[00:00:01] Speaker 03: May it please the court, Brian Matsui for Bard. [00:00:04] Speaker 03: I'd like to try to save three minutes for rebuttal. [00:00:07] Speaker 03: The district court's judgment on patent misuse in quantum erotic should be reversed. [00:00:12] Speaker 03: For patent misuse, the district court took an expansive view of Berlotte and Kimball and failed to heed this court's admonition not to expand the doctrine. [00:00:21] Speaker 03: And for Quantum Marriott, the district court erred when it treated Bard's claim for Quantum Marriott as if it was one for promissory estoppel, despite the fact that this court in Kimball and the Seventh Circuit have said that the two are not the same. [00:00:36] Speaker 03: Now, if I could start with Berlotte, the minimum payments here are nothing like those royalty provisions courts have previously held are unlawful as patent misuse. [00:00:46] Speaker 03: If we look at Kimball, for example, that was a 5% ongoing royalty in perpetuity. [00:00:52] Speaker 03: Those provisions were explicit that they were compensating a patent owner for the post expiration use of a patent. [00:01:01] Speaker 03: But Kimball makes clear that just because a patent extends [00:01:06] Speaker 03: payments beyond the patent's expiration doesn't mean that you have patent misuse. [00:01:12] Speaker 03: Kimball said that there are many ways around Berlotte, and it said that [00:01:18] Speaker 03: All the decision bars are royalties for using an invention after it moved into the public domain. [00:01:24] Speaker 03: Now. [00:01:25] Speaker 04: Can I ask, it seems like that language you just quoted suggests that we're supposed to look at the agreement on its face. [00:01:33] Speaker 04: But somehow this case took a tour into the party's intent in a trial. [00:01:37] Speaker 04: And I'm wondering how we got down a factual inquiry into intent instead of just a facial look at the agreement. [00:01:45] Speaker 03: Well, I think that that's the case because the parties moved on summary judgment and the court decided that the the agreement was ambiguous. [00:01:53] Speaker 03: And so that's why you had [00:01:54] Speaker 03: a trial on the party's intent. [00:01:56] Speaker 03: But I think that ultimately what you're looking at here is an interpretation of the contract, which ultimately is a legal conclusion. [00:02:03] Speaker 02: And I think that under Kimball... Do you agree then, do you agree that the contract itself is clear and unambiguous, or do you believe that, or is your position that it is ambiguous? [00:02:16] Speaker 03: I think that it's silent and so that you can characterize it as ambiguous, but I think that when you have a contract that is silent as to what these minimum payments are for, that is not enough to show that there's patent misuse. [00:02:30] Speaker 03: I think courts have been very clear that you don't construe a contract in a way that makes it unenforceable. [00:02:37] Speaker 02: But if we took your position, [00:02:41] Speaker 02: that what we're looking at is an ambiguous contract. [00:02:47] Speaker 02: I think you go down a path that maybe is not so favorable to your position, is it? [00:02:52] Speaker 03: I think that, certainly I think that this can be resolved on the intrinsic record alone, because if you look at the agreement, there's nothing in the agreement that affirmatively links the minimum payments to the ongoing use of U.S. [00:03:05] Speaker 03: products after the patent expires, and so that would be a way to period stop right there. [00:03:10] Speaker 03: I think that also when you look at certain provisions in the licensing agreement, like section 3.1 and section 3.2, it makes clear that you have use royalties for using the 135 patent that extend only until the patent expires. [00:03:27] Speaker 00: And after that... But the minimum royalty payments don't go down or change. [00:03:31] Speaker 00: after the patent expires. [00:03:33] Speaker 03: That's true. [00:03:34] Speaker 03: They don't go down or change after the patent expires. [00:03:38] Speaker 03: And the only thing that's applied to them then are the Canadian royalties, which go until the Canadian patent expires. [00:03:46] Speaker 03: That's how 3.1 operates, that it has a