] Speaker 02: Paradigm is a massive company with a massive intellectual property portfolio. [00:36:10] Speaker 02: Publicly, it's a public company. [00:36:11] Speaker 02: It has an enormous amount of materials. [00:36:14] Speaker 02: There's a general document in construction this report affirmatively finds. [00:36:18] Speaker 00: There's nothing in particular... What about the email message that Councillor Quinn was referring to? [00:36:24] Speaker 02: The one that we were just referring to. [00:36:27] Speaker 02: The other one you were just talking about? [00:36:30] Speaker 02: Okay, that is about inequitable conduct. [00:36:33] Speaker 02: I just want to say that there is a large amount of material that is provided to us by paradigm that we disclose. [00:36:42] Speaker 02: We subsequently learned about this general document destruction, and we immediately decided to stop it and remove all of the materials. [00:36:49] Speaker 02: This isn't a case in which we were either aware of the fact that it was occurring, that there was a distribution. [00:36:55] Speaker 01: It's coming over the microphone apparently. [00:37:00] Speaker 01: They're not laughing at you. [00:37:02] Speaker 00: Can one of our clerks go over there and check in the audiovisual booth? [00:37:06] Speaker 02: Do you want me to continue or just hold on? [00:37:10] Speaker 01: I'll just wait a second. [00:37:11] Speaker 01: Mr. Goldstein, you were talking about the spoliation before you wanted to segue into the other issues. [00:37:17] Speaker 02: Exactly. [00:37:17] Speaker 02: So just with respect to spoliation, don't get the misimpression that this was a discrete body of documents that was supposed to be highly relevant, or was in fact the principal repository of documents that was relevant to the case. [00:37:28] Speaker 02: There was an enormous amount of discovery, but hardly seven of us. [00:37:31] Speaker 02: If you're trying to determine whether it's going to be a good faith or not, which is going to be at the heart of exfoliation, and whether it's an exceptional case, you look at what we did as soon as we learned about it. [00:37:42] Speaker 02: If one that we disagree, respectfully, but if you have a concern about, we should have been more aggressive in telling them, be sure don't destroy anything beyond what we sent them in the contractual agreement, you still look as soon as we find out. [00:37:54] Speaker 02: We send an express instruction, stop. [00:37:56] Speaker 02: preserve, give us all of the relevant materials. [00:37:59] Speaker 02: And that tells you about our intent, which is the relevant question with respect to whether it's an exception. [00:38:04] Speaker 01: But how could anybody who revives patents and thinks there might be some value to these patents and then gets into a deal with you guys ultimately believe that [00:38:17] Speaker 01: You don't have to save all the technical documents relating to that. [00:38:20] Speaker 02: Well, Your Honor, I think that what was going on was not some determination by the people involved in the case. [00:38:25] Speaker 02: Remember, zone acquires paradigm and institutes a general document destruction. [00:38:29] Speaker 02: It's not like there were two different bodies of documents, those related to R&D that were held in that office, all were produced. [00:38:36] Speaker 02: We're talking about a massive warehouse, completely unrelated to the case that just happened. [00:38:42] Speaker 02: Should it not have happened, it should not have happened. [00:38:44] Speaker 02: That's not the question. [00:38:58] Speaker 02: Well, abandonment as opposed to a lapse. [00:39:14] Speaker 01: Seems to me like a material difference. [00:39:16] Speaker 02: Your Honor, I mean, that reads an awful lot into one word in one cell of a spreadsheet. [00:39:21] Speaker 02: I mean, if there was some concrete discussion of this, I mean, if you and I were having a discussion as lawyers of terms of art, I mean, there's a cell in a spreadsheet that says, abandoned. [00:39:31] Speaker 02: And remember, it's not abandoned. [00:39:32] Speaker 02: We would agree. [00:39:33] Speaker 02: Any sense different from network signatures. [00:39:36] Speaker 02: Network signatures, you decide there's a commercial interest. [00:39:38] Speaker 02: You learn that there's commercial interest. [00:39:40] Speaker 02: It was clearly abandoned in that case. [00:39:42] Speaker 02: And for this court to decide network signatures and then determine that these facts, and we weren't even involved in the revival, it happened before we even came on the scene, to hold that that's a Section 285 case. [00:39:54] Speaker 00: But it seems like when they were abandoned, they were intentionally abandoned. [00:39:58] Speaker 02: Well, that's true in network signatures. [00:40:00] Speaker 00: But then when they were revived, the reason stated for revival was that they were inadvertently led to lapse. [00:40:09] Speaker 02: Exactly the same thing happens in network signatures. [00:40:10] Speaker 02: exactly. [00:40:11] Speaker 02: It's the same form and it's the same reason. [00:40:15] Speaker 02: And remember, that cell doesn't give us any reason to believe there are lots of reasons to revive an abandoned patent that are perfectly lawful. [00:40:21] Speaker 02: Nothing puts us on additional risk. [00:40:23] Speaker 01: Thank you. [00:40:23] Speaker 01: Okay. [00:40:24] Speaker 01: Thank you. [00:40:24] Speaker 01: And I apologize again to counsel.