use provision. [00:03:50] Speaker 03: So both the US patent and the Canadian patent [00:03:53] Speaker 03: have for use payments that are then applied to the minimum payments. [00:03:56] Speaker 02: So we could read this agreement as saying that the payments were for whatever was still in effect, in this case, the Canadian patents, correct? [00:04:06] Speaker 03: You could read that. [00:04:07] Speaker 03: I mean, that's when you look at the agreement. [00:04:09] Speaker 03: It's certainly a way to read the agreement. [00:04:11] Speaker 03: I think that the important point, though, is that when you have an agreement like this that is completely silent as to what these minimum payments are for, you don't then presume [00:04:22] Speaker 03: that you have patent misuse. [00:04:24] Speaker 03: Because as this court said in Zilla, you don't look for additional ways to expand Berlotte. [00:04:29] Speaker 03: As the Supreme Court said in Kimball, that there are many ways around Berlotte. [00:04:33] Speaker 03: And it only precludes one thing. [00:04:34] Speaker 03: It only precludes these ongoing for-use royalties after the patent has entered into the public domain. [00:04:42] Speaker 04: And so what do you think these minimum payments were for? [00:04:46] Speaker 04: I mean, is your argument that they were just spreading the US royalties? [00:04:51] Speaker 04: across time, and so they go into the time later, or how do you explain what they were for? [00:04:57] Speaker 03: I mean, I think that when you look at the agreement, it's very clear that, or when you look at the entire record here, it's very clear that it's hard to sort of dissect what these minimum payments were entirely for. [00:05:10] Speaker 03: It's very clear that they were meant to capture some past use. [00:05:14] Speaker 03: of bi-atrium of Bard's patent rights, and they were also meant to capture some aspect of use. [00:05:22] Speaker 02: Counsel, if that's the case, then you lose, right? [00:05:24] Speaker 03: No, we don't lose your honor. [00:05:26] Speaker 00: Isn't it your argument that it doesn't matter what was intended? [00:05:29] Speaker 00: If the plain language on its face does not clearly articulate payment [00:05:35] Speaker 00: for an expired patent. [00:05:37] Speaker 00: That's all under Brulot. [00:05:38] Speaker 00: I mean, this would be different if we're talking about a commercial dispute between the parties with respect to the enforceability of any one of these provisions. [00:05:44] Speaker 00: But for Brulot purposes, it doesn't matter what the intent was. [00:05:48] Speaker 03: I think that's right. [00:05:49] Speaker 03: All that matters at the end of the day is when you look at this agreement, what was these minimum payments, these payments that were after the patent expired, what were they [00:06:00] Speaker 03: compensating the party for. [00:06:03] Speaker 03: And here, there's just no indication that this was meant to sort of compensate somebody for. [00:06:09] Speaker 00: But why do you have to make that argument? [00:06:12] Speaker 00: I think I'm confused by your sort of toggling back and forth between the plain language without really expanding Brulot makes it clear that the minimum payments would be what they are regardless, but then you're also saying [00:06:28] Speaker 00: that they did account for the U.S. [00:06:31] Speaker 00: patent sort of expiring and coming out. [00:06:34] Speaker 00: So I don't know why you need the second argument. [00:06:37] Speaker 03: We don't need the second argument, Your Honor, and I think that what I'm sort of reacting to the fact that [00:06:42] Speaker 03: There was a trial in this case on this provision and the district court made certain determinations. [00:06:51] Speaker 02: We don't have to get there. [00:06:53] Speaker 02: If we look at the contract and the contract is clear by its terms, we don't have to get beyond that. [00:06:59] Speaker 02: We don't have to look at extrinsic evidence. [00:07:01] Speaker 02: We just will look at the contract itself and can it be read in this way? [00:07:05] Speaker 03: Yes, it can be read in that way, Your Honor. [00:07:07] Speaker 03: And I think that also if we look at the last patent rule, for example, that the Supreme Court made clear about in Kimball, it said that under Bullock, royalties may run until the latest running patent covered under the Patent Agreement expires. [00:07:25] Speaker 03: And that's precisely what we have here. [00:07:27] Speaker 03: We have royalties [00:07:28] Speaker 03: in the form of minimum payments that are running until the last patent expires and here the Canadian patent. [00:07:35] Speaker 03: And so I think that when you just look at the agreement itself, the language of the agreement itself, the court doesn't need to go any farther. [00:07:42] Speaker 03: I'm merely reacting to the fact that, you know, [00:07:45] Speaker 03: If you did get to the extrinsic evidence, I still don't think that it points to showing that there is patent misuse when you look at the negotiating history. [00:07:55] Speaker 02: But I think that when you just look at the... Well, Council, it sounds like there is by your admissions today, isn't it? [00:08:01] Speaker 02: You're paying for sort of past... [00:08:04] Speaker 02: past products or so. [00:08:08] Speaker 02: I guess that's what I understood you to say earlier. [00:08:11] Speaker 03: Well, see, I don't understand. [00:08:13] Speaker 03: Yes, Your Honor, but I would say that the minimum payments could be many things, but that doesn't still demonstrate that those minimum payments, when you're talking about past infringement damages, for example, [00:08:24] Speaker 03: That is not something that would be the ongoing payments for the ongoing use of a patent after it expired. [00:08:33] Speaker 03: And I think that, you know, I know that we don't think, I don't think that it's necessary that we look at this extrinsic evidence, but when you look at what the negotiating history was, what Bard wanted was it wanted to basically get [00:08:45] Speaker 03: a per use royalty that would have ended in 2019. [00:08:48] Speaker 03: And the minimum payments from negotiating history that the district court looked at could be said to just be a proxy for that. [00:08:56] Speaker 03: And that's what the district court found. [00:08:58] Speaker 03: And that's a proxy then for something that would end in 2019. [00:09:00] Speaker 03: It doesn't demonstrate that you would have patent misuse, that this would be compensating [00:09:08] Speaker 03: barred for the post-expiration use of the patent. [00:09:12] Speaker 03: And so I'm saying that is like, even if we get to the extrinsic evidence, we're still in a situation where we still wouldn't have patent misuse. [00:09:23] Speaker 03: Lastly, I'd just like to turn to quantum error, too. [00:09:25] Speaker 03: And this is our backup argument, too, if the court were to affirm the district court on patent misuse. [00:09:33] Speaker 03: We think that the district court got it wrong here. [00:09:37] Speaker 03: our quantum meruit argument as if it was the same as a promissory estoppel one. [00:09:42] Speaker 03: But this court in Kimball noted that you can have a quantum meruit claim if there is patent misuse, that you're just trying to put the party basically [00:09:54] Speaker 03: in a position in which it gets its fair market value. [00:09:58] Speaker 03: And so you're not actually trying to enforce a promise in that situation. [00:10:02] Speaker 03: And the district court treated the two of those the same. [00:10:05] Speaker 03: And so in the event that the court were to determine to affirm patent misuse, it should still send it back on quantum error to determine what would be the fair market value be of what Bard provided to Atrium over the course of its agreement. [00:10:22] Speaker 03: If there are no further questions, I'd like to reserve the rest of my time for rebuttal. [00:10:41] Speaker 01: Good morning, Your Honor, and may it please the Court. [00:10:44] Speaker 01: First, apologizing because I'm wearing jeans. [00:10:47] Speaker 01: I had torn my suit pants on the way out of my hotel room this morning. [00:10:50] Speaker 04: I didn't even notice, but thank you for the apology. [00:10:52] Speaker 04: No problem. [00:10:53] Speaker 01: Hopefully not a bad omen for our case. [00:10:55] Speaker 01: I've done that before. [00:10:59] Speaker 01: So I'll start with the patent misuse issue. [00:11:03] Speaker 01: Your Honors were asking questions about whether or not you simply look at the language of the agreement, and that's it, and there's nothing else to be considered. [00:11:11] Speaker 01: We moved for summary judgment early in this case, saying that the language of the license agreement itself supports that there's patent misuse. [00:11:20] Speaker 01: And I'll turn to that language in a second. [00:11:22] Speaker 01: The reason the district court denied summary judgment, he quoted this court in Zilla. [00:11:27] Speaker 01: which says that we have to look at what Zilla is paying royalties for and under what conditions its obligation to do so is lawful. [00:11:36] Speaker 01: So the court had to figure out what does that minimum royalty provision mean? [00:11:41] Speaker 04: The thing that I don't understand, though, is we have Kimball after Zilla. [00:11:45] Speaker 04: So Kimball says from the Supreme Court, the language that your opposing counsel quoted, [00:11:51] Speaker 04: you can basically get around this. [00:11:53] Speaker 04: There are ways to get around this. [00:11:55] Speaker 04: And so if the whole notion that you can get around it seems to suggest that [00:12:00] Speaker 04: We can't really have an inquiry into intent into whether you're trying to get around something because the court says you can. [00:12:05] Speaker 01: Yes, Your Honor. [00:12:07] Speaker 01: It's totally possible to get around it. [00:12:08] Speaker 01: And that's what we held this entire trial about. [00:12:11] Speaker 01: It was, what does the minimum royalties provision mean? [00:12:14] Speaker 01: The judge wanted to see, well, were the parties contemplating a way of actually getting around it? [00:12:19] Speaker 01: And the way to get around it is exactly what Broulat and what Kimball say. [00:12:22] Speaker 01: You take all these payments during the proper term of the patent. [00:12:26] Speaker 01: Here, the patent expired in 2019. [00:12:28] Speaker 01: So you would be accruing royalties. [00:12:31] Speaker 01: You'd be taking this big pool of money and then spreading that out over the longer term. [00:12:36] Speaker 01: That's not what happened here. [00:12:37] Speaker 01: The judge held an entire trial about the party's intent. [00:12:41] Speaker 04: But why can't we just look at the face of the agreement and say, it looks like they were spreading it out? [00:12:48] Speaker 00: You absolutely- And maybe you should turn to the plain language. [00:12:51] Speaker 00: To Judge Friedland's point, I think the statement that you made at the outset, which is I'm going [00:12:56] Speaker 00: point to the language that on its face establishes the very point that you're trying to make would be helpful. [00:13:01] Speaker 01: Yes, absolutely. [00:13:02] Speaker 01: And starting with that language, there's nothing in the language that says minimum royalties are a deferred payment from 2011 to 2019. [00:13:09] Speaker 01: It just doesn't say that at all. [00:13:11] Speaker 04: But what in Kimball says you have to say that in the contract? [00:13:15] Speaker 04: Why can't you just have something that might be that? [00:13:21] Speaker 04: Does Kimball say that you have to explain in the agreement the reason we're doing this is because we're trying to spread out the payments? [00:13:29] Speaker 01: Kimball doesn't say either way. [00:13:32] Speaker 01: Kimball just says, just like Zilla did, that you're supposed to figure out what are you paying royalties for? [00:13:38] Speaker 01: So that's why the judge held an entire bench trial to figure out what was atrium required to pay. [00:13:43] Speaker 02: Well, but your agreement says that it covers licensed products, correct? [00:13:48] Speaker 01: So the minimum royalties provision, it's undisputed between the parties. [00:13:55] Speaker 01: Within that minimum royalties, it is for ICAST. [00:13:58] Speaker 01: So there's a capital L, capital P licensed products. [00:14:02] Speaker 01: That is a defined term in the license agreement for the vascular products. [00:14:08] Speaker 01: So there's really two buckets of products. [00:14:10] Speaker 01: There's these vascular products, and then there's ICAST. [00:14:14] Speaker 01: It's undisputed. [00:14:16] Speaker 01: Undisputed, both sides agree that payment for ICAST is the core part of the minimum royalty. [00:14:22] Speaker 01: That's what the district court found. [00:14:24] Speaker 01: That's one of his key findings in fact, that within that minimum royalty, it is payment for the ICAST product. [00:14:31] Speaker 01: So let me walk through why the license agreement text itself supports that this is patent misuse. [00:14:38] Speaker 01: So starting with section 3.2, the title is minimum royalties. [00:14:43] Speaker 01: A royalty is a payment for the ability to use a patent. [00:14:47] Speaker 01: 3.2, again, does not expire in 2019. [00:14:50] Speaker 01: It is required to keep paying it out for another five years after the expiration of that patent. [00:14:56] Speaker 01: My colleague across the bench will be quick to point out that the royalty label isn't dispositive, and it's not. [00:15:02] Speaker 01: But it's certainly supportive. [00:15:04] Speaker 01: If the parties didn't think that the minimum royalties were a payment for a royalty, they could have called it something else. [00:15:10] Speaker 01: They could have called it a flat payment or something, but it's titled a minimum royalty. [00:15:15] Speaker 02: Next, if you look at... But it says only on sales in countries with outstanding patents. [00:15:21] Speaker 02: I thought that's what it said. [00:15:23] Speaker 01: So that's 3.1, that's the 15% royalty on the capital L, capital P licensed products, which is those vascular products. [00:15:32] Speaker 01: What happens in 3.2, which is the minimum royalty, there are two parts of it, 3.2A and 3.2B. [00:15:41] Speaker 01: Okay, 3.2A deals with ICAST getting this expanded approval. [00:15:46] Speaker 01: So ICAST was originally approved just for what's called tracheal bronchial uses, that's uses in the throat or the lungs, the windpipe really. [00:15:56] Speaker 01: So if Atrium had applied for an expanded approval, for vascular approval, [00:16:03] Speaker 01: If Atrium had received that vascular approval for ICAST, its sales would have gone through the roof, and it really wanted to get that vascular approval. [00:16:11] Speaker 01: If that happens, the agreement changes the ICAST product, which is on exhibit B to the license agreement, it changes the ICAST product [00:16:19] Speaker 01: from a non-vascular product into a vascular product, and minimum royalties cease. [00:16:26] Speaker 01: They go away. [00:16:26] Speaker 01: So basically, the sales of ICAST would go up, no more minimum royalties, and then ICAST becomes a licensed product, and under 3.1, payments would be made for ICAST until the expiration of the U.S. [00:16:40] Speaker 01: patent. [00:16:41] Speaker 01: That until the expiration of the U.S. [00:16:42] Speaker 01: patent language didn't make its way into 3.2, which is why we have a patent misuse problem. [00:16:47] Speaker 01: Same thing with 3.2b. [00:16:50] Speaker 01: If the original approval for ICAST, which was for tracheobronchial uses, if for some reason the FDA rescinded that and they took away all ability to sell ICAST, then minimum royalties, 3.2, the whole section goes away because then [00:17:06] Speaker 01: ICAST is off the market, and Atrium's not making any money on it, and there's no sales, and so there's no more minimum royalties. [00:17:13] Speaker 01: So it's clear from the text of 3.2 that it's tied to sales of ICAST. [00:17:21] Speaker 01: And again, there's no dispute that ICAST is what the minimum royalties were all about. [00:17:27] Speaker 01: The only dispute is whether... [00:17:30] Speaker 01: My counsel across the bench is saying, well, it was really for this pool of money from 2011 to 2019, and it's deferred. [00:17:38] Speaker 01: We're saying, no, it's ongoing. [00:17:40] Speaker 01: And the text of the language supports that it was ongoing. [00:17:44] Speaker 01: But in addition to that, the district court judge held an entire trial to try to figure out, OK, what has been... Go ahead. [00:17:53] Speaker 04: maybe this trial happened for nothing. [00:17:55] Speaker 04: So we're trying to back up and say, let's look at this agreement and figure out if it violates what Kimball is saying. [00:18:02] Speaker 04: And I guess I'm still having trouble understanding how when you look at this agreement, [00:18:07] Speaker 04: It doesn't, you can't explain it by, okay, there were all these contingencies, whether the FDA approval would happen, the parties had some negotiation in a black box and came out with some division of risk between them that had an amount of money and spread it out over the life of the patent. [00:18:24] Speaker 04: Why is that not a proper interpretation of what happened here and why is that improper under the Supreme Court's opinion? [00:18:30] Speaker 01: Because the license agreement itself says nothing about deferring payments whatsoever and the language [00:18:35] Speaker 01: 3.2 is clearly tied to the payment of a royalty and it's clearly tied to ICAS sales. [00:18:42] Speaker 01: The other side is not even disputing that it's tied to ICAS sales. [00:18:48] Speaker 04: But so it uses the word royalty, but you said that's not dispositive. [00:18:52] Speaker 01: It's not. [00:18:52] Speaker 01: But it's supportive. [00:18:53] Speaker 01: And the judge thought that there was an issue of fact here, which is why the district court judge wanted to figure out, what is this provision? [00:19:00] Speaker 01: He thought, like my colleague said, that the license agreement was ambiguous. [00:19:05] Speaker 01: So he wanted to figure out, OK. [00:19:07] Speaker 01: What were the parties negotiating here? [00:19:10] Speaker 01: What was the point of minimum royalties? [00:19:11] Speaker 01: And it was clear from all the testimony at trial that minimum royalties were payments for ongoing use of the ICAST product and the ability to sell ICAST on an ongoing basis. [00:19:24] Speaker 04: And to the extent, OK, so the Canadian sales, there are still Canadian sales. [00:19:29] Speaker 04: Now, I understand you're saying like this 15 million is way too much money for the Canadian sales. [00:19:34] Speaker 04: But what prevented the parties from essentially spreading out the payments by just using the Canadian sales, even if it's a ridiculous amount? [00:19:41] Speaker 04: What's wrong with that? [00:19:43] Speaker 01: That would have been perfectly appropriate if that's what happened. [00:19:46] Speaker 01: That there's no evidence at all that anyone was trying to have the minimum royalties for any part of the Canadian sales. [00:19:53] Speaker 01: All of the testimony is that the minimum royalties were for ICAST. [00:20:00] Speaker 01: And that's what the district court judge found. [00:20:01] Speaker 01: ICAST was the heart of the deal. [00:20:04] Speaker 01: Their witnesses said it's ICAST. [00:20:05] Speaker 01: Our witnesses said it's ICAST. [00:20:07] Speaker 01: There's no dispute on that point. [00:20:10] Speaker 01: And the language of the agreement, again, it's very supportive that it's ICAST. [00:20:15] Speaker 01: It's talking about the nonvascular products in 3.2A and 3.2B. [00:20:21] Speaker 01: It's only one nonvascular product. [00:20:23] Speaker 01: It's ICAST. [00:20:23] Speaker 01: That's on exhibit B to the license agreement. [00:20:28] Speaker 01: So, Your Honor, if I can turn to the testimony from trial. [00:20:33] Speaker 01: So testimony also supports that minimum royalties were payments for Atrium's ongoing right to sell ICAST. [00:20:41] Speaker 01: Mr. Schofield, who was Atrium's chief negotiator, [00:20:44] Speaker 01: stated that ICAST sales were part of what the $15 million minimum royalty was for. [00:20:48] Speaker 01: That's in the record at page 429. [00:20:52] Speaker 01: Mr. Krauss, who was Bard's chief negotiator, he agreed that what ended up happening in both the Gore case that Bard points to and in this case was that quarterly royalty payments were made for current sales. [00:21:09] Speaker 01: Mr. Krause also testified that $3.75 million a quarter was a way to get some money for ICAST being on the market, and that's in the record at page 537. [00:21:19] Speaker 01: There were also contemporaneous emails. [00:21:23] Speaker 01: Mr. Schofield had emailed Mr. Krause January 3, 2011, and this is in the supplemental record at page 85. [00:21:30] Speaker 01: In his email, he said that payment for royalties, and he's talking about the minimum royalties here, [00:21:36] Speaker 01: is as payment for royalties for past sales, in addition to royalties for current sales, would be applied to meet the $15 million minimum. [00:21:47] Speaker 01: And then in subsequent discussions with Bard, Bard never disputed that minimum royalties were for current sales, including current sales of ICAST. [00:21:55] Speaker 01: There's also ample evidence supporting the court's finding that no one ever discussed or contemplated making deferred payments. [00:22:03] Speaker 01: Mr. Krauss, again, that's Bard's chief negotiator, he said deferred royalties were never disclosed, never discussed. [00:22:12] Speaker 01: That's at 530 and 531 in the record. [00:22:15] Speaker 01: And then all of the atrium witnesses, Mr. Schofield, Mr. Karwaski, who was atrium COO, Mr. Carlton, who was one of the business leads, [00:22:25] Speaker 01: They all said that there was never any notion that atrium would somehow be deferring I cast royalties beyond 2019. [00:22:32] Speaker 01: In addition, and this is important for for several issues, including quantum Merowitz. [00:22:40] Speaker 01: There were internal BARD spreadsheets that show BARD was only expecting payment of the minimum royalties until 2019. [00:22:47] Speaker 01: They have a spreadsheet showing every year 15 million, 15 million, 15 million, and it ends 2019. [00:22:54] Speaker 01: That's in the supplemental record at 131 and 135. [00:22:59] Speaker 01: Also, this notion of deferred payments, which is really BARD's entire argument that they say, oh, it's a deferred payment. [00:23:06] Speaker 01: It doesn't make any sense within the structure of 3.2, because if Atrium had gotten FDA approval to sell ICAST with a vascular indication one day after the only US patent expires, then under the agreement, the minimum royalties end, and BARD would lose five years of these alleged deferred ICAST payments. [00:23:29] Speaker 01: BARD had no reason why it would agree to such a scenario where its deferred payments simply vanish. [00:23:35] Speaker 04: I mean, but everyone expected that the FDA approval would come much earlier, right? [00:23:40] Speaker 04: So if everyone was just operating under a mistaken understanding for this whole negotiation, it's a little hard to unwind. [00:23:49] Speaker 01: So if everyone is operating under this, and this is true, everyone did believe that it would be approximately two years and then Atrium would get FDA approval. [00:23:59] Speaker 01: All of that contemplates under this agreement that minimum royalties end and that the payments are made under 3.1, which is the 15% royalty. [00:24:11] Speaker 01: So and that that very point right there is undercuts their undercuts the quantum Meru at argument because for them to show for bar to show that they have a quantum Meru at claim They had to have an expectation that they were going to be getting paid this extra money after 2019 but they couldn't have had any expectation because everyone agrees that the expectation was going to be that there would be FDA approval for the vascular indication within two years and [00:24:41] Speaker 01: And so if that's the case, there's not going to be this big chunk of extra deferred payments after 2019. [00:24:51] Speaker 01: Your Honor, unless you have anything else, I'll sit. [00:24:55] Speaker 04: Thank you. [00:25:04] Speaker 03: Just a few points, Your Honors. [00:25:06] Speaker 03: First, under Kimball, the agreement doesn't need to say that these are for deferred payments. [00:25:12] Speaker 03: If there's patent misuse, the agreement needs to show that these payments are for the post-expiration use. [00:25:20] Speaker 03: The courts have said that they don't construe contracts in a way to insert a term that would make them unenforceable. [00:25:26] Speaker 03: And that's basically what Atrium's argument does here today. [00:25:29] Speaker 03: It takes an agreement that doesn't say that these are for-use royalties and wants to insert a term to make them unenforceable. [00:25:36] Speaker 03: And construing an agreement like this would undermine the policy favoring settlement. [00:25:40] Speaker 03: The parties were in a protracted dispute. [00:25:43] Speaker 03: They had filed a complaint. [00:25:44] Speaker 03: And this is the way that the parties settled the dispute. [00:25:48] Speaker 03: And it would undermine that policy to say now that, [00:25:51] Speaker 03: bar does not get the benefit of the bargain that it agreed to. [00:25:55] Speaker 03: Now, on the FDA approval part on section on 3.1 to 3.2 of the agreement, these were just contingencies that were negotiated into the agreement. [00:26:07] Speaker 03: Everybody knew that this license agreement was going to include [00:26:10] Speaker 03: both the U.S. [00:26:11] Speaker 03: and the Canadian patent. [00:26:13] Speaker 03: They knew about that months before they signed the agreement. [00:26:16] Speaker 03: They asked for the Canadian patent number. [00:26:18] Speaker 03: They got it. [00:26:19] Speaker 03: All these provisions about when the minimum payments would end were just contingencies based upon the fact that Atrium had assured that they would get FDA approval in one to two years, which they didn't do. [00:26:31] Speaker 03: There's no reason now to take away that benefit of the bargain for Bard [00:26:35] Speaker 03: when things just didn't turn out the way that people expected it to at the end. [00:26:41] Speaker 03: On the last patent rule, again, I just would reiterate that we have two patents here, an unexpired Canadian patent, and in that situation, Kimball makes clear that you can have the royalty continue until that last expiring patent. [00:26:57] Speaker 03: And that's what we have here. [00:26:59] Speaker 03: Under Section 3.1, those Canadian royalty minimum payments would then get applied to the minimum payments in Section 3.2. [00:27:07] Speaker 03: If there were $4 million in royalties from the sale of the Canadian patents products, then there would be no minimum payment that period because the Canadian patent royalties would have exceeded it. [00:27:20] Speaker 03: and then lastly on on quantum arrow it would anyone have expected that would ever happen that the canadian sales would be that high i don't know if any i don't think anyone would expected that but a lot of that when you're looking at this ex ante what people expected [00:27:37] Speaker 03: people did not know how many licensed products would be sold during the course of the agreement. [00:27:43] Speaker 03: They did not know when FDA approval would happen. [00:27:46] Speaker 03: These were things that were just unknowable. [00:27:48] Speaker 03: So when you have things like minimum payments, that basically provides a way to allocate for those various contingencies which may or may not occur. [00:27:57] Speaker 03: But that doesn't make it [00:27:58] Speaker 03: make those payments for the use of an expired patent. [00:28:02] Speaker 03: Certainly not an agreement that's structured like this one, where there aren't royalties that extend beyond the life of the last expiring patent, where there's nothing in the provision itself which indicates that this is for the use of the expired patent. [00:28:17] Speaker 03: And then the last point I'll make is on quantum merit. [00:28:20] Speaker 03: You don't look to see what Bard was trying to get in the contract when you're determining what quantum merit is. [00:28:27] Speaker 03: You don't look and say the total value of the agreement would have been, you know, X million dollars. [00:28:34] Speaker 03: What you do instead is you determine what the fair market value [00:28:36] Speaker 03: of the agreement would have been. [00:28:38] Speaker 03: And just to illustrate the point very quickly, let's say we had a situation in which a startup was basically going to have a 0% license for the 20 years in which a patent was occurring and then try to get a 10% license on the products once that startup then could produce something. [00:28:55] Speaker 03: That would be patent misuse probably because you would have post-expiration use royalties. [00:29:01] Speaker 03: But if you had a quantum error claim, you then would determine what was the value that was provided to that startup. [00:29:07] Speaker 03: And you might determine that that would have been a much higher number than the 0% royalty that the party got. [00:29:14] Speaker 03: If there are no further questions, we would ask the court to reverse. [00:29:18] Speaker 04: Thank you both sides for the helpful arguments. [00:29:20] Speaker 04: This case is submitted.